ANNUAL 

REPORT

to the President 

and Congress

FISCAL YEAR 2020

Postal Regulatory Commission

Submitted 1/26/2021 1:27:15 PM

Filing ID: 115910

Accepted 1/26/2021
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TABLE OF CONTENTS | 3

PRC Mission, Vision, and Guiding Principles................5

Chairman's Letter .......................................................7

Chapter I | Fiscal Year 2020 in Review........................9

Chapter II | About the Commission...........................11

Commission Leadership................................................12

Staff and Office Structure .............................................14

Commission Strategic Plan...........................................15

Chapter III | FY 2020 Proceedings.............................18

Rulemakings Amending Commission Regulations........19

Statutory Review of Market Dominant Rate System...19

Revised Rules of Practice and Procedure.................22

Rate Incentives for Market Dominant Products..........23

Letter Monopoly Exceptions....................................24

Procedures Related to Commission Views ..............24

Updates to Product Lists..........................................24

Amendments to Freedom of Information Act Rules...25

Annual Reports.............................................................25

Annual Compliance Determination..........................25

Financial Analysis ....................................................28

Analysis of Performance Goals................................28

Rate Adjustments.........................................................29

Market Dominant Products.....................................30

Rates of General Applicability.............................30

Rates Not of General Applicability......................31

Competitive Products..............................................31

Rates of General Applicability.............................31

Rates Not of General Applicability......................32

Assumed Federal Income Tax .............................33

Changes to Product Lists and the Mail 

 Classification Schedule ...............................................34

Return Receipt for Merchandise Service .................34

Customized Postage.................................................35

International Mail....................................................35

Public Inquiries.............................................................37

Service Performance................................................37

Value of Postal and Mailbox Monopolies................37

City Carrier Costs.....................................................38

Proposals to Change Analytical Principles....................38

Other Proceedings........................................................41

Complaints...............................................................41

Market Tests and Post Office Closing Appeals.........42

Court of Appeals Cases.................................................43

Inbound Letter Post Unsealing ................................43

Review of Appropriate Share Requirement.............44

First-Class Mail Rate Adjustments ...........................44

Other Court of Appeal Cases...................................44

International Postal Policy............................................45

Chapter IV | Universal Service Obligation

 and Postal Monopoly..............................................46

Background ..................................................................46

Estimated USO Cost.................................................47

Postal Services to Areas of the Nation the Postal

 Service Would Not Otherwise Serve......................47

Maintaining Small Post Offices...........................48

Alaska Air Subsidy...............................................50

Group E Post Office Boxes...................................50

Free or Reduced Rates.............................................50

Preferred Rate Discounts Net Of Costs...............50

Periodicals Losses...............................................51

Other Public Services or Activities...........................52

Six-Day Delivery ..................................................52

Uniform Rates.....................................................52

Postal Inspection Service ....................................53

Value of the Postal Monopoly ......................................53

Chapter V | Public Affairs .........................................56

Consumer Relations — Comments and Inquiries.............56

Inquiries by Source............................................... 56

Inquiries by Issue ................................................. 57

Inquiries by Location ............................................ 57

Chapter VI | Administration......................................58

Financial Management.................................................59

Records Management ..................................................59

Human Resources Management..................................60

Equal Opportunity Employment and Diversity.............60

Information Technology ...............................................61

Endnotes..................................................................62

TABLE OF CONTENTS
4 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

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 Measurement

SPR | Special Purpose Route

TACS | Time and Attendance Collection System

U.S.C. | United States Code

UPU | Universal Postal Union

USO | Universal Service Obligation
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

Ensure transparency and accountability of the 

United States Postal Service and foster a vital

and efficient universal mail system.

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

PRC | Mission, Vision, and Guiding Principles

PHOTO BY FOCALPOINT FILM

CHAPTER I | 5
6 

| POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

PHOTO BY SEAN PAVONE
CHAIRMAN'S LETTER | 7

Chairman’s Letter

JANUARY 2021

On behalf of the Postal Regulatory Commission, I am pleased to present our Annual Report to the President 

and Congress. This report details the key activities over the past year in the Commission’s area of regulatory 

oversight. 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 (USO) 

and the value of the postal monopoly.

In Fiscal Year 2020, the Commission commemorated its 50th anniversary as the Nation’s Postal Service 

regulator. For half a century, the Commission has provided legal and economic oversight of the one agency that 

touches the lives of all Americans in every community nearly every day, at their homes and offices. Ever since 

Congress and President Nixon created it on August 12, 1970, the Commission has consistently conducted its 

work in an open and accessible way, with full transparency and an opportunity for robust input by the public. 

The agency’s operations on behalf of its fellow citizens foster a vital and efficient universal mail system.

Despite the devastation of the COVID-19 pandemic that has disrupted agency and business operations across 

the country since March, the Commission fully maintained the high quality, exceptional level of work that 

is essential to the success of the U.S. Postal Service and its customers. In fact, 100 percent of the agency’s 

professionals utilized the Commission’s enhanced technological capabilities to ensure the Commission’s 

critical work continued without disruption. 

For example, the Commission completed its review of one of its most important dockets in decades —

evaluation of the current system for regulating rates and classes for Market Dominant products — a PAEA 

mandate that requires the Commission to determine whether the law’s objectives are being achieved. If 

the Commission finds that the objectives are not being met, it has the authority to either propose rules that 

modify the system or adopt an alternative system to achieve the objectives. After a rigorous review period 

that extended past FY 2020 and included an advanced Notice of Proposed Rulemaking (NPR), a NPR, and 

a revised NPR, as well as several opportunities for the public and stakeholders to provide comments, the 

Commission issued its final rulemaking on November 30, 2020, adopting rules to modify the system for 

regulating rates and classes for Market Dominant products.

While the Commission has issued its final rule modifying the ratemaking system for Market Dominant products; 

unfortunately, the impact of the COVID-19 pandemic has further exacerbated the Postal Service’s financial 

condition. The Commission is aware that there is still much work to be done to place the country’s postal system 

on sound footing and has already begun the development of its third report under section 701 of the PAEA. 

Every five years, the Commission is required to issue a report to Congress and the President that reflects the 

Commission’s assessment of how well the PAEA is operating and is an opportunity to recommend legislation or 

other measures necessary to improve the effectiveness and efficiency of our Nation’s postal laws.

As the Commission was preparing this Annual Report for publication in January 2021, President Joseph R. 

Biden, Jr. designated me to serve as chairman of the Commission. The text of this document reflects the work 

of the Commission throughout FY 2020, and includes some undertakings completed after the end of the 

fiscal year. Commissioner Robert G. Taub served as chairman throughout that period, and we appreciate his 

leadership in that role. I am grateful for the opportunity to help the Commission build on its progress in 2021.

On behalf of my fellow commissioners and the entire hard-working agency staff, I extend a welcome to the 

new Congress and Administration. The Commission stands ready to begin a productive dialogue with each of 

you on how to ensure the integrity of a universal mail system for years to come. 

Respectfully,

 

Michael M. Kubayanda

CHAIRMAN
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CHAPTER I | 9

CHAPTER I | Fiscal Year 2020 in Review

In addition, the Commission achieved the 

following significant accomplishments:

1. The Commission addressed 

longstanding issues regarding Inbound 

Letter Post, which had not covered 

the Postal Service’s costs since the 

Commission first analyzed volumes, 

costs, and revenues of the Postal 

Service’s international products 

in a 1999 report to Congress.1 The 

Commission reviewed and approved 

the Postal Service’s request to create 

a new product by transferring certain 

Inbound Letter Post mail from the 

Market Dominant to the Competitive 

product list, as well as the Postal 

Service’s proposed self-declared rates 

for the new product. 

2. The Commission won an appeal filed 

with the Court of Appeals for the 

District of Columbia Circuit regarding 

the disclosure of data and analysis 

related to Inbound Letter Post.

Despite the challenges of Fiscal Year (FY) 2020, 

the Postal Regulatory Commission has continued 

to produce quality work that supports its mission 

to ensure transparency and accountability of 

Postal Service operations and foster a vital and 

efficient universal mail system. The Commission’s 

work culminated in its completion of the 

statutorily mandated review of the system 

for regulating rates and classes for Market 

Dominant products. The Commission issued 

final rules adopting changes to the regulations 

governing the Market Dominant rate system 

that were targeted to address areas where the 

ratemaking system had failed to achieve the 

objectives set forth in 39 U.S.C. § 3622(b). 

Among other changes, the final rules:

• Modified the existing price cap to provide 

additional Market Dominant rate adjustment 

authority to permit the Postal Service to 

generate additional revenue to cover two 

costs outside of its control: retirement 

amortization payments and consequences 

of mail density declines

• Provided additional rate authority for noncompensatory mail classes of 2 percentage 

points per class per fiscal year that the Postal 

Service may use at its discretion

• Prohibited the Postal Service from reducing 

rates for non-compensatory products and 

required product-level rate increases for each 

non-compensatory product in a compensatory 

mail class by a minimum of 2 percentage points 

above the percentage increase for the class

• Implemented new requirements for workshare 

discounts to phase out two practices impeding 

pricing efficiency: workshare discounts that are 

set either substantially above or substantially 

below avoided costs

• Adopted additional reporting requirements 

to provide more transparency regarding 

operational efficiency and maintaining highquality service standards, as well as facilitate 

the tracking of costs and monitoring of the 

Postal Service’s efforts to reduce costs

PHOTO BY SEAN PAVONE
10 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

3. The Commission reviewed and approved the 

Postal Service’s proposed rate changes for 

Market Dominant and Competitive products. 

Major cases include:

• Rate adjustments for each Market 

Dominant mail class (First-Class Mail, 

USPS Marketing Mail, Periodicals, Package 

Services, and Special Services)

• Rate adjustments for several domestic and 

international Competitive mail products

• Approval of rates for 267 Competitive 

negotiated service agreements (NSAs) 

between the Postal Service and mailers 

(210 domestic and 57 international)2

4. The Commission published four primary 

reports in FY 2020:

• Annual Report to the President and 

Congress (Annual Report), describing 

the Commission’s operations, 

accomplishments, and activities in FY 2019 

as the regulator of the Postal Service

• Annual Compliance Determination (ACD) 

FY 2019, 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 2019, 

providing an in-depth analysis of the Postal 

Service’s financial health 

• Analysis of Postal Service FY 2019 

Performance Report and FY 2020 

Performance Plan, evaluating whether the 

Postal Service met its performance goals 

5. The Commission presided over several other 

notable rulemaking proceedings in 

FY 2020. The Commission:

• Adopted revised rules of practice and 

procedure to reorganize the Commission’s 

regulations and make them more 

accessible to the public 

• Issued an ANPR seeking information 

from the public regarding 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. The 

letter monopoly is the Postal Service’s 

exclusive right to carry and deliver most 

addressed, paper-based correspondence, 

with some exceptions

• Adopted final rules revising procedural 

rules related to the issuance of Commission 

views on certain international mail matters 

pursuant to 39 U.S.C. § 407(c)(1) 

6. The Commission explored important issues in 

three public inquiry dockets related to service 

performance, the value of the postal and 

mailbox monopolies, and city carrier costs. 

7. The Commission also accomplished the 

following:

• Considered 16 proposals to change various 

accepted analytical principles 

• Adjudicated two complaint cases, 

two market tests, and one post office 

closing appeal

• Processed more than 6,400 inquiries, 

questions, suggestions, and comments 

from the general public primarily involving 

undelivered, delayed, misdelivered, and 

missing mail

• Opened and reviewed 570 new dockets—

an almost 25 percent increase over 

last year’s total—and processed 3691 

documents

• Significantly enhanced technology 

capabilities allowing Commission 

staff to seamlessly adapt to a full-time 

telework environment while increasing 

cybersecurity and maintaining a 

productive work environment 
CHAPTER II | 11

Above: Commissioner Ann Fisher, 

Chairman Robert Taub, 

Commissioner Ashley Poling, 

Vice 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.

PHOTO COURTESY USPS

CHAPTER II | About the Commission
12 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

Commission Leadership

Robert G. Taub | CHAIRMAN

President Barack H. Obama designated Chairman Robert G. Taub as agency 

head on December 4, 2014. 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. 

Chairman Taub has 40 years of experience in public service at the local, 

state, and federal levels. When President Obama first appointed him as a 

commissioner in October 2011, Chairman 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. Chairman 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 (R-NY) 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.

Michael M. Kubayanda | VICE CHAIRMAN

Vice Chairman Michael M. Kubayanda was nominated to the Commission 

on June 6, 2018, by President Donald J. Trump for a term expiring 

November 22, 2020. His nomination was confirmed by the U.S. Senate on 

January 2, 2019. He was named vice chairman in August 2019 and served 

in that position through the end of 2020. Prior to joining the Commission, 

Michael 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, 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 wrote 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.
CHAPTER II | 13

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. Prior to joining the Commission, 

Fisher spent more than a decade 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. She 

also served as an economist on the Senate Small Business Committee 

under former Chairman Larry Pressler (R-SD), and as a government 

relations manager at the U.S. Postal Service headquarters in Washington 

DC. Commissioner Fisher’s term expires October 14, 2024.

Ashley E. Poling | COMMISSIONER

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.
14 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

Staff and Office Structure

Commission staff has expertise in law, economics, 

finance, statistics, and cost accounting. 

The Commission is organized into four 

operating offices:

• 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 FY 2020 

organizational structure.

Figure II-1: Organizational Structure

Jack Callender

Office of the

Inspector General

Deputy Director

Matthew Robinson

Deputy Director

JP Klingenberg

Deputy General 

Counsel

Christopher Laver

Deputy General 

Counsel

Anne Siarnacki

Office of

Accountability

& Compliance

Margaret Cigno

Office of Public Affairs 

& Government Relations

Jennifer Alvarez Warburton

Office of the

General Counsel

David Trissell

Office of the Secretary

& Administration

Erica Barker

Mark Acton

Commissioner

Ann Fisher

Commissioner

Robert Taub

Chairman

Michael Kubayanda

Vice Chairmain

Ashley Poling

Commissioner
CHAPTER II | 15

Commission Strategic Plan

The Commission’s FY 2017-2022 Strategic Plan

is the framework which guides the work of the 

Commission and is a fundamental beacon for 

the Commission’s efforts toward continuous 

improvement, efficiency, and effectiveness. The 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 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 Plan also steers our commitment 

of Commission resources, ensuring we utilize 

our small budget and personnel complement to 

achieve our Strategic Goals.

To assist in measuring the effectiveness of 

its Strategic Plan efforts, the Commission 

participates annually in the Federal Employee 

Viewpoint Survey (FEVS). Although the agency’s 

FY 2020 results have been delayed due to the 

impact of the COVID-19 pandemic, the agency’s 

FY 2019 response rate of 76 percent was higher 

than the government-wide average response 

rate of 43 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 — 

78 percent — continues to be among the higher 

ratings across the government, and provides an 

assessment of where agencies fall within each 

index: HCAAF, Employee Engagement, Global 

Satisfaction, and the New IQ.

Compared to peers across the Federal 

government, Commission staff had a higher 

degree of satisfaction with their work and 

office environment: 78 percent versus the 

government-wide rating of 68 percent. The 

Commission uses FEVs to develop actionable 

plans to address issues raised in confidential 

feedback from employees.

Throughout FY 2020, Chairman Taub met 

with office heads to review progress, 

accomplishments, and challenges related to each 

Strategic Goal and performance metric. 

Key discussion points included the following:

• Ongoing prioritization of workload

• Ongoing updates on the Commission’s 10-year 

rulemaking docket, including assessment of 

adequate resources to support efforts

• Development of media, congressional, and 

public outreach plans for key Commission 

notices

• Review of Commission responses to 

congressional inquiries

• Progress updates regarding efforts to 

increase cybersecurity for IT systems

• Commission efforts and initiatives to meet 

Equal Employment Opportunity target 

employee recruitment goals

• Timeliness of Commission response to 

service-related consumer inquiries

• Ongoing efforts between Commission and 

Postal Service staff to streamline the filing 

process for documents and reports and ensure 

the timeliness of Postal Service reporting

• Proposal to revise the Commission’s Practice 

and Procedure rules to simplify access and 

participation in Commission rulemakings
16 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

Robust discussion regarding Commission 

employee responses to certain FEVS questions 

specifically linked to the Strategic Plan. 

Noteworthy positive or negative changes in 

employee feedback were carefully assessed by 

the Chairman and senior management

• Continued efforts to develop an improved 

records and docket management capability, 

including a modernized docketing system

• Proposed schedule for development of 

updated Commission Human Capital Plan

• Joint department collaboration in handling of 

FOIA requests, internal policy development, 

Commission ethics program, employment, 

and hiring matters

Through these focused discussions, the 

Commission made significant progress in 

achieving the goals set forth in its Strategic Plan

over the course of the year. 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. 

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. 

In addition to its extensive regulatory work 

as detailed in Chapter III, the Commission’s 

major accomplishment under Strategic Goal 1 

includes the publication of final rules adopting 

changes to the regulations governing the Market 

Dominant Rate System. The Commission’s 

Strategic Objective 1.3 tasked the Commission 

to “[r]esponsibly, transparently, and efficiently 

lead the review of the existing statutory system 

for regulating rates and classes for Market 

Dominant products, as well as consider and, 

if necessary, implement modifications or an 

alternative system.” In satisfaction of Objective 

1.3, the Commission concluded its extensive 

statutory review of the Market Dominant Rate 

System and published final rules setting forth 

regulatory changes targeted to address identified 

deficiencies of the ratemaking system. 

Strategic Goal 2 focuses on active engagement 

with Congress and stakeholders in support 

of a dynamic postal system. The Commission 

accomplishes 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. In addition to this work, 

due to the impact of the COVID-19 pandemic on 

Postal Service operations, PAGR also conducted 

increased communication and active engagement 

regarding the postal system with the U.S. 

Congress, the Administration, the Postal Service, 

other government agencies, and the media.

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 accordance with Strategic Goal 3, the 

Commission improved its IT infrastructure to 

support its staff while in a maximum telework 

status due to the COVID-19 pandemic, including 

procuring more secure government equipment 

to replace the use of personal equipment 

for accessing Commission networks. The 

Commission’s focus on security included hiring 

its first cybersecurity manager and conducting a 

security assessment. By focusing a portion of its 

limited resources on infrastructure needs under 

this goal, the Commission was able to seamlessly 

transition its staff to maximum telework and 
CHAPTER II | 17

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’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 virtually hired and 

onboarded eight full-time 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. 

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 to adjust its operations 

to match the regulatory oversight requirements 

of the Postal Service in the fast-paced 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.

PHOTO COURTESY USPS

The Commission’s Strategic Plan, in its entirety, can be viewed or downloaded at www.prc.gov.
The Postal Accountability and Enhancement 

Act (PAEA)3 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.).4 These 

sections contain laws related to Market 

Dominant and Competitive products, 

respectively. Postal Service products are 

characterized as either Market Dominant 

or Competitive.5

 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.”6

 Competitive 

products consist of all other products.7

The Annual Report must analyze 

the extent to which regulations are 

achieving the objectives under 39 

U.S.C. § 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 section 3622(b):

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

CHAPTER III | FY 2020 Proceedings

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18 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT
CHAPTER III | 19

6. Reduce the administrative burden 

and increase the transparency of the 

ratemaking process

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 products8

The Commission established regulations 

governing the Market Dominant Rate System 

in 2007 shortly after the PAEA was enacted.9

In FY 2017, the Commission began 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.

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.10 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 2020.

Rulemakings Amending Commission Regulations

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). 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).”11 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.12

On December 1, 2017, the Commission issued 

Order No. 4257 containing its findings and 

determination of its review of the Market 

Dominant Rate System.13

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.14 The Commission 

evaluated each principal area to determine 

whether the PAEA’s goals were achieved during 

the PAEA era.15 The Commission found that 

while the system achieved some of the goals of 

these principal areas, the overall system had 

not achieved the objectives taking into account 

the factors of the PAEA.16

In its review of the structure of the Market 

Dominant Rate System, the Commission found 

that with respect to pricing, the system did 

not result in increased pricing efficiency.17 In 

its analysis of the financial health of the Postal 

Service, the Commission determined that 

“financial stability, including retained earnings, 

has not been maintained for the Postal Service in 

the medium and long-term time frames and that 

cost reductions and operational efficiency gains 

have not been maximized.”18 The Commission 

also found that “the system did not maintain 

reasonable rates because products and classes 

threatened the financial integrity of the Postal 

Service by failing to cover their attributable 

costs.”19 In its review of service, the Commission 

determined that the system did not effectively 

encourage the maintenance of high quality 

service standards.20
20 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

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

the Commission determines that the Market 

Dominant Rate System has not achieved the 

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.21

The NPR proposed changes designed to address 

key issues with the Market Dominant Rate System 

by providing the Postal Service additional pricing 

authority that complemented rather than replaced 

the price cap.22 The proposed rules provided the 

Postal Service supplemental rate authority to 

generate additional revenue through an additional 

2 percentage points of rate authority per class 

of mail per calendar year, as well as additional 

performance-based rate authority upon the Postal 

Service meeting standards related to operational 

efficiency and service standards.23 The rules also 

expanded pricing authority for non-compensatory 

classes and prohibited reducing rates for noncompensatory products.24 To increase pricing 

efficiency, the proposed rules established 

bands—ranges with upper and lower limits—for 

workshare discount passthroughs.25 The NPR also 

proposed other changes to the rate adjustment 

process that increased visibility into planned rate 

adjustments.26

On December 5, 2019, the Commission issued 

a revised NPR to reflect comments received on 

the initial NPR.27 The revised rules were aimed 

at improving and strengthening the initial 

proposal.28 After considering comments received 

on the revised NPR, the Commission issued 

final rules adopting changes to the regulations 

governing the Market Dominant Rate System.29

The final rules set forth regulatory changes 

targeted to address the identified areas where 

the ratemaking system has failed to achieve the 

objectives set forth in 39 U.S.C. § 3622(b). 

To address obstacles to the Postal Service’s 

ability to maintain financial health and target 

primary drivers of net losses, the final rules 

implement two mechanisms designed to 

provide additional revenue for costs outside the 

Postal Service’s control. The first mechanism, 

designed to address consequences of mail 

density declines, modifies the existing price 

cap to provide additional Market Dominant 

rate adjustment authority equal to the densitydriven portion of increases in average cost-perpiece, as calculated under the Commission’s 

formula.30 The second mechanism, designed 

to address the Postal Service’s retirement 

amortization payments, modifies the existing 

price cap to provide 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 obligation payments, as 

calculated under the Commission’s formula.31

The retirement-based rate adjustment authority 

will be phased in over 5 years.32

The final rules withdraw the performancebased rate authority proposed in the initial 

and revised NPRs in response to commenter 

concerns.33 The Commission intends to open a 

separate rulemaking to further study potential 

modifications to the ratemaking system that 

link financial incentives and/or consequences 

to efficiency gains, cost reductions, and the 

maintenance of service standards.34 For 

purposes of transparency, the final rules adopt 

two of the proposed reporting requirements 

related to the proposed performance-based 

rate authority.35

The Commission adopts final rules relating to 

non-compensatory mail classes and products 

to address the failure of the Market Dominant 

Rate System to maintain reasonable rates 

and promote pricing efficiency. For noncompensatory mail classes, the final rules 

provide an additional rate authority of 2 
CHAPTER III | 21

percentage points per class and per fiscal year 

the Postal Service may use, with an aim to 

narrow the cost coverage gap of those classes 

over time.36 This additional rate authority is 

optional.37 For non-compensatory products, 

the Postal Service is restricted from reducing 

rates for those products and will be required to 

enact product-level rate increases for each noncompensatory product in a compensatory class 

by a minimum of 2 percentage points above 

the percentage increase for the class.38 These 

restrictions are designed to stop the trend of 

declining cost coverage for these products and 

move cost coverage toward 100 percent.39

To improve pricing efficiency, the final rules 

regarding workshare discounts are intended 

to phase out two practices impeding pricing 

efficiency: workshare discounts that are 

set either substantially below avoided costs 

or substantially above avoided costs.40 The 

Postal Service is prohibited from changing 

workshare discounts set equal to avoided 

costs; reducing workshare discounts set below 

avoided costs; and increasing workshare 

discounts set above avoided costs.41 The 

Postal Service may propose to set a workshare 

discount below or above avoided costs only 

under certain circumstances.42 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.43

The final rules also include reporting 

requirements intended to facilitate the tracking 

of costs and monitoring of the Postal Service’s 

efforts to reduce costs.44 They require the Postal 

Service to provide information consisting of 

three separate components: (1) a consolidated 

cost analysis; (2) detailed information regarding 

planned and active large-scale cost-reduction 

initiatives; and (3) summary information 

pertaining to approved Decision Analysis 

PHOTO COURTESY USPS
22 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

Reports, which are internal Postal Service 

documents used to justify and obtain approval 

for certain proposed capital spending projects.45

To increase transparency and reduce 

administrative burden, the final rules implement 

procedural improvements to the ratemaking 

process related to planned rates of general 

applicability.46 Among other changes, they 

require the Postal Service to update the schedule 

for regular and predictable rate adjustments 

annually and provide certain information 

designed to increase transparency for mailers 

regarding the Postal Service’s planned rate 

changes.47 They also extend the minimum 

notice period for rate adjustment filings from 

45 to 90 days and discontinue the Commission’s 

practice of addressing the objectives and factors 

of 39 U.S.C. § 3622(b) and (c) in individual rate 

adjustment proceedings.48

Finally, the final rules provide for a holistic 

review of the effects of the Commission’s rule 

changes after 5 years.49 The Commission retains 

the flexibility to review and adjust certain 

components of the system sooner than 5 years 

if necessary.50 Taken together, the modifications 

adopted in the final rules are designed to remedy 

the deficiencies in the existing Market Dominant 

Rate System identified in Order No. 4257.

Revised Rules of Practice and Procedure

On September 13, 2019, the Commission issued an 

NPR to reorganize its regulations and to revise its 

rules of practice.51 The proposed revisions were 

designed to make the Commission’s regulations 

more user-friendly by organizing them under six 

new subchapter headings.52 Proposed subchapter 

A contained rules describing the Commission 

and its offices as well as employee standards 

of conduct.53 Proposed subchapter B described 

rules relating to the Privacy Act, public records 

and the Freedom of Information Act, and public 

attendance at Commission meetings.54 Proposed 

subchapter C contained revised rules of practice 

applicable to all Commission proceedings.55 It 

proposed generally applicable rules of practice 

and procedure for docketed matters before the 

Commission, rules governing non-public materials 

provided to the Commission, rules prohibiting 

certain ex parte communications, and procedures 

for compelling the Postal Service to provide 

information.56

Proposed subchapter C also established 

procedural frameworks for the two main types of 

Commission proceedings — notice and comment 

proceedings and proceedings with hearings 

on the record.57 The separate framework for 

notice and comment proceedings, distinct from 

the framework for hearings on the record, was 

established to eliminate confusion regarding the 

procedures that apply in notice and comment 

proceedings and to reflect the fact that, since the 

enactment of the PAEA in 2006, the Commission 

has conducted most of its proceedings through 

notice and comment.

The rules in proposed subchapter D provided 

additional procedures for specific types of 

Commission proceedings: Postal Service requests 

for changes in the nature of postal services, 

post office closing appeals, complaints, rate or 

service inquiries, complaints alleging violations 

of 39 U.S.C. § 404a, and procedures related to 

Commission views submitted to the Secretary 

of State.58 Proposed subchapter E contained 

regulations governing Market Dominant and 

Competitive products, product lists, and market 

tests.59 Proposed subchapter F contained rules 

for periodic reporting, service performance and 

customer satisfaction reporting, and accounting 

practices and tax rules for Competitive 

products.60

In response to comments received, 

the Commission adopted the proposed 

reorganization and revisions with limited 

modifications.61 The revised rules became 

effective on April 20, 2020.62
CHAPTER III | 23

Rate Incentives for Market Dominant Products

On February 14, 2020, the Commission issued an 

NPR proposing amendments to the Commission’s 

regulations concerning rate incentives for Market 

Dominant products appearing in 39 C.F.R. part 

3030.63 When adjusting Market Dominant rates 

as part of a rate adjustment proceeding, the 

Commission’s rules permit the Postal Service 

to include rate incentives it plans to offer in the 

percentage change in rates calculation, as long as 

the rate incentives meet certain requirements.64

One requirement is that rate incentives must be 

rates of general applicability, which means the 

rates are “applicable to all mail meeting standards 

established by the Mail Classification Schedule, 

the Domestic Mail Manual, and the International 

Mail Manual.”65

The Commission sought to clarify its rules by 

proposing three changes. First, the proposed 

rules would revise the regulation defining “rate 

of general applicability” for purposes of Market 

Dominant rate adjustment proceedings to clarify 

that rates of general applicability cannot be based 

on mailer-specific data such as historical mailer 

volume.66 Second, the proposed rules would add 

an additional criterion for a rate incentive to 

be eligible for inclusion in a percentage change 

in rates calculation: the rate incentive must be 

made available to all mailers equally on the same 

terms and conditions.67 Third, the proposed rules 

would require that notices of rate adjustment 

include specific information concerning Market 

Dominant rate incentives that the Postal Service 

wishes to have included in a percentage change 

in rates calculation.68

After considering comments received, the 

Commission issued Order No. 5510 adopting 

final rules regarding rate incentives for Market 

Dominant products on May 15, 2020.69 On June 

15, 2020, the Postal Service filed a petition for 

review appealing this order to the United States 

Court of Appeals for the District of Columbia 

Circuit (D.C. Circuit).70 The Postal Service alleged 

that Order No. 5510 “relied on a new factual 

basis that was not revealed in its proposed rule, 

thereby failing to allow for meaningful and 

informed comment.”71

On August 26, 2020, the Commission issued a 

notice of intent to reconsider the final rules.72

The Commission maintained that the proposed 

rules did provide adequate notice.73 However, it 

deemed it prudent to allow the Postal Service 

to comment on any aspect of the proposed 

rules the Postal Service believed it did not have 

the opportunity to comment on previously.74

The Commission stated it would reconsider 

its findings in light of any such comments.75 To 

that end, the Commission stated that it intends 

to issue a new NPR and to reconsider Order 

No. 5510 to ensure that the Postal Service 

and all other interested persons have the 

PHOTO COURTESY USPS
24 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

opportunity to comment fully on the proposed 

rules.76 The Commission noted that it does not 

intend to enforce Order No. 5510 during the 

reconsideration period.77

On September 11, 2020, the Postal Service and 

the Commission filed with the D.C. Circuit a joint 

motion to dismiss the Postal Service’s petition for 

review and vacate Order No. 5510.78

Letter Monopoly Exceptions

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.79 The letter monopoly is the Postal 

Service’s exclusive right to carry and deliver most 

addressed, paper-based correspondence, with 

some exceptions.80 These exceptions are codified 

in 39 U.S.C. § 601, which specifies instances when 

letters are not subject to the letter monopoly.81

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

promulgate “[a]ny regulations necessary to carry 

out [section 601] ... .”82 The Commission issued 

this ANPR to explore potential options for issuing 

these regulations and to identify issues that may 

be considered.83 Two Chairman’s Information 

Requests (CHIRs) were issued and 11 comments 

were received. The Commission is currently 

considering comments received.

Procedures Related to Commission Views

On December 17, 2019, the Commission issued an 

NPR proposing revisions to its procedural rules 

related to the issuance of Commission views 

on certain international mail matters pursuant 

to 39 U.S.C. § 407(c)(1).84 Under section 407(c)

(1), before the Secretary of State concludes any 

treaty, convention, or amendment establishing a 

Market Dominant rate or classification, it must 

request the Commission’s views “on whether 

such rate or classification is consistent with 

the standards and criteria established by the 

Commission under 

[39 U.S.C. §] 3622.”85 Procedures for providing 

Commission views to the Secretary of State 

are codified in 39 C.F.R. part 3025. The NPR 

proposed minor improvements to these rules 

to increase transparency and accountability of 

the process for providing Commission views, 

as well as enhance the accessibility of relevant 

proposals, Commission views, and other related 

documents.86 After considering comments 

received, which supported the proposed changes, 

the Commission adopted these revisions to 39 

C.F.R. part 3025.87

Updates to Product Lists

The Commission maintains product lists 

containing the names of the Market Dominant 

and Competitive products the Postal Service 

is currently offering. The PAEA and the 

Commission’s rules require the Commission 

to update the product lists to reflect changes 

made, including adding new products, removing 

products, and transferring products between 

the Market Dominant and Competitive product 

lists.88 Updates to the product lists must be 

published in the Federal Register.

89

On April 16, 2020, the Commission established 

Docket No. RM2020-8 as the docket where 

future Notices of Update to Product Lists will be 

posted.90 These updates will also be published in 

the Federal Register as a direct final rulemaking 

that amends the Code of Federal Regulations 

(C.F.R.).91 The product lists are published in 
CHAPTER III | 25

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

(Market Dominant Products) and Appendix B 

(Competitive Products).

For each Notice of Update to Product Lists, the 

Commission will consider any adverse comments 

received related to each notice.92 If no significant 

adverse comments are received, the product list 

updates will become effective 30 days after the 

date they are published in the Federal Register

without further action.93 The product lists are 

updated quarterly in the Federal Register as well 

as on the Commission’s website.94

Amendments to Freedom of Information Act Rules

On September 27, 2019, the Commission 

issued a proposed direct final rule to transfer 

responsibility for processing requests under 

the Freedom of Information Act (FOIA), 5 

U.S.C. § 552, et seq., from its Office of Secretary 

& Administration to its Office of General 

Counsel.95 The Commission based the proposal 

on its determination that these requests can 

be processed most efficiently within the Office 

of General Counsel.96 The Commission invited 

interested persons to comment on its proposal no 

later than 30 days from the date of its publication 

in the Federal Register.

97 Because no adverse 

comments were received, the proposed changes 

became effective on November 18, 2019.

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.98 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.99 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 30.100

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 2020, 

each report was issued in Docket No. ACR2019 

and is described below.101

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.102 The Commission publishes its 

analysis of the ACR in the ACD.

The Commission issued the FY 2019 ACD on 

March 25, 2020 and made several principal 

findings and directives.103 First, the Commission 

evaluated Market Dominant products for 
26 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

compliance with three statutory pricing 

requirements: the price cap, workshare 

discounts, and preferred rates.104 There were no 

issues with the price cap and preferred rates.105

The Commission identified compliance issues 

with 12 workshare discounts and found that 

1 workshare discount did not comply with 39 

U.S.C. § 3622(e).106 The Commission directed the 

Postal Service to either align this workshare 

discount with its avoided cost in the next Market 

Dominant rate adjustment or provide support for 

an applicable statutory exception.107

Second, the Commission identified eight noncompensatory Market Dominant products that 

did not generate sufficient revenue to cover their 

attributable costs in FY 2019: (1) Periodicals InCounty, (2) Periodicals Outside County, (3) USPS 

Marketing Mail Flats, (4) USPS Marketing Mail 

Parcels, (5) USPS Marketing Mail Carrier Route, 

(6) Inbound Letter Post, (7) Media Mail/Library 

Mail, and (8) Stamp Fulfillment Services.108 The 

Commission issued findings, directives, and/or 

recommendations for each non-compensatory 

product. For Periodicals, the Commission found 

that the Postal Service’s FY 2019 Periodicals 

Pricing Report meaningfully responded to the 

Commission’s previous directive.109 It directed the 

Postal Service to provide an updated version of the 

Periodicals Pricing Report in the FY 2020 ACR.110

The Commission found that USPS Marketing Mail 

Flats had its worst cost coverage since this product 

was introduced in FY 2007 and that the Postal 

Service had failed to improve its cost coverage or 

identify a timeline for phasing out the subsidy it 

receives.111 The Commission directed the Postal 

Service to increase rates for both USPS Marketing 

Mail Flats and USPS Marketing Mail Parcels in the 

next Market Dominant rate adjustment by at least 

2 percentage points above the class average.112

The Commission strongly recommended that the 

Postal Service propose the same increase for USPS 

Marketing Mail Carrier Route.113 If it elected not 

PHOTO COURTESY USPS
CHAPTER III | 27

to, the Commission directed the Postal Service to 

provide an estimate of the impact of the proposed 

rate increases for this product on the contribution 

of the USPS Marketing Mail class and the USPS 

Marketing Mail Carrier Route product.114

For Inbound Letter Post, the Commission made 

several recommendations to the Postal Service: 

(1) negotiate agreements containing rates that 

are more compensatory than default terminal 

dues, (2) undertake focused initiatives to reduce 

costs without compromising service, and (3) 

work with the Department of State to propose 

compensatory terminal dues to the Universal 

Postal Union (UPU).115 For Media Mail/Library 

Mail, the Commission found that the Postal 

Service’s approach to improve cost coverage 

through above-average price increases was 

appropriate, but historically inadequate.116 The 

Commission directed the Postal Service to submit 

a plan describing how it will increase the cost 

coverage of this product.117 For Stamp Fulfillment 

Services, the Commission urged the Postal Service 

to improve cost coverage and explain its rationale 

if it proposed a below-average price increase in the 

next Market Dominant rate adjustment.118

Third, in the ACD, the Commission evaluated 

Competitive products for compliance with 

39 U.S.C. § 3633(a) in FY 2019. The Commission 

found that Competitive products complied with 

sections 3633(a)(1) and (3) because Market 

Dominant products did not subsidize revenues 

for Competitive products, and Competitive 

products collectively covered an appropriate 

share of the Postal Service’s institutional costs.119

The Commission also determined that revenues 

for six Competitive products did not cover their 

attributable costs and, therefore, did not comply 

with 39 U.S.C. § 3633(a)(2).120 The Commission 

directed the Postal Service to take corrective 

action for these products, such as terminating 

or renegotiating non-compensatory agreements, 

reviewing rate and revenue discrepancies, and 

providing more transparency on costing issues.121

Fourth, the Commission evaluated service 

performance for each Market Dominant product 

by comparing the percentage of mailpieces 

that achieve the stated service standard 

with targets set by the Postal Service.122 The 

Commission found that most products failed to 

meet their annual service performance targets 

in FY 2019.123 It noted that because the Postal 

Service began using a new internal service 

performance measurement (SPM) system in 

FY 2019, service performance results for FY 

2019 are not directly comparable to results for 

previous fiscal years.124 For First-Class Mail 

Single-Piece Letters/Postcards, the Commission 

determined that the Postal Service did not meet 

its service performance targets for this product, 

along with all other First-Class Mail products, 

for the fifth consecutive year.125 However, the 

Commission also found that “[t]he Postal Service 

has made progress in developing a quantitative 

analysis linking its root cause assessments 

with the impact on service performance results 

for this product and other First-Class Mail and 

USPS Marketing Mail products.”126 It directed 

the Postal Service to continue reporting specific 

information developed from its First-Class 

Mail metrics and provide more transparency 

about the progress and effects of its existing 

strategies for improving multi-year national 

service performance.127

Fifth, the Commission examined flats cost 

and service issues by analyzing flats financial 

performance, flats service performance, 

and pinch points impacting flats operational 

performance.128 It found that unit costs 

and contribution losses have continued to 

grow, and no flats product met their service 

performance target in FY 2019.129 The 

Commission noted that annual reporting 

requirements for flats were implemented in FY 

2019, which leveraged internal data the Postal 

Service collected to improve transparency 

and accountability.130 The Commission made 

several recommendations to develop specific 

plans and goals to improve both cost issues and 

service performance for flats in FY 2020.131
28 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

Financial Analysis

On May 7, 2020, the Commission issued its 

Financial Analysis of the United States Postal 

Service Financial Results and 10-K Statement for 

FY 2019.132 The report provided comprehensive 

analysis of the Postal Service’s financial status 

primarily using information reported in its 

FY 2019 Form 10-K, including comparisons 

with FY 2018 results and its FY 2019 Integrated 

Financial Plan (Financial Plan). The Commission’s 

analysis concluded that the Postal Service 

remains on an unsustainable financial path.133 It 

found that in FY 2019, the Postal Service’s total 

net loss was $8.8 billion, which was a decline of 

$4.9 billion compared to FY 2018.134 The net loss 

from operations of $3.2 billion, an increase of 53 

percent over FY 2018 due to higher operating 

expenses, represented a $1.1 billion decline in 

profitability.135 Net operating expenses were 

$1.6 billion higher than in FY 2018, which were 

primarily driven by increases in compensation 

and benefits as well as transportation costs.136 In 

FY 2019, 70.3 percent of the Postal Service’s total 

costs consisted of compensation and benefits 

expenses, and workhours have continued to 

increase annually since FY 2015.137

The Commission found that the Postal Service 

has not had a profitable year in the last decade.138

The Postal Service recorded a $71.5 billion net 

deficit primarily caused by several years of 

net operating losses that started in FY 2007.139

These continued losses have adversely affected 

the Postal Service’s financial position, creating 

a substantial gap between the Postal Service’s 

assets and liabilities.140 The gap between current 

assets and current liabilities has increased 

significantly since FY 2010.141 If current assets 

are not sufficient to meet short-term liabilities, 

the Postal Service could have issues paying its 

creditors in the short term.142

The Postal Service had $8.8 billion in cash as 

of September 30, 2019.143 This represented 

approximately 58 days of liquidity.144The Postal 

Service’s cash reserves covered less than 2 

months of cash and capital expenses excluding 

unpaid retirement plan expenses.145 The Postal 

Service is largely a cash business with minimal 

trade receivables and payables (other than the 

employee related liabilities), which increases 

the importance of cash reserves to mitigate 

unforeseen risks.

146

First-Class Mail, USPS Marketing Mail, and 

Shipping and Packages represented 93 percent 

of the revenue from mail and services.147

Rate increases based on the price cap were 

not sufficient to offset revenue lost from the 

decline in Market Dominant mail volumes.148

Total revenue from Market Dominant products 

decreased by 1.6 percent, and several Market 

Dominant products did not generate sufficient 

revenue to cover attributable costs.149 Although 

the Postal Service’s finances continued to benefit 

from parcel growth, Competitive products 

volume grew only 0.2 percent, which was much 

lower than the 11.0 percent growth in FY 2018.150

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.151 The 

Commission may also provide the Postal Service 

with recommendations related to protecting or 

promoting public policy objectives in title 39.152

On June 1, 2020, the Commission issued a 

detailed analysis of the Postal Service’s progress 

during FY 2019 toward its four performance 

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

Customer Experiences, (3) Safe Workplace and 

Engaged Workforce, and (4) Financial Health.153

In its analysis, the Commission evaluated 

whether the FY 2020 Annual Performance 

Plan (FY 2020 Plan) and FY 2019 Annual 

Performance Report (FY 2019 Report) 

complied with 39 U.S.C. §§ 2803 and 2804.154
CHAPTER III | 29

The Commission’s review found that the FY 

2020 Plan and FY 2019 Report retained many 

improvements implemented in past annual 

performance plans and annual performance 

reports.155 The FY 2020 Plan complied with 

legal requirements in 39 U.S.C. § 2803 and the 

Commission’s directive to identify program 

activities and relate them to the performance 

goals.156 However, while the FY 2019 Report met 

most requirements of 39 U.S.C. § 2804, it did not 

provide comparable results from the past three 

fiscal years or the required explanations for the 

High-Quality Service and Excellent Customer 

Experiences performance goals as required by 

39 U.S.C. § 2804(c).157

The Commission also evaluated whether the 

Postal Service met each performance goal, 

finding that the Postal Service either did not 

meet or only partially met each performance 

goal in FY 2019.158 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.159

Rate Adjustments

One of the Commission’s major statutory 

responsibilities is to ensure that rate 

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.160

These rates are available to the general public; 

examples include Forever Stamps and Priority 

Mail Flat Rate boxes.

Rates not of general applicability are offered by 

the Postal Service to specific mailers through 

negotiated service agreements (NSAs).161 NSAs 

are written contracts between the Postal Service 

and a mailer that are effective for a defined 

period of time.162 They provide for customerspecific rates, fees, or terms of service according 

to the terms and conditions of the contract.163

In FY 2020, the Commission reviewed the Postal 

Service’s proposed changes to rates of general 

applicability and rates not of general applicability 

for both Market Dominant and Competitive 

products. Each is discussed below.

PHOTO COURTESY USPS
30 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

Market Dominant Products

RATES OF GENERAL APPLICABILITY

The PAEA allows the Postal Service to 

change rates of general applicability for 

Market Dominant products as long as the 

rate adjustments meet certain statutory and 

regulatory requirements:

• Rate adjustments for each Market Dominant 

mail class must not exceed the price cap, an 

annual limitation based on the Consumer 

Price Index for All Urban Consumers164

• Workshare discounts must not exceed 

the Postal Service’s avoided costs unless a 

statutory exception applies165

• Preferred rates must be set consistent with 

statutory requirements166

The rate adjustments must also comply with the 

Commission’s rules in 39 C.F.R. part 3030.

On October 9, 2019, the Postal Service filed 

notice of proposed changes in rates of general 

applicability and related MCS changes for Market 

Dominant products.167 The Commission reviewed 

the proposed rate adjustments for compliance 

with the statutory and regulatory requirements 

described above. After analyzing the filings 

and considering the comments received, the 

Commission issued an order approving the 

proposed rate adjustments and related MCS 

changes for USPS Marketing Mail, Periodicals, 

Package Services, and Special Services, finding 

that they complied with the requirements of 

title 39, the Commission’s regulations, and other 

applicable laws.168

The Postal Service’s proposed rate adjustments 

for First-Class Mail were addressed in separate 

orders. On November 13, 2019, the Commission 

issued an order remanding the rate adjustments 

initially proposed for First-Class Mail, finding 

that the proposed rates exceeded the price cap 

limitation specified by 39 U.S.C. § 3622(d).169 It 

directed the Postal Service to file an amended 

notice of rate adjustment for First-Class Mail with 

modified rates that would comply with applicable 

legal requirements, which the Postal Service filed 

on November 20, 2019.170

After analyzing the filings and considering the 

comments received, the Commission issued Order 

No. 5340 approving the amended rate adjustments 

proposed for First-Class Mail, finding that they 

complied with the requirements of title 39.171 The 

Commission reserved final disposition of issues 

not addressed in Order No. 5340.172 On December 

20, 2019, the Commission issued a separate 

order addressing these issues and found that 

the amended rate adjustments and related MCS 

changes for First-Class Mail were consistent with 

applicable laws and regulations.173

On June 1, 2020, the Postal Service filed 

another notice of rate adjustment proposing 

PHOTO COURTESY USPS
CHAPTER III | 31

a new rate incentive that would effectively 

reduce the rate for Every Door Direct Mail 

Retail (EDDM Retail),174 a USPS Marketing Mail 

product designed mainly for local businesses 

to send geographically-targeted advertising 

mail to every household or business on a postal 

delivery route.175 After analyzing the filings 

and considering the comments received, the 

Commission issued an order concluding that the 

proposed rate adjustment and MCS changes for 

EDDM Retail were consistent with the price cap 

and preferential rate requirements under title 39, 

as well as the price cap calculation requirements 

contained in the Commission’s regulations.176

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.177 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 3030, subpart D. No Market Dominant 

NSAs were filed in FY 2020.

Competitive Products

The Commission reviews the Postal Service’s 

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 products178

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”179

3. All Competitive products must collectively 

cover what the Commission determines to be 

an appropriate share of the Postal Service’s 

institutional costs180

Competitive rate adjustments must also comply 

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

3035. In FY 2020, the Commission reviewed the 

Postal Service’s proposed changes to both rates 

of general applicability and rates not of general 

applicability for Competitive products. Each is 

discussed below.

RATES OF GENERAL APPLICABILITY

On October 9, 2019, the Postal Service 

filed a notice proposing changes in rates of 

general applicability for several domestic and 

international Competitive products, along 

with proposed changes to the MCS.181 After 

reviewing the notice, the CHIR responses, and the 

comments received, the Commission approved 

the proposed rate and MCS changes, finding that 

they complied with 39 U.S.C. § 3633(a) and the 

Commission’s regulations.182

On August 14, 2020, the Postal Service filed a 

notice proposing time-limited changes in rates of 

general applicability for Competitive products.183

The Postal Service proposed increasing rates 

for Priority Mail Express, Priority Mail, FirstClass Package Service, Parcel Select, and Parcel 

Return Service effective October 18, 2020.184

Rates would roll back to current levels on 

December 27, 2020.185 After reviewing the 

notice, the CHIR response, and the comments 

received, the Commission approved the proposed 

rate adjustments, finding that they complied 

with 39 U.S.C. § 3633(a) and the Commission’s 

regulations.186

The Postal Service also proposed changes in 

rates of general applicability and associated MCS 
32 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

revisions for Priority Mail Express and Priority 

Mail to implement a new Loyalty Program that 

would provide incentives for new and existing 

Postal Service Click-N-Ship customers.187 After 

reviewing the notice, the CHIR response, and the 

comments received, the Commission approved 

the proposed rate adjustments, finding that 

they complied with 39 U.S.C. § 3633(a) and 

the Commission’s regulations.188 The Loyalty 

Program began on August 1, 2020.189

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 2020, the Commission reviewed and approved 

267 Competitive NSAs: 210 domestic and 57 

international. Table III-1 shows the number of 

NSAs the Commission approved between 

FY 2015 and FY 2020.

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 

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

FY 2015 through FY 2020

Non-Published Rate FY 2020 FY 2019 FY 2018 FY 2017 FY 2016 FY 2015

Global Expedited Package Services 

Non-Published Rates 1-15 380 326 474 393 244 91

Priority Mail — Non-Published Rates 1 

and 2 125 116 145 121 207 0

TOTAL 505 442a 619 514 451 91

a

 FY 2019 totals differ from those reported in the FY 2019 Annual Report because some Priority Mail—Non-Published Rate NSAs were not

included. See FY 2019 Annual Report at 31. 

Competitive NSAs FY 2020 FY 2019 FY 2018 FY 2017 FY 2016 FY 2015

Domestic 210 191 226 211 187 81

International 57 25 81 104 97 58

TOTAL 267 216 307 315 284 139

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.

Table III-1: Competitive NSAs Approved by the Commissiona

FY 2015 through FY 2020
CHAPTER III | 33

standards, rather than the rates for each 

contract before implementation. These nonpublished 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.

On June 25, 2020, the Commission approved 

the Postal Service’s request to add Priority 

Mail-Non-Published Rates 2 to the Competitive 

product list.190 Table III-2 shows the number of 

non-published rate contracts implemented by the 

Postal Service between FY 2015 and FY 2020.

The Commission updates NSA statistics on 

its website.191

International mail. 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.192 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 

Universal Postal 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.193 These rate increases are 

applied to the base rates effective January 1 and 

July 1 of each year.194 During FY 2020, the Postal 

Service filed two rate adjustments for Inbound 

Parcel Post (at UPU rates).195 The Commission 

issued two orders that analyzed the proposed 

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

acknowledged revised rates for this product.196

On August 14, 2020, the Postal Service proposed 

a change in rates not of general applicability 

for Inbound EMS 2, which covers Express Mail 

International documents and merchandise 

received from foreign postal operators for 

delivery in the Postal Service’s domestic 

delivery area.197 After analyzing the filings 

and considering the comments received, 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. § 3035.105.198

The Commission also reviewed proposed selfdeclared rates for Inbound Letter Post, which are 

described below.199

ASSUMED FEDERAL INCOME TAX

The Commission also 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.200 On January 10, 2020, the Postal Service 

filed its calculation of the assumed Federal 

income tax for FY 2019.201 After reviewing the 

calculation and considering one comment received, 

the Commission approved the Postal Service’s 

calculation of the assumed Federal income tax on 

its FY 2019 Competitive products’ income.202
34 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

Changes to Product Lists and the Mail 

Classification Schedule

The Postal Service and mail users may request 

that the Commission change the Market 

Dominant and Competitive product lists 

by adding new products, removing current 

products, or transferring products between the 

lists.203 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 3040.204

The product lists are published in the MCS, 

which also includes rates, fees, and product 

descriptions for each product. The Postal 

Service may propose changes to the MCS by 

filing a request, which the Commission reviews 

for compliance with its regulations.205 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.”206

In FY 2020, the Commission reviewed and 

approved three minor corrections to the MCS 

concerning Adult Signature Service, Priority Mail 

Express International, and the country price 

list for international mail.207 The Commission 

also approved requests by the Postal Service 

to change the product lists and MCS. The major 

dockets are discussed below.208

Return Receipt for Merchandise (RRM) Service

On December 10, 2019, the Postal Service filed 

a renewed request to remove RRM service 

from the MCS.209 RRM service “provide[d] retail 

and commercial mailers with the ability to 

obtain a mailing receipt and a return receipt 

postcard (with the recipient’s signature and 

date of delivery) for packages containing 

merchandise.”210 The Postal Service filed 

its initial request to remove RRM service in 

FY 2015.211 The Commission found that removing 

RRM service met the applicable requirements 

of 39 U.S.C. § 3642 and the Commission’s 

regulations.212 It conditionally approved the 

request subject to adjustments to the unused 

rate adjustment authority for the Special Services 

class.213 In response, the Postal Service notified 

the Commission that it would indefinitely defer 

the removal of RRM service.214

After a series of appeals, the D.C. Circuit vacated 

the Commission’s previous orders on the removal 

of RRM service.215 The court concluded that 39 

U.S.C. § 3642 was a “sufficient and complete 

mechanism” for considering requested changes 

to the product lists and that removing a product 

from the product lists does not constitute a rate 

adjustment.216 Because it had been more than 

a year since the D.C. Circuit issued its decision, 

and the Postal Service had not indicated a 

renewed intent to discontinue RRM service, 

the Commission closed the docket on August 

29, 2019.217 The Commission held that it would 

evaluate any future requests to remove a product 

from the MCS in light of the court’s decision.218

In its renewed request and motion to reopen 

the docket, the Postal Service stated that the 

Commission already held that removing RRM 

service from the MCS complies with 39 U.S.C. 

§ 3642 and the Commission’s regulations.219 It 

also confirmed that there had been no material 

changes concerning RRM service since 2015 

that would require the Commission to revisit its 

initial findings.220 After evaluating the request 

and considering the comments received, the 

Commission approved removing RRM service 

from the MCS and revised the MCS accordingly.221
CHAPTER III | 35

Customized Postage

On May 1, 2020, the Postal Service filed a 

request to remove Customized Postage from 

the Market Dominant product list and revise 

the MCS accordingly.222 Customized Postage 

allows “authorized vendors [to] offer customers 

the ability to personalize postage indicia using 

the customer’s own images or text.”223 The 

Postal Service explained that demand and 

revenue for Customized Postage products have 

steadily declined in recent years, and eligibility 

requirements for the program have caused 

customer complaints and legal disputes.224

After analyzing the filings, the CHIR response, 

and the comments received, the Commission 

approved the request because it complied 

with applicable statutory and regulatory 

requirements.225 The Commission found that 

because the Postal Service cannot create an 

unfair competitive advantage against itself, 

eliminating Customized Postage does not 

constitute an abuse of market power.226 It 

concluded that “[g]iven the lack of market 

power abuse by the Postal Service and after 

consideration of the available alternatives for 

postage and customization of mailings, the 

Commission has determined that the Postal 

Service has met the statutory and regulatory 

requirements for product removal.”227 The 

Commission removed Customized Postage from 

the Market Dominant product list and revised the 

MCS accordingly.228

International Mail

In FY 2020, the Postal Service filed several 

requests to change the product lists and MCS 

that relate to international NSAs and the Inbound 

Letter Post product.

NSAs. On December 13, 2019, the Postal Service 

filed a request to transfer five international 

Market Dominant NSAs from the Market 

Dominant to the Competitive product list.229

The request proposed to remove these five 

NSAs from the Market Dominant product list 

and add them to the Competitive product 

list under the umbrella product Inbound 

Competitive Multi-Service Agreements with 

Foreign Postal Operators 1.230 After analyzing 

the filings and considering comments received, 

the Commission found that the transfer 

request complied with the requirements 

of 39 U.S.C. §§ 3642 (product list changes) 

and 3633 (Competitive products).231 The 

Commission also found that because the NSAs 

were functionally equivalent to the baseline 

agreements for the umbrella product Inbound 

Competitive Multi-Service Agreements with 

Foreign Postal Operators 1, the NSAs could be 

consolidated into this product.232

Inbound Letter Post. Inbound Letter Post consists 

of international mail that is mailed from foreign 

countries and is delivered in the United States.233

Inbound Letter Post is divided into three shapes: 

small letters and cards, large letters or “flats,” 

and small packets and bulky letters.234 Foreign 

postal operators reimburse the Postal Service for 

delivering Inbound Letter Post items at rates called 

terminal dues, which are set by the UPU.235

Terminal dues for Inbound Letter Post have 

long been a concern of the Commission and 

PHOTO COURTESY USPS
36 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

other postal stakeholders because they have 

historically not covered the Postal Service’s costs 

for delivery.236 In FY 2018, President Donald 

J. Trump issued a presidential memorandum 

directing the Secretary of State to seek 

agreement to reform the UPU terminal dues 

system to ensure that prices are consistent with 

the policies outlined in the memorandum.237

The White House Press Secretary subsequently 

issued a statement noting that sufficient progress 

had not been made on reforming the UPU 

terminal dues system.238 In this statement, the 

President concurred with the State Department’s 

recommendation to adopt self-declared rates for 

terminal dues no later than January 1, 2020.239

The State Department also notified the UPU that 

the United States would withdraw in 1 year.240

In response to the notice of withdrawal, the 

UPU held its Third Extraordinary Congress 

in September 2019 and adopted proposals 

authorizing the Postal Service to charge selfdeclared rates for Inbound Letter Post small 

packets effective July 1, 2020.241 As a result, the 

United States withdrew its notification that it 

would leave the UPU.242

On October 29, 2019, the Postal Service filed 

with the Commission proposed self-declared 

rates that would be implemented on July 1, 

2020.243 On November 20, 2019, the Postal 

Service filed a motion to implement the transfer 

of Inbound Letter Post small packets from the 

Market Dominant to the Competitive product 

list effective January 1, 2020.244 The Commission 

reviewed the motion along with the Postal 

Service’s proposed self-declared rates. After 

analyzing the filings and considering comments 

received, the Commission granted the motion and 

approved adding a new product called Inbound 

Letter Post Small Packets and Bulky Letters to 

the Competitive product list effective January 1, 

2020.245 The Commission also approved proposed 

rates for this product effective July 1, 2020.246

The Postal Service filed the self-declared rates 

for Inbound Letter Post Small Packets and 

Bulky Letters under seal and requested that the 

Commission treat these rates as non-public.247

On March 9, 2020, the Commission issued a 

final determination finding that these rates 

should be unsealed.248 It found that the Postal 

Service did not meet its burden of persuasion 

to demonstrate that the rates should be nonpublic.249 The Commission stated that unsealing 

the rates “will substantially further the public 

interest” and that it was unlikely that disclosing 

the rates would result in commercial harm to the 

Postal Service.250 It directed the Postal Service 

to publicly file the rates 7 days after the UPU 

publishes them, which the Postal Service did on 

April 6, 2020.251

The Postal Service also filed with the 

Commission proposed self-declared rates for 

Inbound Letter Post Small Packets and Bulky 

Letters effective January 1, 2021.252 The Postal 

Service filed the proposed rates under seal and 

requested that the Commission afford these 

rates non-public treatment.253 After analyzing 

the filings and considering comments received, 

the Commission approved the proposed rates 

for Inbound Letter Post Small Packets and 

Bulky Letters on May 8, 2020, finding that they 

complied with the statutory and regulatory 

requirements for Competitive products.254 On 

June 3, 2020, the Commission issued a final 

determination finding these rates should be 

unsealed and ordered the Postal Service to file 

them publicly 7 days after the UPU published 

them.255 The Postal Service filed these rates 

publicly on July 20, 2020.256
CHAPTER III | 37

Public Inquiries

Public inquiry dockets are established by the 

Commission to provide a venue to explore 

issues of general interest. Three public inquiry 

dockets were before the Commission in FY 2020 

that dealt with matters related to service 

performance, the value of the postal and mailbox 

monopolies, and city carrier costs.

Service Performance

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.257 Service performance for Market Dominant 

products is measured using SPM systems. In 

FY 2018, the Commission conditionally 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.258 In FY 2018 and FY 2019, 

the Commission issued two orders conditionally 

approving modifications to the internal SPM 

systems.259 The Postal Service began using data 

generated from the new SPM systems in the first 

quarter of FY 2019 to fulfill the statutory and 

regulatory requirements for service performance 

measurement of the affected products.

On June 12, 2020, the Postal Service filed a 

request seeking final approval to use the internal 

SPM systems as the official measurement system 

for service performance reporting for certain 

Market Dominant products and services.260

The Postal Service asserted that it satisfied 

the conditions described in previous orders.261

On July 1, 2020, the Commission issued an 

order finding that the Postal Service satisfied 

the Commission’s directives for conditional 

modifications described in previous orders.262

The Commission granted the request “subject 

to the continuation of the external auditing 

program and the inclusion of appropriate 

explanations in the first annual compliance 

report based on data from SPM” for the specific 

products at issue.263

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.264 The Annual 

Report includes a separate estimate of the value 

of the mailbox monopoly alone.265 The letter 

monopoly is the Postal Service’s exclusive right 

to carry and deliver most addressed, paper-based 

correspondence.266 The mailbox monopoly is the 

Postal Service’s exclusive right to deliver to and 

collect from mailboxes.267

On October 1, 2019, the Commission initiated 

a public inquiry docket to evaluate the 

methodology for estimating the value of the 

postal and mailbox monopolies.268 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.269 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.”270 Five 

CHIRs were issued, and six comments were 

received. This docket is currently pending before 

the Commission.
38 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

City Carrier Costs

In FY 2017, the Commission established Docket 

No. PI2017-1 to evaluate the Postal Service’s 

progress in its ongoing efforts to update its 

city carrier cost models and data collection 

capabilities as required by the Commission.271

This docket investigates “the feasibility of a 

top-down, single-equation model to improve 

the Postal Service’s variability estimates of city 

carrier cost drivers.”272 The Commission issued 

several CHIRs and provided an opportunity for 

interested persons to comment.273

On November 2, 2018, the Commission 

issued an interim order in this proceeding. 

The Commission stated that based on the 

CHIR responses and the comments received, 

additional data are necessary to evaluate 

whether the Postal Service’s city carrier costing 

models can be improved.274 Accordingly, the 

Commission directed the Postal Service to 

provide an expanded dataset of city carrier 

delivery data, as well as report quarterly on the 

status of developing the expanded dataset.275

In FY 2019, the Postal Service began providing 

data and status reports as directed by the 

interim order. This proceeding is currently 

pending before the Commission.

Proposals to Change Analytical Principles

Analytical principles are theories or assumptions 

the Postal Service applies when producing reports 

it submits to the Commission each year.276 In these 

reports, the Postal Service must only use accepted 

analytical principles, which are the analytical 

principles the Commission applied in the most 

recent ACD unless a different analytical principle 

is approved through a Commission proceeding.277

The Commission’s rules allow any interested 

person, including the Postal Service and a Public 

Representative, to petition the Commission to 

initiate proceedings to consider proposals to 

change an accepted analytical principle.278 These 

proceedings, which are filed in rulemaking 

dockets, are intended to improve the quality, 

accuracy, or completeness of data or data analysis 

in the reports the Postal Service submits each year 

to the Commission.279

During FY 2020, the Commission considered 

15 Postal Service proposals to change various 

accepted analytical principles and 1 proposal 

filed by United Parcel Service, Inc. (UPS). The 

Commission issued final orders for 13 of the 

proposals. At the end of FY 2020, three proposals 

were pending before the Commission.

Docket No. RM2019-16 (Proposal One). In this 

docket, the Postal Service sought to revise the cost 

attribution procedures for Special Purpose Routes 

(SPRs) used in the Cost and Revenue Analysis 

Report.280 Proposal One was based on a new study 

of SPR costs that used operational carrier data to 

reflect the current structure of SPR activities.281

The Postal Service reported that approving 

Proposal One would result in two primary cost 

shifts.282 First, costs for Competitive products 

would increase and costs for some Market 

dominant products would decrease.283 Second, 

costs associated with packages would increase 

and costs for letters and flats would decrease.284

The Postal Service used data from the FY 2018 

ACR to estimate the impact of Proposal One.285

The Postal Service reported that Proposal One 

would result in an increase of $124.7 million 

in attributable costs for domestic Competitive 

mail products and in a decrease of $67.8 million 

in attributable costs for domestic Market 

Dominant mail products.286 The overall impact on 

attributable costs for domestic products would 

be an increase of approximately $57.0 million.287

On January 14, 2020, the Commission approved 

Proposal One with some modifications.288 The 
CHAPTER III | 39

Commission found that the new SPR costing 

study reflects how SPR activities have changed 

in the more than 20 years since the special 

study underlying the existing methodology 

was conducted.289 The Commission found that 

the new SPR costing study is an improvement 

in part because it uses operational data, where 

available, instead of survey data, which is likely 

to enhance the quality of the methodology.290

The Commission also found it appropriate that 

the Postal Service developed new cost pools to 

reflect operational realities of SPR activities.291

The Commission found the applied econometric 

models to be an improvement, but modified the 

specifications of the delivery equations.292

Docket No. RM2020-1 (Proposal Nine). In this 

docket, the Postal Service sought to update the 

methodology for estimating facility-related 

costs.293 The existing methodology for allocating 

facility-related costs to products used input 

data from a 1999 study presented in Docket No. 

R2005-1.294 The Postal Service had applied the 

existing methodology in subsequent ACR dockets 

and included changes that reflected facility 

space usage changes that occurred each fiscal 

year since 2005.295 In FY 2016, the Postal Service 

Office of Inspector General (OIG) issued an audit 

report recommending that the Postal Service 

conduct a new study on facility space usage.296

The Postal Service conducted this study in 2018 

and 2019 and incorporated data from that study 

in Proposal Nine.297

In FY 2018, facility-related space provision and 

space support costs accounted for $4.7 billion, or 

6.3 percent of total costs.298 Compared to Docket 

No. ACR2018, Proposal Nine would increase total 

domestic Market Dominant mail attributable 

costs by $127.3 million and decrease total 

domestic Market Dominant services attributable 

costs by $303.8 million.299 Combined, overall 

total domestic Market Dominant attributable 

costs would decrease by $176.5 million, and total 

domestic Competitive attributable costs would 

increase by $85.3 million.300 Total attributable 

costs for First-Class Mail and USPS Marketing 

Mail would increase by $69.2 million and $54.3 

million, respectively.301

The Commission approved Proposal Nine on 

August 17, 2020.302 It found that the more recent 

study better reflects current operations and 

functions that have changed in the past 20 

years since the 1999 study, which underlies 

the existing methodology.303 The Commission 

also viewed the more recent study as an 

improvement over the existing methodology 

because it uses more current operational 

data to update, validate, and adjust the space 

estimates, which significantly improves the 

quality, accuracy and completeness of the Postal 

Service’s facility-related space cost models.304

Docket No. RM2020-7 (Proposal Two). In 

this docket, the Postal Service proposed a 

methodology for updating city carrier regular 

letter and flat street delivery time variabilities 

annually to reflect changes in the relative 

volumes of letter and flat mail.305 The existing 

methodology computed regular delivery time 

variabilities using mean volumes that were 

typically calculated from data in a City Carrier 

Street Time study conducted in 2013.306

Proposal Two proposed to update the 

regular delivery time variabilities using more 

recent mean volumes that are calculated 

by forming the needed volume proportions using 

more recent data from the FY 2019 City 

Carrier Cost System (CCCS) volumes.307 This 

approach would keep total volumes of letters 

and flats the same as they were under the 

existing methodology and only change the 

relative proportions between volumes of letters 

and flats to reflect current volume patterns.308

The Postal Service would apply Proposal Two 

annually to update mean volumes that would 

make it possible to update the delivery marginal 

times and variabilities.309

To estimate the impact of Proposal Two, the 

Postal Service recalculated the regular delivery 

variabilities using FY 2019 CCCS volume 

proportions.310 Comparing current and new 

variabilities showed that for both delivery point 
40 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

sequence mail and cased mail, the new variabilities 

were approximately 0.5 percent higher than 

the current variabilities.311 By contrast, the new 

variabilities for sequenced mail and FSS flats were 

lower than the existing ones by 1.0 percent and 

1.1 percent respectively.312 The Postal Service also 

determined that the new variabilities reduced the 

gap between FSS and non-FSS unit street time costs 

for flats.313 The new variabilities also resulted in 

changes to the unit volume variable city carrier 

costs for nearly all products, the largest impact 

being on unit variable costs for High Density and 

Saturation Flats and Parcels, which decreased by 

1.2 cents per piece.314 For domestic Competitive 

mail products and services, Proposal Two would 

result in a decrease of unit volume variable costs of 

0.2 cents per piece on average.315

In Order No. 5583, the Commission approved 

Proposal Two because it improves the accuracy of 

unit volume variable costs by annually updating 

mean volumes and recalculating the city carrier 

regular delivery street time variabilities to reflect 

current volume proportions among delivered mail 

components.316 The Commission also found that 

annually updating mean volumes of city carrier 

regular delivery mail will result in more accurate 

regular delivery street time variabilities and will 

produce a more accurate estimate of city carrier 

volume variable costs until a new city carrier 

street time model is developed.317

Other proposals. In FY 2020, the Commission 

approved several other proposed methodology 

changes regarding domestic and international 

mail. Docket No. RM2019-12 (Proposal Seven) 

changed the methodology used to determine the 

share of supervisor costs on Sundays and holidays 

at customer service offices and to distribute these 

costs to products.318 The previous methodology had 

used the In-Office Cost System (IOCS) to estimate 

work time for supervisors.319 The methodology 

approved in Proposal Seven uses Time and 

Attendance Collection System (TACS) workhours 

to determine the share of costs for supervisors at 

customer service offices on Sundays and holidays.320

Then it distributes these costs to products using the 

same Product Tracking and Reporting distribution 

key used for city carriers delivering packages on 

Sundays and holidays.321

Docket No. RM2019-14 (Proposal Eight) modified 

the Parcel Select/Parcel Return Service mail 

processing and transportation cost models 

by incorporating Parcel Select Lightweight 

mailpieces.322 Docket No. RM2020-6 (Proposal 

One) changed the revenue, pieces, and weight 

(RPW) reporting methodology “for measuring 

the national totals of non-contract mailpieces 

in domestic parcel mail categories bearing 

PC Postage indicia from postage evidencing 

systems” by replacing sampling estimates with 

corresponding census transactional data.323

Docket No. RM2020-10 (Proposal Three) changed 

the IOCS methodology for sampling city carriers 

from the existing IOCS sampling methodology 

to an IOCS-Cluster sampling system, which the 

Commission found improved the overall accuracy 

of the city carrier cost estimates.324

The Commission also approved seven proposed 

methodology changes relating to international 

mail products. These changes included revising 

the following:

• The revenue distribution methodology for 

Inbound LC/AO mailpieces325

• The costing methodology for the distribution 

of PRIME enhanced payments326

• The costing methodology for the treatment of 

the non-NSA portions of International Priority 

Airmail and International Surface Airlift327

• The methodology for reporting revenue, 

pieces, and weight of Priority Mail 

Express International in the Postal Service’s 

RPW report328

• The International Cost and Revenue Analysis 

reporting methodology used to estimate 

international mail settlement expenses329

• The RPW reporting methodology “for 

measuring the national totals of non-contract 

mailpieces in outbound international product 

categories bearing PC Postage indicia from 

postage evidencing systems”330
CHAPTER III | 41

Pending proposals. Three proposals were open 

at the end of FY 2020. In Docket No. RM2020-2 

(Proposal Ten), the Postal Service proposed a new 

methodology for calculating the cost variability of 

postmasters.331 In Docket No. RM2020-13 (Proposal 

Six), the Postal Service proposed establishing a new 

methodology to determine the volume variability 

factors for the mail processing cost pools 

representing automated letter and flat 

sorting operations.332

In Docket No. RM2020-9 (UPS Proposal One), 

UPS requested that the Commission change 

how the Postal Service determines incremental 

costs and accounts for peak-season costs in its 

periodic reports.333 UPS alleged that existing 

costing models approved by the Commission 

fail to account for increased seasonal costs.334

On September 29, 2020, a video technical 

conference was held online in this proceeding 

to consider matters raised by UPS Proposal 

One.335 The Commission provided interested 

persons an opportunity to comment on matters 

raised by UPS Proposal One and at the technical 

conference.336 The Commission is currently 

considering comments received.

Other Proceedings

Several other proceedings were before the 

Commission in FY 2020: two complaint cases, 

two market tests, and one post office closing 

appeal. Each proceeding is described below.

Complaints

In FY 2020, the Commission adjudicated two 

complaint cases. 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 39.337 One 

requirement is 39 U.S.C. § 403(c), which states that 

the Postal Service must not “make any undue or 

unreasonable discrimination among users of the 

mails, nor shall it grant any undue or unreasonable 

preferences to any such user.” On December 23, 

2019, Randall Ehrlich filed a complaint alleging 

violations of section 403(c) based on an ongoing 

suspension of mail service to his home.338 The 

Postal Service filed a motion to dismiss, to which 

Mr. Ehrlich filed a response.339

On March 17, 2020, the Commission issued 

an order denying the motion to dismiss and 

finding that the complaint raised material 

issues of fact.340 It initiated limited formal 

proceedings by appointing a Presiding Officer to 

set a procedural schedule and conduct limited 

discovery to resolve disputed issues of fact.341

On May 22, 2020, the Postal Service again 

moved to dismiss the complaint because it had 

permanently restored residential mail delivery 

to Mr. Ehrlich’s mailbox.342 On June 2, 2020, 

the Presiding Officer issued an intermediate 

decision that included findings of fact and 

conclusions of law and addressed issues raised in 

the proceeding.343 She dismissed the complaint 

without prejudice.344 Consistent with applicable 

Commission rules, because no party filed an 

exception to the intermediate decision, it became 

the final Commission action as of July 2, 2020.345

However the Presiding Officer also allowed Mr. 

Ehrlich to request to reopen the case within 6 

months of that July 2, 2020 date if the Postal 

Service suspends mail delivery without sufficient 

justification during that time period.346

The Commission also adjudicated a complaint filed 

by the Greeting Card Association (GCA) alleging 

that the Postal Service’s rates for Single-Piece FirstClass Stamped and Metered Letter mail violated 

39 U.S.C. § 403(c) by illegally price discriminating 

against household mailers in favor of business 

mailers.347 GCA also alleged that these rates failed to 
42 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

achieve several objectives of the postal regulatory 

system, set out in 39 U.S.C. § 3622(b).348 The Postal 

Service, the National Postal Policy Council, and 

Pitney Bowes, Inc. filed motions to dismiss the 

complaint, to which GCA filed answers.349

On April 28, 2020, the Commission issued an 

order granting the Postal Service’s motion to 

dismiss the complaint with prejudice.350 The 

Commission explained that it had already 

considered and rejected GCA’s arguments about 

section 3622 in numerous prior Commission 

proceedings.351 Regarding violations of section 

403(c), the Commission stated that to succeed on 

this claim, GCA must pass a three-part test for 

evaluating whether price discrimination rises 

to the level of “undue or unreasonable.”352 GCA 

must establish that household mailers “have 

been offered less favorable rates or terms and 

conditions” compared to other mailers and are 

“similarly situated to the other mailer or mailers 

who have been offered more favorable rates or 

terms and conditions of service[.]”353 Also, there 

must be no rational or legitimate basis for the 

Postal Service to deny household mailers the 

more favorable rates or terms and conditions.354

The Commission applied this test and determined 

that GCA could not establish the third prong 

of the price discrimination test because the 

Postal Service has provided a reasonable 

rationale for offering the metered letter rate.355

Accordingly, the Commission dismissed the 

complaint with prejudice.356

Market Tests and Post Office Closing Appeals

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 first 

adding them to product lists.357 Before initiating 

a market test, the Postal Service must provide 30 

days advance notice to the Commission through 

a filing containing certain information.358 In 

FY 2020, the Postal Service filed notices of two 

market tests. 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.359

Extended Mail Forwarding provides customers 

who submit a permanent change-of-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 period.360 After analyzing 

the filings and considering comments received, 

the Commission authorized the market tests to 

proceed, finding that they complied with the 

applicable statutory and regulatory requirements 

in 39 U.S.C. § 3651 and 39 C.F.R. part 3045.361

The PAEA also permits any person served by a 

post office to appeal its closing or consolidation 

to the Postal Regulatory Commission.362 In 

FY 2020, the Commission reviewed one post 

office closing appeal filed by the City of Bellville, 

Georgia (GA) regarding the closing of the 

Bellville, GA post office.363 The Postal Service 

filed a motion to dismiss the appeal, and the City 

of Belleville filed a brief opposing it.364

On August 27, 2020, the Postal Service filed a 

notice of its decision to pause the Belleville, GA 

post office closing.365 The Commission issued an 

order dismissing the appeal without prejudice, 

which allows persons served by the Bellville, 

GA post office to appeal its closure if and when 

the Postal Service establishes a revised date for 

closing the post office.366
CHAPTER III | 43

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.367 In FY 2020, the 

D.C. Circuit issued several decisions involving 

Commission orders, which are discussed below.

Inbound Letter Post Unsealing

As part of its FY 2018 ACR, the Postal Service 

filed under seal and applied for non-public 

treatment of a library reference containing data 

on Inbound Letter Post.368 On April 12, 2019, 

the Commission issued its FY 2018 ACD, which 

included an analysis of Inbound Letter Post data 

in an accompanying library reference.369 Because 

the Commission’s library reference contained 

data that the Postal Service filed under seal, 

the Commission filed both its analysis and the 

underlying data under seal in Library Reference 

PRC-LR-ACR2018-NP3.370 Concurrently, the 

Commission issued a notice of its preliminary 

determination that it would not be appropriate 

to accord that library reference non-public 

treatment and that the materials should be 

unsealed.371 It provided interested persons an 

opportunity to comment.372

After considering comments received, the 

Commission issued an order directing that the 

library reference be unsealed.373 It determined 

that disclosure of the aggregated Inbound Letter 

Post data and analysis would substantially 

further the public interest in maintaining 

financial transparency of the Postal Service.374

The Commission explained that the public 

interest in maintaining the Postal Service’s 

financial transparency “outweigh[ed] the nature 

and extent of any likely commercial harm that 

may result from disclosing the aggregated 

historical data.”375

The Postal Service filed a petition for review 

appealing this order to the D.C. Circuit.376

The Commission stayed release of the data 

under seal pending the D.C. Circuit’s review.377

On June 30, 2020, the D.C. Circuit issued its 

decision denying the petition for review and 

finding that the Commission’s order was 

neither contrary to law nor arbitrary and 

capricious.378 The D.C. Circuit found that the 

Commission reasonably ordered disclosure of 

the library reference, and the Postal Service’s 

arguments “fail to overcome the deference 

[the court] owes to the Commission’s reasoned 

decisions.”379 It stated it was “reasonable for 

the Commission to consider the extent to 

which commenters have expressed an interest 

in disclosure, and indeed, the Administrative 

Procedure Act require[d] the Commission to 

address significant public comments.”380

On September 1, 2020, Library Reference 

PRC-LR-ACR2018-NP3 was unsealed and 

posted on the Commission’s website as a public 

library reference.381

In Docket No. ACR2019, the Commission made 

a similar determination regarding a nonpublic library reference filed with the FY 2019 

ACD that also contained Inbound Letter Post 

data.382 The Commission stated it was “not 

appropriate to accord non-public treatment to 

the data and analysis” in the library reference 

and directed that these materials should 

be unsealed.383 The FY 2019 data also were 

unsealed contemporaneous with issuing the 

Commission’s determination regarding the 

FY 2019 ACD data.384
44 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

Review of Appropriate Share Requirement

The PAEA requires that Competitive products 

“collectively cover what the Commission 

determines to be an appropriate share of the 

[Postal Service’s] institutional costs ... .”385 At 

least every 5 years, the Commission must review 

the appropriate share requirement to decide 

whether any changes are necessary.386 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.”387 On January 3, 2019, the 

Commission adopted final rules for annually 

calculating Competitive products’ appropriate 

share of institutional costs.388

UPS filed a petition for review appealing the final 

rules to the D.C. Circuit.389 The court granted the 

petition for review, finding that the Commission 

had not adequately explained how the attribution 

of costs through the use of “reliably identified 

causal relationships” can coincide with costs 

“uniquely or disproportionately associated with 

any [C]ompetitive products.”390 The court also 

stated that when setting the appropriate share, 

the Commission did not adequately consider 

“the degree to which any costs are uniquely 

or disproportionately associated with any [C]

ompetitive products” as required by 39 U.S.C. § 

3633(b).391 The court remanded the case to the 

Commission to address these issues consistent 

with the court’s decision.392 The remand is 

currently pending before the Commission.

First-Class Mail Rate Adjustments

The D.C. Circuit issued a decision regarding 

Order No. 4875, in which the Commission 

found that the Postal Service’s planned Market 

Dominant rate and MCS changes were consistent 

with applicable law.393 In FY 2019, Douglas F. 

Carlson filed a petition for review appealing the 

portion of Order No. 4875 related to First-Class 

Mail to the D.C. Circuit.394 On September 13, 

2019, the D.C. Circuit issued its opinion granting 

the petition for review and vacating the portion 

of Order No. 4875 addressing rate adjustments 

for First-Class Mail.395 Specifically, the court 

concluded that Order No. 4875 failed to provide 

an adequate explanation for the Stamped Letters 

price increase, address the statutory objectives 

and factors relevant to the Stamped Letters price 

increase, and respond to comments challenging 

the Stamped Letters price increase under the 

statutory objectives and factors.396

In accordance with the D.C. Circuit’s decision, 

the Commission issued Order No. 5285, 

which applied the requirements of the PAEA, 

the Administrative Procedure Act,397 and 

the Commission’s regulations to determine 

whether the First-Class Mail rate adjustments 

were consistent with applicable law.398 After 

considering the objectives and factors of 39 U.S.C. 

§ 3622(b) and (c), the reasons for the Stamped 

Letters price increase, and the comments 

received, the Commission concluded that the rate 

adjustments for First-Class Mail were consistent 

with applicable law.399

Other Court of Appeal Cases

In FY 2019, the Commission issued an order 

dismissing a complaint filed by Mr. Ehrlich that 

alleged an ongoing suspension of mail service 

to his home and sought specified actions to 

resolve his complaint.400 Mr. Ehrlich appealed 

the Commission’s order to the D.C. Circuit.401

On December 10, 2019, the D.C. Circuit issued a 

judgment denying the petition for review, finding 
CHAPTER III | 45

that the Commission provided a “well-reasoned” 

justification for its decision.402 It stated that Mr. 

Ehrlich “failed to show that the Postal Service 

has offered more favorable rates or terms and 

conditions [of mail service] to similarly situated 

individuals.”403 The D.C. Circuit concluded 

that the Commission’s decision withstood its 

deferential arbitrary-and-capricious standard 

of review.404

The D.C. Circuit also denied a motion filed by 

Elaine Mittleman to recall a mandate from an 

earlier court decision. In FY 2014, the D.C. Circuit 

issued a decision denying petitions for review 

filed by Ms. Mittleman and two other petitioners 

regarding three Commission orders dismissing 

post office closing appeals.405 The D.C. Circuit 

issued a mandate finalizing the decision on 

October 29, 2014.406 On September 25, 2020, Ms. 

Mittleman filed a motion with the D.C. Circuit 

to recall the mandate, which the Commission 

opposed.407 On October 23, 2020, the D.C. Circuit 

issued an order denying Ms. Mittleman’s motion 

without issuing an opinion.408

The Postal Service and other parties filed 

petitions for review appealing the Commission’s 

final rules adopting changes to the regulations 

governing the Market Dominant Rate System.409 

These appeals are pending before the D.C. Circuit.

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.410 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.411 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.412

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 2020.413

Pursuant to section 407(c)(1) and the 

Commission’s regulations, the Commission 

established Docket No. IM2020-1 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.414 The Commission 

subsequently posted proposals and a background 

document for public comment.415 Because the 

UPU later postponed the 27th UPU Congress due 

to the COVID-19 pandemic,416 the Commission 

stated it will provide a revised comment deadline 

once the 27th UPU Congress is rescheduled.417
46 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

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.418

The postal monopoly is the Postal Service’s 

exclusive right to carry and deliver certain types 

of mail and deposit mail into mailboxes.419 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.420

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.

CHAPTER IV | Universal Service Obligation 

 and Postal Monopoly

PHOTO COURTESY USPS
CHAPTER IV | 47

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

FY 2019 FY 2018 FY 2017 FY 2016 FY 2015

Postal Services to Areas of the Nation the Postal 

Service Would Not Otherwise Serve 0.53 0.50 0.46 0.39 0.35

Estimated Revenue Not Received Due to Free 

or Reduced Rates 1.89 1.79 1.71 1.64 1.63

Other Public Services or Activitiesa 2.91 2.92 2.35 2.37 2.26

TOTAL 5.32 5.21 4.53 4.40 4.24

a The FY 2018 and FY 2019 figures include the net cost of the Postal Inspection Service. The sum of columns may not equal total due to rounding.

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:421

• 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

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 2015 to FY 2019.422

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.423

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 U.S.C.] 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)[.]424

The Commission determines these costs by 

combining the estimated costs of maintaining 

small post offices, the Alaska Air Subsidy, and 

Group E Post Office Boxes. Table IV-2 compares 

the costs of each one from FY 2015 to FY 2019.

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 2015 and 
48 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

FY 2019. Until FY 2018, this increase was mainly 

due to the annual increase in clerk costs for 

maintaining small post offices. 

In FY 2019, the increase was due to the increase 

in both the Alaska Air Subsidy and clerk costs for 

maintaining small post offices.

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

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

FY 2019 FY 2018 FY 2017 FY 2016 FY 2015

Maintaining Small Post Offices 358 340 309 245 209

Alaska Air Subsidy 135 120 114 113 107

Group E Post Office Boxes 35 35 34 34 33

TOTAL 527 496 458 392 349

*The sum of columns may not equal total due to rounding.

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.”425 The Postal 

Service uses Cost Ascertainment Group (CAG) 

classifications A to L to categorize post offices 

based on revenue generated.426 Small post 

offices are those that fall within CAG K and

L classifications.427

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 Post Office 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 Post Office Box.428

Table IV-2 lists the estimated costs of 

maintaining small post offices from FY 2015 

to FY 2019. 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.429

Table IV-3 disaggregates the costs of maintaining 

small post offices by component and illustrates 

the recent large shifts among these components. 

It also illustrates changes in employee categories 

staffing CAG K and L post offices. Total 

Postmaster direct and indirect costs increased 

46 percent between FY 2015 and FY 2019, from 

$26 million to $38 million. Total CAG L leave 

replacement430 costs declined 80 percent from 

$102 million in FY 2015 to $20 million in FY 2019. 

Conversely, beginning in FY 2015, CAG K clerk 

costs have increased substantially, from $176 

million in FY 2015 to $408 million in FY 2019. 

Most of the total increase is made up of increased 

salary and benefit costs.
CHAPTER IV | 49

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

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

Selected CAG K and L Post Offices 

Annual Operating Costs FY 2018 FY 2018 FY 2017 FY 2016 FY 2015

CAG K and L Postmastersa 38 35 30 25 26

CAG L Leave Replacements 20 22 21 29 102

CAG K Clerks 408 384 358 289 176

Total Potential Operating Costs Saved (If 

CAG K and L Post Offices Closed) 466 441 408 343 304

Annual Estimated Cost Saving 

Adjustments (If CAG K and L Post 

Offices Closed)

Rural Carrier Now Provides Retail 

Services Costs b 23 19 18 18 17

Rural Carrier Now Provides Delivery 

Service (CAG K and L Post Office Boxes No 

Longer Available)c

44 43 42 42 42

CAG K and L Post Office Boxes Revenue 

Foregone d 42 40 38 37 36

Total Annual Cost Savings Adjustment 109 101 99 97 96

Cost of Maintaining Small Post Offices

(Potential Operating Costs Saved Less 

Cost Savings Adjustments)

358 340 309 245 209

Note: The sum of individual row components may not equal totals due to rounding.

a

 Consistent with the USO Report, previous Annual Reports used the approximated total CAG K and L postmaster salary costs (along with 

overhead and other personnel and non-personnel related costs) to represent the total potential operating costs saved if CAG K and L post 

offices closed. Postmaster costs at CAG K and L post offices were derived by using the postmaster salary costs from the Postmaster Position 

Schedule CAG group proportions to distribute total postmaster (less CAG L leave replacements) costs to the CAG K and L group.

b

 The annual number of CAG K and L retail transactions was approximated using the most currently available data: the FY 2010 retail transactions per revenue dollar and the FY 2013 POStPlan revenues in Docket No. N2012-1. The annual number of CAG K and L retail transactions 

was estimated to be approximately 142 million and was used in this calculation for the fiscal years shown in the table.

c

 FY 2010 CAG K and L Post Office Box volumes were used to estimate the number of new delivery points (for those CAG K and L Post Office 

Boxes no longer available if the post offices were to close).

d

 The FY 2010 CAG K and L Post Office Box volumes were used with the respective current fiscal year Post Office Box unit revenue (billing 

determinants) to estimate fiscal year CAG K and L Post Office Boxes revenue foregone. Sources: Postmaster Position Schedule CAG Group 

Proportions: Library Reference 32 in Docket Nos. ACR2015, ACR2016, ACR2017, ACR2018, and ACR2019 (CRA “B” Workpapers, “I-Forms” 

workbook, “I-CS01.0.2” tab).

Postmasters, CAG L Leave Replacement and Clerks CAG K costs: Library Reference 5 in Docket Nos. ACR2015, ACR2016, ACR2017, ACR2018, and 

ACR2019 (Cost Segments and Components Reconciliation to Financial Statement and Account Reallocation, “seg 1” and “seg 4” tabs in workbook).

Rural Mail Count: Library Reference 40 in Docket Nos. ACR2015, ACR2016, ACR2017, ACR2018, and ACR2019.
50 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

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.431 The Alaska Air Subsidy increased 

from $120 million in FY 2018 to $135 million in 

FY 2019.432

GROUP E POST OFFICE BOXES

Group E Post Office Boxes are provided free of 

charge to customers when the Postal Service 

does not offer carrier delivery to their physical 

address.433 To meet its USO delivery obligation,434

the Postal Service makes Group E Post Office 

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.”435 In FY 2011, the 

Commission approved treating the cost of 

providing Group E Post Office 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.436

Consequently, the Commission included the cost 

of Group E Post Office Boxes, which are primarily 

facility-related, in estimating the USO Cost. 

In FY 2019, servicing Group E Post Office Boxes 

cost approximately $35 million.

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.]”437 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 2015 and FY 2019.

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.438 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 2019, preferred rate discounts net of costs 

were $1.215 billion.
CHAPTER IV | 51

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

FY 2019 FY 2018 FY 2017 FY 2016 FY 2015

Preferred Rate

Discounts Net of Costsa 1,215 1,172 1,104 1,105 1,116

Periodicals Losses 671 614 609 537 512

TOTAL 1,886 1,786 1,713 1,642 1,628

a The FY 2018 and FY 2019 Preferred Rate Discounts Net of Costs figures include In-County Periodicals. At the time of the USO Report, InCounty Periodicals had little impact on the results of that analysis and were not included. 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 18-19, n.20).

PERIODICALS LOSSES

Periodicals Losses are the annual amount by 

which Periodicals’ attributable cost exceeds 

revenue.439 The PAEA’s price cap does not allow the 

Postal Service to fully recover Periodicals Losses 

through rate increases.440 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 although there was 

some variation year-to-year, Periodicals Losses 

were about half a billion dollars each year 

between FY 2015 and FY 2016, and increased 

from $614 million in FY 2018 to $671 million in 

FY 2019. This shortfall represents 56 percent 

of Periodicals revenue in FY 2019. Revenue 

from Periodicals only covered 64 percent of the 

attributable cost of the Periodicals class. 

The Periodicals class has not covered its 

attributable cost since the PAEA was enacted.441

The Commission recently took steps to address 

this issue by finalizing rules adopting changes 

to the regulations governing the Market 

Dominant Rate System.442 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.443 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 2019 ACD, the Commission 

directed the Postal Service to provide an 

updated version of the Periodicals Pricing 

Report in its FY 2020 ACR and include an 

analysis of how the pricing in Docket No. 

R2020-1 impacted the cost, contribution, and 

revenue of Periodicals in FY 2020, and whether 

the new pricing improved the efficiency of 

Periodicals pricing in FY 2020.444
52 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

Table IV-5: Other Public Services or Activities the Postal Service Would Not Provide 

But for Legal Requirements ($ Millions)

Public Service or Activity FY 2019 FY 2018 FY 2017 FY 2016 FY 2015

Six-Day Delivery 2,231 2,259 2,204 2,191 2,074

Uniform First-Class Mail Rates 86 99 52 78 86

Uniform Media Mail/Library Mail Rates 124 97 99 102 101

Postal Inspection Service (Net Cost)a 471 462 N/A N/A N/A

TOTAL 2,912 2,917 2,355 2,371 2,261

a The Commission began including the net cost of the Postal Inspection Service in FY 2018.

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.”445 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 2015 to FY 2019.

SIX-DAY DELIVERY

Since 1984, appropriations bills have included a 

provision requiring the Postal Service to continue 

providing Six-Day Delivery.446 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 

2015 to FY 2019.447 In FY 2019, the estimated cost 

of providing Six-Day Delivery was approximately 

$2.231 billion, a slight decrease from the 

estimated FY 2018 cost of $2.259 billion.

UNIFORM RATES

Rates for First-Class Mail must be uniform 

throughout the United States.448 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 

$99 million in FY 2018 to $86 million in FY 2019.

Media Mail/Library Mail rates must be 

uniform for mail of the same weight and must 

not vary with the distance transported.449

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 
CHAPTER IV | 53

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 

Mail rates were not uniform. 

In FY 2019, the estimated cost of providing uniform 

Media Mail/Library Mail rates was approximately 

$124 million, an increase from the estimated 

FY 2018 cost of $97 million. The increase in cost 

between FY 2018 and FY 2019 was due primarily to 

a larger decrease in the unit contribution of Media 

Mail/Library Mail in FY 2019.450

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).451 The Postal Inspection 

Service enforces over 200 federal laws that 

relate to crimes involving the postal system, its 

employees, and its customers.452 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.”453 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.454 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 2019, the net cost of the Postal Inspection 

Service was approximately $471 million, a slight 

increase from the estimated FY 2018 net cost of 

$462 million.

Value of the Postal Monopoly

The mailbox monopoly is the Postal Service’s 

exclusive right to deliver to and collect from 

mailboxes.455 The letter monopoly is the Postal 

Service’s exclusive right to carry and deliver most 

addressed, paper-based correspondence.456 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.457 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.458

The Commission received six comments from 

postal stakeholders and is currently considering 

comments received and the most appropriate 

revisions to the methodology.459

The Commission uses the model described in 

the USO Report to update current estimates.460

The model assumes that the competitor will 
54 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

“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 

over 24 pages, and letters over 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.461 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.462 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.463 The FY 2015 through FY 2019 postal 

and mailbox monopoly estimates calculated 

using the base case model assumptions are 

presented in Table IV-6.

FY 2019a FY 2018a FY 2017 FY 2016 FY 2015

Postal Monopoly 4.72 4.53 5.34 5.68 5.45

Mailbox Monopoly 0.94 1.03 1.35 1.24 1.03

a

 FY 2018 and FY 2019 values are not comparable to values from FY 2015 through FY 2017. FY 2019 and FY 2018 values account 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. Without these implemented changes 

to the FY 2019 and FY 2018 monopoly calculation methodology, the postal monopoly estimates for FY 2019 and FY 2018 would be over 

$5 billion. The development of the postal and mailbox monopolies estimates for FY 2017 and earlier are consistent with the original 

methodology that included First-Class Presort Parcels with First-Class Presort Letters and First-Class Presort Flats. City carrier and rural 

carrier delivered mail volumes were not adjusted to respective fiscal year national estimates.

Table IV-6: Base Case Model Values of the Postal and Mailbox Monopolies464 ($ Billions)
CHAPTER IV | 55

This year, the Commission also presents the 

FY 2019 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 mid-range values).465

Table IV-7 illustrates the impact on the FY 2019 

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.466

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.

Table IV-7: FY 2019 Value of the Postal and Mailbox Monopolies467 ($ Billions)

Low Base Case High

Postal Monopoly 0.18a 4.72b 9.28c

Mailbox Monopoly 0.03d 0.94e 2.02f

a

 Discount 20%, Delivery Days 6, Entrant’s Cost Advantage 0%, Contestable Volume 50%

b

 Discount 10%, Delivery Days 3, Entrant’s Cost Advantage 10%, Contestable Volume 100%

c Discount 0%, Delivery Days 1, Entrant’s Cost Advantage 30%, Contestable Volume 150%

d

 Discount 20%, Delivery Days 6, Entrant’s Cost Advantage 0%, Contestable Volume 50%

e

 Discount 10%, Delivery Days 1, Entrant’s Cost Advantage 10%, Contestable Volume 100%

f Discount 0%, Delivery Days 1, Entrant’s Cost Advantage 30%, Contestable Volume 150%

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.468 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.469 As compared to the postal monopoly 

estimates in the USO Report, the largest dollar 

change in the estimated FY 2019 postal monopoly 

values are in the “high” model estimates ($7.10 

billion in the USO Report versus $9.28 billion 

in FY 2019) and the base case model estimates 

($3.43 billion in the USO Report versus $4.72 

billion in FY 2019).470 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 2019.

As compared to the mailbox monopoly 

estimates in the USO Report, the FY 2019 

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.471
56 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

Consumer Relations — 

Comments and Inquiries

Inquiries by Source

In Fiscal Year 2020, PAGR received a total of 6,435 comments 

and inquiries. The greatest portion of inquiries, questions, 

suggestions, and comments were received by phone and 

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

website. The remaining correspondence was submitted by 

fax, email, and hardcopy mail.

Quarter 1 2 3 4 TOTAL

Contact 2,036 941 1,176 2,282 6,435

Email 1,936 835 1,013 2,142 5,926

Phone 58 71 99 99 327

Letters 42 35 64 41 182

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 in addition to 

coordinating 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

PHOTO COURTESY USPS

56 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT
CHAPTER V | 57

Commission Order No. 195 directs the Postal 

Service to respond to rate and service inquiries 

forwarded to its 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 these 

inquiries. The reports are available on the 

Commission’s website.

Inquiries by Issue

Consistent with the prior reporting, missing 

packages, delayed, misdelivered, and undelivered 

mail remain the leading complaint types. There 

was also a slight increase in inquires related to 

collection box schedules.

Inquiries by Location

In FY 2020, the Postal Service was separated 

geographically by 7 area offices, and 70 district 

offices. A review of the inquiries referred to the 

Postal Service for escalated resolution revealed 

that an above average number originated in 

the Greater Indiana, Chicago, Capital, and Gulf 

Atlantic Districts.

District Number Received Top Issue

Greater Indiana 35 Collection Box Schedule

Chicago 29 Collection Box Schedule

Capital 23 Missing Packages 

Gulf Atlantic 19 Carrier not delivering mail

Atlanta 14 Delayed Packages 

Lakeland 14 Collection Box Schedule

Colorado/Wyoming 12 Carrier not delivering mail

South Florida 11 Carrier suspended delivery

Triboro 11 Misdelivered Mail

Northern New Jersey 10 Carrier not delivering mail

Top Issue Count

Collection Box Schedule 44

Delayed Mail 38

Missing Packages 31

Misdelivered Mail 20

Undelivered Mail 17

Employee Behavior 15

Retail Lobby 14

Mailbox Requirement 14

Missing Mail 14

Carrier Suspended Delivery 11
58 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

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 

OSA 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). Responsibilities include financial management, records 

management, human resources management, information technology, 

equal employment opportunity, and administrative support. 

CHAPTER VI | Administration

PHOTO COURTESY USPS

58 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT
CHAPTER VI | 59

Financial Management 

The Commission continues to cost-effectively 

and efficiently work within its budget. 

The Commission’s FY 2020 appropriation 

was $16,615,000. In FY 2020, personnel 

compensation accounted for 80 percent of 

expenditures, rent accounted for 13 percent 

of expenditures, and the remaining 7 percent 

of expenditures was for all other operating 

expenses including IT and communications. 

Figure VI-1 below shows the distribution 

of the Commission’s expenditures for FY 2020.

Records Management

In FY 2020, the Commission was committed 

to transparency, accountability, and open 

government through the administration of its 

records management program, including dockets, 

FOIA, and data governance. The Commission 

hosted a technical conference via video 

conferencing during the pandemic and posted 

the audio recording on the Commission’s website, 

www.prc.gov.

During the course of FY 2020, the Commission 

opened and reviewed 570 new dockets — an 

almost 25 percent increase over last year’s total 

— and processed 3,691 documents. FOIA requests 

are now primarily handled by the Office of the 

Figure VI-1: Postal Regulatory Commission, FY 2020 Annual Budget Expenditures

Personnel Compensation 

& Benefits

IT (including Contracting

 & Communications)

Other Operating 

Expenses Rent

Other Operating Expenses

IT 

(including Contracting 

& Communications)

Rent

13%

Personnel Compensation 

& Benefits

80%

5%

2%
60 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

General Counsel; all FOIA requests received 

responses within statutory deadlines in FY 2020. 

The Commission is in the process of developing 

a new electronic document system and 

implementing updated policies, which include 

aligning temporary and permanent electronic 

records with approved records schedules. 

Records management and data governance is 

of heightened importance in a remote work 

environment, so training for staff is under 

review, as is the Commission’s oversight of 

privacy issues.

Human Resources Management

The Commission’s workforce is its primary 

asset, and Goal 4 of the 2017-2022 Strategic 

Plan affirms its commitment to enhancing a 

system that fosters recruitment, development, 

and retention of a talented, skilled, diverse, and 

adaptable workforce. 

The Commission offers a flexible workplace, and 

provides the ability for employees to participate 

in its Alternative Work Schedule program and 

Telework program. During FY 2020, thirty-five 

percent of Commission staff participated in 

the Alternative Work Schedule program. Both 

situational and ad-hoc telework are integral parts 

of the Commission’s continuity of operations 

plan to ensure the Commission’s continued 

functioning during government closure or 

delay. Prior to the pandemic declaration in 

mid-March of 2020, 26 percent of Commission 

staff participated in situational telework, and 

a majority — 60 percent — teleworked on a 

regularly scheduled basis. After the pandemic 

declaration, the Commission converted quickly 

— within a week — to 100 percent telework, and 

staff continued to work remotely, and effectively, 

throughout the fiscal year. 

The Federal Employee Viewpoint Survey (FEVS) 

was developed by OPM to gauge how employees 

feel about their work environment. Although the 

results of the FY 2020 FEVS have been delayed due 

to the impact of the pandemic, the Commission has 

received high overall Employee Engagement Index 

scores and consistently shown that the employees 

rank the Commission as one of the best place to 

work in the Federal government.

Equal Employment Opportunity and Diversity

In FY 2020, the Commission continued its 

commitment to equal employment opportunity 

(EEO) in its initiatives to recruit, develop, and 

retain a skilled, high-achieving, and diverse 

workforce. Women and minorities accounted 

for 57 percent and 32 percent, respectively, 

of its workforce. Women filled 43 percent of 

the agency’s executive positions. In FY 2020, 

the Commission also established a Diversity 

& Inclusion Committee, whose mission is to 

support the Commission’s commitment to 

equal opportunity employment, facilitate the 

development and advancement of women and 

minorities, increase awareness of the diverse 

communities represented at the Commission, 

and provide events and activities that support 

the goal of a diverse and inclusive community. 

Over the course of FY 2020, the Commission 

had zero EEO complaints (formal and 

informal) filed. 
CHAPTER VI | 61

Information Technology

In response to new and emerging security 

threats, the Commission is enhancing its security 

practices and policies to better protect sensitive 

information, as well as to educate employees 

about the importance of safeguarding the 

Commission’s IT infrastructure, applications, and 

data. During FY 2020, the Commission hired a 

new cybersecurity manager, who then initiated 

a security assessment of the agency’s general 

support system. Going forward, the Commission 

will prioritize and address these security 

findings, specifically focusing on high-risk 

areas of concern, and will take the appropriate 

steps to improve the Commission’s security 

program. This assessment will also inform the 

Commission’s privacy program development. 

The Commission is pleased to report that during 

FY 2020, there were no major security incidents 

to report nor any major incidents related to 

personally identifiable information (PII). In 

addition, the Commission updated and improved 

its Continuity of Operations Plan and developed 

a Pandemic Response Plan in response to the 

impact of the COVID-19 pandemic; both plans 

were created to ensure the continuity of the 

Commission’s essential functions across a wide 

range of potential emergencies. The Commission 

continues to collaborate with the Department of 

Homeland Security (DHS) to identify and address 

risks, and to improve its cybersecurity posture.

PHOTO COURTESY USPS
62 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

Endnotes

1 Postal Rate Commission, Report to the Congress: 1998 International Mail Volumes, Costs and Revenues, June 30, 1999, available at: https://www.prc.

gov/docs/9/9372/redactedreport.pdf (accessed January 7, 2021).

2 This number does not include amendments or modifications to existing NSAs.

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

4 39 U.S.C. § 3651(a).

5 39 U.S.C. § 3642(b)(1). “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).

6 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).

7 39 U.S.C. § 3642(b)(1). Examples of Competitive products include Priority Mail, Priority Mail Express, and First-Class Package Service.

8 39 U.S.C. § 3622(b).

9 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.

10 39 U.S.C. § 3651(a).

11 39 U.S.C. § 3622(d)(3).

12 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).

13 Docket No. RM2017-3, Order on the Findings and Determination of the 39 U.S.C. § 3622 Review, December 1, 2017 (Order No. 4257). This order was appealed to the United States Court of Appeals for the District of Columbia. See “Court of Appeals Cases” section below.

14 Order No. 4257 at 17.

15 Id. at 22-23.

16 Id. at 3-4.

17 Id. at 48.

18 Id. at 148.

19 Id. at 248.

20 Id. at 4-5, 250.

21 Docket No. RM2017-3, Notice of Proposed Rulemaking for the System for Regulating Rates and Classes for Market Dominant Products, December 1, 

2017 Order No. 4258).

22 Order No. 4258 at 34.

23 Id. at 38-45, 46-73.

24 Id. at 76-77, 84-85. Non-compensatory products do not cover their attributable costs.

25 Id. at 93-96. Passthroughs represent the relationship between the amount of the workshare discount and the avoided cost as a percentage. A workshare discount’s passthrough percentage is determined by dividing the workshare discount by costs avoided and expressing the result as a percentage.

26 Id. at 27, 98-106.

27 Docket No. RM2017-3, Revised Notice of Proposed Rulemaking, December 5, 2019 (Order No. 5337).

28 Order No. 5337 at 11. 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).

29 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).

30 Order No. 5763 at 72-73.

31 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.

32 Order No. 5763 at 100.

33 Id. at 21.

34 Id.

35 Id. Specifically, when filing the Annual Compliance Report, the Postal Service must “provide the input data and calculations used to produce the annual 

[Total Factor Productivity] estimates, and provide a description of and reason for any changes to the service standards (including relevant business 

rules), or certify that no changes have occurred.” Id.

36 Id. at 159-160, 190-191.

37 Id. at 196.

38 Id. at 182.

39 Id. at 186.

40 Id. at 198.

41 Id. at 19.

42 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.

43 Id. at 200.

44 Id. at 228.

45 Id.

46 Id. at 24, 265.

47 Id. at 242.

48 Id. at 242-244.

49 Id. at 23, 267.

50 Id. at 267.

51 Docket No. RM2019-13, Notice of Proposed Rulemaking to Amend the Commission’s Rules of Practice and Procedure and to Reorganize its Regulations 

in the Code of Federal Regulations, September 13, 2019 (Order No. 5229).

52 Order No. 5229 at 10.
ENDNOTES | 63

53 Id. at 12-13.

54 Id. at 13-14.

55 Id. at 14-15.

56 Id. at 15.

57 Id. at 20, 41, and 45.

58 Id. at 15-16.

59 Id. at 16-17.

60 Id. at 18.

61 Docket No. RM2019-13, Order Reorganizing Commission Regulations and Amending Rules of Practice, January 16, 2020 (Order No. 5407); see Notice 

 of Errata, April 23, 2020.

62 Postal Regulatory Commission, Reorganization of Postal Regulatory Commission Rules, 85 Fed. Reg. 9614 (February 19, 2020).

63 Docket No. RM2020-5, Notice of Proposed Rulemaking to Amend Rules Regarding Rate Incentives for Market Dominant Products, February 14, 2020 

 (Order No. 5433).

64 Order No. 5433 at 2.

65 39 C.F.R. §§ 3030.501(g), 3030.523(e)(2)(iii). The other requirements are that the rate incentive is in the form of a discount or can be easily translated 

 into a discount and that sufficient billing determinants are available for the rate incentive to be included in the percentage change in rate calculation. 

 Id. § 3030.523(e)(2).

66  Order No. 5433 at 1, 8.

67  Id. at 1-2, 8.

68  Id.

69  Docket No. RM2020-5, Order Adopting Final Rules Regarding Rate Incentives for Market Dominant Products, May 15, 2020 (Order No. 5510).

70  Petition for Review, United States Postal Service v. Postal Reg. Comm’n, No. 20-1208 (D.C. Cir. filed June 15, 2020).

71  Petitioner’s Statement of Issues to be Raised, United States Postal Service v. Postal Reg. Comm’n, No. 20-1208, at 2 (D.C. Cir. filed July 16, 2020).

72  Docket No. RM2020-5, Notice of Intent to Reconsider, August 26, 2020 (Order No. 5655).

73  Order No. 5655 at 2.

74  Id.

75  Id.

76  Id.

77  Id.

78  Joint Motion for Voluntary Dismissal and Vacatur, United States Postal Service v. Postal Reg. Comm’n, No. 20-1208 (D.C. Cir. filed Sept. 11, 2020).

79  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).

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

81  Order No. 5422 at 2.

82  39 U.S.C. § 601(c).

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

84  Docket No. RM2020-3, Notice of Proposed Rulemaking to Amend Procedures Related to Commission Views, December 17, 2019 (Order No. 5353).

85  39 U.S.C. § 407(c).

86  Order No. 5353 at 3.

87  Docket No. RM2020-3, Order Adopting Final Rules Related to Commission views, February 24, 2020 (Order No. 5439).

88  39 U.S.C. § 3642(a), (d)(2); 39 C.F.R. § 3040.103.

89  39 U.S.C. § 3642(d)(2); 39 C.F.R. § 3040.103.

90  Docket No. RM2020-8, Notice of Update to Product Lists, April 16, 2020, at 1. The Commission previously published the product list updates in Docket 

 Nos. MC2010-21 and CP2010-36. Id. at 1-2.

91  Id. at 2.

92  Id.

93  Id.

94  Id. at 3; see Mail Classification Schedule (MCS), available at: https://www.prc.gov/mail-classification-schedule (accessed November 9, 2020).

95  Docket No. RM2019-15, Order Proposing Final Rules Relating to the Freedom of Information Act, September 27, 2019 (Order No. 5257).

96  Order No. 5257 at 3.

97  Id. at 4. The proposed revisions were published in the Federal Register on October 4, 2019. Freedom of Information Act, 84 Fed. Reg. 53056

 (October 4, 2019) (to be codified at 39 C.F.R part 3004).

98  39 U.S.C. § 3652(a)(1).

99  Id. § 3652(a)(2), (b), (c).

100 Id. § 3652(a).

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

102  39 U.S.C. § 3653(a), (b).

103  Docket No. ACR2019, Annual Compliance Determination Report Fiscal Year 2019, March 25, 2020 (FY 2019 ACD).

104  39 U.S.C. § 3622(d)(2)(A), 3622(e)(2), and 3626; FY 2019 ACD at 12.

105  FY 2019 ACD at 12.

106 Id. at 1. Workshare discounts provide reduced prices for mail that is prepared or entered in a manner that avoids certain activities the Postal Service 

would otherwise have to perform. Id. at 12. These discounts are based on the estimated avoided costs that result from the mailer performing the 

activity instead of the Postal Service. Id.

107  Id. at 1.

108  Id. at 2.

109  Id. The Periodicals Pricing Report analyzes how pricing decisions impact cost, contribution, and revenue. Docket No. ACR2015, Annual Compliance 

Determination Report Fiscal Year 2015, March 28, 2016, at 23-24.

110  FY 2019 ACD at 2, 32.

111  Id. at 32.

112  Id. at 43, 46.

113  Id. at 52.

114  Id.

115  Id. at 3. The UPU consists of 192 member countries, including the United States, that negotiate international agreements governing the exhange of 

international mail, including applicable rates for delivery. Id. at 52 n. 94.

116  Id. at 66.

117  Id.

118  Id. at 67.
64 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

119  Id. at 70.

120  Id. These products were two domestic negotiated service agreements (NSAs), International Priority Airmail, International Money Transfer Service—Inbound, Royal Mail Group Inbound Air Parcel Post Agreement, and Inbound Competitive Multi-Service Agreements with Foreign Postal Operators 1. Id.

121  Id. at 4.

122  Id. at 91.

123  Id. at 91-92.

124  Id. at 94.

125  Id. at 117.

126  Id. at 4.

127  Id.

128  Id. at 5.

129  Id. at 5, 160.

130  Id. at 175.

131  For example, the Commission recommended that “the Postal Service establish a specific plan to achieve its productivity targets for each flat-shaped 

mail processing machine, and continue to provide estimates of the impact of changing productivities on the mail processing costs of flat-shaped mail 

products in FY 2020.” Id. at 168-169.

132  Docket No. ACR2019, Financial Analysis of United States Postal Service Financial Results and 10-K Statement Fiscal Year 2019, May 7, 2020 (FY 2019 

Financial Analysis).

133  FY 2019 Financial Analysis at 2.

134  Id. at 2, 5. This decline was mostly driven by an increase in the non-cash adjustment to the workers’ compensation expense due to a lower discount 

rate. Id. at 2.

135  Id.

136  Id.

137  Id. at 5.

138  Id. at 3.

139  Id. at 5.

140  Id. at 3. At the end of FY 2019, the Postal Service reported $25.6 billion in total assets and $97.2 billion in total liabilities. Id.

141  Id. at 4.

142  Id.

143  Postal Service FY 2019 Form 10-K at 52.

144  Id. at 39.

145  Id.

146  Id.

147  FY 2019 Financial Analysis at 5.

148  Id. at 6.

149  Id.

150  Id.

151  39 U.S.C. § 3653(d).

152  Id.

153  Docket No. ACR2019, Analysis of the Postal Service’s FY 2019 Annual Performance Report and FY 2020 Performance Plan, June 1, 2020 (FY 2019 Analysis).

154  FY 2019 Analysis at 7-21.

155  Id. at 9.

156  Id. at 9-11.

157  Id. at 9, 15-16.

158  Id. at 23. The Postal Service partially met the Excellent Customer Experiences and Safe Workplace and Engaged Workforce performance goals, but did 

not meet the High-Quality Service and Financial Health performance goals. Id.

159  Id. at 24-97.

160  39 C.F.R. § 3010.101(q).

161  39 C.F.R. § 3010.101(f).

162  Id.

163  Id.

164  39 U.S.C. § 3622(d)(1)(A), (d)(2)(A).

165  39 U.S.C. § 3622(e)(2).

166  39 U.S.C. §§ 3626, 3627, 3629.

167  Docket No. R2020-1, United States Postal Service Notice of Market-Dominant Price Change, October 9, 2019.

168  Docket No. R2020-1, Order on Price Adjustments for USPS Marketing Mail, Periodicals, Package Services, and Special Services Products and Related 

Mail Classification Changes, November 22, 2019 (Order No. 5321).

169  Docket No. R2020-1, Order Remanding Price Adjustments for First-Class Mail, November 13, 2019, at 2 (Order No. 5302). The Commission found that 

the Postal Service made impermissible adjustments to the billing determinants related to Inbound Letter Post. Order No. 5302 at 2. As a result, the 

Postal Service incorrectly calculated the percentage change in rates for First-Class Mail to be 1.926 percent. Id. Using the Postal Service’s planned FirstClass Mail prices, the Commission calculated the proposed percentage change in rates to be 2.109 percent, which exceeded the total price adjustment 

authority of 1.933 percent. Id.

170  Docket No. R2020-1, United States Postal Service Response to Order No. 5302, November 20, 2019.

171  Docket No. R2020-1, Order on Amended Price Adjustments and Classification Changes for First-Class Mail, December 6, 2019 (Order No. 5340).

172  Order No. 5340 at 3-4. These issues include consistency with the PAEA’s objectives and factors, billing determinant adjustments, unused rate adjustment authority for First-Class Mail, the Postal Service’s request to accelerate the transfer of certain international mail products, and comments 

received. Id.

173  Docket No. R2020-1, Order Approving Price Adjustments and Related Mail Classification Changes for First-Class Mail, December 20, 2019, at 2, 65 

(Order No. 5373).

174  Docket No. R2020-2, United States Postal Service Notice of Type 1-C Market Dominant Price Change, June 1, 2020.

175  “Every Door Direct Mail,” United States Postal Service, Glossary of Postal Terms (Publication 32), July 2013; available at: https://about.usps.com/publications/pub32/pub32_terms.htm (Glossary of Postal Terms).

176  Docket No. R2020-2, Order on Price Adjustments for USPS Marketing Mail, June 30, 2020, at 1-2 (Order No. 5570).

177  39 C.F.R. § 3010.101(f).

178  39 U.S.C. § 3633(a)(1).

179  39 U.S.C. §§ 3633(a)(2), 3631(b).
ENDNOTES | 65

180  39 U.S.C. § 3633(a)(3).

181  Docket No. CP2020-5, United States Postal Service Notice of Changes in Rates of General Applicability for Competitive Products, October 9, 2019.

182  Docket No. CP2020-5, Order Approving Price Adjustments for Competitive Products, November 15, 2019, at 6-7 (Order No. 5308).

183  Docket No. CP2020-249, USPS Notice of Time-Limited Changes in Rates of General Applicability for Competitive Products, August 14, 2020 (Docket No. 

CP2020-249 Notice).

184  Docket No. CP2020-249 Notice at 1.

185  Id.

186  Docket No. CP2020-249, Order Approving Price Adjustments for Competitive Products, September 4, 2020, at 6-7 (Order No. 5673).

187  Docket No. CP2020-166, United States Postal Service Notice of Changes in Rates of General Applicability for Loyalty Program, June 5, 2020.

188  Docket No. CP2020-166, Order Approving Price Adjustments for Competitive Products to Implement a Loyalty Program, June 24, 2020 (Order No. 

5561).

189  Order No. 5561 at 1.

190  Docket Nos. MC2020-156 and CP2020-170, Order Adding Priority Mail-Non-Published Rates 2 to the Competitive Product List, June 25, 2020 (Order 

No. 5562).

191  Available at: www.prc.gov; hover over “References” and click on the “Negotiated Service Agreements Statistics” link.

192  Postal Regulatory Commission, Annual Report to the President and Congress Fiscal Year 2017, January 26, 2018, at 36.

193  Universal Postal Union, Regulations to the Convention, Article 32-201, Bern 2017, available at: https://www.upu.int/UPU/media/upu/files/UPU/aboutUpu/acts/nonPermanentActs/actNonPermanentRegulationsConventionFinalProtocolEn.pdf.

194  Id. Article 32-202.

195  Docket No. CP2020-61, Notice of the United States Postal Service of Filing Changes in Rates Not of General Applicability for Inbound Parcel Post (at 

UPU Rates), and Application for Non-Public Treatment, December 10, 2019; Docket No. CP2020-176, Notice of the United States Postal Service of Filing 

Changes in Rates Not of General Applicability for Inbound Parcel Post (at UPU Rates), and Application for Non-public Treatment, June 12, 2020.

196  Docket No. CP2020-61, Order Acknowledging Changes in Prices for Inbound Parcel Post (at UPU Rates), December 31, 2019 (Order No. 5385); Docket 

No. CP2020-176, Order Acknowledging Changes in Prices for Inbound Parcel Post (at UPU Rates), June 25, 2020 (Order No. 5564).

197  Docket No. CP2020-250, 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 14, 2020; Docket No. CP2020-250, Order Approving Changes in Prices Not of General Applicability for Inbound 

EMS 2, August 28, 2020, at 2 (Order No. 5660).

198  Order No. 5660 at 7.

199  See “Changes to Product Lists and the Mail Classification Schedule — International Mail” section, below.

200  39 U.S.C. § 3634; 39 C.F.R. § 3060.40, et seq.

201  Docket No. T2020-1, Notice of the United States Postal Service of Submission of the Calculation of the FY 2019 Assumed Federal Income Tax on Competitive Products, January 10, 2020.

202  Docket No. T2020-1, Order Approving the Calculation of the FY 2019 Assumed Federal Income Tax on Competitive Products, March 9, 2020 (Order No. 5449).

203  39 U.S.C. § 3642(a). The Commission may also initiate a proceeding to change the product lists. Id.

204  39 C.F.R. part 3040, subparts B, C, and D.

205  39 C.F.R. part 3040, subparts E and F.

206  39 C.F.R. part 3040, subpart E; 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).

207  Docket No. MC2019-203, Order Approving Minor Classification Change, October 2, 2019 (Order No. 5261); Docket No. MC2020-7, Order Approving 

Minor Classification Changes, November 8, 2019 (Order No. 5297); Docket No. MC2020-8, Order Approving Minor Changes to a Product Description, 

November 8, 2019 (Order No. 5298); Docket No. MC2020-27, Order Approving Minor Classification Change, December 4, 2019 (Order No. 5331).

208  Product list and MCS changes applicable to rate changes and NSAs are discussed in the “Rate Adjustments” section above.

209  Docket No. MC2015-8, Renewed Request of the United States Postal Service to Remove Return Receipt for Merchandise and Motion to Reopen 

Docket, December 10, 2019 (Docket No. MC2015-8 RRM Service Renewed Request).

210  Docket No. MC2015-8, Request of the United States Postal Service to Remove Return Receipt for Merchandise Service from the Mail Classification 

Schedule, November 17, 2014, at 2.

211  Id.

212  Docket No. MC2015-8, Order Conditionally Approving Removal of Return Receipt for Merchandise Service from Mail Classification Schedule, January 

15, 2015, at 13-14 (Order No. 2322).

213  Order No. 2322 at 14. The Commission stated the Postal Service could either: (1) remove RRM service from the MCS, which would result in a Special 

Services rate increase, or (2) retain RRM service with no impact on the price cap. Id.

214  Docket No. MC2015-8, Response of the United States Postal Service to Order No. 2322, January 28, 2015. The procedural history of this docket is 

described in Order No. 5408. Docket No. MC2015-8, Order Approving Removal of Return Receipt for Merchandise Service from Mail Classification 

Schedule, January 16, 2020, at 2-3 (Order No. 5408).

215  United States Postal Service. v. Postal Reg. Comm’n, 886 F.3d 1261, 1268-1269 (D.C. Circ. 2018).

216  886 F.3d at 1268-1269.

217  Docket Nos. MC2015-8 and MC2015-8R, Order Closing Dockets, August 29, 2019, at 3 (Order No. 5214).

218  Id.

219  Docket No. MC2015-8 RRM Service Renewed Request at 3.

220  Id.

221  Order No. 5408 at 5-6.

222  Docket No. MC2020-126, Request of the United States Postal Service to Remove Customized Postage From the Mail Classification Schedule, May 1, 

2020 (Docket No. MC2020-126 Customized Postage Request).

223  Docket No. MC2020-126 Customized Postage Request at 1.

224  Id. at 2.

225  Docket No. MC2020-126, Order Approving Removal of Customized Postage from Mail Classification Schedule, June 16, 2020 (Order No. 5550).

226  Order No. 5550 at 5.

227  Id. at 7.

228  Id. at 8.

229  Docket No. MC2020-73, United States Postal Service Request to Transfer the Inbound Market Dominant Exprès Service Agreement 1, Inbound Market 

Dominant Registered Service Agreement 1, Inbound Market Dominant PRIME Tracked Service Agreement, Australian Postal Corporation — United 

States Postal Service Bilateral Agreement, and Canada Post Corporation — United States Postal Service Bilateral Agreement to the Competitive Product List, December 13, 2019 (Docket No. MC2020-73 Request).

230  Docket No. MC2020-73 Request at 2-3. This product provides prices for acceptance, transportation within the United States, and delivery of a combination of international mail products. MCS § 2510.1.a.

231  Docket No. MC2020-73, Order Approving Transfer of Market Dominant Negotiated Service Agreements to the Competitive Product List, February 19, 

2020, at 8 (Order No. 5437).
66 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

232  Order No. 5437 at 9-10.

233  Docket No. ACR2017, Annual Compliance Determination Report Fiscal Year 2017, March 29, 2018, at 65 (FY 2017 ACD). Inbound Letter Post mailpieces 

include letters, postcards, printed papers, and small packets weighing up to 2 kilograms. Docket No. MC2019-17, Order Conditionally Approving Transfer, January 9, 2019, at 2 (Order No. 4980).

234  Universal Postal Union, Convention Manual, Article 17.5, Bern 2019 (June 2019), available at: https://www.upu.int/UPU/media/upu/files/UPU/aboutUpu/acts/manualsInThreeVolumes/actInThreeVolumesManualOfConventionMaj1En.pdf.

235  FY 2017 ACD at 65.

236  See, e.g., Order No. 4980 at 3; Docket No. ACR2018, Order Issuing the Determination to Unseal Library Reference PRC-LR-ACR2018-NP3, July 12, 2019, 

at 4-5 (Order No. 5151).

237  Presidential Memorandum for the Secretary of State, Secretary of the Treasury, Secretary of Homeland Security, Postmaster General, and Chairman of 

the Postal Regulatory Commission, “Modernizing the Monetary Reimbursement Model for the Delivery of Goods Through the International Postal System 

and Enhancing the Security and Safety of International Mail,” August 23, 2018, available at: https://www.whitehouse.gov/presidential-actions/presidentialmemorandum-secretary-state-secretary-treasury-secretary-homeland-security-postmaster-general-chairman-postal-regulatory-commission/.

238  Statement from the Press Secretary, October 17, 2018, available at: http://www.whitehouse.gov/briefings-statements/statement-press-secretary-38/

(Press Secretary Statement).

239  Press Secretary Statement. Self-declared rates are set by the Postal Service instead of the UPU.

240  Id.

241  Docket No. CP2019-155, Notice of the United States Postal Service of Effective Date and Specific Rates Not of General Applicability for Inbound EFormat Letter Post, and Application for Non-Public Treatment, October 29, 2019, at 4 (Docket No. CP2019-155 Notice).

242  FY 2019 Annual Report at 40. The FY 2019 Annual Report provides further details about the Presidential Memorandum, the Third Extraordinary Congress, and other events leading to the favorable outcome allowing postal operators to self-declare rates for the delivery of small packets. Id. at 39-40.

243  Docket No. CP2019-155 Notice at 1. The Postal Service initially proposed a range of rates for this product on May 20, 2019, which the Commission approved. Docket No. CP2019-155, Order Approving Range of Rates for Inbound Letter Post Small Packets and Bulky Letters and Associated International 

Registered Mail Service, July 12, 2019, at 1 (Order No. 5152).

244  Docket No. MC2019-17, Motion of the United States Postal Service to Effectuate Transfer on January 1, 2020, and Application for Non-Public Treatment, November 20, 2019, at 5. The Postal Service had filed this request in FY 2019, which Commission conditionally approved pending the proposal, 

review, approval, and implementation of new rates. Order No. 4980 at 23.

245  Docket Nos. MC2019-17 and CP2019-155, Order Granting Postal Service’s Motion and Approving Prices for Inbound Letter Post Small Packets and Bulky 

Letters, December 19, 2019, at 2, 18 (Order No. 5372).

246  Id. at 2, 15, 18.

247  Docket No. CP2019-155 Notice at 7-8, Attachment 1.

248  Docket Nos. MC2019-17 and CP2019-155, Final Determination to Unseal Self-Declared Rates for Inbound Letter Post Small Packets and Bulky Letters, 

March 9, 2020 (Order No. 5451).

249  Order No. 5451 at 34.

250  Id.

251  Order No. 5451 at 2, 35; Docket Nos. MC2019-17 and CP2019-155, Notice of the United States Postal Service in Compliance with Order No. 5451, April 

6, 2020.

252  Docket No. CP2020-120, Notice of the United States Postal Service of Specific Rates Not of General Applicability for Inbound E-Format Letter Post for 

2021, and Application for Non-Public Treatment, April 10, 2020 (Docket No. CP2020-120 Notice).

253  Docket No. CP2020-120 Notice at 4, Attachment 1.

254  Docket No. CP2020-120, Order Approving Prices for Inbound Letter Post Small Packets and Bulky Letters and Acknowledging Prices for Inbound Competitive International Registered Mail Service, May 8, 2020, at 1, 7, 9 (Order No. 5502).

255  Docket No. CP2020-120, Final Determination to Unseal Self-Declared Rates for Inbound Letter Post Small Packets and Bulky Letters, June 3, 2020, at 18 

(Order No. 5527).

256  Docket No. CP2020-120, Notice of the United States Postal Service in Compliance with Order No. 5527, July 20, 2020.

257  Order No. 4257 at 250.

258  Docket No. PI2015-1, Order Approving Use of Internal Measurement Systems, July 5, 2018 (Order No. 4697); Docket No. PI2015-1, Errata to Order No. 

4697, August 21, 2018 (Order No. 4771). Past measurement systems are discussed in the FY 2019 ACD. FY 2019 ACD at 92-93.

259  Docket No. PI2018-2, Order Conditionally Approving Modifications to Market Dominant Service Performance Measurement Systems, November 5, 

2018 (Order No. 4872); Docket No. PI2019-1, Order Conditionally Authorizing the Postal Service to Proceed with Changes to its Market Dominant 

Service Performance Measurement Systems, July 17, 2019 (Order No. 5157). These modifications are discussed in the FY 2019 Annual Report. FY 2019 

Annual Report at 32.

260  Docket No. PI2019-1, United States Postal Service Request for Final Approval of Service Performance Measurement System Modifications for International First Class Mail Service and Return Receipt Service, June 12, 2020 (Docket No. PI2019-1 Request).

261  Docket No. PI2019-1 Request at 2-3.

262  Docket No. PI2019-1, Order Granting Request and Approving Use of Internal Service Performance Measurement System, July 1, 2020, at 10 (Order No. 

5576).

263  Order No. 5576 at 2.

264  Docket No. PI2020-1, Notice and Order Providing an Opportunity to Comment, October 1, 2019, at 1 (Order No. 5260).

265  See “Chapter IV - Value of the Postal Monopoly” section below; FY 2019 Annual Report at 50-51.

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

267  18 U.S.C. § 1725.

268  See Order No. 5260.

269  See “Chapter IV - Value of the Postal Monopoly” section below; FY 2019 Annual Report at 50.

270  Order No. 5260 at 1-2.

271  Docket No. PI2017-1, Notice and Order Establishing Docket Concerning City Carrier Special Purpose and Letter Route Costs and to Seek Public Comment, May 31, 2017 (Order No. 3926).

272  Docket No. PI2017-1, Interim Order, November 2, 2018, at 5 (Order No. 4869).

273  Id. at 2-5.

274  Id. at 1, 16.

275  Id. at 1, 16-17.

276  39 C.F.R. § 3050.1(c).

277  39 C.F.R. §§ 3050.1(a), 3050.10.

278  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. Id.

279  Id.
ENDNOTES | 67

280  Docket No. RM2019-6, Petition of the United States Postal Service for the Initiation of a Proceeding to Consider Proposed Changes in Analytical Principles (Proposal One), June 21, 2019 (Docket No. RM2019-6 Petition). City carrier costs are developed in the Cost and Revenue Analysis for two route 

groups: (1) regular letter routes and (2) SPRs, which “are generally located in dense urban areas and primarily deliver parcels and collect mail from 

collection boxes.” Postal Regulatory Commission, Annual Report to the President and Congress Fiscal Year 2018, January 10, 2019, at 35 n.196. 

281  Docket No. RM2019-6 Petition, Proposal One at 2-3.

282  Id. at 5-6.

283  Id.

284  Id.

285  Docket No. RM2019-6, Order on Analytical Principles Used in Periodic Reporting (Proposal One), January 14, 2020, at 8 (Order No. 5405).

286  Id.

287  Id.

288  Id. at 2.

289  Id. at 12.

290  Id.

291  Id.

292  Id.

293  Docket No. RM2020-1, Petition of the United States Postal Service for the Initiation of a Proceeding to Consider Proposed Changes in Analytical Principles (Proposal Nine), October 31, 2019 (Docket No. RM2020-1 Petition).

294  Docket No. RM2020-1 Petition, Proposal Nine, at 1.

295  Id.

296  Id.

297  Id. at 3.

298  Docket No. RM2020-1, Order on Analytical Principles Used in Periodic Reporting (Proposal Nine), August 17, 2020, at 3 (Order No. 5637).

299  Id. at 10.

300  Id.

301  Id.

302  Id. at 2.

303  Id. at 13.

304  Id.

305  See Docket No. RM2020-7, Order on Analytical Principles Used in Periodic Reporting (Proposal Two), July 9, 2020, at 5 (Order No. 5583); see Docket No. 

RM2020-7, Notice of Errata, July 14, 2020.

306  Order No. 5583 at 4, 6. The total letters and flats delivered volume is the sum of the volumes for four delivery volume variables: delivery point 

sequence mail, cased mail, sequenced mail, and Flats Sequencing System (FSS) mail. Id. at 14-15. The average (mean) volume for each of these four 

variables is calculated by multiplying the relevant proportion of the total delivered mail volume by the overall average delivered mail volume. Id. at 15.

307  Id. at 6.

308  Id.

309  Id. at 6-7.

310  Id. at 7.

311  Id.

312  Id.

313  Id.

314  Id. at 8.

315  Id.

316  Id. at 23.

317  Id.

318  Docket No. RM2019-12, Order on Analytical Principles Used in Periodic Reporting (Proposal Seven), January 6, 2020, at 3 (Order No. 5395).

319  Id. The IOCS “is a three-stage probability sample of employee work time, stratified by employee craft groups, and office Cost Ascertainment Groups 

(CAGs).” Id.

320  Id. at 5.

321  Id.

322  Docket No. RM2019-14, Order on Analytical Principles Used in Periodic Reporting (Proposal Eight), November 12, 2019, at 1-2 (Order No. 5299).

323  Docket No. RM2020-6, Order on Analytical Principles Used in Periodic Reporting (Proposal One), May 19, 2020 at 1-2 (Order No. 5515).

324  Docket No. RM2020-10, Order on Analytical Principles Used in Periodic Reporting (Proposal Three), September 25, 2020, at 1, 15 (Order No. 5697).

325  Docket No. RM2019-7, Order on Analytical Principles Used in Periodic Reporting (Proposal Two), October 1, 2019, at 2 (Order No. 5259). LC/AO is an 

abbreviation for “lettres et cartes” and “autres objets” and is French for “letters and cards” and “other objects.” LC/AO refers to international letters, 

cards, flats, bulky letters, and small packets, whether under the UPU terminal dues system, bilateral agreements, or multilateral agreements.

326  Docket No. RM2019-8, Order on Analytical Principles Used in Periodic Reporting (Proposal Three), October 7, 2019, at 1 (Order No. 5269). PRIME is an 

international agreement among approximately 141 designated postal operators working together in the tracked packet area. Id. at 2. Under PRIME, 

designated postal operators provide each other with enhanced payments, in addition to the basic per item payment, for the timely return of scans. Id.

327  Docket No. RM2019-9, Order on Analytical Principles Used in Periodic Reporting (Proposal Four), November 13, 2019, at 1 (Order No. 5305).

328  Docket No. RM2019-11, Order on Analytical Principles Used in Periodic Reporting (Proposal Six), October 22, 2019, at 2 (Order No. 5280).

329  Docket No. RM2020-11, Order on Analytical Principles Used in Periodic Reporting (Proposal Four), September 23, 2020, at 1 (Order No. 5693).

330  Docket No. RM2020-12, Order on Analytical Principles Used in Periodic Reporting (Proposal Five), September 28, 2020, at 1-2 (Order No. 5700).

331  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.

332  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.

333  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 UPS Proposal One).

334  Docket No. RM2020-9 UPS Proposal One at 3.

335  Docket No. RM2020-9, Notice and Order Establishing Comment Deadline, October 27, 2020, at 1 (Order No. 5738).

336  Order No. 5738 at 1-2.

337  39 U.S.C. § 3662(a).

338  Docket No. C2020-1, Complaint of Randall Ehrlich, December 23, 2019.

339  Docket No. C2020-1, United States Postal Service Motion to Dismiss with Prejudice the Complaint of Randall Ehrlich, January 13, 2020; Docket No. 

C2020-1, Response to Motion to Dismiss, January 31, 2020.

340  Docket No. C2020-1, Order Denying Postal Service Motion to Dismiss Complaint and Notice of Limited Formal Proceedings, March 17, 2020, at 3 (Order No. 5455).
68 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

341  Id.

342  Docket No. C2020-1, United States Postal Service Motion to Dismiss with Prejudice the Complaint of Randall Ehrlich and Stay Deadlines, May 22, 2020.

343  Docket No. C2020-1, Presiding Officer’s Ruling Issuing Intermediate Decision and Dismissing Complaint Without Prejudice, June 2, 2020.

344  Id. at 10.

345  See id.

346  Id.

347  Docket No. C2020-2, Complaint of the Greeting Card Association, January 30, 2020, at 1, 7-8 (GCA Complaint). Stamped letters consist of mailpieces 

bearing non-cancelled stamps or postal validation imprint indicia. Docket No. R2013-10, Order on Price Adjustments for Market Dominant Products 

and Related Mail Classification Changes, November 21, 2013, at 46 (Order No. 1890). Metered letters consist of single-piece letters with postage affixed by meter, information-based indicia, permit imprint, or pre-cancelled stamps. Id. Rates for metered letters are less than rates for stamped letters.

348  GCA Complaint at 1.

349  Docket No. C2020-2, United States Postal Service’s Motion to Dismiss with Prejudice the Greeting Card Association Complaint, February 19, 2020; 

Docket No. C2020-2, National Postal Policy Council Motion to Dismiss and Comments in Support of Pitney Bowes Inc. Motion to Dismiss, February 19, 

2020; Docket No. C2020-2, Pitney Bowes Inc. Motion to Dismiss the Complaint of the Greeting Card Association, February 19, 2020; Docket No. C2020-

2, Greeting Card Association Answer to Pitney Bowes Motion to Dismiss, February 26, 2020; Docket No. C2020-2, Greeting Card Association Answer to 

Postal Service Motion to Dismiss, February 26, 2020; Docket No. C2020-2, Greeting Card Association Answer to National Postal Policy Council Motion 

to Dismiss, February 26, 2020.

350  Docket No. C2020-2, Order Granting the Postal Service’s Motion to Dismiss Complaint with Prejudice, April 28, 2020 (Order No. 5491)

351  Id. at 4-7.

352  Id. at 8.

353  Id. n.20 (citing Docket No. C2009-1, Order on Complaint, April 20, 2011, at 28 (Order No. 718)).

354  Order No. 718 at 28.

355  Order No. 5491 at 9, 22-24.

356  Id. at 25.

357  39 U.S.C. § 3641.

358  Id.; 39 C.F.R. part 3045.

359  Docket No. MT2020-1, Order Authorizing Commercial PO Box Redirect Service, June 3, 2020 (Order No. 5528).

360  Docket No. MT2020-2, Order Authorizing Extended Mail Forwarding Market Test, July 20, 2020, at 1 (Order No. 5591).

361  See Order No. 5528, Order No. 5591.

362  39 U.S.C. § 404(d)(5).

363  Docket No. A2020-1, Petition for Review Received from Dylan Edward Mulligan, City Attorney, Regarding the Bellville, Georgia Post Office 30414, July 

31, 2020.

364  Docket No. A2020-1, United States Postal Service Motion to Dismiss Proceedings, August 10, 2020; Docket No. A2020-1, Response Brief of City of Bellville in Opposition to Postal Service’s Motion to Dismiss, August 21, 2020. 

365  Docket No. A2020-1, Notice of the United States Postal Service Regarding the Bellville Village Post Office, August 27, 2020.

366  Docket No. A2020-1, Order Dismissing Appeal, September 1, 2020 (Order No. 5662).

367  39 U.S.C. § 3663.

368  Docket No. ACR2018, Library Reference USPS-FY18-NP9, December 28, 2018.

369  Docket No. ACR2018, Annual Compliance Determination Report Fiscal Year 2018, April 12, 2019 (FY 2018 ACD).

370  Docket No. ACR2018, Library Reference PRC-LR-ACR2018-NP3, April 12, 2019.

371  Docket No. ACR2018, Notice of a Preliminary Determination to Unseal Library Reference PRC-LR-ACR2018-NP3, April 12, 2019 (Order No. 5055).

372  Order No. 5055 at 14.

373  Order No. 5151 at 2, 70.

374  Id. at 69.

375  Id. at 23.

376  Petition for Review, United States Postal Service v. Postal Reg. Comm’n, No. 19-1155 (D.C. Cir. filed June 31, 2019).

377  Docket No. ACR2018, Order Granting Stay Pending Judicial Review, August 2, 2019 (Order No. 5178).

378  United States Postal Service v. Postal Reg. Comm’n, 963 F.3d 137, 143 (D.C. Circ. 2020) (Rao, J. concurring).

379  Id. at 140, 142.

380  Id. at 141.

381  Docket No. ACR2018, Order Unsealing Library Reference, September 1, 2020 (Order No. 5665).

382  Docket No. ACR2019, Order Issuing the Determination to Unseal Library Reference PRC-LR-ACR2019-NP3, September 18, 2020 (Order No. 5688).

383  Order No. 5688 at 1.

384  Docket No. ACR2019, Notice of Unsealing Library Reference, September 18, 2020.

385  39 U.S.C. § 3633(a)(3). The “appropriate share” is “the minimum percentage level of contribution that [C]ompetitive products are required to collectively contribute toward the Postal Service’s total institutional costs.” 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). Requirements for Competitive products are discussed in the “Rate Adjustments — Competitive Products” section above.

386  39 U.S.C. § 3633(b).

387  Id.

388  See Order No. 4963. Background and procedural history of this rulemaking are discussed in the FY 2019 Annual Report. FY 2019 Annual Report at 18-

19.

389  Petition for Review, United Parcel Service, Inc. v. Postal Reg. Comm’n, No. 19-1026 (D.C. Cir. filed February 4, 2019).

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

391  Id. at 1042, 1049-50 (emphasis in original).

392  Id. at 1052.

393  Docket No. R2019-1, Order on Price Adjustments for First-Class Mail, USPS Marketing Mail, Periodicals, Package Services, and Special Services Products 

and Related Mail Classification Changes, November 13, 2018, at 1-2 (Order No. 4875).

394  See Carlson v. Postal Reg. Comm’n, No. 18-1328 (D.C. Cir. 2019).

395  Carlson v. Postal Reg. Comm’n, 938 F.3d 337 (D.C. Cir. 2019).

396  Carlson, 938 F.3d at 340, 351-352.

397  Pub. L. 79-404, 60 Stat. 237 (1946).

398  Docket No. R2019-1, Order Approving Price Adjustments for First-Class Mail, October 24, 2019, at 3 (Order No. 5285).

399  Order No. 5285 at 67.

400  Docket No. C2019-1, Order Granting Motion to Dismiss, December 12, 2018 (Order No. 4924).

401  Petition for Review, Randall Ehrlich v. Postal Reg. Comm’n, No. 19-1004 (D.C. Cir. filed January 10, 2019).

402  Judgment, Randall Ehrlich v. Postal Reg. Comm’n, No. 19-1004 (D.C. Cir. filed December 10, 2019) (unpublished).
ENDNOTES | 69

403  Id. at 2.

404  Id. at 2-3.

405  Elaine Mittleman v. Postal Reg. Comm’n, 757 F.3d 300, 308 (D.C. Cir. 2014); see Postal Regulatory Commission, Annual Report to the President and 

Congress Fiscal Year 2014, January 5, 2015, at 53.

406  Respondent’s Opposition to Petitioners’ Motion to Recall the Mandate, Elaine Mittleman v. Postal Reg. Comm’n, Nos. 12-1095, 12-1110, and 12-1157, at 

2 (D.C. Cir. filed October 2020) (Respondent’s Opposition).

407  Petitioners’ Motion to Recall the Mandate, Elaine Mittleman v. Postal Reg. Comm’n, Nos. 12-1095, 12-1110, and 12-1157 (D.C. Cir. filed September 25, 

2020); Respondent’s Opposition.

408  Order, Elaine Mittleman v. Postal Reg. Comm’n, Nos. 12-1095, 12-1110, and 12-1157 (D.C. Cir. filed October 23, 2020).

409  Petition for Review, National Postal Policy Council v. Postal Reg. Comm’n, No. 17-1276 (D.C. Cir. filed December 29, 2017); Petition for Review, National 

Postal Policy Council and Major Mailers Association v. Postal Reg. Comm’n, No. 20-1505 (D.C. Cir. filed December 18, 2020); Petition for Review, Alliance 

of Nonprofit Mailers et al. v Postal Reg. Comm’n, No. 20-1510 (D.C. Cir. filed December 18, 2020); Petition for Review, United States Postal Service v. 

Postal Reg. Comm’n, No. 20-1521 (D.C. Cir. filed December 29, 2020).

410  39 U.S.C. § 407(b)(1).

411  39 U.S.C. § 407(c)(1).

412  39 U.S.C. § 407(c)(2).

413  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.

414  Docket IM2020-1, Notice and Order Establishing Section 407 Proceeding, March 9, 2020, at 2 (Order No. 5450).

415  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.

416  Docket IM2020-1, Notice of Filing Correspondence, April 21, 2020.

417  On October 29, 2020, the UPU decided to maintain Abidjan, Côte d’Ivoire as the host city for the 27th Congress in August 2021, as long as the Ivorian 

Government maintained its firm and unequivocal commitment to host the event once the situation returned to normal. The UPU also decided that, in 

the event the 27th Congress could not be held in Côte d’Ivoire, it would be convened in Switzerland no later than September 2021. The Commission 

will set the new comment deadline once the specific dates are confirmed. See https://www.upu.int/en/Press-Release/2020/10/UPU%E2%80%99s-27thUniversal-Postal-Congress-moved-to-August-2021.

418  Postal Regulatory Commission, Report on Universal Postal Service and the Postal Monopoly, December 19, 2008, at 18 (USO Report).

419  USO Report at 10 n.1; see “Value of the Postal Monopoly” section, below.

420  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.

421  39 U.S.C. § 3651(b)(1); “Chapter III — Public Inquiries” section above.

422  At the time the FY 2020 Annual Report was prepared, the most currently available complete data are from FY 2019.

423  See 39 U.S.C. § 3651(b)(2).

424  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).

425  39 U.S.C. § 403(b)(3).

426  Docket No. RM2015-19, Order Approving Analytical Principles Used in Periodic Reporting (Proposal Ten), November 24, 2015, at 1 n.2 (Order No. 2837).

427  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).

428  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.

429  See Postal Regulatory Commission, Annual Report to the President and Congress Fiscal Year 2016, January 12, 2017, at 42.

430  Leave replacement refers to “[a] noncareer hourly rate employee who performs as a relief or leave replacement during the absence of a postmaster in 

a small [p]ost [o]ffice.” See Glossary of Postal Terms, supra note 175.

431  USO Report at 139.

432  The Postal Service states that the main causes of higher air transportation costs in FY 2019 were higher air rates, higher volumes for certain carriers, 

and higher average jet fuel prices. United States Postal Service, 2019 Annual Report on Form 10-K, November 14, 2019, at 17.

433  The Commission found it equitable to offer one post office 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.

434  See USO Report at 196.

435  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.

436  Docket No. RM2011-9, Order Concerning Analytical Principles Used in Periodic Reporting (Proposal One), June 9, 2011, at 4 (Order No. 744).

437  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.

438  FY 2018 ACD at 39.

439  In this Annual Report, attributable cost means incremental cost. See Docket No. RM2016-2, Order Concerning United Parcel Service, Inc.’s Proposed 

Changes to Postal Service Costing Methodologies (UPS Proposals One, Two, and Three), September 9, 2016, at 125 (Order No. 3506). The attributable 

cost for years before FY 2016 reflect the accepted methodology for those years and have 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.

440  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 2019, the losses from Media Mail/Library Mail exceeded the contribution of the other products in Package Services, making the 

class unprofitable as a whole with a net contribution of negative $26.4 million. FY 2019 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.
70 | POSTAL REGULATORY COMMISSION • FY 2020 ANNUAL REPORT

441  FY 2018 ACD at 25, 40-41. 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 county of publication. Outside County consists of publications with a wide variety of 

circulation sizes, distribution patterns, and frequency. FY 2019 Financial Analysis at 62. Both In-County and Outside County Periodicals average unit 

attributable costs increased significantly in FY 2019. Id. at 64.

442  See Order No. 5763; “Chapter III - Rulemakings Amending Commission Regulations” section above.

443  Order No. 5763 at 159-160, 190-191. 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.

444  FY 2019 ACD at 2.

445  39 U.S.C. § 3651(b)(1)(C).

446  See, e.g., Consolidated Appropriations Act, 2017, Pub. L. 115-31, 131 Stat. 135, 369 (2017) (“6-day delivery and rural delivery of mail shall continue at 

not less than the 1983 level”).

447  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 on Elimination of Saturday Delivery, March 24, 2011; Postal Regulatory Commission, Annual Report to the President and Congress Fiscal Year 2011, December 21, 2011, at 41.

448  39 U.S.C. § 404(c).

449  39 U.S.C. § 3683.

450  The decrease in the unit contribution of Media Mail/Library Mail in FY 2019 is due to the increase (8.6 percent) in the unit attributable cost for Media 

Mail/Library Mail in FY 2019. The slight increase in the unit revenue for Media Mail/Library Mail in FY 2019 was not enough to offset the larger increase in the unit attributable cost. See FY 2019 Financial Analysis at 66-67; Appendix A, at 1.

451  See FY 2019 Annual Report at 49.

452  See United States Postal Inspection Service, available at: https://www.uspis.gov/about/what-we-do/.

453  See United States Postal Inspection Service, available at: https://www.uspis.gov/leadership.

454  See United States Postal Inspection Service, available at: https://www.uspis.gov/about/what-we-do/.

455  18 U.S.C. § 1725.

456  The letter monopoly is codified in the Private Express Statutes. See 18 U.S.C. §§ 1693–1699 and 39 U.S.C. §§ 601–606.

457  Contestable mail is certain mail that is dropshipped to the processing facility or delivery unit closest to its destination.

458  See Order No. 5260; “Chapter III — Public Inquiries” section above.

459  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.

460  See USO Report at 143-152.

461  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.

462  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 were offered.

463  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.

464  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.

465  See USO Report at 144, Table 5 notes 2, 5; 143-146.

466  See notes to Table IV-7.

467  The FY 2019 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.

468  See USO Report at 144. The monopoly estimates in the USO Report were developed using the FY 2007 City Carrier Cost System, FY 2007 Rural Carrier Cost 

System, 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.

469  USO Report, folder “Appendices,” folder “USO Appendices,” PDF file “Appendix F Section 4.pdf,” at 10.

470  See USO Report at 144. The FY 2019 postal monopoly estimate calculated using the “low” model assumptions was $0.20 billion compared to the “low” 

model estimate of $0.18 billion in the USO Report.

471  Compare USO Report Table 5 at 144 with Table IV-7.
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