Mailing Industry View and Congressional Update

Northeast Area Mailing Industry Focus Group Meeting

Joe Schick

Vice President of Postal Affairs

| 2

2015 Issues• CPI Increase• FSS Price Structure• Network Rationalization Phase II• New 24 Hour Operations Clock• Machinable Mailpiece Characteristics• Exigent Rollback• USPS Labor Negotiations

| 3

CPI Increase/Price Change• 1.966% average• Industry struggling with analysis (apples to

apples comparisons)– Complexity for flats – FSS pricing– Standard Mail dropship discounts

• First Class Presort – greater than CPI– No change to First Class Single Piece (first ounce)

| 4

CPI Increase/Price Change• Periodicals

– Outside County = 1.34% (PRC found USPS error)– Substantial reductions to pound rates– Substantial increases to bundle and container rates– Wide variance of impact (decreases – much greater than CPI

increases)

• Standard Mail– Letters = greater than CPI– Flats = CPI + 1.05% at a minimum– Enhanced Carrier Route = 1.4% (average)– Parcels = +9%

| 5

CPI Increase/Price Change• Bound Printed Matter

– Flats = <1% increase– Parcels = +2.5% increase– FSS pricing for flats

• Nonprofit Mail– Standard Mail letter increase > regular rates

• 5-digit entered at DSCF• Auto dropship < regular rates

– Periodical increases above CPI

| 6

FSS Pricing• Required prep for all mail destinating in FSS

zones• Eliminates Carrier Route in FSS zones – slightly

higher than current carrier route price• High Density and High Density+ not required• Facility pallets can be entered at DFSS facility• Difficult to determine true impact

| 7

Network Rationalization Phase II• Began in January• 82 facilities• Impact to First Class Mail?• Will Phase I success be replicated?• Concerns with distance from processing to

delivery units?• Rollout will be monitored closely

| 8

24:00

06:00

12:00

18:00

08:00

OutgoingOperations

(5:00 PM – 12:30 AM)

ContinuousDPS/Secondary

Operations(12:00 PM – 6:00 AM)

IncomingPrimary

Operations(8:00 AM – 12:00 PM)

BMEU(8:00 AM – 7:00 PM)

ContinuousRemittance/

Caller Service

Processing0800-0600

24-Hour Plant Operations January 2015

| 9

Machinable Mailpiece• USPS initiates re-examination of machinable

mailpiece characteristics – initially flats– What is reason?– Where are results from previous changes/modifications to

requirements?– What is the expectation for results? (more restrictive or

flexible)

• MTAC Work Groups approved – all products (letters, flats & parcels)– Parcels will be first

| 10

Exigent Rollback• Will exigent increase “expire”?

– Expected by July/August– Reduce prices by 4.3%

• Still waiting for court decision on appeal by USPS and mailing industry– Had been expected before the end of 2014– If court agrees with PRC decision, will it impact CPI

price change implementation date? (combine CPI and exigent rollback)

| 11

Legislative Update• New Chairmen in key committees

– Senator Ron Johnson (WI) – Committee on Homeland Security and Government Affairs

– Rep. Jason Chaffetz (UT) – Committee on Oversight and Government Reform

• Will we see legislation in 2015 or 2016?– USPS improved finances– Positioning for Presidential election has already begun– Congressional priority list – where is USPS reform?– Have the issues changed? (still contentious)

| 12

USPS Labor Negotiations• Improved finances drive demands

– Misleading (6% price increase in 2014)

• APWU position– Coalition– New president (hard line)

• NALC position– Delivering more diverse products– Time on the street (early morning and after 5pm)– 3rd bundle issue (EDDM contributing)

• Results will impact cost and prices

| 13

Questions?