Snail’s pace in postal reform

Postal reform has been slower to come to Europe than surface mail letters take to get from Belgium to Ireland. A lot slower.

While the traditional view that post, telephone and energy services have to be kept firmly in state hands for standards to be upheld has been eroded over the past two decades, it has not yet been fully erased.

Reluctance to break with inherited systems has been particularly marked in the postal sector. Even in the UK, a country known for its espousal of free market values, the government was forced to retreat, at the last minute, from plans to privatise the Post Office after worries became widespread about the future of small, often rural, post offices.

The same fears, coupled with concerns about possible job losses, have made most European governments wary of embracing dramatic change in this area and have thus ensured that plans for EU-wide liberalisation have moved at snail's pace.

After almost a decade of discussions, the European Commission finally unveiled a cautious, step-by-step approach to the task last year with a proposal providing for minimal competition by the turn of the century.

Universal service - the idea that every address should be reachable by post for (usually) the same price, whether in the Alps or Paris - is the back bone of the document.

To achieve this goal, the Commission declared that national post offices should be allowed to maintain their monopoly on the collection, sorting and delivery of letters weighing up to 350 grams - or, in other words, over all basic letter services.

Under the proposal, post offices would also be given control over incoming cross-border mail and direct mail until the year 2001, when competition would be introduced, provided a Commission review of the market gave the go-ahead. What that would mean was that, even after the directive took effect, 80&percent; of the mail market would still be sewn up by state post offices.

To redress that imbalance, the Commission said that state firms would be forced to keep separate accounts for their 'reserved' or monopoly areas and their 'non-reserved' business, to ensure that 'open' services, such as parcel delivery and express mail, would not be propped up by profits made in monopoly areas. It also proposed creating independent regulators to police the sector.

While both sides, clearly tiring of the long wait, welcomed the draft directive, they also expressed contrary but equally grave concerns. Predictably, private express delivery companies complained that the directive did not go far enough.

'To refer to it as liberalisation would be a misnomer,' said Anton van der Lande of the European Express Organisation (EEO), an organisation which represents private couriers. 'After all this time, they only envisage opening 20% of the market.'

The EEO also slammed the Commission for failing to clearly define cross-subsidisation, an omission which it predicted would give rise to flagrant abuses on the part of its members' state rivals.

Those rivals, on the other hand, advocate an even more cautious approach, insisting that no commitment should be made to liberalise incoming cross-border mail and direct mail at the end of the year 2000.

'It does not seem logical to anticipate future liberalisation stages at this time without giving the first stage at least four years. To suggest that a review of the process be conducted in 1998 is not at all appropriate,' explained a representative of the French post office.

'We are not against competition, but we do believe that it should be done gradually according to very clear rules,' she added.

'The private sector is in it for the money and the money alone. But we cannot do the same thing. We cannot simply say: 'I am sorry, it is not profitable, so I will not do it'.'

At the moment, the real cost of delivering a letter in France varies substantially, depending on where senders and recipients live, with some costing four times more to deliver than others. But despite this difference in cost, the post office charges a uniform price - a tradition which it says would become untenable in a competitive market, as private companies secured profitable beats, leaving less lucrative ones to national post offices.

'This sector cannot be compared to others, because there is no physical network. State phone companies, for example, can charge newcomers extra 'universal service' fees to access their networks. But we cannot,' said the French post office representative.

These opinions broadly reflect those expressed by a number of EU member states at a post and telecoms council meeting late last year, at which ministers, mainly from the southern countries, staged a revolt against the Commission, accusing it of moving too quickly towards full competition in both areas.

Belgian Communications Minister Elio di Rupo, giving voice to widespread resentment, told the Commission then that postal businesses simply were not ready for an 'electric shock' of competition.

With some 1.34 million people employed by state post offices which generate 1.3% of the Union's total GDP, it is hardly surprising that member states are approaching the subject with care.

PostEurope, a body which represents national post firms, points to Sweden, where one-third of state postal workers have been made redundant since liberalisation and one-third of post offices have been shut down.

On a European scale, this would mean the loss of some 300,000 jobs.

But the private sector insists competition would not affect jobs. 'If jobs are lost in the public sector, then they will be created in the private one. It is as simple as that. The overall number of jobs will not drop,' said Van Der Lande, adding: 'In fact, we employ more people per envelope than the post offices do.'

Pointing their accusatory fingers elsewhere, private postal and parcel operators claim that they are not only shut out of 80% of the post business, but also face unfair competition in the supposedly 'non-reserved' areas, illegal practices which the Commission has singularly failed to stamp out.

'When compared with the telecoms sector, it is obvious that the competition authorities have been soft on post offices,' says Van Der Lande.

In particular, couriers allege that post offices use monopoly profits to cross-subsidise businesses that are supposed to compete, but are not penalised by DGIV, the Directorate-General for competition.

To clarify the application of competition rules to the sector, the Commission planned to publish a notice last year, but was forced to withdraw it in the face of intense criticism. State phone companies launched a fierce attack on the notice, which they said was legislation masquerading as guidelines.

The document did include references to the 350-gram limit for letters, which would have made it difficult for the European Parliament to change the ceiling had it wanted to.

Faced with a storm of protest from MEPs and ministers, who believed the Commission was trying to introduce liberalisation through the back door, Competition Commissioner Karel Van Miert postponed adoption of the notice until the end of this year, pending approval of the postal services directive.

But that move came under fire too. 'By not adopting the notice, the Commission is more or less giving post monopolies a licence to break competition law,' said Van Der Lande.

As for the draft directive, its chances of being agreed by December are looking increasingly slim.

'Italy has not really made any effort to move on this subject, and the Mediterranean member states have, predictably, lined up against the northern ones,' said one EU diplomat.

But for an industry which waited a decade for a proposal, it comes as no real surprise that its adoption is likely to be a long-drawn out affair.