First-Class Mail - Postcards, letters, or any mailable item, including advertisements and merchandise up to 13 ounces, can be sent using First-Class Mail. This service (or Express Mail or Priority Mail) is required for personal correspondence, handwritten or typewritten letters, and bills or statements of account.

Priority Mail - This 1-3-day delivery, non-guaranteed service is typically used to send documents, gifts, and merchandise.

Express Mail - This money-back guaranteed overnight or two-day service includes tracking, proof of delivery, and insurance up to $100. Delivery to most destinations is available 365 days a year with no extra charge for Saturday, Sunday, or holiday delivery.

Periodicals - Typical periodicals are newspapers, magazines, and newsletters. This service requires prior authorization by the Postal Service.

Standard Mail - Any mailable item, including advertisements and merchandise weighing less than 16 ounces, not required to be sent using First-Class Mail can be sent using Standard Mail. Standard Mail is typically used for advertisements and flyers. Additional content restrictions must be met for authorized nonprofit mailers.

Package Services - Includes Parcel Post, Bound Printed Matter, Library Mail and Media Mail up to 70 pounds.

Special Services - In addition to these and other classes of mail, we offer a variety of enhancements that add value to mail by providing additional security, proof of delivery, or loss recovery. These product enhancements include: Certified Mail, Registered Mail, Delivery Confirmation, Signature Confirmation and insurance.

Money Orders - Are offered as a safe, convenient, and economical alternative to sending cash through the mail. They can be purchased from any Post Office in the United States as well as from any rural route carrier. Postal Money Orders are available up to $1,000 with a daily purchase limit of $10,000 per customer. Money orders can be cashed at any Post Office or can be deposited or negotiated at financial institutions. Money orders are replaced if damaged, lost, or stolen.

Rate and Classification Activity

The PRC is an independent establishment of the executive branch of the United States government. The Commission reviews our proposals to establish and change domestic mail rates, fees and mail classifications. The Commission holds public hearings and issues recommended decisions to the Governors of the Postal Service, who approve, reject, or, in some cases, modify the Commission’s recommendations. The PRC is also authorized to issue advisory opinions concerning proposed changes in the nature of postal services that affect service on a nationwide or substantially nationwide basis, to recommend decisions regarding rate complaints by interested parties, and to report regarding complaints that parties are not receiving postal services in accordance with the policies of the Postal Reorganization Act. The PRC is also responsible for promulgating rules and regulations and establishing procedures deemed necessary and proper to carry out their functions and obligations.

On April 8, we filed a request to increase most rates and fees by 5.4% to generate $3.1 billion annually. Some exceptions have been proposed to ensure that rates or fees cover costs or to meet statutory requirements. The case is Postal Rate and Fee Changes Pursuant to Public Law 108-18, PRC Docket No. R2005-1. Revenues requested in this filing will partially fund the 2006, $3.1 billion escrow requirement established by Public Law 108-18. Were it not for this escrow requirement, we would not have filed this rate increase request.

On November 1, 2005 the PRC issued its Decision on Docket No. R2005-1 to the Board of Governors. The Commission determined that the across-the-board increase suggested by the Postal Service will generate necessary revenues and is consistent with the public policies established by the Postal Reorganization Act. On November 14, 2005 the Governors voted to accept the Postal Rate Commission’s recommendations to take effect January 8, 2006.

Information on PRC recommended decisions and pending dockets can be obtained at the PRC web site http://www.prc.gov.

Competition

The Internet continues to dramatically change the communications market. Within the next decade further innovations such as mobile commerce, broadband, interactive TV, data mining software, and new printing technologies will change the way businesses and consumers interact. While hard copy mail retains tremendous effectiveness, there is little doubt that its share of the overall communications market will continue to shrink.