Dont write off the Postal Service

"We'll take a rake, a hoe, even bees -- in a hive, of course somebody put a stamp on an oak leaf and mailed that, I thought, 'Now I've seen everything!'" That was before people started mailing samples of Mt. St. Helens vilcanic ash.

But despite its willingness to handle such eccentric freight, the lovable image of the through-strom-and-flood mailman is cracking in the public mind. Letters take too long the disgruntled ones want to know, are we getting our 15- cents worth for our stamp?

In the early days of the Post Office Department, the concept was established of universal service at universal rates -- the same price to mail a letter across the country as across the street -- a public service that would serve all the people everywhere in the nation at rates anyone could afford. Congress obligingly picked up the bill for whatever that cost above postal revenues. Hence, the longevity of the 2-cent stamp, and that long-gone greatest of all bargains, the penny post card.

But it's a new ball game now. With the Postal Reorganization Act effective in 1971, Congress abruptly changed the rules. It promised to take politics out of the old Post Office Department, changed its name to the US Postal Service, opened it to commercial competition, required it to break even financially, and arranged to gradually wind down all federal subsidies so that by 1984 it would be virtually self- supporting. Users -- not taxpayers -- would pay for the service.

The new quasi-governmental Postal Service was to serve all Americans everywhere (profitable customers or not), and yet act like any other business out to catch customers with needed service at competitive rates.

Inflation has made Congress's commands almost impossible. Since 1971, the average salary of clerks and carriers has more than doubled -- from $10,187 to $ 21,151 (including fringe benefits). Every time gasoline inches up another 10 cents per gallon, it costs the Postal Service another $30 million. With 86 cents of every revenue dollar going for wages and another 7 cents for transportation and fuel, most costs are beyond the agency's control.

To pay its way with less and less federal subsidies, the Postal Service has had to raise its postal rates. But to raise its rates is to risk losing its clients. Since reorganization, the price to mail a book has risen 350 percent, to mail a magazine, 525 percent.

To make each alss of mail pay its way (as Congress now demands) with salaries at levels critics see as a way out of line with other government employees, the Postal Service has notched up first-class rates four times -- from 6 cents in 1970 to 15 cents today. And in April it applied to the Postal Rate Commission for its fifth increase, effective in 1981, which would raise the first-class letter rate to 20 cents.

Increases may irritate the stamp lickers of the land, but the 24 percent federal subsidy which, until 1971, came out of their tax dollars and artificially held down stamp prices, has been whittled down to 9 percent. And 4 percent of that goes to subsidize mail of nonprofit organizations, reiligious groups, major political parties, free mail for the blind and disabled, etc.

But far more important, as rates increase, customers turn from Uncle Sam's carriers to the burgeoning private deliverers whos rates are sometimes lower and delivery often quicker and more reliable. It is enormous volume alone that makes a universal postal service tick. When volume declines, postal rates inevitably increase, and the vicious circle continues with even more business being carried by the trucks, airplanes, and home-delivery systems of private distributors.

That's what happened to parcel-post mail. In 1970 the Postal Service shipped 800 million packages a year. Today it handles only 200 million. United Parcel Service, by contrast, picked up and delivered 499 million parcels in 1970. Last year the brown trucks with the patent-leather shine and UPS shield handled 1.4 billion parcels.

Now a growing number of private distributors are threatening all other classes of mail except those classified under the private express statutes as "letter mail" -- the one category in which the Postal Service has a monopoly.

If these inroads increase enough, the future of the US Postal Service coud be in serious doubt. The central issue is: How much competition from a private carriers can it stand and still fulfill its mission as a universal postal system?

In a king-sized corner office on the top floor of a L'Enfant Plaza building in Washington, US Postmaster General William F. Bolger reigns over the largest postal system in the world, both in volume delivered and in distance covered. Only one federal agency, the Department of Defense, is larger.

He is responsible for 663,000 postal employees, 240,000 postal vehicles, 168, 000 carrier routes, and 30,000 post offices, which he now refers to as "retail outlets -- a $17.5 billion operation.

In an interview with the Monitor, Postmaster General Bolger stresses that inflation is the villain responsible for rising postal rates. What is jacking up Postal Service costs more than anything else, he explains, is the cost-of-living adjustment (COLA) in the Postal Service's contract with postal unions. Every time the consumer price index edges up one percentage point, postal employees are automatically compensated for about 65 percent of that one-point rise. This adjustment occurs twice a year.

"We negotiated a ceiling in the COLA that would not have exceeded an inflation rate of about 7 percent," Mr. Bolger says. But when the unions didn't ratify the agreement, the issue went to arbitration. The arbitrator took the cap off, and now with the double-digit inflation, he says the contract is costing the Postal Service $1.2 billion, more than it would have had the cap remained on.

He argues that the cost-of-living adjustment procedure itself drives inflation upward, is wrong, and should be redefined. Postal workers, he says, are being compensated for some inflation that does not affect them.

For example, he says, "a great chunk of the consumer price index is tied to real estate transactions -- high mortgage rates. Yet most people in the Postal Service don't move that much and so are not affected by these new interest rates."

Instead, he contends, pay increases should be tied to increased productivity. Only in the first quater of this year has America's rate of productivity begun showing a slight upturn. But since 1971, the Postal Service has registered a gain of 23 percent.It has accomplished this by eliminating 75,000 jobs through attrition and by boosting mechanization from 25 to 70 percent while mail volume has ballooned from 86 billion to 100 billion pieces a year.

Two years ago when Mr. Bolger, a career employee, took office, stepping up from deputy postmaster general, he committed himself to hold postal rates steady for 2 1/2 years. If the independent Postal Rate Commission approves his proposals effective in 1981, he will have kept his word during a period when it is estimated inflation will have rocketed by more than 48 percent.

Under Mr. Bolger, the Postal Service even finished fiscal 1979 with the first surplus the agency has posted since 1945.

Now he is reluctantly requesting a whopping one-third jump in the cost of first-class mail, as well as in various other classes. But not all rates will climb.

The cost of mailing publications of nonprofit organizations, educational material used in classroom, and in-county newspapers all are schduled to drop inprice. The second- class rate for mass-circulation newspapers and magazines -- keenly competitive commodities for the Postal Service right now -- would rise only by 1.9 percent.

His proposals also would offer more reduced-rate incentives than ever before to businesses, which compose 80 percent of all US mail customers. A firm that sorts its first- class mail by ZIP code, for instance, would pay 17 cents instead of 20 cents per letter.

A new nine-digit ZIP code scheduled go into effect next year will make it possible for computerized mailers to sort mail right down to one side or the other of a street, to buildings on it, even to floors in buildings. A firm that sorts its mail to that degree would pay 16 cents.

This kind of cooperation has won high marks for Mr. Bolger from the business community. Critics of his predecessors syat that some of them had the attitude, "This is our business. Take it or leave it." One publisher says the Postmaster General is "doing s super job," more than anyone before him, to turn the mammoth Postal Service into a businesslike operation.

One of the first things Mr. Bolger did was to ask for the help of the business community. He formed a joint task force of business and postal personnel to explore how the Postal Service could become more competitive. Acting immediately on the group's recommendations, he has abolished 75 antiquated regulations taht made doing business with the Postal Service difficult. If he has his way, he will soon have legal authority to eliminate many more.

Despite all these efforts by the Postal Service, why are private distributors of packages and magazines flourishing?

"Because they have been selective in the areas and markets they want to serve ," Mr. Bolger explains. "They market the commercial users and the concentrated areas where they can make a profit.

"But there is a need to serve everyone every place whether or not they are good customer from the standpoint of volume or of location. That is our task. . . . If people in the private sector are willing and able to do what we do, then they ought to do it and government ought to get out of it. But I think the postal monopoly on letters is critical to retain, at least for the foreseeable future. It's the only way we are going to have a universal postal service at universal rates that will serve everyone every place. That is our charge. I don't see anybody in the private sector ready to compete with us on that basis. I don't think they could."

Counting all the local speedy messenger services, there are tens of thousands of people in the parcel delivery business.Purolator Courier Corporation is the largest of the rapid-express package couriers. It found a niche that the Postal Service was not filling.

Responding to the dramatic growth of time-sensitive items in today's business world, Purolator specializes in overnight delivery of only small packages. By the morning after a package is mailed, its fleets of trucks and planes whisk door-to-door thousands of miles away such urgent cargo as radioactive isotopes and computer tapes. Purolator works only a five-day week, serves only dense populations, and delivers mainly to business addresses. It goes where the profit is.

By contrast, the Postal Service works round the clock delivering mail from the Arctic Circle to the Caribbean, and from the Atlantic Coast to the trust territories of the Pacific Ocean. Relying on scheduled airlines, it is affected by every cut in their service.

United Parcel Service, Uncle Sam's leading competitor for package mail, also shipped into a Postal Service vacuum. It not only delivers parcels but picks them up. UPS has been in business since 1907, even before Congress initiated parcel post in 1913. For half a century, UPS serviced only local department stores.

In 1950 it began expanding into a nationwide operation that has beaten parcel post at its own game. Now it picks up and delivers nearly 6 million packages a day. It will chase a lumber camp moving around in an Oregon forest, drive 40 miles down a dirt road to a ranch in Montana. But the bulk of its business is still in the more profitable, heavily populated areas.

For parcels under 15 pounds, its rates are lower than parcel post. Over that weight, its prices are generally higher. But its rates include an automatic $ 100 worth of insurance. Customers value its dependable schedules. And it pays many taxes the Postal Service does not pay.

Had Uncle Sam's couriers been cheap enough, fast enough, reliable and innovative enough, competition like this from the private sector might never have mushroomed.

Despite much improvement since reorganization, the speed and accuracy of Postal Service delivery is still spotty. Mailers report it is excellent, even "fantastic" in some areas. On the other hand, horror stories occasionally surface of letters that take months to travel short distances; of packages that are not only damaged but completely disappear; of newspapers that arrive in a bunch instead of being delivered promptly on a daily basis.

Some critics say the Postal Service's published standards of delivery should be speeded up. They complain that despite thousands of highly dedicated and skilled workers in the Postal Service, poor attitudes of some workers slow down delivery.

Damage to packages, Mr. Bolger reports, has been reduced to less than one-half of 1 percent. Faced with competition, 21 small centers, built since reorganization at a cost of nearly $1 billion, have not attracted enough mail to pay off that investment quickly, as it was projected they would. But Mr. Bolger still doesn't think the government should abandon parcel post. "I don't think they want us to," he says.

"For example, we put 25,000 people to work on the Alaska pipeline. I doubt seriously if, at tariffs we were able to charge people who needed to ship parcels of food and clothing up there, UPS or anybody else in the private sector was ready, willing, and able to run up there and start their delivery service.

"I've got only for them right now if they want to start. The fishing industry in the Aleutians is growing. It is very, very remote. Fishermen go into those ports up there occasionally to get their mail and parcels. We are looking now to see how we can improve our service. I haven't seen any of our private sector competitors beating us up there to try to get that service. . . .

Believe it or not, the success of the home delivery of periodicals, books, and records hinges on the advertising circulars that pour in a never-ending stream into mail boxes, and which John Q. Public disdainfully classifies as "junk mail."

The Postal Service and the publishing industry would never dream of using that terminilogy -- enough people respond to the ads to make them worthwhile to merchants; they help defray the Postal Service's costs; they provide magazine publishers an escape hatch from high potal rates on second-class mail. The big question is, who will deposit the most in your mail box or on your doorstep -- the Postal Service or private carriers?

Better Homes and Gardens and Reader's Digest began pioneering private distribution of their publications as soon as the born-again Postal Service gave its prices a hefty boost. In 1970, when magazines still enjoyed a generous federal subsidy, it cost only 3 cents to mail a copy of Better Homes and Gardens. Today it costs 16.5 cents. For Reader's Digest, the rate has leaped from 2 to 12.5 cents.

One bright idea these publishers came up was to use computer-prepared detached labels (cards) presorted to carrier routes and stuck insude magazines with the address showing. This saves the cost of sorting these heavy publications. The Postal Service is now experimenting with this system in cooperation with these two publishers.

Another scheme developed by Better Homes was to "rent" its subscription list to local carriers. These distributors sold local advertisers space in unaddressed circulars delivered along with the magazines.This combination of magazines and piggyback ads increased the carrier's revenue, and the delivery cost of the magazine dropped from 16.5 cents to 12 cents or less.

Private distributors are delivering only about 5 percent of BHG's subscriptions (370,000). But Robert W. Inhofe, director of distribution for Meredith Corporation, which publishes BHG, says he can foresee delivering 60 percent of subscriber copies privately.

"However, we are not as eager to reach that 60 percent as we were a year ago, because the Postal Service is asking only for a 1.9 percent increase on second-class mail and that is very favorable. But if the Postal Rate Commission should raise that substantially," he warns, "that will have a direct bearing on how far and how quickly we move on into private delivery."

Abot 2.5 percent of Reader's Digest subscriptions (nearly 400,000) and about 2 percent of its books are now being delivered privately.

Enough independent carriers are now delivering magazines and ads to have a trade group of their own -- the National Association of Selective Distributors in Canton, Mass. Is president, John R. Sweeney, says frankly that the Postal Service really cannot compete with private carriers for distribution of ride-along unaddressed advertising circulars for two reasons:

"First," he says, "because the essence of private delivery is cream-skimming, taking the most profitable delivery areas -- the cities and suburbs -- and leaving the rural and outlying areas to the Postal Service.

Second, he says, while 86 percent of the Postal Service's costs are for personnel who earn an average of $12 an hour, labor costs of private carriers, who use inexperienced parttime help at only the federal minimum wage of $3.10 an hour, amount to no more than 50 percent.

Mr. Sweeney stresses that density -- the number of households served -- is absolutely essential to the success of private carriers. He candidly admits that "there is no money to be made in the distribution of the magazine. The profit is being made in the advertising." And its volume, he says, is increasing rapidly.

If Postal Service delivery is spotty, so is that of private magazine carriers. In some areas of the country their performance is smooth and satisfactory. But in the Boston area, for example, one publisher concedes that the service has been "terrible."

The fact that only the Postal Service has the right to deposit mail in your box or slot means that private carriers have to deliver their goods in some other way. Usually they hang it on the doorknob in a plastic bag. Some subscribers in the Boston area complain that their magazine delivery has been erratic, that copies have been thrown onto porches, in shrubbery, on drivewyas wehre they have been squashed bycars, or haven't been delivered at all. Some subscribers have been so disguised with this type of service that they have had their subscriptions returned to the hands of their Postal Service carrier.

To meet the competition, Postmaster General Bolger is offering advertisers attractive discounts for resorting their material according to carrier routs. As a result, he expects to churn through the mails this year about 2 billion more pieces of advertising than a year ago.

What will happen to the US Postal Service if "cream skimming" accelerates? The report of the Postmaster General's business/postal service task force says:

"Volumes losses to these [private delivery] firms could create a self-perpetuating cycle of further postal rate increases followed by even more volume losses. This was the pattern of Parcel Post volume losses. The Postal Service must now allow a repeat of this pattern with its second-and third-class mail." But Mr. Inhofe says, "it doesn't bother me at all that, if we are taking some volume away from the Postal Service, they have cost problems. The Postal Service is simply going to have to react to whatever the competition does. . . . The country may be calling on the Postal Service to provide a different type of service than we have traditionally known it. Just as it was not the thing to do 70 years ago to subsidize buggymakers, the Postal Service may have to do some substantial adjusting."

If it is a new-style postal service the nation is demanding, Mr. Bolger is in the process of producing it. Though mail is still handled manually in small and suburban post offices, mechanization is in full swing in the cavernous big-city postal headquarters where miles of conveyor belts and mechanical sorters clatter all through the night.

But even these ingenious machines which sort with lightning speed are cumbersome compared with the new behemoths of automation now being tested by the Postal Service throughout the country. By fall, Mr. Bolger expects to start soliciting bids for this equipment, looking toward a shift to automation in about five years.

The long-term future of the Postal Service may well lie in electronic communications. In this field, too, the Postmaster General is attempting to compete in these three ways:

* E-COM (electronic computer originated mail) will enable large mailers (200 items or more) to transmit messages electronically to 25 strategically located "serving post offices" to assure two-day delivery anywhere in the country. The Postal Service is eager to begin this new service but is awaiting permission from the Board of Governors of the Postal Service, as well as the outcome of a lawsuit it has initiated against the Federal Communications Commission. The Postal Service is contesting the FCC's claim that it has regulatory jurisdication over the PS in this matter.

* Intelpost (international electronic message service) is the Postal Service's international venture in message transmission via satellite to and from certain countries in Europe and North and South America. A digital facsimile network, Intelpost can send and receive in seconds excellent black and white copies of documents and graphics.

The Postal Service designed the system, gave it the Intelpost name, and was to have been the hub of the network. Messages already are being sent between the United Kingdom and the Postal Service's offices in Washington and New York. But because of prolonged delay in America's regulatory process, other countries are moving ahead without the US. It now appears that Canada will be the hub of the system.

* EMS (electronic message service) envisions a computerized messenger service that could be used by individuals as well as businesses to transmit information electronically from one point to another, with ultimate delivery by letter carrier. This is still in the laboratory stage.

Once the red tape is untangled, it seems that at the very least the US Posal Service of tomorrow will become what Mr. Bolger calls "a computerized letter shop." It remains to be seen how much more of a role it will play in electronic communications.

In the meantime, the Postal Service will continue serving all Americans everywhere, taking "a rake, a hoe, even bees -- in a hive, of course. . . ."