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Postal Liberalization Here and Abroad Kate Muth Association for Postal Commerce (PostCom)

Postal Liberalization Here and Abroad Kate Muth Association for Postal Commerce (PostCom) June 18, 2007. What Mailers Want. Restraint on Prices Competition is supposed to lead to lower prices Does liberalization equate with competition?. ISAL, IPA Have Benefited

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Postal Liberalization Here and Abroad Kate Muth Association for Postal Commerce (PostCom)

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

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

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

  4. Revenue Per Piece for ISAL and IPA(cents per piece) Source: Postal Regulatory Commission from RPW reports

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

  6. Recent International Rate Increases

  7. 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. Mailers Want Worksharing • “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

  9. A Brief History of Worksharing in the U.S.

  10. 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

  11. 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.)

  12. 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.

  13. The Verdict • 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.

  14. 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.

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

  16. Most Important Need • 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.)

  17. Questions? Kate Muth PostCom Kmuth@postcom.org www.postcom.org 703-524-0096

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