POSTAL RATE AND FEE CHANGES, 2000
TRIAL BRIEF OF THE
INDUSTRY ASSOCIATION
RECORDING
Members of the Recording
extensive
use of Standard
other purchasers
bought.
the sound recordings
proposed
in January,
to increase
RIAA contends
revenues
1999.
rates to send their club members
and videos that these consumers
In this proceeding,
and
have
the Postal
Service
has
by 180% from 10 to 18 cents per piece.
that there is not only a “theoretical
the putative
pieces and flats in the Standard
of America (“RIAA”) make
are subject to the “residual shape surcharge”
the surcharge
in computing
No. R2000-1
OF AMERICA
Industry Association
(A) Regular
Many of these shipments
established
Docket
basis” for the inclusion
cost differential
(A) subclass
between
residual
but that the revenue
of
shaped
difference
must, as a matter of law and equity, be taken into account in setting the residual
shape surcharge
foundation
A.
in this case. Witness Glick’s testimony
for this claim.
The Commission’s
Analysis Supplied
Although
surcharge
provides the evidentiary
Decision in Docket R97-1 Expressly
by RIAA Witness Glick.
the Commission
at the level proposed
ultimately
recommended
by the Postal Service
Invited the
the residual
in Docket
shape
R97-1,
it
recognized
that this was “only a beginning
step” and that a number of issues
including the proper treatment of revenue differences
shape”
pieces
examination.
in the
determination
The Commission
out the use of revenues”
theoretical
concluded
surcharge
warranted
its use.”
Docket R97-1 at V-426 (“R-97-l
focus on both the similarities
that it should not “permanently
Opinion
Decision”).
and Recommended
and differences
between worksharing
R97-1 Decision at V-427.
explains
explicates
why,
difference
Witness
discounts
determining
should
the questions
in application
between
explains
is inappropriate
that
(A) Regular
the worksharing
for determining
the appropriate
amount
a parcel
Glick’s
and compellingly
the revenue
resulting
of different recognizable
surcharge,
from shape,
supplied).
2
Rather,
in
the inquiry
among
types of mail pieces.”
is that:
at 2 (emphasis
for establishing
surcharge.
to perform the equivalent of a single ‘exact piece’
comparison, one must control for cost differences
caused by all characteristics other than shape.
RNA-T-1
Witness
parcels,
model
of a shape-based
to isolate “differences
cost causing characteristics,
conclusion
and shaped-
The Postal Service has made no
raised by the Commission
to Standard
Decision,
parcels and flats must be taken into account.
Glick
be intended
rule
It also held that there was need to
attempt to address the issues left open by the Commission.
testimony
further
but that “in the instant case there is not sufficient
basis justifying
based differentials.”
of the
between flats and “residual
other
His
In developing
Crum has controlled
than shape.
the estimate
of cost differences,
Postal Service
for some, but not all, of the relevant
characteristics
He did adjust his cost estimates for the difference
between
witness
other
parcels
and flats resulting from depth of presort and depth of drop ship. The fatal flaw in
his analysis
as applied to Standard
cost differential]
for differences
(A) Regular is that he “did not correct [the
in weight.”
RIAA-T-1 at 3.
When the two shapes of mail being compared
same weight, this omission
may be reasonable
case in the letter/flat differential.
are approximately
or certainly not fatal.
of the
That is the
The same may be true for the comparison
of
parcels and flats if -- within a particular subclass -- the average weight of the two
pieces
is closely
similar.
However,
as witness
Glick points out, the average
weight of a Standard
(A) Regular parcel is 2.5 times greater than the average
weight
(A) Regular flat.
revenue
of a Standard
effects amounts
to “double
In that context,
charging
ignoring weight-related
parcels for weight-related
costs.”
RIAA-T-1 at 3.
In short, there is not only a sound economic
into account
the weight-related
but, in the case of Standard
indefensible.
revenue differences
(A) Regular
39 USC §403(c).
3
“theoretical
basis” for taking
between
flats and parcels
mail, the failure to do so is legally
.
B.
The Revenue Contribution
Issue Needs to be Considered
in the
Context of Other Infirmities in the Postal Service’s Residual Shape
Surcharge Showing.
At this stage of the proceeding
that reinforce the conclusions
F&t,
demonstrate
the
Postal
there are at least three fundamental
reached by witness Glick:
Service
has
not
that shape is the dominant
performed
any
factor explaining
Service’s
analysis
Indeed, in application
of cost causation
fresh
studies
the apparent
in cost between parcels and flats. In R97-I, the Commission
Postal
issues
to
different
recognized
that the
left a great deal to be desired.
to Standard (A) Regular, the Commission
did not rely upon
that analysis at all. Rather, it pointed out that the average weight of “ECR flats
and ECR parcels is essentially
cost differential
425.
“cannot be due to differences
The Commission
between
equal” and therefore,
then extrapolated
flats and parcels
attributable
Service
the cost difference
has treated
attributable
to shape;
in weight.”
(A) Regular
to the difference
between
that the difference
commercial
in shape.”
Id.
and that is not what the Commission
held.
as entirely
Given the
characteristic
(A) Regular parcels, the Postal Service’s failure to take into account
the weight-related
Second,
surcharge
subclass
The Postal
flats and parcels
absence of clear evidence that shape is the dominant cost-causing
of Standard
the
Decision in R97-7 at V-
“to the conclusion”
in the Standard
“must be somewhat
in the ECR subclass,
revenue differences
in that subclass is fatal.
In R97-1 the Commission’s
covering
all Standard
explicitly
(A) subclasses
4
recognized
that a single
“does not reflect the variation
in
average cost or the cost differential
between flats and parcels by subclass.”
Postal Service in this case continues
of the Standard
(A) subclasses.
to propose a uniform surcharge
Given the known differences
possibly shape) and in revenue differences
four subclasses,
The
for all four
in weight
(and
between flats and parcels among the
this is indefensible.
Third, the Commission’s
initiation of the IO-cent surcharge
proceeded
on
the premise that the Postal Service could and would track the cost of residual
shape pieces separately
from flats and that there would be no “confusion”
matter.
at V-424.
R97-1 Decision
It turns out that is not the case: the Postal
Service uses one definition of a residual shape piece for purposes
yet another
particularly
because
for volume and revenues.
critical in application
some (unquantified)
meet the dimensional
Tr. 8/3433-34;
to Standard
percentage
definition
of Standard
of a flat.
3515-17.
of costing and
This issue is
(A) Regular residual shape pieces
(A) Regular parcels in fact
This mismatch
further doubt on the reliability of the extrapolated
predominant
on this
causative factor of cost differences
of definitions
conclusion
casts
that shape is the
between flats and parcels.
CONCLUSION
The entirety of the revenue effect analysis
witness
effect
Moeller
is based on FYI998
until after the conclusion
data.
performed
by Postal Service
Since the surcharge
of that fiscal year, these
did not take
data are of little
probative value.
This is a matter that will be taken up at the appropriate
this proceeding.
There is, however, nothing in the FYI999
into question
witness
Glick’s explanation
5
of why revenue
time in
data that either calls
differentials
must be
taken into account
in setting the Standard
infirmities we have demonstrated
(A) Regular surcharge
or cures the
in the Postal Service’s showing.
Respectfully
submitted,
Ian D. Volner
N. Frank Wiggins
Venable, Baetjer, Howard & Civiletti, LLP
1201 New York Avenue, N.W.
Suite 1000
Washington, DC 20005-3917
Counsel for Recording
of America
Dated:
June 29,200O
Industry Association
.
.
CERTIFICATION
I hereby certify that I have this day served the foregoing
all participants
documents
of record in this proceeding
in accordance
having requested
di-e-
Ian D. Volner
upon
service of discovery
with Section 12 of the rules of practice.
L
document