E8-5925. Change in Rates of General Applicability for Competitive Products: Decision of the Governors of the Postal Service

AGENCY:

Postal Service.

ACTION:

Notice.

SUMMARY:

This notice sets forth changes in rates of general applicability for competitive products.

DATES:

Effective Date: May 12, 2008.

FOR FURTHER INFORMATION CONTACT:

Daniel J. Foucheaux, Jr., 202-268-2989.

SUPPLEMENTARY INFORMATION:

On March 3, 2008, pursuant to their authority under 39 U.S.C. 3632, the Governors of the Postal Service established prices and classification changes for competitive products. The Governors' Decision and the record of proceedings in connection with such decision are reprinted below in accordance with § 3632(b)(2). Implementing regulations will be published separately in the Federal Register.

Stanley F. Mires,

Chief Counsel, Legislative.

Decision of the Governors of the United States Postal Service on Changes in Rates and Classes of General Applicability for Competitive Products (Governors' Decision No. 08-3)

March 4, 2008.

Statement of Explanation and Justification

Pursuant to our authority under section 3632 of title 39, as amended by the Postal Accountability and Enhancement Act of 2006 (“PAEA”), we establish new prices of general applicability for the Postal Service's competitive products, and such changes in classifications as are necessary to define the new prices. The prices and classification changes are shown in Attachment A and are described in detail in the analysis provided by management in Attachment B. We have reviewed that analysis and have evaluated the new prices and classification changes in accordance with 39 U.S.C. 3632-3633 and 39 CFR 3015.2. We approve the changes set forth in Attachment A, finding that they are appropriate, and are consistent with the regulatory criteria. In particular, we note that the price changes are expected to result in an increase of contribution for each competitive product.

For Express Mail service, the overall increase is approximately 3.1 percent. A number of substantive changes are made to the Express Mail price categories. First, the current unzoned retail price structure is replaced with prices that are zoned to reflect the practice in the marketplace and to align prices better with costs. Second, lower prices are available for customers who use alternate postage payment systems that capture more detailed customer information, such as the online service, Click-N-Ship, or corporate accounts. Even lower prices will be available to customers who use corporate accounts and whose average daily volumes exceed a minimum threshold. These changes will improve Express Mail's competitive position, especially with regard to small and medium-sized businesses.

For Priority Mail service, the overall price increase is 4 percent. The average Priority Mail retail price increases by about 6 percent. Customers who use electronic postage and meet other requirements are provided reduced prices. On average, these prices are 3.5 percent lower than retail prices; however, the size of the reduction varies for each specific price point, based on competitive considerations. This should increase volume and revenue from small-volume commercial shippers.

For Parcel Select service, the overall average price increase is 5.7 percent. Prices increase more for Destination BMC entry than for Destination Delivery Unit entry in order to further encourage customers to bring packages to the DDU. Incentives are provided, in the form of declining block prices, for shippers with greater than $5 million annual Parcel Select revenue who increase their volume from the previous twelve month period. To further encourage growth, qualifying shippers whose annual Parcel Select volume grows more than 10 percent will receive rebates ranging from 2 to 14 percent of DDU postage based on their annual postage revenues.

For Parcel Return Service, prices have an overall increase of 2 percent to encourage growth. Prices are realigned between the return delivery unit (RDU) and return BMC categories, such that RBMC has an approximately 9 percent increase and RDU prices are decreased 21 percent.

For Global Express Guaranteed service, the overall price increase is 5.2 percent. Price increases vary by country group and weight increment. An online price remains available. The relatively modest price increases and continued availability of the lower online price should allow this service to remain competitive.

For Express Mail International service, prices will increase on average by 6 percent. Price increases vary by country group and weight increment. Customers using Click-N-Ship or other online applications continue to receive a lower price. In addition, two new incentives are provided for commercial mailers. First, customers receive a reduced price if they pay postage by PERMIT imprint and use authorized software to prepare their mail. This software allows mailers to create online Customs forms, print labels, and track packages. Second, customers also receive a lower price if they use this authorized software to prepare their mail and pay their postage through an Express Mail Corporate Account; this incentive is tiered, depending on volume or postage minimums. The new incentives are expected to result in little or no shift of retail mail volume to the lower prices; rather, they are expected to be used by new customers, or customers who previously had a customized agreement with the Postal Service.

For Priority Mail International service, price increases, on the whole, are 6.1 percent. Different increases apply depending on the weight and country group. Prices are set to fit logically between Express Mail International and First-Class Mail International. The incentive to pay postage online is maintained and a new incentive is added for commercial customers who pay postage by PERMIT imprint and use authorized software to prepare their mail. As with Express Mail International, retail mail volume is not expected to shift to the new lower prices.

For International Direct Sacks—M-Bags (Airmail M-Bags), prices rise around 5.9 percent. The country group structure for this product is expanded to nine country groups to match the Express Mail International, Priority Mail International and planned First-Class Mail International country group structures, providing convenience and ease of use for customers.

For International Priority Airmail (IPA), published prices generally increase by 12.5 percent. For International Surface Airlift (ISAL), prices for ISC Drop Shipment will increase 21.3 percent. In addition, published prices for ISAL Direct Shipment are eliminated and, in the future, will only be available through customized agreements.

Finally, prices for the following International Ancillary Services used with competitive international mail services will increase: International Certificate of Mailing, International Registered Mail, International Return Receipt, International Restricted Delivery and certain International Insurance prices (Priority Mail International Insurance and Global Express Guaranteed Insurance).

As shown in Attachment B, these changes satisfy the statutory requirements. They should not result in the subsidization of competitive products by market dominant products (39 U.S.C. 3633(a)(1)). Each competitive product should cover its attributable costs (39 U.S.C. 3633(a)(2)). They should allow competitive products as a whole to comply with 39 U.S.C. 3633(a)(3), which, as implemented by 39 CFR 3015.7(c), requires competitive products to contribute a minimum of 5.5 percent to the Postal Service's total institutional costs.

Order

The changes in prices and classes set forth herein shall be effective at 12:01 A.M. on May 12, 2008. We direct the Secretary to have this decision published in the Federal Register in accordance with 39 U.S.C. 3632(b)(2). We also direct management to file with the Postal Regulatory Commission appropriate notice of these changes.

By The Governors:

Alan C. Kessler,

Chairman.