In the Matter of the Petition by

POST, INC. PUBLICATIONS,
320 E. Sullivan Street,
Kingsport, Tennessee 37660,

Proposed Annulment of Second-Class Mail Privileges for "POST-NEWS"

P.S. Docket No. 4/163

September 16, 1976

Rudolf Sobernheim Administrative Law Judge

APPEARANCES:
Pete Dykes Publisher Post, Inc. Publications
320 E. Sullivan Street
Kingsport, Tennessee 37660 for Petitioner

Mitchell Knisbacher, Esq.
Law Department U. S. Postal Service
Washington, D. C. 20260 for Respondent

INITIAL DECISION

This is a proceeding initiated by petitioner pursuant to 39 C.F.R. Part 954 to contest the ruling of respondent, represented by the Director of the Office of Mail Classification, Finance Group, U. S. Postal Service (hereinafter referred to as the "Director") which on 30 January 1976 annulled, subject to the outcome of this proceeding, petitioner's second-class mail privileges in respect of the "POST-NEWS".

The question whether petitioner was entitled to mail the Post-News, published by petitioner in Kingsport, TN, at the regular second-class postage rates arose, as far as the record indicates, when it came to the Director's attention sometime between 15 October and 20 November 1975 that petitioner and "the mayor and city council of the town of Mt. Carmel, TN" had entered into an agreement "whereby for the price of one dollar a year paid by the city of Mt. Carmel, the residents may receive a subscription to the 'Post News'" (Resp. Ex. 1). The Director decided that such copies of the Post-News were required to be franked at the transient rate as copies of a periodical publication mailed to persons not included in the list of subscribers (Postal Service Manual (PSM) 132.13). Persons receiving a periodical publication at a nominal subscription rate are in that category (PSM 132.228) and the Director must have concluded that the Mt. Carmel residents were such.

Hence, on 21 November 1975 the Director asked the Postmaster in Kingsport, TN, to determine how many copies were paid for and sent to its residents on behalf of the city of Mt. Carmel and to collect the difference between regular postage and the transient rate from petitioner both for copies already mailed and copies to be mailed in the future. The letter also directed the Postmaster to conduct a joint review with petitioner and verify the Post-News circulation.

The Postmaster discussed this letter with the cognizant mail classification specialist in the Director's office on 16 December 1975. To resolve whatever questions the Postmaster may have raised, the Director in a letter of 19 December 1975 (Resp. Ex. 2) once more explained his position as to the postage due on copies mailed by petitioner under its arrangements not only with the city of Mt. Carmel but now also with the city of Church Hill, TN. He again asserted that such subscriptions were at a nominal rate and that copies of the Post-News mailed to such subscribers should be mailed only if the transient rate was prepaid (PSM 125.67, 132.1).

On 17 December 1975 right after his discussion with the mail classification specialist the Postmaster (Resp. Ex. 4) demanded payment from petitioner of $828.41 for the additional transient rate postage in respect of Post-News copies mailed to residents of Mt. Carmel between 2 October and 20 November 1975. In explanation of his demand he included a copy of the Director's letter of 21 November 1975 (Resp. Ex. 1).

Petitioner replied promptly on 19 December 1975 (Resp. Ex. 5), denying that transient postage was due on the Mt. Carmel subscriptions. It denied that the rate charged was "nominal", amplifying its position as follows:

"...we can easily show that the charge was the full six dollars, and that the town was given a sales commission of five dollars per sale in order to qualify. It is a simple matter of moving one figure on our record."

Petitioner also contended that the Mt. Carmel subscribers were legitimate paid subscribers.

"for they have paid for the paper directly out of tax-collected revenue through their appointed agents."

The Postmaster promptly rejected petitioner's contentions and again demanded payment of past due postage. He noted that additional mailings had been made to Mt. Carmel residents on 11 and 18 December 1975 and that the additional postage would be computed and billed as soon as the proper declaration of copies mailed at a nominal rate (Form 3542) had been submitted (Resp. Ex. 6).

Petitioner responded on 29 December 1975, once more denying that subscriptions to a periodical publication paid for by a municipality as a service to keep its citizens informed were either "gift", or nominal rate subscriptions, for petitioner

"offered the low price in lieu of a sales commission or group discount program, both of which are perfectly acceptable and in line with any and all postal regulations." (Resp. Ex. 7).

Petitioner also contested the Postmaster's figures but this matter is not a part of the instant proceeding.

The Postmaster's reply of 9 January 1976 (Resp. Ex. 8), making demand for additional postage due for a total of $983.01, did nothing to resolve the issue between the parties.

Thereafter an employee of petitioner appears to have been in contact with the Director. As the result of such contact the Director on 19 January 1976 wrote an explanatory letter to petitioner (Resp. Ex. 3). He restated his position that the charge of one dollar for the Mt. Carmel subscriptions was a nominal rate, requiring postage to be paid therefor at the transient rate and pointed specifically to PSM 132.228b which treats subscriptions at a discount of more than 50 percent from the regular rate as nominal rate subscriptions. Here, he pointed out, the regular rate was $6.00, more than double the Mt. Carmel subscription rate.

Secondly, he argued that, since the disputed subscriptions were paid by the city of Mt. Carmel to promote its own interests, they could not under PSM 132.463 be treated as mailable at subscriber rates. Indeed since over half of the copies of the Post-News were mailed to Mt. Carmel nominal rate subscribers, petitioner was not entitled to mail the Post-News itself at second-class postage rates and its second-class mail privileges were subject to revocation. The remainder of the letter discussed matters not material to the initial decision herein.

No resolution was reached on the basis of the Director's 19 January letter and on 30 January 1976 the Director issued the ruling appealed from. It is of unusual length and is, therefore, set forth in full as Appendix I to this initial decision. In his ruling the Director stated as his basic premise that a publication was not considered by him as designed primarily for free publication if over one-half of its total circulation, whether distributed through the mails or by other means, was subscribed for at a rate above nominal, including gift subscriptions not paid for by the subscriber. However, the Mt. Carmel subscriptions could not be treated as such because they were "purchased in the interests of the Mayor and Board Members of Mt. Carmel." (Dir. ruling, App. I, p. 2). Since the 7 January 1976 issue of the Post-News had a total circulation of 1,451 copies of which 773 copies were delivered to Mt. Carmel residents, he considered it as a publication primarily designed for circulation at a nominal rate.

Moreover, he considered it as a publication designed primarily for advertising purposes within the meaning of PSM 132.226 in that "the part of the 'Post-News' which carries Mt. Carmel news is a house organ for the Mayor and Board Members of the Town." ( id ., p. 3). Moreover, the economic importance of the Mt. Carmel subscriptions to petitioner gave the city of Mt. Carmel effective control over the editorial policies of the Post-News and hence the city's residents receiving the publication paid for from the city's treasury were not bona fide subscribers thereto.

On 3 February 1976 petitioner filed its petition protesting the Director's ruling. The petition alleged that a new contract had been entered into with Mt. Carmel. In its answer respondent thereupon stated its willingness to consider whether the alleged change in the situation would modify its position regarding the revocation of petitioner's second-class mail privileges. Continuances were granted to respondent to this end but its position did not change. Petitioner requested a change of venue to Kingsport, TN, and a hearing was held there on 30 June 1976.

At the hearing both sides presented testimonial evidence and a number of documents were introduced in evidence. While some copies of documents were provided by petitioner, all documents were marked as respondent's exhibits and form part of the record on which this decision is rendered. The testimony of witnesses was recorded by a court reporter furnished by the reporting contractor of the Postal Service. However, the reporter's equipment, including the discs or tapes containing the witnesses' testimony, was stolen shortly after the hearing and before it had been transcribed. At the direction of the presiding administrative law judge first respondent and then petitioner gave summaries of the testimony of the witnesses as they remembered it. There were few discrepancies between the two summaries and such as there were resulted largely from petitioner's highly subjective summing up some aspects of what the witnesses had said. Respondent also filed a motion for rehearing and exceptions to petitioner's summary of the evidence.

On 18 August 1976 the presiding administrative law judge issued an order sustaining some and overruling others of respondent's exceptions and ruled that the parties' summaries afforded an adequate basis for the rendering of an initial decision and for exceptions therefrom by any party wishing to appeal it to the Judicial Officer. Accordingly, respondent's motion for rehearing was denied.

Both parties have filed post-hearing briefs.

FINDINGS OF FACT

1. Petitioner is the publisher of the Post-News, a weekly publication in Kingsport, TN, serving that city and its immediate neighbors in Hawkins County, TN.

2. The following issues of the Post-News are in evidence:

18 September 1975 and 2 October 1975 through 29 January 1976 (Resp. Ex. 10)

5 through 26 February 1976 (Resp. Ex. 11)

8 through 10 June 1976 (Resp. Ex. 12)

3. The issue of the Post-News of 18 September 1975, published prior to the time when the events occurred which led to the instant proceeding, well illustrates the range of this weekly newspaper.

a. The issue bears the number "Volume 13 Number 38" and is divided into three sections, section A of 16, section B of 8 and section C of 16 pages. In addition, there is an 8-page supplement celebrating the opening of the Mt. Carmel branch of the Kingsport Federal Savings and Loan Association.

b. The news contained in the 18 September 1975 issue are overwhelmingly local in character. They are supplemented by articles furnished by the Copley News Service and a special series called "Bicentennial Farm Features."

c. Page C-1 bears the headline "Mount Carmel" and the designation "VOL. 1 NO. 7", indicating that this feature of the paper was then recent. To the left is a picture of the mayor of Mt. Carmel and to the right the heading "The Mayor's Corner." Under that item appears a letter, signed by the mayor, to "Dear Citizen" which discusses municipal activities, such as the operation of the swimming pool, street maintenance work, garbage service and briefly other public activities and possible projects. At the end of the Treasurer's report is a reminder that on 31 October 1975 the city will elect a mayor and three aldermen. The page also contains a library report, a report on increased revenue and park cleanup as well as a picture of the new FS&LA branch.

d. Other contents of the 18 September 1975 issue include "Legal Notices" [ i . e . court notices], a report by the Post-News' regular correspondent on the meeting of the Board of Mayor and Aldermen of Church Hill, TN, television programs and advertisements of local supermarkets and other stores.

4. Although other issues of the Post-News are less voluminous, each issue has at least 16 pages.

5. Each issue carries a Mt. Carmel page similar in make-up and content to the one described.

a. The 23 October 1975 issue, for instance, carries in addition to the mayor's report a notice on the senior citizens center and an appeal to the citizens of Mt. Carmel to furnish news items and announcements for the Mt. Carmel page.

b. Although a city election was impending, the Mt. Carmel page was kept free of any political discussions or statements. On 30 October 1975, just before the election, page B-1 of the issue carried the designations of the offices to be filled, the names of the candidates for each office, voting place and hours and a telephone number to call for transportation to the polls. The Mt. Carmel page of 6 November 1975 reported the election results as a news event but the mayor's report kept its ordinary format and made no mention thereof.

c.(i) The Mt. Carmel page of the Post-News, as exemplified by all copies thereof in the record (Resp. Ex. 10 through 12) is devoted solely to a weekly report by the mayor, objective in tone, regarding municipal activities and to reports and notices of activities and events which reflect the current life of the city. The page is wholly free of articles which can in any way be described as either promoting the city of Mt. Carmel, be it socially, economically or politically, or the fortunes, political or personal, of the mayor, aldermen or other city officials. The testimony of the Mayor of Mt. Carmel, given at the hearing, confirms these conclusions. At the least, nothing of the sort is detectible by the presiding administrative law judge as an outside observer.

(ii) Nothing to the contrary was pointed to by respondent either in its brief or through the testimony of its witnesses. At best, the mail classification specialist testified that the Mt. Carmel page might lend itself to such advertising abuse. No showing has been made that such abuse in fact occurred or that the elected officials of Mt. Carmel exercised any influence on the content of the Post-News beyond the Mt. Carmel page. I find this to be true both before and after the making of the agreement discussed in Finding of Fact No. 6 below.

6. On 15 October 1975 petitioner and the city of Mt. Carmel, which has about 3,000 inhabitants, entered into an agreement in regard to the Post-News Mt. Carmel page (Resp. Ex. 13).

a. Petitioner agreed to furnish to Mt. Carmel one page of the Post-News for the city's use for a period of 104 weeks.

b. Petitioner further agreed to distribute by mail one copy of the Post-News to every Mt. Carmel mailing address.

c. Mt. Carmel agreed to furnish the list of addresses and to pay petitioner $1.00 yearly for each copy delivered "to every taxpaying unit." The city was given the right to make additions to and deletions from the list with payment of $1.00 yearly for each addition.

d. The parties agreed to cooperate in the performance of the contract and it was made cancellable at any time without penalty or refund.

7. On 21 November 1975 petitioner entered into a like contract, but for one year only, with the city of Church Hill, TN which also has only about 3,000 inhabitants (Resp. Ex. 15). By motion of the Church Hill Board of Mayor and Aldermen, the Post-News was also designated as the city's official publication (Resp. Ex. 10, Post-News, 20 Nov. 1975, p. 1).

8. The first Church Hill page appeared in the 20 November 1975 issue (Resp. Ex. 10), reporting on the city-county building, the remains of an old mill, new stores and other city news. The second Church Hill page in the Post-News of 26 November 1975 ( ibid .) carried the 1975-1976 budget and miscellaneous announcements.

9. Petitioner pursuant to the foregoing agreements thereafter delivered the Post-News to Mt. Carmel and Church Hill mailing addresses. Whether these lists were provided by the two cities, as their contracts required, is, on the testimony of the city officials who testified on this subject and of petitioner's advertising director, highly doubtful. In any event petitioner appears to have adequate lists at its disposal.

10.a. According to the testimony of the Church Hill city recorder, given on behalf of respondent, the fiscal resources from which either city may pay for the delivery of the Post-News containing the city page to its residents are distributions from the Tennessee State sales tax to the State's municipalities. Local property taxes are not available for this purpose.

b. To the extent, therefore, that the residents of Church Hill and Mount Carmel are paying sales taxes to the State of Tennessee from which a part is paid to the cities of Mt. Carmel and Church Hill respectively, such residents provide, albeit indirectly, the funds from which the two cities paid for the copies of the Post-News delivered to them.

c. As a matter of judicial notice it is most likely that all or almost all residents receiving the Post-News in the two cities contributed and continue to contribute to the State sales tax fund from which the two cities received their revenues.

11. The dispute between petitioner and respondent as to postage payable for copies of the Post-News mailed pursuant to the contracts with Mt. Carmel and Church Hill has been set forth in the introductory section of this initial decision. As a result thereof petitioner advised the Postmaster in Kingsport, TN on 3 February 1976 (Att'mt to Pet'n) that effective with the 5 or 12 February 1976 edition the Post-News would no longer be distributed in Mt. Carmel. In order to serve that community petitioner purported to establish a new publication, called the "Hawkins County Post-News," to be sold only in Mt. Carmel and Church Hill at a subscription price of $2.00 per annum. As the complaint alleges, a new contract for distribution of the Hawkins County Post-News was entered into between petitioner and Mt. Carmel at which the new weekly paper was distributed to the city's residents for $1.00 per annum, the price being paid by the city. Petitioner's witnesses testified that the Post-News is not sold or delivered in Mt. Carmel or Church Hill.

12. The testimony received at the hearing indicated that a like arrangement was made with the city of Church Hill.

13. Delivery of the Hawkins County Post-News to the Church Hill and Mt. Carmel residents was and is being made by carrier delivery outside postal channels.

14.a. A comparison of the Post-News for February and early April to early June 1976 (Resp. Ex. 11, 12) with the issues of the Hawkins County Post-News of the same dates (Resp. Ex. 11A, 12A) shows that the assertedly separate publications are wholly identical in content and management and differ only in the masthead, in the absence of a volume and issue number in the Hawkins County Post-News, and in the editorial box which shows the Post-News as being mailed as second-class matter.

b. There was also a difference in subscription price. The full subscription price for the Post-News was $6.00, that for the Hawkins County Post-News $2.00 (see issues of 10 June 1976, Resp. Ex. 12, 12A).

c. In its brief, dated 30 July 1976, petitioner stated, however, that it had "recently decided, as an economic business matter, to lower the regular subscription price of the Post-News" to $2.00 per year in Kingsport and its immediate trade area. Petitioner further stated in its brief that in the light of rates charged by similar publications the two-dollar rate was reasonable and was not a nominal one. These allegations were not made at the hearing and are not supported by the evidence.

15. Various circulation figures have been adduced none of which can lay claim to represent with the desirable degree of accuracy the current circulation of the Post-News and Hawkins County News.

a. A memorandum of the Manager of Customer Services at the Kingsport post office of 11 June 1976 (Resp. Ex. 9) shows that in the second half of September 1975, 610 copies of the Post-News per week were mailed to Kingsport addresses and 134 weekly to zones 1 and 2 addresses, including Church Hill and Mt. Carmel. The weekly October figures are reversed showing again about 600 copies for Kingsport but 1084 copies for zones 1 and 2.

From mid-November 1975 through January 1976 more copies are mailed each week to Kingsport than to zone 1 and 2 addressees. For February the figures were almost even and in March, April and May more copies were mailed to zone 1 and 2 than to Kingsport addressees. No explanations were furnished for these seemingly rapid shifts in subscribers' addresses.

b. On 9 January 1976 the Manager of Customer Services stated (Resp. Ex. 8) that during the weeks of 11 and 18 December 1975 a minimum of 773 copies were mailed to Mt. Carmel addresses. This figure conflicts with the 11 June 1976 memorandum which shows only 251 copies mailed to zone 1 and 2 addressees which include those in Mt. Carmel.

c. At the hearing one of petitioner's officers testified that the current total press run of the Post-News was 1,400 copies of which 200 were distributed as free samples and that the total press run of the Hawkins County Post-News was 2,250 copies of which 900 were distributed under the agreement with Mt. Carmel and 1,300 under the agreement with Church Hill.

16. Petitioner's witnesses in their testimony made charges of harassment by postal officials, especially the postmaster in Church Hill, because the Post-News had been critical of the Postal Service. No evidence other than the bare allegations of the witnesses was offered and they were interested and perhaps not entirely free of personal bias. For reasons stated in the Conclusions of Law no further findings of fact on these charges need be made.

CONCLUSIONS OF LAW

1. The detailed findings of fact set hereinabove demonstrate amply that no further hearing is necessary to reach a proper determination and disposition of this proceeding. Accordingly respondent's request for a rehearing, renewed at the end of its brief, is denied.

2. The issue to be decided is whether petitioner's second-class mail privileges for the Post-News were properly revoked by the Director. Petitioner's unsupported charges of harassment by local postal officials, even if proven, have no bearing on the resolution of this issue. I wish to emphasize, however, that no evidence appears in the record or was produced at the hearing which would support the charges of harassment or discriminatory treatment on the part of the Postal Service made by petitioner's witnesses.

3. In support of its position respondent has argued that petitioner's publication is designed primarily for advertising purposes (PSM 132.226), lacks a legitimate list of subscribers (PSM 132.225), is designed primarily for free circulation (PSM 132.227) and is designed primarily for circulation at nominal rates (PSM 132.228).

4. PSM 132.226 provides that publications designed primarily for advertising purposes may not qualify for second-class privileges. Section 132.226 then proceeds to list six situations in which publications are deemed to be primarily designed for advertising.

5. An inspection of petitioner's publication, with or without inclusion of the Hawkins County Post-News, makes it clear that it has the character and content of a regular local weekly newspaper and does not serve any primary advertising design and purpose. It carries, of course, a substantial amount of advertising from businesses in its area of publication but it does not exceed in that regard the limits set by PSM 132.226a. Nor does it serve primarily as an advertising medium for other business interests of petitioner ( cf . PSM 132.226b).

6. The Director's conclusion that PSM 132.226 applies is apparently based on the fact that petitioner provides a weekly page to the city of Mt. Carmel and that the city has subscribed to enough copies so that one copy can be furnished by petitioner to every city mailing address (see App. I, pp. 2-3).

7. Contrary to the Director's assertion the Mt. Carmel page (and similarly the Church Hill page not mentioned in his ruling) is free of any advertising or self-promotion, either of the city or its elected or appointed officials. It serves the legitimate function of assuring communication between the city administration and its citizens and to provide for the latter a spot where their announcements and other local news of special interest to Mt. Carmel citizens can be published.

8. There have been instances where publications, seemingly disseminating news of concern to their readers, were nevertheless not found mailable as second-class matter because they served as advertising vehicles for other businesses or for the personal advancement of the publisher. Credit Bureau of Albuquerque , P.S. Docket No. 1/218 (1973); Ralph Petillo , P.S. Docket No. 3/132 (1975); Jack Schaffer , P.S. Docket No. 3/98 (1975). The last-named decision held that a newsletter of an Illinois State Senator, featuring his picture on practically every page and his name and praise in nearly every story, was a publication designed primarily for personally advertising its publisher. No such abuses are noted here nor is there even a scintilla of evidence that either Mt. Carmel or Church Hill or both together exercise the slightest influence on the editorial or business policies of the Post-News. Mere speculation or suspicion is not enough. The reality of the relationship determines the result. Vertical Marketing, Inc. , P.S. Docket No. 2/6 (1974). Accordingly, revocation of petitioner's second-class mail privileges under PSM 132.226 cannot be sustained.

9. In determining whether petitioner complies with the terms of PSM 132.225, .227 and .228 a preliminary question must be decided, to wit: whether petitioner's publication Post-News (Resp. Ex. 10, 11, 12) includes, for purposes of second-class mail status under postal law, the Hawkins County Post-News (Resp. Ex. 11A, 12A). It is petitioner's position that by establishing the Hawkins County Post-News as a separate publication, to be sold and distributed only in Mt. Carmel and Church Hill, Hawkins County, under its agreement with these cities, it has brought the Post-News into compliance with the cited provisions of the Postal Service Manual. In other words, the Post-News is sold in Kingsport and elsewhere outside of Mt. Carmel and Church Hill to paying subscribers at the regular rate of $6.00 per annum (with occasional subscriptions at minor discount) and these constitute its legitimate list of subscribers, neither receiving the Post-News free nor at a nominal subscription rate. The Hawkins County Post-News, on the other hand, is distributed outside the mails, and no second-class mail permit has been applied for or issued for it and it is not subject to postal regulations.

10. At the hearing and in its brief respondent contested this view and asserted that the Post-News and the Hawkins County Post-News are a single publication and that compliance with the postal regulations requires compliance for both papers viewed as one. On this point petitioner's view must be rejected and respondent's view accepted as the correct one. There is no question that petitioner could have established a separate Hawkins County publication for its Mt. Carmel and Church Hill subscribers. But petitioner did not do so. It simply printed a portion of each edition of the Post-News under a separate masthead and editorial box, showing a different title and subscription price but the same office of publication, telephone number and staff.

11. It is well established that two allegedly separate publications of the same publisher which are in fact almost identical, except for their mastheads and the editorial box, are a single publication, entitled only to a single original second-class entry. William P. Marcil , P.O.D. Docket No. 3/82 (1973); O'Shea Publishing Co., Inc. , P.S. Docket No. 4/49 (1975). Even relatively noticeable differences in publication content do not convert four regional editions of a newspaper into four separate publications. Dow Jones & Company, Inc. , P.S. Docket No. 1/11 (1973), aff'd 379 F. Supp. 1167 (D. Del. 1974). The same principle has been applied in a non-postal context to determine the size of a newspaper where publication in the largest local paper was required. Rosewater v. Pinzensham , 38 Neb. 835, 57 N.W. 563 (1894). The same principle must also be applied in determining petitioner's compliance under PSM 132.225, .227 and .228, as regards the Post-News. Post-News and Hawkins County Post-News are one publication.

12. PSM 132.225 required that publications to be mailable at second-class rates "must have a legitimate list of persons who have subscribed by paying or promising to pay at a rate above nominal (see 132.228) for copies to be received during a stated time." This phrase was interpreted in Myrick v. United States , 219 Fed. 1 (1st Cir., 1915) as meaning a list of subscriptions at more than a nominal price either paid or for which "the subscriber, or some one in his behalf, be under obligation to pay the agreed price" (219 Fed. at p. 4). The court continued to the conclusion that, if a substantial number of subscriptions "were paid by others than the recipients of the publication" ( ibid .), this "would be material evidence for the Post Office Department to consider in determining whether the publication was primarily designed for advertising purposes, for free circulation or for circulation at nominal rates, so that the entire publication should be excluded from the second-class privilege of one cent a pound." (219 Fed. at p. 5). In Myrick v. U.S. , supra , the evidence was insufficient criminally to convict the defendants of defrauding the Government by false statements as to their subscribers' list.

13. In the instant case, the disputed Mt. Carmel and Church Hill subscriptions were not paid for by the recipients themselves. They were paid for collectively by the municipality in which the recipients reside out of public funds to which the recipients had contributed at least indirectly through payment of State of Tennessee sales tax on their purchases. Their subscriptions were purchased by the municipality in what appears to be on the record a permissible and legitimate public function for a small semi-rural or suburban municipality: to provide a regular channel of communication between the municipal authorities and the citizens of the municipality and a place for the latter to make public announcements and record events deemed of general interest. While such an arrangement may not be proper in every case, it seems fitting here as a means for fostering a communal life open to participation by the inhabitants of a very small city or village. In that sense the disputed subscriptions are legitimate. No evidence was furnished by respondent at the hearing or otherwise to show improper purpose, such as overreaching for financial gain, advertising or promotion, either by petitioner or the cities.

14. The effect to be given such an arrangement, as described in the preceding conclusions of law, in determining whether the subscriptions received thereunder are part of the publisher's legitimate list of subscribers or are to be treated as free or nominal rate subscriptions has not heretofore been adjudicated in the administrative decisions of the Postal Service. The matter is one of first impression.

15. Two Postal Service decisions establish, however, in accord with the statements in Myrick v. U.S. , supra , that a subscriber need not pay in person and that a subscription price by the ultimate recipient need not be paid to the publisher. In The Oklahoma Municipal League , P.S. Docket No. 1/137 (1972), it was held that the municipalities which were members of the League could subscribe variable numbers of copies of the League's newsletter for their officials if the latter needed to read it as part of their official duties. Subscriptions were mailed to the officials by name and official title at their homes and the subscriptions were adjusted as officials went out of office and new ones were elected or appointed. What caused difficulties to the League in that case was not this mode of subscribing but the fact that the amount of League dues for each member municipality did not reflect the variable number of subscriptions ordered by each but was uniform regardless thereof. In the other case, Postrib Corporation , P.S. Docket No. 1/66 (1973), the publisher had a limited subscribers' list of about 3,000 copies for its book review periodical "Book World" but sold almost 1,700,000 copies thereof to the Washington Post and the Chicago Tribune as part of their Sunday edition. These subscriptions were deemed to be legitimate, subscriber-paid subscription since each subscriber's subscription price paid to the Post or Tribune included some amount, although unspecified, for the delivery of Book World as part thereof.

16. The instant situation is not directly comparable to those dealt with in Oklahoma Municipal League and Postrib , supra . But to me the similarities are decisive. Here, as in Oklahoma , the actual subscriber does enter into the subscription arrangement because it is considered necessary to the fulfillment of its functions. Providing a channel for the flow of information from the municipal administration to its citizens is at least as legitimate as providing reading material for municipal officials. Here too the subscription is made by a third party (the municipality) to the publisher on behalf of the recipients rather than by the latter individually and the subscriber list is adjusted as recipients gain or lose the appropriate status. Of course, nothing in the regulations defines a legitimate subscription as one pursuant to which a pro rata refund of the price is made on cancellation. On the other hand, the recipient, as in Postrib , does not pay the publisher but pays funds (taxes) to a third party from which they flow into the treasury of the actual payor and then into that of the publisher. Finally, one must not lose sight of the fact that the arrangement here pursued and pursues a public purpose in a governmental setting rather than in the kind of private business setting to which PSM 132.225 et seq . and most prior decisions construing these sections are addressed. Accordingly, I conclude that the subscriptions under the Mt. Carmel and Church Hill agreement are legitimate subscriptions.

17. It follows that the Post-News, including the Hawkins County Post-News, is not a publication primarily designed for free circulation (PSM 132.227). It is clearly not intended to be so circulated, for a price is paid for each subscription from funds contributed by the subscribers through their collective governmental agent.

18. Similarly, it cannot be said on the record before me that the subscription price has a token character, being so low that it cannot be considered a material consideration (PSM 132.228a). In so ruling here I do not, however, give credence to petitioner's contention (Resp. Ex. 5, 7) that the difference between the regular six dollar subscription price and the one dollar price for the Church Hill and Mt. Carmel subscriptions is explainable as a saving on sales commissions.

19. Petitioner, however, runs afoul of another provision of the Postal Regulations. For PSM 132.228b provides that prohibited nominal rate subscription include those where the subscriber's subscription price is reduced by more than 50 percent below the regular price. It is obvious that such is the case here and that it is the case for the majority of the subscriptions to the Post-News when it and the Hawkins County Post-News subscriptions are considered together, as they must be. See Montgomery Publishing Company , P.S. Docket No. 1/123 (1972). For petitioner sells about 1,200 subscriptions at the regular six dollar price (Post-News) and about 2,200 discount subscriptions at $1.00 per year (Hawkins County Post-News). That the latter's alleged two dollar regular price possesses any economic reality is not proven. In any event, it too would represent an excessive discount from the regular six dollar price for the Post-News annual subscription.

20. Accordingly, and much as one may regret the outcome, the Director's action must be upheld on the basis that petitioner sells more than 50 percent of its subscriptions at a nominal rate under PSM 132.228b.

21. Petitioner in its brief raises a new issue. It states that it has reduced its regular subscription for the Post-News to $2.00 per annum and thus its Mt. Carmel and Church Hill subscriptions would escape the restrictions imposed by PSM 132.228b. Petitioner argues in its brief that this reduced regular price is not a nominal one under PSM 132.228a. This matter was not presented either to the Director nor to me on appeal from his decision and cannot be decided without a full factual record. An alternative to the petitioner's action would be for it to raise the Mt. Carmel and Church Hill subscription prices or to formulate an intermediate price schedule partly lowering the regular subscription price and partly raising the cities' discount price.

22. It is possible that the aforesaid changes in the subscription rate, if established and shown not to fall within the prohibition of PSM 132.228a, may cure the deficiencies on the basis of which the Director's action in revoking petitioner's second-class mail privileges for the Post-News must be sustained. Thus, no order should be entered at this time but this matter should be suspended for no more than 90 days to provide an opportunity for the parties to determine whether in the light of this decision and the asserted change in the regular Post-News subscription rate a solution is possible by agreement. Within that time, the parties should notify me when the matter is resolved or if they are unable to reach agreement. See The Oklahoma Municipal League , supra (Conclusions, slip op., p. 11); George H. Hawkins , P.S. Docket No. 3/103 (1975) (see Transcript, pp. 60-62; dism. order, dtd 4 December 1975). If at the end of 90 days the parties cannot find a solution this matter will have to be reconsidered and an appropriate decision made as to the action to be taken.