“The impact on most mailers of a slight expansion in delivery times will be negligible,” Davis says. “We just need to prepare our mail a day or two earlier. Some mailers with time-sensitive products may have to pay for expedited service, but if that’s where the costs are, then the user should bear the cost of speedy delivery. But we all have to recognize that if the USPS doubles our postage rates to pay for antiquated expectations, the effect will be catastrophic: There will be no USPS.”
Congress has to realize that the USPS business model has changed “pretty dramatically” in the past 10 years, Davis says, and “the USPS must be given the leeway to adjust its infrastructure and its service model to meet those changes.”
Davis applauds the Postal Service’s move to streamline the processing plants and establish a 2-day delivery service level for First-Class mail. The USPS, in response to a request from many U.S. senators, has agreed to delay the closing or consolidation of any Post Office or mail processing facility until May 15, 2012. The USPS hopes this period will help facilitate the enactment of comprehensive postal legislation.
“It’s time that Congress got out of running the mail business and allow the USPS to keep its costs under control.”
But here’s the rub, Davis says: Reduced service levels may have negligible effect on volume, “but I doubt it. Service standards will still be exemplary by any competitive measure, and fifty cents is still a pretty good deal to send mail around the county in two days.”
If Congress wants to see a real death spiral, Davis says, “It can force the USPS to raise rates to pay for the infrastructure and cost of the inefficiencies in 1-day service. So if the USPS raised rates 40%, 50% or 100% across the board to cover the outdated business model, it would see mail volume melt like a snow cone in Phoenix.”
Davis believes Postmaster General Patrick Donahoe’s plan recognizes what Congress fails to see: mail delivery is a volume game that can only be won with low variable costs and a reduced fixed-cost albatross. “He should be applauded for pushing ahead so vociferously.”