**[Before The]{.smallcaps}**

**POSTAL RATE COMMISSION**

**[Washington, D.C. 20268-0001]{.smallcaps}**

**[Mailing Online Service]{.smallcaps} Docket No. MC98-1**

**PITNEY BOWES RESPONSE TO THE MOTION**

**OF THE UNITED STATES POSTAL SERVICE FOR EXPEDITION,**

**AND FOR WAIVER OF CERTAIN PROVISIONS OF RULE 161 AND**

**CERTAIN PROVISIONS OF RULE 64(h)**

Pitney Bowes Inc. ("Pitney Bowes") submits this response to the Motion
of the United States Postal Service for Expedition, and For Waiver of
Certain Provisions of Rule 161 and Certain Provisions of 64(h) ("Postal
Service Motion").

Pitney Bowes does not oppose the Postal Service request for waiver of
portions of Rules 54 and 64, on the understanding that the case will
nonetheless proceed without bar to appropriate examination of issues
that may be implicated by the rules waived. That is, though the Postal
Service will not be obliged to present otherwise required information at
the onset of this proceeding, parties should not be precluded from
discovering such information as the case moves forward.

Presiding Officer's Ruling MC98-1/2 deals with the requested waiver of
Rule 161 by proposing to bifurcate the docket, and to deal with the
market test and experimental phases of the case in sequence. For the
reasons set forth below, we support this approach which, we believe,
properly balances the Postal Service's desire for expedition with
dictates of procedural fairness.

Postal Service undertakings authorized by the market test rules have a
narrow purpose. They are designed " . . . for obtaining information that
could shed light on the prospects of potential service innovations
through limited testing in the marketplace." [Notice of Proposed
Rulemaking]{.underline}, 60 Fed. Reg. 54981 (October 27, 1995). There
may be situations in which, as the Postal Service urges, market tests
can appropriately serve as precursors to experimental rather than
permanent rates.

However, market testing is legitimate only if it serves the core purpose
of providing the Commission with information that will be helpful to it
in evaluating the propriety of proposed rates, whether they are
"permanent" or experimental. The "test" advocated by the Postal Service
here will not serve that purpose and, therefore, should not be permitted
unless the Postal Service alters its test proposal to conform with the
requirements of Rules 161 and 164 and the spirit of Rule 165.[^1]^/^

As we understand the Postal Service request, it asks that the market
test begin in October of this year, reducing the period for adjudicating
the request for the test to approximately 45 days, roughly half of the
90-day interval established by Rule 164.[^2]^/^ The actual effects of
all of the Postal Service's requests for waiver and expedition are more
dramatic still. They would effectively put in place the experimental
rates on only approximately 45 days notice. Although the market test is
limited in geographic scope, in duration (approximately 3 months)[^3]^/^
and at least tacitly limited in "the number of customers who will
participate" (several thousand), the Postal Service then asks that all
limitations on scope and scale be eliminated for an experiment that
could last up to two years. Under the Postal Service's waiver request,
the time for adjudicating the market test runs simultaneously with that
for adjudicating the experimental proposal. This is not the way that the
Commission's rules were intended to work. Rather, the rules contemplate
that the time for consideration of the experiment is to begin only after
an adjudication of the market test proposal. Thus, unless the proceeding
is bifurcated, the effect of the Postal Service's procedural proposal
will be to very substantially considerably shorten the time for
examination and consideration of the experiment.

Pitney Bowes proposes that the request for a three-month market test be
evaluated by interested parties for as much of the 90-day period
provided by rule for such proceedings as the Commission determines
appropriate. The proposal for experimental rates should be
suspended[^4]^/^ during the period that the market test request is being
adjudicated. Following the entry of an order concerning the market test
proposal, proceedings on the experimental proposal should move forward.
After the expiration of as much of the 150-day period as the Commission
finds to be appropriate for discovery and any necessary hearings,
implementation of the experiment (if recommended by the PRC and approved
by the Governors) could follow. Pitney Bowes has no objection to the
continuation of the market test (for a period not to exceed one year)
after its three-month initial period, during the pendency of
adjudication of the experimental rates proposed. However, the test
limitations on geographic scope and scale (in terms of numbers of
customers served) should be maintained during any such continuation.

This proposal accommodates the Postal Service's desire to conjoin a
market test with experimental rates and balances the Postal Service's
wish for extreme expedition with the needs of interested parties and the
Commission to engage in meaningful analysis of the proposals.

There are two very obvious ways in which deliberations will be aided by
this approach. First, the parties and the Commission will be able to
evaluate the market test price points with knowledge of the actual
contract prices of the printer that will be involved in the test. The
Postal Service has indicated that it expects to come to contract in
"early August". USPS-T-1, 6 (Witness Garvey). Trying to reach a
recommended decision on the market test rates \-- a decision that will
be driven in large measure by these contract prices \-- before the end
of September unnecessarily impedes the deliberative process. More time
than this is required and the procedures advocated here will provide it.

At the next stage of proceeding, examination of the proposed
experimental rates, it is imperative that whatever can be learned from
the market test be applied. As we noted at the outset, this is the
purpose of market testing. If the market test does not begin until early
October, it will be impossible to assemble meaningful data from that
test, evaluate that data and incorporate the data into analysis and
findings before the end of November. Again, more time than this is
required and Pitney Bowes' proposal provides it.

Contrarily, no plausible reason has been advanced by the Postal Service
for the greatly truncated schedule proposed here. The Postal Service
invokes the "[possibility]{.underline} that major software developers
[could]{.underline} integrate Mailing Online into \[unspecified\]
impending updates of software . . ." (Postal Service Motion, 1 (emphasis
supplied)). This is far too imprecise and much too speculative. It is
also inconsistent with the fact that the Postal Service has actually
been engaged in a market test since March of this year and there has
been no disclosure of whether the Mailing Online works satisfactorily
with existing software packages. That is not, of course, to say that
software improvements to advance service efficiency might not be
forthcoming, but it seems extraordinarily unlikely that

knowing of the fate of the experiment by the end of November is critical
to such future developments.

Respectfully submitted,

Ian D. Volner

N. Frank Wiggins

Venable, Baetjer, Howard & Civiletti, LLP

1201 New York Avenue, N.W.

Suite 1000

Washington, DC 20005-3917

Aubrey M. Daniel III

Carolyn H. Williams

Williams & Connolly

725 12th Street, NW

Washington, DC 20005

Counsel to Pitney Bowes Inc.

August 12, 1998

DC1:77130

**CERTIFICATION**

I hereby certify that I have this day served the foregoing document upon
the United States Postal Service and the Office of the Consumer Advocate
in this proceeding in accordance with section 12 of the rules of
practice and the Commission's Order No. 1216.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Ian D. Volner

[^1]: ^/^ While Mr. Garvey's testimony concerning data collection during
    the market test period may literally comply with the requirements of
    Rule 165, the data collected in the course of a market test should
    have some role in the adjudication of rates proposed following the
    test period.

[^2]: ^/^ In the course of adopting the market test rule, the Commission
    noted that "the 60-day schedule dictated by the Postal Service's
    rules may be insufficient to provide interested parties an adequate
    opportunity to exercise their due process rights under 3624."
    [Notice of Proposed Rulemaking]{.underline}, 60 Fed. Reg. at 54982.
    This led to the Commission's recommendation and subsequent adoption
    of a 90-day period for consideration of market test proposals. Rules
    of Practice § 164.

[^3]: ^/^ The rules limit market tests to one year in length except in
    "extraordinary circumstances". Rules of Practice § 161.

[^4]: ^/^ Section 166 of the rules of practice provides for such
    suspension at the request of the Postal Service. The Commission
    plainly has the power to impose a suspension as a condition of the
    rule waivers requested by the Postal Service.