In previous articles, I discussed some of the errors the U.S. Postal Service (USPS) made in the preparing its filing of the year 2000 postal rate case. In addition to these errors of commission, the Postal Service committed a few errors of omission as well. In other words, there were things the USPS could have done, but failed to do, to make the year 2000 rate case an opportunity for success, rather than a recipe for disaster.

The most significant of these possibilities would have been to seek a reclassification of First-Class Mail into two new subclasses--one for single-piece First-Class Mail and one for bulk-entered (or, as it sometimes is called, "workshared") First-Class Mail. For as long as mail classification has existed, both of these types of mail have been consigned to a common subclass. This has greatly inhibited the Postal Service's ability to bring anything even remotely approaching creativity to postal rate design.

Keeping the two together has constrained more sensible base rate designs to nothing less than whole-cent integers. Despite the general citizen's ability to fathom the mysteries of "three stamps for a dollar" postal rate makers persist with this "whole-cent only" silliness. Nonetheless, while there may be some rationale to constraining single-piece First-Class Mail to whole-cent increments, there is absolutely none for bulk-entered, workshared mail. Without any artificial whole-cent constraints, it would be much easier for the Postal Service and the Postal Rate Commission to devise rates that need not shift a billion dollars worth of costs from one class of mail to another because a stamp might be raised a penny.

Even more important, however, is the freedom rate designers could enjoy if the link between single-piece and bulk First-Class Mail were severed. Heck, the USPS might even be emboldened to propose new postal products that are more in keeping with a changing market's needs, rather than serving up the same old hash at higher and higher prices.

For about the past year, mailers have been talking with the Postal Service about proposing a new discount for destination-entered First-Class Mail. The USPS has expressed an understandable reluctance to introduce so sweeping a move without first having a clearer picture of what such a change might mean for day-to-day postal operations. A more modest and more manageable change could be made by introducing a new postal discount for "electronically drop-entered" bulk, presorted, automation compatible First-Class Mail. Such mail could serve as a laboratory to give the Postal Service a better grasp over the "what will dropshipment do to my operations" question. In addition, basing the rate for an electronic dropshipment discount on a more rationally priced bulk First-Class Mail rate not constrained artificially to a whole-cent integer just might make hybrid mail much more attractive than the turkey the USPS has been trying to dish up for well over two decades.

In fact, the USPS could abandon the ridiculous notion that it has to create its own a "soup-to-nuts" hybrid mail system. Instead, it could simply offer to the market an aggressively priced postal rate discount for electronically drop-entered mail and let the private sector and the competitive marketplace determine the feasibility of a hybrid (electronic-to-hardcopy) messaging service.

This is just one innovation the separation of single-piece from bulk mail could offer. There are others. In fact, there could be many others. The challenge for the Postal Service, however, is to have the guts to take the first step. One has to wonder, how many more opportunities will the Postal Service forgo simply because it lacks a sense of ratemaking creativity?