USCA Case #11-1179 Document #1359221 Filed: 02/17/2012 Page 1 of 175 PUBLIC APPENDIX—SEALED MATERIAL IN SEPARATE SUPPLEMENT ORAL ARGUMENT HAS NOT BEEN SCHEDULED IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT GAMEFLY, INC., ) ) Petitioner, ) ) v. ) ) POSTAL REGULATORY COMMISSION ) and UNITED STATES OF AMERICA, ) No. 11-1179 ) Respondents, ) ) UNITED STATES POSTAL SERVICE, ) ) Intervening Respondent. ) SUPPLEMENTAL APPENDIX TO OPENING BRIEFS David M. Levy Matthew D. Field VENABLE LLP 575 7th Street N.W. Washington, D.C. 20004-1607 Telephone: (202) 344-4732 Counsel for GameFly, Inc. February 17, 2012 USCA Case #11-1179 Document #1359221 Filed: 02/17/2012 Page 2 of 175 TABLE OF CONTENTS Record No. Document Description Appendix Page No. 67997 Public (Redacted) Versions of Documents Covered by Presiding Officer’s Ruling C2009-1/17—Part 1 A000394-A000396 of 2 [Documents GFL 468; GFL 523-24] 69368 Direct Testimony of Nicholas F. Barranca on Behalf of the United A000397-A000433 States Postal Service (USPS-T-1) 69572 Direct Testimony of Larry J. Belair on Behalf of the United States Postal A000434-A000461 Service Compendium of Documents Cited in Post-Hearing Brief of GameFly, Inc. [Christensen Studies, August A000462-A000566 2006 (C22-C82) and November 2006 (C83-C126)]] USCA Case #11-1179 Document #1359221 Filed: 02/17/2012 Page 3 of 175 A000394 USCA Case #11-1179 Document #1359221 Filed: 02/17/2012 Page 4 of 175 A000395 USCA Case #11-1179 Document #1359221 Filed: 02/17/2012 Page 5 of 175 A000396 USCA Case #11-1179 Document #1359221 Filed: 02/17/2012Postal Page Regulatory 6 of 175 Commission Submitted 7/29/2010 9:27:52 AM Filing ID: 69368 Accepted 7/29/2010 USPS-T-1 BEFORE THE POSTAL REGULATORY COMMISSION WASHINGTON, D.C. 20268-0001 COMPLAINT OF GAMEFLY, INC. Docket No. C2009-1 DIRECT TESTIMONY OF NICHOLAS F. BARRANCA ON BEHALF OF THE UNITED STATES POSTAL SERVICE A000397 USCA Case #11-1179 Document #1359221 Filed: 02/17/2012 Page 7 of 175 Barranca Direct Testimony, USPS-T-1 PRC Docket No. C2009-1 TABLE OF CONTENTS AUTOBIOGRAPHICAL SKETCH ...............................................................iii PURPOSE OF TESTIMONY ........................................................................1 I. GameFly’s complaint seeks lower rates. ...............................................2 II. The Postal Service does not favor large versus small mailers in an irrational or undue way............................................................................4 A. Large versus Small........................................................................4 B. GameFly versus Netflix and Blockbuster....................................7 C. Efforts to Influence Local Working Relationships and National Policies.........................................................................................11 III. The Postal Service follows a sound policy of deferring to field discretion in making operations decisions..........................................14 A. Local versus National Decision-Making. ..................................14 B. Local Processing of DVD Mail....................................................15 C. Reliance on Postal Service Documents. ...................................16 IV. The Postal Service does not grant Netflix other unreasonable preferences.............................................................................................22 A. DVD Rate. .....................................................................................22 B. Letter Mail Machinability.............................................................24 C. Mail Drop Slots. ...........................................................................25 V. Mailers make choices. ...........................................................................26 A. First-Class Mail............................................................................27 B. GameFly’s Choice. ......................................................................28 C. Similar Treatment. .......................................................................31 i A000398 USCA Case #11-1179 Document #1359221 Filed: 02/17/2012 Page 8 of 175 Barranca Direct Testimony, USPS-T-1 PRC Docket No. C2009-1 VI. The mail processing environment will evolve in the future................32 ii A000399 USCA Case #11-1179 Document #1359221 Filed: 02/17/2012 Page 9 of 175 Barranca Direct Testimony, USPS-T-1 PRC Docket No. C2009-1 AUTOBIOGRAPHICAL SKETCH My name is Nicholas F. Barranca. Currently, I serve as Advisor to the Senior Vice President, Operations. Prior to that, I served as the Senior Advisor and Chief of Staff, Office of the Postmaster General. I have 37 years of postal service. I joined the Postal Service in September of 1973 as a management associate in the Baltimore, Maryland, Post Office. Since then, I have held numerous positions of increasing responsibility in Operations and Marketing. In the early years, I was Foreman of Mails, General Foreman of Mails, Foreman of Delivery and Station Manager, and member of the Control and Logistics Department at the Pittsburgh Bulk Mail Center. In these capacities and others, I have had considerable experience in line operations, as well as management of processing and delivery operations. My most recent executive positions have included Vice President, Operations Planning and Processing; Vice President, Operations Support, Manager Operations Analysis; Manager, In-Plant Operations; Director, Office of Delivery and Customer Service; and Director, Automation Integration, all at Postal Service Headquarters. In Marketing, as Vice President, Product Development, I helped modernize Postal Service product and service offerings, better matching them with customer needs and expectations, working to ensure product features aligned with operational capabilities. iii A000400 USCA Case #11-1179 Document #1359221 Filed: 02/17/2012 Page 10 of 175 Barranca Direct Testimony, USPS-T-1 PRC Docket No. C2009-1 I was a witness for the Postal Service in Docket No. MC83-2 (ZIP + 4), one of the Postal Service’ first efforts to integrate automation technology into the pricing structure. I hold a Bachelor of Science degree in Business Administration, and a Master of Science degree in Business Administration, both from the University of Maryland at College Park. iv A000401 USCA Case #11-1179 Document #1359221 Filed: 02/17/2012 Page 11 of 175 Barranca Direct Testimony, USPS-T-1 PRC Docket No. C2009-1 1 PURPOSE OF TESTIMONY 2 3 The purpose of this testimony is to address several issues raised by GameFly, 4 Inc.’s, Complaint against the Postal Service. GameFly has alleged that the Postal 5 Service engages in undue or unreasonable discrimination against GameFly, and in 6 favor of Netflix, Inc. and Blockbuster. I will explain the Postal Service’ defense against 7 these allegations, and place them in context from the perspectives of postal operations, 8 the Postal Service’ business, and the Postal Service’ policy objectives for its customers 9 and the public. In the following discussion, I will rely substantially on the testimony of 10 Postal Service witnesses Belair (USPS-T-2), Seanor (USPS-T-3), and Lundahl (USPS- 11 T-4). 12 I will address the following topics: (1) GameFly’s implication that the Postal 13 Service’ alleged preference in favor of Netflix and Blockbuster is an outgrowth of its 14 favoritism toward large, influential mailers and against smaller, less influential mailers; 15 (2) GameFly’s contention that it is similarly situated to Netflix and Blockbuster; (3) 16 GameFly’s allegation that Netflix has been given unusual and unwarranted access to 17 postal management decisions in the processing of mail containing DVDs; (4) GameFly’s 18 contention that the Postal Service’ operations policy of deferring to local management 19 decisions in processing DVD mail is undue or unreasonable; (5) GameFly’s contention 20 that local management decisions in this regard are discriminatory against GameFly; (6) 21 GameFly’s reliance on internal communications within the Postal Service to support its 22 complaint; (7) GameFly’s allegations that the Postal Service affords other preferences 23 to Netflix that, together with its mail processing decisions, establish a pattern of undue 24 or unreasonable discrimination and preference; (8) GameFly’s position that the Postal 1 A000402 USCA Case #11-1179 Document #1359221 Filed: 02/17/2012 Page 12 of 175 Barranca Direct Testimony, USPS-T-1 PRC Docket No. C2009-1 1 Service’ operations policy and decisions constitute a denial to it of treatment similar to 2 that afforded to Netflix and Blockbuster, as well as an explicit refusal to give such 3 treatment to GameFly; (9) the Postal Service’ conditional representation that it would 4 process GameFly’s mail in the same manner as Netflix under the same rates that Netflix 5 pays; and (10) implications of the future mail processing environment for GameFly’s 6 claims. 7 8 I. GameFly’s Complaint seeks lower rates. 9 GameFly is seeking lower rates for mailing DVDs. Its Complaint asks for prices 10 equal to those paid by Netflix for the same type and level of mail processing given to 11 Netflix and Blockbuster. Complaint of GameFly, Inc., at ¶ 57 (April 23, 12 2009)(“Complaint”). Its only filed testimony is designed to demonstrate that the postage 13 it currently pays for outgoing and return DVD mail exceeds the rates paid by Netflix by 14 $1.30. Testimony of Sander Glick (GFL-T-1). In this regard, GameFly has chosen to 15 mail its DVDs as First-Class Mail flats. Netflix,