The exploding package of EU Postal Privatisation

Article I did on spec for a publication. They didn't want it in the end, but here you go (I warn you - it's a little dull).

When I was a little boy, every month I would go to the local Canada Post office and get a special envelope with the new commemorative stamps that had recently been issued. My grandparents in England too would send me British commemorative stamps at Christmas, sometimes at other times, falsely saluting Alexander Graham Bell as the inventor of the telephone or raising the ire of the anti-secularists for printing lickable, perforated squares of snowmen instead of magi or mangers.

As I grew older, philately diminished considerably in my estimation. However, when I was in Madrid recently, I wandered down an alley just off the Plaza Mayor, where there is a minor gaggle of stamp shops. I wandered past and saw in a couple of windows not a few stamps and brittle old envelopes with stamps from the era of the Spanish Republic. Though 2006 is the 70^th anniversary of the start of the Spanish Civil War, this was one of the only remembrances I could find in the city of the period. Stamp-collecting has more or less gone the way of the dodo (the extinction of which was, I should note, had been commemorated on one of the stamps I had had as a child) in this age of Playstations and Nickelodeon, and I thought what a shame it was. The socialist thirty-one-year old I am momentarily was a stamp-fanatic eleven-year-old and thought what beautiful little bits of history are held within and taught by these funny sticky squares.

Technology and the proposed new EU postal services directive will soon put paid to stamps and stamp-collecting entirely. The EU FAQ on the directive on the Commission website mentions that after full liberalization it is unlikely that new service providers will retain the anachronism that is the stamp. One can’t mourn the passing of out-dated technologies, I suppose. But the directive will kill off more than the soppy philatelic memories of this nostalgic author. The full privatization of post across Europe will produce services that are deeply uneven and unequal. It will produce a grossly unfair two-tiered postal system, with one set of quality services for the large corporations and urban middle class, and another set of poorly provisioned services for rural areas, the urban poor, small businesses and the outermost territories of member states – if they even have access to such services at all. Though the Commission portrays postal privatization as one more aspect of the grand drive to bring Europeans together, it will in fact diminish the economic, social and territorial cohesion of the Union. The death of public postal services after more than three hundred years of their existence is indeed something to mourn. Or rather, as Wobbly Joe Hill reminded his fellow trade unionists as he was dying: not to mourn, but to organize – against.

The EU internal market Commissioner, Irishman Charlie McGreevy, recently confirmed that all European postal services are to be opened to competition by 2009, in keeping with the last postal directive of 2002. Full, or near-full marketisation of post has already occurred in Germany, Finland, the Netherlands, Sweden and the UK. With the new directive, the commissioner wants to fast-track liberalization in the remaining 22 member states.

Postal services in the Union are covered by a 1997 directive that opened up the sector to competition for mail weighing more than 350 grams – essentially large packages – easily the most profitable sector of the postal market. Items under 350 grams were designated ‘reserved areas’. In 2002, the reserved area was amended down to 100 grams, and as of January, 2006, no mail delivery of items over 50 grams could be monopolized by a national provider. The Commission has this month confirmed that by no later than 2009 are all member states to eliminate this last reserved area.

McGreevy is quick to counter opponents of the measure by saying that we are not to worry, universal service provision – comprising the ‘affordable’ provision of at least one delivery and collection five days a week to all citizens - is ‘copper-fastened’ into the directive.

In fact, upon the briefest of investigations, one finds that universal service provision is not so much ‘copper-fastened’ into the directive as it is lathered in soap and butter ready to slip through its hands and bounce right out the door into a jungle of free-market rapaciousness.

The language used by the commissioner gives the game away immediately. On the liberalizing side, actions ‘should’ and ‘must’ happen. Member states are ‘required’ to take them. But on the consumer side, language ‘provides for the retention of uniform tariffs’ (i.e., the same price for a similar item, regardless of address); it ‘allow[s] a flexible choice of means to finance universal service provision or the possibility to share out the universal service obligation between operators.

But we need not look to the weasel legal language of the directive to see what will happen. We can see the effects of postal privatization in those member states where liberalization has already been completely or nearly completely realized. Closure of rural post offices, mass lay-offs and a flexibilisation of the workforce is the norm in every jurisdiction.

In January this year, Austria’s conservative coalition government agreed to sell of 49 per cent of its shares in Österreichische Post, but the process of privatization has been underway for about a decade. In 1996, the state-owned Austrian Postal Authorities (Österreichische Post- und Telegraphenverwaltung) was refigured as Post und Telekom Austria AGan enterprise based on private company law. It sold off its telecoms and post bus transport services, while simultaneously acquiring a majority stake in Feibra AG, a private distributor of adverts, and has expanded into Slovenia and Slovakia. Over this ten-year pre-privatisation period, thousands of workers have been laid off. Between 2001 and 2005, the workforce was cut by 22 per cent, or 6600 employees. The share of part-time hires has doubled and the number of workers coming from temp agencies has skyrocketed. Whereas previously, the company used temp agency workers only at peak times such as Christmas, such practices have been institutionalized. Finally, more than 1000 local post offices (out of a total of 2300) have been closed across Austria.

In Ireland, An Post sold off its SDS Courier service – its most profitable department – as part of a government-directed opening of the market favouring the big courier services such as DHL and Federal Express. The management is softening up the workforce for privatization by withholding pay-rises and understaffing sorting offices. An Post workers feel that this is part of a strategy of weakening employee morale so that there is less internal resistance to the inevitable full privatization.

In the UK, where postal privatization is quite advanced, there has been thousands of post office closures, almost entirely in rural areas. Only some 1,500 of 8000 rural post offices are profitable, but the principle behind postal services in the UK for some 350 years has been that the profitable regions subsidise outlying and naturally unprofitable areas, ensuring equal access to services across the country. With the liberalization of the Post Office’s most profitable division, is it any wonder that rural post offices are scheduled for market demolition? As of 1999, the UK had some 18000 post offices. It now has 14000, and this week is set to announce an expected further 2500-3000.

In Sweden the postal workforce declined by ten per cent over the period 1995 to 1999 – from 46,000 to 42,000. In Germany, it dropped a whopping 37 per cent – from 380,000 to 240,000 – over the period 1990 to 1999.

The privateers argue that technological change is behind most of this, and this is at least partially true. Some 80 per cent of mail worldwide is now sent via computer. In the UK that figure is 90 per cent. However, at the same time, parcel post has grown by leaps and bounds. Federal Express is the second largest airline in the world, if measured by size of the fleet. The closure of thousands of rural post offices across the Union is a political decision. A neo-liberal fundamentalist decision. It is not driven by technological change.

In the Commission’s own FAQ on what will happen after full liberalization, it states that ‘as a matter of principle, competition creates jobs’. This is true only in a perverse way. In the wake of telecoms liberalization – which is the model to which postal privatization is regularly compared - cost savings to consumers was achieved on the backs of mass lay-offs and outsourcing to temp agencies and developing world call centres. Jobs were created, but poorly paid, ununionised, temporary and part-time ones. Similarly, the private telcos are incredibly reluctant to introduce new technologies to rural and poor areas where they feel the cost of an upgrade of the lines is not worth the revenues they expect from such regions. The cost of a line rental may have dropped across the board, but broadband remains beyond the reach of many in rural areas. Even in urban areas, some telcos have been taken to court for refusing to upgrade lines in apartment complexes that mostly house the elderly or poor, for the same reason. With public service provision, the cost is spread across all regions and levels of income.

The Commission believes that liberalization will result in cost-savings for the consumer. However, the area where money is to be made is in the high-population-density areas where post can be moved in bulk easily. Further, again, in the Commission’s own FAQ, it states that while it is likely that more postal operators will offer services in an open postal market, ‘most operators will be found in the area of business originated mail, which represents close to 90 per cent of total mail volumes. Private consumers are less likely to be able to choose between different postal operators, at least in the short to medium term.’ Elsewhere, in the same document, it states that while the universal service obligation guarantees the affordability of postal services (so it’s gonna be about the same price, but don’t expect any reductions, honey). At the same time, huzzah, ‘prices for business mail are likely to fall very soon after market opening, as most postal companies will focus on this area to begin with.’ Here, they are all but admitting that consumers will not benefit from postal privatization. If postal companies are making their money from business mail, what incentive is there for private service providers to subsidise consumer mail? Any cost-savings they find they will pass on to their most valued customers, not some grandmother in a village in Lapland.

Indeed, the most likely scenario is that private providers will focus on the business and urban mail sectors and leave the rest to the rump incumbent providers.

So if the directive supposedly guarantees universal service provision, how exactly will the market provide?

The answer is it won’t, as, again, the Commission admits. In order to ensure universal service provision member states ‘may choose’ from a range of different options: state aid (subsidizing private businesses), public procurement, compensation funds or cost-sharing. In other words, recognizing that private providers will be extremely reluctant to provide loss-making services, the Commission has concluded that to continue to ensure universal service provision, governments will still have to pay for it.

Essentially, we are selling the goose that lays the golden egg. While still having to fund universal provision of service, governments will no longer have the subsidy for this service that business-originated and parcel post previously provided.

One might as well ask why move forward with privatization at all, if it is not just a big gift to business, wrapped up in string…

…but of course without stamps, and don’t even try to send it from your village post office.