Postal Rates, 35899-35902 [E9-17286]
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Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Notices
same Postal Qualified Wholesalers
(PQWs) as the parties to the contracts in
Docket Nos. CP2008–16 and CP2008–17.
Even though some terms and conditions
of the contracts have changed, it states
the essence of the service to the PQW
customers is offering price-based
incentives to commit large amounts of
mail volume or postage revenue for
Global Bulk Economy (GBE) and Global
Direct (GD).3
The Postal Service indicates that the
instant contracts have material
differences which include removal of
retroactivity provisions, explanations of
price modification as a result of
currency rate fluctuations or postal
administration fees; removal of language
on enforcement of mailing
requirements; and restructuring of price
incentives, commitments, penalties and
clarification of continuing contractual
obligations in the event of termination.
The Postal Service maintains these
differences only add detail or amplify
processes included in prior Global Plus
2 contracts. It contends because the
contracts have the same cost attributes
and methodology as well as similar cost
and market characteristics, the
differences do not affect the
fundamental service being offered or the
essential structure of the contracts. Id. at
8. It states the contracts are substantially
similar both to one another and to the
precursor Global Plus 2 contracts.
Therefore, it asserts these contracts are
‘‘functionally equivalent in all pertinent
respects.’’ Id. at 8.
II. Notice of Filing
The Commission establishes Docket
Nos. CP2009–48 and CP2009–49 for
consideration of the matters related to
the contracts identified in the Postal
Service’s Notice.
Interested persons may submit
comments on whether the instant
contracts are consistent with the
policies of 39 U.S.C. 3632, 3622, or
3642. Comments are due no later than
July 23, 2009. The public portions of
these filings can be accessed via the
Commission’s Web site (https://
www.prc.gov).
The Commission appoints Michael J.
Ravnitzky to serve as Public
Representative in these dockets.
III. Ordering Paragraphs
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It is Ordered:
3 The Postal Service states the commitments also
account for International Priority Airmail (IPA),
International Surface Air Lift (ISAL), Express Mail
International (EMI), and Priority Mail International
(PMI) items mailed under a separate but related
Global Plus 1 contract with each customer. The
Global Plus 1 contracts are the subject of a separate
competitive products proceeding.
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1. The Commission establishes Docket
Nos. CP2009–48 and CP2009–49 for
consideration of the issues raised in
these dockets.
2. Comments by interested persons on
issues in these proceedings are due no
later than July 23, 2009.
3. Pursuant to 39 U.S.C. 505, Michael
J. Ravnitzky is appointed to serve as
officer of the Commission (Public
Representative) to represent the
interests of the general public in these
proceedings.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
Issued: July 16, 2009.
By the Commission.
Judith M. Grady,
Acting Secretary.
[FR Doc. E9–17420 Filed 7–20–09; 8:45 am]
BILLING CODE 7710–FW–P
POSTAL REGULATORY COMMISSION
[Docket No. RM2009–3; Order No. 243]
Postal Rates
Postal Regulatory Commission.
Notice of public forum.
AGENCY:
ACTION:
SUMMARY: This document announces a
public forum to address workshare
discount methodologies in First-Class
Mail and Standard Mail. It invites
public participation in the forum,
responses to views expressed at the
forum, and replies to comments filed in
response to Order No. 192. This
document also incorporates revisions
identified in a July 10, 2009 errata
notice. The revisions affected only the
list of commenters presented in Order
No. 243.
DATES: Public forum: August 11, 2009 at
1 p.m.; responses and reply comments
due: August 31, 2009.
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,
at 202–789–6820 or
stephen.sharfman@prc.gov.
SUPPLEMENTARY INFORMATION: Regulatory
History, 74 FR 50744 (March 24, 2009).
I. Introduction
II. Public Forum Issues
III. Ordering Paragraphs
I. Introduction
On March 16, 2009, the Commission
issued Order No. 191 in Docket No.
R2009–2 approving a set of market
dominant rate changes proposed by the
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35899
Postal Service. It did so with the
awareness that a number of complex
issues relating to the proper application
of the Postal Accountability and
Enhancement Act (PAEA), Public Law
109–435, 120 Stat. 3198 (2006), to those
rates could best be resolved in a followon docket in which sufficient time and
sufficiently flexible procedures would
be available to ensure that these issues
could be thoroughly examined. To that
end, the Commission issued Order No.
192, also on March 16, 2009, soliciting
public comment on the ‘‘legal, factual,
and economic bases’’ underlying the
discounts for First-Class and Standard
Mail approved in Docket No. R2009–2,
and any alternative workshare discount
rate design and cost avoidance
methodologies that participants wished
to propose.1
The comments received on May 26
and 27, 2009 were numerous and wideranging.2 Those comments include legal
interpretations of the relevant portions
of the PAEA, offered arguments (largely
qualitative) concerning the market
position of various categories of FirstClass and Standard Mail, and advocate
both the use or abandonment of certain
traditional benchmarks used to quantify
the costs avoided by various mail
characteristics associated with
workshare discounts. Several
participants offered classification
proposals designed to recognize the
unique cost characteristics of various
subsets of First-Class Mail. Specifically,
Stamps.com proposed that a ‘‘Qualified
PC Postage’’ mail category be
established to reflect the reduced costs
that would accompany single-piece
First-Class Mail to which the mailer has
applied CASS certified software and a
full-service Intelligent Mail Barcode.
Stamps.com Comments at 1. In
addition, the officer of the Commission
appointed to represent the interests of
the general public (Public
Representative) proposed that if the link
between single-piece First-Class Mail
costs and presorted First-Class Mail
rates is to be abandoned, that singlepiece First-Class Mail be established as
a separate class of mail for rate setting
purposes. Public Representative’s
Comments at 23–27.
It is clear from the comments that
resolving some of these issues will be
contingent on how others are resolved.
For example, if the Commission were to
agree with the Postal Service’s view
1 See Order No. 192, Notice of Proposed
Rulemaking on Application of Workshare Discount
Rate Design Principles, March 16, 2009, at 3 (Order
No. 192).
2 There were 13 commenters in response to Order
No. 192. For convenience, participant comments are
identified in Appendix A to this order.
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Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Notices
that, as a legal matter, the worksharing
discount standards of 39 U.S.C. 3622(e)
apply only to components of individual
‘‘products’’ as defined in the Mail
Classification Schedule, it would render
moot any consideration of the market
positions of the various First-Class and
Standard Mail categories issued in
Docket No. R2009–2. Similarly, if the
Commission were to conclude that
section 3622(e) may be applied across
products, but each product at issue
serves a separate and distinct market,
that conclusion would dispense with
the need to consider the issue of what
benchmark would be most appropriate
for measuring the cost avoided by the
worksharing characteristics of those
products. Likewise, if the Commission
were to conclude that First-Class Mail
may not be further subdivided for
purposes of applying caps to rates, it
would nullify the Public
Representative’s rationale for proposing
to establish single-piece First-Class Mail
as a separate class of mail. Because
these issues are mutually dependent,
they will be considered together in the
current phase of this proceeding.
Technical issues of how avoided costs
should be calculated will be considered
after the need for benchmarks has been
confirmed and appropriate benchmarks
have been identified.
Some of the key issues to be
addressed in this docket have basic
public policy dimensions. The
Commission has determined that those
issues might benefit from being aired in
the context of a public forum. A public
forum will have the advantage of
allowing representatives of various
interests to have a dialogue, and
exchange views in a non-adversarial
discussion that allows others to respond
with their own supporting or
contrasting views or with clarifying
questions. The Commission hopes that
such a forum will significantly
strengthen the record on which these
policy-laden decisions will be based. It
envisions convening such a forum
August 11, 2009, at 1 p.m. in the
Commission’s hearing room.
Participants will have an opportunity
to file written responses both to the
exchange of views at the forum and to
the comments filed in response to Order
No. 192 (the notice of proposed
rulemaking in this docket). Those
responses will be due on or before
August 31, 2009. The Commission also
will provide interested parties with an
opportunity to address technical issues
concerning how avoided costs should be
modeled at a later date, when the legal,
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policy, and economic issues described
below have been resolved.3
II. Public Forum Issues
There are two issues that the
Commission would like to explore
further in the context of a public forum.
The first is the issue of whether the
users of single-piece First-Class Mail are
entitled to special protection under the
PAEA, and, if so, whether protection
should take the form of:
1. Maintaining the traditional linkage
of single-piece rates to the rates charged
for Presorted First-Class Mail through a
suitable benchmark;
2. Establishing a separate class of
single-piece First-Class Mail subject to
its own rate cap;
3. Adopting a regulation that would
limit the difference allowed between
single-piece and presorted First-Class
Mail in terms of either average revenue
per piece or percent contribution to
institutional costs;
4. Relying on a qualitative or
subjective standard of protection, such
as the ‘‘just and reasonable’’ standard of
section 3622(b)(8); or
5. Other suggested forms of
protection.
The second policy issue that the
Commission would like the public
forum to address is whether a
worksharing discount should be defined
as:
1. A ‘‘pure’’ presorting, prebarcoding,
handling, or transportation activity that
is a direct substitute for an equivalent
Postal Service activity; or
2. A ‘‘pure’’ worksharing activity as
described above, plus other costreducing mail characteristics that are
facilitated by or naturally support the
‘‘pure’’ worksharing activity, e.g., walk
sequencing and density.
A related aspect of the second policy
issue is whether a discount that reflects
both cost-reducing characteristics that
are directly related to a worksharing
activity, and others that are indirectly
related to, or unrelated to the
worksharing activity:
1. Should be defined as
‘‘worksharing’’ or ‘‘non-worksharing’’
according to some rule, such as which
cost-reducing effect is thought to
predominate;
2. Should be unbundled so that
separate discounts are developed for the
3 For example, several commenters have
indicated an interest in proposing modifications to
established methods for modeling costs avoided by
worksharing, depending on how logically prior
issues have been resolved. See Postal Service
Comments at 46–47; MMA Comments at 12; and
APWU Comments at 7. Consideration of such
proposals will take place at a later, appropriate
time.
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worksharing and non-worksharing
components; or
3. Should remain bundled, but be
analytically decomposed into its
worksharing and other components so
that section 3622(e) standards may be
applied to the worksharing component.
In addition to the broad issues
described above that the Commission
considers appropriate for discussion in
the August 11, 2009 forum, there are
several technical aspects of those issues
that participants should ponder and
comment upon, either in the forum
itself or in the written comments that
are due on August 31, 2009.
Issues specific to First-Class Mail. The
assertions in the comments about the
nature of markets for First-Class letters
are, for the most part, qualitative. What
little supporting data are offered are
subject to more than one interpretation.
In the next round of written comments,
the Commission encourages parties to
provide empirical support for their
understanding of the state of the
markets for single-piece and presort
First-Class Mail letters. Information
about attributes of smaller business
mailers who can be converted (or
already have been converted) by presort
firms from users of single-piece into
users of presorted First-Class would be
especially useful. Similarly, information
about how price signals influence
mailers’ decisions to invest in hardware,
software or quality control processes to
avoid postage penalties that could result
from failing Postal Service acceptance
tests would be particularly helpful.
Issues specific to Standard Mail.
Several commenters make assertions
about the market differences between
Carrier Route, High Density, and
Saturation mail that are largely
qualitative. They assert, for example,
that Saturation mailers appear to have
more delivery alternatives than Carrier
Route or High Density mailers. Valassis/
SMC argues that private delivery is a
less viable option for High Density
mailers because such mailings are
demographically, rather than
geographically targeted. See Valassis/
SMC Comments at 12, n.7. This would
seem to indicate that the market for
High Density mail is more closely
related to the market for Carrier Route
mail because both target specific
addresses. In the next round of
comments, the Commission encourages
parties to provide empirical support for
their understanding of the state of the
markets for the former components of
Enhanced Carrier Route mail.
The Commission also welcomes
additional comment on how
worksharing cost avoidance should be
defined and measured in the context of
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Standard Mail. The Commission has
long concluded that to promote
productive efficiency, discounts for
related categories of mail with the same
own-price demand elasticity should not
exceed the costs that the Postal Service
avoids when mailers perform
worksharing. This principle is known as
efficient component pricing (ECP). The
Postal Service has taken the former
components of the Enhanced Carrier
Route subclass—Carrier Route, High
Density, and Saturation mail—and
redefined them as separate products.
The Postal Service, however, continues
to estimate an own-price elasticity for
these categories as a group, and the
Commission has continued to apply
ECP to worksharing cost differences
among these rate categories on the
premise that they serve the same market
and have essentially the same elasticity
of demand. The Postal Service and some
other commenters now contend that the
High Density and Saturation categories
each serve distinct markets. See Valpak
Comments at 17–18; Valassis/SMC
Comments at 10–14; and Haldi
Comments at 15–16. If true, economic
theory suggests that cost coverages for
each of these products should reflect
distinct market conditions.
If there is not sufficient empirical
evidence to conclude that these
categories serve separate markets, and
ECP remains relevant, applying it under
the current classification structure with
its attendant eligibility requirements is
problematic. For example, several
commenters contend that the difference
in cost between High Density mail and
Saturation mail reflects only the effect
of the density eligibility requirement,
not the effect of worksharing. See Postal
Service Comments at 29; Haldi
Comments at 11; and Valassis/SMC
Comments at 2.
Sequencing mail, however, appears to
fit the definition of worksharing activity
in section 3622(e). If the mailer does not
sequence the mail, then the Postal
Service must do it. A mailer’s decision
to sort the mail into walk-sequence
order depends on the menu of rates. If
a mailer were to prepare a flat-shaped
Saturation mailing without sequencing
it, the mailer would have to pay the 5digit presort rate. He would not be
eligible for the Carrier Route rate
because line-of-travel sequencing is a
prerequisite for that rate. Similarly, he
would not be eligible for the High
Density rate because walk-sequencing is
a prerequisite for that rate.
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Absent demand differences,4 the
relationship between these categories of
mail suggests that the less deeply
sequenced categories could serve as
benchmarks from which the costs
avoided by more deeply sequenced
categories could be measured. For
example, the 5-digit category could be a
suitable cost avoidance benchmark for
all of the remaining categories.
Alternatively, a mailer who presents
High Density or Saturation mail rather
than Carrier Route mail to the Postal
Service does so because the difference
in his cost between sorting to line of
travel and sorting to walk-sequence is
less than the corresponding rate
difference; otherwise, a prudent mailer
would not sort the mail in walksequence order. Accordingly, the cost of
sorting mail to the line-of-travel order as
reflected in the attributable delivery cost
of Carrier Route mail could be viewed
as the appropriate benchmark for both
High Density and Saturation mail.5
With respect to the relationship
between High Density and Saturation
mail, the Postal Service asserts that
there is no worksharing content
difference between the two, and
therefore ECP does not apply. Although
the Postal Service recognizes that there
is a cost difference, it contends that it
is due to density, not to worksharing
activity. The observed cost difference,
however, could be characterized as
gains in efficiency brought about by
worksharing activity, i.e., the Postal
Service’s cost per piece of sorting mail
to walk-sequence order declines as
density increases.6
Viewed as a worksharing-related cost
difference, the rate for a High Density
flat would reflect the difference in
attributable delivery cost between a
4 As noted, in the past, the Commission
determined that Carrier Route, High Density, and
Saturation mail, as a group, share an own-price
demand elasticity that is distinct from Non-carrier
Route mail. For this reason, it de-linked 5-digit mail
and Carrier Route mail in Docket No. MC95–1 when
the former Enhanced Carrier Route (ECR) subclass
was established.
5 Using Carrier Route mail as a benchmark for
letter-shaped Standard Mail is also problematic
because the minimum number of pieces required
for the 5-digit letter rate is 150, while the Carrier
Route letter rate requires only 10 pieces.
6 This is confirmed by Witness Shipe’s testimony
in Docket No. R90–1. It shows that carriers case
mail at a rate of 20.6 pieces per minute for nonsequenced Carrier Route letters, 29.0 pieces for
walk-sequenced High Density letters, and 41.2
pieces for Saturation letters. The corresponding
numbers for flats are 10.7, 13.6 and 27.4 pieces per
minute. See Docket No. R90–1, Direct Testimony of
Thomas Shipe, USPS–T–10, Exhibit USPS–10B, at
3 and 6. This constitutes declining marginal cost.
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35901
High Density flat and a Carrier Route
flat. Similarly, the rate for a Saturation
flat would reflect the difference in
attributable delivery cost between a
Saturation flat and a Carrier Route flat.
Using the same percentage passthrough
for each walk-sequencing discount
would be the mathematical equivalent
of retaining the link between High
Density and Saturation mail.
In addition to commenting on the
broader, more theoretical questions
discussed above, the Commission
invites interested participants to
comment on the following specific
issues and questions:
1. What empirical evidence is there
supporting the proposition that Carrier
Route, High Density, and Saturation
mail each serve separate markets?
2. If High Density and Saturation mail
serve the same market, should the
difference in worksharing unit cost
between High Density and Saturation
mail be subject to the standards of
section 3622(e)? If the answer is no,
specify why marginal worksharing cost
differences are not pertinent to rate
setting.
3. If Carrier Route and High Density
mail serve the same market, should rates
for Saturation mail be set as though it
serves a separate market, even though it
is not classified as a separate product?
4. What bearing does the probability
of mail receiving automated or manual
delivery point sequencing have on the
answers to the above questions?
III. Ordering Paragraphs
It is ordered:
1. A public forum that addresses the
issues described in the body of this
order will be held on August 11, 2009,
at 1 p.m., in the Commission’s hearing
room.
2. Written comments on the matters
discussed at the public forum as well as
the issues discussed in the comments
filed in response to Order No. 192 are
due on or before August 31, 2009.
3. The Secretary shall arrange for
publication of this order in the Federal
Register.
Issued: July 10, 2009.
By the Commission.
Judith M. Grady,
Acting Secretary.
Appendix A—Comments on Notice of
Proposed Rulemaking on Application
of Workshare Discount Rate Design
Principles
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Participant
Title
American Postal Workers Union, AFL–CIO (APWU Comments).
Bank of America Corporation, Discover Financial Services,
J.P. Morgan Chase & Co., and the American Bankers Association.
Greeting Card Association .........................................................
John Haldi (Haldi Comments) ...................................................
Initial Presentation of American Postal Workers Union, AFL–
CIO.
Initial Comments of Bank of America Corporation, Discover
Financial Services, J.P. Morgan Chase & Co., and the
Bankers Association.
Initial Comments of the Greeting Card Association ................
Statement of John Haldi, Ph.D. Concerning Workshare Discounts.
Comments of Mail Order Association of America ...................
Initial Comments of Major Mailers Association ........................
Comments of National Postal Policy Council ..........................
Initial Comments of Pitney Bowes Inc .....................................
Comments of the Public Representatives ...............................
Initial Presentation of Stamps.com ..........................................
Initial Comments of the United States Postal Service .............
Comments of Valassis Direct Mail, Inc. and Saturation Mailers Coalition.
Valpak Direct Marketing Systems, Inc. and Valpak Dealers’
Association, Inc. Comments Regarding Standard Mail Volume Incentive Pricing Program.
Mail Order Association of America ............................................
Major Mailers Association (MMA Comments) ...........................
National Postal Policy Council ...................................................
Pitney Bowes Inc .......................................................................
Public Representatives (Public Representatives Comments) ...
Stamps.com (Stamps.com Comments) .....................................
United States Postal Service (Postal Service Comments) ........
Valassis Direct Mail, Inc. and Saturation Mailers Coalition
(Valassis/SMC Comments).
Valpak Direct Marketing Systems, Inc. and Valpak Dealers’
Association, Inc (Valpak Comments).
[FR Doc. E9–17286 Filed 7–20–09; 8:45 am]
BILLING CODE 7710–FW–P
SMALL BUSINESS ADMINISTRATION
Reporting and Recordkeeping
Requirements Under OMB Review
Small Business Administration.
Notice of reporting requirements
submitted for OMB review.
AGENCY:
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ACTION:
SUMMARY: Under the provisions of the
Paperwork Reduction Act (44 U.S.C.
Chapter 35), agencies are required to
submit proposed reporting and
recordkeeping requirements to OMB for
review and approval, and to publish a
notice in the Federal Register notifying
the public that the agency has made
such a submission.
DATES: Submit comments on or before
August 20, 2009. If you intend to
comment but cannot prepare comments
promptly, please advise the OMB
Reviewer and the Agency Clearance
Officer before the deadline.
Copies: Request for clearance (OMB
83–1), supporting statement, and other
documents submitted to OMB for
review may be obtained from the
Agency Clearance Officer.
ADDRESSES: Address all comments
concerning this notice to: Agency
Clearance Officer, Jacqueline White,
Small Business Administration, 409 3rd
Street, SW., 5th Floor, Washington, DC
20416; and OMB Reviewer, Office of
Information and Regulatory Affairs,
Office of Management and Budget, New
Executive Office Building, Washington,
DC 20503.
FOR FURTHER INFORMATION CONTACT:
Jacqueline White, Agency Clearance
Officer, (202) 205–7044.
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SUPPLEMENTARY INFORMATION:
Title: Secondary Participation
Guaranty Agreement.
SBA Form Numbers: 1086, 1502.
Frequency: On occasion.
Description of Respondents: SBA
Participating Lenders.
Responses: 530.
Annual Burden: 42,000.
Title: Applications for Business
Loans.
SBA Form Numbers: 4, 4SCH–A, 4I,
4L.
Frequency: On occasion.
Description of Respondents:
Applicants applying for a SBA Loan.
Responses: 21,000.
Annual Burden: 295,505.
Title: Small Business Administration
(SBA) Surety Bond Guarantee (SBG)
Customer Survey.
SBA Form Number: N/A.
Frequency: On occasion.
Description of Respondents: SBG
Program management to access program
familiarity in the general small
contractor population and to help
determine the potential market for SBA
surety bond guarantee.
Responses: 382.
Annual Burden: 13.
Jacqueline White,
Chief, Administrative Information Branch.
[FR Doc. E9–17255 Filed 7–20–09; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
Data Collection Available for Public
Comments and Recommendations
ACTION: Notice and request for
comments.
SUMMARY: In accordance with the
Paperwork Reduction Act of 1995, this
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Filing date
May 27, 2009.
May 27, 2009.
May 26, 2009.
May 26, 2009.
May
May
May
May
May
May
May
May
26,
26,
26,
26,
26,
26,
26,
26,
2009.
2009.
2009.
2009.
2009.
2009.
2009.
2009.
May 26, 2009.
notice announces the Small Business
Administration’s intentions to request
approval on a new and/or currently
approved information collection.
DATES: Submit comments on or before
September 21, 2009.
ADDRESSES: Send all comments
regarding whether this information
collection is necessary for the proper
performance of the function of the
agency, whether the burden estimates
are accurate, and if there are ways to
minimize the estimated burden and
enhance the quality of the collection, to
Barbara Brannan, Special Assistant,
Office of Surety Guarantee, Small
Business Administration, 409 3rd Street,
8th Floor, Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT:
Barbara Brannan, Special Assistant,
Office of Surety Guarantee 202–205–
6545 barbara.brannan@sba.gov Curtis B.
Rich, Management Analyst, 202–205–
7030 curtis.rich@sba.gov
SUPPLEMENTARY INFORMATION: SBA’s
Surety Bond Guarantee (SBG) Program
was created to encourage surety
companies to provide bonding for small
contractors. The information collected
on these forms is used to evaluate the
capability and potential sources of small
contractors in the SBG Program.
Title: ‘‘Surety Bond Guarantee
Assistance.’’
Description of Respondents: Surety
Bond Companies.
Form Number: 990, 991, 994, 994B,
994F, 994H.
Annual Responses: 17,916.
Annual Burden: 1,959.
Jacqueline White,
Chief, Administrative Information Branch.
[FR Doc. E9–17254 Filed 7–20–09; 8:45 am]
BILLING CODE 8025–01–P
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]]>Agencies
[Federal Register Volume 74, Number 138 (Tuesday, July 21, 2009)]
[Notices]
[Pages 35899-35902]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-17286]
-----------------------------------------------------------------------
POSTAL REGULATORY COMMISSION
[Docket No. RM2009-3; Order No. 243]
Postal Rates
AGENCY: Postal Regulatory Commission.
ACTION: Notice of public forum.
-----------------------------------------------------------------------
SUMMARY: This document announces a public forum to address workshare
discount methodologies in First-Class Mail and Standard Mail. It
invites public participation in the forum, responses to views expressed
at the forum, and replies to comments filed in response to Order No.
192. This document also incorporates revisions identified in a July 10,
2009 errata notice. The revisions affected only the list of commenters
presented in Order No. 243.
DATES: Public forum: August 11, 2009 at 1 p.m.; responses and reply
comments due: August 31, 2009.
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,
at 202-789-6820 or stephen.sharfman@prc.gov.
SUPPLEMENTARY INFORMATION: Regulatory History, 74 FR 50744 (March 24,
2009).
I. Introduction
II. Public Forum Issues
III. Ordering Paragraphs
I. Introduction
On March 16, 2009, the Commission issued Order No. 191 in Docket
No. R2009-2 approving a set of market dominant rate changes proposed by
the Postal Service. It did so with the awareness that a number of
complex issues relating to the proper application of the Postal
Accountability and Enhancement Act (PAEA), Public Law 109-435, 120
Stat. 3198 (2006), to those rates could best be resolved in a follow-on
docket in which sufficient time and sufficiently flexible procedures
would be available to ensure that these issues could be thoroughly
examined. To that end, the Commission issued Order No. 192, also on
March 16, 2009, soliciting public comment on the ``legal, factual, and
economic bases'' underlying the discounts for First-Class and Standard
Mail approved in Docket No. R2009-2, and any alternative workshare
discount rate design and cost avoidance methodologies that participants
wished to propose.\1\
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\1\ See Order No. 192, Notice of Proposed Rulemaking on
Application of Workshare Discount Rate Design Principles, March 16,
2009, at 3 (Order No. 192).
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The comments received on May 26 and 27, 2009 were numerous and
wide-ranging.\2\ Those comments include legal interpretations of the
relevant portions of the PAEA, offered arguments (largely qualitative)
concerning the market position of various categories of First-Class and
Standard Mail, and advocate both the use or abandonment of certain
traditional benchmarks used to quantify the costs avoided by various
mail characteristics associated with workshare discounts. Several
participants offered classification proposals designed to recognize the
unique cost characteristics of various subsets of First-Class Mail.
Specifically, Stamps.com proposed that a ``Qualified PC Postage'' mail
category be established to reflect the reduced costs that would
accompany single-piece First-Class Mail to which the mailer has applied
CASS certified software and a full-service Intelligent Mail Barcode.
Stamps.com Comments at 1. In addition, the officer of the Commission
appointed to represent the interests of the general public (Public
Representative) proposed that if the link between single-piece First-
Class Mail costs and presorted First-Class Mail rates is to be
abandoned, that single-piece First-Class Mail be established as a
separate class of mail for rate setting purposes. Public
Representative's Comments at 23-27.
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\2\ There were 13 commenters in response to Order No. 192. For
convenience, participant comments are identified in Appendix A to
this order.
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It is clear from the comments that resolving some of these issues
will be contingent on how others are resolved. For example, if the
Commission were to agree with the Postal Service's view
[[Page 35900]]
that, as a legal matter, the worksharing discount standards of 39
U.S.C. 3622(e) apply only to components of individual ``products'' as
defined in the Mail Classification Schedule, it would render moot any
consideration of the market positions of the various First-Class and
Standard Mail categories issued in Docket No. R2009-2. Similarly, if
the Commission were to conclude that section 3622(e) may be applied
across products, but each product at issue serves a separate and
distinct market, that conclusion would dispense with the need to
consider the issue of what benchmark would be most appropriate for
measuring the cost avoided by the worksharing characteristics of those
products. Likewise, if the Commission were to conclude that First-Class
Mail may not be further subdivided for purposes of applying caps to
rates, it would nullify the Public Representative's rationale for
proposing to establish single-piece First-Class Mail as a separate
class of mail. Because these issues are mutually dependent, they will
be considered together in the current phase of this proceeding.
Technical issues of how avoided costs should be calculated will be
considered after the need for benchmarks has been confirmed and
appropriate benchmarks have been identified.
Some of the key issues to be addressed in this docket have basic
public policy dimensions. The Commission has determined that those
issues might benefit from being aired in the context of a public forum.
A public forum will have the advantage of allowing representatives of
various interests to have a dialogue, and exchange views in a non-
adversarial discussion that allows others to respond with their own
supporting or contrasting views or with clarifying questions. The
Commission hopes that such a forum will significantly strengthen the
record on which these policy-laden decisions will be based. It
envisions convening such a forum August 11, 2009, at 1 p.m. in the
Commission's hearing room.
Participants will have an opportunity to file written responses
both to the exchange of views at the forum and to the comments filed in
response to Order No. 192 (the notice of proposed rulemaking in this
docket). Those responses will be due on or before August 31, 2009. The
Commission also will provide interested parties with an opportunity to
address technical issues concerning how avoided costs should be modeled
at a later date, when the legal, policy, and economic issues described
below have been resolved.\3\
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\3\ For example, several commenters have indicated an interest
in proposing modifications to established methods for modeling costs
avoided by worksharing, depending on how logically prior issues have
been resolved. See Postal Service Comments at 46-47; MMA Comments at
12; and APWU Comments at 7. Consideration of such proposals will
take place at a later, appropriate time.
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II. Public Forum Issues
There are two issues that the Commission would like to explore
further in the context of a public forum. The first is the issue of
whether the users of single-piece First-Class Mail are entitled to
special protection under the PAEA, and, if so, whether protection
should take the form of:
1. Maintaining the traditional linkage of single-piece rates to the
rates charged for Presorted First-Class Mail through a suitable
benchmark;
2. Establishing a separate class of single-piece First-Class Mail
subject to its own rate cap;
3. Adopting a regulation that would limit the difference allowed
between single-piece and presorted First-Class Mail in terms of either
average revenue per piece or percent contribution to institutional
costs;
4. Relying on a qualitative or subjective standard of protection,
such as the ``just and reasonable'' standard of section 3622(b)(8); or
5. Other suggested forms of protection.
The second policy issue that the Commission would like the public
forum to address is whether a worksharing discount should be defined
as:
1. A ``pure'' presorting, prebarcoding, handling, or transportation
activity that is a direct substitute for an equivalent Postal Service
activity; or
2. A ``pure'' worksharing activity as described above, plus other
cost-reducing mail characteristics that are facilitated by or naturally
support the ``pure'' worksharing activity, e.g., walk sequencing and
density.
A related aspect of the second policy issue is whether a discount
that reflects both cost-reducing characteristics that are directly
related to a worksharing activity, and others that are indirectly
related to, or unrelated to the worksharing activity:
1. Should be defined as ``worksharing'' or ``non-worksharing''
according to some rule, such as which cost-reducing effect is thought
to predominate;
2. Should be unbundled so that separate discounts are developed for
the worksharing and non-worksharing components; or
3. Should remain bundled, but be analytically decomposed into its
worksharing and other components so that section 3622(e) standards may
be applied to the worksharing component.
In addition to the broad issues described above that the Commission
considers appropriate for discussion in the August 11, 2009 forum,
there are several technical aspects of those issues that participants
should ponder and comment upon, either in the forum itself or in the
written comments that are due on August 31, 2009.
Issues specific to First-Class Mail. The assertions in the comments
about the nature of markets for First-Class letters are, for the most
part, qualitative. What little supporting data are offered are subject
to more than one interpretation. In the next round of written comments,
the Commission encourages parties to provide empirical support for
their understanding of the state of the markets for single-piece and
presort First-Class Mail letters. Information about attributes of
smaller business mailers who can be converted (or already have been
converted) by presort firms from users of single-piece into users of
presorted First-Class would be especially useful. Similarly,
information about how price signals influence mailers' decisions to
invest in hardware, software or quality control processes to avoid
postage penalties that could result from failing Postal Service
acceptance tests would be particularly helpful.
Issues specific to Standard Mail. Several commenters make
assertions about the market differences between Carrier Route, High
Density, and Saturation mail that are largely qualitative. They assert,
for example, that Saturation mailers appear to have more delivery
alternatives than Carrier Route or High Density mailers. Valassis/SMC
argues that private delivery is a less viable option for High Density
mailers because such mailings are demographically, rather than
geographically targeted. See Valassis/SMC Comments at 12, n.7. This
would seem to indicate that the market for High Density mail is more
closely related to the market for Carrier Route mail because both
target specific addresses. In the next round of comments, the
Commission encourages parties to provide empirical support for their
understanding of the state of the markets for the former components of
Enhanced Carrier Route mail.
The Commission also welcomes additional comment on how worksharing
cost avoidance should be defined and measured in the context of
[[Page 35901]]
Standard Mail. The Commission has long concluded that to promote
productive efficiency, discounts for related categories of mail with
the same own-price demand elasticity should not exceed the costs that
the Postal Service avoids when mailers perform worksharing. This
principle is known as efficient component pricing (ECP). The Postal
Service has taken the former components of the Enhanced Carrier Route
subclass--Carrier Route, High Density, and Saturation mail--and
redefined them as separate products. The Postal Service, however,
continues to estimate an own-price elasticity for these categories as a
group, and the Commission has continued to apply ECP to worksharing
cost differences among these rate categories on the premise that they
serve the same market and have essentially the same elasticity of
demand. The Postal Service and some other commenters now contend that
the High Density and Saturation categories each serve distinct markets.
See Valpak Comments at 17-18; Valassis/SMC Comments at 10-14; and Haldi
Comments at 15-16. If true, economic theory suggests that cost
coverages for each of these products should reflect distinct market
conditions.
If there is not sufficient empirical evidence to conclude that
these categories serve separate markets, and ECP remains relevant,
applying it under the current classification structure with its
attendant eligibility requirements is problematic. For example, several
commenters contend that the difference in cost between High Density
mail and Saturation mail reflects only the effect of the density
eligibility requirement, not the effect of worksharing. See Postal
Service Comments at 29; Haldi Comments at 11; and Valassis/SMC Comments
at 2.
Sequencing mail, however, appears to fit the definition of
worksharing activity in section 3622(e). If the mailer does not
sequence the mail, then the Postal Service must do it. A mailer's
decision to sort the mail into walk-sequence order depends on the menu
of rates. If a mailer were to prepare a flat-shaped Saturation mailing
without sequencing it, the mailer would have to pay the 5-digit presort
rate. He would not be eligible for the Carrier Route rate because line-
of-travel sequencing is a prerequisite for that rate. Similarly, he
would not be eligible for the High Density rate because walk-sequencing
is a prerequisite for that rate.
Absent demand differences,\4\ the relationship between these
categories of mail suggests that the less deeply sequenced categories
could serve as benchmarks from which the costs avoided by more deeply
sequenced categories could be measured. For example, the 5-digit
category could be a suitable cost avoidance benchmark for all of the
remaining categories. Alternatively, a mailer who presents High Density
or Saturation mail rather than Carrier Route mail to the Postal Service
does so because the difference in his cost between sorting to line of
travel and sorting to walk-sequence is less than the corresponding rate
difference; otherwise, a prudent mailer would not sort the mail in
walk-sequence order. Accordingly, the cost of sorting mail to the line-
of-travel order as reflected in the attributable delivery cost of
Carrier Route mail could be viewed as the appropriate benchmark for
both High Density and Saturation mail.\5\
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\4\ As noted, in the past, the Commission determined that
Carrier Route, High Density, and Saturation mail, as a group, share
an own-price demand elasticity that is distinct from Non-carrier
Route mail. For this reason, it de-linked 5-digit mail and Carrier
Route mail in Docket No. MC95-1 when the former Enhanced Carrier
Route (ECR) subclass was established.
\5\ Using Carrier Route mail as a benchmark for letter-shaped
Standard Mail is also problematic because the minimum number of
pieces required for the 5-digit letter rate is 150, while the
Carrier Route letter rate requires only 10 pieces.
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With respect to the relationship between High Density and
Saturation mail, the Postal Service asserts that there is no
worksharing content difference between the two, and therefore ECP does
not apply. Although the Postal Service recognizes that there is a cost
difference, it contends that it is due to density, not to worksharing
activity. The observed cost difference, however, could be characterized
as gains in efficiency brought about by worksharing activity, i.e., the
Postal Service's cost per piece of sorting mail to walk-sequence order
declines as density increases.\6\
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\6\ This is confirmed by Witness Shipe's testimony in Docket No.
R90-1. It shows that carriers case mail at a rate of 20.6 pieces per
minute for non-sequenced Carrier Route letters, 29.0 pieces for
walk-sequenced High Density letters, and 41.2 pieces for Saturation
letters. The corresponding numbers for flats are 10.7, 13.6 and 27.4
pieces per minute. See Docket No. R90-1, Direct Testimony of Thomas
Shipe, USPS-T-10, Exhibit USPS-10B, at 3 and 6. This constitutes
declining marginal cost.
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Viewed as a worksharing-related cost difference, the rate for a
High Density flat would reflect the difference in attributable delivery
cost between a High Density flat and a Carrier Route flat. Similarly,
the rate for a Saturation flat would reflect the difference in
attributable delivery cost between a Saturation flat and a Carrier
Route flat. Using the same percentage passthrough for each walk-
sequencing discount would be the mathematical equivalent of retaining
the link between High Density and Saturation mail.
In addition to commenting on the broader, more theoretical
questions discussed above, the Commission invites interested
participants to comment on the following specific issues and questions:
1. What empirical evidence is there supporting the proposition that
Carrier Route, High Density, and Saturation mail each serve separate
markets?
2. If High Density and Saturation mail serve the same market,
should the difference in worksharing unit cost between High Density and
Saturation mail be subject to the standards of section 3622(e)? If the
answer is no, specify why marginal worksharing cost differences are not
pertinent to rate setting.
3. If Carrier Route and High Density mail serve the same market,
should rates for Saturation mail be set as though it serves a separate
market, even though it is not classified as a separate product?
4. What bearing does the probability of mail receiving automated or
manual delivery point sequencing have on the answers to the above
questions?
III. Ordering Paragraphs
It is ordered:
1. A public forum that addresses the issues described in the body
of this order will be held on August 11, 2009, at 1 p.m., in the
Commission's hearing room.
2. Written comments on the matters discussed at the public forum as
well as the issues discussed in the comments filed in response to Order
No. 192 are due on or before August 31, 2009.
3. The Secretary shall arrange for publication of this order in the
Federal Register.
Issued: July 10, 2009.
By the Commission.
Judith M. Grady,
Acting Secretary.
Appendix A--Comments on Notice of Proposed Rulemaking on Application of
Workshare Discount Rate Design Principles
[[Page 35902]]
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Participant Title Filing date
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American Postal Workers Initial Presentation May 27, 2009.
Union, AFL-CIO (APWU of American Postal
Comments). Workers Union, AFL-
CIO.
Bank of America Corporation, Initial Comments of May 27, 2009.
Discover Financial Bank of America
Services, J.P. Morgan Chase Corporation,
& Co., and the American Discover Financial
Bankers Association. Services, J.P.
Morgan Chase & Co.,
and the Bankers
Association.
Greeting Card Association... Initial Comments of May 26, 2009.
the Greeting Card
Association.
John Haldi (Haldi Comments). Statement of John May 26, 2009.
Haldi, Ph.D.
Concerning
Workshare Discounts.
Mail Order Association of Comments of Mail May 26, 2009.
America. Order Association
of America.
Major Mailers Association Initial Comments of May 26, 2009.
(MMA Comments). Major Mailers
Association.
National Postal Policy Comments of National May 26, 2009.
Council. Postal Policy
Council.
Pitney Bowes Inc............ Initial Comments of May 26, 2009.
Pitney Bowes Inc.
Public Representatives Comments of the May 26, 2009.
(Public Representatives Public
Comments). Representatives.
Stamps.com (Stamps.com Initial Presentation May 26, 2009.
Comments). of Stamps.com.
United States Postal Service Initial Comments of May 26, 2009.
(Postal Service Comments). the United States
Postal Service.
Valassis Direct Mail, Inc. Comments of Valassis May 26, 2009.
and Saturation Mailers Direct Mail, Inc.
Coalition (Valassis/SMC and Saturation
Comments). Mailers Coalition.
Valpak Direct Marketing Valpak Direct May 26, 2009.
Systems, Inc. and Valpak Marketing Systems,
Dealers' Association, Inc Inc. and Valpak
(Valpak Comments). Dealers'
Association, Inc.
Comments Regarding
Standard Mail
Volume Incentive
Pricing Program.
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[FR Doc. E9-17286 Filed 7-20-09; 8:45 am]
BILLING CODE 7710-FW-P
