[Federal Register Volume 64, Number 53 (Friday, March 19, 1999)]
[Notices]
[Pages 13613-13617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6841]


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POSTAL RATE COMMISSION

[Docket Nos. MC99-1 and MC99-2; Order No. 1233]


Mail Classification Proceedings; (Authority: 39 U.S.C. 3623)

AGENCY: Postal Rate Commission.

ACTION: Notice of new cases affecting nonletter-sized business reply 
mail.

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DATES: See Supplementary Information section for dates.

ADDRESSES: Send communications concerning this notice to the attention 
of Margaret P. Crenshaw, Secretary of the Commission, 1333 H Street 
NW., Suite 300, Washington, DC 20268-0001.

FOR MORE INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
1333 H Street NW., Washington, DC 20268-0001, 202-789-6820.

SUPPLEMENTARY INFORMATION: On March 10, 1999, the Postal Service filed 
concurrent requests with the Commission for recommended decisions on 
proposed changes in the Domestic Mail Classification Schedule (DMCS). 
Both requests were filed pursuant to Sec. 3623 of the Postal 
Reorganization Act, 39 U.S.C. 101 et seq.
    The proposed changes affect certain nonletter-sized Business Reply 
Mail (BRM). They grow out of an ongoing, two-year experiment 
authorizing two alternatives to the traditional manual method of 
accounting for this type of mail. These alternatives are referred to as 
the ``weight averaging'' method and the ``reverse manifest'' method. 
The experiment was authorized as a result of Docket No. MC97-1. It 
began June 8, 1997 and expires June 7, 1999. See Order No. 1148 
(December 18, 1996); 61 FR 67860-62 (December 24, 1996); PRC Op. MC97-1 
(April 2, 1997); and Decision of the Governors of the United States 
Postal Service on the Commission's Recommended Decision (May 6, 1997).
    The Service represents, in its two requests and related filings, 
that developments warrant making the experimental classification and 
fees permanent for the weight averaging accounting method, but not for 
the reverse manifest method. At the same time, the Service finds that 
certain technical and administrative issues

[[Page 13614]]

related to weight averaging have emerged, and it believes resolution is 
not possible prior to the experiment's scheduled expiration.
    To avoid the disruption in operations and the increase in the per-
piece service fee that would occur if the experimental authority 
expires before a permanent classification for weight averaged 
nonletter-size BRM can be approved, the Service suggests proceeding on 
dual procedural tracks. One track --Docket No. MC99-1--would allow 
expedited consideration of a temporary extension of the current 
classification and fees for qualifying weight-averaged BRM under the 
Commission's experimental rules. The Service asks that this proceeding 
be conducted pursuant to a Commission order authorizing settlement 
negotiations and incorporating certain procedures (and related 
deadlines) entailing action by the Commission or others. See generally 
Request of the United States Postal Service for a Recommended Decision 
on Renewal of Experimental Classification and Fees for Weight-Averaged 
Nonletter-Size Business Reply Mail (March 10, 1999). (Also cited here 
as Docket No. MC99-1.)
    The other track--Docket No. MC99-2--would allow full exploration of 
costing and pricing issues associated with a permanent classification. 
These issues include the Service's proposal to eliminate the setup fee, 
which is an element of the current experiment, and to reduce the per-
piece service fee and the monthly sampling/accounting fee. As in the 
current experiment, the proposed fees under the permanent 
classification would be assessed in addition to applicable First-Class 
or Priority Mail postage. See generally Request of the United States 
Postal Service for a Recommended Decision on Classification and Fees 
for Weight-Averaged Nonletter-size Business Reply Mail (March 10,1999). 
(Also cited here as Docket No. MC99-2). A summary comparison of fees 
under various options follows.

        Current and Proposed Fees Available to Nonletter-Size BRM
              [Assuming Use of an Advance Deposit Account]
------------------------------------------------------------------------
                                    Per-piece
          Classification               fee      Monthly fee   Setup fee
                                     (cents)
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Current Non-QBRM Mail............            8         None         None
Current (and Docket No. MC99-1)              3        $3000        $3000
 Experimental Weight Averaged BRM
Proposed Permanent (Docket No.               1         $600        None
 MC99-2) Weight Averaged BRM.....
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Source: Adapted from Docket No. MC99-2, USPS-T-4 at 14 (Table 1).

    Effect of the instant requests on the experimental classification 
involving the reverse manifest accounting method. The Service is not 
requesting to continue or to make permanent the current experimental 
classification and fees for the reverse manifest accounting method. 
Factors contributing to this decision include the participation of only 
one mailer in the reverse manifesting test; this mailer's subsequent 
switch to the weight averaging method; the inability to confirm the 
viability of reverse manifesting (given that the mailer did not achieve 
the target level of accuracy for postage due estimates during the 
course of participation); and the inability of subsequent market 
research to locate any potential customers interested in a permanent 
classfication for this method. See generally USPS-T-4 (in Docket No. 
MC99-2) at 6-8, referencing USPS-T-2 (in the same docket) and USPS-T-1 
in Docket No. MC97-1. In the absence of a separate filing, the 
experimental BRM classification and fees for reverse manifesting will 
expire June 7, 1999.

Part I. Nature and Scope of Docket No. MC99-1

    In Docket No. MC99-1, the Service effectively seeks, for eligible 
nonletter-size BRM using the weight averaging accounting method, an 
extension of the current experimental classification and fees (in DMCS 
Sec. 931) until implementation of the permanent classification and fees 
requested in the companion docket, or February 29, 2000, whichever 
occurs first. According to the Service, inclusion of a date certain as 
one of the terms of the proposed DMCS language reflects both the 
``extremely unlikely'' prospect that resolution of Docket No. MC99-2 
could take the full 10 months permitted and its interest in a smooth 
transition. March 10, 1999 Motion of the United States Postal Service 
for Waiver of Rule 67c(a)(1) at 3 (``Rule 67c motion'').
    The Service's Docket No. MC99-1 request includes five attachments. 
These consist of proposed changes to the DMCS; the certification 
required by Commission rule 54(p); audited financial statements; an 
index of testimony identifying witness Kiefer (USPS-T-1) as the sole 
witness in this proceeding; and a statement regarding compliance with 
(or requests for waiver of) provisions in Commission rules 54 and 64. 
Accompanying motions seek waiver of certain data requirements, the 
waiver of rule 67c(a)(1) referred to above, and authorization of 
settlement negotiations.
    Experimental status. The Service says designation of its Docket No. 
MC99-1 request as an experimental change shows its interest in 
application of the Commission's expedited rules of practice and 
procedure (39 CFR Secs. 3001.67-67d). Request I at 2. In support of the 
validity of invoking these rules, the Service notes that material 
issues in the original experiment were the subject of a full 
presentation by the Service in Docket No. MC97-1, and characterizes the 
proposal for renewal of the weight-averaging aspect of the experiment 
as modest. It also says the proposed treatment will ensure that renewal 
occurs in a manner that provides continuity for participating post 
office sites and BRM recipients. Id. at 4. The Service further notes 
that in the absence of the requested extension, the otherwise 
applicable BRM per-piece fee of 8 cents would have to be assessed 
during any interim between the expiration of the current experiment and 
the implementation of permanent fees. Id. at 4-5.
    Motion for waiver of certain filing requirements. The Service 
requests waiver of 64(b)(3), 64(d) and 64(h), as well as provisions of 
rule 54 deemed applicable, either independently or through 
incorporation by reference in rules 64(d) and (h). Affected subsections 
include rule 54(b)(3), 54(d), 54(f)-(h), 54(i), 54 (j), 54(k) and 
54(l)(ii). March 10, 1999 Motion of the United States Postal Service 
for Waiver of Certain Filing Requirements Incorporated in the 
Commission's Rules of Practice and Procedure (as revised March 12, 
1999). (Also referred to here as ``Filing Requirements Motion.'') In 
support of

[[Page 13615]]

waiver, the Service cites the limited nature and applicability of the 
proposed DMCS change. In particular, it notes that the extension 
request does not entail a fundamental change in any classification or 
fee or establish a new special service. Moreover, the Service asserts 
that to the extent total cost-revenue relationships might be implicated 
by the requested extension, its proposal will not result in significant 
changes. Id. 2-5.
    Motion for waiver of rule 67c(a)(1). Commission rule 67c(a)(1) 
requires that the Service file a plan describing plans to collect data 
related to the steps it will take during the requested temporary 
renewal phase of the experiment to achieve a level of readiness 
sufficient to implement a permanent classification and fees. Rule 67c 
Motion at 4. The Service contends that the limited purpose of its 
Docket No. MC99-1 request and the availability of detailed cost data in 
Docket No. MC99-2 concerning estimated costs associated with the 
proposed permanent classification and fees render this requirement 
unnecessary. Moreover, it notes that some of this work is already 
underway, and that efforts are being made to complete it expeditiously. 
Id. The Service also invokes the flexibility envisioned by the 
experimental rules as a reason for the Commission to grant the 
requested waiver.
    Motion regarding settlement proceedings. The Service asks that the 
Commission establish procedural mechanisms designed to encourage 
settlement of Docket No. MC99-1, based upon a proposed Stipulation and 
Agreement. In support of this approach, the Service notes that the 
``very limited purpose and scope'' of its Docket No. MC99-1 request is 
to extend the duration of the experimental classification and fees for 
weight-averaged nonletter-size BRM, and that the companion docket--
MC99-2--provides an opportunity to fully explore costing and pricing 
issues related to a permanent classification and fees. March 10, 1999 
Motion of the United States Postal Service to Establish Procedural 
Mechanisms Concerning Settlement at 1 (as revised March 12, 1999) 
(``Procedural Mechanisms Motion'').
    The Service notes that the purpose of the underlying request is to 
obtain authority to continue the experiment for a period long enough to 
ensure resolution of administrative and technical issues before 
implementation of any classification and fees resulting from Docket No. 
MC99-2. Procedural Mechanisms Motion at 2. Moreover, the Service says 
that it anticipates that any discovery in Docket No. MC99-1 related to 
the requested renewal might be relatively limited in duration and 
scope. It suggests that participants could initiate discovery, formally 
or otherwise, immediately upon intervention in the instant proceeding, 
and notes that this could allow them to decide what course to take in 
response to the proposed Stipulation and Agreement. Id. at 3. The 
Service states that in the interest of enhancing expedition, it intends 
to respond to any discovery and information requests related to its 
extension request within 7 calendar days of service. Id. at 3 (fn. 1).
    Based on these representations, the Service moves that the 
Commission include eleven enumerated procedures in its formal public 
notice of this proceeding or, in the alternative, give notice that they 
have been proposed. The procedures (set out in Attachment A) relate to 
various rights and obligations of participants and the Commission, 
including summary adjudication. They address not only the prospect that 
the Stipulation and Agreement will be accepted without opposition, but 
also the possibility that it will be contested by some intervenors or 
otherwise not garner the Commission's approval through summary 
adjudication. The referenced provisions also effectively outline a 
proposed procedural schedule and many of the obligations of the 
Commission and participants.
    The proposed stipulation and agreement. The stipulation and 
agreement the Service has submitted consists of two parts, an 
attachment, and signature pages. Part I reviews background details; 
part II contains 10 terms and conditions. Attachment A consists of 
proposed DMCS changes.

II. Nature and Scope of Docket No. MC99-2

    The Service states that the Docket No. MC99-2 request seeks to make 
permanent the experimental classification currently authorized for 
weight-averaged nonletter-size BRM. It also says it seeks to establish 
applicable BRM accounting fees that more closely correspond to the 
costs of using this method and to improve service for participating BRM 
recipients. The filing includes six attachments, consisting of proposed 
changes to DMCS Sec. 932; proposed changes to DMCS Fee Schedule 931; 
the certification required by Commission rule 54(p); audited financial 
statements; an index of testimony and exhibits for four witnesses; and 
a compliance statement (including references to requests for waiver) 
regarding submission of information called for in rules 54 and 64.
    The direct testimony includes that of witnesses Shields (USPS-T-1), 
Ellard (USPS-T-2), Schenk (USPS-T-3), and Kiefer (USPS-T-4). Witness 
Shields addresses the field application of the weight-averaging 
accounting method for qualifying nonletter-size BRM. Witness Ellard 
sponsors and addresses the Service's market research. Witness Schenk 
addresses the costs of counting, rating and billing nonletter-size BRM 
using the weight averaging method, including a discussion of supporting 
software, a data collection effort, and a special cost study. Witness 
Kiefer discusses the underlying experiment and other matters related to 
establishment of a permanent classification for weight-averaged 
nonletter-size BRM.
    A contemporaneous motion seeks protective conditions for one of 
witness Schenk's workpapers, which the Service filed in camera at the 
time it submitted its request. See March 10, 1999 Motion of the United 
States Postal Service Requesting Protective Conditions for Workpaper 1 
of Witness Leslie Schenk. In support of its motion, the Service states 
that witness Schenk's cost estimates are based upon data that include 
the incoming BRM piece volumes received by three through-the-mail film 
processors who compete among themselves and against other firms in the 
film processing industry. It notes that witness Schenk's access to the 
data has been granted with the explicit understanding that such data 
would not be publicly disclosed and would not be disclosed to any 
competitor of BRM recipients. The Service asserts that without 
conditional access, it would not have been able to present the cost 
study supporting the permanent classification and fees. Id. at 2. 
Accordingly, the Service proposes that the same protective conditions 
applied in identical circumstances in Docket No. MC97-1 (or others 
approved by the Commission) apply here, and invites the attention of 
the Commission and others to P.O. Ruling MC97-1/1, Appendix C (January 
24, 1997). The Service sets out the proposed conditions (consisting of 
10 itemized provisions) and offers Postal Service counsel's assistance 
with arrangements for obtaining copies of the workpaper, upon the 
Commission's approval of the protective conditions. Id. at 2-5.

III. Commission Response to Matters Requiring Action at This Time

    The Commission believes that the Service's proposed procedural 
approach to reconciling the impending expiration

[[Page 13616]]

of the Docket No. MC97-1 experiment with its interest in pursuing 
permanent status for eligible weight-averaged BRM has considerable 
merit. Substantive aspects of the requests and the accompanying motions 
warrant further evaluation, but the submissions as a whole provide a 
comprehensive assessment of the state of the current experiment, the 
procedural steps the Service believes should be taken, and the impact 
of the proposed changes. The Commission strongly encourages interested 
persons to promptly review the related filings in their entirety.
    The Commission agrees to authorize settlement negotiations, as 
requested by the Service. However, it declines to make a blanket 
adoption of the actions the Service sets out in its Procedural 
Mechanisms motion at this time. These actions appear to adequately 
address potential procedural developments, but the Commission is 
interested in participants' observations on the advisability of certain 
deadlines that have been proposed. Therefore, the Commission grants the 
alternative relief the Service suggests by providing notice that these 
procedural steps and related dates have been proposed. Any objections 
to entry into the record of this proceeding all of the Service's 
pertinent Docket No. MC99-1 filings to date should be submitted by 
April 5, 1999, which is also the deadline for intervention. The 
relatively short period for intervention is justified by the limited 
number of mailers or others likely to be affected and the likelihood 
that potential intervenors (in both cases) are already participating in 
the ongoing experiment and have been made aware, on an informal basis, 
of the Service's intentions to file these requests.
    Action on other Docket No. MC99-1 motions. In addition to seeking 
consideration of its request under the Commission's experimental rules, 
the Service moves for waiver of certain filing requirements (in rules 
54 and 64) identified earlier in this order and of rule 67c(a)(1). 
Before ruling on the appropriateness of these requests, the Commission 
will consider participants' views. Comments (on any or all of these 
matters) are to be filed no later than April 5, 1999.
    Actions in Docket No. MC99-2. The protective conditions the Service 
proposes for one of witness Schenk's workpapers were used successfully 
in Docket No. MC97-1. It therefore seems that there should be no 
objection to adopting the same approach in this case; however, the 
Commission will consider comments in opposition to the conditions the 
Service proposed if filed by April 5, 1999.
    The Service has not proposed any procedural dates or alternative 
procedural mechanisms in Docket No. MC99-2. The Commission believes it 
might be useful to learn whether participants are interested in 
establishing any preliminary dates or discussing whether the request 
for permanent authority may also be a candidate for settlement. 
Comments addressing these topics shall be filed no later than April 5, 
1999, and participants should be prepared to address these matters at 
the prehearing conference.
    The Commission directs interested parties to file notices of 
intervention in this proceeding no later than April 5, 1999 which is 
also the deadline for filing such notices in Docket No. MC99-1.
    Intervention in these proceedings. Anyone wishing to be heard in 
either or both cases is directed to file a written notice of 
intervention with Margaret P. Crenshaw, Secretary of the Commission, 
1333 H Street, NW, Suite 300, Washington, DC 20268-0001 no later than 
April 5, 1999. Notices should indicate whether an intervenor is seeking 
full or limited participation status. See 39 CFR Secs. 3001.20 and 
3001.20a.
    Representation of the general public. In conformance with 
Sec. 3624(a) of title 39, U.S. Code, the Commission designates Ted P. 
Gerarden, Director of the Commission's Office of the Consumer Advocate 
(OCA), to represent the interests of the general public in both 
proceedings. Pursuant to this designation, Mr. Gerarden will direct the 
activities of Commission personnel assigned to assist him and, upon 
request, supply their names for the record. Neither Mr. Gerarden nor 
any of the assigned personnel will participate in or provide advice on 
any Commission decision in this proceeding. The OCA shall be separately 
served with three copies of all filings, in addition to and 
contemporaneous with, service on the Commission of the 24 copies 
required by section 10(c) of the Commission's rules of practice [39 CFR 
Sec. 3001.10(c)].
    It is ordered:
    1. The Commission will sit en banc in both Docket No. MC99-1 and 
MC99-2.
    2. Notices of intervention in Docket Nos. MC99-1 and MC99-2 shall 
be filed no later than April 5, 1999.
    3. Ted P. Gerarden, director of the Commission's Office of the 
Consumer Advocate, is designated to represent the interests of the 
general public in Docket Nos. MC99-1 and MC99-2.
    4. The Postal Service and other participants are authorized to 
pursue settlement of the issues in Docket No. MC99-1 based on the 
Stipulation and Agreement the Service has filed.
    5. Interested persons are placed on notice that the Service has 
proposed eleven procedures be taken in connection with settlement, 
including many that determine rights and obligations of the Commission 
and participants. (The referenced procedures are presented in 
Attachment A.)
    6. Postal Service counsel may act as settlement coordinator in 
Docket No. MC99-1 or delegate this responsibility to another 
participant in the proceeding. The Commission shall be promptly 
notified if a delegation occurs.
    7. The Service's Docket No. MC99-1 request (with associated 
attachments), the testimony filed with the request, and the Stipulation 
and Agreement shall be entered into the record of the Docket No. MC99-1 
proceeding on April 6, 1999, if no objection to that procedure is filed 
with the Commission by April 5, 1999.
    8. Comments on the appropriateness of considering Docket No. MC99-1 
under Commission rules 67-67d relating to experiments shall be filed no 
later than April 5, 1999.
    9. Answers to the Postal Service's March 10, 1999 motions 
referenced in the body of this order concerning waiver of certain 
filing requirements and waiver of rule 67c(a)(1) shall be filed no 
later than April 5, 1999.
    10. In connection with Docket No. MC99-2, answers to the Postal 
Service March 10, 1999 motion requesting protective conditions for 
witness Schenk's workpaper 1 shall be filed no later than April 5, 
1999.
    11. Comments on the advisability of setting tentative procedural 
dates in Docket No. MC99-1 (other than for notices of intervention) 
shall be filed no later than April 5, 1999.
    12. A prehearing conference for the consideration of procedural 
matters in both Docket No. MC99-1 and Docket No. MC99-2 shall be held 
in the hearing room of the Commission, 1333 H Street, NW, Washington, 
DC, on April 6, 1999, at 11:00 am. The hearing room will be open for 
the use of interested persons to discuss settlement of any and all 
issues in these cases on April 6, 1999, at 9:30 am.
    13. The Secretary of the Commission shall arrange for publication 
of this order in the Federal Register in a manner consistent with 
applicable requirements.


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    Dated: March 16, 1999.
Margaret P. Crenshaw,
Secretary.

Attachment A--List of Procedures and Related Deadlines Proposed by 
Postal Service (in its March 10, 1999 Motion to Establish 
Procedural Mechanisms Concerning Settlement in Docket No. MC99-1)

    (1) Enter the Postal Service's Request (with associated 
attachments), the testimony and exhibits filed with this Request, 
and the Stipulation and Agreement into the record in this docket;
    (2) give parties until March 29, 1999, to intervene;
    (3) give notice of a formal pre-hearing conference to be 
convened on March 30, 1999, at 11:00 a.m.;
    (4) make the Commission hearing room available to the Postal 
Service and the participants on that date at 9:30 a.m. as the venue 
for an informal off-the-record meeting to discuss the proposed 
Stipulation and Agreement and related matters in advance of the pre-
hearing conference;
    (5) provide notice to intervenors that, if they wish to contest 
re-establishment of the experimental classifications and fees in the 
Postal Service's Request and the proposed Stipulation and Agreement, 
they must, by April 2, 1999, file a statement of their intention to 
do so. Any such statement should identify with specificity the 
classification and fees and other issues contested, and state 
whether the intervenor intends to offer evidence on any such 
classification, fees, and issues.
    (6) If no such statements are filed, the record in this case 
shall be closed and the case submitted to the Commission for summary 
adjudication;
    (7) If one or more such statements are filed, the filing parties 
shall have until April 9, 1999, to conduct discovery of the Postal 
Service;
    (8) The same parties shall have until April 23, 1999, to submit 
testimony and/or pleadings seeking to establish either that, owing 
to the existence of genuine issues of material fact, the proceeding 
is not suited to summary adjudication or that the Stipulation and 
Agreement is arbitrary, capricious, or otherwise not in accordance 
with applicable law. Responsive pleadings by other parties shall be 
due on April 30, 1999. The record shall then be closed provisionally 
and the issues adjudicated by the Commission.
    (9) If the Commission finds that there are no genuine issues of 
material fact, it will promptly notify the parties of such and 
indicate its intention to issue a Recommended Decision accepting the 
classification and fees proposed in the Request and the Stipulation 
and Agreement.
    (10) If the Commission finds (a) that there are genuine issues 
of material fact that prevent summary adjudication, or (b) that 
there are no genuine issues of material fact, but that it declines 
to recommend renewal of the experimental classification and fees for 
weight-averaged nonletter-size BRM proposed in the Docket No. MC99-1 
Request and the Stipulation and Agreement, then it shall promptly 
notify the parties, identifying the genuine issues of material fact 
or other reasons for declining to adopt the proposed classifications 
and fees, and immediately set an expedited schedule for such 
additional discovery and hearings which may be necessary for 
litigation of those matters. During that litigation period, any 
party to the Stipulation and Agreement may fully litigate the 
matters identified as disputed by the Commission, including 
discovery on the Postal Service with respect solely to those issues 
and presentations of testimony without withdrawing from the 
Stipulation and Agreement, provided that such party (a) continues to 
support a Commission recommendation of the classifications and fees 
proposed in the Postal Service's Request and (b) agrees to remain 
bound by the terms of the Stipulation and Agreement.
    (11) If none of the actions by the Commission provided for in 
paragraphs 9 and 10 above have occurred by May 7, 1999,1 
any party to the Stipulation and Agreement may determine not to be 
bound further by that agreement and must provide written notice to 
all parties of this fact within three (3) business days of the above 
date. Any exercise of such right by one or more signatories shall 
not affect the operation of the Stipulation and Agreement as to 
other signatories.

    \1\ The Postal Service desires to allow adequate time for the 
Commission to take action under either paragraph 9 or 10, but is 
strongly in favor of expedited resolution of this docket. It is thus 
hoped that the Commission would be able to act prior to the 
suggested May 7, 1999, date.
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[FR Doc. 99-6841 Filed 3-18-99; 8:45 am]
BILLING CODE 7710-12-P