The CHAIRMAN. Thank you, gentlemen, very much.

The next witness is Mr. John B. Gordon, manager of the Progressive Farmer, Raleigh, N.C.

Mr. Gordon.

STATEMENT OF JOHN B. GORDON, MANAGER, THE PROGRESSIVE FARMER, RALEIGH, N.C.

Mr. GORDON. Mr. Chairman and members of the committee, my name is John B. Gordon, representing the Progressive Farmer Co.

Our publication is a farm and home magazine, published in five separate editions, covering the 16 Southern States. Our editions are edited in Raleigh, N.C., Birmingham, Ala., Memphis, Tenn., and Dallas, Tex. We will observe our 75th anniversary in February 1961.

We are an ABC publication guaranteeing a total of 1,400,000 net paid subscribers to all of our editions. We have no newsstand sales. The Progressive Farmer's second-class postage bill in 1959 was $353,000; for third class, $79,072. These figures are a matter of record and are available to the Committee through the Post Office Depart

ment.

Having attended a number of these hearings, I know that there is always considerable repetition of facts and figures presented by various witnesses. To spare you this ordeal, I know of no better way to wrap up our case than to attach hereto a copy of a letter prepared by the top officers of our company to go to all Representatives and Senators from our territory.

I ask that this letter, which I shall now read to you, be inserted in the records of this committee hearing, so that it will be available to nonrecipients.

The CHAIRMAN. Very well, sir.

Mr. GORDON. This letter has not gone out. There is no date. It is just put under the date of "May 1960." It will be mailed directly after the hearings are completed.

The CHAIRMAN. All right, sir.

Mr. GORDON. And it will be addressed to each Representative and Senator from the Southern States.

The Progressive Farmer is strongly opposed to the administration's postal rate increase proposal as presented in H.R. 11140 and its companion bill, S. 3192. In 1958, Congress passed a postal rate bill that had the effect of increasing our second-class postage costs over 1958 as follows:

If the provisions of this bill are enacted in 1959, an increase of $35.000, or 11 percent; in 1960, it will be $88,000, or 27.7 percent; in 1961, it will be $139,000, or 43.7 percent.

Now, before the third annual increase provided by the 1958 act of Congress has become fully effective, the administration proposes another increase that would boost our 1961 second-class postage costs by at least an additional $84,000 per year for 1961 and each year thereafter. This would make the total increase in costs for the year 1961 over 1958 costs $223,000, or 70.1 percent.

The Progressive Farmer is not opposed to a reasonable increase in secondclass postage rates.

And in all of the hearings, we have so stated. I think that will show in the record.

In August 1957, in testifying before the Senate Post Office Committee, President Butler stated:

"The Progressive Farmer is not opposed to some increase in second-class rates, if Congress feels it is necessary. We have the firm conviction that before any increase is made, Congress should establish a postal policy. In setting this policy, it should decide what is the true value of the public services now being performed by the Post Office Department. To my way of thinking this must be done before intelligent action can be taken on postal rates."

In the postal rate bill passed in 1958, Congress laid down a postal policy. It provided that losses incurred by the Post Office Department due to its public services be charged to general funds. It further provided that the cost of these public services should not constituted a direct charge upon any user or class of users of the mails. Cost of all the many services which the Post Office renders with out charge is estimated to be around $250 million. Admittedly, there is some difference of opinion as to the actual cost of these public services. whatever they are, charging them against the mail user is fantastically unfair. The Postmaster General has disregarded the postal policy as established by Congress in 1958, and continues to include in his figures for Department deficit and arguments for rate increases, many hundreds of millions of dollars that by all that is fair and right should be charged to the general public.

But,

Let us say again that the Progressive Farmer is not opposed to a reasonable increase in second-class rates, if Congress decides it is needed. But we do protest vehemently on having to pay rates that are based on deficit figures which include hundreds of millions of dollars worth of public services. If these public services are worth the money-and we think most of them are let the public pay for them.

Finally, if accurate cost ascertainment figures prove that an increase in second-class rates is in order, let them be reasonable, let them be in keeping with good business practice and with due regard to the welfare of those of us who have no choice but to use the mails. The Post Office Act of 1958 provides for a 1961 increase in our second-class postal bill of 43.7 percent over what we paid in 1958. Let that large increase go into effect before piling another big increase on top of it. And if another increase of the size suggested by the Postmaster General in H.R. 11140 and S. 3192 is necessary, defer it until 1962 and then spread it over a period of 3 years.

Sincerely yours,

THE PROGRESSIVE FARMER COMPANY.

Signed by Eugene Butler, president and editor in chief; Alexander Nunn, vice president and executive editor; and Fowler Dugger, vice president-general manager-treasurer.

Gentlemen, I would be very glad to answer, if possible, any questions that you might wish to ask me.

The CHAIRMAN. Are there any questions of Mr. Gordon?

Mr. GORDON. If not, I certainly thank you, Mr. Chairman and members of the committee, for your courtesies today and at other hearings in the past.

Mr. REES. It is a very, very fine statement.

The CHAIRMAN. We appreciate your statement. You appear to be eminently reasonable and fair about this whole matter. I want to compliment you and also the company, for this letter.

Mr. GORDON. We have tried to be, Mr. Murray.

The CHAIRMAN. Our next witness is Mr. Giles Morrow, president and general counsel of the Freight Forwarders Institute, Washington, D.C.

STATEMENT OF GILES MORROW, PRESIDENT AND GENERAL COUNSEL, FREIGHT FORWARDERS INSTITUTE

Mr. MORROW. Mr. Chairman and members of the committee, my name is Giles Morrow. I am president and general counsel of the Freight Forwarders Institute, with principal offices in the Continental Building, 1012 14th Street NW., Washington, D.C.

The Freight Forwarders Institute is a national organization maintained by and representing freight forwarders subject to regulation under the Interstate Commerce Act. The freight-forwarding industry, as represented by the institute, is opposed to bills H.R. 11140 and 11360 to the extent that they propose increases in first-class and airmail rates.

With regard to the specific proposals contained in these and other bills for increases in other categories of mail, the institute does not have a position. However, it is our position that if increases in any mail rates are authorized at this time, they be imposed with regard to the service that is being performed at a loss.

Freight forwarders are common carriers of freight. They were brought under regulation of the Interstate Commerce Commission by enactment, in 1942, of part IV of the Interstate Commerce Act, which is comparable in regulatory scope to the other parts of the act regulating rail, motor, and water carriers.

Freight-forwarder service is confined to less-volume freight, or lots of freight which can be consolidated into larger volumes, truckload and carload. Forwarders utilize the services of other common carriers for the line-haul movement of freight, while assuming full common carrier responsibility for the transportation from origin to destination.

Approximately 80 freight forwarders operate in domestic service within the United States pursuant to authority granted by the Interstate Commerce Commission. In 1959, the class A-or largest-forwarders transported 24 million shipments, for which they collected gross transportation revenue of approximately $443 million. Net income of the industry in 1959, after income taxes, was a little less than $4 million, not quite 1 cent per each dollar of gross income.

The average weight of shipments moving in forwarder service is about 350 pounds. In 1959 it was 345 pounds. I do not have figures to show the breakdown of forwarder shipments by weight brackets, but forwarders are competitive with parcel post as to some of their business.

Because of the nature of their services, and the manner in which they operate, freight forwarders are exceptionally heavy users of first-class and air mail. As compared with other industries, and particularly other transportation companies, the ratio of postage expense to net earnings is disproportionately high in the forwarding industry.

Freight forwarders consolidate freight at key points throughout the United States and forward it in volume consignments to break-bulk stations throughout the Nation. Their billing papers covering each shipment, are made up on manifold forms with 8 to 10 copies each.

These and other shipping papers must be mailed so as to arrive at the destination station before the arrival of the freight. Unlike some of the physical carriers, forwarders cannot use company mail, but must use first-class or airmail service.

In 1958, the last year for which official figures on postage costs have been published, class A freight forwarders paid $1,634,865 for postage. According to information furnished me by the industry, by far the greatest portion of the postage bill is for first-class and air mail. An increase of 1 cent per ounce in first-class and airmail rates would, by the most conservative of estimates, cost the freight-forwarding industry more than a quarter of a million dollars annually. This additional expense would have a very heavy impact on an industry whose net income is only about $4 million per year.

The survey made by McKinsey & Co., Inc., submitted by the Post Office Department in justification of increased postal rates, concludes that while 70 to 80 percent of all first-class mail is originated by business, the expense, when compared with other items of operating cost, is of "minute significance" to most executives. This is not true of the freight-forwarding industry. Because forwarders operate on such thin margins, the impact of postal increases can best be weighed by comparing such increases with net earnings. Using 1958 figures, the ratio of postage expense to net forwarder income after taxes was 39 percent. An increase of 20 to 25 percent in the postage bill would materially increase this ratio.

The desire to cut down the postal deficit is understandable, but we cannot agree that it is either logical or in the public interest to reduce the deficit by increasing the rates on the only categories of mail that now are more than paying their share of the cost of service. Furthermore, if the cost of first-class mail service is to be increased by a "judgment factor" representing "value of service," we see no reason why such a factor should not be applied in the case of other categories of mail, particularly parcel post, which obviously competes with private enterprise transportation and provides a commercially valuable service for many business shippers.

The testimony and exhibits submitted by the Post Office Department show that first-class mail produces a coverage of 111 percent of its cost. Airmail revenues amount to 114 percent of the cost of the service. On the other hand, table C-2 of the "Survey of Postal Rates" submitted by the Department and printed as House Document No. 381, 86th Congress, shows that for the year 1959, on an adjusted basis, second-class mail produced revenues which covered only 26 percent of costs; revenues from controlled circulation publications amounted to 69 percent of costs; third-class mail revenues accounted for only 73 percent of costs; and fourth-class mail, or parcel post, produced revenues amounting to 96 percent of the cost of the service.

While these figures were adjusted to reflect changes that occurred at any time during the year to an annual basis, there was not included in the cost figure some $39 million attributable to such expenses as workmen's compensation, custodial costs, repairs to buildings, etc. Costs were thus understated by business standards.

Whether or not there are sound reasons why these deficit-producing services should be subsidized by the taxpayer, we submit that there is no reason why they should be subsidized by the users of first-class

mail. Particularly is this true in the case of business-type service such as parcel post which directly competes with privately owned transport services.

We realize that under the Postal Policy Act of 1958 the Postmaster General is supposed to request rate adjustments in parcel post so as to keep revenues and expenses within 4 percent of each other. But in an enterprise as large as the parcel post system that is quite a margin, and the lag is always on the side of revenues.

For example, in November 1959, the Interstate Commerce Commission authorized parcel post increases, which became effective February 1, 1960, intended to produce revenues of $88 million annually, almost the precise amout of the estimated parcel post deficit. So long as the costs of doing business continue on the upward trend, parcel post revenues will continually be millions of dollars behind parcel post costs.

We respectfully suggest that if it be decided to increase postal rates in order to reduce or eliminate the postal deficit, the rates be increased for the services which are responsible for the deficit, and that no increases be made in the already self-sufficient first-class and airmail service.

That concludes my statement.

Thank you.

The CHAIRMAN. Thank you very much for your statement.

The last witness this morning is Mr. S. T. Barkman of Berlin, Wis., executive secretary of the National Association of Advertising Publishers. He is accompanied by Mr. Victor Green of Pekin, Ind., who is president of the National Association of Advertising Publishers. We shall be glad to hear from you gentlemen.

STATEMENT OF S. T. BARKMAN, EXECUTIVE SECRETARY, NATIONAL ASSOCIATION OF ADVERTISING PUBLISHERS, BERLIN, WIS.; ACCOMPANIED BY VICTOR GREEN, PRESIDENT OF THE NATIONAL ASSOCIATION OF ADVERTISING PUBLISHERS

Mr. GREEN. Mr. Chairman and members of the committee, I am Victor Green of Pekin, Ind. As president of the National Association of Advertising Publishers and as publisher of three free distribution papers in southern Indiana, I would like first to thank the members of this committee for giving me the opportunity to present some of our views on postal matters. I hope that something I have to suggest will be of help to the members of the committee in recommending postal regulation in the future.

The publishers throughout the United States who make up our association and operate our industry produce free newspapers that go to all homes in a community's trading area and produce advertising publications without news that go to all homes in a trading area.

We feel that the value of these daily, weekly, and semimonthly publications to their communities and to the small business in their communities is evidenced by the fact that their number has grown from less than 500, 10 years ago, to well over 1,000 now, while most other forms of periodicals have declined rapidly in number. These free newspapers and advertising papers now go to more than 6 million homes each week, where they affect the lives of about 25 million

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