Administrative Practices and Procedures: Postal Service
Federal Register: November 26, 2008 (Volume 73, Number 229)
Rules and Regulations
Page 71935-71940
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
DOCID:fr26no08-9
POSTAL REGULATORY COMMISSION 39 CFR Part 3020
Docket Nos. MC2009-6 and CP2009-7; Order No. 138
Administrative Practice and Procedure, Postal Service
AGENCY: Postal Regulatory Commission.
ACTION: Final rule.
SUMMARY: The Commission is adding Express Mail & Priority Mail to the
Competitive Product List. This action is consistent with changes in a recent law governing postal operations and a recent Postal Service request. Republication of the lists of market dominant and competitive products is also consistent with new requirements in the law.
DATES: Effective November 26, 2008.
ADDRESSES: Submit comments electronically via the Commission's Filing
Online system at http://www.prc.gov.
FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 202-789-6820 and stephen.sharfman@prc.gov.
SUPPLEMENTARY INFORMATION: Regulatory History, 73 FR 66077 (November 6, 2008).
The Postal Service seeks to add a new product identified as Express
Mail & Priority Mail Contract 1 to the Competitive Product List. For the reasons discussed below, the Commission approves the Request.
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Background
On October 27, 2008, the Postal Service filed a formal request pursuant to 39 U.S.C. 3642 and 39 CFR 3020.30 et seq. to add Express
Mail & Priority Mail Contract 1 to the Competitive Product List.\1\ The
Postal Service asserts that the Express Mail & Priority Mail Contract 1 product is a competitive product ``not of general applicability'' within the meaning of 39 U.S.C. 3632(b)(3). This Request has been assigned Docket No. MC2009-6.
\1\ Request of the United States Postal Service to Add Express
Mail & Priority Mail Contract 1 to Competitive Product List and
Notice of Establishment of Rates and Class Not of General
Applicability, October 27, 2008 (Request).
The Postal Service contemporaneously filed a contract related to the proposed new product pursuant to 39 U.S.C. 3632(b)(3) and 39 CFR 3015.5. The contract has been assigned Docket No. CP2009-7.
In support of its Request, the Postal Service filed the following materials: (1) A redacted version of the Governors' Decision authorizing the new product which also includes an analysis of Express
Mail & Priority Mail Contract 1 and certification of the Governors' vote; \2\ (2) a redacted version of the contract which, among other things, provides that the contract will expire 3 years from the effective date, which is proposed to be 1 day after the Commission issues all regulatory approvals; \3\ (3) requested changes in the Mail
Classification Schedule product list; \4\ (4) a Statement of Supporting
Justification as required by 39 CFR 3020.32; \5\ and (5) certification of compliance with 39 U.S.C. 3633(a).\6\
\2\ Attachment A to the Request. The analysis that accompanies the Governors' Decision notes, among other things, that the contract is not risk free, but concludes that the risks are manageable.
\3\ Attachment B to the Request.
\4\ Attachment C to the Request.
\5\ Attachment D to the Request.
\6\ Attachment E to the Request.
In the Statement of Supporting Justification, Kim Parks, Manager,
Sales and Communications, Expedited Shipping, asserts that the service to be provided under the contract will cover its attributable costs, make a positive contribution to coverage of institutional costs, and will increase contribution toward the requisite 5.5 percent of the
Postal Service's total institutional costs. Request, Attachment D, at 1. W. Ashley Lyons, Manager, Corporate Financial Planning, Finance
Department, certifies that the contract complies with 39 U.S.C. 3633(a). See id. Attachment E.
The Postal Service filed much of the supporting materials, including the unredacted Governors' Decision and the unredacted Express
Mail & Priority Mail contract, under seal. In its Request, the Postal
Service maintains that the contract and related financial information, including the customer's name and the accompanying analyses that provide prices, terms, conditions, and financial projections, should remain confidential. Id. at 2-3.
In Order No. 125, the Commission gave notice of the two dockets, appointed a public representative, and provided the public with an opportunity to comment.\7\ The Postal Service filed supplemental materials on November 19, 2008.\8\
\7\ PRC Order No. 125, Notice and Order Concerning Express Mail
& Priority Mail Contract 1 Negotiated Service Agreement, October 31, 2008 (Order No. 125).
\8\ United States Postal Service Notice of Filing Under Seal of
Additional Information Regarding Financial Analysis, November 19, 2008.
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Comments
Comments were filed by the Public Representative.\9\ No filings were submitted by other interested parties. The Public Representative
Comments focus principally on the adequacy of cost coverage, appropriate classification of the product, and overall transparency.\10\ Public Representative Comments at 2-3.
\9\ Public Representative Comments in Response to Order No. 125,
November 10, 2008 (Public Representative Comments).
\10\ With respect to transparency, the Public Representative concludes that ``[t]he Postal Service should be commended for proceeding diligently toward accommodating transparency concerns.''
Id. at 10.
The Public Representative does not see a substantial risk for this particular contract, but does raise concerns regarding mailing profiles that he says warrant close attention when evaluating this and similar agreements.\11\ The Public Representative believes that the proposed
Express Mail & Priority Mail Contract 1 product is appropriately classified as competitive. After reviewing the cost savings measures underlying this contract, the Public Representative determines that the
Page 71936
contract is advantageous to the Postal Service and beneficial to the general public. Id. at 6. He concludes, inter alia, that the contract should generate sufficient revenue to cover the product's attributable costs and contribute to the recovery of total institutional costs assigned to competitive products. Id. at 3-4.
\11\ Id. at 3-4. The specific areas of concern identified by the
Public Representative are whether mailer-specific projected volumes are sufficiently reliable, whether cost impacts of mailer-specific shape and weight profiles are sufficiently acknowledged, whether seasonal effects are taken into account, and whether package density has been considered. Id. at 7-9.
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Commission Analysis
The Commission has reviewed the Request, the contract, the financial analysis provided under seal that accompanies it, and the comments filed by the Public Representative.
Statutory requirements. The Commission's statutory responsibilities in this instance entail assigning Express Mail & Priority Mail Contract 1 to either the Market Dominant Product List or to the Competitive
Product List. 39 U.S.C. 3642. As part of this responsibility, the
Commission also reviews the proposal for compliance with the Postal
Accountability and Enhancement Act (PAEA) requirements. This includes, for proposed competitive products, a review of the provisions applicable to rates for competitive products. 39 U.S.C. 3633.
Product list assignment. In determining whether to assign Express
Mail & Priority Mail Contract 1 as a product to the Market Dominant
Product List or the Competitive Product List, the Commission must consider whether
The Postal Service exercises sufficient market power that it can effectively set the price of such product substantially above costs, raise prices significantly, decrease quality, or decrease output, without risk of losing a significant level of business to other firms or offering similar products. 39 U.S.C. 3642(b)(1). If so, the product will be categorized as market dominant. The competitive category of products shall consist of all other products.
The Commission is further required to consider the availability and nature of enterprises in the private sector engaged in the delivery of the product, the views of those who use the product, and the likely impact on small business concerns. 39 U.S.C. 3642(b)(3).
The Postal Service asserts that its bargaining position is constrained by the existence of other shippers who can provide similar services, thus precluding it from taking unilateral action to increase prices without the risk of losing volume to private companies. Request,
Attachment D, at 2-3. The Postal Service also contends that it may not decrease quality or output without risking the loss of business to competitors that offer similar expedited delivery services. Id. at 2.
It further states that the contract partner supports the addition of the contract to the product list to effectuate the negotiated contractual terms. Id. at 3. Finally, the Postal Service states that the market for expedited delivery services is highly competitive and requires a substantial infrastructure to support a national network. It indicates that large carriers serve this market. Accordingly, the
Postal Service states that it is unaware of any small business concerns that could offer comparable service for this customer. Id.
No commenter opposes the proposed classification of Express Mail &
Priority Mail Contract 1 as competitive. Having considered the statutory requirements and the support offered by the Postal Service, the Commission finds that Express Mail & Priority Mail Contract 1 is appropriately classified as a competitive product and should be added to the Competitive Product List.
Cost considerations. The Postal Service's filing seeks to establish a new domestic Express Mail and Priority Mail product. The contract is predicated on unit costs for major mail functions, e.g., window service, mail processing, and transportation, based on the shipper's mail characteristics.
The Postal Service contends that adding the Express Mail & Priority
Mail Contract 1 product will result in processing Express Mail and
Priority Mail pieces that are less costly for the Postal Service than the average respective Express Mail and Priority Mail mailpiece. See id. Attachment A. It believes that its financial analysis shows that these cost savings can be accomplished while ensuring that the contract covers its attributable costs, does not result in subsidization of competitive products by market dominant products, and increases contribution from competitive products. Id., Attachment E, at 1.
The Postal Service's supplemental filing of November 19, 2008 modifies data it submitted in support of the Request.\12\ The
Commission's analysis of the proposed contract is based on the updated information and alternate cost estimates of certain mail functions.\13\
The Commission employed the latter to determine whether changed cost inputs would materially affect the contract's financial analysis. Based on that analysis, the Commission concludes that the changed inputs do not have a material affect on the underlying financial analysis of the contract. In evaluating costs under a prospective contract compared to the average, the Postal Service should take into account all departures from average cost that may be due to services provided under the contract.
\12\ The Postal Service is encouraged to exercise greater care in reviewing supporting materials for accuracy. The Commission's efforts to review negotiated service agreements expeditiously is hampered if the underlying data are incomplete, erroneous, or otherwise not adequately supported.
\13\ The Commission's analysis is set forth in Library Reference
PRC-CP2009-7-NP-LR-1 which, because it contains confidential information, is being filed under seal.
Based on the data submitted and the Commission's analysis shown in
Library Reference PRC-CP2009-7-NP-LR-1, the Commission finds that
Express Mail & Priority Mail Contract 1 should cover its attributable costs (39 U.S.C. 3633(a)(2)), should not lead to the subsidization of competitive products by market dominant products (39 U.S.C. 3633(a)(1)), and should have a positive effect on competitive products' contribution to institutional costs (39 U.S.C. 3633(a)(3)). Thus, an initial review of the proposed Express Mail & Priority Mail Contract 1 indicates that it comports with the provisions applicable to rates for competitive products.
The Postal Service shall promptly notify the Commission when the contract terminates, but no later than the actual termination date. The
Commission will then remove the contract from the Mail Classification
Schedule at the earliest possible opportunity.
In conclusion, the Commission approves Express Mail & Priority Mail
Contract 1 as a new product. The revision to the Competitive Product
List is shown below the signature of this order and is effective upon issuance of this order.
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Ordering Paragraphs
It is Ordered: 1. Express Mail & Priority Mail Contract 1 (MC2009-6 and CP2009-7) is added to the Competitive Product List as a new product under
Negotiated Service Agreements, Domestic. 2. The Postal Service shall notify the Commission of the termination date of the contract as discussed in this order. 3. The Secretary shall arrange for the publication of this Order in the Federal Register.
List of Subjects in 39 CFR Part 3020
Administrative practice and procedure; Postal Service.
By the Commission.
Steven W. Williams,
Secretary. 0
For the reasons stated in the preamble, under the authority at 39
U.S.C. 503, the Postal Regulatory Commission amends 39 CFR part 3020 as follows:
Page 71937
PART 3020--PRODUCT LISTS 0 1. The authority citation for part 3020 continues to read as follows:
Authority: 39 U.S.C. 503; 3622; 3631; 3642; 3682. 0 2. Revise Appendix A to subpart A of part 3020--Mail Classification to read as follows:
Appendix A to Subpart A of Part 3020--Mail Classification
Schedule
Part A--Market Dominant Products: 1000 Market Dominant Product List:
First-Class Mail:
Single-Piece Letters/Postcards
Bulk Letters/Postcards
Flats
Parcels
Outbound Single-Piece First-Class Mail International
Inbound Single-Piece First-Class Mail International
Standard Mail (Regular and Nonprofit)
High Density and Saturation Letters
High Density and Saturation Flats/Parcels
Carrier Route
Letters
Flats
Not Flat-Machinables (NFMs)/Parcels
Periodicals
Within County Periodicals
Outside County Periodicals
Package Services
Single-Piece Parcel Post
Inbound Surface Parcel Post (at UPU rates)
Bound Printed Matter Flats
Bound Printed Matter Parcels
Media Mail/Library Mail
Special Services
Ancillary Services
International Ancillary Services
Address List Services
Caller Service
Change-of-Address Credit Card Authentication
Confirm
International Reply Coupon Service
International Business Reply Mail Service
Money Orders
Post Office Box Service
Negotiated Service Agreements
HSBC North America Holdings Inc. Negotiated Service
Agreement
Bookspan Negotiated Service Agreement
Bank of America corporation Negotiated Service Agreement
The Bradford Group Negotiated Service Agreement
Market Dominant Product Descriptions
First-Class Mail
Reserved for Class Description
:
Single-Piece Letters/Postcards
Reserved for Product Description
Bulk Letters/Postcards
Reserved for Product Description
Flats
Reserved for Product Description
Parcels
Reserved for Product Description
Outbound Single-Piece First-Class Mail International
Reserved for Product Description
Inbound Single-Piece First-Class Mail International
Reserved for Product Description
Standard Mail (Regular and Nonprofit)
Reserved for Class Description
:
High Density and Saturation Letters
Reserved for Product Description
High Density and Saturation Flats/Parcels
Reserved for Product Description
Carrier Route
Reserved for Product Description
Letters
Reserved for Product Description
Flats
Page 71938
Reserved for Product Description
Not Flat-Machinables (NFMs)/Parcels
Reserved for Product Description
Periodicals
Reserved for Class Description
:
Within County Periodicals
Reserved for Product Description
Outside County Periodicals
Reserved for Product Description
Package Services
Reserved for Class Description
:
Single-Piece Parcel Post
Reserved for Product Description
Inbound Surface Parcel Post (at UPU rates)
Reserved for Product Description
Bound Printed Matter Flats
Reserved for Product Description
Bound Printed Matter Parcels
Reserved for Product Description
Media Mail/Library Mail
Reserved for Product Description
Special Services
Reserved for Class Description
:
Ancillary Services
Reserved for Product Description
Address Correction Service
Reserved for Product Description
Applications and Mailing Permits
Reserved for Product Description
Business Reply Mail
Reserved for Product Description
Bulk Parcel Return Service
Reserved for Product Description
Certified Mail
Reserved for Product Description
Certificate of Mailing
Reserved for Product Description
Collect on Delivery
Reserved for Product Description
Delivery Confirmation
Reserved for Product Description
Insurance
Reserved for Product Description
Merchandise Return Service
Reserved for Product Description
Parcel Airlift (PAL)
Reserved for Product Description
Registered Mail
Reserved for Product Description
Return Receipt
Reserved for Product Description
Return Receipt for Merchandise
Reserved for Product Description
Restricted Delivery
Reserved for Product Description
Shipper-Paid Forwarding
Reserved for Product Description
Signature Confirmation
Reserved for Product Description
Special Handling
Reserved for Product Description
Stamped Envelopes
Reserved for Product Description
Stamped Cards
Reserved for Product Description
Premium Stamped Stationery
Reserved for Product Description
Premium Stamped Cards
Reserved for Product Description
International Ancillary Services
Reserved for Product Description
International Certificate of Mailing
Page 71939
Reserved for Product Description
International Registered Mail
Reserved for Product Description
International Return Receipt
Reserved for Product Description
International Restricted Delivery
Reserved for Product Description
Address List Services
Reserved for Product Description
Caller Service
Reserved for Product Description
Change-of-Address Credit Card Authentication
Reserved for Product Description
Confirm
Reserved for Product Description
International Reply Coupon Service
Reserved for Product Description
International Business Reply Mail Service
Reserved for Product Description
Money Orders
Reserved for Product Description
Post Office Box Service
Reserved for Product Description
Negotiated Service Agreements
Reserved for Class Description
:
HSBC North America Holdings Inc. Negotiated Service
Agreement
Reserved for Product Description
Bookspan Negotiated Service Agreement
Reserved for Product Description
Bank of America Corporation Negotiated Service Agreement
The Bradford Group Negotiated Service Agreement
Part B--Competitive Products.
Competitive Product List:
Express Mail:
Express Mail
Outbound International Expedited Services
Inbound International Expedited Services
Inbound International Expedited Services 1 (CP2008-7)
Priority Mail:
Priority Mail
Outbound Priority Mail International
Inbound Air Parcel Post
Parcel Select
Parcel Return Service
International:
International Priority Airlift (IPA)
International Surface Airlift (ISAL)
International Direct Sacks-M-Bags
Global Customized Shipping Services
Inbound Surface Parcel Post (at non-UPU rates)
International Money Transfer Service
International Ancillary Services
Special Services:
Premium Forwarding Service
Negotiated Service Agreements:
Domestic
Express Mail Contract 1 (MC2008-5)
Express Mail Contract 2 (MC2009-3 and CP2009-4)
Express Mail & Priority Mail Contract 1 (MC2009-6 and
CP2009-7)
Parcel Return Service Contract 1 (MC2009-1 and CP2009-2)
Priority Mail Contract 1 (MC2008-8 and CP2008-26)
Priority Mail Contract 2 (MC2009-2 and CP2009-3)
Priority Mail Contract 3 (MC2009-4 and CP2009-5)
Priority Mail Contract 4 (MC2009-5 and CP2009-6)
Outbound International
Global Expedited Package Services (GEPS) Contracts GEPS 1 (CP2008-5, CP2008-11, CP2008-12, and CP2008-13,
CP2008-18, CP2008-19, CP2008-20, CP2008-21, CP2008-22,
CP2008-23, and CP2008-24)
Global Plus Contracts Global Plus 1 (CP2008-9 and CP2008- 10) Global Plus 2 (MC2008-7, CP2008-16 and CP2008-17)
Inbound Direct Entry Contracts with Foreign Postal
Administrations (MC2008-6, CP2008-14 and CP2008-15)
Competitive Product Descriptions
Express Mail
Reserved for Group Description
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Express Mail
Reserved for Product Description
Outbound International Expedited Services
Reserved for Product Description
Inbound International Expedited Services
Reserved for Product Description
Priority
Reserved for Product Description
Priority Mail
Reserved for Product Description
Outbound Priority Mail International
Reserved for Product Description
Inbound Air Parcel Post
Reserved for Product Description
Parcel Select
Reserved for Group Description
Parcel Return Service
Reserved for Group Description
International
Reserved for Group Description
International Priority Airlift (IPA)
Reserved for Product Description
International Surface Airlift (ISAL)
Reserved for Product Description
International Direct Sacks-M-Bags
Reserved for Product Description
Global Customized Shipping Services
Reserved for Product Description
International Money Transfer Service
Reserved for Product Description
Inbound Surface Parcel Post (at non-UPU rates)
Reserved for Product Description
International Ancillary Services
Reserved for Product Description
International Certificate of Mailing
Reserved for Product Description
International Registered Mail
Reserved for Product Description
International Return Receipt
Reserved for Product Description
International Restricted Delivery
Reserved for Product Description
International Insurance
Reserved for Product Description
Negotiated Service Agreements
Reserved for Group Description
Domestic
Reserved for Product Description
Outbound International
Reserved for Group Description
Part C--Glossary of Terms and Conditions [Reserved]
Part D--Country Price Lists for International Mail [Reserved]
FR Doc. E8-28100 Filed 11-25-08; 8:45 am
BILLING CODE 7710-FW-P
