[Federal Register Volume 73, Number 179 (Monday, September 15, 2008)]
[Proposed Rules]
[Pages 53324-53343]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-21060]



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Part II





Postal Regulatory Commission





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39 CFR Parts 3001 and 3050



Periodic Reporting Rules; Proposed Rule

  Federal Register / Vol. 73, No. 179 / Monday, September 15, 2008 / 
Proposed Rules  

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POSTAL REGULATORY COMMISSION

39 CFR Parts 3001 and 3050

[Docket No. RM2008-4; Order No. 104]


Periodic Reporting Rules

AGENCY: Postal Regulatory Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission is proposing a set of rules to address a 
continuing and expanded need, under a new law, for periodic reports 
from the Postal Service. The proposal describes the scope of reporting 
and the level of detail the Commission believes is needed to provide 
accountability and transparency with respect to Postal Service 
operations. Comments will assist the Commission in developing a final 
set of reporting rules.

DATES: Initial comments due October 16, 2008. Reply comments due 
November 14, 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. Introduction

    The Postal Accountability and Enhancement Act (PAEA), Public Law 
109-435, 120 Stat. 3198 (2006), calls for a fundamental shift of 
responsibilities between the Postal Service and the Postal Regulatory 
Commission (Commission) from those established in the Postal 
Reorganization Act (PRA). Under the PAEA, the Postal Service has 
acquired considerable autonomy and flexibility in determining what 
specific rates and discounts will be charged for mail products. 
Concurrently, the Commission's information gathering and reporting 
responsibilities have been greatly enhanced. This is consistent with a 
dominant theme in the PAEA that increasing the transparency of the 
Postal Service's pricing, classification, and service policies will 
reduce the need to actively regulate the Postal Service in these areas.

II. Statutory Duties That Shape the Proposed Periodic Reporting 
Requirements

    Perhaps the most important tools provided by the PAEA for achieving 
the transparency on which the new statutory scheme relies are the 
annual report that 39 U.S.C. 3652 requires the Postal Service to 
provide to the Commission (which this Notice will refer to as the 
``Annual Report''); the annual evaluation of the regulatory system that 
39 U.S.C. 3651 requires the Commission to provide to Congress and the 
President; and the requirement of 39 U.S.C. 3653 that the Commission 
determine whether the Postal Service has met the rate setting, service, 
and other goals of the PAEA during the preceding fiscal year (which 
this Notice will refer to as the ``Annual Compliance Determination''). 
In addition, the PAEA requires the Commission to prepare longer-term 
reports and assessments such as those required by sections 701 and 702 
of the PAEA, to elicit various managerial reports such as those 
required by 39 U.S.C. 2803 and 2804, and to oversee specialized 
financial reporting such as that required by 39 U.S.C. 3654. The 
periodic reporting rules proposed in this Notice are designed to 
implement all of the PAEA's provisions that make the Postal Service's 
operations and finances transparent and accountable. Accordingly, the 
general terms ``periodic reports'' and ``annual reports'' are used in 
this Notice unless the information elicited serves only the purposes of 
the Annual Compliance Determination that the Commission must make under 
39 U.S.C. 3653.

A. Statutory Standards Guiding the Annual Review Cycle

    The annual compliance report that 39 U.S.C. 3652 requires the 
Postal Service to provide to the Commission is intended to contain the 
source material for the Commission's annual compliance determination of 
the degree to which postal rates and service comply with he 
requirements, objectives, and factors of the PAEA. The Postal Service's 
compliance report is to include an analysis of the costs, revenues, 
rates, and quality of service ``in sufficient detail to demonstrate 
that all products during such year complied with all applicable 
requirements of this title[.]'' 39 U.S.C. 3652(a)(1). The Postal 
Service's compliance report to the Commission is required to 
demonstrate the extent to which both market dominant and competitive 
products recover their attributable costs and contribute to 
institutional costs. See 39 U.S.C. 3622(b)(9), 3622(c)(2), 3633(a)(2), 
and 3633(a)(3). The Postal Service's annual compliance report must also 
allow the service quality of market dominant products to be identified 
and evaluated. See 39 U.S.C. 3622(b)(3), 3622(c)(9), and 3691.
    Similar information is needed with regard to the Postal Service's 
competitive products. 39 U.S.C. 3622(b)(9) and 3633(a)(3) require the 
Commission to determine an appropriate contribution for the competitive 
classes as a whole to the Postal Service's institutional costs. This 
determination is applied to future years. Such determinations must take 
into account ``all relevant circumstances, including the prevailing 
competitive conditions in the market.'' See 39 U.S.C. 3633(b).
    There are additional reasons that the Commission needs to be able 
to evaluate the present and the future as well as the past. 39 U.S.C. 
3651 requires the Commission each year to evaluate the effectiveness of 
the regulatory system that it has constructed to implement the PAEA. 
This report is to include an evaluation of ``the extent to which 
regulations are achieving the objectives under sections 3622 and 3633, 
respectively.'' Thus, the Commission is required to assess the degree 
to which the Postal Service's management of both market dominant and 
competitive products is consistent with the objectives of the new 
statutory scheme. The Commission notes that 39 U.S.C. 3651 asks the 
Commission to evaluate the extent to which its regulations ``are 
achieving'' their statutory objectives, rather than the extent to which 
they ``have achieved'' them. This implies that the Commission is 
expected to base its evaluation on current as well as historical 
conditions. The Commission must also estimate the costs that the Postal 
Service is incurring to comply with its public service mandate and the 
statutory preferences that are preserved in the PAEA. See 39 U.S.C. 
3651(b)(1)(A) and (B).
    39 U.S.C. 3654 requires the Postal Service to submit quarterly and 
annual financial reports to the Commission that meet the requirements 
that corporations issuing publicly registered securities must meet in 
their financial reporting to the Securities Exchange Commission, 
including the requirements of the Sarbanes-Oxley Act of 2002. The 
Commission proposes to incorporate the reporting requirements of 39 
U.S.C. 3654 into the periodic reporting rules under consideration in 
this docket. See proposed Sec. Sec.  39 CFR 3050.40 through 3050.42.

B. Longer-Term Evaluation Responsibilities

    In addition to annual reporting obligations, the Commission is 
required to undertake evaluations of the functioning of the regulatory 
system it has implemented under the PAEA on longer-than-annual cycles. 
39 U.S.C. 3633(b), already mentioned, requires the Commission every 5 
years to re-evaluate

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the need for the requirement that the Postal Service's competitive 
products make an institutional cost contribution determined by the 
Commission. Section 701 of the PAEA requires the Commission, at least 
every 5 years, to re-evaluate the appropriateness of its regulatory 
framework, and recommend any needed modifications to the President and 
Congress. Section 702 requires the Commission, within 2 years of 
enactment of the PAEA, to report to the President and Congress on the 
scope and standards of universal service and the postal monopoly likely 
to be required in the future. To adequately prepare for these longer-
cycle reviews, the Commission will need forward looking as well as 
historical information to stay abreast of developments in the Postal 
Service's finances and operations. The Commission needs a sound 
knowledge base from which it can evaluate the Postal Service's 
commercial and financial prospects.
    Under the PAEA, the Commission has a continuing obligation to 
advise the Department of State on international mail matters. The 
Department of State has the lead responsibility for negotiating 
treaties that affect rates charged for market dominant international 
mail. 39 U.S.C. 407(c) assigns to the Commission an ongoing 
responsibility to provide the Secretary of State with its views on 
whether rates and classifications in an international treaty are 
consistent with the standards and criteria established by the 
Commission under the PAEA. This new statutory role affirms the 
Commission's need for current, detailed information concerning 
international mail. Accordingly, under the proposed rules, the Postal 
Service would provide the cost, volume, revenue, and weight of outbound 
and inbound international market dominant products, disaggregated by 
rate regime and country. It would also provide as yet unspecified 
service performance data in proposed 39 CFR 3050.52.

III. Comparing the Periodic Reporting Required Under the PAEA With That 
Required Under the PRA

A. The Impact of Changes in Commission Responsibilities

    Under the PRA, the most burdensome filing requirements were those 
associated with specific rate requests. These requirements, contained 
in 39 CFR 3001 Subparts B and C are no longer applicable and have been 
replaced by far more spare requirements. See 39 CFR 3010.14 and 3015.5, 
adopted in Order No. 43, October 29, 2007 [See 72 FR 63662, November 9, 
20007].
    In contrast, the evaluation and reporting duties given the 
Commission by the PAEA require periodic reports from the Postal Service 
that are broader in scope than the Commission's current periodic 
reporting rules, which were designed to support the Commission's 
functions under the PRA. Currently, the form and content of information 
that the Postal Service must report periodically to the Commission is 
governed by 39 CFR 3001.102. Rule 102 requires that the Postal Service 
provide the Commission with financial accounting data by year and by 
accounting period, data on volumes and revenues by year and by quarter, 
and annual cost estimates by function (segment and component) and by 
subclass of mail. Rule 102 requires the Postal Service to provide the 
Commission with its annual Cost and Revenue Analysis (CRA) Report and 
its Cost Segments and Components (CSC) Report. Rule 103 requires the 
equivalent reports with respect to international mail.
    Rule 102 reports were needed to enable the former Postal Rate 
Commission to perform its duties defined by the PRA. Chief among them 
was its duty to process the Postal Service's omnibus rate requests in 
an expedited manner while still satisfying the formal ``on the record'' 
hearing requirements of sections 556 and 557 of the Administrative 
Procedure Act (APA). This required the former Postal Rate Commission to 
have an ongoing familiarity with the financial condition of the Postal 
Service, its cost, volume, and revenue trends, and the evolving methods 
by which the Postal Service gathered and analyzed cost data and 
attributed costs to subclasses.
    Under the PAEA, the need for the Commission to stay abreast of such 
developments is even greater. While it no longer has to use cumbersome 
trial-type procedures to evaluate proposed rate changes, the scope of 
its various review functions is comprehensive, and many must be 
completed in a very short time frame.

B. Scope of Periodic Reports Under Current and Former Law

1. Worksharing
    An important difference between the periodic reporting required of 
the Postal Service under the PRA and that which will be required under 
the PAEA relates to the costs and revenues associated with worksharing. 
For example, under the PRA, rule 102 did not require the Postal Service 
to annually report the costs avoided by worksharing for the relevant 
rate categories. The Commission required such information only in 
conjunction with omnibus requests to change rates and discounts. The 
PAEA, however, expressly requires the Commission to ``ensure that 
[workshare] discounts do not exceed the cost that the Postal Service 
avoids as a result of workshare activity'' unless justified on the 
basis of other identified benefits of worksharing activity. See 39 
U.S.C. 3622(e). The information necessary to make this determination 
must be included in the Postal Service's annual compliance report.
    Proposed rule 3050.21(e)(4) directs the Postal Service to provide 
and explain the statutory justification for worksharing discounts that 
exceed 100 percent of the associated cost avoidance. The intent of this 
rule is to provide the Commission and interested parties with the 
information necessary to determine, for each such discount, exactly 
which statutory exemption the Postal Service is invoking and the basis 
for the claim that the exemption applies to it.
    Rule 3010.14(b)(6) serves a similar function for market dominant 
rate adjustment filings. In the first filing of this type (Docket No. 
R2008-1), the Commission found it necessary to issue a Commission 
Information Request seeking clarification to ``allow assessment of 
conformity of the discounted rates with the criteria in the Postal 
Accountability and Enhancement Act[.]'' Commission Information Request 
No. 1, February 26, 2008 at 1 (CIR No. 1). In response, the Postal 
Service identified the exemption it was claiming for each discount and 
elaborated upon its reasons for concluding that each discount satisfied 
the requirements of the exemption. Response of the United States Postal 
Service to Commission Information Request No. 1, March 4, 2008 
(Response to CIR No. 1). The experience in that case should help 
provide guidance as to the extent of explanation and support that is 
anticipated to be provided to satisfy rules 3010.14(b)(6) and 
3050.21(e)(4).
2. Negotiated Service Agreements
    Under the PRA, the Commission did not have standing rules requiring 
the periodic reporting of information specific to negotiated service 
agreements (NSAs). The PAEA requires an annual Commission determination 
as to whether NSAs ``improve the net financial position of the Postal 
Service.'' See 39 U.S.C. 3622(c)(10). 39 U.S.C. 3633(a)(2) requires 
that each competitive product cover its attributable costs. Since the 
Commission views NSAs as distinct products, a

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contribution analysis is required of competitive NSAs as well. 
Accordingly, the Postal Service's Annual Report should provide an 
estimate of the impact that each NSA had on total contribution for the 
fiscal year covered by its annual report. Under the proposed rules, 
therefore, the Annual Report should include sufficient information 
about the costs, volumes, and revenues associated with such agreements 
to enable the Commission to verify the Postal Service's estimate.
    Proposed rule 3050.21(f)(4) directs the Postal Service to provide 
an analysis of each market dominant NSA that shows the effect of the 
agreement on the net financial position of the Postal Service. As with 
other quantitative estimates, rule 3050.21(f)(4) requires that the 
estimates be developed using accepted analytical principles.
    For most areas of analysis, the current methodological baseline is 
the set of analytical principles applied by the Commission in Docket 
No. R2006-1 and affirmed in the Commission's FY 2007 Annual Compliance 
Determination (2007 ACD). The financial effects of NSAs, however, were 
not litigated in Docket No. R2006-1. The Commission did not formulate 
generally applicable principles for determining their net financial 
effect until its 2007 ACD, which established the analytical principle 
that the financial impact of price incentives to increase mail volume 
or to shift mail volume between products should be based on the Postal 
Service's best estimate of the price elasticity of the discounted 
product. 2007 ACD at 127.
    The application of this principle will vary based on the specific 
terms and characteristics of each NSA, but its essence is the use of 
price elasticities to isolate the effect of rate incentives from other 
factors that affect volume. This analytical principle was first 
articulated by the Commission in its Opinion and Further Recommended 
Decision in Docket No. MC2004-3 at paras. 5011-38. Its purpose is to 
apply the terms of an agreement to the specific characteristics of the 
NSA partner's eligible mail (e.g., unit revenues, unit costs, and price 
elasticities). The Commission recognizes that econometrically modeling 
the price elasticity of volumes sent by an individual mailer might not 
always be feasible. Accordingly, with the appropriate justification and 
explanation, reasonable proxies may be used for this and other mailer-
specific traits that are not otherwise obtainable.\1\
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    \1\ For example, the lack of available mailer-specific 
elasticities led the Commission to use subclass-average elasticities 
for Standard Mail to generate its estimates in the 2007 ACD. See 
2007 ACD at 127-30.
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    The characteristics of the NSAs filed with the Commission to date 
make them impractical to analyze for their impact on contribution for 
the fiscal year. This is because each NSA so far has included discount 
incentives that are awarded based on their performance during each 12-
month period that the agreement is in effect. Therefore, unless an 
NSA's implementation date coincides with the beginning of the fiscal 
year, it is impractical to evaluate the effect of the discounts for 
that fiscal year.
    The Commission's proposed rules recognize this difficulty. 
Accordingly, they would require the Postal Service to select the 
anniversary of an NSA's operation that falls within the fiscal year 
covered by the Postal Service's annual compliance report, look back 12 
months from that point, and estimate the NSA's contribution to the 
Postal Service's total institutional costs. See proposed rule 
3050.21(f)(4).
3. The General Role of Elasticity of Demand
    Under the PRA, rule 102 did not require the Postal Service to 
provide information about the price elasticity of demand for postal 
products. The PAEA, however, requires that ``information'' on mail 
volumes be provided for market dominant products. See 39 U.S.C. 
3652(2)(A). Further, many of the objectives and factors that the PAEA 
directs the Commission to consider in establishing a regulatory system 
for market dominant products involve value of service considerations, 
either explicitly (see 39 U.S.C. 3622(c)(1) and 39 U.S.C. 3622(c)(8)), 
or implicitly (see 39 U.S.C. 3622(c)(3) and 39 U.S.C. 3622(c)(4)). The 
most objective evidence of a product's value of service is its price 
elasticity of demand. Accordingly, demand elasticities provide useful 
guides for evaluating how well these factors have been recognized in 
rates. Knowledge of price elasticities of demand is also essential for 
evaluating the impact of rates on allocative efficiency. Allocative 
efficiency is a goal embodied in 39 U.S.C. 3622(b)(1) and 39 U.S.C. 
3622(b)(5).
    The PAEA requires the Commission to ensure that the institutional 
costs of the Postal Service are allocated appropriately between market 
dominant and competitive products. See 39 U.S.C. 3622(b)(9) and 39 
U.S.C. 3633(a)(3). Doing so in a way that takes allocative efficiency 
into account requires the Commission to have knowledge of the relative 
price elasticities of both market dominant and competitive products.\2\ 
Elasticities of demand are also needed to evaluate volume forecasts for 
new products or new rate structures in connection with section 
3622(d)(1)(C) proceedings, including a determination of whether NSAs 
``improve the net financial position of the Postal Service.'' See 39 
U.S.C. 3622(c)(10).
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    \2\ The Postal Service and Parcel Shippers Association (PSA) 
have urged the Commission to consider the market positions of the 
Postal Service's various competitive products when it determines 
what a reasonable institutional cost contribution for those products 
would be under section 3633(a). See Docket No. RM2007-1, Reply 
Comments of the United States Postal Service, May 7, 2007, at 27-28. 
PSA agrees that important evidence of the market position of 
competitive products is provided by their price elasticities of 
demand, citing the Postal Service's estimates of the own-price 
elasticity and the cross-price elasticity of Priority Mail and 
Parcel Post. Docket No. RM2007-1, Comments of Parcel Shippers 
Association in Response to Commission Order Proposing Regulations, 
September 24, 2007, at 3-4.
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    Accordingly, proposed rule 3050.26 would require the Postal Service 
to provide estimates of the elasticity of demand for all postal 
products for which adequate data can be obtained. The underlying 
econometric model of demand elasticity and input dataset are to be 
provided as well. The Postal Service would be required to update the 
model annually.
4. Appropriate Share of Attributable and Institutional Costs
    The PAEA requires that the Commission determine whether a 
competitive product covers its attributable costs. This requirement 
extends to NSAs that involve competitive products, both domestic and 
international. See 39 U.S.C. 3633(a)(2). In addition, 39 U.S.C. 
3622(b)(9) and 39 U.S.C. 3633(a)(3) require that the Commission 
determine whether competitive products collectively bear a minimum 
share of institutional costs that the Commission determines to be 
appropriate. To make an informed determination for competitive products 
as a group, it would be necessary to analyze factors that affect the 
institutional cost contributions of individual products.\3\ This 
requires knowledge of the attributable costs, volumes, and revenues 
associated with competitive

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products, including the portion associated with NSAs.
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    \3\ PSA contended in a previous docket that if the Commission is 
to determine an appropriate contribution for competitive products as 
a whole, it must understand the role played by individual 
competitive products. It points out that over 80 percent of the 
total contribution of competitive products comes from just two 
products--Priority Mail and Express Mail. Docket No. RM2007-1, 
Comments of the Parcel Shippers Association in Response to the 
Commission's Order Proposing Regulations, September 24, 2007, at 3-
4.
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5. Service Performance
    Section 3691 of the PAEA requires the Postal Service, in 
consultation with the Commission, to establish and maintain a set of 
service standards for market dominant products. The section provides 
explicit statutory objectives for the service standards adopted, and 
requires a service performance measurement system in which the 
Commission plays a role. It also authorizes complaints under 39 U.S.C. 
3662 and 39 U.S.C. 3663 for violations of the regulations that 
implement these service standards and performance measurement systems.
    The Commission is deferring consideration of data reporting on 
service quality. Proposed rules 3050.50 through 3050.53 are ultimately 
intended to describe the service performance information that would be 
required to implement the relevant provisions of the PAEA. When 
evaluation of the service performance measurement system currently 
under review in Docket No. PI2008-1 is complete, the Commission intends 
to solicit public comment on what data concerning levels of achievement 
of relevant service standards should be incorporated in rules 3050.50 
through 3050.53.
6. Incremental Costs
    39 U.S.C. 3633(a)(1) prohibits the subsidy of competitive products 
by market dominant products. In Docket No. RM2007-1, the Commission 
addressed this issue and determined that incremental costs would be 
used to test for cross-subsidies of competitive products by market 
dominant products. See 39 CFR 3015.7(a). Accordingly, proposed rule 
3050.23 would require the Postal Service to provide estimates of 
incremental costs. The underlying incremental cost model, the input 
dataset, and processing programs would be required as well. At a 
minimum, the Postal Service must provide a model of the incremental 
costs of competitive products as a group. The Postal Service should 
have as a goal the development of a model of incremental costs for 
individual market dominant products to help identify cross-subsidy of 
one market dominant product by another.
7. Universal Service Obligation
    Under 39 U.S.C. 3651, the Commission must annually report to the 
President and Congress assessing the performance of the regulatory 
system that it has implemented under the PAEA. The Commission is 
required to include in that report an estimate of the costs incurred by 
the Postal Service in meeting its legally mandated public service 
obligations. The Commission is specifically required to estimate the 
cost of the geographic dimension of universal service and the cost of 
preferred rates. See 39 U.S.C. 3651(b)(1)(A) and (B). Under 39 U.S.C. 
3651(c), the Postal Service is obligated to provide such information as 
the Commission, in its judgment, considers necessary to prepare its 
report.
    The Commission is currently developing analyses to inform its 
estimate of the costs incurred by the Postal Service in meeting its 
legally mandated public service obligation. 39 U.S.C. 3651(b)(1)(A) 
identifies a potential geographic component to that obligations. It 
directs the Commission to estimate the costs that the Postal Service 
incurs serving the ``rural areas, communities, and small towns where 
post offices are not self-sustaining'' referenced in 39 U.S.C. 101(b). 
Accordingly, the Commission needs to be able to analyze whether the 
geographic distribution of the Postal Service's delivery offices, 
delivery routes, and retail counter facilities incurs costs that would 
not be incurred by a private provider without public service 
obligations.
    To provide the Commission with data from which the geographic 
variance in delivery costs and customer access costs could be 
estimated, the proposed rules would require that the Postal Service's 
Annual Report provide data sufficient to calculate the costs incurred 
and the revenue derived from each route sampled by the City Carrier 
Cost System (CCCS) and the Rural Carrier Cost System (RCCS). The 
identity of the carrier route, type, its associated processing 
facility, and ZIP Code should be provided. At present, such information 
would include, for each sampled route, the carrier costs and the volume 
of mail delivered, by product (or ``bucket'' of products). The ultimate 
objective would be to identify the actual direct and indirect costs 
associated with each route in the sample.\4\ Rule 3050.30 also proposes 
that the Postal Service provide revenues generated and the costs 
incurred by each retail counter facility in a representative sample of 
such facilities. The applicable ZIP Code should be included. These 
information requirements will be re-evaluated in light of the results 
of the currently ongoing universal service obligation studies required 
by section 702 of the PAEA.
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    \4\ Developing these data might be most efficiently achieved by 
linking the relevant databases, or by modifying the CCCS data 
collection protocol.
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IV. Confidential Treatment of Periodic Reports

    39 CFR Part 3007, proposed in Docket No. RM2008-1, would implement 
the provisions of the PAEA that generally authorize the Postal Service 
to designate information in the periodic reports that it provides to 
the Commission as confidential within the meaning of 5 U.S.C. 552(b) or 
as commercially sensitive within the meaning of 39 U.S.C. 410(c). See 
39 U.S.C. 3654(f). Proposed part 3007 [in Docket No. RM2008-1] would 
resolve the issue of what information so designated, if any, would be 
made public.
    Consistent with section 504(g) of the PAEA, under that rule, the 
issue of public disclosure would be addressed by a process analogous to 
the process prescribed in rule 26(c) of the Federal Rules of Civil 
Procedure. Rather than treat any category of information as 
commercially sensitive per se, the Commission would balance the 
potential harm to the Postal Service's commercial interests against the 
need of stakeholders and the public to know how the Postal Service is 
discharging its duties as a monopoly imbued with a public trust. It is 
also anticipated that flexible remedies provided for by rule 26(c), 
such as the imposition of protective conditions or selective redaction 
of documents, would be available under the Commission's confidentiality 
rules.

V. Content of the Postal Service's Periodic Data Reports Under the PAEA

A. The Cost and Revenue Report and the Cost Segments and Components 
Report

    The Commission's proposed rules would require the Postal Service to 
provide summaries of cost, volume, and revenue data in its annual 
report, primarily to comply with 39 U.S.C. 3652. These would consist of 
the CRA and the CSC reports, presenting costs, volumes, and revenues by 
market dominant product and by competitive product. They would include 
a separate line item for each market dominant international product and 
each competitive international product in the Mail Classification 
Schedule.

B. Format of Documentation Supporting the CRA and CSC Reports

    Supporting documentation for the CRA and the CSC reports should 
present costs, volumes, and revenues as defined in the current Mail 
Classification Schedule, and by each product's

[[Page 53328]]

constituent rate categories. At least for the first several years under 
the PAEA, the Commission proposes that the Postal Service's annual 
report present this information in an alternative format as well. This 
format would present costs, volumes, and revenues by product and rate 
category, reflecting the classification structure that was in effect 
immediately prior to the implementation of the PAEA. See proposed rule 
3050.14. This is illustrated by the appendix appendix to this Notice 
[and Order] labeled ``Products and Categories.'' This disaggregated 
format would provide the Commission and the interested public with 
``building blocks'' that are suitable for multiple purposes. The 
alternative format would allow the CRA data to be configured to 
coincide with the current Mail Classification Schedule, and, with 
modest effort, almost any foreseeable future modification of that 
schedule. At the same time, it would allow the CRA data to be 
configured to coincide with the historical classification structure. 
This should help ensure analytical consistency over time and across 
categories. It would facilitate historical continuity in financial 
reporting, and give the Commission and the interested public the 
ability to track trends in the financial data and make it easier to 
identify and analyze anomalies, should they appear. Presenting 
disaggregated data in this historical format will provide a 
particularly helpful reference point if the product lists under the 
PAEA undergo frequent refinement in the first few years of the new 
regulatory regime. The Commission recognizes that there may be 
obstacles, such as inadequate volume, that make it impractical to 
separately estimate attributable costs for some rate categories. For 
such rate categories, the Postal Service should include volume and 
revenue figures, where available, and provide a footnote in the 
attributable cost column explaining the reasons that separate 
attributable costs could not be estimated, or a suitable proxy could 
not be found.

C. Information Required for International Mail

1. Level of Disaggregation
    Since disaggregated cost, volume, and revenue data on international 
mail would be integrated into the CRA and CSC reports for the first 
time under the proposed reporting rule, a discussion of the information 
required for international products will be helpful.
    The proposed rules would require the Postal Service to provide 
volumes, revenues, costs, weight, and data on outbound and inbound 
international mail. See proposed rules 3050.22(d)(8) through (11). 
Cost, volume, and revenue data would be broken out by product, as 
defined in the current Mail Classification Schedule, and by each 
product's constituent rate categories. Supporting documentation should 
also present costs, volumes, and revenues in the alternative, more 
disaggregated format illustrated in the appendix to this Notice labeled 
``Products and Categories.'' \5\ For outbound and inbound international 
First-Class Mail, data would be reported separately by terminal dues 
regime (``target countries,'' ``transition countries,'' and bi-lateral 
agreements). The underlying country-specific data are to be provided in 
back-up documentation. This will allow the Commission to determine 
whether revenues cover costs at this level of disaggregation.
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    \5\ Most of these data are to be developed quarterly, but 
provided annually. This will enable the Commission to analyze data 
by fiscal year for the purpose of the annual compliance report, and 
by calendar year, which aligns with Universal Postal Union (UPU) 
rate cycles.
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    The required reporting on international products will be more 
complex under the PAEA than it was under the PRA, due primarily to the 
need to identify all international services as either market dominant 
or competitive. Some international services will have both market 
dominant and competitive components, depending upon whether they are 
outbound or inbound, surface or air, single-piece or bulk, and whether 
the rates charged are UPU rates or non-UPU rates. Inbound Parcel Post 
data, for example, should be shown separately for the category subject 
to UPU rates, and for those categories whose rates were negotiated 
bilaterally.
2. Ancillary International Services
    The current draft Mail Classification Schedule treats Ancillary 
Services for international mail categories as a single product. The 
Commission notes that defining these services in aggregate as a 
``product'' is a decision that might warrant further examination. Its 
component services are so heterogeneous as to raise questions about the 
validity of treating them as a coherent product with common cost or 
demand characteristics. The regulatory scheme that the Commission has 
implemented under the PAEA will work best if each defined product has 
cost or demand characteristics that can be meaningfully quantified. In 
pursuit of this goal, International Ancillary Services might need to be 
organized into smaller, more homogenous groupings. In the alternative 
format required by proposed rule 3050.14, these Ancillary Services 
would be disaggregated. One of the benefits of the alternative format 
is that it would facilitate analysis of alternative treatments of 
Ancillary Services.
3. Treatment of Fees Associated With International Mail
    The treatment of fees associated with international mail categories 
in the current draft Mail Classification Schedule might warrant further 
examination as well. The current draft Mail Classification Schedule 
treats them as free-standing products. Where no identifiable 
attributable cost is associated with a fee-based service feature, its 
costs are likely to be reflected in the host product's attributable 
costs. To balance revenues with costs, it may be more appropriate to 
group such fees with their host product than to treat them as free-
standing products. The disaggregated format illustrated in the appendix 
to this Notice would facilitate analysis of alternative treatments of 
fees associated with international products.
    The current draft Mail Classification Schedule separates 
international Special Services into market dominant and competitive 
categories, but it associates all domestic Special Services with the 
market dominant group, even though some domestic Special Services are 
purchased and used in conjunction with competitive products.\6\ It may 
be more appropriate to separate domestic Special Services into 
competitive and market dominant categories. Although there may be more 
rational ways to group data for Ancillary Services and for Special 
Services, doing so is likely to require changes to the Mail 
Classification Schedule.\7\
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    \6\ In Docket No. R2008-1, the first rate adjustment under price 
cap regulation, the Postal Service treated all special services and 
fees (domestic and international, market dominant and competitive) 
as one market dominant class of mail called ``Special Services.''
    \7\ If these classification refinements were made, they would 
have to be accomplished through amendments to the Mail 
Classification Schedule.
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D. Preferred Rate Mail

    The Commission proposes that the CRA and the CSC reports filed 
annually by the Postal Service show separate volumes and revenues for 
each category of preferred-rate mail (e.g., Standard Regular Nonprofit, 
Standard ECR Nonprofit, Outside County Nonprofit, Outside County 
Classroom, Library), even if that category is not defined as a separate 
``product.'' See 39 U.S.C. 3626. This would allow the Commission to

[[Page 53329]]

comply with the requirement in section 3651(b)(1)(B) of the PAEA that 
it estimate the ``cost'' (which the Commission interprets to mean the 
revenue foregone by) of offering preferred rates as a component of the 
cost of the universal service obligation.

E. Brief Narrative Explanation

    The Commission proposes that the Postal Service provide, by July 1 
of each year, a succinct description of the analytical principles that 
have been used to arrive at the estimates in the most recent ACD and 
the reasons that those principles have been accepted. The summary level 
of description and explanation would be equivalent to that which the 
Postal Service traditionally provided with respect to attributable 
costs in Library Reference 1 in the final omnibus rate case processed 
under the PRA, Docket No. R2006-1. These short descriptions of 
principles and reasons should be provided for all areas of analysis, 
including cost attribution, cost avoidance, demand analysis, and 
service performance measurement. This requirement is found in proposed 
rule 3050.60(f). Proposed rule 3050.13 would require the Postal 
Service, at the time that it files its Annual Report, to identify and 
describe any changes in the analytical principles that have been 
accepted since the most recent ACD, and the rationale supporting each 
change.

F. Supporting Documentation Required When Analytical Principles or 
Quantification Techniques Have Changed

    Beyond the basic data summaries and the brief explanation of 
methods required by proposed rules 3050.22 through 3050.26, no 
supporting documentation in the Postal Service's Annual Report would be 
required unless the input data, quantification techniques, or 
analytical principles applied have changed since the most recent ACD 
was issued.\8\ If input data, quantification techniques, or analytical 
principles have changed, the new data and a description of the changes 
to quantification techniques must accompany the report. See proposed 
rules 3050.2 and 3050.13. As will be described in more detail below, 
changed analytical principles will have to have been approved in 
advance by the Commission in a rulemaking proceeding designed for that 
purpose and documented as part of that rulemaking.
---------------------------------------------------------------------------

    \8\ These terms are defined in proposed rule 3050.1.
---------------------------------------------------------------------------

    Proposed rules 3050.22 through 3050.26 list the information items 
that would be required to be included in the annual report if all of 
the items listed were to have changed since the relevant baseline. As 
noted above, under normal circumstances, the relevant methodological 
baseline would be the methods accepted by the Commission in its most 
recent ACD.
    Because the proposed periodic reporting rules are designed to 
require the Postal Service to provide supporting detail only where 
quantification techniques or analytical principles have changed with 
respect to the baseline, they would eliminate the redundant 
documentation that was often presented in an omnibus rate case under 
the procedures of the PRA.\9\
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    \9\ Under the formal hearing procedures of the PRA, an omnibus 
rate case would typically be treated as a trial de novo, in which 
the Postal Service would present witnesses supporting all essential 
aspects of its case--even those that had not changed since they were 
last litigated--and intervenors would challenge elements of the 
Postal Service case, even where the Commission had approved them in 
previous litigation. The result was that a good deal of 
documentation provided in omnibus rate hearings was redundant of 
prior omnibus rate hearings.
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G. More Frequent Periodic Reports

    As with current rule 102, the proposed periodic reporting rule 
requires the Postal Service to provide certain reports on a more 
frequent than annual basis. Most of the more frequently reported items 
support the Postal Service's Annual Report. They would assist the 
Commission in performing its duty under 39 U.S.C. 3653 to annually 
produce a determination on the extent to which the rates and fees 
charged and the service provided by the Postal Service in the reporting 
year complied with the provisions of chapter 36 of title 39 [of the 
U.S. Code]. Due to the short time 39 U.S.C. 3653 allows the Commission 
to produce its compliance determination, it is necessary for the 
Commission to stay as current as possible on the financial and 
operating performance of the Postal Service as the reporting year 
unfolds. More frequent reporting of some items will also enhance 
transparency and accountability by helping mailers determine whether 
there are likely to be grounds for filing a complaint under 39 U.S.C. 
3662. Accordingly, under the proposed rules, items such as the Postal 
Service's Revenue and Expense Summaries Report and the National 
Consolidated Trial Balances will be required after the close of each 
fiscal month.
    Revenue Pieces and Weight (RPW) reports, Quarterly Statistics 
Reports, and billing determinants would be required after the close of 
each fiscal quarter. See proposed rule 3050.25. These quarterly reports 
are needed to help the Commission prepare its annual report under 39 
U.S.C. 3651 which evaluates how the system embodied in its regulations 
is working. In particular, quarterly volume and revenue data would help 
the Commission evaluate how well its price cap regulations are working 
by allowing it to construct hybrid evaluation years that better align 
price and classification changes with their volume and revenue effects. 
Quarterly data on volumes and revenues also will be needed if the 
Postal Service files a request for rate or classification changes 
outside the normal annual cycle.

H. Postal Service Compliance Analysis

    39 U.S.C. 3652(a)(1) states that the Postal Service shall provide 
the Commission with a report

which shall analyze costs, revenues, rates, and quality of service, 
* * * in sufficient detail to demonstrate that all products during 
such year complied with all applicable requirements of this title[.]

    This language requires the Postal Service's report to analyze the 
data it provides in sufficient detail to demonstrate that all of its 
products (market dominant and competitive) complied with all of the 
requirements of title 39 [of the U.S. Code]. The Postal Service, 
therefore, is to provide a compliance analysis with its Annual Report 
that is both broad in scope--covering all requirements of title 39--and 
specific to each product. Proposed rule 3050.20 implements the analysis 
requirement of 39 U.S.C. 3652(a)(1).

VI. Level of Detail Required in the Postal Service's Annual Report

    In most instances where the PAEA requires the Commission to produce 
reports or evaluations, the PAEA directs the Postal Service to provide 
the Commission with the information that the Commission considers 
necessary to prepare the reports required. See 39 U.S.C. 3651(c), 
3652(d), 3651(e)(2), and 3654(e). In order to determine whether the 
rates and service that the Postal Service implements complied with the 
standards of the PAEA, the Commission believes that the information 
that the Postal Service includes in its Annual Report must be supported 
by workpapers at a level of detail that is comparable to the 
documentation that existing rule 54 would have required to support the 
initial filing in an omnibus rate case under the PRA. The proposed 
rules would require, for example, that the Postal Service provide the 
``B'' workpapers, which show the

[[Page 53330]]

distribution of directly attributable costs by cost segment and 
component.\10\
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    \10\ It is important to distinguish the range of information 
items that would be required in the annual report from the level of 
detail that would be required in those various items. The range of 
items that the Postal Service would have to document in its annual 
report under the proposed rules is likely to be considerably more 
narrow than if it were filing an omnibus rate request under the PRA, 
since it would be limited to data and analyses that have changed 
relative to the baseline.
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    The proposed rule would require that estimates that were developed 
using electronic spreadsheets be supported with those spreadsheets, and 
that those spreadsheets display the formulas used and their links to 
related spreadsheets. As in current rule 54, the proposed rule would 
require that documentation be provided in a form that can be read by 
publicly available PC software. It would also require that if a 
processing program were developed specifically to produce an 
accompanying workpaper, it would have to be provided in a form that 
could be executed by publicly available PC software. See proposed rule 
3050.2.
    Unlike an omnibus rate case, the Postal Service would not have to 
document analytical principles used in its annual compliance report to 
the Commission with testimony. If the Postal Service seeks to change 
the analytical principles that it used in its most recent annual report 
provided under the PAEA, the proposed rules would require it to justify 
the change in an informal rulemaking prior to filing its annual report.

VII. Analytical Principles To Be Applied in the Postal Service's Annual 
Report

    39 U.S.C. 3652(e) requires the Commission to ``prescribe the 
content and form of the public reports * * * to be provided by the 
Postal Service under this section.'' The proposed rules would 
distinguish between data entry and manipulation techniques whose 
validity depends on specific ``analytical principles'' and those that 
do not. An analytical principle is a conceptual or theoretical approach 
approved by the Commission for collecting data, attributing costs to 
subclasses, or estimating a product's avoided cost, elasticity of 
demand, or average revenue.\11\ Under the proposed rule, the Postal 
Service's Annual Reports would employ ``accepted analytical 
principles''--principles that the Commission applied in its most recent 
ACD, to estimate volumes, revenues, attributable costs, and avoided 
costs.\12\ The most recently completed ACD would serve as the 
methodological baseline for the subsequent Annual Report unless the 
Postal Service had obtained prior approval from the Commission to 
change the analytical principles that it employs.
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    \11\ The technical definition of ``analytical principle'' is 
found in proposed rule 3050.1(b): ``a particular economic, 
mathematical, or statistical theory, precept, or assumption applied 
by the Postal Service in producing a periodic report to the 
Commission.'' Any data entry or manipulation technique whose 
validity does not depend on the acceptance of a particular economic, 
mathematical, or statistical theory, precept, or assumption is a 
mere ``quantification technique.'' See proposed rule 3050.1.
    \12\ The technical definition of ``accepted analytical 
principle'' is an ``analytical principle applied by the Commission 
in its most recent Annual Compliance Determination, unless different 
analytical principles have been accepted by the Commission in a 
final rule that becomes effective prior to the filing of the Postal 
Service's Annual Report.'' See proposed rule 3050.1.
---------------------------------------------------------------------------

    A proposal to change an accepted analytical principle would require 
an informal rulemaking to evaluate the proposal, and an acceptance of 
the proposal by the Commission. See proposed rule 3050.11. Under normal 
circumstances, this process would have to be completed and a final rule 
published in the Federal Register at least 30 days in advance of the 
filing of the Annual Report. See 5 U.S.C. 553(d). If the Postal 
Service's Annual Report corrects calculations in the most recent ACD, 
or changes the quantification techniques used to make those 
calculations, the Postal Service must accompany its compliance report 
with a list of such changes and a brief explanation of each. See 
proposed rule 3050.2.

A. The Distinction Between ``Analytical Principles'' and Other Elements 
of Analyses Supporting the Annual Compliance Report

    Under the proposed rules, changes in accepted analytical principles 
must be reviewed and accepted by the Commission in advance. In 
contrast, correcting an error or changing a quantification technique 
used in the baseline methodology would only require notice and a brief 
explanation at the time that an annual compliance report is filed with 
the Commission. See proposed rule 3050.2. Updating data used in a 
baseline methodology would require no justification, if done in a 
neutral and balanced way.
    The following guidelines illustrate the distinction between a 
change in an accepted analytical principle and less significant changes 
requiring simpler procedures, such as an update of input data, a 
correction, or a change in quantification technique.
1. Updates
    Plugging more recently collected data into an otherwise unchanged 
model or analysis is neither a change in quantification technique nor a 
change in the analytical principles applied.
2. Corrections
    Correcting a spreadsheet that misidentifies a row or column, or 
applies a formula to the wrong cell, would not be a change in 
quantification technique nor a change in the analytical principle 
applied.
3. Quantification Techniques
    Examples of changes to quantification techniques include 
consolidating multiple spreadsheets into one, using spreadsheet figures 
that are linked rather than hardcoded, changing mainframe SAS to PC 
SAS, and changing from database management software from Access to 
Oracle. Such changes should not change the concept, theory, 
assumptions, or results of an analysis.
4. Data Collection
    Changing the sample frame, sample size, sampling technique, or 
definition of a data element used as input data in an analysis would 
constitute a change to an analytical principle. For example, the 
changes made by the Postal Service in its Management Operating Data 
System (MODS) by discontinuing weighing of mail to obtain an estimate 
of First Handled Pieces, and changes made after FY 2007 in the City 
Carrier Cost System discontinuing the collection of stop- and route-
type information would constitute changes in baseline analytical 
principles. Each of these changes have potentially major impacts on any 
analysis of mail processing or carrier street time cost causation.
    Changing the definition of a data element to reflect changes in 
operations, however, would not constitute a change to an analytical 
principle. For example, if the Postal Service were to forbid mailers to 
enter mail in sacks for operational reasons, it could discontinue 
collecting data on the use of sacks as a container type for purposes of 
determining the subclass distribution of variable mail processing costs 
for mixed mail without review of the change in an informal rulemaking.
5. Analysis
    Changing a data editing technique, economic assumption, functional 
form, model specification, or regression evaluation technique would 
constitute a change in an analytical principle. Similarly, changing a 
formula used in a spreadsheet analysis would constitute a

[[Page 53331]]

change in an analytical principle. Using a more recent measure of an 
input used in a volume variability model (such as an updated 
deliveries-per-stop or deliveries-per-square mile in a street time 
variability model) would not.
    Similarly, if the Postal Service wanted to update its purchased 
transportation cost variability study by updating its calculation of 
average cubic foot miles or average length of haul for various 
transportation segments without changing the form or specification of 
the underlying econometric model, it would not constitute a change in 
an established analytical principle, and would not require review in a 
rulemaking.
    Updating an estimated price elasticity for a given mail product by 
using (in a consistent manner) more recent DRI forecasts for various 
macroeconomic control variables already present in an accepted 
econometric model of demand would not constitute a change in an 
accepted analytical principle, and would not require review in a 
rulemaking.
6. Cost Avoidance
    Changing the classification of cost pools, or the rate categories 
used as benchmarks or proxies, would constitute a change in accepted 
analytical principles.
7. Special Studies
    A special study that follows a reviewed and approved design would 
not constitute a change in analytical principles if it were used to 
update such things as:
     MODS machine productivities;
     Accept rates;
     Productive hourly wage rates;
     Premium pay factors;
     Operation-specific piggyback factors;
     Entry profiles; and
     Shape breakouts of unit attributable costs.
    However, special studies must be reviewed and accepted in an 
informal rulemaking if they use data collection or analytical methods 
that were not accepted by the Commission in its most recent Annual 
Compliance Determination.

B. Procedures for Changing Analytical Principles Used To Collect and 
Analyze Data in the Postal Service's Annual Report

    The PAEA lodges with the Commission ultimate responsibility for 
selecting appropriate input data and analytical methods to be used in 
the Postal Service's Annual Report. See 39 U.S.C. 3652(e). Accordingly, 
the Commission's proposed reporting rules would be more prescriptive 
than the current rules with respect to the data and methods that 
underlie the Postal Service's Annual Report. 39 U.S.C. 3652(e)(2) 
provides that the Commission may ``on its own motion or on request of 
an interested party, initiate proceedings * * * to improve the quality, 
accuracy, or completeness of Postal Service data required by the 
Commission under this subsection * * * .'' Selecting the analytical 
principles to be used in accounting for costs, revenues, or volumes 
falls within the definition of a ``rule'' for purposes of the APA. See 
5 U.S.C. 551(4). Therefore, the procedures that the Commission proposes 
for changing Commission-approved methods for collecting and analyzing 
data of this kind are those of an informal rulemaking under section 553 
of the APA.
    The Commission believes that one of the important benefits of the 
PAEA is the freedom that it gives the postal community to decide 
analytical issues in a non-adversarial context. Under the PRA, 
analytical issues were decided employing a litigation model. Under that 
model, the Commission was required to resolve an analytical issue by 
accepting or rejecting competing analyses submitted by opposing 
witnesses. In some instances, the Commission would cobble together a 
solution from analytical elements proffered by rival witnesses. In 
almost all cases, analyses were presented as faits accomplis, with no 
opportunity for input or feedback from either the Commission or 
interested third parties. The process was cumbersome and the results 
were often less than satisfactory.
    Under the PAEA, the Commission expects that the Postal Service will 
continue to take the lead in deciding how data about its finances, 
operations, and performance will be collected and analyzed. But because 
analytical issues can be addressed in the context of informal 
rulemakings under the PAEA, an opportunity for input and feedback from 
other stakeholders and the Commission can be provided. The Commission 
proposes to take advantage of that opportunity by approaching 
analytical issues through a process that promotes cooperation and 
facilitates consensus.
    39 U.S.C. 3652(e)(2) authorizes the Commission to initiate 
proceedings designed to improve the data in the Postal Service's annual 
reports ``on its own motion or at the request of an interested party.'' 
In keeping with the intent of 39 U.S.C. 3652(e)(2), a proposal to 
change accepted analytical principles may be submitted by the 
Commission, the Postal Service, or other interested parties.
    The Commission will exercise its discretion in deciding whether a 
proposal to change accepted analytical principles justifies the 
initiation of a rulemaking, based on a consideration of the potential 
benefits to the quality of the information available to the postal 
community and the time and resources likely to be expended in the 
inquiry. If the proposal presents a persuasive argument that a change 
in accepted analytical principles is needed, the Commission will 
initiate a docket by publishing a notice of proceeding in the Federal 
Register and on the Commission's Web site.
    The procedures proposed are highly flexible, and would vary 
according to the complexity of the proposed change and the level of 
documentation supporting it. The Commission expects that, for the most 
part, proposals to change established analytical principles will be 
data intensive and technically oriented. It believes that review of 
such proposals can be done more quickly and efficiently if they 
emphasize informal ``discovery'' procedures at the initial stages, 
where clarification of technical issues is often needed, and reserve 
more formal written commentary for later stages.

C. Nature of Rulemakings That Review Analytical Principles Used To 
Prepare Periodic Reports

    The metrics by which the Postal Service's compliance with the PAEA 
is determined depend, importantly, on the analytical principles that 
the Postal Service uses to prepare its periodic reports to the 
Commission. As noted, the analytical principles used in the 
Commission's most recent ACD would serve as the methodological 
baseline.\13\ These would be changed through the informal rulemaking 
procedures prescribed by section 553 of the APA. Such rulemakings are 
likely to take different forms, as circumstances require. Examples of 
the forms they could take are discussed below. All of these forms could 
be accommodated by the generic procedures provided for in proposed rule 
3050.11.
---------------------------------------------------------------------------

    \13\ Currently, in most respects, these coincide with the set of 
analytical principles used in the most recent omnibus rate case 
brought under the PRA (Docket No. R2006-1).
---------------------------------------------------------------------------

1. Strategic Rulemakings
    A strategic rulemaking would be designed to make the ongoing 
development of analysis in cost causation or other areas of analysis as 
orderly and efficient as possible. It would take an inventory of 
longer-term

[[Page 53332]]

data collection and analysis needs. It is likely to involve plans to 
meet those needs over a horizon longer than a year. It might focus on 
existing data collection systems that need to be improved or new data 
collection programs that need to be established. It might list existing 
analytical studies that need to be updated, or new analytical studies 
that need to be undertaken. The scope of a strategic rulemaking would 
be broad, since one of its purposes would be to compare the likely cost 
and benefits of improved data or analysis in different areas of 
research, and the lead time required to conduct the research. The 
purpose would be to prioritize research projects and draw up a 
tentative schedule for conducting them.
    A strategic rulemaking is likely to be general in focus and 
exploratory in nature in its early stages. Accordingly, the procedures 
followed would be quite flexible. They might begin with the equivalent 
of a prehearing conference in which interested parties identify areas 
in which research is most needed and most likely to bear fruit. Once a 
strategic rulemaking has identified and prioritized areas of needed 
research, it would then narrow its focus to specific data to be 
gathered or studies to be performed. The Notice of Proposed Rulemaking 
would be expected to culminate in Commission approval of a list of 
research projects to be undertaken and a preliminary projected time 
table for their completion.
2. Discrete Issue Rulemakings
    Discrete issue rulemakings would address the data requirements, 
analytical methods, and timetable to be followed in researching a 
single analytical issue or closely-related set of issues. At this 
stage, specific research projects are likely to be proposed in the form 
of specific tasks, and the merits of the projects discussed. Initially, 
this discussion is likely to take place in the context of informal 
technical conferences. When the goals and methods to be employed by 
proposed research projects have been well-defined, their merits may be 
discussed in written comments in response to a notice of proposed 
rulemaking. An example would be a rulemaking addressing needed 
corrections and improvements to the Commission's Docket No. R2006-1 
Periodicals cost model, which were examined in a preliminary way in 
Docket No. ACR 2007. In the system being proposed, the need for a study 
of these issues, its feasibility, and its priority, would ordinarily 
have been identified in an earlier strategic rulemaking.
    The timetable for the study would be determined by its scope and 
complexity. The process might begin with a written proposal by the 
proponent of the study to focus evaluation of the study by others. The 
Commission might then give its preliminary approval of the study plan, 
and keep the rulemaking docket open to receive progress reports, and 
evaluate interim results. A final rule would issue when the Commission 
accepts one or more new analytical principles.
3. Expedited Rulemakings
    Expedited rulemakings would be designed to identify and make needed 
improvements in the data and methods that the Postal Service uses to 
produce its most recent Annual Report. Although they could be initiated 
by the Commission or an interested person, in most instances, it is 
anticipated that the Postal Service would take the initiative to 
harmonize its methods and analysis with those approved in the 
Commission's most recent annual compliance determination. This kind of 
rulemaking would focus on near-term improvements to data and analysis 
that could be made in time to be incorporated in the Postal Service's 
next Annual Report. The relatively narrow window of time available for 
completing a compliance-oriented rulemaking is likely to limit such 
rulemakings to studies that are modest in scope and straightforward to 
implement. Where expedition requires it, discovery may take the form 
primarily of oral questions answered in real time, such as informal 
technical conferences.

D. Form and Content of a Proposal To Change an Analytical Principle

    At a minimum, a proposal should identify the established principle 
that needs to be reviewed, explain its perceived deficiencies, and 
suggest how those deficiencies might be remedied. If a proposal offers 
a specific alternative method of collecting or analyzing data, it 
should include the data, analysis, and documentation on which it is 
based. While an estimate of the impact of the proposed change on the 
estimated attributable cost, avoided cost, elasticity of demand, 
average revenue, or service attainment of affected postal products 
would not be mandatory, such an estimate would improve the likelihood 
that the Commission will treat the proposal as ready for a final round 
of comment and possible adoption.
    The Commission's response to a proposal would depend on the 
circumstances--for example, how specific and concrete the proposed 
alternative principle is, and the level of documentation accompanying 
it. If the Commission concludes that the proposal makes a persuasive 
argument that a change in an accepted analytical principle would be 
beneficial and therefore is suitable for review, it would establish a 
review docket. Having opened a review docket, the Commission could ask 
the proponent to provide additional clarification of its criticism of 
the established principle, or to provide supporting documentation for 
its proposed alternative. The Commission could also ask for a written 
response from the Postal Service or the interested public.
    If the Commission considered such preliminary steps unnecessary but 
perceived a need to clarify the basis for the proponent's criticism of 
the accepted principle, to clarify the basis of its proposed 
alternative, or to clarify what relevant data are available, the 
Commission could ask the proponent of the change to provide one or more 
sponsoring analysts to respond to questions from the Commission's 
technical staff, the Public Representative, and interested parties in a 
technical conference format.
    Depending on the circumstance, the format of a technical conference 
may be informal, where no transcript would be kept, or formal, where a 
detailed agenda would be followed and a transcript kept. The former 
might be more suitable where the focus is on the availability of 
relevant data. The latter might be more suitable where expert opinion 
is sought as well. Even where the Postal Service is not the proponent 
of a change in an accepted analytical principle, the Commission might 
ask it to provide one or more experts on the subject matter of a 
proposal in a technical conference format concerning the merits of the 
proposal or to explain what data and analyses are available or could be 
made available to investigate the proposed alternative. The Commission 
may also arrange for a panel of outside experts to provide written 
statements, participate in a technical conference, or give depositions, 
at any stage of discovery where such assistance would be helpful.
    If the Commission were to determine that a proposal is well 
defined, adequately documented, and ready for final evaluation, it 
would publish a notice of proposed rulemaking and seek final written 
comments from interested parties. Until such a notice is issued, the 
proposed rules allow the Commission broad discretion in selecting 
appropriate procedures to follow on a case-by-case basis.
    The intent of proposed rule 3050.11 is to resolve all issues raised 
by proposed changes in analytical principles

[[Page 53333]]

efficiently, well in advance of the filing of the Postal Service's 
Annual Report. This should streamline the processing of the Postal 
Service's report when it is received. Proposed rule 3050.11 does not 
impose a particular lead time on the petitioning for or completing a 
proceeding to change an accepted analytical proceeding. As a practical 
matter, however, if complex or controversial changes to established 
analytical principles are proposed, they would need to be started well 
in advance of the due date of the Annual Report if the goal is to use 
them in the report.

VIII. Section-by-Section Analysis of Proposed Rules

    Proposed rule 3050.1 provides definitions for key terms used in the 
proposed regulations.
    Proposed rule 3050.2 sets forth general standards for documenting 
the Postal Service's periodic reports to the Commission.
    Proposed rule 3050.3 defines the scope and terms of Commission 
access to information in the custody of the Postal Service and its 
Inspector General.
    Proposed rule 3050.10 requires the Postal Service to use analytical 
principles that are accepted by the Commission to prepare an annual 
report to the Commission.
    Proposed rule 3050.11 sets forth the procedures by which changes to 
accepted analytical principles may be adopted.
    Proposed rule 3050.12 requires the Postal Service to indicate 
whether each special study relied on in its annual report to the 
Commission is current and valid, is in the process of being updated, or 
should be excused from the requirement that it be current and valid.
    Proposed rule 3050.13 requires the Postal Service to include in its 
annual report to the Commission a brief narrative that describes any 
changes that have been made to accepted analytical principles since the 
Commission's most recent Annual Compliance Determination was issued, 
and the rationale for making the change.
    Proposed rule 3050.14 requires the Postal Service to present its 
Cost and Revenue Analysis report in a format that corresponds to the 
classification structure in the current Mail Classification Schedule, 
and in an alternative, more disaggregated format that can be used to 
reformat the results to match the classification structure that was in 
effect immediately prior to the adoption of the Postal Accountability 
and Enhancement Act.
    Proposed rule 3050.20 requires the Postal Service's annual report 
to the Commission to analyze the degree to which its products met the 
policies of title 39 of the United States Code.
    Proposed rule 3050.21 prescribes specific categories of data to be 
included in (the content of) the Postal Service's annual report to the 
Commission.
    Proposed rule 3050.22 prescribes the documentation required to 
support the attributable cost estimates in the Postal Service's annual 
report.
    Proposed rule 3050.23 requires the Postal Service to accompany its 
annual report with a documented model of incremental costs.
    Proposed rule 3050.24 prescribes the documentation required to 
support the avoidable cost estimates in the Postal Service's annual 
report.
    Proposed rule 3050.25 requires the Postal Service, each quarter, to 
provide the Commission with its RPW report, its Quarterly Statistics 
Report and billing determinants. It also requires the Postal Service to 
accompany its annual report with the annual version of the RPW report.
    Proposed rule 3050.26 requires the Postal Service, by January 20 of 
each year, to provide the Commission with econometric estimates of 
elasticity of demand for all postal products and to document the 
econometric models that were used to produce them.
    Proposed rule 3050.27 requires the Postal Service to file its 
Workers' Compensation Report and summary workpapers by March 1 of each 
year.
    Proposed rule 3050.28 requires the Postal Service to provide the 
National Consolidated Trial Balances, National Payroll Hours Summary, 
the OPRES report, and the HAT report, within 15 days of the close of 
the relevant period (month or pay period).
    Proposed rule 3050.30 requires the Postal Service to provide, by 
March 31 of each year, information from which the geographic dimension 
of the universal service obligation in the processing, delivery, and 
retail functions can be measured.
    Proposed rule 3050.31 requires the Postal Service to provide the 
Commission with its Annual Report of the Postmaster General, 
Congressional Budget Submission, and Integrated Financial Plan within 
specified intervals after their approval or release.
    Proposed rule 3050.40 requires the Postal Service to provide the 
Commission with various financial reports corresponding in content and 
timing to those that public corporations provide to the Securities and 
Exchange Commission.
    Proposed rule 3050.41 requires the Postal Service to provide the 
Commission with an independent audit of the reports required by 
proposed rule 3050.40, and supporting documentation.
    Proposed rule 3050.42 authorizes the Commission, on its own or at 
the request of interested persons, to initiate proceedings to improve 
the quality of the financial information provided under proposed rule 
3050.40.
    Proposed rule 3050.43 requires the Postal Service to accompany its 
annual report to the Commission with the comprehensive statement, the 
performance plan, and the program performance reports required by 39 
U.S.C. 2401(e), 2803, and 2804, respectively.
    Proposed rules 3050.50 through 3050.53 are reserved.
    Proposed rule 3050.60 lists miscellaneous reports that the Postal 
Service is to provide to the Commission. These include a succinct 
description of the methods used, and the reasons for selecting the 
methods used, to produce the most recent Annual Compliance 
Determination. This is to be provided by July 1 of each year. Also to 
be provided by July 1 of each year is an update of the history of 
changes in postal volumes, revenues, and rates that the Postal Service 
provided in Docket No. R2006-1. In addition, the Postal Service is to 
provide a master list and electronic copies of publications, handbooks, 
and data collection forms both at the beginning of each year and when 
changed; the Household Diary Study when it is completed; and Total 
Factor Productivity estimates and documentation, by March 1 of each 
year.

Appendix [Illustrative list referred to in part V.B. of Supplementary 
Information]

                         Products and categories
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                        Market Dominant Products
 
Domestic First-Class Mail:
    Single-Piece:
        Letters

[[Page 53334]]

 
        Flats
        Parcels
            Total Single-Piece Letters, Flats & Parcels
    Presort:
        Letters
        Flats
        Parcels
            Total Presort Letters, Flats & Parcels
    Automation:
        Letters
        Flats
        Parcels
            Total Automation Letters, Flats & Parcels
                Total Letters, Flats & Parcels
Single-Piece Cards:
    Presort Cards
    Automation Cards
        Total Cards
        Total Domestic First-Class Mail
International First-Class Mail:
    Outbound Single-Piece Letters, Flats, International Parcel Post, and
     Parcels:
    Air:
        UPU Target System Countries
        UPU Transition System Countries
        Subject to bi-lateral agreement
            Canada
            Other
    Surface:
        UPU Target System Countries
        UPU Transition System Countries
        Subject to Bi-lateral Agreement
            Canada
            Other
Outbound Single-Piece Cards:
    Air:
        UPU Target System Countries
        UPU Transition System Countries
        Subject to Bi-lateral Agreement
            Canada
            Other
    Surface:
        UPU Target System Countries
        UPU Transition System Countries
        Subject to Bi-lateral Agreement
            Canada
            Other
                Total Outbound Single-Piece Mail
Inbound Single-Piece Mail:
    Air:
        UPU Target System Countries Using UPU Rates
        UPU Target System Countries Using Negotiated Rates
            Canada
            Other
        UPU Transition System Countries Using UPU rates
        UPU Transition System Countries Using Negotiated Rates
    Surface:
        UPU Target System Countries Using UPU Rates
        UPU Target System Countries Using Negotiated Rates
            Canada
            Other
        UPU Transition System Countries Using UPU Rates
        UPU Transition System Countries Using Negotiated Rates
            Total Inbound Single-Piece Mail
            Total International First-Class Mail
                Total First-Class Mail
Periodicals:
    Within County
    Outside County:
        Regular Rate
        Nonprofit
        Classroom
            Total Outside County
            Total Periodicals
Standard Mail:

[[Page 53335]]

 
    Regular Presort Mail:
        Letters
        Flats
        Parcels
        Not Flat-Machinables
            Total Regular Presort Mail
    Regular Automation Mail:
        Letters
        Flats
            Total Regular Automation Mail
                Total Regular Mail
    Nonprofit Presort Mail:
        Letters
        Flats
        Parcels
        Not Flat-Machinables
            Total Nonprofit Presort Mail
    Regular Automation Mail:
        Letters
        Flats
            Total Nonprofit Automation Mail
                Total Nonprofit Mail
                  Total Regular and Nonprofit Mail
    Enhanced Carrier Route Mail:
        Basic Presort Letters
        High Density Letters
        Saturation Letters
            Total Enhanced Carrier Route Letters
        Basic Presort Flats
        High Density Flats
        Saturation Flats
            Total Enhanced Carrier Route Flats
        Basic Presort Parcels
        High Density Parcels
        Saturation Parcels
            Total Enhanced Carrier Route Parcels
                Total Enhanced Carrier Route Mail
    Nonprofit Enhanced Carrier Route Mail:
        Basic Presort Letters
        High Density Letters
        Saturation Letters
            Total Non-enhanced Carrier Route Letters
        Basic Presort Flats
        High Density Flats
        Saturation Flats
            Total Non-enhanced Carrier Route Flats
        Basic Presort Parcels
        High Density Parcels
        Saturation Parcels
            Total Non-enhanced Carrier Route Parcels
                Total Nonprofit Enhanced Carrier Route Mail
                  Total Enhanced Carrier Route and Non-enhanced Carrier
        Route Mail
            Total Standard Mail
Package Services:
    Single-Piece Parcel Post:
        Intra-Bulk Mail Center
        Inter-Bulk Mail Center
            Total Single-Piece Domestic Parcel Post
        Inbound Surface Parcel Post (at UPU Rates)
            Total Single-Piece Parcel Post
Bound Printed Matter:
    Bound Printed Matter Flats:
        Nonpresorted
        Presorted
        Carrier Route
            Total Bound Printed Matter Flats
    Bound Printed Matter Parcels:
        Nonpresorted
        Presorted
        Carrier Route
            Total Bound Printed Matter Parcels
                Total Bound Printed Matter
Media Mail:

[[Page 53336]]

 
    Single Piece
    Presorted
    Total Media Mail
Library Rate:
    Single Piece
    Presorted
        Total Library Mail
            Total Media and Library Mail
                Total Package Services
USPS Penalty Mail
Free-for-the-Blind Mail
Negotiated Service Agreements (NSAs) (list each separately):
    Total Negotiated Service Agreement Mail
        Total Market Dominant Mail
Special Services:
    Ancillary Services:
        Address Correction
        Applications and Mailing Permits:
            First-Class Mail Presort Fee
            Standard Mail Mailing Fee
                Total Applications and Mailing Permits
        Package Services Mailing Fees:
            Bound Printed Matter Destination Entry Mailing Fee
            Library Mail Presort Mailing Fee
            Media Mail Presort Mailing Fee
                Total Package Service Fees
        Parcel Return Service Fees:
            Account Maintenance Fee
            Permit Fee
                Total Parcel Return Service Fees
        Parcel Select Destination Entry Mailing Fee
        Periodicals Mailing Fees:
            Original Entry Fee
            Reentry Fee
            Additional Entry Fee
            News Agent Registry Fee
                Total Periodicals Mailing Fees
        Permit Imprint Fee
        Business Reply Mail:
            Per-Piece Fee
            Permit/Account Maintenance Fees
                Total Business Reply Mail
        Bulk Parcel Return Service:
            Per-Piece Fee
            Account Maintenance Fee
            Permit Fee
                Total Bulk Parcel Return Service
        Certified Mail
        Certificate of Mailing
        Collect-on-Delivery
        Delivery Confirmation
        Insurance
        Merchandise Return Service:
            Per-Piece Fee
            Account Maintenance Fee
            Permit Fee
                Total Merchandise Return Service
        Parcel Airlift
        Registered Mail
        Return Receipt
        Return Receipt for Merchandise
        Restricted Delivery
        Shipper Paid Forwarding
        Signature Confirmation
        Special Handling
        Stamped Envelopes
        Stamped Cards
        Premium Stamped Envelopes
        Premium Stamped Cards
                Total Ancillary Services
International Ancillary Services:
    International Certificate of Mailing
    International Registered Mail:
        Outbound International Registered Mail

[[Page 53337]]

 
        Inbound International Registered Mail
            Total International Registered Mail
    International Return Receipt:
        Outbound International Return Receipt
        Inbound International Return Receipt
            Total International Return Receipt
    International Restricted Delivery:
        Outbound International Restricted Delivery
        Inbound International Restricted Delivery
            Total International Restricted Delivery
    Inbound International Insurance
    Customs Clearance and Delivery Fee
        Total International Ancillary Services
Address List Services:
    ZIP Coding of Mailing Lists
    Correction of Mailing Lists
    Address Changes for Election Boards
    Carrier Sequencing of Address Cards
        Total Address List Services
    Caller Service/Reserve Numbers
    Change-of-Address Credit Card Authentication
    Confirm
    International Reply Coupon Services:
        Outbound International Reply Coupon Service
        Inbound International Reply Coupon Service
            Total International Reply Services
International Business Reply Mail Services:
    Outbound Business Reply Mail Service
    Inbound International Business Reply Mail Service
            Total International Business Reply Service
    Money Orders
    Post Office Boxes
    Other Special Services:
        Standard Mail Forwarding/Return:
        Forwarding/Return Fee
        Weighted Factor Forwarding/Return Fee
            Total Standard Mail Forwarding/Return
                Total Market Dominant Special Services
                  Total Market Dominant Mail and Services
 
                          Competitive Products
 
Priority Mail:
    Domestic Priority Mail
    International Priority Mail:
        Outbound Priority Mail International:
            Subject to Inward Land Rates
            Subject to Terminal Dues
                UPU Target System Countries
                UPU Transition System Countries
                Subject to Non-UPU Rates
            Total Outbound Priority Mail International
    Inbound Air Parcel Post:
        At UPU Rates
        At Non-UPU Rates:
            Canada
            Other
        Total Inbound Air Parcel Post
            Total International Priority Mail
                Total Priority Mail
Express Mail:
    Domestic Express Mail:
        Custom Designed
        Next Day and Second Day Post Office-to-Post Office
        Next Day and Second Day Post Office-to-Addressee
            Total Domestic Express Mail
International Express Mail:
    Outbound International Expedited Services
    Inbound International Expedited Services:
        At UPU Rates
        At Non-UPU Rates:
            Total Inbound International Expedited Services
                Total International Express Mail:
                  Total Express Mail
Package Services:
    Bulk Parcel Post:

[[Page 53338]]

 
        Inter-Bulk Mail Center:
            Barcoded
            Origin Bulk Mail Center Presort
            Bulk Mail Center Presort
                Total Inter-Bulk Mail Center
        Intra-Bulk Mail Center Barcoded
        Parcel Select:
            Destination Bulk Mail Center
            Destination Sectional Center Facility
            Destination Delivery Unit
                Total Parcel Select
        Parcel Return Service:
            Return Bulk Mail Center
            Return Destination Units
                Total Parcel Return Service
                  Total Bulk Parcel Post
International Mail:
    International Priority Airlift
    International Surface Airlift
    International Direct Sacks-M-Bags
        Outbound International Direct Sacks-M-Bags
        Inbound International Direct Sacks-M-Bags
            Total International Direct Sacks-M-Bags
        Global Customized Shipping Services
        Inbound Surface Parcel Post (at Non-UPU Rates):
            Canada
            Other
                Total Inbound Surface Parcel Post (at Non-UPU Rates)
                  Total International Mail
International Special Services:
    International Money Transfer Service:
        Outbound International Money Transfer Service
        Inbound International Money Transfer Service
            Total International Money Transfer Service
    International Ancillary Services:
        International Certificate of Mailing
        International Registered Mail
        International Return Receipt:
            Outbound International Return Receipt
            Inbound International Return Receipt
                Total International Return Receipt
        International Restricted Delivery
        International Insurance:
            Outbound International Insurance
            Inbound International Insurance
                Total International Insurance
        Custom Clearance and Delivery Fee
            Total International Ancillary Services
                Total International Special Services
Negotiated Service Agreements (list each separately):
    Domestic
        Outbound International:
            Global Package Discount Contracts
            Global Expedited Package Services Contracts
            Global Direct Contracts
            Global Bulk Economy Contracts
            Global Plus Contracts
                Total Outbound International
        Inbound International:
            International Business Reply Service Contracts
            Inbound Direct Entry Contracts with Customers
            Inbound Direct Entry Contracts with Foreign Postal
             Administrations
                Total Inbound International
                  Total Negotiated Service Agreements
        Premium Forwarding Service:
            Enrollment Fee
            Weekly Reshipment Fee
                Total Premium Forwarding Service
------------------------------------------------------------------------

    It Is Ordered:
    1. The Commission proposes to amend its rules of practice and 
procedure by deleting rules 3001.102 and 103 [in Subpart G of 39 CFR 
part

[[Page 53339]]

3001] and adding new part 3050--Periodic Reporting as set forth below.
    2. Interested persons may submit comments by October 16, 2008.
    3. Interested persons may submit reply comments by November 14, 
2008.
    4. Robert Sidman is designated as the Public Representative 
representing the interests of the general public in this proceeding.
    5. The Secretary shall arrange for publication of this Order in the 
Federal Register.

List of Subjects

39 CFR Part 3001

    Admininstrative practice and procedure, Confidential business 
information, Freedom of information, Sunshine Act.

39 CFR Part 3050

    Administrative practice and procedure, Postal Service, 
Recordkeeping and reporting requirements.

    By the Commission.

    Issued August 22, 2008.
Judith M. Grady,
Acting Secretary.
    For the reasons stated in the preamble, under the authority at 39 
U.S.C. 503, the Postal Regulatory Commission proposes to amend 39 CFR 
chapter III as follows:

PART 3001--RULES OF PRACTICE AND PROCEDURE

    1. The authority citation for part 3001 continues to read as 
follows:

    Authority: 39 U.S.C. 404(d); 503; 3622; 3633; 3652; 3661.


Sec.  3001.102  [Removed]

    2. Remove and reserve Sec.  3001.102 in subpart G.


Sec.  3001.103  [Removed]

    3. Remove and reserve Sec.  3001.103 in subpart G.
    4. Add part 3050--Periodic Reporting, to read as follows:

PART 3050--PERIODIC REPORTING

Sec.
3050.1 Definitions.
3050.2 Documentation of periodic reports.
3050.3 Access to information supporting Commission reports or 
evaluations.
3050.10 Analytical principles to be applied in the Postal Service's 
Annual Report.
3050.11 Proposals to change an accepted analytical principle applied 
in the Postal Service's Annual Report.
3050.12 Obsolescence of special studies relied on to produce the 
Postal Service's Annual Report.
3050.13 Additional documentation required in the Postal service's 
Annual Report.
3050.14 Format of the Postal Service's Annual Report.
3050.20 Compliance analysis in the Postal Service's Annual Report.
3050.21 Content of Annual Report.
3050.22 Documentation supporting attributable cost estimates in the 
Postal Service's Annual Report.
3050.23 Documentation supporting incremental cost estimates in the 
Postal Service's Annual Report.
3050.24 Documentation supporting estimates of costs avoided by 
worksharing in the Postal Service's Annual Report.
3050.25 Documentation supporting estimates of volumes and revenues 
in the Postal Service's Annual Report.
3050.26 Documentation of demand elasticities.
3050.27 Workers' Compensation Report.
3050.28 Monthly and pay period reports.
3050.30 Information needed to estimate the cost of the universal 
service obligation.
3050.31 Financial reports.
3050.40 Additional financial reporting.
3050.41 Treatment of additional financial reports.
3050.42 Proceedings to improve the quality of financial data.
3050.43 Information on program performance.
3050.50 Information on service performance for domestic products. 
[Reserved]
3050.51 Information on service performance for Special Services. 
[Reserved]
3050.52 Information on service performance for international 
products. [Reserved]
3050.53 Information on customer satisfaction and retail access. 
[Reserved]
3050.60 Miscellaneous reports and documents.

    Authority: 39 U.S.C. 503, 3651, 3652, 3653.


Sec.  3050.1  Definitions.

    For purposes of this part:
    (a) Accepted analytical principle refers to an analytical principle 
that was applied by the Commission in its most recent Annual Compliance 
Determination, unless a different analytical principle subsequently was 
accepted by the Commission in a final rule.
    (b) Accepted quantification technique refers to a quantification 
technique that was applied in the most recent iteration of the periodic 
report applying that quantification technique or was used to support a 
new analytical principle adopted in a subsequent proceeding under Sec.  
3050.11.
    (c) Analytical principle refers to a particular economic, 
mathematical, or statistical theory, precept, or assumption applied by 
the Postal Service in producing a periodic report to the Commission.
    (d) Annual Compliance Determination refers to the report that 39 
U.S.C. 3653 requires the Commission to issue each year evaluating the 
compliance of the Postal Service with the requirements of that Act.
    (e) Annual Report refers to the report that 39 U.S.C. 3652 requires 
the Postal Service to provide to the Commission each year.
    (f) Product means a postal service listed as a market dominant or a 
competitive product in the Mail Classification Schedule.
    (g) Quantification technique refers to any data entry or 
manipulation technique whose validity does not require the acceptance 
of a particular economic, mathematical, or statistical theory, precept, 
or assumption. A change in quantification technique should not change 
the output of the analysis in which it is employed.


Sec.  3050.2  Documentation of periodic reports.

    (a) At the time that it submits any periodic report to the 
Commission, the Postal Service shall identify any input data that has 
changed, list any quantification techniques that it has changed, and 
list any corrections that it has made, since that report was last 
submitted to and accepted by the Commission. It shall provide a brief 
narrative explanation of each listed change.
    (b) If workpapers are required to support a periodic report, they 
shall:
    (1) Show all calculations employed in producing each estimate;
    (2) Be sufficiently detailed to allow all numbers used in such 
calculations to be traced back to public documents or to primary data 
sources; and
    (3) Be submitted in a form, and be accompanied by sufficient 
explanation and documentation, to allow them to be replicated using a 
publicly available PC application.
    (c) Spreadsheets used in preparing periodic reports shall be 
submitted in electronic form. They shall display the formulas used, 
their links to related spreadsheets, and shall not be password 
protected.
    (d) Filing of portions of the documentation required by this 
section that are not time critical may be delayed up to 2 weeks if the 
Postal Service obtains permission from the Commission to defer filing 
of such portions at least 30 days prior to the date on which the 
periodic report is due.


Sec.  3050.3  Access to information supporting Commission reports or 
evaluations.

    (a) The Commission shall have access to the following material if, 
in its judgment, the information supports any

[[Page 53340]]

report, assessment, or evaluation required by title 39 of the United 
States Code, including:
    (1) The working papers and supporting matter of the Postal Service 
or the Postal Service Inspector General in connection with any 
information submitted under 39 U.S.C. 3652; and
    (2) Information that supports the Commission's annual assessment 
under 39 U.S.C. 3651.
    (b) If the Postal Service or the Postal Service Inspector General 
believes that any document or portion of a document or other matter 
that it has provided to the Commission in a periodic report or to 
supplement a periodic report contains information exempt from 
disclosure under 39 U.S.C. 410(c) or 5 U.S.C. 552(b), that matter shall 
be treated in accordance with [proposed] part 3007 of this chapter.


Sec.  3050.10  Analytical principles to be applied in the Postal 
Service's Annual Report.

    In its Annual Report, the Postal Service shall use only accepted 
analytical principles as defined in Sec.  3050.1.


Sec.  3050.11  Proposals to change an accepted analytical principle 
applied in the Postal Service's Annual Report.

    To improve the quality, accuracy, or completeness of the data or 
analysis of data contained in the Postal Service's Annual Report, the 
Commission, acting on its own behalf, may institute a proceeding to 
change an accepted analytical principle. In addition, any interested 
person, including the Postal Service or a Public Representative, may 
submit a petition to the Commission to initiate such a proceeding.
    (a) Form and content of petition. The petition shall identify the 
accepted analytical principle proposed for review, explain its 
perceived deficiencies, and suggest how those deficiencies should be 
remedied.
    (1) If the petition proposes that a specific alternative analytical 
principle be followed, it should include the data, analysis, and 
documentation on which the proposal is based, and, where feasible, 
include an estimate of the impact of the proposed change on the 
relevant characteristics of affected postal products, including their 
attributable cost, avoided cost, elasticity of demand, average revenue, 
or service attainment.
    (2) If the petitioner requests access to data from the Postal 
Service to support the assertions or conclusions in its petition, and 
such data are not otherwise available, it shall accompany the petition 
with a request to gain access to such data. The petitioner's request 
should identify the data sought, and include the reasons for believing 
that the data will support its petition. To expedite its evaluation of 
the data request, the Commission may, after reasonable public notice, 
order that answers or objections be presented orally or in writing.
    (b) Procedures for processing petition. To better evaluate a 
petition to change an accepted analytical principle, the Commission may 
order that it be made the subject of discovery. By request of any 
interested person, or on its own behalf, the Commission may order that 
the petitioner and/or the Postal Service provide experts on the subject 
matter of the proposal to participate in technical conferences, prepare 
statements clarifying or supplementing their views, or be deposed by 
officers of the Commission.
    (c) Action on the petition.
    (1) After the conclusion of any discovery procedures, the 
Commission shall determine whether to issue a notice of proposed 
rulemaking based on the petition and the supporting material received. 
Such notice shall be evaluated by procedures that are consistent with 5 
U.S.C. 553. Interested parties will be afforded an opportunity to 
present comments and reply comments, either orally or in writing, at 
the Commission's discretion.
    (2) If accepted by the Commission, the change proposed in the 
notice of proposed rulemaking shall be published in a notice of final 
rule in the Federal Register (and on the Commission Web site).


Sec.  3050.12  Obsolescence of special studies relied on to produce the 
Postal Service's Annual Report.

    (a) For each special study whose results are used to produce the 
estimates in its Annual Report, the Postal Service shall indicate the 
date the study was completed and certify that the study reflects 
current operating conditions and procedures. If the Postal Service 
cannot certify that a study reasonably reflects current operating 
conditions or procedures, it must provide a timetable for updating the 
study.
    (b) A presumption of obsolescence shall attach to any special study 
that is more than 5 years old at the time that the annual compliance 
report is due.
    (c) To obtain a waiver of the requirements of this section, the 
Postal Service must file a petition at least 60 days before the date 
upon which its Annual Report is due. The petition and supplemental 
materials must demonstrate to the Commission's satisfaction that any of 
the following criteria is met:
    (1) The operating conditions reflected in the special study have 
not changed;
    (2) Updating the results of the special study would not have a 
significant effect on the costs, volumes, or revenues estimated for any 
postal product;
    (3) The cost of updating the special study would outweigh the 
resulting benefits; or
    (4) An appropriate update or replacement of the special study is 
underway.


Sec.  3050.13  Additional documentation required in the Postal 
Service's Annual Report.

    (a) At the time the Postal Service files its Annual Report, it 
shall include a brief narrative explanation of any changes to accepted 
analytical principles that have been made since the most recent Annual 
Compliance Determination was issued, and the reasons that those changes 
were accepted.
    (b) The Annual Report is subject to the requirements of Sec.  
3050.2.


Sec.  3050.14  Format of the Postal Service's Annual Report.

    The Postal Service's Cost and Revenue Analysis Report shall be 
presented in a format reflecting the classification structure in the 
current Mail Classification Schedule. It shall also be presented in an 
alternative, more disaggregated format capable of reflecting the 
classification structure in effect prior to the adoption of the Postal 
Accountability and Enhancement Act.


Sec.  3050.20  Compliance analysis in the Postal Service's Annual 
Report.

    The Postal Service's Annual Report shall include an analysis of the 
information that it contains in sufficient detail to demonstrate that, 
in the fiscal year covered by its report, all of its products (market 
dominant and competitive) comply with all of the applicable provisions 
of chapter 36 of title 39 of the U.S. Code and the regulations 
promulgated thereunder, meet the goals established under 39 U.S.C. 2803 
and 2804, and promote the public policy objectives set out in title 39 
of the U.S. Code.


Sec.  3050.21  Content of Annual Report.

    No later than 90 days after the close of each fiscal year, the 
Postal Service shall submit a report to the Commission analyzing its 
cost, volume, revenue, rate, and service information in sufficient 
detail to demonstrate that all products during such year comply with 
all applicable provisions of title 39 of

[[Page 53341]]

the United States Code. The report shall provide:
    (a) The volume and revenue generated by each product;
    (b) The attributable costs caused by, and the contribution to 
institutional costs provided by, each product;
    (c) The quality of service received by each market dominant 
product, including the speed of delivery and the reliability of 
delivery;
    (d) The price elasticity of demand for each product;
    (e) For each market dominant workshare discount offered during the 
reporting year:
    (1) The per-item cost avoided by the Postal Service by virtue of 
such discount;
    (2) The percentage of such per-item cost avoided that the per-item 
workshare discount represents;
    (3) The per-item contribution made to institutional costs; and
    (4) When the Postal Service invokes the exception provisions of 39 
U.S.C. 3622(e)(2)(A) through (D), specify the factual and analytical 
bases for its conclusion that those exceptions apply.
    (f) For each market dominant negotiated service agreement:
    (1) Identify its rates and service features;
    (2) Estimate its costs, volumes, revenues, and elasticity of 
demand;
    (3) Analyze its effect on the operational performance of the Postal 
Service, specifying the affected operations and, to the extent 
possible, quantifying the effect;
    (4) Analyze the contribution of the agreement to institutional 
costs for its most recent year of operation. The year analyzed shall 
end on the anniversary of the negotiated service agreement that falls 
within the fiscal year covered by the Postal Service's Annual Report 
and include the 12 preceding months. The analysis shall show all 
calculations and fully identify all inputs. Inputs used to estimate the 
effect on total contribution to the Postal Service, such as unit costs 
and price elasticities, shall be updated using fiscal year values; and
    (5) Analyze the effect of the negotiated service agreement (and 
other functionally equivalent negotiated service agreements) on the 
marketplace. If there were harmful effects, explain why those effects 
were not unreasonable.
    (g) For each competitive negotiated service agreement:
    (1) Identify its rates and service features; and
    (2) Estimate its costs, volumes, revenues, and its elasticity of 
demand;
    (h) For market tests of experimental products:
    (1) Estimate their costs, volumes, and revenues in aggregate by 
market dominant and by competitive product group;
    (2) Estimate the quality of service of each individual experimental 
product; and
    (3) Indicate whether offering the experimental product has created 
an inappropriate competitive advantage for the Postal Service or any 
mailer.
    (i) For each non-postal service, estimate its costs, volumes, and 
revenues; and
    (j) Provide any other information that the Postal Service believes 
will help the Commission evaluate the Postal Service's compliance with 
the Postal Accountability and Enhancement Act.


Sec.  3050.22  Documentation supporting attributable cost estimates in 
the Postal Service's Annual Report.

    The following items shall be reported when they have changed from 
those used in the most recent Annual Compliance Determination:
    (a) The Cost and Revenue Analysis Report (CRA), including relevant 
data on international mail services;
    (b) The Cost Segments and Components Report (CSC);
    (c) All input data and processing programs used to produce the CRA 
report, to include:
    (1) CSC Reconciliation to Financial Statement and Account 
Reallocations;
    (2) Manual Input Requirement (reflecting direct accounting or 
modeled costs);
    (3) The CSC ``A'' report (showing how indirect costs are 
distributed to products based on the distribution of direct costs);
    (4) The CSC ``B'' report (showing how indirect Property Equipment 
Supplies Services and Administrative (PESSA) costs are distributed to 
products;
    (5) The CSC ``D'' report (showing final adjustments to total 
attributable and product-specific costs);
    (6) The CSC ``F'' report (containing distribution keys for indirect 
labor components);
    (7) The control file that includes the CRA program control string 
commands used to produce the CRA and the above-described CSC reports; 
and
    (8) The master list of cost segment components, including all of 
the components used as distribution keys in the development of the CSC 
report and its accompanying reports.
    (d) Spreadsheet workpapers underlying development of the CSC report 
by component. These workpapers shall include the updated factors and 
input datasets from the supporting data systems used, including:
    (1) The In-Office Cost System (IOCS);
    (2) The Management Operating Data System (MODS);
    (3) The City Carrier Cost System (CCCS);
    (4) The City Carrier Street Time Sampling System (CCSTS);
    (5) The Rural Carrier Cost System (RCCS);
    (6) The National Mail Count;
    (7) The Transportation Cost System (TRACS);
    (8) System for International Revenues and Volumes/Outbound (SIRV/
O);
    (9) System for International Revenues and Volumes/Inbound (SIRV/I);
    (10) Military and International Dispatch and Accountability System; 
and
    (11) Inbound International Revenue Accounting Systems (IAB data).
    (e) The econometric analysis of carrier street time, including 
input data, processing programs, and output;
    (f) The Window Service Supply Side Variability, Demand Side 
Variability, and Network Variability studies, including input data, 
processing programs, and output;
    (g) The econometric analysis of purchased highway transportation 
cost variability, including input data, processing programs, and 
output;
    (h) The econometric analysis of freight rail cost variability, 
including input data, processing programs, and output;
    (i) A list and summary description of any transportation contracts 
whose unit rates vary according to the level of postal volume carried. 
The description should include the product or product groups carried 
under each listed contract;
    (j) Spreadsheets and processing programs distributing attributable 
mail processing costs;
    (k) The Vehicle Service Driver Data Collection System (VSD);
    (l) Input data, processing programs, and output of the Vehicle 
Service Driver Cost Variability Study;
    (m) Econometric analysis of postmaster cost variability;
    (n) Floor Space Survey; and
    (o) Density studies used to convert weight to cubic feet of mail.


Sec.  3050.23  Documentation supporting incremental cost estimates in 
the Postal Service's Annual Report.

    Input data, processing programs, and output of an incremental cost 
model shall be reported.


Sec.  3050.24  Documentation supporting estimates of costs avoided by 
worksharing in the Postal Service's Annual Report.

    The following items shall be reported, including supporting 
calculations and derivations:

[[Page 53342]]

    (a) Letter, card, flat, parcel and non-flat machinable mail 
processing cost models with Delivery Point Sequence percentages 
calculated, which shall include:
    (1) Coverage factors for any equipment where coverage is less than 
100 percent;
    (2) MODS productivities;
    (3) Piggyback factors and supporting data;
    (4) Entry profiles, bundle sorts, and pieces per bundle;
    (5) Bundle breakage, handlings, and density;
    (6) Mail flow density and accept rates;
    (7) Remote Computer Reader finalization costs, cost per image, and 
Remote Bar Code Sorter leakage;
    (8) Percentage of mail finalized to carrier route;
    (9) Percentage of mail destinating at post office boxes; and
    (10) Wage rates and premium pay factors.
    (b) Pallet cost models for Periodicals;
    (c) Sack cost models for Periodicals;
    (d) Bundle cost models for Periodicals:
    (e) Other container cost models for Periodicals;
    (f) Analysis of Periodicals container costs;
    (g) Business Reply Mail cost supporting material;
    (h) Enhanced Carrier Route mail processing saturation savings;
    (i) Mail processing unit costs by shape and cost pool for each 
product and benchmark category;
    (j) Delivery costs by product, shape, presort level, automation 
compatibility, and machinability, including Detached Address Label cost 
calculations; and
    (k) Dropship cost avoidance models.


Sec.  3050.25  Documentation supporting estimates of volumes and 
revenues in the Postal Service's Annual Report.

    The following items shall be provided:
    (a) The Revenue, Pieces, and Weight (RPW) report, including 
estimates by shape, weight, and indicia, and the underlying billing 
determinants within 90 days of the close of each fiscal year;
    (b) Revenue, Pieces, and Weight by rate category and special 
service by quarter (within 30 days of the close of the quarter);
    (c) Quarterly Statistics Report, including estimates by shape, 
weight, and indicia (within 30 days of the close of the quarter); and
    (d) Billing determinants (within 40 days of the close of the 
quarter).


Sec.  3050.26  Documentation of demand elasticities.

    By January 20 of each year, the Postal Service shall provide 
econometric estimates of demand elasticity for all postal products 
accompanied by the underlying econometric models and the input datasets 
used.


Sec.  3050.27  Workers' Compensation Report.

    The Workers' Compensation Report, including summary workpapers, 
shall be provided by March 1 of each year.


Sec.  3050.28  Monthly and pay period reports.

    The following reports shall be provided within 15 days of the close 
of the relevant period:
    (a) National Consolidated Trial Balances and the Revenue and 
Expense Summary (monthly);
    (b) National Payroll Hours Summary in electronic form (pay period);
    (c) On-roll and Paid Employee Statistics (ORPES) (pay period); and
    (d) Postal Service Active Employee Statistical Summary (HAT report) 
(pay period).


Sec.  3050.30  Information needed to estimate the cost of the universal 
service obligation.

    The following reports shall be provided by March 31 of each year:
    (a) Mail flow volumes by product (or product group) between each 
pair of mail processing facilities, including local turnaround mail for 
each facility.
    (b) Direct and indirect costs, workhours, and CCCS/RCCS volumes by 
sampled product (or product group), carrier route, facility, and ZIP 
Code;
    (c) For sampled city routes:
    (1) Actual and possible deliveries by type;
    (2) Actual and possible stops by type:
    (3) Collection boxes;
    (4) Number of businesses served; and
    (5) Miles identified by processing facility, route type, and ZIP 
Code;
    (d) For sampled rural routes:
    (1) Stops;
    (2) Boxes served, and
    (3) Mailpieces identified by carrier route, route type, facility, 
and ZIP Code;
    (e) For each retail facility in a representative sample:
    (1) Revenues generated; and
    (2) Costs incurred identified by ZIP Code.


Sec.  3050.31  Financial reports.

    The following reports shall be provided annually at the time noted:
    (a) Annual Report of the Postmaster General (when released to the 
public);
    (b) Congressional Budget Submission and supporting workpapers, 
including Summary Tables SE 1, 2, and 6 (within 7 days of the 
submission of the Federal Budget by the President to the Congress); and
    (c) Integrated Financial Plan (within 7 days of approval by the 
Board of Governors).


Sec.  3050.40  Additional financial reporting.

    The Postal Service shall file the following financial reports with 
the Commission. These reports shall include the information required by 
sections 13 and 15(d) of the Securities and Exchange Act of 1934 (15 
U.S.C. 78m, 78o(d)).
    (a) Quarterly report. Within 40 days after the end of each fiscal 
quarter, the Postal Service shall file a report containing the 
information required by Form 10-Q or any successor form as it may be 
revised.
    (b) Annual report. Within 60 days after the end of each fiscal 
year, the Postal Service shall file a report containing the information 
required by Form 10-K or any successor form as it may be revised. That 
report shall:
    (1) Comply with section 404 (Management Assessment of Internal 
Controls) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262) beginning 
with the annual report for FY 2010;
    (2) Include with respect to the Postal Service's pension and post-
retirement health obligations:
    (i) The funded status of the Postal Service's pension and post-
retirement health obligations;
    (ii) Components of the net change in the fund balances and 
obligations and the nature and cause of any significant changes;
    (iii) Components of net periodic costs;
    (iv) Cost methods and assumptions underlying the relevant actuarial 
valuations;
    (v) The effect of a 1 percent increase in the assumed health care 
cost trend rate for each future year on the service and interest costs 
and the accumulated obligations;
    (vi) Actual contributions to and payments from the funds for the 
years presented and the estimated future contributions and payments for 
each of the following 5 years;
    (vii) The composition of plan assets reflected in the fund 
balances; and
    (viii) The assumed rate of return fund balances and the actual rate 
of returns for the years presented.
    (3) The Postal Service shall obtain the information listed in 
paragraph (b)(2) of this section from the Office of Personnel 
Management no later than 30 days after the end of each fiscal year.
    (c) Current report. Within 4 days after the occurrence of any one 
or more events specified in the items in sections 1-6 and 9 of Form 8-K 
or any successor form as it may be revised, the Postal Service shall 
file a report containing the information required by Form 8-K.
    (d) Segment reporting. For purposes of Form 10-Q and Form 10-K, the 
Postal Service shall include segment

[[Page 53343]]

reporting, beginning with reports for fiscal year 2010. The Postal 
Service shall determine the appropriate segment reporting under 
paragraph (a) of this section after consultation with the Postal 
Regulatory Commission.


Sec.  3050.41  Treatment of additional financial reports.

    (a) The Postal Service shall obtain an opinion from an independent 
auditor on whether the information listed in Sec.  3050.40(b) is fairly 
stated in all material respects, either in relation to:
    (1) The basic financial statements as a whole; or
    (2) On a stand-alone basis.
    (b) The Postal Service and its independent auditor shall provide 
the Commission with the audit documentation and any other matter that 
supports the information submitted under Sec.  3050.40.


Sec.  3050.42  Proceedings to improve the quality of financial data.

    The Commission may on its own motion, or at the request of an 
interested person, initiate proceedings to improve the quality, 
accuracy, or completeness of Postal Service data required under Sec.  
3050.40 whenever it appears that:
    (a) The data have become significantly inaccurate or can be 
significantly improved; or
    (b) Those revisions are, in the judgment of the Commission, 
otherwise necessitated by the public interest.


Sec.  3050.43  Information on program performance.

    The Postal Service shall accompany its Annual Report with the 
following items:
    (a) The comprehensive statement required by 39 U.S.C. 2401(e);
    (b) The performance plan required by 39 U.S.C. 2803; and
    (c) The program performance reports required by 39 U.S.C. 2804.


Sec.  3050.50  Information on service performance for domestic 
products.

    [Reserved]


Sec.  3050.51  Information on service performance for Special Services.

    [Reserved]


Sec.  3050.52  Information on service performance for international 
products.

    [Reserved]


Sec.  3050.53  Information on customer satisfaction and retail access.

    [Reserved]


Sec.  3050.60  Miscellaneous reports and documents.

    The following reports shall be provided at the times indicated:
    (a) A master list of publications and handbooks, including those 
related to internal information procedures, at the beginning of each 
fiscal year;
    (b) An electronic copy of each publication, handbook, and data 
collection form, at the beginning of each fiscal year;
    (c) Data collection forms, and corresponding training handbooks 
(when changed);
    (d) Household Diary Study (when completed);
    (e) Input data and calculations used to produce the annual Total 
Factor Productivity estimates (by March 1 of each year); and
    (f) Succinct narrative explanations of how the estimates in the 
most recent Annual Compliance Determination were calculated and the 
reasons that particular analytical principles were followed. The 
narrative explanations shall be comparable in detail to that which had 
been provided in Library Reference 1 in omnibus rate cases processed 
under the Postal Reorganization Act (by July 1 of each year).
    (g) An update of the history of changes in postal volumes, 
revenues, rates, and fees that appears in Library References USPS-LR-L-
73 through 76 in Docket No. R2006-1 (by July 1 of each year).

[FR Doc. E8-21060 Filed 9-12-08; 8:45 am]
BILLING CODE 7710-FW-P