Transcript No Slide Title
DMA International Day
Postal Liberalization Here and Abroad
Kate Muth Association for Postal Commerce (PostCom) June 18, 2007
DMA International Day
What Mailers Want
Restraint on Prices
–
Competition is supposed to lead to lower prices
–
Does liberalization equate with competition?
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ISAL, IPA Have Benefited
Revenue and Volumes in thousands ISAL
FY 2006 FY 2005 FY 2004 FY 2003 FY 2002 FY 2001 FY 2000
REVENUE
90,046 72,227 70,072 69,125 70,922 97,615 96,660
VOLUME
138,739 112,612 106,383 104,246 103,615 144,700 147,206
IPA
FY 2006 FY 2005 FY 2004 FY 2003 FY 2002 FY 2001 FY 2000
REVENUE
111,524 96,590 88,771 73,035 74,174 89,546 66,658
VOLUME
214,713 207,293 194,707 171,096 165,654 184,182 134,473
Source: Postal Service Revenue, Piece, Weight Reports
DMA International Day
Revenue Per Piece for ISAL and IPA
(cents per piece) Fiscal Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 ISAL 73.8942
69.2822
70.9836
65.8715
65.6631
69.9219
67.6089
66.3095
65.8677
IPA 80.2796
77.0318
74.2180
64.1615
49.5698
48.6129
44.5214
42.6866
45.5921
2005 64.1379
46.5959
2006 65.1626
51.9410
Source: Postal Regulatory Commission from RPW reports
DMA International Day Total International Mail Volume – Annual Growth Rates 34.0
31.0
28.0
25.0
22.0
19.0
16.0
13.0
10.0
7.0
4.0
1.0
-2.0
-5.0
-8.0
-11.0
-14.0
-17.0
-20.0
10.3
-0.7
1990 1991
-0.4
1992
14.9
1993
-5.0
1994 International Mail Volume Annual Growth Rates 1990 - 2006
31.5
Average Growth = 0.5%
-7.1
1995 1996
-4.4
-6.3
9.2
1997 1998 1999 Fiscal Year
6.7
-1.5
-16.5
-10.9
2000 2001 2002 2003
4.8
0.9
-6.9
2004 2005 2006 Source: Postal Regulatory Commission from RPW Reports
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Recent International Rate Increases
DATE AVERAGE INCREASE 5/14/07 13.1% 1/8/06 5.9% 1/7/01 5.8% 5/30/99 3.3%
DMA International Day
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
DMA International Day
DMA International Day
DMA International Day HYPOTHTICAL MAILER TO 16 COUNTRIES - COA COSTS
Address
Austria Australia Belgium Canada** Czech Republic Denmark France Germany
quantity 5000
Netherlands Norway Poland Slovak Republic
5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000
Sweden Switzerland UK US** Total
5000 5000 5000 80000 Min Charge $ 524.40
$ 392.00
$ 1,179.90
$ 450.00
$ 458.85
$ 310.36
$ 1,311.00
$ 655.50
$ 2,294.25
$ 886.75
$ 712.74
$ 458.85
$ 487.71
$ 287.28
$ 679.00
$ 350.00
Total Charges $ 563.73
$ 392.00
$ 1,179.90
$ 472.50
$ 655.50
$ 310.36
$ 1,311.00
$ 655.50
$ 2,294.25
$ 886.75
$ 750.07
$ 960.00
$ 487.71
$ 328.32
$ 712.95
$ 367.50
6% Match Charges in USD # of matches 300 $ 663.00
300 300 300 300 $ 212.00
$ $ $ 234.00
300 300 300 300 300 300 300 300 300 300 300 4500 $ $ $ $ 300.00
624.00
916.00
$ $ $ $ $ $ $
$
36.00
99.00
61.00
234.00
66.00
407.00
-
3,852.00
Grand Total
Per Piece
$ 1,226.73
$ 604.00
$ 1,179.90
$ 472.50
$ 889.50
$ 346.36
$ 1,611.00
$ 1,279.50
$ 3,210.25
$ 985.75
$ 811.07
$ 1,194.00
$ 553.71
$ 328.32
$ 1,119.95
$ 367.50
$ 16,180.05
$ 0.25
$ 0.12
$ 0.24
$ 0.09
$ 0.18
$ 0.07
$ 0.32
$ 0.26
$ 0.64
$ 0.20
$ 0.16
$ 0.24
$ 0.11
$ 0.07
$ 0.22
$ 0.07
$ 0.20
1 2 3 Delivery point and address verification are frequently additional charges Some Posts charge for file conversion.
Some Posts charge for run time.
DMA International Day US UK Swiss Sweden Slovak Poland Norway Netherlands Germany France Denmark Czech Canada Belgium Australia Austria 0 1000 2000 3000 4000 Base Hits
DMA International Day
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
DMA International Day A Brief History of Worksharing in the U.S.
YEAR
1943 1967 1976
ACTIVITY
Worksharing begins in the U.S. when advertising mail and publications were required to be presorted into city zone sequence. The presorting requirement was changed to be based upon 5-digit postal code sequence. No specific discounts were offered initially for presorting. Presorting was a requirement that lowered the overall cost of the class of mail. The U.S. Postal Service offered discounts for First-Class mail that was presorted. 1978 A carrier route presort discount for advertising mail was introduced, and a year later, the prices for advertising mail and publications were set to reflect each mailing's depth of presort. 1982 1991 First automation discount, which required a nine-digit ZIP Code to qualify for the discount. First discounts for drop-shipping mail closer to destination.
Source: “The Impact of Competitive Entry into the Swedish Postal Market,” by Robert Cohen, Per Jonsson, Matthew Robinson, Sten Selander, John Waller, Spyros Xenakis
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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
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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.)
DMA International Day
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.
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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.
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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.
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What’s Needed to Compete
Tracking and tracing of competitive products
Guaranteed delivery
On-time performance of Priority Mail in high-90%
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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.)
DMA International Day
Questions?
Kate Muth PostCom [email protected]
www.postcom.org
703-524-0096