*Rate Case Interveners Submit Final Written Testimony

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Direct marketers want the U.S. Postal Service to reduce its rate increase request by almost half, according to final written rebuttal testimony submitted to the Postal Rate Commission this week.


The PRC, the USPS' oversight board, will listen to rebuttal testimony during hearings that will begin Aug. 22 and will continue through Sept. 1.


Mailing associations and coalitions are putting lots of energy into fighting for lower rate increases this year, because the postal service has asked for a revenue requirement of $3.4 billion and increases of 15 percent or more for many types of mail categories.


For direct marketers, the average increase would be 7.7 percent. The largest increase in this category -- 14 percent -- would be for some automation flats, or catalogs, because of the increased cost of processing flat mail. Magazines could see increases of 15 percent.


The Direct Marketing Association, Washington -- backed by 16 major companies and associations that rely on the USPS to reach customers and deliver goods and services -- submitted testimony that said the USPS should slash its proposed $3.4 billion revenue requirement to $1.8 billion. It argued that the USPS should cut its contingency allowance -- which accounts for $1.7 billion of the requirement and is included in the rate case to offset any unforeseen events -- to $175 million.


"We're sure the postal service will fight our recommendations because they want the money," said Jerry Cerasale, senior vice president of government affairs at the DMA. "But the postal service needs to understand that this is an economy where it is not the only game in town. E-mail is everywhere. If the USPS keeps running up its rates, it will find itself out of business."


The DMA and its partners called the USPS' plan to raise postal rates by 6.4 percent both irresponsible and unnecessary.


"The inflation rate from January 1999 to January 2001 will be about 4.7 percent," Cerasale said. "The rate increase request of 6.4 percent is one-and-a-half times the rate of inflation. We think that is too high. The postal service should only raise rates at or below the rate of inflation."


Cerasale also said the planned rate increases will cause businesses to raise their shipping prices, resulting in an increase in the cost of purchasing merchandise over the Internet. Business mailers will look for other avenues through which to advertise, and the volume of all mail will drop sharply, he said.


"These rate hikes will be the death of the post office," Cerasale said. "The U.S. Postal Service can't afford to drive away its customers."


Businesses joining the DMA in its testimony were Advo Inc.; the Alliance of Independent Store Owners and Professionals; Alliance of Nonprofit Mailers; Amazon.com Inc.; American Business Media; Association for Postal Commerce; Association for Priority Mail Users Inc.; Dow Jones & Co.; Florida Gift Fruit Shippers Association; Greeting Card Association; Magazine Publishers of America; Mail Order Association of America; Major Mailers Association; The McGraw-Hill Cos. Inc.; Parcel Shippers Association; and Time Warner Inc.


The Periodical Coalition also submitted testimony suggesting that the revenue requirement should be cut. The ad-hoc group includes the Magazine Publishers of America; American Business Media; Alliance of Nonprofit Mailers; Coalition of Religious Press Associations; Dow Jones & Co.; The McGraw-Hill Cos.; National Newspaper Association; and Time Warner.


The Periodical Coalition also submitted testimony that "clearly demonstrates that periodicals should receive no more than the systemwide average increase," said Jim Cregan, executive vice president of government affairs at the MPA, Washington. "We think the testimony we filed makes a compelling case for that."


Cregan said the USPS also filed testimony last week that "essentially makes the case itself that the periodical category should get no more than a single-digit increase."


Cregan said a postal witness, Carl G. Degen, an independent postal consultant based in Washington, submitted testimony that "summarizes all the record evidence that we've developed and that they have acceded to, which has the effect of reducing the revenue they say they need from periodicals by [more than] $200 million," Cregan said.


"We think the combination of what we have filed in terms of rebuttal evidence … with what they have filed makes a strong case for [a] final outcome being the single-digit increase and not the 15 percent increase that the postal service originally asked for in January," Cregan said.


While interveners have been submitting testimony to the PRC since the rate case began in January, this round of testimony is important because it allows the objectors to respond to testimony that others filed earlier in the case. It is also a time for interveners to reflect on the newest postal numbers available.


In their testimony, most interveners argued that the USPS' revenue requirement -- and its subsequent rate increase requests -- is too high and should be cut.


After the hearings wrap up Sept. 1, initial trial briefs that summarize the evidence over the past months are due Sept. 13. On Sept. 22, interveners can file reply briefs, whereby interveners can respond to arguments that their opponents made in their initial briefs. This will conclude the case unless the commission orders oral arguments, which is unlikely.


The PRC is expected to finalize its decision on the rate increase on Nov. 8 but has until Nov. 13 to do so. The rate increases are scheduled to go into effect in mid-January.

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