Republicans Eye US Postal Service For Privatization Push

CONSIDER the fate of the once-mighty American Telephone & Telegraph Co.

Over a decade ago, the breakup of AT&T, then a federally protected telephone monopoly, resulted in more competition and better telephone services. Now debate is being rekindled in Washington over whether competition should be imposed on another behemoth with monopoly powers, the United States Postal Service (USPS), by privatizing it.

It's a ``hot topic being discussed within the Republican majority,'' says Gene Del Polito, executive director of the Advertising Mail Marketing Coalition in Washington. Service would be improved through competition, he says, and money could be added to federal coffers by reconfiguring USPS into a private corporation.

USPS as a corporation would pay certain taxes, as does Federal National Mortgage Corporation (Fannie Mae), and could provide funds to pay for goals set forth in the Republican ``Contract With America.'' Outright sale of the Postal Service is another option for putting money into the US Treasury, Mr. Del Polito says.

``It will have to be addressed sometime this year,'' says an aide to Rep. John McHugh (R) of New York, chairman of the newly created House Subcommittee on the Postal Service. As Republicans in the 104th Congress scour the federal budget for places to save and make money, privatization of the service has attracted growing interest. Further, ``the Postmaster General is willing to discuss it now, and he hasn't in the past,'' the aide says.

And in the realm of Capitol Hill power politics, the devolution of the House Post Office and Civil Service Committee into a subcommittee this year is ``a slap in the face'' to the USPS, says Gregory Sidak, a resident scholar at the American Enterprise Institute (AEI) in Washington and editor of the newly released book ``Governing the Postal Service.'' Traditionally, the House commitee has been sympathetic to the postal labor unions' rejection of privatization.

THE shift in political winds hasn't been lost on Marvin Runyon, who, on Jan. 31, became the first Postmaster General to publicly address the privatization issue.

``If it means putting `For Sale' signs in our lobby windows and selling off the mail to the highest bidder, that's a bad idea,'' Mr. Runyon said in a National Press Club speech. ``No private company accountable to Wall Street can carry out our national mandate [for universal delivery at uniform prices].''

``On the other hand, if they mean freeing the Postal Service to become more businesslike and market-driven, we have something to talk about,'' Runyon added. Changes such as incentive pay and more flexibility to introduce new products would allow USPS to become more competitive, he said. ``With enough latitude, I believe one day we could become a profit center for the federal government.''

Currently, USPS has a $8.3 billion cumulative deficit. By law, it is supposed to only break even financially, so Del Polito says ``there are no incentives to become cost efficient. Once you extract the profitmaking motive out of a business,'' there are no rewards for doing well, he adds.

Many other countries have moved toward privatization of their postal systems, such as in Canada, Sweden, and Germany. The results of these changes have been new products and services and ``an increased attention to customer responsiveness, efficiency, and profitability of operations,'' write Michael Crew and Paul Kleindorfer in the AEI book.

For USPS competitors, the cost of technology is decreasing while the ways to use it are ``increasing geometrically,'' Del Polito says. But operations at the Postal Service remain labor-intensive; labor accounts for 85 percent of its costs. At Federal Express, for example, labor makes up 52 percent of operating costs, says a spokesman for the Memphis, Tenn., overnight mail company.

Over the past decade, alternatives to the US mail service have emerged that are often cheaper and faster. The USPS customer base is being chipped away by technology - such as faxes, e-mail, and electronic funds transfer. In the courier business, it faces competitors, such as Federal Express and United Parcel Service. And, as clearer demographic pictures of cable-TV and radio audiences develop, some advertisers are finding commercials an alternative to third-class mail.

``The market is voting,'' says Arthur Sackler, managing director of the Mailers Council in Washington. USPS has lost 35 percent of its financial mail volume to electronic services. ``[USPS] is not like a private-sector company'' in its ability to respond to market demands and customer problems.

``The world has changed'' from the time when USPS was chartered, Del Polito says. ``We want [USPS] to address the issue of `why does the monopoly exist?' ''

As a federally regulated monopoly, the Postal Service cannot independently change its prices, pay, or benefits for employees. It is limited in its attempts to innovate because of oversight by Congress, a Board of Governors, and the Postal Rate Commission. Private companies are often able to move more quickly to offer new services.

Runyon acknowledges the advantage private competitors enjoy, but says that the USPS still does ``remarkably well'' in providing universal service. USPS officials point to an 85 percent customer-satisfaction rating, according to an independent survey.