# Presentation: 056801

## Impact of the New Pricing Regulations

**Impact of the New Pricing Regulations**
**   ****Stephen M. Kearney**
**Vice President**
**Pricing and Classification**
**November 7, 2007**

## Impact of the New Pricing RegulationsTop 10 Changes

**1.****	****No more rate cases**
**No more revenue requirement and break-even rule**
**Contentious, “zero-sum game” replaced with after-the-fact review**
**Decrease in the conflicting needs of different customer groups**
**Postal Service and customer resources can be directed at growing business **
**International mail regulated**
**Inbound mail and services from Posts are products**

## Impact of the New Pricing RegulationsTop 10 Changes

**2****.****	****Streamlined price changes**
**Market-dominant products (mailing services)**
**90% of revenue – 45 days review**
**Future price increases capped at CPI for each class**
**Individual prices within a class may vary**
**Competitive products (shipping services)**
**10% of revenue – 30 or 15 days notice**
**Prices set by Governors**
**Minimum cost floor to prevent cross subsidy**
**Minimum contribution to institutional cost**

## Impact of the New Pricing RegulationsTop 10 Changes

**3.****	****Predictability**
**Price changes will be annual**
**Market dominant price changes will be within CPI**
**No more big changes every 2-4 years**
**Postal Service will provide at least 90 days notice prior to implementation**
**Strategies can be implemented gradually over a number of years **

## Impact of the New Pricing RegulationsTop 10 Changes

**4.****	**** ****Cost-based ****►****Market-driven**
**No longer cost-plus regulation**
**Consider how market will respond**
**Need to identify new products opportunities to generate profit**
**Profit incentive means incentive to innovate to meet customer needs**
**Greater customization**
**More market testing  **

## Impact of the New Pricing RegulationsTop 10 Changes

**5.****	****Encourage or limit customized agreements?**
**Law and regulation specifically provide for negotiated, customer-specific prices**
**Product definition requirement is somewhat vague and open-ended**
**New product proceedings could include discovery or evidentiary hearings**
**Postal Service and customers will need to weigh use of resources for customized agreements **

## Impact of the New Pricing RegulationsTop 10 Changes

**6.****	****Speed to market**
**After the fact review allows rapid product innovation**
**Ability to improve response to changing business environment**
**45 and 30 days notice requirement **

## Impact of the New Pricing RegulationsTop 10 Changes

**7.****	****Customer communication paramount**
**Increased communication between Postal Service and customers**
**Advance notice of price and product changes**
**Greater use of customer data and needs in product and pricing changes **

## Impact of the New Pricing RegulationsTop 10 Changes

**8.****	****Accountability and transparency**
**Complaint process**
**Annual compliance review**
**Service for price more visible**
**Transparent and increased communication between Postal Service and PRC regarding prices and products **

## Impact of the New Pricing RegulationsTop 10 Changes

**9****.****	****Profits fund capital and infrastructure**
**Growing network and infrastructure requirements**
**Must fund through profits**
**Future success linked directly to present performance**

## Impact of the New Pricing RegulationsTop 10 Changes

**10. ****Annual profit or loss**** **
**No more break-even**
**Improve product management and development**
**Focus on opportunities to provide profitable products**
**Reduce costs while providing service**
**Entire organization re-oriented toward profits and growing business **

## Impact of the New Pricing RegulationsTop 10 Changes

**No more rate cases**
**Streamlined price changes**
**Predictability**
**Cost-based ****►****Market driven**
**Encourage or limit customized agreements?**
**Speed to market**
**Customer communication paramount**
**Accountability and transparency**
**Profits fund capital and infrastructure**
**Annual profit or loss**