To conduct this analysis, PRC assesses the value of the monopolies  based on the volume of mail—and the associated net revenues—that  USPS would be expected to lose if its monopolies were eliminated and  new entrants were allowed to provide mail delivery. PRC’s annual estimate of the value of USPS’s monopolies has increased  substantially in recent years—from $3.28 billion in fiscal year 2012 to  $5.45 billion in fiscal year 2015. Stakeholders, experts, and the experiences of  selected foreign posts all suggest that USPS’s monopolies and other  postal policies are interdependent—particularly the specifics around  universal service—and therefore should be considered in tandem. Postal Stakeholders, Experts, and USPS Believe Relaxing Postal Monopolies Could Reduce USPS’s Revenues and Threaten Its Ability to Provide Universal Service

Stakeholders, experts, and USPS told us that narrowing or eliminating the  existing letter delivery and mailbox monopolies could likely reduce  USPS’s revenues and threaten its ability to provide the current level of  universal service. While PRC has not taken a position on whether  USPS’s letter delivery monopoly should be narrowed or eliminated, it  reported in 2008 that “…under the current system, the (letter delivery)  monopoly is maintained to offset the costs placed on  by the  USO.”

		Most Postal Stakeholders and Experts Agree That Relaxing USPS’s Mailbox Monopoly Could Affect Mail Safety, Security, and Efficiency

Stakeholders: Nine of the 16 stakeholders believe that narrowing or  eliminating USPS’s mailbox monopoly could decrease mail security, and  they also oppose changes to this monopoly. Third,  USPS advised that allowing third-party mailbox deliveries could allow  competing providers to skim relatively profitable mail volume away from  USPS, leaving it with less revenue to finance the costs of its universal  service obligation. Additionally,  seven of these experts also said relaxing the monopolies could induce  USPS to become more efficient and increase innovation across the postal  market. Some Countries Reported Revenue Losses for Postal Operators, Increases in Competition and Efficiency after Elimination of Monopolies

A number of countries have narrowed or eliminated their postal  monopolies over the past two decades as part of overall postal reform  that expanded the commercial freedom of their postal services. Specifically:  Increased Competition: The post and/or regulator from all six of the  countries that we contacted—Sweden, Italy, Japan, Germany, France,  and the United Kingdom—said the liberalization of their postal  markets resulted in increased competition. For example, one stakeholder who  opposes modifying USPS’s monopolies said that, if they were to be  changed, policies to ensure universal delivery service would need to be  adopted. On the  other hand, USPS has reported that it is subject to statutory requirements  to which its private competitors are not. Scope Decisions Would Involve Multiple Considerations

Defining the scope of any study is critical because, according to the  government auditing standards, the scope defines aspects of the subject  matter to be studied and other key data collection considerations—such  as the period of time reviewed and the type of data to be collected,  among other things. For example, significant time and  resources would be required for a study to estimate the financial effects  for all laws that apply differently to USPS and its competitors—as well as  the net effect of these legal differences. The  decisions made about how to address these challenges would help  determine the usefulness of the estimates to policymakers. A study estimating the financial  effects of all laws that apply differently to USPS and its private  competitors would require significant time and resources; if estimates  were desired in a shorter time frame—or if financial resources were  limited—tradeoffs would be required. USPS and PRC separately provided technical comments,  which we incorporated as appropriate. In response to USPS’s suggested clarification of PRC’s  estimates presented in table 1, we added a note to make it clear that,  while PRC’s estimates presented in the table represent the effect on  USPS’s net income if its mailbox monopoly or both monopolies were to  be eliminated, it is not the case that subtracting the estimated value of the  mailbox monopoly from the estimated value of the combined letter  delivery and mailbox monopolies provides the value of the letter delivery  monopoly alone. Appendix I: Objectives, Scope, and Methodology

Our objectives were to assess: (1) what is known about the value of the  U.S. Postal Service’s (USPS) letter delivery and mailbox monopolies, (2)  views on the potential effects of narrowing or eliminating these  monopolies; and (3) considerations that would need to be addressed to  estimate the value of USPS’s financial advantages and burdens resulting  from laws that apply differently to USPS and its private competitors. In particular:
PRC makes assumptions about the extent to which a potential entrant  would be able to deliver contestable mail with a lower cost structure  than USPS. As  such, PRC staff said that both the value of the combined postal  monopolies—and the value of the mailbox monopoly on its own—are  likely to continue to increase in the next few years.
Why GAO Did This Study

USPS's mission is to provide universal delivery service while operating as a self-financing entity. Congress has provided USPS with monopolies to deliver letter mail and access mailboxes to protect its revenues, which enables it to fulfill its universal service mission, among other reasons. Despite its monopolies, USPS's poor financial condition has placed its universal service mission at risk. USPS's net losses were $5.6 billion in fiscal year 2016 and were greater than $62 billion over the past decade.
GAO was asked to review the postal monopolies. This report examines (1) what is known about the value of USPS's letter delivery and mailbox monopolies, (2) views on the potential effects of narrowing or eliminating these monopolies; and (3) considerations that would need to be addressed to estimate the effects of laws that apply differently to USPS and its private competitors. To address these questions, GAO reviewed reports issued by PRC and others; obtained views from USPS and PRC, as well as postal stakeholders and experts who have submitted public comments to PRC proceedings; and collected information from six countries—France, Germany, Italy, Japan, Sweden, and the United Kingdom—that have eliminated their postal monopolies, selected based on criteria including their share of global mail volume.
GAO is making no recommendations in this report. USPS disagreed with some stakeholder perspectives, among other things. GAO believes that the information is portrayed in a balanced way and added USPS responses, where appropriate.

What GAO Found

The value of the U.S. Postal Service's (USPS) letter delivery and mailbox monopolies was $5.45 billion in fiscal year 2015, according to the most recent estimate prepared by the Postal Regulatory Commission (PRC), the regulator of USPS. This figure suggests that USPS's net income would decline by this amount if its monopolies were eliminated. To develop these estimates, PRC identifies the mail covered under USPS's monopolies for which a potential entrant might compete to provide service if the monopolies were to be eliminated; such mail is referred to as “contestable.” PRC's estimated value of these monopolies has increased substantially in recent years—it was $3.28 billion in fiscal year 2012—and PRC staff expects that the value will continue to increase in the next few years due to increased volumes of contestable mail.
Narrowing or eliminating USPS's letter delivery and mailbox monopolies would likely have varied effects, according to views provided by postal stakeholders, experts, USPS, and PRC. For example, all parties agreed that allowing other entities to deliver letters could decrease USPS's revenues, and that additional strain would be placed on USPS's ability to continue providing the current level of universal service. Additionally, some stakeholders said that allowing other entities to deliver items to the mailbox could adversely affect the security of mail and increase clutter that would impair USPS's delivery efficiency. On the other hand, most of the postal experts we interviewed said that allowing entry to this market by private competitors could result in increased competition that would spur USPS to become more efficient. Officials from foreign posts or regulators in all six of the countries GAO contacted reported increases in competition after ending their postal delivery monopolies, and some of these countries also reported losses of revenue and market share for the carriers providing universal service. Stakeholders, experts, foreign officials, and USPS agreed that postal policies are interdependent and therefore need to be considered in tandem with one another; officials from all six countries we contacted told us that concurrent postal policy changes, such as increasing a post's degree of commercial freedom or decreasing the scope of its universal service obligation, assisted their transitions away from postal monopolies.
Estimating the effects of laws that apply differently to USPS and its private competitors would require steps including defining appropriate study objectives and assessing scope and methodological tradeoffs. For example, objectives would need to clarify the extent of financial effects to be estimated—whether for USPS as a whole, for only specific products, or for USPS relative to competitors. Scoping decisions would need to define the specific areas to be studied, the period of time to be reviewed, and the type of data to be collected. This would involve multiple considerations, including determining which laws to include and how to address differing stakeholder views. Additional judgment would be needed to address any lack of consensus on methodologies and to determine the appropriate degree of time and resources. For example, a comprehensive study estimating the effects of every law would require significant time and resources; if estimates were desired in a shorter time frame—or if financial resources were limited—tradeoffs would be required.