[Federal Register Volume 76, Number 16 (Tuesday, January 25, 2011)]
[Notices]
[Pages 4395-4398]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-1383]


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POSTAL REGULATORY COMMISSION

[Docket No. R2011-2; Order No. 653]


Postal Service Price Adjustment

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: The Commission is noticing a recently-filed Postal Service 
request to establish price adjustments for all market dominant classes. 
This notice addresses procedural steps associated with this filing.

DATES: Comments are due: February 2, 2011.

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 FOR 
FURTHER INFORMATION CONTACT by telephone for advice on alternatives to 
electronic filing.

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

SUPPLEMENTARY INFORMATION:

I. Introduction
II. Class-Specific Summary
III. Preferred Mail
IV. Mail Classification Schedule Product Description Changes
V. Commission Action
VI. Ordering Paragraphs

I. Introduction

A. Background

    On January 13, 2011, the Postal Service filed a notice with the 
Commission announcing price adjustments, effective April 17, 2011, 
affecting all market dominant classes.\1\ The market dominant classes 
are First-Class Mail, Standard Mail, Periodicals, Package Services, and 
Special Services. Market dominant international products are also 
affected.
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    \1\ See United States Postal Service Notice of Market-Dominant 
Price Adjustment, January 13, 2011 (Notice).
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    The Notice asserts that the adjustments reflect price increases for 
each market dominant class which are equal, on average, to the 
statutory limitation of 1.741 percent. Slight departures from this 
percentage at the class level, which are shown in the following table, 
are generally due to rounding. Id. at 8.

                 Table 1--2011 Price Change Percentages
------------------------------------------------------------------------
                                                              Percentage
                   Market dominant class                        change
------------------------------------------------------------------------
First-Class Mail...........................................        1.741
Standard Mail..............................................        1.739
Periodicals................................................        1.741
Package Services...........................................        1.740
Special Services...........................................        1.740
------------------------------------------------------------------------

    Source: Adapted from Notice at 5 (Table 3).
    Notwithstanding the overall percentage limitation at the class 
level, planned adjustments for certain individual products within a 
class may differ from the average, sometimes substantially. For 
example, the price of a stamp for a one-ounce First-Class letter, which 
is one of the most common postage rates used by the general public, 
will not increase, but remain at 44 cents. Presorted First-Class Mail 
will receive higher-than-price cap percentage increases. The Commission 
strongly encourages interested persons to review the Postal Service's 
Notice and related filings in their entirety to determine the impact of 
the planned adjustments and related classification changes.

B. Context

    Authority for filing. The Postal Service filed the Notice pursuant 
to 39 U.S.C. 3622 and part 3010 of the Commission's rules of practice. 
The introductory part of the Notice addresses several administrative 
matters, including how the Postal Service plans to ensure widespread 
publicity about the changes at least 45 days prior to the effective 
date. Id. at 1. Part I of the Notice addresses the applicable annual 
limitation; identifies accrued unused (``banked'') rate adjustment 
authority available for this adjustment; and calculates the amount of 
new unused rate adjustment authority generated by this price change. 
Id. at 2-6. Part II addresses the consistency of the planned prices 
with statutory objectives and factors; considerations related to 
workshare discounts; and recognition of certain rate preferences. Id. 
at 7-45. Part III discusses related mail classification product 
description changes. Id. at 45-46.
    The Notice includes three attachments. Attachment A presents price 
and mail classification changes. Attachment B presents workshare 
discount calculations. Attachment C presents price index change 
calculations. In related filings, the Postal Service submitted 
workpapers supporting the planned adjustments and a new Schedule of 
Regular Predictable Price Changes.\2\
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    \2\ United States Postal Service Filing of Updated Schedule of 
Regular and Predictable Price Changes, January 13, 2011 (Schedule.)
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C. Basis of Planned Adjustments

    The Notice announcing the planned adjustments for market dominant 
classes was filed pursuant to a revised, more streamlined approach to 
postal ratemaking adopted in 2006.\3\ This

[[Page 4396]]

approach, in brief, generally limits increases to an annual price cap, 
although there is an opportunity (but not a requirement) to draw on 
unused pricing authority generated in previous adjustments.
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    \3\ See generally Postal Accountability and Enhancement Act 
(PAEA) of 2006.
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    The Notice identifies 1.741 percent in effect the day of the filing 
as the applicable annual limitation authority, and asserts that this 
conforms with the percentage currently shown on the Commission's Web 
site.\4\ Id. It also identifies the amount of accrued unused rate 
adjustment authority for each class, but states that none of this 
authority is being applied to the instant adjustment. Instead, the 
Postal Service is relying on only the annual limitation rate adjustment 
authority. This means that a uniform 1.741 percent of rate adjustment 
authority is available for each class. Id. at 3-4. The application of 
this limit results in some unused pricing authority for three classes. 
These amounts, along with amounts generated in previous adjustments, 
appear in Table 4. Id. at 6.
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    \4\ This is based on a 12-month moving average of the Consumer 
Price Index--All Urban Consumers, U.S. All Items (the 
``CUUR0000SA0'' series). Id. at 3.
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II. Class-Specific Summary

A. First-Class Mail

    The Postal Service is not increasing the First-Class Mail, single-
piece first-ounce letter price; however, the additional-ounce rate for 
single-piece letters and flats increases from 17 cents to 20 cents. Id. 
at 12. The price of a single-piece postcard increases from 28 cents to 
29 cents. Id. However, to meet the cap average increase for the class 
as a whole, the Postal Service plans to adjust presorted mail by a 
higher-than-cap average price percentage. Id. This is characterized as 
the reverse of Docket No. R2009-2, when the presort grouping received a 
smaller-than-cap increase. Id. The Notice identifies the following 
percentage change for the six products in First-Class Mail:

          Table 2--2011 First-Class Mail Product Price Changes
------------------------------------------------------------------------
                                                              Percentage
                          Product                               change
------------------------------------------------------------------------
Overall....................................................        1.741
Single-Piece Letters & Cards...............................        0.461
Presort Letters & Cards....................................        1.796
Flats......................................................        5.343
Parcels....................................................        3.753
International..............................................        3.974
------------------------------------------------------------------------

    Source: Adapted from Notice at 12 (Table 5).
    The Notice states that the price change maintains the per-piece 
price differential between letters and flats and increases the price 
differential between letters and parcels, thereby resulting in above-
average increases for Flats and Parcels products. Id. at 13. It also 
addresses other price relationships, including the significance of the 
5-digit automation letter increase, which is 1.5 percent, and thereby 
below the 1.741 percent increase for the class as a whole. Id. The 
overall increase for Flats prices is 5.3 percent, stemming largely from 
a 17.6 percent increase in the price of additional ounces (moving from 
17 cents to 20 cents). Id. at 14. Adjustments for automation flats 
vary, ranging from no increase for some categories to small increases 
or a reduction. Id.
    First-Class Mail parcels receive a 3.8 percent increase, which the 
Notice identifies as higher than the overall increase for this class, 
but still significantly less than the increase for Standard Mail 
parcels. Id.
    Pricing design changes. The Notice identifies two pricing design 
changes in First-Class Mail. One involves the introduction of two 
separate pricing categories for parcels: Commercial Base and Commercial 
Plus. Commercial Base includes all parcels currently included in the 
Presort parcels category, plus the commercial portion of single-piece 
parcels. Single-piece parcels that are the residual of a presorted 
parcel mailing and non-presorted parcels where postage is paid by 
permit imprint, IBI meter, or PC Postage would be eligible for 
Commercial Base single-piece prices. All other single-piece parcels 
would pay retail prices. Id. at 14-15. The Notice says this change 
recognizes that parcels eligible for ``commercial'' prices avoid entry 
through the more costly retail channel. Id. at 15. Commercial Plus 
parcels is a new price category for machinable First-Class Mail parcels 
that weigh at least 3.5 ounces up to, but not including, 16 ounces. Id. 
Other requirements apply. Id.
    The second pricing design change involves treating the first three 
ounces in each parcel pricing category as a single price cell, with 
parcels in each price category paying a single price. Id. The rationale 
is that this will improve contribution from a segment of the First-
Class Mail parcel category that has not been providing an adequate 
contribution. Id. at 15-16.
    The Postal Service plans to increase outbound single-piece First-
Class Mail International by 5.2 percent. Id. at 16. Other international 
changes also are identified. Id.
    Additional matters. The Notice presents a detailed discussion of 
First-Class Mail workshare discounts. Id. at 27-29. Workpaper USPS-
R2011-2/1 provides additional detail on the planned First-Class Mail 
price adjustments and workshare discounts.

B. Standard Mail

    The Notice identifies the following changes for Standard Mail 
products:

            Table 3--2011 Standard Mail Product Price Changes
------------------------------------------------------------------------
                                                              Percentage
                          Product                               change
------------------------------------------------------------------------
Overall....................................................        1.739
Letters....................................................        1.810
Flats......................................................        0.835
Parcels and NFMs...........................................       11.346
High Density/Saturation Letters............................        0.615
High Density/Saturation Flats & Parcels....................        0.403
Carrier Route Letters, Flats & Parcels.....................        1.376
------------------------------------------------------------------------

    Source: Adapted from Notice at 16 (Table 7).
    Standard Mail Letters increase by 1.810, slightly above the class-
wide average. Id. at 16. The Notice states that the below-cap price 
change for the Flats product reflects a continued effort to moderate 
the increase for catalog mailers, as their volume fell considerably in 
FY 2008 and FY 2009. Id. It also presents other observations about the 
need for a cautious approach to Standard Mail flats, generally tied to 
poor economic conditions. Id. Standard Mail Parcels/NFMs receive an 
increase of 11.346 percent based on a need to improve cost coverage. 
Id. at 18.
    The Notice also states that the Postal Service recently filed a 
classification change to transfer Standard Mail parcels to the 
competitive category.\5\ It says the proposed prices are designed to 
move this product closer to covering its costs. Id. at 18.
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    \5\ See Docket No. MC2010-36, Request of the United States 
Postal Service to Transfer Commercial Standard Mail Parcels to the 
Competitive Product List, August 16, 2010.
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    The 1.376 percent increase for Carrier Route mail is below the cap 
in partial recognition of the fact that this product is used by the 
catalog industry. Id.
    Additional matters. The Notice presents a detailed discussion of 
workshare discounts. Id. at 29-42. Further details about the planned 
adjustment for Standard Mail, including workshare discounts, appears in 
Workpaper USPS-R2011-2/2.

C. Periodicals

    The Notice identifies the following changes for Periodicals:

[[Page 4397]]



             Table 4--2011 Periodicals Product Price Changes
------------------------------------------------------------------------
                                                              Percentage
                          Product                               change
------------------------------------------------------------------------
Overall....................................................        1.741
Outside County.............................................        1.767
Within County..............................................        1.093
------------------------------------------------------------------------

    Source: Adapted from Notice at 19 (Table 8).
    The Notice refers to this class's ``challenged'' cost coverage 
status, and states that the new prices are designed to balance the 
effect on individual publications and their readers, while taking 
advantage of the new price structure to create relationships that will 
improve efficiency. Id. at 19.
    Additional matters. The Notice presents a detailed discussion of 
workshare discounts. Id. at 29-42. It notes that in this case, the 
Postal Service ``uses the flexibility of the container-bundle-piece 
price structure'' to limit the extent to which price increases for 
individual publications differ from the average. Id. at 43. However, it 
asserts that at the same time, incentives for efficient preparation are 
strengthened by reflecting a higher percentage of costs in prices that 
have minimal impact on publications that are likely to experience 
above-average increases. It says this furthers the goal of more 
efficient containerization, while being mindful of the impact on 
publications that cannot easily change preparation. Id. at 43. Further 
details about the planned adjustment for Periodicals, including 
workshare discounts, appear in Workpaper USPS-R2011-2/3.

D. Package Services

    The Notice identifies the following price changes for Package 
Services:

          Table 5--2011 Package Services Product Price Changes
------------------------------------------------------------------------
                                                              Percentage
                          Product                               change
------------------------------------------------------------------------
Overall....................................................        1.740
Single-Piece Parcel Post...................................        1.807
BPM Flats..................................................        0.707
BPM Parcels................................................        1.982
Media Mail & Library Mail..................................        1.964
Inbound Surface Parcel Post................................       *1.531
------------------------------------------------------------------------
* Prices for Inbound Surface Parcel Post (at UPU rates) are determined
  by the Universal Postal Union. They are not under the control of the
  Postal Service. These prices are adjusted on a calendar basis. The
  most recent price change took place on January 1, 2011.

    Source: Adapted from Notice at 12 (Table 5).
    The Notice states the Postal Service's overall goal for this class 
is to improve product profitability. Id. at 20. This is reflected in 
increasing the prices of the lowest-performing segments (in terms of 
cost coverage), while remaining within the overall annual limitation. 
However, prices for Media Mail and Library Mail are still below other 
ground parcels to recognize their educational, cultural, scientific, 
and informational value. Id.
    For single-piece Parcel Post, the Postal Service proposes allowing 
prices at the one-pound increment to vary by zone. Id. at 21. It says 
this releases the price constraint for unzoned pricing, which has been 
used in the past to avoid having Parcel Post prices exceed Priority 
Mail prices for the same weight and zone. Id. The Notice says the 
release of this pricing constraint at the one-pound increment leads to 
higher prices for more distant zones. However, the limited size of this 
price increase limits the range of possible price changes; therefore, 
most price increases occur in the range of one to five pounds and the 
remaining prices are nearly unchanged. Id.
    Additional matters. The Notice presents a detailed discussion of 
workshare discounts. Id. at 44-45. Further details about the planned 
adjustment for Package Services, including workshare discounts, appears 
in Workpaper USPS-R2011-2/4.

E. Special Services

    Special Services. The Special Services class includes Ancillary 
Services; International Ancillary Services; Address Management 
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; and 
Customized Postage. Id. at 22. The Notice identifies the overall fee 
increase for Special Services, as a class, as 1.740 percent. Id. It 
does not present a table summarizing percentage price changes by 
individual product, but indicates that for many of the Special 
Services, fee increases were generally designed to be close to the cap 
percentage, while maintaining consistency with historical rounding 
constraints, as these often simplify transactions for customers. Id. It 
says this approach was used for Address Correction Service; Business 
Reply Mail; Certified Mail; Address Management Services; Applications 
and Mailing Permits; Parcel Airlift Service; Post Office Boxes; 
Registered Mail; Return Receipt; Bulk Parcel Return Service; and 
Shipper Paid Forwarding. Id.
    The Notice identifies Account Maintenance Fees as having an 
increase of 3.4 percent to reflect the value of the services the 
accounting fee supports and the goal of recovering institutional costs. 
Id. Insurance also experiences above-average increases in two tiers 
($50.01 to $100.00 and $100.01 to $200.00) due to a combination of the 
nickel rounding constraint and a continued effort to ``smooth'' price 
relationships among the various increments. Id. An increase in the 
incremental fee reflects the higher value of service as the value of 
the item increases. Id.
    Price increases of between 4 and 5 percent for Caller Service 
reflect the higher value customers place on this service. Id. For Post 
Office Boxes, prices are increased only for Size 1 boxes due to the 
small size of the cap. The Notice identifies an increase of $2 in Size 
1 Fee Groups 1 and 2 and of $1 in Fee Groups 3 through 7. Id. at 22-23.
    Stamped Envelopes receive an overall increase of 2.5 percent. Id. 
at 23. The fee for Stamped Cards remains unchanged at 3 cents. Id. 
Collect on Delivery receives a higher-than-average increase of 4.2 
percent based on failure to cover costs. Id.
    The Notice states that the Postal Service's overall approach to 
international special services is to set fees for these services 
similar to the fees for the equivalent domestic service. Id. at 23.
    Workpaper USPS-R2011-2/5 provides additional detail on the Special 
Services adjustment.

III. Preferred Mail

    The Notice states the Postal Service implements the requirements of 
39 U.S.C. 3626 in the same manner as it did in Docket No. R2009-2, 
observing that the Commission concluded that approach reflected an 
appropriate approach. Id. at 23-24. It identifies the preferred 
products or components (Within County Periodicals, Nonprofit and 
Classroom Periodicals, Science of Agriculture Periodicals advertising 
pounds, Nonprofit Standard Mail, and Library Mail) and describes how 
the planned adjustments reflect the various statutory preferences. Id. 
at 23-25.
    Consistency with 39 U.S.C. 3627 and 3629. The Notice states that 
neither section is implicated by the price change, as it does not seek 
to alter free rates (section 3627) or change the eligibility 
requirements for nonprofit rates (section 3629). Id. at 25.

IV. Mail Classification Schedule Product Description Changes

    The Notice, in conformance with rule 3010.14(b)(9), identifies 
changes to product descriptions in the Mail Classification Schedule 
(MCS) associated with the planned price

[[Page 4398]]

adjustments in Attachment A. The MCS revisions are characterized as 
``very limited,'' with only two substantive changes. Id. at 45. The two 
substantive changes are (1) the First-Class Mail classification changes 
related to adding a Commercial Plus category for parcels weighing 
between 3.5 and 16 ounces, and (2) the elimination of stamped envelopes 
with Standard Mail denominations in response to available alternatives 
and reduced consumer demand. Id. at 45-46. The Postal Service states 
that the latter change was proposed in Docket No. R2010-4.
    The Postal Service identifies the following items as corrections to 
the MCS:
     Correcting the maximum weight for Presorted Machinable 
Letters in section 1110.5;
     Renaming Single-Piece Retail and Presorted as Commercial 
Base in section 1120;
     Using a footnote rather than a table to show the 
nonbarcoded/nonmachinable surcharge in section 1120.5;
     Clarifying the treatment of letters weighing more than 3.3 
ounces in section 1205.5 and section 1215.5;
     Correcting a reference to the incorrect product in the 
Ride-Along note in section 1310.6;
     Conforming the Post Office Box lock replacement language 
in section 1550.1 with the Competitive MCS (noting that the fee is 
applied to late payments); and
     Correcting a reference to the Republic of Serbia in the 
country lists in Part D.

    Id. at 46.

    The Postal Service anticipates publishing notice of the changes to 
the Domestic Mail Manual implementing the new features in the Federal 
Register shortly. Id.

V. Commission Action

    The filing of the Notice triggers a Commission review process which 
culminates in an order on the consistency of the planned adjustments 
with various legal, policy, and technical requirements. At this time, 
the Commission takes several steps in line with its responsibilities. 
First, it has posted the Notice and related filings on its Web site 
(http://www.prc.gov). It also has made the Notice available for copying 
and inspection during regular business hours (8 a.m. to 4:30 p.m.) at 
the Commission, 901 New York Avenue NW., Suite 200, Washington, DC 
20268-0001. Any subsequent Postal Service filings in this docket, along 
with any written comments and filings by others, will be posted on the 
Commission's Web site and made available for public inspection and 
copying on the same terms and at the same location as the Notice.
    Second, the Commission establishes a formal docket, captioned 
Docket No. R2011-2, Notice of Price Adjustment, to conduct its review 
of the planned adjustments under 39 U.S.C. 3622.
    Third, the Commission, pursuant to 39 U.S.C. 505, appoints Kenneth 
E. Richardson as officer of the Commission (Public Representative) to 
represent the interests of the general public in this proceeding. He 
will be assisted by Pamela Thompson of the Commission's Office of 
Accountability and Compliance.
    Fourth, the Commission provides a 20-day comment period, calculated 
from the date the Notice was filed. Thus, the comment period in this 
docket extends through close of business on February 2, 2011. Rule 
3010.31(b) provides that public comments should focus primarily on 
whether the planned adjustments comply with the following mandatory 
requirements of 39 U.S.C. chapter 36, subchapter 1, including:

    (1) Whether the planned rate adjustments measured using the 
formula established in section 3010.23(b) are at or below the annual 
limitation established in section 3010.11; and
    (2) Whether the planned rate adjustments measured using the 
Formula established in section 3010.23(b) are at or below the 
limitations established in section 3010.28.

    Method for filing comments. All filings of documents in this case 
shall be made using the Internet (Filing Online) pursuant to Commission 
rules 9(a) and 10(a) at the Commission's Web site, http://www.prc.gov, 
unless a waiver is obtained. 39 CFR 3001.9(a) and 10(a). Instructions 
for obtaining an account to file documents online may be found on the 
Commission's Web site, http://www.prc.gov, or by contacting the 
Commission's Docket Section at [email protected] or via telephone at 
202-789-6846.
    Individuals without access to the Internet or otherwise unable to 
file documents electronically may request a waiver of the requirement 
that documents be filed electronically by filing a motion for waiver 
with the Commission. Such motion may be filed along with any comments 
such individual may wish to submit in this proceeding. Individuals 
requesting a waiver may file hardcopy documents with the Commission 
either by mailing or by hand delivery to the Office of the Secretary, 
Postal Regulatory Commission, 901 New York Avenue NW., Suite 200, 
Washington, DC 20268-0001 during regular business hours on a date no 
later than that specified for such filing. Any person needing 
assistance in requesting a waiver may contact the Docket Section at 
202-789-6846. Hardcopy comments received will be scanned and posted on 
the Commission's Web site.
    Official publication. The Commission directs the Secretary to 
arrange for prompt publication of this notice and order in the Federal 
Register.

VI. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. R2011-2 to consider the 
planned adjustments in prices and fees for market dominant postal 
products and services, as well as the mail classification changes, 
identified in the Postal Service's January 13, 2011 Notice of Market-
Dominant Price Adjustment.
    2. Interested persons may submit comments on the planned price 
adjustments. Comments are due February 2, 2011.
    3. Pursuant to 39 U.S.C. 505, the Commission appoints Kenneth E. 
Richardson as officer of the Commission 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. 2011-1383 Filed 1-24-11; 8:45 am]
BILLING CODE 7710-FW-P