Estimation of Consumers’ Willingness-to-pay for Quality of Service in Post

Abstract

While Postal liberalisation is underway in the EU, much of the postal market remains regulated. Regulation takes the form of both price and entry protection. Entry protection is believed to be necessary for incumbent universal service providers (USPs) who face significant burdens from un-sustainable cross subsidies¹. With both price and entry set exogenously by the regulator, quality of service naturally becomes an issue. Regulators are thus properly concerned about quality of service. At the same time, facing increasing competition from various forms of communication, Posts are also looking at quality of service from a commercial perspective. In fact, at recent international conferences on postal economics and universal service, speakers^2,3 have given quality of service a prominent position in discussions about the future of the postal service. Many posts are under pressure from falling volumes and enhanced potential for electronic substitution. Quality of service improvement is seen as one way of stemming this tide.

The authors are Divisional Directors with LE. The authors wish to thank colleagues at LE, the editors of this volume, and many thanks to An Post. Any opinions, errors, or omissions are purely our own.

While opinions on this differ, we give no opinion on the burden of the USO. However, we point out that the existence of entry protection indicates some policy agreement on significance of the burden.

This includes the dinner address by Donal Curtin, CEO An Post, at the recent 2004 Conference on Postal and Delivery Economics in Cork, Ireland.

For example, see the comments of Mr. Mazou, the Secretary General of the UPU at the 2004 23^rd World Postal Congress, Bucharest. He stressed that quality of service went hand-in-hand with network efficiency, and that increasing quality of service was the most likely way universal postal service providers should be seeking to combat substitution towards electronic communications.