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US Congress must help USPS grow revenues, says GAO

Friday, January 18th, 2013

For USPS to pull itself out of its current financial difficulties, it cannot just rely on pension and healthcare reforms and high-profile cost-cutting measures – it must also find fresh ways to raise new revenue streams.

That is the central message of a new report from the US Government Accountability Office (GAO) sent to Congress this week.

The report comes with a new session of Congress needing to restart the process of drawing up and passing postal reform legislation this year in order to solve the huge financial problems at the US Postal Service, with mail volumes currently falling “precipitously”.

The GAO sheds light on dozens of revenue-raising initiatives that the Postal Service has been pursuing in recent years, but also warns that many have been abandoned for various reasons including the fact that Congress decided back in 2006 to restrict USPS to providing only products and services that could be firmly defined as postal.

The GAO report looks at suggested revenue-generating ideas that arose from conversations between USPS and stakeholders since 2010.

The process identified more than 1,500 ideas, which were narrowed down into specific projects with most potential, fitting with USPS priorities including making it easier to use the mail, improving the value of the mail and growing the package business.

The Postal Service is pursuing 55 projects to increase revenue, 48 of which are extensions of existing postal product lines and services like its Every Door Direct Mail saturation mail programme and extended PO Box services. It has also been investigating experimental postal products like prepaid greeting cards.

However, 25 other projects suggested by stakeholders have not been followed up.

One reason behind some of the potential projects being shelved is that the Postal Service was banned by Congress in 2006 from running non-postal services, although services up and running before that year were allowed to continue, bringing in about $141m a year in 2012.

USPS wants the ban on non postal products lifted by Congress as part of this year’s hoped-for postal reform legislation.

Similarly, USPS would like the legal power to start shipping alcoholic beverages and provide more services to state and local government.

Abandoned initiatives

The Postal Service abandoned 12 projects because they were not expected to be sufficiently profitable, or if it was believed there was a lack of customer demand.

Among the projects that USPS did not believe would offer a return on its investment were an online Identity Management Service educating consumers about identify theft when shopping online. Other projects were considered as requiring too high an initial investment, including a domestic money transfer service and a retail bill-payment service.

Initiatives that were abandoned because of a perceived lack of customer demand included plans to expand self-service passport kiosks in post offices, which was vetoed by the US State Department on cost grounds. And, a plan to have post offices provide identity verification services for the government’s Internal Revenue Service was similarly torpedoed by the IRS opting for an alternative solution.

An initiative offering volume-based discount pricing for First Class Mail was ditched because USPS believed mailers would not have the resources to increase their use of First Class Mail sufficiently to achieve the discounts.

The Postal Service declined to pursue a hybrid mail service that would have involved opening and scanning customers’ physical letters – with customers’ permission – and sending messages to them in digital form. The GAO report stated that it was believed such a service would “potentially damage the trust that customers have in the USPS brand”. Similar services are provided to businesses by other postal services including Deutsche Post and Swiss Post.

Another abandoned initiative similarly thought to risk trust in the USPS brand was a project to provide companies with tools to better target their mailings to customers.

Congressional reforms

The thrust of the GAO report in its recommendations for Congress is that the Postal Service should be freed up to provide a wider range of products and services as part of its efforts to resolve its horrific financial situation.

USPS officials actively want to pursue more non-postal services, as well as the shipment of wine, beer and spirits, the report said. They also want to provide more services for state and local governments.

“According to USPS, opportunities in these three areas could provide significant value to customers, improve USPS’s financial position, and take full advantage of its resources and competencies,” said the GAO, adding the proviso that fresh revenue-generating projects will never be enough to fix all the USPS financial problems.

The GAO told Congress: “We continue to believe action to address the long-standing challenges that hinder USPS’s financial viability, including a consideration of options to expand its revenue generating potential, remains necessary.”

Source: Post&Parcel/GAO

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