
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, March 11, 1990                   TAG: 9003112605
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A5   EDITION: METRO 
SOURCE: The Washington Post
DATELINE: WASHINGTON                                 LENGTH: Medium

POSTAL INCREASE COULD BOOST PRIVATE DELIVERY

The U.S. Postal Service's proposed 23 percent increase in mailing rates for magazines - coming on top of an 18 percent boost two years ago - may produce major changes in magazine delivery beyond the subscription increases that typically follow a rise in postage rates.

"This request will step up our efforts . . . [to develop] massive alternative-delivery systems to relieve cost pressure," said Reginald K. Brack Jr., chairman and chief executive officer of Time Inc.

Time has invested heavily in Publishers Express, a pilot private delivery system in the Atlanta suburbs that has grown from delivering 8,000 magazines when it started last June to 60,000 deliveries and a projected 400,000 by the end of the year.

While Publishers Express currently is "not cheaper" than the mail, President Howard Rosen said: "We're investing money in research and development. In the long term, we will beat the post-office costs."

Whether the long-term might come as early as next year "will be decided when we get a feel for how the rate case comes out," Rosen said.

"It has never been a question of if, just when," said Phillip D. Miller, president and chief executive officer of United Delivery Systems, a 10-year-old Grand Rapids, Mich., that delivers 850,000 publications monthly. "The 1990s are our growth time."

Some of the talk about alternate delivery has turned out to be just that: talk. Postal officials call it saber rattling.

But Miller said he believes the post office will respond. "Where the post office has competition, the rates may not go up; they may actually go down."

Cary H. Baer, vice president for distribution at Reader's Digest, noted that postal officials have proposed a new "saturation" rate category for the "fairly small group of publishers who could most easily move to alternate delivery." However, magazine publishers, noting that the new rates are the most complicated ever proposed, said they were uncertain which publishers would qualify for the saturation discount or how much money would be saved.

Postmaster General Anthony Frank calls Publishers Express an "experiment with 3,000 homes." But, he acknowledged, "If we keep having increases of 20 percent, alternative delivery will make sense financially."

Average postal rates are projected to rise 19 percent under the Postal Service proposal now before the Postal Rate Commission. The costs for magazines are higher, on the average, to make them "more cost-based," according to Frank Haselton, assistant postmaster general for rates and classification. Magazines, because they are bigger and heavier than letters, cannot be sorted automatically on postal equipment.

Magazine spokesmen dispute the contention that proposed new higher rates are justified.

"We have very authoritative economic modeling that proves them dead wrong on this point," Brack said.

by CNB