DMers, USPS Upbeat About Postal Reform Bill

Direct mailers and postal officials expressed mixed feelings about the Postal Modernization Act of 1998, which was approved late last month by a House subcommittee.

The bill, H.R. 22, has been sent to the Committee on Government Reform and Oversight for further consideration. Introduced in 1996 by Rep. John McHugh (R-NY), the bill is designed to give the USPS more freedom to manage its business and establish rules to ensure fair competition. However, McHugh acknowledged it's unlikely the bill will progress this session and will have to be taken up again once the 106th Congress convenes in January.

If passed, the bill would alter the way postal rates are set. For example, it will separate rate-setting into two categories: competitive and noncompetitive. First-Class and Standard-A letters would be deemed noncompetitive by virtue of the USPS' legal monopoly on such types of mail, and rates would be established by using a price cap regimen based on the Consumer Price Index minus a productivity adjustment factor.

Priority Mail, international mail, parcel post and other services similar to those offered by private companies would be considered competitive and run by a newly-formed private corporation. Prices for both categories, however, may be adjusted on an annual basis by the USPS' board of governors according to market conditions. The bill also calls for:

* A realignment of the authority granted to a new USPS board of directors and a renamed Postal Rate Commission.

* The opportunity for the USPS to operate its competitive services with minimum regulatory intrusion.

* The State Department to represent the United States at the Universal Postal Union.

The subcommittee adopted additional amendments, including designating one of the seats on the board of governors to a representative of the postal labor organizations on a rotating basis, and mandating the USPS to study diversity in the postal work force, the effect of automation on employees and the representation of women, minorities and small business in its contracting.

While most mailing insiders and the USPS breathed a sigh of relief that the landmark bill passed McHugh's committee, DMers still want to see some changes made.

“We commend Rep. McHugh for the significant effort he's made,” said Vincent Giuliano, senior vice president of government relations at Advo Inc., Windsor, CT. “We're looking forward to working with Rep. McHugh, Congress, the USPS and the industry in the legislative process to refine the bill.”

The USPS was more specific in what it wants done. In a letter to McHugh, postmaster general William J. Henderson said many of the provisions are essential to postal reform in the 21st century, specifically legislation to modernize the concepts used in postal ratemaking. However, other parts need further attention.

“A concept of equivalent revenue contribution between competitive and noncompetitive service is out of tune with marketplace reality,” he wrote. Since market conditions set the prices for genuinely competitive products and services, relative contributions will be arbitrary and unmanageable.

Nonprofit mailers, however, were pleased with the bill, especially since it says that nonprofit rates — along with other categories of mail — can only be set 2 percent above or below the price cap and that no rate case can suffer repeated increases above the cap two years in a row.

“Here's a challenging task: Try to design legislation that would, on one hand, grant the USPS more flexibility to unilaterally set rates, and also allow USPS officials to offer negotiated rates to some customers,” said Neal Denton, executive director of the Alliance of Nonprofit Mailers, Washington, “and, on the other hand, design enough safeguards so that nonprofit mailers can find some comfort. McHugh has done this.”

McHugh said the bill will fundamentally modernize and reform postal laws for the first time since 1970.

“We need to change our postal laws to make certain that the postal service has the flexibility to adapt, survive and compete in the 21st century,” he said. “My bill will do that, but equally important is the way the bill strengthens and clarifies postal rules to protect the postal service's employees, customers and competitors.”

Whatever postal reform path is chosen, it will take some time for the postal service to adapt.

“H.R. 22, if enacted today, would set in motion a series of reforms that will probably not be fully implemented until sometime in 2007, the end of the first five-year rate cycle,” McHugh said, adding that those who support amendments or alternatives should keep these time frames in mind.

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