The financing of a universal postal service
Privatization, liberalisation, competition: these words are often used in speaking of the telecommunications, energy and transportation sectors. In a liberalised environment competition and public services can enter into conflict. Liberalisation requires thinking about new ways to finance a universal postal service.
The postal services market
In a market that is open to competition, the means of financing a universal postal service has to be re-examined. The postal services market, which has been completely liberalised since January 1, 2011, clearly demonstrates this fact. In this sector, the duties of the universal service are specified in European directives that define the liberalisation of the market for postal services; in Belgium, the universal service obligations are part of a management contract between the historical provider of universal services, BPost, and the state itself. The obligations of the universal service are multi-dimensional and varied but they are limited to only a few products such as individually addressed pieces of mail and small packages weighing less than 2 kg. Universal service requirements touch upon the quality of the postal service and its availability everywhere in Belgium, the price structure and the postage price level. The provider of the universal service is required to distribute and collect mail on a daily basis everywhere in Belgium. Quality of service in terms of transit times and the accessibility of pick-up points must also meet a certain standard. The products offered under universal service must be reasonably priced, and it often happens that the regulating agency imposes a uniform price structure that does not depend on the destination of what is mailed. All European countries apply similar rules, though there are differences in the definition of levels of quality (some countries, for example, require Saturday delivery of mail) and in postage pricing constraints.
“After the market was opened to competition, the new participants (when there were any) concentrated on the profitable segments, leaving the non-profitable segments to the universal service provider,” explained Axel Gautier, a lecturer in industrial organization at the HEC-ULg Management School. “This phenomenon, known as cream-skimming (or cherry picking), is capable of ruining the financing arrangements for the universal service provider.”