*Net Postage Discount Seen Helping Online Stamp Companies, Consumers

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Stamps.com, Santa Monica, CA, the online postage vendor, said Monday it was pleased with the Postal Rate Commission's recommendation for the creation of a new classification and discounted rate for First-Class mail sent using Internet postage.

Earlier this month, the PRC proposed an average 4.6 percent postal rate increase, including a 1-cent increase for the price of First-Class letters -- increasing the cost for sending a letter from 33 cents to 34 cents. However, it also suggested the development of a new mail class that would offer a discounted rate for letters bearing computer-generated postage.

While the PRC did not specify the amount the discount would be, during rate case proceedings, Stamps.com petitioned the PRC for a 4-cent discount for Internet postage, based on the cost savings provided to the USPS through automated processing of mail.

A rate reduction for Internet postage, Stamps.com said, would provide significant cost savings to users of the Stamps.com service and is expected to increase the company's leading customer base.

"The potential savings for our customers through this recommendation is significant," said Stamps.com interim CEO Bruce Coleman. "A discount should lead to increased customer acquisition by providing a strong incentive to use our service and should result in a growth in usage among our current base. Traditional meters would not provide this discount."

A lower rate could be a boon for sales at ailing online postage companies such as Stamps.com and E-Stamp Corp., San Mateo, CA, which have been hit hard by market resistance for Internet companies this year. Last month, Stamps.com laid off 240 staff members after several high-level executive departures, including the resignation of its chief executive. The layoffs are part of Stamps.com's plan to streamline operations.

"This recommendation is a huge vote of confidence for the emerging Internet postage category," said Frank Heselton, former assistant postmaster general for rates and now a consultant to Stamps.com. "The creation of this new classification is a logical first step toward establishing a specific and permanent discount for users of Internet postage. It is unusual for the commission to recommend creation of a new category in the first hearing in which it's considered. Significant support exists within the postal community for developing a specific discount for this category."

The rate decision now moves to the USPS Board of Governors for final approval, which is expected. If accepted, rates and classifications would go into effect Jan. 7. After that the USPS will have a new classification for online rates to which it can apply a discount. The USPS would then send this recommendation back to the PRC, which could approve or disapprove the recommendation or recommend another one.

The board is scheduled to meet Dec. 4-5.

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