An Overview of the Postal Accountability and Enhancement Act April 2008

An Overview of the Postal Accountability and Enhancement Act

April 2008

Agenda What the new law says and how we got to this point Why Congress wrote this law What it means for the Postal Service What it means for you, our customers Bottom line – same mission for the Postal Service

What the new law says and how we got to this point

Why Congress wrote this law

What it means for the Postal Service

What it means for you, our customers

Bottom line – same mission for the Postal Service

Background: What is the Postal Service? A government agency, but run like a business No taxpayer money for operations, funded by you, our customers 700,000 employees Hundreds of processing facilities, over 30 thousand Post Offices Deliver to every address in the nation – universal service Challenge of postal policy: provide universal service, maintain network, and keep prices down

A government agency, but run like a business

No taxpayer money for operations, funded by you, our customers

700,000 employees

Hundreds of processing facilities, over 30 thousand Post Offices

Deliver to every address in the nation – universal service

Challenge of postal policy: provide universal service, maintain network, and keep prices down

Background: Postal Reorganization Act Governed Postal Service from 1971-2006 Independent, business-like organization, phased out subsidies Break even mandate - a requirement and guarantee Model – increasing mail volume + monopoly to support universal service 1990’s – model started to break down Postal Service cut costs through automation and worksharing but policymakers wanted longer term change

Governed Postal Service from 1971-2006

Independent, business-like organization, phased out subsidies

Break even mandate - a requirement and guarantee

Model – increasing mail volume + monopoly to support universal service

1990’s – model started to break down

Postal Service cut costs through automation and worksharing but policymakers wanted longer term change

Postal Act of 2006 Postal Service has the same mission – universal service at affordable prices More businesslike Main aspects of law Incentives to control costs More flexibility in pricing More transparency More oversight

Postal Service has the same mission – universal service at affordable prices

More businesslike

Main aspects of law

Incentives to control costs

More flexibility in pricing

More transparency

More oversight

Postal Act of 2006: Products Creates 2 product categories – Market Dominant and Competitive, or “Mailing Services” and “Shipping Services” Priority Mail Express Mail Bulk Parcel Post Bulk International Mail First Class Mail Periodicals Standard Mail Single Piece Parcel Post Media Mail Bound Printed Matter Library Mail Special Services Single Piece International Shipping Services Mailing Services

Creates 2 product categories – Market Dominant and Competitive, or “Mailing Services” and “Shipping Services”

Priority Mail

Express Mail

Bulk Parcel Post

Bulk International Mail

First Class Mail

Periodicals

Standard Mail

Single Piece Parcel Post

Media Mail

Bound Printed Matter

Library Mail

Special Services

Single Piece International

Postal Act of 2006: Products, cont. No price cap Market forces keep prices competitive 30 days notice required by law Price floor – must make reasonable contribution to overhead costs Regulated with price cap No longer a break even requirement Price Cap based on CPI 45 days notice required by law prior to price changes Shipping Services Mailing Services

No price cap

Market forces keep prices competitive

30 days notice required by law

Price floor – must make reasonable contribution to overhead costs

Regulated with price cap

No longer a break even requirement

Price Cap based on CPI

45 days notice required by law prior to price changes

Postal Act of 2006: Transparency Quarterly and annual financial reporting, like a publicly traded company By 2010, must comply with Sarbanes Oxley, section 404 Requires USPS to document processes and controls Annual compliance report, evaluated by the PRC

Quarterly and annual financial reporting, like a publicly traded company

By 2010, must comply with Sarbanes Oxley, section 404

Requires USPS to document processes and controls

Annual compliance report, evaluated by the PRC

Postal Act of 2006: Transparency, cont. Service Standards issued in December 2007 USPS required to issue proposed service standards for mailing services With a plan for how to measure performance Issued after working with customers through MTAC – Mailers Technical Advisory Committee Intelligent Mail is important for measurement By June 2008, USPS will issue plan for how to meet these standards, including any changes in the network

Service Standards issued in December 2007

USPS required to issue proposed service standards for mailing services

With a plan for how to measure performance

Issued after working with customers through MTAC – Mailers Technical Advisory Committee

Intelligent Mail is important for measurement

By June 2008, USPS will issue plan for how to meet these standards, including any changes in the network

Postal Act of 2006: Oversight PRC has expanded powers Can subpoena records Enforcement: may levy fines for noncompliance

PRC has expanded powers

Can subpoena records

Enforcement: may levy fines for noncompliance

Postal Act of 2006: Impact on Postal Service Need to control costs CPI Cap Can lose money on mailing services if costs are higher than inflation Costs going up faster than cap – fuel, benefits Retiree Health Benefits Fund Payments of $5.4 billion to $5.8 billon per year for 10 years Need to work with customers to reduce costs Implementation Price changes approved – May 12, 2008 implementation Service Standards

Need to control costs

CPI Cap

Can lose money on mailing services if costs are higher than inflation

Costs going up faster than cap – fuel, benefits

Retiree Health Benefits Fund

Payments of $5.4 billion to $5.8 billon per year for 10 years

Need to work with customers to reduce costs

Implementation

Price changes approved – May 12, 2008 implementation

Service Standards

Postal Act of 2006: Impact on Customers Work with customers to reduce costs Address hygiene, reduce UAA mail Predictability of price increases – more frequent, smaller changes tied to CPI Avoid rate shock Transparency – service standards and measurements More innovation – respond to market changes and your needs by rolling out new products faster Innovative pricing and products, contract pricing

Work with customers to reduce costs

Address hygiene, reduce UAA mail

Predictability of price increases – more frequent, smaller changes tied to CPI

Avoid rate shock

Transparency – service standards and measurements

More innovation – respond to market changes and your needs by rolling out new products faster

Innovative pricing and products, contract pricing

Postal Act of 2006: More Issues/Studies Universal Service study Monopoly Look for announcements on the PRC’s website, PRC.gov PRC will hold hearings and invite public comment

Universal Service study

Monopoly

Look for announcements on the PRC’s website, PRC.gov

PRC will hold hearings and invite public comment

Postal Act of 2006 Questions?

Questions?