FISCAL YEAR 2021

ANNUAL REPORT

TO THE PRESIDENT AND CONGRESS

Postal Regulatory Commission

Submitted 1/25/2022 1:01:00 PM

Filing ID: 120750

Accepted 1/25/2022
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TABLE OF CONTENTS | 1

PRC Mission, Vision, and Guiding Principles......... 3

LETTER FROM THE CHAIRMAN........................... 5

CHAPTER I | Fiscal Year 2021 in Review............... 7

CHAPTER II | About the Commission................... 9

Commission Leadership........................................ 10

Staff and Office Structure ..................................... 13

Commission Strategic Plan................................... 14

CHAPTER III | FY 2021 Proceedings................... 17

Rulemakings Amending Commission 

Regulations........................................................... 18 

Statutory Review of Market Dominant 

Rate System .................................................... 18

Performance Incentive Mechanism................ 21

Institutional Cost Contribution 

Requirement................................................... 22

Letter Monopoly Exemptions.......................... 22

Rate Adjustments................................................. 23

Market Dominant Products ............................ 23

 Rates of General Applicability .................... 23

 Rates Not of General Applicability ............. 26

Competitive Products ..................................... 26

 Rates or Classes of General Applicability ... 27 

 Rates Not of General Applicability ............. 28

 Assumed Federal Income Tax ..................... 30

Annual Reports..................................................... 30

Annual Compliance Determination ................ 30

Financial Analysis............................................ 33

Analysis of Performance Goals ....................... 33

Nature of Service Cases........................................ 34

First-Class Mail and End-to-End Periodicals.... 34

First-Class Package Service.............................. 35

Changes to Product List and the Mail Classification 

Schedules ............................................................. 36

Product Lists ................................................... 36

Mail Classification Schedule............................ 37

Public Inquiries..................................................... 38

Changes to Service Performance Measurment

Systems........................................................... 38

Value of Postal and Mailbox Monopolies ....... 38

Universal Service Obligation Valuation

Methodology .................................................. 39

Exemptions to Letter Monopoly ..................... 40

Proposals to Change Analytical Principles............ 41

Other Proceedings................................................ 45

Complaints...................................................... 45

Market Tests and Post Office Closing Appeals 47

Court of Appeals Cases................................... 48

International Postal Policy.................................... 48

CHAPTER IV | Universal Service Obligation 

and Postal Monopoly........................................... 51

Background .......................................................... 51

Estimated USO Cost........................................ 51

Postal Services to Areas of the Nation the Postal 

Service Would Not Otherwise Serve............... 52

 Maintaining Small Post Offices................... 53

 Alaska Air Subsidy ...................................... 55

 Group E Post Office Boxes.......................... 55

Free or Reduced Rates.......................................... 56

Preferred Rate Discounts Net of Costs............ 56

Periodicals Losses ........................................... 56

Other Public Services or Activities........................ 57

Six-Day Delivery .............................................. 57

Uniform Rates................................................. 57

Postal Inspection Service ................................ 58

Value of the Postal Monopoly .............................. 58

CHAPTER V | Public Affairs................................. 61

Consumer Relations – Comments and Inquiries.... 61

Inquiries by Source ......................................... 61

Inquiries by Issue ............................................ 62

Inquiries by Location....................................... 62

CHAPTER VI | Administration ............................ 63

Information Technology ....................................... 63

Financial Management and Budget...................... 64

Records and Data Management........................... 65

Workforce Development...................................... 65

ENDNOTES .......................................................... 67

TABLE OF CONTENTS
Acronyms

ANPR | Advanced Notice of Proposed Rulemaking

ACD | Annual Compliance Determination

ACR | Annual Compliance Report

C.F.R. | Code of Federal Regulations

CAG | Cost Ascertainment Group

CHIR | Chairman’s Information Request

CIR | Commission Information Request

CPI | Consumer Price Index

CY | Calendar Year

FEVS | Federal Employee Viewpoint Survey

FOIA | Freedom of Information Act

FSS | Flats Sequencing System

FY | Fiscal Year

IMb | Intelligent Mail barcode

IOCS | In-Office Cost System

MCS | Mail Classification Schedule

NPR | Notice of Proposed Rulemaking

NSA | Negotiated Service Agreement

PAEA | Postal Accountability and Enhancement Act

RRM | Return Receipt for Merchandise

SPM | Service Performance Management

SPR | Special Purpose Route

TACS | Time and Attendance Collection System

U.S.C. | United States Code

UPU | Universal Postal Union

USO | Universal Service Obligation

2 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT
Guiding Principles

The Commission is committed to and 

operates by the principles of:

Openness

Public participation

Integrity

Fairness and impartiality

Timely and rigorous analysis

Merit

Commitment to excellence

Collegiality and multi-disciplinary approaches

Adaptability

Proactive response to the rapidly changing 

postal environment

MISSION STATEMENT | 3

PHOTO COURTESY: VITO PALISAMOWWW

PRC | Mission, Vision, and Guiding Principles

Vision Statement

To be an independent regulator respected for 

effectively engaging postal stakeholders to promote 

a robust universal mail system through objective, 

accurate, and timely regulatory analyses and 

decisions.

We will look to achieve our vision by:

• Taking a multi-disciplinary and integrated 

approach to work

• Monitoring the environment and anticipating 

changes to enhance agility

• Utilizing rigorous evaluative methods

• Optimizing stakeholder engagement through 

an appropriate and clearly-defined public 

involvement process

• Developing staff expertise to ensure that the 

Commission is a center for excellence in postal 

regulatory matters

• Ensuring that the Commission is an employer of 

choice

• Ensuring efficient stewardship of resources

• Ensuring efficient stewardship of resources

Mission Statement

Ensure transparency and accountability of the United States Postal Service and foster a vital and 

efficient universal mail system.
4 

| POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

PHOTO COURTESY JBYARD
CHAIRMAN'S LETTER | 5

Letter from the Chairman

January 2022

On behalf of the Postal Regulatory Commission, I am pleased to submit the Commission’s Annual Report to the 

President and Congress. This report reflects the agency’s primary activities over the past year. It includes information required under the Postal Accountability and Enhancement Act of 2006 (PAEA) on the operations of the 

Commission, including the extent to which regulations are achieving the objectives outlined in the PAEA, and 

an annual estimate of the cost of the Universal Service Obligation and the value of the postal monopoly.

The Commission is charged with reviewing and approving Postal Service rates, reviewing formal and informal 

complaints, examining proposals for new products and services, and ensuring the Postal Service complies with 

Title 39. 

In Fiscal Year 2021, the Commission issued critical rulemakings, notices, advisory opinions, and reports central 

to our role as regulator and the sustainability of the Postal Service. Notably, the Commission:

• Considered two Postal Service requests to 

1) change service standards nationwide for 

First-Class Package Service, and 2) revise 

service standards for First-Class Mail and 

end-to-end Periodicals, as part of the Postal 

Service’s high profile ten-year strategic plan. 

The Commission issued two advisory opinions 

clarifying the complex issues associated with 

the Postal Service’s planned changes and 

examined the costs and benefits associated 

with the Postal Service’s plans.

• Presided over proceedings of proposed 

rate adjustments for Market Dominant 

and Competitive products and related 

classification changes.

• Produced the Annual Compliance Determination, 

overseeing service and financial compliance 

by the Postal Service, as well as several other 

important annual reports including the Financial 

Analysis of the Postal Service financial results 

and 10-K Statement for FY 2020, and Analysis of 

the Postal Service's FY 2020 Annual Performance 

Report and FY 2021 Performance Plan.

• Adopted final rules to modify a decade-long ratemaking system for Market Dominant mail classes 

which had failed to meet the goals for the system 

established by the PAEA. The Commission 

prevailed in court against a challenge by mailers 

to its determination.

As agency chair, it is one of my priorities to ensure that the Commission continues to expand our technology 

capabilities to support the use, visualization, and dissemination of data in support of the Commission’s mission: 

to ensure transparency and accountability of the postal system and ensure a vital and efficient universal postal 

system. For example, in FY 2021, the Commission developed a plan to hire its first Chief Data Officer and establish a Data Governance Board to make data available to the public in machine-readable formats and manage 

data as a strategic asset to the nation. The Commission also began reorganizing its staff to launch a small data 

analytics group to examine the postal network, address system bottlenecks, and conduct specialized studies of 

postal costs. In addition, the Commission continued exploring ways to better visualize its data in order to make 

data more accessible and understandable for a broader range of stakeholders. 

The activities described in this report reflect the work and dedication of the agency’s staff and demonstrate our 

continued commitment to work with the President, Congress, the Postal Service, mailers, and the public as 

critical decisions are made to sustain a vibrant postal system. 

 Respectfully,

Michael M. Kubayanda

Chairman
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CHAPTER I | 7PHOTO COURTESY: YAYAERNST

The activities and accomplishments highlighted in the Commission’s Annual 

Report to the President and Congress demonstrate the agency’s efficient use 

of limited resources to achieve its mission of ensuring transparency and 

accountability of Postal Service operations, as well as fostering a vital and 

efficient universal mail system. Notably, the Commission issued final rules 

adopting changes to the regulations governing the system for regulating 

rates and classes for Market Dominant products. This rulemaking was the 

Commission’s top priority in FY 2021 and one of its Strategic Objectives. The 

rules are designed to address the systemic deficiencies in the ratemaking 

system identified by the Commission by helping the Postal Service to 

improve pricing efficiency; maintain financial health and target primary 

drivers of net losses; and set reasonable rates. The rules were recently 

upheld in their entirety by the D.C. Circuit Court following a challenge by 

mailers and others to the Commission’s determination.

CHAPTER I | Fiscal Year 2021 in Review

Rulemakings

• Initiated a proceeding to solicit public input 

on performance incentive mechanisms that 

would help the Postal Service maximize 

incentives to increase efficiency and 

reduce costs, maintain high-quality service 

standards, and assure financial stability 

(including retained earnings)

• Issued a supplemental Notice of Proposed 

Rulemaking (NPR) to initiate the 

Commission’s third 5-year review of the 

institutional costs appropriate share 

requirement in 39 U.S.C. § 3633(b)

• Issued an NPR seeking public input on 

proposed regulations related to the letter 

monopoly 

Rate Adjustments

The Commission expeditiously evaluated the 

Postal Service’s proposed rate and classification 

adjustments for Market Dominant and 

Competitive products to ensure compliance with 

the PAEA and the Commission’s regulations. 

• Reviewed and approved two large 

scale rate adjustments for most Market 

Dominant products, along with related mail 

The Commission also adjudicated two major nature of service cases and issued advisory opinions 

on the Postal Service’s proposals to revise service standards for 38.5 percent of First-Class Mail 

and 7 percent of end-to-end Periodicals, as well as 36 percent of First-Class Package Service. The 

Commission’s findings and recommendations will help the Postal Service better implement these 

proposed service standard changes. 

In Fiscal Year 2021 and early FY 2022, the Commission engaged in other proceedings, including: 
8 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

classification changes (MCS). In the second 

proposed rate adjustment, the Commission 

applied the new rules governing the system 

for regulating rates and classes for Market 

Dominant products

• Approved proposed rate adjustments for 

domestic and international Competitive 

products, along with related MCS changes

• Approved the Postal Service’s proposals for a 

time-limited rate adjustment for Competitive 

domestic products and a classification change 

for Priority Mail Express

• Reviewed and approved 136 Competitive 

NSAs and 279 non-published rates contracts

Reports Required by the PAEA

The Commission published four significant 

reports in FY 2021:

• Annual Report to the President and Congress 

describing the Commission’s operations, 

accomplishments, and activities as the Postal 

Service’s regulator

• Annual Compliance Determination reviewing 

the Postal Service’s compliance with 

statutory pricing and service requirements

• Analysis of Postal Service Financial Results 

and 10-K Statement for the Fiscal Year 2020 

providing an in-depth analysis of the Postal 

Service’s financial health

• Review of Postal Service FY 2020 

Performance Report and FY 2021 

Performance Plan evaluating whether the 

Postal Service met its performance goals

Public Inquiry Dockets

The Commission explored matters important to 

postal stakeholders in four public inquiry dockets 

related to service performance, the value of the 

postal and mailbox monopolies, the cost of the 

Universal Service Obligation, and exemptions to 

the letter monopoly.

In other proceedings, the Commission:

• Considered proposed changes to the Market 

Dominant and Competitive product lists 

and the MCS, including the Postal Service’s 

request to transfer Bound Printed Matter 

Parcels to the Competitive product list

• Considered nine proposals to change 

analytical principles and issued final orders 

for seven of these proposals

• Estimated the cost of the Universal Service 

Obligation and the value of the postal 

monopoly

• Adjudicated three complaint cases, oversaw 

three market tests, and considered two Post 

Office closing appeals

• Provided views to the Secretary of State on 

three proposals for the 27th Universal Postal 

Union Congress

• Responded to more than 14,000 inquiries 

from the public related to proposed 

operational changes announced by the Postal 

Service—a 120 percent increase from FY 

2020

• Processed 27 Freedom of Information Act 

requests

• Opened and reviewed 303 new dockets and 

processed a total of 4,353 filings

Rate Adjustments (Cont.)
CHAPTER II | 9

CHAPTER II | About the Commission

Above: Vice Chairwoman 

Ashley Poling, Commissioner 

Ann Fisher, Commissioner 

Robert Taub, Chairman 

Michael Kubayanda, 

Commissioner Mark Acton

The Commission is an independent establishment of the 

Executive Branch of the United States Government. It has 

exercised regulatory oversight over the Postal Service since 

its creation by the Postal Reorganization Act of 1970, with 

expanded responsibilities under the PAEA of 2006. 

The Commission is composed of five Commissioners, each 

of whom is appointed by the President, by and with the 

advice and consent of the Senate, for a term of six years. A 

Commissioner may continue to serve after the expiration of 

his or her term until a successor is confirmed, except that 

a Commissioner may not continue to serve for more than 

1 year after the date on which his or her term would have 

otherwise expired. Not more than 3 of the Commissioners 

may be adherents of the same political party.
10 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Commission Leadership

Michael M. Kubayanda | CHAIRMAN

President Joseph R. Biden, Jr. designated Michael M. Kubayanda chairman of 

the Commission in January 2021. Chairman Kubayanda was reappointed to 

the Commission on December 9, 2021, for a second term expiring November 

22, 2026, following his renomination by President Biden and second 

unanimous confirmation by the United States Senate. He was named vice 

chairman in August 2019 and served in that position through the end of 

2020. Prior to joining the Commission, Chairman Kubayanda served as a 

board member and privacy officer for a digital health startup. He previously 

worked with the Office of Inspector General (OIG) of the U.S. Postal Service, 

ending as director of government relations, a role in which he worked with 

OIG officials to support the work of inspectors general in data analytics. 

In the OIG’s research group, he oversaw research on technical issues and 

authored reports addressing postal economics, intellectual property, and 

public-private partnerships, while serving as an advisor to colleagues on 

issues such as privacy, knowledge management, and innovation. Prior to 

his work with the OIG, he served on the staff of the House Committee on 

Oversight and Government Reform.

Ashley E. Poling | VICE CHAIRWOMAN

Ashley Jay Elizabeth Poling was sworn in as commissioner for a first 

term on August 8, 2019, following her nomination by President Donald J. 

Trump and confirmation by the United States Senate. Prior to joining the 

Commission, Ms. Poling served as the director of governmental affairs and 

senior counsel to Ranking Member Gary C. Peters (D-MI) on the Senate 

Homeland Security and Governmental Affairs Committee where she 

advised Senator Peters on policy issues, negotiated with stakeholders to 

advance bipartisan legislation, and implemented strategies to advance 

Senator Peters’ governmental affairs priorities. Ms. Poling also served as 

senior policy counsel to Senator Heidi Heitkamp (D-ND) and as counsel 

to Senator Jon Tester (D-MT) on their respective Homeland Security and 

Governmental Affairs Subcommittees, where she focused on postal reform 

and federal workforce issues. Ms. Poling’s term expires on November 22, 

2024.
CHAPTER II | 11

Mark Acton | COMMISSIONER

Commissioner Mark Acton was reappointed to the Commission by 

President Barack H. Obama on December 12, 2016, for a third term of 

continued public service extending until October 14, 2022. Commissioner 

Acton was confirmed by the United States Senate on December 10, 2016. 

Commissioner Acton was nominated by President Barack H. Obama on May 

12, 2011, for a second term of office through October 14, 2016, and was 

confirmed by the United States Senate on September 26, 2011. President 

George W. Bush first nominated Mr. Acton as a postal rate commissioner 

on November 7, 2005, and he was confirmed by the Senate on August 3, 

2006. Prior to that appointment, Mr. Acton served as special assistant to 

the chairman of the Postal Rate Commission and assisted in managing all 

aspects of agency operations.

Ann C. Fisher | COMMISSIONER

Ann C. Fisher was sworn in as a commissioner on August 8, 2019, for a 

first term, following her nomination by President Donald J. Trump and 

confirmation by the United States Senate. Her experience with postal 

issues spans close to 3 decades. Commissioner Fisher spent 12 years on 

Capitol Hill in various roles, including deputy staff director to former 

Chairman Susan Collins (R-ME) of the Senate Committee on Homeland 

Security and Governmental Affairs. In this capacity, she served as the 

key Republican Senate aide responsible for overseeing the development 

of the Postal Accountability and Enhancement Act. Fisher also managed 

postal and federal employee issues for Senator Thad Cochran (R-MS) on 

the Senate Subcommittee on International Security and Proliferation. She 

began her career in the Senate serving as an economist on the Senate Small 

Business Committee for then-Chairman Larry Pressler (R-SD). Fisher 

additionally served as a government relations manager at the U.S. Postal 

Service headquarters in Washington under former Postmaster General 

William Henderson. Immediately prior to her designation as commissioner, 

Fisher was director of public affairs and government relations at the PRC. 

Commissioner Fisher's term expires October 14, 2024.
12 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Robert G. Taub | COMMISSIONER

Commissioner Robert G. Taub was chairman of the Commission for more 

than 6 years. President Barack H. Obama designated him as agency head in 

December 2014, and he continued in that role until January 2021. President 

Obama appointed him to both terms on the Commission following 

unanimous confirmations by the United States Senate in 2011 and 2016. 

His current term expires on October 14, 2022. Commissioner Taub has 40 

years of experience in public service at the local, state, and federal levels. 

When President Obama first appointed him to the Commission in October 

2011, Commissioner Taub was the special assistant to Secretary of the Army 

John M. McHugh. As an Army senior executive, he was one of the principal 

civilian advisors to Secretary McHugh, helping him lead a workforce of 

more than 1.2 million people, and manage an annual budget exceeding 

$200 billion. Commissioner Taub was awarded the Army’s Decoration for 

Distinguished Civilian Service. Before his appointment to the Army, Mr. 

Taub served as Chief of Staff to U.S. Representative John M. McHugh (RNY) for the preceding decade. As chief of staff, he oversaw the day-to-day 

operations of Representative McHugh’s staff and offices in Washington, 

D.C. and Northern New York State. In a variety of leadership roles on the 

U.S. House Oversight & Government Reform Committee for 12 years, Mr. 

Taub also worked closely with Congressman McHugh on matters relating 

to the nation’s postal and delivery sector. He crafted Representative 

McHugh’s legislation for modernizing America’s postal laws for the first 

time since 1970, culminating in passage of the Postal Accountability and 

Enhancement Act in 2006. Mr. Taub also helped Representative McHugh 

conduct hearings and investigations into postal operations that ultimately 

led to the enactment of a dozen other postal laws.
CHAPTER II | 13

Staff and Office Structure

Commission staff has expertise in law, economics, finance, statistics, and cost accounting. 

The Commission is organized into four operating offices:

Figure II-1: Organizational Structure

• Accountability and Compliance

The Office of Accountability and Compliance 

is responsible for technical analysis and 

formulating policy recommendations for the 

Commission on domestic and international 

matters. 

• General Counsel.

The Office of the General Counsel ensures 

the Commission fulfills its statutory 

and regulatory obligations by providing 

legal guidance on matters involving the 

Commission’s responsibilities. 

• Public Affairs and Government Relations 

The Office of Public Affairs and Government 

Relations facilitates prompt and responsive 

communications with the public, Congress, 

Federal agencies, the Postal Service, and the 

media.

• Secretary and Administration

The Office of the Secretary and 

Administration records the Commission’s 

official actions; manages the Commission’s 

records, human resources, budget and 

accounting, and information technology; and 

provides other support services.

The Commission maintains an independent Office of the Inspector General. It conducts, supervises, and 

coordinates audits and investigations relating to Commission programs and operations, and identifies 

and reports fraud and abuse in these programs and operations.

Figure II-1 displays the Commission’s current organizational structure.
14 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

The Commission’s FY 2017-2022 Strategic Plan

is the framework that guides the Commission’s 

work and is a fundamental beacon for the 

Commission’s efforts toward continuous 

improvement, efficiency, and effectiveness. The 

Strategic Plan outlines the agency’s vision to 

promote a robust universal mail system through 

objective, accurate, and timely regulatory 

analyses and decisions. 

The Commission focuses its activities on the 

following four strategic goals:

Goal 1: Deliver accurate and objective

 analyses and decisions to ensure

 transparency and accountability of 

 the Postal Service

Goal 2: Actively engage with Congress and

 stakeholders in support of a dynamic

 postal system

Goal 3: Provide an optimal internal

 infrastructure to support the

 management of priorities, workload,

 and emerging requirements

Goal 4: Recruit, develop, and retain a diverse,

 high-performing workforce 

The Commission regularly tracks individual 

department and agency progress in meeting the 

four goals. This Strategic Plan also steers our 

commitment of Commission resources, ensuring 

that we utilize our small budget and personnel 

complement to achieve our Strategic Goals.

Strategic Goal 1 focuses on delivering accurate 

and objective analyses and decisions to ensure 

compliance, transparency, and accountability 

of the Postal Service. These principles are 

the bedrock of the Commission’s work, and it 

conducts thorough and accurate analysis of 

Postal Service reporting in order to ensure that 

the Postal Service is compliant with the law 

and is held accountable for non-compliance. To 

further this goal, the Commission 

conducted extensive regulatory work as detailed 

in Chapter III.

Strategic Goal 2 focuses on active engagement 

with Congress and stakeholders in support 

of a dynamic postal system. The Commission 

achieves this goal by clearly communicating 

complex analyses and decisions to address the 

needs of diverse stakeholders. As set forth in 

Chapter V, the Commission’s Office of Public 

Affairs and Government Relations (PAGR) assists 

the public by handling thousands of consumer 

comments and inquiries related to a host of 

postal issues. Also, in response to the impacts 

of the COVID-19 pandemic on Postal Service 

operations, PAGR has increased communication 

and active engagement about the postal system 

with the U.S. Congress, the Administration, the 

Postal Service, other government agencies, as 

well as with various media outlets.

Strategic Goal 3 focuses on providing an 

optimal internal infrastructure, including IT 

infrastructure, administrative infrastructure, 

and physical infrastructure, to support 

management of priorities, workload, and 

emerging requirements. The Commission is 

able to fulfill its mission and provide effective 

oversight of the Postal Service when it operates 

in an efficient, responsive, and transparent 

matter. In pursuit of this goal, the Commission 

embarked on an aggressive IT modernization 

program which included transition to the cloud, a 

complete security assessment and authorization, 

and enhanced infrastructure and technology 

tools. The Commission continued its focus 

on enhancing its security posture in order to 

support its achievement of Strategic Goals 1 and 

2 to ensure the continuity of the Commission’s 

mission in light of a global pandemic. 

Strategic Goal 4 is a cross-cutting goal that 

focuses on the recruitment, development, 

and retention of a diverse, high-performing 

workforce. As payroll is 80 percent of the 

Commission Strategic Plan
CHAPTER II | 15

Commission’s budget, this heightens the 

significance which the Commission attaches to 

this goal. Loss of experienced and trained staff 

is a risk area and threatens the work of the 

Commission given the unique postal expertise 

required to carry out its mission. In the past 

fiscal year, the Commission has increased its 

hiring and successfully onboarded seven fulltime employees to fill mission-critical vacancies. 

Four of these new employees work in the Office 

of Accountability and Compliance and Office of 

the General Counsel, which separately supports 

Strategic Goal 1.

To assist in measuring the effectiveness of 

its Strategic Plan efforts, the Commission 

participates annually in the Federal Employee 

Viewpoint Survey (FEVS). In FY 2020, the 

Commission achieved a 94 percent response 

rate, an eighteen percentage point increase 

over the FY 2019 response rate. This response 

rate is fifty percentage points higher than the 

government-wide average response rate of 44 

percent. In addition to response rate, one prime 

indicator of agency success provided by the FEVS 

is the Employee Engagement Index, which ranks 

employees’ perceptions of the leadership within 

their agency, their supervisors, and the overall 

work experience. The Commission’s Employee 

Engagement Index—88 percent— continues to be 

among the higher ratings across the government.

Commission staff also report 100 percent 

satisfaction with the Commission’s work-life 

programs and telework programs and high levels 

of global satisfaction compared to peers across 

the Federal government. The Commission uses 

FEVS to develop actionable plans to address 

issues raised in confidential feedback from 

employees. 

The Commission applies its Strategic Plan to 

prioritize and enhance the effectiveness of 

operations by aligning its limited resources to 

accomplish its mission and meet its statutory 

responsibilities and stated Strategic Goals. 

The Commission’s largest challenge in fully 

achieving its Strategic Plan goals remains its 

lack of sufficient funds. As the regulator of the 

Postal Service, the Commission needs the ability 

to remain flexible and nimble in order to adjust 

its operations to match the regulatory oversight 

requirements of the Postal Service in the fastpaced and evolving delivery sector. Given the 

nature of the Commission’s work—responding 

to changes in the postal sector environment, 

while ensuring its statutorily-mandated 

responsibilities are conducted in an efficient 

and effective manner—even small cuts to the 

Commission’s budget significantly impact its 

ability to meet its Strategic Goals. Despite these 

budgetary challenges, the Commission was able 

to efficiently and effectively make significant 

progress in achieving its Strategic Goals and saw 

major accomplishments related to each Strategic 

Goal in 2020.

In FY 2022, the Commission will be revising its 

Strategic Plan and issuing a new and updated 

plan for the agency. The Commission’s current 

Strategic Plan, in its entirety, can be viewed or 

downloaded at www.prc.gov.
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CHAPTER III | 17

PHOTO COURTESY: JODIJACOBSON

CHAPTER III | FY 2021 Proceedings

1. Maximize incentives to reduce costs and 

increase efficiency

2. Create predictability and stability in rates

3. Maintain high quality service standards 

established under 39 U.S.C. § 3691

4. Allow the Postal Service pricing flexibility

5. Assure adequate revenues, including 

retained earnings, to maintain financial 

stability

6. Reduce the administrative burden 

and increase the transparency of the 

ratemaking

7. Enhance mail security and deter 

terrorism

8. Establish and maintain a just and 

reasonable schedule for rates and 

classifications without prohibiting the 

Postal Service from making changes of 

unequal magnitude within, between, or 

among classes of mail

9. Allocate the total institutional costs of 

the Postal Service appropriately between 

Market Dominant and Competitive 

products 6

The Postal Accountability and Enhancement Act (PAEA)1 requires the 

Commission to submit an Annual Report to the President and the Congress 

(Annual Report) that includes an analysis “concerning the operations of the 

Commission under [Title 39], including the extent to which regulations are 

achieving the objectives under sections 3622 and 3633” of Title 39 of the 

United States Code (U.S.C.).2 These sections contain laws related to Market 

Dominant and Competitive products, respectively.3 Market Dominant 

products are those products over which the Postal Service “exercises 

sufficient market power that it can effectively set the price[s] of such 

product[s] substantially above costs, raise prices significantly, decrease 

quality, or decrease output, without risk of losing a significant level of 

business to other firms offering similar products.”4 Competitive products 

consist of all other products.5

The Annual Report must analyze the extent to which regulations are 

achieving the objectives under section 3622, which relate to Market 

Dominant products. The modern system for regulating rates and classes 

for Market Dominant products (Market Dominant Rate System) must 

be designed to achieve the following objectives in 39 U.S.C. § 3622(b):

The Commission established regulations governing the Market Dominant Rate System in 2007 

shortly after the PAEA was enacted. 7 In FY 2021, the Commission completed its review of the Market 

Dominant Rate System to determine if it was achieving the objectives established by Congress in 39 

U.S.C. § 3622(b), taking into account the factors of 39 U.S.C. § 3622(c). The Commission’s review is 

discussed below under the “Statutory Review of Market Dominant Rate System” section.
18 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Statutory Review of Market 

Dominant Rate System

When enacting the PAEA, Congress intended that 

the Market Dominant Rate System achieve the 

nine objectives in 39 U.S.C. § 3622(b), which are 

listed at the beginning of this chapter. Congress 

also required that the Commission review the 

Market Dominant Rate System 10 years after the 

PAEA was enacted “to determine if the system 

is achieving the objectives in [39 U.S.C. § 3622] 

(b), taking into account the factors in [39 U.S.C. 

§ 3622] (c).” 9 In accordance with this statutory 

mandate, the Commission established Docket 

No. RM2017-3 and issued an Advanced Notice 

of Proposed Rulemaking (ANPR) to establish 

a framework for its review and provide notice 

and an opportunity for public comments.10 

On December 1, 2017, the Commission issued 

Order No. 4257 containing its findings and 

determination of its review of the Market 

Dominant Rate System. 11

In Order No. 4257, the Commission identified 

three principal areas of the Market Dominant 

Rate System that encapsulate the nine objectives: 

(1) the structure of the ratemaking system, 

(2) the Postal Service’s financial health, and 

(3) service.12 The Commission evaluated each 

principal area to determine whether the PAEA’s 

goals were achieved during the PAEA era.13 The 

Commission found that while some goals of 

these principal areas were achieved, the Market 

Dominant Rate System as a whole did not achieve 

the objectives taking into account the factors of 

the PAEA. 14 The Commission identified key 

issues with the Market Dominant Rate System, 

including:

• The Market Dominant Rate System did not 

increase pricing efficiency because the Postal 

Service did not set workshare discounts as 

close as practicable to their avoided costs,15 

and multiple products failed to cover their 

attributable costs16

• The Market Dominant Rate System did not 

maximize incentives to reduce costs and 

increase operational efficiency as intended by 

the PAEA17

• The Market Dominant Rate System did not 

maintain financial stability, including 

retained earnings, in the medium and longterm time frames because the Postal Service 

suffered a net loss each year during the PAEA 

era, and the Postal Service lacked sufficient 

net income to generate retained earnings18

• The Market Dominant Rate System did not 

achieve reasonable rates because products 

and classes that failed to cover their 

attributable costs threatened the Postal 

Service’s financial integrity19

• The Market Dominant Rate System did not 

effectively encourage the maintenance of 

high-quality service standards because the 

Postal Service reduced the high-quality 

service standards initially promulgated in 

200720

In accordance with 39 U.S.C. § 3622(d)(3), if 

the Commission determines that the Market 

Dominant Rate System has not achieved the 

Rulemakings Amending Commission Regulations 

The Annual Report must also analyze the extent to which regulations are achieving the objectives 

under 39 U.S.C. § 3633 relating to Competitive products.8 The Commission’s regulations in 39 C.F.R. 

part 3035 support the requirements of section 3633, which are discussed below under the “Rate 

Adjustments - Competitive Products” section. This chapter also describes the Commission’s major 

orders, reports, and proceedings during FY 2021 and early FY 2022.
CHAPTER III | 19

objectives, taking into account the factors of the 

PAEA, the Commission may, by regulation, make 

modifications or adopt an alternative system as 

necessary to achieve the objectives. As a result of 

its findings and determination in Order No. 4257, 

the Commission concurrently issued a Notice 

of Proposed Rulemaking (NPR) that included 

proposed changes to the Market Dominant Rate 

System. The Commission subsequently issued a 

revised NPR to reflect comments received on the 

initial NPR, as well as to improve and strengthen 

the initial proposed rules. 

After considering comments received on the 

revised NPR, the Commission issued final rules 

adopting changes to the regulations governing 

the Market Dominant Rate System. The 

modifications adopted by the Commission were 

designed to achieve all of the PAEA’s objectives 

applied in conjunction with each other. Figure 

III-1 provides examples of how the three major 

aspects of the final rules were designed to 

address the systemic deficiencies identified by 

the Commission to have frustrated the former 

Market Dominant Rate System’s ability to achieve 

these objectives:

Figure III-1: Systemic Deficiencies Addressed by the Final Rules

a Non-compensatory classes refer to classes for which the attributable costs of all products exceed the revenues of all

 products. Order No. 5763 at 189, 285.

b This rule applies only to a product for which both of the following two criteria apply: (1) the product’s attributable costs

 exceed revenue; and (2) the product is included within classes of mail for which the overall class revenue exceeds overall 

 class attributable cost. Order No. 5763 at 181, 187.

c

 This rule applies to each product for which attributable costs exceed revenue, regardless whether the product is included

 within a class of mail that is compensatory overall. Order No. 5763 at 320, Attachment at 15, 21.

Source: Order No. 5337 at 62, 182; Order No. 5763 at 19, 182
20 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

First, to address obstacles to the Postal 

Service’s ability to maintain financial health 

and target primary drivers of net losses, the 

final rules modified the former price cap by 

providing the Postal Service two new forms of 

Market Dominant rate adjustment authority 

in addition to the rate authority provided by 

the percentage change in the Consumer Price 

Index for All Urban Customers (CPI-U). These 

principled adjustments to the Market Dominant 

Rate System were designed to allow the Postal 

Service the opportunity to generate revenue 

to address two sources of costs largely outside 

the Postal Service’s direct control: (1) declines 

in mail density; and (2) statutorily-mandated 

amortization payments for particular retirement 

costs. The density-based rate authority, which is 

designed to address consequences of declines in 

the volume of mail per delivery point, provided 

additional Market Dominant rate adjustment 

authority equal to the density-driven portion of 

increases in average cost-per-piece, as calculated 

under the Commission’s formula.24

The retirement-based rate authority, which 

is designed to address the Postal Service’s 

statutorily-mandated amortization payments for 

particular retirement costs, provided additional 

Market Dominant rate adjustment authority 

equal to the percentage by which total revenue 

(for both Market Dominant and Competitive 

products) would need to increase to provide 

sufficient revenue for the Postal Service to meet 

its required retirement amortization payments, 

as calculated under the Commission’s formula. 25 

The retirement-based rate adjustment authority 

will be phased in over 5 years. 26

Second, to address the failure of the Market 

Dominant Rate System to maintain reasonable 

rates and promote pricing efficiency, the final 

rules provided additional rate adjustment 

authority for non-compensatory classes 

and imposed new requirements for noncompensatory products. As a starting point, the 

final rules prohibited the Postal Service from 

reducing rates for non-compensatory products. 27 

Additionally for each non-compensatory product 

included in a compensatory class, the final rules 

required a minimum rate increases of at least 2 

percentage points above the average percentage 

increase for the class. 28 These restrictions are 

designed to stop the trend of declining cost 

coverage for these products and move cost 

coverage toward 100 percent. 29 For each noncompensatory mail class, the final rules provided 

the Postal Service with the option to use 

additional rate authority of 2 percentage points 

per class and per fiscal year, which is aimed at 

narrowing the cost coverage gap of those classes 

over time. 30

Third, to improve pricing efficiency, the final 

rules enhanced the Commission’s regulation of 

workshare discounts to phase out two practices 

impeding pricing efficiency: workshare discounts 

that are set either substantially below avoided 

costs or substantially above avoided costs. 31 The 

final rules prohibited the Postal Service from 

changing workshare discounts that are equal 

to avoided costs; reducing workshare discounts 

that are below avoided costs; and increasing 

workshare discounts that are above avoided 

costs. 32 The Postal Service may propose to set a 

workshare discount below or above avoided costs 

only under certain circumstances. 33 The Postal 

Service may also request a waiver in advance of 

a rate adjustment filing that, if granted by the 

Commission, would exempt a workshare discount 

from some of the requirements. 34

The final rules made other changes to the Market 

Dominant Rate System that include:

• Extending the minimum notice period for rate 

adjustment filings from 45 to 90 days

• Discontinuing the Commission’s practice of 

addressing the objectives and factors of 39 

U.S.C. § 3622(b) and (c) in individual rate 
CHAPTER III | 21

adjustment proceedings

• Adding reporting requirements intended to 

facilitate the tracking of costs and monitoring 

of the Postal Service’s efforts to reduce costs

• Providing for a holistic review of the effects 

of the Commission’s rule changes after 5 

years, retaining the flexibility to review and 

adjust certain components of the system 

sooner than 5 years if necessary 35

Taken together, the changes adopted in the final 

rules were designed to remedy the deficiencies 

in the existing Market Dominant Rate System 

identified in Order No. 4257.

Mailers and the Postal Service filed petitions 

for review of Order No. 5763, which adopted 

the final rules, before the United States Court 

of Appeals for the District of Columbia Circuit 

(D.C. Circuit). On November 12, 2021, the D.C. 

Circuit denied the petitions for review, finding 

that the Commission acted within the scope of its 

statutory authority, and the changes adopted in 

the final rules were not arbitrary and capricious. 

The D.C. Circuit’s opinion is discussed below in 

the “Court of Appeals Cases” section.

Additionally “to explor[e] ways to enhance the 

regulatory system to promote longer-term 

financial stability, increased efficiency and cost 

reductions, while maintaining high-quality 

service standards... ,” the Commission announced 

its intent36 and subsequently initiated a new 

separate rulemaking in Docket No. RM2021-2 

(Performance Incentive Mechanism), which is 

described further below.

Performance Incentive 

Mechanism

Based on its findings in its order adopting 

final rules changing the Market Dominant 

Rate System that further study would produce 

useful information concerning certain issues, 

the Commission initiated Docket No. RM2021-2 

by issuing an ANPR under 39 U.S.C. § 3622(d)

(3) seeking input from the public about what 

additional regulations promulgated by the 

Commission may be necessary to achieve 

the PAEA’s objectives over the longer term.37 

Specifically, the Commission sought input on 

performance incentive mechanisms (PIMs) that 

would maximize incentives to increase efficiency 

and reduce costs, maintain high-quality service 

standards, and assure financial stability 

(including retained earnings).38 Regulators use 

PIMs to set a target for acceptable performance 

by a regulated entity in a specific area and attach 

financial benefits and/or consequences to ensure 

compliance.39 

The Commission invited comments on ideas for 

PIMs that would:

• Connect direct financial consequences with 

increasing efficiency, reducing costs, and 

maintaining high-quality service standards

• Incentivize the Postal Service to increase 

efficiency and reduce costs using an 

operational efficiency-based requirement 

such as total factor productivity

• Maintain high-quality service standards 

and hold the Postal Service accountable for 

consistently achieving those standards 40

On June 24, 2021, the Postal Service filed a 

motion asking the Commission to hold this 

rulemaking in abeyance until the D.C. Circuit 

resolves appeals of the Commission’s final rules 

adopting changes to the regulations governing 

the Market Dominant Rate System. 41 The Postal 

Service asserted that the outcome of these 

appellate proceedings “would affect the basis 

for evaluating any further pricing authority, 

including the propriety (and contents) of a [PIM].” 

42 The Postal Service’s motion was supported by 

the Public Representative and the Association 

for Postal Commerce, who both shared the same 

concerns.43 On July 2, 2021, the Commission 
22 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

granted the Postal Service’s motion and held this 

rulemaking in abeyance until further notice.44 

This proceeding is currently pending before the 

Commission.

Institutional Cost Contribution 

Requirement

The PAEA requires Competitive products 

to “collectively cover what the Commission 

determines to be an appropriate share of the 

[Postal Service’s] institutional costs... .”45 The 

“appropriate share” is the minimum amount that 

Competitive products as a whole must contribute 

to institutional costs annually.46 At least every 

5 years, the Commission must review the 

appropriate share requirement to decide whether 

any changes are necessary.47 When making this 

determination, the Commission must consider, 

among other factors, “the degree to which 

any costs are uniquely or disproportionately 

associated with any [C]ompetitive products.”48

In FY 2020, the Commission issued Order No. 

4963 codifying a new methodology to calculate 

the appropriate share: a dynamic formulabased approach that measures aspects of the 

competitive market and updates the appropriate 

share annually based on market changes.49 

United Parcel Service, Inc. (UPS) appealed this 

order to the D.C. Circuit, which subsequently 

remanded the case to the Commission to address 

particular issues identified in the court’s 

decision.50

On November 18, 2021, the Commission 

issued a supplemental NPR that addressed 

issues identified by the court and initiated its 

third 5-year review of the appropriate share 

requirement.51 The Commission proposed 

to calculate the appropriate share using the 

same dynamic formula-based approach that 

the Commission previously adopted in Order 

No. 4963.52 The Commission explained how 

the formula operates and how it accounts for 

the prevailing competitive conditions in the 

market and other relevant circumstances that 

the Commission has historically considered 

qualitatively when evaluating the appropriate 

share requirement.53 This proceeding is 

currently pending before the Commission.

Letter Monopoly Exemptions

On February 27, 2020, the Commission issued an 

ANPR seeking information from the public about 

what regulations the Commission may need 

to promulgate to carry out the requirements 

of 39 U.S.C. § 601, which relates to the letter 

monopoly.54 The letter monopoly is the Postal 

Service’s exclusive right to carry and deliver 

most addressed, paper-based correspondence, 

with some exemptions.55 These exemptions 

are codified in 39 U.S.C. § 601, which specifies 

instances when the letter monopoly does not 

apply to a mailpiece. 56

39 U.S.C. § 601(c) directs the Commission to 

promulgate “[a]ny regulations necessary to carry 

out [section 601]... .”57 The Commission issued 

this ANPR to explore potential options for issuing 

these regulations and sought comments on 14 

specific issues.58 Two Chairman’s Information 

Requests (CHIRs) were issued and 11 comments 

were received.59

Based on these comments, the Commission 

issued an order on July 2, 2021 holding this 

rulemaking in abeyance.60 It found that before 

promulgating regulations on section 601(c), it 

was necessary to gather more information from 

the public by initiating a public inquiry docket 

seeking comments to better inform next steps.61 

The Commission announced its intent to issue 

an order governing proceedings in Docket No. 

RM2020-4 after completing the public inquiry 

docket.62

That same day, the Commission issued another 

order initiating the related public inquiry in 
CHAPTER III | 23

Docket No. PI2021-2.63 This proceeding is 

described in the “Public Inquiries” section 

below. Based on the comments received in 

this proceeding and in Docket No. PI2021-2, 

the Commission issued an NPR proposing new 

regulations necessary to carry out 39 U.S.C. § 

601.64

First, the Commission proposed a provision 

stating that certain Postal Service regulations 

related to the letter monopoly fall within the 

scope of the proposed rules and are subject to 

Commission interpretation.65 

Second, the proposed regulations explicitly 

state that the Postal Service no longer has the 

authority to issue regulations interpreting, 

suspending, or otherwise defining the scope 

of the letter monopoly.66 Third, the proposed 

regulations allow interested persons to seek 

interpretation of statutory language or Postal 

Service regulations by either filing a rulemaking 

petition with the Commission or requesting an 

advisory opinion from the Commission’s General 

Counsel.67 This proceeding is currently pending 

before the Commission.

One of the Commission’s major statutory 

responsibilities is to ensure that the Postal 

Service’s proposed rate and classification 

adjustments for Market Dominant and 

Competitive products comply with applicable 

statutory and regulatory requirements. There 

are two types of postal rates: (1) rates of 

general applicability, and (2) rates not of general 

applicability. Rates of general applicability 

are “available to all mailers equally on the 

same terms and conditions.”68 These rates are 

available to the general public; examples include 

Forever Stamps and Priority Mail Flat Rate boxes. 

All customers pay the same rate for a product, 

although some products are only available to 

businesses and not individuals.

Rates not of general applicability are offered by 

the Postal Service to specific mailers through 

negotiated service agreements (NSAs).69 NSAs 

are written contracts between the Postal Service 

and a mailer that are effective for a defined 

period of time.70 They provide for customerspecific rates, fees, and/or terms of service 

according to the terms and conditions of the 

contract.71 

In FY 2021, the Commission reviewed the Postal 

Service’s proposed changes to rates for both 

Market Dominant and Competitive products, 

along with corresponding classification changes. 

Each is discussed below.

Market Dominant Products

RATES OF GENERAL APPLICABILITY

Market Dominant products with rates of general 

applicability are divided into five mail classes as 

shown in Figure III-2.

Rate Adjustments 

PHOTO COURTESY OF USPS
24 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

In FY 2021, there were two large scale Market 

Dominant rate adjustment proceedings. As 

previously discussed, the Commission also issued 

final rules adopting changes to the regulations 

governing the Market Dominant Rate System. 

As described below, the Commission evaluated 

the first proposed rate adjustment based on 

the requirements of the former rules and the 

second proposed rate adjustment based on the 

requirements of the new rules.

Rate adjustments under former rules

The former rules governing rates of general 

applicability for Market Dominant products 

allowed the Postal Service to adjust rates if the 

following statutory requirements were met:

• Rate adjustments for each Market Dominant 

mail class must not exceed the price cap, an 

annual limitation based on the CPI-U72

• Workshare discounts must not exceed the 

Postal Service’s avoided costs unless a 

statutory exception applies73

• Preferred rates must be set consistent with 

statutory requirements74

On October 9, 2020, the Postal Service filed a 

notice proposing rate adjustments and related 

MCS changes for Market Dominant domestic 

and international products.75 The Postal 

Service proposed increasing rates for each 

Market Dominant mail class by between 1.456 

percent (Periodicals) and 1.831 percent (FirstClass Mail).76

The Commission reviewed the proposed rate 

adjustments and MCS changes for compliance 

with the former rules. After analyzing the 

record and considering comments received, 

the Commission issued an order approving the 

proposed rate adjustments and related MCS 

changes.77 

The Commission concluded that the proposed 

rate adjustments:

• Did not violate price cap limitations specified 

by 39 U.S.C. § 3622(d)

• Were consistent with or justified by an 

exception to the workshare discount 

limitations in 39 U.S.C. § 3622(e)

• Were consistent with the pricing 

requirements for preferred rates in 39 U.S.C. 

§ 3626, and did not implicate the pricing 

requirements in sections 3627 and 362978

The new rates and related MCS changes became 

effective on January 24, 2021.79

Rate adjustments under new rules

The new rules differ from the former rules 

Source: 39 C.F.R. part 3040, subpart A, Appendix A.

Figure III-2: Market Dominant Classes and Products

Rates of General Applicability
CHAPTER III | 25

in several key respects. First, the new rules 

provide the Postal Service additional rate 

adjustment authority.80 Under the former rules, 

Market Dominant rate increases for each class 

were generally capped at the rate of inflation 

as measured by the CPI-U.81 The new rules 

modified the price cap to include additional rate 

adjustment authority to allow the Postal Service 

the opportunity to generate revenue to address 

costs related to declines in mail density and 

statutorily-mandated amortization payments for 

particular retirement costs.82

Second, the new rules provide additional rate 

adjustment authority for non-compensatory 

classes and impose new requirements for 

non-compensatory products. The new rules 

prohibit the Postal Service from reducing rates 

for any non-compensatory product.83 If a noncompensatory product is part of a mail class 

that covers its attributable costs, the rates for 

each non-compensatory product must increase 

by at least 2 percentage points more than the 

percentage increase for that class.84 For noncompensatory classes, the new rules provide 

the Postal Service with an optional 2 percentage 

points of additional rate authority. 85

Third, the new regulations contain new 

requirements for workshare discounts:

• If a workshare discount equals the cost 

avoided by the Postal Service, then the size of 

the discount cannot change

• If a workshare discount exceeds the costs 

avoided by the Postal Service, then the size of 

the discount cannot increase

• If a workshare discount is less than the costs 

avoided by the Postal Service, then the size of 

the discount cannot decrease86

The new regulations also set specific limitations 

for setting workshare discounts that do not equal 

avoided costs.87 The Postal Service may not set 

a workshare discount that exceeds its avoided 

costs unless the discount is new, is at least 20 

percent less than the existing discount, or relates 

to a subclass of mail consisting exclusively of 

mail matter of educational, cultural, scientific, 

or informational value.88 The Postal Service 

may not set a workshare discount that is less 

than its avoided costs unless the discount is new, 

is at least 20 percent more than the existing 

discount, or produces a passthrough of at least 85 

percent.89 If none of these exceptions applies, the 

Postal Service must apply for a waiver at least 60 

days before the next rate adjustment filing. 90

On May 28, 2021, the Postal Service filed a 

second notice proposing rate adjustments and 

related MCS changes for Market Dominant 

products, which the Commission evaluated for 

compliance with the new rules.91 The proposed 

rate adjustments were the first to be filed and 

reviewed under the Commission’s new rules 

governing the Market Dominant Rate System.92 

After analyzing the record and considering 

comments received, the Commission issued 

an order concluding that the proposed rate 

adjustments, including workshare discounts, 

were consistent with the new regulations in 

39 C.F.R. part 3030 and applicable Commission 

directives and orders.93 It found that the 

proposed rate adjustments were consistent with 

the pricing requirements in 39 U.S.C. § 3626, and 

the planned MCS changes, as revised in the order, 

were consistent with applicable law.94 The new 

rates and related MCS changes became effective 

on August 29, 2021.95

Application for workshare discount waiver

Before filing the second notice of rate adjustment 

in Docket No. R2021-2, the Postal Service applied 

for a waiver to set the workshare discount for 

First-Class Mail Letters sorted to the 5-Digit 

level below the rule’s 85 percent passthrough 

requirement.96 It asserted that increasing 

this workshare discount to comply with the 
26 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Commission’s regulations “could decrease the 

efficiency of its processing operations.”97 It noted 

that this increase would be nearly 17 percent 

higher than the same discount in FY 2020 and 

thus represent “a dramatic change following 

years of relative pricing stability.98 It also stated 

that this increase “could lead to unpredictable 

changes among the relative proportions of mail 

volumes sorted to 5-Digit, Auto AADC, and Mixed 

AADC.”99 For these reasons, the Postal Service 

sought a waiver to set the workshare discount 

below its avoided costs.100

The Commission initiated a proceeding 

to consider the application for waiver and 

received dozens of comments recommending 

that the Commission deny the application.101 

After reviewing the record and considering 

comments received, the Commission issued 

an order denying the waiver application 

because the Postal Service failed to provide the 

information required by 39 C.F.R. § 3030.286.102 

First, the Postal Service provided high-level 

generalizations instead of specific and detailed 

explanations with supporting analysis and 

discussion of assumptions relied upon.103 Second, 

the Postal Service asserted that increasing 

the workshare discount “could decrease the 

efficiency of its processing operations,” but 

did not include the explanations required 

by 39 C.F.R. § 3030.286(c)(5).104 Third, the 

Commission intended for the Postal Service 

to apply for a waiver only under “exceptional 

circumstances” that did not apply in this case.105 

In the second rate case, the Commission verified 

that the workshare discount for First-Class Mail 

Automation 5-Digit Letters complied with the 

new workshare rules.106

RATES NOT OF GENERAL APPLICABILITY

For Market Dominant products, the Postal 

Service sets rates not of general applicability 

by entering into NSAs with mailers or groups of 

mailers.107 The Commission reviews these NSAs 

to ensure they comply with 39 U.S.C. § 3622(c)

(10) and the Commission’s regulations in 39 

C.F.R. part 3040, subpart G. No Market Dominant 

NSAs were filed in FY 2021.

Competitive Products

When the Postal Service decides to change rates 

or classes of general applicability, it must file 

a notice with the Commission describing the 

proposed changes at least 30 days before the 

new rates or classes become effective.108 For 

proposed changes to rates or classes not of 

general applicability, the Postal Service must 

provide 15 days advance notice.109 The notice of 

proposed rate or class adjustment must include 

an explanation and justification for the proposed 

changes, the effective date of the new rates or 

classes, and either a schedule of the changed 

rates or the record of proceedings regarding the 

changes.110

The Commission then initiates a proceeding to 

consider the proposed rate or class adjustments, 

appoints a Public Representative, and provides 

an opportunity for comment. It reviews proposed 

rate adjustments for Competitive products 

to ensure they comply with three statutory 

requirements in 39 U.S.C. § 3633(a):

1. Market Dominant products must not 

subsidize Competitive products111

2. Revenue for each Competitive product must 

cover its attributable costs, which are “the 

direct and indirect postal costs attributable 

to such product through reliably identified 

causal relationships”112

3. All Competitive products must collectively 

cover what the Commission determines to be 

an appropriate share of the Postal Service’s 

institutional costs113

Competitive rate adjustments must also comply 

with the Commission’s rules in 39 C.F.R. part 

3035. In FY 2021, the Commission reviewed the 

Postal Service’s proposed changes to both rates 
CHAPTER III | 27

and classes of general applicability and rates not of general applicability for Competitive products. 

Each is discussed below.

RATES OR CLASSES OF GENERAL APPLICABILITY

Competitive products with rates of general applicability are grouped into domestic and international 

products, as shown in Figure III-3:

Figure III-3: Domestic and International Competitive Products

Rates of General Applicability

a

 This product consists of the following services: Adult Signature

 Service, Package Intercept Service, and Premium Data Retention

 and Retrieval Service. FY 2020 ACD at 71 n.123.

b This product consists of the following services: International 

 Certificate of Mailing; Competitive International Registered Mail; Outbound International Return Receipt; Restricted Delivery; Outbound 

 International Insurance; and Customs Clearance and Delivery Fee. FY 2020 ACD at 73 n.131.

Source: 39 C.F.R. part 3040, subpart A, Appendix B; FY 2020 ACD at 71, 73.

In FY 2021, the Postal Service filed notices 

proposing changes in rates of general 

applicability for several domestic and 

international Competitive products, along with 

proposed changes to the MCS.114 After reviewing 

the notices, the CHIR response, and the comments 

received, the Commission approved the proposed 

rate adjustments and corresponding MCS 

changes, finding that they complied with 39 U.S.C. 

§ 3633(a) and the Commission’s regulations in 

39 C.F.R. part 3035.115 The new rates and MCS 

changes became effective on January 24, 2021.116

On August 10, 2021, the Postal Service also 

filed a notice proposing time-limited changes 

in rates of general applicability for Competitive 

domestic products.117 The Postal Service 

proposed temporarily increasing rates effective 

October 3, 2021, and rates would roll back to 

current levels on December 26, 2021.118 After 

reviewing the notice and the comments received, 

the Commission approved the proposed timelimited rate adjustments and corresponding MCS 

changes, finding that they complied with 39 U.S.C. 

§ 3633(a) and the Commission’s regulations in 39 

C.F.R. part 3035.119

Additionally, the Commission considered a 

proposed Postal Service classification change for 

Priority Mail Express.120 Specifically, the Postal 
28 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Service proposed to change the MCS to eliminate 

the 10:30 am delivery option and associated 

fee because of the Postal Service’s decision to 

reposition Priority Mail Express as an end-of-day 

guarantee.121 The Postal Service also stated its 

intent to make conforming changes to the DMM 

to make 6:00 pm a uniform delivery commitment 

time.122 After reviewing the notice and comments 

received, the Commission approved the proposed 

classification changes, finding that they complied 

with 39 U.S.C. §§ 3632 and 3633 and 39 C.F.R. 

part 3035.123

RATES NOT OF GENERAL APPLICABILITY

Negotiated Service Agreements 

For Competitive products, the Postal Service sets 

rates not of general applicability by entering into 

NSAs with specific mailers. These NSAs require 

prior Commission review for compliance with 

39 U.S.C. § 3633(a) and 39 C.F.R. part 3035. In FY 

2021, the Commission reviewed and approved 

136 Competitive NSAs: 131 domestic and 5 

international. Table III-1 shows the number of 

NSAs the Commission approved between FY 2016 

and FY 2021.

Table III-1: Competitive NSAs Approved by the Commissiona

FY 2016 through FY 2021

 a This table shows approved NSAs the Postal Service filed as new products or as functionally equivalent to the baseline agreement of existing 

 products. This table does not include NSA modifications or amendments.

 b FY 2020 totals differ from those reported in the FY 2020 Annual Report because 8 international mail NSAs were inadvertently categorized as

 domestic. See FY 2020 Annual Report at 32.

Products with non-published rates enable the Postal Service to enter into contracts featuring negotiated rates without prior Commission approval of the rates specific to each contract. The Commission 

reviews rates for the product as a whole for compliance with statutory standards, rather than the 

rates for each contract before implementation. These non-published rate contracts must comply with 

applicable filing and regulatory requirements, including pre-approved pricing formulas, minimum 

cost coverage, and documentation. The absence of prior review of specific contract rates streamlines 

the approval process, providing the Postal Service with additional flexibility.

In FY 2021, the Postal Service implemented 279 NSAs with non-published rates. Table III-2 shows 

the number of non-published rate NSAs implemented by the Postal Service between FY 2016 and FY 

2021.

The Commission updates NSA statistics monthly on its website.124
CHAPTER III | 29

Table III-2: Non-Published Rate Contracts Implemented by the Postal Service

FY 2016 through FY 2021

 Source: Postal Regulatory Commission, Negotiated Service Agreements (NSAs) Statistics October 2021 Update, available at https://www.prc.gov/ 

 sites/default/files/October%20NSA%20Monthly%20Summary%202021.pdf.

Inbound Letter Post

 Under the Universal Postal Union (UPU) 

Convention, by June 1, 2021, the Postal Service 

may submit self-declared rates for Inbound 

Letter Post Small Packets and Bulky Letters that 

would become effective on January 1, 2022.125 

On May 14, 2021, the Postal Service filed a notice 

with the Commission proposing specific per-item 

and per-kilogram self-declared rates for Inbound 

Letter Post Small Packets and Bulky Letters, 

which would become effective on January 1, 

2022.126 It asserted that the proposed rates 

comply with 39 U.S.C. § 3633.127

Based on its review of the notice, the supporting 

data filed under seal, the CHIR response, and the 

comments received, the Commission concluded 

that the new self-declared rates complied with 39 

U.S.C. § 3633(a) and 39 C.F.R. part 3035.128 The 

Commission also issued a Final Determination 

unsealing the self-declared rates for Inbound 

Letter Post Small Packets and Bulky Letters on 

July 13, 2021.129

Inbound Parcel Post (at UPU rates)

Inbound Parcel Post (at UPU rates) is a 

Competitive product for the acceptance and 

delivery of inbound parcels weighing up to 70 

pounds from foreign postal operators at air rates, 

surface rates, and e-commerce parcel rates.130 

Rates for Inbound Parcel Post (at UPU rates) are 

rates not of general applicability because they are 

only available to foreign postal operators. Under 

the Regulations of the UPU Convention, the Postal 

Service and other foreign postal operators may 

qualify for semi-annual increases to their “base” 

rates for inbound air parcels if they provide 

certain value added services.131 These rate 

increases are applied to the base rates effective 

January 1 and July 1 of each year.132

On December 11, 2020, the Postal Service filed 

a notice announcing its intention to change 

rates not of general applicability for Inbound 

Parcel Post (at UPU rates) effective January 1, 

2021.133 The Commission analyzed the proposed 

rates pursuant to 39 U.S.C. § 3633(a) and issued 

an order acknowledging revised rates for this 

product.134

Inbound Express Mail Service 2

On August 14, 2020, the Postal Service proposed 

a change in rates not of general applicability 

for Inbound Express Mail Service 2 (EMS) 

effective January 1, 2022.135 Inbound EMS 2 

covers Express Mail International documents 

and merchandise received from foreign postal 

operators for delivery in the Postal Service’s 

domestic delivery area.136 After analyzing the 

filings and considering the comments received, 
30 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Annual Reports

Besides the Annual Report to Congress, the 

Commission issues three other reports each 

year that analyze information from the Postal 

Service’s Annual Compliance Report (ACR). The 

ACR analyzes costs, revenues, rates, and quality 

of service for Market Dominant and Competitive 

products.143 The ACR also includes information 

about mail volumes, service performance, and 

customer satisfaction for Market Dominant 

products, as well as information on workshare 

discounts and market tests.144 The PAEA 

requires the Postal Service to prepare and submit 

the ACR to the Commission within 90 days after 

the fiscal year ends on September 30.145

Each year, the Commission analyzes the ACR and 

issues three related reports. The ACD assesses 

the Postal Service’s compliance with statutory 

pricing and service requirements. The Financial 

Analysis Report analyzes the Postal Service’s 

overall financial position. The Analysis of Postal 

Service Performance Goals and Performance 

Plan evaluates whether the Postal Service 

met its performance goals and makes related 

recommendations. In FY 2021, each report was 

issued in Docket No. ACR2020 and is described 

below.146

Annual Compliance Determination

The ACD is an important tool for enhancing 

transparency and accountability by determining 

whether the Postal Service complied with 

statutory pricing and service requirements 

in a given fiscal year. After receiving the ACR, 

the Commission has 90 days to solicit public 

comment and determine whether: (1) any rates 

or fees in effect during the fiscal year did not 

comply with applicable laws; and (2) the Postal 

Service met its service standards in effect during 

the fiscal year.147 The Commission publishes its 

analysis of the ACR in the ACD.

The Commission issued the FY 2020 ACD on 

March 29, 2021 and made several principal 

findings and directives.148 For Market 

Dominant products, the Commission identified 

key issues related to non-compensatory 

products and classes, flat-shaped products, 

and service performance. For each key 

issue, the Commission’s principal findings, 

recommendations, and directives are 

summarized below.

First, with respect to non-compensatory 

products and classes, ten Market Dominant 

the Commission approved the proposed rates, 

finding that they complied with the relevant 

statutory and regulatory requirements of 39 

U.S.C. § 3633(a) and 39 C.F.R. § 3035.105.137

ASSUMED FEDERAL INCOME TAX

The Commission reviewed Postal Service 

calculations related to Competitive products’ 

income. Each year, the Postal Service is required 

to calculate the assumed Federal income tax 

on income from its Competitive products and 

to transfer the amount calculated from the 

Competitive Products Fund to the Postal Service 

Fund.138 On January 14, 2021, the Postal Service 

filed its calculation of the assumed Federal 

income tax for FY 2020.139 CHIR No. 1 was issued 

seeking to reconcile the Competitive income tax 

calculations with the changes to the Competitive 

product revenue and cost data the Postal Service 

filed in the FY 2020 ACR.140 The Postal Service 

filed its CHIR response and revised calculations 

on March 19, 2021.141 After reviewing the revised 

calculation, the CHIR response and the one 

comment received, the Commission approved 

the Postal Service’s revised calculation of the 

assumed Federal income tax on its FY 2020 

Competitive products’ income.142
CHAPTER III | 31

products and two of the five Market Dominant 

classes (Periodicals and Package Services) did 

not generate sufficient revenue to cover their 

attributable costs in FY 2020.149 

The ten Market Dominant products that did 

not generate sufficient revenue to cover their 

attributable costs in FY 2020 were:

• Both Periodicals products (In-County and 

Outside County)

• Three USPS Marketing Mail products (Flats, 

Parcels, and Carrier Route)

• Two Package Service products (Media Mail/

Library Mail and Bound Printed Matter 

Parcels)

• Two Special Services products (Money Orders 

and International Ancillary Services)

• Inbound Letter Post150

For each of the non-compensatory products 

and classes identified above, the Commission 

analyzed financial trends observed over multiple 

fiscal years to develop specific recommendations 

and directives aimed at improving cost 

coverage.

151 Key directives included requiring 

the Postal Service to propose above average price 

increases for all three non-compensatory USPS 

Marketing Mail products (Flats, Parcels, and 

Carrier Route) in the next Market Dominant rate 

adjustment, to continue to update the Periodicals 

Pricing Report analyzing how pricing impacted 

financial results and pricing efficiency, and to 

explore and report concerning opportunities to 

reduce unit costs.152

Second, with respect to flat-shaped products, 

the Commission found that operations, financial, 

and service performance challenges persisted 

in FY 2020.153 Specifically for these products, 

unit costs and contribution losses continued to 

grow while service performance targets were 

also not met.154 Collectively, these products had a 

cumulative negative contribution of more than $1 

billion in FY 2020, which highlights the urgency 

and importance of addressing these issues.155 

The Commission expressed continued concerns 

related to the Postal Service’s lack of specific 

plans to reduce costs and improve service as well 

as the inability of the Postal Service to determine 

how its operational initiatives and/or changes 

will impact cost and service.156 The Commission 

made several recommendations for data 

collection and analysis for ongoing and future 

Postal Service initiatives designed to reduce flats 

costs, improve flats service performance, and/or 

improve flats operations.157

Third, with respect to service performance, the 

Commission evaluated each Market Dominant 

product by comparing the percentage of 

mailpieces that achieve the stated service 

standard with targets set by the Postal Service.158 

It found that most products failed to meet 

their annual service performance targets in FY 

2020.159 Figure III-4 below shows whether each 

Market Dominant product achieved their annual 

service performance targets for FY 2020.

PHOTO COURTESY USPS
32 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

The Commission considered the significant 

internal and external factors that impacted 

service performance in FY 2020, including the 

COVID-19 pandemic, operational changes and 

corporate reorganization undertaken by the 

Postal Service, and efforts to prioritize delivery 

of Political Mail, Election Mail, and Census Mail.160 

The Commission determined that in FY 2020, the 

Postal Service was out of compliance with regard 

to service performance for First-Class Mail 

Single-Piece Letters/Postcards, First-Class Mail 

Outbound Single-Piece International, Outside 

County Periodicals, and In-County Periodicals.161 

It directed the Postal Service to take corrective 

action, including continued reporting of specific 

information developed from internal Postal 

Service metrics.162 These requirements include 

reporting monthly service performance data 

for products found out of compliance.163 The 

Commission developed directives that elicit 

information regarding the steps that the Postal 

Service will take to restore service performance 

for its products in FY 2021.164 Additionally, the 

Commission directed the Postal Service to file a 

pre-implementation service performance impact 

analysis for initiatives that the Postal Service 

plans to implement on or before the next ACD is 

issued, if the initiative would have a reasonably 

foreseeable impact on service performance 

results.165

In addition to these key issues, the Commission 

also identified that seven workshare discounts 

did not comply with 39 U.S.C. § 3622(e) because 

they exceeded the Postal Service’s avoided 

costs.166 The Commission directed the Postal 

Service to either align the non-compliant 

workshare discounts with their avoided cost 

in the next Market Dominant rate adjustment 

or provide support for an applicable statutory 

exception.167

For Competitive products, the Commission 

determined that every domestic product 

Figure III-4: FY 2020 Service Performance Results

For Market Dominant Products

Source: FY 2020 ACD at 98.
CHAPTER III | 33

with rates of general applicability covered its 

attributable cost.168 However, revenues for 

five Competitive products did not cover their 

attributable costs and, therefore, did not comply 

with 39 U.S.C. § 3633(a)(2).169 The Commission 

directed the Postal Service to take corrective 

action, including requiring new quarterly 

reporting on outbound international NSAs to 

ensure ongoing compliance and appropriate 

oversight for these contracts.170

Financial Analysis

The Commission issued its Financial Analysis 

of the United States Postal Service Financial 

Results and 10-K Statement for FY 2020.171 The 

report provided comprehensive analysis of the 

Postal Service’s financial status primarily using 

information reported in its FY 2020 Form 10-

K, including comparisons with FY 2019 results 

and its FY 2020 Integrated Financial Plan. The 

Commission’s analysis concluded that while 

liquidity improved, in large part as a result of 

the CARES Act,172 the Postal Service remains 

financially unstable, its financial condition has 

declined during the past 4 years, and the gap 

between its current assets and current liabilities 

has increased significantly during the last 

decade.173

The Commission found that at the end of FY 

2020:

• The Postal Service’s total net loss was $9.2 

billion

• Cash and cash equivalents (excluding 

restricted cash) totaled $14.4 billion, an 

increase of $5.6 billion and the highest cash 

balance since FY 2006174

• Operating revenue was $73.1 billion, which 

was $2.0 billion more than FY 2019 

• Net operating expenses were $76.6 billion, 

which were $2.4 billion more than FY 2019

• Approximately 77 percent of total expenses 

were personnel-related175

Analysis of Performance Goals

Each year, the Commission must evaluate 

whether the Postal Service met the performance 

goals established in the Postal Service’s annual 

performance report and performance plan.176 

The Commission may also provide the Postal 

Service with recommendations related to 

protecting or promoting public policy objectives 

in Title 39.177

On June 2, 2021, the Commission issued a 

detailed analysis of the Postal Service’s progress 

during FY 2020 toward its four performance 

goals: (1) High-Quality Service, (2) Excellent 

Customer Experiences, (3) Safe Workplace and 

Engaged Workforce, and (4) Financial Health.178 

In its analysis, the Commission evaluated 

whether the FY 2021 Annual Performance 

Plan and FY 2020 Annual Performance Report 

complied with 39 U.S.C. §§ 2803 and 2804.179 

Also, the Commission found that the Postal 

Service either did not meet or only partially 

met each performance goal in FY 2020.180 The 

Commission provided related observations and 

recommendations for each performance goal to 

help the Postal Service meet the performance 

goal and better assess its performance in future 

years.

181
34 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Nature of Service Cases

The Postal Service must request an advisory 

opinion from the Commission for proposed 

changes in the nature of postal services which 

will generally affect service on a nationwide or 

substantially nationwide basis.182 This request 

must be submitted at least 90 days before the 

effective date of the proposed change.183 The 

Commission evaluates requests for an advisory 

opinion for consistency with the policies of Title 

39. These proceedings involve a hearing on the 

record with direct testimony and an opportunity 

for cross-examination. By law, the Commission’s 

final opinion is advisory in nature. The law does 

not give the Commission authority to veto service 

changes. As a result, the Postal Service is not 

required to implement or take any further action 

with regard to the Commission’s opinion.

In FY 2021, the Commission issued two advisory 

opinions on proposed changes to the service 

standards for: (1) First-Class Mail and end-to-end 

Periodicals; and (2) First-Class Package Service. 

Each proceeding is described below.

First-Class Mail and End-to-End 

Periodicals

On July 20, 2021, the Commission issued an 

advisory opinion in Docket No. N2021-1 on 

proposed changes to the service standards for 

First-Class Mail and end-to-end Periodicals.184 

The Postal Service proposed to lengthen the 

service standards by up to 2 additional days for 

38.5 percent of First-Class Mail and 7 percent of 

Periodicals mail. The Postal Service claimed that 

this would improve service capabilities, help it 

achieve its service standards, and reduce mail 

transportation costs.185

In its advisory opinion, the Commission analyzed 

the estimated impact of the proposal on service 

performance, the Postal Service’s financial 

condition, the transportation network, customer 

satisfaction, and mail volume.186 The Commission 

found that, as an initial matter, the proposal 

appeared to target mail that consistently fails 

to meet service performance goals and has the 

most opportunity for improvement.187 However, 

the Commission also found that it was unclear 

how the proposal would address the trend of 

lower on-time service performance caused by 

processing point failures.188

In addition, the Commission found that the 

Postal Service’s computation of the estimated 

cost savings raised potential issues related 

to incomplete data and untenable underlying 

assumptions.189 Moreover, the Commission found 

that the amount of estimated annual cost savings, 

even if fully realized, would not substantially 

affect the Postal Service’s current financial 

condition.190

Regarding the transportation network, the 

Commission found that the model, if successfully 

implemented, would improve the capacity 

utilization of the network.191 However, the 

mismatch between the baseline modeled 

network and the actual current network limited 

the Commission’s confidence in the efficiency 

gains estimated through the Postal Service’s 

modeling process.192

The Commission also found that customer 

satisfaction depends on the Postal Service’s 

ability to achieve its service standards reliably.193 

The Commission stated that although the Postal 

Service performed outreach explaining the 

proposed changes and effects, the Postal Service 

did not show that it adapted its proposal based 

on the concerns or issues raised by its customers 

and stakeholders.194

In evaluating the proposal’s impact on mail 

volume, the Commission found that the Postal 

Service could not estimate with any statistical 

confidence the proposal’s impact on demand 

and volume because the econometric analysis 

submitted by the Postal Service did not address 
CHAPTER III | 35

the causal relationship between delivery times 

and mail volume.195

Finally, the Commission found that the 

proposed changes were not facially inconsistent 

with applicable statutory requirements.196 

However, the Commission also found that the 

Postal Service did not demonstrate that its 

implementation of the proposed changes would 

comport with those requirements.197

Based on these findings, the Commission 

recommended that the Postal Service: (1) 

communicate realistic performance targets; (2) 

monitor implementation to balance savings and 

service; (3) monitor implementation to drive 

transportation efficiency; (4) gauge customer 

satisfaction specifically for its proposed changes; 

(5) allow transparency into ongoing feedback 

and consider changes due to that feedback; and 

(6) limit the use of econometric demand analyses 

for purposes in which it does not provide 

meaningful results.198

First-Class Package Service

On September 29, 2021, the Commission issued 

an advisory opinion in Docket N2021-2 on the 

Postal Service’s proposal to revise service 

standards for First-Class Package Service.199 

The Postal Service proposed to lengthen the 

service standards by 1 to 2 additional days 

for approximately 31.2 percent of First-Class 

Package Service volume and shorten the 

service standards by 1 day for approximately 

4.8 percent of First-Class Package Service 

volume.200 The advisory opinion was the first 

that the Commission had issued for a Competitive 

product, over which the Commission has 

more limited oversight than Market Dominant 

products.

The Postal Service’s stated goals in its proposal 

were to “provide more reliable and consistent 

service performance, improve its ability to 

function according to its operating plans and 

optimize its surface transportation network, 

and create cost savings by allowing more time 

to transport [First-Class Package Service] at 

a lower expense.”201 The Commission found 

that, while the Postal Service’s stated goals for 

the proposal appeared reasonable, it had not 

demonstrated it could meet several factors 

necessary for successful implementation of the 

proposal.202 The Postal Service also did not 

establish a timeframe for when it planned to 

realize the full impact of its proposed changes, 

nor did it estimate a date by which it would meet 

its service performance targets.203 The Postal 

Service also did not include any interim service 

performance targets in its proposal.204 The 

Commission’s analysis revealed that the Postal 

Service’s cost savings estimates may have been 

inflated, and the implementation of the proposed 

changes would not substantially affect the Postal 

Service’s overall financial condition.205

The Commission also determined that flaws in 

the Postal Service’s transportation model may 

have diminished its reliability, as the surface 

network impact projections and estimated cost 

changes presented were potentially inaccurate.206 

Further, the Postal Service failed to demonstrate 

that it was operationally capable of running the 

complex surface network modeled to support the 

proposed service standard changes.207 Finally, 

the Commission cautioned that implementing 

processing and transportation changes prior 

to peak season might present challenges due 

to the continuation of the COVID-19 pandemic 

emergency and resulting stress on the logistics 

industry.208

The Commission provided several 

recommendations for the Postal Service to 

consider prior to implementing its proposal. 

First, the Commission urged the Postal Service 

to set realistic interim service performance 

targets to monitor progress towards its longer 

term target of 95 percent on time delivery for 
36 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Changes to Product Lists and 

the Mail Classification Schedule

Product Lists

The Postal Service and mail users may ask the 

Commission to change the Market Dominant 

and Competitive product lists by adding new 

products, removing current products, or 

transferring products between the lists.213 The 

Commission reviews requests to change the 

product lists for compliance with 39 U.S.C. § 

3642 and the Commission’s regulations in 39 

C.F.R. part 3040.214 The criteria for transferring a 

product are described 39 U.S.C. § 3642(b). 

First, a product may not be classified as 

Competitive if the Postal Service exercises 

sufficient market power so that it can do any of 

the following without risk of losing a significant 

level of business to other firms offering similar 

products:

• Set the product’s price substantially above 

costs

• Raise prices significantly

• Decrease quality

• Decrease output215

Second, a product covered by the postal 

monopoly may not be transferred from the 

Market Dominant product list.216 Third, 

the Commission must consider concerns of 

the private sector, product users, and small 

businesses.217

When adding a product to the Competitive 

product list, the proposed product must also 

meet the financial requirements of 39 U.S.C. 

§ 3633, which are discussed in the “Rate 

Adjustments – Competitive Products” section 

above.218 In FY 2021, the Commission considered 

two major requests to change the Competitive 

products list, which are each described below.

TRANSFER OF BOUND PRINTED MATTER 

PARCELS TO COMPETITIVE PRODUCT LIST

Bound Printed Matter (BPM) Parcels is currently 

a parcel-shaped Market Dominant product in 

the Package Services mail class.219 On March 26, 

2021, the Postal Service filed a request asking 

the Commission to transfer BPM Parcels from the 

Market Dominant to Competitive product list.220 

The newly proposed Competitive offering would 

be called Parcel Select Bound Printed Matter, 

to be included as a subcategory of the existing 

Competitive product referred to as Parcel 

First-Class Package Service.209 Second, the Postal 

Service should develop a rigorous analytical 

methodology to identify the changes in costs that 

would result from implementing its proposal.210 

Third, the Postal Service should monitor 

customer satisfaction going forward, particularly 

for key segments that may be most affected by 

the implementation of its proposal.211 Finally, 

the Commission recommended that the Postal 

Service engage stakeholders in a continuing 

dialogue regarding the effects of implementing 

its proposed changes and potential mitigation 

measures.

212

PHOTO COURTESY USPS
CHAPTER III | 37

Select.221

The Postal Service asserted that the Parcel 

Select Bound Printed Matter product complies 

with requirements under 39 U.S.C. § 3642 and 

the Commission’s regulations.222 It stated that 

mailers use BPM Parcels to ship inexpensive 

“light- to moderate-weight packages containing 

books, catalogs, and similar printed matter 

to individuals and businesses” by ground 

delivery.223 It noted that BPM Parcels is an 

alternative to more general-purpose ground 

shipping products offered by competitors.224

The Postal Service asserted that it does not 

exercise monopoly power over BPM Parcels 

because of “the existence of robust competition 

and large customers that are also competitors 

with their own end-to-end delivery networks.”225 

It stated that the Private Express Statutes do not 

apply to the BPM Parcels product because the 

statutory definition of a “letter” excludes bound 

books, catalogs, telephone directories, and other 

content shipped using this product.226 The Postal 

Service also described customer views and the 

likely effect of the proposed transfer on small 

businesses.227 It stated that “[t]ransferring BPM 

Parcels to the [C]ompetitive product list will not 

violate any of the three standards in 39 U.S.C. § 

3633.”228

Six CHIRs and one Commission Information 

Request were issued, and the Commission is 

currently considering hundreds of comments 

received. This proceeding is pending before the 

Commission.

OUTBOUND INTERNATIONAL NEGOTIATED 

SERVICE AGREEMENTS

On September 18, 2020, the Postal Service 

filed a request to add a new product named 

International Competitive Multi-Service 

Commercial Contracts 1 to the Competitive 

product list.229 The Postal Service proposed 

changes to the filing process so as to allow 

the addition of outbound international NSAs 

to the Competitive product list without prior 

Commission review.230 Under this proposed 

process, the Postal Service would file almost 

all future customized outbound international 

NSAs within the new product, which would be 

approved without further Commission action, 

unless the Commission determined that further 

review was necessary.231 The Postal Service 

asserted that the proposed changes to the filing 

process would reduce the administrative burden 

associated with filing these NSAs.232

The Commission reviewed the request along 

with a CHIR response and comments received. 

Based on its review, the Commission denied the 

request for two reasons.233 First, it stated that 

there was no basis to preliminarily determine 

that the NSAs added within the new product 

would comply with statutory requirements.234 

It noted that the proposed filing process lacked 

sufficient safeguards such as a contract template 

or financial model with a fixed price rate.235

Second, the Commission stated that the NSAs 

proposed for inclusion within the new product 

would not be functionally equivalent because 

they would not necessarily share similar cost 

and market characteristics.236 It noted that 

approving changes to the filing process similar 

to those proposed by the Postal Service would 

require “a consistent financial model applicable 

to all agreements that fall under a product or 

grouping, and a demonstration of the shared cost 

and market characteristics of agreements within 

the product or grouping.”237

Mail Classification Schedule

The Market Dominant and Competitive product

lists are published in the MCS, which also 

includes rates, fees, and descriptions for each 

product. The Postal Service may propose 

changes to the MCS by filing a request, which 
38 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Public inquiry dockets are established by the 

Commission to provide a venue to explore 

issues of general interest. Four public inquiry 

dockets were before the Commission in FY 

2021 that dealt with matters related to service 

performance, the value of the postal and 

mailbox monopolies, the cost of the Universal 

Service Obligation, and exemptions to the letter 

monopoly.

Changes to Service Performance 

Measurement Systems

Service performance results measure how often 

the Postal Service meets its service standards, 

which are the stated days-to-delivery for 

different types of mail.243 Service performance 

for Market Dominant products is measured 

using Service Performance Measurement (SPM) 

systems. In FY 2018, the Commission approved 

the Postal Service’s request to implement 

new internal SPM systems for several Market 

Dominant products, including products within 

domestic First-Class Mail, Periodicals, USPS 

Marketing Mail, and Package Services.244 The 

Commission’s regulations allow the Postal 

Service to propose changes to the SPM systems 

by filing a notice with the Commission.245

On August 31, 2021, the Postal Service filed 

a notice with the Commission proposing two 

material changes to the current SPM system.246 

First, for First-Class Mail, the Postal Service 

would add reporting for 3-Day, 4-Day, and 5-Day 

service standards.247 Second, the Postal Service 

would replace certain references to external SPM 

in its SPM Plan with internal SPM consistent with 

Order No. 5576.248 After thoroughly reviewing 

the record and considering comments received, 

the Commission approved the proposed changes 

to the SPM systems because they adequately 

aligned the SPM Plan with Order No. 5576 and 

the service standard changes described in Docket 

No. N2021-1.249 With respect to suggestions 

raised by commenters concerning issues 

outside the scope of docket such as reporting 

requirements, the Commission plans to initiate a 

rulemaking docket in the future to consider ways 

to improve the accuracy, clarity, and effectiveness 

of the 39 C.F.R. part 3050.250

Value of Postal and Mailbox 

Monopolies

In the Annual Report, the Commission estimates 

the value of the Postal Service’s combined 

letter and mailbox monopolies, which together 

are referred to as the postal monopoly.251 The 

Annual Report includes a separate estimate of 

the value of the mailbox monopoly alone.252 The 

letter monopoly is the Postal Service’s exclusive 

right to carry and deliver most addressed, paperbased correspondence.253 The mailbox monopoly 

is the Postal Service’s exclusive right to deliver to 

and collect from mailboxes.254

On October 1, 2019, the Commission initiated 

a public inquiry docket to evaluate the 

Public Inquiries

the Commission reviews for compliance with 

its regulations.238 In FY 2021, the Commission 

reviewed and approved a request to change the 

MCS product description for Outbound SinglePiece First-Class Package International Service.239

The MCS also contains applicable size and 

weight limitations for mail matter as part of 

the description for each product.240 The Postal 

Service must inform the Commission of proposed 

updates to size and weight limitations for Market 

Dominant and Competitive products.241 In FY 

2021, the Commission reviewed and approved 

two proposed changes to the size limitations for 

international small packets and presorted FirstClass Mail postcards.242
CHAPTER III | 39

methodology for estimating the value of the 

postal and mailbox monopolies.255 It explained 

that the current methodology estimates the 

hypothetical lost profit to the Postal Service 

if potential competitors were allowed to enter 

and compete in the Postal Service’s letter and 

mailbox monopolies.256 The Commission sought 

comments and suggestions for changing and 

enhancing the current estimation methodology 

“to account specifically for recent Postal Service 

data changes, and for any other aspects of the 

monopolies estimation methodology.”257

On February 10, 2021, the Commission filed a 

non-public library reference with supporting 

workpapers that explained the Commission’s 

current methodology for estimating the value 

of the postal and mailbox monopolies.258 It 

explained that interested persons would have 

access to this analysis when preparing comments 

in this proceeding.259 The Commission sought 

comments “on any or all aspects of existing and 

potential methodology changes.”260 In total, 

eight CHIRs were issued, and six sets of initial 

comments followed by three sets of additional 

comments were received. This proceeding is 

pending before the Commission.

Universal Service Obligation 

Valuation Methodology

On December 10, 2020, the Commission initiated 

a public inquiry docket to consider potential 

changes to the Commission’s methodology for 

estimating the cost of the Universal Service 

Obligation (USO Cost).261 The Commission 

last considered this methodology in its 2008 

report on the USO and postal monopoly.262 In 

this report, the Commission explained that the 

Postal Service’s overarching USO is set forth in 39 

U.S.C. § 101(a), which requires the Postal Service 

to “provide postal services to bind the Nation 

together through the personal, educational, 

literary, and business correspondence of the 

people. It shall provide prompt, reliable, and 

efficient services to patrons in all areas and shall 

render postal services to all communities.”263

In the USO Report, the Commission estimated 

the USO Cost, which it updates each year in the 

Annual Report based on the methodological 

approach adopted in the USO Report.264 This 

methodology was based on economic, technical, 

legislative, and societal considerations in 

2008, which have potentially changed since 

then.265 Thus, the Commission established 

Docket No. PI2021-1 to revisit the assumptions 

underlying this methodology to ensure that the 

Commission’s estimated USO Cost reflects the 

current environment in which the Postal Service 

operates.266

The Commission sought public comment on 

any and all aspects of the methodology for 

PHOTO COURTESY USPS
40 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

estimating the USO Cost, including suggestions 

for revising any outdated assumptions and input 

on what data or analytical methods would be 

necessary to incorporate suggested changes 

into the methodology.267 It identified frequency 

of delivery and maintaining small Post Offices 

as two USO Cost components with valuation 

assumptions that appear ripe for revisiting.268 

On January 12, 2021, the Postal Service filed a 

motion asking that the Commission provide a 

detailed explanation of the current methodology 

for estimating the USO Cost, including 

workpapers showing underlying calculations 

from the most recent estimate, to facilitate more 

meaningful comments.269 The Commission 

issued an order granting the motion and stated 

it will issue a library reference to include in this 

proceeding as soon as practicable.270 

To facilitate potentially updating or improving 

selected inputs into the Commission’s calculation 

of the USO Cost, two sets of CHIRs were issued, 

and responses were filed by the Postal Service. 

This proceeding is currently pending before the 

Commission.

Exemptions to Letter Monopoly

On July 2, 2021, the Commission issued an order 

initiating Docket No. PI2021-2 to determine 

whether the Commission needs to promulgate 

regulations to implement statutory exemptions 

to the letter monopoly in 39 U.S.C. § 601.271 This 

public inquiry was related to the Commission’s 

current rulemaking regarding letter monopoly 

exemptions in Docket No. RM2020-4.272 The 

purpose of this public inquiry was to focus the 

Commission’s inquiry on two issues. First, the 

Commission wanted to determine whether 

it should adopt Postal Service regulations 

administering certain sections of section 601.273 

It explained that before the PAEA was enacted, 

the Postal Service issued regulations concerning 

the restrictions on the private carriage of 

letters.274 However, some of these regulations 

were modified and superseded when the 

PAEA was adopted.275 The Commission stated 

that it is interested in exploring whether: (1) 

certain Postal Service regulations implement 

current statutory exemptions in section 601; 

and (2) the Commission should adopt these 

and other regulations to clarify these statutory 

exemptions.276

Second, the Commission sought to identify which 

private carrier services fall within the scope of 

section 601(b)(3).277 Specifically, the Commission 

sought comments on what services were 

“‘described by regulations of the United States 

Postal Service...that purport to permit private 

carriage by suspension of the operation of this 

section’ as of July 1, 2005.”278 The Commission 

also asked for suggestions regarding what 

regulations may be necessary to enumerate in 

clear terms all instances where private carrier 

services fall within the scope of section 601(b)

(3).279

The Commission reviewed comments filed in 

this proceeding and Docket No. RM2020-4.280 

Based on its review, the Commission concluded 

that it received adequate input from the public 

to propose regulations in Docket No. RM2020-4. 

Accordingly, the Commission closed this public 

inquiry docket on November 24, 2021.282
CHAPTER III CHAPTER III || 41

Proposals to Change Analytical Principles

Analytical principles are economic, 

mathematical, or statistical theories or 

assumptions the Postal Service applies when 

producing reports it submits to the Commission 

each year, such as the ACR.283 In these reports, 

the Postal Service must use only those 

analytical principles previously accepted by the 

Commission and applied in the most recent ACD, 

unless a different analytical principle has been 

subsequently approved through a Commission 

proceeding.284

The Postal Service applies analytical principles 

when calculating costs attributable to postal 

products.285 Attributable costs are incurred 

by the Postal Service when it engages in such 

activities as sorting and delivering mail. Costs 

like these must be attributed to products. The 

Commission uses attributable costs and cost 

estimates to evaluate the Postal Service’s overall 

financial performance and compliance with the 

PAEA.286

To add or change an analytical principle, any 

interested person, including the Postal Service 

and the Public Representative, may submit a 

petition asking the Commission to initiate a 

proceeding to consider proposed changes.287 

Petitions are filed with the Commission as 

numbered proposals, such as Proposal One and 

Proposal Two. Proposals must be designed to 

improve the quality, accuracy, or completeness 

of data or data analysis in the reports the Postal 

Service submits each year to the Commission.288

During FY 2021, the Commission considered nine 

Postal Service proposals and one proposal filed 

by UPS. The Commission issued final orders for 

seven of the proposals in FY 2021 or early FY 

2022. Major proposals are described below.

Docket No. RM2020-2 (Proposal Ten) 

Proposal Ten presented a new methodology for 

estimating the variability of Postmaster costs. 

A Postmaster is a manager in charge of a Post 

Office.289 Postmaster compensation and pay 

grades are calculated based on the number 

of Work Service Credits (WSCs), which are 

earned for the amount of revenue generated by 

the Post Office the Postmaster is managing.290 

Postmasters may also earn WSCs by performing 

non-revenue activities such as serving PO Boxes 

and delivery routes, sorting mail, and performing 

administrative functions.291

The Postal Service took the position that the

current methodology for attributing Postmaster 

costs to products is outdated because it is 

based upon a 1984 study.292 To address this 

issue, Proposal Ten sought to update and 

improve the variabilities293 for calculating 

attributable Postmaster costs based upon a 

new study of Postmaster costs “that relies upon 

operational Postmaster data and reflects the 

current structure of Postmaster activities and 

compensation.”294

After reviewing the proposal and comments it 

had received, the Commission rejected Proposal 

Ten.295 It found that “the Postal Service failed to 

show that either the current methodology was 

significantly inaccurate or that Proposal Ten 

would [significantly improve the] methodology 

used to calculate attributable postmaster 

costs.”296 The Commission identified four 

problems with Proposal Ten, including the Postal 

Service’s selection of a 10 percent WSC growth 

rate.297 The Commission described potential 

changes that could address the issues identified 

with Proposal Ten.298

Docket No. RM2020-9 (UPS Proposal One) 

In UPS Proposal One, UPS asked the Commission 

to change how the Postal Service accounts for 

peak season costs in its reports filed with the 

Commission.299 It asserted that “current costing 

models approved by the Commission fail to 

account for peak-season cost increases.”300
42 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

 To address this potential issue, UPS Proposal 

One would have required the Postal Service to:

• Attribute “unexplained peak-season costs” to 

Competitive products as a group under the 

incremental cost test applied under 39 U.S.C. 

3633(a)(1)301

• Closely analyze the seasonality effects and 

revise the cost models to account for these 

effects

• Provide more data about peak-season 

operations to create an improved costing 

methodology

• Develop a new methodological approach 

that address peak-season costs, as well as 

deficiencies in allocating incremental costs to 

Competitive products302

The Commission held a video technical 

conference to consider issues raised by UPS 

Proposal One.303 After considering comments 

it had received, the Commission rejected UPS 

Proposal One.304 The Commission concluded 

that UPS Proposal One violates statutory 

requirements and does not provide any 

improvement to the current methodology.305 It 

found that UPS’s proposed multi-step approach 

for measuring “unexplained” peak-season costs 

contained numerous errors, and its application 

did not produce any reliable estimates of peakseason costs.306 It concluded that the Postal 

Service’s peak-season costs are currently 

reflected in the Postal Service’s costing models 

and should not be re-classified as incremental 

costs attributable to Competitive products.308

The Commission nevertheless found that it is 

appropriate and timely for the Postal Service to 

accelerate studies on peak-season costs. In that 

connection, the Commission noted that it has 

recently established a proceeding, discussed 

below, “to consider possible improvements to 

the quality, accuracy, or completeness of data 

provided by the Postal Service.”309

Docket No. RM2020-13 (Proposal Six) 

Proposal Six310 would establish a new 

methodology for estimating variabilities for 

three mail processing cost pools representing 

automated letter and flat sorting operations.311 

The cost pools included in Proposal Six 

involve labor expenses associated with the 

automated distribution of letters and flats, 

which totaled $2.3 billion in FY 2019.312 The 

current methodology partitioned these mail 

processing cost pools into activities assumed 

to be 100 percent volume-variable, and other 

activities assumed to be non-volume-variable.313 

It was based on “a general assumption that mail 

processing costs should vary in proportion 

with the volume of mail or number of articles 

processed.”314

The current methodology has been used since 

Docket No. R71-1, and its origins predate the 

Postal Reorganization Act and the development 

of the automated mail processing technologies 

described in Proposal Six.315 The Postal Service 

stated that the former Postal Rate Commission 

previously declined to adopt any empirical 

models for mail processing variability because 

of data and econometric issues.316 However, 

the Postal Service explained that several 

factors merit reexamining variabilities for 

automated letter and flat sorting operations, 

including volume changes, the reliability of 

automated counts of mailpiece handlings, and the 

availability of machine utilization data.317

The new methodology “is based on econometric 

analysis of workhour and workload data 

collected by the Postal Service on an ongoing 

basis.”318 The proposed variabilities estimated 

using the new methodology would employ 

monthly Management Operating Data System 

(MODS) datasets compiled into a multi-year 

panel dataset.319 The Postal Service asserted 

that the proposed variabilities would reduce 

FY 2019 volume-variable labor costs for the 

three mail processing cost pools by 8.3 percent 
CHAPTER III | 43

overall.320 The proposed methodology would 

enable the Postal Service to reevaluate and 

update these variabilities because the underlying 

data are produced in the course of Postal Service 

operations and are already included in the 

ACR.321 This proceeding is currently pending 

before the Commission.

Docket No. RM2021-1 (Proposal Seven)

On November 9, 2020, the Postal Service filed 

Proposal Seven, which sought to update and 

improve the variabilities for certain types of 

purchased highway transportation to reflect 

recent operational changes.322 The Postal Service 

explains that it made two major operational 

changes to its highway transportation 

network.323 First, it has increasingly relied on 

additional highway transportation during peak 

season.

324 Second, it introduced Dynamic Route 

Optimization (DRO) contracts, a new type of 

contract that changes both the way highway 

transportation capacities are specified and 

how contractors are paid.325 The Postal Service 

states that it filed Proposal Seven consistent 

with the Commission's past recommendation to 

update variabilities after completing any major 

structural reorganization.326

The Commission approved Proposal Seven with 

one minor change and stated that as modified, 

Proposal Seven improves the accuracy and 

completeness of the Postal Service’s data.327 The 

Commission found that “the updated econometric 

estimates of variabilities for specific types 

of purchased highway transportation are an 

improvement over those estimated variabilities 

produced by the current methodology” and 

that Proposal Seven was responsive to the 

Commission’s past recommendation.328 The 

Commission, however, re-estimated peakseason variabilities, after removing additional 

anomalous observations from the analysis 

dataset.329

Docket No. RM2021-7 (Proposal Four)

In Proposal Four, the Postal Service sought 

to replace the current methodology used to 

attribute Special Purpose Routes (SPR) delivery 

costs to products.330 Proposal Four would 

replace the current methodology, which relies 

on manual data collection sampling, with a 

new system that uses scan data from databases 

that record tracking information and employee 

time and attendance.331 City carrier costs are 

developed for two route groups: (1) regular letter 

routes; and (2) SPRs, which are “street delivery 

activities generally located in dense urban 

areas that primarily include delivering parcels 

and collecting mail from designated collection 

points.”332

 

The Commission approved Proposal Four 

because it would improve both the completeness 

and accuracy of the data used to distribute SPR 

costs.333 It found that “Proposal Four improves 

the completeness of the data used to develop 

distribution [keys] for SPR city carrier cost pools 

by more comprehensively sampling routes that 

deliver infrequently or irregularly.”334 It stated 

that Proposal Four’s proposed sample size of 

26,000 carrier-days is an improvement because 

it greatly exceeds the current sample size of 

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44 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

1,000 manually-tested route-days.335 Thus, 

Proposal Four would likely generate more precise 

estimates of small-volume product costs because 

they would be sampled more frequently.336

The Commission also found that Proposal 

Four improves the accuracy of the data used to 

develop distribution keys for SPR city carrier 

cost pools because “the greater availability of 

data would allow the Postal Service to develop 

separate distribution keys for peak and nonpeak periods, as well as to separate estimates by 

carrier subcategory.”337 It stated that Proposal 

Four would allow the Postal Service to reduce 

data collection costs because the new system 

would not incur labor costs for manual data 

collection.338 The Postal Service estimated that 

the new system would save $200,000 per year.339

Other Proposals 

In FY 2021, the Commission also approved a 

Postal Service proposal to implement a change 

that would simplify calculating and reporting 

of workshare discounts for drop-shipped USPS 

Marketing Mail carrier route flats.340 Other 

rulemaking dockets under consideration by the 

Commission during FY 2021 include:

• Postal Service petitions to make changes in 

the Revenue, Pieces, and Weight reporting 

methodology in terms of sample design, size 

and estimation procedures341

• Proposed changes in the assignment of cost 

pools in the First-Class Mail cost avoidance 

model by reviewing the assignment of cost 

pools as fixed or proportional342

• Initiation of certain improvements in the 

treatment of surface and air transportation 

costs in the International Cost and Revenue 

Analysis343

• Changes to the First-Class Mail Letters cost 

model to disaggregate metered mail by 

machinability status – machinable and nonmachinable as required by Commission in 

its order approving Market Dominant rate 

adjustments under the new rules governing 

the Market Dominant Rate System344

Docket No. RM2022-1 (Priorities for Future Data 

Collection and Analytical Work)

On October 8, 2021, the Commission established 

a proceeding to set priorities for future data 

collection and analytical work.345 The purpose 

of this proceeding is “to consider possible 

improvements to the quality, accuracy, or 

completeness of data” the Postal Service provides 

in its reports filed with the Commission.346 The 

Commission explained that at a time when the 

Postal Service remains under considerable 

financial pressure, having accurate estimates of 

product costs is necessary to understand the net 

revenue consequences of the rates and discounts 

that the Postal Service selects.347 Setting 

priorities for future data collection and analytical 

work will help ensure accurate cost estimates 

and identify analytical principles that need to be 

changed. For example, in UPS Proposal One, the 

Commission found that accelerating studies on 

peak-season costs is appropriate and timely.348

The Commission stated it will develop an 

inventory of data collection and analysis needs, 

comprehensively evaluate these needs, and 

devise a plan for meeting these needs.349 It 

sought comments proposing areas that need 

further research and identifying improvements 

in data collection and analysis that should be 

implemented in the near term and long term.350 

For near term proposals, comments were 

requested on which research topics should 

be prioritized, and what time frame would be 

feasible for completing the research.351 This 

proceeding is currently pending before the 

Commission.
CHAPTER III | 45

Other Proceedings

Several other proceedings were before the 

Commission in FY 2021 and early FY 2022: three 

complaint cases, three market tests, and two 

Post Office closing appeals. Each proceeding is 

described below.

Complaints

A complaint may be filed with the Commission 

by any interested person who believes the 

Postal Service is not complying with certain 

requirements of Title 39.352 Within 90 days after 

a complaint is filed, the Commission will issue an 

order that either: (1) finds the complaint raises at 

least one material issue of fact or law, and begin 

proceedings on the complaint; or (2) dismisses 

the complaint.353 In FY 2021 and early FY 2022, 

there were three complaints filed with the 

Commission.

COMPLAINT REGARDING 10-YEAR 

STRATEGIC PLAN

On March 23, 2021, the Postal Service published 

a 10-Year Strategic Plan announcing potential 

changes intended to achieve financial stability 

and service excellence.354 On October 7, 2021, 

20 states and commonwealths (the States) filed 

a complaint alleging that the Postal Service’s 

failure to submit its 10-Year Strategic Plan to the 

Commission for an advisory opinion violates 39 

U.S.C. § 3661(b).355 Under section 3661(b) before 

making a change in the nature of postal services 

that will generally affect service on a nationwide 

or substantially nationwide basis, the Postal 

Service must seek an advisory opinion from the 

Commission within a reasonable time before the 

proposed change becomes effective.356

The States alleged that the Postal Service 

should have sought an advisory opinion from 

the Commission under section 3661(b) before 

adopting the 10-Year Strategic Plan because it 

adopts changes in the nature of postal services 

with nationwide effect.357 They asserted that the 

Postal Service’s failure to request an advisory 

opinion harms the States and their residents 

because the lack of input from the Commission 

and public on the 10-Year Strategic Plan “removes 

a critical safeguard designed to ensure Postal 

Service accountability.”358 The States asked 

that the Commission order the Postal Service to 

request an advisory opinion on the entire 10-

Year Strategic Plan to “ensure the Commission’s 

review of these significant changes and provide 

the States and the broader public the opportunity 

to comment on them.”359

On October 27, 2021, the Postal Service filed 

a Motion to Dismiss the States’ complaint for 

failing to raise a material issue of fact or law 

that falls within the scope of the Commission’s 

jurisdiction under 39 U.S.C. § 3662.360 It noted 

that the 10-Year Strategic Plan itself does not 

create any changes in the nature of postal 

services and instead announces anticipated 

strategies the Postal Service expects to pursue 

during the next several years.361 It stated that it 

has sought or will seek an advisory opinion for 

the strategies in the 10-Year Strategic Plan that 

will make changes falling within the scope of 

section 3661.362 The Postal Service asserted that 

the 10-Year Strategic Plan in its entirety does not 

fall within section 3661(b)’s scope, that section 

3661(b) does not require the Commission to 

immediately review all initiatives anticipated in 

the 10-Year Strategic Plan, and that dismissing 

the complaint would be consistent with policies 

underlying section 3661(b).363

The States opposed the Postal Service’s Motion to 

Dismiss on November 10, 2021.364 They asserted 

that the 10-Year Strategic Plan describes a series 

of strategies that would implement fundamental 

changes to postal services and operations and 

thus fall within the scope of section 3661(b).365 

The States asserted the claim that changes 

in the 10-Year Strategic Plan likely implicate 

section 3661(b) is colorable because the 10-Year 

Strategic Plan describes changes in the “nature 
46 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

of postal services” that will affect service on a 

substantially nationwide basis.366

On December 17, 2021, the Commission issued 

an order granting the Motion to Dismiss the 

States’ complaint.367 It found that “39 U.S.C. § 

3661(b) does not require the Postal Service to 

request an advisory opinion on the entirety of 

the 10-Year Strategic Plan” for several reasons.368 

First, the Commission determined that the 

10-Year Strategic Plan by itself is not a change 

impacting service and thus did not fall within 

the scope of section 3661(b).369 Second, the 

Commission noted that the Postal Service has 

not yet announced or determined the effective 

dates for most of the initiatives in the 10-Year 

Strategic Plan.370 It stated that section 3661(b) 

and the Commission’s regulations “grant the 

Postal Service substantial discretion regarding 

the timing of a request for an advisory opinion 

and certainly do not require a request to be 

made before an initiative’s effective date has 

been established.”371 In addition, the Commission 

discussed various other factors that supported 

dismissal of the States’ complaint, including the 

Postal Service’s discretion with regard to the 

scope of its requests for advisory opinions and 

the fact that the Commission had conducted 

proceedings reviewing specific initiatives 

contained in the 10-Year Strategic Plan.372 

The Commission addressed and rejected the 

remaining arguments in opposition to dismissal 

of the States’ complaint and concluded that the 

complaint failed to raise any material issues of 

fact or law and thus should be dismissed.373

COMPLAINT OF CHRISTOPHER S. SEARCY

On August 5, 2021, Christopher S. Searcy filed 

a complaint alleging that the Postal Service 

unlawfully suspended mail service to his 

mailbox due to risk to mail carriers caused 

by dogs.374 The Commission’s rules set forth 

procedures for resolving certain complaints 

through the rate or service inquiry process 

by forwarding the complaint to the Postal 

Service for investigation.375 On August 9, 2021, 

the Commission issued an order referring the 

complaint to the Postal Service for investigation 

pursuant to the Commission’s rules for rate or 

service inquiries.376 It directed the Postal Service 

to advise the Commission in writing about the 

resolution of the complaint.377

The Postal Service subsequently filed a written 

status report stating that Mr. Searcy has not 

responded to written correspondence regarding 

attempts to resolve the complaint.378 On October 

27, 2021, noting that it appeared unlikely that 

Mr. Searcy would respond before the expiration 

of section 3662(b)(1)’s 90-day deadline for 

Commission action, the Commission issued an 

order dismissing the complaint.379 It stated that 

the complaint neither explained how the Postal 

Service’s conduct violated 39 U.S.C. § 403(c) nor 

identified any material issues of fact or law at 

issue.380 For the reasons discussed above, the 

Commission dismissed the Complaint without 

prejudice.381

COMPLAINT OF HAPPY TRAILS

On April 23, 2021, Happy Trails Community 

Association, Inc. (Happy Trails) filed a complaint 

asserting that the Postal Service violated section 

403(c).382 Members of Happy Trails owned lots 

within a community that the Postal Service 

classified as a Transient Development under 

the Postal Operations Manual.383 Consequently, 

Happy Trails members were not eligible for 

individual mail delivery and forwarding 

service.384 In its complaint, Happy Trails 

claimed that the Postal Service’s classification 

decision constituted undue or unreasonable 

discrimination because as a result of that 

classification, the Postal Service would not 

provide individual mail delivery and forwarding 

service to Happy Trails members.385

The Postal Service filed a motion to dismiss the 

complaint.386 On June 17, 2021, Happy Trails 

filed a notice to voluntarily dismiss its complaint 
CHAPTER III | 47

with prejudice because it had settled with the 

Postal Service to resolve this matter.387 The 

Commission then issued an order closing Docket 

No. C2021-1 because the issues raised in the 

complaint were resolved.388

Market Tests and Post Office 

Closing Appeals

MARKET TESTS

The PAEA permits the Postal Service to conduct 

market tests of experimental products, which 

allows the Postal Service to offer products and 

services for a limited time period without being 

subject to the applicable requirements of 39 

U.S.C. §§ 3622, 3633, or 3642, or the regulations 

promulgated under those sections.389 Before 

initiating a market test, the Postal Service must 

provide at least 30 days advance notice to the 

Commission through a filing containing certain 

information.390 

There were three active market tests in FY 2021:

• Commercial PO Box Redirect Service 

redirects automated letters during mail 

processing from the Commercial PO 

Box listed on the mailpiece to a second 

Commercial PO Box 391

• Extended Mail Forwarding provides 

customers who submit a permanent changeof-address request the option to extend 

forwarding of all First-Class Mail, First-Class 

Package Service Commercial, and Priority 

Mail mailpieces beyond the 1-year 

forwarding period392

• Plus One is an advertising card that will 

be mailed as an add-on mailpiece with a 

USPS Marketing Mail Letters marriage mail 

envelope containing multiple advertising 

mailpieces393

Market tests are conducted over a 24 month 

period unless the Commission grants the Postal 

Service’s request to extend the market test by up 

to 12 months.394 On June 4, 2021, the Commission 

authorized extending the Plus One market test 

for another 12 months, finding that the Postal 

Service complied with applicable statutory and 

regulatory requirements.395 On November 10, 

2021, the Postal Service provided notice of its 

request to convert the Plus One experimental 

product into a permanent offering on the MCS.396

 

POST OFFICE CLOSING APPEALS

The PAEA permits any person served by a Post 

Office to appeal its closing or consolidation to 

the Commission.397 In FY 2021, the Commission 

considered appeals of the Postal Service’s 

decision to close two contractor-operated retail 

facilities.398 In both cases, the Postal Service 

filed a motion to dismiss the appeal for lack 

of jurisdiction.399 The Commission granted 

both motions and dismissed the appeals with 

prejudice.400 It noted that its jurisdiction to 

consider appeals of contractor-operated facilities 

is limited to facilities that are the “sole source” 

of postal services for the community.401 Because 

the contractor-operated facilities at issue were 

not the “sole source” of postal services in their 

community, the Commission dismissed both 

appeals with prejudice.402

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48 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Court of Appeals Cases

A person adversely affected or aggrieved by the 

Commission’s final order or decision may appeal 

the order or decision to the D.C. Circuit within 30 

days after it becomes final.403

Mailers and the Postal Service filed petitions for 

review of Order No. 5763, which adopted the final 

rules modifying the regulations governing the 

Market Dominant Rate System.404 On November 

12, 2021, the D.C. Circuit issued its opinion 

denying the Mailers’ and the Postal Service’s 

petitions for review and rejecting all arguments 

to overturn the final rules.405 The court 

concluded that “the Commission acted within 

its authority under the [PAEA], and that its 

predictive judgments and economic conclusions 

satisfy the Administrative Procedure Act’s 

requirements of reasoned decision-making.”406 

It found that the scope of the Commission’s 

authority, when acting under 39 U.S.C. § 3622(d)

(3), is broader than the scope of its general 

authority to revise regulations governing the 

Market Dominant Rate System periodically.407

Responding to arguments that the final rules 

were arbitrary and capricious, the D.C. Circuit 

noted that its review of the Commission’s 

technical policy judgments was deferential 

considering that the PAEA expressly entrusted 

the Commission with striking a balance between 

multiple, sometimes competing, objectives.408 

The court concluded that “the Commission 

articulated a rational connection between the 

statutory objectives and the decision it made[,]” 

and “Mailers offer[ed] no basis for the court to 

conclude that the decision was arbitrary and 

capricious in meeting the statutory objectives.”

409

 

The D.C. Circuit also found that the Commission 

adequately justified its decisions to adopt the 

density-based rate authority and not to reopen 

the record to consider the effects of the COVID-19 

pandemic.410

Additionally, the D.C. Circuit rejected the 

arguments advanced by the Postal Service.411 

It stated “[t]he Commission’s decision not to 

implement a rate reset at this time was thus 

reasonable and reasonably explained.”

412

 The 

court found reasonable both the Commission’s 

selection of a Market Dominant Rate System that 

balanced the competing objectives of the PAEA 

and the Commission’s decision to address the 

Postal Service’s financial problem incrementally, 

rather than in a single rulemaking.413 For these 

reasons, the court denied the petitions for 

review.414

The D.C. Circuit also considered an appeal of 

a Commission order dismissing a Post Office 

closing appeal. On February 10, 2021, the 

Commission dismissed a petition for review filed 

by the City of Spanish Fort, Alabama appealing 

the Postal Service's decision to close the Spanish 

Fort community Post Office.415 The City of 

Spanish Fort appealed the Commission’s decision 

to the D.C. Circuit, which dismissed the appeal.416

International Postal Policy

The Secretary of State is responsible for formulating, coordinating, and overseeing international 

postal policy, as well as concluding postal treaties such as those involving the UPU.417 Headquartered 

in Bern, Switzerland, the UPU is an international treaty organization responsible for facilitating 

high-quality universal mail service at affordable rates. Although the State Department has primary 

authority over international postal policy, it must request the Commission’s views on whether any 

treaty, convention, or amendment that establishes a rate or classification for a Market Dominant 

product is consistent with the Market Dominant Rate System.418 The State Department must ensure 

that each treaty, convention, or amendment concluded is consistent with the Commission’s views 

unless there is a foreign policy or national security concern.419
CHAPTER III | 49

Pursuant to 39 U.S.C. § 407(c)(1), the Secretary of 

State requested that the Commission provide its 

views on the “consistency of proposals to amend 

rates or classifications for [M]arket [D]ominant 

products or services within the Universal 

Postal Convention that will be considered at 

the upcoming 27th Universal Postal Union 

(UPU) Congress with the standards and criteria 

established by the Commission under 39 U.S.C. § 

3622[,]” which was initially scheduled to occur in 

August 2020.420

Pursuant to section 407(c)(1) and its regulations, 

the Commission established Docket No. IM2020-

1 in FY 2020 for the purpose of “developing 

its views on whether certain proposals for the 

upcoming UPU Congress are consistent with 

the standards and criteria for modern rate 

regulation established by the Commission under 

39 U.S.C. 3622” and set a deadline for public 

comment.421 The Commission subsequently 

posted proposals and a background document 

for public comment.422 Because the UPU later 

postponed the 27th UPU Congress until August 

2021 due to the COVID-19 pandemic,423 the 

Commission revised its comment deadline to May 

14, 2021.424

On July 9, 2021, the Commission provided its 

views to the Secretary of State,425 on three 

proposals for the 27th UPU Congress that fell 

within the scope of 39 U.S.C. § 407(c)(1) as they 

established rates or classification for the Market 

Dominant Inbound Letter Post Product.426 The 

Commission found that one proposal to require 

tracking for Inbound Letter Post to be consistent 

with the standards and criteria established by 

the Commission under 39 U.S.C. § 3622. The 

Commission also found that two proposals that 

established rates for the delivery of Inbound 

Letter Post, known as terminal dues, were 

inconsistent with the standards and criteria 

established by the Commission under 39 U.S.C. 

§ 3622 based on a fact-specific balancing of the 

objectives and factors enumerated therein.

In FY 2021, the Commission also served in an 

advisory capacity to the Department of State in 

the formulation of U.S. government positions on 

other proposals before the 27th UPU Congress. 

These proposals related to remuneration for 

all international mail products and UPU reform 

towards the achievement of United States 

international postal policies in 39 U.S.C. § 407(a).

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CHAPTER IV | 51

CHAPTER IV | Universal Service Obligation 

 and Postal Monopoly

Background

In this chapter, the Commission provides its 

annual estimates of the cost of the Universal 

Service Obligation (USO) and the value of the 

postal monopoly. In its Report on Universal 

Postal Service and the Postal Monopoly, the 

Commission stated that the overarching USO 

of the Postal Service is set forth in 39 U.S.C. 

§ 101(a), which states that the Postal Service 

must “provide postal services to bind the Nation 

together through the personal, educational, 

literary, and business correspondence of the 

people. It shall provide prompt, reliable, and 

efficient services to patrons in all areas and 

shall render postal services to all communities.” 

The USO has seven principal attributes: (1) 

geographic scope, (2) product range, (3) access, 

(4) delivery, (5) pricing, (6) service quality, and 

(7) an enforcement mechanism.427

The postal monopoly is the Postal Service’s 

exclusive right to carry and deliver certain types 

of mail and deposit mail into mailboxes.428 Unlike 

the cost of the USO (USO Cost), the Commission 

is not required to estimate annually the value of 

the postal monopoly. The Commission provides 

estimates for both the USO Cost and a provisional 

value of the postal monopoly to present a 

balanced perspective.429

In 2008, the Commission estimated the USO Cost 

and the value of the postal monopoly in the USO 

Report. The Commission updates these estimates 

each year in the Annual Report. Beginning in FY 

2018, the net cost of the Postal Inspection Service 

was included in the estimate of the USO Cost.

Estimated USO Cost

The PAEA requires the Commission to estimate 

the costs incurred by the Postal Service in 

providing three types of public services or 

activities:430

• Postal services to areas of the nation the 

Postal Service would not otherwise serve

• Free or reduced rates for postal services as 

required by Title 39

• Other public services or activities the Postal 

Service would not otherwise provide but for 

the requirements of law

PHOTO COURTESY YOCHANNA POTOGRAPHY
52 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

The USO Cost is the total amount of costs 

incurred by the Postal Service in providing these 

public services or activities. Table IV-1 illustrates 

the estimated USO Cost for the last 

5 fiscal years, FY 2016 to FY 2020.431

In this chapter, the Commission provides 

estimates of the costs incurred by the Postal 

Service in providing the public services or 

activities under 39 U.S.C. § 3651(b)(1), describes 

related statutory requirements, and explains the 

methodologies used to estimate these costs.432

On December 10, 2020, the Commission initiated 

a public inquiry in Docket No. PI2021-1 and 

requested suggestions for modifications and 

enhancements to the methodology of estimating 

the cost of the USO to help the Commission 

determine whether all of the assumptions 

underlying the methodology remain valid.433 

Materials provided by the Postal Service in 

response to information requests to date have 

been used to make refinements in the calculation 

of some elements of the cost of the USO, as 

described below.

Table IV-1: Estimated USO Cost ($ Billions) 

Postal Services to Areas of the 

Nation the Postal Service Would 

Not Otherwise Serve

The Commission must estimate the costs 

incurred by the Postal Service in providing:

postal services to areas of the Nation where, 

in the judgment of the Postal Regulatory 

Commission, the Postal Service either 

would not provide services at all or would 

not provide such services in accordance 

with the requirements of [Title 39] if the 

Postal Service were not required to provide 

prompt, reliable, and efficient services to 

patrons in all areas and all communities, 

including as required under the first 

sentence of [39 U.S.C.] section 101(b)[.]434

The Commission determines these costs by 

combining the estimated costs of maintaining 

small Post Offices, the Alaska Air Subsidy, and 

Group E Post Office (PO) Boxes. Table IV-2 

compares the costs of each one from FY 2016 to 

FY 2020.

As shown in Table IV-2, the estimated total cost 

of providing postal services to areas of the nation 

the Postal Service would not otherwise serve 

increased each year between FY 2016 and FY 

2020. This increase is mainly due to the annual 

increase in clerk costs for maintaining small Post 

Offices.
CHAPTER IV | 53

Table IV-2: Estimated Costs of Providing Postal Services to Areas of the 

Nation the Postal Service Would Not Otherwise Serve ($ Millions)

MAINTAINING SMALL POST OFFICES

The Postal Service maintains small Post Offices, 

which are generally located in rural or remote 

areas, as part of its duty “to establish and 

maintain postal facilities of such character and 

in such locations, that postal patrons throughout 

the Nation will, consistent with reasonable 

economies of postal operations, have ready 

access to essential postal services.”

435

 The Postal 

Service uses Cost Ascertainment Group (CAG) 

classifications A to L to categorize Post Offices 

based on revenue generated. 436 Small Post 

Offices are those that fall within CAG K and L 

classifications.437

The Commission determines the costs of 

maintaining small Post Offices by estimating the 

amount the Postal Service would save if rural 

carriers on the street provided the same services 

as those provided at small Post Offices, as well as 

the amount of revenue lost from existing CAG K 

and L PO Boxes. The Commission uses the Rural 

Mail Count to estimate the cost of rural carriers 

providing retail services and for new delivery 

service to those who would no longer have a CAG 

K and L PO Box.438

Table IV-2 lists the estimated costs of 

maintaining small Post Offices from FY 2016 

to FY 2020. The estimated costs of maintaining 

small Post Offices incorporate the main 

categories of employees who may perform 

functions that were previously performed 

primarily by Postmasters.439

Table IV-3 disaggregates the costs of maintaining 

small Post Offices by component and illustrates 

the recent large shifts among these components. 

The clerks’ and Postmasters’ costs for the 

5-year period in Table IV-3 are higher than 

previous Annual Reports due to two changes 

in the calculations: cost data from the National 

Consolidated Trial Balance are used, and clerk 

piggyback costs are added to clerks’ salary 

costs.440 Rural carrier delivery services and PO 

Box revenues foregone in Table IV-3 are also 

higher than previous Annual Reports due to 

the updating of the current number of PO Boxes 

used to calculate these costs. Additionally, rural 

carriers providing retail services costs are also 

lower than figures shown in previous Annual 

Reports due to the current lower number of 

estimated retail visits used to calculate costs.441
54 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Table IV-3: Estimated Cost Savings from Closing CAG K and L Post Offices

Derivation of Updated Costs of Maintaining Small Post Offices ($ Millions)

Note: The sum of individual row components may not equal totals due to rounding. Estimated costs of Maintaining Small Post Offices for 

FY 2016 through FY 2019 differ from previous Annual Reports because a more complete data source for Postmasters’ and clerks’ costs 

was identified from the USPS National Consolidated Trial Balance (NCTB) data and the development and addition of piggyback costs for 

clerks. Additionally, estimated costs of Maintaining Small Post Offices inputs differ due to updated inputs for the number of PO Boxes and 

retail visits incorporated into the FY 2016 through FY 2020 calculations. An upcoming library reference in Docket No. PI2021-1 will detail 

the sources and methodologies used.

a Postmasters costs’ include piggyback costs for overhead and other personnel and non-personnel-related costs.

b

 Clerks costs’ include piggyback costs for overhead and other personnel and non-personnel-related costs.

c

 The cost savings adjustments are used to reduce the potential operating costs saved as there would presumably be an increase in rural 

carrier costs and PO Box revenue foregone (if the small Post Offices were to close).

d

 The estimated fiscal year number of CAG K and L retail transactions was approximated using the most currently available data for FY 2020 

and FY 2019. The approximated FY 2019 number of retail visits was used as a proxy for FYs 2016 through 2018 to develop the estimated 

cost of retail services now provided by rural carriers (if the small Post Offices were to close).

e

 The current number of occupied Market Dominant CAG K and L PO Boxes was used to estimate the number of new delivery points (for 

those CAG K and L PO Boxes customers who would now no longer have delivery to the PO Box if the small Post Offices were to close) for 

the fiscal years shown.

f The current number of occupied Market Dominant CAG K and L PO Boxes was used with the respective fiscal year Market Dominant PO 

Box unit revenue to develop revenues foregone.

Sources for this table are based on the following: NCTB data (clerks and postmasters operating costs); Postmaster relief/leave replacements; rural carrier retail unit and delivery service costs; clerk cost by function (for piggyback cost development); piggyback factors; retail 

visits; and PO Boxes. This information was filed in past Annual Compliance Reports (ACRs) and in Docket No. PI2021-1. See also FY 2020 

Annual Report at 49.

National Consolidated Trial Balance Data (clerks and postmasters operating costs): Commission analysis of respective fiscal year ACRs 

and NCTB data (sub-account 104 and 105 for clerks, sub-account 101 for postmasters) for CAG K and L Post Offices.

Postmaster Relief/Leave Replacements: Library Reference 5, Cost Segments and Components Reconciliation to Financial Statement and 

Account Reallocation, tab “seg 1” in the respective fiscal year ACRs.

Rural Carrier Retail Unit and Delivery Service Costs: Rural Mail Count is based on the following: Library Reference 40 in Docket No. 

ACR2016, ACR2017, and ACR2018; and Rural Mail Count updates for FYs 2019 and 2020 provided in CHIR responses in Docket No. PI2020-1. 

Clerks Costs by Function (for Piggyback cost development): CAG K and L clerk function proportions are based on the activities of sampled 

clerks in the In-Office Cost System Post Offices in CAGs K and L. FY 2017 clerk function proportions were provided in Docket No. ACR2017, 

Responses of the United States Postal Service to Questions 1-16 of Chairman's Information Request No. 21, March 5, 2018. FY 2019 and FY 

2020 clerk function proportions were provided in Docket No. PI2021-1, Responses of the United States Postal Service to Questions 1-3 of 

Chairman's Information Request No. 1, September 24, 2021 (Docket No. PI2021-1, Response to CHIR No. 1).

Piggyback Factors: Library Reference 24 in the respective fiscal year ACRs.

Retail Visits: The number of approximated CAG K and L Post Offices retail transactions inputs for FY 2019 and FY 2020 was provided in 

Docket No. PI2021-1, Response to CHIR No. 1.

PO Boxes: Id. question 2. Respective fiscal year Market Dominant PO Box unit revenues were developed from Library Reference 4 Market 

Dominant billing determinants in Docket Nos. ACR2016, ACR2017, ACR2018, ACR2019 and ACR2020.
CHAPTER IV | 55

ALASKA AIR SUBSIDY

Alaska Bypass Service allows mailers to 

ship goods such as food and other cargo on 

pallets directly to rural customers in Alaska. 

Commercial airline carriers deliver goods on 

pallets to hub airports in either Anchorage 

or Fairbanks. Smaller airline companies or 

independent pilots then break down these pallets 

and deliver the goods to remote communities 

accessible only by air, which are commonly called 

bush sites. The shipped goods “bypass” the Postal 

Service’s network.

With Alaska Bypass Service, the Postal Service 

pays for the cost of air transportation from hub 

airports to bush sites. The difference between 

this cost of air transportation from hub airports 

to bush sites and the average cost of ground 

transportation if it were available is called the 

Alaska Air Subsidy. The Commission previously 

concluded that the Alaska Air Subsidy is part of 

the USO.442 In FY 2020, there was an increase of 

$1.4 million over the FY 2019 Alaska Air Subsidy 

cost. The larger $14.1 million increase in the 

Alaska Air Subsidy cost between FY 2018 and FY 

2019 was due to increases in air volumes and fuel 

costs. 443

GROUP E POST OFFICE BOXES

Group E PO Boxes are provided free of charge to 

customers when the Postal Service does not offer 

carrier delivery to their physical address.444 To 

meet its USO delivery obligation,445 the Postal 

Service makes Group E PO Boxes available “for 

the purpose of resolving potential discrimination 

issues arising from instances in which the Postal 

Service chooses to provide, or not to provide, 

customers with a carrier delivery option.”

446

 In 

FY 2011, the Commission approved treating 

the cost of providing Group E PO Boxes as an 

institutional cost to more equitably distribute the 

USO Cost. The Commission also concluded that 

this treatment was analogous to, and consistent 

with, the treatment of the Alaska Air Subsidy.447 

Consequently, the Commission included the cost 

of Group E PO Boxes, which are primarily facilityrelated, in estimating the USO Cost. In FY 2020, 

servicing Group E PO Boxes cost approximately 

$20 million. In FY 2020, the Group E PO Boxes 

cost was impacted by a new Postal Service 

facility analysis that decreased measured PO Box 

space costs.448
56 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Preferred Rate Discounts Net Of 

Costs

39 U.S.C. § 3626 requires the Postal Service 

to provide reduced rates for preferred rate 

categories in USPS Marketing Mail, Periodicals, 

and Library Mail.450 The Commission determines 

estimated revenue not received by quantifying 

the difference in revenue between mail that is 

statutorily required to receive a discount and the 

revenue the Postal Service would have received 

if those mailpieces were not discounted. This 

increase in revenue is adjusted for potential 

decreases in costs. If not discounted, rates for 

these mailpieces would be higher, resulting in 

a loss of volume and, consequently, lower costs. 

In FY 2020, preferred rate discounts net of costs 

were $1.189 billion.

Periodicals Losses

Periodicals Losses are the annual amount by 

which Periodicals’ attributable cost exceeds 

revenue.

451 The PAEA’s price cap does not allow 

the Postal Service to fully recover Periodicals 

Losses through rate increases.452 It is assumed 

that, if not for the price cap, the Postal Service 

would raise Periodicals rates to the level 

necessary to cover attributable cost. Accordingly, 

the Commission considers these losses to be part 

of the USO Cost.

Table IV-4 illustrates that Periodicals Losses in 

FY 2020 increased by the largest dollar amount 

in the FY 2016-FY 2020 period. Between FY 2019 

and FY 2020, Periodicals Losses increased by 

approximately $100 million. FY 2020 revenue 

from Periodicals only covered 56.9 percent of 

the attributable cost of the Periodicals class, a 

decrease from 64 percent in FY 2019.

The Periodicals class has not covered its 

attributable cost since the PAEA was 

enacted.453 The Commission recently took steps 

to address this issue by finalizing rules adopting 

changes to the regulations governing the Market 

Dominant Rate System.454 Specifically, for noncompensatory mail classes such as Periodicals, 

the final rules provide the Postal Service an 

additional 2 percentage points of rate authority 

per class per fiscal year.455 Similar to CPI-based 

rate authority, if all of this authority is not 

immediately used it may be banked for use in 

future years.

Also, in the FY 2020 ACD, the Commission 

directed the Postal Service to provide an updated 

version of the Periodicals Pricing Report in its 

Free or Reduced Rates

The Commission must estimate the costs incurred by the Postal Service in providing “free or 

reduced rates for postal services as required by [Title 39.]”

449

 The Commission estimates these 

costs by combining preferred rate discounts net of costs and the negative contribution of Periodicals 

(Periodicals Losses). Table IV-4 shows the estimated revenue not received as a result of preferred rate 

discounts and Periodicals Losses between FY 2016 and FY 2020.

Table IV-4: Estimated Revenue Not Received Due to Free or Reduced Rates ($ Millions)
CHAPTER IV | 57

Table IV-5: Other Public Services or Activities the Postal Service 

Would Not Provide But for Legal Requirements ($ Millions)458

Six-Day Delivery

Since 1984, appropriations bills have included 

a provision requiring the Postal Service to 

continue providing Six-Day Delivery.459 The cost 

of providing Six-Day Delivery is measured as 

the estimated savings the Postal Service would 

achieve by providing residential delivery service 

5 days a week instead of 6 days a week. Table IV-5 

shows the cost of Six-Day rather than Five-Day 

Delivery from FY 2016 to FY 2020.460 In FY 2020, 

the estimated cost of providing Six-Day Delivery 

was approximately $2.518 billion, an increase 

from the estimated FY 2019 cost of $2.465 billion.

Uniform Rates

Rates for First-Class Mail must be uniform 

throughout the United States.461 To determine 

the cost of uniform First-Class Mail rates, the 

Commission estimates the increased contribution 

that the Postal Service would earn if dropship 

discounts were allowed for workshared FirstClass Mail. Table IV-5 shows the estimated cost 

of uniform First-Class Mail rates. The estimated 

cost of uniform First-Class Mail rates decreased 

from $71 million in FY 2019 to $52 million in FY 

2020.

Media Mail/Library Mail rates must be 

uniform for mail of the same weight and must 

not vary with the distance transported.462 

The Commission estimates the cost of the 

distance component by assuming that without 

this requirement, Media Mail/Library Mail 

would provide the unit contribution of Bound 

Printed Matter, a proxy that does not have this 

restriction. The Commission estimates the 

additional unit contribution by determining the 

difference between the unit contributions of 

Bound Printed Matter and Media Mail/Library 

Mail. Media Mail/Library Mail total volumes are 

then multiplied by the estimated additional unit 

contribution to produce an estimate of the total 

additional contribution if Media Mail/Library 

Other Public Services or Activities

The Commission must estimate the costs incurred by the Postal Service in providing “other public 

services or activities which, in the judgment of the Postal Regulatory Commission, would not 

otherwise have been provided by the Postal Service but for the requirements of law.” 457 These costs 

include the costs of providing Six-Day Delivery (rather than Five-Day Delivery), uniform rates for 

First-Class Mail and Media Mail/Library Mail, and the net cost of the Postal Inspection Service. Table 

IV-5 shows the costs of providing these public services or activities from FY 2016 to FY 2020.

FY 2021 ACR and include an analysis of how the pricing in Docket No. R2021-1 impacted the cost, 

contribution, and revenue of Periodicals in FY 2021, and whether the new pricing improved the 

efficiency of Periodicals pricing in FY 2021.456
58 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Mail rates were not uniform.

In FY 2020, the estimated cost of providing 

uniform Media Mail/Library Mail rates was 

approximately $94 million, a decrease from the 

estimated FY 2019 cost of $124 million. The 

decrease in cost between FY 2019 and FY 2020 

was due to an increase in the Media Mail/Library 

Mail unit contribution and a decrease in the unit 

contribution of Bound Printed Matter 

in FY 2020. 463

Postal Inspection Service

In the FY 2019 Annual Report, the Commission 

began including the net cost of the Postal 

Inspection Service in the estimated cost 

of the USO as an “other public service or 

activity” under 39 U.S.C. § 3651(b)(1)(C).464 

The Postal Inspection Service enforces more 

than 200 federal laws that relate to crimes 

involving the postal system, its employees, 

and its customers.465 The mission of the 

Postal Inspection Service is "to support and 

protect the [Postal Service] and its employees, 

infrastructure, and customers; enforce the 

laws that defend the nation’s mail system from 

illegal or dangerous use; and ensure public trust 

in mail.”466 Law enforcement activities of the 

Postal Inspection Service involve defending the 

nation’s mail from illegal or dangerous use by, 

for example, combatting illegal narcotics, mail 

fraud, and mail and package theft.467 The costs of 

the Postal Inspection Service are partially offset 

by fines collected and restitution, which are 

subtracted from the total cost to calculate the net 

cost.

In FY 2020, the net cost of the Postal Inspection 

Service was approximately $503 million, an 

increase from the estimated FY 2019 net cost of 

$471 million.468

Value of the Postal Monopoly

The mailbox monopoly is the Postal Service’s 

exclusive right to deliver to and collect from 

mailboxes.469 The letter monopoly is the Postal 

Service's exclusive right to carry and deliver 

most addressed, paper-based correspondence.470 

The combined letter and mailbox monopolies are 

together referred to as the postal monopoly. The 

Annual Report includes estimates of both the 

value of the postal monopoly and the value of the 

mailbox monopoly alone.

The value of the postal monopoly is an estimate 

of the profit that the Postal Service would 

potentially lose if both the mailbox and letter 

monopolies were lifted and the Postal Service 

was subject to competition for mail currently 

covered by the postal monopoly.

The value of the mailbox monopoly is estimated 

based on contestable mail volumes in Periodicals, 

select USPS Marketing Mail prepared in carrier 

route sequence, and Parcel Select.471 Changes 

in the volume of contestable mail affect the 

number of profitable routes the competitor could 

deliver to and the amount of profit the Postal 

Service would lose if the competitor captured the 

contestable mail on those routes.

On October 1, 2019, the Commission initiated 

a public inquiry in Docket No. PI2020-1 and 

requested suggestions for modifications and 

enhancements to the current estimation 

methodology to account for recent Postal 

Service data changes as well as for any other 

aspects of the letter and mailbox monopolies 

(postal monopoly) estimation methodology.472 

After receiving six sets of initial comments and 

three sets of additional comments from postal 

stakeholders, the Commission is currently 

considering these comments and the most 

appropriate revisions to the methodology.473
CHAPTER IV | 59

The Commission uses the model described in 

the USO Report to update current estimates.474 

The model assumes that the competitor will 

“win” or “skim” all of the contestable mail on a 

route if the revenue it would earn from these 

mail volumes is greater than the fixed and 

attributable costs related to the volumes. The 

model also assumes the competitor would deliver 

only local and regional mail to focus on the most 

profitable delivery routes and avoid the need for 

significant capital to establish a processing and 

transportation network.

Even with the postal monopoly, competitors 

still deliver material (e.g., newspapers’ weekly 

advertising supplements) that might otherwise 

be sent via the Postal Service. If the mailbox 

monopoly alone were lifted, competitors could 

deliver and deposit into mailboxes products 

that fall outside of the letter monopoly, such 

as Periodicals, unaddressed saturation mail, 

catalogs exceeding 24 pages, and letters 

exceeding 12.5 ounces. The letter monopoly 

prevents competitors from delivering certain 

mail that is directed to a specific person or 

address, such as First-Class Presorted Letters/

Postcards and USPS Marketing Mail Letters. If the 

letter monopoly were also lifted, this restriction 

would not apply. 

The model currently evaluates the competitor’s 

entry for each route regardless of the extent of 

route clustering. Focusing on routes in the same 

cluster or area would reduce the competitor’s 

fixed costs.475 Also, because the model assumes 

that the competitor does not incur mail 

processing costs, values of the postal and mailbox 

monopolies do not reflect the cost of sorting to 

carrier routes, which is necessary to deliver mail 

presorted to the 5-digit ZIP Code. The model also 

does not account for mailers’ switching costs 

or brand loyalty.476 In addition, bulk parcels, 

which are Competitive products, are considered 

contestable mail. 

Previous Annual Reports presented only 

estimates of the postal and mailbox monopolies 

based on the same assumed mid-range (base 

case model) values for four key variables: (1) 

the volumes that an entrant could contest; (2) 

the entrants’ costs; (3) the entrants’ delivery 

frequency; and (4) the discount that the entrant 

offers to entice customers. The base case 

model for calculating both estimates of the 

postal and mailbox monopolies assumes that 

an entrant would offer a 10 percent discount, 

have a 10 percent cost advantage (be 10 percent 

more efficient), and skim 100 percent of the 

contestable mail on profitable routes.477 The 

FY 2016 through FY 2020 postal and mailbox 

monopoly estimates calculated using the base 

Table IV-6: Base Case Model Values of the Postal and Mailbox Monopolies ($ Billions)478
60 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Table IV-7: FY 2020 Value of the Postal and Mailbox Monopolies ($ Billions)481

The estimates of the postal and mailbox 

monopolies were also developed using the low 

and high model assumptions that were last 

calculated in 2008 when the USO Report was 

issued.482 In the USO Report, the mid-range 

values of the base case model were believed 

to be realistic ranges for the four key model 

input variables.483 As compared to the postal 

monopoly estimates in the USO Report, the 

largest dollar change in the estimated FY 2020 

postal monopoly values are in the “high” model 

estimates ($7.10 billion in the USO Report versus 

$8.26 billion in FY 2020) and the base case 

model estimates ($3.48 billion in the USO Report 

versus $3.82 billion in FY 2020).484 Increases 

in the amount of USPS Marketing Mail 5-digit 

automation letters entered at destination 

sectional center facilities since the USO Report 

was issued contributed to the larger postal 

monopoly estimates using the base case model 

and “high” model assumptions in FY 2020.

As compared to the mailbox monopoly estimates 

in the USO Report, the FY 2020 estimates 

were lower for all key variable assumption 

scenarios due to decreases in the total amount 

of contestable USPS Marketing Mail Enhanced 

Carrier Route mail since the USO Report was 

issued.485

case model assumptions are presented in Table 

IV-6. The large reduction in the value of the 

postal monopoly between FY 2019 and FY 2020 is 

due primarily to the decrease in USPS Marketing 

Mail volume.

The Commission also presents the FY 2020 

estimates of the postal and mailbox monopolies 

based on alternative assumed values (“low” 

and “high” models) for the four key variables (in 

addition to the assumed base case model midrange values).479

Table IV-7 illustrates the impact on the FY 2020 

monopoly estimates given variations in the 

assumptions of the four key variables: (1) the 

amount of discount offered by the entrant; (2) 

the entrant’s cost advantage; (3) the number 

of delivery days; and (4) the percentage of 

contestable mail skimmed on profitable routes.480 

The monopoly estimates calculated using the 

“low” and “high” values of the four key variables 

are unlikely to represent the actual value of the 

monopolies but may be helpful to conceptualize 

the lower and upper bounds of reasonable 

estimates. Given the uncertain nature of how 

competition would evolve in the absence of the 

postal and mailbox monopolies, variations in the 

assumptions are possible. Table IV-7 illustrates 

the sensitivity of the monopoly estimates 

to potential changes in the key model input 

variables’ values.
CHAPTER V | 61

The Commission’s Office 

of Public Affairs and 

Government Relations (PAGR) 

is a significant resource in 

support of public outreach 

and education; complaint 

processing; media relations; 

and liaison with the U. S. 

Congress, the Administration, 

the Postal Service, and 

other government agencies. 

This office informs and 

advises commissioners and 

Commission staff on legislative 

issues and policies related 

to the Commission and the 

Postal Service. PAGR staff also 

coordinate the preparation of 

both congressional testimony 

and responses to congressional 

inquiries concerning 

Commission policies and 

activities. PAGR is the primary 

office assisting the general 

public. 

CHAPTER V | Public Affairs

Inquiries by Source

In Fiscal Year 2021, PAGR received over 14,000 

questions, suggestions, comments, and inquiries. The 

greatest percentage of these were received through 

the online “Contact PRC” link on the Commission’s 

website and by phone. The remaining correspondence 

was submitted by hardcopy mail. This year saw a 120 

percent increase in the comments received from the 

general public in response to proposed operational 

changes announced by the Postal Service (from 6,435 

to 14,149). Sixty-four percent of this contact occurred 

in the third quarter, which is the same quarter the 

Postal Service filed its first proposed Nature of 

Service case (N2021-1) on April 21, 2021. 

Table V-1: FY 2021 Number of Inquiries 

Received by Contact

Consumer Relations - 

Comments and Inquiries
62 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Commission Order No. 195 directs the Postal 

Service to respond to rate and service inquiries 

that the Commission forwards to the USPS Office 

of the Consumer Advocate within 45 days. The 

order also requires the Postal Service to file a 

monthly report summarizing the general nature 

of inquiries they received. These reports are 

available on the Commission’s website at www.

prc.gov, under the USPS Reports tab. 

Inquiries by Issue

Consistent with prior reporting, mail that is 

delayed, misdelivered, and undelivered remains 

the leading complaint type. There was also a 

slight increase in inquires related to collection 

box schedules and incorrect signage.

 

Table V-2: FY 2021 Number of Inquiries 

Received by Issue

Inquiries by Location

In FY 2021, a review of the inquiries referred to the Postal Service for escalated resolution revealed 

that an above average number of service related inquiries originated in the Illinois 1, Georgia, 

Indiana, Maryland, Florida 2, and New York 1 Districts.

Table V-3: FY 2021 Number of Inquiries Received by Location
CHAPTER VI | 63

CHAPTER VI | 63

CHAPTER VI | Administration

The Office of the Secretary and Administration 

(OSA) ensures that the Commission has the 

physical, financial, technological, and human 

capital infrastructure needed to accomplish 

its mission. The work of this department is 

directly tied to the Commission’s Strategic 

Plan, particularly to Goal 3 (provide an optimal 

internal infrastructure to support management of 

priorities, workload, and emerging requirements) 

and Goal 4 (recruit, develop, and retain a diverse, 

high-performing workforce). OSA operates with 

a small staff that handles all agency operations, 

including information technology, financial 

management and budget, records and data 

management, and workforce development. 

Information Technology

Focusing on high-risk areas of concern, the 

Commission’s management and Information 

Technology staff have made significant 

advancements in the agency’s cybersecurity 

posture over the past fiscal year, while also 

managing new threats and challenges to its 

operations. This past fiscal year, by concentrating 

resources on improving its security posture, 

the Commission was able to complete its first 

Security Assessment and Authorization and 

take action towards resolving vulnerabilities. 

The Commission also onboarded a new Cheif 

Administative Officer (CAO) experienced in 

cloud technology and its first cybersecurity 

professional/ CISO to support the Commission’s 

efforts. The Commission continues to 

collaborate with the Department of Homeland 

Security (DHS) to identify and address risks, 

and to improve its cybersecurity posture. IT 

cybersecurity and management staff have also 

expanded the education of employees about the 

importance of safeguarding the Commission’s IT 

infrastructure, applications, and data.

Throughout FY 2021, the Commission’s IT 

team worked to ensure the continuity of the 

Commission’s essential IT functions, supporting 

the agency’s staff on 100 percent telework. 

Expanded by new hires, IT staff transitioned the 

Commission’s internet service provider, firewall, 

and VPN services – resulting in significant cost 

reductions to the Commission and increasing 

visibility on service operations. In addition 

to these cybersecurity and infrastructure 

improvements, the Commission began expanding 

and addressing its treatment of privacy issues for 

PHOTO COURTESY SOLIDAGO
64 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

internal users and external customers.

Despite these advancements, the Commission 

has been designated “At Risk” by the Department 

of Homeland Security (DHS) CIO metrics. In 

March 2021, the Commission was affected 

by four previously undisclosed Microsoft 

Exchange vulnerabilities that only pertained 

to Microsoft customers using an on-premises 

Exchange solution. Although the Commission 

was targeted by an Advanced Persistent Threat 

(APT) actor, ultimately no agency services or 

infrastructure components were compromised; 

however, significant resources were expended 

to resolve this issue. In consultation with the 

Cyber-Security Infrastructure Security Agency 

(CISA), the Commission upgraded its IT service 

operations and transitioned critical services to 

the cloud. 

Financial Management and Budget

The Commission continues to cost-effectively and efficiently work within its budget: the FY 2021 

appropriation was $17,000,000. With the addition of prior year balances, the Commission’s total 

expenditures totaled $17,541,665. Personnel compensation accounted for 81 percent of expenditures; 

rent accounted for 12 percent of expenditures; and the remaining 7 percent of expenditures was for 

all other operating expenses including IT, consulting services, and communications. Figure VI-1 below 

shows the distribution of the Commission’s expenditures for FY 2021.

Figure VI-1: Postal Regulatory Commission, FY 2021 Annual Budget Expenditures
CHAPTER VI | 65

Records and Data Management

Committed to transparency, accountability, and 

open government, the Commission endeavors to 

provide the public with a view into its operations 

as it regulates the U.S. Postal Service. During FY 

2021, the Commission:

• Started a YouTube channel to better facilitate 

public viewing of its proceedings during the 

continued pandemic/remote work situation. 

Two events were streamed and posted: the 

hearing on the N2021-1 case and a technical 

conference for N2021-2

• Processed 27 FOIA requests

• Received and published more than 480 

comments and statements of position on 

N2021-1, filed predominantly by members of 

the mailing public

• Opened 303 new dockets and processed a 

total of 4,353 filings

Records management and data governance have 

come to the forefront during this continued 

remote work environment; as such, the 

Commission is reconsidering how much space – 

physical and digital – is needed to accommodate 

not only its employees, but also all records 

generated in the course of employees’ Federal 

work. In accordance with the National Archives 

and Records Administration requirement that 

agencies transition to using and retaining only 

electronic records, OSA staff began updating 

and overhauling the Commission’s records 

management policy to better address how 

the agency handles, stores, and disposes of its 

documents. 

OSA privacy staff also worked on assembling 

a new policy explicitly defining how the 

Commission will handle privacy issues relating 

to its recordkeeping going forward, both for 

staff and for external customers. This policy 

and its associated framework for privacy impact 

assessments, privacy threshold analyses, and 

system of records notices will be implemented 

during FY 2022.

Workforce Development 

The Commission’s workforce is its primary 

asset, and Goal 4 of the 2017-2022 Strategic 

Plan focuses on the recruitment, development, 

and retention of a diverse, high-performing 

workforce. The Commission’s workforce goal for 

FY 2022 is to enhance its human capital planning 

and alignment, increase essential training 

and professional development, and improve 

recruitment strategies. This work will focus 

on retaining and restoring the Commission’s 

workforce by filling mission-critical positions, 

providing essential professional development and 

training to support the Commission’s important 

work.

The Commission has maintained its commitment 

to equal employment opportunity (EEO) in its 

initiatives to recruit, develop, and retain a skilled, 

high-achieving, and diverse workforce. To this 

end, the Commission provides annual training 

in EEO and the NO FEAR Act and supports a 

Diversity & Inclusion Committee, which offers 

various informative essays and announcements 

throughout the year to bring staff’s attention to 

the achievements and aspirations of a diverse 

group of Americans. In FY 2021, women and 

minorities accounted for 56 percent and 30 

percent, respectively, of its workforce, while 

women filled 44 percent of the agency’s executive 

positions. Over the course of FY 2021, the 

Commission had zero EEO complaints (formal 

and informal) filed.

The Commission prides itself on offering a 

flexible and safe workplace, and normally 

provides the ability for employees to participate 

in its Alternative Work Schedule program 

and Telework program. However, since the 

declaration of the COVID-19 pandemic in 

March 2020, the Commission moved to 100 
66 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

percent reliance on remote work and electronic 

systems to perform its mission. This required 

a shift in focus and support from its physical 

office space to a fully remote environment. As 

noted in the Commission’s Federal Employee 

Viewpoint Survey (FEVS) results, 100 percent of 

participating Commission employees agreed that 

during the COVID-19 pandemic, senior leaders 

demonstrated a commitment to employee health 

and safety. 

The Commission’s 2020 FEVS results indicated 

that the agency continues to build on over four 

years of steadily improving results: making 

progress in the areas of employee engagement, 

employee satisfaction, and inclusion. The FY 

2020 response rate was 94 percent, an eighteen 

percentage point increase over last year’s FEVS 

response rate, and fifty percentage points higher 

than the government-wide average response rate 

of 44 percent. The Employee Engagement Index 

score, which evaluated leaders, supervisors, 

and intrinsic work experiences within the 

Commission, came in at 88 percent – well above 

the average of 69 percent among the other very 

small Federal agencies and the governmentwide average of 71 percent. Two of the 36 

questions showing a positive increase from 

the last FEVS results were “In my work unit, 

differences in performance are recognized 

in a meaningful way” and “My works gives 

me a feeling of personal accomplishment.” 

Commission leadership takes great pride in the 

fact that employees feel personally rewarded 

for their hard work. These findings validate 

the Commission’s determination to provide 

flexibility, accommodation, and safety in its 

workplace.
ENDNOTES | 67

ENDNOTES |

1. Postal Accountability and Enhancement Act, Pub. L. 109-435, 120 Stat. 3198 (2006).

2. 39 U.S.C. § 3651(a).

3. 39 U.S.C. § 3642(b)(1). Postal Service products are categorized as either Market Dominant or 

Competitive. “Product” means “a postal service with a distinct cost or market characteristic for 

which a rate or rates are, or may reasonably be, applied[.]” Id. § 102(6).

4. 39 U.S.C. § 3642(b)(1). Market Dominant products are grouped within 5 classes of mail: First-Class 

Mail, USPS Marketing Mail, Periodicals, Package Services, and Special Services. Id. § 3621(a).

5. 39 U.S.C. § 3642(b)(1). Examples of Competitive products include Priority Mail, Priority Mail Express, 

and First-Class Package Service.

6. 39 U.S.C. § 3622(b).

7. Docket No. RM2007-1, Order Establishing Ratemaking Regulations for Market Dominant and 

Competitive Products, October 29, 2007 (Order No. 43); See Docket No. RM2007-1, Errata Notice 

Concerning Order No. 43, October 31, 2007.

8. 39 U.S.C. § 3651(a).

9. 39 U.S.C. § 3622(d)(3).

10. Docket No. RM2017-3, Advance Notice of Proposed Rulemaking on the Statutory Review of the 

System for Regulating Rates and Classes for Market Dominant Products, December 20, 2016 (Order 

No. 3673).

11. Docket No. RM2017-3, Order on the Findings and Determination of the 39 U.S.C. § 3622 Review, 

December 1, 2017 (Order No. 4257).

12. Order No. 4257 at 17.

13. Id. at 22-23.

14. Id. at 3-4.

15. Workshare discounts provide reduced rates for mail that is prepared or entered in a manner that 

avoids certain activities the Postal Service would otherwise have to perform. Docket No. ACR2020, 

Annual Compliance Determination Report Fiscal Year 2020, March 29, 2021, at 11 (FY 2020 ACD). 

These discounts are based on the estimated avoided costs that result from the mailer performing 

the activity instead of the Postal Service. Id. Avoided costs are the costs the Postal Service would 

have incurred if it had performed the worksharing activity instead of the mailer. Docket No. R2021-2, 

Order on Price Adjustments for First-Class Mail, USPS Marketing Mail, Periodicals, Package Services, 

and Special Services Products and Related Mail Classification Changes, July 19, 2021, at 5 n.5 (Order 

No. 5937).

16. Order No. 4257 at 48, 145-46. Attributable costs are “the direct and indirect postal costs 

attributable to [a] product through reliably identified causal relationships.” 39 U.S.C. §§ 3633(a)(2), 

3631(b). Attributable costs are discussed in the “Rate Adjustments – Competitive Products” section 

below.

17. Order No. 4257 at 148, 221-26.

18. Id. at 148, 168-71, 247.

19. Id. at 236, 248.

20. Id. at 4-5, 250, 273.

21. Docket No. RM2017-3, Notice of Proposed Rulemaking for the System for Regulating Rates and 
68 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Classes for Market Dominant Products, December 1, 2017 (Order No. 4258).

22. Docket No. RM2017-3, Revised Notice of Proposed Rulemaking, December 5, 2019, at 11 (Order No. 

5337). The revised rules are discussed in the FY 2019 Annual Report. Postal Regulatory Commission, 

Annual Report to the President and Congress Fiscal Year 2019, January 21, 2020, at 17-18 (FY 2019 

Annual Report).

23. Docket No. RM2017-3, Order Adopting Final Rules for the System of Regulating Rates and Classes for 

Market Dominant Products, November 30, 2020 (Order No. 5763).

24. Order No. 5763 at 72-73.

25. Id. at 100-101. By calculating the retirement-based rate authority as a percentage of total revenue 

(as opposed to as a percentage of Market Dominant revenue), the mechanism does not burden 

users of Market Dominant products with the entire amount of the retirement amortization 

payments. Order No. 5337 at 93. Revenue generated by this mechanism must be applied to 

amortization payments as computed by the Office of Personnel Management. Id. at 95-96.

26. Order No. 5763 at 100.

27. Id. at 182.

28. Id.

29. Id. at 186.

30. Id. at 159-60, 190-91, 196.

31. Id. at 198.

32. Id. at 19.

33. Id. Specifically, a low workshare discount or an excessive workshare discount would be permitted 

if it were new, if it would represent an improvement of 20 percent over the existing workshare 

discount passthrough, or if it were set in accordance with a prior Commission order (via the 

proposed waiver process). Id. at 199. A low workshare discount would also be permitted if the 

proposed workshare discount would produce a passthrough of at least 85 percent. Id. Additionally, 

an excessive workshare discount would be permitted if it were provided in connection with a 

subclass of mail (product), consisting exclusively of mail matter of educational, cultural, scientific, 

or informational value (39 U.S.C. § 3622(e)(2)(C)) and accompanied by certain information to ensure 

transparency. Id.

34. Id. at 200.

35. Id. at 23, 228, 242-44, 267.

36. Id. at 166.

37. Docket No. RM2021-2, Advance Notice of Proposed Rulemaking Regarding Performance Incentive 

Mechanism, January 15, 2021, at 1, 3 (Order No. 5816); See Order No. 5763 at 166.

38. Order No. 5816 at 1.

39. Id. at 4.

40. Id. at 5-14.

41. Docket No. RM2021-2, Motion of the United States Postal Service to Hold Proceeding in Abeyance, 

June 24, 2021 (Docket No. RM2021-2 Motion). The Postal Service filed this motion before the D.C. 

Circuit issued its decision dismissing the appeals.

42. Docket No. RM2021-2 Motion at 2.

43. Docket No. RM2021-2, Response of the Public Representative in Support of Postal Service Motion, 

June 28, 2021; Docket No. RM2021-2, Statement of the Association for Postal Commerce in Support 

of USPS Motion for Abeyance, June 25, 2021.

44. Docket No. RM2021-2, Order Granting Motion to Hold Proceeding in Abeyance, July 2, 2021 (Order 
ENDNOTES | 69

No. 5928). The Commission issued Order No. 5928 before the D.C. Circuit issued its decision 

dismissing the appeals.

45. 39 U.S.C. § 3633(a)(3). Institutional costs are the costs that remain after attributing all reliably 

identifiable, causally-related product-level and group-level costs to products. Docket Nos. RM2017-1 

and RM2022-2, Supplemental Notice of Proposal Rulemaking and Order Initiating the Third Review 

of the Institutional Cost Contribution Requirement for Competitive Products, November 18, 2021 

(Order No. 6043). Requirements for Competitive products are discussed in the “Rate Adjustments – 

Competitive Products” section below.

46. Docket No. RM2017-1, Order Adopting Final Rules Relating to the Institutional Cost Contribution 

Requirement for Competitive Products, January 3, 2019, at 18 (Order No. 4963).

47. 39 U.S.C. § 3633(b).

48. Id.

49. See Order No. 4963.

50. United Parcel Service, Inc. v. Postal Reg. Comm’n, 955 F.3d 1038, 1041, 1049 (D.C. Cir. 2020). These 

proceedings were described in past Annual Reports. FY 2019 Annual Report at 18-19; Postal 

Regulatory Commission, Annual Report to the President and Congress Fiscal Year 2020, January 26, 

2021, at 44 (FY 2020 Annual Report).

51. See Order No. 6043 at 1-2.

52. Id. at 2-3.

53. Id. at 10.

54. Docket No. RM2020-4, Advance Notice of Proposed Rulemaking to Consider Regulations to Carry 

Out the Statutory Requirements of 39 U.S.C. 601, February 7, 2020 (Order No. 5422).

55. See Private Express Statutes, 18 U.S.C. §§ 1693-1699 and 39 U.S.C. §§ 601-606.

56. See Order No. 5422 at 2.

57. 39 U.S.C. § 601(c).

58. Order No. 5422 at 4, 7-8.

59. Docket No. RM2020-4, Chairman’s Information Request No. 1, March 4, 2020; Docket No. RM2020-

4, Chairman’s Information Request No. 2, April 1, 2020; See Docket No. RM2020-4, Order Holding 

Rulemaking in Abeyance, July 2, 2021, at 1-2 (Order No. 5929).

60. See Order No. 5929.

61. Id. at 2.

62. Id.

63. Docket No. PI2021-2, Notice and Order Providing an Opportunity to Comment on Regulations 

Pertaining to 39 U.S.C. § 601, July 2, 2021 (Order No. 5930).

64. Docket No. RM2020-4, Notice of Proposed Rulemaking for Regulations Pertaining to Section 601, 

November 24, 2021 (Order No. 6047).

65. Order No. 6047 at 17.

66. Id.

67. Id.

68. 39 C.F.R. § 3010.101(q).

69. 39 C.F.R. § 3010.101(f).

70. Id.

71. Id.

72. 39 U.S.C. § 3622(d)(1)(A), (d)(2)(A).

73. 39 U.S.C. § 3622(e)(2).
70 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

74. 39 U.S.C. §§ 3626, 3627, 3629.

75. Docket No. R2021-1, United States Postal Service Notice of Market-Dominant Price Change, October 

9, 2020.

76. Id. at 5. The Commission recalculated the percentage increases proposed by the Postal Service. 

See Docket No. R2021-1, Order on Price Adjustments for First-Class Mail, USPS Marketing Mail, 

Periodicals, Package Services, and Special Services Products and Related Mail Classification Changes, 

November 18, 2020, at 2 (Order No. 5757).

77. Order No. 5757 at 2, 115-16.

78. Id. at 2.

79. Id.

80. 39 C.F.R. § 3030.127(a).

81. See 39 U.S.C. § 3622(d)(1)(A).

82. 39 C.F.R. part 3030, subparts D and E. This additional rate adjustment authority is described above 

in the section “Rulemakings Amending Commission Regulations - Statutory Review of Market 

Dominant Rate System.”

83. 39 C.F.R. § 3030.127(b).

84. 39 C.F.R. § 3030.221. This requirement “does not apply to a non-compensatory product for which 

the Commission has determined that the Postal Service lacks independent authority to set rates 

(such as rates set by treaty obligation).” Id.

85. 39 C.F.R. § 3030.222(a).

86. 39 C.F.R. § 3030.282.

87. 39 C.F.R. § 3030.283-284; See Order No. 5937 at 5-6.

88. 39 C.F.R. § 3030.283. The proposed workshare discount that relates to a subclass of mail consisting 

exclusively of mail matter of educational, cultural, scientific, or informational value must also comply 

with 39 C.F.R. § 3030.285(c).

89. 39 C.F.R. § 3030.284. The relationship between workshare discounts and avoided costs is usually 

expressed as a percentage called a passthrough, which is generally calculated by dividing the 

discount by the cost avoided. Workshare discounts with passthroughs below 100 percent are 

considered below avoided cost workshare discounts. Order No. 5937 at 6 n.7.

90. 39 C.F.R. §§ 3030.284(d), 3030.286(a).

91. Docket No. R2021-2, United States Postal Service Notice of Market-Dominant Price Change, May 28, 

2021 (Docket No. R2021-2 Notice).

92. See Order No. 5763. These rules are described in the “Rulemakings Amending Commission 

Regulations - Statutory Review of Market Dominant Rate System” section above.

93. Order No. 5937 at 2, 129-30.

94. Id. at 2. The Commission also found that the proposed rate adjustments did not implicate the 

pricing requirements appearing in 39 U.S.C. §§ 3627 and 3629. Id.

95. Id. at 130.

96. Docket No RM2021-5, United States Postal Service Application for Waiver Under 39 CFR 3030.286, 

March 26, 2021 (Docket No. RM2021-5 Application). Grounds for waiver to set a workshare discount 

below avoided cost relate to the impediment of efficient postal operations and non-compensatory 

products. See 39 C.F.R. § 3030.286(c)(5), (7).

97. Docket No. RM2021-5 Application at 1.

98. Id. at 2.

99. Id.
ENDNOTES | 71

100. Id.

101. See Docket No. RM2021-5, Order Denying Postal Service Application for Waiver Under 39 C.F.R. § 

3030.286, April 21, 2021, at 5-6 (Order No. 5873).

102. Order No. 5873 at 10.

103. Id.; See 39 C.F.R. § 3035.286(c)(1).

104. Order No. 5873 at 11. Section 3030.286(c)(5) requires the Postal Service to describe the operational 

strategy at issue, provide any supporting quantitative or qualitative analysis, and explain how setting 

a compliant workshare discount would impede the operational strategy the Postal Service identifies. 

See Id. at 10.

105. Id. at 11.

106. Order No. 5937 at 79-80.

107. 39 C.F.R. § 3010.101(f).

108. 39 U.S.C. § 3632(b)(2); 39 C.F.R. § 3035.102-104. The Postal Service must also publish its decision to 

change rates or classes of general applicability in the Federal Register at least 30 days before the 

new rates or classes become effective. Id.

109. 39 U.S.C. § 3632(b)(3); 39 C.F.R. § 3035.105(a).

110. 39 C.F.R. §§ 3035.102-105. For proposed decreases in rates of general applicability and changes to 

rates or classes not of general applicability, the notice must also include: (1) sufficient revenue and 

cost data for the 12-month period following the effective date of the change demonstrating that 

each affective Competitive product will cover its attributable costs; and (2) a Postal Service certified 

statement attesting to the accuracy of the data submitted and explaining why, following the change, 

Competitive products in total will not be subsidized by Market Dominant products. 39 C.F.R. §§ 

3035.103(c), 105(c).

111. 39 U.S.C. § 3633(a)(1).

112. 39 U.S.C. §§ 3633(a)(2), 3631(b).

113. 39 U.S.C. § 3633(a)(3).

114. Docket No. CP2021-15, United States Postal Service Notice of Changes in Rates of General 

Applicability for Competitive International Products, October 9, 2020; Docket No. CP2021-28, USPS 

Notice of Changes in Rates of General Applicability for Competitive Products, November 16, 2020.

115. Docket No. CP2021-15, Order Approving Price Adjustments for Competitive International Products, 

November 24, 2020, at 5 (Order No. 5760); Docket No. CP2021-28, Order Approving Price 

Adjustments for Domestic Competitive Products, December 9, 2020, at 5-6 (Order No. 5773).

116. Order No. 5760 at 6; Order No. 5773 at 6.

117. Docket No. CP2021-127, USPS Notice of Time-Limited Changes in Rates of General Applicability for 

Competitive Products, August 10, 2021 (Docket No. CP2021-127 Notice).

118. Docket No. CP2021-127 Notice at 1.

119. Docket No. CP2021-127, Order Approving Price Adjustments for Domestic Competitive Products, 

August 31, 2021, at 5-6 (Order No. 5973).

120. Docket No. CP2021-81, USPS Notice of Changes in Class of General Applicability for a Competitive 

Product, March 26, 2021 (Docket No. CP2021-81 Notice).

121. Docket No. CP2021-81 Notice at 1-2.

122. See Id.

123. Docket No. CP2021-81, Order Approving Changes in Class of General Applicability for Competitive 

Products, April 14, 2021, at 4 (Order No. 5867).

124. Available at www.prc.gov; hover over “References” and click on the “Negotiated Service Agreements 

Statistics” link.

125. Universal Postal Union, Decisions of the 2019 Geneva Extraordinary Congress, Second 
72 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Additional Protocol to the Universal Postal Convention, Article 28bis.1 (Berne 2019); available 

at https://www.upu.int/UPU/media/upu/files/UPU/aboutUpu/acts/actsOfCurrentCycle/

actsActsOfTheExtraordinaryCongressGenevaEn.pdf.

126. Docket No. CP2021-94, Notice of the United States Postal Service of Rates Not of General 

Applicability for Inbound E-Format Letter Post, and Application for Non-Public Treatment, May 14, 

2021, at 3-5, Attachment 2 (Docket No. CP2021-94 Notice).

127. Docket No. CP2021-94 at 4.

128. Docket No. CP2021-94, Order Approving Prices for Inbound Letter Post Small Packets and Bulky 

Letters, May 28, 2021, at 4-5 (Order No. 5904).

129. Docket No. CP2021-94, Final Determination to Unseal Self-Declared Rates for Inbound Letter Post 

Small Packets and Bulky Letters, July 13, 2021 (Order No. 5935).

130. Postal Regulatory Commission, Annual Report to the President and Congress Fiscal Year 2017, 

January 26, 2018, at 36.

131. Universal Postal Union, Regulations to the Convention Final Protocol, Article 32-201, Berne 2017, 

available at https://www.upu.int/UPU/media/upu/files/UPU/aboutUpu/acts/nonPermanentActs/

actNonPermanentRegulationsConventionFinalProtocolEn.pdf.

132. Id. Article 32-202.

133. Docket No. CP2021-47, Notice of the USPS of Filing Changes in Rates Not of General Applicability for 

Inbound Parcel Post (at UPU Rates), and Application for Non-public Treatment, December 11, 2020, 

at 1.

134. Docket No. CP2021-47, Order Acknowledging Changes in Prices for Inbound Parcel Post (at UPU 

Rates), December 22, 2020 (Order No. 5787); See Docket No. CP2021-47, Notice of Errata to Order 

No. 5787, December 23, 2020 (Order No. 5789).

135. Docket No. CP2021-128, Notice of the United States Postal Service of Filing Changes in Rates Not of 

General Applicability for Inbound EMS 2, and Application for Non-Public Treatment, August 10, 2021, 

at 1.

136. Docket No. CP2021-128, Order Approving Changes in Prices Not of General Applicability for Inbound 

EMS 2, August 20, 2021, at 2 (Order No. 5966).

137. Order No. 5966 at 3.

138. 39 U.S.C. § 3634; 39 C.F.R. § 3060.40, et seq.

139. Docket No. T2021-1, Notice of the United States Postal Service of Submission of the Calculation of 

the FY 2020 Assumed Federal Income Tax on Competitive Products, January 14, 2021.

140. See Docket No. T2021-1, Order Approving the Calculation of the FY 2020 Assumed Federal Income 

Tax on Competitive Products, April 14, 2021, at 3, 6 (Order No. 5866).

141. Order No. 5866 at 2-3.

142. Id. at 4.

143. 39 U.S.C. § 3652(a)(1).

144. Id. § 3652(a)(2), (b), (c).

145. Id. § 3652(a).

146. These reports are on the Commission’s website, available at https://www.prc.gov/prc-reports.

147. 39 U.S.C. § 3653(a), (b).

148. See FY 2020 ACD.

149. Id. at 3-4.

150. Id. at 2-4.

151. Id. at 20-66.
ENDNOTES | 73

152. See, e.g., Id.

153. Id. at 5, 261.

154. Id. at 5.

155. Id. at 261.

156. Id.

157. Id.

158. Id. at 97.

159. Id. at 4.

160. Id. at 99-150.

161. Id. at 5.

162. Id. at 4.

163. Id. at 5.

164. Id.

165. Id. at 5.

166. Id. at 2.

167. Id.

168. Id. at 4.

169. Id. These products were one domestic NSA, GEPS 11, International Money Transfer Service—

Inbound, International Money Transfer Service—Outbound, and International Ancillary Services. Id.

170. Id.

171. Docket No. ACR2020, Financial Analysis of United States Postal Service Financial Results and 10-K 

Statement Fiscal Year 2020, Revised—November 4, 2021 (Revised FY 2020 Financial Analysis).

172. Coronavirus Aid, Relief, and Economic Security Act (CARES Act), March 27, 2020, Pub. L. 116-136.

173. Revised FY 2020 Financial Analysis at 3-5.

174. At the end of FY 2020, the Postal Service had $1 billion in available borrowing authority remaining 

from the PAEA-mandated debt ceiling of $15 billion. Id. at 39. This available borrowing authority 

plus the cash and cash equivalents of $14.4 billion covers approximately 66 days of FY 2020 cash 

expenses. United States Postal Service, 2020 Annual Report on Form 10-K at 45 (filed with the 

Commission on November 13, 2020).

175. Id. at 6-7.

176. 39 U.S.C. § 3653(d).

177. Id.

178. Docket No. ACR2020, Analysis of the Postal Service’s FY 2020 Annual Performance Report and FY 

2021 Performance Plan, June 2, 2021 (FY 2020 Analysis).

179. FY 2020 Analysis at 14-33.

180. Id. at 7. The Postal Service partially met the Excellent Customer Experiences, Safe Workplace and 

Engaged Workforce, and Financial Health performance goals, but did not meet the High-Quality 

Service goal. Id.

181. Id. at 34-128.

182. 39 U.S.C. § 3661(b).

183. 39 C.F.R. § 3020.112.

184. Docket No. N2021-1, Advisory Opinion on Service Changes Associated with First-Class Mail and 

Periodicals, July 20, 2021 (Docket No. N2021-1 Advisory Opinion).

185. Docket No. N2021-1 Advisory Opinion at 1.

186. Id. at 65.
74 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

187. Id. at 66.

188. Id.

189. Id.

190. Id. at 67.

191. Id.

192. Id.

193. Id. at 68.

194. Id.

195. Id.

196. Id. at 161-80.

197. Id.

198. Id. at 5.

199. Docket No. N2021-2, Advisory Opinion on the Service Standard Changes Associated with First-Class 

Package Service, September 29, 2021 (Docket No. N2021-2 Advisory Opinion).

200. Docket No. N2021-2, United States Postal Service Request for an Advisory Opinion on Changes in the 

Nature of Postal Services, June 17, 2021, at 1-5 (Docket No. N2021-2 Request).

201. See Docket No. N2021-2 Advisory Opinion at 52.

202. Id. at 52-53.

203. Id. at 3.

204. Id.

205. Id. at 3-4.

206. Id. at 4.

207. Id. at 4-5.

208. Id. at 5.

209. Id. at 6.

210. Id.

211. Id.

212. Id.

213. 39 U.S.C. § 3642(a). The Commission may also initiate a proceeding to change the product lists. Id.

214. 39 C.F.R. part 3040, subparts B, C, and D.

215. 39 U.S.C. § 3642(b)(1).

216. 39 U.S.C. § 3642(b)(2).

217. 39 U.S.C. § 3642(b)(3).

218. See 39 C.F.R. § 3040.132(c).

219. A BPM Parcels mailpiece may weigh up to 15 pounds and contain printed matter consisting of 

advertising, promotional, directory, or editorial material. Docket No. MC2021-78, United States 

Postal Service Request to Transfer Bound Printed Matter Parcels to the Competitive Product 

List, March 26, 2021, at 3-4 (Docket No. MC2021-78 Request). BPM is available only to business 

customers and is transported by ground shipping and delivery. Id. at 4.

220. See Docket No. MC2021-78 Request.

221. Id. at 1.

222. Id. at 2-14.

223. Id. at 6.

224. See Id. at 6-7.

225. Id. at 10-12.
ENDNOTES | 75

226. Id. at 16.

227. Id. at 14-16.

228. Id. at 17.

229. Docket Nos. MC2020-252 and CP2020-282, Request of the United States Postal Service to Add 

International Competitive Multi-Service Commercial Contracts 1 to the Competitive Products List 

and Application for Non-Public Treatment of Materials Filed Under Seal, September 18, 2020 (Docket 

Nos. MC2020-252 and CP2020-282 Request).

230. Docket Nos. MC2020-252 and CP2020-282 Request at 1.

231. Id. at 4-5, 13.

232. Id. at 8, 15.

233. Docket Nos. MC2020-252 and CP2020-282, Order Denying Request to Add Product to the 

Competitive Product List, November 13, 2020, at 2, 10 (Order No. 5753).

234. Order No. 5753 at 6.

235. Id. at 7.

236. Id. at 8-9.

237. Id. at 10.

238. 39 C.F.R. part 3040, subpart E. The Postal Service may propose material changes or minor 

corrections to the MCS depending on “the degree to which the proposed alteration affects the 

characteristics of the product.” Docket No. RM2015-6, Notice of Proposed Rulemaking on Changes 

and Corrections to the Mail Classification Schedule, November 14, 2014, at 9, 14 (Order No. 2250).

239. Docket No. MC2021-91, Order Approving Classification Changes to Outbound Single-Piece First-Class 

Package International Service, June 10, 2021 (Order No. 5912).

240. 39 C.F.R. § 3040.211; See 39 U.S.C. § 3682.

241. 39 C.F.R. part 3040 subpart F.

242. Docket No. MC2021-25, Order Approving Minor Corrections to the Mail Classification Schedule, 

November 25, 2020 (Order No. 5761); Docket No. MC2021-104, Order Approving Update to the 

Maximum Size Limit for Presorted First-Class Mail Postcards, July 28, 2021 (Order No. 5946).

243. Order No. 4257 at 250.

244. Docket No. PI2015-1, Order Approving Use of Internal Measurement Systems, July 5, 2018 (Order 

No. 4697); See Docket No. PI2015-1, Errata to Order No. 4697, August 21, 2018 (Order No. 4771).

245. 39 C.F.R. § 3055.5.

246. Docket No. PI2021-3, United States Postal Service Notice of Filing Changes to Service Performance 

Measurement Plan Document, August 31, 2021 (Docket No. PI2021-3 Notice).

247. Docket No. PI2021-3 Notice at 1.

248. Id. at 1-2; See Docket No. PI2019-1, Order Granting Request and Approving Use of Internal Service 

Performance Measurement System, July 1, 2020 (Order No. 5576).

249. Docket No. PI2021-3, Order Approving Modifications to Market Dominant Service Performance 

Measurement Systems and Closing Docket, September 28, 2021, at 1, 6, 9 (Order No. 5989). Docket 

No. N2021-1 is described in the “Nature of Service Cases” section above.

250. Order No. 5989 at 8.

251. Docket No. PI2020-1, Notice and Order Providing an Ogpportunity to Comment, October 1, 2019, at 

1 (Order No. 5260).

252. See “Chapter IV - Value of the Postal Monopoly” below; FY 2020 Annual Report at 53-55.

253. Order No. 5260 at 2-3. The letter monopoly is codified in the Private Express Statutes. See 18 U.S.C. 

§§ 1693-1699 and 39 U.S.C. §§ 601-606.
76 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

254. 18 U.S.C. § 1725.

255. See Order No. 5260.

256. Id. at 1; See “Chapter IV - Value of the Postal Monopoly” below; FY 2020 Annual Report at 53-55.

257. Order No. 5260 at 1-2.

258. Docket No. PI2020-1, Notice of Filing Library Reference PRC-LR-PI2020-1-NP1 and Order Setting 

Comment Deadline, February 10, 2021 (Order No. 5832); See Docket No. PI2020-1, Notice of Errata, 

March 1, 2021.

259. Order No. 5832 at 1.

260. Id. at 7.

261. Docket No. PI2021-1, Notice and Order Providing an Opportunity to Comment with Respect to 

Universal Service Obligation Valuation Methodology, December 10, 2020 (Order No. 5777).

262. See Postal Regulatory Commission, Report on Universal Postal Service and Postal Monopoly, 

December 19, 2008 (USO Report).

263. 39 U.S.C § 101(a); See USO Report at 18.

264. Order No. 5777 at 2; See “Chapter IV – Universal Service Obligation and Postal Monopoly” section 

below; 39 U.S.C. § 3651(b)(1).

265. Order No. 5777 at 3.

266. Id.

267. Id. at 1, 3, 8-9.

268. Id. at 3-8.

269. Docket No. PI2021-1, Motion of the United States Postal Service to Disclose Methodological 

Information and to Adjust Procedural Schedule, January 12, 2021, at 1-2. The Public Representative 

filed a response supporting the Postal Service’s motion. Docket No. PI2021-1, Public Representative 

Response to Motion to Disclose Methodological Information and Adjust Procedural Schedule, 

January 14, 2021.

270. Docket No. PI2021-1, Order Granting Motion to Disclose Methodological Information and to Adjust 

Procedural Schedule, January 21, 2021, at 2 (Order No. 5821).

271. Order No. 5930 at 1. The letter monopoly and 39 U.S.C. § 601 are described in the “Rulemakings 

Amending Commission Regulations” section above.

272. See Order No. 5422.

273. Order No. 5930 at 6. Section 601(a) provides for the private carriage of letters when, among other 

things, the letter is in an envelope that is properly addressed, the proper amount of postage is 

affixed to the envelope, and the postage is canceled in ink by the sender. 39 U.S.C. § 601(a). Section 

601(b)(1) and (b)(2) further provide that a letter must meet price and weight requirements in order 

to be carried out of the mail. 39 U.S.C. § 601(b)(1), (b)(2).

274. Order No. 5930 at 6.

275. Id.

276. Id.

277. Id. at 6-7.

278. Id. at 7; See 39 U.S.C. § 601(b)(3).

279. Order No. 5930 at 7.

280. Docket No. PI2021-2, Order Closing Docket, November 24, 2021 (Order No. 6046).

281. Order No. 6046 at 2.

282. Id.

283. 39 C.F.R. § 3050.1(c).
ENDNOTES | 77

284. 39 C.F.R. §§ 3050.1(a), 3050.10.

285. “Costs attributable” mean the direct and indirect postal costs that can be clearly associated with 

a particular mail product through reliably identified causal relationships. 39 U.S.C. § 3631(b). 

Cost attribution involves dividing and distributing the Postal Service’s costs among the products 

associated with those costs.

286. United States Postal Service, Office of Inspector General, Report No. RARC-WP-12-008, A Primer 

on Postal Costing Issues, March 20, 2012, at i, 1. For example, the Commission reviews proposed 

rate adjustments for Competitive products to ensure, among other things, that revenue for each 

Competitive product covers its attributable costs. See “Rate Adjustments – Competitive Products” 

section above.

287. 39 U.S.C. § 3652(e)(2); 39 C.F.R. § 3050.11(a). The Commission, acting on its own behalf, may also 

initiate a proceeding to change an accepted analytical principle. 39 C.F.R. § 3050.11(a).

288. Id.

289. “Postmaster,” Publication 32 – Glossary of Postal Terms, available at https://about.usps.com/

publications/pub32/pub32_terms.htm.

290. Docket No. RM2020-2, Petition of the United States Postal Service for the Initiation of a Proceeding 

to Consider Proposed Changes in Analytical Principles (Proposal Ten), November 29, 2019, at 1 

(Docket No RM2020-2 Petition).

291. Docket No RM2020-2 Petition, Proposal Ten at 1.

292. See Id. at 2.

293. Variabilities are percentages that measure the amount by which costs vary with volume. United 

States Postal Service, Office of Inspector General, Report No. RARC-WP-19-002, What’s Driving 

Postal Transportation Costs?, March 18, 2019, at 22.

294. Docket No. RM2020-2 Petition, Proposal Ten at 1. The Postal Service submitted the new study in a 

filing accompanying Proposal Ten. See Docket No. RM2020-2, Michael D. Bradley, Investigating the 

Variability of Postmaster Costs, November 29, 2019.

295. Docket No.RM2020-2, Order on Analytical Principles Used in Periodic Reporting (Proposal Ten), July 

8, 2021, at 2, 49 (Order No. 5932).

296. Order No. 5932 at 46.

297. Id. at 45-46. First, the 10 percent WSC growth rate is excessive because it is inconsistent with 

general econometric practice and the Postal Service’s current method for calculating variabilities. 

Id. at 45. Also, the Postal Service lacks sufficient historical data to calculate a realistic WSC growth 

rate. Id. Second, the Postal Service failed to demonstrate the robustness of the variability used 

with respect to the assumed change in WSCs. Id. at 45-46. Third, the Postal Service did not use 

clear criteria in its sensitivity analysis that can be relied upon to choose the scaling factor used to 

implement changes in WSCs. Id. at 46. Finally, the unidirectional nature of the proposed variability 

is problematic because it does not consider the possibility that a Post Office may be downgraded 

from its current pay grade to the immediately lower pay grade. Id.

298. Id. at 47-49.

299. Docket No. RM2020-9, Petition of United Parcel Service, Inc. for the Initiation of Proceedings to 

Make Changes to Postal Service Costing Methodologies, May 29, 2020 (Docket No. RM2020-9 

Petition). UPS Proposal One is filed with the Petition.

300. Docket No. RM2020-9 Petition, UPS Proposal One at 3.

301. Incremental costs are “costs that result from providing a specific product, and can be traced to that 

specific product.” Docket No. RM2016-2, Order Concerning United Parcel Service, Inc.'s Proposed 
78 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

Changes to Postal Service Costing Methodologies (UPS Proposals One, Two, and Three), September 

9, 2016, Appendix A at 8 (Order No. 3506); See Docket No. RM2016-2, Notice of Errata, October 

19, 2016. The Commission implemented the incremental cost test to ensure that Market Dominant 

products do not cross-subsidize Competitive products. Order No. 3506 at 10.

302. Docket No. RM2020-9 Petition, UPS Proposal One at 39-41.

303. Docket No. RM2020-9, Notice and Order Establishing Comment Deadline, October 27, 2020 (Order 

No. 5738).

304. Docket No. RM2020-9, Order Rejecting United Parcel Service, Inc.’s Proposed Changes to Postal 

Service Costing Methodologies (UPS Proposal One), November 29, 2021, at 2 (Order No. 6048).

305. Order No. 6048 at 2, 12-13.

306. Id. at 13-16.

307. Id. at 16-21.

308. Id. at 2; See Docket No. RM2022-1, Notice and Order of Proposed Rulemaking on Periodic 

Reporting, October 8, 2021 (Order No. 6004).

309. Order No. 6048 at 2.

310. Docket No. RM2020-13, Petition of the United States Postal Service for the Initiation of a Proceeding 

to Consider Proposed Changes in Analytical Principles (Proposal Six), September 15, 2020, at 1 

(Docket No. RM2020-13 Petition). The Petition was accompanied by a study supporting Proposal Six. 

See Docket No. RM2020-13, A. Thomas Bozzo & Tim Huegerich, Christensen Associates, Analysis of 

Labor Variability for Automated Letter and Flat Sorting, September 15, 2020 (Variability Report).

311. These cost pools are the Delivery Barcode Sorter (DBCS), Automated Flats Sorting Machine (AFSM) 

100, and Flats Sequencing System (FSS). Docket No. RM2020-13 Petition, Proposal Six at 1. The DBCS 

processes letter- and card-shaped mail, while the AFSM 100 and FSS primarily process flat-shaped 

mail. Id. at 1 n.1.

312. Id. at 1-2.

313. Id. at 1.

314. See Variability Report at 4.

315. Docket No. RM2020-13 Petition, Proposal Six at 2.

316. Id. at 3.

317. Id. at 4.

318. Id. at 1.

319. Id. at 5. MODS is a web-enabled application that allows the Postal Service to systematically gather, 

store, and report data on workload, workhours, and machine utilization by operation number and 

facility type. United States Postal Service, Office of Inspector General, Report No. CP-AR-19-001, 

Management Operating Data System Errors and Adjustments, April 3, 2019, at 4.

320. Docket No. RM2020-13, Petition, Proposal Six at 6.

321. Id. at 1-2.

322. Docket No. RM2021-1, Petition of the United States Postal Service for the Initiation of a Proceeding 

to Consider Proposed Changes in Analytical Principles (Proposal Seven), November 9, 2020, at 1 

(Docket No. RM2021-1 Petition).

323. Docket No. RM2021-1 Petition, Proposal Seven at 1.

324. Id.

325. Id.

326. Id.; See Docket No. RM2016-12, Order on Analytical Principles Used in Periodic Reporting (Proposal 

Four), June 22, 2017, at 40 (Order No. 3973).
ENDNOTES | 79

327. Docket No. RM2021-1, Order on Analytical Principles Used in Periodic Reporting (Proposal Seven), 

October 6, 2021, at 2, 15 (Order No. 5999).

328. Order No. 5999 at 2.

329. Id.

330. Docket No. RM2021-7, Petition of the United States Postal Service for the Initiation of a Proceeding 

to Consider Proposed Changes in Analytical Principles (Proposal Four), July 22, 2021 (Docket No. 

RM2021-7 Petition).

331. Docket No. RM2021-7 Petition, Proposal Four at 2. Proposal Four would “replace manual sampling 

with scan data from Product Tracking and Reporting (PTR) combined with the clock rings from 

the Time and Attendance Collection System (TACS).” Id. The PTR system receives and stores all 

tracking scan data from acceptance to delivery. United States Postal Service, Office of Inspector 

General, Report No. 21-036-R21, City Carrier Cost System, July 14, 2021, at 9 n.21. The Postal Service 

uses TACS to track the number of work hours employees spend working in various Postal Service 

operations, such as mail collection, transportation, and delivery. United States Postal Service, Office 

of Inspector General, Report No. 20-180-R21, Timecard Administration, December 9, 2020, at 4. 

Employees must clock in and out during their scheduled work time by swiping their identification 

card. Id. Each swipe updates the employee’s timecard record in TACS and is commonly referred to 

as a “clock ring.” Id.

332. United States Postal Service, Office of Inspector General, Report No. CP-AR-18-002, Delivery Charge 

Codes, January 19, 2018, at 4.

333. Docket No. RM2021-7, Order on Analytical Principles Used in Periodic Reporting (Proposal Four), 

September 30, 2021, at 12 (Order No. 5991). The Commission’s approval was conditioned on the 

Postal Service filing sufficient documentation that it had inadvertently excluded from Proposal Four. 

Order No. 5991 at 16.

334. Id. at 12-13. “Distribution keys are percentages used to assign volume variable costs to products.” 

United States Postal Service, Office of Inspector General, Report No. 20-313-R21, Contract Delivery 

Service Cost Attribution, June 21, 2021, at 9 n.31. “A cost pool represents the cumulative costs 

incurred from related activities performed within [the Postal Service].” Id. at 10 n.37.

335. Order No. 5991 at 13.

336. Id.

337. Id. at 15.

338. Id.

339. Id. at 15-16.

340. Docket No. RM2021-6, Order on Analytical Principles Used in Periodic Reporting (Proposal Three), 

November 4, 2021, at 1. (Order No. 6032).

341. Docket No. RM2021-3, Petition of the United States Postal Service for the Initiation of a Proceeding 

to Consider Proposed Changes in Analytical Principles (Proposal One), March 11, 2021.

342. Docket No. RM2021-4, Petition of the United States Postal Service for the Initiation of a Proceeding 

to Consider Proposed Changes in Analytical Principles (Proposal Two), March 24, 2021.

343. Docket No. RM2021-8, Order on Analytical Principles Used in Periodic Reporting (Proposal Five), 

November 5, 2021 (Order No. 6033).

344. Docket No. RM2021-9, Order on Analytical Principles Used in Periodic Reporting (Proposal Six), 

December 1, 2021 (Order No. 6050); See Order No. 5937 at 82. Order No. 5937 was discussed in the 

“Rate Adjustments – Market Dominant Products” section above.

345. See Order No. 6004.
80 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

346. Id. at 1; See 39 U.S.C. § 3652(e)(2).

347. Order No. 6004 at 9.

348. See Order No. 6048 at 2

349. Order No. 6004 at 9.

350. Id. at 9-10.

351. Id. at 10.

352. 39 U.S.C. § 3662(a).

353. 39 U.S.C. § 3662(b); 39 C.F.R. § 3022.30(a).

354. See United States Postal Service, Delivering for America: Our Vision and Ten-Year Plan to Achieve 

Financial Sustainability and Service Excellence, March 23, 2021, available at https://about.usps.

com/what/strategic-plans/delivering-for-america/assets/USPS_Delivering-For-America.pdf (10-Year 

Strategic Plan).

355. Docket No. C2022-1, Complaint Regarding United States Postal Service Violation of 39 U.S.C. 

§ 3661(b), October 7, 2021 (Docket No. C2022-1 Complaint). On October 22, 2021, the States 

filed a motion to amend the complaint to add the state of Vermont as a complainant, which the 

Commission granted. Docket No. C2022-1, Motion of the States to Amend the Complaint to Add 

State of Vermont as a Complainant, October 22, 2021; Docket No. C2022-1, Order Granting Motion 

to Extend Response Deadline, October 29, 2021, at 2 n.2 (Order No. 6025).

356. 39 U.S.C. § 3661(b). The Commission’s rules require the Postal Service to file its request “not less 

than 90 days before the proposed effective date of the change in the nature of postal services 

involved.” 39 C.F.R. § 3020.112.

357. Docket No. C2022-1 Complaint at 26-32.

358. Id. at 33-36.

359. Id. at 36 ¶ 124.

360. Docket No. C2022-1, United States Postal Service’s Motion to Dismiss, October 27, 2021, at 1 (Docket 

No. C2022-1 Motion to Dismiss).

361. Docket No. C2022-1 Motion to Dismiss at 1.

362. Id. at 1-2.

363. Id. at 5-18.

364. Docket No. C2022-1, Complainants’ Opposition to the United States Postal Service’s Motion to 

Dismiss, November 10, 2021 (Docket No. C2022-1 Opposition).

365. Docket No. C2022-1 Opposition at 6.

366. Id. at 1, 21-28.

367. Docket No. C2022-1, Order Granting Motion to Dismiss Complaint, December 17, 2021 (Order No. 

6067).

368. Order No. 6067 at 16.

369. Id. at 17, 21.

370. Id. at 24.

371. Id. at 23.

372. Id. at 24-29.

373. Id. at 30.

374. Docket No. C2021-2, Complaint of Christopher S. Searcy vs Danville, KY Post Office, August 5, 2021.

375. 39 C.F.R. § 3022.13.

376. Docket No. C2021-2, Order Referring Complaint, August 9, 2021 (Order No. 5954).

377. Order No. 5954 at 2.
ENDNOTES | 81

378. Docket No. C2021-2, Report of the United States Postal Service in Response to Order No. 5954, 

October 5, 2021, at 2; See Docket No. C2021-2, Motion of the United States Postal Service for Late 

Acceptance of its Rule 3023.11(a) Report, October 5, 2021.

379. Docket No. C2021-2, Order Dismissing Complaint, October 27, 2021 (Order No. 6021).

380. Order No. 6021 at 2.

381. Id.

382. Docket No. C2021-1, Complaint Regarding the United States Postal Service's Erroneous Classification 

of Complainant as a Transient Development, April 23, 2021, at 2, ¶ 6-7 (Docket No. C2021-1 

Complaint). Section 403(c) states “the Postal Service shall not, except as specifically authorized in 

this title, make any undue or unreasonable discrimination among users of the mails, nor shall it grant 

any undue or unreasonable preferences to any such user.” 39 U.S.C. § 403(c).

383. Docket No. C2021-1 Complaint at 2, ¶¶ 2-10.

384. Id. ¶¶ 7-11.

385. Id. ¶¶ 2-11.

386. Docket No. C2021-1, United States Postal Service’s Motion to Dismiss, May 12, 2021.

387. Docket No. C2021-1, Complainant’s Notice of Voluntary Dismissal of Complaint with Prejudice, June 

17, 2021.

388. Docket No. C2021-1, Order Closing Docket, June 17, 2021, at 2 (Order No. 5919).

389. 39 U.S.C. § 3641(a)(2).

390. Id. § 3641(c)(1); 39 C.F.R. §§ 3045.2, 3045.3.

391. Docket No. MT2020-1, Order Authorizing Commercial PO Box Redirect Service, June 3, 2020 (Order 

No. 5528).

392. Docket No. MT2020-2, Order Authorizing Extended Mail Forwarding Market Test, July 20, 2020, at 1 

(Order No. 5591).

393. Docket No. MT2019-1, Order Authorizing Plus One Market Test, September 20, 2019 (Order No. 

5239).

394. 39 U.S.C. § 3641(d).

395. Docket No. MT2019-1, Order Authorizing Extension of Plus One Market Test, June 4, 2021 (Order No. 

5909).

396. Docket No. MT2019-1, United States Postal Service Notice of Request to Convert Plus One to 

Permanent Offering, November 10, 2021.

397. 39 U.S.C. § 404(d)(5).

398. Docket No. A2021-1, In the Matter of Spanish Fort, Alabama 36527 / Appeal of Postal Service 

Determination to Close Spanish Fort Post Office, December 28, 2020; Docket No. A2021-2, In the 

Matter of Neskowin, Oregon 97149 / Appeal of David Benneth to Close Neskowin Post Office, May 

26, 2021.

399. Docket No. A2021-1, United States Postal Service Motion to Dismiss Proceedings, January 7, 2021; 

Docket No. A2021-2, United States Postal Service Motion to Dismiss Proceedings, June 7, 2021.

400. Docket No. A2021-1, Order Granting Motion to Dismiss, February 10, 2021 (Order No. 5831); Docket 

No. A2021-2, Order Granting Motion to Dismiss, June 23, 2021 (Order No. 5925).

401. Order No. 5831 at 5-6; Order No. 5925 at 3-4.

402. Order No. 5831 at 14; Order No. 5925 at 8.

403. 39 U.S.C. § 3663.

404. Nat’l Postal Policy Council v. Postal Reg. Comm’n, No. 17-1276, 2021 WL 5263954 (D.C. Cir. Nov. 12, 

2021); Petition for Review, Nat’l Postal Policy Council v. Postal Reg. Comm’n, No. 17-1276 (D.C. Cir. 
82 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

filed Dec. 29, 2017); Petition for Review, Nat’l Postal Policy Council and Major Mailers Ass’n v. Postal 

Reg. Comm’n, No. 20-1505 (D.C. Cir. filed Dec. 18, 2020); Petition for Review, Alliance of Nonprofit 

Mailers et al. v Postal Reg. Comm’n, No. 20-1510 (D.C. Cir. filed Dec. 18, 2020); Petition for Review, 

U.S. Postal Service v. Postal Reg. Comm’n, No. 20-1521 (D.C. Cir. filed Dec. 29, 2020).

405. Nat’l Postal Policy Council v. Postal Reg. Comm’n, No. 17-1276.

406. Id. at 1.

407. Id. at 5.

408. Id. at 6-7.

409. Id. at 8.

410. Id. at 8-9.

411. Id. at 10-11.

412. Id. at 11.

413. Id. at 10.

414. Id. at 11.

415. See Order No. 5831.

416. City of Spanish Fort, Alabama v. Postal Reg. Comm’n, No. 21-1089 (D.C. Cir. filed June 17, 2021).

417. 39 U.S.C. § 407(b)(1).

418. 39 U.S.C. § 407(c)(1).

419. 39 U.S.C. § 407(c)(2).

420. Docket No. IM2020-1, Notice of Filing Correspondence, March 9, 2020; Letter from Nerissa J. Cook, 

Deputy Assistant Secretary, United States Department of State, Bureau of International Organization 

Affairs, to Robert G. Taub, Chairman, Postal Regulatory Commission, March 6, 2020.

421. Docket IM2020-1, Notice and Order Establishing Section 407 Proceeding, March 9, 2020, at 2 (Order 

No. 5450).

422. Docket IM2020-1, Notice of Posting of Proposals, March 26, 2020; Docket IM2020-1, Notice of 

Posting of Document, March 30, 2020; Docket IM2020-1, Notice of Posting of Proposal, April 17, 

2020.

423. Docket IM2020-1, Notice of Filing Correspondence, April 21, 2020.

424. Docket IM2020-1, Order Establishing Comment Deadline, March 31, 2021 (Order No. 5858).

425. Docket IM2021-1, Notice of Posting of Views, July 9, 2021.

426. Postal Regulatory Commission, (draft) Mail Classification Schedule, effective on October 3, 2021, 

available at https://www.prc.gov/mail-classification-schedule, Section 1130. The Inbound Letter 

Post product refers to international mail that is not classified as Parcel Post, Express Mail Service, 

or Global Express Guaranteed. It consists of inbound international pieces (originating outside of the 

United States and destined for delivery inside of the United States) that contain only documents, 

and encompass letters (to include aerogrammes and postcards) and large letters.

427. Postal Regulatory Commission, Report on Universal Postal Service and the Postal Monopoly, 

December 19, 2008, at 18 (USO Report).

428. USO Report at 10 n.1; See “Chapter IV - Value of the Postal Monopoly” section below.

429. In Docket No. PI2020-1, the Commission is evaluating comments and suggestions for modifications 

and enhancements to the current estimation methodology to account specifically for recent Postal 

Service data changes and for any other aspects of the letter and mailbox monopolies (postal 

monopoly) estimation methodology. See Order No. 5260. This proceeding is described below in the 

“Value of the Postal Monopoly” section and in Chapter III in the “Public Inquiries – Value of Postal 

and Mailbox Monopolies” section above.
ENDNOTES | 83

430. 39 U.S.C. § 3651(b)(1).

431. At the time the FY 2021 Annual Report was prepared, the most currently available complete data 

were from FY 2020.

432. See 39 U.S.C. § 3651(b)(2).

433. See Order No. 5777. This docket, which is currently pending before the Commission, is described in 

Chapter III in the “Public Inquiries – Universal Service Obligation Valuation Methodology” section 

above.

434. 39 U.S.C. § 3651(b)(1)(A). 39 U.S.C. § 101(b) requires the Postal Service to “provide a maximum 

degree of effective and regular postal services to rural areas, communities, and small towns where 

post offices are not self-sustaining.” Id. § 101(b).

435. 39 U.S.C. § 403(b)(3).

436. Docket No. RM2015-19, Order Approving Analytical Principles Used in Periodic Reporting (Proposal 

Ten), November 24, 2015, at 1 n.2 (Order No. 2837).

437. See USO Report, Appendix F, section 3 (Robert H. Cohen and Charles McBride, “Estimates of the 

Current Costs of the USO in the U.S.” at 26).

438. The Rural Mail Count classifies all remunerable activities of rural carriers as either Post Office or 

street activities. However, some Post Office activities can occur on the street. For example, parcel 

acceptance on the street is considered a Post Office activity because it can substitute for a customer 

sending a parcel at a Post Office window.

439. See Postal Regulatory Commission, Annual Report to the President and Congress Fiscal Year 2016, 

January 12, 2017, at 42.

440. Piggyback costs augment labor cost estimates by adding the costs associated with supervisors and 

administration, service-wide benefits, along with facility-related and equipment-related costs. See

Docket No. PI2021-1, Responses of the United States Postal Service to Questions 1-3 of Chairman’s 

Information Request No. 1, September 24, 2021, question 3.b. (Docket No. PI2021-1, Response to 

CHIR No. 1).

441. The Postal Service states that “[t]he ratio of retail transactions per retail revenue dollar declined 68 

percent from 0.552 to 0.176 between FY 2007 and FY 2020.” See Docket No. PI2021-1, Response to 

CHIR No. 1, question 2.b.iii.

442. USO Report at 139.

443. United States Postal Service, 2019 Annual Report on Form 10-K, November 14, 2019, at 17; Docket 

No. ACR2019, Financial Analysis of United States Postal Service Financial Results and 10-K Statement 

Fiscal Year 2019, May 7, 2020, at 80.

444. The Commission found it equitable to offer one PO Box at no charge to any customer the Postal 

Service determined ineligible for carrier delivery. Docket No. MC96-3, Opinion and Recommended 

Decision, April 2, 1997, at 62.

445. See USO Report at 196.

446. Docket No. RM2011-9, Petition of the United States Postal Service Requesting Initiation of a 

Proceeding to Consider a Proposed Change in Analytical Principles (Proposal One), April 6, 2011, at 

1.

447. Docket No. RM2011-9, Order Concerning Analytical Principles Used in Periodic Reporting (Proposal 

One), June 9, 2011, at 4 (Order No. 744).

448. See Docket No. RM2020-1, Order on Analytical Principles Used in Periodic Reporting (Proposal 

Nine), August 17, 2020 (Order No. 5637), Appendix B, at 4; Docket No. RM2020-1, Responses of the 

United States Postal Service to Questions 1-16 of Chairman’s Information Request No. 3, June 10, 
84 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

2020, questions 7.c.-7.d., 9.b.; Docket No. ACR2020, Library Reference USPS-FY20-8, December 29, 

2020, PDF file “USPS-FY20-8.Preface.pdf,” at 1.

449. 39 U.S.C. § 3651(b)(1)(B). The Postal Service provides free postage for blind and disabled persons 

and for overseas voting. Id. §§ 3403-3406. The Postal Service receives appropriated funds 

reimbursing it for providing free postage. Id. § 2401(c). For this reason, the cost of providing free 

postage is not included in the USO Cost.

450. FY 2018 ACD at 39.

451. In this Annual Report, attributable cost means incremental cost. See Order No. 3506 at 125. The 

attributable cost for years before FY 2016 reflects the accepted methodology for those years and 

has not been recalculated. 39 U.S.C. § 3622(c)(2) defines attributable cost as the “direct and indirect 

postal costs attributable to each class or type of mail service through reliably identified causal 

relationships plus that portion of all other costs of the Postal Service reasonably assignable to 

such class or type[.]” In Order No. 3506, the Commission revised the methodology for determining 

attributable cost to include inframarginal costs, developed as part of the estimation of incremental 

costs. Before that order, attributable cost only included the sum of volume-variable costs, which 

rise as volume increases and fall as volume decreases, and product-specific fixed costs, which are 

costs caused by a specific product but do not vary with volume. See Docket No. ACR2016, Financial 

Analysis of United States Postal Service Financial Results and 10-K Statement Fiscal Year 2016, March 

31, 2017, at 37.

452. Periodicals is a preferred class of mail and receives several statutory discounts such as a 5 percent 

discount for nonprofit and classroom publications. These losses were initially called “Losses on 

Market Dominant Products” in past Annual Reports. The Commission later clarified that the USO 

Cost only includes Periodicals Losses. Postal Regulatory Commission, Annual Report to the President 

and Congress Fiscal Year 2012, January 3, 2013, at 37 n.3. Losses on other unprofitable Market 

Dominant products are not included because those products are in classes that were profitable 

overall. USO Report at 134. In FY 2020, the losses from Media Mail/Library Mail and BPM Parcels 

exceeded the contribution of the other profitable products in Package Services, making the class 

unprofitable as a whole with a net contribution of negative $67.1 million. FY 2020 Financial Analysis, 

Appendix A. The methodology for estimating the cost of uniform rates for Media Mail/Library Mail 

captures this loss as part of the cost of that element of the USO. To avoid double counting, the loss 

is not listed separately here.

453. FY 2020 ACD at 21-22. The Periodicals class is comprised of two products: In-County and Outside 

County. In-County is typically used by newspapers with smaller weekly circulations for distribution 

within the county of publication. Outside County consists of publications with a wide variety of 

circulation sizes, distribution patterns, and frequency. Revised FY 2020 Financial Analysis at 67. 

Both In-County and Outside County Periodicals average unit attributable costs increased and were 

particularly large in FY 2020. Id. at 69.

454. See Order No. 5763. The final rules are described in Chapter III in the “Rulemakings Amending 

Commission Regulations – Statutory Review of Market Dominant Rate System” section above.

455. Order No. 5763 at 159-60, 190-91. Order No. 5763 revised 39 C.F.R. part 3030 to create a new 

subpart for Non-compensatory Classes or Products. Id. at 370; Id. Attachment at 38-39.

456. FY 2020 ACD at 2.

457. 39 U.S.C. § 3651(b)(1)(C).

458. The Postal Service provided updated Rural Mail Count data for FYs 2020 and 2019. See Docket 

No. PI2020-1, Response to CHIR No. 6, question 1; Docket No. PI2020-1, Library Reference USPS-
ENDNOTES | 85

PI2020-1/NP5, folder "ChIR6.Q1;" Docket No. PI2020-1, Library Reference USPS-PI2020-1/NP3, folder 

“Q1.” Uniform First-Class Mail Rates costs for FY 2020 and FY 2019 methodologies use elasticities 

based on data that include the respective fiscal year and do not use the forecasting model volumes.

459. See, e.g., Consolidated Appropriations Act, 2021, Pub. L. 116-260, 134 Stat. 1182, 1423 (2020) (“6-

day delivery and rural delivery of mail shall continue at not less than the 1983 level[.]”).

460. The methodology for calculating the current cost of Six-Day Delivery differs from the methodology 

applied in the USO Report in 2008 because it reflects refined and more comprehensive costs 

based on the Commission’s findings in its Advisory Opinion on Elimination of Saturday Delivery. 

See Docket No. N2010-1 Advisory Opinion; Postal Regulatory Commission, Annual Report to the 

President and Congress Fiscal Year 2011, December 21, 2011, at 41.

461. 39 U.S.C. § 404(c).

462. 39 U.S.C. § 3683.

463. The increase in the unit contribution of Media Mail/Library Mail in FY 2020 is due primarily to 

the decrease (9.1 percent) in the unit attributable cost for Media Mail/Library Mail in FY 2020. 

See Revised FY 2020 Financial Analysis at 71-72; Appendix A. The FY 2020 decrease in the unit 

contribution of BPM was due to an increase in the unit attributable cost which was not fully offset 

by the slight increase in the unit revenue. Id.

464. See FY 2019 Annual Report at 49.

465. See United States Postal Inspection Service, available at https://www.uspis.gov/about/what-we-do/.

466. See United States Postal Inspection Service, available at https://www.uspis.gov/leadership.

467. See United States Postal Inspection Service, available at https://www.uspis.gov/about/what-we-do/.

468. See Docket No. ACR2020, Library Reference USPS-FY20-32, December 29, 2020, PDF file “USPSFY20-32 Preface.pdf,” at 3.

469. 18 U.S.C. § 1725.

470. The letter monopoly is codified in the Private Express Statutes. See 18 U.S.C. §§ 1693-1699 ; 39 

U.S.C. §§ 601-606.

471. Contestable mail is certain mail that is dropshipped to the processing facility or delivery unit closest 

to its destination.

472. See Order No. 5260. This proceeding is described in Chapter III in the “Public Inquiries – Value of 

Postal and Mailbox Monopolies” section above.

473. See Docket No. PI2020-1, Comments of the Association for Postal Commerce, November 1, 2019; 

Docket No. PI2020-1, Comments of the Greeting Card Association, November 1, 2019; Docket No. 

PI2020-1, Comments of the National Postal Policy Council, November 1, 2019; Docket No. PI2020-1, 

Comments of the Public Representative, November 1, 2019; Docket No. PI2020-1, Initial Comments 

of United Parcel Service, Inc. on Notice and Order Providing an Opportunity to Comment, November 

1, 2019; Docket No. PI2020-1, Initial Comments of the United States Postal Service, November 

1, 2019; Docket No. PI2020-1, Comments of the Public Representative, March 26, 2021; Docket 

No. PI2020-1, Second Comments of United Parcel Service, Inc., with Respect to Postal Monopoly 

Valuation Methodology, March 26, 2021; Docket No. PI2020-1, Second Comments of the United 

States Postal Service, March 26, 2021.

474. See USO Report at 143-52.

475. The Commission would need route-level, geographic-specific data to account for clustering. Further 

improvements could be made by assuming the competitor would design routes to more efficiently 

deliver the contestable mail. However, this would require information about volume delivered to 

each stop that is not currently available.
86 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

476. Although the model assumes a 10 percent discount would be necessary to entice customers to 

switch, brand loyalty, inertia, the need to prove quality, and other factors affect the pace at which 

customers would switch from the Postal Service to a competitor. The base case model assumes a 

competitor would capture 100 percent of the contestable mail on routes that are skimmed. See

USO Report at 149. However, some customers may not switch to a competitor even if a discount 

was offered.

477. The base case model entrant delivery frequency differs for the postal and mailbox monopoly 

estimates calculation, i.e., assumed entrant delivery frequency for the postal monopoly estimate is 3 

days a week and 1 day a week for the mailbox monopoly estimate.

478. Subtracting the value of the mailbox monopoly from the value of the postal monopoly does not 

yield the value of the letter monopoly because there is an overlap in the contestable mail and a 

different frequency of delivery by the competitor. Without access to mailboxes, it is unlikely that the 

competitor could successfully capture mail directed to a specific person or address because those 

mailpieces are delivered to and collected from mailboxes. Therefore, a separate estimate of the 

value of the letter monopoly alone (retaining the mailbox monopoly) is not provided.

479. See USO Report at 144, Table 5 notes 2, 5; 143-46.

480. See notes to Table IV-7.

481. The FY 2020 estimates were calculated accounting for First-Class Package Service being moved to 

the Competitive products category and are adjusted to the respective fiscal year national estimates 

as estimated by the City Carrier Cost System and the Rural Mail Count and Rural Carrier Cost 

System.

482. See USO Report at 144. The monopoly estimates in the USO Report were developed using the FY 

2007 CCCS, FY 2007 RCCS, and the FY 2006 Rural Mail Count. USO Report, folder “Appendices,” 

folder “USO Appendices,” PDF file “Appendix F Section 4.pdf,” at 9 n.9.

483. USO Report, folder “Appendices,” folder “USO Appendices,” PDF file “Appendix F Section 4.pdf,” at 

10.

484. See USO Report at 144.

485. Compare USO Report Table 5 at 144, with Table IV-7.
ENDNOTES | 87 This page has intentionally been left blank.
88 | POSTAL REGULATORY COMMISSION • FY 2021 ANNUAL REPORT

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