~~ECEIVF!)
BEFORE THE
Docket
POSTAL RATE AND FEE CHANGES, 2000
No. R2000-1
NOTICE OF PITNEY BOWES INC.
CONCERNING ERRATA TO
TESTIMONY OF WITNESS HALDI (PB-T-2)
Pitney Bowes Inc. hereby provides notice of the filing of errata to the testimony
of witness
John
Haldi
immediately
following
(PB-T-2).
pages.
The errors
and corrections
are listed
Revised pages are attached with the changes
by bold face type.
Respectfully
submitted,
r-,\D A
Ian D. VolnerN. Frank Wiggins
Venable, Baetjer, Howard & Civiletti, LLP
1201 New York Avenue, N.W.
Suite 1000
Washington, DC 20005-3917
Counsel for Pitney Bowes Inc.
Dated:
July 13, 2000
on the
indicated
Errata for PB-T-1
Page
Line(s)
12
5
Change “754”
to
“746”
12
23
Change “754.168”
to
“746.128”
12
23
Change “791.212”
to
“799.252”
13
2
Change “6.7”
to
“6.6”
14
15
Change “6.745”
to
“6.673”
14
19
Change “6.715”
to
“6.643”
20
9
Change “3.0
to
“5.0”
20
11
Delete “slightly”
27
15
Change “$754.2”
to
“$746.1 PI
27
16
Change “$726.6”
to
“$718.8”
29
22
Change “19.449”
to
“11.630”
29
22
Change “. 165”
to
“.099”
29
22
Change “.386”
to
“.231”
29
22
Change “20.000”
to
“11.960”
29
24
Change “565.802”
to
“557.784”
29
24
Change “12.329”
to
“12.263”
29
24
Change “10.692”
to
“10.537”
29
24
Change “586.623”
to
“580.583”
29
29
Change “726.584”
to
“718.766”
29
29
Change “13.697”
to
“13.631”
29
29
Change “13.886”
to
“13.731”
Errata for PB-T-1 (can’t)
Page
Line(s)
29
29
Change “754.168”
29
32
Change “Tr.6/263” to Tr.2119262”
29
42
Change “2650” to “2653”
29
46
Change “9257” to “9251”
29
47
After “paper.” delete the period, insert a comma, then add
“and 59.8 percent volume variable.”
30
3
Change “$791.2”
to
“799.3”
32
8
Change “$754”
to
“$746”
32
12
Change “67,400”
to
“$66,720”
32
12
Change “6.74”
to
“6.67”
32
14
Change “$791”
to
“$799”
33
26
Insert “5~.
33
45
Change “$791,212,200”
33
51
Delete period and add “,21/9262” following Tr.612631
34
5
Change “Tr.21/3621”
34
31
Change “ $755,, 668,000” to “$755,668,000
34
42
Insert “5~.
39
19
Change “705,519”
to
“697,478”
39
19
Change “641,495”
to
“649,535”
39
19
Change “1,347,014”
39
21
Change “25,647”
to
“746.128”
Credit Card Fees
to
8,040,OOO”
“$799,252,200”
to “Tr. 21/9252”
Response to PB/USPS-Tll-3(f)
3/21/00)
to
to
“1,345,343”
“26,069”
(revised
Page
Line(s)
Errata for PB-T-1 (con?)
39
21
Change “35.929”
to
39
21
Change “6.l”to
“6.2”
39
22
Change “83,617”
to
“84,071”
39
22
Change “94,682”
to
“95,135”
39
22
Change “15.0”
to
“15.1”
39
23
Change “36,391”
to
“36,6125”
39
23
Change “45,349”
to
“45,583”
39
23
Change “13.9”
to
“14.0”
39
25
Change “208”
to
“332”
39
25
Change “3,241”
to
“3,366”
39
26
Change “3,854”
to
“4,291”
39
26
Change “19,166”
to
“19,603”
39
28
Change “754,168”
to
“746,128”
39
28
Change “791,212”
to
“799,252”
“36,350”
costs associated
1
2
on the cost of meters
3
Summary
with meters
is shown
in Appendix
data on both revenues
4
stamps
and meters
5
The attributable
6
was substantially
greater
7
million]
in Table
as shown
are classified
during
as institutional.
B.
(Appendix
C) and costs from
the Base Year, FY 1998, are shown
cost of stamps
Details
and accountable
paper
than the attributable
($746
cost of meters
in Table
1.
million)
($6.3
1.
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
Table 1
Postal Selvice Revenues
and Cost of Revenues,by Source
Fiscal Year 1998
($, millions)
Revenues
Cost
(3)
Institutional
Cost
Stamps &accountable paper
11,181
746.128
799.252
Meters
21,076
6.286
8.989
(1)
(2)
Attribu-
table
Sources:
Full
Cost
I,545380
15.275
Stamp costs, Appendix A.
Meter costs, Appendix B.
Revenues,Appendix C; revenuesshown here exclude metered postage generated
at Postal Service windows.
Postal Service costs to collect
collected,
(4)
are shown
revenues,
in Table 2. As indicated
12
as a percent
by the bottom
of revenues
row of this
1
table, as a percentage
2
using
3
full cost of stamps
4
percent.rI
stamps
the attributable
exceeds the cost of meters
perspective,
the Postal Service incurs
times greater
than
the costs incurred
Moreover,
8
declining
9
be incurred
in the future.
of postage
to collect
10
percent
11
meters...[which]...involve
12
customer
13
operational
relatively
Witness
meters
cost from
the same revenue
insignificant
with
accounting
an electronic
and the meter manufacturer.
180
from
meters
is
costs will
Davis notes that ‘Currently,
in use are remote-set
in revenue
are more than
net cost associated
The
13.7
each $1 billion
costs which
the Postal Service’s
to the point where
by more than
to collect
from stamps,
transaction
by more than 6.6 percent.
exceeds the cost of meters
From another
meters.
14
of revenues,
over 90
electronic
transaction
between
the licensed
The Postal Service has no
role in such transactions,
e.‘.
such settings.“4
and therefore
incurs
no cost for
4b
Postal administrations,
including the USPS, recognize that selling
stamps through postal counters consumes a far too high percentage of revenue
collected, and can be inconvenient as well. Accordingly they have implemented
other low cost and more convenient methods for customers to purchase
stamps; e.g., stamps can be ordered by mail or telephone, or purchased at
grocery stores through a consignment program. Regardless of how
inexpensively stamps may be distributed through other channels, however, they
still represent a high cost form of postage payment.
USPS-T-30,
pages 15-16 (emphasis added).
13
1
2
3
4
5
6
7
8
9
Table 2
Costs of Stampsand Meters
as Percent of Revenues
FY 1998
10
11
(1)
(2)
12
13
14
Attributable
cost
Full
cost
6.673%
13.821%
0.030%
___
_______
6.643%
0.072%
__-_______
13.749%
Stamps & accountable
paw
15
16
17
18
19
Meters
DIFFERENCE
20
21
22
In terms
of the 34-cent
23
Class Mail in this Docket,
24
cents.&
rate proposed
transaction
for the first ounce
costs of 6.7 percent
of First-
amount
to 2.3
sol For simplicity, the discussion here focuses on the rate for the first
ounce of letter mail. In FY 1998, the average revenue from each piece of FirstClass single piece nonpresort letter mail was 40.2 cents, and the projected
average revenue in Test Year (after rates) is 43.5 cents. Applying a 6.7 percent
transaction cost to average revenue figures instead of the first ounce rate would
increase the average transaction cost attributable to an average single piece of
_ stamped First-Class Mail from 2.3 to 2.9 cents, and reduce the passthrough to
35 percent.
14
C.
The Proposed
Discount
Would
Enjoy Simplicity
of Execution
This is not the first proposal to recognize cost differences within
5
single piece First-Class
6
receives
a lower rate in recognition
I
delivery
cost, but pays an additional
8
high transaction
9
For QBRM the Postal Service charges 30 cents postage plus a fee of 5.0 cents
Mail.
cost involved
Qualified
Business
Reply Mail (“QBRM”)
of its lower mail processing
fee that explicitly
in counting
and
recognizes
pieces and collecting
costs. The QBRM accounting
the
revenue.
10
per piece to cover the transaction
fee slightly
11
exceeds 2.3 cents, the average cost of collecting revenue via stamps for the first
12
ounce of single piece First-Class
13
be considered
14
delivery costs.
Mail. For retail mail, total system cost should
to include transaction
costs as well as mail processing
and
A reduced rate for Courtesy Reply Mail (“CRM”) has been
15
16
recommended
by the Commission
17
instance
18
Among
reasons
which
19
mailing
public
(i) would
20
denominations
of stamps, and (ii) would need to be vigilant about the
21
amount
they put on CRM and non-CRM
22
Service could have a serious problem protecting
the Governors
which
in two prior dockets,
have declined
the Governors
to adopt
and in each
the recommendation.
cited for their action
need to maintain
20
an inventory
is that the
of two
mail, else the Postal
its revenues.
Appendix
I
A
COST OF STAMPS
2
The Postal Service’s
3
4
includes
5
stamps
total cost of obtaining
revenues
from stamps
the cost of creating
and manufacturing
stamps, distributing
J’j
selling stamps, and recalling and
to some 35,4 11 outlets,”
destroying
excess stamp
For decades
channels:
inventory.
the Postal Service sold stamps
(i) post office windows;
carriers.
In recent
10
introduced
11
by phone,
12
utilizes
13
Costs
14
During
15
envelopes
16
96.3 percent,
17
cost to manufacture
years, however,
new channels
stamps
other retail
Attributed
(ii) contract
through
stations;
and (iii) rural
the Postal Service has creatively
for distributing
stamps.
These include:
by mail, and a stamp consignment
channels
only three
such as grocery
program
stamps
that
stores and bank ATMs.
to Stamps
FY 1998, the attributable
and cards amounted
or $718.8
costs of (i) stamps,
to some $746.1
million
and (ii) stamped
if
million. e Of these costs,
were attributable
to stamps
alone.
The
3C:
18
stamps
was $183 millionp?
Response to PB/USPS-T-11-14,
while
Tr. 21/9256.
19
Details on volume variable costs are contained
and workpapers of USPS witness Meehan (USPS-T- 11).
20
For additional information pertaining
responses to OCA/USPS-47-50,
Tr. 21/9068-9081,
9105; also OCA/USPS-T9-16-17,
Tr. 21359-360.
29
the
in the testimony
to the cost of stamps, see
and 60-62, Tr. 21.9102-
I
2
3
4
5
6
;
9
10
;:
13
ii
16
17
18
19
Table A-l
Attributable Cost of Stamps
Fiscal Year 1996 ($, millions)
16.
16.
;i
2
29
30
::
33
Supplies/stamps
accountable
Stamps
_-._.
357.736
&
paper
Mgt of stamp consignment
183.396
prog.
16, 16 Artists
18 & 20
;:
22
23
24
(1)
_______
cost segment ------ _
Description
No.
___
3.
Clerks/window service
16.
Stamp Advisory Committee
(2)
Stamped
Envelopes
(3)
Stamped
Cards
3.041
7.096
(4)
Total
Attributable
_____
367.677
9.123
3.206
195.729
4.646
4.646
0.306
0.306
0.065
0.065
A11 630
0.099
0.231
557.784
12.263
10.537
Indirect costs, at 0.45 x
clerks/window service costs
160.982
1.368
Total attributable costs
718.766
13.631
Credit card fees
SUBTOTAL
Sources:
m
13.731
11.960
560.563
165.545
746.128
Window service costs (stamps), response to PBIUSPS-Tl l-26, Tr. 612631
envelopes and cards, respectively, Meehan W.S. 3.2.6, column 4, W.S.
3.2.2, column 0.
:z
:;
:;
40
2
43
iit
2
48
49
50
51
Cost of stamps, envelopes and cards, response to PBIUSPS-Tl
and 29, Tr. 6/2617.2634-2635.
Stamp consignment
costs, response to PBIUSPS-Tll-6,
l-7.26
Tr. 6/2616
Artists and stamp advisory committee, response to PBIUSPS-Tl l-5 & 23,
Tr. 6/2615, 2629-2653, using volume variability of 59.8 percent applied to
pertinent account numbers.
Credit card fees, response to PBIUSPS-Tl l-3 (referred to USPS, revised
3/13/00), Tr. 2119250-9251. estimated at $20 million for stamps and
accountable paper, and 59.8 percent volume variable.
Piggyback factor for indirect costs, response to PBIUSPS-Tll-12,
Tr. 6/2621,
29
It has not been possible
associated
with
creating
costs that could
4
to quantify
and selling
be quantified
every institutional
stamps.
amounted
cost
In Fiscal Year 1998, those
to $799.3
million,
as shown
in
Table A-2.
In addition
5
incurs
to the dollar
6
Service
a number
7
use of stamps,
8
precision.
Those items marked
9
elaborated
on here.
Costs
by mail.
11
program,
which
it manages
12
program
include
(i) printing
13
forms
14
class permit),
15
use the BRM envelope.
16
and/or
17
filled by clerks
18
represents
19
stamps
20
are reported
21
however,
customers
“n.a.”
(not available)
internally.
order forms,
Orders
distributed,
any degree of
by mail
by mail
such order
and bear a first
are segregated
To the extent
that orders
the cost of their
stamps.
may be
time
Some costs of the
in the Postal Service records,
As indicated
the Postal Service did not explicitly
30
that
by mail are filled by clerks
service clerks,
cost of selling
in row 5 of Table A-2.
the
reply mail fees for all customers
in local post offices.
by mail program
(ii) distributing
for stamps
other than window
with
in Table A-2 are
Costs of the stamps
(these are widely
a net additional
here with
The Postal Service has a stamps
and (iii) the business
supervisors
costs associated
could not be quantified
10
to postal
in Table A-2, the Postal
of other incremental
but which
for stamps
costs shown
and
in rows 6 and 7,
record
any cost (either
the
1
stamp
stock.
Charging
the stamp
2
the Postal Service charges
3
annually,
4
1998 volume
others
program
would
but data were not available
variable
with the same registry
result
in a significant
for the computation.
cost for registry
fees as
sum
The total FY
was $99,336,000.
S
6
Cost of Obtaining
Revenues
From
Stamps
In FY 1998 the total attributable
paper
(stamped
revenues
10
million.
11
envelopes
12
$66,720
13
envelopes
from stamps
Thus,
cost for stamps
and cards) amounted
and accountable
to collect
to $746
$1 ,OOO,OOO in revenue
while
to $11,18
from stamps,
attributable
1
stamped
costs of
percent.
On a full cost basis, the recurring
14
another
15
of stamp
16
collect
17
the Postal Service incurred
$799
million,
paper amounted
and cards the Postal Service incurred
or 6.67
and accountable
million
institutional
to the cost of stamps.
and accountable
paper exceeded
$1 ,OOO,OOO in revenue
Conservatively,
$1,545
from stamps,
full costs of about
32
costs added
million.
stamped
$138,100
the full costs
Thus,
envelopes
to
and cards
or 13.81 percent.
I
Table A-2
2
Postal Service Institutional Costs
Associated with Stamps
FYI998
:
5
6
7
i
Row
____
cost
Segment
________
__
10
11
12
13
14
la
lb
3
2
2. 3, 15.20
3
19
4
z’:
Item
______
Amount
___--.--___
SALES AND REVENUE COLLECTION
Non-variable window service cost
Piggyback
$417.930,000
186.068,500
USPS stamp vending machines
82.859,143
10
Rural carrier stamp sales
24,853,491
13
Stamp sales at contract stations
24,943.lOO
5a
Cost of stamps by mail
36,OOO.OOO
5b
Management
25
26
27
5c
Credit
6
Cost to distribute 64 million order forms
n/a
it
7
Mailing fees to distribute stamps (registry & penalty)
n/a
ii
17
18
22
ii
of Consignment
Program
Card Fees
3,123.414
8,040,OOO
30
31
STAMP CREATION
E
Artist costs
217,829
Stamp Advisory Committee
203,893
8
16,18
9
15, 16, 18. 20
10
18
INTERNAL DISTRIBUTION
Stamp Distribution Network personnel
11
14
Surface transportation
12
3
Registry labor cost
z
:?3
.
36
39
40
41
13,012,831
cost to distribute stamps
n/a
n/a
TOTAL
$ 799,252,200
Sources for Table A-2
Row
50
::.
53
la.
1b.
Non-volume variable labor cost, response to PBIUSPS-Tl l-26, Tr. 6/2631,21/9262
Piggyback factor, response to PBIUSPS-Tl l-12 (b), Tr. 6/2621_
2.
Stamp vending machine costs.
Service (Seg. 3, PBIUSPS-Tl l-12(a),
Tr. 6/2620-2621.
33
revised 3/21/00).
$54.245,804
I
999,973
30,727.971
Mileage PB/USPS-Tll-12(b),
Tr. 6/2621,
Space cost (Seg.15. PBIUSPS-Tll-12(b)),
Tr. 6/2621
Depreciation (Seg. 20, PBIUSPS-Tl I-g(b)(referred to
USPS), Tr. 21/9252.
Total cost
Share assigned to stamps
Cost assigned to stamps
2
3
4
2
7
;
10
6,091,986
$92,065.714
90%
$8’2,859.143
N.B. Some non-stamp products are sold through vending machines, and the amount of
such items is estimated at 10 percent.
11
12
13
3.
i;’
Time allowance for sale of stamps:
20
Per week/route (Postal Bulletin No. 21952, dtd 8/14/97)
Per year/route
17.33
60,731
Rural routes, Financial & Operating Statements, A/P 7, PFY 1998
1,052,671
Rural carrier hours for stamp sales
Total rural carrier hours (Nat’1 Payroll Hours
155,790,953
Summary Report, 9/l l/98)
0.675694
Percent of total hours for stamp sales
$3.678,215,000
Total rural carrier labor cost, USPS-T-l 1, Exh. W.S. 10.0.1
$24,853,491
Rural carrier stamp sales cost
16
I3
19
20
2
23
24
4.
::
:z
ii
39
::
42
43
44
Costs associated with stamp sales at contract stations are estimated as follows:
Total window service costs, USPS-T-l 1, Exh USPS-1 IA, p. 20
Cost of window service stamp sales,
response to PB/USPS-Tl l-26, Tr. 6/2631.
Percent of window service cost attrib. to stamp sales
Total contract station costs, response to PBIUSPS-Tll-6
(Referred to USPS), Tr. 6/2616.
Cost of stamp sales at contract stations, at 37.04%
E3
29
:z
36
Costs associated with stamp sales by rural carriers are estimated as follows:
5a.
$2,040,353,000
$755.668.000
37.04%
$67.348.000
$24.943.100
5b.
Stamps by mail, response to PBIUSPS-Tll-10
and 12, Tr. 2119254,
Tr. 612620-2821.
Response to PBIUSPS-Tll-8
(revised 3/21/00), Tr. 6/2618.
5c.
Response
6.
Order form distribution, Response to PB/USPS-Tl I-IO, (Referred to USPS),
Tr. 21/9254
Mailing fees to distribute stamps (registry & penalty) are
contained in Revenue Segment 1, Account 41118.
7.
to PBIUSPS-Tll-3(f)
(revised
3/13/00), Tr. 219255-9257
34
minutes
hours
routes
hours
hours
percent
1
Sources for Table A-2 (con?)
Row
z
4
a.
Artist costs, response to PBIUSPS-Tl
2630.
9.
Costs for the Stamp Advisory Committee, response to PB/USPS-Tl
and 23, Tr. 6/2613, 2629-2630.
l-5 (revised 3/21/00) and 23, Tr. W2615. 2629-
2
s’
1;
;:
13
14
15
16
17
network personnel, PB/USPS-Tll-5
l-5 (revised 3/21/00)
10.
Costs for stamp distribution
Tr. 6/2613.
(revised 3/21/00) and 23,
11.
Surface transportation
6/2628.
12.
Stamps are distributed to (and returned from) 35.411 outlets via registered mail; response
to PBIUSPS-Tl l-21. Tr. 6/2627.
is used to distribute stamps; response to PBIUSPS-TI
34
l-22, Tr.
CERTIFICATION
I hereby
participants
certify that I have this day served the foregoing
of record in this proceeding
in accordance
with Section
practice.
cur\o;-
N. Frank Wiggins
document
upon all
12 of the rules of