U.S. Postal Service:

Priority Mail at Risk to Competition if Double Postage Rule Is Suspended

GGD-92-68: Published: May 7, 1992. Publicly Released: May 7, 1992.

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Pursuant to a congressional request, GAO assessed the: (1) extent of competition that the U.S. Postal Service (USPS) could face in the marketplace if Congress suspended the extremely urgent double postage rule that gives it the exclusive right to deliver such letters; and (2) financial impact of such a change on USPS revenues.

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.

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