[Federal Register Volume 73, Number 223 (Tuesday, November 18, 2008)]
[Rules and Regulations]
[Pages 68345-68348]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-27323]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket Nos. MC2009-4 and CP2009-5; Order No. 131]


Administrative Practice and Procedure, Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adding Priority Mail Contract 3 (MC2009-4 
and CP2009-5) to the Competitive Product List. It is also noticing a 
related contract. These actions are consistent with changes in a recent 
law governing postal operations and a related Postal Service request. 
Republication of the lists of market dominant and competitive products 
is also consistent with new requirements in the law.

DATES: Effective November 18, 2008.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-789-6820 and [email protected].

SUPPLEMENTARY INFORMATION: Regulatory History, 73 FR 66075 (November 6, 
2008).
    The Postal Service seeks to add a new product identified as 
Priority Mail Contract 3 to the Competitive Product

[[Page 68346]]

List. For the reasons discussed below, the Commission approves the 
Request.

I. Background

    On October 27, 2008, the Postal Service filed a formal request 
pursuant to 39 U.S.C. 3642 and 39 CFR 3020.30 et seq. to add Priority 
Mail Contract 3 to the Competitive Product List.\1\ The Postal Service 
asserts that the Priority Mail Contract 3 product is a competitive 
product ``not of general applicability'' within the meaning of 39 
U.S.C. 3632(b)(3). This Request has been assigned Docket No. MC2009-4.
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    \1\ Request of the United States Postal Service to Add Priority 
Mail Contract 3 to Competitive Product List and Notice of 
Establishment of Rates and Class Not of General Applicability, 
October 27, 2008 (Request).
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    The Postal Service contemporaneously filed a contract related to 
the proposed new product pursuant to 39 U.S.C. 3632(b)(3) and 39 CFR 
3015.5. The contract has been assigned Docket No. CP2009-5.
    In support of its Request, the Postal Service filed the following 
materials: (1) A redacted version of the Governors' Decision 
authorizing the new product which also includes an analysis of Priority 
Mail Contract 3 and certification of the Governors' vote; \2\ (2) a 
redacted version of the contract which, among other things, provides 
that the contract will expire 1 year from the effective date, which is 
proposed to be 1 day after the Commission issues all regulatory 
approvals; \3\ (3) requested changes in the MCS product list; \4\ (4) a 
Statement of Supporting Justification as required by 39 CFR 3020.32; 
\5\ and (5) certification of compliance with 39 U.S.C. 3633(a).\6\
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    \2\ Attachment A to the Request. The analysis that accompanies 
the Governors' Decision notes, among other things, that the contract 
is not risk free, but concludes that the risks are manageable. See 
also Errata to Request of the United States Postal Service to Add 
Priority Mail Contract 3 to Competitive Product List and Notice of 
Establishment of Rates and Class Not of General Applicability, 
October 30, 2008.
    \3\ Attachment B to the Request.
    \4\ Attachment C to the Request.
    \5\ Attachment D to the Request.
    \6\ Attachment E to the Request.
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    In the Statement of Supporting Justification, Kim Parks, Manager, 
Sales and Communications, Expedited Shipping, asserts that the service 
to be provided under the contract will cover its attributable costs, 
make a positive contribution to coverage of institutional costs, and 
will increase contribution toward the requisite 5.5 percent of the 
Postal Service's total institutional costs. Request, Attachment D, at 
1. Ashley Lyons, Manager, Corporate Financial Planning, Finance 
Department, certifies, based on the financial analysis provided by the 
Postal Service, that the contract complies with 39 U.S.C. 3633(a). See 
id. Attachment E.
    The Postal Service filed much of the supporting materials, 
including the Governors' Decision and the specific Priority Mail 
Contract 3, under seal. In its Request, the Postal Service maintains 
that the contract and related financial information, including the 
customer's name and the accompanying analyses that provide prices, 
terms, conditions, and financial projections, should remain under seal. 
Id. at 2.
    In Order No. 123, the Commission gave notice of the two dockets, 
appointed a public representative, and provided the public with an 
opportunity to comment.\7\
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    \7\ PRC Order No. 123, Notice and Order Concerning Priority Mail 
Contract 3 Negotiated Service Agreement, October 31, 2008 (Order No. 
123).
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II. Comments

    Comments were filed by the Public Representative.\8\ No filings 
were submitted by other interested parties. The Public Representative's 
comments focus principally on confidentiality and pricing under the 
contract. Public Representative Comments at 2-3.
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    \8\ Public Representative Comments in Response to United States 
Postal Service Request to Add Priority Mail Contract 3 to 
Competitive Product List, November 6, 2008 (Public Representative 
Comments).
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    The Public Representative states that a sufficient rationale for 
maintaining the confidentiality of the documents under seal has been 
provided by the Postal Service. The Public Representative reviewed the 
cost savings measures for the purposes of this contract and determines 
that the contract is advantageous to the Postal Service and beneficial 
to the general public. Id. He concludes, inter alia, that the contract 
should generate sufficient revenue to cover the product's attributable 
costs and contribute to the recovery of total institutional costs 
assigned to competitive products. Id. at 3-4.

III. Commission Analysis

    The Commission has reviewed the contract, the financial analysis 
provided under seal that accompanies it, and the comments filed by the 
Public Representative.
    Statutory requirements. The Commission's statutory responsibilities 
in this instance entail assigning Priority Mail Contract 3 to either 
the Market Dominant Product List or to the Competitive Product List. 39 
U.S.C. 3642. As part of this responsibility, the Commission also 
reviews the proposal for compliance with the Postal Accountability and 
Enhancement Act (PAEA) requirements. This includes, for proposed 
competitive products, a review of the provisions applicable to rates 
for competitive products. 39 U.S.C. 3633.
    Product list assignment. In determining whether to assign Priority 
Mail Contract 3 as a product to the Market Dominant Product List or the 
Competitive Product List, the Commission must consider whether

the Postal Service exercises sufficient market power that it can 
effectively set the price of such product substantially above costs, 
raise prices significantly, decrease quality, or decrease output, 
without risk of losing a significant level of business to other 
firms or offering similar products.

39 U.S.C. 3642(b)(1). If so, the product will be categorized as market 
dominant. The competitive category of products shall consist of all 
other products.
    The Commission is further required to consider the availability and 
nature of enterprises in the private sector engaged in the delivery of 
the product, the views of those who use the product, and the likely 
impact on small business concerns. 39 U.S.C. 3642(b)(3).
    The Postal Service asserts that its bargaining position is 
constrained by the existence of other shippers who can provide similar 
services, thus precluding it from taking unilateral action to increase 
prices without the risk of losing volume to private companies. Request, 
Attachment D, at 2-3. The Postal Service also contends that it may not 
decrease quality or output without risking the loss of business to 
competitors that offer similar expedited delivery services. Id. It 
further states that the contract partner supports the addition of the 
contract to the product list to effectuate the negotiated contractual 
terms. Id. at 3. Finally, the Postal Service states that the market for 
expedited delivery services is highly competitive and requires a 
substantial infrastructure to support a national network. It indicates 
that large carriers serve this market. Accordingly, the Postal Service 
states that it is unaware of any small business concerns that could 
offer comparable service for this customer. Id.
    No commenter opposes the proposed classification of Priority Mail 
Contract 3 as competitive. Having considered the statutory requirement 
and the support offered by the Postal Service, the Commission finds 
that Priority Mail Contract 3 is appropriately classified as a 
competitive product and should be added to the Competitive Product 
List.
    Cost considerations. The Postal Service's filing seeks to establish 
a new domestic Priority Mail product. The

[[Page 68347]]

contract is predicated on unit costs for major mail functions, e.g., 
window service, mail processing, and transportation, based on the 
shipper's mail characteristics.
    The Postal Service contends that adding the Priority Mail Contract 
3 product will result in processing Priority Mail pieces that are less 
costly for the Postal Service than the average Priority Mail piece. See 
Id. Attachment A. It believes that its financial analysis shows that 
these cost savings can be accomplished while ensuring that the contract 
covers its attributable costs, does not result in subsidization of 
competitive products by market dominant products, and increases 
contribution from competitive products. Id., Attachment E, at 1.
    Based on the data submitted and the comments received, the 
Commission finds that Priority Mail Contract 3 should cover its 
attributable costs (39 U.S.C. 3633(a)(2)), should not lead to the 
subsidization of competitive products by market dominant products (39 
U.S.C. 3633(a)(1)), and should have a positive effect on competitive 
products' contribution to institutional costs (39 U.S.C. 3633(a)(3)). 
Thus, an initial review of the proposed Priority Mail Contract 3 
indicates that it comports with the provisions applicable to rates for 
competitive products.
    The Postal Service shall promptly notify the Commission when the 
contract terminates but no later than the actual termination date. The 
Commission will then remove the contract from the Mail Classification 
Schedule at the earliest possible opportunity.
    In conclusion, the Commission approves Priority Mail Contract 3 as 
a new product. The revision to the Competitive Product List is shown 
below the signature of this Order and is effective upon issuance of 
this Order.
    It Is Ordered:
    1. Priority Mail Contract 3 (MC2009-4 and CP2009-5) is added to the 
Competitive Product List as a new product under Negotiated Service 
Agreements, Domestic.
    2. The Postal Service shall notify the Commission of the 
termination date of the contract as discussed in this order.
    3. The Secretary shall arrange for the publication of this order in 
the Federal Register.

List of Subjects in 39 CFR Part 3020

    Administrative practice and procedure; Postal Service.

    By the Commission.
Steven W. Williams,
Secretary.

0
For the reasons stated in the preamble, under the authority at 39 
U.S.C. 503, the Postal Regulatory Commission amends 39 CFR part 3020 as 
follows:

PART 3020--PRODUCT LISTS

0
1. The authority citation for part 3020 continues to read as follows:

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


0
2. Revise Appendix A to subpart A of part 3020--Mail Classification to 
read as follows:

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

Part A--Market Dominant Products

1000 Market Dominant Product List

First-Class Mail
    Single-Piece Letters/Postcards
    Bulk Letters/Postcards
    Flats
    Parcels
    Outbound Single-Piece First-Class Mail International
    Inbound Single-Piece First-Class Mail International
Standard Mail (Regular and Nonprofit)
    High Density and Saturation Letters
    High Density and Saturation Flats/Parcels
    Carrier Route
    Letters
    Flats
    Not Flat-Machinables (NFMs)/Parcels
Periodicals
    Within County Periodicals
    Outside County Periodicals
Package Services
    Single-Piece Parcel Post
    Inbound Surface Parcel Post (at UPU rates)
    Bound Printed Matter Flats
    Bound Printed Matter Parcels
    Media Mail/Library Mail
Special Services
    Ancillary Services
    International Ancillary Services
    Address List Services
    Caller Service
    Change-of-Address Credit Card Authentication
    Confirm
    International Reply Coupon Service
    International Business Reply Mail Service
    Money Orders
    Post Office Box Service
Negotiated Service Agreements
    HSBC North America Holdings Inc. Negotiated Service Agreement
    Bookspan Negotiated Service Agreement
    Bank of America corporation Negotiated Service Agreement
    The Bradford Group Negotiated Service Agreement

Market Dominant Product Descriptions

First-Class Mail
[Reserved for Class Description]
    Single-Piece Letters/Postcards
    [Reserved for Product Description]
    Bulk Letters/Postcards
    [Reserved for Product Description]
    Flats
    [Reserved for Product Description]
    Parcels
    [Reserved for Product Description]
    Outbound Single-Piece First-Class Mail International
    [Reserved for Product Description]
    Inbound Single-Piece First-Class Mail International
    [Reserved for Product Description]
Standard Mail (Regular and Nonprofit)
[Reserved for Class Description]
    High Density and Saturation Letters
    [Reserved for Product Description]
    High Density and Saturation Flats/Parcels
    [Reserved for Product Description]
    Carrier Route
    [Reserved for Product Description]
    Letters
    [Reserved for Product Description]
    Flats
    [Reserved for Product Description]
    Not Flat-Machinables (NFMs)/Parcels
    [Reserved for Product Description]
Periodicals
[Reserved for Class Description]
    Within County Periodicals
    [Reserved for Product Description]
    Outside County Periodicals
    [Reserved for Product Description]
Package Services
[Reserved for Class Description]
    Single-Piece Parcel Post
    [Reserved for Product Description]
    Inbound Surface Parcel Post (at UPU rates)
    [Reserved for Product Description]
    Bound Printed Matter Flats
    [Reserved for Product Description]
    Bound Printed Matter Parcels
    [Reserved for Product Description]
    Media Mail/Library Mail
    [Reserved for Product Description]
Special Services
[Reserved for Class Description]
    Ancillary Services
    [Reserved for Product Description]
    Address Correction Service
    [Reserved for Product Description]
    Applications and Mailing Permits
    [Reserved for Product Description]
    Business Reply Mail
    [Reserved for Product Description]
    Bulk Parcel Return Service
    [Reserved for Product Description]
    Certified Mail
    [Reserved for Product Description]
    Certificate of Mailing
    [Reserved for Product Description]
    Collect on Delivery
    [Reserved for Product Description]
    Delivery Confirmation
    [Reserved for Product Description]
    Insurance
    [Reserved for Product Description]
    Merchandise Return Service
    [Reserved for Product Description]
    Parcel Airlift (PAL)
    [Reserved for Product Description]
    Registered Mail
    [Reserved for Product Description]
    Return Receipt
    [Reserved for Product Description]
    Return Receipt for Merchandise
    [Reserved for Product Description]

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    Restricted Delivery
    [Reserved for Product Description]
    Shipper-Paid Forwarding
    [Reserved for Product Description]
    Signature Confirmation
    [Reserved for Product Description]
    Special Handling
    [Reserved for Product Description]
    Stamped Envelopes
    [Reserved for Product Description]
    Stamped Cards
    [Reserved for Product Description]
    Premium Stamped Stationery
    [Reserved for Product Description]
    Premium Stamped Cards
    [Reserved for Product Description]
    International Ancillary Services
    [Reserved for Product Description]
    International Certificate of Mailing
    [Reserved for Product Description]
    International Registered Mail
    [Reserved for Product Description]
    International Return Receipt
    [Reserved for Product Description]
    International Restricted Delivery
    [Reserved for Product Description]
    Address List Services
    [Reserved for Product Description]
    Caller Service
    [Reserved for Product Description]
    Change-of-Address Credit Card Authentication
    [Reserved for Product Description]
    Confirm
    [Reserved for Product Description]
    International Reply Coupon Service
    [Reserved for Product Description]
    International Business Reply Mail Service
    [Reserved for Product Description]
    Money Orders
    [Reserved for Product Description]
    Post Office Box Service
    [Reserved for Product Description]
Negotiated Service Agreements
[Reserved for Class Description]
    HSBC North America Holdings Inc. Negotiated Service Agreement
    [Reserved for Product Description]
    Bookspan Negotiated Service Agreement
    [Reserved for Product Description]
    Bank of America Corporation Negotiated Service Agreement
    The Bradford Group Negotiated Service Agreement

Part B--Competitive Products

Competitive Product List

Express Mail
    Express Mail
    Outbound International Expedited Services
    Inbound International Expedited Services
    Inbound International Expedited Services 1 (CP2008-7)
Priority Mail
    Priority Mail
    Outbound Priority Mail International
    Inbound Air Parcel Post
Parcel Select
Parcel Return Service
International
    International Priority Airlift (IPA)
    International Surface Airlift (ISAL)
    International Direct Sacks--M-Bags
    Global Customized Shipping Services
    Inbound Surface Parcel Post (at non-UPU rates)
    International Money Transfer Service
    International Ancillary Services
Special Services
    Premium Forwarding Service
Negotiated Service Agreements
    Domestic
    Express Mail Contract 1 (MC2008-5)
    Express Mail Contract 2 (MC2009-3 and CP2009-4)
    Parcel Return Service Contract 1 (MC2009-1 and CP2009-2)
    Priority Mail Contract 1 (MC2008-8 and CP2008-26)
    Priority Mail Contract 2 (MC2009-2 and CP2009-3)
    Priority Mail Contract 3 (MC2009-4 and CP2009-5)
    Outbound International
    Global Expedited Package Services (GEPS) Contracts
    GEPS 1 (CP2008-5, CP2008-11, CP2008-12, and CP2008-13, CP2008-
18, CP2008-19, CP2008-20, CP2008-21, CP2008-22, CP2008-23, and 
CP2008-24)
    Global Plus Contracts
    Global Plus 1 (CP2008-9 and CP2008-10)
    Global Plus 2 (MC2008-7, CP2008-16 and CP2008-17)
    Inbound Direct Entry Contracts with Foreign Postal 
Administrations (MC2008-6, CP2008-14 and CP2008-15)
Competitive Product Descriptions
    Express Mail
    [Reserved for Group Description]
    Express Mail
    [Reserved for Product Description]
    Outbound International Expedited Services
    [Reserved for Product Description]
    Inbound International Expedited Services
    [Reserved for Product Description]
    Priority
    [Reserved for Product Description]
    Priority Mail
    [Reserved for Product Description]
    Outbound Priority Mail International
    [Reserved for Product Description]
    Inbound Air Parcel Post
    [Reserved for Product Description]
    Parcel Select
    [Reserved for Group Description]
    Parcel Return Service
    [Reserved for Group Description]
    International
    [Reserved for Group Description]
    International Priority Airlift (IPA)
    [Reserved for Product Description]
    International Surface Airlift (ISAL)
    [Reserved for Product Description]
    International Direct Sacks--M-Bags
    [Reserved for Product Description]
    Global Customized Shipping Services
    [Reserved for Product Description]
    International Money Transfer Service
    [Reserved for Product Description]
    Inbound Surface Parcel Post (at non-UPU rates)
    [Reserved for Product Description]
    International Ancillary Services
    [Reserved for Product Description]
    International Certificate of Mailing
    [Reserved for Product Description]
    International Registered Mail
    [Reserved for Product Description]
    International Return Receipt
    [Reserved for Product Description]
    International Restricted Delivery
    [Reserved for Product Description]
    International Insurance
    [Reserved for Product Description]
    Negotiated Service Agreements
    [Reserved for Group Description]
    Domestic
    [Reserved for Product Description]
    Outbound International
    [Reserved for Group Description]

Part C--Glossary of Terms and Conditions [Reserved]

Part D--Country Price Lists for International Mail [Reserved]

[FR Doc. E8-27323 Filed 11-17-08; 8:45 am]
BILLING CODE 7710-FW-P