[Federal Register: March 19, 1999 (Volume 64, Number 53)]
[Notices]
[Page 13613-13617]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19mr99-126]

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POSTAL RATE COMMISSION

[Docket Nos. MC99-1 and MC99-2; Order No. 1233]


Mail Classification Proceedings; (Authority: 39 U.S.C. 3623)

AGENCY: Postal Rate Commission.

ACTION: Notice of new cases affecting nonletter-sized business reply
mail.

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DATES: See Supplementary Information section for dates.

ADDRESSES: Send communications concerning this notice to the attention
of Margaret P. Crenshaw, Secretary of the Commission, 1333 H Street
NW., Suite 300, Washington, DC 20268-0001.

FOR MORE INFORMATION CONTACT: Stephen L. Sharfman, General Counsel,
1333 H Street NW., Washington, DC 20268-0001, 202-789-6820.

SUPPLEMENTARY INFORMATION: On March 10, 1999, the Postal Service filed
concurrent requests with the Commission for recommended decisions on
proposed changes in the Domestic Mail Classification Schedule (DMCS).
Both requests were filed pursuant to Sec. 3623 of the Postal
Reorganization Act, 39 U.S.C. 101 et seq.
    The proposed changes affect certain nonletter-sized Business Reply
Mail (BRM). They grow out of an ongoing, two-year experiment
authorizing two alternatives to the traditional manual method of
accounting for this type of mail. These alternatives are referred to as
the ``weight averaging'' method and the ``reverse manifest'' method.
The experiment was authorized as a result of Docket No. MC97-1. It
began June 8, 1997 and expires June 7, 1999. See Order No. 1148
(December 18, 1996); 61 FR 67860-62 (December 24, 1996); PRC Op. MC97-1
(April 2, 1997); and Decision of the Governors of the United States
Postal Service on the Commission's Recommended Decision (May 6, 1997).
    The Service represents, in its two requests and related filings,
that developments warrant making the experimental classification and
fees permanent for the weight averaging accounting method, but not for
the reverse manifest method. At the same time, the Service finds that
certain technical and administrative issues

[[Page 13614]]

related to weight averaging have emerged, and it believes resolution is
not possible prior to the experiment's scheduled expiration.
    To avoid the disruption in operations and the increase in the per-
piece service fee that would occur if the experimental authority
expires before a permanent classification for weight averaged
nonletter-size BRM can be approved, the Service suggests proceeding on
dual procedural tracks. One track --Docket No. MC99-1--would allow
expedited consideration of a temporary extension of the current
classification and fees for qualifying weight-averaged BRM under the
Commission's experimental rules. The Service asks that this proceeding
be conducted pursuant to a Commission order authorizing settlement
negotiations and incorporating certain procedures (and related
deadlines) entailing action by the Commission or others. See generally
Request of the United States Postal Service for a Recommended Decision
on Renewal of Experimental Classification and Fees for Weight-Averaged
Nonletter-Size Business Reply Mail (March 10, 1999). (Also cited here
as Docket No. MC99-1.)
    The other track--Docket No. MC99-2--would allow full exploration of
costing and pricing issues associated with a permanent classification.
These issues include the Service's proposal to eliminate the setup fee,
which is an element of the current experiment, and to reduce the per-
piece service fee and the monthly sampling/accounting fee. As in the
current experiment, the proposed fees under the permanent
classification would be assessed in addition to applicable First-Class
or Priority Mail postage. See generally Request of the United States
Postal Service for a Recommended Decision on Classification and Fees
for Weight-Averaged Nonletter-size Business Reply Mail (March 10,1999).
(Also cited here as Docket No. MC99-2). A summary comparison of fees
under various options follows.

        Current and Proposed Fees Available to Nonletter-Size BRM
              [Assuming Use of an Advance Deposit Account]
------------------------------------------------------------------------
                                    Per-piece
          Classification               fee      Monthly fee   Setup fee
                                     (cents)
------------------------------------------------------------------------
Current Non-QBRM Mail............            8         None         None
Current (and Docket No. MC99-1)              3        $3000        $3000
 Experimental Weight Averaged BRM
Proposed Permanent (Docket No.               1         $600        None
 MC99-2) Weight Averaged BRM.....
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Source: Adapted from Docket No. MC99-2, USPS-T-4 at 14 (Table 1).

    Effect of the instant requests on the experimental classification
involving the reverse manifest accounting method. The Service is not
requesting to continue or to make permanent the current experimental
classification and fees for the reverse manifest accounting method.
Factors contributing to this decision include the participation of only
one mailer in the reverse manifesting test; this mailer's subsequent
switch to the weight averaging method; the inability to confirm the
viability of reverse manifesting (given that the mailer did not achieve
the target level of accuracy for postage due estimates during the
course of participation); and the inability of subsequent market
research to locate any potential customers interested in a permanent
classfication for this method. See generally USPS-T-4 (in Docket No.
MC99-2) at 6-8, referencing USPS-T-2 (in the same docket) and USPS-T-1
in Docket No. MC97-1. In the absence of a separate filing, the
experimental BRM classification and fees for reverse manifesting will
expire June 7, 1999.

Part I. Nature and Scope of Docket No. MC99-1

    In Docket No. MC99-1, the Service effectively seeks, for eligible
nonletter-size BRM using the weight averaging accounting method, an
extension of the current experimental classification and fees (in DMCS
Sec. 931) until implementation of the permanent classification and fees
requested in the companion docket, or February 29, 2000, whichever
occurs first. According to the Service, inclusion of a date certain as
one of the terms of the proposed DMCS language reflects both the
``extremely unlikely'' prospect that resolution of Docket No. MC99-2
could take the full 10 months permitted and its interest in a smooth
transition. March 10, 1999 Motion of the United States Postal Service
for Waiver of Rule 67c(a)(1) at 3 (``Rule 67c motion'').
    The Service's Docket No. MC99-1 request includes five attachments.
These consist of proposed changes to the DMCS; the certification
required by Commission rule 54(p); audited financial statements; an
index of testimony identifying witness Kiefer (USPS-T-1) as the sole
witness in this proceeding; and a statement regarding compliance with
(or requests for waiver of) provisions in Commission rules 54 and 64.
Accompanying motions seek waiver of certain data requirements, the
waiver of rule 67c(a)(1) referred to above, and authorization of
settlement negotiations.
    Experimental status. The Service says designation of its Docket No.
MC99-1 request as an experimental change shows its interest in
application of the Commission's expedited rules of practice and
procedure (39 CFR Secs. 3001.67-67d). Request I at 2. In support of the
validity of invoking these rules, the Service notes that material
issues in the original experiment were the subject of a full
presentation by the Service in Docket No. MC97-1, and characterizes the
proposal for renewal of the weight-averaging aspect of the experiment
as modest. It also says the proposed treatment will ensure that renewal
occurs in a manner that provides continuity for participating post
office sites and BRM recipients. Id. at 4. The Service further notes
that in the absence of the requested extension, the otherwise
applicable BRM per-piece fee of 8 cents would have to be assessed
during any interim between the expiration of the current experiment and
the implementation of permanent fees. Id. at 4-5.
    Motion for waiver of certain filing requirements. The Service
requests waiver of 64(b)(3), 64(d) and 64(h), as well as provisions of
rule 54 deemed applicable, either independently or through
incorporation by reference in rules 64(d) and (h). Affected subsections
include rule 54(b)(3), 54(d), 54(f)-(h), 54(i), 54 (j), 54(k) and
54(l)(ii). March 10, 1999 Motion of the United States Postal Service
for Waiver of Certain Filing Requirements Incorporated in the
Commission's Rules of Practice and Procedure (as revised March 12,
1999). (Also referred to here as ``Filing Requirements Motion.'') In
support of

[[Page 13615]]

waiver, the Service cites the limited nature and applicability of the
proposed DMCS change. In particular, it notes that the extension
request does not entail a fundamental change in any classification or
fee or establish a new special service. Moreover, the Service asserts
that to the extent total cost-revenue relationships might be implicated
by the requested extension, its proposal will not result in significant
changes. Id. 2-5.
    Motion for waiver of rule 67c(a)(1). Commission rule 67c(a)(1)
requires that the Service file a plan describing plans to collect data
related to the steps it will take during the requested temporary
renewal phase of the experiment to achieve a level of readiness
sufficient to implement a permanent classification and fees. Rule 67c
Motion at 4. The Service contends that the limited purpose of its
Docket No. MC99-1 request and the availability of detailed cost data in
Docket No. MC99-2 concerning estimated costs associated with the
proposed permanent classification and fees render this requirement
unnecessary. Moreover, it notes that some of this work is already
underway, and that efforts are being made to complete it expeditiously.
Id. The Service also invokes the flexibility envisioned by the
experimental rules as a reason for the Commission to grant the
requested waiver.
    Motion regarding settlement proceedings. The Service asks that the
Commission establish procedural mechanisms designed to encourage
settlement of Docket No. MC99-1, based upon a proposed Stipulation and
Agreement. In support of this approach, the Service notes that the
``very limited purpose and scope'' of its Docket No. MC99-1 request is
to extend the duration of the experimental classification and fees for
weight-averaged nonletter-size BRM, and that the companion docket--
MC99-2--provides an opportunity to fully explore costing and pricing
issues related to a permanent classification and fees. March 10, 1999
Motion of the United States Postal Service to Establish Procedural
Mechanisms Concerning Settlement at 1 (as revised March 12, 1999)
(``Procedural Mechanisms Motion'').
    The Service notes that the purpose of the underlying request is to
obtain authority to continue the experiment for a period long enough to
ensure resolution of administrative and technical issues before
implementation of any classification and fees resulting from Docket No.
MC99-2. Procedural Mechanisms Motion at 2. Moreover, the Service says
that it anticipates that any discovery in Docket No. MC99-1 related to
the requested renewal might be relatively limited in duration and
scope. It suggests that participants could initiate discovery, formally
or otherwise, immediately upon intervention in the instant proceeding,
and notes that this could allow them to decide what course to take in
response to the proposed Stipulation and Agreement. Id. at 3. The
Service states that in the interest of enhancing expedition, it intends
to respond to any discovery and information requests related to its
extension request within 7 calendar days of service. Id. at 3 (fn. 1).
    Based on these representations, the Service moves that the
Commission include eleven enumerated procedures in its formal public
notice of this proceeding or, in the alternative, give notice that they
have been proposed. The procedures (set out in Attachment A) relate to
various rights and obligations of participants and the Commission,
including summary adjudication. They address not only the prospect that
the Stipulation and Agreement will be accepted without opposition, but
also the possibility that it will be contested by some intervenors or
otherwise not garner the Commission's approval through summary
adjudication. The referenced provisions also effectively outline a
proposed procedural schedule and many of the obligations of the
Commission and participants.
    The proposed stipulation and agreement. The stipulation and
agreement the Service has submitted consists of two parts, an
attachment, and signature pages. Part I reviews background details;
part II contains 10 terms and conditions. Attachment A consists of
proposed DMCS changes.

II. Nature and Scope of Docket No. MC99-2

    The Service states that the Docket No. MC99-2 request seeks to make
permanent the experimental classification currently authorized for
weight-averaged nonletter-size BRM. It also says it seeks to establish
applicable BRM accounting fees that more closely correspond to the
costs of using this method and to improve service for participating BRM
recipients. The filing includes six attachments, consisting of proposed
changes to DMCS Sec. 932; proposed changes to DMCS Fee Schedule 931;
the certification required by Commission rule 54(p); audited financial
statements; an index of testimony and exhibits for four witnesses; and
a compliance statement (including references to requests for waiver)
regarding submission of information called for in rules 54 and 64.
    The direct testimony includes that of witnesses Shields (USPS-T-1),
Ellard (USPS-T-2), Schenk (USPS-T-3), and Kiefer (USPS-T-4). Witness
Shields addresses the field application of the weight-averaging
accounting method for qualifying nonletter-size BRM. Witness Ellard
sponsors and addresses the Service's market research. Witness Schenk
addresses the costs of counting, rating and billing nonletter-size BRM
using the weight averaging method, including a discussion of supporting
software, a data collection effort, and a special cost study. Witness
Kiefer discusses the underlying experiment and other matters related to
establishment of a permanent classification for weight-averaged
nonletter-size BRM.
    A contemporaneous motion seeks protective conditions for one of
witness Schenk's workpapers, which the Service filed in camera at the
time it submitted its request. See March 10, 1999 Motion of the United
States Postal Service Requesting Protective Conditions for Workpaper 1
of Witness Leslie Schenk. In support of its motion, the Service states
that witness Schenk's cost estimates are based upon data that include
the incoming BRM piece volumes received by three through-the-mail film
processors who compete among themselves and against other firms in the
film processing industry. It notes that witness Schenk's access to the
data has been granted with the explicit understanding that such data
would not be publicly disclosed and would not be disclosed to any
competitor of BRM recipients. The Service asserts that without
conditional access, it would not have been able to present the cost
study supporting the permanent classification and fees. Id. at 2.
Accordingly, the Service proposes that the same protective conditions
applied in identical circumstances in Docket No. MC97-1 (or others
approved by the Commission) apply here, and invites the attention of
the Commission and others to P.O. Ruling MC97-1/1, Appendix C (January
24, 1997). The Service sets out the proposed conditions (consisting of
10 itemized provisions) and offers Postal Service counsel's assistance
with arrangements for obtaining copies of the workpaper, upon the
Commission's approval of the protective conditions. Id. at 2-5.

III. Commission Response to Matters Requiring Action at This Time

    The Commission believes that the Service's proposed procedural
approach to reconciling the impending expiration

[[Page 13616]]

of the Docket No. MC97-1 experiment with its interest in pursuing
permanent status for eligible weight-averaged BRM has considerable
merit. Substantive aspects of the requests and the accompanying motions
warrant further evaluation, but the submissions as a whole provide a
comprehensive assessment of the state of the current experiment, the
procedural steps the Service believes should be taken, and the impact
of the proposed changes. The Commission strongly encourages interested
persons to promptly review the related filings in their entirety.
    The Commission agrees to authorize settlement negotiations, as
requested by the Service. However, it declines to make a blanket
adoption of the actions the Service sets out in its Procedural
Mechanisms motion at this time. These actions appear to adequately
address potential procedural developments, but the Commission is
interested in participants' observations on the advisability of certain
deadlines that have been proposed. Therefore, the Commission grants the
alternative relief the Service suggests by providing notice that these
procedural steps and related dates have been proposed. Any objections
to entry into the record of this proceeding all of the Service's
pertinent Docket No. MC99-1 filings to date should be submitted by
April 5, 1999, which is also the deadline for intervention. The
relatively short period for intervention is justified by the limited
number of mailers or others likely to be affected and the likelihood
that potential intervenors (in both cases) are already participating in
the ongoing experiment and have been made aware, on an informal basis,
of the Service's intentions to file these requests.
    Action on other Docket No. MC99-1 motions. In addition to seeking
consideration of its request under the Commission's experimental rules,
the Service moves for waiver of certain filing requirements (in rules
54 and 64) identified earlier in this order and of rule 67c(a)(1).
Before ruling on the appropriateness of these requests, the Commission
will consider participants' views. Comments (on any or all of these
matters) are to be filed no later than April 5, 1999.
    Actions in Docket No. MC99-2. The protective conditions the Service
proposes for one of witness Schenk's workpapers were used successfully
in Docket No. MC97-1. It therefore seems that there should be no
objection to adopting the same approach in this case; however, the
Commission will consider comments in opposition to the conditions the
Service proposed if filed by April 5, 1999.
    The Service has not proposed any procedural dates or alternative
procedural mechanisms in Docket No. MC99-2. The Commission believes it
might be useful to learn whether participants are interested in
establishing any preliminary dates or discussing whether the request
for permanent authority may also be a candidate for settlement.
Comments addressing these topics shall be filed no later than April 5,
1999, and participants should be prepared to address these matters at
the prehearing conference.
    The Commission directs interested parties to file notices of
intervention in this proceeding no later than April 5, 1999 which is
also the deadline for filing such notices in Docket No. MC99-1.
    Intervention in these proceedings. Anyone wishing to be heard in
either or both cases is directed to file a written notice of
intervention with Margaret P. Crenshaw, Secretary of the Commission,
1333 H Street, NW, Suite 300, Washington, DC 20268-0001 no later than
April 5, 1999. Notices should indicate whether an intervenor is seeking
full or limited participation status. See 39 CFR Secs. 3001.20 and
3001.20a.
    Representation of the general public. In conformance with
Sec. 3624(a) of title 39, U.S. Code, the Commission designates Ted P.
Gerarden, Director of the Commission's Office of the Consumer Advocate
(OCA), to represent the interests of the general public in both
proceedings. Pursuant to this designation, Mr. Gerarden will direct the
activities of Commission personnel assigned to assist him and, upon
request, supply their names for the record. Neither Mr. Gerarden nor
any of the assigned personnel will participate in or provide advice on
any Commission decision in this proceeding. The OCA shall be separately
served with three copies of all filings, in addition to and
contemporaneous with, service on the Commission of the 24 copies
required by section 10(c) of the Commission's rules of practice [39 CFR
Sec. 3001.10(c)].
    It is ordered:
    1. The Commission will sit en banc in both Docket No. MC99-1 and
MC99-2.
    2. Notices of intervention in Docket Nos. MC99-1 and MC99-2 shall
be filed no later than April 5, 1999.
    3. Ted P. Gerarden, director of the Commission's Office of the
Consumer Advocate, is designated to represent the interests of the
general public in Docket Nos. MC99-1 and MC99-2.
    4. The Postal Service and other participants are authorized to
pursue settlement of the issues in Docket No. MC99-1 based on the
Stipulation and Agreement the Service has filed.
    5. Interested persons are placed on notice that the Service has
proposed eleven procedures be taken in connection with settlement,
including many that determine rights and obligations of the Commission
and participants. (The referenced procedures are presented in
Attachment A.)
    6. Postal Service counsel may act as settlement coordinator in
Docket No. MC99-1 or delegate this responsibility to another
participant in the proceeding. The Commission shall be promptly
notified if a delegation occurs.
    7. The Service's Docket No. MC99-1 request (with associated
attachments), the testimony filed with the request, and the Stipulation
and Agreement shall be entered into the record of the Docket No. MC99-1
proceeding on April 6, 1999, if no objection to that procedure is filed
with the Commission by April 5, 1999.
    8. Comments on the appropriateness of considering Docket No. MC99-1
under Commission rules 67-67d relating to experiments shall be filed no
later than April 5, 1999.
    9. Answers to the Postal Service's March 10, 1999 motions
referenced in the body of this order concerning waiver of certain
filing requirements and waiver of rule 67c(a)(1) shall be filed no
later than April 5, 1999.
    10. In connection with Docket No. MC99-2, answers to the Postal
Service March 10, 1999 motion requesting protective conditions for
witness Schenk's workpaper 1 shall be filed no later than April 5,
1999.
    11. Comments on the advisability of setting tentative procedural
dates in Docket No. MC99-1 (other than for notices of intervention)
shall be filed no later than April 5, 1999.
    12. A prehearing conference for the consideration of procedural
matters in both Docket No. MC99-1 and Docket No. MC99-2 shall be held
in the hearing room of the Commission, 1333 H Street, NW, Washington,
DC, on April 6, 1999, at 11:00 am. The hearing room will be open for
the use of interested persons to discuss settlement of any and all
issues in these cases on April 6, 1999, at 9:30 am.
    13. The Secretary of the Commission shall arrange for publication
of this order in the Federal Register in a manner consistent with
applicable requirements.

[[Page 13617]]

    Dated: March 16, 1999.
Margaret P. Crenshaw,
Secretary.

Attachment A--List of Procedures and Related Deadlines Proposed by
Postal Service (in its March 10, 1999 Motion to Establish
Procedural Mechanisms Concerning Settlement in Docket No. MC99-1)

    (1) Enter the Postal Service's Request (with associated
attachments), the testimony and exhibits filed with this Request,
and the Stipulation and Agreement into the record in this docket;
    (2) give parties until March 29, 1999, to intervene;
    (3) give notice of a formal pre-hearing conference to be
convened on March 30, 1999, at 11:00 a.m.;
    (4) make the Commission hearing room available to the Postal
Service and the participants on that date at 9:30 a.m. as the venue
for an informal off-the-record meeting to discuss the proposed
Stipulation and Agreement and related matters in advance of the pre-
hearing conference;
    (5) provide notice to intervenors that, if they wish to contest
re-establishment of the experimental classifications and fees in the
Postal Service's Request and the proposed Stipulation and Agreement,
they must, by April 2, 1999, file a statement of their intention to
do so. Any such statement should identify with specificity the
classification and fees and other issues contested, and state
whether the intervenor intends to offer evidence on any such
classification, fees, and issues.
    (6) If no such statements are filed, the record in this case
shall be closed and the case submitted to the Commission for summary
adjudication;
    (7) If one or more such statements are filed, the filing parties
shall have until April 9, 1999, to conduct discovery of the Postal
Service;
    (8) The same parties shall have until April 23, 1999, to submit
testimony and/or pleadings seeking to establish either that, owing
to the existence of genuine issues of material fact, the proceeding
is not suited to summary adjudication or that the Stipulation and
Agreement is arbitrary, capricious, or otherwise not in accordance
with applicable law. Responsive pleadings by other parties shall be
due on April 30, 1999. The record shall then be closed provisionally
and the issues adjudicated by the Commission.
    (9) If the Commission finds that there are no genuine issues of
material fact, it will promptly notify the parties of such and
indicate its intention to issue a Recommended Decision accepting the
classification and fees proposed in the Request and the Stipulation
and Agreement.
    (10) If the Commission finds (a) that there are genuine issues
of material fact that prevent summary adjudication, or (b) that
there are no genuine issues of material fact, but that it declines
to recommend renewal of the experimental classification and fees for
weight-averaged nonletter-size BRM proposed in the Docket No. MC99-1
Request and the Stipulation and Agreement, then it shall promptly
notify the parties, identifying the genuine issues of material fact
or other reasons for declining to adopt the proposed classifications
and fees, and immediately set an expedited schedule for such
additional discovery and hearings which may be necessary for
litigation of those matters. During that litigation period, any
party to the Stipulation and Agreement may fully litigate the
matters identified as disputed by the Commission, including
discovery on the Postal Service with respect solely to those issues
and presentations of testimony without withdrawing from the
Stipulation and Agreement, provided that such party (a) continues to
support a Commission recommendation of the classifications and fees
proposed in the Postal Service's Request and (b) agrees to remain
bound by the terms of the Stipulation and Agreement.
    (11) If none of the actions by the Commission provided for in
paragraphs 9 and 10 above have occurred by May 7, 1999,<SUP>1</SUP>
any party to the Stipulation and Agreement may determine not to be
bound further by that agreement and must provide written notice to
all parties of this fact within three (3) business days of the above
date. Any exercise of such right by one or more signatories shall
not affect the operation of the Stipulation and Agreement as to
other signatories.

    \1\ The Postal Service desires to allow adequate time for the
Commission to take action under either paragraph 9 or 10, but is
strongly in favor of expedited resolution of this docket. It is thus
hoped that the Commission would be able to act prior to the
suggested May 7, 1999, date.
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[FR Doc. 99-6841 Filed 3-18-99; 8:45 am]
BILLING CODE 7710-12-P