USPS news highlights

BUSINESS MAILERS NEWS UPDATE
December 5, 2002
Domestic:

1. The USPS reported it expects revenue to growth from standard and first class mail however projects a decline in the volume of first class mail for PFY 2003. This projection takes into consideration the postal rate increases of 30 June 2002 that averaged 7.7 %. This increase is expected to increase postal revenues US$ 5 Billion in PFY 2003.

2. Stand Mail for PFY 2003 is projected to grow to US$ 17.4 Billion while first class mail will increase to US$ 38.2 billion. Volume for first class mail is expected to drop by 4 billion pieces.

3. USPS PMG John Potter stated that the USPS is considering consolidating some of the 300 mail-processing centers throughout the United States. Through the consolidation the USPS hopes to gain additional efficiencies and offset low mail volumes.

4. Final reporting for the USPS PFY 2003 is to be released to the public on 15 December 2002. (www.usps.com) In preliminary leaks the project loss to the USPS has been reduced to less than US$ 1 Billion.

5. The USPS Financial Plan for PFY 2003, as presented by CFO-EVP Richard Strasser calls for a net income of US$ 600 million. Revenue is projected to grow to US$ 70.4 billion a 5.9 % increase over estimated revenue of PFY 2002. Mail volume is projected to grow 1.9 % or 205.7 billion articles, below the volume levels of PFY 2000.

6. The possibility of a moratorium on USPS Rate increases rests within the hands of the 108th Congress that will take office January 2003. The USPS has announced that if the legislation needed to reduce the USPS pension contributions is enacted a moratorium of “no postal rate revisions until 2004 ” may be extended until 2006. January of 2003 will also see the USPS begin to prepare for a rate case filing with the PRC that would generate a rate increase “at some point in 2004”. The new bill, when introduced in congress, will have the support of the Office of Management and Budget as well as support from the nations mailing coalitions and organizations. There may be some obstacles that this bill will have to clear to win approval on the hill. The first obstacle centers on the fact that a decrease in postal contributions would generate a loss to the income of the Federal Budget. (Currently Congress has not approved the 2003 federal budget.) This decrease would generate an additional US$ 3 Billion in budget deficit that would have to be offset. Second – There are several new Congressional Representatives and they may not wish to reduce programs to offset this deficit. Third – The 108th Congress will see many committee members leaving from committees that oversee the postal service. Rep. Dan Burton, chairman of the House Committee on Government Reform will step down due to term limits, Sen. Joseph Liberman Committee on Government Affairs and Sen. Daniel Akaka of the postal issues sub-committee will relinquish their chairs due to the change in Senate Majority. Sen. Thad Cochran may become chair of the postal subcommittee within the Senate Committee on Government Affairs and Senator Collins may become chairwoman of the Government Affairs Committee. In addition there is a new Senior Vice President for government affairs at the USPS. Ralph Moden will be charged with dealing with the se issues.

BUSINESS MAILERS NEWS UPDATE
December 5, 2002
Page 2

7. The USPS has announced a new “ON LINE” service that would permit customers to hold mail and remove mail holds on line. Using this new service available at www.usps.com. The customer first selects “Mail Delivery” and then gives all needed information. This service was tested in Baltimore and Philadelphia for several months and averaged approximately 5,000 customers per month

8. The USPS has announced that it expects to save US$ 25 million from a consolidation program that has become effective 2 November 2002. This program will see the elimination of 833 accounting technical positions from 85 district accounting offices. This elimination is due to the fact that some work preformed by these individuals has moved from paper into electronic payment noted Gerry Krienkamp of the USPS. The end of PFY 2003 will complete this program. It will add 350 jobs to three of the USPS’s accounting service in San Mateo, Eagan and St. Louis.

9. The USPS is currently testing a program in New York State that will enable postal letter carriers on business routes to provide brochures and information about Priority and Express Mail services to small business customers. The USPS plans to roll out this program nationwide in 2003. The carriers question owners or employees concerning parcels they ship and then the USPS follows up via telesales or a visit from a USPS sales representative. In addition carriers also ask customers whether they wish to buy a Priority Mail subscription. The National Association of Letter Carriers have been involved with this test and possible 2003 rollout.

10. The USPS has announced that it will terminate regional mail contracts for eight regional airlines and three regional airline associations. With this termination the USPS has decided to deliver mail via trucks to rural areas.

11. The USPS has announced the start of two major automation projects designed to reduce costs lessen the workload that was preformed by 37,500 full-time workers. These programs could annually save the USPS over US$ 2 billion in operational costs. The first system will arrange magazines and other large flat mail in a sequence that will be delivered by the mail carrier. The second system will combine flat and letter mail into a single sequenced package. Tom Day of the USPS Engineering stated that when functional the daily tasks of a letter carrier could be reduced as much as 20 %. Currently under research and test these projects are to be evaluated for incorporation into USPS operations by late 2004 and equipment deployed to all 7,000 processing centers in 2006 or 2007.

12. USPS announced the retirement of Eastern Area VP Gary McCurdy effective 4 January 2003. McCurdy will be moving on to the position of Executive VP of MBNA the world’s largest independent issuer of credit cards located in Wilmington, DE. McCurdy has responsibility for the Eastern Area including Ohio and Pennsylvania as well as other states.

BUSINESS MAILERS NEWS UPDATE
December 5, 2002
Page 3

13. The Senate has confirmed Ruth Y. Goldway and Tony Hammond to serve as commissioners of the Postal Rate Commission. Goldway was appointed by President Clinton in 1998 and now with the approval of President Bush will serve until November of 2008. President Bush appointed Tony Hammond during “as a recess appointment” in August. In addition to the two commissioners above there are chairman is George Omas and vice Chairman Danny Covington and currently their one Democratic seat vacant.

14. February 2003 will see the USPS announce a “sweeping redesign” of its operations. This project assigned to the Massachusetts Institute of Technology was to develop a computer model to aid the USPS determine how the mail delivery system can be improved. Received preliminary the aim of this redesign will be to design “one uniform, standardized network”. Involved in this resign will be the USPS network of shipping points, processing centers, post offices and other facilities.

15. The USPS BOG is scheduled to meet on 9 December 2003. Among other issues to be considered is a proposal for a new Parcel Return Service. This will be a closed meeting, however on 10 December at an open meeting, the BOG will review and discuss PFY Audited 2002 report, The USPS PFY 2002 Annual Report, as well as other issues relating to the PFY Fiscal 2004 Appropriation Request and Capital Investments for the Flat Recognition Improvement Program and Flats Feeder Enhancement Program.