Post Office Proposes Special Rate For Mailing DVDs

An anonymous reader writes "The United States Postal Service is seeking to implement a special postage rate for companies such as Netflix, GameFly and Blockbuster (PDF), which send DVDs to their customers and then receive them back. This proposal for special rates for two-way mailers of optical disks follows a protracted legal complaint from GameFly, which argued that Netflix was receiving special handling by the Postal Service while paying a cheaper postage rate."

Comments

How is this news?

[Adnonify]

You buy volume and pay a different price? Basic economics ... how can a company do business otherwise?

Re:How is this news?

[hairyfeet]

Because unlike every other business on the planet Dubya passed a law that says the USPS has to have the ENTIRE retirement plan, to the very last penny for every single employee, funded for something like 40 years?

I have to wonder if this law getting passed couldn't be traced back to Fed Ex and UPS wanting the business that USPS was doing so found a way to stick them with a bill that they could never pay while remaining able to compete. After all you don't see Fed Ex and UPS funding 40 years worth of retirement per employee in their retirement accounts do you? It lets them tie a boat anchor to USPS so that USPS ends up in a bind and either has to cut service or raise prices, both of which benefits UPS and Fed Ex.

Re:How is this news?

[Mitreya]

I have to wonder if this law getting passed couldn't be traced back to Fed Ex and UPS wanting the business that USPS was doing so found a way to stick them with a bill that they could never pay while remaining able to compete.

USPS is also not allowed to raise prices beyond some (official/fudged) price index increase.

It lets them tie a boat anchor to USPS so that USPS ends up in a bind and either has to cut service or raise prices, both of which benefits UPS and Fed Ex.

UPS/FedEx constantly use USPS on "unprofitable" routes, because USPS is also required to keep prices relatively constant. So if the package is going to the middle of nowhere, UPS and FedEx will gladly outsource it to USPS which will deliver it at a loss. USPS cannot actually raise prices, but if they cut services, that may actually harm their competitors.

Re:How is this news?

[Y-Crate]

Because unlike every other business on the planet Dubya passed a law that says the USPS has to have the ENTIRE retirement plan, to the very last penny for every single employee, funded for something like 40 years?

It's worse than that. The law gives the USPS 10 years to come up with 100% of the money needed to fund all of its pension requirements for the next 75 years.

It's designed to destroy the USPS so Republican lawmakers can bemoan how government has once again failed to deliver. Except that they're the ones who have failed us.

Re:How is this news?

[arobatino]

When the PAEA was passed in late 2006, it was at right about the peak in total mail volume (which of course they didn't know at the time) and the recession was still 2 years off. Everyone (Democrats, Republicans, and the postal service and unions) thought the prefunding was easily affordable, so it passed with bipartisan support. For example see this from the NALC (the main letter carrier's union) giving it high praise. (Although after things went sour, they started insinuating that it had been shoved down their throats, and pretty much everyone believes that by now.) Prior to 2006 there was no prefunding requirement at all, so it was just bad timing - it would have been fine if done 5 or 10 years earlier.

By the way, the correct prefunding figure is actually 50 years (see this and this which debunk the oft-repeated false value of 75 years).

Re:How is this news?

[Anonymous Coward]

> Every business should be required to actually fund their pension plans

I'll do you one better: employer pension plans should be outlawed. You want a pension plan? It has to be managed by a outside entity, and the employer is never allowed to touch the money once it goes in.

Re:How is this news?

[Cardcaptor_RLH85]

Yes, it makes sense to pay up your pension fund in advance...not 75 years in advance though! By paying into your pension fund 75 years in advance, you are funding the pensions of employees who haven't even been born yet. I can see requiring that the next 25 years worth of pensions are funded in advance but 75 years is insanity and for most businesses would be completely untenable.

Re:How is this news?

[Y-Crate]

Every business should be required to actually fund their pension plans instead of whining to the government for bailouts later. See countless examples of companies going bankrupt over union demands and the unions whining about their pensions they're "owed"

By forcing the USPS to actually be accountable for it's promises to the unions, they can deal with the problem now rather than later.

I have absolutely zero problem with forcing institutions to pre-fund their pension plans.

But Congress gave the USPS entirely unreasonable demands in an entirely unreasonable timeframe. Even 40 or 50 years in 10 would be far too much.

But all of this is beside the point and not the real issue here, as the whole purpose of the stipulation is to trigger the financial collapse of the USPS.

Re:How is this news?

[NJRoadfan]

Both offer "last mile" USPS delivery to ANY address in the US for reduced costs. FedEx calls is "SmartPost" and UPS calls it "SurePost". Your package is still shipped via the parcel company's network, but instead of being delivered directly to your door, it gets dropped off at the local USPS distribution center where they take care of the rest of the delivery. The trade off is that it usually takes longer for your package to arrive. The only perk is that you get Saturday delivery (for now).

Re:How is this news?

[artor3]

Okay, here's the deal. You have until your 30th birthday to fully fund a retirement account that must last until you turn 95. If you can't, you must declare bankruptcy and lose everything. Sound fair?

Re:How is this news?

[g1powermac]

And, as a former rural carrier, I can tell you that arrangement is quite profitable for the post office. The rural carriers have to go their routes anyway, so the extra package load costs quite little. The only costs are some time for the clerks/management to sort the incoming packages in the morning, and the slightly higher evaluations for the routes (which translates to a small bit more money to the carriers).

Re:How is this news?

[hairyfeet]

I take it we have some "invisible hand" nutbars with mod points today?

Like it or not here are some facts, FACT the USPS was doing just fine UNTIL that law was passed that required them to fund a LIFETIME of retirement for each and every person that has worked or will work for them, NO other company has to do this and UPS and Fed Ex sure as fuck don't do this, FACT we have had several activists use the "starve the beast" meme that the AC pointed out, the Tea Party is just the latest, Grover Norquist and his "No new taxes EVAR" pledge being one of the most prominent examples, and FACT we haven't seen a damned thing passed this past 20+ years that wasn't either written by or sponsored by a lobbyist or lobbying group so you know damned good and well such a major change to the USPS had to be wanted by SOMEBODY with money or else it wouldn't have gotten done in the first place!

But you keep buying the "invisible hand" bullshit which even the libertarians know doesn't even exist in the stock market much less anywhere else, but I bet my last soon to be inflated to worthless dollar that if you follow the money either Fed Ex or UPS paid for the retirement law or a "starve the beast" true believer like Norquist and his followers paid to have it passed.

Re:How is this news?

[MightyYar]

My understanding is that the 75 years number is, in typical politician style, misleading. Congress is making the Post Office fully fund current retiree pensions as well as current employee pensions. Add those numbers together and you get the equivalent of funding pensions out 75 years - but that's not the way the law is phrased.

There's nothing wrong with funding the pensions (in fact it's the only moral choice), but I do fault the congress for not approving a rate increase or for not letting them stretch out the time a bit. We've been letting the government rack up these pension debts without proper accounting, and it has to stop.

Re:How is this news?

[MightyYar]

Why is this down-rated? Detroit is exactly what happens when pensions go unfunded - which is what the Post Office pensions were when congress passed that law.

Re:How is this news?

[Anonymous Coward]

It's worse than that. The law gives the USPS 10 years to come up with 100% of the money needed to fund all of its pension requirements for the next 75 years.

It's designed to destroy the USPS so Republican lawmakers can bemoan how government has once again failed to deliver. Except that they're the ones who have failed us.

Oh, it's even worse than that. When a veteran from the military gets employment at the USPS, now instead of the military budget being responsible for his/her retirement, the USPS is now responsible for it. Even for the years they were in the military! (Does any money already put in for that person by the military to any funds transfer to the USPS? Of course not, silly.)

This of course makes the military budgets look better, and the USPS budgets look worse. And veterans are given hiring preference by the USPS of course.

Re:How is this news?

[MightyYar]

Before you call someone a tard, look into the issue. They, over a ten year span, are being forced to: (a) fully fund their current employees' pensions, and (b) fully fund their retirees' pensions. Some opposing politician or commentator derived a "75 years" equivalency from this, which is misleading and meant to make the law seem more ridiculous than it is.

The flaws with the law are the aggressive timetable and the lack of authorization for increased rates, not the full funding of pensions. That is a good idea, and meant to prevent a Detroit moment in the future. It is reprehensible that we allow the federal government to rack up debts in the form of promised future benefits without proper accounting, let alone funding.

The rest of the story

[KalvinB]

http://arstechnica.com/gaming/2011/03/the-cost-difference-in-mailing-netflx-vs-gamefly-all-of-gameflys-profits/

The reason GameFly pays more is because their mailers weigh more. Netflix keeps the mailer at 1 ounce and pays 44 cents each. GameFly's mailer is 2 ounces and they pay the two ounce price. The big giant clue in the linked article is that the USPS is considering changing the price of the 2 ounce mailer to the price of a 1 ounce mailer.

So the real story is that GameFly wants a discount with zero actual justification.

The packaging for GameFly costs more. Work it into your business model or reduce the packaging weight.

I don't do business with GameFly but if I did, I'd cancel. They actually have the nerve to pretend Netflix is getting some kind of special treatment while they are the ones seeking it.

There is nothing unfair about what the USPS is doing. The rest of us have to pay by the ounce for our mail.

Re: The rest of the story

[kiddailey]

Not excusing this, but perhaps they've tried and haven't been able to redesign a mailer that doesn't somehow infringe on Netflix's mailer patent (and any others that likely exist):

http://www.google.com/patents/US6966484

Re:The rest of the story

[Kal Zekdor]

http://arstechnica.com/gaming/2011/03/the-cost-difference-in-mailing-netflx-vs-gamefly-all-of-gameflys-profits/

The reason GameFly pays more is because their mailers weigh more. Netflix keeps the mailer at 1 ounce and pays 44 cents each. GameFly's mailer is 2 ounces and they pay the two ounce price. The big giant clue in the linked article is that the USPS is considering changing the price of the 2 ounce mailer to the price of a 1 ounce mailer.

So the real story is that GameFly wants a discount with zero actual justification.

The packaging for GameFly costs more. Work it into your business model or reduce the packaging weight.

I don't do business with GameFly but if I did, I'd cancel. They actually have the nerve to pretend Netflix is getting some kind of special treatment while they are the ones seeking it.

There is nothing unfair about what the USPS is doing. The rest of us have to pay by the ounce for our mail.

Just read the article you linked. While interesting, it does kinda support Gamefly's case. A 2-ounce mailer cost $1.05, whereas a 1-ounce mailer cost $0.44. In other words Gamefly pays ~238% of what Netflix pays, 38% above any differences in weight. Further, at these weights, the majority of the cost of delivery is a flat cost, rather than an increase in fuel consumption due to weight. The cost of fuel to transport 1 ounce of additional weight is certainly less than a penny; the vehicle, occupant, and other cargo make up the vast majority of the weight (and the occupant's time is no small factor on the cost). Just basing numbers on the weight of the packages alone, charging ~$0.10 extra for the additional ounce will more than make up for the added costs.

Re:The rest of the story

[LordKronos]

http://arstechnica.com/gaming/2011/03/the-cost-difference-in-mailing-netflx-vs-gamefly-all-of-gameflys-profits/

The reason GameFly pays more is because their mailers weigh more. Netflix keeps the mailer at 1 ounce and pays 44 cents each. GameFly's mailer is 2 ounces and they pay the two ounce price. The big giant clue in the linked article is that the USPS is considering changing the price of the 2 ounce mailer to the price of a 1 ounce mailer.

So the real story is that GameFly wants a discount with zero actual justification.

The packaging for GameFly costs more. Work it into your business model or reduce the packaging weight.

I don't do business with GameFly but if I did, I'd cancel. They actually have the nerve to pretend Netflix is getting some kind of special treatment while they are the ones seeking it.

There is nothing unfair about what the USPS is doing. The rest of us have to pay by the ounce for our mail.

Just read the article you linked. While interesting, it does kinda support Gamefly's case. A 2-ounce mailer cost $1.05, whereas a 1-ounce mailer cost $0.44. In other words Gamefly pays ~238% of what Netflix pays, 38% above any differences in weight. Further, at these weights, the majority of the cost of delivery is a flat cost, rather than an increase in fuel consumption due to weight. The cost of fuel to transport 1 ounce of additional weight is certainly less than a penny; the vehicle, occupant, and other cargo make up the vast majority of the weight (and the occupant's time is no small factor on the cost). Just basing numbers on the weight of the packages alone, charging ~$0.10 extra for the additional ounce will more than make up for the added costs.

There are other factors you haven't considered. Perhaps larger, thicker, or heavier packages tend to jamb in the automatic processing machines more often, requiring more manual intervention and slowing everything down. And even if that doesn't apply to gamefly's specific case, it may apply to packages greater than 1 ounce in general. And if that's the case, it would justify the post office making a special exception for gamefly since they wouldn't actually be costing more.

Re:The rest of the story

[Kal Zekdor]

There are other factors you haven't considered. Perhaps larger, thicker, or heavier packages tend to jamb in the automatic processing machines more often, requiring more manual intervention and slowing everything down. And even if that doesn't apply to gamefly's specific case, it may apply to packages greater than 1 ounce in general. And if that's the case, it would justify the post office making a special exception for gamefly since they wouldn't actually be costing more.

Haven't claimed to have considered all factors, just refuting one. :-P

For example, the Ars article indicates that because Netflix does ~97% of the DVD mailer volume, and because of that, and the fact that Netflix mailers are easily identifiable due to their red packaging, they are often sorted out from standard mail and handled differently, reducing costs. I'm not sure how I feel about this, as on the one hand, a business has the right to pass costs (or savings) on to the customer, but on the other, a governmental institution should not be favoring or discriminating.

Re:The rest of the story

[EmperorArthur]

Interesting things about "favoring and discriminating." The cost difference is all because of the way that Gamefly ships vs Netflix. That's discriminating based on package weight.

Everything else the arstechnica article is talking about refers to the likelihood of breakage and the time to deliver. Gamefly uses only a few shipping facilities while Netflix has many. If you don't have to ship cross county then things are going to be faster, and thus have less of a chance of breakage.

The other trick is that Netflix has highly identifiable mailers that are all the same. The post office employees immediately know that the contents of these mailers are fragile. I would expect the post office to group similar items together. Especially if they're breakable. Gamefly decided that it wasn't worth the trouble since most post office employees aren't familiar with them, and they had too many disks stolen.

An option is for the post office to create a special DVD mailer that all companies can use. Allow some customization, but make it immediately apparent to the handlers that what's being shipped is a DVD. By standardizing the packaging they can give everyone the same quality of service while potentially allowing for more mail to be automatically sorted by a machine.

Re:The rest of the story

[bill_mcgonigle]

I was a Netflix subscriber when they switched over to the current, thin mailers. The story at the time was that the new mailers could be handled by the automated sorting machines at the USPS facilities and that the difference in cost between postage and breakage was strongly on the side of postage - Netflix was willing to absorb the additional breakage, which they expected but at a low level, based on statistical sampling and tests they'd conducted.

One discontinuity is that, I think, the game discs are several multiples more expensive than the DVD's, so GameFly can't absorb as much breakage. That's probably why they've still got the thick mailers and why their subscription prices are 50% higher than Netflix.

It sounds to me like they have a more expensive business model and are asking the USPS to subsidize it.

US Post Office is messed up big time

[NormAtHome]

I have Netflix and I'm on one of the bigger plans of 5 at a time and this last week has been a postal service cluster F***. Last Saturday I put 5 DVD's in the mail slot at the post office and on Monday two were received by Netflix and the other three didn't get there until Tuesday. Then on Wednesday I put two back in the mail and one arrived Thursday and the other still didn't arrive on Friday and I had to call and have it declared missing. Now keep in mind that according to the mailers the PO box that it's going to is in the next town over, I can't understand how DVD's that go in the mail at the exact same time some take an extra day to arrive.

Re:US Post Office is messed up big time

[PRMan]

Because the postman liked that movie.

Re:US Post Office is messed up big time

[g1powermac]

That's pretty difficult, actually, at least if you dropped the dvd's at the post office. The back room of a post office is pretty well secured to protect such things, with cameras everywhere. I've worked at a small/medium sized post office and have toured a processing plant, and there is quite a bit of interesting things going on to prevent stealing of mail. I especially liked the closed in catwalks with one way mirrors for the postal inspectors that go all the way around the processing plant. Even at my post office, there was a separate entrance with its own key going to a secured room for a postal inspector to enter only. The joke of the whole thing is though that outside of the post office/processing plants, there's pretty much no security. Most of the rural carriers drive their own vehicles, and there's no inspections to make sure you cleared out all the mail in your car. And for the postal trucks, there's no cameras or gps to track where you're going, but they at least check the truck to make sure everything is out. So, how difficult is it to take mail while on route? Sadly, incredibly easy. And many carriers have went to prison for it because of doing even more incredibly stupid things, like stealing tracked packages. Now, here is a possible reason why those dvds got there at different times. I was told that I needed to separate all netflix dvd's I picked up from the regular outgoing mail. The clerks then did something different with them compared to the regular outgoing mail, but I'm not sure what. I would happen to guess that they are sent through different channels. So, maybe some of your dvd's were separated, but not all. So some got there faster than others.

Why would I click on a PDF story link?

[93 Escort Wagon]

PDFs can contain all sorts of crapware, and Slashdot isn't exactly known for vetting its submissions.

Re:Why would I click on a PDF story link?

[SeaFox]

It's from a government site. NSA paranoia aside, a Postal Regulatory Commission complaint is not going to contain some ridiculous scripts or other executable bits.

You always have the option of opening it with the built-in PDF reader on Firefox, which would only be able to open the plain document portion of it if there is anything else embedded.

Re:dumb

[PRMan]

Because then I couldn't send it back just by sticking it in my mailbox at the curb.

Re:dumb

[metiscus]

In the USA, it is illegal to deliver first class mail unless you are the USPS, unless it is delivered at a cost of 6x the current USPS delivery rate.

http://about.usps.com/who-we-are/postal-history/universal-service-postal-monopoly-history.pdf

We have laws preventing exercise of free enterprise in the delivery of standard mail. http://en.wikipedia.org/wiki/Private_Express_Statutes

Companies in the past have attempted to circumvent these restrictions and have been run out of business by the government through legal means. The competing company was quite successful financially. http://en.wikipedia.org/wiki/American_Letter_Mail_Company

Re:dumb

[EmperorArthur]

The USPS has their own police force. If they think you've been sending non time sensitive things through anyone but USPS then they're legally allowed to fine a company hundreds of thousands of dollars.

In theory the Post Office gets regulated by congress because congress has granted it a monopoly on certain kinds of mail.

Actually they do, by law

[raymorris]

Actually private companies DO invest money so the pensions they promised will be paid. Typically, the employer sendd their part to an IRS or 401k account in the employee's name. That way, the money is there 40 years later while the employee is retired.

Occasionally, an employer will get caught screwing around with that and not properly investing that money on behalf of the employees they promised it to. That's called fraud. It's just that federal agencies were allowed to commit this type of fraud. With the internet, USPS may not have the revenue to in 40 years to cover the retirement pay for today's employees. That's why they now have to invest retirement pay for today's employees today, just like private companies do.

Re:dumb

[Seumas]

Oh, I'm sure they wouldn't be. My point is that your service has to generally be shit for people to be willing to pay a lot more to avoid using you. If they were free to compete like any other business, they would both have to raise their prices and improve their service. It's a win-win.

I definitely understand the value of always retaining a very cheap service for delivering letters (though even at double the current price, it'd be ridiculously cheap and reasonable). For anything other than a standard postcard or letter, though, they should be allowed to compete.

Song of the South

[tepples]

A streaming service with every film ever produced is not likely in either of our lifetimes. For one thing, it'd have to include Song of the South, and Disney has made it clear by its actions over the past two decades that it doesn't plan to release that film as part of its standard "vault" rotation.

DVD for areas without cable or DSL

[tepples]

Digital Versatile Disc is a cost-efficient medium for moving 4 to 8 GB packets of data in and out of geographic areas not served by a wired broadband provider. Cellular ISPs in the United States charge on the order of $10 per GB for microwave data transmission; satellite ISPs aren't much cheaper.

It's not favoriting to make a process efficient

[SuperKendall]

Netflix does ~97% of the DVD mailer volume, and because of that, and the fact that Netflix mailers are easily identifiable due to their red packaging, they are often sorted out from standard mail and handled differently...on the other, a governmental institution should not be favoring or discriminating.

I would hope like hell that ANY business, government or not, would evolve a special process to handle any one item that represented such a large percentage of traffic. Although it might appear to be favoritism, in reality it's just being efficient by treating a known quantity in a way that reduces the load across the rest of the system.

Re:dumb

[Anonymous Coward]

The reasons for the Postal monopoly are not at first obvious. A Libertarian minded person would cry foul at the legalized monopoly, citing private enterprise being able to do it cheaper. Until one looks at what would happen if the USPS was not the only game in town.

From the USPS Monopoly History link you provided:

"Without such protection, Congress reckoned that private companies would siphon off high-profit delivery routes, leaving only money-losing routes to the Department, which then would be forced to rely on tax-payers to continue
operations"

If the US did allow first class mail to be delivered by private companies, the USPS would not be self sustaining, and would require tax revenue in order to keep operating in all jurisdictions in the US.