Seeking to bolster the ailing U.S. Postal Service, federal regulators moved on Friday to allow bigger jumps to stamp prices beyond the rate of inflation, a move that could eventually add millions more dollars to companies' shipping rates from prescription drugs to magazine subscriptions.
Continue Reading Below
The Postal Regulatory Commission announced the decision as part of a much-anticipated, 10-year review of the Postal Service's stamp rates. It concluded that the post office's mounting red ink from declining mail volume and costs from its pension and health care obligations hamper the ability to provide reliable mail and package service in the digital age.
The commission's plan would give the Postal Service freedom to raise the price of its first-class stamp, now at 49 cents, by an additional 2 percent above the rate of inflation to help avoid bankruptcy and make needed multi-billion dollar investments, such as upgraded information technology and new delivery trucks.
The post office could also tack on another 1 percent to the stamp price if it met certain standards for "operational efficiency" and quality service.
In all, that could translate to an increase of up to a few cents each year, depending on rates of inflation, compared with roughly 1 cent per year previously. The new pricing system would be in place for at least the next five years.
Businesses immediately voiced objections, calling the regulatory plan "disappointing."
"The more-than-doubling over 5 years at current inflation rates proposed by the commission would be harmful to postal customers and the Postal Service," said Art Sackler, manager of the Coalition for a 21st Century Postal Service, a broad trade group that includes mailers such as Amazon and the National Retail Federation. He said higher stamp rates could drive more price-sensitive consumers to online communications, decreasing postal revenue further.
"Once mail leaves, it rarely comes back," he said.
Groups including eBay, Netflix and Greeting Card Association had urged the commission to defer on major changes to the Postal System's pricing system, arguing in part that Congress had intended to keep a rate cap in placed based on a law passed in 2006. Only lawmakers can provide financial relief from the onerous requirements placed on the Postal Service to pre-fund retiree health benefits, which have been the biggest factor behind its financial losses over the last decade, the groups said.
The Postal Service, which had sought almost complete freedom to raise postal rates, said it was still reviewing the proposal to see if it was sufficient. "We continue to believe that any price cap is unnecessary in the rapidly evolving postal marketplace, for which all of our customers have alternatives to using the mail," said Postmaster General Megan Brennan.
The regulators' plan now will go through public comment, taking effect next spring unless there is substantial pressure from Congress, businesses or the public.
Robert Taub, the Republican chairman of the Postal Regulatory Commission, made clear Friday that changes are needed to address the Postal Service's dire financial situation and help keep it competitive with rival shipping companies.
The Postal Service, now in the midst of the busy holiday shipping season, has projected it will reach new highs this year in holiday package delivery but warned that it may not be sustainable as finances continue to deteriorate.
"The system has not maintained the financial health of the Postal Service," Taub declared.
Shipping rival UPS, which has opposed higher stamp rates as potentially anticompetitive, said Friday it hoped the regulatory commission would take additional steps to protect companies that the Postal Service competes with. UPS argues the post office could unfairly use revenue from higher stamp rates to lower package delivery rates, "which would be against U.S. law."
An independent agency of government, the Postal Service has lost money for 11 straight years. While online shopping has led to years of double-digit growth in its package-delivery business, it hasn't offset declines in lucrative first-class mail. Overall mail volume, which makes up more than two-thirds of postal revenue, dropped 27 percent over the last decade as people relied more on email and online bill payments.
Follow Hope Yen on Twitter at https://twitter.com/hopeyen1