Linda A. KingsleySenior Vice President, Strategy and TransitionUnited States Postal ServiceEMA FoundationNovember 2007

How the 21st Century United States Postal Service May Be Unique

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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?

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• Providing Universal Service

• Growing delivery network1.8 - 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

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• $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 DifferencesScale

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• 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 DifferencesPublic Policy and History

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• “Coopetition” with traditional competitors

Delivery Unit entry parcels, transportation

• U.S. markets and payment systemsBills, statements, and checks in the mail

• Highly developed direct mail industryPrinters, list providers, designers

• Lower percentage of international mail <3% revenue

Key DifferencesMarkets

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• Stable and Affordable Rates• Good Service• Trust / Security• Face of U.S. Government• Cumbersome pricing regime

Key DifferencesBurning Platform for Change

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• 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

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1971 1983 1989

1995 2001 200719770%

50%

100%

150%

200%

250%

300%

350%

400%

450%

Strategic Transformation PlanRates 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 BusinessExchange rates in effect Oct 2007

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Strategic Transformation PlanTotal Factor Productivity

72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

Percent GrowthFY

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

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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

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What’s in the Postal Act of 2006?

Retained Earnings Profit 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

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USO = regular service at uniform price

• Every Country has a different definitionThey 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

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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

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GAO Business Model Study 2011

Study other posts / industries Labor Regulation Governance Infrastructure Financial condition

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Looking Forward

Intelligent MailInformation 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

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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…