"Where Fillmore County News Comes First"
Online Edition
Friday, August 22nd, 2014
Volume ∞ Issue ∞
 

One Moment, Please... A good rate increase?


Fri, Oct 25th, 2013
Posted in All Commentary

Every week, the Fillmore County Journal spends a lot of money with our local USPS locations in the region. As a matter of fact, our postal costs rank among the top three of all of our expenses for producing the newspaper.

And, this is why I pay close attention to the direction of our United States Postal Service -- including any missteps as I see them.

On September 25, 2013, the United State Postal Service announced a proposed pricing that includes rate increases of more than 6-percent on virtually all classes of mail effective January 26, 2014.

So, the single-piece letter rate would go from 46 cents to 49 cents, the largest increase in the history of postal increases ever. And, all mailing costs would be adjusted accordingly.

While it may seem odd that I would say this, I’m actually glad the USPS is considering a rate increase nearly double the rate of inflation. Why, you may ask? Certainly, this increase will impact our business, increasing our expenses without giving us any more in value.

But, with this dramatic increase we need to consider a number of factors that make it completely justifiable.

First, if the USPS rates were increased consistently year-after-year at the rate of inflation (1 cent more per year) starting in 1971 until today, the cost of a stamp would be 50 cents instead of 46 cents in 2013. Now 4 cents may not seem like a big deal, but the USPS “proposed changes, which would go into effect in January 2014, are intended to generate $2 billion in incremental annual revenue for the Postal Service,” according to USPS officials. If that’s the case, then every year that the USPS hasn’t kept up with the rate of inflation with a modest 1 cent rate increase, they have been falling behind with incremental annual revenue. That’s revenue that they can never recapture. Plus, the projected 1 cent increase trains the consumer to be prepared for budgeting purposes to expect that the cost of postal delivery will increase the same rate every year.

Second, the USPS rates have not kept up historically with increasing fuel costs, which are obviously a huge expense for the USPS -- driving more than 1.3 billion miles every year to deliver mail to more than 152 million households six days a week. Back in 1971, the cost of a gallon of gas was around 36 cents per gallon. Today, a gallon of gas hovers around $3.18 per gallon of gas, which is an 883-percent increase over the past 32 years. Meanwhile, with the cost of the USPS postage increasing from 8 cents to 46 cents over that same period, the increase has only been 575-percent. This doesn’t take into consideration the increased cost of USPS wages and benefits. The Congressional Regulatory Commission overseeing the USPS master plan has simply been too slow to react on important and timely business decisions relating to the fiscal viability of one of our nation’s assets.

Is it enough?

To me, the bigger question is whether this substantial rate increase is too little too late.

This rate increase may not be enough, because there is a smaller base of customers using the USPS than years past. More people are transitioning to online banking to pay bills, which circumvents the USPS. As a matter of fact, our bank where we do our commercial banking for the newspaper recently started charging $3 per month if you preferred to continue to receive printed bank statements via the USPS. Otherwise, you could forego the fee by signing up for e-statements. This just one example of how many businesses seem to be working against the USPS in order to cut expenses. I understand that these banks are crunching the numbers and this may make sense since probably every bank is moving in that direction, but it does leave a bad taste in my mouth. I guess I am a supporter of the USPS, and I feel that we are sort of taking the USPS for granted. The less we use our local USPS locations and services, the more they will diminish their services. When we complain, we will have nobody to blame but ourselves -- and the Congressional Regulatory Commission.

I think one of the biggest challenges the USPS, and more importantly the Congressional Regulatory Commission, has faced over the past 20 years is that they have been too slow to change. There has been no vision for understanding how the Internet could impact their business. An epic fail.

A USPS Vision

According the USPS Postal Facts webpage, they harnessed 423 million visitors at www.usps.com in 2012. So, why isn’t the USPS selling online advertising to businesses like Amazon, eBay, GAP, Old Navy, and many more? With that high volume of website traffic, surely a variety of businesses would jump at the chance to advertise on the USPS website.

And, what about the USPS stamp? I see specially designed stamps every time I go into our local Post Office. Instead of displaying Elvis Presley on the U.S. postage stamp, get a corporate sponsor. Why not sell the space of the USPS stamp. With over 160 billion pieces of mail processed in 2012, that volume presents an opportunity for a corporation like Verizon or to further establish their brand identity on every piece mail delivered around the United States.

Nope, instead the USPS spends money on sponsoring Lance Armstrong and the U.S. Pro Cycling team to appear in the Tour de France at a price tag of more than $50 million. Hmmm, the USPS can’t afford to pay attention, and yet they are sponsoring a bicycle team at a multi-million dollar level that is racing in a foreign country not served by the USPS. Makes sense, I guess?

What we will probably

see in Fillmore County

I’m going to make an unpopular prediction which I hope doesn’t come true, but is very possible based on how the USPS has operated over the past couple years.

We currently have USPS locations in Mabel, Canton, Harmony, Preston, Rushford, Peterson, Lanesboro, Fountain, Wykoff, Ostrander, Spring Valley and Chatfield. My prediction is that there will only be five USPS locations left in Fillmore County. Mabel and Canton locations will be consolidated to operate out of Harmony. Lanesboro, Whalan, and Fountain will be consolidated to operate out of Preston. Peterson will completely consolidate to operate out of Rushford. Wykoff and Ostrander will consolidate to operate out of Spring Valley. And, Chatfield will remain the same, contending with a growing population in the 55923 zip code. Like I said, these are not popular predictions, but I think they are very likely based on recent decisions made for our USPS locations.

Since the USPS manages 31,272 retail locations, they will be looking at the cost of staffing and maintaining those locations as a way to trim expenses. I’m not saying I want to see it happen, but it is very likely.

The changes revolving around the USPS have brought about a tremendous amount of conversation. I hear people talking about it all the time. This past year, a loyal Journal reader asked me why consumers pay for a Post Office Box and yet the USPS delivers mail to people out in the rural areas free of charge. I had never thought of it that way, but she may have been on to something.

At this point, I think we need to consider all options. Make a list and prioritize the best case scenarios. And, get all of the USPS employees involved in the conversation along with the public. I think our collective wisdom can outperform the historically stagnant and reactionary master plan of the revolving leadership of the Congressional Regulatory Commission. We, as citizens, really need to consider ourselves owners of the USPS. This is our system and we need to do something to fix it for the sake of long-term sustainability.

Comments:







Your comment submission is also an acknowledgement that this information may be reprinted in other formats such as the newspaper.



4163

11:38:18, Oct 25th 2013

Brian Quinn says:
I'll stick to the Elvis stamp thank you.


4171

11:53:02, Oct 26th 2013

RandyF says:
You were doing great up until you had to reach back over 10 years to bring up corporate sponsorship of a cycling team. What was wrong with doing that, at the time. UPS has its NASCAR sponsorship, FedEx has its PGA sponsorship, to this day.

When USPS ended its sponsorship, and Discovery Channel took over, there has not been another corporate sponsorship endeavor taken.

It makes absolutely no sense to try to apply events of 10 years ago to events of today. Oh, and your math skills need some work. 3¢ is not the greatest increase in Postal History. Sometime back in the 1990's, a stamp went up 4¢, 25¢ to 29¢. In your 4th paragraph, you correctly state that it is "proposed" to go from 46¢ to 49¢ in January. Actually, you neglected to state that this is proposed, not set in stone yet. In your 7th paragraph, you state, "Now 4 cents may not seem like a big deal". Is it 3¢ or 4¢??

Ok, I'm nitpicking a bit on some things. Overall, many of the ideas you mention have been proposed in the past but COngress and the PRC will not allow the USPS to go into a lot of those areas. Thank lobbyists for that. Even your own Newspaper Association lobbies Congress about USPS issues that may adversely affect Newspapers.

It's all politics.


4172

4:16:38, Oct 26th 2013

Jason Sethre, Publisher of Fillmore County Journal says:
To Brian Quinn: How much revenue is generated from the sale of Elvis stamps VS. the revenue that could be generated from "stamp sponsors" plus the sale of stamps? Basically, the USPS has a funding shortfall. Revenues are declining... the formula of sales based on rate + volume isn't keeping pace with increased expenses... or even decreasing expenses at this point. So, while we'd like to continue to do business as usual, that will only dig the hole deeper. The Elvis stamp may have been a luxury that the USPS can't afford without some sort of compensation. I guess the good thing is that in the long-term, if the "stamp sponsorship" concept took hold, your Elvis stamp would be worth a lot more money -- coming from the pre-sponsorship era!

To RandyF: UPS and FedEx are no comparison to USPS. They don't provide the exact same service as the USPS -- which is delivery to every household and business six days a week.

And, furthermore, UPS and FedEx have profitable business plans, which entitles them to sponsor NASCAR, the PGA Tour or the Tour de France if they wish. The shareholders of the USPS are the U.S. citizens, compared to the shareholders of FedEx and UPS -- both traded on the NY Stock Exchange.

Note to recent reports relating to financial performance of UPS and FedEx:

UPS: http://finance.yahoo.com/news/ups-posts-bigger-quarterly-profit-120423870.html

FedEx: http://www.latimes.com/business/money/la-fi-mo-fedex-cyber-monday-20131023,0,2592770.story

And, besides, what value is there in sponsoring a bicycling team that appears in the Tour de France (overseas) when your entire business operation is bound by the U.S. borders? How many Americans who would be the USPS targeted customers watch the Tour de france? According to this link... http://www.statista.com/statistics/229087/people-who-watched-the-tour-de-france-on-tv-within-the-last-12-months-usa/ ... the 2008 Tour de France boasted 17.83 million viewers. If you are going to take $50 million dollars to market your business and your operations are bound by the U.S. borders, doesn't it make sense to target an audience that watches the Super Bowl or World Series? With 108 million Americans watching the (2013) Super Bowl XLVII, that just makes sense compared to the Tour de France numbers. And, all of this is pending that the USPS is profitable, which they are not and have not been for quite some time.

You are correct. I did error in my recognition of postal stamp price increases, which are available here: http://about.usps.com/who-we-are/postal-history/domestic-letter-rates-since-1863.htm

The single-piece letter rate was increased to from 22 cents to 25 cents on April 3, 1988, and then again to 29 cents on February 3, 1991. But, this wasn't a math error, this was a reference error. I missed this in my analysis. Regardless, whether we're talking 3 cents or 4 cents, the general premise of this conversation relates to how to fix the problems of the USPS.

Regarding your question about my reference to 3 cents and 4 cents in the 7th paragraph, please re-read that again. I think you are misunderstanding my explanation. Here it is again...

"First, if the USPS rates were increased consistently year-after-year at the rate of inflation (1 cent more per year) starting in 1971 until today, the cost of a stamp would be 50 cents instead of 46 cents in 2013. Now 4 cents may not seem like a big deal, but the USPS “proposed changes, which would go into effect in January 2014, are intended to generate $2 billion in incremental annual revenue for the Postal Service,” according to USPS officials. If that’s the case, then every year that the USPS hasn’t kept up with the rate of inflation with a modest 1 cent rate increase, they have been falling behind with incremental annual revenue."

You see, RandyF, I put together a spreadsheet matching up columns of rate of inflation since 1971, rate of gasoline per year since 1971, rate of a stamp per year since 1971, and projected the rate of a stamp staring with the rate of 8 cents back in 1971 and adding 1 cent per year to that rate every year until 2013. So, in 2013 our rate is 46 cents, when it would have actually been 50 cents if we had simply set a rate schedule increase of 1 cent per year. Instead of wasting the time of our USPS officials and the Postal Regulatory Commission on deciding whether a rate increase is warranted every few years, just set it at a 1-cent-per-year increase on the single-letter mail piece.

Debating over what won't work and why is fine, and can be of value in some ways.

But, I always like to see solutions to problems. I've offered a few. What are yours?

If you'd like some additional facts and figures to chew on, here's a good start: http://about.usps.com/who-we-are/postal-facts/welcome.htm


Hoffman Stables