Implications of Electronic Mail and Message Systems for the U.S. Postal Service

Ch. 3-Market Penetration Mode/ and Technology Assumptions .33

These alternatives are used in later chapters
to test the sensitivity of the projected mail vol
umes, first class revenues and costs, and labor

force requirements to assumptions about the
growth and timing of Generation II EMS.

Underlying Mainstream Growth

Between 1970 and 1980, the overall volume
of mail handled by USPS grew at an annual
compounded rate of about 2.2 percent. Be
tween 1900 and 1977, the annual compounded
rate of growth was about 2.0 percent. There
fore, OTA used an estimate of 2 percent as the
baseline underlying rate of growth in the mail
stream. In other words, absent any diversion,
it was assumed that the mainstream would
grow by about 2 percent per year over the next
20 years (the timeframe of this study).
However, there are several indications that
this assumption may be on the low side. For
example, the University of Michigan study es
timated an annual mainstream growth rate of
2.9 percent prior to technological diversion.7
Also, in 3 of the last 4 years the actual rate
of growth in the mainstream exceeded even
this 2.9 percent level.* The USPS estimated
rate of growth for fiscal year 1981 is 3.5 per
cent.8Finally, between 1947 and 1977, the
annual compounded mainstream growth was
about 3.2 percent.
Table 8 summarizes the various justifica
tions for assuming a 2 v. a 3 percent underly
ing mainstream growth rate. The balance of
evidence appears to suggest that a 2 or even
1 percent rate is typical of economically de
pressed periods, while the rate has been 3 per
cent or more during better economic times.
These possibilities were accommodated in
the market penetration model by making sen
sitivity runs of the model under different sets
of assumptions, and by adjusting all results
upward by 10 percent to be consistent with
'Kallick, Rodgers, et. al., op. cit.
*5.1 percent for fiscal year 1978; 2.9 percent for fiscal year
1979; 6.5 percent for fiscal year 1980; and 3.5 percent (estimated)
for fiscal year 1981.
'Per Nov. 22, 1981, telephone conversation with Lou
Eberhardt, USPS Public Information Office.

Table 8.-Alternative Assumptions About
Underlying Mainstream Growth Rate
Justifications for 3-percent underlying growth rate
1947-77 average mainstream growth = 3.2 percent per
year
1977-81 average mainstream growth = 4.2 percent per
year
1951-77 average first-class mail growth = 2.8 percent
per year
University of Michigan mainstream study estimate= 2.9
percent per year
Justifications for 2-percent underlying growth rate
1970-80 average mainstream growth = 2.2 percent per
year
1900-77 average mainstream growth = 2.0 percent per
year (includes 1930's depression and both World
Wars)
1951-77 ratio of first-class mail to disposable personal
income declined from 76 million letters per $1
billion to 57 million letters per $1 billion
Justifications for I-percent underlying growth rate
1971-76 average mainstream growth = 1.1 percent per
year
1971-76 average first-class mail growth = 0.7 percent
per year
aM Kallick, W. Rodgers, et al. Household Mailstream Study, Final Report,
DreDared for USPS Mail Classification Division 1978
bJohn F McLaughlin, et at, TetephoneLetter Competition A Frst Look, Har
yard University, 1979
SOURCE Off Ice of Technology Assessment
the estimated fiscal year 1981 USPS overall
mail volume. Sensitivity runs were carried out
for both a higher (3 percent) and a lower (1 per
cent) underlying mainstream growth rate. The
results of selected sensitivity runs are pre
sented in chapter 4.
The one time 10 percent adjustment in re
sults for consistency with 1981 data was
needed because the actual mainstream growth
during the 1977 81 period far exceeded the
2 percent annual rate that was assumed initial
ly. As noted in chapter 4, the market diver
sion model was based on 1977 mainstream
data, which was the only detailed data avail
able at the time of the study. The model as
sumed that, under the baseline growth of 2

United States. Congress. Office of Technology Assessment. Implications of Electronic Mail and Message Systems for the U.S. Postal Service. UNT Digital Library. http://digital.library.unt.edu/ark:/67531/metadc39480/. Accessed April 24, 2014.