WASHINGTON – The U.S. Postal Service has unveiled proposed new pricing incentives that would effectively reshape the future of mail and provide benefits to both business customers and the Postal Service. The current pricing structure for postal products relies primarily on a weight based system. The new plan – sent to the Postal Rate Commission (PRC) as part of a 2007 price adjustment proposal package – combines weight with shape to allow the Postal Service to better align prices with processing costs to ensure every type of mail covers its costs. Price changes would not occur before May, 2007.

Current Postal Service prices do not distinguish between some letters, flats, and parcels. For example, in First-Class Mail, the current single-piece price is 63 cents to mail a 2-ounce letter, a 2-ounce flat, and a 2-ounce parcel. The new plan recognizes that each of these shapes has substantially different processing costs and should have different prices.

The new pricing plan, in effect, creates an adjustable rate system by giving mailers the opportunity to obtain lower rates as they find ways to configure their mail into shapes that reduce processing costs for the Postal Service. For example, if the contents of a First-Class flat can be folded and placed in a letter-sized envelope, the mailer can reduce the postage by as much as 20 cents per piece. If a First-Class parcel can be configured as a flat, the mailer will save 36 cents.

As the Postal Service emphasizes shape in its pricing, it also proposes to reduce the additional ounce rate. As mail pieces become heavier, the proposed price increase declines. For letters over one ounce, the new prices are actually lower than today's prices.

"Our pricing proposal recognizes changes in underlying costs and market conditions, and includes pricing initiatives to improve efficiency, which helps keep rates affordable for everyone," said Postmaster General John E. Potter. "We will work closely with our business mailers in the coming months to show them how they can take advantage of the new pricing to keep their mailing costs as low as possible," added Potter.

The following chart illustrates the many opportunities to mitigate price increases as business mailers help the Postal Service to shape a more efficient future:

Class/Product	Product description	Current price	Proposed price	Potential modification	Proposed price with modification
First Class Mail	Parcel - 6 ounces; Single Piece	$1.59	$2.00	Reconfigure the piece as a flat	$1.62
	Large envelope (a flat) – 2 ounces	$0.63	$0.82	Reconfigure the piece as a letter	$0.62
Standard Mail	Parcel – 8 ounces, Basic presort, no dropship	$0.794	$1.301	Enter at the destination BMC	$1.101
	Parcel – 12 ounces, 3/5-digit presort, DSCF	$0.823	$0.939	Enter at destination DU, 5-digit presort	$0.801
	4-ounce rigid automation flat, DSCF entry	$0.275	$0.491	Use flexible packaging for automation	$0.291
	Saturation flat, 3 ounces, DAL used, DDU entry	$0.136	$0.155	Put the address on the flat (no DAL)	$0.140
Address Correction Service	Electronic notification – First Class Mail	$0.21	$0.06	Use Automated (OneCode) ACS	$0.00
	Electronic  notification – Standard Mail	$0.21	$0.25	Use Automated (OneCode) ACS	$0.02
Periodicals	8-ounce, 5-digit auto, mailed in sacks (40 per sack)	$0.334	$0.381	Co-palletize with another magazine (1639 per pallet)	$0.361
				As above, but enter at DADC	$0.312
Priority Mail	10 POUND, 1.6 CUBIC FOOT PARCEL-Zone 8	$20.25	$28.75	Reduce package size by 25%	$24.85

Since 1775, the Postal Service and its predecessor, the Post Office Department, has connected friends, families, neighbors and businesses by mail. It is an independent federal agency that visits more than 144 million homes and businesses every day and is the only service provider delivering to every address in the nation. The Postal Service receives no taxpayer dollars for routine operations, but derives its operating revenues solely from the sale of postage, products and services. With annual revenues of $70 billion, it is the world’s leading provider of mailing and delivery services, offering some of the most affordable postage rates in the world. The U.S. Postal Service delivers more than 46 percent of the world’s mail volume—some 212 billion letters, advertisements, periodicals and packages a year—and serves seven million customers each day at its 37,000 retail locations nationwide.