Office. The Postal Service filed a motion to
dismiss the proceedings on jurisdictional
grounds. The PRC granted the motion of the
Postal Service in a decision issued December
3, 2003.
D. Postal Cost
Apportionment and Postal
Ratemaking
Developments
1. Capital One Negotiated
Service Agreement: Docket
No. MC2002-2
On September 19, 2002, the Postal
Service filed a request with the PRC seeking
a recommendation on limited rate and classification
changes designed to implement a
contractual arrangement with Capital One
Financial Services Corporation, one of the
largest users of First-Class Mail service. The
agreement with Capital One Financial
Services Corporation is the first attempt by
the Postal Service to establish rates applicable
to only one mailer through a negotiated
service agreement (NSA). The Postal Service
requested the Commission recommend
establishing additional discounts on an
experimental basis for Capital One's First-
Class Mail letters volume above a threshold
of 1.225 billion pieces annually. These
discounts would increase with higher levels
of volume above the threshold, but would not
be available on any volume mailed before the
threshold was reached. Availability of the
discounts to Capital One would also be
conditioned on Capital One changing its
practices relating to undeliverable-as-addressed
(UAA) mail. Currently, most of
Capital One's UAA mail is physically returned
to Capital One, in accordance with standard
First-Class Mail service features. Under the
NSA, Capital One would agree to accept electronic
notice of nondelivery as a substitute for
physical returns. This change would yield
substantial cost savings for the Postal
Service. To implement this aspect of the
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agreement, the request sought a recommendation
for a waiver of the fee currently
charged for this service.
The Postal Service proposed the Capital
One Services NSA as a limited, three-year
experiment under the PRC's expedited procedures
for experimental classification
proposals. The PRC, however, declined to
consider the case under the rules for experiments.
Three parties, including the PRC's
Office of Consumer Advocate (OCA), filed
cases in opposition. The PRC also took the
unusual step of calling an economist as its
own witness to address the issue of the
effects of the NSA on competition.
On March 31, 2003, the Postal Service,
Capital One Services, and the PRC's OCA
signed a Stipulation and Agreement in which
the OCA withdrew its opposition to the NSA.
In exchange for the OCA's support of the
Capital One NSA and the Postal Service's
request for rate and fee changes, the Postal
Service set forth the process for proposal,
consideration, and negotiation of NSAs
comparable to the Capital One NSA. In addition
to the three main signatories, 10 other
interveners signed the Stipulation and
Agreement.
On May 15, 2003, the PRC issued its
decision recommending the requested rate
and fee changes with the following exception:
It limited the total amount of discounts available
to Capital One to the amount of
anticipated cost-savings from its use of the
service that provides electronic information in
lieu of the physical return of UAA pieces. On
June 2, 2003, the governors of the Postal
Service approved the PRC's recommendations;
their decision was implemented on
September 1, 2003.
2. Experimental Periodicals
Co-palletization Drop Ship
Discounts Case:
Docket No. MC2002-3
On September 26, 2002, the Postal
Service filed a request with the PRC for rate
incentives to induce Periodicals mailers to
prepare and enter more mailings on pallets, |
Chapter 1
Compliance with Statutory Policies Introduction
- Fundamental Service to the People
- The Workforce
- Service to Small or Rural Communities
- Postal Cost Apportionment and Postal Ratemaking Developments
- Transportation Policies
- Postal Service Facilities, Equipment, and Supplies
Chapter 2 Postal Operations
Chapter 3 Financial Highlights
Chapter 4 2003 Performance Report and Preliminary 2005 Annual Performance Plan |