U.S. POSTAL 

SERVICE

Key Considerations 

for Potential Changes 

to USPS’s Monopolies

Report to Congressional Requesters

June 2017

GAO-17-543

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-17-543, a report to 

congressional requesters

June 2017

U.S. POSTAL SERVICE

Key Considerations for Potential Changes to USPS’s 

Monopolies

What GAO Found

The value of the U.S. Postal Service’s (USPS) letter delivery and mailbox 

monopolies was $5.45 billion in fiscal year 2015, according to the most recent 

estimate prepared by the Postal Regulatory Commission (PRC), the regulator of 

USPS. This figure suggests that USPS’s net income would decline by this 

amount if its monopolies were eliminated. To develop these estimates, PRC 

identifies the mail covered under USPS’s monopolies for which a potential 

entrant might compete to provide service if the monopolies were to be 

eliminated; such mail is referred to as “contestable.” PRC’s estimated value of 

these monopolies has increased substantially in recent years—it was $3.28 

billion in fiscal year 2012—and PRC staff expects that the value will continue to 

increase in the next few years due to increased volumes of contestable mail.

Narrowing or eliminating USPS’s letter delivery and mailbox monopolies would 

likely have varied effects, according to views provided by postal stakeholders, 

experts, USPS, and PRC. For example, all parties agreed that allowing other 

entities to deliver letters could decrease USPS’s revenues, and that additional 

strain would be placed on USPS’s ability to continue providing the current level 

of universal service. Additionally, some stakeholders said that allowing other 

entities to deliver items to the mailbox could adversely affect the security of mail 

and increase clutter that would impair USPS’s delivery efficiency. On the other 

hand, most of the postal experts we interviewed said that allowing entry to this 

market by private competitors could result in increased competition that would 

spur USPS to become more efficient. Officials from foreign posts or regulators in 

all six of the countries GAO contacted reported increases in competition after 

ending their postal delivery monopolies, and some of these countries also 

reported losses of revenue and market share for the carriers providing universal 

service. Stakeholders, experts, foreign officials, and USPS agreed that postal 

policies are interdependent and therefore need to be considered in tandem with 

one another; officials from all six countries we contacted told us that concurrent 

postal policy changes, such as increasing a post’s degree of commercial 

freedom or decreasing the scope of its universal service obligation, assisted their 

transitions away from postal monopolies. 

Estimating the effects of laws that apply differently to USPS and its private 

competitors would require steps including defining appropriate study objectives 

and assessing scope and methodological tradeoffs. For example, objectives 

would need to clarify the extent of financial effects to be estimated—whether for 

USPS as a whole, for only specific products, or for USPS relative to competitors. 

Scoping decisions would need to define the specific areas to be studied, the 

period of time to be reviewed, and the type of data to be collected. This would 

involve multiple considerations, including determining which laws to include and 

how to address differing stakeholder views. Additional judgment would be 

needed to address any lack of consensus on methodologies and to determine 

the appropriate degree of time and resources. For example, a comprehensive 

study estimating the effects of every law would require significant time and 

resources; if estimates were desired in a shorter time frame—or if financial 

resources were limited—tradeoffs would be required. 

View GAO-17-543. For more information, 

contact Lori Rectanus at (202) 512-2834 or 

rectanusl@gao.gov. 

Why GAO Did This Study

USPS’s mission is to provide universal 

delivery service while operating as a 

self-financing entity. Congress has

provided USPS with monopolies to 

deliver letter mail and access 

mailboxes to protect its revenues, 

which enables it to fulfill its universal 

service mission, among other reasons. 

Despite its monopolies, USPS’s poor 

financial condition has placed its 

universal service mission at risk. 

USPS’s net losses were $5.6 billion in 

fiscal year 2016 and were greater than

$62 billion over the past decade. 

GAO was asked to review the postal 

monopolies. This report examines (1) 

what is known about the value of 

USPS’s letter delivery and mailbox 

monopolies, (2) views on the potential 

effects of narrowing or eliminating 

these monopolies; and (3)

considerations that would need to be 

addressed to estimate the effects of 

laws that apply differently to USPS and 

its private competitors. To address 

these questions, GAO reviewed 

reports issued by PRC and others; 

obtained views from USPS and PRC, 

as well as postal stakeholders and 

experts who have submitted public 

comments to PRC proceedings; and 

collected information from six

countries—France, Germany, Italy, 

Japan, Sweden, and the United 

Kingdom—that have eliminated their 

postal monopolies, selected based on 

criteria including their share of global 

mail volume. 

GAO is making no recommendations in 

this report. USPS disagreed with some 

stakeholder perspectives, among other 

things. GAO believes that the 

information is portrayed in a balanced 

way and added USPS responses, 

where appropriate. 
Page i GAO-17-543 Postal Monopoly

Letter 1

Background 3

PRC Estimated the Value of USPS’s Monopolies to Be Over $5 

Billion in 2015 5

Relaxing USPS’s Monopolies Could Likely Have Varied Effects 8

Assessing the Impact of Laws that Apply Differently to USPS and 

Private Competitors Would Involve Various Considerations 17

Agency Comments and Our Evaluation 28

Appendix I Objectives, Scope, and Methodology 31

Appendix II Information on the Postal Regulatory Commission’s (PRC) Method for 

Estimating the Value of USPS’s Monopolies 35

Appendix III Comments from the U.S. Postal Service 40

Appendix IV GAO Contact and Acknowledgements 48

Tables

Table 1: Postal Regulatory Commission (PRC) Estimates of the 

Value of the U.S. Postal Service’s (USPS) Letter Delivery 

and Mailbox Monopolies, 2007-2015 7

Table 2: Analysis and Application of Selected Laws, Taxes, and 

Fees on the U.S. Postal Service (USPS) and its Private 

Competitors 19

Contents
Page ii GAO-17-543 Postal Monopoly

Abbreviations

CBO Congressional Budget Office

DOJ Department of Justice 

FTC Federal Trade Commission 

NALC National Association of Letter Carriers 

PAEA Postal Accountability and Enhancement Act of 2006 

PRC Postal Regulatory Commission 

UPS United Parcel Service 

USO Universal service obligation 

USPS U.S. Postal Service

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Page 1 GAO-17-543 Postal Monopoly

441 G St. N.W.

Washington, DC 20548

June 22, 2017

The Honorable Ron Johnson

Chairman

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Jason Chaffetz

House of Representatives

The U.S. Postal Service (USPS) is a critical part of today’s 

communications and commerce. In fiscal year 2016, USPS delivered 154 

billion pieces of mail to 156 million delivery points, generating revenues of 

$71.5 billion. USPS has dual roles, one as an independent establishment 

of the executive branch required to provide universal delivery service,1

and the other as a self-financing entity operating in a business-like 

manner. Congress has long provided USPS with revenue protection in 

the form of statutory monopolies to deliver letter mail and access 

mailboxes. These monopolies protect USPS’s revenues, which helps

USPS fulfill its universal service mission. The letter delivery monopoly has 

prevented private competitors from engaging in “cream-skimming”

activity, wherein they could otherwise offer service on low-cost routes at 

rates below USPS’s while leaving USPS with high-cost routes.2 The 

mailbox monopoly was created to protect postal revenues by preventing 

the private delivery of unstamped mail.3 Despite the revenue protection 

these monopolies have offered USPS as it has carried out its mission to 

provide prompt, reliable, and efficient services to the public, universal 

service remains at risk due to USPS’s poor financial status. This is due, in 

large part, to trends that include declining volumes of profitable FirstClass Mail and growing expenses. USPS’s net losses were $5.6 billion in 

fiscal year 2016—and are greater than $62 billion over the past decade—

 1 As part of its universal service obligation, USPS “shall have as its basic function the 

obligation to provide postal services to bind the Nation together through the personal, 

educational, literary, and business correspondence of the people ... [by providing] ... 

prompt, reliable, and efficient services to patrons in all areas and ...postal services to all 

communities.” 39 U.S.C. § 101(a).

2 GAO, Postal Service Reform: Issues Relevant to Changing Restrictions on Private Letter 

Delivery, GAO/GGD-96-129A Volume I and GAO-GGD-96-129B Volume 2 (Washington, 

D.C.: Sept. 12, 1996).

3 GAO, U.S. Postal Service: Information About Restrictions on Mailbox Access,

GAO/GGD-97-85 (Washington, D.C. May 30, 1997).

Letter
Page 2 GAO-17-543 Postal Monopoly

and USPS has reported that it expects continuing losses and liquidity 

challenges for the foreseeable future under its current business model 

and statutory framework.

Congress, USPS, and other postal stakeholders have considered a range 

of different business models to address USPS’s financial difficulties and 

define its future role in an evolving postal marketplace. As part of these 

considerations, questions have been raised about the continued need for 

the letter delivery monopoly and the mailbox monopoly and, more 

broadly, about a variety of laws that apply differently to USPS and its 

private delivery competitors such as United Parcel Service (UPS) and 

FedEx. As your request noted, it is important that policymakers 

understand the advantages and disadvantages of USPS’s status as an 

independent establishment of the executive branch. This report focuses 

on (1) what is known about the value of USPS’s letter delivery and 

mailbox monopolies, (2) views on the potential effects of narrowing or 

eliminating these monopolies; and (3) considerations that would need to 

be addressed to estimate the value of USPS’s financial advantages and 

burdens resulting from laws that apply differently to USPS and its private 

competitors.

To determine what is known about the value of USPS’s letter delivery and 

mailbox monopolies, we primarily focused on the latest estimates of their 

value issued by the Postal Regulatory Commission (PRC)—an 

independent establishment of the executive branch that regulates 

USPS4

—by interviewing and obtaining supporting documentation from 

PRC officials. To identify potential effects of narrowing or eliminating 

(“relaxing”) USPS’s monopolies, we obtained views of 16 selected postal 

stakeholder organizations (“stakeholders”) and 9 selected postal experts, 

chosen because they had previously expressed views on these 

monopolies and other postal issues. These perspectives are not 

generalizable, but they provide a wide range of views on postal monopoly 

issues—and they represent some of the key groups with whom Congress 

interacts when developing postal policy. We also contacted selected 

foreign postal operators and their regulators in six industrialized countries 

that have eliminated statutory delivery monopolies to collect information 

on their experiences; the six countries were selected based on several 

criteria including their revenues relative to other nations who have 

eliminated their postal monopolies. To identify considerations that would 

 4 PRC is composed of five commissioners, each of whom is appointed by the President, 

by and with the advice and consent of the Senate, for terms of 6 years. 
Page 3 GAO-17-543 Postal Monopoly

need to be addressed to estimate the value of USPS’s financial 

advantages and burdens resulting from laws that apply differently to 

USPS and its private competitors, we reviewed criteria from the 

government auditing standards,5 relevant laws, and a 2007 Federal Trade 

Commission (FTC) report that identified federal and state laws that apply 

differently to USPS private companies providing similar competitive 

products.6 In addition, we obtained the views of postal stakeholders who 

have previously submitted relevant public comments to obtain their views 

on considerations regarding how these estimates could be updated. See 

appendix I for more information on our objectives, scope, and 

methodology.

We conducted this performance audit from December 2015 to June 2017 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Congress created USPS’s letter delivery monopoly as a revenue 

protection measure so that USPS can meet its universal mail service 

obligation, which includes service to all communities and uniform rates for 

some mail.7 As a practical matter, mail covered by this monopoly primarily 

consists of First-Class Mail and USPS Marketing Mail. Since USPS’s

original establishment, its letter delivery monopoly has been both 

broadened and reduced at various times through statutory and regulatory 

changes that have redefined which types of correspondence and other 

materials are covered. For example, the enactment of the 2006 Postal 

Accountability and Enhancement Act (PAEA) resulted in several changes 

 5 GAO, Government Auditing Standards: 2011 Revision, GAO-12-331G (Washington, 

D.C.: December 2011).

6 FTC, Accounting for Laws that Apply Differently to the United States Postal Service and 

its Private Competitors (Washington, D.C.: December 2007) (‘2007 FTC report’).

7 USPS’s letter delivery monopoly is codified in a set of criminal and civil laws called the 

Private Express Statutes. These laws generally prohibit anyone from establishing, 

operating, or using a private company to carry letters for compensation on regular trips or 

at stated periods over postal routes or between places where mail regularly is carried. 18 

U.S.C. §§ 1693-1699 and 39 U.S.C. §§ 601-606. 

Background
Page 4 GAO-17-543 Postal Monopoly

to USPS’s letter delivery monopoly, including establishing price and 

weight limits on mail covered by the monopoly.8

With regard to USPS’s mailbox monopoly, legislation enacted in 1934 

prohibited the delivery of unstamped mail into mailboxes, essentially 

granting exclusive access to mailboxes (“mailbox monopoly”) to USPS 

which remains in place to this day.9 The U.S. Supreme Court upheld the 

constitutionality of the mailbox monopoly in 1981, stating that mailboxes 

are an essential part of national mail delivery and that postal customers 

agree to abide by laws and regulations that apply to their mailboxes in 

exchange for USPS agreeing to deliver and pick up mail.10 In addition, 

USPS regulations restrict which types of items may be placed upon, 

supported by, attached to, hung from, or inserted into a mailbox.11 The 

Postal Inspection Service, a part of USPS, is responsible for enforcing 

postal laws, including the restriction on placing mail without postage in 

mailboxes and laws that prohibit mail theft, obstruction of mail, and mail 

fraud.12

PAEA also set forth reporting requirements on USPS’s letter delivery and 

mailbox monopolies, its universal service obligation (USO), and laws that 

apply differently to USPS and its competitors. Pursuant to these 

requirements, PRC issued a 2008 report that, among other things, 

estimated the value of USPS’s letter delivery and mailbox monopolies 

 8 The price limit provides that a letter may be carried out of the mails when the amount 

paid is at least the amount equal to 6 times the rate then currently charged for the 1st 

ounce of a single-piece of First-Class Mail letter. The weight limit provides that a letter 

may be carried out of the mails when “the letter weighs at least 121⁄2 ounces.” Pub. L. No. 

109-435 § 503 (2006), codified at 39 U.S.C. § 601(b)(1)-(2).

9 18 U.S.C. § 1725.

10 U.S. Postal Service v. Council of Greenburgh Civic Ass’n, 453 U.S. 114 (1981).

11 Exemptions allow (1) mailable matter to be left without postage in door slots and 

nonlockable bins or troughs used with apartment house mailboxes; (2) mailable matter to 

be left without postage on a hook or ring attached to the post or other support for the 

mailbox; and (3) unstamped delivery of newspapers that are regularly mailed Periodicals 

to curbside mailboxes on Sundays and national holidays, if they are removed before the 

next scheduled day of mail delivery. USPS Domestic Mail Manual (DMM) § 508.3, which 

is incorporated into the Code of Federal Regulations. 39 C.F.R. § 211.2(a).

12 For example, see 18 U.S.C. §§ 1701, 1702, 1708, 1709 and 1341. 
Page 5 GAO-17-543 Postal Monopoly

and the cost of its USO.13 The Federal Trade Commission issued a 2007 

report that, among other things, estimated the financial impact of laws 

that apply differently to USPS and its competitors.14 FTC’s report 

concluded that, “from USPS’s perspective, its unique legal status likely 

provides it with a net competitive disadvantage versus private carriers.”15

Since 2008, PRC has conducted an annual analysis to estimate the lost 

net revenues that USPS would incur if the monopolies were eliminated.16

To conduct this analysis, PRC assesses the value of the monopolies 

based on the volume of mail—and the associated net revenues—that 

USPS would be expected to lose if its monopolies were eliminated and 

new entrants were allowed to provide mail delivery.17 PRC also examines 

the impact of eliminating solely the mailbox monopoly using the same 

methodology. Most of the postal experts we interviewed said they 

 13 Postal Regulatory Commission, Report on Universal Postal Service and the Postal 

Monopoly (Washington, D.C.: Dec. 19, 2008)(2008 PRC USO/Monopoly Report). This 

report was required by PAEA. Pub. L. No. 109-435 § 702. In developing its 2008 report, 

PRC contracted with George Mason University’s (GMU) School of Public Policy to provide 

a methodology for calculating the value of the letter and mailbox monopolies and the cost 

of the USO), as well as the history of the monopolies, among other things. See GMU 

School of Public Policy, Study of Universal Service and the Postal Monopoly: Appendix F 

(Arlington, VA: November 2008), including Appendix F: Section 2: Methodologies for 

costing the USO and Valuating the Letter and Mailbox Monopolies (by John C. Panzar);

Appendix F: Section 4: Quantitative Analysis of the Value of the Postal and Mailbox 

Monopolies (by Robert H. Cohen), and Appendix C: Postal Monopoly Laws: History and 

Development of the Monopoly on the Carriage of Mail and the Monopoly on Access to 

Mailboxes (by James I. Campbell Jr.). PRC also held a public proceeding to solicit input 

from interested parties.

14 FTC, Accounting for Laws that Apply Differently to the U.S. Postal Service and its 

Private Competitors (Washington, D.C.: December 2007). 

15 2007 FTC report, page 8.

16 PRC is not required to estimate the value of the postal monopolies on a yearly basis. 

However, PRC is required by law to estimate the cost of USPS’s universal service 

obligation. 39 U.S.C. § 3651(b)(1). Nevertheless, PRC has chosen to also provide an 

estimate of the monopoly value on a yearly basis. 

17 See Postal Regulatory Commission, Report on Universal Postal Service (2008), and 

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

2016. In particular, PRC’s method involves estimating—if the monopolies were 

eliminated—the extent to which entrants would be able to profitability deliver certain types 

of mail—known as “contestable” mail. Contestable mail is mail that is entered into USPS’s 

system at a processing facility or postal delivery unit near its destination, for which a 

competitor would need to perform little or no mail processing to prepare it for delivery. 

Most contestable mail volumes are comprised of First-Class Mail entered in bulk quantities 

and USPS Marketing Mail (e.g., primarily advertising mail). Certain of the contestable mail 

categories are outside the letter monopoly, and PRC only considers these volumes when 

estimating the value of the mailbox monopoly alone.

PRC Estimated the 

Value of USPS’s 

Monopolies to Be 

Over $5 Billion in 

2015
Page 6 GAO-17-543 Postal Monopoly

consider PRC’s method of estimating the loss in mail volume and 

revenues that USPS would experience if the monopolies were lifted to be 

a reasonable approach to measuring their value. See appendix II for a 

discussion of the methodology PRC employs to develop its estimates of 

the value of USPS’s monopolies.

PRC’s annual estimate of the value of USPS’s monopolies has increased 

substantially in recent years—from $3.28 billion in fiscal year 2012 to 

$5.45 billion in fiscal year 2015.18 Similarly, the value of the mailbox 

monopoly alone rose from $700 million to $1.03 billion over the same 

timeframe. Moving forward, although USPS’s overall mail volumes are 

declining, PRC staff told us that they believe the volume of mail that 

entrants would be likely to successfully compete for if the monopolies 

were eliminated will increase, and therefore the value of the monopolies 

is expected to rise. Table 1 provides PRC’s annual estimates of the value 

of USPS’s monopolies since 2007.

 18 For PRC’s latest estimates of the effect of laws related to USPS’s universal service and 

public service obligations, and of USPS’s delivery and mailbox monopolies, see Postal 

Regulatory Commission, Annual Report to the President and Congress, Fiscal Year 2016.
Page 7 GAO-17-543 Postal Monopoly

Table 1: Postal Regulatory Commission (PRC) Estimates of the Value of the U.S. 

Postal Service’s (USPS) Letter Delivery and Mailbox Monopolies, 2007-2015

Dollars in billions

Year Both letter delivery and

mailbox monopolies

Mailbox monopoly

2007 $3.48 $1.33

2008 2.96 1.07

2009 2.93 0.79

2010 3.33 0.69

2011 3.34 0.91

2012 3.28 0.70

2013 3.93 0.81

2014 4.61 0.77

2015 5.45 1.03

Source: PRC. | GAO-17-543

Note: These values represent the effect on USPS’s net income if its mailbox monopoly or both 

monopolies were eliminated. Although the value of the combined monopolies is derived by assuming 

that both the letter delivery and mailbox monopolies are eliminated, and the value of the mailbox 

monopoly is derived assuming only the mailbox monopoly is eliminated, the value of USPS’s letter 

delivery monopoly is not able to be determined by simply subtracting the value of the mailbox 

monopoly from the value of both monopolies. PRC does not estimate the value of USPS’s letter 

monopoly alone because it is unlikely that a competitor would enter the market to deliver letters that 

could not be delivered to the mailbox.

In addition to PRC’s efforts to estimate the value of USPS’s monopolies, 

another study recently examined other financial implications of USPS’s 

exclusive access to mailboxes.19 This analysis focused on the benefit that 

USPS’s exclusive access to mailboxes provides, relative to competitors 

that are not allowed to place items in mailboxes. In particular, the study 

examined the extra costs that are involved in door delivery—the main

option available to USPS’s competitors—compared to delivery to 

mailboxes, especially when mailboxes are located at the curbside, in 

cluster boxes, or centralized mailrooms in large residential and 

commercial buildings. Using the average costs of door delivery compared 

to average delivery costs to these other mailbox locations that are less 

costly to access, the study estimated that USPS’s costs would have been 

$14.9 billion greater in fiscal year 2013 if it had to deliver all mail and 

packages to the door, as its competitors generally do. It is important to 

 19 Shapiro, Robert J., The Basis and Extent of the Monopoly Rights and Subsidies 

Claimed by the United States Postal Service (March 2015).
Page 8 GAO-17-543 Postal Monopoly

note that this work did not measure the value of USPS’s monopolies as 

the reduction in USPS’s net revenues if they were to be eliminated; as 

such, this work is not comparable to PRC’s analysis or estimates.

Narrowing or eliminating (“relaxing”) USPS’s letter delivery and mailbox 

monopolies could likely have a number of varied effects. While postal 

stakeholders, experts, and USPS told us that relaxing these monopolies 

could decrease USPS’s revenues and threaten its ability to continue 

providing universal service as currently implemented, experts stated 

doing so could also lead to greater efficiencies and innovation. The 

experiences of selected foreign postal operators and regulators we 

contacted illustrate that, while some postal operators saw decreases in 

revenue and losses in market share, some also reported increases in 

competition and efficiency. Stakeholders, experts, and the experiences of 

selected foreign posts all suggest that USPS’s monopolies and other 

postal policies are interdependent—particularly the specifics around 

universal service—and therefore should be considered in tandem. We 

have previously reported that, given the changing use of mail, many of 

the statutory and regulatory elements that shape USPS’s structure and 

service—as well as the broader delivery market—might be relevant to 

reconsider.

Stakeholders, experts, and USPS told us that narrowing or eliminating the 

existing letter delivery and mailbox monopolies could likely reduce 

USPS’s revenues and threaten its ability to provide the current level of 

universal service.

Stakeholders: Eight of the 16 stakeholders who responded to our 

questionnaire stated that the letter delivery monopoly is needed to protect 

USPS’s ability to continue universal service at affordable rates.20 In 

particular, some of these stakeholders said that, if the letter monopoly 

were narrowed or eliminated, new entrants would be more likely to serve 

profitable areas, such as cities, and leave less profitable rural areas to 

USPS—assuming that it were to remain the nation’s universal service 

provider. One postal management organization told us that removing the 

 20 Eleven of the 16 stakeholders (e.g., mailing associations, postal unions and 

management associations, and private companies) oppose any changes to USPS’s 

monopolies. One stakeholder favors the elimination of USPS’s monopolies. Four of the 16 

stakeholders did not take a position; 2 of these 4 explained that it was difficult for their 

diverse memberships to reach a position. 

Relaxing USPS’s 

Monopolies Could 

Likely Have Varied 

Effects

Postal Stakeholders, 

Experts, and USPS 

Believe Relaxing Postal 

Monopolies Could Reduce 

USPS’s Revenues and 

Threaten Its Ability to 

Provide Universal Service
Page 9 GAO-17-543 Postal Monopoly

letter delivery monopoly would result in a devastating shortfall between 

USPS revenues and its costs related to meeting its universal service 

obligation.

Experts: Likewise, eight of the nine experts we interviewed agreed that 

relaxing USPS’s monopolies would likely result in greater financial burden 

on USPS, and six of them said that doing so could lead to the need for 

reduced provision of universal service.21 Despite this, seven of the nine 

experts support pursuing such changes to USPS’s letter delivery 

monopoly. Two of the experts favor narrowing—but not fully eliminating—

the letter delivery monopoly, and five favor completely eliminating both 

monopolies.

USPS and PRC: USPS stated that narrowing or eliminating the letter 

delivery monopoly would place significant mail volume and related 

revenues at risk, compromising its ability to provide high quality, 

affordable universal service in a financially self-sufficient manner. Further, 

USPS stated that narrowing or eliminating its letter delivery monopoly 

would result in competitors diverting the most profitable mail volume, 

which would significantly accelerate trends that are already very 

challenging to its financial sustainability.22 According to USPS, additional 

decline in mail volumes would pose a fundamental challenge because 

economies of scale are crucial to its ability to provide a high level of 

universal service at affordable rates. USPS also told us that there is no 

basis to conclude that eliminating the letter monopoly is necessary for it to 

promote efficiency, quality service, and innovative postal products. As in 

the past, USPS strongly opposes any changes to its letter delivery and 

mailbox monopolies. While PRC has not taken a position on whether 

USPS’s letter delivery monopoly should be narrowed or eliminated, it 

reported in 2008 that “...under the current system, the (letter delivery) 

 21 In our interviews with postal experts, potential options for narrowing USPS’s letter 

delivery monopoly were discussed including retaining the monopoly for certain types of 

mail but opening the market for entrants to provide certain other mail (i.e., a distinction 

between USPS Marketing Mail vs. First-Class Mail), reducing statutory price and weight 

limits for mail retained within the monopoly, or reducing the scope of federal regulations 

that define “letter” for the purpose of mail covered. For the mailbox monopoly, most of the 

experts viewed a ‘narrowing’ option as one that would only allow new entrants to place 

items in mailboxes that had been granted a license to do so to ensure safety and security.

22 According to USPS, due to both the recent recession and electronic diversion of mail, it 

has experienced a substantial decline in mail volumes over the past decade. Total mail 

volumes have declined 28 percent since fiscal year 2006, while First-Class Mail volumes 

have declined by 36 percent in that period (and 40 percent since fiscal year 2000). USPS 

expects mail volume to continue declining for the foreseeable future.
Page 10 GAO-17-543 Postal Monopoly

monopoly is maintained to offset the costs placed on [USPS] by the 

USO.”23

Stakeholders: Nine of the 16 stakeholders believe that narrowing or 

eliminating USPS’s mailbox monopoly could decrease mail security, and 

they also oppose changes to this monopoly. One mailer association said 

that the mailbox monopoly provides USPS customers with assurance that 

their mail is secure. This stakeholder also said that USPS’s exclusive 

access to mailboxes helps facilitate investigations of mail theft and other 

mail crimes. One of the 16 stakeholders who responded to our 

questionnaire favors relaxing USPS’s mailbox monopoly and stated that it 

is unnecessary to protect the security of the mailbox, as criminal and civil 

law punish theft and trespass.

Experts: Although seven of the nine experts we interviewed support 

relaxing this monopoly, four experts cited increased concerns about mail 

security if the mailbox monopoly no longer limited access to USPS’s 

competitors.24 Two experts stated that having multiple entities with access 

to the mailbox could cause problems such as cluttering. One expert 

opposed to relaxing USPS’s mailbox monopoly noted that much of the 

increased delivery to mailboxes—were access to be broadened—would 

be advertising mail and suggested that it would be questionable to relax 

this monopoly to primarily facilitate advertising distribution.

USPS and PRC: USPS stated that relaxing its mailbox monopoly could 

negatively affect mail safety and security and that doing so would result in 

both decreased efficiencies and service performance, and threaten the 

financing of its universal service obligation. First, USPS stated that 

removing this monopoly could increase opportunities for criminal activity 

involving mail and complicate the enforcement of postal laws. USPS 

 23 The estimates that PRC develops for the value of USPS’s monopolies and the universal 

service obligation (USO) are not comparable. While PRC’s estimate of the value of 

USPS’s monopolies represents the projected loss in net income USPS would experience 

if its letter delivery and mailbox monopolies were eliminated, the estimated value of the 

USO represents the costs that USPS incurs by providing public services or activities it 

would not provide but for legal requirements, and the revenue not received from free or 

reduced rates required by law.

24 Three of seven experts who favor modification of USPS’s mailbox monopoly prefer a 

narrowing—rather than a full elimination—through which competitors would be required to 

obtain a license to obtain access to mailboxes. The three other experts favor a complete 

elimination of USPS’s mailbox monopoly. 

Most Postal Stakeholders 

and Experts Agree That 

Relaxing USPS’s Mailbox 

Monopoly Could Affect 

Mail Safety, Security, and 

Efficiency
Page 11 GAO-17-543 Postal Monopoly

added that, in addition to direct harm to consumers and employees who 

could be harmed by dangerous substances in mailboxes, USPS and the 

mailing industry could suffer from the resulting lack of public trust in the 

mail as a secure communication medium. Second, according to USPS, its 

efficiency and service performance could also be adversely impacted, 

particularly regarding the delivery of market-dominant mail volumes. For 

example, increased mailbox clutter due to the presence of items left there 

by third-parties would mean that USPS letter carriers would have to 

spend time determining which items to take with them (collection mail) 

and which to leave behind (items delivered by alternative delivery 

providers)—or may not be able to fit mail into a mailbox at all. Third, 

USPS advised that allowing third-party mailbox deliveries could allow 

competing providers to skim relatively profitable mail volume away from 

USPS, leaving it with less revenue to finance the costs of its universal 

service obligation. In regard to the mailbox monopoly, PRC cited its 2008 

report, which stated that past public proceedings indicate a broad 

spectrum of support for its continuation and cited disadvantages to USPS 

if this monopoly were to be eliminated, including difficulty investigating 

mail fraud, maintaining mail security, and efficiently collecting mail from 

cluttered mailboxes.

Seven of the nine experts we interviewed said that relaxing USPS’s 

monopolies could create competition in the postal market. Additionally, 

seven of these experts also said relaxing the monopolies could induce 

USPS to become more efficient and increase innovation across the postal 

market. Although experts offered mixed views regarding how much actual 

entry into the postal delivery market would occur if the letter delivery 

monopoly were withdrawn, they generally stated that the prospect of 

competitive pressure would stimulate USPS to be more efficient through 

both cost-cutting and general restructuring of the organization. One 

expert told us that such changes would also benefit the economy as a 

whole. Similarly, some of the experts we interviewed also said that 

relaxing USPS’s mailbox monopoly would have beneficial effects. With 

regard to USPS’s mailbox monopoly, four of the nine experts told us that 

its elimination would stimulate USPS to be more efficient and six experts 

said it would stimulate more innovation. For example, one expert noted 

that the characteristics of mailboxes have changed little in decades and 

suggested that opening them to competitive providers might bring 

innovation to the mailbox itself.

Most Postal Experts 

Believe Relaxing USPS’s 

Monopolies Could 

Increase Competition, 

Efficiency, and Innovation
Page 12 GAO-17-543 Postal Monopoly

A number of countries have narrowed or eliminated their postal 

monopolies over the past two decades as part of overall postal reform 

that expanded the commercial freedom of their postal services.25 In 

responding to our questionnaire requesting information on the effects 

experienced as a result of modifications to their respective postal 

monopolies, a number of the selected foreign posts and regulators told us 

that their respective changes resulted in losses of market share, mail 

volume, and revenues for the incumbent carrier, as well as varying 

changes in postal rates. Officials from all six of the countries we 

contacted noted increases in competition; some also cited increases in 

efficiency as well as improved customer service and performance.

• Effect on Market Share, Mail Volumes, and Revenue: Officials from 

Italy, Germany, and the United Kingdom reported that the 

liberalization of their postal markets resulted in the incumbent carrier 

experiencing a loss of market share, volumes, and revenues 

generated by items previously covered by monopoly. In Germany, 

Deutsche Post26 reported that it has lost about 12 percent of market 

share compared with when it had a full monopoly. In the United 

Kingdom, Royal Mail and its regulator both reported that, although its 

market share for letters was minimally impacted, it has lost substantial 

business from large senders of bulk mail.27 Officials from Japan, 

Sweden, and France were unable to confirm whether the liberalization 

of their countries’ respective postal markets resulted in such effects.

 25 Notably, countries in the European Union (EU) followed EU directives that narrowed 

their delivery monopolies over time before eliminating them. A number of these countries 

had defined their monopolies with limitations based on the price and weight of a mail 

piece, among other things; the EU issued directives that required its member countries to 

successively lower the monopoly weight limits over time before eliminating them 

completely. EU countries also are subject to minimum EU requirements for universal 

postal service, which were established in 1997. In addition to these developments, some 

national postal services in Europe and elsewhere have been either partially or fully 

privatized in recent years.

26 Germany has not formally designated a postal operator with the Universal Postal Union; 

however, Deutsche Post AG is the practical equivalent, as described below. Deutsche 

Post AG has been a private company listed on the German stock exchange since 

November 2000. As of March 2016, the Government of Germany owned about 21 percent 

of the company’s stock.

27 The United Kingdom’s Office of Communications (Ofcom), which is the nation’s 

independent communications regulator including of the postal service, designated Royal 

Mail as the designated operator required to provide universal service in March 2012.

Some Countries Reported 

Revenue Losses for 

Postal Operators, 

Increases in Competition 

and Efficiency after 

Elimination of Monopolies
Page 13 GAO-17-543 Postal Monopoly

• Effect on Postal Rates: Officials from Italy and the United Kingdom 

reported that liberalization of their respective postal markets resulted 

in changes to some postal rates. Italian officials reported that some of 

Poste Italiane’s rates increased, but its business rates either remained 

stable or were slightly reduced.28 In the United Kingdom, Ofcom 

officials told us that a new regulatory framework was put in place 

which allowed Royal Mail to rebalance its prices; Royal Mail then 

increased the price of single piece stamped items substantially in 

many cases, while bulk mail prices increased to a lesser extent. 

Officials from Germany, Sweden, and Japan stated that the 

liberalization of their postal markets did not result in increased prices 

of services provided by their posts.

Many foreign posts also reported that changes to their postal monopolies 

resulted in increases in competition and efficiency, as well as 

improvements in customer service and performance. Specifically:

• Increased Competition: The post and/or regulator from all six of the 

countries that we contacted—Sweden, Italy, Japan, Germany, France, 

and the United Kingdom—said the liberalization of their postal 

markets resulted in increased competition. According to officials from 

Italy, competition in the Italian mailing industry increased significantly 

after liberalization, especially for bulk mail services. French officials 

said that the number of providers has increased; however, they added 

that the increase in competition has not been as great as some 

stakeholders expected and La Poste29 maintains a dominant market 

position.

• Effects on Efficiency of the Collection and Delivery of Mail: Officials 

from three countries—Germany, Sweden, and the United Kingdom—

reported that the liberalization of their postal markets, which was done 

in tandem with other postal reforms, resulted in increased efficiency of 

the collection and delivery of mail. For example, in the United 

Kingdom, officials from Royal Mail stated that it had to modernize its 

operations to successfully compete in the current postal market. 

However, officials from Italy stated that liberalization did not lead to 

greater efficiencies, as increased competition resulted in a large 

volume decline for Poste Italiane, which was forced to also maintain a 

heavily fixed cost structure to meet its universal service obligation.

 28 Poste Italiane, a public company, is the designated universal service provider in Italy. 

29 La Poste, a limited public company, is the designated postal operator in France. In 

2010, La Poste was named as France’s designated postal operator and universal service 

provider for a period of 15 years, beginning January 1, 2011. 
Page 14 GAO-17-543 Postal Monopoly

• Effects on Customer Service and Performance: Officials from three 

countries—Germany, Sweden, and the United Kingdom—stated that 

the liberalization of their postal market resulted in improved customer 

service and performance of their posts.30 According to German 

officials, the speed and reliability of their nation’s postal services has 

increased since liberalization. Officials from Royal Mail stated that 

while it is meeting service targets, the changes to the way in which 

services are delivered in the United Kingdom (e.g., post delivered 

later in day or delivery offices relocating) have not always been 

popular with customers; both residential and business consumers 

have reported slightly higher levels of satisfaction with other postal 

operators in recent years.

• Effect on Universal Service Obligation: Officials from three countries—

Germany, Sweden, and the United Kingdom—stated that liberalization 

of their postal markets did not negatively impact their universal service 

obligation for postal retail and delivery services. According to German 

officials, no changes to its provision of universal service or financial 

support were required. However, officials from Poste Italiane stated 

that its competitors are free to enter whichever markets they like (i.e., 

potentially implement cream-skimming policies), a situation that has 

put the sustainability of their ability to provide universal service at risk.

The experiences of these foreign posts illustrate the variety of effects of 

making changes to existing postal monopolies. However, it is also 

important to remember the context in which the posts operate differs 

greatly from one country to the next—each country is in a unique situation 

and uses specific measures to address its challenges and opportunities. 

When compared with other countries, the United States lies in the higher 

range of universal service obligation scope requirements, especially for 

quality standards including frequency of delivery and coverage. USPS 

officials said that some of the effects of liberalization among foreign posts 

have no bearing in the United States, stating that some of the efficiency 

advances that other countries have seen in recent years were made long 

ago in this country. Although we did not directly evaluate the implications 

of each liberalization experience or how it may apply to the United States, 

these experiences nonetheless provide important context for the 

consideration of any changes to USPS’s monopolies.

 30 Japan Post’s regulator responded that that it does not know whether the liberalization of 

its postal market resulted in improved customer service and performance of its postal 

market.
Page 15 GAO-17-543 Postal Monopoly

Postal stakeholders and experts—as well as both USPS and PRC—

suggested that any consideration of changes to USPS’s letter delivery 

and mailbox monopolies should take place within the context of broader 

U.S. postal policy.

Stakeholders: Although eleven of 16 postal stakeholders oppose the idea 

of narrowing or eliminating USPS’s monopolies, some noted that 

additional postal policy issues should be included in discussion of 

potential changes to the monopolies. For example, one stakeholder who

opposes modifying USPS’s monopolies said that, if they were to be 

changed, policies to ensure universal delivery service would need to be 

adopted. Another stakeholder stated that no change in law or regulation 

could offset the adverse consequences that would come from narrowing 

or eliminating USPS’s letter delivery monopoly, but suggested that the 

financial burden of requiring USPS to prefund retiree health benefits be 

eliminated. Another postal stakeholder explained that improved security 

and more thorough background checks would need to be required for 

businesses that would have access to the mailbox, in addition to laws to 

which non-USPS firms must adhere when delivering to currently 

prohibited mailboxes.

Experts: All nine of the experts we interviewed said that analysis of 

possible changes to USPS’s monopolies should be conducted in tandem 

with other postal policy considerations. Experts cited issues such as 

USPS’s universal service obligation, postal pricing flexibility, and the fair 

application of policies and rules across providers as important for 

policymakers to consider.

USPS and PRC: USPS and PRC also stressed the importance of 

considering any potential changes to USPS’s monopolies within the 

context of the nation’s broader postal policy. USPS officials told us that 

any modification of its monopolies would require Congress to make 

significant policy decisions regarding how to ensure that existing postal 

services could still be achieved in their absence. USPS officials also 

stated that many foreign posts that have liberalized have not done so in 

isolation, but rather along with other reforms including government aid 

and measures to afford the incumbent carriers greater commercial 

freedom to manage their businesses. PRC staff told us that the scope of 

the monopoly and the cost of providing universal service are 

interdependent, such that changes in one alter the value/cost of the other, 

There is Broad Consensus 

That Potential Monopoly 

Changes Should Be 

Considered in Tandem 

with Broader Postal 

Policies
Page 16 GAO-17-543 Postal Monopoly

adding that any changes to the monopoly should carefully consider the 

relationship of the monopoly and the universal service obligation.

Foreign Posts and Regulators: Officials from all six of the countries we 

contacted told us that, as their respective postal markets were opened to 

competition from new entrants, the concurrent implementation of other 

postal polices helped to manage their transition away from their 

incumbent providers’ monopolies. For example, officials from the United

Kingdom stated that The Postal Services Act of 2011 privatized Royal 

Mail and gave it complete commercial freedom to raise funds for 

modernization; Royal Mail was also relieved of its pension deficit of 10 

billion pounds. In Italy, policymakers decreased the scope of Poste 

Italiane’s universal service obligation to enable it to maintain its 

obligations as competition increased in the market. According to officials 

from the postal regulator in Japan, the Japan Post was granted greater 

freedom to establish prices for first and second class mail items as part of 

the process of the liberalization of the Japanese postal market.31

We have previously reported that action by Congress and USPS is 

urgently needed on a number of difficult issues to facilitate progress 

toward USPS’s financial viability. The significant deterioration in USPS’s 

financial condition, its increasing debt, and the grim forecast for declining 

overall mail volumes over the next decade led GAO to add USPS’s 

financial condition to its High-Risk List in 2009.32 Moreover, the financial 

condition of USPS is but one outcome of the changing landscape of the 

postal sector. We reported in 2010 that, given the changing use of mail, 

many of the statutory and regulatory elements that shape USPS’s 

structure and service—as well as the broader delivery market—might be 

relevant to reconsider.33 These include (1) the appropriate universal 

service obligation, in light of fundamental changes in the use of mail; (2) 

whether USPS requires a monopoly over delivery of certain types of letter 

mail and access to mailboxes to finance—in part or wholly—its universal 

postal service obligation; and (3) whether USPS should be solely 

responsible for providing universal postal service, or whether that 

responsibility should be shared with the private sector. Such 

 31 Japan Post was established as a private company responsible for universal postal 

services since 2007. 

32 GAO, U.S. Postal Service: Strategies and Options to Facilitate Progress toward 

Financial Viability, GAO-10-455 (Washington, D.C.: Apr. 12, 2010).

33 GAO-10-455.
Page 17 GAO-17-543 Postal Monopoly

considerations may assist Congress, USPS, and other postal 

stakeholders as they work not only on issues related to the letter delivery 

and mailbox monopolies, but also to address USPS’s financial difficulties 

and define its future role in an evolving postal marketplace.

We have reported that, as long as it remains a federal entity protected by 

the postal monopoly, USPS’s ability to compete with the private sector 

should be balanced with appropriate oversight and adequate legal 

standards to ensure fair competition.34 In this regard, some postal 

stakeholders have maintained that USPS has competitive advantages 

because it is exempt from some laws governing the private sector. On the 

other hand, USPS has reported that it is subject to statutory requirements 

to which its private competitors are not. Given these differences, it is 

important to understand the constraints and limitations that would 

complicate the process of arriving at estimates that would be useful for 

policymakers. To help summarize the key considerations that would need 

to be addressed to estimate the value of USPS’s financial advantages 

and burdens resulting from laws that apply differently to USPS and its 

private competitors, they are organized into four broad categories: (1) 

objectives to study, (2) scope to be covered, (3) methodology to be used, 

and (4) reporting.

Consistent with government auditing standards, it would be important for 

anyone examining the laws that apply differently to USPS and its private 

competitors to carefully define the objectives of the study. As explained 

by those standards, the objectives for any future study could be framed 

as questions that the organization conducting the research would seek to 

answer. Developing these questions is a critical step, as their answers will 

guide decisions on what specific information will be needed for reporting, 

which in turn will identify the parameters of the study’s scope and 

methodology and lay the framework for the context in which the findings 

are presented.35 Objectives for such a study could be defined as 

questions related to the following:

 34 GAO, U.S. Postal Service: Key Elements of Comprehensive Postal Reform, 

GAO-04-397T (Washington, D.C.: Jan. 28, 2004).

35 GAO, Government Auditing Standards: 2011 Revision, GAO-12-331G (Washington, 

D.C.: December 2011).

Assessing the Impact 

of Laws that Apply 

Differently to USPS 

and Private 

Competitors Would 

Involve Various 

Considerations

Study Objectives Would

Need to Be Defined
Page 18 GAO-17-543 Postal Monopoly

• What are the financial effects of laws that apply differently to USPS 

and its private competitors on 

USPS’s net income?

• What are the financial effects of laws that apply differently to USPS 

and its private competitors on 

USPS’s competitive mail products?36

• What are the financial effects of laws that apply differently to USPS 

and its private competitors on 

both USPS and its private competitors?

As these questions demonstrate, a study’s objectives can become 

increasingly complex, requiring more and varied sources of information.

Defining the scope of any study is critical because, according to the 

government auditing standards, the scope defines aspects of the subject 

matter to be studied and other key data collection considerations—such 

as the period of time reviewed and the type of data to be collected, 

among other things. Scoping considerations for this type of study would 

include, for example: (1) which laws to include, (2) whether to include 

data already studied or collect new data, (3) how to address the difficulty 

in quantifying some effects, and (4) how to handle differing stakeholder 

views on scope.

Many Laws Apply Differently to USPS Than to Its Competitors

Many laws apply differently to USPS and its competitors (see table 2). 

FTC found that some laws have positive financial effects on USPS, while 

others have negative financial effects. These laws also affect private 

competitors; for example, USPS’s letter and mailbox monopolies limit the 

types of items competitors can deliver and where they can leave items. 

The number and type of laws to be included in such a study would affect 

its approach and eventual results. For example, significant time and 

resources would be required for a study to estimate the financial effects 

for all laws that apply differently to USPS and its competitors—as well as 

the net effect of these legal differences. If results were needed more 

immediately—or if financial resources were limited—decisions would 

need to be made to narrow the scope.

 36 USPS’s competitive mail products mainly include Priority Mail Express, Priority Mail, 

First-Class Package Service, Parcel Select, USPS Retail Ground, Parcel Return Service, 

and some types of International Mail.

Scope Decisions Would 

Involve Multiple 

Considerations
Page 19 GAO-17-543 Postal Monopoly

Table 2: Analysis and Application of Selected Laws, Taxes, and Fees on the U.S. Postal Service (USPS) and its Private 

Competitors 

Citation(s) Description

Letter mail monopoly

18 U.S.C. §§ 1693-99 and 39 U.S.C. 

§§ 601-06

USPS’s letter delivery monopoly is codified in criminal and civil laws knowns as the Private 

Express Statutes. These laws generally prohibit anyone from establishing, operating, or using a 

private company to carry letters for compensation on regular trips or at stated periods over 

postal routes or between places where mail regularly is carried.

This means that competing private delivery companies can only deliver items (e.g., packages) 

not covered under this monopoly.

Mailbox monopoly

18 U.S.C. § 1725

Restricts access to mailboxes by prohibiting anyone from intentionally placing mailable matter 

without postage in any mailbox, essentially granting USPS exclusive access to mailboxes.

USPS’s private competitors cannot deposit such items in mailboxes.

Assumed federal income tax on 

competitive products

39 U.S.C. § 3634

USPS is required to annually compute its assumed federal income tax on competitive products 

income, which represents the amount of net income that would be imposed if USPS were 

assessed such taxes, and transfer this amount from its Competitive Products Fund to its Postal 

Service Fund.

According to the Federal Trade Commission’s 2007 report, USPS’s competitors are subject to 

federal income tax—a tax that is to be paid to the U.S. Treasury.

Tax/fee exemptions

U.S. Const. art. VI,cl. 2.

Generally, states may not impose taxes directly on the federal government, thus exempting 

USPS from state taxes. According to FTC’s 2007 report, various state and local taxes have not 

been applied to USPS, such as state and local income taxes, property and real estate taxes for 

USPS-owned properties, sales and use taxes, vehicle registration fees, tolls, state franchise 

taxes, business licensing fees, franchise fees, and business taxes.

The Federal Trade Commission further noted that these state and local taxes can be applied to 

USPS’s competitors. 

Borrowing authority

39 U.S.C. § 2005

USPS has the authority to borrow up to $15 billion from the U.S. Treasury, unlike its private 

competitors. However, although the Treasury is authorized to approve the issuance of USPS 

obligations to private creditors, it does not do so, as a matter of policy, according to USPS. 

Regulatory authority

39 U.S.C. § 401(2)

USPS has the authority to issue federal postal regulations, unlike its private competitors. For 

example, USPS has issued regulations further defining the scope of its mailbox monopoly.

Power of eminent domain/ 

payment of debt priority

39 U.S.C. § 401(9)

USPS has the authority to exercise the power of eminent domain and the possession of the 

priority of the United States with respect to the payment of debts out of bankruptcies, 

insolvencies, and estates.

USPS’s private competitors are not authorized to exercise eminent domain.

Protection from damages related 

to U.S. mail delivery

28 U.S.C. § 2680(b)

No claims can be made arising out of the loss, miscarriage, or negligent transmission of letters 

or postal matter—that is, items handled by USPS.

This specific restriction does not apply to items handled by USPS’s competitors.

Postal law enforcement

39 U.S.C. § 204, 18 U.S.C. § 3061 

The U.S. Postal Inspection Service—the law enforcement, crime prevention, and security arm 

of USPS—investigates postal-related crimes including mail theft, mail fraud, and postal 

robberies, among others.

Other law enforcement agencies also investigate theft of items being handled by USPS, as well 

as its competitors.
Page 20 GAO-17-543 Postal Monopoly

Citation(s) Description

Geographic scope of service

39 U.S.C. §§ 101(a), 403(a)

USPS is required to provide prompt, reliable, and efficient services to patrons in all areas, to 

render postal services to all communities, and to service as nearly as practicable the entire 

population of the United States. USPS is specifically required to receive, transmit, and deliver 

written and printed matter, parcels, and like matter throughout the United States, its territories 

and possessions, and pursuant to international agreements, throughout the world.

The specific requirements summarized above do not apply to USPS’s private competitors.

Degree of service

39 U.S.C. § 101(b)

USPS is required to provide a maximum degree of effective and regular postal services to rural 

areas, communities, and small towns where post offices are not self-sustaining. No small post 

office can be closed solely for operating at a deficit.

These specific requirements do not apply to USPS’s private competitors.

Mail delivery

39 U.S.C. § 101(e),(f); Pub. L. No. 

114-113 (2015)

In determining all policies for postal services, USPS is required to give the highest 

consideration to the requirement for the most expeditious collection, transportation, and 

delivery of important letter mail. In selecting modes of transportation, USPS is required to give 

the highest consideration to the prompt and economical delivery of all mail.

For many years, provisions in annual appropriations acts have stated “[t]hat 6-day delivery and 

rural delivery of mail shall continue at not less than the 1983 level.”

These specific requirements do not apply to USPS’s private competitors.

Uniform rates

39 U.S.C. §§ 404(c), 3683

USPS is required to provide uniform postal rates for certain types of mail, including at least one 

class of mail sealed against inspection (which traditionally has been fulfilled by First-Class 

Mail), Media Mail, and Library Mail.

Such requirements do not apply to USPS’s private competitors.

Nonprofit rate discount

39 U.S.C. § 3626

USPS is required to provide reduced rates for nonprofit periodicals and for advertisements sent 

by nonprofit organizations and qualifying national and state political committees.

Such requirements do not apply to USPS’s private competitors.

Alaska Bypass mail

39 U.S.C. § 5402

USPS is required to provide Alaska Bypass service, which allows mailers to ship goods and 

other cargo on pallets directly to rural customers in Alaska, bypassing USPS’s network. USPS 

pays for the cost of air transportation from hub airports to Alaska bush sites.

Such requirements do not apply to USPS’s private competitors.

Collective bargaining

39 U.S.C. §§1004,1206-07

USPS negotiates collective bargaining agreements with its labor unions. If they are unable to 

agree, binding arbitration by a third-party panel will ultimately be used to establish agreement. 

USPS is also statutorily required to consult with postal supervisory and managerial 

organizations concerning changes in pay, benefits, and other programs that affect their 

membership.

These specific requirements for the collective bargaining process do not apply to USPS’s 

private competitors.

Benefit programs

5 U.S.C. §§ 8301 et seq., 8401 et 

seq., and Chapter 89; 39 U.S.C. §§ 

1005(d), 1005(f)

USPS is required to participate in federal pension and health benefit programs, with specific 

provisions regarding the required level of USPS’s funding of these programs and retiree health 

benefits coordinate with Medicare. The law requires USPS’s fringe benefits to be at least as 

favorable as those in effect when the Postal Reorganization Act of 1970 was enacted.

These specific requirements governing pension and health benefits do not apply to USPS’s 

private competitors.

Pricing restrictions

39 U.S.C. § 3622(d)

An inflation-based price cap generally limits rate increases for market-dominant products, 

including First-Class Mail, USPS Marketing Mail, Periodicals and Package Services such as 

Bound Printed Matter, Media Mail, and Library Mail.

Such requirements do not apply to USPS’s private competitors.
Page 21 GAO-17-543 Postal Monopoly

Citation(s) Description

Funding of regulatory/oversight 

agencies

39 U.S.C. §§ 504(d), 2003(e)

USPS is required to fund the Postal Regulatory Commission, the Postal Inspection Service, 

and the USPS Office of the Inspector General.

USPS’s private competitors are not required to fund the federal agencies that have authority to 

regulate and investigate them.

Federal purchase laws

39 U.S.C. § 410

USPS is required to comply with specific laws that relate to federal purchases of products and 

services, such as the Davis-Bacon Act.

a

Such requirements do not apply to USPS’s private competitors.

Workers’ compensation

5 U.S.C. §§ 8101 et seq.; 39 U.S.C. 

§ 1005(c)

USPS is required to participate in the federal workers’ compensation program, which covers 

postal and other federal and provides compensation to federal employees, as well as 

dependents, in the event of an employee’s death.

USPS’s private competitors and employees are covered by state-based workers’ compensation 

laws and programs.

Source: GAO analysis based on the U.S. Code and Federal Trade Commission, Accounting for Laws that Apply differently to the United States Postal Service and Its Private Competitors (Washington, 

D.C.: December 2007), Postal Regulatory Commission, Report on Universal Postal Service and the Postal Monopoly (Washington, D.C.: Dec. 19, 2008), Postal Regulatory Commission, Annual Report to 

the President and Congress: Fiscal Year 2016 (Washington, D.C.: January 2017). | GAO-17-543

Note: The Federal Trade Commission found in 2007 that some laws have positive financial effects on 

the U.S. Postal Service (USPS), while others have negative financial effects. See Federal Trade 

Commission, Accounting for Laws that Apply differently to the United States Postal Service and Its 

Private Competitors (Washington, D.C.: December 2007). This table includes selected laws, taxes, 

and fees that were identified by the Federal Trade Commission in its 2007 report, by USPS and other 

stakeholders in the public proceeding for that report, by PRC in its 2008 report, as well as in 

responses to GAO for this review.

a

Under the Davis-Bacon Act, USPS’s contracts for public buildings and public works in a given local 

area worth more than $2,000 must require the contractors involved to pay all the laborers and 

mechanics they employ on those contracts the prevailing wage for that area, as calculated by the 

U.S. Department of Labor. See 40 U.S.C. §§ 3141-3147; 39 U.S.C. § 410(b)(4)(A).

The analysis of what laws to include and their impact on USPS’s 

operations is further complicated because while some laws appear to 

provide USPS with financial advantages, whether or not they actually do 

may depend on how they are interpreted and applied in practice. For 

example, FTC’s 2007 report stated that, although some jurisdictions 

refrain from ticketing its vehicles, USPS has agreed to pay parking fines 

in other jurisdictions; it is unclear whether USPS vehicles are exempt 

from being ticketed.37 In another area, the FTC report found that USPS 

benefits from “disparate customs treatment,” but did not offer explanation 

for the reasoning behind this finding. Further, postal pension and retiree 

health benefit fund assets for postal retirees are in funds that by law are 

required to be invested solely in Treasury securities,38 which are backed 

by the full faith and credit of the federal government. In contrast, private 

 37 Federal Trade Commission, Accounting for Laws that Apply differently to the United 

States Postal Service and Its Private Competitors (Washington, D.C.: December 2007).

38 5 U.S.C. §§ 8348(c), 8909a(c).
Page 22 GAO-17-543 Postal Monopoly

companies can and do invest retirement funds in more diversified 

portfolios.

Use of Findings from Other Studies

Another consideration is what information to include from previous 

studies. One would have to decide whether or not to use PRC’s annual 

estimates and reports on the financial effects on USPS of laws related to 

its universal service and public service costs and the value of USPS’s 

monopolies.39 In postal labor negotiations, USPS has presented the result 

of studies on the comparability of postal wages and benefits with the 

private sector; however, the results have been contested by major postal 

labor unions involved in collective bargaining.

Challenges in Quantifying Some Effects

In some cases, effects may be challenging to quantify—in part because 

they have not been previously quantified, and in part due to the 

complexity of developing estimates. For example, FTC’s 2007 report that 

estimated the effects of laws on USPS wages did not attempt to estimate 

the financial effects of every law. FTC’s report stated it would have been 

difficult to quantify the effects of some laws, such as USPS’s ability to 

obtain property through eminent domain and disparate customs treatment 

for USPS and its competitors. Overcoming these challenges may require 

additional time and resources, as well as the acceptance of risk beyond 

the control of the team conducting the study, such as lack of available 

data.

Addressing Differing Stakeholder Views on Scope

Key postal stakeholders hold differing views on what the scope of a 

potential study might be. For example, although National Association of 

Letter Carriers (NALC)40 officials told us that NALC does not see any 

need for an update to the 2007 FTC report, they added that such an 

update should not attempt to study the comparability of USPS wages to 

the private sector. NALC officials explained that postal unions have 

 39 For PRC’s latest estimates of the effect of laws related to USPS’s universal service and 

public service obligations, and of USPS’s delivery and mailbox monopolies, see PRC, 

Annual Report to the President and Congress: Fiscal Year 2016 (Washington, D.C.: 

January 2017).

40 NALC represents carriers who deliver mail on city routes.
Page 23 GAO-17-543 Postal Monopoly

negotiated and debated with USPS over the definition of “comparability”

and “comparable levels of work.”41 NALC officials added that there is no 

one objective or scientific definition of these terms, which must be 

negotiated by the parties in the face of changing circumstances and 

debate, and stated that the collective bargaining table is the appropriate 

venue for this debate. In contrast, USPS officials told us that any future 

study should estimate the comparability of both USPS wages and 

benefits to the private sector.

Government auditing standards state that a study’s methodology 

describes the nature and extent of procedures for gathering and 

analyzing evidence needed to address its objectives, which should be 

sufficient and appropriate to support findings to reduce the risk of 

improper conclusions.42 When deciding upon a study’s methodology, one 

would need to address such challenges as (1) lack of consensus on 

methodology options, (2) constraints on time and resources, and (3) 

limitations on publicly available data and supporting documentation. The 

decisions made about how to address these challenges would help 

determine the usefulness of the estimates to policymakers.

Lack of Consensus of Methodology Options

No consensus exists on the most appropriate methodology that should be 

used to estimate the financial effects of certain laws that apply differently 

to USPS and its competitors. For example, USPS officials told us that 

there is no generally accepted consensus on how to measure the 

comparability of postal wages and benefits and said it has used 

numerous methodologies over the years to make estimates in this area. A 

NALC official explained that USPS and postal unions have long disagreed 

on the definition of “comparability” and “comparable” levels of work. 

Depending on how a study approaches this issue, it could affect decisions 

about methodology and data. USPS has preferred to define comparability 

as the level of USPS wages and benefits for different jobs performed by 

USPS relative to similar jobs performed by companies in the entire private 

 41 USPS is required to achieve and maintain compensation for its officers and employees 

comparable to the rates and types of compensation paid in the private sector. 39 U.S.C. § 

101(c). USPS also is required to have a policy of compensation and benefits for all officers 

and employees on a standard of comparability to the compensation and benefits paid for 

comparable levels of work in the private sector of the economy. 39 U.S.C. § 1003.

42 GAO-12-331G.

Methodology 

Considerations Would 

Involve Judgments
Page 24 GAO-17-543 Postal Monopoly

sector (e.g., similar jobs performed by USPS competitors and mail 

processing jobs performed by private companies in the mailing industry), 

while the postal unions have preferred to compare USPS with its large 

competitors such as United Parcel Service (UPS) and FedEx.

Potential Constraints on Time and Resources

Some methodologies would require considerable time and resources to 

collect the necessary data, and any constraints in these areas may 

influence the choice of methodology. A study estimating the financial 

effects of all laws that apply differently to USPS and its private 

competitors would require significant time and resources; if estimates 

were desired in a shorter time frame—or if financial resources were 

limited—tradeoffs would be required. For example, USPS officials told us 

that, when estimating the value of USPS’s exemption from property and 

real estate taxes for USPS-owned properties, the most appropriate data 

would be the current assessed value of each USPS-owned property and 

the current applicable tax rate(s). However, they noted that USPS does 

not have data on the assessed value for its owned properties. They 

estimated that collecting data on a valid sample of USPS-owned 

properties43 would require specialists such as tax assessors and 

appraisers, and cost $7.6 million to $9 million—an amount they deemed 

to be cost-prohibitive.44 With respect to estimating wage and benefit 

comparability, USPS officials stated that the different types of work 

performed by postal employees in the various bargaining units does not 

lend itself to a one-size-fits-all approach to private sector comparability or 

a single answer for all USPS employees. They said that USPS has 

generally used multiple methodologies to estimate wage and benefit 

 43 In fiscal year 2016, USPS reported that it owned 8,484 properties with 192.5 million 

interior square feet, such as post offices and mail processing facilities. USPS also 

reported that it leased 23, 214 properties with 78.7 million interior square feet. See USPS, 

United States Postal Service FY2016 Annual Report to Congress (Washington, D.C.: 

December 2016).

44 This amount did not include the cost to develop data on the value of USPS personal 

property such as sorting equipment, or to collect data on what the state and/or local 

property tax rates would be for each USPS property or piece of equipment. Further, USPS 

officials said that the appropriate benchmark for estimating the financial effect of its 

exemption would be the amount that USPS would pay relative to its competitors if both 

were fully subject to these taxes, a process that would require collecting information on 

the dollar value of any exemptions that USPS’s private competitors receive.
Page 25 GAO-17-543 Postal Monopoly

comparability in each collective bargaining proceeding.45 They also noted 

that some of these methodologies require a high degree of expertise 

and/or subject matter knowledge, such as expertise in statistical or 

regression analyses, as well as specialized knowledge and experience in 

employee compensation and wage determination. These factors have 

implications for the time and resources that would be required to estimate 

wage and benefit comparability.

Additionally, USPS officials said that collecting data on the value of 

USPS’s exemption from vehicle registration fees would require a review 

of state registration fees for each state and vehicle type, as well as other 

information.46

Limitations on Public Data and Supporting Documentation

Some USPS data and documentation that could be useful for a future 

study may not be publicly available, either because USPS has not been 

asked to disclose it in public proceedings or because it is considered 

exempt from public disclosure. For example, USPS is not required to 

disclose information prepared for use in connection with the negotiation of 

collective bargaining agreements, which would include USPS studies of 

 45 USPS has four major postal labor unions. As noted above, NALC represents city 

delivery carriers. The National Rural Letter Carriers Association represents rural delivery 

carriers, the American Postal Workers Union represents clerks, maintenance employees, 

motor vehicle operators, and non-mail processing professional employees, and the 

National Postal Mail Handlers Union represents mail handlers who load, unload, prepare, 

sort and containerize mail for delivery. USPS said specific methodologies it has used in 

collective bargaining proceedings with these unions have included (1) matching postal 

bargaining unit jobs with similar work in the private sector requiring similar skills, and using 

wage surveys to compare postal compensation with private sector compensation; (2) 

using a Department of Labor database to compare postal wages to the pay of private 

sector employees with similar skill levels, as well as comparing skill levels of postal 

employees with private sector employees who make similar pay; (3) looking at mailers 

who use “drop shipping” (transporting mail to a destination facility or delivery unit) because 

it is less expensive for them to bypass most of the postal delivery network and do the work 

themselves than to pay full postal rates; (4) looking at companies that consolidate mail 

from multiple sources and presort it for entry into USPS’s system at a discount, which 

USPS said pay significantly less than postal wages for mail processing work; (5) reviewing 

job postings from direct competitors like FedEx and UPS for positions where the work is 

similar; and (6) examining quit rate data of postal bargaining unit employees and 

comparing it to private sector quit rate data.

46 USPS’s vehicle fleet includes more than 227,000 vehicles used for delivery, transport, 

administrative, and other purposes. See USPS, United States Postal Service FY2016 

Annual Report to Congress (Washington, D.C.: December 2016).
Page 26 GAO-17-543 Postal Monopoly

wage and benefits comparability prepared for such negotiations.

47 While 

data and documentation relating to USPS’s competitive products could be 

instrumental to evaluating any specific financial effects of legal 

advantages and disadvantages on competitive products, USPS often 

classifies this information as proprietary and does not disclose it 

publicly.48 In addition, according to USPS officials, certain data may need 

to be collected from USPS’s private competitors who may consider such 

data to be proprietary and exempt from public disclosure, such as trade 

secrets.49 Thus, it is unclear whether these data and their supporting 

documentation would be available to certain organizations conducting 

such a study and, if so, under what circumstances and with what 

limitations they may be able to be discussed in a publicly-available report.

In order for estimates to be as useful as possible to readers, the report 

would need to include sufficient information to allow for informed 

discussion about the results. Government auditing standards state that a 

report should disclose the objectives, scope, and methodology—as well 

as the results, including findings and conclusions. According to these 

standards, readers need this information to understand the study’s 

purpose, the nature and extent of the research, context and perspective 

on what is reported, and any significant limitations.50 In addition, the 

standards also state that a report should describe the scope of the work 

performed and any limitations, including issues that would be relevant to 

readers, so they can reasonably interpret the findings, conclusions, and 

recommendations without being misled. Further, according to government 

auditing standards, a report should also discuss any significant 

constraints imposed on the approach by information limitations or scope 

impairments, which might include data that were unavailable due to 

 47 39 U.S.C. § 410(c)(3).

48 USPS is not required to disclose information of a commercial nature which under good 

business practice would not be publicly disclosed. 39 U.S.C. § 410(c)(2).

49 Trade secret information is generally defined as information for which the owner has 

taken reasonable measures to keep secret and the information derives independent 

economic value from not being generally known by the public. See 18 U.S.C. § 1839. See 

also GAO, Department of Commerce—Property Implications of Proposed Transition of 

U.S. Government Oversight of Key Internet Technical Functions, B-327398 (Washington, 

D.C.: Sept. 12, 2016). Officers or employees of the United States, under penalty of 

criminal sanctions, are prohibited from disclosing proprietary information except as 

authorized by law. 18 U.S.C. §1905.

50 GAO-12-331G.

Reporting Considerations
Page 27 GAO-17-543 Postal Monopoly

restrictions on time or resources. This discussion would help readers 

understand how much confidence to place in the findings.

To put the importance of such reporting into context, USPS and many 

postal stakeholders have made various proposals over the years to 

change laws that apply differently to USPS and its competitors. A wide 

range of reasons have been given in support of such proposals, such as 

enhancing USPS’s financial position, assuring the continuation of 

universal postal service or revising the universal service obligation to 

better meet changing customer needs, and assuring fair competition. 

Regardless of the reasons behind any given proposal, estimating the 

potential financial effects of specific laws could provide Congress and 

other stakeholders with information that could be used to consider 

possible changes to these laws. Estimates of the effects of certain laws 

on USPS, specifically on its competitive products, and on these products 

relative to its competitors could be different in their nature and timeframes 

than the information regularly provided by the Congressional Budget 

Office (CBO) on the estimated financial effects of proposed laws on 

federal government revenues and expenses.51

Considering the longstanding disagreements over controversial issues in 

this area, it would be particularly helpful for such a study to be conducted 

by an independent party free of conflicts of interest. Any party tasked with 

such an undertaking would require sufficient time and resources to 

produce estimates of sufficient precision to prove useful for decision 

makers and facilitate broad stakeholder acceptance and use of the 

results.

 51 CBO estimates are generally prepared for proposed legislation that has been reported 

by a full committee of the U.S. House of Representatives or of the U.S. Senate, other than 

the House and Senate Committees on Appropriations, and often have a 10-year horizon.
Page 28 GAO-17-543 Postal Monopoly

We provided a draft of this report to USPS, PRC, FTC, and the U.S. 

Department of Justice (DOJ) for review and comment prior to finalizing 

the report. FTC and DOJ did not have any comments on the report. We 

received written comments from USPS, which are reproduced in 

appendix III. USPS and PRC separately provided technical comments, 

which we incorporated as appropriate.

In its written response, USPS stated that it appreciated our effort to 

develop an understanding of its monopolies in supporting secure and 

affordable universal postal service and other postal policy goals. 

However, USPS disagreed with aspects of our discussion of (1) the 

impact of relaxation of foreign postal monopolies, (2) PRC’s estimates of 

the value of USPS’s letter delivery and mailbox monopolies, (3) the 2015 

paper by Robert Shapiro, and (4) selected laws that apply differently to 

USPS and its competitors.

In its comments, USPS stated that it appreciated our efforts to obtain 

views from a broad cross-section of postal stakeholders, although it 

stated that it does not agree with all of the perspectives expressed. USPS 

emphasized that, while some believe that narrowing or eliminating its 

monopolies might have some beneficial effects, it believes doing so would 

divert revenue away from USPS, compounding its financial pressures. 

USPS also wrote that, in the current financial environment, it would not be 

responsible for policymakers to implement such changes while 

maintaining the USO in its current form. Our report acknowledges these 

points and states that postal stakeholders and experts agree that actions 

to narrow or eliminate USPS’s monopolies could reduce its revenues, 

placing a greater financial burden on USPS and threatening its ability to 

provide universal service.

Regarding the relaxation of foreign postal monopolies, USPS emphasized 

that other reforms were made in tandem with changes to postal 

monopolies in other countries, including government aid and changes to 

afford the incumbent carrier greater commercial freedom to manage its

businesses. Although our draft report stated that we found broad 

consensus among postal stakeholders and experts—as well as both 

USPS and PRC—that any potential changes to USPS’s monopolies 

should be considered in tandem with broader postal policies, we updated 

our report to include additional context in response to USPS’s comments.

USPS took issue with the information provided by officials from foreign 

posts and regulators that the narrowing or elimination of their monopolies 

Agency Comments 

and Our Evaluation
Page 29 GAO-17-543 Postal Monopoly

resulted in increased efficiency, and noted that many other postal policies 

were undertaken at the same time, as discussed above. Moreover, USPS 

wrote that the effects of postal liberalization in other countries has no 

bearing upon USPS because some of the efficiency advances that other 

countries have seen in recent years were realized many years ago in the 

United States. Our report states that it is important to remember the 

context in which the posts operate differs greatly from one country to the 

next, and that each country is in a unique situation and uses specific 

measures to address its challenges and opportunities. At the same time, 

we state that although we did not directly evaluate the implications of 

each liberalization experience or how it may apply to the United States, 

the experiences nonetheless provide important context for the 

consideration of any changes to USPS’s monopolies. For additional 

context, we also updated our report to include USPS’s perspective on this 

issue.

In its letter, USPS also suggested further clarification regarding our 

discussion of certain aspects of PRC’s estimates of the value of USPS’s 

monopolies. In response to USPS’s suggested clarification of PRC’s 

estimates presented in table 1, we added a note to make it clear that, 

while PRC’s estimates presented in the table represent the effect on 

USPS’s net income if its mailbox monopoly or both monopolies were to 

be eliminated, it is not the case that subtracting the estimated value of the 

mailbox monopoly from the estimated value of the combined letter 

delivery and mailbox monopolies provides the value of the letter delivery 

monopoly alone. In addition, USPS also expressed concern that the 

discussion of the 2015 paper by Robert Shapiro could wrongly imply 

equivalent credibility to the work performed by PRC. We recognize this

concern. Our report states that Shapiro’s work did not measure the value 

of the monopolies as the reduction in USPS’s net revenues if they were to 

be eliminated, but rather focuses on other financial implications of the 

mailbox monopoly. We further state that the Shapiro work is not 

comparable to that conducted by PRC.

Regarding our summary of selected laws that apply differently to USPS 

and its competitors, USPS found it to be relatively thorough, but offered a 

series of technical comments and suggested additional laws that could be 

added to the summary. We incorporated technical comments to this 

section, as appropriate. However, we did not include any additional laws, 

as our intent was not to provide an exhaustive summary of laws, taxes, 

and fees that apply differently to USPS and its private competitors.
Page 30 GAO-17-543 Postal Monopoly

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies of this report to the 

appropriate congressional committees, the Postmaster General, the 

Chairman of PRC, and other interested parties. In addition, the report will 

be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff making key contributions to this 

report are listed in appendix IV.

Lori Rectanus

Director

Physical Infrastructure Issues
Appendix I: Objectives, Scope, and 

Methodology

Page 31 GAO-17-543 Postal Monopoly

Our objectives were to assess: (1) what is known about the value of the 

U.S. Postal Service’s (USPS) letter delivery and mailbox monopolies, (2) 

views on the potential effects of narrowing or eliminating these 

monopolies; and (3) considerations that would need to be addressed to 

estimate the value of USPS’s financial advantages and burdens resulting 

from laws that apply differently to USPS and its private competitors.

To determine what is known about the value of USPS’s letter delivery and 

mailbox monopolies, we reviewed relevant literature, and discussed 

existing estimates with postal experts. Specifically, we reviewed the 

Postal Regulatory Commission’s (PRC) 2016 annual report, which 

includes an estimate of the value of the postal monopolies, as well as 

PRC’s original 2008 study that described the effort’s methodology in 

depth. We also reviewed several other studies conducted by other 

researchers soon after the 2006 enactment of The Postal Accountability 

and Enhancement Act (PAEA), studies that either described methods for

analyses or actually conducted analyses of the value of USPS’s 

monopolies. In addition to reviewing PRC’s studies, we also met with 

PRC staff to further discuss aspects of its analyses. Further, we reviewed 

a study authored by Dr. Robert Shapiro entitled The Basis and Extent of 

the Monopoly Rights and Subsidies Claimed by the United States Postal 

Service, which discusses other financial implications of USPS’s mailbox 

monopoly. Finally, we discussed both the analysis conducted by PRC and 

Dr. Shapiro’s study with the nine postal experts we interviewed to obtain 

their views on the methods and findings of these studies.

To identify the potential impacts of narrowing or eliminating USPS’s letter 

delivery and mailbox monopolies, we took a series of steps. First, we 

created and distributed a questionnaire to 21 postal stakeholder 

organizations (“stakeholders”) that (1) testified and filed comments during 

the public comment solicitations as part of the work of the 2003 

President’s Commission on the USPS; (2) provided testimony or 

comments to PRC on universal service and the postal monopoly, and (3) 

GAO previously surveyed during audit work conducted in support of the 

prior GAO reported titled U.S. Postal Service: Strategies and Options to 

Facilitate Progress toward Financial Viability.

1 We initially selected and 

contacted 25 organizations—including postal unions, management 

associations, mailing associations, and private companies—to which it 

was planned to distribute the questionnaire. Subsequently, GAO learned 

 1 GAO, U.S. Postal Service: Strategies and Options to Facilitate Progress Toward 

Financial Stability, GAO-10-455 (Washington, D.C.: Apr. 12, 2010).

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 32 GAO-17-543 Postal Monopoly

that two of these stakeholders were no longer in existence and that two of 

them had merged into a single organization, resulting in a list of 21 

stakeholders who received a copy of the questionnaire. GAO pretested 

this questionnaire with two stakeholders to ensure that it was clearly 

worded, unbiased, comprehensive, and that terminology was used 

correctly and made changes to the content of the questions in response. 

GAO received responses from 16 of the 21 stakeholders—a response 

rate of 76.2 percent—11 of which were completed questionnaires and 5 

were comprised of correspondence answering some or all the questions 

posed. We also provided this questionnaire to USPS and PRC, both of 

whom completed it. In addition, we also conducted structured interviews 

with nine postal experts to obtain their views on the potential impacts of 

narrowing or eliminating USPS’s monopolies. Many of these experts were 

identified as postal consultants and individuals who worked on or 

commented on PRC’s 2008 report on universal service and the postal 

monopoly;2 others were recommended by stakeholders or agency 

officials. We determined through a literature search and prior audit work 

that each expert has substantial knowledge and experience in postal 

issues. We created and pretested an interview guide with two experts to 

ensure that questions were accurate, clear, and unbiased, and made 

changes in response. We analyzed the responses received from postal 

stakeholders and experts and summarized both their reasons for favoring, 

opposing, or holding no position on whether USPS’s monopolies should 

be narrowed or eliminated and what they believed the potential effects of 

doing so may be. While the responses from the judgmentally-selected 

group of postal stakeholders and experts are not generalizable, they 

provide a wide range of views among those who have previously 

expressed views on the postal monopoly and related policy issues—and 

represent some of the key groups with whom Congress interacts when 

developing postal policy.

Further, to determine what have been the experiences of foreign postal 

administrations in selected industrialized countries that have narrowed or 

eliminated its postal monopolies, we collected information from the top 20

major postal markets, as determined by the Universal Postal Union 

(UPU), a specialized agency of the United Nations that coordinates 

international postal polices. Using this information, we identified countries 

(1) with the largest global shares of postal revenue and domestic mail, (2) 

with developed economies (classified by their level of development as 

 2 PRC, Report on Universal Postal Service and the Postal Monopoly (Washington, D.C.: 

Dec. 19, 2008)
Appendix I: Objectives, Scope, and 

Methodology

Page 33 GAO-17-543 Postal Monopoly

measured by per capita gross national income);3 and (3) have fully 

liberalized their postal monopoly laws. Based on these criteria, we 

selected six countries–Germany, France, Japan, Italy, Sweden, and the 

United Kingdom. Using a list of contacts provided by PRC officials, we 

sent requests to both the postal administration and regulator in each of 

these six nations to obtain information regarding their respective 

liberalization experiences. While the responses from foreign postal 

operators and their regulators in these judgmentally-selected countries 

are not generalizable, they provide information and perspectives that 

complement the views of experts and American postal stakeholders on 

the potential effects of narrowing or eliminating the USPS monopolies.

To identify considerations that would need to be addressed to estimate 

the value of USPS’s financial advantages and burdens resulting from 

laws that apply differently to USPS and its private competitors, we 

reviewed criteria from the Government Auditing Standards.4 These 

standards provide a framework for performing high-quality performance 

audits, including establishing an overall approach to obtain reasonable 

assurance that the evidence is sufficient and appropriate to support the 

findings. In addition, we reviewed relevant laws and a 2007 Federal Trade 

Commission (FTC) report5 and obtained information from FTC on how 

some of its estimates were compiled. We identified and focused upon four 

of the largest financial effects of USPS’s legal status estimated in the 

2007 FTC report: the comparability of USPS and private sector wages 

and USPS’s exemptions from property real estate taxes, sales and use 

taxes, and vehicle registration fees, and obtained information on how 

these estimates were compiled. We contacted USPS and four postal 

industry stakeholders who had submitted comments in the FTC 

proceeding leading up to its 2007 report to obtain their opinion on 

considerations regarding how these estimates could be updated, 

considering the factors we had identified. These five stakeholders 

represented different sectors, including USPS, some of its private 

competitors, and some of its postal labor unions. We received responses 

from USPS and the National Association of Letter Carriers (NALC)6 on 

 3 Based on the United Nations classification of developed economies, economies in 

transition, and developing economies, among all of the countries in the world.

4 GAO, Government Accounting Standards: 2011 Revision, GAO-12-331G (Washington, 

D.C.: December 2011).

5 FTC, Accounting for Laws that Apply Differently to the United States Postal Service and 

its Private Competitors (Washington, D.C.: December 2007)(‘2007 FTC report’).

6 NALC represents carriers who deliver mail on city routes.
Appendix I: Objectives, Scope, and 

Methodology

Page 34 GAO-17-543 Postal Monopoly

considerations for estimating financial advantages and disadvantages of 

USPS’s unique legal status. Our analysis was limited to identifying key 

considerations, some of which included different options, for how to 

conduct research to estimate the financial effects of certain aspects of 

USPS’s legal status; we did not evaluate these options or recommend 

which should be pursued if a new study were to be conducted.

We conducted this performance audit from December 2015 to June 2017 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: Information on the Postal 

Regulatory Commission’s (PRC) Method for 

Estimating the Value of USPS’s Monopolies

Page 35 GAO-17-543 Postal Monopoly

This appendix describes the method used by PRC to estimate the value 

of the U.S. Postal Service’s (USPS) letter delivery and mailbox 

monopolies. In particular, this appendix discusses (1) why economic 

value to USPS may derive from the statutory monopolies, (2) the method 

that PRC employs to estimate the value of the monopolies, and (3) PRC’s 

findings.

Statutory monopolies are sometimes granted when the provision of a 

good has certain cost conditions. In particular, in a case where one large 

firm can produce a product for the entire market more cheaply, on 

average, than a set of smaller firms, monopoly is sometimes viewed as a 

preferred market structure, and a legal limitation on entry may be used to 

ensure that the market remains monopolistic. In the case of postal 

service, for example, USPS’s large and interconnected operational 

network leverages both economies of scale and scope and, as such, it is 

unlikely that it would be profitable for a new firm to compete against 

USPS for all forms of mail or in all locations.1 However, certain segments 

of the market may be more profitable to enter—both due to lower costs of 

service and/or higher potential revenues. If entry is open, competitors 

may be able to compete for business in these profitable submarkets, 

leaving the incumbent carrier with higher average costs to serve the 

remaining market.2 The loss suffered by the incumbent from the 

elimination of a statutory monopoly can be viewed as the “value” that the 

legal monopoly affords the incumbent firm—in this case, USPS.

 1 Economies of scale exist when producing more of a product results in lower average 

costs of production, and economies of scope occurs when a firm produces more than one 

product using overlapping resources and the result is lower per unit of costs of production

than if each product was produced independently.

2 This form of entry is often referred to as “cream skimming” because entrants only serve 

submarkets with lower costs and/or higher revenues.

Appendix II: Information on the Postal 

Regulatory Commission’s (PRC) Method for 

Estimating the Value of USPS’s Monopolies

Statutory Monopolies May 

Confer Economic Value
Appendix II: Information on the Postal 

Regulatory Commission’s (PRC) Method for 

Estimating the Value of USPS’s Monopolies

Page 36 GAO-17-543 Postal Monopoly

PRC’s method for estimating the value of USPS’s monopolies rests on a 

counterfactual: how would USPS’s net revenues be affected if the 

statutory monopolies were removed? As such, PRC estimates (1) the 

extent to which entry, if it were to be legally allowed, into the mail delivery 

market would be economically profitable; and (2) based on that entry, the 

extent of lost net revenues USPS would experience.3 To do so, PRC 

makes a variety of assumptions about the prospects for new firms to 

profitably enter segments of the postal delivery market.

Contestable Mail

The first key element of PRC’s analysis is the identification of which types 

of mail are “contestable.” PRC identifies contestable mail as those mail 

items that are presorted and drop-shipped at local destinations—such as 

advertising mail or First-Class Mail presorted by 5-digit ZIP Codes that 

could be drop-shipped. Contestable mail is of most interest to an entrant 

because there is minimal work related to sorting and transport. For the 

analysis of the elimination of both monopolies, all contestable mail 

categories are considered to be available to a potential entrant, should it 

decide to serve the route. In the case of the analysis of the mailbox 

monopoly alone, PRC only analyzes the contestable mail categories that 

fall outside of the letter delivery monopoly. In the latter case, private 

delivery companies are currently allowed to provide such service, such as 

delivery of magazines and advertising mail not covered by USPS’s 

delivery monopoly; however, because private delivery companies are not 

currently able to place items in mailboxes, they may choose not to deliver 

these items. There are fewer categories of contestable mail outside the

letter monopoly; therefore, when examining the value of only the mailbox 

monopoly, the volume of contestable mail is less than half of that when 

both monopolies are examined.

 3 It is possible that the removal of a monopoly right might result in no entry. This could 

occur if there are no profitable entry opportunities for other firms—even if they only serve 

the most profitable segment of the market. In such a case there would be no economic 

value to the legally-imposed monopolies. However, if removal of a statutory monopoly 

invoked new entry and some of the monopolist’s business were competed away, the 

monopoly has an economic value under this method. 

PRC Estimates the Value 

of USPS’s Monopolies 

based on Lost Net 

Revenues Due to 

Elimination of the 

Monopolies
Appendix II: Information on the Postal 

Regulatory Commission’s (PRC) Method for 

Estimating the Value of USPS’s Monopolies

Page 37 GAO-17-543 Postal Monopoly

Entrant Cost and Pricing

Once contestable mail volumes are identified, PRC makes a variety of 

assumptions about the economic circumstances of the potential entrant, 

relative to USPS. In particular:

• PRC makes assumptions about the extent to which a potential entrant 

would be able to deliver contestable mail with a lower cost structure 

than USPS. Two key elements of an entrant’s cost advantage include:

• The extent of the entrant’s reduced variable costs relative to those 

of USPS, due to various efficiencies or cost advantages it may 

enjoy—most notably lower labor rates. PRC’s base assumption is 

that the entrant has a 10 percent cost advantage relative to USPS.

• The extent of the entrant’s lower fixed costs, relative to USPS. 

Reduced fixed costs are due largely to the assumption that an 

entrant will not deliver mail 6 days per week, as USPS is required 

to do. The base case assumption is that an entrant would deliver 3 

days per week if both monopolies were eliminated and only 1 day 

per week if only the mailbox monopoly were eliminated. The 

reduction in delivery days would provide a cost advantage for the 

entrant over USPS.

• PRC also makes assumptions regarding the prices an entrant would 

charge for its service, relative to USPS rates. PRC’s base assumption 

is that the entrant’s prices would be 10 percent lower than USPS’s 

rates.

Entrant’s Determination of which Routes to Serve

The PRC analysis focuses on the likelihood of entry—that is, the ability of 

an entrant to make a profit—at the route level. PRC staff told us that 

PRC’s analysis of entry decisions was conducted at the route level 

because the data it obtained from USPS for this analysis are for individual 

routes. To ascertain which routes an entrant might serve, PRC uses data 

on mail volumes, by each type of mail category, for a sample of routes it 

obtains from USPS. Based on that route-level volume data, and the 

specific economic assumptions described above, PRC is able to calculate 

the entrant’s prospective profitability on the set of sample routes—and 

thus ascertain which routes the entrant would enter if the monopolies 

were lifted. Once the entered routes are determined, PRC can estimate 
Appendix II: Information on the Postal 

Regulatory Commission’s (PRC) Method for 

Estimating the Value of USPS’s Monopolies

Page 38 GAO-17-543 Postal Monopoly

USPS’s volume and revenue losses due to entry.4 PRC’s calculation of 

USPS’s expected loss in net revenues is considered to be the estimated 

“value” of USPS’s monopolies.5

Some Considerations of PRC Method

PRC’s economic analysis informs, with caveats, stakeholders and 

decision-makers about the value of USPS’s monopolies. However, some 

elements of its analysis are important to consider when interpreting the 

findings. In particular:

• PRC assumes that if an entrant chooses to serve a route—that is, the 

entrant believes it can make a profit on the route—it will immediately 

garner 100-percent of the contestable mail volume on that route. 

However, in practice, it may take time for an entrant to gain a 

significant foothold in the market. Alternative assumptions or 

sensitivity analyses that attempt to consider the time an entrant would 

require to build its business—in part due to how mailers make 

purchasing decisions when there are multiple competitors—might 

shed light on the reasonableness of the model’s current assumptions 

on the entrant’s market share.

• PRC uses USPS data on individual postal routes as the geographic 

level for this analysis. However, it is possible that potential entrants 

could make decisions on a broader regional basis, particularly 

because mailers (i.e., the entrant’s potential customers) might make 

their purchasing decisions on a broader geographic basis. PRC staff 

told us that routes abutting one another typically have similar volume 

characteristics, which would minimize concerns about the small 

geographic scope of the PRC approach. Nevertheless, it is difficult to 

ascertain the extent to which using this small geographic scope in this 

analysis would result in a pattern of entry in alignment with a viable 

business plan.

 4 In addition to reductions in revenues from the loss of volume, there are also offsetting 

reductions in USPS costs due to delivering a smaller volume of mail.

5 When PRC first estimated the value of USPS’s monopolies in 2008, based on fiscal year 

2007 data, it conducted a variety of sensitivity analyses by altering the various 

assumptions. For example, the 2008 study included assumptions using both higher and 

lower variable and fixed costs savings for the entrant than the assumptions used in the 

base case, as well as alternative assumptions about the extent of contestable mail an 

entrant would capture upon entry. In recent years, PRC has not published these 

alternative model specifications in its reports. PRC staff told us that their results were not 

highly sensitive to these alternative assumptions.
Appendix II: Information on the Postal 

Regulatory Commission’s (PRC) Method for 

Estimating the Value of USPS’s Monopolies

Page 39 GAO-17-543 Postal Monopoly

Since 2008, PRC has conducted an annual analysis to estimate the lost 

net revenues that USPS would incur if its monopolies were eliminated. 

For 2015, which is the most recent year available, PRC estimated that the 

elimination of both the letter and mailbox monopolies would result in 

$5.45 billion loss in net revenues for USPS, while the elimination of solely 

the mailbox monopoly would result in $1.03 billion in lost net revenues. 

PRC staff told us that increases in the value of the postal monopolies in 

recent years were due to growing contestable mail volumes, and added 

that they expect these volumes to continue rising in the near future.6 As 

such, PRC staff said that both the value of the combined postal 

monopolies—and the value of the mailbox monopoly on its own—are

likely to continue to increase in the next few years.

 6 Despite such increases in contestable mail, overall USPS mail volumes have been 

steadily decreasing in recent years. As we reported in 2016, USPS continues to face 

decreases in mail volume, its primary revenue source, as online communication and ecommerce expand. As of fiscal year 2016, USPS’s total mail volume had declined 27 

percent from its peak in fiscal year 2006.

PRC’s Estimated Value of 

USPS’s Monopolies Has 

Risen in Recent Years 

Due to Increased Volumes 

of Contestable Mail
Appendix III: Comments from the U.S. Postal Service

Page 40 GAO-17-543 Postal Monopoly

Appendix III: Comments from the U.S. Postal 

Service
Appendix III: Comments from the U.S. Postal Service

Page 41 GAO-17-543 Postal Monopoly
Appendix III: Comments from the U.S. Postal Service

Page 42 GAO-17-543 Postal Monopoly
Appendix III: Comments from the U.S. Postal Service

Page 43 GAO-17-543 Postal Monopoly
Appendix III: Comments from the U.S. Postal Service

Page 44 GAO-17-543 Postal Monopoly
Appendix III: Comments from the U.S. Postal Service

Page 45 GAO-17-543 Postal Monopoly
Appendix III: Comments from the U.S. Postal Service

Page 46 GAO-17-543 Postal Monopoly
Appendix III: Comments from the U.S. Postal Service

Page 47 GAO-17-543 Postal Monopoly
Appendix IV: GAO Contact and Acknowledgments

Page 48 GAO-17-543 Postal Monopoly

Lori Rectanus, (202) 512-2834 or RectanusL@gao.gov

In addition to the individual named above, Derrick Collins (Assistant 

Director); Chad Williams (Analyst-in-Charge); Samer Abbas; Amy 

Abramowitz; Antoine Clark; Pat Donahue; Jaci Evans; Kenneth John; Kim 

McGatlin; Oliver Richard; Frank Todisco; Walter Vance; Michelle

 Weathers; and Crystal Wesco made key contributions to this report.

Appendix IV: GAO Contact and 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(100492)
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