Postal Service Proposes Priority Mail Rate Increases

Postal Service witnesses state that, if their proposed rates for Priority Mail are recommended by the Commission and approved by the Postal Service Board of Governors, the increase in Priority Mail rates will average 7.4 percent. The largest proposed increase in any one rate cell is 16 percent. By contrast, in the last omnibus rate case, Docket No. R94-1, the increase in Priority Mail rates averaged 4.75 percent (with individual Priority Mail rate cells increasing as much as 23 percent).

As in Docket No. R94-1, the proposed increase in rates for unzoned two pound and under Priority Mail is less than the subclass average. The Postal Service proposes an increase of 6.67 percent for unzoned two pound and under Priority Mail. Since two pound and under Priority Mail constitutes approximately 80 percent of all Priority Mail volume, many heavier-weight Priority Mail rate cells again face a double-digit increase to make up for the favorable treatment given two pound and under Priority Mail.

The Postal Service has proposed 10 percent increases in the three-to-five pound unzoned rate cells, and an average increase of 8.89 percent in the over-five-pounds zoned rate cells. There are 390 Priority Mail zoned rate cells. Of this number, 175 rate cells face double-digit increases. On the other hand, 3 rate cells (all in Zones Local, 1, 2, 3) face 5 cent decreases in rates, while 2 cells face no change in rates. The following analysis further describes the range of proposed rate changes.

Zones Local, 1, 2, 3.
Largest increase: 6.30 percent (6 lb.); smallest increase: -0.30 percent (30 and 31 lb.); number of rate cells with double-digit increases: 0; and average increase in unzoned rate cells: 2.45 percent.

Zone 4
Largest increase: 10.39percent (70 lb.); smallest increase: 0 percent (6 lb.); number of rate cells with double-digit increases: 16; and average increase in unzoned rate cells: 8.71 percent.

Zone 5
Largest increase: 9.15 percent (6 lb.); smallest increase: 0.27 percent (21 lb.); number of rate cells with double-digit increases: 0; and average increase in unzoned rate cells: 3.56 percent

Zone 6
Largest increase: 15.46 percent (70 lb.); smallest increase: 3.77 percent (9 lb.); number of rate cells with double-digit increases: 51; and average increase in unzoned rate cells: 12.44 percent.

Zone 7
Largest increase: 16.00 percent (70 lb.); smallest increase: 4.33 percent (8 lb.); number of rate cells with double-digit increases: 53; and average increase in unzoned rate cells: 13.02 percent.

Zone 8
Largest increase: 15.67 percent (70 lb.); smallest increase: 5.00 percent (9 lb.); number of rate cells with double-digit increases: 55; and average increase in unzoned rate cells: 13.14 percent.

New Delivery Confirmation Service Proposed: Track & Trace Lite

The Postal Service also proposes to offer Priority Mail users a delivery confirmation service. This service will be sold to some Priority Mail users, while others will receive the service without charge. Delivery confirmation will also be made available to mailers of Parcel Post, Bound Printed Matter, Special and Library Mail. This service will provide mailers with the date of delivery (or attempted delivery).

The Postal Service admitted that its proposed delivery confirmation service:

...provides only a narrow range of information and has no effect on the underlying service in terms of speed or reliability provided to the mail piece. Specifically, there is no signature constituting written proof of delivery as there would be for return receipt service, nor is the piece given different handling as an accountable piece of mail, as would be the case for registered mail or certified mail. In addition, the collection, mode of transportation, and priority of delivery for delivery confirmation pieces is no better than for pieces within the same subclasses that do not use delivery confirmation.

Delivery confirmation will be provided by hand-held battery-powered barcode scanners to be used by carriers, box section clerks, window clerks, and other postal employees. Data input will be made through barcode reader and alphanumeric keyboard. At the end of the day, the scanners will be placed in docking stations that will permit passive transfer of information from the scanners to a central database. The Postal Service plans to issue a dedicated scanner to every city and rural carrier route, as well as other postal locations which require access to a scanner. The Postal Service has announced it has awarded a $218 million contract to Lockheed-Martin for 300,000 handheld scanners, to be deployed in 38,000 postal facilities by the end of 1998.

Priority Mail’s electronic option would be known as Priority Mail Base Delivery Confirmation (PMB DC), which would be free, while the manual option would be known as Priority Mail Retail Surcharge Delivery Confirmation (PMRS DC), and cost an additional 35 cents.

Under PMB DC, the Priority Mail user will: (1) obtain a package identification number electronically; (2) apply their own barcoded labels to Priority Mail packages; and (3) provide the Postal Service with an electronic manifest of all delivery confirmation pieces on the day the pieces are mailed. The manifest must include: (1) the date of the mailing; (2) the individual package ID numbers of the Priority Mail pieces mailed; and (3) the destination ZIP Codes. Recipients of the free delivery confirmation service are required to access the delivery confirmation information electronically.

Under PMRS DC, the Priority Mail user will obtain a delivery confirmation identification number on a USPS-supplied barcoded label at the retail counter, where Postal Service staff will apply the barcoded label manually. Recipients of the $.35 cent delivery confirmation service can obtain delivery confirmation using a toll-free number to the corporate call management system. The Postal Service anticipates that the availability of delivery confirmation service, both to large-volume Priority Mail users and to mailers of individual Priority Mail pieces, will increase future Priority Mail volume.

Priority Mail Presort -- Death of a Discount?

The Postal Service proposes to eliminate the Priority Mail presort discount. Currently, presorted Priority Mail receives an 11 cent per-piece discount. To qualify for presort rates, the mailer must mail a minimum of 300 pieces sorted to five-digit, three-digit and state sacks and bundles. Each sack or bundle must contain at least six pieces.

The Postal Service justified its proposal with the argument that Priority Mail presort has met with very little mailer interest. Presort volume has been less than one percent of total Priority Mail volume — 7 million pieces during 1996. Of course, by this logic (using figures from the Postal Service’s Fiscal Year 1997 Cost and Revenue Analysis), Mailgrams — which had a volume of only 5.8 million pieces — should also be eliminated.

The Postal Service also argues that presorting should have diminished value as a form of worksharing as the Postal Service develops its Priority Mail Processing Centers (PMPCs). The PMPC contractor will be required to sort Priority Mail to the five-digit level. As discussed above, the existing discounts provide an incentive for mailers to perform sorting at a less fine level.

Finally, while the Postal Service did not propose any significant mail classification changes within Priority Mail, it has proposed the elimination of Standard A Single Piece mail, which it estimates would increase Priority Mail volume by 231 million — a nearly 25 percent increase in volume.

1997 Calendar

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