Market sets pace of change in postal sector

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Series Details Vol.7, No.7, 22.2.01, p13
Publication Date 22/02/2001
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Date: 22/02/01

By Bruce Barnard

THE European Union is already paying a heavy price for its failure to agree last December on the latest proposals to liberalise its 80 billion euro-a-year postal market.

The German government has just told partially-privatised Deutsche Post that it can keep its monopoly on domestic mail delivery beyond the scheduled expiry at the end of 2002. Berlin made clear that Europe's largest mail market will be closed to competition until the EU agrees on a timetable to deregulate the sector.

The decision will undermine efforts by Union president Sweden, which opened its market in 1994, to revive momentum toward liberalisation because it is unlikely to force a change of heart by the two leading protectionist powers, France and Britain.

No one is pinning much hope on an early breakthrough in the stalled negotiations between member states. France hailed its failure to broker a compromise at the end of its presidency last year as a "victory" for postal workers as deregulation will be delayed until 2004 at the earliest.

The figures on the negotiating table are hardly radical. The original European Commission proposal to cut the letter monopoly from 350 grams to 50 grams in 2003 would have opened up just over 20% of the market to competition but it was immediately shot down by EU governments and their protected postal authorities.

The negotiations in the abortive meeting of EU postal ministers last December centered on cutting the monopoly weight to around 130 grams- barely 7% of the market - by 2003 and then to 50 grams in 2006. But even this was too much for France and its allies, who pressed for a 100 gram limit in 2006, dashing any hopes of striking a deal with the pro-market forces.

While there is little movement in Brussels or Union capitals, postal monopolies and private companies are betting that market forces will force liberalisation through the back door. The top postal players, Deutsche Post and TPG of the Netherlands, are pulling even further ahead of the pack by moving deeper into logistics, air express, freight forwarding and air cargo.

The European mail market will most likely be dominated by the German, Dutch, French and British postal authorities within a decade, regardless of the pace of liberalisation in Brussels.

The smaller authorities realise their best hope of survival lies in teaming up with larger groups, plugging their domestic networks into the global delivery operations of the big guns.

The Europeans are eating into the markets of the leading US delivery companies, UPS and FedEx, and are way ahead of the US Postal Service in breaking into new businesses. And analysts say it is only a matter of time before loose, fledgling transatlantic alliances firm up into joint ventures.

The accelerating activity in the market place makes up for the inactivity in stuffy meeting rooms in Brussels.

The European Union is already paying a heavy price for its failure to agree in December 2000 on the latest proposals to liberalise its 80 billion euro-a-year postal market.

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