A Postal Rate Case Update

March 9, 2007

11:30 a.m. (EST)

Dear DMA Member:

What a week this has been for the mailing community! As you are probably aware, we have been working aggressively to let the US Postal Service (USPS) Board of Governors know that some of the specific rate increase recommendations issued by the Postal Regulatory Commission (PRC) on February 26 would be devastating to many of our commercial and nonprofit members.

I would like to take a moment to bring you up to speed on what has happened so far, and what we must prepare for in the weeks and months ahead.

But first, I want to personally thank everyone who joined DMA in this important fight and stepped up to the plate to respond quickly to our call to action.

The Board of Governors has received hundreds of comments from DMA members and others in the mailing community, and many of you have also copied your responses to the PRC Chairman and to your members of Congress. Your efforts have certainly sent a loud message to Washington that the PRC’s unexpected recommendations for flat-shaped mail will, if implemented, have negative consequences for many mailers.

What Happens Next?

In our own comments available here, http://www.the-dma.org/government/GovernorsLetter.pdf DMA has asked the Postal Governors to reject the PRC’s specific

recommendations for flat-shaped mail and to send them back to the PRC for reconsideration. We firmly believe that the PRC can mitigate the exorbitant rate increases for flat-shaped mail without having to alter its recommendations for other classes of mail.

Now we must wait to see what action the Governors will take. There are reports that the Board of Governors will act next week, but as of this moment, we do not have confirmation as to exactly when the Governors will announce their approval or rejection of the PRC’s recommendations. However, as soon as we have new information, we

will promptly communicate the news to you.

If the Governors tell the PRC to revise and resubmit its recommendations, I ask you to continue working with us to let the PRC know that several of its current proposals are unacceptable to the mailing community. However, if the Governors do accept the PRC’s recommendations, I assure you that we will use every possible means to fight a harmful decision.

What About Postal Reform?

I am sure many of you are also asking, “why is this happening?” After all, with our recent victory on postal reform legislation, it seemed that the nightmares of arbitrary, unexpected, and unjustifiable postal rate increases would be behind us.

Unfortunately, as we have stressed since December when the President signed the new postal reform law, the postal rate case (filed on May 3, 2006) was already well underway, and as required by law, proceeded under the old ratesetting rules rather than the new law that we fought so hard to attain, but which will not go into effect until June 2008.

Certainly, we had hoped that as the PRC adopted its new name and structure, it would also embrace the spirit of progress and predictability that will guide future ratesetting processes. Unfortunately, the PRC seems to be clinging instead to backward-looking ideas. While we were not entirely pleased with the rate increases the USPS requested last May, we expected those proposed rates to be relatively consistent with the PRC recommendations.

In the days after the PRC released its recommendations on February 26, we learned that the PRC’s public statements were masking serious flaws in the details of its recommendations.

Also, we began hearing from members as you had a chance to analyze how the PRC’s complex proposal would affect your specific operations. Although the impact would vary for each mailer, it quickly became clear that the rate increases recommended for flat-shaped mail were going to be far higher and more damaging than any of us had expected.

The fact that the PRC refuses to recognize the impact of its actions on some of the most important postal customers not only shows how desperately we needed postal reform, but also should remind us that we have more than a year to go until those reforms are fully implemented.

Another Rate Case Before Reform Takes Effect?

Even as we look forward to a new system that will help protect and preserve direct mail as the lifeblood of direct marketing, it is still possible that the Postal Service will squeeze in another rate case before the new system takes effect in June 2008. That would mean yet one more rate increase under the old, pre-reform ratesetting rules.

As DMA continues our efforts to mitigate the current rate increase proposal, we must also be ready to discourage the USPS from initiating a new rate case request that could be equally harmful, if not more so, than the one we are fighting now.

I am personally committed to keeping ALL channels of direct marketing and advertising open and affordable, so that you - our members - can make decisions based upon the channels or combination of channels that work best for you.

Unexpected rate shocks such as those that would be triggered by the PRC’s recommended rates would narrow marketers’ choices. Moreover, this kind of disproportionate rate increase is tantamount to having marketing decisions driven by bureaucracy rather than market forces.

In closing, I thank you once again for your invaluable help. I also urge you to stay abreast of new developments and be ready to add your voice to ours when circumstances demand. Moving forward, we will keep you informed and up-to-date through regular DMA communications.

Your input is critical to our continued success in shaping the policies that affect your organization and its future.

Sincerely,

John A. Greco, Jr.

President & CEO

Direct Marketing Association