Table of Contents

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 21: On the Use of Reverse Auctions to Designate Universal Postal Service Providers

Carlos Costa

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

Extract

* Carlos Costa† 55 1 INTRODUCTION There has been an intense debate on the conditions regarding the permanent provision of a minimum set of postal services for the whole of each nation’s territory and across borders, with adequate quality of service (QoS) levels and at affordable prices and, in particular, regarding the necessity to continue imposing the Universal Service Obligation (USO) upon operators to ensure that goal, within a full market opening (FMO) environment. However, the literature regarding the use of reverse auctions specifically to designate the postal universal service provider (USP), is fairly limited – Borrmann (2004) and Calzada et al. (2010) seem to be the most interesting exceptions – and, in the case of the particular conditions of the Portuguese market, nonexistent. After a very brief sketch of the Portuguese experience on USO policy, Section 2 provides the context of the discussion of reverse auctions for USPs. Section 3 draws attention to conceptual and design issues associated with reverse auctions. Sections 4 and 5 discuss, respectively, the advantages and the disadvantages of reverse auctions in the postal USO. Finally, Section 6 provides a brief summary, the main conclusions and some ideas that seem to need additional research if the use of reverse auctions is to be considered an appropriate measure in the Portuguese market. 2 THE FUTURE: REVERSE AUCTIONS TO DESIGNATE POSTAL USPS? The enforcement of a USO in Portugal ensured the reliable provision of postal services for the whole of the country, with an appropriate QoS1 and at an affordable...

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