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1. The Cost of Unjustified Stamp Price Differentials for Postal Users

The Free and Fair Post Initiative (FFPI) on 20 December 2001 released its first study on stamp price differentials between Member States in the EU. The study showed striking differences in prices: a stamp for a 20 gram-letter costs 2,33 times more in Germany than in Spain.

*Source: Infonation, UN publication 1997.

Some Member States’ postal operators like Deutsche Post World Net and the Irish incumbent wish to increase their stamp rates.

The FFPI is convinced that, as long as national postal monopolies are allowed to have free reign over their home markets, market mechanisms will be prevented from creating downward pressure on prices for basic postal services. In view of the fact that postal services in the EU handle approximately 135 billion items per year, generating a turnover of about EUR 80 billion or about 1,4% of GDP, the overall impact of stamp price differentials in the EU is considerable.

The current position of the European Parliament in the first reading and the Council’s common position on the proposed new postal Directive are unlikely to provide a solution to these fundamental problems. The proposed market openings are quite limited, in particular seeing that potential competitors are not likely to invest in the postal sector unless considerable market openings will happen in the coming years and unless the EU aggress on a final date for full liberalisation. It must not be forgotten that the incumbents normally remain super-dominant in the segments that have been liberalised, often making the market impenetrable for new entrants. Without a substantial liberalisation of the postal markets, users and consumers will be bound to one provider only. They will continue to suffer from limited choice, frequent poor quality of service and excessive prices.

No justification

It is impossible for consumers and other users to assess if what they are paying for postal services is justifiable, in particular since many the postal operators, in breach of EC law, lack transparent systematic accounting.

Something that is easy to identify, however, is that the stamp price differentials in the EU exceed those identified by the EU for other products and services. Furthermore, these differences are not justified by factors such as population density as is shown in the table above. One would expect stamp rates in high population density countries to be lower than in countries with low population density due to the distances that need to be covered. It is therefore surprising to see that the stamp price in a country like Germany (3rd highest population density) is only 6% below the Swedish stamp rate (54 Cents including VAT) with the 2nd lowest density in the EU.

Another important issue for postal users is to ensure that monopoly revenues are used for their purpose, i.e. to provide a good basic postal service. Often, postal users note that the prices they are paying for basic letter services do not reflect on the quality and choice of services offered to them by the postal operators. Rather to the contrary, the substantial price differentials inevitably raise questions as to if the postal operators use the revenues from their legal monopolies for commercial purposes outside the monopoly area, for instance to expand into other product markets.

The FFPI considers that instruments such as quality measurement systems must be put in place to verify that the financial resources from the monopoly are truly invested to improve the quality and choice offered by the postal operators in the universal service obligation area.

As a result of the lack of competition in the postal market, European consumers and users of postal services will continue to be excluded from the benefits of the internal market. They will have to pay excessive stamp prices in comparison to the quality of the service offered. That is the real cost of Non-liberalisation.