As a result of our merger with American Business Media (ABM) this month, SIIA is now active in the postal reform debate. We appreciate the efforts of House Oversight and Government Reform Chairman, Darrell Issa (R-CA) on this critical issue and watched today’s hearing with great interest.
Of specific importance to SIIA members is how legislation will treat so-called “underwater products,” like periodicals, that USPS contends do not meet their attributable costs. SIIA is concerned that current cost coverage calculations for periodicals are flawed due to the excess capacity expenses at USPS that are attributed to periodicals. We are further worried that any significant additional rate increases beyond annual CPI, whether as “underwater” surcharges or across-the-board increases, will significantly harm SIIA members who publish and mail BtoB periodicals and newsletters.
That said, SIIA fully supports the process for evaluating rates and cost coverage for “underwater products” in the discussion draft of the 113th Congress Postal Reform Act drafted by Chairman Issa. This common sense approach delays any rate increases for two years while a study is conducted to determine the impact of USPS excess capacity on the attributable costs of periodicals. Only then, with these excess costs taken into consideration, the legislation allows for sustainable 2% annual increases in addition to CPI if periodical cost coverage is still below 90% of attributable costs.
Given recent pressure on so-called “underwater products” at USPS, SIIA polled its membership to determine the impact of additional rate increase on top of normal annual CPI increases. The results support our overall position on the draft legislation.
- In our poll, two out of three respondents said they would reduce mailed periodicals by an average of 11% if postal rates increased by a total of 7.5% (estimated CPI and a 5% “Underwater” surcharge) next year.
- This means that instead of gaining revenues from an additional 5% increase on loss-making or “underwater” classes of mail, USPS would actually lose 11% of mail volume and the associated revenue from that volume after only one year of such increases.
- For SIIA members alone, this represents $17 million in lost postal revenue in just the first year.
- In addition, 28% of respondents indicated that they would eliminate some print magazines entirely if they received a 7.5% increase, and 96% of respondents said they would take other measures, like offering digital alternatives to current print titles, as a result of such increases.
- Respondents indicated that actions to decrease mailings would be permanent.
SIIA’s membership publishes more than 600 print periodical titles and mails approximately 800 million magazines and newsletters each year. In addition, SIIA members collectively spend an estimated $260 million in postage each year. This represents approximately 12% of the volume and 15% of the revenue in the periodicals class within the US Postal Service.
Michael Hettinger is VP for the Public Sector Innovation Group (PSIG) at SIIA. Follow his PSIG tweets at @SIIAPSIG. Sign up for the Public Sector Innovation Roundup email newsletter for weekly updates.