*Mailer Groups, USPS Competitors Speak Out on HR22

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Most mailer groups offered mixed feelings about HR22, the Postal Modernization Act, and offered some changes to it at a hearing held by John McHugh (R-NY), chairman of the subcommittee on the postal service, in Washington last week.

The Mailers Coalition for Postal Reform, which consists of members of the Advertising Mail Marketing Association, American Express, the Direct Marketing, Mail Order Association of America, and the Parcel Shippers Association, for example, said that the basic structure of HR22, which separates classes of mail into competitive and noncompetitive categories and provides rate flexibility to the postal service, is sound and has the group's full support.

However, Jerry Cerasale, senior vice president of government affairs for the DMA who spoke on behalf of the coalition, also offered some changes to the bill that the group believes will protect mailers from sudden and drastic rate increases.

For example, he said that noncompetitive products should be defined as products over which the postal service has a monopoly by law or through market dominance.

"The service should not have the carte blanche discretion to set rates that HR22 affords competitive classes, if, in fact, the postal service has a monopoly over that class of mail," said Cerasale. "Mailers who use such classes need the protections offered by the indexed rate provisions in HR22."

Cerasale also said the group does not agree with the HR22 requirement that the minimum mark up for competitive classes of mail must equal the average mark up for all postal products.

'This provision is too restrictive and is counterproductive to the goal of giving the postal service the tools to survive in the 21st Century," he said.

In addition, Cerasale said the minimum contribution for competitive classes of mail should be established by the commission for base rates after applying all factors of the act. Then, the minimum contribution should be calculated in a revenue-weighted basis for all the contributions of the competitive subclasses.

"This would maintain the level-playing field for postal service competitors that the commission established," said Cerasale.

The Coalition also said that it agrees with the HR22 provision that allows the USPS to enter into negotiated service agreements, where a single customer and the USPS agree on a certain rate tied to guaranteed mail volume. But, he said that the procedure needs to be in place for handling complaints from other parties who can also meet the terms of an existing NSA, but are denied a similar arrangement. In these cases, he said, the PRC must render a decision on the complaint within 90 days, subject to judicial review.

Witness Robert Kamerschen, chairman of Advo, Inc, a large direct mail company, agreed that HR22 provision on NSA's should be reworked.

"We believe that the bill's provision allowing the USPS to enter into negotiated service agreements with customs should be stronger to ensure that reform truly achieves its objective," said Kamerschen, who spoke on behalf of the Saturation Mailers Coalition, trade group representing over 40 companies hat use the postal service to provide saturation advertising programs.

In the SMC's suggested framework, NSAs would be self-financing, requiring customers to earn their reduced rates by bringing in additional revenues. This way, no other mailer would have to bear the burden of reduced rates. In addition, NSAs would be available to any mailer who qualifies, regardless of size, and all USPS contracts would be a matter of public record.

"We're not trying to get a bigger piece of the postal pie," said Kamerschen. "On the contrary, our goal is to sustain and grow the whole pie."

In general, however, the hearing, which also included witnesses from the Department of Justice, USPS competitors UPS and FedEx, and other mailer groups, offered little surprises.

James P. Kelly, president/CEO of the United Parcel Service, said that USPS legislative reform should focus on creating greater accountability and oversight of the agency to ensure a level playing field for competitors and greater protection for consumers.

"It's time to have this government agency refocus on its primary mission of providing superior universal letter-mail delivery," said Kelly. "[To do so], Congress should at a minimum, strengthen the Postal Rate Commission to increase the postal service's accountability to consumers and taxpayers."

Kelly urged Congress to give the PRC the authority to make binding decision on all postal rates, including jurisdiction over international rates and service, and authority over the postal services' revenue requirement to ensure that it is covering the costs of each product.

Kelly also noted that PRC oversight is even more critical in light of a recent announcement that the USPS will partner with DHL to provide two-day delivery to Europe at below-market rates.

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