The MPA, the Postal Service, and the Battle for Affordable Shipping
The publishing industry scored a victory when the Postal Service's exigency surcharge was rolled back, but the struggle is far from over.
The fight continues.
That's what Linda Thomas Brooks, president and CEO of the Association of Magazine Media (MPA), told members in a message last week announcing the long-sought-after rollback of the U.S. Postal Service's exigency surcharge—a 4.3 percent premium applied to all classes of mail, including periodicals, since January 2014.
"While we are enthusiastically celebrating this milestone," Brooks wrote of the rollback that she says will save publishers more than $60 million in postage over the next year, "We do proceed with caution as the fight for affordable postage is made up of many battles."
Indeed, three days before the postal rate reduction was even implemented, the USPS revealed in a statement that it had petitioned the Postal Regulatory Commission to begin early the mandated ten-year review of the consumer price index rate cap, and the repeal of the exigency surcharge itself is currently the subject of litigation in the appellate courts.
So what does all of this mean for the publishing industry?
For a grasp of where things stand moving forward, it's necessary to examine how we arrived here, in the wake of the first postal rate reduction in 97 years. Folio: spoke with James Cregan, executive vice president of government affairs for the MPA, a role he's filled since 1999.
"It’s important to know how important postal still is to our industry," Cregan begins. "Even here at the dawn of the digital age, postal is still a major issue, a major concern for us, so that’s why we spend so much time on it."
The passage of the Postal Accountability and Enhancement Act of 2006 (PAEA) was a watershed moment for the regulation of postage rates. Prices were capped—tied to the consumer price index—and the Postal Regulatory Commission was empowered to provide oversight and verify the compliance of the USPS. Before the rate cap was put in place, the USPS set postage rates by determining the cost of providing the service and then adding a markup.
"For example, around 2000, the Postal Service made a proposal to the [Commission] that periodicals be raised 15 percent in one fell swoop," Cregan says. "As you can imagine, that got the attention of our members."
Then came the Great Recession. The Postal Service was financially crippled—the true extent of the damage remains the subject of debate—and it petitioned the Commission for permission to raise rates beyond those dictated by the consumer price index.
"The postal service started out asking for essentially a perpetual exigent increase, saying that they were permanently damaged by the recession and needed to be made whole going forward," says Cregan. "Their original request, five years ago, was essentially for a permanent exigent surcharge on top of the rates that were already in effect."
The MPA fought back, and a compromise was reached. The Commission set a recovery goal of around $4 billion, which the USPS could recover through an exigency surcharge beginning in January, 2014. The Commission tracked the Postal Service's revenue, and eventually set April 10, 2016 as the day on which the $4 billion target would be reached.
April 10 arrived and the surcharge was repealed, but the USPS has made clear its intention to continue the fight.
"Given our precarious financial condition and ongoing business needs, the price reduction required by the [Commission] exacerbates our losses," wrote Postmaster General, Megan J. Brennan, in a statement. "This unfortunate decision heightens the importance of the review of our ratemaking system which our regulator is required to conduct later this year."
Cregan argues that it's a dangerous position for the Postal Service to take, and one that could further jeopardize the government agency down the road.
"They made an attempt to convince congress to put the exigent surcharge into law and make it permanent," he says. "That would’ve been very bad for all concerned, including, I think, the Postal Service. They have to understand that it’s a different age. They’re not the only game in town anymore, and they have to improve their customer relations and understand that we—that is, the MPA—are their customers."
In fact, Cregan says, the implementation of the price cap ten years ago has been beneficial to the USPS. It's forced the agency to become more efficient and focus on improving its relationships with its customers—not the least of which are publishers represented by the MPA.
"We understood the predicaments that the Postal Service was in when the economy was tanking," Brooks says. "Our members are willing to work with and help the Postal Service. Everyone has to do things more efficiently and be smarter and more effective."
No policy debate is immune to posturing from those on both sides of the issue, but indications are that the ongoing war of attrition between the USPS and the MPA has no foreseeable end. Even as Cregan dismisses the rising crescendo of panic in the Postal Service's public statements and disclosures of it's billion-dollar quarterly losses—terms like "precarious," "unsustainable," and "critical" appear often—there's little doubt on either side that the Postal Service's balance sheet remains in dire straits.
While publishers will surely celebrate the immediate 4.3 percent savings on postage, it's important to remember that the cost reduction is by no means permanent. The statutory review of the consumer price index cap will commence later this year (perhaps earlier, if the Postal Service's petition is well-received), and the battle over the exigency surcharge will continue to rage in appellate courts as the USPS argues the case for a $12 billion, surcharge-fueled revenue boost and the MPA vehemently disagrees.
Whether the solution involves further rate hikes, serious reorganization to drive efficiency and savings, or the USPS simply fading into obscurity remains unclear. What is clear, however, is that both organizations are willing to continue the fight to pursue their respective interests.
When the Crown Post, the colonial mail system in use prior to the American Revolution, drove William Goddard's Pennsylvania Chronicle out of business, Goddard and Benjamin Franklin established an alternative system to distribute the revolution-sympathetic newspaper to readers. After the revolution, that system formed the basis for the Postal Service Act, signed into law by George Washington in 1792, which established what would eventually become the Postal Service we all know today.
"Here we are in the early 21st century, and it's difficult to name another reason for having a continuance of this federally-subsidized, monopoly-protected national postal system," concludes Cregan. "[Periodicals] are one of the last remaining public policy reasons for the postal system we have in this country. I think the more enlightened leaders within the Postal Service understand that."