PRC: USPS Presort Discount Too Generous

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Move inevitable to save $2 billion, says Postmaster General.
Move inevitable to save $2 billion, says Postmaster General.

The U.S. Court of Appeals denied on June 11 the petition for review filed by the United States Postal Service (USPS) filed against the Postal Regulatory Commission (PRC), to which the USPS is subordinate on matters like mail rates.

At issue is the PRC's claim that the USPS is over-discounting for presorted mail—bulk mail organized according to its destination by the mailer prior to handing it over to the USPS. The discount for presorting is supposed to result in lower costs and greater efficiency for the USPS; it is also intended to incent bulk mailers to continue using USPS services rather than electronic channels like email.

The USPS discount is what's called a “workshare discount”— given by the USPS for performing tasks the agency would otherwise perform itself. However, a PRC governing statute specifies that the discount may not surpass the costs avoided as a result of presorting. Because the USPS presorting discount surpasses those costs, the PRC concludes the discount is too generous.

In light of the continuous losses in revenue, the USPS considers it necessary to offer large discounts for bulk mailers to ensure that they continue to use the USPS. As Charley Howard, VP of postal affairs of direct marketing services agency Harte-Hanks, understands this concern. “Ten to 15 years ago [direct mailers] were captive customers,” he says. “Now we have alternatives.”

While Howard observes some Harte-Hanks clients contemplating the shift to social media and email, direct mail remains one of the best ways of reaching the target audience. Therefore, Howard doesn't expect a reduced discount for presorted mail to have a significant impact on the industry's modus operandi, especially since presorting mail has benefits beyond the reduced costs. “Mail is time sensitive, which means that the less the Post Office has to handle a mail piece, the quicker it moves through the system,” he explains.

Howard voiced his support for the Postmaster General Patrick Donahoe. “He's done more than any of his predecessors to make the Post Office more efficient,” Howard explains. He adds that privatization of the USPS will be “hell for the mailer”, but he believes the USPS “should be allowed to behave more like a business.”

The USPS is currently reviewing the decision passed down today, and declined to comment until it has conducted further analysis.

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