Reform a reality for next rate hike

It’s official: Future postal rate increases will follow the provisions of the postal reform bill passed a year ago. That means rate hikes will be tied to the Consumer Price Index (CPI), or rate of inflation, for mailing services including First Class Mail, Standard Mail, and periodicals.

The U.S. Postal Service’s Board of Governors announced Nov. 15 that future prices would be adjusted using new regulations issued by the Postal Regulatory Commission on Oct. 29. The board’s decision is consistent with the Postal Reform and Accountability Act, which calls for a rate-increase cap that fixes future postage increases at or below the rate of inflation. It also has strict criteria regarding conditions for emergency rate increases.

Technically, the BOG could have filed one final rate case under the old regulations in place since 1971, but voted to proceed with the new pricing regulations. “We thank the Postal Regulatory Commission for completing the new rules eight months ahead of the statutory deadline,” Postmaster General John E. Potter said in a release. “This delivers one of the main goals of the new law for business mailers — a predictable price schedule.”

Gene Del Polito, president of the Association for Postal Commerce, is pleased with the BOG’s decision to tie future price increases to CPI. “For us, it will mean predictability,” he says. “Increases and change will come but, by and large, we know they won’t deviate greatly from what the rate of inflation is.”

In the postal rate case that took effect in May, catalogers were hit hardest, with many facing increases from 20% to 40%. Del Polito is convinced that the USPS understands the Standard Mailers’ plight. “The Postal Service fully appreciates that catalogers got whacked in the last rate case and [it has] no intention of repeating that,” he says.

Still, some say catalogers aren’t out of the woods when it comes to massive rate increases. Hamilton Davison, executive director of the American Catalog Mailers Association, says the misconception in the industry is that the CPI cap tied to future price increases precludes exorbitant rate hikes like the one sustained this year by catalogers. “The CPI cap is at the class level,” he says. “The entire class has to be averaged out to at or below CPI level.”

Some classes within Standard Mail can be all over the board, Davison says. “Our real concern is because so many other Standard Mail classes have been very 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.”

Flat chance Another challenge facing mailers will be the Postal Service’s deployment of a new flats sequencing system (FSS). “The relief catalogers need to get is going to have to come from the flats automation program, which won’t be sufficiently implemented until 2010,” Del Polito says.

This new generation of flat-sorting equipment will sort flats into the sequence a mail carrier walks. The USPS was scheduled to begin deploying FSS equipment in 2008, but Del Polito believes it will take time for catalogers to feel the full economic effect of the new technology.

“If the cost of mailing flats continues to go up, everybody will be racing against time to get the FSS equipment fully implemented,” he says. And mailers should remember that “it took 10 years to fully realize savings potential from letter automation.”

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