OCA-T-7
Docket No. R2000-1
DIRECT TESTIMONY
OF
GAIL WILLETTE
ON BEHALF OF
THE OFFICE OF THE CONSUMER ADVOCATE
Page
TABLE OF CONTENTS
I.
STATEMENT
II.
PURPOSE
Ill.
HISTORY
IV.
COURTESY
OF QUALIFICATIONS
.__.............................................................
AND SCOPE OF TESTIMONY
OF CEM INITIATIVES
1
. .. . . . . . . . . . . . . . . .. .. . . . . .. .. . . . . .. .. . 3
. .. . . . ..._.__.____..............................................,..,
4
....................................................
5
A.
Why the Postal Service Needs CEM.. .....................................................
5
B.
Definition of the Proposed
...............................................
8
C.
The CEM Rate ........................................................................................
8
D.
How CEM Would Work .........................................................................
11
E.
Potential CEM Participants
1.
2.
F.
ENVELOPE
MAIL PROPOSAL
Classification..
and Revenue Impact .................................
Volumes .....................................................................................
Revenue Consequences ............................................................
Advancement
of Postal Service Objectives and Consistency
with 39 U.S.C. 93623(c) and 33622(b) ..................................................
V.
CONCLUSIONS
VI.
PROPOSED
DMCS LANGUAGE
....................................................................
Docket No. R87-1 CEM Proposal ...........................................................
B.
Docket No. R90-1 Courtesy
C.
Docket No. MC951
A
13
14
15
. .. .. . . . . . . .. . . . . .. . . .. .. . . .. .. .. . . . . . . . . .. . . . . . . .. .. . . . . .. .. . . . .. . 22
A.
APPENDIX
13
Courtesy
23
1
Envelope Mail Proposal.. ............................
3
Envelope Mail Proposal.. ........................
.4
UNITED STATES OF AMERICA
Before The
POSTAL RATE COMMISSION
WASHINGTON, D.C. 20268-0001
Postal Rate and Fee Changes,
2000
Docket No. R2000-1
)
DIRECT TESTIMONY
OF
GAIL WILLETTE
1
2
I.
STATEMENT
OF QUALIFICATIONS
My name is Gail Willette.
I have been employed
by Office of the Consumer
3
Advocate
(OCA) since May 1980.
I served as Director of the OCA from March 1995 to
4
February
1999.
before
5
beginning
with Docket
No. R80-1.
,6
application
of peak-load
costing methodology
7
I presented
testimony
quantifying
8
Class rate categories,
Courtesy
9
Envelopes.
I have testified
My testimony
between
,My testimony
Envelope
to mail processing.
No. MC91-1
difference
11
1, I presented
12
authored
13
UPS,” which was presented
14
Hakone,
15
for classes of mail. And in Docket No. MC95-1,
“Regulation
the
In Docket No. R90-1,
for two proposed
First-
Compatible
the attributable
Firms: The Postal Service
in Postal and Delivery
In Docket No. R94-1, I recommended
I presented
cost
In Docket No. MC93-
As an adjunct to that testimony,
of Unregulated
at the Workshop
flats.
occasions,
concerned
and Automation
concerned
flats and nonprebarcoded
an analysis of the parcel market.
Japan, in June 1994.
estimates
Mail (“CEM”)
IO
a paper entitled
on numerous
in that proceeding
the cost avoidance
in Docket
prebarcoded
this Commission
I coand
Economics,
in
cost coverages
an analysis of the costs of
OCA-T-7
Docket No. RZOOO-1
1
First-Class
2
CEM.
CEM.
My testimony
I am an Economist.
3
4
Texas at Austin.
5
where
6
micro-economic
7
statistics.
In 1971, I received
a BA degree
from the University
of
In 1978, I obtained an MS degree from the University of Rhode Island,
I specialized
in resource
theory,
9
Natural
Resource
econometrics,
Economics
10
impacts
on agriculture
11
capacity,
12
Production”
13
Advancement
I presented
at the
My course work included
economics.
operations
From 1979 to 1980, I was employed
8
14
in Docket No. R97-1 was a proposal for the adoption of
Division.
My work included
with~the
an invited
talk entitled
annual
computer
by the U.S. Department
associated
1980
research,
regulation
meeting
“Costs
of the
and
in the
of economic
pesticides.
of Pesticides
American
science,
of Agriculture
the analysis
of chemical
the areas of
In this
in Agricultural
Association
for
the
of Science.
From 1978 to 1979, I worked
15
Oceanic and Atmospheric
16
impacts resulting from the regulation
17
authored
18
which was presented
19
Fishing in 1979.
for the U.S. Department
Administration.
National
My work included the analysis of economic
of U.S. Territorial
a paper entitled “Bioeconomic
of Commerce,
Simulation
at the NATO Symposium
-2-
Fisheries,
In this capacity,
I co-
of the Atlantic Sea Scallop Fishery,”
on Applied
Operations
Research
in
OCA-T-7
Docket No. R2000-1
1
II.
PURPOSE
AND SCOPE OF TESTIMONY
The purpose
2
of this testimony
CEM
consists
again the adoption
of preprinted,
of Courtesy
self-addressed
business
3
Envelope
Mail
4
envelopes
provided by mailers as a courtesy to their customers.’
5
the CEM rate, CEM mail must: bear a facing identification
6
bear a proper ZIP code; bear indicia signifying that the piece is eligible for the discount;
7
meet automation
8
preapproved
9
by the Postal Service for Qualified
10
associated
(“CEM”).
is to propose
compatibility
standards
by the Postal Service.
as prescribed
In order to qualify for
mark; bear a proper barcode;
by the Postal Service; and be
CEM would receive the same discount
Business
Reply Mail (“QBRM”).
proposed
No fees would be
with CEM.
1
This is a proposal to establish CEM as a rate categoty
subclass; the proposal does not extend to cards.
-3-
within the existing
First-Class
letters
OCA-T-7
Docket No. R2000-1
1
III.
HISTORY
OF CEM INITIATIVES
A summary
2
of the history of CEM proposals
3
material in Appendix
4
material was also included with my Docket No. R97-1 testimony.
5
the Commission
6
stated that its recommendations
7
with and support of the Service’s
8
prebarcoding
9
part “the substantial
10
prebarcoded
2
A provides background
is included
again recommended
savings.“’
A. The
and a context for the CEM proposal.
The Commission
were “based primarily on the Commission’s
interest in expanding
This
In Docket No. R97-1,
CEM as a shell classification.
The Postal Service Governors
questions
as Appendix
the availability
agreement
of benefits from
again rejected CEM, stating in
raised on the record regarding discrete rate treatment for
CEM lead us to reject the recommended
classification
change.“3~
PRC Op. R97-1 75169.
3
Decision of the Governors of the United States Postal Service on the Recommended Decision of
the Postal Rate Commission on Prepaid Reply Mail and Courtesy Envelope Mail, Docket No. R97-1 at 5.
-4-
OCA-T-7
Docket No. R2000-1
1
IV.
COURTESY
ENVELOPE
MAIL PROPOSAL
Why the Postal Service Needs CEM
2
A.
3
The diversion
of transactions
mail to electronic
4
Postal Service for some time.
5
decline in transactions
6
First-Class
7
the study cited by Postmaster
8
1987 and 1998 virtually no growth in First-Class
9
In addition, the Postal Service has postulated
10
price
11
previously
12
Postmaster
General
Henderson
mail coupled with competitive
pressures
Mail revenue at risk.4 Although
in single-piece
media has been a concern of the
Mail
that the
can put $17 billion in
no elasticity for First-Class
General Henderson,
First-Class
has testified
Mail was used in
recent data indicates that between
Mail occurred
in the household
sector.’
that there may be a greater response
generated
by households
than
had
to
been
observed.’
Figure 1 shows the decline in household
13
1987 household-generated
14
1998, however, only 14.8 percent of First-Class
mail’s share of total First-Class
mail made up 21.3 percent
4
of total First-Class
Mail was generated
Assumes diversion of 18.3 percent of the 1997 First-Class volume.
LR-I-179.
Mail.
By
by households,
Docket No. R2000-1. USPS-
5
See Postal Service response to OCA/USPS-1.
5
Docket No. MC2000-2, Reply Brief of the United States Postal Service at 35.
-5-
Mail. In
Docket No. R2000-1
OCA-T-7
Figure
1:
Household
This mail is being diverted
reasons.
The focus
of the Postal
appears to be better service.’
be the solution to stemming
CEM
provides
Share
Mail
to other media or leaving the mailstream
Service
in attempting
the decline in household
consumers
with a lower cost alternative
generated
mail
institutional
costs.’
a needed
to slow
mail
it does not appear to
use of mail.
the diversion
for bill payments.
$0.18
for other
to retain transactions
While service clearly is important,
an opportunity
provides
Of First-Class
contribution
In addition, each CEM piece generates
of mail
by providing
Each piece of householdto defray
Postal
Service
cost savings at least equal
to those of a QBRM mailpiece.
7
Reisner. Bob, Understanding
the Business
Environment,
page 4.
8
Resoonse of USPS to OCAIUSPS-121
-6-
Leadership,
Vol. 1, No. 3, Sept. 1999,
OCA-T-7
Docket No. R2000-1
It has recently
1
been
using information
pointed
out that consumers
2
government
3
use. This seems to happen even if consumers
The
4
Postal
Service
5
delivering
6
security-of electronic
7
payment,
8
resulting opportunity
9
can be valuable
enjoys
bill payments,
could be induced
11
when customers
Consumers
First-Class
transporting
undecided
and
about the
about electronic
Mail if a discount
nicely with new services
itself to continue
is offered.
bill
The
The Postal
such as eBi//F’ay.
to be the bill payment
reason for supporting
medium of choice even
small
and
14
automation.
CEM is fair and sends a message
15
business
16
underpayment
17
associated
is as important
of postage
business
CEM is the direct benefit which would accrue
to individual
mailers
from
the
Postal
Service’s
to small-volume
advances
mailers
to the Postal Service as that of large-volume
in
that their
mailers.
Since
does not appear to be a problem, there is little financial
risk
with CEM.‘O
CEM is less complicated
other
processing,
who may be concerned
or who are otherwise
13
19
for
switch to electronic forms of payment.
Still another
18
with that
for the Postal Service to further build good will with its customers
and dovetail
Service can position
with
are unfamiliar with the technology.’
a reputation
to choose
to interact
if there is a cost savings associated
mail in a secure environment.
10
12
technology
are willing
business
correspondents
to administer
provide
than a program
postage
paid
in which creditors
envelopes
for
and
customers.
9
Robert D. Atkinson and Jacob Ulevich. Digital Government: The Next Step to Reengineering
Federal Government, Progressive Policy Institute, March, 2000, page 11, and 25, note 7.
10
The over paid revenue is greater than short paid revenue by $204.6 million.
USPS to OCAIUSPS-69 (Revised 4/7/2000).
-7-
See response
the
of
OCA-T-7
Docket No. R2000-1
1
Administrative
costs and difficulty
2
mailers to oppose Prepaid Reply Mail (“PRM”) in Docket No. R97-1.
3
and more straightfoward
4
automation
compatibility
recouping
product,
the postage
costs prompted
but still puts the Postal Service
many large
CEM is a simpler
in control
of its
and thus its low cost features.
Definition of the Proposed
Classification
5
B.
6
The definition of CEM remains the same as its Docket No. R97-1 delineation.
7
In
that docket CEM was defined as follows.
8
9
10
11
12
13
14
CEM would employ a Postal Service preapproved reply envelope.
CEM
would be preprinted, bear an appropriate ZIP Code and corresponding
barcode, a FIM marking as designated by the Postal Service, and an
indicia identifying the mail piece as qualified for the CEM discount. The
upper right hand corner of the mail piece would, bear a postage ‘affrxation
block informing consumers that a First-Class discount stamp may be
used.”
15
C.
16
I propose that the CEM rate be the same as rate approved
‘,‘,.
The CEM Rate
study
18
avoidance
19
Campbell
20
witness
21
Service request, QBRM postage would be 31 cents, three cents lower than the single-
12
13
by Postal
Service
witness
of 3.38 cents for QBRM
letters,
testimony
in this regard,
Fronk to pass through
Docket No. R97-1, OCA-T-400
Campbell
for QBRM,
is applicable
and also support
to CEM.”
the decision
3 cents of the cost avoidance.13
showing
The cost
17
11
sponsored
for QBRM.
a cost
I support
the
of Postal Service
Under the Postal
at 5.
USPS-T-29 at 40.
USPS-T-33 at 22. Not passing through the full amount of the estimated cost savings is consistent
with past practice involving new discounts, and provides a hedge against the product attracting more
volume than antiCiDated.
Docket No. R2000-1
OCA-T-7
1
piece rate of 34 cents.
2
single-piece
3
In the event the Commission
no change
in the
First Class rate, the CEM (and QBRM) rate would be 30 cents.
It was demonstrated
4
reply mail (“CRM”)‘4
5
today.
6
types is identical.15
7
only one minor alteration
8
consumers
in Docket No. R97-1 that the cost avoidance
and QBRM letters is the same.
Other than the accounting
Further, CRM envelopes,will
- the addition
10
compatibility
11
reply and meter reply mail to be automation
12
enclosures
standards.
has
ensured
The Domestic
out in my Docket
14
informs individual
15
around the country
16
order
17
Service provides publications
mailers of barcoding
to help them
provide a significant
make their
that
CRM
envelopes
Mail Manual requires
compatible
of these two mail
into CEM mail with
informing
problems.
meet
automation
courtesy reply,
when
No. R97-1 testimony,
business
they are mailed
amount of technical
as
postage rate.”
the Postal Service
Mail piece Design Analysts
mail automation-compatible.”
designed
to be the case
on the envelope
in letter-size pieces that are mailed at an automation
As I pointed
of courtesy
CEM stamp.
The
Service
be transformed
of a CEM indicator
that they may use a discounted
Postal
This continues
function for QBRM, the processing
9
13
recommends
assistance
Further,
to help mailers prepare automation
also
located
to mailers in
the Postal
compatible
14
Courtesy reply mail is a preprinted return envelope (or card) provided as a courtesy to customers.
The customer pays the postage.
15
Witness Campbell’s responses to OCAAJSPS-T29-1 and OCAAJSPS-T29-5 indicate that except
for the accounting function, these mailpieces are virtually identical.
Since no accounting function is
involved, there is no need for a fee to be associated with CEM mail.
16
C810.8.0.
17
Docket No. R97-1, Tr. 19D/9350-52.
-9-
Docket No. R2000-1
OCA-T-7
1
mail (including
2
forums.
3
properly prepare their mail.‘*
4
educating
5
are as automation
6
in electronic
It even provides
providers
format)
plastic templates
By extension,
compatible
8
thereof (such as the additional
9
piece card rate).19
11
estimated
for preparing
12
Service customers
and ensuring
consumers
First-Class
presented
15
consumer
research
16
In evaluating
17
18
19
20
in the same way it
surcharge,
use of CEM could be $ 9.2 million.
and delivering
and variations
and the single-
This is the amount
a mailing to every address
informing
Postal
fraud.”
The Postal Service also has argued that consumers
Testimony
directly
costs of a mailing to inform the public about the
of potential telemarketing
14
that CEM mailpieces
postage requirements,
ounce rate, the nonstandard
The additional
of and proper
at public
the Postal Service should have no problem
also can educate
informs them about basic single-piece
existence
consultation
as CRM pieces are now.
7
10
technical
and gauges free of charge so mailers can
about new CEM requirements
The Postal Service
13
and it provides
by Postal Service witness
prefer using only one stamp.
Ellard in Docket No. R97-1 presented
in support of retaining the “one-stamp”
witness Ellard’s study the Commission
system for First-Class
Mail.
stated:
The Commission notes that witness Ellard acknowledges that “user
preference” is a “complex area to pursue.” This alone, may be sufficient
reason to consider the responses less than definitive on the issue of
CEM’s appeal.*’
18
Id.
Docket No. R97-1, Tr. 19D19333.
20
Response of USPS to OCAIUSPS-8 (revised), 10, and 73. The response to OCAIUSPS-63
estimates domestic delivery addresses to be 132,152,777.
Multiplying 132.152,777 by $0.051, the
postage cost would be $6.7 million. The total would then be $9.2 million.
PRC Op. R97-1,75189.
-lO-
OCA-T-7
Docket No. RZOOO-1
Another argument
1
advanced
2
changed
3
objection seems unreasonable,
4
agreed, saying:
against CEM is that mail processing
since CEM was first introduced
technology
and that CEM was no longer feasible.”
given the nearly identical QBRM.
has
This
The Commission
The Commission finds it disappointing that witness Sheehan, after years
of Postal Service resistance to the CEM concept. Now claims CEM’s time
may have “come and gone.” While processing changes undoubtedly have
occurred since CEM was initially raised on this record, Miller’s data show
that a prebarcoded piece generates savings over a handwritten piece.23
5
6
7
8
9
CEM remains
10
a workable
classification
for the Postal
11
appreciate
12
like CEM.
13
D.
14
CEM has been and remains a very simple concept.
saving money and will change mailing habits when presented
mail envelopes
16
that the CRM envelope
17
envelope
that would
18
consumer
could affix a reduced-price
who now take advantage
As I testified
is automation
of automation
compatible.
be transformed
with a product
Providers
discounts
of courtesy
reply
already must ensure
It is this automation-compatible
into a CEM
envelope,
and upon
CRM
which
the
postage stamp.
in Docket No. R97-1, the “transformation”
20
CEM piece would be simple.
21
that the consumer
22
same area now used for the postage
22
Consumers
How CEM Would Work
15
19
Service.
CRM providers
would only need to signify on the piece
could choose to apply a CEM stamp.
block and current
Id., 75191.
Id., 75195.
-ll-
of a CRM piece into a
This could be imprinted
message
contained
in the
therein
OCA-T-7
Docket No. RZOOO-1
1
(e.g.,
“Post
2
standardize
3
effortsz4
Office
will not deliver
the CEM-message
without
postage”).
to be imprinted
5
the de minimis changes
6
asked
7
compatibility
8
redirect)
9
compatibility
10
analysis.“Z5
11
whether
the
noted.
Postal
“No.
Service
Generally,
requirements,
has
surveyed
address through
or analyzed
reply envelopes
has not been
the use of standardized
13
accurate,
14
would have these characteristics.27
barcodes. *’
The characteristics
educational
preprinted
He acknowledged
of CRM envelopes
16
visited in Docket
No. R97-1.
The transition
17
straightforward.
For current
CRM providers,
18
should be the same or substantially
26
Docket No. R97-1, Tr. 4/l 544.
27
Id.
addresses
-12-
on
for formal
survey
or
are sent to the correct
and through the use of
that certified
CEM envelopes
also
have not changed
since this issue was
for CRM providers
to CEM providers
There still does not appear to be any requirement
standardized.
Docket No. R97-1, Tr. 11/5900.
automation
meet the automation
a need
printing
is
costs for new CEM envelopes
the same as currently
24
25
the
Postal Service witness Moden (answering
courtesy
so there
12
15
could
and would not need more than
Witness Fronk noted that CRM ensures that bill payments
readable
Service
In Docket No. R97-1 Postal Service witness Fronk was
of courtesy reply envelopes.
stated:
Postal
as part of its overall
The current CRM system has proved workable
4
The
exist.
The same general
that the message inside the postage block be
OCA-T-7
Docket No. R2000-1
1
formatting
would be used; the minor change in wording
2
to add costs.
Some CRM providers may have large inventories
3
in the postage block is unlikely
of CRM envelopes
with the
4
current format.
The Postal Service can ease the transition to CEM by providing a
5
period during which it educates
6
time should allow most CRM providers to exhaust current envelope supplies and begin
7
to print CEM envelopes
8
unused stock remaining at the time CEM is implemented,
9
changed
the public about CEM and prints CEM stamps.
as prescribed
into CEM envelopes
by the Postal Service.
10
message to the left of the postage block informing consumers
11
may be applied.
12
stocks of CRM envelopes
13
customers
14
the printer for the amendment.”
E.
15
take advantage
regulations
could be thus “amended.”
that a discount stamp
could specify that remaining
Mailers wishing to let their
Volumes
18
come from CRM mailers.
19
services are almost identical.
28
Postal Service approved
and Revenue lmoact
As in Docket No. R97-1, the OCA projects
17
could be
of the new CEM rate could have existing stock sent back to
Potential CEM Particioants
1.
16
Postal Service implementing
If CRM providers have
those envelopes
merely by printing an additional
This
This is consistent
R97-1, Tr. 21/10690-l.
As CEM is defined
with my previous recommendation
-13-
that nearly all CEM volume would
above, the ,qualifications
on the transition
to CEM.
for the two
See Docket No.
OCA-T-7
Docket No. R2000-1
The Postal Service has provided ODIS volume information
1
2
Class Mail.29
3
reported
4
9.2 billion
5
adjusted FIM-tagged
6
First-Class
single-piece
7
reasonable
to assume that a similar portion of First-Class
8
FIM-tagged
in the test year.
9
single-piece
mail for the test year.3’
for single-piece
For fiscal year 1999, the volume of single-piece
as 9.2 billion
pieces.
FIM-tagged
Except
government,
letters would
metered,
be candidates
and
FIM-tagged
letters is
permit
all of the
for conversion
mail,
to CEM.
letter volume for fiscal year 1999 is given as 9 billion pieces.
letter
volume
is reported
Witness Tolley forecasts
as 48.2
First-
billion
single-piece
pieces3”
RPW
Total
It is
letters would be
52.9 billion pieces of First-Class
If the test year volume of FIM-tagged
mail is the
10
same percent,.of the, total as in fiscal year 1999, there will be 10 billion potential CEM
11
pieces3’
2.
12
Revenue Conseauences
If every FIM-tagged
13
mailpiece converted,
a highly unlikely event in the near term,
14
the impact could reach $300 million ($0.03 x 10 billion pieces).
15
not convert
16
attracts
17
diversion,
contributes
new volume,
more revenue.
or retains
volume
In addition,
Every piece that does
to the extent that offering
that otherwise
would
CEM
be lost to electronic
the revenue impact would be reduced.
29
Response of USPS to OCALJSPS-42. Response of USPS to OCIWSPS-39
FIM-tagged volume of 9.0 billion pieces for First-Class Mail.
30
Response of USPS to OCAIUSPS-42.
31
USPS-T-6 at 59.
32
9 I48.2 = 0.18672.
reported single-piece
Applying this ratio to test year volume of 52.9 yields about 10 billion pieces.
-14-
OCA-T-7
Docket No. R2000-1
Underpayment
Service; consumers
reasonable
of postage
to expect that many customers
on CEM-qualified
5
keep two denominations
6
consumers
to become
7
purchasing
habits accordingly.
9
not appear
appear to err on the conservative
4
8
does
envelopes.
to be a problem
side when applying postage.
will continue
to use undiscounted
It also seems likely that some consumers
of stamps
familiar
handy.
In addition,
with the discounted
As noted earlier, the cost of informing
miltion.
11
materials
12
alternative
13
be avoided
14
letting
15
complaints
16
17
F.
18
employees
to a nationwide
it will take some time for
the public through
their stamp
a nationwide
mailing
it can be used could be $9.2
and customers
mailing.33
customers
know
about
CEM
The approximately
could
about the increase in the First-Class
$6.6 million in postage
be effective
costs.
CEM will advance
stated objectives
20
recommended
21
consumers.
is consistent
CEM
See attachment
with the Postal Reorganization
as a means
of extending
to USPS response to OCMJSPS-50.
-15-
customer
rate.
Objectives
CEM proposal
could
This method of
in countering
Advancement
of
Postal
Service
39 USC. &3623(c) and s3622tb)
the Postal Service’s
in the
to explain the basis for new rates as an
as could some of the $2.5 million in preparation
19
33
postage
This cost would be lower if the Postal Service included this information
provided
It is
will not want to
rate and change
about the new service, and under what circumstances
10
for the Postal
and
Act.
automation
Consistency
with
in this case, and the
The Commission
benefits
directly
has
to
OCA-T-7
Docket No. R2000-1
Historically,
1
consumers
2
Recently,
3
and increasingly
4
devices, and by personal computer.34
5
by providing consumers
6
mail.
7
however,
have paid their
consumers
bills through
have taken advantage
of technological
have been paying their bills by telephone,
a convenient
CEM addresses
the use of automation-compatible
9
cost avoidance
for courtesy
automatic
debit payment
and less expensive
diversion
way to return bill payments
by
has been to encourage
mail. In Docket No. R97-1 the Postal Service agreed
reply mail pieces
CEM reply pieces)
(which
are for all practical
identical
11
avoidance
12
witness
13
mail, the Postal Service is able to permit the general public to more directly share in the
14
benefits of automation
15
to share directly in the benefits of automation
for the PRM pieces in its Docket
Miller stated, “[b]y recognizing
Operational
feasibility
18
approach
19
mailers who now enjoy a prebarcode
20
with CEM regulations.
has stated
that it wants
proposal.
as the cost
As Postal Service
with this
who return CEM mail will be able
by paying a discounted
rate.
in the establishment
to develop
for both mailers
Under
the same
some of the cost savings associated
is another consideration
Postal
that is workable
No.R97-1
.“35 Likewise, consumers
17
Service
is essentially
purposes
10
16
to the proposed
developments
the threat of electronic
A goal of both the Postal Service and the Commission
8
the mail or in person.
a processing
and the Postal Service.
of CEM. The
and accounting
Operationally,
discount will have to do almost nothing to comply
current
Postal
34
Service
regulations,
the CRM
return
Xenakis, Spyros S., Trends in First-Class Mail Volumes with Emphasis on Bill/Payment and
Advertising Mail, July, 1999 at 11.
35
Docket No. R97-1, USPS-T-32 at 36-37.
- 16 -
OCA-T-7
Docket No. R2000-1
1
envelope
2
mailers will only have to ensure
3
appropriate
5
additionally
of CEM, such
that the CEM return envelope
bears an
stamp indicator.
CEM also is consistent
4
To take advantage
also must be automation-compatible.36
classification
schedule
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
the establishment
(1)
for all mail;
26
to CEM.
27
are particularly
28
29
30
31
32
33
(6)
with statutory
changes
goals.
39 U.S.C. 33623(c)
be made in accordance
and maintenance
requires
that
with these factors:
of a fair and ,equitable classification
system
the relative value to the people of the kinds of mail matter entered into the postal
system and the desirability and justification for special classifications and service of
mail;
(2)
the importance
of providing
(3)
reliability and speed of delivery;
classifications
the importance of providing classifications
(4)
high degree of reliability and speed of delivery;
the desirability of special classifications
(5)
and of the Postal Service; and
(6)
such other factors as the Commission
with
extremely
high degrees
which do not require
of
an extremely
from the point of view of both the user
may deem appropriate.
In addition to the factors listed above, the 39 USC.
$3622(b) factors also apply
Some are nearly the same as those of 39 U.S.C. 53623(c).
Two, however,
relevant to CEM:
the degree of preparation of the mail for delivery into the postal system
performed by the mailer and its effect upon reducing costs to the Postal Service;
simplicity of structure for the entire schedule and simple, identifiable relationships
(7)
between the rates or fees charged the various classes of mail for postal services.
36
DMM §§ C810.8.0 through C810.8.2.
-l7-
OCA-T-7
Docket No. R2000-1
The use of CEM will lower postage
1
costs for consumers.
2
businesses
to incur more than very small additional
3
consumers
the benefit of using a discounted
4
so doing) need only supply automation-compatible
5
are now doing anyway.
6
their existing
7
indicator.
8
and costs will be achieved
9
rate that accurately
adding
With more widespread
Businesses
wishing to offer
Stamp (and gain good will from
reply envelopes,
something
many
will only have to make one modification
the Postal
Service
approved
CEM
greater measure as household
to
postage
use of CEM, the goal of more closely aligning
in substantially
rates
mailers pay a
reflects costs.
It ,is ~useful tq address
10
First-Class
These businesses
reply envelopes,
costs.
CEM will not cause
the specific statutory
of CEM.
classification
factors and how they
11
would be promoted by adoption
The first pertinent factor i&the
12
and maintenance
of a fair and equitable
classification
system for all mail.”
13
proposal will promote a fair and equitable
classification
system because
14
aligns rates with costs for household
15
costs as described
16
addition, CEM is fairer to those mailers who wish to offer their customers
17
of reduced rates.
mailers.
CEM envelopes
establishment
The CEM
it more closely
avoid precisely the same
in Docket No. R97-1 by Postal Service witness
Miller for PRM.
In
the advantage
The second factor is “the relative value to the people of the kinds of mail matter
18
19
entered
into the
20
classifications
21
means
22
desirability
postal
and service
for returning
system
of mail.”
bill payments.
and justification
and
the desirability
Consumers
-18-
for special
highly value the mail system
Also consumers
for the CEM classification
and justification
trust the Postal Service.
as a
The
is that it more closely aligns rates
Docket No. RZOOO-1
OCA-T-7
1
with costs for household
2
paying bills.
mailers and gives consumers
The next pertinent
3
criterion
is “the importance
4
extremely
5
the type most easily and economically
6
(like CRM) is prebarcoded
7
greater than for much of First-Class
9
of providing
high degrees of reliability and speed of delivery.”
The next criterion
8
a secure,
require an extremely
processed
low-cost
classifications
by the Postal Service.
of providing
11
This criterion is neutral in effect.
12
The fifth criterion
of delivery” is
classifications
high degree of reliability and speed of delivery.”
choice
Because CEM
mail.37
is “the importance
add CEM to the consumer
with
CEM mail is “clean” mail,
and screened for accuracy, the “reliability
10
method of
which do not
The proposal to
list does not reduce such existing, classifications.
is “the desirability
of special classifications
from the point of
13
view of both the user and of the Postal Service.”
From the point of view of the
14
consumer,
15
cost-based
16
business mailers, as noted above, CEM offers a more practical and less expensive
17
for them to gain good will by providing
18
discounted
CEM is a realistic way to ensure that they will be paying a fair, equitable,
First-Class
postage.
rate for prebarcoded
envelopes.
their customers
From the point of view of
with the opportunity
way
to use
While the Postal Service has long objected to CEM on such bases
37
A bill payer may be induced by a CEM discount to use the accurate, clean, prebarcoded envelope
provided, rather than choosing a blank envelope. The latter may result in hand addressing, with its added
processing and delivery problems.
-19-
OCA-T-7
Docket No. R2000-1
1
as the “two-stamp”
2
operational
objections
The
3
problem,
final
I would
observe
to CEM in Docket No. MC951,
criterion
is “such
4
appropriate.”
5
when evaluating
6
around for some years.
7
proposals
8
market.
9
costly for most consumers.
other
There are several pertinent
the CEM proposal.
because
that the Commission
such
as well it should here.38
as the
Commission
points that the Commission
may
deem
ought to consider
First, as noted above, CEM proposals
have been
One can easily infer that the Postal Service has resisted such
its First-Class
For example,
factors
dismissed
Mail monopoly
paying bills by walking
Many businesses
makes consumers
payments
a largely captive
to offices is inconvenient
are national companies
Local utilities generally
and
and do not have
10
local payment
offj,ces.
11
arrangements
with local banks) so payments
12
few consumers
13
likely because of location inconvenience
14
make such payments.
15
infancy, and many question their reliability; we are still largely a society which needs or
16
desires a paper record of transactions,
avail themselves
Automatic
have one or more local offices (or have
may be walked
of this opportunity
in.
under the current
and the costs associated
debit and computer
However,
18
use First-Class
19
the trend toward
20
retain these payments
38
PRC Op. MC951
of payments
most
payment systems are still in their
which payment by mail facilitates.
Mail at the full rate in the future.
migration
system,
with spending time to
It is clear that the Postal Service cannot assume that consumers
17
relatively
The Postal Service has acknowledged
from the mailstream.
in the mailstream.
n5050 et seq.
-2o-
will continue to
CEM provides
a tool to
OCA-T-7
Docket No. R2000-1
1
Turning
2
degree of preparation
3
evaluating
4
Postal Service’s
5
be clean and that processing
6
to the two particularly
relevant factors from #3622(b),
of the mail on reducing costs to the Postal Service is important
CEM because
the CRM mailpieces
automation
Finally, simplicity
environment.
are required
This characteristic
to be compatible
in
with the
ensures that the mail will
costs will be avoided.
of structure,will
7
because
8
difference
9
while CEM postage is paid by the sender
be maintained
its rate will be identical to that of QBRM.
between
the effect of the
with the establishment
For ratemaking
purposes,
of CEM
the key
these two mail types is that QBRM postage is paid by the recipient
-2l-
OCA-T-7
Docket No. R2000-1
1
V.
CONCLUSIONS
The concept of CEM is not new to this Commission.
2
3
of years as has mail processing
technology.
4
contents
5
Diversion of transactions
6
would send a message to consumers
7
reductions
brought about by technological
8
three-cent
discount,
9
costs than consumers’
of reply mail are increasing
Electronic
in availability
options for transporting
and attractiveness
mail is a concern of the Postal Service.
advances
the
to consumers.
The adoption of CEM
and give them an opportunity
to share in the cost
within the Postal Service.
With a
CEM mail will travel under a rate that is more closely aligned with
current
alternative,
simple to accomplish;
the First Class single-piece
10
operationally
11
revenue loss even under the most liberal volume estimates.
12
R97-1,
13
classification
39
It has evolved over a period
CEM promotes
Adoption
“the establishment
of CEM will not engender
and maintenance
system.“39
39 U.S.C. 53623(c)(l).
- 22 -
rate.
CEM is
a substantial
As I testified in Docket No.
of a fair and equitable
OCA-T-7
Docket No. R2000-1
1
VI.
PROPOSED
I propose
2
DMCS LANGUAGE
specific
3
language
4
100.020X
5
CEM consists
6
mark as prescribed
7
reauirements:
8
a.
9
Postal Service.
DMCS
language
that defines
CEM.
The proposed
DMCS
is as follows:
Courtesy Envelope Mail (CEM)
of mailable
matter in envelopes
bv the Postal Service.
Be a ureaddressed.
preprinted
10
b.
Bear a proper Zip Code.
11
C.
Bear a prooer barcode
12
the Postal Service.
13
d.
14
prescribed
15
e.
Bear an indication
that must bear a facino identification
CEM must also meet the followino elrorbrlity
reply envelope,
correspondina
that the envelope
whose desion is aooroved
to the proper Zip Code, as prescribed
is elioible
for the CEM discount,
bv the Postal Service.
Meet automation
compatibilitv
criteria as prescribed
-23-
bv the
bv the Postal Service.
by
as
1
APPENDIX
2
HISTORY OF CEM INITIATIVES
DOCKET NOS. R87-I,
3
4
A.
IN
R90-1, AND MC95-1
Docket No. R87-1 CEM Proposal
In Docket No. R87-1, OCA proposed
5
A
CEM was
7
with a corresponding
8
CEM characteristic
9
Postal Service’s automation
equipment,
and, ultimately, to facilitate the Postal Service’s
IO
processing
First-Class,
letter mail.’
11
used CEM mail pieces were self-addressed
12
payments,
bearing a nine-digit ZIP Code
barcode and a Facing Identification
was designed
of~,single-piece
merchandise
OCA’s five-cent
discount
was not delivered
15
office box or by firm holdout.
16
proposal
17
thereby
Examples
18
for the delivery and payment of bills3
2
Id. at 14970.
3
PRC Op. R87-1, n5036.
provided and used for bill
agencies.
on the fact that a preaddressed
was delivered
Further, the OCA argued that implementation
Service
more attractive
loss of mail volume to computer
Docket No. R87-1, Tr. 20/15011
with the
of the most frequently.
with government
by a carrier; rather, the envelope
make use of the Postal
reduce the potential
Each proposed
more compatible
return envelopes
was premised
envelope
Mark (FIM).’
to make the envelope
order forms, and communications
14
1
envelope
for CEM.
defined as a preprinted
would
First-Class
discount
6
13
single-piece
a five-cent
return
to a post
of the CEM
to the public and
networks
and telephone
OCA-T-7
Docket No. R2000-1
The Commission
1
to preserve
did not recommend
the “attributable
implementation
2
sought
3
nonpresorted
4
a CEM classification
5
recognize
6
Class letter mail during the next omnibus proceeding.
First-Class
change.
any cost differential
8
a prebarcoded
9
included
10
indication
11
post office box delivery address.
12
13
It stated
and propose
reply envelope
a preprinted
envelope
on the reply envelope
In response
foundation
rate.“4 However, the Commission
To qualify for the Commission’s
7
costs
for the
proposed
25 cent
adoption
Service
be able to
would
rates for both CEM and single-piece
or a business
with a ZIP+4
CEM category,
reply mail piece.
qualified
barcode,
raised during the hearings,
5
Id., 75038.
Id., 75043.
A-2
an
for the CEM rate, and~:a
the Commission
[I]t is our view that in the exercise of our classification responsibilities
pursuant to 5 3623, the requirement of a ‘fair and equitable classification
system for all mail’ compels us to strive for a classification structure which
permits the establishment of cost-based rates, In further amplification, the
rate for each rate category should not only reflect the average costs of a
piece of mail within the rate category, but also the actual unit cost for each
piece of mail within the rate category should not vary significantly from
each other piece. The cost characteristics of the pieces of mail within the
rate category should be homogeneous
within reasonable parameters so
as to minimize cross-subsidization.”
4
First-
CEM requirements
quoted the following from Docket No, MC78-2:
14
15
16
17
18
19
20
21
22
23
of
a mail piece had to be
Code and corresponding
that the envelope
It
did recommend
that the Postal
proposed
to several arguments
of OCA’s CEM proposal.
OCA-T-7
Docket No. R2000-1
1
The Commission
[ulnder the Act, we are required to consider the other factors enumerated
in §3623(c).
The preceding paragraph addresses the requirement of
53623(c)(l)
that the classification schedule be fair and equitable.
The
other classification criteria relevant to the CEM proposal is 53623(c)(5)
which requires the Commission to consider the desirability of the CEM
rate from the ‘point of view of both the user and of the Postal Service.’
The CEM user, whether it be business or household mailers, will find a
special CEM classification
desirable
because
of the resulting rate
reduction.
Businesses and other mailers who mail nonpresorted
mail
which will not qualify for the CEM rate will find this classification
undesirable as their rates will be higher. The Postal Service will benefit
because establishment of a CEM category will provide an inducement to
mailers to place bar codes and FIM marks on the mail thereby reducing
postal costing leading to increased efficiency. See Tr. 20/14970-71.
This
fact weighs the minor additional effort the Service faces to administer an
additional rate category.’
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
also noted that:
B.
Docket No. R90-1 Courtesy
Envelope Mail Proposal
In Docket No. R90-1, OCA proposed
19
20
defined as a preprinted
21
FIM, identified
22
to a post office box, bearing
23
Each
24
compatible.*
25
automation
26
pay a rate commensurate
27
the position that limiting automation
mail
single-piece
as a courtesy
piece
was
discount
envelope,
as prescribed
a nine-digit
The CEM proposal
discounts,
First-Class
envelope
characteristic
a three-cent
7
Docket No. R90-1, Tr. 30/I 5676.
8
Id. at 15634.
marked with a
by the Postal Service, addressed
designed
allowed
those
to
make
unable
and individual
with the cost of their automation
Id., 75056.
machinable,
CEM was
ZIP Code and the corresponding
e.g., small businesses
6
for CEM.
CEM
mail
barcode.’
automation
to take advantage
of bulk
mailers, the opportunity
compatible
mail.
to
OCA took
discounts to bulk mailings was not justified because
A-3
Docket No. R2000-1
OCA-T-7
1
automated
processing
of a single piece of First-Class
Mail was shown to reduce costs
2
on a per piece basis9
With the increase in First-Class
rates, OCA thought that a First-
3
Class single-piece
4
from the Postal Service mailstream
automation
discount
to alternate bill-payment
In its opinion, the Commission
5
by individual
be achieved
7
barred small mailers from participating
8
to eliminate bulk mailing requirements.”
9
three-cent
10
not distributed
11
c.
discounts
14
piece
15
Service’s
16
automation
9
mail pieces and if the bulk mailing requirements
proposal
in automation
discounts,
could
needlessly
then the time had come
However, the Commission
rejected the OCA’s
on the grounds that the cost savings identified were
Docket No. MC95-1 Courtesy
13
media.”
to all users.”
In Docket
12
of bill payments
stated that if cost savings from automation
6
CEM discount
would reduce the migration
No.
MC95-1,
Envelope Mail Proposal
under
the
Postal
Service’s
proposal,
automation
would have been available only to mailers who mailed in bulk. The minimum
requirement
proposal
to ,qualify
was
compatible
500.
for the automation
Individuals
basic
and small
category
business
pieces would have received no discount.
Id. at 15534.
PRC Op. R90-1, n5164.
Id., 75177.
Id.
A-4
under
mailers
the Postal
who mailed
OCA-T-7
Docket No. R2000-1
OCA argued that this violated the Postal Reorganization
1
2
of fair and equitable
classifications
3
needs of single piece automation
4
its own stated goal of adding
5
considerations
6
cent discount for CEM.‘4
existed.13
goal
by not considering
the
mailers, OCA argued, the Postal Service was violating
classifications
where
To remedy this perceived
CEM was defined as preprinted,
7
Moreover,
for all mailers.
Act’s classification
significant
mailers as a courtesy to their customers.”
9
rate, CEM mail would have had to:
or market
inequity, the OCA proposed
self-addressed
8
operational
business envelopes
provided by
In order to qualify for OCA’s proposed
bear a facing identification
a 12-
CEM
mark; bear a proper
10
barcode;, bear a proper ZIP code; bear indicia signifying that the piece is eligible for the
11
discount;
12
and be preapproved
meet automation
In Docket
13
compatibility
No. MC95-1,
proposal,
15
proposal and volume projection.
17
while OCA witness
Witness
as prescribed
Thompson
I provided
Thompson
argued
(OCA-T-100)
(OCA-T-200)
13
Docket No. MC95-1, Tr. 23/l 0420.
14
Id. at 10425.
the cost basis for the CEM
provided
15
in its proposal.‘7
OCA proposed CEM as a rate category within the existing
proposal did not extend to cards. See Tr. 23/10457.
Id. at 10445.
17
See USPS-T-l
the policy basis, rate
that CEM met the reclassification
Postal Service had used to define subclasses
16
by the Postal Service;
by the Postal Service.16
14
16
standards
at 21-37
A-5
criteria that the
Specifically,
First-Class
courtesy
letters subclass;
the
OCA-T-7
Docket No. R2000-1
1
envelope
mail was said to: represent
2
encourage
a low-cost
3
modernized
entry requirements;
4
operational
needs
5
contents
6
content-based
mailstream;
a homogeneous
allow the Postal Service
represent
further
CEM
the Postal
elrgrbrlrty was
Service’s
avoidance
9
into account
in establishing
market and
not dependent
goal of moving
on the
away
both mail processing
and delivery operations.20
C,EM volume of between
11
the range of potential CEM volume, witness Thompson
12
the CEM proposal for the test year to be between $470 million and $783 millionZ3
14
example,
15
Postal
16
businesses
18
Brooklyn
Service
and 6.5 billion pieces.”
estimated
and the Postal Service opposed
Union Gas (“BUG”) joined
in denouncing
the CEM
Given
the revenue impact of
OCA’s CEM proposal.24
Reader’s
proposal
took
OCA witness Thompson
estimated
Some participants
3.9 billion pieces*’
analysis
10
13
from
a discount of 12 cents based on a cost-
figure of 13.4 cents that I developed. I9 The cost avoidance
8
category;
rates.”
In Docket No. MC95-1, OCA proposed
7
flexibility
a mail category where significant
exist; and, because
of the mailpiece,
cost and market-based
Digest Association
as fundamentally
who provide CEM mailers with reply envelopes.
unfair
BUG suggested
For
‘and the
to the
that this
Tr. 23/l 0422.
Tr. 23/10425.
20
For highlights
21
Tr. 23/10450.
22
Id. at 10452.
23
Id. at 10432.
of the costing methodology,
see Tr. 23110333, 10334, 10340, 10373.
24
The Council of Public Utility Mailers suggested the Commission
set an interim rate until the next omnibus case. CPUM Brief at 6.
A-6
approve the CEM proposal but
OCA-T-7
Docket No. R2000-1
1
inequity could eventually
lead to a decrease
2
Service claimed that the large corporate
mailers incur the expense
3
pieces, yet they will receive no financial
reward.
4
penalized
by the effects of deaveraging
Service
witnesses
in CEM voIume.25 Reader’s
and
of preparing
CEM
They also claimed these mailers are
on the single-piece
Potter
Digest and the
rate.*’
5
Postal
6
Service’s opposition
to CEM on rebuttal.
7
difficulties associated
with implementing
8
the certification
process necessary
9
the CEM rate.
He claimed that this process would be costly and difficult to administer
the CEM proposal.
11
place for BRMAS
12
arguably,
13
process
14
duplication
alleged operational
Potter was concerned
BRM, made more difficult by the fact that CEM providers
not have any financial
be ineffective
Postal
with
He likened it to the process already in
incentive
because
to cooperate.27
certification
He also argued
would,
that the
indicia would ,lend themselves
to
on personal computers.z8
Potter also argued there would be an increase
16
the CEM proposal.
17
and thereby misusing
25
the
for mailers to qualify their mail pieces as eligible for
and that it could lead to poor customer relations.
15
presented
Witness Potter discussed
10
would
Alexandrovich
He contended
in short-paid
that the possibility of customers
CEM, should not be underestimated.29
mail as a result of
becoming
confused,
The effect of an increase
Brooklyn Union Brief at 8
26
RDA Brief at 5. Tr. 36116326. CPUM disputed this argument, claiming that it is the consumer who
ultimately incurs the expense of CEM because the cost of envelopes is reflected in the prices consumers
pay. CPUM Brief at 5.
27
Tr. 36/16212-13.
28
Id. at 16216.
29
Id. at 16218
A-7
OCA-T-7
Docket No. R2000-1
1
in the volume of short paid mail was projected
2
substantial
3
deliver short paid mail, so workhours
4
would have to be hired.
5
paperwork
6
He suggested
7
due” mail would strain customer
8
cost of an increase in short paid mail volume would be large.
costs.
Additional
to cause the Postal Service to incur
hours would allegedly
be needed to identify, process, and
would increase.
Potter contended
More revenue protection
that both an increased
involved with “postage due” mail would contribute
that requiring
people to come to the post office to pick up their “postage
relations.30 Witness Alexandrovich
Witness Potter anticipated
10
might need to issue a unique
CEM stamp,
11
combination
the FIM.3’ He also claimed
12
would
13
stamp.32
suffer
because
other problems.
obscuring
retailers
would
The bulk of Alexandrovich’s
14
15
methodology
16
contention
17
pieces.
18
mailers who do not currently
30
31
and Thompson’s
He suggested
regardless
testimony
concerns
that the Postal Service
that consignment
in offering
problems
although
lead to greater volumes
that “the OCA has failed~ to provide
provide prebarcoded
also argued that the
of the CEM rate, to avoid
not be interested
volume estimation,
that a CEM rate would
He charged
and the
to possible service delays.
9
postage
workload
clerks
sales
more than one
in Willette’s
costing
he also questioned
of prebarcoded
004’s
envelope
any basis to quantify
reply envelopes
would respond
how
to a
Tr. 36/16221-24
Id. at 16225.
32
Id. A Postal Service survey suggested that at least some of these potential difficulties could be
obviated through selection of the CEM stamp’s denomination, or inclusion in booklets which mixed CEM
and regular-rate stamps. USPS-MCR-LR-123,
Tr. 36/16268.
A-8
OCA-T-7
Docket No. R2000-1
1
CEM discount.“33
2
in more prebarcoded
3
Without this information,
envelope
In its decision,
pieces cannot be substantiated.34
the Commission
4
familiar, since the Commission
5
inclusive
6
that the Postal Service, and like-minded
7
criticisms of the proposal:36
category
he said, claims that a CEM rate would result
commented
had recommended
in two previous
omnibus
that the CEM proposal
was quite
its adoption or recommended
rate cases.35
opponents
The Commission
a more
observed
of CEM, had revived their earlier
8
9
10
11
12
13
,14
15
They argue that the costs avoided by CEM are less than the OCA
estimates; that CEM volumes are unknown and a discount would produce
an adverse financial impact of uncertain but serious magnitude; that
administration
of a CEM rate would be difficult and detrimental to the
efficient ,operation of the postal system; and that a discount to users of
courtesy envelopes would be an unearned windfall, particularly to the
For the
affluent citizens who purportedly would~ be its primary beneficiaries.
most part, these criticisms remain unpersuasive.
16
The Commission
17
my cost-avoidance
18
measurable
33
noted that Postal Service witness
estimate
for CEM
did not rebut
Alexandrovich’s
the
existence
,.~‘.’
critique of
of significant
cost-avoidances3’
Id. at 16307
34
Witness Alexandrovich
also testified that Wllette’s cost avoidance figure was inaccurate.
Alexandrovich
also offered testimony in rebuttal of witness Thompson’s volume and revenue impact
estimates.
35
37
PRC Op. MC95-1, at V-33
Id. at V-34
A-9
Docket No. R2000-1
1
OCA-T-7
The Commission
took note of witness Potter’s argument
2
would be unduly costly and time consuming.
3
the Service
4
envelope
5
which requirement
8
these pieces conform.38
7
piece as CEM eligible could not be done under the same contemplated
8
It should not be any more costly or time consuming
than what the Service has already
9
proposed.“39
this
10
had proposed
in its own direct
mail pieces included in automation
The
presumably
The Commission
that certifying CEM mail
observed,
case a requirement
though, that
that all courtesy
mailings meet the automation
standards,
would entail some type of review process to insure that
It added that there was “no evident reason why certifying
Commission
observed
that
was
a
review process.
confirmed
by witness
Alexandrovich!’
11
12
13
14
15
CHAIRMAN
GLEIMAN:
[PIlease explain to me what additional
would be incurred and how they would be incurred simply by virtue
fact that I can put a 20-cent stamp on that envelope that has already
certified as automation-compatible
as opposed to putting a 32-cent
on there?
16
17
THE WITNESS:
Assuming the certification processes were the same in
both cases, there wouldn’t be an additional cost of that.
18
The Commission
also found
19
effort or investment
20
in order to obtain a discount!’
38
to use computers
it “improbable”
Id.
40
Id. at V-34-35.
4,
Id. at V-35.
would
make the
to forge indicia, as witness Potter had suggested,
Id.
39
that consumers
costs
of the
been
stamp
A-10
OCA-T-7
Docket No. RZOOO-1
The
1
2
Commission
underestimated
3
4
5
6
7
8
9
also
expressed
the
view
that
witness
Potter
the general public’s capability to change their mail preparation
seriously
habits?
The Postal Service has numerous means available to it to overcome
potential problems with consumer use of a discount stamp. Also, it is
probable that providers of CEM envelopes will assist in the education
process to ensure that courtesy envelope mail is used in an appropriate
fashion, Likewise, consumers faced with the possibility of a late charge
should a remittance be returned for postage due will be motivated to use
the discounted stamp only when appropriate.
10
Responding
11
the mailer of the piece,
12
stated?
13
14
15
16
17
to participants
who attacked
not the provider,
the CEM proposal
would
as unfair because
get the discount,
the Commission
As CPUM has observed, the mailer of the reply envelope ultimately pays
for that piece as a transaction cost. Additionally, whatever the motive of
the originator in providing an automation-compatible
reply envelope, only
the decision of the recipient to use it will further the Service’s goal of a
loo-percent barcoded mailstream.
18
The Commission
19
be of significant
also stated it was reasonable
concluded
that Courtesy
21
recommendation
22
establishment
23
specific rate for the CEM category.
24
financial impact, and the need to accommodate
42
that a discounted
rate will
benefit to lower income mailers.44
The Commission
20
to anticipate
as a discounted
category
of a CEM rate category.45
Id.
44
Id. at V-36
45
Id.
of First-Class
However,
Mail remained
A-II
worthy
of
Mail, and recommended
it refrained
from recommending
It noted that its ” first consideration
Id.
43
Envelope
a
is its potential
that impact in a case in which no class
OCA-T-7
Docket No. R2000-1
1
of mail is called upon to produce
2
that while the 12-cent discount
3
per se, “the prospective
4
is cause for serious concern
5
the Commission
6
rates recommended
7
recommended
8
concept for the Governors’
9
specific discount to a subsequent
more, or less, total revenue.”
proposed
by the OCA was not necessarily
volume of discounted
wanted
regarding
the consequent
by the Commission
Postal
in this proceeding.“47
purely as a mail (or so-called
consideration,
Governors
11
recommendation4’
12
the point that now a very substantial
13
be in excess of 80 percent,
14
relevant
15
closely
16
induced by the discount to convert from less-desired
17
desired
18
accrue from increased
Thus, potential
46
Id. at V-36-37.
47
Id. at V-37.
48
Id.
the
majority of CEM, estimated
benefits
benefits
worksharing
In addition,
of First-Class
The Commission
of creating
Commission’s
of a
had risen’to
They found this change
any worksharing
pool of candidate
discount
to
highly
can ,be
mailers who might be
mail preparation
would be replaced
CEM
by market research
practices to more-
to the Postal Service which
49
thus
“shell”) classification
opined that the amount of prebarcoding
related to the size of the available
ones.
rejected
already was prebarcoded.
the potential
and
proceeding.48
The
The Governors
impact.“46
stating it would leave recommendation
ratemaking
Service’s
uncertain
of the revised schedule
10
because
financial
found
unreasonable
CEM pieces is somewhat
to “avoid complication
the CEM category
The Commission
by the prospect
normally
might
of deadweight
Decision Of The Governors Of The United States Postal Service On The Recommended
Decisions Of The Postal Rate Commission On Courtesy Envelope Mail And Bulk Parcel Post, Docket No.
Mc95-1, issued March 4, 1996 (“CEM Decision”).
A-12
OCA-T-7
Docket No. R2000-1
1
revenue
losses engendered
by the grant of discounts
2
savings5
The Governors
also posited that the envelope
3
incentive
to put a barcode
4
financial benefits would be “bestowed
5
receive
6
remittance
proportion
cost
provider would have no direct
if not doing so currently
because
the
primarily on those individuals fortunate enough to
of prebarcoded
reply
envelopes
from
entities
desiring
mail.“5’
They also thought that a CEM discount could cause the Postal Service to incur
7
8
a high
on the envelope
with little or no offsetting
substantial
costs?
The Postal Service presented testimony in this case discussing a number
of administrative and enforcement concerns that would arise if the mailing
public routinely had to choose, on a piece-by-piece
basis, between two
letter stamp denominations.
Potential ,problems include an increase in
short-paid mail, delays and increased customer dissatisfaction
resulting
from the Postal Service’s response to the increase in short-paid mail,
longer lines in postal lobbies and higher window clerk costs, friction
between the Postal Service and the customers who currently provide
prebarcoded
reply envelopes voluntarily, and several other potential
disruptions
to the relationship
between the Postal Service and its
customers.
9
10
11
12
13
14
15
16
17
16
19
20
It also stated that there would be a direct revenue loss in the hundreds
21
dollars, which would have to be offset by rate increases for other types of maits
22
Its last concern
23
Governors
24
because
stated
that
addressed
the general
household
mailers
the savings realized from automated
50
Id. at 3.
51
Id. at 4.
52
Id.
53
Id.
A-13
issue of fairness
already
had
processing
of millions of
and equity.
benefited
of household
.’
from
The
automation
mail have been
OCA-T-7
Docket No. R2000-1
averaged
with the other costs of First-Class
Class rate increases-
Mail, and used to mitigate
It stated that when households
overall First-
use the CEM envelope
provided
by others, the return letter they mail has relatively low cost. “For the rest of their letters,
however,
sent in their own envelopes,
often with hand-written
addresses,
continue to deposit relatively high cost mail.“55 “ Unless households
households
were called upon to
pay higher rates which reflect the higher costs of their mail that is not sent in reply
envelopes
(an approach
that would nevertheless
advocated
by no one in this case), a proposal
allow them to pay lower rates which reflect the lower costs of
their reply mail seems distinctly one-sided.“”
54
Id. at 5
55
Id.
56
Id.
such as CEM
A-14