[Federal Register Volume 73, Number 246 (Monday, December 22, 2008)]
[Rules and Regulations]
[Pages 78189-78192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30373]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket Nos. MC2009-11 and CP2009-13; Order No. 148]


New Domestic Mail Product

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adding Parcel Select & Parcel Return Service 
Contract 1 to the Competitive Product List. This action is consistent 
with changes in a recent law governing postal operations and a recent 
Postal Service request. Republication of the lists of market dominant 
and competitive products is also consistent with new requirements in 
the law.

DATES: Effective December 22, 2008.

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

SUPPLEMENTARY INFORMATION: Regulatory History, 73 FR 74212 (December 5, 
2008).

I. Background

    The Postal Service seeks to add a new product identified as Parcel 
Select & Parcel Return Service Contract 1 to the Competitive Product 
List. For the reasons discussed below, the Commission approves the 
Request.
    On November 25, 2008, the Postal Service filed a formal request 
pursuant to 39 U.S.C. 3642 and 39 CFR 3020.30 et seq. to add Parcel 
Select & Parcel Return Service Contract 1 to the Competitive Product 
List.\1\ The Postal Service asserts that the Parcel Select & Parcel 
Return Service Contract 1 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. MC2009-11.
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    \1\ Request of the United States Postal Service to Add Parcel 
Select & Parcel Return Service Contract 1 to Competitive Product 
List and Notice of Establishment of Rates and Class Not of General 
Applicability, November 25, 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. CP2009-13.
    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 Parcel 
Select & Parcel Return Service Contract 1 and certification of the 
Governors' vote; \2\ (2) a redacted version of the contract which, 
among other things, provides that the contract will expire on May 31, 
2011, and will become effective 1 day after the Commission issues all 
regulatory approvals; \3\ (3) requested changes in the Mail 
Classification Schedule 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 
agreement remains profitable regardless of the discount level and 
results in a positive contribution impact of the Postal Service 
under all conditions.
    \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, Daniel J. Barrett, 
Acting Manager, Product & Business Development, Ground Shipping 
Services, 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. W. Ashley Lyons, Manager, Corporate 
Financial Planning, Finance Department, certifies 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 unredacted Governors' Decision and the unredacted 
contract, 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 
confidential. Id. at 2-3.
    In Order No. 142, 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. 142, Notice and Order Concerning Parcel Select 
Parcel Return Service Contract 1 Negotiated Service Agreement, 
December 2, 2008 (Order No. 142).
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II. Comments

    Comments were filed by the Public Representative and Newgistics, 
Inc.\8\ The Public Representative Comments focus principally on the 
adequacy of cost coverage, appropriate classification of the product, 
and overall transparency. Public Representative Comments at 1-2. He 
concludes that the agreement meets the important public interest in 
adequate cost coverage and believes the agreement is properly 
classified as a competitive product. Id.
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    \8\ Public Representative Comments in Response to Order No. 142, 
December 10, 2008 (Public Representative Comments); Response from 
Bill Razzouk, Newgistics to Postal Regulatory Commission Notice and 
Order Concerning Parcel Select & Parcel Return Service Contract 1 
Negotiated Service Agreement Order No. 142, December 10, 2008 
(Newgistics Comments).
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    The Public Representative also raises an issue with respect to 
transparency and the method that the Postal Service uses in this case 
to redact its filings. He notes that the Commission's rules contemplate 
text-based pdf files where possible. Id. at 5; accord 39 CFR 3001.10. 
Despite these minor caveats, the Public Representative believes that 
the Postal Service should be commended for continuing to proceed 
diligently toward accommodating transparency concerns in a very 
competitive business environment.
    Newgistics' comments focus on the financial gain to the Postal 
Service. It believes that the contract must demonstrate that it will 
provide ``new volumes and revenues'' to the Postal Service. It wants to 
ensure that the Postal Service does not take volume from other postal 
mail service providers. It notes that shifting mail from one Postal 
Service customer to another does not result in a contribution gain for 
the Postal Service. Newgistics also contends

[[Page 78190]]

that contract rates should not provide an unfair advantage to one 
company over another.

III. Commission Analysis

    The Commission has reviewed the Request, the contract, the 
financial analysis provided under seal that accompanies it, and the 
comments filed by the Public Representative and Newgistics.
    Statutory requirements. The Commission's statutory responsibilities 
in this instance entail assigning Parcel Select & Parcel Return Service 
Contract 1 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 Parcel 
Select & Parcel Return Service Contract 1 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 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. The Postal Service also contends that it may not 
decrease quality or output without risking the loss of business to 
competitors that offer similar delivery services. Id. It further states 
that the contract partner supports the addition of the contract to the 
Competitive Product List to effectuate the negotiated contractual 
terms. Id. at 3. Finally, the Postal Service states that the market for 
ground 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 Parcel Select & 
Parcel Return Service Contract 1 as competitive. Having considered the 
statutory requirements and the support offered by the Postal Service, 
the Commission finds that Parcel Select & Parcel Return Service 
Contract 1 is appropriately classified as a competitive product and 
should be added to the Competitive Product List.
    Cost considerations. The Commission's library reference PRC-CP2009-
13-NP-LR-1 analyzes the financial impact of this of this contract. 
Library Reference PRC-CP2009-13-NP-LR-1 updates the original data 
submitted by the Postal Service and provides calculations for revenue 
per piece for each of the negotiated service agreement's rate 
categories. The results show that the updated data do not cause the 
financial results to vary significantly.
    Based on the data submitted and the Commission's analysis shown in 
Library Reference PRC-CP2009-13-NP-LR-1, the Commission finds that 
Parcel Select & Parcel Return Service Contract 1 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 Parcel Select & Parcel Return 
Service Contract 1 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.
    Public Representative comments. As evidenced by filings in other 
recent negotiated service agreement dockets, it appears that the Postal 
Service typically has the ability to properly redact files using 
blackouts while maintaining the documents' ``searchability'' 
characteristics. The Postal Service should strive to ensure that all 
redacted documents are properly redacted using blackouts unless it 
specifically justifies the use of other redaction methods in its 
filings.
    Newgistics comments. For the Commission to approve new competitive 
products and their accompanying rates not of general applicability, the 
law requires that the contracts meet the requirements of 39 U.S.C. 
3633, 3642 and accompanying regulatory criteria. The Postal Service 
should strive to obtain new volumes and revenues, but the law does not 
require new volumes and revenues for the Postal Service to enter into 
negotiated service agreements for competitive products. Additionally, 
section 403(c) bars undue discrimination and unreasonable preferences. 
However, no evidence of undue discrimination or unreasonable 
preferences has been shown here. If Newgistics believes that such a 
violation exists, it may file a complaint with the Commission pursuant 
to 39 U.S.C. 3662 to explore the issue.
    In conclusion, the Commission approves Parcel Select & Parcel 
Return Service Contract 1 as a new competitive 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. Parcel Select & Parcel Return Service Contract 1 (MC2009-11 and 
CP2009-13) 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:

[[Page 78191]]

Appendix A to Subpart A of 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]
    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
2000 Competitive Product List
Express Mail
    Express Mail
    Outbound International Expedited Services
    Inbound International Expedited Services
    Inbound International Expedited Services 1 (CP2008-7)
Priority Mail
    Priority Mail
    Outbound Priority Mail International
    Inbound Air Parcel Post
Parcel Select
Parcel Return Service
International
    International Priority Airlift (IPA)
    International Surface Airlift (ISAL)
    International Direct Sacks--M-Bags
    Global Customized Shipping Services
    Inbound Surface Parcel Post (at non-UPU rates)
    Canada Post-United States Postal Service Contractual Bilateral 
Agreement for Inbound Competitive Services (MC2009-8 and CP2009-9)
    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)
    Express Mail & Priority Mail Contract 1 (MC2009-6 and CP2009-7)
    Parcel Return Service Contract 1 (MC2009-1 and CP2009-2)
    Parcel Select & Parcel Return Service Contract 1 (MC2009-11 and 
CP2009-13)
    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)
    Priority Mail Contract 4 (MC2009-5 and CP2009-6)
    Outbound International

[[Page 78192]]

    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. E8-30373 Filed 12-19-08; 8:45 am]
BILLING CODE 7710-FW-P