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United States Government Accountability Office: 
GAO: 

Report to the Chairman, Subcommittee on Federal Financial Management, 
Government Information, Federal Services, and International Security, 
Committee on Homeland Security and Governmental Affairs, U.S. Senate: 

January 2013: 

U.S. Postal Service: 

Overview of Initiatives to Increase Revenue and Introduce Nonpostal 
Services and Experimental Postal Products: 

GAO-13-216: 

GAO Highlights: 

Highlights of GAO-13-216, a report to the Chairman, Subcommittee on 
Federal Financial Management, Government Information, Federal 
Services, and International Security, Committee on Homeland Security 
and Governmental Affairs, U.S. Senate. 

Why GAO Did This Study: 

USPS continues to face a dire financial situation. Reducing costs is 
essential, but USPS also must generate additional revenue through the 
sale of products and services. PAEA, enacted in 2006, eliminated USPS’
s authority to offer nonpostal services unless they were offered as of 
January 1, 2006, and expressly grandfathered by the PRC. USPS may, 
however, offer new nonpostal services if they are related to the 
grandfathered nonpostal services. It may also offer experimental 
postal products that meet certain conditions. As requested, this 
report describes: (1) the nonpostal services grandfathered after the 
enactment of PAEA, experimental postal products offered since 
enactment of PAEA, and discretionary services USPS currently performs 
for other federal agencies; (2) initiatives-—including nonpostal 
services and experimental postal products—-USPS is pursuing to 
generate additional revenue and the status of these initiatives; and 
(3) the reasons USPS decided not to pursue other revenue-generating 
initiatives that it had identified. 

GAO reviewed PAEA provisions and PRC decisions pertaining to nonpostal 
services, experimental postal products, and services performed for 
other federal agencies and USPS documents related to the initiatives 
that USPS chose to pursue and those it decided not to pursue. GAO 
interviewed USPS officials regarding these issues. 

In commenting on a draft of this report, USPS agreed that its 
financial viability is dependent not only on cutting costs, but also 
on generating additional revenue. 

What GAO Found: 

The U.S. Postal Service (USPS) currently offers 12 nonpostal services 
(i.e., services not directly related to mail delivery) that were 
grandfathered by the Postal Regulatory Commission (PRC) after 
enactment of the Postal Accountability and Enhancement Act (PAEA). 
These services-—which include Passport Photo Services, the sale of 
advertising to support change-of-address processing, and others—-
generated a net income of $141 million in 2011. Since enactment of 
PAEA, USPS has received approval from PRC to offer eight experimental 
postal products, which are products that differ significantly from 
other offered products, such as the sale of gift cards loaded with a 
specified sum of money. Lastly, USPS performs at least four 
discretionary services (i.e., services it chooses, rather than is 
required, to perform) for other federal agencies, such as accepting 
passport applications for the State Department. 

USPS is currently pursuing 55 new initiatives that it identified based 
on outreach to postal stakeholders. USPS chose to pursue these 
initiatives because of their potential to increase revenue and add 
value to the mail, among other reasons. Forty-eight initiatives are 
extensions of existing lines of postal products and services, such as 
offering Post Office Box customers a suite of service enhancements 
(e.g., expanded lobby hours and earlier pickup times) at selected 
locations and increasing public awareness of the availability of 
postal services at retail stores. Three initiatives are extensions of 
existing nonpostal services, including allowing customers to forward 
their mail to a new address using mobile devices. Finally, four of the 
initiatives involve experimental postal products, such as prepaid 
postage on the sale of greeting cards. These four experimental 
products are among the total of eight experimental products that have 
received PRC approval since enactment of PAEA. Forty-five of the 55 
initiatives are ongoing; the remaining are under development. 

USPS considered but decided not to pursue 25 other stakeholder-
identified initiatives, primarily because of financial reasons. Twelve 
initiatives were abandoned because USPS determined they were not 
likely to be profitable or the initial investment was too high. 
Reasons for not pursuing other initiatives included insufficient 
stakeholder interest or lack of statutory authority. USPS would like 
to pursue revenue-generating opportunities in three areas-—nonpostal 
services, shipments of alcoholic beverages, and services performed for 
state and local governments—-if it is provided with statutory 
authority to do so. USPS officials said opportunities in these areas 
could improve USPS’s financial position, but they emphasized that 
additional innovations will not be sufficient to return USPS to 
financial solvency. Results will also be constrained by the economic 
climate and by changing use of the mail. USPS’s multiyear revenue plan 
detailing its competitive strategies is expected in the spring of 2013. 

View [hyperlink, http://www.gao.gov/products/GAO-13-216]. For more 
information, contact Lorelei St. James at (202) 512-2834 or 
stjamesl@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

USPS Offers 12 Grandfathered Nonpostal Services, 8 Experimental Postal 
Products, and at Least 4 Discretionary Services for Federal Agencies: 

USPS's Efforts to Generate Additional Revenue Include Ongoing and 
Planned Postal and Nonpostal Initiatives: 

USPS Did Not Pursue 25 Initiatives because of Financial and Other 
Reasons, and Believes Additional Statutory Authorities Would Provide 
Opportunities to Increase Revenue: 

Concluding Observations: 

Agency Comments: 

Appendix I: USPS's Grandfathered Nonpostal Services: 

Appendix II: USPS's Approved Market Tests for Experimental Postal 
Products, as of November 30, 2012: 

Appendix III: Examples of Services USPS Currently Performs on a 
Discretionary Basis for Federal Agencies: 

Appendix IV: Description of Ongoing USPS Initiatives, as of November 
14, 2012: 

Appendix V: Comments from the United States Postal Service: 

Appendix VI: GAO Contact and Staff Acknowledgments: 

Figures: 

Figure 1: Sole or Primary Reason Cited by USPS for Pursuing 55 
Initiatives: 

Figure 2: Reasons Cited by USPS for Not Pursuing the 25 Initiatives: 

Abbreviations: 

PAEA: Postal Accountability and Enhancement Act: 

PRC: Postal Regulatory Commission: 

USPS: U.S. Postal Service: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

January 15, 2013: 

The Honorable Tom Carper: 
Chairman: 
Subcommittee on Federal Financial Management,Government Information, 
Federal Services, and International Security: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

Dear Mr. Chairman: 

The U.S. Postal Service (USPS) continues to face a dire financial 
situation and does not have sufficient revenues to cover its expenses, 
putting its mission to provide prompt, reliable, and efficient service 
at risk. As customers increasingly turn to digital communications and 
online payment methods, total mail volumes have decreased 
precipitously, falling almost 21 percent from fiscal years 2007 
through 2011. In 2012, USPS reached its $15 billion borrowing limit 
[Footnote 1] and incurred a $15.9 billion net loss.[Footnote 2] 

According to the Postmaster General, reducing USPS's costs is 
essential, but generating additional revenue is also necessary. 
Consequently, the Postmaster General implemented a variety of 
strategies to increase revenue, including strategies to strengthen the 
value of mail to businesses, improve the experience of USPS's 
customers, and compete with private sector firms for the package 
business. 

As requested, this report examines matters related to USPS's provision 
of nonpostal services (i.e., services not directly related to the 
delivery of mail, such as Passport Photo Services). In particular, you 
asked us to review those nonpostal services that were offered at the 
time the Postal Accountability and Enhancement Act (PAEA) was enacted 
in 2006 and that the Postal Regulatory Commission (PRC) determined 
should be continued, or "grandfathered".[Footnote 3] In addition, as 
agreed with your staff, we also provide information on two other areas 
with the potential to generate revenue: (1) experimental postal 
products and (2) services that USPS performs on a discretionary basis 
for other federal agencies. PAEA granted USPS the authority to offer 
experimental postal products, which are those that are significantly 
different from all other products USPS offers and have certain other 
characteristics. Such products include a same-day delivery service for 
local buyers in selected metropolitan areas and prepaid postage on the 
sale of greeting cards. Discretionary services for other federal 
agencies are services that USPS may choose to pursue but is not 
required to perform.[Footnote 4] Such services include collecting data 
on vacant addresses for the Department of Housing and Urban 
Development. 

This report describes: 

1. The nonpostal services grandfathered after the enactment of PAEA, 
the experimental postal products approved for market testing since the 
enactment of PAEA, and the services USPS currently performs for other 
federal agencies. 

2. The initiatives--including nonpostal services and experimental 
postal products--USPS is pursuing to generate additional revenue and 
the status of these initiatives. 

3. The reasons USPS decided not to pursue other revenue-generating 
initiatives that it had identified. 

To address these objectives, we reviewed and analyzed numerous 
documents, including: 

* relevant laws, such as those pertaining to USPS's authority to 
engage in nonpostal services, experimental postal products, and 
services for federal agencies; 

* reports on USPS's nonpostal services, experimental postal products, 
and services for federal agencies issued by GAO, USPS's Office of 
Inspector General, and others; 

* agreements specifying the terms and conditions for USPS's ongoing 
cooperation with other federal agencies; 

* PRC decisions (orders) and relevant stakeholder filings submitted in 
response to the PRC's proceedings on USPS's nonpostal services and 
experimental postal products since PAEA's enactment; 

* the results of USPS's 2010 outreach to external and internal 
stakeholders to identify potential revenue-generating opportunities, 
including USPS's 2011 plan for increasing revenue; and: 

* updated documentation on USPS's current strategy and plan for 
increasing revenue, which is under development, including information 
on initiatives that USPS chose to pursue and those it decided not to 
initiate; USPS's rationale for these decisions; the status of the 
initiatives that USPS is pursuing; and the available revenue and cost 
estimates for these initiatives. 

We also interviewed USPS officials, including the Chief Marketing and 
Sales Officer and Executive Vice President, the Vice President for 
USPS's Domestic Products, General Counsel staff, and others. Among 
other things, we discussed: 

* USPS's actions and processes for identifying and assessing 
additional revenue-generating opportunities, including those related 
to nonpostal services, experimental postal products, and discretionary 
services for federal agencies; 

* USPS's criteria for deciding which opportunities to pursue; 

* the status of its decisions; and: 

* the reasons why USPS decided not to pursue certain initiatives and 
obtained USPS's views on what, if any, statutory authorities USPS 
believes it needs to pursue other, potential revenue-generating 
initiatives. 

We also interviewed PRC staff to obtain additional information and 
clarification on the nonpostal services and experimental postal 
products offered by USPS since PAEA's enactment, and on the services 
USPS provides on a discretionary basis for federal agencies. Finally, 
we obtained information on the status, results, and applicable time 
frames for these services, products, and activities from USPS staff. 
Appendixes I, II, and III provide more detailed information on USPS's 
grandfathered nonpostal services, approved market tests for 
experimental postal products through November 2012,[Footnote 5] and 
examples of services that USPS currently performs on a discretionary 
basis for federal agencies, respectively. 

We conducted this performance audit from April 2012 to January 2013 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

The Postal Reorganization Act provided USPS with authority to offer 
nonpostal services.[Footnote 6] USPS used this authority to introduce 
a wide array of products, such as prepaid phone cards; an electronic 
funds transfer service between the United States and Mexico (Dinero 
Seguro); and retail merchandise, such as T-shirts, mugs, and neckties. 
In 2006, PAEA eliminated USPS's authority to offer nonpostal services 
unless they were offered as of January 1, 2006, and expressly 
grandfathered by the PRC.[Footnote 7] PAEA directed the PRC to review 
USPS's ongoing nonpostal services within 2 years of enactment to 
determine whether they should continue (i.e., be grandfathered), 
taking into account the public's need for the service and the private 
sector's ability to meet that need. The PRC defined, for the purposes 
of its review, a service to be an ongoing commercial activity that 
USPS offered to the public for financial gain.[Footnote 8] Using this 
definition, all nonpostal services that were offered as of January 1, 
2006, were ultimately grandfathered by the PRC. 

With PRC approval, USPS can introduce new, related nonpostal products 
if they fall under the umbrella of one of its grandfathered nonpostal 
services. For example, because the PRC grandfathered Officially 
Licensed Retail Products as a nonpostal service, USPS can offer a 
variety of related products, including stamp dispensers and framed 
postal artwork, as long as they are consistent with the underlying 
grandfathered nonpostal service. 

While USPS offers a number of nonpostal products and services, the 
revenue they generate is relatively small. Nonpostal revenue in fiscal 
year 2011 was $173 million, accounting for a small fraction of a 
percent of USPS's total revenue of $65.7 billion. 

PAEA required that grandfathered nonpostal services be regulated as 
either market dominant, competitive, or experimental products." 
[Footnote 9] Market dominant services include those products where 
USPS exercises sufficient market power that it can, among other 
things, effectively set the price of such product substantially above 
cost without risk of losing a significant level of business to other 
firms offering similar products.[Footnote 10] For example, first-class 
mail letters and sealed parcels are market-dominant products. 
Competitive services consist of all other products and are those in 
which USPS competes with the private sector.[Footnote 11] USPS is 
required to cover its costs for these services. 

PAEA also authorized USPS to conduct market tests of experimental 
postal products if the product being tested (1) is significantly 
different from all products offered by USPS within the prior 2-year 
period; (2) will not result in an undue market disruption, especially 
for small business concerns; and (3) is correctly classified as either 
a market dominant or competitive product. The PRC, as a matter of 
practice, considers whether these conditions have been met before USPS 
can begin a market test. PAEA authorized market tests for products 
that are not anticipated to exceed $10 million in annual revenue and 
authorized the PRC to exempt products from this threshold if the 
annual revenue will not (or is not expected to) exceed $50 million. 
Generally, a market test may not exceed 2 years.[Footnote 12] The 
purpose of a market test is to determine, among other things, if there 
is a market for the product and, if so, to test various pricing 
scenarios.[Footnote 13] The time frame allows USPS to demonstrate a 
"nexus" to the mail and, consequently, that the product is a postal 
product.[Footnote 14] If USPS believes a market test demonstrates that 
a product is suitable, it may seek approval from the PRC to 
permanently offer it. USPS also may terminate a market test if, for 
example, the test did not meet USPS's objectives.[Footnote 15] 

The Postal Reorganization Act authorized USPS to enter into 
interagency agreements to provide property and services to federal 
agencies.[Footnote 16] The parties must specify the terms and 
conditions of their collaboration, including the activities to be 
performed by USPS and the terms of reimbursement, if applicable. One 
such agreement allows USPS to accept passport applications on behalf 
of the U.S. Department of State (State Department). 

Given declining mail volumes, customers' changing needs and their use 
of the mail, and a desire to address these issues, USPS began engaging 
with internal and external stakeholders within the postal community to 
generate ideas for innovative products and services that could 
generate additional revenue. In the summer and fall of 2010, USPS held 
a series of discussions, including an innovation symposium with 
stakeholders including business leaders, partners, customers, 
suppliers, and academics, to gather insights on potential innovations 
and revenue opportunities. According to USPS, the outreach generated 
over 1,500 potential initiatives, which were evaluated and winnowed 
down based on a variety of factors, such as time to implement, return 
on investment, and strategic fit. According to USPS, its decisions to 
pursue certain initiatives have been guided by several recurring 
themes, including: 

* making it easier and more convenient for businesses and consumers to 
do business; 

* promoting mailing best practices, such as those that incorporate 
barcode technology into advertising campaigns; and: 

* innovating and leading in e-commerce delivery to meet the needs of 
the mobile generation. 

In addition to these recurring themes, each initiative is aligned to 
support one of USPS's three primary marketing strategies. These 
strategies are: (1) First-Class Mail--slow the diversion of First-
Class Mail by differentiating hard copy from digital mail and 
embracing new opportunities from digital and social media; (2) 
Marketing Mail--simplify the use of marketing mail for businesses and 
promote emerging technologies for marketing mail; and (3) Shipping 
Services--develop solutions to grow shipping services in the e-
commerce market. 

USPS's overall strategic direction is described annually in its 
Comprehensive Statement of Postal Operations and the impact of these 
strategies is described in its annual Integrated Financial Plan--both 
of which are publicly available. While the 2013 Integrated Financial 
Plan[Footnote 17] indicates that USPS expects an operating loss of $2 
billion in 2013, it projects that USPS's revenue-generating 
initiatives will help USPS increase its shipping revenue by 10 percent 
and reduce the decline in its mailing revenue to 3 percent in fiscal 
year 2013. USPS plans to complete a multiyear revenue plan in the 
spring of 2013 that will include details on its competitive strategies. 

We have previously reported that making progress toward financial 
viability would require USPS to take steps to cut costs and increase 
revenue within its current legal authority.[Footnote 18] USPS 
supported the provision in postal reform legislation passed in the 
Senate that would have provided USPS with the authority to undertake 
new revenue-generating initiatives such as offering new nonpostal 
services and exploring opportunities to offer services on behalf of 
state and local governments.[Footnote 19] We also previously 
identified questions we believe are important to consider before USPS 
is granted such additional authority,[Footnote 20] including the 
following: 

* How would USPS finance its nonpostal activities, considering its 
difficult financial condition? 

* Should USPS be allowed to compete in areas where there are already 
private-sector providers, and if so, on what terms? 

USPS Offers 12 Grandfathered Nonpostal Services, 8 Experimental Postal 
Products, and at Least 4 Discretionary Services for Federal Agencies: 

Nonpostal Services: 

At the time PAEA was enacted, USPS was offering 12 nonpostal services 
that it has continued to offer as a result of these services being 
grandfathered by the PRC. Two of these are market dominant services, 
including MoverSource (a service whereby the cost of changing a 
customer's mailing address is defrayed through the sale of 
advertising) and Philatelic Sales (sales related to the hobby of stamp 
collecting). The remaining 10 are competitive services, including 
USPS's Passport Photo Service. In fiscal year 2011, USPS reported to 
the PRC that it generated net income totaling $141 million from its 12 
nonpostal services and related products. Appendix I provides 
additional information about each of these grandfathered nonpostal 
services. 

Experimental Postal Products: 

Since the enactment of PAEA, USPS has received approval from the PRC 
to market test a total of eight experimental postal products. Four of 
the eight approved market tests are for market dominant products, such 
as First Class Tracer, which enables the tracking of First-Class 
letters through the mail stream. The remaining four experimental 
products are competitive products, including USPS's Gift Cards--
experimental product to test the feasibility of selling gift cards 
loaded with a specified sum of money to consumers who could choose to 
mail the cards. Four of these experimental products are an outgrowth 
of USPS's stakeholder discussions on new revenue-generating 
initiatives and are discussed further below. 

USPS terminated one of the eight approved market tests--Collaborative 
Logistics--a test to determine whether there was a market for renting 
excess space on USPS's long-haul delivery trucks. While USPS 
considered the market test successful, it did not seek to make 
Collaborative Logistics a permanent product. Instead, USPS terminated 
the test in September 2011, indicating that its ongoing facility 
consolidations had resulted in significant opportunities to reduce 
overcapacity and costs within its transportation network. Depending on 
its future financial and operational conditions, USPS said it may seek 
to introduce this product on a permanent basis in the future. Appendix 
II provides more information on each of the experimental postal 
products for which USPS has received PRC approval for market testing 
since the enactment of PAEA. 

Discretionary Services Performed for Other Federal Agencies: 

USPS has the authority to perform services for other federal agencies 
on a discretionary basis by entering into written agreements with 
these agencies. Because any postal officer may enter into such 
agreements, and USPS does not have a centralized office responsible 
for executing or otherwise tracking these agreements, USPS was unable 
to provide comprehensive information on the agreements it currently 
has. However, based on our discussions with USPS officials and our 
review of related reports, we identified at least four services that 
USPS performs on a discretionary basis for federal agencies. For 
example, USPS collects data on vacant addresses for the Department of 
Housing and Urban Development to use in forecasting neighborhood 
changes, assessing neighborhood needs, and measuring the performance 
of its housing-related programs. USPS also accepts passport 
applications at over 6,300 post offices nationwide for the State 
Department. By using USPS's extensive network of post offices, the 
agencies' agreement is intended to provide passport applicants with 
more convenient access to passport acceptance services than the State 
Department could provide alone, particularly in remote U.S. areas. In 
addition, USPS leases its excess space, including parking, office 
space, and roof areas to federal agencies, including the General 
Services Administration. Finally, USPS processes investigations 
related to equal employment opportunity complaints for numerous 
federal agencies.[Footnote 21] Appendix III provides more information 
on these services. 

USPS's Efforts to Generate Additional Revenue Include Ongoing and 
Planned Postal and Nonpostal Initiatives: 

As of November 2012, USPS was pursuing 55 stakeholder-identified 
initiatives that it believes respond to the changing needs of 
consumers and businesses and strengthen the relevance of USPS and the 
mail.[Footnote 22] Forty-eight initiatives are extensions of USPS's 
existing lines of postal products and services; three are extensions 
of grandfathered nonpostal services; and four are experimental postal 
products. Forty-five of the initiatives are ongoing, and are discussed 
below and in more detail in appendix IV. Ten are under development and 
are not discussed. 

Extensions of Existing Postal Products and Services: 

Thirty-nine of the 48 initiatives that are extensions of USPS's 
existing lines of postal products and services are ongoing. Examples 
include: 

* The reclassification of 6,000 of its post office boxes from market 
dominant to competitive in markets with other mail services in fiscal 
year 2011. This change allowed USPS to offer post office box customers 
additional services such as expanded lobby hours, earlier pick-up 
times, and the use of post office locations for street-styled 
addressing (e.g., 131 South Center St. #3094, instead of P.O. Box 
3094) for an increased fee. 

* The launch in fiscal year 2012 of the Partner Campaigns--an 
initiative in which USPS works with retail partners to increase the 
public's awareness that retail stores also offer postal services. 
According to USPS, the Partner Campaigns are expected to increase 
customer access to postal products and services. 

* The launch of 2nd Ounce Free in fiscal year 2012--an initiative that 
enables large mailers, such as banks, to send twice as much mail for 
the 1-ounce price. According to USPS, this product allows mailers to 
use the second ounce for marketing purposes which adds value to their 
mailings. For example, a mailer may choose to combine advertising with 
its bills and statements. If that advertising leads to the consumer 
using return mail, it could lead to greater sales for USPS and the 
mailer and slow the decline in the use of First-Class Mail. 

Nonpostal Services and Experimental Postal Products: 

USPS is pursuing three stakeholder-identified initiatives that are 
extensions of its existing nonpostal services. Two of these 
initiatives are ongoing, including an effort to allow customers to 
change their addresses using mobile devices, which expands the ways a 
customer can request address changes through MoverSource. USPS is also 
pursuing four stakeholder-identified initiatives involving 
experimental postal products.[Footnote 23] Two that have completed 
market testing and are ongoing as permanent postal products are Every 
Door Direct Mail™, which is designed to make it easier for small and 
medium-sized businesses to advertise using the mail, and Reinvigorate 
Samples, which is intended to encourage increased mailings of product 
samples. Market tests for the two other experimental postal products--
prepaid postage on the sale of greeting card and a campaign to involve 
selected companies in direct mail advertising--are under way. 

Reasons for Pursuing the 55 Initiatives: 

USPS pursued these 55 initiatives for reasons including revenue 
generation and adding value to the mail, among others, as shown in 
figure 1. Twenty-four initiatives (44 percent) were pursued solely or 
primarily to grow revenue, including a First-Class Package Service for 
packages weighing less than 1 pound--the only per-ounce pricing in the 
marketplace, according to USPS officials. To grow revenue, USPS also 
introduced several options for returning unwanted merchandise more 
easily and conveniently. USPS officials could not provide estimates of 
the expected net income for all of the 55 initiatives; however, the 
officials estimated that 9 of them will collectively generate a net 
contribution of about $240 million in fiscal year 2012. 

Figure 1: Sole or Primary Reason Cited by USPS for Pursuing 55 
Initiatives: 

[Refer to PDF for image: pie-chart] 

Grow revenue (24 initiatives): 44%; 
Add value to the mail (16 initiatives): 29%; 
Increase customer access (10 initiatives): 18%; 
Support USPS strategic goals (3 initiatives): 5%; 
Slow mail decline (2 initiatives): 4%. 

Source: GAO analysis of USPS initiatives. 

[End of figure] 

USPS Did Not Pursue 25 Initiatives because of Financial and Other 
Reasons, and Believes Additional Statutory Authorities Would Provide 
Opportunities to Increase Revenue: 

USPS decided not to pursue 25 additional stakeholder-identified 
initiatives because of financial and other reasons. Specifically, 12 
of 25 initiatives, or 48 percent, were abandoned because of financial 
reasons. For example, USPS decided not to offer online Identity 
Management Services to educate customers about how to protect 
themselves from identity theft when shopping online. USPS anticipated 
that the service also would provide convenient access for purchasing 
from online companies pre-qualified by USPS. According to USPS, it 
abandoned this initiative because it determined that the initiative 
would not result in a return on USPS's investment. In other cases, 
USPS determined that initiatives required too high an initial 
investment or posed other financial risks and uncertainties. For 
example, USPS decided not to pursue a domestic money-transfer service 
and a retail bill-payment initiative because the costs would render 
these financial services unprofitable at this time. 

USPS decided not to pursue the remaining 13 stakeholder-identified 
initiatives for other reasons. 

* USPS eliminated four initiatives that could be viewed as nonpostal 
services because it lacks statutory authority to perform new services 
in this area, as discussed further below. 

* USPS eliminated four initiatives because stakeholders were not 
interested in participating in the efforts. For example, USPS wanted 
to expand and digitalize its passport services at self-service kiosks 
in post offices as a potential means to reduce error and fraud. 
However, according to a recent USPS Office of Inspector General 
report, the State Department was not interested in participating 
because, in its view, the kiosks would not be cost effective.[Footnote 
24] USPS also tried to partner with the Internal Revenue Service to 
use personnel at post office locations to verify the identities of 
individuals claiming eligibility for the Earned Income Tax Credit (a 
benefit for certain individuals who work and have lower wages). 
According to USPS officials, there was limited interest on the part of 
the Internal Revenue Service because, as reported by the Office of 
Inspector General, the Internal Revenue Service decided to implement 
an alternative solution. 

* USPS eliminated two initiatives because it determined that they 
required a greater initial commitment of resources than other 
initiatives and were therefore of lower priority. For example, USPS 
decided not to provide eligible companies with volume-based discount 
pricing to increase their use of First-Class Mail because companies 
may be unwilling or unable to make the needed investments for the 
initiative to work. Instead, USPS officials said they are focusing on 
other incentives with lower investment thresholds. 

* USPS eliminated two initiatives because it determined that they 
could potentially damage the trust that customers have in the USPS 
brand. One initiative involved opening and scanning a customer's mail--
with the customer's permission--to send the mail to them in digital 
form. The other initiative envisioned providing companies with tools 
to enable them to better target their mailings to consumers. 

* USPS eliminated one initiative that conflicted with ongoing efforts 
to reduce the postal workforce. Specifically, USPS decided not to use 
its Human Resource Shared Services Center to offer retirement 
management services to other federal agencies, in part, because it 
does not currently have sufficient capacity to expand these services. 

Figure 2 summarizes the primary reasons cited by USPS for not pursuing 
the 25 initiatives. 

Figure 2: Reasons Cited by USPS for Not Pursuing the 25 Initiatives: 

[Refer to PDF for image: pie-chart] 

Financial--e.g., insufficient return on investment (12 initiatives): 
48%; 
Lack of stakeholder interest/participation (4 initiatives): 16%; 
Lack of statutory authority (4 initiatives): 16%; 
Risk to brand (2 initiatives): 8%; 
Not a priority (2 initiatives): 8%; 
Operational--e.g., insufficient capacity (1 initiative): 4%. 

Source: GAO. 

[End of figure] 

According to USPS officials, they would like to pursue additional 
revenue-generating opportunities in three areas--nonpostal services; 
shipments of beer, wine, and spirits; and cooperation with state and 
local governments--if provided with additional statutory authority. 
The officials stated that USPS staff have briefed congressional 
members and staff about these areas.[Footnote 25] In addition, they 
noted that USPS has outlined its interests in publicly available 
reports, including its March 2010 Action Plan, which lays out the 
agency's position on its need for increased flexibility to offer new 
and innovative products.[Footnote 26] USPS also reiterated its 
interest in acquiring additional statutory authorities in February 
2012 when it issued its 5-year business plan.[Footnote 27] According 
to USPS, opportunities in these three areas could provide significant 
value to customers, improve USPS's financial position, and take full 
advantage of its resources and competencies. USPS emphasized, however, 
that additional innovations in these areas will not be sufficient to 
solve USPS's dire financial situation. Results will also be 
constrained by the economic climate and by changing use of the mail. 

Concluding Observations: 

USPS's financial viability is dependent not only on cutting costs, but 
also generating additional revenues. USPS generated a net income of 
$141 million in 2011 from its offerings of nonpostal services and 
products. While beneficial, this income pales in comparison to USPS's 
net loss of $15.9 billion in 2012. To address its deepening fiscal 
crisis, USPS believes that additional services and products in three 
areas--including nonpostal services, shipments of alcoholic beverages, 
and cooperation with state and local governments--could generate some 
additional revenue; however, additional statutory authority is needed. 
Legislation was introduced to improve USPS's financial condition. The 
legislation included increased flexibilities to allow USPS to offer 
new products; however, Congress was unable to reach overall agreement 
on the steps needed to sustain and transform USPS. We continue to 
believe action to address the long-standing challenges that hinder 
USPS's financial viability, including a consideration of options to 
expand its revenue-generating potential, remains necessary. 

Agency Comments: 

We provided a draft of this report to USPS for review and comment. In 
its written comments, reprinted in appendix V, USPS stated that its 
financial viability is dependent not only on cutting costs but also 
generating additional revenue. USPS also provided technical comments 
which we incorporated, as appropriate. 

We are sending copies of this report to the appropriate congressional 
committees, the Postmaster General, and other interested parties. In 
addition, the report will be available at no charge on GAO's Web site 
at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions regarding this report, please 
contact me at (202) 512-2834 or stjamesl@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made key contributions 
to this report are listed in appendix VI. 

Sincerely yours, 

Signed by: 

Lorelei St. James: 
Director: 
Physical Infrastructure Issues: 

[End of section] 

Appendix I: USPS's Grandfathered Nonpostal Services: 

Market Dominant Nonpostal Services: 

Number: 1; 
Grandfathered nonpostal service (first year offered): Market Dominant 
Nonpostal Services: MoverSource (1995); 
Description: Market Dominant Nonpostal Services: MoverSource is a 
program involving USPS's change-of-address orders. The program is 
offered through a multiyear alliance between USPS and Imagitas--a 
subsidiary of Pitney Bowes--and provides USPS customers with, among 
other things, a form for requesting address changes; confirmation of 
the change; and mailings containing move-related tips, advertising, 
and offers. The revenue and cost of the program are shared between 
USPS and Imagitas. USPS also receives a share of the $1 fee collected 
for each internet change-of-address order. In addition, the mailings 
generate postage revenue for USPS that is not shared. According to 
USPS, the MoverSource program adds value to the change-of-address 
process, while defraying its annual costs for processing these 
changes. USPS typically processes about 40 million change-of-address 
orders annually, of which about one-third are processed online; 
Number of nonpostal products under the service: None; 
Publicly reported net income,[A] fiscal year 2011[B]: $51.9 million. 

Number: 2; 
Grandfathered nonpostal service (first year offered): Market Dominant 
Nonpostal Services: Philatelic Sales (about 1850); 
Description: Market Dominant Nonpostal Services: USPS sells a wide-
range of stamps and stamp-related items to customers involved in the 
hobby of stamp collecting. Examples of philatelic items include first 
day covers,[C] ceremony programs, uncut press sheets, framed stamps, 
binders for storing stamps, and philatelic guides. USPS satisfies its 
orders for philatelic items through two fulfillment channels--retail 
outlets and USPS's Stamp Fulfillment Services. Selected philatelic 
items are available at USPS retail facilities, but most are sold 
through USPS's Stamp Fulfillment Services via USPS.com®, the USA 
Philatelic catalog, phone, and fax. In May 2012, the price of these 
items ranged from less than a dollar for the first day cover of the 
Common Tern bird stamp to $1,440 for a sheet of American Wigeon duck 
stamps; 
Number of nonpostal products under the service: about 900; 
Publicly reported net income,[A] fiscal year 2011[B]: ($0.7 
million)[D]. 

Subtotal: Nonpostal market dominant services: 
Publicly reported net income,[A] fiscal year 2011[B]: $51.2 million. 

Competitive Nonpostal Services: 

Number: 3; 
Grandfathered nonpostal service (first year offered): Market Dominant 
Nonpostal Services: Affiliates for Website (2001); 
Description: Market Dominant Nonpostal Services: In exchange for a 
portion of revenue generated, USPS provides its website customers with 
access to other companies (affiliates) that also provide mailing 
services and products. USPS's website currently hosts hyperlinks to 
three affiliates--Cardstore, Click2Mail, and PremiumPostcard--under 
agreements styled as affiliate marketing arrangements. According to 
USPS, affiliate arrangements provide customers with increased access 
to, among other things, postal products and services and generate 
revenue for USPS through affiliation fees, increased website traffic, 
and additional postage sales. According to USPS, its affiliate website 
agreements are actively managed by both parties. As a result, the 
parties meet monthly and discuss marketing goals and objectives to 
increase the parties' revenue and website visits; 
Number of nonpostal products under the service: 3; 
Publicly reported net income,[A] fiscal year 2011[B]: N/A[E]. 

Number: 4; 
Grandfathered nonpostal service (first year offered): Market Dominant 
Nonpostal Services: Affiliates - Other (Linking Only) (2001); 
Description: Market Dominant Nonpostal Services: This program is 
similar to the one described immediately above, except that USPS does 
not actively manage these affiliate arrangements. USPS's website 
currently hosts hyperlinks to three such affiliates--Start Sampling, 
My Savings, and Maponics--which provide customers with products and 
services ranging from free samples and coupons to maps. According to 
the Postmaster General, USPS's agreements with these affiliates can be 
viewed as leases of USPS's "virtual real estate." "Linking only" 
affiliates pay either a flat fee (i.e., "cost per click" as in the 
case of Start Sampling and My Savings) or, in the case of Maponics, 
share a portion of the revenue with USPS for having a link to its 
website; 
Number of nonpostal products under the service: 3; 
Publicly reported net income,[A] fiscal year 2011[B]: N/A. 

Number: 5; 
Grandfathered nonpostal service (first year offered): Market Dominant 
Nonpostal Services: Electronic Postmark® (1995); 
Description: Market Dominant Nonpostal Services: Electronic Postmark 
is a web-based security program that enables customers, using 
authorized service providers under license with USPS, to detect 
whether documents or files time stamped with an electronic postmark 
have been altered since the postmark was applied. Authorized providers 
generate the "timestamp" (the postmark) on secure servers that they 
own and maintain. Providers pay a quarterly fee for this service, with 
additional fees for usage above a certain threshold. In 2010--the last 
year in which USPS sold this service to a provider--the quarterly fee 
was $75,000 per provider for up to 1.5 million electronic postmarks 
and $0.02 for each additional postmark; 
Number of nonpostal products under the service: None; 
Publicly reported net income,[A] fiscal year 2011[B]: N/A. 

Number: 6; 
Grandfathered nonpostal service (first year offered): Market Dominant 
Nonpostal Services: FedEx® Drop Boxes (2001); 
Description: Market Dominant Nonpostal Services: This nonpostal 
service involves a non-exclusive lease agreement between USPS and 
FedEx, which for a fee, allows FedEx to place its drop boxes at USPS 
post offices. In September 2012, there were about 4,870 of these boxes 
located at USPS retail facilities. According to USPS, all 
responsibilities related to the installation, maintenance, collection, 
and removal of the drop boxes reside with FedEx; 
Number of nonpostal products under the service: None; 
Publicly reported net income,[A] fiscal year 2011[B]: N/A. 

Number: 7; 
Grandfathered nonpostal service (first year offered): Market Dominant 
Nonpostal Services: Licensing Programs Other Than Officially Licensed 
Retail Products (early 1990s); 
Description: Market Dominant Nonpostal Services: This program is 
similar to Number 9 below, except that it involves the sale of postal 
branded merchandise through other (nonpostal) channels. In fiscal year 
2012, USPS had about 20 licensing agreements with third-party vendors 
for their use of USPS's intellectual property on thousands of products 
including apparel, fashion accessories, cards and stationery, pet 
products, toys and games, and other types of consumer products. USPS 
charges a nominal fee ($25) for the use of its trademarks or 
copyrighted material for noncommercial or limited commercial purposes. 
However, it negotiates the price for its licensees' use of patents, 
and other intellectual property involving more extensive commercial 
purposes. According to USPS, it manages its licensed products by, 
among other things, requiring licensees to obtain advance approval for 
USPS-branded products, imposing quality control standards, and 
policing product use and promotion; 
Number of nonpostal products under the service: about 20; 
Publicly reported net income,[A] fiscal year 2011[B]: N/A. 

Number: 8; 
Grandfathered nonpostal service (first year offered): Market Dominant 
Nonpostal Services: Non-sale lease agreements - nongovernment (late 
1980s/early 1990s); 
Description: Market Dominant Nonpostal Services: USPS has a variety of 
agreements with private, nongovernmental entities to lease excess USPS 
space, including parking, office, warehouse space, and land. For 
example, USPS leases its rooftop space and excess land to advertisers 
and cellular providers for billboards and antenna towers. In fiscal 
year 2012, USPS had about 600 lease agreements with nongovernmental 
entities. The parties negotiate the price of the lease, which vary by 
agreement; 
Number of nonpostal products under the service: about 600; 
Publicly reported net income,[A] fiscal year 2011[B]: N/A. 

Number: 9; 
Grandfathered nonpostal service (first year offered): Market Dominant 
Nonpostal Services: Officially Licensed Retail Products (mid-1990s); 
Description: Market Dominant Nonpostal Services: USPS licenses its 
intellectual property, including its postal trademarks and stamp 
images, to parties who use these images on merchandise that USPS sells 
in its post offices and on its website. (The program involves the 
actual sale of the licensed retail merchandise--not the royalty 
payments that USPS receives for licensing its intellectual property to 
these parties.) In fiscal year 2012, USPS had 150 licensing agreements 
with third-party vendors for their use of USPS branded items such as 
weight scales, stamp dispensers, teddy bears, passport holders, framed 
artwork, and key chains. In September 2012, prices for these products 
ranged from $1.30 for reflective mailbox stickers to $134.99 for 
framed art; 
Number of nonpostal products under the service: 150; 
Publicly reported net income,[A] fiscal year 2011[B]: N/A. 

Number: 10; 
Grandfathered nonpostal service (first year offered): Market Dominant 
Nonpostal Services: Passport photo service (early 2000s); 
Description: Market Dominant Nonpostal Services: USPS produces and 
sells passport photos to individuals for a fee of $15 at more than 
5,000 USPS passport application acceptance sites; 
Number of nonpostal products under the service: None; 
Publicly reported net income,[A] fiscal year 2011[B]: N/A. 

Number: 11; 
Grandfathered nonpostal service (first year offered): Market Dominant 
Nonpostal Services: Photocopying service (early 1990s); 
Description: Market Dominant Nonpostal Services: USPS offers self-
service photocopying services at about 2,540 of its retail facilities. 
In some locations, photocopiers were installed by commercial vendors 
under contracts with USPS. The remaining machines were installed by 
USPS. In September 2012, USPS charged a fee of between $0.10 to $0.50 
per page for copying; 
Number of nonpostal products under the service: None; 
Publicly reported net income,[A] fiscal year 2011[B]: N/A. 

Number: 12; 
Grandfathered nonpostal service (first year offered): Market Dominant 
Nonpostal Services: Training facilities (1997-1998); 
Description: Market Dominant Nonpostal Services: USPS rents excess 
facility space and services at its two training facilities to outside 
parties. The facilities include meeting rooms, housing, and exercise 
areas. Available services include (1) conference-related services such 
as food and the rental of audio-visual equipment, and (2) hospitality-
related services such as lodging, fitness-related services, banquet 
services, and the onsite sale of sundries. USPS contracts with a 
company to manage each of the facilities. Management companies set the 
price for the services provided and USPS receives a negotiated 
percentage of net profits; 
Number of nonpostal products under the service: None; 
Publicly reported net income,[A] fiscal year 2011[B]: N/A. 

Number: Subtotal: Nonpostal competitive services: 
Publicly reported net income,[A] fiscal year 2011[B]: $89.8 million. 

Total: All nonpostal services; 
Publicly reported net income,[A] fiscal year 2011[B]: $141.0 million. 

Source: GAO analysis of USPS and PRC documents. 

[A] The Postal Regulatory Commission (PRC) Annual Compliance 
Determination Report for Fiscal Year 2011 (Mar. 28, 2012). USPS 
annually reports financial data on all products, including market 
dominant and competitive products, to the PRC. USPS reports its 
competitive information to the PRC in "nonpublic" reports. The PRC 
does not Publicly disclose these data, except in aggregate form. 

[B] USPS's fiscal year 2012 financial data for its market dominant and 
competitive products is not expected to be reported until March 2013. 

[C] A first day cover is a stamped envelope, post card, or other 
postal material showing that the stamp was canceled at the post office 
where the stamp was issued. 

[D] USPS reported a net loss of $666,210 for Stamp Fulfillment 
Services Handling Services for sales in fiscal year 2011--$171,954 
revenue less $838,164 for expenses. According to USPS, the reported 
loss relates to handling fees assessed on the portion of its 
customers' philatelic orders processed by its Stamp Fulfillment 
Service in Kansas City, Mo. and resulted from the PRC's accepted 
method for allocating revenue and expenses for handling services for 
Philatelic and Non-Philatelic orders. Philatelic Sales (a nonpostal 
service) and Non-Philatelic Sales (a postal service) are fulfilled 
through USPS's Stamp Fulfillment Services with handling fees received 
for order processing and fulfillment. However, according to USPS, 
revenue associated with its "Philatelic Sales" represents handling 
fees paid by customers who order using alternative sales channels such 
as USPS.com, catalog, phone, and mail, and excludes all revenue from 
product sales. According to USPS, the two sales channels "are in 
practical and operational terms one service" and, consequently, USPS 
cannot precisely allocate revenues and expenses between the two. Also, 
according to USPS, a portion of USPS's Philatelic Sales occur at 
retail ("brick and mortar") outlets where customers do not incur 
handling fees. Finally, USPS's reported financial data do not include 
expenses related to its sales of philatelic items at retail facilities 
because USPS has not yet determined how to estimate these costs. 

[E] Financial information on USPS's competitive products is not 
Publicly reported. 

[End of table] 

[End of section] 

Appendix II: USPS's Approved Market Tests for Experimental Postal 
Products, as of November 30, 2012: 

Market Dominant: 

Number: 1; 
Name and anticipated timeframe for market test, at approval: Alternate 
Postage Payment Method for Greeting Cards (about Jan. 1, 2011 to about 
Dec. 31, 2012); 
Description: Alternate Postage removes a step in the mailing process 
because it enables consumers to send greeting cards without affixing 
postage. According to USPS, the alternate payment method makes it 
easier and more convenient for customers to purchase and mail cards 
because they do not have to determine and affix the proper postage 
before mailing. Instead, the cost of postage is included (prepaid) in 
the price consumers pay for the card. To participate, a company must 
produce and distribute greeting cards with envelopes bearing barcodes 
and other USPS specified markings that allow USPS to identify each 
envelope in the mail stream. Participating companies pay USPS in two 
steps. First, USPS receives 50 percent of the postage revenue when the 
card is sold to consumers (or distributed to third-party vendors)--
even if the card is not mailed. Second, companies must pay USPS for 
the postage for cards that USPS determines were actually mailed; 
Expected annual revenue at approval[A]: $10 million-$50 million[B]; 
Status: 
Ongoing. While only one greeting card company--Hallmark--was 
participating in this test as of November 30, 2012, USPS hopes to make 
prepaid greeting cards more widely available by expanding the test 
program to additional partners. Further, USPS requested and received 
PRC approval to extend the market test beyond December 2012 and seek 
the PRC's approval of Alternate Postage as a permanent product after 
the market test ends; 
Revenue: USPS projects this product will result in $12 million in 
revenue for fiscal year 2012 and $17 million in revenue for fiscal 
year 2013. 

Number: 2; 
Name and anticipated timeframe for market test, at approval: Every 
Door Direct Mail™-Retail; 
formerly called Marketing Mail Made Easy (about Feb. 27, 2011 to about 
Jan. 31, 2013); 
Description: Every Door Direct Mail-Retail was a test that used 
simplified addressing, entry, pricing and payment options to entice 
small and medium-sized businesses to advertise to consumers within 
their neighborhoods. By making advertising through the mail (direct 
mail) less costly and complex, USPS hoped to attract new mail 
customers and/or increase its mail volume and revenues from existing 
small-volume business mailers. The test had several features. For 
example, USPS allowed small and medium-sized businesses to send up to 
5,000 mail pieces per day at a reduced cost (14.2 cents per piece). 
USPS also reduced the complexity of the mailings by allowing the 
businesses to prepare their mail using simplified addressing, such as 
"Postal Customer," which eliminated the need to purchase mailing lists 
and print specific addresses on each of their mail pieces. In 
addition, USPS made it more convenient for these businesses to enter 
mail into the mailstream because it allowed them to bring their 
mailings to their local post office instead of to a mail-processing 
plant that may not be conveniently located. Finally, USPS waived all 
permitting and mailing fees for the businesses' mailings; 
Expected annual revenue at approval[A]: $10 million-$50 million[B]; 
Status: 
Revenue: According to USPS, revenue for this product has continued to 
grow and, as of October 2012, surpassed $2 million per week at its 
retail locations. USPS estimates this product will result in $55 
million in revenues in fiscal year 2012 and $100 million in revenue in 
fiscal year 2013. 

Number: 3; 
Name and anticipated timeframe for market test, at approval: Mail 
Works Guarantee (about June 2011 to about May 2013); 
Description: This test was aimed at demonstrating the effectiveness of 
direct mail advertising campaigns to 16 of the country's "top" 
advertising companies. According to USPS, these companies spend $90 
billion annually for advertising on all media, but spend approximately 
$3 billion (about 3 percent) advertising through the mail. 
Consequently, in requesting the PRC's approval for the market test, 
USPS stated that it saw "huge potential revenue" if USPS could involve 
these companies in direct mail advertising campaigns using First-Class 
and Standard Mail. To qualify for the test, a company must spend at 
least $250 million on advertising annually, but allocate less than 1 
percent of its total advertising budget to direct mail. In addition, 
it must mail 500,000 to 1 million pieces of First-Class Mail or 
Standard Mail during a direct mail campaign. Participating companies 
would be required to pay normal postal rates for their mailings, but 
receive a postage back guarantee (i.e., a credit to their USPS account 
of up to $250,000) if a direct mail advertising campaign fails to 
achieve its goal; 
Expected annual revenue at approval[A]: less than or equal to $10 
million; 
Status: 
Ongoing, but unlikely to be successful. As of November 30, 2012, USPS 
had not yet found any companies interested in participating in the 
market test. According to USPS, the test is not likely to be 
successful because its incentives for program participation "were not 
sufficient to cause customers to change their behavior." While the 
test has not been successful thus far, USPS said it is continuing to 
solicit participation from large companies with multi-million dollar 
advertising budgets that do not currently use the mail as part of 
their advertising mix. In addition, USPS is exploring revisions to the 
test's participation requirements to help attract customers. On 
January 8, 2013, USPS filed to terminate the Mail Works Guarantee 
market test with the PRC; 
Revenue: None. 

Number: 4; 
Name and anticipated timeframe for market test, at approval: First-
Class Tracer (about Dec. 2011 to about Nov. 2013); 
Description: This test product is designed to satisfy the needs of 
consumers who want to track their First-Class letters through the mail 
stream. Specifically, the product allows customers to purchase and 
affix a barcode label, tracing number, and a code which, collectively, 
enable them to track the status (excluding delivery confirmation) of 
their First-Class mailings on USPS's website. According to USPS's 
request for the test's approval, USPS expected to sell the tracing 
labels in packages of 5 and 10 and to sell the packages at differing 
prices--ranging from $0.99 to $2.99 depending on the quantity and 
location--to test customer acceptance at 50 retail postal locations in 
the Washington, D.C., metropolitan area; 
Expected annual revenue at approval[A]: less than or equal to $10 
million; 
Status: Ongoing. According to USPS, while this test was not expected 
to conclude until November 2013, the First-Class Tracer had sold out 
at most of its participating retail locations as of mid-October 2012; 
Revenue: According to USPS, this product generated $3,065 in revenue 
though mid-October 2012. 

Competitive: 

Number: 5; 
Name and anticipated timeframe for market test, at approval: 
Collaborative Logistics (May 7, 2009 to Sept. 30, 2011, as extended); 
Description: Collaborative Logistics--the first experimental market 
test offered under PAEA--was initiated to reduce excess capacity in 
USPS's highway transportation network. According to USPS, its 
utilization of vehicles across this network varied by day of week, 
time of month, and season. As a result, USPS sought to optimize its 
network of purchased highway transportation by reselling available 
space on its contractors' trucks. During the course of the test, USPS 
resold, on a space-available basis, truck space to six customers for 
shipments that were required to be loaded on pallets. The loads were 
delivered to large postal processing facilities and picked up at large 
downstream postal facilities. USPS negotiated the price with each 
customer based on a variety of factors, including the customers' 
required service standards; 
Expected annual revenue at approval[A]: less than or equal to $10 
million; 
Status: 
Terminated in September 2011. USPS views this market test as 
successful, but did not seek to make it a permanent postal product 
despite its original intention to do so. Instead, USPS terminated the 
test in September 2011, indicating that it had reevaluated its plans. 
USPS explained that its ongoing facility consolidations had resulted 
in significant opportunities to reduce overcapacity and costs within 
its transportation network. Depending on its future financial and 
operational conditions, USPS said it may seek to introduce this 
product on a permanent basis sometime in the future; 
Revenue: According to USPS, this product generated about $2.1 million 
over the testing time frame. 

Number: 6; 
Name and anticipated timeframe for market test, at approval: Samples 
Co-op Box (May 2010); 
Description: Samples Co-Op Box was a 1-week test mailing of parcel 
boxes containing an assortment of samples, such as beauty, health, and 
snack products, from various packaged goods companies. USPS partnered 
with a company to prepare and mail the boxes and to conduct market 
research, and USPS delivered the boxes to consumers in targeted 
demographic areas without charge. According to USPS, while product 
samples provide an effective way for companies to build brand 
awareness for their products, the volume of samples sent through the 
mail has declined in recent years. Consequently, this test was 
intended to, among other things, explore ways to increase sample 
mailings that, according to USPS, offered "the potential for millions 
of dollars" of additional postal revenue. Another purpose of the test 
was to obtain information about the cost-effectiveness of the program 
and its value to product manufacturers and consumers; 
Expected annual revenue at approval[A]: 0[C]; 
Status: Completed, now a permanent postal product; 
This test was completed in May 2010 following a 1-week mailing of 
several hundred thousand boxes of samples to consumers in Charlotte, 
N.C. and Pittsburgh, Pa. According to USPS, the test was well received 
by both the sample recipients and the participating packaged goods 
companies. USPS secured the PRC's approval to add this product as a 
new competitive postal product (Parcel Select Contract 1) in March 
2011 and executed an agreement with Start Sampling, a Mail Service 
Provider that offers sample fulfillment services, to distribute the 
sample boxes. USPS receives postage revenue for each of the "Sample 
Showcase" boxes plus a share of the revenue generated in product sales; 
Revenue: N/A[C]. 

Number: 7; 
Name and anticipated timeframe for market test, at approval: Gift 
Cards (about May 1, 2011 to about April 30, 2013); 
Description: This market test allows customers to purchase gift cards 
loaded with a specified sum of money that may be sent through the 
mail. According to USPS, the sale of gift cards at selected retail 
postal locations increases customer convenience and enhances postal 
revenue by encouraging customers to use the mail for gifting purposes. 
USPS activates the card and earns a negotiated percentage of each 
card's activation fee. The remainder of the fee is remitted to the 
issuer of the card. In its request for approval of the market test, 
USPS indicated that it intended to enter into an agreement with one or 
more card providers. USPS also indicated that it might test different 
activation fees, which typically range from $3.95 to $5.95 depending 
on the value and type of the gift card; 
Expected annual revenue at approval[A]: less than or equal to $10 
million; 
Status: 
Ongoing. USPS entered into an agreement with American Express and 
currently offers this vendor's gift cards at about 5,200 USPS retail 
locations. The test is expected to be completed by May 2013; 
Revenue: According to USPS, this product generated $96,000 in revenue 
during fiscal year 2011 and is expected to generate about $1.1 million 
during fiscal year 2012. 

Number: 8; 
Name and anticipated timeframe for market test, at approval: Metro Post™
(about Nov. 2012 to Oct. 2013); 
Description: Metro Post is a same-day delivery service for local 
buyers who purchase products from participating online e-commerce 
companies (and associated retailers) in selected metropolitan areas. 
According to USPS, it anticipates entering into relationships with up 
to 10 online e-commerce companies over the course of the market test. 
Metro Post is intended to test the operational feasibility of same-day 
package delivery to/from multiple locations and to help USPS determine 
the optimal pricing structure for the service; 
Expected annual revenue at approval[A]: 10 million-50 million[B]; 
Status: 
Ongoing. PRC approved the market test for Metro Post on November 14, 
2012. USPS selected San Francisco as the first city for testing. The 
market test began on December 17, 2012; 
Revenue: Not yet available. 

Source: GAO Analysis of USPS and PRC documents. 

[A] This column provides information on the amount of revenue USPS 
expected to generate from the market test when it announced its 
intention to initiate the test. 

[B] USPS requested, and received, the PRC's approval to exceed the $10 
million annual revenue limitation. 

[C] This test did not anticipate any revenue to USPS. The agency 
conducted the test free of charge to the parties involved. 

[End of table] 

[End of section] 

Appendix III: Examples of Services USPS Currently Performs on a 
Discretionary Basis for Federal Agencies: 

Number: 1; 
Discretionary services performed for federal agencies[A](first year of 
service): USPS accepts passport applications for the U.S. Department 
of State (State Department) (1974); 
Description: Pursuant to an interagency agreement between USPS and the 
State Department and authorities granted under 39 U.S.C. § 411 and 31 
U.S.C. § 686. USPS is authorized to accept passport applications on 
behalf of the Department. Under the terms of the most recent agreement 
(2000), trained USPS personnel, among other things, review each 
passport application for completeness, record pertinent information 
about the identification the applicant used, collect fees, and send 
the completed application to the State Department. USPS retains a 
portion ($25) of the collected fees in the form of an execution fee. 
In fiscal year 2011, USPS accepted approximately 5.6 million passport 
applications in over 6,300 post offices nationwide. According to USPS, 
the applications generated net income of $43 million for the period. 
By using USPS's extensive network of post offices, the agreement is 
intended to provide passport applicants with more convenient access to 
passport acceptance services than the State Department could provide 
alone, particularly in remote U.S. areas. According to the interagency 
agreement, either party may terminate the agreement, without 
liability, with 180 days advance notification to the other party. 

Number: 2; 
Discretionary services performed for federal agencies[A](first year of 
service): USPS leases excess space to other federal agencies (late 
1980s/early 1990s); 
Description: Through various interagency agreements and authorities 
granted under 39 U.S.C. §§ 401, 410, and 411, USPS is authorized to 
enter into non-sale lease (tenancy) agreements with government 
agencies for such things as excess parking, office space, and roof 
space for antennae towers. In fiscal year 2011, USPS received about 
$24 million in revenue for 91 non-sale lease (tenancy) agreements with 
federal agencies. Most of USPS's leases (tenancy agreements) for 
excess parking and office space are with the General Services 
Administration, while USPS's roof space is typically leased to law 
enforcement agencies. According to USPS, because its tenancy 
agreements generate revenue for space that USPS is not using, they 
help maximize the value of USPS's real estate holdings. Note: USPS 
also enters into non-sale lease agreements with private, 
nongovernmental parties. However, as discussed in appendix I, those 
agreements are carried out pursuant to a grandfathered nonpostal 
service. 

Number: 3; 
Discretionary services performed for federal agencies[A] (first year 
of service)): USPS processes equal employment opportunity (EEO) 
complaints for other federal agencies (2006); 
Description: Through various interagency agreements and under 
authority granted by 39 U.S.C. § 411, in 2006, USPS began conducting 
EEO investigations on behalf of other federal agencies. According to 
USPS officials, USPS initiated this service to generate additional 
revenue. In addition, USPS believed that given its extensive 
experience in this area, it could use its existing contractor 
workforce to reduce the costs and improve the timeliness and quality 
of other agencies' EEO complaints processing. Since 2006, 17 federal 
agencies have entered into interagency agreements with USPS for this 
purpose. In fiscal year 2011, USPS's National EEO Investigative 
Service Office completed 255 investigations for 9 federal agencies 
that generated about $558,000 in net income. According to USPS, 
interagency agreements can be terminated at any time by the mutual 
agreement of the parties. 

Number: 4; 
Discretionary services performed for federal agencies[A] (First year 
of service): USPS collects vacant address data for the Department of 
Housing and Urban Development (HUD) (2005); 
Description: Pursuant to authorities granted under 39 U.S.C. § 411 and 
a 4-year interagency agreement with HUD, USPS agreed to provide HUD 
with data on vacant U.S. residential and business addresses. According 
to the agencies' most recent agreement (September 2011), HUD intends 
to use this information to forecast neighborhood changes, assess 
neighborhood needs, and measure the performance of several of its 
programs. HUD agreed to pay USPS $30,000 in 2011 and has options to 
purchase additional data over a 4-year period for a total cost of up 
to $160,000. The parties specified that the agreement may be 
terminated for no reason or any reason by written notice to the other 
party. 

Source: GAO analysis of USPS and PRC documents and related reports. 

[A] In addition to services that USPS performs on a discretionary 
basis for federal agencies, USPS is required--either by law or 
executive order--to perform numerous services on behalf of federal 
agencies. For example, the Migratory Bird Hunting and Conservation 
Stamp Act requires USPS to print, issue, and sell duck stamps (that 
serve as hunting licenses) for the U.S. Fish and Wildlife Service. 
Pub. L. No. 73-124, 48 Stat. 451 (Mar. 16, 1934). Through executive 
order, USPS also is directed to deliver medicines to individuals in 
the event of a large scale biological attack. Exec. Order No. 13527, 
75 Fed. Reg. 737 (Jan. 6, 2010). 

[End of table] 

[End of section] 

Appendix IV: Description of Ongoing USPS Initiatives, as of November 
14, 2012: 

First-Class Mai: 

Number: 1; 
Initiative Name: 2nd Ounce Free; 
Description: 2nd Ounce Free enables large mailers, such as banks, to 
send twice as much mail for the one-ounce price. According to USPS, 
this product allows mailers to use the second ounce for operational or 
marketing purposes which increases the potential value of their 
mailings; 
Reason: Slow erosion, add value. 

Number: 2; 
Initiative Name: Alternative Postage Payment; 
Description: Alternate Postage Payment removes a step in the mailing 
process because it enables consumers to send greeting cards without 
affixing postage. According to USPS, the alternative payment method 
makes it easier and more convenient for customers to purchase and mail 
cards because they do not have to determine and affix the proper 
postage before mailing. Instead, the cost of postage is included 
(prepaid) in the price consumers pay for the card. USPS introduced 
this product as an experimental product in January 2011 and, according 
to USPS, expects to seek its approval as a permanent product at a 
later date. Appendix II provides additional information on this 
product initiative; 
Reason: Add value. 

Number: 3; 
Initiative Name: IMb-based Initiatives; 
Description: USPS is pursuing a pricing incentive that will offer 
customers a higher discount for sending First-Class Mail that meets 
its Intelligent Mail barcode (IMb) requirements. According to USPS, 
this initiative supports USPS's goal of increasing adoption of its 
intelligent barcodes that, among other things, enhances USPS's mail-
processing efficiency and increases its ability to track the location 
of mail as it moves through the mail stream; 
Reason: Add value. 

Number: 4; 
Initiative Name: Negotiated Service Agreements/Total Customer Value 
Contracts; 
Description: This initiative targets USPS's largest mailers of First-
Class Mail and Standard Mail and is carried out through negotiated 
service agreements between the parties. Participating mailers will 
receive reduced postage costs if they meet specified volume 
commitments. According to USPS, the initiative may be extended to 
other product categories if it is successful; 
Reason: Slow erosion. 

Number: 5; 
Initiative Name: Picture Permit Imprint Indicia; 
Description: This initiative allows mailers to enhance the "indicia" 
area (i.e., the postage block area) of a mail piece with a picture or 
image, including mobile barcodes. According to USPS, the images can be 
used to advertise brands, bring immediate attention to the mail piece, 
and potentially improve the rate in which mail is opened; 
Reason: Add value, support. 

Number: 6; 
Initiative Name: Product Rationalization and Simplification; 
Description: This initiative represents USPS's ongoing process to 
analyze its First-Class Mail product and service offerings. The 
analysis is intended to result in, among other things, the continuous 
simplification of mail offerings, the optimization of USPS's First-
Class Mail products in the marketplace, and the elimination of product 
redundancies. In addition, USPS hopes to reduce the cost and 
complexity of its customers' mailings and identify gaps between 
product features and customer needs. According to USPS, the 
introduction of its 2nd Ounce Free initiative was a direct result of 
this effort; 
Reason: Support. 

Number: 7; 
Initiative Name: Stamps; 
Description: This initiative is intended to increase USPS's sales of 
stamps and philatelic products. Specifically, USPS said it intended to 
renew its emphasis on properly marketing and displaying stamps and 
philatelic products in its retail locations and to expand its Forever 
stamp pricing to its collectible stamp program; 
Reason: Add value. 

Marketing Mail: 

Number: 8; 
Initiative Name: 2012 Holiday Mobile Shopping Promotion; 
Description: This promotion ran between November 7-21, 2012, and 
offered business mailers an upfront 2-percent postage discount on 
qualifying mailings. To qualify, the mailings had to include a two-
dimensional barcode that when read or scanned by a mobile device, 
linked the recipient to a website for purchasing the advertised 
product. According to USPS, by delivering mobile-optimized promotional 
offers, coupons, and catalogs to customers in time for the Black 
Friday-Cyber Monday shopping sprees, the initiative was intended to 
spur mobile purchasing; 
Reason: Add value, slow erosion. 

Number: 9; 
Initiative Name: 2013 Promotional Calendar; 
Description: This initiative involves a series of short-term 
promotions designed to provide mailers and marketers with incentives 
to promote innovative uses of the mail that increase its value to 
recipients. In addition, according to USPS, the promotions are 
intended to accelerate best practices among marketers and business 
mailers, while increasing awareness and engagement among consumers; 
Reason: Add value, slow erosion. 

Number: 10; 
Initiative Name: Additional Supporting Strategies; 
Description: This initiative involves activities that support overall 
USPS efforts, such as those related to simplifying USPS's pricing, 
product lines, and mailing processes. For example, according to USPS, 
it is examining its existing discounts for the presorting of customer 
mailings and is establishing flexible pricing based on location and 
capacity in its processing and transportation networks; 
Reason: Add value, grow revenue. 

Number: 11; 
Initiative Name: Advertising Mailing Services; 
Description: This initiative involved an advertising campaign to 
promote the value of advertising and First-Class Mail to business and 
residential customers. According to USPS, the campaign ran in the fall 
of 2011 and centered around two television ads--called "Hacked" and 
"Face-to-Face"; 
Reason: Grow revenue. 

Number: 12; 
Initiative Name: Direct Mail Hub; 
Description: Direct Mail Hub is a USPS internet site designed to 
educate small business owners, including many first-time business 
users, on how to use direct mail to advertise their businesses to 
consumers. According to USPS, the site helps small businesses generate 
mailings from start-to-finish and complements its Every Door Direct 
Mail product; 
Reason: Add value, grow revenue. 

Number: 13; 
Initiative Name: Free Standing Inserts; 
Description: This initiative is intended to respond to the decline in 
the circulation of newspapers, which advertisers often use to deliver 
inserts, such as circulars, to customers. Instead of being inserted in 
a newspaper, advertisers can--for example--bundle multiple advertising 
leaflets in mailings to consumers. The initiative is carried out 
through negotiated service agreements and, as of November 2012, USPS 
had negotiated one such agreement; 
Reason: Grow revenue. 

Number: 14; 
Initiative Name: Mail Works Guaranteed; 
Description: This initiative targets large advertising companies that 
rely on other media--not mail--to advertise to prospective customers. 
Specifically, USPS hopes to demonstrate the effectiveness of direct 
mail as an advertising medium. Appendix II provides additional 
information on this initiative, which was introduced as an 
experimental product in June 2011. On January 8, 2013, USPS filed to 
terminate the Mail Works Guarantee market test with the PRC; 
Reason: Grow revenue. 

Number: 15; 
Initiative Name: Mobile Commerce & Personalization Promotion; 
Description: This initiative offers business mailers a 2 percent 
postage discount on their qualified mailings. To qualify, the mailing 
must contain a two-dimensional barcode or print/mobile technology that 
can be read or scanned by a mobile device. According to USPS, the 
initiative is designed to encourage marketers to incorporate a "Mobile 
on Mail" multi-channel marketing approach that uses mail as the 
gateway for driving e-commerce activity and transactions; 
Reason: Add value, slow erosion. 

Number: 16; 
Initiative Name: MoverSource; 
Description: This initiative involves a potential enhancement to 
MoverSource--a program for changing a mail recipient's address. With 
this initiative, USPS is exploring the feasibility of allowing mail 
recipients to use their mobile devices as another vehicle for changing 
their mailing address. (USPS currently allows mail recipients to 
change their addresses via a printed form, by phone, or online.) 
Appendix I provides additional information about MoverSource; 
Reason: Add value. 

Number: 17; 
Initiative Name: Periodicals; 
Description: This initiative involves an ongoing USPS effort to 
develop mutually beneficial partnerships with companies in the 
periodical industry. According to USPS, as of November 2012, one topic 
under discussion involved potentially offering magazine subscriptions 
through USPS channels; 
Reason: Grow revenue. 

Number: 18; 
Initiative Name: Reinvigorate Samples; 
Description: Reinvigorate Samples is an effort aimed at increasing the 
use of mail to deliver product samples. This initiative is a follow-on 
to Sample-Co-op boxes that USPS initiated as an experimental product. 
Appendix II provides additional information about Sample Co-op boxes; 
Reason: Grow revenue. 

Number: 19; 
Initiative Name: Simplified & Saturation Mail Incentives/; 
Every Door Direct Mail--Retail; 
Description: USPS introduced Every Door Direct Mail-Retail as an 
experimental postal product that used simplified addressing, entry, 
pricing and payment options to entice small and medium-sized 
businesses to advertise to consumers within the businesses' 
neighborhoods. By making advertising through the mail (direct mail) 
less costly and complex, USPS hopes to attract new mail customers 
and/or increase its mail volume and revenues from existing small-
volume business mailers. The PRC approved Every Door Direct--Retail as 
a permanent postal product in September 2012. Appendix II provides 
additional information about this product; 
Reason: Grow revenue. 

Shipping Services: 

Number: 20; 
Initiative Name: Digital Channel Components; 
Description: This initiative is intended to make it easier for 
technology-savvy and mobile customers to, among other things, order 
packing supplies, buy postage, print labels, and schedule free package 
pickups using USPS's website and other digital channels, such as smart 
phone mobile applications. The increased use of digital channels is 
intended to provide customers with greater access to USPS's products 
and services; 
Reason: Add value. 

Number: 21; 
Initiative Name: ePostage; 
Description: ePostage is an initiative to provide mobile and 
technology-savvy customers with greater access to USPS's products and 
services. As part of this effort, USPS has developed commercial 
shipping tools that, among other things, provide payment and tracking 
services for online retailers. According to USPS, for example, its e-
Postage solution is currently used by one major online retailer; 
Reason: Grow revenue. 

Number: 22; 
Initiative Name: Grow Small and Key Accounts; 
Description: This initiative involves enhancements to USPS's portfolio 
of products and services targeted toward small businesses. According 
to USPS, recent enhancements include Carrier Pickup and Priority Mail 
Prepaid Forever Flat Rate Packaging. USPS also has extended its flat-
rate-shipping options with Priority Mail and Express Mail padded 
envelopes, and upgraded its online Click-N-Ship platform on USPS.com; 
Reason: Grow revenue. 

Number: 23; 
Initiative Name: Growth through Competitive Contracts and Pricing; 
Description: This initiative involves the renegotiation of USPS's 
Parcel Select contracts to adjust its pricing for deliveries based on 
geography. Specifically, USPS adopted a two-tiered pricing approach--
one tier for suburban areas and another tier for rural areas--that is 
expected to lead to greater volume and revenue. According to USPS, for 
example, the contract changes enable private-sector firms to leverage 
USPS's low costs and delivery access to provide "last-mile services" 
to their customers; 
Reason: Grow revenue. 

Number: 24; 
Initiative Name: Increase Profitability for Lightweight Products; 
Description: This initiative involves a First-Class Package Service 
for packages weighing less than 1 pound. According to USPS, this 
service provides the only per-ounce pricing in the marketplace; 
Reason: Grow revenue. 

Number: 25; 
Initiative Name: Market-Based Pricing and Products; 
Description: This initiative is to better align USPS pricing with 
market demand and USPS costs. The Postal Accountability and 
Enhancement Act of 2006 required USPS's market-dominant products to 
cover their costs and any price increases for these products must be 
tied to the rate of inflation. For example, USPS moved Parcel Post®--
previously an unprofitable market-dominant product--to its competitive 
product line. According to USPS, this change will enable USPS to raise 
its price for Parcel Post to at least cover the product's costs. In 
addition, the change is expected to benefit USPS's Priority Mail® 
products which, according to USPS, had been disadvantaged because 
these products were previously competing against the unprofitable 
Parcel Post service; 
Reason: Support goals. 

Number: 26; 
Initiative Name: Marketing, Advertising & Promotions/; 
Advertising Shipping Services; 
Description: This initiative is intended to help USPS compete for a 
larger share of the parcel shipment business. Specifically, USPS 
developed a marketing plan to communicate the benefits of its 
products, services, and initiatives through multi-channel marketing 
campaigns. According to USPS, one feature of the plan involves 
reminding customers about the benefits and features of existing 
shipping options which it hopes will "continue to position" USPS as 
the "shipper of choice" for businesses; 
Reason: Grow revenue. 

Number: 27; 
Initiative Name: Position Ancillary Services for Revenue Growth and 
Profitability; 
Description: USPS plans to give shippers greater control of their 
packages by, among other things, enabling them to request that a mail 
piece be returned or redirected before final delivery to the 
recipient. For example, Hold For Pickup permits a package to be 
shipped directly to a Post Office and held until picked up. Other 
ancillary services include Adult Signature Required and Adult 
Signature Restricted Delivery, which are designed to satisfy security 
and privacy concerns for shipments that by law require an adult's 
signature; 
Reason: Grow revenue. 

Number: 28; 
Initiative Name: Returns Management; 
Description: This initiative provides customers with various self-
service returns options, such as the ability to print shipping labels 
that make it easier and more convenient to return merchandise through 
the mail. According to USPS, the introduction of these "return-on-your-
own" options is intended to make USPS the preferred channel for 
business-to-consumer returns; 
Reason: Grow revenue. 

Number: 29; 
Initiative Name: Shipping Supplies for Customers; 
Description: This initiative involves an expansion of USPS's offerings 
of free packaging supplies to increase customer convenience and 
support growth of its expedited shipping products; 
Reason: Support. 

Access to USPS Products and Services: 

Number: 30; 
Initiative Name: Business Mail Acceptance; 
Description: The initiative involves the introduction or improvement 
of various processes USPS uses to accept business mail for processing, 
including processes that verify and track the mailings. In addition, 
USPS intends to upgrade its infrastructure to allow electronic data on 
mailings to be stored at designated local sites (in addition to the 
centralized database) to address the possibility of network outages; 
Reason: Increase access, grow revenue. 

Number: 31; 
Initiative Name: Business Mail Entry; 
Description: This initiative involves the introduction of online 
resources and streamlined processes intended to make it easier for 
mailers to prepare and enter their mail into the mail stream; 
Reason: Increase access, grow revenue. 

Number: 32; 
Initiative Name: Business Service Network Group; 
Description: This initiative involves the 400 field employees who 
provide day-to-day assistance to USPS's 27,000 commercial customers 
throughout the country. According to USPS, in addition to customer 
service, these employees also establish relationships with its 
customers' key decision makers; 
Reason: Increase access, grow revenue. 

Number: 33; 
Initiative Name: Contract Mechanisms; 
Description: USPS is exploring new tiered pricing structures that 
would allow customers to earn additional mailing discounts once they 
exceed specified revenue or volume thresholds; 
Reason: Grow revenue. 

Number: 34; 
Initiative Name: Corporate Customer Contact; 
Description: USPS plans to in-source its customer call-in center in an 
effort to improve customer service and increase the likelihood of 
customers purchasing postal products. According to USPS, this is a 
high priority initiative which is required under the terms of its 
latest contract with the American Postal Workers' Union. USPS said the 
call center will begin operations in the fall of 2012 and ramp up its 
operations through the spring of 2013 to meet its contractual 
commitment to have 1,100 union employees assigned to call center 
operations by May 2013; 
Reason: Increase access. 

Number: 35; 
Initiative Name: Current Product Growth/New Product Introductions; 
Description: USPS is developing and expanding its line of retail 
products, such as greeting cards, promotional and mail related 
products, and tote bags. All of these products are aimed at extending 
postal branding in the marketplace, cross promote core postal 
products, and improve the overall shopping experience; 
Reason: Grow revenue. 

Number: 36; 
Initiative Name: Grow P.O. Box Revenue; 
Description: This initiative targets small business customers that, 
according to USPS, are looking for increased convenience from their 
post office boxes. Specifically, USPS reclassified 6,000 of its post 
office boxes from market dominant to competitive products in markets 
with other mail services in fiscal year 2011. This change allowed USPS 
to offer post-office-box customers additional services such as 
expanded lobby hours, earlier pick-up times, and the use of post 
office locations for street-styled addressing (e.g., 131 South Center 
St. #3094, instead of P.O. Box 3094) for an increased fee; 
Reason: Grow revenue. 

Number: 37; 
Initiative Name: Integrated Customer Access Plan/Customer Experience; 
Description: This initiative was designed as a communications campaign 
built around the theme that USPS is "Everywhere I Am" with "I" being 
the customer. USPS is pursuing this initiative as an alternative 
access communications effort. According to USPS, this theme is 
extremely important to customers who are mobile and tech savvy, and 
therefore, not afraid to use remote postal locations to do business; 
Reason: Increase access. 

Number: 38; 
Initiative Name: Licensing; 
Description: USPS is pursuing licensing opportunities, particularly 
opportunities that will promote its stamp program. According to USPS, 
its licensing efforts have two goals. First, by controlling the use of 
its postal trademarks, USPS said it protects its brand and ensures 
that its good name is not harmed by indiscriminate use of its 
trademarks. Second, USPS said it has a very valuable collection of 
American art as part of its stamp image library and that private 
sector organizations want to leverage the collection for their 
endeavors. According to USPS, licensing this art helps defray its 
costs and helps support its stamp program. Appendix I provides 
additional information about USPS's licensing activities; 
Reason: Grow revenue. 

Number: 39; 
Initiative Name: Partner Campaigns; 
Description: This initiative involves working with retail partners to 
increase awareness of the retailers' stores as locations where 
customers can obtain postal services; 
Reason: Increase access, grow revenue. 

Number: 40; 
Initiative Name: Retail Brick & Mortar; 
Description: This initiative focuses on improving customer service at 
USPS's retail facilities. For example, USPS plans to test different 
approaches and staffing options to improve customer experience and 
reduce customer wait time at its retail facilities. In rural America, 
USPS is adjusting service to local demand through its use of Village 
Post Offices and changes to its hours of facility operations; 
Reason: Increase access. 

Number: 41; 
Initiative Name: Retail Service Incentives; 
Description: According to USPS, it plans (over the next 5-10 years) to 
shift the majority of its retail volume from USPS-owned facilities to 
retail partners and stamp partners via its Retail Partner Expansion 
Program. This program will establish regional and national contracts 
that will allow select retailers to provide USPS products and services 
to their customers. According to USPS, the program will increase 
customer access to USPS products and services more rapidly and at a 
lower cost than would be possible through existing channels. In 
addition, USPS believes that the program will increase its market 
share and create a substantial retail platform for introducing new 
USPS products and services in the future, among other benefits; 
Reason: Increase access, grow revenue. 

Number: 42; 
Initiative Name: Sales Strategies; 
Description: This initiative seeks to substantially increase USPS's 
revenue from political mail. Specifically, USPS hopes to generate $500 
million in revenue in fiscal years 2012 and 2013 through a major sales 
and marketing effort. According to USPS, such an increase would double 
the revenue it received during the previous election season; 
Reason: Grow revenue. 

Number: 43; 
Initiative Name: Self-Service Components; 
Description: This initiative is intended to increase customer access 
to self-service postal options which, according to USPS, will 
substantially lower its costs and improve its customers' experience, 
among other benefits. Specifically, USPS plans to install self-service 
kiosks in about 2,500 high-traffic USPS facilities to emphasize self-
service as the optimal channel for accessing postal services; 
Reason: Increase access. 

Number: 44; 
Initiative Name: Strategic Account Management; 
Description: This initiative involves realigning USPS's sales staff to 
build relationships with its largest customers. USPS expects over $60 
million in incremental revenue as a result of this realignment in 2012; 
Reason: Grow revenue. 

Number: 45; 
Initiative Name: Upsell-at-Retail; 
Description: As part of its effort to grow revenue, personnel at post 
offices are attempting to increase their sales of expedited packaging 
and extra services through a concerted sales effort; 
Reason: Grow revenue. 

Source: GAO analysis of USPS information. 

[End of table] 

[End of section] 

Appendix V: Comments from the United States Postal Service: 

Gary C. Berlin: 
Vice President, New Products and Innovation: 
United States Postal Service: 
475 L'Enfant Plaza SW, Room 5100: 
Washington Dc 20250-5100: 
[hyperlink, http://www.usps.com] 

January 7, 2013: 

Ms. Lorelei St. James: 
Director, Physical Infrastructure Issues: 
United States Government Accountability Office: 
Washington, DC 20548-0001: 

Dear Ms. St. James: 

Thank you for the opportunity to provide comments to the Government 
Accountability Office (GAO) report titled, Overview of Initiatives to 
Increase Revenue and Introduce Nonpostal Services and Experimental 
Postal Products. 

We concur with the overarching conclusion of the report that the 
United States Postal Service's financial viability is dependent not 
only on cutting costs but also generating additional revenue. As such, 
we reiterate that legislation enabling us to offer additional services 
and products in three areas — nonpostal services, shipments of 
alcoholic beverages, and cooperation with state and local 
governments — is a key component of our ability to continue to 
generate new revenue and improve our financial condition. 

Sincerely, 

Signed by: 

Gary C. Reblin 

[End of section] 

Appendix VI: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Lorelei St. James, (202) 512-2834 or stjamesl@gao.gov. 

Staff Acknowledgments: 

In addition to the contact named above, Kathleen Turner and Heather 
Halliwell (Assistant Directors), Tonnye Conner-White, Delwen Jones, 
Steve Martinez, Josh Ormond, James Russell, and Crystal Wesco made key 
contributions to this report. 

[End of section] 

Footnotes: 

[1] USPS is authorized by statute to borrow $3 billion annually and a 
maximum of $15 billion. 39 U.S.C. § 2005(a). 

[2] USPS has incurred $41 billion of net losses over the previous 6 
years, including a $5.1 billion net loss in fiscal year 2011. The 
$15.9 billion net loss includes $11.1 billion for two required 
payments to prefund its future retiree health benefits. Originally due 
at the end of fiscal year 2011, USPS's $5.5 billion retiree health 
benefit payment was delayed until August 1, 2012. Pub. L. No. 112-74, 
§ 632, 125 Stat. 786, 928 (Dec. 23, 2011). USPS missed that payment as 
well as the $5.6 billion payment that was due on September 30, 2012. 
Even though USPS did not make these payments, it recorded a loss for 
the obligation to make these payments. 

[3] Pub. L. No. 109-435, 120 Stat. 3198 (Dec. 20, 2006). 

[4] We excluded services that USPS is required to perform for other 
federal agencies, including those required by statute or executive 
order. For example, the Migratory Bird Hunting and Conservation Stamp 
Act requires USPS to print, issue, and sell duck stamps (that serve as 
hunting licenses) for the U.S. Fish and Wildlife Service. Pub. L. No. 
73-124, 48 Stat. 451 (Mar. 16, 1934). Through executive order, USPS 
also is directed to deliver medicines to individuals in the event of a 
large scale biological attack. Exec. Order No. 13527, 75 Fed. Reg. 737 
(Jan. 6, 2010). 

[5] PAEA allows USPS to test experimental products under certain 
conditions in order to encourage product innovation and rapid product 
introduction. 

[6] Pub. L. No. 91-375, 84 Stat. 724 (Aug. 12, 1970). 

[7] This authority was eliminated because of stakeholder concerns 
about the unprofitability of some of the offered services and 
competition with the private sector. See United States Postal Service 
v. Postal Regulatory Commission, 599 F. 3d 705, 706 (Mar. 30, 2010). 

[8] Postal Regulatory Commission, Order 154, Review of Nonpostal 
Services Under the Postal Accountability and Enhancement Act, Docket 
No. MC-2008-1, Dec. 19, 2008, Washington, D.C. 

[9] USPS has not offered experimental nonpostal products. As discussed 
later, several experimental postal products are offered by USPS. 

[10] 39 U.S.C. 3642(b). 

[11] PAEA specifies that USPS's Board of Governors shall establish 
rates and classes for competitive mail products. Pub. L. No. 109-435, 
§ 202, codified at 39 U.S.C. § 3632. 

[12] If requested by USPS, the PRC may extend the testing period for 
an additional year. 39 U.S.C. § 3641(d). 

[13] 39 U.S.C. § 3641(e). 

[14] A postal service (or product) need not be mailed to constitute a 
"postal" offering. Specifically, PAEA defines a postal service to mean 
the delivery of letters, printed matter, or "mailable" packages, 
including acceptance, collection, sorting, transportation, or other 
functions ancillary thereto. Pub. L. No. 109-435, § 101. 

[15] Additionally, the PRC is authorized to cancel a market test if it 
fails to meet the required conditions. 39 U.S.C. § 3641(f). 

[16] Pub. L. No. 91-375, § 2, codified at 39 U.S.C. § 411. 

[17] United States Postal Service, Fiscal Year 2013 Integrated 
Financial Plan (Nov. 23, 2012). 

[18] GAO, U.S. Postal Service: Strategies and Options to Facilitate 
Progress toward Financial Viability, [hyperlink, 
http://www.gao.gov/products/GAO-10-455], (Washington, D.C.; Apr. 12, 
2010). 

[19] See 21st Century Postal Service Act of 2012, S. 1789, 112th Cong. 
(2012). 

[20] GAO, U.S. Postal Service: Financial Challenges Continue, with 
Relatively Limited Results from Recent Revenue-Generation Efforts, 
[hyperlink, http://www.gao.gov/products/GAO-10-191T], (Washington, 
D.C.; Nov. 5, 2009). 

[21] According to USPS officials, USPS initiated this service to 
generate additional revenue. In addition, USPS believed that given its 
extensive experience in this area, it could use its existing 
contractor workforce to reduce the costs and improve the timeliness 
and quality of other agencies' equal employment opportunity complaints 
processing. USPS's National Equal Opportunity Employment Service 
Office conducts these investigations. 

[22] None of the 55 initiatives involve services that USPS intends to 
perform for one or more federal agencies. 

[23] These four initiatives are among the eight total experimental 
products for which USPS has received PRC approval for market testing. 

[24] U.S. Postal Service Office of Inspector General, Partnerships 
with Other Government Agencies, (Management Advisory), DA-MA-12-006 
(Sept. 28, 2012). 

[25] USPS officials noted that proposed legislation introduced 
provides additional authority for USPS to engage in these activities. 
See S. 1789, 112TH Cong. (2012). 

[26] USPS, Ensuring A Viable Postal Service for America, An Action 
Plan for the Future (March 2010). 

[27] USPS, Plan to Profitability, 5-Year Business Plan (February 16, 
2012). 

[End of section] 

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