Postal Reform Process Begins p.17

By: DEBRA GERSH HERNANDEZ THE PROCESS OF postal reform has begun on Capitol Hill, but newspaper lobbyists are none too pleased with proposals currently on the table.
Introduced in the House of Representatives, H.R. 3717, the Postal Reform Act of 1996, would reformat the U.S. Postal Service in its internal operations and customer rates.
"Many of the reforms sought by the Postmaster General are contained in H.R. 3717, including the ability to offer postal customers volume discounting, the unilateral ability to offer new products, and significant flexibilities in determining postal rates," explained the bill's sponsor, Rep. John M. McHugh (R- N.Y.), chairman of the Committee on Government Reform and Oversight's Subcommittee on the Postal Service.
Among other things, the bill sets up a new rate-making process that divides mail into two categories: Competitive, mail that faces competition in the marketplace and would be priced by the board of directors based on market conditions; and Noncompetitive, which includes first-class mail and other products that have little alternative to using the Postal Service, for which price caps would be set based on economic factors.
The Postal Rate Commission would have a greater oversight role, and the Federal Trade Commission and Department of Justice antitrust section would oversee competitive matters.
An 18-month omnibus rate case before the PRC would be held to determine a base line of current rates and fees upon which the new formulas would be determined.
Volume discounts for competitive mail would be allowed, as long as all customers are offered the same deal. This proposal would be tested for three years.
The Postal Service also would be granted the authority to deposit revenues in the U.S. Treasury or any Federal Reserve bank or depository for public funds, allowing it to take advantage of financial services not available from the Treasury.
All appropriations and taxpayer funding of postal operations would be withdrawn, with a few exceptions, such as free mail for the blind and disabled, although congressional oversight would continue.
At the first of a series of hearings on the bill, McHugh dispelled speculation that it would be completed by the end of July, noting that, "We're going to take as long as necessary to do this right."
On the other side of the Hill, Sen. Ted Stevens (R-Alaska), chairman of the Committee on Governmental Affairs, has indicated he will wait until the House completes its work on postal reform before taking it up in the Senate.
Stevens, who also has conducted hearings on the issues, was rumored to be preparing draft legislation, but in an April letter to the Postmaster General, he wrote that he would wait.
"As I indicated during the hearings, any reform proposal must have the support of the mailers, the Postal Service, and the employee groups," Stevens wrote. "There is so much controversy and so many groups with diverse views, and in many cases diametrically opposed positions on the issues that, in my opinion, we should not present a draft for discussion.
"I have conveyed to chairman McHugh it is my feeling that the House should proceed with his bill," Stevens continued. "Once we receive that bill in the Senate, I will do my best to resolve some of these issues this year."
During the first two hearings on the McHugh bill in the House, the subcommittee heard from the Postmaster General and the chairman of the Postal Rate Commission and from representatives of Postal Service workers.
Additional hearings planned for July were pushed back to September, at which time newspaper industry representatives are slated to present their views.
Leaders of both the Newspaper Association of America and the National Newspaper Association, however, already have expressed their concerns.
NNA president and CEO Tonda Rush said her organization is still analyzing the bill, but the reaction ranges from "thinking this is the beginning of Armageddon to the sky is falling."
"There's no question that, as it's written, it would be bad for community newspapers," she said. "It puts the Postal Service in direct competition. At the same time, I respect what McHugh is trying to accomplish."
Rush called the bill "a reasonable, workable concept, but we don't like it."
"It abandons all thought of having the Postal Service identity be in government and its purpose be public service," she added. "It makes it a regular corporation, with the only distinction that it's owned by the federal government with its deep pockets.
"We think it's the wrong way to run the Postal Service," Rush said. "We'd rather see the Postal Service tackle its core problems like costs, particularly labor costs, and try to redesign a Postal Service that is not dependent on being a giant hog, gobbling up volume, and maintain its public service mission."
Rush noted that she does not believe McHugh's intent is to hurt newspapers, but is to save the Postal Service. "If we happen to be carrion lying in the desert, that's too bad," she said.
The NAA, in general, is "concerned about allowing a government monopoly to compete with the private sector," commented president and CEO John F. Sturm.
"Specifically," he added, "we are very concerned about what we see as ill-conceived proposals giving a monopoly the power to grant its most favorite customers volume discounts and contract rates that are not based on cost savings."
"It is inevitable that smaller mailers will pick up the tab for the discounts given to the big mailers," Sturm remarked.
Sturm also noted that, "The solutions for becoming more competitive are right under postal management's noses: increased productivity, lower costs and improved service. And, these solutions do not require an act of Congress."
Postmaster General Marvin Runyon, a strong supporter of postal reform, called McHugh's bill "a solid beginning," but pointed to three "major issues" of concern.
"First among our concerns is regulation and oversight," Runyon said during the first hearing.
"We are concerned that some of the systems, precautions, and shifts in authority put forward here with good intent unnecessarily add regulation, duplicate safeguards, and substitute bureaucratic controls for marketplace discipline," he said, noting, for example, that the bill "would add two new layers of oversight authority ? the Federal Trade Commission and the Department of Justice ? and give a significantly greater role to the PRC [Postal Rate Commission]." Runyon's second concern was with rate setting, where the Postal Service feels "there are opportunities to simplify still further in this area, to set pricing guidelines that are clear from the start, that everyone can see, anticipate, and budget for," he said.
Third on the Postmaster General's list was "the bottom line ? the price of business flexibility."
Runyon told the subcommittee that the Postal Service expects to make $370 million a year in savings from the deregulation of international transportation and from new investment freedoms.
There are, however, significant costs, which Runyon estimated would cost the Postal Service "some $2 billion in the first year alone. And these costs would begin immediately," he added. "A lot of the opportunities for new revenue would be delayed for 18 months until the completion of the base line omnibus rate case.
"This imbalance between revenues and costs is a deep concern to us," Runyon commented.
Postal Rate Commission chairman Edward J. Gleiman, while withholding support or opposition while he evaluates the bill further, agreed with the overall commitment to maintain universal service at a uniform, reasonable rate and on the need to increase Postal Service efficiency.
Among Gleiman's concerns are the Postal Service's ability, under the proposal, to implement changes in second-class pricing that already have been rejected by the PRC or the Postal Service Board of Governors.
"The Postal Service, following Federal Register notice, could implement a pallet discount, a zoned rate structure for editorial matter, and a bulk discount for high-density publications," he commented. "Further, it could develop discounts based on other characteristics, and it could amplify the discounts that already exist.
"If changes of this kind were made, the potential exists to increase the rates for many thousands of publications by 20% to 30% or more to offset rate reductions for relatively few publications by percentages of similar magnitude," Gleiman warned.
The PRC chairman pointed out that, "Under the bill, the Postal Service, on the basis of short notice and limited or no additional review, could proceed with a quantity discount or a density discount to bring about almost the exact same split it originally proposed. There would be no need to consult with customers.
"Equally important, it appears there is no recourse short of a legislative remedy," he said, adding that, "This type of extensive congressional involvement is what the Postal Reorganization Act sought to reduce."
But newspaper lobbyists are not pleased with proposals so far
?(Postmaster General Marvin Runyon, a strong supporter of postal reform, called McHugh's bill "a solid beginning," but pointed to three "major issues" of concern.) [Caption & Photo]


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