USPS Rate Proposal Shifts More Costs From Major Mailers to Individual Customers

Based on an analysis of the Postal Service’s own data, APWU testimony before the Postal Rate Commission has demonstrated that proposed increases in the price of postage would expand a controversial USPS policy — shifting costs from large corporate mailers to small businesses and individual citizens. 

Testimony submitted on Sept. 6 shows that new rates requested by the Postal Service would increase excessive discounts to major mailers who presort their mail, and, as a result, force small businesses and individual customers who do not presort their mail to pay more.

The report, prepared by economist Kathryn Kobe, the director of Price, Wage and Productivity Analysis for Economic Consulting Services, found that the suggested presort discounts are considerably larger than the costs the Postal Service would avoid as a result of worksharing. The testimony was submitted in response to the postage rate proposal filed by the USPS on May 3.

If discounts were properly set, Kobe asserts, postage for patrons who do not presort their mail could be increased to only 41 cents per first-class letter instead of 42 cents, as the USPS has proposed.

“This testimony proves the extent to which the USPS has strayed from its fundamental mission to serve all Americans,” said William Burrus, president of the American Postal Workers Union. “The USPS has been granting excessive discounts to large corporations at the expense of small businesses and individual customers for some time. This most recent proposal would overturn the essential principle of uniform rates.”

In the past the Postal Service has claimed that it has calculated the discounts it provides to corporate mailers by determining the costs saved by specific worksharing activities and subtracting the savings from the regular rates. In the pending case, the Postal Service has used a different method, which obscures this comparison. Kobe’s report makes the comparison as the Postal Service has made it in the past and demonstrates how the new methodology — which de-links the rates of first-class single-piece letters — would deliver substantially inflated discounts to corporate mailers.

“The Postal Service has failed to provide any convincing rationale for this change in methodology or for the change in its policies” that the modification represents, said Kobe. A similar proposal to de-link single piece and worshared first-class letters was rejected by the rate commission in 1997. 

As a result of the Postal Service’s flawed methodology, Kobe says, the proposed rates would provide corporate presort mailers with vastly inflated discounts relative to the costs the USPS avoids. Corporate mailers who engage in 5-digit presorting, for example, save the Postal Service an average of 7.296 cents per letter. However, the USPS proposal would offer these mailers a significantly larger discount of 10.8 cents.

The Postal Service has predicted that 18 billion letters will be mailed at these discounted rates in 2008. If not corrected by the Postal Rate Commission, this one excessive discount would cost the Postal Service approximately $600 million per year, Kobe said following her testimony.

As a result, citizens — most of whom do not presort their mail – would be forced to subsidize unnecessary discounts to these special interests.

The Kobe report findings are particularly striking in light of the Postal Service’s proposal to consolidate postal facilities across the nation, reducing service to many customers, Burrus said.

“It is unconscionable that at the same time the Postal Service is seeking to raise rates for individual customers and to deprive them of efficient and reliable mail service, it is proposing to give record-setting, unjustified discounts to special interests,” said Burrus.