Delivering the mail: The last link opens Germany pushes its EU neighbors to end monopoly on letters
In the early evening at Deutsche Post's main sorting center in Frankfurt, 4.5 million letters pass through human hands before racing across conveyor belts and under electronic eyes that can read even barely legible handwriting to divine where the letter should go. By midnight, bright yellow plastic bins of letters land on trucks for overnight sprints across Europe.
Each mailing is a slice of the roughly euro 4 billion, or USD5.2 billion, that Deutsche Post takes in from its letter business each year ‹ a third of its German revenues. Opening this business to competition would put as much of a fifth of that business at risk.
But when the German government ends Deutsche Post's monopoly on simple letter delivery next Jan. 1, in the name of better service and lower prices for consumers, the postal service will have to open its sorting and delivery system to other players ‹ in much the same way that former telecommunications and transportation monopolies have had to adjust.
For its part, Deutsche Post is fighting back, putting competitors on notice that access to its postal sorting and distribution network will come only if they meet the company's specifications for humble letters ‹ ''no bills on beer coasters,'' a spokesman, Hans Jurgen Thomeczek, said. And since this will be a business, and not a public utility, newcomers will have to pay for the privilege.
''If they do, fine,'' Thomeczek said. ''Then everyone will be our customers.''
Deutsche Post stands at the center of a simmering European showdown over throwing open simple letter delivery to competition, and the outcome is by no means certain for any of the players. On one side are the consumers and new entrants, who stand to gain, and, on the other, the old monopolies, which stand to lose.
In October, the European Commission started a campaign to get European Union member states to abolish monopolies for delivery of letters under 50 grams, or 1.8 ounces, by 2009. (Most of the rest of the mail delivery business in Europe ‹ packages, value-added rapid services and the like ‹ has already been opened up to competition.) Germany, which holds the presidency of the Union until June 30, is ready to take this step a year early, convinced that the result will be better and cheaper service for consumers.
Indeed, in Germany, where liberalization is arguably most advanced, new competitors have already popped up to offer Deutsche Post competition in limited areas, giving them valuable experience and ready-made networks that will come in handy when full-bore competition arrives.
But the notion that a foreign postal monopoly ‹ for example, the French ‹ might obtain the right to enter the German market before its own government agrees to a date for opening its doors ruffles feathers at Deutsche Post, which is demanding that Germany use its influence during its EU presidency to fix a date for postal liberalization throughout Europe.
''It would be as though Germany accepts Renaults and Fiats but other countries do not accept Volkswagens and Mercedes,'' said Klaus Zumwinkel, chief executive of Deutsche Post, in a recent interview. ''The essence of European unity is the free flow of services and people.''
What the Germans do ‹ both at home, and as a leader of the EU ‹ will have consequences for the rest of Europe. If Germany moves unilaterally, it will expose itself to competition, but if the largest European economy refuses to budge, it will set back the cause of opening markets throughout the EU, according to people involved in the issue.
''If the liberalization in Germany is blocked, then nothing will happen in the rest of Europe,'' said Philippe Bodson, president of the Free and Fair Post Initiative, a lobbying organization, based in Brussels, for users of postal services and competitors to the national monopolies. ''It has become a bellwether.''
Behind this political fight lies a European postal services market that bubbles with competition for parcels but is still a patchwork of upstarts, reformed monopolies and stodgier ones, all jostling for position in the letter delivery business.
And it is uncharted territory. Sweden's choice of competition in letter delivery in the early 1990s is regarded as a success. PTS, the Swedish national postal regulator, estimates that the cost of sending a letter dropped in real terms by 50 percent in a decade thanks to greater competition, though Sweden remains a small market compared to other European countries.
Britain opened up its mail delivery market last year, but it is too soon to draw clear lessons, people in the business have said.
''We really don't have a single big success story anywhere in the world,'' said Frank Ihlenburg, a managing director of Putz & Partner, a Hamburg-based consultancy that advises many different logistics companies. ''There is no paradigm for perfect liberalization of postal markets.''
That leaves Europe to invent one, even as many member states have staked out their own strategies.
The first elements were put in place over the past decade, as the EU mandated
competition in small parcel delivery, and watched services for consumers improve as they sank in price. The last EU directive, approved in 2002, created competition for everything but letters below 50 grams ‹ about the size of a standard business letter.
The German market ‹ because it is in an advanced stage of opening, and because the government has pressed forward over Deutsche Post's objections ‹ offers some insight into what European letter delivery could look like in the future.
After the last EU directive was approved, Germany began licensing new operators to deliver normal letters, but with a caveat that staved off full competition for normal post: only ''value-added'' letter service was allowed under the 50 gram limit. That meant new companies had to offer an additional twist ‹ a guarantee of letter delivery by 9 a.m., or electronic tracking, for example ‹ to compete with Deutsche Post in this area.
Competition flourished, and today more than 1,000 companies offer postal services in Germany. Some are tiny businesses serving a single town, while others are alliances of publishers who are using newspaper-delivery networks to deliver mail. The bicycling green postmen of the PIN Group, one such venture, and the orange logo of TNT, a Dutch company, have become ubiquitous in big German cities.
It also became a way for competitors to hedge their bets. Mindful of the lengthy political battles involving other ''network industries,'' notably telecommunications and energy, new competitors saw a great incentive to build their own sorting and delivery networks so that they would not have to pay Deutsche Post for the privilege. And since Deutsche Post does not control access to a house the way, for example, that Deutsche Telekom once did ‹ after all, anyone can toss a letter in a mailbox ‹ the competitors were free to try.
The network argument remains a vital issue in Europe, something that the British experience exemplifies.
Last year, with a strong regulator supervising it, Royal Mail reduced the prices it charges for access to its network, which did improve competition. But it is also ensuring that no one creates parallel networks, cementing dependence on Royal Mail.
The German approach has also primed new mail delivery networks, ensuring that upstarts will be able to begin delivering plain old letters from the moment full liberalization takes effect. That alarms Deutsche Post.
France has emerged as one of the most formidable opponents of full-throttle competition for letter delivery by 2009, and its own monopoly, La Poste, faces little domestic competition. Impregnable at home, could it attack the German market after 2008? La Poste did not return calls seeking comment, but in the last five years, it has acquired parcel delivery companies in Germany, giving it networks that could theoretically expand to include letters.
Zumwinkel of Deutsche Post believes the danger is so great that he is advising Merkel, a conservative Christian Democrat, to put off opening the German market until other European countries agree to reciprocate by a certain date.
The company's union, ver.di, also has the ear of the Social Democrats who form half of Merkel's coalition, making for two powerful voices in Berlin that would like to wait on postal liberalization.
Merkel's government is so far refusing to budge, but Zumwinkel is hoping for a reconsideration, especially if other countries do not promise to follow Germany's lead.
''In the political world, if you open your market you cannot reclose it if others do not follow,'' Zumwinkel said. However, he added, ''you can delay.''
