Periodic Reporting Rules, 53324-53343 [E8-21060]

Agencies

• POSTAL REGULATORY COMMISSION

[Federal Register Volume 73, Number 179 (Monday, September 15, 2008)]
[Proposed Rules]
[Pages 53324-53343]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-21060]



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Part II





Postal Regulatory Commission





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39 CFR Parts 3001 and 3050



Periodic Reporting Rules; Proposed Rule

Federal Register / Vol. 73, No. 179 / Monday, September 15, 2008 / 
Proposed Rules

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POSTAL REGULATORY COMMISSION

39 CFR Parts 3001 and 3050

[Docket No. RM2008-4; Order No. 104]


Periodic Reporting Rules

AGENCY: Postal Regulatory Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission is proposing a set of rules to address a 
continuing and expanded need, under a new law, for periodic reports 
from the Postal Service. The proposal describes the scope of reporting 
and the level of detail the Commission believes is needed to provide 
accountability and transparency with respect to Postal Service 
operations. Comments will assist the Commission in developing a final 
set of reporting rules.

DATES: Initial comments due October 16, 2008. Reply comments due 
November 14, 2008.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at https://www.prc.gov.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-789-6820 and stephen.sharfman@prc.gov.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The Postal Accountability and Enhancement Act (PAEA), Public Law 
109-435, 120 Stat. 3198 (2006), calls for a fundamental shift of 
responsibilities between the Postal Service and the Postal Regulatory 
Commission (Commission) from those established in the Postal 
Reorganization Act (PRA). Under the PAEA, the Postal Service has 
acquired considerable autonomy and flexibility in determining what 
specific rates and discounts will be charged for mail products. 
Concurrently, the Commission's information gathering and reporting 
responsibilities have been greatly enhanced. This is consistent with a 
dominant theme in the PAEA that increasing the transparency of the 
Postal Service's pricing, classification, and service policies will 
reduce the need to actively regulate the Postal Service in these areas.

II. Statutory Duties That Shape the Proposed Periodic Reporting 
Requirements

    Perhaps the most important tools provided by the PAEA for achieving 
the transparency on which the new statutory scheme relies are the 
annual report that 39 U.S.C. 3652 requires the Postal Service to 
provide to the Commission (which this Notice will refer to as the 
``Annual Report''); the annual evaluation of the regulatory system that 
39 U.S.C. 3651 requires the Commission to provide to Congress and the 
President; and the requirement of 39 U.S.C. 3653 that the Commission 
determine whether the Postal Service has met the rate setting, service, 
and other goals of the PAEA during the preceding fiscal year (which 
this Notice will refer to as the ``Annual Compliance Determination''). 
In addition, the PAEA requires the Commission to prepare longer-term 
reports and assessments such as those required by sections 701 and 702 
of the PAEA, to elicit various managerial reports such as those 
required by 39 U.S.C. 2803 and 2804, and to oversee specialized 
financial reporting such as that required by 39 U.S.C. 3654. The 
periodic reporting rules proposed in this Notice are designed to 
implement all of the PAEA's provisions that make the Postal Service's 
operations and finances transparent and accountable. Accordingly, the 
general terms ``periodic reports'' and ``annual reports'' are used in 
this Notice unless the information elicited serves only the purposes of 
the Annual Compliance Determination that the Commission must make under 
39 U.S.C. 3653.

A. Statutory Standards Guiding the Annual Review Cycle

    The annual compliance report that 39 U.S.C. 3652 requires the 
Postal Service to provide to the Commission is intended to contain the 
source material for the Commission's annual compliance determination of 
the degree to which postal rates and service comply with he 
requirements, objectives, and factors of the PAEA. The Postal Service's 
compliance report is to include an analysis of the costs, revenues, 
rates, and quality of service ``in sufficient detail to demonstrate 
that all products during such year complied with all applicable 
requirements of this title[.]'' 39 U.S.C. 3652(a)(1). The Postal 
Service's compliance report to the Commission is required to 
demonstrate the extent to which both market dominant and competitive 
products recover their attributable costs and contribute to 
institutional costs. See 39 U.S.C. 3622(b)(9), 3622(c)(2), 3633(a)(2), 
and 3633(a)(3). The Postal Service's annual compliance report must also 
allow the service quality of market dominant products to be identified 
and evaluated. See 39 U.S.C. 3622(b)(3), 3622(c)(9), and 3691.
    Similar information is needed with regard to the Postal Service's 
competitive products. 39 U.S.C. 3622(b)(9) and 3633(a)(3) require the 
Commission to determine an appropriate contribution for the competitive 
classes as a whole to the Postal Service's institutional costs. This 
determination is applied to future years. Such determinations must take 
into account ``all relevant circumstances, including the prevailing 
competitive conditions in the market.'' See 39 U.S.C. 3633(b).
    There are additional reasons that the Commission needs to be able 
to evaluate the present and the future as well as the past. 39 U.S.C. 
3651 requires the Commission each year to evaluate the effectiveness of 
the regulatory system that it has constructed to implement the PAEA. 
This report is to include an evaluation of ``the extent to which 
regulations are achieving the objectives under sections 3622 and 3633, 
respectively.'' Thus, the Commission is required to assess the degree 
to which the Postal Service's management of both market dominant and 
competitive products is consistent with the objectives of the new 
statutory scheme. The Commission notes that 39 U.S.C. 3651 asks the 
Commission to evaluate the extent to which its regulations ``are 
achieving'' their statutory objectives, rather than the extent to which 
they ``have achieved'' them. This implies that the Commission is 
expected to base its evaluation on current as well as historical 
conditions. The Commission must also estimate the costs that the Postal 
Service is incurring to comply with its public service mandate and the 
statutory preferences that are preserved in the PAEA. See 39 U.S.C. 
3651(b)(1)(A) and (B).
    39 U.S.C. 3654 requires the Postal Service to submit quarterly and 
annual financial reports to the Commission that meet the requirements 
that corporations issuing publicly registered securities must meet in 
their financial reporting to the Securities Exchange Commission, 
including the requirements of the Sarbanes-Oxley Act of 2002. The 
Commission proposes to incorporate the reporting requirements of 39 
U.S.C. 3654 into the periodic reporting rules under consideration in 
this docket. See proposed Sec. Sec.  39 CFR 3050.40 through 3050.42.

B. Longer-Term Evaluation Responsibilities

    In addition to annual reporting obligations, the Commission is 
required to undertake evaluations of the functioning of the regulatory 
system it has implemented under the PAEA on longer-than-annual cycles. 
39 U.S.C. 3633(b), already mentioned, requires the Commission every 5 
years to re-evaluate

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the need for the requirement that the Postal Service's competitive 
products make an institutional cost contribution determined by the 
Commission. Section 701 of the PAEA requires the Commission, at least 
every 5 years, to re-evaluate the appropriateness of its regulatory 
framework, and recommend any needed modifications to the President and 
Congress. Section 702 requires the Commission, within 2 years of 
enactment of the PAEA, to report to the President and Congress on the 
scope and standards of universal service and the postal monopoly likely 
to be required in the future. To adequately prepare for these longer-
cycle reviews, the Commission will need forward looking as well as 
historical information to stay abreast of developments in the Postal 
Service's finances and operations. The Commission needs a sound 
knowledge base from which it can evaluate the Postal Service's 
commercial and financial prospects.
    Under the PAEA, the Commission has a continuing obligation to 
advise the Department of State on international mail matters. The 
Department of State has the lead responsibility for negotiating 
treaties that affect rates charged for market dominant international 
mail. 39 U.S.C. 407(c) assigns to the Commission an ongoing 
responsibility to provide the Secretary of State with its views on 
whether rates and classifications in an international treaty are 
consistent with the standards and criteria established by the 
Commission under the PAEA. This new statutory role affirms the 
Commission's need for current, detailed information concerning 
international mail. Accordingly, under the proposed rules, the Postal 
Service would provide the cost, volume, revenue, and weight of outbound 
and inbound international market dominant products, disaggregated by 
rate regime and country. It would also provide as yet unspecified 
service performance data in proposed 39 CFR 3050.52.

III. Comparing the Periodic Reporting Required Under the PAEA With That 
Required Under the PRA

A. The Impact of Changes in Commission Responsibilities

    Under the PRA, the most burdensome filing requirements were those 
associated with specific rate requests. These requirements, contained 
in 39 CFR 3001 Subparts B and C are no longer applicable and have been 
replaced by far more spare requirements. See 39 CFR 3010.14 and 3015.5, 
adopted in Order No. 43, October 29, 2007 [See 72 FR 63662, November 9, 
20007].
    In contrast, the evaluation and reporting duties given the 
Commission by the PAEA require periodic reports from the Postal Service 
that are broader in scope than the Commission's current periodic 
reporting rules, which were designed to support the Commission's 
functions under the PRA. Currently, the form and content of information 
that the Postal Service must report periodically to the Commission is 
governed by 39 CFR 3001.102. Rule 102 requires that the Postal Service 
provide the Commission with financial accounting data by year and by 
accounting period, data on volumes and revenues by year and by quarter, 
and annual cost estimates by function (segment and component) and by 
subclass of mail. Rule 102 requires the Postal Service to provide the 
Commission with its annual Cost and Revenue Analysis (CRA) Report and 
its Cost Segments and Components (CSC) Report. Rule 103 requires the 
equivalent reports with respect to international mail.
    Rule 102 reports were needed to enable the former Postal Rate 
Commission to perform its duties defined by the PRA. Chief among them 
was its duty to process the Postal Service's omnibus rate requests in 
an expedited manner while still satisfying the formal ``on the record'' 
hearing requirements of sections 556 and 557 of the Administrative 
Procedure Act (APA). This required the former Postal Rate Commission to 
have an ongoing familiarity with the financial condition of the Postal 
Service, its cost, volume, and revenue trends, and the evolving methods 
by which the Postal Service gathered and analyzed cost data and 
attributed costs to subclasses.
    Under the PAEA, the need for the Commission to stay abreast of such 
developments is even greater. While it no longer has to use cumbersome 
trial-type procedures to evaluate proposed rate changes, the scope of 
its various review functions is comprehensive, and many must be 
completed in a very short time frame.

B. Scope of Periodic Reports Under Current and Former Law

1. Worksharing
    An important difference between the periodic reporting required of 
the Postal Service under the PRA and that which will be required under 
the PAEA relates to the costs and revenues associated with worksharing. 
For example, under the PRA, rule 102 did not require the Postal Service 
to annually report the costs avoided by worksharing for the relevant 
rate categories. The Commission required such information only in 
conjunction with omnibus requests to change rates and discounts. The 
PAEA, however, expressly requires the Commission to ``ensure that 
[workshare] discounts do not exceed the cost that the Postal Service 
avoids as a result of workshare activity'' unless justified on the 
basis of other identified benefits of worksharing activity. See 39 
U.S.C. 3622(e). The information necessary to make this determination 
must be included in the Postal Service's annual compliance report.
    Proposed rule 3050.21(e)(4) directs the Postal Service to provide 
and explain the statutory justification for worksharing discounts that 
exceed 100 percent of the associated cost avoidance. The intent of this 
rule is to provide the Commission and interested parties with the 
information necessary to determine, for each such discount, exactly 
which statutory exemption the Postal Service is invoking and the basis 
for the claim that the exemption applies to it.
    Rule 3010.14(b)(6) serves a similar function for market dominant 
rate adjustment filings. In the first filing of this type (Docket No. 
R2008-1), the Commission found it necessary to issue a Commission 
Information Request seeking clarification to ``allow assessment of 
conformity of the discounted rates with the criteria in the Postal 
Accountability and Enhancement Act[.]'' Commission Information Request 
No. 1, February 26, 2008 at 1 (CIR No. 1). In response, the Postal 
Service identified the exemption it was claiming for each discount and 
elaborated upon its reasons for concluding that each discount satisfied 
the requirements of the exemption. Response of the United States Postal 
Service to Commission Information Request No. 1, March 4, 2008 
(Response to CIR No. 1). The experience in that case should help 
provide guidance as to the extent of explanation and support that is 
anticipated to be provided to satisfy rules 3010.14(b)(6) and 
3050.21(e)(4).
2. Negotiated Service Agreements
    Under the PRA, the Commission did not have standing rules requiring 
the periodic reporting of information specific to negotiated service 
agreements (NSAs). The PAEA requires an annual Commission determination 
as to whether NSAs ``improve the net financial position of the Postal 
Service.'' See 39 U.S.C. 3622(c)(10). 39 U.S.C. 3633(a)(2) requires 
that each competitive product cover its attributable costs. Since the 
Commission views NSAs as distinct products, a

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contribution analysis is required of competitive NSAs as well. 
Accordingly, the Postal Service's Annual Report should provide an 
estimate of the impact that each NSA had on total contribution for the 
fiscal year covered by its annual report. Under the proposed rules, 
therefore, the Annual Report should include sufficient information 
about the costs, volumes, and revenues associated with such agreements 
to enable the Commission to verify the Postal Service's estimate.
    Proposed rule 3050.21(f)(4) directs the Postal Service to provide 
an analysis of each market dominant NSA that shows the effect of the 
agreement on the net financial position of the Postal Service. As with 
other quantitative estimates, rule 3050.21(f)(4) requires that the 
estimates be developed using accepted analytical principles.
    For most areas of analysis, the current methodological baseline is 
the set of analytical principles applied by the Commission in Docket 
No. R2006-1 and affirmed in the Commission's FY 2007 Annual Compliance 
Determination (2007 ACD). The financial effects of NSAs, however, were 
not litigated in Docket No. R2006-1. The Commission did not formulate 
generally applicable principles for determining their net financial 
effect until its 2007 ACD, which established the analytical principle 
that the financial impact of price incentives to increase mail volume 
or to shift mail volume between products should be based on the Postal 
Service's best estimate of the price elasticity of the discounted 
product. 2007 ACD at 127.
    The application of this principle will vary based on the specific 
terms and characteristics of each NSA, but its essence is the use of 
price elasticities to isolate the effect of rate incentives from other 
factors that affect volume. This analytical principle was first 
articulated by the Commission in its Opinion and Further Recommended 
Decision in Docket No. MC2004-3 at paras. 5011-38. Its purpose is to 
apply the terms of an agreement to the specific characteristics of the 
NSA partner's eligible mail (e.g., unit revenues, unit costs, and price 
elasticities). The Commission recognizes that econometrically modeling 
the price elasticity of volumes sent by an individual mailer might not 
always be feasible. Accordingly, with the appropriate justification and 
explanation, reasonable proxies may be used for this and other mailer-
specific traits that are not otherwise obtainable.\1\
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    \1\ For example, the lack of available mailer-specific 
elasticities led the Commission to use subclass-average elasticities 
for Standard Mail to generate its estimates in the 2007 ACD. See 
2007 ACD at 127-30.
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    The characteristics of the NSAs filed with the Commission to date 
make them impractical to analyze for their impact on contribution for 
the fiscal year. This is because each NSA so far has included discount 
incentives that are awarded based on their performance during each 12-
month period that the agreement is in effect. Therefore, unless an 
NSA's implementation date coincides with the beginning of the fiscal 
year, it is impractical to evaluate the effect of the discounts for 
that fiscal year.
    The Commission's proposed rules recognize this difficulty. 
Accordingly, they would require the Postal Service to select the 
anniversary of an NSA's operation that falls within the fiscal year 
covered by the Postal Service's annual compliance report, look back 12 
months from that point, and estimate the NSA's contribution to the 
Postal Service's total institutional costs. See proposed rule 
3050.21(f)(4).
3. The General Role of Elasticity of Demand
    Under the PRA, rule 102 did not require the Postal Service to 
provide information about the price elasticity of demand for postal 
products. The PAEA, however, requires that ``information'' on mail 
volumes be provided for market dominant products. See 39 U.S.C. 
3652(2)(A). Further, many of the objectives and factors that the PAEA 
directs the Commission to consider in establishing a regulatory system 
for market dominant products involve value of service considerations, 
either explicitly (see 39 U.S.C. 3622(c)(1) and 39 U.S.C. 3622(c)(8)), 
or implicitly (see 39 U.S.C. 3622(c)(3) and 39 U.S.C. 3622(c)(4)). The 
most objective evidence of a product's value of service is its price 
elasticity of demand. Accordingly, demand elasticities provide useful 
guides for evaluating how well these factors have been recognized in 
rates. Knowledge of price elasticities of demand is also essential for 
evaluating the impact of rates on allocative efficiency. Allocative 
efficiency is a goal embodied in 39 U.S.C. 3622(b)(1) and 39 U.S.C. 
3622(b)(5).
    The PAEA requires the Commission to ensure that the institutional 
costs of the Postal Service are allocated appropriately between market 
dominant and competitive products. See 39 U.S.C. 3622(b)(9) and 39 
U.S.C. 3633(a)(3). Doing so in a way that takes allocative efficiency 
into account requires the Commission to have knowledge of the relative 
price elasticities of both market dominant and competitive products.\2\ 
Elasticities of demand are also needed to evaluate volume forecasts for 
new products or new rate structures in connection with section 
3622(d)(1)(C) proceedings, including a determination of whether NSAs 
``improve the net financial position of the Postal Service.'' See 39 
U.S.C. 3622(c)(10).
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    \2\ The Postal Service and Parcel Shippers Association (PSA) 
have urged the Commission to consider the market positions of the 
Postal Service's various competitive products when it determines 
what a reasonable institutional cost contribution for those products 
would be under section 3633(a). See Docket No. RM2007-1, Reply 
Comments of the United States Postal Service, May 7, 2007, at 27-28. 
PSA agrees that important evidence of the market position of 
competitive products is provided by their price elasticities of 
demand, citing the Postal Service's estimates of the own-price 
elasticity and the cross-price elasticity of Priority Mail and 
Parcel Post. Docket No. RM2007-1, Comments of Parcel Shippers 
Association in Response to Commission Order Proposing Regulations, 
September 24, 2007, at 3-4.
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    Accordingly, proposed rule 3050.26 would require the Postal Service 
to provide estimates of the elasticity of demand for all postal 
products for which adequate data can be obtained. The underlying 
econometric model of demand elasticity and input dataset are to be 
provided as well. The Postal Service would be required to update the 
model annually.
4. Appropriate Share of Attributable and Institutional Costs
    The PAEA requires that the Commission determine whether a 
competitive product covers its attributable costs. This requirement 
extends to NSAs that involve competitive products, both domestic and 
international. See 39 U.S.C. 3633(a)(2). In addition, 39 U.S.C. 
3622(b)(9) and 39 U.S.C. 3633(a)(3) require that the Commission 
determine whether competitive products collectively bear a minimum 
share of institutional costs that the Commission determines to be 
appropriate. To make an informed determination for competitive products 
as a group, it would be necessary to analyze factors that affect the 
institutional cost contributions of individual products.\3\ This 
requires knowledge of the attributable costs, volumes, and revenues 
associated with competitive

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products, including the portion associated with NSAs.
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    \3\ PSA contended in a previous docket that if the Commission is 
to determine an appropriate contribution for competitive products as 
a whole, it must understand the role played by individual 
competitive products. It points out that over 80 percent of the 
total contribution of competitive products comes from just two 
products--Priority Mail and Express Mail. Docket No. RM2007-1, 
Comments of the Parcel Shippers Association in Response to the 
Commission's Order Proposing Regulations, September 24, 2007, at 3-
4.
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5. Service Performance
    Section 3691 of the PAEA requires the Postal Service, in 
consultation with the Commission, to establish and maintain a set of 
service standards for market dominant products. The section provides 
explicit statutory objectives for the service standards adopted, and 
requires a service performance measurement system in which the 
Commission plays a role. It also authorizes complaints under 39 U.S.C. 
3662 and 39 U.S.C. 3663 for violations of the regulations that 
implement these service standards and performance measurement systems.
    The Commission is deferring consideration of data reporting on 
service quality. Proposed rules 3050.50 through 3050.53 are ultimately 
intended to describe the service performance information that would be 
required to implement the relevant provisions of the PAEA. When 
evaluation of the service performance measurement system currently 
under review in Docket No. PI2008-1 is complete, the Commission intends 
to solicit public comment on what data concerning levels of achievement 
of relevant service standards should be incorporated in rules 3050.50 
through 3050.53.
6. Incremental Costs
    39 U.S.C. 3633(a)(1) prohibits the subsidy of competitive products 
by market dominant products. In Docket No. RM2007-1, the Commission 
addressed this issue and determined that incremental costs would be 
used to test for cross-subsidies of competitive products by market 
dominant products. See 39 CFR 3015.7(a). Accordingly, proposed rule 
3050.23 would require the Postal Service to provide estimates of 
incremental costs. The underlying incremental cost model, the input 
dataset, and processing programs would be required as well. At a 
minimum, the Postal Service must provide a model of the incremental 
costs of competitive products as a group. The Postal Service should 
have as a goal the development of a model of incremental costs for 
individual market dominant products to help identify cross-subsidy of 
one market dominant product by another.
7. Universal Service Obligation
    Under 39 U.S.C. 3651, the Commission must annually report to the 
President and Congress assessing the performance of the regulatory 
system that it has implemented under the PAEA. The Commission is 
required to include in that report an estimate of the costs incurred by 
the Postal Service in meeting its legally mandated public service 
obligations. The Commission is specifically required to estimate the 
cost of the geographic dimension of universal service and the cost of 
preferred rates. See 39 U.S.C. 3651(b)(1)(A) and (B). Under 39 U.S.C. 
3651(c), the Postal Service is obligated to provide such information as 
the Commission, in its judgment, considers necessary to prepare its 
report.
    The Commission is currently developing analyses to inform its 
estimate of the costs incurred by the Postal Service in meeting its 
legally mandated public service obligation. 39 U.S.C. 3651(b)(1)(A) 
identifies a potential geographic component to that obligations. It 
directs the Commission to estimate the costs that the Postal Service 
incurs serving the ``rural areas, communities, and small towns where 
post offices are not self-sustaining'' referenced in 39 U.S.C. 101(b). 
Accordingly, the Commission needs to be able to analyze whether the 
geographic distribution of the Postal Service's delivery offices, 
delivery routes, and retail counter facilities incurs costs that would 
not be incurred by a private provider without public service 
obligations.
    To provide the Commission with data from which the geographic 
variance in delivery costs and customer access costs could be 
estimated, the proposed rules would require that the Postal Service's 
Annual Report provide data sufficient to calculate the costs incurred 
and the revenue derived from each route sampled by the City Carrier 
Cost System (CCCS) and the Rural Carrier Cost System (RCCS). The 
identity of the carrier route, type, its associated processing 
facility, and ZIP Code should be provided. At present, such information 
would include, for each sampled route, the carrier costs and the volume 
of mail delivered, by product (or ``bucket'' of products). The ultimate 
objective would be to identify the actual direct and indirect costs 
associated with each route in the sample.\4\ Rule 3050.30 also proposes 
that the Postal Service provide revenues generated and the costs 
incurred by each retail counter facility in a representative sample of 
such facilities. The applicable ZIP Code should be included. These 
information requirements will be re-evaluated in light of the results 
of the currently ongoing universal service obligation studies required 
by section 702 of the PAEA.
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    \4\ Developing these data might be most efficiently achieved by 
linking the relevant databases, or by modifying the CCCS data 
collection protocol.
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IV. Confidential Treatment of Periodic Reports

    39 CFR Part 3007, proposed in Docket No. RM2008-1, would implement 
the provisions of the PAEA that generally authorize the Postal Service 
to designate information in the periodic reports that it provides to 
the Commission as confidential within the meaning of 5 U.S.C. 552(b) or 
as commercially sensitive within the meaning of 39 U.S.C. 410(c). See 
39 U.S.C. 3654(f). Proposed part 3007 [in Docket No. RM2008-1] would 
resolve the issue of what information so designated, if any, would be 
made public.
    Consistent with section 504(g) of the PAEA, under that rule, the 
issue of public disclosure would be addressed by a process analogous to 
the process prescribed in rule 26(c) of the Federal Rules of Civil 
Procedure. Rather than treat any category of information as 
commercially sensitive per se, the Commission would balance the 
potential harm to the Postal Service's commercial interests against the 
need of stakeholders and the public to know how the Postal Service is 
discharging its duties as a monopoly imbued with a public trust. It is 
also anticipated that flexible remedies provided for by rule 26(c), 
such as the imposition of protective conditions or selective redaction 
of documents, would be available under the Commission's confidentiality 
rules.

V. Content of the Postal Service's Periodic Data Reports Under the PAEA

A. The Cost and Revenue Report and the Cost Segments and Components 
Report

    The Commission's proposed rules would require the Postal Service to 
provide summaries of cost, volume, and revenue data in its annual 
report, primarily to comply with 39 U.S.C. 3652. These would consist of 
the CRA and the CSC reports, presenting costs, volumes, and revenues by 
market dominant product and by competitive product. They would include 
a separate line item for each market dominant international product and 
each competitive international product in the Mail Classification 
Schedule.

B. Format of Documentation Supporting the CRA and CSC Reports

    Supporting documentation for the CRA and the CSC reports should 
present costs, volumes, and revenues as defined in the current Mail 
Classification Schedule, and by each product's

[[Page 53328]]

constituent rate categories. At least for the first several years under 
the PAEA, the Commission proposes that the Postal Service's annual 
report present this information in an alternative format as well. This 
format would present costs, volumes, and revenues by product and rate 
category, reflecting the classification structure that was in effect 
immediately prior to the implementation of the PAEA. See proposed rule 
3050.14. This is illustrated by the appendix appendix to this Notice 
[and Order] labeled ``Products and Categories.'' This disaggregated 
format would provide the Commission and the interested public with 
``building blocks'' that are suitable for multiple purposes. The 
alternative format would allow the CRA data to be configured to 
coincide with the current Mail Classification Schedule, and, with 
modest effort, almost any foreseeable future modification of that 
schedule. At the same time, it would allow the CRA data to be 
configured to coincide with the historical classification structure. 
This should help ensure analytical consistency over time and across 
categories. It would facilitate historical continuity in financial 
reporting, and give the Commission and the interested public the 
ability to track trends in the financial data and make it easier to 
identify and analyze anomalies, should they appear. Presenting 
disaggregated data in this historical format will provide a 
particularly helpful reference point if the product lists under the 
PAEA undergo frequent refinement in the first few years of the new 
regulatory regime. The Commission recognizes that there may be 
obstacles, such as inadequate volume, that make it impractical to 
separately estimate attributable costs for some rate categories. For 
such rate categories, the Postal Service should include volume and 
revenue figures, where available, and provide a footnote in the 
attributable cost column explaining the reasons that separate 
attributable costs could not be estimated, or a suitable proxy could 
not be found.

C. Information Required for International Mail

1. Level of Disaggregation
    Since disaggregated cost, volume, and revenue data on international 
mail would be integrated into the CRA and CSC reports for the first 
time under the proposed reporting rule, a discussion of the information 
required for international products will be helpful.
    The proposed rules would require the Postal Service to provide 
volumes, revenues, costs, weight, and data on outbound and inbound 
international mail. See proposed rules 3050.22(d)(8) through (11). 
Cost, volume, and revenue data would be broken out by product, as 
defined in the current Mail Classification Schedule, and by each 
product's constituent rate categories. Supporting documentation should 
also present costs, volumes, and revenues in the alternative, more 
disaggregated format illustrated in the appendix to this Notice labeled 
``Products and Categories.'' \5\ For outbound and inbound international 
First-Class Mail, data would be reported separately by terminal dues 
regime (``target countries,'' ``transition countries,'' and bi-lateral 
agreements). The underlying country-specific data are to be provided in 
back-up documentation. This will allow the Commission to determine 
whether revenues cover costs at this level of disaggregation.
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    \5\ Most of these data are to be developed quarterly, but 
provided annually. This will enable the Commission to analyze data 
by fiscal year for the purpose of the annual compliance report, and 
by calendar year, which aligns with Universal Postal Union (UPU) 
rate cycles.
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    The required reporting on international products will be more 
complex under the PAEA than it was under the PRA, due primarily to the 
need to identify all international services as either market dominant 
or competitive. Some international services will have both market 
dominant and competitive components, depending upon whether they are 
outbound or inbound, surface or air, single-piece or bulk, and whether 
the rates charged are UPU rates or non-UPU rates. Inbound Parcel Post 
data, for example, should be shown separately for the category subject 
to UPU rates, and for those categories whose rates were negotiated 
bilaterally.
2. Ancillary International Services
    The current draft Mail Classification Schedule treats Ancillary 
Services for international mail categories as a single product. The 
Commission notes that defining these services in aggregate as a 
``product'' is a decision that might warrant further examination. Its 
component services are so heterogeneous as to raise questions about the 
validity of treating them as a coherent product with common cost or 
demand characteristics. The regulatory scheme that the Commission has 
implemented under the PAEA will work best if each defined product has 
cost or demand characteristics that can be meaningfully quantified. In 
pursuit of this goal, International Ancillary Services might need to be 
organized into smaller, more homogenous groupings. In the alternative 
format required by proposed rule 3050.14, these Ancillary Services 
would be disaggregated. One of the benefits of the alternative format 
is that it would facilitate analysis of alternative treatments of 
Ancillary Services.
3. Treatment of Fees Associated With International Mail
    The treatment of fees associated with international mail categories 
in the current draft Mail Classification Schedule might warrant further 
examination as well. The current draft Mail Classification Schedule 
treats them as free-standing products. Where no identifiable 
attributable cost is associated with a fee-based service feature, its 
costs are likely to be reflected in the host product's attributable 
costs. To balance revenues with costs, it may be more appropriate to 
group such fees with their host product than to treat them as free-
standing products. The disaggregated format illustrated in the appendix 
to this Notice would facilitate analysis of alternative treatments of 
fees associated with international products.
    The current draft Mail Classification Schedule separates 
international Special Services into market dominant and competitive 
categories, but it associates all domestic Special Services with the 
market dominant group, even though some domestic Special Services are 
purchased and used in conjunction with competitive products.\6\ It may 
be more appropriate to separate domestic Special Services into 
competitive and market dominant categories. Although there may be more 
rational ways to group data for Ancillary Services and for Special 
Services, doing so is likely to require changes to the Mail 
Classification Schedule.\7\
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    \6\ In Docket No. R2008-1, the first rate adjustment under price 
cap regulation, the Postal Service treated all special services and 
fees (domestic and international, market dominant and competitive) 
as one market dominant class of mail called ``Special Services.''
    \7\ If these classification refinements were made, they would 
have to be accomplished through amendments to the Mail 
Classification Schedule.
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D. Preferred Rate Mail

    The Commission proposes that the CRA and the CSC reports filed 
annually by the Postal Service show separate volumes and revenues for 
each category of preferred-rate mail (e.g., Standard Regular Nonprofit, 
Standard ECR Nonprofit, Outside County Nonprofit, Outside County 
Classroom, Library), even if that category is not defined as a separate 
``product.'' See 39 U.S.C. 3626. This would allow the Commission to

[[Page 53329]]

comply with the requirement in section 3651(b)(1)(B) of the PAEA that 
it estimate the ``cost'' (which the Commission interprets to mean the 
revenue foregone by) of offering preferred rates as a component of the 
cost of the universal service obligation.

E. Brief Narrative Explanation

    The Commission proposes that the Postal Service provide, by July 1 
of each year, a succinct description of the analytical principles that 
have been used to arrive at the estimates in the most recent ACD and 
the reasons that those principles have been accepted. The summary level 
of description and explanation would be equivalent to that which the 
Postal Service traditionally provided with respect to attributable 
costs in Library Reference 1 in the final omnibus rate case processed 
under the PRA, Docket No. R2006-1. These short descriptions of 
principles and reasons should be provided for all areas of analysis, 
including cost attribution, cost avoidance, demand analysis, and 
service performance measurement. This requirement is found in proposed 
rule 3050.60(f). Proposed rule 3050.13 would require the Postal 
Service, at the time that it files its Annual Report, to identify and 
describe any changes in the analytical principles that have been 
accepted since the most recent ACD, and the rationale supporting each 
change.

F. Supporting Documentation Required When Analytical Principles or 
Quantification Techniques Have Changed

    Beyond the basic data summaries and the brief explanation of 
methods required by proposed rules 3050.22 through 3050.26, no 
supporting documentation in the Postal Service's Annual Report would be 
required unless the input data, quantification techniques, or 
analytical principles applied have changed since the most recent ACD 
was issued.\8\ If input data, quantification techniques, or analytical 
principles have changed, the new data and a description of the changes 
to quantification techniques must accompany the report. See proposed 
rules 3050.2 and 3050.13. As will be described in more detail below, 
changed analytical principles will have to have been approved in 
advance by the Commission in a rulemaking proceeding designed for that 
purpose and documented as part of that rulemaking.
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    \8\ These terms are defined in proposed rule 3050.1.
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    Proposed rules 3050.22 through 3050.26 list the information items 
that would be required to be included in the annual report if all of 
the items listed were to have changed since the relevant baseline. As 
noted above, under normal circumstances, the relevant methodological 
baseline would be the methods accepted by the Commission in its most 
recent ACD.
    Because the proposed periodic reporting rules are designed to 
require the Postal Service to provide supporting detail only where 
quantification techniques or analytical principles have changed with 
respect to the baseline, they would eliminate the redundant 
documentation that was often presented in an omnibus rate case under 
the procedures of the PRA.\9\
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    \9\ Under the formal hearing procedures of the PRA, an omnibus 
rate case would typically be treated as a trial de novo, in which 
the Postal Service would present witnesses supporting all essential 
aspects of its case--even those that had not changed since they were 
last litigated--and intervenors would challenge elements of the 
Postal Service case, even where the Commission had approved them in 
previous litigation. The result was that a good deal of 
documentation provided in omnibus rate hearings was redundant of 
prior omnibus rate hearings.
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G. More Frequent Periodic Reports

    As with current rule 102, the proposed periodic reporting rule 
requires the Postal Service to provide certain reports on a more 
frequent than annual basis. Most of the more frequently reported items 
support the Postal Service's Annual Report. They would assist the 
Commission in performing its duty under 39 U.S.C. 3653 to annually 
produce a determination on the extent to which the rates and fees 
charged and the service provided by the Postal Service in the reporting 
year complied with the provisions of chapter 36 of title 39 [of the 
U.S. Code]. Due to the short time 39 U.S.C. 3653 allows the Commission 
to produce its compliance determination, it is necessary for the 
Commission to stay as current as possible on the financial and 
operating performance of the Postal Service as the reporting year 
unfolds. More frequent reporting of some items will also enhance 
transparency and accountability by helping mailers determine whether 
there are likely to be grounds for filing a complaint under 39 U.S.C. 
3662. Accordingly, under the proposed rules, items such as the Postal 
Service's Revenue and Expense Summaries Report and the National 
Consolidated Trial Balances will be required after the close of each 
fiscal month.
    Revenue Pieces and Weight (RPW) reports, Quarterly Statistics 
Reports, and billing determinants would be required after the close of 
each fiscal quarter. See proposed rule 3050.25. These quarterly reports 
are needed to help the Commission prepare its annual report under 39 
U.S.C. 3651 which evaluates how the system embodied in its regulations 
is working. In particular, quarterly volume and revenue data would help 
the Commission evaluate how well its price cap regulations are working 
by allowing it to construct hybrid evaluation years that better align 
price and classification changes with their volume and revenue effects. 
Quarterly data on volumes and revenues also will be needed if the 
Postal Service files a request for rate or classification changes 
outside the normal annual cycle.

H. Postal Service Compliance Analysis

    39 U.S.C. 3652(a)(1) states that the Postal Service shall provide 
the Commission with a report

which shall analyze costs, revenues, rates, and quality of service, 
* * * in sufficient detail to demonstrate that all products during 
such year complied with all applicable requirements of this title[.]

    This language requires the Postal Service's report to analyze the 
data it provides in sufficient detail to demonstrate that all of its 
products (market dominant and competitive) complied with all of the 
requirements of title 39 [of the U.S. Code]. The Postal Service, 
therefore, is to provide a compliance analysis with its Annual Report 
that is both broad in scope--covering all requirements of title 39--and 
specific to each product. Proposed rule 3050.20 implements the analysis 
requirement of 39 U.S.C. 3652(a)(1).

VI. Level of Detail Required in the Postal Service's Annual Report

    In most instances where the PAEA requires the Commission to produce 
reports or evaluations, the PAEA directs the Postal Service to provide 
the Commission with the information that the Commission considers 
necessary to prepare the reports required. See 39 U.S.C. 3651(c), 
3652(d), 3651(e)(2), and 3654(e). In order to determine whether the 
rates and service that the Postal Service implements complied with the 
standards of the PAEA, the Commission believes that the information 
that the Postal Service includes in its Annual Report must be supported 
by workpapers at a level of detail that is comparable to the 
documentation that existing rule 54 would have required to support the 
initial filing in an omnibus rate case under the PRA. The proposed 
rules would require, for example, that the Postal Service provide the 
``B'' workpapers, which show the

[[Page 53330]]

distribution of directly attributable costs by cost segment and 
component.\10\
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    \10\ It is important to distinguish the range of information 
items that would be required in the annual report from the level of 
detail that would be required in those various items. The range of 
items that the Postal Service would have to document in its annual 
report under the proposed rules is likely to be considerably more 
narrow than if it were filing an omnibus rate request under the PRA, 
since it would be limited to data and analyses that have changed 
relative to the baseline.
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    The proposed rule would require that estimates that were developed 
using electronic spreadsheets be supported with those spreadsheets, and 
that those spreadsheets display the formulas used and their links to 
related spreadsheets. As in current rule 54, the proposed rule would 
require that documentation be provided in a form that can be read by 
publicly available PC software. It would also require that if a 
processing program were developed specifically to produce an 
accompanying workpaper, it would have to be provided in a form that 
could be executed by publicly available PC software. See proposed rule 
3050.2.
    Unlike an omnibus rate case, the Postal Service would not have to 
document analytical principles used in its annual compliance report to 
the Commission with testimony. If the Postal Service seeks to change 
the analytical principles that it used in its most recent annual report 
provided under the PAEA, the proposed rules would require it to justify 
the change in an informal rulemaking prior to filing its annual report.

VII. Analytical Principles To Be Applied in the Postal Service's Annual 
Report

    39 U.S.C. 3652(e) requires the Commission to ``prescribe the 
content and form of the public reports * * * to be provided by the 
Postal Service under this section.'' The proposed rules would 
distinguish between data entry and manipulation techniques whose 
validity depends on specific ``analytical principles'' and those that 
do not. An analytical principle is a conceptual or theoretical approach 
approved by the Commission for collecting data, attributing costs to 
subclasses, or estimating a product's avoided cost, elasticity of 
demand, or average revenue.\11\ Under the proposed rule, the Postal 
Service's Annual Reports would employ ``accepted analytical 
principles''--principles that the Commission applied in its most recent 
ACD, to estimate volumes, revenues, attributable costs, and avoided 
costs.\12\ The most recently completed ACD would serve as the 
methodological baseline for the subsequent Annual Report unless the 
Postal Service had obtained prior approval from the Commission to 
change the analytical principles that it employs.
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    \11\ The technical definition of ``analytical principle'' is 
found in proposed rule 3050.1(b): ``a particular economic, 
mathematical, or statistical theory, precept, or assumption applied 
by the Postal Service in producing a periodic report to the 
Commission.'' Any data entry or manipulation technique whose 
validity does not depend on the acceptance of a particular economic, 
mathematical, or statistical theory, precept, or assumption is a 
mere ``quantification technique.'' See proposed rule 3050.1.
    \12\ The technical definition of ``accepted analytical 
principle'' is an ``analytical principle applied by the Commission 
in its most recent Annual Compliance Determination, unless different 
analytical principles have been accepted by the Commission in a 
final rule that becomes effective prior to the filing of the Postal 
Service's Annual Report.'' See proposed rule 3050.1.
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    A proposal to change an accepted analytical principle would require 
an informal rulemaking to evaluate the proposal, and an acceptance of 
the proposal by the Commission. See proposed rule 3050.11. Under normal 
circumstances, this process would have to be completed and a final rule 
published in the Federal Register at least 30 days in advance of the 
filing of the Annual Report. See 5 U.S.C. 553(d). If the Postal 
Service's Annual Report corrects calculations in the most recent ACD, 
or changes the quantification techniques used to make those 
calculations, the Postal Service must accompany its compliance report 
with a list of such changes and a brief explanation of each. See 
proposed rule 3050.2.

A. The Distinction Between ``Analytical Principles'' and Other Elements 
of Analyses Supporting the Annual Compliance Report

    Under the proposed rules, changes in accepted analytical principles 
must be reviewed and accepted by the Commission in advance. In 
contrast, correcting an error or changing a quantification technique 
used in the baseline methodology would only require notice and a brief 
explanation at the time that an annual compliance report is filed with 
the Commission. See proposed rule 3050.2. Updating data used in a 
baseline methodology would require no justification, if done in a 
neutral and balanced way.
    The following guidelines illustrate the distinction between a 
change in an accepted analytical principle and less significant changes 
requiring simpler procedures, such as an update of input data, a 
correction, or a change in quantification technique.
1. Updates
    Plugging more recently collected data into an otherwise unchanged 
model or analysis is neither a change in quantification technique nor a 
change in the analytical principles applied.
2. Corrections
    Correcting a spreadsheet that misidentifies a row or column, or 
applies a formula to the wrong cell, would not be a change in 
quantification technique nor a change in the analytical principle 
applied.
3. Quantification Techniques
    Examples of changes to quantification techniques include 
consolidating multiple spreadsheets into one, using spreadsheet figures 
that are linked rather than hardcoded, changing mainframe SAS to PC 
SAS, and changing from database management software from Access to 
Oracle. Such changes should not change the concept, theory, 
assumptions, or results of an analysis.
4. Data Collection
    Changing the sample frame, sample size, sampling technique, or 
definition of a data element used as input data in an analysis would 
constitute a change to an analytical principle. For example, the 
changes made by the Postal Service in its Management Operating Data 
System (MODS) by discontinuing weighing of mail to obtain an estimate 
of First Handled Pieces, and changes made after FY 2007 in the City 
Carrier Cost System discontinuing the collection of stop- and route-
type information would constitute changes in baseline analytical 
principles. Each of these changes have potentially major impacts on any 
analysis of mail processing or carrier street time cost causation.
    Changing the definition of a data element to reflect changes in 
operations, however, would not constitute a change to an analytical 
principle. For example, if the Postal Service were to forbid mailers to 
enter mail in sacks for operational reasons, it could discontinue 
collecting data on the use of sacks as a container type for purposes of 
determining the subclass distribution of variable mail processing costs 
for mixed mail without review of the change in an informal rulemaking.
5. Analysis
    Changing a data editing technique, economic assumption, functional 
form, model specification, or regression evaluation technique would 
constitute a change in an analytical principle. Similarly, changing a 
formula used in a spreadsheet analysis would constitute a

[[Page 53331]]

change in an analytical principle. Using a more recent measure of an 
input used in a volume variability model (such as an updated 
deliveries-per-stop or deliveries-per-square mile in a street time 
variability model) would not.
    Similarly, if the Postal Service wanted to update its purchased 
transportation cost variability study by updating its calculation of 
average cubic foot miles or average length of haul for various 
transportation segments without changing the form or specification of 
the underlying econometric model, it would not constitute a change in 
an established analytical principle, and would not require review in a 
rulemaking.
    Updating an estimated price elasticity for a given mail product by 
using (in a consistent manner) more recent DRI forecasts for various 
macroeconomic control variables already present in an accepted 
econometric model of demand would not constitute a change in an 
accepted analytical principle, and would not require review in a 
rulemaking.
6. Cost Avoidance
    Changing the classification of cost pools, or the rate categories 
used as benchmarks or proxies, would constitute a change in accepted 
analytical principles.
7. Special Studies
    A special study that follows a reviewed and approved design would 
not constitute a change in analytical principles if it were used to 
update such things as:
     MODS machine productivities;
     Accept rates;
     Productive hourly wage rates;
     Premium pay factors;
     Operation-specific piggyback factors;
     Entry profiles; and
     Shape breakouts of unit attributable costs.
    However, special studies must be reviewed and accepted in an 
informal rulemaking if they use data collection or analytical methods 
that were not accepted by the Commission in its most recent Annual 
Compliance Determination.

B. Procedures for Changing Analytical Principles Used To Collect and 
Analyze Data in the Postal Service's Annual Report

    The PAEA lodges with the Commission ultimate responsibility for 
selecting appropriate input data and analytical methods to be used in 
the Postal Service's Annual Report. See 39 U.S.C. 3652(e). Accordingly, 
the Commission's proposed reporting rules would be more prescriptive 
than the current rules with respect to the data and methods that 
underlie the Postal Service's Annual Report. 39 U.S.C. 3652(e)(2) 
provides that the Commission may ``on its own motion or on request of 
an interested party, initiate proceedings * * * to improve the quality, 
accuracy, or completeness of Postal Service data required by the 
Commission under this subsection * * * .'' Selecting the analytical 
principles to be used in accounting for costs, revenues, or volumes 
falls within the definition of a ``rule'' for purposes of the APA. See 
5 U.S.C. 551(4). Therefore, the procedures that the Commission proposes 
for changing Commission-approved methods for collecting and analyzing 
data of this kind are those of an informal rulemaking under section 553 
of the APA.
    The Commission believes that one of the important benefits of the 
PAEA is the freedom that it gives the postal community to decide 
analytical issues in a non-adversarial context. Under the PRA, 
analytical issues were decided employing a litigation model. Under that 
model, the Commission was required to resolve an analytical issue by 
accepting or rejecting competing analyses submitted by opposing 
witnesses. In some instances, the Commission would cobble together a 
solution from analytical elements proffered by rival witnesses. In 
almost all cases, analyses were presented as faits accomplis, with no 
opportunity for input or feedback from either the Commission or 
interested third parties. The process was cumbersome and the results 
were often less than satisfactory.
    Under the PAEA, the Commission expects that the Postal Service will 
continue to take the lead in deciding how data about its finances, 
operations, and performance will be collected and analyzed. But because 
analytical issues can be addressed in the context of informal 
rulemakings under the PAEA, an opportunity for input and feedback from 
other stakeholders and the Commission can be provided. The Commission 
proposes to take advantage of that opportunity by approaching 
analytical issues through a process that promotes cooperation and 
facilitates consensus.
    39 U.S.C. 3652(e)(2) authorizes the Commission to initiate 
proceedings designed to improve the data in the Postal Service's annual 
reports ``on its own motion or at the request of an interested party.'' 
In keeping with the intent of 39 U.S.C. 3652(e)(2), a proposal to 
change accepted analytical principles may be submitted by the 
Commission, the Postal Service, or other interested parties.
    The Commission will exercise its discretion in deciding whether a 
proposal to change accepted analytical principles justifies the 
initiation of a rulemaking, based on a consideration of the potential 
benefits to the quality of the information available to the postal 
community and the time and resources likely to be expended in the 
inquiry. If the proposal presents a persuasive argument that a change 
in accepted analytical principles is needed, the Commission will 
initiate a docket by publishing a notice of proceeding in the Federal 
Register and on the Commission's Web site.
    The procedures proposed are highly flexible, and would vary 
according to the complexity of the proposed change and the level of 
documentation supporting it. The Commission expects that, for the most 
part, proposals to change established analytical principles will be 
data intensive and technically oriented. It believes that review of 
such proposals can be done more quickly and efficiently if they 
emphasize informal ``discovery'' procedures at the initial stages, 
where clarification of technical issues is often needed, and reserve 
more formal written commentary for later stages.

C. Nature of Rulemakings That Review Analytical Principles Used To 
Prepare Periodic Reports

    The metrics by which the Postal Service's compliance with the PAEA 
is determined depend, importantly, on the analytical principles that 
the Postal Service uses to prepare its periodic reports to the 
Commission. As noted, the analytical principles used in the 
Commission's most recent ACD would serve as the methodological 
baseline.\13\ These would be changed through the informal rulemaking 
procedures prescribed by section 553 of the APA. Such rulemakings are 
likely to take different forms, as circumstances require. Examples of 
the forms they could take are discussed below. All of these forms could 
be accommodated by the generic procedures provided for in proposed rule 
3050.11.
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    \13\ Currently, in most respects, these coincide with the set of 
analytical principles used in the most recent omnibus rate case 
brought under the PRA (Docket No. R2006-1).
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1. Strategic Rulemakings
    A strategic rulemaking would be designed to make the ongoing 
development of analysis in cost causation or other areas of analysis as 
orderly and efficient as possible. It would take an inventory of 
longer-term

[[Page 53332]]

data collection and analysis needs. It is likely to involve plans to 
meet those needs over a horizon longer than a year. It might focus on 
existing data collection systems that need to be improved or new data 
collection programs that need to be established. It might list existing 
analytical studies that need to be updated, or new analytical studies 
that need to be undertaken. The scope of a strategic rulemaking would 
be broad, since one of its purposes would be to compare the likely cost 
and benefits of improved data or analysis in different areas of 
research, and the lead time required to conduct the research. The 
purpose would be to prioritize research projects and draw up a 
tentative schedule for conducting them.
    A strategic rulemaking is likely to be general in focus and 
exploratory in nature in its early stages. Accordingly, the procedures 
followed would be quite flexible. They might begin with the equivalent 
of a prehearing conference in which interested parties identify areas 
in which research is most needed and most likely to bear fruit. Once a 
strategic rulemaking has identified and prioritized areas of needed 
research, it would then narrow its focus to specific data to be 
gathered or studies to be performed. The Notice of Proposed Rulemaking 
would be expected to culminate in Commission approval of a list of 
research projects to be undertaken and a preliminary projected time 
table for their completion.
2. Discrete Issue Rulemakings
    Discrete issue rulemakings would address the data requirements, 
analytical methods, and timetable to be followed in researching a 
single analytical issue or closely-related set of issues. At this 
stage, specific research projects are likely to be proposed in the form 
of specific tasks, and the merits of the projects discussed. Initially, 
this discussion is likely to take place in the context of informal 
technical conferences. When the goals and methods to be employed by 
proposed research projects have been well-defined, their merits may be 
discussed in written comments in response to a notice of proposed 
rulemaking. An example would be a rulemaking addressing needed 
corrections and improvements to the Commission's Docket No. R2006-1 
Periodicals cost model, which were examined in a preliminary way in 
Docket No. ACR 2007. In the system being proposed, the need for a study 
of these issues, its feasibility, and its priority, would ordinarily 
have been identified in an earlier strategic rulemaking.
    The timetable for the study would be determined by its scope and 
complexity. The process might begin with a written proposal by the 
proponent of the study to focus evaluation of the study by others. The 
Commission might then give its preliminary approval of the study plan, 
and keep the rulemaking docket open to receive progress reports, and 
evaluate interim results. A final rule would issue when the Commission 
accepts one or more new analytical principles.
3. Expedited Rulemakings
    Expedited rulemakings would be designed to identify and make needed 
improvements in the data and methods that the Postal Service uses to