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 22: Priority and Non-Priority Services: Returning to the Origins?

Filipa Silva

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


* Filipa Silva† 56 1 INTRODUCTION The postal sector is a traditional yet innovative industry. It has developed new products and services, responding to technological, demand and regulatory changes. Although the universal service providers (USPs) in the 27 European Union member states (EU27) are in different stages of development, they share common challenges such as full market opening (FMO). This chapter analyzes the commercial strategy of USPs, specifically in the key market segment of domestic standard letter mail, be it Priority or Non-Priority, when available. In 2010, all EU27 countries had a Priority service (next-day delivery) for the domestic standard1 letter mail, and roughly half also had a Non-Priority service. In a two-tier system, postal operators sort Priority letter mail in the peak hour, while the Non-Priority letter mail is sorted in the off-peak hour, ensuring that Priority mail is delivered the next day at a price premium and Non-Priority letter mail is generally delivered in two or three days as an economic service, at a lower price. The first European country to adopt a two-tier system in the domestic standard letter mail was, to our knowledge, the United Kingdom, in 1968. Since then, other countries have also adopted this strategy. The latest adopters were Romania (2009), and Latvia and Lithuania (2007). Two countries temporarily adopted2 a two-tier system for domestic standard letter mail – Italy, from 1999 to 2006, and Belgium, from 2003 to 2006. These cases suggest that the two-tier system might be used by USPs in different conditions, for...

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