REcEIVEL!
BEFORE THE
POSTAL RATE COMMlSSlON
WASHINGTON,
D.C. 20268-0001
POSTAL RATE AND FEE CHANGES, 1997
Docket No. R97-1
\
OBJECTION OF THE UNITED STATES POSTAL SERVICE TO
NEWSPAPER ASSOCIATION
OF AMERICA INTERROGATORY
NAAIUSPS-2(g)
(September 8, 1997)
The United States Postal Service hereby objects to Newspaper
America
interrogatory
NAA/USPS-2(g),
Association
of
filed on August 29, 1997. The interrogatory
is
vague as drafted.
Further, the requested
this proceeding.
Also, with regard
information
is not relevant to any issues in
to FY 1997, the information
is commercially
sensitive.
NAAIUSPS-2(g)
states:
Please indicate whether for FY 1996 and FY 1997, whether the sums
expended in the national and each regional advertising budget were within
the appropriate budget set by the responsible postal official.
First, the wording
“appropriate
budget”‘?
of the interrogatory
for advertising
Does the interrogatory
responsible
postal
What
is meant
by the
Does this mean the set amount budgeted for total advertising?
What is the time period envisioned
be budgeted
is unclear.
by the question?
at the beginning
For example,
of the year, but subsequently
imply that the set amount cannot
official?
be modified?
Does this refer to the Chief
determines
advertising
strategy?
responsible
for the overall budget?
21set amount may
Marketing
Does it refer to the Chief Financial
Does it refer to the Postmaster
modified
Who is the
Officer,
who
Officer, who is
General or the
2
Chairman
of the Board
of Governors,
who
might
be deemed
to be ultimately
responsible?
In any event, it is assumed that the question was motivated by reports appearing
in the press that the former Chief Marketing
allegedly
exceeded
his advertising
budget.
overspend
or underspend
advertising
costs are what they are.
parties to challenge
particular
items.
Officer of the Postal Service, Loren Smith,
is completely
Whether
irrelevant
“responsible
to these
It is not the function
the appropriateness
postal
officials”
proceedings.
The
of the Commission
or the
of Postal Service spending
or budgeting
on
There is no “line item veto“ on these types of expenditures.
The requested
information
is also irrelevant
because of the rnanner in which
the Postal Service historically has treated advertising costs. Basically, a total estimated
dollar amount for ad’vertising expense is included as part of the revenue requirement.
That total estimated
spent
on advertising.
subclasses
rollforward
dollar amount consists of internal projections
Some
of those
projections
for what might be
relate to specific
classes
and
of mail and some do not. That total dollar amount is then input into the
model and distributed
“Other” category
to specific classes and subclasses
based on the distribution
category
was for general advertising
category
of mail. The base year distribution
of mail or to the
of those costs in the base year. The “Other”
costs which were not associated
with a specific
was, of course, based on actual, historical
spending.
In this case, ,the distribution
does not appear in the presentation
of those costs to classes and s,ubclasses
of mail
of volume variable costs for the interim and test
3
years
because
methodology,
of the Postal Service’s
advertising
variable costs.
incremental
cost methodology.
Under this
costs in total are treated as “Other” rathelr than as volume
(For individual
subclasses,
they are included implicitly as incremental
costs via the ratio method used by witness Takis, USPS-T-41 .) How,ever, anyone can
see what the advertising
costs associated
with specific classes and subclasses
have been in the interim
and test years,
methodology,
the alternate cost presentation
pursuant
by consulting
to Rule 54(a)(l).
in the absence
See Library Reference
would
of the incremental
cost
filed by tihe Postal Service
H-215, at Pari I, Section
14, page
18 (FY 97); Part /I, Section 12, page 18 (TY 98 BR); Part 111,Sectior;t 12, page 18 (TY
98 AR) (component
7615). This information
has seemed to suffice in past cases and
should suffice here. It is hard to imagine why NAA needs to know whether advertising
budgets were exceeded.
Moreover, with regard to FY 1997, confirming whether the advertising
been exceeded
over.
would reveal commercially
If a competitor
its advertising
advertising
sensitive
budget,
it could infer that the Postal Service
for the remainder
for the delivery of advertising
would
of the fiscal year and into the next year.
campaign
It is no secret that the newspapers
risk its competitive
FY 1997 is not yet
knew, for example, that the Postal Service had already overspent
might thus begin its, own heavy advertising
advantage.
information.
budget has
material.
position by disclosure
not spend
on
The competitor
to gain an unfair competitive
are competitors
of Ihe Postal Service
The Postal Service should not be required to
of this information.
4
Respectfully
submitted,
UNITED STATES POSTAL
SERVICE
By its attorneys:
Daniel J. Foucheaux, Jr.
Chief Counsel, Ratemaking
,kfl- -w.a---ca
Susan M. Duchek
CERTIFICATE
OF SERVICE
I hereby certify that I have this day served the foregoing document upon all
participants of record in this proceeding in accordance with section 12 of the Rules of
Practice.
Susan M. Duchek
475 L’Enfant Plaza West, S.W.
Washington, DC. 20260-l 137
(202) 268-2990; Fax -5402
September 8, 1997