Post offices finally called to account

The UK postal monopoly is about to disappear. Good riddance.
Everyone understands that customers benefit from competition. Competition drives price rivalry, efficiency and value for money, and causes operators to put new services on the market. However, many postal monopolists argue that outlawing competition is the only way to safeguard a nationwide (or “universal”) postal service. This is nonsense. There is not a shred of evidence that opening the postal markets to competition stops the provision of a basic nationwide postal service. Far from assuring a universal postal service: monopolies will kill the distribution industry.
Just imagine, for a moment, that postal monopolies will continue forever. Customers have nowhere else to go. Why should post offices become efficient or try to keep their prices down? Why should they improve their quality or increase their range of services?
But why even stop there? Why not spend their monopoly money on every available parcel, freight and logistics company, consumer bank and travel agency? Indeed, the European Court of First Instance recently decided that doing just this is not prohibited by competition law.
And then comes the killer blow: why not claim that the “universal” service includes this whole new range of services? Crosssubsidies will flow and competition will be irreparably damaged in a whole string of, currently unregulated, industries.
Staggeringly, this suggestion has already been voiced as a serious possibility.
Happily, there is light at the end of the tunnel. Despite frantic efforts by the anticompetition lobby, who have advanced arguments like these, European lawmakers and a handful of courageous national governments and regulators (among them Postcomm) are determined to remove restrictions and drive the benefits of competition into the hands of customers.
But it is about time too. After all, as a matter of basic competition law, monopolies are illegal.
Allowed for too many years to rumble on, regardless of whether they made profits or not, many post offices throughout Europe have finally been called to account. The 1997 EC Postal Directive, although far from introducing new competition, did successfully kick-start the liberalisation process. Since then, we have seen a remarkable turnaround in the fortunes of the hitherto massively loss making Poste Italiane and of several other European post offices. The German and Dutch governments had jumped the gun and already started the painful process of turning their national post offices into efficient and profitable organisations. They did this to make sure they will be ready for competition when it does come. In Sweden, the near overnight liberalisation in 1993 led to a less orderly introduction of competition, but there is no doubt that the basic service has, if anything, improved since then.
The UK now eagerly awaits Postcomm’s final decision, in May, on how to introduce competition into the UK letter market. The significance of this decision must not be underestimated. Its impact will stretch not only beyond national boundaries, but also into other industries.
Germany has already extended Deutsche Post’s monopoly by five years as a direct result of other key markets, such as the UK, failing to introduce competition. The reasoning has nothing to do with economic
necessity but is based on the schoolchild logic of”I will, if you will — I won’t, if you don’t”.
If Postcomm fixes a clear date for market opening, Germany has no excuse to further delay its liberalisation. A host of smaller countries will feel free, if not compelled, to open their markets too. Customers everywhere will benefit.
For a successful market opening, Postcomm has three steps to follow. First, it must keep its courage and set a clear date for market opening.
Second, Postcomm must make Consignia strong by giving it sufficient time to prepare for full competition and the commercial freedom to compete, but, at the same time, protect individuals through sensible price caps. Third, it must protect neighbouring markets from unfair competition and nip in the bud the prospect of a sprawling universal service definition. If it can do these three things, it will do a service to every stakeholder in the distribution industry.
On the other hand, if Postcomm bows to political pressure and shirks its responsibility, the pitiful state of affairs as currently exists in the UK and the rest of Europe will drag on. Frustrated by the lack of competition, customers will increasingly seek to use other media to reach their clients and the postal industry will suffer a potentially fatal blow.
The UK has a unique opportunity to show the rest of Europe, if not the world, how to ensure a solid, basic postal service and how to make its incumbent post office an efficient and successful operator in the face of vibrant competition, without damaging surrounding markets.
The process will be painful but, if Postcomm does not bite the bullet now, then monopolies and monopolists will grow until they choke the postal and surrounding industries to death.