Monopolies fed free market medicine

Date: 29/10/1998

By Chris Johnstone

IF POLITICS were not the art of the possible, the European Commission would have three immediate policies to reinvigorate declining sectors such as post and rail: liberalisation, liberalisation, liberalisation.

As it is, political opposition to such a recipe has forced the Commission to tiptoe around these public service sectors, where legal and practical monopolies still persist. The liberalisation diet has been drip-fed into them with mixed success.

Transport Commissioner Neil Kinnock bluntly warned railways recently that they faced being sidelined unless they confronted their shortcomings and started giving customers what they wanted. He said a recent upturn in the amount of cargo being transported by rail should not fool anyone, adding: “One swallow does not make a summer.”

Kinnock's latest proposal to breathe new life into the railways sets a ten-year target for 25&percent; of the freight sector to be opened to competition. This, it is argued, should give existing companies enough time to get used to the new environment. “We have tried everything else, we might as well try this,” Kinnock told a meeting of the great and the good from Europe's rail infrastructure companies.

This proposal, which has won the support of most EU governments but has been greeted with suspicion by France, follows on from Kinnock's earlier moves to promote a network of dedicated rail expressways for freight across the Continent.

These were aimed at removing the cross-border barriers, such as inspections and changes of train, which have resulted in cargoes tending to move as fast as a snail on the way to its funeral.

A few freight freeways have been launched by operators, but the age-old problem of getting a green light to cross several countries at the right time and the right price has derailed several projects and left companies doubting whether this is the best way forward.

Postal liberalisation has also made sluggish progress. Some say that the ambitious designs for postal liberalisation drawn up by the Commission's Directorate-General for competition (DGIV) could have been taken out of a file and dusted down at any time over the last five years.

However, political pressure has allowed only a tamed-down version to emerge. A Franco-German deal at the end of 1996 set the slow pace for postal market-opening across the EU, allowing national post offices to safeguard their monopoly on delivering ordinary letters and advertising material - so-called direct mail - weighing up to 350 grams (about the weight of two broadsheet newspapers) until 2003.

The Commission has to come up with follow-up proposals for after 2003 by the end of the year and has launched a series of studies to point the way forward.

So far, these controversial reports have all delivered the same general message that more postal liberalisation will not damage national post offices' ability to provide a country-wide pick up and delivery service.

Some countries, such as Sweden, Finland, the Netherlands and Germany, have already gone further than the pre-2003 demands for liberalisation in various market segments.

Two factors would appear to tip the balance in favour of a fresh push by the Commission in favour of postal liberalisation. First, the concept of protected markets appears more and more incongruous every day as other ways of delivering information, such as e-mail and fax, eat into their overall market share.

As this realisation sinks in, the balance of power within the EU between post offices which applaud and those which oppose further liberalisation is changing, with Germany and Deutsche Post switching sides and joining the pro-competition camp. “Deutsche Post now believes it has more to gain outside its domestic market than to lose by opening up its home market,” said an industry observer.

Just how much times have changed was demonstrated by the company's favourable reaction to two studies drawn up for the Commission which welcomed the idea of more competition in direct and cross-border mail. Whether the Commission will deliver has still to be seen.