International Postal Update — January 2011January 3, 2011
EU LIBERALIZES MAIL, BUT COMPETITION INTERMITTENT
On January 1, 11 member states of the European Union ended their postal monopolies, although observers expressed concern that actual competition has been slow to develop across much of the continent. Under the terms of the EU’s Third Postal Directive, Austria, Belgium, Bulgaria, Denmark, France, Ireland, Italy, Portugal, Slovenia and Spain joined the six countries which have already ended postal monopoly rights for the traditional national carrier — Estonia, Finland, Germany, the Netherlands, Sweden and the United Kingdom. In these nations, the last and largest reserved area of the mail – letters up to 50 grams – are open to competition. As a result, some 95 percent of the EU’s internal postal market is liberalized. Ten EU member states – Cyprus, Czech Republic, Luxemburg, Greece, Hungary, Latvia, Lithuania, Poland, Romania, and Slovakia – have been granted an additional two years to implement full liberalization.
Although the legal framework of open competition has in theory been activated, definitions of critical terms and interpretations of requirements continue to vary widely among EU member nations. Since the Universal Service Obligation (USO) still falls without exception to the traditional national carrier, policies differ as to how USO is defined, how the costs of providing such service are calculated, what subsidies are allowable, and how subsidies are to be paid.
In a recent white paper, the Free and Fair Post Initiative (FFPI) argued that the disparity between EU member states on issues ranging from VAT rates to labor rules threatens the success of postal liberalization. In order to ensure that liberalization works as intended, FFPI is calling on EU states to remove barriers to entry into the postal market and level the playing field for all postal operators.
ROYAL MAIL RAISES PRICES AMIDST GRIDLOCK ON PRIVATIZATION
On December 17, on the heels of a ruling by its regulator Postcomm, Britain’s Royal Mail announced substantial price increases across a range of stamped mail to take effect April 4, 2011. Although Royal Mail spokesmen emphasized that the cost of franking a standard letter of up to 100 grams still will remain amongst the lowest within the EU, the increases come at an awkward time, as mail volumes continue to decline.
The coalition British government, well aware of the financial troubles the national post faces, remains locked in debate over whether to privatize portions of Royal Mail. No potential buyer has emerged, given the level of uncertainty surrounding any sale agreement. According to a series of detailed financial studies performed by analyst Timothy D. Nestved in the British postal watchdog publication Hellmail, Royal Mail losses cannot be attributed – as Royal Mail spokesmen routinely claim – to overall declines in the volume of mail. Instead, they appear to be the result of increasing losses in market share to private competitors. Nestved argues that increases in stamp prices will only drive more consumers to competitors, so the additional revenues derived from higher prices are bound to be transitory at best.
Royal Mail management claims that cost-cutting and automation efforts are succeeding and may eventually make the Royal Mail business model viable once again, but it’s unclear whether the statistics offered by the organization are trustworthy. According to Nestved, the entire mail sector cannot be made financially viable without a much more fundamental restructuring of the business model for mail delivery.
UNITED STATES OFFERS DELEHANTY FOR UPU SPOT
On November 9, the United States revealed that it would nominate Dennis Delehanty for Deputy Director General of the Universal Postal Union. The election will take place at the next Universal Postal Congress in Doha, Qatar, in 2012.
Delehanty has served at the UPU’s International Bureau and has held positions with the U.S. Postal Service and the Department of State. In announcing his nomination at the Bellevue Palace Hotel in Bern, Switzerland, U.S. Ambassador to the United Nations Betty King cited Delehanty’s role in the creation of the EMS (or Express Mail Service) Cooperative and six years of service on the Quality of Service Fund Board of Trustees.