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Postal Issues — Rate Case Pushes Forward

January 2007 BY ERIK CAGLE
Senior Editor
THE GOOD news, bad news scenario has struck the commercial printing industry, as well as the mailing community. The first bit of news should help serve as some consolation to the latter.

Unless you’ve spent the last month on holiday in Copenhagen, you’re well aware that the Postal Accountability and Enhancement Act was miraculously salvaged by Congress in the closing minutes of the 109th session, a.k.a the lame duck, (see story on page 5). On December 20, H.R. 6407 was pushed through by President Bush, giving the green light to legislation aimed at modernizing the United States Postal Service’s (USPS) business practices.

The ramifications are huge. While details of the legislation are still coming to light, the main thrust is that the degree of future increases will be tied into the Consumer Price Index (CPI), except under extra-ordinary circumstances. Keeping increases in line with inflation is a major bonus to direct mailers in scheduling future campaigns.

Like a scene out of an action movie, where the evil foe is vanquished, but a bomb is still set to detonate in two minutes, there doesn’t seem to be any stopping this year’s rate case currently before the Postal Rate Commission (PRC). A decision was scheduled for March, with likely implementation in May. Some have already speculated that implementation could be delayed.

“My thought is that since this legislation could give the USPS some financial relief going forward, it may consider granting a longer period of time between the Board of Governors’ approval of the PRC recommendations and the date the rates are implemented,” pondered Joe Schick, director of postal affairs for Quad/Graphics, on the Sussex, WI-based company’s Website. “Mailers have been asking for at least 60 days and as much as 90 days to make software and process changes, but…it could be as little as 30 to 45 days.”

Schick cautioned that his views are based on the initial overview of the legislation. Indeed, the fate of the coming rate increase is not etched in stone.

In the short term, the euphoria over reform passage—which includes the retooling of the ridiculously litigious rate case filing process—should somewhat mitigate the sting of the coming increase, which is 8.5 percent for standard mail and 11.4 percent for periodicals. But mailers also have to reconcile the boost, and what it means from the production, distribution and volume standpoints.

Finding cost savings in areas of production won’t be easy. Ben Lamm, director of direct mail supplier management for financial services provider Capital One, notes that his company is already an efficient mailer and will have difficulty wringing more value out of its marketing spend.
 

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