[Federal Register Volume 76, Number 211 (Tuesday, November 1, 2011)]
[Notices]
[Pages 67500-67503]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-28214]



[[Page 67500]]

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POSTAL REGULATORY COMMISSION

[Docket No. R2012-3; Order No. 921]


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 market dominant products by 
amounts which, on average, are at or below the statutory price cap of 
2.133 percent for each class of mail. This notice addresses procedural 
steps associated with this filing.

DATES: November 7, 2011: Comments are due.

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. Overview
II. The Commission's Role
III. Summary by Class of Mail
IV. Preferred Mail and Worksharing Discounts
V. MCS Schedule
VI. Administrative Actions
VII. Ordering Paragraphs

I. Overview

A. Index-Based Price Changes for Market Dominant Classes of Mail

    On October 18, 2011, the Postal Service filed an Adjustment Notice 
pursuant to 39 U.S.C. 3622 and 39 CFR part 3010.\1\ The Adjustment 
Notice presents the Postal Service's plans to adjust prices for market 
dominant products by amounts which, on average, are at or below the 
statutory price cap of 2.133 percent for each class of mail. Adjustment 
Notice at 3. The planned adjustments affect both domestic and 
international market dominant products.
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    \1\ United States Postal Service Notice of Market-Dominant Price 
Adjustment, October 18, 2011. (Adjustment Notice). This is a Type 1-
A adjustment under Commission rules.
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    The Postal Service notes that the most recently available data from 
the Bureau of Labor Statistics provides the Postal Service with 
inflation-based price adjustment authority of 2.133 percent.\2\ Id. at 
3. The following table presents class-specific averages.
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    \2\ Specifically, the U.S. Department of Labor's Consumer Price 
Index for All Urban Consumers, U.S. All Items (the ``CUUROOOOSA0) 
series.

         Table 1--2012 Price Change Percentage by Class of Mail
------------------------------------------------------------------------
                                                              Planned
                  Market dominant class                     percentage
                                                              change
------------------------------------------------------------------------
First-Class Mail........................................           2.133
Standard Mail...........................................           2.124
Periodicals.............................................           2.133
Package Services........................................           2.133
Special Services........................................          -0.663
------------------------------------------------------------------------

    Id. at 5.
    The Adjustment Notice states that the overall average for Special 
Services is a result of large price reductions for Delivery 
Confirmation and Confirm services. Id. at 26. In addition, price 
adjustments for products within other classes may vary from the 
average, sometimes substantially. These variances typically reflect 
several considerations consistent with the Postal Service's pricing 
flexibility under the Postal Accountability and Enhancement Act (PAEA) 
of 2006.
    Classification changes. The Adjustment Notice identifies a wide 
range of classification changes. Some involve reformatting and minor 
editorial revisions. Others concern product transfers approved in prior 
Commission proceedings. Id. at 50-52.
    Effective date. The Postal Service plans to implement its planned 
price and classification changes for Mailing Services on January 22, 
2012 at 12:01 a.m. Id. at 1. It notes this is a departure from past 
practice, but says it is consistent with the implementation date for 
planned rate changes for its competitive Shipping Services. Id. at 9.

B. Context and Format of Adjustment Notice

    The Adjustment Notice includes a brief introductory section, three 
enumerated parts, and three attachments. The Postal Service also 
submitted separate workpapers supporting the planned changes. The 
introductory section includes the Postal Service's certification, in 
accordance with rule 3010.14(a)(3), that it will provide widespread 
notice of the planned adjustments prior to the planned implementation 
date. Id. at 1. It identifies Scott J. Davis as the Postal Service 
official who will respond to queries from the Commission. Id. at 2.
    Part I presents a discussion of compliance with the price cap. Id. 
at 2-6. Part II discusses prices in detail, including workshare 
discounts. It also explains the consistency of the prices with the 
objectives and factors of 39 U.S.C. 3622 and the preferential pricing 
requirements of 39 U.S.C. 3626. Id. at 6-50. Part III describes related 
Mail Classification Schedule (MCS) changes. Id. at 50-52.
    Attachment A presents MCS changes in legislative format and 
includes schedules of the new prices. Attachment B presents workshare 
discounts and related information. Attachment C contains the Postal 
Service's price cap calculation. This includes, in conformance with 
rule 3010.22(b), an adjustment to the moving average because less than 
12 months have passed since the most recent price change (filed on 
January 13, 2011).
    The workpapers are designated as follows:
    First Class Mail: USPS-R2012-3/1.
    First Class Mail International: USPS-R2012-3/NP1.
    Standard Mail: USPS-R2012-3/2.
    Periodicals: USPS-R2012-3/3.
    Package Services: USPS-R2012-3/4.
    Special Services: USPS-R2012-3/5.
    Each set of workpapers includes a preface which provides an 
overview, a discussion of any necessary adjustments to the billing 
determinants for the four quarters ending Q3 FY 2011, and an 
explanation of the revenue calculations.
    Basis for adjustments. The Adjustment Notice was filed under the 
PAEA's revised approach to postal pricing. In brief, this approach 
generally limits increases at the class level to an annual price cap, 
although the Postal Service may elect, but is not required, to draw on 
unused pricing authority generated as a result of previous adjustments. 
In this case, the Postal Service elects not to draw on that authority. 
It is, instead, relying only on the price cap authority. However, the 
Postal Service's approach to Standard Mail and Special Services in this 
case adds to the unused pricing authority from previous cases. The 
following table identifies the total unused pricing authority that will 
be available following the changes in this case.

 Table 2--Postal Service's Calculation of Total Unused Pricing Authority
                 Available Following Docket No. R2012-3
------------------------------------------------------------------------
                                                          Total unused
                         Class                               pricing
                                                          authority (%)
------------------------------------------------------------------------
First-Class Mail......................................            -0.530
Standard Mail.........................................            -0.463

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Periodicals...........................................            -0.562
Package Services......................................            -0.551
Special Services......................................             2.324
------------------------------------------------------------------------

    Id. at 6 (adapted from the Table 4 in the Adjustment Notice).

II. The Commission's Role

    This marks the fourth time the Commission will review index-based 
changes for market dominant classes under authority established in the 
PAEA. The filing of the Adjustment Notice triggers a PAEA requirement 
that the Commission establish a formal docket to review, within 45 
days, the consistency of the Postal Service's planned adjustments with 
the price cap and related requirements. The Commission must also 
provide public notice that the Postal Service has filed a price 
adjustment case; publish the notice in the Federal Register; appoint an 
officer of the Commission (Public Representative) to represent the 
interests of the general public, and provide a 20-day public comment 
period.
    Issuance of this Notice and Order (Order) allows the Commission to 
fulfill these obligations. This Order provides an overview of the 
Postal Service's plans. Interested persons may obtain more detail by 
reference to the Adjustment Notice, the related workpapers, and review 
of subsequent errata, if any.

III. Summary by Class of Mail

A. First-Class Mail

    The following table identifies the Postal Service's planned 
percentage price changes for its First-Class Mail products.

                 Table 3--First-Class Mail Price Changes
------------------------------------------------------------------------
                                                                Percent
                   First-class mail product                      change
                                                                  (%)
------------------------------------------------------------------------
Single-Piece Letters and Cards...............................      2.468
Presort Letters and Cards....................................      1.580
Flats........................................................      1.605
Parcels......................................................     10.882
International*...............................................      4.679
Overall......................................................      2.133
------------------------------------------------------------------------

    Id. at 12.
    The first-ounce First-Class Mail price. The price of a stamp for 
the first-ounce of single-piece letter mail, including the Forever 
stamp, increases by one cent under the Postal Service's plan, going 
from 44 cents to 45 cents. Id.
    Single-Piece Letters and Cards. The overall increase of 2.468 
percent for Single-Piece Letters and Cards includes a 3 cent increase 
in the price for Single-Piece Cards. Id.
    Presort Letters and Cards. The Postal Service acknowledges that the 
overall increase for this product is below the overall average for 
First-Class Mail, and explains its rationale for this outcome. Id. at 
13. It presents a comparison of First-Class Mail First-Ounce Prices. 
Id. at 14, Table 6.
    In an effort to retain certain types of volume, the Postal Service 
proposes to expand the lightest weight step (currently, one ounce) for 
First-Class Mail Automation and Nonautomation Presort Letters by 
increasing the maximum qualifying weight of an automation letter from 1 
ounce to 2 ounces. This ``free ounce'' will be available only to pieces 
weighing 2 ounces or less. A 3-ounce piece will pay for additional 
ounces the traditional way. Id. at 15. The Postal Service presents the 
percentage price change First-Class Automation Letters/2-ounce Pieces. 
Id. at 16, Table 7.
    Flats. The Postal Service notes, among other things, that prices 
for Nonautomation Presort and Mixed ADC Automation flats will increase 
by less than 1 percent. Id. ADC, 3-digit, and 5-digit automation flats 
increase at a higher percentage than the overall increase in Flats, as 
well as the overall increase in First-Class Mail. Id.
    Parcels (including Keys and Identification Devices). The Postal 
Service acknowledges that the 10.8 percent increase for parcels is 
higher than the overall increase for this class, but asserts that it 
expects this to improve the cost coverage for the parcels that remain 
in the market dominant stream. Id. at 17. It notes that as a result of 
Docket No. MC2011-22, Commercial Base and Commercial Plus parcels are 
now classified as competitive, and that its January 2012 prices for 
these parcels will be provided in a notice filed later this fall. Id. 
at 16. The Retail portion of single-piece parcels remains in the market 
dominant First-Class Mail class. Id. See also id. at 12-13.
    International. The Postal Service increases Outbound Single-Piece 
First Class Mail International (FCMI) by 4.9 percent overall. Id. at 
17. The rationale for an increase for FCMI Letters ``significantly 
above'' the First-Class Mail average is to address cost coverage 
problems. Id. For FCMI Letters, Flats, and Parcels, the overall 
increases are 6.6 percent, 3.7 percent, and 4.0 percent. Id.

B. Standard Mail

    The following table presents the Postal Service's planned changes 
for Standard Mail products.

                  Table 4--Standard Mail Price Changes
------------------------------------------------------------------------
                                                                Percent
                    Standard mail product                        change
                                                                  (%)
------------------------------------------------------------------------
Letters......................................................      1.867
Flats........................................................      2.209
Parcels......................................................      2.864
High Density/Saturation Letters..............................      2.298
High Density/Saturation Flats and Parcels....................      2.878
Carrier Route Letters, Flats and Parcels.....................      2.425
Overall......................................................      2.124
------------------------------------------------------------------------

    Id. at 18.
    The Postal Service attributes its lower-than-average increase for 
Standard Letters to above-cap increases for Flats and Parcels; a price 
increase for Detached Address Labels (DALs); and a price reduction for 
nonprofit letters that was needed to achieve the required nonprofit to 
commercial revenue per-piece ratio. Id.
    The Standard Mail price adjustment also reflects classification 
changes to the Postal Service's NFMs/Parcels product. This involves 
restructuring parcels offerings to address the different needs of 
fulfillment parcels and marketing parcels. Id. at 19. The 
restructuring, in brief, involves a transfer of commercial machinable 
and irregular parcels to the competitive product list, in accordance 
with the Commission's conditional approval in Docket No. MC2010-36. Id. 
at 19-20. It also involves eliminating the NFMs category and replacing 
it with a new Marketing Parcels category. Id. at 21. Additional details 
about these classification changes are provided in the Postal Service's 
filing. See id. at 21-22.
    DALs used with Flats. The Postal Service is increasing the 
surcharge for DALs used with Flats from 1.7 cents per piece to 5.0 
cents and dividing DALs into two categories. Id. at 22. One category is 
for labels with advertising; the other is for labels with no 
advertising. Id. at 22-23.
    DALs used with Parcels. The Postal Service is eliminating the 
surcharge for DALs used with parcels based on its belief that DALs 
eliminate the need to keep bulky parcels sequenced before

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and during the delivery operation. Id. at 23.

C. Periodicals

    The following table presents the Postal Service's planned changes 
for the Periodicals class.

                   Table 5--Periodicals Price Changes
------------------------------------------------------------------------
                                                                Percent
                     Periodicals product                         change
                                                                  (%)
------------------------------------------------------------------------
Outside County...............................................      2.136
Within County................................................      2.054
Overall......................................................      2.133
------------------------------------------------------------------------

    Id. at 23.
    The Postal Service asserts, among other things, that this price 
change ``refines price relationships to encourage efficiency and 
containerization, while limiting the price increases for individual 
publications.'' Id. It is adding one rate cell for Origin Mixed Area 
Distribution Center (ADC) pallets to allow mailers who enter mail at 
origin to be more efficient by using origin-entered mixed ADC pallets. 
Id. at 24. It says this will encourage palletization rather than 
sacking where feasible. Workpaper USPS-R2012-3/3 provides more details. 
Id.

D. Package Services

    The following table presents the Postal Service's planned 
percentage changes for the Package Services class.

                 Table 6--Package Services Price Changes
------------------------------------------------------------------------
                                                              Percentage
                  Package services product                      change
------------------------------------------------------------------------
Single-Piece Parcel Post...................................        2.472
Bound Printed Matter Flats.................................        0.504
Bound Printed Matter Parcels...............................        1.886
Media Mail and Library Mail................................        2.581
Inbound Surface Parcel Post................................      1.958 *
Overall....................................................        2.133
------------------------------------------------------------------------
* Prices for Inbound Surface Parcel Post (at UPU rates) are determined
  by the Universal Postal Union and are not under the Postal Service's
  control. These prices are adjusted by the Postal Operations Council.
  Id. at 24 n.11.

    Id.
    The Postal Service identifies its overall goal in Package Services 
as improving product profitability. Id. The Postal Service 
characterizes the adjustment for Single-Piece Parcel Post as slightly 
larger than average for the class, but not as high as for Media/Library 
Mail, reflecting the fact that this product does not cover cost, but 
has a higher cost coverage than Media/Library Mail. Id. The Postal 
Service is eliminating the 3-cent barcode discount for Media Mail, 
Library Mail, and Bound Printed Matter. It asserts that this discount 
will become obsolete when all mail will be required to have a barcode. 
Also, the Postal Service says this discount is unnecessary with the 
mandatory requirement of the Intelligent Mail Package barcode for 
commercial customers in 2013. Id.
    Package Intercept. The Postal Service is adding Package Intercept 
service as an optional feature for First-Class Mail, Standard Mail, and 
Package Services. Id. at 26. It anticipates proposing this service as a 
new competitive product in the market-dominant section of the MCS, but 
includes the related changes in the market-dominant section of the MCS 
filed in this docket for administrative ease. Id.
    Bound Printed Matter. For BPM Flats, the price increase is lower 
than products with lower cost coverage, given the Postal Service's 
assessment that this product ``already has healthy cost coverage'' and 
the need to offset higher price increases for lower-performing 
products. Id. at 25. The Postal Service says this continues the shape-
based de-averaging that began in Docket No. R2011-1 and reflects the 
lower costs of processing and delivery flats relative to parcels. Id.

E. Special Services

    The Adjustment Notice does not present a table of percentage price 
increases for the products in this class. The Postal Service asserts 
that it designed fee increases to be close to the cap percentage for 
most of them, while maintaining consistency with historical rounding 
constraints that simplify transactions for customers.\3\ Id. The Postal 
Service states that the overall increase for Special Services is -0.663 
percent due to its plan to include Delivery Confirmation as an integral 
part of several parcel offerings at no additional fee. Id. The Special 
Services workpapers provide information on price changes and resulting 
percentage changes. See USPS-R2012-3/5.
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    \3\ The Postal Service identifies these products as: 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; Stamp Fulfillment Services; and Customized Postage. Id. 
at 26.
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    The Postal Service presents a detailed discussion of planned 
changes to individual products within Special Services. For more 
information refer to the Adjustment Notice and workpaper USPS-R2012-3/
5. Id. at 26-29.

IV. Preferred Mail and Worksharing Discounts

    Preferred mail. The Adjustment Notice includes the Postal Service's 
explanation that it implemented section 3626 pricing requirements in 
the same manner as in the Docket No. R2011-2 price change, and notes 
the Commission concluded the Postal Service's interpretation of section 
3626 is appropriate. Id. at 29. The Postal Service identifies each of 
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 comport with applicable statutory 
factors. Id. at 29-31.
    Consistency with 39 U.S.C. 3627 and 3629. The Adjustment Notice 
observes that neither of these sections are implicated by the price 
change, as the Postal Service does not seek to alter free rates 
(section 3627) or change the eligibility requirements for nonprofit 
rates.
    Workshare discounts. The Adjustment Notice includes the Postal 
Service's justification and explanation, in accordance with rules 
3010.14(b)(5) and (6), for workshare discounts that exceed 100 percent 
of avoided costs or that are substantially below 100 percent. It is 
presented by class and, where appropriate, by individual product. Id. 
at 31-50.

V. MCS Schedule

    The Adjustment Notice, in conformance with rule 3010.14(b)(9), 
identifies numerous changes to the MCS. See id. at 50-52.

VI. Administrative Actions

    The Commission hereby establishes a formal docket, captioned Docket 
No. R2012-3, Notice of Price Adjustment, to conduct the review of the 
Postal Service's planned price adjustments mandated in 39 U.S.C. 3622. 
It already has posted the Adjustment Notice on the Commission's Web 
site (http://www.prc.gov), and has made the Adjustment Notice available 
for copying and inspection during the agency's regular business hours 
of 8 a.m. to 4:30 p.m. weekdays, except Federal holidays. Additional 
Postal Service and Commission filings in this docket, as well as 
written comments or filings by others, will also be posted on the 
Commission's Web site and made available for inspection and copying at 
the Commission during the business hours referred to above.
    Public comment period. The Commission`s rules provide a period of

[[Page 67503]]

20 days from the date of the Postal Service's filing for public 
comment. 39 CFR 3010.13(a)(5). Comments by interested persons are due 
no later than November 7, 2011.
    Commission rule 3010.13(b) further provides that public comments 
are to focus primarily on whether the planned price adjustments comply 
with the following mandatory requirements under the PAEA:

    (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.

    Participation and designated filing method. Participation in some 
Commission proceedings requires interested persons to file notices of 
intervention prior to, or in conjunction with, submitting other 
documents. This approach does not apply in this type of case. Instead, 
interested persons are to submit comments electronically via the 
Commission's Filing Online system, unless a waiver is obtained. 
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 staff at (202) 789-6846.
    Persons without access to the Internet or otherwise unable to file 
documents electronically may request a waiver of the electronic filing 
requirement by filing a motion for waiver with the Commission. The 
motion may be filed along with any comments the person may wish to 
submit in this docket. Persons 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 by the date specified for such filing. Any person 
needing assistance in requesting a waiver may contact the Docket 
Section at (202) 789-6846. Hardcopy documents 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 order in the Federal Register.
    Appointment of Public Representative. In conformance with 39 U.S.C. 
505, the Commission appoints Cassandra L. Hicks to represent the 
interests of the general public in this proceeding.
VII. Ordering Paragraphs
    It is ordered:
    1. The Commission establishes Docket No. R2012-3 to consider 
planned price adjustments in rates and fees for market dominant postal 
products and services identified in the Postal Service's October 18, 
2011 Adjustment Notice.
    2. Comments by interested persons on the planned price adjustments 
are due no later than November 7, 2011.
    3. Pursuant to 39 U.S.C. 505, the Commission appoints Cassandra L. 
Hicks 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. 2011-28214 Filed 10-31-11; 8:45 am]
BILLING CODE 7710-FW-P