[Federal Register Volume 69, Number 145 (Thursday, July 29, 2004)]
[Notices]
[Pages 45353-45356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17094]


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POSTAL RATE COMMISSION

[Docket No. MC2004-5; Order No. 1413]


Repositionable Notes Market Test

AGENCY: Postal Rate Commission.

ACTION: Notice and order.

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SUMMARY: This document establishes a formal docket for consideration of 
a proposed one-year market test of a supplemental service feature for 
bulk First-Class Mail, Standard Mail, and Periodicals. Conducting the 
test would allow the Service to collect data and information on 
customer response and related matters, and thereby determine whether it 
should seek to establish these services as permanent offerings.

DATES: See SUPPLEMENTARY INFORMATION for dates.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov.

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

SUPPLEMENTARY INFORMATION: Notice is hereby given that on July 16, 
2004, the Postal Service filed a request with the Postal Rate 
Commission pursuant to section 3623 of the Postal Reorganization Act, 
39 U.S.C. 101 et seq., for a recommended decision on a proposed market 
test of a supplemental service feature for bulk First-Class Mail, 
Standard Mail, and Periodicals that would allow ``repositional notes'' 
to be attached to such mail. The Postal Service proposes to implement 
the market test through additions to the Domestic Mail Classification 
Schedule (DMCS) and associated new surcharges. The request includes 
attachments and is supported by the testimony of two witnesses and a 
library reference. It is on file in the Commission's docket room for 
inspection during regular business hours and is available on the 
Commission's home page at www.prc.gov.
    Description of the request. For a period of one year, the Postal 
Service proposes to charge mailers for attaching a ``Repositional 
Note'' (RPN) to mailpieces of certain subclasses. According to the 
Postal Service, an RPN is a Post-it-type self-adhesive note that 
mailers can affix to the outside of a mailpiece. Because eligible RPNs 
are mechanically applied using air pressure, and have an adhesive strip 
that is wider than on notes used in typical office settings, they are 
unlikely to become detached from the mailpiece during handling. They 
are typically used to display advertising messages that encourage 
recipients to open, read, and respond to the internal contents of the 
mailpiece. They can be removed by the recipient and re-attached to 
computers, refrigerators, or similar objects as reminders that extend 
the life of the commercial message. They can also be used as a simple 
way to correct minor errors in catalogues. USPS-T-1 (Direct Testimony 
of USPS witness Holland) at 1.
    The Postal Service states that RPNs have been available nationally 
for bulk letter mail for approximately a year, and that there have been 
no operational problems or costs to the Postal Service associated with 
their use over that time. It states that Domestic Mail Manual 
provisions authorizing RPNs for bulk letter mail are currently in 
place. Its proposed market test, therefore, is not expected to alter 
the status quo, except to allow bulk flat mail to carry RPNs, and to 
charge fees for their use. Id. at 2-3.
    Motion for a stand-alone market test. The Postal Service proposes 
that portions of rules 54, 64, and 161 be waived in this case. To the 
extent that rules 161(a) and 162 require the filing of a 
contemporaneous request for a permanent classification change as a 
prerequisite for a market test, the Postal Service asks for a waiver of 
that requirement. The Commission has determined that the Postal 
Service's RPN proposal is not appropriately filed under its market test 
rules. It is, however, treating this proposal as if filed pursuant to 
its provisional service change rules. See 39 CFR 3001, subpart

[[Page 45354]]

J. Accordingly, the motion for waiver of the requirement that a 
proposed market test be filed concurrently with a proposed permanent 
classification change will be dismissed as moot.
    In its motion, the Postal Service argues that a formal request for 
a permanent classification change is unnecessary in light of the 
purpose of the test and the simplicity of the proposal. It asserts that 
the purpose of the market test is to explore demand levels at the 
surcharges chosen. It asserts that a permanent request formulated at 
this stage would essentially duplicate the market test that it 
requests, but could not reflect any modifications that market 
experience might prompt. Therefore, it argues, it would be more 
productive to formulate a permanent proposal after market experience 
was gathered. It asserts that the simplicity of the proposal obviates 
the need for the extensive documentation that would ordinarily 
accompany a request for permanent changes to classification and rate 
schedules. It argues that Docket No. MC98-1 (Mailing Online) provides a 
precedent for allowing a market test to proceed even though it is not 
part of a proposal for a permanent classification change. United States 
Postal Service Motion for Waiver of Request for Permanent Change as a 
Condition for Market Test Procedures, July 16, 2004, at 1, 4.
    The Postal Service's position that the market test rules can be 
appropriately invoked when the market test is not undertaken 
concurrently with, and in support of, a proposed permanent change in 
the mail classification schedule is based on a strained interpretation 
of that rule, and of precedents that have implemented it.
    The market test rules are intended to give the Postal Service a way 
of gaining operational experience and gathering the raw material with 
which to make an evidentiary record that will support a new, permanent 
mail classification. They contemplate minimal evidentiary support for a 
test that is limited in service area, duration, and potential impact on 
mailers and competitors. The rationale for allowing the Postal Service 
to proceed with a market test despite a sparse evidentiary record is 
that a procedure is needed to allow the Postal Service to ``fill in the 
holes'' and to make a substantial record for the associated proposed 
classification change where a probative record would otherwise be 
difficult to compile.
    Associating a market test with a proposed classification change 
ensures that stakeholders will soon be able to evaluate a closely-
related permanent change based on a substantial record. This purpose is 
reflected in 39 CFR 3001.162(i), which requires that the market test 
include ``a plan for gathering the data needed to support a permanent 
change in mail classification and for reporting the test data to the 
Commission.'' For this reason, rules 161(a) and 162 state that a market 
test is to be preliminary to, and in support of, a proposed permanent 
classification change. See 39 CFR 3001.161(a) and the preamble to 39 
CFR 3001.162.
    The Postal Service's assertions that its RPN proposal is simple, 
straightforward, and will have little impact on existing rate and 
classification schedules does not obviate the ultimate need for a 
substantial record with which to evaluate the proposal. Docket No. 
MC98-1 was allowed to proceed as a market test because there was a 
substantial need to ``fill in the holes'' to support a permanent 
change, and there was a concurrent request to process the proposal as 
an experiment under rule 67 [39 CFR 3001.67] of the Commission's rules. 
This increased the prospect that a more substantial record would soon 
be available with which to evaluate the Mailing Online proposal.
    The Postal Service's RPN proposal is not associated with a proposed 
change in the Domestic Mail Classification Schedule. It appears to be 
already well developed operationally and conceptually, and to have been 
nationally available for a considerable period of time. As the Postal 
Service appears to acknowledge, its RPN proposal could be cast as a 
proposed permanent change with little alteration. Its purpose is less 
to fill in unknowns that are needed to fashion a proposed permanent 
change, than to make a service enhancement quickly available, where the 
enhancement poses little risk of upsetting the status quo. 
Consequently, it is not appropriate to consider the Postal Service's 
RPN proposal under the Commission's market test rules.
    It is, however, appropriate for consideration under the 
Commission's rules governing provisional service changes. These rules 
are available to process requests to establish provisional services 
that ``will supplement, but will not alter, existing mail 
classifications and rates for a limited and fixed duration.'' See 39 
CFR 3001.171 and 173. They are meant to facilitate ``introduction of 
provisional services that enhance the range of postal services 
available to the public, without producing a material adverse effect 
overall on postal revenues or costs, and without causing unnecessary or 
unreasonable harm to competitors of the Postal Service.'' The 
Commission's provisional service change rules are designed to allow 
provisional service enhancements with little potential to adversely 
impact stakeholders to be implemented quickly without the making of an 
unnecessarily elaborate factual record.
    The Postal Service's RPN proposal would add to the rate and service 
options under the DMCS rather than alter or reconfigure existing rate 
and classification schedules. It is a simple change, limited to one 
year, that is expected not to adversely effect any stakeholder. 
Therefore, it appears well suited for processing under the streamlined 
and accelerated procedures of the Commission's provisional service 
change rules. See 39 CFR part 3001, subpart J. Accordingly, the 
Commission will provisionally allow the Postal Service's filing to be 
processed under those rules.
    Conditional motion for waiver of certain documentation 
requirements. The Postal Service asserts that there is precedent for 
construing rules 54, 64 and 162 not to require the full panoply of 
documentation called for by those rules if the proposed classification 
change is experimental or minor in nature. Rather than require the 
Postal Service to submit much of that documentation in a form that 
specifically addresses the minor classification change being proposed, 
the Postal Service argues that the Commission has been willing to 
consider material incorporated by reference from the most recent 
general rate case and from periodically reported material to largely 
satisfy these documentation requirements. The Postal Service states 
that its Repositional Notes proposal is a minor classification change 
that would not materially affect the rates, fees, and classifications 
established in Docket No. R2001-1, the most recent general rate case. 
It asserts that it would have no impact on Postal Service costs, and 
limited impact on revenues and volumes. Accordingly, the Postal Service 
argues, it should be sufficient that its request incorporates by 
reference generalized documentation from Docket No. R2001-1, and from 
periodic reports from past years such as Cost and Revenue Analysis 
reports. It asks that if the Commission construes its documentation 
rules strictly, and does not consider incorporation of such generalized 
historical documentation by reference to be sufficient, that the 
Commission waive certain of those rules. It lists the following rules 
that would need to be waived under a strict construction of their 
applicability: 54(b)(3), 54(c), 54(e), 54(f)(2)-(3),

[[Page 45355]]

54(h)(1)-(12), 54(i), 54(j)(1)-(7), 64(b)(1)-(4), 64(c)(1)-(3), 64(d), 
and 64(h). Statement of the United States Postal Service Concerning 
Compliance with Filing Requirements and Conditional Motion for Waiver, 
July 16, 2004 at 1-5.
    The Postal Service is proposing that RPNs be allowed on bulk 
letters and flats in the First-Class Mail, Standard Mail, or 
Periodicals subclasses. The proposed surcharge is 0.5 cent per piece 
for First-Class Mail, and 1.5 cents per piece for Standard and 
Periodical mail. USPS-T-1 at 1-5; USPS-T-2 (Direct Testimony of USPS 
witness Kaneer) at 3.\1\
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    \1\ At page 1 of the Notice of the United States Postal Service 
Concerning the Filing of a Request for a Recommended Decision on a 
Market Test, dated July 16, 2004, accompanying the Postal Service's 
request, the Postal Service states that the proposed surcharges are 
``1\1/2\ cents for RPNs on First-Class Mail and \1/2\ cent for RPNs 
on Standard Mail and Periodicals.'' On July 20, 2004, the Postal 
Service filed errata to this notice, confirming that the proposed 
rate is \1/2\ cent for applying an RPN to a First-Class mailpiece, 
and 1\1/2\ cent for applying an RPN to a piece of Standard or 
Periodical mail. On the same date, it filed errata to Attachment E 
to its request correcting the relevant proposed DMCS and rate 
schedule sections.
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    Proposed settlement procedures. The Postal Service requests that 
the Commission establish settlement procedures in this proceeding. It 
argues that settlement of issues surrounding its request is appropriate 
because the proposed test is simple and straightforward, is to last for 
only one year, merely increases the options for mailers of certain 
classes of bulk mail, and involves only the testing of demand at the 
two prices proposed. The Postal Service notes that the Commission's 
market test rule contemplates that a recommend decision on the proposal 
be issued within 90 days. See rule 164. It asks the Commission to 
establish a date for a settlement conference in advance of the 
prehearing conference, and to be granted permission in advance to 
conduct the conference in the Commission's hearing room. It observes 
that expediting the processing of its proposal in this manner would 
help make RPNs available during the peak mailing season. See United 
States Postal Service Motion for Establishment of Settlement 
Procedures, July 16, 2004, accompanying its request. It adds that if a 
settlement conference were held before the intervention period expires, 
and a participant were to subsequently intervene, that the Postal 
Service could brief any such intervenor on the substance of the 
settlement conference.
    The period for issuing a recommended decision under the 
Commission's provisional service change rules is 90 days, and the 
rationale for seeking an early settlement of this case applies equally 
under those rules. See 39 CFR 3001.174. Accordingly, the Commission 
authorizes settlement negotiations in this proceeding. It appoints 
Postal Service counsel as settlement coordinator. In this capacity, 
counsel for the Service shall report on the status of settlement 
discussions at the prehearing conference. The Commission authorizes the 
settlement coordinator, at his discretion, to schedule settlement 
conferences on August 9, 10, or 11, 2004, prior to the prehearing 
conference in the Commission's hearing room. Authorization of 
settlement discussions does not constitute a finding on the proposal's 
procedural status or on the need for a hearing.
    Further procedures. Rule 173(b) provides that interested persons 
may intervene within 28 days of the Postal Service's filing of a 
request for permission to conduct a provisional service change. In view 
of the Postal Service's objective of implementing its proposal in time 
for the peak mailing season, the normal period for intervention under 
subpart J will be shortened from 28 days to 21 days. Notices of 
intervention will be due on August 6, 2004. Late motions for 
intervention will nevertheless be entertained for good cause shown. The 
notice of intervention shall be filed using the Filing Online system at 
the Commission's Web site (www.prc.gov), unless a waiver is obtained 
for hardcopy filing. See rules 9(a) and 10(a) [39 CFR 3001.9a and 10a]. 
Notices should indicate whether participation will be on a full or 
limited basis. See rules 20 and 20a [39 CFR 3001.20 and 20a].
    Section 173(e) of the rules of practice [39 CFR 3001.173(e)] states 
that the Commission will hold hearings on a Postal Service request for 
a provisional service change.

when it determines that there is a genuine issue of material fact to 
be resolved in the consideration of the Postal Service's request, 
that party shall file with the Commission a request for a hearing 
within the time allowed in the notice of proceeding. The request for 
a hearing shall state with specificity the fact or facts set forth 
in the Postal Service's filing that the party disputes, and when 
possible, what the party believes to be the true fact or facts and 
the evidence it intends to provide in support of its position.

    Any participant who wishes to dispute a genuine issue of material 
fact to be resolved with regard to the Postal Service's RPN proposal 
shall file a request for a hearing by August 11, 2004. In order to 
assist the Commission's determination of whether a hearing is 
necessary, should any written discovery be directed to the Postal 
Service by a participant before August 11, 2004, the Postal Service 
shall respond within 10 days.
    Prehearing conference. A prehearing conference will be held on 
August 11, 2004 at 11 a.m. in the Commission's hearing room. 
Participants shall be prepared to address whether there is an issue of 
material fact requiring a hearing as provided by rule 173(e) [39 CFR 
173(e)]. It would greatly assist the Commission if participants file 
supporting written argument in advance of the prehearing conference in 
regard to the identification of issues that would indicate the need to 
schedule a hearing.
    Public participation. In conformance with section 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.
    It is ordered:
    1. The Commission establishes Docket No. MC2004-5 to consider the 
Postal Service Request referred to in the body of this Order.
    2. The Commission will act en banc in this proceeding.
    3. Notices of intervention shall be filed no later than August 6, 
2004.
    4. Shelley S. Dreifuss, director of the Commission's Office of the 
Consumer Advocate, is designated to represent the interests of the 
general public.
    5. The Postal Service's RPN proposal will be processed under 
subpart J of the Commission's rules of practice [39 CFR 3001, subpart 
J].
    6. The Postal Service's Motion for Waiver of Request for Permanent 
Change as a Condition for Market Test Procedures is dismissed as moot.
    7. Answers to the Postal Service's Motion for Filing Requirements 
and Conditional Motion for Waiver of the portions of rule 54 and 64 
cited in that motion are due on August 6, 2004.
    8. Postal Service counsel is appointed to serve as settlement 
coordinator in this proceeding. The Commission will make its hearing 
room available for settlement conferences on August 9, 10, or 11, 2004, 
and at such times deemed necessary by the settlement coordinator.
    9. A prehearing conference will be held on August 11, 2004, at 11 
a.m., in the Commission's hearing room.

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    10. Participants who wish to request a hearing on the Postal 
Service's Request in this docket to conduct a market test shall submit 
such a request, together with statements in conformance with 39 CFR 
3001.173(e), no later than August 11, 2004.
    11. The Postal Service shall provide responses to any written 
discovery requests submitted before August 11, 2004, within 10 days.
    12. The Secretary shall cause this Notice and Order to be published 
in the Federal Register.

    Issued: July 22, 2004.

    By the Commission.
Garry J. Sikora,
Acting Secretary.
[FR Doc. 04-17094 Filed 7-28-04; 8:45 am]
BILLING CODE 7710-FW-P