Price Change 2018 January 2018.

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Presentation transcript:

Price Change 2018 January 2018

2018 Price Change Agenda Overview Market Dominant First-Class Mail® USPS Marketing Mail® Package Services Extra Services Overview Competitive Time Line Implementation Sunday, January 21, 2018 PRC Ten Year Review

2018 Price Change Strategy – use 95% of available cap 1.987% Needed to be within 95% of CPI by class CPI forecasted at 1.44% for August 2018 Governors' term ended in December of 2016 Approved the MD strategy Approved 95% Approved the Competitive prices Promotions Continue to develop potential new promotions Evaluate when new Governors are approved Impact FC - $40M MM - $60M Strategy – use 95% of available cap

First-Class Mail - ~1.9% overall increase 2018 Price Change First-Class Mail - ~1.9% overall increase First-Class stamp price moves to 50 cents Product CPI Percent Change Single-piece Letters & Cards 2.1% Single-piece Metered 2.2% Flats 0.4% Parcels* N/A Presort Letters & Cards 1.6% First-Class Mail International** (includes letters, cards, and flats) 0.0% * Moved to Competitive 9/3/2017 ** Does not include International Inbound 4

Key First-Class Mail Single-Piece Prices 2018 Price Change Key First-Class Mail Single-Piece Prices Current Price New Percent Change Stamp Price 1 Oz. 0.49 0.50 2.0% Single Piece Additional Ounce 0.21 0.0% Meter Price 1 Oz. 0.46 0.47 2.2% Single-Piece Flats 1 Oz. 0.98 1.00 Single-Piece Cards 0.34 0.35 2.9% Keep extra ounce at $0.21 cents Meter increase one cents Flats – 2 times SP price , two stamps SP Cards – increase by one cent

Key First-Class Mail Bulk Prices 2018 Price Change Key First-Class Mail Bulk Prices Current Price New Percent Change Mixed AADC Automation Letters 0.423 0.424 0.2% AADC Automation Letters 0.403 0.408 1.2% 5-Digit Automation Letters 0.373 0.378 1.3% Mixed ADC Automation Flats 0.750 0.705 -6.0% 3-Digit Automation Flats 0.630 0.593 -5.9% 5-Digit Automation Flats 0.446 0.474 6.3% Address Flats WS Reduce MADC Flats -6% Raise 5D Flats +6% Up to 3.5 ounces for free for commercial letters remains Note: IMb discount remains at $0.003.

USPS Marketing Mail 2018 Price Change ~1.9% overall increase Product CPI Percent Change Letters 2.0% Flats 2.1% Carrier Route Letters, Flats, and Parcels High Density / Saturation Letters 2.4% High Density / Saturation Flats and Parcels 1.1% Parcels 2.8% EDDM-Retail 0.6% IMb Discount remains at $0.001 Change order of pallet preparation CR pallets made before merged pallets Note: IMb discount remains at $0.001. Incent Pure CR Pallets by prioritizing pure pallets during preparation 7

Key USPS Marketing Mail Commercial Origin Prices 2018 Price Change Key USPS Marketing Mail Commercial Origin Prices Current Price New Percent Change Letters (5-Digit Auto entered at Origin) $0.251 0.00% Flats (5-Digit Auto Flat entered at Origin) $0.387 $0.393 1.55% Carrier Route (Flat entered at Origin) $0.290 $0.295 1.72% High Density/Saturation Letters (Saturation Letter entered at Origin) $0.186 High Density/Saturation Flats (Saturation Flat entered at Origin) $0.218 $0.219 0.46% EDDM-Retail $0.177 $0.178 0.56% Over incenting dropship letters Narrowed in last price change Continue to close gap (taking a measured approach) 10 percentage points by PRC req. 8

Nonprofit Origin Prices 2018 Price Change USPS Marketing Mail Nonprofit Origin Prices Current Price New Percent Change Letters (5-Digit Auto entered at Origin) $0.134 $0.136 1.49% Flats (5-Digit Auto Flat entered at Origin) $0.244 $0.227 -6.97% Carrier Route (Flat entered at Origin) $0.209 $0.213 1.9% High Density/Saturation Letters (Saturation Letter entered at Origin) $0.111 0.00% High Density/Saturation Flats (Saturation Flat entered at Origin) NP Revenue per piece is required to be 60% of commercial prices Law states at subclass level Currently applied a class level Proposal at PRC to move back to subclass 9

2018 Price Change Current Price New Marketing Mail Comm. Auto Letters Current Price New $ Difference % Difference Mixed Origin $0.288 $0.287 -$0.001 -0.35% 5-Digit Origin $0.251 $0.000 0.00% 5-Digit DNDC $0.225 $0.227 $0.002 0.89% 5-Digit DSCF $0.217 $0.220 $0.003 1.38% HD DSCF $0.168 $0.172 $0.004 2.38% Saturation Origin $0.186 Saturation DNDC $0.162 $0.164 1.23% Saturation DSCF $0.155 $0.158 1.94% $0.026 $0.024 $0.008 $0.007 Narrow incentive for dropship letters by 10 percentage points Narrow NDC Narrow DSCF Narrow incentive for HD Letters Same processing as 5D $0.024 $0.022 $0.007 $0.006

Marketing Mail Nonprofit 2018 Price Change Marketing Mail Nonprofit Auto Letters Current Price New $ Difference % Difference Mixed Origin $0.171 $0.172 $0.001 0.58% 5-Digit Origin $0.134 $0.136 $0.002 1.49% 5-Digit DNDC $0.108 $0.112 $0.004 3.70% 5-Digit DSCF $0.100 $0.105 $0.005 5.00% HD DSCF* $0.087 $0.090 $0.003 3.45% Saturation Origin $0.111 $0.000 0.00% Saturation DNDC $0.089 2.30% Saturation DSCF $0.080 $0.083 3.75% $0.026 $0.024 $0.008 $0.007 NP Higher increases Smaller actual change Prices lower than commercial counterparts $0.024 $0.022 $0.007 $0.006

2018 Price Change Current Price New Price Incent pre CR Pallets Marketing Mail Comm. Auto Flats Current Price New Price $ Difference % Difference 5-Digit DSCF $0.335 $0.340 $0.005 1.49% C-R Basic DSCF $0.252 $0.257 1.98% Pure C-R DSCF* $0.232 $0.238 $0.006 2.59% Pure C-R DDU* $0.221 $0.227 2.71% HD DSCF (125 pieces) $0.194 $0.000 0.00% HD+ DSCF (300 pieces) $0.174 $0.173 -$0.001 -0.57% Saturation DSCF (90%) $0.164 $0.165 $0.001 0.61% Saturation DDU (90%) $0.155 $0.156 0.65% $0.083 $0.083 $0.020 $0.019 $0.011 $0.011 Incent pre CR Pallets Make CR bundles before merged bundles

Marketing Mail Pound-Rate Commercial Flats 2018 Price Change Marketing Mail Pound-Rate Commercial Flats Rev/Pc – 8 oz. Auto Flats Current Rev/Pc* New Rev/Pc* $ Difference % 5-Digit DSCF $0.508 $0.511 $0.003 0.59% C-R Basic DSCF $0.394 $0.393 -$0.001 -0.25% Pure C-R DSCF $0.374 $0.000 0.00% Pure C-R DDU $0.352 HD DSCF $0.294 $0.293 -0.34% HD+ DSCF $0.274 $0.272 -$0.002 -0.73% Saturation DSCF $0.264 Saturation DDU $0.246 Less focus on pound price Deemphasizing weight *Current and New Revenue per piece rounded to 3 decimal points

2018 Price Change CPI Percent Periodicals Change Outside County 1.93% Inside County 1.84% The majority of the large circulation publications will pay between 1.0 and 1.9 percent more in postage from this price change. On average, heavier weight mailers will also see their postage increase by less than CPI. On average, large Nonprofit mailers will see changes in their prices from 1.3 percent increases to declines of 1.4 percent. On average, smaller, low circulation publications (less than 150 thousand per issue) will see above average increases due to small circulation, lighter weight pieces and a higher percentage of non-machinable pieces. Ride Along Prices changed by $0.001 or 0.6%

Package Services - ~2.0% overall increase 2018 Price Change Package Services - ~2.0% overall increase Product CPI Percent Change Media Mail/Library Mail 1.99% Alaska Bypass 1.31% Bound Printed Matter Flats- Overall 2.09% Origin – Carrier Route -1.98% DSCF – Carrier Route 3.83% DDU – Carrier Route 6.35% Parcels - Overall 1.92% Origin - Basic Presort -3.04% DSCF - Basic Presort 2.33% DDU - Basic Presort 4.66% Over encouraged DDU entry for Flats ad Parcels Being addressed in the price change Comail BPM Flats with MM Flats and Periodicals Note: Will allow co-mail up to 24 ounces with existing Periodical and Marketing Mail co-mail pools. 15

Extra Services - ~2.0% overall increase 2018 Price Change Extra Services - ~2.0% overall increase Product CPI Percent Change PO Boxes™ 1.9% Certified Mail® 3.0% Return Receipt 0.7% Certificate of Mailing 3.2% Address Correction Service 2.5% All Other 1.7% 16

2018 Price Change Competitive Prices Products Priority Mail 3.9% Jan. 2018 Products % Change Priority Mail 3.9% Priority Mail Express Parcel Select Heavyweight 4.9% Parcel Select Lightweight (PSLW) 7.0% First-Class Package Service (FCPS) Retail Ground Parcel Return Service (PRS) International FCM Retail Parcels 14.5% 0.8% Retail 6.2% Com. Base** 6.1% Com. Plus** Overall 3.9% price increase Comm. Base and Pulse – about 6% FedEx 4.9% Transfer FCM Parcels to competitive * Estimated. ** Reduces Commercial Base discount to 9.4% off Retail & Commercial Plus discount to 12.7% off Retail.

Resources 2018 Price Change Online Postal Explorer® ─ pe.usps.com Current and new prices Including downloadable price files in excel and CSV formats Federal Register notices Domestic Mail Manual & International Mail Manual DMM® Advisory ─ posted on Postal Explorer, also special e-mail updates All information is available on Postal Explorer. Notice 123 will be available close to the price change implementation date.

10-Year Review

Disclaimer This is intended as a summary of the PRC’s proposal in Order No. 4258, not as the Postal Service’s views on that proposal. Any opinions are solely those of the presenter, not of the Postal Service. The PRC proposal discussed here is just that: a proposal. These rules are not final.

10-Year Review PAEA directed: PRC to determine whether current system meets objectives Solicited comments - Dec. 20, 2016 80+ entities provided comments - March 2017 PRC issued findings Dec. 1, 2017 System not working Issued proposed rules Comments on proposed rule due March, 1, 2018

10 Year Review – Is system meeting objectives? Regulatory Proceedings 10 Year Review – Is system meeting objectives? To maximize incentives to reduce costs and increase efficiency To create predictability and stability in rates To maintain high quality service standards To allow the Postal Service pricing flexibility To assure adequate revenues, including retained earnings, to maintain financial stability To reduce the administrative burden and increase the transparency of the ratemaking process To enhance mail security and deter terrorism To establish and maintain a just and reasonable schedule for rates and classifications, however this shall not be construed to prohibit the Postal Service from making changes of unequal magnitude within, between, or among classes of mail To allocate the total institutional costs of the Postal Service appropriately between market dominant and competitive products

Outline of PRC Proposal 10-Year Review PRC Proposal provides for: Three different types of additional pricing authority Specified bands and grace periods for workshare pass-throughs Procedural changes impacting timeline and schedule for price changes

Questions?