New data indicates proposed cuts could mean
greater losses in volume, revenue
March 22, 2012 -- The proposed cuts in service sought by the U.S. Postal Service could result in a far-greater loss of mail volume—and thus of revenue—than postal authorities previously have disclosed, new testimony indicates.
In fact, the losses—outlined in a preliminary study commissioned by the USPS but which the agency has since kept under wraps—could outweigh any savings realized by the cuts.
The Postal Service has said that implementing slower service standards for first-class mail would cause mail volume to decline by 1.7 percent. But at the March 21 hearing of the Postal Regulatory Commission, it was disclosed that market research done by the USPS on a number of its agenda items (ending Saturday delivery, closing small post offices, degrading first-class mail service standards) produced a preliminary estimate of a dramatic 10.3 percent drop in mail volume.
The USPS said it decided to pull the plug on this study before it was completed, because the results were not “reliable” (even though it was conducted by the same outfit that did the market research for this case and for the USPS’ previous five-day case). As a result, USPS told the research firm to limit its study to the impact on mail volume of service-standard changes.
PRC Chairman Ruth Goldway observed from the bench that the results of the unfinished study suggest that if implemented, the proposed cuts might produce a death spiral for the Postal Service—in which degrading service drives customers away and reduces revenue, thus requiring still more cuts—and she requested the underlying data.
“The discussion about a death spiral that people have been talking about is validated to some degree by the response that you got there,” Goldway said. “It’s a cautionary note for us all to have, and I’m glad that this information has surfaced....”
Fredric Rolando, president of the National Association of Letter Carriers, said: “This substantiates our concerns that the proposed cuts are counter-productive. And it shows the need for Congress to proceed carefully as it addresses the postal financial situation, and to avoid rash cuts in service to the American people that would do more harm than good to USPS finances.
“Any changes that make the Postal Service more efficient are a good idea, but they must be part of an overall business plan for the future, not merely cuts that degrade service and drive customers away. We are still awaiting such a plan from the USPS,” Rolando said.
Two witnesses testified about the research at Wednesday’s PRC hearing. Greg Whiteman, USPS’s manager of market research, testified about the estimated 10.3 percent volume decline. He was joined in testifying about the previously undisclosed market research by Rebecca Elmore-Yalch, senior vice president at ORC International, the consulting firm that did the research.
The PRC was holding hearings for its advisory opinion about the USPS “Network Rationalization” plan to consolidate some 200 mail-processing plants and to reduce service standards as a result. Whiteman said the preliminary research showed if all of the Postal Service’s contemplated changes, including ending Saturday delivery and closing post offices were taken into account, first-class mail volumes would drop by 10.3 percent.
Questioned by PRC Vice Chairman Nancy Langley whether the Postal Service had abandoned the initial research because the results were not the ones desired, Whiteman denied that, saying instead that the data wasn’t reliable.