-
'RECEIVEO
BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON,
D.C. 20268-0001
POSTAL
RATE AND FEE CHANGES,
DIRECT
1997 ;
TESTIMONY
OF
MICHAEL K. PLUNKETT
ON BEHALF OF
THE UNITED STATES POSTAL SERVICE
Docket No. R97--1
TABLE OF CONTENTS
AUTOBIOGRAPHICAL
I.
PURPOSE
Il. SPECIAL
SKETCH
OF TESTIMONY
SERVICES
A. CERTIFICATES
B. INSURANCE.
G. PERMIT
OF MAILING..
DELIVERY
AND FEE PROPOlSALS..
............
.
.9
11
.............................................................
...................................................
.I 6
RETURN .......................................................
22
23
FEES .......................................................................
H,, PERIODICALS
1
.l
..................................................
.........................................................
CONFIRMATION
F. MERCHANDISE
,.--
CLASSIFICATION
RECEIPTS.
E. DELIVERY
1
...............................................................
..........................................................................
C. RESTRICTED
0. RETURN
..iil i
..........................................................
APPLICATION
.26
FEES.. ......................................
LIST OF TABLES
TABLE
1. 1996 INSURANCE
TABLE 2. DELIVERY
INDEMNITY
CONFIRMATION
COSTS
.._......
FEE SCHEDULE
._.... 6
,...
19
1
AUTOBIOGRAPHICAL
2
My name is Michael
3
Pricing Office of Marketing.
4
letter carrier at the Dracut, Massachusetts
5
the Manchester,
6
customer
7
Intern program.
6
various
9
included
,‘--
operations,
11
Budget and Financial
12
1997, I transferred
13
of fee design for various
14
I received
17
Pennsylvania,
of positions
to
in
to the Management
a number of assignments
the country
in
These assignments
In 1995, I transferred
human
to the (office of
where I served as an Economist.
to the office of Pricing.
My responsibilities
In February
include all aspects
special services.
bachelor’s
State University
Administration
in 1984 as a
area, and district oftices in finance,
and marketing.
Analysis
in the
In 1985, I transferred
In 1990, I was accepted
in headquarters,
resources,
Business
Post Ofice.
Division where I held a number
units throughout
10
an economist
for the Postal Service
As an intern, I rotated through
positions
16
I am currently
I began working
operations.
organizational
Pennsylvania
K. Plunkett
New Hampshire
services
15
SKETCH
degrees
in finance
in University
from the Wharton
where I concentrated
and economics
Park, Pennsylvania,
from
and a Masters
School at the University
on finance
and decision
of
sciences.
in
.-..
I
I. PURPOSE OF TESTIMONY
The purpose
2
,,d-..~
is to propose
3
fees for the following
4
restricted
5
service,
6
II. SPECIAL SERVICES CLASSIFICATION
7
A. CERTIFICATES
8
1. PROPOSAL
9
The Postal Service
delivery,
special services:
return receipts,
certificates
11
listing of an original
of mailing,
confirmation,
application
12
the proposed
13
increase
proposed
14
percent.
The proposed
15
increments
16
proposed
17
2. CHARACTERISTICS
an average
Specifically,
certificate,
increase
classification
or an additional
increase
of mailing
20
particular
21
may not request
22
is there any insurance
merchandise
return
increase
percentage
in :fees for
increase
for a bulk mailing
for a certificate
verification
for certificates
are provided
of the mailing
delivery
for additional
1,000 piece
is 14.3 percent.
against
who wish to retain an
of pieces to particular
loss or damage
At the
of mailing would be ,132 percent.
for customers
in conjunction
and the
up to 1,000 pieces is 9.1
addresses
date, but who neither want nor need a record of delivery
restricted
for a
copy of a listing, is 9.1 percent,
for a listing on a firm mailing book is 25 percent,
fees the cost coverage
independent
insurance,
AND FEE PROPOSALS
15.2 percent
the proposed
for a certificate
19
and
fees.
over the initial 1,000 pieces in a mailing
Certificates
changes
OF MAILING
is proposing
of mailing.
certificates
delivery
permit fees, and Periodicals
10
18
I-.
of this testimony
with a certificate
included
on a
‘The mailer
of mailing,
in the servicie.
Three
nor
types of verification
mailings
are available
to mailers: verification
via form 3817, verification
in a firm book or customer
mailing
manifest
of mailings
of indivildual
pieces and
of three or more lpieces recorded
via form 3877, or verification
of a bulk
via form 3606.
3. REVEINUE HISTORY
The revenue
6
generated
from certificates
of mailing
7
FY 1970 until 1984 but has been on a steady decline
a
revenue
9
consecutive
fell 6.7 percent from to $4.2 million.
year in which revenue
of mailing
came in FY 1984 when revenue
11
complete
/record of the revenue
12
library reference
13
4. FEE HISTORY
The revenue
equaled
fronn
In FY 1996,
peak for certiticates
$14.lmillion.
history of certificates
A more
of mailing
i:s available
in
H-187.
In Docket No. R94-1, the fee-for certificates
14
since then.
steadily
This makes FY 1996 the fifth-I
has fallen.
IO
increased
15
percent
for both individual
16
percent for each additional
17
from $0.50 to $0.55 for an individual
16
up to 1,OOlO pieces increased
19
additional
20
book increased
21
for individual
22
with the exception
thousand
pieces, and for mailing
of mailing
books, and inc.reased
1,000 pieces of a bulk mailing.
increased
inclreased
piece certificate,
ten
16
The f,ees went up
and the fee for mailings
of
from $2.50 to $2.75, while the fee for each
from $0.30 to $0.35.
$0.05 during every fee increase
pieces has also increased
The additional
since 1981.
Since 1981, the fee
by $0.05 in every general
of 1988 when the fee remained
unchanged.
thousand
rate increase
The fee for the
,
,/--
1
first thousand
2
18.5 percent
3
increased
4
firm books for multiple
5
certificates
6
5. FEE DESIGN
in 1985.
of mailing
a
distinct
9
consistent
increased
reflecting
the deaveraging
certificates.
A complete
is available
fees for the different
with modeled
required
11
to growth iin wage rates.
12
rounding
13
certificates
14
constraint
15
132 percent
16
B. INSURANCE
17
1. PROPOSAL
ia
The Postall Service
19
insurance
20
the Commission’s
21
R94-1, reflects the higher indemnity
22
and is comparable
_c-
constraints
adequate
cost coverages
fees.
Fee increases
with the statutory
an overall
The resulting
recommended
were used.
The proposed
due primarily
The rounding
increase
though
of 139 percent
limits recommended
recommended
3
existing
cost coverage
average
of 154 percent,
cost coverage
to the Commission’s
are
of
pricing criteria.
17.3 percent
cost coverage
is
of form 3817, origina. form 3877, ancl
1,000 pieces of bulk mailings
proposes
This fee structure
given cost increases
for the firm book fee was 25 cents.
is consistent
fee structure;
with the current fee schedule,
of 5 cents for originals
for additional
of mailing.
(LR-H-107).
As is consistent
of
H-187.
retain the existing
types of certificates
10
for a single mail piece
record of the fee history for
of mailing
cost differences
in 1991 and 1988 and
of costs with the introduction
in library reference
fees for certificates
to maintain
by 25 percent
In 1981, the cost of a certificate
167 percent
Proposed
7
.-
pieces in a mailing
in
higher than
ifi Docket INo.
in Docket No. MC96-3,
cost coverage
of 1.48
percent
in that case.
In addition
to create a bulk insurance
electronic:
4
to the fee changes,
classification
the Postal Service
proposes
for bulk parcel mailers who use
manifesting.
2. CHARACTERISTICS
5
Insurance
is used to provide
indemnity
6
articles lost or damaged
7
pieces are marked as such at the time of acceptance,
a
treated in the same manner
9
$50 are given a number
in transit.
for the value (up to $5,000)
For articles with values
as uninsured
pieces.
10
the article and on the customer
11
addressee
or the addressee’s
having a value over
this number
receipt. Upon delivery,
agent is required.
up to $50, insured
after which they are
Articles
at the time of acceptance;
of
is placed both on
the signature
This process
of the
aids in evaluating
_-
12
indemnity
claims and provides
13
Insurance
is used primarily
14
Parcel Post in particular.
15
3. VOLUME HISTORY
Insurance
16
volume
an additional
in conjunction
element
with package
has been declining
transactions
of security
steadily.
services
to the mail piece.
generally,
and
Over the last 25 years, the
17
number of insurance
ia
to 28.8 million
in 1996.
19
volume,
which
has fallen from 570 million pieces to 213 million over the same
20
period.
Complete
21
library reference
This decline
volume
H-187.
has gone from a peak of 114.1 million in 1971
histories
has paralleled
for insurance
the trend in parcel post
and parcel post are available
in
I
2
4. FEE HISTORY
C’urrent Insurance
fees range from $0.75 to $45.70
3
declared
value of the article.
4
insurance
was raised from $600 to $5,000.
5
increased
1 percent
6
declared
7
limit for insured
a
by an avlerage of 9 percent.
9
pieces was raised from $25 to $50, and fees were reduced
indemnity
complete
11
5. FEE DESIGN
Fees for Insurance
which consists
14
with declared
15
declared
limit for
In Docket No. R94,-1, the fee!s were
a uniform
value over the first $100.
increment
for each $100 of
In Docket No. R90-1, the indemnity
In Docket No. R87-1, the value limit for unnumberf?d
fee history for Insurance
13
16
overall by establishing
the indemnity
upon the
parcels was raised from $500 to $600, and fees were increasecl
10
12
In Docket No. MC96-3,
depending
is presented
have been designed
of a fee for unnumbered
in library reference
using the existing
As indicated
17
can be separated
ia
costs common
19
excluding
20
$0.63 respectively.
21
for unnurnbered
fee structure,
pieces
charge for each $100 in
value up to $5,000.
in library reference
to determine
to insured
indemnity
H-l 87.
pieces, a base fee for numbered
values less than $100, and an additional
indemnity
an {average of 2%. A
H-107, costs associated
the costs unique to numbered
pieces in general.
costs, for numbered
This cost difference
is the primary
.-
5
pieces, and the
In the test year, the net unit costs,
and unnumbered
pieces
with Insurance
pieces are $1 24 and
reason for the lower fee
Indemnity
1
costs, however,
2
the following
t:able indicates,
3
pieces with values
4
with values
are a function
average
of the value of the articles.
per piece indemnity
As
costs for insured
up to $50 were 11 cents in FY 1996, while costs for articles
between
$50 and $100 were 24 cents.
TABLE
5
1996
lnden
6
1.
in
G
1
The proposed
7
a
coverage
9
contingency,.
fees for insurance
of 154 percent
Insurance
of the total insurance
are willing
to pay to indemnify
11
Moreover,
insurance
12
sensitivity
om the part of customers
13
relatively
14
also enhance
15
surface
16
price.
a cost
indemnity
and
who use the service
has intrinsic
of -0.1, indicating
who purchase
this service,
value.
very little price
which suggests
2). Higher limits and the bulk insurance
the value of the product
provides
Customers
an article that by definition
has a low price elasticity
high value (Criterion
This feature
costs including
is a high value service.
10
alternative
have been set to provide
offering.
a limited amount
At the same time, the primary
of insurance
places the value of the postal offering
6
proposal
as part of the basic
in perspective.
.-
1
Moreover,
2
Express
3
(Criterion
postal alternatives
Mail, which include
can include
some insurance
increase
is consistent
comparable
6
(Criterion
4). At the same time, the 154 percent
7
improper
8competition
8
proposal
rewards
9
fee schedule
period of time and should
customer
has proven
complexity
relatively
cost coverage
easy to administer
11
technically
sophisticated
customers
12
summary,
the proposed
fee schedule
13
competitors,
is for bulk insurance
The bulk insurance
is fair and equitable
In
for customers,
alike.
pieces with values greater
than $6001, I have used the Commission’s
16
revenue
17
Appendix
16
cost per piece will be equal to 0.5 percent of the indemnity
19
proposed
20
6. BULK INSURANCE
21
The Postal Service
in the Commission’s
fees is presented
‘7) and the only
which would apply to the more
of actual claims data for insured
3. Moreover,
The existing
6).
(Criterion
15
D, Schedule
guards against
who can easily adapt to its use.
and the Postal Service,
as shown
over a
have a modest impact on customers
efforts to reduce costs (Criterion
additional
In the absence
with the rate of inflation
on the part of the Postal Service.
10
22
mail and
as part of the basic: charge
5
14
registered
5).
The 17.3 percent
4
for insurance
method for estimating
Opinion
is proposing
and fee
in Docket No. MC96-3,
I have assumed
in workpaper
volume
that the average
value.
indemnity
A table of the
WP-2.
to establish
an option within
service for bulk mailers that would allow such mailers to purchas.e
7
insurance
insurance
by
1
using electronic.
manifesting.
2
library reference
H-l 10, by virtue of the fact that window
3
avoided.
4
unnumbered
5
study had estimated
6
unnumbered
7
LR-PCR-37).
6
most recent study reflects a relatively
small sample size, the Postal Service
9
proposes
of the estimated
10
This reduces
This s;tudy estimates
insured
cost savings
and numbered
the savings
and numbered
Because
pieces respectively.
respectively
50 percent
costs are
An earlier
(Docket
No. MC97-2,
in the estimates,
savings
USPS-
and because
the
for unnumbered
for bulk insurance.
In addition
to the window
12
costs for bulk insurance
services
13
Current
14
at the time of mailing.
15
indemnity
16
the wholesale
17
because
18
may be different
19
the change
20
savings
21
for a period suflscient to accumulate
are expected
coverage
services
provides
The proposed
costs that will be avoided,
indemnity
to be lower than for basic insurance.
indemnity
for the actual value of the article
bulk insurance
service
would provide
for the lesser of the actual value of the article at the time of mailing
cost of the contents
to the sender.
the lost value to the shipper
from the retail price.
in indemnity
It is expected
This is a reasonable
is the replacement
Though
is not quantified
will be Idemonstrable
irl
at 47.2 cents and 81.9 cents per piece for
11
22
insured
insured
pieces in setting the discount
costs as shown
of 79.9 cents and $1 .I3 for
of the wide variation
to pass through
insurance
the administrative
once the bulk insurance
approach
cost of the article, which
the additional
in this docket,
OI-
savings
related to
it is expected
that such
option has been in place
claims experience.
that the lower fees and relative
ease of purchase
that bulk
-.
23
insurance
allows will make insurance
a more attractive
and valuable
product
fol
our largie customers,
I--.
insurance
demand
and enhance
the value of the delivery
is associated.
The Postal Service
for bulk insurance
from prospective
market research
has been conducted.
and or migration
of existing
because
the discount
savings,
the availability
is predicated
customers,
volume
for insurance
informal
with which
indications
of
but, as yet no formal
estimates
are unavailable.
on passing through
of bulk insurance
effect oln cost coverage
has received
Consequently,
insurance
services
of new volume
However,
half of the estimated
is not expected
to have a negative
as a whole.
7. EXF’RESS MAIL INSURANCE
Docket No. MC96-3
10
,-
for merchandise
insurance
12
included
13
was set at $0.90, the same increment
14
Service
15
Insurance
16
for Express
17
$100 of indemnity
16
C. RESTRICTED DELIVERY
19
1. PROPOSAL
in the Express
proposes
items.
Mail rate.
insurance.
Mail merchandise
and fees for Express
for articles
valued
M;sil
up to $500 is
The fee for each $100 of value above $500
as for general
to retain the existing
and general
a classification
Insurance
11
20
T-
established
relationship
Insurance
valued
insurance
between
is proposed
The Postal
Express
Mail
to be offered at no fee
up to $500, and for a fee of $1 for each
value above $500.
The Postal Service
21
restricteNd delivery
service.
22
H-107, the cost coverage
proposes
to retain the existing
At the $1.71 unit cost indicated
for restricted
delivery
9
fee of $2.75 for
in L.ibrary Reference
would be 159 percent.
I
.-
2. CHARACTERISTICS
Restricted
2
delivery
is an ancillary
#numbered insured,
service
used in conjunction
3
certified,
4
service offers the sender the option of requiring
that delivery
5
addressee
or an authorized
makes restricted
6
substantial
enhancement
Restricted
7
C.O.D., and registered
agent.
delivery
can be requested
mailing.
However,
9
required
to pay the additional
for requests
10
expended1 in notifying
11
3. VOLUME HISTORY
Restricted
delivery
twenty-five
14
higher thaln in FY 1995.
15
have grown at an average
16
history is provided
17
4. FEE HISTORY
18
years.
delivery
a
at the time of mailin’g or after
cost for postage,
volume
telegram,
the mailer is
or telephone
service
office.
has grown slowly but steadily
The FY 1996 volume
rate of 2.2 percent.
A complete
delivery
transactions
volurne
and revenue
H-187.
In Docket No. R94-1, the fee for restricted
delivery
19
percent from $2.50 to $2.75 per piece of mail.
20
been 25 percent
21
that, the fee had increased
60 percent
22
was increased
The fee was raised 33 percent
in 1991 representing
over the last
of 3.9 million pieces was 5 percent
Over the last five years, restricted
in library reference
25 percent.
delivery
be made only to th,e
made after the time of mailing,
the delivery
13
Restricted
over normal delivery.
6
12
This feature
mail.
with
The previous
an increase
in 1988.
10
service was raised ten
fee increase
from $2.00 to $2.50.
had
Prior to
In both 1985 and 1981, the fee
in 19:78, and 20
,--
1
percent
in 1976.
A complete
2
in library reference
3
5. FEE DESIGN
delivery
service
is available
H-187.
As indicated
4
fee history for restricted
above, the Postal Service
5
schedulle for restricted
delivery,
6
increase.
The proposed
proposed
coverages
(Criterion
2). The proposed
proposes
which shields existing
cost coverage
of 159 percent
for other high value products
coverage
delivery
are sufficient
10
variable
costs (Criterion
11
requirements
12
D. RETURN RECEIPTS
13
I. PROPOSAL,
ensures
custom,ers
fee
from any rate
is comparable
to the
such as retiurn receipts
that the revenues
to cover costs, and provide
3). In summary,
to retain the existing
a contribution
the proposal
of the Act and yields a fair and equitable
from restricted
to non-volume
is consistent
with the
fee (Criterion
1).
/-
14
,--.
The Postal Service
15
for Merchandise
service,
16
the time of mailing,
17
The proiposed
18
The Postal Service
19
box to indicate
20
mail piece.
21
would allow customers
22
proposed
proposes
increases
36 percent for regular Return
and 7 percent
for Return Receipts
fees for these services
will be changing
that delivery
Receipts
purchas,ed
purchased
are $1.70, $1.45, and $7.00 respectively.
the return receipt form to include
is also proposing
to purchase
confirmation
at
after mailing.
a (check (off
of the mail piece was made at the address
The Postal Service
delivery
of 46 percent fclr Return Receipt
a classitication
return receipt service
service.
11
change
in conjunction
on the
that
with the
I
2. CHAFWZTERISTICS
Return
2
receipts
provide
customers
with proof of delivery
3
The return receipt provides
4
addressee’s
5
piece was delivered
if that address
6
piece.
above, a box will be checked
7
was made! to the address
9
agent, the date the piece was delivered,
As indicated
Rel:urn receipts
8
registered
the sender with the signature
services,
10
(merchandise
11
insured).
is different
of a mail piece.
of the ,addressee
and the address
from the address
or the
where the
on the mail
on the return receipt if delivery
on the piece.
are available
Express
in conjunction
with certified,
Mail, Priority Mail (merchandise
only), and insured
In FY 1996, 97 percent
C.O.D.,
only), Standard
pieces with a value exceeding
of return receipts
and
B
$50 (“numbered”
were on certified
mail, 1.3
-
12
percent were on registered,
13
were on insured
14
3. VOLUME HISTORY.
Return
15
1.3 percent were on merchandise,
mail.
receipt service has shown consistently
During this period volume
high volumse growth
16
the last 25 years.
17
annual
18
this growth
19
over the last ten years, and by more than 6.6 percent
20
A complete
growth
and 0.3 percent
rate of slightly
volume
history
has more than tripled, with an
more than 5 percent.
has been accelerating.
Volume
is presented
over
During more recent periods,
grew by an average
on average
in library reference
of 5.3 percent
since FY 1990.
USPS H-l 87.
-,
12
.-.
I
4.
FEE HISTORY
In Docket No. R94-1, the fees were each raised by about ten percent.
2
3
The fee for non-merchandise
4
mailing
5
$1.00 to $1 .iO,, return receipts
6
the mail was delivered
7
mailing that show to whom and when the mail was delivered
8
$6.00 to $6.60.
9
address
10
and showing
return receipts,
when purchased
at the time of
to whom and when the mail was delivered,
showing
increased
to whom, when, and the address
from $1.35 to $1.50, and requests
In 1991, fees were increased
by 12.5 percent
was (raised from
where
rnade after
increased
from
for the option that includes
and by 11 percent for the receipts
showing
the
to whom
and when the piece was delivered.
In 1988, return receipt for merchandise
11
service was first offered,
12
of $1.00, for the date and the recipients
13
signature,
14
have increased
15
$0. IO and receipts with the address
16
complete
record of the fee history for return receipts
17
reference
l-I-1 87.
and address
of delivery
in regular
In subsequent
increments:
As a result of the classification
18
signature,
and $1.20 for the date,
cases, the fees for this service
receipts without
the address
rising by
rising by $0.15 in 1991 and 1995. A
change
receipts
indicate
to whom the mail was delivered,
20
address
of delivery
21
for this se’rvice were set at $1 .I 0 for non-merchandise
from the address
13
is available
in library
In Docket No. MC96-3,
19
if different
at a fee
the date of delrvery,
all return
and the
on the mail piece. The nevv fees
and $1.20 for
1
merchandise.
These are the same fees as the previous
2
showing
3
5. FEE DEZSIGN
the date of delivery
and the recipient.
Return receipt service
4
(including
5
value of service to its customers
6
despite fee increases
7
service, we are adding
The iinclusion
8
9
correct will improve
as evinced
(Criterion
by the strong
2). By offering
additional
doubt as to whether
11
be enhanced
12
have an impact on costs as it adds to the duties required
13
attempting
14
small.
15
revisiting
16
can be studied.
17
coverage
10
Therefore,
of this (Criterion
correspondence.
we assume
this costs in a subsequent
The Postal Service
19
for return receipt service
20
Under the proposal
21
would become
22
closer to, thle system-wide
believes
of 125 percent,
147 percent.
is
was
would
of this colmponent
will
of the employee
will be relatively
model the costs, we propose
filing when the actual costs of the practice
that at the proposed
of any additional
the Commission
in this testimony,
the address
that the cost increase
to allow absorption
In Docket No. MC96-3,
address
3) and other services
Addition
rather than attempt to explicitly
will be sufficient
growth
box as part of the
that the current
correct or n’ot. Thus, the reliability
however,
recent volume
a check-off
box to indicate
by reducing
for subsequent
only) has a high
value for return receipt customers.
of the check-off
service
service for merchandise
10
delivery;
fees for receipts
recommended
The proposed
cost coverage
co:st.
a cost coverage
well below the system-wide
the cost coverage
14
average.
for return receipt service
cost coverage
proposed
fees cost
is still below, but
by the Postal Service
in
,P.
1
Docket No. R97-1 than the current
2
high value 5or return receipt service.
and thus better reflects the
The lproposed fee for return receipt for non-merchandise
3
,<--..
cost coverage,
4
help make the cost coverage
5
proposed
6
cost of this service compared
7
indicated
6
customers
9
The proposal
with the coverage
fee for return receipt for merchandise
in my testimony
service
with non-merchandise
regarding
the proposed
for certified
mail. The
reflects the additional
service.
delivery
Furthermore,
confirmation
does yield a relatively
is due in large measure
11
return receipts
large increase
to the recent overall decrease
after their restructuring
12
-proposed
increase,
13
Service
14
Moreover,
15
such as Express
16
delivery
for customers,
(Criterion
unfairly
against
potential
however,
in the amount
indicates
this
paid for
that the Postal
private competitor
there are at least some partial alternatives
Mail when the signature
available.
4). At the same time, the
along with the cost coverage,
is not competing
as
service,
lseeking a lower value service will have such an alternative
10
alternatives.
within the F’ostal Service
is not waived,
and to a certain degree,
confirmation.
In summary,
17
consistent
service would
I believe the proposal
18
reflects the value of the service
19
relevant
20
6. CLASSIFICATION
purchased
is fair and equitable
by customers
(Criterion
1). It
and meets all the
criteria of the Act.
CHANGE
21
The Postal Service
is proposing
22
mail sent Iunder the new delivery
that return receipt service
confirmation
classification
be available
schedule
(see
fol
below).
Delivery
confirmation
will provide
mail with a unique
it is appropriate
for return receipt service.
For this reason,
use return receipt service
on mail sent under this new classification
Return receipt mail sent under the delivery
provide
the same information
request,
9
IO
identifier
customers
to customers
will be provided
of the recipient’s
name, signature,
from the original
address.
to enable
confirmation
to
schedule.
will
mail. At their
with a copy of an electronically
of delivery
customers
schedule
as other return receipt
and the address
necessary
stored image
if it is different
E. DELIVERY CONFIRMATION
1. PROPOSAL
The Postal Service
II
is proposing
to establish
I2
mailers of Priority Mail, Parcel Post, Bound Printed
I3
Mail that will provide
14
delivery,
I5
mailers
16
systems
17
component
customers
if appropriate.
Small fees are proposed
elelments
discussed.
is contained
A description
in witness
19
different
type of customer.
Senders
20
confirmation
21
this case, the postal employee
22
barcoded
and its
testimony
(USPS-T-22).
each targeted
to a
mail pieces may obtain delivery
or through
will apply the necessary
label, and the customer
except for
of the service
available,
service at the postal retail counter,
and Library
and use more automated
Treworgy’s
of individual
for
or the date of attempted
for this service,
of Priority Mail who apply their own barcodes
as subsequently
service
Matter, Special
with the date of delivery
There wiill be two types of acceptance
I8
a new special
their rural carrier.
delivery
In
confirmation
will be given a receipt that shows the delivery
I6
-
,_F.,.
1
confirmation
identification
2
confirmation
information
number.
by use of a toll-free
The second type of delivery
3
4
the needs of larger volume
5
Service
6
the pieces are mailed.
7
of the mailing,
a
electronic
9
themselves,
IO
The customer
an electronic
manifest
of all delivery
is designed
the Postal
such as the date
ZIP Code.
must apply the necessary
and must access the delivery
confirmation
to serve
pieces on the day that
information
and destination
confirmation
or the Internet.
of providing
confirmation
would include
ID number,
,form of delivery
acceptance
who are capable
The manifest
the package
phone number
confirmation
shippers
may then access delivery
Users of the
labeling
information
electronically.
2. VOLUME AND REVENUE
Services
11
like delivery
confirmation
service
have been available
to
--_.
I2
customers
of competitors
13
customers,
have requested
I4
absence
I5
for delivery
16
delivery
17
largest volume
ia
of the Postal Service for a number
of such a service
20
through
21
mail.
service,
Standard
was assessed
through
indicating
that t.he
to use the f30stal Service
(B) customer
a survey
interest
in using
of the Postal Service’s
parcel shippers.’
This survey
purchasing
confirmation
may lead to unwillingness
in some circumstances.
confirmation
19
a delivery
Postal
of years.
delivery
indicated
that some large customers
confirmation
the Postal Service,
Priclrity Mail customers
service,
were interested
in
both for parcels they cr.rrrently ship
and for additional
volume
were also surveyed
’ See LR-H-166
17
for some subclasses
regarding
their expected
of
use of
delivery
confirmation.
Sharkey’s
1:estimony (USPS-T-33).
additional
volume
detailed
5
A summary
accruing
in my workpaper
of these findings
is presented
The cost and revenue
due to the availability
in witness
impacts
of delivery
of the
confirmation
are
WP 5.
3. FEE DESIGN
As the financial
6
analysis
7
cost coverage
for delivery
0
excludes
9
which have been included
confirmation
11
when used with Standard
12
confirmatioln
13
coverage
in WP 5 indicates,
service
thiose costs related to providing
the estimated
is 106 percent.
Priority
This coverage
Mail base delivery
fees, the implicit coverages
(B) mail are 165 percent
and 123 percent
for manual delivery
for Priority Mail retail surcharge
fees for delivery
delivery
delivery
confirmation.
The implicit
confirmation
is 103 percent
15
market plac:e for expedited
16
offer trackirlg
17
satisfy its customers
16
Service
19
Priority Maill customers
who satisfy the criteria described
in witness
20
testimony
pp. 5-6). As indicated
Sharkey
21
the base volume
(IJSPS-T-22
delivery.
confirmation
for electronic
The proposed
has; elected
expectations
to provide
reflect an evolution
All of the Postal Service’s
often included
variable
confirmation
for delivelry confirmation
14
capabilities,
in the basic rate.
regarding
delivery
expedited
confirmation
costs of providing
in the
In order to better
delivery,
without
by witness
cost
major competitors
the Postal
additional
charge to
Treworgy’s
I[USPS-T-33)
this service are included
16
~~--
overall
in the costs of Priority Mail (see USPST-33).
Undler the proposed
10
summary
--
in Priority
,Y--
1
Mail CO&,
2
Priority Mail.
3
,-
and consequently
The proposed
have the effect of reducing
the cost coverage
35 cent fee for Priority Mail retail surcharge
4
confirmation
reflects the additional
5
to retail customers,
6
case of Priority Mail base delivery
7
confirmation
6
but to meset customers’
9
offering dIelivery confirmation,
cost of providing
above the costs included
available,
delivery
in Priority
confirmation,
10
customers
11
contribution
12
cover costs and provide
13
confirmation
the existing
of the associated
are presented
Mail costs.
contribution,
expects
customer
classifications.
a minimal
confirmation
status information.
the Postal Service
and help maintain
delivery
service
As in the
the intent is to make delivery
not as a source of additional
need for delivery
of
contribution.
However,
by
to attract some new
base, thereby
Consequently,
in and of itself,
protecting
the
the fee is set only to
The fees for delivery
in table 2.
TABLE 2
14
Delivery
Confirmation
Proposed
Fees
Service
Manual
Mail Classification
Priority
Mail
Standard
15
(B)
Type
Electronic
$
0.35
$
$
060
$
0.25
16
17
i-
The proposed
fees for delivery
18
Standard
(B) manual delivery
19
electronic
delivery
confirmation
confirmation
confirmation
of $0.60 per piece for
and $0.25 per piece for Standard
are intended
19
to be high enough
,io result in
(B)
1
revenue
th,at will cover the costs of the service
2
cover nonvolume-variable
3
have markups
4
delivery
5
erode contlribution
6
the criteria set forth in the Postal Reorganization
costs.
Unlike Priority
confirmation
some contribution
Mail, Standard
that are well below the system average.
to unreasonably
low levels.
(B) subclasses
Consequently,
offering
in Priority Mail volume
the cost coverage
of 106 percent
These fees are consistent
with
Act, 39 U.S.C. section
3622(b).
expected
6
confirmation,
9
service
satisfies
10
costs.
11
based on a conservative
estimate
12
estimated
is conservatively
13
service for ,a mail piece with delivery
14
mail piece without
15
range of information
16
speed or reliability
provided
17
constituting
proof of delivery
16
nor is the piece given different
19
would be the case for registered
20
mode of transportation,
21
no better than for pieces within the same subclasses
22
confirmation.
as a result of delivery
Criterion
3 that the
bear the costs that vary with it, and make some contribution
As discussed
in witness
cost coverage
written
to
at fees that are less than or just greater than costs would
Given the increase
7
and provide
the service,
Treworgy’s
testimony
(USPS T-2;!), the fees are
of the costs of providing
the service,
so the
low. While the value of delivery
confirmation
delivery
to other
(Criterion
confirmation
provides
and has no effect on the underlying
to the mail piece.
2) is higher than for a
only a narrow
service
Specifically,
im terms of
there is no signature
as there would be for return receipt service,
handling
as an accountable
mail or certified
and priority of delivery
20
mail.
piece Iof mail, as
In addition,
for delivery
the collection,
contirmlation
pieces is
that do not Lose delivery
-.
.'--
By offering
1
2
delivery
confirmation
based on the Costs of providing
service,
Criterion
who desire the additional
1 is satisfied.
delivery
Customers
confirmation
this time, there is not a fee increase,
7
no existiing customers
C’ustomers
currently
(Criterion
have offered delivery
confirmation
11
their customers
for several
12
and sometimes
as part of the basic service.
(Criterion
confirmation
14
preparahon
6) by offering
15
window
16
is not unlduly complicated
17
class of mail with which delivery
18
summary,
costs and provide
the proposal
to them all of the alternatives
and tracking
years, sometimes
The fees in the delivery
information
confirmation
reflect the degree
electronically.
to
fee,
of mailer
The structum
relevant
will be made available.
(Criterion
1, 2, 4, and 5 seem particularly
21
above, Criterion
for this new service.
22
two fees for each class tied to the costs associated
23
Criterion
by establishing
the service
3623(c),
Criteria
As described
as an optional
one witch
with the two levels of servic:e.
by having the customers
21
In
1).
criteria listed at Section
20
satisfied
service
7) by offering two levels of service for each1
With respect to the classification
2 is likewise
and tracing
as an option for an additional
service
is fair and equitable
1 is satisfied
Iof the Postal
lower fees to those mailers who will bypass
the package
(Criterion
does not exisl: at
(Criter-ion 4). As such,
5). As noted above, competitors
Service
who
by the fee.
to have available
10
13
service
per se, to consider
will be inconvenienced
will continue
available
confirmation
the
information
service will pay more than customers
As delivery
6
,/-
as an
service for which fees are charged
do not desire such information.
19
(B) customers
optional
offered through
7.
service to Standard
who desire the optional
1
delivery
confirmation
2
fact that, as the value of the mail to the sender and the recipient
3
sender
4
whether
the merchandise
4 relates to the importance
do not require
7
noted above, delivery
8
5 relates to the desirability
9
user and the Postal Service.
an extremely
10
the Postal Service
11
F. MERCHANDISE
12
1. PROPOSAL
the
of maintaining
classifications
which
and speed of delivery.
classifications
delivery
As
Criterion
from the point of view of the
have requested
confirmation
that
service.
RETURN
15
Library
16
128 percent.
17
2. CHARACTERISTICS
proposes
to retain the existing
return service.
return service
mailer withlout requiring
20
postage
21
resembles
and an additional
fee of 30 cents per
At the 23.3 cent unit cost indicated
H-107, the cost coverage
19
business
increases,
service to determine
As noted above, customers
initiate an optional
piece for merchandise
Merchandise
and by virtue of the
will not affect the speed of dellivery.
of special
14
Reference
confirmation
high degree of reliability
confirmation
The Postal Service
18
for such service,
sent was, in fact, delivered.
6
13
pay separately
may be more likely to choose delivery
Criterion
5
service
for merchandise
allows a recipient
fee for each piece received.
reply for First-Class
Mail, though
22
return would be
to receive parcels
the mailer to pay the postage.
in
The recipient
pays the
In this respect
merchandise
from a
it
return is most
,-.
1
often used as a supplement
2
obtain merchandise
3
Merchandise
return is a high value service,
relationship
5
return exist, namely
6
the recipient.
7
3. FEE IHISTORY
9
between
In Docket
merchandise
A permit felt is required
to
return service.
4
6
to parcel post service.
in that it helps to cement
mailers and their customers.
payment
of postage
Alternatives
return was raised 20 percent
piece fee was raised 25 percent
11
was raised 25 percent.
12
their fees using an advanced
13
was redu’ced 33 percent.
14
1981, there was no change
15
increased
16
of merchandise
17
G. PERMIT FEES
18
1. PROPOSAL
19
The Postal Service
20
percent,
21
fees:
to merchandise
by the sender and refund of postage
No. R94-1, the per piece fee (not including
IO
the
postage)
by
for
from $0.25 to $0.30. In 1991, the per
(from 20 cents to 25 cents) and the permit fee
Also in 1991, it became
a requirement
that firms pay
,-.
_,.-
22
23
33 percent
deposit account.
1988, the per piece fee
In 1985, the per piece fee increased
in the original
from its original
return is available
is proposing
from $85 to $100.
During
!jO percent.
In
per piece fee and the permit fee
level.
A complete
in library reference
to increase
This proposed
First-Class Mail Presort Fee
Standard (A) Bulk Mailing Fee
23
H-187.
the annual
increase
record lof the fee histor)
permit fees by 17
would apply to the following
Standard (B) Special Presort Mailing
Destination Bulk Mail Center Fee
Merchandise
Return Fee
Permit Imprint Fee
The fees for Periodicals
7
will be treated separately
below.
2. CHARACTERISTICS
The First-Class
8
9
applications
Fee
for First-Class
Mail Presort
Fee allows mailers to pay a discounted
mail that meets the appropriate
Mail Manual.
as set forth
in the Domestic
11
allows mailers
12
subject to the Postal Service’s
13
fees enable
14
piece, rates. Destination
15
enter their m,ailings at the bulk mail center where the pieces are delstined,
16
qualify for discounted
17
mailers to us,e merchandise
18
return refused
(B) Special
preparation
rnailers to enter Standard
standards.
Standard
rates,
(A) bulk mailing
(A) mail at bulk, as opposed
to single
bulk mail center fees allow mailers of standard
rates where applicable.
pieces without
return service,
Merchandise
thus allowing
number
in the front upper right-hand
21
postage
on {the pieces.
---
and to
return ,fees authorize
their customers
to
22
locations
as determined
23
requirements
24
mailings.
25
permit impri,nt fee is paid in addition
corner,
mail pieces with indicia and a permit
rather than use stamps or metered
Permit mail can be deposited
by the post office granting
are designed
mail to
having to pay postage.
20
All classes
presort mailing fee
mail to enter mail at discounted
Perm!it fees allow mailers to preprint
19
(B) Special
standard!;
IO
of Standard
The Standard
preparation
rate
to ensure
only at specified
the permit.
that the correct postage
of mail are eligible
for mailing
times and
These
is collected
under a permit imprint.
on
The
-.
to the other annual
24
--
permits fo’r those
,--
1
mailings
which
require
2
bulk, anlz’ destination
3
3.
permit indicia,
such as First-Class
Bulk Mail Center
presorted,
Standard
r(A)
mailings.
REVENUE AND VOLUME HISTORY
4
The number
of permit imprint accounts
5
1970 to a peak of 166,000
6
has declined
7
for the permit imprint fee is included
0
4. FEE HISTORY
in FY 1985.
to fewer than 100,000.
grew steadily
from 47,000
Since that time, the number
A complete
revenue
in library reference
10
year to $85 a year.
11
Each previous
12
percent
13
33 percent
14
complete
15
187.
16
5. FEE DESIGN
history
H-187.
In 1991, the fee was raised 25 percent,
fee increase
of permits
and transaction
In1Docket No. R94-1, the permit fee was raised 13 percent
9
in FY
from $75 a
from $60 to $75.
had been $10 from the pre-existing
level.
The
.,.+
iincreases for those years were 20 percent in 1988, 25 percent in 1985,
in 1981, 50 percent
record of the fee history for permit is available
Alj indicated
17
in 1978, and 100 percent
in library reference
10
permits
19
cover these costs and provide
20
costs.
A mol-e
in libralry reference
H-
H-107, the unit cost of administering
has risen to $87.17 in the test year.
a modest
in 1976.
The $100 fee has been proposed
contribution
25
to non-volume-variable
to
1
H. PERIODICALS
APPLICATION
FEES
1. PROPOSAL
The Postal Service
applications.
For original
proposes
the following
entry the fee will remain $305, the addihonal
will be $50, and the fees for reentry
the cost coverage
7
for Periodicals
entry fee
and news agents will be $50. At these fees
application
fees would be 129 percent.
2. CHARACTERISTICS
The Periodicals
I3
9
fees for Periodilcals
application
who wish to obtain Periodicals
fee is a one-time
mailing
10
original
11
application.
12
other than 1:hose where the original
13
entry by filing an application
privileges
entry fee is to cover the administrative
Holders
of a Periodicals
fee required
for their publications.
costs of processirxg
The re-entry
application
15
the status of the authorized
16
frequency
entry was granted
and fee are required
17
office of entry receives
18
registration
19
who handle two or more publications
publication
of issues, preferential
changes,
may request
the
and processes
of Periodicals:
with a change
the application
of requests
by different
at offices
an additional
entry fee.
mailers vvhen
in name,
rate status, or office of publication.
fee is to cover processing
The
permit who wish to enter mailings
and paying the additional
14
of all mailers
The original
and fee. The news
by authorized
publishers.
n’ews agents
.---.
1
3. REVEiNUE HISTORY
Revenues
2
3
that growth
4
percent
5
declined
6
application
from Periodicals
has been erratic.
application
For example,
over the last ten years. However,
from the previous
fees is available
year.
fees have grown over time, though
revenue
has grown an averacle
of 3
in five of those ten years, revenue
A more complete
in library reference
revenue
history of Periodicals
H-187.
4. FEE HISTORY
Init:ially, original
entry fees were based on the publication’s
10
1978, the $30 fee for a circulation
under 2,000 was increased
11
the first increase
mailing application
12
reorganization.
13
than 2,000 but less than 5,000 was increased
14
with circulation
15
circulation
16
current
for second-class
circulation.
In
tom$120, marking
fees since postal
Also in 1978, the $60 fee for publications
with cilrculation
greatel
,*-
17
had no bearing
unchanged
on application
The fee for publications
at $120.
Subsequent
fees, which have gradually
to 1978
risen to their
level.
The re-entry
and news registration
10
‘1970. A classification
19
Since that change
20
,-
over 5,000 remained
to 5120.
Additional
change
fees were $15 and $2!5 respectively
implemented
in 1978 equated
the two fees have remained
the two fees at $30.
equal.
entry fees were at one time based on distance,
21
charge for a more distant zone. In 1970 the fees for an additional
22
1 & 2 was $15 and for zones 3 - 8 was $50.
23
registration
fees a 1978 reclassification
with a higher
entry for zones
As in the case of re-entry
established
27
in
and news
a single fee for additiclnal
1
entries
irrespective
2
history of Periodicals
3
5. FEE DESIGN
of zone.
The fee at that time was set at $50. A complete
application
fees is available
fee
in H-187.
4
5
As indicated
above, the Postal Service
6
additional
entry applications
7
schedule
for Periodicals
6
applications
9
fees updated
from $85 to $50.
applications,
are processed.
in October
and reentry
proposes
In addition
the change
of Second-Class
1983, a cost differential
applications
applications
11
to the fact that at that time reentry
12
3510, whereas
13
These applications
14
processing
15
personnel
16
case. Both reentry and additional
17
essentially
18
the processing
between
was established.
applications
there were no forms available
to simplifying
reflects a change
In the cost analysis
IO
to reduce the fee for
in the way
application
additional
The differential
were processed
for additional
the fee
entry
was due
using PS Form
entry applicants.
-_
letters from the publisher,
costs at Postal Service
in the Business
identical
Because
19
required
headquarters.
Mail Acceptance
handling.
According
department,
entry applications
As indicated
entry applications
20
comprise
2 percent
of periodicals
21
minimal.
Despite the proposed
22
continue
to cover costs, and to provide
reduction
this is no longer thle
use Form 35,lO and receive
to $44.65.
few in number
(they
the effect on cost coverage
in this fee,
contribution
28
H-.107. reducing
entry applications
are relatively
applications),
in increased
to Postal Service
in library reference
time lowers unit costs for additional
additional
resulting
Periodicals
applications
to non-volume-variable
is
will
.-
1
costs.
2
reducing
Moreover,
the fee reduction
the complexity
satisfies
the seventh
of the fee structure
29
ratemaking
criterion
by