Privatization: Could the Benefits Seen in Other Network Industries be Realized in Postal Industries?
31 January 2012
By Stuart Holder and Helen Smith
At a time when national postal operators are facing many challenges, including falling demand and markets being opened up to competition, privatization is being actively considered as a policy option. In this chapter of a newly-published book, Multi-Modal Competition and the Future of Mail, NERA Associate Director Stuart Holder and Consultant Helen Smith consider whether the benefits of privatization seen in other network industries could be realized in postal industries. They discuss potential differences between public and private firms and how these might affect efficiency, including the profit motive, capital market discipline, ability to finance investments, and industrial relations. The authors then summarize the empirical literature on the impact of these differences, drawing on experience in both the postal industry and other network industries, including telecoms, electricity, and rail. To apply insights from the literature to postal markets, the authors examine the difference between post and other industries, and how these might affect the benefits from privatization. Key differences include the higher labor intensity of the postal industry, the level of competition at the time of privatization, and the role of the post as an essential service with a universal service obligation. The authors conclude that, despite differences with other industries, privatization has a positive role to play in the postal industry in helping firms tackle the challenges of electronic substitution and the need to maintain the universal service.
"Privatization: Could the Benefits Seen in Other Network Industries be Realized in Postal Industries?" was published in Multi-Modal Competition and the Future of Mail, edited by M. Crew and P. Kleindorfer, Edward Elgar, January 2012, chapter 11, pp. 150-164. The book is available for purchase on Amazon.
