[Federal Register Volume 71, Number 65 (Wednesday, April 5, 2006)]
[Notices]
[Pages 17146-17147]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-4950]


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POSTAL RATE COMMISSION

[Docket No. MC2006-3; Order No. 1458]


Negotiated Service Agreement

AGENCY: Postal Rate Commission.

ACTION: Notice and order.

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SUMMARY: This document informs the public that the Postal Service and 
Washington Mutual Bank (WMB) are seeking Commission approval of an 
agreement they have reached involving discounted First-Class Mail rates 
for certain WMB solicitation mail. The document describes the 
agreement, identifies certain preliminary decisions, and addresses 
procedural steps, including key deadlines.

DATES: 1. April 21, 2006: Deadline for intervention. 2. April 25, 2006: 
Reserved for prehearing conference.

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 202-789-6820.

SUPPLEMENTARY INFORMATION:

Procedural History

    Capital One Services, Inc. Negotiated Service Agreement, 67 FR 
61355 (September 30, 2002).
    Negotiated Service Agreement Final Rule, 69 FR 7574 (February 18, 
2004).
    On March 29, 2006, the United States Postal Service filed a request 
seeking a recommended decision from the Postal Rate Commission 
approving a Negotiated Service Agreement (NSA) with Washington Mutual 
Bank.\1\ The NSA is proffered as a new baseline NSA. The Request, which 
includes six attachments, was filed pursuant to chapter 36 of the 
Postal Reorganization Act, 39 U.S.C. 3601 et seq.\2\
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    \1\ Request of the United States Postal Service for a 
Recommended Decision on Classifications, Rates and Fees to Implement 
a Baseline Negotiated Service Agreement with Washington Mutual Bank, 
March 29, 2006 (Request).
    \2\ Attachments A and B to the Request contain proposed changes 
to the Domestic Mail Classification Schedule and the associated rate 
schedules; Attachment C is a certification required by Commission 
rule 193(i) specifying that the cost statements and supporting data 
submitted by the Postal Service, which purport to reflect the books 
of the Postal Service, accurately set forth the results shown by 
such books; Attachment D is an index of Postal Service testimony; 
Attachment E is a compliance statement addressing satisfaction of 
various filing requirements; and Attachment F is a copy of the 
Negotiated Service Agreement.
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    The Postal Service has identified Washington Mutual Bank (WMB), 
along with itself, as parties to the NSA. This identification serves as 
notice of intervention by WMB. It also indicates that WMB shall be 
considered a co-proponent, procedurally and substantively, of the 
Postal Service's Request during the Commission's review of the NSA. 
Rule 191(b) [39 CFR 3001.191b]. An appropriate notice of appearance by 
Washington Mutual Bank, March 29, 2006, also has been filed.
    In support of the Request, the Postal Service has filed Direct 
Testimony of Ali Ayub on Behalf of the United States Postal Service, 
March 29, 2006 (USPS-T-1). WMB has separately filed Direct Testimony of 
Michael Rapaport on Behalf of Washington Mutual Bank, March 29, 2006 
(WMB-T-1). Witness Ayub has reviewed the testimony of witness Rapaport 
on behalf of the Postal Service and, in accordance with rule 192(b) [39 
CFR 3001.192b], states that such testimony may be relied upon in 
presentation of the Postal Service's direct case.\3\
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    \3\ USPS-T-1 at 2.
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    The Postal Service submitted several contemporaneous related 
filings with its Request. The Postal Service has filed a proposal for 
limitation of issues in this docket.\4\ The proposal identifies issues 
that the Postal Service contends are well established and need not be 
relitigated. It proposes limiting issues unique to the Washington 
Mutual Bank NSA, specifically citing the financial impact of the 
agreement upon the Postal Service and the fairness and equity issues in 
regard to other users of the mail and competitors of the parties to the 
agreement.
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    \4\ United States Postal Service Proposal for Limitation of 
Issues, March 29, 2006.
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    The Postal Service has filed a request to establish settlement 
procedures.\5\ The Postal Service believes that there is a distinct 
possibility of settlement as the substance of the agreement concerns 
the availability of declining block rates, which are now a well 
established feature of NSAs. The Postal Service further asserts that 
the new features of the agreement consist of risk mitigation 
safeguards.
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    \5\ Motion of the United States Postal Service for Establishment 
of Settlement Procedures, March 29, 2006.
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    The Postal Service believes that it has met the specific filing 
requirements set forth in rules 193 and 195 [39 CFR 3001.193, 
3001.195]. It has filed a motion requesting that if the Commission 
concludes that the submitted materials and incorporations are not 
sufficient, that those requirements be waived.\6\
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    \6\ Statement of the United States Postal Service Concerning 
Compliance with Filing Requirements and Conditional Motion for 
Waiver, March 29, 2006 (Request for Waiver).
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    The Postal Service's Request, the accompanying testimonies of 
witnesses Ayub (USPS-T-1) and Rapaport (WMB-T-1), and other related 
material are available for inspection at the Commission's docket 
section during regular business hours. They also can be accessed 
electronically, via the Internet, on the Commission's Web site (http://www.prc.gov).

I. The WMB NSA

    The Postal Service proposes to enter into a three-year NSA with 
WMB. It asserts that although the WMB NSA is similar in structure to 
the Capital One NSA, Docket No. MC2002-2, in that it contains an 
address correction element and a declining block rate volume discount 
element, it is unique in that the economic value of the agreement 
derives primarily from the gain in contribution derived from the 
declining block rate discount element.
    The declining block rate volume discount element provides WMB with 
per-piece discounts on those portions of its First-Class Mail that 
exceed specified volume thresholds. The initial volume threshold, which 
must be exceeded to receive any discount, is 450 million pieces. The 
discounts range from 2.0 cents to 5.0 cents depending on the block 
volume.
    The address correction element provides WMB, at certain levels of 
volume, with electronic address corrections without fee for properly 
endorsed First-Class Mail solicitations. WMB will receive the services 
associated with Change Service Requested, Option 2, which include 
forwarding. In return, WMB agrees to forgo physical return of 
undeliverable mail, which otherwise is provided under the existing 
service features of First-Class Mail for mail that cannot be

[[Page 17147]]

forwarded. WMB also will apply for participation in the PostalOne! 
system for permit mail that is entered directly into the mailstream by 
WMB. Furthermore, the NSA envisions that WMB will use commercially 
reasonable efforts to implement OneCode ACS, once such service becomes 
available.
    Because the rationale for the agreement focuses on the additional 
contribution derived from the declining block rate element, and not on 
the cost savings associated with the address correction element, the 
agreement does not establish a limit on the maximum cumulative discount 
available to WMB based on projected cost savings. In place of this risk 
mitigating mechanism, the WMB NSA provides a solicitation mail volume 
guarantee.
    The agreement also provides an annual adjustment mechanism to the 
volume thresholds, an enhanced mergers and acquisitions clause, a 
termination clause which allows the Postal Service to cancel the 
agreement without cause or penalty with 30 days' advance written 
notice, and a transactions penalty clause.
    The Postal Service estimates it will benefit by $45.3 million over 
the life of the NSA. This is based on estimates of $47.6 million in 
increased contribution due to increased First-Class Mail volume, and a 
net leakage of minus $2.3 million due to the discount feature of the 
agreement.\7\
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    \7\ USPS-T-1 at 26. The Request estimates a benefit of $46.3 
million over the life of the agreement. Request at 7.
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    The Postal Service does not include the savings from the Address 
Correction Service (ACS) element in the overall value of the agreement. 
Including these savings would increase the value of the agreement by 
$7.3 million based on conversion of before-rates First-Class Mail 
marketing volume to ACS.\8\ The potential savings based on the future 
conversion of ACS to OneCode ACS have not been calculated.
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    \8\ USPS-T-1 at 31.
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II. Commission Response

    Applicability of the rules for baseline NSAs. For administrative 
purposes, the Commission has docketed the instant filing as a request 
predicated on a baseline NSA as described by rule 195 [39 CFR 
3001.195].
    Request for waiver of certain filing requirements. Although the 
Postal Service believes that it has met the specific filing 
requirements set forth in rules 193 and 195 [39 CFR 3001.193, 
3001.195], it has filed a Request for Waiver if the Commission 
concludes that the submitted materials and incorporations are not 
sufficient. Such requests sometimes serve a purpose under the 
Commission's general filing rules, when compliance with the standard 
filing requirements far exceeds what is required to justify a 
particular proposal. However, the rules promulgated for NSAs attempt to 
narrow the filing requirements to only what is necessary, and are 
specific as to what is required. Because the rules are narrow and 
specific, a request for waiver should also be narrow and specific as to 
the request to waive a particular item. General requests for waivers of 
filing requirements do not meet this standard. The Postal Service's 
Request for Waiver is denied. If, at a later time, it is concluded that 
a specific filing requirement has not, need not, or cannot be met, the 
Postal Service may, without prejudice, request a waiver of that 
requirement.
    Settlement. The Commission encourages communications among the 
Postal Service and other participants to facilitate resolving issues 
early in a proceeding. These communications can be either informal, or 
at formally sanctioned settlement conferences. Settlement conferences 
early in a proceeding have substantial value in exploring the various 
positions of the different participants.
    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 to hold settlement 
conferences and will make the Commission's hearing room available for 
such conferences. Authorization of settlement discussions does not 
constitute a finding on the proposal's procedural status or on the need 
for a hearing.
    Representation of the general public. 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, 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.
    Intervention. Those wishing to be heard in this matter are directed 
to file a notice of intervention on or before April 21, 2006. The 
notice of intervention shall be filed using the Internet (Filing 
Online) at the Commission's Web site (http://www.prc.gov), unless a 
waiver is obtained for hardcopy filing. Rules 9(a) and 10(a) [39 CFR 
3001.9a and 3001.10a]. Notices should indicate whether participation 
will be on a full or limited basis, and shall indicate if a hearing on 
this Request is desired. See rules 20 and 20a [39 CFR 3001.20 and 
3001.20a].
    Prehearing conference. A prehearing conference will be held April 
25, 2006, at 9:30 a.m. in the Commission's hearing room. Participants 
shall be prepared to address the Postal Service's proposal for limiting 
issues, and any issue(s) that justify scheduling a hearing. The 
Commission strongly urges participants to file supporting written 
argument in advance of the prehearing conference in regard to the 
identification of any issue(s) that would indicate the need to schedule 
a hearing, and any objection to the Postal Service's proposal for 
limiting issues. The Commission intends to consider these issues 
shortly after the prehearing conference.

Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. MC2006-3 to consider the 
Postal Service Request referred to in the body of this order.
    2. The Commission will sit en banc in this proceeding.
    3. The Statement of the United States Postal Service Concerning 
Compliance with Filing Requirements and Conditional Motion for Waiver, 
March 29, 2006, is denied, without prejudice.
    4. Postal Service counsel is appointed to serve as settlement 
coordinator in this proceeding.
    5. Shelley S. Dreifuss, Director of the Commission's Office of the 
Consumer Advocate, is designated to represent the interests of the 
general public.
    6. The deadline for filing notices of intervention is April 21, 
2006.
    7. A prehearing conference will be held April 25, 2006 at 9:30 a.m. 
in the Commission's hearing room.
    8. The Secretary shall arrange for publication of this notice and 
order in the Federal Register.

    By the Commission.

    Issued: March 31, 2006.
Steven W. Williams,
Secretary.
 [FR Doc. E6-4950 Filed 4-4-06; 8:45 am]
BILLING CODE 7710-FW-P