Postal Service prices are set by the Board of Governors and reviewed by the PRC for compliance with the requirements of the law. We generally adjust prices for Mailing Services annually in May, with increases averaging no higher than the rate of inflation. We have provided, and plan to continue to provide, at least 90 days notice of the new prices for Mailing Services.
On May 11, 2009, we increased prices for Mailing Services by an average of 3.8%. The average increase was at or below the rate of inflation (calculated using the CPI-U for the past twelve months using an averaging method established by the PRC) for First-Class Mail, Standard Mail and Package Services. Periodicals and Special Services each increased slightly more than inflation, in both cases by drawing on previously accrued but unused pricing authority. The First-Class Mail stamp price increased from 42 cents to 44 cents. As with 2008’s change, customers could use previously purchased Forever Stamps after the price change, without adding additional postage.
On October 15, 2009, the Postmaster General announced that there will be no increase in Mailing Services — First-Class Mail, Standard Mail, Periodicals, single-piece Parcel Post and Special Services — prices in 2010. On November 4, 2009, we announced that prices for Shipping Service products — including Priority Mail, Express Mail, Global Express Guaranteed, Express Mail International, Priority Mail International, Parcel Select and Parcel Return Service — will increase an average of 3.3% effective January 4, 2010.
Prices for Shipping Services must cover each product’s attributable costs, as well as an appropriate share of the institutional costs of the Postal Service. The institutional cost allocation, determined by the PRC, is 5.5% of total attributable costs. We offer contract prices, rebates, online price reductions and other incentives to encourage growth. By law, prices must be announced at least 30 days prior to the implementation date.
Prices for Shipping Services increased an average of 5% in January 2009. This was the first time the Postal Service adjusted prices for Shipping Services on a different schedule than for Mailing Services. As part of this change, Commercial Plus pricing was introduced, providing reduced prices for high-volume Express Mail and Priority Mail users. New Commercial Plus prices are, on average, 14.5% less than retail for Express Mail and 7% less for Priority Mail.
