Wednesday, April 10, 2013

Publishers May Pay To Preserve Saturday Delivery

Publishers and other mailers celebrating today’s news that Saturday mail delivery will be continued should take another look at the announcement’s ominous words.

“The Board has also asked management to evaluate further options to increase revenue, including an exigent rate increase to raise revenues across current Postal Service product categories and products not currently covering their costs,” today's statement from the U.S. Postal Service’s Board of Governors said.

Translated from Beltway Babble into plain English: The board wants to hit Periodicals publishers and mailers of Standard-class flat mail, such as catalogs, with an extra rate hike. Increases in most postal rates are limited to the inflation rate, but in emergencies USPS can seek “exigent” rate hikes.

USPS estimated its plan to end most Saturday deliveries would have added $2 billion annually to its beleaguered bottom line. Now the governors are looking for other ways to get that money, and instead of an across-the-board increase they’re suggesting that the hikes be targeted at allegedly unprofitable mail.

Despite extensive downsizing by the Postal Service and better preparation of catalogs and magazines by mailers, USPS claims its costs of handling flat mail have risen rapidly in recent years. Some postal experts blame USPS’s cost-accounting system, which tends to allocate the costs of “automation refugees” and other inefficiencies to the Periodicals class and to Standard flats.

Adding insult to injury, the $1.3 billion investment in the Flats Sequencing System (FSS) – which was supposed to revolutionize the handling of such mail – so far is costing more money than it is saving.

USPS claims the Periodicals class (magazines and newspapers) pays only 72% of its costs, meaning that a 39% rate hike would be needed to bring the class to theoretical breakeven. For “Standard flats” – the portion of Standard-class flat mail not in carrier-route bundles – the increase would be 24%. The most efficient Standard mailers would be largely shielded from an exigent rate hike because most of their mail is in carrier-route bundles.

Here’s some background information on the relevant postal issues:

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