Before the

POSTAL REGULATORY COMMISSION

Washington, DC 20268-0001

Periodic Reporting Rules Docket No. RM2008-4

INITIAL COMMENTS OF THE GREETING CARD ASSOCIATION

The Greeting Card Association (GCA) files these comments in response to
Commission Order No. 104 (August 22, 2008). We focus on one aspect of
the Commission's initiative with respect to estimating the cost of the
Postal Service's public service responsibilities, for the purpose of
preparing the annual report required by 39 U.S.C. § 3651(b)(1).

The Commission describes the purpose of proposed Rule 3050.30 at pp.
12-14 of Order No. 104. As we understand that description, the
information called for by proposed Rule 3050.30 is meant to allow the
Commission to estimate the "geographic component" of public service
costs -- i.e., the costs particularly associated with the issue
addressed in 39 U.S.C. § 3651(b)(1)(A)[^1]. Other types of information
might be necessary for the development of the total picture contemplated
by § 3651(b)(1).

In general, the data called for by the proposed rule properly aim to
recognize not only the costs associated with the geographic areas in
question, but also the revenues. This is clearly appropriate. Any
attempt to decide whether a particular area would be left unserved, or
served inadequately, absent a public service obligation[^2] would have
to consider the available revenues as well as the direct and indirect
costs. In the context of a hypothetical decision as to whether a given
area would be served absent a public service obligation, the analyst
would naturally consider the *net* cost of the service. The Commission,
accordingly, proposes to require "data sufficient to calculate the costs
incurred and the revenue derived from each route sampled by the City
Carrier Cost System (CCCS) and the Rural Carrier Cost System
(RCCS)."[^3]

It is not altogether clear, however, that the proposed rule captures all
of the revenue associated with serving areas of interest under
§ 3651(b)(1)(A). With respect to rural routes, the Commission would
require --

> \(d\) For sampled rural routes:
>
> \(1\) Stops;
>
> \(2\) Boxes served; and
>
> \(3\) Mailpieces
>
> identified by carrier route, route type, facility, and ZIP Code\[.\]

In the case of retail facilities, covered by subsection (e) of the
proposed rule, the Commission explicitly asks for revenues generated, as
well as costs incurred, by ZIP Code. Like retail offices, however, rural
carriers regularly sell stamps, provide special services, and accept
packages.[^4] It does not appear that the revenue from these activities
is recorded by the Rural Carrier Cost System. The purpose of the RCCS,
as described in Library Reference L-12 in Docket R2006-1, is to
"gather\[ \] data for distributing major portions of carriers' salaries,
benefits and related costs to the various categories of mail *for postal
ratemaking purposes*."[^5] For cost allocation in ratemaking, data on
the dollars collected through rural carriers' postage sales and other
revenue-generating activities on the route might indeed be superfluous.
For purposes of the § 3651(b)(1)(A) estimate, we suggest that they are
highly important.

GCA suggests, therefore, that the Commission expand proposed Rule
3050.30 by requiring information on revenue collected by rural carriers,
in addition to the data on stops, boxes, and mailpieces already
incorporated in the Rule.

Respectfully submitted,

GREETING CARD ASSOCIATION October 16, 2008

David F. Stover

2970 South Columbus St., No. 1B

Arlington, VA 22206-1450

\(703\) 998-2568

\(703\) 998-2987 fax

E-mail: [postamp@crosslink.net]{.underline}

[^1]: That subparagraph requires the Commission to estimate the cost of

    > \(A\) postal services to areas of the Nation where . . . the
    > Postal Service either would not provide services at all or would
    > not provide such services in accordance with the requirements of
    > this title if the Postal Service were not required to provide
    > prompt, reliable, and efficient services to patrons in all areas
    > and all communities, including as required under the first
    > sentence of section 101(b)\[.\]

[^2]: In this connection, we note that the Commission expresses the
    standard as "whether the geographic distribution of the Postal
    Service's delivery offices, delivery routes, and retail counter
    facilities incurs costs that would not be incurred *by a private
    provider* without public service obligations." Order No. 104, p. 13;
    italics added. The concept of "private provider" may entail the
    requirement of a (presumably competitive) return on expenditures to
    serve the areas in question. Section 3651(a)(1)(A) does not seem to
    require that additional cost assumption. It speaks merely of a
    hypothetical situation in which the Postal Service has no
    (geographic) public service obligation. In more general terms: a
    hypothetical *nonprofit* (presumably governmental) provider with no
    public service obligation is also logically possible. Such a
    provider might, under certain cost and revenue assumptions, be able
    to serve a geographic area which a profit-making firm would pass by.
    If this is so, the standard quoted above could imply an overestimate
    of geographically-driven public service costs by including more
    areas than strictly necessary.

[^3]: Ibid.

[^4]: The Postal Service has said that rural carriers provide most of
    the services available in a retail office. Docket R2006-1, Postal
    Service Library Reference LR-L-12, *Rural Carrier Cost System
    Statistical and Computer Documentation,* p. 1.

[^5]: Ibid.; italics added.