U.S. Postal Service

First-class mail protections would not be appreciably reduced if Congress suspended or modified the double postage rule for extremely urgent letter mail. About 99 percent of this mail weighs less than six ounces and is delivered for less than $1.50. As postal rates increase, however, the spread between the proposed minimal urgent mail exemption rate of $3.00 will narrow or disappear, meaning that private carriers may make increasing inroads into first-class mail delivery unless the $3.00 exemption rate is indexed to correspond with future rate increases. The Postal Service's Priority Mail, which advertises second-day service and has a mix of protected and unprotected material, would be immediately at risk to competition if the double postage rule were suspended. Priority Mail rates now start at $2.90, only 10 cents less than the minimum $3.00 limit. Private overnight companies, notably Federal Express and UPS, would be strong competitors for letters now sent by Priority Mail. Given the Postal Service's reputation for being less consistent and reliable than its major competitors in on-time delivery of overnight and second-day mail, the Postal Service could expect a significant loss of its Priority Mail letter business.

GAO found that: (1) the double postage rule requires carriers to charge twice as much as the USPS rate for delivery of extremely urgent letters; (2) suspension of the rule could allow private carriers to deliver extremely urgent first-class letters for as little as $3; (3) USPS currently delivers about 99 percent of its extremely urgent first-class letters for less than $1.50, half of the minimum rate that competitors could charge; (4) USPS priority mail could be at risk to substantial competition, since its rates currently start at $2.90; (5) priority mail is the fastest growing service USPS offers, producing fiscal year 1991 revenues of about $1.8 billion; (6) private overnight delivery companies would be strong competitors to carry letters that now go by USPS priority mail; (7) USPS has a reputation for less consistent and reliable performance than its potential competitors; and (8) postal rate increases would increase the at-risk exposure of USPS services to competition.