Challenging economic conditions, a changing business environment, and declining mail volumes have contributed to USPS’s revenue shortfall and inability to cover its expenses and financial obligations. USPS has incurred 9 consecutive years of net financial losses and over $125 billion in unfunded liabilities as of fiscal year 2015. As a result, USPS has remained on GAO’s High Risk List since 2009. USPS’s financial condition is largely attributable to a decline in mail volume. Overall, mail has declined by 28 percent from its peak—213 billion pieces—in fiscal year 2006 to about 154 billion pieces in fiscal year 2015. Volume for First-Class Mail, USPS’s most profitable product, has significantly declined from its peak in fiscal year 2001. For instance, First- Class Single Piece mail—that is, all mail bearing postage stamps such as bill payments, personal correspondence, cards, and letters—has declined by about half over the last 9 years (see fig. 1). Although overall mail volumes have declined, USPS packaging and shipping services have experienced double-digit growth in recent years, largely as a result of electronic commerce. USPS package volume roughly doubled from 2008 to 2015. Package and shipping services, though, are sensitive to economic changes and have a lower profit margin than First-Class Mail. In addition to mail and package delivery, USPS maintains its retail network of post offices across the country. In fiscal year 2015, there were approximately 31,600 total postal managed retail offices. A key part of USPS’s revenue stream, post offices contributed a little over half of the $19 billion in total retail revenue that USPS earned in fiscal year 2015. USPS has reported decreases in retail revenue at its post offices, as well as fewer retail visits (see fig. 2). Online revenues through the USPS website (usps.com), though, generated over $1 billion in fiscal year 2015. USPS also has partnerships with retailers that provide another 64,000 locations for customers to access stamps and USPS services. In response to its financial crisis, USPS took a number of actions that attempted to balance its operating costs with its lower revenues, including making changes to its operations and network. For example: From 2009 to 2013, USPS decreased the size of its workforce as well as overall work hours through retirements, attrition, and initiatives to streamline its operations. In 2012 and 2013, USPS consolidated 141 mail-processing facilities and reduced mail-processing work hours by over 6 million in 2013. USPS reduced or modified retail hours in thousands of mostly small, rural post offices as part of its Post Office Structure Plan (POStPlan). USPS has also expanded its partnerships with retailers in an effort to provide greater access to its products and services while reducing costs. USPS changed its standards by increasing the number of days for some mail to be delivered and still be considered on time. These changes have led to concerns that rural areas are facing degraded delivery service performance. USPS is now collecting data to examine rural delivery service performance. Overall, Internet access and use has grown nationwide, and a large majority of Americans now have access to broadband. According to the Pew Research Center, use of broadband has grown from less than 10 percent of adults in 2000 to about 67 percent in 2015. However, FCC has concluded that advanced telecommunications capability is not being deployed to all Americans in a reasonable and timely fashion. In particular, many Americans still lack access to advanced telecommunications capability, especially in rural areas and on tribal lands. The federal government has made efforts to increase access to the Internet across the United States, especially in rural areas. As required by the American Recovery and Reinvestment Act of 2009 (Recovery Act), FCC released the National Broadband Plan in 2010 to improve access to, and the services provided by, broadband. To extend access to broadband as well as to stimulate the economy, Congress also appropriated $7.2 billion for broadband programs in the Recovery Act. This funding included $2.5 billion for USDA’s Broadband Initiatives Program (BIP), which provided financing for broadband infrastructure projects in rural areas. By 2010, USDA had awarded BIP funding to nearly 300 projects. Broadband access to various Internet services, especially online bill paying, has in recent years been associated with reduced of use transaction mail, a subset of First-Class Mail. Our analysis of USPS’s HDS data from 2007 to 2014 found a negative relationship between broadband use and the volume of transaction mail sent, after adjusting for available demographic and other factors that might be associated with the use of postal services. In other words, controlling for age, income, and education, households that used broadband to access Internet services tended to send less transaction mail than other households. Our analysis of the HDS data also found that households using broadband were specifically more likely to pay bills online. Further, other analysis we performed in one of our case study areas suggests that broadband availability was associated with greater likelihood of online bill payment. Specifically, we found that the more broadband providers available to customers of a specific regional bank in Louisiana, the more likely these customers were to pay certain bills online. These findings are consistent with other research that has shown First-Class Mail volume to be negatively affected by availability of the Internet. Further, these findings align with evidence that while some customers still prefer to receive paper statements through the mail, an increasing percentage now pay their bills electronically. Our summary of HDS data on how households pay their bills also illustrates this trend (see fig. 3). All 11 of the experts we spoke with agreed that individuals with broadband are more likely to engage in online activities that replace transaction mail use, such as online bill paying. One of the experts we spoke with noted that in contrast to correspondence mail, discussed below, bill payments are financial transactions and therefore more easily influenced by matters of cost and convenience. Two other experts we spoke with noted that some businesses have encouraged customers—often through financial incentives—to switch to electronic bill payment. Correspondence mail, another subset of First-Class Mail, has been in decline for over a decade, but we found that broadband use may not have had a significant effect on that trend in recent years. Specifically, our analysis of USPS HDS data found no statistically significant relationship between use of broadband and correspondence mail, after adjusting for demographic and other factors that might be associated with the use of postal services. USPS has reported that some decline in correspondence mail has been due to electronic diversion, but four of the experts, as well as the PRC officials, we spoke with suggested that by now most individuals have changed their behaviors to reflect their Internet use, since many households have had the basic Internet access necessary for electronic communications for years. That is, according to these experts, a substantial number of individuals now have established preferences for e-mail and other technologies over mail, developed over many years, and their behavior does not continue to change. As one expert we spoke with suggested, the lack of a relationship between broadband and correspondence mail in our analysis could reflect that individual communication choices are no longer significantly influenced by broadband in the home. Two experts we spoke with also noted that correspondence mail has been a relatively small portion of First-Class Mail and has generally been a durable part of the mail stream. Some individuals may continue to send personal cards and invitations as a matter of etiquette and tradition, possibly making this type of mail volume more resistant to electronic diversion. Although USPS’s First-Class Mail volume, including both correspondence and transaction mail, has declined substantially since 2000, it is unclear to what extent broadband use will lead to further declines. Several studies have found that electronic diversion was a key factor in past mail volume declines. However, although USPS has said that they anticipate that First-Class Mail volume will continue to decline with the migration to electronic alternatives resulting from technological changes, experts we spoke with had mixed views on the future of First-Class Mail and its relationship to broadband use. Only 4 of the 11 experts we spoke with said that First-Class Mail was likely to continue decreasing at least in the short-term. Two of these experts maintained that there may be another large decline in First-Class Mail as broadband access expands and the now younger generations—who have come of age almost entirely using electronic services and technologies for their business and personal interactions—become the dominant portion of the population and economy. One expert suggested that as the Internet continues to evolve, there are likely to be new, unforeseen ways in which postal business will be diverted online. As USPS has explained to PRC, even upon reaching the natural ceiling of Internet use (where theoretically everyone in the United States could have Internet access), electronic diversion of the mail could still increase because of an increasing depth of Internet usage (that is, an increasing number of things individuals can accomplish using the Internet). For example, First-Class Mail could erode further if more individuals abandon paper copies of their bills and rely on electronic records exclusively. Four experts, as well as officials from six of the groups we spoke with for our case studies, also suggested that Internet privacy and security concerns could be contributing to a slowed rate of electronic diversion. For example, officials from one group of business officials we met with said that many people in their area see mail as safer than Internet services because of computer hacking and identity theft concerns. According to these officials, cybersecurity concerns remain a barrier to broadband adoption and a source of continued First-Class Mail use. USPS officials told us they recognized that broadband use is changing the way people use postal services. As a result, USPS has been exploring a variety of initiatives to strengthen the value of First-Class Mail for all business and residential customers. USPS is piloting Informed Delivery, a program which lets customers receive an interactive e-mail each day that shows the faces of the mail pieces they will receive in their mailbox.