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

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

Projected rate increases (or decreases) under
various assumptions are summarized in table
10. As shown, using the alternative/revenue
cost assumption (where revenue/piece is the
same for conventional and Generation II hard
copy fist class delivery, as would be the case
under current USPS pricing policies), a small
rate decrease is projected for 1995. If the
100 percent EMS stimulation assumption also
applied, for the high Generation II growth
alternative, rate decreases of about 16 and 9
percent are projected for 1995 and 2000, re
spectively. Under these assumptions, the pro
Table 10.-Projected First-Class Mail Rate
Increases or Decreases, Years 1995 and 2000
1995 2000
High but plausible Generation II EMSgrowth alternative
Underlying mainstream growth rate
1 percent ....................... + 10.50/+ 31.40/%
Underlying mainstream growth rate
2 percent ....................... + 3.2 + 18.1
Underlying mainstream growth rate
3 percent .... .................. .- 2.5 + 7.4
Assume alternative revenue/cost
figures........................ . - 6.1 + 4.9
Assume alternative revenue/cost
figures and 100 percent EMS
stimulation .............. .......- 15.9 -9.2
Very high Generation ii EMS growth alternative
Underlying mainstream growth rate
2 percent ....................... + 6.2 + 20.4
Assume alternative revenue/cost
figures ........................ - 9.9 + 2.6
Assume alternative revenue/cost
figures and 100 percent EMS
stimulation ..................... - 23.7 - 14.3
Moderate Generation iiEMSgrowth alternative
Underlying mainstream growth rate
2 percent ....................... + 2.0 + 18.1
Assume alternative revenue/cost
figures........................ . - 4.4 + 5.0
Assume alternative revenue/cost
figures and 100 percent EMS
stimulation ..................... - 1 1.8 - 9.1
Slow Generation ii EMS growth alternative
Underlying mainstream growth rate
2 percent ....................... + 0.3 + 14.6
Assume alternative revenue/cost
figures......................... - 1.6 + 8.4
Assume alternative revenue/cost
figures and 100 percent EMS
stim ulation ..................... - 4.3 +0.1
(+ ) projected first class mail rate increase
( ) = projected first class mail rate decrease
Unless otherwise indicated, 2 percent underlying mainstream growth rate is
assumed
SOURCE Office of Technology Assessment based on data from figs 9 and 10

jected rate decreases are even larger for the
alternative representing very high Generation
II EMS growth. Even the slow growth alter
native would not require a rate increase in
2000.
In comments to OTA, the Department of
Justice (DOJ) has expressed the view that
USPS could not successfully charge a different
rate for delivery of Generation II as compared
to conventional first class mail, either legally
under the Postal Reorganization Act's rateset
ting requirements or as a practical operational
matter. Both the Postal Rate Commission and
DOJ reviewers believe that OTA's alternative
revenue/cost assumption is the most likely
rate basis, absent a change in USPS pricing
policies.
All of the foregoing projections assume
other variables are held constant, including
volume. If first class volume was sensitive to
rate increases, a volume reduction could result
which might in turn necessitate further rate
increases, and so on. A 20 to 30 percent in
crease (net of inflation) in first class rates could
be enough to adversely affect the competitive
position of first class mail. If second and
third class volumes declined significantly, per
haps due to competition from alternative de
livery services, additional pressure on rates
would be generated. Also, all of the rate pro
jections are in constant 1980 dollars and do
not reflect increases due to inflation. And the
revenue/cost analysis in chapter 5 assumed
that productivity improvements with respect
to conventional mail would offset increases in
the cost of capital and real wages. Should the
real cost of capital or labor or both exceed the
inflation rate, further upward pressure on
postal rates would be experienced. In addition,
the revenue/cost analysis assumed significant
cost displacement for USPS delivery of Gen
eration II EMS hardcopy output. If the cost
displacement turned out to be less, or if other
kinds of USPS EMS services resulted in a net
real cost increase, the rate projections could
be substantially different. Finally, the rev
enue/cost analysis assumed that current
USPS service levels would be maintained.

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 September 20, 2014.