EU Plans Postal Liberalization in 2011

Two years late, Europe's transport ministers have agreed to a program to open postal service to competition. Prices for individual letters will rise

EU transport ministers have backed a plan to open up the postal services to full competition in 2011 -- two years later than originally planned due to opposition mainly from France and Italy.

The deal on the final phase of liberalisation in the €88 billion sector, agreed on Monday in Luxembourg (1 October), comes after months of disagreement among countries over both the timetable and how to tackle its possible negative consequences.

The key to the adopted compromise was a suggestion that for eleven countries -- primarily states in central and eastern Europe which have not yet made much progress in removing postal monopolies -- the deadline can be still two years later, 2013.

The EU first triggered the postal reform in 1997, introduced some modifications in 2002 while the so-called "third postal services directive" is supposed to finalise the process.

While the European Commission originally suggested 2009 for opening the delivery of light-weight letters and postcards to full competition -- as the last category where national postal companies face no rivals, the European Parliament also backed the later 2011 date.

Only three EU member states -- Sweden, Finland and the UK -- have already fully liberalised their postal service markets, including items weighing below 50 grams.

Several others, such as Germany and the Netherlands are set to follow suit and open up their markets before the 2011 deadline.

Apart from the timetable debate, the member states had a strong discussion on how to maintain "universal service obligation" in the liberalised sector.

The principle means that a certain list of services must be provided to citizens -- like delivery of letters and parcels within a certain time, with a certain frequency and standard.

To achieve this, member states are allowed to choose their own model of financing these services by supporting their public providers -- either through state aid, compensation funds, cost sharing or other means.

Part of the deal is that uniform tariffs will be allowed -- irrespective of the location of the mail receiver -- "for consumer or single-piece mail or for public policy reasons" but not in business correspondence.

More choice and more expensive letters

The commission believes that the postal reform may boost new technologies of delivery used by European consumers, such as sending an email to be delivered by mail.

It may also lead to a different infrastructure -- with post offices getting replaced by less costly franchised postal agencies or other service points in shops or petrol stations, already suggested by some German companies.

But it will be up to member states and national regulators to ensure that postal services are well accessible across their territories -- through post offices, letter boxes or other points.

While the prices in business correspondence are likely to fall -- with more competition foreseen in this commercially lucrative area -- prices of individual letters may shoot up by up to 50 percent.

The postal services in the EU handle an estimated 135 billion items a year and they employ around 5.2 million people.

Before it's here, it's on the Bloomberg Terminal.