ABP-T-1
RECEIVi!l
BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON,
D.C. 20268-0001
POSTAL RATE AND FEE CHANGES,
1997 )
D::c30 2 IEi101‘37
<;;;I”:i;~‘~i_j ‘,:J;,;j;;;,;;~
Docket
No. R97-1
DIRECT TESTIMONY
OF
KEITH CRAIN
ON BEHALF OF
PUBLISHING
INTERVENORS
David R. Straus
Thompson Coburn
700 14’h Street N W
Suite 900
’ ’ ’
Washington, D.C.
202-508-1000
(office)
202-508-1010
(facsimile)
Attorney for
Amercian Business Press
December 30, 1997
847251
ABP-T- 1
BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON, D.C. 20268-0001
POSTAL RATE AND FEE CHANGES,
1997 )
Dockeit No. R97-1
DIRECT TESTIMONY
OF KEITH CRAIN
ON BEHALF OF PUBLISHING
INTERVENIORS
My name is Keith Crain, and I am Chairman
1
2
Inc.
I am testifying
on behalf of the American
3
of Religious Press Associations,
4
Publishers of America,
5
Newspaper Association
is a publisher
publications.
8
We publish twenty-seven
9
offices in the U.S. We have additional
Inc., the National
of consumer,
trade and business
It was founded in 1916 and today publishes thirty
publications
I have been Chairman
11
succeeding
12
Our company
13
Communications
847251
Companies,
Inc., the Magazine
and Time Warner.
7
10
Business Press, the Coalition
Dow Jones & Company,
The McGraw-Hill
Crain Communications
6
of Crain Communications
my late mother,
publications.
in the United States and publish in six
offices in six other U.S#. cities.
of this family business since last May,
who succeeded my father when lhe passed away.
was founded by my father in 1916.
I have worked at Crain
since I got out of school and have had a wide variety
of
ABP-T- 1
1
positions with the company.
2
and, additionally,
I am publisher of a couple of our magazines
I am editorial
director
of several others.
I am not an expert on postal ratemaking,
3
4
publishing
industry,
5
and money my company
6
Postal Service in delivering
but I do know a bit about the
the impact of postal rates on our industry
and other spend to reduce costs and assist the
our publications
on time.
Even though we at Crain and, I believe, the publishing
7
and the time
industry
in
8
general are pleased that the Postal Service has proposed only a modest
9
increase for periodicals,
we are gravely concerned
10
claim that the costs of handling
11
with the new methods
12
introduced
13
handle periodicals
14
businessman,
15
compounded
16
by the publishing
periodicals
continue
to increase rapidly and
of assigning costs to classes and subclasses
in this docket.
This persistent
is enormously
pattern
frustrating
and to the publishing
industry
of increasing
costs to
to me as a publisher
industry,
by the Postal Service’s struthious
and that frustration
and a
is
response to years of efforts
to seek the causes of the alleged increases.
The sponsors of this testimony
17
with the Postal Service’s
are so concerned
about: the Postal
18
Service’s failure to investigate
19
having increased
20
colleague Chris Little)
21
their parochial concerns with rate design issues to focus on what we truly
847251
seriously the reasons for periodical
by, it claims, 87% in ten years (as explained
costs
by my
that they have decided to put aside, at least for now,
-2-
ABP-T-1
1
believe to be a threat to the well-being
2
the Postal Service’s seeming
inability
3
periodicals
refusal even to recognize that there is a
4
problem,
and its consistent
much less to do anything
of our industry.
Again, that threat is
to control the costs of handling
about it.
The Postal Service often claims that it wants to be free to operate
5
6
“more like a business.”
7
stone unturned
8
inexplicable
9
to pass them on.
Any business, in my experience,
would leave no
in an effort to find and cure the problems
costs increases,
yet the Postal Service appears content merely
As I’ve already stated, this is not a new problem,
10
leading to
and it is not a
11
problem of which the Postal Service is unaware.
12
appearing
13
year-by-year,
14
identify
15
marble walls of L’Enfant Plaza. However, I can recount first hand a
16
frustrating
for the Magazine Publishers of America,
case-by-case
The meeting
17
I attended
was attended
18
me, in my role as chairman
19
Kummerfeld,
20
chairman
21
Jones
847251
president
the task of providing
history and detail of the industry’s
and cure the problem,
meeting
I will leave to Rita Cohen,
the
efforts to
efforts that always seem to run into the
at Postal headquarters
on June 4 of this year.
by Gordon Hughes, preside;nt of ABP and
of ABP’s Legal Committee,
as well as by Don
of MPA, Rick Smith, the president
of INewsweek and
of MPA’s board, Jim O’Brien of Time Warner and Dan Austin of Dow
from the publishing
industry.
The Postal Service was represented
-3-
by
ABP-T- 1
1
Postmaster
General Marvin Runyon, Deputy Postmaster
2
Coughlin and Senior Vice President Alan Kane. The industry
3
expressed their growing
4
productivity
5
periodical
6
not upward,
7
in mail preparation
8
concern that “automation
9
paradoxical
dismay and frustration
and the resulting
mailers.
representatives
at the decline in flat handling
disproportionate
We explained
General Mike
rate and cost increases for
that the cost trend should be downward,
in light of the industry’s
growing
investment
and drop shipping activities,
refugees”
of time and money
and we presented
may contribute
significantly
again our
to the
cost increases.
As always, the Postal Service response was a general clenial that there
10
11
is a cost incurrence
or measurement
12
there is an “automation
refugee”
13
joint study with industry
to determine
14
reduced,
15
scope or methodology
problem.
but as Ms. Cohen explains,
and a specific denial that
The Postal Service did agree to a
how flat processing
costs can be
there has yet to be agreement
on the
of the study.
One of the most troubling
16
problem,
aspects of these continuing
cost increases is
17
that they hit us at the same time as we are spending
18
to prepare our mail and to drop ship it. We perform
19
improve service and to reduce our postal costs, as well as those of the Postal
20
Service.
847251
Yet it seems that no matter
more and more money
these activities
how much we “workshare,”
-4-
both to
the Postal
ABP-T-1
1
Service’s “share” of the work increases,
2
bad, to put it charitably.
Crain Communications
3
and despite our efforts, service is
is not a huge company,
4
one that expends considerable
5
maximize
6
directly
7
industry
8
their own costs and the Postal Service’s costs.
9
company’s
distribution
10
operations
and the service we obtain.
the level of delivery
resources to minimize
service it obtains).
for Crain Communications
when I say that publishers
director,
its postage costs (and
I can certainly
are doing about all they can to reduce
is supplying
Joyce McGarvy, our
testimony
concerning
I will just summarize
our
it here.
such as Auto Wee!k, Automotive
12
News and Advertislno
13
such as Modern Phvsician and Business Marketinq.
14
extensively
15
able to automate
16
periodicals,
17
Service adds barcode readers to the soon-to-be-deployed
18
Crain spent more than $3,500,000
19
including
20
publishers
847251
speak
and, I believe, for nearly rail players in this
We publish both weekly periodicals,
11
but it is a sophisticated
Acre, as well as fortnightly
and monthl,y periodicals,
as we can, and we barcode everything
We presort as
that the Postal Service is
(but because we publish a number of tabloid-sized
we are unable to obtain automation
substantial
expenditures
discounts
until the Postal
FSM 1000s).
last year drop shipping our publications,
on air freight.
do the same.
-5-
We know that many other
ABP-T-1
That is why the skyrocketing
1
periodical
2
to us. We are stymied,
3
look to the Postal Service to constrain
handling costs are so troubling
because there is nothing left for us to do. We must
costs.
I recognize that the Postal Rate Commission
4
5
Postal Service to slow the supposedly
6
But what the Commission
7
costs, both those we incur ourselves
8
give substantial
9
informational”
rising costs of handling
periodicals.
can do here is to recognize the problem of rising
and those of the Postal Service, and
weight to the “educational,
value of periodicals
rates.
cannot sirnply order the
cultural,
when considering
scientific and
the appiropriate
10
Periodicals
It should also consider that most publications
11
rate increases just last year, as a result of “classification
experienced
reform.”
To its credit, the Postal Service appears to have considered
12
13
matters
14
periodicals.
15
regular rate periodicals,
16
under the circumstances
17
Crain and most other publishers
18
markup
19
produce a substantially
higher markup.
20
rate experts appearing
for periodical
21
Postal Service has in our view overstated
847251
in proposing
rates, especially
I understand
is appropriate,
when it comes to the rnarkup for
that it has proposed a “coverage”
lower than in prior cases.
(including
these
,of 107% for
While we agree that,
the fairly large postal rate increase that
experienced
in 1996), a relatively
low
we also believe that the rates proposed actually
I will of course defer to the cost and
intervenors
-6.
to explain why and how the
the costs of handling
periodicals.
ABP-T- 1
1
ABP endorses the testimony
2
Stralberg,
3
irrespective
4
overstatement
5
information
6
give weight to this very real problem when considering
as well as the testimony
of whether
of Michael Hehir.
or not the Commission
exists, and whether
or not it feels that there is sufficient
industry
is no different
8
not like to see any of its costs increase.
9
live with the proposed rates, although
implication
My message is that
is 100% conv’inced that this
to permit it to redo all ,of the numbers,
Clearly, the publishing
7
on these issues of Witnesses Cohen, Shew and
it nevertheless
the proposed
from any other.
Nevertheless,
should
rates.
It does
I believe that we can
I am not certain that we can live with
10
the long-term
of rising Postal Service costs and its new method
11
of assigning them.
12
than the Periodical rates proposed by the Postal Service while, at the same
13
time, refraining
14
and that, if followed
15
for periodicals.
I urge the Commission
from approving
847251
rates no higher
the new costing methods thalt are improper
in future cases, will lead to devastating
Thank you for the opportunity
16
to recommend
to appear.
-7-
i-ate increases