[Federal Register Volume 65, Number 240 (Wednesday, December 13, 2000)]
[Notices]
[Pages 77934-77938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31359]


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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 Now<SUP>TM</SUP> 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 Now<SUP>TM</SUP> 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 Now<SUP>TM</SUP>.
    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 
Now<SUP>TM</SUP> 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