DOCKET SECTION
RECEIVEI)
BEFORE THE
POSTAL RATE COMMlSSlCN
WASHINGTON, D.C. 20268-0001
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POSTAL RATE AND FEE CHANGES,
Docket No. R97-1
1997
NOTICE OF THE UNITED STATES POSTAL SERVICE
CONCERNING REVISIONS
TO THE DIRECT TESTIMONY OF WITNESS O’HARA (USPS-T-30)
The United States Postal Service hereby files these revisions reflected in the
attached list to the direct testimony of witness O’Hara (USPS-T-30).
today are intended to reflect in the narrative portion of USPS-T-30
Tihe revisions filed
the handful of
numerical changes which result from the earlier filed revisions to Exhibit-30B
(September
19, 1997) and to Exhibit-30D
For the convenience
replacement
(August 22, 1997)
of the Commission
and participants
pages to the narrative portion of USPS-T-30
Respectfully
in this proceeding,
are attached.
submitted,
UNITED STATES POSTAL SERVICE
By its attorneys:
Daniel J. Foucheaux,
nse$ ‘;“;a
Jr.
Michael T. Tidwell
475 L’Enfant Plaza West, SW.
Washington, D.C. 20260-l 137
(202)268-2998/FAX:
-5402
October 3, 1997
1 o-3-97
REVISIONS
TO USPS-T-30
Paae
Line
Redace
With
26
22
198
192
28
7
204
205
32
11
4.8
7.2
32
16
154
155
33
11
154
155
37
5
103
104
Replacement
pages follow.
Revised 10-3-97
1
This is partly due to the whole-cent
2
one-cent
3
does First-Class
4
increase
5
effect of this increase
6
The availability
increase
represents
rounding
a larger percentage
Mail letter rates.
However,
of alternatives
than for First-Class
alternatives
mentioned
in the discussion
9
for personal
messages
and Standard
Mail letters (criterion
10
announcements
and other advertising,
11
volume in cards than in letters.
12
The rate structure
for First-Class
13
letters, so that considerations
14
(criterion
revenue
17
(criterion
test-year
below average,
(criterion
the
4).
Mail cards is somewhat
5). In addition to the electronic
of letters, First-Class
letters can be used
(A) Mail can be used for many of the sale
which are a more significant
Mail cards parallels
of mailer preparation
after-rates
of $1,089 million exceeds
portion of
that for First-Class
(criterion
Mail
6) and simplicity
volumes,
their estimated
the First-Class
incremental
Mail cards
cost of $609 million
3).
The proposed
criteria;
on card rates than it
7) are also parallel.
At projected
16
rate; a
in view of the fact that the overall
for First-Class
8
19
increase
on mailers is clearly acceptable
broader
18
for the single-piece
in card rates since Docket No. R90-1 is significantly
7
15
constraint
26
rate level reflects a balanced
it is fair and equitable
(criterion
consideration
of all the relevant
1).
20
21
B. Priority Mail
22
The Postal Service is proposing
a cost coverage
of 192 percent for Priority
Revised
1
estimated
2
above incremental
cost is $2,598 million, so that revenues
cost (criterion
The proposed
3
4
incremental
fair and equitable
28
are comfortably
3).
rate level is appropriate
(criterion
10-3-97
in the light of all relevant
criteria;
it is
1) to both mailers and competitors.
5
6
C. Express
7
The Postal Service is proposing
8
percent,
which corresponds
Express
9
Mail
factors are considered.
11
transportation,
12
general
13
capability.
14
above 1.0 in absolute
15
services
16
extremely
rate increase
collection
collection
of 3.7 percent.
2) is very high when intrinsic
system, though
system used by First-Class
Mail.
not as extensive
value, and is uniquely
The 3.7 percent
on mailers (criterion
19
modest growth
20
increase,
increase
This indicates
will have a modest and clearly acceptable
(less than 2 percent
rate increase
“At -1 .I 8, the Classroom
absolute value.
-
rate levels.”
and special
an
value of service.
4). Given Express
the proposed
as the
at -1.53, is well
so among the subclasses
for which the Postal Service proposes
air
It also benefits from a tracking
On the other hand, Express Mail’s price-elasticity,
low economic
of 205
It receives the highest delivery priority, extensive
and a significant
18
21
22
to an average
Mail’s value of service (criterion
10
17
an Express Mail cost coverage
effect
Mail’s small market share and its quite
in FY 1996) even in the absence
of a rate
should not have an unfair effect on
Periodicals
own-price
elasticity
also exceeds
1 .O in
Revised 10-3-97
1
developed
2
effect on users that would result from the immediate
3
coverages
4
they have grown so rapidly in the past several years.
after a careful consideration
to current
Periodicals
of all the criteria, taking into account
costs, pending
application
an improved
32
the
of previous
cost
understanding
of why
5
2. Preferred-Rate
6
The RFRA requires
7
that Within County,
8
Periodicals
each have a mark-up
9
full rates, or a cost coverage
10
apply, with a mark-up
11
in rate increases
12
respectively.”
and Classroom
equal to one-half that of Regular
of 103.5 percent.
equal to five-twelfths
averaging
Nonprofit,
3.4 percent,
For the test-year,
that of Regular
3.9 percent,
Periodicals
for
Step 5 rates will
Periodicals;
this results
and 7.2 percent
13
E. Standard
14
1. Regular
15
The Postal Service is proposing
16
17
18
19
20
21
22
23
24
25
-
.--___
A Mail
Regular
subclass,
In common
a cost coverage
which results in an average
with other Standard
of 155 percent for the
rate increase
subclasses,
of 4.1 percent.
Regular has a relatively
low
“Witness
Kaneer (USPS-T-35) describes why, given the difficulties in
accurately measuring cost for very small subclasses, applying Nonprofit Periodicals
rates to Classroom mail is appropriate pending further analysis to develop an
improved cost framework to apply the RFRA mark-ups to Classroom.
The financial
summary in my workpapers,
which relies strictly on the test-year cost developed
from reported FY 1996 cost data, reflects the fact that this cost is greater than
after-rates revenues.
-
Revised 10-3-97
1
intrinsic value of service (criterion
2
transponation,
3
Service often attempts
4
frame, these typically
5
order to facilitate
6
for Regular
7
Enhanced
8
9
2) due to its deferability
and lack of access to the collection
to satisfy mailer requests
involve advance
the achievement
planning
Carrier Route, suggesting
an acceptably
average
system.
for delivery within a specific time
and coordination
an intermediate
rate increase
economic
value of service.
is well below inflation and will have
it is only slightly below the 4.5 percent system-average
11
155 percent
12
this increase.
The Regular
indicates
subclass
14
commercial
15
more suited to geographic
16
(criterion
17
demographically
targeted
18
cable television
channels,
19
The price elasticity
letters but lower than that of
10
13
by the mailer in
small impact on the users of Regular mail (criterion
cost coverage,
messages
that competitors
is somewhat
and the Enhanced
5) is somewhat
targeting.
4). The fact that
increase,
together
more suited to demographic
Carrier Route subclass
by
targeting
of
is somewhat
of alternatives
but a number of alternatives
exist, including
with the
are not unfairly targeted
For this reason, the availability
less for Regular,
advertising
ground
While the Postal
of these delivery requests.
is higher than that of First-Class
The 4.1 percent
for delivery,
33
special-interest
for
magazines,
and internet web sites.
The mail within the Regular subclass
all has a substantial
degree of mailer
6), with some of it being both prebarcoded
and sorted to 5-
20
preparation
(criterion
21
digit areas.
Overall, however,
22
Enhanced
Carrier Route.
it does not have the same degree,of
preparation
as
Revised
1
result is a 4.8 percent decrease
in average
10-3-97
37
rates
2
F. Standard
3
1. Parcel Post
4
The Postal Service is proposing
5
6
B Mail
which corresponds
to an average
In general,
7
a Parcel Post cost coverage
rate increase
of 10.2 percent for the subclass.
Parcel Post exhibits a low intrinsic value of service (criterion
8
has a low delivery
priority and uses primarily ground transportation.
9
increased
concerns,
10
system.
11
indicating
security
Moveover,
13
this proceeding,
14
Post (criterion
15
revenue
16
increase.
17
current
18
their competitive
19
elasticity
10.2 percent average
4). Unfortunately,
incremental
is just below 1.0 (in absolute
rate increase
is one of the highest in
have some effect on mailers who use Parcel
due to cost increases
and the need to ensure that
have been able to compete
Parcel Post rates, and a 10.2 percent rate increase
21
uniformly
successfully
will not adversely
at
affect
position.
In one sense, alternatives
volume business
value),
cost, there was very little room to mitigate this
Parcel Post competitors
20
Due to
value of service.
and will undoubtedly
covered
2); it
it no longer enjoys its former access ‘to the collection
its own-price
a low economic
The proposed
12
of 104 percent,
shippers.
accessible.
to Parcel Post are plentiful, especially
For individuals,
however,
Direct access to competitor’s
these alternatives
services
for largeare not
may be limited to a
CERTIFICATE
OF SERVICE
I hereby certify that I have this date served the foregoing document upon all
participants of record in this proceeding in accordance with section 12 of the Rules of
Practice.
44/(7~
Michael T. Tidwell
475 L’Enfant Plaza West, S.W.
Washington, D.C. 20260-l 145
October 3. 1997