ANNUAL REPORT TO THE 

PRESIDENT AND CONGRESS 

F i s c a l Ye a r 2 0 1 0
POSTAL REGULATORY COMMISSION 3

CHAIRMAN’S MESSAGE, DECEMBER 2010

For well over two centuries, the United States has benefitted from a successful and ubiquitous Postal Service 

binding the people of the Nation together. Methods of communications in the country continue to change, and 

the mail is no longer the primary way we keep in touch. Nevertheless, when, earlier this year, the Commission 

called for a dialogue on the future of the country’s mail, the people of the Nation demonstrated their support 

for and reliance on the mail. During FY 2010, the Commission received more than 19,000 customer inquiries, suggestions and comments, a nearly 11-fold increase over FY 2009.

It has been a remarkable and challenging year for the Postal Regulatory Commission, marked not only by a 

record outpouring of public interest but a dramatic increase in our workload and exercise of responsibility. 

There was a 50 percent increase in docketed proceedings, more than a dozen hearings on complex issues, 

and wide-ranging, thought-provoking Congressional oversight. I am proud to present the Commission’s 2010 

Annual Report on behalf of my fellow Commissioners and staff whose unstinting effort and professionalism are 

evident in the successes documented here.

Exigent Rate Case

The Postal Service did not file for an increase under the Consumer Price Index (CPI) price cap in FY 2010, as recession-caused deflation resulted in a CPI formula of minus 0.356 percent. Rather, it chose to file an Exigent Rate 

Request of 5.6 percent in July for proposed implementation in January, 2011. The Commission had just 90 days 

to study and decide upon this precedent-setting request that attracted the involvement of much of the mailing community. After a careful review and with a unanimous vote, the Commission found that the Postal Service failed to 

meet the legal requirements for an exception to the rate cap. The Commission’s decision affirmed the fundamental 

importance of the statutory price cap in protecting postal consumers and promoting Postal Service efficiency.

Advisory Opinion Dockets 

As the Postal Service has explored possible responses to the recession, competition from digital media, and 

the financial stress of Retiree Health Benefit Fund obligations, the Advisory Opinion process has become an 

increasingly important platform for the Commission to foster public debate on the future of the Nation’s postal 

system and for the Commission to offer its guidance. The law requires the Postal Service to request a nonbinding Advisory Opinion from the Commission in advance of a “nationwide or substantially nationwide” change in 

postal services.

In FY 2010, the Commission considered Postal Service requests concerning the process for closing urban and 

suburban retail facilities (Docket No. N2009-1) and the elimination of Saturday mail delivery, collection and 

outbound processing (Docket No. N2010-1). During the course of the public review sponsored by the Commission on Docket No. N2009-1, the Postal Service continued to reexamine its candidate list of retail offices 

designated for possible closing and the list shrank from 3,200 to just 162 locations. In its Opinion, the Commission recommended specific changes to the process to improve planning, enhance customer notification and 

input, and provide due process consistent with statutory guidelines for closing post offices.
4 2010 ANNUAL REPORT 

On March 30, 2010, the Commission opened Docket N2010-1 to develop an Advisory Opinion on a 

Postal Service proposal to end Saturday mail service and related processing and collection activities. We held 

proceedings in Washington, D.C. and seven field hearings across the country to listen to the public’s input and 

we also solicited public input through the mail, press releases and the Commission’s website.

Strengthened Regulation and Oversight

In March, the Commission issued its third Annual Compliance Determination assessing Postal Service performance in accordance with the Postal Accountability and Enhancement Act (PAEA) and enumerated specific 

actions the Postal Service should take to better balance revenues and costs and to improve service. During the 

year, work continued on a joint Commission-Postal Service report to Congress on Periodicals cost issues and 

opportunities to increase efficiency, and the Commission initiated Public Inquiry Docket PI2010-1 to determine 

if post office closing procedures were being circumvented by the Postal Service through the use of extended 

emergency suspensions. The Commission also issued new rules and guidelines to improve mail workshare discount methodologies, clarify the Postal Service’s involvement in nonpostal business activities and adopt leading 

federal-sector Freedom of Information Act (FOIA) practices.

Growth and Innovation

The Commission strongly supports efforts by the Postal Service to develop and evaluate new products and to 

make use of the competitive flexibilities provided by the PAEA. For a second time, we approved seasonal sales 

initiatives to spur increased First-Class and Standard Mail volume during traditionally slow mailing periods.

The Commission also authorized the Postal Service to test a new experimental product, the “Samples Co-Op 

Box,” to promote growth via cost-effective product sample distribution. This is the second market test requested 

by the Postal Service since the PAEA was enacted.

In addition, the Commission promptly approved 127 Negotiated Service Agreements (NSAs) proposed by the 

Postal Service in FY 2010, a 98 percent increase from FY 2009. To date, NSA performance has been generally positive but insufficient to materially affect Postal Service finances. Of the NSA proposals, 124 were in the 

Competitive Products category and 3 requests were in the Market Dominant category.

Achieving Financial Viability

While an improving economy is strengthening the mail market, the Postal Service faces potential financial 

insolvency in FY 2011 due to a large and increasing debt load and a statutory cap on its borrowing authority. 

In our Exigent Rate review, the Commission received documentation from the Postal Service showing that the 

primary cause of its liquidity crisis is related to an overly ambitious requirement for the Postal Service to prefund its Retiree Health Benefit Fund obligations. At the Postal Service’s request, and as authorized by law, the 

Commission also provided an independent actuarial analysis showing the Postal Service’s civil service pension 

obligation may be overstated by as much as $55 billion. Adjustments to one or both of these obligations could 

provide the financial stability needed by the Postal Service as it restructures its operations and as Congress 

considers possible changes to the Postal Service’s business model.
POSTAL REGULATORY COMMISSION 5

Commission Management and Accountability

Our staff of 70 employees successfully managed an unprecedented increase in workload while instituting 

better, more transparent and accurate procedures, introducing improvements in our information technology 

platform, enhancing staff professional development and building a more collegial and mutually supportive 

work environment. Most of all, our focus is on serving the public. The Postal Accountability and Enhancement 

Act requires the Postal Service to be more accountable and transparent, and the Commission has taken on 

the challenge as well. Our staff is engaged in ongoing efforts to better communicate with our constituents and 

more actively address their concerns. The Commission initiated monthly public meetings to report on our activities and arranged to webcast all of our open proceedings. Again, I thank them for their excellent effort and 

teamwork.

Shared Goals

The Commission – like Congress and the Postal Service – dedicates itself to serving the American people in all 

we do. The regulatory review and Congressional oversight enacted first in 1971 continues to safeguard the 

postal services Americans rely on. We thank the Postal Service for its shared commitment to carrying out the 

laws and regulations as envisioned by Congress.

Finally, I extend my sincere thanks and admiration to the American people for their support of the Commission’s 

work throughout the year. 

Sincerely,

Ruth Y. Goldway

Chairman
6 2010 ANNUAL REPORT 

Table Of Contents

CHAIRMAN’S MESSAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Chapter I

ABOUT THE COMMISSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Staff

Mission Statement

Guiding Principles

Commission’s Strategic Plan

Chapter II

EFFECTIVENESS OF THE COMMISSION’S RULES IN ACHEIVING THE OBJECTIVES OF THE PAEA . 13

Effectiveness of Rules Related to Pricing 

Technical Description of Price Cap

Effectiveness of Rules In Assuring Stability, Predictability and Flexibility In Pricing

Request for an Exigent Rate Case

Concurring Opinions on R2010-4

Standard Mail Incentive Program

First-Class Mail Incentive Program

Competitive Product Cases and Negotiated Service Agreements

Review of Price Adjustment and Classification Changes Related to Move Update Adjustments

Review of Experimental Products

Effectiveness of Rules in Achieving Worksharing Limitations

Effectiveness of Rules in Maintaining Just and Reasonable Rate Schedule

Rules for Complaints and Rate and Service Inquiries

Complaints during FY 2010

Effectiveness of Rules in Assuring Adequate Revenues and Incentives to Reduce Costs

Effectiveness of Rules in Enhancing Transparency

Annual Compliance Determination

Importance of Data in the ACD to Assure Transparency

Periodic Reporting Rule on Service Performance Measurement and Customer Satisfaction

Postal Service Cost Methodology Rules

Rules on Confidential Materials filed by the Postal Service

Obtaining Information from the Postal Service–Subpoenas

Financial Reporting

Freedom of Information Act Rules

Effectiveness of Rules in Achieving the Objectives of Section 3633 of the PAEA

Competitive Rate Change

Accounting and Periodic Rules
POSTAL REGULATORY COMMISSION 7

Chapter III

COSTS OF THE UNIVERSAL SERVICE OBLIGATION AND VALUE OF MAIL MONOPOLY . . . . . 29

Estimated Cost of the Universal Service Obligation

Estimated Value of the Monopoly

Chapter IV

OTHER LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Station and Branch Optimization and Consolidation Initiative, Docket No. N2009-1

Six-Day to Five-Day Street Delivery and Related Service Changes, Docket No. N2010-1

Review of Non-Postal Services Docket Nos. MC2008-1 Phase I and Phase II

Mail Classification Schedule Updates

Appeals of Post Office Closings

Chapter V

INTERNATIONAL ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Chapter VI

PUBLIC AFFAIRS AND OUTREACH EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Overview

Congressional Testimony

Outreach Activity

Consumer Relations

Public Representative

Commission Website

Freedom of Information Act (FOIA)

Chapter VII

OTHER COMMISSION ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Segal Report on Postal Service Funding of Civil Service Retirement System

Urban Institute Study on the Social Value of the Mail

Periodicals Cost Study

Consultation with the Postal Service

Chapter VIII

ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Employee Welfare

Equal Employment Opportunity (EEO)

Information Technology

Diversity

Transparency and Open Government

New AWS and Telework Policies
8 2010 ANNUAL REPORT 
 POSTAL REGULATORY COMMISSION 9

Chapter I

About the Commission

The Commission is an independent agency that has exercised regulatory oversight over the U.S. Postal Service 

since its creation by the Postal Reorganization Act of 1970 (PRA) with expanded responsibilities under the Postal 

Accountability and Enhancement Act of 2006 (PAEA). The Commission is composed of five Commissioners, 

appointed by the President, with the advice and consent of the Senate, for a term of six years. The Chairman is 

designated by the President and serves as the head of the agency. A Commissioner may continue to serve after 

expiration of his or her term for up to one year. No more than three members of the Commission may be from 

the same political party.
10 2010 ANNUAL REPORT 

Ruth Y. Goldway, Chairman

First appointed as a Commissioner on April 7, 1998. Designated 

Chairman by Barack Obama on 

August 6, 2009. Term expires 

November 22, 2014. Former 

Manager of Public Affairs for the 

Getty Trust. Former Director of 

Public Affairs, California State University, Los Angeles. 

Former Council Member and Mayor, City of Santa 

Monica. Founder and Former Chairperson, Santa 

Monica Pier Restoration Corporation. Former Assistant 

Director of California’s Department of Consumer Affairs. Co-founder of Women in Logistics and Delivery 

Services.

Tony Hammond, 

Vice-Chairman

Appointed as a Commissioner 

on August 15, 2002. Elected 

Vice-Chairman October 20, 

2009. Term expires October 

14, 2010. Former owner and 

managing member, T. Hammond 

Company, LLC. Former Senior Consultant to Forbes 

2000, Incorporated. Former Senior Vice President of 

the direct marketing firm, FL&S. Served as Director of 

Campaign Operations for the Republican National 

Committee for the 1998 election cycle. Former Executive Director and Finance Director, Missouri 

Republican Party. Staff to former U.S. Representative 

Gene Taylor (R-MO).

Mark Acton

Appointed as a Commissioner 

on August 3, 2006. Term 

expires October 14, 2010. 

Served as Vice-Chairman from 

November 22, 2007, to 

October 15, 2008. Served as Special Assistant to 

former Postal Rate Commission Chairman George 

Omas. Former Staff Director, Republican National 

Committee (RNC) Counsel’s Office. Former Deputy 

to the Chairman of the 2004 Republican National 

Convention. Served as Special Assistant to the RNC 

Chief Counsel as well as RNC Counsel’s Office 

Government Relations Officer and Redistricting Coordinator. Formerly served as both Executive Director, 

Republican National Convention, Committee on Permanent Organization and Deputy Executive Director, 

Committee on Rules. Former Executive Director of the 

RNC Redistricting Task Force. 

Dan G. Blair

Appointed as a Commissioner 

and designated Chairman on 

December 15, 2006. Served 

as Chairman until August 6, 

2009. Term expires October 

14, 2012. Formerly served as 

both Acting Director and Deputy 

Director, U.S. Office of Personnel Management. 

Former Senior Counsel to Senator Fred Thompson 

(R-TN) on the Senate Committee on Governmental 

Affairs. Former Staff Director, U.S. House of Representatives Subcommittee on the Postal Service. Former 

Minority General Counsel, U.S. House of Representatives Committee on Post Office and Civil Service. 

Elected as a Fellow to the National Academy of 

Public Administration in 2008.

Nanci E. Langley

Appointed as a Commissioner 

on June 6, 2008. Served as 

Vice-Chairman from October 

2008 - 2009. Term expires 

November 22, 2012. Former 

Director of Public Affairs and 
POSTAL REGULATORY COMMISSION 11

Government Relations, Postal Regulatory Commission. 

Former Deputy Staff Director to Senator Daniel K. 

Akaka (D-HI), U.S. Senate Committee on Homeland 

Security and Governmental Affairs’ Subcommittee on 

Oversight of Government Management, the Federal 

Workforce and the District of Columbia. Communications Director to former U.S. Senator Spark M. 

Matsunaga (D-HI). Elected as a Fellow of the National Academy of Public Administration in 2009.

Staff

Assisting the Commission is a staff with expertise in 

law, economics, finance, statistics, and cost accounting. The Commission is organized into four operational offices:

•Accountability and Compliance;

•General Counsel;

•Public Affairs and Government Relations; and

•Secretary and Administration.

The Commission maintains an independent office for 

its Inspector General.

MISSION STATEMENT

Ensure transparency and accountability of the United 

States Postal Service and foster a vital and efficient 

universal mail system.

GUIDING PRINCIPLES

The Commission is committed to and operates by the 

principles of:

•Openness;

•Stakeholder (public) participation;

•Collegiality and multi-disciplinary approaches;

•Timely and rigorous analysis;

•Fairness and impartiality;

•Integrity; 

•Commitment to excellence; and

•Merit.
12 2010 ANNUAL REPORT 

COMMISSION’S STRATEGIC PLAN

One of the Commission’s first acts as the Postal Regulatory Commission was to organize and assign the 

existing operational framework to meet the challenges 

of the PAEA. Efforts began immediately to develop the 

Postal Regulatory Commission’s first Strategic and Operational Plan for Fiscal Years 2008 through 2012. 

This Plan outlines the Commission’s core Mission and 

Vision for the first five years, the key Strategic Goals 

to help the Commission fulfill its Mission and Vision, 

and the Operational Strategies to meet statutory 

requirements of the Act. These strategies help ensure 

transparency and accountability of the United States 

Postal Service and foster a vital and efficient universal 

mail system.

As the Commission carries out its responsibilities and 

duties, and evaluates its progress and performance 

based on the strategic goals outlined in this Plan, it 

will make appropriate modifications.

The Strategic Plan can be viewed in its entirety on the 

Commission’s website at www.prc.gov.

PRC Organizational Chart WITH OFFICE HEADS 

AND ASSISTANT POSITIONS
 POSTAL REGULATORY COMMISSION 13

Chapter II

Effectiveness of the Commission’s Rules in 

Achieving the Objectives of the PAEA 

The Postal Accountability and Enhancement Act (PAEA), Public Law 109-435, requires the Commission to 

annually assess the effectiveness of its rules and regulations in achieving the objectives under sections 3622 

(modern rate regulation) and 3633 (provisions applicable to rates for competitive products) of Title 39 of the 

United States Code. The objectives of section 3622 are to:

1. Maximize incentives to reduce costs and increase efficiency;

2. Create predictability and stability in rates;

3. Maintain high quality service standards;

4. Allow the Postal Service pricing flexibility;

5. Assure adequate revenues, including retained earnings, to maintain financial stability;

6. Reduce administrative burdens and enhance transparency of ratemaking process;

7. Enhance mail security and deter terrorism;

8. Establish and maintain a just and reasonable schedule for rates and classifications, without restricting the 

Postal Service’s ability to make changes of unequal magnitude within, between or among classes of mail; 

and

9. Allocate the total institutional costs of the Postal Service appropriately between the market dominant and 

competitive products.
14 2010 ANNUAL REPORT 

In addition to these objectives, section 3622 sets 

limits on discounts related to mail preparation 

(worksharing). The implementation of the Commission 

Rules for a Modern System of Ratemaking achieved 

the pricing objectives of the act. The implementation 

of the rules relating to periodic reporting, treatment 

of confidential material, and complaint procedures 

enhanced transparency and accountability, served 

to maintain just and reasonable rates, and increased 

efficiency of postal operations.

The objectives of section 3633 are to:

1. Prohibit the subsidization of competitive products 

by market dominant products;

2. Ensure that each competitive product covers its 

attributable costs; and

3. Ensure that all competitive products collectively 

cover what the Commission determines to be an 

appropriate share of the institutional costs of the 

Postal Service.

The efficacy of the Commission’s rules in meeting 

these objectives this year is discussed below.

EFFECTIVENESS OF RULES 

RELATED TO PRICING 

Commission Order No. 43 established rules for 

changing rates for both market dominant and competitive products. These rules incorporated the statutory 

requirement that changes in rates for market dominant 

products may not exceed the annual rate of inflation 

and encompassed the objectives of 39 U.S.C. 3622 

and 3633.

The rules are designed to allow the Postal Service 

pricing flexibility by applying the Consumer Price Index (CPI) cap at the class level rather than at the rate 

category level. This flexibility is tempered somewhat 

by the separate worksharing requirements of section 

3622(e) and consideration of other objectives such 

as maintaining just and reasonable rates.

The Postal Service did not file for a CPI-based rate 

adjustment this year for market dominant products as 

the established CPI cap was negative.

Order No. 43 also established rules for expeditiously 

processing Negotiated Service Agreements (NSAs) 

between the Postal Service and individual mailers. 

For market dominant NSAs, the rules direct the Postal 

Service to provide details demonstrating compliance 

with statutory requirements of 39 U.S.C. 3622(c)(10), 

that such NSAs result in either financial or operational 

benefit to the Postal Service and do not cause undue 

harm to the market. The rules seek to minimize the 

administrative and economic burden of implementing 

agreements. At the same time the signatories of NSA’s 

are required to submit comprehensive relevant data. 

The rules strike a reasonable balance to foster pricing 

flexibility, transparency, and accountability.

The Postal Service submitted three market dominant 

NSAs which were approved by the Commission 

this year.

The Postal Service has further flexibility in providing 

experimental products. If a product is deemed to be 

experimental it is excluded from the requirements of the 

ratemaking rules. Specific limitations on experimental 

products are outlined in the PAEA under section 3641 

of Title 39 U.S.C.

The Postal Service submitted one experimental 

product proposal in FY 2010.

Section 3622(d)(1)(E) directs the Commission to 

implement procedures whereby rates may be adjusted beyond the inflation-based cap due to exceptional 

or extraordinary circumstances. First, the Commission 

must determine, after notice and opportunity for a 

public hearing and comment, whether such 
POSTAL REGULATORY COMMISSION 15

adjustment is “reasonable and equitable and necessary” to enable the Postal Service to maintain and 

continue the development of postal services of the 

kind and quality adapted to the needs of the United 

States. Commission rules in 39 CFR 3010.2 refer to 

rate filings of this type as “exigent.” 39 CFR 3010.6 

outlines streamlined proceedings for exigent adjustments, consistent with the 90-day review period and 

due process considerations.

The Postal Service filed an Exigent Rate Case on 

July 6, 2010.

The Commission’s rules provide even greater flexibility to price competitive products. The rules allow 

the Commission 30 days to determine whether the 

Postal Service’s proposed rates for competitive products are meeting the objectives of section 3633. The 

Commission uses an incremental cost test to validate 

compliance with the cross-subsidy requirement that 

revenue generated from competitive products equals 

or exceeds the incremental costs of such products. The 

Commission has set the appropriate share of institutional costs to be borne by competitive products at 

5.5 percent, subject to revision as needed.

The Commission approved the Postal Service’s third 

annual request for a competitive price increase which 

was implemented in calendar year 2010.

For competitive NSAs, the rules, in accordance with 

the law, allow for not less than a 15-day review of 

all agreements. Competitive NSAs are evaluated for 

compliance with the statutory requirements for competitive products.

The Postal Service submitted 124 competitive NSAs 

all of which were approved in less than the statutory 

time period provided.

The rules can be viewed at www.prc.gov/prc-docs/

home/PAEA/FinalRulesWeb.pdf.

TECHNICAL DESCRIPTION OF PRICE CAP

The Commission established rules applicable to the 

price cap in 39 CFR 3010.20 et seq. The Commission has set the price cap at the percent change in 

the level of the seasonally unadjusted Consumer Price 

Index for All Urban Consumers (CPI-U), between the 

most recent average 12-month period from the date 

the Postal Service files its notice of rate adjustment 

and the average of the preceding 12-month period.

The use of a 12-month average corresponds to the 

U.S. Bureau of Labor Statistics method for calculating 

annual changes in the CPI and provides greater stability and predictability.

The difference between the annual price cap and 

the percentage change, which might be proposed 

by the Postal Service, is known as the “unused rate 

authority.” Cumulative unused rate authority can be 

reserved for use for up to five years. This banked rate 

authority, which is a feature of the PAEA, can be used 

to increase rates beyond the annual price cap, with a 

limitation of two percent in each class in a given year. 

The banked authority provides the Postal Service with 

greater pricing flexibility.

Table 1 – FY 2010 Partial Year and 

Annual Limitations

Month-Year Limitation Month-Year Limitation

Oct–09* -0.728% Apr–10 0.482%

Nov–09* -0.577% May-10 0.757%

Dec–09* -0.356% Jun–10 0.968%

Jan–10 -0.143% Jul–10 1.252%

Feb–10 0.013% Aug–10 1.477%

Mar–10 0.236% Sep–10 1.685%

*Partial Year Limitations
16 2010 ANNUAL REPORT 

The Commission publishes the 12-month 

average change in CPI on its website at 

http://www.prc.gov/PRC-DOCS/home/CPI.pdf.

EFFECTIVENESS OF RULES IN 

ASSURING STABILITY, PREDICTABILITY AND FLEXIBILITY IN PRICING

The Commission’s rules related to ratemaking afford 

the Postal Service substantial pricing flexibility while 

assuring predictability and stability, and maximizing 

incentives to reduce costs.

Request for an Exigent Rate Case

On July 6, 2010, the Postal Service filed an “exigent” 

rate request pursuant to the authority in 39 U.S.C. 

3622(d)(1)(E) and 39 CFR Section 3010.60 et seq., 

seeking to increase rates for market dominant 

products, on average, by 5.6 percent, effective 

January 2, 2011.

Because the Postal Service had indicated that it 

intended to file an exigent rate case, the Commission 

established a framework for the proceedings after providing a forum for discussions with the general public 

and mailing community on the technical process. The 

first of four technical conferences was held on June 

16, 2010, providing an opportunity to discuss unique 

procedural considerations and to identify possible 

solutions to potential issues “that might otherwise complicate fair and meaningful participation by interested 

persons.” Participants in the June 16, 2010, conference explored a broad spectrum of topics including 

the desirability of further technical conferences, the 

nature and extent of permissible discovery, the manner 

in which participants would be permitted to submit 

questions to the Commission for response by the Postal 

Service, and procedures for filing written comments.

The Postal Service’s filing asserted that the circumstances it faced were “extraordinary or exceptional” 

and that the proposed rates were reasonable, equitable, and necessary. The Postal Service’s proposed 

rates involved the identification of available CPI-U 

based price caps by class (an average of 0.578 

percent), an explanation of why the revenue generated from increases limited by those caps would 

be inadequate, and an alternative proposed set of 

higher-percentage price increases. According to the 

Postal Service, this methodology could potentially be 

viewed as an exercise in borrowing against future 

price caps and that if future circumstances permit, 

the Postal Service might be able to “pay back” some 

or all of the exigent increase by basing future price 

increases calculated below levels that future CPI-U 

calculations might otherwise indicate.

In its filing, the Postal Service stated that it was facing 

an impending cash flow crisis and the exigent request 

was only one of several steps intended to improve 

its financial condition. The Postal Service stated that 

while the proposed increases would not eliminate 

a revenue shortfall, this was one of the few options 

which could reasonably be expected to have a shortterm positive impact.

The Commission thoroughly reviewed the goals of 

postal reform legislation, and the role that the exigent 

rate authority plays in the new system of rate regulation. A wide variety of participants submitted extensive legal arguments that assisted the Commission in 

properly interpreting the exigent rate provision.

After consideration of all evidence, testimony and 

comments submitted for the record, the Commission 

unanimously decided to deny the Postal Service’s 

request for rate increases in excess of the price cap.
POSTAL REGULATORY COMMISSION 17

In Order No. 597 (9/30/10), R2010-4, the Commission concluded that to be valid, an exigent rate 

adjustment must be shown to be:

 Due to either extraordinary or exceptional 

circumstances;

 Reasonable, equitable, and necessary under best 

practices of honest, efficient, and economical management; and

 Necessary to maintain and continue the development of postal services of the kind and quality 

adapted to the needs of the United States.

A majority of the Commission found that the recent recession, and the decline in mail volume experienced 

during the recession, did qualify as an extraordinary 

or exceptional circumstance. However, the Commission found that the requested exigent rate adjustments 

were not designed to respond to the recent recession, 

or its impact on mail volume. Rather, adjustments 

represented an attempt to address long-term structural 

problems not caused by the recent recession.

The law, 39 U.S.C. 3622(d)(1)(E) and 39 CFR 

3010.60 ., as well as the legislative history indicate 

that the price cap can only be breached in certain, 

limited situations. All of the three tests set out above 

must be met. The “due to” requirement in the law 

prevents a bona fide extraordinary or exceptional circumstance from being misused as a general revenue 

enhancement mechanism that circumvents the price 

cap.

The Commission’s decision was supported by 

analyses showing that the impending cash flow crisis 

identified by the Postal Service was not a result of the 

recession. To the contrary, this cash flow crisis would 

have occurred whether or not the recession took 

place, and is the result of other unrelated structural 

problems. The Commission’s analysis showed that the 

proposed exigent rate adjustments would neither solve 

nor delay that crisis.

The decision also included an analysis of the impact 

of the current retiree health benefits payments schedule on the Postal Service’s retained earnings and liquidity. This analysis shows that the Postal Service has 

been unable to meet the statutory payment schedule 

with funds from operations, and has instead used all 

of its retained earnings and drawn down from its 

$15 billion borrowing authority. Whether the requested rate increases were approved or not, the Postal 

Service would be unable to meet this annual obligation in 2011, or in succeeding years.

The Commission analyzed the Postal Service’s efforts 

to cut costs in response to the recent recession. The 

Postal Service achieved more than $6 billion in cost 

reductions in 2009, and cost containment programs 

are now resulting in workhour reductions outpacing 

volume declines.

The Commission concluded that exigent rate increases 

are limited to amounts shown to be needed due to 

specific exigent circumstances. It found that in this instance, the Postal Service failed to quantify the impact 

of the recession on Postal finances, address how the 

requested rate increases related to the recession’s impact on postal volumes, or identify how the requested 

rates would resolve the crisis at hand.

In October 2010, the Postal Service filed a petition 

with the U.S. Court of Appeals for the District of Columbia Circuit, seeking a review of the Commission’s interpretation of how prices can be set under extraordinary 

and exceptional circumstances. The matter is currently 

pending before the Court on an expedited schedule.
18 2010 ANNUAL REPORT 

Concurring Opinions on R2010-4

Concurring Opinion of Commissioner Blair 

(Summary)

Commissioner Blair filed a separate concurring 

opinion whereby he found the Postal Service’s exigent 

request “did not meet the threshold test of showing 

the existence of ‘extraordinary or exceptional circumstances’ as required by the Postal Accountability and 

Enhancement Act.” In Commissioner Blair’s view, the 

Postal Service’s argument that its current financial crisis 

resulted from a broken business model dependent on 

volume growth and the steep decline in mail volume 

was not an “extraordinary or exceptional circumstance.” Rather, he determined that this requirement 

contemplated the imposition of new, additional or 

unexpected costs on the Postal Service.

He acknowledged that the drop in mail volume 

was significant, resulting from the recession and the 

continuing trend of electronic diversion. However, 

such events had been contemplated for some time by 

policy makers and the Postal Service, and pointed to 

the inability of the Postal Service to respond to and 

plan for forseeable and periodic changing market 

conditions as the source of the Postal Service’s financial crisis. In concluding, he stated claims of a flawed 

business model dependent on mail volume growth 

did not meet the “extraordinary or exceptional circumstances” test necessary to justify raising rates above 

and beyond inflation.

Concurring Opinion of Commissioner Langley 

(Summary) 

Commissioner Langley filed a separate concurring 

opinion in which she stated her belief that the recession-driven volume declines experienced by the Postal 

Service probably had measurable financial impact 

that may have warranted some financial relief. 

However, she found that the written and oral testimonies of Postal Service witnesses did not demonstrate 

that the proposed rates were intended to offset the 

financial harm caused by the exigent circumstance 

nor that the rate adjustments were reasonably related 

to the financial harm caused by that circumstance. 

Moreover, it became apparent through these testimonies that the Postal Service’s request was designed to 

be a part of its long-term recovery plan, not to deal 

with an emergency situation.

Commissioner Langley further observed that the indepth analysis provided by all parties further illuminated the unique conditions that must exist in order to 

pierce the cap through an exigent request. 

Standard Mail Incentive Program 

On February 26, 2010, the Postal Service filed a 

motion for a price adjustment, for Standard Mail letters 

and flats. The proposal was similar to an incentive 

program approved by the Commission in June 2009. 

The Commission approved the program to begin on 

July 1, 2010, and expire on September 30, 2010.

The 2010 Incentive Program represents the Postal 

Service’s efforts to further exercise its pricing authority 

under the PAEA. The Postal Service estimated that the 

2010 Incentive Program would provide incremental 

revenue of between $34 million and $157 million 

from new volume. The 2010 Incentive Program was 

also designed to provide the Postal Service with information on how to improve future price adjustments 

by generating data for measuring the impact of short 

term price changes on mailing behavior.

As a result of concerns raised during the proceedings 

and the review of the prior incentive program, on 

June 8, 2010, the Commission initiated a Proposed 

Rulemaking concerning methods to estimate volume 

changes caused by pricing incentive programs. The 
POSTAL REGULATORY COMMISSION 19

purpose of the proceeding is to develop methods to 

determine how much mail volume is the result of each 

pricing incentive. This proposed rulemaking is still in 

the procedural stages. Comments were filed by interested parties in July 2010. To date, no final Order or 

Rule has been issued.

First-Class Mail Incentive Program 

On August 11, 2009, the Postal Service filed with the 

Commission a notice announcing its intention to adjust 

prices for certain First-Class Mail, presorted letters, 

flats, and cards sent by qualifying mailers. The Postal 

Service characterized the planned adjustment as a 

temporary First-Class Mail incentive program to spur 

volume growth during the recession. The stated intent 

of the Program was to provide an incentive for customers to increase presorted, non-parcel, First-Class Mail 

volume above any volume they would have otherwise 

mailed. The Postal Service incorporated provisions to 

address the possibility of strategic shifting or withholding of volume. The plan included as a key element a 

20 percent rebate on qualifying incremental volume 

above certain volume thresholds for a three-month 

duration from October 1, 2009, through December 

31, 2009. The Commission approved the Program on 

September 16, 2009, and required the Postal Service 

to file relevant revenue and cost data within 15 days 

of crediting rebates to qualifying mailers.

Data to assess the success of this incentive program 

was filed by the Postal Service in July 2010. The data 

collection report filed by the Postal Service indicated 

that the Program generated $18 million in contributions on 212 million incremental pieces.

Competitive Product Cases and Negotiated 

Service Agreements

The Commission reviewed 124 Competitive Product 

cases and three Market Dominant Negotiated Service 

Agreements filed by the Postal Service this fiscal year. 

As seen in Table 2, the number of cases reviewed in 

FY 2010 nearly doubled from 2009. These cases 

were all reviewed and approved by the Commission 

in a timely manner.

In addition to competitive product cases and NSAs, 

the Commission approved a change in rates of general applicability for competitive products in Order 

No. 353, issued December 4, 2009, to take effect 

on January 4, 2010. In terms of domestic competitive products, Express Mail prices, overall, increased 

by 4.5 percent. Priority Mail prices increased by 3.3 

percent overall. Parcel Select increased on average 

by 4.7 percent and Parcel Return Services decreased 

by an average of 3.0 percent. For International Competitive products, Global Express Guaranteed service 

increased on average by 4.1 percent. Express Mail 

International increased on average by 2.9 percent 

and Priority Mail International by 3.0 percent.

Table 2 – Negotiated Service Agreements 

Approved by Commission

Type of NSA

Cases

FY 2010 FY 2009 FY 2008

Competitive Domestic 13 31 2

Competitive International 111 32 19

Total Competitive 124 63 21

Market Dominant Domestic 0 0 0

Market Dominant International 3 1 0

Total Market Dominant 3 1 0
20 2010 ANNUAL REPORT 

Review of Price Adjustment and Classification 

Changes Related to Move Update Adjustments 

In Docket No. R2010-1, Order No. 348, issued on 

November 25, 2009, the Commission approved in 

part, and rejected in part, a Postal Service proposal 

to establish Move Update Assessment charges for 

First-Class Mail. The Postal Service filed its proposal 

with the Commission on October 15, 2009. The 

proposed changes were scheduled for implementation on January 4, 2010.

The Commission approved the application of the proposed seven cent Move Update Assessment Charge 

to Presort First-Class Mail mailings that fail the Performance Based Verification (PBV) test and cannot demonstrate compliance with Move Update requirements. 

Similarly, it approved the Move Update Assessment 

Charge for Standard Mail. However, the Commission 

rejected the proposal to apply Single-Piece First-Class 

rates to Move Update noncompliant Standard Mail 

mailings. Thus, the Move Update Noncompliance 

Charge of seven cents per piece remained the approved charge for Standard Mail noncompliance. 

While the Commission authorized the proposed 

rate structure, it urged the Postal Service to consider 

alternatives which may accomplish its Move Update 

objectives in a more equitable fashion.

Review of Experimental Products

Section 3641 authorizes the Postal Service to “conduct market tests of experimental products in accordance with this section.” A product may not be tested 

under this provision, however, unless it satisfies each of 

the following conditions: (1) the product is significantly 

different from all products offered by the Postal Service 

within the two-year period preceding the start of the 

test (section 3641(b)(1)); (2) the product will not result 

in unfair or inappropriate competitive advantage for 

the Postal Service or any mailer, especially in regard 

to small business concerns (section 3641(b)(2)), and; 

(3) the product is correctly characterized as either Market Dominant or Competitive (section 3641(b)(3)).

The Postal Service proposed to conduct a market test 

designed to gain information concerning the operations, costs, and potential market for an experimental 

product provisionally titled Samples Co-Op Box. The 

Samples Co-Op Box is a parcel which will contain 

assorted product samples from multiple consumer 

package goods companies.

The market test consists of one mailing of several hundred thousand co-op boxes to consumers in two test 

markets. The Postal Service indicated that it expected 

the mailing to be completed in a single week. The 

market test also includes research, conducted by the 

Postal Service or its partner, designed to gain information about the proposed product. 

The Commission approved the proposed experimental 

product in May 2010. In its order, the Commission 

noted that should the Postal Service want to add 

Samples Co-Op Boxes to its Competitive Products List, 

it should file adequate cost and revenue data demonstrating that the proposed product covers its attributable costs.

EFFECTIVENESS OF RULES IN 

ACHIEVING WORKSHARING 

LIMITATIONS 

The Commission’s oversight has been effective in balancing the Postal Service’s pricing flexibility with the 

statutory requirements related to workshare discounts. 

(Workshare discounts are reduced rates based on 

costs avoided by the Postal Service when mailers 

undertake certain mail preparation and processing 

tasks.) This has been accomplished either through 

requiring the Postal Service to adjust discounts or by 
POSTAL REGULATORY COMMISSION 21

accepting the Postal Service justification of exceptions to the rules. The Commission notes that basing 

discounts on historical cost avoidance calculations 

is problematic because costs will change during the 

time the discounts are in place.

Section 3622 of 39 U.S.C. imposes limitations on 

workshare discounts. Section 3622(e)(2) directs the 

Commission to ensure that workshare discounts do not 

exceed the costs avoided by the Postal Service, unless 

certain conditions are met. This provision effectively 

limits the Postal Service’s ability to set workshare 

discounts that exceed 100 percent of avoided costs. 

The Commission’s rules require the Postal Service to 

justify any proposed workshare discounts that exceed 

100 percent of avoided costs by explaining how they 

qualify for one of 4 exceptions permitted under the 

PAEA. Worksharing discounts are permitted to exceed 

100 percent if the discount is:

(1) Associated with a new postal service, a change 

to an existing postal service or with a new workshare 

initiative related to an existing Postal Service and 

necessary to induce mailer behavior that furthers the 

economically efficient operation of the Postal Service 

and the portion of the discount in excess of the cost 

that the Postal Service avoids as a result of the workshare activity will be phased out over a limited period 

of time; (2) The amount of the discount above costs 

avoided is necessary to avoid rate shock and will be 

phased out over time; (3) The discount is provided in 

connection with subclasses of mail consisting exclusively of mail matter of educational, cultural, scientific 

or informational value; or (4) Reduction or elimination 

of the discount would impede the efficient operation 

of the Postal Service.

In its FY 2009 Annual Compliance Determination 

issued in March 2010, the Commission identified 30 

workshare discounts that exceeded avoided costs. 

Seventeen of those discounts were justified by the 

exceptions in the statute. For the 13 that were not justified, the Commission ordered that they be realigned 

in the next general market dominant adjustment filing. 

In its exigent rate filing, the Postal Service responded 

to the Commission Order by proposing adjustments 

to many of the workshare discounts which exceeded 

100 percent of avoidable costs. However, that rate 

request was denied, and the concerns must be addressed in the future.

The Commission established docket RM2009-3 to 

examine the legal, factual and economic bases underlying the discounts for First-Class and Standard Mail 

previously approved in the May 2009 Market Dominant Price Adjustment and to consider any alternative 

workshare discount rate design and cost avoidance 

methodologies proposed by participants.

In Commission Order No. 536 issued September 14, 

2010, the Commission concluded that, as a legal 

matter, the worksharing discount pricing constraint 

established in 39 U.S.C. 3622(e) may apply within, 

or across, products. Whether the limit on workshare 

discounts prescribed by section 3622(e) applies 

to particular groups of mail depends on whether 

the groups in question serve the same, or different, 

markets. If they serve the same market, the selection 

of an appropriate benchmark depends on what types 

of mail within the base group would have incentive to 

shift to the workshared group in response to changes 

in their relative prices.

The Commission concluded that there is a substantial 

subset of Single-Piece First-Class Mail that serves essentially the same market as presort First-Class Mail, 
22 2010 ANNUAL REPORT 

and that a worksharing relationship exists between 

the two types of mail. However, the Commission acknowledged that the reference group or “benchmark” 

currently used to measure presort First-Class Mail 

avoided costs is obsolete. In the follow-on proceeding, RM2010-13, instituted simultaneously with Order 

No. 536, the Commission solicited comments on 

whether the current Bulk Metered Mail (BMM) reference group should be discarded as a benchmark in 

favor of a number of alternatives, including Information Based Indicia (IBI) mail, a weighted average of 

BMM and IBI mail, “Qualified PC Postage” mail, or 

some other group of Single-Piece First-Class Mail. The 

specific cost characteristics to be included in the reference group selected are also being examined. This 

docket is pending with comments to be filed early in 

2011.

EFFECTIVENESS OF RULES IN 

MAINTAINING JUST AND 

REASONABLE RATE SCHEDULE 

Rules for Complaints and Rate and Service Inquiries 

The Commission rules for complaints are designed, in 

part, to facilitate maintenance of a just and reasonable rate schedule by enabling the Commission to hear 

and resolve complaints in a streamlined and efficient 

manner while providing appropriate due process for 

all participants. These rules establish a separate procedure for dealing with issues that do not require the 

more formalized procedures applicable to complaints.

Complaints during FY 2010

There were three Complaints before the Commission 

during FY 2010. 

Complaint of GameFly, Inc.

The Complainant in this proceeding is a mailer of DVDs 

who alleges that the Postal Service is discriminating in 

favor of certain other DVD mailers by providing them 

with preferential service.

DVDs sent through the mail are vulnerable to breakage when processed by automated letter processing 

equipment. The Complainant alleges that the Postal 

Service unlawfully implemented a national policy that 

affords select DVD mailers preferential processing, 

such as hand culling and sorting that prevents damage to DVDs, at no additional charge. Complainant 

claims that it and other DVD mailers have been unlawfully denied such preferential service with the result 

that they must pay significantly higher mailing costs 

in order to achieve comparable reductions in DVD 

breakage rates. The Postal Service argues that there 

are valid operational and other reasons for limiting 

the availability of the allegedly preferential services to 

certain specific mailers.

This is the first complaint proceeding to be adjudicated under the formal complaint procedures adopted 

by the Commission under the PAEA. Extensive discovery has been conducted and administrative hearings 

have been held. The parties completed the filing of 

legal briefs during November 2010, and a formal 

decision is forthcoming. 

Complaint of Personal Assistance Services Council

In this proceeding, the Complainant alleged that 

the Postal Service had unlawfully denied its application to send mail at Nonprofit Standard Mail rates. 

The Postal Service moved to dismiss the complaint 

for failure to satisfy the regulatory requirement that a 

Complainant meet and confer with the Postal Service 

to resolve any differences before a complaint may be 

filed. The Complainant did not oppose the dismissal 

of its complaint. The parties will work to achieve 

satisfactory resolution of the dispute. The Commission 

dismissed the complaint without prejudice.
POSTAL REGULATORY COMMISSION 23

Complaint of Lance P. McDermott

The Complainant in this proceeding sought to challenge the sale by the Postal Service of the Queen 

Anne Post Office in Seattle, Washington (Queen Anne 

Station). An earlier attempt by the same Complainant 

to appeal the closing of the Queen Anne Station was 

rejected as premature in light of the fact that the facility 

was, at that time, still in operation and no final disposition document had been issued by the Postal Service. 

The complaint alleged that the Postal Service had not 

followed statutory requirements for sale of the facility. 

The Commission granted the Postal Service’s motion 

to dismiss on the grounds that it lacked jurisdiction to 

consider Complainant’s specific claims.

EFFECTIVENESS OF RULES IN 

ASSURING ADEQUATE REVENUES 

AND INCENTIVES TO REDUCE 

COSTS

FY 2010 continued a string of net losses for the Postal 

Service that began in the first year under the PAEA, FY 

2007. During FY 2010 the Postal Service had a net 

loss of $8.5 billion, the largest net loss in Postal Service history. However, the operating deficit was much 

less, $0.6 billion. About $2.5 billion of the loss was 

due to a non-cash fair-value adjustment to the workers 

compensation liability which was charged to expenses 

during the fourth quarter of FY 2010. Additionally, the 

Postal Service was required to pay the full scheduled 

payment of $5.5 billion into the Postal Service Retiree 

Health Benefits Fund in FY 2010. The Postal Service 

sought to receive deferral of the payment, similar to 

what Congress allowed in FY 2009. However, Congress did not include a deferral for FY 2010, before 

it recessed near the end of the fiscal year. The losses 

are causing a significant strain on the Postal Service’s 

ability to continue to finance operations. At the end of 

FY 2010 total debt reached $12 billion, leaving only 

the maximum annual amount of $3 billion available 

during FY 2011. The Postal Service ended FY 2010 

with a cash balance of $1.2 billion, significantly less 

than would be reasonable to start the ensuing fiscal 

year. The Postal Service estimates that by the end of 

FY 2011, it will be unable to make the PAEA required 

$5.5 billion payment to the Retiree Health Benefits 

Fund because of insufficient cash on hand. Table 3 

shows the cash position of the Postal Service from the 

passage of PAEA in FY 2007 through FY 2010.

Commission analysis in its Exigent Rate decision demonstrated the effectiveness of the Price Cap regime 

on reducing costs. One of the goals of price cap 

regulation was to incent the Postal Service to reduce 

costs and improve efficiency. As seen in Figure 1, 

in FY 2010 the Postal Service was able to reduce 

workhours faster than its volume declined.

In FY 2009, the Postal Service eliminated over $6 

billion in costs, and in FY 2010 it was able to reduce 

costs again by almost $4 billion. By August of 2010, 

cost reductions were outpacing postal volume and 

Table 3 – USPS Cash Flows FY 2007–2010 

($ in Millions)

FY 2007 FY 2008 FY 2009 FY 2010

Net Income/(Loss) (5,142) (2,806) (3,794) (8,505)

Non-Cash items and 

Other Cash Flows 2,539 2,367 5,367 5,213

Cash Flows from 

Investing Activities 500 (1,938) (1,806) (1,323)

Cash Flows from 

Financing Activities 2,005 2,910 2,890 1,687

Net Increase/

(Decrease) in Cash (98) 533 2,657 (2,928)

Cash Balance BOY 997 899 1,432 4,089

Cash Balance EOY 899 1,432 4,089 1,161

Debt Outstanding 4,200 7,200 10,200 12,000
24 2010 ANNUAL REPORT 

revenue declines, indicating that FY 2011 will be a 

more favorable year for the Postal Service except for 

the Retiree Health Benefits Fund issue. Most of the cost 

reductions were achieved through workhour reductions. 

In FY 2009, the Postal Service was able to reduce 

workhours by 115 million. In FY 2010, the Service 

reduced workhours by more than 80 million, resulting 

in a savings of almost $3 billion. The Postal Service 

has also been able to reduce non-personnel expenses 

by altering transportation networks and renegotiating 

supply contracts with many vendors.

EFFECTIVENESS OF RULES IN 

ENHANCING TRANSPARENCY 

A key tool for achieving transparency in Postal Service operations is the annual review of information 

provided by the Postal Service to the Commission, in 

accordance with regulations adopted by the Commission. The Postal Service has 90 days after the close 

of the fiscal year to collect, audit, and submit data 

which the Commission determines necessary. The 

Commission has an additional 90 days to solicit comments from the public, evaluate the data, and provide 

a written determination of Postal Service’s compliance 

with applicable statutory policies.

Annual Compliance Determination

On March 29, 2010, the Commission issued its 

third Annual Compliance Determination. The report 

assessed the Postal Service’s FY 2009 performance. 

It focused on three main areas: financial condition, 

including a detailed analysis of the impending cash 

flow crisis; strategic goals; and pricing policies. The 

PAEA identifies multiple policy considerations that 

apply to these three areas. To the extent possible, 

the Commission identified the most relevant statutory 

objectives and factors and, where necessary, balanced the importance of each. In a number of areas 

the policy requirements, objectives and factors of the 

PAEA were not fully satisfied in FY 2009. However, 

the Commission found that in many cases the Postal 

Service had initiated actions to address these problems. Consequently, the Commission did not take any 

immediate actions but identified several issues that 

needed to be addressed in the near term. The Postal 

Service’s progress in these areas will be assessed 

in the FY 2010 Annual Compliance Determination, 

which will be issued in March 2011.

The Commission’s financial analysis identified the 

seriousness of the Postal Service’s financial difficulties 

early in 2010. It identified losses resulting from the 

economic recession, continuing Internet substitution, 

and losses resulting from rates that were below-cost 

for certain major classes of mail. The Commission’s 

Annual Compliance Determination report highlighted 

for Congress that the expected losses raised serious 

doubts about the Postal Service’s continuing ability to 

meet its financial obligations, and to fulfill its statutory 

obligation to provide fundamental postal services to 

the Nation.

Figure 1– Change in Volume and Workhours by 

Quarter FY 2010
POSTAL REGULATORY COMMISSION 25

Importance of Data in the ACD to Assure 

Transparency

The Commission’s regulations applicable to the annual 

review were promulgated pursuant to the PAEA, codified as 39 U.S.C. 3652, which requires the Postal 

Service, using such methodologies as the Commission may prescribe, “to demonstrate that all products 

during such year complied with all applicable requirements of this title.” The Postal Service is required to 

submit cost, revenue, volume and service information 

in its annual report to the Commission.

In the 2009 ACD, the Commission identified 14 market dominant products and services whose revenues 

failed to cover attributable costs. Much of this mail 

was flat-shaped. Therefore, the Commission requested 

a specific timeline for achieving a positive contribution 

from these pieces.

In response to the Commission’s request, as part of 

its Exigent Rate case, the Postal Service filed USPSLR-R2010-4/9 “Flats Strategy” on July 6, 2010. The 

Flats Strategy was separated into two sections. The 

first section, “Operations,” contained programs the 

Postal Service identified as opportunities to realize 

operational savings. The second section, “Pricing 

Strategies,” contained a description of the Postal Service’s approach in pricing flat-shaped products, which, 

in concert with the operational strategies, would 

improve the cost coverage of Flats. The Flats Strategy 

contained 30 operational programs. Four of the programs concerned transportation operations, nineteen 

concerned mail processing operations, and seven 

concerned delivery operations. The Postal Service 

provided a qualitative financial impact for each program, but did not provide any quantitative estimate of 

savings. The expected implementation dates ranged 

from 2010 to 2016. In response to questions posed 

at a technical conference, the Postal Service provided 

supplemental information: an estimated date for the 

realization of anticipated savings, and progress in 

implementation for each program. The programs were 

defined as either concepts or in development. The 

Postal Service estimated that, under a specific set of 

assumptions, it will take approximately five years for 

Standard Mail Flats to cover costs.

In its 2009 ACR, the Postal Service also discussed its 

compliance with the objectives and factors of section 

3622. The Commission noted in its review of the 

Postal Service’s annual report that while some of the 

objectives and factors do not easily lend themselves 

to a quantifiable measure of compliance, such as 

Objective 2 (predictability and stability in rates), there 

are some objectives that can be measured against 

financial standards, accounting principles and historical results, such as Objective 9 (the allocation 

of institutional costs between market dominant and 

competitive products).

Similarly, there are several factors listed in section 

3622(c) that are quantifiable and provide reasonable 

benchmarks on which a finding of compliance could 

be based. These include Factor 2 (the requirement 

that each class or type of mail cover its attributable 

costs and make a reasonable contribution to overhead), Factor 3 (rate impact), and Factor 10 (whether 

special classification improved the Postal Service’s net 

financial position and did not cause unreasonable 

harm to the marketplace).

Periodic Reporting Rules on Service Performance 

Measurement and Customer Satisfaction

In order to maintain high quality service standards, 

the Commission continues to address the need for 

adequate measurements and disclosure of results.
26 2010 ANNUAL REPORT 

Section 3622 of Title 39 of the United States Code 

provides that the Commission by regulation establish 

“a modern system for regulating rates and classes for 

market dominant products.” The quality of service, 

and its reporting forms an integral part of many of the 

objectives and factors set forth in that section. Reporting on quality of service allows assessment of whether 

the Postal Service is meeting the objective of maintaining the high quality service standards established 

under section 3691. It furthers the objective of increasing the transparency of the rate making process 

and allows assessment of the factors addressing the 

value of service and by association with the proposed 

measurement systems, the value of intelligent mail. 

Finally, it is important when analyzing whether quality of service is impacted in order to comply with rate 

cap requirements of 39 U.S.C. 3622(d).

Section 3652(a)(2) of Title 39 requires that the Postal 

Service include in an annual report to the Commission 

an analysis of the quality of service “for each marketdominant product provided in such year” by providing 

“(B) measures of the quality of service afforded by the 

Postal Service in connection with such product, including -- (i) the level of service (described in terms of speed 

of delivery and reliability) provided; and (ii) the degree 

of customer satisfaction with the service provided.”

The Commission issued Order No. 465 in Docket 

No. RM2009-11 on May 25, 2010. Order No. 

465 established final rules concerning periodic 

reporting of service performance measurement and 

customer satisfaction. Within this Order, the Commission established a timeline for full compliance with 

all reporting requirements by the filing date of the FY 

2011 Annual Compliance Report (ACR) unless waivers were sought. The order established two separate 

processes for seeking waivers.

The first step in the process was addressed in Order 

No. 531 in Docket No. RM2010-11, and consisted 

of the Postal Service petitioning the Commission for 

semi-permanent exceptions from reporting, pursuant to 

rule 3055.3. The second step consisted of the Postal 

Service petitioning the Commission for temporary 

waivers of reporting until such time that reporting can 

be provided. The Postal Service subsequently filed for 

temporary waivers from periodic reporting on October 1, 2010, in Docket No. RM2011-1.

Postal Service Cost Methodology Rules 

In anticipation of filing its 2009 ACR, the Postal Service filed 30 proposals with the Commission from June 

2009 through December 2009 seeking consideration 

of a number of proposed changes in costing methodologies and data collection methods. These proposals led to a series of rulemakings. The Commission 

accepted 27 of the proposed methodology changes, 

accepted one with one exception, and rejected one.

The Postal Service has filed eight additional proposed 

changes to its costing methodologies in anticipation of 

filing its 2010 ACR. One proposal has been accepted by the Commission and the other proposals are 

currently under evaluation by the Commission’s staff.

Rules on Confidential Materials filed by the Postal 

Service 

On June 19, 2009, in Order No. 225, the Commission adopted final rules that establish a procedure for 

according appropriate confidentiality for non-public 

materials filed with the Commission. Essentially, “nonpublic materials” means any document, information, or 

thing filed with the Commission and claimed exempt 

from disclosure under applicable sections of the United 

States Code by the Postal Service or protected from dis
POSTAL REGULATORY COMMISSION 27

closure under Federal Rules of Civil Procedure 26(c) by 

a third party with a proprietary interest in the materials.

These rules lay a foundation for the Commission’s 

treatment of non-public materials filed by the Postal 

Service and other parties.

Obtaining Information from the Postal Service–

Subpoenas

The Commission issued its final rule in Docket No. 

RM2009-12 on April 9, 2010, which established 

procedures for obtaining information from the Postal 

Service. In compliance with PAEA section 602 which, 

among other things, authorizes: (a) the issuance of 

subpoenas requiring officers, employees, agents, 

or contractors of the Postal Service to appear and 

present testimony or to produce documentary or other 

evidence, and (b) the issuance of orders that require 

the taking of depositions and responses to written 

interrogatories by any of those same persons. Section 

504(f) further authorizes the enforcement of subpoenas 

by appropriate district courts of the United States.

Financial Reporting

As required by 39 U.S.C. 3654, the Commission 

has been monitoring the Postal Service’s progress towards compliance with section 404 of the SarbanesOxley Act (SOX). Section 404 requires establishment 

of internal controls for financial reporting. The Postal 

Service reports that it was fully compliant in FY 2010.

Freedom of Information Act Rules 

Order No. 322, issued on October 23, 2009, 

revised procedures for the Commission’s handling 

of FOIA requests to reflect the Openness Promotes 

Effectiveness in our National Government Act of 

2007, Pub. L. 110-175, 121 Stat. 2524 (OPEN 

Government Act). The substantive changes included a 

declaration of a presumption of openness, a provision 

to allow partial grants of requests, a mechanism for 

requesters to receive a tracking number for each FOIA 

request, a rule barring the collection of fees if the Commission does not comply with the 20 working day time 

limit, and a designation of the FOIA Public Liaison.

The Commission was the first federal agency to issue 

rules citing President Barack Obama’s January 21, 

2009 Memo on the Freedom of Information Act, and 

Attorney General Eric Holder’s March 19, 2009 

FOIA guidelines.

EFFECTIVENESS OF RULES IN 

ACHIEVING THE OBJECTIVES OF 

SECTION 3633 OF THE PAEA

Competitive Rate Change

The Commission’s review of rate adjustments for competitive products is governed by section 3633(a) of 

39 U.S.C. Section 3633(a) establishes three statutory 

standards, incorporated into the Commission’s rules, 

applicable to competitive products. First, each competitive product must cover its attributable cost. Second, competitive products must collectively cover their 

appropriate share of the Postal Service’s institutional 

costs, which the Commission has determined to be, 

at a minimum, 5.5 percent of the Postal Service’s total 

institutional costs. Third, competitive products may not 

be cross subsidized by market dominant products. 

In FY 2010, the Postal Service filed two notices of 

changes in rates of general applicability for competitive products. The first notice was filed on November 

4, 2009, and set forth price adjustments for domestic 

competitive products: Express Mail, Priority Mail, 

Parcel Select and Parcel Return Service, and for international competitive products: Global Express Guaranteed, Express Mail International, and Priority Mail 
28 2010 ANNUAL REPORT 

International. The Commission found that the planned 

price increases in this docket satisfied the statutory 

and regulatory requirements of 39 U.S.C. 3633 and 

39 CFR 3015.7 and approved the rate adjustment 

by Order No. 353, issued on December 4, 2009. 

The new prices went into effect on January 4, 2010.

The second notice was filed on November 17, 

2009, pursuant to 39 U.S.C. 3642 and 39 CFR 

3020.30. It called for adding Inbound Air Parcel Post 

at Universal Postal Union (UPU) Rates to the Competitive Products List to take effect January 1, 2010. The 

Commission’s statutory responsibilities in this docket 

entailed assigning the Inbound Air Parcel Post at UPU 

Rates to either the Market Dominant Product List or to 

the Competitive Products List. The Commission also 

reviewed the proposal for compliance with PAEA 

requirements. The Commission found that based on 

the filed supporting data, Inbound Air Parcel Post at 

UPU Rates met all statutory standards applicable to 

competitive products.

Accounting and Periodic Rules 

The Commission, to further ensure that the objectives 

of section 3633 are met, issued Order No. 479 

on June 25, 2010 in Docket No. RM2009-9. The 

Commission’s Order was in response to the Postal 

Service’s proposed methodology, filed on July 23, 

2010, detailing how each asset and liability account 

identified in the Chart of Accounts would be allocated to the theoretical competitive products enterprise. 

In its June 25 Order, the Commission resolved issues 

pertaining to the allocation of assets and liabilities to 

the theoretical competitive products enterprise.

The Commission has developed Accounting and 

Periodic Reporting Rules applicable to competitive 

products for the establishment and application of: (a) 

the accounting practices and principles to be followed by the Postal Service and (b) the substantive 

and procedural rules for determining the assumed 

Federal Income tax on competitive products income. 

The funds generated by this assumed tax are to be 

put in the Postal Service’s General Fund to further 

contribute to offsetting overhead expenses.
 POSTAL REGULATORY COMMISSION 29

Chapter III

Costs of the Universal Service Obligation 

and Value of Mail Monopoly

ESTIMATED COST OF THE UNIVERSAL SERVICE OBLIGATION 

The PAEA requires the Commission to provide annual updates on the estimated cost to the Postal Service for 

providing universal service. The law requests three separate estimates: (1) the cost of providing service to 

areas of the Nation that would not receive service but for the universal service obligation; (2) the revenue 

foregone by providing free or reduced rates for postal services as required by 39 U.S.C. 2401(c); and (3) 

other public services or activities related to the universal service obligation. Table 4 provides the estimate for 

the first and third components. Table 5 provides the estimate for the second component. At this writing, the 

data necessary to compute the costs for FY 2010 were not available. Therefore, the cost estimates utilize FY 

2007, FY 2008 and FY 2009 data. Most of the increase in the cost of six-day delivery between FY 2007 

and FY 2008 is due to refinement of the method used to calculate indirect costs of delivery. The USO cost of 

six-day delivery is based on the George Mason University method used in previous annual reports. It has been 

updated for FY 2009, and certain calculations have been refined. Refinements over the course of time may be 

necessary.
30 2010 ANNUAL REPORT 

The Postal Service provides statutorily discounted 

rates for the nonprofit rate categories in Periodicals, 

Standard Regular, and Standard Enhanced Carrier 

Route. Additionally, statutory discounts are given to 

Periodicals, Classroom and Science of Agriculture 

and to Library Rate. Table 5 presents the Commission’s 

estimates of revenue forgone by the Postal Service in 

providing discounted rates to preferred categories of 

mail in FY 2007, FY 2008, and FY 2009.

ESTIMATED VALUE OF THE 

MONOPOLY

While not required by law, the Commission updated 

its combined and mailbox monopoly values for the 

present year using the base case assumptions and 

methodology outlined in its 2008 Report on Universal 

Postal Service and the Postal Monopoly. The updated 

and previous year values are shown on the next page. 

The value of the monopoly estimates the profit lost by 

the Postal Service if potential competitors are allowed 

to enter and compete in the Postal Service’s letter 

monopoly (stemming from the Private Express Statutes) 

and the mailbox monopoly. In other words, if the 

Postal Service’s combined monopoly (letter monopoly 

and mailbox monopoly) and, separately, the mailbox 

monopoly are eliminated, the value of the monopoly 

estimates how much the Postal Service would lose. 

The updated “base case” monopoly values reported 

below are lower than last year’s values due to the 

reduction in volume this year and higher fixed network 

costs. Due to both factors, the Commission concludes 

that potential competitors would find entry into previously monopolized areas less profitable and thus less 

attractive. As a result, the Commission’s estimates 

reflect a lower profit lost by the Postal Service because of a lower incidence of entry by competitors 

when eliminating either monopoly. The Commission 

estimates entry on 32 percent of total routes under the 

base case combined monopoly. This figure is considerably lower than the 41 percent value estimated for 

Table 4 – Cost of Universal Service ($ in Billions)

Mandate FY 2009 FY 2008 FY 2007

Six-Day Delivery Instead of 

Five Day Delivery1 2.080 2.160 1.930

Impact of Nonprofit Mail 

Discounts Net of Costs 1.322 1.223 1.150

Unzoned Media/Library Rates 0.096 0.094 0.063

Losses on Market Dominant 

Products 0.696 0.437 0.448

Maintaining Small Post Offices 0.536 0.549 0.586

Alaska Air Subsidy 0.121 0.124 0.107

Uniform Rates for First-Class 

Mail 0.081 0.212 0.130

Total Cost of Universal Service 

Obligation 4.932 4.799 4.414 

1 The USO cost of Six-Day Delivery in FY 2009 is based on 

GMU method and it may change depending on the Commission’s 

decision in N2010-1.

Table 5 – Revenue Not Received from Free and 

Reduced Price Mail ($ in Billions) 

Estimated Revenue 

Not Received

Mail Class FY 2009 FY 2008 FY 2007

Standard Mail

Nonprofit 1.001 0.969 0.757

Nonprofit - ECR 0.097 0.072 0.150

Total Standard Mail 1.098 1.041 0.908

Periodicals

Nonprofit 0.013 0.011 0.013

Classroom 0.001 0.001 0.001

Total Periodicals 0.014 0.012 0.014

Library Rate 0.001 (0.001) (0.000)

Free-for-the-Blind Mail 0.054 0.052 0.061

Total 1.167 1.104 0.982
POSTAL REGULATORY COMMISSION 31

Table 6 – Value of the Monopoly (Billions)

FY 2009 FY 2008 FY 2007

Mailbox Monopoly 0.79 1.07 1.33

Combined Monopoly 2.11 2.96 3.48

FY 2008. Similarly, for the mail box monopoly, the 

percentage of profitable routes decreases from 45 

percent to 33 percent.

The base case assumptions applying to competitors in 

the present analysis include: (1) full diversion of local 

contestable mail when discounting existing Postal 

Service rates by at least ten percent; (2) competitors 

incur only delivery costs, and deliver three times a 

week under the combined monopoly, and once a 

week under the mail box monopoly; and (3) competitors are ten percent more cost efficient than the Postal 

Service. Besides differences in delivery frequency, 

mail subject to diversion under the mail box monopoly 

is much more restricted in scope compared to the 

combined monopoly, as explained in detail in the 

Comission’s USO report.

The method employed to estimate both monopoly values is also the same as in last year’s approach. The 

Commission’s model estimates competitor profits for 

all routes based on contestable volumes, discounted 

rates and adjusted delivery costs. Entry occurs only 

on routes with positive profits. The monopoly value 

is estimated as the sum of lost contributions on routes 

from volume diversion to competitors.

The Commission’s estimates should be viewed as 

“upper bounds” for several reasons. As described in 

the USO report, it is entirely possible that entry would 

only occur on profitable co-located routes that are. 

Because the Commission’s model evaluates entry for 

each route regardless of the extent of route clustering, 

monopoly values are likely overstated. Second, the 

Commission’s model ignores any carrier route sorting 

required by potential entrants for five-digit sorted letter 

mail entering the system at the plant or delivery unit 

level. Inclusion of these costs would also lower the 

extent of entry to some degree.

On the price side, the model does not address the 

added pricing flexibility that the Postal Service would 

be granted if either monopoly is lifted. Presumably, 

either lifting the mail box monopoly or eliminating the 

Private Express Statutes or both means that affected 

mail could no longer be classified as market dominant. Further, exclusion of such mail from the price 

cap also means that the Postal Service could freely 

price the newly competitive products without affecting rates for the remaining market dominant products, 

if any. Under such circumstances, the Postal Service 

could be expected to respond to competitive entry by 

lowering its own rates and/or delivery frequencies 

where and when these changes would still be expected to generate positive contributions. Although such 

contributions from contestable products would likely 

be lower than under existing market dominant values, 

they would likely be higher than if volumes would be 

fully diverted to competitors because of inflexible rates 

or delivery frequencies. The Commission will be researching these and other issues related to estimating 

monopoly values under more realistic conditions.
32 2010 ANNUAL REPORT 
 POSTAL REGULATORY COMMISSION 33

Chapter IV

Other Legal Proceedings

Station and Branch Optimization and Consolidation Initiative, 

Docket No. N2009-1

On July 2, 2009, the Postal Service filed a request with the Commission asking for a determination whether 

a plan to optimize the Postal Service’s retail network by consolidating the operations of some retail stations 

and branches into nearby facilities constitutes a change in the nature of Postal Services, within the meaning of 

39 U.S.C. Section 3661(b). The Postal Service described the plan as the Postal Service Station and Branch 

Optimization and Consolidation Initiative.

The Initiative focused on stations and branches that report to USPS Executive and Administrative Schedule level 

24 (EAS-24) and above Postmasters. These facilities represent approximately two-thirds of the over 4,800 

Postal Service classified stations and branches nationwide.

The Commission held field hearings on September 16, 2009, at the Independence Civic Center in Independence Ohio and at Fordham University, Bronx, N.Y. on September 23, 2009. In addition, a hearing to enter 

the Postal Service’s direct case and provide an opportunity for participants to orally cross-examine Postal Service witnesses was held on September 30, 2009. A hearing to enter participants rebuttal cases and provide 

an opportunity for participants to orally cross-examine rebuttal witnesses was held on November 18, 2009. 

The Commission’s Advisory Opinion was subsequently issued on March 10, 2010.
34 2010 ANNUAL REPORT 

In its Advisory Opinion the Commission found that it 

was consistent with applicable public policy for the 

Postal Service to adjust its retail footprint to recognize 

changing customer needs and usage. However, the 

Commission also found that a number of changes 

should be made to the current Postal Service process to ensure that adequate and efficient service is 

maintained.

First, the Commission found that the Postal Service 

should improve opportunities for customers to offer input. Second, the Commission found that the financial 

analysis used to determine the cost savings from closing a facility should be improved. Finally, the Commission found that the Postal Service should provide 

the local managers responsible for development of 

proposals to close facilities with written guidance on 

obtaining relevant information and applying qualitative decision factors.

In conclusion, the Commission indicated that if the 

improvements identified by the Commission were 

adopted by the Postal Service, the planned subsequent nationwide applications of this process would 

be consistent with public policy. As of the issuance 

of the advisory opinion, it appeared that the initial 

application of the station and branch discontinuance 

process would affect a smaller number of facilities than 

originally proposed. A more recent Postal Service filing 

indicated that only 162 stations and branches were 

currently under review. However, the Postal Service has 

indicated that this review process would continue to be 

applied in the future to numerous retail facilities. 

SIX-DAY TO FIVE-DAY STREET 

DELIVERY AND RELATED SERVICE 

CHANGES, DOCKET NO. N2010-1

The Postal Service, on March 30, 2010, filed a 

request with the Commission for an Advisory Opinion 

under the provisions of 39 U.S.C. 3661 for the elimination of Saturday delivery. The Postal Service is proposing to eliminate Saturday delivery nationally, except 

for delivery of Express Mail and delivery to those Post 

Office Boxes currently receiving Saturday delivery. The 

Postal Service is also proposing to eliminate Saturday 

initial processing of all mail except Express Mail and 

qualifying destination entry bulk mail. The collection of 

mail from street collection boxes would also be eliminated on Saturday, except to collect overflow on an 

as-needed basis.

The Postal Service estimated the annualized cost 

savings expressed in 2009 dollars at $3.103 billion 

per year. The Postal Service noted that the estimate 

could be affected by future increases in hourly labor 

costs, input unit costs, number of delivery points, and 

reduced mail volumes. The Postal Service states that 

extensive market research has revealed that the elimination of Saturday delivery would have little impact 

on its consumer and commercial customers It estimated the potential volume loss at 0.7 percent, which 

results in an annual revenue loss of $428 million.

Customer outreach by the Postal Service in the early 

stages of the proposal’s development led to modifications. It was determined that Saturday retail service 

and post office box delivery for Post Offices currently 

open on Saturdays would be retained. Remittance 

mail would still be processed and transported over 

the weekend so that it would continue to be available 

for pickup seven days a week. In addition, if needed, 
POSTAL REGULATORY COMMISSION 35

parcel deliveries would be added on several Saturdays before Christmas.

The Commission heard from various witnesses on both 

sides of the issue. Concerns were expressed about 

the Postal Service’s proposal such as possible adverse 

effects on rural America, vote-by-mail programs, and 

pharmaceuticals-by-mail programs. Further, concerns 

were expressed about a possible reduction in the benefits that may exist from the presence of carriers on the 

streets under the Postal Service’s current six-day delivery 

schedule. 

Other customers have indicated that they could adapt 

to five-day delivery to street addresses, particularly 

if the plan would result in strengthening of the Postal 

Service’s financial situation or reducing the need for 

future rate increases.

Section 3661(c) of Title 39 requires that the Commission afford an opportunity for a formal on-the-record 

hearing of the Postal Service’s Request under the terms 

specified in sections 556 and 557 of Title 5 of the 

U. S. Code before issuing its advisory opinion. Pursuant to the requirement of section 3661(c) of Title 39, 

Public Representatives were appointed to represent the 

interests of the general public.

The Postal Service presented the direct testimony of 

11 witnesses supporting its request. Hearings on the 

Postal Service’s direct case were held from July 14 to 

July 22, 2010 in Washington, D.C. On August 2, 

2010, rebuttal testimony was filed by three parties. 

The Commission held hearings on the rebuttal witnesses on September 13-16, 2010. On September 

23, 2010, the Postal Service submitted surrebutal 

testimony of four witnesses. The Commission heard 

cross-examination of two rebuttal witnesses.

Senator Daniel K. Akaka (HI) and Senator Lisa 

Murkowski (AK) each asked that the Commission hold 

field hearings in Hawaii and Alaska, respectively, to 

better understand the unique role postal services play 

in those states. Unfortunately, the Commission was 

unable to travel to those states to hold field hearings. 

Senator Murkowski appeared before the Commission 

to present testimony on the Postal Service’s proposal. 

In addition, both Senator Murkowski and Senator 

Akaka submitted written statements to the Commission. Senator Murkowski testified that exceptional conditions exist in Alaska in terms of the sheer distances 

of travel, and the challenges of terrain, transportation, 

and weather. She reminded the Commission that 82 

percent of the communities in Alaska are not connected by roads. There are no mail trucks and small 

planes are used for the most part. Senator Murkowski 

was concerned that mail delivery, which is already 

slower in the state, would take even longer if Saturday processing and delivery were to be discontinued. 

Senator Akaka informed the Commission that the state 

of Hawaii faced similar challenges to mail delivery, citing a combination of logistical, physical and 

financial barriers. In addition, he noted that Hawaii’s 

elections could be impacted due to the state’s use of 

vote-by-mail.

In addition to the hearings held in Washington, D.C., 

the Commission held seven field hearings:

 Las Vegas, Nevada, May 10, 2010

 Sacramento, California, May 12, 2010

 Dallas, Texas, May 17, 2010

 Memphis, Tennessee, May 19, 2010

 Chicago, Illinois, June 21, 2010

 Rapid City, South Dakota, June 23, 2010

 Buffalo, New York, June 28, 2010

The Commission is evaluating the proposal.
36 2010 ANNUAL REPORT 

REVIEW OF NON-POSTAL 

SERVICES DOCKET NOs. MC2008-1 

PHASE I AND PHASE II

MAIL CLASSIFICATION SCHEDULE UPDATES

The Mail Classification Schedule (MCS), codified 

at 39 CFR Appendix A to Subpart A of Part 3020, 

includes the Market Dominant Product List and the 

Competitive Product List. The products appearing on 

these lists are products that the Postal Service currently 

is authorized to offer. In FY 2011, a formal rulemaking will be initiated to augment the Mail Classification 

Schedule to include descriptions of all products. The 

Commission and the Postal Service have cooperated 

on development of draft language for the product 

descriptions and have used this draft language to communicate various classification changes that have been 

reviewed by the Commission over the past two years.

APPEALS OF POST OFFICE CLOSINGS

Under 39 U.S.C. 404(d) the Commission’s authority to review Postal Service decisions to close or 

consolidate post offices is limited to a review of the 

procedures used by the Postal Service to reach its 

decision; the adequacy of the record supporting the 

decision; and determination of whether the decision 

was arbitrary, capricious, or otherwise contrary to 

law. If the Commission found that a Postal Service 

determination to close or consolidate post offices was 

legally flawed in some manner, the proceeding could 

be remanded to the Postal Service for reconsideration. The Commission may not modify a determination 

of the Postal Service.

A2010-1 Cranberry, Pennsylvania 16319 

On October 6, 2009, a petition was filed with the 

Commission seeking review of the Postal Service’s actions regarding the Cranberry post office. Petitioners 

argued that the Postal Service failed to follow the 

closing procedures set forth in 39 U.S.C. 404(d). 

The Postal Service maintained that the Cranberry post 

office was not closed but instead suspended. The 

Commission found that the Postal Service had failed 

to follow its suspension procedures. It directed the 

Postal Service to provide regular updates describing its 

progress in producing a plan of action regarding the 

Cranberry post office. In the update filed October 25, 

2010, the Postal Service indicated that the proposal to 

close the Cranberry post office has been posted.

A2010-2 Steamboat Springs, Colorado 80487 

On December 29, 2009, a petition was filed with 

the Commission seeking review of the Postal 

Service’s closure of the Sundance post office located 

in Steamboat Springs, Colorado. The Petitioner 

argued that the Postal Service had failed to follow the 

closing procedures established in 39 U.S.C. 404(d). 

The Postal Service maintained that formal closing 

procedures need not be followed because Sundance 

was a station and not a post office, and the final 

decision to close the station had not been made. The 

Commission dismissed the appeal finding that the 

Postal Service’s actions constituted a rearranging of 

retail facilities within the community and not a closing 

as envisioned under 39 U.S.C. 404(d).

A2010-3 Elko, Nevada 89803

On February 22, 2010, a petition was filed with the 

Commission seeking review of the Postal Service’s 

decision to close the East Elko station. Petitioner complained that the Postal Service had not followed the 

closing procedures mandated in 39 U.S.C. 404(d). 

The Postal Service argued that since the facility was a 

station and not a post office the Commission lacked 

jurisdiction to hear the appeal. The Commission 
POSTAL REGULATORY COMMISSION 37

dismissed the appeal finding that the procedures of 

39 U.S.C. 404(d) were not applicable given the close 

proximity of the Elko Main Post Office and the fact that 

the same services were available at that office.

A2010-4 Crescent Lake, Oregon 97733

The petition for review in Docket No. A2010-4 was 

filed on March 12, 2010. Members of the Crescent 

Lake community argued that the notice informing 

citizens of the closing was inadequate and failure to 

maintain the zip code after closing resulted in misdirected mail. The Postal Service moved to dismiss the 

appeal, arguing that it was filed late. The Commission dismissed the appeal as untimely since it was not 

filed within 30 days of the posting of the final determination to close the post office. The Commission 

suggested that to avoid potential confusion for patrons 

of offices subject to discontinuance in the future, the 

Postal Service should consider providing direct notice 

to affected persons via the mail.

A2010-5 Rentiesville, Oklahoma 74459

The petition for review in this proceeding was filed 

on August 25, 2010. Petitioner argues that the Postal 

Service failed to consider what effect closing the 

Rentiesville post office would have on the community. 

The Postal Service contends that it has complied with 

applicable law and filed a copy of its final determination to close the Rentiesville post office on December 

21, 2010. The matter was remanded to the Postal 

Service for further consideration.

A2010-6 Renfro Valley, Kentucky 40473

The petition for review was filed on August 25, 

2010. Petitioner argues that the Postal Service has 

failed to consider the effect closing the Renfro Valley 

post office will have on the community. The Postal 

Service asserts that it has adequately addressed the 

issues raised in Petitioner’s appeal. Further, the Postal 

Service indicates that it has consolidated the Renfro 

Valley post office and established a community post 

office 2.6 miles away in Mt. Vernon, Kentucky. On 

December 16, 2010, the Commission issued Order 

No. 609 affirming the Postal Service’s determination 

to consolidate the Renfro Valley Post Office and establish a community post office.
38 2010 ANNUAL REPORT 
 POSTAL REGULATORY COMMISSION 39

Chapter V

International Activities

Throughout FY 2010, the Postal Regulatory Commission continued its active international engagement, including review of the Postal Service’s growing international initiatives. The Postal Service increased its filings of 

international Negotiated Service Agreements (NSAs) by nearly 400 percent from 30 in FY 2009 to 114 in FY 

2010. This represented almost 90 percent of all NSAs filed with the Commission. All but three of these were 

for competitive products and services.

The Commission also continued its participation in the work of the Universal Postal Union (UPU), particularly 

with respect to inter-administration delivery payments, quality of service, reform of the Union, universal service, 

and strategic planning. The UPU is an international treaty organization and specialized agency of the United 

Nations whose mission is to promote an affordable, quality universal service in all 191 member countries. 

Through the UPU, members negotiate, inter alia, rates for the delivery of international mail, technical standards, product development, and security procedures. Commissioners and senior staff served as members of 

the U.S. delegation to major UPU meetings, including the Postal Operations Council, Council of Administration 

and Strategy Conference.

The Commission has a statutory obligation under 39 U.S.C. 407 to provide its views to the Department of 

State on any amendments to a rate or classification in an international treaty. The Commission has therefore 

become increasingly engaged in the UPU’s work on inter-administration payments for letter mail delivery, or 

terminal dues, particularly in light of the Postal Service’s loss of nearly $100 million on inbound international 

mail, including registered service, in FY 2009. The Commission worked cooperatively with the Department 

of State, Postal Service and other UPU members to develop alternative payment methodologies that would 

improve the Postal Service’s cost coverage for inbound international mail while preserving the affordability of 

international mail for U.S. citizens.
40 2010 ANNUAL REPORT 

In FY 2010, the Commission also built on earlier initiatives to promote the sharing of information and best 

practices with other postal regulators. In FY 2009, 

then-Chairman Blair launched the Postal Regulatory 

Dialogue as a proactive initiative to bring together 

postal regulators from diverse geographical regions 

to share technical information and best practices in 

postal regulation. As a result of the overwhelming positive response of other regulators to this effort, China 

hosted a second Postal Regulatory Dialogue in May 

2010, in which the Commission participated, that 

focused on various aspects of universal service. The 

European Commission will organize the third Postal 

Regulatory Dialogue in June 2011.

During two UPU Forums on Postal Regulation held 

during FY 2010, Chairman Goldway presented 

overviews of postal reform in the United States, the 

role of the Commission, and challenges to the U.S. 

postal system. Participants represented not only postal 

regulators, but also postal operators, governments, 

and the private sector. In addition, recognized by 

the European Commission for its commitment to the 

international promotion of postal regulatory best 

practices, the Commission was the only non-European 

postal regulator invited to speak at the 2nd European 

High-Level Conference on Postal Services in Valencia, 

Spain to an audience that included European Commissioners, ministers and heads of postal operators 

and regulatory entities.

The Commission also hosted visits by international 

postal regulators who wanted to learn more about the 

Commission’s activities and interaction with key postal 

stakeholders. The Commission held technical meetings with the Executive Director of the National Postal 

Agency of Ecuador, which regulates the postal market, 

as well as two Commissioners from ARCEP, the French 

Telecommunications and Regulatory Authority. As part 

of these visits, the Commission organized meetings 

with senior officials in Congress, the Postal Service, 

and the private sector to provide these visitors with 

broad exposure to the U.S. postal market. These international officials also attended public hearings held 

by the Commission on major filings and experienced 

first-hand the transparency of the review process.

PRC Commissioners meet with visiting French postal commissioners.
POSTAL REGULATORY COMMISSION 41

The Commission is committed to working closely not 

only with the Department of State and Postal Service, 

but also with other government agencies that are involved in the postal or express delivery industry, such 

as the Department of Commerce and Office of the 

U.S. Trade Representative. In October 2009, Chairman Goldway led the U.S. delegation to the third 

U.S.-China Symposium on Postal Reform and Express 

Delivery, organized by the Department of Commerce 

in conjunction with State Post Bureau, the regulator 

of the Chinese postal market. Through this initiative, 

Chairman Goldway promoted a level playing field for 

the Postal Service and express delivery providers in 

the Chinese market.

Lastly, the Commission renewed its commitment to participate in the Department of State’s Federal Advisory 

Committee on International Postal and Delivery Services. This Committee, created under 39 U.S.C. 407, 

serves in an advisory capacity to the Department of 

State on international postal issues and is primarily 

comprised of stakeholders from the private sector.

Chairman Goldway addressing the symposium in Nanjing, China.
42 2010 ANNUAL REPORT 
 POSTAL REGULATORY COMMISSION 43

Chapter VI

Public Affairs and Outreach Efforts

Overview

The Office of Public Affairs and Government Relations (PAGR) serves as the public face of the Commission. 

The Office is the Commission’s primary resource in support of public outreach and education, media relations, 

and liaison with Congress, the Postal Service and other government agencies. The PAGR Director 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 Congressional 

inquiries concerning Commission policies and activities.

Congressional Testimony

Chairman Goldway and the Director of the Office of Accountability and Compliance (OAC) appeared before 

Congressional Committees to report on the program plans and actions of the Commission and respond to 

questions from Members. Chairman Goldway testified before the Senate Appropriations Subcommittee on 

Financial Services and General Government in March of 2010. The Chairman also testified before a joint 

hearing of the House Committee on Oversight and Government Reform and the House Subcommittee on the 

Federal Workforce, Postal Service and the District of Columbia in April of 2010. Also in April, the Chairman 

testified before the Senate Subcommittee on Federal Financial Management, Government Information, Federal 

Services, and International Security. In May of 2010, the Director of OAC testified before the House Subcommittee. Congressional testimony by Commissioners and staff is available online at the Commission website.

3/18/2010—Testimony of Chairman Ruth Goldway before the Senate Appropriations Subcommittee on Financial Services and General Government. The purpose of the hearing was to discuss the Postal Service plan 

to eliminate Saturday mail delivery. Goldway explained the Commission role in the process of reviewing the 
44 2010 ANNUAL REPORT 

impending Postal Service proposal for a reduction in 

delivery frequency.

4/15/2010—Testimony of Chairman Ruth Goldway 

before a joint hearing of the House Committee on 

Oversight and Government Reform and the Federal 

Workforce, Postal Service and the District of Columbia Subcommittee entitled, “Continuing to Deliver: An 

Examination of the Postal Service’s Current Financial 

Crisis and its Future Viability.” Goldway described 

her views regarding any potential reductions in 

service to the public. In considering the future of the 

Postal Service, Goldway noted that the Commission 

must consider what the Constitution and law require, 

what is best for the Nation, and the maintenance 

and improvement of the universal service obligation. 

Chairman Goldway also encouraged Postal Service 

development of a detailed, innovative new retail strategy. Also discussed was the Commission’s support 

for a readjustment of the Postal Service’s scheduled 

payments for future retiree health benefits; upcoming 

Commission work on an Advisory Opinion related to 

5-day mail delivery; and a Commission review of the 

Office of Personnel Management’s calculation of the 

CSRS pension liability. 

4/22/2010—Testimony of Chairman Ruth Goldway 

before a hearing of the Senate Subcommittee on Federal Financial Management, Government Information, 

Federal Services, and International Security entitled, 

“The Future of the Postal Service.” Chairman Goldway 

described work the Commission is engaged in to 

address the vulnerability of the Postal Service, fulfill its 

legislative mandate for a modern, transparent system 

for regulating rates and assure high quality service performance. Goldway detailed both the review process 

the Commission planned to undertake for N2010-1 

and Commission involvement in the recalculation of 

the CSRS pension liability.

5/12/2010—Testimony of Office of Accountability and Compliance Director John Waller before a 

hearing of the House Subcommittee, entitled “The 

Price is Right, or is it? An Examination of USPS 

Workshare Discounts and Products that do Not Cover 

Their Costs.” Waller noted that properly designed 

workshare discounts act to control costs and create 

competition within mail processing. He described 

the Commission’s use of Efficient Component Pricing, 

to develop prices for the individual components of a 

service with the goal of promoting the efficient use of 

each component. Also detailed was the Commission’s 

statutory role when a discount exceeds avoided costs. 

Waller also identified cost coverage problems associated with three products: Periodicals, Standard Mail 

Flats and Standard Mail Non-Flat Machinables.

Outreach Activity

In its normal course of activities, the Commission 

routinely hears from members of the public involved 

in or representing the mailing industry as well as 

members of Congress. The Commission performed 

a number of public outreach activities to engage 

citizens and other stakeholders as a key part of its 

statutory responsibilities.

The Commission affords public comment on rulemakings, complaints, mail classification cases, public 

inquiries, rate cases and other matters. There is an 

opportunity for both formal and informal comment 

and both initial and reply comments. Commenters are 

encouraged to use the electronic filing system to file 

their comments online. Comments filed electronically 

are published on our website under the appropriate 

docket number.

In conjunction with the Commission’s review of the 

Postal Service’s proposal to eliminate Saturday mail 

delivery to street addresses, Docket N2010-1, field 
POSTAL REGULATORY COMMISSION 45

hearings were held in Las Vegas, Nevada; Sacramento, California; Dallas, Texas; Memphis, Tennessee; Chicago, Illinois; Rapid City, South Dakota; and 

Buffalo, New York. These hearings promoted greater 

public input into the Commission’s Advisory Opinion. 

In each city, witnesses from the mailing community, 

the general public, labor unions and professional 

organizations, and the Postal Service testified. Attendees were afforded the opportunity to make comments 

or raise questions at the close of each hearing.

The Commission also maintains a public commenter 

file containing letters, emails and faxes for each 

docket. The file is available for public viewing.

Consumer Relations

The Consumer Relations Specialist responds to public 

comments and customer inquiries, handles complaints 

which do not rise to the level of formal complaints, and 

serves as liaison with the Office of Consumer Advocate 

of the Postal Service for service issues. The Consumer 

Relations staff manages and tracks public inquiries, 

informal complaints of a rate or service nature, and 

correspondence utilizing a Public Inquiry Log database 

developed in-house. Inquiries are tracked based on 

source and nature of the inquiry.

Further in-depth breakdown of categories are used to 

determine issues of significance to consumers and the 

mailing industry. Other factors the Commission deems 

of interest to the public are also tracked. This process 

provides a tool for the Commission to perform general analyses related to quality of service and helps 

to identify concerns, trends, and potential systemic 

problems as part of the PAEA’s requirement to monitor service. The Public Inquiry Log is posted on the 

Commission’s website on a quarterly basis under the 

“What’s New” column. A new web page is currently 

being developed to archive quarterly and yearly logs 

for interested consumers. 

During 2010, the Commission received over 19,000 

inquiries, suggestions and comments, which was 

nearly an 11-fold increase over the 1,800 received 

in 2009. Consumer queries were received largely 

through the Commission’s website link, “Contact 

PRC,” found on the top banner of the home page. 

As seen in Figure 2, 12,972 comments were from 

Consumers, 2,423 from Business Owners whose 

comments were solicited by the National Association of Letter Carriers, 595 from Mailers, and 2,978 

identified as Postal Employees. The vast majority of 

comments were in regard to Docket N2010-1 on the 

Postal Service’s proposal for a change from 6-day to 

5-day delivery. Time of response for the majority of 

the customer contacts averaged one day despite the 

tremendous increase in volume over the previous year.

The top consumer issue was public interest in Docket 

N2010-1. Over 20,000 public comments and suggestions were received. In addition to this outpouring 

of opinions, other top consumer issues included 837 

queries and comments on rates and Docket R2010-4, 

the Postal Service’s request for an exigent rate increase; 

367 mail delivery issues which included misdelivered, 

missing and delayed mail, and hold mail; 

Contact PRC 12,978

Mail 4,912

Other email 216

FAX 488

Phone 701

Table 7 – Method of Contact
46 2010 ANNUAL REPORT 

360 emergency suspension and post office closing 

queries which included comments on Docket PI2010-

1, public inquiry investigation on suspended post offices, and Docket N2009-1, nature of service inquiry 

on the Postal Service’s Station and Branch Optimization and Consolidation Initiative; 79 collection box 

issues; 41 stamp suggestions and issues; 41 prison 

inmate queries; and 38 queries on mail processing 

consolidation issues. Figure 3 features a breakdown of 

these consumer concerns.

Commission Order No. 195 established that rate 

and service inquiries forwarded to the Postal Service’s 

Office of the Consumer Advocate require a response 

by the Postal Service within 45 days. In 2010 the 

Commission forwarded 701 rate and service inquiries to the Postal Service. The Order also requires the 

Postal Service to file a monthly report summarizing the 

general nature of these inquiries. The reports are filed 

on the Commission’s website under “What’s New” 

and with Postal Service Periodic Reports.

Public Representative

Title 39 U.S.C. 505 requires that in all public proceedings by the Commission, the Commission shall 

designate an “officer of the Postal Regulatory Commission” to represent the interests of the general public. 

The Public Representative focuses on the interests of 

the general public as distinct from the interests of other 

groups, such as business mail users, and enterprises 

in the private sector.

The Public Representative is generally not bound by 

ex parte restrictions imposed on Commissioners and 

staff involved in decision-making, and may draw upon 

analytical and legal resources of the Commission as 

required. However, the Public Representative does not 

participate in any Commission deliberations regarding 

the matter in question. By Commission rules, the Public 

Representative may not – except for formal comments 

submitted for the record – discuss the matter under 

Figure 2—Inquiries by Source Figure 3—Top Consumer Issues

(not including over 20,000 comments on USPS proposal to 

change delivery service from 6 days to 5 days) 
POSTAL REGULATORY COMMISSION 47

consideration with Commissioners and their assistants. 

Anyone from outside the Commission may contact 

and consult with the Public Representative during the 

course of a case to discuss how the public interest 

may be affected. The name and contact information 

for a designated Public Representative for each active 

docket is noticed in the initiating order and posted on 

the Commission’s website. There is also a link on the 

home page that contains a regularly updated listing 

of Public Representatives, the dockets in which they 

serve, and their contact information.

Commission Website

The Commission added a new section to its website 

titled “Information for Postal Consumers.” In one convenient location, consumers can now access Commission online resources; information on Commission and 

Postal Service performance; and simple, easy-to-use 

tools for complaints and questions. New links include: 

Current USPS Service Performance Results; PRC and 

USPS frequently asked questions; how to request PRC 

assistance with a postal service issue or problem, a 

Template for a Formal Complaint, and a Guide to 

Complaints and Rate or Service Inquiries. The Guide 

to Complaints was developed by the Office of the 

General Counsel to assist customers in determining 

whether their complaint could be handled through the 

informal rate or service inquiry process or was suited 

to a more formal complaint process. A web page 

was added to archive Monthly USPS Reports on Rate 

and Service Inquiries, and a new page has also been 

developed to archive quarterly and yearly PRC Public 

Inquiry Logs.

Freedom of Information Act 

(FOIA)

The Commission disseminates its official orders, 

opinions and Federal Register Notices through the 

Library and Dockets section of its website. Any public 

document, including its own, which is filed with the 

Commission, is available the same day on the website’s Daily Listing link. Subscribers can receive email 

notification of new postings. We believe that broad 

access to Commission records and data has limited 

the number of FOIA requests that would have otherwise been made.

The Commission received 22 FOIA requests in FY 

2010, many of which were redirected to the Postal 

Service in an average of five days. The Commission 

uses both written and electronic methods, depending 

on the initial contact, to respond to the public. The 

Commission recently certified its online FOIA Reading 

Room as meeting statutory requirements.
48 2010 ANNUAL REPORT 
 POSTAL REGULATORY COMMISSION 49

Chapter VII

Other Commission Activities

SEGAL REPORT ON POSTAL SERVICE FUNDING OF CIVIL SERVICE 

RETIREMENT SYSTEM

Pursuant to a report by the USPS Office of the Inspector General (USPS-OIG) dated January 20, 2010, the 

Postal Service requested that the Commission perform an independent review of the current allocations of the 

Civil Service Retirement System (CSRS) costs in accordance with PAEA Section 802(c) (not codified). The Commission, through an open bid process, engaged The Segal Company to perform an independent review.

Currently, the administrator of the CSRS, the Office of Personnel Management (OPM), allocates to the Postal 

Service all residual costs in excess of the “frozen” benefit calculated based on the accrued pension percentage and final rate of pay as of June 30, 1971, when the Postal Reorganization Act of 1970 (P.L. 91-375) 

established the Postal Service as an autonomous Federal entity and transferred to it the responsibilities of the 

Post Office Department (POD).

In its report, Segal recommended the continued usage of the pension plan’s accrual formula for the allocation 

of costs of the CSRS benefit payments for former POD employees. In lieu of the currently used final POD salary 

to determine the Federal Government’s share of the costs of benefit payments, Segal recommended using the final average high three-years of Postal Service salary to determine the Federal Government’s share. Segal finds 

the USPS-OIG and OPM’s methodologies within the range of acceptable options and notes that the current 

allocation, though fair and equitable solely within the context of P.L. 93-349, overstates USPS responsibility for 

CSRS payments to former POD employees by approximately $50 to $55 billion.
50 2010 ANNUAL REPORT 

On June 30, 2010, the Commission submitted its 

independent actuarial report “Civil Service Retirement 

System Cost and Benefit Allocation Principles (Segal 

Report)” to Congress, OPM and the Postal Service. 

The Commission concurred that an adjustment of 

$50-$55 billion in favor of the Postal Service would 

be equitable and in conformance with current generally accepted actuarial principles and practices.

URBAN INSTITUTE STUDY ON 

THE SOCIAL VALUE OF THE MAIL

In October 2009, the Commission awarded a 

contract to The Urban Institute to identify the array of 

benefits provided by the Postal Service that contribute 

to the social value of the post in the United States. 

The study was intended to categorize these benefits 

and identify possible metrics and methods for estimating their value. 

The Urban Institute conducted a literature search, interviewed a large number of knowledgeable individuals, and drew upon analytical experience in the fields 

of sociology and economics. The contractor submitted 

its final report on February 2, 2010.

The report identified and described dozens of benefits, clustered around the following eight broad 

categories:

•Consumer 

•Business 

•Safety and Security 

•Environmental 

•Delivery of Other Government Services 

•Information Exchange 

•Social Linkage 

•Civic Pride and Patriotism 

The study also described additional research methodologies that could quantify the social and economic 

value of the described social benefits.

On May 7, 2010, the Commission issued a Request 

for Proposal to quantify some or all of the social 

benefits identified in the study, and received 13 

proposals by the deadline. Three of these proposals 

were selected for further research work, beginning 

in August 2010 and continuing into FY 2011. The 

contractors are SJ Consulting, Joy Leong Consulting, 

and The Urban Institute.

PERIODICALS COST STUDY

Section 708 of the PAEA directs the Postal Service 

and the Commission to jointly study the quality of 

the data used to determine the attributable costs of 

Periodicals mail and opportunities for improving the 

efficiency of this mail class. The PAEA does not establish a deadline for issuance of this report. To date, the 

Commission and the Postal Service have:

•Developed an outline of the final report

•Analyzed data related specifically to publications

•Analyzed overall cost data

•Conducted meetings with mailers

•Conducted a webinar on cost issues related to Periodicals mail

•Visited Postal Service facilities to view how Periodicals mail is processed

•Produced a first draft 

•Discussed recommendations

The Commission anticipates publication of the final 

report to Congress in FY 2011.
POSTAL REGULATORY COMMISSION 51

CONSULTATION WITH THE 

POSTAL SERVICE

39 U.S.C. 3652(a)(2)(B) requires the Postal Service, 

in consultation with the Commission, to establish modern service standards for market dominant products. 

Through a series of monthly consultations, the Commission has monitored Postal Service progress toward 

compliance with PAEA provisions, in particular those 

related to service performance measurements. The 

Commission has continued these monthly consultations 

to monitor Postal Service progress in implementing 

systems for measuring Postal Service performance in 

meeting the agreed upon service standards.
52 2010 ANNUAL REPORT 
 POSTAL REGULATORY COMMISSION 53

Chapter VIII

Administration

EMPLOYEE WELFARE

The Postal Regulatory Commission continues to provide a safe work environment for its employees. The Commission ended FY 2010 accident free with no on-the-job injuries or lost workdays. In 2010 the Commission 

formed a Health and Wellness Committee to focus on safety and welfare initiatives and education, including a 

monthly program of safety, health and welfare outreach and activities. The Commission also offered an enhanced Flexible Work Program to include Alternative Work Schedules and Telework.

The biennial Federal Employee Viewpoint Survey (FEVS) administered or distributed by the Office of Personnel 

Management is a tool that measures employees’ perceptions of whether, and to what extent, conditions that 

characterize successful organizations are present in their agencies. In the 2010 FEVS survey, the Commission 

had a 75 percent response rate, compared to the overall government response rate of 52 percent. In addition: 

•97 percent of Commission employees agreed they are willing to put in the extra effort to get a job done.

•92 percent of employees rate the overall quality of work done by their Commission workgroup as very 

good/good.

•83 percent of employees believe that the Commission is successful in accomplishing its mission. 

•75 percent of Commission employees would recommend the PRC as a good place to work.
54 2010 ANNUAL REPORT 

The complete Postal Regulatory Commission Federal 

Employee Viewpoint Survey can be found on our 

website at: http://www.prc.gov/prc-pages/about/

hr/humancapitalsurvey.aspx

EQUAL EMPLOYMENT 

OPPORTUNITY (EEO)

During FY 2010, the Commission had no EEO complaint filings and provided EEO training for all of its 

employees.

INFORMATION TECHNOLOGY

Improvements to the Commission’s Information Technology in 2010 include: an enhanced dockets 

platform; conversion of Commission documents from 

a legacy Laserfiche document access software system 

to a modern searchable file format for incorporation 

into our online archives; expanded telecommunications, teleconferencing and telework capabilities; 

and a more robust Continuity of Operations Plan. 

An electronic procurement system was successfully 

implemented along with the first phase of automating 

employee personnel records.

DIVERSITY 

In FY 2010, the Commission continued its commitment to recruit, develop and retain a skilled, highachieving, and diverse workforce. The Commission 

ended the year with 57 percent of its female employees in executive or professional level positions. 

Women and minorities now represent 50 percent 

of the executive and professional workforce and 58 

percent of the overall workforce. The Commission 

also provided expanded internship opportunities to 

aid in the recruitment and development of minority 

employees.

TRANSPARENCY AND OPEN 

GOVERNMENT 

As part of its mission of ensuring transparency, accountability and openness, the Commission this fiscal 

year began holding monthly public meetings under the 

provisions of the Government in the Sunshine Act and 

provided live audio-casts of hearings, technical conferences and public meetings which were posted to the 

www.prc.gov website.

NEW AWS AND TELEWORK 

POLICIES

In 2010, the Commission expanded Telework and 

Alternative Work Schedule programs. The Telework 

Program provides employees an alternative worksite 

setup that allows: more flexibility in meeting personal 

and professional responsibilities; freedom from office distractions; and the ability to work productively 

during an emergency. Improvements in technology, 

such as allowing staff to connect directly to their work 

desktops from their home offices, make telework efficient and effective. The Commission Alternative Work 

Schedule (AWS) Program allows employees to complete their 80-hour biweekly work requirement in less 

than 10 workdays through a compressed schedule.

Both of these programs enhance employee work 

life, make the Commission more competitive as an 

employer, and increase employee retention. Telework and AWS also support high-priority initiatives 

of Congress, under OMB Directive and the Executive branch such as reducing environmental impact; 

energy conservation; and emergency preparedness. 

During the historic snow storms of February 2010, the 

Commission was able to continue its work through the 

efforts of the many staff people who worked from their 

home offices. More than 50 percent of Commission 

employees participated in these programs in 2010.
POSTAL REGULATORY COMMISSION 55
901 New York Avenue NW, Suite 200

Washington, DC 20268 - 0001