Sunday, August 22, 2010

The Definition of the Postal Market

In its most recent post, Hellmail announced an upcoming shift in its direction.  Until now, Hellmail has focused on providing news and commentary on Royal Mail and its competitors in Great Britain and to a lesser extent postal operators and technology throughout Europe.  In early 2011, Hellmail "will see the expansion of what it does and the areas it covers.   ... Whilst 'post' will remain a central theme, this blurring of communications will be reflected in its output with a broader coverage on EU regulation, World communications, new markets and products."

What does this change mean for how postal markets are defined?
  • The market includes both national posts and competitors that offer only collection and sortation services, and others that offer full origin to destination services.
  • Postal markets include a range of physical and digital delivery services for documents as well as parcel delivery, and possibly financial services sold at what were primarily offices that sold only mail and parcel delivery services.   
In terms of regulation, the new definition of postal markets shifts has tended to shift regulatory power  from industry specific regulators to regulators that cover both digital and physical delivery.   In many cases, the shift to a multi-modal postal market has had the effect of reducing regulation as the broader definition of the market reduces the justification of market regulation.  Regulation of postal markets is also losing favor as the regulatory process is perceived to reducing innovative business practices and economic growth.

Finally, the broader definition of the postal market has increased the importance of capitalization for both national postal operators and their competitors. Strong capitalization is critical for making adjustments in mail processing operations, modernizing retail operations including expanding the use of self-service kiosks, and entry into hybrid mail, digital delivery of documents and a range of financial services.     Smaller national operators are seeking mergers as looser alliances are no longer deemed sufficient to compete.  Mergers have occurred between the Danish and Swedish Post Offices as a means to reduce duplicate back-office operations which allows the enterprise to reduce overhead and improve both profitability and working capital.  Proposals to privatize posts that remain owned by the government are continuing to develop as government ministers and postal managers realize that capital needs exceed what can be generated from postage in an environment where government investments are unavailable. 

The United States postal market will not be immune from these trends.   The question before stakeholders and policy makers is will Congress make the necessary changes to ensure that the United States Postal Service makes the necessary adjustments in order to compete in both the world today and the one that will exist a decade from now.

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