[Federal Register Volume 72, Number 156 (Tuesday, August 14, 2007)]
[Notices]
[Pages 45467-45468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-15835]


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POSTAL REGULATORY COMMISSION

[Docket No. MC2007-4; Order No. 23]


Negotiated Service Agreement

AGENCY: Postal Regulatory Commission.

ACTION: Notice and order.

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SUMMARY: This document establishes a docket for consideration of the 
Postal Service's request for approval of contract rates with The 
Bradford Group. It identifies key elements of the proposed agreement, 
which involves Standard Mail letters and flats rates, and addresses 
preliminary procedural matters.

DATES: 1. August 24, 2007: Deadline for intervention and responses to 
limitation of issues. 2. August 28, 2007: Prehearing conference, 11 
a.m. in the Commission's hearing room.

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, 
202-789-6820 and [email protected].

SUPPLEMENTARY INFORMATION: On August 3, 2007, the United States Postal 
Service filed a request seeking a recommended decision from the Postal 
Regulatory Commission approving a Negotiated Service Agreement (NSA) 
with The Bradford Group.\1\ The NSA is proffered as functionally 
equivalent to the Bookspan NSA recommended by the Commission in Docket 
No. MC2005-3 (baseline agreement). [70 FR 42602.] The Request, which 
includes six attachments, was filed pursuant to chapter 36 of title 39, 
United States Code.\2\
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    \1\ Request of the United States Postal Service for a 
Recommended Decision on Classifications and Rates to Implement a 
Functionally Equivalent Negotiated Service Agreement with Bradford 
Group, August 3, 2007 (Request).
    \2\ Attachments A and B to the Request contain proposed changes 
to the Domestic Mail Classification Schedule and 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 testimony and exhibits; 
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 The Bradford Group, along with 
itself, as parties to the NSA. This identification serves as notice of 
intervention by The Bradford Group. It also indicates that The Bradford 
Group shall be considered a co-proponent, procedurally and 
substantially, of the Postal Service's Request during the Commission's 
review of the NSA. Rule 191(b) [39 CFR 3001.191(b).] An appropriate 
Notice of The Bradford Group of Appearance and Filing of Testimony as 
Co-Proponent, August 3, 2007, has been filed.
    In support of the direct case, the Postal Service has filed Direct 
Testimony of Broderick A. Parr on Behalf of the United States Postal 
Service, August 3, 2007 (USPS-T-1) and library reference USPS-LR-L-1, 
MC2004-3 Opinion and Further Recommended Decision Analysis for The 
Bradford Group NSA. The Bradford Group has separately filed direct 
testimonies of Steve Gustafson (BG-T-1) and Wendy Ring (BG-T-2) both on 
behalf of The Bradford Group, August 3, 2007. The Postal Service has 
reviewed The Bradford Group testimony and, in accordance with rule 
192(b) [39 CFR 3001.192(b)], states that such testimony may be relied 
upon in presentation of the Postal Service's direct case. USPS-T-1 at 
3.
    The Request relies on record testimony entered in the baseline 
docket. This material is identified in the Postal Service's Compliance 
Statement, Request Attachment E.
    Requests that are proffered as functionally equivalent to baseline 
NSAs are handled expeditiously, until a final determination has been 
made as to their proper status. The Postal Service's Compliance 
Statement, Request Attachment E, is noteworthy in that it provides 
valuable information to facilitate rapid review of the Request to aid 
participants in evaluating whether or not the procedural path suggested 
by the Postal Service is appropriate.
    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.\3\ Rule 196(a)(6) [39 CFR 
3001.196(a)(6)]. The proposal identifies issues that were previously 
decided in the baseline docket, and key issues that are unique to the 
instant Request.
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    \3\ United States Postal Service Proposal for Limitation of 
Issues, August 3, 2007.
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    Rule 196(b) [39 CFR 3001.196(b)] requires the Postal Service to 
provide written notice of its Request, either by hand delivery or by 
First Class Mail, to all participants of the baseline docket. This 
requirement provides additional time, due to an abbreviated 
intervention period, for the most likely participants to decide whether 
or not to intervene. A copy of the Postal Service's notice was filed 
with the Commission on August 3, 2007.\4\
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    \4\ Notice of the United States Postal Service Concerning the 
Filing of a Request for a Recommended Decision on a Functionally 
Equivalent Negotiated Service Agreement, August 3, 2007.
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    The Request, accompanying testimonies of witnesses Parr (USPS-T-1), 
Gustafson (BG-T-1), and Ring (BG-T-2), the baseline agreement, and 
other related material can be accessed electronically, via the 
Internet, on the Commission's Web site (http://www.prc.gov).

I. Background: Baseline Bookspan Negotiated Service Agreement, Docket 
No. MC2005-3

    If a request predicated on a NSA is found to be functionally 
equivalent to a previously recommended, and currently in effect, NSA, 
it may be afforded accelerated review. Rule 196 [39 CFR 3001.196]. The 
Postal Service asserts that the NSA in the instant Request is 
functionally equivalent to the now in effect Bookspan NSA recommended 
by the Commission in Docket No. MC2005-

[[Page 45468]]

3.\5\ The Bookspan NSA will remain in force from June 1, 2006 to June 
1, 2009. See Decision of the Governors of the United States Postal 
Service on the Recommended Decision of the Postal Rate Commission on 
Rate and Service Changes to Implement Baseline Negotiated Service 
Agreement with Bookspan, Docket No. MC2005-3, May 31, 2006.
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    \5\ See Opinion and Recommended Decision, Docket No. MC2005-3, 
May 10, 2006.
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    The Bookspan NSA is designed to provide incentives to Bookspan to 
increase its use of Standard Mail letters for the purpose of soliciting 
members for its various book clubs. Direct Testimony of Michelle K. 
Yorgey on Behalf of the United States Postal Service, Docket No. 
MC2005-3, July 14, 2005, at 2. The Bookspan agreement provides Bookspan 
with a per-piece discount for Standard Mail letter volumes that exceed 
specified volume thresholds. Discounts are only payable after certain 
specified minimum volume commitments have been reached. The volume 
commitment levels are subject to adjustment each year, based on the 
previous year's actual volume. Id.
    The Bookspan NSA also provides for several other risk mitigation 
features to protect the Postal Service's interests. If Bookspan sends 
more than a maximum number of qualifying pieces in one year, the 
agreement automatically terminates. Either party may also 
unconditionally cancel the agreement with 30 days' notice. 
Additionally, the agreement contains a mechanism to adjust the volume 
blocks applicable to discounts if Bookspan merges or acquires other 
entities.

II. The Bradford Group NSA

    The Postal Service proposes to enter into a three-year NSA with The 
Bradford Group. The agreement provides The Bradford Group with 
declining block rates for Standard Mail letters and flats soliciting 
new and existing customers for The Bradford Group's collectibles and 
other gift items. The total estimated net benefit to postal finances 
over the three-year period of this NSA is $5.3 million. Request at 4.
    The Bradford Group NSA is based on the same key substantive 
functional elements that are central to the Bookspan agreement. Id. at 
3. Like the Bookspan NSA this agreement provides declining block rates 
for Standard Mail letter solicitations. Additionally, The Bradford 
Group agreement provides declining block rates for Standard Mail flats. 
By providing discounts for both letters and flats, the potential for 
letter-flat conversion will be mitigated. USPS-T-1 at 2. Based on an 
analysis of The Bradford Group's volume histories and forecasts, the 
Postal Service does not anticipate a significant conversion between 
letters and flats.
    The agreement contains several provisions to mitigate risk. These 
provisions include an annual adjustment mechanism for those volume 
commitments, based on actual experience, an automatic termination 
clause if volumes exceed a specified cap, and an unconditional right of 
cancellation for both parties. Request at 2.
    In the first year of the agreement, the projected before-rates 
volumes are $146.5 million for letter pieces and $53.5 million for flat 
pieces. Discounts would be earned for volumes above the thresholds of 
147 million and 53.5 million pieces for letters and flats respectively. 
The discounts will not be paid unless The Bradford Group actually mails 
154 million letters and/or 54.5 million flats. Id. at 2-3.
    Without an incentive such as that provided by the proposed NSA, The 
Bradford Group marketing volumes are expected to be flat or falling due 
to the highly volume variable nature of The Bradford Group's 
operations.

III. Commission Analysis

    Applicability of the rules for functionally equivalent NSAs. For 
administrative purposes, the Commission has docketed the instant filing 
as a request predicated on an NSA functionally equivalent to a 
previously recommended and ongoing NSA. A final determination regarding 
the appropriateness of characterizing the NSA as functionally 
equivalent to the Bookspan NSA, Docket No. MC2005-3, and application of 
the expedited rules for functionality equivalent NSAs, will not be made 
until after the prehearing conference.
    Representation of the general public. In conformance with section 
3624(a) of title 39, the Commission designates Kenneth E. Richardson, 
acting 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. Richardson will direct 
the activities of Commission personnel assigned to assist him and, upon 
request, will supply their names for the record. Neither Mr. Richardson 
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 August 24, 2007. 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 
3001.9(a) and 10(a).] Notices should indicate whether participation 
will be on a full or limited basis. See rules 20 and 20a [ 39 CFR 
3001.2 and 20a.] No decision has been made at this point on whether a 
hearing will be held in this case.
    Prehearing conference. A prehearing conference will be held August 
28, 2007, at 11 a.m. in the Commission's hearing room. Participants 
intending to object to the Postal Service's proposal for limiting 
issues, or intending to identify issue(s) that would indicate the need 
to schedule a hearing shall file a written explanation of their 
position by August 24, 2007. Participants shall be prepared to discuss 
these issues during the prehearing conference. The Commission intends 
to issue a ruling on these issues shortly after the prehearing 
conference.

Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. MC2007-4 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. Kenneth E. Richardson, acting director of the Commission's 
Office of the Consumer Advocate, is designated to represent the 
interest of the general public.
    4. The deadline for filing notices of intervention is August 24, 
2007.
    5. A prehearing conference will be held August 28, 2007 at 11 a.m. 
in the Commission's hearing room.
    6. Participants intending to object to proceeding under rule 196 
[39 CFR 3001.196], intending to object to the Postal Service's proposal 
for limiting issues, or intending to identify issue(s) that would 
indicate the need to schedule a hearing shall file a written 
explanation of their position by August 24, 2007.
    7. The Secretary shall arrange for publication of this notice and 
order in the Federal Register.

    By the Commission.
Steven W. Williams,
Secretary.
 [FR Doc. E7-15835 Filed 8-13-07; 8:45 am]
BILLING CODE 7710-FW-P