U.S. POSTAL 

SERVICE

Opportunities to 

Increase Revenue 

Exist with 

Competitive Products; 

Reviewing Long-Term 

Results Could Better 

Inform Promotions 

Decisions

Report to Congressional Requesters

June 2013

GAO-13-578

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-578, a report to 

congressional requesters

June 2013

U.S. POSTAL SERVICE

Opportunities to Increase Revenue Exist with 

Competitive Products; Reviewing Long-Term Results

Could Better Inform Promotions Decisions

Why GAO Did This Study

For several years USPS has not 

generated sufficient revenues to cover 

its expenses. Although much focus has 

been on USPS’s costs as a way to 

close the gap between its revenues 

and expenses, generating additional 

revenue is also needed. To increase 

mail volume and revenue, USPS has 

implemented NSAs, sales, and 

promotions with a variety of products. 

As requested, GAO reviewed (1) the 

trends and reported results of USPS’s 

sales, promotions, and NSAs, as well 

as (2) any opportunities and 

challenges related to generating 

additional revenue from them. GAO 

reviewed USPS documents, PRC 

decisions, and annual reports, and 

interviewed officials from USPS and 

PRC. GAO also interviewed mailers, 

which were selected in part based on 

participation in NSAs, sales, and 

promotions. Their views cannot be 

generalized to all mailers.

What GAO Recommends

GAO recommends that when filing for 

approval, USPS provide information to 

PRC about USPS’s data collection and 

analysis plans for estimating the longterm financial results of promotions. 

GAO also recommends that PRC 

evaluate USPS’s data collection and 

analysis plans for promotions as part of 

its review. In commenting on the 

report, USPS disagreed with the first 

recommendation, and PRC agreed 

with both recommendations. USPS 

stated it does not believe the 

recommendation will significantly affect 

the PRC’s review process or improve 

the quality of USPS’s business 

decisions. GAO continues to believe 

this recommendation has merit, as 

discussed in this report.

What GAO Found

The U.S. Postal Service (USPS) has developed numerous negotiated service 

agreements (NSA), sales, and promotions since the enactment of the Postal 

Accountability and Enhancement Act (PAEA) in 2006, and they generate a small 

but growing portion of USPS total revenue. PAEA established two categories of 

products: “market dominant,” where USPS has a monopoly, and “competitive,” 

which includes all other products, such as shipping services. NSAs, sales, and 

promotions are generally designed to encourage additional mail volume and 

revenue through temporary discounts on specific mail products. For example, 

USPS has offered promotions to incentivize mailers to invest in technology that 

may increase the value of mail for those mailers over the long-term. No NSAs, 

sales, or promotions followed the enactment of PAEA until regulations were 

issued in late 2007. The number of NSAs, sales, and promotions has increased 

most years since. The revenue generated from NSAs, sales, and promotions has 

also increased overall. The most revenue was generated by competitive NSAs. 

Financial results of competitive NSAs are not reported publicly. According to the 

Postal Regulatory Commission (PRC), which exercises regulatory oversight over 

USPS, nearly all competitive NSAs have covered their costs. Market dominant 

NSAs generated little revenue, in part because few were done. Sales and 

promotions have also generated little revenue.

Opportunities for increasing revenue from NSAs, sales, and promotions are 

primarily with competitive NSAs, though challenges may limit revenue, and it will 

likely not offset declines from other products. Continued growth in e-commerce is 

creating opportunities to generate additional revenue through competitive NSAs. 

Opportunities to generate additional revenue through market dominant NSAs are 

limited by low demand for those products. Also, it is difficult for USPS to 

determine whether any volume and revenue increases directly result from market 

dominant NSAs because it is difficult to accurately estimate mailers’ future mail 

volume. In addition, USPS and some mailers we spoke with noted that the 

process for developing both market-dominant and competitive NSAs can be 

burdensome, hindering the development of new agreements. USPS has taken 

actions, though, to streamline the process for developing competitive NSAs. 

Opportunities for generating revenue from sales and promotions are also limited 

by low demand as well as limited review of the long-term financial results before 

implementation. USPS has noted that promotions satisfy rate requirements by, 

for example, helping to generate revenues for USPS. In particular, promotions 

are used to encourage mail volume over the long term. However, USPS does not 

provide data and analysis about the potential long-term financial results when 

submitting promotions to PRC for its approval. As a result, PRC does not assess

the methodologies for evaluating the long-term financial results of promotions 

before implementation. Given USPS’s financial situation, USPS should 

demonstrate how promotions may achieve positive long-term financial results, in 

order to help maximize the revenue generated by those postage rate discounts.

View GAO-13-578. For more information, 

contact Lorelei St. James at (202) 512-2834 or

stjamesl@gao.gov.
Page i GAO-13-578 USPS Revenue Options

Letter 1 

Background 3

Since 2007, USPS Has Developed Numerous NSAs, Sales, and 

Promotions That Have Generated a Small but Growing Portion 

of USPS’s Total Revenue 6

Opportunities for Increasing Revenue from NSAs, Sales, and 

Promotions Are Primarily from Competitive NSAs, though 

Challenges May Limit Revenue 17

Conclusions 29

Recommendations 29

Agency Comments and Our Evaluation 29

Appendix I Scope and Methodology 34

Appendix II Required Objectives and Factors for Sales and Promotions 37

Appendix III Comments from the United States Postal Service 40

Appendix IV Comments from the Postal Regulatory Commission 45

Appendix V GAO Contact and Staff Acknowledgments 47

Tables

Table 1: Requirements for Negotiated Service Agreements (NSA) 5

Table 2: Negotiated Service Agreement (NSA) Requests Approved 

by PRC since the Enactment of PAEA, by Fiscal Year 7

Table 3: Number of Sales and Promotions Approved by PRC, by 

Fiscal Year 7

Table 4: Estimated Net Revenue of Sales and Promotions, Fiscal 

Years 2009 to 2013 14

Contents 
Page ii GAO-13-578 USPS Revenue Options

Figures

Figure 1: USPS Revenue from Negotiated Service Agreements 

(NSA) and Other Mail, Fiscal Years 2009 to 2012 9

Figure 2: Estimated Net Revenue from Domestic, Market-Dominant 

Negotiated Service Agreements, 2003 to 2014 12

Figure 3: How Mobile Quick Response (QR) Codes Work 16

Figure 4: Profit from Market Dominant Products and All 

Competitive Products, Fiscal Year 2012 19

Figure 5: Negotiated Service Agreement (NSA) Development 

Process 20

Abbreviations

NSA negotiated service agreement

OIG Office of Inspector General 

PAEA Postal Accountability and Enhancement Act 

PRC Postal Regulatory Commission

QR Quick Response

UPU Universal Postal Union

USPS United States Postal Service

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-13-578 USPS Revenue Options

441 G St. N.W.

Washington, DC 20548

June 25, 2013

The Honorable Thomas R. Carper

Chairman

The Honorable Tom Coburn, M.D.

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Susan M. Collins

The Honorable Carl Levin

United States Senate

For several years, the United States Postal Service (USPS) has not 

generated sufficient revenues to cover its expenses, putting its mission to 

provide prompt, reliable, and efficient service at risk. Although much of 

the focus has been on USPS’s costs as the way to close the gap between 

its revenues and expenses, generating additional revenue is also 

necessary. As customers increasingly turn to digital communications and 

online payment methods, total mail volume has decreased precipitously, 

falling 25 percent from its peak in fiscal year 2006 to fiscal year 2012. As 

a result, USPS’s revenue has declined substantially. In 2012, USPS 

reached its $15-billion borrowing limit and incurred a $15.9-billion net 

loss.1 USPS expects that its expenses will exceed revenue and that mail 

volume will continue to decline each year through fiscal year 2020.

Among USPS’s activities to enhance its revenue are negotiated service 

agreements (NSA), sales, and promotions designed to increase or 

sustain mail volume and revenue through temporary discounts on specific 

mail products. In 2010, we reported on various options to generate 

additional revenue, including the use of NSAs, as part of a broader report 

 

1 The $15.9-billion net loss includes $11.1 billion for two required payments to 

prefund future retiree health benefits. Originally due at the end of fiscal year 

2011, USPS’s $5.5 billion retiree health benefit payment was delayed until 

August 1, 2012. Pub. L. No. 112-74, § 632, 125 Stat. 786, 928 (Dec. 23, 2011). 

USPS missed that payment as well as the $5.6-billion payment that was due on 

September 30, 2012. Even though USPS did not make these payments, it 

recorded a loss for the obligation to make these payments.

 
 

Page 2 GAO-13-578 USPS Revenue Options

on options to facilitate USPS’s progress toward financial sustainability.2

Since that time, USPS has developed dozens more NSAs, sales, and 

promotions, which you asked us to review. We examined (1) the NSAs, 

sales, and promotions USPS has developed and their reported financial 

results, and (2) any opportunities to generate additional revenue from 

NSAs, sales, and promotions and any challenges that could hinder their 

development and implementation.

To describe the NSAs, sales, and promotions that USPS has developed, 

as well as their reported financial results, we reviewed public and nonpublic documents. To summarize the financial results of NSAs, we 

examined non-public versions of USPS’s Cost and Revenue Analysis 

reports as well as other non-public USPS documents that included the 

volume, cost, and revenue of individual NSAs. We also reviewed USPS 

data collection reports for market dominant NSAs. To summarize the 

number of, and results from, USPS sales and promotions, we reviewed 

USPS documents requesting approval for sales and promotions and 

obtained additional data from USPS on the estimated results of sales and 

promotions. We assessed the reliability of these data sources by 

interviewing USPS officials, and determined that the data were sufficiently 

reliable for our reporting purposes. We also reviewed the Postal 

Regulatory Commission (PRC) conclusions about NSAs, sales, and 

promotions in their Annual Compliance Determination Reports.

3

To identify and assess any opportunities to generate additional revenue 

from NSAs, sales, and promotions, as well as challenges, if any, that 

could hinder their development and implementation, we reviewed USPS 

and PRC documents, and conducted interviews with stakeholders.

Specifically, we reviewed relevant regulations, PRC proceedings, and 

internal USPS evaluations of NSAs. We also conducted interviews with 

officials from USPS, PRC, and 15 “mailers” to enhance our understanding 

of the circumstances in which NSAs, sales, and promotions are 

developed and implemented.4 We selected mailers that both have and 

 

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

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

3 The PRC’s Annual Compliance Determination Report is an after-the-fact review 

of the performance of USPS, focusing primarily on financial transparency and 

compliance with pricing and service performance standards.

4 We defined a “mailer” as an entity that prepares and/or presents mailings to 

USPS.
 

Page 3 GAO-13-578 USPS Revenue Options

have not participated in NSAs, sales, and promotions, as well as other 

factors. We also spoke with industry associations that represent major 

USPS mailers. The views of mailers and industry associations cannot be 

generalized to all mailers and industry associations because the sampled 

mailers were selected as part of a nonprobability sample. Appendix I 

contains a detailed discussion of our scope and methodology.

We conducted this performance audit from September 2012 to June 2013 

in accordance with generally accepted government auditing standards.

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

sufficient, appropriate evidence to provide a reasonable basis for our 

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

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

An NSA is a customized contract between USPS and a specific entity—

often a mailer or foreign postal operator—typically lasting a year or more. 

NSAs provide customer-specific rates—generally lower prices on specific 

mail products—in exchange for meeting volume targets and mail 

preparation requirements. The goal of these agreements is generally to 

encourage additional mail volume and revenue. For example, an NSA 

may provide a postage rate discount, paid to the mailer as a rebate at the 

end of a fiscal year, for all mail volume above a specific threshold.

The Postal Accountability and Enhancement Act (PAEA)5 authorized 

USPS to create NSAs for two discrete categories of mail products, market 

dominant and competitive, as outlined in table 1.6 The market dominant 

category includes products for which USPS has a monopoly or would be 

 

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

6 USPS had the ability to create NSAs prior to enactment of PAEA. In 2002, 

PRC determined NSAs were legally permissible under the Postal Reorganization 

Act of 1970 (PRA) because it gave USPS “a clear mandate to innovate by 

developing effective and efficient services adapted to the needs of the Nation’s 

mail users.” See PRC, Report to the Congress: Authority of the United States 

Postal Service to Introduce New Products and Services and to Enter Into Rate 

and Service Agreements with Individual Customers or Groups of Customers

(Feb. 11, 2002). According to PRC in 2011, “there was a consensus among 

stakeholders that the standard regulatory process used to evaluate NSAs under 

the PRA was unnecessarily complex and time consuming.” See PRC, Section 

701 Report (Sept. 22, 2011). 

Background 
 

Page 4 GAO-13-578 USPS Revenue Options

able to exercise substantial market power, such as First-Class Mail and 

Standard Mail. Competitive products are all other types of mail, and 

include primarily shipping services such as Priority Mail, Express Mail, 

and Parcel Select.

The legal requirements for NSAs differ based on whether the postal 

products are market dominant or competitive. PAEA requires market 

dominant NSAs to improve the net financial position or enhance the 

performance of operational functions of USPS so long as the agreement 

does not cause unreasonable harm to the marketplace. Also, market 

dominant product NSAs must be made available to “similarly situated 

mailers.”

7 PAEA requires competitive NSAs, as well as competitive 

products in general, to cover their attributable costs, meaning they must 

generate more revenue than the costs attributable to delivery of the 

products, such as the labor involved in handling that mail.8 Further, 

competitive products overall, including NSAs, must contribute at least 5.5 

percent of USPS’s institutional costs—that is, overhead costs not directly 

related to the delivery of products.

As directed by PAEA, PRC issued final regulations in 2007 that 

established procedures for its reviews of competitive and market 

dominant NSAs, as summarized in table 1.9 As with all postal rate 

changes, USPS must obtain approval from PRC prior to implementing 

NSAs. PRC has approved all NSAs proposed by USPS through fiscal 

year 2012. PRC also reviews NSAs after implementation for compliance 

with regulatory criteria, in its Annual Compliance Determination Report. 

 

7 Pub. L. No. 109-435, § 201, codified at 39 U.S.C. 3622(c)(10).

8 Pub. L. No. 109-435, § 201, codified at 39 U.S.C. 3633(a)(2). 

9 PRC, Order Establishing Ratemaking Regulations for Market Dominant and 

Competitive Products, Order No. 43, Docket No. RM2007-1, October 29, 2007.
 

Page 5 GAO-13-578 USPS Revenue Options

Table 1: Requirements for Negotiated Service Agreements (NSA)

Mail products Requirements

Competitive • For each competitive product, NSA must 

recover its attributable costs.

• Competitive products, collectively, including 

NSAs, must contribute at least 5.5 percent 

of USPS’s total institutional costs.b

Express Mail Fastest expedited delivery 

First-Class Packagesa Packages less than 16 ounces

Priority Mail First-Class Mail more than 13 ounces and any other mail 

matter less than 13 ounces with expedited delivery 

Parcel Select Ground delivery service for large and medium sized 

shippers

Parcel Return Service Return service for large and medium sized shippers

International All international competitive products

Market dominant • NSAs must either:

o Improve the net financial position of 

USPS, or

o Enhance operational functions.

• NSAs may not cause unreasonable harm to 

the marketplace.

• NSAs must be available to similarly situated 

mailers.

First-Class Mail Cards, letters, “flats”

c

Standard Mail Advertising, circulars, catalogs, some small parcels

Periodicals Magazines, newsletters

Package Services Merchandise, printed material

International All international market dominant products

Source: GAO summary of statute and Postal Regulatory Commission (PRC) regulations.

a

The First-Class Package Services product was moved from the market dominant to the competitive 

category in fiscal year 2012.

b

USPS and PRC calculate total institutional costs for each fiscal year. All competitive products must 

generate revenue above costs attributable to the delivery of those competitive products at least as 

much as 5.5 percent of total institutional costs.

c

“Flats” are defined as mail pieces that exceed the dimensions of a normal letter but remain flat, such 

as large envelopes, newsletters, and magazines.

To increase or sustain mail volume and revenue, USPS has also provided 

short-term discounts, called sales or promotions, on specific mail 

products for groups of mailers, in contrast to NSAs, which are 

agreements with individual mailers for longer periods. Sales—often called 

price incentive programs—have sought to increase, or curb the decline of, 

mail volume by temporarily offering a discount (paid through a rebate) to 

mailers whose mail volume exceeds a predetermined volume threshold 

during a specific period. Some sales were offered in the summer, when 

USPS stated it had excess capacity in its system. These sales were 

designed to generate revenue during the sale period and not necessarily 

to have long-term benefits. After 2010, USPS began offering promotions 

instead of sales, which also provide temporary discounts, but seek to 

increase the long-term value of mail by, for example, integrating mobile 

technology into mailers’ advertising campaigns. As with all postal rate 

changes, USPS must obtain approval from PRC prior to implementing 
 

Page 6 GAO-13-578 USPS Revenue Options

sales and promotions.10 PRC reviews whether the proposed sales and 

promotions meet postal rate regulations that include several qualifying 

factors such as whether sales and promotions help assure adequate 

revenues for USPS. See appendix II for a full list of these objectives and 

factors of postal rate regulation.

The number of NSAs, sales, and promotions has increased in most years 

since the enactment of PAEA. There were no new NSAs approved 

following the enactment of PAEA until PRC regulations governing NSAs 

were issued in October 2007. As seen in table 2, the majority of NSAs 

have been with competitive products. Starting in fiscal year 2011, USPS 

began using “umbrella” products that allow multiple mailers to agree to 

similar NSAs. As a result, the total number of NSA-product requests for 

approval in the table below appears to decline in 2011 and 2012, when in 

fact the total number of individual contracts with mailers has continued to 

grow.11

 

10 Market dominant products are subject to a price cap for each class of mail 

equal to the annual Consumer Price lndex—All Urban Consumers. 

11 Table 2 includes NSA requests approved by PRC since the enactment of 

PAEA, rather than active NSAs, for two reasons. First, many NSAs are active 

across multiple fiscal years, so reporting active NSAs can produce misleading 

totals. Second, there were active NSAs in fiscal years 2007 and 2008 that were 

approved before the implementation of new regulations in October 2007, and are 

thus not directly comparable to later NSAs approved under PAEA regulations.

Since 2007, USPS Has 

Developed Numerous 

NSAs, Sales, and 

Promotions That 

Have Generated a 

Small but Growing 

Portion of USPS’s 

Total Revenue

Number and Revenue Have 

Increased since 2007
 

Page 7 GAO-13-578 USPS Revenue Options

Table 2: Negotiated Service Agreement (NSA) Requests Approved by PRC since the Enactment of PAEA, by Fiscal Year

Mail type 2007 2008 2009 2010 2011 2012

Competitive 

Domestica 0 1 32 13 14 32

Internationalb 0 16 34 112 50 23

Total competitive 0 17 66 125 64 55

Market dominant

Domesticc 0 0 0 0 1 1 

Internationald 0 0 1 3 3 4 

Total market dominant 0 0 1 3 4 5 

Total NSA requests approved 0 17 67 128 68 60

Source: PRC.

a

These figures represent the number of domestic, competitive NSA requests approved by PRC since 

the enactment of PAEA. One domestic, competitive NSA request was for an “umbrella” product that 

allows USPS to enter into individual contracts, all with similar terms, without filing the contracts with 

PRC for pre-implementation review. This product involves Priority Mail and was approved in fiscal 

year 2011. Overall, domestic, competitive NSAs have been approved for Priority Mail, Express Mail, 

Parcel Select, Parcel Return Service, and First-Class Package Service mail products. Some 

agreements utilize multiple mail products.

b

As with domestic, competitive NSAs, these figures represent the number of NSA requests approved 

by PRC since the enactment of PAEA. Three international, competitive NSA requests were for 

“umbrella” products that allow USPS to enter into individual contracts, all with similar terms, which are 

filed at the PRC, but not for pre-implementation review. 

c

These figures represent the number of domestic, market dominant NSA requests approved by PRC 

since the enactment of PAEA. These figures do not include three NSAs that were filed after 

enactment of PAEA in December 2006, but before PRC updated its regulations governing NSAs in 

October 2007.

d

As with domestic NSAs, these figures represent the number of NSA requests approved by PRC 

since the enactment of PAEA. Most international, market dominant NSAs are with foreign postal 

operators.

The first sales were offered in fiscal year 2009, in part as a response to 

the decline in mail volume resulting from the recession, and USPS has 

since offered a variety of promotions (see table 3 below).

Table 3: Number of Sales and Promotions Approved by PRC, by Fiscal Year

Sales and promotions 2009 2010 2011 2012

Sales 3 1 2 0 

Promotions 0 0 1 1 

Total 3 1 3 1 

Source: GAO analysis of USPS documents.
 

Page 8 GAO-13-578 USPS Revenue Options

USPS data show that revenue generated from NSAs, sales, and 

promotions has generally increased each year since the enactment of

PAEA, with most of the revenue generated by competitive product NSAs.

We cannot report the specific revenue generated by competitive NSAs 

because of the proprietary nature of data related to competitive products.

However, the total revenue generated as part of all NSAs increased over 

240 percent from fiscal year 2009 to 2012, though it remains a small 

portion of USPS’s total revenue (see fig. 1). Market dominant NSAs 

generated a relatively small portion of this revenue, partly because there 

have been few such agreements. Beyond NSAs, sales and promotions 

have also generated limited revenue since the first sale in 2009. As 

discussed below, it is not clear how much net revenue USPS has 

generated from market dominant NSAs or sales and promotions.12

 

12 For the purposes of this report, “net revenue” refers to the revenue, minus 

attributable costs and discounts, above what would have been earned by USPS 

in the absence of the NSA, sale, or promotion (called “net contribution” by 

USPS).
 

Page 9 GAO-13-578 USPS Revenue Options

Figure 1: USPS Revenue from Negotiated Service Agreements (NSA) and Other 

Mail, Fiscal Years 2009 to 2012

Since the enactment of PAEA, the number of competitive NSAs has 

grown substantially. PRC has approved 327 domestic and international 

competitive NSA product requests through fiscal year 2012. A number of 

these NSA requests are actually “umbrella” products that include 

numerous individual contracts, all with similar terms. Counting these 

individual contracts separately illustrates the substantial number of NSAs, 

with 446 domestic and international competitive NSAs active in fiscal year 

2012 alone.

According to USPS officials and a mailer we spoke with, the increased 

number of competitive NSAs was due mainly to increased experience 

with NSA contracts and product enhancements. For example, according 

to these officials, USPS and PRC processes associated with developing 

competitive NSAs have become more efficient as a result of improved 

costing techniques and additional experience developing contracts with 

mailers. USPS and PRC also worked together to develop umbrella 

products that allow multiple mailers to agree to similar discounts for 

USPS Has Developed 

Numerous Competitive 

Product NSAs; Most Have 

Covered Costs and 

Generated a Small but 

Growing Portion of Total 

USPS Revenue
 

Page 10 GAO-13-578 USPS Revenue Options

related mail products. Product enhancements may have also increased 

USPS’s ability to attract more business with NSAs. For example, officials 

from USPS and a mailer we spoke with noted that USPS’s ability to track 

packages’ transit times and its delivery performance improvements for 

parcels have made USPS products more attractive to customers.

The financial results of competitive product NSAs are not reported 

publicly, but according to PRC, most such agreements have covered their 

costs, and according to USPS, these agreements have generally been 

successful in enhancing revenue. According to PRC, all domestic 

competitive NSAs have complied with the legal requirements, including 

that they generate revenue that covers their attributable costs. Four

international competitive NSAs in fiscal year 2012, however, did not cover 

their costs. According to PRC, the international competitive NSAs that did 

not cover costs were projected to cover costs when USPS filed its 

request.13

Although competitive NSAs are collectively profitable, these agreements 

generate a small portion of USPS’s total revenue and help cover less of 

USPS’s institutional costs than market dominant products.14 Competitive 

products overall, including NSAs, generate a relatively small part of 

USPS’s total revenue because they generally involve much lower mail 

volumes than market dominant products. Additionally, total revenue from 

competitive products covers less of USPS’s institutional costs than the 

revenue from the two major market dominant products, First-Class Mail 

and Standard Mail.

 

13 In its fiscal year 2012 Annual Compliance Determination Report, PRC directed 

USPS to modify its international competitive NSA cost models for certain 

international products to accurately develop costs, or to increase its cost 

contingency factor to accommodate costs that cannot be modeled.

14 For the purposes of this report, “profit” refers to revenue above attributable 

costs.
 

Page 11 GAO-13-578 USPS Revenue Options

USPS has implemented few market dominant NSAs. USPS has been 

granted approval by PRC to implement two domestic, market dominant 

NSAs since the enactment of PAEA, though only one of these was active, 

as of May 2013. In fiscal year 2012, there was one active market 

dominant domestic NSA, and eight active market dominant international 

NSAs. USPS has implemented few such NSAs in part because of the 

decline in demand for market dominant mail products, as discussed 

further below.

Domestic, market dominant NSAs have likely generated limited, if any, 

net revenue (see fig. 2). Most of these agreements were implemented 

prior to the enactment of PAEA. According to USPS, all domestic market 

dominant NSAs have generated net revenue of $68.5 million dollars to 

date. However, PRC, using a different methodology that is discussed 

below, estimates a net loss of $11.8 million for all domestic market 

dominant NSAs.

For example, the USPS and PRC estimates of net revenue for the 

Discover NSA approved in fiscal year 2011 differ substantially. USPS’s 

estimate of net revenue assumes that all volume greater than the 

projected volume is because of the rebate. USPS developed its estimates 

of projected volume based on Discover’s mail volume history as well as 

other qualitative factors. PRC used a quantitative methodology based on 

product elasticities—that is, the estimated sensitivity of total product mail 

volume to price changes—associated with the mail product involved. As a 

result, USPS estimated net revenue of about $24 million in the first year 

of the NSA with Discover, while PRC estimated USPS lost over $4 

million. As discussed further below, PRC has encouraged USPS to 

identify a more reliable method for evaluating the impact of market 

dominant NSAs.

Since Enactment of PAEA, 

USPS Has Developed Few 

Market Dominant NSAs 

and Generated Limited, if 

Any, Net Revenue from 

Them
 

Page 12 GAO-13-578 USPS Revenue Options

Figure 2: Estimated Net Revenue from Domestic, Market-Dominant Negotiated Service Agreements, 2003 to 2014

a

USPS and PRC have used different methodologies for estimating the net revenue generated by 

domestic, market dominant negotiated service agreements. Net revenue refers to the revenue, minus 

attributable costs and discounts, above what would have been earned by USPS (called “net 

contribution” by USPS).

b

No discounts were paid pursuant to the HSBC contract because it did not reach the discount 

threshold during any of the three contract years.

c

The Bank of America contract was cancelled after the first year of the contract because of the 

estimated loss of revenue.

International market dominant NSAs implemented since the enactment of 

PAEA consist mainly of agreements with foreign posts and are estimated 

to have lost approximately $25 million in net revenue in fiscal year 2012, 

according to USPS. However, PRC has noted that the volume sent under 
 

Page 13 GAO-13-578 USPS Revenue Options

the NSAs generated smaller losses than what would have occurred if the 

volumes were sent under Universal Postal Union (UPU) international 

postal rates. According to USPS officials, agreements with foreign posts 

are governed by UPU rates, which are developed based on domestic 

postal rates. The U.S. has low domestic postal rates compared to other 

countries, and as a result, its UPU-established inbound mail rates do not 

allow some international NSAs to cover their costs.15 As PRC explained in 

its 2012 Annual Compliance Determination Report, the “current UPU 

formula [for setting international postal rates] adversely affects the 

financial performance of inbound mail [NSAs].” Similar to competitive 

domestic NSAs, the first international market dominant NSAs after PAEA 

were active in fiscal year 2009.16

USPS has implemented six sales and three promotions, all of which 

offered temporary discounts to mailers to sustain and grow mail volume. 

USPS estimates that these sales and promotions have earned a 

maximum net revenue of about $184 million (see table 4). According to 

USPS data, some sales and promotions are estimated to have generated 

little to no net revenue during the program periods. However, according to 

USPS officials, these incentives have generally been successful in that 

they will eventually help sustain mail volume. Officials said that mailers 

who have taken advantage of sales and promotions have increased their 

overall mail volume, while those who have not participated in these 

programs have kept their volume steady or reduced it. Further, USPS’s 

long-term goal for promotions is that they will enhance the value of the 

mail for mailers and therefore help to keep mailers in the mail beyond the 

program period. It is unclear the extent to which sales and promotions are 

accomplishing this goal, as discussed below. PRC approves sales and 

promotions under the requirements for setting rates and has conducted 

after the fact reviews of two sales. According to PRC officials, they were 

 

15 Some USPS agreements with foreign posts are long-standing agreements that 

were in place before the enactment of PAEA. Though some of these agreements 

do not cover costs, the agreements improve the net financial position of USPS by 

allowing contract-specific rates for above-UPU cost coverage rates where 

applicable. 

16 International NSAs prior to the enactment of PAEA were classified as 

International Customized Mail Agreements (ICM) and were not comparable to 

NSAs after the enactment of PAEA.

Since Enactment of PAEA, 

USPS Has Increased Sales 

and Promotions but 

Generated Limited, if Any, 

Net Revenue
 

Page 14 GAO-13-578 USPS Revenue Options

unable to evaluate the results of the other sales or promotions because 

USPS did not provide sufficient data to PRC.

Table 4: Estimated Net Revenue of Sales and Promotions, Fiscal Years 2009 to 2013 

Name of sale or promotion Fiscal year Product(s) 

Duration of

program 

period

USPS estimate of net 

revenue (during 

program period)a

PRC estimate of net 

revenue (during 

program period)b

Sales

Standard Mail Volume Incentive 

Pricing Programc 2009 Standard Mail 4 months $24.1 million -36.9 million

Saturation Mail Incentive 

Programd 2009 - 2010 Standard Mail 12 months $18.9 million Not estimated

First-Class Mail Incentive 

Programe 2009 First-Class Mail 3 months $18 million -$7 million

Standard Mail Volume Incentive 

Pricing Programc 2010 Standard Mail 5 months $48 to $65 million Not estimated

Saturation-HD Mail Incentive 

Programf 2011 - 2012 Standard Mail 12 months $14.5 million Not estimated

“Reply Rides Free” – First Class 

Mail Incentiveg 2011 - 2012 First-Class Mail 12 months $14.3 million Not estimated

Promotionsh

Mobile barcode promotioni 2011 First-Class and 

Standard Mail

2 months $13 million Not estimated

Mobile barcode promotioni 2012 First-Class and 

Standard Mail

2 months -$5 million to $2 million Not estimated

Holiday mobile shopping 

promotioni 2013 First-Class and Standard Mail

2 weeks - $1 million to $14 

million

Not estimated

Source: USPS.

a

Net revenue refers to the revenue, minus attributable costs and discounts, above what would have 

been earned by USPS in the absence of the sale or promotion (called “net contribution” by USPS).

b

PRC has not evaluated the results of most sales and promotions because of data limitations.

c

Offered a 30 percent postage discount on Standard Mail volume above a threshold volume tailored 

to each mailer.

d

Offered postage discounts for saturation mail volume above threshold volumes tailored to each 

mailer.

e

Offered 20 percent postage discount on presorted First-Class Mail volume above a threshold volume 

tailored to each mailer.

f

Offered postage discounts on saturation and high density volume above a threshold volume tailored 

to each mailer. 

g

Offered postage discount for First-Class Mail automation letters above a threshold volume tailored to 

each mailer.

h

USPS has noted that many of these promotions are designed to have an impact on mail volume and 

revenue beyond the program period by, for example, helping to increase the value of mail for mailers. 

However, USPS has not reported any estimates of the long-term financial results.

i

Offered postage discount to First-Class and Standard cards, letters, and flats that included a twodimensional mobile barcode.
 

Page 15 GAO-13-578 USPS Revenue Options

USPS offered sales on First-Class Mail and Standard Mail products to 

encourage additional mail volume and revenue during a historically lowvolume period. For example, USPS’s first sale was held during 4 months 

in the summer of 2009, offering a 30 percent discount for Standard Mail 

on incremental volume above a threshold volume tailored to each 

participating mailer. USPS stated that it had the ability to offer a steep 

discount on any mail volume sent above what the customer mailed during 

the same four month period in the summer of 2009 because it had 

significant excess capacity and, as a result, there was little incremental 

cost for USPS to mail the additional volume. USPS conducted a similar 

sale in the summer of 2010 because of the estimated profits from the first 

sale, as well as continued excess capacity.

USPS estimated maximum net revenue of $126 million for the sales it has 

conducted, though PRC has estimated different results than USPS in 

every case where PRC has examined the net revenue. Specifically, PRC 

estimated that the 2009 sales programs—Standard Mail Volume Incentive 

Pricing Program and First-Class Mail Incentive Program—lost money for 

USPS during the time in which it offered the discount. PRC estimated a 

$7 million net loss for the First-Class Mail Incentive Program, and an 

approximately $37 million net loss for the Standard Mail Volume Incentive 

Pricing Program. As with domestic, market dominant NSAs, PRC used a 

different methodology than USPS to estimate the net revenue generated 

by these sales. The different methodologies used by PRC and USPS to 

evaluate discount programs for market dominant products are discussed 

further below. According to PRC, they have not evaluated the results of 

all sales because of corrupt or missing USPS data.

USPS estimated a maximum net value of about $58 million for 

promotions conducted to date (see table above). USPS has offered 

promotions as temporary discounts on First-Class Mail and Standard Mail 

products to help connect physical mail to technology, which USPS 

assumed would increase the value of mail for mailers and help sustain 

mail volume and revenue in the future. For example, USPS promotions

encourage retailers to print Quick Response (QR) codes on physical mail 

pieces, which allow the consumer to scan the QR code with their mobile 

device, directing them to the retailers’ website, as illustrated in figure 3. 

Sales 

Promotions
 

Page 16 GAO-13-578 USPS Revenue Options

Figure 3: How Mobile Quick Response (QR) Codes Work

USPS has used promotions to increase the value of the mail for mailers 

so that they sustain their use of mail. Specifically, USPS uses promotions 

as tools to develop innovative products, such as the use of discounts as

incentives for mailers to invest in technology that may increase the value 

of mail over the long term. For instance, USPS implemented the 2012 

holiday mobile shopping promotion for 2 weeks and gave a 2 percent 

discount to First-Class Mail and Standard Mail cards, letters, and flats that 

included a QR code.17 With this promotion, USPS sought to provide 

incentives for more mailers to use mobile barcodes to direct consumers to 

their websites for more information on sales. Officials told us that USPS 

believed direct mail that included such barcodes is more valuable 

because it makes the mail a multi-media experience. USPS noted that by 

increasing the value of its mail products it can retain as much advertising 

revenue as possible. An additional component of this promotion was the 

potential for customers to earn an additional 1 percent discount if their 

volume exceeded specified Priority Mail thresholds. Although USPS has 

estimated the financial result of promotions for the program period, it has 

not provided any estimates of the long-term financial results to PRC, as 

discussed in more detail later in this report.

 

17 Mobile barcodes, called Quick Response “QR” codes, when scanned by a 

mobile phone, can direct the user to an Internet website.
 

Page 17 GAO-13-578 USPS Revenue Options

Opportunities exist to generate additional revenue through competitive 

product NSAs primarily because of merchandise shipments associated 

with the continued growth in e-commerce.18 USPS projects that total 

shipping and package volume will grow by about 33 percent by the end of 

fiscal year 2017, after increasing about 7.5 percent in fiscal year 2012.

Expansion of e-commerce has been a key factor in the growth of these 

products, most of which are competitive. Moreover, e-commerce 

continues to grow and has not reached its full potential because of 

accessibility, returns, payment, and security concerns. Companies that 

can solve these shortcomings may garner additional business, and USPS 

may be able to develop NSAs with these companies.

Other factors may allow USPS to continue taking advantage of the growth 

in e-commerce and generate additional revenue through competitive 

product NSAs. First, even if USPS moves to a 5-day delivery schedule, it 

 

18 Electronic commerce, or e-commerce, refers to conducting business (e.g., 

buying and selling products and services) on the Internet.

Opportunities for 

Increasing Revenue 

from NSAs, Sales, and 

Promotions Are 

Primarily from 

Competitive NSAs, 

though Challenges 

May Limit Revenue

Opportunities Exist to 

Generate Additional 

Revenue from Competitive 

NSAs but Will Likely Not 

Offset Declines from Other 

Products 

Opportunities Exist Because of 

Continued Growth in ECommerce
 

Page 18 GAO-13-578 USPS Revenue Options

has proposed that it would continue to deliver packages on Saturday to 

maintain its advantage of delivering to every household 6 days a week 

without a surcharge.19 Second, although USPS faces private-sector 

competitors with entrenched market share of the package delivery 

business, USPS has certain competitive advantages. Although FedEx 

and UPS lead the high-volume business-to-business package delivery 

market, it can be very expensive for them to deliver single items to 

residential addresses, particularly in rural areas. Along with such “last 

mile” delivery advantages, USPS also has special access to some large 

residential buildings.

While the growth and opportunities associated with competitive products 

are substantial, additional growth is not likely to offset declines in other 

products. Competitive products taken as a whole are a modest piece of 

USPS’s total revenue, and generate relatively low profits, compared to 

the most profitable market dominant products, First-Class Mail and 

Standard Mail (see fig. 4).20 Even with robust growth in competitive 

products, including NSAs involving those products, it is extremely unlikely 

that this additional revenue will offset the projected declines in First-Class 

Mail and other products.

 

19 Provisions in annual USPS appropriations since 1984 mandate 6-day-a-week 

delivery and rural mail delivery at certain levels. These provisions have specified 

that “6-day delivery and rural delivery of mail shall continue at not less than the 

1983 level.” See e.g., Pub. L. No. 111-117, 123 Stat. 3200 (Dec. 16, 2009).

20 While these products generated a profit, USPS also had significant institutional 

costs, which along with required payments to prefund its future retiree health 

benefits, contributed to a $15.9 billion net loss for USPS in fiscal year 2012. 
 

Page 19 GAO-13-578 USPS Revenue Options

Figure 4: Profit from Market Dominant Products and All Competitive Products, 

Fiscal Year 2012

Note: Profit refers to revenue above attributable costs, and does not reflect USPS’s institutional costs.

USPS’s ability to generate additional revenue from competitive product 

NSAs may also face challenges because of the length of the process to 

develop NSAs. The USPS Office of Inspector General (OIG) reported in 

2011 that, despite improvements, the preparation and review process for 

new product approvals puts USPS at a competitive disadvantage in terms 

of speed to market.21 Three mailers we spoke with that had NSAs with 

USPS said that the time it took to develop and obtain approval for NSAs 

was long when compared to negotiating contracts with USPS’s 

competitors, and three other mailers also described the process as 

lengthy (see fig. 5). Four of the mailers we spoke with that had not 

 

21 USPS Office of Inspector General, Risk Analysis Research Center, Postal 

Service Revenue: Structure, Facts, and Future Possibilities, RARC-WP-12-002 

(Oct. 6, 2011).

Process for Developing 

Competitive NSAs Could Limit 

Additional Revenue
 

Page 20 GAO-13-578 USPS Revenue Options

developed NSAs with USPS also told us that they perceive the process of 

developing NSAs as burdensome, which deters them from pursuing such 

agreements.

Figure 5: Negotiated Service Agreement (NSA) Development Process

USPS officials said that they employ a “risk-based” process for evaluating 

proposed NSAs, which involves differing levels of scrutiny depending on 

the size of the proposed agreement. Specifically, USPS has a multi-step 

internal process for developing and approving competitive NSAs. First, 

the agreement is generally negotiated by sales representatives using 

costing templates, which allows them to develop agreements that are 

estimated to cover the costs of the particular product involved. USPS’s 

finance office also examines each agreement to ensure that it is projected 

to cover its costs. USPS conducts a “business evaluation” to ensure that 
 

Page 21 GAO-13-578 USPS Revenue Options

the agreement is likely to generate profit for USPS. USPS’s Law 

Department reviews an agreement throughout its development. USPS

officials noted that carrying out business evaluations can be difficult 

because of the availability of the data and the ability to turn the analysis 

around quickly. Competitive NSAs are also authorized by the USPS 

Board of Governors, subject to internal USPS review, as well as review 

by PRC. The officials said that the competitive, dynamic, nature of the 

marketplace requires them to “go to market” quickly, which has to be 

balanced with the review process to ensure agreements generate profit 

for USPS. 

USPS officials noted that the PRC review process for competitive product 

NSAs offers competitors the opportunity to undercut USPS’s price. In 

2011, PRC noted that “mailers have expressed concerns about the time 

and expense associated with NSAs” but concluded that “[e]xperience 

suggests that the time and effort required to put an NSA into effect is due, 

in greater part, to negotiating with the Postal Service and internal Postal 

Service review and approval rather than to the Commission’s limited 

regulatory review.”22 Two mailers we spoke with also noted that they 

spent the majority of the time developing NSAs with USPS, not waiting for 

a PRC review. USPS officials noted that the time and effort that they 

spend on internal review and approval for international NSAs in particular 

are largely a result of the PRC’s Rules of Practice. If the regulatory review 

were further streamlined, according to USPS, the time and effort needed 

to develop NSAs would be substantially reduced. PRC officials noted that 

as USPS and PRC have gained experience with competitive NSAs and 

streamlined the process, the average time has steadily decreased.

USPS has taken actions to streamline the process for developing 

competitive NSAs. First, to expedite and simplify the review of some 

competitive NSAs, USPS and PRC developed “umbrella” products. These 

products allow USPS to enter into NSAs that fall within a range of prices.

A mailer may enter into such an NSA without pre-implementation review 

by PRC. According to USPS officials and PRC, this structure has 

facilitated the development of many NSAs, while maintaining an 

appropriate level of oversight. Second, USPS officials employ risk-based 

internal reviews, submitting NSAs with larger potential revenues to 

greater internal scrutiny than those with more limited potential before they 

 

22 PRC, Section 701 Report.
 

Page 22 GAO-13-578 USPS Revenue Options

are provided to PRC for review. Finally, USPS has developed costing 

“templates” for its sales force. These templates include mail products’ 

attributable costs, facilitating the sales forces’ ability to offer discounts to 

mailers that allow USPS to at least cover its costs with the NSA.

To further streamline the process for developing NSAs, USPS has 

advocated for “after the fact” reviews of all competitive product NSAs.

These reviews could improve NSAs’ speed-to-market, as is currently 

done with the “umbrella” products discussed above. According to PRC 

officials, they have determined that it is best to allow after the fact reviews 

of certain types of NSAs only after USPS and PRC have gained 

experience with those types of NSAs and determined how to best 

improve data quality and collection.

Opportunities to generate net revenue through market dominant product 

NSAs are limited. USPS’s current estimates, as well as those of 

Christensen Associates on behalf of the USPS’s OIG, suggest that FirstClass Mail has low price elasticity.23 These estimates mean that FirstClass Mail volume is relatively insensitive to price changes and that 

recent volume declines are not related to the price of the postal products 

but to other factors, such as the lower cost of electronic communication.

As a result, many mailers are not likely to respond to price decreases, 

such as discounts in NSAs, with additional mail volume, or to price 

increases with less volume. USPS’s estimates also suggest that Standard 

Mail has relatively low price elasticity.

As a result of these price elasticities, price increases for some market 

dominant products may actually generate more revenue than discounts in 

market dominant NSAs. Indeed, it is likely that First-Class Mail as a whole 

 

23 USPS Office of Inspector General, White Paper, Analysis of Postal Price 

Elasticities, RARC-WP-13-008 (May 1, 2013).

Opportunities to Generate 

Net Revenue from Market 

Dominant NSAs Are 

Limited by Low Demand 

and Other Challenges

Price Increases for Market 

Dominant Products May 

Generate More Revenue than 

Discounts in NSAs
 

Page 23 GAO-13-578 USPS Revenue Options

could weather higher prices, according to the USPS OIG.24 In theory, an 

attractive target for price increases would be products with low price 

elasticities, as modest price changes would likely have relatively minor 

effects on volume. As USPS commented in 2011, it might be rational, in 

some cases, to increase prices of profitable products with low 

elasticities.25 First-Class Mail, and to a lesser extent Standard Mail, are 

highly profitable for USPS and have low price elasticities. There may 

therefore be additional revenue potential in the remaining First-Class Mail 

and Standard Mail volume, and capturing this intrinsic value by increasing 

prices is a common business practice. However, there may also be a 

point at which rate increases are self-defeating, potentially triggering 

large, permanent declines in mail volume. Also, market dominant 

products are subject to a price cap for each class of mail, limiting the 

extent to which USPS can increase the prices on, for example, FirstClass Mail.

USPS faces the difficulty of determining whether market dominant NSAs 

will increase volume and revenue. To show that market dominant NSAs 

improve the net financial position of USPS (i.e., create net revenue), PRC 

requires USPS to provide details about the expected improvements in 

USPS revenue resulting from any proposed NSA.26 Estimating the net 

revenue generated by an NSA depends on accurately estimating how 

much mailers would mail in the absence of an agreement. Accordingly, 

PRC has directed that USPS provide it with details of projected mailerspecific costs, volumes, and revenues absent the NSA and as a result of 

the NSA.27 To satisfy this requirement, USPS has generally used mail 

volume data, as well as expectations of future economic conditions, to 

develop projections of mailers’ future volumes. However, USPS has not 

described to the PRC its precise methods for using past mail volume data 

and other qualitative factors used to develop these projections.

 

24 USPS OIG, Postal Service Revenue: Structure, Facts, and Future Possibilities. 

25 PRC, Section 701 Report (USPS Response to Commission’s Draft Section 701 

Report).

26 Market dominant NSAs must either improve the net financial position of USPS 

or enhance the performance of mail operations. 39 U.S.C. § 3622(c)(10)(A).

27 PRC, Order Establishing Ratemaking Regulations for Market Dominant and 

Competitive Products. 

Data Limitations Create 

Challenges for Analyzing 

Market Dominant NSAs
 

Page 24 GAO-13-578 USPS Revenue Options

While PRC has noted that “it is incumbent upon the Postal Service to 

develop a quantitative approach that incorporates the factors it is using to 

estimate volumes,” this approach can be challenging because of data 

limitations.28 One possible quantitative approach, suggested by PRC, to 

estimate mailer-specific volumes both in the absence of and as a result of 

an NSA is an elasticity model, using mailer-specific elasticities (that is, a 

measure of the mailer’s sensitivity to price for a specific product). Using 

mailer-specific elasticities would allow for a precise estimation of volumes 

in the absence and as a result of an NSA. However, developing mailerspecific elasticities can be very difficult. According to PRC officials, 

estimation of mailer-specific price elasticities depends on having many 

observations of a mailer’s volumes at different prices, in order to use 

statistical models to isolate the effect of price from all other factors that 

influence a mailer’s volume. PRC has reported that when it is not possible 

to develop a mailer-specific elasticity, “the system-wide average for 

products will generally provide useable proxies.”

29 However, as USPS has 

noted, the use of average product elasticities to estimate the results of 

NSAs, rather than mailer-specific elasticities, can be problematic, 

particularly when the response of individual mailers to NSAs are very 

different than the average response.30 Further, according to a mailer we 

spoke with, USPS has little choice but to evaluate the projected net value 

of an NSA based on historical mail volumes and qualitative factors. The 

mailer explained that the projection of future mail volumes is inherently 

uncertain; even the mailer did not know how much it was going to mail in 

the next year.

 

28 PRC, Order Adding Discover Financial Services 1 Negotiated Service 

Agreement to the Market Dominant Product List, Order No. 694, Docket No. 

MC2011-19, March 15, 2011.

29 PRC, Rate and Service Changes to Implement Functionally Equivalent 

Negotiated Service Agreement with Bank One Corporation, Opinion and Further 

Recommended Decision, April 21, 2006.

30 In its fiscal year 2012 Annual Compliance Determination Report, PRC also 

acknowledged “that the elasticity of individual mailers may differ from that of the 

class as a whole.” They used average product elasticities, though, “because they 

are the only available elasticity estimates at this time.” However, PRC officials 

also told us that the USPS model for estimating products’ elasticities has not 

been updated to reflect new products and that such an update would likely have 

an impact on the accuracy and reliability of USPS’s forecasts and NSA 

evaluations.
 

Page 25 GAO-13-578 USPS Revenue Options

In a 2010 proceeding, PRC “sought suggestions from interested persons 

for new methods to estimate volume changes resulting from pricingincentive programs of the Postal Service.”

31 After comments from 

stakeholders, PRC concluded that “it is not persuaded that the 

alternatives offer a demonstrable improvement over the current 

method.”

32 PRC encouraged USPS to identify a more reliable method for 

evaluating the impact of NSAs, sales, and promotions and to continue 

collecting data that could be used for that purpose. PRC said that the 

accuracy of analysis could be improved by USPS’s willingness to collect 

mailer-specific, or even industry-specific, information. The lack of this 

data has frustrated PRC efforts to evaluate their financial impact.

Ultimately, though, the case for pursuing NSAs must be a matter of 

business judgment by USPS management, according to USPS.

Although these data limitations may increase the risk that market 

dominant NSAs will lose money for USPS, they are partially mitigated by 

provisions in recent NSAs. USPS has implemented early-out clauses in 

NSAs to mitigate the risk posed by unclear projections of net revenue. For 

instance, the recent Discover NSA may be canceled at the end of any 

contract year, by either party, should the experience prove to be at odds 

with the parties’ expectations. Further, when approving the Discover NSA, 

PRC estimated that the NSA was unlikely to improve USPS’s net financial 

position but stated that “allowing this negotiated service agreement to 

proceed will allow management to enhance its knowledge of potential 

tools to slow the overall declining trend for First-Class Mail volume.”

33

However, in the 2012 Annual Compliance Determination Report, PRC 

recommended that USPS re-evaluate the benefits and costs of continuing 

the NSA if it is not realizing a net benefit. As of May 2013, USPS had not 

canceled the contract.

 

31 PRC, Notice of Proposed Rulemaking Concerning Methods to Estimate 

Volume Changes Caused by Pricing Incentive Programs, Order No. 469, Docket 

No. RM2010-9, June 8, 2010.

32 PRC, Order Terminating Proceeding, Order No. 738, Docket No. RM2010-9, 

May 27, 2011.

33 PRC, Order Adding Discover Financial Services 1 Negotiated Service 

Agreement to the Market Dominant Product List. 
 

Page 26 GAO-13-578 USPS Revenue Options

Another challenge to generating additional revenue from market dominant 

product NSAs is that the process for developing these agreements can 

hinder the development of new agreements. Market dominant product 

NSAs are reviewed by PRC as part of a public proceeding. According to 

four mailers we spoke with, the fact that such NSAs go through a public 

process is a disincentive to developing such agreements. These mailers 

are sensitive about allowing any company-specific information to become 

public through the PRC review process. According to a 2011 USPS OIG 

report, transparency requirements, although prudent, make operating in a 

competitive marketplace difficult.34 PRC officials told us, though, that the 

transparency of these proceedings helps balance the increased pricing 

flexibility granted to USPS under PAEA with the need for USPS 

accountability. Further, PRC regulations allow USPS to file confidential or

proprietary information under seal, so that it remains nonpublic.35

Beyond the transparency concerns, many mailers are concerned about 

the time and resources needed to obtain a market dominant NSA. Many 

mailers we spoke with expressed concern about the length of time it took 

to develop NSAs. Officials from Valassis told us that they spent about 2 

years negotiating its recent market dominant NSA, and officials for 

Discover said their negotiation lasted about a year. According to another 

mailer we spoke with, such long negotiations can hinder the ability to 

agree on an NSA because during these time periods the marketplace can 

shift, changing the incentives for mailers. PRC review times for these 

NSAs can also be substantial, though this time has decreased. For 

domestic, market dominant NSAs approved since the enactment of

PAEA, the average review time was 88 days, whereas the average 

review time for those NSAs prior to PAEA was 214 days.

A major reason for the substantial time and resources needed to develop 

market dominant NSAs is that many such agreements have faced 

substantial opposition from mailers and stakeholders. In particular, some 

mailers and mailer industry associations have claimed that some 

proposed market dominant NSAs would harm the marketplace. By 

statute, market dominant NSAs “may not cause unreasonable harm to the 

marketplace.”

36 In the proceeding for the most recent such NSA, with 

 

34 USPS OIG, Postal Service Revenue: Structure, Facts, and Future Possibilities.

35 39 CFR § 3007.10. Also see PRC, Dockets Protected Materials Procedures. 

36 39 U.S.C. § 3622(c)(10)(B).

Mailers View the Process for 

Developing Market Dominant 

NSAs as Burdensome
 

Page 27 GAO-13-578 USPS Revenue Options

Valassis, a majority of commenters opposed the agreement because they 

claimed it would create an unfair competitive advantage for Valassis and 

harm the marketplace. Commenters said that the agreement would 

prevent other direct mail companies from competing on a level playing 

field, since Valassis would have a discount on its mail as part of the 

agreement. Some commenters also expressed concern that the NSA 

could negatively affect local newspapers by replacing the Sunday or 

weekend newspaper’s preprinted advertising package—a crucial source 

of income, according to newspapers—with stand-alone direct mail from 

Valassis. Despite such opposition, though, PRC has approved both 

market dominant NSAs proposed since enactment of PAEA.37

Opportunities to generate substantial additional revenue through sales 

and promotions are limited because of changes in the use of mail. Sales 

and promotions have been used for the market dominant products FirstClass Mail and Standard Mail. As noted above, though, estimates indicate 

that demand for these market dominant products is low, and the volume 

for these products continues to decline. Further, the small scale of sales 

and promotions—often with short time frames and relatively small 

discounts—limit their impact for large mailers, since they may be unlikely 

to change their mailing patterns in response to a relatively small incentive.

Two mailers we spoke with maintained that USPS’s sales and promotions 

are most effective for small and medium sized mailers.

USPS has noted that by encouraging additional mail volume and 

revenue, sales and promotions provide pricing flexibility to mailers and 

help assure adequate revenues for USPS. By statute, sales and 

promotions must “help achieve” several objectives, such as assuring 

adequate revenues, to maintain financial stability.38 Additionally, the 

system for regulating rates must take into account several factors, such 

as the requirement that each class of mail bear the direct and indirect 

 

37 PRC ultimately approved the Valassis NSA, noting that the deal would not 

cause unreasonable harm to the marketplace since the prices under the NSA are 

compensatory (i.e., in excess of attributable costs) and thus not anti-competitive. 

See PRC, Order Approving Addition of Valassis Direct Mail, Inc. Negotiated 

Service Agreement to the Market Dominant Product List, Order No. 1448, Docket 

No. MC2012-14, August 23, 2012. This decision has been challenged and is 

being reviewed by the U.S. Court of Appeals for the District of Columbia Circuit.

38 39 U.S.C. § 3622(b)(5).

Opportunities for 

Generating Net Revenue 

from Sales and Promotions 

Are Limited by Mail Use 

Changes and Limited 

Analysis of Long-term 

Impact
 

Page 28 GAO-13-578 USPS Revenue Options

costs attributable to that class of mail. (See app. II for a list of all 

objectives and factors.)

In support of sales and promotions when filing for approval with PRC, 

USPS has provided estimates of the financial result during the program 

time period. A few of these estimates for recent promotions have 

projected USPS to lose money during the program period. For example, 

USPS estimated that its 2011 mobile barcode promotion would reduce 

revenue by as much as $4.63 million. USPS has maintained, though, that 

promotions in particular can have value after the program period ends, so 

evaluating the financial effect based solely on mailer performance during 

the program period does not accurately reflect the true value of these 

programs. Indeed, USPS has stated that the long-term goal of promotions 

is to enhance the value of the mail for mailers, thereby helping sustain 

mail volume. USPS continues to implement a variety of such promotions, 

with six new domestic promotions planned for calendar year 2013.

According to USPS, it continues to refine the methodologies used to 

measure the long-term financial effects of sales and promotions, including 

tracking mailer behavior and surveying customers, but further data

collection and analysis can be difficult. For example, without knowledge of 

mailers’ planned mail volumes, USPS cannot precisely measure volume 

that would have been sent by mailers absent the sale or promotion.

Further, attempts to gather data to estimate mailers’ planned mail 

volumes can be difficult, as with market dominant NSAs. Nevertheless, 

USPS monitors the performance of promotion participants after the 

promotion period, and benchmarks their performance (i.e., mail volume) 

against their past performance, expected performance, and non-program 

participant performance.

Although not required to when filing for approval, USPS has not provided 

details to PRC on the long-term goals, the information it plans to collect in 

support of those goals, and the analysis it plans to perform to assess 

whether the long-term financial results of promotions met the intended 

goals. As a result, PRC has not assessed USPS methodologies for 

evaluating the long-term financial results of promotions. As USPS has 

noted, its financial challenge leaves little margin for error. Providing 

detailed data collection and analysis plans to PRC before implementation 

of promotions would allow USPS to better justify how these incentives 

help assure adequate revenues. PRC’s assessment of these plans, as 

part of its approval decisions for promotions, would also help ensure that 

USPS promotions have positive financial results.
 

Page 29 GAO-13-578 USPS Revenue Options

To achieve financial sustainability, USPS has been working to generate 

additional revenue to cover its costs. NSAs, sales, and promotions may 

help achieve this goal. Since enactment of PAEA in late 2006, USPS has 

made significant progress in using its increased pricing flexibility and 

generated billions of dollars in revenue through domestic and 

international NSAs. It is very unlikely, though, that additional net revenue 

created by NSAs will offset the revenue declines in other product areas. 

Additionally, the benefits, including long-term financial results, of 

promotions are not well understood by PRC and other postal 

stakeholders because USPS does not provide detailed information on its 

data collection and analysis plans to PRC before implementation. As a 

result, PRC has not had an opportunity to evaluate USPS’s long-term 

goals and analysis plans for promotions. Though it can be difficult to 

collect and analyze data on the impact of promotions, given USPS’s dire 

financial situation, demonstrating how promotions may achieve positive 

long-term financial results can help USPS maximize the revenue 

generated by those postage rate discounts. 

Because USPS faces a deteriorating financial situation, we recommend 

that the following two actions be taken to help ensure that future 

promotions generate net revenue for USPS:

The Postmaster General should direct staff to provide specific datacollection methods and analytical processes for estimating the net 

financial results of promotions to PRC as part of USPS’s request for PRC 

approval of all promotions.

The Chairman of the PRC should direct staff to evaluate USPS’s datacollection and analysis plans for USPS’s proposed mail promotions and 

discuss these evaluations in the PRC decisions for those mail 

promotions.

We provided a draft of this report to USPS and PRC for review and 

comment. USPS and PRC both provided written comments in response, 

which are summarized below and included in their entirety in appendixes 

III and IV, respectively. In USPS’s written response, USPS disagreed with 

the first recommendation and noted concerns regarding the 

characterizations of promotions, sales, and NSAs in the report. In 

separate correspondence, USPS also provided technical comments, 

which we incorporated as appropriate. In PRC’s written response, PRC 

agreed with both recommendations and provided comments on NSAs.

Conclusions 

Recommendations 

Agency Comments

and Our Evaluation
 

Page 30 GAO-13-578 USPS Revenue Options

USPS stated that it disagreed with the first recommendation that USPS 

should provide specific data-collection methods and analytical processes 

for estimating the net financial results of promotions to PRC as part of 

USPS’s request for PRC approval of all promotions. USPS stated that it 

does not believe the recommendation will significantly affect the PRC’s 

review process, improve the quality of USPS’s business decisions, or 

assure that promotions yield positive financial results. USPS noted that 

PRC has concluded that past promotions proposed by USPS comply with 

the relevant requirements, which emphasize the importance of pricing 

flexibility. PRC stated that it agreed with both recommendations and that 

it welcomes the opportunity to evaluate USPS’s data-collection and 

analysis efforts for promotions.

We continue to believe that providing additional information to PRC on 

the potential long-term results would allow USPS to better justify 

promotions, and provide PRC with valuable additional information for its 

evaluation. Promotions for market dominant products must comply with 

several statutory objectives and factors, including that they help assure 

adequate revenues. When filing for approval, USPS has provided 

information to PRC estimating that some promotions may lose money 

during the program period. However, as USPS has noted, promotions are 

designed to increase the long-term value of mail, thereby helping to 

sustain mail volume and revenue. Given its dire financial situation, USPS 

should be commended for using its pricing flexibility to try and enhance its 

revenue. However, USPS has not provided information to PRC 

demonstrating how promotions could achieve these long-term goals. 

Providing information about the potential long-term financial results of 

promotions could help PRC better evaluate whether the proposed 

promotions help assure adequate revenues and comply with the other 

objectives and factors. USPS cannot afford to implement promotions 

without demonstrating how they can achieve positive long-term results.

USPS also stated in its letter that the report does not articulate how 

USPS could improve upon the methodologies it is using to conduct 

evaluations of promotions. We agree. We did not intend for the report to

proscribe the methodologies that USPS should use to evaluate these 

long-term effects. Rather, the report concludes, though, that USPS’s 

methodologies should be made available for PRC’s evaluation prior to the 

implementation of promotions. This review would allow PRC to better 

evaluate the extent to which the promotions satisfy requirements.

Promotions 
 

Page 31 GAO-13-578 USPS Revenue Options

USPS also provided additional comments related to promotions:

• In USPS’s letter, USPS stated that the draft report concluded that 

promotions should not be offered unless USPS had “assurance” that 

promotions will achieve positive financial results. USPS correctly 

notes that no business decision is ever accompanied by a guarantee 

of success, and we have revised the relevant statement in our 

conclusions. However, as USPS agreed, sound analysis should 

accompany every business decision, including the implementation of 

promotions, particularly given USPS’s financial situation.

• In its letter and technical comments, USPS stated that the report 

should more clearly delineate the differences between promotions and 

sales. In particular, USPS noted that promotions are designed to help 

sustain mail volume and revenue over the long-term. Sales, though, 

are designed to generate additional mail volumes, but only during the 

sale period itself. We have revised the relevant text throughout this 

report to better distinguish between the different goals of sales and 

promotions.

• In USPS’s letter, USPS also notes that some of the costs for recent 

promotions have been recovered through the creation of additional 

price cap authority, mitigating the risk of financial losses from the most 

recent promotions. USPS is to be commended for seeking ways to 

mitigate the financial risks of any postage rate discount, as it has done 

with early-out clauses in market dominant NSAs. However, in a recent 

decision approving a promotion, PRC did not accept the price cap 

treatment proposed by USPS.39

• In its letter, USPS also requested that we characterize the data 

provided by USPS to PRC on some sales not as “corrupt” but 

“incomplete” or “insufficient.” The term “corrupt” is not meant to imply 

that USPS intended to make data provided to PRC unusable. 

However, according to PRC, data provided to it by USPS on an early 

 

39 PRC, Order Approving Technology Credit Promotion, Order No. 1743, Docket 

No. R2013-6, June 10, 2013. USPS sought to recover revenue equal to the 

rebates from the promotion by creating new pricing authority that it could use at 

the time of the next annual price adjustment. This issue is also under broader 

review by PRC (see PRC Docket No. RM2013-2). Several parties have advised 

PRC to bar USPS from recovering as rate adjustment authority any revenue that 

is forgone because of promotions.
 

Page 32 GAO-13-578 USPS Revenue Options

sale was “corrupt” and hindered PRC’s ability to evaluate the financial 

results of that effort. We did not modify the report related to this issue.

USPS also disagreed with the statement in the report that many mailers 

are not likely to respond to price decreases, such as discounts in market 

dominant NSAs, with additional mail volume. USPS stated that market 

dominant NSAs can provide promising opportunities to increase mail 

volumes and revenues in the future. Our conclusion about market 

dominant NSAs is based primarily on USPS’s estimates indicating that 

market dominant mail products have low elasticities. These estimates are 

a measure of the degree to which mailers respond to price changes and 

alter their demand for products and services. However, these estimates 

are product-wide averages. To the extent individual mailers have 

elasticities different from the average, it may be possible to incentivize 

additional mail volume from those mailers through price decreases. Few 

mailers, though, are likely to have an elasticity different enough from the 

average to warrant such an agreement.

PRC also clarified two points in the report related to market dominant 

NSAs. First, PRC noted that USPS’s methodologies for assessing the 

financial impact of market dominant NSAs are not considered 

authoritative under statutory and regulatory requirements unless and until 

such methodologies are accepted by PRC as “accepted analytical 

principles” under sections 3050.10 and 3050.1(a) of the Code of Federal 

Regulations, Title 39. Second, PRC noted that after-the-fact review of 

NSAs works well for Non-Published Rate contracts, but is not applicable 

for agreements not subject to established, specific limitations that assure 

consistency with applicable statutory requirements. No change to the 

report was necessary based on these comments.

As we agreed with your office, unless you publicly announce the contents 

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

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

appropriate congressional committees, Postmaster General, Chairman of 

PRC, USPS OIG, and other interested parties. In addition, the report will

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

NSAs 
 

Page 33 GAO-13-578 USPS Revenue Options

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

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

our Offices of Congressional Relations and Public Affairs may be found 

on the last page of this report. GAO staff who made key contributions to 

this report are listed in appendix V. 

Lorelei St. James

Director

Physical Infrastructure Issues
Appendix I: Scope and Methodology

Page 34 GAO-13-578 USPS Revenue Options

To describe the NSAs, sales and promotions U.S. Postal Service (USPS) 

has developed, as well as their reported financial results, we reviewed 

public and non-public documents as well as additional USPS data. To 

summarize the financial results of NSAs, we examined non-public 

versions of USPS’s Cost and Revenue Analysis reports for fiscal years 

2009 through 2012. We also reviewed non-public documents that 

included the volume, cost, and revenue of active competitive, domestic 

NSAs, for fiscal years 2009 through 2012. There were no active domestic 

competitive NSAs in fiscal years 2007 and 2008. We also reviewed nonpublic documents that included the volume, cost, and revenue of active 

competitive, international NSAs, for fiscal years 2007 through 2012. We 

also reviewed the data collection reports for market dominant NSAs. To 

confirm our summaries of the number and results of NSAs, we also 

obtained additional data from USPS on the number of active NSAs, by 

fiscal year, as well as the estimated financial results of all market 

dominant NSAs. We also reviewed Postal Regulatory Commission’s 

(PRC) Annual Compliance Determination Report for fiscal years 2007 

through 2012, to identify, where applicable, which competitive NSAs PRC 

determined covered their attributable costs. We also reviewed PRC’s 

conclusions in these reports about the financial results of market 

dominant NSAs. To summarize the number of, and results from, USPS 

sales and promotions to date, we reviewed USPS documents filed with 

PRC requesting approval for sales and promotions as well as PRC’s 

Annual Compliance Determination Reports. We also obtained additional 

data from USPS on the estimated results of sales and promotions.

To put the financial results of incentives into context of USPS’s overall 

financial situation, we also examined other USPS documents. These 

included the Revenue, Pieces, and Weights reports for fiscal years 2007 

through 2012 and the fiscal year 2012 Form 10-K filing.1 Further, we also 

obtained USPS projections of future mail revenue and volume.

We assessed the reliability of these data sources by interviewing USPS 

officials. Based on this information, we determined that the data provided 

to us were sufficiently reliable for our reporting purposes.

 

1 The Form 10-K report is also called the Annual Report Pursuant to Section 13 

or 15(d) of the Securities Exchange Act of 1934.

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 35 GAO-13-578 USPS Revenue Options

We also conducted interviews with USPS and PRC officials, as well as 15 

mailers that have participated in NSAs, sales, and promotions, on the 

financial condition of USPS and the results of those incentives, in order to 

enhance our understanding of the circumstances in which these 

incentives are developed and implemented. In these interviews we also 

discussed potential limitations to USPS and PRC analyses of incentives’ 

results. See below for information on how we selected mailers to 

interview.

To identify and assess any opportunities to generate additional revenue 

from NSAs, sales, and promotions, as well as challenges, if any, that 

could the hinder their development and implementation, we conducted 

interviews with a variety of stakeholders. We conducted interviews with 

officials from USPS, PRC, and 15 mailers that both have and have not 

participated in USPS incentives (see list below). In order to obtain a range 

of perspectives on the opportunities and challenges related to NSAs, 

sales, and promotions, we identified mailers that have participated in 

NSAs involving a variety of competitive and market dominant products,

and both international and domestic mail. We also identified mailers that 

had not participated in NSAs. Among these mailers, we interviewed both 

large and small mailers, defined as whether the mailer had more or less 

than $250 million in annual revenue in the most recent fiscal year for 

which data or estimates were available, as well as some that were

recommended to us by a mailer association. Finally, we interviewed 

industry associations that represent major mailers in order to gather 

additional perspectives on the opportunities and challenges associated 

with NSAs, sales, and promotions, including the Association for Postal 

Commerce, Direct Marketing Association, National Newspaper 

Association, and Newspaper Association of America. The views of 

mailers and industry associations cannot be generalized to all mailers and 

industry associations because they were selected as part of a 

nonprobability sample.

Mailers Interviewed

• 4imprint

• Amazon

• AT&T

• Barnes & Noble

• Canada Post

• Discover Financial Services

• FedEx SmartPost

• Gardens Alive!
Appendix I: Scope and Methodology

Page 36 GAO-13-578 USPS Revenue Options

• Harriet Carter Gifts

• Highlights for Children, Inc.

• Pitney Bowes

• Quad/Graphics

• UPS

• Valassis

• Valpak

To further identify and assess opportunities and challenges related to 

NSAs, sales, and promotions, we also reviewed a variety of documents.

First, we reviewed the 2007 PRC regulations governing NSAs. Second, 

we reviewed a variety of PRC proceedings, including its 2010 proceeding 

to investigate methodologies for estimating volume changes due to 

pricing incentive programs, and its recommended decisions for all 

domestic, market dominant NSAs approved to date. We also examined 

PRC approval decisions for other NSAs in order to document the length 

of the PRC review process. We also reviewed the internal business 

evaluations conducted by USPS for a variety of domestic, competitive 

NSAs. Finally, we reviewed findings from relevant USPS Office of 

Inspector General reports. We determined that the methodologies of 

these reports were sufficiently reliable for our purposes.
Appendix II: Required Objectives and Factors 

for Sales and Promotions

Page 37 GAO-13-578 USPS Revenue Options

As part of the review for a proposed sale or promotion or market 

dominant products, PRC evaluates whether the sale or promotion 

satisfies the requirements of postal rate regulation.1 As listed below, these 

requirements include several objectives that the sale or promotion must 

be designed to achieve and several factors that PRC must take into 

account.

(1) To maximize incentives to reduce costs and increase efficiency.

(2) To create predictability and stability in rates.

(3) To maintain high quality service standards established under section 

3691.

(4) To allow the Postal Service pricing flexibility.

(5) To assure adequate revenues, including retained earnings, to 

maintain financial stability.

(6) To reduce the administrative burden and increase the transparency of 

the ratemaking process.

(7) To enhance mail security and deter terrorism.

(8) To establish and maintain a just and reasonable schedule for rates 

and classifications, however the objective under this paragraph shall not 

be construed to prohibit the Postal Service from making changes of 

unequal magnitude within, between, or among classes of mail.

(9) To allocate the total institutional costs of the Postal Service 

appropriately between market-dominant and competitive products.

(1) the value of the mail service actually provided each class or type of 

mail service to both the sender and the recipient, including but not limited 

to the collection, mode of transportation, and priority of delivery;

 

1 See 39 U.S.C. § 3622.

Appendix II: Required Objectives and Factors 

for Sales and Promotions

Objectives

Factors
Appendix II: Required Objectives and Factors 

for Sales and Promotions

Page 38 GAO-13-578 USPS Revenue Options

(2) the requirement that each class of mail or type of mail service bear the 

direct and indirect postal costs attributable to each class or type of mail 

service through reliably identified causal relationships plus that portion of 

all other costs of the Postal Service reasonably assignable to such class 

or type;

(3) the effect of rate increases upon the general public, business mail 

users, and enterprises in the private sector of the economy engaged in 

the delivery of mail matter other than letters;

(4) the available alternative means of sending and receiving letters and 

other mail matter at reasonable costs;

(5) the degree of preparation of mail for delivery into the postal system 

performed by the mailer and its effect upon reducing costs to the Postal 

Service;

(6) simplicity of structure for the entire schedule and simple, identifiable 

relationships between the rates or fees charged the various classes of 

mail for postal services;

(7) the importance of pricing flexibility to encourage increased mail 

volume and operational efficiency;

(8) the relative value to the people of the kinds of mail matter entered into 

the postal system and the desirability and justification for special 

classifications and services of mail;

(9) the importance of providing classifications with extremely high 

degrees of reliability and speed of delivery and of providing those that do 

not require high degrees of reliability and speed of delivery;

(10) the desirability of special classifications for both postal users and the 

Postal Service in accordance with the policies of this title, including 

agreements between the Postal Service and postal users, when available 

on public and reasonable terms to similarly situated mailers, that— 

(A) either— 

(i) improve the net financial position of the Postal Service 

through reducing Postal Service costs or increasing the 

overall contribution to the institutional costs of the Postal 

Service; or
Appendix II: Required Objectives and Factors 

for Sales and Promotions

Page 39 GAO-13-578 USPS Revenue Options

(ii) enhance the performance of mail preparation, 

processing, transportation, or other functions; and

(B) do not cause unreasonable harm to the marketplace.

(11) the educational, cultural, scientific, and informational value to the 

recipient of mail matter;

(12) the need for the Postal Service to increase its efficiency and reduce 

its costs, including infrastructure costs, to help maintain high quality, 

affordable postal services;

(13) the value to the Postal Service and postal users of promoting 

intelligent mail and of secure, sender-identified mail; and

(14) the policies of this title as well as such other factors as the 

Commission determines appropriate.
Appendix III: Comments from the United States 

Postal Service

Page 40 GAO-13-578 USPS Revenue Options

Appendix III: Comments from the United 

States Postal Service
Appendix III: Comments from the United States 

Postal Service

Page 41 GAO-13-578 USPS Revenue Options
Appendix III: Comments from the United States 

Postal Service

Page 42 GAO-13-578 USPS Revenue Options
Appendix III: Comments from the United States 

Postal Service

Page 43 GAO-13-578 USPS Revenue Options
Appendix III: Comments from the United States 

Postal Service

Page 44 GAO-13-578 USPS Revenue Options
Appendix IV: Comments from the Postal 

Regulatory Commission

Page 45 GAO-13-578 USPS Revenue Options

Appendix IV: Comments from the Postal 

Regulatory Commission
Appendix IV: Comments from the Postal 

Regulatory Commission

Page 46 GAO-13-578 USPS Revenue Options
Appendix V: GAO Contact and Staff 

Acknowledgments

Page 47 GAO-13-578 USPS Revenue Options

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

In addition to the contact named above, Teresa Anderson (Assistant 

Director), Ken Bombara, Kyle Browning, Colin Fallon, Imoni Hampton, 

Josh Ormond, Sara Ann Moessbauer, and Crystal Wesco made key 

contributions to this report.

Appendix V: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(544181)
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