[Federal Register Volume 75, Number 45 (Tuesday, March 9, 2010)]
[Notices]
[Pages 10843-10845]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4915]


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POSTAL REGULATORY COMMISSION

[Docket No. R2010-3; Order No. 416]


Special Summer Postal Rate Program

AGENCY:  Postal Regulatory Commission.

ACTION:  Notice.

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SUMMARY:  The Postal Service plans to offer a special volume pricing 
incentive for certain Standard Mail this summer. This document 
announces establishment of a docket to consider the plan, provides 
certain information about the plan, and provides additional information 
about related procedures, including an opportunty for public comment.

DATES:  Comments are due: March 18, 2010.

ADDRESSES:  Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov. Commenters who cannot submit their 
views electronically should contact the person identified in the For 
Further Information Contact section by telephone for advice on 
alternatives to electronic filing.

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

SUPPLEMENTARY INFORMATION:

Table of Contents

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

I. Overview

    On February 26, 2010, the Postal Service filed with the Commission 
a notice announcing its intention to adjust prices for Standard Mail 
letters and flats pursuant to 39 U.S.C. 3622 and 39 CFR part 3010.\1\ 
The proposed adjustment is another Standard Mail Volume Incentive 
Pricing Program (Standard Mail Incentive Program) similar to the one 
introduced in May 2009,\2\ and subsequently approved by the 
Commission.\3\ The planned implementation date of the Standard Mail 
Incentive Program is July 1, 2010, and the planned expiration date is 
September 30, 2010.
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    \1\ United States Postal Service Notice of Market-Dominant Price 
Adjustment, February 26, 2010 (Notice).
    \2\ Docket No. R2009-3, United States Postal Service Notice of 
Market-Dominant Price Adjustment, May 1, 2009.
    \3\ Docket No. R2009-3, Order Approving Standard Mail Volume 
Incentive Pricing Program, Order No. 219, June 4, 2009.
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II. Postal Service Filing

    Standard Mail Incentive Program. The Standard Mail Incentive 
Program, like that introduced in Docket No. R2009-3, will give eligible 
companies a 30 percent postage rebate on qualifying Standard Mail 
letters and flats above a predetermined threshold agreed upon by both 
the mailer and the Postal Service. Notice at 4. The threshold is the 
amount of Standard Mail for each participating company sent through the 
Permit(s) or Ghost Permit(s) or through its Mail Service Provider (MSP) 
from July 1 to September 30, 2010 plus 5 percent of the volume for the 
same period last year (SPLY + 5 percent). Id. Based on the Postal 
Service's quarter 2 forecast of less than 1 percent volume growth from 
July 1 through September 30, 2010, a participant's volumes must grow 
significantly more than average before qualifying for any rebate. Id.
    To ensure against mailers shifting June volume to July, or October 
volume to September, an additional volume threshold will be established 
for June through October 2010, using the same SPLY + 5 percent formula. 
If the actual volumes for that period do not meet the respective 
month's threshold (SPLY + 5 percent), the difference will be deducted 
from the Standard Mail Incentive Program qualifying volume. Id.
    Eligibility for the Standard Mail Incentive Program requires 
qualifying mailers to have mailed 350,000 or more Standard Mail letters 
and flats between July 1 and September 30, 2009 through one or more 
permit imprint advance deposit account(s) owned by the company or 
through permits set up on behalf of the company by a MSP. Id. at 3. 
Approximately 3,525 customers will be eligible to participate in the 
sale, representing 67 percent of Standard Mail volume. Id. To 
participate, documentation specifying that the applicant is the owner 
of the mail is required. Id. MSPs are not eligible, and participating 
mailers are not eligible for any other concurrent postal incentive

[[Page 10844]]

program that would result in multiple discounts. Id. at 3-4.
    The objective of the Standard Mail Incentive Program is to generate 
incremental Standard Mail volume and revenue. Volume is estimated to 
increase between 311 million and 1.1 billion new pieces. Id. at 2. The 
Standard Mail Incentive Program is designed to increase mail volume 
during a typically low-volume summer period. The program is intended to 
benefit customers, who will have the opportunity to foster 
relationships with existing and new patrons with limited investment, 
and the Postal Service, which can utilize current excess capacity to 
deliver the additional low-cost volumes during the summer months, 
improve its data systems, and enhance relationships with customers. Id. 
at 3.
    The Postal Service notes that the volume threshold is lower than 
last year and will result in about 400 more customers being eligible to 
participate. Id. at 9. It asserts that additional costs for increased 
labor or technology solutions to administer the program prohibit 
accepting every mailer of Standard Mail. In addition, it contends that 
extending eligibility to small businesses might result in rebates on 
mail that would be sent anyway. Id.
    Conformance with 39 CFR part 3010. The Postal Service represents, 
in conformance with the notice requirements of 39 CFR 3010.14(a)(3), 
that it will issue public notice of the price changes at least 45 days 
before the planned implementation date via several additional means, 
including a press release, notice on its Web site (http://www.usps.com) 
and its Postal Explorer Web site, and in future issues of MailPro, the 
Postal Bulletin, and the Federal Register. The Postal Service 
identifies Greg Dawson, Manager, Pricing Strategy, as the official 
available to provide prompt responses to requests for clarification 
from the Commission. Id. at 2.
    Rule 3010.14(b)(9) requires that the Postal Service's notice 
include every change to the product descriptions within the Mail 
Classification Schedule (MCS) necessitated by the planned price 
adjustments. The Postal Service presented proposed changes for the 
previous Standard Mail Incentive Program in Appendix A to its notice in 
Docket No. R2009-3 based on draft MCS language being developed by the 
Commission in cooperation with the Postal Service. The Postal Service 
states that the Notice is covered by the current MCS; thus, its Notice 
does not include a new schedule of proposed MCS language. Id. at 1, 
n.1.
    Program administration. A Postal Service letter to all eligible 
Standard Mail customers will provide instructions for mailers who wish 
to apply for the program and how to verify their threshold volumes 
through an enrollment process. Mailers not receiving a letter who wish 
to apply may contact [email protected]. After the Postal Service and 
the mailer agree on threshold volumes, a Certification Letter must be 
signed for full enrollment. Certified volumes will be used to calculate 
the rebates due at the end of the Standard Mail Incentive Program with 
data from Postal One! and CBCIS. Rebates, after adjustments, will be 
added to the company's Trust Account. Each mailer is to certify, 
similar to the certification required by PS Form 3600, Postage 
Statement, the data used to calculate the volume thresholds and 
rebates. Id. at 5.
    Financial impact. The Standard Mail Incentive Program is expected 
to provide incremental revenue of about $34 million to $157 million 
from new volume. Customers whose mail would increase without the 
Incentive Program will benefit through a postage discount on volume 
above their certified threshold. Based on the previous Standard Mail 
Incentive Program, the Postal Service does not expect a significant buy 
down from First-Class Mail. Id. at 6.
    The Postal Service believes there is excess capacity to process and 
deliver additional volume so that, in the short run, additional volume 
will incur reduced additional attributable costs that may be below the 
standard estimate of long-run attributable cost. Appendix A to the 
Notice includes an explanation of the Postal Service's assessment of 
excess capacity and attributable costs. Id. at 7. Unlike the previous 
Standard Mail Incentive Program, the Postal Service presumes that the 
increased volumes may incur some additional carrier costs to deliver 
the incremental volumes, but the Postal Service does not expect short-
run cost increases in buildings, new equipment, and vehicles. Id.
    The Postal Service notes that the Standard Mail Incentive Program 
includes Standard Flats and Non-Profit products which did not make a 
positive contribution in Docket No. R2009-3. Id. In support, the Postal 
Service says this initiative must be viewed as a whole, citing Appendix 
A to the Notice. It says that excluding Standard flats from the 
Standard Mail Incentive Program would change the dynamics of the sale 
for a large portion of catalog mailers. These mailers view Standard 
Flats and Carrier Route Flats as essentially the same product providing 
about 40 percent of their volume in Standard Flats (the other 60 
percent is Carrier Route Flats). Where Standard Mail Flats are residual 
pieces after all possible Carrier Route volumes are qualified, their 
exclusion will reduce customers' incentives and potentially result in 
unintended consequences. Id. The Postal Service further states that 
long-term competitive benefits of including Standard Flats in the 
Standard Mail Incentive Program can result in more catalogs being 
mailed as evidenced by their large incremental growth above the 
baseline during the previous Incentive Program. Mailers also claim that 
mailing more catalogs converts prospects to new customers, which 
increase the use and efficiency of the mail. Id. at 8. The expected net 
contribution of the Standard Mail Incentive Program is between -$3.5 
million to + $25.4 million with administrative costs estimated at 
$930,000. Id.
    Risks. The Postal Service cites several inherent risks that may 
affect the financial outcome of the Standard Mail Incentive Program. 
These include overestimating the volumes generated by the incentive, 
underestimating the administrative costs, and the risk that a large 
portion of rebates would be paid on volumes that would have been mailed 
anyway. Id. at 8-9.
    Price cap compliance. The Postal Service intends to treat the 
program in a manner mathematically analogous to the procedure in rule 
3010.24 consistent with the previous Standard Mail Incentive Program. 
It will ignore the effect of the price decrease on the price cap for 
both future and current prices and therefore has not made a calculation 
of cap or price changes described in rule 3010.14(b)(1)-(4). Id. at 10.
    Objectives and factors, workshare discounts, and preferred rates. 
The Postal Service states that the Standard Mail Incentive Program does 
not substantially alter the degree Standard Mail prices already address 
the objectives and many of the factors in 39 U.S.C. 3622(b) of title 
39. Id. at 10-14. The Postal Service further states that to the extent 
the program affects Standard Mail workshare discounts, it will shrink 
them, keeping discounts with a passthrough of 100 percent or less in 
compliance, and bringing passthroughs over 100 percent closer to 
compliance. Nonprofit Standard Mail letters and flats will be eligible 
for the Standard Mail Incentive Program and the rates will change 
proportionately, thus maintaining the 60 percent ratio between prices.

[[Page 10845]]

III. Commission Action

    The Commission establishes Docket No. R2010-3 to consider all 
matters related to the Notice as required by 39 U.S.C. 3622. Interested 
persons may express views and offer comments on whether the planned 
changes are consistent with the policies of 39 U.S.C. 3622 and the 
Commission's applicable regulations. Comments are due no later than 
March 18, 2010.
    The Commission appoints Emmett Rand Costich, Kenneth R. Moeller and 
John Klingenberg to represent the interests of the general public in 
this proceeding. See 39 U.S.C. 505.

IV. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. R2010-3 to consider 
matters raised by the Postal Service's February 26, 2010 filing.
    2. Interested persons may submit comments on the planned price 
adjustments. Comments are due March 18, 2010.
    3. Pursuant to 39 U.S.C. 505, the Commission appoints Emmett Rand 
Costich, Kenneth R. Moeller and John Klingenberg 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 Notice in the Federal Register.

    By the Commission.
Shoshana M. Grove,
Secretary.
[FR Doc. 2010-4915 Filed 3-8-10; 8:45 am]
BILLING CODE 7710-FW-S