Proposed increase in stamp prices faces opposition from new group

By Ed O'Keefe
Wednesday, July 7, 2010

The price of a first-class postage stamp could jump to 46 cents early next year if a Postal Service proposal goes through, but hundreds of the nation's largest mailers are banding together to try to block the increase.

The Postal Service announced its proposed rate changes Tuesday, but some mailers -- organizing, they say, in an unprecedented effort -- argue that the agency should make deeper cost cuts before raising prices on first-class stamps, magazines and packages.

Along with a two-cent stamp increase, the cost for each additional ounce of first-class mail would climb to 18 cents from the current 17 cents. The price to mail a postcard would rise to 30 cents, and magazine publishers would see an 8 percent rate jump, according to the proposal.

Officials anticipate that the changes would generate $2.3 billion in revenue during the first nine months of next year, helping close a $7 billion budget gap to $4.7 billion. The Postal Service declined to provide the expected impact on mail volume.

First-class stamps have cost 44 cents since May 2009. All "forever" stamps would remain valid, officials said. (Officials on Tuesday also unveiled a new "forever" stamp design of evergreen trees, which will be available in the fall.)

The government-backed Postal Regulatory Commission has 30 days to consider the rate plan. The average price increase proposed Tuesday is 5.4 percent, well above the rate of inflation currently set by regulators at .6 percent, according to the Postal Service. By law the agency must demonstrate "exceptional or extraordinary circumstances" to regulators to justify a price increase beyond inflation.

But the Postal Service will face stiff resistance from a new coalition called the Affordable Mail Alliance, formed in the past week to represent hundreds of nonprofits and corporations, including magazine publishers and catalog mailers, such as kitchen retailer Williams-Sonoma. The group said it wants the agency to rein in labor and operations costs before raising rates.

Tony Conway, executive director of the Alliance of Nonprofit Mailers and a spokesman for the Affordable Mail Alliance, said the Postal Service's delivery network "is a system that's built to handle about 300 billion pieces of mail, and they've got about 170 billion, and it's set to decrease. It's basically twice as big as it needs to be. It's that excess capacity and costs that are creating the need in their minds to do this."

In addition to Williams-Sonoma, the alliance includes Conde Nast Publishing, Reader's Digest, the American Girl doll company, the Envelope Manufacturers Association and the Catalog Mailers Association.

The Postal Service has cut more than 200,000 jobs through attrition and will trim $3.5 billion in costs by Sept. 30, said Maura Robinson, the agency's vice president for pricing.

"We're going to continue those cost and operational improvement programs," she said.

The proposed price increases come as the Postal Service anticipates losing at least $6.5 billion in the fiscal year that ends Sept. 30 and $7 billion next year. Raising rates is part of a series of reforms introduced to close an anticipated 12-figure budget gap in the next decade.

The Postal Service wants Congress to end billions of dollars of required prepayments for retiree health benefits and to allow the end of Saturday mail deliveries.

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