Mailers: Timing Wrong for Rate Increase

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Direct mailers are calling for a delay in the implementation of the U.S. Postal Service's R-97 Rate Case, which is expected in July.


Companies are concerned that the introduction at that time of proposed new rates -- which could increase Standard A mail 3.9 percent -- would penalize the postal service and its customers.


Anthony Ruggiero, director of worldwide postal and distribution at Franklin Mint, Franklin Center, PA, recently wrote to Sam Winters, chairman of the USPS' board of governors, stating that there would be detrimental effects on both mailers and the postal service if new rates were implemented before Jan. 1, 1999.


Ruggiero said the case should be delayed to give companies a chance to purchase and implement updated versions of their mailing software.


"Not only are there going to be rate changes, there are going to be procedural changes," said Ruggiero. "All of these things need software to make them happen -- and the few times we've had changes, the software community is always very late in getting their software up and ready. It's because they are never sure what's going to be accepted and not accepted by the PRC [Postal Rate Commission] and the board of governors."


Ruggiero said he was concerned about timing.


"If this starts to hit in the late summer, early fall time frame -- when all of the mailers are beginning to send out their mailings for the fall and winter seasons -- it will cause major procedural problems," he said. "And our current estimates indicate that the fall 1998 mailing volumes will reach record quantities."


Other groups said the rate case should be delayed in light of USPS' record profits of $4.7 billion over the last three years and a surplus of $980 million in the first quarter of fiscal 1998.


Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association, asked the PRC to urge the postal service to postpone any increase this year.


"This hike would come on the heels of a near-record $1.3 billion surplus -- the third year in a row of $1-billion-plus surpluses," he said in a prepared statement. "Clearly, the postal service doesn't need a rate increase right now. Leaving rates where they are is generating new revenue for the postal service, far beyond projections."


Cerasale acknowledged that the proposed increase would be modest for most mailers, but added, "A rate increase this early could jeopardize mail-volume growth, needlessly hurt business and drive up communication costs at a time when the postal service needs to be more competitive than ever."


Although it is the board of governors that has the final say over whether or not rate increases can be delayed, the PRC can make rate recommendations. And mailers are confident it will consider the surplus when making its decision.


The PRC submitted a notice of inquiry to all intervenors in the rate case, asking them if the commission should recognize the USPS' 1997 net income. Major mailing organizations, including the DMA and the Advertising Mail Marketing Association, said it should.


Others said the PRC could not consider the USPS' financial performance without revising the case to take the surplus into account.


At least one organization, the Mailing Advertising Service Association, has decided to wait and review the PRC's recommendations before suggesting an implementation strategy to the board of governors.


PRC chairman Ed Gleiman declined to comment on case proceedings.


Meanwhile, the rate case continues on schedule. Additional dates are as follows:


* March 9, parties can file a final rebuttal.


* March 16-20, there is an opportunity for everyone who has filed to be sworn in and be subject to questions from the commissioners, postal service and other participants in the case.


* April 1, intervenors can file legal briefs to best explain how the evidence should be interpreted and what legal principles are applicable to determine what the rates should be.


* Intervenors must submit reply briefs by April 10.


* The commission will prepare a written decision in early May.


* The board of governors is scheduled to make a final decision by late spring or early summer.


The period for intervention -- where interested parties have an opportunity to submit their testimony for or against the rate case -- ended in August. The PRC cannot accommodate any more witnesses.


"The hearings are going forward," said Stephen Scharfman, PRC legal adviser. "A lot of people may feel that since the postal service is making money, nothing is happening in this arena. But there is still a case going on now, and we still don't know for sure if there will be a rate increase as a result of it."
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