45848 Federal Register / Vol. 73, No. 152 / Wednesday, August 6, 2008 / Rules and Regulations 

1Request of the United States Postal Service, May 

30, 2008 (Request). 

2Attachment A illustrates the proposed changes 

to the Mail Classification Schedule. Attachment B 

is a Statement of Supporting Justification by Maura 

Robinson, Manager, Pricing Systems and Analysis 

for the Postal Service. 

3Mail that will be rerouted separately includes 

mail requiring a scan, signature, or additional 

postage at delivery. Express Mail articles are 

rerouted immediately. Priority Mail articles are 

rerouted separately unless shipping them in the 

PFS package would not delay their delivery. FirstClass Mail packages that do not fit in the weekly 

PFS shipment will be rerouted separately. Standard 

Mail pieces will only be included in the PFS 

package if they can be accommodated in the PFS 

package after letters, flats or large envelopes, and 

magazines have been included. Otherwise, 

Standard Mail pieces will be shipped postage due. 

Parcel Post, Bound Printed Matter, Media Mail, and 

Library Mail pieces will not be included in the PFS 

package, but will be shipped postage due. 

4PFS is available for a minimum of two weeks 

and maximum of 52 weeks. Payment for the entire 

period of service is due with the application. 

5Comments of United Parcel Service in Response 

to Order Concerning Postal Service’s Request to 

Transfer Premium Forwarding Service to the 

Competitive Products Category (UPS Comments); 

Comments of National Association of Retail 

Shipping Centers, Inc. (Order No. 80) (NARSC 

Comments); Public Representative Comments on 

Postal Service Request to Transfer Premium 

Forwarding Service to the Competitive Products 

Category (Public Representative Comments); and 

Initial Comments of David B. Popkin (Popkin 

Comments); all filed June 16, 2008. 

6Reply Comments of the United States Postal 

Service, June 20, 2008 (Postal Service Reply 

Comments); Reply Comments of David B. Popkin, 

June 23, 2008 (Popkin Reply Comments). 

POSTAL REGULATORY COMMISSION 

39 CFR Part 3020 

[Docket No. MC2008–4; Order No. 88] 

Administrative Practice and 

Procedure; Postal Service 

AGENCY: Postal Regulatory Commission. 

ACTION: Final Rule. 

SUMMARY: The Commission is 

transferring Premium Forwarding 

Service from the market dominant list to 

the competitive product list. It is 

updating the market dominant product 

list to reflect the status of several 

agreements. It is also republishing the 

product lists. These actions are 

consistent with changes in a recent law. 

DATES: Effective August 6, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Stephen L. Sharfman, General Counsel, 

202–789–6820 or 

stephen.sharfman@prc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On May 30, 2008, the Postal Service 

filed a request to modify the Mail 

Classification Schedule transferring 

Premium Forwarding Service (PFS), 

which is currently classified as a market 

dominant product within the Special 

Services class, to the competitive 

product list.1 The Request was made 

pursuant to 39 U.S.C. 3642 and 39 CFR 

3020.30 et seq. and included two 

attachments.2

Rule 3020.30 allows the Postal 

Service to request the transfer of a 

product from the market dominant 

product list to the competitive product 

list. The Postal Service must provide 

detailed support and justification for 

such a request. 39 CFR 3020.31 and 

3020.32. The Commission reviews the 

Request and the comments of interested 

parties under 3020.34. 

PFS provides residential postal 

customers with a forwarding service for 

their mail when they are away from 

their primary residences. Most mail 

from a customer’s permanent address is 

forwarded once a week via Priority Mail 

to the customer’s temporary address.3

The customer is charged a $10 

enrollment fee and a weekly fee of 

$11.95.4 PFS is used by postal 

customers with multiple residences, or 

those on extended travel for business, or 

personal reasons, and recreational 

vehicle owners. 

The Postal Service supports its 

Request with a Statement of Supporting 

Justification from Maura Robinson, 

Pricing Systems and Analysis Manager, 

at the Postal Service. The Postal Service 

explains that no Governors’ Decision is 

required in this case since no change in 

classification or price is proposed, but 

merely a transfer of a product from one 

product list to another. Request at 1. 

The Postal Service also asserts that PFS 

will ‘‘meet the statutory cost coverage 

requirements’’ applicable to competitive 

products under 39 U.S.C. 3633. Request, 

Attachment B at 1–2. The Postal Service 

further asserts that because private 

alternative options to PFS are available 

in the form of commercial mail 

forwarding services or informal 

agreements with friends that PFS 

properly belongs in the competitive 

product category. Id. at 3–4. The Postal 

Service contends with regard to PFS 

that it does not have the ‘‘ability to set 

prices substantially above costs, raise 

prices significantly, decrease quality, or 

decrease output, without losing a 

significant level of business.’’ Id. at 3. 

The Postal Service position is that the 

‘‘[t]ransfer of PFS to the competitive 

product list will ensure that its revenues 

are appropriately classified, since * * * 

PFS is provided within a competitive 

market.’’ Id. at 5. 

The Commission issued its Notice and 

Order Concerning Postal Service’s 

Request to Transfer Premium 

Forwarding Service to the Competitive 

Products Category and established 

Docket No. MC2008–4 on June 3, 2008. 

II. Comments 

The Commission in Order No. 80 

provided interested persons an 

opportunity to offer comments on 

whether the proposed transfer of PFS 

from the market dominant to 

competitive product list is consistent 

with the policies of 39 U.S.C. 3633 and 

3642. Comments were received from 

United Parcel Service (UPS), the 

National Association of Retail Shipping 

Centers, Inc. (NARSC), the Public 

Representative, and David B. Popkin 

(Popkin).5 The Postal Service and 

Popkin also filed reply comments.6

In its comments, UPS asks that the 

Commission evaluate the impact the 

proposed transfer of PFS from the 

market dominant to the competitive 

product list would have on competitive 

products’ required contribution to 

institutional costs. UPS Comments at 2. 

However, it also states that ‘‘[i]t does not 

appear that PFS will substantially 

change the contribution of competitive 

products collectively to institutional 

costs.’’ UPS does not oppose the 

proposed transfer of PFS to the 

competitive product list. Id. 

NARSC also does not oppose the 

proposed transfer, but states 

emphatically that the weekly fee for PFS 

should not be reduced from the current 

price of $11.95. NARSC contends that 

‘‘[p]ricing below that level [would] 

substantially [affect] the PMB [Private 

Mail Box] industry as a predatory 

business practice.’’ NARSC Comments 

at 1. 

Popkin comments that there are no 

true alternatives to PFS. Popkin 

Comments at 2–3. He states that 

commercial alternatives to PFS are not 

substantially the same because they 

must be used on a permanent basis and 

are not available in all locations. Id. He 

also contends that informal 

arrangements with friends and family 

are not a realistic alternative to PFS. Id. 

at 3. Mr. Popkin also expresses his 

concern that the present PFS rules 

require ‘‘that all interaction to establish, 

modify, or terminate the service be done 

in person at the post office servicing the 

customer’s permanent mailing address’’ 

and that no alternatives are available to 

the in-person option. Id. at 1. 

The Public Representative 

recommends that the Commission 

should either reject the proposed 

transfer of PFS from the market 

dominant to the competitive product list 

or institute proceedings under rule 

3020.34(b) to further scrutinize the 


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Federal Register / Vol. 73, No. 152 / Wednesday, August 6, 2008 / Rules and Regulations 45849 

7Motion of the United States Postal Service for 

Acceptance of Reply Comments, June 20, 2008 

(Postal Service Reply Comments). 

8Motion of David B. Popkin for Acceptance of 

Reply Comments, June 23, 2008; David B. Popkin 

Reply Comments, June 23, 2008 (Popkin Reply 

Comments). 

9 In addition, products that are covered by the 

postal monopoly may not be transferred from the 

market dominant to the competitive product list. 

39 U.S.C. 3642(b)(2). 

10http://www.mbe.com/ps/index.html. 

11The Commission is not convinced by the Postal 

Service’s argument that informal mail forwarding 

by friends and neighbors is substantially similar to 

the services provided by PFS or commercial 

alternative mail forwarding options. PFS customers 

enter into a formal business-like relationship with 

the Postal Service with the benefit of clearly 

established parameters for the forwarding of their 

mail. Friends are not ‘‘firms offering similar 

products.’’ 39 U.S.C. 3642(b)(1). Nonetheless, such 

an arrangement may be a satisfactory alternative for 

some mail recipients. 

proposed transfer. Public Representative 

Comments at 2. He asserts that the 

Postal Service has failed to demonstrate 

that it does not have sufficient market 

power over prices, quality of service and 

output with regard to PFS. Id. The 

Public Representative cautions that the 

Postal Service will exercise virtually 

unlimited market power with PFS in a 

significantly large segment of the market 

if PFS is moved to the competitive 

products list. Id. at 1–2. He also states 

that PFS should not be classified as a 

competitive product because there are 

no real alternatives for residential 

mailers. Id. at 4–6. 

The Postal Service filed a motion to 

be allowed to offer a reply and offered 

reply comments to the Public 

Representative’s comments.7 The 

Commission grants the Postal Service’s 

motion. The Postal Service argues in its 

reply that although the available 

commercial alternatives to PFS may not 

be exactly the same as PFS, for example, 

they may have some differing features; 

they are substantially similar enough to 

classify PFS appropriately as a 

competitive, and not a market 

dominant, product. Postal Service Reply 

Comments at 2–3. The Postal Service 

states that NARSC’s comments make it 

clear that NARSC sees PFS as a 

competitor to its members’ mail 

forwarding services offerings. Id. at 3. 

The Postal Service also references a 

recent Commission field hearing in 

Flagstaff, Arizona where Cameron 

Powell, Vice President of Earth Class 

Mail in Seattle, Washington, testified 

that Earth Class Mail provides a 

reasonable alternative to PFS for mailers 

that are within the target market. Id. 

Popkin also filed a motion to be 

allowed to offer a reply and offered 

reply comments.8 The Commission 

grants Popkin’s motion. In his reply 

comments Popkin contends that 

services provided by NARSC members 

and Earth Class Mail are not 

substantially similar enough to truly be 

competitive with PFS services. Popkin 

Reply Comments at 2–3. He states that 

a search of NARSC’s website reveals 

that in the Northeast region of the 

United States no NARSC member stores 

exist in Maine, Vermont, Rhode Island, 

New Jersey, Delaware, and the District 

of Columbia, and that only limited 

locations are available in New 

Hampshire, Massachusetts, Connecticut, 

New York, Pennsylvania, and Maryland. 

Id. at 2. Popkin also lists prices for 

various Earth Class Mail services related 

to mail forwarding apparently implying 

that Earth Class Mail services are more 

expensive than PFS. Id. at 3. He again 

concludes that PFS has no truly 

comparable competition. 

III. Commission Analysis 

39 U.S.C. 3642 addresses adding or 

removing products from the competitive 

and market dominant product lists and 

‘‘transferring products between the 

lists.’’ The Postal Service, the 

Commission, and users of the mail can 

request such an addition, removal or 

transfer. 

The statute lays out several criteria 

that must be considered by the 

Commission when deciding whether an 

addition, removal, or transfer of a 

product is appropriate. The threshold 

question the Commission must ask is 

whether: 

* * * the Postal Service exercises 

sufficient market power that it can effectively 

set the price of such product substantially 

above costs, raise prices significantly, 

decrease quality, or decrease output, without 

risk of losing a significant level of business 

to other firms offering similar products. 

39 U.S.C. 3642(b)(1). If this is the case, 

the product will be categorized as 

market dominant. The competitive 

category of products shall consist of all 

other products. 

The Commission is further required to 

consider the availability and nature of 

enterprises in the private sector engaged 

in the delivery of the product, the views 

of those that use the product, and the 

likely impact on small business 

concerns. 39 U.S.C. 3642(b)(3).9 The 

Commission rules implementing section 

3642 require the Postal Service to 

provide data and supporting 

justification when requesting the 

addition, removal or transfer of a 

product. 39 CFR 3020.30 et seq. 

The question of whether the Postal 

Service has sufficient market power to 

effectively set prices for PFS without 

actual competition has been addressed 

by the Postal Service, the Public 

Representative, and Popkin. 

The Public Representative argues that 

the Postal Service exercises ‘‘virtually 

unlimited market power with PFS in a 

significantly large segment, if not 

virtually all, of the relevant market 

***’’ and that it has failed to provide 

the necessary justification and 

supporting data to make a sufficient 

showing that PFS is not a market 

dominant product. Public 

Representative Comments at 2–4. 

Popkin also contends that there are no 

truly competitive alternatives to PFS 

because of significant pricing, logistic 

and geographic availability differences. 

Popkin Comments at 2–4; Popkin Reply 

Comments at 3. 

The Postal Service, on the other hand, 

asserts that its bargaining position is 

constrained by the existence of other 

shippers who can provide services 

similar to PFS, and thus, the market 

precludes it from taking unilateral 

action to increase prices or decrease 

service without the risk of losing 

volume to private companies in the mail 

forwarding business. Request, 

Attachment B at 2–4. The Postal Service 

claims that informal agreements with 

friends, private sector firms and 

commercial mail forwarding services 

offer substantially similar mail 

forwarding services under similar 

conditions. Id. The Postal Service has 

not provided specific data concerning 

those alternatives, but cites several 

alternative sources like Earth Class Mail, 

several mail forwarding services geared 

towards snowbirds, and commercial 

mail receiving agencies. Id.; Postal 

Service Reply Comments at 2. In 

addition, it appears that Mail Boxes Etc. 

(MBE) provides a mail forwarding 

service for its mailbox customers.10

With the exception of mail forwarding 

services provided by friends, all other 

services require that customers change 

their address with the Postal Service on 

a temporary or permanent basis.11

Finally, the Postal Service states that 

PFS is but one alternative in the mail 

forwarding market and that ‘‘[t]here is 

likely to be a minimal impact, if any, on 

small business concerns.’’ Request, 

Attachment B at 4. In addition, because 

the competitive product rules set a cost 

floor, the Postal Service asserts that it 

will not be able to under price PFS in 

order to eliminate competitors. Id. at 5. 

This is the first time the Commission 

has been called upon to decide whether 

it is appropriate to transfer a service 

from the market dominant product list 

to the competitive product list. The 

record supports the finding that there is 

a sufficient pool of alternative services 


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45850 Federal Register / Vol. 73, No. 152 / Wednesday, August 6, 2008 / Rules and Regulations 

12The absence of quantitative support for this 

conclusion is inescapable as PFS is a new, low 

volume special service providing a product that is 

ancillary to the core functions of the Postal 

Service’s business. 

13See Request at 1–2. ‘‘The record also makes 

clear that PFS covers costs and, with overall cost 

coverage exceeding 140 percent, makes a reasonable 

contribution to overhead costs.’’ PRC Op. MC2007–

3 at 3, January 7, 2008. 

14 Id. 

15PFS will be reviewed again as part of the 

Annual Compliance Determination in early 2009 

and any changes, if necessary, will be 

recommended at that time. 

16 Docket No. MC2004–4. The agreement expired 

on January 1, 2008. 

17 Docket No. MC2004–3. The agreement expired 

on April 1, 2008. 

18 Docket No. MC2007–1. The agreement became 

effective on April 1, 2008. 

19 Docket No. MC2007–4. The agreement became 

effective on June 1, 2008. 

that are sufficiently similar to PFS to 

limit the Postal Service’s ability to 

effectively set the price (in the technical 

economic sense) of PFS.12

The Commission notes that a transfer 

of a product between product lists is not 

necessarily permanent. If circumstances 

should warrant in the future, for 

example, if the Postal Service appeared 

to be price gouging users of this service, 

the Commission under section 3642 and 

its own rules can initiate a transfer of 

PFS from the competitive product list 

back to the market dominant product 

list. Moreover, users of the mail also can 

request such a transfer. See 39 U.S.C. 

3642 and 39 CFR 3020.30 et seq. 

As part of its responsibility, the 

Commission will review competitive 

products for their compliance with 39 

U.S.C. 3633. The Commission has 

previously reviewed the cost coverage of 

PFS and determined that PFS covers its 

costs 13 (39 U.S.C. 3633(a)(2)); the 

transfer should not lead to the 

subsidization of competitive products 

by market dominant products (39 U.S.C. 

3633(a)(1)); and should have a positive 

effect on competitive products’

collective ability to provide their 

appropriate share of institutional costs 

(39 U.S.C. 3633(a)(3)).14 Thus, a 

preliminary review of the transfer of 

PFS to the competitive product list 

indicates that it comports with the 

provisions applicable to rates for 

competitive products.15

Therefore, having considered the 

statutory requirements, the argument 

put forth by the Postal Service, and the 

public comments, the Commission finds 

that PFS may be appropriately 

categorized as a competitive product, 

and therefore, may be transferred to the 

competitive product list. 

IV. Other Changes to the Mail 

Classification Schedule 

Other revisions are also being made to 

the Mail Classification Schedule. In the 

Negotiated Service Agreements section, 

the Discover Financial Services 

Negotiated Service Agreement 16 and the 

Bank One Negotiated Service 

Agreement 17 have expired, and will be 

deleted, and the Bank of America 

Corporation 18 and The Bradford Group 

agreements 19 previously approved will 

be added. 

The revisions to the market dominant 

and competitive product lists are shown 

below the signature of this Order, and 

shall become effective upon publication 

in the Federal Register. 

It is Ordered: 

1. The Postal Service request to 

modify the Mail Classification Schedule 

by transferring Premium Forwarding 

Service to the competitive product list 

filed May 30, 2008, is granted. 

2. The Motion of the United States 

Postal Service for Acceptance of Reply 

Comments filed June 20, 2008, is 

granted. 

3. The Motion of David B. Popkin for 

Acceptance of Reply Comments filed 

June 23, 2008, is granted. 

4. The Discover Financial Services 

Negotiated Service Agreement is deleted 

from the Mail Classification Schedule. 

5. The Bank One Negotiated Service 

Agreement is deleted from the Mail 

Classification Schedule. 

6. The Bank of America Corporation 

Negotiated Service Agreement is added 

to the Mail Classification Schedule. 

7. The Bradford Group Negotiated 

Service Agreement is added to the Mail 

Classification Schedule. 

8. The Secretary shall arrange for 

publication of this Order in the Federal 

Register. 

List of Subjects in 39 CFR Part 3020 

Administrative practice and 

procedure, Postal Service. 

By the Commission. 

Issued July 16, 2008. 

Steven W. Williams, 

Secretary. 

■ For the reasons stated in the preamble, 

under the authority at 39 U.S.C. 503, the 

Postal Regulatory Commission amends 

39 CFR part 3020 as follows: 

■ 1. The authority citation for part 3020 

continues to read as follows: 

Authority: 39 U.S.C. 503; 3622; 3631; 3642; 

3682. 

■ 2. Revise Parts A and B of Appendix 

A to Subpart A of Part 3020—Mail 

Classification Schedule to read as 

follows: 

Appendix A to Subpart A of Part 

3020—Mail Classification Schedule 

*****

Part A—Market Dominant Products 

1000 Market Dominant Product List 

First-Class Mail 

Single-Piece Letters/Postcards 

Bulk Letters/Postcards 

Flats 

Parcels 

Outbound Single-Piece First-Class Mail 

International 

Inbound Single-Piece First-Class Mail 

International 

Standard Mail (Regular and Nonprofit) 

High Density and Saturation Letters 

High Density and Saturation Flats/Parcels 

Carrier Route 

Letters 

Flats 

Not Flat-Machinables (NFMs)/Parcels 

Periodicals 

Within County Periodicals 

Outside County Periodicals 

Package Services 

Single-Piece Parcel Post 

Inbound Surface Parcel Post (at UPU 

rates) 

Bound Printed Matter Flats 

Bound Printed Matter Parcels 

Media Mail/Library Mail 

Special Services 

Ancillary Services 

International Ancillary Services 

Address List Services 

Caller Service 

Change-of-Address Credit Card Authentication 

Confirm 

International Reply Coupon Service 

International Business Reply Mail 

Service 

Money Orders 

Post Office Box Service 

Negotiated Service Agreements 

HSBC North America Holdings Inc. Negotiated Service Agreement 

Bookspan Negotiated Service Agreement 

Bank of America Corporation Negotiated Service Agreement 

The Bradford Group Negotiated Service 

Agreement 

1001 Market Dominant Product Descriptions 

* * * * * 

Part B—Competitive Products 

2000 Competitive Product List 

Express Mail 

Express Mail 

Outbound International Expedited 

Services 

Inbound International Expedited Services 

Inbound International Expedited 

Services 1 (CP2008–7) 

Priority Mail 

Priority Mail 

Outbound Priority Mail International 

Inbound Air Parcel Post 

Parcel Select 

Parcel Return Service 

International 

International Priority Airlift (IPA) 


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Federal Register / Vol. 73, No. 152 / Wednesday, August 6, 2008 / Rules and Regulations 45851 

International Surface Airlift (ISAL) 

International Direct Sacks—M—Bags 

Global Customized Shipping Services 

Inbound Surface Parcel Post (at nonUPU rates) 

International Money Transfer Service 

International Ancillary Services 

Special Services 

Premium Forwarding Service 

Negotiated Service Agreements 

Domestic 

Outbound International 

Global Expedited Package Services 

(GEPS) Contracts 

GEPS 1 (CP2008–5) 

Global Plus Contracts 

Global Plus 1 (CP2008–9 and 

CP2008–10) 

* * * * * 

[FR Doc. E8–17984 Filed 8–5–08; 8:45 am] 

BILLING CODE 7710–FW–P 


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