PRC tells USPS Slower Mail Won’t Help Finances

While USPS plans to move forward with their planned second rate increase in 2021, the Postal Regulatory Commission has spoken out on one of the Postal Service’s key upcoming strategies: slowing down mail service. As part of the agency’s 10-year plan to achieve financial sustainability, USPS plans on diverting a significant portion of mail volume away from air transportation, and to its ground network. This will theoretically reduce costs for overall First-Class Mail volume, but will in turn, slow down delivery timeframes.

PRC Argues that Higher Package Costs Will Offset Savings from USPS Slowing Down Mail

Under this new strategy, USPS plans to deliver 21% of its First-Class Mail volume in four days. Another 10% will be delivered in five days. This marks a significant slowdown from the 1-3 day standard that USPS maintains for all current First-Class Mail volume.

According to the PRC, slowing down mail won’t help the Postal Service’s finances much because of another core part of the organization’s business: package services. As package volume continues to increase, so, too, do the costs associated with it. Due to the overall trend of decreasing mail volume and rising package volume, the PRC argues that higher costs USPS needs to foot to handle a surge in packages would actually eliminate any projected cost savings that would come from implementing the new service standard.

USPS Will Need to Overhaul its Surface Transportation Network

The PRC argues that, in order for the mail slowdown strategy to actually reduce costs, USPS will need to overhaul its surface transportation network. Obviously, that overhaul can’t take place without incurring significant costs in the short-term.

In an advisory opinion piece the PRC published, the Commission wrote the following:

“It is not clear that the tradeoff between financial viability and maintaining high-quality service standards is reasonable. The Commission agrees that there is potential to increase surface transportation efficiency and capacity utilization. For this initiative to be a success, the Postal Service will need to reconfigure its surface transportation network to build efficient trips with multiple stops and hubs.”

The PRC’s Opinion isn’t Binding, and USPS Will Likely Still Move Forward with the Planned Slowdown

The PRC—while an oversight board of sorts for USPS—didn’t take a hard opposing stance on slowing down mail delivery. Instead, the only Commission only an opinion, which USPS isn’t obligated to take into consideration. Moreover, while this slowdown strategy affects mail volume, USPS also plans to slow down a significant portion of First Class Package volume at the same time.

First Class Package’s Loss May Be Priority Mail’s Gain

Should USPS slow down a significant portion of First Class Package, customers will have to wait longer for their items to arrive. Thus, if shippers don’t wait customers to wait, they may choose to pay more for faster delivery on lightweight packages. The question isn’t whether any First Class Package volume will migrate to Priority Mail as a result of the slowdown; the question is how much of it will. If shippers don’t wait customers to wait, they may choose to pay more for faster delivery on lightweight packages.

Ultimately, USPS makes a higher margin on Priority Mail packages than anything else. So, diverting volume away from First Class Package to Priority Mail would make USPS more money. However, while this “upsell” will benefit USPS, it could harm shippers who formerly relied on affordable First Class Package rates.

The Postal Regulatory Commission is an independent agency that sets postal rates and oversees the US Postal Service. Read the entire Postal Regulatory Commission’s Advisory Opinion piece here.