While we agree that some increases may be justified, we believe such increases must be realistic and based on the following criteria: (1) Any increases should be considered in the light of prices charged by competitive services which can be and which are being rendered in lieu of the delivery system provided by the Post Office.

(2) Any increases should be applied in a manner that will not materially curtail the volume of second-class mail delivered through the Post Office. Otherwise such an increase will result in a lower over-all return to the Post Office Department.

(3) Any increases in postal rates should not be so excessive so as to provide for a cancellation of a large number of subscribers and thus cause not only a loss to the Post Office and to the publisher, but also the forsaking of valued publications to the readers.

The members of these associations wish to reemphasize their position that newspapers are not seeking and have never sought a subsidy. Historically, second-class mail rates were established by Congress so that the citizens of this country could obtain news and other reading matter at rates which they could afford to pay. It has been of particular benefit to those people living in isolated points, particularly to those served by rural free delivery. Records in our conference files show that the majority of newspapers charge appreciably less for mail subscriptions than they do for newsstand and carrier delivery.

In determining the proper rate for second-class mail, insofar as newspapers are concerned, the honorable Jesse M. Donaldson, Postmaster General, has said that a large proportion of the cost of rural free delivery must be allocated to second-class mail. This we dispute. The Congress of this country established rural free delivery to permit the rapid delivery of all classes of mail to those in rural areas. These services would still be necessary if no second-class matter were carried to these rural residents. It is inconsistent to believe that the newspapers of this country should have their second-class postal charges determined on the basis of helping to subsidize a rural free delivery service established by Congress.

Although rural free delivery and star route service is widely utilized by newspapers, in many instances these services are inadequate. Today a smaller percentage of newspapers are delivered through the mails than at any previous time in the history of the postal service. It is apparent that either the cost of the second-class mail service or the inflexibility of the deliveries provided by the post office are responsible in a large degree for this decline.

An unwarranted and excessive increase in postal rates would tend to force more and more newspapers to find methods of delivery which would be better suited to their needs. Today many newspapers have been obliged to resort to deliveries in conjunction with the delivery of motion-picture film to the theaters, through the use of bread truck deliveries, bus systems, and even the utilizing of personal delivery service by individuals in their off hours of employment.

Newspaper publishers arrange to label their papers, bundle them up, put them in bags, label the bags on the outside and then deliver them to the post office so that they can be mailed out to the point of delivery. Newspapers must meet their delivery schedules and as a result have been performing some functions which should have been performed by the Post Office Department. In many places, newspapers go even to the point of delivering their newspapers to the post

offices of ultimate delivery. In one typical instance of a nonmetropolitan daily newspaper, sacks are delivered by the newspaper to 43 post offices in the county of publication each morning so as to assure proper delivery.

In summary, we reiterate that newspapers want no subsidy and we quote from one of the large, metropolitan papers in the Middle Atlantic area that

these newspapers want no subsidy from the Government-that they are willing to pay the full, accurately determined cost of delivering that part of their circulations which goes by mail.

This editorial, however, goes on to say:

The Government should cut down its own extravagant use of those services. And Congress should put into effect without more delay the Hoover Commission recommendations for divorcing the Post Office Department from politics and making it a more efficient, more economical business institution.

I want to express that as a feeling of many other newspapers. They are torn between two motives: One, that we should pay our way, and we feel the cost-ascertainment figures are not a proper determination of what the actual cost of handling the newspapers should be, and we are torn on the other hand by a real desire to have a more efficient Post Office Department. With that in mind we certainly feel that there should be real consideration by your committee and the House Committee, either jointly or separately, to handle this tremendous problem of the United States Government's biggest civilian enterprise today, the Post Office Department.

Thank you very much.

Senator CARLSON. Mr. Serrill, I notice from your statement that you do not believe that the second-class mail should carry a large percentage of the cost of the rural free delivery service.

Mr. SERRILL. The history of the rural free delivery, Senator, as we see it and I speak personally as a farm boy-it is a service to the people living on the rural free delivery routes, and as such that service must be supplied irrespective of whether they get newspapers or not. In other words, first-, second-, third-, and fourth-class material arrives daily in my rural post-office box today. If you were to eliminate all the second-class material entirely it would still not eliminate your need for rural free delivery, nor would it eliminate the need of these many, many small post offices, and they are legion in our States in the Middle Atlantic area.

I notice there have been some consolidations of RFD delivery. I notice there have been some efficiencies incorporated in the RFD even on my own route at home, but I still think the major cost of RFD is a charge that must be made either as a public service to the rural resident or it must be charged more properly against the other classes. If the cost becomes too high for second class the Post Office will lose that revenue. I know some instances in our own State where newspapers are sending their papers out, in one instance by bakery trucks, and they find it less expensive and more efficient than going through the rural mails.

Senator CARLSON. I am glad to get your comment on that. I grew up on my father's farm and I remember the day we started rural route 1 in Concordia, Kans., in 1890. In checking the cost ascertainment report of the Department, as I say very hurriedly, and it is very com

plicated, it did seem to me they charge too much to second-class mail, and I was glad to get your views on it.

Mr. LATIMER. Mr. Chairman, I would like to direct this question not solely to Mr. Serrill, but to the entire group of newspapers that are represented, including Mr. Cranston Williams. It is similar question to the one that we presented yesterday. Have you a proposed amendment to offer in lieu of the section in this bill affecting second-class mail, or could you prepare an amendment and submit it to the committee?

Mr. SERRILL. One behalf of our members I could not, sir. You are leading up to the question as to what you would consider a fair increase, is that your question?

Mr. LATIMER. What percentage of increase do your interests feel should be included in the bill?

Mr. SERRILL. I personally am not familiar enough with the absolute extent of the increase in your costs, that is, out-of-pocket costs for second-class mail. I read somewhere where you spoke in terms of thirty-some-odd percent increase over the last few years, and I cannot find out what that was. I heard some comment that some proposal has been made to you of a 10-10-10 percent increase. I would not know. I know I am making some proposals before our own State legislature for changes in many of the acts which affect advertising requirements in most of those proposals and they have been accepted by the legislature and that is to the extent that the increase should be less than 15 percent. One hundred percent is way out of line.

Mr. LATIMER. Yesterday the group that was testifying for the smaller magazines suggested an increase in the aggregate of 25 percent spread over 3 years, and at the earlier sessions Chairman Johnston inquired of witneses whether, in their opinion, an increase in the aggregate of 50 percent spread over 3 years could be borne by the industry without undue hardship.

Mr. SERRILL. Mr. Chairman, may I answer that with another question?

Senator UNDERWOOD. Yes.

Mr. SERRILL. Are you seeking an increase based on what the industry can bear or are you seeking an increase upon the premise that there are certain increased costs during this inflationary period that should be collected from the industry?

Mr. LATIMER. Mr. Chairman, I will attempt to answer that. Of course, I am only an employee of the committee, attempting to assist the committee. I think the best answer to that is this: If we accept the cost ascertainment of the Post Office Department in approximate figures, it is indicated that second class today is costing slightly over $240 million to carry, and that the revenue derived from the users of second class is slightly over $40 million annually, leaving a difference there of approximately $200 million annually. The breakdown of that and this is not exact-is approximately half in the newspaper field and half in the magazine field. I am inclined to think that it is slightly heavier in the magazine field, but not a great deal. The cost is again fairly the same, although I am inclined to think, from my years of experience in the postal service, that probably the cost is slightly greater in the newspaper field than in the magazine. field. The reason for that-I think the committee might want this

at this time is that carrying, the haul, if I might use that expression, of newspapers is a lesser distance on the average.

Mr. SERRILL. That is right.

Mr. LATIMER. The New York Times would be probably the exception to that. The newspaper is hauled a lesser distance than the magazine. Since both classes of publications are chargeable on a different rate for the reading content and advertising content, it is easily discerned that on the long hauls is where the Post Office gets its greatest revenue. This simply was used as an illustration, because we had testimony on that by a popular magazine which carries a high percentage of advertising, and others do likewise.

In the light of that, I think it is a fair assumption that at least half of the deficit in second class, if we accept the cost ascertainment, is chargeable to the newspapers.

Now may I add one thing, Mr. Chairman and I have been in the newspaper field and not in the magazine field. The newspapers will continue, under this bill, to enjoy a slight preferential advantage in the continuation of the free-in-county distribution.

Mr. SERRILL. Mr. Chairman, I would not dispute the point brought up, but it has been the newspapers' contention that this cost-ascertainment report charges an undue amount against newspapers for the delivery service which is being rendered and which, on RFD and star routes, was set up by act of Congress many years ago as a service to the rural population. In that respect, we feel that the cost ascertainment does not give a true picture.

Now it is the right of Congress to change that system in any way it feels it should, but unless you change your premise upon which this system was set up, we do not feel that we should be charged, as newspaper people, with the cost of this tremendously expensive rural delivery system. It is tremendously expensive. You cannot put motor vehicles on the road without a large cost today.

Senator UNDERWOOD. Let me ask you a question there. My opinion. has been all the time if the Post Office is run as a business then the Government has got no business running it.

Mr. SERRILL. That is right.

Senator UNDERWOOD. But if the Post Office is run as a business would not it be justified in cutting out most of the rural routes? That is the first thing it would do.

Mr. SERRILL. It would either do that or it would cut out some of the many thousands of one-man or one-woman post offices in this country, and probably do both simultaneously.

Senator UNDERWOOD. At a great disservice to the people of the country.

Mr. SERRILL. That is right, sir, although I do believe that there are some mergers and some consolidations that would be efficient today and still provide service to the public by the growth of transportation media.

Senator UNDERWOOD. From your familiarity with newspapers don't you know that there are one or two distant subscribers at the end of a route that are costing as much as the other 200 subscribers on the route, and that the newspaper would just simply cut off the two at the end of the route and make them come down to the corner grocery store to get the paper?

Mr. SERRILL. That is not usually the practice. Not speaking as a circulation manager, but I think most circulation managers are just as zealous to get the last two subscribers as the first subscribers. In some instances, even on our own motor routes, I know there are many subscribers at distant points that get the paper, and it is a big cost to the newspaper to deliver each day, but it is done in the matter of public service. Of course, the Post Office Department is primarily engaged in public service following the tradition of rural delivery. Senator UNDERWOOD. The reason I bring that out is we are up against a double proposition here. The first one is how much of this is business service and how much of it is public service for which the public should pay.

Mr. SERRILL. Yes.

Senator UNDERWOOD. Do you have any questions?

Senator CARLSON. No.

Senator UNDERWOOD. Thank you very much.

STATEMENT OF CRANSTON WILLIAMS, GENERAL MANAGER, AMERICAN NEWSPAPER PUBLISHERS ASSOCIATION

Mr. WILLIAMS. My name is Cranston Williams and I am general manager of the American Newspaper Publishers Association.

It is the feeling of the daily newspapers with respect to your question as to going in and breaking down the various sections of secondclass publications-and I did not hear the other testimony-that you could make a flat increase across the board of 10 percent; that you set up the joint committee as proposed by Senator Carlson and then get at the facts, but not start at this time and separate second class and say that the newspapers should get a higher rate and the others who use second class should not be increased as much, but that they all get that 10 percent as it now stands, and my amendment would be simply along that line.

The second point I want to make, because Mr. Latimer mentioned it, I often ask the question if second class is causing a $200 million deficit and it was wiped out completely, the best figures we could find are that the Government would save approximately $50 million, $60 million to $75 million, and my question always is, How can something that you would not save but $75 million on if you did not have it cause a loss of $200 million?

Senator UNDERWOOD. Thank you, Mr. Williams.

Mr. Wilmeth and Mr. Babcock.

STATEMENT OF CHARLES E. BABCOCK, NATIONAL LEGISLATIVE COMMITTEE; ACCOMPANIED BY JAMES L. WILMETH, NATIONAL SECRETARY, NATIONAL COUNCIL JUNIOR ORDER UNITED AMERICAN MECHANICS, PHILADELPHIA, PA.

Mr. BABCOCK. My name is Charles E. Babcock and I am chairman of the national legislative committee of the National Council Junior Order United American Mechanics, and also their legislative agent in Washington. The home address is Vienna, Va. I am accompanied this morning, Mr. Chairman, by Mr. James L. Wilmeth, the national secretary of the Junior Order of the United American Mechanics of the United States, who has come from Philadelphia to attend this