By: Kelvin Childs
Rates go up for newspaper publishers, down for direct mailers
Citing record profits and lower-than-anticipated inflation, the Postal Rate Commission last Monday scaled back the U.S. Postal Service’s requested $2.4 billion rate increase by one-third. It recommended pushing the implementation date back until January, if not later.
The commission also approved a higher mail rate increase for newspapers and periodicals than the Postal Service had asked for, while lowering the mail rates for direct advertisers.
While reducing the Postal Service’s overall request by $745 million, the commission approved an increase in first class mail from 32? to 33?. For periodicals ? the category of mail many daily and weekly community newspapers use ? the commission OK’d a 1.1% increase in the in-county rate and a 4.6% increase in the regular rate. The Postal Service had asked that the in-county rate go up 1.9% and the regular rate go up 3.9%.
The commission also proposed making more small newspapers eligible for a walk-sequencing discount by no longer requiring that at least 125 pieces be delivered on a carrier’s route. The new requirement would be that at least 25% of the addresses on the route receive the paper. And it proposed lowering the fee for newspapers that take their papers to post offices outside of their zone because they want better service.
Because the law requires each category of mail to cover its costs and contribute to overhead, the commission approved the rate increases of periodicals, said chairman Edward J. Gleiman, who spoke May 11 in Washington, D.C., at the release of the commission’s findings. Periodicals’ costs have gone up 18% since the last rate hike proposal three years ago, he said. This is because automated mail handling systems can’t easily accommodate newspapers.
On the other hand, the automated systems can deal with direct advertising pieces, he said, and such mail is price-sensitive. Because of that, and because the Postal Service is enjoying large surpluses and low inflation, the commission recommended only a 1.2% increase in the Standard A Commercial Regular rate overall and only 2.2% more for the Commercial Enhanced Carrier Route.
The National Newspaper Association, which represents community newspapers, was pleased with the proposal overall, particularly that the periodical mailers’ share of overhead costs was lowered.
“In our testimony to the Postal Rate Commission, we objected to the Postal Service proposal to increase the rates for local newspapers at a time when service delivery is deteriorating rapidly,” stated Kenneth B. Allen, NNA executive vice president and CEO.
“We are delighted the commission agreed with this position and applaud their decision, which will benefit both local newspapers and their communities,” Allen continued.
The Newspaper Association of America, which represents 1,700 papers in the United States and Canada, also was pleased with the recommendations, in particular that some advertising mail rates were not as low as the Postal Service had asked. The NAA argues that the Postal Service wanted to cut ad mail rates, by as much as 18% in some categories, in order to draw business from newspapers, making up the lost revenue with higher rates on first- class and other mail.
“The Postal Rate Commission’s decision is sound and, once again, demonstrates the need for careful, intelligent supervision of the postal system,” stated John F. Sturm, NAA president and CEO.
“It makes no sense to implement a sharp decrease in postal rates for advertising mail that most people don’t read and don’t want when virtually all other rates are going up,” continued Sturm.
The Postal Service submitted its rate increase request in July 1997, anticipating that increases would be approved by May and implemented by June. However, Gleiman said, emphatically, “My colleagues and I see no reason why any increases should be put into effect before January of 1999, at the earliest.”
The rate proposal forecasts a $1.4 billion deficit, even though at the time the Postal Service expected a $600 million surplus for the year. It ended 1997 with a $1.2 billion surplus, following surpluses of $1.8 billion in 1995 and $1.5 billion in 1996. For the first half of 1998, the agency has a $1.3 billion surplus, Gleiman said.
“We believe the service may have seriously misestimated its need for a rate hike,” he said.
Several times, Gleiman criticized the Postal Service for giving the commission outdated and inaccurate cost and revenue projections to evaluate. The rate proposal, based on 1996 data, overestimated inflation and doesn’t reflect all the savings garnered from mail reclassification begun in the fourth quarter of 1996, he said. And, because of the 1997 surplus, the commission found that the annual revenue the Postal Service sets aside for past years’ losses can be reduced by $70 million.
In February, the commission asked the Postal Service to provide more recent data, but the Postal Service declined to do so. “I think it’s unfortunate that the Postal Rate Commission can’t get the information it wants to get by simply asking for it, or by subpoenaing it,” said Sturm. “I can’t think of any other regulatory or quasi-regulatory agency that only gets the information that the regulatee wants them to have.”
The Postal Service Board of Governors may now approve, reject or modify the proposal, or send it back for more consideration.
A Postal Service spokeswoman said that the agency has no comment on the rate commission’s announcement and will wait to see how the Board of Governors will act.
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?(copyright: Editor & Publisher May 16, 1998) [Caption]