Q&A: Postal Chairman Dan Blair in the Hot Seat May 20, 2008 7:15 AM
, By Jim Tierney
JobZone
Search and post jobs for the Multichannel Merchant. Including jobs for brand & agency marketers, e-commerce, catalog marketers, ops & fulfillment, direct marketing and more.
With rates what they are, many catalogers are ready to go
postal about rising costs. Dan G. Blair, chairman of the Postal Regulatory
Commission, addressed some of their concerns in an exclusive interview with
Multichannel Merchant.
Q: How would you describe the PRC’s role in the rate-setting
process?
A: Prior to the passage of the Postal Accountability and Enhancement Act (PAEA)
in December 2006, the Commission recommended adjustments in postal rates and
classification to the Governors of the U.S. Postal Service. The law
significantly strengthened the Commission. Our primary responsibility as a
regulator is to ensure transparency and accountability of the Postal Service. We
are no longer a rate-setting body, but a regulator ensuring that the Postal
Service complies with the requirements of the law.
Q: Besides volume, what factors does the PRC consider when
differentiating mail classifications during the rate-setting process?
A: Under the PAEA, the Commission must consider several criteria when
determining whether different postal offerings should be classified as separate
products. For an offering to be a separate product, the Commission must
determine that the postal offering has either distinct cost characteristics or
distinct market characteristics for which a rate or rates may be reasonably
applied. During the rate-setting process, the Commission must also ensure that
workshare discounts do not exceed 100% of the cost that the Postal Service
avoids as a result of the worksharing activity unless the USPS demonstrates
that the discount meets certain statutory criteria.
Q: Catalogs got hit hard with the rate hike last May. How
would you explain those exorbitant rate increases for Standard Mail Flats? A: That increase was considered under the old rules
governing rate adjustments under the Postal Reorganization Act, and came after
two settled rate cases, in 2001 and 2005. Because of these settled cases, rates
were not tracking costs. Thus, between 2000 and 2006, the relationship between
rates and costs eroded substantially. This caused the Postal Service to have a
higher net revenue from letters than from flats, despite the fact that letters
are less expensive to process. To address this, the Commission’s recommended
flat rates moved Standard Regular flats toward paying a fairer share. Piece by
piece—even under the PRC’s recommended rates—Standard Mail flats do not
contribute as much as Standard Mail letters do to the overall cost of the
postal system. Under the Commission’s recommended rates, the Postal Service
makes roughly 3 cents more from letters than from flats.
Q: With reform, why is it necessary to raise rates every
May?
A: The law gives the USPS more flexibility to determine how often to change
rates subject to several statutory objectives. The Postal Service expects to
implement rate changes for all market dominant classes annually in mid-May. As
long as the adjustments are made on a schedule that maintains predictability
and stability in rates, the USPS can adjust rates at any time.
Even with the CPI cap under the reform bill, some catalogers are concerned they
could still bear the brunt of an increase among Standard Mailers. What should
they do? We encourage the public to submit written comments when the Postal
Service files a Notice of Price Change. Second, individuals may file complaints
if they believe that the Postal Service is not complying with relevant
provisions of the law. Third, comments may be submitted seeking redress in
connection with the Commission’s Annual Compliance Determination.
