Congress and other stakeholders have raised questions about USPS’ participation in the e-commerce area. Some stakeholders have expressed concerns that USPS is establishing e-commerce products and services in competition with those already existing in the private sector, a role they regard as not appropriate for a government entity. For example, USPS has established an electronic bill payment and presentment service when many private-sector companies in the financial services industry, such as banks, already provide such services. In August 2000, USPS stated that it had a valid and appropriate role to play in the e-commerce area: “our long history as a trusted provider of universal communications services for the American people and the unquestioned value of our presence in and service to every community make it logical and, we think, imperative that we continue to develop the e-commerce products and services that our customers will need and demand both now and in the future for their business and personal lives.” USPS has stated that the pace of the e-commerce revolution is highly uncertain and that the evolution of market and customer requirements will increase the need for a more flexible, innovative, and responsive Postal Service. According to USPS, many of its direct competitors have taken their business online, and many new competitors are threatening other parts of its business. Further, competition is evolving through electronic diversion and alternatives in the areas of electronic bill payment and presentment, and payment options; secure messaging services; and digital security services, such as digital certificate authorities. Intense competition from online shipping services exists from two major competitors—FedEx and United Parcel Service (UPS). The key players each have unique approaches to new electronic business opportunities. According to USPS, it also faces competition from foreign postal administrations, many of which have developed a formal strategy for e- commerce development, in some cases, supported by a dedicated business unit. USPS offers a variety of e-commerce and Internet-related products and services that deal with the delivery of money, messages, and merchandise. Over the past year, USPS has added specific goals and strategies for its e- commerce program. In September 2000, USPS stated that the e-commerce goal for fiscal year 2001 was to “Use the Internet channel to offer new and enhanced products and services that provide the U.S. Postal Service with revenue such as license fees and user charges.” More specific e-commerce fiscal year 2001 goals included (1) generating $104 million in revenue from e-commerce initiatives, (2) increasing customer traffic to USPS’ Web channel (USPS.com), and (3) improving customer overall satisfaction with USPS’ channel/service offerings. In February 2001, USPS’ three primary goals for USPS.com, from which many e-commerce and Internet-related offerings are accessed, were to (1) increase USPS revenue, (2) maximize customer satisfaction, and (3) reduce costs for USPS. In June 2001, USPS said that its goals were to use the best available and emerging technologies, including the Internet, to enhance the value, availability, and affordability of postal products and services for all customers and to expand universal access to the delivery of messages, merchandise, and money by providing customers with choices when doing business with USPS. Recently, USPS appears to be narrowing its focus in the e- commerce area. In September 2001, the Postmaster General stated that “I will take a close look at our e-commerce activities and we will retain those that support growth of our core products and others that are profitable.” Significant changes have affected the marketplace in the past year, particularly in the e-commerce sector, with many dot.com companies going out of business. Due to this market volatility, some e-commerce providers, such as USPS, have experienced slower rates of adoption and lower revenue than anticipated. Yet e-commerce plays an ever-growing role in the national economy. According to a recent report, the number of American adults with Internet access grew by 16 million in the second half of 2000. More than half of those surveyed for the report who had Internet access had bought a product online at one time or another. The Census Bureau of the Department of Commerce estimated that total e-commerce sales for 2000 were $25.8 billion, about 0.8 percent of total retail sales, and for the second quarter of 2001, about 0.9 percent. Privacy concerns are widely regarded as one of the main issues delaying greater use of the Internet and e-commerce. In particular, consumers appear concerned about the extent to which some Web site operators collect personal information and share that information with third parties without the consumer’s knowledge. Surveys have also shown that some potential e-commerce customers avoid using these products and services because of fear that their personal information will be misused. Since we issued our report in September 2000, USPS has taken actions to respond to our recommendations, but it has only made limited progress in resolving the problems that our recommendations were aimed to correct. Over the past year, USPS has continued to struggle with the management and performance of its e-commerce program. Implementation of USPS’ e- commerce initiatives has continued in a fragmented and inconsistent manner. We recommended that the Postmaster General (1) take appropriate actions to help ensure that e-commerce and related initiatives are appropriately identified and maintain accurate and complete information related to the status of these initiatives, (2) follow processes and controls that have been established for developing and approving e- commerce initiatives, and (3) provide complete and accurate information on costs and revenues for the financial data on e-commerce initiatives. USPS continues to have difficulty defining, identifying, and classifying its Internet-related initiatives, including e-commerce initiatives; and inconsistency remains in the implementation of its processes and controls for developing, approving, and monitoring the performance of e-commerce initiatives. Finally, financial information related to USPS’ e-commerce and Internet-related activities is still not complete, accurate, and consistent. We discussed USPS’ difficulties with its e-commerce program with the Deputy Postmaster General. He acknowledged the difficulties and described USPS’ planned actions for addressing the problems. He stated that USPS intends to be able to provide complete financial reporting on all of its e-commerce initiatives by the end of calendar year 2001. USPS continues to have difficulty defining and determining which of its Internet-related initiatives are e-commerce initiatives. In our previous report, we recommended that USPS take actions to appropriately identify e-commerce and related initiatives and maintain complete information on their status. At the time we issued our previous report, USPS defined its e- commerce activities as those products and services that required the Internet to do business and generated revenue to USPS through user charges or licensing fees. Throughout our review, USPS was in the process of revising this definition. According to the Deputy Postmaster General, USPS was refining the definition to deal with what it says were anomalies that have surfaced that made this definition confusing and inappropriate. In October 2001, he stated that USPS’ difficulty in reaching agreement among its various business units on which initiatives were e-commerce was faced by many companies where there was an overlap between e- commerce and core product activities and infrastructure development to reduce costs. Differing internal views about the definition and classification of Internet- related initiatives, including e-commerce initiatives, made it difficult for USPS to provide us with a complete list of e-commerce initiatives. Over the past few months, USPS officials explained the difficulties they had experienced due to differing opinions as to how e-commerce initiatives should be defined and what initiatives should be considered e-commerce versus those that support or enhance existing core products and services. E-commerce initiatives are just one subset of USPS’ new products and services, which may include other Internet-related initiatives as well as retail and advertising initiatives. How an initiative is defined and classified also affects how its costs, particularly indirect costs, and revenues are reported. Without a clear understanding of which initiatives are e- commerce, USPS cannot provide complete, accurate, and consistent information on its e-commerce program. USPS’ criteria for different categories of e-commerce and other Internet- related initiatives have changed several times over the past few months. In a letter dated December 4, 2001, commenting on a draft of this report, the Deputy Postmaster General stated that USPS now defines as e-commerce “those products or services that require the Internet for the customer to do business with us and whose primary objective is to directly generate new revenue.” Further, he stated that USPS also said that it recognized that some of its new products and services might either use the Internet or generate new revenue, but only those that met both tests would be defined as e-commerce. However, USPS noted that initiatives defined as “non-e- commerce” would not receive any less management scrutiny. Applying this definition, USPS stated that it currently has 5 e-commerce initiatives: ePayments, PosteCS, NetPost Certified, NetPost Mailing Online/NetPost Cardstore, and Secure Electronic Delivery Services/Electronic Postmark. USPS officials explained that the difficulty they have encountered in attempting to define and classify e-commerce and Internet-related initiatives is due to differences in the purposes for various initiatives. They further explained that these different purposes could be grouped into three major categories of Internet-related initiatives. First, some initiatives are intended to directly generate revenue as stand-alone products. Second, other initiatives may indirectly generate revenue by supporting existing core products and services. Third, still other initiatives may or may not generate revenue, but are primarily intended to provide customers with easier access to other products and services. Examples of these different categories follow. An example in the first category would include eBillPay.