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First-Class Mailers Rebut Prepaid Reply Plan

The U.S Postal Service is facing rebellion from its largest constituency, First-Class mailers, over a proposed service that would let consumers return bills and other material without paying postage.

If passed by the Postal Rate Commission, Prepaid Reply Mail (PRM) would give a discount to participating businesses — especially credit card and utility companies that send First Class mail — who supply prepaid envelopes to customers.

Here is how PRM would work: Any participating First-Class mailer would provide a printed, addressed, barcoded and postage-paid reply envelope and would receive a 3-cent discounted rate on that return mail. To participate, the companies would have to pay a $1,000 monthly fee and would be responsible for counting the actual number of pieces that were received by customers.

Last month, several organizations — including the American Bankers Association, American Financial Services Association, National Postal Policy Council and the Direct Marketing Association — told the USPS Board of Governors that the plan would create many hardships on the business community and would force most of them to pursue less expensive electronic bill payment systems.

Ultimately, they said, it would result in reduced mail volume and would prompt rate increases for all mailers. Its high administrative costs also would exclude most small- and medium-sized businesses, thus limiting participation to 10 percent of all businesses.

“PRM is not totally developed and tested, and it should be looked at a little more thoroughly,” said Jerry Cerasale, senior vice president of government issues at the DMA, Washington.

When PRM was proposed last summer, the Board of Governors called it “a monthly postal dividend for the American people.”

While the service is voluntary, Barry Brennan, director of postal affairs at the Mailing Advertising Services Association, Alexandria, VA, said the associations think it will give participating companies an unfair advantage.

“Companies are concerned that the market will demand that they offer it if their competitors do,” Brennan said, “and, frankly, the administrative cost is so astronomical that if the citizens are getting a break, they may not be because the company will charge it back in their bills.”

Utility Brooklyn Union Gas, Brooklyn, NY, is embracing PRM.

“There are reasonable assurances that both the participating mail recipients and the postal service will realize material benefits,” the utility said during rate case testimony last year.

Other companies have yet to sign on.

The postal service said the $1,000 monthly fee is justified since PRM would end up costing it more than $20 million dollars, considering the fact that it is predicting that 786 million pieces of mail will be First-Class prepaid reply pieces — and each of these pieces would be discounted 3 cents.

No one is for sure how the PRM proposal will pan out. The USPS' Board of Governors can decide at any point to withdraw all or a portion of a rate case, which this is a part of.

“This is not a very central issue [in the rate case],” Cerasale said, “and the governors have withdrawn measures that they don't support by telling the Postal Rate Commission to basically ignore things.”

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