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to 1994 would only occur if all costs rose 700 to 800%. If costs rose 700 to 800%, all mail costs would increase and any rate increase for preferred rate mail would not be out of line of all other postal rate increases.

The recommended Commission rates for within-county secondclass which have lower carrier route presort rates in step 14 and the smallest percentage increase at full, unphased rates will encourage within-county mailers to carrier route presort their publications. As more publications are presorted to carrier route, Postal Service costs diminish. This should have a muting effect on any future cost increases. This same phenomenon has occurred in regular rate bulk third-class. As carrier route presortation became the predominant rate category in bulk thirdclass, costs for bulk third-class on average dropped and have continued to grow at a much slower pace than other classes of mail. Therefore, if the widening of the presort discount in within-county encourages mailers to more efficiently prepare their publications, postal costs and further rate increases will both be reduced.

Janet D Steiger

Washington, D.C. 20268

October 22, 1984

The Honorable Robert Garcia, Chairman
Subcommittee on Postal Operations and Services
Committee on Post Office and Civil Service

U. S. House of Representatives
209 Cannon House Office Building
Washington, D. C. 20515

Dear Chairman Garcia:

Enclosed are responses to your follow-up questions

of the hearing of September 27, 1984. If you have any further questions, please do not hesitate to contact me.



Janet D. Steiger


1. In April of this year, GAO issued a report entitled "Opportunities to Improve the Postal Ratemaking Process." I would like your comments on the following issues raised in that report.


Should Congress consider amending the Postal

Reorganization Act to limit the number of reconsiderations and the length of the reconsideration process?

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Should the (PRC) Commission be given subpoena power to insure that relevant information is exchanged among participants in a timely manner?

If yes, why? Has the Commission experienced extreme delays in the exchange of relevant material?

For some time, a majority of

1. Limits on reconsideration. the Commission has favored a statutory amendment that would give the PRC final decisional authority in rate and classification matters. This change, if made, would negate the problem of excessively time-consuming reconsiderations although even that authority should be subject to one request for reconsideration by the Governors along with a statement of their disagreements.

As a measure addressed to the somewhat different problem of shortening the existing process, we would have no difficulty in supporting generally the idea of a time limit on

reconsideration. However, it remains true that some reconsiderations


because of the issues raised by the Governors -- could involve further hearings, whereas others might entail only issues that the Commission could decide without further proceedings. An inflexible time limit, if short, might not accommodate the rights of the parties; and if long, might sacrifice the benefits of changing the process. We would suggest that any specific limit should be subject to waiver, if the Commission makes a written finding that such an additional, defined period of time is necessary.

Subpoena. The Commission favors, as did GAO in the cited report, the creation of subpoena authority of the kind commonly found in regulatory statutes. The existence of this authority would facilitate the collection of needed, relevant information

while providing a judicial forum for challenges to the appropriateness of the subpoena in a particular case.

While we have noted substantial improvements in the provision of relatively routine sorts of information, it remains true that there is no satisfactory remedy when data of a more controversial nature are withheld. In the recent rate proceeding, fairness to the opposing parties reflected in our rule on computer-based evidence


the concern


required that

we strike testimony resting on computer studies where documentation sufficient to let parties replicate and test those studies was not forthcoming. Attached is an excerpt from the Appendix to Commission Order No. 562, issued May 30, 1984, detailing the procedures the Commission had to employ in an attempt to obtain this material for the parties.

2. In R84-1, the current postal rate case, witnesses pointed out that the third-class rate structure permits bulk business mail to travel for the same price at four ounces as at one ounce. When first-class mail becomes more expensive with each incremental ounce, this structure seems unbalanced. Why did the Rate Commission reject proposals to create a pricing system for third-class mail that is more similar to first-class mail?

The Commission has not rejected the idea of a different structure for third-class mail, but has made its R84-1 decision on the basis of the record evidence. That evidence did not establish that the cost of handling this mail varies with weight, at least in the weight range mentioned. Appealing arguments were made by some of the parties for a structure that recognized weight variation down to zero, but they were based on the assumption that cost varied with weight and not on empirical data pointing to that conclusion. There was empirical evidence pointing the other way, although it was itself not conclusive.

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3. Is it possible that new weight studies will show that four ounces of mail are actually more expensive to handle, particularly in the carrier cost, than one ounce? Was the Commission satisfied with past studies that purported to show no cost increase until the current weight break of 3.9 ounces? If not, why did the Commission recommend a very similar weight break at 3.5 ounces?


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The Commission is awaiting with interest the outcome of a special study being conducted by the Postal Service albeit not the study favored by the Commission to investigate at least some aspects of the relation between weight and cost in thirdclass mail. It may be that this study will contribute to a permanent solution to the third-class rate structure problem. However, it is not designed to identify any weight/cost relationships in the carrier street time segment; to that extent, the issue posed in this question will have to be otherwise resolved.

The Commission, as noted above, did not find any of the studies put forth in Docket R84-1 fully satisfactory. That the recommended rates contain a break point of 3.5 ounces is the result of an improvement in the way the existing structure is applied. It does not represent an endorsement of the existing 3.9 ounce breakpoint, which in the Service's proposal would have been raised to 4.0 ounces.

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