U.S. Postal Service: USPS Needs to Clearly Communicate How Postal
Services May Be Affected by Its Retail Optimization Plans	 
(13-JUL-04, GAO-04-803).					 
                                                                 
A key element of the ongoing postal reform deliberations before  
Congress is the U.S. Postal Service's (USPS) ability to carry out
its mission of providing universal mail delivery and retail	 
services at reasonable rates. Many are concerned that USPS's	 
mission is at risk in the current operating environment of	 
increasing competition and decreasing mail volumes. Preserving	 
universal service, particularly in rural areas, is a goal of	 
postal reform. GAO was asked to discuss (1) how USPS provides	 
universal mail delivery services and access to postal services in
both rural and urban areas; (2) what changes USPS is making or	 
plans to make related to providing postal services, including	 
changes that may affect rural areas; and (3) what are the major  
issues that have been raised related to how USPS provides postal 
services.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-803 					        
    ACCNO:   A10932						        
  TITLE:     U.S. Postal Service: USPS Needs to Clearly Communicate   
How Postal Services May Be Affected by Its Retail Optimization	 
Plans								 
     DATE:   07/13/2004 
  SUBJECT:   Agency missions					 
	     Competition					 
	     Customer service					 
	     Delivery terms					 
	     Internal controls					 
	     Mail delivery problems				 
	     Performance measures				 
	     Postal facilities					 
	     Postal rates					 
	     Postal service					 
	     Mail processing operations 			 
	     Rural areas					 

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GAO-04-803

United States Government Accountability Office

GAO	Report to the Chairman, Committee on Governmental Affairs, U.S. Senate

July 2004

U.S. POSTAL SERVICE

  USPS Needs to Clearly Communicate How Postal Services May Be Affected by Its
                           Retail Optimization Plans

This report was initially issued on July 13, 2004. It was reissued on July
16, 2004, with the following changes to page 3, paragraph 1, sentences 3
and 4:

"about 95 percent of USPS's customers" was changed to "most of USPS's
customers"

"about 40 percent of customers" was changed to "about 32 percent of
customers"

"about 33 percent of customers" was changed to "about 41 percent of
customers"

In addition, in the first line of figure 7 on page 23, the following
change was made:

"Provided mail delivery to almost 37 million addresses" was changed to
"Provided mail delivery to almost 35 million addresses"

                                       a

GAO-04-803

Highlights of GAO-04-803, a report to the Chairman, Committee on
Governmental Affairs, U.S. Senate

A key element of the ongoing postal reform deliberations before Congress
is the U.S. Postal Service's (USPS) ability to carry out its mission of
providing universal mail delivery and retail services at reasonable rates.
Many are concerned that USPS's mission is at risk in the current operating
environment of increasing competition and decreasing mail volumes.
Preserving universal service, particularly in rural areas, is a goal of
postal reform. GAO was asked to discuss (1) how USPS provides universal
mail delivery services and access to postal services in both rural and
urban areas; (2) what changes USPS is making or plans to make related to
providing postal services, including changes that may affect rural areas;
and (3) what are the major issues that have been raised related to how
USPS provides postal services.

To provide convenient and costeffective services, GAO is recommending that
the Postmaster General provide improved transparency and communication to
Congress and other stakeholders through additional information related to
its retail optimization initiative, including the criteria USPS will use
to guide its decisions; USPS's process for involving stakeholders; the
impact on customers; and the time frames for implementation. USPS agreed
to review its communication processes, but not to specify its criteria or
time frames.

www.gao.gov/cgi-bin/getrpt?GAO-04-803.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Mark Goldstein at (202)
512-2834 or [email protected].

July 2004

U.S. POSTAL SERVICE

USPS Needs to Clearly Communicate How Postal Services May Be Affected by Its
Retail Optimization Plans

USPS provides its customers, regardless of where they live, with services
that include mail delivery at no charge and access to retail services.
However, differences exist in how, when, and where USPS provides these
services. These differences have always existed due to the nation's
geographic diversity and changes in technology, transportation, and
communications. Universal postal service is not defined by law, but
appropriations legislation requires 6-day mail delivery and prohibits USPS
from closing small, rural post offices. Delivery and retail decisions are
made primarily by local USPS officials with overarching guidance provided
by national policies and procedures. Local decisions are based on cost and
service factors, including the number and location of deliveries, quality
of roads, employee safety, and mail volume.

Postal Services Have Been Provided in Different Ways Over Time

USPS has taken actions, and is planning future actions, to improve the
efficiency of its delivery and retail networks. Overall, customers in
urban and rural areas will probably not see significant changes in
delivery services since most changes are focused on operational
improvements. On the retail side, USPS plans to provide more
cost-effective and convenient service by developing new, low-cost
alternatives; moving stamp-only transactions away from post office
counters; and optimizing its retail network. USPS's retail optimization
involves tailoring services to communities' needs and replacing
"redundant, low-value access points with alternative access methods." It
remains unclear how customers in rural areas will be affected by these
retail initiatives since most are planned for high-growth, high-density
areas.

Generally, postal customers are satisfied with the services provided to
them. The issues that have raised the greatest concerns from customers
include inconsistent mail delivery and the threat of post office closings
or reductions in post office hours. Also, concerns have been raised about
USPS's limited communication regarding its planned changes to its
networks. USPS's retail optimization could be an opportunity for USPS to
reduce its costs while improving customer service. However, USPS needs to
provide additional transparency and accountability mechanisms to better
communicate its retail optimization plans and raise stakeholders'
confidence that decisions will be made in a fair, rational, and fact-based
manner.

Contents

  Letter

Results in Brief
Background
Differences Exist in How USPS Provides Delivery and Retail

Services Actions to Improve Delivery and Retail Services Key Issues
Include Delivery Inconsistencies and the Uncertain

Future of Retail Network Conclusions Recommendation for Executive Action
Agency Comments and Our Evaluation

1 3 5

9 26

30 37 37 38

  Appendixes Figures Figure 1:

                 Appendix I: Objectives, Scope, and Methodology
                                       40
          Appendix II: Number of Post Offices by State, Year-end 2003
                                       42
      Appendix III: Agency Comments from the United States Postal Service
                                       44
Tables         Table 1: Key Events in Postal History, 1775-2004          6 
              Table 2: Key Delivery Decisions Made by Local Officials      10 
            Table 3: USPS Policies and Procedures for Establishing Carrier 
                                       Routes                              12 
            Table 4: Information on Selected Route Types, Fiscal Year 2003 13 
           Table 5: Post Offices, Stations, and Branches: Fiscal Year 1980 
                           Compared with Fiscal Year 2003                  24 
          Table 6: Customer Issues Documented by USPS, First 2 Quarters of 
                                  Fiscal Year 2004                         32 

Figure 2:

Figure 3: Figure 4: Figure 5: Figure 6: Figure 7:

Number of Post Offices per Capita Has Been
Decreasing 8
Rural Routes Cumulatively Have Grown at a Much
Greater Rate Than City Routes 14
Rural Routes Are Becoming More Dense 15
USPS's Different Modes of Delivery, Fiscal Year 2003 16
Modes of Delivery, Fiscal Year 2003 18
Overview of the Retail Network 20
Retail Alternatives Moving Away from Traditional Post
Offices 22

Contents

Abbreviations

NALC National Association of Letter Carriers
NDCBU Neighborhood Delivery Collection Box Unit
NRLCA National Rural Letter Carriers Association
PRC Postal Rate Commission
USPS United States Postal Service

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
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copyright holder may be necessary if you wish to reproduce this material
separately.

A

United States Government Accountability Office Washington, D.C. 20548

July 13, 2004

The Honorable Susan M. Collins Chairman, Committee on Governmental Affairs
United States Senate

Dear Chairman Collins:

The challenges facing the U.S. Postal Service (USPS)-that is, record
declines in mail volumes for some high-margin products, difficulties in
controlling costs and enhancing revenues, and increases in competition-
are not temporary problems that will fade away. Nevertheless, a common
message voiced by many postal stakeholders is that although change is
needed to address these and other significant challenges, the concept of
universal postal service needs to be preserved. These stakeholders believe
that providing universal postal service is the cornerstone of USPS's
mission; is essential to the nation's communications network and economy;
and is vital to the American people, many of whom rely upon the
consistency of mail delivery and convenient access to the retail postal
network. The concept of universal postal service, however, is not clearly
defined in law and has evolved over time with changes in technology,
transportation, and communications. These changes are continuing today,
raising some concerns about how they may affect future postal services-
including those in rural areas. USPS has noted that rural delivery
continues to provide a vital link between urban and rural America. Some
Members of Congress have stated that post offices are fundamental to the
identity of small towns, providing them with an economic and social
anchor.

A key discussion point in ongoing postal reform deliberations in Congress
is USPS's ability to carry out its mission of providing universal mail
delivery and postal retail services at reasonable rates. In April 2001, we
reported on the financial, operational, and human capital challenges that
threaten USPS's ability to carry out its mission in the 21st century and
remain selfsupporting through postal revenues. We placed USPS's
transformation efforts and long-term outlook on our high-risk list and
recommended that USPS develop a comprehensive plan to determine the
actions needed to address its major challenges. USPS issued its
Transformation Plan a year later, which identified steps to guide future
USPS operations. This plan included specific actions aimed at making the
delivery and retail networks more efficient and convenient for customers,
including promoting more efficient delivery routes and utilizing low-cost
retail transactions. The President also recognized the importance of
USPS's role and mission and

established the President's Commission on the United States Postal Service
(the President's Commission) to examine USPS's future. The President's
Commission issued a report in July 2003 that put forward a proposed vision
for USPS and recommendations to ensure the future viability of postal
services.1 The report emphasized the importance of maintaining
6-day-aweek, affordable, universal postal service and acknowledged that
USPS's mission is at risk in the current operating environment of
increasing competition and decreasing mail volumes. In addition, Congress
is also interested in maintaining a high level of postal services for the
American people and has held a number of hearings recently on postal
reform issues. We testified in November 2003, January 2004, and March 2004
about the information in the report issued by the President's Commission,
the challenges facing USPS in carrying out its mission, and the key
elements of postal reform.2

In response to your request, this report addresses three objectives: (1)
how does USPS provide universal mail delivery service and access to postal
services in both rural and urban areas; (2) what are the changes USPS is
making and planning to make related to providing postal services,
including changes that may affect rural areas; and (3) what are the major
issues that have been raised related to how USPS provides postal services?

Our review of USPS's delivery and retail services is based upon an
analysis of USPS policies and procedures; the roles and responsibilities
of postal officials involved in making delivery and retail decisions;
delivery and retail data provided to us from USPS; proposed changes in
related documents, such as the Transformation Plan and the President's
Commission's report on the U.S. Postal Service; and interviews with key
postal stakeholders, including USPS officials, representatives from
employee unions and management associations, and the Postal Rate
Commission (PRC). We assessed the reliability of the data provided to us
from USPS and found them to be sufficient for our purposes of providing a
basic description of USPS's delivery and retail networks. A more detailed
discussion of our

1The President's Commission on the United States Postal Service, Embracing
the Future: Making the Tough Choices to Preserve Universal Mail Service
(Washington, D.C.: July 31, 2003).

2U.S. General Accounting Office, U.S. Postal Service: Bold Action Needed
to Continue Progress on Postal Transformation, GAO-04-108T (Washington,
D.C.: Nov. 5, 2003); U.S. Postal Service: Key Elements of Comprehensive
Postal Reform, GAO-04-397T (Washington, D.C.: Jan. 28, 2004); and U.S.
Postal Service: Key Reasons for Postal Reform, GAO-04-565T (Washington,
D.C.: Mar. 23, 2004).

objectives, scope, and methodology is included in appendix I. We conducted
our review at USPS headquarters in Washington, D.C., between June 2003 and
June 2004 in accordance with generally accepted government auditing
standards. We requested comments from USPS on a draft of this report, and
its comments are discussed later in this report and reproduced in appendix
III.

Results in Brief	USPS customers are provided, regardless of where they
live, with postal services that include mail delivery at no charge and
access to USPS's retail services. Differences exist, however, in how USPS
provides these services, particularly in how, when, and where mail
delivery service is provided and how customers have access to the postal
retail network. For example, although most of USPS's customers receive
delivery service 6 days a week, deliveries are made less frequently to
businesses that are not open 6 days a week, seasonal areas that are not
open year-round, and some customers in remote areas. Also, about 32
percent of customers who receive carrier delivery receive mail at their
front doors; about 41 percent of customers receive it at curbline
mailboxes; and about 27 percent of customers receive it at centralized
delivery points that contain multiple receptacles in one location.
Further, on the retail side, there is no standard for customer access
requirements. Customers in more densely populated areas generally have
access to postal services at more locations than customers in less densely
populated areas. These differences have existed throughout the more than
200 years of postal services in the United States and have developed due
to the nation's geographic diversity and changes in technology,
transportation, and communications. USPS's statutory framework establishes
general postal service policy but does not specifically define USPS's
universal service obligation or how USPS is to carry it out. However, in
USPS's annual appropriations acts, Congress requires USPS to continue its
6-day-a-week delivery and rural delivery service and prohibits the
consolidation or closure of small rural or other small post offices. USPS
has interpreted its universal service obligation by establishing a set of
overarching national policies and procedures that provide the basis for
field staff, such as postmasters who are in charge of post offices, to
make decisions related to the local provision of delivery and retail
services. These field officials, who are familiar with the daily
operations of the areas being served, make their decisions by considering
such cost and service factors as the number, location, and projected
growth of delivery points in the area; the quality of the roads and
transportation; employee safety; mail volume; projected costs and
efficiency; customer demand; and the type of service offered in nearby
areas.

USPS has taken actions, and is planning future actions, to improve the
efficiency and effectiveness of its delivery and retail networks. In the
delivery area, USPS is continuing efforts to make delivery operations more
cost-effective by utilizing efficient routes and delivery locations (e.g.,
to curbline boxes). USPS also is implementing several initiatives-such as
standardizing its operations and deploying new automation to reduce manual
mail sortation-aimed at improving the consistency of delivery time,
reducing delivery workhours, and increasing the number of deliveries per
route. These actions will not likely result in a noticeable change in
delivery service for customers in urban or rural areas because most of the
changes are focused on operational improvements. On the retail side, USPS
has instituted a strategy of providing low-cost retail alternatives that
may decrease reliance on post offices; moving simple transactions such as
stamp purchases away from post office counters; and optimizing its retail
network. USPS stated in its Transformation Plan that the objective of its
retail network optimization initiative is to tailor retail services to the
individual needs of communities and to replace "redundant, low-value
access points with alternative access methods." It is not clear how
customers in rural areas may be affected by these planned retail changes,
because most of USPS's initiatives are planned for high-growth,
highdensity areas.

USPS survey data show that postal customers are generally satisfied with
the postal services provided to them; however, when customers have raised
issues, they generally involve inconsistent services on the delivery side
and the potential threat of post office closings or reductions in post
offices hours on the retail side. In addition, customers, postal
employees, and Congress have raised issues regarding limited communication
about USPS's plans to optimize its retail network. Specifically, customers
have raised issues about how their access and convenience to services may
be affected; employees have raised issues about how their jobs and
compensation may be affected; and some Members of Congress are concerned
about how USPS plans to make decisions related to optimizing its
infrastructure. USPS has also raised concerns about legal requirements and
practical constraints that limit its flexibility to make changes to the
postal network.

We agree that finding efficiencies in the retail network is important for
USPS and that USPS's retail optimization initiative could be an
opportunity for a "win-win" outcome for both USPS and its stakeholders.
Through improved communication and collaboration with affected
stakeholders, USPS could demonstrate that it wants to effectively partner
with its

customers in communities, both urban and rural, to provide more convenient
and cost-effective services, while preserving facilities needed to support
universal postal service. We are recommending that the Postmaster General
provide improved transparency and communication to inform Congress and
other stakeholders of the actions USPS plans to take regarding its retail
optimization strategy, including the criteria that will guide its
decisions; the process that will be used to involve postal stakeholders;
the impact on customers, including those in rural areas; and the time
frames for implementing all phases of its retail optimization initiative.
In commenting on a draft of this report, USPS concurred with "the spirit
of the report's findings" that improved transparency and communication are
needed and said it would be reviewing its process for communicating
changes to the retail network with its local districts and other
stakeholders. USPS also stated that the criteria used for retail decisions
vary throughout the postal network, and that it could not provide a time
frame for implementing all phases of the retail optimization initiative.
We believe that it is important to establish and communicate the criteria
it considers as the basis for its retail decisions to help stakeholders
feel confident that decisions are made in a fair, rational, and fact-based
manner. Furthermore, we believe that time frames can, and should, be
established for the different phases of USPS's retail initiatives in order
to not only provide postal stakeholders with information on when these
initiatives will be deployed, but also to help USPS and stakeholders
evaluate the performance of these initiatives in terms of how they fit
into the network optimization plans as a whole and their impact on costs,
rates, and mailers' business plans.

Background	USPS is an independent establishment of the executive branch
with a mission to bind the nation together through the personal,
educational, literary, and business correspondence of the people. The
Postal Reorganization Act of 1970 reorganized the former U.S. Post Office
Department into the United States Postal Service. USPS's current legal
framework

o 	requires it to break even over time and intended it to be
self-supporting from postal operations;

o 	requires it to provide a maximum degree of effective and regular postal
services to rural areas, communities, and small towns where post offices
are not self-sustaining; and

o 	prohibits it from closing small post offices solely because they are
operating at a deficit, it being the specific intent of Congress that
effective postal services be insured to residents of both urban and rural
communities.3

USPS's mission and role, and the processes used to carry out mail delivery
and retail services, have evolved over time with changes in technology,
transportation, and communications. Key events in postal history are
listed in table 1.

          Table 1: Key Events in Postal History, 1775-2004 Year Event

1775	Benjamin Franklin appointed first Postmaster General under the
Continental Congress-customers received mail delivery at post offices

1823 Navigable waters designated post roads by Congress

1838 Railroads designated post routes by Congress

1847 U.S. postage stamps issued

1858 Street letter boxes installed

1860 Pony Express started

1863	Free city delivery instituted; postage rates became uniform
regardless of distance

1901 Number of post offices reached its peak at 76,945 offices

1902 Rural free delivery became permanent service

1907 United Parcel Service founded

1911 First carriage of mail by airplane

1913 Parcel Post instituted

    1950 Residential deliveries reduced from twice a day to once a day 1964
  Self-service post offices opened 1970 Postal Reorganization Act created the
                          United States Postal Service

1972 Stamps by Mail instituted

1973 Federal Express began operations 1987 Stamps by Phone instituted

                             339 U.S.C. S: 101(b).

(Continued From Previous Page)

Year Event

  1990 Easy Stamp allowed computer purchase of stamps 1992 Stamps sold through
                                      ATMs

1997 Stamps Online instituted

2004 Automated Postal Center self-service machines deployed

Sources: USPS, www.fedex.com, www.ups.com.

Most customers in the early development of the national post office had to
pick up their mail from a post office. The first step toward universal
delivery service was taken in 1863 when Congress declared that free city
delivery would be established at post offices where income from postage
was sufficient to pay all expenses of delivery. Mail delivery service was
gradually extended to smaller cities and was later extended to rural areas
in 1902. Advances in the delivery of mail coincided with transportation
improvements. Various transportation modes developed throughout history
have been used to transport mail, ranging from stagecoaches in the 1700s;
steamboats, trains, and the Pony Express in the 1800s; and finally by
airplanes, automobiles, and trucks in the 1900s. Furthermore, advances in
transportation were particularly important in rural areas; rural delivery
helped stimulate road improvements to these areas because passable roads
were a prerequisite for establishing new delivery routes.

Throughout the nation's history, the post office has been a key component
in the provision of postal services. Post offices proliferated throughout
the 1800s as the United States' territory grew and new postal routes were
established. At the turn of the 20th century, the number of post offices
reached its peak with nearly 77,000 offices, which was an average of 1
post office for every 1,000 residents in the country (see fig. 1).

Figure 1: Number of Post Offices per Capita Has Been Decreasing Number of
post offices (in thousands)

U.S. population (in millions) 300 250 250

200 200

150 150

100 100

50 50

00

Year

Post offices

U.S. population

Sources: USPS, U.S. Bureau of the Census.

The number of post offices per capita declined throughout the 20th
century, to an average of 1 post office for every 10,000 people in 2000.
As transportation improved, it became easier for rural carriers to deliver
mail to a wider area, which decreased reliance on post offices for being
the primary delivery and collection point. Furthermore, rural carriers
provided retail services as part of their routes, so customers did not
have to travel to a post office for these services.

1790 1800 1810 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940
                         1950 1960 1970 1980 1990 2000

Differences Exist in How USPS Provides Delivery and Retail Services

Providing mail delivery and access to retail postal services is central to
USPS's mission and role. According to USPS officials, all USPS customers
are eligible for free mail service and most receive delivery 6 days a
week. Furthermore, all customers have access to retail services provided
through the postal network, including the ability to purchase stamps from
post offices or other retail facilities. Differences exist, however, in
how USPS provides these services, particularly in where, when, and how
customers receive the mail and have access to the postal network. These
differences have always existed and have evolved with changes in
technology, transportation, and communications. Delivery and retail
decisions are made primarily by local staff (i.e., district employees and
local postmasters), with overarching guidance provided by national USPS
policies and procedures. These local field staff consider such factors as
the number and location of delivery points in the area, the quality of the
roads and transportation, employee safety, mail volume, projected costs,
and the type of service offered in nearby areas. The following information
in this section provides an overview of the current USPS delivery and
retail networks, recent trends, and how decisions about delivery and
retail networks are made.

Overview of USPS's Delivery Services

USPS's legal and statutory framework provides the basis for its delivery
services. For example, USPS is to

o 	"provide prompt, reliable, and efficient services to patrons in all
areas and shall render postal services to all communities";

o 	"provide a maximum degree of effective and regular postal services to
rural areas, communities, and small towns where post offices are not
self-sustaining";

o 	"receive, transmit, and deliver throughout the United States...written
and printed matter, parcels, and like materials"; and

o 	"serve as nearly as practicable the entire population of the United
States."4

439 U.S.C. S: 101(a), 39 U.S.C. S: 101(b), and 39 U.S.C. S: 403(a).

These provisions are considered key parts of universal service and provide
the general operational guidance for USPS. USPS has the ability to
establish delivery service within these broad provisions but by law must
operate in a break-even manner. A long-standing provision in the
appropriations acts for USPS requires the continuation of 6-day delivery
and rural delivery service.5

According to USPS officials, delivery decisions are made at the local
levels. National policies outline overall operational guidance, but
discretion is provided to local officials, including area and district
managers and postmasters, to make delivery decisions in their respective
areas. These local officials-who, according to national USPS officials,
are most familiar with the area to be served-make decisions related to the
type, frequency, and location of delivery service that will be provided to
a given address. A summary of key decisions is included in table 2, and
additional information on each of these decisions is provided in the
following sections.

 Table 2: Key Delivery Decisions Made by Local Officials If carrier service is
                  selected, the following decisions are made:

    Key decisions              Options                 Useful statistics      
                    Carrier service or delivery to       Approximately 86% of 
Type of service          a USPS retail facility        delivery points are 
                        to be collected by the        served by a carrier.    
                               customer            
     Frequency of    6 days a week or less than 6  Most deliveries are 6 days 
       service               days a week                    a week.           

Type of carrier route City, rural, or highway contract route	67% of all
routes are city routes. Rural routes, however, have been increasing in the
last 10 years, while the number of city routes has recently declined.

Modes of delivery Door, curbline, or centralized delivery	41% of
deliveries are to curbline mailboxes, 32% are to the door, and 27% are to
centralized boxes.

Source: USPS.

According to USPS, local officials select the delivery method that
provides service in the most efficient and cost-effective manner. They
consider such factors as the number and location of delivery points in the
area, the quality

5For example, Transportation, Treasury, and Independent Agencies
Appropriations Act, 2004, Pub. L. No. 108-199, div. F, title IV, 118 Stat.
340 (Jan. 23, 2004); and 39 U.S.C. S: 403 note. The provision states that
"6-day delivery and rural delivery of mail shall continue at not less than
the 1983 level."

of the roads and transportation, employee safety, mail volume, projected
costs, and the type of service offered in nearby areas. These local
officials also are provided with specific manuals that contain national
guidance on establishing delivery service, as well as on how to carry out
these operations on a day-to-day basis.

Type of Service	USPS customers are entitled to receive mail delivery
service at no charge in one of two ways: via mail carrier or via the
customer retrieving his or her mail at a designated postal facility. The
majority of USPS's residential and business deliveries are made by mail
carriers-about 86 percent in fiscal year 2003. Approximately 14 percent of
USPS's deliveries are where customers travel to a USPS facility, primarily
a post office, to retrieve their mail. These customers receive mail
service either via box service or general delivery pick up. Box service
may be provided (1) at no charge to customers who are not eligible for
carrier service-this would represent their free mail delivery service-or
(2) at a fee to customers to supplement their existing delivery service.
Customers who are not eligible for carrier delivery and whose retail
facility does not provide box service are provided with general delivery
service where they retrieve their mail from a post office counter at no
charge.

While current mail recipients have access to mail delivery service at no
charge-the cost of delivery is borne by postal ratepayers-the process by
which customers are eligible for free delivery has recently been
clarified. In the 1996 Mail Classification Case before the PRC, USPS
proposed eliminating the fee for box service that it charged customers who
were not eligible for carrier delivery. At the time of this case, USPS
estimated that about 940,000 boxes would be offered free of charge as a
result of this policy. This proposal, however, did not require USPS to
offer a free box to all customers ineligible for carrier delivery, such as
those ineligible due to their proximity to a postal facility (i.e., the
quarter-mile rule).6 These customers would only be allowed to receive
general delivery service at no charge. The PRC, in its ensuing
recommendation, raised issues about inequities regarding customer
eligibility for free box delivery and urged USPS to rectify them. USPS
dropped the quarter-mile-rule provision during the following 1997 rate
case, and, as such, customers ineligible for carrier service became
eligible for free box service.

6Under the quarter-mile rule, USPS exempted itself from providing carrier
delivery service to customers who reside within a quarter-mile of noncity
delivery post offices (within a halfmile for the smallest post offices).

Frequency of Service	According to USPS officials, most customers receive
mail delivery 6 days a week, but there are customers who do not. These
customers include businesses that are not open 6 days a week;
resort/seasonal areas that are not open year-round; or areas that are not
easily accessible due to transportation constraints, such as remote areas
that may require the use of boats or airplanes to deliver the mail. For
example, mail is transported by mules for delivery in the Grand Canyon, by
snowmobiles for delivery in some areas of Alaska, and by boats for
delivery on islands in Maine and other states.

Type of Carrier Routes	As previously stated, the majority of USPS
customers receive carrier service. Once it is determined that a customer
is eligible for carrier service, USPS determines the type of carrier route
service that will be provided. USPS has three primary carrier route
categories-city, rural, and highway contract routes-and has national
policies and procedures that contain the criteria used to establish,
manage, and operate the three types of routes. Excerpts from these policy
and procedure manuals are provided in table 3.

     Table 3: USPS Policies and Procedures for Establishing Carrier Routes

City delivery

Establishment is considered when the following requirements are met:

o  Within the area to be served there is a population of 2,500 or more or
750 possible deliveries.

o  At least 50 percent of the building lots in the area to be served are
improved with houses or business places. Where a house or building and its
yard or ground covers more than one lot, all lots so covered are
considered improved.

o  The streets are paved or otherwise improved to permit travel of USPS
vehicles at all times, without damage or delay.

o  Streets are named and house numbers are assigned by the municipal
authorities in accordance with Management Instruction DM-94089-03,
Addressing Conventions.

o  The street signs are in place and the house numbers are displayed.

o  The rights-of-way, turnouts, and areas next to the roads and streets
are sufficiently improved so that the installation and servicing of boxes
are not hazardous to the public or USPS employees.

o  Satisfactory walks exist for the carrier when required.

o  Approved mail receptacles or door slots are installed at designated
locations.

                                 Rural delivery

Establishment of rural delivery service is considered when the following
requirements are met:

o  Customer Density: A newly established route should serve an average of
at least one residential or business delivery per mile. On routes of less
than 10 miles, an average of at least six deliveries per mile should be
eligible for service before a route is established. Unusual conditions
such as the volume and type of mail should be considered.

o  Minimum Workloads: In post offices with no existing rural delivery
service, the proposed route evaluation should reflect sufficient workload
to meet minimum rural carrier scheduling requirements efficiently.

o  Roads: Roads should generally be public and must be well maintained and
passable for delivery vehicles year-round. Rural delivery service is not
established over roads that are not kept in good condition, that are
obstructed by gates, or that cross unbridged streams that are not fordable
throughout the year. If travel over private roads is proposed, the person
responsible for road maintenance must provide a written agreement to keep
the road passable at all times. If these conditions are not met, delivery
can be withdrawn.

(Continued From Previous Page)

Highway contract box delivery

Established after USPS solicits contracts for the transportation of mail
between post offices or other designated points where mail is received or
dispatched. These contract carriers are not USPS employees.

o  Highway contract route advertisements and contracts state whether box
delivery, collection service, or other mail services are required and
specify the area to be served.

o  In addition to usual box delivery and collection service on some
routes, carriers are required to provide retail functions, such as selling
stamps, delivering and accepting special service mail, and accepting money
order applications.

Source: USPS.

USPS's "rural" designation does not necessarily reflect geographically
defined rural areas, and there is no population threshold for a
USPSdesignated rural or city route.7 Rural carrier routes encompass a wide
range of geographic areas and may cover both less-densely populated areas
generally considered to be rural as well as suburban areas generally
considered to be urban. A USPS rural route such as one in Charlotte, North
Carolina, or Jacksonville, Florida, may cover a geographically defined
suburban area and may contain a similar number of delivery points as a
city route. USPS officials explained that many suburban areas met rural
route criteria when they were originally established. However, they also
stated that although the population may have grown in an area that now may
be considered suburban, USPS maintains existing operations in this
situation. Thus, it retains the rural route classification. A brief
overview of these route types is provided in table 4.

Table 4: Information on Selected Route Types, Fiscal Year 2003

Possible Average Type of carrier deliveries deliveries route (millions)
Routes per route Carriers

                        City  84.7  164,975  513     229,404 (USPS employees) 
                       Rural  34.5   72,743  474      Full-time: 61,611 (USPS 
                                                                   employees) 
                                                            Part-time: 56,451 
            Highway contract   2.2   10,065  220 5,864 (route is served by a  
                                                           contract employee) 

                                 Source: USPS.

7USPS policies that establish city delivery state the following: "The
postal customer population may vary greatly from the general census
population because of different boundary interpretations and
designations."

City routes (67 percent of all routes) tend to be located in densely
populated areas with high concentrations of delivery points. As figure 2
shows, growth in city routes has stagnated since 1994 and has been
declining since 2000, while growth in rural routes continues.

Figure 2: Rural Routes Cumulatively Have Grown at a Much Greater Rate Than
City Routes

Cumulative percentage change 70

60

50

40

30

20

10

0

Fiscal year

City routes Rural routes

Source: USPS.

Rural routes, accounting for only about 29 percent of all routes, are the
fastest growing type of route. Of the 1.8 million delivery points added in
fiscal year 2003, 1.2 million delivery points are located on rural routes.
Rural routes encompass a wide range of areas, with some of the larger
routes serving hundreds of delivery points and some smaller routes having
just 1 delivery per mile. Not only are rural routes the fastest growing
route type, the number of deliveries per route (route density) is also
increasing. Figure 3 shows that rural routes with 12 or more deliveries
per mile have been increasing at a much faster rate than rural routes with
fewer than 12 deliveries per mile. Furthermore, as shown in table 4, the
average deliveries

198319841985198619871988198919901991199219931994199519961997199819992000200120022003

per route for city routes and rural routes are relatively similar, 513 and
474, respectively.

                 Figure 3: Rural Routes Are Becoming More Dense

                            Numbers in thousands 40

                                       35

                                       30

                                       25

                                       20

                                       15

                                      10 5

                                       0
198319841985198619871988198919901991199219931994199519961997199819992000200120022003

Fiscal year

12+ deliveries per mile Fewer than 12 deliveries per mile Source: USPS.

The remaining 4 percent of routes are highway contract routes (10,065 in
fiscal year 2003), which serve areas that are not serviced by city or
rural routes. On some of these routes, deliveries are made along the
line-of-travel to individual addresses as mail is being transported from
one facility to another.

Modes of Delivery	USPS has guidance to help determine the physical
location where the mail will be delivered. USPS works with local real
estate developers when determining the locations of delivery for new
addresses and has three general modes of delivery that specify the
physical location of the delivery: door, curbline, or a centralized unit
that contains mail receptacles for multiple customers. Figure 4 provides
the number of these modes of delivery as of the end of fiscal year 2003.

Figure 4: USPS's Different Modes of Delivery, Fiscal Year 2003

Curbline - 49 million Other (primarily door) - 39 million Centralized - 33
million

                              Sources: USPS, GAO.

Note: This figure includes the modes of delivery that are used on carrier
service. It does not include the nearly 20 million deliveries made to USPS
retail facilities (i.e., to post office boxes or general deliveries).

Door delivery once was the norm in urban settings; however, USPS changed
its policy in 1978 to limit additional door deliveries to further enhance
delivery efficiencies (door deliveries remain the most expensive mode of
delivery). As a result, curbline delivery and centralized delivery are the
fastest growing modes of delivery. According to USPS delivery officials,
the only instance where new delivery points would receive door delivery
would be if the new delivery point is established on a block that
currently receives door delivery. Centralized units include cluster boxes,
Neighborhood Delivery Collection Box Units (NDCBU), and apartmentstyle
boxes. Cluster box units are centralized units of individually locked
compartments, while NDCBUs are centralized units of more than eight
individually locked compartments. Between fiscal years 2001 and 2003, the
number of curbline boxes increased by more than 2 million; the number of
centralized boxes has grown by about 1.8 million; and the number of other
deliveries (primarily door), which are not available for most new
deliveries, decreased by almost 400,000.

Differences in Delivery According to USPS, it must balance the legal
requirement to operate as a Service Are Based on Cost break-even entity
with the need to serve its customers in a competitive and Service
Considerations environment. As such, the following cost and customer
convenience trade

offs are associated with each of the previously discussed delivery

decisions.

o 	Carrier service v. the customer collecting mail from a USPS facility.
If carrier service is provided, USPS incurs the cost of providing the
personnel and transportation to support these services, but most customers
receive their mail closer to their residences or businesses. On the other
hand, requiring customers to travel to their respective post office to
collect mail may be more inconvenient for the customer, but USPS does not
have to incur personnel and transportation costs associated with carrier
delivery.

o 	6-day-a-week delivery v. something less than 6-day-a-week delivery.
According to USPS, the more days that delivery is provided, the higher the
cost of providing this service. On the other hand, customers, Congress,
and the President's Commission have noted the importance of 6-day-a-week
delivery. USPS studied the impact of eliminating Saturday delivery and
found that the possible savings were not significant enough to offset the
potential risks that any reduction in delivery days would have a negative
impact on USPS's competitive position.

o 	City v. rural v. highway contract box delivery routes. Although the
delivery service provided on each of these routes is generally similar,
carriers on rural and highway contract routes provide retail services,
such as stamp sales, while city carriers do not. A USPS official stated
that there are significant cost differences between the different types of
routes. USPS estimated that the additional annual cost in fiscal year 2003
for each city door delivery ($295) was more than twice as expensive as
rural delivery ($143) and over three times as expensive as highway
contract deliveries ($90). The USPS official stated that a key factor in
determining the total cost of a route is the carriers' compensation
systems, which differ for each group of carriers. The systems for city and
rural carriers are collectively bargained between USPS and their
associated unions-the National Association of Letter Carriers (NALC)
represents city carriers, and the National Rural Letter Carriers
Association (NRLCA) represents rural carriers. Generally speaking, city
carriers are compensated on an hourly basis, while rural carriers are
compensated on a salary basis. Agreements entered into by these groups
also establish duties and responsibilities for the carriers and USPS
management. Compensation for contract carriers are established via the
contract posted by USPS.

o 	Door v. curbline v. centralized modes of delivery. According to USPS,
the cost per delivery generally increases as the delivery is made closer
to the customer's door. Delivery to a customer's door is the least

efficient mode of delivery because the carrier has to dismount from the
vehicle. Deliveries to centralized units, such as cluster boxes and
NDCBUs, are the most efficient form of carrier delivery because carriers
can make multiple deliveries in one stop. The mode of delivery to be
provided is considered by USPS when determining the type of service that
will be used. For example, most deliveries on rural and highway contract
routes are farther away from the customer's front door than deliveries on
city routes. Figure 5 shows that most rural and highway contract
deliveries in fiscal year 2003 were to the curb rather than at the door.

Figure 5: Modes of Delivery, Fiscal Year 2003

City routes Rural routes Highway contract routes

                        Other delivery (primarily door)

Source: USPS.

USPS local officials select the delivery option that provides service in
the most efficient and cost-effective manner, and they consider numerous
cost and customer service factors when making these decisions. This
balance between cost and customer convenience is further illustrated in
our discussion of USPS's retail network.

Overview of USPS's Retail Services

As part of meeting its universal service obligation, USPS is required to
do the following:

o 	USPS should serve as nearly as practicable the entire U.S. population
and provide postal facilities in such locations that give postal patrons
ready access to essential postal services consistent with reasonable
economies of postal operation.8

o 	USPS should provide a maximum degree of effective and regular postal
services to rural areas, communities, and small towns where post offices
are not self-sustaining. No small post office shall be closed solely for
operating at a deficit, it being the specific intent of Congress that
effective postal services be insured to residents of both urban and rural
communities.9

Historically, post offices, stations, and branches served as the primary
access points for providing postal services to most customers. These
facilities were located in towns and communities across the country and
provided key locations where mail could be collected and delivered. Figure
6 illustrates the current network of these retail facilities.

839 U.S.C. S:S: 403(a) & (b)(3). 939 U.S.C. S: 101 (b).

Figure 6: Overview of the Retail Network

If additional retail points are needed, then subordinate retail facilities
are used

Source: USPS.

Note: Branches are units of a main post office located outside the
corporate limits of a city or town, while stations are units of a main
post office located inside the corporate limits of a city or town. Also,
in small communities where the main post office has been discontinued, a
contract postal unit will be designated as the Community Post Office.

In addition to traditional brick-and-mortar retail facilities, USPS
currently offers retail services through other alternatives, such as
self-serving vending machines, ATMs, grocery and drug stores, and the
Internet. Figure 7 illustrates many of these retail alternatives.

                 [This page has been intentionally left blank]

Figure 7: Retail Alternatives Moving Away from Traditional Post Offices

First-Class stamps are distributed to participating retailers (e.g.,
grocery stores, drug stores, and ATMs). These services were available in
about 40,000 locations in fiscal year 2003. Partnership with Hallmark Gold
Crown Stores for use of postage meters and retail services at almost 500
stores at end of fiscal year 2003 (and 700 more in fiscal year 2004).

Self-Service Platform/Automated Postal Center

Funding approved for manufacture and deployment of 2,500 units by November
2004. Self-service kiosks designed to replace aging self-service vending
equipment. Provide 80% of the services provided at a retail counter and
make payments using debit/credit cards. Deployed in post office lobbies
and high-traffic areas (both postal and nonpostal).

Vending Machines

There were 29,325 revenue-generating machines in 21,292 locations in
fiscal year 2003. Located in post offices and other high-traffic areas
(both postal and nonpostal). Includes stamp machines (both single and
booklets) and multicommodity machines (includes various types of postage
and telephone cards).

 Sources: USPS, National Rural Letter Carriers Association, www.usps.com, GAO.

Postal services available through these access points can include
purchasing stamps and postage, mailing packages, and sending money orders.
Differences exist, however, in how access to retail service is provided to
customers across the country. These differences (1) exist in terms of what
types of retail options customers have access to and where these retail
options are located and (2) are based on cost and customer service
determinations made by local USPS officials. This section identifies
access points currently provided by USPS, describes differences in the
network, and explains why these differences exist.

The wide variety of retail options currently offered by USPS differs
significantly from its original retail network. Changes in technology,
transportation, and geography diminished the need for a large network of
post offices, and the number of post offices per capita has consistently
declined since the early 1900s (see fig. 1). Table 5 shows that over the
last 20 years, the number of post offices, stations, and branches has
decreased by over 1,900 units. This decrease reflects USPS's movement
toward fewer "bricks-and-mortar" facilities.

Table 5: Post Offices, Stations, and Branches: Fiscal Year 1980 Compared
with Fiscal Year 2003

                                                                   Percentage 
                            Facility type  FY 1980 FY 2003  Change     change 
                             Post offices   30,326  27,556  -2,770      -9.1% 
         Classified branches and stations    4,109    5,796  1,687       41.1 
           Contract branches and stations    3,346    2,777   -569      -17.0 
                   Community Post Offices    1,705    1,450   -255      -15.0 
                                    Total   39,486  37,579  -1,907      -4.8% 

Source: USPS.

USPS still has almost 28,000 post offices nationwide, and these post
offices remain a key access point for USPS's nationwide retail network.
USPS does not have specific standards for establishing post offices on the
basis of population density or distance between post offices. The number
of post offices and retail facilities compared with the population of the
area served differs throughout the country. Appendix II provides
information on the number of retail postal facilities in each state, along
with each state's population. For example, states such as North Dakota and
South Dakota that have a relatively low-population density tend to have a
lower ratio of

people per USPS retail facility (i.e., fewer than 2,000 residents for
every USPS retail facility). On the other hand, states such as Florida and
California that have a relatively high-population density tend to have a
higher ratio of people per USPS retail facility (i.e., about 15,000
residents for every USPS retail facility).

Postal officials told us that customers of smaller post offices tend to be
more dependent on their post office for access to the postal network.
Survey data collected for the President's Commission showed that rural
customers reported visiting their post offices more often than customers
in urban areas. This issue of dependency is important to note when
considering retail access because USPS recognizes that customer use of
post offices versus other retail alternatives varies. For example,
according to USPS, many of the new retail alternatives, such as
consignment with private retailers such as grocery stores and ATMs, have
been deployed primarily in high-growth, high-population areas
(coincidentally, these areas are where many retail competitors to USPS are
located). Customers in these high-growth, high-population areas may not be
as dependent on a post office for meeting their daily postal needs, and
therefore they utilize these alternative methods of accessing USPS's
retail network.

Retail Decisions Are Based on Cost and Customer Access Considerations

Differences exist throughout the postal network in terms of how and where
customers have access to USPS's retail network. USPS officials stated that
USPS's approach to the retail network requires a balance of cost and
service considerations and incorporates such factors as customer demand,
the population of the surrounding area, the post office's physical
location, mail volumes, costs, and revenues.

Many of USPS's retail alternatives are aimed at offering more efficient,
accessible ways of providing retail service, particularly in high-growth,
high-revenue areas. When deciding where to deploy these alternatives, USPS
officials told us that they consider both (1) the location where a retail
option is needed and (2) the type of retail options that should be
deployed. They also consider customer access needs while balancing economy
and efficiency concerns. For example, it is more costly for USPS to
provide retail service at a post office counter than via its Web
site-www.usps.com. Some customers, however, may not have Internet service
or may prefer going to their local post office to conduct their postal
transactions. Moreover, USPS has stated that opening new post offices is
considered only when area service needs cannot be met through its current
facilities or by less costly alternatives. USPS has stated that whenever
possible it

establishes contract postal units, which can provide equal service without
the costs associated with building and operating new post offices. These
units are privately owned and operated and, as such, are less expensive.
USPS opened 666 contract stations and branches in fiscal year 2003.

Actions to Improve Delivery and Retail Services

USPS faces the continuing challenge of providing high-quality postal
services while absorbing the costs associated with an ever-increasing
delivery network. USPS estimated that serving its new delivery points in
fiscal year 2003 would add roughly $270 million in annually recurring
delivery costs. At the same time, USPS's revenue per delivery declined
each year since fiscal year 2000. USPS and other stakeholders have
recognized these challenges, which have been highlighted as part of USPS's
Transformation Plan and the President's Commission's report. USPS has
taken actions, and is planning future actions, to deal with these
challenges and improve the efficiency and effectiveness of its delivery
and retail networks. These actions will include the following: on the
delivery side, emphasizing cost-effective routes and delivery locations
(i.e., to curbline boxes); and on the retail side, providing low-cost
alternatives and optimizing its retail network. The actions planned in the
delivery area may not result in a noticeable change of service for people
in rural areas. Customers in rural areas may experience greater access to
USPS's retail network via improvements to www.usps.com, but actions to
promote other low-cost alternatives are primarily targeted toward
customers in highgrowth, high-density areas. Furthermore, it is not clear
how rural customers may be impacted by USPS's efforts to increase
efficiencies by optimizing its retail network. This section provides an
overview of the actions that USPS is planning to take, in both the
delivery and retail areas, and what these actions are intended to achieve.

Actions to Improve Efficiency and Effectiveness in USPS's Delivery Network

USPS has high costs related to its nationwide infrastructure and
transportation network, which includes delivering mail 6 days a week to
most of the 141 million addresses nationwide. Achieving efficiencies in
this area is difficult because the network grows by approximately 1.7
million new addresses each year. Mail volumes have recently been
decreasing, and USPS is facing increasing per-piece delivery costs since
carriers must make deliveries even if they have fewer letters to deliver.
As previously discussed, USPS has already taken actions to improve
delivery efficiency, including promoting rural routes and emphasizing
curbline and centralized

modes of delivery. These actions are likely to continue in both suburban
and rural areas.

USPS's initiatives for increasing rural delivery efficiency may not be
noticeable to rural customers because they relate to improving internal
USPS operations, rather than changing residential delivery. These
initiatives include sending managers through a training program to ensure
that they understand the basic concepts of managing rural delivery;
distributing electronic operations newsletters that provide specific
strategies for reducing rural workhours and raising awareness of the need
to focus on rural management; and implementing a rural time review, which
is a process to examine and analyze the timekeeping, recording, and
reporting process for rural delivery.

On a more comprehensive, nationwide basis, USPS has implemented
initiatives aimed at increasing the efficiency of the overall delivery
network. USPS has established a route optimization effort meant to help
determine the best way to route carriers. USPS hopes this effort will lead
to a reduction in workhours, vehicle mileage, and costs, while at the same
time improving safety. According to USPS, automation improvements, such as
the Delivery Point Sequencing of mail, will increase efficiency by
automating some of the mail sorting activities that are currently done
manually by mail carriers.10 This automation would decrease the amount of
time that a carrier would spend sorting the mail and increase the amount
of time that a carrier could be out making more deliveries.

Actions to Improve Efficiency and Customer Access to USPS's Retail Network

Both USPS and the President's Commission have recognized that USPS needs
to adjust its retail network so that it provides the optimal level of
retail access at the lowest possible cost. The retail service options
available to rural customers will largely remain the same, with the
exception of rural customers who have access to the Internet
(www.usps.com). USPS officials stated that USPS plans to deploy most other
new retail alternatives in high-growth, high-density areas, such as
fast-growing suburbs. However, it is not clear why some retail
alternatives that offer greater customer convenience, such as stamp
purchases at grocery or other retail stores, may not be provided to those
in rural areas. Further, it is not clear how rural customers may be
impacted by USPS's retail optimization efforts to

10Delivery Point Sequencing is an automated process by which mail is
sorted according to the individual addresses on the delivery route.

close and/or consolidate retail facilities. In its Transformation Plan,
USPS stated that its planned efforts to improve access to retail services
for all customers while becoming more cost-effective include three key
initiatives:

(1) Create new, low-cost retail alternatives. USPS identified ways to
provide cost-effective services that improve customer convenience and
access by utilizing low-cost retail alternatives, such as the Internet,
ATMs, and supermarkets. According to USPS, most of the alternatives are
aimed at providing additional access to high-growth, high-revenue areas
where demand for services is more concentrated and will not be available
in lesspopulated areas. For example, many of the 666 contract postal units
opened in fiscal year 2003 were in urban areas such as Los Angeles,
California, and Orlando, Florida. However, USPS noted two alternatives
that would be available to most customers, including those in rural areas-
the Internet, for customers with access, and the recently implemented
"Click-N-Ship" program. USPS's Internet Web site is available to customers
24 hours a day, 7 days a week, and was designed to handle most retail
transactions that take place in local post offices, such as printing
shipping labels and postage for packages, buying stamps, sending money
orders, and filing address changes. USPS's Click-N-Ship program allows
customers to print shipping labels for packages and pay for postage using
their computers. Customers can arrange to have their mail carrier pick up
the package, or they can leave it in a mail collection box or at their
local post office. This carrier pick-up service is currently available in
urban and suburban areas, and USPS and the NRLCA have recently agreed to
conduct a nationwide pilot that would test this program on rural routes.

(2) Move stamp-only transactions away from the post office window. The
new, low-cost retail alternatives provide USPS with an opportunity to
increase the efficiency of postal transactions. In fiscal year 2003, about
onethird of the visits to USPS retail facilities included stamp purchases,
and over 130 million visits were for stamp-only purchases. Smaller post
offices tend to conduct a higher percentage of stamp-only transactions. As
indicated in its Transformation Plan, window service at a post office is a
relatively expensive way to provide stamp purchases when compared with
low-cost alternatives, such as providing stamp purchases from ATMs,
through the mail, from the Internet, or from a grocery store. In addition,
residents on rural and highway contract routes can purchase stamps and
other retail services from their mail carriers. USPS has begun to promote
the use of these alternatives for postal transactions; in November 2002,
USPS launched a national campaign promoting alternative access to postal

products to create customer awareness of stamp-purchasing alternatives.
Between fiscal year 2002 and 2003, the number of stamp-only visits at
postal facilities decreased by about 25 million (a 16 percent reduction),
and the number of stamp transactions decreased by about 60 million (a 10
percent reduction).

(3) Optimize the retail network. As simple transactions such as selling
stamps and printing shipping labels are redirected to lower cost
alternatives, USPS plans to take actions to tailor retail services to the
individual community needs and provide the optimal level of retail access
at the least possible cost. USPS has established a nationwide database of
its retail network that includes about 150 data points for each of its
retail postal facilities, such as operating costs, revenues, proximity to
other retail points, number of deliveries, and customer demographics. This
database provides USPS with a baseline for evaluating its network, from
which it plans to first focus its retail strategy on "underserved"
locations. USPS then plans to focus on high-revenue locations, most of
which are located in urban and suburban areas. Lastly, USPS will focus on
"overrepresented" areas. The Transformation Plan stated that USPS would
replace "redundant, low-value access points" with alternative access
methods, but it did not provide information on the specific criteria that
USPS would use to make this determination. It is unclear how post offices
in rural areas may be affected by this initiative, because, as USPS stated
in its Infrastructure and Workforce Rationalization Plan to Congress, "the
savings from closing small post offices are minimal, since the potential
savings in personnel and office rent are often more than offset by the
additional cost of rural delivery service needed in lieu of post office
box delivery." Another approach, recommended by the President's
Commission, would be for USPS to optimize its retail network by assessing
its "low-activity" post offices to determine if they are needed to ensure
the fulfillment of universal service. If USPS determines that these post
offices are needed, they should be retained, even if they are not
economical. If not, the President's Commission stated that USPS should
work with the affected community to consider how to dispose of excess
facilities.

USPS has begun taking actions to optimize its retail network by lifting
the self-imposed moratorium established in 1998 on closing post offices
and by adjusting post office hours. During fiscal year 2003, USPS formally
closed about 440 post offices and other retail facilities, more than half
of which USPS had placed on emergency suspension. A post office can be
placed on emergency suspension due to circumstances such as a natural
disaster, sudden loss of the post office building lease when no suitable
alternative

quarters are available, or severe damage to or destruction of the post
office building. An emergency suspension is one of three circumstances
that may prompt USPS to initiate a feasibility study to determine whether
to close a post office. The other two are (1) a postmaster vacancy and (2)
special circumstances such as the incorporation of two communities into
one. USPS plans to close 311 post offices in fiscal year 2004 that were
placed on emergency suspension between February 1983 and June 2003. An
additional 65 post offices that were placed on emergency suspension
between August 2002 and November 2003 are not scheduled to close. USPS has
reported that post office closures will continue, and that in a normal
year about 100 to 200 small, rural post offices are closed when the
communities in which these offices are located essentially disappear.

According to USPS, it has also adjusted hours at existing post offices
from time to time to reflect customer demand. Although USPS could not
provide information on the number of post offices where changes in hours
occurred in fiscal year 2003, it did provide a description of how hour
adjustments are made. According to USPS officials, postmasters are
responsible for establishing window service hours based on the needs of
the community within the funding resources. Officials noted that they
periodically assess the number of transactions and customer visits
throughout the day to determine the appropriate hours, and that hours may
be extended or shortened in response to customer demand. USPS reported
that its efforts to increase efficiencies in its retail area have resulted
in a decrease of almost 5 million workhours from fiscal years 2002 to
2003.

Key Issues Include Delivery Inconsistencies and the Uncertain Future of
Retail Network

USPS and the President's Commission both have recognized the need for
establishing a postal network that is capable of providing universal
service in an efficient and cost-effective manner. The actions identified
by USPS that were discussed in the previous section illustrate that future
service decisions are being planned with a focus on increasing efficiency
and customer service. According to surveys conducted both by USPS and for
the President's Commission, customers are generally satisfied with the
services provided by USPS. However, when issues are raised by postal
stakeholders, including Members of Congress, customers, and USPS
employees, they generally relate to inconsistent delivery services and
limited communication related to planned changes to the retail network.
USPS has also raised issues about legal requirements and practical
constraints that limit its flexibility to make changes to the postal
network. Progress toward optimizing the postal retail network will require
USPS to collaborate and communicate more effectively with stakeholders in
order

to raise their confidence that USPS's actions will result in improved
customer service and more cost-efficient operations.

Customer Satisfaction and Issues

Data reflect that customers are generally satisfied with the services
provided by USPS. USPS customer satisfaction data showed that 93 percent
of households nationwide continue to have a positive view of USPS. USPS's
Customer Satisfaction Measurement survey gathers information from
households and businesses throughout the country, and the residential
survey includes questions on such topics as mail delivery service, retail
options, time waiting in line at post offices, and USPS advertising. A
survey was also conducted as part of the President's Commission's work to
determine the public perception of USPS. This survey reported that
customers throughout the country, including those in cities and rural
areas, have a favorable view of USPS.11

Although it is reported that overall customer satisfaction is high, when
customers do raise concerns, many relate to inconsistencies in delivery
services and changes in access to retail services.12 For example, in the
first 2 quarters of fiscal year 2004, USPS's customer telephone system-
Corporate Customer Contact-documented over 1.3 million calls that raised
customer issues. As table 6 shows, these issues fell into five general
categories. The delivery/mail pickup category contained the most customer
complaints with over 88 percent of the total customer issues. These calls
included issues about late deliveries, changes in the location of the
customers' deliveries, and misdeliveries.

11Peter D. Hart Research Associates, A Consumer Survey About the U.S.
Postal Service, May 2003.

12Concerns raised by customers through telephone calls or letters are not
necessarily representative of the concerns that the whole population of
customers may or may not have.

  Table 6: Customer Issues Documented by USPS, First 2 Quarters of Fiscal Year
                                 2004 Category

Number of documented issues

Percentage of total documented issues

                     Delivery/Mail pick-up     1,163,578                88.0% 
                                 Personnel      106,684       
                     Post office/Equipment             35,337 
                                    Retail             14,443 
                  Web site/Contacting USPS              1,965 
                                     Total     1,322,007               100.0% 

Source: USPS.

We reviewed a sample of letters received by Members of Congress involved
in the oversight of USPS in 2002 and 2003. Of the 134 letters that we
reviewed, the most common delivery-related concerns pertained to the mode
of delivery that was used and mail arriving late or at inconsistent times.
On the retail side, the issues raised most frequently were concerns about
potential post office closings or relocations. Several customers wrote
that closing or relocating post offices would make it difficult or
inconvenient for them to access retail postal services.

Congressional Issues	In addition to constituent letters containing
specific questions about USPS operations, Congress has raised
long-standing issues about the basic provisions of universal service and
retail access, particularly to customers in rural areas. The Postal
Reorganization Act contained specific provisions requiring that effective
postal services would be ensured to residents of both urban and rural
communities. Congress had additional concerns about community involvement
in decisions to close or consolidate post offices. In 1976, it amended the
Postal Reorganization Act and established specific requirements for USPS
when attempting to close a post office, including that USPS must consider
the effects on the community served, the employees of the facility, and
economic savings to USPS that would result from the closure, as well as
provide notice to customers.13 This amendment sought to involve
communities in decisions, which would help to ensure that these decisions
were made in a fair, consistent manner. The amendment also established an
appeals process to the PRC to allow for

1339 U.S.C. S: 404 (b).

independent review of decisions to close or consolidate post offices.
Congress has long included language in USPS annual appropriations
legislation forbidding the closure or consolidation of small, rural post
offices.

The closure requirements added by this amendment, however, did not apply
to postal facilities that were to be expanded, relocated, or newly
constructed, and Congress remained concerned that communities were not
sufficiently involved in decisions regarding their post offices. In 1998,
USPS responded to these concerns by establishing regulations relating to
the expansion, relocation, or new construction of post offices that
required local officials and citizens to be notified, provided affected
customers with a chance to provide comments, and required USPS officials
to consider this community input.14 However, postal facilities placed in
emergency suspension were not subject to the post office closure or
consolidation requirements. A 1999 congressional hearing focused on USPS's
closure process when some stakeholders raised concerns that USPS might be
using its emergency suspension procedures to avoid post office closure
requirements. We issued a report on emergency suspensions in 1997 and
found that between the beginning of fiscal year 1992 through March 31,
1997, USPS had suspended the operations of 651 post offices, some of which
had been in suspension over 10 years.15 After USPS lifted its 1998
moratorium on closures in 2003, USPS began to close most of its suspended
post offices.

Concerns remain about the extent to which customers are included in retail
decisions as evidenced by the fact that current Members of Congress
continue to introduce legislation related to USPS's process for closing
post offices and ensuring that communities are involved in the
decision-making process.16

1439 C.F.R. S: 241.

15U.S. General Accounting Office, U.S. Postal Service: Information on
Emergency Suspensions of Operations at Post Offices, GAO/GGD-97-70R
(Washington, D.C.: Apr. 23, 1997).

16S. 1534, Rural Post Office and Community Preservation Act of 2003 and
H.R. 3432, Post Office Community Partnership Act of 2003.

USPS Employee Issues	Employee groups are concerned with USPS's attempts to
make changes to the postal network. For example, these groups have raised
issues about the perceived lack of communication from USPS about how it
makes these decisions. Carrier unions have also raised issues related to
actions taken by USPS to establish and categorize carrier routes. Carrier
compensation represents a significant portion of the total delivery costs,
which is a key consideration in USPS's delivery route decisions. For a
number of years, USPS, the NALC, and the NRLCA have had a continuing
dispute over the assignment of work jurisdictions for mail delivery. These
disputes pertain to the conversion of city delivery to rural delivery, or
vice versa, and the assignment of new deliveries (whether a new route will
be a city route or a rural route). There were an estimated 1,300 disputes
at the national and local levels related to this issue at the end of 2003.
USPS and the two unions established a joint task force in May 2003 to
expedite resolution of outstanding city/rural jurisdictional disputes.
Furthermore, additional disputes regarding the process for conducting mail
counts and route inspections have also been raised. Mail counts and route
inspections are key factors in determining carrier duties and
compensation, and thus total delivery costs. Mail counts and route
inspections are used to identify the amount of mail sorted and handled by
carriers during an average workday and what determines the efficiency of
the current route structure.

USPS Issues	USPS has raised issues about its lack of flexibility to make
necessary changes to its delivery and retail networks. Changes to USPS's
retail infrastructure are limited by both legal requirements and practical
constraints. As previously mentioned, USPS by law cannot close a small
post office solely because it is operating at a deficit. Furthermore,
Members of Congress and other stakeholders have often intervened in the
past when USPS has attempted to close post offices or consolidate postal
facilities. Proposed post office closures have provoked intense opposition
because local post offices are sometimes viewed as (1) a critical means of
obtaining ready access to postal retail services, (2) a part of American
culture and business, and (3) critical to the viability of certain towns
or central business districts. In regards to its delivery network, USPS
appropriations acts have included provisions on 6-day-a-week delivery and
rural mail service, and there is strong stakeholder opposition to cuts in
the frequency or quality of postal services. The President's Commission
agreed that USPS might need additional flexibility as part of establishing
the proper configuration of a 21st century postal network; however, the
commission stated that mechanisms are needed to ensure accountability and
oversight.

Retail Optimization Communication Issues

The Postmaster General has stated that without greater flexibility, it may
become increasingly difficult for USPS to continue achieving cost savings,
and that if USPS is unable to significantly restrain its costs, it may
have to reconsider universal service as it is provided today. Although
USPS faces some constraints to making changes, the previous section of
this report illustrates that there are actions USPS could take to improve
efficiency in the delivery and retail areas while improving customer
service. For example, low-cost retail alternatives, such as the Internet,
provide USPS with an opportunity to enhance customer access nationwide,
while at the same time offering cost-effective and convenient ways to
provide service. However, without more information about how USPS will
make decisions related to changing its postal network, including closures
or consolidations of existing facilities, it is difficult for customers to
understand how they may be affected by these decisions. It is particularly
important that customers in rural areas, who may be more dependent on
their local post offices, are informed about how they may be affected by
these decisions.

We agree that actions are needed to restrain costs and that some legal and
practical restraints limit USPS's flexibility to make changes to its
network. However, USPS's communication with Congress and stakeholders
about what it intends to do and how it intends to optimize its retail
network is important so that stakeholders will have more confidence in
USPS's decisions. Stakeholders, who are a critical component of
implementing successful changes, have raised concerns about potential
changes to USPS's network. Specifically, as previously mentioned,
stakeholders have been concerned about a perceived lack of communication
throughout USPS's decision-making process. Examples include insufficient
information regarding potential changes such as closing post offices or
making adjustments to post office hours. Furthermore, recent postal reform
legislation reflects concerns about the future provision of delivery and
retail services. Both the House and Senate postal reform legislation
introduced in May 2004-The Postal Accountability and Enhancement Act, H.R.
4341 and S. 2468-included provisions that required a study of universal
postal service and what the future of universal service may entail. The
Senate bill required USPS to provide Congress with a discussion of
potential changes to its infrastructure, including its delivery and retail
networks. This proposed plan provides an opportunity for USPS to provide
Congress with additional information that will facilitate better
understanding of what USPS hopes to accomplish through its optimization
efforts and how it plans to make its decisions in this area.

We have previously reported on the importance of keeping Congress and
stakeholders informed throughout the decision-making process to
successfully transform the Postal Service.17 Last November, we recommended
that USPS develop an integrated plan to optimize its infrastructure and
workforce, in collaboration with its key stakeholders, and make the plan
available to Congress and the public.18 USPS agreed with this
recommendation and in January 2004 presented its Infrastructure and
Workforce Rationalization Plan to the House and Senate oversight
committees. The plan included a section on improving its retail network by
increasing access and customer convenience in a cost-efficient manner.
Although this plan included a general discussion of initiatives that USPS
is planning for its retail and delivery network, it did not explain how
USPS planned to make decisions-that is, what specific criteria would be
used as the basis for USPS decisions. For example, USPS has discussed
general principles that it has established as a basis for its retail
optimization strategy as outlined in its Transformation Plan and
Transformation Plan Update. We previously discussed these principles, and
they included targeting underserved areas, particularly in high-growth
areas, and replacing redundant, low-value access points with alternative
access methods. However, the plan did not discuss how USPS would define
"underserved" areas for determining where new self-service options are to
be located, or "redundant, low-value access points" that are to be
replaced. It is not clear if USPS has consulted its customers, including
those in rural areas, in developing its network optimization plans to
determine their needs, their preferences on retail alternatives, and which
postal facilities may be needed to provide postal services. Further, it is
not clear if USPS's optimization strategy related to removing redundant or
excess postal facilities would follow the existing process for closing
post offices, which essentially is a local decision in response to local
circumstances, such as a postmaster vacancy, lease expiration, building
damage, or an emergency. If such an incremental approach based on local
decisions is used to implement USPS's retail optimization strategy, it is
not clear that the implementation would lead to the desired result of a
systemwide optimal network overall.

17U.S. General Accounting Office, U.S. Postal Service: Deteriorating
Financial Outlook Increases Need for Transformation, GAO-02-355
(Washington, D.C.: Feb. 28, 2002).

18GAO-04-108T.

Conclusions	USPS's retail optimization strategy could be an opportunity
for a "win-win" outcome for both USPS and its customers, including those
in rural areas, in that USPS could reduce its costs while at the same time
improving access for its customers. According to USPS, it is already in
the process of providing its customers with greater access to its services
through a variety of new, more convenient alternatives. USPS has also
initiated efforts that have increased efficiencies and cut costs and plans
further actions in the future. However, many stakeholders, including
Members of Congress, are concerned about the limited information and
communication USPS has provided regarding its network optimization plans
and how customers will be affected by its proposed changes. Without more
information about how USPS will make decisions related to changing the
current postal network, including closures or consolidations of existing
facilities, it will be difficult for customers to understand how they may
be affected-particularly those in rural areas who may be more dependent on
their local post offices.

Effective communication is needed to demonstrate that USPS wants to
partner with its customers in communities nationwide to provide more
convenient and cost-effective delivery and retail services and to preserve
post offices needed to support universal service. Improved transparency
and accountability mechanisms are also needed to raise stakeholder
confidence that decisions will be made in a fair, rational, and fact-based
manner. Such mechanisms could include a clear process to ensure that key
stakeholders are consulted and properly informed of decisions that may
affect them. Increasing communication and collaboration with key
stakeholders may also help facilitate better understanding of the
different challenges and needs facing USPS and its customers in urban and
rural areas, the rationale for decisions, the cost implications related to
budget and rate decisions, and the trade-offs involved with actions to
achieve a more efficient and effective network.

Recommendation for Executive Action

To facilitate USPS's progress in implementing its planned actions aimed at
improving efficiency in its postal network while increasing customer
service, we recommend that the Postmaster General provide improved
transparency and communication to inform Congress and other stakeholders
of the actions it plans to take regarding its retail optimization
strategy, including (1) the criteria USPS will use to make decisions
related to changing its retail network; (2) the process it will use to
communicate with postal stakeholders throughout the decision-making
process; (3) the

impact on customers, including those in rural areas; and (4) the time
frames for implementing all phases of its retail optimization initiative.

Agency Comments and Our Evaluation

We received written comments on a draft of this report from the Acting
Vice President of Delivery and Retail for USPS in a letter dated June 30,
2004. USPS's comments are summarized below and reprinted in appendix

III. USPS officials also provided technical and clarifying comments, which
were incorporated into the report where appropriate. USPS's letter
concurred with "the spirit of the report's findings" and acknowledged that
USPS must continue to take steps to improve the efficiency and
effectiveness of its delivery and retail networks. In response to the four
specific provisions included in our recommendation, USPS stated the
following:

o 	The criteria used to make retail decisions vary because retail
optimization is a dynamic and evolving process, and the key to making any
postal decision is quality service to customers. There are, however,
specific criteria for certain elements of the retail network (e.g., 300
books of stamps must be sold by the retailer each month in order to
participate in the consignment program).

o 	USPS will continue to advise postal stakeholders (e.g., congressional
staff, management associations, labor unions, and employees) of changes
that affect the retail network.

o 	It is USPS's policy to notify customers of changes that impact their
services. USPS will review how best to communicate those types of changes
to customers and develop a process for the field to notify headquarters of
changes in operating hours that could potentially impact the community.

o 	The retail optimization initiative does not have a fixed time frame
because it is an evolutionary process. As such, USPS said that "it would
be impossible to provide a time frame for implementing all phases of the
retail optimization initiative."

We agree that the retail optimization effort is a dynamic and evolving
process, and that the actions described by USPS to improve communication
with its local districts and other stakeholders about changes to the
retail network are a step in the right direction. However, even though
there are constant changes in the retail network, it is

important for stakeholders to feel confident that USPS's retail decisions
are made in a fair, rational, and fact-based manner. Therefore, we
continue to believe that establishing and communicating the criteria that
provide the basis for USPS's retail decisions would help to raise this
level of confidence. Furthermore, although USPS says it has not identified
a fixed time frame for its retail optimization efforts because it is an
evolutionary process, this does not mean that time frames for specific
projects or initiatives are not needed. Time frames can, and should, be
established for the different phases of USPS's retail initiatives to
provide postal stakeholders with information on when these initiatives
will be deployed so that interested parties, such as mailers, can
determine the implications for their own business plans. In addition, time
frames are needed so that USPS and stakeholders can evaluate the
performance of these initiatives and how they fit into the network
optimization plans as a whole, including the potential impact on costs and
rates.

We will send copies of this report to the Ranking Minority Member of the
Senate Committee on Governmental Affairs, the Chairmen and Ranking
Minority Members of the House Committee on Government Reform and the House
Special Panel on Postal Reform and Oversight, Senator Thomas R. Carper,
the Postmaster General, the Chairman of the Postal Rate Commission, and
other interested parties. We will also make copies available to others on
request. In addition, this report will be available at no charge on GAO's
Web site at http://www.gao.gov.

If you have any questions about this report, please contact me at (202)
5122834 or at [email protected]. Key contributors to this assignment were
Teresa Anderson, Joshua Bartzen, and Heather Halliwell.

Sincerely yours,

Mark L. Goldstein Director, Physical Infrastructure Issues

Appendix I

                       Objectives, Scope, and Methodology

To meet our first objective, which was to provide information on the U.S.
Postal Service's (USPS) policies, procedures, and practices for providing
rural delivery services, and how they compare with those in urban areas,
we discussed USPS's basis for providing delivery and retail services, the
legal framework under which these decisions are made, and the process used
to carry out these decisions with USPS officials. We supplemented this
information with (1) USPS documents and manuals describing letter carrier
duties and the roles of USPS officials in managing delivery services and
(2) USPS operational guidance for providing service, including
establishing delivery routes and locations of deliveries, retail
alternatives, and services/locations of these alternatives. Also, because
USPS is subject to legal and statutory considerations when making retail
and delivery decisions, we reviewed the applicable statutes that establish
USPS's mission and role as a provider of universal postal service and the
collective bargaining contracts established with its two sets of
bargaining employees-the National Rural Letter Carriers Association and
the National Association of Letter Carriers. We discussed USPS's current
policies and procedures with various USPS officials who were knowledgeable
about the retail and delivery networks, as well as with letter carrier and
postmaster representatives and Postal Rate Commission officials. We
obtained, reviewed, and analyzed delivery and retail data pertaining to
routes, delivery points, and retail network from various sources,
including USPS officials, the Annual Report, and the Comprehensive
Statement of Operations. We assessed the reliability of data provided by
USPS by reviewing the data for inconsistencies and checking for duplicate
or missing values. In those cases where we found discrepancies, we worked
with USPS to address the problems. We determined that these data were
sufficiently reliable for the purposes of this report.

To meet the second objective, which was to discuss changes USPS is making,
and planning to make, related to providing postal services to rural areas
and the potential impact of these proposed changes, we reviewed, analyzed,
and discussed with USPS officials actions that were planned as part of its
Transformation Plan and its related updates, growth plans, operational
strategies, Infrastructure and Workforce Rationalization plan, as well as
the recommendations to USPS as part of the President's

Appendix I
Objectives, Scope, and Methodology

Commission on the United States Postal Service (the President's
Commission) report.1

To meet our third objective of identifying issues that USPS may need to
consider when making decisions related to providing postal services in
rural areas, we interviewed various USPS officials, such as retail and
delivery managers, customer contact representatives, and administrators of
the Customer Satisfaction Management Survey. To gather additional
information on stakeholder issues and preferences, we interviewed
representatives from the letter carrier and postmaster groups, analyzed
stakeholder comments raised before the President's Commission, reviewed
the Hart Study that was conducted on behalf of the commission, reviewed
USPS documentation related to its planned actions, and examined newspaper
reports of customer concerns about changes in delivery and retail access.2
Due to the current legislation proposed in both houses of Congress, we
reviewed this proposed legislation as well the pertinent legislative
history of congressional concerns in the delivery and retail areas.

To gain an additional understanding of customer issues with USPS, we met
with USPS Congressional Relations staff to gather information on the types
of written customer inquiries that are sent to Members of Congress. These
staff provided us with a sample of letters related to retail and delivery
issues that were sent to Members of Congress who then forwarded these
concerns to USPS for resolution. USPS established categories for
documenting these issues (e.g., delivery service, delivery method, and
retail service). We requested copies of letters in selected retail and
delivery categories that in 2002 and 2003 were sent to Members of Congress
who provided oversight of USPS. We analyzed these letters and established
our own set of delivery and retail categories on the basis of information
presented in the letters. We felt it was necessary to establish our own
set of categories because some letters contained issues that were raised
across categorization areas.

1The President's Commission on the United States Postal Service, Embracing
the Future: Making the Tough Choices to Preserve Universal Mail Service
(Washington, D.C.: July 31, 2003).

2Peter D. Hart Research Associates, A Consumer Survey About the U.S.
Postal Service, May 2003.

Appendix II

Number of Post Offices by State, Year-end 2003

                            USPS retail facilitiesa

                               Contract                        
                              stations/                        
                   Classified  branches                        
                                   (and                        
                 stations and Community Total USPS                  Residents 
                                   Post   retail                       served 
State  Post       branches  Offices) facilities Populationb     per retail 
         offices                                                    facilityb 
    AK       184           34        79        297     626,932          2,111 
    AL       558           83        34        675   4,447,100          6,588 
    AR       582           57        35        674   2,673,400          3,966 
    AZ       198           97       147        442   5,130,632         11,608 
    CA     1,056          721       351      2,128  33,871,648         15,917 
    CO       381           88        64        533   4,301,261          8,070 
    CT       233           91        26        350   3,405,565          9,730 
    DC         1           61        10         72     572,059          7,945 
    DE        53           17         4         74     783,600         10,589 
    FL       457          377       271      1,105  15,982,378         14,464 
    GA       606          153        72        831   8,186,453          9,851 
    HI        72           32        21        125   1,211,537          9,692 
    IA       892           34       112      1,038   2,926,324          2,819 
    ID       226           19        37        282   1,293,593          4,587 
    IL     1,225          190        96      1,511  12,419,293          8,219 
    IN       716           77        64        857   6,080,485          7,095 
    KS       603           44       111        758   2,688,418          3,547 
    KY       785           56        71        912   4,041,769          4,432 
    LA       468           75        36        579   4,468,976          7,718 
    MA       398          234        54        686   6,349,097          9,255 
    MD       394          110        44        548   5,296,486          9,665 
    ME       433           20        44        497   1,274,923          2,565 
    MI       822          140       252      1,214   9,938,444          8,187 
    MN       734           90       153        977   4,919,479          5,035 
    MO       912          119       105      1,136   5,595,211          4,925 
    MS       407           42        51        500   2,844,658          5,689 
    MT       312           14        55        381     902,195          2,368 
    NC       741          149        81        971   8,049,313          8,290 
    ND       341            7        52        400     642,200          1,606 
    NE       479           38        65        582   1,711,263          2,940 
    NH       227           20        26        273   1,235,786          4,527 
    NJ       520          234        30        784   8,414,350         10,733 

                                  Appendix II
                   Number of Post Offices by State, Year-end
                                      2003

                         (Continued From Previous Page)

                            USPS retail facilitiesa

                               Contract                        
                              stations/                        
                   Classified  branches                        
                                   (and                        
                 stations and Community Total USPS                  Residents 
                                   Post   retail                       served 
State  Post       branches  Offices) facilities Populationb     per retail 
         offices                                                    facilityb 
    NM       286           47        66        399   1,819,046          4,559 
    NV        85           53        21        159   1,998,257         12,568 
    NY     1,513          438       124      2,075  18,976,457          9,145 
    OH       996          251       158      1,405  11,353,140          8,081 
    OK       576           57        49        682   3,450,654          5,060 
    OR       332           61        93        486   3,421,399          7,040 
    PA     1,711          292       128      2,131  12,281,054          5,763 
    RI        51           48         7        106   1,048,319          9,890 
    SC       360           66        51        477   4,012,012          8,411 
    SD       338            6        59        403     754,844          1,873 
    TN       533           93        52        678   5,689,283          8,391 
    TX     1,409          355       283      2,047  20,851,820         10,187 
    UT       176           32        93        301   2,233,169          7,419 
    VA       809          182        61      1,052   7,078,515          6,729 
    VT       270           15        19        304     608,827          2,003 

    WA    443                                     128 100 671 5,894,121 8,784 
    WI    718                                      53 106 877 5,363,675 6,116 
    WV    759                                       36 40 835 1,808,344 2,166 
    WY    176                                          7 17 200 493,782 2,469 
Total 27,557                          5,743 4,180 37,480 281,421,546 7,509 
                          Sources: USPS, U.S. Bureau of the Census.           
                     aThere are 200 retail facilities in the following United 
                            States territories that were not included in this 
                analysis: American Samoa, Federated States of Micronesia,     
                Guam, Marshall Islands, Northern                              
                  Mariana Islands, Puerto Rico, Palau, and Virgin Islands.    

bPopulation figures are from the 2000 Census. The average number of
residents per retail facility is an estimate and might be affected by
changes in population between 2000 and 2003.

Appendix III

Agency Comments from the United States Postal Service

Appendix III
Agency Comments from the United States
Postal Service

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