U.S. Postal Service: Development and Inventory of New Products (Letter
Report, 11/24/98, GAO/GGD-99-15).
Pursuant to a congressional request, GAO reviewed the Postal Service's
(USPS) development and marketing of new products and provided
information on the expense and revenues associated with the products,
focusing on: (1) the statutory and regulatory authorities and
constraints covering all major groups of new products; (2) the potential
impact that enactment of H.R. 22 and USPS' proposed reform legislation
could have on new products; (3) providing information on USPS Marketing
Department's new product development process and determining, for three
selected products, how closely that process was followed; and (4)
providing information, including financial data, on all new postal and
nonpostal products USPS marketed or had under development during fiscal
years (FY) 1995, 1996, and 1997.
GAO noted that: (1) the statutory and regulatory authorities governing
USPS provide USPS broad latitude to develop and market a wide variety of
new products; (2) GAO's analysis shows that USPS is subject to at least
three constraints in developing and marketing new products; (3) since it
is the underlying statutory mission of USPS to provide postal services
to bind the nation together, USPS needs to be able to explain how any
new product it develops will further that mission; (4) under its
statutory authority, before marketing a new domestic postal product,
USPS must request a recommended decision from the Postal Rate Commission
(PRC) regarding the propriety of USPS' proposed classification, rates,
or fees for the new product; (5) prior to issuing its recommended
decision, PRC is required to hold hearings on USPS' proposal; (6) the
Postal Board of Governors may reject or modify PRC's recommended
decision; (7) USPS is not required to request a recommended decision
from PRC in the case of nonpostal products; (8) USPS' ability to market
new products can be constrained by congressional oversight, restrictions
imposed during the appropriations process, or other legislative actions;
(9) adoption of either H.R. 22 or legislative changes offered by USPS
would amend USPS' current statutory authority to develop, test, approve,
and market new products; (10) H.R. 22 should place new restrictions on
the introduction of new, nonpostal products and international postal
products; (11) however, H.R. 22 would provide USPS with broader latitude
to test market experimental postal products; (12) USPS' Marketing
Department established the New Business Initiatives and Products Group,
which implemented a new product development process, CustomerPerfect!;
(13) it is intended to ensure effective management control through a
formalized system of checks and balances that require top management
buy-in at four critical stages: (a) concept; (b) business plan; (c)
test; and (d) implementation; (14) three judgmentally selected products
showed that in developing these products, the Marketing Department's New
Business Initiatives and Products Group generally followed the
CustomerPerfect! new product development process; (15) information and
financial data show that during fiscal years 1995, 1996, and 1997, USPS
marketed, or had under development, 19 new products that had been
publicly announced; and (16) total revenues and expenses for the 19
products, from inception through FY 1997 were $148.8 million and $233.5
million.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD-99-15
TITLE: U.S. Postal Service: Development and Inventory of New
Products
DATE: 11/24/98
SUBJECT: Postal service
Postal law
Proposed legislation
Agency proceedings
Product evaluation
Competitive advantage
Commodity marketing
Commodity sales
IDENTIFIER: USPS CustomerPerfect
USPS FirstClass Phonecard
USPS REMITCO
USPS Electronic Postmark System
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO report. Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved. Major **
** divisions and subdivisions of the text, such as Chapters, **
** Sections, and Appendixes, are identified by double and **
** single lines. The numbers on the right end of these lines **
** indicate the position of each of the subsections in the **
** document outline. These numbers do NOT correspond with the **
** page numbers of the printed product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
** A printed copy of this report may be obtained from the GAO **
** Document Distribution Center. For further details, please **
** send an e-mail message to: **
** **
** **
** **
** with the message 'info' in the body. **
******************************************************************
Cover
================================================================ COVER
Report to the Chairman, Subcommittee on the Postal Service, Committee
on Government Reform and Oversight House of Representatives
November 1998
U.S. POSTAL SERVICE - DEVELOPMENT
AND INVENTORY OF NEW PRODUCTS
GAO/GGD-99-15
New Postal Products
(240272)
Abbreviations
=============================================================== ABBREV
CIPS - Customer-Initiated Payment System
IBIP - Information Based Indicia Program
PIN - personal identification n`umber
PostECS - Postal Electronic Courier Service
PRC - Postal Regulatory Commission
USPS - United States Postal Service
WINGS - WEB Interactive Network of Government Services
Letter
=============================================================== LETTER
B-278754
November 24, 1998
The Honorable John M. McHugh
Chairman, Subcommittee on the Postal Service
Committee on Government Reform and Oversight
House of Representatives
Dear Mr. Chairman:
This report responds to your request for information on new Postal
Service products. Over the past few years, the Postal Service's
introduction of new products\1 has stirred controversy. Some Members
of Congress have said that the Service is unfairly expanding its
product line to compete in nonpostal-related markets and have
introduced legislation to curtail such activity. Some private sector
companies have also complained about the Service's entry into
nontraditional postal markets. They were concerned that the Postal
Service could use its governmental status to an unfair advantage when
introducing products that compete with private sector companies. In
examining these concerns, you requested that we review several issues
related to the Postal Service's development and marketing of new
products and provide information on expenses and revenues associated
with new products the Service introduced in recent years. You
indicated this information would be useful to the Subcommittee in its
deliberations to reform the U.S. Postal Service.
As agreed with the Subcommittee, this report addresses the following
objectives:
-- Identify the statutory and regulatory authorities and
constraints covering all major groups of new products.
-- Identify the potential impact that enactment of H.R. 22\2 and
the Postal Service's proposed reform legislation could have on
new products.
-- Provide information on the Postal Service Marketing Department's
new product development process and determine, for three
selected products, how closely that process was followed.
-- Provide information, including financial data, on all new
postal\3 and nonpostal\4
products the Service marketed and/or had under development during
fiscal years 1995, 1996, and 1997.
--------------------
\1 For purposes of this report, a product is defined as a commodity,
a service, or a concept that is expected to result in a commodity or
service.
\2 H.R. 22 was legislation considered during the 105th Congress to
fundamentally modernize and reform the U.S. Postal Service. A
similar bill (H.R. 3717, 104th Cong. (1996)) was introduced in the
104th Congress.
\3 There is no statutory definition of a postal product. However,
court and administrative decisions have held that products are
considered to be postal in nature if they involve an aspect of the
posting, handling, or delivery of mail.
\4 Nonpostal products include, for example, retail merchandise and
most of the Service's new electronic initiatives.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
The statutory and regulatory authorities governing the Postal Service
provide the Service broad latitude to develop and market a wide
variety of new products, including both postal and nonpostal
products. Under these broad authorities, the Service has developed
an array of new products, such as Global Priority Mail and prepaid
phone cards. Our analysis shows that the Service is subject to at
least three constraints in developing and marketing new products.
First, since it is the underlying statutory mission of the Postal
Service to provide postal services to bind the nation together, the
Service needs to be able to explain how any new product it develops
will further that mission. Second, under its statutory authority,
before marketing (including test marketing) a new domestic postal
product, which necessarily involves classification\5 of mail, the
Service must request a recommended decision from the Postal Rate
Commission (PRC) regarding the propriety of the Service's proposed
classification, rates, or fees for the new product. Prior to issuing
its recommended decision, PRC is required to hold hearings on the
Service's proposal. The Postal Board of Governors, however, may
reject or modify PRC's recommended decision. The Service is not
required to request a recommended decision from PRC in the case of
nonpostal products, such as telephone cards and retail merchandise.
Third, the Service's ability to market new products can be
constrained or influenced by congressional oversight, restrictions
imposed during the appropriations process, or other legislative
actions.
Adoption of either H.R. 22 or legislative changes offered by the
Postal Service would amend the Service's current statutory authority
to develop, test, approve, and market new products. H.R. 22 would
place new restrictions on the introduction of new, nonpostal products
and international postal products. For example, the Service would be
restricted to introducing new, nonpostal products through a
for-profit corporation created and owned by the Postal Service.
However, H.R. 22 would provide the Service with broader latitude to
test market experimental postal products.\6 For example, market tests
of new postal products could be conducted for as long as 2 years and
generate $10 million in revenues per year without prior PRC approval
and could be extended to a third year with PRC's approval. Larger
scale market tests, with up to $100 million in annual revenues, would
also be permitted under rules adopted by PRC. The Postal Service's
proposed legislative changes would also provide the Service with
broader latitude to test market experimental postal products. Under
the Service's proposed changes, it would be able to test market
experimental domestic postal products without having them reviewed by
PRC first. Under the Service's proposal, it could also continue to
develop, test, approve, and market new capital,\7 philatelic,\8
international, and nonpostal products without having them reviewed by
PRC.
In 1996, to facilitate the Service's goal of initiating and growing
new businesses, the Service's Marketing Department established the
New Business Initiatives and Products Group, which implemented a new
product development process. Known as the CustomerPerfect!sm\9 new
product development process, it is intended to ensure effective
management control through a formalized system of checks and balances
that require top management buy-in at four critical stages: (1)
concept stage, (2) business plan stage, (3) test stage, and (4)
implementation stage. Our review of three judgmentally selected
products showed that in developing these products, the Marketing
Department's New Business Initiatives and Products Group generally
followed the CustomerPerfect! new product development process. The
Service provided explanations, in all cases, for any deviations from
the process.
Information and financial data we gathered on new products show that
during fiscal years 1995, 1996, and 1997, the Service marketed, or
had under development, 19 new products that had been publicly
announced. Three of these new products involved strategic
alliances\10 with other businesses, such as the Service's alliance
with SmarTalk Teleservices, Inc. to market FIRSTCLASS PHONECARD\TM .
As of July 1998, the Service had discontinued 5 of the 19 new
products for various reasons and was considering discontinuing
another. Total revenues and expenses for the 19 products, from
inception through fiscal year 1997, as reported by the Postal Service
and unaudited by us, were $148.8 million and $233.5 million,
respectively. During the first 3 quarters of fiscal year 1998,
Service officials stated that 4 of the 19 new products had produced
revenues that exceeded expenses. In this regard, it may not be
reasonable to expect all new products to become profitable in their
early years, because new products generally take several years to
become established and recover their start-up costs. Appendi x III
contains an inventory that provides summary background and financial
information about the Service's 19 new products.
--------------------
\5 Classification refers to a grouping of mail matter for assigning
it a specific rate or method of handling.
\6 Experimental postal product is a term used in H.R. 22 that
generally equates to a new postal product.
\7 Capital products are generally limited to infrastructure
improvements, such as buildings and equipment.
\8 Philatelic products are stamps and related merchandise that
incorporates stamps.
\9 CustomerPerfect! is the Service's Malcolm Baldrige Award
criteria-based management system. The CustomerPerfect! management
cycle of planning, implementation, and review consists of activities
intended to give direction to the organization and to build and
sustain improved performance against set goals.
\10 A strategic alliance is an agreement between two or more parties
for sharing the risks of a project, including revenues and expenses.
BACKGROUND
------------------------------------------------------------ Letter :2
The Postal Service is an independent establishment in the executive
branch. The Postmaster General, Deputy Postmaster General, and nine
presidentially appointed members of the Postal Board of Governors
direct the operations of the Postal Service. The Postal Service is
to operate in a businesslike manner and is to break even in the long
term. An independent Postal Rate Commission was established to,
among other things, regulate the Postal Service's adherence to
ratemaking standards and to ensure that it does not take advantage of
its monopoly on the delivery of letter mail.
Since the creation of the General Post Office in 1775, the core
business of the U.S. Postal Service has been the collection and
delivery of letters and packages to the households and businesses of
the nation. Today, however, the Service sees its core business
threatened by the advent of the electronic age. The Service believes
that its role as provider of universal postal service at uniform
rates faces competition significantly more challenging than the
competition from past eras--most notably the telegraph and the
telephone.
In 1997, former Postmaster General Marvin Runyon, in testimony before
your Subcommittee, said the electronic rival the Postal Service
currently faces goes far beyond anything faced before. He stated
that computers, telephones, television, and electronic funds
transfers are being brought together with a rapidly evolving
communications network, and this network promises one day to link
nearly every home and business in the nation with the capability to
rapidly trade messages, money, and multimedia content.
According to the Postal Service, this new communications
network--e.g., the Internet and its World Wide Web, e-mail,
electronic commerce, and electronic data exchange--is fundamentally
altering consumers' choices and expectations. More importantly,
because of these new choices, the Service is concerned that future
First-Class Mail revenues will decline due to the electronic
diversion of mail. In fact, the former Postmaster General was so
concerned about this prospect that he testified before the
Subcommittee that if a significant amount of First-Class Mail
gravitates to alternative sources of delivery, this could jeopardize
the Service's core business, which is the financial bedrock of
universal service.
It is against this backdrop that the Postal Service began, in the
mid-1990s, focusing resources on the aggressive development and
introduction of new products--primarily nonpostal products. This
move, however, has created controversy. Some Members of Congress and
some private sector companies have said that the Postal Service is
unfairly expanding its product line to compete in nonpostal-related
markets, and they have manifested their concerns in various forms.
For example:
-- Representative Hunter introduced a bill (H.R. 3690) on June 20,
1996, to prohibit the Service from making available to the
public any commercial nonpostal service that it did not have
available on January 1, 1994. H.R 3690 was not enacted and was
reintroduced as H.R. 198 on January 7, 1997. H.R. 198 was
referred to the Committee on Government Reform and Oversight
with no further legislative action.
-- Representative Northup sought to stop the Postal Service from
expanding one of its international mail services--Global Package
Link--through an amendment to the Fiscal Year 1998 Treasury,
Postal Service, and General Government Appropriations bill.
Although the proposed amendment did not become part of the
Fiscal Year 1998 Appropriations Act, the conferees agreed to
study the issue.\11 Additionally, the Conference Report
accompanying the act included a request that the Postal Service
report on its nonpostal activities.\12
New products originate from several different sources within the
Postal Service organization, and various review and approval
processes are used for the introduction of new products--the source
and type of approval process used generally being related to the type
of product. New products typically fall into one of the following
major groups--capital, philatelic, postal, and nonpostal products.
--------------------
\11 We issued a report on Global Package Link service in June 1998.
See U.S. Postal Service: Competitive Concerns About Global Package
Link Service (GAO/GGD-98-104, June 5, 1998).
\12 The Postal Service issued its report responding to the conferees'
request on February 27, 1998.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3
To identify the statutory and regulatory authorities and constraints
covering all groups of new products, we researched and analyzed
applicable sections of the U.S. Code, Postal Service regulations,
PRC regulations, and relevant court and administrative opinions and
decisions. Additionally, we reviewed H.R. 22 and the Postal
Service's proposed reform legislation to determine how existing
statutory and regulatory authorities and constraints governing new
products may be affected by enactment of either of these legislative
proposals.
To document the Marketing Department's CustomerPerfect! new product
development process, we interviewed marketing and finance managers
responsible for the development and oversight of the process. To
track the flow of three judgmentally selected products\13 through the
process, we worked primarily with the program managers responsible
for those products. In all cases, we obtained, where possible,
documentation to corroborate oral statements. This documentation
included, for example, copies of draft and approved Business
Proposition Statements, copies of draft and approved Business Plans,
documents provided to top management and the Postal Service's Board
of Governors, financial information about the three new products, and
summary information about contracts and contractors. We did not
independently verify the accuracy of the financial data provided or
validate the Service's claim as to how much of its annual revenues
were at risk to electronic diversion.
We gathered pertinent information from the Service's Finance
Department to develop profiles, including financial data, on the
remaining new products the Service marketed and/or had under
development during fiscal years 1995, 1996, and 1997 and that had
been publicly announced as of November 1997. Included in the
information we gathered were Business Proposition Statements,
Business Plans, documents provided top management and the Board of
Governors, and financial information about each new product. We
reviewed and analyzed the information gathered and summarized the
results of that work in appendix III. Clarification questions were
addressed either by Finance officials or the program manager
responsible for a particular product. As with the three products we
reviewed in detail, we did not independently verify the accuracy of
the financial data provided on the remaining products in appendix
III. The inventory of products in appendix III is limited to
products marketed and products under development that have been
publicly announced by the Service. It does not include products
under development that have not been publicly announced because of
the proprietary nature of the Service's research and development
effort. To help ensure that all new products were identified, we
researched the Service's electronic database of press releases,
speeches, and testimonies to identify announcements concerning
products under development.
We conducted our review at Postal Service Headquarters in Washington,
D.C., between November 1997 and July 1998 in accordance with
generally accepted government auditing standards.
We requested comments on a draft of this report from the Postal
Service, and the Service's comments are discussed at the end of this
letter.
--------------------
\13 Of the Postal Service's 19 new products, 11 were under the
purview of the Marketing Department's new product development
process. From those 11, 3 were selected for more in-depth
review--the Service's phone card business (FIRSTCLASS PHONECARD\TM ),
the Service's remittance processing business (REMITCO), and the
Service's Electronic Postmark\TM System. This selection was made in
concert with the Subcommittee staff and provides coverage of products
in varying stages of completion.
STATUTORY AND REGULATORY
AUTHORITIES AND CONSTRAINTS
GOVERNING THE POSTAL SERVICE'S
ABILITY TO MARKET NEW PRODUCTS
AND RECENT REFORM PROPOSALS
------------------------------------------------------------ Letter :4
The Postal Service has broad statutory authority to develop, test,
approve, and market a variety of new products, including new capital,
philatelic, domestic and international postal, and nonpostal
products. However, our analysis shows that the Service is subject to
at least three constraints. First, since it is the underlying
statutory mission of the Postal Service to provide postal services to
bind the nation together, the Service needs to be able to explain how
any new product it develops will further that mission.\14 Second,
under its statutory authority, before marketing (including test
marketing) a new domestic postal product, which necessarily involves
classification of mail, the Service must request a recommended
decision from PRC regarding the propriety of the Service's proposed
classification, rates, or fees for the new product. Prior to issuing
its recommended decision, PRC is required to hold hearings on the
Service's proposal. The Governors of the Postal Service may approve,
allow under protest, reject, or modify PRC decisions as provided for
in statute.\15 Finally, the Service's ability to market new products
can be constrained or influenced by congressional oversight,
restrictions imposed during the appropriations process, or other
legislative actions.
Adoption of H.R. 22 or legislative changes offered by the Postal
Service would amend the Service's current statutory authority to
develop, test, approve, and market new products. H.R. 22 would
place new restrictions on the introduction of new, nonpostal products
and international postal products. For example, the Service would be
restricted to introducing new, nonpostal products through a
for-profit corporation created and owned by the Postal Service.
However, H.R. 22 would provide the Service with broader latitude to
test market experimental postal products. For example, market tests
of new postal products could be conducted for as long as 2 years and
generate $10 million in revenues per year without prior PRC approval
and could be extended to a third year with PRC's approval. The
Postal Service's proposed legislative changes would also provide the
Service with broader latitude to test market experimental postal
products. Under the Service's proposed changes, it would be able to
test market experimental domestic postal products without having them
reviewed by PRC first.
--------------------
\14 The Service's basic mission is to provide postal services to bind
the nation together and provide those services in a prompt, reliable,
and efficient manner, at reasonable rates, to all communities and
patrons. See 39 U.S.C. 101.
\15 39 U.S.C. 3625(a).
CURRENT STATUTORY AND
REGULATORY AUTHORITIES AND
CONSTRAINTS GOVERNING THE
POSTAL SERVICE'S ABILITY TO
MARKET NEW PRODUCTS
---------------------------------------------------------- Letter :4.1
The Postal Reorganization Act of 1970\16 provides the Postal Service
with broad statutory authority to develop, test, approve, and market
new products. With respect to the Postal Service's general duties,
the act directs the Service to plan, develop, promote, and provide
adequate and efficient postal services at fair and reasonable rates
and fees.\17 In addition, it specifies that it is the Service's
general duty to "receive, transmit, and deliver . . . written and
printed matter, parcels, and like materials and provide such other
services incidental thereto as it finds appropriate to its functions
and in the public interest."\18
In more specific terms, the act also provides the Postal Service
authority to develop a variety of new products. With regard to new
capital products, the Service has authority under the act to
determine the need for post offices, postal and training facilities,
and equipment and to provide such offices, facilities, and equipment
as it determines are needed.\19 The act also provides the Service
with the specific power to provide philatelic services.\20 With
regard to new international products, the act has been interpreted by
the courts as providing the Service, with the consent of the
president, the authority to establish international products.\21
Finally, with regard to nonpostal products, the act provides the
Service with the specific power to "provide, establish, change, or
abolish special nonpostal or similar services."\22 These provisions
do not contain any specific limitations or constraints on the Postal
Service's authority to develop, test, approve, and market these
products except for the requirement to obtain presidential consent
with regard to international products. Nevertheless, our analysis
shows that the Postal Service is subject to at least three
constraints that affect postal operations, including the development
and marketing of new products.
First, the act sets forth the mission of the Service to provide
"postal services to bind the Nation together through the personal,
educational, literary, and business correspondence of the people."\23
In addition, it directs the Service to provide postal services in a
prompt, reliable, and efficient manner, at reasonable rates, and to
all communities and patrons. Therefore, when the Service develops
any new product, it needs to be able to explain how that new product
will further its underlying statutory mission. For example, in
response to recent questions from Congress regarding its marketing of
new retail products with postal themes, such as neckties, T-shirts,
greeting cards, and other gift items, Postal officials justified
these nonpostal products as being needed to help provide the
necessary revenues to operate its basic functions and obligations.\24
However, more recently, the Postal Service acknowledged growing
concerns in Congress and in the private sector about its marketing of
these retail products, and it decided to end the sales of apparel
merchandise at post offices.\25
Second, under its statutory authority, before marketing a new
domestic postal product, which necessarily involves classification of
mail, the Service must request a recommended decision from PRC
regarding the propriety of the Service's proposed classification,
rates, or fees for the new product. The requirement to request a
recommended decision from PRC before marketing a new product applies,
however, only to new domestic postal products.\26 Therefore, the
Service may introduce new capital, philatelic, international, and
nonpostal products without first requesting a recommended decision
from PRC. Although there is no statutory definition of a postal
product, court and administrative decisions have held that a product
is considered to be postal in nature if it involves an aspect of the
posting, handling, or delivery of mail.\27
With regard to new domestic postal products, the act also requires
that PRC provide an opportunity for a hearing on the record for the
Service, mail users, and a PRC officer representing the interests of
the general public prior to PRC issuing its recommended decision.\28
Under its regulations, PRC provides general rules of practice for
these proceedings and special rules and expedited proceedings for
recommended decisions, such as decisions on (1) experimental
products, (2) market tests of new products, and (3) new products that
are to be marketed for only a limited amount of time.\29 The Postal
Service's Board of Governors may approve, allow under protest,
reject, or modify PRC decisions as provided for in statute.
Third, the Postal Service's ability to market new products can be
constrained or influenced by congressional oversight and other
congressional action. The act provides for congressional oversight
of the Postal Service. This oversight responsibility resides
primarily with the Senate Committee on Governmental Affairs and its
Subcommittee on International Security, Proliferation and Federal
Services; and with the House Committee on Government Reform and
Oversight and its Subcommittee on the Postal Service. These
Committees and Subcommittees periodically hold oversight hearings on
postal operations, at which time the Postal Service may be asked to
justify any new product being developed or marketed. Additionally,
other congressional action, including restrictions imposed during the
appropriations process and other types of legislative action, can
constrain or influence the Postal Service's new product activities.
--------------------
\16 Pub. L. No. 91-375, 84 Stat. 720, as amended and codified in
Title 39 of the United States Code.
\17 39 U.S.C. 403(a).
\18 Id.
\19 39 U.S.C. 404(a)(3).
\20 39 U.S.C. 404(a)(5).
\21 See UPS Worldwide Forwarding, Inc. v. USPS, 66 F.3d 621 (3d
Cir. 1995) (interpreting 39 U.S.C. 407(a)).
\22 39 U.S.C. 404(a)(6).
\23 39 U.S.C. 101(a).
\24 Report on Postal Service Activities-In Compliance with the
Conference Report on Public Law No. 105-61 (Feb. 27, 1998).
\25 The Postmaster General announced this change in policy on June
24, 1998. The Service plans to continue such sales through mail
order catalogs, its Web site, at special events, and at the Postmark
America store in the Mall of America in Minnesota.
\26 See 39 U.S.C. ch. 36; UPS Worldwide Forwarding, Inc. v. USPS,
66 F.3d 621 (3d Cir. 1995); PRC Opinion, "Provisional Packaging
Service," MC97-5 at note 1 (March 31, 1998).
\27 See National Association of Greeting Card Publishers v. USPS,
569 F.2d 570, 596 (D.C. Cir. 1976); PRC Order No. 1145, "Complaint
of Coalition Against Unfair USPS Competition," C96-1 (Dec. 16,
1996).
\28 39 U.S.C. ch. 36.
\29 See 39 C.F.R. Part 3001.
CURRENT AUTHORITIES AND
CONSTRAINTS WOULD BE
AFFECTED BY THE ADOPTION OF
H.R. 22
---------------------------------------------------------- Letter :4.2
On January 7, 1997, the Chairman, Subcommittee on the Postal Service,
introduced H.R. 22 in the 105th Congress to reform the laws that
govern the Postal Service. H.R. 22 followed up on a similar bill
(H.R. 3717, 104th Congress (1996)) introduced by the Chairman in the
104th Congress. The most recent version of H.R. 22 was agreed to by
the Subcommittee on the Postal Service on September 24, 1998. H.R.
22--currently entitled the Postal Modernization Act of 1998--would
amend the Service's current statutory authority to develop, test,
approve, and market new products in a number of ways.
First, H.R. 22 would provide, for the first time, statutory
definitions for the terms postal products and nonpostal products. A
postal product would be specifically defined as "any service that
provides for the physical delivery of letters, printed matter, or
packages weighing up to 70 pounds, including physical acceptance,
collection, sorting, or transportation services ancillary thereto." A
nonpostal product would be defined as "any product or service offered
by the Postal Service (or that could have been offered by the Postal
Service under section 404(a)(6), as last in effect before the date of
enactment of the Postal Modernization Act of 1998) that is not a
postal product."
Having specifically distinguished between postal and nonpostal
products, H.R. 22 would place additional constraints on the
introduction of new, nonpostal products. Under H.R. 22, the Service
would be restricted to introducing new, nonpostal products through a
private, for-profit corporation funded through revenues derived from
the Service's competitive products and loans obtained on the credit
of the corporation itself. The corporation would be owned by, but
separate from, the Postal Service and would be subject to the same
corporate laws as any other similar private company. Furthermore,
nonpostal products that the Service first offered to the public
between January 1, 1994, and the date of enactment of H.R. 22 would
be transitioned into the private corporation, following a schedule
and procedures established by PRC.\30
Nonpostal products first offered to the public prior to January 1,
1994, could continue to be produced or discontinued by the Service
directly (but not established or changed). PRC would not, as under
current law, be involved in reviewing the establishment of new
nonpostal products.
Under H.R. 22, for the first time postal products would be
specifically divided into separate "competitive" and "noncompetitive"
categories. Competitive products would include those postal products
facing full competition within the marketplace. As specified in H.R.
22, competitive activities would be, to the maximum possible extent,
on the same terms and conditions as those faced by private sector
competitors.
After establishment of initial rates (referred to in H.R. 22 as
baseline rates) based on a recommended decision by PRC, the Postal
Service would have discretion to set prices for competitive products
as it deems appropriate, as long as (1) each of these products was
priced to cover its own costs, and (2) the competitive products
collectively made a specified contribution to the overhead of the
Postal Service. PRC would do annual audit reviews of competitive
products to ensure that prices were set in accordance with the law.
Noncompetitive products would include those products such as
First-Class Mail and other classes of mail for which there are few
practical or legal alternatives to the Postal Service. After
establishment of baseline rates based on a recommended decision by
PRC, rates for noncompetitive products would be established using a
price "cap" regimen, based on the consumer price index less a
"productivity offset," which PRC will determine every 5 years. Once
the cap is established, the Postal Service may adjust prices on an
annual basis within specified limits.
International postal products would be grouped into the competitive
or noncompetitive categories, as appropriate, and would, for the
first time, be treated the same as any other postal product with
regard to PRC involvement and oversight.
H.R. 22 would provide the Service with broader latitude to test
market experimental postal products. Under H.R. 22, experimental
postal products could be tested in the marketplace without having to
meet the specific price cap/competitive category requirements the
bill would impose. Specifically, the proposal would authorize market
tests of experimental noncompetitive and competitive postal products
for as long as 2 years and for $10 million in revenues per year
without prior PRC approval. Market tests could be extended to a
third year with PRC's approval. Larger scale market tests,
generating up to $100 million in annual revenues, would also be
permitted under rules adopted by PRC. The Postal Service would be
required to provide to PRC (1) notice prior to the initiation of any
market tests; and (2) annually, information regarding costs,
revenues, and quality of service on its market tests of new products.
PRC would have the authority to review market tests through annual
audit, to review market tests upon complaint, or to stop market tests
that do not meet established criteria. After completion of the
market tests, the Service would be required to either discontinue the
test or follow the requirements for its permanent placement in either
the competitive or noncompetitive postal product categories.
--------------------
\30 Under H.R. 22, the Postal Rate Commission would be renamed the
Postal Regulatory Commission.
CURRENT AUTHORITIES AND
CONSTRAINTS WOULD BE
AFFECTED BY THE ADOPTION OF
THE POSTAL SERVICE'S
PROPOSED LEGISLATIVE CHANGES
OF MAY 7, 1997
---------------------------------------------------------- Letter :4.3
In response to the introduction of the original version of H.R. 22,
the Postal Service presented to the Subcommittee on the Postal
Service its own legislative proposal for postal reform on May 7,
1997. The proposal, referred to as the Postal Pricing Reform Act of
1997, would allow the Postal Service to test market experimental
domestic postal products without having them reviewed by PRC first.
The Postal Service believes that the existing system is unduly
inhibiting, potentially too lengthy, and inadequate to accommodate
the needs of a modern Postal Service.\31
The proposal provides for the Postal Service to test market
experimental, domestic postal products without first requesting a
recommended decision from PRC on product classification and rates or
fees. After an experimental product has been in existence for 3
years or has actually generated $100 million of annual revenue, the
Postal Service could either discontinue the experiment or request a
recommended decision from PRC. The Service could continue to offer
experimental products while PRC was conducting hearings.
Under the Service's proposal, the Service could continue to develop,
test, approve, and market new capital, philatelic, international, and
nonpostal products without having them reviewed by PRC. Finally, the
proposal does not appear to affect current distinctions between
postal and nonpostal products set forth in administrative and court
decisions.
--------------------
\31 Decision of the Governors of the USPS on the Recommended Decision
of PRC, C96-1 at 9-10 (April 8, 1997).
THE MARKETING DEPARTMENT'S
CUSTOMERPERFECT! NEW PRODUCT
DEVELOPMENT PROCESS AND
ILLUSTRATIVE EXAMPLES OF THREE
PRODUCTS UNDER THE PURVIEW OF
THAT PROCESS
------------------------------------------------------------ Letter :5
The Service's Marketing Department is one of the primary players in
the introduction of new products. Since June 1996, the Marketing
Department has relied on a formalized review and approval process to
govern the introduction of its new products. The process, referred
to as the CustomerPerfect! new product development process, is based
on the Malcolm Baldrige Award criteria and incorporates many aspects
of the Service's review and approval process for capital projects.
As part of our overall review of the Marketing Department's new
product development process, we traced the movement of three products
through that process, and we found that they generally followed the
tenets of the CustomerPerfect! new product development process.
THE MARKETING DEPARTMENT'S
CUSTOMERPERFECT! NEW
PRODUCT DEVELOPMENT PROCESS
---------------------------------------------------------- Letter :5.1
During the early 1990s, Postal management recognized that the Postal
Service was facing a future of growing competition across many of its
product lines. In particular, managers believed that the emerging
electronic communications industry had the potential to seriously
erode the Service's First-Class Mail base--the financial bedrock of
universal service. Faced with this perspective, management developed
the corporate goal of initiating and growing new businesses,
particularly in the electronic communications arena, in order to
ensure its commercial viability as a service provider for the
worldwide movement of messages, merchandise, and money.
To carry out its goal of initiating and growing new businesses, the
Service turned primarily to its Marketing Department, which began
developing concepts for new products. To oversee this work,
Marketing established a New Business Initiatives and Products Group.
Additionally, to facilitate the process of developing and introducing
new products and to ensure effective management control, the Service
developed a formalized system of checks and balances that requires
top management buy-in at critical stages of the development process.
This system of checks and balances, adopted in June 1996, is known as
the CustomerPerfect! new product development process. This process
is also used to review the performance of products and terminate
those that do not perform to Postal Service expectations.
As an additional check to ensure that the new product development
process is followed, top management established a Business Evaluation
Group in the Finance Department. In addition to helping the
Marketing Department oversee the process, the Business Evaluation
Group is to validate the financial feasibility of new products and
provide the Board of Governors with an independent financial
assessment of each new product. The Business Evaluation Group
reports directly to the Chief Financial Officer/Senior Vice
President.
Under the new product development process, new products initiated by
the Marketing Department's New Business Initiatives and Products
Group go through four distinct stages: the (1) concept stage, (2)
business plan stage, (3) test stage, and (4) implementation stage.
During each stage, there are specific review and decision points for
top management. Additionally, the Board of Governors must approve
the Business Plan, product testing and results, and product
implementation (rollout).
The purpose of the concept stage is to generate ideas for new
products that are consistent with the Service's strategic plan\32 and
CustomerPerfect!. The Marketing Department prepares a Business
Proposition Statement during this stage that outlines such things as
the business objective for the new product, the market situation, and
a revenue forecast. If the Chief Marketing Officer approves the
Business Proposition Statement, then the new product proposal
advances to stage 2--the business plan stage.
In the business plan stage, a preliminary Business Plan is prepared
that includes detailed sections on customer requirements, the target
market and strategy for entering that market, the organization and
management structure for the business, financial projections, and
critical success factors and measures of success. In developing the
preliminary Business Plan, a cross-functional team is assembled to
achieve consensus on the product assumptions needed to build the
preliminary Business Plan. Team members, selected on the basis of
skills needed, are drawn from various postal headquarters
departments, such as Marketing, Finance, Legal, and Purchasing; and
Field Operations. Any issues the cross-functional team cannot
resolve by consensus are settled by the Chief Marketing Officer.
After the preliminary Business Plan is developed, the Chief Marketing
Officer solicits feedback from individual members of the Management
Committee, which comprises the Postmaster General, Deputy Postmaster
General, Chief Operating Officer, Chief Financial Officer, and Chief
Marketing Officer. Following review and approval by the Management
Committee, the Marketing Department conducts a proof of concept
operations test with a vendor to validate the new product concept.
If the operations test indicates that the new product concept is
valid and ready for market testing, then the Chief Marketing Officer
presents the preliminary Business Plan to the Strategic Planning
Committee of the Board of Governors for review. With the Strategic
Planning Committee's approval, the Chief Marketing Officer presents
the preliminary Business Plan to the Board of Governors. If the
Board approves the preliminary Business Plan, then the proposed new
product moves to stage 3--the test stage.
The purpose of the test stage is to test and evaluate the new product
in the marketplace. Postal field operations participate with
cross-functional team representatives to establish the scope of a
limited market test and the measures of success. Following the
limited market test, the Chief Marketing Officer reviews the test
results and determines the need for an expanded test. If the Chief
Marketing Officer determines that an expanded test is warranted, then
a proposal for a major market test is prepared. That proposal is
then to be reviewed and approved by the Management Committee,
Strategic Planning Committee of the Board of Governors, and the Board
of Governors. Following Board approval, the new product is tested in
a major market. After the major market test, the process requires a
thorough review of the results by the cross-functional team and Chief
Marketing Officer. If this review determines that the established
measures of success have been met, the new product proceeds to stage
4--the implementation stage.
The first step in the implementation stage is for the Marketing
Department to update and finalize the Business Plan on the basis of
the results of the major market test and feedback from the individual
members of the Management Committee. After a final review and
approval of the market test results and Business Plan by the
Management Committee, Strategic Planning Committee of the Board, and
the Board of Governors, the new product is rolled out to the target
market, which, in most cases, is the nation.\33 After a new product
is rolled out, it is to be tracked continuously against the Business
Plan and subjected to annual performance reviews by the Marketing
Department. On the basis of the results of the annual performance
reviews, the Marketing Department is to make improvements to the new
product as indicated.
Appendix I lists the major events during each of the four stages of
the new product development process.
--------------------
\32 Under the Government Performance and Results Act of 1993,
agencies are to develop strategic plans in which they define their
missions, establish results-oriented goals, and identify strategies
they will use to achieve those goals.
\33 Products such as Dinero Seguro (electronic money transfers to
Mexico) are available only in selected U.S. markets.
THREE EXAMPLES OF PRODUCTS
UNDER THE MARKETING
DEPARTMENT'S
CUSTOMERPERFECT! NEW
PRODUCT DEVELOPMENT PROCESS
---------------------------------------------------------- Letter :5.2
As part of our overall review of the Marketing Department's new
product development process, we traced the movement of three
products--FIRSTCLASS PHONECARD\TM , REMITCO, and Electronic
Postmark\TM System--through that process, primarily to determine how
closely they followed prescribed steps. The Postal Service had
partially developed all three products before the CustomerPerfect!
new product development process was implemented in June 1996. Prior
to that date, the products followed developmental steps similar to
and later incorporated into the new product development process.
FIRSTCLASS PHONECARD\TM is the name of the Postal Service's prepaid
phone card, which can be purchased at postal retail outlets and from
postal vending machines. REMITCO is the Postal Service's remittance
processing business. REMITCO extends the Postal Service's business
of delivering payments, such as credit card and utility payments, to
the actual processing of checks being mailed from customers to
businesses. Electronic Postmark\TM is the Postal Service's
electronic version of its traditional postmark. The Electronic
Postmark\TM System applies the digital signature of the Postal
Service to an electronic transaction, states the time and date it is
applied, and displays notification to the recipient if the
transaction has been tampered with.
Although all three products were moved into the new product
development process in June 1996, the products entered different
stages of the new process and progressed at different rates.
FIRSTCLASS PHONECARD\TM entered the new process at the test stage and
has since progressed to the implementation stage. At the end of
fiscal year 1997, FIRSTCLASS PHONECARD\TM was the only product to
have achieved national rollout under this process. REMITCO and
Electronic Postmark\TM System entered the new process at the business
plan stage, although REMITCO is the only one of the two that has
progressed to the test stage. In general, we found that each of the
three products followed the tenets of the new process. However,
proof of concept operations tests were not done for FIRSTCLASS
PHONECARD\TM and REMITCO, although the process called for these
tests. According to Postal officials, such tests were unnecessary
because the product concepts had already been validated by various
private sector companies.
Appendix II contains a more detailed discussion of each product,
including information on the origin and development of the product;
the short- and long-term goals for the product; and our assessment of
how closely the product followed the new product development process,
as well as the Postal Service's rationale for any deviations from the
new process.
INVENTORY OF NEW POSTAL
PRODUCTS
------------------------------------------------------------ Letter :6
Appendix III contains an inventory and summary information about each
publicly announced new product the Postal Service marketed and/or had
under development during fiscal years 1995, 1996, and 1997--excluding
capital and philatelic products.\34
Table 1 summarizes the financial performance of each new product and
the 19 products in total, from product inception through fiscal year
1997, and for the first 3 quarters of fiscal year 1998.
Table 1
Summary Financial Data on New Products
Marketed and/or Under Development During
Fiscal Years 1995, 1996, and 1997
(Exclusive of Capital and Philatelic
Products)
Profit (loss) in millions
--------------------------
Product
inception First 3
through quarters of
fiscal year fiscal year
Product 1997 1998
------------------------------------------ ------------ ------------
FIRSTCLASS PHONECARD\TM ($3.0) \$3.9\a
REMITCO (6.1) (6.3)
Electronic Commerce Services\b (20.3) \c
Global Priority Mail (5.4) (0.6)
Global Package Link (1.1) (0.2)
Retail Merchandise 3.3 5.0
PostOffice Online (0.8) (4.5)
WEB Interactive Network of Government (4.0) (1.1)
Services
Deliver America (3.2) \c
Information Based Indicia Program (3.1) (1.8)
Customer Initiated Payment System (1.3) \c
Unisite Antenna Program (1.6) 0.1\
LibertyCash (6.4) (1.9)
Dinero Seguro (10.5) (5.4)
Sure Money (0.5) (0.5)
Delivery Confirmation (2.9) 9.6
Provisional Packaging Service (2.6) \c
Fastnet (11.7) \c
Global e-Post (3.5) \c
======================================================================
Total ($84.7) ($3.7)
----------------------------------------------------------------------
Note: Figures in table are as reported by the Postal Service and
unaudited by GAO.
\a Does not include any proceeds from the sale of the FIRSTCLASS
PHONECARD\TM business to SmarTalk Teleservices, Inc.
\b Includes Electronic Postmark\TM System and Certificate Authority
System.
\c Reported no financial activity during first 3 quarters of fiscal
year 1998.
Source: U.S. Postal Service.
The information displayed in appendix III provides (1) a description
of each product, (2) a history of each product, (3) financial data
from inception of product through fiscal year 1997, and (4) fiscal
year 1998 financial data--through quarter 3--for each product.
Highlighted below are some of our observations concerning the
inventory listing.
-- Of the 19 new products listed, 11 were at least partially
developed under the Marketing Department's CustomerPerfect! new
product development process and 8 were not.
-- Three products--FIRSTCLASS PHONECARD\TM , Dinero Seguro, and
Unisite Antennas--involved strategic alliances with other
entities.
-- Of the 19 new products listed, 5 had been discontinued as of
July 1998, and the Service was considering discontinuing 1
more--Customer Initiated Payment System (CIPS). Additionally,
the Service was awaiting a decision from its Board of Governors
on whether or not to proceed with its Provisional Packaging
Service (formerly known as pack-and-send).
-- Of the 19 new products listed, 10 were started before fiscal
year 1996, 6 were started in fiscal year 1996, and 3 were
started in fiscal year 1997.
-- From date of product inception through fiscal year 1997, only
one product reported making a profit--retail merchandise. Total
revenues and expenses reported for the 19 products, through
fiscal year 1997, were $148.8 million and $233.5 million,
respectively, resulting in a net loss of $84.7 million. In this
regard, it may not be reasonable to expect all new products to
become profitable in their early years, because new products
generally take several years to become established and recover
their start-up costs.
-- During the first 3 quarters of fiscal year 1998, 13 of the 19
products listed had financial activity. Four of the 13 reported
net profits, and 9 reported net losses for the period. Total
revenues and expenses for the 13 products during the first 3
quarters of fiscal year 1998 were $117.8 million and $121.5
million, respectively, resulting in a reported net loss of $3.7
million.
--------------------
\34 As noted earlier, products under development that had not been
publicly announced are not included in the inventory.
AGENCY COMMENTS
------------------------------------------------------------ Letter :7
We requested comments from the Postmaster General on a draft of this
report. On October 27, 1998, the Postal Service's Chief Marketing
Officer/Senior Vice President provided comments on the draft report.
He said that the Service was in agreement with the information
presented. He provided some technical updates, which we incorporated
into the report where appropriate.
---------------------------------------------------------- Letter :7.1
We are sending copies of this report to the Ranking Minority Member
of your Subcommittee; the Chairman and Ranking Minority Member of the
Subcommittee on International Security, Proliferation and Federal
Services, Senate Committee on Governmental Affairs; the Postmaster
General; and other interested parties. Copies will also be made
available to others upon request.
Major contributors to this report are listed in appendix IV. If you
have any questions about the report, please call me on (202)
512-8387.
Sincerely yours,
Bernard L. Ungar
Director, Government Business
Operations Issues
MAJOR EVENTS DURING EACH STAGE OF
THE MARKETING DEPARTMENT'S
CUSTOMERPERFECT! NEW PRODUCT
DEVELOPMENT PROCESS
=========================================================== Appendix I
CONCEPT STAGE
-- Generate an idea for new product that is consistent with the
Service's strategic plan and CustomerPerfect!.
-- Prepare a Business Proposition Statement for the new product
idea.
-- Present the Business Proposition Statement to the Chief
Marketing Officer for Review and Approval.
-- Move the new product idea to the business plan stage following
the Chief Marketing Officer's approval.
BUSINESS PLAN STAGE
-- Prepare a preliminary Business Plan for the new product and
solicit feedback from the individual members of the Management
Committee.
-- Present the preliminary Business Plan to the Management
Committee for review and approval to proceed with an operations
test.
-- Conduct a proof of concept operations test to validate the new
product concept and its readiness for market testing.
-- Provide operations test results to the Chief Marketing Officer
for review and approval.
-- Present the preliminary Business Plan, including operations test
results, to the Board of Governors' Strategic Planning Committee
and then to the Board of Governors for their sequential review
and approval.
-- Move the new product to the test stage following approval by the
Board's Strategic Planning Committee and the Board of Governors.
TEST STAGE
-- Perform a limited-scope market test of the new product.
-- Evaluate limited-scope market test results and present results
to the Chief Marketing Officer for review and decision on
whether to proceed with a major market test.
-- Present a proposal for a major market test to the Management
Committee, the Board's Strategic Planning Committee, and the
Board of Governors for their sequential review and approval to
proceed with the major market test.
-- Conduct the major market test and evaluate the results against
measures of success. Submit results for the Chief Marketing
Officer's review.
-- Move to the implementation stage following determination by the
Chief Marketing Officer that measures of success for the major
market test were met.
IMPLEMENTATION STAGE
-- Finalize the Business Plan on the basis of major market test
results and feedback from individual members of the Management
Committee.
-- Present the finalized Business Plan and results of the major
market test to the Management Committee, the Board's Strategic
Planning Committee, and the Board of Governors for their
sequential review and approval.
-- Roll out new product to target market following review and
approval of the major market test results and Business Plan by
the Management Committee, the Board's Strategic Planning
Committee, and the Board of Governors.
-- Track the new product continuously against the Business Plan,
perform annual reviews, and improve the product as indicated.
ILLUSTRATIVE EXAMPLES OF THREE
PRODUCTS UNDER THE PURVIEW OF THE
CUSTOMERPERFECT! NEW PRODUCT
DEVELOPMENT PROCESS
========================================================== Appendix II
As part of our overall review of the Marketing Department's new
product development process, we traced the movement of three
products--FIRSTCLASS PHONECARD\TM , REMITCO, and Electronic
Postmark\TM System--through that process, primarily to determine how
closely those products followed prescribed steps. Our discussion of
each product includes information on the origin and development of
the product; the short- and long-term goals for the product; and our
assessment of how closely the product followed the new product
development process, as well as the Postal Service's rationale for
any deviations from the process. In general, we found that each of
these three products followed the tenets of the CustomerPerfect! new
product development process.
FIRSTCLASS PHONECARD\TM
FIRSTCLASS PHONECARD\TM is the exclusive brand name of a phone card
offered through a strategic alliance between the U.S. Postal Service
and SmarTalk Teleservices, Inc. Phone cards are a way of paying for
telephone service in advance by establishing a prepaid account with a
card issuer. Phone cards provide customers with a convenient way of
making calls when away from the home or office.\1
The Postal Service entered the phone card business about 3 years ago
as a way of increasing revenues and providing customers with a
convenient, reliable, and trusted means for purchasing and using
phone cards. The Service's short-term goal for the FIRSTCLASS
PHONECARD\TM is to provide a reliable service and make the business
profitable. Its long-term goal is to become a leading retailer in
the phone card industry. The FIRSTCLASS PHONECARD\TM initiative has
generally followed the CustomerPerfect! new product development
process.
--------------------
\1 To use a prepaid phone card, the cardholder calls the card
issuer's toll-free number, inputs his/her personal identification
number (PIN), and inputs the telephone number he/she wishes to reach.
The card issuer's computer times the call and deducts the charges
from the cardholder's account.
HISTORY OF FIRSTCLASS
PHONECARD\TM
------------------------------------------------------ Appendix II:0.1
According to Postal officials, the genesis of the Postal Service's
entry into the phone card business was in July 1995, after American
Express Telecom, Inc., approached the Service about forming a
strategic alliance to market phone cards. In August 1995, the
Service signed an agreement with American Express to test market
phone cards in 712 postal facilities in 7 geographic areas--Columbus,
OH; Albuquerque, NM; San Diego, CA; Miami, FL; Salt Lake City, UT;
San Antonio, TX; and Providence, RI. According to postal officials,
the test market locations were chosen primarily because of their high
concentrations of target consumers;\2 and secondarily because the
Service had already slated these areas for increased advertising
budgets, which could be used, in part, to promote phone card sales.
In May 1996, the Service and American Express expanded the test to 5
more geographic areas--Atlanta, GA; San Francisco, CA; Orlando, FL;
New York, NY; and Washington, D.C.--which brought the total number of
postal facilities selling phone cards to about 1,200. In November
1996, following approval by the Board of Governors, the Service and
American Express signed an agreement establishing a strategic
alliance for marketing phone cards nationwide. In essence, the terms
of the alliance provided that the revenues and expenses were to be
shared equally between the two parties. Since the alliance agreement
was signed, an additional 10,500 postal facilities have begun selling
phone cards, bringing the total number of facilities selling phone
cards to about 11,700 at the end of fiscal year 1997. The number of
locations selling phone cards has increased only slightly since that
time. In August 1997, the Service and American Express also began
implementing a plan for marketing phone cards in as many as 4,000
postal vending machines.\3
Also, in August 1997, SmarTalk Teleservices, Inc., approached
American Express to discuss acquiring its subsidiary, American
Express Telecom, Inc., which included FIRSTCLASS PHONECARD\TM .
SmarTalk also wanted to establish a strategic alliance with the
Postal Service for continuing the FIRSTCLASS PHONECARD\TM business.
SmarTalk offered $34 million for the FIRSTCLASS PHONECARD\TM
business, which was to be split equally between the Postal Service
and American Express. According to Postal officials, American
Express was interested in SmarTalk's offer because it was in the
process of consolidating operations and reducing its secondary
business ventures. According to Postal officials, the Service was
also interested in SmarTalk's offer for a number of reasons. First,
SmarTalk's offer seemed reasonable when compared to other buy-outs in
the industry. Second, the terms of the proposed new alliance
agreement with SmarTalk were more favorable to the Service than the
terms under the alliance with American Express had been. Third, in a
J.P. Morgan study commissioned by the Postal Service in late 1996 to
evaluate potential phone card partners, SmarTalk ranked third among
the top seven candidates. The Service believed, on the basis of the
results of that study, that SmarTalk would make a good strategic
alliance partner. Subsequently, on December 8, 1997, the Board of
Governors voted to accept SmarTalk's offer; and on December 22, 1997,
the Service, American Express, and SmarTalk signed the transition
plan agreement for the FIRSTCLASS PHONECARD\TM business. The
transition to SmarTalk began in January 1998 and was completed in
June 1998.
--------------------
\2 Target consumers included such groups as college students,
foreign/domestic tourists, small business owners, military personnel,
seniors, and people relocating.
\3 At the end of fiscal year 1997, the Service was marketing the
FIRSTCLASS PHONECARD\TM in about 2,000 postal vending machines.
SHORT- AND LONG-TERM GOALS
FOR THE FIRSTCLASS
PHONECARD\TM BUSINESS
------------------------------------------------------ Appendix II:0.2
The Service's short-term goal for the FIRSTCLASS PHONECARD\TM is to
provide a reliable product to customers and make the business
profitable. Its long-term goal is to grow revenue annually at a rate
of at least 15 percent and become a leader in the phone card
industry. According to Postal Service data, through fiscal year
1997, the FIRSTCLASS PHONECARD\TM business had performed
substantially below expectations--operating at a net loss. However,
for the first three quarters of fiscal year 1998, the FIRSTCLASS
PHONECARD\TM business was operating at a net profit. Overall, Postal
Service data show that the FIRSTCLASS PHONECARD\TM business has
covered all start-up costs and contributed a net profit to the Postal
Service.
A Business Plan prepared by the Marketing Department in August 1996
for FIRSTCLASS PHONECARD\TM projected a $35 million profit for the
Service in fiscal year 1997. The Postal Service's share of the
revenues and expenses was projected to be $90 million and $55
million, respectively. The actual performance in fiscal year 1997
was quite different--the Postal Service's share of the revenues and
expenses was $10 million and $12.4 million, respectively, resulting
in a net loss for the year of $2.4 million. Postal officials
attributed the differences between projections and actual performance
to overly optimistic projections. For fiscal year 1998, the Service
has established a Postal Service revenue goal of $32.3 million. The
Service has not established a specific net profit goal for fiscal
year 1998; however, it expects the business will operate at a profit.
Through the first three quarters of fiscal year 1998, the FIRSTCLASS
PHONECARD\TM business had achieved $11.9 million of its $32.3 million
revenue goal for the year and was operating at a net profit of $3.9
million.\4
The Postal Service acknowledges that achieving its long-term goal
will be a formidable task--it has more than 500 competitors in the
phone card industry. Other companies in the phone card business
range from small operations to large international companies, such as
American Telephone and Telegraph, Sprint Communications Company, and
MCI Telecommunications Corporation. According to International
Telecard Association data, phone card sales in the United States
totaled $1.1 billion in 1996.\5 The Postal Service expects phone card
sales in the United States, according to a study by J.P. Morgan, to
reach more than $3 billion annually by the year 2000.
--------------------
\4 No proceeds from the sale of the FIRSTCLASS PHONECARD\TM business
to SmarTalk are included in the amounts shown.
\5 The International Telecard Association is a voluntary association
of companies and individuals in the phone card industry.
FIRSTCLASS PHONECARD\TM
INITIATIVE GENERALLY
FOLLOWED THE
CUSTOMERPERFECT! NEW
PRODUCT DEVELOPMENT PROCESS
------------------------------------------------------ Appendix II:0.3
The FIRSTCLASS PHONECARD\TM initiative, under the guidance of the
Marketing Department, began in 1995, about 1 year before adoption of
the CustomerPerfect! new product development process. During this
time, the initiative went through development phases similar to those
of the new product development process. The FIRSTCLASS PHONECARD\TM
went through a concept and business plan phase and entered a test
phase with phone cards being test marketed in about 1,200 postal
facilities. The test at 1,200 postal facilities occurred under the
direction of the former Chief Marketing Officer, although no proof of
concept operations test was done during the business plan phase to
validate the FIRSTCLASS PHONECARD\TM . According to postal
officials, a proof of concept operations test was considered
unnecessary because the concept had already been validated by
numerous private sector companies, including American Express and
SmarTalk, who were already successfully marketing phone cards.
The new product development process was implemented in June 1996, and
the FIRSTCLASS PHONECARD\TM was officially placed in the test stage
of that process. Two major events have occurred with phone cards
since that time, and both events were approved by the Service's top
management and its Board of Governors. First, the FIRSTCLASS
PHONECARD\TM entered the implementation stage, and its national
rollout began. Second, American Express Telecom, Inc., was sold to
SmarTalk, and a new strategic alliance was formed between the Postal
Service and SmarTalk for continuing the FIRSTCLASS PHONECARD\TM
business.
At the end of fiscal year 1997, FIRSTCLASS PHONECARD\TM was the only
initiative under the purview of the new product development process
to have reached the implementation stage and national rollout.
According to postal officials, the results of the FIRSTCLASS
PHONECARD\TM business will be evaluated annually and adjustments made
to ensure continued product improvement and profitability.
REMITCO
REMITCO is the Postal Service's new remittance processing business.
REMITCO extends the Postal Service's business of delivering payments,
such as credit card and utility payments, to the actual processing of
checks being mailed from customers to businesses.
At present, the Service has one remittance processing facility, which
is located on Staten Island in New York City. That facility is
operated for the Postal Service by a private company--REMITCO
Management Corp.\6 The Postal Service's short-term goal is to make
the Staten Island remittance processing facility profitable. The
Service's long-term goal is to protect First-Class Mail volume by
encouraging businesses to allow customers to pay their bills via mail
instead of electronically. Thus far, REMITCO has generally followed
the steps incorporated in the CustomerPerfect! new product
development process.
--------------------
\6 The Postal Service's remittance processing business is named
REMITCO. REMITCO Management Corp. is the name of the private sector
business hired by the Postal Service to manage and operate its Staten
Island facility.
HISTORY OF REMITCO
------------------------------------------------------ Appendix II:0.4
According to the Postal Service, REMITCO was conceived as a way to
slow the public's move toward electronic bill payment by developing a
remittance processing service that would support customers who want
to continue paying their bills with paper checks via mail while, at
the same time, offering the businesses that receive those payments a
convenient, economical, and high-quality alternative to in-house
remittance processing.
According to Postal officials, the concept of processing remittances
became a reality for the Service in December 1996, when it signed a
contract to take over and operate American Express' remittance
processing facility on Staten Island in New York City. This facility
had been operated in-house by American Express to process incoming
payments from its high-dollar credit card customers in the Northeast.
The Staten Island project is serving as the Service's first test of
its new REMITCO remittance processing business--a business the
Service hopes to expand nationwide by eventually opening numerous
facilities throughout the nation.
According to Postal officials, because the Postal Service did not
want to manage the day-to-day operations of a remittance processing
facility, it contracted with REMITCO Management Corp. to run the
Staten Island facility. REMITCO Management Corp. began processing
American Express remittances at the Staten Island facility on May 15,
1997.
The REMITCO Management Corp. consists of approximately 95 employees.
Many of REMITCO's employees are former American Express remittance
processing employees who worked at the Staten Island facility. There
are no Postal Service employees doing remittance processing.
The operation of the Postal Service's REMITCO business is
straightforward. For example, when consumers in the Northeast mail
their American Express credit card payments to an American Express
post office box in New York City or Newark, NJ, the Postal Service
identifies and separates the mail containing those payments at the
originating mail processing facility. It then transports that mail,
along with other mail, to its postal facility in New York City or
Newark, NJ. From there, a private courier transports the mail
containing the payments to the Staten Island REMITCO facility. At
the facility, REMITCO employees utilize automated equipment to open
the mail, record the payments, and prepare bank deposit statements.
The batched checks are then taken by private courier to American
Express' bank for deposit.
According to Postal officials, REMITCO will help improve and protect
its First-Class Mail-based remittance stream--one of its core
businesses. By protecting the First-Class Mail-based remittance
stream, Postal officials believe REMITCO will also save postal jobs
tied to the processing and delivery of that mail.
In 1997, the Postal Service delivered about 15 billion First-Class
Mail-based remittances from consumers to businesses. Those payments
generated nearly $5 billion in postage revenue for the Service. In
recent years, however, Postal officials have become concerned that
new information technology is fundamentally altering consumers'
choices and expectations for paying their bills. The former
Postmaster General voiced these concerns in testimony before the
House Subcommittee on the Postal Service on April 24, 1997, when he
noted that computers, telephones, and electronic funds transfers are
offering consumers attractive alternatives to paying bills through
the mail. He stated that electronic alternatives take
". . . dead aim on (the Service's) most critical market:
First-Class Mail." Further, he stated that "one fourth of (the
Service's) business--indeed, the core (of the Service's) business and
the financial bedrock for universal service--is bills, payments, and
statements." He concluded that the Service is already seeing
substantial diversion of bill payments from the First-Class Mail
stream to other electronic methods of bill paying--even though that
medium is still in its infancy.
Postal officials point to two developments that they believe are
signaling serious trouble for First-Class Mail volume. First, they
estimate that $6 billion of the Service's $33 billion First-Class
Mail revenue is at risk of being lost to electronic diversion of
mail. Second, they note that the Service's share of the
correspondence and transactions market decreased from 77 percent to
less than 59 percent between 1991 and 1996 as a result of electronic
diversions. Postal officials believe that the Postal Service,
through REMITCO, can slow the diversion of First-Class remittance
mail to electronic diversion.
Postal officials stated that some private sector companies have
expressed concern that the Service is competing with them
head-on--but with an unfair advantage. According to Postal
officials, these competitors believe that the Postal Service provides
faster delivery of remittances to REMITCO than to private sector
processors. Postal officials stated, however, that the same
procedure used to identify and separate REMITCO's mail containing
payments early in the mailstream and transport that mail to REMITCO
is applied to all businesses that have a minimum number of mailpieces
at a processing facility each day. The number of mailpieces can vary
by location and time but is generally around 250 pieces.
SHORT- AND LONG-TERM GOALS
FOR REMITCO
------------------------------------------------------ Appendix II:0.5
The Postal Service's short-term goal for REMITCO is to increase its
customer base to a level that will produce a net profit from the
Staten Island operation.\7 The long-term goal is for REMITCO to be a
national network of payment processing centers that will help protect
First-Class Mail volume by encouraging businesses to allow customers
to continue paying their bills via mail instead of switching to
electronic payments.
At present, the Postal Service's REMITCO operation on Staten Island
is processing remittances for three businesses--American Express;
Public Service Electric and Gas of Metro Park, NJ; and Mellon Bank
Credit Card of Wilmington, DE.\8 The Service is targeting, as
potential customers, businesses that receive 10 million remittances
or more annually and do their own remittance processing. Examples
include credit card companies, utilities, communications companies,
mortgage companies, insurance companies, and large retailers.
The Service estimates that for the Staten Island facility to become
profitable, it must process about 60 million remittances annually.
As of the end of fiscal year 1997, the facility was processing at the
rate of about 50 million pieces annually. Officials hope that within
5 years, the facility will be processing approximately 186 million
remittances annually for about 30 customers at a net profit of
approximately $6 million per year. Through fiscal year 1997,
however, REMITCO reported a net loss of about $6.1 million.
The Postal Service has stated that it plans for REMITCO to eventually
become a national remittance processing network. The preliminary
Business Plan projected that within 5 years the Service would be
operating about 20 REMITCO facilities near major remittance
processing markets throughout the country.\9 It also estimated that
within 5 years REMITCO could contribute between $300 million and $350
million in revenue and $70 million to $80 million in profit to the
Postal Service each year. According to Postal officials, if those
aspirations are realized, REMITCO will have achieved its long-term
goal of protecting First-Class Mail as the preferred method of paying
bills.
Postal officials noted that of the 15 billion First-Class
consumer-to-business remittances delivered in 1997, approximately 11
billion--about 73 percent--were processed in-house. This percentage
is declining as the market consolidates and more companies outsource
remittance processing. The Service is targeting 1 billion of the 11
billion consumer-to-business remittance payments that are currently
processed in-house. The target group is companies with high-volume
remittances because the Service believes it can offer a lower cost
alternative. The Service is not targeting remittances processed by
third-party processors such as banks.
--------------------
\7 Total revenue for fiscal year 1997 was $1.4 million, and start-up
and operating expenses were $6.3 million.
\8 REMITCO began processing remittances for Public Service Electric
and Gas in April 1998 and Mellon Bank Credit Card in June 1998.
\9 According to Postal officials, the number of anticipated
processing facilities has since been revised to about 10.
REMITCO GENERALLY FOLLOWED
THE CUSTOMERPERFECT! NEW
PRODUCT DEVELOPMENT PROCESS
------------------------------------------------------ Appendix II:0.6
REMITCO was conceived in June 1995, a year before the inception of
the CustomerPerfect! new product development process. Nonetheless,
REMITCO followed steps later incorporated in the new product
development process and was officially moved under that process in
June 1996.
REMITCO, a Marketing Department product, went through a concept
phase, which began in June 1995, similar to the new product
development process. During the summer and fall of that year, ideas
regarding the feasibility and marketing of the business were
formulated and a Business Proposition Statement was prepared. In
December 1995, the Chief Marketing Officer reviewed and approved the
statement, and REMITCO moved into a preliminary business plan phase.
At the outset of that phase, representatives of the various postal
departments involved in bringing a new product to market--such as
marketing, legal, finance, and information systems--worked together
to achieve a consensus on assumptions for a Business Plan.
In June 1996, REMITCO was officially placed in the business plan
stage of the CustomerPerfect! new product development process.
Although the business plan stage of the new product development
process calls for a proof of concept operations test with a vendor,
Postal officials explained that this step was not undertaken because
retail remittance is a well-established service in the private
sector. A preliminary Business Plan was presented to the Strategic
Planning Committee on April 1, 1996, and the Board of Governors
approved proceeding to the test stage on November 5, 1996.
The test stage of the REMITCO project began in December 1996, when
the Service was awarded a contract by American Express to process
remittances at its Staten Island processing facility. That same
month, the Service contracted with REMITCO Management Corp. to
operate the facility--in effect, a major market test of the REMITCO
concept. Evaluation of the test was scheduled to be completed in
October 1998 by a cross-functional product team. With the Chief
Marketing Officer's approval of the test results, the Business Plan
is to be finalized and REMITCO is to be presented to top management
for approval. The plan is to then be presented to the Board of
Governors.
If the Board approves the Business Plan, the Service could either
begin an expanded major market test at additional sites or move
REMITCO to the implementation stage and begin a national rollout of
REMITCO before the end of 1998. According to Postal officials,
results of the rollout will be checked against the Business Plan
through an annual review process, and continuous improvements will be
made.
ELECTRONIC POSTMARK\TM SYSTEM
An electronic postmark is an unmodifiable time and date stamp
attached to an electronic communication--such as e-mail. In the case
of a Postal Service-applied electronic postmark, the associated
communication is digitally signed. The digital signature enables the
Service to determine if there has been any unauthorized access or
modification to the electronic message after it was postmarked.
The Electronic Postmark\TM System was developed under the Postal
Service's electronic commerce services research initiative. The
electronic commerce services research initiative was discontinued at
the end of fiscal year 1997 following the development of the
Electronic Postmark\TM System and the Certificate Authority
System.\10 The Postal Service continues work on both the Electronic
Postmark\TM System and the Certificate Authority System.
The Service's short-term goal for its Electronic Postmark\TM System
is to refine the product through operations testing and begin
marketing. The Service's long-term goal is to elevate the public's
acceptance of the Electronic Postmark\TM System to the same level as
the postmark for traditional mail.
Prior to June 1996, activities associated with developing the
Service's Electronic Postmark\TM System were approved under the
capital projects review and approval process. Since June 1996,
Electronic Postmark\TM System activities have been under the
Service's CustomerPerfect! new product development process.
--------------------
\10 The Certificate Authority System authenticates or certifies the
identity of customers sending and receiving electronic messages.
HISTORY OF ELECTRONIC
POSTMARK\TM SYSTEM
------------------------------------------------------ Appendix II:0.7
The Postal Service's Electronic Postmark\TM System prototype
originated from a research initiative known as electronic commerce
services. That research effort began in fiscal year 1993 and was
discontinued at the end of fiscal year 1997. According to Postal
officials, the electronic commerce services research initiative was
discontinued after it met its objectives, i.e, the successful
development of two new electronic capabilities--the Electronic
Postmark\TM System and the Certificate Authority System. The
electronic commerce services research initiative was the Service's
first endeavor in the electronic commerce arena.
The Postal Service views its entry into the electronic commerce
market as an extension of its core business--the delivery of
traditional mail. According to Service officials, electronic mail
has the same attributes as traditional mail, but because of security
concerns, electronic mail has not gained wide acceptance in the legal
and business community--especially for legal and financial
transactions.
The Service believes that its Electronic Postmark\TM System will help
bring the level of acceptability of electronic mail up to that of
First-Class Mail. The Service recognizes that some private companies
are already marketing electronic postmarking services. However, the
Service believes it is in the best position to serve the public's
need for an independent, third-party agent offering secure electronic
mail. According to the Postal Service, the public has trusted the
Service with the security of its traditional mail for over 200 years.
Postal officials believe that with Postal-backed electronic services,
the public will have the same high level of trust and confidence in
the security of the Service's electronic mail that it does with the
Service's traditional mail.
SHORT- AND LONG-TERM GOALS
FOR ELECTRONIC POSTMARK\TM
SYSTEM
------------------------------------------------------ Appendix II:0.8
The Service's short-term goal for its Electronic Postmark\TM System
is to complete operational testing, make refinements to the product
as called for by the operations tests, and build a solid case for a
substantial investment to build and deploy an Electronic Postmark\TM
production system. The Service expects to begin wide-scale marketing
of its Electronic Postmark\TM System within the next 2 years.
Additionally, the Service plans to explore the feasibility of
licensing private companies to use its Electronic Postmark\TM System.
The Service's long-term goal is to elevate the level of acceptance of
its Electronic Postmark\TM System to the same level as its
traditional postmark. No specific time frames have been established
for this goal. According to Postal officials, the speed at which
this occurs will be dictated not only by advancements in electronic
technology but also by the courts, which must decide issues relating
to the legal acceptability of digitally signed electronic documents
in lieu of traditional "hard-copy" documents.
ACTIVITY ON ELECTRONIC
POSTMARK\TM SYSTEM HAS BEEN
LIMITED UNDER THE
CUSTOMERPERFECT! NEW
PRODUCT DEVELOPMENT PROCESS
------------------------------------------------------ Appendix II:0.9
As noted above, the Service's Electronic Postmark\TM System was
initiated under the umbrella of its electronic commerce services
research initiative. The concept of electronic commerce services was
conceived in 1993, about 3 years before the CustomerPerfect! new
product development process was implemented. During that period, the
electronic commerce services research initiative was under the
capital projects review and approval process--a process used to
monitor the development of capital projects, such as the upgrading of
postal equipment and the construction and renovation of postal
facilities.
According to Postal officials, there are many similarities between
the new product development process and the capital projects review
and approval process. Consequently, the electronic commerce services
research initiative, between 1993 and 1996, went through stages
similar to the concept stage and business plan stage of the new
product development process. For example, a capital projects
decision analysis report was prepared for the electronic commerce
services research initiative, which is very similar to the
preliminary Business Plan required during the business plan stage of
the new product development process. Also, the Board of Governors
approved the electronic commerce services research initiative, just
as the Board must approve new products under the new product
development process. According to Postal officials, when the
initiative was discontinued at the end of fiscal year 1997, the
Service had spent $20.3 million on electronic commerce services. Of
that amount, $3.2 million was spent on the Electronic Postmark\TM
System.\11
With the implementation of the new product development process in
June 1996, the electronic commerce services research initiative was
moved from the capital projects review and approval process to the
business plan stage of the new product development process. It
remained at that stage until it was discontinued in September 1997.
According to Postal officials, the Electronic Postmark\TM System is
to be moved under the auspices of another Postal Service initiative,
PostOffice Online, after some limited market testing later in 1998
under Postal Electronic Courier Service (PostECS), a joint project
involving the U.S. Postal Service, Canada Post, and LaPoste
(France). PostECS is an electronic service designed to replace
traditional international faxes and overnight courier services. The
U.S. Postal Service joined the PostECS project with Canada Post and
LaPoste in early 1998.
After successfully testing its Electronic Postmark\TM System
capability under PostECS, the Service plans additional testing under
its PostOffice Online initiative. PostOffice Online, currently in
the test stage of the new product development process, is a service
designed to help small businesses move money and messages and sell
merchandise conveniently and securely over the Internet. PostOffice
Online began market testing in March 1998. A classification case was
filed on July 15, 1998, with PRC for Mailing Online Services--a
component of PostOffice Online. A more detailed description of
PostOffice Online can be found in appendix III.
--------------------
\11 The remaining $17.1 million was spent developing the Certificate
Authority System.
INVENTORY OF NEW PRODUCTS MARKETED
AND/OR UNDER DEVELOPMENT DURING
FISCAL YEARS 1995, 1996, AND 1997
(EXCLUSIVE OF CAPITAL AND
PHILATELIC PRODUCTS)
========================================================= Appendix III
Financial data from inception FY 1998 financial data through
of product through FY 1997 quarter 3
------------------------------- --------------------------------
Revenue
Profit goal
Revenue Expenses (loss) for FY Revenue Expenses Profit
Name of Inception (millions (millions (millions 1998\a (millions (millions (loss)
product Description of product History of product date ) ) ) (millions) ) ) (millions)
------------- ------------------------------------ ------------------------------------ ---------- --------- --------- --------- ---------- --------- --------- ----------
FIRSTCLASS Prepaid telecommunications card. The In July 1995, American Express FY 1995 $11.1 $14.1 ($3.0) $32.3 $\11.9\c $8.0 $3.9\c\
PHONECARD\TM FIRSTCLASS PHONECARD\TM is the brand Telecom, Inc., approached the Postal
name of a prepaid phone card Service about forming a strategic
available to the public through a alliance to market phone cards. In
strategic alliance\b between the August 1995, the Postal Service and
(This product Postal Service and SmarTalk American Express entered into an
is discussed Teleservices, Inc. The FIRSTCLASS agreement to test market phone
in more PHONECARD\TM can be purchased\ at cards. Following the market test,
detail on postal retail units and from postal the FIRSTCLASS PHONECARD\TM was made
pages 26- vending machines throughout the U.S. available nationwide. At the end of
30.) At the end of 1997, the FIRSTCLASS 1997, the FIRSTCLASS PHONECARD\TM
PHONECARD\TM was available in $10, was being sold in about 11,700
$20, and $50 denominations, and the postal retail units and in about
per-minute rate for domestic calls 2,000 postal vending machines.
was 39 cents. In April 1998, the
Service lowered its per-minute rate At the end of 1997, SmarTalk
and added a $100 phone card. The new Teleservices, Inc., acquired
per-minute rate ranged from 25 cents American Express Telecom, Inc.,
for the $100 card to 33 cents for including the FIRSTCLASS
the $10 and $20 cards. International PHONECARD\TM business, for $34
rates varied by country. million and formed a new strategic
alliance with the Postal Service for
continuing the business. The $34
million from the sale of the
business was split equally between
the Postal Service and American
Express.
The FIRSTCLASS PHONECARD\TM business
is sponsored by the New Businesses
Marketing Group and has been
monitored under the
CustomerPerfect\
new product development process
since adoption of that process in
June 1996. At the end of 1997, this
was the only product to have
achieved national rollout under the
new product development process.
REMITCO Remittance processing. REMITCO is a In 1995, American Express decided to FY 1995 $1.4 $7.5 ($6.1)\ N/A $2.3 $8.6 ($6.3)
Postal Service business managed by outsource its in-house remittance
(This service the REMITCO Management Corp. REMITCO processing operation located on
is discussed extends the Service's role beyond Staten Island in New York City. The
in more mail delivery to the processing of Postal Service was the successful
detail on remittance documents. Remittance bidder on this project and in
pages 30- processing involves opening return December 1996 signed a contract with
35.) envelopes and extracting bill American Express. In turn, the
payments, processing the checks and Postal Service contracted with
depositing them into business REMITCO Management Corp. to manage
recipients' bank accounts, and and operate the Staten Island
electronically transmitting facility.
remittance records to the business
recipients. The Postal Service assumed the lease
on the Staten Island facility from
As potential REMITCO customers, the American Express on July 15, 1997,
Service is targeting businesses that and has spent approximately $2
receive 10 million remittances or million on improvements. The
more annually and do their own facility is owned by the New York
remittance processing. Examples Port Authority.
include credit card companies,
utilities, communications companies, REMITCO began processing American
mortgage companies, insurance Express remittances on May 15, 1997.
companies, and large retailers. Since then it has started processing
remittances for Public Service
Electric and Gas of Metro Park, NJ;
and Mellon Bank Credit Card of
Wilmington, DE. Ultimately, the
Service hopes to have a nationwide
network of about 10 other similar
processing facilities.
REMITCO is sponsored by the
Service's New Businesses Marketing
Group and has been monitored under
the CustomerPerfect\
new product development process
since adoption of that process in
June 1996.
Electronic Value added services for electronic The initial research under the FY 1993 0.0 $20.3 ($20.3) N/A N/A N/A\d\ N/A
Commerce transmissions. The electronic electronic commerce services
Services commerce services initiative was a initiative began in FY 1993. With
(includes research effort initiated by the the development of two new
Electronic Postal Service to develop value electronic systems--the Electronic
Postmark\TM added services for electronic Postmark\TM System and the
System and transmissions. Through this Certificate Authority System--this
Certificate research, electronic commerce research initiative was completed.
Authority services developed two new Plans are to integrate these two new
System) electronic commerce systems--the systems into Postal Service products
Electronic Postmark\TM System and a and possibly commercial vendor
(Electronic Certificate Authority System. The products for testing during 1998.
Commerce Electronic Postmark\TM System
Services applies an electronic time and date The Postal Service was to begin
initiative stamp and the digital signature of testing its Electronic Postmark\TM
discontinued the Postal Service to an entire System in October 1998. The first
9/97) electronic transaction, and displays tests are to be done under PostECS
notification to the recipient if the (Postal Electronic Courier Service),
transaction has been tampered with. a joint project involving the U.S.
(Electronic The Certificate Authority System Postal Service, Canada Post, and
Postmark\TM authenticates or certifies the LaPoste (France). PostECS is an
System is identity of customers sending and electronic service designed to
discussed in receiving electronic messages. replace international faxes and
more detail overnight courier services. The U.S
on pages 35- Postal Service joined PostECS in
38.) early 1998.
The principal sponsor of the
electronic commerce services
initiative was the Service's
Technology Applications Group. The
initiative began about 3 years
before adoption of the
CustomerPerfect\
new product development process.
Funding for the initiative was
approved under the capital projects
review and approval process. Future
activities associated with the
Electronic Postmark\TM System and
Certificate Authority System are to
be governed by the new product
development process.
Global Expedited international delivery Global Priority Mail evolved from an FY 1995 $23.6 $29.0 ($5.4) $27.5 $18.9 $19.5 ($0.6)
Priority Mail service for documents, earlier pilot program launched in
correspondence, and merchandise. March 1995 known as WorldPost
Conceptually, Global Priority Mail Priority Letter Service. WorldPost
is the Service's domestic priority Priority Letter Service officially
mail service elevated to an became Global Priority Mail in March
international level. Priority Mail 1996. Global Priority Mail is an
is First-Class Mail that receives expedited international service for
special handling for a premium documents, correspondence, and
price. Global Priority Mail is merchandise being sent to designated
available for mail sent from the countries. The service features a 4-
U.S. to any 1 of 33 destinations.\e business-day delivery standard to
designated countries for a premium
price.
Global Priority Mail is sponsored by
the Service's International Business
Unit and is not under the purview of
the CustomerPerfect\
new product development process.
Global Expedited international package Global Package Link evolved from an FY 1995 $77.5 $78.6 ($1.1) $47.5 $20.3 $20.5 ($0.2)
Package delivery service for high-volume earlier pilot program launched in
Link\f U.S. mailers. Global Package Link is November 1994 known as International
an expedited international parcel Package Consignment Service.
delivery service offered by the International Package Consignment
Postal Service to U.S. mailers who Service officially became Global
send at least 10,000 parcels per Package Link in November 1995. The
year to 1 or more destinations initial work on the program began in
covered by the program. To FY 1995. According to Service
participate in the program, U.S. officials, Global Package Link was
mailers must agree to link their designed as a parcel delivery
information systems with those of service that would make it easier
the Postal Service so the customer and more economical for direct
and the Service can generate marketers to export bulk shipments
reciprocal data concerning the of merchandise internationally. In
parcels, meet certain shipping 1998, Global Package Link service
preparation requirements, and was available to 11 destinations.\h
designate the Postal Service as the Global Package Link parcels are
carrier of choice\g for each country generally scheduled for delivery in
to which the Global Package Link 3 to 10 business days, depending on
parcels are being sent.\ the destination.
Global Package Link is sponsored by
the Service's International Business
Unit and is not under the purview of
the CustomerPerfect\
new product development process.
Retail Marketing merchandise displaying The Service's centralized retail FY 1997 $25.9 $22.6\k \$3.3 $79.3 $31.5 $26.5\k $5.0
Merchandise\i stamp images or Postal Service merchandise program started in early
symbols. Retail merchandise marketed FY 1997 with the emphasis primarily
by the Service contains either a on postal stores. According to
stamp image, heritage logo, or the Postal officials, the program
logo of a core service--e.g., quickly expanded to the traditional
Priority Mail. Examples of retail postal retail units because of the
merchandise marketed by the Service positive feedback from customers.
include T-shirts, beverage mugs, Prior to FY 1997, merchandise was
neckties, greeting cards, and marketed on a decentralized basis.
stationery. As of July 1998, such According to Postal officials,
merchandise was being sold in all merchandise marketed in this manner
500 postal stores\j and in about was generally associated with a
25,000 of the Service's 33,000 special event, such as the unveiling
traditional retail units. of a new stamp. Under the
Merchandise may also be ordered from decentralized program, each
a Postal Service catalog or through postmaster could decide what
the Service's Web site. However, in merchandise, if any, to market.
June 1998, the Service announced
plans to curtail its retail Retail merchandising is sponsored by
merchandising activity. The Service the Service's Retail Group and is
will no longer sell apparel not under the purview of the
merchandise in post offices, CustomerPerfect\
although such merchandise will still new product development process.
be available at the Postmark America However, retail merchandise does
Store in the Mall of America and follow a modified retail product
through catalog and web site development process.
programs and special events.
Stationery, greeting cards,
packaging products, and a limited
line of collectables will continue
to be sold at retail units.
PostOffice Internet-based postal services. The PostOffice Online project began FY 1997 $0.0 $0.8 ($0.8) N/A $0.0 $4.5 ($4.5)
Online\ PostOffice Online is a service in July 1997. It is an umbrella
(formerly designed to help small businesses electronic initiative that combines
known as move money, messages, and some of the Service's new ideas with
DeskTop Post merchandise conveniently and some of its prior research work in
Office) securely over the Internet. the electronic arena. For example,
Conceptually, PostOffice Online the ability to send newsletters and
customers will be able to (1) pay advertisements electronically to the
for their mailings and print postage Service for preparation and delivery
using their personal computers; (2) began as a research and development
buy mailing products and supplies project known as NetPost, and the
on-line; and (3) contact the Postal Electronic Postmark\TM System began
Service and request parcel pickup as part of a research initiative
service, or check to see if a known as electronic commerce
particular package has been services. (See discussion on\ pages
delivered. Customers will also be 35-38.)
able to design their own newsletters
or advertisements and send them to Market testing of PostOffice Online
the Postal Service electronically. began in March 1998 with 50
At that point, the Service will customers in Tampa, FL. In May 1998,
assume responsibility for printing the test was expanded to include
the documents and delivering them to about 50 customers in Hartford, CT.
the addresses the customer chooses. An updated version of PostOffice
Also, as part of PostOffice Online, Online has been developed based on
the Service will test its Electronic experience from these tests. The
Postmark\TM System. However, the Electronic Postmark\TM System
Service does not plan to conduct portion of the test is not scheduled
these tests until after the to begin until later in 1998--
Electronic Postmark\TM System has following its initial test under
been successfully tested under PostECS. On July 15, 1998 the
PostECS--Postal Electronic Courier Service filed a classification case
Service.\ PostECS is a joint project with PRC for a component of
involving the U.S. Postal Service, PostOffice Online--Mailing Online
Canada Post, and LaPoste (France). Services.
PostECS is designed to replace
international faxes and overnight PostOffice Online is sponsored by
courier services. (The Electronic the New Businesses Marketing Group
Postmark\TM System is discussed in and has always been monitored under
detail on pages 35-38 and in summary the CustomerPerfect\
form in this appendix under new product development process.
"Electronic Commerce Services.")
WEB Internet-based information on The Postal Service began a 6 month FY 1996 $0.0 $4.0 ($4.0) N/A $0.0 $1.1\ ($1.1)
Interactive government services and products. operations test of WINGS in May 1996
Network of WINGS was designed to provide one- in North Carolina. No fees were
Government stop shopping for federal, state, charged participating agencies
Services and local government information and during the operations test. WINGS
(WINGS) services. Conceptually, using a was discontinued at the end of its
portable computer connected to the operations test because of (1)
(Project Internet or a public kiosk located lower-than-anticipated public demand
discontinued in high-traffic areas, such as post for the service, (2) agencies'
2/98) office lobbies, libraries, shopping reluctance to participate in a
malls, and grocery stores, the consolidated interagency information
public could (1) locate needed program, and (3) a new direction for
government information and services, electronic commerce services.
and (2) transact government
business. Examples of the types of WINGS was sponsored by the New
information and services that were Businesses Marketing Group and was
to be available under WINGS included monitored under the
(1) motor vehicle registration, (2) CustomerPerfect\
tax forms and answers, and (3) new product development process
change of address notices. following adoption of that process
Anticipated revenues were to come in June 1996.
from fees paid by the agencies
participating in WINGS.
Deliver Interactive catalog shopping through The idea for the Deliver America FY 1995 $0.0 $3.2 ($3.2) N/A N/A N/A N/A
America kiosks. Conceptually, through kiosks kiosks originated in FY 1995. The
connected to the Internet, customers project was put "on-hold" for
could have electronically ordered several months due to the
(Project stamps, postal-related retail reassignment of resources. No market
discontinued merchandise, and U.S. Mint tests were conducted. The Deliver
6/97) collectible coins and have the America initiative was subsequently
merchandise delivered by the Postal discontinued in June 1997.
Service to the address(es) of their
choice. Plans were to expand Deliver America was sponsored by the
available merchandise, after an New Businesses Marketing Group and
initial test period, to include was monitored under the
sportswear, business supplies, and CustomerPerfect\
housewares. The project, however, new product development process
was discontinued before any tests following adoption of that process
were conducted. in June 1996.
Information Electronic Postage Using Personal The initial research for the project FY 1996 $0.0 $3.1 ($3.1) N/A $0.0 $1.8 ($1.8)
Based Indicia Computers. To print electronic began in FY 1996, following our
Program postage using a personal computer, a report\l on weaknesses in the
(IBIP) customer purchases postage on-line Service's postage meter program. In
through an established account with May 1994, we reported that the
the Postal Service. The value of the Service incurred revenue losses
postage is then downloaded and stemming from criminal tampering
secured in an electronic vault that with postage meters, counterfeiting
is connected to the personal of indicia, and criminal use of lost
computer. With the required and stolen meters to produce meter
software, indicias can then be indicia for which postage was not
printed directly on a mailstrip or paid. In response to that report and
the mailpiece, and the amount of the its own investigation, the Service
postage is automatically deducted initiated the Information Based
from the electronic vault. Each Indicia Program to enhance its
indicia produced in this manner postage metering revenue security.
contains a digital signature that
makes counterfeiting, without After successfully meeting
detection, difficult. On August 25, laboratory conditions for secure
1998, the Service announced that it postage, the Postal Service began
had approved, for market testing, a market testing products to print
system for printing electronic Information Based Indicia in March
postage that would not require a 1998. On March 31, 1998, at the
vault attached to the customer's National Postal Museum in
computer. Washington, D.C., the first letter
bearing approved personal computer-
In April 1998, this service was generated postage was produced.
available, only on a test basis, in
the Washington, D.C., metropolitan The Information Based Indicia
area. The Postal Service expects to Program is sponsored by the
expand this service to other Service's Retail Group, which
geographic locations during the manages all postage metering.
latter part of 1998. Although this product is not
sponsored by the New Businesses
Marketing Group, it has followed the
CustomerPerfect\
new product development process
since adoption of that process in
June 1996.
Customer- Payment alternative for recurring The research work on CIPS began in FY 1996 $0.0 $1.3 ($1.3) N/A $0.0 $0.0 $0.0
Initiated bills. CIPS is another way for FY 1996. At the end of 1997, no
Payment consumers to pay recurring bills. customer tests had been conducted on
System (CIPS) Conceptually, under CIPS, consumers CIPS. The Postal Service had been
who choose to participate in the unsuccessful in its efforts to
program will receive a prebarcoded convince large private sector
post card with a unique companies to participate in the
identification number--instead of a program. The Postal Service is
courtesy reply envelope--along with considering terminating this program
their monthly statements from because of difficulty in getting a
participating companies. Consumers major company to participate in the
drop their prebarcoded cards in the program.
mail, and the Postal Service
initiates the payment. Financial CIPS is sponsored by the New
institutions are then electronically Businesses Marketing Group and has
instructed via the automated been monitored under the
clearinghouse network to debit the CustomerPerfect\
customer's account and credit the new product development process
invoicer's account--thus paying the since adoption of that process in
bill. June 1996.
Unisite Wireless communication towers on The first antenna constructed under FY 1996 <$0.05\n $1.6 ($1.6) N/A $0.1 $0.0 $0.1
Antenna postal property. Through a strategic the Unisite Antenna Program became
Program\m alliance between the Postal Service operational in June 1996.
and Unisite Incorporated, 150 Constructing antennas on postal
communication towers are to be built sites led to unexpected public
on postal property and then leased criticism of the program. Because of
to wireless carriers. Under the this, the Postal Service put its
strategic alliance agreement, the plans on hold to expand the program
Postal Service contributes the land beyond the original 150 sites. At
and Unisite Incorporated contributes the end of 1997, 15 antenna sites
its construction and marketing were operational.
services. Revenues and expenses are
to be essentially shared equally The Unisite Antenna Program is
between the two parties. sponsored by the Service's
Facilities Group and is not under
the purview of the CustomerPerfect\
new product development process. The
approval for the program was granted
under the rules governing the
Service's contracting authority.
LibertyCash Stored-value card. LibertyCash is a Exploratory work on the LibertyCash FY 1995 $0.1 $6.5 ($6.4) N/A <$0.05\n $1.9 ($1.9)
(formerly Postal Service stored-value card card began in FY 1995. Following an
known as that can be used to pay for all operations test in late 1996, the
LibertyCard) postal products and services. The Service began market testing the
card can be filled in amounts of $5 card in 1,222 postal retail units in
to $300 at the retail unit or over May 1997. In August 1998, the
the telephone. The card is Service expanded its market test to
replaceable if lost or damaged. The include an additional 1,600 retail
customer selects his/her own units, bringing the total to about
personal identification number. 2,800 post offices.
Market test locations include about
2,800 post offices in Indiana, LibertyCash is sponsored by the New
Colorado, Wyoming, Florida, Nevada, Businesses Marketing Group and has
Northern California, and been monitored under the
Minneapolis/St. Paul, MN. CustomerPerfect\
new product development process
since adoption of that process in
June 1996.
Dinero Seguro Electronic money transfers from the The idea for Dinero Seguro FY 1996 $\1.5 \$12.0 ($10.5) N/A $4.6\ $10.0 ($5.4)
U.S. to Mexico. Dinero Seguro, which originated in 1989. However, it was
means "safe money," is an electronic not until FY 1996 that the Service
version of a Money Order that can be began an earnest effort to market
used to transfer money from Dinero Seguro. According to Postal
designated U.S. locations to Mexico. officials, the Service thought it
At the end of 1997, Dinero Seguro was inappropriate to enter this
was available at about 870 postal market before 1996 because of the
retail units in California, Texas, ailing financial condition of the
and Illinois. As part of a Dinero market leader. According to Postal
Seguro transaction, the customer is officials, the Service did not want
given a confirmation number and a to be perceived as contributing to
prepaid phone card good for one 3- the market leader's financial woes.
minute call to Mexico. The customer
can then use the phone card to The Service decided to move forward
inform the person in Mexico that the with Dinero Seguro in 1996 following
money has been sent and pass along the market leader's financial
the confirmation number. The recovery. In May 1996, the Service
transferred funds can then be picked began an operations test and shortly
up from any one of the more than thereafter began test marketing
1,300 Bancomer Bank branches in Dinero Seguro in three states with
Mexico. This service is provided significant Mexican-origin
through a strategic alliance\b populations. Plans to further expand
between the U.S. Postal Service and Dinero Seguro have been put on hold
Bancomer Bank. pending further review by the
Service.
Dinero Seguro is part of an umbrella
initiative known as Money Mover.
Money Mover covers the Service's
international and domestic money
order business and its new
electronic money-by-wire service--
Sure Money.
Dinero Seguro is sponsored by the
New Businesses Marketing Group and
has been monitored under the
CustomerPerfect\
new product development process
since adoption of that process in
June 1996.
Sure Money Electronic money transfers from the Sure Money was designated a FY 1997 $0.0 $0.5 ($0.5) N/A $0.0 $0.5 ($0.5)
U.S to El Salvador, the Philippines, potential Postal Service product in
and the Dominican Republic. This FY 1997. Assuming favorable outcome
service was not available at the end of the Dinero Seguro tests, Postal
of 1997. Rather, it was awaiting the officials expect to test market Sure
results of the Dinero Seguro tests. Money in early FY 1999. This
Sure Money provides the same service schedule may be affected, however,
as Dinero Seguro, except in this by the outcome of the Postal
case, the money is transferred to El Service's review of its Dinero
Salvador, the Dominican Republic, or Seguro program.
the Philippines.
Sure Money is part of an umbrella
A domestic version of this money- initiative known as Money Mover.
by-wire service is also planned. The Money Mover covers the Service's
domestic version will allow international and domestic money
immediate money transfers between order business and its planned
post offices, stations, and branches domestic electronic money-by-wire
within the United States. Plans call service.
for testing to begin in 1999.
Sure Money is sponsored by the New
Businesses Marketing Group and has
been monitored under the
CustomerPerfect\
new product development process
since adoption of that process in
June 1996.
Delivery Tracking mail as it moves through The Postal Service began offering a FY 1991 $0.1 $3.0 ($2.9) N/A $28.2 $18.6 $9.6
Confirmation the mailstream and notifying limited delivery confirmation
(formerly shippers upon delivery. This service service for Express Mail in 1991. In
known as is designed to provide the date of February 1996, the Board of
Track-and- delivery or attempted delivery for Governors approved $60.5 million for
Trace) Express Mail, Priority Mail, and track-and-trace research and
Standard Mail (B)--parcels, bound development testing, and in May
printed matter, and library mail. 1997, it approved $704.3 million to
This service was included in the implement the delivery confirmation
rate filing approved by the Board of system infrastructure.
Governors in July 1998. It is
designed to meet expedited and Delivery Confirmation was initially
package shippers' need for delivery sponsored by the Postal Service's
status information. To support this Comprehensive Interactive
service, a new data acquisition and Information System Management Group,
communications infrastructure is which is now the Information Systems
being implemented. A major component Group in Expedited/Package Services.
of this implementation is the Delivery Confirmation is not subject
deployment of hand-held scanners to to the CustomerPerfect\
all delivery employees. This new product development process.
deployment is expected to be Project funding, however, was
completed by February 1999. To help approved under the Service's capital
ensure that a high level of service projects approval process--a process
is provided to customers who similar to the new product
purchase the service when it becomes development process.
available, a national delivery
confirmation operations test was
started in late 1997. The revenues
to date are associated with the test
customers.
Provisional Packaging service. Under this Following an initial test in 1993, FY 1993 $0.8\o $3.4 ($2.6) N/A N/A N/A N/A
Packaging proposed service, the Postal Service the Postal Service expanded testing
Service will, for a fee, prepare customers' in 1996 to about 20 Post Office
(formerly packages for shipment and enter them Express units located in
known as directly into the mailstream. supermarkets and other high customer
Pack-and- traffic locations. The packaging
Send) In April 1998, PRC approved a 2- service was suspended following a
year test of this service; and as of PRC decision in February 1997 that
July 1998, the Service was awaiting the service was subject to PRC
a decision from its Board of classification and rate-setting
Governors on whether or not to procedures.
proceed with its packaging service.
On July 30, 1997, the Postal Service
filed a request with PRC to offer a
provisional packaging service. PRC
approved a 2-year test, but it
encouraged the Board of Governors to
reconsider the public interest
before marketing this service. In
particular, it asked the Governors
to consider "the financial
consequences of entering into
competition with the thousands of
existing owner-operated small
businesses that currently provide
packaging services, and to consider
what measures the Postal Service
might implement to mitigate the
potential harm to individual private
businesses." As of October 1998,
Provisional Packaging Service was on
hold pending further evaluation.
Provisional Packaging Service is
sponsored by the Service's Marketing
Systems Group and is not under the
purview of the CustomerPerfect\
new product development process.
Fastnet Overnight package delivery service Beginning in 1995, the Service test FY 1995 $6.8 $18.5 ($11.7) N/A N/A N/A N/A
in selected metropolitan areas. marketed Fastnet in 13 selected
(Project Fastnet was an overnight delivery geographic locations. At the
discontinued service available in selected conclusion of the test in early
in early geographic locations for parcels 1996, the Service discontinued
1996) originating and destinating within Fastnet because the results fell
the same area. Fastnet service was short of expectations.
available in Austin, TX; Baltimore,
MD; Buffalo, NY; Columbus, OH; Fastnet was sponsored by the
Hackensack, NJ; Indianapolis, IN; Service's New Businesses Marketing
Jacksonville, FL; Las Vegas, NV; Group and was discontinued before
Miami, FL; Minneapolis/St. Paul, MN; the Group adopted the
Orlando, FL; San Diego, CA; and CustomerPerfect\
Tampa, FL. new product development process.
Global e- International E-mail to hard copy In April 1996, the Postal Service FY 1996 $0.0 $3.5 ($3.5) N/A N/A N/A N/A
Post\p delivery system. Under the Global e- conducted an operations test of
Post concept, a mailer would prepare Global e-Post in Anaheim, CA. In
(Project data and transmit it to the Postal that test, Xerox Corporation
discontinued Service, which would then route the electronically sent, through the
in late 1996) electronic transmission to a partner U.S. Postal Service, a letter to the
postal administration in the German Postal Administration that
destination country. At the was downloaded, printed, and
destination foreign postal facility, delivered to more than 10,000
the transmission would be matched business addresses in Germany. The
with stored templates, printed, project was discontinued later in
placed in envelopes, and delivered 1996 so available staff could be
through the foreign postal system. devoted to higher priority projects.
Global e-Post was sponsored by the
Service's New Businesses Marketing
Group. Global e-Post began before
adoption of the CustomerPerfect\
new product development process.
However, the project was
discontinued under the
CustomerPerfect\
new product development process.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
N/A means not applicable.
Note: The financial data displayed in this matrix were provided by
the U.S. Postal Service. According to Postal officials, expenses
reported include one-time nonrecurring start-up costs. Other
information is based on interviews with Postal officials and
documentation provided by the Service, e.g., Business Proposition
Statements, Business Plans, and documents provided to top management
and the Board of Governors. We did not independently verify the
accuracy of the financial data.
\a Annual revenue goals are established only for products and
services that have moved past their initial pilot project status.
\b A strategic alliance is an agreement between two or more parties
for sharing the risks of a project, including revenues and expenses.
\c The Postal Service is amortizing its $17 million share of the
sales proceeds over the 4-year life of the strategic alliance with
SmarTalk. No proceeds from this sale are included in the amounts
shown.
\d About $300,000 was spent on Electronic Postmark\TM System during
the first 3 quarters of fiscal year 1998.
\e Global Priority Mail service is available to Austria, Belgium,
Denmark, Finland, France, Germany, Great Britain, Iceland, Ireland,
Luxembourg, The Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, Australia, China, Hong Kong, Japan, New Zealand, The
Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam,
Canada, Brazil, Chile, Israel, Mexico, and Saudi Arabia.
\f Global Package Link was the subject of another GAO report. See
U.S. Postal Service: Competitive Concerns About Global Package Link
Service (GAO/GGD-98-104, June 5, 1998).
\g "Carrier of choice" means that Global Package Link customers agree
to use the Postal Service as their carrier unless the parcel
recipient specifically chooses another carrier.
\h In 1998, 11 destinations were covered by the program--Canada,
China, Japan, Mexico, Brazil, Chile, Hong Kong, France, Germany,
Singapore, and the United Kingdom.
\i Retail merchandising was the subject of a Postal Service report
prepared in response to a House Appropriations Committee request on
this activity. The report, dated February 27, 1998, was addressed to
the Chairman of the House Committee on Appropriations.
\j A postal store is a retail unit, with extended hours, designed to
make postal services and products more readily accessible to the
customer.
\k Expenses for retail merchandise reflect inventory in retail units
awaiting sale.
\l See GAO report, Postage Meters: Risk of Significant Financial
Loss But Controls Are Being Strengthened (GAO/GGD-94-148, May 26,
1994), for additional details.
\m Additional information concerning the Postal Service's Unisite
Antenna Program can be found in a report prepared by the Postal
Service's Office of Inspector General--(CAG-AR-98-001, Apr. 1998).
\n Because this figure is less than $50,000, it is not included in
the financial data discussed elsewhere in this report.
\o Revenues from market tests conducted prior to 1997 could not be
collected because there was no dedicated account identifier code in
place.
\p Closely associated with Global e-Post was International Data Post,
which was a consortium of several European countries and the U.S.
Postal Service to establish a network among various postal
administrations to make it possible to e-mail personal correspondence
to foreign postal administrations that, in turn, would deliver hard
copies of the correspondence to the intended recipient. That concept
has not yet materialized.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV
GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C.
Gerald P. Barnes, Assistant Director
William R. Chatlos, Senior Social Science Analyst
Roger L. Lively, Senior Evaluator
Charles F. Wicker, Senior Evaluator
OFFICE OF GENERAL COUNSEL,
WASHINGTON, D.C.
Jill P. Sayre, Senior Attorney
*** End of document. ***