Volume IV, No. 1 Winter 1997 Newsletter

John Kelly New Manager for Expedited Mail and Parcels

John Kelly has been named Vice President of the Expedited and Package Business unit. His most recent assignment in the Postal Service was as manager of the New York Metro Area, where he is widely regarded to have done an outstanding job. This is the first time that Priority Mail has had a Vice-President in charge of the product. Hopefully, this appointment reflects high- level recognition of the importance of Priority Mail to the Postal Service's bottom line. Mr. Kelly succeeds Dave Shinnebarger, who will be assuming other duties within the Postal Service. Mr. Kelly's appointment follows the revolving-door personnel pattern in many key slots that has characterized Mr. Runyon's tenure as PMG.

Volunteers Sought for Free Delivery Confirmation

The Postal Service is seeking volunteers to use the free delivery confirmation service now offered to Priority Mail users. Unlike the earlier track-and-trace test, which was limited to Florida, delivery confirmation is available nationwide. To qualify, the Priority Mail must (1) contain a minimum of 500 pieces, (2) be submitted on an electronic manifest, and (3) have a mailer-applied barcoded peel-off label. Senders can obtain delivery confirmation via direct dial-in or through a special web site on the internet. Any Priority Mail user interested in volunteering should call Judy Mannings at (202) 268-8135. Big-name companies like CTC, Bell Atlantic and the Home Shopping Network are already participating in tests of delivery confirmation.

FedEx Joins Move to Zoned Rates

Following the lead of UPS, Federal Express has announced that as of July 1, 1997 all rates for packages will have zoned rates. Under the announced change, rates to nearby areas will go down, while rates to more distant areas will increase.

This change in rate policy reflects the fact that FedEx no longer flies all mail to its hub in Memphis. Instead, the growth in volume has made it possible for FedEx to truck large volumes of packages between many cities, at lower expense.

Postal Reform Bill Reintroduced by Congressman McHugh

Congressman William McHugh (R-NY), Chairman of the House Subcommittee on the Postal Service, under the House Government Reform and Oversight Committee, has reintroduced his postal reform legislation. The new bill, H.R. 22, is virtually identical to the one considered last year. The only change has been deletion of the two provisions that were enacted as part of the budget bill last September: (i) an increase in the annual stipend for the Governors, from $10,000 to $30,000 per year, and (ii) creation of an independent Inspector General, reporting directly to the Governors

Significantly, the new bill would still exempt from the Private Express Statutes any package for which the Postal Service charges more than $2.00. This provision would exempt all Priority Mail from the Private Express Statutes, and turn the two-day delivery market into a real free-for-all.

Testimony on last year's bill identified no consensus, and expressed widely diverse opinions. Evidently, significant changes must be made before the bill can approach even a minimal consensus.

Chairman McHugh, and Congressman Chaka Fattah (D-PA) (Ranking Minority Member of the Subcommittee) have scheduled two days of oversight hearings in March. The first hearing, scheduled for March 12, is expected to include testimony from representatives of the General Accounting Office and from the Postmaster General. The second hearing, scheduled for March 19, will receive testimony from the Inspector General of the Postal Service and the Board of Governors. The initial hearing on the proposed postal reform legislation is scheduled on April 16.

Postal Service Income

Through the end of Accounting Period 5 the Postal Service had a cumulative net income of $825.3 million. This was $39.7 million under the profit budgeted for this time period, and $620.2 million less than the net income at the end of the same accounting period last year. The Postal Service has historically incurred substantial operating deficits in the late Spring and Summer months. Nevertheless, it would appear that the Postal Service will comfortably exceed its budgeted profit of $55 million for fiscal year 1997. Absent a rate case some time this summer, however, the outlook for fiscal 98 would be a deficit, probably in the vicinity of $500 million to $1 billion.

Priority Mail Volume, Revenues Up 13%

During Accounting Period 4, Priority Mail volume was up 14.0 percent over the same period last year. For the first four accounting periods cumulatively, the volume was up 13.7 percent over the same period last year, while revenues were up 13.4 percent.

Parcel Reclassification Case Filed

At the Governors’ January meeting, it was announced that they had approved the filing of a reclassification case for parcels. The case actually was filed February 21, 1997. The case contains no classification changes for Priority Mail, except with respect to hazardous materials.

Decision Awaited on Dedicated Priority Mail Facilities

The Priority Mail re-engineering project, which calls for the opening of a number of new facilities dedicated to Priority Mail in the Northeast and Florida, continues to push ahead. The Postal Service has been evaluating bids received in December. At this point, the Postal Service expects to decide (1) whether to subcontract the facilities or operate them itself, and (2) if they are to be subcontracted, whom to select as operator. A decision is expected to be announced in April or early May.

Priority Mail Advertising Appeal Won by Postal Service

As reported in the last APMU newsletter, the National Advertising Division of the Council of Better Business Bureaus, Inc. had recommended that the Postal Service disclose the fact that Priority Mail does not offer tracking or guarantees in its Priority Mail comparison advertisements. The Postal Service appealed that recommendation to the National Advertising Review Board (NARB). On January 28, 1997, a panel of the Review Board decided that the Postal Service is not "required to make the additional disclosures." Score one for the Postal Service. The Review Board's press release stated that

the United States Postal Service (USPS) has a reasonable basis to substantiate its comparative advertising for Priority Mail Service. The NARB panel reviewed the truthfulness and accuracy of USPS' advertising and determined that the advertising in question need not be modified. USPS' print and television campaign features direct price comparisons between Priority Mail Service and the significantly more expensive, two-day delivery services offered by Federal Express and United Parcel Service. The NARB decision is in response to the advertiser's appeal to the peer- review group; the ruling overturns a November 7, 1996 case decision by the National Advertising Division (NAD) of the Council of Better Business Bureau, Inc., in which NAD had recommended that the USPS advertising be modified to disclose that Priority Mail is not tracked or guaranteed. USPS' advertising was examined by NAD through its standard monitoring program; neither Federal Express nor United Parcel Service were parties to the NAD/NARB proceedings. [Emphasis added.]

In the wake of its favorable decision from the National Advertising Review Board, the Postal Service has vowed to continue running its aggressive advertising campaign that compares Priority Mail with second-day offerings from Federal Express and UPS. Separately, Business Mailers Review notes that the advertising campaign does not seem to have increased the already healthy growth rate.

PMG Tells Governors Home Shopping Network is Big Priority Mail User

At the January meeting of the Board of Governors, PMG Runyon told them that "through Accounting Period 3, the Home Shopping Network generated more than 2 million pieces of Priority Mail business worth almost $7 million in revenue. In just six days — December 16-21 — we delivered more than 318,000 pieces of Priority and Express Mail for the Home Shopping Network, brand new business worth more than $1.4 million. That is important growth in one of our core products."

1997 Calendar

APMU Meetings	May 20 - New Orleans, Louisiana (at Postal Forum) September - Washington, D.C. (to be scheduled) December - Washington, D.C. (to be scheduled)
National Postal Forum	May 18-21 - New Orleans, Louisiana September 7-10 - Boston, Massachusetts
MailCom 1997	April 8-11 - Atlantic City, New Jersey October 20-23 - Las Vegas, Nevada
MTAC Meetings	June 10-12 - Washington, D.C. September 23-25 - Washington, D.C. December 9-11 - Washington, D.C.
Postal Board of Governors	April 7-8 - New Orleans, Louisiana May 5-6 - Washington, D.C. June 2-3 - San Juan, Puerto Rico June 30-July 1 - Washington, D.C. (Audit Comm.) August 4-5 - Minneapolis, Minnesota September 8-9 - Washington, D.C. (Audit Comm.) October 6-7 - Charlotte, North Carolina November 3-4 - Washington, D.C. (Audit Comm.) December 8-9 - Los Angeles, California (Audit Comm.)

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)