NEWSPAPERS CONCERNED ABOUT POSTAL SERVICE

By: Todd Shields USPS Wants Greater Flexibility To Raise Rates


WASHINGTON -- The U.S. Postal Service (USPS) says it is losing money at unprecedented rates, with a deficit of $2 billion or more possible this year. The dire forecast has prompted pleas for White House intervention, caught the attention of Congress -- and raised concern at newspapers.

Postal executives are asking Washington to recast the rules governing their agency, saying they need greater flexibility to respond to rapidly changing market conditions. Large dailies, however, fear the USPS would use new freedoms to favor large direct-mail companies that compete for advertising. Smaller newspapers, which are distributed by post, fear ever-more frequent rate increases if the Postal Service sinks into chronic crisis.

Papers already face their second rate increase of this year. Rates used to ship newspapers went up from about 6% to 10% in January, and are set to rise again July 1 by another 1% to 3%. This second increase is a result of the USPS' decision to override the Postal Rate Commission that vets rate-hike requests. It leaves small newspapers impatient. "Our rates are going up, service is going down. We need improvement now," said Senny Boone, vice president for government relations at the National Newspaper Association, an industry group for smaller papers.

The Postal Service says it is squeezed by slowing growth in mail volume and increased competition from private delivery services, as a sluggish economy stifles postal revenue stretched by increased fuel costs. Postal governors in March asked President Bush for his support for modernizing the main 31-year-old postal law. In following weeks, they warned "universal service is at risk without statutory reform," froze construction on post offices, and contemplated reduction of deliveries to five days from six.

Such pronouncements, skeptics say, may be aimed mainly at Capitol Hill, where the USPS hopes to win the pricing freedom it covets. "We've always suspected this most recent flurry ... was at least in part designed to stimulate a sense of crisis in Congress," said Jack Estes, executive director of the Main Street Coalition for Postal Fairness. Its membership includes the Newspaper Association of America, which represents daily newspapers.

Daily newspapers generally do not post their product. But they do worry that pricing flexibility would allow the Postal Service to cut deals with specific companies. Currently, rates may differ among classes of mail but not between companies. Newspapers fear price flexibility will produce a class of favored, large-volume advertising mailers who enjoy low rates that, unfairly, are subsidized by those doomed to use other, pricier mail products. The scenario foresees direct mailers, with a major cost subsidized by the USPS, in a position to lure advertisers away from newspapers.

Congress is poised to weigh in. Rep. Dan Burton, R-Ind., chair of the House Committee on Government Reform, has devoted two hearings this year to postal affairs. In a letter to President Bush, Burton said "change is needed" and called for White House involvement in "this matter of extreme urgency."

A committee member and longtime postal maven, Rep. John McHugh, R-N.Y., is offering as a starting point failed legislation he developed during the last Congress. Large dailies opposed the bill in part because it allowed price flexibility. Small newspapers supported it, believing it held out the promise of rate stability.

Critics say that, before it gets regulatory relief, the Postal Service needs to better control its costs. George A. Omas, vice president of the independent Postal Rate Commission, said the Postal Service is on track to spend $1.7 billion more this year than it anticipated -- and has yet to explain why.

"The deficits are real," said USPS spokesman Greg Frey. He points to hiring freezes and other cost-cutting measures. Postmaster General John E Potter, who took office June 4, said such steps have helped the service rack up $2 billion in recent savings.



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



Copyright 2001, Editor & Publisher.