page 8 of 87

I. GENERATE REVENUE

The Postal Service is a self-sufficient agency deriving its revenues almost entirely from postage and fees paid by mailers. Postal operations are not supported by tax dollars. Revenue must completely cover the cost of operations, including growth of the universal delivery network, investments in future improvements, and numerous public service functions. The Postal Service must set prices to cover costs.

STRATEGY: FOSTER GROWTH THROUGH CUSTOMER VALUE

Create more customer value in core products and services to increase mail volume and revenue to continue financing universal service and the growing delivery network. Value includes increased product utility, improved ease of use and access, and more reliable, predictable performance at affordable prices.

A. STRATEGIC CHALLENGES AND TRENDS

A number of key trends will influence customer use of the mail over the 5-year planning period:

• The Internet now reaches more than 71 percent of households and penetration is expected to increase. High-speed broadband makes Internet-based services easier to use and will likely increase the use of online alternatives to mail. The projected decline of First-Class Mail impacts the Postal Service's ability to continue to finance the growing universal service network. This is the single greatest challenge facing the Postal Service.
• Businesses attempting to contact and influence customers are finding it more difficult to reach mass audiences and are turning to more sophisticated techniques and technologies to reach selected audiences with more relevant messages.
• Consumers want readily accessible, relevant information to make better decisions, and the Internet is fast becoming their primary source of information. Consumers also value services that provide safeguards against threats to privacy, identity theft, and fraud.