- The Washington Times - Tuesday, November 14, 2000

The U.S. Postal Rate Commission yesterday recommended a one-penny increase in first-class postage, which would bring the cost of sending a letter up to 34 cents in January.

The U.S. Postal Service requested the increase to cover rising costs of labor and gasoline. The decision to go forward with the increase is now up to the post office's Board of Governors, which is meeting early next month.

The proposed increase covers all classes of postage and would take effect Jan. 7, said Bob Cohen, director of technical analysis and planning for the commission.

"The increases are routine events," he said. "The costs go up because of labor costs, which is 80 percent [of our money] and are on the rise on a regular basis. It also has to do with other things the Postal Service purchases like fuel, vehicles, buildings, equipment."

The Postal Service is a semi-independent federal agency that is not funded by tax dollars. It is expected to make enough money to break even, but the service still carries a $3.5 billion accumulated deficit, built up over many unprofitable years.

The increase for first-class stamps is the lowest of the expected increases. It will generate about $1 billion a year.

The 22-cent rate for a second ounce of first-class mail will stay the same, as will the 20-cent postcard, although the Postal Service had asked that they be raised by two cents and one cent, respectively.

Newspapers and magazines will rise 9.9 percent, parcel post 2.7 percent, priority mail 16 percent, regular standard 8.8 percent and bound printed materials 17.6 percent.

The increases have upset commercial mailers, who say they are too high.

"Magazines are willing to pay their share, but it's highly unfair to increase postal rates so much that they become prohibitively expensive for the consumers who subscribe to periodicals," said Nina Link, president and chief executive officer of the New York-based Magazine Publishers of America, which represents more than 300 publishers worldwide.

The high rates could drive mailers to seek alternative marketing venues and hurt the post office financially, said Jerry Cerasale, senior vice president for government affairs for the Direct Marketing Association.

"Some of our catalogue members are looking at 16 percent increases … so now they have to look for alternative means like the Internet for marketing," he said.

DMA is the largest trade association for direct-marketing businesses, with close to 5,000 members throughout the United States and 53 other countries.

"This is going to reduce mail volume and cause a spiral, which is going to hurt the Postal Service financially in the future," Mr. Cerasale added.

Unlike businesses, when the Postal Service wants an increase in rates, it has to first petition the rate commission. That body then holds hearings over a 10-month period before making a decision.

The Postal Service filed its request with the commission in January 1999, as the new 33-cent stamp was hitting the market. The agency asked for an overall rate increase of $2.8 billion in revenues, or a 6.4 percent increase; only about $800 million was needed for anticipated cost increases, according to the Postal Service.

Trade groups representing commercial mailers fought the increase, and the commission cut back its request to $2 billion, or 4.7 percent.

Mr. Cohen said about $1.7 billion of the original request was for unforeseen expenditures.

The Postal Service had a $363 million profit in its 1999 fiscal year but was expecting to lose money in fiscal 2000, which ended Sept. 30. Final figures are scheduled to be announced in December.

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