Effects of rivalry on The Post Office
From Mr Ian Senior Sir, The Postal Services Commission is right to open up part of the letter business to competiton immediately and to fully liberalise the market by 2006 (report, Business, January 31). Consignia is crying wolf in saying that it faces “death by a thousand cuts”.
The letter monopoly was abolished in Sweden in 1994 and in New Zealand in 1998. In both cases the liberalisation of the market took place with the full support of the two incumbent postal administrations. Both administrations provide universal service at a uniform tariff and neither is compensated for the cost of uneconomic deliveries to sparsely populated areas. Both administrations have faced new competitors in the market. Both administrations have generally been profitable, though much less so than when they had the comfort of the letter monopoly.
Both administrations still have at least 90 per cent of the letters market.
Throughout the 1990s the Post Office made profits of around Pounds 300 million per year and paid substantial sums to the Treasury as well. If Consignia cannot make a profit at a time when competition is only embryonic and it has 95 per cent of the letters market, that in itself is a reason for introducing competition.
