January 2017 Price Structure Considerations Great Lakes Area Industry Focus Group

Price Change Goals Transparency No unintended consequences Simplification Growth

Proposed Transparency Internal Process Proposed Dates Share Concepts with Industry Validate Financials (IRC) Solicit ELT Approval Solicit Governor Approval File with PRC PRC Decision All discussions around January 2017 Product Concepts and Potential Structural Changes are to be considered preliminary and non-binding as they are still under consideration and are pending USPS senior leadership approval. Final Prices and Product decisions are within the sole authority of Governors and subject to PRC approval. Proposed Dates 7/12-7/13: Share Key Concepts with MTAC Aug: Share Technical Changes and Draft Postage Statements with Developers Aug: Share Draft Mailing Standards Sep/Oct.: Final PRC Market Dominant Nov: Competitive Filings Nov/Dec: Publish Final Prices, Standards 1/8: Target Implement pre-release 1/22: Targeted Price Effective Date

No Unintended Consequences Items under consideration: First-Class Combine AADC and 3-Digit Automation Letters for First-Class Presort 3rd Ounce free for First-Class Commercial Letters First-Class Mail Promotions Standard Mail Combine AADC and 3-Digit Automation Letters for Standard Mail Presort Simplify Standard Automation Letters by eliminating the per pound rate between 3.3 and 3.5 ounces Increase Standard Mail flats piece price weight break from 3.3 ozs. to 4.0 ozs. Adjust Standard Mail Forwarding fee to two decimal places Simplify Simple Samples Standard Mail Promotions FSS Standard Mail revert to previous structure

No Unintended Consequences, cont. Items under consideration: Periodicals FSS Periodicals revert to previous structure Shipping Half and Full Tray Pricing for Premium Forwarding Service FSS Bound Printed Matter revert to previous structure International Restructure PIM & PMEI Country Groups for Flat Rate Parcels

No Unintended Consequences, cont. Items under consideration: Special Services Combine Permit for Outbound/Return Shipping Products Eliminate fees for Inbound/Outbound Commercial Competitive Shipping Products Move Update – assign a price for postage assessment through census-based verification for Move Update Link Group E (Free) P.O. Boxes utilized with street addresses Redesign COD to provide only Hold-for-Pickup with optional transfer of money collected by EFT

FSS Price Structure Under consideration: Standard flats, BPM* & Periodicals revert to structure in place prior to January 2014 Prices not based on equipment used to sort – label list determine bundle and pallet makeup Allows Operations flexibility to add or remove ZIPS without impacting prices Encourages industry to reverse volume decline and resume adding names to qualify for carrier route discount Allows Pricing and Legal time to work with PRC via technical conference open to industry on best way to address in cap calculation Allows us time to make adjustments based on feedback from PRC and Industry *BPM FSS prep will be required (was optional in Jan 2014)

Standard Letters DSCF/DNDC Passthrough Issue: Change in DSCF pass-through calculation from FY14 to FY15 DSCF Letters pass-through went from 57.4% in the FY14 ACD to 225% in FY15 ACD FY15 Discount $0.045 FY15 cost avoidance – $0.02 per piece Issue impacts both DNDC and DSCF dropship letters Prior to May 2015 price change we were using the per pound price element for 3.3 to 3.5 ounces to calculate pass-through for all DSCF and DNDC Letters Elimination of the per-pound price element in May 2015 triggered change in pass-through Would require up to a 27% price increase to address Reduce pass-throughs to 100 would adversely affect mailers Modest increases over a number of price changes