U.S. POSTAL SERVICE CONSIDERS ANOTHER RATE INCREASE

By: Todd Shields

Smaller Papers Fear Annual Rate Hike


WASHINGTON – The U.S. Postal Service (USPS) last month put
in place rate hikes that did not exactly thrill newspaper
executives, but at least left them grateful steeper increases had
been avoided.

Now, barely a month later, the USPS is again moving toward a
possible rate increase. And this time, few mail users are
sanguine.

The USPS’s board of governors last week told postal managers to
begin preparing a rate case “as soon as possible.” The directive
set the service on course to again enter the nearly yearlong
regulatory gauntlet that can lead to a rate increase – at a
time its last rate request remained unresolved.

Rate increases used to occur every three or four years; the
USPS’s last request was filed in January 2000. Last week’s
directive means it could be back for more money within months and
begin charging even higher rates by mid-2002. The development
comes against a backdrop of higher fuel costs for the service’s
202,000 vehicles, stubbornly high labor costs for its work force
of 800,000, and a slowing economy that is curtailing mail volume
and hence revenue – not to mention a seemingly irreversible
trend that has increasing portions of lucrative first-class and
priority mail going to electronic and other competitors.

Some whose businesses depend on the mail wonder whether recent
events herald an era of yearly rate increases meant to rescue a
perpetually broke USPS.

“This is scary,” said Senny Boone, vice president for government
relations for the National Newspaper Association, a trade group
that represents smaller-circulation papers for the most part.

Many weekly newspapers move copies to subscribers via the mail,
and for them postal costs usually rank third behind payroll and
newsprint. Rate hikes pose an obvious threat to profitability. A
struggling USPS also could cut delivery routes to save money,
making it harder to get newspapers to subscribers.

Large dailies, too, are on alert. While they mainly use
independent distributors to get the paper to the doorstep, many
also produce advertisement-laden products that are mailed to each
household.

Such lucrative publications could be threatened by a series of
rate increases, said Chet Dalzell, a spokesman for Harte-Hanks
Inc. The San Antonio-based company finished selling its
newspapers in 1997, but publishes nearly 800 shoppers in
California and Florida. “If the cost goes up much more, that’s
just going to scare advertisers to other vehicles,” Dalzell said.

USPS spokesman Greg Frey said he is not certain the service will
apply to the independent Postal Rate Commission (PRC) for another
increase. “I don’t think anyone is sure.” He said a strong
economy might bolster postal revenue, and noted the most recent
rate case was not yet finalized.

The rate commission in November slashed by one-fourth the $2.8-
billion increase the USPS had requested 10 months earlier. The
service put the new rates into effect Jan. 7, but it did so under
protest and sent the case back to the PRC. Whatever the
commission’s decision, the nine postal governors may override it
by a unanimous vote. In their public statement last week, the
governors noted they had “unanimously voiced disappointment” with
the PRC.

All of which leaves postal rates in greater flux than normal.

“This is not a done deal,” said Bob Brinkmann, vice president for
postal and regulatory affairs at the Newspaper Association of
America, a trade group representing large dailies. “We’re going
to have to watch what happens. And a lot of it is tied to the
economy.”



Todd Shields (tshields@editorandpublisher.com) is the Washington editor for E&P.



Copyright 2001, Editor & Publisher.

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