Monday, April 27, 2015

Decline: First the Post Office, then Verizon, AT&T

Telecom analyst Nick Del Deo charts the Postal Service's decline and draws sobering lessons for Verizon and other phone companies

Decline: First the Post Office, then Verizon, AT&T

Letters and shipments by the US Postal Service, "the world's largest distribution system," has fallen by more than one-sixth since 2004 - but US law has required the service to boost the number of addresses where it delivers by 6%, writes Nick Del Deo, telecom analyst at Bernstein Research, in a report to clients today.

In response, the Post Office has laid off one-sixth of its workers and done a respectable job cutting costs, especially considering how Congress won't let it raise prices faster than inflation or close politically-connected post offices just about anywhere.

But the easy cuttin is over, Del Deo adds. Employee healthcare and pension costs are rising, and "universal service" requirements make it impossible to end the low-priced, high-cost service to new Montana dude ranches and other far-flung properties.

"The parallel between the dispiring story of the Postal Servcie and that of the incumbent wireline telephone comapnies are obvious," Del Deo concludes. Verizon and AT&T have to serve everyone, and they've trimmed management ranks and sold marginal business lines.

But "the costs that remain," like "maintenance, utilities, network operations... will be much more difficult to purge from the system."Bernstein is urging clients to hold or sell most phone stocks, and buy underpriced, profitable cable giants TimeWarner or Comcast.

About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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