Postal Affairs

In October 2008, the US Postal Service will implement new automation equipment for processing and sorting flat-sized mail such as catalogues, magazines, newspapers and newspapers’ Total Market Coverage (TMC) products. This automation system is known as the Flats Sequencing System (FSS). USPS wants to reduce the amount of time it takes letter carriers to case mail at post offices. USPS hopes that automation will improve “street time” for letter carriers and reduce overtime costs.

USPS management has said that “saturation” mail - service typically used by newspapers’ saturation advertising mail competitors (and also by newspaper TMC programs on some routes where subscriber penetration is low) - will not be required to go to central facilities for FSS processing but will continue to be allowed to enter into local delivery units or post offices. Newspaper TMC mail sent at “high-density” rates  on the other hand  would no longer be allowed to enter at local post offices but will be forced to these central facilities for automation.

This change in entry requirements could place newspapers at a competitive disadvantage to their national saturation adverting mail competitors by: (1) increasing newspaper production and transportation costs; (2) threatening timely delivery of newspapers’ non-subscriber advertising products; and (3) raising postage rates through the loss of local entry discounts.

NAA met with USPS in late February to express newspaper industry concern over the impact of the FSS system. In addition, the Association's officers sent on April 7, 2008 a letter to Postmaster General Jack Potter outlining the problem and expressing the view -- held by many newspapers -- that if the FSS system increases production costs, raises rates, or degrades our delivery service, newspapers will have no choice but to explore alternative means for delivery. NAA will continue to engage in a dialogue with USPS management in an attempt to find a mutually acceptable solution to this problem.

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In Dec. 2006, Congress passed the Postal Accountability and Enhancement Act. The legislation restructured the operations of the U.S. Postal Service (USPS) to provide it with more pricing and operational flexibility, while giving a regulatory agency, the Postal Regulatory Commission (PRC), new powers to conduct oversight of the $70 billion government enterprise.

Though comprehensive postal reform legislation has been passed and the PRC has begun to explore a new rate making system, NAA will continue to monitor Congress and respond to any legislative efforts that would impact newspapers use of the postal service.

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The U.S. Postal Service on February 11 announced an increase in postage rates, which will go into effect on May 12, 2008. The Postal Service also indicated that it will raise rates each year in May. Given the fact that the Postal Service is facing a $1 billion loss in revenue in fiscal year 2008 due to structural and cyclical factors, it is not surprising that it would like to raise rates on an annual basis. NAA predicted that - under postal reform - mailers will see smaller, but more frequent rate increases.

Under the new postal reform law, the Postal Service has new flexibility to raise or lower rates so long as the average price for a particular class of mail stays below the rate of inflation, as measured by the Consumer Price Index. The rate of inflation used by the Postal Service was 2.9 percent and was provided by the Postal Regulatory Commission.

The rate increase for the entire class of Standard Mail is 2.8 percent. For Standard Enhance Carrier Route flats - mail service used by newspapers to send Total Market Coverage products to non-subscribers - the rates are as follows:

• High Density ECR entered at the DDU (local post office) – 15.9 cents, up from 15.4 cents.

• Saturation ECR entered at DDU - 14.0 cents, up from 13.6 cents.

• High Density ECR entered at SCF (central facility) - 16.8 cents, up from 16.3 cents.

• Saturation ECR entered at the SCF – 14.9 cents, up from 14.5 cents.

The rate increase for the entire class of Periodical mail is 2.7 percent. Rates for Periodicals mail vary depending upon sorting, handling, weight and where the mail is drop-shipped. For example, for Within-the-County Periodicals the rates increase vary from a 2.4 percent increase for ECR, High Density and 1.7% increase for ECR Basic.

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