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
As I grew older, philately diminished considerably in my estimation. However, when I was in
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
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
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,
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
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
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.