[Federal Register Volume 60, Number 208 (Friday, October 27, 1995)]
[Proposed Rules]
[Pages 54981-54989]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26554]



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POSTAL RATE COMMISSION

[Docket No. RM95-4, Order No. 1084]

39 CFR Part 3001


Rules of Practice and Procedure

AGENCY: Postal Rate Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commission is proposing amendments to its rules of 
practice and procedure that would facilitate expedited consideration of 
requests of the United States Postal Service to: Conduct market tests 
of new postal services in order to develop information necessary to 
support a permanent mail classification change; adopt, on a provisional 
basis, mail classification and associated rate changes that supplement, 
but do not alter, existing rates and mail classifications; and adopt 
permanent but narrowly focused mail classification changes that 
supplement, but do not alter, existing rates and mail classifications. 
In addition to these amendments, the Commission is proposing a rule 
that would allow the Postal Service to use a multi-year test period for 
the purpose of demonstrating the financial viability of potential new 
services that are the subject of a concurrent Postal Service request.

DATES: Comments must be submitted on or before December 26, 1995.

ADDRESSES: Comments and correspondence should be sent to Margaret P. 
Crenshaw, Secretary of the Commission, 1333 H Street NW, Suite 300, 
Washington, DC 20268-0001 (telephone: 202/789-6840).

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, Legal Advisor, 
Postal Rate Commission, 1333 H Street NW, Suite 300, Washington, DC 
20268-0001 (telephone: 202/789-6820).

SUPPLEMENTARY INFORMATION: On April 24, 1995, the Commission issued an 
Advance Notice of Proposed Rulemaking in response to a petition 
submitted by the United States Postal Service. The Postal Service's 
petition, filed April 13, 1995, asked the Commission to initiate a 
rulemaking with a view to adopting new procedural rules applicable to 
seven ratemaking and mail classification topics, for the purpose of 
facilitating expedited consideration and review of Postal Service 
requests in those areas. For the most part, the rules proposed in the 
Postal Service's petition pursue specific recommendations of the Joint 
Task Force on Postal Ratemaking.1 The Commission summarized the 
Postal Service's seven proposed rules and solicited the views of 
interested parties on the draft rules and six other topics in the 
Advance Notice. 60 FR 22017-19 (May 4, 1995).

    \1\See Postal Ratemaking in a Time of Change: A Report by the 
Joint Task Force on Postal Ratemaking (June 1, 1992).
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    The Commission received 21 sets of comments in response to the 
Advance Notice.2 In addition to their views on the merits of the 
Postal Service's proposed rules, several parties submitted that it 
would be inappropriate to go forward with the requested rulemaking in 
light of the current focus on mail classification reform and the 
parties significant commitment of resources in Docket No. MC95-1. In 
contrast, the Postal Service commented that it sees no utility in 
deferring consideration of any of its proposed rules, and that 
simultaneous consideration of all of them is warranted.

    \2\The Association of American Publishers, American Bankers 
Association, American Business Press, Air Courier Conference of 
America, Advo, Inc., Advertising Mail Marketing Association, Direct 
Marketing Association, Inc., Dow Jones & Company, Inc., Federal 
Express Corporation, Florida Gift Fruit Shippers Association, 
McGraw-Hill Companies, Inc., Major Mailers Association, Mail Order 
Association of America, Magazine Publishers of America, National 
Newspaper Association, Newspaper Association of America, the 
Commission's Office of the Consumer Advocate, Quality Letter 
Service, Inc., Time Warner Inc., United Parcel Service, and the 
United States Postal Service submitted comments in response to the 
Advance Notice.
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    The Commission concurs in the Postal Service's initiative ``to 
reopen the dialogue over administrative reform to a new chapter, and to 
focus on procedural changes designed to provide more expedition and 
flexibility.'' Petition of United States Postal Service to Initiate 
Rulemaking, April 13, 1995, at 5. However, the Commission is also 
mindful of the current workload imposed on all those involved in Docket 
No. MC95-1 and mail classification reform generally, and is disinclined 
to occasion additional efforts now without a realistic prospect of 
procedural enhancements in the near term. An additional consideration, 
which the Postal Service acknowledges in its petition, is the existence 
of potential legal impediments to implementing at least some of the 
concepts recommended by the Joint Task Force.
    In view of these competing considerations, the Commission has 
determined to promulgate draft rules which would implement a majority, 
but not all, of the Postal Service's seven procedural initiatives. 
Specifically, the Commission has drafted proposed rules for application 
in the areas of market tests, provisional new services, minor changes 
in permanent mail classifications, and multi-year financial test 
periods for new services. At this point, these initiatives appear to 
hold the greatest promise for procedural improvement in the near term. 
The Commission will endeavor to pursue the remaining initiatives, which 
appear to present somewhat greater challenges under the Postal 
Reorganization Act as currently interpreted, in subsequent proceedings.
    Market tests of potential new services. While one commenter, United 
Parcel Service, disputes the necessity of adopting a market test rule, 
the Joint Task Force Report correctly observes that there is no ``well-
worn path'' in Commission procedure for obtaining information that 
could shed light on the prospects of potential service innovations 
through limited testing in the marketplace. Sections 67 through 67d of 
the current rules of practice (39 CFR 3001.67 through .67d) establish 
procedures for considering mail classification requests that the Postal 
Service denominates as ``experimental'' in character. However, this 
pre-existing mechanism may not be the most efficient and effective way 
to facilitate market testing, as the Postal Service has commented. The 
Commission agrees with the Postal Service and the Governors that it 
would be useful to explore new procedures explicitly designed for 
limited market tests that would enable the Service to gain ``real 
world'' experience with innovative services, and that would at the same 
time generate information needed to support recommendation of such 
services as permanent mail classifications. Employing these procedures 
within the larger context of an ongoing proceeding to consider a Postal 
Service request for a permanent classification change would also assist 
in establishing the objectives of market tests and defining their 
reasonable limits.
    The Postal Service's proposed market test rules would apply to 
requests which seek ``changes in rates or mail classification preceded 
by testing in the market in order to develop information necessary to 
support a permanent change.'' Proposed 39 CFR 3001.121. Insofar as the 
Postal Service has proposed rules that would apply to requests for 
expedited market tests of changes in existing rates only, 

[[Page 54982]]
unaccompanied by a proposed service innovation, the Service's proposal 
exceeds the scope of the Joint Task Force's recommendations. Those 
recommendations were directed toward ``potential service 
innovations[,]'' and contemplated implementation through ``rules for 
the consideration of mail classification proposals to allow market data 
to be obtained from limited tests * * *'' Joint Task Force Report at 
47, 48. (Emphasis added.) In the Commission's view, market testing of 
pure rate changes for existing services could raise difficult issues of 
consistency with the fairness and equity factor in 39 U.S.C. 3622(b)(1) 
and the prohibition of undue discrimination or preferences among mail 
users in 39 U.S.C. 403(c). Accordingly, to foreclose these potential 
issues and thereby simplify the market testing initiative, the 
Commission's draft rules are limited to market tests of proposed 
changes in mail classification, together with the rates proposed for 
the proposed new mail classification.
    One commenter, the Newspaper Association of America, has suggested 
that the Commission must reject the Service's proposed market test 
rules because they are unlawful in several respects: They limit the 
Commission's review to a ``yes or no'' determination, thereby limiting 
analysis and potentially precluding consideration of some applicable 
statutory factors; they incorporate too short a deadline for Commission 
action; and they set no outside parameters for the duration of a market 
test. Other commenters--the American Bankers Association, Air Courier 
Conference of America, Federal Express Corporation, and United Parcel 
Service--presented similar criticisms of the Service's proposed rules 
regarding the limited scope of the Commission's review, attenuated data 
requirements, and the indefinite scope and duration of market tests 
permissible under the rules.
    At the outset, the Commission believes that it is possible to craft 
rules for the expedited consideration and recommendation of market 
tests that are consistent with both the substantive and procedural 
requirements of the Postal Reorganization Act. Substantively, the Act 
requires that the Commission's recommendations be in accordance with 
the policies of Title 39 and the factors specified in sections 3622 and 
3623. Under ordinary circumstances, if a Postal Service request appears 
to be incompatible with established postal policy or applicable 
statutory factors, the Commission endeavors to cure those deficiencies 
by recommending modifications in the Service's proposal, if that is 
feasible and appropriate. This would certainly be the case with respect 
to a permanent mail classification change requested by the Postal 
Service. However, in the case of a market test, the Postal Service's 
evident intention would be to implement a plan both expeditiously and 
in the form in which it was designed by management. A recommendation to 
modify the proposed plan in any significant respect--even if the 
Commission considered modification to be compelled by applicable 
factors--could jeopardize the timeliness of the test and seriously 
impair its usefulness. This being the case, a relatively inflexible 
``yes or no'' determination by the Commission might be viewed as the 
necessary price of expedition, but it seems to be a reasonable one 
under the terms of the Reorganization Act. The risk of proposing a 
market test that the Commission would find itself unable to recommend 
under the policies and factors of the Act would be borne entirely by 
the Postal Service.3

    \3\Of course, in any such case the Commission would express its 
specific concerns in its Opinion and Recommended Decision, and would 
provide guidance on how the identified deficiencies could be 
remedied.
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    For these reasons, the Commission believes that it would be 
feasible to implement an expedited, ``yes or no'' review of proposed 
market tests, provided the objectives and criteria applicable to such 
tests are clearly specified. Accordingly, the first section of the new 
Subpart I proposed for addition to the Commission's rules begins by 
stating that the procedures apply in cases in which the Postal Service 
has requested a recommended decision pursuant to section 3623 
``preceded by testing in the market in order to develop information 
necessary to support a permanent change.'' Proposed Sec. 3001.161. The 
section also declares a Commission policy in favor of recommending 
``market tests that are reasonably calculated to produce information 
needed to support a permanent change in mail classification, and that 
are reasonably limited in scope, scale, duration and potential adverse 
impact.'' In order to clarify the issue of maximum duration, upon which 
some parties commented, the proposed rule would declare a limit of one 
year, except in extraordinary circumstances and for good cause shown.
    With regard to procedural requirements, the Commission believes 
that it is possible to fashion expedited procedures that would 
accommodate the due process rights of participants and enable it to 
review all issues presented, but agrees with various comments that 
claimed the Postal Service's proposed market test rule would provide 
for unduly attenuated proceedings. First, the artificial limitation of 
issues to be considered by the Commission under the Service's proposed 
rule cannot be justified, as the comments of American Bankers 
Association and Newspaper Association of America observe. It is 
altogether likely that a proposed market test, conducted within the 
larger context of a Postal Service request for a permanent change in 
mail classification, will involve the determination of relatively few 
issues. However, in order to be able to recommend to the Governors that 
a proposed market test be conducted, the Commission is obliged by the 
Reorganization Act to assure itself that all applicable statutory 
factors have been duly considered. Consequently, the Commission's 
proposed rules do not contain any issue-limiting provision, but instead 
adopt a procedural mechanism for narrowing the issues that might 
require a hearing. See proposed Sec. 3001.163(e).
    The Commission also believes that the 60-day schedule dictated by 
the Postal Service's rules may be insufficient to provide interested 
parties an adequate opportunity to exercise their due process rights 
under section 3624. For this reason, the Commission's proposed market 
test rules incorporate a 90-day decisional schedule. The proposed rules 
also are designed to maximize the opportunity of potential participants 
to examine and respond to the Postal Service's request through 
inclusion of expedited public notice provisions similar to those in the 
Commission's rules applicable to Express Mail Market Response requests. 
These provisions allow interested persons to register for expedited 
receipt of Postal Service requests to conduct market tests, and direct 
the Service to serve copies of such requests on the registrants either 
by hand delivery or Express Mail service. They also direct the Postal 
Service to serve copies of its request on all participants in the most 
recent omnibus rate proceeding. See proposed Sec. 3001.163 (b) through 
(d).
    The Commission's proposed rules would require the Postal Service to 
describe the features of its requested market test in some detail, 
identifying the services to be provided, the rates to be charged, the 
number and extent of the areas to be served, the test's duration, and 
the anticipated number of customers who will participate. Proposed 
Sec. 3001.162 would also require the Service to describe the means by 
which it plans to provide equal access to all potential users in the 
test market service areas, and its plan for gathering 

[[Page 54983]]
and reporting the data needed to support a permanent mail 
classification change.
    However, the rules would also afford the Postal Service 
considerable flexibility in conducting market tests, and in acting upon 
their results. If the Service anticipates that periodic reporting of 
test data would be harmful to the purposes of the test--for example, by 
revealing information that might lead mailers or competitors to take 
actions that would influence the test results--its plan could provide 
for presenting the test data as part of the information to be filed 
subsequently in support of a permanent mail classification change. 
Additionally, if the experience gained from the market test leads the 
Postal Service to change its plans regarding the new service, proposed 
Sec. 3001.166(b) would allow the Service to move for revision or 
withdrawal of its request for a permanent mail classification change. A 
motion to withdraw its request would relieve the Postal Service of any 
obligation to produce the test data that would otherwise be submitted. 
Finally, while market tests to be recommended by the Commission 
ordinarily would be limited to one year in duration, proposed 
Sec. 3001.161 states that this limitation would not necessarily bar the 
Postal Service from conducting more than one market test in support of 
a potential classification change, under appropriate circumstances.
    Requests for provisional service changes of limited duration. The 
Joint Task Force Report recommended that the Commission adopt rules 
providing fast-track, ``yes or no'' review of proposed service 
innovations that would supplement existing rates and classifications 
without altering any of them. The purpose of the rules would be to 
enable the Postal Service to introduce a new service offering quickly, 
while allowing postal customers to ``either try the new service or 
stick with the existing service menu, or both.'' Report at 52. The 
Report also recommended that the Service's request for the new service 
denominate it as provisional, and specify an ending date in its filing.
    The Postal Service has proposed provisional service change rules 
that nominally would apply to ``requests that the Commission recommend 
changes in rates or mail classification which supplement, but do not 
alter, existing classification and rates. * * *'' USPS proposed 
Sec. 3001.131. (Emphasis added.) While it is unclear how a rate change 
unaccompanied by a change in mail classification could supplement, yet 
not alter, existing classification and rates, the Service's proposed 
rule could be read to extend to provisional changes in rates alone. 
Such changes would be beyond the scope of the Joint Task Force's 
recommendations, and the Commission's proposed Sec. 3001.171 includes 
alternative language.
    Several commenters--including American Bankers Association, Federal 
Express Corporation, and United Parcel Service--questioned the 
potential application of the Postal Service's proposed rules, or 
whether rules for provisional services would accomplish any purposes 
different from those addressed by the market test rules. At this point, 
the Commission believes that separate provisional service rules could 
be employed to accomplish objectives similar to those for market tests, 
but in somewhat different ways. For example, in appropriate instances 
provisional services might be introduced simultaneously throughout the 
postal system, rather than in just a few market testing areas. In any 
event, these issues merit further consideration, and the Commission 
invites both the Postal Service and other interested parties to submit 
further comments.
    In light of the similarities in purpose and overall structure 
between the Service's proposed market test rules and the rules for 
provisional services, the Commission's proposed Subpart J parallels the 
provisions in proposed Subpart I. Proposed Sec. 3001.171 would define 
applicability of the rules, and declare as Commission policy the 
recommendation of provisional services that enhance the range of postal 
services available to the public, without producing a material adverse 
effect overall on postal revenues or costs, and without causing 
unnecessary or unreasonable harm to competitors of the Postal Service. 
The latter criteria follow both the Joint Task Force Report's 
recommendations and the language of the Postal Service's proposed 
rules. The proposed section would also limit recommended provisional 
services to two years' duration ordinarily, but provide for extension 
to an additional year if the Postal Service has filed a request to 
establish the provisional service as a permanent mail classification.
    Proposed Sec. 3001.172 establishes the filing requirements 
applicable to requests for provisional services. Each formal request 
would be required to include descriptive and proposed Domestic Mail 
Classification Schedule language and rate schedules, documentation to 
support the rates proposed for the provisional service, a termination 
date on which the proposed service would be discontinued, and an 
estimate of the effect of implementing the proposal on overall Postal 
Service costs and revenues. The section would also establish compliance 
with subpart C of the current rules applicable to mail classification 
requests as a general standard applicable to the contents of formal 
requests, but would allow the Postal Service to seek waiver of 
particular requirements by explaining why responsive information is 
unavailable.
    The Postal Service's proposed rules would allow requests for 
provisional services to include proposed rates ``which may encompass a 
range of rates.'' USPS proposed Sec. 3001.132(a). As noted above, the 
Commission is not proposing rules at this time that would establish the 
concept of rate bands in Commission proceedings, and the Postal 
Service's proposed language is not included in the Commission's rules 
for provisional services. However, in light of the ``yes or no'' 
feature of the Service's proposal in this area, which has been 
retained, the Commission is reluctant to adopt rules that would compel 
rejection of a requested provisional service solely because of 
deficiencies in a single proposed rate. Interested parties are invited 
to comment on how this potential problem should be addressed, and to 
suggest specific language for inclusion in the rules.
    Proposed Sec. 3001.173 would establish expedited procedures for 
public notice of the Postal Service's request and for conducting the 
proceeding. The section closely tracks the procedures specified for 
market test requests in proposed Sec. 3001.163 in order to give 
interested parties the earliest feasible notice of the requested 
provisional service and to establish whether a hearing will be 
necessary.
    As with the Commission's proposed market test rules, proposed 
Subpart J does not include the issue-limiting provisions contained in 
the Postal Service's proposed rules, but substitutes a procedural 
mechanism for narrowing the issues that might require a hearing. This 
accommodates the concerns of commenters Air Courier Conference of 
America and Newspaper Association of America that the Service's 
proposed rules would fail to provide the thorough review provided by 
current procedures. The rule for decision in proposed Sec. 3001.164 
provides for issuance of a ``yes or no'' Commission decision in 
accordance with all applicable policies of the Postal Reorganization 
Act, and declares the objective of completing consideration of proposed 
provisional services within 90 days, consistent with the procedural due 
process rights of interested persons. 

[[Page 54984]]

    Proposed Sec. 3001.175 would direct the Postal Service to collect 
and report data pertaining to provisional services that have been 
recommended by the Commission and implemented by the Board of 
Governors. The Service's data collection and reporting requirements 
would generally correspond to the periodic reporting requirements 
specified in Sec. 3001.102 of the current rules. However, if the 
Service does not revise its regular data reporting systems to include 
the provisional service while it is in effect, the section would direct 
the Service to perform and file the results of special studies on a 
corresponding schedule to provide equivalent information to the extent 
reasonably practicable.
    Finally, proposed Sec. 3001.176 would provide for formal Postal 
Service requests that provisional services currently in effect be 
terminated, or established as permanent mail classifications either as 
originally recommended or in modified form. Following the provisional 
service's termination date, the section would allow the Postal Service 
to submit a request for its re-establishment under any subpart of the 
Commission's rules which would otherwise apply.
    Expedited consideration of requests for minor mail classification 
changes. Noting that requests for permanent mail classification changes 
have been held to a uniform set of requirements regardless of whether 
the proposed change is complex or relatively simple, the Joint Task 
Force recommended that the Commission establish a streamlined version 
of its rules to consider ``appropriately limited proposals'' within the 
framework of a 90- to 150-day procedural schedule. Report at 55.
    The Postal Service proposes rules that would provide expedited 
review of requested classification changes that are ``minor,'' which 
would be defined as changes that do not involve changes in current 
rates or fees, and which: (a) Involve only changes in current mailing 
requirement or eligibility standards; (b) pertain to existing or 
proposed mail types or services estimated to provide less than 10 
percent of total Postal Service revenues; or (c) are otherwise found by 
the Commission to be appropriately limited. USPS proposed Sec. 3001.69. 
As commenters Federal Express Corporation and United Parcel Service 
have noted, the 10 percent standard is problematical because of its 
potential scope: A threshold as high as Sec. 5.5 billion could be 
expected to encompass quite a few classification changes of more than 
``minor'' consequence. For this reason, the Commission's proposed 
Sec. 3001.69 adopts a different standard that includes classification 
changes which ``would only affect categories of service with low 
aggregate costs and revenues.''
    The Commission's proposed Sec. 3001.69a would impose somewhat more 
stringent requirements on the contents of formal requests for minor 
classifications than the Postal Service's proposed provision. The 
section would require: Descriptive and proposed Domestic Mail 
Classification Schedule language, as well as any pertinent rate 
schedules; a thorough explanation of the grounds on which the Service 
submits that the requested change is minor in character; and an 
estimate, in the greatest level of detail practicable, of the overall 
impact of the requested change on postal costs and revenues, mail 
users, and competitors of the Postal Service. As with the proposed 
rules for provisional service requests, the section would establish 
compliance with subpart C as the general standard applicable to the 
contents of formal requests, but would allow the Postal Service to seek 
waiver of particular requirements by explaining why responsive 
information is unavailable, or should not be required in light of the 
minor character of the requested classification change. These 
provisions are intended to assure the availability of all information 
genuinely necessary for evaluation of the proposed classification 
change.
    Proposed Sec. 3001.69b specifies expedited procedures for noticing 
the Postal Service's request, allowing interventions and responses to 
the Service's request for consideration under the expedited rules, and 
the Commission's determination whether the request is appropriate for 
consideration as a minor classification change. If the Commission 
determines that the request is not appropriate for consideration as a 
minor change, the expedited rules will not apply, and the request will 
be considered under other appropriate provisions. If the Commission 
determines that the expedited rules should apply, respondents who 
requested a hearing will be directed to identify the material issues of 
fact that require a hearing, and identify the facts presented in the 
Postal Service's filing that it disputes. The section states that 
hearings will be held if the Commission determines that there are 
genuine issues of material fact to be resolved, and that a hearing is 
needed to resolve them. Unlike the Postal Service's proposed provision, 
this section would not exclude any category of factual issue from 
consideration.
    The Postal Service's proposed rules would require the Commission to 
issue a recommended decision within 60 days after filing of the request 
if no party challenges it, and within 90 days if an on-the-record 
inquiry is conducted. The Commission is concerned that these deadlines 
would not allow adequate opportunities for interested persons to 
participate meaningfully in every phase of the proceeding, particularly 
in ascertaining if a hearing may be necessary. Consequently, proposed 
Sec. 3001.69c provides for issuance of a recommended decision within 90 
days after filing if no hearing is held, and 120 days if a hearing is 
held. The intervals between procedural milestones specified in proposed 
Sec. 3001.69b are designed to accommodate these time limits.
    Multi-year test periods for proposed new services. The Joint Task 
Force Report concluded that the single-year test period prescribed in 
the Commission's rules tends to restrict opportunities for new service 
innovation by the Postal Service. Such services can entail substantial 
initial expenditures for equipment, marketing, or other introductory 
investments that will not be recovered in their early, low-volume 
startup periods. In order to allow new services an opportunity to 
mature and achieve financial breakeven, the Report recommended that the 
Commission adopt rules providing for a multi-year test period of at 
least four or five years for proceedings involving new service 
offerings. Report at 50-52.
    The Commission concurs with this rationale for multi-year test 
periods, but believes that their use must be supported by convincing 
substantial evidence in each case. Commenters Air Courier Conference of 
America and Federal Express Corporation expressed concerns that a 
multi-year test period could become a vehicle for allowing rates for 
new services to be set below attributable costs, and argued that it 
would be impermissible for the Commission to delegate a decision on 
breakeven to the Postal Service. These are legitimate concerns, but in 
the Commission's view they can be addressed by crafting a rule that 
will provide for full disclosure of available information and 
exploration on the record. Also, as a general matter, it would appear 
that to merit recommendation a multi-year test period should be 
commensurate with the horizon of the Postal Service's financial 
planning and be fully supported by financial analysis.
    In light of these considerations, the Commission's proposed Subpart 
K would adopt a policy of allowing the use of multi-year test periods 
of up to 5 fiscal years in support of requests to 

[[Page 54985]]
establish new postal services ``where the Postal Service has presented 
convincing substantial evidence in support of the test period 
proposed.'' Proposed Sec. 3001.181. The new subpart would require that 
each such request be supported by the testimony of a witness on behalf 
of the Postal Service, who would be responsible for providing a 
complete description of the proposed multi-year test period, a detailed 
explanation of the Service's bases for requesting the period, and a 
complete description of the Service's plan for achieving an appropriate 
contribution to institutional costs from the new service. The rules 
would also require the provision of complete documentary support for, 
and detail underlying, the requested test period, including cost, 
revenue and volume estimates, Return on Investment projections, and any 
other pertinent analyses prepared by the Postal Service.
    The remaining Postal Service initiatives. As noted in the 
introduction to the discussion of the proposed rules, the Commission 
has determined to defer consideration of the Postal Service's remaining 
three initiatives: rules for limited scope rate cases, rate bands for 
competitive services, and Negotiated Service Agreements. Each of these 
areas merits further study and deliberation before proposing 
implementation in procedural rules.
    With regard to limited scope rate cases, the Commission agrees in 
principle that it should be possible to consider Postal Service 
requests for relatively minor rate adjustments on an expedited basis. 
However, at this juncture it is not evident that a prescriptive rule of 
the sort proposed by the Postal Service is either necessary or would be 
beneficial. As commenters American Bankers Association, Newspaper 
Association of America, and United Parcel Service noted, such rules 
present problems in defining what is a ``relatively minor adjustment'' 
in current rates, and the preclusion of certain potential issues from 
consideration may trench upon interested parties' rights to an adequate 
opportunity for a hearing. Additionally, it is unclear how the possible 
effects of the proposed rate change upon other classes and subclass of 
mail could be accommodated. In light of the Commission's generally 
favorable experience in expediting consideration of the Postal 
Service's omnibus rate request in Docket No. R94-1, the Commission 
believes it would be preferable at this point to devise measures for 
expediting consideration of rate requests on a case-by-case basis.
    The Commission also believes it would be advisable to defer 
consideration of rules incorporating special procedures to establish 
rate bands for competitive services. The commenters generally agreed 
that defining what constitutes a ``competitive service'' is 
problematical, especially when the influence of the Private Express 
Statutes is taken into consideration. Additionally, as commenters Air 
Courier Conference of America, Florida Gift Fruit Shippers Association, 
Newspaper Association of America, and United Parcel Service noted, the 
proposed procedures raise significant statutory and public policy 
issues concerning the respective roles of the Postal Service and the 
Commission in the ratemaking process. When the Commission last 
addressed the rate band concept, in Docket No. RM91-1, it declined to 
adopt rules incorporating the concept in the absence of the four-year 
strategic ratemaking cycle it had proposed in furtherance of the Joint 
Task Force's recommended new model for the ratemaking process.4 
The Commission stated:

    \4\See Postal Ratemaking in a Time of Change, supra, at 10-38.

    (W)ithout the regular scrutiny of the institutional cost 
contributions made by competitive categories of service which the 
regular cycle of omnibus and midcycle rate cases provides, the 
implementation of band rates would revive concerns expressed by 
other commenters regarding the risk of predation, exploitation of 
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monopoly customers, and evasion of statutory requirements.

58 FR 16393 (March 26, 1993). (Footnote omitted.) The same concerns 
remain pertinent today.
    Finally, the concept of Negotiated Service Agreements presents its 
own singular set of difficulties. In responding to earlier initiatives, 
the Commission has expressed doubt about the utility of ``contract 
rate'' procedures under the Postal Reorganization Act as it has been 
construed by the courts.5 In this docket, commenters have cited 
the decision in UPS Worldwide Forwarding, Inc. v. United States Postal 
Service,6 in which an international mail service that featured 
prices negotiated between the Postal Service and large-volume-capable 
customers was found to violate several requirements of the Postal 
Reorganization Act. Since those comments were filed, the District 
Court's decision has been reversed. However, in doing so the Court of 
Appeals was careful to distinguish the Reorganization Act's provisions 
governing international rate setting, which it characterized as a 
``model of simplicity,'' from the open and more technically rigorous 
process required for adopting domestic rates.7 It is by no means 
apparent that the reviewing court's approbation would extend to 
domestic Negotiated Service Agreements.8 An additional 
administrative consideration, which the petition of the Postal Service 
reflects, is the necessity of conducting a classification proceeding to 
recommend the adoption of Negotiated Service Agreements as a discrete 
type of mail classification before procedural rules can be published 
for notice and comment. In view of these potential impediments and 
uncertainties, the Commission will defer the consideration of 
Negotiated Service Agreements to subsequent proceedings.

    \5\See Docket No. RM89-5, Notice Inviting Further Comments, 54 
FR 47223 (November 13, 1989).
    \6\853 F. Supp. 800 (D. Del. 1994), rev'd, No. 94-7423 (3d Cir., 
September 15, 1995).
    \7\No. 94-7423, supra, slip op. 20.
    \8\``In challenging the Postal Service, its competitors 
characterize it as a `public service' and `essentially a public 
utility.' In the domestic area, we believe those descriptions are 
apt. In some ways, the skepticism surrounding the ICM service exists 
because the program seems antithetical to traditional notions of the 
Postal Service. We expect to pay the same price for a postage stamp 
as everyone else, not to have to bargain for the best rate. In this 
sense, the Postal Service is properly compared to a public utility 
that charges the same rate to all customers.'' Slip op. at 31.

    Issued by the Commission on October 13, 1995.
Margaret P. Crenshaw,
Secretary.

List of Subjects in 39 CFR Part 3001

    Administrative practice and procedure, Postal Service.

    Accordingly, 39 CFR part 3001 is amended as follows:
    1. The authority citation for 39 CFR part 3001 continues to read as 
follows:

    Authority: 39 U.S.C. 404(b), 3603, 3622-3624, 3661, 3662.

    2. Sections 3001.69 through 3001.69c are added to Subpart C to read 
as follows:


Sec. 3001.69   Expedited minor classification cases--applicability.

    This section and Secs. 3001.69a through 3001.69c apply in cases 
where the Postal Service requests a recommended decision pursuant to 
section 3623 and seeks expedited review on the ground that the 
requested change in mail classification is minor in character. The 
requirements and procedures specified in these sections apply 
exclusively to the Commission's consideration of requested mail 
classification changes which the Postal Service denominates as, and the 
Commission finds to be, 

[[Page 54986]]
minor in character. A requested classification change may be considered 
to be minor in character if it would not involve a change in any 
existing rate or fee and:
    (a) Involves only changes in eligibility standards or requirements 
applicable to mail classes or services; or
    (b) Would only affect categories of service with low aggregate 
costs and revenues.


Sec. 3001.69a   Expedited minor classification cases--filing of formal 
request and prepared direct evidence.

    (a) Whenever the Postal Service determines to request that the 
Commission submit a decision recommending a mail classification change, 
and to seek expedited review on the ground that the requested change is 
minor in character, it shall file a request for a change in mail 
classification pursuant to section 3623 that comports with the 
requirements of subpart C, part 3001, of the rules of practice and of 
this section. Each such formal request shall include the following 
particular information:
    (1) A description of the proposed classification change or changes, 
including proposed changes in the text of the Domestic Mail 
Classification Schedule and any pertinent rate schedules;
    (2) A thorough explanation of the grounds on which the Postal 
Service submits that the requested change in mail classification is 
minor in character; and
    (3) An estimate, prepared in the greatest level of detail 
practicable, of the overall impact of the requested change in mail 
classification on postal costs and revenues, mail users, and 
competitors of the Postal Service.
    (b) If the Postal Service believes that data required to be filed 
under Sec. 3001.64 are unavailable, it shall explain their 
unavailability, as required by Sec. 3001.64(a)(2) (i), (ii), and (iv). 
If the Postal Service believes that any of the data or other 
information required to be filed under Sec. 3001.64 should not be 
required in light of the minor character of the requested change in 
mail classification, it shall move for a waiver of that requirement, 
stating with particularity the reasons why the character of the request 
and its circumstances justify a waiver of the requirement. A 
satisfactory explanation of the unavailability of information required 
under Sec. 3001.64, or of why it should not be required to support a 
particular request, will be grounds for excluding from the proceeding a 
contention that the absence of the information should form a basis for 
rejection of the request, unless the party desiring to make such 
contention:
    (1) Demonstrates that, having regard to all the facts and 
circumstances of the case, it was clearly unreasonable for the Postal 
Service to propose the change in question without having first secured 
the information and submitted it in accordance with Sec. 3001.64; or
    (2) Demonstrates other compelling and exceptional circumstances 
requiring that the absence of the information in question be treated as 
bearing on the merits of the proposal.


Sec. 3001.69b   Expedited minor classification cases--expedition of 
procedural schedule.

    (a) The purpose of this section is to provide a schedule for 
expediting proceedings in which the Postal Service requests that the 
Commission recommend a change in mail classification and expedite 
consideration of that request on the ground that the change is minor in 
character.
    (b) Within 5 days after receipt of a Postal Service request 
invoking the operation of Secs. 3001.69 through 3001.69c, the 
Commission shall issue a notice of proceeding and provide for 
intervention by interested parties pursuant to Sec. 3001.20. The notice 
of proceeding shall state that the Postal Service has denominated the 
mail classification change it requests a minor change, and has 
requested expedited consideration pursuant to Secs. 3001.69 through 
3001.69c. The notice shall further state the grounds on which the 
Postal Service submits that the requested change in mail classification 
is minor in character, and shall afford all interested parties 21 days 
after publication within which to intervene, submit responses to the 
Postal Service's request for consideration of its proposed mail 
classification change under the terms of Secs. 3001.69 through 
3001.69c, and request a hearing.
    (c) Within 28 days after publication of the notice of proceeding 
pursuant to paragraph (b) of this section, the Commission shall decide 
whether to consider the request of the Postal Service as a minor 
classification change request under Secs. 3001.69 through 3001.69c, and 
shall issue an order in the proceeding incorporating that ruling. The 
Commission shall order a request to be considered under Secs. 3001.69 
through 3001.69c if it finds that:
    (1) The requested classification change is minor in character, and
    (2) The effects of the requested change are likely to be 
appropriately limited in scope and overall impact.
    (i) If the Commission determines that the request of the Postal 
Service is not appropriate for consideration as a minor classification 
change request, no further procedures under Secs. 3001.69 through 
3001.69c shall be ordered, and the request will be considered in 
accordance with other appropriate provisions of subpart C of this part.
    (ii) If the Commission determines that the Postal Service request 
is appropriate for consideration under Secs. 3001.69 through 3001.69c, 
those respondents who request a hearing shall be directed to state with 
specificity within 14 days after publication of the notice the issues 
of material fact that require a hearing for resolution. Respondents 
shall also identify the fact or facts set forth in the Postal Service's 
filing that the party disputes, and when possible, what the party 
believes to be the true fact or facts and the evidence it intends to 
provide in support of its position.
    (d) The Commission will hold hearings on a Postal Service request 
which is considered under Secs. 3001.69 through 3001.69c when it 
determines that there are genuine issues of material fact to be 
resolved, and that a hearing is needed to resolve those issues. 
Hearings on the Postal Service request will commence within 21 days 
after issuance of the Commission order pursuant to paragraph (c) of 
this section. Testimony responsive to the Postal Service request will 
be due 14 days after the conclusion of hearings on the Postal Service 
request.


Sec. 3001.69c   Expedited minor classification cases--time limits.

    The Commission will treat cases to which Secs. 3001.69 through 
3001.69c apply as subject to the maximum expedition consistent with 
procedural fairness. The schedule for adoption of a recommended 
decision will therefore be established, in each such case, to allow for 
issuance of such decision not more than 90 days after the filing of the 
request of the Postal Service if no hearing is held, and not more than 
120 days after the filing of the request if a hearing is scheduled.
    3. Subpart I is added to read as follows:
Subpart I--Rules for Expedited Review to Allow Market Tests of Proposed 
Mail Classification Changes
Sec.
3001.161  Applicability.
3001.162  Filing of market test proposal and supporting direct 
evicence.
3001.163  Procedures--expedition of public notice and procedural 
schedule.
3001.164  Rule for decision.
3001.165  Data collection and reporting requirements.
3001.166  Suspension, continuation or termination of proceeding. 

[[Page 54987]]


Subpart I--Rules for Expedited Review to Allow Market Tests of 
Proposed Mail Classification Changes


Sec. 3001.161  Applicability.

    The rules in this subpart apply in cases in which the Postal 
Service requests a recommended decision pursuant to section 3623 
preceded by testing in the market in order to develop information 
necessary to support a permanent change. The requirements and 
procedures specified in this subpart apply exclusively to the 
Commission's determination to recommend in favor of or against a market 
test proposed by the Postal Service, and do not supersede any other 
rules applicable to the Postal Service's request for recommendation of 
a permanent change in mail classification. In administering this 
subpart, it shall be the policy of the Commission to recommend market 
tests that are reasonably calculated to produce information needed to 
support a permanent change in mail classification, and that are 
reasonably limited in scope, scale, duration, and potential adverse 
impact. Except in extraordinary circumstances and for good cause shown, 
the Commission shall not recommend market tests of more than one year 
in duration; however, this limitation is not intended to bar the Postal 
Service from conducting more than one market test in support of a 
potential permanent change in mail classification in appropriate 
circumstances.


Sec. 3001.162  Filing of market test proposal and supporting direct 
evidence.

    Whenever the Postal Service determines to request that the 
Commission submit a recommended decision on a change in mail 
classification preceded by testing in the market, the Postal Service 
shall file with the Commission, in addition to its request for a 
permanent change in mail classification pursuant to section 3623, a 
request for a recommended decision in favor of its proposed market test 
of the requested change in mail classification. Each formal request 
filed under this subpart shall include such information and data and 
such statements of reasons and bases as are necessary and appropriate 
fully to inform the Commission and the parties of the nature, scope, 
significance and impact of the proposed market test, and to show that 
it is in the public interest and in accordance with the policies of the 
Act and the applicable criteria of the Act. Each formal request shall 
also include the following particular information:
    (a) A description of the services to be provided in the market 
test, and the relationship between the services to be provided and the 
permanent change or changes in the mail classification schedule 
requested by the Postal Service;
    (b) A statement of each rate or fee to be charged for each service 
to be provided during the market test, together with all information 
relied upon to establish consistency of those rates and fees with the 
factors specified in section 3622(b);
    (c) A description of the number and extent of the service areas in 
which the market test will be conducted, including the number and type 
of postal facilities which will be used;
    (d) A statement of the planned duration of the market test;
    (e) Proposed Domestic Mail Classification Schedule provisions which 
incorporate the information required in paragraphs (a) through (d) of 
this section;
    (f) An estimate of the number of customers who will participate in 
the market test, together with a description of the means by which the 
Postal Service plans to provide equal access to all potential users in 
the test market service areas; and
    (g) A plan for testing the proposed change or changes in the 
market, including a plan for gathering the data needed to support a 
permanent change in mail classification and for reporting the test data 
to the Commission. If periodic reporting of the test data would be 
harmful to the purposes of the test, such as by revealing information 
that might encourage competitors or mailers to take actions that would 
affect the test results, the plan may provide for presentation of the 
test data as part of the subsequent filing of data supporting a 
permanent mail classification change.


Sec. 3001.163  Procedures--expedition of public notice and procedural 
schedule.

    (a) The purpose of this section is to provide a schedule for 
expediting proceedings in which the Postal Service proposes to conduct 
a market test of a requested change in mail classification it has 
submitted to the Commission pursuant to section 3623.
    (b) Persons who are interested in participating in proceedings to 
consider Postal Service requests to conduct a market test may register 
at any time with the Secretary of the Postal Rate Commission, who shall 
maintain a publicly available list of the names and business addresses 
of all such registrants. Persons whose names appear on this list will 
automatically become parties to each proceeding in which the Postal 
Service requests to conduct a market test pursuant to this subpart. 
Other interested persons may intervene pursuant to Sec. 3001.20 within 
28 days after the filing of a formal request made under the provisions 
of this subpart. Parties may withdraw from the register or a particular 
case by filing a notice with the Commission.
    (c) When the Postal Service files a request under the provisions of 
this subpart, it shall on that same day effect service by hand delivery 
of the complete filing to each person registered pursuant to paragraph 
(b) of this section who maintains an address for service within the 
Washington metropolitan area and service the complete filing by Express 
Mail service on all other registrants. Each registrant is responsible 
for insuring that his or her address remains current.
    (d) When the Postal Service files a request under the provisions of 
this subpart, it shall on that same day send by Express Mail to all 
participants in the most recent omnibus rate case a notice which 
briefly describes its proposal. This notice shall indicate on its first 
page that it is a notice of a Market Test Request to be considered 
under this subpart, and identify the last day for filing a notice of 
intervention with the Commission.
    (e) Within 5 days after receipt of a Postal Service request under 
the provisions of this subpart, the Commission shall issue a notice of 
proceeding and provide for intervention by interested parties pursuant 
to Sec. 3001.20. In the event that a party wishes to dispute a genuine 
issue of material fact to be resolved in the consideration of the 
Postal Service's request, that party shall file with the Commission a 
request for a hearing within the time allowed in the notice of 
proceeding. The request for a hearing shall state with specificity the 
fact or facts set forth in the Postal Service's filing that the party 
disputes, and when possible, what the party believes to be the true 
fact or facts and the evidence it intends to provide in support of its 
position. The Commission will hold hearings on a Postal Service request 
made pursuant to this subpart when it determines that there is a 
genuine issue of material fact to be resolved, and that a hearing is 
needed to resolve that issue.


Sec. 3001.164  Rule for decision.

    The Commission will issue a decision in accordance with the 
policies of the Postal Reorganization Act recommending either in favor 
of or against the Postal Service's proposed market test. The purpose of 
this subpart is to allow for consideration of proposed market tests 
within 90 days, consistent 

[[Page 54988]]
with the procedural due process rights of interested persons.


Sec. 3001.165  Data collection and reporting requirements.

    In any case in which the Commission has issued a recommended 
decision in favor of a market test requested by the Postal Service, and 
the Board of Governors has put the market test recommended by the 
Commission into effect, the Postal Service shall gather test data and 
report them to the Commission in accordance with the plan submitted 
pursuant to Sec. 3001.162(f). If the Postal Service's plan for 
reporting test data does not provide for periodic reporting during the 
conduct of the test, the Postal Service shall submit all test data to 
the Commission no later than 60 days following the conclusion of the 
test.


Sec. 3001.166  Suspension, continuation or termination of proceeding.

    (a) In any case in which the Commission has issued a recommended 
decision in favor of a market test requested by the Postal Service, and 
the Board of Governors has put the market test recommended by the 
Commission into effect, the Postal Service may move for suspension of 
the proceeding in which its request for a permanent change in mail 
classification is to be considered. The Commission shall grant the 
Postal Service's motion for suspension if, in the Commission's opinion, 
it would be reasonable under the circumstances to defer consideration 
of the request until the information to be produced in connection with 
the market test becomes available.
    (b) At any time during the pendency of a market test recommended by 
the Commission pursuant to this subpart, or following the completion of 
such a market test, the Postal Service may move to revise or withdraw 
its request for a permanent change in mail classification. If the 
Postal Service moves to revise its request, it shall file with the 
Commission all data necessary to support its amended request. If the 
Postal Service moves to withdraw its request, it need not produce the 
test data that would otherwise be submitted pursuant to Sec. 3001.165.
    4. Subpart J is added to read as follows:
Subpart J--Rules for Expedited Review of Requests for Provisional 
Service Changes of Limited Duration
Sec.
3001.171  Applicability.
3001.172  Filing of formal request and prepared direct evidence.
3001.173  Procedures--expedition of public notice and procedural 
schedule.
3001.174  Rule for decision.
3001.175  Data collection and reporting requirements.
3001.176  Continuation or termination of provisional service.

Subpart J--Rules for Expedited Review of Requests for Provisional 
Service Changes of Limited Duration


Sec. 3001.171  Applicability.

    The rules in this subpart apply in cases in which the Postal 
Service requests that the Commission recommend the establishment of a 
provisional service which will supplement, but will not alter, existing 
mail classifications and rates for a limited and fixed duration. The 
requirements and procedures specified in this subpart apply exclusively 
to the Commission's determination to recommend in favor of or against a 
provisional service proposed by the Postal Service, and do not 
supersede the rules applicable to requests for permanent changes in 
rates, fees, mail classifications, and in the nature of postal 
services. In administering this subpart, it shall be the policy of the 
Commission to recommend the introduction of provisional services that 
enhance the range of postal services available to the public, without 
producing a material adverse effect overall on postal revenues or 
costs, and without causing unnecessary or unreasonable harm to 
competitors of the Postal Service. Except in extraordinary 
circumstances and for good cause shown, the Commission shall not 
recommend provisional services of more than two years in duration; 
however, the Commission may grant a request to extend a provisional 
service for an additional year if a Postal Service request to establish 
the provisional service as a permanent mail classification is pending 
before the Commission.


Sec. 3001.172  Filing of formal request and prepared direct evidence.

    (a) Whenever the Postal Service determines to request that the 
Commission submit a decision recommending the establishment of a 
provisional service of limited and fixed duration, it shall file a 
request for a change in mail classification pursuant to section 3623 
that comports with the requirements of subpart C of the rules of 
practice and of this subpart. Each formal request shall include the 
following particular information:
    (1) A description of the proposed classification, including 
proposed Domestic Mail Classification Schedule language and rate 
schedules;
    (2) An explanation and complete documentation of the development of 
the rates proposed for the provisional service;
    (3) A termination date on which the proposed provisional service 
will be discontinued;
    (4) An estimate of the effect of implementing the proposed 
provisional service on overall Postal Service costs and revenues during 
the period in which it is in effect; and
    (5) A plan for meeting the data collection and reporting 
requirements specified in Sec. 3001.175.
    (b) If the Postal Service believes that data required to be filed 
under Sec. 3001.64 are unavailable, it shall explain their 
unavailability, as required by Sec. 3001.64(a)(2)(i), (ii), and (iv). 
In particular, if the provisional character of the request bears on the 
unavailability of the data in question, the Postal Service shall 
explain in detail the nexus between these circumstances. A satisfactory 
explanation of the unavailability of data will be grounds for excluding 
from the proceeding a contention that the absence of the data should 
form a basis for rejection of the request, unless the party desiring to 
make such contention:
    (1) Demonstrates that, having regard to all the facts and 
circumstances of the case, it was clearly unreasonable for the Postal 
Service to propose the change in question without having first secured 
the data which are unavailable, or
    (2) Demonstrates other compelling circumstances requiring that the 
absence of the data in question be treated as bearing on the merits of 
the proposal.


Sec. 3001.173  Procedures--expedition of public notice and procedural 
schedule.

    (a) The purpose of this section is to provide a schedule for 
expediting proceedings in which the Postal Service requests that the 
Commission recommend the establishment of a provisional service which 
will supplement, but will not alter, existing mail classifications and 
rates for a limited and fixed duration.
    (b) Persons who are interested in participating in proceedings to 
consider Postal Service requests to establish a provisional service may 
register at any time with the Secretary of the Postal Rate Commission, 
who shall maintain a publicly available list of the names and business 
addresses of all such registrants. Persons whose names appear on this 
list will automatically become parties to each proceeding in which the 
Postal Service requests establishment of a provisional service pursuant 
to this subpart. Other 

[[Page 54989]]
interested persons may intervene pursuant to Sec. 3001.20 within 28 
days after the filing of a formal request made under the provisions of 
this subpart. Parties may withdraw from the register or a particular 
case by filing a notice with the Commission.
    (c) When the Postal Service files a request under the provisions of 
this subpart, it shall on that same day effect service by hand delivery 
of the complete filing to each person registered pursuant to paragraph 
(b) of this section who maintains an address for service within the 
Washington metropolitan area and serve the complete filing by Express 
Mail service on all other registrants. Each registrant is responsible 
for insuring that his or her address remains current.
    (d) When the Postal Service files a request under the provisions of 
this subpart, it shall on that same day send by Express Mail service to 
all participants in the most recent omnibus rate case a notice which 
briefly describes its proposal. Such notice shall indicate on its first 
page that it is a notice of a Request for Establishment of a 
Provisional Service to be considered under this subpart, and identify 
the last day for filing a notice of intervention with the Commission.
    (e) Within 5 days after receipt of a Postal Service request under 
the provisions of this subpart, the Commission shall issue a notice of 
proceeding and provide for intervention by interested parties pursuant 
to Sec. 3001.20. In the event that a party wishes to dispute a genuine 
issue of material fact to be resolved in the consideration of the 
Postal Service's request, that party shall file with the Commission a 
request for a hearing within the time allowed in the notice of 
proceeding. The request for a hearing shall state with specificity the 
fact or facts set forth in the Postal Service's filing that the party 
disputes, and when possible, what the party believes to be the true 
fact or facts and the evidence it intends to provide in support of its 
position. The Commission will hold hearings on a Postal Service request 
made pursuant to this subpart when it determines that there is a 
genuine issue of material fact to be resolved, and that a hearing is 
needed to resolve that issue.


Sec. 3001.174  Rule for decision.

    The Commission will issue a decision in accordance with the 
policies of the Postal Reorganization Act recommending either in favor 
of or against the Postal Service's proposed provisional service of 
limited duration. The purpose of this subpart is to allow for 
consideration of proposed provisional services within 90 days, 
consistent with the procedural due process rights of interested 
persons.


Sec. 3001.175  Data collection and reporting requirements.

    In any case in which the Commission has issued a recommended 
decision in favor of a provisional service of limited duration 
requested by the Postal Service, and the Board of Governors has put the 
provisional service recommended by the Commission into effect, the 
Postal Service shall collect and report data pertaining to the 
provisional service during the period in which it is in effect in 
accordance with the periodic reporting requirements specified in 
Sec. 3001.102 . If the Postal Service's regular data reporting systems 
are not revised to include the provisional service during the period of 
its effectiveness, the Postal Service shall perform, and provide to the 
Commission on a schedule corresponding to Sec. 3001.102 reports, 
special studies to provide equivalent information to the extent 
reasonably practicable.


Sec. 3001.176  Continuation or termination of provisional service.

    At any time during the period in which a provisional service 
recommended by the Commission and implemented by the Board of Governors 
is in effect, the Postal Service may submit a formal request that the 
provisional service be terminated, or that it be established, either as 
originally recommended by the Commission or in modified form, as a 
permanent mail classification. Following the conclusion of the period 
in which the provisional service was effective, the Postal Service may 
submit a request to establish the service as a mail classification 
under any applicable subpart of the Commission's rules.
    5. Subpart K is added to read as follows:

Subpart K--Rules for Use of Multi-Year Test Periods

Sec.
3001.181  Use of multi-year test period for proposed new services.
3001.182  Filing of formal request and prepared direct evidence.

Subpart K--Rules for Use of Multi-Year Test Periods


Sec. 3001.181  Use of multi-year test period for proposed new services.

    The rules in this subpart apply to Postal Service requests pursuant 
to section 3623 for the establishment of a new postal service, with 
attendant rates, which in the estimation of the Postal Service cannot 
generate sufficient volumes and revenues to recover all costs 
associated with the new service in the first full fiscal year of its 
operation. In administering these rules, it shall be the Commission's 
policy to adopt tests periods of up to 5 fiscal years for the purpose 
of determining breakeven for newly introduced postal services where the 
Postal Service has presented convincing substantial evidence in support 
of the test period proposed.


Sec. 3001.182  Filing of formal request and prepared direct evidence.

    In filing a request for establishment of a new postal service 
pursuant to section 3623, the Postal Service may request that its 
proposal be considered for a test period of longer duration than the 
test period prescribed in Sec. 3001.54(f)(2). Each such request shall 
be supported by the following information:
    (a) The testimony of a witness on behalf of the Postal Service, who 
shall provide:
    (1) A complete definition of the multi-year test period requested 
for the proposed new service;
    (2) A detailed explanation of the Postal Service's preference of a 
multi-year test period, including the bases of the Service's 
determination that the test period prescribed in Sec. 3001.54(f)(2) 
would be inappropriate; and
    (3) A complete description of the Postal Service's plan for 
achieving an appropriate contribution to institutional costs from the 
new service by the end of the requested test period.
    (b) Complete documentary support for, and detail underlying, the 
test period requested by the Postal Service, including:
    (1) Estimated costs, revenues, and volumes of the proposed new 
service for the entire requested test period;
    (2) Return on Investment projections and all other financial 
analyses prepared in connection with determining the cost and revenue 
impact of the proposed new service; and
    (3) Any other analyses prepared by the Postal Service that bear on 
the overall effects of introducing the proposed new service during the 
requested test period.

[FR Doc. 95-26554 Filed 10-26-95; 8:45 am]
BILLING CODE 7710-FW-P