Mysteries surrounding the New Postal Rates

Nearly three weeks after the U.S. Postal Service proposed hiking most postal rates, mailing experts and regulators can’t figure out what the proposal means.

Agreeing with a coalition of mailers’ groups that USPS’s filing was incomplete for all but First-Class Mail, the Postal Regulatory Commissionon Monday extended the discussion period on the proposed April 26 rate increases for “market-dominant” mail classes.

Some mailers are skeptical of USPS’s calculation that the price increases, especially for the Standard and Periodicals classes, are just shy of 2%. But until USPS answers an extensive list of questions about the new rate structures and the new rules that will accompany them, no one can evaluate whether the proposed rate hikes are legal, the PRC said.

A pallet of magazines in FSS-optimized bundles

Even after the rates are fully explained, divining their implications for individual mailers, for USPS, and for others will be no simple matter. Here are seven important but mostly unanswered questions about the rates:

1) How much will myrates change? If you’re assuming the answer is less than 2%, you may be in for a rude awakening. These are is not across-the-board increases. Forever Stamps aren’t going up at all, enabling USPS to stick First-Class business mailers with increases that exceed 2%. The new rules may whack mailers that have mostly carrier-route or high-density mail but result in lower postage for some other mailers. Folio: magazine notes that some rates will double while others will decrease more than 20%; most mailings, however, involve multiple types and levels of rates. Many mailers won’t really know what the new rates will mean until their printer or other service provider can run an elaborate presort analysis, which can’t happen until the new rules and rates are clarified.

2) Will the rates alter how paper is priced and sold in the United States? The new rates would continue and extend the Postal Service’s efforts to de-emphasize weight in calculating rates. USPS acknowledges that it overcharges for weight, in the past using it as a proxy for some of its costs that are not directly weight related. The result is that paper mills tend to charge higher premiums for lightweight paper in the U.S. than they do in other markets, knowing that American postal rates give buyers a strong incentive to use lighter paper. (That’s especially true for magazine-quality papers, which in many other countries are used primarily for products distributed through stores rather than the mail.) But with Standard letters no longer having “pound” rates and with weight charges for some other mail declining, some mailers may switch to heavier paper.

3) For flats mailers, will the new mail-preparation standards be must-do, ought-to-do, or nice-to-do? This is an especially big question for flats mailers, and their printers, because of new preparation standards for mail going to ZIP codes served by the Flats Sequencing System (FSS) and new incentives to create pallets of carrier-route bundles in non-FSS areas. It’s still not clear what mailers will actually be required to do on April 26 and what will be optional but important – for example, valuable enough to overhaul how mail is prepared and shipped. And sometimes USPS incentives are duds, not worth the additional expenses or investment required to take advantage of them.

4) Will the rates and regulations create new competitive advantages for some printers – and disadvantages for others? For many types of printing, a major differentiator is the ability to minimize customers’ mail costs through mail consolidation, in-line customization, dropshipping, etc. Postal officials talk a good game about wanting to encourage co-mailing, selective binding, and other forms of mail consolidation, but that isn’t always reflected in new rates. Conversely, incentives to consolidate and dropship mail can hurt small printing plants that don’t prepare enough mail to obtain the best rates for their clients.

5) Will printers, other service providers, and USPS itself be ready for April 26? The proposed rate structure will have some new charges and apparently lots of new rules and incentives. But software providers can’t redo their coding or printers their mail-preparation procedures or equipment until they know what the new rules will be. And then there’s the question of whether the Postal Service will be ready for the resulting changes in how mail is prepared and delivered.

6) Will the new rules and rates finally make FSS start paying off? USPS’s multibillion-dollar investment in the huge machines was supposed to reduce dramatically its costs of carrying flat mail. But so far, higher handling costs have eaten up the resulting delivery savings, which has increased pressure on USPS to jack up rates for Standard and Periodicals flats. New FSS preparation standards are supposed to address that by changing how mail is packaged for ZIP codes served by the FSS machines, such as by eliminating carrier-route bundles.

7) Will the new rules cause more lightweight pallets and other “tail of the mail” problems? Printers and mailers note that recent changes in postal regulations have forced a lot of flat mail to be placed on extremely light pallets, which tend to cause such problems as reducing the amount of mail that fits into a truck. The new rates include incentives (or requirements; it’s not clear yet what’s optional) for creating 5-digit carrier-route pallets and FSS scheme pallets. But will that have the perverse effect of causing other mail to be packaged and shipped less efficiently?

Source: Dead Tree Edition http://deadtreeedition.blogspot.com/2015/02/seven-mysteries-of-new-postal-rates.html

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