[Federal Register Volume 73, Number 159 (Friday, August 15, 2008)]
[Rules and Regulations]
[Pages 47833-47835]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-18872]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket No. MC2008-5; Order No. 94]


Administrative Practice and Procedure, Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adding the Postal Service's Express Mail 
Contract 1 to the competitive product list. This action is consistent 
with changes in a recent law governing postal operations. Re-
publication of the lists of market dominant and competitive products is 
also consistent with new requirements in the law.

DATES: Effective August 15, 2008.

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:

I. Background

    On July 21, 2008, the Postal Service filed a request pursuant to 39 
U.S.C. 3642 and 39 CFR 3020.30, et seq. to modify the Mail 
Classification Schedule by adding Express Mail Contract 1 to the 
competitive product list. The Postal Service asserts that Express Mail 
Contract 1 is a competitive product ``not of general applicability'' 
within the meaning of 39 U.S.C. 3632(b)(3).\1\ A redacted version of 
the Governors' Decision establishing the price and classification and a 
certification of the Governors' vote is included as Attachment A to the 
filing (Attachment A). The requested changes in the Mail Classification 
Schedule product list are included in the filing as Attachment B with 
the new product shown in brackets.\2\ The statement of supporting 
justification required by 39 CFR 3020.32 is included as Attachment C to 
the filing (Attachment C).
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    \1\ Request of the United States Postal Service to Add Express 
Mail Contract to Competitive Product List and Notice of 
Establishment of Rates and Class Not of General Applicability, July 
21, 2008 (Request).
    \2\ The draft Mail Classification Schedule (MCS) remains under 
review. The Commission anticipates providing interested persons an 
opportunity to comment on the draft MCS in the near future.
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    In the same July 21, 2008 filing, the Postal Service gives notice, 
pursuant to 39 U.S.C. 3632(b)(3) and 39 CFR 3015.5, that the Governors 
have established prices and classifications not of general 
applicability for Express Mail Contract 1. Request at 2.
    In support of its Request, the Postal Service has also filed 
materials under seal, including an unredacted version of an explanation 
and justification in the Governors' Decision and an unredacted 
analysis. Also filed under seal are the cost and revenue data and the 
certification of compliance with 39 U.S.C. 3633(a)(1), (2), and (3). 
The Postal Service asserts ``that the contract, related financial 
information, the customer's name and the portions of the Governors' 
Decision and accompanying analysis that provides prices, terms, and 
conditions should remain confidential.'' Id.
    After its initial review, the Commission sought additional 
information with respect to several issues in this case. Toward that 
end, it issued Commission Information Request No. 1 on July 29, 
2008.\3\ The Postal Service promptly responded providing the requested 
clarifying information on August 4, 2008.\4\
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    \3\ Commission Information Request No. 1, July 29, 2008.
    \4\ See Notice of Response of the United States Postal Service 
to Commission Information Request No. 1, August 4, 2008.
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    As noted above, the Postal Service filing in this docket was made 
pursuant to rule 3015.5 and rule 3020.30 et seq. As a consequence, the 
Commission will review the filing under both rule 3015 and part 3020, 
subpart B.

II. Comments

    Comments were filed by United Parcel Service (UPS),\5\ the Public 
Representative,\6\ and David B. Popkin.\7\
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    \5\ Comments of United Parcel Service in Response to Order 
Concerning Modification of the Mail Classification Schedule and 
Prices Under Express Mail Negotiated Service Agreement, July 31, 
2008 (UPS Comments).
    \6\ Public Representative Comments in Response to United States 
Postal Service Request to Modify the Mail Classification Schedule 
and Prices Under Express Mail Negotiated Service Agreement, July 31, 
2008 (Public Representative Comments).
    \7\ Initial Comments of David B. Popkin, July 31, 2008 (Popkin 
Comments). Popkin also filed a Letter of Intervention and Request 
for Information. Letter from David B. Popkin to Steven W. Williams, 
Notice of Intervention and Request for Information, July 30, 2008 
(Letter). The Commission notes that notices of intervention are not 
necessary for the filing of comments in these types of proceedings 
and are, in fact, discouraged. Where appropriate, motions may be 
filed under Commission rule 3001.21.
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    UPS urges the Commission to require public disclosure of the 
proposed contracts subject to adequate safeguards to allow meaningful 
public review. It believes that if interested parties are denied access 
to this information, the complaint process under section 3662 will be 
largely rendered a nullity. UPS Comments at 2.
    Along the same lines, Popkin expresses concern that because the 
Postal Service's filing was largely under seal, the public cannot 
comment meaningfully on it. Popkin Comments at 2. In addition, Popkin 
offers several observations about the filing in this case and waiver of 
signature upon delivery. Id. at 3.
    The Public Representative comments on several aspects of the Postal 
Service's filings in this case including (1) confidentiality; (2) 
pricing, cost coverage, and contribution; and (3) the specific 
agreement. With respect to confidentiality, the Public Representative 
argues that the Postal Service should justify the limits of all 
confidentiality requests to comport with the spirit of Federal Rules of 
Civil Procedure 26(c) and the Freedom of Information Act. Public 
Representative Comments at 3. With respect to pricing, cost coverage 
and contribution, the Public Representative acknowledges that the 
pricing in the negotiated service agreement (NSA) comports with the 
provisions of title 39. With respect to the specific agreement, the 
Public Representative believes that it promotes an increased Express 
Mail volume, specifically pieces that are less costly to process. Id. 
at 5.

III. Commission Analysis

A. Statutory Requirements

    The statutory responsibility of the Commission, in this instance, 
is to assign a new product to either the market dominant list or the 
competitive product list. 39 U.S.C. 3642. As part of this 
responsibility, the Commission also will preliminarily review the 
proposal for compliance with the requirements of the Postal 
Accountability and Enhancement Act (PAEA) of 2006. For proposed 
competitive products, this includes a review of the provisions 
applicable to rates for competitive products. 39 U.S.C. 3633.
    The Postal Service contends that adding the Express Mail Contract 1 
product will result in processing Express Mail pieces that are less 
costly for the Postal Service than the average Express Mail piece. See 
Request, Attachment A. It believes that its

[[Page 47834]]

financial analysis shows that these cost savings can be accomplished 
while ensuring that the contract covers its attributable costs, does 
not result in subsidization of competitive products by market dominant 
products, and increases contribution from competitive products. Id.; 
Request, Attachment C, at 1.
    The Commission has reviewed the financial analysis provided under 
seal that accompanies the agreement as well as the comments filed by 
interested persons. Based on the information provided, the Commission 
finds that the proposed product submitted should cover its attributable 
costs (39 U.S.C. 3633(a)(2)); should not lead to the subsidization of 
competitive products by market dominant products (39 U.S.C. 
3633(a)(1)), and should have a positive effect on competitive products' 
contribution to institutional costs (39 U.S.C. 3633(a)(3)). Thus, a 
preliminary review of the proposed Express Mail Contract 1 product 
indicates that it comports with the provisions applicable to rates for 
competitive products.
    In determining whether to assign the Express Mail contract as a 
product to the market dominant product list or the competitive product 
list the Commission must consider whether

    [T]he Postal Service exercises sufficient market power that it 
can effectively set the price of such product substantially above 
costs, raise prices significantly, decrease quality, or decrease 
output, without risk of losing a significant level of business to 
other firms offering similar products. 39 U.S.C. 3642(b)(1). If this 
is the case, the product will be categorized as market dominant. The 
competitive category of products shall consist of all other 
products.
    In Order No. 43, the Commission issued regulations establishing a 
modern system of rate regulation, including a list of competitive 
products. PRC Order No. 43, Order Establishing Ratemaking Regulations 
for Market Dominant and Competitive Products, October 29, 2007, paras. 
3061, 4013. Among other things, the Commission determined that each NSA 
would initially be classified as a separate product. The specific 
Express Mail Contract 1 filed in this docket will be classified as a 
new product.
    The Commission is further required to consider the availability and 
nature of enterprises in the private sector engaged in the delivery of 
the product, the views of those that use the product, and the likely 
impact on small business concerns. 39 U.S.C. 3642(b)(3).
    The Postal Service asserts that its bargaining position is 
constrained by the existence of other shippers who can provide similar 
services. Thus, the market precludes the Postal Service from taking 
unilateral action to increase prices without the risk of losing volume 
to private companies. Request, Attachment C, at 2-3. The Postal Service 
also contends that the Postal Service may not decrease quality or 
output without risking the loss of business to competitors that offer 
similar expedited delivery services. Id. at 2. It further states that 
the user/NSA partner supports the addition of the contract to the 
product list to effectuate the negotiated contractual terms. Id. at 3. 
Finally, the Postal Service states that due to the fact that Express 
Mail requires a substantial infrastructure to support a national 
network, large shippers serve the market under consideration. 
Accordingly, the Postal Service is unaware of any small business 
concerns that could offer comparable service for this customer. Id.
    No commenter opposes the proposed regulatory classification of the 
Express Mail Contract 1 as competitive, and no late-filed comments were 
received.\8\ Having considered the statutory requirements, the argument 
put forth by the Postal Service, and the public comment, the Commission 
finds that Express Mail Contract 1 is appropriately classified as a 
competitive product and should be added to the competitive product 
list. The revisions to the competitive product list are shown below the 
signature of this Order, and shall become effective upon publication in 
the Federal Register.
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    \8\ See Public Representative Comments at 2.
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B. Updating the Mail Classification Schedule

    The Express Mail contract contains a provision for early 
termination of the contract. The Postal Service shall promptly notify 
the Commission of an early termination, but in no event later than the 
actual termination date. The Commission then will remove the contract 
from the Mail Classification Schedule at the earliest possible 
opportunity.

C. Confidentiality

    The Commission is aware that the treatment of information as 
confidential is a sensitive issue. The Postal Service, the Public 
Representative, United Parcel Service, and Popkin all express valid 
concerns with respect to documents submitted under seal. Very shortly, 
the Commission will address these issues on a broader level and 
establishing procedures to determine the degree of confidentiality to 
be accorded to this type of information. Interested persons will have 
an opportunity to comment on appropriate procedures governing the 
treatment of confidential information filed by the Postal Service.
    It is Ordered:
    1. The Express Mail Contract 1 will be added to the competitive 
product list as a separate product under Negotiated Service Agreements, 
Domestic as Express Mail Contract 1 (MC2008-5).
    2. The Secretary shall arrange for publication of the amended 
product list in the Federal Register .

List of Subjects in 39 CFR Part 3020

    Administrative practice and procedure, Postal Service.

    By the Commission.
Steven W. Williams,
Secretary.

0
For the reasons stated in the preamble, under the authority at 39 
U.S.C. 503, the Postal Regulatory Commission amends 39 CFR part 3020 as 
follows:
0
1. The authority citation for part 3020 continues to read as follows:

    Authority: 39 U.S.C. 503; 3622; 3631; 3642; 3682.

0
2. Revise Parts A and B of Appendix A to Subpart A of Part 3020--Mail 
Classification Schedule to read as follows:

Appendix A to Subpart A of Part 3020--Mail Classification Schedule

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Part A--Market Dominant Products--1000 Market Dominant Product List
    First-Class Mail
    Single-Piece Letters/Postcards
    Bulk Letters/Postcards
    Flats
    Parcels
    Outbound Single-Piece First-Class Mail International
    Inbound Single-Piece First-Class Mail International
    Standard Mail (Regular and Nonprofit)
    High Density and Saturation Letters
    High Density and Saturation Flats/Parcels
    Carrier Route
    Letters
    Flats
    Not Flat-Machinables (NFMs)/Parcels
    Periodicals
    Within County Periodicals
    Outside County Periodicals
    Package Services
    Single-Piece Parcel Post
    Inbound Surface Parcel Post (at UPU rates)
    Bound Printed Matter Flats
    Bound Printed Matter Parcels
    Media Mail/Library Mail
    Special Services
    Ancillary Services
    International Ancillary Services
    Address List Services
    Caller Service
    Change-of-Address Credit Card Authentication
    Confirm
    International Reply Coupon Service

[[Page 47835]]

    International Business Reply Mail Service
    Money Orders
    Post Office Box Service
    Negotiated Service Agreements
    HSBC North America Holdings Inc. Negotiated Service Agreement
    Bookspan Negotiated Service Agreement
    Bank of America Corporation Negotiated Service Agreement
    The Bradford Group Negotiated Service Agreement
    1001 Market Dominant Product Descriptions
Part B--Competitive Products--2000 Competitive Product List
    Express Mail
    Express Mail
    Outbound International Expedited Services
    Inbound International Expedited Services
    Inbound International Expedited Services 1 (CP2008-7)
    Priority Mail
    Priority Mail
    Outbound Priority Mail International
    Inbound Air Parcel Post
    Parcel Select
    Parcel Return Service
    International
    International Priority Airlift (IPA)
    International Surface Airlift (ISAL)
    International Direct Sacks--M-Bags
    Global Customized Shipping Services
    Inbound Surface Parcel Post (at non-UPU rates)
    International Money Transfer Service
    International Ancillary Services
    Special Services
    Premium Forwarding Service
    Negotiated Service Agreements
    Domestic
    Express Mail Contract 1 (MC2008-5)
    Outbound International
    Global Expedited Package Services (GEPS) Contracts
    GEPS 1 (CP2008-5)
    Global Plus Contracts
    Global Plus 1 (CP2008-9 and CP2008-10)

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[FR Doc. E8-18872 Filed 8-14-08; 8:45 am]
BILLING CODE 7710-FW-P