Special Report: The Shape of Things to Come

June 2007

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As I write this, it’s a week before the May 14 implementation date for the majority of the rate increases and mail prep changes associated with the 2007 postal rate case. And while mailers are focusing their attention on these current challenges, they just might get caught looking the wrong way as the bigger postal picture gets tuned. The hard work of mapping out the new structure for the U.S. Postal Service (USPS) and its customers is just starting, says Bob McLean, executive director of the Mailers Council, an Arlington, Va.-based organization that represents marketers on postal policy and legislative issues.

Target Marketing spoke with McLean to get a sense of how the postal system is changing, and what mailers need to know to make sure they are a part of the discussion on the USPS’ future.

Target Marketing: What is the current state of affairs for the USPS?
Bob McLean: The biggest change for them is the rate process. But to take a step back for a second, there are more than a dozen studies required by the postal reform act. Some of these are to be carried out by the postal service, many of them by the Postal Regulatory Commission and one of them jointly, which will determine the new rate setup. Some of them will be done by the GAO, and some by the FTC. And all of them are to be reviewed with the oversight of Capitol Hill … The two biggest of all these studies are … the one [that involves] coming up with a rule for the new rate process and another one that is very important to mailers, [which] is the requirement to create a system for delivery standards and measurement systems to see if [the USPS is] meeting these new standards. That’s huge for mailers, because right now we do not have a structured performance measurement system for most of the classes of mail that most mailers care about.



TM: What rate increase schedule is likely to take shape under the new rules?
BM: Most people are expecting annual increases, once the USPS files the first case under the new rule. And right now the Postal Service hasn’t decided whether or not it’s going to file another rate case under the old rule. … I think that they got a lot more opposition from their customers and they certainly got a lot more opposition from Capitol Hill at the recent oversight hearings in the House and in the Senate. … Formally, the Postal Service has yet to decide, and at this week’s Board of Governors’ meeting, it did not come up.

What we’ve expressed to the Postal Service is that this is the worst thing they can do to ensure that people stay in the mailing industry. … You saw what happened this week where there have been changes to some of the rates that already came out in the most recent case. So we’re dealing with a rate case that doesn’t want to end. One of my members has already put the cost of what happened [recently] at $2.6 million, because this is staff time, printing costs, distribution costs, computer programming costs … for the meter manufacturers, they’ve been making computer chips to go in their larger machines; all of those have to be replaced again.

TM: Are there any aspects of reform that might catch mailers flat-footed in the future?
BM: It’s most important for mailers to recognize that postal reform didn’t end with the passage of the bill. It’s just beginning. And these studies I mentioned are going to have a profound influence on the future of the mailing industry. Some of the influences will be related to cost. Others will be issues having to do with how easy or difficult it is to do business with the Postal Service. So, it’s a situation that bears watching [with the] recognition that Congress left a lot of these details to be finished by other parties. … One of the more long-term studies requires the GAO to look at the monopoly [and] universal service. Universal service is something we all take for granted, but should not. Because if the GAO should come back and say, “You know, the Postal Service really can’t afford to do this anymore, we think they ought to change delivery the following ways,” those recommendations could become policy. … Mailers need to be very cognizant of the fact that many of these decisions coming up could make it possible to stay in the mailing industry or make it very discouraging.

—Hallie Mummert

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