Economics of Postal Services: Final Report
A Report to the European Commission DG-MARKT
Prepared by NERA
EXECUTIVE SUMMARY i
1. INTRODUCTION 1
1.1. This Report 1
1.2. Our Terms of Reference 1
1.3. Coverage of the Study 3
1.4. Structure of the Rest of this Report 3
2. OUR APPROACH 5
2.1. Methodology 5
2.2. Information Sources 7
3. THE CHANGING NATURE OF POSTAL PROVISION 9
3.1. Introduction 9
3.2. Services Provided by Universal Service Providers 10
3.3. The Traditional Postal Value Chain 11
3.4. Parcels and Express Services 26
3.5. Conclusions 30
4. DEVELOPING POSTAL BUSINESS STRATEGIES 33
4.1. Introduction 33
4.2. The External Context that Operators Face 34
4.3. Strategies Adopted by Postal Operators 39
4.4. A Typology of Postal Operators 49
4.5. Conclusion: Impact of Strategy on the Economics of Postal Services 55
5. POSTAL COSTS IN EUROPE 59
5.1. Introduction 59
5.2. Availability of Cost Information in the Postal Sector 60
5.3. Total Cost Levels 62
5.4. Categories of Cost: Labour; Depreciation; Materials etc 66
5.5. Unit Labour Costs 68
5.6. Costs in the Postal Value Chain 71
5.7. The Costs of Different Types of Traffic 73
5.8. Costs of Parcels and Express Services 75
5.9. Conclusions: Information on Postal Costs 79
6. AN INITIAL VIEW OF THE DETERMINANTS OF POSTAL
COSTS 81
6.1. Introduction 81
6.2. Economies of Scale, Density and Scope 81
6.3. Unit Costs and Demographic Factors 87
6.4. Unit Costs and Postal Infrastructure 90
6.5. The Impact of Universal Service Obligations 93
6.6. The Impact of Quality of Service Requirements 96
6.7. Conclusions: Summary of the Initial Review of Cost Drivers 97
7. THE ECONOMETRIC APPROACH TO ASSESSING COST
CAUSALITY 99
7.1. An Introduction to the Econometric Approach 99
7.2. A Review of Previous Econometric Studies of the Postal Sector 100
7.3. Conclusions 114
8. ESTIMATION OF A EUROPEAN POSTAL COST FUNCTION 117
8.1. Introduction 117
8.2. Data 118
8.3. Total Cost Function 121
8.4. Collection Cost Function 128
8.5. Sorting Cost Function 130
8.6. Transport Cost Function 131
8.7. Delivery Cost Function 133
8.8. Conclusions 134
9. POST OFFICE RETAIL NETWORKS 135
9.1. Introduction 135
9.2. Functions of the Retail Network 135
9.3. Constraints on Changing the Retail Network 136
9.4. The Network of Retail Post Offices 138
9.5. Changes in the Provision of Post Office Services 139
9.6. Non-Postal Services Provided by Retail Post Offices 144
9.7. Selling Postal Banks 146
9.8. The Cost of the Retail Post Office Network 147
9.9. Conclusions 147
10. CONCLUSIONS: THE ECONOMICS OF POSTAL SERVICES 149
10.1. Introduction 149
10.2. The Aims of the Study 150
10.3. The Evidence on Costs in the Postal Sector 151
10.4. Implications for the Development of Competition 155
10.5. The Role of Retail Networks 158
10.6. The Dynamic Development of the Industry 159
REFERENCES 163
P:LibraryPostalEC Postal StudiesEconomics of Postal Services July04.pdf
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