USPS May Raise Rates, After All

A year after an industry alliance helped defeat a proposed exigent rate increase by the U.S. Postal Service, the price hike may go through after all, as part of a larger plan to save the troubled institution, which is rapidly approaching insolvency. The rate hikes, including an increase of 8%-9% for periodicals and 5.8% for other types of mail, were rejected last year by the Postal Regulatory Commission. But they have been dusted off by the Obama Administration as a possible, partial solution to USPS financial woes. Periodicals are one of the least profitable mail classes for the USPS, partly because of repeated rejections by the PRC of proposed rate hikes. Catalogs and other types of direct-marketing solicitation, classified as "standard," are also less profitable than first-class mail, requiring about three pieces of standard mail to equal the profit from one piece of first-class mail. The USPS has nonetheless resorted to periodicals and standard mail as a way of maintaining delivery capacity when first-class mail volumes dropped, in effect subsidizing delivery of first-class mail with increased volumes of standard mail.