On Feb. 24, United Parcel Service delivered a letter from Austin to Lufkin, Tex. -- a fairly simple piece of business, but one that marked the end of a 20-year struggle by UPS to win approval to carry parcels from point to point within the state.

The battle, which cost the parcel delivery company millions of dollars and involved the filing of a 290-page application, was fought on terrain where the combat over trucking deregulation is still hand-to-hand.

At least when it comes to trucking, regulation is alive and well and living on the state level. Since 1980, trucks moving in interstate commerce have been relatively free of the regulation that once inhibited entry and helped keep truck rates high. Within the states, however, the old rules prevail.

Proponents of carrying deregulation into the states say that federal deregulation of interstate trucking has increased the number of truck companies and reduced freight rates, and that consumers would be served by extending those benefits to within states. Opponents that the current system serves the needs of shippers and trucking companies well and protects consumers against excessive charges.

Forty-three states still regulate intrastate trucking. Texas is generally considered the most strictly regulated, but others, too, limit entry into the market by new carriers and restrain rate competition to some degree. Trucking is not regulated in Alaska, Arizona, Florida, Wisconsin, Maine, New Jersey and Delaware.

A number of bills have been introduced or are being drafted to extend deregulation to the states. But the attempt raises politically difficult questions about states' rights and federal preemption.

At stake, according to at least one study, is a massive amount of trucking. A study by the University of Pennsylvania's Wharton School transportation program found that approximately two of every three tons of manufactured products move from the factory to a point within the same state. In California, eight of every 10 tons of products shipped from manufacturers are shipped to points within the state, said Bruce Allen, director of the Wharton project.

Transportation Secretary Elizabeth H. Dole, as part of a proposal to expand federal deregulation of trucking, has included provisions that would prohibit states from enacting additional intrastate regulation and that would provide for an investigation of economic regulation of trucking by the states to determine if it imposes burdens on interstate commerce.

Other bills would go further. One measure, introduced by Rep. Tom DeLay (R-Tex.) and Rep. Jim Moody (D-Wis.) would create a new class of carrier, called national carriers, that would be exempt from any intrastate regulation. To qualify as a national carrier, a trucking company would have to operate in three contiguous states. Hearings on that measure are scheduled for later this month.

Sen. Bob Packwood (R-Ore.) is drafting a trucking deregulation measure that is also expected to include some move toward deregulation of intrastate trucking. According to Dick Henderson, executive vice president of the Private Truck Council of America, a draft version contains provisions that would preclude states from introducing or maintaining state regulation. Proposals limiting intrastate regulation of trucking appear likely to be adopted only as part of a larger trucking deregulation measure, not by themselves, according to sources familiar with the legislative outlook.

Opponents of trucking regulation, who generally include large shippers who would benefit from lower rates in a more competitve system, have also attempted to undo state regulation in state legislatures.

Opponents of economic regulation of trucking within state borders argue that it adds to consumer costs. Richard P. Schwitzer of the PTCA, the council that represents companies that carry their own goods, cited costs incurred by Frito-Lay in shipping products within Texas as an example.

To transport a truckload of corn chips from Topeka, Kan., to Irving, Tex., cost the company $1.48 a mile because of lower interstate rates, he said. The same shipment carried from Lubbock, Tex., to Irving, Tex., cost $2.57 a mile. According to Procter & Gamble, in 1984 it cost the company $430 to ship a truckload of Tide or Cheer detergent from Alexandria, La., to Houston -- a distance of 238 miles. The same truckoad shipped from Dallas to Houston, a distance of 243 miles, cost $612.

According to Clark Jobes, an acting member of the Texas Railroad Commission, which regulates trucking within the state, trucking regulation grew out of populist concerns in the 1920s and 1930s. The rate system sets rates based on the costs of a carrier's operations. If too many carriers entered the market, consumers would end up paying for the additional carriers' costs too, paying for excess capacity, he said.

The system was also designed to make sure that "trucking companies aren't serving large shippers at below price and making it up on a mom-and-pop clock manufacturer in Silsbee," he said.

Jobes said that changed economic conditions might warrant some changes in the state system of regulation, but that he has seen nothing so far that would convince him that federal preemption of states' rights is warranted.

"We feel the system works. It has worked for years," said Amy Hightower, director of public relations for the Texas Motor Transportation Association. UPS, now a Texas trucker, has recently joined the association.

The UPS case began when the company filed an application in 1966, according to Dan Buckley, a UPS spokesman. One of the requirements was that the company list the routes it would serve, which in the case of UPS was every road in Texas. "We used a Rand McNally map and listed every highway and roadway, all the identified roadways with numbers," he said.

In 1969, that application was found to be invalid because the type of authority the company was seeking was not authorized by law, and that issue went to court. According to Buckley, a state court found in 1976 that the Railroad Commission did have the authority, but the court did not have the authority to send the case back to the commission. UPS filed again in 1979 for reconsideration and fought up to the Texas Supreme Court, which turned down the Railroad Commission's appeal in 1981. In 1982, UPS refiled and the process began again.

On Feb. 24, the commission made its final decision, turning down opponents to the application who were seeking reconsideration. Former railroad commissioner Buddy Temple, who had voted in favor of UPS's application, handed a UPS representative a letter to be delivered to Temple's Lufkin office, declaring it to be the first package shipped intrastate by UPS in Texas.