February 23, 2006

We covered a lot of very important ground here at MTAC this first day. We learned early in the meeting that MTAC will have a special pavilion at the National Postal Forum (NPF). If you are going to NPF, make sure you stop by this MTAC booth and see first hand how this organization works and why they are such a crucial part of improving the commercial mail industry.

United States Postal Service® chief financial officer Dick Strasser presented his last financial update at MTAC. He is retiring on April 3 and I wish him a happy retirement. I have always enjoyed his financial updates as he would always go out of his way to explain the numbers and what drives them. In this update, he explained that while Standard Mail™ volumes are lower than they expected (1.5% versus 4.7% same period last year), First-Class Mail® was not declining as rapidly as they had projected.

Strasser also talked about the delivery network and stated that the USPS® is delivering to 145 million addresses and that number has been growing by 2 million new addresses each year for the past several years. Imagine 2 million new delivery points every year! Unfortunately, the USPS is seeing a decline in revenue per entry point. In 2000, it was at $1.50 per delivery point and now it’s running at $1.40. They expect that number to continue to decline as well as pressure from the Internet and other forms of marketing drive mail volumes down.

We also heard about the latest on Postal Reform from Tom Day, USPS SVP Government Relations. According to Day, the financial part of the proposed legislation will be the make or break part of Postal Reform, just as we had predicted. In the worst case scenario, he explained that the USPS will need to ask for nearly a 20 percent postage increase in order to meet the amortized obligations of the $20 billion escrow funding and military pension payment requirements.

The other interesting part of Day’s presentation was that the USPS was beginning to concede on parts of allowing management control to shift from the USPS to the proposed Postal Regulatory Commission. This is a change from the terse letter sent several weeks ago stating the USPS Board of Governors was in strict opposition to all of the proposed legislation.

Paul Vogel, USPS VP Network Operations Management, provided an update on the network changes that are making headlines across the country. He explained that the USPS is converting Area Mail Processing (AMP) centers into Regional Distribution Centers (RDC). The RDCs will become the modern version of the current Bulk Mail Centers (BMC) and will house the Automated Package Processing System (APPS) machines. This conversion process will be gradual as the old systems are removed and the new APPS machines are installed. Vogel explained that in some cases it may take 18 months just to remove all the heavy steel located in the various facilities. As such, you can expect some rerouting of the mail to temporary processing locations. Label list changes will convey this information, but Vogel would only commit to a 30 to 180 day notice window for distributing this information. Firstlogic will aim to keep you informed on any label list changes as soon as we are notified.

Rounding out the major topics today was an update on the new OneCodeSolution barcode that will eventually replace our current Postnet code. Charles Bravo, USPS SVP Intelligent Mail and Address Quality, explained that the new barcode is essentially ready to go for First Class letters. An announcement will be made at the NPF on the exact date that the new barcode can be used throughout the industry. Unfortunately, flat sized mail testing is still lagging behind. It may not be until autumn when we can begin seeing the OneCodeSolution on our catalogs and periodical mail pieces. This has some mailers upset as they would prefer to only do the barcode change once. As such, the USPS may see many mailers waiting until the final product is available for all classes and processing categories.

These are just the highlights, folks. Let me know if you would like me to “dig a little deeper” into these topics. Also, as you probably know, Firstlogic hosts many webinars that feature industry and USPS guests. If there is a specific topic that you would like to see as a webinar, let me know and I will try to arrange for a USPS or industry expert to join me in a webinar to discuss that topic.