[00:00:02] Speaker 00:
Case number 16-1284, United States Postal Service Petitioner versus Postal Regulatory Commission.

[00:00:09] Speaker 00:
Mr. Belt for the petitioner, Ms.

[00:00:11] Speaker 00:
Kirstein for the respondent.

[00:00:49] Speaker 01:
Good morning, Mr. Belt.

[00:00:50] Speaker 01:
Good morning, Your Honors.

[00:00:51] Speaker 01:
You may please the Court.

[00:00:52] Speaker 01:
We have two cases here about the scope of the price cap, 39 USC 3622D.

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Two and a half years ago, this Court held that the price cap's statutory language did not entirely foreclose the Commission from regulating some changes to mail preparation requirements as changes to rates subject to the cap.

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But if it chose to do so, it needed to articulate an intelligible standard.

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The commission's announced standard last time, the basic characteristic of a mailing standard, this court held did not come close to being a comprehensible standard.

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And this court accordingly remanded the case to announce an intelligible standard that would provide clear guidance for determining whether a mail preparation change is a rate change subject to the cap.

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We are here today because the commission did not do that.

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on remand, the commission retained the basic characteristic of a mailing test, the very test this court remanded, with the only tweak being that significant changes would be what effect a basic characteristic of a mailing.

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There are two parts.

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There's the deletion part and there is the redefinition.

[00:02:06] Speaker 01:
That's according to their test.

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They have two different tests, yes.

[00:02:09] Speaker 01:
Well, that's what we're looking at.

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That's what the case presents to us.

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There are two parts to this, and you can lose either way.

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And so it seems to me the problem you first face is they appear to endorse pretty much what we prescribed as a legitimate test in the form of a deletion test.

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And this case fits it, and it's certainly consistent.

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You seem to want to argue otherwise.

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Our first decision explicitly accepted the logic of the deletion test.

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They embraced that.

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This case seems to fit it perfectly.

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Now, it is true, it totally went through the redefinition test.

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But why do we have to if one of the two tests stands alone to defeat your claim here?

[00:03:01] Speaker 01:
Well, I have several points on that, Your Honor.

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The court remanded the basic characteristic of the mailing test, which is the redefinition test.

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because it failed to articulate a clear standard.

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So that even if, in theory, the deletion test, and I'll get to this, but even if the deletion test resolved the treatment of the barcode rule, this court remanded for a standard that provided clear guidance.

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And we are still left in a situation that regardless of the specific application to the barcode rule, we are left without clear guidance.

[00:03:31] Speaker 02:
And that goes to the... Not if we were to say, for example,

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You got clear guidance.

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There is a deletion test.

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And let's assume we agree with you on the redefinition.

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One possibility is we could say, we agree.

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We don't understand what that means, so we're not endorsing that.

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But this case easily fits the deletion test.

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That's a real deletion test.

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We said it once.

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We're saying it again.

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And you lose on those terms.

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We don't have to worry ourselves.

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going forward about whether there is such a thing as a redefinition test, if it's applied again, whatever court deals with it, they can deal with it.

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Why isn't that a viable resolution?

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Again, you're right.

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On this case, we were here with the same exact rule we were before, and the commission argued last time that it was a deletion.

[00:04:15] Speaker 02:
Well, you see, there's a premise in your argument that's wrong.

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That is, that we rejected the deletion test the first time around.

[00:04:24] Speaker 02:
We did not.

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The court didn't, the deletion test was not, did not prevent... Well, I don't think the court did agree with the logic of it.

[00:04:38] Speaker 01:
I think there's not much in the decision about the deletion test, but it didn't... Well, actually, well, let me...

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If you force someone from one category to the next, that's all we're really saying.

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You're deleting and forcing someone to go from category B to A. That's that we're saying.

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It's not really hard to work through that.

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That's fair enough.

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But I also reject that this was a deletion.

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But I will get to that.

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I just want to make a point, though, that this is the same rule as last time, and that rule

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If deletion were clear and if deletion were sufficient to resolve the case, the case wouldn't have been remanded.

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The reason is not necessarily so.

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I understand that's what you're wanting to argue.

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That is not necessarily so because sometimes the panel may say,

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Well, you brought all this stuff up.

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Clean it up.

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And you were resting heavily on redefinition.

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And none of that's clear to us.

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We're sending it all back.

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We're not saying your deletion test is wrong.

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Because a panel can understand in its mind, one option is the commission would say, OK, forget the redefinition test.

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We're just sticking with deletion.

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That's just the way we think.

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We tend to be conservative.

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We don't want to venture too far.

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So we send it all back.

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So, but we still have the deletion test standing as a logical test, and they're resting on it.

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Let me, let me declare that.

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Can I just follow that up?

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Sure.

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I mean, you'll have time to respond to other aspects of it, but suppose we have a deletion.

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Under 23D, we then, for rate cap purposes, go on to the question of whether there's an alternative.

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And it seems to me that the argument that you have

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consistently made with respect to whether they change.

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can be treated – a change that doesn't directly involve a change in prices – can be treated as a change in prices has never been answered.

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Namely, the proposition that that is true if but only if the users of the old – let's call it rate cell – the users of the old rate cell are driven

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logically by economic incentive into a higher-priced product.

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It seems to me the unifying theme of your position through all these cases is that that would be a reasonable test and the Commission has never responded to that argument.

[00:07:09] Speaker 01:
Yeah, I would resist sort of the alternative, driving them to a higher-priced product, but certainly, I mean, this is ultimately the price cap as a cap on rate increases.

[00:07:18] Speaker 06:
I'm not sure why you're resisting that.

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I think that's actually very helpful to you.

[00:07:21] Speaker 06:
Because the Commission never so found.

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The Commission never said, and here there are facts showing,

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that these mailers are driven to the higher price product.

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They just as so as you.

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And I took that to be part of your argument.

[00:07:37] Speaker 01:
Yeah, and I'm sorry.

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I should have been much more clear that I'm not resisting the point you're making.

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I'm resisting the idea of product, because I think that gets into the second case.

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Well, let's say rate sale.

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Yeah, rate sale.

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And I agree with that.

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I'm sorry, Your Honor.

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Why is that so clear here as opposed to the other case?

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And the other case is certainly a compelling argument.

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Here, you're sitting with the same barcode.

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You want to keep using it, you're in another rate category.

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You are there.

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So one is yet approved.

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The other case is entirely different.

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I agree on that point, the point that Judge Williams is raising.

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In this case, it seems to me, the cell's removed.

[00:08:16] Speaker 02:
Well, where am I now?

[00:08:17] Speaker 02:
Well, oh, incidentally, you're in the higher rate category now.

[00:08:20] Speaker 01:
Right, and that describes, Your Honor, every mail preparation change we have.

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Every mail preparation change presents a mailer with the same fundamental choice.

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Either comply with the change and don't pay a higher price, or don't comply with the change and pay a higher price.

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Now, it would be one thing if the Commission's position was that means every single mail preparation change is a rate increase, because we're just going to assume mailers won't comply.

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But that's not their position.

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Their position is they will comply if it's not significant.

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They'll comply with minor changes.

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And that gets to the problem, if we have no guidance as to what's minor and what's major.

[00:08:54] Speaker 06:
And, indeed, conceptually, it seems like what's behind the position that, well, if it's a minor change, you'll comply, and that's not a change, is, so packed into that is a kind of cost-benefit analysis.

[00:09:06] Speaker 06:
I mean, if it used to be that the Postal Service says, you don't have to seal your envelopes, and then they start saying, actually, can you dampen those and seal them down?

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that if we assume nobody's going to change, then they're going to have to like, you know, they can't mail or maybe there's some deluxe cost for custom ceiling by the Postal Service.

[00:09:26] Speaker 06:
But isn't that, I mean, conceptually, help me out whether this is right.

[00:09:31] Speaker 06:
The question is not,

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whether the rate change fits within the price cap, which requires that we use historical practice as a benchmark.

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The question is the antecedent question, has there been a rate change?

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And that we don't have to look, I mean, it would be quite anomalous given the purposes of the act to freeze historical practice as the benchmark.

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Don't we need some other benchmark like

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Will mailers find it quite amenable to use, in this case, the, now it's slipping my mind, the super barcode.

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The full service barcode.

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Because it gives them a discount and the action they need to take to qualify for that discount

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is cheaper than the benefit they get from garnering the discount.

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In other words, it's a net benefit to them.

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And if it is net beneficial, then to assume that they're going to go to the more expensive product just doesn't make sense.

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And so we look at that and we say, well, it's not a rate change because the customers are going to be economically

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as well off or better.

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Is that?

[00:11:04] Speaker 01:
I think that's a very fair way, and I think that that points to the flaws of this significance test of theirs.

[00:11:11] Speaker 01:
That it's, first of all, it's asking the wrong question.

[00:11:13] Speaker 01:
It is, I think it does purport to answer exactly- No, stick with the deletion.

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The significance, I think it's an easy argument for you to make.

[00:11:20] Speaker 02:
It's really the deletion because, and I think your instinct,

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may be correct, because if you agree with what my colleague is saying, you're essentially saying my first decision is wrong.

[00:11:34] Speaker 02:
Oh, not at all, Your Honor.

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I think... What's left?

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If the deletion case can't make it, what's left?

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That is, if you simply remove this category, I'm in the next category.

[00:11:47] Speaker 02:
Well, all right.

[00:11:48] Speaker 02:
What case makes it under our original decision?

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Let's talk about the deletion.

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Where the preparation

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where you can look at preparation and consider it may have a rate effect, which is what the holding was initially.

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Now, the conversation so far seems to be undercutting that decision.

[00:12:07] Speaker 02:
And if it's not undercutting it, what cases would be covered by it?

[00:12:11] Speaker 02:
I hear what we're saying, and I was worried about that the first time, but I'm curious

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to what you think is left.

[00:12:19] Speaker 01:
Oh, I see.

[00:12:20] Speaker 02:
You see what I'm saying?

[00:12:20] Speaker 02:
Yeah, you mean what would be a rate change?

[00:12:22] Speaker 02:
Judge Williams and Judge, if my colleagues are right, is there anything left of the first decision?

[00:12:28] Speaker 02:
Of course.

[00:12:29] Speaker 02:
And if so, tell me.

[00:12:30] Speaker 01:
Yeah, OK.

[00:12:31] Speaker 01:
So the first decision essentially gets out to something that purports not to be a rate change, but nevertheless is sort of a rate change in disguise, right?

[00:12:37] Speaker 01:
That's what I think.

[00:12:38] Speaker 02:
Don't be obscure.

[00:12:40] Speaker 01:
I won't be obscure.

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I'll be very specific.

[00:12:42] Speaker 02:
Preparation.

[00:12:43] Speaker 01:
Let's say, let's say.

[00:12:44] Speaker 01:
that we had to qualify for bulk mail of what we call the pre-sort mail category.

[00:12:50] Speaker 01:
Let's say you have to mail 500 pieces at a time, right, to bulk mail.

[00:12:57] Speaker 01:
If we change that to be 1,000 pieces at a time, all right,

[00:13:01] Speaker 01:
You know, a mailer that's sending 600 pieces at a time, that's what they're sending.

[00:13:05] Speaker 01:
So you would be, I think the commission would be well within its rights to say, wait a minute, this purports to be a mail preparation change, but I think all this is really doing is telling those mailers that are sending 600 pieces, you don't qualify anymore, you're going to have to pay us more.

[00:13:19] Speaker 02:
I'm struggling making that a preparation change in my mind.

[00:13:21] Speaker 02:
That doesn't sound, that sounds like a straight up

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Rate change to me.

[00:13:25] Speaker 02:
Yeah, but it's how you present your mail.

[00:13:27] Speaker 02:
That's more than you can come up with anything.

[00:13:29] Speaker 01:
It's how you present your mail.

[00:13:30] Speaker 01:
I mean, it's similar to, you know, if we change the size or the minimum, any of those minimum volume requirements to us, those are the kinds of things that are sort of amenable to be a rate change in disguise.

[00:13:41] Speaker 01:
Now, mail preparation change, the problem is that we have done countless mail preparation changes.

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The commission has determined that none of them are rate changes until this case.

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So we need a standard, and that's what this court said.

[00:13:54] Speaker 04:
Let's assume everybody agrees there is a deletion.

[00:14:06] Speaker 04:
Then we have to determine

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the Commission has to determine what the effect of that deletion is.

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And it seems to me that for rate purposes, it has to look to its own regulation, which the relevant part is point 23D4.

[00:14:24] Speaker 04:
And so the first question is, is there an alternative?

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If there is no alternative, then we zero out that cell and it disappears.

[00:14:39] Speaker 04:
And this question – so this is the question determining is there an alternative, and secondarily, the question of what the correct alternative is.

[00:14:48] Speaker 04:
It doesn't seem to me that we have anything from the Commission as to how it makes – and I think this was a question posed by the 2015 opinion.

[00:15:00] Speaker 04:
anything as to how you determine whether there is or is not an alternative.

[00:15:07] Speaker 01:
I think that is true.

[00:15:10] Speaker 04:
I should say that I've looked into what the Commission said on ascertaining the existence of an alternative and I don't find it very helpful.

[00:15:20] Speaker 01:
I also have not found anything on that, but I still have a threshold problem, and I want to clarify this because I think it's really important.

[00:15:26] Speaker 01:
Apart from the whole deletion prong, this was not a deletion, okay?

[00:15:30] Speaker 01:
I want to be very clear.

[00:15:31] Speaker 01:
Factually, this was not a deletion.

[00:15:33] Speaker 01:
The rate, and if you look at page 65, I think it's JA65.

[00:15:37] Speaker 01:
I know that I have that chart on page 11 of the brief, but if you look at the actual rate schedule,

[00:15:43] Speaker 01:
This, page JA65 shows what the first class prices were, okay, 65 and 66.

[00:15:51] Speaker 01:
There was a set of automation prices.

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There was a set of non-automation prices, the ones you default to.

[00:15:57] Speaker 01:
And then on page JA66, it talks about a discount, that you can get this discount for full-service intelligent mail.

[00:16:04] Speaker 01:
We weren't changing any of those prices, and we weren't even deleting the standard automation rate.

[00:16:08] Speaker 01:
It's still there in the rate schedule.

[00:16:10] Speaker 01:
This is our proposal, and it's still accessible to mailers.

[00:16:13] Speaker 01:
I'm not sure I follow that.

[00:16:14] Speaker 06:
Because it's a discount, it's not a rate.

[00:16:16] Speaker 06:
It's not a deletion, but you're deleting

[00:16:19] Speaker 06:
one of the discounts.

[00:16:20] Speaker 01:
Well, we're deleting.

[00:16:21] Speaker 01:
No, we're not.

[00:16:21] Speaker 01:
We're not deleting the discount.

[00:16:23] Speaker 01:
Okay.

[00:16:23] Speaker 01:
What we're saying is that that

[00:16:26] Speaker 01:
in order to continue to qualify for automation rates, that includes the standard rate as listed on page JA66 and the discount, you need to change what you do, okay?

[00:16:36] Speaker 01:
You need to, we're not deleting the rate.

[00:16:38] Speaker 01:
If it is a deletion, if it is a deletion, we are deleting the higher of two automation rates, right?

[00:16:45] Speaker 01:
In effect.

[00:16:46] Speaker 06:
But you are.

[00:16:47] Speaker 04:
Oh, go ahead.

[00:16:50] Speaker 05:
Go ahead.

[00:16:51] Speaker 04:
The criteria for this rate, I'm sorry, for this class of service happened to be exactly the same as the criteria for another class of service, right?

[00:17:09] Speaker 01:
You mean if we had gone forward with this change?

[00:17:12] Speaker 01:
Yes, right.

[00:17:13] Speaker 04:
That's correct.

[00:17:16] Speaker 04:
It sounds to me like an empty cell, a cell that's there, but it has no substantive significance.

[00:17:23] Speaker 04:
And it seems to be a little odd for you to tie yourself to the mast of the proposition that there's no deletion.

[00:17:29] Speaker 01:
Well, I guess the point is that

[00:17:32] Speaker 01:
First of all, the rates there is accessible.

[00:17:34] Speaker 01:
I agree that as a practical matter, a male or acting in its economic self-interest should also take the discount, right?

[00:17:40] Speaker 01:
It should actually pay less.

[00:17:41] Speaker 06:
Right, because once you've equated the criteria for qualifying for the two rates, anybody in their right mind is going to take the two discounts.

[00:17:48] Speaker 06:
Anybody in their right mind is going to take the bigger of the two discounts.

[00:17:51] Speaker 06:
But so that really, though, gets to my

[00:17:55] Speaker 06:
point, which is a little bit in tension with the line of questioning that Judge Edwards is advancing.

[00:18:02] Speaker 06:
I don't really see a bright line distinction between a deletion of a rate as distinct from a service, which gets to the next case, but deletion of a rate and a change in rate.

[00:18:17] Speaker 06:
Because I think as Judge Williams had been saying,

[00:18:22] Speaker 06:
Any change in a rate is getting rid of rate A, and we are having to point to what the next rate is.

[00:18:30] Speaker 06:
So it's a change.

[00:18:31] Speaker 06:
A deletion could occur by incremental incremental incremental incremental changes.

[00:18:35] Speaker 06:
I don't know.

[00:18:37] Speaker 06:
I think the facts, as you described, that really illustrate that they're conceptually really the same thing.

[00:18:44] Speaker 06:
There's no separate thing that's a deletion.

[00:18:47] Speaker 06:
Any deletion is a change, and any change could be characterized as a deletion and a creation of a new rate.

[00:18:54] Speaker 01:
I suppose in a sense that's true.

[00:18:56] Speaker 01:
What about a deletion of a service?

[00:18:59] Speaker 01:
A deletion of a service is different.

[00:19:00] Speaker 01:
I'm talking about rates within a service.

[00:19:01] Speaker 01:
Your eyes should be very clear about that.

[00:19:03] Speaker 01:
I think that part of the problem here is that

[00:19:08] Speaker 01:
This case presents one weird fact that I think has led the Commission to a very strange place, which is, you know, let's be clear that every mail preparation change poses this fundamental question to a mailer, okay, this fundamental choice.

[00:19:21] Speaker 01:
Comply with the requirement and don't pay a higher price, right, or don't comply with the requirement and default to a higher price.

[00:19:28] Speaker 01:
So every mail preparation change presents that choice.

[00:19:31] Speaker 01:
Now the Commission has said, but not every mail preparation change, it's a rate change, oh, sorry.

[00:19:38] Speaker 01:
So, you know, you need a standard.

[00:19:41] Speaker 01:
The only additional fact here is that if you comply, you'll actually end up qualifying for a lower rate.

[00:19:49] Speaker 01:
So that's the only difference between this case and those cases.

[00:19:51] Speaker 01:
Those cases are if you comply, you stay where you are.

[00:19:55] Speaker 01:
In this case, it's if you comply, you actually qualify for a lower rate.

[00:19:59] Speaker 01:
And what the commission appears to be saying is that additional fact

[00:20:02] Speaker 01:
which they call the deletion, somehow makes it more likely that this ends up a price increase.

[00:20:07] Speaker 01:
I mean, it seems on its face if you had two rates, the standard one and the extra one you qualify for, and you get rid of the higher one, that's on its face a rate reduction.

[00:20:18] Speaker 01:
The only reason we're here is because we changed the mailing requirement.

[00:20:22] Speaker 01:
And that's back to the redefinition test.

[00:20:24] Speaker 01:
I mean, you cannot have a standard that has two different tests, the deletion and redefinition, where the outcome of the case depends on which one you apply first, right?

[00:20:33] Speaker 04:
Because if, let's say that... Well, it seems to me your more important point is that

[00:20:42] Speaker 04:
If this whole set of cases where the commission doesn't go through the exercise of determining, for example, is there an alternative, but allows the service to change the requirements, but another set of cases where it goes through the rigmarole just because the Postal Service has accompanied the change with a discount,

[00:21:12] Speaker 04:
underscores the significance of the question posed by the 2015 decision.

[00:21:19] Speaker 04:
What is your standard?

[00:21:21] Speaker 01:
That's exactly right, Your Honor.

[00:21:22] Speaker 01:
That's the problem is that that we can't have this case driven by the deletion prong because that doesn't we're still that we're here because the question is, was it a significant change to the mail preparation requirement?

[00:21:35] Speaker 01:
And on that and I have score

[00:21:37] Speaker 01:
They're both asking the wrong question, which is significant compared to what?

[00:21:40] Speaker 01:
It's compared to the price you would pay if you didn't comply.

[00:21:43] Speaker 01:
They don't ask that question.

[00:21:44] Speaker 01:
They just say, is it significant either in the abstract or compared to other malpreparation changes?

[00:21:49] Speaker 01:
But even more fundamentally, they don't leave us with any guidance on how you satisfy the test.

[00:21:54] Speaker 01:
They say there's a point on the spectrum where, they say that several times in the order, where a change moves from being minor to being significant.

[00:22:03] Speaker 01:
They spent five pages, and I point the court to J.A.

[00:22:06] Speaker 04:
5000.

[00:22:07] Speaker 04:
In fairness, for example, we have a de minimis doctrine, but it's not crystal clear where it kicks in.

[00:22:17] Speaker 04:
And so, I mean, suppose they were applying a de minimis doctrine.

[00:22:23] Speaker 04:
We couldn't fault them for being slight blurring at the line.

[00:22:27] Speaker 04:
But it's not having, to me at least, the problem is that they never pose the question significantly in relation to what.

[00:22:35] Speaker 01:
Yes.

[00:22:36] Speaker 04:
Is it a relative test and relative to what?

[00:22:40] Speaker 01:
And the question, the answer should be relative to the price you would pay if you didn't comply, right?

[00:22:44] Speaker 01:
That's the rationale.

[00:22:45] Speaker 01:
And they don't pose that question at all.

[00:22:46] Speaker 04:
You pose that.

[00:22:48] Speaker 04:
to them and they don't answer.

[00:22:49] Speaker 01:
That is correct.

[00:22:50] Speaker 01:
But even as to it's on its own terms, and I see my time's up if I may just finish this point, that even on its own terms, it's not just a question of being a little bit vague at the lines.

[00:23:00] Speaker 01:
If you look at page JA 531 to 35, that's where they describe what significance means.

[00:23:05] Speaker 01:
And I have literally no idea what they're talking about.

[00:23:08] Speaker 01:
That's a five page discussion.

[00:23:09] Speaker 01:
And all we know is it's factual.

[00:23:11] Speaker 01:
There's a point on the spectrum.

[00:23:12] Speaker 01:
We won't tell you what that point is.

[00:23:14] Speaker 01:
and that we are experts.

[00:23:16] Speaker 02:
Let me ask you something to make sure I understand your position.

[00:23:21] Speaker 02:
We said initially, if a discounted rate is deleted, this is the first opinion.

[00:23:26] Speaker 02:
If a discounted rate is deleted, forcing a mailer to pay a higher price for their piece of mail, that price increase is captured and counted toward the price cap.

[00:23:37] Speaker 01:
Do you agree with that?

[00:23:37] Speaker 01:
Absolutely agree with that.

[00:23:39] Speaker 01:
I mean, that is an example of a deleted rate causing somebody to have to pay more.

[00:23:43] Speaker 01:
This is not one of those cases.

[00:23:44] Speaker 01:
This is A, it's not a deletion, but even if it were, it doesn't tell you which direction you're going, right?

[00:23:49] Speaker 01:
That's what the significance test does.

[00:23:50] Speaker 06:
Your point is that if there's a deletion, it has created an opportunity for the mailer to pay a lower price.

[00:23:58] Speaker 01:
In this particular case?

[00:23:59] Speaker 01:
In this particular case.

[00:24:00] Speaker 01:
And that's about the alternative question.

[00:24:01] Speaker 06:
In this particular case.

[00:24:03] Speaker 02:
Right.

[00:24:03] Speaker 02:
And then, oh, sorry.

[00:24:04] Speaker 02:
That's Judge Williams' point about there's no consideration about the alternatives.

[00:24:08] Speaker 02:
Is that what you're saying?

[00:24:09] Speaker 02:
Well, in part, I mean- I'm trying to understand where you're going with this in light of the first case.

[00:24:14] Speaker 01:
If we delete a discount, which is what the court said, absolutely.

[00:24:18] Speaker 01:
If the effect of that is to force everybody to pay more, if we once had a sale price and we got rid of it, yes, we've deleted a rate and you pay more.

[00:24:26] Speaker 01:
In this case, again, putting aside the fact this isn't actually a deletion, if it's effectively a deletion, it doesn't tell you is the mail going to go down or up.

[00:24:35] Speaker 01:
And that's where the significance test reports to kick in.

[00:24:38] Speaker 01:
They say if it's a minor change, they're going to do it, and therefore, in this case, pay down.

[00:24:42] Speaker 01:
If not, if it's a significant change, they won't do it and will pay up.

[00:24:46] Speaker 01:
And that gets to the problem that they're not comparing, A, they're not asking the right question significant compared to what, and B, they are leaving us with no guidance.

[00:24:54] Speaker 01:
They say it's inherently factual, but don't actually examine the facts.

[00:24:58] Speaker 01:
They don't even look at the search.

[00:24:59] Speaker 06:
Those are two distinct problems.

[00:25:01] Speaker 06:
One, they don't give you a rubric, and two,

[00:25:04] Speaker 06:
to the extent that they're saying it's factual, they don't actually examine the facts of what people are paying to comply and that kind of thing.

[00:25:11] Speaker 06:
Do you have examples?

[00:25:15] Speaker 02:
We don't look at history.

[00:25:16] Speaker 02:
See, I'm not following your theory completely.

[00:25:18] Speaker 02:
I'm really not.

[00:25:20] Speaker 02:
And again, I know what the struggle was in the first case.

[00:25:24] Speaker 02:
And I'm not suggesting that the arguments that are being raised are insignificant.

[00:25:30] Speaker 02:
But I'm trying to figure out how you're squaring it with what we were saying.

[00:25:34] Speaker 02:
and where you're coming out in light of precedent, because we said something about deletion is legitimate in our view.

[00:25:43] Speaker 02:
And are you now saying, well, you didn't think it through, or are you saying, no, it's viable?

[00:25:48] Speaker 02:
And if so, how do you square it with this case?

[00:25:51] Speaker 01:
It is absolutely viable, Your Honor.

[00:25:52] Speaker 01:
What I'm saying, what you said about deletion is if you delete a discount, forcing mailers to pay more, that's a rate increase.

[00:25:58] Speaker 01:
We agree completely.

[00:26:00] Speaker 01:
In this case, A, there wasn't a deletion, but if there was, it's not getting rid of a discount, it's getting rid of, on its face, a higher of two automation rates.

[00:26:08] Speaker 01:
But the real question is, are mailers going to be forced down or forced up?

[00:26:12] Speaker 01:
And the answer to that question is this other test.

[00:26:14] Speaker 01:
We wouldn't be here if we didn't change the mail preparation requirement.

[00:26:17] Speaker 01:
If all we did was say, we don't have the top one anymore, you only have the lower one, well, that's not a space rate decrease because the mailers who were paying the top one moved down.

[00:26:25] Speaker 01:
It's the fact that we changed the requirement.

[00:26:27] Speaker 01:
That's why we're here.

[00:26:29] Speaker 01:
We don't think it's a significant change.

[00:26:30] Speaker 01:
But to your point about history, the only relevant history here is that 88 percent of the volume is already voluntarily using the full service barcode without even the prospect of paying more.

[00:26:41] Speaker 01:
They don't have to.

[00:26:42] Speaker 01:
They already do it.

[00:26:43] Speaker 01:
So that, I would think, is the most pertinent fact as to the question, is this the kind of thing mailers are equipped to do?

[00:26:49] Speaker 06:
They're doing it.

[00:26:50] Speaker 06:
So do you have examples in mind, and maybe this is a perilous exercise to invite you to engage in, but we are absolutely a court of precedent, and we are bound by the first opinion, and we take that on cheerfully.

[00:27:12] Speaker 06:
So then the question is what are the kinds of lines that the commission might draw that would give you workable guidance?

[00:27:23] Speaker 01:
We proposed one to the commission and I think that this was one that was very workable and I think would address the concerns that something that purports to be a rating or purports to be something else is actually a rate increase in disguise.

[00:27:35] Speaker 01:
And that was when we changed the product-defining features of a service.

[00:27:39] Speaker 01:
The three we gave were the size.

[00:27:43] Speaker 01:
If we suddenly said, in order to send a letter, something had to be less than 10 inches, and if it's not, it gets bumped up to being a flat.

[00:27:51] Speaker 01:
which is a more expensive product.

[00:27:54] Speaker 01:
If weight, we price according to weight, if we change the weights, the weight requirements, then I think that's one, and also minimum volume requirements.

[00:28:04] Speaker 01:
My example from before, that if, you know, it used to be that you had to send 500 pieces to get the bulk mail race and suddenly you made it 1,000 pieces, I think the commission would have a good reason to think, you know, you're not doing that to force a change in behavior.

[00:28:17] Speaker 01:
you're changing that to force them to actually pay a higher price.

[00:28:20] Speaker 01:
I mean, that's the bottom line, is our mail preparation requirements on their face have a sort of a different purpose than a rate change, right?

[00:28:27] Speaker 01:
I mean, sort of like a business can balance its budget in two ways.

[00:28:31] Speaker 01:
It can either raise revenue or essentially operate more efficiently, right?

[00:28:35] Speaker 01:
And on their face, rate increases do the former.

[00:28:38] Speaker 01:
You know, they raise revenue.

[00:28:39] Speaker 01:
The price cap deals with that.

[00:28:42] Speaker 01:
And that's the price cap restricts the amount we can do that, thus forcing us to be more efficient.

[00:28:46] Speaker 01:
Mail preparation changes on their face are designed to make us operate more efficiently.

[00:28:51] Speaker 01:
And the question is, are there ones where there's reason to believe this says it's a mail preparation change, but it's really a rating.

[00:28:58] Speaker 06:
I'm not really following that.

[00:29:00] Speaker 06:
I'm trying to conceptually generalize from the examples that you gave.

[00:29:04] Speaker 06:
And for example, in size of mail,

[00:29:08] Speaker 06:
I think the male size requirements have standardized, and I gather that that's mostly for automatic sorting, when you get square envelopes, it's harder when you get very tiny envelopes, it's hard.

[00:29:22] Speaker 06:
So the size requirement might be just like the barcode requirement here.

[00:29:26] Speaker 06:
I'm not sure how we can

[00:29:29] Speaker 06:
I don't know.

[00:29:30] Speaker 06:
I'm thinking again, so taking it up a level conceptually, how could, in a general way that would cover unforeseen circumstances, the Commission articulate the nature of that test?

[00:29:41] Speaker 06:
Yeah.

[00:29:42] Speaker 06:
Where I thought you were going had more to do with economics, frankly.

[00:29:46] Speaker 04:
How mailers respond, right?

[00:29:49] Speaker 04:
Or can they be expected to respond?

[00:29:50] Speaker 01:
We expect them.

[00:29:51] Speaker 02:
You're not supposed to inquire into that, no?

[00:29:54] Speaker 01:
Well, that comes up later in the analysis.

[00:29:56] Speaker 01:
This question is sort of a threshold question of is it a rate change, right?

[00:30:00] Speaker 01:
The stuff about mailers respond is they're computational rules.

[00:30:03] Speaker 02:
I have to think about it, and you can think about it on rebuttal.

[00:30:05] Speaker 02:
You're conflating the two parts of the test that suggest deletion is the first part,

[00:30:09] Speaker 02:
flowing into redefinition.

[00:30:11] Speaker 02:
That's never been my understanding, ever.

[00:30:14] Speaker 02:
And that's your whole argument, and you keep resisting the deletion saying, and then you want to get into, well, that's the initial, and then we look to see whether the, look under the redefinition, and now we're lost.

[00:30:27] Speaker 02:
I think they're distinct tests.

[00:30:29] Speaker 02:
Now, if there's certainly an argument you can make that the deletion test is wrong, I can understand the argument on the redefinition.

[00:30:36] Speaker 02:
I understood it initially, I understand it now.

[00:30:39] Speaker 02:
But on the deletion test, you're going a lot of different places, and I'm struggling to understand.

[00:30:44] Speaker 02:
Judge Williams posed, and you're not biting on it.

[00:30:48] Speaker 02:
At the very beginning, is there an alternative?

[00:30:51] Speaker 02:
Is the beginning end for him, as I understand it?

[00:30:53] Speaker 02:
That's not the way your argument has been flowing.

[00:30:56] Speaker 02:
And you're trying to conflate the two to make it a single test.

[00:31:00] Speaker 02:
That has never been the inquiry, as I understood it, ever.

[00:31:05] Speaker 01:
If I'm completing the test, I'm actually trying to point out that if you have a test with two distinct problems and they point to opposite directions, if they point in opposite directions, you have a problem.

[00:31:16] Speaker 02:
Well, let's start out by saying, let's assume that the second one, redefinition, makes no sense on any terms.

[00:31:22] Speaker 02:
And so let's talk about deletion.

[00:31:24] Speaker 02:
You kept wanting to go back and put the two together.

[00:31:27] Speaker 02:
Judge Williams gives you one option.

[00:31:29] Speaker 02:
You don't play with that one.

[00:31:32] Speaker 02:
I'm not, you can do it on rebuttal, we hear what the commission says, but I'm not understanding.

[00:31:37] Speaker 01:
Yeah, and just to quickly to point that I didn't mean to battle Judge Williams.

[00:31:43] Speaker 02:
No, you weren't battling him.

[00:31:44] Speaker 02:
You just were not, you were not embracing what he was suggesting as kind of a straightforward

[00:31:48] Speaker 01:
I guess the bottom line is, if there's a deletion, it still doesn't answer the question, where does the volume go?

[00:31:53] Speaker 01:
Right.

[00:31:53] Speaker 01:
Right.

[00:31:54] Speaker 01:
And you can't, that's right.

[00:31:55] Speaker 01:
And in this case, it could go up, it could go down, and the answer to that question depends on the redefinition test.

[00:32:01] Speaker 01:
That's the point.

[00:32:01] Speaker 01:
If it's a minor change, they assume it goes down.

[00:32:04] Speaker 01:
No, in this case, that's what I'm saying.

[00:32:05] Speaker 04:
Whether it depends on it or not, you have under the regulation, the commission has to answer the question, is there an alternative?

[00:32:13] Speaker 04:
And it has to answer the question, what that alternative is.

[00:32:18] Speaker 01:
Well, I think I've used the time in court's time.

[00:32:24] Speaker 01:
If you don't have any questions, I would love for additional rebuttal time, but it's obviously your decision.

[00:32:28] Speaker 06:
We will give you additional time.

[00:32:32] Speaker 04:
Not to mention the fund of our term receipt.

[00:32:38] Speaker 03:
I'd like to start by clarifying the way the calculation in 301023 works.

[00:32:49] Speaker 03:
That calculation was adopted at the inception of the commission.

[00:32:53] Speaker 03:
it with the support of the postal service, and it was previously upheld, and that calculation answers the question of where the mail volume goes.

[00:33:03] Speaker 04:
We're talking about 23D4?

[00:33:05] Speaker 04:
Well, the actual equation with the sigma sign is in C, but... That's all once you have a deletion with an alternative, right?

[00:33:18] Speaker 03:
Certainly.

[00:33:19] Speaker 04:
In fact, you know, for some reason,

[00:33:23] Speaker 04:
where the mailers are going.

[00:33:27] Speaker 06:
In other words, that's calculating the amount of the rate change for application of the cap, but it isn't speaking to the antecedent question of whether there's a rate change subject to the cap.

[00:33:37] Speaker 06:
You're just assuming that basically everything's a rate change, and that's where we're struggling.

[00:33:43] Speaker 06:
We're trying to figure out, well, no, some things aren't, and some things are, and what's the determinant there?

[00:33:49] Speaker 03:
Yes, so I think looking at the calculation which the court already upheld does answer this question.

[00:33:55] Speaker 03:
What we're doing is we're saying how much is it going to cost next year to send last year's mail, right?

[00:34:02] Speaker 03:
So we take... Be careful about that.

[00:34:05] Speaker 04:
It seems to me that the 2015 decision is clear that what we're talking about

[00:34:13] Speaker 04:
is the mailers pay more to the Postal Service.

[00:34:18] Speaker 04:
We're not talking about some sort of abstract, well that's not abstract, but some incurrence of expense that isn't going to the Postal Service.

[00:34:31] Speaker 03:
That's right.

[00:34:32] Speaker 03:
So I'm not talking about expenses that don't go to the Postal Service.

[00:34:35] Speaker 03:
What I'm talking about is the charge, but the Postal Service is going to charge for the exact same mail

[00:34:41] Speaker 03:
in the next year.

[00:34:43] Speaker 06:
But that exact same, see, that's what I'm objecting to.

[00:34:46] Speaker 06:
That cannot be the threshold definition of whether there is a rate change.

[00:34:54] Speaker 06:
Because then what you're taking is you're taking the historical volume test, which is a tool for determining the amount of the rate change, once you know you have a rate change, and determining whether it complies with the rate cap.

[00:35:08] Speaker 06:
And you're using that

[00:35:10] Speaker 06:
as a way for deciding whether there is a rate change in the first place.

[00:35:16] Speaker 06:
And I think that's mixing apples and oranges and actually contrary to the act and ossifying postal service practice.

[00:35:23] Speaker 06:
So, I mean, there are hints in the record that that's what the commission's doing, but I'm not sure that it provides a legal answer to the question before us, which is whether there's a rate change.

[00:35:34] Speaker 03:
So there's a rate change, the threshold question,

[00:35:38] Speaker 03:
which is a question of remand, is there a rate change is answered by whenever there's a rate that's deleted, whenever something is deleted is no longer available and no one can ever use that rate, there's a rate change and we have to... Well, well, well, careful, careful, because under certain circumstances, it's very clear from the regs that if there's a service deleted,

[00:36:05] Speaker 04:
and there's no alternative, all you do is zero out that cell.

[00:36:11] Speaker 03:
That's right.

[00:36:12] Speaker 04:
So you have to answer the question, if you're relying on the lesion, why is it that we don't follow that model?

[00:36:21] Speaker 03:
Because if the same piece of mail with the basic barcode came in this year, we would still send that mail, we would just charge more.

[00:36:32] Speaker 03:
So the same piece of mail, when we look at how much it's going to cost next year to send last year's mail, that same piece of mail comes in, it gets charged more.

[00:36:43] Speaker 04:
It may be... Does that make sense?

[00:36:46] Speaker 04:
Does it make any economic sense to have that as the...

[00:36:49] Speaker 04:
concept of whether there is or is not an alternative.

[00:36:53] Speaker 03:
So this use of historical volume was already upheld by the court.

[00:36:57] Speaker 04:
It was adopted by the commission at its inception at the recommendation of the Postal Service because this is... Aren't you talking about cases where it's perfectly clear that the removal of A leads everyone to B, right?

[00:37:17] Speaker 03:
No, we're not talking about what people will do.

[00:37:22] Speaker 03:
We are not making any predictions.

[00:37:25] Speaker 03:
We considered making predictions and what we decided, what the commission decided at its inception, at the recommendation of the Postal Services, it would not make predictions.

[00:37:37] Speaker 03:
Those are complex and controversial and Congress gave us 45 days to do this.

[00:37:41] Speaker 03:
We cannot predict mailer behavior in that time.

[00:37:44] Speaker 03:
So what we're doing is taking that same piece of mail.

[00:37:47] Speaker 03:
Would we still send that piece of mail?

[00:37:50] Speaker 03:
Here, the answer is yes.

[00:37:52] Speaker 03:
We would still take that piece of mail with the barcode, but we would charge the non-automated, the commission would charge the non-automated rate.

[00:37:59] Speaker 03:
Sorry, the postal service would charge the non-automated rate.

[00:38:02] Speaker 03:
So the rate would be increased.

[00:38:05] Speaker 03:
So this is not a calculation.

[00:38:07] Speaker 03:
that looks at what anybody is going to do in response to incentives.

[00:38:12] Speaker 03:
That might be a good way to calculate rate change, but it's also a good way to calculate rate change to say how much is it going to cost next year to send the same mail that was sent last year.

[00:38:27] Speaker 04:
It seems to me you're talking about a form of this lovely equation at the top of where it must be part of C. That's all fine, it seems to me, where you're simply applying it to

[00:38:48] Speaker 04:
We have a hundred types of mail, and the type of mail in type seven, the price of that goes up, okay?

[00:38:57] Speaker 04:
So we run that through the equation, fine.

[00:39:01] Speaker 04:
That shows whether or not the postal service is exceeding the rate cap.

[00:39:07] Speaker 04:
And I can certainly see how, in that instance, a simple change in price of a simple service

[00:39:18] Speaker 04:
it would be burdensome for the Commission in every such case to go through the economic analysis.

[00:39:26] Speaker 04:
But here you have the interior question of whether it is at all a rate change.

[00:39:33] Speaker 04:
That involves a whole bunch of other things which you have never explained.

[00:39:39] Speaker 03:
No, Your Honor.

[00:39:40] Speaker 03:
What we're looking at, I'd like to answer that both in terms of the calculation and in terms of

[00:39:46] Speaker 03:
the reallocation and how that's determined.

[00:39:50] Speaker 03:
So starting with the calculation, what we do is we take the number of pieces of mail times the price for that mail.

[00:39:58] Speaker 03:
We're not going to use prices in that calculation for next year that no mail will use.

[00:40:03] Speaker 03:
And that's the situation with the basic barcode rate.

[00:40:06] Speaker 03:
No mail is going to use that rate.

[00:40:09] Speaker 03:
So when we multiply number of basic barcode pieces

[00:40:12] Speaker 03:
times the price, we're not gonna use that price, it's been deleted.

[00:40:15] Speaker 03:
So that tells us, the answer to the question on remand, is there a rate effect here?

[00:40:20] Speaker 03:
The answer is yes, we can't use that rate, no mail will go by that rate, it's deleted.

[00:40:26] Speaker 03:
So now the question of where the mail goes.

[00:40:29] Speaker 04:
Have you distinguished that from these cases, for example, of different bundling requirements?

[00:40:36] Speaker 04:
Certainly, so.

[00:40:39] Speaker 04:
What is the distinction?

[00:40:40] Speaker 04:
Yep.

[00:40:42] Speaker 03:
Now, I need to be really, really clear about that.

[00:40:46] Speaker 03:
Significance does not determine whether the rate goes up or down.

[00:40:50] Speaker 03:
We're only in the significance world if we have a redefinition of the rate cell.

[00:40:56] Speaker 03:
So if we had one rate cell for barcodes,

[00:40:59] Speaker 03:
And last year you had to use basic barcodes, and next year you have to use full-service intelligent mail barcodes.

[00:41:05] Speaker 03:
Then we're talking about redefinition.

[00:41:07] Speaker 03:
There were bundling requirements before.

[00:41:09] Speaker 03:
We say you have to bundle differently.

[00:41:11] Speaker 03:
That would be the redefinition world.

[00:41:14] Speaker 02:
There's no argument that there was simple barcode more than simple barcode before.

[00:41:21] Speaker 02:
Simple is now gone.

[00:41:23] Speaker 02:
you can keep using it, you're just going to pay more.

[00:41:25] Speaker 02:
That's your argument.

[00:41:26] Speaker 03:
Exactly.

[00:41:27] Speaker 03:
So the way this calculation works, not making any predictions about mailer behavior because those are complex, as the commission said back in 72 FedReg, they're complicated, they're complex, they're controversial.

[00:41:41] Speaker 03:
We can't get them done in the 45 days Congress gave us.

[00:41:45] Speaker 03:
So I see you both on that.

[00:41:46] Speaker 06:
So instead you're using the historical Valhalla rule, which is

[00:41:52] Speaker 06:
rushing right past the threshold question of whether there is even a rate change.

[00:41:57] Speaker 06:
And because you're running a historical volume rule to say, oh, look, there's a rate change because everyone who is using the simple barcode, if they make no change in their behavior, is going to have to use

[00:42:09] Speaker 06:
some much more expensive rate, then that's a rate change.

[00:42:12] Speaker 06:
Whereas it seems like the question is, if you buy USPS's way of framing, they say, no, there's no deletion.

[00:42:19] Speaker 06:
In fact, there's no rate change.

[00:42:21] Speaker 06:
We're just slightly changing the qualifications for each discount.

[00:42:26] Speaker 06:
And we're going to keep that sell.

[00:42:28] Speaker 06:
And then smart mailers are going to say, not just 88% of them, but 100% of them are going to say, we want that.

[00:42:33] Speaker 06:
Lowest discount because we're already doing what we need to qualify for it and to the extent that there's a rate change It's a drop and so if you want to count it toward the cap fine But it's not going to use up any more of the of the available volume of the cap So I'm not sure this is going to completely if you're going to think this is responsive and please stop me if I'm going the wrong way but what we're looking at when we

[00:42:58] Speaker 03:
when we answer the antecedent question of whether there's a rate effect.

[00:43:03] Speaker 03:
That's not answering the question whether that rate went up or down.

[00:43:06] Speaker 03:
That's determined by the calculation.

[00:43:08] Speaker 03:
So there's a rate effect when there's a rate that is gone.

[00:43:12] Speaker 03:
So we're not taking into account what people do in response because we can't do that in 45 days.

[00:43:19] Speaker 06:
I think what the Postal Service, and they'll have a chance to put it in their own words, but I think their point is every single change

[00:43:28] Speaker 06:
every single change, no matter how minute, is going to be subject to that same analysis.

[00:43:35] Speaker 06:
So if we say you have to seal the envelopes, you have to seal them with water-soluble glue rather than some other kind of glue, you know, because it's going to cause that, in the past, the commission has said, not a rate change, not a rate change, not a rate change, then suddenly it becomes a rate change.

[00:43:52] Speaker 06:
And how, I mean, conceptually,

[00:43:55] Speaker 06:
I understand your point, but how do you distinguish?

[00:43:59] Speaker 06:
I mean, that's the basic question on remand from the first opinion, which conceptually is totally clear.

[00:44:05] Speaker 06:
But then when the commission says, OK, we're going to give you a rule, it seems like a non-rule.

[00:44:11] Speaker 06:
Where do we look?

[00:44:12] Speaker 06:
to tell significance?

[00:44:15] Speaker 03:
So I am happy to talk about significance, but significance only matters under the redefinition prong.

[00:44:21] Speaker 03:
When we're multiplying the rate, the number of pieces and the rate last year and comparing it to the number of pieces and the rate next year, if there is no rate for next year, if that rate is not going to be used, we don't compare those things.

[00:44:36] Speaker 03:
So it's a very, we know people make changes in response to incentives, but it's still a reasonable way to calculate the change of rates to say how much is it going to cost to send the same thing next year.

[00:44:48] Speaker 04:
So the consumer... Can I just go back?

[00:44:50] Speaker 04:
Is there anything in the process by which the Commission has arrived at its view that there should be no consideration of historical volume that indicates the Commission

[00:45:04] Speaker 04:
was purporting to address, for example, the scope of the no-alternative provision in 23D-4 or the basic question, is there a rate change at all?

[00:45:23] Speaker 04:
Is it something in the – you know, commissions give explanations of how they've arrived at a decision.

[00:45:30] Speaker 04:
Is there anything in that decision

[00:45:34] Speaker 04:
in the explanation of your insistence on looking only at historical numbers, indicating that it addressed, in any way, this sort of issue.

[00:45:46] Speaker 03:
So the historical numbers, this goes back to the inception of the commission, and it was upheld last time.

[00:45:52] Speaker 03:
So in 72, Fed read.

[00:45:54] Speaker 04:
I have no problem with historical numbers.

[00:45:56] Speaker 04:
The question is the scope of the application of historical numbers.

[00:46:02] Speaker 04:
And whether there was any consideration by the commission of what its scope should be.

[00:46:08] Speaker 03:
So going back to this first rate making, what the commission said- Which is the first?

[00:46:16] Speaker 03:
I said rate making.

[00:46:17] Speaker 03:
What I meant is rule making where the commission set out this test to begin with.

[00:46:23] Speaker 03:
In 72 Fed Rec, it says it's adopting the Postal Services Proposal, that it mapped the historical volumes to the Notice of Price schedule.

[00:46:32] Speaker 03:
The Postal Services Proposal is cited in our brief at page five, those June 18, 2017 comments, and that goes through page five to nine of the Postal Services Proposal, exactly how it's going to handle this.

[00:46:47] Speaker 03:
And it talks about, for example, if all shapes of packages used to be treated the same,

[00:46:56] Speaker 03:
And now we're going to have different rates for different shapes of packages.

[00:46:59] Speaker 03:
It may very well be that people would choose to use the cheaper shapes of packages.

[00:47:04] Speaker 03:
But the Postal Service says, we can't get into these predictions about what people would do in response to incentives.

[00:47:11] Speaker 03:
Those are useful for other things, but not for the rate change calculation.

[00:47:16] Speaker 03:
For the rate change calculation, we should take the same things that were sent last year

[00:47:21] Speaker 03:
and see how much the charge is going to be for those things next year.

[00:47:37] Speaker 03:
appendix, but our brief on page 5 links to the URL.

[00:47:43] Speaker 03:
We didn't think that this was part of the case on remand because the court has already upheld.

[00:47:48] Speaker 03:
It said it found no merit in the challenge to the historical volume and rule analysis in this case.

[00:47:54] Speaker 04:
But it didn't address the question of the scope of how it's used.

[00:47:58] Speaker 03:
Well, it said in this case, right, in this case, if there is no basic barcode rate, that mail has to go at the higher rate that is used for non-automated mail.

[00:48:14] Speaker 03:
So that's the rate that we use when we say how much is it going to cost to take the exact same mail

[00:48:19] Speaker 03:
last year and it was sent last year and send it this year.

[00:48:24] Speaker 03:
The consumer price index, when it looks at the change in the basket of goods, we know if apples go way up, some people will buy oranges, but the consumer price index just looks at the price of apples last year and this year.

[00:48:35] Speaker 03:
We're doing the same thing.

[00:48:36] Speaker 03:
This is a perfectly reasonable way to calculate a change in rates.

[00:48:41] Speaker 03:
How much does it cost?

[00:48:42] Speaker 06:
I mean, we keep just being in the same loop, but that's calculating

[00:48:46] Speaker 06:
the amount of the rate change, not the initial question of is this a rate change such that it is something that needs to be subjected to that analysis.

[00:49:02] Speaker 06:
And if that analysis is used to determine the historical volume test, is used to determine whether there's a rate change in the first place,

[00:49:14] Speaker 06:
there will always be a rate change.

[00:49:17] Speaker 06:
Every single preparation, every single service change, except services for which there is no alternative, but everything else which causes people who are using one service to using another, all of those are gonna be rate changes.

[00:49:35] Speaker 06:
And I didn't take that to be conceptually the commission's position, although it seems to be panning out that way.

[00:49:42] Speaker 03:
No, that's certainly not what I'm trying to say.

[00:49:45] Speaker 03:
Whenever there is a deletion, there is a rate change.

[00:49:48] Speaker 03:
So if something was worth putting in the mail classification schedule to begin with and you get rid of it, that is a rate change.

[00:49:55] Speaker 04:
That has a rate effect.

[00:49:57] Speaker 04:
Excuse me.

[00:49:57] Speaker 04:
There's a rate change which under some circumstances results in the

[00:50:05] Speaker 04:
income for the Postal Service under that rate being simply deleted altogether, and then there are some for which a different treatment applies.

[00:50:16] Speaker 04:
And I, at least, am interested in finding out how the Commission decides which is which.

[00:50:23] Speaker 04:
Which principle applies.

[00:50:24] Speaker 03:
And I think we're skipping over my answer because it's so straightforward.

[00:50:28] Speaker 03:
If the same piece of mail coming into the system could be sent, we just look at what the price, the commission looks at the price that it would go by.

[00:50:39] Speaker 03:
So an example.

[00:50:40] Speaker 04:
So suppose the situation is such that every mailer with his or her head screwed on

[00:50:48] Speaker 04:
always makes a tiny change to move into a different category that is actually cheaper, even though if the mailer persisted in the old conduct, it would bump up three cents apiece.

[00:51:06] Speaker 04:
Do you still apply that?

[00:51:08] Speaker 04:
And what is it that shows that the Commission has focused on that question?

[00:51:16] Speaker 03:
Going back to when we first put this rule into place, and we also reconsidered it at 78, what the Commission said is that

[00:51:26] Speaker 03:
These predictions of what mailers are going to do are complex.

[00:51:32] Speaker 03:
We have bad experiences with them.

[00:51:34] Speaker 03:
The commission's predecessor used to use these kinds of predictions, and it took expert testimony.

[00:51:41] Speaker 03:
It was this very long process.

[00:51:42] Speaker 03:
They can't get it done in 45 days.

[00:51:45] Speaker 03:
They need a simple, objective, straightforward test.

[00:51:49] Speaker 03:
And the test is, how much is it going to cost to send the same mail next year?

[00:51:54] Speaker 03:
We're not going to make predictions about how users are going to respond to incentives.

[00:51:59] Speaker 03:
I do want to answer the question of whether every single change then is a rate change, because the answer to that is no.

[00:52:07] Speaker 03:
There's a deletion.

[00:52:09] Speaker 03:
When there's a deletion, it's always a rate change.

[00:52:12] Speaker 03:
But if the cell continues along and the... That's true, only in the sense that

[00:52:17] Speaker 04:
If there's no alternative, we zero out the revenue received by the Postal Service.

[00:52:23] Speaker 03:
So if there's a deletion, there's always an effect on the rate change calculation would be a cleaner way of saying what I just said.

[00:52:29] Speaker 03:
I'm sorry.

[00:52:30] Speaker 03:
If there's a change to the cell, and the classic example are the carrier route, you have to bundle your mail by carrier route.

[00:52:38] Speaker 03:
If there's a change to something like that, but the cell continues, then we're looking at whether that's a significant change.

[00:52:47] Speaker 03:
But, and with significance what we care about is if it's such a big difference, it's actually a different product.

[00:52:53] Speaker 03:
But if something is deleted, it always does affect.

[00:52:57] Speaker 03:
So a lot of these little changes we're talking about are changes

[00:53:02] Speaker 03:
to male cells that continue.

[00:53:05] Speaker 03:
So then we're in the redefinition world, but that's not where we are in this case.

[00:53:09] Speaker 03:
Here, there is a cell that cannot be used, that has been deleted.

[00:53:15] Speaker 03:
No mail is going by that price, so we're not going to use that price when we figure out how much it's going to cost to send last year's mail next year.

[00:53:26] Speaker 04:
Faithfully applying 23D4 means that when there is a deletion, there's always a recalculation of how the rate cap fits what the Postal Service is doing.

[00:53:40] Speaker 04:
But it's a completely different calculation depending on whether there is or is not an alternative.

[00:53:47] Speaker 04:
And so it's not clear to me why there's any justification for the commission not giving us a theory as to when there is and is not an alternative.

[00:54:00] Speaker 06:
Well, and what the alternative is, there are actually two levels, I think, to Judge Williams' question.

[00:54:06] Speaker 06:
One is, is there an alternative at all?

[00:54:10] Speaker 06:
And the other is,

[00:54:12] Speaker 06:
And I think I hear your answer to the second, which is where a lot of your case rests.

[00:54:16] Speaker 06:
The other is, which alternative is it?

[00:54:20] Speaker 06:
And you're saying, by saying deletion is what we have here, then you're saying, then we're in the realm of the historical volume rule.

[00:54:30] Speaker 06:
And then you just say, nobody's changing anything at all.

[00:54:34] Speaker 06:
And we're going to, therefore, in this case, the higher rate, not being eligible for the discount, which is what pushes me back to every, what's the word?

[00:54:48] Speaker 06:
If it's not a deletion case, it's a redefinition case.

[00:54:53] Speaker 06:
Every redefinition case can be seen as a deletion case, and every deletion case can be seen as a redefinition case.

[00:55:01] Speaker 06:
I'm not sure what the cell deletion

[00:55:06] Speaker 03:
So we're doing this really goes back to the calculation, right?

[00:55:12] Speaker 03:
We want to know how much it's going to cost to send last year's mail next year.

[00:55:17] Speaker 03:
When we multiply the number of pieces of mail times the rate, that's a rate that won't be used.

[00:55:22] Speaker 03:
We have to move that mail.

[00:55:24] Speaker 03:
And then the historical volume rule tells us where we move that mail.

[00:55:27] Speaker 03:
We assume it's the same mail.

[00:55:29] Speaker 03:
It goes someplace else.

[00:55:30] Speaker 03:
If the criteria for meeting the cell have changed, if we're in the redefinition world, we don't necessarily have to move the mail because the rate is still there, the product is still there.

[00:55:40] Speaker 03:
Then we're in the significance world.

[00:55:42] Speaker 03:
But if the rate is not there, we have to move the mail.

[00:55:46] Speaker 04:
Now, how we move the mail... There are three places, right?

[00:55:51] Speaker 04:
There are a minimum of three places.

[00:55:53] Speaker 03:
Well, one place is gone, right?

[00:55:55] Speaker 04:
The basic mark of a place is gone.

[00:55:59] Speaker 03:
Right.

[00:56:00] Speaker 03:
And so what we did at the recommendation of the Postal Service, and I do recommend that this was not addressed now because it has been so thoroughly addressed in the past.

[00:56:11] Speaker 03:
And if you look at the

[00:56:13] Speaker 03:
Postal services comments, which we said on page five of our brief, goes through for five pages how this calculation would work.

[00:56:23] Speaker 03:
If that same piece of mail can be sent next year, we just look at what we would charge for that piece of mail.

[00:56:29] Speaker 03:
If that piece of mail can't be sent, if there were a rate for sending live scorpions last year, the post office says no more live scorpions, then we zero it out.

[00:56:38] Speaker 03:
Cash on delivery, home delivery.

[00:56:41] Speaker 03:
if there's no more home delivery.

[00:56:45] Speaker 02:
I don't know whether it's this straightforward.

[00:56:49] Speaker 02:
Basic barcode, go ahead, keep using it.

[00:56:52] Speaker 02:
But the cell you used to be in doesn't exist anymore, so you're in the higher cell, period.

[00:56:57] Speaker 02:
Exactly.

[00:56:58] Speaker 02:
That's your straightforward case.

[00:56:59] Speaker 06:
That's your straightforward case.

[00:57:01] Speaker 06:
And then the question is, okay, here

[00:57:04] Speaker 06:
We, you know, postal service says, no, no, we haven't, we don't have a deletion.

[00:57:08] Speaker 06:
We still have that cell.

[00:57:09] Speaker 06:
We're just slightly tweaking the preparation requirements.

[00:57:13] Speaker 06:
Lick your envelopes.

[00:57:13] Speaker 06:
You still have the exact same rate.

[00:57:15] Speaker 06:
It's a, it's a point, what was it, a .3 or .2 cent discount.

[00:57:22] Speaker 06:
Hey, by the way, since you're doing that mail preparation,

[00:57:25] Speaker 06:
that slight tweak, you're also eligible for a 0.23 discount.

[00:57:29] Speaker 06:
Take a pick.

[00:57:30] Speaker 06:
Nothing's deleted.

[00:57:31] Speaker 06:
And then you're the reason this case is back to us on a significance of the change is, is that significant, that change?

[00:57:40] Speaker 02:
So.

[00:57:40] Speaker 02:
Well, see, I'm really missing the facts.

[00:57:41] Speaker 02:
My, my, and I'll have to hear the other side, too.

[00:57:44] Speaker 02:
My understanding was, which you keep trying to argue, you don't get into any of these significant, it's use the basic barcode.

[00:57:51] Speaker 02:
That's fine.

[00:57:52] Speaker 02:
Yeah, there was a sell.

[00:57:55] Speaker 02:
That cell is gone now.

[00:57:56] Speaker 02:
So the rate undergirding that is gone.

[00:57:59] Speaker 02:
So if you keep using your basic barcode, you're going to be charged more.

[00:58:03] Speaker 02:
Is that right?

[00:58:03] Speaker 02:
Is that your argument?

[00:58:04] Speaker 03:
That's exactly right.

[00:58:05] Speaker 03:
So that rate, that barcode rate is gone.

[00:58:08] Speaker 02:
There's no preparation.

[00:58:10] Speaker 02:
Maybe this is too simplistic and maybe I have a record wrong.

[00:58:13] Speaker 02:
There's no preparation inquiries.

[00:58:15] Speaker 02:
There's nothing.

[00:58:15] Speaker 02:
Keep using your basic barcode.

[00:58:18] Speaker 02:
You're just going to be charged more because that other cell is gone.

[00:58:21] Speaker 03:
Exactly.

[00:58:22] Speaker 03:
It really is just that simple for deletion.

[00:58:26] Speaker 03:
The redefinition test, the reason we're looking at significance there is to figure out if this is actually a different product.

[00:58:32] Speaker 03:
No, no, no.

[00:58:33] Speaker 03:
That's a horrible test.

[00:58:35] Speaker 04:
Did this happen in the initial introduction of... We have in the record references to the initial introduction of barcodes, and this wasn't applied at all, right?

[00:58:49] Speaker 03:
The initial introduction of barcodes?

[00:58:52] Speaker 03:
Maybe Your Honor is talking about when the barcoding format changed.

[00:58:58] Speaker 03:
So there was a change to the barcoding format at some point.

[00:59:06] Speaker 03:
So that barcode cell still existed, and there was a change to the barcode format.

[00:59:11] Speaker 03:
And that would have been in the redefinition world, but that wasn't a big enough change to make it actually a different product.

[00:59:19] Speaker 03:
This barcode change is much, much bigger.

[00:59:22] Speaker 03:
We don't need to think about that at all, but I do want to make clear.

[00:59:28] Speaker 03:
Yeah, so it's bigger in that it's really a different product.

[00:59:34] Speaker 03:
To use it, you have to keep track of every single piece of mail, know every tray it's in, have a barcode on the tray that tells you every piece of mail in the tray, have a barcode in the container that tells you every piece of mail in the container.

[00:59:47] Speaker 03:
You're having to buy new software, retrain your employees, change your operations, get new equipment.

[00:59:53] Speaker 03:
This is a really big change.

[00:59:54] Speaker 03:
It's a different product.

[00:59:57] Speaker 03:
Of course, we don't need to go to that at all because our barcode rate is gone, right?

[01:00:02] Speaker 03:
So when we're figuring out how much it's going to cost in last year's mail next year, that rate is gone.

[01:00:07] Speaker 03:
We go to the higher price.

[01:00:08] Speaker 03:
If you are thinking about this in terms of how significant the change is, I do want to make clear this is an incredibly significant change.

[01:00:16] Speaker 03:
This test, if we're in the redefinition world, in the case where there's just one barcode rate that continues, what we're talking about

[01:00:26] Speaker 03:
What the test is designed to get is situations where the nature of the cell has really changed.

[01:00:32] Speaker 03:
Large scale system changes and we can tell those if you were using a service and to continue using the service you have to spend a lot of money and totally change the way you do business.

[01:00:43] Speaker 03:
It's probably not the same service and the redefinition test is only for those really big changes.

[01:00:51] Speaker 04:
firmly believes that if compliance with the new criteria will cost, let's say, an extra – for each piece will require a tenth of a cent.

[01:01:09] Speaker 04:
And because there are a lot of mailers, it will cost $20 million a year across the economy.

[01:01:19] Speaker 04:
you get a Sint discount by complying, no, the mailers will pick-headedly go ahead and get the pricey, no barcoded at all product.

[01:01:37] Speaker 03:
So we're not making a prediction about what people will do because we don't know what people will do.

[01:01:41] Speaker 04:
But you're acting as if.

[01:01:43] Speaker 03:
What we're doing is comparing the price of the same mail next year.

[01:01:47] Speaker 03:
And this was, remember, the alternatives, controversial and complex.

[01:01:52] Speaker 03:
We can't get them done in the 45 days Congress gave them.

[01:01:54] Speaker 03:
That's why the Postal Service recommended and the mailer community

[01:01:59] Speaker 03:
even vast majority supported this change that looks only at the same pieces of mail.

[01:02:07] Speaker 06:
But maybe they supported it.

[01:02:09] Speaker 06:
I mean, I know the Postal Service supported it with exceptions, and the barcode rule was one of the exceptions that they cited, I believe.

[01:02:17] Speaker 06:
And the problem is, I'm just going, zooming way out and looking at this in terms of what the act

[01:02:25] Speaker 06:
was trying to accomplish, and what this provision about the monopoly products, market-dominant products is trying to accomplish.

[01:02:34] Speaker 06:
We want innovation, right?

[01:02:36] Speaker 06:
But we don't want the postal service taking advantage of its market-dominant role.

[01:02:41] Speaker 06:
The test, as you describe it, it seems to me that immediately the deletion

[01:02:51] Speaker 06:
inquiry swallows the redefinition inquiry because every redefinition is the deletion of one and substitution of a new one.

[01:02:58] Speaker 03:
I believe so.

[01:02:59] Speaker 03:
Then why isn't this just a redefinition case?

[01:03:02] Speaker 03:
Because there's a rate that's gone.

[01:03:04] Speaker 03:
No, it's still there.

[01:03:06] Speaker 03:
No mail can go by that rate.

[01:03:07] Speaker 06:
It's still there.

[01:03:08] Speaker 06:
I saw it in the appendix.

[01:03:10] Speaker 03:
It's still there.

[01:03:11] Speaker 03:
So no mail can go by the rate, and so the commission says if no mail can go by a rate, it's gone.

[01:03:17] Speaker 06:
No, it's still there.

[01:03:18] Speaker 06:
There's just a slight tweak to the preparation, but the rate is still there.

[01:03:21] Speaker 02:
We'll get to the other side.

[01:03:22] Speaker 02:
This is where there's real confusion.

[01:03:24] Speaker 02:
My understanding was it doesn't matter what you write on the page, there is no such rate.

[01:03:28] Speaker 03:
Exactly.

[01:03:29] Speaker 02:
And I haven't, I thought the other side conceded that in their briefing, that you send it basic, you are not, there is no such rate.

[01:03:37] Speaker 03:
no piece of mail is paying that basic barcoding rate under the commission's proposal.

[01:03:41] Speaker 02:
The fact that it's on a piece of paper doesn't mean it's a real rate.

[01:03:44] Speaker 02:
The rate is gone.

[01:03:45] Speaker 02:
That's your argument.

[01:03:46] Speaker 02:
Yes.

[01:03:47] Speaker 02:
That was my understanding.

[01:03:48] Speaker 02:
Yes.

[01:03:48] Speaker 03:
And that's a really important point.

[01:03:50] Speaker 03:
No piece of mail will ever pay the basic barcoding rate.

[01:03:53] Speaker 03:
There's no such thing.

[01:03:54] Speaker 03:
There's no such thing.

[01:03:55] Speaker 03:
I thought there was.

[01:03:57] Speaker 06:
I thought there was.

[01:03:57] Speaker 06:
And they've just changed the mail preparation requirements.

[01:04:00] Speaker 03:
So this is so critical, Your Honor.

[01:04:02] Speaker 06:
To appoint them to the mail preparation requirements for the

[01:04:09] Speaker 06:
for the intelligent full service.

[01:04:11] Speaker 03:
So, no.

[01:04:13] Speaker 03:
If a piece of mail comes in with the intelligent full service barcode, it's not going to pay the basic barcode rate.

[01:04:19] Speaker 03:
It'll pay the intelligent full service barcode rate, which is lower.

[01:04:22] Speaker 03:
If a piece of mail comes in with the basic barcode, it will not pay the basic barcode rate because nothing's going to pay the higher rate.

[01:04:28] Speaker 03:
Nothing is paid.

[01:04:29] Speaker 06:
But what about my larger point, which is,

[01:04:33] Speaker 06:
that by having the historical volume rule, which I took to be

[01:04:41] Speaker 06:
have a much more discreet task about once you know that there's a change, we're gonna calculate the nature of the change.

[01:04:46] Speaker 06:
By having that sort of creep into the question of whether there's a rate change in the first place, you're creating a very ossified system.

[01:04:55] Speaker 06:
You're basically saying, you're giving the, even though in the real world, the whole point and the very likely outcome is that a lot of services are gonna become more efficient and a lot of mailers are gonna do things more

[01:05:10] Speaker 06:
you know, at the same price or less, we're going to pretend that it's going to be way more expensive.

[01:05:16] Speaker 06:
And therefore, the Postal Service isn't going to be able to make that innovation.

[01:05:20] Speaker 06:
They're going to have to do it the same old way they were doing it before.

[01:05:23] Speaker 06:
That seems like a very strange world to be in, given the purpose of this statute.

[01:05:29] Speaker 03:
So I'd like to have two answers, one the text of the statute and the other the policy, the justification.

[01:05:35] Speaker 03:
So what we're talking about here is a change that, going to the justification, is a change that really moves the work out of the postal service to the mailers.

[01:05:46] Speaker 03:
It's not making the system as a whole more efficient necessarily, it's moving work from the postal service to the mailer.

[01:05:52] Speaker 04:
That's actually a complicated issue when you start to think about it.

[01:05:56] Speaker 04:
in fact, much more efficient for the mailers to do it so that the effect of moving is quite complex.

[01:06:05] Speaker 06:
They get a lot more information.

[01:06:06] Speaker 06:
So one question would be, is your position that, fine, the postal service can do this, but they have to pay for the machines and the staff at the mailers?

[01:06:19] Speaker 06:
in order to get this going.

[01:06:21] Speaker 06:
They can't externalize, I take your point, they can't externalize what used to be postal service functions onto the mailers and say, ha, look how efficient we've become and charge the same price because that is a market dominant.

[01:06:34] Speaker 06:
exploitation of their market dominant role.

[01:06:36] Speaker 06:
Like, you do all the work and we will, you know, you in fact have to frank it, you have to, you know, everything, and you just have to, you know, push a button and say this is U.S.

[01:06:47] Speaker 06:
Postal Service and that's the only thing we're responsible for.

[01:06:49] Speaker 06:
I get that, that that's may in fact be abuse of market dominant role.

[01:06:52] Speaker 06:
So your position is the way they innovate here is that they have to pay for the

[01:06:56] Speaker 06:
Equipment?

[01:06:57] Speaker 03:
No, so they can still do this.

[01:06:59] Speaker 03:
They did it for packages.

[01:07:01] Speaker 03:
They can use the incentives.

[01:07:03] Speaker 03:
They can provide information.

[01:07:05] Speaker 03:
They got 88% of people to switch based on that kind of incentive.

[01:07:13] Speaker 03:
There's nothing that stops them from making these efficiency changes.

[01:07:16] Speaker 03:
But they do have to take into account the rate change

[01:07:20] Speaker 03:
for the mailers who are still using the basic barcode.

[01:07:26] Speaker 03:
So those people do face a change in rates.

[01:07:30] Speaker 03:
And going back to the statutory language, the commission has a lot of discretion here to set up a system that

[01:07:39] Speaker 03:
monitors the change in rates, right?

[01:07:42] Speaker 03:
And using a rate change calculation that says we're gonna measure change in rates by looking at how much it costs next year to send last year's mail is a really reasonable, straightforward way to measure a change in prices.

[01:07:56] Speaker 03:
There's nothing arbitrary and capricious about saying we're gonna look at change in prices by looking at how much it costs next year to send last year's mail.

[01:08:04] Speaker 03:
I see that I'm over my time.

[01:08:08] Speaker 03:
If there are no further questions, I'll ask the court to deny the petition.

[01:08:14] Speaker 03:
Thank you.

[01:08:18] Speaker 06:
Mr. Bell, we will give you three minutes for the final.

[01:08:25] Speaker 04:
I have a question to start out with.

[01:08:27] Speaker 04:
I have to admit, I did not go back to the rulemaking to see the position taken by the service

[01:08:36] Speaker 04:
with respect to this historical volume.

[01:08:39] Speaker 04:
Is counsel correct in saying that the position of the service was expressed in terms which embrace the decision as to whether or not we have a rate change?

[01:08:54] Speaker 01:
No, Your Honor, it was just the effect of a rate change.

[01:08:57] Speaker 01:
So there are two questions.

[01:08:58] Speaker 01:
The computational rules are triggered when there's been a rate change, and that's all we were saying, is that when you're applying those computational rules, you generally don't make predictions.

[01:09:06] Speaker 01:
I mean, an easy example is if we raise prices, that's going to have some effect on demand.

[01:09:11] Speaker 01:
We just don't get into that.

[01:09:13] Speaker 04:
But the threshold... Okay, so when we go back, as I'm sure we will,

[01:09:18] Speaker 04:
to that proceeding, we'll find nothing from you addressing whether historical volumes or something else should be used to identify a rate change.

[01:09:30] Speaker 01:
That is correct.

[01:09:30] Speaker 01:
Just the effect of the rate change.

[01:09:32] Speaker 01:
At least that's my understanding.

[01:09:33] Speaker 01:
I think I'm right.

[01:09:34] Speaker 01:
I'm only sure I'm right about that.

[01:09:35] Speaker 01:
This deletion, I want to get back to this point because I think

[01:09:42] Speaker 01:
I also think it's important, and I think it goes the other way.

[01:09:44] Speaker 02:
Let me answer one question, which I thought was clear from the physicians.

[01:09:51] Speaker 02:
I thought you would effectively acknowledge, I won't say concede as if that's a bad thing, I thought you would effectively acknowledge that any mailer who uses basic barcodes is going to pay a higher rate.

[01:10:02] Speaker 02:
We do acknowledge that, and that would be... And wait, that's one part.

[01:10:06] Speaker 02:
I thought that was absolutely clear.

[01:10:08] Speaker 02:
You use BASIC now, you're paying a higher rate.

[01:10:10] Speaker 02:
That is correct.

[01:10:11] Speaker 02:
Go ahead and use it.

[01:10:12] Speaker 02:
You're paying a higher rate.

[01:10:13] Speaker 02:
And that reference to BASIC in that chart is of no moment because you don't charge that anymore.

[01:10:20] Speaker 02:
There is no charge for BASIC anymore.

[01:10:24] Speaker 02:
Don't use the word deletion.

[01:10:26] Speaker 02:
It is a non-functioning number in there because you don't, if I come in and say I demand that you charge me that rate, you're gonna laugh at me.

[01:10:35] Speaker 02:
I think that we're, sorry, right?

[01:10:38] Speaker 02:
We're not gonna laugh at you.

[01:10:40] Speaker 02:
But you're not gonna charge me at that rate because it doesn't exist.

[01:10:44] Speaker 02:
The rating, I think we're conflating two things.

[01:10:48] Speaker 01:
No, no, no.

[01:10:49] Speaker 02:
I really want you to answer that question.

[01:10:51] Speaker 02:
This really is simple.

[01:10:52] Speaker 02:
I may be simplistic, but I've got to understand it at the lowest level first.

[01:10:56] Speaker 02:
That rate doesn't exist functionally.

[01:11:00] Speaker 02:
I can come in with all the paper I want.

[01:11:02] Speaker 02:
You're not going to charge me at that basic rate anymore, right?

[01:11:05] Speaker 02:
The rate exists, but it also will qualify you for a discount.

[01:11:08] Speaker 01:
You're not going to charge me at that rate anymore, right?

[01:11:13] Speaker 01:
I don't know what we're saying about that rate.

[01:11:15] Speaker 01:
There is no such thing as a basic barcoding rate.

[01:11:18] Speaker 01:
I think we're conflating the rates and what you need to do to qualify for them.

[01:11:22] Speaker 01:
There is a standard automation rate, and the requirements for qualifying for that have changed over time.

[01:11:27] Speaker 01:
At one time, it required a post-net barcode rate.

[01:11:30] Speaker 01:
So just as you would say, if I came in tomorrow with a post-net rate five years ago, I would say I will not charge you a post-net rate.

[01:11:36] Speaker 02:
I'm Mr. Barcode user yesterday.

[01:11:38] Speaker 02:
You've now done what you just did, and I'm coming in tomorrow.

[01:11:43] Speaker 02:
I'm not going to get that same barcode rate that I got yesterday, right?

[01:11:46] Speaker 01:
You will not get the same rate you got.

[01:11:46] Speaker 01:
That's correct.

[01:11:47] Speaker 01:
It's going to be higher, right?

[01:11:48] Speaker 01:
Indeed.

[01:11:49] Speaker 01:
And that is true of literally- I thought that was clear.

[01:11:51] Speaker 01:
Yes.

[01:11:51] Speaker 01:
And that is true of literally every mail preparation change we make.

[01:11:55] Speaker 01:
Everyone.

[01:11:56] Speaker 01:
If we something is small, the commission is acknowledged.

[01:11:59] Speaker 01:
Well, like if we change where you have to have your address label, it's not.

[01:12:02] Speaker 02:
It's not if it's not really a preparation, but I hear you.

[01:12:06] Speaker 02:
I, if you're simply saying you use the same thing, you're just going to pay more.

[01:12:10] Speaker 02:
Right.

[01:12:11] Speaker 02:
To me, that's not, has nothing to do with preparation.

[01:12:13] Speaker 02:
It's just.

[01:12:15] Speaker 02:
You know, but it may have, as an economic matter, it may have some effects.

[01:12:19] Speaker 02:
It may force you to rethink how to do business, but you can keep doing business as you were before, but you're going to pay a higher price.

[01:12:25] Speaker 04:
But if you do meet the new criteria, you get the discount.

[01:12:31] Speaker 01:
That is correct.

[01:12:32] Speaker 01:
And this is the problem, that what you're describing, Judge Edwards, would mean every male preparation change is a rate, not only a rate change, but a rate increase.

[01:12:40] Speaker 02:
What we're describing is the complexity of the first decision that emanates.

[01:12:45] Speaker 02:
I mean, I think we understood it initially.

[01:12:49] Speaker 02:
It's being amplified greatly today.

[01:12:52] Speaker 02:
And I think that's

[01:12:54] Speaker 02:
what we have to think about.

[01:12:56] Speaker 02:
But I never understood you to suggest that that basic rate exists anymore.

[01:13:01] Speaker 02:
I don't care if it's on a piece of paper.

[01:13:02] Speaker 01:
Again, there's the rate and then there's the qualifying for it.

[01:13:05] Speaker 01:
But again, let me just be clear.

[01:13:06] Speaker 01:
This can't be more important.

[01:13:08] Speaker 01:
Let's take something where everybody agrees it's a minor change.

[01:13:10] Speaker 01:
They're changing the location of the address label.

[01:13:13] Speaker 01:
The Commission's already said that's not one.

[01:13:14] Speaker 01:
That means if we each have a rule that changes where the address label needs to be to qualify for a specific price, some kind of discount, some machine ability discount, and you come in tomorrow and say, I'm not going to change that address label placement.

[01:13:28] Speaker 01:
To Judge Edwards' point, we would still mail your mail, but you're not going to get that price.

[01:13:32] Speaker 01:
We're bumping you up.

[01:13:33] Speaker 01:
So the problem is if you extrapolated from what you just said to every mail preparation change, then every mail preparation change is a rate increase.

[01:13:43] Speaker 01:
But we know it's not.

[01:13:44] Speaker 04:
It is if there is some alternative, even though no one may ever use it, where you you pay a higher price by pigheadedly pursuing your old practice.

[01:14:00] Speaker 01:
There's almost always a higher price out there because I mean, because we honestly are our most no, but our most basic

[01:14:06] Speaker 01:
I don't want to overuse the term.

[01:14:08] Speaker 01:
Basically, our most sort of standard single piece mail, you put a stamp on it, you mail.

[01:14:12] Speaker 01:
That doesn't really have mailing requirements.

[01:14:14] Speaker 01:
These are all things for getting essentially lower rate to you.

[01:14:17] Speaker 01:
So there's always something you can default to.

[01:14:19] Speaker 01:
So there's always an alternative.

[01:14:21] Speaker 01:
And let's think about it this way.

[01:14:25] Speaker 01:
I thought you were asking a question.

[01:14:29] Speaker 01:
I was, but then I didn't want to interrupt you.

[01:14:31] Speaker 01:
Let's assume there never had been

[01:14:34] Speaker 01:
that further discount.

[01:14:35] Speaker 01:
I mean, the chart I used on page 11 which just sort of illustrates the change.

[01:14:38] Speaker 01:
Let's assume that third row wasn't there, the discounted automation rate.

[01:14:42] Speaker 01:
There was just non-automation and automation, all right?

[01:14:46] Speaker 01:
And let's say we change the requirement to get the automation, right, as we've done before.

[01:14:51] Speaker 01:
It was post net and basic and full service, all right?

[01:14:55] Speaker 01:
The question would be, I think under the commission's analysis, is that a significant change?

[01:15:00] Speaker 01:
If it is, we will assume they won't do it and they'll bump up.

[01:15:03] Speaker 01:
And if it's not, we'll send it out, right?

[01:15:05] Speaker 01:
And why should this case be analyzed differently?

[01:15:09] Speaker 01:
Just because if you do what we ask you to do, you'll actually end up paying less.

[01:15:13] Speaker 01:
Under the commission sort of got this perverse thing that the prospect of paying less makes it more likely we have a rate increase, or put differently, the deletion that you speak of, Your Honor.

[01:15:24] Speaker 01:
is we had two rates, two automation rates, the high one and the low one.

[01:15:28] Speaker 01:
We're getting rid of the high one.

[01:15:30] Speaker 01:
If you want to call that a deletion, great, but it's a decrease.

[01:15:33] Speaker 02:
No, I think what their point is, and maybe it's too simplistic, certainly attracted my attention, it's exactly the same piece of mail.

[01:15:44] Speaker 02:
You're not prohibited from mailing it this way.

[01:15:48] Speaker 02:
Keep on doing it.

[01:15:49] Speaker 02:
We're just going to charge you more.

[01:15:52] Speaker 02:
That, why?

[01:15:54] Speaker 02:
Because that old rate cell that we used to use to charge you, it's there on the piece of paper, but it is of no moment.

[01:16:01] Speaker 02:
So keep doing it.

[01:16:02] Speaker 02:
You want to be stupid?

[01:16:03] Speaker 02:
Keep sending it the way you used to send it?

[01:16:06] Speaker 02:
You're going to pay more.

[01:16:08] Speaker 02:
That's the simple argument that they're making.

[01:16:10] Speaker 02:
That's the whole deletion thesis.

[01:16:14] Speaker 02:
That's what they're basing their claim on.

[01:16:16] Speaker 02:
And you are paying more

[01:16:18] Speaker 02:
for exactly the same piece of mail, which you can send.

[01:16:23] Speaker 02:
So there's no preparation change.

[01:16:24] Speaker 02:
The service has not said, no, you can't send it this way anymore.

[01:16:28] Speaker 02:
You can go ahead and send it.

[01:16:30] Speaker 01:
You're just going to pay more.

[01:16:31] Speaker 01:
Again, that describes every mail preparation change.

[01:16:33] Speaker 01:
The why isn't the absence of the cell.

[01:16:37] Speaker 01:
The why is that we change the requirement.

[01:16:39] Speaker 01:
So again, address label change.

[01:16:41] Speaker 01:
You can still send it.

[01:16:43] Speaker 01:
If you don't change the location of your address, you can send it.

[01:16:45] Speaker 01:
We're just going to pay.

[01:16:46] Speaker 01:
We're going to charge you more.

[01:16:47] Speaker 01:
That's true of every one of our mail preparation changes.

[01:16:49] Speaker 01:
And so the why isn't that the cell doesn't exist, because the cell was replaced in effect by a lower one.

[01:16:55] Speaker 01:
So why is that more likely to be an increase?

[01:16:56] Speaker 01:
It's more likely to be a decrease.

[01:16:58] Speaker 01:
So the why isn't the existence of the cells.

[01:17:00] Speaker 01:
It's what you need to do.

[01:17:01] Speaker 01:
That's why we're here.

[01:17:02] Speaker 01:
I mean, there's, of course, more that I can't say.

[01:17:06] Speaker 06:
I was going to ask you the same big picture question.

[01:17:08] Speaker 06:
So let's say there's a deletion and every change, meal preparation changes, price cap, and we're just in a world in which there's more pressure on the Postal Service to be super efficient, save money, all of it's going to be analyzed, all of it's going to be reviewed.

[01:17:27] Speaker 06:
Can you live with that?

[01:17:29] Speaker 01:
Not at all, because the effect of that kind of decision, that every mail preparation changes are there for us to be more efficient.

[01:17:36] Speaker 01:
They're not shifting costs to mailers.

[01:17:37] Speaker 01:
If a mailer doesn't use the full service format, we're not going to do it for them.

[01:17:40] Speaker 01:
This isn't a cost we're shifting.

[01:17:42] Speaker 01:
This is an effort to be more efficient, as would, say, changing the address label because we bought a new machine that's going to allow us to process mail more efficiently, whatever.

[01:17:50] Speaker 01:
These mail preparation requirements are there so we can operate more efficiently and there's a premium on that because of the price cap.

[01:17:57] Speaker 06:
But then you just have to show it in a rate review.

[01:18:01] Speaker 06:
You have to show that it's efficient, that it's within the price cap, that the changes that you've done are all netting out to be within the price cap and under the inflation-adjusted amount for that class.

[01:18:15] Speaker 01:
But the efficiency thing isn't the price cap.

[01:18:18] Speaker 01:
The price cap is a cap on the amount we can charge, the amount people can hand over.

[01:18:22] Speaker 01:
This is a change to a requirement.

[01:18:25] Speaker 01:
It serves a different purpose entirely.

[01:18:27] Speaker 01:
I mean, that's like saying,

[01:18:28] Speaker 01:
that tax increases are the same as spending cuts.

[01:18:32] Speaker 01:
I mean, they both accomplish the same goal, which is to balance the budget, but they're totally different.

[01:18:36] Speaker 01:
I mean, the cap is a cap on the revenue that we can extract from mailers in exchange for services.

[01:18:42] Speaker 01:
Whether we're operating a mailing rule isn't designed for that.

[01:18:46] Speaker 01:
It's designed to be complied with.

[01:18:47] Speaker 01:
It's designed to change behavior.

[01:18:49] Speaker 01:
It's designed to essentially help us cut costs, which is a totally different inquiry.

[01:18:54] Speaker 01:
Now, as the court, I think the opinion,

[01:18:56] Speaker 01:
before I was alluding to, there are some things that potentially purport to be mail preparation requirements, but that are actually disguised rate increases that are going to result in mailers paying more for their service, paying us more, not incurring more cost, but paying us more.

[01:19:11] Speaker 01:
That's fine, but there needs to be a standard.

[01:19:14] Speaker 01:
But that's not, I mean, again, the full service intelligent mail requirement couldn't be that.

[01:19:19] Speaker 01:
I mean, 88% of mail pieces, even without being forced to, are already doing it.

[01:19:23] Speaker 01:
So all we're doing is saying that other 12%, we want you to do it too.

[01:19:27] Speaker 01:
How is that a major piece?

[01:19:29] Speaker 06:
But that cuts both ways, because as the commission said just a few minutes ago, doesn't that 88% mean that, you know, without any change, you're moving people

[01:19:41] Speaker 06:
successfully, you're innovating successfully.

[01:19:45] Speaker 06:
Why do you need to get rid of that one, that one cell?

[01:19:48] Speaker 01:
Well, keep in mind there's a trade-off even to the 88 percent because remember we're offering them a price discount.

[01:19:54] Speaker 01:
We're not taking, we're not, that's not, the commission's not giving us extra cap authority because of a price decrease.

[01:19:59] Speaker 01:
So we have incentives to, I mean that's one of our incentives is that.

[01:20:03] Speaker 01:
I mean the fact that we

[01:20:05] Speaker 01:
now want, I mean, this is largely the commission's behest to get full service compliance at 100 percent.

[01:20:12] Speaker 01:
They use it as a diagnostic tool to monitor our service performance.

[01:20:16] Speaker 01:
That's why they've been asking us to drive mail to 100 percent compliance.

[01:20:21] Speaker 01:
And the idea that they're going to do that and then make us pay for it in the form of imputed income for mailers that aren't actually going to pay for it is ridiculous.

[01:20:29] Speaker 01:
It actually gets more pernicious than that because if we ever do increase prices,

[01:20:33] Speaker 01:
At that point, we're going to have 100% compliance.

[01:20:35] Speaker 01:
There's going to be more volume down there that the cap is going to apply to.

[01:20:39] Speaker 01:
I mean, it seems like we get hit both ways.

[01:20:42] Speaker 01:
But this is not, I mean, on its face, this is something that was not designed to raise prices.

[01:20:48] Speaker 01:
It was designed to change behavior.

[01:20:50] Speaker 01:
And I think the only relevant fact is going to work.

[01:20:53] Speaker 04:
Let me raise an interesting question.

[01:20:54] Speaker 04:
I'm sorry, you're right.

[01:20:55] Speaker 04:
Let's suppose the commission is right.

[01:20:58] Speaker 04:
in its barcode disposition.

[01:21:01] Speaker 04:
Are you saying that there's no way over time by which the post office can get out of the imputed income from this, from mailers purportedly using this service, which in fact they aren't using?

[01:21:23] Speaker 04:
purportedly using garden variety first class, I guess, even though they aren't.

[01:21:29] Speaker 04:
The mailers we're talking about.

[01:21:30] Speaker 01:
There is no way out, your honor.

[01:21:32] Speaker 01:
The way the commission computes the cap, let's say these 12%, they're assuming that these 12% won't comply, that will cost us $368 million a year every year.

[01:21:44] Speaker 06:
But then why don't you do another little trivial change next year, and then all of that will be washed out, or will it, because the price cap will be

[01:21:55] Speaker 01:
No.

[01:21:56] Speaker 06:
Will be, because what's in it will be continued to be counted that way forever?

[01:22:01] Speaker 01:
Forever, yes.

[01:22:02] Speaker 01:
That's how it works.

[01:22:03] Speaker 01:
That if we came to the next year and said, I know that you assumed that this 12% was going to buy up, but they didn't, too bad.

[01:22:10] Speaker 01:
It still counts against the cap.

[01:22:11] Speaker 06:
I mean, we know this because- But then you have a new cap and you have a new calculation.

[01:22:15] Speaker 01:
The cap only applies to changes, to rate changes.

[01:22:17] Speaker 01:
It doesn't comply to sort of, you know- But that rate change is done, so there's no way to wash it out.

[01:22:23] Speaker 01:
Nope.

[01:22:24] Speaker 01:
There is not, and that's the problem.

[01:22:25] Speaker 01:
And in fact, I mean, if you look back three years ago when we first went to, five years ago now, when we first went to the commission, at that point, 64% were complying, right?

[01:22:34] Speaker 01:
So the theory was that 36% wouldn't.

[01:22:36] Speaker 01:
Well, at that point, after that, we came back to the next time and said, well, I guess that prediction was wrong, because 2 thirds of them have since complied voluntarily.

[01:22:43] Speaker 01:
And rather than say, oh, maybe we've got this wrong.

[01:22:45] Speaker 01:
Maybe this isn't a big deal.

[01:22:47] Speaker 01:
Maybe mailers are equipped to handle this.

[01:22:49] Speaker 01:
I mean, I heard a parade of horribles about all the changes.

[01:22:52] Speaker 01:
We're talking about process, we're talking about like software updates.

[01:22:57] Speaker 01:
They do that all the time.

[01:22:58] Speaker 06:
So you're being charged, I mean, unless we, like we remanded without vacature before, but unless we were to vacate, you're going to be charged that.

[01:23:07] Speaker 01:
Well, we're not in fact, because we withdrew it because they told us what they would be charged.

[01:23:10] Speaker 01:
So right now we decided not to go for it.

[01:23:12] Speaker 01:
I mean, the original request, again, with the 36%,

[01:23:15] Speaker 01:
would have resulted in $1.2 billion a year in imputed revenue that we never would have gotten.

[01:23:22] Speaker 01:
We know we wouldn't have gotten it because, in fact, it didn't, you know, two-thirds of cents complied voluntarily.

[01:23:27] Speaker 01:
If we had gone to them and said, oh, I know that you had this expectation back then that this 36% would just default to a higher price, they didn't.

[01:23:36] Speaker 01:
There's no mechanism to get that money back.

[01:23:38] Speaker 01:
It's $1.2 billion a year, every year, forever.

[01:23:42] Speaker 01:
And that is the problem with treating mail preparation changes as rate, as price cap events.

[01:23:47] Speaker 01:
They're not.

[01:23:48] Speaker 01:
I mean, it's, you know, these are designed to change behavior.

[01:23:51] Speaker 06:
But aren't there mail preparation, I'm sorry.

[01:23:53] Speaker 06:
Yeah, yeah, sorry.

[01:23:54] Speaker 06:
Aren't there mail, theoretically anyway, there are mail preparation requirements that save the Postal Service money and labor.

[01:24:03] Speaker 06:
There are ways of saying this is mail preparation that outsource it.

[01:24:09] Speaker 01:
I don't know about outsourcing it, but the point of these is to make us more efficient, so it is to save us money.

[01:24:14] Speaker 01:
That's, in fact, what price cap regulation does.

[01:24:17] Speaker 01:
It incentivizes efficiency because we can't just cover cost increases with higher prices.

[01:24:22] Speaker 01:
All I know is that we have done

[01:24:24] Speaker 01:
Countless mail preparation changes since the passage of this law in 2007.

[01:24:29] Speaker 01:
We know the commission has treated literally zero of them as rate increases.

[01:24:34] Speaker 01:
And therefore, whether they were outsourced, whether, you know, none of them have ever been rate increases before, because, of course, they're designed to get mailers to comply.

[01:24:43] Speaker 01:
That doesn't mean they can't regulate them.

[01:24:44] Speaker 01:
I mean, they could call it an unreasonable regulation.

[01:24:46] Speaker 01:
Well, and they do regulate, for example, when something's deleted, if we know from our next case.

[01:24:51] Speaker 01:
Well, indeed.

[01:24:52] Speaker 01:
And so they have, right, so they have, I mean, they have many tools at their disposal.

[01:24:56] Speaker 01:
They've never seen any of these as rate increases.

[01:24:59] Speaker 01:
And I'm not sure what makes this one a rate increase.

[01:25:01] Speaker 01:
I mean, they, you know, I just heard counsel say, well, this one's, you know, hugely, it's a huge deal.

[01:25:06] Speaker 01:
Again, how big a deal can it be if 88% are already doing it voluntarily?

[01:25:11] Speaker 01:
I mean, this is no, actually, I'm not sure it's more costly than the carrier route changes that we make.

[01:25:16] Speaker 01:
There's, of course, nothing in the record.

[01:25:18] Speaker 01:
The Commission didn't actually analyze that.

[01:25:19] Speaker 01:
It just posits it that it must be more costly.

[01:25:23] Speaker 01:
So, you know, our problem is that if we're suddenly going to treat mail preparation changes as rate changes, we have a disincentive to innovate.

[01:25:34] Speaker 01:
We have a disincentive to cut costs.

[01:25:36] Speaker 01:
We have a disincentive to operate more efficiently.

[01:25:38] Speaker 01:
And that was precisely what this price cap regulation was intended for us to do.

[01:25:42] Speaker 01:
You can't generate more revenue from price increases.

[01:25:45] Speaker 01:
Therefore, you have to operate more efficiently.

[01:25:47] Speaker 01:
To operate more efficiently, we have to change mail preparation requirements.

[01:25:53] Speaker 01:
If they say, well, you can't do that either, then where does that leave us?

[01:25:56] Speaker 01:
I mean, that can't be.

[01:25:57] Speaker 01:
Well, that's not what Congress had in mind.

[01:25:59] Speaker 01:
If Congress had a price cap, it's just a cap on the rates that you pay us.

[01:26:04] Speaker 01:
It doesn't, again, doesn't mean the commission can't regulate mail preparation requirements.

[01:26:08] Speaker 01:
It can.

[01:26:09] Speaker 01:
it just can't regulate, it can't allow them to go forward, but only if we pay for them as though they were price increases.

[01:26:15] Speaker 04:
Because that's everything.

[01:26:17] Speaker 04:
The price cap mechanism is known in other fields, and I was wondering whether, and there are no citations on this, how in the other fields, I mean, I'm thinking of telecommunications, although that particular form of regulation may by now have died,

[01:26:35] Speaker 04:
But has anyone tried to figure out how the regulatory agencies handled this sort of innovation under those price caps?

[01:26:48] Speaker 01:
Not that I'm aware of.

[01:26:50] Speaker 01:
I wish I could give you an answer on that, but I just don't know.

[01:26:55] Speaker 06:
So I'm just trying to think of like a narrower way.

[01:26:57] Speaker 06:
When I first read the USPS, one opinion I thought, well, it makes sense that some mail preparation requirements would be

[01:27:04] Speaker 06:
counted against the price cap because a market-dominant actor could, for example, outsource.

[01:27:09] Speaker 06:
I mean, maybe requiring mail to be pre-sorted and delivered in ways that correspond to the ultimate destination is such a thing.

[01:27:18] Speaker 06:
It used to be that you could throw, you know, and you still can first-class mail, throw things willy-nilly, different days, and then you pay a big price, but you get a discount if you

[01:27:29] Speaker 06:
package it all by, but let's say the Postal Service said, you know, anything going to the West Coast has to be put in the mailbox on Monday, anything going to the middle of the country has to be put in the mailbox on Tuesday, like it's all going to be pre-sorted by people, and we're going to raise the price for that, then you're both getting labor saving internally, and you're getting as much or more money, and that would be a preparation requirement that might be sort of a de facto price increase because it's actually money in the Postal Service's pocket.

[01:28:00] Speaker 01:
I mean, I think there's a lot there.

[01:28:04] Speaker 01:
And I think to some extent, this whole regime was set up for situations where when you're raising prices and also changing requirements, do you look into the extent to which the requirement affects the volume?

[01:28:19] Speaker 01:
This, of course, the commission is doing something totally different.

[01:28:22] Speaker 01:
They're saying a standalone mail preparation requirement is a rate change.

[01:28:26] Speaker 01:
And they seem to do this on the deletion.

[01:28:28] Speaker 01:
But again, if it is a deletion, we've deleted the hire.

[01:28:30] Speaker 06:
So let's say they haven't changed rates at all, but they've said, you know, California mail goes in the box on Monday and, you know, Chicago mail on Tuesday, so that we don't have to hire people to sort.

[01:28:42] Speaker 06:
So we're going to get the same money that we used to get, but we're saving.

[01:28:46] Speaker 06:
We can fire all our mail sorters.

[01:28:48] Speaker 06:
That seems to me, I mean, to me, that's the beauty and the logic of that USPS1 decision is that seems right, that you shouldn't be able to hold your rate

[01:28:56] Speaker 06:
steady and get a pass on whether something is a rate change and at the same time save yourself money by outsourcing

[01:29:03] Speaker 06:
certain aspects of the job.

[01:29:05] Speaker 01:
I think there's two things going on here.

[01:29:07] Speaker 01:
And that's not what this case is because you have to discount.

[01:29:09] Speaker 01:
And as to your question, I think there's two things going on.

[01:29:11] Speaker 01:
There's the prices and then sort of the savings on the shifting of costs and stuff.

[01:29:16] Speaker 01:
And I think this is very consistent with the court's opinion and certainly consistent with the Supreme Court's decision that we cite that came right after, which is a rate is just the money you hand us in exchange for services.

[01:29:25] Speaker 01:
So if we're doing something to essentially what you would say pass costs onto mailers,

[01:29:30] Speaker 01:
That doesn't implicate the price gap.

[01:29:32] Speaker 01:
I mean, because that's not money we get, right?

[01:29:34] Speaker 01:
It's money, essentially.

[01:29:36] Speaker 01:
I mean, it's not revenue we get.

[01:29:38] Speaker 06:
Well, but I'm saying it is revenue that you get.

[01:29:40] Speaker 06:
Because we save the cost.

[01:29:42] Speaker 06:
Because you save the cost.

[01:29:43] Speaker 06:
So if you save the same price, but the product that the customer's getting is cheaper for you to provide because you've outsourced the task to them,

[01:29:53] Speaker 06:
Yeah, and they're paying to a third party.

[01:29:54] Speaker 06:
But in fact, they're giving value to you.

[01:29:57] Speaker 06:
That's what I thought was actually the core insight of USPS1, was that market dominance can be abused.

[01:30:03] Speaker 06:
And it may be a narrow factual slice of situations, but I think mail sorting might be one of them.

[01:30:08] Speaker 06:
That if you didn't give a discount to the bulk mailers who sort, but actually kept the price steady and then laid off all your expensive people, you get more profit at the end of the day, right?

[01:30:19] Speaker 06:
Even with the price being static.

[01:30:21] Speaker 01:
Well, sadly, the Postal Service is not profitable, but I know what you mean.

[01:30:24] Speaker 01:
More revenue.

[01:30:26] Speaker 01:
Well, not more revenue, fewer costs, right?

[01:30:27] Speaker 01:
Same revenue, lower costs.

[01:30:28] Speaker 01:
Well, more money, more net money that you can hang on to.

[01:30:32] Speaker 01:
And again, the commission, all right.

[01:30:35] Speaker 01:
The price cap, again, is a cap just on revenue, not net revenue, not shifting of costs.

[01:30:39] Speaker 01:
Right.

[01:30:41] Speaker 06:
You get more bucks.

[01:30:42] Speaker 06:
You have more money in your piggy bank.

[01:30:44] Speaker 01:
We don't get more money.

[01:30:45] Speaker 01:
We spend less money.

[01:30:46] Speaker 01:
You have it.

[01:30:47] Speaker 01:
You have it.

[01:30:47] Speaker 01:
You have more money at the end of the day.

[01:30:48] Speaker 01:
And again, the price cap only regulates the money we get, the money that's handed over, not that net.

[01:30:53] Speaker 01:
Again, does it mean that can't be raised?

[01:30:56] Speaker 06:
Well, under USPS 1, it regulates.

[01:30:59] Speaker 06:
I take the core logic of USP as one to be it regulates this other thing, too, a de facto.

[01:31:06] Speaker 01:
Well, actually, I took the court's opinion to say that where something that not only changes actually literal rates, but affects what mailers actually pay, meaning pay to us.

[01:31:18] Speaker 01:
So I think that a rate has a fixed meaning in the law.

[01:31:22] Speaker 01:
It means the price.

[01:31:23] Speaker 01:
It means the amount that's handed over in exchange for a service.

[01:31:26] Speaker 01:
I think the ambiguity that the court identified went to the term change, that you can affect prices not just by literally changing them, but by doing something that's going to have the effect of somebody paying higher prices, but still it deals with prices.

[01:31:41] Speaker 01:
I think what you're dealing with is the idea of sort of shifting costs, and I think that's regulated under other tools in the statute.

[01:31:47] Speaker 04:
That's the authority of the commission to say you can't do this at all, right?

[01:31:51] Speaker 01:
Yeah, sure.

[01:31:52] Speaker 01:
I mean, the commission has that authority.

[01:31:53] Speaker 01:
Absolutely.

[01:31:53] Speaker 01:
They say, wait, you can't pass those costs on to mailers.

[01:31:56] Speaker 01:
That's unreasonable.

[01:31:58] Speaker 01:
That's a different inquiry than the price cap.

[01:32:00] Speaker 01:
Price cap's just a mathematical formula.

[01:32:02] Speaker 01:
Like, what revenue are we generating from our services?

[01:32:06] Speaker 01:
And so that, I think, is a different inquiry.

[01:32:09] Speaker 01:
On top of that, the commission's analysis isn't to sort of compensate mailers for the costs, right?

[01:32:14] Speaker 01:
It's to compensate mailers for the prices they would pay if they didn't incur those costs, right?

[01:32:19] Speaker 01:
It's the idea they won't incur them, they're just going to pay.

[01:32:22] Speaker 01:
And that's why the critical question has to be, are the costs of compliance greater or less than the price they would pay otherwise?

[01:32:29] Speaker 01:
That's where the price cap ends and the other parts of the commission sort of authority begin.

[01:32:37] Speaker 06:
Why don't we take a five minute break because we're hearing from you again and we've kept you a very long time and everyone can take a minute and we'll see you back.

[01:32:49] Speaker 06:
Thank you.