French regulator raises La Poste price cap for 2015 to 2018
La Poste has been granted regulatory approval to raise its domestic postal rates by up to 3.5% above the rate of inflation each year, from the start of 2015 until 2018. The regulator of the French postal industry, ARCEP, has accepted the state-owned company’s proposals, agreeing that the increase is required to protect the universal service in light of “dramatic” declines in mail volumes each year.
ARCEP said the postal business model was based on economies of scale — the larger the number of mail items being sent, the lower the cost of sending them — but French mail volumes have been falling by 4.3% each year over the past five years.
Mail categorised as part of the universal service saw volumes decreasing by 5.5% in 2013.
The price cap of inflation-plus-3.5% sets an overall limit on raising rates for universal postal services, but within that cap individual services can have rates increased above or below that amount, as long as the overall increase for all services is no more than inflation plus 3.5%.
ARCEP said it worked closely with La Poste on the new price cap, which will replace the existing pricing plan that was set for 2013 to 2015.
The regulator said: “In light of the dramatic changes occurring in the economic environment in which La Poste operates, ARCEP considers that its decision will protect the future of the universal service, while ensuring the financial burden is shared fairly between La Poste and postal service users.
“It gives La Poste the means to engage in an overhaul of its development model,” ARCEP added.
Review
The new scheme will be reviewed mid-2016 to assess how it functions with the nature of the postal industry in that year. But, the price cap could also be reviewed at any other time if the regulator decides to do so, or if La Poste requests a review.
The regulator noted that the kind of situation being faced by La Poste is happening in many other countries around the world, particularly those in Europe.
“It testifies to a decrease in the use of postal services that coincides with the increasing digitisation of written correspondence,” said the regulator.
Commenting on the regulator’s decision, La Poste confirmed that the new prices will take effect from 1 January, 2015, and it will announce the prices two months in advance.
La Poste Group said the plan approved by the regulator gives it the power to use 50% of its permitted price increases under the new cap within the first year.
“In all industrialised countries, postal operators are facing a profound change in the economic environment due to increasing use by customers of paperless solutions. La Poste in France is facing a historic decline in mail volumes,” the company said.
“Through the allocation granted, La Poste has the necessary means to ensure the sustainability of the universal service and maintain a high quality level of service.”
