Postal ReformJanuary 2000 BACKGROUND Postal reform legislation has been a key issue for the Direct Marketing Association during the past two Congresses. Association leaders have long felt that the Postal Service must be reorganized in anticipation of substantial losses of First-Class mail volume because of the explosive growth of e-commerce and the growing competition for postal business from both private competitors and foreign postal administrations. The DMA's position on postal reform is that a new Postal Service must be created that will be able to act much more like a business than is possible under current law. It must be given increased pricing flexibility so it can anticipate and meet competition, it needs greater control over its financial structure to give it more flexibility in meeting its capital needs, and it must be given the ability to develop new products as the needs of its customers change in our rapidly evolving communications marketplace. H.R. 22, sponsored by House Postal Service Subcommittee chairman John McHugh (R-NY), takes broad strides toward reaching these goals and is strongly supported by The Direct Marketing Association. The bill establishes a new postal ratemaking process to replace the slow, cumbersome, and unresponsive process now in place. For its monopoly products, such as First-Class mail and most of Standard (A) mail, the Postal Service could set new rates once a year without going through a lengthy ratemaking process. It could not, however, raise rates beyond a formula that would include the Consumer Price Index and a "productivity factor" to be set by the Postal Rate Commission. For competitive products such as Express and Priority Mail, the Postal Service could set rates as a business would set rates. The Postal Rate Commission would be responsible for supervising the requirement in the bill that there be no cross-subsidization between the monopoly classes and the competitive classes of mail. The bill would also establish a "private law corporation" completely separate in structure from the Postal Service that could engage in almost any business that a private corporation can today. Also very important to direct marketers is the provision that would allow the Postal Service to negotiate individual service contracts with customers. DM IMPACT Without reform of the basic structure of the Postal Service, direct marketers believe that postal costs and prices will skyrocket and the principle of universal service, guaranteed only by the United States Postal Service, will become a thing of the past. Both results of inaction would be extremely detrimental to direct marketing. CURRENT STATUS The House Postal Service Subcommittee has approved H.R. 22. However, it is now bottled up in the full Government Operations Subcommittee, largely because of a competing "reform" proposal being pushed by postal competitors such as United Parcel Service, and a Democratic proposal that, we believe, falls far short of the reforms needed to ensure a viable Postal Service in the future. DMA ACTIVITIES The DMA has been significantly involved in the postal reform process from the beginning. We have testified at hearings, submitted a number of comments to Chairman McHugh, and met with the House Postal Subcommittee staff to work out the details of the legislation. The DMA will continue to lobby for committee approval of H.R. 22 during the second session of the 106th Congress.
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