Wednesday, March 8, 2017

Price cap on postage is at stake

Twelve days from now, all eyes should be on the Postal Regulatory Commission (PRC) comment page for the ten-year rate review. This is for public input to the process in which the PRC must decide whether the postage rate regulatory process that has been in place since 2007 is sufficiently meeting the nine objectives set by Congress. If it is not, then the PRC is directed by Congress to make changes.

The centerpiece of the rate process now is a cap on postage increases by class of mail based on the general inflation indicator, the Consumer Price Index (CPI). Price cap regulation of a government monopoly such as the United States Postal Service (USPS) is considered “state-of-the-art” or “best practice.” It limits the monopoly to increasing its prices at the average of all price increases in the economy.

The external price cap provides marketplace incentives to non-monopoly businesses due to direct competition. Indeed, the USPS has reduced its operating costs by $14 billion in the ten years under the cap. And a price cap performs the essential role of protecting captive customers from predatory pricing that unregulated monopolies often practice.

Indeed, many nonprofits rely on mail for fundraising and communications, and they have nowhere else to go but the USPS. Often, mail delivery is the only good or service that a nonprofit cannot put out for competitive bid. That is why we all need the protection of a cap.