BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON,
D.C. 20268-0001
POSTAL
RATE AND FEE CHANGES,
Rebuttal
JOHN
Docket No. R97-1
1997 )
Testimony
of
L. CLARK
on Behalf of
CTC DISTRIBUTION
SERVICES,
L.L.C.
William J. Olson
John S. Miles
Alan WoIl
John F. &Render,
Jr.
WILLIAM
J. OLSON, P.C.
8180 Greensboro Dr., Suite 1070
McLean, Virginia
22102-3823
(703) 356-5070
Counsel for CTC Distribution
Services, L.L.C.
March
9, 1998
TABLE
OF CONTENTS
Page
INTRODUCTION
.___.___.___.._._______.___.______.___.__..._
1
1
I.
PURPOSE
II.
THE COMMISSION
SHOULD RECOMMEND
THE
POSTAL SERVICE’S PROPOSED UNIFORM
DESTINATION
ENTRY DISCOUNT
STANDARDS
2
THERE HAS BEEN NO SHOWING THAT THE
POSTAL SERVICE’S ESTIMATES
OF AVOIDED
COSTS ARE PROBLEMATIC
.
4
CONCLUSION
8
III.
Iv.
OF TESTIMONY
i
1
INTRODUCTION
2
See CTC-T-1, pp. 1-2, Tr. 20/10162-63.
3
I. PURPOSE
4
This testimony
is submitted
5
Parcel Shippers
Association
6
Parcel Service (“UPS”) witness
7
in the respective
8
Commission
9
Service’s proposals
proposals
OF TESTIMONY
to rebut certain
(“PSA”) witness
Luciani
Zwieg (PSA-T-3)
(UPS-T-4)
the deficiencies
offered by these witnesses,
10
the Postal Service’s proposals
11
Origin
12
(“DBMCs”),
Destination
13
Destination
Delivery
and of LJnited
Parcel Post. The
in the criticisms
of the Postal
and should recommend
in full
which relate to the entry of Parcel Post at
Bulk Mail Centers (“OBMCs”),
Sectional
Destination
Center Facilities
(“DDUs”).
1
of
and to expose weaknesses
they have made regarding
should recognize
Units
aspects of the testimony
Bulk Mail Centers
(“DSCFs”),
and
1
2
3
II.
THE COMMISSION
SHOULD
RECOMMEND
THE
POSTAL SERVICE’S
PROPOSED
UNIFORM
DESTINATION
ENTRY DISCOUNT
STANDARDS
Under the current
worksharing
discounts
are developed,
postal rate setting process, when new postal
(and the appropriate
corresponding
the Postal Service first estimates
worksharing,
as reflected
by certain identified
8
Postal Service next determines
9
appropriate
to pass through
its experience
costs avoided by the
qutication
what percentage
to worksharing
based upon a number
10
factors, including
11
process has been very successful for the Postal Service, as worksharing
12
become an integral
13
worksharing
14
steadily
component
discounts
of rate setting,
available
for various
worksharing
discounts.
and the number
has
of
mail classes and subclasses has
has played an instrumental
16
Postal Service’s success, by ensuring
17
have been in the public interest,
18
of additional
19
mailing
20
exceeded its original
21
program.
22
Parcel Post discounts
discounts
that proposed worksharing
as well as by encouraging
as their benefits
public have become evident.
expectations
role in the
discounts
the development
to both the Postal Service and the
Successes of the Postal Service have
with its DBMC Parcel Post worksharing
In this docket, the Postal Service seeks to extend the range of its
to include
discounts
2
of
This
grown.
The Postal Rate Commission
15
The
standards.
of the avoided costs would be
mailers,
with similar
rate structures)
for BMC presort
and prebarcoding,
1
and for OBMC, ‘DSCF and DDU entry, as well as DBMC,
2
successful for other classes of mail.
3
Witness
Zwieg has submitted
testimony
stating
which have proven
that
“[vlolume
4
necessary
5
operational
6
The size and operational
7
should determine
8
by the Commissi,on.”
9
to confuse the type of provisions
historically
10
Classification
(DMCS)
and the type of provisions
11
Domestic
@MM).
The Postal Service proposal
12
accompanying
13
appear to be proper,
14
proven track record as a user of Parcel Post, and its existing
15
We would have no difficulty
in utilizing
16
destination
and we believe that the expansion
17
Post worksharing
to qualify
[for the new Parcel Post rate categories]
decision made jointly
capabilities
the qualifying
(PSA-T-3,
Schedule
Mail Manual
by mailers
DMCS revisions
level rather
program
destination
people.
entry facility
than a level arbitrarily
p. 8, Tr. 25/13451.)
This statement
contained
imposed
appears
in the Domestic Mail
contained
in the
and
appear to follow the traditional
and should be adopted.
entry discounts,
should be an
and postal operations
of a particular
levels
CTC Distribution
distinctions,
Services has a
rate structure.
the Postal Service’s proposed
is in the best interests
3
of the Parcel
of the Postal Service.
1
2
3
4
III.
THERE HAS BEEN NO SHOWING
THAT
THE POSTAL SERVICE’S
ESTIMATES
OF AVOIDED
COSTS ARE PROBLEMATIC
The only other criticism
of which I am aware concerning
5
Service’s new Pa.rcel Post worksharing
6
Service’s competitor.
7
competition
8
have seen in past dockets, of strongly
9
UPS feels might encroach on UPS products
10
proposals
This is unsurprising,
comes from UPS, the Postal
not only in view of the obvious
Parcel Post offers to UPS, but also the practice
In my direct testimony
resisting
of UPS, which we
Postal Service offerings
in this proceeding,
I tried to point out, why
strengthening
the Postal Service’s Parcel Post offerings
12
entire nation,
as well as for the Postal Service’s own operations
13
welfare.
14
advent of the Postal Service’s DBMC program,
15
game in town” with respect to nationwide
16
away the dominant
17
strike gave the country
18
depend on a single company for an important
19
pp. 9-15, Tr. 20/10170-76.
parcel delivery.
market.
The 1997 UPS
It is not a “zero-sum”
game, where there must, or should, be a single purveyor
21
delivery
22
in this industry.
It is in the nation’s best interest
4
for those who
service such as parcel delivery.
industry.
Thus, while UPS testimony
the “only
It is still far and
just a glimpse of the dangers lurking
is a still-burgeoning
for t:he
and economic
UPS was effectively
20
service.
is important,
Prior to 1990, and the
player in the parcel delivery
Parcel delivery
which
or profit margins.
11
See CTC-T-I,
the Postal
of nationwide
for competition
criticizing
to flourish
the Postal Service’s
1
proposed Parcel Post worksharing
2
testimony
3
indu,stry
4
beneficially
5
T-4), for example,
6
estimates,
7
26/14442-46.)
8
9
is deficient
discounts
in not recognizing
is no surprise,
the true state of the parcel delivery
and how the Postal Service’s proposals
the entire industry
and the nation.
who criticized
for Parcel Post would affect
UPS witness
Luciani
(UPS-
the Postal Service’s cost avoidance
could not even offer an opinion
Witness Luciani
I believe the
on these matters.
could not say whether
segment of the economy, whether
(See Tr.
Parcel Post was a growing
the Postal Service’s DBMC program
had
10
caused Parcel Post to grow significantly,
11
Parcel Post since 1990 has had any adverse effect on IJPS itself.
12
26/14445-46.
13
Docket No. R90-1, where UPS sponsored testimony
in opposi,tion to the very
14
establishment
It was UPS, not the
15
Postal Service, which made poor volume forecasts in that docket regarding
16
DBMC.
17
growth
18
this proceeding,
19
Lucia&s
20
Witness Luciani
of the DBMC
Even if witness
or even whether
also worked
worksharing
Luciani
the growth
on the UPS testimony
program.
has not studied
the significance
of
Tr.
in PRC
of the
of Parcel Post, these subjects formed a part of my direct testimony
refusal
which witness
to comment,
Witness Luciani
21
avoidance
22
uncertainty,
Luciani
read.
(Tr. 26114440.)
UPS seems to be trying
did offer an opinion
to avoid the issue.
on the Postal Service’s cost,
estim.ates, which he said were uncertain.
he suggests that the passthrough
5
By witness
Based on such
of avoided costs should~ be
in
1
limited
2
recommended
3
26/14308-14317,)
4
suggestion.
to 77 percent,
by the Postal Service in this docket.
(UPS-T-4,
I would like to point out some weaknesses
First, witness
5
rat,her than the 98-100 percent passthroughs
Luciani
himself
pp. 22-31, Tr.
in that
admits that the passthroughs
6
higher,
7
his opinion
8
(Tr. 26/14441.)
9
Postal Service’s Parcel Post worksharing
program
10
only question
of the destination
11
After the Comm,ission
12
to the extent possible in this docket, it should reject the mere 77 percent
13
passthrough
14
amount.
15
as the Postal Service has proposed, if the Commission
should be
that the Postal Service’s cost avoidance
estimates
Even under the UPS’s view of the matter,
has to do with the amount
does not share
are uncertain.
therefore,
should be adopted,
Second, although
by witness Luciani,
witness
analyst,
Luciani
and pass through
appears to have testified
16
economic or financial
17
education,
18
itself subject to question,
19
states that the Postal Service’s cost avoidance estimates
20
execution,”
21
Assuming
22
The real maihng
and the
entry discounts.
perfects the Postal Service’s cost avoidance
recommended
the
estimates
the whole
as an
a field in which I have not received formal
much of what he says about the Postal Service’s cost estimates
even by lay people such as myself.
whi,ch is impossible
to attain.
(UPS-T-4,
For example, he
are based on “perfect
p. 26, Tr. 26114312.)
that is so, could not the same be said about every cost estimat,e?
world in which CTC and UPS do business
6
is
strives for
1
perfection,
2
applied by the Commission.
3
in any way the “imperfection”
4
Presumably,
5
notion of imperfect
6
Postal Service’s cost avoidance
but rarely
hits the mark.
Furthermore,
execution
Furthermore,
8
entry savings estimated
9
offers no contrary
cannot be the standard
witness Luciani
in execution
it would be extremely
I
Perfection
does not quantify
that he says is bound to exist.
small, and I believe that witness
should have no impact whatsoever
witness
states that the mail processing
by the Postal Service are inexplicably
proof or explanation.
(UPS-T-4,
13.) Similarly,
11
parcels and that costs of plant load clerks should be attributed
12
categories
13
proof or quantification
14
Tr. 26114312-
that DBMC parcels are different
pp. 27-28, Tr. 26114313-14)
DBMC
high, but,
pp. X-27,
10
(UPS-T-4,
on the
estimates.
Luciani
his arguments
Luciani’s
from other
to specific rate
are simply posited, with no
of any kind.
These UPS positions
should be recognized
15
no meaningful
proof for support.
16
of the Postal Service’s volume estimates
17
Docket No. R90-1.
18
accepted the Postal Service’s volume forecasts
19
conservative.
20
The Postal Service’s volume predictions
21
and, contrary
22
Post worksharing
Ultimately,
History
as simply
They are reminiscent
rejected that criticism
as reasonable
has revealed how conservative
program
with
of the UPS criticism
for the new DBMC program
the Commission
to the UPS position
arguments,
and
and
those estimates
were understated,
in
were.
not overstated
in R90-1, the Postal Service’s DBMC Parcel
has been a resounding
7
success.
The same result should obtain here, where the UPS has predicted
consequences
if t,he Postal Service’s cost avoidance
But its arguments
motivated
are unsupported
by UPS’ own interest.
estimates
has presented
that in the past, the Postal Service’s DBMC cost avoidance
been consistently
overstated.
extremely
profitable.
estimates
in this proceeding.
10
Rather,
the DBMC program
and are
no evidence
estimates
have
has been
UPS has offered no sound basis for questioning
IV.
9
are accepted.
by specific facts and figures,
Witness Luciani
dire
the cost
CONCLUSION
For these reasons, as well as the reasons raised in my direct testimony,
11
I ask the Commi.ssion
12
worksharing
13
OBMC, DBMC,
program,
to recommend
including
the Postal Service’s Parcel Post
the BMC presort
DSCF, and DDU discounts,
8
and prebarcode,
as proposed.
and the
TEOFSERVICE
I hereby certify that I have this day servedthe foregoing document upon all participants
of record in this proceeding in accordancewith Section 12 of the Rules of Practice.
March 9, 1998