Saturday, April 20, 2013

New Postal Incentive Could Backfire for Mailers

Mailers should beware of postal officials bearing gifts.

The U.S. Postal Service announced a few days ago a “Technology Credit” of up to $5,000 for mailers who use Full-Service Intelligent Mail Barcodes. But if the Postal Service gets its way, the one-time credit would result in a permanent and ultimately far more expensive price increase for senders of First Class, Standard, Periodicals, and Bound Printed Matter mail.

And it would set a precedent for similar efforts to circumvent the inflation-based price cap on most postal rates.

“The purpose of the Technology Credit is to offset a portion of the investment by mailers in the hardware and software changes necessary to support Full-Service mailings,” the USPS filing said. Mailers already have another incentive to go Full Service by Jan. 26, 2014: After that, only mail with Full Service IMbs will receive automation discounts.

At an estimated cost of $66 million, USPS will provide credits to mailers that have mailings containing at least 90% Full-Service pieces between June 1, 2013 and May 31, 2014.

Here’s the catch: USPS is asking the Postal Regulatory Commission to consider the credits a price decrease for purposes of calculating the price cap for the next round of rate changes. Without such consideration, USPS claims it would be discouraged from offering future credits that promote more efficient mailing practices.

The logic of the request seems to be that the Postal Service would be paying out credits of $66 million to mailers in the coming months, so it should be able to balance that with $66 million worth of price increases next year.

But consider the case of a major magazine that now pays $10 million annually in Periodicals postage and earns the $5,000 Technology Credit. If the Consumer Price Index doesn’t change during the course of 2013, the magazine normally would not face a postage increase next year.

With the Postal Service’s request, however, even with no inflation the Periodicals rate cap would increase an estimated one-quarter of a percent. That increase would cost the magazine almost $25,000.

And if the inflation rate remained zero percent for another year, again the magazine’s postage bill would be $10,025,000 – instead of the even $10 million it would be if the USPS's request is denied

In other words, if the Postal Service is successful, the magazine would get a $5,000 credit this year and in return pay a recurring charge of almost $25,000 annually. With a return on investment like that, no doubt postal officials would look for other one-time credits they could “give” mailers.

The PRC has set a deadline of May 6 for comments on the Postal Service’s proposal.

Other articles about postal price-cap controversies include:


Priceless Inkjet Cartridge Co. said...

Thanks for the info. We do ship a lot using USPS and a step like that makes me wonder if they are planning a major price increase?!?

Anonymous said...

It's about time these mailers started paying higher rates, the USPS is drowning and these mailers are profiting billions of dollars...about time.

Tom in Ohio said...

Hey Anonymous,
Research your topic better before you post like this. Mailers don't make much on the mailing of the product, almost 50% of the invoice is just postage. Because of postage increases page counts and circulation numbers are dropping. So if I print less pages and less books and the USPS charges more postage where are all of the billions coming from? Do you work for the USPS maybe?