Because of an editing error, a story yesterday incorrectly described the postmaster general's criticism of the new first-class mail rate. Anthony M. Frank characterized the 29-cent rate as "penny- foolish." (RP 1/29/91)

The U.S. Postal Service yesterday reluctantly accepted a four-cent increase in the price of a first-class letter to 29 cents effective Feb. 3, but decried the new rate as "pound-foolish."

Postmaster General Anthony M. Frank warned that the 16 percent increase may be insufficient and said many Americans would have prefer "the roundness" of the 30-cent rate that the Postal Service initially proposed. "We are allowing the best of rates and the worst of rates," he said.

Frank also expressed fears that when coupled with the recession and higher costs the service is certain to face this year, it may be forced to seek still higher rates. He did not predict, however, when that might be.

In anticipation of the 29-cent rate, post offices today will begin selling stamps printed before the new rate was known. The stamps bear a red tulip and carry the letter F instead of a denomination. They will sell for 29 cents each and will be offered along with a four-cent "makeup" rate stamp.

The makeup rate stamp, which also lacks a printed denomination, is for use with existing supplies of 25-cent stamps. The makeup and the F stamp are to be used only on domestic mail, because international mail rules require all stamps to show a specific value.

The Postal Service's Board of Governors voted 8 to 1 yesterday morning to implement "under protest" most of the new rates proposed earlier this month by the independent Postal Rate Commission.

In surprise move, the board accepted, but delayed, a two-cent discount for individuals who pay bills with pre-addressed, bar-coded envelopes. The Postal Service long has opposed such a discount, but Frank said the governors had agreed that individuals who back automated mail techniques such as bar codes should be rewarded.

But Frank said that the service did not have any 27-cent stamps available for the rate and predicted that the two-tiered stamp structure would confuse many customers.

Postal officials said it may be several months before the discount rate is implemented. The service wants time to conduct an education campaign and to ensure that its machinery can automatically sort most of the business reply envelopes that come with monthly utility and credit card bills.

The postal governors also voted to return the overall case to the rate commission with a request for more details on how it reached its volume and revenue projections.

"With all the financial pressures we are facing, we cannot afford to gamble on whether the rate commission has correctly estimated volume and revenue," Frank said. "If they erred -- and we believe they have -- the recommended rates may well proved to be 'penny wise and pound foolish.' "

The rate commission, in trimming the proposed first-class rate by a penny, accused the service of placing too heavy a burden on individuals instead of bulk mailers. Frank and Norma Pace, chairman of the postal governors, questioned whether the large increases the commission proposed for third-class mail, sometimes described as junk mail, would drive many mailers to use private delivery services. The private mail services, which are expanding, have become an increasing worry for the government-owned Postal Service.

Robert Setakian, a San Francisco businessman who has served as a postal governor since 1985, cast the lone dissent against the recommended rates. He later told reporters that he was "outraged" by the rate commission's proposals for third-class mail, saying the panel was "attempting to kill off an entire industry" by forcing it to absorb a large rate increase.

Robert Kamerschen, chief executive officer of Advo-Systems Inc., the nation's largest direct mail firm, predicted the new rates will force bulk mailers to seek alternatives to the Postal Serivce, but he said he was happy that the service accepted some of the discounts proposed by the rate commission.

The service announced it was boosting the price of most international air mail letters to 50 cents a half ounce from 45 cents on Feb. 3. Letters to Canada will increase to 40 cents and a new 35-cent rate will be established for half-ounce letters to Mexico. These rates do not require review by the rate commission.