[Federal Register Volume 73, Number 246 (Monday, December 22, 2008)]
[Rules and Regulations]
[Pages 78186-78189]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30420]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket Nos. MC2009-12 and CP2009-14; Order No. 149]


Administrative Practice and Procedure, Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adding Express Mail and Priority Mail 
Contract 2 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 74213 (December 5, 
2008).

I. Background

    The Postal Service seeks to add a new product identified as Express 
Mail & Priority Mail Contract 2 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 Express 
Mail & Priority Mail Contract 2 to the Competitive Product List.\1\ The 
Postal Service asserts that the Express Mail & Priority Mail Contract 2 
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. MC2009-12.
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    \1\ Request of the United States Postal Service to Add Express 
Mail & Priority Mail Contract 2 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. CP2009-14.
    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 Express 
Mail & Priority Mail Contract 2 and certification of the Governors' 
vote; \2\ (2) a redacted version of the contract which, among other 
things, provides that the contract will expire 3 years from the 
effective date, which is proposed to be 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 contract 
is not risk free, but concludes that the risks are manageable.
    \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. 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 Express 
Mail & Priority Mail Contract 2, 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. 143, 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 Express Mail 
& Priority Mail Contract 2 Negotiated Service Agreement, December 2, 
2008 (Order No. 143).
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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 
states that the Postal Service's filing complies with applicable 
Commission rules of practice and procedure, and concludes that the 
Express Mail & Priority Mail Contract 2 agreement comports with the 
requirements of title 39. Public Representative Comments at 4. He 
further states that the agreement appears beneficial to the general 
public. Id. at 1.
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    \8\ Public Representative Comments in Response to United States 
Postal Service Request to Add Express Mail & Priority Mail Contract 
2 to Competitive Product List and Notice of Establishment of Rates 
and Class Not of General Applicability, December 10, 2008 (Public 
Representative Comments).
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III. Commission Analysis

    The Commission has reviewed the Request, the contract, the 
financial analysis provided under seal that

[[Page 78187]]

accompanies it, and the comments filed by the Public Representative.
    Statutory requirements. The Commission's statutory responsibilities 
in this instance entail assigning Express Mail & Priority Mail Contract 
2 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 Express 
Mail & Priority Mail Contract 2 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, paragraph (d). 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 Competitive Product List to effectuate the negotiated 
contractual terms. Id. at paragraph (g). 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. at paragraph (h).
    No commenter opposes the proposed classification of Express Mail & 
Priority Mail Contract 2 as competitive. Having considered the 
statutory requirements and the support offered by the Postal Service, 
the Commission finds that Express Mail & Priority Mail Contract 2 is 
appropriately classified as a competitive product and should be added 
to the Competitive Product List.
    Cost considerations. The Postal Service's financial analysis shows 
that Express Mail & Priority Mail Contract 2 results in cost savings 
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. The 
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 Commission notes that in evaluating costs under a prospective 
contract compared to the average, the Postal Service should take into 
account all departures from average cost that may be due to services 
provided under the contract. The failure to do so, while having no 
material effect on the underlying financial analysis of the contract in 
this instance, hampers the timely review of the Postal Service's 
financial analysis. See also PRC Order No. 138, November 20, 2008, at 
6-7.
    Based on the data submitted, the Commission finds that Express Mail 
& Priority Mail Contract 2 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 Express Mail & Priority Mail Contract 2 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 Express Mail & Priority Mail 
Contract 2 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. Express Mail & Priority Mail Contract 2 (MC2009-12 and CP2009-
14) 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 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

[[Page 78188]]

    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)
    Express Mail & Priority Mail Contract 2 (MC2009-12 and CP2009-
14)
    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
    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]

[[Page 78189]]

    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. E8-30420 Filed 12-19-08; 8:45 am]
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