[Federal Register Volume 84, Number 193 (Friday, October 4, 2019)]
[Notices]
[Pages 53181-53183]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21679]


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POSTAL REGULATORY COMMISSION

[Docket No. PI2020-1; Order No. 5260]


Public Inquiry

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: The Commission is suggesting modifications and enhancements to 
the current estimation methodology to account specifically for recent 
Postal Service data changes, and for any other aspects of the 
monopolies estimation methodology. This document informs the public of 
this proceeding and the technical conference, invites public comment, 
and takes other administrative steps.

DATES: Comments are due: November 1, 2019.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov. Those who cannot submit comments 
electronically should contact the person identified in the FOR FURTHER 
INFORMATION CONTACT section by telephone for advice on filing 
alternatives.

FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 
202-789-6820.

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SUPPLEMENTARY INFORMATION:

Table of Contents

    I. Introduction
    II. Background
    III. Comments
    IV. Ordering Paragraphs

I. Introduction

    In its Annual Report, the Commission estimates both a value for the 
Postal Service combined letter and mailbox monopolies, which are 
jointly referred to as the postal monopoly, and a separate value for 
the mailbox monopoly alone.\1\ The current methodology estimates the 
hypothetical lost profit to the Postal Service if potential competitors 
were allowed to enter and compete in the Postal Service's letter and 
mailbox monopolies. FY 2018 Annual Report at 53-54. The Commission is 
soliciting comments and suggestions for modifications and enhancements 
to the current estimation methodology to account specifically for 
recent Postal Service data changes, and for any other aspects of the 
monopolies estimation methodology.\2\
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    \1\ See PRC Annual Report to the President and Congress Fiscal 
Year 2018, January 10, 2019, at 53-54 (FY 2018 Annual Report).
    \2\ In this proceeding as in previous related Dockets, the 
Commission continues to solicit comments and participation of 
interested parties on the methodology to estimate the value of the 
Postal Service monopolies. See Docket No. PI2008-3, Notice and Order 
Providing An Opportunity to Comment, April 18, 2008 (Order No. 71); 
Docket No. PI2009-1, Notice and Order Providing an Opportunity for 
Comment, December 19, 2008 (Order No. 152).
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II. Background

    On December 19, 2008, the Commission transmitted to Congress and to 
the President a Report on Universal Postal Service and the Postal 
Monopoly \3\ as required by section 702 of the Postal Accountability 
and Enhancement Act (PAEA), Public Law 109-435, 120 Stat. 3218 
(2006).\4\ In its Report, the Commission first estimated the annual 
value of the combined letter and mailbox monopolies to be $3.48 billion 
and the value of the mailbox monopoly alone to be $1.33 billion for FY 
2007. See Report at 144; Order No. 152. Since then, although not 
required to do so by statute, the Commission also publishes in its 
Annual Report updated estimates for the values of both the combined 
letter and mailbox monopolies and the mailbox monopoly alone using the 
base case assumptions and methodology outlined in its Report. See 
Report at 143-152. The estimates for the value of the monopolies vary 
each year depending on changes in delivery costs, volumes, and 
revenues. See, e.g., FY 2018 Annual Report at 53.
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    \3\ PRC Report on Universal Postal Service and the Postal 
Monopoly, December 19, 2008 (Report). The Commission was assisted in 
this undertaking by a team of experts assembled by the School of 
Public Policy at George Mason University (GMU) and by GMU's Center 
for Social Science Research.
    \4\ Section 702(a)(1) of the PAEA requires the Commission to 
submit a report to the President and Congress on ``universal postal 
service and the postal monopoly in the United States . . . including 
the monopoly on the delivery of mail and on access to mailboxes.''
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    Section 702(a)(1) of the PAEA uses the term ``postal monopoly'' to 
include both the Postal Service's monopoly on the delivery of mail 
(letter monopoly) and on access to mailboxes (mailbox monopoly). The 
letter monopoly is the Postal Service's exclusive right to carry and 
deliver most addressed, paper-based correspondence.\5\ The mailbox 
monopoly is the Postal Service's exclusive right to deliver to and 
collect from mailboxes. 18 U.S.C. 1725. For the estimated values of 
both the combined letter and mailbox monopolies and the mailbox 
monopoly alone, profits under the status quo are calculated and then 
compared with profits without the monopoly element under review, 
leaving all elements of the universal service obligation (USO) in 
place.\6\
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    \5\ Id. The letter monopoly is codified in the Private Express 
Statutes. See 18 U.S.C. 1693-1699; 39 U.S.C. 601-606.
    \6\ Report at 143. The Postal Service's obligation to provide 
``universal service'' is often referred to as the USO. ``Universal 
postal service'' is the term commonly used to refer to postal 
service to all parts of the country. See United States Postal Serv. 
v. Flamingo Indus. (USA) Ltd., 540 U.S. 736, at 741 (2004) (citing 
39 U.S.C. 101, 403); Order No. 71.
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    The estimated value of the combined letter and mailbox monopolies 
is a hypothetical estimate of the potential profit that the Postal 
Service would lose if both the letter and mailbox monopolies were 
lifted, and the Postal Service were subject to competition for mail 
currently covered by the letter and mailbox monopolies.\7\ The 
Commission also estimates the value of the mailbox monopoly alone 
because some mail is outside the letter monopoly.\8\ For example, it is 
lawful for private parties to deliver Periodicals, unaddressed 
saturation mail, catalogs over 24 pages, letters over 12.5 ounces, and 
parcels as these products are all not subject to the letter monopoly. 
FY 2018 Annual Report at 54.
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    \7\ FY 2018 Annual Report at 53; see Report at 144.
    \8\ Report at 148. The value of the letter monopoly alone 
(retaining the mailbox monopoly) is not separately estimated. 
Without access to mailboxes, it is unlikely that the entrant could 
successfully capture mail directed to a specific person or address 
because those mailpieces are delivered to and collected from 
mailboxes. FY 2018 Annual Report at 53.
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    Therefore, to estimate the hypothetical value of the mailbox 
monopoly alone, the current methodology calculates the potential 
decrease in Postal Service profits that would result from eliminating 
the mailbox monopoly while retaining the letter monopoly. Id. at 53-54. 
The current methodology for estimating the value of both the combined 
letter and mailbox monopolies and the mailbox monopoly alone has been 
in use since FY 2009.\9\ This methodology examines Postal Service data 
on city and rural delivery routes to see if a private delivery firm (or 
entrant) could profitably deliver a portion of mail, which is termed 
``contestable'' mail.\10\ The current methodology assumes that entry 
from a competitor would potentially occur on all routes that are most 
profitable for the competitor.\11\
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    \9\ See PRC Annual Report to the President and Congress, Fiscal 
Year 2009, January 8, 2010, at 32-33 (FY 2009 Annual Report); Order 
No. 152.
    \10\ See Report, folder ``Appendices.zip,'' folder ``USO 
Appendices,'' PDF file ``Appendix F Section 4.pdf,'' Quantitative 
Analysis of the Value of the Postal and Mailbox Monopolies, Robert 
H. Cohen (Analysis of Postal and Mailbox Monopolies), at 4, 
available at: https://www.prc.gov/prc-reports?keys=USO&field_report_type_value=All&=Apply.
    \11\ Id. See Report for a detailed description of the estimation 
methodology, SAS programs, workbooks and data files used for the 
Analysis of Postal and Mailbox Monopolies, folder ``Workpapers and 
Data Files AppendixF4.zip,'' folder ``Workpapers and Data Files 
Appendix F4,'' Word file ``WorkpaperF4.doc.''
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    In the 2009 Annual Report, the Commission stated that the estimated 
values of the monopolies ``should be viewed as upper bounds for several 
reasons.'' FY 2009 Annual Report at 32. The Commission acknowledged the 
possibility that entry by a competitor may only occur on profitable 
routes that are co-located (e.g., multiple profitable routes are 
sufficiently close together to make entry into that geographic area 
attractive). Id. Given that possibility, and the current methodology 
that evaluates entry for each route regardless of the extent of route 
clustering, the Commission noted that the estimated monopoly values are 
likely overstated. Id. Additionally, the current estimation methodology 
does not account for any carrier route sorting costs required by 
potential entrants for five digit sorted letter mail entering the 
system at the sectional center facility or the destination delivery 
unit. Id. The Commission noted that inclusion of these costs would also 
lower the extent of entry to some degree. Id.
    On December 15, 2017, the Commission approved a methodology change 
to the City Carrier Cost System (CCCS).\12\ In the CCCS, the Postal

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Service replaced the delivery point sequence (DPS) manual mail sampling 
for the route with a sampling method that evaluates a sample of digital 
images from Delivery Barcode sequence second pass operations within a 
ZIP Code.\13\ This new methodology creates issues related to 
calculating the profitability for DPS mail on city carrier routes in 
the current estimation methodology.\14\ As such, the Commission is 
soliciting comments and suggestions for modifications and enhancements 
to the current estimation methodology for both the combined letter and 
mailbox monopolies value, as well as the mailbox monopoly alone value, 
to account for the recent CCCS data changes, as well as any other 
potential modifications to the methodology for estimating the values of 
the monopolies.
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    \12\ See Docket No. RM 2017-3, Order on Analytical Principals 
Used In Periodic Reporting (Proposal Nine), December 15, 2017 (Order 
No. 4278).
    \13\ See Docket No. ACR2018, Library Reference USPS-FY18-34, 
December 28, 2018, at 1, 28-32.
    \14\ The current estimation methodology uses the delivery 
volumes on all evaluated rural routes and uses a sample of city 
routes in the CCCS to estimate all city routes delivered volumes. 
See Report, Analysis of Postal and Mailbox Monopolies, at 9.
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III. Comments

    The Commission invites public comment concerning its methodology to 
estimate the values of both the combined letter and mailbox monopolies 
and the mailbox monopoly alone reported in its Annual Report. 
Interested persons are invited to comment on any or all aspects of 
potential methodology changes. Comments are due November 1, 2019. The 
Commission does not anticipate the need for reply comments at this 
time. Material filed in this docket will be available for review on the 
Commission's website, http://www.prc.gov.

IV. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. PI2020-1 for the purpose 
of considering potential methodological changes to the computation of 
the estimated values of both the combined letter and mailbox monopolies 
and the mailbox monopoly alone.
    2. Interested persons may submit written comments on any or all 
aspects of the Commission's estimation methodology no later than 
November 1, 2019.
    3. Lawrence Fenster is designated to represent the interests of the 
general public in this docket.
    4. The Secretary shall arrange for publication of this Notice in 
the Federal Register.

    By the Commission.
Darcie S. Tokioka,
Acting Secretary.
[FR Doc. 2019-21679 Filed 10-3-19; 8:45 am]
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