Postal Penance
One year after a disastrous
rate hike, the USPS promises predictable pricing and
internal reforms
April 2008
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Thanks to U.S. laws banning more than two consecutive presidential terms, in November, there won’t be anyone outside the White House chanting “four more years.” Instead, there is an exciting race for a new candidate to step into office, embodying hope and change.
For years, the USPS has held sovereign control over rate cases, without regulations in place, like the consecutive-term legislation, to protect public interest. “One of the big issues under the old laws was whether the then Postal Rate Commission had the authority to look at the size of the piece of pie that the Postal Service was asking for and say, ‘You don’t need that size; you only need this much.’ But, basically, the Postal Service could get pretty much what it asked for,” says Ed Gleiman, consultant to the Direct Marketing Association (DMA) on postal issues and former chairman of the PRC.
Due to the extremely high May 2007 rate increase, the introduction of shaped-based pricing, rises in production costs and a continued economic downturn in 2007-08, the volume of mail sent dropped significantly. This resulted in lower revenues for both mailers and the USPS. On top of this, another rate adjustment is scheduled for May.
Fortunately, help is on the way. To protect both mailers’ and USPS’ interests, the new Postal Accountability and Enhancement Act has already taken effect and capped the May 2008 rate increases for mail services at or below the Consumer Price Index. The PAEA is the first major legislative change in USPS history in more than 30 years and grants the former PRC, now the Postal Regulatory Commission, greater authority. Meanwhile, the USPS has also enacted its Strategic Transformation Plan, a series of internal reforms slated for a 2010 completion and promoting renewed efficiency, accountability, profitability and market compatibility in its system.
With this new legislation and framework built for change, one year after the worst rate case in U.S. postal history, it is again possible to see the goals of the post office and mailers converging.
The New Law vs. the Old Rate Case System
Perhaps the USPS is paying penance for its misdeeds last year, for the proposed rate adjustments for May are unusually benign. Yet there’s much more to it. “It’s the new law that’s the key to the new rates this year—not anything that transpired in the last six to eight months,” Gleiman stresses.
For years, the USPS has held sovereign control over rate cases, without regulations in place, like the consecutive-term legislation, to protect public interest. “One of the big issues under the old laws was whether the then Postal Rate Commission had the authority to look at the size of the piece of pie that the Postal Service was asking for and say, ‘You don’t need that size; you only need this much.’ But, basically, the Postal Service could get pretty much what it asked for,” says Ed Gleiman, consultant to the Direct Marketing Association (DMA) on postal issues and former chairman of the PRC.
Due to the extremely high May 2007 rate increase, the introduction of shaped-based pricing, rises in production costs and a continued economic downturn in 2007-08, the volume of mail sent dropped significantly. This resulted in lower revenues for both mailers and the USPS. On top of this, another rate adjustment is scheduled for May.
Fortunately, help is on the way. To protect both mailers’ and USPS’ interests, the new Postal Accountability and Enhancement Act has already taken effect and capped the May 2008 rate increases for mail services at or below the Consumer Price Index. The PAEA is the first major legislative change in USPS history in more than 30 years and grants the former PRC, now the Postal Regulatory Commission, greater authority. Meanwhile, the USPS has also enacted its Strategic Transformation Plan, a series of internal reforms slated for a 2010 completion and promoting renewed efficiency, accountability, profitability and market compatibility in its system.
With this new legislation and framework built for change, one year after the worst rate case in U.S. postal history, it is again possible to see the goals of the post office and mailers converging.
The New Law vs. the Old Rate Case System
Perhaps the USPS is paying penance for its misdeeds last year, for the proposed rate adjustments for May are unusually benign. Yet there’s much more to it. “It’s the new law that’s the key to the new rates this year—not anything that transpired in the last six to eight months,” Gleiman stresses.
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