,
,x-.
BEFORE THE
POSTAL PATE COMMISSION
WASHINGTON, DC 20268-0001
Special
Services
Fees
Docket
and Classifications)
No.
MC96-3
OFFICE OF THE CONSUMER ADVOCATE
INTERROGATORIES TO UNITED STATES POSTAL SERVICE
WITNESS W. ASHLEY LYONS
(OCA/USPS-Tl-27-33)
(August
9, 1996)
Pursuant
the
Postal
to
Rate
sections
Commission,
25 and 26 of
the
Office
the
of
Rules
the
of
Practice
Consumer
of
Advocate
T--,
hereby
submits
documents.
the
United
incorporated
interrogatories
Instructions
States
Postal
and requests
included
with
Service
dated
for
production
OCA Interrogatories
June
19,
1946,
of
l-4
to
'are-hereby
by reference.
Respectfully
?4%42.&=
GAIL WILLETTE
Director
Office
of the
S&!%%Eg+
Attorney
submitted,
L~..d.,!L
Consumer
Advocate
-.,_
j . .<.d.
.. ,_
Docket
No.
MC96-3
2
1 _---.
In
OCA/USPS-Tl-27.
examination,
Docket
Postal
No.
Service
MC95-1,
witness
In a world
where information
expensive,
one might want
Ramsey prices
lie or the
between
Ramsey prices
and
might
be a sufficient
and
making.
Tr.
a.
In
developing
rates
of
alternative
If
Schmalensee
crossstated,
is difficult
and
to know the region
where
direction
of differences
alternative
prices,
and that
rational
ground
for decision-
your
but
not
previously
your
response
negative,
please
If
that
it
decisions
to
part
had
used
the
Ramsey prices
Ramsey
of
of
in
this
prices
Postal
lie
or
the
and
all
interrogatory
Ramsey
developing
Include
and a copy
in
of
all
your
is
pricing
pricing
data
and
proposals
response
cites
to
for
all
source
documents
referenced
this
interrogatory
is
filed.
to
part
explain
sufficient
made in
(a)
copies
MC96-3.
used
did
_II ?
prices
sources
MC96-3,
where
between
provide
No.
No.
region
differences
response
alternative
Docket
"the
Docket
prices
affirmative,
C.
for
determine
direction
b.
oral
33/15083.
Service
I-.
during
(a)
of
how the
and rational
this
filing.
Postal
Service
grounds
for
determined
the
pricing
Docket
No.
MC96-3
3
1 ,*-..
QCA/USPS-TI-28.
states,
Witness
-[T]he
Postal
and economically
(except
for
rates
are
are
proposed
not
to
Group
E)."
efficient?
allocatively
OCA/USPS-Tl-29.
Service
Service
efficient
allocatively
or
Needham's
witness
In
his
Foster
response
to
OCA/USPS-T7-23
is
believes
that
it
increase
the
fees
Are
Please
the
fully
to
proposed
explain
more
practical
cover
post
costs
office
why the
efficient.
Docket
NO. R94-1
testimony,
Postal
stated,
There are generally
two ways of examining
value
of
service
-- the intrinsic
value
and the economic
value.
Intrinsic
value
considers
actual
levels
and features
of
services
which are indicated
by factors
such as service
Economic
value
involves
customer
standards,
.
perception
of the worth
of the service
and depends
not
on intrinsic
value
of the service
in question
in
isolation,
but also on the range of alternatives
available.
Docket
No.
R94-1.
USPS-T-11
at
17-18.
Economic
value
of service,
as measured
by relative
elasticities
of demand, can be used in a quantitative
way through
the application
of Ramsey pricing
models.
Though Ramsey pricing
is not used in a formal
sense to
determine
the rates
proposed
here,
the cost coverages
for First-Class
Mail
letters
and third-class
bulk
regular
rate
mail
which result
from across-the-board
rate
increases
are more in accord
with Ramsey pricing
principles
than were the cost coverages
in recent
The need to move in
Commission
recommended
decisions.
this
direction
was a central
theme in a 1992 GAO
"U.S.
Postal
Service:
Pricing
Postal
entitled
report,
Services
in a Competitive
Environment."
[Footnote
relationships
in a direction
omitted.
1 Moving price
which
focuses
on economic
value
of service
places
box
rates
Docket
No.
MCPb-3
4
,--
greater
emphasis
previously
been
Id.
at
At
page
on customer
the case.
perceptions
than
had
1946.
1 of
your
testimony,
you
state,
This filing
is one of several
recent
cases initiated
the Postal
Service
that
represent
a move toward
more
demand-oriented
ratemaking
within
the context
of the
Postal
Service's
operational,
financial,
and other
policy
goals.
a.
In
is
MC96-3,
the
Postal
Service
moving
toward
by
Ramsey
pricing?
b.
If
your
response
affirmative,
elasticities
of
the
were
If
you
respond
is
the
Postal
pricing?
If
changed
its
that
please
current
demand
(a)
of
service,
developed
C.
part
and given
relative
value
to
not
demand
models
determine
how the
part
changing
previously
to
is
use
the
Postal
when
economic
Service
elasticities
of
MCPb-3.
to
please
pricing
proposals
for
negatively
interrogatory
Ramsey
pricing
Service
this
explain
prepared
so,
of
explain
(a)
its
of
this
position
why the
articulated
interrogatory,
on efficient
Postal
position
Service
on effic&nt
pricing.
OCA/USPS-Tl-30.
The following
OCA/USPS-Tl-22.
Please
refers
to
your
response
to
,--.
explain
what
postal
card
printing
costs
Docket
No.
declined
MC96-3
such
that
you
Show the
reduction.
all
5
were
previously
to
derivation
and provide
sources,
able
copies
recognize
a $65,000
of
all
calculated
of
all
source
cost
numbers,
documents
cite
not
filed.
OCA/USPS-Tl-31.
"[Plostal
In
cards
addressing."
offer
Are
compatible
USPS-T-8
than
an ideal
postal
cards
post
cards?
OCA/USPS-Tl-32.
In
MC95-1,
states,
at
17,
109,
witness
medium
for
at
more
Please
Postal
Needham
automated
likely
to
explain
printing
and
be automation
your
Service
states,
response.
witness
McBride
,--..
USPS-T-l
The effects
of the imbalance
in institutional
cost
burden
between
the efficient
and less efficient
components
of the subclasses
are exacerbated
by the
fact
that
efficient
mail
tends to be more price
sensitive.
This greater
price
sensitivity
stems from
mailers
in all
classes
tend to
the fact
that
efficient
have more non-postal
options
open to them in the market
place.
a.
Assume
postal
cards
and thus
Service,
card
cards
rate
more
please
in
efficient
and
$0.20
the
less
more
automation
efficiently
explain
from
imbalance
are
processed
why increasing
to
$0.22
institutional
efficient
compatible
would
cost
cost
by the
the
not
than
burden
components.
Postal
effective
result
post
in
between
postal
an
the
Docket
j
,‘--,
No.
Please
b.
6
MC963
explain
would
not
as post
drive
cards
OCA/USPS-Tl-33.
Postmaster
for
the
less
Postal
for
to
costly
which
are
the
Postal
$0.02
the
to
quoted
please
process
explain
mailing
rate
and deliver,
,--.
costly
to
process
more
pamphlet
as saying,
"If
and deliver,
it
Given
why the
for
a postal
as opposed
and deliver.
such
to
It,"
it
(costs
General
Service
cards,
post
less
cost
Postmas.ter
to
process.
"Max
should
Postal
postal
card
alternatives
Service
,,,--.
more
for
other
Postal
Service's
process
fee
See attachment.
effective
to
is
to
mail.”
statement,
less
cost
Runyon
the
customers
which
Service
you
the
postal
In
General
Runyon's
raising
why charging
is
which
cards,
are
“If it costs less
ffi- the Postal Service to process
What’s behind Clossificatioa Reform?
‘!
post less for you to mail.”
and deliver, it
0 Standard
The Postal Sewice is detenm
jrovide the finest range of
comm,,n,cat,ons products and services to every American.
That’s why we continually invest in advanced technology to
make us even more competitive in the marketplace.
Introducino Classification Reioorm.It’s the embodiment of the
Postal Se&e philosophy quoted above. And it offers P menu
of preparation options to make your business mail a better
value than ever. They’re available on the letters, cards, flat
mail and publications that make up selected subclasses within
First, Periodicals and Standard Mail classifications.
For example. the Postal Service will have installed automated
equipment worth a total 13.6 billion by the end of this year.
These machines reduce our manual labor processing costs.
50 we’re encouragmg customers to send as much automated
mail as possible - in return for shared cost savings.
When you Mar It. you take full advantage of the new value in
business mail. How! By preparing mail to allow us to make
maximum use of our highly efficient automation equipment.
In return, you get the chance to earn deeper discounts on
your mailings.
Reinvestment
When you Nox It, your most immediate benefit is a savings
on postage costs. And it makes good business sense to
reinvest the money you save in improving your overaLl
mailing operation.
Far from
Postal
- we
and give
For example.
categories
NonproFits
The results are impressive. The postage savings Classification
Reform offers can be no important source of revenue for our
customers to reinvest in more mailings or new equipment.
It’s aood
The more YOUprep, the more vou sove.
With the
If you’re already barcoding your mail. it will be quite simple
to convert to the new procedures. If not, you may have to
make a relatwely modest investment in equipment. But it
can pay for itself in lower postage costs and maximized
mailing efficiencies.
For example, you could upgrade mailing equipment to heighten
efficiency - and lead to even further savings in time and
money. Or you could send addlti
Advertising Mail without
increasing your budget.
Maybe both.
The baw principle of Classihcatlon Reform is that, if you prepare your business mail in ways that bypass sew~l handling
steps, we’,, rec,procate wth lower postage rates. And as a rule
of thumb, “the more you prep, the more you save.”
What wecificolk
Eon&t&&
your business?
A chance to em deeper d~ounb
Is that
We asked what you needed - then formed Advisory Groups of
mailers, equipment vendors and association representatives to
recommend the best ways for us to deliver your needs.
for arowth.
Classification Reform was developed to bring you these
specific benefits,
We will
postage
classifications.
Classification
letters.
Will also
.
.
AddressIng correctly and properly will also help us cut the
amount of mail that’s undeliverable as addressed (UAA), which
IS costly and inefficient for the Postal Service and
its c”st”mers.
by borcodmg mail
Simple changes.
Most business mail WI,! now h! one of these three classifications Their names are brief. efficient and descriptive:
0 First-Class W”
0 Periodicof$ - iormerlysecond-class mail
.:
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.
savings
mation
Representative
Standard
complete
Guide,
%o mq
Reply
The guide
- for
”
/-.
CERTIFICATE
I hereby
document
accordance
upon
certify
all
with
that
I have
participants
section
OF SERVICE
3.B(3)
this
date
of
record
of
the
in
served
this
special
wp+
SHELLEY DREIFUSS
Attorney
Washington,
August
9,
DC
1996
20268-0001
the
foregoing
proces2ding
rules
of
practke.
in