A Bad Move for Small Mailers: Postal Expert Questions Move Update Surcharge
January 5, 2010 By Robert W. Mitchell
|
However, the Postal Service didn't take that course. It chose instead to make Move Updating a requirement for all Standard mailings, no alternatives allowed. Its justification appears to be its analysis that its costs will be lower and that the most advantageous course for each mailer is to finance and follow through with Move Updating. It's inefficient, however, for the Postal Service to substitute its judgment, by regulation, for that of mailers, and it's a mystery why the Postal Service should be opposed to offering its UAA services, as an option, at a fair price.
For Standard mailings that aren't Move Updated, if such mailings could still be called “Standard mailings,” the Postal Service took the position that the only rates available would be the rates for Single-piece First-Class, now 44 cents for the first ounce, if letters. The attendant rate increases would be quite large, and particularly so for nonprofit mailers. For example, a 1-ounce nonprofit letter, sorted to 5 digits and entered at a destination SCF, would see an increase of 394.4 percent.
Even higher increases would exist for heavier pieces and flats. When a Federal Register process drew comments that the mailers bearing the increases could well be “small local businesses and nonprofit organizations,” the Postal Service brushed off the possibility of a burden by saying that it “feels that there are many methods mailers can use in order to qualify and make this fit any business model.” [Federal Register, Vol. 72, No. 188 (Friday September 28, 2007), p. 55056].
The Postal Regulatory Commission made it clear in November that noncompliant mailings can remain Standard mailings and that the applicable rates are the reigning Standard rates plus a surcharge. The order also approved a proposal to set the surcharge at 7 cents, which is a smaller penalty than the Postal Service had in mind. But that doesn't make the rates efficient or fair.
The cost justification behind the surcharge, as provided by the Postal Service, is that a Standard piece intercepted as UAA (and then discarded) costs the Postal Service, on average, 5.2 cents more than a Standard piece that receives ordinary delivery. That gives rise to several important questions:
1. Why is the 7-cent surcharge so much higher than the 5.2 cent cost? A surcharge may at times be more than 100 percent of the cost underlying it, but not often when it's first introduced.
2. Why should each piece in a mailing pay the surcharge when only a few pieces would be expected to require UAA treatment? If, on average, 20 percent of the pieces in noncompliant mailings receive UAA treatment, and the markup to 7 cents were taken as appropriate, common ratesetting practice would set the each-piece surcharge at 1.4 cents (0.20 times 7 cents).
3. Why should letters and flats pay the same surcharge when the UAA cost for letters is undoubtedly lower than the UAA cost for flats? When rate differences aren't based on corresponding cost differences, inefficient signals are sent to mailers — and inefficient behavior can be expected.
4. Is the 5.2 cent cost net of any costs avoided by not having to complete delivery on pieces that are intercepted? It's not apparent that the cost study nets these costs out. If it doesn't, mailers would be in the position of being double charged.
For all of these reasons, the surcharge of 7 cents would seem to be an immense overcharge. Aside from suggesting that the Postal Service doesn't want to make its UAA services available on reasonable terms, it'll drive some mailers to leave the Postal Service, perhaps finding that email will work just fine. These mailers will not come back.
|
