Two Major Events:

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(No Transcript)
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• Two Major Events
• 2006 Postal Rate Case
• Postal Reform

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Let's Look at the Anatomy of A Postal Rate Case
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The Process

• USPS BOG authorizes rate case filing with the
  Postal Rate Commission ("PRC").
• Starts a 10-month process of hearings
• Culminates in a PRC recommended decision
• Final action made by the USPS Governors
• Implementation ordered by the USPS BOG

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• Why a regulatory process?
• USPS has a monopoly
• Regulation substitutes for competition

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• Steps in the Process
• USPS specifies revenue need
• Costing
• Pricing
• Rate design

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• Major Classes of Mail
• First-Class
• Periodicals
• Standard
• Packages
• Expedited

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• Ratemaking is done at the Subclass Level
• First-Class
• Letters Sealed Parcels
• Cards
• Priority
• Standard
• Regular
• Enhanced Carrier Route

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Caused Costs
Attributable Costs
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Overhead
Caused Costs
Institutional Costs
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10
Base Rate

InstitutionalCosts
x
Markup
100
Attributable Costs
Markup 100 (attributable)
X (institutional)
..cents (Base Rate)
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10
Base Rate

Workshare discountsApplied Here
InstitutionalCosts
x
Markup
Workshare savings earned here
100
Attributable Costs
Markup 100 (attributable)
X (institutional)
..cents (Base Rate)
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• Revenue Requirement
• 4 billion in new revenue
• 1 contingency reserve

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• Proportionate Postal Volume
• Standard Mail..51.3
• First-Class42.8

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SHAPE-BASED CRITERIA

• LETTERSFLATSPARCELS

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KEY DETERMINING FEATURES

• Non-Automation/Non-Machinable
• Non Automation
• Automation

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THE BASIC STRUCTURE

• If it meets the dimensions and
• If it weighs
• Then it is a letter

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• Non-automation letters
• Letters that meet automation dimensions but no
  barcode

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• Non-machinable letters
• Letters that do not meet automation guidelines

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STANDARD MAIL

• LETTER RATES
• AND CATEGORIES

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THE BASIC STRUCTURE

• If it meets the dimensions and
• If it weighs
• Then it is a letter

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THE BASIC CATEGORIES

• Non-Automation/Non Machinable
• Non Automation
• Automation

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• Flats
• Automatable
• Not Flat Machinable (FSM 1000)
• Hybrid Flats
• Move to Parcels

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Either Godor the devil is in the details. and
the details will be in the DMM
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Mail Class USPS Proposed Average PRC
Recommended Increase Increase First
Class 7.1 6.9 Standard Regular 9.6 9.5
Nonprofit Regular 8.9 6.7 Standard
ECR 8.9 6.9 Nonprofit ECR 8.8 8.8 Peri
odicals 11.7 11.7 Priority 13.6 13.6
Express 12.5 12.5 Parcel Post 17.4 16.6

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Key Elements of Postal Reform Bill P.L. 109-435
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• Revised Rate Regulation
• Market-Dominant Services(monopoly-protected)
• Competitive Service
• (Express, Parcels)

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• Call for transparency and accountability
• Services
• Operations
• Finances

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Service performance standards for all
market-dominant products Measurement of
service Public reports audits
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Revised definition of the monopoly 6x price of 1
oz First-Class stamp 12.5 oz
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Changes the role of the regulator Postal Rate
Commission Postal Regulatory Commission
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Reports New rules for financial
reporting Reports on universal service Reports on
the monopoly Reports on new ratemaking Reportsrep
ortsreports
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• Incentives
• Change in executive compensation
• Flexibility over rates and classifications
• Can operate at a profit and retain earnings

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• Reform called for by mailers
• Mailers need
• Universal mail system
• Consistent Reliable
• Service (Utility-like)
• Cost-efficient Mail Service