1. DMA International Day Postal Liberalization Here and Abroad Kate Muth Association for Postal Commerce (PostCom) June 18, 2007

2. DMA International Day What Mailers Want Restraint on Prices –Competition is supposed to lead to lower prices –Does liberalization equate with competition?

3. DMA International Day ISAL, IPA Have Benefited Revenue and Volumes in thousands

4. DMA International Day Revenue Per Piece for ISAL and IPA (cents per piece) Fiscal YearISALIPA 199673.894280.2796 199769.282277.0318 199870.983674.2180 199965.871564.1615 200065.663149.5698 200169.921948.6129 200267.608944.5214 200366.309542.6866 200465.867745.5921 200564.137946.5959 200665.162651.9410 Source: Postal Regulatory Commission from RPW reports

5. DMA International Day Source: Postal Regulatory Commission from RPW Reports Total International Mail Volume – Annual Growth Rates

6. DMA International Day Recent International Rate Increases DATEAVERAGE INCREASE 5/14/0713.1% 1/8/065.9% 1/7/015.8% 5/30/993.3%

7. DMA International Day Mailers Want Comprehensive Change of Address System in Europe Viable COA in other countries – businesses spend money to acquire new customer only to lose them once they move. USPS strong in this regard – robust COA system. Privacy issues are a major hurdle in Europe

8. DMA International Day

12. “ The United States letter monopoly is among the least liberal in the world because it is not subject to price or weight limitations. The U.S., however, allows worksharing, which has grown steadily and substantially over time. As a result, much of the value chain is now in the hands of mailers and third-party consolidators, and, due to worksharing, the U.S. has the most liberalized postal market in the industrialized world. Because even total liberalization of the monopoly may not be effective in creating postal competition (e.g., Sweden and New Zealand), worksharing may be a more effective way to introduce competition into a postal market.” –THE IMPACT OF USING WORKSHARING TO LIBERALIZE A POSTAL MARKET; Robert H. Cohen, William W. Ferguson, John D. Waller and Spyros S. Xenakis Mailers Want Worksharing

13. DMA International Day A Brief History of Worksharing in the U.S.

14. DMA International Day WORKSHARING – Where USPS Is Liberalized Worksharing saved USPS $14 Billion in 2004 Saved economy $11 Billion in 2004 USPS workforce reduction due to worksharing – workforce would have had to increase 22% (additional 187,000 work years) Stimulates mail volume – Since introduction of worksharing discounts for advertising mail in 1978, ad mail has grown 240% Source: The Impact of Using Worksharing to Liberalize a Postal Market; Cohen, Ferguson, Waller, Xenakis

15. DMA International Day POSTAL ACCOUNTABILITY AND ENHANCEMENT ACT (PAEA) Does new law set USPS on path to commercialization? –New law sets up market-dominant and competitive categories. –Modern system of regulation for market-dominant products tied to inflationary price cap. (Rules still to be written.) –USPS free to set rates for competitive products as long as rate cover “appropriate share” of institutional costs. (Rules still to be written.)

16. DMA International Day PAEA – International Highlights of New Law Customs law applied equally to competitive products. (June 20 is date for this to be done.) Dept. of State must adopt “competitively neutral” policy towards UPU. (Immediate action.) PRC has greater authority in international postal policy. PRC has authority to review international mail rates. –Not clear exactly what PRC’s authority is. Rules still to be written.

17. DMA International Day On Competitive Side: Appears to set USPS on a path to commercialization. –Freedom around pricing –Customized agreements allowed –Short lead time on announcing rate increases –Quicker response to competitors’ actions Market-Dominant Side: Jury is still out. Too many rules still to be written. The Verdict

18. DMA International Day Opportunities Getting the full range of services from USPS –For example, Customer X could get customized international agreement, customized prices on Priority Mail and a negotiated service agreement on market-dominant products, such as volume discounts on incremental volume growth.

19. DMA International Day Tracking and tracing of competitive products Guaranteed delivery On-time performance of Priority Mail in high-90% What’s Needed to Compete

20. DMA International Day Culture Change: USPS, PRC and Industry –It is time to think of USPS as a corporate commercial activity and not a federal government program. If it remains a federal program, like highways or Amtrak or homeland security funds, every member of Congress feels it is his/her job to get a fair share for his/her constituents -- regardless of what is good for the country. We need to get USPS as far into the commercial realm as feasible, and as far out of the political realm as possible. (Disclaimer: This is Kate’s opinion and is not necessarily the view of the association.) Most Important Need

21. DMA International Day Kate Muth PostCom Kmuth@postcom.org www.postcom.org 703-524-0096 Questions?