Declining letter mail volumes and increasing electronic substitution, which have accelerated with the recent recession, have reduced postal revenues for both the foreign posts and USPS. Additionally, foreign posts told us they, like USPS, faced high infrastructure and workforce costs. Some foreign posts began to modernize their delivery or retail networks, or both, as early as the 1990s. One of the factors precipitating these changes occurred when the European Union began to establish a timetable for the gradual ending of monopolies of letter markets, in its 1997 Council Directive. In 2008, the European Union directed its members to fully “open” their domestic letter markets to competition by 2010 (i.e., remove their monopoly on delivering letter mail). In doing so, the European Union stated that it wanted to “allow sufficient time to put in place the…modernization and restructuring measures required to ensure long- term viability under the new market conditions” of the posts. In all six countries we reviewed, the posts were experiencing challenges related to declining mail volumes or high infrastructure, labor, or operating costs, or both, which necessitated the need for modernization. See figure l for a list of the six foreign posts we reviewed, including how we identified them in this report. USPS is facing similar challenges as other industrialized nations’ posts. For example, USPS has a brick and mortar retail infrastructure it cannot afford to maintain. However, USPS currently manages more retail outlets— approximately 32,500—than all of the foreign posts we reviewed combined. In addition, USPS has twice as many delivery points as any foreign post we studied—USPS delivers to 151 million homes, businesses, and post office boxes. Another challenge that USPS experienced was a record loss of $8.5 billion in fiscal year 2010. Thus, as we have reported, without substantial changes to its business model, USPS’s ability to fulfill its mission through self-supporting, businesslike operations is not sustainable. All of the foreign posts discussed in this report have implemented various initiatives to complement or enhance traditional delivery by offering customers more alternatives to send and receive letters and packages. Traditional delivery methods for foreign posts of letters, packages or parcels, and advertising mail, can include: carrier-to-home (to a customer’s door or mail box), and cluster boxes (grouping of boxes for customers in a particular neighborhood, instead of individual mail boxes at a personal residence, which are often found within a housing development). Although letter mail volumes have been decreasing, some foreign posts expect parcel volumes to strengthen as economic conditions improve, particularly with the emergence of online shopping and small business growth. According to foreign post officials we spoke with, customers have been increasingly changing the way they use and receive their mail. With increasing Internet and broadband access and related changing use of the mail, use of traditional mail has been declining as customers find more convenient and faster ways to communicate. Several of the posts we met with said that customers were using various electronic means to conduct their daily business, such as paying bills online, sending postcards and greeting cards electronically, or receiving news and other periodicals via the Internet instead of hard copy (all referred to as e-substitution). This changing use of the mail was a primary factor driving changes in the way the posts do business. In addition, foreign post officials told us they have a significant amount of costs associated with delivering traditional letter mail and packages. Some posts have been experiencing increases in the number of delivery points every year, at the same time that mail volumes overall have been declining. Australia Post and Canada Post officials told us the number of addresses has generally grown each year by about 200,000 addresses. A few of the posts attribute a major part of their costs to delivering the mail (also known as the “last mile”). Given all of these factors, the foreign post operators we met with have begun to focus on adjusting or downsizing their delivery networks and providing multi-channel approaches to give their customers more choices in how they send and receive mail. All six posts we met with offered some form of digital or hybrid means of sending and receiving mail, and several of the posts reported increased customer service and satisfaction as a result of these offerings. Digital mail is communication between a sender and a recipient through completely electronic communication (this could include personal e-mail and electronic bills and other communication with businesses). While postal experts have a variety of definitions for hybrid mail, there is no consensus on the exact definition. In this report, we use the term “hybrid mail” to describe different ways of sending and receiving mail and communication using a blend or combination of electronic or digital mail and physical forms. For example, an item—a bill, letter, card, or other communication—is electronically transmitted, processed and converted into a letter post item for physical delivery to the addressee. Figure 2 illustrates examples of digital and hybrid mail services, and figure 3 shows examples of their availability through the six foreign posts we reviewed. E-Potbrief™–Allowustomer to commnicte ecrely vi the Internet. When customer regiter for the ervice, they re reqired to authenticte their identity y preenting n identifiction crd or passport. All commniction ent nd received vi the E-Porief™ ecre gtewre end-to-end encrypted. Cot i the same as for letter. In cas when n E-Porief™ i ent to recipient who i not regitered for the ervice or if the ender cho thi option, the E-Porief™ will e printed y DP DHL nd delivered phyiclly. Docment ent nd igned throgh E-Porief™ re leglly inding nd confidentil. e-Letter–A hyrid mil delivery ervice thllowustomer to e-mil letter to e delivered phyiclly to non-e-mil recipient. Poten AB print the letter t dedicted print loction nd then deliver them phyiclly vi the pot. SuisseID–Offer ecre identifiction nd digitignre cabilitie for itustomer. Customer receive n identifiction crd or USB device fter preenting proof of identifiction Swiss Pot retil office. SusseID us high-grde ecrity technology for ecre login nd leglly vlid digitignre. Swiss Pot Box–Regitered customern hve their phyicl mil received, nned, nd delivered Swiss Pot. Customern chooe how they wold like to ccept their mil. After receiving n initinned imge of the front nd back of phyicl piece of mil (for exmple, letter), ustomer cn reqt thSwiss Pot (1) open the mil, n the entire content of the mil, nd end the content electroniclly to the customer; (2) leve the mil nopened nd hve the mil ent to the customer’s phyicddress; or (3) hred the mil piece. “We want to change the way people think about the last mile—as no longer physical, but digital.” A video depiction of Swiss Post Box, described previously, is available here. (Accessed on Feb. 9, 2011) While there is no consensus on a definition of hybrid mail, there does seem to be agreement that the way customers communicate is changing, and moving more toward a digital environment. According to Canada Post officials, in order to stay relevant to customers, the Post began to make a number of revisions to its corporate plans and strategies in 2005, focusing more on electronic and hybrid options. Over the years, Canada Post has been engaged in a number of efforts to reinvent, update, and enhance customer use of the mail through digital alternatives. Canada Post officials observed that some initiatives were successful, while others failed because they may have been ahead of their time. For example, according to a Canada Post official, epost 2.0 will be an improvement on a former digital offering and will be introduced within the next 2 years. Some postal officials see digital and hybrid mail as the “new last mile” and are gearing toward incorporating more digital mail delivery options for their customers. Foreign postal officials told us that their digital and hybrid mail options offered three benefits. First, some of the officials said these digital and hybrid mail services offer enhanced security and trust. They told us that they use their customers’ trust and loyalty in the “brand” of the postal operator to illustrate that digital and hybrid mail communications through the postal operator are secure. According to an Itella official, the biggest advantage of NetPosti was mail security. The official said that a NetPosti account was not as easily accessible as an e-mail account and its contents. The primary concern for Itella was ensuring security of the mail. Swiss Post created its Suisse ID to incorporate security encryption on the actual identification card or Universal Serial Bus (USB) used by customers to sign into their accounts. This encryption provided customers with a secure encryption whenever they logged in. Customers must have their identification verified in person at a post office before receiving the SuisseID. Second, officials at three of the six posts we spoke with offered their customers who use digital or hybrid mail solutions the opportunity to archive not only their digitally transmitted mail, but other documents as well. NetPosti offered archiving of all data and documents for 7 years free of charge. Customers could also bring into their NetPosti accounts personal files, such as scanned receipts, for a fee. Swiss Post offered customers the option to archive their documents. Third, three of the six foreign posts offered hybrid mail options combined with a “platform of services.” This platform offered integration between the sending and receipt of mail (letters, bills, cards, etc.)