DMA: USPS Rate Hike Will Damage Economy

The DMA Says Proposed $6.1 Billion Rate Hike Will Further Damage the Economy;
Congress Must Enact Sweeping Reform to Allow the USPS to Survive

NEW YORK, Sept. 24 /PRNewswire/ — The Direct Marketing Association (The
DMA) has voiced grave concerns over the timing and size of the postal rate
increase request that was filed today with the independent Postal Rate
Commission (PRC). The United States Postal Service (USPS) Board of Governors
(BOG) filed a rate case today with the PRC, seeking a $6.1 billion hike in
postage rates across the board. This proposed increase is in addition to the
$3 billion in hikes that the Postal Service has implemented since January
2001.
Under the USPS's proposal, the price of a First-Class stamp will jump
three cents, from the current 34 cents to 37 cents. Postmaster General John
E. Potter told a Senate panel on September 20 that this increase would cost
the average household $1 per month. However, the proposed increase will cost
business mailers, both small and large, much more — and most of those costs
will be passed on to the consumer.
"The Postal Service has already hit the mailing public with two rate
increases this year that will take $3 billion out of the American consumers'
wallets. Now they are seeking to take an additional $6.1 billion next year,"
said H. Robert Wientzen, president & CEO, The DMA. "In an economy that has
been struggling all year and is now under additional pressure from the
September 11 tragedy, it is unfathomable that the Postal Service would ask
consumers and businesses to sustain yet another postage increase. Such new
increases, which average 8.7 percent overall and are far in excess of the rate
of inflation, will be a major drain on our softening economy."
Since the approval process takes 10-12 months, the new rates could take
effect just as businesses and consumers are gearing up for the 2002 holiday
season. Because of the lengthy approval process set forth in current law, the
USPS Board indicated that it felt compelled to seek the increase now.
At an August meeting with postal officials, business executives explained
that, given the current economic climate, the prospect of rate increases next
fall would force them to plan now to reduce volume significantly next year —
further reducing the USPS's ability to remain competitive.
This decision is further evidence of the need for legislative reform to
update the 30 year-old law under which the Postal Service operates.
"While I understand the Postal Service's angst over its own financial
condition, its situation is much improved over an earlier projection for a
$3 billion loss this year," said Ed Gleiman, the former Chairman of the Postal
Rate Commission who is currently spearheading The DMA's postal reform
campaign. "The Postal Service could have — and should have — delayed this
rate increase request in order to avoid doing long-term damage to its business
customers and, ultimately, itself."
"While I can appreciate that the postal governors might feel their
fiduciary responsibility required them to seek another round of rate
increases, as a federal agency with a government granted monopoly, the U.S.
Postal Service has a broader obligation to our nation's economy," said Jerry
Cerasale, senior vice president of government affairs, The DMA. "This
ill-timed proposal, which could increase the cost of mailing catalogues by 9.3
percent, would ripple through the economy with an impact far beyond those
mailers."
"For many of our members, postage is already the single biggest line item
in their budgets," said Wientzen. "With this next round of inflation-busting
increases, the biggest loser, aside from our economy, will be the Postal
Service, as it drives away business customers and the mail volumes that
underwrite its existence."
The DMA is the leading and largest trade association for businesses
interested in interactive and database marketing, with nearly 5,000 member
companies from the United States and 53 other nations. Founded in 1917, its
members include direct marketers from every business segment as well as the
nonprofit and electronic marketing sectors. Included are catalogers, Internet
retailers and service providers, financial services providers, book and
magazine publishers, book and music clubs, retail stores, industrial
manufacturers and a host of other vertical segments, including the service
industries that support them. According to a DMA-commissioned study, direct
and interactive marketing sales in the United States exceeded $1.7 trillion in
2000, including $110 billion in catalog sales and $24 billion in sales
generated by the Internet. The DMA's Web Site is http://www.the-dma.org.