[Before The]{.smallcaps}

POSTAL RATE COMMISSION

WASHINGTON, D.C. 20268-0001

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  [Postal Rate and Fee Changes,       Docket No. R2000-1
  2000]{.smallcaps}                   

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**RESPONSE OF UNITED STATES POSTAL SERVICE**

**TO PRESIDING OFFICER'S INFORMATION REQUEST NO. 7**

**QUESTIONS 3 AND 4**

The United States Postal Service hereby provides responses to questions
3 and 4 of Presiding Officer's Information Request No. 7, issued on
April 6, 2000.

Each question is stated verbatim and is followed by the response.

Respectfully submitted,

UNITED STATES POSTAL SERVICE

By its attorneys:

Daniel J. Foucheaux, Jr.

Chief Counsel, Ratemaking

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

Anthony Alverno

Attorney

475 L\'Enfant Plaza West, S.W.

Washington, D.C. 20260-1137

\(202\) 268-2997; Fax --6187

April 17, 2000

**CERTIFICATE OF SERVICE**

I hereby certify that I have this day served the foregoing document upon
all participants of record in this proceeding in accordance with section
12 of the Rules of Practice.

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

Anthony Alverno

475 L\'Enfant Plaza West, S.W.

Washington, D.C. 20260-1137

\(202\) 268-2997; Fax --6187

April 17, 2000

3.  Please refer to LR-I-95, LR95revised.xls, sheets 'city load' (cl)
    and 'Delivery Volume' (dv). Shortening the notation somewhat, the
    formula in cell C64 on sheet cl is C53 \* dvG3 + (dvG13 -- dvG3) \*
    C53, which, after factoring and reducing equals C53 \* dvG13. In
    words, the formula is the unit cost of letters times the DMM-defined
    letter volume. The formula in cell D64 is D53 \* dvH3 + (dvH13 --
    dvH3) \* C53. This one does not reduce. In words, the formula is the
    unit cost of flats times the CS7 volume of flats [plus]{.underline}
    the difference in flat volume between the DMM and CS7 times the unit
    cost of letters. It is not clear why a flat-volume difference should
    be multiplied by the unit cost of letters. Please provide a
    rationale for this product and explain the rationale for the lack of
    symmetry between cells cl C64 through C71, and cells cl D64 through
    E71.

**RESPONSE:**

As discussed in my response to POIR#6 question 4, "using City Carrier
Cost System (CCS) volumes can overstate true volume of DMM-defined
letters delivered by city carriers because the volumes by shape recorded
in the CCS can be based on where mail is physically cased instead of its
DMM shape." It can be deduced that any amount of volume regarded by the
DMM as flats that are in excess of what CCS regards as flats (dvH13 --
dvH3) must be what CCS regards as letters. Therefore, the appropriate
cost per piece for this volume is the CCS letter cost per piece. This
happens because some flats have been identified as letters in the CCS
because they are cased in the letter case. It is my understanding that
these flats are assumed to have the average elemental load costs of
letters since they would presumably be part of a letter bundle. Thus, it
is logical in this case to assign letter unit costs to this portion of
DMM-defined flats.

4 Please refer to USPS-T-28, Table 5, revised 3/1/00. The cost
difference between the "Regular Nonletter Subtotal" of 8.359 cents and
the "ECR Basic Nonletters" cost of 6.589 cents, being 1.77 cents, is
used by witness Taufique (USPS-T-38) as part of the cost basis for the
carrier route discount for Outside-County Periodicals. It appears that
both of these cost figures are weighted averages of the corresponding
costs of flats and of parcels within each category.

(a) Please provide the proportion of flats to parcels for each of these
    Standard A categories.

(b) Please provide the relative proportions of flats to parcels in the
    Periodicals categories of 5-digit and carrier route.

(c) Acknowledging the relative levels of parcels in the two Standard A
    categories, please explain the meaning of the cost difference of
    1.77 cents and explain its applicability to Periodicals discounts.

RESPONSE:

a.  Using data provided in Sections I and II of USPS LR-I-92, Standard
    (A), the proportions are as follows:

    Regular 3/5 Nonauto 36.25% flats to 12.33% parcels (3 to 1)

    Regular CR 37.20% flats to 2.31% parcels (16 to 1)

b.  Using data provided in Section IV of USPS :LR-I-94, Periodicals, the
    proportions are as follows:

Regular 3/5 Nonauto 99.62% flats to 0.042% parcels (2,354 to 1)

Regular CR 99.67% flats to 0.001% parcels (79,042 to 1)

Nonprofit 3/5 Nonauto 93.43% flats to 0.030% parcels (3,090 to 1)

Nonprofit CR 98.85% flats to 0.002% parcels (46,531 to 1)

Combined 3/5 Nonauto 98.51% flats to 0.040% parcels (2,453 to 1)

Combined CR 99.44% flats to 0.002% parcels (65,797 to 1)

c\. The 1.77 cents cost difference is the difference between the
weighted average cost of Standard Mail (A) Regular nonletters and ECR
Basic nonletters. Since data were not developed separately for flats and
parcels in ECR, it is not currently possible to re-estimate Periodicals
carrier route costs using Periodical's percentages of flats and parcels.
Thus, the 1.77 cents cost difference is the best available proxy for
Periodicals costs.