[Federal Register Volume 74, Number 159 (Wednesday, August 19, 2009)]
[Notices]
[Pages 41947-41948]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-19854]


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POSTAL REGULATORY COMMISSION

[Docket No. R2009-5; Order No. 276]


Postal Service Price Changes

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: This document discusses the Commission's establishment of a 
docket to a Postal Service request to adjust prices for a temporary 
First-Class Mail Incentive Program.

DATES: Comments are due August 31, 2009.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov.

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

SUPPLEMENTARY INFORMATION:

I. Overview
II. Postal Service Filing
III. Commission Action
IV. Ordering Paragraphs

I. Overview

    On August 11, 2009, the Postal Service filed with the Commission a 
notice announcing its intention, pursuant to 39 U.S.C. 3622 and 39 CFR 
part 3010, to adjust prices for certain First-Class Mail presorted 
letters, flats and cards sent by qualifying mailers.\1\ The Postal 
Service characterizes the planned adjustment as a temporary First-Class 
Mail Incentive Program (Program) to spur volume growth during the 
current recession. Key elements of the Program include a 20 percent 
rebate on qualifying incremental volume; certain volume thresholds; and 
a 3-month duration, extending from October 1, 2009 through December 31, 
2009. Id. at 2-3.
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    \1\ United States Postal Service Notice of Market-Dominant Price 
Adjustment, August 11, 2009 (Notice). The Postal Service also refers 
to the qualifying presorted pieces as non-parcel First-Class Mail. 
See, for example, Id. at 4.
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    The Notice addresses plans for public notice; program description 
and administration; price cap compliance; statutory objectives and 
factors; workshare discounts; and impact on preferred rates. A schedule 
of the new temporary prices and conforming revisions to Mail 
Classification Schedule language appear in Appendix A to the Notice in 
compliance with Commission rules 3010.14(a)(1) and 3010.14(b)(9).

II. Postal Service Filing

    Program description. The Postal Service asserts that the proposed 
Program will give eligible companies a 20 percent postage rebate on 
qualifying presort letter, flat and card volumes mailed between October 
1, 2009 and December 31, 2009. Id. Qualifying volume is defined as a 
single company's First-Class Mail volume over and above a predetermined 
threshold. Id. at 3.
    Eligibility; rebate threshold. To be eligible to participate in the 
Program, a company must have mailed 500,000 or more non-parcel First-
Class Mail pieces between October 1 and December 31 in both 2007 and 
2008 through company-owned permit accounts or through permits set up on 
the company's behalf by a Mail Service Provider. Id. Participants must 
then exceed a company-specific threshold during October 1, 2009 through 
December 31, 2009 to qualify for the incentive rebate.\2\ Incremental 
volume mailed by an eligible, participating company above the 
calculated threshold will earn a 20 percent rebate.
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    \2\ This threshold is determined by computing the ratio of the 
October 1-December 31, 2008 non-parcel First-Class Mail presorted 
volume to the October 1-December 31, 2007 non-parcel First-Class 
Mail presorted volume. The result is then multiplied by the 
company's October 1-December 31, 2008 non-parcel First-Class Mail 
presorted volume. Id.
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    Rebate calculation; credit. The rebate will be calculated as the 
average revenue per piece for all eligible mail volume during the 
program period multiplied by the incremental volume above the threshold 
during the program period. It will be credited to the company's permit 
trust account. Id.
    Program intent. The stated intent of the Program is to provide an 
incentive for customers to increase non-parcel First-Class Mail 
presorted volume above the volume they otherwise would have sent. To 
protect this core element of the Program, the Postal Service includes 
provisions to address the possibility of strategic shifting or 
withholding of volume. Id. at 4.
    Program administration. The Notice addresses several aspects of 
program administration, including methods for contacting eligible 
mailers; procedures for establishing company thresholds and crediting 
rebates to permit trust accounts; data collection and reporting 
(including filing some data under seal); financial impact; and risk. 
See generally id. at 4-8.
    Under the data collection plan, the Postal Service will submit 
Program-related data to the Commission 90 days after the payment of 
incentive rebates. The Notice describes specific components of the 
plan, notes that some participant data will be filed under seal, and 
states that actual administrative costs will be identified. Id. at 6.
    With respect to the financial aspects of the Program, the Postal 
Service expects, based on the 20 percent rebate and the expressed 
interest of customers, a contribution increase of around $24 million 
and a revenue increase, net of the 20 percent rebate, of $43 million. 
It anticipates new volume of about 103 million pieces, which it says 
will generate about $31 million in additional revenue and $16 million 
in contribution. It also expects about 103 million pieces to ``buy up'' 
from Standard Mail, providing an additional $12 million in revenue and 
$8 million in contribution. Id. at 7. Administrative costs are expected 
to total $809,000, and to be easily covered by the contribution 
generated from additional volume. Id.
    The Postal Service's primary measure of success will be incremental 
revenue and volume growth over the threshold for participating 
customers, but qualitative aspects, such as the Postal

[[Page 41948]]

Service's ability to efficiently and effectively administer the program 
and customer feedback, also will be monitored. Id. at 5-6.
    Conformance with public notice and other requirements. In 
conformance with rule 3010.14(a), the Postal Service certifies that it 
will inform customers of the planned price adjustments in numerous 
ways. Id. at 1. In addition to the formal Notice filed with the 
Commission, these include notice via USPS.com, the Postal Explorer 
website, the DMM Advisory, the P&C Weekly, a press release, PCC 
Insider, MailPro, the Postal Bulletin, and the Federal Register. Id. at 
1-2. The Postal Service identifies Greg Dawson as the official contact 
for Commission queries. Id. at 2.
    Impact on the price cap. The Postal Service proposes to treat the 
Program, for purposes of price cap compliance, in a manner it 
characterizes as ``mathematically analogous to the procedure described 
in Rule 3010.24.'' Id. at 8. It explains that this means it intends to 
ignore the effect of the price decrease resulting from the program on 
the price cap for both future and current prices, and therefore has 
made no calculation of cap or price changes described in rule 
3010.14(b)(1) through (4). Id.
    Statutory objectives and factors. The Notice further provides, in 
compliance with rules 3010.14(b)(5) through 3010.14(b)(8), the Postal 
Service's assessment of how the planned Program helps achieve the 
objectives of 39 U.S.C. 3622(b) and properly takes into account the 
factors of 39 U.S.C. 3622(c). See generally id. at 8-13. With respect 
to statutory objectives, this includes the Postal Service's conclusion 
that to a large extent, the establishment of the Program either does 
not substantially alter the degree to which the First-Class Mail prices 
already address the statutory objectives, or its belief that those 
objectives are addressed by the design of the system itself. Id. at 10. 
The Postal Service also observes that establishment of this Program, 
which is designed to encourage First-Class Mail presort letters, flats 
and cards volume growth during a recession, is an example of the 
increased flexibility provided to the Postal Service under the Postal 
Accountability and Enhancement Act (PAEA) of 2006. Id. It further 
states that the fact that the program will provide an incentive for 
profitable new mail and provide a boost to a key customer segment will 
enhance the financial position of the Postal Service.
    In terms of statutory factors, the Postal Service asserts that, as 
with the objectives, the establishment of the Program does not 
substantially alter the degree to which First-Class Mail prices address 
many of them. Id. at 12. It adds that the Program is ``a prime example 
of how the Postal Service can utilize the pricing flexibility provided 
under the PAEA in order to encourage increased mail volume.'' Id. It 
maintains that the Program will help to counteract the effect of the 
current recession on business mailers, and provide a boost to a key 
customer segment. It also says that although the rebates are material, 
the Program will not affect the ability of First-Class Mail to cover 
its attributable costs, and that as a result of the Program, First-
Class Mail as a whole will make an increased contribution toward 
overhead costs. Id. at 12-13.
    Workshare discounts. The Postal Service states that to the extent 
the Program affects discounts between presort categories, it will 
shrink them, but asserts that the Program itself is not worksharing, 
nor should its effects be considered a modification of, or change to, 
First-Class Mail worksharing discounts. Id. at 13. It asserts that the 
Program is a temporary incentive intended to drive additional First-
Class Mail presort volume and, as such, is not tied to any specific 
mail preparation or induction practice. Id. It suggests that the 
discounts, in this sense, are similar to the incremental discounts the 
Commission has approved in a number of negotiated service agreements or 
the IMb discount that will take effect in the fall. Id.
    Preferred rates. The Postal Service asserts that the Program will 
have no impact on any preferred rates.

III. Commission Action

    Establishment of docket; comments. Pursuant to its rules 
implementing the PAEA, the Commission establishes Docket No. R2009-5 to 
consider all matters related to the Notice. 39 CFR 3010.13(a). It also 
issues the instant Order to provide notice of the Postal Service's 
filing. Therein, consistent with provision of a 20-day comment period, 
starting from the date the Postal Service filed its Notice, the 
Commission directs that comments are due no later than August 31, 2009. 
39 CFR 3010.13(a)(5). Interested persons may express views and offer 
comments on whether the planned price adjustment is consistent with the 
policies of 39 U.S.C. 3622 and with applicable requirements of 39 CFR 
part 3010.
    Public representative. Commission rule 3010.13(a)(4), which 
implements 39 U.S.C. 505, requires the Commission to identify, in its 
notice addressing the Postal Service's filing, an officer of the 
Commission to represent the interests of the general public in this 
docket. In satisfaction of this requirement, the Commission appoints 
Richard A. Oliver.
    Other matters. Pursuant to rule 3010.13(c), the Commission will 
issue its determination in this proceeding by September 14, 2009.

IV. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. R2009-5 to consider 
matters raised in the Postal Service's August 11, 2009 filing.
    2. Interested persons may submit comments on the planned price 
adjustments. Comments are due August 31, 2009.
    3. Pursuant to 39 U.S.C. 505, the Commission appoints Richard A. 
Oliver to represent the interests of the general public in this 
proceeding.
    4. The Commission directs the Secretary of the Commission to 
arrange for prompt publication of this document in the Federal 
Register.

    By the Commission.
Ann C. Fisher,
Acting Secretary.
[FR Doc. E9-19854 Filed 8-18-09; 8:45 am]
BILLING CODE 7710-FW-P