Mailers Respond to McHugh's H.R. 22 Changes

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The Mailers Coalition for Postal Reform focused on how postal rates are set in written comments submitted to U.S. Rep. John McHugh for his Postal Reform Bill.

McHugh (R-NY) had asked interested parties to respond to revisions he made to H.R. 22, which is designed to overhaul the laws governing the U.S. Postal Service. Key areas included having the postal service split its products and services into competitive and noncompetitive groups, creating a separate corporation for the competitive ones and the authority to set most of the rates for them, adding a Consumer Price Index-based price cap and expanding of the role of the Postal Rate Commission.

The Mailers Coalition -- a consortium of mailing associations including the Direct Marketing Association, the American Mail Marketing Association, the Postal Policy Council and the Parcel Shippers Association -- paid attention to Chapter X of the bill, which pertains to setting postal rates, classes and services.

Although the group agreed that all postal products and services be distinguished primarily as noncompetitive, it suggested that the products be grouped into five baskets. One basket should include single-piece First-Class mail, for example, while another should include bulk First-Class mail and still another, periodicals.

The group also agreed with H.R. 22's proposals to use the CPI as the key component for determining postal rate increases, but suggested instituting a "Consumer Price Dividend" to reduce rates, which will assure that mailers always receive below-inflation-rate increases.

And, though it agreed with H.R. 22 that the USPS should have the authority to set prices for competitive products and services as often as needed, it didn't agree that there should be separate financial accounting for these products. Instead, "each year, the prices charged for competitive products should be sufficient to cover incremental costs, and each year, the average price for competitive products should be increased by an amount that is at least equal to the average annual rate increase assigned to all noncompetitive baskets." This, the group said, would assure that the USPS does not abuse its monopoly powers by permitting noncompetitive products to subsidize the prices assigned to competitive products.

More than 30 groups, including the United Parcel Service and the USPS, offered additional comments to McHugh's bill. Here are highlights:

* In lengthy documentation, the USPS' Board of Directors said it is concerned that the "circulated revision paper would move the legislation in directions that do not achieve the improvements necessary for workable reform. ... Moreover, the changes now contemplated call into question some of the most successful features of the 1970 postal reforms." The board said it did not support the revised H.R. 22's suggestion for the management of the postal system to submit to greater external government review or its idea to expand the regulatory role of the PRC. In addition, the paper would limit H.R. 22's original proposal for pricing flexibility, saying it focused instead on the comparatively smaller categories of service perceived to be the most competitive.

* In separate memos, the DMA and the AMMA, suggested that legislative reform include the use of performance-based incentives, similar to those used in the private sector, and the elimination of pay caps on executive compensation. Both groups also urged the postal service and the postal unions to negotiate performance-based incentives with collective bargaining.

* The Mailers Council, an organization composed of large for-profit and nonprofit mailing companies, said that although its members had differing views on specific provisions in the amended bill, it hoped H.R. 22 would "reflect the council's primary objective in the debate on postal reform: to ensure that the postal service has the opportunity to provide the lowest possible postal rates without compromising service."

* Pitney Bowes, Stamford, CT, a major postal software company, questioned whether the public could ever be confident that the H.R. 22's proposed Private Law Corp. -- whereby the postal service could sell nonpostal products in a wholly-owned and controlled environment -- would never be subsidized or favored. The company, however, supported the idea that the postal service should not sell these products directly.

Dana Johnson, a spokeswoman for McHugh, said that the subcommittee is reviewing the comments and that it will prepare legislative language before going to mark-up in late May or June. The full committee should consider it shortly thereafter.

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