[Federal Register Volume 77, Number 88 (Monday, May 7, 2012)]
[Notices]
[Pages 26795-26796]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-10945]


=======================================================================
-----------------------------------------------------------------------

POSTAL REGULATORY COMMISSION

[Docket No. MC2012-13; Order No. 1328]


Product List Changes

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: The Commission is noticing a recently-filed Postal Service 
request to remove Parcel Post from the market dominant product list and 
to add a nearly identical ``Parcel Post'' to the competitive product 
list. Alaska Bypass Service would remain on the market dominant product 
list. This notice addresses procedural steps associated with this 
filing.

DATES: Comments are due: May 31, 2012.
    Reply Comments are due: June 15, 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, 
[email protected] or 202-789-6820.

SUPPLEMENTARY INFORMATION: On April 26, 2012, the Postal Service filed 
a notice with the Commission under 39 U.S.C. 3642 and 39 CFR 3020.30 et 
seq. requesting that certain changes be made to the market dominant and 
competitive product lists.\1\ Specifically, the Postal Service proposes 
to (1) remove Parcel Post from the market dominant product list; (2) 
add ``Parcel Post,'' a nearly identical product, to the competitive 
product list; and (3) leave Alaska Bypass Service, which is currently 
part of Parcel Post, on the market dominant product list.\2\ Id. at 1.
---------------------------------------------------------------------------

    \1\ Request of the United States Postal Service to Transfer 
Parcel Post to the Competitive Product List, April 26, 2012 
(Request).
    \2\ Alaska Bypass Service allows shippers to send shrink-wrapped 
pallets of goods intra-Alaska at Parcel Post rates from designated 
``hub points'' to designated ``bush points.'' Id., Attachment B at 
2.
---------------------------------------------------------------------------

    Parcel Post is an economical ground package delivery service for 
less-than-urgent and oversize packages that competes with comparable 
products offered by competitors. Id. at 1-2. The Postal Service asserts 
that Parcel Post fulfills all criteria for competitive products under 
39 U.S.C. 3642. Id. at 2. It requests that Parcel Post be removed from 
the market dominant product list and that a similar product called 
Parcel Post be added to the competitive product list. The Postal 
Service states that the new competitive Parcel Post product would be 
nearly identical to the current Parcel Post offering, except that 
Alaska Bypass Service would remain on the market dominant product list. 
Id.
    Supporting materials. To support its Request, the Postal Service 
filed the following attachments:
     Attachment A--Resolution of the Governors of the United 
States Postal Service, March 21, 2012 (Resolution No. 12-02);
     Attachment B--Statement of Supporting Justification; and
     Attachment C--Proposed Mail Classification Schedule 
changes.
    In its Statement of Supporting Justification, the Postal Service 
states that Alaska shippers will still have access to Alaska Bypass 
Service on the market dominant product list after Parcel Post is 
removed. Thus, it asserts that the proposed changes will continue to 
meet the objectives and factors in 39 U.S.C. 3622(b) and (c). Id., 
Attachment B at 2.
    The Postal Service explains why the proposed changes will not 
violate the standards of 39 U.S.C. 3633. It notes that in FY 2011, 
Parcel Post had an estimated cost coverage of 89.2 percent. It 
recognizes that a price increase will be necessary to ensure that 
Parcel Post covers its attributable costs and prohibits market dominant 
products from subsidizing competitive products. It asserts that the 
proposed changes should also cover an appropriate share of its 
institutional costs assuming that the current 5.5 percent contribution 
rate remains the same.\3\ Request, Attachment B at 3.
---------------------------------------------------------------------------

    \3\ See 39 U.S.C. 3633(a)(3); 39 CFR 3015.7(c). The Commission 
is currently re-evaluating the institutional cost contribution 
requirement for competitive products. See Docket No. RM2012-3, Order 
No. 1108, Notice of Proposed Rulemaking to Evaluate the 
Institutional Cost Contribution Requirement for Competitive 
Products, January 6, 2012.
---------------------------------------------------------------------------

    The Postal Service contends that Parcel Post has small market 
shares in both the ground package retail market (17.6 percent) and the 
broader ground package market (1.1 percent), even though Parcel Post 
prices are lower than those charged by UPS and FedEx for comparable 
products.\4\ Id., Attachment B at 5. It notes that a comparison of the 
service standards indicates that UPS and FedEx provide faster 
guaranteed delivery times than those currently offered by Parcel Post. 
Id. For these reasons, the Postal Service contends that current Parcel 
Post customers would have viable alternatives from competitors if the 
Postal Service were to raise prices, degrade service, or decrease 
output. Id., Attachment B at 6.
---------------------------------------------------------------------------

    \4\ The Postal Service states that Parcel Post primarily 
competes in the ground package retail market, which includes 
households and small businesses with fewer than nine employees. Id., 
Attachment B at 4.
---------------------------------------------------------------------------

    In describing the views of current Parcel Post customers, the 
Postal Service asserts that their major concern would likely be the 
price increases resulting from the proposed changes. The Postal Service 
acknowledges that a modest price increase will be necessary to attain 
full cost coverage. However, it contends that Priority Mail prices will 
effectively serve as a price cap because the Postal Service cannot 
raise Parcel Post prices above Priority Mail prices without shifting 
Parcel Post volume to Priority Mail. It explains that Parcel Post will 
continue to have the same service standards if the proposed changes are 
implemented, ensuring that customers in rural communities will continue 
to receive reliable ground package delivery service. Id., Attachment B 
at 8.
    The Postal Service estimates that only 15 percent of Parcel Post's 
volume is attributable to small businesses. Thus, it concludes that 
most small businesses should not see significant changes to their 
mailing options as a result of the proposed changes. Id., Attachment B 
at 9. The Postal Service contends that the contents of Parcel Post will 
fall outside the scope of the letter monopoly and that any letters 
contained in these parcels will fall within the scope of the exceptions 
or suspensions to the Private Express Statutes. Id., Attachment B at 6-
7.
    Notice of filings. The Commission establishes Docket No. MC2012-13 
to consider the Postal Service's proposals described in its Request. 
Interested persons may submit comments on

[[Page 26796]]

whether the Request is consistent with the policies of 39 U.S.C. 3642, 
3633, and 39 CFR 3020.30 et seq. Comments are due by May 31, 2012. 
Reply comments are due by June 15, 2012.
    The Request and related filings are available on the Commission's 
Web site (http://www.prc.gov). The Commission encourages interested 
persons to review the Request for further details.
    The Commission appoints Kenneth E. Richardson to serve as Public 
Representative in this proceeding.
    It is ordered:
    1. The Commission establishes Docket No. MC2012-13 to consider 
matters raised by the Request.
    2. Pursuant to 39 U.S.C. 505, Kenneth E. Richardson is appointed to 
serve as an officer of the Commission (Public Representative) to 
represent the interests of the general public in this proceeding.
    3. Comments by interested persons are due by May 31, 2012.
    4. Reply comments are due by June 15, 2012.
    5. The Secretary shall arrange for publication of this order in the 
Federal Register.

    By the Commission.
Shoshana M. Grove,
Secretary.
[FR Doc. 2012-10945 Filed 5-4-12; 8:45 am]
BILLING CODE 7710-FW-P