Abstract
Exogenous structural phenomena have affected the postal industry in recent years. Mail volumes have dramatically decreased due to digitalization, while parcel volumes have increased mainly due to e-commerce growth. These trends will continue to shape the industry in Europe. In this context, universal service providers (USPs) have diversified their sources of revenues and profits, aiming to grab all the opportunities coming from new businesses such as the growth of parcels and to exploit the economies of scope from the post office network.
In this context, a new role of the postal operator (PO) seems to emerge at the same time a change of the regulatory context becomes a need. The PO is becoming the “link” between the delivery and communication markets exploiting its primary assets the delivery network, the post office/acceptance point network, and proximity services.
The views presented are those of the authors and not of the affiliated institutions. We would like to thank our session chairman Prof. Pier Luigi Parcu and discussant Soterios Soteri for the constructive comments and suggestions. Furthermore, we would like to thank Prof. Tim Brennan for providing us, during the discussion in Dublin, a critical assessment of the paper and comments about SSNIP (small but significant and non-transitory increase in price) test. He believes that it is still a topic of debate how much the SSNIP test is a test on market dominance versus a test to identify the availability of substitute services or even more if the objective is to identify specific elasticity. We have taken into account his comments in our paper.
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Notes
- 1.
The US Antitrust Division (1982), Horizontal Merger Guidelines, Department of Justice, indicates the hypothetical monopolist test has an instrument to define the relevant market. The SSNIP test is used in this kind of analysis as it measures the customer reaction to a hypothetical permanent small price increase (from 5% to 10%).
- 2.
This analysis is applied in a conceptual framework defined as a test of the hypothetical monopolist. In short, the analysis investigates, with empirical data and related evidences, whether product A finds sufficiently strong/close substitutes, for example, the product B.
- 3.
The US Antitrust Division (1982), Horizontal Merger Guidelines, Department of Justice, https://www.justice.gov/archives/atr/1982-merger-guidelines
- 4.
Regulation (eu) 2018/644 of the European Parliament and of the Council on cross-border parcel delivery services, 18/04/2018.
- 5.
- 6.
Relative to the public administration reasons for not digitalizing communications are privacy concerns, technical difficulties with e-government platforms, and cultural preferences for traditional postal services.
- 7.
“Nine out of 17 NRAs replied to our survey that the incumbent’s three main competitors’ market shares in the national parcel segment are growing at an at least moderate pace and 3 classified the growth pace as strong. Eight of the responding NRAs considered the market stable. Not a single market was considered to exhibit declining market shares of the incumbent’s competitors” (Copenhagen Economics (2018a, p. 81)).
- 8.
Regarding these data the report specifies: “Countries that include other postal services not just letter post, FR, IE, and IT, – includes letter and parcel service; DE represents postal business revenues in total group’s revenues; NO represents the mail segments; HR, IS, LT, LU, and MT include other not specified postal services; PL includes all USO services; SE and CH revenues for communication services. The EU, EEA, and CH average is an unweight average.”
- 9.
Commission notice (1997, §17),“The question to be answered is whether the parties’ customers would switch to readily available substitutes or to suppliers located elsewhere in response to a hypothetical small (in the range 5–10%) but permanent relative price increase in the products and areas being considered. If substitution were enough to make the price increase unprofitable because of the resulting loss of sales, additional substitutes and areas are included in the relevant market.”
- 10.
The survey tested more than 400 Poste Italiane’s customers and considered the main uses for communications (such as invoices, periodic reports, bank statements, quotations).
- 11.
It is worth noting that the data above exclude firms that have already completely digitalized their communications and are no more Poste Italiane’s customers.
- 12.
Small businesses are defined as small office home office (SOHO) from 1 to 9 employers (Copenhagen Economics 2018b, p. 50).
- 13.
The survey measures the experience of a representative sample of all Italian consumers and in particular those who have a relationship with a company providing B2C services (utilities, telecommunications companies, banking institutions).
- 14.
This analysis is applied in a conceptual framework defined as a test of the hypothetical monopolist. In short, the analysis investigates, with empirical data and related evidences, whether product A finds sufficiently strong/close substitutes, for example, the product B.
- 15.
“Undertaking a market definition analysis at monopolistic prices can lead one to define too broad a market and fail to identify market power when it is present, which is known as the ‘Cellophane Fallacy’,” United States Department of Justice, Monopoly Power, Market Definition and the “Cellophane” Fallacy, https://www.justice.gov/atr/monopoly-power-market-definition-and-cellophane-fallacy
- 16.
“E-substitution nel mercato postale della corrispondenza” (p. 22–23).
- 17.
Data are related to 2017.
- 18.
Recital 9, Regulation (Eu) 2018/644.
- 19.
UPS/Tnt Express, 2013, at § 156, “In line with its decisional practice, the Commission identifies the relevant product markets on the basis of the speed of delivery (that is to say, express delivery services - commonly understood as services with a next day delivery commitment, and standard/deferred delivery services)”. In the most recent Decision, Fedex/Tnt Express (2016 at § 90), the Commission defined “deferred delivery services” as those “with a longer delivery time” comparing to express deliveries which are “also considerably more expensive.
- 20.
FUB (2019), E-substitution nel mercato postale della corrispondenza, p. 22–24.
- 21.
“On the other hand, adjoining markets driven by e-commerce are growing, especially in the parcels market and the broader delivery services market……… possibly becoming a market for the delivery of products or services, such as letters, parcels, and weekly meal boxes or an even wider logistics services market” Ministry of Economic Affairs and Climate Nederland (2018), An affordable postal letter in a digital society, p. 1.
- 22.
Slide 24.
- 23.
Gori (2018), (§ 6), “The specific characteristic of widespread physical presence and consumers’ trust of the Postal Operators, i.e. once again building on their legacy assets, can lead to a new strategy that fully integrates them in the digital world” (p. 13).
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Romito, S., Vacca, I., Rovero, A., Gori, S. (2020). The Fading of the Traditional Postal Market Boundaries and a New Role for Postal Operators: A European Perspective. In: Parcu, P.L., Brennan, T.J., Glass, V. (eds) The Changing Postal Environment. Topics in Regulatory Economics and Policy. Springer, Cham. https://doi.org/10.1007/978-3-030-34532-7_5
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