Volume V, No. 4 Winter 1998 Newsletter

Schedule Set for Appeal of Omnibus Rate Case

The decision of the Governors in Docket No. R97-1, the recently-concluded omnibus postal rate case, has been appealed by three parties: United Parcel Service (UPS), the Alliance of Nonprofit Mailers, and Niagara Telephone Co. An appeal of the Standard A parcel surcharge by four photo-finishers acting jointly (District Photo, York Photo, Mystic Color Labs, and Seattle FilmWorks) was withdrawn. (See the Fall 1998 issue of APMU News for a discussion of issues raised.) Key dates for that appeal are as follows.

UPS Seeks Higher Rates for Priority Mail and Parcel Post

Pursuant to the schedule outlined above, United Parcel Service filed its brief on November 16, 1998. UPS seeks (i) to increase Priority Mail rates by contesting the Commissions's assigned cost coverage of 166 percent for Priority Mail as too low, and (ii) to increase parcel post rates by contesting the Postal Rate Commission's decision in Docket No. R97-1 to treat some of the cost of providing service to the Alaska bush as an institutional cost associated with providing universal service rather than as a cost attributable to parcel post. Regarding Priority Mail's cost coverage, UPS argues that the Commission misapplied 39 U.S.C. Sec. 3622(b)(5), the requirement that the Commission consider "available alternative means of sending and receiving letters and other mail matter at reasonable costs," when it assigned Priority Mail a lower cost coverage than monopoly-protected First Class Mail (172 percent), even though Priority Mail had been demonstrated to have less success meeting its service standards than First-Class. If UPS gets the coverage it wants, the rate for an average piece of Priority Mail would increase 71 cents. APMU has intervened in the appeal to defend Priority Mail rates and is determining the role it will play at this time.

A successful UPS attack on parcel post rates would cause some, perhaps all, parcel post rates to increase sharply. Such an outcome could in turn have an indirect effect on Priority Mail rates, since parcel post rates act as a floor under Priority Mail rates.

Governors' PostECS Being Tested by Postal Service, Challenged by UPS

In conjunction with Canada Post and La Poste (the French postal administration), the Postal Service is conducting an operations test of a new global electronic courier service (ECS) known as PostECS. This new service is being developed under leadership of the Brussels-based International Post Corporation, and includes document encryption, password protection, and real-time track-and-trace capability. The goal is to provide secure transmission of documents via the Internet.

A Postal Service advertisement states that PostECS would allow business documents to be sent quickly and at substantial cost savings compared to overnight and other courier services. PostECS thus poses a competitive threat to FedEx, United Parcel Service, and others as well as to the Postal Service's own Express and Priority Mail products. Businesses wishing to try PostECS are being offered a 30-day free trial.

United Parcel Service filed a formal complaint with the Postal Rate Commission ("PRC") on October 5, 1998 concerning the Postal Service's PostECS experiment, citing three grounds.

First, UPS claimed that the service amounts to a new class of mail. Thus, before the Postal Service could launch such an experiment, it should have requested a recommended decision from the Postal Rate Commission in accordance with Sections 3622 and 3623 of the Postal Reorganization Act.

Second, UPS claimed that the rate charged for PostECS, especially the offer of a 30-day free trial, is below cost which (i) violates Section 3622(b)(3) of the Postal Reorganization Act, the requirement that each type of mail service cover its attributable cost, and (ii) constitutes unfair competition with a similar service provided by UPS, in violation of Section 3622(b)(4).

Third, UPS claimed that the Postal Service has failed to request an Advisory Opinion on PostECS, as required by Section 3661(b) of the Postal Reorganization Act.

As relief, UPS requests the PRC to conduct a formal hearing and submit to the Governors a recommendation which rejects the PostECS experiment.

Postal Reform Legislation Update

Rep. John McHugh (R- NY), Chairman of the House Subcommittee on the Postal Service, successfully moved his postal reform bill, H.R. 22, from his subcommittee to the full House Government Reform and Oversight Committee before the 105th Congress adjourned. In its final form the bill included three new amendments. Ranking Minority Member Chaka Fattah (D-PA) proposed adding a labor representative to the Postal Service Board of Governors. Rep. Danny Davis (D-IL) proposed a provision that three Postal Service studies be conducted on diversity, assisting displaced workers, and contracting with small businesses, women and minorities. Rep. Ben Gilman (R-NY) added language addressing the relationship between the Postal Service and the Commission with respect to labor negotiations.

H.R. 22 will likely serve as the foundation for further postal reform debate early in the 106th Congress. The bill would alter the way that postal rates are set and allow the Postal Service more freedom and flexibility to compete in other enterprises. Assuming that Rep. McHugh continues as Chairman of the House Subcommittee on Postal Service, it is expected that he will endeavor to move his bill out of the full committee and onto the floor of the House during 1999.

APMU's Priority Mail Performance Monitoring Project

Members are reminded that APMU is planning its own project to monitor Priority Mail performance. The system will be rely on data from the new electronic delivery confirmation service when it becomes effective. Four companies already have expressed interest and if would be desirable to have a few more. Any organization interested in participating should contact APMU economic counsel John Haldi at (212) 664-8877, if they have not already done so. Results will be available to APMU members.

Priority Mail Volume Grew Sharply in FY 1998

At the end of postal fiscal year 1998, total Priority Mail volume and revenues were up by approximately 9 percent over the corresponding period of the prior year. The growth rate of Priority Mail continues to outstrip all other major subclasses. Here are the numbers (which, except for the per piece figures, are in millions):

Postal Rate Commission Appointments

Congratulations to both Edward J. Gleiman whose reappointment as PRC Chairman has been confirmed for a full six-year term, and Dana B. Covington of Vicksburg, MS, who has been confirmed for a full term as a new commissioner. Prior to his appointment, Mr. Covington was the Director of Communications, Planning and Policy for the United States Senate Sergeant at Arms. Previously, he worked for the Republican National Committee after running for Congress in Mississippi's 2nd Congressional District in 1996.

Parcel Post Rates Adjusted

On September 24 the Postal Rate Commission issued its Further Opinion and Recommended Decision in the R97-1 rate case. Responding to an objection filed by UPS, the Commission recommended an increase in the 2-pound DDU rate for parcel post, but also recommended that other DDU rates for parcel post be adjusted downward so parcels entered at DDUs would provide the same total revenues. Those rates were accepted by the Postal Service Board of Governors on October 5.

Heisman Trophy Balloting to Use Priority Mail

John Kelly, Postal Service V-P for Expedited/Package Services, told the National Postal Forum that Priority Mail will be the official delivery service for this year's Heisman Trophy Award balloting. This prestigious award is given annually to the top college football player. Ballots are cast by almost 1,000 sportswriters and sportscasters nationwide. Heisman balloting begins in mid-November, and all ballots will be delivered and returned via Priority Mail.

1999 Calendar

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