ORDER NO. 35

UNITED STATES OF AMERICA

POSTAL REGULATORY COMMISSION

WASHINGTON, DC 20268-0001

Before Commissioners: Dan G. Blair, Chairman;

> Dawn A. Tisdale, Vice Chairman;\
> Mark Acton; Ruth Y. Goldway; and\
> Tony L. Hammond

Rate and Service Changes to Implement Docket No. MC2007-5

Baseline Negotiated Service Agreement

With Life Line Screening

ORDER REGARDING LIMITATION OF ISSUES AND

ESTABLISHING PROCEDURAL SCHEDULE

(Issued September 14, 2007)

*Prehearing conference.* At the September 10, 2007 prehearing conference
several procedural issues were discussed. First, the Office of the
Consumer Advocate (OCA) indicated that it was currently actively engaged
in discovery and that after discovery was completed it might require
hearings.[^1] OCA indicated that it expected to need approximately two
additional weeks for discovery. Life Line Screening (Life Line) agreed
that such a request was reasonable. Second, Life Line suggested that
after the discovery cut-off date, the Commission should require
participants to state, with some particularity, the issues that they
believe necessitate a hearing. Life Line argued that such a request is
reasonable to put the participants and Commission on notice as to the
issues to be heard in the case. Third, the Postal Service's Proposal for
Limitation of Issues (Proposal) was also addressed. Proposal at 1-2. No
participant filed a response to the Postal Service's Proposal or
commented on the Proposal at the prehearing conference.

*Procedural schedule.* The OCA indicated that two weeks should give it
sufficient time to complete initial discovery. No participant objected
to the timeframe proposed by the OCA. Accordingly, the Commission will
set the discovery deadline as September 24, 2007. To provide
participants with sufficient time to examine and evaluate the discovery
responses, the Commission sets October 9, 2007 as the deadline for
participants to indicate whether they seek a hearing in this case and to
identify the reasons why they believe a hearing is necessary. A further
procedural schedule will be issued after a review of the pleadings filed
on October 9, 2007.

*Motion to limit issues.* The Postal Service filed a proposal to limit
the issues open for litigation in this proceeding due to what it
believes are "extensive similarities" between the current docket and the
Bookspan NSA, Docket No. MC2005-3. *Id.* The Proposal essentially
requests precluding the issues of "(1) whether NSAs are consistent with
the statutory scheme of the Postal Reorganization Act \[the Act\] and,
in particular, 39 U.S.C. § 403(c), which prohibits undue preferences;
(2) the finding that an open 'niche' classification should not be
preferred over an NSA in general; (3) the finding that cost savings are
not required for volume-based discount NSAs; and (4) the utility of
declining block rates." *Id*. No participant filed a response to the
Postal Service's Proposal.

Statements such as those listed above by the Postal Service are not
particularly helpful when unconnected to a factual predicate. This is
especially true when the Postal Service does not offer any support,
context, or citation indicating that the Commission has made such
findings.

It is particularly problematic with respect to the second proposed
statement. The Commission has stated the opposite proposition in a
similar context. In Docket No. MC2002-2 (the Capital One NSA), the
Commission found that "all other things being equal, more inclusive mail
classifications are preferable to more restrictive alternatives." PRC
Op. MC2002-2, ¶ 3037.[^2]

With respect to the first and third proposed statements, in the Capital
One case, the Commission found that the Act permits the Postal Service
to contract with individual mailers if (1) the contract is reviewed in a
public proceeding and satisfies the substantive criteria of the Act; (2)
the proposed rate and service changes will work to the mutual benefit of
the mail users and the postal system as a whole; and (3) the
rate-and-service package is offered to other potential users willing to
meet the same conditions of service. *Id.*, ¶ 3013; PRC Op. MC2005-3,
¶ 4001. The Commission's rules also state "it shall be the policy of the
Commission to recommend Negotiated Service Agreements that are
consistent with statutory criteria, and benefit the Postal Service,
without causing unreasonable harm to the marketplace." 39 C.F.R.
§ 3001.190(b). In Bookspan, the Commission noted that "declining block
rates --- without associated cost savings --- can be approved under the
Act if such agreements provide additional net revenue above and beyond
the amounts that would have been generated in the absence of the
declining block rates." PRC Op. MC2005-3, ¶ 4006. (Footnote omitted.) It
found that "there is no bar to potential NSAs that do not have a cost
savings element so long as the essential features of the NSA are
available to other similarly situated mailers and there is a reasonable
justification for the Agreement." *Id.,* ¶ 4018.

With respect to the fourth statement, in addition to lacking a factual
predicate and being without support, context, or citation, the term
"utility" is too overbroad and vague to serve a useful purpose. In
certain circumstances declining block rates may have utility and in
others they may not. The Commission can not make a blanket statement
about declining blocks rates and their nexus to the term utility.

*It is ordered:*

1.  Initial discovery requests should be filed no later than September
    24, 2007.

2.  Participants seeking a hearing in this proceeding are directed to
    file a statement to that effect no later than October 9, 2007, along
    with supporting reasons.

3.  The Postal Service's Proposal for Limitation of Issues, filed August
    8, 2007, is granted in part and denied in part as discussed in the
    body of this Order.

By the Commission.

Steven W. Williams

Secretary

[^1]: *See* Office of the Consumer Advocate Statement Concerning Issues
    That May Require a Hearing, September 7, 2007.

[^2]: The Commission went on to say that "the Commission has maintained
    a consistent policy of entertaining and acting upon claims that new
    mail classifications should be available on more inclusive terms
    than were originally proposed.... Nevertheless, the Commission will
    continue to allow participants to inquire into the feasibility of
    more inclusive classification provisions, and to propose more
    expansive alternatives, as it has done in this proceeding." *Id.*, ¶
    3038-40.