5. CAPITAL ONE NEGOTIATED SERVICE AGREEMENT: DOCKET NO. MC2002-2
On September 19, 2002, the Postal Service filed a Request with the Postal Rate Commission seeking a recommendation on limited rate, fee and classification changes designed to implement a customized agreement with a large user of First-Class Mail. The agreement with Capital One Financial Services Inc. constitutes the first attempt by the Postal Service to establish customized rates applicable to the unique circumstances of one mailer through a Negotiated Service Agreement (NSA). The agreement is structured to reduce the Postal Service’s costs while providing Capital One an incentive to use First-Class Mail rather than Standard Mail for solicitations. Features of the agreement include reduction in the volume of returned mail, enhanced address hygiene practices relating to undeliverable-as-addressed (UAA) mail, and discounts on First-Class Mail solicitation volume that exceeds an established threshold. The request seeks a Commission recommendation establishing the discounts on an experimental basis. While no other mailer is sufficiently similar to Capital One to take advantage of this NSA’s terms, the Postal Service has indicated a willingness to work with other mailers to establish mutually beneficial NSAs or niche classifications.

The Postal Service and Capital One filed the testimony of six witnesses who testified on the desirability and financial impacts of the proposed changes. Hearings on the direct testimony were held December 3-5, 2002. Two participants have indicated an intention to file their own direct cases opposing the Postal Service request or supporting their own proposals. The case is currently pending before the Commission.