International Postal Update — January 2008

EUROPEAN LIBERALIZATION DELAYED AGAIN

Opening of postal markets officially pushed back. A committee of the 27-member European Commission granted EC members a new two-year delay – from 2009 to 2011 for 13 countries and to 2013 for 12 new member states, along with Luxembourg and Greece – in opening their postal markets to full competition for mail under 50 grams. Only Sweden, Finland and the UK have already moved ahead to complete postal liberalization. Germany fully liberalized its market on Jan. 1.

Minimum wage ruling in Germany undercuts 2008 liberalization. On Dec. 20, the German parliament approved the introduction of a Deutsche Post-defined minimum wage which all postal competitors must pay. The law is a blow to private companies hoping to deliver mail in Germany at lower costs, notably Dutch rival TNT Post and the German PIN Group.

Deutsche Post loses some VAT exemptions. DP’s broad VAT exemption was cut back to cover only stamps. Rivals claimed the exemption gave DP an unfair advantage, but the tax change is far less important to competition than the minimum wage order.

Great Britain rocked by Royal Mail strikes. Single and multi-day strikes in June, July and October have businesses scurrying to find alternative providers. Mail unions struck over pay, jobs and pensions, costing Royal Mail some £200m, and businesses much more. Across the Channel, French postal workers joined other public sector unions in November and walked off their jobs protesting benefit changes.

Dutch put off liberalization. In December, citing Germany’s anticompetitive practices — including Deutche Post’s VAT exemption and the new minimum-wage law — the Netherlands announced that a full opening of the Dutch postal market for letters under 50 grams has been postponed indefinitely.

U.S. POSTAL SERVICE IN TRANSITION?

Postal Unions seek new legislation on subcontracts. A bill introduced in November by a Massachusetts Democrat gained seven cosponsors just before the holiday break. H.R. 4236, the Mail Network Protection Act, would require the USPS to bargain with postal unions whenever it moved to outsource significant business. Unions urged such a bill in testimony before Congress back in April and July of this year.

The Treasury Department presented a new set of accounting rules to the Postal Regulatory Commission in December. The rules cover USPS products that compete with private sector offerings. The PRC will be reviewing the rules, which are designed to prevent cross subsidization by the Postal Service’s “market dominant” products. The rules also are designed to determine assumed Federal income tax on competitive products for any year.

PUTIN APPOINTS NEW HEAD OF RUSSIAN POST

Former head of Sberbank put in charge of Russia’s vast postal system in a shakeup. In October, Russian President Vladimir Putin tapped Andrei Kazmin, a man who has been credited with transforming Sberbank, Russia’s largest bank, to serve the new globalized Russian economy, to head up the nation’s postal service. The Russian Post yearly handles over 1.4 billion letters, 38 million parcels and more than 188 million money transfers, but provides notoriously irregular delivery. Kazmin is expected to undertake major changes.