[Federal Register Volume 61, Number 159 (Thursday, August 15, 1996)]
[Notices]
[Pages 42449-42452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20782]


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POSTAL RATE COMMISSION

[Docket No. MC96-3; Order No. 1129]


Special Services Fees and Classifications

August 8, 1996.
ACTION: Notice of expansion of scope of docket.

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SUMMARY: Notice is hereby given that on August 8, 1996, the Postal Rate 
Commission expanded the scope of this proceeding at the request of 
Nashua Photo Inc. and Mystic Color Lab to include consideration of 
classification modification with respect to Business Reply Mail. 
Previous notice of the scope of this proceeding was published in the 
Federal Register on June 21, 1996, 61 FR 31968-312001. Interested 
persons wishing to participate in this matter will be considered to 
have good cause for not submitting a notice of intervention prior to 
this date, and may request intervention pursuant to Commission Rules of 
Practice sections 20, 20a, and 20b. 39 CFR 3001.20, 3001.20a, 3001.20b.

ADDRESSES: Comments and correspondence should be sent to Margaret 
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., Washington, DC 20268-0001 
(telephone: 202-789-6820).

SUPPLEMENTARY INFORMATION: On July 15, 1996, Nashua Photo Inc. and 
Mystic Color Lab (``Nashua/Mystic'') filed a motion to enlarge the 
scope of this proceeding to consider an alleged inequity in the fee 
structure for Business Reply Mail. Nashua Photo Inc. and Mystic Color 
Lab Motion to Enlarge Scope of Proceeding for Consideration of 
Classification Modification with Respect to Business Reply Mail, July 
15, 1996 (``Motion''). Presiding Officer's Ruling MC96-3/4 certified 
the issues raised by the Motion to the full Commission. The Commission 
accepts certification, and grants the Nashua/Mystic Motion.
    Nashua/Mystic request that this docket address the need to 
establish a category of Business Reply Mail (BRM) that would be 
eligible for a discounted advance deposit fee comparable to the current 
two-cent per-piece fee charged barcoded BRM. The Motion acknowledges 
that the BRM generated by Nashua and Mystic is not ``prebarcoded and 
automatable'' and that such mail cannot take advantage of the Postal 
Service's automated Business Reply Mail Accounting System (BRMAS). 
Motion at 3. It argues, however, that Nashua and Mystic have a system 
for processing their incoming bulk non-automatable BRM mail that 
reduces the Postal Service's BRM-related costs below those of mail 
processed by the BRMAS system. For this reason, it contends, mail 
processed in this manner should be eligible for a discounted BRM fee 
comparable to that charged for barcoded BRM. Id. at 2.
    Parties' Arguments. The Motion alleges that the Postal Service's 
refusal to charge a discounted BRM fee that reflects the costs avoided 
when the business reply customer handles and accounts for its own 
incoming mail is due, in part, to the lack of a DMCS provision for such 
a discount. It argues that amending DMCS Rate Schedule SS-2 to provide 
for a ``non-automatable bulk'' discount category for BRM processed by 
bulk handling and accounting methods approved by the Postal Service 
would remedy the

[[Page 42450]]

inequity of the current fee structure. Motion at 3-4. It contends that 
the Commission has jurisdiction under Sec. 3623(b) to recommend 
classification changes on its own initiative, and, therefore, has the 
authority to entertain the classification proposals of intervenors in 
this proceeding. It argues that this would promote the policies of the 
Act stated in Sec. 3623(c)(1) (``the establishment of a fair and 
equitable classification schedule''), and Sec. 3622(c)(5) (``the 
desirability of special classifications from the point of view of both 
the user and of the Postal Service''). The Motion argues that it would 
be inequitable not to provide them an opportunity to develop an 
evidentiary record supporting its proposal in this proceeding because 
it is the only proceeding dealing with special services that the Postal 
Service has indicated it will file in the foreseeable future. Id. at 5.
    The Postal Service filed its answer to the Motion on July 24, 1996. 
Opposition of United States Postal Service to Nashua Photo Inc. and 
Mystic Color Lab Motion to Enlarge Scope of Proceeding for 
Consideration of Classification Modification with Respect to Business 
Reply Mail, July 24, 1996 (``Postal Service Opposition''). The Postal 
Service argues that the Motion should be rejected because its Request 
is a set of proposals to reclassify discreet special services that have 
nothing to do with Business Reply Mail. Postal Service Opposition at 4. 
It asserts that reviewing the BRM fee structure in this docket would be 
premature for both practical and policy reasons.
    The Postal Service warns that the Commission might have to evaluate 
the Nashua/Mystic proposal on an underdeveloped record, since the data 
necessary are not yet available. It urges that the Nashua/Mystic 
proposal be deferred, because relevant data ``are expected to be 
developed during the coming months'' as part of a comprehensive review 
of its BRM program's costs and business processes. It argues that 
evaluation of the Nashua/Mystic proposal is likely to delay processing 
of its proposals in this docket, since it is likely to raise a wide 
range of novel and contentious issues, including whether a bulk 
discount should be offered to both automated and non-automated BRM, and 
the costs of administering a bulk BRM discount. Id. at 4-5. It argues 
that it should be the Postal Service's managerial prerogative to treat 
the proposals in its Request, rather than that of Nashua/Mystic, as its 
near-term business priorities. Id. at 1, 3. It asserts that 
recommending a rate for bulk BRM in this docket would violate 
management's statutory prerogatives, and warns that the Governors are 
likely to reject a shell rate category for bulk BRM, should the 
Commission recommend it. Id. at 2-3.
    Finally, the Postal Service argues that denying the Motion would 
not leave Nashua and Mystic without relief. Responding to their 
assertion that this docket is the only reclassification case for 
special services that the Postal Service plans to file in the 
foreseeable future, the Postal Service contends that its policy 
statement of July 19, 1996, on BRM reform ``opens the possibility that 
there soon will be a BRM reclassification case'' in which the Nashua/
Mystic proposal could be considered. Id. at 5.
    The Office of the Consumer Advocate (OCA) also filed a response 
opposing the Motion. Office of the Consumer Advocate Response to Motion 
of Nashua Photo and Mystic Color Lab to Enlarge Scope of Proceeding, 
July 25, 1996 (``OCA Response''). The OCA states that the Nashua/Mystic 
proposal appears to have merit and should be investigated, citing 
previous expressions of Commission concern that the costs avoided by 
mail services that do not require delivery are not adequately reflected 
in their rates. OCA Response at 4-5. It contends, however, that to 
begin an investigation of the BRM fee structure almost two months into 
these proceedings might delay the processing of the Postal Service's 
proposals. It regards delay as unwarranted, since it sees no connection 
between reform of the BRM fee structure and the Postal Service's 
proposals in this docket. Id. at 1. The OCA argues that it would be 
more appropriate to consider the Nashua/Mystic proposal in a separate 
complaint proceeding brought under Sec. 3662, or in a separate phase of 
the current docket. Id. at 1-2.
    On July 31, 1996, Nashua and Mystic filed a memorandum replying to 
the arguments of the Postal Service and the OCA. Nashua Photo Inc. & 
Mystic Color Lab Reply Memorandum Regarding Their Motion to Enlarge 
Scope of Proceeding for Consideration of Classification Modification 
with Respect to Business Reply Mail, July 31, 1996 (``Nashua Reply''). 
Nashua's Reply describes the procedures used to handle Nashua's BRM 
mail. According to Nashua, it receives its incoming film processing 
orders from the Postal Service in sacks by truck. It asserts that it 
does all remaining handling of this incoming BRM mail, including 
keeping an incoming manifest system that generates a daily computer 
report for the Postal Service of the amount of postage and BRM fees 
owed. It describes the Postal Service's role as limited to sampling the 
incoming mail to verify these reports. Nashua contends that because 
this system requires less BRM-related work of the Postal Service than 
BRMAS mail, charging it a 10-cent, rather than a 2-cent BRM fee is 
unfair. It alleges that the Postal Service does not believe that the 
current DMCS permits it to charge a reduced fee for non-automated BRM. 
Its proposal is intended to remove this perceived obstacle to charging 
it fair BRM fees. Nashua Reply at 3, n.3.
    Nashua's Reply urges rejection of the Postal Service's policy 
argument that management's decisions concerning the scope of its 
classification proposals should control the scope of the hearings in 
which they are considered. It warns against assuming that a failure by 
management to request a particular classification change means that 
management would arbitrarily refuse to consider a record supporting 
such a change. Such an assumption, it argues, would make futile the 
authority granted to the Commission in Sec. 3623(b) of the Act to 
initiate hearings on classification proposals. Id. at 7-8, 9-11. Nashua 
cites Docket No. MC78-2 as an illustration that this authority can be 
productively invoked. In that docket, it notes, the Governors adopted 
the Commission's recommendation to create presort discount categories 
for non-profit third-class mail, even though the Postal Service did not 
propose changes to that subclass in that docket. Id. at 10, n.9.
    Nashua's Reply challenges the Postal Service's contention that the 
Commission has a policy of excluding intervenors' proposals from 
dockets under circumstances similar to those in this docket. It notes 
that the Postal Service's Opposition attempts to draw parallels between 
Nashua's proposal in this docket, and a proposal by United Parcel 
Service (UPS) to expand the scope of Docket No. MC95-1 that the 
Commission rejected. According to the Postal Service, Nashua notes, the 
Commission rejected UPS's proposal to enlarge Docket No. MC95-1 because 
UPS proposed changes to a mail category that the Postal Service's 
proposals did not address, threatening to unduly burden and delay the 
consideration of its own proposals. The Postal Service has not proposed 
substantive changes to BRM, and claims that it would unduly burden and 
delay this proceeding to add difficult BRM issues to the complex set of 
issues raised by its own proposals. Nashua Reply at 2-3.
    Nashua counters that the reasons that the Commission used to 
restrict the scope of Docket No. MC95-1 do not

[[Page 42451]]

apply to its proposal in this docket. It observes that in Docket No. 
MC95-1, the Commission evaluated proposals to reclassify ``the totality 
of First-Class, second-class and third-class mail'' in ten months. It 
argues that the same amount of time is available to evaluate the 
``vastly smaller'' set of issues in this docket, which involves 
reclassification of only six special services. Nashua contends that the 
Postal Service is well aware of the contrast. It quotes from the Postal 
Service's letter to the participants in this docket proposing a partial 
settlement, which states that activity in this docket has been 
``relatively light, and there are many fewer issues than in an omnibus 
rate or classification proceeding.'' Under these circumstances, Nashua 
argues, considering a minor change in BRM is unlikely to significantly 
delay this proceeding. Nashua Reply at 4-5, 9.
    Nashua argues that the parallel that the Postal Service attempts to 
draw with Docket No. MC95-1 fails in another crucial respect. It notes 
that the Postal Service's Opposition offers no assurance that Nashua 
would have other remedies if its Motion were denied. The Opposition, 
Nashua asserts, offers no commitment to filing a BRM reclassification 
case in the near future, just an expectation that later this year it 
will be in a position to ``take appropriate action'' of an unspecified 
nature. Id. at 6, 11.
    Commission Analysis. Determining the appropriate scope of the 
Commission's dockets is an administrative matter generally left to the 
Commission's sound discretion. It involves balancing various 
objectives. Prominent among them is procedural efficiency, but there 
are others. One of them is the Commission's ``affirmative duty to 
develop facts and make recommendations which further the goals and 
objectives of the Act.'' See Docket No. MC78-2, Opinion and Recommended 
Decision on Reconsideration, March 24, 1980, at 13. Among those 
statutory objectives are that mail classifications be fair and not 
unduly discriminatory [see Secs. 3623(c)(1) and 403(c)], and that they 
be structured to fairly reflect major distinctions in costs, demand, 
and other Sec. 3622(b) factors.
    Nashua has alleged that its BRM requires less work of the Postal 
Service, and therefore imposes less cost on the Postal Service, than 
automated BRM. If this were shown to be true, the five-fold disparity 
in the BRM discount offered to these two types of BRM might indicate 
that this fee structure violates Sec. 3623(c)(1), and Sec. 403(c). Such 
a case might be rebutted, for example by a showing that it would be 
administratively impractical to establish a separate discount category 
for non-automated bulk BRM mail processed as Nashua describes. The 
important point is that not allowing Nashua to attempt to prove its 
case in this docket would frustrate the objectives of the Act, unless 
there are important countervailing considerations.
    The countervailing considerations alleged by the Postal Service are 
not persuasive. The Postal Service argues that, as a matter of policy, 
the boundaries of classification proposals selected by management 
should control the scope of the hearings in which they are considered. 
This ``policy'' is not consistent with the structure of the Act. The 
Act clearly does not assume that a failure by management to request a 
particular classification change means that management would 
arbitrarily refuse to consider a record supporting such a change. Such 
an assumption would make a mockery of the authority granted to the 
Commission in Sec. 3623(b) of the Act to initiate hearings on 
classification proposals. As Nashua notes, this authority has been 
productively exercised in prior dockets, such as MC78-2, where the 
Governors adopted the Commission's recommendation to reconfigure a 
subclass that was not addressed in the Postal Service's initial filing. 
Nashua Response at 10, n.9.
    Although BRM is a special service, the Postal Service argues that 
it is inappropriate to address it in this docket, because it is 
unrelated to the six special services that it proposes to modify. This 
argument that BRM is unrelated is valid, as far as it goes. Most of the 
six special services are unrelated to each other and to BRM. The Postal 
Service's Request proposes miscellaneous, rather than systematic 
classification changes to special services. Since all are essentially 
discreet, self-contained services, there is little procedural 
efficiency to be lost by considering another discreet special service 
in this docket. The decision to address Nashua's proposal in this 
docket should turn on other factors.
    More significant is the Postal Service's argument that considering 
Nashua's proposal in this docket would be premature, because the Postal 
Service is currently reexamining BRM costs and operations. The prospect 
of having access to more BRM cost and operational data in a subsequent 
case would support deferring consideration of Nashua's proposal if it 
were coupled with some assurance that there will be a relevant filing 
in the foreseeable future. As Nashua points out, however, the Postal 
Service has promised only that it will be in a better position ``to 
take appropriate action'' at the end of the year, action which might or 
might not involve a filing with the Commission. Nashua Reply at 6, 11. 
This contrasts with the situation in Docket No. MC95-1 in which the 
Commission refused UPS's request to include reform of the Priority Mail 
rate structure. An important factor in that decision was the 
Commission's belief that issues relating to the structure of Priority 
Mail would be reviewed in a future docket, based on the intentions 
expressed by the Postal Service to make a relevant filing in the near 
future. See Docket No. MC95-1, Order No. 1064, citing Tr. 1/30.
    The other factor on which the Commission relied in refusing to 
enlarge the scope of MC95-1 was the impracticality of adding 
potentially complex reclassification issues to the sweeping 
classification reforms already under consideration in that docket. This 
contrasts with the situation in this docket, where the same amount of 
time is available to examine a considerably narrower set of Postal 
Service proposals. As the Postal Service has acknowledged, activity in 
this docket has been light, and there are many fewer issues to consider 
than in an omnibus classification docket. Notice of the United States 
Postal Service Regarding Partial Settlement, July 19, 1996, at 3.
    The narrowness of the issues raised by Nashua's proposal further 
reduces the prospect that considering them in this docket will delay 
processing of the Postal Service's proposals. To support a 
recommendation that a discreet rate category be established for bulk, 
non-automatable BRM processed by the business reply customer, it is not 
essential for Nashua to show what the specific discount should be. It 
may be sufficient to show that the BRM costs of such mail are 
systematically and substantially below the BRM costs of other advance 
deposit non-automatable BRM. Nashua has disavowed an intent to litigate 
issues of the appropriate attributable cost and rate for automated BRM 
itself. Nashua Reply at 3, n.3.
    Accordingly, it does not appear that considering Nashua's proposal 
in this docket is likely to significantly delay the consideration of 
the Postal Service's proposals in this docket. If, during the course of 
this proceeding, the Postal Service should demonstrate that Nashua's 
proposal cannot be adequately considered without a wide-ranging 
reexamination of the structure of BRM fees, and that such a 
consideration must await the outcome of its current investigations, the 
Nashua proposal can

[[Page 42452]]

be severed and considered in a separate phase of this docket.
    It is ordered:
    1. The Nashua Photo Inc. and Mystic Color Lab Motion to Enlarge 
Scope of Proceeding for Consideration of Classification Modification 
with Respect to Business Reply Mail, filed July 15, 1996, is granted.
    2. The Secretary shall cause a notice of this determination to be 
published in the Federal Register.

    Issued by the Commission on August 8, 1996.
Margaret P. Crenshaw,
Secretary.
[FR Doc. 96-20782 Filed 8-14-96; 8:45 am]
BILLING CODE 7710-FW-P