Periodic Reporting Rules, 20834-20858 [E9-9590]

Agencies

• POSTAL REGULATORY COMMISSION

[Federal Register Volume 74, Number 85 (Tuesday, May 5, 2009)]
[Rules and Regulations]
[Pages 20834-20858]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-9590]



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Part IV





Postal Regulatory Commission





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39 CFR Parts 3001 and 3050



Periodic Reporting Rules; Final Rule

Federal Register / Vol. 74 , No. 85 / Tuesday, May 5, 2009 / Rules 
and Regulations

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POSTAL REGULATORY COMMISSION

39 CFR Parts 3001 and 3050

[Docket No. RM2008-4; Order No. 203]


Periodic Reporting Rules

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adopting a set of rules to address the need 
for periodic reports from the Postal Service. Adoption of these rules 
will facilitate accountability and transparency of Postal Service 
operations, consistent with a new postal law. This document 
incorporates a revision to an internal reference in the rules. This 
revision was identified in a recent notice.

DATES: Effective June 4, 2009.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-7689-6824 and stephen.sharfman@prc.gov.

SUPPLEMENTARY INFORMATION: Regulatory History, 73 FR 53324 (September 
15, 2008).

I. Introduction

    Under the Postal Accountability and Enhancement Act (PAEA), Public 
Law 109-435, 120 Stat. 3218 (2006), the Postal Regulatory Commission 
was given enhanced information gathering and reporting 
responsibilities. To implement its information gathering and reporting 
functions under the PAEA, the Commission issued its Notice of Proposed 
Rulemaking Prescribing Form and Content of Periodic Reports on August 
22, 2008 (Order No. 104).
    Initial comments on these proposed rules were filed by seven 
participants.\1\ Reply comments were filed on November 14, 2008 by 
eight participants.\2\ Comments were generally supportive of the 
proposed rules as appropriate and reasonable requirements on which to 
base financial reporting under the new regulatory regime under the 
PAEA. The Postal Service commends the rules for leaving the existing 
financial reporting structure essentially intact while adapting it from 
a subclass-based format to a product-based format. It notes that the 
fundamental building blocks of cost reporting will remain the same, 
separating accrued costs into segments, applying variability studies to 
form pools of attributable costs, and using data collection systems to 
distribute those pools to products, as summarized in the Cost and 
Revenue Analysis (CRA) Report and the Cost Segments and Components 
(CSC) Report. Costs avoided by worksharing and other characteristics 
will continue to be estimated, for the most part, by down-flow models 
supplemented by special studies. Postal Service Comments at 1-2.
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    \1\ Comments of the Department of Defense in Docket No. RM2008-
4, filed on October 15, 2008 (DOD Comments); Initial Comments of the 
Public Representative (Public Representative Comments); Initial 
Comments of the Greeting Card Association (GCA Comments); Initial 
Comments of Time Warner Inc. in Response to Order No. 104 (Time 
Warner Comments); Initial Comments of the United States Postal 
Service in Response to Order No. 104 (Postal Service Comments); 
Valpak Direct Marketing Systems, Inc. and Valpak Dealer's 
Association, Inc. Initial Comments Regarding Proposed Rules 
Prescribing Form and Content of Periodic Reports (Valpak Comments); 
and Initial Comments of Major Mailers Association (MMA Comments), 
filed on October 16, 2008.
    \2\ Reply Comments of Time Warner Inc. in Response to Order No. 
104 (Time Warner Reply Comments); Reply Comments of the Public 
Representative (Public Representative Reply Comments); Reply 
Comments of United Parcel Service on Notice of Proposed Rulemaking 
Prescribing Form and Content of Periodic Reports (UPS Reply 
Comments); Reply Comments of Magazine Publishers of America, Inc., 
Alliance of Nonprofit Mailers and American Business Media (MPA/ANM/
ABM Reply Comments); Reply Comments of Pitney Bowes Inc. (Pitney 
Bowes Reply Comments); Valpak Direct Marketing Systems, Inc. and 
Valpak Dealers' Association, Inc. Reply Comments Regarding Proposed 
Rules Prescribing Form and Content of Periodic Reports (Valpak Reply 
Comments); and Reply Comments of the United States Postal Service in 
Response to Order No. 104 (Postal Service Reply Comments), all filed 
on November 14, 2008.
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    The Postal Service also commends the rules for giving appropriate 
recognition to the transitional status of data reporting, providing a 
flexible approach for converting from subclass- to product-based 
reporting, and integrating negotiated service agreement (NSA) data into 
the larger reporting system. Id. The Postal Service concludes that 
overall the proposed new rules establish ``a workable framework for the 
ACR and periodic reporting.'' Id. at 2. Some participants argue that a 
few of the proposed rules should be pared back until experience 
indicates that there is a need for more robust versions of the rules 
while other participants argue that the proposed rules need to be made 
more robust in some respects. Comments are discussed in the context of 
the specific proposed rule to which they apply.

II. Proposals To Revise Specific Reporting Rules

A. Proposed Rule 3050.1 (Definitions)

    Definition of ``Analytical Principle.'' Proposed rule 3050.1 
defines certain terms used in the periodic reporting rules. Proposed 
paragraph (c) of this section defines ``analytical principle'' as:

    A particular economic, mathematical, or statistical theory, 
precept, or assumption applied by the Postal Service in producing a 
periodic report to the Commission.

Valpak argues that this definition is too narrow. Noting that the 
Commission considers a change in the specification of a regression 
model to be a change to an ``analytical principle,'' Valpak argues that 
a regression analysis ``may be viewed as a tool or a technique, or even 
a method, but it is not commonly understood to be a `theory,' 
`precept,' or `assumption.' '' Valpak Comments at 21. Valpak's argument 
is supported by the Public Representative. Public Representative Reply 
Comments at 17.
    The Commission believes that the ambiguity that Valpak and the 
Public Representative perceive is resolved when the definition of 
``analytical principle'' in final rule 3050.1(c) is read together with 
the definition of ``quantification technique'' in final rule 3050.1(f). 
Final rule 3050.1(f) reads:

    Quantification technique refers to any data entry or 
manipulation technique whose validity does not require the 
acceptance of a particular economic, mathematical, or statistical 
theory, precept, or assumption. A change in quantification technique 
should not change the output of the analysis in which it is 
employed.

Together, the definitions of ``analytical principle'' and 
``quantification technique'' divide the data manipulation techniques 
used to produce the Postal Service's periodic reports into two 
categories--those whose validity requires acceptance of a causal 
theory, and those whose validity does not.
    Explanatory terms are included in a regression equation because 
they are assumed to ``explain,'' or partially cause, the phenomenon 
being measured. Because explanatory terms are assumed to influence the 
phenomenon being measured (or are being tested to see if they do), they 
fit the definition of ``analytical principle.'' In contrast, choosing a 
standard statistical package, such as SAS or STATA, to fit the 
regression equation to the data (using the standard mathematical 
formula for calculating least squares) does not depend on any 
assumption about what causes the phenomenon being measured and should 
not affect the result. The statistical package chosen to run the 
regression, therefore, fits the definition of ``quantification 
technique.'' This should clarify how the definitions in final rule 
3050.1 fit together as a comprehensive whole. Because the Commission 
does not believe that the definition of ``analytical principle'' in 
Sec.  3050.1(c) needs to be modified, it declines to accept Valpak's 
proposal.

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    Definition of the term ``product.'' Proposed rule 3050.1 defines 
terms that are of unique relevance to part 3050 of the Commission's 
rules. The Public Representative argues that the definitions contained 
in proposed rule 3050.1 should be consistent with and not redundant of 
those found in Sec.  3001.5--the main definitional section of the 
Commission's rules. He notes, in particular, that the term ``product'' 
is defined in proposed rule 3050.1 and in Sec.  3001.5, and that the 
definitions are not precisely the same. The Commission agrees that the 
term ``product'' does not need to be defined in its periodic reporting 
rules. Accordingly, it has eliminated the term ``product'' from the 
definitions provided in final rule 3050.1.
    Definitions of ``Annual Report'' and ``section 3652 report.'' 
Proposed rule 3050.1(e) defined the term ``Annual Report'' as ``the 
report that section 3652 of the Postal Accountability and Enhancement 
Act requires the Postal Service to provide to the Commission each 
year.'' In its discussion of revisions to Sec.  3050.20, infra, the 
Commission observes that the analysis that Sec.  3050.20 requires the 
Postal Service to provide is meant to implement Sec.  3652 of the PAEA. 
Generally, Sec.  3652 requires the Postal Service to analyze how rates 
and service in the previous year complied with the requirements of 
title 39 of the United States Code.
    The comments received concerning proposed rule 3050.20 have 
persuaded the Commission that instead of ``Annual Report,'' its 
periodic reporting rules need to employ two standard references to the 
annual reports that the Postal Service is required to file with the 
Commission--one broader than the term ``Annual Report,'' and one that 
is slightly more narrow. Where a broader definition is intended, the 
final rules use the phrase ``annual periodic reports to the 
Commission.'' Where the narrower definition is intended, the final 
rules use the phrase ``section 3652 report.'' That phrase, however, 
will be used to encompass all of the Postal Service reports required by 
Sec.  3652 except for the program performance reports referenced by 
Sec.  3652(g). Those reports are also required to be reported at the 
time that the Postal Service files its comprehensive statement with 
Congress. See 39 U.S.C. 2804(a) and 2401(e). To avoid redundant 
reporting, ``section 3652 report'' is understood to exclude program 
performance reporting under Sec. Sec.  2803 and 2804. See final rule 
3050.1(g).

B. Proposed Rule 3050.2 (Corrections and Changes in Input Data or 
Quantification Techniques)

    Proposed rule 3050.2 requires that the Postal Service document its 
periodic reports. Paragraph (a) requires it to list and explain 
corrections, changes in input data, and changes in quantification 
techniques made since the report was last filed. Paragraphs (b) and (c) 
require the submission of workpapers and spreadsheets that meet certain 
standards. Paragraph (d) allows portions of the documentation required 
by ``this section'' that are not time critical to be filed up to two 
weeks late if the Postal Service gets advance approval of the 
Commission.
    Delayed filing of documentation. Valpak observes that it is less 
appropriate to file the material required by paragraph (a) 2 weeks 
later than the other material required by proposed rule 3050.2. The 
Commission agrees. Final rule 3050.2 applies the deferral option only 
to paragraphs (b) and (c).
    Tracking the impact of errors. Valpak argues that where errors have 
been corrected, the impact of the correction could be masked by other 
changes in the relevant periodic report. It argues that proposed rule 
3050.2 would lead to more transparency if it were to state:

    Corrections should be presented in a manner that permits 
replication of the calculation both before, and after, correction of 
the error.

Id. at 22.
    The Postal Service argues that complying with the proposed 
requirement might be a straightforward exercise if a model with an 
error consisted of a single spreadsheet. The spreadsheet program would 
allow the program to be run both with the error and with the error 
corrected. It points out, however, that where there is an elaborate set 
of linked models, as occurs in the CRA, complying with the proposal 
might require a large number of time-consuming model runs if there were 
multiple errors whose impact needed to be separately demonstrated. 
Under this circumstance, the Postal Service argues that complying with 
the proposal would be a large waste of effort and resources. Postal 
Service Reply Comments at 7-8. The Commission agrees. Accordingly, it 
declines to adopt the revision to proposed rule 3050.2 that Valpak 
proposes.
    Duty to explain variations in results that exceed a quantitative 
threshold. MMA argues that the Postal Service's choices of what input 
data to use can be as significant in their impacts as what analytical 
methods the Postal Service chooses to apply to data. As an 
illustration, it complains that the Postal Service's insistence on 
using theoretical Delivery Point Sequencing (DPS) percentages rather 
than actual DPS percentages has had a major impact on the cost of the 
kind of mail that it sends. It notes that proposed rule 3050.2 would 
require the Postal Service to identify input data or quantification 
techniques and to list any corrections that it has made since a 
periodic report was last submitted and to explain the change or 
correction. The listing and explanation are to be provided when the 
Postal Service submits the relevant periodic report. It argues that 
where the impact of such changes is sufficiently large, this proposed 
procedure is inadequate. It proposes that there be an opportunity for 
advance review of changes to input data, quantification techniques, or 
corrections that impact avoided costs by more than 0.1 cent. MMA 
Comments at 2-4. It argues that this issue will grow with the adoption 
of the Intelligent Mail barcode. Id. at 4-5.
    The Postal Service opposes the proposal, arguing that it is 
impossible to identify the complete set of input changes that cause 
changes to cost avoidance estimates in excess of a particular threshold 
until the workshare models are finalized. It asserts that there is 
``virtually no lag time between finalization of the workshare models 
and filing of the ACR.'' Postal Service Reply Comments at 22. The 
Commission accepts the Postal Service's representation that there is 
not a sufficient interval between the finalization of its avoided cost 
model results and the filing of its Sec.  3652 report to accommodate 
MMA's proposal.
    Valpak offers a related proposal. It asks that the Postal Service 
be required to identify and explain its Sec.  3652 report results that 
are anomalous from a logical perspective, and to explain results that 
change a product's unit attributable costs from year to year by more 
than the change in the Consumer Price Index plus or minus 5 percent. 
Otherwise, Valpak states, in the brief time available to mailers, they 
``would need to search for such peculiarities on their own and, even if 
found, mailers would be left wondering about the relevant facts and 
their significance, because they would have received no explanation 
from the Postal Service.'' Valpak Comments at 20.
    The Postal Service responds by arguing that the definition of a 
logical anomaly is too subjective to serve as a workable rule. It also 
argues that the plus-or-minus 5 percent standard for variations in unit 
attributable costs is too objective; that is, it cannot be varied for 
small mail classes whose unit cost

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results vary substantially due to the problem of small sample size. It 
also questions the value of pursuing such details of cost analysis in a 
price cap regulatory regime. Postal Service Reply Comments at 7.
    The Commission urges the Postal Service to include in its Sec.  
3652 report, to the maximum extent possible, explanations of both 
logical anomalies and unusually large swings from year to year in its 
unit attributable cost results. Nevertheless, it declines to adopt a 
quantitative threshold triggering this obligation as arbitrary. It also 
agrees that logical anomalies are too subjective to serve as a workable 
rule. It, therefore, declines to adopt periodic reporting rules with 
quantitative thresholds as Valpak requests.

C. Proposed Rule 3050.3 (Confidential Treatment of Periodic Reports)

    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 would resolve the issue of how 
information so designated could be made public. The Commission 
contemplates initiating a series of rulemakings designed to identify in 
part 3050 specific categories of information that would be 
presumptively confidential and specific categories of information that 
presumptively would not, as a guide to future submissions by the Postal 
Service and third parties.

D. Proposed Rule 3050.11 (Procedures for Changing Accepted Analytical 
Principles)

    Proposed rule 3050.11 sets forth procedures governing Commission 
review of a petition or notice of proceeding to change an accepted 
analytical principle. It would evaluate proposals to change accepted 
analytical principles under the informal rulemaking procedures of 5 
U.S.C. 553. The proposed rule would allow the Commission, its Public 
Representative, the Postal Service, or private parties, to file a 
petition or notice of proceeding to change accepted analytical 
principles used in the Postal Service's annual reports to the 
Commission. The rule goes on to identify content that the petition 
should contain and the procedures to be followed in obtaining 
additional information that would support the petition.
    Methodological rulemakings initiated by the Commission. Valpak 
points out that proposed rule 3050.11 would allow the Commission to 
institute this process on its own behalf although the rule has 
provisions with respect to the content of the instituting document and 
the procedures for gathering supporting information that are explicitly 
related only to ``petitions.'' It correctly observes that this leaves 
it unclear whether these provisions are meant to apply to proceedings 
begun by the Commission on its own initiative. Valpak Comments at 14. 
To remove this ambiguity, final rule 3050.11 explicitly relates these 
provisions not just to a ``petition,'' but to a ``notice of 
proceeding'' issued by the Commission.
    Methodological rulemakings initiated by a Public Representative. 
Proposed rule 3050.11 lists a ``Public Representative'' among those who 
would be authorized to petition for a rulemaking to change an accepted 
analytical principle. Valpak notes that the current Commission practice 
is to appoint public representatives only after a formal docket has 
been established. It says ``[i]n such a situation, it is unclear 
whether anyone among the Commission's rotating Pubic Representatives 
could initiate a change in an `accepted analytical principle.' '' 
Valpak Comments at 24. The Public Representative makes a related 
recommendation that a public representative should be appointed in a 
methodology rulemaking immediately after the Commission has concluded 
that a petition should move from the evaluation stage (see paragraphs 
(a) and (b) of proposed rule 3050.11) to the notice of proposed 
rulemaking stage (see paragraph (c)(2) of proposed rule 3050.11). 
Public Representative Comments at 7.
    The Commission appoints a public representative in every 
proceeding. 39 U.S.C. 505. Thus, the public will be represented in 
strategic rulemakings as described in this order. Furthermore, public 
representatives are appointed in Annual Compliance Determination (ACD) 
dockets as well as dockets established to consider rate and 
classification adjustments. A public representative in any such 
proceeding could determine that petitioning to initiate a rulemaking 
would be an appropriate exercise of responsibility.
    Discovery. Paragraph (b) of proposed rule 3050.11 provides:

    To better evaluate a petition to change an accepted analytical 
principle, the Commission may order that it be made the subject of 
discovery. By request of any interested person, or on its own 
behalf, the Commission may order that the petitioner and/or the 
Postal Service provide experts on the subject matter of the proposal 
to participate in technical conferences, prepare statements 
clarifying or supplementing their views, or be deposed by officers 
of the Commission.

    This paragraph allows the Commission to make a petition for a 
methodological rulemaking the subject of discovery at its discretion. 
Valpak argues that ``optional discovery provides neither protection nor 
due process.'' Valpak Comments at 33. It comments that:

    This provision implicitly assumes that the Commission will be 
able to decide on its own, from the face of a petition to change, 
whether mailers should have the due process right to investigate the 
proposed change. But such an assumption is unlikely to be accurate. 
Mailers often focus on changes which appear significant to them, 
giving greater attention to details than the Commission staff can 
devote to the issues and consequences presented by such changes. 
Moreover, not all weaknesses are apparent of the face of each 
proposal.

    Id. Accordingly, Valpak contends that discovery should be provided 
for as of right. It recommends that this be accomplished by applying 
the formal hearing procedures of part 3001, subpart A, of the 
Commission's rules to methodological rulemakings. Id. at 12.
    As explained in Order No. 104 at 30-35, the Commission has drafted 
proposed rule 3050.11 to accommodate methodological rulemakings that 
run the gamut from broad surveys of the Postal Service's need for new 
data and research into analytical issues (which Order No. 104 labels 
``strategic rulemakings'') to narrow relatively minor methodological 
changes that could be placed on a ``fast track'' to be evaluated in 
time to incorporate them into the next section 3652 report. Where 
technical issues are complex or controversial, technical conferences 
are likely to be the first procedure authorized as a vehicle for 
interested parties to identify issues that need to be explored. Where 
technical conferences demonstrate a need for follow up in more depth, 
discovery requests will be entertained and, very likely, granted. Where 
proposed methodological changes are relatively minor and non-
controversial, and time is of the essence, however, making discovery a 
``right'' could take away the Commission's ability to adapt review 
procedures to fit the underlying issues presented. This could 
ultimately hinder, rather than improve, the compliance review process 
if it results in a diversion of the technical resources of all 
concerned from more pressing issues. The Postal Service generally 
agrees. Postal Service

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Reply Comments at 4-6. For these reasons, final rule 3050.11 retains 
the Commission's discretion to order discovery in evaluating petitions 
for review of changes in analytical principles.
    ``Missing role of other parties.'' In Valpak's comments on 
paragraph (b) of proposed rule 3050.11, the topic heading ``Missing 
Role of Other Parties'' appears. Valpak Comments at 26. Under that 
heading, Valpak notes that paragraph (b) authorizes the Commission to 
``order'' the ``petitioner'' and/or the ``Postal Service'' to provide 
experts on the subject matter of the petition ``to participate in 
technical conferences, prepare statements * * * or be deposed.'' Id.
    Valpak complains that ``there is no express authority in this rule 
for expert testimony to be filed by other parties.'' Id. From the fact 
that the rule does not require the expert testimony of third parties, 
Valpak seems to conclude that the rules do not permit such testimony. 
To remedy this alleged defect, it proposes that the language of 
paragraph (b) be expanded from ``the Commission may order that the 
petitioner and/or the Postal Service'' to ``the Commission may order 
that the petitioner, any interested persons, and/or the Postal Service 
[provide experts to participate in the process.]'' Id. at 27.
    As Valpak recognizes, the Commission does not have the authority to 
order experts employed by third parties to participate in a 
methodological rulemaking. Therefore, the fact that Sec.  3050.11 does 
not do so should not give rise to any inference that third-party 
experts would not be permitted to participate in the petition 
evaluation stage of a rulemaking. Such participation will be 
encouraged, but the Commission does not believe that it is something 
that it can require. As the Commission noted in its notice of proposed 
rulemaking in this docket, it views collaboration as the ideal approach 
to the development and evaluation of analytical principles in postal 
ratemaking. See Order No. 104 at 30-31.
    Referring to the procedures that it had to follow in vetting 
analytical issues under the Postal Reorganization Act (PRA), the 
Commission made the following observation:

    [T]he Commission was required to resolve an analytical issue by 
accepting or rejecting competing analyses submitted by opposing 
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.

Id. at 30. Valpak reads this comment as a Commission preference for a 
procedure that ``eliminates all counter-proposals'' to those contained 
in a petition. Valpak Comments at 32, n.13. Valpak contends:

    The new process is likely to be more satisfactory only if 
various parties (i) are allowed to, and (ii) do, participate 
vigorously in the proposed process, from the outset. Otherwise, 
Postal Service studies will go largely unchallenged, and the 
Commission will be unaided by input from the parties.

Id.
    The Commission agrees that broad and vigorous public participation 
is beneficial. The Commission believes this goal can be more fully 
realized by expanding the informal rulemaking process. In ``on the 
record'' hearings under the PRA, the Commission was required to choose 
one from among what typically was a very limited set of models that was 
sponsored ``on the record'' by the Postal Service or an intervenor. Any 
correction of a model, or synthesizing of competing models that the 
Commission tried to do to support a decision, was likely to be 
challenged as procedurally infirm because it was not ``sponsored by a 
witness on the record.'' The PAEA, on the other hand, allows 
methodological issues to be resolved through informal rulemakings which 
allow collaborative research and multi-party input. That is the 
Commission's goal in conducting methodological rulemakings under Sec.  
3050.11.
    Deposing witnesses. Among other things, paragraph (b) of proposed 
rule 3050.11 provides that the petitioner or the Postal Service provide 
witnesses on the subject matter of the petition to be ``deposed by 
officers of the Commission.'' Valpak associates the term ``depose'' 
with adversarial interrogation. It asserts that if the Commission's 
officers were to depose witnesses, it would put them in the untenable 
position of being both litigators and decision-makers.
    To call informal rulemaking such as that which proposed rule 
3050.11 would authorize ``litigation'' mischaracterizes that process. 
Nevertheless, it may be beneficial to replace the phrase ``deposed by 
officers of the Commission'' with the phrase ``or answer questions 
posed by the Commission or its representatives'' as the Postal Service 
proposes. See Postal Service Reply Comments at 9. This should eliminate 
the inference that Valpak draws. Final rule 3050.11 incorporates that 
change.
    Oral input. Valpak notes that proposed rule 3050.11 gives the 
Commission discretion to prescribe the form of input (oral or written) 
that it will receive from interested parties. It does this at two 
points in the informal rulemaking process. In paragraph (a)(2), it 
allows the petitioner to request access to Postal Service data to 
support its petition, and gives the Commission discretion to require 
that the Postal Service's answers or objections be presented orally or 
in writing. In paragraph (c)(1), the rule allows interested parties to 
comment on any notice of proposed rulemaking that is issued based on a 
petition to change accepted analytical principles. It gives the 
Commission discretion to require that their comments be made orally as 
well as in writing. Valpak Comments at 24-25.
    Valpak argues that requiring a petitioner to make its requests for 
Postal Service data to support its petition orally (paragraph (a)(1)) 
and requiring interested parties to comment on notices of proposed 
rulemaking orally (paragraph (c)(1)) ``almost certainly would add 
confusion to a proceeding and, possibly, would restrict the due process 
rights of interested parties'' because the answers could address ``some 
of the most complex, sometimes arcane, and significant matters that 
come before the Commission.'' Id. at 25. It also argues that oral 
comments presented by lawyers would rarely be as useful as 
``thoughtful, written commentary.'' Id., n.11. It requests that the 
discretion to require oral rather than written responses be eliminated 
from the two paragraphs referenced above. Id. at 25-26.
    The answer to Valpak's concerns is that where complex or arcane 
matters are under review, the Commission is likely to reflect those 
considerations in its decision, and allow comments to be submitted in 
written form. While it might share Valpak's skepticism of the value of 
oral comments presented by attorneys, the Commission notes that oral 
comments on technical matters could be presented by technical experts. 
The Commission notes that 5 U.S.C. 553(c) affords interested persons a 
right to submit written comments in rulemakings covered by its 
procedures. Accordingly, the Commission has revised proposed rule 
3050.11(c) \3\ to provide interested persons with the right to submit 
written comments in response to a notice of proposed rulemaking issued 
under Sec.  3050.11. Final rule 3050.11, however, preserves the 
Commission's discretion to require answers or objections to data 
requests

[[Page 20838]]

made under Sec.  3050.11(a)(2) \4\ to be oral or in writing. This will 
allow the Commission to adjust procedures and review periods to fit the 
issues presented by a particular petition.
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    \3\ Proposed rule 3050.11(c) has become final rule 3050.11(d).
    \4\ Proposed rule 3050.11(a)(2) has become final rule 
3050.11(b)(2).
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    Notice of pending studies. The purpose of proposed rule 3050.11 is 
to provide for the input of mailers and the Commission before the 
Postal Service settles upon the analytical principles that it will 
apply in its annual reports to the Commission. Valpak argues that the 
rule will not be effective in accomplishing that purpose unless it 
requires the Postal Service to notify mailers and the Commission of 
special studies that are intended to result in changes to accepted 
analytical principles while those studies are still in their formative 
stage. Id. at 30-35. It proposes that the Postal Service be required to 
publish a ``short status report'' on all special studies that it 
proposes or are already underway, regardless of whether they would have 
to be submitted as Sec.  3050.11 proposals. It proposes that the list 
be updated quarterly, and include the ``unit within the Postal 
Service'' that is responsible for conducting the study, the study's 
beginning date, current status, and expected completion date, and the 
analytical principles that the study ``may affect.'' Id. at 35.
    The Postal Service considers adding such a requirement to Sec.  
3050.11 as impractical, burdensome and unnecessary. It argues that it 
has little incentive under the current regulatory system to keep its 
pending special studies secret until completed. It asserts that:

    The Commission has ample authority to discourage such 
inclinations simply by rejecting the resulting methodologies when 
the Postal Service `unveils' its proposals. Consequently, not 
wishing to waste time, effort, and money, the Postal Service is not 
going to proceed with major new studies in the PAEA regulatory 
environment without engaging in what it believes will be deemed by 
the Commission to be an appropriate amount of prior consultation. 
This entire portion of the Valpak comments is written as if Valpak 
did not bother to read the Commission's careful discussion of 
Strategic Rulemakings. Order No. 104 at 32-33.

Postal Service Reply Comments at 10-11 (footnote omitted).
    The Postal Service validly comments that strategic rulemakings are 
intended to provide mailers and the Commission with a description of 
its plans for new special studies and status reports on any special 
studies that are already underway. This is because a strategic 
rulemaking's main task is to obtain an overview of the Postal Service's 
research efforts, take inventory of its research needs, and set 
priorities for future research. In the interim between strategic 
rulemakings, the Postal Service is expected to keep mailers and the 
Commission current on major special studies, planned or pending, that 
are expected to lead to proposed changes in the analytical principles 
that it will use to prepare its annual reports to the Commission. If 
its voluntary efforts to provide mailers and the Commission notice of 
its plans for special studies should falter, the Commission could 
always reconsider Valpak's proposal to make notice mandatory.
    Advance review of changes to data reporting systems. The periodic 
reporting rules proposed by the Commission make an important 
distinction between analytical principles and mere quantification 
techniques. Analytical principles are methods that reflect a theory, 
precept, or assumption about causation. Changing analytical principles 
can be expected to change the results of an analysis. Quantification 
techniques, in contrast, are the mechanics of calculating numbers that 
are theory neutral. The classic example would be multiplying two 
numbers with a hand calculator versus multiplying the same two numbers 
with a slide rule. The technique used should not change the result. See 
proposed rules 3050.1 and 3050.2. The Commission's periodic reporting 
rules are designed to allow the Commission and the public to review 
changes to analytical principles before they are applied by the Postal 
Service to estimate its financial results. These rules intend to make 
this a manageable task by exempting mere quantification techniques from 
advance review and acceptance by the Commission.
    In Order No. 104, the Commission used a number of examples designed 
to illustrate the distinction between analytical principles, for which 
advance review is required, and quantification techniques, for which 
advance review is unnecessary. The Postal Service questions the 
appropriateness of several of these examples.
    One example used was a major change that the Postal Service 
recently made to the way that it collects Mail Processing Data System 
(MODS) data. MODS data is primarily used by postal managers to estimate 
plant workload so that the manager can adjust his staffing to match 
that workload. MODS data has long played a central role in modeling 
volume-variable mail processing costs, distributing those costs to 
subclasses, and in determining mail processing productivities in cost 
avoidance models.
    For decades, the Postal Service has relied on calculating First 
Handled Pieces (FHP) from MODS data as a proxy for how much volume was 
being handled by each processing plant. Finding a valid plant-wide 
estimate of FHP required that collection mail be weighed and the weight 
converted to the equivalent of pieces. This process was cumbersome, 
time consuming, and became less accurate if conversion factors were not 
updated. Nevertheless, for decades FHP has been the only reasonable 
proxy for plant-level volume that is available for modeling the volume 
variability of mail processing labor costs.
    Without knowing how much volume is coming in to mail processing 
plants, there is little chance of accurately estimating the share of 
the nearly $22 billion of variable mail processing costs for which each 
product is responsible. If the Postal Service cannot successfully model 
how different products incur different shares of system mail processing 
costs, it cannot know how profitable its various products are at the 
rates it has chosen. Not surprisingly, to lose the empirical basis for 
modeling how mail processing costs are caused is of concern to the 
Commission, which is charged by the PAEA with the responsibility of 
determining cost estimation methods.
    The Postal Service emphasizes that MODS is a management data system 
first, and a ratemaking data system second. It asserts that this makes 
it inappropriate for the Commission to require advance review of its 
decisions about how and when this data collection system should be 
modified. Postal Service Comments at 30-31.\5\
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    \5\ It is worth pointing out that it is the Postal Service that 
has made the decision to have MODS perform dual service as both a 
management data system and a data system that plays a central role 
in ratemaking. To find mail processing volumes, it could have chosen 
to establish a data system that is designed primarily as a 
ratemaking data system comparable to the In-Office Cost System 
(IOCS) or the City Carrier Cost System (CCCS). As long as it has 
made this choice, it should recognize that it has made the 
Commission and the mailing public a stakeholder in the way that MODS 
is administered.
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    Time Warner expands on the theme that the Commission should play a 
more passive role in the decisions that are made to modify the Postal 
Service's basic data collection systems. It extends that theme to data 
systems, like the IOCS, that were established primarily for ratemaking 
purposes. Time Warner argues that there are myriad minor changes to the 
IOCS that the Postal Service implements at the beginning of each fiscal 
year, and that it would be burdensome and unnecessary for the Postal 
Service to have to get advance

[[Page 20839]]

approval in an informal rulemaking before implementing most of these 
changes. As a substitute for that approach, Time Warner makes this 
---------------------------------------------------------------------------
proposal:

    A sounder, more moderate approach would be for the Postal 
Service, at the beginning of each fiscal year, to announce changes 
it is making in the instructions to IOCS data collectors and for 
interested parties to have an opportunity at that time to petition 
for the initiation of a rulemaking proceeding to review changes that 
seem questionable. Advance knowledge of the changes in format and 
content of the IOCS sample data would facilitate analysis by the 
Commission and interested parties of such data when it becomes 
available after the fiscal year is ended.

Time Warner Reply Comments at 4-5 (footnote omitted).
    The procedure that Time Warner describes seems to be similar to the 
one in proposed rule 3050.2 for handling changes made by the Postal 
Service in the quantification techniques that it uses. In that proposed 
rule, the change is listed and briefly described after the Postal 
Service has already incorporated it into its analysis and it is, for 
all practical purposes, a fait accompli.
    A procedure of this kind is appropriate for quantification 
techniques that have changed because quantification techniques are, by 
definition, not supposed to affect the results of an analysis. Changes 
to a basic data system such as IOCS, however, could affect the results 
of an analysis that relies on IOCS data. For that reason, if the Postal 
Service plans myriad minor changes to the IOCS or other basic data 
systems used in ratemaking, the Postal Service should treat them as 
changes to analytical principles and solicit public comment on them 
early enough that revisions can be made, if needed, without 
jeopardizing the planned implementation date for the changes. 
Accordingly, the proposal of Time Warner is not accepted.

E. Proposed Rule 3050.12 (Obsolete Special Studies)

    Proposed rule 3050.12 was inspired by some recent examples of cost 
estimates with important rate consequences that were significantly 
inaccurate because the Postal Service had relied on a one-time study or 
one-time data collection effort that had become grossly non-
representative with the passage of time. An example is the bundle-flow 
model that the Postal Service continued to use for Periodicals. It 
reflected a flat-processing environment that had largely disappeared 
roughly 5 years before the Postal Service began a field study to update 
the bundle-flow model to reflect post-AFSM 100 bundle flows. Another 
example is the Barcode Sorter accept rate for letters, which has a 
major impact on estimates of avoided costs for workshared letters. 
Nearly a decade passed before the Postal Service updated an accept rate 
that was originally based on a special survey.\6\ Proposed rule 3050.12 
would have required the Postal Service to list such one-time studies or 
one-time data collection efforts that it relies on to produce its 
annual periodic reports to the Commission and the study's completion 
date. The proposed rule would have required the Postal Service to 
either certify that each one-time study on which it continues to rely 
still reflects the current operating environment or provide a timetable 
for updating the study so that it does. The proposed rule included a 
presumption that a one-time study or data collection effort that is 
more than 5 years old is obsolete. It also included liberal waiver 
provisions. See Order No. 104 at 36, 43.
---------------------------------------------------------------------------

    \6\ The same data are now collected automatically and routinely 
updated.
---------------------------------------------------------------------------

    Even though one-time cost variability and cost avoidance studies 
are not routinely updated, the Postal Service asserts that they are 
``tied to'' basic data reporting systems that are updated every year, 
thus minimizing the need for the proposed rule. Postal Service Comments 
at 15-16. It also argues that the proposed rule would be burdensome and 
unworkable.
    To make that case, it focuses on cost avoidance models that 
underlie the calculation of worksharing discounts. It asserts that it 
would be impractical to list such models and identify the completion 
date of each because it continually refines such models in minor ways 
which, it claims, would make it difficult to determine their vintage. 
Id. at 15-20. It says that cost avoidance models ``have evolved over 
decades of postal litigation and incorporate new data as possible.'' 
Id. at 18. For example, ``wage rates, total mail processing costs by 
shape, piggyback factors, MODS data, and other inputs to these models 
are updated every year.'' It then asks ``[w]hat is the date that the 
Commission will use as a reference? * * * If one input in a study is 
more than five years old, is the study presumed to be obsolete?'' Id. 
It argues that such difficulties make it prudent to make proposed rule 
3050.12 a mere placeholder, to be available when the need for such a 
rule becomes more compelling. Id. at 14-15, 17.
    The Postal Service's argument that the vintage date of cost 
avoidance models is difficult to identify is essentially a ``straw 
man.'' It works only if one chooses to disregard the clearly drawn 
distinction in these periodic reporting rules between changed 
analytical principles on the one hand, and mere updating of input data 
on the other. See Order No. 104 at 27-29. The string of examples cited 
by the Postal Service all fall clearly into the latter category and, 
therefore, would not have a bearing on the ``completion date'' of a 
cost avoidance model. Postal Service Comments at 18. The completion 
data of a cost avoidance model is determined by the analytical method 
on which it is based. As Order No. 104 explains, changed analytical 
principles are those that change a causal theory or assumption. With 
respect to cost avoidance models, this would include a change in the 
underlying operations that are being modeled, piggybacking a type of 
cost for the first time, a redefined MODS pool, a new CRA adjustment 
factor, or a new density study. The Commission's recent experience with 
cost methodology rulemakings has demonstrated that the distinction 
between changing the analytical principles underlying cost models and 
updating the data that are input to those models is comprehensible and 
workable.
    The Commission, however, recognizes that the Postal Service's 
technical staff has limited time and resources to devote to the problem 
of updating the cost studies. Final rule 3050.12, therefore, is revised 
to impose the minimum reporting requirement that will still give the 
Commission a systematic indicator of the potential scope of the problem 
of reliance on obsolete special studies. Only paragraph (a) of the 
proposed rule (see Order No. 104 at 43) is retained in final rule 
3050.12. It now requires the Postal Service to list each special study 
relied on to produce its annual periodic reports to the Commission and 
its completion date. It requires the Postal Service to indicate whether 
the special study still reflects current operating conditions and 
procedures. It also requires the Postal Service to annually update the 
list. This will indicate to the Commission and the postal community 
where potential obsolescence problem areas might be.
    In paring back the requirements of Sec.  3050.12, the Commission 
accepts the suggestion of the Postal Service (Postal Service Comments 
at 17 and Time Warner (Time Warner Reply Comments at 2-3) that the 
problem of what to do about obsolescent special studies be addressed as 
part of a ``strategic rulemaking'' such as that described in Order No. 
104 at 32. A strategic

[[Page 20840]]

rulemaking would be one designed to make a comprehensive evaluation of 
the costing research needed by the Postal Service, prioritize those 
needs, and reach a consensus within the postal community on a timetable 
for achieving them.

F. Proposed Rule 3050.13 (Explanation of Changes Made to Accepted 
Analytical Principles)

    Proposed rule 3050.13(a) states:

    At the time the Postal Service files its Annual Report, it shall 
include a brief narrative explanation of any changes to accepted 
analytical principles that have been made since the most recent 
Annual Compliance Determination was issued, and the reasons that 
those changes were accepted.

Valpak proposes adding to the proposed rule a requirement that the 
Postal Service provide a table of analytical principles that have been 
changed since the last section 3652 report, that specifies the docket 
in which the change was approved, and estimates the effect of the 
change using current-year data. Valpak comments that the latter 
requirement would be especially useful since the analytical principle 
would have been approved on the basis of the previous year's data. 
Valpak Comments at 36-37.
    The Postal Service vigorously objects to adding the latter 
requirement. It emphasizes that Valpak is proposing that the Postal 
Service be required to run multiple versions of the current-year models 
for each approved change, one version with the change, and one version 
without. The Postal Service argues that this would be a waste of effort 
because these changes would have all been approved in advance.
    The Commission agrees with the Postal Service that the benefit of 
requiring this information is limited since the analytical principles 
will have already been approved in an informal rulemaking. The burden 
on the Postal Service could be substantial, however, if it were 
required to run its current-year model multiple times in the very brief 
period that it has to prepare its section 3652 report for the previous 
year. See Postal Service Reply Comments at 13-14. Because the burden 
appears to outweigh the benefit, the Commission declines to adopt the 
change proposed by Valpak.
    Paragraph (b) of proposed rule 3050.13 stated that the Postal 
Service's annual report was subject to proposed rule 3050.2. Proposed 
rule 3050.2 requires the Postal Service to identify changes in input 
data, quantification techniques, and corrections of errors in its 
periodic reports. Since the section 3652 report is a periodic report, 
the Commission concludes that paragraph (b) of this section is 
superfluous. Accordingly, paragraph (b) of this section has been 
deleted from final rule 3050.13.

G. Proposed Rule 3050.14 (Reporting the CRA in a More Disaggregated 
Format)

    Proposed rule 3050.14 states that the Postal Service's Cost and 
Revenue Analysis (CRA) report shall be presented in a format that 
reflects the current Mail Classification Schedule, but should also be 
presented in an alternative, more disaggregated format that is capable 
of reflecting the classification structure that was in effect prior to 
the adoption of the PAEA. The purpose is to report data in a way that 
can serve as building blocks. This would allow the data to be 
structured to coincide with historical data, which would facilitate 
analysis of trends in postal finances and operations and support model 
building with the use of time series and panel data. It would also 
accommodate future changes in the Mail Classification Schedule without 
destroying the usefulness of historical data for analysis and modeling 
going forward. The alternative, disaggregated format is illustrated by 
the Appendix to Order No. 104 entitled ``Products and Categories.'' A 
comparable Appendix accompanies this order.
    The Public Representative proposes that the Commission clarify the 
status of the Appendix. He argues that it should be made a formal 
appendix to part 3050 of the Commission's rules for inclusion in the 
Code of Federal Regulations (CFR), or that the Appendix be issued as a 
guidance document, consistent with OMB Bulletin 07-02, 72 FR 3432 
(January 25, 2007). Otherwise, he says, the mailing public might be 
unaware of the alternative information that it contains. Public 
Representative Comments at 8.
    The Commission believes that it would be inappropriate to make the 
Appendix a formal appendix that would appear in the CFR because it 
would be too cumbersome to update, should that become necessary. The 
Commission, however, will consider making it a guidance document.
    The Postal Service suggests that the Commission make minor 
refinements to the categories of international mail listed in the 
alternative reporting format in the Appendix, ``Products and 
Categories,'' accompanying Order No. 104. Postal Service Comments at 
41. The Postal Service proposes that product names in the Appendix 
conform to the new product names that it gave to its ``rebranded'' 
outbound international mail products on May 14, 2008. See 72 FR 16604 
(April 4, 2007). The Postal Service also seeks to update the Appendix 
to reflect the elimination of outbound economy mail services that use 
surface transportation. Id. Additional refinements requested include 
the use of a consistent naming convention for reporting purposes, and 
the elimination of reporting categories for which ``neither revenue nor 
cost information exists.'' Id. at 43.
    Most of the Postal Service's suggested refinements are adopted in 
the revised Appendix. However, the Commission adds certain inbound 
Special Services categories for which data should be reported. The 
revised Appendix replaces ``International First-Class Mail'' and 
``International Priority Mail'' with the rebranded names ``First-Class 
Mail International'' and ``Priority Mail International,'' respectively. 
The revised Appendix also removes references to ``surface'' under 
First-Class Mail International for outbound single-piece letters, 
flats, IPPs, and parcels, and outbound single-piece cards.\7\ However, 
the revised Appendix shows that data for ``air'' and ``surface'' 
categories should be reported under ``Inbound Single-Piece Mail (Letter 
Post)'' because air and surface were not eliminated as service 
offerings for inbound First-Class Mail International.
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    \7\ The acronym ``IPPs,'' or irregular parcels and pieces, 
refers to parcels that ``do not meet the dimensional criteria of 
machinable parcels and other parcels that cannot be processed by 
parcel sorters.'' Glossary of Postal Terms, Publication 32, May 1977 
(Updated With Revisions through July 5, 2007) at 56.
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    In keeping with the rebranded naming of outbound mail products, the 
Commission adds a reporting requirement for Global Express Guaranteed 
(GXG) and Express Mail International (EMI) under ``Outbound 
International Expedited Services'' in the Competitive Products section 
of the Appendix. This added reporting requirement is consistent with 
the Postal Service's existing reporting of GXG and EMI in the FY 2007 
and FY 2008 International Cost and Revenue Analysis (ICRA) reports.
    The revised Appendix adopts a consistent, new naming convention for 
reporting data related to outbound and inbound international mail. The 
new naming convention preserves the Commission's proposed reporting of 
disaggregated cost, volumes, and revenue data separately by terminal 
dues regime. See Order No. 104 at 18. The new naming convention also 
simplifies reporting by reducing the number of categories, primarily 
for inbound single-piece mail. Thus, the following naming convention is

[[Page 20841]]

adopted: Target System Countries at UPU rates, Transition System 
Countries at UPU rates, Subject to Agreement, Canada, Other.
    The new naming convention is applicable to First-Class Mail 
International, outbound single-piece letters, flats, IPPs, and parcels, 
outbound single-piece cards, and inbound single-piece mail (i.e., 
``letter post'') separately for inbound air and surface letter post; 
and Priority Mail International for outbound Priority Mail subject to 
terminal dues. For Inbound Air Parcel Post, the naming convention 
replaces ``At Non-UPU Rates'' with ``Subject to Agreement.''
    The new naming convention reference ``Subject to Agreement'' 
throughout the revised Appendix is intended to encompass the separate 
reporting of data by negotiated agreements that are both bilateral and 
multilateral in nature.\8\ In this regard, ``Canada'' is listed for the 
relevant products and categories of mail covered by an existing 
bilateral agreement, while ``Other'' is intended as a placeholder for 
reporting data in response to future bilateral or multilateral 
agreements.
---------------------------------------------------------------------------

    \8\ For purposes of this category, the term ``multilateral'' 
refers to an agreement other than the multilateral agreement of the 
UPU convention.
---------------------------------------------------------------------------

    International Ancillary Services is currently defined as a product 
on both the market dominant and competitive product lists. Among the 
component categories of that product are Inbound International Return 
Receipt and Inbound International Insurance. The FY 2008 ICRA includes 
line items for these services as well, although no revenue or cost 
information is reported.\9\ The Postal Service asserts that these 
categories should be dropped from the Appendix because revenue and cost 
information for them ``does not exist.'' Postal Service Comments at 43-
44. As long as these categories remain components of International 
Ancillary Services, and appear as line items in the ICRA, the 
Commission prefers that they appear in the alternative format as well. 
If there is no data to report, the Postal Service may enter an ``N/A'' 
notation.
---------------------------------------------------------------------------

    \9\ FY 2008 ICRA Report, December 29, 2008, worksheet tab A 
Pages (md) and A Pages (c).
---------------------------------------------------------------------------

    At the Postal Service's request, the Appendix is revised to include 
``Inbound International Delivery Confirmation'' as a reporting category 
for data on ``revenue from the delivery confirmation surcharge for 
[inbound] Xpresspost and Expedited Services [from] Canada.'' Id. at 44.
    Pitney Bowes proposes that the Commission attach a 3-year sunset 
provision to the Appendix, following up on the Commission's remark in 
Order No. 104 at 16, that the alternative format might not be needed 
after a few transitional years. The Commission prefers to watch events 
unfold to see how quickly the Mail Classification Schedule stabilizes, 
after which it will make a decision about the usefulness of the 
alternative format in the longer run.

H. Proposed Rule 3050.20 (Compliance and Other Postal Service Analyses)

    Time Warner provides several intricate arguments in support of what 
it terms ``a relatively clear-cut jurisdictional issue'' that it sees 
in Sec.  3050.20 as originally proposed. Time Warner Comments at 13. At 
the center of its discussion is concern over the types of circumstances 
where Commission action might be appropriate in response to a finding 
of ``noncompliance'' under 39 U.S.C. 3653(b). While some of Time 
Warner's arguments are unpersuasive, the Commission finds that the 
language of proposed rule 3050.20 should be modified to eliminate 
confusion in this area.
    The Commission finds misguided Time Warner's suggestion that the 
Postal Service is not required to develop and implement rates that 
comply with the rate policies of Sec.  3622. Id. at 9-10. The PAEA 
provides an integrated set of policy guidelines for the Postal Service 
to follow in setting rates. Although the Commission is responsible for 
reviewing the Postal Service's performance, most commenters believe 
that the initial responsibility for balancing and achieving these 
policies is, and should be, with the Postal Service rather than the 
Commission.
    Section 3622(a) does direct the Commission to establish, and when 
necessary revise, a system of ratemaking to foster achievement of the 
requirements, objectives, and factors spelled out in subsequent 
paragraphs. Order No. 43 implemented such a system, directing that the 
Postal Service accompany each planned rate increase with a 
demonstration of compliance with those policies. See 39 CFR 3010.14.
    However, even if no regulations had been implemented by the 
Commission, the Governors would have to establish rates that comply 
with the policies of Sec.  3622. 39 U.S.C. 404(b) only authorizes the 
Governors to establish rates that are in accordance with the policies 
of chapter 36 of title 39 of the United States Code.
    Time Warner contends that the concept of ``compliance'' is not 
easily applicable to such things as objectives and factors, which by 
their nature must be weighed and balanced. To ease concerns over the 
potential misuse of the Commission's broad remedial powers, Time Warner 
requests a Commission statement on how or when it might find the Postal 
Service to be not in compliance with such subjective terms. The 
Commission believes that Time Warner's request is well intentioned, but 
this rulemaking is not an appropriate vehicle for such a discussion.
    The Postal Service joins Time Warner in arguing that it should not 
have to analyze the extent to which it has achieved its program 
performance goals established under Sec. Sec.  2803 and 2804 as part of 
the compliance analysis required by proposed rule 3050.20. It argues 
that these sections already require the Postal Service to discuss its 
performance goals and evaluate its achievement of those goals in the 
comprehensive statement that it is required to file with Congress by 39 
U.S.C. 2401(e). When evaluating whether the Postal Service has met its 
program performance goals, the Postal Service argues, it is the 
Commission's duty to review the Postal Service's comprehensive 
statement. Postal Service Comments at 49.
    Sections 2803 and 2804 require the Postal Service to evaluate the 
degree to which its individual programs have met their objectives, by 
quantitative criteria where possible. The comprehensive statement that 
the Postal Service must file with Congress under Sec.  2401(e) includes 
these program performance evaluations. Those evaluations, if done 
properly, would allow the Commission to determine whether the 
performance goals established under Sec. Sec.  2803 and 2804 have been 
met. Because it is redundant, the requirement in proposed rule 3050.20 
that the Postal Service analyze whether it has met the program 
performance goals established under Sec. Sec.  2803 and 2804 has been 
deleted from final rule 3050.20. The Commission does this on the 
understanding that the Postal Service's comprehensive statement filed 
under Sec.  2401(e) will be sufficiently specific and concrete to allow 
the Commission to make an informed determination as to whether the 
Postal Service has met the performance goals established for specific 
programs, as Sec. Sec.  2803 and 2804 contemplate.
    Section 3653(d) authorizes the Commission annually to make 
``recommendations'' to the Postal Service ``related to the protection 
or promotion of public policy objectives set out in this title.'' This 
authorization is broader in subject matter than the Postal Service's 
comprehensive statement, which is limited to an analysis of how the 
Postal Service's

[[Page 20842]]

programs have met the public policy objectives of Sec.  101 of title 39 
of the United States Code. Because it is not redundant of the analyses 
required in the Postal Service's comprehensive statement, the 
requirement in proposed rule 3050.20 that the Postal Service analyze 
how its products (individually or collectively) have promoted the 
public policy objectives of title 39 remains in final rule 3050.20.
    Section 3653 allows the Commission the latitude to evaluate 
compliance ``for products individually or collectively.'' This language 
appears to authorize the Commission to determine what level of 
disaggregation makes sense when analyzing compliance with a particular 
criterion derived from the statute. The Commission believes that it 
will be beneficial to harmonize the analyses required of the Postal 
Service under proposed rule 3050.20 with the evaluations that Sec.  
3653 authorizes the Commission to make. Therefore, the Commission 
revises the language of final rule 3050.20 to allow the Postal Service 
to analyze whether its products have complied with a particular 
statutory goal, objective, or mandate, both at the individual product 
level, or for products collectively, where analysis at that level is 
appropriate.
    The Commission agrees with Time Warner that using the term 
``compliance'' in the title of proposed rule 3050.20 does not 
appropriately describe the task it assigns to the Postal Service--to 
analyze how its products have promoted the public policy objectives of 
title 39 of the United States Code. The Public Representative agrees. 
See Public Representative Reply Comments at 3. The solution is to 
bro