[Federal Register Volume 67, Number 189 (Monday, September 30, 2002)]
[Notices]
[Pages 61355-61358]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-24772]


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POSTAL RATE COMMISSION

[Docket No. MC2002-2; Order No. 1346]


Experimental Mail Classification Case

AGENCY: Postal Rate Commission.

ACTION: Notice and order on new experimental docket.

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SUMMARY: This document establishes a docket for consideration of a 
proposed three-year experiment. The experiment, if approved, would 
implement a negotiated service agreement between the Postal Service and 
Capital One Services, Inc. The proposed terms entail certain discounts 
and fee waivers for qualifying Capital One First-Class mailings. This 
document briefly reviews the proposal, sets initial procedural 
deadlines, and identifies other Commission actions related to the 
proposal.

DATES: 
    1. September 19, 2002: request filed with Commission.
    2. September 24, 2002: issuance of Commission notice and order (no. 
1346).
    3. October 17, 2002: deadline for notices of intervention, comments 
on application of experimental rules, and responses to various motions.
    4. October 23, 2002: prehearing conference (10 a.m.).

[[Page 61356]]

    5. October 17, 2002: deadline for filing notices of intervention, 
comments on application of experimental rules, and answers to various 
motions; October 23, 2002 (10 a.m.): prehearing conference.

ADDRESSES: Send correspondence to the attention of Steven W. Williams, 
Secretary, Postal Rate Commission, 1333 H Street NW., Suite 300, 
Washington, DC 20268-0001.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-789-6815.

SUPPLEMENTARY INFORMATION: On September 19, 2002, the United States 
Postal Service filed a request with the Postal Rate Commission for a 
recommended decision on a proposed three-year experimental 
classification change, and related discounts and fee waivers, for 
qualifying First-Class mailings entered by Capital One Services, Inc. 
(``Capital One''). Request of the United States Postal Service for a 
recommended decision on classification, rates and fees for Capital One 
Services, Inc. negotiated service agreement (``request''). The 
Service's request was filed pursuant to chapter 36 of the Postal 
Reorganization Act, 39 U.S.C. 3601 et seq. It was accompanied by a 
contemporaneous motion seeking waiver of certain requirements of rules 
54 and 64; by a motion for joint sponsorship of the proposed changes by 
the Postal Service and Capital One; and by a notice of the filing of a 
Postal Service library reference, USPS-LR-1. All these documents are 
available for physical inspection in the Commission's docket section 
during regular business hours, and for Internet access on the 
Commission's Web site at http://www.prc.gov within the search field 
``Docket No. MC2002-2.''

Simultaneous Filings by Capital One

    On the same date, Capital One filed a petition for leave to 
intervene in the proceeding initiated by the Postal Service's request, 
and to join the Service in its motion for joint sponsorship of the 
proposed rate and service changes. In addition to requesting that it be 
granted the status of a full participant under rule 20 at the outset of 
this proceeding, Capital One seeks leave to present testimony in 
support of the Postal Service's request, and submits the prepared 
direct testimony of two witnesses.

Brief Description of Joint Proposal

    The Postal Service proposes rate and service changes that would be 
available for certain forms of high-volume First-Class mail use in 
order to implement the terms of a contract negotiated between the 
Service and Capital One. Under that contract, which is appended as 
attachment G to the request, the Postal Service and Capital One would 
observe reciprocal requirements, conditions, and conduct that would 
support alterations in the rates and fees of specified services 
available to Capital One--specifically, mailings of certain categories 
of First-Class Mail and optional use of address correction service.
    Under the proposed changes, Capital One would be eligible for new 
incremental per-piece discounts for certain of its First-Class Mail 
solicitation and customer correspondence volume. Beyond an overall 
annual volume threshold, these discounts would vary under a ``declining 
block'' rate structure, with discounts increasing as specified levels 
of volume are exceeded. If Capitol One enters 750 million eligible 
pieces of First-Class Mail during the first year after implementation, 
electronic address correction service would also be provided by the 
Postal Service without fee to Capitol One's solicitations entered as 
First-Class Mail when such pieces prove to be undeliverable as 
addressed and cannot be forwarded under existing regulations. In 
return, Capital One would agree to forgo its current practice of 
receiving free return of such undeliverable mail, which is an existing 
service feature of First-Class Mail. Additionally, Capital One would be 
required to perform specific actions to maintain and improve the 
address quality of mail it enters as First-Class Mail.

Rationale for Filing the Joint Proposal

    The Postal Service states that adoption of the rate and 
classification changes proposed in its request will allow it and the 
Commission to test the effectiveness of the negotiated service 
agreement (``NSA'') approach, as a means of providing pricing 
flexibility under the Postal Reorganization Act's existing ratemaking 
and mail classification provisions. The Service states that agreements 
similar to NSAs have been successfully employed to set prices in other 
regulated industries, by foreign postal administrations, and by the 
Postal Service with its international customers. Request at 2-3.
    With respect to the particular changes negotiated between the 
Postal Service and Capital One, the Service anticipates that they will 
lead to a net reduction in its costs related to handling of forwarded 
and returned mail. In addition, the changes are expected to enable 
Capital One to reduce its postage costs. More broadly, if volume 
conditions are met, the Service states that it expects the revenue 
effects to result ultimately in a reduction in other mailers' 
proportional contribution to the Service's institutional costs. Id. at 
2.

Significance of Experimental Designation

    The Postal Service states that it believes it would be appropriate 
for the Commission to review and recommend the operative rate and 
classification elements of its NSA-based proposal as an experimental 
classification, under the expedited rules of practice and procedure for 
experimental changes in 39 CFR 3001.67-3001.67. These rules provide for 
issuance of the Commission's recommended decision within 150 days of 
the filing of the Postal Service's request, or of the Commission's 
determination that experimental treatment of the proposal is 
appropriate, whichever occurs later. 39 CFR 3001.67d.
    In support of this treatment, the Service asserts that the 
substance of its request is innovative, and thus is consistent with the 
purpose of the experimental rules. Request at 3-4. According to the 
Service, the minor impact, limited scope of application, and proposed 
three-year duration of the requested changes conform to the logic of 
the experimental approach. Id. at 4. The Service further argues that 
the Commission's specialized procedures for considering experimental 
classifications are sufficiently comprehensive to provide for the 
exploration and resolution of whatever factual and legal issues might 
be raised regarding the proposals. Id. at 5. Finally, the Postal 
Service claims that the prospects for generating data and information 
documenting the effects of the proposed changes warrant adopting an 
experimental approach.\1\ Id. at 4.
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    \1\ The Postal Service's plan for collecting and reporting data 
associated with the implementation of the proposed changes is 
described in the testimony of witness Michael K. Plunkett, USPS-T-2.
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Motion for Waiver of Certain Commission Rules

    In its waiver motion, the Postal Service states that it has 
supplemented information it developed specifically for this filing by 
incorporating documentation it submitted in connection with the most 
recently concluded omnibus rate proceeding, docket no. R2001-1. Motion 
of United States Postal Service for Waiver, September 19, 2002. The 
Service argues that this is a reasonable and sufficient approach to 
satisfying the filing requirements of sections 54, 64, and 67

[[Page 61357]]

of the rules, in that the Capital One NSA experiment would not 
materially alter the rates, fees, and classifications proposed and 
adopted in the R2001-1 proceeding. In assessing compliance with the 
applicable filing requirements, the Service claims that substantial 
weight should be given to the nature of the proposed changes, and their 
negligible impact on physical attributes of mail and limited impact on 
costs, volumes, and revenues. However, should the Commission conclude 
that the materials imported from docket no. R2001-1 are insufficient, 
and that strict construction of the rules regarding information 
pertaining to other mail categories and special services would require 
newly-developed testimony reflecting the changes proposed in the 
request, the Service moves that those requirements be waived.

Appropriate Procedures at the Outset of This Case

    The character of the request before the Commission is novel, in 
that the rate and mail classification changes proposed therein were 
arrived at bilaterally, through a process of negotiation. Thus, unlike 
typical rate and mail classification proposals submitted by the Postal 
Service, the Capital One negotiated service agreement evidently has two 
independent but contractually-linked proponents.
    In view of this unique origin, the Commission is inclined to 
initiate its review of the request on the terms jointly advanced by the 
Postal Service and Capital One. As the Service notes in its motion for 
joint sponsorship, the proposed changes are mutually advantageous to 
the Service and Capital One, and are based on information provided by 
both parties. The Service's motion, and Capital One's petition, 
indicate that both parties are prepared to submit and defend their 
affirmative cases-in-chief at the outset of the case. Under these 
circumstances, although the rules of practice do not explicitly provide 
for this order of presentation, the Commission concludes that the 
proposed procedures would serve the interests of efficiency and economy 
in conducting the proceeding. Additionally, to the extent that other 
participants will be able to examine the evidence proffered by Capital 
One at an earlier stage of the proceeding, the proposed procedures 
would enhance its fairness. Accordingly, the Commission shall grant 
Capital One's petition to intervene at the outset and join the Postal 
Service's motion for joint sponsorship; grant the Service's and Capital 
One's joint motion for joint sponsorship of the request's proposed 
changes; and grant the Service's motion for leave to rely on Capital 
One's case-in-chief. However, other participants may submit responses 
to these motions if they so desire, and their grant is subject to 
reconsideration, should another participant lodge any objection in its 
answer.

Appropriateness of Proceeding Under the Experimental Rules

    As noted earlier, the Postal Service asks that the Commission 
consider its request under Commission rules 67-67d. As provided in rule 
67, in determining whether these procedures are appropriate, the 
Commission will consider the proposed change's novelty, magnitude, the 
ease or difficulty of collecting data, and proposed duration.
    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 17, 2002, and participants should be prepared to discuss 
relevant issues at the prehearing conference.
    Pending a determination on this issue, participants should 
recognize that the motion seeking application of the experimental rules 
may, or may not, be granted. The experimental rules provide that cases 
falling within this designation shall be treated as subject to the 
maximum expedition consistent with procedural fairness, and that 
participants will be expected to identify genuine issues of material 
fact at an early stage in this case. See rule 67a(b). The schedule 
ultimately adopted in appropriate cases is established to allow for 
issuance of a decision not more than 150 days following a determination 
regarding the appropriateness of applying the experimental rules or the 
filing of the request, whichever occurs later. 39 CFR 3001.67d. 
However, rule 67 states that the Commission reserves the right, in 
appropriate cases, to require that the procedures normally prescribed 
for non-experimental cases under 39 U.S.C. 3623 be used for a request 
that the Postal Service has submitted as a proposed experiment.

Other Matters

    Limitation of issues. Rule 67a provides a procedure for limiting 
issues in experimental cases. To enable participants to evaluate 
whether genuine issues of fact exist, the proponents--i.e., both the 
Postal Service and Capital One--shall respond to discovery requests 
within 10 days. Written discovery pursuant to rules 25-28 may be 
undertaken upon intervention.
    Need for hearing. A decision on whether there is a need for 
evidentiary hearings, and the scope of any such hearings, has not been 
made. Comments on this matter, and other procedural issues raised by 
the Service's request, should be filed no later than October 17, 2002, 
and participants should be prepared to discuss these matters at the 
prehearing conference.
    Representation of the general public. In conformance with Sec.  
3624(a) of title 39, the Commission designates Shelley S. Dreifuss, 
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, Ms. Dreifuss will direct the activities 
of Commission personnel assigned to assist her and, upon request, will 
supply their names for the record. Neither Ms. Dreifuss 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(d) [39 CFR 3001.10(d)].
    Intervention. Those wishing to be heard in this matter are directed 
to file a written notice of intervention with Steven W. Williams, 
Secretary of the Commission, 1333 H Street NW., Suite 300, Washington, 
DC 20268-0001, on or before October 17, 2002. Notices should indicate 
whether participation will be on a full or limited basis. See 39 CFR 
3001.20 and 3001.20a.
    Prehearing conference. A prehearing conference will be held 
Wednesday, October 23, 2002, at 10 a.m. in the Commission's hearing 
room.

Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. MC2002-2, Experimental 
Rate and Service Changes to Implement Negotiated Service Agreement with 
Capital One Services, Inc., to consider the request referred to in the 
body of this order.
    2. The motion of United States Postal Service for joint sponsorship 
of proposals and for leave to rely on Capital One's case-in-chief, 
filed September 19, 2002, is granted, subject to reconsideration in 
response to any objection lodged by other participants in this 
proceeding.
    3. The petition of Capital One Services, Inc. for leave to 
intervene in the above-captioned proceeding, and to join United States 
Postal Service motion for joint sponsorship of proposals, filed

[[Page 61358]]

September 19, 2002, is granted, subject to reconsideration in response 
to any objection lodged by other participants in this proceeding.
    4. The Commission will sit en banc in this proceeding.
    5. The deadline for filing notices of intervention and comments 
regarding the appropriateness of proceeding under rules 67 through 67d 
is October 17, 2002.
    6. Answers to the Service's motion for waiver of certain filing 
requirements, to its motion for joint sponsorship of proposals, and to 
Capital One's motion for leave to intervene and jointly sponsor the 
proposals are due no later than October 17, 2002.
    7. Written discovery pursuant to rules 26-28 may be undertaken upon 
intervention.
    8. The Postal Service and Capital One Services, Inc. shall respond 
to discovery requests within 10 days.
    9. A prehearing conference will be held Wednesday, October 23, 
2002, at 10 a.m. in the Commission's hearing room.
    10. Shelley S. Dreifuss, director of the Commission's Office of the 
Consumer Advocate, is designated to represent the interests of the 
general public.
    11. The Secretary shall arrange for publication of this notice and 
order in the Federal Register.

    By the Commission.
Steven W. Williams,
Secretary.
[FR Doc. 02-24772 Filed 9-27-02; 8:45 am]
BILLING CODE 7710-FW-P