In the Same Boat
More than a year has slipped away since postal reform legislation was enacted. During that time, a rate case developed under pre-reform rules was enacted and decimated flats mail; overall mail volume was down for the U.S. Postal Service’s first fiscal quarter of the year; and the Federal Trade Commission reported that the USPS is hampered by regulations requiring it to use more resources than necessary to support its products and services.
So, the real work of postal reform continues. To get some perspective on what mailers can expect in the near future, Target Marketing called on Leo Raymond, director of postal affairs for the Mailing & Fulfillment Service Association, a national trade association that represents the needs of the mailing and fulfillment services industry.
Target Marketing: So far, what effect has the Postal Accountability and Enhancement Act (PAEA) had on the mailing climate for direct marketers?
Leo Raymond: The direct effects of the PAEA haven’t really been felt yet, but the mailing climate is starting to look different. By that, I mean that the most meaningful impact of the reform legislation—replacing the outdated pricing mechanism—has not been used as yet, but the industry is starting to figure out what may happen when it is.
To get a hint of the future, just look at the immediate past. In the 2006 rate case, the USPS implemented a rate structure that highlighted the cost differences between “efficient” and “inefficient” mail, and the consequent rate implications of those differences. Automation-compatible letter mail fared much better than nonmachinable flats, for example. If such a blunt price signal could be sent under the old rate-setting regime, it’s reasonable to conclude that, under the new rate-setting process, the signals will not be more subtle.
The PAEA, as implemented in the Postal Rate Commission’s recently published regulations, caps price increases at [the Consumer Price Index] but does so at the class level. As a result, the price changes within a class (e.g., in subordinate rate categories and rate cells) can move more widely, provided it all averages out to CPI or less for the class as a whole. Knowing this, mailers are becoming more aware of the potential for rates that reinforce the message of efficiency so starkly delivered last May.