MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

MICHELE NORRIS, host:

And I'm Michele Norris.

The woes of the post office are as familiar by now as the corner mailbox. Mail volume is down, thanks to the Internet and the recession. And it's expected to keep falling; most post offices lose money.

So Postmaster General John Potter is proposing a set of changes that he says will right the ship. They include closing some post offices and eliminating one day of mail delivery a week.

NPR's Brian Naylor reports.

BRIAN NAYLOR: Neither snow, nor rain, nor heat, nor gloom of night can change the fact that the 21st century has not treated the Postal Service kindly. We pay our bills, invite friends to parties and read magazines mostly now online. Meanwhile, the recession has led to companies mailing fewer ads and catalogs.

The Postal Service lost $3.8 billion last fiscal year, and the red ink is projected to add up to an astounding $238 billion in 10 years if nothing is done. Postmaster General John Potter says plenty can be done. Among the first steps, close some of the nation's 32,000 post offices, most of which lose money.

Mr. JOHN POTTER (Postmaster General, U.S. Postal Service): We're not talking about wholesale closing of every post office in America. I'm talking about giving management the choice to make decisions that are in the best interest of consumers.

NAYLOR: There are more post offices in the U.S. than there are McDonald's, Starbucks, Wal-Marts and Walgreens combined. Yet the average post office has 600 customers in a week, while the average grocery store has 20,000.

Potter would like to see postal services provided in places like grocery and office-supply stores. Potter would also like to deliver the mail a little less often than the six days a week the postman now rings.

Mr. POTTER: The amount of mail that we deliver to every address per day is going down, and going to every address is a fixed cost. And so, as the volume declines, the only way to address that cost is to reduce the frequency of delivery.

NAYLOR: Potter outlined his plans in a briefing for reporters after three national consultants analyzed the post office business in the U.S. It's not a pretty picture just about every revenue stream is going down, while every cost is going up.

In addition to the recession and the Internet, there's a big problem created by Congress: It ordered the Postal Service to prepay its future retirees' pension and health benefits. That's a cost of more than $5 billion a year.

Democratic Senator Thomas Carper of Delaware chairs a Senate subcommittee on the post office. He says the pension prepayments are a major cause of the Postal Service's red ink.

Senator THOMAS CARPER (Democrat, Delaware): We shouldn't ask the Postal Service what we ask of no other state or local government and, as far as I know, no other business enterprise to do. And that is to upfront set aside enormous amounts of money to meet health care needs of their potential pensioners.

NAYLOR: The Postal Service could and probably will also raise its rates. Potter says it's not covering costs right now on some mail it delivers, such as magazines. But the danger is too big a rate hike could chase away more customers.

Mr. POTTER: We could actually hurt our business going forward and begin to have the Postal Service spiral into the ground. So we want to be very judicious about using that tool.

NAYLOR: While postal regulators are likely to approve a rate hike, it will be up to Congress to authorize the proposed changes in the number of delivery days and closing of post offices. In the past, that's been a tough sell, especially to lawmakers who represent rural districts and who fear some small towns could lose their community centers. Potter hopes that the new data will convince lawmakers to act in order to, in his words, protect the service that America has grown to love.

Brian Naylor, NPR News, Washington.

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