In 2006, PAEA  eliminated USPS’s authority to offer nonpostal services unless they were  offered as of January 1, 2006, and expressly grandfathered by the PRC. One such agreement allows USPS to  accept passport applications on behalf of the U.S. Department of State  (State Department). USPS plans to complete  a multiyear revenue plan in the spring of 2013 that will include details on  its competitive strategies. USPS Offers 12 Grandfathered Nonpostal Services, 8 Experimental Postal Products, and at Least 4 Discretionary Services for Federal Agencies

		Nonpostal Services

At the time PAEA was enacted, USPS was offering 12 nonpostal services  that it has continued to offer as a result of these services being  grandfathered by the PRC. Experimental Postal Products

Since the enactment of PAEA, USPS has received approval from the  PRC to market test a total of eight experimental postal products. The remaining four experimental products are  competitive products, including USPS’s Gift Cards—experimental product  to test the feasibility of selling gift cards loaded with a specified sum of  money to consumers who could choose to mail the cards. Discretionary Services Performed for Other Federal Agencies

USPS has the authority to perform services for other federal agencies on  a discretionary basis by entering into written agreements with these  agencies. USPS’s Efforts to Generate Additional Revenue Include Ongoing and Planned Postal and Nonpostal Initiatives

As of November 2012, USPS was pursuing 55 stakeholder-identified  initiatives that it believes respond to the changing needs of consumers  and businesses and strengthen the relevance of USPS and the mail. Forty-eight initiatives are extensions of USPS’s existing lines of postal  products and services; three are extensions of grandfathered nonpostal  services; and four are experimental postal products. Nonpostal Services and Experimental Postal Products

USPS is pursuing three stakeholder-identified initiatives that are  extensions of its existing nonpostal services. Two of these initiatives are  ongoing, including an effort to allow customers to change their addresses  using mobile devices, which expands the ways a customer can request  address changes through MoverSource. USPS is also pursuing four  stakeholder-identified initiatives involving experimental postal products. Market tests for the two other  experimental postal products—prepaid postage on the sale of greeting  card and a campaign to involve selected companies in direct mail  advertising—are under way. Reasons for Pursuing the 55 Initiatives

USPS pursued these 55 initiatives for reasons including revenue  generation and adding value to the mail, among others, as shown in  figure 1. USPS Did Not Pursue 25 Initiatives because of Financial and Other Reasons, and Believes Additional Statutory Authorities Would Provide Opportunities to Increase Revenue

USPS decided not to pursue 25 additional stakeholder-identified  initiatives because of financial and other reasons. Specifically, 12 of 25  initiatives, or 48 percent, were abandoned because of financial reasons. USPS decided not to pursue the remaining 13 stakeholder-identified  initiatives for other reasons. According to USPS officials, they would like to pursue additional revenue- generating opportunities in three areas—nonpostal services; shipments of  beer, wine, and spirits; and cooperation with state and local  governments—if provided with additional statutory authority. USPS emphasized, however, that  additional innovations in these areas will not be sufficient to solve USPS’s  dire financial situation. Results will also be constrained by the economic  climate and by changing use of the mail. USPS generated a net income of $141  million in 2011 from its offerings of nonpostal services and products. In its  written comments, reprinted in appendix V, USPS stated that its financial  viability is dependent not only on cutting costs but also generating  additional revenue. Available services include (1) conference-related services  such as food and the rental of audio-visual equipment, and (2) hospitality- related services such as lodging, fitness-related services, banquet  services, and the onsite sale of sundries. According to USPS  officials, USPS initiated this service to generate additional revenue. The  Postal Accountability and Enhancement Act of 2006 required USPS’s market-dominant  products to cover their costs and any price increases for these products must be tied to  the rate of inflation.
Why GAO Did This Study

USPS continues to face a dire financial situation. Reducing costs is essential, but USPS also must generate additional revenue through the sale of products and services. PAEA, enacted in 2006, eliminated USPS's authority to offer nonpostal services unless they were offered as of January 1, 2006, and expressly grandfathered by the PRC. USPS may, however, offer new nonpostal services if they are related to the grandfathered nonpostal services. It may also offer experimental postal products that meet certain conditions. As requested, this report describes: (1) the nonpostal services grandfathered after the enactment of PAEA, experimental postal products offered since enactment of PAEA, and discretionary services USPS currently performs for other federal agencies; (2) initiatives--including nonpostal services and experimental postal products--USPS is pursuing to generate additional revenue and the status of these initiatives; and (3) the reasons USPS decided not to pursue other revenue-generating initiatives that it had identified.
GAO reviewed PAEA provisions and PRC decisions pertaining to nonpostal services, experimental postal products, and services performed for other federal agencies and USPS documents related to the initiatives that USPS chose to pursue and those it decided not to pursue. GAO interviewed USPS officials regarding these issues.
In commenting on a draft of this report, USPS agreed that its financial viability is dependent not only on cutting costs, but also on generating additional revenue.

What GAO Found

The U.S. Postal Service (USPS) currently offers 12 nonpostal services (i.e., services not directly related to mail delivery) that were grandfathered by the Postal Regulatory Commission (PRC) after enactment of the Postal Accountability and Enhancement Act (PAEA). These services--which include Passport Photo Services, the sale of advertising to support change-of-address processing, and others--generated a net income of $141 million in 2011. Since enactment of PAEA, USPS has received approval from PRC to offer eight experimental postal products, which are products that differ significantly from other offered products, such as the sale of gift cards loaded with a specified sum of money. Lastly, USPS performs at least four discretionary services (i.e., services it chooses, rather than is required, to perform) for other federal agencies, such as accepting passport applications for the State Department.
USPS is currently pursuing 55 new initiatives that it identified based on outreach to postal stakeholders. USPS chose to pursue these initiatives because of their potential to increase revenue and add value to the mail, among other reasons. Forty-eight initiatives are extensions of existing lines of postal products and services, such as offering Post Office Box customers a suite of service enhancements (e.g., expanded lobby hours and earlier pickup times) at selected locations and increasing public awareness of the availability of postal services at retail stores. Three initiatives are extensions of existing nonpostal services, including allowing customers to forward their mail to a new address using mobile devices. Finally, four of the initiatives involve experimental postal products, such as prepaid postage on the sale of greeting cards. These four experimental products are among the total of eight experimental products that have received PRC approval since enactment of PAEA. Forty-five of the 55 initiatives are ongoing; the remaining are under development.
USPS considered but decided not to pursue 25 other stakeholder-identified initiatives, primarily because of financial reasons. Twelve initiatives were abandoned because USPS determined they were not likely to be profitable or the initial investment was too high. Reasons for not pursuing other initiatives included insufficient stakeholder interest or lack of statutory authority. USPS would like to pursue revenue-generating opportunities in three areas--nonpostal services, shipments of alcoholic beverages, and services performed for state and local governments--if it is provided with statutory authority to do so. USPS officials said opportunities in these areas could improve USPS's financial position, but they emphasized that additional innovations will not be sufficient to return USPS to financial solvency. Results will also be constrained by the economic climate and by changing use of the mail. USPS's multiyear revenue plan detailing its competitive strategies is expected in the spring of 2013.