Battle hots up over postal sector reform

Date: 28/09/00

By Peter Chapman

EU TELECOMS ministers will nod their heads enthusiastically when plans to open up the last bastions of the former telephone monopolies to competition are discussed at a meeting next week.

But talks on far less radical plans to chip away at the power of Europe's post offices are likely to prompt a very different reaction.

On the table will be the European Commission's blueprint for the postal sector which single market chief Frits Bolkestein launched in May. The brief he inherited from predecessor Martin Bangemann was to prepare for another 'gradual and controlled' step towards full liberalisation of the market from 2003.

This meant widening the scope of a 1997 directive which opened some of the postal industry to the rigours of competition. But it also meant ensuring that the traditional post offices kept a large enough 'reserved area' free from competition to allow them to fund costly 'universal service' obligations such as deliveries to remote rural areas.

As the battered and bruised Bolkestein now knows, any threat to the friendly old postman and his 1.3 million colleagues means a lot more to many people than who links up a few copper wires.

Although politically charged, the crux of the Commissioner's plan could almost be written on the back of the proverbial envelope. Firstly, he proposes to cut the weight of letters reserved for delivery by post offices from 350 to just 50 grams - or, from five times the price of a basic stamp to two and a half times.

Secondly, he envisages using the same weight limit to free up more of the Union's market for direct 'junk' mail letters, although six member states have already gone further than that. Thirdly, he proposes opening up outward-bound cross-border deliveries to competition, meaning that any operator could take letters of any weight out of a country, although a national post office would probably deliver them to their final destination in the EU. Finally, he promises to unveil proposals for additional steps towards liberalisation no later than 2004, with an eye to implementation in 2007.

Overall, the proposals would open up areas representing 22% of the traditional post operators' businesses to competition.

Depending on which side you take in the debate, Bolkestein has either squandered a precious opportunity to open the market to new operators or he has thrown the post operators and the provision of universal services to the wolves.

French Post Minister Christian Pierret has made Paris' views on the issue plain - and in the process provided an indication of the ferocity of the fight which lies ahead.

France is insisting that the weight limit should not be reduced beyond 150 grams for letters. Anything more, Pierret argues, would threaten the jobs of the country's postal workers. No sooner had Bolkestein unveiled his plan than Pierret was demanding additional assessments of the impact of reducing the threshold for competition in letter delivery, and insisting that the envisaged 'next step' in 2007 must not herald full competition in the market. But private postal firms, which employ 400,000 workers across the EU, regard Bolkestein's failure to propose the full liberalisation of direct mail as a wasted opportunity. They also see it as a blow to the development of a potentially vibrant market which could have offered benefits to all companies in the sector.

Private courier firms claim failure to open up more of the sector to competition could prevent the creation of new jobs as the industry loses out to new forms of marketing, such as e-mail messaging. "The Commission has lost an opportunity to liberalise the market substantially," says Rohan Malhotra, spokesman for the European Express Association, which represents private firms. "If critics succeed in seeing the weight limit shifted to 150 grams, then the value of going through the legislative process becomes questionable."

Bolkestein may have taken an early mauling from both sides, but the Dutch Commissioner has a key ally - German Christian Democrat Markus Ferber, rapporteur on the issue for the European Parliament's transport committee.

Ferber is a firm supporter of increased liberalisation of the sector. But he already knows that he will have to compromise if his report is to win the support of Socialist members who are fighting to stop the reserved area for ordinary letters being cut below 150 grams. "There are serious arguments on all sides...and we will have to look at all possibilities," says Ferber.

The German MEP predicts that both the weight and price limits, and the date proposed by the Commission for the 'next step', will be the main bones of contention. If 2007 remains the target, Ferber foresees a clamour from some for a 150-gram limit at this stage. "If we have 50 grams now, it would make no sense to have a weight limit in the next step," he says. "That is why some people are calling for 150 grams."

The post offices and their public sector rivals are also at loggerheads over moves to liberalise all deliveries incorporating any extra services which add value to basic delivery. These 'special services' could include guaranteed delivery at a specified hour the next day, or the use of sophisticated information technology to track a letter's precise location at any time.

But critics such as France's La Poste and the UK's Royal Mail claim the plan to liberalise these services fully was included in the proposals without a proper analysis of its effects. They argue that it could wreak havoc on universal service and the areas of business still reserved for the post offices.

Without a legally-watertight definition of bona fide special services, postal operators fear it would be easy for rivals to gain unfettered access to the market by providing customers with minimal 'extra services'. "Unless there is a better definition, you could have a postman going along singing a song and that is an extra 'special service'," quipped one post office official. Critics also claim that the move would undermine operators' efforts to develop the scope of the universal service they offer.

Both Ferber and the Commission's legal service have promised to look at ways of addressing these concerns.

Major feature.