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Multi-Modal Competition and the Future of Mail

Multi-Modal Competition and the Future of Mail

Advances in Regulatory Economics series

Edited by Michael A. Crew and Paul R. Kleindorfer

This compilation of original papers selected from the 19th Conference on Postal and Delivery Economics and authored by an international cast of economists, lawyers, regulators and industry practitioners addresses perhaps the most significant problem that has ever faced the postal sector – electronic competition from information and communication technologies. This has increased significantly over the last few years with a consequent serious drop in mail volume.

Chapter 11: Privatization: Could the Benefits Seen in Other Network Industries be Realized in Postal Industries?

Stuart Holder and Helen Smith

Subjects: economics and finance, competition policy, public sector economics


Stuart Holder† and Helen Smith‡ 25 26 1 INTRODUCTION At a time when national postal operators are facing many challenges, including falling demand and markets being opened up to competition, privatization is being actively considered as a policy option. Given the apparent success of privatization in other network industries, and the strong reactions to suggested privatization of postal services, it is an appropriate time to review the potential benefits of privatization, the extent to which they could be realized in the postal industry, and where any benefits may fall. In particular, it is important to consider whether privatization can help postal operators respond to the threat of e-substitution and an increasingly competitive market. The term ‘privatization’ is used in a variety of contexts. These range from an increase in private sector involvement in an industry, through subcontracting or worksharing agreements, to full sale of a publicly owned business. In this chapter, we focus on the impacts of private ownership of the firm. There have been several postal privatizations, including in Germany, Austria and the Netherlands. These privatizations have all been flotations but have varied in scale, with the government retaining a majority share in Austria, in contrast to the fuller privatizations in Germany and the Netherlands. Privatized European posts have benefited from the flexibility to adapt to changes in the market. In the case of Germany, privatization of Deutsche Post allowed the firm to adjust to changing market conditions and in the Netherlands, private ownership of PostNL has made it...

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