Another Rate Increase

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United Parcel Service has raised its delivery rates three times since July 2002, and it even imposed a surcharge because of higher gas prices. Ditto at FedEx and DHL. Small percentage increases have basically become an annual event for the major carriers. And the U.S. Postal Service? Zip. Nada. Nothing. Though it's never welcomed, you have to admit that the postal service's rate case, which was filed with the Postal Rate Commission three days ago, is overdue. (Yet if Congress would come along and remove a nasty $3.1 billion escrow requirement, we could see the rate increase disappear until 2007.)

Every company executive who uses the mail should take his or her hat off to Postmaster General John E. Potter and his staff for reining in costs, reducing the size of the USPS' labor force and managing operations. The man has not had an easy four years. He took charge four months before the 9/11 terrorist attacks. Days later, the anthrax scare threatened to bring the mail flow to a halt. So a 5.4 percent increase should come as no surprise. In fact, some would say that mailers ought to cheer since industry experts were discussing rumors of back-breaking, double-digit increases not five months ago. So why isn't anyone cheering? As Business Week pointed out in its "First-Class Crisis in the Making?" article last week, the postal service is in deep doo-doo.

Though Standard volume increased 6.9 percent during the Oct. 1-Feb. 28 period, most other mail categories were flat or down. Of most concern is First-Class, which has long made up more than half of the USPS' revenues. Last year, postal officials said they expect Standard mail to surpass First-Class in volume for the first time ever this year. As First-Class continues its decline because more people go online to communicate with friends and pay their bills - and, more importantly, businesses send more bills and correspondence by e-mail - the problem will only get worse. And so begins the postal service's death spiral.

Sadly, Congress probably won't see the problem as a full-fledged crisis. Our lawmakers haven't yet. "Rates are only increasing 5.4 percent. Why, that's the first time in almost four years. Things must be fine at the postal service," Rep. Whosie Whatsie will say to himself, ignoring the speeches by Sen. Susan Collins and Rep. John McHugh. Why? Because we all know that Congress only reacts to real crises - like when the national no-call registry's legitimacy comes into question.

Let's hope I'm wrong.


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