[Federal Register Volume 76, Number 183 (Wednesday, September 21, 2011)]
[Proposed Rules]
[Pages 58433-58436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-24149]


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POSTAL SERVICE

39 CFR Part 121


Proposal To Revise Service Standards for First-Class Mail, 
Periodicals, and Standard Mail

AGENCY: Postal Service\TM\.

ACTION: Advance notice of proposed rulemaking; request for comments.

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SUMMARY: The Postal Service seeks public comment on a proposal to 
revise the service standard regulations contained in 39 CFR part 121. 
Among other things, the proposal involves eliminating the expectation 
of overnight service for First-Class Mail and Periodicals, and, for 
each of these classes, narrowing the two-day delivery range and 
enlarging the three-day delivery range. One major effect of the 
proposal would be to facilitate a significant consolidation of the 
Postal Service's processing and transportation networks.

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DATES: Comments must be received on or before October 21, 2011.

ADDRESSES: Written comments should be mailed to Manager, Industry 
Engagement and Outreach, United States Postal Service, 475 L'Enfant 
Plaza, SW., Room 4617, Washington, DC 20260. Comments also may be 
transmitted via e-mail to [email protected]. Copies of all 
comments will be available for inspection and photocopying at the 
Postal Service Headquarters Library, 475 L'Enfant Plaza, SW., 11th 
Floor North, Washington, DC 20260, between 9 a.m. and 4 p.m., Monday 
through Friday.

FOR FURTHER INFORMATION CONTACT: Anthony Frost, Industry Engagement and 
Outreach, 202-268-8093; or Emily Rosenberg, Network Analytics, 202-268-
5585.

SUPPLEMENTARY INFORMATION: The Postal Service's processing and 
transportation networks were developed, over many decades of growing 
mail volumes, largely to achieve service standards for First-Class Mail 
and Periodicals, particularly their overnight service standards. In 
Section 302 of the Postal Accountability and Enhancement Act of 2006, 
Congress found that the Postal Service's networks were larger than 
necessary and directed the Postal Service to consolidate its 
infrastructure to better align with changing conditions. Since then, 
the Postal Service has vigorously pursued operational consolidation 
opportunities to reduce excess capacity in its networks.
    During the same time period, however, mail volumes have declined 
substantially, such that the Postal Service's processing and 
transportation networks exhibit more excess capacity in relation to 
current and projected mail volumes than previously anticipated. As a 
result of the sharp revenue declines associated with falling volumes, 
as well as other statutorily mandated costs, the Postal Service has 
experienced significant financial losses for the past four years. 
Unfortunately, further network consolidations (beyond those that have 
already been performed or are currently under study), which are 
necessary to align the Postal Service's infrastructure with current and 
projected mail volumes and to bring operating costs in line with 
revenues, will for the most part be unachievable without a relaxation 
of certain service standards for First-Class Mail, Periodicals, and 
Standard Mail. The Postal Service is therefore exploring a proposal 
(the Proposal) to revise these service standards.

I. Proposed Service Standard Revisions

    The Postal Service established its current service standards for 
market-dominant products on December 19, 2007, in accordance with 39 
U.S.C. 3691. The service standards for First-Class Mail, as set forth 
in 39 CFR 121.1, range from 1 to 3 delivery days for mail that travels 
within the contiguous United States, and 1 to 5 delivery days for mail 
that originates or destinates in Alaska, Hawaii, or the U.S. 
territories. One aspect of the Proposal would be to revise 39 CFR 121.1 
such that the service standards for First-Class Mail that travels 
within the contiguous United States would become 2 to 3 delivery days. 
Similarly, the service standards for First-Class Mail that originates 
or destinates in Alaska, Hawaii, or the U.S. territories would become 2 
to 5 delivery days.
    In other words, the Postal Service would eliminate the expectation 
of overnight service for First-Class Mail, narrow the two-day delivery 
range, and enlarge the three-day delivery range. These changes would 
apply to all First-Class Mail, including letters, flats, and 
parcels.\1\ The potential impact of the Proposal on First-Class Mail is 
illustrated below:
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    \1\ As the Postal Service stated when it established the current 
service standards, ``there are finite limits in the level of service 
standard differentiation that can be effectively managed on the 
workroom floors of a complex logistical network.'' Modern Service 
Standards for Market-Dominant Products, 72 FR 72221 (Dec. 19, 2007). 
Therefore, any service standard revisions adopted by the Postal 
Service will continue to apply at the class level.

        Proportion of First-Class Mail Volume by Service Standard
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                                          Current           Proposed
                                         (percent)         (percent)
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1-day..............................              41.5                0
2-day..............................              26.6               50.6
3-day..............................              31.6               49.1
4-day..............................               0.3                0.3
5-day..............................              <0.1               <0.1
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    Because service standards for a portion of Periodicals are linked 
to First-Class Mail service standards, the Postal Service would revise 
the Periodicals service standards as well. As specified in 39 CFR 
121.2, the service standards for Periodicals presently range from 1 to 
9 delivery days within the contiguous United States. Under the 
Proposal, the service standards for both end-to-end and destination-
entry Periodicals within the contiguous United States would be revised 
to a range of 2 to 9 delivery days.
    The substantial consolidation of the mail processing network made 
possible by the above service standard revisions would result in the 
elimination of some facilities at which Standard Mail users currently 
enter mail. In particular, it is possible that Area Distribution 
Centers (ADCs) would no longer be available for entering mail. 
Therefore, it is possible that the Proposal could require a revision to 
the current service standard for end-to-end Standard Mail entered at 
ADCs, as set forth in 39 CFR 121.3(a)(2). The exact nature of this 
revision is presently unclear.
    In addition, although the service standards for other Postal 
Service products would not be revised, all Postal Service products 
could experience changes in specific 3-digit ZIP Code origin-
destination pairs' transit times. The changed transit times would 
remain within the current ranges set forth in each product's service 
standards.\2\
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    \2\ While competitive products' service standards are not 
published, the transit times for competitive products would remain 
within the overall ranges that are marketed for those products (such 
as 1-2 delivery days for Express Mail, and 1-3 delivery days for 
Priority Mail).
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II. Changes to Mail Processing and Transportation Networks

    If the Postal Service were to revise service standards as described 
above, it could significantly improve operating efficiency and lower 
the operating costs of its mail processing and transportation networks. 
To meet overnight service standards for First-Class Mail, processing 
facilities currently initiate their primary and secondary sortation

[[Page 58435]]

cycles well into the evening and early morning hours. In particular, 
processing facilities generally run their Delivery Point Sequencing 
programs (DPS) between 12:30 a.m. and 7 a.m. DPS is the sortation of 
the next day's destinating letter- and flat-shaped mail pieces into the 
precise order in which they will be delivered on carrier routes. After 
mail is run through DPS, it is transported to delivery units, where it 
is taken by carriers for delivery. The processing window for DPS 
operations is set late in the night so that all originating First-Class 
Mail collected from a processing facility's overnight service area on a 
particular day can reach the facility before DPS is run that night. 
This is done to ensure that the portion of the originating First-Class 
Mail that destinates in the facility's service area is run through DPS 
that night and delivered by carriers the next day, fulfilling that 
mail's overnight service standard. Thus, the arrival time of First-
Class Mail with an overnight service standard largely dictates the 
start time for DPS processing.
    By eliminating overnight service standards for First-Class Mail, 
and thus eliminating the need for processing facilities to wait into 
the night for mail collected during the day to reach the facilities, 
the Postal Service could move the time for its primary and secondary 
sortations to much earlier in the day. Under the Proposal, the Postal 
Service would institute earlier critical entry times and redesign its 
network so that mail that needs to be processed on a particular day 
would reach mail processing facilities by 8 a.m. Consequently, the 
Postal Service could begin running DPS at noon. Thus, DPS could be run 
for 16 hours (12 p.m. to 4 a.m.) instead of 6.5 hours (12:30 a.m. to 7 
a.m.) each day.
    The Postal Service could also reduce the amount of manual casing 
that occurs at delivery units. Currently, some First-Class Mail Flats 
and Periodicals whose zones are processed on the Flats Sequencing 
System (FSS) arrive at mail processing facilities too late to be sorted 
by FSS. Because some of these mail pieces have an overnight service 
standard, they are sorted on the same night to the carrier route level 
and then transported to delivery units. As a result, these pieces 
require manual casing at delivery units. Under the revised service 
standards, such pieces would arrive at processing facilities in time 
for the next day's FSS sortation, thereby eliminating manual casing of 
such pieces at delivery units.
    The Postal Service believes that, with the longer processing 
windows and other changes described above, it could consolidate mail 
processing operations from over 500 locations currently to fewer than 
200 locations, resulting in lower facilities costs and significant 
labor workhour savings.\3\ It could also reduce the total amount of 
machinery needed to run DPS, on a national level, by approximately one-
half. This would allow for greater reliance on machinery that incurs 
lower maintenance costs.
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    \3\ The effects of the Proposal would be limited to the 
approximately 460 Processing and Distribution Centers, Customer 
Service Facilities, Logistics and Distribution Centers, Surface 
Transfer Centers, and associated Annexes. The Proposal should not 
affect Network Distribution Centers, Air Mail Centers, Remote 
Encoding Centers, and International Service Centers.
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    In addition, the Postal Service could improve the efficiency of its 
transportation network. To meet the current service standards, a large 
proportion of the Postal Service's mail trucks operate at low levels of 
capacity. With a reduced number of processing locations and longer 
processing windows, the Postal Service could reduce the number of mail 
trucks it needs and ensure that more of those trucks operate at higher 
levels of capacity.
    The Postal Service believes that the consolidations and reductions 
described above would result in an infrastructure that better aligns 
with current and projected mail volumes and would lead to significant 
cost containment opportunities.

III. Effects of the Proposal

    The Postal Service has listed briefly below several major effects 
that the Proposal may have:
     The reduced availability of locations at which drop ship 
discounts may be applied could require changes to commercial mailers' 
transportation networks. For national mailers, this could result in 
cost savings, given that they would transport mail to fewer locations. 
For regional and local mailers, the reduced availability of business 
mail entry units and drop ship locations could cause additional costs, 
if they have to transport mail over longer distances.
     Commercial mailers who use products that have zone-based 
pricing may experience price changes, if the locations at which they 
currently enter mail are eliminated and the nearest available locations 
are within different 3-digit ZIP Codes.
     Commercial mailers of First-Class Mail, Periodicals, and 
Standard Mail who seek to have their mail reach recipients on specific 
delivery days may have to restructure their production cycles to align 
with the changed critical entry times and reduced number of entry 
points.
     While some commercial mailers could effectively maintain 
same-day processing and overnight delivery by restructuring their 
production cycles to align with the changed critical entry times, this 
would not be possible for retail First-Class Mail customers, because 
mail pieces dropped off at blue collection boxes and other retail 
collection points before 8 a.m. would not be collected and transported 
to processing locations in time for same-day processing.
     The longer processing windows could enhance the 
reliability of the Postal Service in meeting the revised service 
standards.

IV. Request for Comments

    The Postal Service requests comments on all aspects of the 
Proposal. In particular, the Postal Service solicits comments on the 
effects that the Proposal could have on senders and recipients of 
First-Class Mail, Periodicals, and Standard Mail, as well as any 
potential effects on users of other mail classes. Mail users are 
encouraged to comment on the nature and extent of costs or savings they 
might experience as a result of the changes described in this notice, 
as well as any additional possible benefits they foresee. Comments 
explaining how mail users might change their mailing practices or 
reliance on the mail if the Proposal is implemented also are 
encouraged. The provision of empirical data supporting any cost-benefit 
analysis also would be useful. In addition, the Postal Service seeks 
suggestions on how to modify the Proposal to better serve mail users. 
Further, the Postal Service requests mail users' views regarding the 
application of the policies and requirements of title 39 of the U.S. 
Code, particularly sections 101, 403, 404, and 3691, to the Proposal 
and to service standard revisions generally.
    The Postal Service intends to consider comments received in 
response to this notice as it determines whether and how to amend its 
service standard regulations. This request for comments is being 
pursued in concert with other customer and public outreach activities, 
through mailer and other organizations, and through consultation with 
individual customers and groups of customers. If the Postal Service 
should decide to move forward with the Proposal, it will publish a 
proposed rule in the Federal Register and solicit public comment. It 
also would request an advisory opinion from the Postal

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Regulatory Commission pursuant to 39 U.S.C. 3661(b).

Stanley F. Mires,
Attorney, Legal Policy & Legislative Advice.
[FR Doc. 2011-24149 Filed 9-20-11; 8:45 am]
BILLING CODE 7710-12-P