Within twenty-four hours of the January 12th filing by the United States Postal Service of the rate case now designated as R2000-1 (the latest in a series of rate cases that began after postal reorganization in 1970), MPA's members united to protest the Postal Service's proposed fifteen percent rate hike for periodicals. While USPS charts and press information released in connection with the filing suggested that periodicals rates would increase by "only" twelve percent, analysis of the actual filing by MPA's expert economists showed that most of MPA's members are facing increases of fifteen percent or more, representing an additional $300 million in postage costs for the industry. This increase is substantially above the rate of inflation, two to three times the USPS system-wide average for other classes, and nearly five times the proposed percentage increase for the First Class stamp.

At presstime, MPA's attorneys and economists had begun work on the case itself: an arduous trial-type proceeding, held before the Postal Rate Commission, that precedes enactment of new rates.

And, in conjunction with its legal efforts, MPA has launched a $10-million, three-year campaign designed not only to help bring the rate hike for periodicals more in line with the rate of inflation and the more modest increases proposed for other classes of mail, but to seek fundamental reform in the way the Postal Service does business, from top to bottom.

"The Postal Service's message to the magazine industry is clear," MPA President Nina B. Link said. "Our readers and we are being told that we have to pay the price for the Postal Service's inherent inefficiencies and out-of-control cost structure. It is intolerable. We intend to fight the battle with every weapon at our disposal."

These weapons include engaging the services of top-rated Washington lobbying and public relations firms, inaugurating a public education effort distributed through magazine advertisements targeted to reach nine out of ten American consumers, and increasing industry pressure on Congress to enact necessary reform legislation. MPA also will be looking into the possibility of finding alternative delivery systems for magazines.

"We want the American people and their elected representatives to know what's at stake here -- not just for their magazines, but for the future of the postal system itself," said Christopher M. Little, Vice Chairman of the MPA Board and Chairman of the MPA Government Affairs Council. Board Member Don Logan added that "no one should underestimate the difficulty of the task MPA is undertaking," but called it an "effort that must be made."

At the time of the filing of the rate case, MPA President Link said that the proposed increase "could seriously damage the very industry that has been, and is today, one of the bedrock justifications for the existence of the United States Postal Service as Benjamin Franklin intended," and MPA Board Chairman Cathleen P. Black noted that "[s]omething is terribly wrong with a postal system that targets magazines, books and newspapers for the highest increases."

[Postmaster General William Henderson agrees -- at least in theory -- with this assessment. As the Newsletter reported last fall, at a speech before the American Magazine Conference in October, Henderson reiterated his oft-stated belief that there was "no advantage" to the Postal Service to put the industry in jeopardy with a massive rate hike, because magazines, which he characterized as the "anchor stores" in the Postal Service "mall," are the items that "drive the habit of the American public of going to the mailbox."]

Litigation of the case has begun in earnest. Already, eight individual Postal Service witnesses, as well as the Postal Service itself, have been served with written questions regarding the testimony they filed in conjunction with R2000-1, and MPA and its periodicals coalition allies (the Alliance of Nonprofit Mailers, the American Business Press, Dow Jones & Co., the National Newspaper Association, the McGraw-Hill Companies and Time Warner) have filed joint documents proposing modifications to the procedural schedule with the Postal Rate Commission. A prehearing conference -- to be attended by attorneys for all of the dozens of parties that have intervened in R2000-1 -- is scheduled for February 16 at the PRC. Following the conference, the schedule for the remaining proceedings -- including discovery and the filing of detailed MPA positions on all issues -- will be set by PRC Chair Ed Gleiman, the Presiding Officer for the case.

It is possible that Gleiman and the Commission could lengthen the case beyond its current August termination date, as he already has sent a "Notice of Inquiry" to the Postal Service questioning its use of 1998 (rather than 1999) data in making its rate-hike proposals, and asking the Service to provide the Commission with the dates by which it could rework the proposals to incorporate 1999 data. It is unclear at this time whether the use of the more recent data would result in a lower projected increase for periodicals rates, and MPA's economists will be studying the numbers.

The focus of the litigation itself will be to examine not only what the Postal Service says it needs in terms of revenue, but how it arrived at its projections, and the quality and basis of the information it used to determine them. MPA and its allies will also be focusing on cost-saving measures identified last year by the joint Industry/USPS task force co-chaired by MPA's Rita Cohen, and on incorporating the potential savings to be reaped from these measures into the Postal Service's cost and revenue projections in the coming years.

• For more information about the Postal Service's proposed rate increase, and MPA's counterattack, please contact the Washington office.

Just weeks after President Clinton signed the comprehensive federal sweepstakes measure into law, legislators in Indiana, Kentucky and Colorado introduced state sweepstakes bills that MPA believes contain burdensome disclosure requirements that may be unconstitutional under the First Amendment.

None of the bills has passed yet, but the informed speculation is that each eventually will become law in some form. As a result, MPA is working with industry allies to amend the language in the bills so that it complies with the rigorous First Amendment protections for commercial speech.

• For more information about these bills, please call the Washington office.

On February 3, the Postal Rate Commission approved a two-year experiment allowing one qualifying Standard A attachment or enclosure to be included in a periodical for a flat charge of 10-cents (a rate that is roughly half the estimated Standard rate for this type of piece). The approval represents the culmination of a two-year effort by MPA and its allies at the American Business Press.

Last September, the United State Postal Service filed a request with the PRC for approval of the experimental classification -- a step MPA and ABP had actively advocated since late 1997. After some preliminary legal skirmishing, intervenors in the case (including MPA) participated in a series of settlement conferences aimed at resolving outstanding issues, including concerns expressed by some Standard A mailers that permitting Periodicals mailers to include a "ride-along" would "cannibalize" revenue from the Postal Service, and divert advertising from Standard A mailings. MPA and the ABP argued, however, that the types of materials that would be included in a Periodical as ride-alongs would not otherwise be sent by co-op or direct mail marketing, but instead would complement the host magazine content. As a result, MPA said, the new classification would bring new volume -- and revenue -- to the Postal Service, and would offer an attractive alternative to many advertisers.

The experimental service will be the subject of on-going data collection and USPS review over the next two years. Mailers are limited to one "ride-along" piece (such as a product sample or CD-ROM) per issue. Other restrictions include weight, size, and shape limits. Details of the implementation of the new classification are still under discussion. The rate should take effect within the next few months.

During the fall, MPA and its allies in the Newspaper Association of America and the Motion Picture Association of America sought to ensure that the voices of the traditional communications industries were heard in all proceedings regarding the drafting of the Uniform Computer Information Transactions Act (UCITA) -- a measure designed to bring uniformity to transactions involving the sale or transfer of computer information. Last month, just weeks before the new uniform law was set to be heard in the first state legislature (Virginia) to consider it, the media group scored a significant victory.

UCITA, a purported contract law, was originally intended to validate "shrink-wrap" licenses -- the contractual terms to which a consumer agrees after opening a package of software, or clicking "I accept" on a computer screen. But it soon ballooned into a 335-page codification of contract terms desired and supported by large software vendors, and, in its current form, applies to nearly every transaction in "computer information," including online content such as text, images, sound and illustrations.

In 1998, MPA helped organize a coalition of media trade organizations -- including the NAA and the MPAA, the National Association of Broadcasters and the National Cable Television Association -- for the purpose of slowing down or halting the original incarnation of UCITA. MPA actively advocated the position that the bill's drafters either recognize the needs of these traditional information industries or that they scrap the project altogether. Last summer, it appeared that the project was dead.

In July, however, the National Conference of Commissioners of Uniform State Laws (NCCUSL), led by heavy lobbying by representatives from technology-intensive states, endorsed the law and forwarded its "model" statutes to all fifty state legislatures for consideration.

Throughout the fall, MPA and its coalition allies continued to press for changes in UCITA, particularly with regard to provisions affecting the gathering and publishing of news. Specifically, MPA lobbied to ensure:

• that long-standing rules (such as, for example, those regarding the ownership of published materials) governing transactions in the traditional media industries were not superseded;
• that a section making publishers virtual guarantors of the veracity of information transmitted on their Web sites be substantially modified;
• that transactions between publishers and freelancers be made exempt from the reach of the statute, in order to prevent having different sets of contractual rules apply solely on the basis of the means by which the freelancer completed his or her assignment (e.g., with a computer as opposed to an SLR camera), the means of transmission of the work (by e-mail, as opposed to by telephone), or the medium in which the work appeared (i.e., on a Web site as opposed to in a magazine).

We were successful on all counts. These and others of our coalition's amendments were incorporated into UCITA prior to its introduction in Virginia, and should be included in all versions of the bill considered by other jurisdictions.

• MPA will continue to monitor state implementation of UCITA throughout 2000 and 2001. For further information on the statute, please call the Washington office.

• Copies of MPA's Letter to the California Supreme Court are available from the Washington office.