Potter: Rates Will Rise Despite Positive Outlook

The U.S. Postal Service's profits will top $1 billion again this year, but it still needs to raise rates in 2006 to make a $3.1 billion escrow payment because of congressional changes to its retirement fund, Postmaster General John E. Potter said yesterday.

“Productivity was up again this year, and that will be five straight years of positive productivity,” he said via satellite to an audience gathered at more than 200 venues nationwide to honor Postal Customer Councils. Still, Potter hedged on when the higher rates will take effect.

“We have to stay flexible,” he said. “We are sensitive to your needs and your desire to have us push the rates as far back as possible, but we can't do it now because of all the uncertainty.”

That uncertainty includes fallout from Hurricane Katrina, rising gas prices and mail volume in the critical fall/holiday mailing season. Postal insiders expect the rate increase to take effect on Martin Luther King Jr. Day.

“Anyone who goes to buy a gallon of gas today knows that the prices are extremely high. Every time the price of a gallon of gas goes up a penny, it costs the postal service $8 million,” said Potter, who still expressed confidence in the economy. “I think we are going to have a good first quarter for the postal service and fourth quarter for your businesses.”

Potter also reflected on the hurricane's effect on postal workers in the South.

“Many came to work even though their own properties were destroyed or severely damaged,” he said. “They did so because they understood the importance of putting in place methods to deliver Social Security, retirement checks and public assistance checks wherever Gulf residents had been relocated.”

Five hundred postal employees have yet to check in, Potter said, “but I am optimistic that they are all OK.”

Full service has been returned to 82 percent of the post offices in the region. More than 30,000 Social Security checks have been distributed, and more than 100,000 displaced customers have filed change-of-address forms.

Potter also said the USPS will release information about the second phase of its transformation plan at the end of the month. This part will build on successes achieved since the plan was implemented in 2002. The plan serves as a blueprint through 2010, focusing the postal service on transforming itself into a more customer-focused, service-oriented and technologically advanced delivery service.

“I see a time when every piece of mail has a barcode on it,” he said. “That may not be achievable by 2010, but I think it is a target we must move toward.”

Potter also discussed the four-state barcode, which can hold nearly three times as much data as the POSTNET code now used to sort and deliver mail. This single, four-state barcode soon will replace the more than 30 barcodes and labels mailers use to sort and track mail, he said. The USPS has said that the barcode frees up valuable real estate on the envelope to use for marketing information.

“These high-quality barcodes will help us — and you — reduce costs and increase efficiency by combining multiple services in one barcode to give you greater predictability,” Potter said.

The USPS is testing the barcode internally as well as with Prudential Financial, which is sending 10,000 First-Class letters daily with the barcode on it. The test began Aug. 31.

When discussing the transformation plan, Potter said the USPS envisions technology that lets mailers track mail at every point in the process and that reduces undeliverable mail by making it easier for customers to update their mailing lists more frequently and with less hassle.

Potter expects the plan to offer new ideas to enhance the value of direct mail for small and midsize businesses as well as major corporate mailers. He also said the USPS wants to expand its use of negotiated service agreements as a way to build future, profitable business.

There are 216 Postal Customer Councils in the national network, with more than 120,000 members who help the USPS make the mail work better for customers.

Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

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