When No Postal Rate Increase Is a Bad Thing

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With the CPI close to zero, there's a chance for no rate hike in 2016. That could stymie operational improvements beneficial to mailers.

No rate hike could derail FSS savings.
No rate hike could derail FSS savings.

The exigent surcharge's expected demise next April is, of course, a good thing for mailers. Even better, the CPI-U (urban consumer price index), which is used to set the percentage of the Postal Service's annual rate increase, was up only 0.1% this June over last June. That sets up a possible scenario in which, come spring of 2016, mailers would see the 4.3% surcharge go away and no higher rate installed—a hallelujah situation if ever there was one.

But nothing is that simple when it comes to matters postal. In fact, Joe Schick, Quad/Graphics' director of postal affairs, maintains that no CPI rate increase could turn out to be a bad thing for mailers. “It's good for the obvious reason, but it could be bad if it interferes with adjustments to mail preparation,” Schick wrote in a blog this week.

Under the Postal Service's annual request for, say, a 2% increase like the one granted for 2015 are rate changes all around that number for separate classes of mail. Big mailers like Quad have several efficiency projects surrounding some of those classes in the works with USPS that would require rate changes to be put into effect. But class changes are nearly impossible to attain without a blanket CPI rate boost.

“For instance, we have an ongoing request with the [Postal Rate Commission] about Intelligent Mail barcode full service, and the Commission ruled that the service change would constitute a rate change,” Schick told Direct Marketing News. “What kind of regulations changes can you make outside of a price change.”

Schick is mostly concerned about changes proposed for the Flats Sequencing System (FSS) mail that could award significant savings to his company and, in turn, its bulk mailer clients. Currently, Quad and other big mailers must dedicate each pallet to just one “scheme,” or set of contiguous ZIP codes. The proposed new system would allow multi-scheme pallets holding up to six schemes. But any savings mailers might gain from this change must come in the form of a lower rate OKed by the PRC.

“The exigent rollback would be considered a price change, so all they have to do is pull that out. They know what those numbers are going to be, so the process doesn't allow for other changes,” Schick said.

Schick noted that the Postal Service's new CMO Jim Cochrane and its VP of Pricing Cynthia Sanchez are aware of the situation and are working with mailers to address it. “They've been very straightforward with us,” Schick said. “They are very sincere in wanting to do the right thing.” 

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