Neither rain nor sleet nor competition .... Despite criticism, Postal Service insists monopoly is needed for most services

Pushing up the price of a postage stamp to 25 cents has caused a lot of grumbling. It has also turned up the heat on an already simmering debate over whether the United States Postal Service (USPS) is doing what it was set up to do: deliver the nation's mail efficiently and reliably. To cope with burgeoning costs, the Postal Service cut its service hours at almost the same time the Postal Rate Commission raised mailing rates - more than 18 percent for first-class mail and almost 25 percent for third class.

As a result, third-class mailers, especially angered by the increases, have taken their longtime support away from the postal monopoly and have joined those aggressively lobbying for major changes in the mail delivery system.

Third class covers mail-order catalogs, some magazines, large pieces, and advertising mail.

Proposed reforms include contracting out more services, breaking the Postal Service into about five smaller units, and completely lifting the ``private express'' barriers, which prohibit letters from being delivered by anyone but the USPS.

``Competition would not be limited to price alone,'' says Gene Del Polito, executive director of the Third Class Mail Association. Private companies ``would have to offer services superior to those available today,'' he says.

Extremely urgent and overnight mail as well as periodicals and books have been exempt from the private express restriction since 1979. That has allowed companies like Federal Express and United Parcel Service to provide competitive overnight delivery services to almost every town in the United States.

But the USPS says this would not work for first- or second-class mail. Mail delivery, it contends, is a ``natural monopoly,'' and needs the government to guarantee universal delivery rates and ensure that distant and lightly populated rural areas are not ignored because they cost more to serve.

Almost everyone, even the Postal Service, agrees that the federal mail monopoly needs improvements, in particular, to remove waste and provide better delivery. While postal rates have climbed, delivery of first-class mail is 10 percent slower than it was before the Postal Office was reorganized in 1970, the Postal Service concedes. It lost $223 million last year after showing a $303 million surplus in 1986.

But Postmaster General Anthony Frank, though in his post for only a month, tends to agree with his predecessors that the system should not be privatized.

Mr. Frank says he hopes to make the Postal Service more efficient through management changes. At an all-day meeting last week among various members of the industries, he argued that recent government action has ``tied management's hands and taken away their discretionary power over spending.''

``The USPS was established to bind the nation together,'' says Edward Bowley, legislative consultant at the National League of Postmasters of the US. ``We cannot fragmentize it and maintain a universal postal system. It's just too vast, too complex, and it took 200 years to establish.''

The most obvious answer to the efficiency and cost-containment problem, Frank says, is not adding competition, but developing and using new technology. ``A full-scale automation program is scheduled to go into operation next year,'' he says. When it has paid for itself, it could save $700 million in labor costs a year.

But costly high-tech equipment in and of itself is not seen as the answer. The postal rate increase and concurrent reduction in service hours have made this all too clear, opponents say.

``If we found those conditions in the private sector, we'd go after them with zeal,'' said James Miller, director of the Office of Management and Budget. He adds that the OMB's reductions amounted to less than 1 percent, which he says do not justify the USPS's drastic cuts in service. The Postal Service has cited OMB cuts as a reason for raising rates and reducing hours.

The Federal Trade Commission reasons that if the Postal Service was indeed a natural monopoly, it would not need the full panoply of congressional protection it now has. The President's Commission on Privatization, which published its findings last month, came out in favor of gradually turning the USPS over to the private sector.

But while the US government has considered selling parts or all of monopolies like the USPS, Amtrak, and others, congressional opposition to most of these moves remains strong. Twelve agencies have even enacted various statutory impediments to privatization.

While every recent Congress has introduced legislation to sell the Postal Service and end its monopoly status, ``nothing has come of it,'' an aide to the House Post Office and Civil Service Committee notes.

It's not surprising.

The 800,000 USPS employees live in every congressional district, and their union, the National Association of Letter Carriers, is one of the largest political action committee contributors. It fiercely opposes putting the postal system in free-market hands.

These workers, the highest paid semiskilled workers in the world, stand to lose a lot by moving into the competitive job market. According to the Postal Rate Commission, the average postal worker's salary is about $26,000 - $38,750 if overtime and benefits are included - 21 percent higher than comparable private-sector jobs. Thus, salaries and benefits account for 83 percent of the USPS budget, while transportation is only 7 percent.

While a competitive market would almost certainly mean reduced wages and benefits, the privatization commission recommended a gradual transition to the private sector, so that present employees are not penalized.

Privatization is being more seriously considered by many outside Congress as the only way to bring down labor costs.

``Even sacred cows are sacred no longer,'' says Richard Barton, senior vice-president of government affairs at the Direct Marketing Association, one of several industry trade groups calling for some form of privatization of the postal system.

But postal workers warn that privatizing the mail system would surely result in ``cream skimming,'' where private companies grab the most profitable routes and services, and those less desirable fall by the wayside, leaving some people without mail pickup or delivery.

If necessary, says FTC chairman Daniel Oliver, mail could ``piggyback onto the services that already deliver packages and mail to every rural area.''

The USPS already contracts out some of its work. Last year, one-tenth of its budget was spent for private contractors to sort mail and deliver it to rural routes. Both supporters of the USPS and of competitive delivery support an extension of contracted services. The Commission on Privatization estimated the service could save billions of dollars by contracting out 7,000 of its post offices to retailers.

Others, however, fear this would block ``substantive reform'' and only give the USPS more money to put back into employee salaries and benefits instead of improving efficiency.

Paying more for inefficiency is what has stung a former USPS ally into angry action against keeping the federal monopoly.

The Third Class Mail Association has petitioned the Postal Rate Commission to lift the restriction against private companies delivering third-class mail. Otherwise, the association's Mr. Del Polito says, more ``punishing rate increases will soon follow, and severely constrain the growth of our industry.''

Making the 60 billion or more pieces of third-class mail available to the private sector would allow the government to test out, on a small scale, how the free market would handle the mail system, says Thomas Moore, a member of the Council of Economic Advisers.

Private express mail carriers, says the Air Courier Conference of America, are demonstrating the success of competition. The USPS has attempted to keep from losing too much business to these couriers by requiring that they charge at least $3 per item.

Even if, as the USPS argues, its service in many areas has not slowed at all while the volume of mail has doubled in 10 years, the Postal Service is concerned about its future.

Electronic mail - predicted to grow 60 percent a year by 1990 - is expected to capture a major portion of mail traffic. Already, the technology allows speedier service at lower costs.

But the USPS is not allowed, because of its monopoly status, to offer electronic mail services.

In testimony before Congress, Mr. Moore suggested that the USPS was worth something like $30 billion in assets. And selling off either parts or all of the monopoly has been touted as one way to reduce the budget deficit.

While the USPS operates on money it receives from postage, it is included in the federal budget. A bill pending in the House would take it off the budget.