Main developments in the postal sector 2008-2010
Main developments in the postal sector 2008-2010
The European Commission, DG Internal Market and Services, has commissioned Copenhagen Economics to provide a study on the main developments in the postal sectors of the EU27-Member States, Norway, Iceland, Luxembourg and Switzerland in the period from 2008 to 2010. The study is a follow-up on previous studies1 covering the periods 2004-2006 and 2006-2008. These studies serve as important inputs for the European Commission’s active market monitoring of the postal sector.
In this study, we provide a number of recommendations on how to improve the application of the postal acquis (i.e. the accumulated legislation, legal acts, and court decisions which constitute the body of European Union law). These recommendations are based on a detailed survey of a wide range of indicators, covering regulatory, economic, social, consumer and employment aspects, as well as quality of service and technological development. The main developments and our recommendations are described in this document, while the indicators are carefully documented in a separate document with country fiches for each of the 31 countries covered by the study.
THREE MAIN THEMES: USO, LABOUR MARKET, AND COMPETITION
The years from 2008 to 2010 have seen many changes in the postal sector. EU Member States have prepared for the implementation of the Third Postal Directive which implies, among other things, full market opening.
Meanwhile, the long-term market trends have continued: Volumes have fallen, particularly due to e-substitution and the financial crisis; employment at the national postal operators has fallen and competitors’ market shares have remained almost unchanged. We have identified three main themes in the postal sector developments which we find to be of particular importance.
The first theme is the universal service obligation (USO). Full market opening removes the traditional source of financing for the USO: The reserved area. However, in most countries the financing of the USO does not seem to pose a major challenge to date. Currently, only a few countries have found it necessary to compensate the universal service provider for the net costs of the USO. However, increased competition, declining mail volumes and removal of reserved areas may change this situation in the future. Therefore, to allow informed decisions about the future scope of USO, we recommend that all countries perform systematic studies of the costs and the benefits of various USO elements. This is important to avoid provision of costly USO services which consumers do not need. We have conducted a pilot study to examine consumers’ need for a USO and their willingness to pay for different USO elements. Our study suggests that residential, but not business customers attach high value to maintaining a significant number of post offices. This may warrant a USO ensuring more post offices than the postal operator would find commercially attractive in a free market.
The second theme is the postal labour market. We foresee a continued decline in the number of postal workers. We conclude that technological development will cost more jobs at national postal operators (NPOs) than competition, because the level of competition only grows slowly while e-substitution is causing a significant decline in mail volumes and increased automation is implying significant reductions in the workforce. We find that competition may reduce wage levels if postal workers, before liberalisation, earn higher wages than workers with similar skills in comparable industries. We do not find evidence of postal wages falling below the wage level in comparable industries. However, an extensive use of self-employed mail deliverers may result in wages below the wage level in comparable sectors, since self-employed workers (having the job as a secondary source of income) are sometimes prepared to work for low wages. We have identified several instances where sector-wide extensions of regulation of wages and employment standards have impeded competition, either because wages are set above the level in comparable industries or because provisions prevent competitors from using alternative business models (e.g. increased use of part-time or younger workers) to overcome the challenge of having less economies of scale than the NPO.
The third theme is competition. Our study has been conducted as the Member States are implementing the Third Postal Directive. The Postal Directive will end a long tradition of having a reserved area for certain postal services and will open all postal markets to competition by 31 December 2010 for most Member States, or by 31 December 2012 at the latest for the remaining 11 Member States. Although we observe that the formal implementation of the Postal Directive follows the specified timeline in most cases, we foresee that actual competition will only increase slowly and gradually. The postal market is difficult for new entrants due to declining mail volumes and large economies of scale and scope to the benefit of the incumbent. Regulators can play a key role in ensuring a level playing field so that real competition can develop. We point to a number of regulatory remedies on European level, including removal of VAT distortions (implementing VAT on all postal services) and on national level, including ensuring independence of the NRA and access to postal infrastructure that can ensure a more level playing field for competition.
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WIK (2006), Ecorys (2008)
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