OFFICIAL TRANSCRIPT OF PROCEEDINGS BEFORE THE POSTAL RATE COMMISSION In the Matter of: 1 ) Docket No.: R2006-1 F'OSTAL RATE AND FEE CHANGES ) VOLUME #10 Date : August 16, 2006 Place : Washington, D.C. Pages : 2369 through 2720 HERITAGE REPORTING CORPORATION Ofj5cial Reporters 1220 Id Street, N.W., Suite 600 Washington. D.C. 20005 (202) 628-4888 2369 POSTAL RATE COMMISSION In the Matter of: ) I POSTAL RATE AND ) Docket No.: R2006-I FEE CHANGES I Suite 200 Postal Rate Commission 901 New York Avenue, N.W Washington, D.C. Volume 10 Wednesday, August 16, 2006 The above-entitled matter came on for hearing pursuant to notice, at 9:32 a.m. BEFORE: HON. GEORGE A. OMAS, CHAIRMAN HON. DAWN A. TISDALE, VICE-CHAIRMAN HON. TONY HAMMOND, COMMISSIONER HON. RUTH Y. GOLDWAY, COMMISSIONER APPEARANCES : -On behalf of United States Postal Service: KEN HOLLIES, Esquire ERIC KOETTING, Esquire FRANK HESELTON, Esquire United States Postal Service 475 L’Enfant Plaza West, S.W Washington, D.C. 20260 (202) 268-2900 Heritage Reporting Corporation (202) 628-4888 2370 APPEARANCES : (Cont'd.) -On behalf of the Office of the Consumer Advocate: SHELLEY DREIFUSS, Esquire EMMETT RAND COSTICH, Esquire Postal Rate Commission Office of the Consumer Advocate 901 New York Avenue, N.W., Suite 200 Washington, D.C. 20268 (202) 789-6839 -On behalf of National Newsvaper Association: TONDA RUSH, Esquire King & Ballow P.O. Box 50301 Arlington, Virginia 22205 (703) 812-8989 -011 behalf of United Parcel Service: JOHN E. MCKEEVER, Esquire DLA Piper Rudnick Gray Cary US, LLP One Liberty Place 1650 Market Street, Suite 4900 Philadelphia, Pennsylvania 19103-7300 (215) 656-3310 -On behalf of Valvak Dealers Association and Valpak Direct -M(3rketinq Svstems, Inc. : WILLIAM J. OLSON, Esquire William J. Olson, P.C. 8180 Greensboro Drive, Suite 1070 McLean, Virginia 22102-3860 (703) 356-5070 Heritage Reporting Corporation (202) 628-4888 2371 WITNESSES APPEARING: MARTIN CZIGLER ELIANE VAN-TY-SMITH (Not Present) A. THOMAS BOZZO VOIR KCTNESSES : DIRECT CROSS REDIRECT RECROSS Martin Czigler 2374 __ 2439 -- _- by Ms. Rush __ 2428 __ __ ._ A. Thomas Bozzo 2477 __ __ __ _- by Mr. Olson __ 2685 __ __ __ by Mr. McKeever __ 2710 __ __ ._ -RULINGS _PAGE Riding re cancellation of August 21, 2006, hearing 2373 aind rescheduling witnesses to August 22, 2006 Rding setting dates for designating institutional 2373 responses and filing transcript corrections -DOCUMENTS TRANSCRIBED INTO THE RECORD PAGE Response of Witness Czigler to PSA interrogatory 2378 redirected from Witness Smith, PSA/USPS-T-13-1 Corrected designated written cross-examination 2380 of Martin Czigler, USPS-T-1 Corrected designated written cross-examination 2443 of Eliane Van-Ty-Smith,USPS-T-11 Response of Witness Bozzo to Presiding Officer's 2481 Information Request, POIR No. 10, Question 6 Corrected designated written cross-examination 2497 of A. Thomas Bozzo, USPS-T-12 Heritage Reporting Corporation (202) 628-4888 2372 -EXEIBLTS -EXHIBITS AND/OR TESTIMONY IDENTIFIED RECEIVED Corrected direct testimony of 2374 2376 Martin Czigler on behalf of the United States Postal Service, USPS -T- 1 Response of Witness Czigler to 2377 2377 PSA interrogatory redirected from Witness Smith, PSA/USPS-T- 13 - 1 Corrected designated written 2379 2379 cross-examination of Martin Czigler, USPS-T-1 Corrected direct testimony of 2441 2441 Eliane Van-Ty-Smith on behalf o:E the United States Postal Service, USPS-T-11 Corrected designated written 2442 2442 cross-examination of Eliane Van-Ty - Smith, USPS - T-11 Corrected direct testimony of 2477 2479 A. Thomas Bozzo on behalf of the United States Postal Service, USPS-T-12 Response of Witness Bozzo to 2480 2480 Presiding Officer's Information Request, POIR No. 10, Question 6 Corrected designated written 2496 2496 cross-examination of A. Thomas Bozzo, USPS-T-12 Heritage Reporting Corporation (202) 628-4888 2373 1 -pBQcEEPINES 2 (9:32 a.m.) 3 CHAIRMAN OMAS: Good morning. Today we 4 continue hearings to receive the testimony of Postal 5 Service witnesses in support of Docket No. R2006-1, 6 Request for Rate and Fee Changes. 7 I have some announcements. This morning I 8 signed or issued two Presiding Officer Rulings. One 9 ruling cancels Monday's hearing. Witnesses scheduled 10 to present testimony on Monday, August 21, are 11 rescheduled for August 22. Again, I repeat. There 12 will be no hearings on Monday, August 21. The 13 witnesses have been rescheduled for Tuesday, 14 August 22. 15 I also set dates for designating 16 institutional responses and filing transcript 17 corrections. 18 Does anyone have any procedural matters to 19 discuss at this point this morning? 20 (No response.) 21 CHAIRMAN OMAS: Three witnesses are 22 scheduled to appear today. They are Witnesses 23 Czigler, Van-Ty-Smith and Bozzo. 24 Mr. Hollies, would you like to identify your 25 first witness? Heritage Reporting Corporation (202) 628-4888 2374 1 MR. HOLLIES: Good morning. Thank you, Mr. 2 Chairman. The Postal Service calls Dr. Martin 3 Czigler. 4 CHAIRMAN OMAS: Dr. Czigler, would you raise 5 your right hand? 6 Whereupon, 7 MARTIN CZIGLER 8 having been duly sworn, was called as a 9 witness and was examined and testified as follows: 10 CHAIRMAN OMAS: Please be seated. 11 (The document referred to was 12 markcd for identification as 13 Exhibit No. USPS-T-1.) 14 DIRECT EXAMINATION 15 BY MR. HOLLIES: 16 Q Good morning, Dr. Czigler. Before you are 17 two copies of a document that is marked for 18 identification as USPS-T-1. Do you recognize that 19 document? 20 A I do. 21 Q Could you press the button on your 22 microphone so that the light is bright? 23 A I do. 24 d Thank you. Was that document prepared by 25 you or under your direction? Heritage Reporting Corporation (202) 628-4888 2375 1 A Yes, it was. 2 Q Is that your testimony, your direct 3 testimony in this docket? 4 A Yes, it is. 5 Q And were you to testify orally today would 6 your testimony be the same? 7 A Yes, it would be. 8 Q Have you any errata or corrections in that 9 document? 10 A No, I do not. 11 MR. HOLLIES: Mr. Chairman, the Postal 12 Service therefore moves that the testimony of Dr 13 Martin Czigler be admitted into evidence in this 14 proceeding, and I am prepared to hand two copies to 15 the court reporter. 16 CHAIRMAN OMAS: Is there any objection? 17 (No response.) 18 CHAIRMAN OMAS: Hearing none, I will direct 19 counsel to provide the reporter with two copies of the 20 corrected direct testimony of Martin Czigler. 21 That testimony is received into evidence. 22 However, as is our practice, it will not be 23 transcribed. 24 // 25 // Heritage Reporting Corporation (202) 628-4888 2376 1 (The document referred to, 2 previously identified as 3 Exhibit No. USPS-T-1, was 4 received in evidence.) 5 CHAIRMAN OMAS: Mr. Czigler, have you had an 6 opportunity to examine the packet of designated 7 written cross-examination that was made available to 8 you this morning in the hearing room? 9 THE WITNESS: Yes, I have. 10 CHAIRMAN OMAS: If those questions that were 11 contained in that packet were posed to you orally 12 today would your answers be the same as those you 13 previously provided? 14 THE WITNESS: Yes, they would be, although I 15 have three typographical corrections I'd like to make. 16 In the response to NNA/USPS-T-1-27,in the 17 second bullet the word "cr'"should be changed to 18 "nor". In the third bullet, the word "the" is 19 duplicated. In the fourth bullet, again the word "or" 20 should be changed to "nor". 21 CHAIRMAN OMAS: Fine. There is also the 22 following interrogatory responses that I would like to 23 enter into the evidentiary record at this time. It is 24 PSA/USPS-T-13-1,redirected to Witness Czigler. 25 Mr. Czigler, if you were asked to respond Heritage Reporting Corporation (202) 628-4888 2377 1 orally to these questions today would your answers be 2 the same as those you previously provided in writing? 3 THE WITNESS: Yes, they would be. 4 CHAIRMAN OMAS: I am providing two copies of 5 the answers to the reporter and direct that they be 6 submitted into evidence and transcribed. 7 (The document referred to was 8 marked for identification as 9 Exhibit No. PSA/USPS-T-13-1 10 and was received in 11 evidence.) 12 // 13 // 14 // 15 // 16 // 17 // 18 // 19 // 20 // 21 // 22 // 23 // 24 // 25 // Heritage Reporting Corporation (202) 628-4888 2378 RESPONSE OF POSTAL SERVICE WITNESS MARTIN CZIGLER TO INTERROGATORY OF PARCEL SHIPPERS ASSOCIATION, REDIRECTED FROM WITNESS MARC SMITH PWspSl13-1. Please refer to Attachment 14 of your testmony, which contains Test Year mail processing unit costs by shape and Table 1 below. Table 1. Test Year Mail Processing Unit Costs for Parcels Mail Category Unit Costs (in Cents) 102.49 303.81 304.70 2.610.44 2.450.04 59.60 125 92 62.28 11 1~67 (b) Please provide the coefficient of variation for every figure in Table 1 RESPONSE: Approximate CVs are available for the mail processing labor costs in the base year, estimated using the Generalized Variance Function approach. These are a lower bound for the CVs for test year mail processing unit costs. Docket No. R2006-1 2379 1 CHAIRMAN OW: Would you please provide the 2 reporter with two copies of the corrected written 3 cross-examination? It will be transmitted and 4 transcribed into the record.