Before the

POSTAL REGULATORY COMMISSION

WASHINGTON, DC 20268-0001

Competitive Product Prices Docket No. MC2009-17

Express Mail & Priority Mail

Express Mail & Priority Mail Contract 4

Competitive Product Prices Docket No. CP2009-24

Express Mail & Priority Mail Contract Mail 4

(MC2009-17)

Negotiated Service Agreement

PUBLIC REPRESENTATIVE COMMENTS IN RESPONSE TO

UNITED STATES POSTAL SERVICE REQUEST TO ADD EXPRESS MAIL & PRIORITY MAIL
CONTRACT 4 TO COMPETITIVE PRODUCT LIST AND NOTICE OF ESTABLISHMENT OF
RATES AND CLASS NOT OF GENERAL APPLICABILITY

(March 4, 2009)

In response to Order No. 184,[^1] the Public Representative hereby
comments on the February 20 Request of the United States Postal Service
to add Express Mail & Priority Mail Contract 4 to the Competitive
Product List (Request) and its Errata filed on March 3.

The Request comports with title 39 stipulations and the relevant
Commission Rules of Practice and Procedure. For these reasons, it
appears to be beneficial to the general public.

The Public Representative has accessed and reviewed all materials the
United States Postal Service submitted under seal in this matter,
documentation in its original (not redacted) version. The Request (and
its accompanying documentation) is persuasive. Each element of 39 USC
3633(a) appears to be met by this Express Mail and Priority Mail
Contract 4.

For a competitive products pricing schedule *not of general
applicability*,[^2] the Postal Service must demonstrate that the
contract will comply with 39 USC 3633(a): It will not allow market
dominant products to subsidize competitive products, it will ensure that
each competitive product covers its attributable costs; and enable
competitive products as a whole to cover their costs (contributing a
minimum of 5.5 percent to the Postal Service's total institutional
costs). In the Governors' February 19 Decision

09-2 (at 1), the Governors assert that these conditions are met.

**Accountability and Confidentiality**

The Postal Service Request contains a rationale for maintaining
confidentiality concerning pricing, processes which enable discounted
pricing, the attendant formulae and other contractual terms which are
matters of commercial sensitivity.[^3] Here, it would appear that the
Postal Service has concisely justified the extent of confidentiality
appropriate in this matter, providing a brief explanation for
maintaining the confidentiality of each aspect of the matters remaining
under seal. It appears that the Postal Service has made a good faith
effort to supply enough pertinent details to demonstrate the need for
material under seal to be protected.

> **The Agreement**

The agreement features a number of provisions that are mutually
beneficial to the parties, and beneficial to the general public. It
should be noted that this contract constitutes new volume for the Postal
Service. The Postal Service acknowledges "some risk" (Attachment A to
the Governor's Decision), and notes that actual performance under this
contract could vary from estimates, but concludes that the contract will
remain profitable. Components of the agreement which suggest positive
results:

-   An "Escalation Factor" is included to ensure the equity of the base
    pricing for the duration of the three-year contract.

-   Elements which make the mailer's pieces less costly for the Postal
    Service to handle than their publicly-offered products.

-   Volume incentives to earn larger discounts.

The pricing formulae approved in Governors' Decision 09-2 should assure
that there is no subsidization of this EMS and Priority Mail negotiated
service agreement by market dominant products.

**\
Conclusion**

The Public Representative submits that the present Express Mail &
Priority Mail Contract 4 agreement complies with title 39. The costing
data submitted by the Postal Service indicates that it will not allow
market dominant products to subsidize competitive products; it will
ensure that each competitive product covers its attributable costs; and
enable competitive products as a whole to cover their costs
(contributing a minimum of 5.5 percent to the Postal Service's total
institutional costs). The Postal Service request also fulfills all
relevant requirements for Commission Rules of Practice and Procedure.

The Public Representative respectfully offers the preceding Comments for
the Commission's consideration.

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

Paul L. Harrington

Public Representative

901 New York Ave., NW Suite 200

Washington, D.C. 20268-0001

\(202\) 789-6867; Fax (202) 789-6883

e-mail: <paul.harrington@prc.gov>

[^1]: Notice and Order Concerning Express Mail & Priority Mail Contract
    4 Negotiated Service Agreement, February 24, 2009.

[^2]: *See* 39 C.F.R. 3015.5-7.

[^3]: Postal Service Request, at 2-3.