Promises No New Rate Hikes, but Critics Hoped to See More Change

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WASHINGTON ( -- Postmaster General John Potter's transformation plan for the U.S. Postal Service drew some praise but also strong criticism from marketing and media groups.

To no one's surprise, Mr. Potter's pledge last week of no additional rate hikes until 2004 pleased all.

"We are particularly pleased with [the] commitment to hold off on new rate increases and we will work hard with the Postal Service ... so future rate increases can be pushed off further," H. Robert Wientzen, president-CEO of the Direct Marketing Association, said in a statement.

The rest of the plan drew more varied reaction.

'Not the appropriate path'
"The plan before us is not the appropriate path," said John Sturm, president-CEO of the Newspaper Association of America, who urged appointment of a presidential commission to examine the Postal Service.

The restructuring plan

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comes out as the Postal Service launches its new ad campaign. The campaign breaks April 15 and was created by Bcom3 Group's Leo Burnett USA, Chicago. It continues the "brought to you by ..." theme. The Postal Service is in the midst of an agency search intended to cut costs, but intends to keep the new campaign theme.

At 450 pages, the plan unveiled April 5 ultimately recommended Congress keep the Postal Service much as it is while removing some restraints.

For marketers and media companies, the biggest changes included:

  • Added flexibility to seek phased-in rate hikes. Instead of proposing a rate hike and then returning a year or two later, the plan asks for flexibility to propose initial hikes and follow with later increases without the need of new rate proceedings.

  • Added ability to respond in service levels and delivery frequency to market conditions.

    'Experimental mail classifications'
    The report also said the Postal Service will "seek approval for negotiated service agreements and other target pricing initiatives [and] reforms in procedures in introducing experimental mail classifications."

    In unveiling the report during a speech at the National Press Club, Mr. Potter warned that a completely privatized system would lead to a "delivery divide" far worse than any digital divide. He said the transformation plan he unveiled would replace the goal of breaking even with a new one of providing "reasonable returns" that could both finance capital projects and allow the Postal Service to ride out tough economic times without rate hikes.

    "As a commercialized government enterprise, we could introduce flexible pricing. ... We would have the flexibility to adjust prices based on market demands," he said.

    Magazine publishers praised the commitment not to raise rates and said they were generally pleased with the Postal Service's plan to move forward with operational efficiency reforms, but they wanted to look more closely at the report.

    "There is a lot of meat in there," said Jim Cregan, executive vice president of Magazine Publishers of America. "We were surprised it was as [comprehensive] as it was."

    Was it just the economy?
    Robert Brinkmann, vice president and counsel for the Newspaper Association, questioned whether the Postal Service's financial problems reflected long-term troubles or the sort of economic problems suffered by media companies as a result of the economic downturn and the Sept. 11 attacks.

    Ed Gleiman, a former chairman of the Postal Rate Commission who now consults for the Direct Marketing Association, said he is "optimistic" about the report.

    Some groups, however, suggested the Postal Service hadn't gone far enough. "It is business as usual," said Frances Smith, executive director of Consumer Alert, a group that promotes consumer benefits of a market economy.

    She said the Postal Service's monopoly in delivering first-class mail removes its incentives to innovate and lower costs.

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