For decades, postage rates for some mail pieces have been zoned, with prices basically scaled to the distance between the place of mailing and the location of the addressee. Twenty years ago, there were nine zones (“Local” and 1-8); in 2014, a ninth zone was established that applied to items addressed to places in the far western Pacific.

Last November 22, the Postal Service filed with the Postal Regulatory Commission to establish a Zone 10. Zone 10 rates would apply to Priority Mail Express, Priority Mail, and USPS Ground Advantage packages that originate (1) in the lower 48 States and destined to Alaska, Hawaii, or the US territories (which include Puerto Rico, the US Virgin Islands, and territories in the Pacific, including Guam and American Samoa); (2) in Alaska and destined to Hawaii or the US territories; (3) in Hawaii or a territory in the Pacific Ocean and destined to Alaska, Puerto Rico, or the US Virgin Islands; and (4) in Puerto Rico or the US Virgin Islands and destined to Alaska, Hawaii, or a territory in the Pacific Ocean. Zone 10 prices would not apply to packages that originate in Alaska, Hawaii, or the US territories and are destined to the lower 48 States. As proposed, the prices would be five percent higher than those that took effect on January 21. The USPS stated in its filing that, if approved, Zone 10 prices would be effective at a future date, but no sooner than July 1, 2024.

The Postal Service claimed that Zone 10 prices “will better align with the zoning practices of [its] competitors, who currently have separate zones for offshore destinations,” noting that they “charge significantly more for shipments from the lower 48 states to offshore locations than for shipments in the reverse direction.” The Postal Service added that its decision to establish Zone 10 was “cost-based in nature” because “[t]he cost of transport to offshore locations is higher on average than it is to transport to non-offshore destinations.”

On March 22, the Postal Regulatory Commission approved the Postal Service’s proposal, which is where the adventure begins.

In its order approving the rates, the commission noted that its statutory role is limited to reviewing proposed USPS prices to ensure their legality. As it explained,

“Despite significant concerns with the policy implications of the proposed changes and the Postal Service’s handling of this proposal, the Commission recognizes that its role in reviewing proposed Competitive product rate and classification changes is extremely limited by law. The Commission approves the proposed price and classification changes as consistent with applicable law and finds that it has no legal basis to reject the proposed changes. At the same time, the Commission is concerned that the Postal Service’s proposal does not reflect reasoned consideration of the potential widespread effects of its proposal, is not prudent, and is not consistent with the best interests of all stakeholders. The Commission strongly encourages the Postal Service and the Governors to give this proposal further consideration and study in light of the overwhelming number of substantive concerns ex-pressed in the record by Postal Service customers and stakeholders before determining whether it is prudent or necessary to establish a new Zone 10 for Priority Mail Express, Priority Mail, and USPS Ground Advantage and implementing new Zone 10 prices.”

The commission had received over two dozen comments, many from Alaska’s federal and state legislators, with all but one (ironically, from the PRC’s “Public Representative”) opposing the USPS proposal. As the commission noted:

“Several commenters discuss what they view as the Postal Service’s obligation to serve and its history of serving all Americans at non-discriminatory prices… Several commenters assert that the Postal Service is a public service, and not a business, and state that the Postal Service is unfairly singling out offshore areas for disparate treatment and contributions to revenue…

“Several commenters question whether shipping services to Alaska or other offshore areas are part of a competitive market given the lack of alternatives available…”

Somewhat uncharacteristically, but just as significantly, the commission devoted about one-third of its order to address matters outside its narrow statutory authority:

“…the Commission is concerned that the Postal Service’s proposal may not be prudent and that the Postal Service has not given its proposal adequate consideration and study. Thus, the Commission would be remiss if it did not raise the several concerns it has with the Postal Service’s proposal and approach.

“…The Postal Service… acknowledges that it did not complete ‘market research, customer impact studies, surveys, focus groups, and/or testing with alternative prices to determine the impacts of adding Zone 10 prices’ and asserts that it ‘did not find it necessary to conduct’ such advance study.

“…The Postal Service’s lack of advance study and research into the effects of its proposal is concerning as is the fact that the Postal Service has deemed such study unnecessary… [T]he Commission is concerned that the Postal Service’s proposal may not be prudent and strongly encourages the Postal Service and the Governors to give this proposal further consideration and study before determining whether to establish a new Zone 10 and implement new Zone 10 prices.

The commission also questioned the lack of support for the Postal Service’s claims of higher costs:

“…[T]he Postal Service’s failure to determine actual Zone 10 transportation costs in advance of its initial filing is concerning… Given this, the Commission directs the Postal Service to file a rulemaking proceeding proposing and supporting the methodological changes necessary to derive separate Zone 10 transportation costs for Priority Mail and USPS Ground Advantage within 90 days of the date of this Order.”

The PRC also addressed the issue of universal service:

“Several commenters assert that the Postal Service has an obligation as a public service and pursuant to its universal service obligation to serve all areas of the country equally and at non-discriminatory prices… Although the universal service obligation requires that the Postal Service serve all areas of the nation, nothing in current law requires the Postal Service to ensure equal prices for Competitive products across all areas of the United States…

“The law also contains the more general requirements [that] impose clear legal obligations on the Postal Service and its Governors. However, the Commission does not have enforcement authority over… those provisions…”

To some observers, the myopic pursuit of additional revenue through Zone 10 prices without any evaluation of the market response or impact on customers is emblematic of Postmaster General Louis DeJoy’s arbitrary and high-handed attitude. Likely aware (and indifferent) that the PRC could do nothing about any issues outside its statutory role, and that the PRC could not require the USPS to give more than passing response to commenters’ concerns, DeJoy saw little reason to not ratchet up prices where USPS competitors may already be charging more.

The commission was clearly frustrated that its legal charter does not allow it to go beyond the simple numbers when reviewing a postal pricing proposal but nonetheless opened a Public Inquiry docket (PI2024-2) “to explore the appropriate classification of Zone 10 packages pursuant to 39 USC 3642 and whether the implementation of Zone 10 prices raises a material issue of fact concerning whether a violation of 39 USC 403(c) has occurred if the Postal Service elects to implement the Zone 10 prices.”

(39 USC 403(c) bans “undue or unreasonable discrimination among users of the mails.” 39 USC 3642(b)(1) defines competitive products, and 39 USC 3642(b)(3) requires “due regard… be given to … the views of those who use the product involved… and the likely impact of the proposed action on small business concerns.”

As stated in its order establishing the inquiry docket, the PRC noted that, in its order approving Zone 10 prices,

“[t]he Commission also identified two areas that were particularly suited to further exploration in a separate public inquiry proceeding: (1) the question of whether Zone 10 packages are appropriately classified as Competitive products … and (2) the question of whether the implementation of Zone 10 prices raises a material issue of fact concerning whether a violation of 39 USC 403(c) has occurred if the Postal Service elects to implement the Zone 10 prices.”

The PRC appointed a presiding officer for the docket who also will serve “in an investigatory role.” The PRC further directed that “once the presiding officer serving as investigator has sufficient information” to make a determination on either matter, “the presiding officer shall file a public, written report to the Commission in this proceeding detailing his analysis and recommendations to the Commission on that issue.” In turn, “Upon receipt of these reports, the Commission will consider if further action in this docket or separate proceedings is appropriate.”

The PRC neither established a procedural schedule for the docket nor set a deadline by which the aforementioned reports were due. However, the commission clearly expects that its “investigator” will gather a wide range of information. The mandate to dig as deep as needed was obvious.

Though much dust has been kicked up by the Postal Service’s Zone 10 plans, it’s yet to be seen whether that will deter the agency’s leadership from implementing Zone 10 as planned.

Leo Raymond is Owner, Mailers Hub.

This article originally appeared in the May/June, 2024 issue of Mailing Systems Technology.