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20-cent stamp looms, but money alone won't lick US postal problems

A 20-cent stamp? relax, there in some evidence that by 1990 the 20-cent stamp may be but a fond memory. So, too, may be the handfull of mail waiting at home each day.

By then, some forecasters believe, home mail may be coming only three times a week, cheap electronic telecopiers may have become widespread, and you may think of a dozen private companies before you remember that -- why, yes, the US Postal Service (USPS) could deliver auntie's birthday present also.

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Behind the Postal Service's request this week for a 20-cent first-class stamp in 1981 is the story of a 200-year-old institution -- part government, part business since reorganization in 1970 -- steadily losing hold of the one advantage it has in the highly competitive communications market: its monopoly over the mails.

This is shaking the delicate balance between the public service envisioned by Benjamin Franklin and the cost-effective enterprise demanded by Congress.

If the nickel increase is approved by the independent Postal Rate Commission, the revenue would carry the Postal Service through 1983, Postmaster General William F. Bolger says. Beyond that, he is making no predictions.

Even with that extra nickel, Mr. Bolger says, current service will be in for cost cutting if Congress does not approve a $736 million operating subsidy for 1981. Among the adjustments possible in the next few years:* termination of Saturday mail delivery and upward adjustment of the special rate for non- profit corporations.

That may be just the beginning. In the decade ahead, the Postal Service faces stiff competition from private enterprise and new technology. Companies such as United Parcel Service (UPS), Federal Express, and a dozen others are jockeying for a bigger share of the second- and third-class mail market. UPS already handles more than five times as many parcels as does the Postal Service.

Meanwhile, private delivery companies (e.g., news agents) and alternatives to the lucrative direct-mail trade are proliferating. A Postal Service study late last year concludes that the direct-mail flow is "seriously threatened by competing media." One of the reasons that your Sunday newspaper is chockful of colorful inserts is that advertisers are using it as a direct-mail route. In a sense, the paperboy is the mailman on Sunday.

The Postal Service's one clear edge is in first-class mail, which private companies are prohibited from usurping. But technological developments are even imperiling this advantage. Electronic mail devices, which send letter facsimiles over telephone lines, soon could steal a large portion of first-class traffic. REsearch indicates that up to 80 percent of all first-class mail is business oriented -- a natural for converting to electronic service.

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Marketing experts at the Postal Service are well aware of these trends. In his two years as Postmaster General, Mr. Bolger has pushed hard for development of a USPS-operated electronic mail service. His plan calls for a system in which businesses that generate large quantities of bills or other mailings by computer could transmit them electronically to post offices in major cities. There, the messages would be printed out, stuffed into envelopes, and delivered by route carriers.

The system, called E-Com, is the center of a four-way controversy currently raging among the Postal Service, the Postal Rate Commission, the Federal Communications Commission, and telecommunications companies. The issue is tied into congressional efforts to reform federal communications law, and a clear-cut resolution has yet to be worked out.

These developments in mind, is the Postal Service pricing itself out of the market with a 20-cent stamp?

"That's the big concern," says a Postal Service watcher in Congress. But he and others say their analyses indicate the Postal Service has little choice but to ask for higher rates. "There's no great amount of slack in manpower, as far as we have been able to determine," one staffer says. "And, of course, all those postal vehicles are hamstrung by fuel costs."

The fear of business loss also was present in 1978, when first-class postage rose from 13 to 15 cents. But the number of pieces of mail has increased to more than 100 billion since them. Despite higher volume and USPS belttightening , in those two years, Mr. Bolger says the nickel increase became "inevitable" because to two uncontrollable factors: wages and fuel costs.

When gasoline rises 10 cents a gallon, Mr. Bolger says, the annual fuel bill for 240,000 postal vehicles increases $30 million. But, more importantly, the Postal Service is the nation's most labor-intensive business. With 665,000 employees, the payroll consumes 86 percent of its costs.

An escalator clause is built into the Postal Service's collective bargaining agreement with the American Postal Workers Union.* This recently added $11 million to payroll costs, due to the February rise in the consumer price index.

"Merely keeping up with inflation," Mr. Bolger maintains, "would justify a new first- class rate of 22 cents." Instead, he says, the nickel increase, coupled with new efficiency measures, should cover costs and leave a small budget surplus in 1981 and 1982.

"Efficiency" means high worker productivity, a longer ZIP code for some, and incentives to presort for big users. Mr. Bolger reported this week that the Postal Service plans to spend $600 million on optical machines that will sort mail mechanically by reading a ninedigit ZIP code. Big mailers who use the extra four digits and make the numbers machinereadable will get reduced rates.

In the long term, some congressional experts predict, efficiency may mean a difficult decision about the future of the "public service" side of the mails.

"If all congressional appropriations are eliminated," one staffer says, "USPS cannot ask rate payers to pay for non-cost-effective delivery. You already are hearing talk up here that by the end of the decade three-day delivery to residences could be a reality. And some of the other frequent, convenient collections may get a hard look."

Before the Postal Service was reorganized in 1970 from an executive department into a public corporation, most cost increases were dealt with by higher subsidies from Congress.* The main goals of reorganization were to ensure efficient management and rates that would cover the costs of service. That translated to higher stamp prices -- but also highly praised management.

There have, however, been some raised eyebrows over which classes of users are being asked to pay more and which less. Rep. James Hanley (D) of New York says he thinks the new rates are "cleverly designed" to eliminate opposition -- notably newspaper and magazine publishers and nonprofit organizations, traditional foes of rate increases.

But the postal ratemaking process, Mr. Bolger points out, requires that rates for each class of mail be calculated separetely, so that each class pays all attributable cost. He says that "refined cost studies" have resulted in his recommendations for certain classes.

But a congressional budget analyst says he believes there could be "two cents worth of slack" in the nickel increase being sought for first class. "It may be an 18-cent stamp after 10 months worth of debate," he says.


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