[Federal Register Volume 64, Number 194 (Thursday, October 7, 1999)]
[Notices]
[Pages 54693-54695]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-26113]



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POSTAL RATE COMMISSION

[Docket No. MC2000-1; Order No. 1264]


Mail Classification Case

AGENCY: Postal Rate Commission.

ACTION: Notice of initiation of experimental mail classification 
docket.

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SUMMARY: This document provides notice that the Commission has 
established a new docket to consider a proposed two-year experiment 
allowing certain Standard class mail to ``ride along'' in Periodicals 
class mail for a flat charge of 10 cents. It also addresses related 
procedural matters, such as expedition, waiver of certain filing 
requirements, and settlement discussions. This notice and the related 
directives will allow the Service's proposal to be considered 
expeditously.

DATES: The deadline for intervention is October 25, 1999. Certain 
responses are due October 25, 1999. A prehearing conference is 
scheduled for October 28, 1999.

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

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
Postal Rate Commission, 202-789-6820.

SUPPLEMENTARY INFORMATION: On September 27, 1999, the United States 
Postal Service filed, pursuant to section 3623 of the Postal 
Reorganization Act, 39 U.S.C. 101 et seq., a request with the Postal 
Rate Commission for a recommended decision on a proposed two-year 
experimental classification change affecting all subclasses of 
Periodicals mail. The request includes a corresponding rate change. 
Request of the United States Postal Service for a Recommended Decision 
on an Experimental ``Ride-Along'' Classification and Rate for 
Periodicals Mail (``Request'').

Contents of the Filing

    The Service's request includes five attachments. Attachments A and 
B, respectively, consist of proposed changes to Domestic Mail 
Classification Schedule (DMCS) section 443 and proposed changes to 
Periodicals rate schedules. Attachment C is the certification required 
by Commission rule 54(p). Attachment D is an index of testimony, 
exhibits and workpapers (indicating there are no workpapers). 
Attachment E is a detailed statement regarding compliance with 
Commission rules 54, 64 and 67.
    The request is supported by the testimony of witness Taufique of 
the Postal Service (USPS-T-1) and industry witness Schwartz (USPS-T-2). 
Witness Taufique explains the current treatment accorded Standard (A) 
attachments or enclosures in Periodicals mail. He also describes how 
the instant proposal would change the traditional treatment. Taufique 
also estimates the impact of the proposal on postal revenues and costs; 
addresses the consistency of the proposal with relevant statutory 
criteria; and presents the data collection plan. See USPS-T-1.
    Witness Schwartz describes advertisers' generally negative reaction 
to proposals that include payment of Standard (A) postage for ``Ride-
Along''-type advertisements. USPS-T-2 at 1-2. He also testifies that 
his experience leads him to believe that the proposed experimental 
rates could produce substantial new volume. Id. at 3.

Related Documents

    Along with its request, the Service filed a contemporaneous motion 
seeking expedition of the proceeding and waiver of certain filing 
requirements. It also filed a proposed stipulation and agreement. 
Motion of the United States Postal Service for Expedition and for 
Waiver of Certain Provisions of Rule 64(h) (``Procedural Motion''); 
[Proposed] Stipulation and Agreement (``Proposed Agreement'').
    The Service's request and related documents are on file in the 
Commission's docket room and are available for inspection during the 
Commission's regular business hours. They also have been posted on the 
Commission's website (www.prc.gov).

Description of the Request

    The Postal Service proposes to test charging a flat, or uniform, 
rate of 10 cents when a qualifying Standard (A) piece ``rides along'' 
in Periodicals mail. This rate would be assessed in addition to postage 
on the host Periodicals piece. Neither the weight nor the content of 
the ``ride-along'' piece would affect the rate of the Periodicals host 
copy. USPS-T-1 at 3.
    The filing indicates that the proposed charge is expected to be 
lower than the rate that would be charged for the Standard (A) piece if 
it traveled on a separate or ``standalone'' basis. Revenues and costs 
associated with the ``ride-along'' would be reported with Periodicals 
revenues and costs. Id.

Restrictions

    The proposed change is limited to one Standard (A) enclosure or 
attachment per periodical. The Service indicates that this limitation 
is to ensure that the unique characteristics of Periodicals are 
maintained while providing an effective medium for targeted 
advertising. The enclosure also must meet physical criteria ensuring 
that neither the shape nor the machinability of the host piece would be 
altered. For example, the weight of the ``ride-along'' piece cannot 
exceed the weight of the host piece, nor exceed 3.3 ounces on its own. 
Id. at 4.

Effect on Other Attachments and Enclosures in the Host Piece

    As indicated, only one ``ride-along'' piece would be allowed per 
each copy of a Periodical under the Service's proposal. However, 
mailers could continue to pay Standard (A) rates for other eligible 
Standard (A) attachments or enclosures in a periodical. Id. at 3.

Duration of the Experiment

    The Postal Service proposes a two-year experimental period, 
starting as of an effective date established by the Governors of the 
Postal Service.

Rationale for the Proposal and Experimental Objectives

    The Service expects the experimental classification change to 
provide a cost-effective method to mail what are now Standard (A) 
supplements, including very small product samples, to targeted markets. 
Id. at 4. Also, the Service notes that the current arrangement for 
Standard (A) enclosures in a periodical assumes two separate mailings, 
whereas only one is actually processed and delivered. Id. The Service 
contends that as long as the shape and automation compatibility of the 
host piece are not affected by the inclusion of the ``ride-along'' 
piece, presumably any additional cost would be caused only by the 
additional weight of the ``ride-along'' piece. Id.
    With respect to the 10-cent charge, the Service notes, among other 
things, that the physical requirements for the ``ride-along'' piece 
have been drafted to attempt to ensure that the inclusion of the piece 
does not result in any additional mail processing or delivery costs. It 
therefore asserts that the proposed rate ``should comfortably cover any 
additional cost due to incremental weight, and also provide 
contribution that comfortably exceeds the contribution deemed 
reasonable for the Periodicals subclass.'' Id. at 5.
    The Service says one objective of the experiment is to gauge the 
reaction of advertisers and publishers to the classification change. 
Id. at 9. It says another is to determine the impact of ``ride-along'' 
pieces on Periodicals costs. Id. at 10.

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Revenue and Cost Impact

    Based on several assumptions, the Service estimates net additional 
revenue resulting from the proposed change of about $4.8 million. Id. 
at 9. With respect to costs, the Service anticipates ``minimal'' 
impact. In support of this assessment, it notes that the cost (if any) 
of a current Standard (A) enclosure or attachment (estimated at about 
25 million pieces) is already captured with Periodicals costs. Id. It 
also says that the only potential additional cost would be caused by 
the additional weight, as piece-related costs, either in mail 
processing or delivery, are not expected to change due to the physical 
requirements.

Relationship to Postal Policies

    The Service asserts that the requested classification change will 
further the general policies of efficient postal operations and 
reasonable rates and fees enunciated in the Postal Reorganization Act. 
Request at 2. The Service also says the change conforms with the 
criteria of 39 U.S.C. 3623(c) and section 3622(b). Id.

Data Collection Plan

    The proposed data collection plan is described in Attachment A to 
USPS-T-1. Among other things, it includes use of an alternate mailing 
statement for mailers intending to mail ``ride-along'' pieces during 
the experiment. USPS-T-1 at 12. Participating mailers also will be 
required to provide a sample of the mailpiece, an additional copy of 
the mailing statement, and a response to a questionnaire. Id. at 12-13.
    The Service indicates that it expects diversion from other mail 
classes to be minimal, given that ``ride-along'' pieces historically 
have been designed to be included in Periodicals. Id. at 13. However, 
the Service says it is planning to conduct a survey of advertisers to 
estimate any such diversion.

Rationale for Seeking Expedition

    In support of its motion seeking expedition and waiver of filing 
requirements, the Service notes that the minor, experimental change it 
is requesting is fully explained in witness Taufique's testimony. It 
also states that Taufique's testimony indicates that the proposed 
change will have an insignificant effect on the Postal Service's 
overall volumes, revenues and costs. Moreover, based on discussions 
with the Periodicals industry, the Service says it expects industry 
support and believes there is a ``concrete potential'' for settlement. 
The Service asserts that there should not be any significant adverse 
effect on competitors.
    With respect to expedition, the Service does not request specific 
dates, but proposes adoption of several procedural steps. One is a 
relatively short intervention period, based on the assumption that many 
interested parties already are aware of the proposal. Another is that 
participants be required, in their notices of intervention, to indicate 
whether they request a hearing and, if so, to delineate those issues 
which they believe to be of sufficient, material import to warrant a 
hearing. (If there is no request for a hearing, or if the Commission 
determines that there are no genuine issues of material fact, the 
Service suggests that the Commission can dispense with discovery and 
hearings, as contemplated by rule 67a.)
    The Service also requests that the Commission authorize scheduling 
of a settlement conference as quickly as possible following the 
deadline for intervention. It notes that promptly reaching a settlement 
will obviate the need for most, if not all, subsequent procedural 
steps. Procedural Motion at 4. However, the Service asks that if 
discovery is found necessary, the time allotted for such be 
abbreviated. In support of this approach, it notes that with only two 
pieces of testimony, no library references, and no workpapers, 
``abridged and expedited discovery should not be an issue.'' Id. 
Finally, the Service notes that other procedures, such as briefs and 
oral argument, may be able to be eliminated. Id.

Rationale for Seeking Waiver of Filing Requirements

    In support of waiver, the Service notes that Attachment E to its 
request demonstrates compliance with a number of the requirements of 
rules 54 and 64. For other requirements, however, the Service seeks 
waiver under rule 64(h)(3), which provides that the Commission may 
waive certain filing requirements if it determines that the proposed 
change does not significantly change the rates and fees and cost-
revenue relationships referred to in rule 64(h)(1). Rule 64(h)(1) 
states that the Postal Service, when requesting a change in the 
classification schedule, must provide certain rule 54 information 
concerning requests for changes in postal rates and fees if the 
proposed classification change would result in either changes in the 
rates or fees for any existing class or subclass of mail and service; 
the establishment of a new class, subclass or service for which rates 
are to be established; a change in the relationship of costs to 
revenues for any class or subclass; or a change in the relationship of 
total Postal Service costs to total revenues.
    Addressing these points, the Service asserts that the proposed 
change does not alter the existing rates and fees for Periodicals; one 
enclosure per Periodical will be allowed to travel at a different rate 
than previously; those enclosures currently travel at Standard (A) 
rates; and under the proposal will pay a uniform ten cents per piece.
    The Service also states that the proposed change does not create a 
new subclass or service, but simply adds a new part to section 443 of 
the DMCS and Periodicals rate schedules that will specify the proposed 
flat charge for enclosures. The Service notes that Periodicals 
subclasses will exist as they did before and enclosures will be 
allowed, as they are now. However, it says that enclosures meeting 
certain physical requirements will be able to travel at a different 
postage charge.
    Further, the Service says the effects of the proposed changes on 
the relationships between costs and revenues for postal classes, 
subclasses and services, or the postal system as a whole will not be 
altered in a significant way. Under the proposal, revenues from the 
experimental enclosures will be credited to Periodicals, rather than to 
Standard A (as they are when the enclosures travel at the Standard (A) 
rate). Id. at 5. The Service says: ``It is hoped that this will boost 
the cost coverage for Periodicals, but it should not make a major 
change due both to the experimental nature of the proposal, and due to 
the physical criteria and limit of one enclosure per Periodical 
proposed.'' Id. at 6. Also, the Service says that any diminution in the 
Standard (A) cost coverage as a result of the revenues for the 
experimental enclosures being credited to Periodicals will be 
insignificant. Id. The Service acknowledges that it anticipates that 
there may be some revenue loss for the postal system as a whole because 
the applicable Standard (A) rate for an enclosure normally would be 
more than ten cents, but this loss should be minimal. The Service says 
it anticipates that the lower rate will attract new volumes, generating 
new revenue which could more than offset any loss. It estimates the 
maximum revenue loss resulting from the proposed experimental change at 
approximately $5.5 million, and the new revenues generated at 
approximately $10.2 million, for a net gain of $4.8 million. Id.

Proposed DMCS Changes

    The proposed DMCS changes entail the addition of a new provision

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(proposed Sec. 443.1a) captioned ``Ride-Along Attachments and 
Enclosures.'' It reads:

    ``Ride-Along'' Attachments and Enclosures. A limit of one 
Standard Mail piece, not exceeding the weight of the host copy and 
weighing a maximum of 3.3 ounces, from any of the subclasses listed 
in section 321 (Regular, Enhanced Carrier Route, Nonprofit or 
Nonprofit Enhanced Carrier Route) may be attached to or enclosed 
with an individual copy of Periodicals Mail for an additional 
postage payment of ten cents. Periodicals containing ``Ride-Along'' 
attachments or enclosures must maintain uniform thickness as 
specified by the Postal Service. The Periodicals piece with the 
``Ride-Along'' must maintain the same shape and automation 
compatibility as it had before addition of the ``Ride-Along'' 
attachment or enclosure and meet other preparation requirements as 
specified by the Postal Service.
    This provision expires [insert date corresponding to two years 
after its effective date.]

    Corresponding changes to Periodicals rate schedule 421, 423.3, 
423.4, 423.2 are effected through the addition of a new note stating: 
``For a Ride-Along item enclosed with or attached to a periodical, add 
$0.10 per copy (experimental).''

Proposed Stipulation and Agreement

    The proposed agreement the Service filed along with its request 
consists of two parts. Part I, captioned Background, notes the date of 
filing of the Service's request, its designation as Docket No. MC2000-
1, and related matters. Part II, Terms and Conditions, consists of ten 
numbered paragraphs. The matters covered therein address issues such as 
the evidentiary record and the extent to which signatories are bound by 
the agreement. Interested participants are referred to the full text of 
the agreement for further details.

Intervention

    Those wishing to be heard in this matter are 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, 
on or before October 25, 1999. Notices should indicate whether 
participation will be on a full or limited basis. See 39 CFR 3001.20 
and 3001.20a.

Appropriateness of Proceeding Under Experimental Rules

    The Service has requested that the Commission handle this case 
under Commission rules 67-67d. In determining whether these procedures 
are appropriate, the Commission will consider: (1) The novelty of the 
proposed change; (2) the magnitude of the proposed change; (3) the ease 
or difficulty of collecting data on the proposed change; and (4) the 
duration of the proposed change.
    Participants are invited to comment on whether the Postal Service's 
request should be evaluated under rules 67-67d. Comments are due on or 
before October 25, 1999. Pending the Commission's determination on this 
matter, participants should adopt the working assumption that the 
Service's motion seeking application of the experimental rules will be 
granted.
    Rule 67a provides a procedure for limiting issues in experimental 
cases. To enable participants to evaluate whether genuine issues of 
fact exist, the Postal Service shall respond to discovery requests 
within 10 days. Written discovery pursuant to rules 25-28 may be 
undertaken immediately upon intervention.
    A decision on whether there is a need for evidentiary hearings, and 
the scope of any such hearings has not been made yet. Participants 
wishing to comment on this question should include in their notices of 
intervention a statement of issues raised by the Service's request. 
Participants should also designate therein those issues involving 
questions of material fact which they believe require trial-type 
hearings. The Postal Service and any interested participant should be 
prepared to discuss these statements and designations at the prehearing 
conference.

Representation of the General Public

    In conformance with section 3624(a) of title 39, 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 this proceeding. Pursuant to this designation, Mr. Gerarden 
will direct the activities of Commission personnel assigned to assist 
him and, upon request, will 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 at the same time as, service on the Commission of the 
24 copies required by Commission rule 10(c) (39 CFR 3001.10(c)).

Prehearing Conference

    A prehearing conference will be held on Thursday, October 28, at 11 
a.m. in the Commission's hearing room.

Authorization of Settlement Proceedings

    The Commission is authorizing settlement proceedings. It appoints 
Ted P. Gerarden, the director of the OCA, as settlement coordinator. 
Formal discussions may begin immediately after the close of the 
intervention period and, preferably, should be held prior to the 
prehearing conference on October 28, 1999.
    It is ordered:
    1. The Commission establishes docket no. MC2000-1, Experimental 
``Ride-Along'' Classification Change for Periodicals, to consider the 
request referred to in the body of this order.
    2. The Commission will sit en banc in this proceeding.
    3. Notices of intervention are to be filed no later than October 
25, 1999.
    4. Participants are directed to include in their notices of 
intervention statements of issues and designations of issues requiring 
trial-type proceedings. Those intending to respond to such statements 
or designations should be prepared to do so at the prehearing 
conference.
    5. Answers to the Postal Service's motion to expedite the 
proceeding and for waiver of certain filing requirements are due no 
later than October 25, 1999.
    6. Ted P. Gerarden, director of the Commission's office of the 
consumer advocate, is designated to represent the interests of the 
general public.
    7. The Commission will hold a prehearing conference on Thursday, 
October 28, 1999, at 11 a.m. The conference will be held in the 
Commission's hearing room.
    8. The Commission authorizes settlement negotiations, and 
encourages that these begin at the earliest opportunity following the 
deadline for intervention and, preferably, prior to the prehearing 
conference.
    9. Mr. Gerarden is appointed to serve as settlement coordinator in 
this proceeding.
    10. The Secretary of the Commission shall cause this notice and 
order to be published in the Federal Register, in accordance with 
applicable requirements.

(Authority: 39 U.S.C. 3622)

    Dated: October 1, 1999.
Cyril J. Pittack,
Acting Secretary.
[FR Doc. 99-26113 Filed 10-6-99; 8:45 am]
BILLING CODE 7710-FW-P