November 18, 2015

Yesterday, senior United States Postal Service (USPS) leadership for the first time publicly committed to have no general price increase for letter and flat mail in 2016. (The USPS previously announced an average 9.5 percent price increase for competitive package shipping services beginning in January 2016.)

The mailing announcement came at the Postmaster General’s Mailers Technical Advisory Committee (MTAC), of which the Alliance is a member. The great news was given by Chief Marketing and Sales Officer Jim Cochrane. Of course, the USPS faces a Consumer Price Index (CPI) cap of less than one percent on its mailing services. Nevertheless, we applaud the announcement by the USPS as a goodwill gesture toward its customers and a good business decision to remove one element of uncertainty facing mailers.

Jim did add, in response to questions, that the USPS is open to an overall “revenue-neutral” rate case in 2016 designed to fix pricing anomalies caused by the 2015 rate changes. Jim reminded MTAC that within a revenue-neutral price change, some would go up and others would go down, in other words, there would be “winners and losers.”

Both Jim Cochrane and USPS Chief Financial Officer Joe Corbett assumed or conceded in their discussions that the 4.3 percent exigent surcharge will be rolled back around April 2016 when the target revenue is reached per the July 29 ruling by the Postal Regulatory Commission. This also was well received by customers as it allows them to firm up their own plans. Jim somewhat jokingly told attendees not to tell their leadership that their mailing budgets could be reduced, but rather to use the upcoming price reduction to send more mail. He did have a more serious message that price reductions can spur volume growth. And CFO Corbett gave a 2016 forecast for a small operating profit even with the mid-year price reduction. Perhaps mailers will take Jim’s advice and surprise Joe next year with a hefty mail volume increase!

Mailers also need to continue hedging their forecasts against the somewhat longshot possibility that either the USPS court appeal or attempt at new legislation could make the surcharge permanent. We believe neither is likely, but will keep you posted.

In the meantime, remember to thank your postal partners for their move toward a more customer–friendly posture!