Postal Reform: The Inside Scoop: A Conversation with Ben Cooper - Part 2

By Cary Sherburne, Senior WTT Editor

February 8, 2007 -- In Part One of this Special Report, WhatTheyThink spoke with Ben Cooper, Executive Director of The Print Council and the lobbyist responsible for bringing together an unprecedented coalition of interested parties to work for passage of the bill, to learn more about the legislative process and the value of the bill from his perspective.

In Part One of this two-part Special Report, Cooper spoke about:

• The coalition behind the Postal Reform Bill
• The goals and objectives the coalition was trying to achieve
• The USPS and its competition
• The new Postal Regulatory Commission
• The timeline for implementation

In Part Two, read about:

• The impact of the Postal Reform Bill on printers and buyers of print
• Issues and concerns for major mailers
• How newspapers weigh in
• The impact of online bill payment on the mail stream
• What’s next for the USPS

WTT:  What does this bill mean for printers?

BC:  I believe that this bill probably has more significance for the printing industry than it does for others because print right now is a distribution-dependent industry, and its competitor—if one regards electronic communications as a competitor—doesn’t have the distribution limitations that print does.  Whether distribution utilizes the Postal Service or some other process, print has to get to its intended point of use.  The postal system, because it is responsible for distribution, is critical for the next five to ten years of the industry.  Think about magazines. The Magazine Publishers of America says that over 90% of magazines are distributed by the Postal Service.  All of standard mail and a good number of catalogs are distributed by the Postal Service. Many of the top companies in the industry print periodicals, catalogs, and standard mail, and that is their primary business focus. If you don’t have a defined distribution system, that market gets tough.  If you are the publisher of a magazine, you have alternatives.  The printer does not.  So from that perspective, this bill is more significant to the print side than to the customer side.  The printer depends on print and distribute, but his customer does not.  LLBean, for example, is opening retail stores and doing a lot online. Most catalog companies have a heavy web-based program now—that is what they have moved to.  I was at a recent conference where Joel Quadracci delivered a very impassioned talk about the role of print.  Not too long afterwards, one of the publishers said, “We use print now, but our business does not depend on print and we are constantly seeking alternatives to print.”  That is a stark reminder that the customers of print have more avenues than the printer.  Progressive printers are trying to be part of that movement into those different distribution models.

WTT:  So for the buyers of print, what are the key benefits of this bill?

BC:  What I hear from customers of print, people like Ann Moore, CEO of Time, Cathy Black, CEO of Hearst, and people in the catalog and direct marketing businesses, the key benefit is predictability—having some ability to forecast rates would most likely keep them in the postal system.  Being able to look three, four, five years down the road and know that your rates are going to remain pretty much the same except for CPI increase, was important to them.  My view of this as a lobbyist is that if it is important to the customers of print, it should be important to the printer.

WTT:  Were there any other major issues for mailers and/or customers of print?

BC:  Capital One is a good example of a large mailer whose primary issue was a rate cap structure and predictable rates.  But they also wanted the ability to negotiate rates for a very large volume of mail and to get work share discounts.  They can do this now, but a lot of things the USPS had been doing were not codified, so you had to work them out on a case-by-case basis.  This bill codified work share discounts.  Some postal employees are fiercely opposed to work share discounts because they believe you are taking work away from them by contracting out their work. Under the 1971 law, anytime the USPS wanted to negotiate work share discounts, there was always a battle with the unions.  We now have this codified structure, which is extremely important for big mailers like Capital One.

WTT:  Do newspapers factor into this at all?

BC:  The newspaper industry was originally very opposed to negotiated service agreements.  They had threatened to oppose the bill over that provision alone.  While I would not presume to speak for the newspaper industry, it is my understanding that they were concerned that these NSA’s could result in tilting the playing field in favor of large volume advertising mailers at the expense of newspaper advertising. Our coalition made a commitment to work with, and not against, the newspaper industry from the beginning of the process.  That spirit of cooperation resulted in the passage of a bill that they supported which included an NSA provision which they also supported.

WTT:  As we talk about the whole Postal Service situation and the ability to continue with universal service, it would seem to me that as online bill payment continues to grow in popularity, that would result in a significant decline in first class mail for both presentment and payment, with significant impact on USPS revenues.

BC:  The bigger issue isn’t strictly that online bill payment takes away the presentment and payment. It is also the collateral standard mail that goes along with it.  Something like five to seven pieces of collateral standard mail per presentment end up going to recipients as part of the bill presentment process. For example, if American Express sends someone a bill, they will also send them other types of offers, such as travel. As you shift toward the electronic process, converting people to online, you are rolling the dice, as it were, as to whether recipients will respond to advertising online as well as they respond to print advertising.  Today, credit card companies are still more comfortable with printed mail.

WTT:  Other than what we have already talked about, are there any other aspects of the bill or the current rate case that will affect the volume of mail in the mail stream?

BC:  One of the huge benefits of the current rate case is a substantial reduced second-ounce rate for first class mail.  If you mail a bill at 42 cents, the cost for the second ounce will be substantially reduced.  If you are American Express, that means you can put more advertising material in the presentment mail that goes out rather than sending the first class bill and a second standard mail piece.  Plus it has the advantage of going first class.  Mailers would like all mail to go first class, but they don’t want to pay first class rates.  This way they get first class mail at cheaper rates.  This was an effort by the USPS to keep financial services mail in the system.  And it may ultimately have the benefit of building first class volume. This is a big deal for the printing industry, too.

WTT:  Thanks, Ben.  This has been very educational.  Is there anything else you would like to add before we close?

BC:  Like so many things, examining the past to predict the future in the Postal Service doesn’t accomplish much.  If you go back ten years, the Postal Service was already feeling the effects of electronic competition, but nothing near what they are experiencing now.  Even five years ago, it just wasn’t the same.  You could put two graphs on top of each other, one being rate increases and the other being mail volume, and you could make a statistical conclusion that the increase in postal rates resulted in the increase in mail volume. Going forward, that is not going to work because the USPS cannot raise prices enough to generate the revenue they need.  They will have to generate revenue using creative measures—maybe seasonal rates, more work sharing discounts, there are all kinds of things they can and will need to do.  The future of the USPS may ironically be a private system that uses public carriers.  That has been talked about a lot.  You have a private processing and distribution system, but you still have the friendly carrier walking the mail to the door.  The mail carrier is one of the most trusted public servants in the country.  What is not generally held in high esteem is service at the local Post Office and the overall system.  The term of art that is used is the “last mile of delivery.” You could privatize everything except the last mile.  That may be the next round. 

It was fun working on this.  If I look at it long term regarding my role in the printing industry, I believe the printing industry has not done enough over time to support its customers in public policy issues, and this was a case where the vertical industry—from paper through all sorts of processing and distribution, to customers—worked together.  It was an effective team. The result was not inevitable at any point, but it was only possible because there never was any splintering of the group. 

Cary can be reached via email at cary@sherburneassociates.com, online at www.sherburneassociates.com and by telephone at 603-430-5463.

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