______________________________________________________________________________
BEFORE THE
POSTAL REGUATORY COMMISSION
__________________
Docket No. R2006-1
____________________________
POSTAL RATE AND FEE CHANGES, 2006
________________________
JOINT REPLY BRIEF
OF
DIRECT MARKETING ASSOCIATION, INC.
ALLIANCE OF NONPROFIT MAILERS
CONCERNING ALLOCATION OF INSTITUTIONAL COSTS
________________________
David M. Levy
SIDLEY AUSTIN LLP
1501 K Street, NW
Washington, DC 20005-1401
(202) 736-8214
Counsel for Alliance of Nonprofit Mailers
Dana T. Ackerly II
COVINGTON & BURLING LLP
1201 Pennsylvania Avenue, N.W.
Washington, DC 20004-2401
(202) 662-5296
Counsel for Direct Marketing
Association, Inc.
Dated: January 4, 2007
______________________________________________________________________________
TABLE OF CONTENTS
I.
COMMISSION PRECEDENT UNDER SECTION 3622 IMPOSES A HEAVY
BURDEN ON ANY PROPOSAL TO REALLOCATE THE INSTITUTIONAL COST
BURDEN BETWEEN FIRST-CLASS MAIL AND STANDARD MAIL. ....................... 1
II.
GCA HAS FAILED TO JUSTIFY SHIFTING TO STANDARD MAIL ANY
INSTITUTIONAL COSTS FROM SINGLE-PIECE FIRST-CLASS MAIL, LET
ALONE FROM FIRST-CLASS MAIL GENERALLY...................................................... 4
A.
GCA’s Rate Proposal(s) Would Entail A Major Reallocation Of Institutional
Cost Burdens From First-Class To Standard Mail. ................................................. 8
B.
GCA Has Ignored Most Of The Relevant Pricing Factors Of 39 U.S.C.
§ 3622(b). ................................................................................................................. 8
C.
III.
IV.
1.
Maintenance of a fair and equitable rate schedule (Factor 1) ......................9
2.
Value of the mail service actually provided to the sender and the
recipient (Factor 2) ....................................................................................11
3.
Effect upon business mail users (Factor 4) ................................................13
GCA’s Analysis Of Electronic Substitution For Bill Payment Mail Is Superficial
And Unsound. ........................................................................................................ 17
1.
Qualitative analysis ....................................................................................17
2.
Econometric data .......................................................................................19
D.
The Potential For Reduction Or Elimination Of The Contingency Requested By
The Postal Service Provides No Justification For GCA’s Pricing Proposal. ........ 19
E.
Even If A Reduction In The Institutional Burden On Some First-Class Mail
Were Warranted—And It Is Not—The Remedy Proposed By GCA Is Grossly
Overbroad. ............................................................................................................. 20
THE REBUTTAL TESTIMONY OF NAA WITNESS SIDAK CANNOT BE RELIED
ON AS SUPPORT FOR ANY INCREASE IN THE INSTITUTIONAL COSTS
RECOVERED FROM STANDARD MAIL. .................................................................... 21
A.
Mr. Sidak’s Testimony, To The Extent Used By NAA To Attack The Allocation
Of Institutional Costs Proposed By The USPS In Its Case-In-Chief, Constitutes
Improper Rebuttal. ................................................................................................. 22
B.
NAA Has Failed To Justify Its Pricing Proposal Under The Pricing Factors Of
The Act. ................................................................................................................. 23
C.
The Changing Relative Volumes Of First-Class And Standard Mail Are An
Insufficient Basis For Shifting Institutional Costs Between Classes. .................... 24
CONCLUSION.................................................................................................................. 25
BEFORE THE
POSTAL REGULATORY COMMISSION
WASHINGTON, D.C. 20268-0001
________________________________________________
)
POSTAL RATE AND FEE CHANGES, 2006
)
________________________________________________)
Docket No. R2006-1
JOINT REPLY BRIEF
OF
DIRECT MARKETING ASSOCIATION, INC.
AND ALLIANCE OF NONPROFIT MAILERS
CONCERNING ALLOCATION OF INSTITUTIONAL COSTS
Direct Marketing Association, Inc. (“DMA”) and the Alliance of Nonprofit Mailers
(“ANM”) respectfully submit this reply brief on the allocation of institutional costs between
First-Class Mail and Standard Mail. This brief responds to the initial briefs of the Greeting Card
Association (“GCA”) and the Newspaper Association of America (“NAA”). For the reasons set
forth below, the Commission should reject the proposals made by GCA and NAA to reallocate
institutional costs from First-Class Mail to Standard Mail, as compared with the institutional cost
allocation proposed by the Postal Service.
I.
COMMISSION PRECEDENT UNDER SECTION 3622 IMPOSES A HEAVY
BURDEN ON ANY PROPOSAL TO REALLOCATE THE INSTITUTIONAL
COST BURDEN BETWEEN FIRST-CLASS MAIL AND STANDARD MAIL.
The statutory scheme for allocating institutional costs from individual classes and
subclasses of mail is undoubtedly familiar to the Commission. Rates for all classes and
1
subclasses, with narrow exceptions, must cover their attributable costs. 39 U.S.C. § 3622(b)(3).1
Institutional costs—the costs not attributable to individual classes and subclasses—must be
allocated among those classes pursuant to the remaining eight factors of Section 3622(b).2
The first two decades after the enactment of the Postal Reorganization Act witnessed
recurrent litigation over the meaning of these provisions. Much of this litigation involved
disputes between users of First-Class and Third-Class (now Standard) Mail over the allocation of
institutional costs between the two classes. These issues were considered at length in two
appellate court decisions that addressed the statutory pricing factors and their application to the
multi-faceted characteristics of the two classes.3
1
Unless otherwise indicated, citations are to Title 39, U.S. Code, immediately before enactment
of the Postal Accountability and Enhancement Act (“PAEA”), Pub. L. No. 109-435, 120 Stat.
3198. Section 201 of PAEA, to be codified at 39 U.S.C. § 3622(b), appears to contemplate that
the ratemaking provisions of the prior statute will generally remain applicable for this case.
National Ass’n of Greeting Card Publishers v. USPS, 462 U.S. 810, 834 (1983) (“NAGCP IV”).
In its 1983 decision in NAGCP IV, the Supreme Court put to rest a decade-long dispute over the
meaning of Section 3622(b)(3), i.e., whether Congress intended the term “reasonably assignable”
to create a third tier of costs that were to be assigned separately to the various mail classes, or
whether the term was simply a reference to a two-tier pricing process under which all nonattributable costs (known as “institutional” costs) would be distributed among the classes in
accordance with the pricing factors. The Court held that the two-tier approach was the correct
interpretation of the Act.
2
Direct Marketing Ass’n, Inc. v. USPS, 778 F.2d 96, 102 (2d Cir. 1985) (“DMA”) (“Title 39,
U.S. Code section 3622(b), sets out nine factors, in addition to the ‘policies of this title,’ that
must be considered in setting postal rates.”); id. at 104 (“All factors must be considered . . .”);
Mail Order Ass’n v. USPS, 2 F.3d 408 (D.C. Cir. 1993).
3
The DMA case was the first appeal of an omnibus postal rate case (PRC Docket No. R84-1)
following the NAGCP IV decision. In its decision, the Second Circuit reviewed in detail, and
approved, the justifications that the Commission had given for the relative institutional costs
burdens it was recommending for First-Class and “Bulk Rate Regular” Mail (as Standard Mail
was then called). 778 F.2d at 101-106. The MOAA case was an appeal from PRC Docket No.
R90-1. In its decision, the D.C. Circuit also reviewed in detail the Commission’s consideration
of the nine statutory factors. 2 F.3d at 426-427.
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Throughout this period, and continuing to the present, the Commission has thoroughly
analyzed all the statutory pricing factors and has articulated its judgment concerning the basic
relationship between the cost coverages of First-Class and Standard. Although the precise
numbers have varied from case to case, the basic principles have not. Consequently, the result
of the Commission’s analysis has remained the same: cost coverage for Standard Mail should be
at, or slightly below, the systemwide average, and cost coverage for First-Class Mail should be
somewhat above the systemwide average.4 The level of care and detail exercised by the
Commission in this process is demonstrated, to take just two examples, in its Opinions in the last
two omnibus postal rate cases that were fully litigated, Docket Nos. R97-1 and R2000-1. The
attention of the Commission is respectfully directed to the relevant sections of these two
opinions.5
The result of these criteria is a conservative, incremental approach that disfavors radical
changes in the allocation of institutional costs. As the Commission said in its Opinion in R97-1,
Simply put, the Commission relies on the precedential value of its past evaluation of the
evidence as a starting point and then evaluates new evidence presented to determine
whether changes from its past allocation decisions are appropriate.6
4
E.g., PRC Op. R84-1 at 464, quoted in DMA, 778 F.2d at 101-102; R97-1 Op. at 433-435, 446447. NAA erroneously claims that “the Commission has consistently stated that it would have
preferred to reduce the institutional cost burden on First-Class Mail relative to other classes, but
felt unable to do so because of concerns of rate shock in other classes that would have had to pay
more.” NAA Br. at 36 (emphasis added). NAA’s claim is correct only for the Commission’s
recommended decisions in R90-1 and R94-1. The Commission has generally approved the
institutional cost burdens proposed by the Postal Service since then. See PRC Op. R97-1 at 434,
¶¶ 5510-5511; PRC Op. R2000-1 at 352 (USPS presentation is “well reasoned”).
5
PRC Op. R97-1 at 227-597; PRC Op. R2000-1 at 193-599. Concerning the rates for Standard
Mail specifically, see, e.g., PRC Op. R2000-1 at 350-352.
PRC Op. R97-1 at 229; see also PRC Op. R2000-1 at 196 (“[The Commission’s extensive
discussions of the way in which the various non-cost criteria are incorporated in its
recommended rates] serve as benchmarks for evaluating whether . . . new evidence warrants a
departure from prior allocations.”).
6
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In the present case, the USPS has proposed an allocation of institutional cost burdens that
would maintain essentially the same relationship that has prevailed in the last several omnibus
rate cases.7
The only two participants to argue seriously in their briefs for a shift of institutional
costs from First-Class Mail to Standard Mail are GCA and NAA. As we explain in the next two
sections of this brief, neither GCA nor NAA has satisfied the burden of proof required by the
Commission under Section 3622(b) for such a reallocation of institutional costs.
II.
GCA HAS FAILED TO JUSTIFY SHIFTING TO STANDARD MAIL ANY
INSTITUTIONAL COSTS FROM SINGLE-PIECE FIRST-CLASS MAIL, LET
ALONE FROM FIRST-CLASS MAIL GENERALLY.
The initial briefs of DMA/ANM and the Postal Service explained why the Commission
should reject the proposal of the Greeting Card Association (“GCA”) to shift several hundred
million dollars in institutional costs (and possibly as much as $800 million) from Single-Piece
First-Class Mail (and possibly presort First-Class Mail as well) to Standard Mail. DMA/ANM
Br. Concerning Allocation Of Institutional Costs; USPS Br. 37-62, 134-36, 139-41. Nothing in
the initial brief of GCA warrants a different conclusion. Cf. GCA Br. 23-65.
Before responding to GCA’s specific arguments, it is worth noting that the particular
rates GCA is actually proposing, and the particular evidence GCA relies on in support of those
rates, are unclear. The original GCA proposal, as set forth in the September 6 direct testimony of
GCA witness James Clifton, was limited to the Single-Piece subclass of First-Class letter mail.
Dr. Clifton proposed that the Commission recommend a rate of 41 cents for the first ounce of
Single-Piece First-Class letters—one cent less than the 42 cent rate requested by the Postal
Service—and make up the resulting shortfall in institutional costs by increasing rates on
7
E.g., O’Hara, Tr. 31/5122-23.
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Standard Mail. He specifically disclaimed any intention to modify the rates proposed by the
Postal Service for Presort First-Class Mail:
For this case, I propose that the Commission increase the unit
contributions made by Standard A Regular Mail sufficiently to
reduce the rate increase on First Class single piece letters from 42
to 41 cents. Under de-linking, this proposal should not impact the
rates or discounts proposed by the Postal Service for First Class
workshared mail at all, and I do not propose any change in those
rates from what USPS has proposed. 8
In mid-October, GCA reversed course. It filed a discovery response by Dr. Clifton
asserting that his proposal “must” be expanded to include a one cent-per-piece reduction in rates
for Presort First-Class Mail as well.9 A few days before Dr. Clifton’s appearance on the witness
stand, GCA filed a revised version of his testimony explicitly incorporating this “alternative”
proposal.10 On cross-examination, however, Dr. Clifton was unable to estimate with certainty
the revenue impact of the expanded proposal, or even to specify what kinds of First-Class Mail it
would cover.11
GCA’s brief appears to signal a retreat from Dr. Clifton’s expanded proposal. On the one
hand, GCA argues vociferously against the “delinking” of Single-Piece and Presort rates. GCA
Br. 10-23. On the other hand, the section of GCA’s brief dealing with the allocation of
institutional costs between First-Class and Standard Mail asks only that the Commission limit the
8
Clifton Direct (GCA-T-1) (version originally filed on Sept. 6, 2006) at 58; accord, Clifton
revised response to DMA/GCA-T1-1(h) (filed Oct. 20, 2006), Tr. 29/9786 (“My proposal is
limited to First Class single piece letter mail and Standard A Regular letter mail.”).
9
Clifton response to DMA/GCA-T1-7 (Tr. 29/9794-99).
10
Clifton Direct (GCA-T-1) (revised version filed Nov. 2, 2006) at 59-60; Notice of Filing of
Revised Testimony of GCA Witness Clifton (Nov. 2, 2006); see also Tr. 29/9959 (Clifton)
(explaining rationale for expanding proposal).
11
Compare Tr. 29/9959 (Clifton) (estimating that his expanded proposal would reduce the
contribution from First-Class Mail by approximately $519 million per year); id. at 9960 (unable
to reconcile $519 million figure with existence of 980 billion pieces of First-Class Mail).
-5-
increase in “FCLM first ounce rates to no more than 41 cents”—a request that could be
accommodated by a rate adjustment limited to single-piece mail. Id. at 65; accord, id. at 6.
GCA’s brief makes no mention of its augmented proposal, and avoids any mention of how much
its proposal would cost (which would reveal whether the augmented version of the proposal is
still on the table), let alone how GCA would pay for it through offsetting rate increases.
The evidence GCA relies on appears to be a moving target as well. GCA’s direct case
rested primarily on an elaborate econometric study by Dr. Clifton of the elasticity of demand for
Single-Piece First-Class Mail service; qualitative market analysis received relatively little
attention. Clifton Dir. (GCA-T-1) at 58-59; Kelejian Dir. (GCA-T-5); cf. Martin Dir. (GCA-T2). Cross-examination and rebuttal testimony exposed numerous flaws in the specification and
assumptions of Dr. Clifton’s model, however, and demonstrated that its results are nonsensical
on their face. The model predicts, for example, that reducing the Single-Piece rate by one cent
while leaving Presort rates unchanged would cause Single-Piece volume to decrease. Thress
Reb. (USPS-RT-2) at 43 (citing Tr. 29/9932); see generally Thress Reb. (USPS-RT-2); USPS
Br. 58-59 (discussing record).
In its brief, GCA has backpedaled from its reliance on Dr. Clifton’s model, emphasizing
instead a series of qualitative or impressionistic arguments for reducing the Single-Piece rate.
GCA Br. 23-40. GCA buries its defense of the model in a short section deep into its brief, id.
at 54-61, and asserts that the GCA rate proposal should be adopted even if the Commission
rejects Dr. Clifton’s elasticity estimates in favor of the Postal Service’s. Id. at 61-62 (asserting
that the Commission “does not have to resolve the battle of elasticities in order to adopt GCA’s
position”); id. at 6 (stating that the “elasticity battle is subsumed by considerations of the broader
market realities,” which warrant adoption of a 41-cent Single-Piece rate “[r]egardless of whether
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the Commission credits GCA’s or the Postal Service’s measures of First Class elasticity.”); id.
at 25 (“At the end of the day . . . the elasticity battle is subsumed by considerations of the
broader market realities.”).
This whack-a-mole litigation strategy cannot, however, obscure GCA’s failure to meet its
burden of proof under Section 3622(b). First, it is undisputed that even the most modest version
of GCA’s proposal would shift several hundred million dollars of institutional costs annually to
Standard Mail. Second, GCA has not begun to make the multi-factor showing required by the
Commission under Section 3622(b) for such a reallocation of institutional costs. Third, even if
(contrary to fact) changes in demand elasticities or competitive market conditions were sufficient
under Section 3622(b) to justify a reallocation of institutional costs, the hypothesis that
competition from electronic diversion has made the Postal Service’s remaining volume of
Single-Piece First-Class Mail highly price sensitive is unsupported by the record. To the
contrary, the price of postage is one of the least significant influences on whether households
switch to electronic bill payment; and even GCA concedes that households that already use
electronic bill payment are unlikely to return to First-Class Mail at any conceivable rate of
postage. Finally, even if (again contrary to fact) GCA had established its case, the proposed
remedy of reducing rates on all First-Class letter mail (or even all Single-Piece Mail) would be
grossly overbroad. GCA has offered no evidence that the demand for other kinds of Single-Piece
First-Class Mail—including greeting cards and other personal correspondence—is elastic, or has
become any more elastic than in past rate cases. In fact, demand for this kind of mail service
remains highly inelastic, and the markups proposed by the Postal Service for it remain
appropriate.
-7-
A.
GCA’s Rate Proposal(s) Would Entail A Major Reallocation Of Institutional
Cost Burdens From First-Class To Standard Mail.
It is undisputed that either version of GCA’s proposal would result in a large shift of
institutional costs to Standard Mail, and large percentage increases for that mail. Cf. Tr.
29/9795-96 (Clifton response to DMA/GCA-T1-7) (estimating that his original and expanded
proposal would reduce contribution from First-Class Mail by approximately $338 million and
$519 million, respectively); Robinson Reb. (USPS-RT-10) at 12-23, Tr. 32/10711-12 (estimating
that expanded GCA proposal could reduce First-Class contribution by approximately $812
million). GCA’s initial brief does not even mention any of these figures.
That this reallocation of institutional costs would have a large push-up effect on Standard
Mail rates is equally undisputed. USPS witness Robinson testified that witness Clifton’s first
proposal would result in an 11.8 percent increase for Standard Mail Regular and an 11.0 percent
increase for Nonprofit Standard Mail. She also testified that witness Clifton’s second proposal
would result in a 14.8 percent increase for Standard Regular and a 14.0 percent increase for
Standard Nonprofit. Robinson Reb. (USPS-RT-10), at 14, 25, Tr. 32/10713, 10724. Moreover,
witness Robinson has actually underestimated the rate increases for letter-shaped Standard Mail,
since her estimates spread Clifton’s revenue differential over all Standard Regular and Nonprofit
Mail, whereas witness Clifton’s recommendation applies only to the letter-shaped mail. GCA
ignores these facts as well.
B.
GCA Has Ignored Most Of The Relevant Pricing Factors Of 39 U.S.C.
§ 3622(b).
GCA’s initial brief, like its prefiled testimony, largely ignores the ratemaking criteria
enumerated in 39 U.S.C. § 3622(b). This omission would alone require rejection of the GCA
proposal—even if (contrary to fact) GCA had managed to demonstrate that the demand for
-8-
Single-Piece First-Class Mail were more elastic than in the past. We discuss each relevant
ratemaking factor in turn.
1.
Maintenance of a fair and equitable rate schedule (Factor 1)
Section 3622(b)(1) requires the Commission to consider “the establishment and
maintenance of a fair and equitable schedule” of rates. Fairness in this sense is often regarded as
protecting mailers from undue exploitation of monopoly power. E.g., R 94-1, Appendix F, p. 24,
¶ 169; accord, Tr. 29/9971 (Clifton) (agreeing that Factor 1 “sometimes has been described as
fairness in terms of exploiting monopoly power”). This provision obviously does not help GCA:
the very premise of its case is that competition from electronic communications is making
inroads into the market for bill-payment and other transaction communications, thereby
assertedly lessening (or even eliminating) the Postal Service’s market power over such
communications. See, e.g., Clifton Direct (GCA-T-1) at 11 (“USPS HAS NO REMAINING
MARKET POWER IN THE U.S. PAYMENTS MARKET . . ..”).
The GCA proposal is clearly unfair and inequitable in one important respect: it would
dilute the recognition of shape, and its effect on costs, proposed by the Postal Service in this
case. In an obvious attempt to limit the already large impact of the GCA proposal on rates for
Standard Mail, Dr. Clifton stated that he did not intend to apply his proposal to First-Class flats
and parcels. Tr. 29/9960-61. The effect of this limitation, however, is to reduce the shape-based
differentiation that the Postal Service has proposed in this case. Id. at 9961. Dr. Clifton did not
address this issue in his testimony. Id.
GCA argues that the existing allocation of institutional costs to Single-Piece First-Class
Mail is unfair in a different sense: that it imposes a regressive burden on the lower-income
households because the users of single-piece mail “will likely be . . . disproportionately
-9-
comprised of the less educated, the elderly, and the less wealthy.” GCA Br. 38-40. This
argument suffers from several obvious fallacies, however.
First, GCA offers no evidence that increases in the Single-Piece rate are regressive to any
substantial degree. The annual household expenditure on Single-Piece First-Class postage is
approximately $84.66 and the average household sends about 187 pieces of mail each year.12
The 2005 Household Diary Study also shows that less affluent families send about the same
amount of single piece mail as more affluent families. A one-cent reduction in the price of
Single-Piece First-Class Mail would thus save less affluent families about $1.87 per year, about
the cost of a two-liter bottle of soda pop. This is hardly the place where a social reformer would
start in attacking regressive policies or practices in the United States.
Dr. Clifton, by his own admission, not only made no estimate of how much money his
proposal would save the average household in First-Class Postage, but he also made no estimate
of how much more the consumer would “pay indirectly for higher Standard postage paid by . . .
vendors or advertisers.” Tr. 29/9972 (Clifton). In any event, nothing in the record indicates that
a one-cent change in the Single-Piece rate would have a material impact on the standard of living
of any demographic group — rich, middle-class or poor.
Second, GCA makes no attempt to quantify the distributional effect of the increases in
Standard Mail rates that would be required to offset a reduction in First-Class rates. This is
hardly a trivial concern. America’s charities depend heavily on the Nonprofit subclasses of
Standard Mail to raise funds. Because 39 U.S.C. § 3626 links nonprofit and commercial
12
Household Diary Study -- Mail Use & Attitudes in FY 2005 (USPS April 2006). The Diary
shows 21.1 billion pieces of First-Class Mail sent by households. Table E1. The average
revenue per piece is 45.3 cents. Table 1.3. There are 112.9 million households. Table 2.2.
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Standard rates through a statutory formula, Dr. Clifton’s proposal would necessarily increase
nonprofit Standard rates in tandem with commercial Standard rates. PRC R2005-1 Op. & Rec.
Decis. ¶ 6058; accord, Robinson Reb. (USPS-RT-10), Tr. 32/10712. Increased Standard Mail
rates for these nonprofit organizations could mean a dollar-for-dollar reduction in program
expenditures, hurting the poorest of America’s poor.
2.
Value of the mail service actually provided to the sender and the
recipient (Factor 2)
Section 3622(b)(2) requires the Commission to consider “the value of the mail service
actually provided each class or type of mail service to both the sender and the recipient,
including but not limited to the collection, mode of transportation, and priority of delivery.”
Value of service is the only factor to which GCA gives any significant attention. The
proposition that the demand for Single-Piece First-Class Mail has become more elastic is, among
other things, an argument that, at least in one dimension, the value of this class of service has
declined. Even here, however, GCA’s analysis is superficial and incomplete.
First, the value of a service for purposes of Section 3622(b)(2) is a far more complex and
multi-dimensional attribute than simply the own-price elasticity of demand for the service, and
consideration of value of service in setting coverage ratios is a far more nuanced exercise than
Ramsey Pricing.13 In fact, as the Commission has long recognized, the value of an average piece
E.g., DMA, 778 F.2d at 103-104 (“Value of service” includes “intrinsic value” as well as
relative demand); Tr. 29/9803 (Clifton response to NNA/GCA-T1-1) (agreeing that “there are
other factors that matter in determining the value of [a] subclass to mailers beyond its own price
demand elasticities in general”); id. at 9967, lines 1-8 (Clifton) (disavowing any intention to
propose Ramsey pricing); id. at 9969, lines 1-2 (same).
13
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of First-Class Mail to its sender and recipient is substantially higher than the value for a
corresponding piece of Standard Mail.14
Second, GCA’s market analysis of the effect of electronic substitution on demand for
First-Class Mail service is limited to bill payment (or transactional) mail. A substantial share of
Single-Piece First-Class volume, however, is used to send greeting cards and other personal
correspondence, and for other purposes apart from bill payments. Tr. 29/9948-49 (Clifton crossex); 2005 Household Diary Study at 20 (reproduced at Tr. 29/9993). GCA offers no analysis
whatsoever of the value of this service. Tr. 29/9949, lines 3-15, and 9950, lines 3-10 (Clifton)
(admitting that he had not developed separate elasticity estimates for Single-Piece First-Class
Mail used to send greeting cards or other personal correspondence); id. at 9949, line 24, to 9950,
line 2 (admitting that he had not evaluated the competition that the USPS faces for delivery of
greeting cards). These are striking omissions from a trade association whose very reason for
being is the promotion of the greeting card industry. GCA’s reticence in this area is
understandable: Single-Piece First-Class Mail used for personal correspondence has a very high
value of service, stable and highly inelastic demand, and only limited substitution from
electronic communications. See Tr. 29/9950, lines 8-10 (Clifton) (acknowledging that he did not
analyze demand for greeting card mail because it is not an area “where volume is substantially
E.g., PRC Op. R97-1 at 433 (“[Standard] Regular mail possesses intermediate intrinsic value
of service and economic value, higher than those of ECR mail, but not at the level of First-Class
Mail.”); O’Hara Direct, USPS-T-31 (Revised August 25, 2006) at 17-18, 27 (“Value of service
(criterion 2) for First-Class Mail letters is high in terms of both intrinsic and economic measures.
It benefits from the extensive collection system, which is designed primarily for First-Class Mail,
it travels by air when the distance between sender and recipient warrants it, and it receives a high
priority of delivery. It is sealed against inspection and is forwarded (or returned to sender)
without additional charge.” By contrast, “Standard Regular has a relatively low intrinsic value of
service (criterion 2) due to its lack of access to a collection system, reliance on ground
transportation, and its potential deferability for delivery. . . . The price elasticities for Standard
Regular and Nonprofit . . . suggest[] an intermediate economic value of service.”)
14
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declining”); id. at lines 13-14 (agreeing that “the demand for mail delivery of greeting cards is
quite inelastic”); id. at 15-18 (agreeing that greeting cards have a “high value to the sender”); id.
at 9951, lines 3-5 (not disputing that greeting cards also have a high value to the recipient as
well). According to GCA, e-mail, text messaging and phone calls are inferior substitutes for
greeting cards: “the majority of Americans say they prefer the old-fashioned handwritten card or
letter to make someone feel truly special.” Tr. 29/9991 (GCA fact sheet). Furthermore, because
the typical greeting card costs between $2 and $4 (id.), changes in postage rate have only a small
impact on the delivered cost of the card.
Third, GCA analysis of demand is completely solipsistic. While GCA offers estimates
of changes in the elasticity of demand for Single-Piece First-Class Mail, GCA witness Clifton
offered no corresponding econometric estimates of the elasticity of demand for Standard Mail
and other mail classes that share the burden of covering the Postal Service’s institutional costs.
In fact, banks and other marketers and advertisers have a wide variety of alternatives to Standard
Mail for solicitations. Buc Reb. (DMA-RT-1), Tr. 35/11686-99. Without data that would
support a comparative analysis of changes in substitute services and demand elasticities across
mail classes, the elasticity of demand for First-Class Mail alone is a meaningless statistic.
3.
Effect upon business mail users (Factor 4)
Section 3622(b)(4) also requires the Commission to consider “the effect of rate increases
upon . . . business mail users.” GCA did not consider this factor; and GCA’s subsequent efforts
to cure this omission merely underscore the superficiality and incompleteness of GCA’s analysis.
The financial services industry constitutes a major group of business mail users.
According to the 2005 Household Diary Study, a publicly available source of data that Dr.
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Clifton has cited at least a dozen times in this case for other purposes,15 households received 13.8
billion bills and statements by mail from the financial services industry in 2005, slightly more
than half of the 25.2 billion bills and statements from all sources that year. 2005 Household
Diary Study at 32. Banks, S&Ls, credit unions and credit card issuers alone accounted for 8.9
billion of these pieces. Id. In the same year, households received 8.7 billion pieces of
advertising from the financial services industry via First-Class Mail, and 19.4 billion pieces via
Standard Mail. Id. at 39. Under the circumstances, information on the financial effect of Dr.
Clifton’s proposal on the financial industry is directly relevant to the Commission’s analysis
under Section 3622(b)(4). See Presiding Officer’s Ruling No. R2006-1/97 (compelling GCA to
produce such information).
In his answer to a discovery request from DMA, Dr. Clifton asserted that the banking
industry as a whole “should be pleased with” his proposal to shift the coverage of institutional
costs from Single-Piece First-Class letters to Standard Mail. Dr. Clifton stated that, according to
the “latest publicly available reliable data I have seen,” (1) a “majority of the bank industry’s
mail volume in First Class continues to be mailed at the full single piece rate”; (2) “banks outside
of urban and suburban areas do not necessarily have access to a presort bureau and do not have
enough mail volume to warrant leasing or purchasing automation machinery”; and “[l]ess than
6% of the banking industry’s volume of mail and cost of mail is posted at Standard A Regular
Rates.” Tr. 29/9789 (Clifton response to DMA/GCA-T1-3).
After the Commission granted DMA’s motion to compel GCA to produce the “latest
publicly available reliable data” to which Dr. Clifton alluded, however, his “latest publicly
15
See Clifton Direct (GCA-T-1) at 9 n.1; Clifton response to USPS Interrogatory USPS/GCAT1-49, 59 and 60, Tr. 29/9865-67, 9884, 9886, 9892.
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available reliable data” turned out to be the report of a survey of banks taken in 1999—or, more
precisely, a mislabeled pie chart in the survey report. He also conceded that only a small fraction
of the First-Class Mail sent by banks today is still Single-Piece mail. Tr. 29/9871-72, 9935-40
(Clifton discovery responses); see also Tr. 29/9977 (Clifton).16
Dr. Clifton continued to insist, however, that the impact of his proposal would be
“obviously, and irrefutably, a net gain for the banking industry” because, according to the 1999
bank survey data, banks enter 1.7 billion pieces of single-piece First-Class Mail but only 426
million pieces of Standard A regular mail. Tr. 29/9940 (emphasis in original). But the notion
that banks and other financial services firms send only 426 million pieces of Standard solicitation
mail each year is absurd. 426 million pieces equate to only about two pieces per American
household per year. Tr. 29/9983-84.
In fact, the 2005 Household Diary Study indicates that the annual volume of Standard
Mail sent by banks, S&Ls, credit unions and stand-alone credit card issuers is more in the range
of 10 billion pieces—about 25 times Dr. Clifton’s estimate.17 And the Data Collection Reports
filed with the Commission for just three financial industry participants in NSAs—Capital One,
JPMorgan Chase, and Discover—together send about two billion pieces of letter-shaped
16
The 2005 Household Diary Study reported that 83.9 percent of the First-Class Mail received
by households from the bank industry in 2005 was “sent presort.” For the credit card industry,
the figure was 97.1 percent. For the financial industry as a whole, the figure was 86.4 percent.
2005 Household Diary Study, Appendix A-2, Table A2-20 (reproduced at Tr. 29/9996).
17
According to the 2005 Household Diary Study, the financial services industry mailed 19.4
billion pieces of Standard Mail advertising to households in 2005. 2005 Household Diary Study
at 39 (Tr. 29/9995). Although these figures are not disaggregated by type of financial service
firm, another table in the same report shows that slightly over half of all bills and statements
mailed to households by the industry were banks, S&Ls, credit unions and stand-alone credit
card issuers. Id. at 32 (Tr. 29/9994). Applying the same ratio to the 19.4 billion figure indicates
that approximately 10 billion pieces of Standard Mail pieces were entered by these segments of
the financial services industry.
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Standard Mail per year. See Tr. 29/9988, 9997-99 (discussing Capital One Data Collection
Report); Buc Reb. (DMA-RT-1) at 3-4 & Exh. DMA-RT1 and RT2, Tr. 35/11690-91, 11694-99
(Bank One and Discover Data Collection Reports).
Confronted with these data, Dr. Clifton refused to budge. He professed to be unaware of
the cited portions of the 2005 Household Diary Study: “I may or may not have the entire
household diary study. I’m very focused. I tend to download only the pages I need . . .” Tr.
29/9979. Besides, he asserted, the data in the Study ignore the vast share of total mail volume
supposedly received at nonhousehold addresses:
There is a lot of other mail out there that banks send to
nonhouseholds. My corporation, I would estimate I get 10
corporate pieces from banks for every piece my household gets
from a bank.
Tr. 29/9982 (Clifton). (In fact, the 2005 Household Diary Study states that mail “sent or
received by households constituted 82 percent of total domestic mail in FY 2005.” 2005
Household Diary Study at 1.) Dr. Clifton likewise dismissed the large volumes of Standard
solicitation mail reported by Capital One, BankOne (now JPMorgan Chase) and Discover on the
ground that “I’m not talking about banks that are really just credit card companies and all the
rest. My testimony referred to banks.” Tr. 29/9988.
The implications of these errors goes beyond GCA’s failure to satisfy 39 U.S.C.
§ 3622(b)(4). As Dr. Clifton acknowledged, econometric analysis is as much an art as a science,
and an evaluation of competing econometric models depends to a significant degree on the
judgment and skill of the analyst.18 An econometrician who makes errors so crude and obvious
concerning basic volume data for an industry in which he has had many years of personal
18
Clifton, Tr. 29/9973-74.
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involvement can hardly be regarded as a trustworthy and reliable witness on the subtle and
highly technical judgment calls entailed in econometric estimates of the elasticities of demand
for mail service.19
C.
GCA’s Analysis Of Electronic Substitution For Bill Payment Mail Is
Superficial And Unsound.
Even if (contrary to fact) information on substitute products and demand elasticities for a
subclass or category of mail were legally sufficient to justify a reallocation of institutional costs
under Section 3622(b), GCA has failed to establish the factual predicate for such an argument.
GCA has offered no credible evidence that a one-penny reduction in the price of Single-Piece
First-Class Mail would significantly slow the further diversion of such mail to electronic bill
payment services—let alone restore the volumes that the Postal Service has already lost. In fact,
the record indicates that the choice between Single-Piece First-Class Mail and electronic forms
of bill payment is virtually unaffected by marginal changes in the price of postage. MPA/ANM
Br. 5; USPS Br. 33-62. We discuss in turn the qualitative competitive analysis, and then the
quantitative econometric data.
1.
Qualitative analysis
The hypothesis underlying GCA’s case is that the availability of electronic bill payment
(including increase in speed offered by broadband internet service) has increased the price
elasticity of demand among the remaining mailers of Single-Piece. GCA Br. 23-27; accord,
NAA Br. 28-29. An equally plausible hypothesis, however, is that the decision whether to
19
In terms of the Daubert line of cases that GCA invokes by analogy (GCA Br. 41-42), expert
testimony that relies on incorrect facts must be rejected because the theory as applied by the
expert does not “fit” the facts of the particular case. Daubert v. Merrell Dow Pharmaceuticals,
Inc., 509 U.S. 579, 591 (1993); Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 153-57
(1999).
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migrate from First-Class Mail to electronic bill payment is driven primarily by factors other than
the price of Single-Piece postage, and that a bi-modal distribution in the demand for single-piece
bill payment mail has resulted from this fact. Specifically, for the households that have already
made the front-end investment of time and money needed to switch to electronic bill payment,
the low marginal costs of electronic bill payment, and the opportunity costs of the time saved by
not writing and mailing checks,appear to be so great that most households would not return to
bill payment by mail even if the cost of the postage were much lower—or even zero. For most
of the “late adapter” households that have not switched to electronic bill payment, the non-postal
hurdles to doing so (including the cash and opportunity costs of buying a computer, learning how
to use it, subscribing to an internet provider, learning how to use the internet, signing up for
electronic bill payment, learning how to use it, and overcoming the fear of entrusting bill
payments and bank account information to the Internet) likewise appear to outweigh the onepenny reduction in postage proposed by GCA. If so, the one-cent rate adjustment proposed by
GCA will generate far too little additional volume to offset the loss in contribution per piece. In
fact, the record provides far more support for the second hypothesis than the first. See USPS Br.
37-55 (discussing evidence).
GCA concedes that its proposal is unlikely to induce current users of electronic bill
payment to return to First-Class Mail. GCA Br. 63 (acknowledging the “general consensus that
the First Class volumes that have left the postal system due to electronic diversion will not
return”). GCA asserts, however, that its proposal is likely to stem further migration from the
bill-payers that still use Single-Piece First-Class Mail. Id. at 34-37 (discussing Martin Reb.
(GCA-T-2)). The Postal Service initial brief provides a comprehensive review of the flaws in
Professor Martin’s survey (USPS Br. 38-55), and we agree with the Postal Service’s conclusion
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that the survey results “fundamentally confirm the extremely minor role of postal rates in the
greater scheme of electronic diversion.” Id. at 47-48.
Finally, it is essential in this context to recognize the distinction, noted above, between
Single-Piece First-Class Mail and the subset of that mail used for bill payments. GCA is
proposing to apply a one-cent reduction to all Single-Piece First-Class Mail (and, indeed,
perhaps to Presort First-Class Mail as well). Apart from bill payment mail, however, GCA has
offered no comparable analysis of the effect of electronic substitution on any subset of FirstClass Mail. Given the substantial volume of First-Class Mail entered for purposes other than
paying bills, this is a major failure of proof.
2.
Econometric data
The econometric data on demand elasticities sponsored by GCA witness Clifton,
although voluminous and complex, require little further attention by the Commission. The
Postal Service has identified numerous flaws in Dr. Clifton’s econometric analysis. Thress Reb.
(USPS-RT-2), Tr. 38/13010 et seq.; USPS Br. 56-62. As noted above, GCA, apparently
recognizing that Dr. Clifton’s econometric study is in tatters, now proclaims the “battle of
elasticities” to be subordinate the “broader market realities.” GCA Br. 6, 25, 61-62. We agree.
D.
The Potential For Reduction Or Elimination Of The Contingency Requested
By The Postal Service Provides No Justification For GCA’s Pricing Proposal.
On pages 62-65 of its brief, GCA suggests that the possible reduction or elimination of
the one-percent contingency requested by the Postal Service as a result of the recent enactment
of the Postal Accountability and Enforcement Act, Pub. L. No. 109-435, is an additional ground
for adopting GCA’s rate proposal. DMA and ANM, along with many other participants (but not
GCA), are cosponsors of testimony arguing for elimination of the contingency. Buc, DMA-T-1
at 11-17; see initial brief of DMA et al. at 8-19. The notion that the first fruits of such an
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adjustment should go to Single-Piece First-Class Mail, however, is a complete non sequitur. To
the extent that the contingency is treated as an attributable cost, the reduction should be backed
out from the costs attributed to each class and subclass in accordance with the otherwise
applicable methods of attribution. To the extent that the contingency is treated as an institutional
cost, the savings should be allocated among the classes and subclasses of mail in accordance
with the factors of Section 3622(b). Nothing in the statute, however, warrants bypassing these
standards to allow Single-Piece First-Class Mail to cut to the head of the line.
E.
Even If A Reduction In The Institutional Burden On Some First-Class Mail
Were Warranted—And It Is Not—The Remedy Proposed By GCA Is
Grossly Overbroad.
Finally, even if Dr. Clifton had made a sufficient showing under Section 3622(b)
to justify a reallocation of institutional cost between First-Class and Standard Mail—and he has
not—his proposed remedy of reducing the institutional costs borne by all Single-Piece FirstClass Mail (or, indeed, all First-Class letter mail) would be grossly overbroad. Dr. Clifton’s
demonstration of the supposedly growing elasticity of demand for Single-Piece First-Class Mail
focused almost entirely on its use for paying bills. He did not even attempt such a showing for
other components of single-piece mailstream, most notably greeting cards and other personal
correspondence. The demand for such mail is clearly inelastic, however. Personal
correspondence exemplified by greeting cards has a high value to both the sender and the
recipient.20 Moreover, the cost of postage is a relatively small component of the delivered cost of
a greeting card, which commonly cost $2 to $4 for the card and envelope alone.21 Even if the
Commission were to credit Dr. Clifton’s claims in their entirety, a less drastic alternative to his
20
See Section II.B.2, supra.
21
See id.
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proposal would be to charge a relatively high markup for Single-Piece mail generally, but to
offer a discount for courtesy reply mail, a Single-Piece mail category commonly used by
households to pay bills. Dr. Clifton agreed that this “is certainly an option.”22
III.
THE REBUTTAL TESTIMONY OF NAA WITNESS SIDAK CANNOT BE
RELIED ON AS SUPPORT FOR ANY INCREASE IN THE INSTITUTIONAL
COSTS RECOVERED FROM STANDARD MAIL.
In the rebuttal phase of this case, NAA witness Gregory Sidak presented testimony
purportedly rebutting the testimony of Valpak witnesses Mitchell (VP-T-1) and MOA witness
Prescott (MOAA-T-1) regarding the allocation of institutional costs between Standard ECR Mail
and Standard Regular Mail. See Sidak Reb. (NAA-RT-1) at 3, Tr. 32/10823. Noting that
Standard Mail volume has increased vis-à-vis First-Class Mail volume, and the increased
deployment of broadband communications has caused consumers to migrate from First-Class
Mail, Mr. Sidak concluded that the Commission “should reject the proposals by Val-Pak witness
Mitchell and MOAA witness Prescott to reduce the institutional cost contribution of Standard
ECR Mail.” Id. at 25-26, Tr. 32/10845-46.
In the course of his testimony, Mr. Sidak indicated agreement with the testimony of GCA
witness Clifton concerning the “growth of broadband subscription and usage, along with the
decline of First-Class Mail volumes.” Tr. 32/10824; see generally id. at 10827-43. For these
reasons, Mr. Sidak suggested that the Commission consider “lessening, not increasing, the
institutional cost burden placed on First-Class Mail” by an unspecified amount, and “begin to
move that burden to other mail.” Id. at 10840. Mr. Sidak did not offer any estimate of the
elasticity of demand for First-Class Mail, Standard Mail, or any other mail service; did not
22
Tr. 29/9954, lines 11-20.
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recommend any specific action that the Commission should take in this case (beyond rejecting
the Valpak/MOAA proposals to reduce the institutional cost burden of Standard ECR mail); and
did not attempt to justify any alternative to the USPS rate proposal under the factors of 39 U.S.C.
§ 3622(b). Indeed, beyond the observation that increases in First-Class rates large enough to set
off a death spiral of First-Class volume could “reasonably” be argued to violate the “fair and
equitable” standard of Section 3622(b)(1), Mr. Sidak offered no discussion of Section 3622(b) at
all.23
In the NAA’s initial brief, however, Mr. Sidak’s narrow and limited testimony rebutting
the MOAA/Valpak proposal to reduce the share of institutional costs borne by Standard ECR
Mail has blossomed into an affirmative proposal for a class-wide increase in the institutional cost
burden borne by all subclasses of Standard Mail. NAA Br. 23-45. The Commission should
reject this proposal on several grounds.
A.
Mr. Sidak’s Testimony, To The Extent Used By NAA To Attack The
Allocation Of Institutional Costs Proposed By The USPS In Its Case-InChief, Constitutes Improper Rebuttal.
Mr. Sidak’s testimony, if interpreted as support for NAA’s eleventh-hour frontal assault
on the overall relationship between the prices of First-Class Mail and Standard Mail, would
constitute improper rebuttal. The Commission’s rules expressly provide that the case-in-chief of
participants other than the USPS “shall include the participant’s direct case and rebuttal, if any,
to the initial proponent’s case-in-chief. Rule 30(e)(1) (emphasis added). “New affirmative
23
Dr. Clifton disavowed any claim that adoption of a 42 cent rate in this case would trigger a
death spiral of declining First-Class Mail volume. While insisting that further rate increases in
the future might cause a death spiral, he acknowledged that his elasticity estimates imply that
“the Postal Service will make more money of the life cycle [of the proposed rates] from a 42cent stamp.” Tr. 29/9963, lines 12-16, and 9964, lines 19-23.
- 22 -
matter (not in reply to another participant’s direct case) should not be included in rebuttal
testimony or exhibits.” Id.
Mr. Sidak’s views on the growth of broadband communications, and the resulting impact
on First-Class Mail volumes, were permissible rebuttal to the MOAA and Valpak testimony in
favor of reducing the contribution borne by Standard ECPR mail. Expanding the use of Mr.
Sidak’s testimony from a shield against MOAA and Valpak to a sword against the original USPS
rate proposal, however, is a misuse of his testimony. The Postal Service’s case-in-chief did not
propose to reallocate institutional costs from First-Class to Standard Mail; hence, none of the
direct testimony filed by the other participants on September 6 opposed such a reallocation.
NAA could have proposed such a reallocation on its own initiative in its September 6 direct
testimony, as GCA, in fact, did. Unlike GCA, however, NAA did not. Finally, the direct
testimony of Valpak Witness Mitchell (VP-T-1) and MOAA witness Prescott (MOAA-T-1) did
not reopen the door to this issue. Valpak and MOAA proposed only to reduce the share of
institutional costs covered by Standard ECR Mail. While NAA was certainly entitled to submit
rebuttal testimony against the Valpak/MOAA proposal, the separate issue of the institutional
costs borne by any class of Standard Mail should be increased beyond the levels proposed by the
USPS was not raised by Valpak or MOAA, and hence was beyond the proper scope of rebuttal.
B.
NAA Has Failed To Justify Its Pricing Proposal Under The Pricing Factors
Of The Act.
However, even if Mr. Sidak’s testimony were properly before the Commission as
evidence for a reallocation of institutional costs, NAA has not begun to meet its burden of proof
under 39 U.S.C. § 3622(b). As explained above in connection with the GCA proposal, the
Commission may not recommend a proposal to reallocate institutional costs from one mail class
to another without considering the multiple factors enumerated in Section 3622(b). NAA does
- 23 -
not even mention, let alone attempt to satisfy, these factors. In this regard, NAA falls short of
even GCA’s showing. Unlike GCA, NAA has not even attempted to offer a marketing analysis
or a study of demand elasticities. Indeed, NAA has not even proposed any particular set of rates
at all: what NAA is asking the Commission to consider is less a rate proposal than a thought
experiment. Needless to say, a pricing concept so inchoate and unsupported cannot be
recommended under Section 3622.24
C.
The Changing Relative Volumes Of First-Class And Standard Mail Are An
Insufficient Basis For Shifting Institutional Costs Between Classes.
Apparently aware that it has not come close to satisfying Section 3622(b), NAA asserts
instead that the declining volume of First-Class Mail justifies a reduction in its institutional cost
coverage as a matter of “law” and “policy.” NAA argues that, “As First-Class Mail loses [its
status as a majority of the mailstream] . . . a reevaluation of institutional cost assignments is
required both as a matter of law and as a matter of policy.” NAA Br. 25. “The cost coverage of
First-Class Mail has consistently been set above the systemwide average,” NAA contends,
specifically because First-Class Mail has been “the largest component and majority of the
mailstream.” Id. at 25-26.
These claims are both unsupported and incorrect. While a decline in the volume of a
mail class may warrant inquiry into whether the demand for that class has become more priceelastic, mail volume as such is not one of the statutory pricing factors. NAA cites no case
authority in which the Commission has relied on declining volume, without more, as a ground
NAA’s statement that “[t]he record in this proceeding contains two concrete proposals that
would reduce the institutional cost burden on First-Class Mail,” NAA Br. at 36, incorrect. The
closest to a concrete proposal was offered by GCA. The testimony of APWU witness Kobe was
limited to intra-First-Class pricing issues, and her proposals would not affect Standard Mail
rates. Cf. NAA Br. at 37, 41; APWU-T-1 at 12.
24
- 24 -
for a reduced institutional coverage; and to the best of counsel’s knowledge there is none. For
example, the DMA and MOAA decisions discuss the relative value of First-Class Mail and
Standard Mail in some detail.25 The fact that First-Class Mail was the largest class, or the
“predominant” class, was not mentioned.26
NAA’s argument is also unsupported as a matter of policy. While the volume of FirstClass Mail undeniably has been affected by electronic media and other factors, the record is
devoid of evidence that a further reduction in the cost coverage for First-Class Mail would be a
contribution-maximizing strategy for the Postal Service, let alone that such a realignment would
comport with the multiple statutory pricing factors of Section 3622(b).
IV.
CONCLUSION
At the end of the day, the GCA and NAA arguments amount to the following: First-
Class volume is weakening; therefore, First-Class rates should be lowered. As demonstrated
above, this argument is insufficient under the Act, is unsupported by substantial evidence of
record, and is unwise as a matter of policy.
The Commission need not reach these policy issues, because GCA and NAA have not
even attempted to address most of the factors required for a prima facie showing under 39 U.S.C.
§ 3622(b). Further, a reduction in the price of the First-Class stamp from 42 cents to 41 cents
certainly will not solve the problem of declining First-Class volume -- for a number of reasons,
including the fact that First-Class Mail is highly price inelastic. There are many important policy
25
DMA, 778 F.2d at 103-104; MOAA, 2 F.3d at 426.
26
Moreover, the Commission has not hesitated to recommend above-average coverage ratios for
relatively low-volume services. See PRC R2005-1 Op., App. G, Schedule 1 (recommending
contributions of 248.8 percent for Mailgrams and 184.9 percent for money orders).
- 25 -
issues raised by what is happening to First-Class volume; they should be addressed thoroughly
and thoughtfully. “Socking it” to Standard Mail will not solve any of these problems, however.
Respectfully submitted,
David M. Levy
SIDLEY AUSTIN LLP
1501 K Street, NW
Washington, DC 20005-1401
(202) 736-8214
Counsel for Alliance of Nonprofit Mailers
Dana T. Ackerly II
COVINGTON & BURLING LLP
1201 Pennsylvania Avenue, N.W.
Washington, DC 20004-2401
(202) 662-5296
Counsel for Direct Marketing Association,
Inc.
Dated: January 4, 2007
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