More postal pain?

The joy of the long-awaited postal reform may be short-lived. The U.S. Postal Service wants to raise rates again, and nobody knows how the agency will go about the increase. Some fear the USPS may try to go for one last big hike under the old rules.

But even if the USPS is ready to follow the rate-making provisions of the Postal Reform and Accountability Act passed late last year, the increase may be more than mailers expected.

If the USPS files one last big rate case under the old law, that would essentially preclude any hike in 2008, says Joe Schick, director of postal affairs for Sussex, WI-based printer Quad/Graphics. “But it would create a possible huge increase in January 2009, as the USPS and the PRC line up all costs with the appropriate rates.”

Or the agency could go with the CPI (Consumer Price Index)-based increases under the new law, which would likely be implemented in May 2008, Schick says, “when the USPS says it needs the infusion of new revenue to cover the shortfalls for fiscal year 2008.”

Many believe that the agency will be ready to adhere to the provisions of the Reform Act, which means the increase will be subject to inflationary levels.

That’s supposed to be the good news for Standard mailers, who got socked with postal increases of 20%-25%, and as high as 40% in some cases this past May. The Reform bill includes a rate-increase cap that ties future postage increases at or below the rate of inflation and strict criteria regarding conditions for emergency rate increases. But within the Standard Mail category, under the new rate-making scheme flats could still bear the brunt of future increases.

Hypothetically, Schick says a CPI increase of 3% could be applied to all classes of mail. But within the classes, there could be variance between the subclasses.

For example, in Standard Mail letters could increase X, flats increase Y, and parcels increase Z, he says, “so some categories of mail could realize increases larger than CPI as long as the total increase for that class equates to CPI.” Under the old law, he says, cost dictated increases for each class and subclass.

“No decision has been made on when prices might change again or whether we would seek price changes under the old rules,” says USPS spokesman David Partenheimer. “We have until Dec. 20 to file a rate case under the old rules or wait for the PRC to come out with its final new pricing regulations and seek price changes under the new regulations.”

But some industry groups, such as the American Catalog Mailers Association, think mailers should be prepared for the worst. The ACMA’s real concern, according to executive director Hamilton Davison, is that many other Standard Mail classes have been active in postal policy advocacy. “They’re claiming their mail is highly automated and cost effective, and the brunt of cost increases should be put on flats,” he says.

Catalogs: a new postal product

The situation could be so dire that there is serious talk of pushing to have catalog mail considered its own service or product.

Don Landis, vice president of postal affairs for catalog printer Arandell Corp., says he favors separating standard letters and flats into different subclasses. But, he adds, “splitting standard letters and flats presently is a long shot.”

Schick is also dubious: “I’m not sure if the USPS would make that type of change right out of the box.” The agency has stated that if it moves under CPI in May, it would only change the rates and not make any wholesale changes to the structures or products and services, he says.

But Gene Del Polito, president of the Association for Postal Commerce, is optimistic that catalogers won’t be hit as hard with rate hikes post-reform. “The Postal Service is free to vary amounts of increases at subclass levels,” he says. “I don’t expect anything significantly out of bounds relative to inflation.”

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