When Will People Stop Using Mail As First Class Postage Price Rises

By Douglas A. McIntyre Updated Nov 25, 9:23AM EST · Published Nov 25, 5:32AM EST

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

The United States Postal Service made two announcement recently. First, it announced a $5 billion annual loss. It also said the price of a first class stamp would rise from $.46 to $.47. At some point the current drop in the use of first class mail has to fall more rapidly than the USPS can increase first class rates. First class may become no class at all–at least in terms of usage.

When the Post Office announced its last fiscal financials, operating revenue posted at $66 billion compared to $65.2 billion the previous year. First class revenue was worse–down from $28.2 billion to $28.1 billion, not much of a drop at all. However, almost any product can price itself out of the market, and for first class mail, that problem can and will accelerate.

First class mail revenue continues to lead all other classes in terms of the revenue it contributes to the USPS. At $.47, the Postal Service could claim it offers an unmatchable service for letters. That has not been true in part for some time because of the advent of e-mail, and the ancient fax machine. The final challengers to the value of the service–UPS (NYSE: UPS) and FedEx (NYSE: FDX).

FedEx and UPS have mostly stayed with business package shipping, although each has products meant for the home delivery market. The $28 billion first class market has to be attractive, eventually. FedEx’s revenue in the last fiscal year came to $44.3 billion. Logistically, FedEx may not be ideally set up for lighter packages now, but it has the infrastructure to change that at some point–the point at which it become profitable.

Each of the financial opportunities for FedEx holds true for UPS which cannot afford to have its primary rival move into a large opportunity unchallenged.

The Postal Office claims the primary challenge to its financial status involves pre-funding of retirement benefits. That is only partially the case . At some point, first class mail rates increase will make that part of the postal service’s business more attractive to the private sector. The Post Office cannot afford that sort of competition

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.