[Federal Register Volume 73, Number 159 (Friday, August 15, 2008)]
[Notices]
[Pages 47984-47986]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-18887]


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POSTAL SERVICE


Request of the Postal Service To Add Express Mail Contract to 
Competitive Product List

AGENCY: Postal Service.

ACTION: Notice.

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SUMMARY: This notice sets forth the request of the Postal Service to 
add a new product (Express Mail Contract) to the competitive product 
list.

DATES: Effective Date: August 15, 2008.

FOR FURTHER INFORMATION CONTACT: Daniel J. Foucheaux, Jr., 202-268-
2989.

SUPPLEMENTARY INFORMATION: The Postal Service in accordance with 39 
U.S.C. 3642 and 39 CFR 3020.30 et seq. is filing a Request before the 
Postal Regulatory Commission, the addition of a new product, Express 
Mail Contract 1, to the competitive product list of the Mail 
Classification Schedule. As required by 39 U.S.C. 3642(d)(1), the 
Request is being published in the Federal Register. The Request is set 
out below.

Neva R. Watson,
Attorney, FOIA/Privacy and Government Relations.

Before the Postal Regulatory Commission

Washington, DC 20268-0001

[Docket No. MC2008-5]

Modification of the Mail Classification Schedule; Addition to 
Competitive Product Category; Express Mail Contract 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.
    In accordance with 39 U.S.C. 3642 and 39 CFR 3020.30 et seq., the 
United States Postal Service hereby requests modification of the Mail 
Classification Schedule product list. The Postal Service proposes to 
add Express Mail Contract 1 to the competitive product list.\1\ This is 
a competitive product not of general applicability within the meaning 
of 39 U.S.C. 3632(b)(3).\2\ A redacted version of the Governors' 
Decision establishing the price and classification and a certification 
of the Governors' vote is provided in Attachment A.\3\ Attachment B 
shows the requested changes in the Mail Classification product list 
with the addition in brackets.\4\ Attachment C provides a statement of 
supporting justification for this request, as specified in 39 CFR 
3020.32.\5\
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    \1\ 39 CFR Sec.  3020.31(a), (c).
    \2\ Id. Sec.  3020.31(d).
    \3\ Id. Sec.  3020.31(b).
    \4\ Id. Sec.  3020.31(f).
    \5\ Id. Sec.  3020.31(e).
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    As explained in the supporting justification, the Postal Service 
believes that it is appropriate to add this contract to the list of 
competitive products. The Commission should therefore approve this 
request as set forth in its rules. As required by 39 U.S.C. 3642(d)(1), 
this Request is being published in the Federal Register .
    The Postal Service also 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 this 
contract.\6\ The prices and class are to be effective one day after the 
Commission approves the required addition to the product list.\7\ An 
explanation and

[[Page 47985]]

justification is provided in the Governors' Decision and accompanying 
analysis, which are being filed in unredacted version under seal.\8\ 
Also, being filed under seal are the required cost and revenue data \9\ 
and certification of compliance with 39 U.S.C. 3633(a)(1) and (3).\10\
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    \6\ Id. Sec.  3015.5(a).
    \7\ Id. Sec.  3015.5(b).
    \8\ Id.
    \9\ Id. Sec.  3015.5(c)(1).
    \10\ Id. Sec.  3015.5(c)(2).
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    While aware that the Commission intends to address broader 
confidentiality issues in the future,\11\ the Postal Service maintains 
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. 
The contract contains pricing and other information related to the 
customer and its processes as well as to Postal Service processes and 
procedures for handling the mail tendered under the contract. Related 
financial information contains cost and pricing information underlying 
the contract. Prices and other contract terms relating to the parties' 
processes and procedures are highly confidential in the business world 
and the Postal Service protects them in accordance with industry 
standards. The ability of the Postal Service to negotiate such 
contracts would be severely compromised if prices and other information 
pertaining to these types of agreements were publicly disclosed. Also, 
public disclosure would compromise the ability of the customer to 
negotiate favorable shipping services contracts in the future. The name 
of the customer should remain confidential due to the substantial 
likelihood that the Postal Service's competitors would use such 
information to target their efforts and undercut the Postal Service's 
prices. The Postal Service is aware of no competitor or private company 
of comparable size and scope that releases similar information to the 
public.
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    \11\ See Order No. 86, Order Concerning Global Expedited Package 
Services Contract, Docket No. CP2008-5, June 27, 2008, at 7.

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Respectfully submitted,

United States Postal Service,
By its attorneys:
Daniel J. Foucheaux, Jr.,
Chief Counsel, Ratemaking,
Scott L. Reiter,
475 L'Enfant Plaza West, S.W.,
Washington, DC 20260-1137,
(202) 268-2999, Fax-5402,
[email protected],
July 21, 2008.

ATTACHMENT A to Postal Service Request

Docket No. MC2008-5

Redacted Governors' Decision

Decision of the Governors of the United States Postal Service on 
Establishment of Rate and Class Not of General Applicability for 
Express Mail Service (Governors' Decision No. 08-9)

July 16, 2008.

Statement of Explanation and Justification

    The Postal Service and* * * have entered into a shipping services 
contract that provides specialized pricing for* * * use of Express Mail 
service. Accordingly, pursuant to our authority under section 3632 of 
title 39, as amended by the Postal Accountability and Enhancement Act 
of 2006 (``PAEA''), we establish a new price not of general 
applicability, and such changes in classifications as are necessary to 
implement the new price.
    Under the contract,* * * The contract is for three years.* * *
    We have reviewed management's analysis of the contract, which is 
attached. We have evaluated the new price and classification changes in 
this context in accordance with 39 U.S.C. 3632-3633 and 39 CFR 3015.5 
and 3015.7. We approve the changes, finding that they are appropriate, 
and are consistent with the regulatory criteria, as indicated by 
management.

Order

    We direct management to file with the Postal Regulatory Commission 
appropriate notice of these classification and rate changes and to 
request any needed addition to the competitive product list. The 
changes in price and class set forth herein shall be effective one day 
after the Commission approves any required addition to the product list 
under 39 CFR 3020 Subpart B.

By The Governors:
Alan C. Kessler--------------------------------------------------------
Chairman

Analysis of the Express Mail Service Contract with* * *

    Under the terms of the Postal Service's Express Mail contract 
with.* * *
    * * * The customized features included in this contract will make 
the pieces less costly for the Postal Service than the average Express 
Mail piece.* * *
    Based on the estimated increase in contribution from this contract, 
in light of anticipated costs and volumes, this contract will cover its 
attributable cost (39 U.S.C. 3633(a)(2)) and will result in competitive 
products as a whole complying with 39 U.S.C. 3633(a)(3), which, as 
implemented by 39 CFR 3015.7(c), requires competitive products to 
contribute a minimum of 5.5 percent to the Postal Service's total 
institutional costs. Accordingly, no issue of subsidization of 
competitive products by market dominant products arises (39 U.S.C. 
3633(a)(1)).

MAIL CLASSIFICATION SCHEDULE

PART B--COMPETITIVE PRODUCTS

2000 COMPETITIVE PRODUCT LIST

NEGOTIATED SERVICE AGREEMENTS

    Domestic
[Express Mail Contract 1]

Statement of Supporting Justification

    I, Kim Parks, Manager, Sales and Communications, Expedited 
Shipping, am sponsoring this request that the Commission add Express 
Mail Contract 1 to the list of competitive products. This statement 
supports the Postal Service's request by providing the information 
required by each applicable subsection of 39 CFR 3020.32. I attest to 
the accuracy of the information contained herein.

    (a) Demonstrate why the change is in accordance with the policies 
and applicable criteria of the Act.
    As demonstrated below, the change complies with the applicable 
statutory provisions.

    (b) Explain why, as to the market dominant products, the change is 
not inconsistent with each requirement of 39 U.S.C. 3622(d), and that 
it advances the objectives of 39 U.S.C. 3622(b), taking into account 
the factors of 39 U.S.C. 3622(c).
    Not applicable. The Postal Service is proposing that this Express 
Mail contract be added to the competitive products list.

    (c) Explain why, as to competitive products, the addition, 
deletion, or transfer will not result in the violation of any of the 
standards of 39 U.S.C. 3633.
    The service to be provided under the contract will cover its 
attributable costs and make a positive contribution to coverage of 
institutional costs. The contract will increase contribution toward the 
requisite 5.5 percent of the Postal Service's total institutional 
costs. Accordingly, no issue of subsidization of competitive products 
by market dominant products arises (39 U.S.C. 3633(a)(1)).

    (d) Verify that the change does not classify as competitive a 
product over

[[Page 47986]]

which the Postal Service exercises sufficient market power that it can 
without risk of losing a significant level of business to other firms 
offering similar products: (1) Set the price of such product 
substantially above costs, (2) raise prices significantly; (3) decrease 
quality; or (4) decrease output.
    The contract sets specific terms and conditions for providing 
Express Mail service to the customer. Express Mail is provided in a 
highly competitive market. The Postal Service is unable to set prices 
substantially above costs, raise prices significantly, decrease 
quality, or decrease output, without losing this business to private 
competitors in the expedited shipping market.
    In negotiating this contract, the Postal Service's bargaining 
position was constrained by the existence of other providers of 
services similar to the Postal Service's. As such, the market precludes 
the Postal Service from taking unilateral action to increase prices or 
decrease service. As with Express Mail service in general, the Postal 
Service may not decrease quality or output without risking the loss of 
business to competitors that offer similar expedited delivery services. 
The market does not allow the Postal Service to raise prices or offer 
prices substantially above costs; rather, the contract is premised on 
prices and terms that provide sufficient incentive for the customer to 
ship with the Postal Service rather than a competitor.

    (e) Explain whether or not each product that is the subject of the 
request is covered by the postal monopoly as reserved to the Postal 
Service under 189 U.S.C. 1696, subject to the exceptions set forth in 
39 U.S.C. 601.
    I am advised that Express Mail service and this contract are not 
covered by these provisions. See part (d) above.

    (f) Provide a description of the availability and nature of 
enterprises in the private sector engaged in the delivery of the 
product.
    See part (d) above. Expedited shipping, including guaranteed 
overnight shipping, is widely available from well-known and successful 
private firms at both published and contract prices.

    (g) Provide any available information of the views of those who use 
the product on the appropriateness of the proposed modification.
    Having entered into this contract with the Postal Service, the 
customer supports the addition of the contract to the product list so 
that the contractual terms can be effectuated.

    (h) Provide a description of the likely impact of the proposed 
modification on small business concerns.
    The market for expedited delivery services is highly competitive 
and requires a substantial infrastructure to support a national 
network. Large shipping companies serve this market. The Postal Service 
is unaware of any small business concerns that could offer comparable 
service for this customer.

    (i) Include such other information, data, and such statements of 
reasons and bases, as are necessary and appropriate to fully inform the 
Commission of the nature, scope, significance, and impact of the 
proposed modification.
    Additional details regarding the terms of the contract have been 
provided to the Commission under seal due to the sensitivity of the 
contract to both the customer and the Postal Service.

[FR Doc. E8-18887 Filed 8-14-08; 8:45 am]
BILLING CODE 7710-12-P