April 18th Presentation To Northern Ohio Pc Cs Pl 109 435

Slide 1: An Overview of the Postal Accountability and Enhancement Act April 2008 | 1

Slide 2: 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 | 2

Slide 3: 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 | 3

Slide 4: 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 | 4

Slide 5: 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 | 5

Slide 6: Postal Act of 2006: Products  Creates 2 product categories – Market Dominant and Competitive, or “Mailing Services” and “Shipping Services” Mailing Services Shipping Services  First Class Mail  Priority Mail  Periodicals  Express Mail  Standard Mail  Bulk Parcel Post  Single Piece Parcel Post  Media Mail  Bulk International Mail  Bound Printed Matter  Library Mail  Special Services  Single Piece International | 6

Slide 7: Postal Act of 2006: Products, cont. Mailing Services Shipping Services  Regulated with price  No price cap cap Market forces keep prices  No longer a break even competitive requirement  30 days notice required  Price Cap based on CPI by law  45 days notice required  Price floor – must make by law prior to price reasonable contribution to changes overhead costs | 7

Slide 8: 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 | 8

Slide 9: 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 | 9

Slide 10: Postal Act of 2006: Oversight  PRC has expanded powers Can subpoena records Enforcement: may levy fines for noncompliance | 10

Slide 11: 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 | 11

Slide 12: 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 | 12

Slide 13: 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 | 13

Slide 14: Postal Act of 2006  Questions? | 14