[Federal Register: December 13, 2000 (Volume 65, Number 240)]
[Notices]
[Page 77934-77938]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13de00-87]

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POSTAL SERVICE

Retirement Plan for Manually Set Postage Meters

AGENCY: Postal Service.

ACTION: Notice of final plan.

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SUMMARY: This notice of the final plan for the retirement of manually
set postage meters clarifies the second phase of the plan to take
postage metering to a higher level of security. The Postal Service
recently completed the first phase of an overall Postal Service plan
with the decertification of mechanical postage meters. Upon completion
of the four phases of this plan, all meters in service will offer
enhanced levels of security, thereby greatly reducing the Postal
Service's exposure to meter fraud, misuse, and loss of revenue.

DATES: May 1, 2000.

FOR FURTHER INFORMATION CONTACT: Nicholas S. Stankosky, 703-292-3703.

SUPPLEMENTARY INFORMATION: In 1995 the Postal Service, in cooperation
with all authorized postage meter manufacturers, began a phase-out, or
decertification, of all mechanical postage meters because of identified
cases of indiscernible tampering and misuse. Postal revenues were
proven to be at serious risk. The completion of this effort, which
resulted in the withdrawal of 776,000 mechanical meters from service,
completed Phase I of the proposed plan for secure postage meter
technology. Recent advances in postage meter technology offer high

[[Page 77935]]

levels of security, operational reliability, and flexibility for meter
users. As a result, the Postal Service is addressing the next category
of less secure meters: electronic meters that are manually set by
postal employees. Of the current total, installed population of
1,469,841 meters, almost 92 percent are remotely set through telephone
access to a manufacturer's setting center. Customers have recognized
the advantages of remote setting, and as a result the marketplace has
moved in a positive direction. The remaining 131,426 manually set
electronic meters are to be retired and no longer authorized for use as
postage evidencing devices. It is the Postal Service's intent to make
this an orderly process with minimal problems for users.
    The proposed plan for Phase II, the retirement of manually reset
electronic meters, was published for comment in the Federal Register,
May 1, 2000. The Postal Service requested that comments on the proposed
plan be submitted by June 15, 2000. The Postal Service received seven
written comments from postage meter manufacturers, interested
companies, large commercial mailers, and industry associations
representing commercial mailers. Eight additional comments came from
companies and industry associations after an article on the retirement
plan was published in the Postal Service's Memo to Mailers, June 2000.
Although those comments came after June 15, 2000, they were considered
in the response.
    The Postal Service gave thorough consideration to those comments,
modified the proposed plan as appropriate, and now announces the
adoption of the final plan. This plan gives users of manually reset
postage meters ample time to make timely and intelligent decisions on
replacement meters.
    The Postal Service's evaluation of the comments follows. The final
plan, as revised, follows the discussion of comments. The comments are
organized to reflect common topics addressed by the commenters.

A. Discussion of Comments

    1. Support for plan. Two postage meter manufacturers commented in
support of the plan.
    2. Meter models not available to the public. One postage meter
manufacturer commented that the list of meter models included some
models that fit the category but that are not available to the public.
    The Postal Service revised the list to include only those models
available to the public.
    3. Affected meter models. One postage meter manufacturer commented
that some of the models included on the list are capable of remote
setting and need not be retired or withdrawn.
    The Postal Service determined that those models should remain on
the list. Any meter capable of remote setting that is currently being
reset manually must be reinstalled by the postage meter manufacturer as
a remote set meter with a new model number before the user can continue
to use it. The Postal Service added a requirement to this effect.
    4. Timing of retirement plan. Three commenters questioned the
timing of the retirement plan, coming as it does soon after the
completion of the decertification of mechanical meters. They noted that
some users who replaced their mechanical meters with manually reset
electronic meters are faced now with the expense of another meter
replacement.
    Although the Postal Service did not require that users of
mechanical meters replace those meters with remote set electronic
meters, pamphlets that were widely distributed to users by the Postal
Service during the decertification process suggested that users rent
``remote set meters as this will be our direction in the future.''
    5. Replacement meters. Two industry associations were concerned
about the possibility that the Postal Service would require the near-
term retirement of a meter selected to replace a manually reset meter
and asked about the long-range plans for postage meter technology.
    Phases III and IV of the proposed plan for secure postage meter
technology were published for comment in the Federal Register on August
21, 2000. Upon completion of these phases of the plan all meters in
service will offer enhanced levels of security, thereby greatly
reducing the Postal Service's exposure to meter fraud, misuse, and loss
of revenue. Given the rapid pace of new technological developments for
secure postage meter technology, leases for postage meter equipment of
more than five (5) years' duration would appear to be inadvisable.
    6. Communications with meter users. One postage meter manufacturer
was concerned about inadequate, misleading, or confusing communications
to meter users, and another questioned the Postal Service requirement
for the manufacturer to provide generalized correspondence with meter
users to the Postal Service for review.
    The Postal Service is working to ensure the integrity of the meter
retirement process with expeditious, accurate, and informative
communications with postage meter users, postal employees, and postage
meter manufacturers, and it expects manufacturers to provide accurate,
timely information to their customers. If the Postal Service finds that
meter manufacturers or their agents are disseminating misleading
information, it reserves the right to review all generalized
manufacturer communications to all customers or a subclass of its
customers prior to distribution to customers.
    7. Request for list of lease expiration dates. One postage meter
manufacturer questioned the requirement to provide the Postal Service
with a complete listing of lease expiration dates, since such
information is considered confidential business information.
    Manufacturers will no longer be asked to submit this information.
However, in order to accomplish the goal of ensuring that manually
reset meters are withdrawn in accordance with the plan, the Postal
Service will review meter manufacturer lease records and records of
meter withdrawals shortly after each quarterly retirement date.
    8. Security of remote set meters. One industry association asked
for information to support the Postal Service claim of increased
security benefits with remote set postage meters and the actual risk to
Postal Service revenue from manually reset meters.
    Postal Service records show that all major meter fraud cases have
involved physical tampering. USPS ability to detect meter fraud
involving conventional postage meters is limited; the best protection
for postal revenue comes from requiring the change to more secure
meters. The increased security of remote reset meters is based, first
of all, on the analysis by the resetting computer of the meter control
total when the meter user contacts the resetting center to obtain
additional postage. The computer used for resetting can identify any
imbalance that would warrant investigation. This amounts to an
``inspection'' of the control totals each time the meter is reset.
Second, remote meter resetting eliminates the use of the meter keys
that must be used when meters are reset manually. These keys allow
access to any meter of the same model and sometimes other meters of the
same manufacturer. Loss and theft of these keys, which would allow
improper access to meters, is a major security issue that is eliminated
with remote set meters. In addition, any manually set meter allows the
possibility of human error by the resetting clerk.

[[Page 77936]]

    New, remotely reset meters are also more reliable and have more
features than manually reset meters; meter manufacturers can provide
the specifics. The remote set meters are clearly more flexible because,
unlike manual set meters, they do not have to be removed from the plant
or office and taken to a remote location for resetting. They can be
reset and returned to service in minutes.
    There are 131,426 manually reset meters in use, which represents
8.2 percent of the total number of postage meters. Postal revenue from
manually reset meters for our 2000 fiscal year is $6,121,084,200, which
is 29.8 percent of total meter revenue. Given the significant
contribution of the relatively small number of manually reset meters to
postal revenue, it is essential that these meters be secure.
    9. Advantage to meter manufacturers from retirement of manually
reset meters. Several large commercial mailers and the industry
associations representing such mailers commented that the change to
remote reset meters gives an advantage to the meter manufacturers over
meter users. They felt that manufacturers would benefit from
replacement of mailing equipment, from additional fees--which could be
increased at any time--and from the interest on the money deposited by
a user before it is reset on the meter.
    Retiring manually reset postage meters is a USPS plan to increase
meter security and is not driven by the manufacturers. Checks for
postage must be made payable to the U.S. Postal Service (or to the
manufacturer) and are sent by the meter user to the designated Postal
Service lockbox account at Citibank. The manufacturer does not benefit
from any ``float'' on the money, unless the manufacturer has
established its own bank to handle the funds before they are deposited
with the Postal Service and its customers elect to deposit funds in
that bank. Moreover, through its Postage NowTM program, the
USPS promotes the use of electronic payments: automated clearing house
(ACH) debits and credits, and wire transfer of funds. Using such
electronic payments to the Postal Service lockbox account minimizes
float by allowing customers to pay for postage at a time that is very
close to the time that postage is needed. In most cases, postage
payment and meter resetting can take place on the same business day.
    Any additional fees and costs for users are determined on a
manufacturer-by-manufacturer basis and not by the Postal Service.
Customers have choices in a competitive meter marketplace if they are
not satisfied with the fees and policies of a given manufacturer. Users
of remote set meters benefit from the additional features not available
on manually set meters and from the increased convenience of using
meters that do not require a trip to the post office during the
business day for resetting. Individual meter manufacturers can provide
detailed information about their products and services.
    10. Inconvenience and increased cost of remote set meters. All
comments from interested companies, large commercial mailers, and
industry associations representing such mailers addressed the perceived
difficulties, inconvenience, and cost of changing from manually reset
meters to remote set meters. The following comments and responses
discuss the major areas of concern.
    11. Increased fees. Commenters were concerned about increased fees
and the financial costs associated with the change to a remote set
meter including (1) Higher resetting fees compared with the free resets
at the post office; (2) higher service fees, especially for last-minute
mailings, or if the mailer wants immediate access to postage, or if
funds are not on deposit for a specified time period; and (3) the loss
to the mailer of interest earned on funds during the time period
between when money is sent to the manufacturer and when postage is
used. Mailers noted that they would need to keep significant funds on
deposit with a meter manufacturer to cover the costs of last-minute
mailings--especially since the amount of postage needed each day is so
unpredictable.
    The Postal Service is encouraging meter manufacturers to work with
the industry and the Postal Service to ensure that the fees and
procedures for resetting remote set meters meet the needs of all
customers, including large commercial mailers and third party mailers.
In the competitive postage meter marketplace, every customer has the
option to change meter manufacturers and/or to negotiate the fees paid.
Although the commenters assumed that manually reset meters are reset
for free, that assessment does not account for the user time, labor,
and travel costs incurred when a meter is taken to the post office.
Remote set meters can thus be more cost effective and convenient than
manually reset meters, and offer the possible availability of postage
24 hours a day, seven days a week, depending on the manufacturer plan
selected.
    12. Increased equipment costs. Nine commenters were concerned about
increased equipment costs, especially the need for new mailing
equipment if the new remote set meter is incompatible with the mailer's
existing equipment. They also mentioned the cost of installing a new
(possibly dedicated) telephone line to handle meter resets.
    Any changes to mailing equipment required because of
incompatibilities with remote set postage meters, as well as the need
for an additional telephone line, is manufacturer dependent and not
under the control of the Postal Service. However, according to
manufacturer feedback, mailing equipment changes should be minimal.
    13. Problems in handling last-minute mailings. Seven commenters,
including presort bureaus, third party mailers, and industry
associations, were concerned about losing the ability to obtain postage
on their meters to process last-minute mailing requests. Currently,
many mailing agents bring a check and a postage meter to the post
office to have the meter reset while they wait. They claim that losing
this option will inconvenience their customers since mailers would be
unable to bring in mail for processing at the last minute and have it
metered. They noted that additional time is required for remote setting
since there is a delay of several days between the time when additional
funds are transmitted or requested and when the funds are available for
use. Commenters noted that they would need to keep significant funds on
deposit to cover such last-minute postage needs since costs are so
unpredictable and variable, another added expense. Commenters noted
that they might have to change procedures to accommodate last-minute
mailings.
    Through the Postal Service's Postage NowTM program,
which was designed to facilitate quick electronic payment for postage,
mailers can pay close to the last minute for mailings. If the customer
authorizes an ACH debit, the meter can be reset immediately. Payment by
wire transfer allows meter resetting within two to three hours. Should
a customer prefer to pay for postage by check, there is no waiting
period required by the Postal Service for a check to clear before an
account is credited. In fact, the Postal Service processes all checks
within 24 hours of receipt, and the information is then transferred to
the manufacturer for an update of the user's account. The user's
designated Citibank lockbox is located geographically so as to minimize
time in transit for the checks mailed in for postage. The Citibank
lockbox is specific to each manufacturer and has files for automated
updates of users' accounts. The Postal Service agrees that some mailers
may have to adapt new procedures for last-minute mailings.

[[Page 77937]]

However, both the Postal Service and meter manufacturers are aware of
the challenges for some mailers in handling last-minute mail and are
working on solutions that will be implemented by June 30, 2001, the
first mandated retirement date for manually reset meters. In addition,
the Postal Service strongly encourages use of Postage NowTM.
    14. Cut-off time for end-of-day resets. One industry representative
noted that depending on time zone, meter manufacturer cut-off time for
daily deposits (such as 6:00 p.m. EST) limits the ability of West Coast
and Hawaiian commercial mailers to respond to emergency postage needs
after 12:00 noon.
    The Postal Service does not have a cut-off time for daily deposits.
Any cut-off time is established on a manufacturer-by-manufacturer
basis, rather than by the Postal Service. Meter manufacturers are aware
of the potential timing problems with meter resetting for some mailers
and are working on solutions that will be implemented by June 30, 2001,
the first mandated retirement date for manually reset meters.
    15. Alternative payment plans. Two industry associations suggested
alternative payment options for customers who need immediate access to
postage, including using credit cards and having the Postal Service act
as an intermediary between the customer and meter manufacturer for
immediate resetting of the meter. Commenters said that any solution
must involve nearly instantaneous deposit and crediting of postage.
    As noted before, certain electronic payments through Postage
NowTM can satisfy any last-minute request for postage. The
Postal Service does not allow use of credit cards as a payment option
for remote meter resettings. Since local post offices do not have any
direct interface with the Citibank lockbox, they cannot be used as an
intermediary for resetting postage meters.
    16. Procedures for getting customer postage on meters for mailing
agents. Four commenters, including commercial mailers and industry
associations, were concerned with the procedures for paying for
customer postage on remote set meters. Commercial mailers' customers
prepay for mailings, which can include the use of meters from more than
one manufacturer, as well as other forms of postage, such as permits.
The commenters were unclear about how they will be able to get this
postage onto their remote set meters under the new system without
either a waiting period for the customer, or else providing the postage
up front and taking the risk that the customer's check will clear. Even
if checks are made out to the U.S. Postal Service, they said different
checks will now be needed for each meter manufacturer and form of
postage.
    Mailing agents, such as presort bureaus, will need a way to
guarantee their customer funds. Checks should be made payable to the
U.S. Postal Service and sent to the designated Citibank lockbox, as
appropriate for each meter company. However, if a check is made out to
a third party, it will be processed by the Postal Service if the third
party endorses it over to the Postal Service on the back of the check.
As the commenters noted, there may be a need for different checks for
each meter manufacturer and form of postage.
    17. Multiple meters. Two industry associations were concerned about
how commercial mailers would handle multiple customer meters, since
they often have meters from more than one manufacturer, resulting in
multiple setting fees and contractual arrangements.
    The customers of the third party mailers are responsible for meter
fees. Commercial mailers should handle these costs in accordance with
industry practices.
    18. Permission to continue to reset meters at post office. Two
commenters asked for permission to continue to reset their meters at
the local post office, given the many problems associated with changing
to remote reset meters.
    The Postal Service must maintain a level playing field for all
mailers and cannot accept the continued risk of less secure meters. The
Postal Service will not allow the continued use of manually reset
meters beyond the dates given in the plan.
    19. Mailings for state and local governments. Two industry
associations asked how meter resetting will be handled for state and
local governments that use only checks for payment. They also noted
that it is often illegal for state and local governments to place funds
on deposit with private parties.
    Although the funds for resetting postage meters are sent to the
Postal Service's lockbox account at Citibank, a private sector bank,
checks are made payable to the U.S. Postal Service. In addition, the
Postal Service does not keep funds on deposit at Citibank. Each day,
all available Postal Service funds are concentrated in the Postal
Service Fund at the U.S. Treasury. Checks made payable to the U.S.
Postal Service are sent to a designated Citibank Postal Service lockbox
account, but the funds for resetting postage meters are not deposited
with a private business; rather, they are deposited with the U.S.
Postal Service.
    20. Speed of remote set meters. One industry association was
concerned that remote set meters are not as fast as manually reset
meters. The availability of high-speed meters is dependent on the
individual meter manufacturer's approved meter models and is not within
the control of the Postal Service.
    21. Timetable for meter retirement. One manufacturer questioned the
timetable for withdrawals of manually set meters, especially the
immediate withdrawal of meters upon lease expiration for leases
expiring between January 1, 2001, and June 30, 2001, and suggested an
alternative.
    The Postal Service reviewed the suggestion and revised the
timetable to simplify the withdrawal schedule and to ensure that all
users will be able to make timely and intelligent decisions on
replacement meters. Under the revised timetable, any meter covered
under a lease that expires after December 31, 2000, may be used until
the end of the calendar quarter following the quarter in which the
lease expires, at which time the meter must be retired and withdrawn
from service. This date is called the retirement date. For example, any
meter with a lease expiring during the first quarter of 2001 (January,
February, or March 2001) must be retired before the end of the second
quarter of 2001 and will have a retirement date of June 30, 2001. This
timetable will give all manually set postage meter users at least three
months to replace the meter with a remote set meter and will
consolidate retirement dates. The first date for mandatory manual meter
retirement will be June 30, 2001.
    22. Protection of funds for postage if meter or meter manufacturer
fails. One commenter was concerned about how postage funds would be
protected in the event of the failure of the postage meter, and another
was concerned about the possible bankruptcy of the meter manufacturer.
    Postage meters undergo extensive testing to ensure against meter
failure and memory loss. There are established procedures for postage
refunds in the case of meter failure. The Postal Service is working
with manufacturers to make the process easier and more immediate. The
new technology used in remote set meters enhances the process and gives
the customer additional protections. All funds for postage are sent
directly from customers to a Postal Service account and are not held by
the manufacturer. Each day, the Postal Service concentrates all of its
available funds in

[[Page 77938]]

the Postal Service Fund at the U.S. Treasury. Therefore, the user's
money is protected in the unlikely event of a manufacturer bankruptcy.

B. The Final Postal Service Plan for the Retirement of Manually
Reset Postage Meters

    1. Effective February 1, 2000, new placements of manually reset
electronic postage meters ceased. The decision applied to new customers
as well as existing meter users. All meter manufacturers were notified
of this policy and have complied.
    2. The Postal Service will allow a lease extension for a manually
set electronic meter up to December 31, 2001, for any lease that
expires during calendar year 2000. No other lease extensions are
permitted by the Postal Service. Manufacturers or users cannot avoid
meter retirement by the manipulation of leases.
    3. Some users currently have a lease for a manually reset
electronic meter that expires after December 31, 2000. Any meter
covered under such a lease may be used until the end of the calendar
quarter following the quarter in which the lease expires, at which time
the meter must be retired and withdrawn from service. This date is
called the ``retirement date.'' For example, any meter with a lease
expiring during the first quarter of 2001 (January, February, or March
2001) must be retired before the end of the second quarter of 2001 and
will have a retirement date of June 30, 2001. This timetable will give
all manually set postage meter users at least three months to replace
the meter with a remote set meter and will consolidate retirement
dates.
    4. All retired meters must be withdrawn from active service records
immediately upon the retirement date following lease expiration.
Manufacturers must process PS Form 3601-C, Postage Meter Activity
Report, to withdraw the meter effective the retirement date.
    5. Retired meters must be physically returned to the manufacturer
within 30 business days after the retirement date. The use of a retired
meter in the time period between the retirement date and when the meter
is returned to the manufacturer may result in the cancellation of the
user registration.
    6. Official notification to users explaining this plan will be sent
directly by the Manager, Postage Technology Management, Postal Service
Headquarters. No other correspondence will be considered to be
official.
    7. The manager of Postage Technology Management reserves the right
to review manufacturer correspondence to these meter users prior to
distribution.
    8. After each retirement date, the Postal Service may review meter
manufacturers' lease records in comparison with meter withdrawals, to
ensure that all meters that should have been retired were retired.
    9. Any manually reset electronic postage meter that is capable of
remote meter setting must be either converted to remote meter setting
or withdrawn from service. The function that allows manual resetting
must be disabled.
    10. Given the rapid pace of new technological developments for
secure postage meter technology, meter manufacturers should not offer,
and customers should not accept, leases for postage meter equipment of
more than five (5) years' duration.
    11. The following meter models may be affected by this plan. Any
postage meter that is taken to a post office for resetting is affected
by this plan and must be retired, even if it is not included on the
following list.

Ascom Hasler

    1441
    1441X
    1446
    1446X
    16410
    16413
    16413X
    16463
    16463X
    17563
    17563X
    4280
    64280
    741
    741X
    7410
    7410X
    7413
    7413X
    7560
    7560X
    7563
    7563X

Francotyp-Postalia

    7000
    7100
    7200

Neopost

    9212
    9212G
    9248
    9248G
    9252
    9252G
    9257
    9257G
    9258
    9258G
    9252U
    9257U
    9258U
    9258UG
    9267
    9268
    9268G
    9282M
    9287GM
    9287M
    9288GM
    9288M
    9512GM
    9512M
    9547GM
    9547M
    9548GM
    9548M

Pitney Bowes

    6501
    6502
    6513
    B901
    E101
    E102

Stanley F. Mires,
Chief Counsel, Legislative.
[FR Doc. 00-31359 Filed 12-12-00; 8:45 am]
BILLING CODE 7710-12-P