1. Linda A. Kingsley Senior Vice President, Strategy and Transition United States Postal Service EMA Foundation November 2007 How the 21 st Century United States Postal Service May Be Unique

2. 2 Outline Common Ground Key Differences Strategic Transformation Successes What’s in the Postal Act of 2006 Looking Forward Will USPS End Up Looking Like Any of the Other Posts?

3. 3 Providing Universal Service Growing delivery network 1.8 - 2 million new delivery points a year Competition across all categories Slowing growth of core business Demand for high quality, low cost Increasing operating costs (fuel, labor, benefits) Other Posts (and non-posts) want access Common Ground

4. 4 $75 billion revenue 213 billion pieces 37,000 post offices, stations, branches 685,000 career employees 219,000 USPS-owned vehicles 148 million delivery points 1,400+ pieces per delivery point per year Key Differences Scale

5. 5 No U.S. tradition of state-sponsored enterprises Historically limited to mail delivery services - no link with telecom or banking Deference to private sector, constraints on operational and market flexibility - financial services, direct mail Highly developed mailing industry Worksharing / Access since mid-1970’s (80% of volume) Access mailers are partners, not competitors Heavy mailer group involvement for decades Key Differences Public Policy and History

6. 6 “Coopetition” with traditional competitors Delivery Unit entry parcels, transportation U.S. markets and payment systems Bills, statements, and checks in the mail Highly developed direct mail industry Printers, list providers, designers Lower percentage of international mail <3% revenue Key Differences Markets

7. 7 Stable and Affordable Rates Good Service Trust / Security Face of U.S. Government Cumbersome pricing regime Key Differences Burning Platform for Change

8. 8 Low Postage Rates 8 years of increases in Total Factor Productivity Avg. $1+ billion savings annually 115,000 fewer career employees Record Service Performance and Customer Satisfaction Increasing Employee Satisfaction Innovation to Core Products Strategic Transformation Successes

9. 9 1971198319891995200120071977 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% Strategic Transformation Plan Rates Growing No More Than Overall Inflation CPI-U Stamps Postage Among Lowest in Industrialized Nations Germany$.83 France$.81 Great Britain$.73 Japan$.72 Canada$.57 United States$.41 Source: U. S. Postal Service, International Business Exchange rates in effect Oct 2007

10. 10 Strategic Transformation Plan Total Factor Productivity 72737475767778798081828384858687888990919293949596979899000102030405060708 Percent Growth FY Est.Proj. 22.0 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Cumulative 1972 - 2008

11. 11 Growing by Adding Value to the Core usps.com Priority Flat Rate Boxes Click-N-Ship Carrier Pick-up Premium Forwarding Service Alliances (eBay, Imagitas) Intelligent Mail (just getting started) >>> Building Awareness

12. 12 What’s in the Postal Act of 2006?  Retained EarningsProfit  Pricing Flexibility and annual CPI cap  Endorses Network Efficiency  By Dec ’08 PRC in consultation with USPS makes recommendations to Congress on: –Universal Service –Private Express Statutes –Mailbox Monopoly  Dec ’11 GAO study on Business Model

13. 13 USO = regular service at uniform price Every Country has a different definition They are currently asking “How to Fund”? Different from just Universal Service Frequency of delivery? 85% of delivery points don’t cover costs What products? Retail access? Linked to PES Private Express Statutes If no Monopoly on FCM: no need for a price cap? cause cost of USO to rise

14. 14 Mail Box Monopoly  Only Post in the World  Impacts in other countries –Collection boxes –Building and box access  What if the box is full? Service impacts  Dilute the value of Mail?  Considerable Security and Trust implications

15. 15 GAO Business Model Study 2011  Study other posts / industries  Labor  Regulation  Governance  Infrastructure  Financial condition

16. 16 Looking Forward  Intelligent Mail Information is as important as the piece itself  Customization  Flats Sequencing  Virtual Addresses?  Delivery Frequency?  Sustainability counters Do Not Mail  Culture Change More customer focused, innovative

17. 17 We are at a critical crossroads in postal history. The industry is strong and opportunities abound to ensure viability of postal services for future generations In Summary…