Sometimes, it seems, the Postal Service bends over backwards to ensure that periodicals are mailed inefficiently so that it can bellow about how unprofitable they are.
The latest example is the proposed exigent rate increases, which once again would fall more heavily on efficient Periodicals-class mailers than on inefficient ones. Before they get approval for extra-special exigent rate increases for the Periodicals class, postal officials should explain why they keep forcing publishers to follow rules that drive up the Postal Service’s costs.
Periodicals regulations, for example, hinder dropshipping and force the use of sacks, both of which are lose-lose propositions that waste money for publishers and the Postal Service.
Time Inc. tried to get those rules eased in the groundbreaking 2006 postal rate case by proposing significant discounts for mail dropshipped to Bulk Mail Centers (now known as Network Distribution Centers). But the Postal Service resisted that change, claiming that Time’s proposed cost-based approach to Periodicals rates would be unfair to small publishers.
“One of the ironies of the rate case is that Time’s BMC proposal would have done relatively little for Time and other big publishers but would have been especially helpful to small-circulation publishers,” says Mark W. White of U.S. News & World Report, who testified in the rate case.
Periodicals rules mean that even the largest publishers and co-mail pools end up with mail that is sacked, instead of palletized, and with mail that cannot be dropshipped cost effectively. The problem is magnified for small, nationally distributed publications, especially those with little advertising content.
A convoluted solution
The Postal Service’s recently released Flats Strategy acknowledged that Periodicals rules hinder dropshipping and lead to a lot of sacked mail, which is expensive for the Postal Service to handle. But it proposed a convoluted solution: Allow Periodicals flats to be co-mailed or co-palletized with Standard flats (which are typically catalogs).
A recent experiment with mixed-class co-mail bombed because of limitations in the Postal Service’s information systems. And some publications, like daily newspapers, are not suited to mixed-class co-mail.
There’s a simpler solution: Change Periodicals rules to be more like those for Standard flats, which allow the creation of NDC pallets (nearly eliminating sacks) and provide meaningful discounts for dropshipping to NDCs. That would save publishers some money and the Postal Service a lot more.
The Postal Service could even allow “mixed-NDC pallets” and other changes that could eliminate Periodicals sacks for many publishers, White points out, “rather than the current rules that force publishers to create sacks that are expensive for printers, mailers, and the Postal Service.”
The Washington Monument Strategy
But perhaps postal executives don’t want the Periodicals class to be efficient. Periodicals might be the USPS’s Washington Monument.
In 1968, the U.S. Park Service responded to budget cuts by reducing visiting hours at the Washington Monument, then directing irate tourists to make their views known to their Congressional representatives, whose offices are located only a few blocks away. (Here’s a fuller account of the incident.) Ever since then, the “Washington Monument” strategy is the name for bureaucrats’ trick of trying to protect their budgets by proposing minor cuts in highly popular programs.
The Periodicals class represents only 3% of the Postal Service’s revenue but nevertheless is highly visible to the public and Congress. Through antiquated rules and questionable cost accounting (See, for example, For Periodicals, The Postal Service’s Math Doesn’t Add Up.), USPS has made Periodicals look like a highly unprofitable operation that’s ripe for huge price increases.
With the Postal Service trying to win support for cost-saving measures like five-day delivery, having a grip on the publishing industry’s, um, sensitive anatomical parts comes in handy.
When USPS executives mention the possibility of significant double-digit price increases for Periodicals, newspaper editorial writers and magazine columnists suddenly become interested in the Postal Service’s financial predicament. And Congressmen start getting interested in avoiding a big hike in postage rates.
In some ways, it’s hard to object to anything that might help bring about reform of the Postal Service’s “pre-funding of retiree health benefits” (which are actually interest-free, no-term loans to the federal government) and pension-fund overpayments.
A game of "chicken"
But a bureaucratic game of "chicken" – if indeed a concerted effort, rather than mere incompetence, causes Periodicals’ supposed lack of profitability – can be dangerous and counter-productive. More than ever, publishers are determining that a business model relying on the Postal Service for distribution is not viable in the long term.
At a time when mailers should be rallying around the Postal Service to push for real reforms in Congress, they have instead banded together in an unprecedented coalition to fight the service and its exigent rate increases. And with publishers likely to take a big hit from this proposal and others emanating from L’Enfant Plaza, groups like the Affordable Mail Alliance have no trouble getting press coverage.
The Park Service never faced that kind of organized anger from its customers.
Previous articles in the “tough questions” series: