Mailers react to USPS's veto of rate relief

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The mailing community is disappointed that the Governors of the U.S. Postal Service failed to provide relief for the millions of commercial mailers who are being hit with massive, unplanned increases in postage costs.

The Postal Regulatory Commission's "Second Opinion and Recommended Decision on Reconsideration," issued May 25, established a transitional temporary rate reduction of 3 cents for all Standard Mail Regular flats and 2 cents for Standard Regular nonprofit flats. In a vote during the Board of Governors' closed meeting on June 19, the Governors decided not to implement the temporary change.

"We are extremely disappointed and frustrated by the latest decision from the Postal Governors," said Jerry Cerasale, the DMA's senior vice president for government affairs. "After recognizing that the PRC's original recommendations would have been detrimental to many of its commercial customers, the Governors asked the PRC to reconsider. And while DMA was not completely satisfied with the scope of the PRC's revised recommendations and offered a practical and legal long-term solution in our June 4 comments to the USPS Board of Governors, we are even more unhappy today that the Governors have made a 'do-nothing' decision that offers no help at all for their mailing customers."

On March 19, the Governors asked the PRC to reconsider some of the prices originally recommended on Feb. 26 and implemented on May 14 because they were concerned that price increases recommended by the PRC may impose an unnecessary degree of "rate shock" on the catalog industry and small businesses particularly. The recommended increase for some catalog mailers is as much as 40 percent, which is more than double what the USPS proposed.

Mr. Cerasale noted that a ripple effect is already being felt by flat-shaped mailers as well as by the downstream companies that provide mailing services and supplies.

"Hundreds of our DMA members let postal officials know that these outrageously high rates would force them to cut mailings by 10 percent, 20 percent or even more. We have already heard that many paper suppliers are planning a 15 to 18 percent reduction in coated-paper production because they expect a significant drop in orders as catalogers reduce volume due to these higher rates."

In its reconsideration proposal, the USPS had asked for a 3-cent reduction in piece rates for Standard Regular flats offset by a 0.7 cent increase in piece rates for most Standard Mail Regular letters. The USPS reasoned that this was appropriate because under the breakeven requirement of the Postal Reorganization Act, lower rates for similar categories must be offset by higher rates for others.

"We appreciate the [PRC's] thorough review of this matter and its creative recommendations to implement temporary rate reductions for mailers of Standard Mail flats," James C. Miller, chairman of the USPS Board of Governors, wrote in the final decision. "We are concerned, however, that approving those recommendations would not be legally sound or practically prudent."

Mr. Miller said the approach suggested by the [PRC] would result in breakeven within the test year, if the effective dates for selected rate changes were changed outside of the test year.

"This is the first time such a step has been recommended in an omnibus rate case and even the [PRC] recognized that 'the Governors may determine that it is necessary to reject this recommendation,'" Mr. Miller said. "We are troubled by the potential consequences of this approach in terms of disparate treatment for mailers and by the [PRC's] acknowledged lack of authority to circumvent the Board's control over the timing of rate changes."

Mr. Miller said the PRC estimated that the cost to the USPS of its recommendation would be $100 million.

"That amount of money is substantial," he said, "and its financial effect cannot be discounted …[D]espite our agreement that mitigation of rate shock is indeed a worthwhile objective, we are not inclined to approve the means recommended by the [PRC] to achieve this end."

Another issue was the difficulty in implementing the PRC's recommendation.

"Given the amount of lead time necessary to develop the software changes required to support these rate changes, the actual number of weeks in which the reduced rates might be in effect would be minimal," he said. "Such a short time frame of relief doing the low mailing season for a catalog industry that makes plans months in advance is not likely to mitigate rare shock significantly."

Despite these issues, the American Catalog Mailers Association echoed the DMA's sentiments.

"We are extremely disappointed that the Board has chosen not to grant much needed relief to the catalog industry," said Hamilton Davison, executive director of the ACMA. "Although ACMA understands the USPS's constraints regarding revenue shortfalls, we believe there were various workable solutions to problems currently faced by the catalog industry and the Postal Service. It is very unfortunate that some of these proposals were not carried forward in the final decision. We are concerned that the mailing community will look back on this series of decisions as highly damaging to the best long-term interests of all those who depend on a strong postal system."

ACMA is asking catalogers to reach local and national postal representatives with catalogers' unique needs and benefits to the system as a whole. The organization plans to create packages to assist them in reaching out to both the mailing community and their elected officials to publicize the industry's interests.

"It is now more important than ever for the catalog industry to make its voice heard," Mr. Davison said. "Although we are disappointed with this decision, we believe that we can work together with all parties in the future as long as we maintain a unified voice."

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