Advances in Regulatory Economics series
Edited by Michael A. Crew and Timothy J. J. Brennan
Chapter 25: The costs, functions and pricing of postal payment channels
European letter mail revenue amounts to an estimated Ä35 billion. The efficiency with which this is collected is an important determinant of overall profitability of postal operators (POs) and the payment channels through which POs serve customers in turn shape the mailer experience. How the customer pays matters. Payment method is a critical driver of postal product costs but has received relatively little attention in the literature compared to other product cost drivers such as format, weight and speed of delivery. This chapter is focused on payment channels as a cost driver, their functions and cost characteristics. It brings together what is known about postal payment channels, including how national regulatory authority (NRA) policies have evolved to provide incentives for the more efficient and systematic management of payment method by POs, particularly in liberalized European markets. The three principal payment channels are printed postage impression (PPI), meters, and stamps. PPI is typically a payment-in-arrears channel and accounts for some 64 percent of total postage revenue, with meters (largely payment in advance) and stamps (payment in advance) collecting around 23 and 13 percent, respectively, of total letter mail revenue (Walsh, 2011: 258). The role of postal payment channels was a major element of Sir Rowland Hillís 1837 critique of Royal Mailís largely recipient-pays process. The problem was that a significant proportion of the monies generated were eaten up by transaction costs involved in collecting revenue in arrears.
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