Sweden/EU industry: Post liberalisation…in a big country

Liberalisation of the postal sector will mark the end of an era across the EU. Making the transition to open markets will prove to be a bloody process for some – at stake are jobs, time-honoured principles such as universal service provision and cherished assets, including post offices, letter-boxes and sorting offices.

But countries such as Sweden, which liberalised in the early 1990s, warn that resistance is futile. Traditional postal service provision is being stretched by the advent of digital technology and e-commerce. The sector, says dominant postal operator Posten AG, can choose to adapt of its own volition or sink.

"Physical post will diminish if postal services don’t adapt and it will be difficult to uphold the universal service obligation in the end," says Susanne Flyckt, chief officer for regulatory affairs at Posten, formerly a state-backed monopoly.

Sweden is a flag-bearer for the liberalisation cause. A report compiled this year by Sweden’s postal regulator shows that universal service provision, or standards guaranteeing non-discriminatory access to postal services, has not suffered as a result of market opening. "The previously high service- quality of Posten has, as a result of the liberalisation and the growing competition, even improved in terms of quality and efficiency," says the report.

According to Flyckt, any jobs lost at Posten since market-opening have been "down to technological developments and changes in customer behaviour". The regulatory report, published in March, shows that the introduction of new techniques, including highly automated sorting centres and the reorganisation of the post office network, in any case, predated liberalisation.

Sweden’s ability to maintain excellent service standards on a commercial basis is largely founded on faithful adherence to the EU postal directives of 1997 and 2002, which set licence terms and conditions for universal provision. The Swedish basic counter service act also obliges the company to provide nationwide access to services. (Some vestiges of old-market thinking still hold fast, however: the European Commission last year approved two payments of euro 44 million in Swedish state aid to fulfil the provisions of the act.)

After 14 years of liberalisation, Posten still holds 91% of the market for letters. Rival operator CityMail specialises in delivery of industrial mail and pre-sorted bulk mail to Sweden’s main cities. Over 40% of households and companies in Sweden are served by CityMail, which pays the same rates to its workers as those paid by Posten.

The Swedish regulator approves. "In a situation where monopoly reigns, it is all too easy to hide different kinds of problems behind monopoly gains," says the report. "This is especially true when you can use the old but erroneous argument that those gains are needed to finance the universal service."

Sweden is joined by fellow early birds Finland (1994), Estonia (2002), the UK (2006) and next year’s crop of liberalisers Germany and the Netherlands. Philippe Bodson, president of the Free and Fair Post Initiative, an organisation representing users of postal services and companies pushing to compete with incumbents says: "Some of the biases about liberalisation, the ones that aim to protect public service provision, are not strongly based."

Early liberalisers

UK

The UK postal market was liberalised on 1 January 2006. Dominant market-player Royal Mail is fully owned by the state. Market opening is enshrined in the postal services act of 2000, which establishes that one delivery of mail per UK household is expected six days a week. There are currently 15 other licensed operators on the market. Eighty percent of mail in the euro 9.5 billion market is to or from business.

Finland

In theory, the Finnish market is already liberalised, but provisions on deregulation contained in the 1994 act on postal services have produced few visible results. Delivery frequency contained in the act is six days per week in urban centres and once per week in areas of low population density. Monopoly Posten Finland Abp became a limited company in 2001 and is 100% owned by the state. A licence granted to a potential rival expired before postal activities started. Electronic communications have shrunk the market significantly in recent years.

Estonia

The Estonian postal market was partially opened to competition in 2002 with the entry into force of the postal law. Universal service obligations (USO) are still the sole preserve of incumbent Eesti Post, a fully state-owned company. Statutory minimum service is six deliveries per household per week. The market is relatively small given the country’s low population density, but competition in markets outside the USO is growing with the presence of major courier and express service providers such as DHL.