[Federal Register Volume 73, Number 34 (Wednesday, February 20, 2008)]
[Notices]
[Pages 9363-9368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-3163]


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POSTAL REGULATORY COMMISSION

[Docket No. R2008-1; Order No. 59]


Administrative Practice and Procedure; Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Notice and order.

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SUMMARY: The Commission is conducting a formal review of the Postal 
Service's planned rate adjustments for essentially all products in the 
market dominant category, which includes the First-Class stamp, and 
limited classification revisions. The adjustments are based on a 
statutory price cap. A public comment period extends through March 3, 
2008. This will be followed by a Commission determination on the 
consistency of the adjustments with certain considerations. The new 
rates and the classification revisions are expected to take effect May 
12, 2008.

DATES: March 3, 2008: Deadline for public comments.

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: 

Regulatory History

    1. 72 FR 63662 (November 9, 2007).
    2. 72 FR 64155 (November 15, 2007).
    3. 73 FR 6426 (February 4, 2008).

I. Overview

A. Background

    On February 11, 2008, the United States Postal Service (Postal 
Service) filed with the Postal Regulatory Commission (Commission) a 
document captioned United States Postal Service Notice of Price 
Adjustment (Adjustment Notice).\1\ This document was filed pursuant to 
39 U.S.C. 3622(d)(1)(C) and part 3010 of the Commission's Rules of 
Practice and Procedure. It announces the Postal Service's intention to 
adjust rates for all products in its market dominant business category 
on May 12, 2008, in amounts that are, on average, within a 2.9 percent 
statutory price cap for each class. The Commission notes that the 
average change, in some instances, includes significant percentage 
changes within a class. Moreover, in limited situations, prices for 
some products in some classes do not change.
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    \1\ See also United States Postal Service Notice of Filing 
Supplement to Appendix A, New Prices and Fees, to Notice of Market-
Dominant Price Adjustment (February 12, 2008) Errata, February 12, 
2008 (Errata). The Errata supplies price charts that were missing 
from Appendix A in the Postal Service's February 11, 2008 filing for 
seven non-ancillary special services. The section in this notice on 
special services provides further details.
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    The Adjustment Notice also addresses several limited classification 
revisions affecting single-piece domestic International Mail and 
identifies a limited classification change affecting Periodicals. The 
International Mail changes are largely designed to mirror the domestic 
structure. The Periodicals change reflects a provision in the Postal 
Accountability and Enhancement Act of 2006 (PAEA) extending a rate 
preference to certain mailers.

B. Context

    The filing of the Adjustment Notice marks the first instance in 
which the Postal Service is exercising its authority, under the PAEA 
and related Commission rules, to make an annual adjustment in rates for 
products in the market dominant category under a new streamlined, 
index-based approach. The market dominant product category is one of 
two business lines established in the PAEA. It includes First-Class 
Mail letters and sealed parcels; First-Class Mail cards; Periodicals; 
Standard Mail; Single-piece Parcel Post; Media Mail; Bound Printed 
Matter; Library Mail; Special Services; and Single-piece International 
Mail. 39 U.S.C. 3621. The other line is the Competitive Products 
category, which includes Priority Mail; Expedited Mail; Bulk Parcel 
Post; Bulk International Mail; and Mailgrams.\2\ 39 U.S.C. 3631. Rate 
and fee adjustments for each business category are governed by 
different procedures.
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    \2\ Mailgram service was terminated on August 17, 2006. See 
Postal Bulletin 22192, October 26, 2006, at 5.
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C. Statutory Price Cap

    The statutory price cap is a new mechanism for adjusting rates for 
market dominant products, and a key element in the new process for 
changing postal rates established pursuant to the PAEA. It represents a 
weighted annual increase in the CPI-U for the past 12 months, 
calculated under Commission rules implementing the PAEA.\3\ The price 
cap was expressly adopted in the PAEA and, in conjunction with a short 
review period, replaces a much longer, more litigious, trial-type 
ratemaking approach that was in place since 1970.
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    \3\ The references to CPI-U is to the Department of Labor's 
Consumer Price Index for All Urban Consumers.
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II. Impact on Mailers

    Summary. The planned adjustments, summarized in terms of percentage 
change at the class level, are: First-Class Mail, 2.889 percent; 
Standard Mail, 2.875 percent; Periodicals, 2.710 percent; Package 
Services, 2.876 percent; and Special Services, 2.848 percent. Each 
percentage is below the statutory price cap. Adjustment Notice at 5.
    The First-Class stamp. The planned change in the First-Class 
postage stamp, which is widely used by the general public for eligible 
mail weighing an ounce or less, is an increase of 1 cent. This raises 
the rate from its current level of 41 cents to 42 cents. For the second 
ounce of First-Class single-piece mail, the planned rate goes from 58 
cents to 59 cents, on the same basis. Id. at 3; Appendix A at 1.
    The Forever Stamp. As a result of Docket No. R2006-1, the Postal 
Service introduced a First-Class Mail ``Forever Stamp.'' The price of 
this stamp at the time of its introduction was 41 cents, which equated 
to the Docket No. R2006-1 price for the first ounce of single-piece 
First Class Mail. This stamp will continue to be sold for 41 cents 
until May 12, 2008, and will cover postage for mailing single-piece 
First-Class Mail even after the anticipated price increase to 42 cents 
on May 12, 2008. However, on and after May 12, under the planned 
adjustments, a new purchase of a Forever Stamp will be at the 42-cent 
rate. These stamps, like the original issue, will continue to cover the 
mailing of one-ounce single-piece First-Class Mail, regardless of 
future increases in the underlying rate.

III. Unused Rate Adjustment Authority

    The Postal Service notes that it has no unused rate adjustment 
authority available for use in this price change. It further states 
that while it was its

[[Page 9364]]

general intent to fully use its authority under the cap in this price 
change, it has not met the cap percentage precisely. It attributes this 
largely to the effect of rounding. Id. at 5. Accordingly, the Postal 
Service states that it is banking the residual amount below 2.9 percent 
for each class in accordance with the following schedule:

                               Table III-1
------------------------------------------------------------------------
                                                                 Percent
                             Class                               change
------------------------------------------------------------------------
First-Class Mail..............................................     0.011
Standard Mail.................................................     0.025
Periodicals...................................................     0.190
Package Services..............................................     0.024
Special Services..............................................     0.052
------------------------------------------------------------------------

Id. at 5 (footnote omitted).

IV. Consistency of Adjustment Notice with Commission Rules

    Relationship of streamlined procedures to intended implementation 
date. Commission rules implementing the PAEA require the Postal Service 
to file notice of its intention to adjust market dominant rates at 
least 45 days prior to the intended implementation date. The Commission 
notes, in this instance, that the Postal Service is providing more than 
the minimum amount of notice, given that the anticipated effective date 
is May 12, 2008.

V. Commission Action

    In Docket No. RM2007-1, the Commission developed a set of 
procedures to carry out its review of an Adjustment Notice in 
accordance with the PAEA and pertinent provisions of the Administrative 
Procedure Act. Pursuant to these procedures, the filing of an 
Adjustment Notice triggers a requirement that the Commission establish 
a formal docket to review the consistency of the planned adjustments 
with regulations that subsume legal provisions, policy issues, and 
technical matters. Requirements related to public notice, official 
publication, public representation, a public comment period, and other 
matters also attach to the review.
    The Commission takes several steps at this time in conformance with 
these requirements. First, it has posted the Postal Service's 
Adjustment Notice on its Web site, http://www.prc.gov. It also has made 
the Adjustment Notice available for copying and inspection during 
regular business hours (8 a.m. to 4:30 p.m.) at the Commission, 901 New 
York Avenue, NW., Suite 200, Washington, DC 20268-0001. Any subsequent 
Postal Service filings in this docket, along with any written comments 
and filings by others, also will be posted on the Commission's Web site 
and made available for public inspection and copying at the Commission 
during regular business hours.
    Second, the Commission establishes the requisite formal docket, 
captioned Docket No. R2008-1, Notice of Price Adjustment, to conduct 
its mandatory review of the Postal Service's planned rate adjustments. 
It notes that this review is conducted under the legal authority of 39 
U.S.C. 3622.
    The Commission's intention is to conduct this review by bringing 
its judgment to bear on the basis of the material presented in the 
Adjustment Notice, the objectives, factors and requirements of the 
PAEA, including referenced postal policies, Commission rules, and 
public comments.
    Third, the Commission issues this notice addressing the Adjustment 
Notice and related matters, in conformance with Sec.  3010.13. It also 
directs the Secretary of the Commission to arrange for prompt 
publication of this notice and order in the Federal Register. It 
appoints Kenneth E. Richardson to represent the interests of the 
general public in conformance with Sec.  3010.13(a)(4).
    Public comment period; focus of comments. The Commission designates 
a 20-day comment period starting from the date of the filing of the 
Adjustment Notice in conformance with Sec.  3010.13(a)(5). By operation 
of Commission Sec.  3001.15 on computation of time, the comment period, 
which otherwise would end on March 2, 2008, extends through close of 
business on March 3, 2008. Section 3010.13(b) provides that public 
comments should focus primarily on whether planned rate adjustments 
comply with the following mandatory requirements of 39 U.S.C. chapter 
36, subchapter I:

    (1) Whether the planned rate adjustments measured using the 
formula established in rule 3010.23(b) are at or below the annual 
limitation established in rule 3010.11; and
    (2) Whether the planned rate adjustments measured using the 
formula established in rules 3010.23(b) are at or below the 
limitations established in rule 3010.28.

    Method for filing comments. The formal intervention process set out 
in the Commission's rules does not apply in this type of docket. 
Instead, interested persons are to submit comments electronically via 
the Commission's Filing Online system. The Commission will provide 
assistance to anyone not familiar with this method of filing. Those 
seeking assistance should contact either the docket section at 202-789-
6846 or Kenneth E. Richardson, the officer of the Commission in this 
case, at 202-789-6859.
    Additional procedural steps; timetable. Section 39 CFR 3010.13(c) 
provides that the Commission, within 14 days of the conclusion of the 
public comment period will determine, at a minimum, whether the planned 
rate adjustments are consistent with the annual limitation set forth in 
39 CFR 3010.11; the limitations set forth in 39 CFR 3010.28; and 39 
U.S.C. 3626, 3627 and 3629, and issue an order announcing its findings. 
In this instance, the deadline for the Commission's determination is 
March 17, 2008. If the planned rate adjustments are found consistent 
with applicable law by the Commission, they may take effect pursuant to 
appropriate action by the Postal Service Governors. In the event the 
Commission determines that planned rate adjustments are not consistent 
with applicable considerations, additional procedures apply. See 39 CFR 
3010.13(c) through 3010.13(i).

VI. Summary of Contents of Postal Service Adjustment Notice

    Background. Commission rule 39 CFR 3010.14 requires the Postal 
Service to include certain explanatory and supporting information in 
each Adjustment Notice, but leaves organization of the notice and 
presentation of the requisite material to the discretion of the Postal 
Service. The purpose of the information the Postal Service provides is 
to facilitate expeditious review of the consistency of the Adjustment 
Notice with pertinent considerations.
    Organization of Adjustment Notice. The Adjustment Notice in this 
docket consists of an introductory section; three sections designated 
as parts; four appendices; six attachments; a request for confidential 
treatment for certain International Mail data; and a conditional motion 
for waiver.\4\
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    \4\ See Adjustment Notice at 1 and 4.
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    Introductory section. The Postal Service identifies the planned 
effective date as May 12, 2008, in conformance with 39 CFR 
3010.14(a)(2), in the general introduction. It also represents, in 
conformance with the notice requirements of 39 CFR 3010.14(a)(3), that 
it will issue public notice of the planned rate changes at least 45 
days before the effective date via several means in addition to its 
Adjustment Notice. Specifically, it states that this includes issuing 
notice of the price changes, on the same day of its filing with the 
Commission, on the Postal

[[Page 9365]]

Service's Web site (http://www.usps.com), the Postal Explorer Web site 
(http://www.pe.usps.com), the DMM [Domestic Mail Manual ] Advisory, and 
the P&C [Producers and Consumers] Weekly; and a press release 
announcing the changes. The Postal Service also states that it plans to 
provide public notice of the price changes in future issues of the PCC 
[Postal Customer Council ] Insider, MailPro (March/April issue) and the 
Postal Bulletin. Id. at 1-2.
    The Postal Service identifies Joseph D. Moeller, Manager of 
Pricing, as the Postal Service official who will be available to 
provide prompt responses to requests for clarification from the 
Commission. In the remainder of the Adjustment Notice, it provides 
supporting technical information and justifications, including 
workpapers where applicable. 39 CFR 3010.13(a)(1), 3010.13(a)(3), 
3010.13(a)(4), and 3010.14(b). Id.
    Part I. The Postal Service represents that the material presented 
in Part I, captioned Price Cap Compliance, complies with 39 CFR 
3010.14(b)(1) through (4) by identifying the amount of the applicable 
price cap; the percentage change in prices for each class of mail; the 
amount of any unused rate (price) adjustment authority available for 
each class of mail; and the amount of any unused rate adjustment 
authority generated by this price change. Id. at 5. It notes that the 
instant price change, in its view, does not include any ``new workshare 
discounts'' within the meaning of Sec.  3010.14(c). Id. at 5-6 and 6, 
n.7.
    Part II. The Postal Service represents that the material presented 
in Part II, captioned Description of the Prices, responds to 39 CFR 
3010.14(b)(7) and (8). These rules require the Postal Service to 
discuss how the planned price ``help achieve'' the objectives of 39 
U.S.C. 3622(b) and ``properly take into account'' the factors of 39 
U.S.C. 3622(c); and how the planned prices are consistent with 39 
U.S.C. 3626, 3627 and 3629.
    Part III. The Postal Service represents that Part III, captioned 
MCS [Mail Classification Schedule] Product Description Changes, 
responds to the requirement in 39 CFR 3010.14(b)(9) that the instant 
notice include all the changes to the product descriptions within the 
MCS that are necessitated by the planned rate adjustments. Id. at 37. 
These changes use the draft MCS submitted by the Postal Service on 
September 24, 2007, as supplemented on November 20, 2007, as a base. 
Id.
    Appendices. The Adjustment Notice is accompanied by four 
appendices. The appendices are identified as Appendix A, New Prices and 
Fees; Appendix B, Worksharing Passthrough Tables; Appendix C, Changes 
to (Proposed) Mail Classification Schedule Language; and Appendix D, 
Price Cap Calculation.
    Attachments. The attachments consist of workbooks the Postal 
Service has prepared demonstrating how the prices identified in the 
appendices comply with the price cap. The five public attachments are 
identified as USPS-R2008-1/1: First-Class Mail Cap Compliance; USPS-
R2008-1/2: Standard Mail Cap Compliance; USPS-R2008-1/3: Periodicals 
Cap Compliance; USPS-R2008-1/4: Package Services Cap Compliance; and 
USPS-R2008-1/5: Special Services Cap Compliance. The non-public 
attachment is identified as USPS-R2008-1/NP1: Inbound Single-Piece 
First-Class Mail International--Letter-Post (Input to Attachment USPS-
R2008-1/1). In support of its request for confidential treatment for 
this appendix, the Postal Service invokes 39 U.S.C. 410(c)(2).
    Conditional motion for waiver. The Postal Service observes, in a 
footnote to its Adjustment Notice, that it believes that it has 
complied with all requirements in the Commission's rules; however, to 
the extent that the Commission concludes otherwise, it moves for a 
waiver. Id. at 1.

VII. Class-Specific Summary of Price Adjustments

A. First-Class Mail

    The Postal Service identifies six First-Class Mail products: 
Single-piece Letters/Postcards, Presorted Letters/Postcards, Flats, 
Parcels, Outbound Single-Piece First-Class Mail International, and 
Inbound Single-piece First-Class Mail International. The planned price 
changes for these products, in percentage terms, range from 1.93 
percent to 3.55 percent. Product-specific changes appear in the 
following table.

                               Table VII-1
------------------------------------------------------------------------
                                                                 Percent
                            Product                              change
------------------------------------------------------------------------
Single-Piece Letters & Cards..................................      2.50
Presort Letters & Cards.......................................      3.55
First-Class Flats.............................................      1.93
First-Class Parcels...........................................      2.18
International.................................................     *3.09
Overall.......................................................     2.889
------------------------------------------------------------------------
* This includes Inbound and Outbound Single-Piece First-Class Mail
  International.

Id. at 13.

    The Postal Service states that a major driver of the overall 
increase for First-Class Mail is the price of a stamp for one-ounce, 
single-piece letters. It plans to increase this price by 1 cent (2.44 
percent), which is slightly less than CPI. This increase also reflects 
the integer (cent) rounding constraint traditionally applied to this 
price. The Postal Service notes that as a result, the presort letters/
postcard product has a modest above-the-cap increase. Id.
    Recognition of shape. The Postal Service states that it has only 
modestly increased the recognition of shape in First-Class Mail flats 
and parcels on a per-piece basis, given recent large increases for 
those shapes in Docket No. R2006-1. Id.
    Nonmachinable surcharge. The Postal Service states that it has set 
the nonmachinable surcharge for single-piece and non-automation presort 
letters at 20 cents to increase recognition of nonmachinability in 
prices. Id.

B. Standard Mail

    The Postal Service identifies six Standard Mail products: Letters; 
Flats; Parcels and Not-Flat Machinables (NFMs); High Density and 
Saturation Letters; High Density and Saturation Flats and Parcels; and 
Carrier Route Letters, Flats, and Parcels. The planned price changes 
for these products, in percentage terms, range from 0.86 percent to 
9.66 percent. Product-specific changes appear in the following table.

                               Table VII-2
------------------------------------------------------------------------
                                                                 Percent
                            Product                              change
------------------------------------------------------------------------
Letters.......................................................      3.39
Flats.........................................................      0.86
Parcels and NFMs..............................................      9.66
High Density/Saturation Letters...............................      1.66
High Density/Saturation Flats and Parcels.....................      2.09
Carrier Route Letters, Flats and Parcels......................      2.99
Overall.......................................................     2.875
------------------------------------------------------------------------

Id. at 15.

    The Postal Service states the price changes for the Letters and 
Flats products reflect its decision to moderate increases for catalog 
and other flats mailers due to the large price increases they 
experienced last year. It explains that to moderate price increases for 
flats, it has increased prices for letters by slightly more than the 
cap. The prices for flats increase by less than the increase in CPI-U 
(0.86 percent). The Postal Service says that when combined with the 
change for carrier route, which increases by 2.99 percent, flats as a 
whole increase by 1.67 percent. Id.
    The Postal Service also asserts that it is reducing the flats pound 
price slightly

[[Page 9366]]

in absolute terms to provide some additional relief for catalogs. It 
notes that in some instances, more highly presorted catalogs weighing 
more than the break point will experience modest price reductions. Id. 
at 15-16. The Postal Service maintains that by lowering the marginal 
cost of adding pages, the pound price reduction will also encourage 
catalog mailers to add content to their catalogs. Id. at 16.
    Standard Mail parcels. The Postal Service notes that Standard Mail 
parcels experience relatively large price increases, reflecting the 
higher costs of processing compared to other shapes. It says this 
``will help bolster their contribution.'' Id. The Postal Service also 
states that the current price structure leads to less efficient 
transportation and entry practices, and asserts that the new prices 
move toward providing parcels with ``better cost coverage and encourage 
efficient dropship behavior by increasing the incentive to take parcels 
to the delivery unit.'' Id. It further states that its pricing for 
parcels ``is also a further step in the Postal Service's ongoing 
harmonization of all of its parcels offerings.'' Id.
    Carrier route mail. The Postal Service characterizes its approach 
to carrier route mail as one that only modestly raises the pound price 
and results in an increase that is very close to the cap. It asserts 
that carrier route mail tends to have market characteristics that are 
more similar to non-carrier route Standard Mail than to the saturation 
mail with which it was formerly grouped. It claims that with the advent 
of delivery point sequencing of letters and the expected implementation 
of the Flats Sequencing System (FSS), the relationship between carrier 
route and less-dense preparation will remain important. It says it 
expects to continue monitoring the pricing of flats mail as FSS 
advances, and will make adjustments as necessary to take full advantage 
of FSS operations while considering the implications for customers. Id.
    Saturation and high-density mail. The Postal Service says it plans 
modest, below-cap increases for saturation and high-density Standard 
Mail. Under its approach, the pound price decreases slightly, which the 
Postal Service asserts is consistent with its recent pricing proposals 
for saturation-type mail. Id. It says that while it believes that 
further consideration of the pound price is warranted, it has chosen to 
make a small, incremental reduction this year. It says that a lower 
pound price should help to encourage saturation mailers to increase 
their content, as this is the price mailers use when deciding whether 
it is economical to put additional inserts and weight into saturation 
mailings. Id. at 16-17.
    Other efficiency-related adjustments. The Postal Service notes that 
it makes several additional adjustments designed to improve mail 
processing efficiency. It says some, like increased dropship discounts 
for parcels and increased incentives for automation, are discussed in 
more detail in Part II.C. of its Adjustment Notice. Id. at 17. It says 
it also widens the price gap between saturation letters and flats 
brought to the destination sectional center facility, on the 
expectation that this will reduce the incentive for some mailers to 
convert letter-size mail pieces to flats, which are not as efficient to 
process and deliver. Id.

C. Periodicals

    The Postal Service identifies two Periodicals products: Within 
County Periodicals and Outside County Periodicals. The planned price 
changes are relatively close and both are below the cap. Product-
specific changes appear in the following table.

                               Table VII-3
------------------------------------------------------------------------
                                                                 Percent
                            Product                              change
------------------------------------------------------------------------
Outside County................................................     2.713
Within County.................................................     2.630
Overall.......................................................     2.710
------------------------------------------------------------------------

Id. at 17.

    Outside County. The Postal Service notes that Outside County 
Periodicals prices were restructured last July, and asserts that this 
resulted in large price increases for some customers groups, 
particularly smaller publications. It says it has therefore sought to 
limit the degree to which the increase for any one price element varies 
from the average increase for the product, in the interest of reducing 
the possibility of substantially greater-than-average price increases 
for any publication. Id. at 17-18. It says that Periodicals efficiency 
incentives ``have generally been maintained at their current levels.'' 
Id. at 18. It asserts that this will allow Periodicals mailers to 
continue adjusting to the new framework while allowing the Postal 
Service to continue studying the effect of the new structure on 
mailers. It asserts that in future price adjustments, it will be able 
to use this information, as well as the banked pricing authority (of 
0.190 percent) generated by the planned increase in this case in 
pricing decisions to improve the profitability of Periodicals. Id.
    The Postal Service also notes that its FY 2007 Annual Compliance 
Report indicated that Periodicals was the only class of mail that did 
not cover its attributable costs in the last fiscal year. It asserts, 
however, that the new Periodicals price structure was only in effect 
for a small part of FY 2007, and that the cost coverage calculated for 
that year is therefore based primarily on the costs and revenues 
resulting from Docket No. R2005-1 prices. It says the new structure is 
expected to have cost-savings benefits as mailers respond to the 
incentives it creates. It concludes that an increase in May of this 
year, in conjunction with last July's increase and increased mailer 
response to the new structure, should help move Periodicals toward 
cost-compensatory status. The Postal Service also says it is working to 
further understand and reduce Periodicals costs, and has assembled a 
task force for that purpose, consistent with section 708 of the PAEA. 
Id.

D. Package Services

    The Postal Service identifies five Package Services products: 
Single-Piece Parcel Post, Bound Printed Matter Flats, Bound Printed 
Matter Parcels, Media Mail/Library Mail, and Inbound Surface Parcel 
Post (at Universal Postal Union (UPU) rates). The planned price changes 
range from a low of 0.42 percent to a high of 4.54 percent. Product-
specific changes appear in the following table.

                               Table VII-4
------------------------------------------------------------------------
                                                                 Percent
                            Product                              change
------------------------------------------------------------------------
Single-Piece Parcel Post......................................      3.30
BPM Flats.....................................................      0.42
BPM Parcels...................................................      2.10
Media Mail and Library Mail...................................      4.54
Inbound Surface Parcel Post...................................    * 2.62
Overall.......................................................     2.876
------------------------------------------------------------------------
*The Postal Service notes that prices for Inbound (International)
  Surface Parcel Post (at UPU rates) are determined by the Universal
  Postal Union and are not under its (the Postal Service's) control. Id.
  at 19, n.15.

Id. at 19.

    Medial Mail/Library Mail. The Postal Service states that in Package 
Services, it has focused on improving the profitability of Media Mail/
Library Mail and single-piece Parcel Post. It notes that the most 
recent Annual Compliance Report indicates that Media Mail/Library Mail 
have a very low cost coverage, so it plans to increase the prices for 
this product by an overall percentage greater than the cap. However, 
the Postal Service maintains that the prices for this product remain 
relatively low, in recognition of its

[[Page 9367]]

``educational, scientific, cultural, and informational value.'' Id. The 
Postal Service further notes that within this product, the prices for 
the 5-digit presort categories increase by greater than the product 
average. It asserts these categories currently receive discounts that 
exceed avoided costs by more than is necessary, so the discounts are 
accordingly reduced. Id.
    Single-piece Parcel Post. The Postal Service plans to raise the 
prices for single-piece Parcel Post slightly above the cap to improve 
its cost coverage. It says that within this product, and consistent 
with its approach in Docket No. R2006-1, it plans to increase intra-BMC 
prices by more, on average, than inter-BMC prices. Id. It says the 
overall average price increase is 5.79 percent for intra-BMC and 2.56 
percent for inter-BMC, for a combined average increase of 3.30 percent. 
Id. at 19-20.
    The Postal Service adds that no intra-BMC base (machinable) prices 
decrease, but says ``a handful'' of inter-BMC base prices decrease, by 
up to 5 percent (Oversized, Zone 8). It also says that because non-
machinable Parcel Post parcels were on average smaller in FY 2007 than 
in previous years, both the intra-BMC and inter-BMC nonmachinable 
surcharges are reduced by 5 percent. Id. at 20.
    Bound Printed Matter (BPM). The Postal Service plans to set BPM 
prices below the price cap, to offset the larger increases in single-
piece Parcel Post and Media Mail/Library Mail, and to remain below the 
price cap. Id. Within BPM, the prices for flats (which the Postal 
Service identifies as primarily heavy catalogs) increase by a lesser 
percentage than parcels (which primarily reflect order fulfillment). 
The Postal Service says this continues, but does not conclude, the 
shape-based de-averaging that began in Docket No. R2001-1, and that it 
reflects the overall lower costs of processing and delivering flats, as 
opposed to parcels, and is designed to encourage increased volume of 
lower-cost, flat-shaped catalogs. Id.
    In addition, the Postal Service says it increases the pound prices 
for both parcels and flats ``to ensure better coverage of 
transportation costs, particularly for short-distance mail pieces, and 
to harmonize the BPM pricing structure with other Package Services 
prices.'' The Postal Service says these changes lead to larger price 
increases for heavier weight pieces, and for closer-in zones, and to 
relatively smaller increases for some lighter pieces and pieces going 
to farther zones. Id.
    Dropship discounts. The Postal Service plans to reduce the dropship 
discounts to destination bulk mail centers and destination sectional 
center facilities, and to increase the discount to destination delivery 
unit, on grounds that this will provide more efficient price signals. 
It asserts that the first two discounts are too heavily discounted 
relative to their avoided costs, while the third needs to be increased. 
Id. at 21.

E. Special Services

    The Postal Service identifies 11 Special Services products: 
Ancillary Services; International Ancillary Services; Address List 
Services; Caller Service; Change-of-Address Credit Card Authentication; 
Confirm; International Reply Coupon Service; International Business 
Reply Mail Service; Money Orders; Post Office Box Service; and Premium 
Forwarding Service. The planned overall increase is 2.848 percent. Id. 
The Postal Service did not present a product-specific table of 
changes.\5\
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    \5\ The Errata supplies price charts that were missing from 
Appendix A in the Postal Service's February 11, 2008 filing for the 
following non-ancillary special services: 1515 Address List 
Services; 1520 Caller Service; 1525 Change-of-Address Credit Card 
Authorization; 1530 Confirm; 1545 Money Orders; 1550 Post Office Box 
Service; and 1555 Premium Forwarding Service. The Errata also states 
that three incorrect insurance fees have been identified on page 31 
of 35 of Appendix A. It provides a revised page 31 with the correct 
fees. The Postal Service says it will post amended or corrected 
versions of all prices and fees in locations under the control of 
the Postal Service.
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    The Postal Service states that for many Special Services, fee 
increases were generally designed to be close to the percentage 
increase in CPI-U, while maintaining consistency with historical 
rounding constraints. Id. It says that Special Services affected by 
this approach include Business Reply Mail; Certified Mail; Caller 
Service; Address List Services (for example, List Correction and ZIP 
Coding of mailing lists); Account Maintenance; Application and Mailing 
Permit fees; Parcel Airlift Service; Post Office Boxes; Return Receipt 
(the Green Card); electronic Signature Confirmation; Shipper Paid 
Forwarding; and Special Handling. Id. The Postal Service states the 
greater increases for Electronic Return Receipt and Return Receipt 
After Mailing reflect their high value of service. Id. at 21, n.17.
    Certified Mail. The Postal Service observes that Certified Mail has 
a significant effect on the percentage increase for this class. It says 
that the Certified Mail fee, with a nickel rounding constraint, 
increases by 5 cents, or 1.9 percent. The Postal Service says this was 
chosen, rather than the alternative increase of 10 cents, or 3.8 
percent, because a 3.8 percent increase for Certified Mail, coupled 
with its relatively large size, would have required many other fees 
within Special Services to be priced well below the cap. The Postal 
Service considers this contrary to the high value many of the other 
fees provide. Id. at 22.
    Address Correction Service (ACS). For ACS, the Postal Service says 
the price increases are designed to address increased costs and reflect 
the value this service provides. It states that two of the fees (the 
One Code ACS ``additional notices'' fee for First-Class Mail letters 
and the One Code ACS ``first two notices'' fee for Standard Mail 
letters) increase by $0.01. Id. It says the additional notice fee for 
Standard Mail increases by $0.03, paralleling the percentage increase 
for First-Class Mail. It says no price changes are made to the Manual 
and Electronic ``Other'' fees, to encourage better addresses. Id.
    Certificate of Mailing. The Postal Service asserts that in 
Certificate of Mailing, it designed fees for individual pieces to 
increase by a percentage as close to the cap percentage as possible, 
consistent with the historical nickel rounding constraint for this 
special service. However, it increases fees for Certificates of Mailing 
for bulk pieces slightly above the cap to reflect the low price 
compared to a high value of service. Id.
    Confirm. The Postal Service observes that there has been a recent 
decrease in the number of end user subscribers for Confirm. It says 
that the planned new prices nonetheless retain the existing unlimited 
scan option, but that this tier receives a larger increase to reflect 
the changing subscriber base. Id.
    Insurance. The Postal Service states that the planned above-average 
price increases for the $50.01 to $100 fee and the $100.01 to $200 fee 
are intended to smooth the price relationships among the various 
increments. It says the increase in the incremental fee reflects the 
increased value of service provided as the item's value increases. Id. 
at 22-23.
    Registered Mail. The Postal Service plans to increase fees for 
Registered Mail by an average of 7.3 percent to reflect the high value 
of service offered, and to improve the very low cost coverage. Id. at 
23.
    Stamped Envelopes. The Postal Service does not plan to increase the 
fees for single-piece stamped envelopes in recognition of the users of 
these envelopes. It says it keeps the fees for plain envelopes in packs 
of 500 as close to the cap as possible within the rounding constraints. 
Fees for personalized envelopes, however, increase by more than the cap 
to reflect

[[Page 9368]]

the convenience this service provides. Id.
    Stamped Cards. The Postal Service plans to increase the fee for a 
single Stamped Card by the minimum amount of $0.01, which is a 50 
percent increase. It also increases the other Stamped Cards fees by 50 
percent. Id.
    Bulk Parcel Return Service. The Postal Service states that the 
increase in the per-piece fee is similar to the general increase for 
Standard Mail parcels, which comprises this category. Id.
    Restricted Delivery, Collect on Delivery Notice of Nondelivery and 
Alteration of Charges, and Money Order inquiries. The Postal Service 
says the larger-than-average fee increases for these services reflect 
their high value of service. Id.
    International special services. The Postal Service says its general 
approach to international special services has been to set fees for 
those services that are similar to the fees for the equivalent domestic 
service, and that it has followed this approach for International 
Certificates of Mailing; International Registered Mail; International 
Return Receipts; and International Restricted Delivery. Id. at 23.

VIII. Mail Classification Schedule Product Description Changes

    The Postal Service addresses Sec.  3010.14(b)(9) in Part III of its 
Adjustment Notice. Id. at 37-38. This rule requires that the Adjustment 
Notice include all the changes to the product descriptions within the 
MCS that are necessitated by the planned price adjustments. The Postal 
Service provides the proposed MCS revisions in Appendix C. It notes 
that the changes are based on the draft MCS it submitted on September 
24, 2007 (as supplemented on November 20, 2007). Id. at 37. Revisions 
are made to the MCS in Outbound Single-Piece First-Class Mail 
International and in Outside County Periodicals.
    International Mail. The MCS changes related to International Mail 
reflect changes to the International Mail Manual (IMM) that expand the 
number of country groups for First-Class Mail International to nine; 
implement the new shape-based prices for letters, large envelopes 
(flats), and packages (small packets); and apply the nonmachinable 
surcharge to all nonmachinable letters, regardless of weight. The 
Postal Service states that notice of the IMM changes is being placed on 
http://www.USPS.com and will be published shortly in the Federal 
Register. Id.
    Outside County Periodicals. The Postal Service states that the MCS 
revisions for this product reflect the changes to the Domestic Mail 
Manual (DMM) required to implement 39 U.S.C. 3626(g)(4), which 
authorizes the provision of a discount for the Outside County pieces of 
a Periodicals publication having fewer than 5,000 Outside County 
pieces, and at least one Within County piece. The Postal Service states 
that the DMM changes implementing this new discount are being placed on 
http://www.USPS.com and will be published shortly in the Federal 
Register. Id. at 37-38.

IX. Ordering Paragraphs

It Is Ordered

    1. The Commission establishes Docket No. R2008-1 to consider the 
planned price adjustments in rates and fees for market dominant postal 
products and services identified in the Postal Service's February 11, 
2008 Notice of Market-Dominant Price Adjustment.
    2. The Commission establishes a 20-day period for public comment on 
the planned price adjustments. This period extends through March 3, 
2008.
    3. The Commission appoints Kenneth E. Richardson as officer of the 
Commission to represent the interests of the general public in this 
proceeding.
    4. The Commission directs the Secretary of the Commission to 
arrange for prompt publication of this notice in the Federal Register.

    By the Commission.
Steven W. Williams,
Secretary.
[FR Doc. E8-3163 Filed 2-19-08; 8:45 am]
BILLING CODE 7710-FW-P