International Postal Update — July 2010

EUROPEAN UNION LIBERALIZATION DEADLINE APPROACHING

The deadline for European countries to comply with the European Commission’s Third Postal Directive, which requires the majority of them to open their postal markets to competition, is just six months away. As Philippe Bodson, President of the Free and Fair Post Initiative (FFPI), put it, “This year is therefore crucial in order to ensure the development of a free and fair postal market.” Thus far, just five member states (Germany, the United Kingdom, Finland, the Netherlands, and Sweden) have liberalized their postal markets. And within the last three years, according to FFPI, only two countries have opened their markets.

On April 29-30, European policymakers and postal leaders gathered at the European Commission Second High Level Conference on Postal Services in Valencia, Spain, to assess the broader state of European postal markets. At the conference, postal leaders proclaimed that 90 percent of the European market will be “open to competition” at the beginning of 2011 — if all goes according to plan.

The road to liberalization is certainly uphill. The FFPI reports that the debate over liberalization is ongoing in such countries as Belgium, Denmark, Ireland, Lithuania, Italy, Spain, Slovenia, and Portugal, even though all are subject to the year-end deadline. After 2011 dawns, many European posts will retain their monopolies. Nine member states that joined the EU after 2004, as well as Greece and Luxembourg, have until December 31, 2012, to open their postal markets.

EU COUNTRIES MAY UNDERMINE DIRECTIVE’S IMPACT

The transition to a fully liberalized postal market may be bumpy in several European countries. In France, for instance, La Poste has locked up a 15-year commitment as the country’s universal service provider. La Poste calls itself a “national public utility.” Such a long-term commitment may slow competition in France once the market is liberalized.

The Netherlands opened its market to competition on April 1, 2009, but incumbent TNT has an open-ended contract for providing universal service. Belgium has not yet opened its postal market but has granted the incumbent operator bpost (formerly La Poste/De Post) a contract to provide universal service through 2017. Belgium has also established onerous licensing regulations for postal operators. New market entrants will be required to cover 80 percent of the country’s territory within five years of breaking onto the scene and must deliver mail at least two days a week.

Postal unions in Norway have spoken against liberalization, claiming that it will lead to higher prices, fewer delivery days, and longer transit times.

SUBSIDIZATION OF UNIVERSAL SERVICE REMAINS HOT TOPIC

EU member states continue to debate the meaning of universal postal service. The European Union allows states to subsidize the provision of universal service, but individual countries are more or less free to decide how to do so. In a speech at the Valencia conference, Joaquín Almunia, the Vice-President of the European Commission responsible for Competition policy, said, “We must ensure that the compensation granted does not exceed the actual net cost of discharging the public service obligation, together with a reasonable profit, and that it does not cross-subsidise commercial activities.”

Almunia defended the Commission’s willingness to strike down state subsidies. He pointed out that the Commission has not allowed aid for commercially viable posts when that aid amounts to a state guarantee that lowers borrowing costs or otherwise distorts competition.

GREECE TO PARTIALLY PRIVATIZE POST

The Greek government will sell a 39 percent stake in the national post in order to raise funds to boost its balance sheet. This partial privatization is a condition of the massive bailout of the Greek government by the European Union and the International Monetary Fund. As part of the plan, Greece must also sell off stakes in state-owned rail and water companies. The privatization plan is expected to bring in 1 billion euros ($1.2 billion) annually.