[Federal Register Volume 69, Number 63 (Thursday, April 1, 2004)]
[Notices]
[Pages 17244-17249]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7265]


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POSTAL RATE COMMISSION

[Docket No. C2004-1; Order No. 1399]


Periodicals Rate Complaint

AGENCY: Postal Rate Commission.

ACTION: Notice and order on new complaint docket.

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SUMMARY: This document announces the Commission's intention to hold 
hearings on a formal complaint filed by several major Periodicals 
mailers. The complaint concerns the alleged inconsistency of certain 
Periodicals rates with several provisions of the Postal Reorganization 
Act, given several developments affecting the viability of the 
longstanding rate structure. The Commission also announces several 
related procedural steps.

DATES: 1. Deadline for filing direct testimony: April 26, 2004.
    2. Deadline for filing notices of intervention: May 21, 2004.

ADDRESSES: File all documents referred to in this order electronically 
via the Commission's Filing Online system at http://www.prc.gov.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, 202-789-6818.

SUPPLEMENTARY INFORMATION: Summary. Five mailers who make extensive use 
of Outside County Periodicals rates have lodged a formal complaint with 
the Commission pursuant to section 3662 of the1970 Postal 
Reorganization Act (the Act or the PRA).\1\ They assert that the 
Complaint ``concerns fundamental reform of the Periodicals rate 
structure'' in the interest of achieving greater conformity with 
statutory rate making provisions. Complaint at 4. Complainants contend 
that the need for such reform is clear, as is the path that should be 
taken to achieve it. They seek hearings on their allegations regarding 
the inefficacy of the rate structure and other relief consistent with 
their claims, including the potential adoption of an alternative rate 
schedule.
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    \1\ Complaint of Time Warner Inc., Conde Nast Publications, a 
Division of Advance Magazine Publishers Inc., Newsweek, Inc., The 
Reader's Digest Association, Inc. and TV Guide Magazine Group, Inc. 
Concerning Periodicals Rates, January 12, 2004 (Complaint). These 
mailers are also collectively referred to in this order as 
Complainants.
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    The Commission accepts the Complaint under section 3662, over the 
Postal Service's objection, and announces its intention to hold 
hearings under section 3624 to determine whether the allegations in the 
Complaint are valid.\2\ If the Commission finds that to be the case, it 
will issue a recommended decision on classification changes under 
section 3623. This decision will not include a rate recommendation.
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    \2\ The American Postal Workers Union, AFL-CIO (APWU), in a 
February 13, 2004 letter addressed to the Secretary of the 
Commission, expressed its opposition to the Complaint. Reasons 
include the Complaint's reliance on Docket No. R2001-1 rate case 
assumptions; concern that the proposal is a ``radical departure'' 
from the current methodology; the possibility of establishing a poor 
precedent; the absence of an allegation that current Periodicals 
rates are illegal; and the alleged inappropriateness of the 
Commission's interference in the discussion process. The rules of 
practice do not specifically authorize the APWU's filing at this 
point in the absence of a motion, but the Commission accepts it and 
has considered the points it raises in reaching its conclusions.
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I. The Time Warner Inc. et al. Complaint

    The Complaint includes information addressing applicable Rule 83 
provisions, such as identification of the Complainants; a statement of 
the grounds for the complaint and the

[[Page 17245]]

statutory policies at issue; a description of similarly affected 
classes of persons; and a description of the relief sought. As part of 
the stated grounds, it provides detailed observations on numerous 
Periodicals issues and initiatives, including developments leading to 
the creation of a joint Periodicals Task Force, a description of 
certain Task Force recommendations, and comments on AFSM 100 
productivity.\3\ Complaint at 17-18.
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    \3\ AFSM 100 equipment is the Service's newest mechanized flat 
sorting equipment.
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    The filing also includes two exhibits, an extensive evidentiary 
proffer, and two attachments. Exhibit A is a multi-year comparison of 
Periodicals costs and inflation; Exhibit B is the Complainants' 
proposed alternative rate schedule for Outside County Periodicals Non-
Letters. The evidentiary proffer announces the Complainants' readiness 
to sponsor the testimony of the following expert witnesses: Robert W. 
Mitchell (TW et al.-T-1) on Periodicals rate design; Halstein Stralberg 
(TW et al.-T-2) on the development of Periodicals costs; John Steele 
Gordon (TW et al.-T-3) on the impact of technological progress on ``the 
widespread dissemination of information'' in the United States; and Joe 
Schick (TW et al.-T-4) on the impact on smaller publications and their 
printers of eliminating the unzoned editorial pound rate. The proffered 
testimony of witnesses Mitchell and Stralberg appear, for information, 
as Attachments A and B to the Complaint. Related workpapers have been 
filed with the Commission's docket section as library references. 
Complainants indicate the testimony of the other witnesses they have 
identified can be provided reasonably soon.

A. Grounds for Filing the Complaint

    Reasons for seeking reform. Complainants claim that the need for 
reform --and deficiencies that underlie that need--``have grown 
increasingly evident'' over the last two decades. In support of this 
contention, they cite historical trends showing increases in mail 
processing costs and declines in mail processing productivity, despite 
extensive efforts by the Postal Service and mailers to achieve more 
efficient Periodicals handling. Id. at 4-5 (fn. omitted). They point to 
the Service's apparent belief that rate design changes are needed to 
address inefficiencies in the Periodicals class, given repeated rate 
and classification filings pursuing various alternatives. Id. at 5. 
They also note successive reductions the Commission has made in 
Periodicals cost coverage. However, they observe that ``with coverage 
barely above 100 percent since the [Docket] No. R97-1 rates went into 
effect, virtually no leeway remains for the Commission to shield 
mailers in this way from the problems of the subclass or deficiencies 
in its rate structure.'' Ibid.
    Inefficient price signals. Complainants identify inefficient price 
signals as a significant deficiency in the underlying rate structure. 
They say these signals stem from a longstanding focus on whether 
Periodicals costs are piece-or pound-oriented. However, they assert 
that improvements in cost analysis over the past decade, along with 
advances in postal mechanization, now show that costs are determined 
``in meaningful and systematic ways'' by factors other than the basic 
piece/pound distinction. These include how bundles, sacks and pallets 
are made up, including related presort levels, and associated 
interactions, such as mailing entry points. Id. at 6. Given that 
recognition of these cost-causing factors in current rates is extremely 
limited, Complainants assert that mailers cannot make efficient mailing 
decisions, and should not be expected to do so. Ibid.
    Consequently, Complainants argue that the price signals in the 
existing rate structure are not only inconsistent with cost incurrence 
as now understood, but inconsistent to the point that they impair the 
value of Periodicals mail service in two ways: by raising costs and by 
failing to recognize the way Periodicals mail is prepared. They assert 
that neither result is contemplated by the Postal Reorganization Act. 
Ibid.
    Obsolete and counterproductive unzoned editorial pound rate. 
Complainants regard the unzoned editorial pound rate, which dates to 
1917, as another serious deficiency. They characterize it as ``a 
substantial impediment to the development of a more efficient 
Periodicals rate structure and an anomalous element that complicates 
and sometimes defeats coherent Periodicals rate design.'' Id. at 9. 
They note that the Commission has recognized that this feature imposes 
certain inefficiencies, but has declined to approve proposed changes 
based on references in sections 101(a) and 3622(b)(8) to ``widespread 
dissemination of information'' as a means of ``binding the Nation'' and 
out of a concern for certain mailers.
    Complainants make three related assertions on this point. One is 
that the record on the unzoned editorial pound rate in previous 
Commission proceedings is deficient because it does not adequately 
address historical, cultural, technological and legal developments 
since 1917. Id. at 10. Another is that the decision in Mail Order 
Ass'n. of America v. United States Postal Service, 2 F.3d 408 (D.C. 
Dir. 1993) significantly undermined the Commission's rationale for 
maintaining the unzoned editorial rate preference. Id. at 11-12. A 
third claim is that changes since Docket No. R90-1 cast doubt on 
whether the unzoned editorial rate currently generates policy benefits 
that outweigh the burdens it imposes in derogation of other policies of 
the Act, or even advances the policies of the Act at all. These changes 
include the availability of pool shipments, the emergence of mass 
media, and the burgeoning information revolution. Id. at 10.
    Complainants contend that reconsideration in light of current 
knowledge and circumstances will demonstrate that maintaining an 
unzoned editorial rate for the purpose of fostering ``widespread 
dissemination of information'' via Periodicals:

--Is no longer a useful, or even explicable, way of recognizing or 
promoting the educational, cultural, scientific and informational value 
(ECSI) of Periodical publications;
--Provides a rate benefit to long-haul publications only at the cost of 
imposing complementary rate burdens on similarly situated short- and 
average-haul publications, in derogation of the recognition owed to the 
ECSI element of those publications under section 3622(b)(8), as well as 
the requirement that rates and classifications be fair and equitable, 
as set out in sections 3621, 3622(b)(1) and 3623(c)(1);
--Imposes substantial operational and pricing inefficiencies on the 
Postal Service and the Periodicals subclass as a whole; and
--Creates substantial obstacles to a rational, comprehensible, 
economically coherent Periodicals rate design, in derogation of section 
3622(b)(7). Id. at 13.

B. Evidentiary Proffer

    Complainants state that they are prepared to present evidence 
supporting their contention that pertinent improvements in rate 
elements would bring about efficient changes on the part of mailers and 
would bring rates into closer conformity with the Act. This includes 
the Mitchell, Stralberg, Gordon and Schick testimonies. They note, in 
particular, that witness Gordon's testimony will show how a century of 
technological, economic and social progress has ``transformed the 
conditions * * * thought to justify an unzoned editorial rate.'' Id. at 
9.

[[Page 17246]]

Complainants consider the improvements they propose meritorious in 
their own right, quite apart from other factors affecting mailers, but 
further claim that ``the unprecedented and unexplained Periodicals cost 
and rate increases of recent years make it all the more important to 
explore every available path of progress.'' Ibid.

C. Main Elements of the Proposed Alternative Rate Structure

    Complainants assert that the following ``simple remedies'' will 
make Periodicals rates far more reflective of associated costs. These 
changes are reflected in their Exhibit B rate schedule, and include:

--Establishing separate charges for the bundles, sacks and pallets used 
in each mailing, instead of deriving all Periodicals revenue from piece 
and pound charges;
--Recognizing both bundle and container presort levels, as well as the 
effect of the mailing's entry point, on costs incurred;
--Recognizing the importance of AFSM 100 machinability for non-carrier 
route flats; and
--Continuing a preference for editorial content in Periodicals, but 
allowing publications with high editorial content to earn lower rates 
by entering mail closer to its final destination.

Id. at 7.
    Complainants acknowledge that their proposal includes more rate 
elements than the current structure, but say it ``would allow 
simplification of the ever more complex mail preparation 
requirements.'' Id. at 8. They also assert that their proposal is not a 
complete solution, and suggest that the Service ``may possess more 
recent cost and mail-characteristics data with more accurate unit cost 
estimates.'' Ibid.

D. Relief Sought; Basis for Jurisdiction

    Requested relief. Complainants seek hearings on their complaint 
under section 3624 of the Act and issuance of a decision, under 
sections 3622, 3623 and 3625 of the Act, recommending the adoption of 
cost-based Periodicals Outside County rates that (1) more fully reflect 
differences in operational and cost-causing characteristics within the 
Periodicals Outside County subclass; (2) discontinue the policy of 
maintaining an unzoned editorial pound rate; and (3) promote more 
efficient methods of mail preparation and entry by sending mailers 
better price signals. Id. at 21.
    Jurisdiction. Complainants assert that the Commission's 
jurisdiction to hear this matter is founded on 39 U.S.C. 3662, 101(a) 
and (d), 403(a) and (c), 3622(b)(1)-(8), and 3623(c)(1). Id. at 19. 
Section 3662 establishes the Commission's authority to hear rate and 
service complaints. The other referenced provisions address various 
policies, such as ``Nation binding,'' fairness and equity of rates and 
classifications, efficient services, and recognition of the degree of 
mail preparation. These provisions are set out in the body of the 
Complaint. Id. at 19-20.
    In addition, the Complainants cite with approval the following 
Commission statement on jurisdiction:

    In a Section 3662 complaint, the rate at issue need not be per se 
``unlawful,'' before changes may be recommended. In each case, the 
Commission will evaluate the relevant facts and circumstances, and 
determine whether the policies of the Act, on balance, call for the 
recommendation of a change in rates.

Id. at 2, fn. 1, citing PRC Op. C99-4, Opinion and Recommended Decision 
on Complaint of Continuity Shippers Association, April 14, 2000, at 13.

III. Postal Service Answer

    The Postal Service filed its Answer to the Complaint on February 
11, 2004.\4\ Therein, it states that it does not oppose improved 
efficiency in Periodicals rate design; believes more can be done in 
this regard; and says it is exploring many of the structural changes 
Complainants propose. Answer at 2. At the same time, it opposes any 
form of Commission action on the Complaint at this time, other than 
summary dismissal. The Service cites an array of legal, policy and 
practical considerations in support of its position. The most serious 
of these are alleged deficiencies in the form and substance of the 
pleading.
    Alleged flaws in the Complainants' filing. The Service asserts that 
under the clear meaning of the language of section 3662 and Commission 
rules, the threshold question in any rate and service complaint must be 
whether the existing rates are unlawful, not whether some alternative 
set of rates would constitute an improvement. Id. at 3-4. It claims, 
however, that the instant filing ``appears premised on the supposition 
that adoption of their proposed changes would constitute an improvement 
over the current rates, rather than any well-grounded allegation that 
the current rate structure is unlawful.'' Id. at 4. It therefore argues 
that the Complaint fails to establish the necessary foundation for 
conducting a section 3662 rate complaint proceeding: namely, specific 
and colorable allegations that the existing rates fail to conform to 
specific policies of the Act. Id. at 6.
    The Service claims that this failure not only prevents Complainants 
from establishing the only statutory basis for proceeding under section 
3662, but also precludes the Service from meeting its obligations under 
the Commission's rules. Id. at 2-3. In particular, it asserts that 
Complainants do not specifically allege that existing rates, fees, or 
classifications for Periodicals mail do not conform to specific 
policies in the Act. Instead, the Service says the Complainants 
explicitly indicate that the status quo conforms to those policies 
because they state that the purpose of their alternative is ``to 
achieve greater conformity'' with the ratemaking provisions of the Act. 
Id. at 3. It also says critical factual allegations are never clearly 
articulated in a format to which the Postal Service can directly 
respond, but instead ``the factual foundations * * * consist of broad 
discussions of complex and interrelated histories of operations and 
finances, as well as convoluted technical analyses and quantitative 
derivations forming the bases for alternative rate proposals.'' Id. at 
6-7. As such, the Service says they do not lend themselves to the type 
of answer typically expected in section 3662 proceedings or 
contemplated by the Commission's rules. In addition, it asserts that by 
avoiding compliance with these ``strict guidelines,'' Complainants have 
failed to perfect their attempts to lawfully invoke the complaint 
procedures, and have failed to carry even the minimal burden of 
justifying the Complaint in the first instance. Id. at 8.
    Contentions regarding section 3662 jurisdiction. The Service 
asserts that the Complaint is really an attempt to initiate broad-based 
rate and classification changes across the Outside County Periodicals 
subclass, and therefore ``falls conspicuously outside the range of 
cases contemplated to be entertained pursuant to section 3662.'' Ibid. 
In fact, it says that such treatment would violate both sections 
3622(a) and 3628 of the Act. In an extended discussion, the Service 
presents its views on the regulatory scheme set out in the statute, 
attendant rights and responsibilities of the respective agencies, and 
section 3662's purported status as a limited ``safety valve.''
    Moreover, the Service claims section 3628 is clearly intended as 
the exclusive channel for review of rate case matters. It dismisses 
Commission statements suggesting that section 3628 does not preclude it 
from reviewing rate and related classification issues within a 
complaint proceeding. Id. at 17, citing

[[Page 17247]]

Order No. 1310, Docket No. C2001-2, April 27, 2001, at 13-14. Given 
this position, the Service says that since the combined classification 
and rate structure the complainants now propose to improve was 
established (or, at the least, reestablished) in the last omnibus rate 
proceeding, it was incumbent upon any party challenging that structure 
to pursue those types of issues then, up to and through the judicial 
review provisions of section 3628. Id. at 16-18 (citing the legal 
doctrines of res judicata and collateral estoppel).
    Opposition to the initiation of a mail classification proceeding. 
The Service acknowledges that the Commission has the option to consider 
the filing as if it were a petition to institute a classification 
proceeding pursuant to section 3623, but encourages it to decline to do 
so. In support of this position, the Service says the next omnibus rate 
case will provide a vehicle for consideration of the Complainants' 
concerns. It also contends that the absence of such a proceeding would 
allow it to continue consultations with all Periodicals mailers to 
develop a Periodicals rate and classification proposal for future 
consideration by the Commission. Id. at 20-21. Finally, the Service 
says deferring consideration of these issues would allow it to 
determine whether co-mailing and co-palletization can provide 
Periodicals mailers with the efficiency-related ``choices'' that 
underlie the Periodicals redesign proposed in the Complaint. Id. at 21.
    If the Commission does hold a hearing, the Service suggests that it 
may parallel, at least in some respects, progress the Service is making 
on similar issues with mailers. Id. at 21-23. It also says that since 
smaller publications can be expected to strongly oppose the Complaint's 
substantive proposals, the opportunity to include them may be lost. Id. 
at 23.

IV. Discussion

    A pivotal question in any filing before the Commission is whether 
jurisdiction lies. In this case, the Postal Service asserts that the 
Complainants have failed to make the requisite jurisdictional showing 
because there is neither an ``unambiguous claim'' that existing rates 
do not conform to applicable policies, nor adequate identification of 
the policies that are implicated. Moreover, it believes that 
Complainants' reliance on a Commission statement, in PRC Op. C99-4, 
regarding the scope of section 3662 is misplaced. It contends the 
Commission's view is not a legally supportable position. Id. at 4, fn. 
2 (referring to Complaint at 2, citing PRC Op. C99-4, April 14, 2000, 
at 13).
    The Commission concludes that no fundamental flaws in the filing 
preclude its acceptance for the purpose of determining whether the 
concerns it raises are justified. The Service's contention that 
Complainants have failed to invoke jurisdiction because they have not 
used several ``magic words'' is not persuasive.\5\ First, it invokes 
the ``plain meaning'' of a statutory provision only at the expense of a 
``plain reading'' of the entirety of the pleading. The Complaint raises 
a sophisticated, not simplistic, claim. Thus, the Service's near-
exclusive focus on one or two phrases in the Complaint ignores its very 
core: a challenge to the continued efficacy of Outside County 
Periodicals rates, given a structure that may be so outmoded and 
inapposite that the rates it generates ipso facto violate controlling 
provisions of the Act. Considered in this light, the Complainants' 
reliance on the Commission's previous statement regarding its 
responsibility to evaluate relevant facts and circumstances is not 
misplaced.
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    \5\ The Service alludes to the possibility that use of the words 
``greater conformity'' rather than something unambiguous may be an 
``artful dodge'' by two or more individual Complainants who consider 
themselves bound to not object to the current rate structure by 
virtue of being signatories to the Docket No. R2001-1 settlement. 
The Commission has no response to this, other than to note the clear 
evidence that the Complainants have read, and apparently agreed, 
with the Commission's statement, in PRC Op. C99-4 at 13, that the 
rate at issue in a section 3662 complaint need not be per se 
``unlawful'' before changes may be recommended. See, for example, 
Complaint at 2.
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    Failure to identify policies, as required by Rule 83. The Service 
also contends that Complainants have failed to comply with Rule 83 in 
certain respects, including a failure to identify the policies they 
believe are involved. Complainants devote more than a page of their 
pleading to setting out specific provisions of the Act, in addition to 
citing them in the text. The pleading also contains substantial 
discussion about why Complainants contend that consistency with these 
policies is lacking. Given these circumstances, the Service's argument 
must be rejected.
    Technical compliance. The Service is correct that the filing does 
not necessarily conform to the format used by others. However, Rule 83 
speaks to required information, rather than a set format. The 
Complainants have provided their full name and address in compliance 
with Rule 83(a). Complaint at 2-4. In the Commission's view, they have 
provided, throughout their extensive filing, a full and complete 
statement of their grounds, including specific reference to the postal 
rates involved and the policies to which it is claimed they do not 
conform. They have described all persons or classes of persons known or 
believed to be similarly affected (Outside County Periodicals mailers), 
in compliance with Rule 83(c). Id. at 5 and 18-19 (and elsewhere). They 
have provided a statement of the specific relief or redress requested, 
in compliance with Rule 83(d). Id. at 1 and 21. No copies of the type 
of correspondence referred to in Rule 83(e) have been provided. The 
Commission assumes this is because none exists. If this is not the 
case, Complainants should supplement their filing in this respect.
    Given the foregoing assessment, the Commission concludes that the 
Service's assertion that technical deficiencies foreclose Complainants 
from having set out colorable claims is unfounded.
    Effect of practical obstacles on holding a hearing. The Service 
notes that there are several practical considerations the Commission 
should consider. These include the inability to recommend rates if it 
proceeds with this Complaint; the possibility of redundant discussions 
on some issues, as the Service and mailers may continue independent 
talks; ongoing pallet experiments; strong objections from small 
mailers; and the ability to address issues the Complaint raises in the 
next omnibus rate case.
    The Commission finds that these considerations are not persuasive 
reasons to refrain from holding hearings. The inability to recommend 
rates in a classification case initiated by the Commission is a 
statutory reality. Dow Jones v. United States Postal Service, 656 F.2d 
786, 790 (D.C. Cir. 1981). This was a contributing factor in a recent 
Commission decision to forego initiating a proceeding on non-postal 
services, see Order No. 1388 (January 16, 2004), but the totality of 
the circumstances indicate a different result is appropriate here. This 
is a complaint that raises basic issues about the efficacy and legality 
of a current rate structure applicable to an entire class of mail. The 
Commission will consider these issues, ask for and review data as 
appropriate to inform our deliberations, and if necessary recommend 
changes to that structure.
    Nonetheless, practical considerations lead the Commission to 
conclude that this inquiry should not result in the recommendation of 
specific rates. Foremost among these considerations is the importance 
of avoiding unnecessary disruption to the businesses of both

[[Page 17248]]

Periodicals mailers and the Postal Service. Before the type of sweeping 
changes suggested by Complainants are implemented, substantial time 
must be allowed for mailer education on the new design, as well as on 
use of new mailing statements that would have to be designed and 
distributed. Postal facilities would have to prepare for an altered 
mailstream. Publishers and printers must have adequate opportunity to 
alter their mailing practices in recognition of any new rate structure 
prior to its implementation.
    Given the industry's concerns about any rate increases in the 
current economic climate, Commission consideration of potential changes 
in specific rates in the context of this complaint would be likely to 
obscure the careful review of more important structural concepts. 
Proceeding to review the effects of the current and proposed rate 
structures on economic efficiency and the various public policies of 
the Act as a first step, before attempting to design actual rates, is 
most likely to allow for efficient evaluation of relevant and material 
issues. If a new structure is found appropriate, the period for 
education and preparation can begin while specific rates are being 
developed.
    There is widespread recognition that the Postal Service is planning 
on submitting an omnibus rate request shortly. In the interim, it may 
be possible to develop and analyze additional cost and volume data that 
may be identified as necessary for use in that case. Further, issues 
resolved in this case can perhaps be implemented in that case. 
Regardless of the timing of additional dockets the importance of 
avoiding potential widespread confusion attendant to implementing a new 
rate design without allowing substantial time for mailer education and 
preparation, convince the Commission that it is best to forego any 
specific rate recommendations in response to this Complaint. If this 
Complaint is found to be justified, the most proper course of action 
for the Commission will be to recommend to the Governors classification 
changes that describe and define a rate structure more consistent with 
the policies of the Act. This will allow the Postal Service to develop 
in the first instance rates designed to fairly implement the new rate 
structure.
    The fact that discussions may occur in other forums while a 
Commission proceeding is underway may dilute attention in some 
respects, but may energize the inquiry in other ways. In addition, 
Commission proceedings offer significantly more potential for open and 
public discussion than might be the case with some industry/Postal 
Service talks. Data from ongoing pallet experiments could presumably be 
introduced into the hearing record as it becomes available, so no party 
would appear to be disadvantaged by a parallel complaint hearing on 
pallet-related issues.
    Two other factors cited as obstacles--the likelihood of strong 
objections from some mailers and the ability to consider issues raised 
here in a future rate case--actually present no greater hurdles than 
they would in any circumstance. In fact, the Commission's assigned 
statutory role is to serve as a forum for matters that are often 
inherently contentious, and it is no stranger to opposition from 
mailers who oppose various proposals and initiatives, be they in the 
category of large or small. Past experience indicates that the 
Commission allows all parties' concerns to be aired, and this 
proceeding will be no different. Finally, not postponing consideration 
of the potential need for significantly revised rate structure to the 
next omnibus case avoids at least two difficulties. One is that 
interested mailers and the Commission are not likely to be as 
preoccupied by myriad other, complex controversial issues such as are 
present in omnibus rate cases. Additionally, outside the context of the 
10-month statutory time frame of a rate case, there is considerably 
more leeway in almost all aspects of scheduling. This should result in 
the most complete and balanced record possible for analyzing the issues 
raised by Complainants.

IV. Preliminary Procedural Matters

    Hearings. The anticipated scope of this case encompasses matters 
raised in the Complaint, as well as other issues found to be germane. 
This proceeding will address concerns about the efficacy of the rates 
generated by the current structure in light of:


     The extremely low cost coverage the class has 
been assigned in recent rate decisions;
     Persistent, disproportionate increases in 
Periodicals mail processing costs;
     Recent trends in mail processing productivity; 
and
     The impact of the unzoned (or ``flat'') 
editorial pound rate on the Commission's ability to recommend rates 
that are consistent with the statutory ratemaking criteria.


    Status of Time Warner Inc. et al.'s proffered testimony. 
Complainants are directed to file all testimony, including that already 
provided as attachments to its Complaint with the Commission no later 
than 30 days from the date of this Order.
    Representation of the general public. In conformance with section 
3624(a) of title 39, U.S. Code, 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.
    Request related to Complaint format and Rule 84 obligations. The 
Commission has considered the Service's request that, at a minimum, 
Complainants be required to recast their filing in a manner that 
facilitates an admission or denial pursuant to Rule 84. The motivation 
for this request appears to be a concern that the Complaint's format 
may place the Service's compliance with Rule 84 in jeopardy because its 
February 11, 2004 Answer does not admit or deny any factual 
allegations. It notes that Commission rules indicated that the absence 
of an explicit response in its Answer may be deemed to be an admission 
of some fact. Answer at 13-14, fn. 8.
    Rule 84 serves at least two main purposes: it is a formal avenue 
for the Service to address matters raised in a complaint, and a vehicle 
for the Commission to make certain procedural and substantive 
determinations. As a general observation, the Commission notes that the 
Answer the Service has provided conveys a clear grasp of the legal and 
technical issues involved in the Complaint, a full understanding of 
attendant consequences, and the ability to identify alternative courses 
of action. To the extent the Service is concerned about admissions by 
default, the Commission states that, given the circumstances presented 
by the format of the filing in this case, it is waiving the 
applicability of that portion of Rule 84. Accordingly, the Service's 
objection on this ground is moot.
    The Complainants will not be directed to recast their pleading. To 
the extent the Service's request that this be done derives from the 
fact that two proffered pieces of testimony were attached to the 
Complaint, it is moot. The Service is not expected to address those 
evidentiary proffers at this time. To the extent the request grows out 
of the claim that specific policies of the Act have not been 
identified, the

[[Page 17249]]

Commission finds this contention plainly erroneous. The body of the 
Complaint identifies and quotes numerous policies; moreover, the 
discussion includes explanations of which policies are implicated and 
why this is so. Complaint at 19-20. Finally, the fact that discrete 
paragraphs are not numbered, as they have been in some complaint 
filings, does not appear to significantly impede a response.
    Request for opportunity for comments from others. The Service 
suggests that the Commission provide an opportunity for others to 
comment prior to instituting proceedings on the Complaint. The 
Commission believes that sufficient facts and information have been 
placed before it via the Complainants' pleading and the Service's 
February 11, 2004 Answer. Interested parties will have an opportunity 
to address issues of concern to them throughout the hearing process.
    Intervention; hearing. Those wishing to be heard in this matter are 
directed to submit a notice of intervention, on or before May 21, 2004, 
via the Commission's Filing Online system, which can be accessed 
electronically at http://www.prc.gov. Persons needing assistance with 
Filing Online may contact the Commission's Docket Section at 202-789-
6846. Notices shall indicate whether participation will be on a full or 
limited basis. See 39 CFR 3001.20 and 3001.20a. The Commission 
anticipates holding a hearing in this case. To assist the Commission in 
making decisions relative to this determination, participants are 
directed to indicate, in their notices of intervention, whether they 
intend to participate in the hearing and the nature of that 
participation. Pursuant to rules 26-28, participants may initiate 
discovery following the submission of Complainant's testimony.
    Public notice. The Commission directs the Secretary to arrange for 
publication of this Order in the Federal Register.

V. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. C2004-1, Periodicals Rate 
Design, to consider matters raised in the Complaint of Time Warner Inc. 
et al. and other germane issues.
    2. The Commission will sit en banc in this proceeding.
    3. The deadline for filing notices of intervention is May 21, 2004.
    4. Notices of intervention shall indicate whether the intervening 
party intends to participate in the hearing, and the nature of that 
participation.
    5. The deadline for filing direct testimony is 30 days from the 
date of this order.
    6. Shelley S. Dreifuss, director of the Commission's Office of the 
Consumer Advocate, is designated to represent the interests of the 
general public.
    7. The Secretary shall arrange for publication of this document in 
the Federal Register.

    Dated: March 26, 2004.
Steven W. Williams,
Secretary.
[FR Doc. 04-7265 Filed 3-31-04; 8:45 am]
BILLING CODE 7710-FW-P