Bern Switzerland

1
United States Postal Service Opportunities and
Implications of the New Postal Law

• Bern Switzerland
• April 2007

2
The Postal Service Today

• Mission does not change
• Reliable universal service at affordable
  rates
• Strategic Transformation Goals do not change
• Revenue, Costs, Service, Employee Results
• Some aspects of how the Postal Service manages
  will change

3
Financial Challenges Remain

• Productivity continues in right direction,
  however
• Product mix changing
• First-Class Mail volume declining
• Direct Marketing Mail growing but contribution
  less
• Cost drivers are growing faster than the Consumer
  Price Index
• Health Benefits
• Fuel
• Expanding Delivery Network

4
What Has Changed?

• Increased pricing flexibility for growth and
  innovation
• Increased accountability
• No longer break-even profits and retained
  earnings
• Funding of future retiree health benefits

5
What Has Not Changed?

• The U.S. Postal Service remains an independent
  agency of the Executive Branch
• Oversight by Congress, Regulator, Federal Auditor
  GAO and Inspector General
• Retains the same monopoly status as existing law
• Universal Service obligation for monopoly
  products
• Mailbox monopoly is retained control of the
  last mile

6
Postal Regulatory Commission

• Broader regulatory authority
• Pricing
• Service
• Financial
• Responsible for establishing regulations and
  issuing reports
• Newly created complaint process provides for
  remedial action

7
Two Product Categories
Competitive 11
Market-Dominant 89

• First-Class Mail
• Periodicals
• Standard Mail
• Single-Piece Parcel Post
• Media Mail
• Bound Printed Matter
• Library Mail
• Special Services
• Single-Piece International

• Priority Mail
• Expedited Mail (Express Mail)
• Bulk Parcel Post
• Bulk International Mail

FY 2005 Revenues
8
Pricing Market-Dominant Products
9
Pricing Competitive Products
10
International Postal Arrangements
11
International Postal Arrangements (continued)
12
International Postal Arrangements (continued)
13
Financial Transparency

• Separate accounting for Market-Dominant and
  Competitive products
• U.S. Treasury Department makes recommendations to
  Postal Regulatory Commission by December 2007
• Internal income taxes on profits from Competitive
  Products Fund
• Comply with Sarbanes-Oxley by 2010

14
Guiding Principles

• A modern pricing and regulatory system
• Service standards consistent with universal
  service at affordable prices
• Financial transparency
• A strong mailing industry for the long term