from the Congress and from the industry, we considered this matter very carefully and decided to make the second step much more liberal. There is no merging required between nonidenticals and identicals. To my mind, this is the most difficult problem, and we have eliminated that. We also eliminated the sorting of nonidenticals to three digits. We ask them to sort now only to States. I think that even the members of the industry will tell you this is a very liberalized version of the original proposed rulemaking. Mr. DANIELS. Do you think that with the notice being publicized on June 29 this year and the rate going into effect October 1, that 3month period of time in which you request compliance is a sufficient, reasonable period of time for them to employ the necessary independent help? I think you testified the employees of the Post Office Department who are detached and working in the various plants with the publishers and mailers are not going to be discharged. The Department is going to retain them. You believe if you have sufficient vacancies. in the Department, it would not be necessary to discharge them from their employment? Do you think the market today, the labor market, will have the necessary skilled help available to put to work in time to comply with this regulation effective October 1? Mr. MCMILLAN. I do. I do not think they will have a big problem because the October 1 regulation applies only to the identical pieces. And most of these come off an assembly line, the labels are printed on a machine, and they come over an assembly line. It really does not take a whole lot of skill to pick up the three-digit code, 002 we will say, cut it off and put in the sack 002. In other words, this is more of a labor-type function than it is a scheme-type function. I do not foresee any great difficulty at all. Then, of course, the second phase will be a manual operation, but they have known about this since the latter part of June, the publication in the Register, and before that by discussions with them. They knew we were coming up with something. They have until January 15, 1969, to get ready for the second phase. This is the one in my conversations with the people and with Members of Congress that creates the most problems for them. So here they have had 6 months. Mr. DANIELS. I have another question with reference to the meaning of the regulation. "It shall apply to all shipments of 1,000 identical pieces per day." By the words "per day," do you mean a single shift, second shift, or third shift, or does it not encompass the shifts within a 24-hour period of time? Mr. MCMILLAN. As far as I know, it is my understanding most of these are placed in the mail during the daylight hours which would be true in the Post Office. They work daylight time primarily. If they do work on a 24-hour basis, we will take the Post Office day which is midnight to midnight. Mr. DANIELS. What do you mean by the word "identical"? Is that described in the regulations? Mr. MCMILLAN. No, it is not. The word "identical" is not spelled out specifically in the proposed rulemaking, but our thinking at this time, Mr. Congressman, is it would be the same title. In other words, "Tom Sawyer," if you had a thousand copies of "Tom Sawyer," those would be identical. If you ran off another 500 copies of "Huckleberry Finn," the same day, those would not be identical. Mr. DANIELS. What if it were the same size and weight? Mr. DANIELS. If there is a variation in size or weight, you would not consider that identical? Mr. MCMILLAN. Of course we assume if a book has the same title it would have the same size and weight. Mr. DANIELS. In our study of the postal rates last year, the committee, as you know, spent considerable time in revising the rates for first-, second-, third-, and fourth-class mail. We increased the rates with the view in mind that we would overcome the deficit of $1.2 billion. Now, by virtue of the increase in pay that was granted under last year's legislation, and the additional cost of transporting the mail, do you envision any substantial deficit this year in the handling of the various classes of mail? Mr. MCMILLAN. I think Mr. Nicholson could give you that better than I, Mr. Daniels. Mr. NICHOLSON. Yes; there is a substantial deficit, Mr. Daniels. In 1969-I do not have those papers with me, but the total deficit is in excess of three-quarters of a billion dollars, as I recall. I will provide the figure for the record if you wish. Mr. DANIELS. I have the cost ascertainment report of 1967 before me and refer to page 12, exhibit 1, "Adjustment of revenues includes costs." They anticipate a deficit of $211,066,000. Do you think that is a correct figure? Mr. NICHOLSON. That is the deficit if the 1967 volume of mail paid. postage at the new rate and the employees were paid at the new rate of pay; yes, sir. But inasmuch as the volume of mail will have increased in both 1968 and 1969, the likelihood is that the gap between revenue and cost will be somewhat greater than the 211 shown on the exhibit that you referred to. Mr. DANIELS. I do not want to impose any greater responsibility upon the chairman of the subcommittee, but I was wondering what your view is with respect to this committee again making a study of the postal ratemaking system. Would you recommend it? Mr. NICHOLSON. I do recommend it, Mr. Daniels. Timing may be something that you would want to consider. The Department has underway some studies that I think will be very useful and will add to the ability to understand the dynamics of the problem. Those studies are not available yet, but I would suppose, and I believe the chairman of this committee has much the same feeling, that a review by this subcommittee of postal ratemaking would be in the interests of the Congress, the mailers, the Department, and the public. Mr. DANIELS. I recall during last year's hearings a great deal of testimony was taken with reference to the means employed to ascer tain the cost, and a great deal of criticism was leveled at the Department as to how they arrive at their cost ascertainment. I believe the chairman stated you did propose to go into that next year. I think using that line, the Department ought to get itself ready to testify on that subject. Mr. MAY. I believe the figure you were reading from the cost ascertainment is exclusive of public service costs. Mr. DANIELS. Yes. Mr. MAY. So if you add the public service costs in there, you are up around $800 million, in the neighborhood of the figure Mr. Nicholson was using as the projected deficit. Mr. DANIELS. Do I understand correctly, Mr. Nicholson, that you have a study underway with reference to cost ascertainment? Mr. NICHOLSON. Yes; we do, Mr. Daniels. We have let a contract with the very eminent and well-qualified firm of Touche, Ross, Bailey & Smart to design the data collection of a cost system that will enable us to determine the long-range incremental costs associated with the various classes of mail by using existing information to the extent possible and defining areas in which we need to capture and record new information. This is a technical study of designing a cost system that will lend itself to computer mechanization and avail itself of existing cost systems, the accounting system, for example, and other systems. The purpose of the product of this study would be to add to the information presently available in cost ascertainment. It is not a replacement of cost ascertainment, but an addition to the information in that report. We believe that the results of the consultant's work will be available early in calendar year 1969. It is our hope and expectation that we will have thorough and professional discussions with all interested parties, the Congress if it wishes, with mailers if they wish, to evaluate and improve if possible on the technical design that the contractor will provide us with. When we do finish that period of evaluation and agree on a system, we will begin the implementation and should have reports out of the new system in about 12 or 13 months after the agreement is reached. Mr. DANIELS. I have no more questions, Mr. Chairman. Mr. OLSEN. Thank you, Mr. Daniels. What is the cost of that contract? Mr. NICHOLSON. It is $75,300. Mr. OLSEN. Thank you, gentlemen, very much. We appreciate your appearance. The next witness is Jack Cassidy, chairman of the Technical Subcommittee of the Joint Postal Committee of American Book Publishers Council and the American Educational Publishers Institute. I understand you are being accompanied by Mr. Robert Frase, director of the Washington office. Mr. CASSIDY. Yes, Mr. Frase to my left, and also Mr. Steuart Pittman at my right. Mr. OLSEN. You may proceed. THE STATEMENT OF JOHN W. CASSIDY, CHAIRMAN, TECHNICAL SUBCOMMITTEE OF THE JOINT POSTAL COMMITTEE OF AMERICAN BOOK PUBLISHERS COUNCIL AND THE AMERICAN EDUCATIONAL PUBLISHERS INSTITUTE, ACCOMPANIED BY ROBERT W. FRASE, DIRECTOR, JOINT WASHINGTON OFFICE OF THE COUNCIL AND INSTITUTE, AND STEUART PITTMAN, SPECIAL COUNSEL FOR THE JOINT TECHNICAL SUBCOMMITTEE Mr. CASSIDY. Thank you, Mr. Chairman, for allowing me to come before this committee to comment on this bill. I have a prepared statement which I will read from. Before I get into the formal part of the statement, there are several things I would like to have your permission to answer as far as the previous testimony. The first thing is if we are talking about $4 million, I cannot speak for the industry finally, but I would think we would say raise our rates by $4 million and let's all go home, because our estimate is far beyond $4 million, and if the Post Office is only saving $4 million, there is something wrong with somebody's figures. That is one thing. The other thing I want to comment on, it was testified that the first announcement of this regulation came out on June 29. That is not correct. The first announcement came out in late December and it took almost verbatim the wording from the Postal Manual dealing with third-class mailing and applied it to book mailings. Mr. DANIELS. May I interrupt? I think I stated in questioning the previous witnesses that on Saturday, June 29, the Post Office Department advertised the proposed rulemaking notice in the Federal Register. Mr. CASSIDY. That is true. But before the Federal Register announcement, there was an actual regulation published in the Postal Bulletin which said the rules for sorting third-class mail would apply to fourth-class educational materials. This quickly was rescinded because the Department realized the regulation was not at all designed to deal with books that could not be tied together in sacks. So the Department withdrew that quickly, and we had the long hiatus between that time and June 29 when the first new version of the regulation was published. So that was the second point I wanted to make. The third point I wanted to make was one which I think is very important. I am not sure which gentleman said it. I think it was Mr. Nicholson, who said that industry under the detached mail units have no incentive to improve the operation because the Post Office is on the receiving end of it. I have here a document put out and sent to me by the Transportation Division of the Post Office Department, headed by Mr. John F. Jones, Director. I also have been working with a very capable gentleman by the name of Weir and another gentleman by the name of Wolfe. This document breaks down not into three digit ZIP but into five digit ZIP, a program for the dispatch pattern of all the books going out of our Hanover plant. This thing we have been working on, at least as far as the implementation of such a program, we have had two programers working full time for over 5 months in trying to develop a sophisticated program for our computer which will make five-digit separation of all of our book labels, will simultaneously produce the bag tags necessary for the number of bags involved, breaking it all the way down from five digits to a residue three digit, another residue to State. This was done not in anticipation of this regulation at all. This was being done voluntarily and was being worked on to be put into our computer installation. This regulation-incidentally, to do this it not only is the cost of the program, but when you break down a complicated problem such as this is into five-digit ZIP, it uses a tremendous amount of memory in the computer and memory in a computer costs a lot of money. Under the regulations I do not have to break this down to five digits at all. I question whether we will break it to five digits because it is much easier and much less expensive in the computer to stick to three digits, and also easier at the bagging end, because you are dealing with bigger lots going to central points where it has to be redistributed. The Post Office I think has not really thought this all the way through as far as the impact on their own operation because every single book that is put into a bag, whether it be State or by three-digit ZIP, has to, at some point, be opened and dumped and rehandled and sorted to office of destination. This is every single bag that comes in under that kind of sorting. This kind of sorting which is applicable to big mailing means that most of these bags will be directed to the office from which they are going to be distributed to the consumer, the bags are put on trucks and are never touched again until they get to the office of destination. I think this is good evidence the industry has been and will continue to cooperate in their own interest in doing things for the Post Office insofar as these mailings. I think the Post Office would be working backward on the basis of this three-digit concept. That is all I have to say on those, if I may go ahead with my state ment. Mr. OLSEN. Proceed, Mr. Cassidy. Mr. CASSIDY. My name is John W. Cassidy and I am vice president of Nelson Doubleday, Inc., a wholly owned subsidiary of Doubleday & Co., Inc., publishers in New York City. I am appearing here as chairman of the Technical Subcommittee of the Joint Postal Committee of the American Book Publishers Council and the American Educational Publishers Institute. Incidentally, I am also Chairman of the Postmaster General's Technical Advisory Subcommittee appointed to deal with this subject. I have with me Mr. Robert W. Frase, director of the joint Washington office of the council and institute, and Mr. Steuart Pittman, special counsel for this joint technical subcommittee. The council and the institute are the two major professional associations of book publishers, the members of which produce more than 90 percent of books of all kinds published in the United States. The 192 members of the American Book Publishers Council publish many types of books such as adult general-or trade-books, juvenile books, scientific, medical and professional books, religious books, university press books, book club books, and paperback books of all descriptions. The 99-777-68 |