Transcript

On today’s podcast, I recap the November MTAC meetings, the Board of Governor’s meeting on November 10, and the USPS market competitive pricing for 2022 that if approved by the PRC would go into effect on January 9, 2022.

Welcome to the podcast everyone!

The Postmaster General’s Mailers Technical Advisory Committee held its meetings on November 2^nd and 3^rd and due to COVID, it was a remote meeting with MTAC members and industry stakeholders attending. And while I appreciate being able to attend the MTAC meeting remotely, I do wish it had  been in-person as it would have been nice to thank Wanda Senne for her service on the MTAC Executive Committee these past six years and to congratulate Sharon Harrison from AT&T on her retirement. Wanda has done an excellent job as an MTAC representative for many years, serving two years as the industry vice chair, two years as the industry chair, and two more years as the immediate past chair. She now transitions to the MTAC ex officio members where we welcome her continued dedication to MTAC and the industry.

Sharon Harrison has done so much for this industry with regards to address quality and First-Class Mail I would need far more time than a podcast to touch on even just the highlights. Her professionalism, dedication to improving the value of mail, and her commitment to representing the interests of First-Class mailers has been exemplary. I had the pleasure of serving with Sharon in MTAC leadership and she always put the interest of the industry first with a level of professionalism that really sets a standard for  others to follow. Thank you, Sharon, for your many years of dedication to MTAC and I know I am among many that are wishing you a well-deserved retirement!

And speaking of congratulations, I would like to congratulate all the new MTAC Industry Focus Area Leaders that were recently elected at the November meeting. This includes:

• Tom Glassman – leading Network Operations
• Kurt Ruppel – leading Marketing Mail Letters
• Adam Collinson – leading Data, Technology, and Addressing
• Rose Flanagan – leading Entry, Payment, and Product
• Don Caddy – leading Packages
• Eric Kisgen – leading Periodicals Flats
• Carol Kliewer – leading Marketing Mail Flats
• David Marinelli – leading First-Class Mail Letters

Each of these elected leaders will serve a two-year term and will represent their respective areas of the supply chain as well as the MTAC association to which they have active membership.

Finally, I do want to also thank Bob Schimek for serving as MTAC industry chair these past two-years. I cannot recall a more challenging time for an MTAC industry chair than these past two-years and Bob did an excellent job making sure MTAC provided the type of technical advisory our postal partners need. At the end of this calendar year, Bob Schimek will transition to the industry immediate past chair, Bob Rosser will transition to the MTAC industry chair position, and Lisa Wurman will become the MTAC industry vice-chair as she was elected by the MTAC membership during the June 2021 meetings.

After the recognitions, PMG DeJoy provided some opening remarks. He spoke for just over 40 minutes, and it pretty much was a repeat of what we heard at Postcom. The PMG is focused on the Delivering for America Plan and while appreciative of input from the mailing industry and other stakeholders, firmly believes that immediate action is necessary to ensure a vibrant and sustainable Postal Service for the next ten years and beyond. He acknowledged that there are ongoing efforts with MTAC and seemed to be supportive of it noting that he hasn’t asked for MTAC to stop providing advice. However, he will be more receptive of industry input after he is able to, in my words, “right the ship so that it can continue a course for a sustainable future.” While I’m sure there are some if not many in the industry that disagree with the PMG’s approach, I do appreciate his candid comments and his passion.

Turning to the USPS Board of Governors, they held a public meeting on November 10 at USPS Headquarters in L’Enfant Plaza. This was the first in-person guest meeting and also included remote guests. I listened to the live hearings, and it was pretty standard until the end which I will get to in a minute.

The PMG started off reminding everyone of the dire situation the USPS was facing without a plan to mitigate the projected $160 billion loss over the next ten years. He also recapped the recent GAO report, which he spoke to at the Postcom Study Day meeting I discussed in a prior podcast and stated that the despite the alarms raised by the GAO nothing had been done. So, PMG DeJoy and the BOG set out to do something about it and hence the Delivering for America Plan was published. Per the PMG, there are three basic tenets of the plan.

1. The USPS must deliver to every address six days a week
2. The USPS must become self-sustained
3. The USPS must have a vision of sustainability into the foreseeable future and have a strategy to get there

Based on these tenets, the PMG said the USPS designed their 10-year plan, which included raising prices adjusting service standards to a level they could meet, and to make judicious investments for future sustainability.

I broke down this plan in more detail in a prior podcast, but the net here is that I agree the USPS needs to have a plan for future sustainability. They need to have predictability in pricing and an open and active venue for interaction with the entire supply chain upon which this mailing industry, or as I see it ecosystem, needs to exist. While I may not agree with everything in the plan, I do applaud the USPS and the BOG for having a transparent and open dialog as we work together to ensure a viable USPS that benefits us all.

Next, CFO Joe Corbett presented the financials for FY2021 and a forecast for FY2022. The USPS ended the fiscal year with an operating revenue increase of nearly $4B, which is a 5.3% increase. This is primarily due to package volume increase due to ecommerce. Despite that, the USPS still had an adjusted loss of nearly $7B for the fiscal year. Mr. Corbett noted that if the DFA, as they refer to the Delivering for America Plan, isn’t implemented as presented this will only get worse.

A motion to pass the FY2022 plan was made, seconded, and passed unanimously by the BOG. This plan assumes a net income loss of $8.4 Billion if Congress does nothing, and a net income loss of $1.2B if legislation is passed, which CFO Corbett, the PMG, and many in the industry believe can be achieved despite everything currently being discussed by Congress.

Projected mail volumes were also presented by CFO Corbett and reflected an overall decline of 4.8 billion pieces. This includes a 3.4% decline in First-Class Mail and a 3.5% decline in Marketing Mail which together would reflect a 4-billion-piece decline. Despite the projected volume declines, the USPS is still anticipating a 0.6% increase in revenue for FY2022 due to the price increases.

After the presentation from the CFO, the BOG Chairman validated that the USPS is not going out of business given the investment of $8B in capital commitment. The USPS is a solid platform for an entire industry that will continue long into the future. The BOG is committed to supporting a vibrant USPS that will continue to serve the nation and support an ecosystem of over $1 trillion dollars and over 6 million jobs.

Next up was Scott Bombaugh, the Chief Technology Officer for the USPS who reviewed the latest service performance. In nearly every category, the USPS showed improvement of service performance compared to the revised service levels. And I think it bear repeating that these service levels, including future reports, are being compared to revised standards that have been lowered due to a multitude of factors. And while I know that sounds somewhat negative, which it does, the reality is that the USPS has simply been unable to attain the prior service levels they had initially established. So yes, this is lowering the bar and as I’ve noted on prior podcasts may not be what the customer or market expects, it is a baseline upon which the USPS should meet and exceed in order to ensure timely and predictable delivery of the mail.

After these updates, the Board then moved to elections for the Chair and Vice-Chair of the Board of Governors. Governor Bloom was nominated and seconded and just before the vote was called, Governor Hajjar moved to table the election. It is likely that this was due to the fact that Governor Bloom’s current term would expire on December 8 and has not yet been reappointed by President Biden and confirmed by the Senate. After a brief consultation with Legal, it was determined that Hajjar’s motion could not proceed and thus the vote would need to continue. Governor Bloom was reelected as Chair with several governors voting no. Governor Martinez was reelected as vice-chair also with several governors voting no.

Finally, on November 12 the DC District Court of Appeals unfortunately denied the mailing industry’s appeal to overrule the PRC decision to expand the USPS pricing authority beyond CPI-U. This means that the USPS will be able to proceed with future Market Dominant price increases based initially on CPI-U pursuant to Title 39, but will also now have these additional pricing adders that I spoke about in a prior podcast. Thus, the industry should expect a price increase in June of 2022 that will be between 6% to 7% based on the current rate of inflation and the forecasted adders.

So, just to help our listeners understand what the next fourteen months will look like, here are when he price adjustments will occur.

1. January 9 – Next Market Competitive increase
2. July 2022 – Next Market Dominant increase with a range of 6% to 7% based on inflation and the pricing adders
3. October 2022 – Package surcharge roll on
4. December 2022 – Package surcharge rolls off
5. January 2023 – Next Market Competitive and Market Dominant price increase

And speaking of price increases, Market Competitive prices will go up on January 9 pending PRC approvement. This includes an increase in the price of a Small Flat-Rate Box to $9.45. The Medium Flat-Rate Box would increase to $16.10, the Large Flat-Rate Box would decrease to $21.50 and the price of the APO/FPO Large Flat-Rate Box would decrease to $20.00. Regular Flat-Rate Envelopes, Legal Flat-Rate Envelopes, and Padded Flat-Rate Envelopes would increase to $8.95, $9.25, and $9.65 respectively. Per the USPS notification, these price increases would contribute to $40 billion of investments in people, technology, and infrastructure over the next 10 years to modernize and improve the Postal Service’s operations and customer experience.

Thank you for listening to today’s podcast, and if you’d like to learn more about mail tracking, or how to better automate your mailing workflows, please visit us at BCC Software.com or give us a call. As always, we’d like to know “How can we help?” Thank you for listening to the podcast, and have a great day!