 The estimated $3 billion in reductions, to be announced in broader
detail on Monday, are part of a wide-ranging effort by the
cash-strapped Postal Service to quickly trim costs, seeing no
immediate help from Congress.The changes would provide short-term
relief, but ultimately could prove counterproductive, pushing more
of America's business onto the Internet. They could slow everything
from check payments to Netflix's DVDs-by-mail, add costs to
mail-order prescription drugs, and threaten the existence of
newspapers and time-sensitive magazines delivered by postal carrier
to far-flung suburban and rural communities.
That birthday card mailed first-class to mom also could arrive a
day or two late, if people don't plan ahead.
"It's a potentially major change, but I don't think consumers are
focused on it, and it won't register until the service goes away,"
said Jim Corridore, analyst with S&P Capital IQ, who tracks the
shipping industry. "Over time, to the extent the customer service
experience gets worse, it will only increase the shift away from
mail to alternatives. There's almost nothing you can't do online
that you can do by mail."
The cuts, now being finalized, would close roughly 250 of the
nearly 500 mail processing centers across the country as early as
next March. Because the consolidations typically would lengthen the
distance mail travels from post office to processing center, the
agency also would lower first-class mail delivery standards that
have been in place since 1971.
Currently, first-class mail is supposed to be delivered to homes
and businesses within the continental U.S. in one day to three days.
That will lengthen to two days to three days, meaning mailers no
longer could expect next-day delivery in surrounding communities.
Periodicals could take between two days and nine days.
About 42 percent of first-class mail is now delivered the
following day. An additional 27 percent arrives in two days, about
31 percent in three days and less than 1 percent in four days to
five days. Following the change next spring, about 51 percent of all
first-class mail is expected to arrive in two days, with most of the
remainder delivered in three days.
The consolidation of mail processing centers is in addition to
the planned closing of about 3,700 local post offices. In all,
roughly 100,000 postal employees could be cut as a result of the
various closures, resulting in savings of up to $6.5 billion a year.
Expressing urgency to reduce costs, Postmaster General Patrick
Donahoe said in an interview that the agency has to act while
waiting for Congress to grant it authority to reduce delivery to
five days a week, raise stamp prices and reduce health care and
other labor costs.
The Postal Service, an independent agency of government, does not
receive tax money, but is subject to congressional control on large
aspects of its operations. The changes in first-class mail delivery
can go into place without permission from Congress.
After five years in the red, the post office faces imminent
default this month on a $5.5 billion annual payment to the Treasury
for retiree health benefits. It is projected to have a record loss
of $14.1 billion next year amid steady declines in first-class mail
volume. Donahoe has said the agency must make cuts of $20 billion by
2015 to be profitable.
It already has announced a 1-cent increase in first-class mail to
45 cents beginning Jan. 22.
"We have a business model that is failing. You can't continue to
run red ink and not make changes," Donahoe said. "We know our
business, and we listen to our customers. Customers are looking for
affordable and consistent mail service, and they do not want us to
take tax money."
Separate bills that have passed House and Senate committees would
give the Postal Service more authority and liquidity to stave off
immediate bankruptcy. But prospects are somewhat dim for final
congressional action on those bills anytime soon, especially if the
measures are seen in an election year as promoting layoffs and cuts
to neighborhood post offices.
Technically, the Postal Service must await an advisory opinion
from the independent Postal Regulatory Commission before it can
begin closing local post offices and processing centers. But such
opinions are nonbinding, and Donahoe is making clear the agency will
proceed with reductions once the opinion is released next March.
"The things I have control over here at the Postal Service, we
have to do," he said, describing the cuts as a necessary business
decision. "If we do nothing, we will have a death spiral."
The Postal Service initially announced in September it was
studying the possibility of closing the processing centers and
published a notice in the Federal Register seeking comments. Within
30 days, the plan elicited nearly 4,400 public comments, mostly in
opposition.
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Among them:
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Small-town mayors
and legislators in states including Illinois, Missouri, Ohio and
Pennsylvania cited the economic harm if postal offices were to
close, eliminating jobs and reducing service. Small-business
owners in many other states also were worried.
"It's kind of a lifeline," said William C. Snodgrass, who owns a
USave Pharmacy in North Platte, Neb., referring to next-day
first-class delivery. His store mails hundreds of prescriptions
a week to residents in mostly rural areas of the state that lack
local pharmacies. If first-class delivery were lengthened to
three days and Saturday mail service also were suspended, a
resident might not get a shipment mailed on Wednesday until the
following week.
"A lot of people in these communities are 65 or 70 years old,
and transportation is an issue for them," said Snodgrass, who
hasn't decided whether he will have to switch to a private
carrier such as UPS for one-day delivery. That would mean
passing along higher shipping costs to customers. "It's
impossible for many of my customers to drive 100 miles,
especially in the winter, to get the medications they need."
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ESPN The Magazine and Crain
Communications, which prints some 27 trade and consumer
publications, said delays to first-class delivery could ruin the
value of their news. Their magazines are typically printed at
week's end, with mail arrival timed for weekend sports events or
the Monday start of the workweek. Newspapers, already struggling
in the Internet age, also could suffer.
"No one wants to receive Tuesday's issue, containing news of
Monday's events, on Wednesday," said Paul Boyle, a senior vice
president of the Newspaper Association of America, which
represents nearly 2,000 newspapers in the U.S. and Canada.
"Especially in rural areas where there might not be broadband
access for Internet news, it will hurt the ability of newspapers
to reach customers who pretty much rely on the printed newspaper
to stay connected to their communities."
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AT&T, which mails approximately 55
million customer billing statements each month, wants assurances
that the Postal Service will widely publicize and educate the
public about changes to avoid confusion over delivery that might
lead to delinquent payments. The company is also concerned that
after extensive cuts, the Postal Service might realize it cannot
meet a relaxed standard of two- to three-day delivery.
Other companies standing to lose include Netflix, which offers
monthly pricing plans for unlimited DVDs by mail, sent one disc or
two at a time. Longer delivery times would mean fewer opportunities
to receive discs each month, effectively a price increase. Netflix
in recent months has been vigorously promoting its video streaming
service as an alternative.
"DVD by mail may not last forever, but we want it to last as long
as possible," Netflix CEO Reed Hastings said this year.
Maine Sen. Susan Collins, the top Republican on the Senate
committee that oversees the post office, believes the agency is
taking the wrong approach. She says service cuts will only push more
consumers to online bill payment or private carriers such as UPS or
FedEx, leading to lower revenue in the future.
"Time and time again in the face of more red ink, the Postal
Service puts forward ideas that could well accelerate its death
spiral," she said, urging passage of a bill that would refund nearly
$7 billion the Postal Service overpaid into a federal retirement
fund, encourage a restructuring of health benefits and reduce the
agency's annual payments into a retiree health account.
That measure would postpone a move to five-day-a-week mail
delivery for at least two years and require additional layers of
review before the agency closed postal branches and mail processing
centers.
"The solution to the Postal Service's financial crisis is not
easy but must involve tackling more significant expenses that do not
drive customers," Collins said.
In the event of a shutdown due to bankruptcy, private companies
such as FedEx and UPS could handle a small portion of the material
the post office moves, but they do not go everywhere. No business
has shown interest in delivering letters everywhere in the country
for a set rate of 44 cents or 45 cents for a first-class letter.
Ruth Goldway, chair of the Postal Regulatory Commission, said the
planned cuts could test the limits of the Postal Service's legal
obligation to serve all Americans, regardless of geography, at
uniform price and quality. "It will have substantial cost savings,
but it really does have the potential to change what the postal
service is and its role in providing fast and efficient delivery of
mail," she said.
[Associated Press;
By HOPE YEN]
Copyright 2011 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten or
redistributed.
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