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Letter delivery is declining for the post office but package and business delivery continues to rise (that is why some rates targetting those actually went down).
And over the last decade while I no longer ever send mail I have directly increased the amount of mail caused to be send over what would have been sent otherwise (so on top of the junk mail I'd say that the Netflix, Amazon, etc. deliveries far outpace the loss of several outgoing bills per month).
Most of the pressure for price increases has little to do with total demand but with increased cost of doing business (how much do you think a 40% increase in the price of gas affects them with all their delivery vehicles, for example). And the size thing is related to automation. If mail comes through in predefined sizes and addressing formats it can be handled with near zero human intervention. If it doesn't more expensive handling is required.
The post office will deliver an unwrapped bowling ball if you attach stamps and an address but it'll cost them a lot more to do it.
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