The US Postal Service: Fish or Fowl?

RECENTLY I noticed that my local letter carrier arrives earlier, is more friendly, and even seems to have an extra bounce in his step. Perhaps this heightened sense of energy is attributable to the fighting spirit in the home office - the United States Postal Service. Motivated by a succession of business-oriented postmasters general, including current Postmaster General Anthony M. Frank, the Postal Service is vigorously confronting the threat of competition.

The press this month reported excerpts from an internal memorandum by Deputy Postmaster General Michael Coughlin that demonstrate this trend. Mr. Coughlin, like Mr. Frank, is bullish on expanding post-office locations to high-traffic shopping malls. In his memo, he argued that this strategic move is vital to meet the growing challenge from alternative mail-service providers. For the first time, the $35 billion Postal Service is sending a clear message to the business community: We aim to win, too.

Yet this move into a competitive marketplace only serves to heighten the sense of ambivalence under which the Postal Service operates.

In the 1970 Postal Reorganization Act, Congress sought to create an independent, businesslike organization to replace the inefficient, politically-dominated Post Office Department. The act promised lower, fairer rates, better wages and working conditions for employees, and continued service to rural areas and small post offices, as well as managerial efficiency. But Congress never resolved the deep-rooted conflict between operation as a business and operation as a public service. As a result, the Postal Service has stumbled into some ill-advised ventures to compete with private companies.

The most dramatic example was E-COM, a message system that the Postal Service first proposed in 1978. E-COM was designed to serve volume mailers that generated mass mailings from data stored in electronic form. The data were transmitted from 25 major post offices to other cities, where the messages were transformed into hard copy, then put into envelopes and delivered in two days. E-COM was akin to the mailgram service offered by Western Union in partnership with the Postal Service, but with a crucial difference. Unlike mailgrams, E-COM involved the Postal Service as the active agent for marketing, selling, and managing a business service that had historically been provided by the private sector.

The Postal Service battled two administrations for the right to offer E-COM in the marketplace. It obtained President Carter's blessing by accepting a number of restrictions, such as barring the Postal Service from building its own transmission network or subsidizing electronic-mail operations with tax money or revenues from other postal services. And when the Reagan Justice Department tried to block E-COM's launch, Postal Service lawyers fought back and won.

By 1985, however, E-COM's flow of red ink was too deep to tolerate. In its last full year of operation, E-COM's total volume reached only 22.7 million messages, and it lost more than $70 million. Hovering over the debacle was the question once posed by Postmaster General Benjamin Bailar, who served in the Nixon administration. ``If private industry is willing and able to provide a service,'' he asked, ``why in heaven's name should the government get involved?''

Also troubling to some policymakers has been the Postal Service's role as a monopolist. Under the law, the Postal Service has the exclusive right to carry ``letters'' for others over post routes.

As the second decade of the Postal Service ends, a re-evaluation of the Postal Act is in order. Given the Postal Service's formidable manpower (over 800,000 employees), choice post-office locations, and vast distribution system, it is well positioned to enter ancillary businesses, such as providing facsimile services or compiling targeted mailing lists for sale to direct-marketing firms. Under Frank, the Postal Service is poised to make these types of bold moves as opportunities arise.

A similar boldness within Congress and the White House is needed so that the Postal Service knows whether to retreat or push ahead. Without a signal from the political establishment, the Postal Service's struggle to find its soul will remain harder than traveling through rain, sleet, or snow to deliver the mails.