Alliance Report – July 15, 2022

PMG plans largest-ever revamp of USPS plants

Postmaster General DeJoy recently shared with USPS employees his ambitious plans to completely revamp the network of procession plants. Presumably, he will share them with customers at the July 25 Mailers Technical Advisory Committee meeting.


In what probably would be the largest change in modern postal operations, DeJoy intends to consolidate the current 435 plants into about 60 regional processing plants. He says that they will be much more capable of handling the growing package volumes along with the declining letter and flat mail. The PMG stressed to employees that the new plants will be much more worker-friendly, cleaner, and better-lighted.


The massive capital investment strategy is the $40 billion that the Delivering for America manifesto promised. It will be largely funded by the record rate increases imposed on monopoly mail as well as the $107 billion in financial relief recently provided by the Postal Service Reform Act of 2022. If USPS can start covering its operating costs and making a profit, retained earnings could be reinvested in the network.


DeJoy is no doubt aware of the previous failed attempts by PMGs to right-size and consolidate the network. Members of Congress and other elected officials, as well as postal unions, objected vehemently to closing and consolidations of plans and job relocations. A net reduction of 375 plants never has been done before.


DeJoy hopes to immunize his plan from the usual opposition in several ways. He has tied the future of USPS as a “self-sustaining” agency to competing for a larger share of the package market, and the new plants are key to that business strategy. He also has tied a larger proportion of electric vehicles to the new network design. And he has been emphasizing how dark, dirty, and dingy current plants are for employees. His shiny new plants are promised as a much-needed improvement for employee morale, health, productivity, and retention.


Certainly, greater efficiency and a right-sized network are goals the Alliance and many other mailers have been urging for years. We look forward to hearing and reading the details of the plan. We remain concerned that the large rate hikes imposed on mailers to fund USPS initiatives will greatly suppress demand and accessibility to mail for nonprofits and many others who rely on it. And if greater efficiency is achieved, we will remain vigilant about whether a fair share of cost savings are captured and passed on to customers.


January 2023 mail rate hikes could average 4.5% to 6.5%


USPS rate authority is rising rapidly, according to the Postal Regulatory Commission which has its unique 12-month moving average of the official Consumer Price Index. The latest CPI cap is 2.807%.


For the planned January 8, 2023 rate hike, there are two more monthly CPI releases to go before an October filing. We would expect a cap of about 4.5% following the September 13 CPI release by the Bureau of Labor Statistics. The PRC filing would occur before the October 13 CPI release. USPS indicated the January 8 date this week.


The regulator would require “underwater” products such as Marketing Mail Flats to add 2% more, bringing them to about 6.5%, while other categories within the class, such as MM Letters, would be below average. The other PRC add-ons have been exhausted for this year with the July rate hikes.

How will these rate increases on top of the 16% to 20% already imposed in the past 18 months affect the demand for mail, perhaps amid a recession? This would be the first of the semi-annual increases that USPS promised to the surprise of everyone, including the regulator.


Postal management and the Governors have received ample feedback that rate increases every six months is a bad idea that will suppress demand for mail and cause the mailing industry unneeded extra costs. Now the highest inflation in over 40 years is combined with the very real prospect of a recession by January. If there ever was a time for independent USPS Governors representing the national interest to change course, this is it.


USPS to have only one competitive ground package service in 2023: First-Class Package Service

  • Parcel Select Ground and Retail Ground to be eliminated
  • Priority Mail air service to continue


Citing the corporate buzzwords of streamlining and simplifying, USPS informed the PRC this week that it plans to combine all competitive ground package services into one, starting with the January 8, 2023 mailing price increases. The combined service will be called First-Class Package Service.


While certain to make logistics experts happy, the reduction in package choices will not necessarily aid the USPS DFA business plan in growing its package market share and profits. Quite often, USPS has offered a more complex set of choices to meet the needs of disparate customer segments.


USPS says the consolidation will include:


  • An expansion of the First-Class Package Service product weight limit
    (currently an ounce-based offering up to 15.999 ounces), up to 70 pounds.


  • The size (dimension) limitations for First-Class Package Service will be
    updated to align with the product consolidation.


  • $100 of insurance will be included in the enhanced First-Class Package
    Service product.


  • Cubic pricing tiers will be added to the enhanced First-Class Package
    Service product, along with Oversized, Dimensional Weight, and
    Nonstandard Fees.


  • The Parcel Select Ground price category will be eliminated from the
    Parcel Select product to avoid redundancy. Both Parcel Select Ground
    and USPS Retail Ground will be subsumed under the newly enhanced
    First-Class Package Service product.


  • The Limited Overland Routes price category will be retained and shifted
    under First-Class Package Service.


  • First-Class Package Service will continue to offer both Retail and Commercial price categories, and the Retail category will continue to be sealed against inspection.


USPS has not revealed its pricing plans for FCPS and promises to do so in a later filing with the regulator. With only the requirement to cover attributable costs and make a small contribution to offset institutional costs, the Postal Service should have no trouble clearing the low hurdle at the PRC.


PRC filings confirm fallacy of test of “postal banking”


After the media and interest groups in favor of postal banking hailed a “pilot test” that started in September 2021, we told our members it was not a serious test and it was not “banking.” All of this was confirmed in filings at the PRC by USPS, the American Postal Workers Union, PostCom, and the American Bankers Association.


The regulatory issue at hand is whether the test represents a new non-postal service. When some postal spokespeople and press reports did describe it as a bold new service, in the latest filing USPS points out that it simply added a new payment alternative to an existing product that the agency has sold for years, gift cards. The payment option is third-party paychecks or business checks up to $500 and the gift card fee is $5.95. Not surprisingly, the test in four post offices has yielded almost no transactions: six in the first quarter this year and one in the second.


USPS also revealed that in doing the test it was placating a postal union: “Representatives from a major postal union identified this as an initiative that
could potentially be useful for a segment of consumers, and the Postal Service
agreed to the pilot to be responsive to that request of a key stakeholder. The
pilot will help determine operational capability and also whether this initiative
provides a benefit to the communities involved.”


The APWU said in its comment that it wants real postal banking which this cynical test is not: “As a proponent of genuine postal banking, the APWU acknowledges that the
paycheck payment program is not postal banking or even an expanded postal financial
service. The APWU supports the Campaign for Postal Banking, a coalition of consumer,
worker, financial reform, economic justice, community, civic, and faith-based
organizations building a campaign-based movement to inform and mobilize the public to call on the Postal Service to restore postal banking.”


We continue to believe that the USPS will never be allowed to compete directly with the banking, financial services, or other private sector industries. To achieve its difficult goal of a “self-sustaining” government agency, USPS is going to have to become profitable in the combination of its two service segments: monopoly mail and competitive packages.


Remember to tell the PRC about the impact of rates by July 31


We have sent several Alliance Alerts suggesting that nonprofit mailers and service providers take this unique opportunity to tell the Postal Regulatory Commission how the rate increases they enable are affecting us. This is another reminder that the deadline of July 31 is fast approaching.


We earlier let you know that the Postal Regulatory Commission is asking for your feedback on the above-inflation postage price increases it authorized for last August and this past week on July 10, 2022.


Feedback is due by July 31, 2022, either by email to or by postal mail to the Postal Regulatory Commission, 901 New York Ave., N.W., Ste. 200, Washington, DC 20268.


We suggest that your letters have three main parts:


  1. A description of your organization’s mission and use of mail. These can be as detailed as you want. As the PRC and USPS have very little direct knowledge of rate-paying customers, a full education is in order. If you are comfortable, include data on all the types of mail you use, both volume and cost, and what purposes the mail performs for your organization. Include data on the results you get from the mail, for example, funds raised, subscriptions and memberships initiated and renewed, member benefits provided, bills and payments, petitions signed, and constituents reached.


  1. An accounting of how the 2021 and 2022 postage rate increases will affect your organization. Percentage and dollar increase for your type of mail. Short-term and long-term actions the rate hikes will force you to do or consider doing. Reductions in funds raised, members initiated or renewed, subscriptions initiated or renewed, costs imposed on your members or constituents, and services delivered toward your mission. Will you consider major changes in your mail strategy? Might you abandon mail or cut back on mail significantly?


  1. Urge the PRC to respond positively to the petition filed by the Alliance of Nonprofit Mailers on April 11, 2022 (Docket RM2022-5). Our petition, in partnership with the Association for Postal Commerce, urges the regulator to “revisit its regulations authorizing above-CPI rate increases.” Our petition is generally relevant to the consultation topic, and our members may not otherwise get a chance to express such support if the PRC simply denies the petition without opening a notice-and-comment period.  Of course, we’ll keep our eyes peeled to see whether the PRC rules on our petition before the July 31 due date for these comments and let you know.