We've been tracking the monthly data from the US Postal Service for quite some time now. We like the data because the volume of letters and periodicals are reported, which removes effects of inflation from the analysis. Remember: we inflation adjust dollar data to get a sense of changes in actual volume, and sometimes the act of adjusting those data can possibly create their own distortions. Any time that one can use actual data of physical goods or numbers of transactions, or numbers of employees or their hours, those data can be more reliable than anything that is currency-based. So it is with interest that we offer the chart below (click to enlarge). It shows the changes on a year-to-year basis for three classes of mail, first, standard, and periodicals. We've also added a "first+standard" category. All of the data are based on 12-month moving totals to minimize the effect of seasonal swings. Essentially, standard mail is up the approximate percentage that first class is down. In round numbers, first class mail in 2009 was 84 billion pieces, and it dropped to 77 billion in 2010. Standard mail was 80 billion pieces, and increased to 84 billion. The volume of standard mail was probably helped by the return of some financial services direct mail in 2010. It does seem that in the longer term, there are more mailings going the standard route, however, as the incentives of tighter budgets and cleaner data bases have a direct financial benefit compared to first class mail. The long-term decline in both forms of mail is still very much intact. Neither have kept up with population growth. Periodicals continue their decline with no indication of bottoming. Publishers may be attempting to diversify into media such as tablet PCs and other branded channels, but any synergistic effect to printed versions is still elusive, and probably unlikely. Everyone knows that the USPS is in deep trouble, and is now attempting to shift responsibility for pre-reorganization pensions back to the Federal government. This is a bailout, of course, yet every stakeholder seems to want to call it something else. Executives at the USPS have little freedom of action. On one hand, they claim to be operating like a real business, yet on the other hand, political influence is around every corner and under every rock. The latest issue is whether or not the USPS can close rural locations that are not financially wise to retain. A real business can change its locations as it needs to. It can also open new channels as they make sense to. As long as the USPS does not have the freedom of action that other businesses have, it will be unable to adjust to new technologies and new opportunities. One of the worst actions in recent years has been the tying of USPS rates to the Consumer Price Index, removing the competitive price pressures from computing and communications from their consideration. Computers have dropped about -7.5% per year for two decades. Communications costs are dropping at approximately -3.5% per year. Yet, it is likely that the next postal rate increase will be about +3.5-4.0% if the CPI keeps moving in its current direction. The price increases of postage have bullied the prices of commercial printing down; print buyers have a budget for projects, and if the USPS keeps demanding larger pieces of that pie, print prices cannot recover their own increased materials costs. Eventually, printer profits and print worker wages get crowded out, and the price advantage of digital media increases. Even after you account for the possible increased effectiveness of print, the lower costs of digital media balance them out. It's a strange, vicious circle. Postal costs increase, so mailings are reduced in number to compensate. That means that run lengths decrease, which means that per piece costs of print rise because fixed costs and makereadies are a greater percentage of costs. Lysander Spooner, where are you when we need you most? In the long run, the Federal government is creating funding and incentives for the buildout of broadband to all areas of the country. Even in the recent purchase of NBC Universal by Comcast, part of the deal that the FCC required was that Comcast expand its network to certain rural areas at very low pricing, as well as selling computer products to those customers at low cost. One can easily envision in 15 or 20 years that the USPS requirement for "universal service," the requirement to be able to deliver to every US address on a delivery day will be removed. Just like broadcast now has virtually universal delivery today with the advent of satellite services, digital delivery via broadband will ultimately replace the USPS.