,
BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON, D.C. 20268-0001
HECEIVED
JUL7 4 18 f% ‘00
POST,~.i.
POSTAL RATE AND FEE CHANGES, 2000
)
OFFit&$,k$t:
..,~? ‘6
N,$;~~O.]
ERRATA TO DIRECT TESTIMONY OF DR. JOHN HALDI (APMU-T-l)
ON BEHALF OF ASSOCIATION OF PRIORITY MAIL USERS, INC. (ERRATUM)
(July 7, 2000)
The attachederrata provide corrections on several pagesof APMU-T-l, including
corrections on pages72 and 74 made in accordancewith the responseto USPS/APMU-Tl-28.
A list of the corrections is attached, along with copies of the relevant pageswith the
highlighted corrections.
Respectfully submitted,
WILLIAM J. OLSON, P.C.
8180 GreensboroDrive, Suite 1070
McLean, Virginia 22102-3860
(703) 356-5070
Counsel for:
Val-Pak Direct Marketing Systems, Inc.,
Val-Pak Dealers’ Association, Inc., and
Carol Wright Promotions, Inc.
CERTIFICATE OF SERVICE
I hereby certify that I have this day servedby the foregoing document upon all
participants of record in this proceeding in accordancewith section 12 of the Rules of Practice.
July 7, 2000
Corrections to Direct Testimony
of APMU Witness John Haldi CAPMU-T-1)
&
Change
&
9
7
Delete the comma after “testimony”
47
6
“Table 8” to “Table 9”
47
8
“Table 8” to “Table 9”
48
5
“Table 8” to “Table 9”
49
17
“Table 8” to “Table 9”
68
“unrounded” to “rounded”
69
“unrounded” to “rounded”
72
11
“$9.9” to “$9.95”
74
19
“$9,866(000)” to “$9,951(000)”
74
21
“$5,814,563(000)” to “$5,814,438(000)’
74
24
“$2,342,848(000)” to “$2,342,723(000)”
IV. COST CONSIDERATIONS
1
A.
The PMPC Network
In my testimony
the Priority
items,
Mail Processing
I noted
Phase I PMPC area.
PMPC contract
10
No. R97- 1, I discussed
Center
that the stated
least 96.5 percent
Year,
in Docket
on-time
(“PMPC”)
discussed
Mail costs, particularly
other
was to provide
service for all destinations
That same testimony
of
at
within
the
the effect of the
on that docket’s
Test
199S7
The PMPC Network
and Service Performance
Even at that time, it was noted that the entire
11
Among
goal of the new network
Two-Day
on Priority
contract.6
the initiation
12
performance
13
Airlines
14
Postal Service
15
difficult
16
timely
17
Even if one were to discount
period
was given over to the contractor,
Inc., to process
until
and transport
return
Priority
delivery
of priority
could
Mail in terms
6
Docket No. R97- 1, NDMS-T-2.
7
Id., pp. 74-79
pp. 66-69.
9
Emery Worldwide
Thus,
“improve
it would
signiiicantly”
of full end-to-end
the above-stated
two-day
Mail after receipt
to the Postal Service.
to see how the Postal Service
normal
from the
be
on the
performance.
goal. and simply
to focus
1
Figure 2
2
3
4
Performance
of First-Class and Priority
Based on ODIS Data
FY 1997-FY1999
Mail
5
A. Achievement
CI First-Class
6
7
Source:
Source:
Mail
m Priority
Mail
Table 9 ODE First-Class and Priority Mail Overnight Standard
Achievement data.
B. Achivement
8
9
of Overnight Standard
of 2nd Day Standard
Table 9 ODE First-Class and Priority Mail Two-Day Standard
Achievement data.
47
1
Figure 2 (Cont.)
2
3
4
Performance
of First-Class and Priority
Based on ODIS Data
FY 1997 - FY 1999
C. Achievement
Mail
of 3rd Day Standard
55.0
Percent
Achieved
80.0
75.0
70.0
N1997
FY1998
D First-Class
L
5
6
Source:
7
Mail
PI 1999
n Priority
Mail
Table 9 ODE First-Class and Priority Mail Three-Day
Achievement data.
As these independently
8
evidence
indicates
9
expedite
the handling
measured
that efforts
undertaken
and transportation
10
First-Class
Mail have borne
11
for Priority
Mail is greater
12
failure
13
assume
that the Postal Service,
14
delivery
area, has adjusted
15
logistics
to meet the asserted
to achieve
performance
fruit.
Standard
data show, no
by the Postal Service to
of Priority
Mail over that of
The fact that the two-day
than that of First-Class
service commitments.
Customers
in setting
its internal
standard.
48
Mail does not just@
can be expected
the more aggressive
processes
service area
two-day
and transportation
to
1
Value
2
raised,
3
short
4
anything,
of service is not enhanced
only to be frustrated
of the mark,
system,
7
information
8
ODIS is not an end-to-end
9
from the origination
the Origin
data.
Destination
Figure
11
Priority
12
Mail performan
13
trailed
14
and by 13 percent
15
were 7 percent
16
standard
17
percent
18
on the following
19
standard,
2 depicts
Mail.
ce in overnight,
First-Class
Instead,
two-day
in the three-day
pages.
did Priority
produces
Mail and Priority
performance
office.
Mail versus
and three-day
standard
way, Priority
See Figure 2, Charts A and C.
See Figure 2, Chart B.
49
at best44,
Mail failures
standard
See Figure
In not one single quarter,
Mail have better
areas
Mail in the overnight
in the two-day
area.
that of
that Priority
ce in all areas by 5 percent
standard
Mail.
is measured
to the destination
than those of First-Class
higher
If
measurement
(“ODE”),
of First-Class
at worst. 45 Put another
higher
in its wake.
FY 1997 - 1999, it shows
Mail’s performan
area, 11.7 percent
higher
System
of First-Class
the ODIS performance
the period
that falls well
Postal Service
office (time of postmark)
During
are
value of service.
Information
system.
expectations
and frustration
Another
on service performance
10
45
degrades
customer
performance
disappointment
such an exercise
6
44
by poor actual
leaving
ODIS performance
5
when
performance
area, and 8
2 and Table 9
for any service
or a higher
value of
Table 10
Priority Mail
bPMU Proposed Rater(rounded)
Weight
LPoundo)
Flat Rate
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
2,
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
&g@
3.75
3.00
3.75
4.75
5.75
6.75
6.95
7.05
7.15
7.25
7.35
7.45
7.65
7.85
8.25
8.60
9.00
9.40
9.75
10.15
10.55
10.90
11.30
11.70
12.05
12.45
12.84
13.22
13.60
14.00
14.35
14.75
15.15
15.50
15.90
16.30
16.85
17.05
17.45
17.80
18.20
18.60
18.95
19.35
19.75
20.10
20.50
2osQ
21.25
21.65
22.05
22.40
22.80
Zone4
3.75
3.00
3.75
4.75
5.75
6.75
7.30
7.75
8.20
8.65
8.95
9.55
10.15
10.75
11.40
12.00
12.60
13.20
13.80
14.40
15.00
15.65
16.25
16.85
17.45
18.05
18.65
19.30
19.90
20.50
21.10
21.70
22.30
22.95
23.55
24.15
24.75
25.35
25.95
28.80
27.20
27.80
28.40
29.00
29.60
30.20
30.85
31.45
32.05
32.65
33.25
33.85
34.50
m
m
3.75
3.00
3.75
4.75
5.75
6.75
7.35.
7.85
8.35
8.85
9.10
9.75
10.35
10.95
11.60
12.20
12.85
13.45
14.10
14.70
15.35
15.95
16.60
17.20
17.85
18.45
19.10
19.70
20.35
20.95
21.80
22.20
22.80
23.45
24.05
24.70
25.30
25.95
26.55
27.20
27.80
28.46
29.05
29.70
30.30
30.95
31.55
32.20
32.80
33.45
34.05
34.65
35.30
3.75
3.00
3.75
4.75
5.75
6.75
7.50
8.15
8.80
9.45
10.10
10.70
11.40
12.10
12.80
13.55
14.25
14.95
15.65
16.35
17.10
17.80
18.50
19.20
19.95
20.65
21.35
22.05
22.75
23.50
24.20
24.90
25.60
26.30
27.06
27.75
28.45
29.15
29.90
30.60
31.30
32.00
32.70
33.45
34.15
34.85
35.55
36.30
37.w
37.70
38.40
39.10
39.85
68
Zone7
3.75
3.00
3.75
4.75
5.75
6.75
7.83
8.80
9.80
10.75
11.75
12.65
13.55
14.45
15.35
16.20
17.10
18.00
18.90
19.80
20.70
21.55
22.45
23.35
24.25
25.15
26.00
26,9-l
27.80
28.70
29.60
30.45
31.35
32.25
33.15
34.05
34.90
35.80
36.70
37.60
38.50
39.40
40.25
41.15
42.05
42.95
43.85
44.70
45.60
46.50
47.40
48.30
49.15
Zonee
3.75
3.00
3.75
4.75
5.75
6.75
8.35
9.85
11.35
12.85
14.35
15.85
16.95
18.15
19.30
20.50
21.65
22.85
24.00
25.20
26.35
27.50
28.70
29.85
31.05
32.20
33.40
34.55
35.75
36.90
38.10
39.25
40.45
41.60
42.80
43.95
45.15
46.30
47.50
48.65
49.85
51.00
52.20
53.35
54.55
55.70
56.90
58.05
59.26
60.40
61.60
82.75
63.95
.
Table 10 (cont.)
Priority Mail
APMU Proposed Rates(rounded)
Weight
(Pound?ll
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
m
23.20
23.55
23.95
24.35
24.70
25.10
25.50
25.65
26.25
26.65
27.00
27.40
27.80
28.15
28.55
28.95
29.35
29.70
Zone4
35.10
35.70
36.30
36.90
37.50
38.15
38.75
39.35
39.95
40.55
41.15
41.75
42.40
43.00
43.60
44.20
44.80
45.40
zone5
35.90
36.55
37.15
37.80
38.40
39.05
39.65
40.30
40.90
41.55
42.15
42.80
43.40
44.05
44.65
45.30
45.90
46.50
69
w
40.55
41.25
41.95
42.70
43.40
44.10
44.80
45.50
46.25
46.95
47.65
48.35
49.05
49.80
50.50
51.20
51.90
52.65
Zone7
50.0
50.95
51.85
52.75
53.65
54.50
56.40
56.30
57.20
58.10
58.95
59.85
60.75
61.65
62.55
63.40
64.30
65.20
gyJ
65.10
66.30
67.45
68.65
69.80
70.95
72.15
73.30
74.50
75.65
76.85
76.00
79.20
80.35
81.55
82.70
83.90
85.05
Third,
1
to be conservative,
2
to the estimated
3
pound,
4
5
costs.
I apply
a passthrough
This gives a schedule
of only 75 percent
of discounts
for each
up to 70 lbs.
Fourth,
I average the discounts
over the pertinent
range,
i.e., 6 to
10 lbs., and every 10 lbs. thereafter.
6
Fifth,
7
The volume
I round
the proposed
of destination
discounts
down to the nearest
entry SCF Priority
Mail used to dropship
8
smaller
items is not known,
but it is reckoned
9
percent
of all zoned Priority
Mail pieces over 5 pounds
10
used for this purpose.
11
result
12
reduction
13
well as additional
14
be expected
15
priced,
16
prevent
loss of such SCF destinating
17
carriers
which
18
due to the availability
19
which
in a reduction
would
Using the volumes
in revenues
be revenue
revenue
of $9.95
from the enclosed
dropship
have been better
did not previously
projected
from any increase
from the Postal Service’s
merged-mail,
that as much
milhon.
offering
product.
as 10
already
may be
at APMU rates would
Offsetting
in Priority
this
Mail volume
pieces, both of which
Mail volume
able to compete
of consolidated
national
exist.
72
as
could
of a more reasonably
Such a rate discount
Priority
5 cents.
with
postage
would
help
to alternative
Priority
Mail entry
payment
options
2
Table 12
3
4
Priority Mail Financial Summary
Test Year Volume, Revenue and Cost After Rates
5
6
7
8
9
10
11
12
13
14
15
16
Test Year After Rates
Volume
Revenue at proposed rates
Revenue per piece
Test Year after rates cost
Contingency
Cost with contingency
Cost per piece
Cost coverage at proposed rates
Average rate increase
17
PickuD Revenue and Cost
Pickup revenue at proposed rates
Pickup costs
18
Fee Revenue
19
Discount
20
21
22
23
24
25
26
Total Test Year After Rates
Total volume
Total revenue
Total cost including contingency
Contribution to institutional costs
Cost coverage
1,475,128 (000)
$5,820,622 (000)
$3.95
$3,384,221 (000)
2.5%
53,468,827 (000)
$2.35
168%
2.6%
$2,972 (000)
$2,888 (000)
5795 (000)
for SCF Delivew
$9,951 (000)
74
1,475,128 (000)
$5,814,438 (000)
~3~471,715(000,
$2,342,723 (000)
168%