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Chris: Hi, this is Chris Lien.
Anita: And I'm Anita Pursley. Welcome to Industry Corner, a podcast where we share postal industry news to help you stay informed.
Chris: On today's podcast, we discuss the 2020 price update from Steve Phelps at a recent meeting and update on Seamless Acceptance and Enterprise Payment Systems, legislative update, and some concerns around Informed Delivery. So let's get into it. Welcome to the podcast, everyone. Hi Anita.
Anita: Hi Chris.
Chris: How are you today?
Anita: I'm doing well. Hey, I'm going on vacation on Saturday, so I'm really in a good mood.
Chris: Excellent. I'm looking forward to some, um, trips as well. I've got some opportunities to do some speaking in the industry, a couple of PCC events, which are always fun. There's the National Association of College and University Mailers that's coming up in July. So just a lot of activity and a lot of fun things. And of course it's summer, but speaking of meetings and getting together, you were recently at the PostCom meeting, right? The association for Postal Commerce.
Anita: Right. Boy, we have a lot to talk about today. I'm really just going to highlight Steve Phelps' presentation and then Marc McCrery's.
Anita: So we got an update on the 2020 pricing plan, the tenure rate review. Of course everybody's been worried about whether the commission would come out with something on that, but it's pretty unlikely that they could do anything in time for a January increase. So really the postal service only has the option of filing for a regular January CPI increase. So, we are going to likely see a filing in the first couple of weeks in October.
Anita: And the projection that Steve Phelps gave us was that the August CPI would be around 1.98%.
Chris: Really? That's interesting.
Chris: And I say that because when I looked at the PRC webpage, prc.gov for our listeners, you can download or take a look at the 12 month average change in CPI to SU, which is the metric that's being looked at, and is for April. It's been trending in the low two's, right? 2.259 for April. So help us bridge that a little bit.
Anita: I looked at it as well cause I was kinda surprised by the 1.98. It's been trending downward if you look. And I think the postal service uses, I believe it's called Global Insights for all of their forecasting. And it's been pretty accurate according to Steve. Of course there's a little bit of bank authority, but apparently it's very, very minimal, like in the tenths percent. So I think it's pretty safe to say that mailers could budget for 2% of course, you know, there's differences in rate sales and product categories. I think the first-class pre-sort mailers have got to be prepared for a much higher increase because we're not going to see another 5 cent increase in the single piece stamps. So, I think that's the one that's going to be the hardest to swallow.
Anita: But anyways, so Steve was very transparent. You know, he's following in Sharon's footsteps. He does not want the industry to be surprised. He does not want any unintended consequences. You know, it seems like there's always something that does pop up, but he's really focused on that. And of course the industry appreciates that. So some of the ideas that they're considering, first one being combining marketing mail flats, carrier route high density and bound printed matter flats into one product. Now if I remember correctly or if I heard correctly, I don't think they're going to be ready for that for the January price change. That's a huge move.
Chris: Yes it is.
Anita: It really is. So I think it would require them to raise marketing mail flats piece maximum from 16 ounces to 20, which is the bound printed matter. And then of course I don't know how that would be impacted by co-mail cause I think there's a higher weight maximum if you're co-mailing with other products. But that's definitely something that they're evaluating. And then there was something called plus one and this is the first I've heard about it, but others in the room had heard. And of course we'll know more cause they're planning to file a market test, and it's for saturation letters and it's equivalent to a DAL for saturation flats. What is that detached at?
Chris: Detached Address Label.
Anita: Right, exactly. So of course there's going to be a price associated with that, I'm sure. So I don't know if there's going to be a lot of interest in that, but it's an interesting concept. And then they're evaluating the weight breaks on marketing mail flats as well. So if you recall a few years back where they raised the weight break from the piece of the piece pound from 3.3 up to 4, well they're evaluating that again to see if 4 ounces is the right number.
Chris: Oh, interesting. Okay.
Anita: Yeah. And I was very involved in that because I told them look at how many pieces or how much volume they had in the 3.3 to 4 ounce range. Cause I told him, I said, I'm pretty sure you're not going to find much in there because that's what everybody's working towards is trying to keep under that weight max. So, we'll see what that brings. And then they're evaluating the mail preparation minimums and maximums. And I've heard that as a recommendation from the industry. So you know, is 150 piece the right number? Is 10 pieces in marketing mail and 6 in periodicals? You know, I'm assuming that that's what he is talking about. And then they want to further incent the carrier route pallets. I wish he had shared some results on that. Like are they seeing an increase in carrier route pallets? Because from my perspective, it's such a density issue. It's not just something that they can create unless they do some sort of a co-pal for for carrier route pallets.
Chris: It's all tied to volume, right? I mean it's all based on how much volume you have to work with.
Anita: Right? It's a five digit palette with carrier route bundles that's just cross doctor delivered right to DDU. So they're also looking at ways to incent Seamless Acceptance. Which I thought that was a smart thing, but I think it's going to be difficult because he mentioned they could possibly wave permit fees for example. Well waving permit fees helps the mailer.
Chris: Right. Not the preparer.
Anita: Right, and that's who's paying the expense of the additional requirements and seamless.
Chris: Hasn't that always been the challenge though, Anita, really? When you look at it, the postal service tries to come up with these levers and different incentives and ways to be able to get mail prepared in a way that helps expedite delivery and control their costs. But the levers that they have are all related to postage from the mail owner.
Chris: And rarely does it result in a benefit or something to ameliorate the cost for the mailing service provider. And that's the real challenge. And so I know a lot of the times when we've been in these MTAC meetings and these proposals will come up, its like, well that's great for the mail owner, but oftentimes they're not passing that through to the service provider. Or if the service provider tries to sort of blend that into their mail preparation costs or something like that, it's very difficult to do and can take quite a bit of time and effort to do it. So it'd be nice to see if we could find a different way to be able to do that.
Anita: And that's why we've never been able to come up with a promotion that rewards the mail service provider. It's a difficult subject. Right. But that's a good point. So we're going to see more coming out on this in the summer. They're going to share it with the industry.
Anita: And then they'll go to the BOG in September, file in October, and plan to implement in January like normal, or like standard, I should say.
Chris: Right, a regular cadence that they're doing and hopefully we don't end up with another bifurcated price adjustment. Right? In fact, now on June 23rd here, in just a few weeks from when we're recording this podcast, we're going to have the round two of the price adjustment that went into effect in January of 2019, so I know in the past Anita we had heard that the postal service typically by April likes to at least have an idea of what the prices are going to look like in the next year. And it kind of sounds like we're sort of at that point now that they recognize that the, the timeline of implementation doesn't really give them an opportunity to do anything substantially different between now and October. Other than looking at some of these other considerations. So that's just what it sounds like to me. I will say that I like the idea of going back and revisiting – is a 10 pieces per bundle, is a 6 for periodicals, 150 pieces – all those types of things because they were established a long time ago when we had certain mail volumes and equipment and a supply chain. So it probably makes sense to revisit all that and see does it make sense if it's time to update it
Anita: Right. And maybe we can help them with some of the analysis. I would love that.
Chris: Right, right. Well that's the heart of what MTAC is about. Right? A technical advisory committee. So hopefully that's something that we'll discuss. You mentioned Seamless Acceptance though.
Anita: So the adoption rate is still pretty low. It's only up 38%.
Anita: Yeah. But you know, Marc is really listening to the industry and he went over a lot of stuff that I'm sure he's going to go over with us at our users conference because Marc is going to be there, right?
Chris: Marc McCrery, USPS Vice President of Payment and Mail Acceptance. Right?
Anita: Acting, but still…
Chris: Acting, excuse me, acting. Thank you. Yeah, that's right. We still have the A in front of that. Marc's a great individual and we've known Marc a long time and thrilled that he's agreed to be at our user conference Information Exchange in August.
Anita: Right. So he went over things like the top five reasons for undocumented because I think that's probably the biggest issue for mailers is keeping track of the undocumented, and then resolutions that go along with that. But he'll go over that in much more detail, but they're going to take a step back on the Federal Register proposal and, and I'm not surprised by that, and even this is still a tentative plan, but the way they're looking at it right now is that they'll file in September a proposal in the federal register notice. And of course it goes along with the 30 day comment period, and then go parallel by March 1st of 2020, mandatory by September 1st, 2020. So they're just pulling back a little bit and they're, they're really working with mailers and trying to overcome all of the objections. So that was a nice little update. And then he also talked about EPS. So there's some improvement there. Now 77% of CAPS accounts have migrated.
Chris: Oh Wow. Okay. So that has improved.
Anita: It has improved but, but it is past April 1st.
Chris: Yeah, that's right! Cause people that ask for an extension that weren't ready, did the post service draw a line then for when you, you have to be done if you were granted an extension?
Anita: Well they extended the deadline from April 1st to July 1st, and of course he said they're not gonna stop accepting mail. They're going to be more aggressive in their outreach to make sure that everybody's on board. And then he announced that EPS customers will have the ability to manage their accounts through EPS beginning in August.
Chris: Oh Nice. So I know that we've got some customers, they're doing EPS mailings, so there'll be helpful for them. Anything else that Marc had to share?
Anita: Nothing that comes to mind right now.
Chris: What's going on the legislative front Anita? I know you watch that very closely.
Anita: Believe it or not there's a lot going on. So, you know, we talked, I think it was last time about the postal services transformation plan. Yeah. They have to close $125 billion gap in the next 10 years. So I don't know how anybody can do a 10 year plan. I mean, I can see 3 or 5 years out. But anyway, apparently they conducted a briefing for the House Homeland Security and Government Affairs Committee. So hopefully Meadows and Elijah Cummings are happy with what they've seen. We'll see. But apparently I've heard that the PMG might be releasing some of those details at the upcoming MTAC.
Chris: Oh, that would be great to see. So this is that plan that he talked about when we watched the House hearing that he was promised to plan, hadn't seen it yet.
Chris: But this is the one that the PMG had committed that she was going to get to him and then now they have that.
Anita: And I'm sure the association executives who always meet the day before MTAC, or at least that's their new schedule. I'm sure they'll get a briefing as well.
Chris: Good, good. Okay.
Anita: And then the House is drafting legislation, which may be coming out soon as well, and it's going to be similar to H.R.756, which we've seen over the last couple of congresses. But there's something new and it, and it's, I think they're terming it “vested liabilities”. So the postal service would only be required to pre-fund the current annuitants and then those employees who are vested in the retirement plans. And I think the savings could be somewhere in the 60 to 80 billion dollar range. So that's something that was not in previous proposals, and it's a private sector best practice. So I think that there's some hope there. But then again, the Conservatives or Republicans on the Ways and Means Committee were not in favor of Medicare integration. So who knows if that's gonna go anywhere.
Chris: Yeah. The concern on that was how it would score relative to the Treasury. Right?
Anita: Right. And that Medicare is already in bad shape and they don't want to make it any worse shape, I guess.
Chris: Sure. Yeah. Can you put several hundred thousand postal employees on that and there was concerns about adding additional pressure and stress to it.
Anita: Right, exactly.
Chris: So nominations though, right? There's another nominee?
Anita: Yup. There's another nominee for the Postal Regulatory Commission, Ashley Poling. And you know, I had never even heard her name before, but I did a little bit of digging and found out that she is the Director of Government Affairs for Senator Gary Peters, who is the new ranking member on the committee.
Chris: So she does have some experience or exposure to the mailing industry. I thought she did some work with Senator Heitkamp too, of North Dakota at one point.
Anita: Good memory. Heitkamp and Jon Tester.
Chris: There you go. All right.
Anita: Right, exactly. So she does have a lot of postal experience and seems like the perfect candidate. Of course, we'll see how that goes. But also Martinez and Bloom, which we've talked about a lot, they're on the Senate Executive Calendar. So they're awaiting a floor vote. And then of course we've got Ann Fisher also as the other PRC Commissioner that's pending a hearing, I believe.
Chris: Right, from the Senate. So it sounds like the laundry list of confirmations for the Senate continues to grow, at least in the context of the postal, hopefully we'll be able to get to those quickly because we definitely need more voices to the table and, and I'm glad to hear that this new nominee has exposure and experience with the mailing industry indirectly through those representatives and those senators.
Anita: Yeah. You know, I should mention that Michael Kubayanda, the new commissioner, spoke at PostCom also.
Chris: Oh, nice!
Anita: And, yeah, he was very humble and very appreciative to have the audience. I think he's now a little bit more comfortable with his role at the commission. His first hire is some economist that is extremely bright and technical and I think it's a real sign of the direction that he's taking. And of course he's very thoughtful and he's extremely smart himself. So I think we'll see some good things from him and some new innovative things. I know he mentioned he really wants to review the NSA process and of course
Chris: That needs review.
Anita: That's a welcome
Chris: Yeh it needs some review. Okay. Finally, Informed Delivery. There's some concerns in the industry on that relative to promotions and being ready. Right?
Anita: Right. It's been building for the last few weeks. Have you noticed in your daily digest that it doesn't work on Mondays?
Chris: I haven't noticed that. That's interesting. So we're not receiving our ID email feeds on Mondays?
Anita: Well we're getting the email, but we'll, you know how you get a box that says there is something in your mailbox that we don't have an image for?
Chris: Yeah, I've noticed a lot more of those.
Anita: Right. Well if you look on Mondays, and Chris this has been the last five I'm pretty sure, because I mentioned it to Bob Dixon at the postal forum. And I told him, Bob, I receive daily digest that said I had no letter mail, but yet I had seven pieces in my mailbox, and he goes: Was it a Monday? So I've been watching this carefully, as has Mitch Carpenter. He's been noticing it as well. And it happened on Tuesday after Memorial Day.
Chris: That's interesting. So the day after a holiday or the day after a Sunday. So for some reason the day after is not getting the piece scans. That's interesting.
Anita: And you know, is a huge delivery day. So if I was a mailer who was utilizing Informed Delivery for a campaign, that would really be upsetting to me.
Anita: Hopefully they'll fix that soon.
Chris: Yeah. Maybe Bob will have something for us at MTAC to explain maybe what's going on
Anita: And there's more system issues. This has happened in the past where they've had issues with post-campaign reports. And I heard that that is happening again as well. So you know, we've got the Informed Delivery promotion coming up at the end of the year. In fact, I think you can start registering for the promotion beginning next month. But they don't have all of the promotion requirements finalized yet. And with all of these issues coming up, I think there's a real concern in the industry that they might not be ready for the deluge of campaigns that are going to take place in that time frame.
Chris: That's true. So that's a concern. I know I talked to a lot of companies at the National Postal Forum and they're absolutely looking for ways to embrace informed delivery and take advantage of the promotion calendar. So that's a concern if we don't have the systems ready. And I note that even some of the postal employees were talking to me and wanting to get a better understanding of the step by step process by which a mailing service provider or mail owner might use software to be able to start participating and working with a business customer gateway. Cause I know there's a pilot for the BCG coming out as well this year. So a lot of different underlying systems with the postal service, that are hopefully going to be ready because you're right, it'll be a deluge of all this data that's going to need to be fed into the system to take advantage of the promotions and to leverage Informed Delivery.
Anita: Right. Hey and there's one other thing that is really concerning and is being discussed more and more in the industry is security. First of all, Informed Delivery doesn't have the same security protocols that exist in EPS or BCG, you know, where you have a business administrator, and if you know the mid on piece, anyone can set up an id campaign for that mid.
Chris: Right. And we saw that there were a couple of situations where people were using Informed Delivery in a nefarious way to be able to look at people's mail.
Anita: Right, and then to the first-class mailers have expressed concern because apparently where the URLs are stored, anyone could actually go in and hijack an image and then replace it with another image. So I'm, I'm afraid it's a disaster waiting to happen.
Chris: Oh Wow. Yeah, that's not good. Okay,
Anita: Well hopefully we'll hear from Greg Crabb at MTAC. He works in the IT security, so I think they're bringing him in on this.
Chris: All right, good. Okay. Well a lot of stuff going on. Anita as always a, we're going to be watching that Informed Delivery and the promotions very closely. I know we're going to talk about that quite a bit at MTAC. Great to hear some advanced notice on the price adjustments for 2020 as we come into January of next year and hopefully we'll see some movement in the Senate on these confirmations. So great coverage on this. Anything else Anita?
Anita: You know, one thing I think we forgot to mention that you and I both learned at the postal forum, is it Jim Cochran is coming back into the industry.
Chris: That's right. Yes, yes. Yeah. Hard to miss. He's a very tall person. So he was at the National Postal Forum and now he's going to be back with parcels, right? Packages?
Anita: Right. He's going to have the Parcel Shippers Association and I don't think that it takes place until later this year but Pierce Meyers who is the chairman of the NPF board, He is going to be retiring from PSA. And then speaking of the NPF board, the newest member
Chris: Dennis Farley
Anita: Dennis Farley, formerly with ESPN. So he's very excited to be part of the NPF board. But I realized that we keep forgetting to mention that and I thought people would be interested to know.
Chris: Absolutely. And both are well recognized names and a lot of fans in the industry for both Dennis and for Jim Cochran, so welcome back! We're glad that they're staying involved in the industry, and we look forward to their leadership and their respective associations and that the National Postal Forum. Right.
Chris: Alright, well Anita, thank you so much for the information.
Anita: Thanks Chris. You too. Have a great day, everybody.
Chris: Thanks, and thanks to our listeners for tuning in. We really appreciate your feedback. We value your time, value your business, and look forward to talking to you soon. If you have any questions, please visit bccsoftware.com or give us a phone call. As always, we'd like to know how can we help? Thanks and have a great day.