A penny more to mail a letter Delayed increase: 33-cent stamp still a bargain as Postal Service tries to compete against e-mail and faxes.

July 24, 1998

THE U.S. Postal Service is caught in a bind that inevitably makes it an unpopular agency. Inflation and modernization costs keep forcing up the price of first-class postage. Every time the cost of mailing a letter goes up, the public complains.

This time around, the agency has managed to postpone a rate hike for four years. And the 2.9 percent increase, effective in January, is less than inflation for the second straight time.

That should be grounds for applause from the public.

It isn't.

During that time, the Postal Service saw volume and revenue increase, leading to a cumulative profit of $5.8 billion. Forgotten are prior years of billion-dollar deficits and the huge cost of new technology. Erasing those deficits, buying automated and robotic equipment for new Postal Service buildings and paying a giant, unionized work force consumed most of those profits.

So it's time once again to increase postal rates. The United States' mail-delivery service still remains a remarkable bargain compared with the rates charged in other industrialized nations. Yet the Postal Service is under intense pressure to improve its efficiency -- and keep price increases to a minimum.

Private-delivery carriers continue to be the preferred service for big businesses. The dramatic rise of electronic mail and fax-machine messages pose a real and present danger for the old-fashioned government mailman.

Much of the new postal equipment is designed to make the quasi-public agency more competitive with electronic options. But the agency is saddled with heavy labor costs that consume 80 cents of every dollar in revenue. That may prove to be its undoing in the long run.

The Postal Service is being forced to take a more entrepreneurial approach. If it fails to react to the e-mail threat, it may see mail volume shrink, necessitating larger stamp price increases in the future. That could turn into a vicious spiral, with the Postal Service eventually going the way of the Pony Express.

Pub Date: 7/24/98

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