Europe’s postal services disagree over delivery date for market liberalisation

Date: 08/10/1998

By Chris Johnstone

DEEP divisions between Europe's post offices are being exposed as some push ahead with reform while others try to close ranks around a formula to protect their traditional strongholds.

Those differences have been thrust into the open by the tortuous attempts of a majority of Europe's post offices to seal a new deal on how much they charge each other for handling cross-border mail.

It is a small, but symbolic example of how the post offices' unity has crumbled to such an extent that they are no longer speaking the same language, at the very moment when the European Commission is attempting to decide how to approach the next stage of postal liberalisation after 2003.

Most of Europe's post offices have been tinkering with a revised version of their mutual charging framework for foreign mail - known as terminal dues - for more than a year, responding to Commission demands that the revenue generated by charges for cross-border mail should be distributed more fairly to cover the costs of the post office which deliver letters to the door.

Large-scale business users and consumer groups claim that the proposed deal, known as Reims II, amounts to a cartel between post offices which offers the prospect of higher charges with no parallel improvements in service.

They have seized upon a new bilateral charging system introduced by the EU's market-opening leaders, the Dutch post office PTT Post and its Swedish counterpart Sweden Post, as a mould-breaking move which offers a new vision of the future.

"This deal is a new bench-mark, a new reference point," said Alistair Tempest, director-general of the Federation of European Direct Marketing (FEDMA).

Big users of postal services and consumers groups would clearly like the current Reims II deal to collapse, of its own accord or with Commission help, and be replaced by something based upon the Dutch-Swedish agreement.

Ironically, however, the Swedish post office is still a member of the group which is struggling to win official approval for the agreement.

The short-term advantages of the Dutch-Swedish formula for such major users as magazine publishers are not hard to fathom.

Instead of the dramatic two-stage increase in these settlement fees (by between 40% and 200% of domestic delivery rates) envisaged under Reims II, the Swedish-Dutch deal provides for step-by-step rises of 15% a year with penalties if quality improvement targets are not met.

It will also allow preferential delivery rates for magazines to apply across borders, something which post offices have deliberately tried to discourage up until now. "This is a big point for us," said Tempest.

Commission competition officials took only a few months to clear the Swedish-Dutch deal. By contrast, the Reims II plan has undergone a series of alterations, with the latest, made only a week ago, prompting some to suggest that it is now effectively a Reims III. PTT is negotiating similar deals to that with Sweden Post with five other national post offices, although it refuses to say which ones it is talking to.

"We want to follow the same formula as much as possible," said a company spokesman.

The implications for the industry if the Swedish-Dutch accord and other such deals succeed are clear: the two-speed, two-tier transformation of Europe's post offices will become even more entrenched.

That process is already under way ahead of the February 1999 deadline for governments to take the first steps on the path towards postal liberalisation.

The deal hammered out by member states in 1996 conserves the monopolies for letters, direct mail, and international post up to 350 grams.

However, some countries have already gone much further. Sweden scrapped its domestic postal monopoly in 1993; the Netherlands only intends to allow PTT a monopoly on letters weighing up to 100 grams; Germany plans to limit the letters monopoly to all deliveries weighing less than 200 grams; and Denmark, more cautiously, to letters below 250 grams.

Member states have a similar patchwork of existing and proposed rules for advertising material or direct mail, one of the main money-spinners for the sector.

Finland has scrapped its domestic monopoly, but would-be new entrants are complaining that steep licensing charges limit the effect of this measure. The Nordic member states and the Netherlands want the Commission to open the postal market fully after 2003.

The Hague has said it is prepared to do just that, but only if other countries pledge to follow suit.

The Swedish post office insists its enthusiasm for market opening is not based on the potential opportunities this would offer for launching operations in other countries, but on the service improvements which would be offered to Swedes posting letters abroad.

"What competition would allow is for us to change our partner for the delivery of letters in Italy if we were not happy with the service offered by the Italian post office," said Sture Wallander, head of international relations for the post office.

Meanwhile, the Commission is keeping its plans for future postal liberalisation close to its chest.

The delicacy of the issue is underlined by the fact that the institution's decision to clear the Dutch-Swedish deal was announced by the companies concerned, rather than by Commission officials.

The last two reports in a series of industry studies aimed at helping the Commission to decide on the best way forward for the sector are due to be released in the next few weeks.

They are, in part, a response to French criticism that not enough preparatory work was done before decisions were taken on the first round of liberalisation two years ago. However, the initial findings of the studies appear to have angered all sides.

In the last round of negotiations, the French and German governments joined forces to ensure that the first stage of liberalisation would be very cautious.

But postal industry analysts believe it will be more difficult for Paris and Bonn to perform a similar double act next time around.

They argue that there is pressure for change which the Commission, even with a French dagger at its throat, cannot avoid responding to. "Germany, or rather the German post office, has changed. They can see problems of liberalisation on the home market but massive opportunities abroad," said one expert.