R2006-1 Information

 PostCom Members!! The Postal Service has proposed significant changes in the structure of Standard Mail Rates in the case it has just filed. This means that when you look at the class averages USPS has put out, they are useless in telling you how these rates will affect your business. Here's what you need to do: Take some live mailings--more than just one or two--and bump them up against the proposed rates. Then, let PostCom know what you've discovered. Send this information to: info@postcom.org.

Overall average percent increases:

    7.1%    First-Class Mail
    9.0%    Standard Mail
    13.8%  Priority Mail
    12.5%  Express Mail
    13.4%  Package Servies
    11.2%  Special Services

The Postal Service's proposed rates for R2006 are posted on the Postal Rate Commission web site. Please note that Postal Service failed to include its Bound Printed Matter rate chart in its initial filing. You can find those charts on the USPS web site.We've posted the Library and Media Mail rates on this site. The USPS had inadvertently left these charts out of its filing with the Postal Rate Commission.

The USPS stressed that mailers need look at individual rate cell changes to really see the impact of the proposed rates. The USPS implied that increases in some discounts will actually result in some rate reductions, but in other cases where mailers choose less efficient options, the rate increases can range from low to moderate to large.

Contingency Rate. The case will contain an historically low 1% contingency rate.

Confirm. The USPS will propose changes to the Confirm rate structure that charges an upfront registration fee for the first 1 million scans and then charges declining block rates for additional scans above the first 1 million.

Address Quality incentives -- ACS.  The USPS will propose that the existing electronic ACS option will continue to exist, but the proposed rate for First-Class Mail will go from the current 21-cents to 6-cents and for Standard Mail it is proposed to go from the current 21 cents to 25 cents. For OneCode ACS, which is based on use of the 4-state barcode, the USPS will propose that for First-Class Mail and Standard Mail, the 1st two corrections for an address will be free, then the per correction fee for the same address after that will be 5-cents for First-Class Mail and 15-cents for Standard Mail.

First-Class Mail.  First-Class letters, flats, and parcels will be split to different rates, as a result of letters being much lower cost to the USPS to process, said postal officials.  For example, the 2 ounce letter rate proposed is  $ 0.62 and the proposed 2 ounce flat rate is $ 0.82, a 30% increase. The USPS said the mailer could mitigate that rate impact by re-packaging the 2 ounce flat to become a 2 ounce letter. A 2 ounce parcel in First-Class would be one of the most increased rates proposed, the USPS said, going from $ 0.63 to $ 1.20 (a 90% increase). The USPS stressed that many of the rate cells will actually reduce, but some will contain significant increases.

Priority Mail.  The USPS will propose a dimensional pricing element for Priority Mail sent to Zones 5-8 and larger than 1 cubic foot.  The USPS said its competitors already use dimensional charges. 

Express Mail.  The USPS said it will propose a new 1 pound Express Mail flat rate at $19.50 (vs. the current 2 lb rate of $18.80).

Standard Mail flats/parcels.  The USPS said that smaller parcels are costly and inefficient for it to handle, and its proposed rates will reflect that.  For example, an 8 ounce Standard Mail parcel rate currently 79.4 cents is proposed to go to $1.30, a 64% increase.  The USPS said mailers could do 2 things to mitigate the impact:  use drop ship discounts, which it said will be increased to provide greater incentive; or redesign the parcel to become a flat and drop ship. The USPS said that Standard Mail "flats" such as CDs/DVDs currently mailed in jewel cases would be defined as a processing category in between flats and parcels in the proposed structure, with a 78% increase in rate for a jewel box mailed at Standard Mail rates. The mailer should look at redesigning the piece to be more flexible and qualify as a true automation flat, the USPS said, or continue to mail as a jewel box and pay the higher postage.

Periodicals.  The USPS said it will focus on increased efficiency for Periodicals, including a proposed container fee of 85-cents per container (either per sack or per pallet) to incent Periodicals mailers to prepare more mail on pallets than in sacks.  The USPS also said it is proposing enhanced drop ship discounts for Periodicals.

Standard Mail saturation DAL.  The USPS will propose a new 1.5-cent per piece charge for Standard Mail saturation pieces prepared with a separate Detached Address Label (DAL) piece. The USPS said the separate additional piece adds more cost than benefit in its automation program. 

Processing categories.  The USPS said that it will be pursuing separate to its filing an effort to make its mailing standards in sync with the proposed rate structure and changes, by clarifying and better defining processing categories based on its processing equipment and methods.

Be sure to check the two USPS press releases: Postal Service Proposes New Approach To Shape A More Efficient Future and Postal Service Seeks Price Adjustments. Also check the Postal Service's Pricing and Classification Weekly.

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Regarding the rate case, you might want to take a look at these materials that the Postal Service has prepared.

• Postal Service Seeks Price Adjustments
• Postal Service proposes new approach to shape a more efficient future.
• Rate Case Talking Points
• Why Prices Change
• History of First-Class Stamp Rates
• Shaping a More Efficient Future
• Examples of opportunities to mitigate price increases
• Examples of Common Price Adjustments
• Pricing and Classification Weekly
• Anatomy of a Postal Rate Case.

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• In response to the Postal Service's filing for an 8.5% average postal rate increase, PostCom President Gene Del Polito noted that "those who will be most adversely affected represent a segment of society that is responsible for generating some $900 billion economic activity (or about nine percent of the nation's Gross Domestic Product) and for the existence of some nine million American jobs nationwide. "While mailers understand that postage rates eventually must go up to pay for increases in operating expenses, the current system provides for no predictability and no opportunity for mailers to budget for the higher rates. It's essential, " the PostCom President said, "that Congress complete its postal reform work with dispatch. Without reform, he emphasized, our nation will continue to suffer a fiscal burden that has nothing to do with improving the quality of the mail services we receive."

• Reacting to the Postal Service’s announced plan to raise postage rates for magazines by an average of 11.4%, Magazine Publishers of America (MPA) today urged Congress to move quickly to complete action on postal reform legislation.

• The Coalition for a 21st Century Postal Service representing the companies and organizations in a mailing industry approaching $1 trillion in value called today for immediate action on postal reform. Ben Cooper, who chairs the coalition, said the announcement by the Postal Service of a significant rate increase for next year is clear evidence that the current law does not provide a framework for the future.

•  Rep. John McHugh (R-NY) went on record saying that "The news today of the U.S. Postal Service's proposal to increase postage rates is not surprising given the rising energy costs and the agency's costs of doing business. However, a 13.5 percent hike in just over two years borders on the excessive - and that's just the increase in first class postage. Other products would go up by more than 25 percent. Postal reform legislation that Congress is poised to enact would limit such extreme rate hikes, instead linking them to the Consumer Price Index, while also providing tools to ensure the future solvency of the Postal Service."

• According to Advertising Age, "The U.S. Postal Service delivered a double dose of bad news to media companies and direct marketers today: It is seeking a major rate increase to take effect next year, and it expects to file annual rate increases in the future. Then the news got worse: The Postal Service is seeking to boost rates as much as 11.4% on magazines and 24.2% on newspapers (though the increase for out-of-county rates, which is the most widely used newspaper rate, would be 11.2%); mailers of CDs and samples could also face big hikes."

• Once again the US Postal Service has filed a request to raise postage rates for the nation’s consumer, business and nonprofit mailers. The proposed 8.5 percent average increase (9.0 percent for standard mail) comes on top of the 5.4 percent increase that went into effect in January. “Postal rate increases are never good news for organizations that rely on the mail to get their messages and packages out, and this latest increase would mean millions of extra dollars in costs for commercial mailers and nonprofit organizations,” said Jerry Cerasale, DMA’s Senior Vice President for Government Affairs.

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