Postal Rates To Rise p. 11

By: Debra Gersh Hernandez Newspaper Association of America lauds keeping the
increases below the rate of inflation, and National
Newspaper Association head says her group is 'not unhappy' sp.

TO NO ONE'S surprise, postal rates will be increasing next year, although the percentages suggested by the Postal Rate Commission (PRC) are somewhat different than those submitted by the U.S. Postal Service.
The Postal Service generally accepted a proposal earlier this year from the Mailers Council and other large postal customers, who said they would accept a postal rate increase of 10.3% across-the-board, to give the Postal Service the funds it needs and to speed up and simplify the rate-making process.
The PRC accepted the Postal Service's recommendation to raise the cost of a first-class stamp from 29? to 32? ? although the overall first-class rate will go up only 8.9% ? and it deviated from the 10.3% formula in other rate classes.
According to the commission, a 10.3% across-the-board increase would have created a disproportionate burden for institutional costs on first-class mail, which already pays for 72% of the Postal Service's overhead costs.
The second-class, in-county rate, which the Postal Service ? after originally calling for a 34% increase ? suggested be decreased 1.5%, has been recommended for a 1.8% increase.
Commission chairman Edward Gleiman said the recommendation was based on "attributable costs with that type of mail."
According to figures supplied by the commission, the second-class rate for a within-county newspaper, 5 ounces, carrier-route, presort-delivery unit entry is currently 7.48?. Under the Postal Service proposal, that would have fallen to 7.31?, but the commission has recommended it increase to 7.57?.
The second-class regular rate also was recommended by the commission for a greater increase (13.9%) than asked for by the Postal Service (10.3%), as was the third-class, regular bulk rate, which has been recommended to go up 14%, also more than the 10.2% suggested by the Postal Service.
"The commission recommends increases of approximately 14% for the bulk commercial subclasses of second-class and third-class mail, and for fourth-class, bound printed matter," Gleiman said at a news conference, announcing the commission's recommendations:
"Second-class rates are available for publications such as newspapers and magazines. Third-class rates are used largely for advertising."
Gleiman noted, "The costs of processing and delivering these categories of mail have been increasing faster than the costs of first-class mail. However, significantly, the commission's recommended 14% increases are smaller than the rise in inflation experienced since the filing of the last major rate case in 1990."
The commission chairman also warned the Postal Service that it "must control costs and it must improve service" if it is to survive.
"What has become crystal clear during our nine-month review process is that businesses and the general public simply will not pay more for less very much longer. Every alternative delivery means . . . will be tried and found attractive if the Postal Service fails to deliver all mail on time," he said.
Regarding the rates, Robert Brinkmann, vice president/postal and regulatory affairs for the Newspaper Association of America (NAA), said, "This is just about what we expected."
The NAA statement lauded keeping the increases below the rate of inflation and noted that while it supported the 10.3% increase, it believes the PRC "appropriately balanced the competing interests before it."
Tonda Rush, president and CEO of the National Newspaper Association (NNA), said, "The rates that came out were not surprising. We figured that the Postal Rate Commission would have to do some adjustment. Overall, we were not unhappy."
The 1.8% increase for second-class, in-county mail will be a lot easier to bear than the original 34% proposed by the Postal Service. The first number was the result of faulty data collection, a problem that is being remedied.
"It was important to us that the commission recognized the data collection system is flawed . . . . We're trying to have a rate based on actual cost of mail," Rush noted.
The NNA is working with Postal Service officials toward correcting the problem, but Rush fears a remedy may not be at hand before another rate case.
Mailers Council executive director Arthur Sackler said that "overall, it's not a bad decision."
While the Mailers Council supported the 10.3% increase, Sackler called the changes "significant but not severe . . . . We kind of expected they would make some changes, and they are within the range of our expectations."
The Direct Marketing Association (DMA), however, criticized the PRC for the hit on third-class mailers.
"By insisting on third-class rates that are higher than those proposed by the Postal Service, the PRC has penalized what has been a profitable sector of postal business," stated Jonah Gitlitz, president and CEO of the DMA.
"By shifting burdens to third-class mail, this decision will cause a drop in expected third-class mail volume that will hurt the Postal Service and all postal customers," he warned in his statement.
"The Postal Service has historically provided the nation's advertisers with a vehicle for communicating efficiently with consumers and businesses," Gitlitz added. "However, in today's Information Age, there are other media vying for direct mail business. Today's decision will persuade many advertisers to use other media ? some of it less targeted ? to reach prospective customers."
The PRC's recommendations now go to the Governors of the Postal Service for final approval. The new rates could go into effect as soon as Jan. 1, 1995, and, of budgeted annual revenue of $54.6 billion, are expected to contribute as much as $4.7 billion.
Early next year, the Postal Service also is expected to tackle a major rate reclassification.