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Legislative provision would benefit Postal Service competitors

Provision is in House version of postal reform bill; White House has threatened veto over language on veterans' pensions in both the House- and Senate-passed versions.

A small provision in the House version of the postal overhaul bill would raise rates for customers sending single-piece parcel packages, effectively giving a big payoff to U.S. Postal Service competitors.

The House provision places single-piece packages into a category for products that compete in an open market alongside UPS and FedEx. Rates for those products would be set by comparisons with its private competitors. Additionally, unlike most postal products, customers would have to pay a sales tax on sending their individual packages.

Both provisions, insiders say, would drive up prices. The bills also would create a category for first-class mail, but those rates would be set by the Postal Regulatory Commission and subject to an annual rate cap. One postal insider said it is the "general belief" that the provision was created to serve the interests of Postal Service competitors.

Acknowledging the likely price increase because of the provision, the insider said "anything that weakens the Postal Service is in the advantage" of the agency's competitors.

Bill Olson, an attorney for the Association of Priority Mail Users, said there has been "an enormous amount of private lobbying" from UPS throughout the drafting of the overhaul bill. He said the single-piece package provision in the House measure "effectively accomplishes the agenda" of companies such as UPS.

"Competitors want the Postal Service to be forced by reform to charge prices beyond what the market will bear" to drive customers away, Olson said. "This bill effectively does that."

UPS spokesman Dan Bolger said the company has been "up front" in its support of postal legislation, arguing that all mail competitors should "have a higher level of transparency."

He said having products compete in a market-driven economy better serves customers looking to predict their mailing costs. The legislation, he said, would benefit customers by leveling the playing field.

"This is not a competitive advantage play for UPS," Bolger said of the House bill, whose chief sponsor is Rep. John McHugh, R-N.Y. The White House has threatened a veto over language on veterans' pensions that is in both the House- and Senate-passed bills. As a result, the House has not named conferees.

Gene Del Polito, president of the Association for Postal Commerce, a group representing direct mailers, said implementing the House provision would hurt customers. He said because customers typically send single-piece parcels at the same time as their first-class mail, "the House got it wrong" by dividing the two into separate pricing categories.

Del Polito said "consumers would be better off" if the packages they send through the mail -- anything from birthday gifts to care packages -- were not priced by the same market that drives UPS parcels.