The European postal services market

The European postal services market and European Union market liberalisation

Member States of the European Union reached a compromise deal to liberalise postal services in the European Union by 2011, following more than 20 years of Commission-led negotiations to open up the European postal services sector.

The deal includes the following main elements:
1) Full postal liberalisation of the European Union by 2011 (instead of the Commission's preferred date of 2009), including for letters under 50 grammes;
2) The possibility of delaying opening postal markets until 2013 for Cyprus, Czech Republic, Greece, Hungary, Latvia, Lithuania, Luxembourg, Malta, Poland, Romania and Slovakia;
3) Under a so-called reciprocity clause, Member States that open their postal services markets by 2011 can deny market access until 2013 to those Member States that choose to delay postal market liberalisation;
4) Minimum pay provisions and postal workers' right to strike will not be affected by the law;
5) Universal Service Obligation (USO) - Member States can dictate uniform tariffs between rural and urban areas, sufficient access to post offices and minimum delivery requirements.

Financing provisions for USO will be decided by European Member States, who can either fund the postal service with monies from state coffers or oblige operators to contribute into a common fund. The Commission, which reserves the right to scrutinise the financing plans, will be required to help Member States to calculate the cost of universal postal services.

To date five European Union Member States have abolished the reserved area before the date foreseen in the Postal Directive: Germany, Finland, Sweden, UK and the Netherlands.

The liberalisation of the German postal market coincided with the introduction of a statutory minimum wage in the postal sector in Germany. This minimum wage is significantly higher than the wages currently paid by alternative postal operators and its introduction could well have an adverse effect on the development of competition.

In the Netherlands, already a highly competitive postal services market with non-postal operators having a 14% share of the postal services market, the liberalisation came into effect on April1st. last.

Overall in the European Union, postal services are estimated to handle 135 billion items per year, reflecting a turnover of about € 90 billion. About two-thirds of this turnover is generated by mail services. The reminder is generated by parcels and express services which are already in the competitive area (i.e., the market is fully open to competing operators).

Addressed mail volumes have continued to grow in the European postal services market over the past years. Volume growth was more pronounced in the 10 “new” Member States which joined the European Union in 2004 and 2007 than among the “old” Member States. In the period from 2004 to 2006 European postal services mail volumes grew by 6.5% on average in the new Member States compared to an average growth of 1.5% in the other fifteen Member States. The European postal services market is continuing to evolve towards a one way distribution market with business originating mail accounting on average for 85% or more of total mail volumes

It is expected that European Union Member States with a less developed postal services market will continue to grow substantively, with a marked growth potential in particular relating to direct mail as quality of European postal services levels improve. In European Union Member States with mature postal services markets the situation is different. Some of these European Union Member States can still achieve moderate growth rates whereas other Member States such as the UK and the Netherlands have already experienced declining addressed mail volumes in recent years.

Competition in the European letter post services market is emerging but is still developing slowly, and meaningful competition still has to emerge in this European postal services market. Market shares of competitors, although increasing, remain at a low level even in European Union Member States that have fully liberalised their postal services markets. End-to-end competition is further developed than average in Spain, Sweden, Germany and the Netherlands.

Estimated postal market shares of competitors in these European Union Member States range from around 8% in Spain to 9% in Sweden, 10% in Germany and 14% in the Netherlands in 2007. In the new European Union Member States developing end-to-end competition can be observed in Bulgaria, the Czech Republic, Estonia and Romania. In the majority of the other Member States market shares of competitors remain, with some exceptions, below 2%.

The European postal services market remains diverse and it will be interesting to see if the deadlines for market liberalisation in the European postal services market are acheived.