January-February 2001

Vol. VIII, No. 1


 Signature Confirmation Now Available for Priority Mail

The Postal Service’s new Signature Confirmation service debuted on February 4, and is now available for Priority Mail and all other Package Services.  For shippers who send and receive information electronically, the fee for this additional service is $1.25 per piece, in addition to postage.  This new service provides customers with a copy of the recipient’s signature and name, in addition to the delivery date and time.

New Presort Discounts Being Proposed for Priority Mail

The Board of Governors unanimously approved the filing of a new experimental docket involving Priority Mail at their meeting in San Antonio on February 5-6.  We have learned that:

           The Postal Service will offer varying discounts for Priority Mail that is presorted to 5-digit, 3-digit and ADC (Area Distribution Centers).

           The new presort discounts will be proposed as experimental rates, to last for three years.

           The case is expected to be filed with the Postal Rate Commission by the end of February.

The exact amount of the discount will not be disclosed until the case is filed.  A qualifying mailing must contain at least 300 presorted pieces, or 500 pounds.  Flats and parcels will have to be packaged separately. 

The Postal Service cannot offer volume discounts, but presort discounts can serve as a proxy for those mailers who have sufficient volume and density to qualify.  For such mailers, the proposed presort discounts may help ameliorate the large increase in rates that took effect in January.

Participation in the experiment will be limited to a small number of participants (around 10), and the Postal Service plans to work closely with each participating mailer to learn about problems and determine how the program can be improved.  APMU members who think they may be interested can contact APMU at 703-356-6913 for more details.

 PRC’s Opinion and Recommended Decision Upon Reconsideration

On Friday, February 9, the Postal Rate Commission issued its Opinion and Recommended Decision Upon Reconsideration in Docket No. R2000-1.  The Opinion is on the PRC website, www.prc.gov.  In brief, the Commission:

           Denied the Postal Service’s request to increase the provision for contingencies by an additional $1 billion, and left other rates unchanged, except for two; and

           Due to errors that had been discovered, recommended increased rates for Certified Mail and Bound Printed Matter (BPM), which would provide the Postal Service with an additional $83 million in revenue per year.

With respect to the contingency provision, the Commission based its opinion on the evidence in the record, and reaffirmed that the Postal Service’s cursory testimony on the subject was unconvincing and lacked substantive facts to support the request.  The Commission acknowledged the Postal Service references to various non-record items such as press reports about recent economic events that portend a slowing economy.  It also noted, however, that the Postal Service admitted that (i) the evidentiary record did not need to be reopened, and (ii) the Commission should not rely on extra-record material during its reconsideration.

The Commission left the door ajar for further reconsideration of the case.  It stated that if the Postal Service now possesses new “information that would in its view, justify a larger contingency amount,” it would be willing to reopen the record and act expeditiously to review such evidence and issue a further opinion.

The matter is now back in the Governors’ lap.  If they want more revenue from this case, they can:  (i) ask the Commission to reopen the record, or (ii) reject the latest decision and again send the case back to the Commission.  If the Commission again fails to increase rates, the Governors could use what some call “the anarchy clause,” make a finding of revenue insufficiency under the Commission’s recommended rates, and acting unanimously, unilaterally override the Postal Rate Commission and impose higher rates.  This could happen as soon as two or three months from now.  Although it may appear that the near-term commencement of another rate case would make the use of the anarchy clause unlikely, rates from a new rate case are at least 15 months away.  (See next article re new rate case.)

Governors Start Planning for Next Rate Case

The Board of Governors, at their February meeting, determined that the Postal Service must begin preparing a new rate case as soon as possible.  The decision came after receiving a report on the Postal Service’s current financial condition and outlook.  The current betting is that the case could be filed as early as June, or as late as August, assuming a newly-enshrined PMG did not have his own ideas about postal rates.

In what appears to be a somewhat short-sighted response to the Postal Service’s predicament of shrinking margins (specifically, costs increasing faster than revenues) the Board of Governors also directed management to (i) reduce the capital commitment budget in fiscal 2001 from $3.6 billion to $2.6 billion; (ii) postpone making future financial commitments; and (iii) match future capital commitments to cash flow.  Arbitrarily postponing and restricting modernization of the infrastructure seems likely to accelerate, rather than retard, subsequent rate cases (see next article on nearly stagnant productivity).

Postal Service Productivity

Postal Service Total Factor Productivity (“TFP”) during the fiscal year 2001 (ended September 30) grew by an impressive 2.4 percent.  However, this follows two dismal years during which TFP declined by 1.2 and 0.3 percent, respectively.  Since Postal Reorganization in 1971, the Postal Service has experienced a cumulative growth in TFP of only 11.1 percent, while productivity in the whole economy has grown by 53.4 percent, according to the Bureau of Labor Statistics.  The Postal Service’s lagging productivity, probably more than any other factor, helps explain why it has continuing financial problems that require frequent and large rate hikes. 

Paul Vogel To Speak at APMU Forum Breakfast

APMU will host a Breakfast and Briefing at the National Postal Forum in Orlando on Tuesday, March 27.  Paul Vogel, USPS Vice President for Network Operations Management, who was at the heart of the decision to end the Emery contract and sign the FedEx contract,  will be the featured speaker.  Please mark your calendar now.

FedEx and UPS Sue DHL

FedEx and UPS have filed suit in federal court to ground the Deutsche Post subsidiary, DHL, alleging that it is a foreign owned airline, in contravention to the U.S. law.  This is a new front in a war that, until now, had been restricted to Europe, where UPS has long claimed that Deutsche Post uses profits from it monopoly letter service to subsidize parcel delivery.  Deutsche Post, which recently was partially privatized through a stock offering to the public, is gearing up to be a global player in the delivery market, especially the market for expedited packages.  A significant presence in the U.S. market would be critical to establishing a worldwide presence.

New 1-lb. Rate Available for Priority Mail

As most Priority Mail users are aware, Priority Mail now features a new 1-pound rate (for $3.50).  Although sharply higher than the old 2-pound rate ($3.20), it is somewhat less than the new 2-pound rate ($3.95).  Priority Mailers should be aware that when using the 1-pound rate they cannot use the flat rate envelope.  Other packaging is available from the Postal Service.

House Abolishes Postal Service Subcommittee

The House Committee on Government Reform, chaired by Dan Burton (R-IN) has abolished the Subcommittee on the Postal Service, formerly chaired by John McHugh (R-NY).  Responsibilities of the subcommittee will be assumed by the full committee.  In the last session, Representative McHugh sponsored H.R. 22.  Because of a Republican-sponsored initiative, House rules now limit chairmanships to six years, and McHugh was no longer eligible to chair the subcommittee.  Abolishing the subcommittee ends speculation about who might become the chair during the current session.

Postal Reform:  An Issue That Won’t Go Away

As noted elsewhere in this newsletter, productivity in the Postal Service continues to lag far behind that of the whole economy, while rates move relentlessly upward.  Automation and modernization of the Postal Service’s infrastructure, rather than being accelerated, are being slowed down and postponed.  The Postal Service seemingly is unable or unable to fix itself. 

Elsewhere, especially in Europe, the trend towards privatization of postal administrations and a reduction in the scope of their local monopoly.  For example, Sweden and Finland have abolished the postal monopoly altogether, and shares in the Dutch and German post offices have been sold to private investors.

In the face of trends such as those mentioned here, the subject of postal reform will not go away, even though the House Subcommittee on the Postal Service has been abolished.  The introduction of new reform legislation and a new round of Congressional hearings appear inevitable.  Whether such legislation will provide the Postal Service with the freedom and a mandate to make necessary changes remains to be seen.

New APMU Officer – Glenda Franklin of HSN

Ms. Glenda Franklin, Senior Manager of Logistics Planning for Home Shopping Network, Inc., was elected APMU secretary at the APMU quarterly meeting on January 31 in Washington, D.C.

Calendar of Events

See the APMU Calendar of events at http://www.apmu.org/calendar.html.

The Association of Priority Mail Users, Inc. is a nonprofit organization of Priority Mail users and suppliers to Priority Mail users which seeks to ensure that proper business and financial decisions are made by the United States Postal Service to promote and protect the cost efficiency and quality of service of Priority Mail.  For information on APMU programs and membership information, please call 703-356-6913.

Association of Priority Mail Users, Inc. • 8180 Greensboro Drive, Suite 1070
McLean, Virginia 22102-3860 • (703) 356-6913 (phone) • (703) 356-5085 (fax)
http://www.apmu.org • apmu@mindspring.com




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