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DMA: Rate Increase Likely To Accelerate Move To Postal Service Alternatives

Press release from the issuing company

Aging First-Class Mail Customer Will Not Be Replaced by Younger Customers NEW YORK, June 24, 2002 – The Direct Marketing Association (The DMA) released survey results that indicate the upcoming June 30 postage rate increase will accelerate the movement of younger Americans away from First-Class Mail for bill payment, accelerating the United States Postal Service’s (USPS) financial crisis. More than half of the survey respondents under age 25, and 42 percent of those between 25 and 34 said the rate increase will lead them to look for bill payment alternatives, such as electronic bill payment. "Unfortunately, this may end up being your father's Postal Service," said H. Robert Wientzen, president & CEO, The DMA. "Unless Congress and the Administration give it the ability to compete, the Postal Service will be as much a relic as paying your bills by mail." The 1970 business model with which Congress has saddled the USPS requires a continual annual growth of First-Class volume from each and every generation of Americans. The survey dramatically shows that the USPS business plan is woefully disconnected to the demands of younger generations and with the stiff competition inherent to today's electronic and private delivery marketplace. In 2000, bill payment, or transactional mail, accounted for almost half (49.1 percent) of all First-Class Mail. Because the Postal Service's business operations are based on a volume-growth model, it is ill-prepared for a generational crisis that reduces the use of First-Class Mail by the very people who represent tomorrow's high-volume bill payers. "Without the implementation of changes that would increase productivity and efficiency, a decline in volume would result in the costs being passed along to consumers in order to cover overhead. This cycle will inevitably lead to the extinction of our postal system," Wientzen continued. "The long term prognosis for the Postal Service's prevailing business model is grim," said Dr. Peter A. Johnson, economist, The DMA, who authored the study. "Bill payment by First-Class Mail could become a fossil, used only by those Americans whose habits were formed before the widespread adoption of PCs and the Internet – back in the dark ages when having a television and a telephone meant multimedia," said Johnson. Until now, the normal pattern for postal patrons saw bill payments by First-Class Mail increasing steadily through life as marriage, career, homeownership, and family lead them to transact more. "From now on, however, this pattern may go the way of the Hula-hoop and the Rumble seat," Johnson said.