U.S. Postal Service

Today, the U.S. Postal Service competes with communications technologies and private carriers for the delivery of services in markets that in 1970 were the sole domain of the Postal Service. Many observers believe that the current ratemaking process takes too long for the Postal Service to respond to today's rapidly changing market conditions. This report discusses (1) whether changes in policies concerning volume discounting and demand pricing should still be considered by Congress, (2) the issues surrounding the current ratemaking process, and (3) proposals for modifying the postal ratemaking process and other changes that merit further consideration by Congress. The proposals that GAO offers--to improve the effectiveness of the postal ratemaking process, ensure financial accountability, and give the Postal Service more flexibility to price and compete in the marketplace--provide the Postal Service, the Postal Rate Commission, and Congress with a variety of options to consider in reforming the ratemaking process.

GAO found that: (1) the Postal Service has petitioned the Postal Rate Commission to give it more flexibility in pricing postal products and establish a market-based mail classification schedule; (2) new Postal Service pricing mechanisms could minimize mail volume losses and keep rates lower for most mail classes; (3) Congress may have to clarify the 1970 ratemaking criteria because the Postal Service and Commission disagree on the extent that market forces impact postal rates; (4) postal ratemaking usually takes 10 months to complete and it does not include the time the Postal Service spends preparing rate cases and appeals; (5) proposed postal ratemaking reforms include developing accelerated procedures for market testing new products, establishing rate bands for competitive products, and allowing volume-based rates for high volume shippers; and (6) the Postal Service needs to be able to control labor costs and resolve workforce issues to remain competitive in the postal marketplace.