It’s Time to Allow the USPS to Compete Fairly

By Paul Johnson, President CMS – Complete Mailing Solutions

Unfair Restrictions

Businesses function on foundational economic rules – pricing is determined on demand, the cost of doing business and profit needed to stay healthy and grow.  Pricing can be changed whenever it is warranted.  However, there is one glaring exception to this economic model – the United States Postal Service.

While the USPS is not a government entity, it is governed by Congress and the Postal Rate Commission (PRC).  As a federally mandated entity, they are required to function within specific parameters, among them:

Post Office Signage
  • Prefunding 75 years of retiree health benefits (this mandate was passed in 2006 and required funding within a ten-year span, at a cost of about $110 billion).
  • Basing price increases on the Consumer Price Index (CPI), which limits how much rates can change.  If costs are higher than the CPI increase, the Postal Service must absorb the difference.
  • Providing pickup and delivery service to all areas within the United States, six days a week.  As housing and businesses expand to wider and wider areas, the USPS is required to provide service, even though it is not cost effective to do so.  And, they are not allowed to add a fuel surcharge to cover additional expenses (as UPS and FedEx can).

No other private enterprise or federal agency is required to function under these constraints.  The prefunding of retiree health benefits alone is primarily responsible for the majority of the USPS’s financial losses since 2013.

Both consumers and businesses rely heavily on the Postal Service’s ability to deliver mail and parcels.  In fact, UPS and FedEx rely on the USPS to provide “last mile delivery” in areas where it is not affordable for them to do so.  How does this allow the USPS to compete? This is an unfair advantage provided to the competition.

We have blogged about this situation before and provided even more details of how the USPS is at a disadvantage, but now is the time for change so the USPS can compete fairly in the marketplace.

The Postal Service – A Vital Institution

The Postal Service is a historic institution, established by our founding fathers in order that all people may have equal access to communications.  This principle was mandated within our Constitution to ensure its survival and is a fundamental part of the nation’s infrastructure.  The USPS mandate is to bring the nation together, and their commitment is providing secure, reliable, affordable delivery of mail and packages.  No tax dollars are used to support operating expenses.  Rather, the USPS relies exclusively on the sale of postage, products and services to fund its operations.

Today, the USPS employs over 633,000 career and contract workers (2019).  As such, it has significant impact in local economies, both in direct activities from its workers as well as the broader economic activity that it enables.  If it were a private sector company, it would rank 40th in the 2018 Fortune 500 and 123rd in the 2017 Global Fortune 500.  Unfortunately, it has been losing money for more than a decade due to the many restrictions placed on it while its main competitors (FedEx and UPS) are free to raise prices, ad hoc, to ensure a profit.

This is clearly an unfair playing field and the restrictions placed on the USPS is an unsustainable financial path going forward.  We believe the Postal Service should be released from the primary restrictions that have resulted in its fiscal woes specifically, elimination of:

  • Prefunding employee health benefits
  • Linkage with Consumer Price Index to cap rate hikes in order that the Postal Service can adjust rates to cover costs
  • 6-day delivery requirement – allow the USPS to determine delivery frequency (with a minimum 5-day requirement) in order to reduce costs

We feel these steps would begin turning the around the USPS’ financial health while still maintaining high service levels.

A Great First Step

On February 5th, the House of Representatives passed bipartisan legislation that would lift the prefunding mandate on future retiree health benefits.  This legislation, the USPS Fairness Act, was authored by Rep. Peter DeFazio of Oregon (you can see his floor speech here). 

We heartily endorse the passing of this legislation and encourage the Senate to follow suit.

What do you think?  Isn’t it time to allow the USPS to compete fairly? We encourage your comments and feedback on this vitally important service to our nation.

4 Benefits of USPS’ Intelligent Mail Indicia (IMI)

By Paul Johnson, President CMS – Complete Mailing Solutions

Did you know that once you download postage onto your meter it becomes the property of the USPS?  The Postal Service is dedicated to helping you get the most out of your postage meter. 

To improve customer service, ensure mail flow is more efficient and cost-effective as well as data secure, the USPS is now requiring the use of the next generation mailing indicia – the Intelligent Mail Indicia (IMI) – as new mailing systems are introduced into the marketplace.   

The Old Standard

Since 2000, the USPS utilized an Information Based Indicia (IBI) on metered mail.  The Information4-Based Indicia is a 2-dimensional barcode plus human-readable information. The barcode data contains information such as the amount of postage, origin zip code, destination,mail class, weight, and confirmation/tracking numbers: 

Old IBI indicia image
Old IBI indicia

While this was state-of-the-art in its day, IBI technology is no longer adequate.  One of its weaknesses is that when a mail machine user enters a specific postage amount, the Service Class is removed, which hampers the USPS from efficiently managing the movement of mail.

In addition, postage meters were required to connect with the USPS servers to download usage information every 90 days.  This made it difficult for the USPS to effectively manage mail flow and identify mailing trends in a timely or effective manner.

The New Standard

The next generation of metered technology was introduced into the marketplace in 2015 – the Intelligent Mail Indicia (IMI).  However, it has not been required to date, but will be with all new mailing equipment developed.  The IMI indicia:

  1. Captures significantly more data – in addition to information captured with the IBI indicia, the new IMI indicia also includes the type of mailing system and mail service used. 
  2. Gives the Post Office more real-time data on which to manage their logistics, identify mailing trends and optimize the movement of mail through the system.
  3. Ensures correct postage is used – Service Classes are required when using the IMI indicia.
New IMI Indicia

The USPS now requires that all new mailing systems meet the IMI standards as they are introduced into the market. 

IMI Benefits & Best Practices

1.Accurate Postage
Mailing system users have experienced mail or packages that are returned for insufficient postage.   Conversely, they have placed too much postage for the service class used.  With the new IMI, a Service Class is required for all mail and postage will automatically be calculated.  No more manual entry of incorrect postage amounts, ensuring the correct postage is used.

Best Practice: Utilizing IMI technology will save money and help avoid mail being returned.  This will ensure important mail (e.g., invoices, statements, etc.) reaches its destination in a timely manner, which improves cash-flow and customer satisfaction.

2. More Current Information
Mailing systems using Intelligent Mail Indicia are mandated by the USPS to connect to the manufacturer’s servers every 72 hours (vs. every 90 days for the old IBI).  This ensures that the USPS receives frequent postage use information on which to manage mail flow.  It also ensures that equipment is automatically kept up to date with rate changes and other software improvements.  If a connection is not made every 72 hours, the meter will be locked out.

Best Practice:  Your meter must have a constant Internet connection via a dedicated LAN line to avoid meter lockouts.

3. Enhanced Security
The new IMI indicia meets the standards of the Federal Information Processing for data encryption.  This ensures that information is transmitted securely to and from the postage meter.  The National Institute of Standards and Technology (NIST) has announced that IBI technology no longer meets its standard of security.

Best practice: Use Pin #’s and department codes to keep unauthorized people from using your postage meter and to better track who is using postage in your company.

4. Faster, Consistent Connectivity
Some mailers still use dedicated phone lines for their postage meters. These Dial-up connections cannot be used with the IMI due to the amount of data being transmitted and the speed of transmission.  Only dedicated LAN connections can be used, eliminating the need to check to see if the meter is hooked up to an internet connection as well as the expense of a dedicated phone line.

Best practiceURIs, along with their respective IP addresses, should be added as exceptions (whitelisted) if firewall rules currently block any sites of unknown origin.

Neopost is the first to launch a mail machine using the new IMI indicia.  Their new iX-3 is the first mailing system enabled with IMI, with additional models being introduced in early 2020.  Take a look at this easy-to-use option that makes IMI enhancements available to small businesses.  It will optimize your postage and mailing-related expenditures. 

If you have questions or to find out more about the benefits of IMI for your business, give us a call, (303-761-0681). We’re happy to help!

How Does the Postal Service Change Rates?

By Paul Johnson, President CMS – Complete Mailing Solutions

“Why doesn’t the USPS just implement a larger rate increase and get it over with?”

How many times have you or someone you know said this about postal rates for office postage meters and stamps? Postal rate increases (and the rare decrease) are often so small and frequent that it doesn’t seem worth it. People often wonder if the costs of implementing a one or two cent increase outweigh the resulting revenue increase. Yet nearly every year (with some exceptions) we see rates go up a penny or two.
What most people don’t know is that the USPS is severely constrained by laws and regulations including the Postal Accountability Enhancement Act (PAEA). Many also don’t realize that the USPS is not a department of the US government. In other words, it isn’t organized under any of the executive cabinet departments. It was reorganized in 1971 under the PAEA, to be an independent establishment of the executive branch of our government. As such, it has neither government funding nor the freedom to set its rates and policies in the ways that a free-market, for-profit corporation does. Considering these and other factors outside the purview of this post, they’re placed in a situation in which it’s quite difficult to succeed.

Interesting facts about the USPS

  • The USPS is not tax funded, but is an independent establishment of the federal government. Revenue is earned exclusively from product sales. Learn more here.
  • $71.5 billion in revenue for 2016 would put it in the top 40 Fortune 500 companies if it were independent.
  • The Postal Service is the 2nd oldest federal department or agency. See the history of the USPS


The USPS is governed by the Postal Rate Commission (PRC) and, therefore, can’t make independent decisions about what rates should be (more on this in a future blog). So that begs the question…

How are rates determined?

The Postal Service operates two lines of business: one for “market dominant” products (First-Class Mail, Standard Mail, Media Mail, etc.) and one for “competitive products” (e.g., Priority Mail, Express Mail and First-Class Package Service). Each line has its own regulations and pricing rules that are administered by the PRC. While rate adjustments are a fairly in-depth topic, a key factor in determining rates for market dominant services (which account for 74% of USPS annual revenue) is the Consumer Price Index (CPI). When the CPI goes up, rates can be increased; however, when the CPI drops, postal rates must be lowered. Because they are constrained by the CPI, the USPS can’t respond to competitive pressures such as rate changes by UPS or FEDEX, who can increase their pricing at will.

USPS Shipping Rate Increase Goes Into Effect January 17, 2016

usps-logo

By Paul Johnson, President Complete Mailing Solutions

The USPS will increase rates on their shipping services, including First-Class Package and Priority Mail rates, which will go into effect Sunday, January 17, 2016. The increase does not impact First Class Mail letter rates.

The average shipping service price increase is 9.5%, while Priority Mail specifically will experience a 9.8% increase. Priority Mail Express products will see the highest rate increase of 15.6%.
Other changes to note:

• The USPS will offer a 10:30 am Priority Mail Express delivery request for a $5 fee.
• The maximum weight for First Class Parcel Service will increase from 13 ozs. to 15.999 ozs. Presort discounts have been eliminated. An IMpB label is required on these packages or a 20¢ surcharge will be incurred.
• The Priority Mail Express flat rate box has been eliminated.
• Parcel Select® Nonpresort will be renamed “Parcel Select Ground™”
• Standard Post® will be renamed “Retail Ground™. Mailing requirements will remain unchanged.

The following is an overview of the pricing change:

Service 2015 Rate 2016 Rate
Priority Mail (Retail) $5.75 $6.45
Priority Mail (Commercial Base) $5.05 $5.75
Priority Mail Express (Retail) $19.99 $22.95
Priority Mail Express (Commercial Base) $18.11 $20.66

Also of note is that the USPS is significantly increasing Commercial Plus rates (discounts to highest volume users) to align them more closely with Commercial Base Pricing (discounts to users of authorized postage payment methods). The USPS has stated their long term goal is to eliminate Commercial Plus Pricing and consolidate to only one set of commercial discounted rates sometime in 2017.

In spite of this increase, mail machine users will continue to enjoy lower mailing rates versus over-the-counter retail rates. However, each USPS rate change has a significant impact on your mail that can be costly if not implemented correctly.

Contact CMS immediately to discuss what you can do to offset these increases and improve deliverability of your mail at a lower rate.

Remember, rates change Jan 17th!!!
The Postal Service will observe the Martin Luther King Jr Birthday on Monday Jan 18th; find all USPS Holidays here