[Federal Register Volume 74, Number 85 (Tuesday, May 5, 2009)]
[Rules and Regulations]
[Pages 20834-20858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-9590]



[[Page 20833]]

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Part IV





Postal Regulatory Commission





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39 CFR Parts 3001 and 3050



Periodic Reporting Rules; Final Rule

Federal Register / Vol. 74 , No. 85 / Tuesday, May 5, 2009 / Rules 
and Regulations

[[Page 20834]]


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POSTAL REGULATORY COMMISSION

39 CFR Parts 3001 and 3050

[Docket No. RM2008-4; Order No. 203]


Periodic Reporting Rules

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adopting a set of rules to address the need 
for periodic reports from the Postal Service. Adoption of these rules 
will facilitate accountability and transparency of Postal Service 
operations, consistent with a new postal law. This document 
incorporates a revision to an internal reference in the rules. This 
revision was identified in a recent notice.

DATES: Effective June 4, 2009.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-7689-6824 and <a href="/cdn-cgi/l/email-protection#ea999e8f9a828f84c499828b988c878b84aa9a9889c48d859c"><span class="__cf_email__" data-cfemail="f98a8d9c89919c97d78a91988b9f949897b9898b9ad79e968f">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: Regulatory History, 73 FR 53324 (September 
15, 2008).

I. Introduction

    Under the Postal Accountability and Enhancement Act (PAEA), Public 
Law 109-435, 120 Stat. 3218 (2006), the Postal Regulatory Commission 
was given enhanced information gathering and reporting 
responsibilities. To implement its information gathering and reporting 
functions under the PAEA, the Commission issued its Notice of Proposed 
Rulemaking Prescribing Form and Content of Periodic Reports on August 
22, 2008 (Order No. 104).
    Initial comments on these proposed rules were filed by seven 
participants.\1\ Reply comments were filed on November 14, 2008 by 
eight participants.\2\ Comments were generally supportive of the 
proposed rules as appropriate and reasonable requirements on which to 
base financial reporting under the new regulatory regime under the 
PAEA. The Postal Service commends the rules for leaving the existing 
financial reporting structure essentially intact while adapting it from 
a subclass-based format to a product-based format. It notes that the 
fundamental building blocks of cost reporting will remain the same, 
separating accrued costs into segments, applying variability studies to 
form pools of attributable costs, and using data collection systems to 
distribute those pools to products, as summarized in the Cost and 
Revenue Analysis (CRA) Report and the Cost Segments and Components 
(CSC) Report. Costs avoided by worksharing and other characteristics 
will continue to be estimated, for the most part, by down-flow models 
supplemented by special studies. Postal Service Comments at 1-2.
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    \1\ Comments of the Department of Defense in Docket No. RM2008-
4, filed on October 15, 2008 (DOD Comments); Initial Comments of the 
Public Representative (Public Representative Comments); Initial 
Comments of the Greeting Card Association (GCA Comments); Initial 
Comments of Time Warner Inc. in Response to Order No. 104 (Time 
Warner Comments); Initial Comments of the United States Postal 
Service in Response to Order No. 104 (Postal Service Comments); 
Valpak Direct Marketing Systems, Inc. and Valpak Dealer's 
Association, Inc. Initial Comments Regarding Proposed Rules 
Prescribing Form and Content of Periodic Reports (Valpak Comments); 
and Initial Comments of Major Mailers Association (MMA Comments), 
filed on October 16, 2008.
    \2\ Reply Comments of Time Warner Inc. in Response to Order No. 
104 (Time Warner Reply Comments); Reply Comments of the Public 
Representative (Public Representative Reply Comments); Reply 
Comments of United Parcel Service on Notice of Proposed Rulemaking 
Prescribing Form and Content of Periodic Reports (UPS Reply 
Comments); Reply Comments of Magazine Publishers of America, Inc., 
Alliance of Nonprofit Mailers and American Business Media (MPA/ANM/
ABM Reply Comments); Reply Comments of Pitney Bowes Inc. (Pitney 
Bowes Reply Comments); Valpak Direct Marketing Systems, Inc. and 
Valpak Dealers' Association, Inc. Reply Comments Regarding Proposed 
Rules Prescribing Form and Content of Periodic Reports (Valpak Reply 
Comments); and Reply Comments of the United States Postal Service in 
Response to Order No. 104 (Postal Service Reply Comments), all filed 
on November 14, 2008.
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    The Postal Service also commends the rules for giving appropriate 
recognition to the transitional status of data reporting, providing a 
flexible approach for converting from subclass- to product-based 
reporting, and integrating negotiated service agreement (NSA) data into 
the larger reporting system. Id. The Postal Service concludes that 
overall the proposed new rules establish ``a workable framework for the 
ACR and periodic reporting.'' Id. at 2. Some participants argue that a 
few of the proposed rules should be pared back until experience 
indicates that there is a need for more robust versions of the rules 
while other participants argue that the proposed rules need to be made 
more robust in some respects. Comments are discussed in the context of 
the specific proposed rule to which they apply.

II. Proposals To Revise Specific Reporting Rules

A. Proposed Rule 3050.1 (Definitions)

    Definition of ``Analytical Principle.'' Proposed rule 3050.1 
defines certain terms used in the periodic reporting rules. Proposed 
paragraph (c) of this section defines ``analytical principle'' as:

    A particular economic, mathematical, or statistical theory, 
precept, or assumption applied by the Postal Service in producing a 
periodic report to the Commission.

Valpak argues that this definition is too narrow. Noting that the 
Commission considers a change in the specification of a regression 
model to be a change to an ``analytical principle,'' Valpak argues that 
a regression analysis ``may be viewed as a tool or a technique, or even 
a method, but it is not commonly understood to be a `theory,' 
`precept,' or `assumption.' '' Valpak Comments at 21. Valpak's argument 
is supported by the Public Representative. Public Representative Reply 
Comments at 17.
    The Commission believes that the ambiguity that Valpak and the 
Public Representative perceive is resolved when the definition of 
``analytical principle'' in final rule 3050.1(c) is read together with 
the definition of ``quantification technique'' in final rule 3050.1(f). 
Final rule 3050.1(f) reads:

    Quantification technique refers to any data entry or 
manipulation technique whose validity does not require the 
acceptance of a particular economic, mathematical, or statistical 
theory, precept, or assumption. A change in quantification technique 
should not change the output of the analysis in which it is 
employed.

Together, the definitions of ``analytical principle'' and 
``quantification technique'' divide the data manipulation techniques 
used to produce the Postal Service's periodic reports into two 
categories--those whose validity requires acceptance of a causal 
theory, and those whose validity does not.
    Explanatory terms are included in a regression equation because 
they are assumed to ``explain,'' or partially cause, the phenomenon 
being measured. Because explanatory terms are assumed to influence the 
phenomenon being measured (or are being tested to see if they do), they 
fit the definition of ``analytical principle.'' In contrast, choosing a 
standard statistical package, such as SAS or STATA, to fit the 
regression equation to the data (using the standard mathematical 
formula for calculating least squares) does not depend on any 
assumption about what causes the phenomenon being measured and should 
not affect the result. The statistical package chosen to run the 
regression, therefore, fits the definition of ``quantification 
technique.'' This should clarify how the definitions in final rule 
3050.1 fit together as a comprehensive whole. Because the Commission 
does not believe that the definition of ``analytical principle'' in 
Sec.  3050.1(c) needs to be modified, it declines to accept Valpak's 
proposal.

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    Definition of the term ``product.'' Proposed rule 3050.1 defines 
terms that are of unique relevance to part 3050 of the Commission's 
rules. The Public Representative argues that the definitions contained 
in proposed rule 3050.1 should be consistent with and not redundant of 
those found in Sec.  3001.5--the main definitional section of the 
Commission's rules. He notes, in particular, that the term ``product'' 
is defined in proposed rule 3050.1 and in Sec.  3001.5, and that the 
definitions are not precisely the same. The Commission agrees that the 
term ``product'' does not need to be defined in its periodic reporting 
rules. Accordingly, it has eliminated the term ``product'' from the 
definitions provided in final rule 3050.1.
    Definitions of ``Annual Report'' and ``section 3652 report.'' 
Proposed rule 3050.1(e) defined the term ``Annual Report'' as ``the 
report that section 3652 of the Postal Accountability and Enhancement 
Act requires the Postal Service to provide to the Commission each 
year.'' In its discussion of revisions to Sec.  3050.20, infra, the 
Commission observes that the analysis that Sec.  3050.20 requires the 
Postal Service to provide is meant to implement Sec.  3652 of the PAEA. 
Generally, Sec.  3652 requires the Postal Service to analyze how rates 
and service in the previous year complied with the requirements of 
title 39 of the United States Code.
    The comments received concerning proposed rule 3050.20 have 
persuaded the Commission that instead of ``Annual Report,'' its 
periodic reporting rules need to employ two standard references to the 
annual reports that the Postal Service is required to file with the 
Commission--one broader than the term ``Annual Report,'' and one that 
is slightly more narrow. Where a broader definition is intended, the 
final rules use the phrase ``annual periodic reports to the 
Commission.'' Where the narrower definition is intended, the final 
rules use the phrase ``section 3652 report.'' That phrase, however, 
will be used to encompass all of the Postal Service reports required by 
Sec.  3652 except for the program performance reports referenced by 
Sec.  3652(g). Those reports are also required to be reported at the 
time that the Postal Service files its comprehensive statement with 
Congress. See 39 U.S.C. 2804(a) and 2401(e). To avoid redundant 
reporting, ``section 3652 report'' is understood to exclude program 
performance reporting under Sec. Sec.  2803 and 2804. See final rule 
3050.1(g).

B. Proposed Rule 3050.2 (Corrections and Changes in Input Data or 
Quantification Techniques)

    Proposed rule 3050.2 requires that the Postal Service document its 
periodic reports. Paragraph (a) requires it to list and explain 
corrections, changes in input data, and changes in quantification 
techniques made since the report was last filed. Paragraphs (b) and (c) 
require the submission of workpapers and spreadsheets that meet certain 
standards. Paragraph (d) allows portions of the documentation required 
by ``this section'' that are not time critical to be filed up to two 
weeks late if the Postal Service gets advance approval of the 
Commission.
    Delayed filing of documentation. Valpak observes that it is less 
appropriate to file the material required by paragraph (a) 2 weeks 
later than the other material required by proposed rule 3050.2. The 
Commission agrees. Final rule 3050.2 applies the deferral option only 
to paragraphs (b) and (c).
    Tracking the impact of errors. Valpak argues that where errors have 
been corrected, the impact of the correction could be masked by other 
changes in the relevant periodic report. It argues that proposed rule 
3050.2 would lead to more transparency if it were to state:

    Corrections should be presented in a manner that permits 
replication of the calculation both before, and after, correction of 
the error.

Id. at 22.
    The Postal Service argues that complying with the proposed 
requirement might be a straightforward exercise if a model with an 
error consisted of a single spreadsheet. The spreadsheet program would 
allow the program to be run both with the error and with the error 
corrected. It points out, however, that where there is an elaborate set 
of linked models, as occurs in the CRA, complying with the proposal 
might require a large number of time-consuming model runs if there were 
multiple errors whose impact needed to be separately demonstrated. 
Under this circumstance, the Postal Service argues that complying with 
the proposal would be a large waste of effort and resources. Postal 
Service Reply Comments at 7-8. The Commission agrees. Accordingly, it 
declines to adopt the revision to proposed rule 3050.2 that Valpak 
proposes.
    Duty to explain variations in results that exceed a quantitative 
threshold. MMA argues that the Postal Service's choices of what input 
data to use can be as significant in their impacts as what analytical 
methods the Postal Service chooses to apply to data. As an 
illustration, it complains that the Postal Service's insistence on 
using theoretical Delivery Point Sequencing (DPS) percentages rather 
than actual DPS percentages has had a major impact on the cost of the 
kind of mail that it sends. It notes that proposed rule 3050.2 would 
require the Postal Service to identify input data or quantification 
techniques and to list any corrections that it has made since a 
periodic report was last submitted and to explain the change or 
correction. The listing and explanation are to be provided when the 
Postal Service submits the relevant periodic report. It argues that 
where the impact of such changes is sufficiently large, this proposed 
procedure is inadequate. It proposes that there be an opportunity for 
advance review of changes to input data, quantification techniques, or 
corrections that impact avoided costs by more than 0.1 cent. MMA 
Comments at 2-4. It argues that this issue will grow with the adoption 
of the Intelligent Mail barcode. Id. at 4-5.
    The Postal Service opposes the proposal, arguing that it is 
impossible to identify the complete set of input changes that cause 
changes to cost avoidance estimates in excess of a particular threshold 
until the workshare models are finalized. It asserts that there is 
``virtually no lag time between finalization of the workshare models 
and filing of the ACR.'' Postal Service Reply Comments at 22. The 
Commission accepts the Postal Service's representation that there is 
not a sufficient interval between the finalization of its avoided cost 
model results and the filing of its Sec.  3652 report to accommodate 
MMA's proposal.
    Valpak offers a related proposal. It asks that the Postal Service 
be required to identify and explain its Sec.  3652 report results that 
are anomalous from a logical perspective, and to explain results that 
change a product's unit attributable costs from year to year by more 
than the change in the Consumer Price Index plus or minus 5 percent. 
Otherwise, Valpak states, in the brief time available to mailers, they 
``would need to search for such peculiarities on their own and, even if 
found, mailers would be left wondering about the relevant facts and 
their significance, because they would have received no explanation 
from the Postal Service.'' Valpak Comments at 20.
    The Postal Service responds by arguing that the definition of a 
logical anomaly is too subjective to serve as a workable rule. It also 
argues that the plus-or-minus 5 percent standard for variations in unit 
attributable costs is too objective; that is, it cannot be varied for 
small mail classes whose unit cost

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results vary substantially due to the problem of small sample size. It 
also questions the value of pursuing such details of cost analysis in a 
price cap regulatory regime. Postal Service Reply Comments at 7.
    The Commission urges the Postal Service to include in its Sec.  
3652 report, to the maximum extent possible, explanations of both 
logical anomalies and unusually large swings from year to year in its 
unit attributable cost results. Nevertheless, it declines to adopt a 
quantitative threshold triggering this obligation as arbitrary. It also 
agrees that logical anomalies are too subjective to serve as a workable 
rule. It, therefore, declines to adopt periodic reporting rules with 
quantitative thresholds as Valpak requests.

C. Proposed Rule 3050.3 (Confidential Treatment of Periodic Reports)

    Part 3007, proposed in Docket No. RM2008-1, would implement the 
provisions of the PAEA that generally authorize the Postal Service to 
designate information in the periodic reports that it provides to the 
Commission as confidential within the meaning of 5 U.S.C. 552(b) or as 
commercially sensitive within the meaning of 39 U.S.C. 410(c). See 39 
U.S.C. 3654(f). Proposed part 3007 would resolve the issue of how 
information so designated could be made public. The Commission 
contemplates initiating a series of rulemakings designed to identify in 
part 3050 specific categories of information that would be 
presumptively confidential and specific categories of information that 
presumptively would not, as a guide to future submissions by the Postal 
Service and third parties.

D. Proposed Rule 3050.11 (Procedures for Changing Accepted Analytical 
Principles)

    Proposed rule 3050.11 sets forth procedures governing Commission 
review of a petition or notice of proceeding to change an accepted 
analytical principle. It would evaluate proposals to change accepted 
analytical principles under the informal rulemaking procedures of 5 
U.S.C. 553. The proposed rule would allow the Commission, its Public 
Representative, the Postal Service, or private parties, to file a 
petition or notice of proceeding to change accepted analytical 
principles used in the Postal Service's annual reports to the 
Commission. The rule goes on to identify content that the petition 
should contain and the procedures to be followed in obtaining 
additional information that would support the petition.
    Methodological rulemakings initiated by the Commission. Valpak 
points out that proposed rule 3050.11 would allow the Commission to 
institute this process on its own behalf although the rule has 
provisions with respect to the content of the instituting document and 
the procedures for gathering supporting information that are explicitly 
related only to ``petitions.'' It correctly observes that this leaves 
it unclear whether these provisions are meant to apply to proceedings 
begun by the Commission on its own initiative. Valpak Comments at 14. 
To remove this ambiguity, final rule 3050.11 explicitly relates these 
provisions not just to a ``petition,'' but to a ``notice of 
proceeding'' issued by the Commission.
    Methodological rulemakings initiated by a Public Representative. 
Proposed rule 3050.11 lists a ``Public Representative'' among those who 
would be authorized to petition for a rulemaking to change an accepted 
analytical principle. Valpak notes that the current Commission practice 
is to appoint public representatives only after a formal docket has 
been established. It says ``[i]n such a situation, it is unclear 
whether anyone among the Commission's rotating Pubic Representatives 
could initiate a change in an `accepted analytical principle.' '' 
Valpak Comments at 24. The Public Representative makes a related 
recommendation that a public representative should be appointed in a 
methodology rulemaking immediately after the Commission has concluded 
that a petition should move from the evaluation stage (see paragraphs 
(a) and (b) of proposed rule 3050.11) to the notice of proposed 
rulemaking stage (see paragraph (c)(2) of proposed rule 3050.11). 
Public Representative Comments at 7.
    The Commission appoints a public representative in every 
proceeding. 39 U.S.C. 505. Thus, the public will be represented in 
strategic rulemakings as described in this order. Furthermore, public 
representatives are appointed in Annual Compliance Determination (ACD) 
dockets as well as dockets established to consider rate and 
classification adjustments. A public representative in any such 
proceeding could determine that petitioning to initiate a rulemaking 
would be an appropriate exercise of responsibility.
    Discovery. Paragraph (b) of proposed rule 3050.11 provides:

    To better evaluate a petition to change an accepted analytical 
principle, the Commission may order that it be made the subject of 
discovery. By request of any interested person, or on its own 
behalf, the Commission may order that the petitioner and/or the 
Postal Service provide experts on the subject matter of the proposal 
to participate in technical conferences, prepare statements 
clarifying or supplementing their views, or be deposed by officers 
of the Commission.

    This paragraph allows the Commission to make a petition for a 
methodological rulemaking the subject of discovery at its discretion. 
Valpak argues that ``optional discovery provides neither protection nor 
due process.'' Valpak Comments at 33. It comments that:

    This provision implicitly assumes that the Commission will be 
able to decide on its own, from the face of a petition to change, 
whether mailers should have the due process right to investigate the 
proposed change. But such an assumption is unlikely to be accurate. 
Mailers often focus on changes which appear significant to them, 
giving greater attention to details than the Commission staff can 
devote to the issues and consequences presented by such changes. 
Moreover, not all weaknesses are apparent of the face of each 
proposal.

    Id. Accordingly, Valpak contends that discovery should be provided 
for as of right. It recommends that this be accomplished by applying 
the formal hearing procedures of part 3001, subpart A, of the 
Commission's rules to methodological rulemakings. Id. at 12.
    As explained in Order No. 104 at 30-35, the Commission has drafted 
proposed rule 3050.11 to accommodate methodological rulemakings that 
run the gamut from broad surveys of the Postal Service's need for new 
data and research into analytical issues (which Order No. 104 labels 
``strategic rulemakings'') to narrow relatively minor methodological 
changes that could be placed on a ``fast track'' to be evaluated in 
time to incorporate them into the next section 3652 report. Where 
technical issues are complex or controversial, technical conferences 
are likely to be the first procedure authorized as a vehicle for 
interested parties to identify issues that need to be explored. Where 
technical conferences demonstrate a need for follow up in more depth, 
discovery requests will be entertained and, very likely, granted. Where 
proposed methodological changes are relatively minor and non-
controversial, and time is of the essence, however, making discovery a 
``right'' could take away the Commission's ability to adapt review 
procedures to fit the underlying issues presented. This could 
ultimately hinder, rather than improve, the compliance review process 
if it results in a diversion of the technical resources of all 
concerned from more pressing issues. The Postal Service generally 
agrees. Postal Service

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Reply Comments at 4-6. For these reasons, final rule 3050.11 retains 
the Commission's discretion to order discovery in evaluating petitions 
for review of changes in analytical principles.
    ``Missing role of other parties.'' In Valpak's comments on 
paragraph (b) of proposed rule 3050.11, the topic heading ``Missing 
Role of Other Parties'' appears. Valpak Comments at 26. Under that 
heading, Valpak notes that paragraph (b) authorizes the Commission to 
``order'' the ``petitioner'' and/or the ``Postal Service'' to provide 
experts on the subject matter of the petition ``to participate in 
technical conferences, prepare statements * * * or be deposed.'' Id.
    Valpak complains that ``there is no express authority in this rule 
for expert testimony to be filed by other parties.'' Id. From the fact 
that the rule does not require the expert testimony of third parties, 
Valpak seems to conclude that the rules do not permit such testimony. 
To remedy this alleged defect, it proposes that the language of 
paragraph (b) be expanded from ``the Commission may order that the 
petitioner and/or the Postal Service'' to ``the Commission may order 
that the petitioner, any interested persons, and/or the Postal Service 
[provide experts to participate in the process.]'' Id. at 27.
    As Valpak recognizes, the Commission does not have the authority to 
order experts employed by third parties to participate in a 
methodological rulemaking. Therefore, the fact that Sec.  3050.11 does 
not do so should not give rise to any inference that third-party 
experts would not be permitted to participate in the petition 
evaluation stage of a rulemaking. Such participation will be 
encouraged, but the Commission does not believe that it is something 
that it can require. As the Commission noted in its notice of proposed 
rulemaking in this docket, it views collaboration as the ideal approach 
to the development and evaluation of analytical principles in postal 
ratemaking. See Order No. 104 at 30-31.
    Referring to the procedures that it had to follow in vetting 
analytical issues under the Postal Reorganization Act (PRA), the 
Commission made the following observation:

    [T]he Commission was required to resolve an analytical issue by 
accepting or rejecting competing analyses submitted by opposing 
witnesses. * * * In almost all cases, analyses were presented as 
faits accomplis, with no opportunity for input or feedback from 
either the Commission or interested third parties. The process was 
cumbersome and the results were often less than satisfactory.

Id. at 30. Valpak reads this comment as a Commission preference for a 
procedure that ``eliminates all counter-proposals'' to those contained 
in a petition. Valpak Comments at 32, n.13. Valpak contends:

    The new process is likely to be more satisfactory only if 
various parties (i) are allowed to, and (ii) do, participate 
vigorously in the proposed process, from the outset. Otherwise, 
Postal Service studies will go largely unchallenged, and the 
Commission will be unaided by input from the parties.

Id.
    The Commission agrees that broad and vigorous public participation 
is beneficial. The Commission believes this goal can be more fully 
realized by expanding the informal rulemaking process. In ``on the 
record'' hearings under the PRA, the Commission was required to choose 
one from among what typically was a very limited set of models that was 
sponsored ``on the record'' by the Postal Service or an intervenor. Any 
correction of a model, or synthesizing of competing models that the 
Commission tried to do to support a decision, was likely to be 
challenged as procedurally infirm because it was not ``sponsored by a 
witness on the record.'' The PAEA, on the other hand, allows 
methodological issues to be resolved through informal rulemakings which 
allow collaborative research and multi-party input. That is the 
Commission's goal in conducting methodological rulemakings under Sec.  
3050.11.
    Deposing witnesses. Among other things, paragraph (b) of proposed 
rule 3050.11 provides that the petitioner or the Postal Service provide 
witnesses on the subject matter of the petition to be ``deposed by 
officers of the Commission.'' Valpak associates the term ``depose'' 
with adversarial interrogation. It asserts that if the Commission's 
officers were to depose witnesses, it would put them in the untenable 
position of being both litigators and decision-makers.
    To call informal rulemaking such as that which proposed rule 
3050.11 would authorize ``litigation'' mischaracterizes that process. 
Nevertheless, it may be beneficial to replace the phrase ``deposed by 
officers of the Commission'' with the phrase ``or answer questions 
posed by the Commission or its representatives'' as the Postal Service 
proposes. See Postal Service Reply Comments at 9. This should eliminate 
the inference that Valpak draws. Final rule 3050.11 incorporates that 
change.
    Oral input. Valpak notes that proposed rule 3050.11 gives the 
Commission discretion to prescribe the form of input (oral or written) 
that it will receive from interested parties. It does this at two 
points in the informal rulemaking process. In paragraph (a)(2), it 
allows the petitioner to request access to Postal Service data to 
support its petition, and gives the Commission discretion to require 
that the Postal Service's answers or objections be presented orally or 
in writing. In paragraph (c)(1), the rule allows interested parties to 
comment on any notice of proposed rulemaking that is issued based on a 
petition to change accepted analytical principles. It gives the 
Commission discretion to require that their comments be made orally as 
well as in writing. Valpak Comments at 24-25.
    Valpak argues that requiring a petitioner to make its requests for 
Postal Service data to support its petition orally (paragraph (a)(1)) 
and requiring interested parties to comment on notices of proposed 
rulemaking orally (paragraph (c)(1)) ``almost certainly would add 
confusion to a proceeding and, possibly, would restrict the due process 
rights of interested parties'' because the answers could address ``some 
of the most complex, sometimes arcane, and significant matters that 
come before the Commission.'' Id. at 25. It also argues that oral 
comments presented by lawyers would rarely be as useful as 
``thoughtful, written commentary.'' Id., n.11. It requests that the 
discretion to require oral rather than written responses be eliminated 
from the two paragraphs referenced above. Id. at 25-26.
    The answer to Valpak's concerns is that where complex or arcane 
matters are under review, the Commission is likely to reflect those 
considerations in its decision, and allow comments to be submitted in 
written form. While it might share Valpak's skepticism of the value of 
oral comments presented by attorneys, the Commission notes that oral 
comments on technical matters could be presented by technical experts. 
The Commission notes that 5 U.S.C. 553(c) affords interested persons a 
right to submit written comments in rulemakings covered by its 
procedures. Accordingly, the Commission has revised proposed rule 
3050.11(c) \3\ to provide interested persons with the right to submit 
written comments in response to a notice of proposed rulemaking issued 
under Sec.  3050.11. Final rule 3050.11, however, preserves the 
Commission's discretion to require answers or objections to data 
requests

[[Page 20838]]

made under Sec.  3050.11(a)(2) \4\ to be oral or in writing. This will 
allow the Commission to adjust procedures and review periods to fit the 
issues presented by a particular petition.
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    \3\ Proposed rule 3050.11(c) has become final rule 3050.11(d).
    \4\ Proposed rule 3050.11(a)(2) has become final rule 
3050.11(b)(2).
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    Notice of pending studies. The purpose of proposed rule 3050.11 is 
to provide for the input of mailers and the Commission before the 
Postal Service settles upon the analytical principles that it will 
apply in its annual reports to the Commission. Valpak argues that the 
rule will not be effective in accomplishing that purpose unless it 
requires the Postal Service to notify mailers and the Commission of 
special studies that are intended to result in changes to accepted 
analytical principles while those studies are still in their formative 
stage. Id. at 30-35. It proposes that the Postal Service be required to 
publish a ``short status report'' on all special studies that it 
proposes or are already underway, regardless of whether they would have 
to be submitted as Sec.  3050.11 proposals. It proposes that the list 
be updated quarterly, and include the ``unit within the Postal 
Service'' that is responsible for conducting the study, the study's 
beginning date, current status, and expected completion date, and the 
analytical principles that the study ``may affect.'' Id. at 35.
    The Postal Service considers adding such a requirement to Sec.  
3050.11 as impractical, burdensome and unnecessary. It argues that it 
has little incentive under the current regulatory system to keep its 
pending special studies secret until completed. It asserts that:

    The Commission has ample authority to discourage such 
inclinations simply by rejecting the resulting methodologies when 
the Postal Service `unveils' its proposals. Consequently, not 
wishing to waste time, effort, and money, the Postal Service is not 
going to proceed with major new studies in the PAEA regulatory 
environment without engaging in what it believes will be deemed by 
the Commission to be an appropriate amount of prior consultation. 
This entire portion of the Valpak comments is written as if Valpak 
did not bother to read the Commission's careful discussion of 
Strategic Rulemakings. Order No. 104 at 32-33.

Postal Service Reply Comments at 10-11 (footnote omitted).
    The Postal Service validly comments that strategic rulemakings are 
intended to provide mailers and the Commission with a description of 
its plans for new special studies and status reports on any special 
studies that are already underway. This is because a strategic 
rulemaking's main task is to obtain an overview of the Postal Service's 
research efforts, take inventory of its research needs, and set 
priorities for future research. In the interim between strategic 
rulemakings, the Postal Service is expected to keep mailers and the 
Commission current on major special studies, planned or pending, that 
are expected to lead to proposed changes in the analytical principles 
that it will use to prepare its annual reports to the Commission. If 
its voluntary efforts to provide mailers and the Commission notice of 
its plans for special studies should falter, the Commission could 
always reconsider Valpak's proposal to make notice mandatory.
    Advance review of changes to data reporting systems. The periodic 
reporting rules proposed by the Commission make an important 
distinction between analytical principles and mere quantification 
techniques. Analytical principles are methods that reflect a theory, 
precept, or assumption about causation. Changing analytical principles 
can be expected to change the results of an analysis. Quantification 
techniques, in contrast, are the mechanics of calculating numbers that 
are theory neutral. The classic example would be multiplying two 
numbers with a hand calculator versus multiplying the same two numbers 
with a slide rule. The technique used should not change the result. See 
proposed rules 3050.1 and 3050.2. The Commission's periodic reporting 
rules are designed to allow the Commission and the public to review 
changes to analytical principles before they are applied by the Postal 
Service to estimate its financial results. These rules intend to make 
this a manageable task by exempting mere quantification techniques from 
advance review and acceptance by the Commission.
    In Order No. 104, the Commission used a number of examples designed 
to illustrate the distinction between analytical principles, for which 
advance review is required, and quantification techniques, for which 
advance review is unnecessary. The Postal Service questions the 
appropriateness of several of these examples.
    One example used was a major change that the Postal Service 
recently made to the way that it collects Mail Processing Data System 
(MODS) data. MODS data is primarily used by postal managers to estimate 
plant workload so that the manager can adjust his staffing to match 
that workload. MODS data has long played a central role in modeling 
volume-variable mail processing costs, distributing those costs to 
subclasses, and in determining mail processing productivities in cost 
avoidance models.
    For decades, the Postal Service has relied on calculating First 
Handled Pieces (FHP) from MODS data as a proxy for how much volume was 
being handled by each processing plant. Finding a valid plant-wide 
estimate of FHP required that collection mail be weighed and the weight 
converted to the equivalent of pieces. This process was cumbersome, 
time consuming, and became less accurate if conversion factors were not 
updated. Nevertheless, for decades FHP has been the only reasonable 
proxy for plant-level volume that is available for modeling the volume 
variability of mail processing labor costs.
    Without knowing how much volume is coming in to mail processing 
plants, there is little chance of accurately estimating the share of 
the nearly $22 billion of variable mail processing costs for which each 
product is responsible. If the Postal Service cannot successfully model 
how different products incur different shares of system mail processing 
costs, it cannot know how profitable its various products are at the 
rates it has chosen. Not surprisingly, to lose the empirical basis for 
modeling how mail processing costs are caused is of concern to the 
Commission, which is charged by the PAEA with the responsibility of 
determining cost estimation methods.
    The Postal Service emphasizes that MODS is a management data system 
first, and a ratemaking data system second. It asserts that this makes 
it inappropriate for the Commission to require advance review of its 
decisions about how and when this data collection system should be 
modified. Postal Service Comments at 30-31.\5\
---------------------------------------------------------------------------

    \5\ It is worth pointing out that it is the Postal Service that 
has made the decision to have MODS perform dual service as both a 
management data system and a data system that plays a central role 
in ratemaking. To find mail processing volumes, it could have chosen 
to establish a data system that is designed primarily as a 
ratemaking data system comparable to the In-Office Cost System 
(IOCS) or the City Carrier Cost System (CCCS). As long as it has 
made this choice, it should recognize that it has made the 
Commission and the mailing public a stakeholder in the way that MODS 
is administered.
---------------------------------------------------------------------------

    Time Warner expands on the theme that the Commission should play a 
more passive role in the decisions that are made to modify the Postal 
Service's basic data collection systems. It extends that theme to data 
systems, like the IOCS, that were established primarily for ratemaking 
purposes. Time Warner argues that there are myriad minor changes to the 
IOCS that the Postal Service implements at the beginning of each fiscal 
year, and that it would be burdensome and unnecessary for the Postal 
Service to have to get advance

[[Page 20839]]

approval in an informal rulemaking before implementing most of these 
changes. As a substitute for that approach, Time Warner makes this 
---------------------------------------------------------------------------
proposal:

    A sounder, more moderate approach would be for the Postal 
Service, at the beginning of each fiscal year, to announce changes 
it is making in the instructions to IOCS data collectors and for 
interested parties to have an opportunity at that time to petition 
for the initiation of a rulemaking proceeding to review changes that 
seem questionable. Advance knowledge of the changes in format and 
content of the IOCS sample data would facilitate analysis by the 
Commission and interested parties of such data when it becomes 
available after the fiscal year is ended.

Time Warner Reply Comments at 4-5 (footnote omitted).
    The procedure that Time Warner describes seems to be similar to the 
one in proposed rule 3050.2 for handling changes made by the Postal 
Service in the quantification techniques that it uses. In that proposed 
rule, the change is listed and briefly described after the Postal 
Service has already incorporated it into its analysis and it is, for 
all practical purposes, a fait accompli.
    A procedure of this kind is appropriate for quantification 
techniques that have changed because quantification techniques are, by 
definition, not supposed to affect the results of an analysis. Changes 
to a basic data system such as IOCS, however, could affect the results 
of an analysis that relies on IOCS data. For that reason, if the Postal 
Service plans myriad minor changes to the IOCS or other basic data 
systems used in ratemaking, the Postal Service should treat them as 
changes to analytical principles and solicit public comment on them 
early enough that revisions can be made, if needed, without 
jeopardizing the planned implementation date for the changes. 
Accordingly, the proposal of Time Warner is not accepted.

E. Proposed Rule 3050.12 (Obsolete Special Studies)

    Proposed rule 3050.12 was inspired by some recent examples of cost 
estimates with important rate consequences that were significantly 
inaccurate because the Postal Service had relied on a one-time study or 
one-time data collection effort that had become grossly non-
representative with the passage of time. An example is the bundle-flow 
model that the Postal Service continued to use for Periodicals. It 
reflected a flat-processing environment that had largely disappeared 
roughly 5 years before the Postal Service began a field study to update 
the bundle-flow model to reflect post-AFSM 100 bundle flows. Another 
example is the Barcode Sorter accept rate for letters, which has a 
major impact on estimates of avoided costs for workshared letters. 
Nearly a decade passed before the Postal Service updated an accept rate 
that was originally based on a special survey.\6\ Proposed rule 3050.12 
would have required the Postal Service to list such one-time studies or 
one-time data collection efforts that it relies on to produce its 
annual periodic reports to the Commission and the study's completion 
date. The proposed rule would have required the Postal Service to 
either certify that each one-time study on which it continues to rely 
still reflects the current operating environment or provide a timetable 
for updating the study so that it does. The proposed rule included a 
presumption that a one-time study or data collection effort that is 
more than 5 years old is obsolete. It also included liberal waiver 
provisions. See Order No. 104 at 36, 43.
---------------------------------------------------------------------------

    \6\ The same data are now collected automatically and routinely 
updated.
---------------------------------------------------------------------------

    Even though one-time cost variability and cost avoidance studies 
are not routinely updated, the Postal Service asserts that they are 
``tied to'' basic data reporting systems that are updated every year, 
thus minimizing the need for the proposed rule. Postal Service Comments 
at 15-16. It also argues that the proposed rule would be burdensome and 
unworkable.
    To make that case, it focuses on cost avoidance models that 
underlie the calculation of worksharing discounts. It asserts that it 
would be impractical to list such models and identify the completion 
date of each because it continually refines such models in minor ways 
which, it claims, would make it difficult to determine their vintage. 
Id. at 15-20. It says that cost avoidance models ``have evolved over 
decades of postal litigation and incorporate new data as possible.'' 
Id. at 18. For example, ``wage rates, total mail processing costs by 
shape, piggyback factors, MODS data, and other inputs to these models 
are updated every year.'' It then asks ``[w]hat is the date that the 
Commission will use as a reference? * * * If one input in a study is 
more than five years old, is the study presumed to be obsolete?'' Id. 
It argues that such difficulties make it prudent to make proposed rule 
3050.12 a mere placeholder, to be available when the need for such a 
rule becomes more compelling. Id. at 14-15, 17.
    The Postal Service's argument that the vintage date of cost 
avoidance models is difficult to identify is essentially a ``straw 
man.'' It works only if one chooses to disregard the clearly drawn 
distinction in these periodic reporting rules between changed 
analytical principles on the one hand, and mere updating of input data 
on the other. See Order No. 104 at 27-29. The string of examples cited 
by the Postal Service all fall clearly into the latter category and, 
therefore, would not have a bearing on the ``completion date'' of a 
cost avoidance model. Postal Service Comments at 18. The completion 
data of a cost avoidance model is determined by the analytical method 
on which it is based. As Order No. 104 explains, changed analytical 
principles are those that change a causal theory or assumption. With 
respect to cost avoidance models, this would include a change in the 
underlying operations that are being modeled, piggybacking a type of 
cost for the first time, a redefined MODS pool, a new CRA adjustment 
factor, or a new density study. The Commission's recent experience with 
cost methodology rulemakings has demonstrated that the distinction 
between changing the analytical principles underlying cost models and 
updating the data that are input to those models is comprehensible and 
workable.
    The Commission, however, recognizes that the Postal Service's 
technical staff has limited time and resources to devote to the problem 
of updating the cost studies. Final rule 3050.12, therefore, is revised 
to impose the minimum reporting requirement that will still give the 
Commission a systematic indicator of the potential scope of the problem 
of reliance on obsolete special studies. Only paragraph (a) of the 
proposed rule (see Order No. 104 at 43) is retained in final rule 
3050.12. It now requires the Postal Service to list each special study 
relied on to produce its annual periodic reports to the Commission and 
its completion date. It requires the Postal Service to indicate whether 
the special study still reflects current operating conditions and 
procedures. It also requires the Postal Service to annually update the 
list. This will indicate to the Commission and the postal community 
where potential obsolescence problem areas might be.
    In paring back the requirements of Sec.  3050.12, the Commission 
accepts the suggestion of the Postal Service (Postal Service Comments 
at 17 and Time Warner (Time Warner Reply Comments at 2-3) that the 
problem of what to do about obsolescent special studies be addressed as 
part of a ``strategic rulemaking'' such as that described in Order No. 
104 at 32. A strategic

[[Page 20840]]

rulemaking would be one designed to make a comprehensive evaluation of 
the costing research needed by the Postal Service, prioritize those 
needs, and reach a consensus within the postal community on a timetable 
for achieving them.

F. Proposed Rule 3050.13 (Explanation of Changes Made to Accepted 
Analytical Principles)

    Proposed rule 3050.13(a) states:

    At the time the Postal Service files its Annual Report, it shall 
include a brief narrative explanation of any changes to accepted 
analytical principles that have been made since the most recent 
Annual Compliance Determination was issued, and the reasons that 
those changes were accepted.

Valpak proposes adding to the proposed rule a requirement that the 
Postal Service provide a table of analytical principles that have been 
changed since the last section 3652 report, that specifies the docket 
in which the change was approved, and estimates the effect of the 
change using current-year data. Valpak comments that the latter 
requirement would be especially useful since the analytical principle 
would have been approved on the basis of the previous year's data. 
Valpak Comments at 36-37.
    The Postal Service vigorously objects to adding the latter 
requirement. It emphasizes that Valpak is proposing that the Postal 
Service be required to run multiple versions of the current-year models 
for each approved change, one version with the change, and one version 
without. The Postal Service argues that this would be a waste of effort 
because these changes would have all been approved in advance.
    The Commission agrees with the Postal Service that the benefit of 
requiring this information is limited since the analytical principles 
will have already been approved in an informal rulemaking. The burden 
on the Postal Service could be substantial, however, if it were 
required to run its current-year model multiple times in the very brief 
period that it has to prepare its section 3652 report for the previous 
year. See Postal Service Reply Comments at 13-14. Because the burden 
appears to outweigh the benefit, the Commission declines to adopt the 
change proposed by Valpak.
    Paragraph (b) of proposed rule 3050.13 stated that the Postal 
Service's annual report was subject to proposed rule 3050.2. Proposed 
rule 3050.2 requires the Postal Service to identify changes in input 
data, quantification techniques, and corrections of errors in its 
periodic reports. Since the section 3652 report is a periodic report, 
the Commission concludes that paragraph (b) of this section is 
superfluous. Accordingly, paragraph (b) of this section has been 
deleted from final rule 3050.13.

G. Proposed Rule 3050.14 (Reporting the CRA in a More Disaggregated 
Format)

    Proposed rule 3050.14 states that the Postal Service's Cost and 
Revenue Analysis (CRA) report shall be presented in a format that 
reflects the current Mail Classification Schedule, but should also be 
presented in an alternative, more disaggregated format that is capable 
of reflecting the classification structure that was in effect prior to 
the adoption of the PAEA. The purpose is to report data in a way that 
can serve as building blocks. This would allow the data to be 
structured to coincide with historical data, which would facilitate 
analysis of trends in postal finances and operations and support model 
building with the use of time series and panel data. It would also 
accommodate future changes in the Mail Classification Schedule without 
destroying the usefulness of historical data for analysis and modeling 
going forward. The alternative, disaggregated format is illustrated by 
the Appendix to Order No. 104 entitled ``Products and Categories.'' A 
comparable Appendix accompanies this order.
    The Public Representative proposes that the Commission clarify the 
status of the Appendix. He argues that it should be made a formal 
appendix to part 3050 of the Commission's rules for inclusion in the 
Code of Federal Regulations (CFR), or that the Appendix be issued as a 
guidance document, consistent with OMB Bulletin 07-02, 72 FR 3432 
(January 25, 2007). Otherwise, he says, the mailing public might be 
unaware of the alternative information that it contains. Public 
Representative Comments at 8.
    The Commission believes that it would be inappropriate to make the 
Appendix a formal appendix that would appear in the CFR because it 
would be too cumbersome to update, should that become necessary. The 
Commission, however, will consider making it a guidance document.
    The Postal Service suggests that the Commission make minor 
refinements to the categories of international mail listed in the 
alternative reporting format in the Appendix, ``Products and 
Categories,'' accompanying Order No. 104. Postal Service Comments at 
41. The Postal Service proposes that product names in the Appendix 
conform to the new product names that it gave to its ``rebranded'' 
outbound international mail products on May 14, 2008. See 72 FR 16604 
(April 4, 2007). The Postal Service also seeks to update the Appendix 
to reflect the elimination of outbound economy mail services that use 
surface transportation. Id. Additional refinements requested include 
the use of a consistent naming convention for reporting purposes, and 
the elimination of reporting categories for which ``neither revenue nor 
cost information exists.'' Id. at 43.
    Most of the Postal Service's suggested refinements are adopted in 
the revised Appendix. However, the Commission adds certain inbound 
Special Services categories for which data should be reported. The 
revised Appendix replaces ``International First-Class Mail'' and 
``International Priority Mail'' with the rebranded names ``First-Class 
Mail International'' and ``Priority Mail International,'' respectively. 
The revised Appendix also removes references to ``surface'' under 
First-Class Mail International for outbound single-piece letters, 
flats, IPPs, and parcels, and outbound single-piece cards.\7\ However, 
the revised Appendix shows that data for ``air'' and ``surface'' 
categories should be reported under ``Inbound Single-Piece Mail (Letter 
Post)'' because air and surface were not eliminated as service 
offerings for inbound First-Class Mail International.
---------------------------------------------------------------------------

    \7\ The acronym ``IPPs,'' or irregular parcels and pieces, 
refers to parcels that ``do not meet the dimensional criteria of 
machinable parcels and other parcels that cannot be processed by 
parcel sorters.'' Glossary of Postal Terms, Publication 32, May 1977 
(Updated With Revisions through July 5, 2007) at 56.
---------------------------------------------------------------------------

    In keeping with the rebranded naming of outbound mail products, the 
Commission adds a reporting requirement for Global Express Guaranteed 
(GXG) and Express Mail International (EMI) under ``Outbound 
International Expedited Services'' in the Competitive Products section 
of the Appendix. This added reporting requirement is consistent with 
the Postal Service's existing reporting of GXG and EMI in the FY 2007 
and FY 2008 International Cost and Revenue Analysis (ICRA) reports.
    The revised Appendix adopts a consistent, new naming convention for 
reporting data related to outbound and inbound international mail. The 
new naming convention preserves the Commission's proposed reporting of 
disaggregated cost, volumes, and revenue data separately by terminal 
dues regime. See Order No. 104 at 18. The new naming convention also 
simplifies reporting by reducing the number of categories, primarily 
for inbound single-piece mail. Thus, the following naming convention is

[[Page 20841]]

adopted: Target System Countries at UPU rates, Transition System 
Countries at UPU rates, Subject to Agreement, Canada, Other.
    The new naming convention is applicable to First-Class Mail 
International, outbound single-piece letters, flats, IPPs, and parcels, 
outbound single-piece cards, and inbound single-piece mail (i.e., 
``letter post'') separately for inbound air and surface letter post; 
and Priority Mail International for outbound Priority Mail subject to 
terminal dues. For Inbound Air Parcel Post, the naming convention 
replaces ``At Non-UPU Rates'' with ``Subject to Agreement.''
    The new naming convention reference ``Subject to Agreement'' 
throughout the revised Appendix is intended to encompass the separate 
reporting of data by negotiated agreements that are both bilateral and 
multilateral in nature.\8\ In this regard, ``Canada'' is listed for the 
relevant products and categories of mail covered by an existing 
bilateral agreement, while ``Other'' is intended as a placeholder for 
reporting data in response to future bilateral or multilateral 
agreements.
---------------------------------------------------------------------------

    \8\ For purposes of this category, the term ``multilateral'' 
refers to an agreement other than the multilateral agreement of the 
UPU convention.
---------------------------------------------------------------------------

    International Ancillary Services is currently defined as a product 
on both the market dominant and competitive product lists. Among the 
component categories of that product are Inbound International Return 
Receipt and Inbound International Insurance. The FY 2008 ICRA includes 
line items for these services as well, although no revenue or cost 
information is reported.\9\ The Postal Service asserts that these 
categories should be dropped from the Appendix because revenue and cost 
information for them ``does not exist.'' Postal Service Comments at 43-
44. As long as these categories remain components of International 
Ancillary Services, and appear as line items in the ICRA, the 
Commission prefers that they appear in the alternative format as well. 
If there is no data to report, the Postal Service may enter an ``N/A'' 
notation.
---------------------------------------------------------------------------

    \9\ FY 2008 ICRA Report, December 29, 2008, worksheet tab A 
Pages (md) and A Pages (c).
---------------------------------------------------------------------------

    At the Postal Service's request, the Appendix is revised to include 
``Inbound International Delivery Confirmation'' as a reporting category 
for data on ``revenue from the delivery confirmation surcharge for 
[inbound] Xpresspost and Expedited Services [from] Canada.'' Id. at 44.
    Pitney Bowes proposes that the Commission attach a 3-year sunset 
provision to the Appendix, following up on the Commission's remark in 
Order No. 104 at 16, that the alternative format might not be needed 
after a few transitional years. The Commission prefers to watch events 
unfold to see how quickly the Mail Classification Schedule stabilizes, 
after which it will make a decision about the usefulness of the 
alternative format in the longer run.

H. Proposed Rule 3050.20 (Compliance and Other Postal Service Analyses)

    Time Warner provides several intricate arguments in support of what 
it terms ``a relatively clear-cut jurisdictional issue'' that it sees 
in Sec.  3050.20 as originally proposed. Time Warner Comments at 13. At 
the center of its discussion is concern over the types of circumstances 
where Commission action might be appropriate in response to a finding 
of ``noncompliance'' under 39 U.S.C. 3653(b). While some of Time 
Warner's arguments are unpersuasive, the Commission finds that the 
language of proposed rule 3050.20 should be modified to eliminate 
confusion in this area.
    The Commission finds misguided Time Warner's suggestion that the 
Postal Service is not required to develop and implement rates that 
comply with the rate policies of Sec.  3622. Id. at 9-10. The PAEA 
provides an integrated set of policy guidelines for the Postal Service 
to follow in setting rates. Although the Commission is responsible for 
reviewing the Postal Service's performance, most commenters believe 
that the initial responsibility for balancing and achieving these 
policies is, and should be, with the Postal Service rather than the 
Commission.
    Section 3622(a) does direct the Commission to establish, and when 
necessary revise, a system of ratemaking to foster achievement of the 
requirements, objectives, and factors spelled out in subsequent 
paragraphs. Order No. 43 implemented such a system, directing that the 
Postal Service accompany each planned rate increase with a 
demonstration of compliance with those policies. See 39 CFR 3010.14.
    However, even if no regulations had been implemented by the 
Commission, the Governors would have to establish rates that comply 
with the policies of Sec.  3622. 39 U.S.C. 404(b) only authorizes the 
Governors to establish rates that are in accordance with the policies 
of chapter 36 of title 39 of the United States Code.
    Time Warner contends that the concept of ``compliance'' is not 
easily applicable to such things as objectives and factors, which by 
their nature must be weighed and balanced. To ease concerns over the 
potential misuse of the Commission's broad remedial powers, Time Warner 
requests a Commission statement on how or when it might find the Postal 
Service to be not in compliance with such subjective terms. The 
Commission believes that Time Warner's request is well intentioned, but 
this rulemaking is not an appropriate vehicle for such a discussion.
    The Postal Service joins Time Warner in arguing that it should not 
have to analyze the extent to which it has achieved its program 
performance goals established under Sec. Sec.  2803 and 2804 as part of 
the compliance analysis required by proposed rule 3050.20. It argues 
that these sections already require the Postal Service to discuss its 
performance goals and evaluate its achievement of those goals in the 
comprehensive statement that it is required to file with Congress by 39 
U.S.C. 2401(e). When evaluating whether the Postal Service has met its 
program performance goals, the Postal Service argues, it is the 
Commission's duty to review the Postal Service's comprehensive 
statement. Postal Service Comments at 49.
    Sections 2803 and 2804 require the Postal Service to evaluate the 
degree to which its individual programs have met their objectives, by 
quantitative criteria where possible. The comprehensive statement that 
the Postal Service must file with Congress under Sec.  2401(e) includes 
these program performance evaluations. Those evaluations, if done 
properly, would allow the Commission to determine whether the 
performance goals established under Sec. Sec.  2803 and 2804 have been 
met. Because it is redundant, the requirement in proposed rule 3050.20 
that the Postal Service analyze whether it has met the program 
performance goals established under Sec. Sec.  2803 and 2804 has been 
deleted from final rule 3050.20. The Commission does this on the 
understanding that the Postal Service's comprehensive statement filed 
under Sec.  2401(e) will be sufficiently specific and concrete to allow 
the Commission to make an informed determination as to whether the 
Postal Service has met the performance goals established for specific 
programs, as Sec. Sec.  2803 and 2804 contemplate.
    Section 3653(d) authorizes the Commission annually to make 
``recommendations'' to the Postal Service ``related to the protection 
or promotion of public policy objectives set out in this title.'' This 
authorization is broader in subject matter than the Postal Service's 
comprehensive statement, which is limited to an analysis of how the 
Postal Service's

[[Page 20842]]

programs have met the public policy objectives of Sec.  101 of title 39 
of the United States Code. Because it is not redundant of the analyses 
required in the Postal Service's comprehensive statement, the 
requirement in proposed rule 3050.20 that the Postal Service analyze 
how its products (individually or collectively) have promoted the 
public policy objectives of title 39 remains in final rule 3050.20.
    Section 3653 allows the Commission the latitude to evaluate 
compliance ``for products individually or collectively.'' This language 
appears to authorize the Commission to determine what level of 
disaggregation makes sense when analyzing compliance with a particular 
criterion derived from the statute. The Commission believes that it 
will be beneficial to harmonize the analyses required of the Postal 
Service under proposed rule 3050.20 with the evaluations that Sec.  
3653 authorizes the Commission to make. Therefore, the Commission 
revises the language of final rule 3050.20 to allow the Postal Service 
to analyze whether its products have complied with a particular 
statutory goal, objective, or mandate, both at the individual product 
level, or for products collectively, where analysis at that level is 
appropriate.
    The Commission agrees with Time Warner that using the term 
``compliance'' in the title of proposed rule 3050.20 does not 
appropriately describe the task it assigns to the Postal Service--to 
analyze how its products have promoted the public policy objectives of 
title 39 of the United States Code. The Public Representative agrees. 
See Public Representative Reply Comments at 3. The solution is to 
broaden the title of proposed rule 3050.20. Final rule 3050.20 is now 
entitled ``Compliance and other analyses in the Postal Service's 
section 3652 report to the Commission.'' This broadened title indicates 
that an analysis can be required annually by Sec.  3050.20 without 
constituting a ``compliance'' issue. In this regard, the Commission 
notes that the set of rules adopted in this docket are generally 
referred to as ``periodic reporting rules'' rather than ``compliance 
rules'' because they are intended to provide the information needed for 
all reports that the Commission is obligated by the PAEA to produce, 
whether or not they are compliance related.
    Special reporting requirements for products out of compliance. 
Valpak proposes to amend proposed rule 3050.20 to require the Postal 
Service to provide supplemental information about products that ``do 
not comply with all applicable provisions of PAEA.'' For such products, 
it proposes that the rule:

    i. Require the Postal Service to explain the most important 
circumstances underlying the failure to meet the applicable 
provisions of PAEA;
    ii. Explain what steps the Postal Service plans to take to bring 
the products into full compliance with PAEA; and
    iii. Indicate the time frame within which the Postal Service 
contemplates * * * achieving full compliance.

Valpak Comments at 39.
    For example, for a product that failed to cover its costs, Valpak 
would require the Postal Service to (1) explain why it did not cover 
its costs; (2) explain what steps the Postal Service plans to take to 
ensure that it will cover its costs; and (3) indicate when it expects 
those steps to bring the product's revenues above costs. Valpak argues 
that unless proposed rule 3050.20 is strengthened in this way, neither 
mailers who are cross-subsidizing such products, nor the Commission, 
will know how to respond to the failure of a product to comply with the 
requirements of the PAEA. Id. at 39-40.
    The Postal Service responds only briefly to Valpak's proposal. It 
notes that Valpak would have the Postal Service give public notice in 
proposed rule 3050.20 of forward-looking remedial steps. It argues that 
such requirements are not appropriate for that rule since it is 
intended to implement a section of the PAEA (3652) that is focused on 
the past year. Postal Service Reply Comments at 14 and n.7.
    MPA/ANM/ABM criticize Valpak's proposal as one that misconstrues 
the role that Sec.  3622(c)(2) plays in the statutory structure. 
(Section 3622(c)(2) requires each ``class or type'' of mail to cover 
its attributable costs.) Though Sec.  3622(c)(2) is characterized in 
the PAEA as a ``requirement,'' the coalition argues that it is little 
more than advisory in nature, since the price cap overrides it and all 
other objectives and factors that are found in the statute. They argue 
that failing to comply with an objective or factor in the course of 
complying with a more important one (the cap) does not give rise to a 
Postal Service obligation to explain anything in the context of 
compliance analysis.\10\ The coalition, however, considers it ``not 
unreasonable'' for the Commission to add a new paragraph (k) to 
proposed rule 3050.21 requiring the Postal Service to:
---------------------------------------------------------------------------

    \10\ The coalition does not address scenarios in which a type of 
mail service does not cover its costs even though it, or the 
``class'' to which it belongs, has cap room. Congress, however, 
contemplated scenarios under which a ``loss-making'' product could 
be out of compliance with the PAEA. See 39 U.S.C. 3662(c).

    [p]rovide an explanation when revenues for a mail class or 
service do not cover attributable costs, and provide any other 
explanation that the Postal Service believes will be helpful to 
clarify how the Postal Service has considered the objectives of 39 
---------------------------------------------------------------------------
U.S.C. Sec.  3622(b) and the factors of 39 U.S.C. 3622(c).

MPA/ANM/ABM Reply Comments at 4.
    With respect to a product with a history of non-compliance with 
some requirement of the PAEA, the Commission agrees with Valpak that it 
would be helpful in the compliance review process to know what the 
Postal Service considers to be the causes of that product's non-
compliance, what the Postal Service plans to do to bring that product 
into compliance, and how long it expects that process to take. In the 
Commission's view, providing such information with the section 3652 
report itself would greatly benefit the review process. As the 
Commission observed in its FY 2007 ACD at 91:

    The Postal Service should support its annual report with more 
complete explanations, and discuss data which may be perceived as 
anomalous, such as large variations in unit costs. With only 90 days 
available for the Commission to make its findings and even less time 
for interested parties to analyze the data and submit comments, it 
is crucial to the process that the data filed by the Postal Service 
is accompanied by accurate descriptions and a thorough analysis.

To encourage the Postal Service to provide a more thorough analysis of 
high priority topics relating to whether particular products have met 
particular standards articulated in the PAEA, the Commission has added 
paragraph (c) to final rule 3050.20. That paragraph provides:

    (c) [The Postal Service] shall address such matters as non-
compensatory rates, discounts greater than avoided costs, and 
failures to achieve stated goals for on-time delivery standards, 
particularly where the Commission observed and commented upon the 
same matter in its Annual Compliance Determination for the previous 
year.

This provision reflects the revision by Valpak to proposed rule 3050.20 
in the sense that it establishes a specific duty to include in the 
section 3652 report an analysis of results for products that do not 
satisfy certain provisions of the PAEA.
    The Commission is mindful of the burdens that the Postal Service 
faces in preparing its section 3652 report and, therefore, the duty 
that it imposes on the Postal Service is narrower than that which 
Valpak's proposal would have imposed. Rather than require the Postal

[[Page 20843]]

Service to explain the reasons that an outcome did not meet a 
particular standard of the PAEA, its plans for curing that deficiency, 
together with an expected timetable, it merely requires the Postal 
Service to ``address'' a very brief list of outcomes that do not 
satisfy a particular, objective PAEA standard.
    The purpose of the provision is essentially to provide interested 
persons and the Commission with salient information when a particular 
PAEA standard is not satisfied by a particular result involving a 
particular product. The breadth of the explanations will vary with each 
factual situation. Paragraph (c) is framed in a manner that does not 
require a conclusion that a product that fails to comply with some 
statutory policy does or does not ``comply'' with the PAEA as a whole. 
It merely calls for relevant facts in those instances in which certain 
PAEA standards were not satisfied. Because the Commission has added 
paragraph (c) to final rule 3050.20, it declines to adopt Valpak's 
proposed revision of proposed rule 3050.20 or the related suggestion by 
MPA/ANM/ABM to revise proposed rule 3050.21.

I. Proposed Rule 3050.21 (Period for Measuring Institutional Cost 
Contribution of NSAs)

    Proposed rule 3050.21(f) prescribed the reporting requirements for 
market dominant NSAs. Among other things, the proposed rule requires 
the Postal Service to report results for the NSA's contract year where 
that does not correspond to a fiscal year. The Postal Service observes 
that:

    it may also be possible to devise a means of conducting 
contribution assessments based directly on the fiscal year. If so, 
NSA data linked to the fiscal year would be more amenable to 
integration with the rest of the fiscal year reporting presented in 
the ACR. Therefore, the Postal Service requests that the proposed 
rule be amended to allow it the option to report on either a fiscal 
year basis or on the most recent year of operation. Building this 
flexibility into the rule could result in reporting procedures that 
are more efficient for both the Postal Service and the Commission.

Postal Service Comments at 36 (footnote omitted).
    The Commission agrees with the goal expressed by the Postal Service 
of being able to report NSA results in a way that can be synchronized 
with the fiscal year report for the rest of the system. The problem 
appears to be that the Postal Service has not yet found a way to do 
that without sacrificing the accuracy of the resulting estimates.
    In library reference USPS-FY08-30, the Postal Service provides 
financial results for NSAs that were active in FY 2008. Consistent with 
its proposal, the Postal Service provided volume data on a fiscal year 
basis. The analysis that used this volume information is, however, a 
flawed method of analyzing the compliance of volume-based NSAs with 
Sec.  3622(c)(10) because it does not compare apples to apples. The 
Commission has approved application of a price elasticity test to NSAs 
as an objective way to measure the net contribution from any discount 
offered. The purpose of the elasticity test is to develop a meaningful 
before-rates forecast to measure possible revenue leakage from the 
discount. Applying the elasticity test to fiscal year volumes that do 
not align with the discount schedule, however, severs the connection 
between discounts and volumes, making any net contribution analysis 
meaningless. This approach creates a before-rates volume that does not 
correspond to any discount earned. The disconnect between contract 
years and fiscal years prevents a meaningful estimate of the net 
institutional cost contribution of NSAs. Accordingly, the Commission 
defers the Postal Service's proposal until it can demonstrate that it 
has found a way to adjust data for NSAs that are out of phase with the 
fiscal year to a fiscal-year basis without substantially distorting the 
resulting estimates.

J. Proposed Rule 3050.25 (Volume and Revenue Data)

    Proposed rule 3050.25 identifies the data reports that the 
Commission needs to estimate volumes and revenues, such as the Revenue, 
Pieces, and Weight System (RPW) reports, the Quarterly Statistics 
Reports, and the billing determinants. The Postal Service objects only 
to the proposal that it provide billing determinants on a quarterly 
basis. It explains that meeting this requirement would require added 
expense to generate special weight reports and other input data that it 
now generates only annually. It argues that the added expense is not 
warranted in view of the limited benefits of this requirement. Id. at 
37-39.
    Time Warner supports the Postal Service's comments in this regard. 
It points out, however, that most of the volume and mail characteristic 
data on bulk mail comes from electronically filed reports by bulk 
mailers. It suggests that quarterly billing determinants for bulk mail 
classes could be produced at little additional expense, with the 
understanding that revisions might need to be made to the results at 
the end of the year. It says that such information might provide useful 
indications ``of the extent to which mailers are taking advantage of 
the various worksharing discounts offered by the rate structure[,]'' 
which ``might indicate the cost trends to anticipate for the various 
classes of mail.'' Time Warner Reply Comments at 5-6.
    The Commission proposed that the Postal Service provide quarterly 
billing determinants primarily as an aid to analyzing the consistency 
of proposed rates with the price cap constraint. Because rate increases 
under the current calendar are out of phase with the annual billing 
determinant data, quarterly data are helpful in isolating what revenue 
changes are the result of changes in rates. The Commission believes 
that the benefits of this form of reporting outweigh its burdens, 
absent a more definitive estimate of the extra time and resources that 
providing quarterly billing determinants would entail. Therefore, final 
rule 3050.25 requires the Postal Service to provide billing 
determinants quarterly within 40 days of the close of the quarter. 
Annual billing determinants are required to be broken out by quarter as 
well.
    Additionally, it would be extremely helpful if the Postal Service 
could develop billing determinant data separated between periods when 
different sets of rates were in effect. The Commission requests that, 
if possible, the Postal Service provide this information on a voluntary 
basis.
    An example of the separation that the Commission requests is the 
set of new market dominant prices that will go into effect on May 11, 
2009, roughly in the middle of the third quarter of FY 2009. If the 
Postal Service were able to separate the quarterly data between pre-May 
11 and post-May 11 revenue and volume information, the Commission would 
be able to develop a set of volume weights that correspond to the 
periods in which different prices were in effect. These weights could 
be used to develop weighted-average-rates per piece by class for 
comparison with the planned weighted-average-rate per piece by class, 
developed using historic billing determinant data in accordance with 
the Commission's rules in Docket No. R2009-2. Of course, data for one 
part of a quarter would not be sufficient for such a comparison, but 
since the rates generally stay in effect for a year, the Commission and 
the public, by virtue of the periodic reporting rules, would eventually 
have access to data for a full year reflecting one set of rates.\11\

[[Page 20844]]

These data would prove useful for the evaluation of the efficacy of the 
price cap. They would be particularly useful 7 years from now when the 
Commission must re-evaluate the current system of ratemaking. See 39 
U.S.C. 3622(d)(3).
---------------------------------------------------------------------------

    \11\ The Commission is not asking the Postal Service to make 
this separation in billing determinant data to reflect new price 
categories, new discounts, or new surcharges. The post-
implementation data can be compared with the pre-implementation data 
based on current reporting techniques. For example, the quarterly 
data that will include volume and revenue data subject to the 
planned Intelligent Mail barcode (IMb) discount will not require 
separate reporting for the IMb discount because no corresponding 
revenue and volume will exist in the quarter until the discount goes 
into effect. Thus, any data that are reported for the IMb discount 
can only reflect the effect of the new discount. However, if the 
level of that discount is subsequently changed, the quarterly data 
would have to be separated between the two discount regimes for 
accurate comparisons of actual weighted-average-rate per piece with 
planned weighted-average-rate per piece.
---------------------------------------------------------------------------

    Although the Postal Service implements price changes for 
competitive products at a different time of year and although these 
prices are not subject to the price cap, competitive product billing 
determinants split between the pre- and post-rate implementation date 
would also be helpful. It would enable the Commission to evaluate more 
accurately the effects of price changes on the financial condition of 
the Postal Service and how such pricing activities help the Postal 
Service meet the requirements of 39 U.S.C. 3633(a).

K. Proposed Rule 3050.26 (Demand Elasticity and Volume Forecasting)

    The proposed periodic reporting rules would have required the 
Postal Service to provide econometric estimates of demand elasticity 
for all postal products accompanied by the underlying econometric 
models and input data sets used. The provision establishing these 
requirements was proposed rule 3050.26. To accommodate the Postal 
Service's internal operational preferences, proposed rule 3050.26 
requires that this information be filed with the Commission by January 
20 of each year. Proposed rule 3050.26 is not associated specifically 
with the Postal Service's section 3652 report. The specific information 
items (other than avoided cost information) that the Commission deems 
necessary for it to carry out the compliance analysis required of it by 
Sec.  3653 are found primarily in proposed rule 3050.21. For the sake 
of completeness, the requirement that the Postal Service provide a 
demand elasticity estimate for each postal product was included there 
as well. See Order No. 104, proposed rules 3050.21(f) and (g), at 45-
46.
    The Postal Service points out that proposed rules 3050.21(f) and 
(g) are redundant of proposed rule 3050.26, but require the same demand 
information to be filed with the Commission several weeks in advance of 
January 20 in late December of each year. It urges the Commission to 
resolve this redundancy in favor of the January 20 due date 
incorporated in proposed rule 3050.26. Postal Service Comments at 29. 
We accept the Postal Service's suggestion, and delete the references to 
demand elasticities from final rule 3050.21.
    Explanatory narrative. The Postal Service emphasizes that it 
includes an explanatory narrative of its methods for estimating demand 
in its January 20 filing under proposed rule 3050.26 (even though that 
proposed rule did not explicitly require a narrative explanation of 
methods). It then notes that proposed rule 3050.60(f) requires a brief 
narrative explanation of how the estimates in the most recent ACD were 
calculated and the reasons that particular analytical principles were 
followed (due on July 1 of each year). Id. at 24-25.
    Based on the Commission's narrative in Order No. 104, the Postal 
Service correctly concludes that the Commission had intended the term 
``analytical principle'' to be broad enough to encompass the analytical 
principles used in econometric models of demand. The Postal Service 
argues that the brief narrative explanation of analytical principles 
underlying its demand analysis that proposed rule 3050.60(f) would 
require is redundant of the narrative explanation that it provides to 
the Commission in January of each year under proposed rule 3050.26. It 
urges the Commission to interpret proposed rule 3050.60(f) as not 
requiring a brief narrative explanation of analytical principles used 
in estimating demand elasticities. Id. at 29-30.
    The Commission had intended the brief narrative explanations called 
for by proposed rule 3050.60(f) as explanations ``in a nutshell'' 
similar to those traditionally provided in Library Reference 1 in rate 
cases under the PRA. The main value of a set of such explanations of 
methods is that they would serve as a quick guide to the non-expert in 
understanding the arcane world of postal cost, volume, and revenue 
analysis. Therefore, it is not entirely accurate to characterize the 
Sec.  3050.60(f) narrative as redundant of the more technical and 
detailed narrative that the Postal Service provides in January under 
proposed rule 3050.26. The Commission believes that this ``quick 
guide'' is quite helpful in making postal analysis more accessible to 
the lay public, and that this is as true of demand analysis as of other 
kinds of analysis. It therefore continues to interpret final rule 
3050.60(f) \12\ as applicable to analytical principles underlying the 
Postal Service's estimates of demand elasticity. Because a ``nutshell'' 
explanation is all that is expected, it is unlikely to significantly 
add to the Postal Service's reporting burden.
---------------------------------------------------------------------------

    \12\ Proposed rule 3050.60(f) has become final rule 3050.60(g).
---------------------------------------------------------------------------

    Advance review of analytical principles underlying demand and 
volume forecasting models. With respect to demand elasticity estimates, 
the Postal Service's major criticism is not redundancy, but the 
Commission's inclusion of demand elasticity estimates in its 
requirement that analytical principles used in its periodic reports be 
reviewed in advance by the Commission and the public. See proposed rule 
3050.11. The Postal Service argues that the econometric models that it 
uses to estimate demand elasticity and to forecast volume are not like 
econometric models that it uses to estimate volume-variable costs. It 
asserts that the former are respecified, reworked, or tweaked almost 
every time that new input data are used. Accordingly, it argues, it is 
impractical for it to subject such frequent model revisions to advance 
review in a rulemaking context, as proposed rule 3050.11 would 
apparently require. Id. at 22-29. Although it concedes that demand 
elasticities play an important role in evaluating rates under the PAEA, 
it asserts that the Commission does not have authority to ``dictate'' 
the methods by which it forecasts volumes comparable to what it 
arguably had under the PRA since the evaluations that the Commission is 
obligated to make are primarily retrospective. Id. at 26. It, 
therefore, asks that analytical principles that underlie its volume and 
demand models be exempt from advance review.
    The Postal Service contends that the goals of advance review could 
largely be served by the opportunity that the Commission would have to 
react to the Postal Service's demand modeling and volume forecasting 
methods, either in the course of the ACD or at another time of the 
Commission's choosing. It states that it would remain receptive to 
Commission input as to how such modeling could be improved. Id. at 29.
    The Commission agrees with the Postal Service that its mandate to 
review analytical principles that the Postal Service uses to model 
demand elasticity and to forecast volume is not ``parallel'' with its 
mandate to review analytical principles that the Postal Service uses to 
estimate its costs. Its mandate to review

[[Page 20845]]

cost principles is based directly on the language of Sec.  3652(a)(1) 
that the Postal Service shall analyze ``costs, revenues, rates, and 
quality of service, using such methodologies as the Commission shall by 
regulation prescribe * * *.'' Its mandate to review the analytical 
principles used to estimate demand elasticities arises from its duty to 
evaluate rates and service in terms of the many objectives and factors 
of the PAEA that implicitly incorporate elasticity of demand. See Order 
No. 104 at 10-11. Elasticity of demand also provides essential evidence 
of ``market power,'' which is the root concept underlying the 
Commission's determinations under Sec.  3642 that certain products be 
given market dominant or competitive product status under the PAEA.
    The Commission's mandate to review analytical principles underlying 
volume forecasting arises where forecasting volumes is an intermediate 
step in estimating unit attributable costs or unit revenues.\13\ Even 
though the Commission does not have rate design or revenue requirement 
responsibilities that require it to use the kind of roll forward that 
was part of formal rate cases under the PRA, it still has a need for 
volume forecasts to carry out some of its responsibilities. One is to 
review the compliance of rates proposed by the Postal Service with the 
price cap. Where, as in the last general rate adjustment, the Postal 
Service proposed rate increases for some products to take effect later 
than others, an accurate estimate of the revenue likely to be earned 
requires a product-level volume forecast. Volume forecasts are also 
needed to accurately assess whether revenues for specific competitive 
products with low profit margins are likely, at proposed rates, to 
remain above their attributable costs. In this regard, the Postal 
Service has voluntarily provided 1-year volume projections for a number 
of its competitive products at new rates to allow the Commission to 
more accurately verify the likelihood that they will, in fact, recover 
their costs in the coming year. Finally, in establishing service 
standards under Sec.  3691, the Postal Service, in consultation with 
the Commission, is directed to take into account, among other things, 
``mail volume and revenues projected for future years[.]'' See 39 
U.S.C. 3691(c)(4).
---------------------------------------------------------------------------

    \13\ Volume information (with respect to market dominant 
products) is also mentioned in section 3652(a)(2) as within the 
Commission's purview.
---------------------------------------------------------------------------

    In addition to the role that the Commission plays in evaluating 
rates and service, the Commission has the duty to calculate the cost 
(understood as profit impact) of the various Universal Service 
Obligation (USO) mandates. Estimating the costs for at least two of 
these mandates--Nonprofit Mail discounts and uniform rates for First-
Class Mail--requires analysis of volume effects. Volume forecasts are 
also a necessary part of an analysis of the Postal Service's near-term 
financial outlook, which is relevant to the Commission's duties under 
Sec.  3651 to assess the degree to which the modern system of rate 
regulation is achieving the objectives of Sec. Sec.  3622 and 3633. The 
need for volume forecasts to adequately discharge this duty is obvious 
from the current alarm shared by the postal community over dramatic 
volume declines experienced and expected in the current fiscal year. 
The extent of near-term volume declines, current and expected, is 
highly relevant to a Sec.  3651 assessment, as is the method by which 
those volume declines have been estimated.
    Finally, volume forecasts can play an important role in the 
remedial phase of compliance review under Sec. Sec.  3653(c) and 
3662(c). For example, in its FY 2007 ACD, the Commission found that the 
performance of several loss-making products was not consistent with all 
of the applicable provisions of the PAEA. It did not take remedial 
action because new rates had already been recommended for those 
products before the issuance of the ACD. In that situation, volume and 
cost projections are needed to determine whether or not the new rates 
are likely to bring the affected products back above attributable 
costs. Because of their value in accomplishing the tasks described 
above, and because they are so closely related to the Postal Service's 
econometric model of demand elasticity, the Commission has added to 
final rule 3050.26 the requirement that the Postal Service provide its 
volume forecasting model and underlying documentation in January of 
each year.
    As explained above, the Commission has a number of legitimate needs 
for estimates of demand elasticity and for volume forecasts, and to be 
able to evaluate the methods used to do them. That review, however, 
should interfere as little as possible with postal management's 
administration of its volume forecasting capability. Accordingly, the 
Commission will not require advance review of the methods by which the 
Postal Service estimates demand elasticity or forecasts volumes. To 
that end, final rule 3050.10 has been revised to make it clear the 
analytical principles that the Postal Service applies in estimating 
demand elasticities or forecasting volumes need not be reviewed in 
advance by the Commission.\14\
---------------------------------------------------------------------------

    \14\ The Postal Service conjectured that the Commission viewed 
the presence of the term ``elasticity of demand'' in proposed rule 
3050.11(a)(1) as the basis of its authority to require advance 
review of the analytical principles that it applies in estimating 
demand elasticities. It, therefore, requested that that term be 
deleted from proposed rule 3050.11. A close reading of that 
provision reveals that it is one item in a list of types of impact 
that the Postal Service should estimate (where feasible) that would 
arise from adopting a proposed change in an analytical principle. 
However, to remove any ambiguity about the Commission's intentions 
in this regard, that term has been removed from final rule 
3050.11(a)(1) (renumbered as final rule 3050.11(b)(1)).
---------------------------------------------------------------------------

    Current-year roll forward. The Public Representative proposes that 
the periodic reporting rules include a requirement that the Postal 
Service provide a current-year financial forecast. He notes that Sec.  
3651 requires the Commission to evaluate its own operations, including 
``the extent to which regulations are achieving the objectives under 
sections 3622 and 3633, respectively.'' (Emphasis omitted.) Public 
Representative Comments at 3. He emphasizes that the task assigned to 
the Commission is to evaluate the current, rather than the past, 
success of its regulations in achieving their objectives. To do this 
effectively, he argues, it would be helpful to have information about 
the current year as well as historical information. He notes that the 
objectives of Sec. Sec.  3622 and 3633 referred to in Sec.  3651 
primarily address rate, classification, service, and other issues that 
Congress expects the Commission to assess on a current basis, including 
whether products cover their attributable costs and whether competitive 
products are contributing an appropriate share to institutional costs. 
With respect to the latter assessment, he notes, Sec.  3633 requires 
the Commission to take into account ``prevailing,'' as opposed to past, 
conditions in the market. He argues that to adequately meet the mandate 
of Sec.  3651, current as well as historical data would be required. 
Id. at 3-4. He argues that such projections will highlight any unusual 
trends expected in product costs, and allow the public to better 
determine whether particular products are likely to cover their 
attributable costs. Id. at 5. He assumes that the Postal Service 
projects costs and revenues for the current year as part of the process 
of selecting new rates and to meet numerous other management needs. 
Therefore, he argues, providing a current-year financial roll forward 
is unlikely to add significantly to the Postal Service's reporting 
burden. Id.

[[Page 20846]]

    The Public Representative's logic is sound concerning the 
Commission's need for a current-year financial projection. A current 
assessment of the extent to which the Commission's regulations are 
achieving the objectives of Sec. Sec.  3622 and 3633 would appear to 
require the best available data about the current as well as past 
years. Although the Public Representative is somewhat vague about the 
benefits of having a current-year projection to help the Commission in 
its evaluation, his general point is well taken. In its discussion of 
demand and volume forecasting, the Commission explained how having 
near-term cost and volume projections would improve its ability to 
carry out a number of specific tasks that have been assigned to it by 
the PAEA.
    The Postal Service, however, takes issue with the Public 
Representative's assumption that providing the equivalent of a current-
year roll forward would impose little added burden. It states that it 
``does not routinely run its rate case roll-forward model, and there is 
no other way to get the set of comprehensive cost projections at the 
product and the rate category level that the PR describes.'' Postal 
Service Reply Comments at 20. It cautions that ``the Commission should 
[not] blithely add preparation and documentation of a roll-forward 
model to the already crushing list of activities which the Postal 
Service must complete in 90 days following the end of the fiscal year* 
* *.''
    Although the Commission is sympathetic to the Postal Service's 
burden argument, it would prefer to have a better grasp of exactly how 
much extra time and resources would be required to provide a roll 
forward for the current year. The Commission believes that the benefits 
of being able to predict the net revenue effect of the Postal Service's 
proposed rates before it proposes them each year would be of 
substantial value to postal management. At the same time, it would be 
of significant benefit to the Commission in being able to more 
accurately evaluate the consistency of those rates with the price cap. 
Although a current-year roll forward would have these potentially 
important benefits, as discussed above, it is not clear at this time 
that it would outweigh the risk that this added requirement might be 
more than the Postal Service can handle in the very brief window 
available to it to produce the section 3652 report each year. 
Therefore, the Commission declines to adopt the Public Representative's 
proposal for a comprehensive roll forward for the current year at this 
time.

L. Proposed Rule 3050.28 (Monthly and Pay Period Reports)

    Proposed rule 3050.28 deals with monthly and pay period reports. It 
would require that the Postal Service provides, among others things, 
the National Consolidated Trial Balance and the Revenue and Expense 
Summary. The Postal Service was originally opposed to providing them, 
presuming that its enterprise-wide public disclosure obligations were 
co-extensive with those of the private sector. Id. at 39-41. The Postal 
Service has since publicly provided similar, but somewhat less detailed 
information. That information, under the title ``Monthly Summary 
Financial Report'' has been added to the list of reports required by 
final rule 3050.28. The form in which that information will be reported 
accompanies the text of the final rule.

M. Proposed Rule 3050.30 (Universal Service Obligation)

    Proposed rule 3050.30 would have required a set of data that was 
designed to facilitate modeling of the cost of various USO mandates. It 
included mail flow volumes by product between each pair of mail 
processing facilities. It also would have included costs, work hours, 
and CCCS/RCCS volumes by sampled product, route, facility, and ZIP 
Code. In addition, it would have included for sampled city routes, 
actual and possible deliveries by type, actual and possible stops by 
type, collection boxes, number of businesses served, and miles. Roughly 
comparable data would have been required for sample rural routes.
    The general objection of the Postal Service to this proposed rule 
was that the USO studies underway were not yet complete (as of the 
October filing date for reply comments in this docket), and that it 
would be easier to isolate a set of data essential to costing the 
various USO mandates after the results of those studies were in. It 
reasons that the methodologies to be applied should be settled upon 
before the data is collected or reported.\15\ Id. at 5-8.
---------------------------------------------------------------------------

    \15\ While this is generally a prudent approach, a 
countervailing consideration is that where there is a lack of 
relevant data, that lack of data has a tendency to drive the 
selection of the method used.
---------------------------------------------------------------------------

    Although this was an appropriate argument at the time, the USO 
studies conducted on behalf of both the Postal Service and the 
Commission have since been submitted and follow-up comments received. 
See Docket Nos. PI2008-3 and PI2009-1. This circumstance allows the 
Commission to form at least preliminary judgments about what data are 
likely to play an important role in estimating the costs of the various 
USO mandates. The Commission is aware, however, that issues of what 
data can reasonably be made available, and the costs and benefits of 
doing so, are complex and nuanced. The Postal Service recommends that 
when the studies are complete, that it, the Commission, and interested 
parties confer on what methodologies are appropriate to develop the 
annual USO cost estimates, what input data would be needed to apply 
those methodologies, and what data are already available or obtainable 
at reasonable cost. Id. at 5-6.
    The Commission accepts the Postal Service's recommendation. It will 
retain proposed rule 3050.30 as a placeholder, as the Postal Service 
requests. It will institute a separate informal rulemaking docket to 
determine what data should be reported to allow the Commission to 
annually estimate the cost of the various USO mandates.

N. Proposed Rules 3050.40 and 3050.41 (SEC-Type Financial Reports)

    Section 3654 of the PAEA requires the Postal Service to file with 
the Commission certain standard financial reports the Securities and 
Exchange Commission (SEC) normally requires publicly traded 
corporations to file, including the Form 10-K and the Form 10-Q. 
Section 3654 articulates the requirement in considerable detail. In an 
attempt to make the Commission's periodic reporting rules a 
comprehensive reflection of the reporting requirements that the PAEA 
imposes on the Postal Service, proposed rule 3050.40 essentially 
restates the SEC-style reporting requirement found in Sec.  3654. 
Proposed rule 3050.41 restates the audit requirements of that section.
    The Postal Service argues that Sec.  3654 is detailed and 
unambiguous and should be regarded as definitively expressing its 
obligation to furnish the Commission with SEC-style reports. Therefore, 
it argues, there is no need for an implementing regulation. It urges 
the Commission to make proposed rule 3050.40 a placeholder to be 
available in the event that the Postal Service's reporting should be 
shown to be inaccurate or in need of modification. Id. at 9-14. In the 
event that the Commission decides to retain a detailed counterpart of 
Sec.  3654 in its periodic reporting rules, the Postal Service provides 
alternative language as Attachment A to its initial comments.
    The Commission agrees that Sec.  3654 makes the SEC-style reporting 
required of the Postal Service explicit in most respects, and that it 
is not of critical

[[Page 20847]]

importance that a detailed counterpart appear in the Commission's 
periodic reporting rules. However, both the Commission and the Postal 
Service support minor modifications of the manner in which these 
requirements are stated, which makes it beneficial to restate the 
requirements in the Commission's rules. There is also some value in 
collecting all of the Postal Service's obligations to report 
information to the Commission in one place to simplify the task of 
those interested in tracking compliance with those obligations.
    Accordingly, final rule 3050.40 restates the Postal Service's SEC-
style reporting obligations essentially as they appear in Sec.  3654. 
One minor difference is that Sec.  3654(a)(2) is omitted from the 
Commission's rule. This is done to accommodate the Postal Service's 
concern that it not be defined as a ``registrant'' for purposes of 
determining what SEC reports it is obligated to file. Some aspects of 
some of those reports are highly specific to entities that have the 
legal status of private corporations and are inapplicable to the Postal 
Service because it does not share that legal status. Another minor 
difference is that the Commission includes a requirement that when the 
Postal Service receives the pension and post-retirement health 
obligation information specified in Sec.  3654(b)(1) from the Office of 
Personnel Management that it furnish copies of that information to the 
Commission.

O. Proposed Rules 3050.50 et seq. (Service Performance)

    Section 3691 of title 39 of the United States Code requires the 
Postal Service, in consultation with the Commission, to establish and 
maintain a set of service standards for market dominant products. That 
section provides explicit statutory objectives for the service 
standards adopted, and requires a service performance measurement 
system in which the Commission plays a role. It also authorizes 
complaints under Sec.  3662 for violations of the regulations that 
implement these service standards and performance measurement systems.
    The Commission is deferring consideration of data reporting on 
service quality. Proposed rules 3050.50 et seq. are ultimately intended 
to describe the service performance information that would be required 
to implement the relevant provisions of the PAEA. A separate rulemaking 
docket will be initiated shortly to develop these reporting 
requirements.

P. Proposed Rule 3050.60 (Master List of Handbooks, Etc.)

    Proposed rules 3050.60(a) through (c) would require the Postal 
Service to provide a master list of publications, handbooks, and data 
collection forms at the beginning of each fiscal year in hard copy and 
in electronic form. Data collection forms and corresponding training 
manuals would be provided ``when changed.''
    The Postal Service argues that the proposed rules should only 
require a comprehensive set of these materials initially, and further 
materials in all the categories listed only ``when changed.'' It also 
alleges that providing electronic versions of all such materials could 
be a significant burden. Id. at 47-48. The Commission incorporates 
these suggestions in final rules 3050.60(b) through (d). It also limits 
the requirement that these items be provided in electronic format to 
those already in that format.

Q. Standardized Narrative Explanations

    Valpak observes that various rules proposed in this docket imply a 
need for a narrative explanation of lesser or greater elaboration. It 
argues that such narrative explanations should be standardized. It 
proposes that the Commission express a uniform standard as a 
definitional rule. The definition it advocates reads as follows:

    Rule 3050.1a. Full and detailed explanation. Where the rules in 
this Part require the Postal Service to file or otherwise submit an 
explanation, including the explanatory reports, analyses, lists, 
estimates, and other such items required by the various rules in 
Part 3050, the Postal Service shall provide a narrative setting 
forth a full and detailed explanation, providing the information 
requested, such as how the items in question were calculated and/or 
determined, how they differ from such items in the immediately 
preceding report of the same type, and how they comply with the 
requirements of the law and/or those imposed by the Commission.

Valpak Comments at 16-17. The Public Representative generally supports 
Valpak's proposal. Public Representative Reply Comments at 16-17.
    Providing full and detailed explanations everywhere an explanation 
would be helpful is ordinarily a laudable goal. Imposing a one-size-
fits-all standard in the context of the periodic reporting rules, 
however, would tend to work at cross-purposes with these rules.
    In drafting these periodic reporting rules, the Commission is 
mindful that the need for detailed explanations differs markedly from 
one report to another, and that the time available to produce detailed 
explanations differs dramatically from one report to another as well. 
For example, the ratemaking schedule that has been adopted under the 
PAEA puts the Postal Service under considerable strain to produce its 
annual section 3652 report. It has 90 days to prepare its CRA, apply 
the results of associated special studies, and to analyze the 
significance of the overall results. Rather than impose an obligation 
on the Postal Service to provide detailed explanations on every aspect 
of its section 3652 report, it would be more productive to allow the 
Postal Service to focus on the main issues that its report raises, and 
treat those in some depth.
    Valpak itself has suggested that for any rate or service that has 
not complied with the standards of title 39 in the review year, the 
Postal Service should provide an explanation of the causes, the remedy 
that it plans to pursue, and the expected time frame for bringing the 
rate or service into compliance. This is an example of where the Postal 
Service's limited time in preparing a section 3652 report should be 
focused. The standard that Valpak proposes would interfere with this 
kind of prioritization.
    The Commission views flexibility in the nature of the narrative 
required as one of the strengths of its periodic reporting rules. Some 
of the periodic reports required by the Commission are intended to 
elicit only brief, simplified explanations to orient the lay public, 
rather than in-depth, technical explanations of things that are not in 
controversy and, if required, are likely to divert resources from more 
important work. A good example is final rule 3050.60(f) which requires 
the Postal Service to submit the equivalent of the ``Library Reference 
1'' quick guide that was traditionally submitted in PRA rate cases.\16\
---------------------------------------------------------------------------

    \16\ Because the section 3050.60(f) narrative is meant to serve 
as a ``Cliffs Notes'' for the lay public seeking to understand 
postal costing, it would not have to be comprehensively redone each 
year. It would have to be updated only where accepted analytical 
principles have changed. This is consistent with what Pitney Bowes 
recommends. See Pitney Bowes Reply Comments at 3.
---------------------------------------------------------------------------

    Final rule 3050.2(a) is another good example. It requires the 
Postal Service to list corrections that it has made and input data and 
quantification techniques that have changed since the pertinent 
periodic report was last submitted, together with ``a brief narrative 
explanation of each listed change.'' The Commission regards this 
requirement as reasonable because the narrative explanation only 
requires a

[[Page 20848]]

``bare bones'' explanation sufficient to give the public and the 
Commission notice of the reason for the change, rather than an in-depth 
discussion or defense of the change.
    In fashioning the periodic reporting rules, the Commission 
contemplates that in-depth technical or theoretical explanations will 
be reserved for the contexts in which they are most needed. Those would 
include the informal rulemakings where new analytical principles are 
evaluated, and the compliance review period where significant 
compliance issues have been identified. To keep the flexibility to 
adapt narrative explanations to the context in which they arise, the 
Commission believes it best not to impose the same standard on each. 
For that reason, the Commission declines to adopt Valpak's proposal.

III. Indirectly Related Proposals

A. Substantive Proposals

    The Appendix to this order contains an illustrative alternative 
format for the CRA that breaks out costs, volumes, and revenues for 
products and for rate categories. The rationale for requiring this more 
detailed alternative format was provided in Order No. 104 at 16-17. 
Time Warner notes that for Outside County Periodicals, there have been 
distinct rate categories added for bundles, sacks, and pallets. It 
suggests that it is both feasible and desirable to further disaggregate 
the Outside County data in the Appendix by bundle, sack, and pallet. It 
argues that CRA costs could be disaggregated to this level by simply 
re-tabulating IOCS data that is already routinely gathered. It argues 
that this disaggregation of CRA costs would provide ``better guidance 
for rate setting, as well as better guidance for possible cost 
reductions'' within the Periodicals class. Time Warner Comments at 14-
15.
    The Postal Service opposes this proposal. It validly observes that 
changing the source of the estimates for the costs of bundles, sacks, 
and pallets would constitute a change in analytical principles, and, 
therefore, should be handled in an informal cost methodology rulemaking 
under the procedures outlined in proposed rule 3050.11. Postal Service 
Reply Comments at 25. For that reason, the Commission declines to adopt 
Time Warner's proposal.
    Time Warner also suggests that because the alternative format 
illustrated in the Appendix is highly disaggregated, particularly with 
respect to international mail, some data might suffer from small-sample 
variation. To overcome this problem, it suggests that the data for 
small-volume categories be averaged over several years. This, too, 
would constitute a change in analytical principles. Time Warner 
Comments at 14. The Commission declines to adopt it in the context of 
this rulemaking for the same reason.

B. Procedural Proposals

    Discovery. None of the rules proposed by the Commission in this 
docket involved altering the procedures by which the Postal Service's 
section 3652 report is reviewed. Nevertheless, a number of procedural 
proposals have been offered for the Commission's consideration, 
primarily by Valpak. Some of these proposals have been endorsed by the 
Public Representative.
    Valpak argues that the procedures for reviewing the Postal 
Service's section 3652 report do not provide enough opportunity for 
private parties to participate effectively. Given the paucity of 
explanatory narrative in the report itself, Valpak contends that the 
Commission should adopt rules that expressly allow private parties to 
engage in discovery against the Postal Service. It makes the same 
recommendation with respect to informal rulemakings in which proposals 
to change analytical principles are reviewed. It suggests that this be 
accomplished by making the formal hearing procedures described in part 
3001, subpart A applicable to annual compliance review. Valpak Comments 
at 14-15.
    Time Warner responds that Valpak suffers from an illusion that the 
procedural due process rights that were guaranteed in rate hearings 
under the PRA were carried forward by Congress in the PAEA. It contends 
that Congress purposely omitted from the PAEA any right to a ``hearing 
on the record'' with its attendant rights of discovery, cross-
examination, testimony, and briefs. It asserts that with respect to 
compliance review, the only procedure that the PAEA guarantees third 
parties is an opportunity to comment on the Postal Service's section 
3652 report. It likewise asserts that no procedural due process rights 
attach to an informal rulemaking reviewing changes to analytical 
principles other than the right to comment. Time Warner Reply Comments 
at 14-16.
    The Postal Service opposes Valpak's proposal as well. It emphasizes 
that the Commission is allowed only 90 days to review its section 3652 
report and third parties have considerably less than that to prepare 
their comments if they are to be meaningfully reviewed by the 
Commission. It argues that this schedule is so compressed that the 
Commission must screen third-party discovery requests so that the 
limited resources of its technical staff are available to respond to 
issues that the third parties and the Commission collectively view as 
of the highest priority. It contends that it should only be obligated 
to respond to discovery requests to the extent that they are reflected 
in Commission information requests. It concludes that the Commission 
should have the discretion to follow a similar approach in conducting 
methodological rulemakings where there is a need to expedite the 
process. Postal Service Reply Comments at 4-6.
    The Commission agrees with the Postal Service that the extremely 
compressed time schedules under which compliance review must be 
conducted, and under which some methodological rulemakings might have 
to be conducted, make it prudent for the Commission to retain the 
discretion to screen the kind and amount of discovery to which the 
Postal Service must respond. The Commission also agrees with Valpak and 
others that effective third-party participation in both compliance 
review and methodology review is extremely important. The Commission 
concludes that these rules will allow it to most effectively utilize 
the limited time and technical resources available to investigate the 
most pressing postal issues that arise in both annual compliance 
reviews and from methodological research.
    Period allowed for comments in compliance review. Section 3653 
requires the Commission to provide parties to a compliance review 
proceeding an opportunity for comment on the Postal Service's section 
3652 report. The period allowed for comment is not prescribed by the 
Commission's rules. On an ad hoc basis, the Commission afforded 30 days 
for initial comments and 15 days for reply comments in the first two 
compliance review cycles.
    Valpak argues that the Commission should adopt procedural rules 
governing compliance review, and that those rules should allow 45 days 
for initial comments and 15 for reply comments. It says that this would 
provide a more reasonable time for interested parties to review the 
complex documentation that accompanies the Postal Service's section 
3652 report, and still leave the Commission with enough time to take 
the comments of the public into account in its determination. Valpak 
Comments at 13.
    The Commission appreciates how challenging it is to evaluate the 
complex documentation that the Postal Service files supporting its 
section 3652 report.

[[Page 20849]]

The Commission, however, has found that the comment periods that have 
been established in the notices issued in the first two compliance 
review dockets have not provided it with any leeway in the amount of 
time that it has reserved to itself to draft and issue its Annual 
Compliance Determination. It, therefore, declines to act on Valpak's 
suggestion. Appendix [Illustrative list referred to in part II.G. of 
Supplementary Information.]

Products and Categories

Market Dominant Products

Domestic First-Class Mail:
    Single-Piece:
    Letters
    Flats
    Parcels
    Total Single-Piece Letters, Flats & Parcels
Presort:
    Letters
    Flats
    Parcels
    Total Presort Letters, Flats & Parcels
Automation:
    Letters
    Flats
    Parcels
    Total Automation Letters, Flats & Parcels
    Total Letters, Flats & Parcels
    Single-Piece Cards
    Presort Cards
    Automation Cards
    Total Cards
    Total Domestic First-Class Mail
First-Class Mail International:
Outbound Single-Piece Letters, Flats, IPPs, and Parcels:
    Target System Countries at UPU Rates
    Transition System Countries at UPU Rates
    Subject to Agreement
    Canada
    Other
    Total Outbound Single-Piece Letters, Flats, IPPs, and Parcels
Outbound Single-Piece Cards:
    Target System Countries at UPU Rates
    Transition System Countries at UPU Rates
    Subject to Agreement
    Canada
    Other
    Total Outbound Single-Piece Cards
    Total Outbound Single-Piece Mail
Inbound Single-Piece Mail (Letter Post):
Air:
    Target System Countries at UPU Rates
    Transition System Countries at UPU Rates
    Subject to Agreement
    Canada
    Other
Surface:
    Target System Countries at UPU Rates
    Transition System Countries at UPU Rates
    Subject to Agreement
    Canada
    Other
    Total Inbound Single-Piece Mail
    Total International First-Class Mail
    Total First-Class Mail
Periodicals:
    Within County
    Outside County:
    Regular Rate
    Nonprofit
    Classroom
    Total Outside County
    Total Periodicals
Standard Mail:
    Regular Presort Mail:
    Letters
    Flats
    Parcels
    Not-Flat Machinables
    Total Regular Presort Mail
Regular Automation Mail:
    Letters
    Flats
    Total Regular Automation Mail
    Total Regular Mail
Nonprofit Presort Mail:
    Letters
    Flats
    Parcels
    Not-Flat Machinables
    Total Nonprofit Presort Mail
Regular Automation Mail:
    Letters
    Flats
    Total Nonprofit Automation Mail
    Total Nonprofit Mail
    Total Regular and Nonprofit Mail
Enhanced Carrier Route Mail:
    Basic Presort Letters
    High Density Letters
    Saturation Letters
    Total Enhanced Carrier Route Letters
    Basic Presort Flats
    High Density Flats
    Saturation Flats
    Total Enhanced Carrier Route Flats
    Basic Presort Parcels
    High Density Parcels
    Saturation Parcels
    Total Enhanced Carrier Route Parcels
    Total Enhanced Carrier Route Mail
Nonprofit Enhanced Carrier Route Mail:
    Basic Presort Letters
    High Density Letters
    Saturation Letters
    Total Non-enhanced Carrier Route Letters
    Basic Presort Flats
    High Density Flats
    Saturation Flats
    Total Non-enhanced Carrier Route Flats
    Basic Presort Parcels
    High Density Parcels
    Saturation Parcels
    Total Non-enhanced Carrier Route Parcels
    Total Nonprofit Enhanced Carrier Route Mail
    Total ECR and Non-ECR Mail
    Total Standard Mail
Package Services:
    Single-Piece Parcel Post:
    Intra-Bulk Mail Center
    Inter-Bulk Mail Center
    Total Single-Piece Domestic Parcel Post
    Inbound Surface Parcel Post (at UPU Rates)
    Total Single-Piece Parcel Post
    Bound Printed Matter:
    Bound Printed Matter Flats:
    Nonpresorted
    Presorted
    Carrier Route
    Total Bound Printed Matter Flats
    Bound Printed Matter Parcels:
    Nonpresorted
    Presorted
    Carrier Route
    Total Bound Printed Matter Parcels
    Total Bound Printed Matter
    Media Mail:
    Single Piece
    Presorted
    Total Media Mail
    Library Rate:
    Single Piece
    Presorted
    Total Library Mail
    Total Media and Library Mail
    Total Package Services
    USPS Penalty Mail
    Free-for-the-Blind Mail
    Negotiated Service Agreements (NSAs) (list each separately):
    Total Negotiated Service Agreement Mail
    Total Market Dominant Mail
    Special Services:
    Ancillary Services:
    Address Correction
    Applications and Mailing Permits:
    First-Class Mail Presort Fee
    Standard Mail Mailing Fee
    Total Applications and Mailing Permits
    Package Services Mailing Fees:
    Bound Printed Matter Destination Entry Mailing Fee
    Library Mail Presort Mailing Fee
    Media Mail Presort Mailing Fee
    Total Package Service Fees
    Parcel Return Service Fees:
    Account Maintenance Fee
    Permit Fee
    Total Parcel Return Service Fees
    Parcel Select Destination Entry Mailing Fee
    Periodicals Mailing Fees:
    Original Entry Fee
    Reentry Fee
    Additional Entry Fee
    News Agent Registry Fee
    Total Periodicals Mailing Fees
    Permit Imprint Fee
    Business Reply Mail:
    Per-Piece Fee
    Permit/Account Maintenance Fees
    Total Business Reply Mail
    Bulk Parcel Return Service:
    Per-Piece Fee
    Account Maintenance Fee
    Permit Fee
    Total Bulk Parcel Return Service
    Certified Mail
    Certificate of Mailing
    Collect-on-Delivery
    Delivery Confirmation
    Insurance
    Merchandise Return Service:
    Per-Piece Fee
    Account Maintenance Fee
    Permit Fee
    Total Merchandise Return Service
    Parcel Airlift
    Registered Mail
    Return Receipt
    Return Receipt for Merchandise
    Restricted Delivery
    Shipper Paid Forwarding
    Signature Confirmation
    Special Handling
    Stamped Envelopes
    Stamped Cards
    Premium Stamped Envelopes
    Premium Stamped Cards
    Total Ancillary Services
    International Ancillary Services:

[[Page 20850]]

    International Certificate of Mailing
    International Registered Mail:
    Outbound International Registered Mail
    Inbound International Registered Mail
    Total International Registered Mail
    International Return Receipt:
    Outbound International Return Receipt
    Inbound International Return Receipt
    Total International Return Receipt
    International Restricted Delivery:
    Outbound International Restricted Delivery
    Inbound International Restricted Delivery
    Total International Restricted Delivery
    Inbound International Insurance
    Inbound International Delivery Confirmation
    Customs Clearance and Delivery Fee
    Total International Ancillary Services
    Address List Services:
    ZIP Coding of Mailing Lists
    Correction of Mailing Lists
    Address Changes for Election Boards
    Carrier Sequencing of Address Cards
    Total Address List Services
    Caller Service/Reserve Numbers
    Change-of-Address Credit Card Authentication
    Confirm
    International Reply Coupon Services:
    Outbound International Reply Coupon Service
    Inbound International Reply Coupon Service
    Total International Reply Services
    International Business Reply Mail Services:
    Outbound Business Reply Mail Service
    Inbound International Business Reply Mail Service
    Total International Business Reply Service
    Money Orders
    Post Office Boxes
    Other Special Services:
    Standard Mail Forwarding/Return:
    Forwarding/Return Fee
    Weighted Factor Forwarding/Return Fee
    Total Standard Mail Forwarding/Return
    Total Market Dominant Special Services
    Total Market Dominant Mail and Services
    Competitive Products
Priority Mail:
    Domestic Priority Mail
    Priority Mail International:
    Outbound Priority Mail International:
    Subject to UPU Inward Land Rates
    Subject to Terminal Dues
    Target System Countries at UPU Rates
    Transition System Countries at UPU Rates
    Subject to Agreement
    Canada
    Other
    Total Outbound Priority Mail International
    Inbound Air Parcel Post:
    Subject to UPU Inward Land Rates
    Subject to Agreement
    Canada
    Other
    Total Inbound Air Parcel Post
    Total Priority Mail International
    Total Priority Mail
Express Mail:
    Domestic Express Mail:
    Custom Designed
    Next Day and Second Day Post Office-to-Post Office
    Next Day and Second Day Post Office-to-Addressee
    Total Domestic Express Mail
    Outbound International Expedited Services
    Global Express Guaranteed
    Express Mail International
    Inbound International Expedited Services:
    Subject to UPU Rates
    Subject to Agreement
    Canada
    Other
    Total Inbound International Expedited Services
    Total International Express Mail:
    Total Express Mail
Package Services:
    Bulk Parcel Post:
    Inter-Bulk Mail Center:
    Barcoded
    Origin Bulk Mail Center Presort
    Bulk Mail Center Presort
    Total Inter-Bulk Mail Center
    Intra-Bulk Mail Center Barcoded
    Parcel Select:
    Destination Bulk Mail Center
    Destination Sectional Center Facility
    Destination Delivery Unit
    Total Parcel Select
    Parcel Return Service:
    Return Bulk Mail Center
    Return Destination Units
    Total Parcel Return Service
    Total Bulk Parcel Post
    International Mail:
    International Priority Airmail
    International Surface Airlift
    International Direct Sacks--M-Bags
    Outbound International Direct Sacks--M-Bags
    Inbound International Direct Sacks--M-Bags
    Total International Direct Sacks--M-Bags
    Global Customized Shipping Services
    Inbound Surface Parcel Post (at Non-UPU Rates):
    Canada
    Other
    Total Inbound Surface Parcel Post (at Non-UPU Rates)
    Total International Mail
    International Special Services:
    International Money Transfer Service:
    Outbound International Money Transfer Service
    Inbound International Money Transfer Service
    Total International Money Transfer Service
    International Ancillary Services:
    International Certificate of Mailing
    International Registered Mail
    International Return Receipt:
    Outbound International Return Receipt
    Inbound International Return Receipt
    Total International Return Receipt
    International Restricted Delivery
    International Insurance:
    Outbound International Insurance
    Inbound International Insurance
    Total International Insurance
    Custom Clearance and Delivery Fee
    Total International Ancillary Services
    Total International Special Services

IV. Ordering Paragraphs

    It is Ordered:
    1. The Commission hereby amends its rules of practice and procedure 
by deleting rules 3001.102 and 103, and adding new part 3050--Periodic 
Reporting as set forth below.
    2. These actions will take effect 30 days after publication in the 
Federal Register.
    3. The Secretary shall arrange for publication of this order in the 
Federal Register.

List of Subjects

39 CFR Part 3001

    Administrative practice and procedure; Confidential business 
information, Freedom of information, Sunshine Act.

39 CFR Part 3050

    Administrative practice and procedure, Postal Service, 
Recordkeeping and reporting requirements.

    Issued: April 16, 2009.

    By the Commission.
Steven W. Williams,
Secretary.

0
For the reasons stated in the preamble, under the authority at 39 
U.S.C. 503, the Postal Regulatory Commission amends 39 CFR chapter III 
as follows:

PART 3001--RULES OF PRACTICE AND PROCEDURE

0
1. The authority citation for part 3001 continues to read as follows:

    Authority:  39 U.S.C. 404(d); 503; 3622; 3633; 3652; 3661.


Sec.  3001.102  [Removed]

0
2. Remove and reserve Sec.  3001.102 in subpart G.


Sec.  3001.103  [Removed]

0
3. Remove and reserve Sec.  3001.103 in subpart G.

0
4. Add Part 3050--Periodic Reporting, to read as follows:

PART 3050--PERIODIC REPORTING

Sec.
3050.1 Definitions applicable to this part.
3050.2 Documentation of periodic reports.
3050.3 Access to information supporting Commission reports or 
evaluations.
3050.10 Analytical principles to be applied in the Postal Service's 
annual periodic reports to the Commission.
3050.11 Proposals to change an accepted analytical principle applied 
in the Postal Service's annual periodic reports to the Commission.
3050.12 Obsolescence of special studies relied on to produce the 
Postal Service's annual periodic reports to the Commission.
3050.13 Additional documentation required in the Postal Service's 
section 3652 report.
3050.14 Format of the Postal Service's section 3652 report.

[[Page 20851]]

3050.20 Compliance and other analyses in the Postal Service's 
section 3652 report.
3050.21 Content of the Postal Service's section 3652 report.
3050.22 Documentation supporting attributable cost estimates in the 
Postal Service's section 3652 report.
3050.23 Documentation supporting incremental cost estimates in the 
Postal Service's section 3652 report.
3050.24 Documentation supporting estimates of costs avoided by 
worksharing and other mail characteristics in the Postal Service's 
section 3652 report.
3050.25 Volume and revenue data.
3050.26 Documentation of demand elasticities and volume forecasts.
3050.27 Workers' Compensation Report.
3050.28 Monthly and pay period reports.
3050.30 Information needed to estimate the cost of the universal 
service obligation. [Reserved]
3050.35 Financial reports.
3050.40 Additional financial reporting.
3050.41 Treatment of additional financial reports.
3050.42 Proceedings to improve the quality of financial data.
3050.43 Information on program performance.
3050.50 Information on service performance for domestic products. 
[Reserved]
3050.51 Information on service performance for Special Services. 
[Reserved]
3050.52 Information on service performance for international 
products. [Reserved]
3050.53 Information on customer satisfaction and retail access. 
[Reserved]
3050.60 Miscellaneous reports and documents.

    Authority:  39 U.S.C. 503, 3651, 3652, 3653.


Sec.  3050.1  Definitions applicable to this part.

    (a) Accepted analytical principle refers to an analytical principle 
that was applied by the Commission in its most recent Annual Compliance 
Determination unless a different analytical principle subsequently was 
accepted by the Commission in a final rule.
    (b) Accepted quantification technique refers to a quantification 
technique that was applied in the most recent iteration of the periodic 
report applying that quantification technique or was used to support a 
new analytical principle adopted in a subsequent rule 3050.11 
proceeding.
    (c) Analytical principle refers to a particular economic, 
mathematical, or statistical theory, precept, or assumption applied by 
the Postal Service in producing a periodic report to the Commission.
    (d) Annual Compliance Determination refers to the report that 39 
U.S.C. 3653 requires the Commission to issue each year evaluating the 
compliance of the Postal Service.
    (e) Annual periodic reports to the Commission refers to all of the 
reports that the Postal Service is required to provide to the 
Commission each year.
    (f) Quantification technique refers to any data entry or 
manipulation technique whose validity does not require the acceptance 
of a particular economic, mathematical, or statistical theory, precept, 
or assumption. A change in quantification technique should not change 
the output of the analysis in which it is employed.
    (g) Section 3652 report refers to the annual compliance report 
provided by the Postal Service to the Commission pursuant to 39 U.S.C. 
3652, but does not include the reports required by 39 U.S.C. 2803 and 
2804.


Sec.  3050.2  Documentation of periodic reports.

    (a) At the time that it submits any periodic report to the 
Commission, the Postal Service shall identify any input data that have 
changed, list any quantification techniques that it has changed, and 
list any corrections that it has made since that report was last 
submitted to and accepted by the Commission. It shall provide a brief 
narrative explanation of each listed change.
    (b) If workpapers are required to support a periodic report, they 
shall:
    (1) Show all calculations employed in producing each estimate;
    (2) Be sufficiently detailed to allow all numbers used in such 
calculations to be traced back to public documents or to primary data 
sources; and
    (3) Be submitted in a form, and be accompanied by sufficient 
explanation and documentation, to allow them to be replicated using a 
publicly available PC application.
    (c) Spreadsheets used in preparing periodic reports shall be 
submitted in electronic form. They shall display the formulas used, 
their links to related spreadsheets, and shall not be password 
protected.
    (d) Filing of portions of the documentation required by paragraphs 
(b) and (c) of this section that are not time critical may be delayed 
up to 2 weeks if the Postal Service obtains permission from the 
Commission to defer filing of such portions at least 30 days prior to 
the date on which the periodic report is due.


Sec.  3050.3  Access to information supporting Commission reports or 
evaluations.

    (a) The Commission shall have access to material if, in its 
judgment, the information supports any report, assessment, or 
evaluation required by title 39 of the United States Code, including:
    (1) The working papers and supporting matter of the Postal Service 
or the Postal Service Inspector General in connection with any 
information submitted under 39 U.S.C. 3652; and
    (2) Information that supports the Commission's annual assessment 
under 39 U.S.C. 3651.
    (b) [Reserved]


Sec.  3050.10  Analytical principles to be applied in the Postal 
Service's annual periodic reports to the Commission.

    In its annual periodic reports to the Commission, the Postal 
Service shall use only accepted analytical principles. With respect to 
its submissions under Sec.  3050.26, however, the Postal Service may 
elect to use an analytical principle prior to its acceptance by the 
Commission.


Sec.  3050.11  Proposals to change an accepted analytical principle 
applied in the Postal Service's annual periodic reports to the 
Commission.

    (a) To improve the quality, accuracy, or completeness of the data 
or analysis of data contained in the Postal Service's annual periodic 
reports to the Commission, the Commission, acting on its own behalf, 
may issue a notice of proceeding to change an accepted analytical 
principle. In addition, any interested person, including the Postal 
Service or a public representative, may submit a petition to the 
Commission to initiate such a proceeding.
    (b) Form and content of notice or petition. The notice of 
proceeding or petition shall identify the accepted analytical principle 
proposed for review, explain its perceived deficiencies, and suggest 
how those deficiencies should be remedied.
    (1) If the notice of proceeding or petition proposes that a 
specific alternative analytical principle be followed, it should 
include the data, analysis, and documentation on which the proposal is 
based, and, where feasible, include an estimate of the impact of the 
proposed change on the relevant characteristics of affected postal 
products, including their attributable cost, avoided cost, average 
revenue, or service attainment.
    (2) If the petitioner requests access to data from the Postal 
Service to support the assertions or conclusions in its petition, and 
such data are not otherwise available, it shall accompany the petition 
with a request to gain access to such data. The petitioner's request 
should identify the data sought, and include the reasons for believing 
that the data will support its petition. To

[[Page 20852]]

expedite its evaluation of the data request, the Commission may, after 
reasonable public notice, order that answers or objections be presented 
orally or in writing.
    (c) Procedures for processing a notice or petition. To better 
evaluate a notice or petition to change an accepted analytical 
principle, the Commission may order that it be made the subject of 
discovery. By request of any interested person, or on its own behalf, 
the Commission may order that the petitioner and/or the Postal Service 
provide experts on the subject matter of the proposal to participate in 
technical conferences, prepare statements clarifying or supplementing 
their views, or answer questions posed by the Commission or its 
representatives.
    (d) Action on the notice or petition. (1) After the conclusion of 
discovery procedures, if any, the Commission shall determine whether to 
issue a notice of proposed rulemaking based on the petition and the 
supporting material received. Such notice shall be evaluated by 
procedures that are consistent with 5 U.S.C. 553. Interested parties 
will be afforded an opportunity to present written comments and reply 
comments, and, if the Commission so orders, to present oral comments as 
well.
    (2) If accepted by the Commission, the change proposed in the 
notice of proposed rulemaking shall be published in a final rule in the 
Federal Register and on the Commission's Web site.


Sec.  3050.12  Obsolescence of special studies relied on to produce the 
Postal Service's annual periodic reports to the Commission.

    The Postal Service shall provide a list of special studies whose 
results are used to produce the estimates in its annual periodic 
reports to the Commission. It shall indicate the date the study was 
completed and whether the study reflects current operating conditions 
and procedures. The Postal Service shall update the list annually.


Sec.  3050.13  Additional documentation required in the Postal 
Service's section 3652 report.

    At the time the Postal Service files its section 3652 report, it 
shall include a brief narrative explanation of any changes to accepted 
analytical principles that have been made since the most recent Annual 
Compliance Determination was issued and the reasons that those changes 
were accepted.


Sec.  3050.14  Format of the Postal Service's section 3652 report.

    The Postal Service's Cost and Revenue Analysis (CRA) report shall 
be presented in a format reflecting the classification structure in the 
Mail Classification Schedule. It shall also be presented in an 
alternative, more disaggregated format capable of reflecting the 
classification structure in effect prior to the adoption of the Postal 
Accountability and Enhancement Act.


Sec.  3050.20  Compliance and other analyses in the Postal Service's 
section 3652 report.

    (a) The Postal Service's section 3652 report shall include an 
analysis of the information that it contains in sufficient detail to 
demonstrate the degree to which, in the fiscal year covered by its 
report, each of its products (market dominant and competitive) comply 
with all of the applicable provisions of title 39 of the United States 
Code and the regulations promulgated thereunder, and promote the public 
policy objectives set out in title 39 of the United States Code.
    (b) Its analysis shall be applied to products individually, and, 
where appropriate, to products collectively.
    (c) It shall address such matters as non-compensatory rates, 
discounts greater than avoided costs, and failures to achieve stated 
goals for on-time delivery standards. A more detailed analysis is 
required when the Commission observed and commented upon the same 
matter in its Annual Compliance Determination for the previous fiscal 
year.


Sec.  3050.21  Content of the Postal Service's section 3652 report.

    (a) No later than 90 days after the close of each fiscal year, the 
Postal Service shall submit a report to the Commission analyzing its 
cost, volume, revenue, rate, and service information in sufficient 
detail to demonstrate that all products during such year comply with 
all applicable provisions of title 39 of the United States Code. The 
report shall provide the items in paragraphs (b) through (j) of this 
section.
    (b) The volume and revenue generated by each product;
    (c) The attributable costs of, and the contribution to 
institutional costs made by, each product;
    (d) The quality of service received by each market dominant 
product, including the speed of delivery and the reliability of 
delivery;
    (e) For each market dominant workshare discount offered during the 
reporting year:
    (1) The per-item cost avoided by the Postal Service by virtue of 
such discount;
    (2) The percentage of such per-item cost avoided that the per-item 
workshare discount represents;
    (3) The per-item contribution made to institutional costs; and
    (4) The factual and analytical bases for its conclusion that one or 
more of the exception provisions of 39 U.S.C. 3622(e)(2)(A) through (D) 
apply.
    (f) For each market dominant negotiated service agreement:
    (1) Identify its rates and service features;
    (2) Estimate its costs, volumes, and revenues;
    (3) Analyze its effect on the operational performance of the Postal 
Service, specifying the affected operations and, to the extent 
possible, quantifying the effect;
    (4) Analyze the contribution of the agreement to institutional 
costs for its most recent year of operation. The year analyzed shall 
end on the anniversary of the negotiated service agreement that falls 
within the fiscal year covered by the Postal Service's annual periodic 
reports to the Commission and include the 12 preceding months. The 
analysis shall show all calculations and fully identify all inputs. 
Inputs used to estimate the effect on total contribution to the Postal 
Service, such as unit costs and price elasticities, shall be updated 
using fiscal year values; and
    (5) Analyze the effect of the negotiated service agreement (and 
other functionally equivalent negotiated service agreements) on the 
marketplace. If there were harmful effects, explain why those effects 
were not unreasonable.
    (g) For each competitive negotiated service agreement:
    (1) Identify its rates and service features; and
    (2) Estimate its costs, volumes, and revenues.
    (h) For market tests of experimental products:
    (1) Estimate their costs, volumes, and revenues individually, and 
in aggregate, by market dominant and by competitive product group;
    (2) Estimate the quality of service of each individual experimental 
product; and
    (3) Indicate whether offering the experimental product has created 
an inappropriate competitive advantage for the Postal Service or any 
mailer.
    (i) For each nonpostal service, estimate its costs, volumes, and 
revenues; and
    (j) Provide any other information that the Postal Service believes 
will help the Commission evaluate the Postal Service's compliance with 
the applicable provisions of title 39 of the United States Code.

[[Page 20853]]

Sec.  3050.22  Documentation supporting attributable cost estimates in 
the Postal Service's section 3652 report.

    (a) The items in paragraphs (b) through (p) of this section shall 
be reported when they have changed from those used in the most recent 
Annual Compliance Determination.
    (b) The CRA report, including relevant data on international mail 
services;
    (c) The Cost Segments and Components (CSC) report;
    (d) All input data and processing programs used to produce the CRA 
report, to include:
    (1) CSC Reconciliation to Financial Statement and Account 
Reallocations;
    (2) Manual Input Requirement (reflecting direct accounting or 
modeled costs);
    (3) The CSC ``A'' report (showing how indirect costs are 
distributed to products based on the distribution of direct costs);
    (4) The CSC ``B'' report (showing how indirect Property Equipment 
Supplies Services and Administrative (PESSA) costs are distributed to 
products;
    (5) The CSC ``D'' report (showing final adjustments to total 
attributable and product-specific costs);
    (6) The CSC ``F'' report (containing distribution keys for indirect 
labor components);
    (7) The control file that includes the CRA program control string 
commands used to produce the CRA and the above-described CSC reports; 
and
    (8) The master list of cost segment components, including all of 
the components used as distribution keys in the development of the CSC 
report and its accompanying reports.
    (e) Spreadsheet workpapers underlying development of the CSC report 
by component. These workpapers shall include the updated factors and 
input data sets from the supporting data systems used, including:
    (1) The In-Office Cost System (IOCS);
    (2) The Management Operating Data System (MODS);
    (3) The City Carrier Cost System (CCCS);
    (4) The City Carrier Street Time Sampling System (CCSTS);
    (5) The Rural Carrier Cost System (RCCS);
    (6) The National Mail Count;
    (7) The Transportation Cost System (TRACS);
    (8) System for International Revenues and Volumes/Outbound (SIRV/
O);
    (9) System for International Revenues and Volumes/Inbound (SIRV/I);
    (10) Military and International Dispatch and Accountability System; 
and
    (11) Inbound International Revenue Accounting Systems (IAB data).
    (f) The econometric analysis of carrier street time, including 
input data, processing programs, and output;
    (g) The Window Service Supply Side Variability, Demand Side 
Variability, and Network Variability studies, including input data, 
processing programs, and output;
    (h) The econometric analysis of purchased highway transportation 
cost variability, including input data, processing programs, and 
output;
    (i) The econometric analysis of freight rail cost variability, 
including input data, processing programs, and output;
    (j) A list and summary description of any transportation contracts 
whose unit rates vary according to the level of postal volume carried. 
The description should include the product or product groups carried 
under each listed contract;
    (k) Spreadsheets and processing programs distributing attributable 
mail processing costs;
    (l) The Vehicle Service Driver Data Collection System;
    (m) Input data, processing programs, and output of the Vehicle 
Service Driver Cost Variability Study;
    (n) Econometric analysis of postmaster cost variability;
    (o) Floor Space Survey; and
    (p) Density studies used to convert weight to cubic feet of mail.


Sec.  3050.23  Documentation supporting incremental cost estimates in 
the Postal Service's section 3652 report.

    Input data, processing programs, and output of an incremental cost 
model shall be reported.


Sec.  3050.24  Documentation supporting estimates of costs avoided by 
worksharing and other mail characteristics in the Postal Service's 
section 3652 report.

    (a) The items in paragraphs (b) through (l) of this section shall 
be reported, including supporting calculations and derivations.
    (b) Letter, card, flat, parcel and non-flat machinable mail 
processing cost models with Delivery Point Sequence percentages 
calculated, which shall include:
    (1) Coverage factors for any equipment where coverage is less than 
100 percent;
    (2) MODS productivities;
    (3) Piggyback factors and supporting data;
    (4) Entry profiles, bundle sorts, and pieces per bundle;
    (5) Bundle breakage, handlings, and density;
    (6) Mail flow density and accept rates;
    (7) Remote Computer Reader finalization costs, cost per image, and 
Remote Bar Code Sorter leakage;
    (8) Percentage of mail finalized to carrier route;
    (9) Percentage of mail destinating at post office boxes; and
    (10) Wage rates and premium pay factors.
    (c) Pallet cost models for Periodicals;
    (d) Sack cost models for Periodicals;
    (e) Bundle cost models for Periodicals;
    (f) Other container cost models for Periodicals;
    (g) Analysis of Periodicals container costs;
    (h) Business Reply Mail cost supporting material;
    (i) Mail processing units costs for Carrier Route, High Density, 
and Saturation mail;
    (j) Mail processing unit costs by shape and cost pool for each 
product and benchmark category;
    (k) Delivery costs by product, shape, presort level, automation 
compatibility, and machinability, including Detached Address Label cost 
calculations; and
    (l) Dropship cost avoidance models.


Sec.  3050.25  Volume and revenue data.

    (a) The items in paragraphs (b) through (e) of this section shall 
be provided.
    (b) The Revenue, Pieces, and Weight (RPW) report, including 
estimates by shape, weight, and indicia, and the underlying billing 
determinants, broken out by quarter, within 90 days of the close of 
each fiscal year;
    (c) Revenue, pieces, and weight by rate category and special 
service by quarter, within 30 days of the close of the quarter;
    (d) Quarterly Statistics Report, including estimates by shape, 
weight, and indicia, within 30 days of the close of the quarter; and
    (e) Billing determinants within 40 days of the close of the 
quarter.


Sec.  3050.26  Documentation of demand elasticities and volume 
forecasts.

    By January 20 of each year, the Postal Service shall provide 
econometric estimates of demand elasticity for all postal products 
accompanied by the underlying econometric models and the input data 
sets used; and a volume forecast for the current fiscal year, and the 
underlying volume forecasting model.


Sec.  3050.27  Workers' Compensation Report.

    The Workers' Compensation Report, including summary workpapers, 
shall be provided by March 1 of each year.

[[Page 20854]]

Sec.  3050.28  Monthly and pay period reports.

    (a) The reports in paragraphs (b) through (f) of this section shall 
be provided within 15 days of the close of the relevant period or as 
otherwise stated.
    (b) Monthly Summary Financial Report on the 24th day of the 
following month, except that the report for the last month of each 
quarter shall be provided at the time that the Form 10-Q report is 
provided.
    (1) The report shall follow the formats as shown below.
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[[Page 20855]]


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[[Page 20856]]


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    (2) [Reserved]
    (c) National Consolidated Trial Balances and the Revenue and 
Expense Summary (monthly);
    (d) National Payroll Hours Summary in electronic form (pay period);
    (e) On-roll and Paid Employee Statistics (ORPES) (pay period); and
    (f) Postal Service Active Employee Statistical Summary (HAT report) 
(pay period).


Sec.  3050.30  Information needed to estimate the cost of the universal 
service obligation. [Reserved]


Sec.  3050.35  Financial reports.

    (a) The reports in paragraphs (b) through (d) of this section shall 
be provided annually at the time indicated.
    (b) Annual Report of the Postmaster General (when released to the 
public);
    (c) Congressional Budget Submission and supporting workpapers, 
including Summary Tables SE 1, 2, and 6 (within 7 days of the 
submission of the Federal Budget by the President to the Congress); and
    (d) Integrated Financial Plan (within 7 days of approval by the 
Board of Governors).


Sec.  3050.40  Additional financial reporting.

    (a) In general. The Postal Service shall file with the Commission:
    (1) Within 40 days after the end of each fiscal quarter, a 
quarterly report containing the information required by the Securities 
and Exchange Commission to be included in quarterly reports under 
sections 13 and 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 
78m, 78o(d)) on Form 10-Q, as such form (or any successor form) may be 
revised from time to time;
    (2) Within 60 days after the end of each fiscal year, an annual 
report containing the information required by the Securities and 
Exchange Commission to be included in annual reports under such 
sections on Form 10-K, as such form (or any successor form) may be 
revised from time to time; and
    (3) Periodic reports within the time frame and containing the 
information prescribed in Form 8-K of the Securities and Exchange 
Commission, as such form (or any successor form) may be revised from 
time to time.
    (b) Internal control report. For purposes of defining the reports 
required by paragraph (a)(2) of this section, the Postal Service shall 
comply with the rules prescribed by the Securities and Exchange 
Commission implementing section 404 of the Sarbanes-Oxley Act of 2002 
(15 U.S.C. 7262), beginning with the annual report for fiscal year 
2010.
    (c) Financial reporting. The reports required by paragraph (a)(2) 
of this section shall include, with respect to the Postal Service's 
pension and post-retirement health obligations:
    (1) The funded status of the Postal Service's pension and post-
retirement health obligations;
    (2) Components of the net change in the fund balances and 
obligations and the nature and cause of any significant changes;
    (3) Components of net periodic costs;
    (4) Cost methods and assumptions underlying the relevant actuarial 
valuations;
    (5) The effect of a 1 percentage point increase in the assumed 
health care cost trend rate for each future year on the service and 
interest costs components of net periodic post-retirement health cost 
and the accumulated obligation;
    (6) Actual contributions to and payments from the funds for the 
years presented and the estimated future contributions and payments for 
each of the following 5 years;
    (7) The composition of plan assets reflected in the fund balances; 
and
    (8) The assumed rate of return on fund balances and the actual 
rates of return for the years presented.
    (d) Time of filing. Within 5 business days of receiving the data 
listed under paragraph (c) of this section from the Office of Personnel 
Management, the Postal Service shall provide two copies of that data to 
the Commission.
    (e) Segment reporting.
    (1) Beginning with reports for fiscal year 2010, for purposes of 
the reports required under paragraphs (a)(1) and (2) of this section, 
the Postal Service shall include segment reporting.
    (2) The Postal Service shall determine the appropriate segment 
reporting under paragraph (e)(1) of this section after consultation 
with the Commission.


Sec.  3050.41  Treatment of additional financial reports.

    (a) For purposes of the reports required by Sec.  3050.40(a)(2), 
the Postal Service shall obtain an opinion from an independent auditor 
on whether the information listed in Sec.  3050.40(c) is fairly stated 
in all material respects, either in relation to the basic financial 
statements as a whole or on a stand-alone basis.

[[Page 20858]]

    (b) Supporting matter. The Commission shall have access to the 
audit documentation and any other supporting matter of the Postal 
Service and its independent auditor in connection with any information 
submitted under Sec.  3050.40.


Sec.  3050.42  Proceedings to improve the quality of financial data.

    The Commission may, on its own motion or on request of an 
interested party, initiate proceedings to improve the quality, 
accuracy, or completeness of Postal Service data required under Sec.  
3050.40 whenever it shall appear that the data have become 
significantly inaccurate or can be significantly improved; or those 
revisions are, in the judgment of the Commission, otherwise 
necessitated by the public interest.


Sec.  3050.43  Information on program performance.

    (a) The Postal Service shall provide the items in paragraphs (b)(1) 
through (3) of this section at the same time that the President submits 
an annual budget to Congress:
    (b)(1) The comprehensive statement required by 39 U.S.C. 2401(e);
    (2) The performance plan required by 39 U.S.C. 2803; and
    (3) The program performance reports required by 39 U.S.C. 2804.
    (c) Section 3050.10 does not apply to the reports referenced in 
this section.


Sec.  3050.50  Information on service performance for domestic 
products. [Reserved]


Sec.  3050.51  Information on service performance for Special Services. 
[Reserved]


Sec.  3050.52  Information on service performance for international 
products. [Reserved]


Sec.  3050.53  Information on customer satisfaction and retail access. 
[Reserved]


Sec.  3050.60  Miscellaneous reports and documents.

    (a) The reports in paragraphs (b) through (g) of this section shall 
be provided at the times indicated.
    (b) A master list of publications and handbooks, including those 
related to internal information procedures, data collection forms, and 
corresponding training handbooks by July 1, 2009, and again when 
changed;
    (c) The items listed in paragraph (b) of this section in hard copy 
form, and in electronic form, if available;
    (d) Household Diary Study (when completed);
    (e) Input data and calculations used to produce the annual Total 
Factor Productivity estimates (by March 1 of each year);
    (f) Succinct narrative explanations of how the estimates in the 
most recent Annual Compliance Determination were calculated and the 
reasons that particular analytical principles were followed. The 
narrative explanations shall be comparable in detail to that which had 
been provided in Library Reference 1 in omnibus rate cases processed 
under the Postal Reorganization Act (by July 1 of each year); and
    (g) An update of the history of changes in postal volumes, 
revenues, rates, and fees that appears in library references USPS-LR-L-
73 through 76 in Docket No. R2006-1 (by July 1 of each year).


[FR Doc. E9-9590 Filed 5-4-09; 8:45 am]
BILLING CODE 7710-FW-P


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