Volume III, No. 1 January-February 1996 Newsletter

Reclassification (Phase I) Decision Released by PRC

On Friday, January 26, the Postal Rate Commission released its Opinion and Recommended Decision in the Phase I Reclassification Case (Docket No. MC95-1) that the Postal Service filed on March 24, 1995. In brief, the Commission recommended a number of rate changes along the lines requested by the Postal Service. The Commission indicated a general dislike for new subclasses, however, and it denied all requests for creation of new subclasses except one - namely, a new Enhanced Carrier Route subclass.

The Commission's recommendations are expected to be acted upon by the Postal Service Governors at their meeting on Monday, March 4. (The Commission's press release and extensive summary were mailed previously to all APMU members.) Priority Mail classification changes, which were not involved in the Phase I case, are expected to be filed later this year, along with reclassification changes for parcels.

Experimental Small Parcel Rate Case Filed - APMU Intervenes

On December 19, 1995, the Postal Service filed a new case (Docket No. MC96-1) with the Postal Rate Commission requesting an experimental discount of four cents per piece for small First Class and Priority Mail parcels that are (i) barcoded and (ii) entered at post offices within the areas served by mail processing plants in Philadelphia, Pennsylvania, Southeastern Pennsylvania, and St. Petersburg, Florida. APMU intervened in the docket to monitor its developments.

The small parcel and bundle sorter (SPBS) at each of these three facilities has been equipped with barcode scanners that increase throughput and reduce costs. The primary purpose of the proposal is to see how mailers respond to a four-cent discount. In accordance with a request by the Postal Service, the Commission is hearing the case on an expedited basis. No intervenor submitted testimony opposing the request. Initial briefs were filed on February 26, and final briefs are scheduled to be submitted on March 4. Two intervenors, UPS and OCA, have argued on brief that the amount of the discount should be reduced.

GAO Reports on Spending Goofs

Copies of a recent (January 18, 1996) report by the GAO, Conditions Leading To Problems in Some Major [Postal Service] Purchases, have been distributed to all APMU members. The study reviews seven problem procurements between 1986-1993. One of the problem contracts was for the air transportation hub in Indianapolis for expedited mail ($105 million). Another was for air transportation service for expedited mail, known as the Eagle Network ($107.8 million annually). Since Priority Mail constitutes about two-thirds of the total volume of mail that uses the Eagle Network, Priority Mail gets stuck with about two-thirds of any excessive costs of network operation.

George Hurst to be Priority Mail Product Manager

George Hurst has been appointed Priority Mail Product Manager under Dave Shinnebarger, Manager for Expedited and Parcel Services. George has been at Postal Service Headquarters for the past eight years, working in the area of business mail acceptance. His responsibility for Priority Mail will be a full-time assignment.

New 3-Day Service Offering By UPS Targets Priority Mail

United Parcel Service has announced a new guaranteed 3-day delivery service with zoned rates. UPS has also announced that its 2-day service will offer zoned rates. Since Priority Mail is generally a 2-3 day service (without guarantees), it would appear that competition is heating up in the expedited services market.

MTAC Report – Priority Mail Redesign and Other News

The December MTAC meeting received a detailed report on the Priority Mail redesign project from Diane Regan and Tony Pajunas. The new, dedicated Priority Mail facilities will use non- traditional operating philosophies, including a "clean building" policy every night (this ought to result in more consistent service). Priority Mail plant-loaded to airmail facilities and dropshipped to destinating SCFs will skip the new dedicated Priority Mail network. Contrary to earlier information, the next-day service standard will be expanded, from 14 to 19 percent of total Priority Mail volume.

Priority Mail Volumes, Revenues Continue Growth in FY 1995

The Revenue, Pieces, Weight ("RPW") Report for fiscal year 1995 has been released, and it shows that Priority Mail was among the Postal Service's leading growth products last year. The volume of Priority Mail was up 2.6 percent, while the volume of First-Class Mail declined 1.2 percent. As a result of the rate increase that took effect on January 1, 1995, Priority Mail revenues were up even more, by 8.1 percent.

Track & Trace Initial Test Approved by Governors

At its meeting on February 5, 1996, the Board of Governors approved funding for the initial phase of the Postal Service's new Track and Trace program for Priority Mail. This initial phase is a development testing project, and reclassification changes relating to Track and Trace for Priority Mail will be deferred, pending outcome of this test.

Postal Service Finances Project Rate Stability Through 1997

Despite last year's rate increase and growing competition from faxes and other forms of electronic transmission, mail revenues have continued to hold up. In addition, the low rate of inflation means that Postal Service labor costs reflect only minimal cost-of-living wage adjustments. As a result, it now appears that when the current fiscal year ends next September, the Postal Service will achieve a surplus of over $1 billion. With such a surplus, the Postal Service will not need to request new rates before March 1997, at the earliest. Higher rates would not take effect until 1998. Thus the outlook for another two years of rate stability now appears excellent, which should be good news for mailers' budgets.

APMU Honors Dave Harris

David Harris, the Secretary of the Postal Rate Commission from 1970 to 1983, and Secretary to the Board of Governors since 1983, has retired (effective December 31, 1995). Dave previously served as the chief administrative officer of the Postal Rate Commission, and has been one of the great personalities and gentlemen on the Postal scene for a generation. Dave was honored at the APMU meeting in December, and he regaled those in attendance with fascinating stories, acquired over his career, about the Postal Service and its leaders. He will be greatly missed.

Dave's replacement, promoted from Assistant Secretary to the Board, is Thomas J. Koerber. Mr. Koerber has spent most of his career with the Postal Inspection Service.

Reclassification Issues for Priority Mail

The Postal Service currently plans to file a further reclassification case for parcels and Priority Mail sometime in the late summer or early fall. Several proposals appear to be under consideration, and the matter is quite fluid. For Priority Mail, the creation of a new minimum weight level (such as 8 ounces or 1 lb.) has been discussed, as well as the possibility of some type of bulk entry discount. Track and Trace appears to be deferred for the time being, pending completion of the testing project described on page 3, above. The picture for parcels is even more confusing, with significant industry concern that any change be made for the better, rather than for the sake of change. The Postal Service hosted a parcel and Priority Mail working meeting to get input from mailers on February 13, and presentations were made by Ashley Lyons, Dave Shinnebarger, and Bob Sheehan. Subsequent to that meeting, APMU has prepared written comments on a variety of reclassification ideas. Postal Service preparation for such a case will require substantial additional work, including further market research and cost studies.

APMU Celebrates Second Anniversary

APMU will celebrate the second anniversary of its first formal board meeting when it meets in Washington, D.C., on March 12, 1996. At that meeting, directors and officers for 1996 will be elected. All interested persons are encouraged to attend. Call (703) 356-6913 for more information.

1996 Calendar of Events

APMU Meetings	March 12 - Washington, D.C. June 11 - Washington, D.C. September - Washington, D.C. (to be scheduled) December - Washington, D.C. (to be scheduled)
National Postal Forum	April 21-24 - Anaheim, California August 25-28 - Washington, D.C.
MailCom 1996	March 3-7 - Atlantic City, New Jersey September 25-28 -- Dallas, Texas
MTAC Meetings	March 12-14 - Washington, D.C. June 11-13 - Washington, D.C. September - Washington, D.C. (to be scheduled) December - Washington, D.C. (to be scheduled)

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 22102-3823 • (703) 356-6913 (phone) • (703) 356-5085 (fax)