Squeeze play on mail delivery

Morse Mill, Mo., lost its gristmill during the Great Depression and most stores a few decades later. Even the Victorian Morse Motel, where Charles Lindbergh once visited, has turned into a private dilapidated home that rents rooms by the month.

But the one thing this threadbare town still has, through rain and sleet and penury, is a post office.

Now, however, even mainstays of small-town America like this one may face an uncertain future. Under a cost-cutting move, the US Postal Service is considering closing branches in some rural towns - and even more controversial, ending Saturday delivery nationwide.

The mere thought of letters arriving in people's mailboxes less frequently - even by one day a week - is drawing angry protests from Morse Mill to Capitol Hill. Yet the decision isn't an easy one for the Postal Service, either.

It is caught between two seemingly inexorable forces: mounting debt and its obligation, as a quasi-public service, to provide universal delivery. In fact, it is the one government entity that touches the lives of Americans more often than any other.

Yet the agency's ability to balance these two interests - as it was mandated to do by Congress when it partially privatized the agency 30 years ago - is becoming increasingly untenable in an age of electronic mail and private overnight delivery services.

"There is no way for them to turn without them incurring the fury and the ire of vested interest groups," says Ulric Weil, senior technology strategist at Friedman, Billings, Ramsey Group, a brokerage firm in Arlington, Va. "Old people don't want to lose Saturday delivery. Businesspeople don't want rates to go up. The post office is in a no-win situation."

Four months ago, the Postal Service projected it would notch a $480 million deficit after several years in the black. Now, it expects to lose between $2 billion and $3 billion. Some $800 million of that comes because the Postal Service didn't get as big a postage-rate increase as it expected, according to the General Accounting Office, the investigative arm of Congress. Most of the rest stems from the sudden downturn in the economy, which historically reduces mail volumes.

"If the economy goes south from where it is today ... it could be worse," Postmaster General William Henderson warned Congress in his testimony last week.

Meanwhile, Federal Express and other private delivery services continue to capture increasing volumes of express mail and parcel deliveries. And the Internet threatens to capture $17 billion worth of first-class-mail business over the coming decade as companies look to bill customers electronically.

The warnings could hardly come at a worse time, since the post office boosted first-class rates only three months ago. And such increases, as well as proposals to cut service, don't sit well with postal customers or Congress.

"Any CEO who would go before his board and say that would be out on the street in 10 minutes," says Edward Hudgins, director of regulatory studies with the Cato Institute, a libertarian think tank in Washington, D.C.

But given its quasi-public status, the Postal Service has few options. It can't raise rates without a long and arduous federal approval process. It can't give special deals to, say, magazine publishers whose inserts generate lots of return mail from subscribers. And it can't decide that some places are just too remote to serve on a regular basis.

"If this were solely going to be a moneymaking operation, there would never be a letter delivered to Alaska," says Nancy Pope, museum program specialist for the National Postal Museum in Washington, D.C.

But the post office continues to play a community role in small towns and offers a vital link to those who don't use computers. "You can call it a class split," Ms. Pope says. "The disenfranchised who do not have the computer by poverty or by choice are still the people who are relying on the post office."

To keep competitive, the Postal Service wants more flexibility to adjust rates, close facilities, and negotiate union labor rates more aggressively. Some experts are pushing for all-out privatization - a move competitors resist.

For now, the Postal Service retains formidable advantages. It pays no taxes. It retains a legal monopoly on first-class mail and can borrow from the US Treasury.

From a business point of view, the largest 7,000 of the nation's 38,000 post offices conduct most the business, according to Postmaster General Henderson. The rest cost roughly $2 to operate for every $1 they bring in.

Yet any time the Postal Service suggests closing a facility, "the resistance is off the scale," says Richard Watkins, spokesman for the Postal Service's regional office in St. Louis.

When the Postal Service tried to close small offices in the late 1990s, the outcry was so fierce that it had to back down. Just cutting back on Saturday window service in Thonotosassa, Fla., earlier this year raised the ire of several residents. "Unhappy?" complained one in a letter to the Tampa Tribune. "Don't take your complaints to the management or you'll come away feeling like fourth-class mail."

Here in Morse Mill, the post office has moved from the sunroom of the old motel to its living room, to a temporary facility, and finally to the tidy two-room brick building at the intersection of highways B and EE, which serves as the entrance to the hamlet.

"It's kind of like a full-service gas station," explains postmaster Annette Hollenbeck, who still stamps by hand every piece of mail and weighs it on old-fashioned, nonelectronic scales.

"You give a little service and you get to know people," she says. I know when people are having good days and when they're having bad days."

Larger post offices nearby offer rural delivery, but many of the locals seem to prefer picking up their mail at the boxes here. Of 182 boxes, 150 are rented. Patrons come in to buy stamps or money orders.

"It's kind of nice to go into a business," says Richard Sickendick, holding a stack of mail he's just picked up from his box, "and you talk."

(c) Copyright 2001. The Christian Science Monitor