Industry watchers to look to Sweden to see how British postal services might soon look
Controversial plans to increase competition to the Royal Mail have prompted industry watchers to look to Sweden to see how British postal services might soon look.
Postcomm, the regulator, this week unveiled plans to sweep away Consignia’s protected monopoly. It ruled that bulk business mail could be handled by rival operators within eight weeks.
The moves put Britain further ahead in opening up postal services than most European countries. But, in 1993, Sweden became the first country in the world to deregulate fully its postal services and, after almost a decade, there is little visible evidence of the hoped-for competition.
Critics of increased competition say they hope the lessons from Sweden – early price rises and job losses – will not be repeated in Britain. Advocates of competition, however, say the moves have improved the efficiency of Posten, the state-owned post company.
Posten, which previously had a monopoly on delivering letters, still holds 95 per cent of the total market and rivals have found it hard to compete against such a powerful incumbent.
According to Sweden’s National Post and Telecom Agency, the independent regulator, Posten’s service has improved as a result of even this limited competition. Already one of the most efficient services in the world, Posten now deliveries 96 per cent of first-class letters overnight.
Rival operators existed in direct mail, express and courier services, and parcel delivery which had never been protected by a statutory monopoly.
Unlike its rivals, Posten still has a universal service obligation. But Sten Selander, head of the postal department at the regulator, says it is wrong to see this as a burden. In a deregulated market, the ability to offer such a guarantee is a real advantage, he says.
Prices on letters are regulated according to a price cap system. Following deregulation, there was a sharp rise in prices, with a first-class stamp increasing from SKr2.90 in 1993 to SKr5 by 1997. However, this was partly from the addition of 25 per cent value added tax on postage. Since 1997 prices have not changed.
In total there are now about 40 independent postal companies but most are small and serve very local areas. Only CityMail, which focuses on bulk business to customer deliveries in Stockholm, Gothenburg and Malmo, can really be considered a rival.
Hakan Ohlsson, CityMail’s deputy chief executive, says deregulation has taken time to work. The failure to be clear about access to infrastructure, such as address changes, mail redirection and post office boxes, has led to problems. Weak competition authorities also hampered the new operators who found it difficult to battle against exclusive contracts and alleged predatory pricing, he says.
Posten itself has struggled with ways of funding its extensive branch network. In most cases postal services are now being detached from remaining cashier and payment functions. Postal services will be conducted through small counters established in outlets such as petrol stations and convenience stores.
The move will mean 2,000 of the 5,000 jobs in counter services will disappear. Postal workers in Britain will hope that is not a sign of things to come here.
Page 3; Edition London Ed2; Section NATIONAL NEWS
Copyright 2002: Financial Times Group
