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###### Postal Service

# AGENCY:

Postal Service. 

# ACTION:

Notice of final plan. 

# 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                           ( print 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.                           ( print 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.                           ( print 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                           ( print 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