[Federal Register Volume 74, Number 24 (Friday, February 6, 2009)]
[Rules and Regulations]
[Pages 6230-6233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-2487]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket Nos. MC2009-15 and CP2009-21; Order No. 176]


New Domestic Mail Product

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adding Express Mail Contract 3 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 February 6, 2009, and is applicable beginning January 
27, 2009.

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

SUPPLEMENTARY INFORMATION: Regulatory History, 74 FR 1262 (January 12, 
2009).
    The Postal Service seeks to add a new product identified as Express 
Mail Contract 3 to the Competitive Product List. For the reasons 
discussed below, the Commission approves the Request.

I. Background

    On December 31, 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 Contract 3 to the Competitive Product List.\1\ The Postal Service 
asserts that the Express 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. MC2009-15.
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    \1\ Request of the United States Postal Service to Add Express 
Mail Contract 3 to Competitive Product List and Notice of 
Establishment of Rates and Class Not of General Applicability, 
December 31, 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. CP2009-21.
    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 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 the day 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 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 confidential. Id. at 2-3. It further believes that it would be 
inappropriate in this case to redact information through the 
``blackout'' method since it could provide information or clues about 
the name of the customer, the length and breadth of price charts, the 
complexity of annual adjustment mechanisms, or other similar sensitive 
information. Accordingly, it redacts the sensitive information using 
ellipses. Id. at 3.
    In Order No. 165, 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. 165, Notice and Order Concerning Express Mail 
Contract 3 Negotiated Service Agreement, January 5, 2009 (Order No. 
165).
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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 Contract 3 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. He 
notes that the Postal Service redacted information using ellipses 
rather than by the ``blackout'' method because the blackout method 
might provide information or clues regarding the name of the customer, 
the length and breadth of the price charts, the complexity of annual 
adjustment mechanisms, or other similar sensitive information. He 
believes that in this case the increased care might be warranted, but 
suggests that the Commission address this issue in its forthcoming 
rules regarding treatment of confidential information in Docket No. 
RM2008-1.
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    \8\ Public Representative Comments in Response to United States 
Postal Service Request to Add Express Mail Contract 3 to Competitive 
Product List, January 15, 2009 (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 accompanies it, and the 
comments filed by the Public Representative.
    Statutory requirements. The Commission's statutory responsibilities 
in this instance entail assigning Express Mail Contract 3 to either the 
Market Dominant Product List or to the Competitive Product List. 39 
U.S.C.

[[Page 6231]]

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 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 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, para. (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 para. (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 para. (h).
    No commenter opposes the proposed classification of Express Mail 
Contract 3 as competitive. Having considered the statutory requirements 
and the support offered by the Postal Service, the Commission finds 
that Express 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 financial analysis shows 
that Express Mail Contract 3 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 PRC Order No. 138, November 20, 2008, at 6-7.
    Based on the data submitted, the Commission finds that Express 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 Express 
Mail Contract 3 indicates that it comports with the provisions 
applicable to rates for competitive products.
    Redactions. The Public Representative helpfully suggests that the 
Postal Service's method to redact certain sensitive information could 
be addressed in more detail in Docket No. RM2008-1. It is the 
Commission's understanding that the Postal Service now has the 
technology to use graphical, black box redaction methods. See Dockets 
No. MC2009-6 and CP2009-7, Public Representative Comments in Response 
to Order No. 125, November 10, 2008 at 10. Graphical redactions (as 
opposed to ellipses) are the most easily understandable form of 
redaction.
    As a general matter, it is not apparent how graphical redaction 
methods could have resulted in harm to the Postal Service. If, 
nonetheless, the Postal Service chooses to use ellipses, it should more 
fully justify (under seal if necessary) the use of that method, 
including how graphical redactions compromise the confidentiality of 
the information submitted and can cause harm to the Postal Service.\9\
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    \9\ In this case, for example, the Postal Service states that 
the use of graphical redactions could provide information or clues 
on (1) the name of the customer; (2) the length and breadth of price 
charts; (3) the complexity of the annual adjustment mechanisms; and 
(4) other similar sensitive information. Request at 3. It offers no 
support for its position.
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    Other considerations. The Postal Service shall promptly notify the 
Commission of the scheduled termination date of the agreement. If the 
agreement terminates earlier than anticipated, the Postal Service shall 
inform the Commission prior to the new termination date. The Commission 
will then remove the product from the Mail Classification Schedule at 
the earliest possible opportunity.
    In conclusion, the Commission approves Express 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.

IV. Ordering Paragraphs

    It is Ordered:
    1. Express Mail Contract 3 (MC2009-15 and CP2009-21) 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 scheduled 
termination date, and update the Commission if the termination date 
changes for either 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.

    Dated: January 27, 2009.

    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 
Schedule to read as follows:

[[Page 6232]]

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
    Inbound International
    Canada Post--United States Postal Service Contractual Bilateral 
Agreement for Inbound
    Market Dominant Services
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

Competitive Product List
Express Mail
    Express Mail
    Outbound International Expedited Services
    Inbound International Expedited Services
    Inbound International Expedited Services 1 (CP2008-7)
    Inbound International Expedited Services 2 (MC2009-10 and 
CP2009-12)
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)

[[Page 6233]]

    Express Mail Contract 3 (MC2009-15 and CP2009-21)
    Express Mail & Priority Mail Contract 1 (MC2009-6 and CP2009-7)
    Express Mail & Priority Mail Contract 2 (MC2009-12 and CP2009-
14)
    Express Mail & Priority Mail Contract 3 (MC2009-13 and CP2009-
17)
    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)
    Priority Mail Contract 4 (MC2009-5 and CP2009-6)
    Outbound International
    Global Direct Contracts (MC2009-9, CP2009-10, and CP2009-11)
    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. E9-2487 Filed 2-5-09; 8:45 am]
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