POSTAL RATE CASE UPDATE: Catalogers Must Take Immediate Action on USPS-PRC Rate Diferences, Vendors Say

Among several catalogers and printers who last week uncovered a sizable difference among rate increases that the U.S. Postal Service had requested in its original R2006 rate case and those that the Postal Regulatory Commission (PRC) on Feb. 26 recommended, was Don Landis, vice president of postal affairs for printer Arandell Corp.

“This increase will have a serious, adverse effect on the catalog industry,” he says, referring to the rates for some catalog categories if implemented per the PRC’s recommendations. “It has the potential of moving catalogers to different media, which is the very thing the USPS didn’t want to happen.”

(See the bottom of this article for what action you can take. Bottom line: Have your letter in the hands of the USPS Board of Governors by this Thursday, March 8.)

Big Differences

Among the most noteworthy differences in the rates for Standard Mail pieces under the break weight of 3.3 oz. proposed by the USPS compared to those recommended by the PRC include many newly-created flats categories. Landis shared those and other rate discrepancies with Catalog Success:

* The USPS called for a $0.391 cent rate for mixed area distribution center (MXD ADC) automatable flats, the PRC recommended a rate of $0.477;

* The USPS called for a $0.431 rate for MXD ADC non-automatable flats, the PRC recommended $0.515;

* The USPS called for a $0.354 rate for ADC automatable flats, the PRC recommended $0.424;

* The USPS called for a $0.328 rate for 3-digit automatable flats, the PRC recommended $0.392;

* The USPS called for a $0.401 rate for ADC non-automatable flats, the PRC recommended $0.461;

* The USPS called for a $0.378 rate for 3-digit non-automatable flats, the PRC recommended $0.427;

* The USPS called for a $0.300 rate for 5-digit automatable flats, the PRC recommended $0.335;

* The USPS called for a $0.343 rate for 5-digit non-automatable flats, the PRC recommended $0.363.

For established rates, the differences weren’t as large, but equally significant.

* The USPS called for a $0.233 rate for basic enhanced CRR flats, the PRC recommended $0.249;

* The USPS called for a $0.182 rate for saturation ECR flats, the PRC recommended $0.187;

* The USPS called for a $0.204 rate for high density ECR flats, the PRC recommended $0.205.

Landis notes that there is only one opportunity for the catalog industry to express its concern regarding the PRC recommendations. “The USPS Board of Governors must be made aware of the adverse effects these rates will have on the catalog industry,” he says. “Awareness must come from catalogers and not suppliers. We are working with our customers on this issue now.”

Landis advises catalogers to send a letter to the Board of Governors voicing their concern with the recommended rates. “We are also looking at ways to move customers to a more efficient and less expensive presort,” he says.

How to Contact USPS

To reach the USPS Board of Governors, write to

The Honorable James C. Miller III
Chairman
United States Postal Service Board of Governors
475 L’Enfant Plaza, Room 10300
Washington, D.C. 20260-0004

But industry insiders strongly urge catalogers to fax their letters ASAP to (202) 268-5472.

What to Write

Below are two recommended ways to contact the USPS Board of Governors:

Data services firm Experian has composed the template of a letter it recommends catalogers to write:

Dear Honorable Chairman Miller:

(Company Name) is a large FLAT mailer and is very disappointed in the Postal Regulatory Commission’s (PRC) decision to raise rates on FLAT mail much higher than the USPS requested. This late and surprise decision will only cause our firm to cut back on the volume of FLAT mail we send. We budgeted for a 9%-12% increase and now are not seeing any increases below roughly 20% for our mail. As I am sure you are aware, budgets for the remainder of calendar year 2007 have been set for many months, so the only way we can absorb this unanticipated significant additional rate increase is to reduce our quantity of mailings. This will obviously shrink USPS revenues and volumes if the rates the PRC has set are approved.

(Company Name) spends (insert your total dollars in postage) per annum and now will have to cut our volume in FLAT mail by (insert the percentage of volume cut plus estimated revenue to the USPS lost due to this cut and emphasize this is across all subclasses of standard FLAT mail volume) based on these rates. On average my cost per thousand will increase by (insert dollar amount here) per annum. We urge you to consider that your recommendation be to remand the rate case and possibly reconsider future rate increases for FLAT mail that will not reduce mail volumes or revenue requirements.

Thank you for your time to read our concerns and take them under consideration.

Best regards,

(CEO/president signature)

And this morning, NEMOA recommended this letter template:

Dear Honorable Chairman Miller:

I am contacting you to outline how the new Standard Mail rates recommended by the Postal Regulatory Commission will hurt both my company and the USPS. The recommended rates are almost double what we expected, and the new increase will require that we re-examine our catalog circulation with the objective of cutting postage costs. I expect that these new rates will cause us to cut our budgeted circulation and the net effect will be less revenue for the Postal Service. I am asking that you consider the impact of these rates on catalog mail volume and reduce the increase on Standard Mail Flats.

We mailed X number of catalogs in 2006 and paid (your amount) in postage. We expected to increase our circulation by(your amount) percent in 2007. Our 2007 postage budget is based on the Standard Mail rates proposed in May 2006, and this was a (you can use whatever percentage you planned on; it should be around 10) percent increase over current rates. Our budget calls for postage to increase (your estimated dollar amount) this year. Under the rates proposed by the PRC our postage is now expected to increase (you can put in the percentage that your printer will help you calculate, or look at the new rate increases in the press and estimate; the percentage increase should be somewhere around 20 percent) so our postage would increase by (your dollar amount) in 2007. The proposed PRC rates are such a large and unexpected increase that we will be forced to reexamine our circulation and I expect that some of our marginally profitable catalogs will now fall below breakeven. As a rough estimate at this early date, I expect to cut our budgeted circulation by (make your best guess here) percent if these new rates are implemented.

The rates proposed by the PRC are more than five times the rate of inflation, about twice the rates proposed by the USPS, and are being proposed well after our budget has been set. They will make some of our planned circulation unprofitable, so we have no choice but to cut out those unprofitable catalogs. The net effect will be a loss of volume for the USPS, and the loss of volume will only grow worse as the full effects of the rates are felt in 2008 and beyond, along with any new rate increases. I expect the proposed rates to reduce mailing volume throughout the catalog industry, resulting in less prospecting names for 2008, and the risk of a downward spiral in Standard Mail volume for the USPS. In addition to negatively impacting our catalog circulation, this postal increase will significantly affect our company’s profitability and future employment levels.

Best regards,

(CEO/president signature)