U.S. Postal Service: Pricing Postal Services in a Competitive Environment
GGD-92-49 Published: Mar 25, 1992. Publicly Released: Mar 25, 1992.
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GAO assessed the U.S. Postal Service's (USPS) response to the competition it faces in the marketplace, focusing on the: (1) constraints and obstacles that hinder effective USPS competition; and (2) major issues of pricing postal services in the competitive environment.
Matter for Congressional Consideration
|If Congress wishes USPS to compete effectively for business customers in parcel post and Express Mail, Congress should consider reexamining the provisions of section 403(c) of the Postal Reorganization Act. Congress should determine if volume discounting by USPS, in which all customers would be given the same volume discounts, would in fact result in undue or unreasonable discrimination among mailers and undue or unreasonable preference to a mailer, given that this practice is a widely used pricing strategy by private carriers.||The recommendations are being addressed in the proposed Postal Reform Act introduced by the Chairman of the House Subcommittee on the Postal Service. The proposal allows access to volume discounts on negotiated service agreements for similarly situated customers. GAO reaffirmed the recommendations in another report (GGD-96-8, November 15, 1995).|
|Congress should reexamine the ratemaking criteria set forth in the Postal Reorganization Act and consider amending the criteria to state that: (1) in allocating institutional costs, demand factors, including elasticities of demand, are to be given a weight that takes into account the need to maintain the long-term viability of USPS as a nationwide full-service provider of postal services; and (2) such use of demand factors will not be inconsistent with the rate criterion requiring the establishment of a fair and equitable rate schedule as long as each mail class recovers the direct and indirect costs attributable to that service and makes some contribution to institutional costs.||The recommendations are being addressed in the proposed Postal Reform Act introduced by the Chairman of the Subcommittee on the Postal Service. The proposal allows the Postal Service to set its competitive products prices according to demand factors as long as they cover attributable costs. GAO reaffirmed the recommendations in another report (GGD-96-8, November 15, 1995).|