Regulation threatens the postal industry and economic growth

(17.09.2007) - Regulators and lawmakers are failing to understand the economics of the postal industry, claims International Post Corporation (IPC) chief executive officer, Herbert-Michael Zapf. Speaking at the Asia Pacific Mail and Express Conference today in Singapore, Dr Zapf quoted a new study undertaken by the IPC in cooperation with the German Institute for Economic Research (DIW). "BvDP"



The study titled, How to Regulate the Postal Industry – an economic approach, determines that liberalisation of the postal market is being accompanied by new, complex, and detailed regulations, but that the economics of the postal business and the dynamics of the postal market are either ignored or not understood.

“Regulators have taken their liberalisation model from industries such as gas, electricity and telecommunications, but have failed to grasp that these classical network industries are defined by a natural monopoly consisting of pipelines, cables, or similar infrastructure. The postal industry, by contrast, is characterised by an infrastructure consisting mainly of a human delivery workforce, routes, and other means of transportation that are open to everyone,” said Dr. Zapf.

The study reveals, that in the postal markets, the number of new entrants have made it possible to create an alternative postal infrastructure, clearly demonstrating that a monopoly does not exist.  Examples can be found in areas of the market already open to competitors such as parcels, express services, newspaper delivery and international mail services.

In addition, the study points out that the postal industry is not self-contained, but is in competition with many other industries offering alternative means of communication, advertising, and delivery services. However, many lawmakers and regulators operate as if the postal market is autonomous, and the only threat of competition is generated by postal operators each seeking to grow their market share. Regulators continue to ignore competition from suppliers of alternative communications such as e-mail, the internet and SMS, even though they are negatively impacting the mail volumes.

“The opening of postal markets to competition requires that regulation be symmetric and that common rules apply to all operators, both incumbents and competitors.  In an industry of such importance to the economy and the labour market, mistakes by regulators must be avoided,” said Zapf.  “The prime role of regulators must be to help, rather than hinder the development of the market.  Asymmetric regulation is already highly questionable in classical network industries, and applying this approach to the postal industry would constitute an enormous regulatory failure.”

The study concludes that sector-specific regulation of liberalised postal services is unnecessary and that existing legal measures, particularly competition law, are able to deal with any deficiencies that might arise in a competitive postal marketplace.