PRC Assess USPS Pricing and Service in 2018 Annual Compliance Determination: Directs Postal Service to Address a Number of Outstanding Compliance Issues

Today the Postal Regulatory Commission (Commission) issued its Annual Compliance Determination (ACD) assessing the pricing and service performance standards of the U.S. Postal Service (Postal Service) in fiscal year 2018. This ACD marks the 11th Compliance Determination issued since the enactment of the Postal Accountability and Enhancement Act of 2006.

The following is a summary of the Commission’s findings, recommendations, and directives.

Workshare Discounts:
The Commission identifies compliance issues related to 23 workshare discounts and finds that three of the discounts were out of compliance. For two of the three workshare discounts, the prices approved in Docket No. R2019-1 align the discounts with avoided costs; therefore, the Commission requires no further action. For the one workshare discount remaining out of compliance, the Commission directs the Postal Service to either align the workshare discount with its avoided cost in the next Market Dominant price adjustment or provide support for an applicable statutory exception. In addition, for the Periodicals class, the Commission finds that the Postal Service meaningfully addressed the FY 2017 ACD directives to report on the cost and contribution impact of worksharing and progress in improving pricing efficiency. The Commission directs the Postal Service to continue reporting on Periodicals pricing issues in its FY 2019 Annual Compliance Report (ACR).

Noncompensatory Market Dominant Products:
The report identifies eight Market Dominant products as noncompensatory in FY 2018. Regarding Periodicals In-County and Periodicals Outside County, the Commission finds that additional transparency is necessary to hold the Postal Service accountable. The Commission will continue to explore cost and service issues related to flats in Docket No. RM2018-1. For USPS Marketing Mail Flats, the Commission finds that an advanced remedy is needed to address the Postal Service’s continuing failure to comply with the Commission’s FY 2010 ACD directive to increase the cost coverage, as USPS Marketing Mail Flats cost coverage is at an all-time low and remains in violation of the law. In the next generally applicable Market Dominant price adjustment, the Postal Service must propose a price increase for USPS Marketing Mail Flats that is at least 2 percentage points above the class average for the USPS Marketing Mail class. Additionally, the Postal Service must continue responding to the requirements of the FY 2010 ACD directive by reducing USPS Marketing Mail Flats’ costs and continue to comply with the FY 2015 directive. For USPS Marketing Mail Parcels, the Commission finds that revenue was not sufficient to cover attributable cost in FY 2018 and strongly recommends an advanced remedy in light of the repeated failure of USPS Marketing Mail Parcels to covers its costs. With regard to Stamp Fulfillment Services, the Commission finds that revenue was not sufficient to cover attributable cost in FY 2018. The Commission further finds that revenue for Inbound Letter Post was not sufficient to cover attributable cost. The Commission recommends that the Postal Service, in coordination with the Department of State, negotiate bilateral and multilateral agreements that contain rates for UPU letter post mail that are more compensatory than terminal dues. The Commission also recommends that the Postal Service file rates for the Competitive Inbound Small Packets and Bulky Letters product as soon as possible. For Media Mail/Library Mail, the Commission finds that the Postal Service’s approach to improve cost coverage through above-average price increases is appropriate and encourages the Postal Service to explore opportunities to further reduce the unit cost of Media Mail/Library Mail. Finally, in Contract Year 4, the Commission finds that the PHI NSA did not meet the criteria of 39 U.S.C. § 3622(c)(10)(A). The Postal Service terminated the agreement during Contract Year 4; therefore, the Commission finds that no further action is necessary.

Competitive Products Rates and Fees:
The Commission identifies six Competitive products that did not cover attributable costs and were found to be out of compliance with 39 U.S.C. § 3633(a)(2): two domestic NSAs, International Priority Airmail (IPA), International Money Transfer Service—Inbound (IMTS—Inbound), International Ancillary Services, and Officially Licensed Retail Products (OLRP). The Commission directs the Postal Service to take corrective action, including monthly reporting, reporting on an investigation of cost estimates, reporting on an investigation of rate and revenue discrepancies, and provide an update on the status of the request to seek authority to terminate or renegotiate agreements.
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