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Competition is the one factor in a free-market economy that drives prices down. Most people even vaguely familiar with free enterprise are aware of that.

So as the U.S. Postal Service faces the most serious threats ever to its existence - threats from electronic mail, faxes and private parcel delivery services - it has decided the only course of action is to ask for a 10.3 percent increase in postage rates.Huh?

Incredible as it seems, postal officials are trying to make that case. They are backed by the Mailers Council, which represents large-volume mailers. An official from the council told the Postal Rate Commission this week that a rate hike would be "a transition, a bridge to the future."

More likely it will be only half a bridge - just long enough to send the Postal Service on a flying leap off the edge.

Every week, more and more Americans are buying computers and learning how to send an unlimited number of electronic letters to their friends and relatives using services that require minimal monthly fees. Many others are getting into the habit of using fax machines to instantly ship letters and documents anywhere in the world. Using either of these services, people can send pictures or pay bills without ever having to lick a stamp.

Meanwhile, fierce competition is spurring long-distance telephone companies to offer bargains.

Conventional mail delivery gradually is becoming obsolete. How then does the Postal Service figure it can reverse this trend by raising the cost of sending a letter? A logical prediction is that a 32-cent postage rate would send more people in search of alternatives than has the current 29-cent rate.

The Clinton administration has proposed new customer service standards that, among other things, would require the Postal Service to deliver first-class mail anywhere in the United States within three days. Local first-class mail would reach its destination overnight.

Those are good goals. Government and quasi-governmental services should strive to be more efficient. But these standards don't begin to compare with the instant delivery electronic services offer.

Clearly, the Postal Service has let the world pass it by. Officials are hoping the extra money collected through higher postal rates will give them time to review their services and prices.

Unfortunately, time is not a commodity the Postal Service can squander, particularly as personal computer sales remain brisk.