News: Nonprofit Postal Rates Set To Skyrocket

May 7, 2007       Mark Hrywna      

Nonprofits may be faced with a decision to reduce the size of their mailings from flats to letters if substantial postage increases permanently go into effect. The Postal Regulatory Commission (PRC) returned a decision last week on two of three issues it was asked to reconsider by the Board of Governors of the United States Postal Service (USPS).

The PRC agreed with the Postal Service on rate increases for Priority Mail Flat-Rate Box and the Non-machinable Surcharge for First Class. A motion by the Coalition of Catalog Mailers’ (CCM) to reopen the record for Standard Mail Flat rates, the third issue, was denied. Instead, the PRC had set deadlines for opening comments by May 4 and reply comments May 11 on the Standard Mail Flats. New postal rates are scheduled to take effect May 14.

"The key there is the deadline for the second round of comments is three days before all these rates go into effect. That certainly suggests that the new rates will go into effect as proposed by PRC and probably will be in effect for a few weeks," said Tony Conway, executive director of the Alliance of Nonprofit Mailers. Typically, it takes several weeks for the PRC to review comments before making a decision, he said. Even if new rates begin May 14, the PRC could modify them in some way a few weeks later, he added.

Nonprofits that mail flats could be in for some rate shock, with some increases in Standard Flats as much as 30 to 40 percent under the new rates. "It’s such a steep increase that rate shock impact has some pretty severe impact on flat mailers," Conway said. "Is it too much too soon? That’s what the issue turns on."

Oversized flats are costlier for the Postal Service to process. After years of flats benefiting from averaging with the more efficient letter mail in the same class, Conway said, the USPS decided to make the rates better reflect the true cost of handling such mail. Letters make up about 80 percent of the volume in the Standard class, he said.

Mailers of flats generally understand the economics of the decision, Conway said, but "it’s a huge hit that came out of the blue" that people didn’t budget or plan for and could disrupt business plans. "It’s a severe impact on the bottom line in one fail swoop."

Some mailers of standard flats have decided to change the way they prepare mail, Conway said. What might have been mailed as a flat in the past could be redesigned to be classified as a letter. "It goes into the whole business analysis, and the decision in large part on the marketing appeal of flats."

For some, letters do not enjoy nearly as good a response rate as flats. "With rates going up fairly substantially, I think all mailers in the flats arena are taking a real hard look at what we want to do," Conway said, such as changing designs of pieces or moving out of flats into letters. "I know some that are going to smaller pieces, others are probably finding they just can’t do that; a large flat is most effective." In those cases, he said, perhaps they might aim for reducing volume while staying in flats.