[Federal Register Volume 74, Number 64 (Monday, April 6, 2009)]
[Rules and Regulations]
[Pages 15384-15387]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-7680]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket Nos. MC2009-21 and CP2009-26; Order No. 197]


New Domestic Mail Product

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adding the Postal Service's Priority Mail 
Contract 5 negotiated service agreement to the Competitive Product 
List. This action is consistent with changes in a recent law governing 
postal operations. Republication of the lists of market dominant and 
competitive products is also consistent with new requirements in the 
law.

DATES: Effective April 6, 2009 and is applicable beginning March 30, 
2009.

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

SUPPLEMENTARY INFORMATION:
    Regulatory History, 74 FR 12406 (March 24, 2009).

I. Background

    The Postal Service seeks to add a new product identified as 
Priority Mail Contract 5 to the Competitive Product List. For the 
reasons discussed below, the Commission approves the Request.
    On March 13, 2009, 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 5 to the Competitive Product List.\1\ The Postal Service 
asserts that the Priority Mail Contract 5 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. MC2009-21.
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    \1\ Request of the United States Postal Service to Add Priority 
Mail Contract 5 to Competitive Product List and Notice of 
Establishment of Rates and Class Not of General Applicability, March 
13, 2009 (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. CP2009-26.

[[Page 15385]]

    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 5; \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 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, Mary Prince Anderson, 
Acting 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 
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. 193, 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. 193, Notice and Order Concerning Priority Mail 
Contract 5 Negotiated Service Agreement, March 17, 2009 (Order No. 
193).
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II. Comments

    Comments were filed by the Public Representative.\8\ No comments 
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 
Priority Mail Contract 5 agreement comports with the requirements of 
title 39. Id. at 4. He further states that the agreement appears to be 
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 Priority Mail Contract 5 to 
Competitive Product List and Notice of Establishment of Rates and 
Class Not of General Applicability, March 25, 2009 (Public 
Representative Comments).
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    The Public Representative believes that the Postal Service has 
provided adequate justification for maintaining confidentiality in this 
case. Id. at 2-3. He indicates that several contractual provisions are 
mutually beneficial to the parties and general public. Id.

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 Priority Mail Contract 5 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 5 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 Priority Mail 
Contract 5 as competitive. Having considered the statutory requirements 
and the support offered by the Postal Service, the Commission finds 
that Priority Mail Contract 5 is appropriately classified as a 
competitive product and should be added to the Competitive Product 
List.
    Cost considerations. The Postal Service presents a financial 
analysis showing that Priority Mail Contract 5 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.
    Based on the data submitted, the Commission finds that Priority 
Mail Contract 5 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 
proposed Priority Mail Contract 5 indicates that it comports with the 
provisions applicable to rates for competitive products.
    The electronic files submitted in support of the Request did not 
include all supporting data. Future requests must provide all 
electronic files showing calculations in support of the financial 
models associated with the request. A failure to provide such 
information may delay resolution of requests in the future.
    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

[[Page 15386]]

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 Priority Mail Contract 5 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. Priority Mail Contract 5 (MC2009-21 and CP2009-26) 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 termination occurs prior 
to that date, 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
    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

[[Page 15387]]

    [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)
    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)
    Express Mail & Priority Mail Contract 4 (MC2009-17 and CP2009-
24)
    Express Mail & Priority Mail Contract 5 (MC2009-18 and CP2009-
25)
    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)
    Priority Mail Contract 5 (MC2009-21 and CP2009-26)
    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 International
    Inbound Direct Entry Contracts With Foreign Postal 
Administrations (MC2008-6, CP2008-14 and CP2008-15)
    International Business Reply Service Competitive Contract 1 
(MC2009-14 and CP2009-20)
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. E9-7680 Filed 4-3-09; 8:45 am]
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