E :: C E I Y E !I
BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON, D. C. 20268-0001
POSTAL RATE AND FEE CHANGES,
1997
i
DIRECT TESTIMONY OF
BRADLEY V. PAFFORD
ON BEHALF OF
UNITED STATES POSTAL SERVICE
Docket No. R97-1
,,--..
USPS-T-l
CONTENTS
AUTOBIOGRAPHICAL
SKETCH .......................................................................
........................................................
3.
OF REVENUE AND VOLUME.. ...................................................
4.
PURPO:SE AND SCOPE OF TESTIMONY
ESTIMATION
.a-..
1.
Subsystem
............................................................
A.
Non-countable
B.
Domestic Probability Subsystem ...................................................
C.
Preoaration
of Revenue and Volume Estimates ............................
4.
6.
7.
1.
,,-1
2
3
4
5
6
7
8
9
10
11
12
_+-
DIRECT TESTIMONY
BRADLEY :FPAFFORD
AUTOBIOGRAPHICAL
My name is Bradley V. Pafford.
I am a Mathematical
Statistician
in Statistical
13
Policy and Programs,
14
1991, During that time I have worked on statistical design issues for improving the
15
Service’s statistical information
16
in Docket No. R94-1, and for Postal Service statistical issues in D’ockets MC952,
17
MC96-3.
18
Finance.
SKETCH
Prior to my employment
I have been employed by the Postal Service since
systems.
I provided technical support to witness Steele
with the Postal Service, I was a Mathematical
19
Statistician
with the U. S. Department
20
Statistics Service (NASS) for eleven years.
21
research in areas such as questionnaire
22
survey quality assurance
23
survey data and developing
24
for four years in NASS field offices supervising
25
responsible
26
published
27
Statistical A:ssociation Annual Conference
28
Research
programs.
for the publication
and
of Agriculture
(USDA), National Agricultural
During that time I conducted
survey
design, response errors, and establishing
I worked in the survey methods area analyzing
estimation techniques
for complex surveys. I also worked
field data collection,
of estimates of various agricultural
many USDA technical reports, and have contributed
and was directly
commodities.
I have
papers at thle American
and the Bureau of the (Census Annual
Conference.
I was awarded a Bachelor of Science degree with a major in Forestry from
30
*.--
Virginia Polytechnic
Institute and State University in 1977, and a IMaster of Science
2.
1
degree in Forestry from Virginia Polytechnic
2
Master of Science degree in Forestry concentrated
3
recreation
environments,
4
probability
sample of users of the Cape Hatteras National Seashore
5
of North Carolina.
6
State University.
a
Washington
9
Subcommittee.
- 1992.
on survey research
with my master thesis developed
My
in outdoor
around a time and location
in tine Outer Banks
In 1985 I received a Masters of Statistics degree from North Carolina
I am currently a member of the American
7
10
Institute and State University in 1979.
Statistical
Statistical Association
and the
Society, where in the past I served on the Quantitative
I was an instructor of statistics at the USDA graduate
Literacy
school from 1988
I-.
PURPOSE
1
AND SCOPE OF TESTIMONY
The purpose of my testimony
2
is to describe the major statistic:al
3
information
systems which generate estimates of revenues and volumes underlying
4
Postal Service’s request.
5
volume syst’em, the type of estimates that are produced,
6
reliability of major estimates of revenues, volumes, and weight.
7
descriptions
a
H-89.
My testimony covers the general design of the revenue and
and tables showing the
More detailed
of the statistical design of each system are contained
The statutory requirement
9
the
in Library Reference
that each class of mail and special service be
10
priced so as to cover its volume variable costs compels the Postal Service to determine
11
the revenues and volumes of each class, subclass, and special service.
12
Service’s revenue systems do not often coincide with, or specifically
13
categories
14
systems to provide estimates of the revenues and volumes of the various rxtegories
15
mail.
However, the
identify, individual
<I-.
of mail or service.
Therefore,
the Postal Service relies on various statistical
of
4.
1
ESTIMATION
OF REVENUE
AND VOLUME
.The Postal Service’s postage revenue accounting
2
sys:tem contains several
3
accounts which are associated
4
most postage revenue accounts are general accounts which are not identified with
5
specific mail categories.
In addition, the revenue accounting
6
any volume information.
Therefore,
7
accounting
8
System, and with statistical data from the Revenue, Pieces and Weight (RPVV) System
9
to develop estimates of revenue and volume for each class and subclass of rnail and
information
10
special service.
11
Subsystem
12
A.
with specific classes or subclasses
systern does not contain
the Postal Service supplemen&
its revenue
with mailing statement data from mailers through the PERMIT
The RPW system includes two major subsystems:
the Non-countable
arld the Domestic Probability Subsystem.
Non-countable
Subsvstem
The Non-countable
13
of mail. However,
,-
Subsystem
is built around eight revenue accounts
14
information
supplied by mailers on mailing statements.
The revenue accounts
15
AK 41416 (First-Class
16
second-class
17
mail); A/C 41414 and 41441 (third-class
18
A/C 41412 (fourth-class
19
provide revenue by rate category,
20
provide this additional
21
gathered
22
where the bulk mail entry function has not been automated.
23
data are sumrnarized
24
provide detailed documentation
25
System. The mailing statement forms include:
and
include:
bulk permit imprint mail); A/C 41310 and 41:320 (publishers”
mail); AK 41411 and 41440 (third-class
bulk permit irnprint regular-rate
bulk permit imprint nonprofit-rate
mail); and,
permit imprint bound printed matter). These accounts
and they provide no volume information
detail, information
from all automated
do not
at all. To
supplied by mailers on mailing statements
is
bulk mail entry offices, and a stratified sample of offices
each Postal Quarter.
Offices mailing statement
Library References
of the automated
H-72 through
H-76
bulk mail entry system, or PERMIT
Form 3600 (First-Class
permit imprint),
.-
5.
Form 3541 (second-class),
Form 3602 (third-class
imprint), and Form 3605 (fourth-class
FY 1996 mailing statements
regular and non-profit
rate permit
bound printed matter perrnit imprini).
are provided in Library Reference
Copies of
H-89.
In the case of First-Class bulk mail, the estimates from the Non-countable
Subsystem
,F--
for First-Class
bulk permit imprint constitute the Postal Servicse’s final
6
estimates for its constituent
7
permit imprint falls in A/C 41416.
a
Non-countable
9
constitute
Subsystem
rate categories
since all revenue frclm First-Class
bulk
Also for First-Class bulk mail, the estim,ates from the
for PERMIT System precanceled
stamped and metered mail
the Postal Service’s final estimates for its constituent
In the
10
case of domestic publishers’
11
Subsystem
12
categories
since all revenue for this class of mail falls in A/C 41310 and A/C 41320.
13
third-class
bulk regular-rate,
14
printed matter, some revenue falls in general postage revenue xcounts,
15
identified with a specific category of mail. For the components
16
categories
17
volume are estimated
18
second-class
rate categories.
mail, the estimates from the Non-countable
constitute the Postal Service’s final estimates for its constituent
third-class
bulk nonprofit-rate
and fourth-class
rate
bound
where it is not
of these three
whose revenue is in the general postage revenue accounts,
revenue and
by the Domestic Probability Subsystem.
Quarterly estimates from the Non-countable
Subsystem
are added to
19
provide Fiscal Year estimates of the revenue, pieces and weighi., by rate category.
20
Details of the design of the Non-countable
Subsystem
For
are in Library Reference
H-89.
6.
1
Domestic
B.
Probabilitv Subsvstem
Many categories
2
system.
of mail are not identified within the Postal Service’s
3
revenue accounting
For these categories,
estimates of revenue and volume
4
are developed
5
Subsystem
6
domestic mail exiting the Postal Service is partitioned
7
sampling frame.
8
randomly selected MEP and day within the Postal Quarter, or MEP-day.
9
MEP-day in the sample, a subsample
by the Domestic Probability Subsystem.
is a continuous
The Domestic Probability
probability sample of mail exiting the U.S. postal system.
into frame unii.s, as part of a
A frame unit is a mail exit point, or MEP. A sampling unit is :a
of the mail is selected.
10
of the selected mailpieces
11
direct entry into portable microcomputers
12
System (CODES).
13
H-59.
are recorded by rate category.
14
are developed
15
categories
16
are in turn combined
CODES - RPW is documented
For each
The revenue and weight
Data collection
under the Computerized
is done via
On-Site Data Entry
in Library References
From the sample data, estimates of the proportion
H-54 through
of revenue, pieces and weight
,and used to distribute general postage account revenue to the measured
of mail. Separate
18
Domestic Probability
19
Reference
estimates are developed
for each Postal Quarter, which
to produce Fiscal Year estimates.
A description
17
All
of the sample design and data collection procedures
Subsystem
is contained
G-44 of Docket No. R94-1.
in Library Reference
of the
H-89, and Library
7.
.-1
C.
Preparation
Fiscal Year estimates from the Non-countable
2
.-
of Revenue and Volume Estimates
3
Subsysterns
4
revenue and volume for all categories
5
reporting system is documented
6
Service’s statistical information
7
final adjustment
8
estimates.
9
the categories
10
(expressed
11
presented
of RPW are combined with miscellaneous
and Domestic Probability
data to produce estimates
of mail in the RPW reporting system.
in Library References
H-38.
of
The RPW
Because the Postal
systems are based on the Postall Fiscal Year (PFY), a
to these estimates
is made to produce Governrnent
Fiscal Year (GFY)
For Fiscal Year 1996, GFY estimates of the revenue, pieces and weight for
of mail are presented
as percentages),
in Tables 1, 2 and 3. Coefficients
and upper and lower 95% confidence
of variation
limits are also
8
---.
TABLE 1
FISCAL YEAR 1996 REVENUE ESTIMATES
AND ASSOCIATED CONFIDENCE LIMITS
REVENUE
Service Category
($1,OOOs)
____________________-----..---.--_...-----._.---First-Class Mail:
Letters and parcels
21,194,141
Presort letters & pcl
10.050,277
Carrier Presort letters
754,086
Postal cards
91,344
Private mailing cards
535.832
Presort private cards
281,102
50,387
Carrier Presort cards
Domestic mail fees
158,569
Total First-Class
33,116,539
Priority Mail
Domestic mail fees
Total Priority
Express Mail
Mailgrams
Second-class mail:
Within county
Outside county:
Regular rate
Nonprofit pub1
Classroom pub1
Total publishers’
Publishers’ - label 3579
Application fees
Total second-class
C.V.11 OF
LOWER 95%
UPPER 95%
ESTIMATE
CONFIDENCE
CONFIDENCE!
LIMIT /3
(PERCENT)
LIMIT /3
---__________-__..__
___..__________________
___________----_-__0.50
N/C
N/C
4.24
N/C
N/C
N/C
4.42
N/C
3.320,546
946
3,321,491
1.27
19.50
1.27
736,805
N/C I2
1.596
N/C
75.741
N/C
1,579,682
328,314
9,428
1.993,165
19,925
775
2,013,865
N/C
N/C
N/C
N/C
7.24
N/C
N/C
20,987,050
21,401,232
83,713
98,975
144,775
172.36:3
3.237.505
583
3,238,427
3,403,58’7
1,30!3
3,404,55!5
17,085
22,765
--.
9.
TABLE 1
(CONTINUED)
Service Category
C.V./l OF
REVENUE
ESTIMATE
(PERCENT)
($1.000s)
-------____--.-_ --------------------
LOWER 95%
CONFIDENCE
LIMIT 13
-----------------------
UPPER 95%
CONFIDENCE
LIMIT /3
____________________
Third-class mail:
Single-piece rate
Bulk rate - basic
- carrier route
- 315.dig. prsrt
Total regular
Nonprofit - basic
- carrier route
- 3/5-dig. prsrt
Total nonprofit
Bulk mailing fees
Domestic mail fees
Special handling
Total third-class
135,455
I ,477,87t
4,298,520
4,845,728
10.622,119
392,621
241,626
691,627
I ,325,874
53,979
37,647
19
12,175,094
5.74
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
14.30
113.14
N/C
120,132
217,041
0
48.253
61
Fourth-class mail:
Parcels (zone rate)
Bound printed matter
Special fourth-class rate
Library rate
Domestic mail fees
Special handling
P.A.L. fees
Total fourth-class
691,369
448,035
334,694
47,957
1,577
378
71
I ,524,oai
1.91
2.02
3.22
7.15
10.41
15.55
24.87
1.60
665,404
430,213
313,491
41,205
1,253
262
36
1,476,089
717,334
465,857
355,897
54,709
1,901
494
106
1,572,073
U.S. Postal Service Mail
Free mail for the blind and
handicapped
Total domestic mail
Total international
Total all mail
mail
52,889.471
NIC
1,648,759
N/C
54.538.230
N/C
i 50,778
10
TABLE 1
(CONTINUED)
C.V.Il OF
LOWER 95%
UPPER 95%
REVENUE
ESTIMATE
CONFIDENCE
CONFIDENCE
Service Category
(PERCENT)
LIMIT /3
LIMIT 13
($1 .OOOs)
_______________.--~-...------------- ____________________
____________________
____________________~.
____________________
Special and other services:
Registry - fees affixed
113,277
106,709
I 19,845
2.94
Insurance
49,195
3.03
46,258
52,132
Collect-on-delivery
21,305
24.04
11,216
31,394
Certified
558,485
1.61
:;40,783
576,187
Special delivery
3,800
29.29
1,608
5,992
Money orders
I 80,543
N/C
Subtotal
926,606
2.07
888,817
964,395
Out. MO taken into rev
40,780
N/C
Stamped envelopes
15,914
N/C
Box rents
570,303
N/C
Total specl R other svcs
1,553.602
N/C
Total mail and special
8, other services
Other income
Total income
___---------------I/ Coefficient of Variation = 100
2/ Not Computed.
3/ Lower Limit = Est. Revenue Upper Limit = Est. Revenue +
56,091.832
N/C
526,418
N/C
56,618.250
N/C
x (Est. Std. Deviation / Est. Revenue)
(1.97 X Est. Standard Deviation)
(1.97 X Est. Standard Deviation)
11.
TABLE 2
FISCAL YEAR 1996 PIECE ESTIMATES
AND ASSOCIATED CONFIDENCE LIMITS
C.V./1 OF
LOWER 95%
UPPER 95%
PIECES
ESTIMATE
CONFIDENCE
CONFIDENCE
Service Category
(PERCENT)
LIMIT 13
($1,000s)
LIMIIT /3
________________._________________
___-_________-__
__-________________
___----..---___.-__~.-- ____-___l_____ll__
First-Class Mail:
Letters and parcels
54,150,759
0.63
53,479.095
54,822.423
Presort letters & pc
36,213,548
N/C
Carrier Presort letters
2.843.645
N/C
Postal cards
454,006
4.23
416,139
491,873
Private mailing cards
2,598,099
N/C
Presort private cards
1,639,197
N/C
Carrier Presort cards
316,820
N/C
Domestic mail fees
Total First-Class
98,216.074
N/C
,..-_
Priority Mail
Domestic mail fees
Total Priority
Express Mail
Mailgrams
Second-class mail:
Within county
Outside county:
Regular rate
Nonprofit pub1
Classroom pub1
Total publishers’
Publishers’ - label 3579
Application fees
Total second-class
,-
937,273
1.24
914,3:37
960,209
937,273
1.24
914,3:37
960,209
57,573
N/C I2
4,204
N/C
877,829
N/C
6,984,301
2,205,180
58,885
10,126,194
N/C
N/C
N/C
N/C
10,126,194
N/C
N/C
12.
TABLE2
(CONTINUED)
C.V.17 OF
LOWER 95%
UPPER 95%
PIECES
ESTIMATE
CONFIDENCE
CONFIDENCE
Service Category
($1,000~)
(PERCENT)
LIMIT /3
LIMIT /3
____________________---~.----------________________
___________-__-_
--------------------~.-_________.
.___________
_
Third-class mail:
Single-piece r;ste
145,007
7.82
123,3,34
168,280
5,776,422
N/C
Bulk rate - basic
29.180.737
N/C
- carrier route
- 3/5-dig. prsrt
24,374,086
N/C
59,331,244
N/C
Total regular
2,966,936
N/C
Nonprofit - basic
2,908.617
N/C
- carrier route
- 3/5-dig. prsrt
6.333.530
N/C
12,209,084
Total nonprofit
N/C
Bulk mailing fees
Domestic mail fees,
Special handlilng
71,686.135
N/C
Total third-class
Fourth-class mail:
Parcels (zone rate)
Bound printed matter
Special fourth-class rate
Library rate
Domestic mail fees
Special handling
P.A.L. fees
Total fourth-class,
212,828
516,111
189,793
30,133
1.83
1.13
3.37
9.74
205,168
504,638
177,176
24,34-g
220,488
527,584
202,410
35,917
948,866
1.35
923,672
974,060
U.S. Postal Service Mail
360,114
3.14
337,830
382,398
49,969
12.46
37,7m
62,230
Free mail for the blind and
handicapped
Total domestic mail
Total international
Total all mail
mail
182,386.402
N/Cl2
1,053,071
N/C
183.439.473
N/C
13.
TABLE 2
(CONTINUED)
c.v.17 OF
LOWER 95%
UPPER 95%
ESTIMATE
PIECES
CONFIDENCE
CONFIDENCE
(PERCENT)
Service Category
LIMIT /3
LIMIT /3
($1,000s)
_____________-__-___---~._________________________
_________-______-__
_______________----___
________,__________.
Special and other services:
Registry - fees affixed
18,623
2.97
17,535
19,711
Insurance
28,724
3.24
26.8’93
30,555
Collect-on-delivery
4,866
24.27
2:,5,40
7,192
Certified
270,832
3.03
254, ,690
286,974
Special delivery
382
29.22
182
602
214,029
N/C
Money orderfs
Subtotal
537,456
N/C
U.S. Postal Service Special Service Transactions:
Registry
14,567
Certified
1,915
299
Special Delivery
Special Handling
15
Return Receipts
1,311
Total
16,796
7.92
20.85
la.44
83.85
24.62
a.14
12,2!33
I.129
I!30
67:
16,841
2,701
408
1,947
40
14,101
19,491
I/ Coefficient of Variation = 100 x (Est. Std. Deviation /Est. Revenue)
2/ Not Computed.
3/ Lower Limit, = Est. Revenue - (1.97 X Est. Standard Deviation)
Upper Limit = Est. Revenue + (1.97 X Est. Standard Deviation)
14.
TABLE 3
FISCAL YEAR 1996 WEIGHT ESTIMATES
AND ASSOCIATED CONFIDENCE LIMITS
C.V./l OF
LOWER 95%
UPPER 9!5%
ESTIMATE
CONFIDENCE CONFIDENCE
POUNDS
Service Category
($1,000~)
(PERCENT)
LIMIT I3
LIMIT /3
____________________~~-~------~--~-----__-__-_-____________________
___________________
..___-_-_--__~______
First-Class Mail:
0.53
Letters and parcels
2.4373451
2,412,113
2,462,789
Presort letters & pcl
1,434,480
N/C
Carrier Presort letters
N/C
112,903
4.23
2,838
2,601
Postal cards
3,075
N/C
Private mailing cards
16,493
N/C
Presort private cards
12,791
2,562
Carrier Presort cards
N/C
Domestic mail fees
4.019,519
N/C
Total First-Class
Priority Mail
Domestic mail fees
Total Priority
Express Mail
1562,801
1.43
1,518,863
1,606,,739
1.562.801
1.43
1,518,863
1,606.,739
63,727
N/C I2
N/C
Mailgrams
Second-class mail:
Within county
Outside county:
Regular rate
Nonprofit publ
Classroom pub1
Total publishers’
Publishers’ - label 3579
Application fees
Total second-class
256.785
N/C
3,250.571
594,585
30,082
4,132,022
N/C
N/C
N/C
N/C
4.132,022
N/C
15.
Service Category
Third-class mail:
Single-piece rate
Bulk rate basic
- carrier route
- 3/5-dig. prsrt
Total regular
Nonprofit ‘. basic
- carrier route
3/5-dig. prsrt
Total nonprofit
Bulk mailing fees
Domestic mail fees
Special hslndling
Total third-class
UPPER 95%
CONFIDENCE
LIMIT I3
31,301
675,326
4,111.416
3,373,518
8,160,261
200,697
192,403
429,727
822,827
5.22
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
9,014,389
N/C
1,094,939
1,231,296
319,402
50,971
1.93
1.11
3.36
3.48
1,053.229
i ,204,384
298,246
47.47.4
1,'136,649
1,;!58,208
340,558
54,468
2,696,608
1.20
2.632,7413
2,760,476
U.S. Postal Service Mail
97,832
5.20
87,8i:3
107,846
Free mail for the blind and
handicapped
32,595
17.87
21,122
44,068
21.619,494
N/C-2
253,462
N/C
211872,957
N/C
Fourth-class mail:
Parcels (zone r-ate)
Bound printed matter
Special fourth-class rate
Library rate
Domestic mail fees
Special handling
P.A.L. fees
Total fourth-class
Total domestic mail
Total international
Total all mail
,-
POUNDS
($1,000~)
TABLE 3
(CONTINUED)
C.V. /I OF LOWER 95%
ESTIMATE CONFIDENCE
(PERCENT)
LIMIT /3
mail
28,0@#1
II Coefficient of Variation = 100 x (Est. Std. Deviation / Est. Revenue:)
21 Not Computed.
31 Lower Limit = Est. Revenue - (1.97 X Est. Standard Deviation)
Upper Lirnit = Est. Revenue + (1.97 X Est. Standard Deviation)
34,521