Postal sector set for more liberalisation

Liberalisation in the postal services sector would appear to be inevitable. Some national governments may have strong feelings about protection of the sector, but providers, both public and private, are gradually adopting a more prag- matic, market-oriented approach.

Underpinning the postal sector’s status as a service of general economic interest is its continuing (albeit reduced) importance to economic and social life. The postal service is part of the economic infrastructure and the postal sector is a major EU employer, worth €88 billion in revenue per year or about 1% of EU gross domestic product. In many cases, postal services are still state-sponsored monopolies and some governments are loath to relinquish control over the sector.

But the EU has agreed to a deadline of 2009 for liberalisation of the sector. The Commission is expected to propose a third postal directive, due in December 2006, to complete the process of liberalisation that was set in motion almost a decade ago. Countries leading the way in opening up their markets include Sweden, Finland, Estonia and the UK. Countries such as Italy and France lag behind.

In 1997, the first postal directive sought to establish an internal market for the sector, setting common standards and principles, and determining the range of services that should be opened to competition (eg, letters weighing more than 350 grams). State control and protection of postal services was to be allowed only to "the extent necessary to ensure the maintenance of universal service", it stated.

The second postal directive, introduced in 2002, set a timetable for gradual reduction of state control of the sector. Member states set up national regulators, although the independence of these is, in some cases, still debatable. In 2003, a substantial chunk of the market was opened when the 350-gram limit for protected services was lowered to 100 grams. This limit was lowered again at the beginning of this year to just 50 grams.

Private sector service providers are understandably keener to see an opening up of the sector than their public sector counterparts. But the notion of all-out liberalisation is not so appaling to all national champions. Deutsche Post is already competing with incumbent Royal Mail in the UK.

Marc Pouw, secretary-general of PostEurop, the Brussels-based lobby which represents the interests of national incumbents, says: "Some [members] would say they have nothing against competition, but that they need time to adapt. Others are in a completely different situation in terms of company structure."

Philippe Bodson, president of The Free and Fair Post Initiative (FFPI), a lobby set up six years ago to campaign for an end to protectionism in the postal services sector, believes that liberalisation is the best way to ensure that providers fulfil their universal service obligations. "We want to ensure a competitive and well-functioning market with choice and a variety of high quality services at fair and affordable prices," he says.

Both those who support increased liberalisation and those who argue for postal services to be protected from competition claim that the outcomes they seek are fairness and affordability. But staying still is probably not an option, when electronic communications and competition from express carriers have substantially eroded the core of the postal sector.

Liberalisation could therefore be the sensible approach in this particular case. An element of competition would be the best guarantor of evolution within the sector. Moreover, of all services deemed to be of general economic interest, postal services are perhaps the most suited to competition, particularly when it is considered that around 80% of mail handled is now from business rather than individuals. But any reform of the market should be tackled thoughtfully, with due attention to issues relating to non-discriminatory access to essential facilities. As Pouw puts it: "We are looking for certainty, stability and a clear way forward."

Clarity is also of prime importance to Bodson. The market liberalisation that new market entrants are so keen to see will need to be contained by a solid framework from the Commission if the sector is to maintain high standards of provision after this period of upheaval. "We expect to see a proposal completing the process of liberalisation, clarifying and defining rules regarding a number of important elements such as the role of national regulators, the way that prices and tariffs are set and the definition of universal service," he says.

Liberalisation in the postal services sector would appear to be inevitable. Some national governments may have strong feelings about protection of the sector, but providers, both public and private, are gradually adopting a more prag- matic, market-oriented approach.