Table V-1 Proposal Two Cost Impacts ($ Millions) Initial Proposal Two Updated Proposal Two Attributable Attributable % of Attributable % of “Hidden” “Hidden” Mail Costs under Variable Costs under Current Variable Costs under Current Classes Current Costs Proposal Two Costs Costs Proposal Two Costs Methodology Market 28,205 2,649 30,854 109% 1,072 29,277 104% Dominant Competitive 10,970 725 11,695 107% 388 11,358 104% Total 39,175 3,374 42,549 109% 1,460 40,635 104% Summary of Initial and Reply Comments Hidden Variable Costs Methodological Assumptions Commenters criticize methodological assumptions that Neels relies upon in his analysis of Postal Service’s costs. Specifically, commenters question Neels’s reliance on McBride’s classification of the CRA cost components and Neels’s treatment of the Postal Service as a single-product firm. Reliance on McBride’s Analysis of Cost Components Commenters criticize analysis because it utilizes a previous analysis conducted by McBride that relies on McBride’s own classification of costs, which has not been critically reviewed and for which he expressed reservations. Postal Service Comments at 29; Bradley Comments at 39-40. As Bradley points out, McBride’s analysis includes classification of costs made by neither the Postal Service nor the “a [Commission].” Bradley Comments at 39. Additionally, Bradley states that McBride’s analysis of cost components has never been critically reviewed and, as a result, Bradley
Table V-1 Proposal Two Cost Impacts ($ Millions) Initial Proposal Two Updated Proposal Two Mail Classes Attributable Costs under Current Methodology “Hidden” Variable Costs Attributable Costs under Proposal Two % of Current Costs “Hidden” Variable Costs Attributable Costs under Proposal Two % of Current Costs Market Dominant 28,205 2,649 30,854 109% 1,072 29,277 104% Competitive 10,970 725 11,695 107% 388 11,358 104% Total 39,175 3,374 42,549 109% 1,460 40,635 104% Summary of Initial and Reply Comments Hidden Variable Costs Methodological Assumptions Commenters criticize methodological assumptions that Neels relies upon in his analysis of Postal Service’s costs. Specifically, commenters question Neels’s reliance on McBride’s classification of the CRA cost components and Neels’s treatment of the Postal Service as a single-product firm. Reliance on McBride’s Analysis of Cost Components Commenters criticize analysis because it utilizes a previous analysis conducted by McBride that relies on McBride’s own classification of costs, which has not been critically reviewed and for which he expressed reservations. Postal Service Comments at 29; Bradley Comments at 39-40. As Bradley points out, McBride’s analysis includes “a classification of costs made by neither the Postal Service nor the [Commission].” Bradley Comments at 39. Additionally, Bradley states that McBride’s analysis of cost components has never been critically reviewed and, as a result, Bradley
Order3506.docx