[Federal Register Volume 86, Number 30 (Wednesday, February 17, 2021)]
[Notices]
[Pages 9958-9963]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03103]


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POSTAL REGULATORY COMMISSION

[Docket No. PI2020-1; Order No. 5832]


Public Inquiry

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: The Commission, in response to a motion by the Postal Service, 
notices its filing of a detailed explanation of its current Universal 
Service Obligation (USO) valuation methodology, including workpapers 
showing the calculations underlying the Commission's most recent USO 
valuation. The Commission has determined that providing the 
documentation of its current monopoly valuation methodology, including 
supporting workpapers, would be equally valuable to interested persons 
seeking to comment in this docket. This document informs the public of 
this proceeding and the technical conference, invites public comment, 
and takes other administrative steps.

DATES: Comments are due: March 26, 2021.

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.

SUPPLEMENTARY INFORMATION: In Docket No. PI2021-1 and in response to a 
motion by the Postal Service, the Commission notices its filing of a 
detailed explanation of its current Universal Service Obligation (USO) 
valuation methodology, including workpapers showing the calculations 
underlying the Commission's most recent USO valuation.\1\ The 
Commission has determined that providing the documentation of its 
current monopoly valuation methodology, including supporting 
workpapers, would be equally valuable to interested persons seeking to 
comment in this docket. Library Reference PRC-LR-PI2020-1-NP1 (filed 
under seal) consists of the SAS programs, datasets, input workbooks and 
output files used to develop the FY 2018 and FY 2019 postal and mailbox 
monopolies estimates.\2\ In addition, the Library Reference includes a 
Word document describing these files, processing instructions and their 
use, as well as the various output files produced.
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    \1\ Docket No. PI2021-1, Order Granting Motion to Disclose 
Methodological Information and to Adjust Procedural Schedule, 
January 21, 2021 (Order No. 5821).
    \2\ The mailbox monopoly is the Postal Service's exclusive right 
to deliver to and collect from mailboxes. The letter monopoly is the 
Postal Service's exclusive right to carry and deliver most 
addressed, paper-based correspondence. The combined letter and 
mailbox monopolies are together referred to as the postal monopoly. 
Subtracting the value of the mailbox monopoly from the value of the 
postal monopoly does not yield the value of the letter monopoly 
because there is overlap in the contestable mail and a different 
frequency of delivery by the competitor. Without access to 
mailboxes, it is unlikely that the competitor could successfully 
capture mail directed to a specific person or address because those 
pieces are delivered to and collected from mailboxes. Therefore, a 
separate estimate of the value of the letter monopoly alone 
(retaining the mailbox monopoly) is not calculated.
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    As such, the Commission is providing public notice of filing its 
Analysis of the Value of the Postal and Mailbox Monopolies (Library 
Reference PRC-LR-PI2020-1-NP1).

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Overview of Current Changes to Original Monopolies Methodology

SAS Programs Changes, Input Workbooks Changes and Other Material 
Methodological Changes (FY 2018 and FY 2019 Monopolies Estimates)

    To the extent possible, the Commission attempted to update and 
replicate nearly all aspects of the original methodology.\3\ Out of 
necessity, the original SAS programming code was modified to 
accommodate or incorporate changes in the data sources such as new 
product codes or other time or mail volume changes.\4\
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    \3\ See Report on Universal Postal Service and the Postal 
Monopoly, December 19, 2008 (2008 USO Report). Additionally, the 
Commission filed Appendices and Workpapers attached as zip files. 
See folder ``Appendices,'' folder ``USO Appendices,'' PDF file 
``Appendix F Section 4.pdf'' (Quantitative Analysis of the Value of 
the Postal and Mailbox Monopolies, Robert H. Cohen) and folder 
``Workpapers and Data Files Appendix F4.zip.'' The files included 
with the FY 2018 and FY 2019 PRC-LR-PI2020-1-NP1 Library Reference 
mimic the same structure (where applicable) and purpose of the SAS 
programs and datasets as well as the input and output workbooks 
provided in the 2008 USO Report ``Workpapers and Data Files Appendix 
F4.zip'' folder ``Workpapers and Data Files Appendix F4.''
    \4\ For example, the City Carrier Cost System (CCCS) sampling 
design change described in Docket No. ACR2008, Library Reference 
USPS-FY08-34, December 30, 2008, PDF file ``USPS-FY08-
34_CCCS_Final.pdf,'' at 1. Additionally, to improve efficiency, the 
rural product distribution keys development was automated in the 
methodology after the 2008 Report.
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    The original monopoly methodology had ``Parcel Post'' as the only 
mail in the category that the SAS programs and processing refer to as 
``d23'' volume.\5\ In the 2008 USO Report methodology, contestable mail 
included ``Parcel Post'' dropshipped at the destination delivery unit 
(DDU).\6\ Because ``Parcel Post'' evolved \7\ since then, in the FY 
2018 and FY 2019 methodology, the ``d23'' volume includes Parcel 
Select/Parcel Select Lightweight, Retail Ground/Standard Post and 
First-Class Packages in the input workbooks and volume groupings of the 
overarching structure of the SAS processing programs code.\8\
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    \5\ The FY 2007 CCCS data set had bucket number 23 mail volume 
as ``Parcel Post.'' See Docket No. ACR2007, Library Reference USPS-
FY07-28, December 28, 2007, file ``USPS_FY07_28_CCCS_Final.doc, at 
12; Workpapers and Data Files Appendix F4, file ``SAS program 
``CCS07_newwts1.sas.''
    \6\ See 2008 USO Report, Workpapers and Data Files Appendix F4, 
Excel file ``contestable_vol_est_120708.xls,'' tab ``FY07.'' A note 
is included in tab ``FY07,'' line 11, ``Note: used .523 (ratio of 
DDU/Tot PP in R2006-1) x 349 mil (FY07 Tot PP RPW).''
    \7\ The United States Postal Service Office of Inspector General 
states that ``Parcel Post has evolved into a diverse set of package 
delivery services that are integral to the Nation's lifestyle and 
commerce, including Priority Mail, Parcel Select, which allows 
mailers to enter discounted packages deep within the U.S. Postal 
Service's network, and Standard Post, Parcel Post's direct 
descendant.'' See United States Postal Service Office of Inspector 
General White Paper, Report No. RARC-WP-14-004, 100 Years of Parcel 
Post, December 20, 2013, at ii, available at: https://www.uspsoig.gov/sites/default/files/document-library-files/2015/rarc-wp-14-004_0.pdf.
    \8\ See Docket No. ACR2019, Library Reference USPS-FY19-NP22, 
December 27, 2019, PDF file ``USPS-FY19_NP22_CCCS_Preface.pdf,'' at 
37-38; Library Reference USPS-FY19-NP23, December 27, 2019, PDF file 
``USPS-FY19-NP23_RCCS_Preface.pdf,'' at 22-23: bucket numbers 123 
(First-Class Package), 420 (Parcel Select), 430 (Parcel Select 
Lightweight), 460 (Retail Ground/Standard Post). The ``d23'' 
percentage of contestable mail is based on the number of Parcel 
Select and Parcel Select Lightweight packages dropshipped (data 
source from the billing determinants) at the DDU. See Library 
Reference PRC-LR-PI2020-1-NP1, Excel file ``Contestable_2019.xlsx,'' 
tabs ``FY 19,'' ``FY 19 Contestable,'' and ``19Parcel Select.''
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    The FY 2018 and FY 2019 data source mail volume inputs to the 
models also differ from previous years. The volume inputs are adjusted 
(weighted) to the national fiscal year annual estimates of mail volume 
delivered by city carriers (on letter routes) and rural carriers. The 
Commission's Sensitivity Analysis section that follows includes the 
results of those changes for FY 2019.

Commission's Sensitivity Analysis

    The Commission's models allow for the selection of different values 
for certain key parameters that affect the estimated value of the 
monopolies. In addition to the base case values that reflect the 
assumptions that the Commission selected as the most likely, ``low'' 
and ``high'' values are evaluated to demonstrate the sensitivity of the 
results to each parameter and to help conceptualize the lower and upper 
bounds of reasonable estimates. Figure 1 shows that the combined 
monopoly value estimate is most sensitive to the contestable volume 
with a range from low to high of about $7.2 billion. The results are 
less sensitive to the discount or to the cost advantage variables.
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    To test the sensitivity of the FY 2019 base case combined monopoly 
estimate, the value of the combined monopoly estimate is shown below in 
Table 1 for the full range of each parameter while holding the other 
variables to their base case values.
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    \9\ The base case combined monopoly model parameters (discount, 
delivery days/week, cost advantage and percentage of contestable 
mail potentially skimmed on profitable routes) are shaded in Table 
1. The base case parameters for the combined (letter and mailbox)/
postal monopoly estimate are the entrant offers a 10 percent 
discount, has a 10 percent cost advantage, delivers 3 days a week 
and potentially skims 100 percent of the eligible contestable mail 
on profitable routes.
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    Figure 2 shows that the mailbox monopoly value estimate is most 
sensitive to the contestable volume with a range from low to high of 
about $1.6 billion. The mailbox monopoly value estimate is also 
sensitive to the number of delivery days. The results are less 
sensitive to the discount or to the cost advantage variables.

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    To test the sensitivity of the FY 2019 base case combined monopoly 
estimate, the value of the combined monopoly estimate is shown below in 
Table 2 for the full range of each parameter while holding the other 
variables to their base case values.
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    \10\ The parameters for the base case of the mailbox monopoly 
model are that the entrant offers a 10 percent discount, has a 10 
percent cost advantage, delivers 1 day a week, and potentially skims 
100 percent of the eligible contestable mail on profitable routes.
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    To the extent that the Commission's additional analysis and this 
information may affect comments already filed in this docket or create 
new areas of interest for parties, the Commission is opening up a 
second comment period. Interested persons are invited to comment on any 
or all aspects of existing and potential methodology changes. Comments 
are due March 26, 2021.
    It is ordered:
    1. The Commission provides notice of filing its Analysis of the 
Value of the Postal and Mailbox Monopolies in Library Reference PRC-LR-
PI2020-1-NP1.
    2. Interested persons may submit written comments on any or all 
aspects of the Commission's estimation methodology no later than March 
26, 2021.
    3. The Secretary shall arrange for publication of this Order in the 
Federal Register.

    By the Commission.
Erica A. Barker,
Secretary.
[FR Doc. 2021-03103 Filed 2-16-21; 8:45 am]
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