Update: USPS Takes DMers for Granted, Wientzen Says

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WASHINGTON -- The U.S. Postal Service is taking continued business and revenue growth of direct mail for granted and is treating the industry unfairly, said H. Robert Wientzen, president/CEO of the Direct Marketing Association, to attendees of the DMA 2000 Government Affairs Conference here this week.


Wientzen said the USPS' rate proposals for direct mailers still run three to five times the growth rate of inflation; although, the 1996 postal reclassification and the 1999 rate increase generated surplus revenue. Those factors and a booming economy helped the agency mask its cost increases in operations, he said.


Instead of catering to the tens of thousands of businesses and millions of consumers who use the mail to sell, ship and handle returns, the USPS is catering to First-Class mail. Because this category is being adversely affected by the growth of the Internet, the USPS has proposed only a modest First-Class rate increase, Wientzen said.


As a result, it appears the USPS "is taking for granted that direct mail and periodicals will always be growing lines of business and revenue. ... [The USPS' actions suggest that] they are operating on a fundamental premise that is clearly ineffective and, frankly, way out of step with basic 21st-century business practices," he said. "And that is, when your sales fall off -- no problem -- you can just raise your prices."


Wientzen said the USPS did this once before -- and lost.


"During the early 1990s, it hiked rates of some catalog mailers by as much as 90 percent," he said. "The results? Catalog mail volume declined. Direct mail volume stagnated. There was a spiral of deficits and steep rate hikes, and some longtime mailers just gave up and switched to other media."


The DMA is urging the Postal Rate Commission to reject the current rate case and tell the postal service to try again, but "I wouldn't hold my breath," Wientzen said.


The USPS is trying to improve its business practices to lower costs in the future, Deputy Postmaster General John Nolan said at the conference later that day. As part of a major undertaking to reduce costs and remain competitive, he said, the postal service plans to cut administrative staff by 33 percent over the next three years. The cuts are part of a larger plan to reduce costs by $6 billion over the next six years. In addition, Nolan is awaiting a report on the value of each piece of property and every building the agency owns so it can eliminate excessive costs that could add up to millions of dollars that could be invested in technology to help drive down costs.


The agency also is trying to identify new mail users to make sure its core business is growing. "We are seeing how the Internet itself can open up direct mail to a whole lot of people who never planned on using it before," he said.


Nolan said he will begin working with the postal team to plan the 2003 and 2005 rate cases.


"Over the course of the next year, you can expect that we will be talking to people throughout the industry, trying to figure out what [we need to do] to remain viable," he said.


In his speech, Wientzen discussed Rep. John McHugh's Postal Modernization Act, H.R. 22, which offers incentives to help the agency cap costs, set rates and introduce services with greater flexibility. McHugh, R-NY, remains committed to getting the bill passed, but Wientzen said politics is holding it up and asked attendees for help in gaining congressional approval.


"If ever there is going to be significant reform, members of Congress have got to hear from you. I urge you to get involved and join the DMA's campaign for the kind of legislative reform necessary to allow the postal service to compete successfully in the marketplace of the 21st century," he said.


The association handed out a draft letter -- signed by Jerry Cerasale, the DMA's senior vice president of government affairs -- that could be mailed to the House Government Reform Committee, where the bill is pending. Meanwhile, Robert Taub, McHugh's chief aide, said McHugh and the postal subcommittee are working on a new version of H.R. 22 with hopes of moving it out of the Government Reform Committee, where it is stalled.

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