Reconciling Competition, Downstream Access, and Universal Service in Postal Markets
Most postal reform legislation includes provisions mandating incumbents to provide downstream access to their competitors. That is, a dominant firm may be required to provide a portion of its vertical chain of production to firms that may be its competitors in its final product markets. Mandating such “unbundled access” on “reasonable terms” has a long tradition in antitrust/competition policy. Recent liberalization of the markets of traditional public utilities has moved this issue to the forefront of regulatory policy as well. This policy tool is of only limited usefulness in the case of postal markets. The reason is quite simple: the sunk costs that can give rise to “bottleneck monopolies” in other infrastructure industries are largely absent from postal networks. Not only are the benefits of mandating access limited in postal markets, the prevalence of nation-wide averaged prices means that the granting of access may facilitate wasteful, cream-skimming entry. That is, in postal markets, economic theory tells us that there are costs as well as benefits associated with mandating unbundled access. One cannot merely presume that this policy, an essential component of telecommunications liberalization, should also be automatically applied to liberalized postal markets as well.
KeywordsService Component Delivery Cost Postal Service Postal Network Access Price
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