The headline on the press release indicated that the U.S. Postal Service was taking a big step forward. “Postal Service Progresses With Operational Efficiencies,” it read. But in reality, the U.S. Mail is going backwards.
With its Monday press release, the Postal Service said it must reduce operating costs by $30 billion by 2015 in order to return to profitability, and to reach this goal it has decided that First Class Mail will no longer be delivered within one business day. Delivery times will shift from 1-3 days to 2-3 days.
The change won’t take effect immediately. The Postal Service must go through a special rule-making process before the measure becomes official — listing the measure for comment with the Federal Register, an agency that documents proposed changes to federal regulations — but the idea is to change the delivery window sometime in 2012. The Postal Service will continue to offer Express Mail, which delivers overnight to most contiguous U.S. locations, but at a far greater cost.
In the last decade, the Postal Service has seen its business eaten away at both ends. With the explosion of email, instant messaging, Skype, and Facebook, the world is sending fewer letters via snail mail. The agency says that standard mail volume has decreased by 43 billion pieces in the past five years. On the other side, services like UPS, FedEx and DHL — private sector outfits that don’t answer to government bureaucracy — have eaten away at the Postal Service’s package delivery business.
The end of one-day delivery is just one way the Postal Service is cutting costs, and it remains to be seen how the ongoing budget cuts will affect businesses still dependent on the US Mail. Few will miss getting junk mail if credit card companies and other outfits decide it’s no longer viable to pound mailboxes. But outfits like Netflix or weekly periodicals like Newsweek or The Economist will face additional costs and challenges.
“For us, there’s a correlation between happy customers and having our newspaper for the weekend,” Paul Rossi, The Economist’s managing director and publisher tells Wired. The newspaper closes its publishing cycle on Thursday morning, so having it in people’s mailboxes for the weekend’s “leanback time” has always been a challenge. Rossi says that the possibility of the post office eliminating Saturday delivery all together will be the real detriment to their business.
“But the bright light for us is that we see a lot of readers converting to digital,” he says.
Since 2006, the postal service has closed 186 facilities, removed more than 1,500 pieces of mail processing equipment, and cut more than 110,000 employees through attrition. In September, the USPS announced changes to service standards designed to provide further consolidation, assessing 252 out of 487 processing facilities for possible closure. In November, turning to the private sector for help, it hired Evercore Partners, a massive investment bank, to review and advise on the restructuring policy.
Though the federal government oversees the agency, USPS says all revenue comes from the sales of stamps and mail products — not from the taxpayer. Just last month, the USPS announced its price changes for 2012 with an average increase of 4.6 percent across all shipping services.
Postmaster General Patrick Donahoe said that the infrastructure needed to support First-Class Mail drove the overall requirements of the USPS’s nationwide network and, he said, maintaining it “is no longer realistic.”
The USPS could not be immediately reached for direct comment.