[Federal Register Volume 77, Number 12 (Thursday, January 19, 2012)]
[Proposed Rules]
[Pages 2676-2677]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-851]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3015

[Docket No. RM2012-3; Order No. 1108]


Competitive Postal Products

AGENCY: Postal Regulatory Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commission is initiating a review to determine whether 
competitive products provide the appropriate minimum contribution to 
the Postal Service's institutional costs. This document invites 
comments to facilitate examination of this question.

DATES: Comments are due: March 5, 2012. Reply comments are due: April 
2, 2012.

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, 
at [email protected] or (202) 789-6820.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Invitation To Comment
III. Ordering Paragraphs

I. Introduction

    The Postal Accountability and Enhancement Act (PAEA), Public Law 
109-435, 120 Stat. 3218 (2006), directs the Commission to promulgate 
regulations to ensure that competitive products, collectively, bear an 
``appropriate share'' of the Postal Service's institutional costs. See 
39 U.S.C. 3633(a)(3).
    The initial Commission review of this issue determined that 
competitive products, collectively, annually should contribute a 
minimum of 5.5 percent of the institutional costs of the Postal 
Service. Order No. 43, October 29, 2007, paras. 3040-47. The PAEA 
further directs the Commission to revisit this question every 5 years. 
See 39 U.S.C. 3633(b).\1\
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    \1\ REVIEW OF MINIMUM CONTRIBUTION.--Five years after the date 
of enactment of this section, and every 5 years thereafter, the 
Postal Regulatory Commission shall conduct a review to determine 
whether the institutional costs contribution requirement under 
subsection (a)(3) should be retained in its current form, modified, 
or eliminated. In making its determination, the Commission shall 
consider all relevant circumstances, including the prevailing 
competitive conditions in the market, and the degree to which any 
costs are uniquely or disproportionately associated with any 
competitive products.
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    Five years has passed since enactment of the PAEA. The Commission 
initiates Docket No. RM2012-3 to evaluate how to ensure that the 
appropriate minimum contribution to the Postal Service's institutional 
costs is provided by competitive products. The Commission will decide 
whether its rule 3015.7(c), established in Order No. 43, which sets the 
5.5 percent minimum contribution, should be retained in its current 
form, modified, or eliminated.
    When establishing the initial level of appropriate contribution 
from competitive products, the Commission tried to balance the risk of 
setting the contribution level too high with the risk of setting it too 
low. Given a very competitive marketplace where the Postal Service's 
market share is relatively small, setting the contribution level too 
high could adversely affect the Postal Service's ability to compete. On 
the other hand, establishing a markup that is too low could give the 
Postal Service an artificial competitive advantage. The Commission gave 
considerable weight to the historical contribution made by items 
categorized as competitive products by the PAEA. The Commission set the 
minimum contribution level at 5.5 percent of total institutional costs, 
in line with the competitive products' estimated contribution to 
institutional costs of 5.4 percent in FY 2005 and 5.7 percent in FY 
2006.
    Since rule 3015.7(c) has been in place, the Postal Service's 
competitive products collectively have covered more than 5.5 percent of 
the Postal Service's institutional costs. For FY 2007, the revenue from 
competitive products minus their attributable costs equaled 5.66 
percent of total institutional costs.\2\ For FY 2008, the contribution 
from

[[Page 2677]]

competitive products represented 5.54 percent of total institutional 
costs.\3\ The contribution from competitive products to the recovery of 
the Postal Service's institutional costs was 6.78 percent in FY 2009 
and 7.12 percent in FY 2010.\4\ In FY 2009 and FY 2010, institutional 
costs were reduced compared with previous years, due in part to the 
congressionally mandated reductions of the required annual contribution 
to the Retirement Health Benefits Fund. The Postal Service also has 
increasingly exercised its flexibility to transfer mail volume from 
market dominant products to competitive products. See 39 U.S.C. 3642.
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    \2\ FY 2007 Annual Compliance Determination, March 28, 2008, at 
113.
    \3\ FY 2008 Annual Compliance Determination, March 30, 2009, at 
87.
    \4\ FY 2009 Annual Compliance Determination, March 29, 2010, at 
117; FY 2010 Annual Compliance Determination, March 29, 2011, at 
138.
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    On December 29, 2011, the Postal Service filed its 2011 Annual 
Compliance Report with the Commission. That report indicates that in FY 
2011 competitive products collectively contributed 7.84 percent of the 
Postal Service's institutional costs.\5\
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    \5\ See Docket No. ACR2011, FY 2011 Annual Compliance Report, 
December 29, 2011, at 64. Competitive products contribution, $2.317 
billion, divided by total institutional costs, $29.554 billion.
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II. Invitation To Comment

    The Commission invites comments to facilitate its examination of 
the appropriateness of the current contribution level. To inform its 
deliberations, the Commission requests comments from interested members 
of the public on whether and how changes in competitive market 
conditions, the allocation of costs to competitive products, the number 
and volume of competitive products, or any other changes should impact 
the minimum appropriate share of institutional costs of the Postal 
Service that should be provided by competitive products. As required by 
the statute, the Commission in making its determination must consider 
all relevant circumstances, including the prevailing competitive 
conditions in the market, and the degree to which any costs are 
uniquely or disproportionately associated with any competitive 
products. Comments also are welcome on any issues relevant to the 
reasonableness of the current 5.5 percent contribution requirement and 
retaining, modifying, or eliminating it.
    Comments are due March 5, 2012. Reply comments may be submitted on 
or before April 2, 2012.
    Pursuant to 39 U.S.C. 505, R. Kevin Harle is designated as the 
officer of the Commission to represent the interests of the general 
public (Public Representative). The Public Representative will direct 
the activities of Commission personnel assigned to him and, upon 
request, will provide their names for the record. Neither the Public 
Representative nor any of the assigned personnel will participate in or 
provide advice on any Commission decision in this proceeding.

III. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. RM2012-3, in compliance 
with 39 U.S.C. 3633(b).
    2. The Commission designates R. Kevin Harle as the Public 
Representative representing the interests of the general public in this 
proceeding.
    3. Comments are due March 5, 2012.
    4. Reply comments are due April 2, 2012.
    5. The Secretary shall arrange for publication of this notice in 
the Federal Register.

    By the Commission.
Shoshana M. Grove,
Secretary.
[FR Doc. 2012-851 Filed 1-18-12; 8:45 am]
BILLING CODE 7710-FW-P