Study: Reform Will Save Money for Standard Mailers

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Mailers who send Standard letters and flats would save millions of dollars over 10 years under postal reform, according to a study done for the Direct Marketing Association by SLS Consulting Inc. The U.S. Postal Service, however, says the new report is inherently flawed.


"This is an overly simplistic, shoddy bit of documentation to try to fool people into believing that legislative reform the way it is currently stated suddenly gave you a windfall of reduced rates," said Thomas G. Day, USPS senior vice president of government relations. "Nothing could be further from the truth."


Larry Buc, president of SLS Consulting, Washington, which specializes in economic, operational and environmental analysis in the mailing industry, said that the model contained many assumptions, as with any model.


"All these sorts of things are some ways assumption-driven because you are never really sure," he said.


The study found that postage payments would be meaningfully smaller under either the House (H.R. 22) or Senate (S. 662) bills, even more so under the Senate bill.


The savings are the result of the net cost savings from lifting the pension escrow and changing the retiree benefit payment mechanisms as prescribed by the bills as well as the implementation of a Consumer Price Index-based rate indexing system beginning in 2008, the study said.


The study assumed that without reform, postal rates would rise annually at a higher rate than CPI.


"The reality is the [USPS] Board of Governors ... [said it] was committed to keeping rates capped under CPI even without legislative reform, and that is further emphasized in the Transformation Plan that we just released," Day said. "We have done it, and we will continue to do it."


The House passed H.R. 22 on July 26. The Senate Committee on Homeland Security and Governmental Affairs approved the bill for floor action in June, but no other action has been taken.


SLS modeled Standard mail postage from 2006 to 2015, with and without reform. For the reform cases, it used the provisions of H.R. 22 as passed by the House and the provisions of S. 662 as reported to the Senate floor by the committee. It then modeled postage costs for mailers with annual volumes of 50 million, 100 million, 250 million and 500 million pieces a year.


The study found that mailers of 1 billion Standard letters annually would save $181 million from 2006 to 2015 under S. 662 and $151 million under H.R. 22. The savings go down from there. Mailers of 500,000 pieces annually would save $91 billion under S. 662 and $75 million under H.R. 22, and those mailing 50 million pieces annually would save $9 million under S. 662 and $8 million under H.R. 22.


Mailers of Standard flats also would save. Mailers sending 500,000 pieces annually would save $129 million under S. 662 and $107 million under H.R. 22.


SLS said its model embodies further assumptions such as:


· 2006 postage for all cases is based upon the rates proposed by the USPS in the current rate case.


· With or without reform, the USPS will raise rates again Jan. 1, 2007. Based on a statement by Board of Governors chairman Jim Miller, rates will increase by mid-single digits in 2007 without reform. The model assumes that without reform the 2007 rate increase will be 6 percent. With reform, rates would increase less.


· After 2006, the model assumes that the percentage rate increase for Standard mail letters and non-letters in all rate cells will be the same in any given year and will be so either with or without legislation.


Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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