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Radical Postal Rate Reform is Needed Now

Posted by Mark Fallon on May 5, 2019, 1:01:00 PM

Titanic
Last month, the Senate hearings on the Presidential Task Force on the United States Postal Service (USPS) dimmed any hopes for legislative postal reform. The more recent House Oversight Committee hearing on the finances of the USPS were confirmation that true bipartisan commitment to pass legislation doesn’t exist. Absent any changes, Postmaster General (PMG) Brennan predicts that the USPS will run out of cash in 2024.

The USPS – and the mailing industry – can’t wait for Congress. Action is needed now.
Postage rates for market dominant mail are limited by the rate of inflation as determined by the Consumer Price Index (CPI). However, the classification of mail isn’t. That is the prerogative of the Board of Governors and the Postal Regulatory Commission (PRC). That’s where meaningful change can be made.

The PRC published a proposal in 2017 to give the USPS more flexibility in determining rate increases. There was the expected response and outcry from the mailing industry, bemoaning the impact of any substantial rate increase. The PRC never responded, and 18 months later, there’s still no new rule.

The problem isn’t giving the USPS the ability to raise rates beyond the CPI (which they should). The problem is that the current rate and classification structure is fundamentally flawed. The USPS is the only major post that uses content as the primary factor to determine rate classification.

First-Class Mail. USPS Marketing Mail. Media Mail. Library Mail. Bound Printed Matter. Periodicals. The definitions for these categories were developed decades, sometimes centuries, ago. Meanwhile, document composition, printing technology and data analytics have transformed how companies create mail for their customers.

Marketers can create pieces tracking an individual’s address, home value, automobile, income and purchases. Magazine publishers can print unique issues for every subscriber. Even books can be tailored for the specific reader.

Instead of focusing on the content, the pricing factors should be the size, weight, processing costs and delivery times. Similar to package delivery, the carrier doesn’t care what’s in the box, nor do they determine what is essential or non-essential. The sender – the rate payer – determines the level of service they desire and what they’re willing to pay. All mail should be treated in a similar fashion.

What should the new system look like? Who knows? We do know that the current system is outdated, broken, and should be abolished.

The USPS doesn’t have the knowledge or expertise to draft a new classification plan. Even with help of the Mailers Technical Advisory Committee (MTAC), the USPS is too far removed from the mail creation process. Any new plan must come from outside the walls of L’Enfant Plaza.

The USPS Board of Governors should appoint a commission with the charge to draft a new postage rate system. The only directive should be that the new plan can’t be a modification of the existing structure. Members should come from:

  • Mail owners
  • Mail associations
  • Service providers
  • Software companies
  • Equipment vendors
  • Current/past members of the PRC
  • USPS
  • ????

Similar to the Presidential Commission of 2003, the group would hold public hearings to gather additional input – before and after a new model is drafted. A final proposal would be presented to the Board of Governors and the PRC for approval. This would take time, up to a year, but it is worth the effort and expense.

This approach requires no legislation and would put the future of the USPS on solid ground. This proposal may be radical, but now is the time for drastic change. There’s less than 5 years left until insolvency.

Meanwhile, the rank and file of the USPS will continue delivering the mail.

Attend one of our classes  at the 2019 National Postal Forum

United States Postal Service / USPS / U.S. Postal Service / Postal Reform

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