[Federal Register Volume 76, Number 247 (Friday, December 23, 2011)]
[Proposed Rules]
[Pages 80312-80314]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32906]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3050

[Docket No. RM2012-2; Order No. 1053]


Periodic Reporting

AGENCY: Postal Regulatory Commission.

ACTION: Proposed rulemaking.

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SUMMARY: The Commission is establishing a docket to consider new 
measurement of Flats Sequencing Systems operations, a change in the 
definition of certain MODS operations, modifications to flats cost 
models, modification of the mail processing cost model applicable to 
First-Class Mail presort letters, and modification of the Business 
Reply Mail cost model in periodic reporting of service performance 
measurement. Establishing this docket will allow the Commission to 
consider the Postal Service's proposal and comments from the public.

DATES: Comments are due: December 30, 2011. Reply comments are due: 
January 9, 2012.

ADDRESSES: Submit comments electronically by accessing the ``Filing 
Online'' link in the banner at the top of the Commission's Web site 
(http://www.prc.gov) or by directly accessing the Commission's Filing 
Online system at https://www.prc.gov/prc-pages/filing-online/login.aspx. Commenters who cannot submit their views electronically 
should contact the person identified in FOR FURTHER INFORMATION CONTACT 
section as the source for case-related information for advice on 
alternatives to electronic filing.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
at (202) 789-6820 (case-related information) or [email protected] 
(electronic filing assistance).

SUPPLEMENTARY INFORMATION: On November 30, 2011, the Postal Service 
filed a petition pursuant to 39 CFR 3050.11 requesting that the 
Commission initiate an informal rulemaking proceeding to consider 
changes in the analytical methods approved for use in periodic 
reporting.\1\ On December 9, 2011 \2\ and on December 12, 2011 \3\ it 
filed errata to the attachments to the petition.
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    \1\ Petition of the United States Postal Service Requesting 
Initiation of a Proceeding to Consider Proposed Changes in 
Analytical Principles (Proposals Sixteen through Twenty), November 
30, 2011.
    \2\ United States Postal Service Notice of Filing of Errata to 
Attachments to Petition, December 9, 2011.
    \3\ United States Postal Service Notice of Filing of Errata to 
Attachments to Petition, December 12, 2011.
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    On December 7, 2011, GameFly, Inc. moved to strike from the Postal 
Service's petition a sentence that references GameFly and the 
sentence's accompanying footnote, which also references GameFly, on the 
ground that the references violated certain statutory privacy 
protections for mailers, and disclosed proprietary information.\4\ On 
December 13, 2011, the Postal Service filed a response to the GameFly 
Motion.\5\ In it, the Postal Service denies the substantive allegations 
made by GameFly, Inc. It also explains that in order to prevent delay 
in the processing of the original November 30, 2011

[[Page 80313]]

petition, it has re-filed that petition with the material that GameFly 
objects to voluntarily excised.\6\ Because the Postal Service has 
voluntarily provided GameFly with the relief that it requests, its 
Motion will be dismissed as moot.
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    \4\ Motion of GameFly, Inc., to Strike Portions of USPS Petition 
for Rulemaking, Docket No. RM2012-2, filed Dec. 7, 2011 (Motion).
    \5\ Response of the United States Postal Service to Motion of 
GameFly, Inc. to Strike Portions of USPS Petition for Rulemaking, 
December 13, 2011.
    \6\ Petition of the United States Postal Service Requesting 
Initiation of a Proceeding to Consider Proposed Changes in 
Analytical Principles (Proposals Sixteen through Twenty), December 
13, 2011 (Petition).
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    Proposal Sixteen: proposed productivity measurement for Flats 
Sequencing System. Proposal Sixteen introduces a new method for 
measuring the productivity of Flats Sequencing System (FSS) operations 
based upon the Management Operating Data System (MODS). The resulting 
productivity measurements would be used in the cost models for flats.
    The calculations of avoided cost estimates used in setting 
discounts for presort mail are based upon engineering models that de-
average the mail processing costs of presorted price categories by 
presort level. Petition at 3. These models diagram mailflows for the 
various presort price categories, and use productivities (piece 
handlings per workhour), at the various operations through which the 
mail flows. It then uses wage rates, piggyback factors, and other 
inputs to compute avoided costs. Id. The Postal Service explains that 
these models are periodically updated to reflect operational changes, 
including major equipment deployments such as FSS. Id.
    Under Proposal Sixteen, the Postal Service develops a productivity 
measure for flats delivery point sequencing using Total Pieces Handled 
(TPH) from MODS operation 538 divided by the sum of workhours from MODS 
operations 530 and 538. The Postal Service states that flats to be 
sorted into delivery point sequence are initially prepared in operation 
530, and then sorted into delivery sequence in operation 538. Since a 
MODS TPH count is not directly available for the 530 prep operation, 
the Postal Service proposes to combine hours from that operation with 
hours from the 538 direct sorting operation, for which a TPH count is 
available. The TPH count from the 538 sorting operation is divided by 
hours from both operations to get a combined productivity for the prep 
and sorting activity. Id.
    Because the proposed FSS productivity measure for flats sequencing 
is new, the Postal Service states there are no data to predict the 
impact of the productivity measure on the calculation of avoided costs. 
Id. at 4.
    Proposal Seventeen: consolidation of MODS Operation Groups 
applicable to letter automation productivities. In response to changes 
in the definition of certain MODS operations, Proposal Seventeen 
consolidates MODS operation groups associated with the productivity 
calculations for the DBCS/DIOSS automated letter image reading and 
sorting operations.
    MODS productivities measured by either Total Pieces Fed (TPF) or 
Total Pieces Handled (TPH) per workhour, are available for a variety of 
letter, flat, and parcel distribution operations. These productivities 
are used as inputs to engineering cost models to calculate the costs 
avoided by worksharing activities for purposes of setting workshare 
discounts.
    During FY 2011, the identification numbers for some MODS operations 
were discontinued, and the associated work incorporated into other MODS 
operations. Id. at 5. Specifically, workload and associated workhours 
for the Input Subsystem (ISS) were incorporated into the Barcode 
Sorting (BCS) operation groups. According to the Postal Service, ``[a] 
similar, though smaller, shift also affects Output Subsystem (OSS) 
operation groups'' which, in turn, will be consolidated with BCS 
operations during FY 2012.'' Id. The cost models will employ the 
productivity measures from these new consolidated operation groups once 
the consolidations are completed.
    The Postal Service provides a table showing the current 
disaggregated MODS operations and the proposed aggregations. Id. at 6. 
The Postal Service also provides a table showing the change in 
productivities upon completion of the consolidations. Id.
    Proposal Eighteen: modifications to the Flats cost models. Proposal 
Eighteen makes four modifications to the cost models for flats. 
Modification One incorporates FSS processing costs into the flats cost 
models. With deployment of FSS now complete, the Postal Service 
proposes to use FSS input data in the flats cost models to estimate the 
costs of FSS operations.
    Modification Two corrects ``an anomalous'' difference in costs 
between Mixed Area Distribution Center (MADC) automation and Area 
Distribution Center (ADC) automation flats in First-Class Mail, 
Periodicals, and Standard Mail. Id. at 9-10. Currently, the costs of 
MADC presorted flats are less than the costs of ADC flats that receive 
more mailer presorting. According to the Postal Service, this anomaly 
occurs because single-piece mail is currently included in the downflow 
densities, which overstates the proportion of MADC mail that flows 
directly from the Outgoing Primary (OP) operation to the Incoming 
Secondary (IS) operation. The Postal Service proposes to adjust the 
downflow densities for flats to mitigate the effect of including 
single-piece mail using a methodology previously approved by the 
Commission for use in cost models for letters. Id. at 10.
    Modification Three corrects an error in the calculation of 
mechanized ADC pallet bundle sortation in the cost model for 
Periodicals flats. Currently, cells for the coverage of mechanized ADC 
pallet bundle sortation are incorrectly referenced to the coverage for 
mechanized MADC bundle sortation. The resulting formula errors are 
corrected by remapping the references to the proportion of broken ADC 
pallet bundles.
    Modification Four calculates the cost for bundles entered on MADC 
pallets--a newly-created classification. Id. at 11. As a new 
classification, there are no volumes in FY 2011 to estimate costs. The 
Postal Service proposes to ``use ADC pallets entered at the destination 
ADC as a proxy for MADC pallets.'' Id.
    Proposal Nineteen: modification of the First-Class Mail Presort 
Letters mail processing cost model. Proposal Nineteen modifies the mail 
processing cost model applicable to First-Class Mail presort letters. 
Currently, the mail processing cost model only estimates avoided costs 
for the combined nonautomation machinable Mixed Automated Area 
Distribution Center (MAADC) and Automated Area Distribution Center 
(AADC) price categories. The Postal Service proposes to develop 
separate cost estimates for the nonautomation machinable MAADC and the 
AADC categories. Id. at 12. This proposed methodology change would be 
consistent with Proposal Twelve, presented in Docket No. RM2012-1, in 
which the Postal Service disaggregated the cost estimates for 
nonautomation machinable MAADC and AADC Standard Mail presort letters. 
Id.
    Proposal Twenty: modification of the Business Reply Mail cost 
model. Proposal Twenty modifies the Business Reply Mail (BRM) cost 
model. The cost model develops the avoided cost estimate in support of 
the Qualified BRM (QBRM) barcode discount, and includes cost studies 
that support various annual, quarterly, monthly, and per-piece BRM 
fees. Id. at 15. The Postal Service offers Proposal Twenty in response 
to the Commission's request to initiate a rulemaking proceeding to 
address the current methodology used to develop the avoided cost 
estimate for the QBRM discount. Id.

[[Page 80314]]

    The QBRM avoided cost estimate is derived from a methodology 
proposed by the Postal Service in Docket No. R97-1. Based on that 
methodology, the Postal Service observes that the avoided cost estimate 
has decreased over time as the Postal Service has ``continued to 
capture savings as a result of * * * technological improvements'' in 
the recognition of handwritten addresses on reply pieces. Id. at 18. 
The mail processing cost of a handwritten reply mailpiece serves as the 
baseline for comparison to the mail processing costs for a QBRM reply 
piece to determine the avoided cost estimate. Accordingly, ``when all 
empirical facts are considered,'' the Postal Service ``proposes the 
continued use of the Docket No. R97-1 QBRM cost avoidance 
methodology.'' Id. at 18-19.
    Proposal Twenty also updates and revises the productivity estimates 
developed in the BRM fee cost studies. In those studies, many of the 
productivity estimates are based upon proxies rather than direct 
observation or measurement of actual activities. Moreover, some of the 
productivity estimates that are based upon field studies are dated. Id. 
at 16.
    The Postal Service relies on two studies to develop inputs used in 
the cost studies. The first is the BRM Practices Study, which was 
conducted in 2005 and presented in Docket No. R2006-1, USPS LR-L-34. 
Id. at 19. The BRM Practices Study ``measure[s] the percentage of mail 
by price category that is processed using various counting, rating, and 
billing methods.'' Id. It is periodically updated. Based upon recent 
field observations, the Postal Service states that the data inputs from 
the 2005 BRM Practices Study ``should be relied upon to develop the BRM 
fee estimates.'' Id. at 23.
    The second study develops productivity data, representing various 
counting, rating, and billing activities, which have been manually 
collected at postal field sites. The most recent field study was 
conducted during the summer of 2011. Id. Based upon this study, the 
Postal Service develops productivity data for the following activities: 
web Business Reply Mail Accounting System counting, web End of Run 
counting, machine counting, manual counting, weight averaging counting 
(letters), weight averaging counting (flats & parcels), PostalOne! 
billing, and manual billing. Id. at 26.
    Data from the 2011 Field Study were also used to develop ``minutes 
per day'' estimates that support the QBRM quarterly fee and revise the 
nonletter size BRM monthly fee cost studies.
    The Petition, Attachments, and library references estimating the 
impact of Proposals Sixteen through Twenty are available for review on 
the Commission's Web site, http://www.prc.gov.
    Pursuant to 39 U.S.C. 505, Larry Fenster is designated as Public 
Representative to represent the interests of the general public in this 
proceeding. Comments are due no later than December 30, 2011.
    It is ordered:
    1. The Petition of the United States Postal Service Requesting 
Initiation of a Proceeding To Consider Proposed Changes in Analytical 
Principles (Proposals Sixteen through Twenty), filed December 13, 2011, 
is granted.
    2. The Commission establishes Docket No. RM2012-2 to consider the 
matters raised by the Postal Service's Petition.
    3. Interested persons may submit comments on Proposals Sixteen 
through Twenty no later than December 30, 2011. Reply comments are due 
no later than January 9, 2012.
    4. Larry Fenster is appointed to serve as the Public Representative 
to represent the interests of the general public in this proceeding.
    5. The Motion of GameFly, Inc., to Strike Portions of USPS Petition 
for Rulemaking, Docket No. RM2012-2, filed December 7, 2011, is 
dismissed as moot.
    6. The Secretary shall arrange for publication of this notice in 
the Federal Register.

    By the Commission.

Shoshana M. Grove,
Secretary.
[FR Doc. 2011-32906 Filed 12-22-11; 8:45 am]
BILLING CODE 7710-FW-P