DMA President & CEO John A. Greco, Jr. Updates Members on Flats Rates, Next Rate Case, and 'Do Not Mail' Bills

July 10, 2007 — Direct Marketing Association (DMA) President & CEO John A. Greco, Jr. today sent members an update on three postal policy matters: the Standard Mail flats rates that took effect on May 14, the next rate case at the Postal Regulatory Commission (PRC), and “Do Not Mail” bills that now have been introduced in 15 states in 2007.

The full text of Greco’s postal update follows:

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With all that has happened recently in the postal arena, I thought it would be timely to provide you with some final thoughts on the 2006 rate case, a look ahead at future ratesetting processes, and an update on “Do Not Mail” legislation.

Flat-Shaped Mail Rates

First, I would like to share with you my deep disappointment regarding the recent decision of the Governors of the US Postal Service (USPS) to reject a reprieve, even a temporary one, from the exorbitant rate increases imposed on those who mail in the Standard Regular and Nonprofit Flats classes.

Throughout the litigation process that followed the USPS’s original rate case request in May 2006, there was not the slightest hint that such increases — which in some cases were more than double what the USPS had initially requested — were likely to be recommended by the Postal Regulatory Commission (PRC).

When the PRC unveiled those surprising recommendations on February 26, hundreds of you joined with us to warn the Postal Governors that such increases would lead to significant cuts in mailing volumes and a long-term downward spiral in postal revenues.

Our concerns had considerable resonance, and the Governors requested that the PRC reconsider its recommendations for flat-shaped mail.

Even after the exorbitant increases went into effect under protest on May 14, we proceeded to offer the PRC a proposal to finance a modest reduction in rates by offsetting a portion of the USPS’s $800 million contingency fund. Instead, the PRC chose to offer a temporary reduction with no offset for lost revenue.

We then urged the Governors not only to accept the PRC’s recommendation, but to insist that those temporary rate reductions be made permanent. We also reiterated the financing proposal to the Governors. However, in spite of our efforts, the Governors chose to retain the flats increases that took effect on May 14.

As we warned, these outrageous rate increases are already causing a ripple effect throughout the mailing community. According to USPS sources, flat-mail volumes are down significantly. Also, the ramifications of these postage increases have already reached the paper industry, where there are reports of production cuts in coated paper in anticipation of softening demand.

Future Rate Increases

As we move forward, our attention must focus on how future rate increases will be managed under the postal reform act that was signed into law last December. As many of you know, the PRC by June 19, 2008, must promulgate regulations implementing the new law’s ratesetting procedures, including CPI-capped rate adjustments for market-dominant products, which include Standard Mail.

During the transition period — which ends December 20, 2007 — the new law permits the USPS to file for one more rate increase using the complex and costly ratesetting rules that have governed increases since 1971. The prospect of one more “old-style” rate case is alarming, given its potentially devastating effect on the mailing community.

At DMA, we are fighting hard to ensure that the next rate increase process will proceed under the new rules.

The PRC, aware of marketers’ concerns and troubled by the prospect of hearing an old-style rate case while attempting to bring the new system online, has stated a goal to issue rules for the CPI-capped rate system by this October. If the PRC meets its October target, the USPS will be in a position to seek the next round of rate increases under the new, mailing industry-preferred system established by the Postal Accountability and Enhancement Act.

To this end, we are working closely with both the PRC, through its rulemaking, and with the USPS at the highest levels to:

1. Ensure timely issuance of well-reasoned rules for the new ratesetting system;

2. Urge that the next round of postal rate adjustments will be implemented pursuant to these new rules; and,

3. Obtain a commitment from the USPS that any postage increases under the new system will not take place until at least a year from now.

On each of these key fronts, our preliminary discussions have been positive.

Do Not Mail Legislation/Mail Moves America

On another crucial postal front, we continue to see stirrings at the state level of what we believe will be a long-term, concerted national effort to limit advertising mail. The threat facing the mailing community comes in the form of misguided state legislation that seeks to establish state-run “Do Not Mail” registries.

This threat is real — and growing. In 2006, there were four such bills in four states; in 2007 to date, there have been 18 bills introduced in 15 states.

“Do Not Mail” legislation is being driven by environmental, privacy, and consumer groups who often distort the facts in their efforts to eliminate advertising mail to consumers. The opposition is well-financed.

Therefore, the concerted efforts of everyone in the mailing community are needed to keep this essential channel of communication open to the American public.

In response to this challenge, DMA has led more than 50 associations and companies in the development of the Mail Moves America coalition. This broad-based organization has determined that the best response to the growing threat posed by state “Do Not Mail” legislation is one that is aggressive, coherent, and equipped with complete and convincing information about the consumer benefits of advertising mail.

DMA has made — and will continue to make — a substantial financial commitment to Mail Moves America, in addition to providing research and personnel support. However, DMA and the coalition need your help, too.

I invite you to join Mail Moves America by making a financial contribution to support the coalition’s efforts. Coalition funds will be employed to produce informational materials for use with policymakers and the media, support the cost of advocacy in the states, and keep the mail open as a communications channel for every American.

It is vital that we work together aggressively to keep mail moving in America. If you would like more information about Mail Moves America or state “Do Not Mail” initiatives, please contact our Washington, DC office at rbarnes@the-dma.org.

In an era when electronic communications often dominate the spotlight, mail remains an essential tool for reaching and serving consumers, and it continues to play a vital part of our nation’s economy. That said, DMA is committed to making sure that all channels remain effective and affordable components of the multichannel marketing mix.

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