Alliance Alert — July 22, 2015

Any day now, the Postal Regulatory Commission (PRC) is likely to issue what should be the final decision on the 4.3 percent exigent surcharge that customers are paying to compensate the Postal Service (USPS) for losses it sustained from the 2007-09 recession. The case was remanded to the PRC by the appeals court to repair one part of its original decision–how it counts lost mail volume from the time it occurred during the recession. Originally, the PRC counted the losses for only their first year, known as “count once,” while the court said they should be counted until most of its four criteria for a “new normal” were reached. In short, “new normal” is reached when the fact that volume was lost is no longer “extraordinary,” as in, when most businesses and nonprofits know they have to adjust to the recession they all experienced.

The range of possible decisions by the PRC is wide and the outcome is very uncertain:

1. Fixing a computational error in the contribution lost by USPS each year while extending the counting of losses to the “new normal” would end the surcharge very close to its original scheduled time early next month.

2. Simply extending the loss count to the “new normal” without fixing the contribution error would make the surcharge last until approximately next spring.

3. Redefining the “new normal” to the USPS fiscal year 2013 when it resumed making operational income, and counting losses until then while not fixing the contribution error would extend the surcharge for about five more years.

4. Completely abandoning the “new normal” rule would make the surcharge permanent.

The Alliance and its mailer allies have argued for option 1, while the USPS is pushing for option 3.

What we believe may be lost in all this regulatory haggling is that customer retention should be the Postal Service’s number one priority. A network operation that depends on volume should do its utmost to retain the customer volume it already has, which is much more cost-effective than going out and trying to win new customers. A government public service that depends on public support and Congressional oversight also should do what it can to retain diverse, high quality content that people want to receive in their mailboxes.

The things the USPS and PRC need to do to retain the most customers, the most volume, and the highest quality mailbox content are very simple. They need to restore the affordability, predictability, and transparency of postal pricing. Congress and the supporters of the 2006 postal reform act knew the importance of this and made it the centerpiece of the law. These things really do make a difference in whether postal customers stay in the mail, increase their use of the mail, or move out of the mail. The regulatory battle that has now raged for far too long is hurting the USPS much more in the long run than any extra cash they pocket in the short run will help. Loyal, continuing customer relationships are long-term annuities versus the one-time cash infusion the exigent fight entails. Sending long-time customers away to get some cash now is tantamount to mortgaging the future.

How the USPS treats its customers really does affect their decisions about whether to increase, maintain, or reduce mail volume. Within almost every postal customer organization there are champions of hard-copy mail and supporters of reducing the mail expense to help fund new digital strategies. When these organizations experience arbitrary and capricious, from a practical point of view, pricing and product changes, the mail champions can be at a loss to explain to their colleagues why they should stay with the USPS.

Most nonprofit and for-profit mailers these days rely heavily on mail service providers like Quad Graphics and RR Donnelley to make mail work for them. We urge the Postal Service to work closely with both mailers and their service providers in a collaborative fashion to make all future price, product, mail preparation changes lead to more, not less, mail volume.

We hope the upcoming PRC decision supports the long-term retention of postal customers and success of the USPS. And going forward, we urge USPS leadership to truly emphasize customer retention through the affordability, predictability, and transparency of postal pricing.