Thursday, October 13, 2011

Postal Study Is Bad News For Publishers

Pressure to jack up postal rates for magazines and newspapers was heightened today with the release of a long-awaited study of Periodicals class costs.

Publishers have been hoping for years that the joint Postal Regulatory Commission-U.S. Postal Service study would disprove USPS's claim that postage is covering barely three-fourths of the Periodicals-related costs. No such luck.

"After review of Postal Service responses to data quality recommendations from prior reviews, the Postal Service and the Commission agree that the cost data are reasonably accurate for ratemaking purposes," the report says.

The publishing industry has frequently criticized USPS's methods of allocating costs among classes, noting the rapid increase in costs attributed to Periodicals despite greater automation and better mailing practices.

"Over the past decade, the unit cost of Periodicals has increased faster than the cost of inflation," the report acknowledges, partly because of "the Postal Service’s inability to capture efficiencies in flat mail processing similar to those it has captured for letter mail."

"Substantial opportunities for increasing the efficiency of flat mail processing and transportation exist. Over the past decades the Postal Service has introduced many programs designed to capture some of these efficiencies. However, it is unclear how successful these programs have been."

Still, the PRC believes that "most, but not all, of the Periodicals deficit can be resolved through operational efficiencies." Some of that would entail handling Periodicals mail more like Standard flat mail (such as catalogs).

USPS, however, "believes that substantial differences exist between the characteristics of Periodicals and Standard Mail flats, and that these differences reflect mailer and reader preferences that need to be respected." Upholding those differences limits the potential efficiency savings for Periodicals.

The report spells out ways that the inflation-based cap on postage increases could be pierced to bring Periodicals revenue more in line with costs:

"A legislative change which relaxes strict inflation-based price caps by class and allows for flexible pricing reflecting market dynamics might enable the Postal Service to further remedy the Periodicals cost coverage issue. Absent this legislative change, regulatory action could fix the Periodicals cost coverage problem if the Postal Regulatory Commission intervened as part of its Annual Compliance Determination (ACD) process to raise Periodicals prices to achieve 100 percent cost coverage."

Another option is to get rid of Periodicals pricing altogether, the report says. Periodicals could be charged First Class rates for relatively fast service or Standard rates for slower service and then receive a special discount that recognizes periodicals' unique role in educating and informing the public.

Other articles about Periodicals cost coverage include:


Anonymous said...

What is really sad is that the flat machines (FSS) are tearing up the magazines big time.

dryMAILman said...

What the report should have said 5 years ago:

"Over the past decade, the unit cost of Periodicals has increased faster than the cost of inflation, mainly because of the Postal Service’s reliance on contractors notorious for misconduct, ineptitude, and campaign contributions to both parties."