Advances in Regulatory Economics series
Edited by Michael A. Crew and Paul R. Kleindorfer
Chapter 19: Termination charges in the international parcel market
The parcel segment is one of the most liberalized segments in the postal industry. A recent market survey commissioned by the EC has revealed that 30 out of 31 European incumbents perceived competition within the parcel segment as ‘intense’ (Okholm et al., 2010). In the parcels market, incumbents are typically referred to as ‘designated operators’ (DOs) in that they have been designated by their home country to fulfill the country’s international obligations stemming from the Universal Postal Union (UPU). These obligations include the termination of international inbound parcels sent by other DOs according to the UPU’s remuneration system referred to as ‘inward land rates’ (ILRs). Besides the DOs, the main market players competing in the international parcels market are integrators. Integrators are international companies that provide integrated services between countries, that is, operating in the country of origin and destination under the same brand. Examples include DHL, FedEx, UPS and TNT. Competition for an international parcel takes place in the country of origin between a DO and integrated operators. Generally, DOs do not compete against each other because sending a parcel to country A is not a substitute for sending a parcel to country B and DOs operate in their domestic market exclusively (exemptions are selected integrators that are dominated by a DO, such as DHL or DPD). Hence, the international parcel market consists of separated but interconnected domestic parcel markets.
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