Publishers Doubt Postal Rate Increase Can Be Cut

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Despite promises from the U.S. Postal Service to reduce the 15 percent magazine rate increase request the agency filed with the Postal Rate Commission earlier this year, magazine publishing associations doubt the goal can be achieved.


Postmaster General William J. Henderson told members of a congressional subcommittee this month that he is committed to reversing the rate increase for magazine publishers from 15 percent to 8 percent or 10 percent. This was the first time Henderson said publicly he is committed to this goal.


But according to a status report released earlier this month by American Business Media, New York, a consortium of trade business publishers, after meeting with the USPS, the prospect of successfully reducing the increase to single digits is unlikely.


"While Henderson is on the record as saying he is trying to decrease the rate increase, and I think that he is really trying, the numbers do not bear this out," said Gordon T. Hughes, CEO of American Business Media.


ABM along with the Magazine Publishers Association, Washington, and major publishers are skeptical, because earlier this year the USPS incorporated actual fiscal 1999 cost data into the rate case and updated its 2001 forecasts to reflect inflation and the recent increase in gasoline prices. This update added $560 million to the agency's overall costs, indicating that any rate increase would probably be in double digits.


In addition, insiders are saying that the $150 million reduction of the agency's revenue requirement -- which periodical publishers thought would help turn their rate increase into a single digit -- is now shifting out of periodical classes and into other classes.


Hughes said, "It's our severe hope that the USPS will be able to develop the numbers that they said they would develop, and I do believe that they are working at it like they never have before. But as it is right now, I'm not optimistic about it."


The rate case, however, continues. Rebuttal testimony will be filed and cross-examined in August, followed by legal briefs in September. The PRC is scheduled to make a decision at the beginning of November, and new rates will go into effect in January.
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