Feasibility of Cost Study on Certain Classes of Mail

GGD-77-64: Published: Jun 29, 1977. Publicly Released: Jun 29, 1977.

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A recent cost study dealt with the qualifications of certain mailers for reduced rates and the allocation of costs among the various classes of mail. The Postal Reorganization Act of 1970 required that each class of mail recover "attributable cost" plus some portion of institutional costs.

The Postal Rate Commission has attributed 60.4 percent of costs to particular classes of mail and types of services and the remaining 39.6 percent has been assigned in accordance with customer demand and value of service factors. The Commission on Postal Service agreed with this allocation and stated that attributing more costs will increase rates and decrease mail volume. In a recent decision in favor of the Greeting Card Publishers Association, the U.S. Court of Appeals said that the Postal Service was establishing prices of different classes of mail improperly; that first-class rates were too high and the others too low. Between 1971 and 1976, the volume of first-class mail increased 4 percent, and second-class mail declined by 8 percent. Declines have also occurred in the volumes of third-class mail and parcel post. Significant rate increases have occurred and the Commission on Postal Service believes that, if rates for second-class, third-class, and fourth-class mail continue to increase, volumes will continue to decline.

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