Advances in Regulatory Economics series
Edited by Michael A. Crew, Paul R. Kleindofer and James I. Campbell Jr
* Leon A. Pintsov† and Andrei Obrea† The multitude is more constant and wiser than the monarch. (Niccolò Machiavelli, ‘Discours’, 1517) 1. INTRODUCTION The postal sector is now facing the most challenging period in its history. On the one hand, up to now the postal sector in its letter-mail market has not faced competition as a result of the historic reserved areas and, in the case of the United States, the letterbox monopoly. On the other hand it is confronting formidable competition from outside of its traditional boundaries (this type of competition is frequently referred to as ‘electronic substitution’). The main intent of the postal regulatory reform is to unlock the beneﬁts of competition in the letter-mail market. These beneﬁts have been extensively discussed with the main focus mostly on cost reduction and increasing service reliability. However, these beneﬁts, even if achieved, would still seem to oﬀer a rather modest response to the challenges facing the sector. Furthermore, since electronic substitution extends competition well beyond the bounds of the traditional postal sector, sector-speciﬁc regulatory instruments are limited in their ability to deal with this challenge. This chapter addresses these challenges by oﬀering a constructive solution to one of the basic imperatives of postal reform, the need to facilitate radical changes in the capabilities of postal service providers to undertake product innovation. The solution is based on far more extensive use of e-commerce technology than is currently being practiced. There are evident complementarities between many elements...
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