Proposed postal rates save, skewer newspapers p.17

By: DEBRA GERSH HERNANDEZ THE NEWSPAPER INDUSTRY was both saved and skewered by the recent rate structure reclassification proposal from the Postal Rate Commission.
Newspapers that deliver their product via second-class mail did well in the PRC proposal, which suggests renaming the category, Publications, but puts forth no subclass change, as was proposed by the U.S. Postal Service.
In the third-class arena, however, the PRC agreed with Postal Service recommendations to offer substantial discounts to bulk advertising mailers, much to the chagrin of the newspaper industry, which warned that costs ultimately may be shifted to first class.
The USPS proposed splitting second-class into subclasses known as Publications Service and Regular. Large publications, such as nationally distributed magazines, would have fallen under the Service category and received substantial discounts. The remainder of second-class would have borne substantial increases.
"This split was not justified on the record," said PRC chairman Edward J. Gleiman. "There was no evidence of distinct markets or products; rather, the proposed subclasses were defined by volume and geographical density. It became increasingly clear as the commission proceeded with this case that the proposed split was contrived."
According to the PRC opinion, the subclass rates proposed by the USPS would have led to a 14% decrease for the approximately 800 publications that qualified as Publications Service, but there would have been a 17% increase for the more than 11,000 periodicals categorized as Regular.
"We are obviously quite pleased that the Commission recognized the value of a Postal Service that serves all of its customers fairly. It stood up to a major campaign by the Postal Service to begin retrenchment on a 200-year-old tradition of universal service," commented National Newspaper Association chairman R. Jack Fishman, president of Lakeway Publishers Inc., Morristown, Tenn.
"We support the Postal Service's efforts to lower its prices for efficient mail, but this proposal was primarily designed to reward mailers for bringing in more business. That's not universal service, and we opposed it," Fishman added.
"The Postal Rate Commission in this case was a firewall," said NNA president and CEO Tonda Rush. "It was the only thing that kept second class from being yanked out from under newspapers.
"It doesn't mean there's no impact," she added, "but it's the difference between a sprained ankle and a broken leg."
The reaction to the third-class rate proposals, however, was quite different.
In third class, which the PRC recommended renaming Standard class, there would be three new subclasses: Automation, Regular, and Enhanced Carrier Route.
"Once again, the Postal Service has been successful in skewing the competitive situation in favor of its advertising mail, bulk mail, partners to the detriment of those of us who have our own delivery systems," commented Newspaper Association of America president and CEO John Sturm.
What this third-class decision means for newspapers, Sturm explained, "is their competitors are going to knock a nickel or so off their per-piece price. That's going to make them a tougher competitor for newspapers.
"Down the road, it could be more, when they start shifting the overhead to first class," he added.
Sturm said the decision "ultimately will screw first-class mailers, who have no real alternative. This is exactly what we tried to prevent the [regional Bell operating companies] from doing; stop funding [an operation] through a cross-subsidy.
"It's the same thing. They're funding third class from monopoly first class."
Sturm criticized the Postal Service for what NAA called inaccurate cost measurements, and he charged that the PRC was not given the data it needed to properly set rates.
"A flawed regulatory process should not be tolerated, and we urge Congress to look into the matter," he commented.
NAA spent over $500,000 on this rate case, more than any other, because of its importance, Sturm said.
"This was a different kind of case," he said. "It sets the stage for other rate cases. We knew early on that this was a big case."
The decision came out the way it did "not for lack of trying or resources," Sturm added. "We put on multiple economic experts, when in the past we had one. We had a couple of law firms, when in the past we had just one. We pulled out all the stops from a litigation standpoint."
According to Sturm, a chief obstacle was highlighted in the PRC report, which noted, "there is virtual unanimity of support for Standard Mail from the Postal Service and users of this mail.
"Opposition to the proposed subclasses within Standard Mail comes from the OCA [Office of the Consumer Advocate] and parties, who, in this docket, appear in the posture of competitors of the Postal Service, not mail users."
"That's us," said Sturm. "They're saying everybody likes this except OCA and competitors, who were discounted.
"The line is clearly drawn, and we're not making any bones about it. We have a competitive interest, and we did our best. We swung and missed on the last pitch. The game never ends in this town. It only has innings and periods and quarters," he said.
Sturm said NAA "will look at an appeal to the court at the appropriate procedural moment."
This case moves next to the Postal Service Board of Governors for approval, but postal reclassification also is being looked at by a House subcommittee, whose chairman had no comment.
"To some extent, the issues on the Hill will be somewhat different," Sturm said, noting they would likely focus more on "overarching issues like privatization and major reform . . . [And] the question of the Postal Service getting pricing flexibility and other attributes of acting more like a business, remembering that they aren't a business."
Both NAA and NNA have been vehemently opposed to such proposals.