[Federal Register Volume 61, Number 95 (Wednesday, May 15, 1996)]
[Rules and Regulations]
[Pages 24447-24457]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12130]



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POSTAL RATE COMMISSION

39 CFR Part 3001

[Docket No. RM95-4; Order No. 1110]


Rules of Practice and Procedure

AGENCY: Postal Rate Commission.

ACTION: Final rule.

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SUMMARY: This final rule sets forth amendments to the Commission's 
rules of practice and procedure that provide for 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 final rule adopts provisions that 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.

EFFECTIVE DATE: These rules are effective May 15, 1996 through May 15, 
2001.

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 October 27, 1995, the Commission 
published a notice of proposed amendments to its rules of practice and 
procedure designed to facilitate expedited consideration of Postal 
Service requests to: (1) Conduct market tests of new postal services in 
order to develop information necessary to support a permanent mail 
classification change; (2) adopt, on a provisional basis, mail 
classification and associated rate changes that supplement, but do not 
alter, existing rates and mail classifications; and (3) adopt permanent 
but narrowly focused mail classification changes that supplement, but 
do not alter, existing rates and mail classifications. The proposed 
amendments also include provisions that would permit the Postal Service 
to request the Commission's use of 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. 
60 FR 54981-89 (October 27, 1995). The Commission's proposed rules 
pursue specific recommendations of the Joint Task Force on Postal 
Ratemaking,1 and are responsive to a majority of the initiatives 
requested by the Postal Service in a petition submitted to the 
Commission on April 13, 1995. Id. at 54981.
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    \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 17 sets of comments in response to the 
Notice of October 27.2 The commenters present divergent views on 
both the substance of the Commission's proposed rules and the propriety 
of adopting them in the current proceeding. Additionally, several 
commenters suggest that the Commission pursue other initiatives in this 
proceeding that were originally recommended by the Joint Task Force 
Report and proposed in the Postal Service's petition. In view of these 
diverse statements of position, it is appropriate to begin with a 
discussion of the considerations bearing on the Commission's 
determination to adopt new rules at this time in four areas, on a five-
year trial basis.
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    \2\ The American Bankers Association, American Business Press, 
Advertising Mail Marketing Association, Direct Marketing 
Association, Inc., Dow Jones & Company, Inc., Federal Express 
Corporation, McGraw-Hill Companies, Inc., Major Mailers Association, 
Mail Order Association of America, Magazine Publishers of America, 
Newspaper Association of America, National Newspaper Association, 
the Commission's Office of the Consumer Advocate, Parcel Shippers 
Association, Time Warner, Inc., United Parcel Service, and the 
United States Postal Service submitted comments in response to the 
Notice. Some of these comments were not timely filed, primarily 
owing to extraordinarily adverse weather conditions on the date they 
were due. In order to avoid prejudice to any party who wished to 
comment, the Commission has considered all comments received.
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I. Considerations Bearing on Adoption of Proposed Rules

    In the Notice of Proposed Rulemaking published on October 27, the 
Commission announced its determination to promulgate draft rules which 
would implement a majority, but not all, of the seven procedural 
initiatives contained in the Postal Service's Petition of April 13, 
1995. 60 FR 54981. The Commission found that four of the initiatives 
offered the greatest promise for procedural improvement in the near 
term. Accordingly, the Commission published draft rules of procedure 
governing market tests, limited-duration provisional service changes, 
minor classifications changes, and multi-year test periods for new 
services. With regard to the remaining three Postal Service 
initiatives--rules for limited scope rate cases, rate bands for 
competitive services, and Negotiated Service Agreements--the Commission 
concluded that their consideration should be deferred for various 
reasons, but stated that each of the areas merits further study and 
deliberation in subsequent proceedings. Id. at 54981, 54985.

The Deferred Postal Service Proposals

    Several commenters ask the Commission to take up one or more of the 
three remaining initiatives, either in this proceeding or by initiating 
another rulemaking in the near future. Time Warner urges the Commission 
to reconsider the determination to defer consideration of rules for 
establishing rate bands for competitive services and rules providing 
for contract rates; Parcel Shippers Association comments that adoption 
of procedures allowing rate bands and negotiated service contracts is 
crucial to the competitive posture of the Postal Service. Advertising 
Mail Marketing Association, Dow Jones & Company, Magazine Publishers of 
America, and Mail Order Association of America comment in favor of 
initiating a proceeding in the near future to consider one or more of 
the three deferred initiatives. The Postal Service states that it would 
have preferred that all its proposals be addressed in this proceeding, 
but urges the Commission to issue a further rulemaking on the remaining 
initiatives now that Docket No. MC95-1 has been concluded.
    The Commission continues to believe that limited scope rate cases, 
rate bands, and Negotiated Service Agreements present issues that are 
qualitatively

[[Page 24448]]

 different from, and more difficult than, those in the four areas for 
which rules have been proposed. For this reason they will not be 
considered in the current proceeding. In addition to the unresolved 
legal and other issues cited in the Notice of October 27, see 60 FR 
54985, consideration of rules in these three areas would necessarily 
involve an exploration of technical and other substantive issues. For 
example, development of a rule providing for rate bands would require 
consideration of the technical resources available to support adoption 
of a range of rates for competitive mail categories and to gauge the 
impact of their adoption, and appropriate filing requirements to 
support such requests. With regard to Negotiated Service Agreements, 
adoption of rules applicable to such special classifications would 
involve consideration of the objective criteria that would be required 
of a mailer to qualify for reduced contract rates.3 The Commission 
is prepared to take up the issues raised by limited scope rate cases, 
rate bands, and Negotiated Service Agreements in a forthcoming 
rulemaking proceeding.
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    \3\ By way of analogy, the Postal Service's rules applicable to 
International Customized Mail (ICM) service impose two objective 
qualifications on potential international contract ratepayers: 
minimum-volume qualifying criteria, and a single-point-of-origin 
criterion. International Mail Manual Sec. 292; see 58 FR 29782.
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The Commission's Proposed Rules

    One commenter--the Newspaper Association of America (NAA)--opposes 
adoption of most of the Commission's proposed amendments as unsound 
from a regulatory perspective. NAA urges the Commission to abandon the 
proposed rules for market tests, provisional services, and multi-year 
test periods because their adoption would violate the regulatory 
structure of the Postal Reorganization Act, unjustifiably advancing 
competitive considerations at the ultimate expense of captive monopoly 
ratepayers.
    A particular problem raised by the proposed rules, according to 
NAA, ``is who bears any potential losses from market tests of new 
services, provisional services, or from multi-year test periods.'' NAA 
Comments at 4-5. Were the Postal Service a private regulated utility, 
NAA observes, the Service's losses would be disallowed from its rate 
base, or at least segregated from the costs of monopoly services, and 
ultimately absorbed by its shareholders. In contrast, when the Service 
loses money, that loss is cumulated in the Prior Years' Losses 
component of the revenue requirement, and adds to the institutional 
costs of the Postal Service. As a result, NAA argues, any financial 
losses stemming from ill-advised or underpriced new services approved 
under the proposed rules would ultimately be shifted in large measure 
to monopoly mailers, thereby creating a cross-subsidy in contravention 
of the intent of Congress. Unless and until Congress makes fundamental 
changes in the Reorganization Act that would grant the Commission power 
to police the rate effects of Postal Service forays into competitive 
service--especially enhanced authority over the revenue requirement--
NAA states that the proposed rules should not be adopted.
    NAA's comments raise legitimate concerns regarding the possible 
impact of non-compensatory services upon other postal ratepayers, 
particularly monopoly mailers. The Commission agrees that new services 
adopted to meet competitive or other perceived needs must be offered at 
compensatory rates, and cannot be allowed to become a revenue burden on 
other categories of mail. However, the possibility that the 
Commission's proposed rules could become a vehicle for producing such 
results does not compel the conclusion that they should not be adopted. 
Rather, it is a reason for fashioning and applying the rules in a 
manner that will avoid this potential harm. Each of the proposed rules 
for introducing new services includes provisions that will serve to 
limit the potential negative financial impact of its application. 
Market tests will be limited in duration and typically will occur in 
only a few areas. Provisional services also will be limited in 
duration. Minor classification changes will be recommended only if 
their anticipated impact on overall postal costs and revenues is minor. 
Furthermore, in applying the rules the Commission will be bound, as 
always, by the requirement in Sec. 3622(b)(3) to recommend rates that 
recover estimated costs and contribute to the institutional costs of 
the Postal Service.
    National Newspaper Association (NNA) and other commenters raise a 
different general concern regarding the proposed rules: potential 
problems of due process associated with the 90- to 120-day procedural 
schedules established in the rules. NNA comments that the speed made 
necessary by the foreshortened decisional deadlines equates to 
advantage for the Postal Service as proponent, to exclusion of 
potential parties, to expense borne by parties who do participate, and 
to harm of the Commission's decisional process by limiting the time in 
which to develop an evidentiary record. NNA Comments at 3-4. The 
Commission's Office of the Consumer Advocate also identifies due 
process and evidentiary problems that could result from the abbreviated 
procedural schedules as its primary concerns regarding the rules. OCA 
asks the Commission to state explicitly that any new rules adopted in 
this proceeding will not be used to shift the burden of proof from the 
Postal Service or limit discovery. OCA Comments at 7-10. Similar 
concerns regarding particular proposed rules were voiced by American 
Bankers Association, McGraw-Hill, Newspaper Association of America, and 
United Parcel Service.
    Procedural schedules of 90 or 120 days admittedly may impose some 
extraordinary demands on participants, but they are by no means 
impossible to meet, as the prompt litigation and deliberations in 
Docket No. MC96-1 demonstrate. The Reorganization Act directs the 
Commission to consider rate and classification change requests 
``promptly,'' and authorizes it to adopt rules ``[i]n order to conduct 
its proceedings with utmost expedition consistent with procedural 
fairness to the parties.'' 39 U.S.C. Sec. 3624(a), (b). The Commission 
has designed the rules adopted in this proceeding with features--such 
as registration and expedited notice provisions--to increase the 
feasibility of the prescribed decisional schedules. However, the 
Commission wishes to assure all parties that it will not allow these 
rules to be used to alter the normally applicable standards of proof, 
curtail legitimate discovery and hearing practice, or otherwise deprive 
interested parties of their procedural rights. It should also be borne 
in mind that in any proceeding conducted under the new rules, an 
affected participant may lodge a motion for extension of the procedural 
schedule, which the Commission will grant if it finds that an extension 
is required to provide due process.
    Additionally, in light of the various concerns expressed by 
commenters about the operation of the proposed rules and their 
consequences, the Commission is including a ``sunset'' provision in 
each of the four components of the final rule, which will cause them to 
be reviewed or terminated within a five-year period.

II. Market Tests of Potential New Services

Applicability of Rule

    Several parties filed comments suggesting changes which would 
enlarge applicability of the Commission's proposed market test rule. 
Both the Postal Service and Time Warner express support for a rule that

[[Page 24449]]

would go beyond the Joint Task Force's recommendations by encompassing 
market tests of rate changes as well as market tests of new services. 
Federal Express Corporation comments that the rule should extend to 
tests of new international mail services, as well as domestic services; 
the National Newspaper Association suggests that non-postal services 
contemplated by the Postal Service should also be included. Finally, 
American Bankers Association suggests that a Postal Service request for 
a permanent change in mail classification should not be a pre-requisite 
for procedures that would authorize market tests of potential new 
services.
    The final rule adopted by the Commission preserves the terms of 
applicability recommended by the Joint Task Force Report and 
incorporated in the proposed market test rule. As the Commission 
observed in the Notice of October 27, tests of pure rate changes in the 
usual selective form of market testing would necessarily raise 
questions of fairness and equity under 39 U.S.C. Sec. 3622(b)(1) and of 
undue discrimination or preference among mail users under Sec. 403(c). 
Comments provided in response to the October 27 Notice do not provide 
persuasive countervailing considerations that would justify inclusion 
of rate tests in the rule.4 Similarly, in the absence of clear 
statutory bases for including market tests of international postal 
services and non-postal services to--which types of service none of the 
Commission's current rules applies--the Commission declines to extend 
the final rule into these areas. The Commission also declines to 
broaden the rule beyond the context contemplated by the Joint Task 
Force recommendation, namely, in connection with the filing of a 
request for a permanent change in mail classification. In the 
Commission's view, a ``free-standing'' market test rule would require a 
different set of procedures, and possibly additional forms of 
evidentiary support by the Postal Service.
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    \4\ The Postal Service is, of course, free to request expedited 
consideration under special rules of practice in connection with any 
rate change request it may wish to submit.
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    As the preamble states, the final rule includes a new 
Sec. 3001.161(b), which establishes a five-year sunset provision for 
the effectiveness of the market test rule.

Evidentiary Requirements

    Several parties commented on the appropriateness of the evidentiary 
requirements applicable to market test proposals prescribed in proposed 
Sec. 3001.162. The Postal Service commented generally that the proposed 
section requires the preparation and provision of too much information, 
and more particularly that the required estimate of the number of 
customers who will participate in the market test could be difficult to 
produce. In contrast, other commenters--including American Bankers 
Association, Newspaper Association of America, and National Newspaper 
Association--suggested that the Postal Service should be required to 
produce additional information to support proposed market tests.
    The Commission's final rule maintains the evidentiary requirements 
of the proposed rule, with minor alterations to accommodate the 
concerns of commenters. The Commission continues to believe that the 
general standard declared in proposed Sec. 3001.162, namely, the 
provision of ``such information and data . . . 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,'' 
establishes the appropriate standard of evidentiary support. In 
response to the Postal Service's comments, Sec. 3001.162(g) of the 
final rule requires the Service to provide an estimate of the number of 
customers who will participate in the test ``to the extent that such an 
estimate is practicable.'' Also, in order to implement Federal Express 
Corporation's proposal of a mechanism that would provide an alternative 
to rendering a ``yes or no'' decision on proposed market tests, 
Sec. 3001.162(f) of the final rule adds a requirement that the Postal 
Service state the goals and objectives of the market test, and 
subsection (g) requires the Service to identify ``those features of the 
proposed market test that, [in its opinion,] cannot be modified without 
significantly impairing the value of the test.''

Rule for Decision

    Proposed Sec. 3001.164 provides for the Commission's issuance of a 
``yes or no'' decision either in favor of or against the Postal 
Service's proposed market test. Several commenters--Federal Express 
Corporation, the Commission's Office of the Consumer Advocate, and 
United Parcel Service--question the consistency of this decisional 
standard with the exercise of the Commission's best judgment in 
performing its statutory responsibilities. As noted above, Federal 
Express proposes an alternative to a ``yes or no'' decisional standard: 
allowing the Postal Service to designate those elements of its proposed 
market test which cannot be modified without negating its value, and 
adopting a decisional standard which would preclude the Commission only 
from modifying those designated elements. The Commission would thereby 
retain the option of making necessary modifications in less essential 
elements of a proposed market test.
    Upon consideration, the Commission believes that the mechanism 
proposed by Federal Express is preferable to restricting the 
Commission's decision to a blanket approval or rejection of a proposed 
market test. As noted in the Notice of October 27, the Commission's 
preference and practice has been to cure any identified inconsistencies 
with statutory policies or factors by recommending modifications, if 
they are feasible. 60 FR 54982. Yet, the Commission also noted, a 
recommendation to modify a market test in a manner that would depart 
significantly from postal management's plan ``could jeopardize the 
timeliness of the test and seriously impair its usefulness.'' Ibid. 
Because the mechanism proposed by Federal Express would better 
accommodate these competing considerations, Sec. 3001.164 of the final 
rule provides for issuance of a decision in accordance with the 
policies of the Reorganization Act, but without ``modification of any 
feature of the proposed market test which the Postal Service has 
identified in accordance with Sec. 3001.162(f)'' as one that cannot be 
modified without significantly impairing the value of the test.5
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    \5\ Commenter McGraw-Hill suggests an alternative mechanism 
which would provide for preliminary Commission advice to the Postal 
Service to modify unacceptable features of the proposed market test 
prior to rendition of a decision. While this proposal also has 
merit, the Commission anticipates that its implementation could 
significantly extend the 90-day schedule proposed by the Commission 
and adopted in the final rule.
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 Data Collection and Reporting Requirements

    Several parties submitted comments addressing the data collection 
and reporting requirements specified in proposed Sec. 3001.165, and the 
exemption from providing market test data afforded by proposed 
Sec. 3001.166(b). The Postal Service comments that the provision 
requiring it to submit all test data to the Commission no later than 60 
days following the conclusion of the test could prove to be an 
obstacle. McGraw-Hill suggests that the rule should be modified to 
require the Postal Service to report all test data collected. 
Similarly, United Parcel Service states that the rule

[[Page 24450]]

should require periodic public reporting of the test data without 
exception.
    The Commission's final market test rule retains the data collection 
and reporting provisions of the proposed rule. The 60-day requirement 
in Sec. 3001.165 is intended to establish a benchmark for the Service's 
production of market test data in the proceeding to consider 
recommendation of the proposed service as a permanent mail 
classification; if the Postal Service encounters difficulty in meeting 
this deadline in a particular case, the Commission will entertain a 
motion for a reasonable extension. The Commission also continues to 
believe that an inflexible rule requiring the Postal Service to report 
all market test data on a periodic basis, without exception, would be 
insufficiently flexible to accommodate the Service's legitimate needs, 
especially with regard to services tested in a competitive field. 
Accordingly, the final rule continues to require production of all test 
data only if the Postal Service elects to pursue recommendation of the 
tested new service as a permanent mail classification.

Suspension, Continuation or Termination of Proceeding

    Section 3001.166 of the Commission's proposed rule provides for 
Postal Service motions to suspend the proceeding to consider its 
request for a permanent mail classification change, and states that the 
Commission shall grant the motion ``if, in the Commission's opinion, it 
would be reasonable under the circumstances to defer consideration of 
the request'' until data to be produced by the market test becomes 
available. In its comments on this provision, the Postal Service states 
that the suspension of its request should be automatic.
    The Commission is concerned that the Postal Service may have 
misunderstood the intent of this provision. It is not designed to 
compel the Service to litigate its proposal while the market test is 
being conducted. Rather, it is designed to preserve the opportunity to 
move forward in the consideration of the requested permanent change in 
mail classification if meaningful progress can be made, for the sake of 
expedition. Automatic suspension of the proceeding would foreclose this 
option. If no progress appears likely until information produced in the 
market test is available, the Commission will order a suspension.

III. Requests for Provisional Service Changes of Limited Duration

Applicability of Rule

    Commenters raised two issues regarding applicability of a rule for 
provisional service changes: (1) whether such a rule would serve any 
independent purpose, given adoption of a market test rule; and (2) what 
the proper scope of a provisional service change rule should be.
    Several commenters--including American Business Press, the 
Newspaper Association of America, the Commission's Office of the 
Consumer Advocate, and United Parcel Service--take the position that a 
rule for considering provisional service changes would perform no 
separately identifiable function, or that the concept of a 
``provisional service change'' is too nebulous to warrant adoption of a 
rule. Notwithstanding these comments, the Commission continues to 
believe, as the Joint Task Force concluded, that a separate rule may be 
useful for considering certain types of service changes for which 
market testing would not be appropriate or adequate. While it would be 
impossible to foresee the full spectrum of such changes, the Commission 
anticipates that certain types of systemwide, seasonal, or special 
service changes would be more appropriately considered as provisional 
service changes, rather than as the subjects of market tests. 
Therefore, the final rule contains separate provisions for the 
expeditious consideration of provisional service changes.
    However, the Commission declines to expand the rule to include 
provisional changes in rates or in the terms of existing mail 
classifications, as the Postal Service and Time Warner suggest in their 
comments. The Joint Task Force recommended that an expedited procedure 
for introducing provisional service changes ``should be available, 
under more restrictive terms, for use in appropriate circumstances.'' 
Report at 52. [Emphasis added.] The ``restrictive terms'' include a 
limitation to ``innovations * * * which supplement existing rates and 
classifications without altering any of them, so that customers could 
either try the new service or stick with the existing service menu, or 
both.'' Ibid. American Business Press, Newspaper Association of 
America, and McGraw-Hill express concern in their comments that the 
provisional service change rule could be used to restructure existing 
services under the guise of introducing a ``new'' service, or otherwise 
alter pre-existing service options. In order to address these concerns, 
and to implement the concept envisioned by the Joint Task Force, the 
Commission's final rule retains the proposed rule's limitation of 
applicability to proposed provisional services that ``will supplement, 
but will not alter, existing mail classifications and rates for a 
limited and fixed duration.'' Sec. 3001.171(a).
    As the preamble states, the final rule includes a new 
Sec. 3001.171(b), which establishes a five-year sunset provision for 
the effectiveness of the provisional service change rule.

Evidentiary Requirements

    The Postal Service comments that the filing requirements contained 
in proposed Sec. 3001.172 would increase the complexity of seeking a 
provisional service change, and would be likely to impair the 
expedition with which such changes could be adopted. American Bankers 
Association takes the position that the rule should require the Service 
to provide the maximum cost and revenue information available, in order 
to prevent shifting the cost burden of providing the provisional 
service to captive users of First-Class Mail.
    The final rule maintains the filing requirements of the proposed 
rule. The Commission continues to believe that requiring the Service to 
provide a description of the salient features of a proposed provisional 
service change, together with an estimate of the effects of 
implementing it and all other available information responsive to the 
requirements in current Sec. 3001.64, imposes a reasonable standard of 
evidence. If the Postal Service experiences difficulty in developing 
the required information, it may file a motion for waiver, or an 
explanation of unavailability as provided in Sec. 3001.172(b). On the 
other hand, if a participant believes that critical information has not 
been produced, it may seek to compel its production through discovery 
and motions practice.
    As with the market test rule, in order to implement Federal Express 
Corporation's proposal of a mechanism that would provide an alternative 
to rendering a ``yes or no'' decision on proposed provisional service 
changes, Sec. 3001.172(a)(2) of the final rule adds a requirement that 
the Postal Service state its goals and objectives in introducing the 
provisional service, and subsection (a)(3) requires the Service to 
identify ``those features of the proposed provisional service that, [in 
its opinion,] cannot be modified without significantly reducing the 
benefits of introducing the proposed service.''

[[Page 24451]]

Rule for Decision

    Proposed Sec. 3001.174 provides for the Commission's issuance of a 
``yes or no'' decision either in favor of or against the Postal 
Service's proposed provisional service change. Several commenters--
Federal Express Corporation, the Commission's Office of the Consumer 
Advocate, and United Parcel Service--challenge this mode of decision, 
as they did with respect to market tests. Once again, Federal Express 
proposes an alternative that would allow the Postal Service to 
designate those elements of its proposed provisional service change 
which cannot be modified without negating its value, together with a 
decisional standard which would preclude the Commission only from 
modifying those designated elements.
    Because the same decisional considerations are mutually applicable 
to market tests and provisional service changes, the Commission has 
decided to modify proposed Sec. 3001.174 to provide for issuance of a 
decision in accordance with the policies of the Reorganization Act, but 
without ``modification of any feature of the proposed service which the 
Postal Service has identified in accordance with Sec.  
3001.172(a)(2).''6
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    \6\ McGraw-Hill once again proposes an alternative providing for 
preliminary Commission advice to the Postal Service to modify 
unacceptable features of the proposal prior to a decision. The 
Commission declines to adopt this mechanism on the same bases cited 
with respect to the market test rule.
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Data Collection and Reporting Requirements

    Section 3001.175 of the proposed rule directs the Postal Service to 
collect and report data pertaining to a recommended provisional service 
during the period in which it is in effect. The section would allow the 
Service to satisfy these requirements either through its regular data 
collection and reporting systems, in combination with the Service's 
regularly filed periodic reports under 39 CFR Sec. 3001.102, or by 
conducting and reporting the results of special studies on a 
corresponding schedule ``to the extent reasonably practicable.''
    In its comments, the Postal Service ``strongly objects'' to the 
requirements in proposed Sec. 3001.175. Comments at 19. The Service 
asserts that it is ``neither necessary nor practical'' to require it to 
modify its regular data reporting systems to include a provisional 
service, and that it is ``unreasonable'' to expect it to conduct 
special studies on a quarterly basis. Ibid. In the Service's view, data 
pertaining to a provisional service will not be germane until a record 
is developed for the purpose of determining whether to recommend the 
service as a permanent mail classification, and ``[d]ata issues will 
receive a full airing then.'' Ibid.
    The Postal Service's resistance to periodic data collection and 
reporting for recommended provisional services is, quite frankly, 
difficult to fathom. Under Sec. 3001.171(a) of the final rule, a 
provisional service may be recommended for a duration of up to two 
years. The Postal Service collects and publicly reports cost and 
revenue data for all services it offers on at least an annual basis; 
there is no apparent justification for exempting a recommended 
provisional service from this practice. Proposed Sec. 3001.175 does not 
require the Service to perform quarterly special studies for 
provisional services; it only cites Sec. 3001.102 reporting 
requirements as a standard, and directs the Service to observe them 
``to the extent reasonably practicable.'' The final rule retains this 
reasonable standard of data collection and reporting.

IV. Expedited Consideration of Requests for Minor Mail Classification 
Changes

Applicability of Rule

    Proposed Sec. 3001.69 states that a requested mail classification 
change may be considered to be ``minor in character,'' and therefore 
eligible for expedited consideration, 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. Several commenters suggested that the 
section's standard of applicability should be clarified, or replaced 
with an alternative definition of ``minor in character.''
    The Postal Service comments that the proposed rule's applicability 
criteria require further explanation; Direct Marketing Association 
regards the Commission's standards as an improvement over those in the 
Service's proposed rule, but observes that application in specific 
instances will present difficulties. American Bankers Association, 
Newspaper Association of America, National Newspaper Association, and 
McGraw-Hill challenge the proposed rule's definition of eligibility 
changes as ``minor,'' drawing on experience in recent dockets such as 
MC95-1 to illustrate that putative eligibility changes may produce 
major impacts on users of the affected mail classification. Other 
commenters question the appropriateness of the ``low costs and 
revenues'' standard. OCA comments that the standard is ambiguous, and 
may be over-inclusive in light of past mail classification 
controversies that arguably involved low costs and revenues but 
required more extensive scrutiny. United Parcel Service comments that 
imposition of the ``low costs and revenues'' standard would tend to 
reduce scrutiny of classification changes in almost all the competitive 
subclasses. Advertising Mail Marketing Association comments that 
neither of the proposed rule's standards will serve to include minor 
classification changes and exclude major ones, and proposes an 
alternative two-part test that would treat a proposed change as 
``minor'' if it:

    (a) Does not materially alter the conditions of eligibility for 
the entry of mail in a particular subclass, or for a particular rate 
element or work sharing discount; and (b) does not materially 
increase or decrease the estimated or projected institutional cost 
contribution of the affected subclass.

AMMA Comments at 5-6.
    Upon consideration of the parties' comments, the Commission agrees 
that the definition of ``minor'' classification changes in proposed 
Sec. 3001.69 should be amended. Therefore, the Commission has re-
drafted the applicability provisions to include only those proposed 
mail classification changes that are likely to be moderate in their 
impact both on mailers and on the postal system as a whole. The 
substitute retains the introductory clause precluding any change in 
existing rates or fees, and models two additional clauses on AMMA's 
suggested language, with one alteration: the clause concerning changes 
in conditions of eligibility has been modified to preclude only 
requests for more restrictive eligibility terms. Thus, proposals to 
make existing mail classifications more inclusive could be considered 
under the minor classification change provisions.
    As the preamble states, the final rule includes a new 
Sec. 3001.69(b), which establishes a five-year sunset provision for the 
effectiveness of the minor classification change rule.

Expedition of Procedural Schedule--Expedited Notice

    Commenter McGraw-Hill suggests that the expedited procedures 
specified in proposed Sec. 3001.69b should be supplemented to include 
registration and expedited notice provisions similar to those contained 
in the proposed market test rule [Sec. 3001.163(b)-(d)] and proposed 
rule for provisional service changes [Sec. 3001.173(b)-(d)]. McGraw-
Hill comments that the inclusion of such conforming provisions ``are

[[Page 24452]]

justified by the short timeframes contemplated for the proceedings in 
question.'' McGraw-Hill Comments at 5.
    The Commission agrees that inclusion of such provisions in the 
minor classification change rule is justified, and would be beneficial. 
Expedited notice of the Postal Service's filing of a request can be 
expected to enable interested parties to intervene, and initiate 
discovery if they so desire, earlier in the proceeding. Consequently, 
the final rule has been amended to add three new subsections to 
proposed Sec. 3001.69b. New subsection (b) provides for registration 
with the Secretary of the Commission by persons who are interested in 
participating in minor classification change proceedings. These 
registrants will automatically become parties to each such proceeding, 
but they may withdraw at any time. New subsection (c) requires service 
of the Postal Service's complete filing by hand delivery to registrants 
with addresses within the Washington metropolitan area, and by Priority 
Mail to all other registrants. New subsection (d) requires the Postal 
Service to give notice by First-Class Mail of the filing of its request 
to all participants in the most recent omnibus rate proceeding. Service 
by Priority Mail and First-Class Mail have been substituted for Express 
Mail, which is required in the market test and provisional service 
change rules, in view of the potentially longer procedural schedule 
available in minor classification change proceedings, and to reduce the 
resulting burden on the Postal Service. Also, in order to enable the 
Service to identify the last day for parties' intervention in the 
notice required by new subsection (d), Sec. 3001.69b(e) of the final 
rule has been modified to provide that the Commission's notice of 
proceeding ``shall afford all interested parties 26 days after filing 
of the Postal Service's request within which to intervene[.]''

V. Multi-Year Test Periods for Proposed New Services

Applicability of Rule.

    Several commenters question the terms under which proposed 
Sec. 3001.181 would allow the Postal Service to use multi-year test 
periods for proposed new services. Newspaper Association of America, 
United Parcel Service, and McGraw-Hill take the position that the rule 
should not extend to permit test periods as long as five years, in 
light of the Postal Service's demonstrated limitations in producing 
forecasts in prior Commission proceedings. In contrast, the Postal 
Service comments that a five-year period may not be sufficient for some 
proposed services, and that the appropriate length of a test period 
should be determined on a case-by-case basis.
    The final rule retains the declaration of a Commission policy in 
favor of test periods of up to five fiscal years. The Joint Task Force 
Report recommended the adoption of ``rules providing for a multi-year 
break-even period of at least four or five years[,]'' Report at 51, and 
the Commission accordingly has used five years as a policy benchmark. 
The Commission is well aware that Postal Service projections have 
usually been limited to two- or three-year horizons in postal rate and 
classification proceedings. However, the Commission is prepared to 
provide the Service with the opportunity to submit longer-range 
forecasts, and to use those projections if they prove to be credible. 
Furthermore, the Postal Service is free in any given proceeding to ask 
the Commission to expand its policy declaration, if it can furnish even 
longer-range projections that it believes to be reliable.
    The Postal Service, Advertising Mail Marketing Association, and 
Direct Marketing Association oppose another portion of the Commission's 
policy declaration in proposed Sec. 3001.181, which refers to 
``convincing substantial evidence in support of the test period 
proposed.'' These commenters challenge the quoted language on the 
ground that it would subject the Postal Service's evidence in support 
of a multi-year test period to a higher standard of proof than the 
``substantial evidence'' standard of evidentiary support commonly 
required of administrative decisions. The Postal Service suggests that 
this language ``be eliminated as unjustified and unnecessary.'' Postal 
Service Comments at 25.
    The proposed rule's use of the phrase ``convincing substantial 
evidence'' in the policy declaration was not intended to establish an 
extraordinary evidentiary standard for application to the Postal 
Service's test year projections; it was only intended to declare a 
policy in favor of departure from the normally-applicable test year 
rule when the Service's evidence persuades the Commission that such a 
departure is justified. In order to remove any ambiguity on this point, 
the final rule deletes the word ``convincing.''
    As the preamble states, the final rule includes a new 
Sec. 3001.181(b), which establishes a five-year sunset provision for 
the effectiveness of the multi-year test period rule.

Filing of Evidence in Support of Formal Request.

    In its comments, the Postal Service opposes the filing requirements 
in proposed Sec. 3001.182 (b)(2) and (b)(3) of the proposed rule, which 
direct the Service to produce 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 any other 
analyses by the Service that bear on the overall effects of introducing 
the new service during the requested test period. The Service claims 
these requirements are unnecessary, would introduce needless complexity 
and confusion into the proceeding, and call for material that is 
``likely to include pre-decisional material and/or material of 
commercial sensitivity that would not ordinarily be disclosed in 
Commission proceedings.'' Postal Service Comments at 26. Time Warner 
also comments on the ``excessive data and documentation requirements'' 
of the proposed rule, Comments at 4, and urges the Commission to 
``accommodate its information and documentation requirements to the 
inevitability that new services will be supported by scarcer, more 
attenuated data than established ones. . . .'' Time Warner Comments at 
5.
    The Commission is well aware of the problems of information 
deficiency that can be associated with new services, and does not 
intend to apply unrealistic standards of proof to such services. 
However, the Commission is also aware from experience in prior 
proceedings that financial analyses and other information of the types 
responsive to proposed Sec.  3001.182(b) (2) and (3) are likely to 
underlie the Postal Service's cost and revenue estimates for a proposed 
new service, or will at least bear significantly on the credibility and 
accuracy of those estimates. The relevance and probative value of these 
analyses are likely to be intensified when estimates are projected as 
much as five years into the future. Consequently, the final rule 
retains these filing requirements, to put the Postal Service on notice 
that all relevant supporting analyses will be scrutinized in the 
proceeding. If the Postal Service believes that special considerations 
of privilege and resulting harm should exempt certain responsive 
information in any given case, it may file a motion for waiver 
explaining why the requirement should not apply.

[[Page 24453]]

VI. Regulatory Evaluation

    It has been determined pursuant to 5 U.S.C. 605(b) that these rules 
will apply exclusively to the United States Postal Service in 
proceedings conducted by the Postal Rate Commission, and to parties who 
choose to participate in those proceedings. Therefore, it is certified 
that these rules will not have a significant impact on a substantial 
number of small entities under the terms of the Regulatory Flexibility 
Act, 5 U.S.C. 501 et seq. Because these rules will only apply to the 
Postal Service and other participants in Commission proceedings, it has 
also been determined that these rules do not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment 
pursuant to Executive Order 12612. Inasmuch as the rules impose 
information-gathering and reporting requirements exclusively upon the 
United States Postal Service for the purpose of conducting mail 
classification change proceedings, they do not contain any information 
collection requirements as defined in the Paperwork Reduction Act [44 
U.S.C. 3502(4)], and consequently the review provisions of 44 U.S.C. 
3507 and the implementing regulations in 5 CFR part 1320 do not apply.

List of Subjects in 39 CFR Part 3001

    Administrative practices and procedure, Postal Service.

    For the reasons set out in the preamble, 39 CFR part 3001 is 
amended as follows:

PART 3001--RULES OF PRACTICE AND PROCEDURE

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

    Authority: 39 U.S.C. 404(b), 3603, 3622-24, 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.

    (a) 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, minor in character. A requested classification 
change may be considered to be minor in character if it:
    (1) Would not involve a change in any existing rate or fee;
    (2) Would not impose any restriction in addition to pre-existing 
conditions of eligibility for the entry of mail in an existing subclass 
or category of service, or for an existing rate element or work sharing 
discount; and
    (3) Would not significantly increase or decrease the estimated 
institutional cost contribution of the affected subclass or category of 
service.
    (b) This section and Secs. 3001.69a through 69c are effective May 
15, 1996 through May 15, 2001.


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 this section and of subpart C of this part. 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) Persons who are interested in participating in proceedings to 
consider Postal Service requests for minor changes in mail 
classification 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 a minor mail 
classification change pursuant to Secs. 3001.69 through 3001.69c. 
Parties may withdraw from the register or a particular case by filing a 
notice with the Secretary of the Commission.
    (c) When the Postal Service files a request under the provisions of 
Secs. 3001.69 through 3001.69c, 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 Priority 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 
Secs. 3001.69 through 3001.69c, it shall on that same day send by 
First-Class Mail to all participants in the most recent omnibus rate 
case a notice which briefly

[[Page 24454]]

describes its proposal. This notice shall indicate on its first page 
that it is a notice of a request for a minor change in mail 
classification to be considered under Secs. 3001.69 through 3001.69c, 
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 
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 26 days 
after filing of the Postal Service's request 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.
    (f) Within 28 days after publication of the notice of proceeding 
pursuant to paragraph (e) 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.
    (g) 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.
    (h) 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.
    (i) 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 (f) 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. Sections 3001.161 through 3001.166 are added as Subpart I to 
read as follows:
Subpart I--Rules Applicable to Requests for Market Tests of Proposed 
Mail Classification Changes
Sec.
3001.161  Applicability.
3001.162  Filing of market test proposal and supporting direct 
evidence.
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.

Subpart I--Rules Applicable to Requests for Market Tests of 
Proposed Classification Changes


Sec. 3001.161  Applicability.

    (a) This section and Secs. 3001.162 through 3001.166 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 these sections 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.
    (b) This section and Secs. 3001.162 through 3001.166 are effective 
May 15, 1996 through May 15, 2001.


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);

[[Page 24455]]

    (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) A statement of the goals and objectives of the proposed market 
test, supported by quantitative projections of anticipated results to 
the extent practicable.
    (g) A statement of those features of the proposed market test that, 
in the opinion of the Postal Service, cannot be modified without 
significantly impairing the value of the test;
    (h) An estimate of the number of customers who will participate in 
the market test to the extent that such an estimate is practicable, 
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
    (i) 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 Secretary of 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) 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 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 Secs. 3001.161 through 3001.166, 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 on the Postal Service's 
proposed market test in accordance with the policies of the Postal 
Reorganization Act, but will not recommend modification of any feature 
of the proposed market test which the Postal Service has identified in 
accordance with Sec. 3001.162(g). The purpose of this subpart is to 
allow for consideration of proposed market tests within 90 days, 
consistent 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(h). 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 shall explain the 
circumstances leading to its motion, but need not produce the test data 
that would otherwise be submitted pursuant to Sec. 3001.165.
    4. Sections 3001.171 through 3001.176 are added as Subpart J, to 
read as follows:

[[Page 24456]]

Subpart J--Rules Applicable to 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 Applicable to Requests for Provisional Service 
Changes of Limited Duration


Sec. 3001.171  Applicability.

    (a) This section and Secs. 3001.172 through 3001.176 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 these 
sections 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.
    (b) This section and Secs. 3001.172 through 3001.176 are effective 
May 15, 1996 through May 15, 2001.


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 this subpart and of subpart C of 
this part. 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) A statement of the goals and objectives of introducing the 
proposed provisional service, supported by quantitative projections of 
anticipated results to the extent practicable.
    (3) A statement of those features of the proposed provisional 
service that, in the opinion of the Postal Service, cannot be modified 
without significantly reducing the benefits of introducing the proposed 
service;
    (4) An explanation and complete documentation of the development of 
the rates proposed for the provisional service;
    (5) A termination date on which the proposed provisional service 
will be discontinued;
    (6) 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
    (7) 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 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 Secretary of 
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 Secs. 3001.171 through 
3001.176, 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

[[Page 24457]]

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 on the Postal Service's 
proposed provisional service in accordance with the policies of the 
Postal Reorganization Act, but will not recommend modification of any 
feature of the proposed service which the Postal Service has identified 
in accordance with Sec. 3001.172(a)(3). 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. Sections 3001.181 and 3001.182 are added as Subpart K, 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.

    (a) The rules in Secs. 3001.181 and 3001.182 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 test periods of up to 5 fiscal years 
for the purpose of determining breakeven for newly introduced postal 
services where the Postal Service has presented substantial evidence in 
support of the test period proposed.
    (b) This section and Sec. 3001.182 are effective May 15, 1996 
through May 15, 2001.


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.

    Issued by the Commission on May 7, 1996.
Margaret P. Crenshaw,
Secretary.
[FR Doc. 96-12130 Filed 5-14-96; 8:45 am]
BILLING CODE 7710-FW-P