U.S. Postal Service: Electronic Commerce Activities and Legal Matters
(Testimony, 09/07/2000, GAO/T-GGD-00-195).

The United States Postal Service (USPS) has defined e-commerce
initiatives to include products and services that: (1) require the use
of the Internet; and (2) generate revenues for USPS from user charges or
license fees. It has identified seven e-commerce initiatives intended to
facilitate the movement of messages, merchandise, and money. For
example, USPS has introduced PosteCS, an Internet-based global document
delivery system. The Stamps Online initiative allows purchase of stamps
and other philatelic products. USPS introduced its eBillPay initiative,
an electronic bill presentment and payment service, in April 2000. In
the development stage, USPS is working on an electronic mailbox, which
could link electronic and physical addresses. GAO found, however, that
USPS provided inconsistent information on the status of its initiatives,
did not always adhere to its process requirements, and its financial
data were inaccurate and incomplete. USPS believes that it has broad
statutory authority to offer e-commerce products and service. The Postal
Inspection Service, which is responsible for enforcing postal laws, has
authority and responsibility to investigate violations of law that
involve USPS e-commerce products and services. This testimony summarizes
the September report, GAO/GGD-00-188.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-GGD-00-195
     TITLE:  U.S. Postal Service: Electronic Commerce Activities and
	     Legal Matters
      DATE:  09/07/2000
   SUBJECT:  Postal service
	     Electronic data interchange
	     Computer networks
	     Strategic planning
	     Performance measures
	     Electronic commerce
	     Internet
IDENTIFIER:  USPS E-commerce Program

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GAO/T-GGD-00-195

United States General Accounting Office
GAO

Testimony

Before the Subcommittee on International
Security, Proliferation, and Federal Services
Senate Committee on Governmental Affairs

For Release on Delivery
Expected at
10:00 a.m., EDT
on Thursday
September 7, 2000
GAO/T-GGD-00-195

U.S. POSTAL SERVICE
Electronic Commerce Activities and Legal Matters

Statement of Bernard L. Ungar
Director, Government Business Operations Issues
General Government Division

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U.S. Postal Service: Electronic Commerce
Activities and Legal Matters
Page 2                           GAO/T-GGD-00-195
USPS is in the early stages of implementing its
electronic commerce        (e-commerce) program.
USPS has taken steps this year to develop and
implement its e-commerce activities, including
developing a definition of its e-commerce
initiatives, identifying e-commerce and related
initiatives, and establishing a process for
approving these initiatives. USPS identified seven
e-commerce initiatives involving products and
services meant to  facilitate the movement of
messages, merchandise, and money in ways that
require the use of the Internet and generate
revenues for USPS. USPS also outlined overall e-
commerce goals and strategies and developed some
performance targets for its e-commerce
initiatives. However, GAO identified three problem
areas relating to USPS management of its
e-commerce area:

ï¿½    inconsistencies in identifying e-commerce and
related initiatives and in  reporting the status
of these activities, which made it difficult to
obtain a complete and accurate picture of USPS' e-
commerce activities;

ï¿½    inconsistencies in following the required
process for reviewing and approving its e-commerce
initiatives, which raised questions as to whether
the initiatives were appropriately planned and
reviewed; and

ï¿½    deficiencies in the financial information
USPS provided for its e-commerce activities, which
raised concerns about the accuracy and
completeness of the financial reporting for e-
commerce activities.

To help ensure more effective management and
oversight of USPS'            e-commerce
activities, GAO recommended that the Postmaster
General  (1) take appropriate actions to help
ensure that e-commerce and related initiatives are
appropriately identified and maintain accurate and
complete information related to the status of
these initiatives; (2) follow processes and
controls that have been established for developing
and approving       e-commerce initiatives; and
(3) provide complete and accurate information on
costs and revenues for the financial data on e-
commerce initiatives.

In the legal area, USPS provided its views on how
various laws and regulations apply to its e-
commerce activities.  USPS said its unique status
as an independent establishment of the executive
branch gives it broad legal authority and
discretion to offer e-commerce products and
services in ways that USPS finds appropriate to
its assigned functions and in the public interest.
USPS, some competitors, and others have
conflicting views on the extent of USPS' legal
authority to offer e-commerce products and
services and under what circumstances it should
offer such services.

Statement
U.S. Postal Service: Electronic Commerce
Activities and Legal Matters
Page 4                           GAO/T-GGD-00-195
Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to participate in
the Subcommittee's hearing on the electronic
commerce (e-commerce) initiatives of the U.S.
Postal Service (USPS). In my testimony, I will
summarize the main findings and recommendations of
our report on USPS e-commerce initiatives and
related legal matters, which is based on the
review we conducted from January through August
2000.1

Members of Congress and postal stakeholders have
raised issues related to the merits of USPS'
development of nonpostal products and services,
including those that are e-commerce related. As
USPS has recently developed and implemented a
number of e-commerce initiatives, you requested us
to provide information on the status of USPS' e-
commerce activities and related legal and
regulatory matters.

In my testimony today, I will describe USPS' (1) e-
commerce initiatives that have been implemented or
are being developed, (2) goals and strategies for
the e-commerce area, (3) processes for approving
these initiatives, and (4) expected performance
and results to date related to e-commerce
initiatives. I will also discuss areas we
identified during the course of our review where
USPS can improve its management of its e-commerce
activities. In addition, I will describe USPS'
views on how major federal laws and regulations
apply to its e-commerce initiatives and identify
some legal issues that have been raised concerning
its e-commerce activities. Our report on USPS' e-
commerce initiatives provides more detail on each
of these areas.2

USPS Activities in the E-Commerce Area
USPS is in the early stages of developing its
current e-commerce program. We previously reported
on USPS' new products and services, including
several e-commerce activities piloted or
implemented during fiscal years 1993 through 1997.3
Since then, USPS has discontinued its earlier
e-commerce activities, some of which have helped
USPS develop new       e-commerce-related products
and services.

Since the beginning of 2000, USPS has taken a
number of steps to develop and implement its e-
commerce activities. Some key actions included
developing a definition of its e-commerce
initiatives, identifying its            e-commerce
and related initiatives, outlining its overall
goals and strategies, establishing expected
performance, and providing some information on
results to date.

How USPS defines its e-commerce activities is
fundamental when determining what USPS is doing in
the e-commerce area and what process is to be
followed in reviewing and approving e-commerce
initiatives. The development of goals and
strategies is key to understanding what USPS
expects to achieve in this area. The review and
approval processes are to establish accountability
for management and oversight of the e-commerce
initiatives. Information on performance targets
and results is to provide a basis for determining
if the actual performance of the e-commerce
initiatives is meeting intended targets.

USPS Definition of its        E-Commerce
Initiatives
USPS' definition of its e-commerce initiatives has
two components-those products or services that (1)
require the Internet to do business and (2)
generate revenue to USPS through user charges or
licensing fees. USPS defined its e-commerce
initiatives as a subset of its broader "eBusiness"
environment, which included other categories of
related initiatives that may involve use of new
technology, such as "eService" initiatives that
are to be value-added services or enhancements to
existing services. Other related initiatives
referred to as "gray area" initiatives did not
meet the requirements of the e-commerce
definition. Another category called
"infrastructure" initiatives included information
technology systems and other technology
initiatives that are required to support e-
commerce initiatives. USPS' distinctions among
these categories illustrate that USPS activities
involving the Internet include more than just its
designated         e-commerce initiatives.

USPS Identified Seven Current E-Commerce
Initiatives
USPS identified seven e-commerce initiatives that
were either planned or implemented as of September
2000. These seven initiatives are generally
intended to facilitate the movement of messages,
merchandise, and money. To facilitate the movement
of messages, USPS introduced the PosteCS
initiative, an Internet-based global document
delivery system implemented in May 2000. To
facilitate the movement of merchandise, USPS
introduced the Stamps Online initiative in
December 1998 that enables customers to use the
Internet to purchase stamps, philatelic products,
and other USPS products. USPS also plans to expand
this initiative to include a Virtual Store that
would offer USPS merchandise and other stamp
products for sale via the Internet. To facilitate
the movement of money, in April 2000 USPS
introduced its eBillPay initiative, an electronic
bill presentment and payment service.

USPS also identified three initiatives that it
refers to as gray area initiatives. Gray area
initiatives are related to e-commerce initiatives
but either would not generate revenue for USPS or
would not require use of the Internet.

Table 1 provides a list and descriptions of USPS'
e-commerce initiatives and gray area initiatives.

Table 1: USPS E-Commerce and Gray Area Initiatives
as of September 2000
Initiative     Description of initiative           Intended       Status
                                                 customers
E-Commerce initiatives
Electronic     Creates a secure electronic time    Financial,     Implemented
Postmark       and date stamp for electronic       legal,         4/00.
(EPM)          communications and provides         medical,
              evidence of any tampering.   USPS   governmental,
              is seeking business partners to     and
              integrate EPM into their products,  educational
              services, and systems. Revenue to   organizations
              date has been generated from
              businesses that incorporated EPM
              with their  services. EPM also has
              been used with the PosteCS
              initiative.
ePayments      Provides integrated ePayment        Consumers and  eBillPay
               solutions:                          businesses     was
              (1) eBillPay-consumers paying                     implemented
              bills, (2) businesses sending                     4/00. The
              bills, (3) consumers paying each                  rest of the
              other, and (4) consumers receiving                services
              financial statements. eBillPay                    are in the
              services are currently offered                    planning
              through a partnership with a                      stage.
              private company.          The
              eBillPay service is to be offered
              to new customers at no charge for
              the first 6 months. Revenue is to
              be generated by user fees.
Internet       MoversNet includes three products   All postal     MoversNet
Change of      and services: the hard copy         customers      was
Address and    publications-Movers Guide and                     implemented
Move-Related   Welcome Kit-                                      summer
Products and   and the Internet application called               1996.
Services       MoversNet.com. Currently                          Enhancement
(MoversNet)    MoversNet.com allows downloading a                s to
               form for customers to submit                      MoversNet
              changes of physical addresses and                 were
              is accessible via the USPS Web site               scheduled
              and via direct link. It is offered                for
              through a strategic alliance with a               implementat
              private company. Future MoversNet                 ion in
              enhancements, which are to involve                9/00.
              integration into a proposed                       
              MoversGuide Web site, are to allow                
              additional services, such as
              electronic changes to physical
              addresses,   e-mail addresses, and
              electronic accounts; ordering
              various services (e.g., power,
              electric, water, cable, newspaper,
              and long-distance telephone
              service); and new security
              features, such as credit card
              verification. Revenue to date has
              been generated by commissions from
              USPS' partner.
NetPost.Certif Is to provide confidential, ensured Organizations  Not
ied            delivery of electronic  documents   that file      implemented
               to the government. A completed      information    .
              electronic   delivery is to be      with the
              certified back to the sender via an government
              electronic receipt containing a
              USPS electronic postmark that
              provides legal proof of filing.
              Revenue is to be generated from
              transaction fees from government
              agencies.
NetPost        Is to allow mailers to              Small Office   To be
Mailing Online electronically transmit their       and Home       implemented
               documents, correspondence,          Office (SOHO)  9/00.
              newsletters, and other First-Class  customers
              Mail and Standard A mail (primarily
              advertising mail), along with
              mailing lists, to USPS. Electronic
              files would then be     securely
              distributed to printing contractors
              who print documents, insert them
              into addressed envelopes, sort the
              mailpieces, and transport the
              mailing to post offices for
              processing and delivery. Revenue is
              to be generated by printing and
              mailing fees paid by users.
PosteCS        Provides a secure, private,         Large to       Implemented
               Internet-based document delivery    medium-size    5/00.
              system. Users establish secure      businesses and
              links using Secure Socket Layer     SOHOs
              (SSL) protocol. They then upload a
              file(s) to the PosteCS server using
              desktop software. To receive
              PosteCS messages, the recipients
              need only to have access to e-mail
              and an Internet browser. USPS has
              joined with Canada Post and LaPoste
              of France to provide this service
              globally. Also, the EPM initiative
              was used as part of PosteCS.
              Revenue is   to be generated by
              user fees.
Stamps         Stamps Online allows the purchase   All postal     Stamps
Online/Virtual of stamps and other existing USPS   customers      Online
Store          products. After the Virtual Store                 implemented
               is  implemented, postal customers                 12/98;
              are to be able to purchase stamps,                Virtual
              philatelic products, phone cards,                 Store
              and other USPS merchandise via the                implementat
              Internet, including new products                  ion planned
              not currently available. Revenue to               in 2000.
              date has been generated    from the
              face value of postage stamps and
              from other   existing USPS products
              ordered via the Internet.
Gray area initiatives
Returns@ease   Enables customers to return         Online         Implemented
              Internet-purchased merchandise.     merchants      11/99.
              Using a Merchandise Return
              Application Program Interface,
              businesses can authorize customers
              to download a postage-paid label
              directly from their Internet sites.
              The program is designed to make
              returning items bought via the
              Internet, through catalogs, and by
              phone easier for both buyers and
              sellers. Revenue is generated from
              user fees and postage.
Dinero SeguroT Allows electronic fund transfers    Americans of   
               from the U.S. to Mexico.     Dinero Mexican        Implemented
              SeguroT, which means "Sure Money,"  origin, most   6/96.
              is a         money-by-wire service  recently       
              that can be used to transfer money  immigrants
              from designated U.S. postal
              locations to more than 1,300
              Bancomer Bank branches in Mexico.
              This initiative uses telephone
              lines instead of the Internet and
              is to become      part of a planned
              Sure Moneyr service.a Revenue is
              generated by Dinero SeguroT through
              money-wire transfer fees.
PC Postage     Allows customers of private         SOHO market    Implemented
              companies to purchase and print                   8/99.
              stamps onto labels and envelopes
              using their computers and the
              Internet. Private companies sell PC
              Postage products   after USPS
              certifies that these products meet
              USPS standards. USPS receives
              revenue from the face value of
              postage stamps.
aUSPS has identified additional target countries,
which it plans to include in an expansion effort
to this initiative, referred to as Sure Moneyr.
Source: USPS documents.
USPS does not consider products and services to be
e-commerce initiatives if they involve use of the
Internet but either do not generate revenues, or
the revenues generated are related to existing
core products and services. USPS considers these
products and services to be value-added services
or enhancements to existing services. For example,
customers can use the Internet to access
information about USPS products and services, look
up ZIP codes and post office locations, download
labels for mailing packages, and check the status
of certain items mailed without paying any fees.
Customers can also use the Internet as an
alternative channel to access existing core
products and services, such as Priority and
Express Mail; to confirm delivery; or to arrange
for package return. The revenues from these
enhancements are to be reported with the existing
core products and services.

USPS is also developing other initiatives, which
it refers to as infrastructure initiatives, to
support its e-commerce initiatives. For example,
USPS has identified an electronic mailbox, which
is a concept in the early development stage that
could link electronic and physical addresses, as
an infrastructure initiative.

USPS Goals and Strategies for the E-Commerce Area
USPS outlined the purpose and direction for its
eBusiness and e-commerce areas and stated that its
overall goal is to use the best technology,
including the Internet, to provide customers with
expanded universal access and choices on how they
do business with USPS. USPS also explained that
the criteria for these initiatives are that they
be universally available, designed to fulfill
customer and marketplace needs, offer customers
voluntary choices, be secure and private, provide
financial benefits to customers and USPS, and be
consistent with USPS' mission. USPS identified
eight strategies for accomplishing its eBusiness
goal and its related e-commerce goal. Examples of
these strategies were using the Internet as a cost-
effective channel, providing security and privacy
for customers, minimizing USPS investments and
risks, and pursuing partnerships and alliances
with industry.

To carry out these goals and strategies, USPS has
established an eBusiness Integration team that is
responsible for eBusiness implementation planning
and for developing an eBusiness strategic plan. In
addition, USPS established the eBusiness
Opportunity Board (e-BOB) to provide operational
oversight in the eBusiness area and to review the
performance of e-commerce initiatives.

USPS Processes for Approving E-Commerce
Initiatives
In May 2000, USPS established a management process
for reviewing and approving e-commerce initiatives
that is different from the review and approval
process for other new products. The e-commerce
review process was designed as an expedited 120-
day process to result in quicker approval of
initiatives than USPS' review and approval process
for new products. The e-commerce review process
requires a business proposal and plan, a public
affairs/communication plan, periodic monitoring,
and approval by top management or USPS' Board of
Governors (BOG). Some e-commerce initiatives were
launched before the new process was introduced and
were therefore subject to USPS' former approval
process. In instances in which a project contains
significant capital investments, the initiative is
also to be subject to the headquarters review and
approval process for capital projects.

The Deputy Postmaster General explained to us how
resource allocation for e-commerce initiatives was
unlike that for all other areas in the USPS
budget. He said that all of the funding for USPS e-
commerce activities was budgeted and kept in one
overall fund. He said these funds were not
allocated to specific managers until program
managers justified the use of funds for specific
projects.

Performance Expectations and Results
USPS provided information on its performance
targets and results achieved for e-commerce
initiatives implemented to date. USPS also told us
in July 2000 that the aggregate fiscal year 2001
planned revenue for e-commerce initiatives that
was being submitted for BOG approval totaled
$104.0 million, and projected expenses specific to
e-commerce initiatives totaled $67.2 million.
These totals do not include infrastructure and
other costs associated with e-commerce, which also
are to be calculated.

Evaluation of the results of USPS' e-commerce
initiatives, according to USPS, is generally based
on the service performance provided to consumers
and businesses and on the revenue, cost, and
contribution to financial performance. A BOG
resolution adopted in June 2000 specifies that
"significant new types of e-commerce initiatives,
which have not been previously presented to the
Board [of Governors] for review, shall be
presented to the Board before being launched."
Initiative reviews by e-BOB are to be conducted on
at least a quarterly basis, and quarterly status
reports are to be sent to BOG.

USPS Opportunities for Improving Implementation of
E-Commerce Initiatives
During our review, we identified a number of
inconsistencies and other problems in the
information provided by USPS that indicated areas
in which it can improve implementation of its e-
commerce initiatives. These management
deficiencies indicate that more effective
management and oversight is needed in this area.
We made recommendations to USPS that address these
issues.

Inconsistencies in Identifying E-Commerce and
Related Initiatives
During the course of our review, USPS
inconsistently applied its definition of e-
commerce in identifying its initiatives and
provided inconsistent information on the status of
its initiatives. These inconsistencies made it
difficult to ensure we had a complete and accurate
picture of USPS'           e-commerce activities.
USPS was able to reconcile some of the
inconsistencies, but consistency across the
organization will be necessary for USPS to provide
accurate and complete information on the status of
its e-commerce initiatives. As previously
mentioned, BOG is to receive quarterly status
reports on USPS' e-commerce initiatives.

USPS has struggled to properly classify its e-
commerce and other initiatives that relate to its
broader eBusiness environment. The initial list of
e-commerce and related initiatives that USPS
provided to us in April 2000 included 28
initiatives. As of July 2000, the list had been
reduced to seven e-commerce initiatives. USPS
dropped some of the initiatives on the initial
list because they were identified as
infrastructure or enhancements to core products
and services, and called others gray area
initiatives because they did not fit the
definition of e-commerce initiatives. In addition,
some initiatives are in various stages of
development, and their classification may change
as their product features evolve. As we discussed
the rationale for the classification of specific
initiatives with USPS officials, we noted several
apparent inconsistencies where initiatives that
seemed to have similar characteristics were not
treated similarly.

In some cases, it was difficult to understand the
rationale for the identification of the
initiatives without more clarification from USPS
on how it intended to treat the revenue from these
initiatives. Also, some initiatives were provided
in conjunction with other products and services,
and it was not clear how the revenues would relate
to e-commerce versus other core products or
services. Finally, some initiatives were not
currently generating revenues, such as eBillPay,
but USPS planned to generate revenues from these
initiatives in the future. USPS' consistent
application of its e-commerce definitions is
important so that it can maintain complete and
accurate information about its e-commerce and
related activities.

USPS also provided conflicting information related
to the status of certain e-commerce activities
that made it difficult for us to determine when
some of the e-commerce initiatives had been
implemented. We recognize that activities in this
area continue to evolve. However, USPS has had
difficulty providing complete and accurate
information on initiatives that have been ongoing
for some time.

USPS Has Not Consistently Followed its Processes
for Approving E-Commerce Initiatives
USPS did not consistently adhere to its process
requirements for the review and approval of its e-
commerce initiatives. According to information
provided by USPS, none of the five e-commerce
initiatives fully or partially implemented to date
have had all of the required documents, such as
business plans, or formal approvals from
appropriate officials. Consequently, it is not
clear whether USPS management properly reviewed
and approved e-commerce initiatives to ensure that
they would support USPS' overall mission and
goals.

Problems and Inconsistencies in USPS' Reported
Financial Results for the E-Commerce Area
We identified deficiencies in the financial
information provided for the e-commerce activities
that raised concerns about the accuracy and
completeness of USPS' financial reporting for its
e-commerce activities. We do not believe the
financial data that USPS provided were
sufficiently complete and reliable to be used to
assess USPS' progress toward meeting its overall
financial performance expectation that revenues
generated by e-commerce products and services in
the aggregate are to cover USPS' direct and
indirect costs as well as make a contribution to
overhead. Without accurate and complete
information on the revenues and expenses
associated with USPS' e-commerce initiatives, USPS
and other stakeholders will not be able to assess
progress toward meeting USPS' financial goal in
the e-commerce area.

USPS' Views on Legal Matters Relating to its E-
Commerce Activities
In the legal area, USPS has provided legal
information and analysis that should be a valuable
reference to Congress and other stakeholders
interested in how laws and regulations apply to
USPS' e-commerce activities. We did not evaluate
USPS' legal analysis or attempt to obtain others'
views for our report, although we summarized some
of the concerns that have been raised regarding
USPS' e-commerce activities. We also summarized
some of our reports that may relate to the
application of laws and regulations to USPS e-
commerce activities, although, due to time
constraints, we did not update this past work for
the purposes of our review of specific USPS e-
commerce activities.

USPS' Views of Its Authority in the
E-Commerce Area
USPS believes that it has broad statutory
authority to offer e-commerce products and
services in ways that it finds appropriate to its
assigned functions and in the public interest.
USPS told us this authority is grounded in several
provisions of the Postal Reorganization Act of
1970,4 not just the provision relating to its
specific power to offer nonpostal services. USPS
said that the law provides discretion to its Board
of Governors to determine whether particular new
services are appropriate and in the public
interest.

Our Reports That Discussed USPS Legal Authority
We have issued reports that may relate to the
application of laws and regulations to USPS e-
commerce activities:

ï¿½    We reported in 1998 that statutory and
regulatory authorities governing USPS provide it
broad latitude to develop and market a wide
variety of new products, including both postal and
nonpostal products.5

ï¿½    We reported in 1996 and 1999 that we and USPS
had differing interpretations of federal privacy
protections that relate to change-of-address
information reported by USPS customers.6
USPS' Views on the Application of Laws,
Regulations, and Policies to its E-Commerce
Activities
According to USPS, numerous federal laws and
regulations apply to its e-commerce products and
services, but it has a different legal status from
its private sector competitors in some respects.
For example, USPS reported that federal privacy
laws afford USPS e-commerce customers greater
protection than is provided for customers of
private sector providers. Further, USPS told us
that the public interest, universal service,
antidiscrimination, and other policy provisions of
the Postal Reorganization Act of 1970 provide
consumer protections in connection with its e-
commerce products and services, but many other
federal consumer protection laws are inapplicable
to USPS. However, USPS stated that some federal
consumer protection laws may apply to USPS in
certain circumstances, and others may apply to
USPS contractors or financial institutions that
help USPS offer e-commerce products and services.

Concerning law enforcement and e-commerce, USPS
reported that the Postal Inspection Service, a
part of USPS that is responsible for enforcing
postal laws, has authority and responsibility to
investigate violations of law that involve USPS e-
commerce products and services. The authority of
the Inspection Service was enhanced in 1998 by a
delegation of authority from the U.S. Attorney
General. This delegation gave the Inspection
Service limited jurisdiction to investigate
violations of certain crimes that may relate to
USPS' e-commerce products, such as the Electronic
Postmark. However, USPS told us that the
Inspection Service has no authority to investigate
electronic communications that do not "have a
postal nexus."

In the competition area, USPS told us that the
antitrust laws and general competition-related
statutes do not apply to USPS, with the exception
of the advertising and competition provisions of
the Lanham Act.7  However, USPS stated that
federal law prescribes competition-related factors
that must be considered with regard to USPS e-
commerce activities.

USPS also said that in some cases, major federal
regulations apply to its e-commerce products,
including regulations adopted by USPS and other
federal agencies, such as Department of the
Treasury and Federal Reserve regulations related
to USPS' eBillPay initiative. However, it also
noted that the ability to make generalizations
about how the regulations apply to USPS is
somewhat limited. USPS reported that it has
authority to issue regulations pertaining to its
own e-commerce products and services, but USPS
also said it has "no authority to act as a
regulator over economic activity in general or
over the Internet in particular."

Finally, USPS reported that its activities in the
e-commerce area are generally not subject to
administration policies that apply to other
executive branch agencies. According to USPS,
executive orders and Office of Management and
Budget (OMB)   instructions, unless grounded in
separate statutory authorization covering USPS or
by national security laws, do not apply as a
matter of law, although USPS may voluntarily be
guided by certain of them.

Concerns Have Been Raised About USPS E-Commerce
Activities
USPS, some competitors, and other stakeholders
have conflicting views on the extent of USPS'
legal authority to offer e-commerce products and
services and under what circumstances it should
offer such services. Some USPS competitors and
others have recently raised concerns that USPS has
an unfair competitive advantage in the e-commerce
area because it is subject to legal and regulatory
requirements that are different from those its
competitors are subject to. On the other hand, the
Postmaster General and some other stakeholders
have said that current laws put USPS at a
competitive disadvantage and have called for
changes to give USPS increased flexibility to
compete. The appropriate role of USPS has been
debated for many years and continues to be debated
in the context of proposals for comprehensive
legislation to reform the nation's postal laws. In
addition, some specific concerns have been raised
about USPS               e-commerce activities
that also relate to emerging e-commerce issues,
such as the privacy of consumer information and
what new e-commerce products are subject to PRC
review.

Recommendations
Our report recommended that the Postmaster General
take the following actions to help ensure more
effective management and oversight of USPS' e-
commerce activities:

ï¿½    take appropriate actions to help ensure that
e-commerce and related initiatives are
appropriately identified and maintain accurate and
complete information related to the status of
these initiatives,

ï¿½    follow processes and controls that have been
established for developing and approving e-
commerce initiatives, and
ï¿½    provide complete and accurate information on
costs and revenues for the financial data on e-
commerce initiatives.
In commenting on our draft report, USPS generally
agreed with the facts in our report and endorsed
the report's recommendations. However, USPS noted
differences in perspectives related to some of the
concerns we discussed. Specifically, USPS stated
that its senior management had reviewed and
approved all of its e-commerce initiatives before
implementation. If so, such approvals were not
fully documented. USPS also stated that it is
already taking the necessary actions to implement
the recommendations in our report within a
management structure that will provide long-term
as well as day-to-day oversight of its e-commerce
program. PRC generally agreed with the report's
analysis of the issues and further commented on
USPS' pricing policy for its e-commerce
initiatives.

                                        -     -
-     -     -

Mr. Chairman, this concludes my statement. I would
be pleased to respond to any questions you or the
Members of the Subcommittee may have.

Contact and Acknowledgments

For further information regarding this testimony,
please contact Bernard L. Ungar at (202) 512-8387.
Individuals making key contributions to this
testimony included Teresa L. Anderson, Kenneth E.
John, Angela S. Davis, Casey L. Brown, Hazel J.
Bailey, Alan N. Belkin, and Victor B. Goddard.

_______________________________
1 U.S. Postal Service: Postal Activities and Laws
Related to Electronic Commerce (GAO/GGD-00-188,
Sept. 7, 2000).
2 GAO/GGD-00-188.
3 U.S. Postal Service: Development and Inventory
of New Products (GAO/GGD-99-15, Nov. 24, 1998).
4 P.L. 91-375.
5 Our analysis showed that USPS is subject to at
least three constraints in developing and
marketing new products: (1) explaining how any new
product will further USPS' mission to provide
postal services to bind the nation together; (2)
requesting a recommended decision from the Postal
Rate Commission (PRC) in the case of domestic
postal products; and (3) addressing constraints or
influences that may arise from congressional
oversight, restrictions imposed during the
appropriations process, or other legislative
actions. See U.S. Postal Service: Development and
Inventory of New Products (GAO/GGD-99-15, Nov. 24,
1998).
6 We reported that in our view, use of information
linked to the National Change of Address (NCOA)
program to create or maintain new-movers lists by
USPS licensees, who are viewed under the Privacy
Act as if they were USPS employees, would be
inconsistent with the Privacy Act. USPS disagreed,
stating that the NCOA program does not violate the
Privacy Act because NCOA information provided to
licensees, and by licensees to their customers, is
limited to the new addresses of persons whose
names and addresses are already on the licensee's
or the customer's list. See U.S. Postal Service:
Improved Oversight Needed to Protect Privacy of
Address Changes (GAO/GGD-96-119, Aug. 13, 1996);
and U.S. Postal Service: Status of Efforts to
Protect Privacy of Address Changes (GAO/GGD-99-
102, July 30, 1999).
7 15 U.S.C.  1125(a).
*** End of document ***