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Commentary & Analysis

Going Postal

By Frank J.

By WhatTheyThink Staff
Published: January 14, 2005

By Frank J. Romano Without reform, we will see rate increases in excess of inflation and this will have a devastating impact on the printing industry. January 14, 2005 -- The year just ended was supposed to be the year for U.S. Postal Service reform. But lame-duck lawmakers are preoccupied with other matters, and the mailing industry must now resurrect postal reform legislation with double-digit increases in mailing rates in 2006 looming like a giant black cloud. Last year, committees in both the House and Senate voted unanimously for postal legislation that would give the Postal Service more flexibility in its services and the prices it charges for them, with guaranteed six-days-a-week delivery to every address in the United States. President Bush named a presidential commission in 2002 to study potential alternatives for the Postal Service’s dismal outlook under its current business model. The most important aspect of postal reform is the preservation of the $900 billion mailing industry with its 9 million jobs nationwide. Without reform, we will see rate increases in excess of inflation and this will have a devastating impact on the printing industry. Postal Service officials will file for a 2006 rate hike this spring, the first increase since 2002 when a first-class stamp rose to 37 cents. Without legislative action, it is predicted to be a double-digit increase. Without reform, we will see rate increases in excess of inflation and this will have a devastating impact on the printing industry. Last reorganized 35 years ago, the Postal Service has 635,000 full-time and 164,500 part-time employees, a giant fuel bill, and relies on revenue from operations instead of taxpayer funding (as it should be). The organization is plagued by stagnant revenue, rising costs, and declining mail volume, and has several years of losses to prove it. Postal officials are concerned about the accelerating decline in letters and other first-class mail, which have covered two-thirds of the Postal Service’s costs. Officials predict further erosion as we turn to the Internet, e-mail, and cell phones to pay bills and stay connected. As revenue has declined, the number of physical addresses, to which the Postal Service must deliver, has increased. There are 1.8 million new addresses added each year and the business model had always assumed that costs could be covered by growing mail volume--growth that is no longer there. With expected paper cost increases plus the expected postal increase in 2006, magazines and catalogs could see a 25 percent increase in their costs. Congress provided some financial relief when it allowed the Postal Service to scale back billions of dollars for its pension accounts, which temporarily restored the Postal Service to profitability. Uncertainty is bad for small and large mailers that are now trying to budget for future mailing expenses. With expected paper cost increases plus the expected postal increase in 2006, magazines and catalogs could see a 25 percent increase in their costs. It will be difficult to cover this with higher ad rates and subscription prices. We need to focus on postal reform. The printing industry has tried to work with the Postal Service. This will not work. Promoting direct mail is not the answer. Reform is the answer and the printing industry should be vocal in lobbying for it. It is only a matter of our survival.

 

 

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