[Federal Register Volume 63, Number 141 (Thursday, July 23, 1998)]
[Notices]
[Pages 39600-39603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-19666]


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POSTAL RATE COMMISSION

[Docket No. MC98-1; Order No. 1216]


Mail Classification Proceeding

(Authority: 39 U.S.C. 3623)

AGENCY: Postal Rate Commission.

ACTION: Notice and Order Concerning Request for Experimental Online 
Mailing Service and Fees, including Market Test.

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SUMMARY: This notice and order addresses legal and administrative 
matters related to the Postal Service's request for expedited 
consideration of an experimental mail classification and fee schedule 
for an online mailing special service. The Service proposes that a 
market test of the proposed service precede introduction. The proposed 
duration of the experiment is 2 years.

DATES: See SUPPLEMENTARY INFORMATION section for dates.

ADDRESSES: See Supplementary Information section for address to which 
communications concerning this notice and order should be sent.

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

SUPPLEMENTARY INFORMATION: Notice is hereby given that on July 15, 
1998, the United States Postal Service filed a Request with the Postal 
Rate Commission pursuant to sec. 3623 of the Postal Reorganization Act, 
39 U.S.C. 101 et seq., for a recommended decision on proposed additions 
to the Domestic Mail Classification Schedule (DMCS) on an experimental 
basis. The request also incorporates a proposal for the establishment 
of associated new fees. The request includes attachments and is 
supported by the testimony of eight witnesses and four library 
references. It is on file in the Commission docket room and is 
available for inspection during the Commission's regular business 
hours. For interested persons who have access to the internet, the 
request and related documents are available on the Commission's home 
page at http://www.prc.gov/wsdocs/MC98-1/MC98-1.htm.

Proposed market test preceding establishment of experimental mail 
classification and fees.

    The Postal Service indicates that it desires to conduct a market 
test of the proposed online mailing service prior to its introduction 
as an experimental mail classification. The Service proposes to 
conclude a current operations test <SUP>1</SUP> and

[[Page 39601]]

begin a more extensive market test of the service, at interim fees to 
be recommended by the Commission, in early September of this year. 
Postal Service Request at 2-3.
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    \1\ According to the request, the Postal Service currently is 
conducting an operations test of the proposed Mailing Online service 
with one postal web server, one printer contractor, and a maximum of 
200 customers located in Tampa, FL and Hartford, CT. Test customers 
currently pay the single-piece First-Class rate for mailing, but no 
additional fee for production of the mailpiece entered into the 
postal system. Request at 2.
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    Under the Service's proposal, the market test would be conducted 
while the Commission considers its request to establish Mailing Online 
as an experimental service. The interim market test fees would remain 
in effect pending the Commission's issuance of a recommended decision 
on the proposed experimental mail classification, and would expire upon 
implementation of the requested experimental service, or within 3 
months of a decision rejecting the latter proposal. In a separate 
motion filed by the Postal Service, which is described in more detail 
below, the Service states that its ``preferred objective for this 
experiment is to have it recommended by the Commission by the end of 
November, 1998.'' <SUP>2</SUP> In the event the Commission recommends 
the experimental classification and associated fees, the Service 
anticipates that they will be implemented together with the new rates 
and fees that the Governors of the Postal Service have resolved to put 
into effect on January 10, 1999, in connection with Docket No. R97-1. 
The Service proposes that the experimental service have a duration of 2 
years.
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    \2\ Motion of the United States Postal Service for expedition 
and for waiver of certain provisions of rule 161 and certain 
provisions of rule 64(h), July 15, 1998, at 1.
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Description of Request

    The proposed Mailing Online service would enable individuals and 
organizations with access to a personal computer and an internet 
connection to transmit documents created on their computers to the 
Postal Service in digital form for printing and entry as mail, paying 
online in a single transaction. Users would transmit digital document 
files generated in any of several selected word processing and desktop 
publishing applications, together with recipient information and other 
data, to a designated Postal Service site on the world wide web. The 
Service would offer users a number of choices regarding printing and 
finishing specifications, customization of output by recipient 
variables in the user's database, and scheduling of a specific mailing 
date.
    Users of the proposed Mailing Online service would be charged 
existing postage rates for mailing, plus a fee for production and other 
pre-mailing services. Depending upon the character of the material 
being sent and the user's service preference, mail pieces generated by 
the Mailing Online service would be charged postage at either the 
First-Class or standard mail automation basic rates applicable to the 
finished mail piece.<SUP>3</SUP>
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    \3\ In addition to offering Mailing Online users the opportunity 
to use First-Class Mail or standard mail regular rates, a witness 
for the Postal Service states in part of its pre-filed testimony 
that the Service is developing a means for verifying the eligibility 
of mailers with standard nonprofit permits, so that they may use the 
service to mail at standard nonprofit rates.
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    In lieu of specific unit fees for the Mailing Online special 
service, the Postal Service proposes what might be described as a 
``cost plus'' approach to fee calculation. For the duration of the 
market test, the Service proposes that fee elements be set at the unit 
contract cost of the respective service feature to the Postal Service, 
multiplied by a factor of 1.25 to provide a resulting cost coverage of 
125 percent. According to the Service, these various costs will be 
established in the Mailing Online printer contract to be awarded during 
August 1998. For the subsequent experimental service phase, the Service 
proposes fees to be calculated by multiplying the sum of printer 
contractual costs for the particular mailing <SUP>4</SUP> by the same 
125 percent cost coverage, then adding 0.1 cent per impression to 
recover other Postal Service costs. Postal Service Request, Attachment 
B1, page 2; Attachment B2, page 1.
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    \4\ The Postal Service anticipates that printing costs may vary 
substantially by region because of differing levels of labor and 
real estate costs. Thus, a Mailing Online user whose documents are 
sent to a printing site located in a higher-cost area would likely 
pay higher fees than if the same services were performed by a 
printer in a lower-cost area.
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Expedited Consideration of the Request

    The Service's request invokes the operation of two independent 
portions of the Commission's rules of practice and procedure which 
provide for expedited consideration of requests for particular types of 
mail classification changes. The first of these, encompassing rules 67 
through 67d (39 CFR 3001.67 through 3001.67d), applies to requests for 
new services or mail classification changes that are experimental in 
character. These rules provide for the adoption of streamlined 
procedures for considering such requests, and require participants to 
identify the genuine issues of material fact raised by the Postal 
Service proposal in order to limit formal hearings to those issues. 39 
CFR 3001.67a. They also provide for establishment of a procedural 
schedule that will allow issuance of a recommended decision within 150 
days from any favorable determination the Commission may make as to the 
propriety of treating the Postal Service proposal as experimental. 39 
CFR 3001.67d.
    In connection with the proposed interim market test, the Postal 
Service also invokes the operation of subpart I of the rules of 
practice, 39 CFR 3001.161 through 3001.166. The purpose of these 
expedited procedures, as stated in 39 CFR 3001.164, ``is to allow for 
consideration of proposed market tests within 90 days, consistent with 
the procedural due process rights of interested persons.'' Section 
3001.163(e) requires any participant who wishes to dispute a genuine 
issue of material fact presented by the Service's request to identify 
facts it will controvert with specificity, and provides for formal 
hearings only when the Commission determines that there is a genuine 
and material factual issue to be resolved, and that a hearing is needed 
for that purpose.
    According to the Service, its request is suitable for consideration 
under both the experimental service and market test rules. Mailing 
Online service qualifies for consideration under the market test rules, 
the Service states, because the proposed test would be modest in scope, 
scale, duration, and potential impact, and because it is being 
conducted ``as a stepping stone to a more permanent service offering.'' 
Request at 5. (Footnote omitted.) The proposed service also qualifies 
for consideration as an experiment, the Service submits, in view of its 
novelty as an electronic means of presenting documents for entry into 
the mail; the modest anticipated magnitude of its impact upon postal 
costs and revenues, and the mailing costs and practices of mail users; 
the need to gather information suitable for supporting a request for a 
permanent mail classification change; and the desirability of a two-
year experiment to generate cost and volume information, as well as to 
demonstrate the viability of the service. Id. at 6-7.
    In a separate notice dated July 15, 1998, a copy of which was filed 
with its request, the Postal Service certifies that it has complied 
with the early notification requirement specified for requested market 
tests in 39 CFR 3001.163(d).

Motion for Expedition and Waiver of Certain Provisions

    The Postal Service's request was also accompanied by a pleading 
captioned, ``Motion of the United States Postal Service for expedition, 
and for waiver of certain provisions of rule 161 and

[[Page 39602]]

certain provisions of rule 64(h).'' In this pleading, the Service asks 
the Commission to accelerate the expedited consideration of its request 
provided by the experimental service rules to achieve the Postal 
Service's preferred objective of issuance of a decision by the end of 
November 1998. According to the Service, the accelerated procedural 
schedule it seeks is required to allow it ``to explore the possibility 
that major software developers could integrate Mailing Online into 
impending updates of software in order to make the service widely and 
easily available to individual, small-office, and home-office 
mailers.'' Motion at 2. Additionally, the Service notes, a Commission 
decision no later than the end of November would accommodate the 
Service's planned deployment schedule that calls for nationwide 
customer access to Mailing Online service in January 1999. Ibid.
    The Service's motion also requests that portions of Commission 
rules 161 and 64(h) be waived in this case. To the extent that rule 
161(a) could be read to require the filing of a contemporaneous request 
for a permanent classification change as a prerequisite for a market 
test, the Postal Service requests a waiver of that requirement so that 
it may go forward with the market test at interim fees to be 
recommended by the Commission. Id. at 2-3. Pursuant to rule 64(h)(3), 
the Service also asks to be relieved of the obligation to produce 
certain information regarding cost and revenue effects of its proposal, 
on the grounds that its proposal would not change any existing rates or 
fee, or produce a significant impact upon the cost-revenue 
relationships of existing postal services. Id. at 5-7. Specifically, 
the Service seeks waiver of rules 54(b)(3) in part, 54(f)(2), 54(f)(3), 
54(h), 54(j), and 54(l) in part. Id. at 8-9.

Further Procedures; Filing Address

    Rule 163(b) provides that interested persons may intervene in 
proceedings to consider Postal Service requests to conduct a market 
test within 28 days after the Service's filing. Accordingly, anyone 
wishing to be heard in this matter 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, on or before 
August 12, 1998. Intended participants should indicate whether they 
request formal intervention or limited participator status. See 39 CFR 
3001.20 and 3001.20a.
    Rule 163(e) [39 CFR 3001.163(e)] states that the Commission will 
hold hearings on a Postal Service request for a market test ``when it 
determines that there is a genuine issue of material fact to be 
resolved, and that a hearing is needed to resolve that issue.'' To 
assist that determination, the same subsection directs parties who wish 
to dispute a genuine issue of material fact to file a request for a 
hearing, which:

shall state with specificity the fact or facts set forth in the 
Postal Service's filing that the party disputes, and when possible, 
what the party believes to be the true fact or facts and the 
evidence it intends to provide in support of its position.

Ibid.
    Any participant who wishes to dispute a genuine issue of material 
fact to be resolved with regard to the Postal Service's proposed market 
test in this proceeding shall file a request for a hearing as specified 
in rule 163(e) by August 12, 1998. In order to assist the Commission's 
determination of whether a hearing is necessary, should any written 
discovery be directed to the Postal Service by a participant before 
August 12, 1997, the Postal Service shall respond within 10 days.
    With regard to the Service's longer-term request to establish 
Mailing Online service as an experimental mail classification, rule 
67(c) provides that the Commission will entertain representations by 
participants that the proposal should not be considered as an 
experiment, and should follow the normal mail classification change 
procedures. Any participant intending to make such a representation 
shall do so by pleading no later than August 12, 1998.
    In addition, rule 67a(b) requires parties to proceedings in which 
the Postal Service seeks a classification change it denominates as 
experimental in character to file statements of the issues they 
perceive in the case at the earliest possible time following the filing 
of the Service's request, or following a determination that the 
proposed change is experimental in character. In view of the Service's 
motion for extraordinarily expeditious consideration of its proposal, 
participants' statements of issues shall also be due no later than 
August 12, 1998.
    A prehearing conference will be held in this proceeding on Friday, 
August 14, 1998, at 9:30 a.m. in the Commission's hearing room. 
Participants should be prepared to discuss what formal procedures, 
including hearings, may be necessary and appropriate in this docket. In 
addressing the issue of appropriate procedures in this docket, 
participants should also be prepared to address the potentially 
different procedural requirements presented by the Postal Service's 
market test proposal and its request for establishment of Mailing 
Online as an experimental service. If the Commission determines that 
formal hearings to resolve genuine issues of material fact are required 
for either or both, hearings to evaluate the supporting evidence 
presented by the Postal Service may be scheduled to begin as soon as 
August 26, 1998. The presiding officer will establish subsequent 
procedural dates.

Representation of the General Public

    In conformance with 39 U.S.C. 3624(a), the Commission designates W. 
Gail Willette, acting Director of the Commission's office of the 
consumer advocate (OCA), to represent the interests of the general 
public in this proceeding. Pursuant to this designation, Ms. Willette 
will direct the activities of Commission personnel assigned to assist 
her and, when requested, will supply their names for the record. 
Neither Ms. Willette 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 rule 10(c) (39 CFR 3001.10(c)).
    It is ordered:
    1. The Commission will sit en banc in this proceeding.
    2. Notices of intervention shall be filed no later than August 12, 
1998.
    3. Participants who wish to request a hearing on the Postal 
Service's request in this docket to conduct a market test shall submit 
such a request, together with statements in conformance with 39 CFR 
3001.163(e), no later than August 12, 1998.
    4. Statements of issues presented by the Postal Service's request 
in this docket to establish a Mailing Online experimental mail 
classification in conformance with 39 CFR 3001.67a(b) shall be filed no 
later than August 12, 1998.
    5. Answers to the Postal Service's motion for expedition and for 
waiver of certain provisions of rule 161 and certain provisions of rule 
64(h) are to be submitted no later than August 12, 1998.
    6. The Postal Service shall provide, within 10 days, responses to 
any written discovery requests submitted to it before August 12, 1998.
    7. W. Gail Willette, acting director of the Commission's OCA, is 
designated to represent the general public.

[[Page 39603]]

    8. A prehearing conference in this docket shall be held on Friday, 
August 14, 1998, at 9:30 a.m. in the Commission's hearing room.
    9. The Secretary shall cause this notice and order to be published 
in the Federal Register.

    Dated: July 20, 1998.

    By the Commission.
Cyril J. Pittack,
Acting Secretary.
[FR Doc. 98-19666 Filed 7-22-98; 8:45 am]
BILLING CODE 7710-FW-P