1. 1 Shaping a More Efficient Future Price Change Proposal Mailers’ Technical Advisory Committee Stephen M. Kearney Vice President Pricing & Classification May 17, 2006

2. 2 High-Level Goals  Growth  Efficiency  Cost coverage  Addressing  Positioning for the future

3. 3 High-Level Initiatives  Shape-based pricing –Less emphasis on weight  Incentives –Containers –Drop shipping –Sorting –Packaging  More choices  Forever Stamp  Low-cost Address Change Service

4. 4 Agenda  Review full product line –Strategy –Significant changes –Specific examples  Timeline to 2007  Questions

5. 5 First-Class Mail Strategy  Shape-based pricing schedules –Letters –Flats –Parcels  De-emphasize weight

6. 6 First-Class Mail Significant Changes  Forever Stamp  Single-piece 39¢ ►42¢  Postcards 24¢ ►27¢  Additional ounce 24¢ ►20¢ –Letters over 1 ounce go down –Flats over 6 ounces go down  Similar pattern for workshare  New Business Parcel category

7. 7 First-Class Mail Examples WeightCurrentProposed 1 ounce 39¢42¢ 2 ounce 63¢62¢ 3 ounce 87¢82¢ Letters WeightCurrentProposed 1 ounce 52¢62¢ 7 ounce $1.83$1.82 13 ounce $3.27$3.02 Flats WeightCurrentProposed 1 ounce 52¢$1.00 7 ounce $1.83$2.20 13 ounce $3.27$3.40 Parcels

8. 8 First-Class Mail Examples Item Current Price Proposed Price Opportunity Proposed Price with Modification 6 oz. parcel$1.59$2.00 Reconfigure as a flat $1.62 2 oz. flat$0.63$0.82 Reconfigure as a letter $0.62 + 19¢ + 3¢+ 41¢ - 1¢

9. 9 Priority Mail Strategy  Cover costs –Especially large lightweight items  De-emphasize weight for heavier items  Continue to improve convenience

10. 10 Priority Mail Significant Changes  Dimensional weight pricing for Zones 5-8  Lower prices for heavier items  Permanent Flat Rate Box

11. 11 Priority Mail Examples Item CurrentProposed Flat Rate Envelope $4.05$4.65 Flat Rate Box 8.108.80 12-pound (Chicago to Los Angeles) 19.8022.85 25-pound (Chicago to Los Angeles) 36.8531.05

12. 12 Priority Mail Examples Item Current Price Proposed Price Opportunity Proposed Price with Modification Zone 8, 10 pound, 1.6 cubic foot parcel $20.25$28.75 Reduce size by 25% to 1.2 cubic feet $24.85 + $8.50+ $4.60

13. 13 Express Mail Strategy  Low-cost alternative for shipping documents Significant Change  New 1-pound price

14. 14 Express Mail Examples Price change examples CurrentProposed Up to 1/2 Pound & Flat Rate Envelope $14.40$16.25 Over 1/2 Pound, up to 1 Pound 18.8019.50 Over 1 Pound, up to 2 Pounds 18.8021.40

15. 15 Standard Mail Strategy  Align pricing with operations –Encourage growth of efficient, effective mail  Expand shape-based pricing

16. 16 Standard Mail Significant Changes  Increase drop ship incentives  Add more presort options  Create distinct prices for parcels  Add “Not Flat-Machinable” category  Discontinue destination delivery unit rate for letters  Differentiate prices for detached address labels

17. 17 Standard Mail Examples Item CurrentProposed Advertising letter (3-digit auto, DBMC) 19.2¢20.7¢ Non-machinable letter (3-digit, DBMC) 30.3¢39.5¢ Catalog (3-ounces, 3-digit auto, DBMC) 25.3¢30.0¢ Catalog (3-ounces, 5-digit auto, DBMC) 25.3¢27.2¢ Catalog (8-ounces, 5-digit auto, DBMC) 44.1¢44.9¢ Catalog (8-ounces, 5-digit auto, DSCF) 42.8¢43.3¢

18. 18 Standard Mail Examples Item Current Price Proposed Price Opportunity Proposed Price with Modification 8 oz. parcel, basic presort, no drop ship 82.4¢$1.301 Enter at destination BMC $1.101 12 oz. parcel 3/5-digit presort, DSCF 85.3¢93.9¢ Enter at DDU, 5-digit presort 80.1¢ 4 oz. rigid auto flat, 5-digit presort, DSCF 27.5¢49.1¢ Use auto- compatible flexible packaging 29.1¢ +47.7¢+27.7¢ +8.6¢- 4.2¢ +18.7¢+1.6¢

19. 19 Periodicals Strategy  Encourage efficiency –Containers –Drop ship  Simplify co-palletization rules

20. 20 Periodicals Significant Changes  New 85¢ container charge  Enhanced drop ship incentives –Particularly for high-editorial content

21. 21 Periodicals Examples Item CurrentProposed Weekly news magazine (6 oz., 40% adv., CR-RT, SCF, 2000-piece pallet) 17.9¢20.0 ¢ Opinion journal (5 oz., 10% adv., 3-digit, zone 4, 50-piece sack) 29.5 ¢ 33.6 ¢ Local Newspaper (4 oz., DDU, CR-RT) 8.5 ¢ 10.5 ¢

22. 22 Periodicals Examples Item Current Price Proposed Price Opportunity Proposed Price with Modification 8 oz., 5-digit auto, mailed in sacks (40 pieces per sack) 33.4¢38.1¢ Co-palletize with another magazine (1639 pieces per pallet) 36.1¢ As above, but entered at DADC 31.2¢ + 4.7¢ + 2.7¢ - 2.2¢

23. 23 Package Services Strategy  More efficiency  Streamline product offering

24. 24 Package Services Significant Changes  Discontinue retail Bound Printed Matter  Lower increase for DDU and DSCF entry  Require barcodes on all Parcel Select items

25. 25 Package Services Examples Price change examples CurrentProposed 1-Pound Parcel Post $3.95$4.55 5-Pound Parcel Post (Chicago to Los Angeles) $9.11$9.45 5-Pound Parcel Select DDU $1.51$1.67 15-pound Parcel Select DSCF $3.27$3.88 1.5-Pound BPM flat DSCF presort 73.1¢72.8¢ 5-Pound BPM parcel DBMC presorted & barcoded $1.298$1.516

26. 26 Special Services Strategy  Improve address quality  Modernize services Significant Changes  New low-cost One Code Address Change Service for letters  Redesign Insurance  Reduce electronic Return Receipt fee

27. 27 Special Services Examples One Code ACS fees CurrentProposed Automated First-Class Mail (letters only) First two notices, each N/A 0¢0¢ Additional notices, each N/A 5¢5¢ Automated Standard Mail (letters only) First two notices, each N/A 2¢2¢ Additional notices, each N/A 15¢

28. 28 Special Services Examples ACS fees CurrentProposed Electronic ACS notifications (First-Class Mail) 21¢6¢6¢ Electronic ACS notifications (other classes) 21¢25¢ Manual (paper) notifications (all classes) 75¢50¢

29. 29 Special Services Examples Item CurrentProposed Certified Mail $2.40$2.65 Express Mail Insurance ($100 to $200) $1.0575¢ Return Receipt (paper copy) $1.85$2.15 Return Receipt (electronic) $1.3585¢

30. 30 Timeline 2006 2007 May Jun July Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Governors Decision (March/April) Implementation (May/June) PRC Recommendation (Early March) Litigation (May through March 2007) Filing Date (May 3, 2006) 10 Months 1 Year

31. 31 Thank You Questions?