industry groups and identified a number of issues that will need to be resolved before a phasing proposal is pursued.

     Another ongoing pricing initiative is the periodicals price incentive test. This test provides an incentive for small publications to combine their mailings on pallets and drop them closer to the point of delivery - in effect turning small mailings into larger mailings. Mailers benefit from lower prices while the Postal Service reduces its processing costs. It is expected that this kind of pricing will become more important with the predicted growth of smaller, more specialized publications.

     A new Customized MarketMail classification enables advertising mailers to send non-rectangular-shaped mailpieces, which were not previously mailable. The service, which began in August 2003, offers customers the new option of sending uniquely-shaped advertising pieces targeting specific customer groups by interest, sales potential, or product. The unique nature of these pieces likely makes them of greatest interest to advertisers who wish to send targeted, promotional messages to a selected audience.

     A significant new development in the way Postal Service prices are set occurred on September 22, 2002, when subscriptionbased pricing for CONFIRM service went into effect. The CONFIRM system allows customers to track letters and flats as they move through the mail processing system. Data generated from PLANET barcodes on mailpieces are made available to individual subscribers so they can find out where their mail is in the process.

     Traditionally the Postal Service set prices on a unit basis: a fixed price was charged for each letter, flat, or parcel. The larger the number of pieces mailed, the higher the postage charged. With CONFIRM service the Postal Service does not charge for individual

units (tracking scans). Rather, it charges for subscriptions that allow for either an unlimited number of scans or a large, fixed-quantity of scans to be received by the subscriber for a fixed-price per year. Whether the mailer uses all the scans, part of them, or none, the price remains the same. CONFIRM service represents the first time subscriptionbased pricing has been used to collect revenue.

     The Information Technology (IT) organization is modernizing the Postal Service infrastructure and application portfolios. At the same time, IT continues to examine and refine its business processes to ensure that it provides the most current and valuable services to the Postal Service and its customers. To improve efficiency and reduce overall costs, the organization is striving to standardize, simplify, and centralize its operations in order to improve efficiency and reduce overall costs.

     In 2003, IT focused significant attention on upgrading the computing infrastructure, enhancing information security, providing universal computing connectivity, and establishing a corporate-wide data warehouse. Through the strategic application of these and other initiatives, IT is building a strong foundation on which the Postal Service can base future operations.

     A few years ago, many of the Postal Service's information technology resources were outdated and no longer supported by manufacturers. To remain competitive in the marketplace, the Postal Service had to make major investments in its computing platform. The IT organization was charged with planning and implementing a completely modernized distributed computing infrastructure throughout the Postal Service. Implementation of that new infrastructure, the Advanced Computing Environment (ACE) is now well underway.