Tension and contention for postal world increases

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I've been following the postal environment for quite a while, and I've never seen things quite so contentious.

Let's start with the recent rate increase. The U.S. Postal Service's proposed increase would have hit light-weight catalogs and parcels hard with big double-digit increases. The Postal Regulatory Commission compounded things by knocking a penny off the First Class stamp, thereby draining revenue out of the postal system. To make matters worse, it steepened the increase on lighter-weight catalogs.

Cataloger contentions

Then, a group of catalog mailers started a new trade group to represent catalogs. This might make sense except heavy-weight catalog mailers are content.

The Postal Service's Board of Governors, in an attempt to relieve industry pressure, particularly from catalogers, sent back to the PRC the Standard Mail portion of their rate increase recommendation for further review.

The commission proposed a temporary rate reduction of 3 cents per piece for Standard Mail regular flats and 2 cents for Standard Mail nonprofit flats. The reduction would end on Sept. 29 and could begin after postal Board of Governors' approval. With the Governors' decision still outstanding, the most mailers could get is three months of relief. This offers minimal opportunity to react and change mailing plans.

Automation complications

To top it off, postal software suppliers complain they will have no time to make and test software changes to automated postage reports. The PRC is suggesting manual bottom line adjustments to postage reports.

Another object of mailer tension and angst is over the Postal Service's plan to automate the delivery sequence sorting of flats. There is no question that this area is a major expense and a big challenge facing the Postal Service. The objective is to have flats, primarily catalogs and magazines, bar coded and sorted into delivery sequence to reduce letter carrier in-office sorting time.

At a recent flats symposium, Deputy Postmaster General Pat Donahoe noted that letter mail delivery sequencing began 14 years ago, and it's now operating at an 83 percent level. Mr. Donahoe said from the beginning of the program, the Postal Service expects flat-sorting sequencing at an 80 percent level.

Given address positioning requirements, flats stiffness and flexibility requirements and problems inherent with the physical characteristics of flats, the 80 percent level, if achieved, will be a fantastic accomplishment. Mailers and the Postal Service will be feeling plenty of pressure if the program gets off to a slow start.

Labor disputes

There are a number of issues relating to the Postal Service's craft employees and their unions that's adding to the tension in the postal world.

First is the fact that the service was unable to reach a contract agreement with the two unions representing letter carriers. They are the National Association of Letter Carriers and the National Rural Letter Carriers' Association, representing city and rural letter carriers respectively. Both sides are now preparing their economic testimony to be presented to an arbitrator who will make a binding decision.

It's been a while since a postal labor agreement has not been settled by the two sides through direct negotiations. Clearly it would have better if the direct-negotiation route could have been followed. It's probably an indication of problems in the labor management environment as the Postal Service continues to try and automate the delivery process. Delivery efficiencies mean that letter carriers get larger delivery routes.

Legal issues

And as if mail delivery needed more complications, a group of Democratic senators, led by Tom Harkin (D-IA), have introduced a bill that would forbid the Postal Service from contracting out any new delivery routes.

It's interesting to note that the recently passed reform legislation was silent on labor issues. This legislation would end the silence and restrict Postal Service actions to control costs just when First Class volume is in decline. It's not clear whether this bill has a future, although it clearly is being pushed by the delivery unions.

To top it off, the largest of the postal unions, the American Postal Workers Union, together with a coalition of consumers and nonprofit mailers, has filed a lawsuit against the Mailers Technical Advisory Committee. MTAC comprises trade association representatives that represent all segments of the business, government and nonprofit mailing community.

The lawsuit challenges "secret policy making by a Postal Service advisory committee." What will come of this suit? Who knows? But the MTAC process has functioned well over the years to enhance postal and mailer communication and help implement new postal technology.

One hopes the sides will be able to work out their differences through administrative remedies, but in the meantime it may put a damper on technology implementation, including the flats-automation program.

What's next?

What else is causing concern? Certainly it's the possibility of a USPS rate increase filing late this year with another postage increase likely in 2008. The underlying issue is whether the Postal Service will file for the increase under the new reform legislations essentially across the board guidelines? Or will it file under the old, cost-plus-markup, more litigious rules?

With some catalogers reeling, the MTAC facing criticism, a proposed temporary rate reduction that's received mixed reviews, labor-contract arbitration, an intricate flats-automation program, pending congressional legislation to restrict contracting out, declining mail volumes and the possibility of an additional Federal Reserve interest rate increase that would further reduce volume, it makes for a trying time in the mailing universe.

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