Postal Service forecast grim

Increasing use of electronic bill-paying threatens to deprive the U.S. Postal Service of substantial revenue, possibly enough to force the closure of post offices, the increase of postage rates and a cutback of postal service, the General Accounting Office warns.

The Postal Service ended last year $200 million in the red, and the outlook for improvement is grim. Postal forecasters expect the volume of first-class mail to decline 18 percent by 2008, the GAO said in its Performance and Accountability Series report on USPS Jan. 17.

In the longer term, the Postal Service projects, electronic bills and payments will replace half of the bills and payments that are now sent by mail, GAO said. Bills and payments make up a major portion of first-class mail, which is the most profitable part of the mail. Efforts to use technology to improve Postal Service productivity have yielded disappointing results so far, GAO said. Major investments in automation and information technology over 30 years have increased productivity by only 11 percent.

Part of the problem is that delivering the mail remains a labor-intensive endeavor. Labor costs account for more than 75 percent of the Postal Service's operating expenses, GAO reported.

Nevertheless, the Postal Service plans to spend more than $17 billion over the next five years on automation and information technology in hopes of achieving a productivity "breakthrough" that saves at least $1 billion a year.

The Postal Service has attempted to profit from the Internet and electronic commerce, offering electronic billing and payment services, certified e-mail and other electronic services. But so far, "the service's financial data for its electronic commerce initiatives were not sufficiently complete and reliable to assess the Service's performance," GAO said.

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