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Amended Postal Act will secure universal services in all parts of the country

15.09.2016

Posti thinks the Postal Act should be amended soon in order to secure the maintenance of postal services in the whole of Finland in the coming years.

- Digitization changes the communication needs of our customers and decreases our delivery volumes. This could result in unreasonably high prices for our customers. This is why we think it is urgent to renew the legislation and secure a reasonably priced universal service for consumers and companies, Heikki Malinen, President and CEO at Posti says. 

The Ministry of Transport and Communications is currently preparing amendments to the provisions on universal services in the Postal Act. Today Posti submitted its comments on the matter to the Ministry. In Posti's view, the primary objective of the amendment should be to secure the availability of the universal service in the digitizing world. The amendment should take into consideration the drastic increases in digital communications and the changing needs of customers.

Posti's universal service obligation currently covers a minor share of all postal items, i.e., letters and postcards paid by stamps. Less than 5% of all mail is covered by the provisions.

- The universal service obligation means that Posti must deliver letters on five days a week, despite the fact that the average Finn receives only 11 letters or postcards covered by the obligation per year. Letter is the new wired telephone: it is becoming less and less common as a means of communication.

Digitization drops postal volumes and threatens the universal service

According to Malinen, digitization has transformed the postal sector more drastically than any other phenomenon in its history, and the annual decreases in postal volumes-of up to 10%-threaten the existence of the universal service. Without the cost-effectiveness enabled by less stringent regulations, the per unit costs of publications and letters will become unreasonably high, given the lower volumes.

- The customers want to consume reasonably priced postal services. By deregulating the universal service, we could keep the delivery costs of all items, including newspapers, in control. This would secure deliveries in all parts of the country, Malinen says.

Without these amendments, the universal service might become financially unsustainable, which might require more public funds for postal delivery. According to an assessment by Etla in 2013, the annual net costs of producing the universal service amount to approximately EUR 76 million.

Posti supports the option presented by the Ministry in its memorandum that would repeal the provision on delivering items covered by the universal service obligation on five days a week and enable delivering them on three days a week in the future.

Newspaper companies get the best of both worlds

The amended Postal Act that entered into force in June allows newspaper companies to use their own delivery companies to deliver letters without any obligations related to place, time or delivery days. Yet they require Posti to deliver newspapers on five days a week and even demand more stringent legislation on Posti.

Kaj Kulp, Vice President at Posti's Mail Services, reminds us that newspaper companies could extend their delivery to cover new areas, but they have so far focused their early-morning delivery on the profitable densely populated areas. Posti, on the other hand, delivers mail on sparsely populated areas, where delivery costs can be up to 10 times higher.

- In the current system, the newspaper companies that deliver letters get the best of both worlds. In free and fair competition, the rules should be the same for all operators.

Newspaper delivery has never been covered by the universal service obligation, but they have always been delivered commercially. According to Kulp, increasing newspaper delivery prices are the kernel of the arguments. Finnish Newspapers Association demands that Posti's major letter customers should finance the five-day delivery of newspapers.

According to Kulp, the Postal Act cannot solve the problems of printed publications.

- The Postal Act does not keep delivery or subscription volumes high. As the volumes decrease, the unit costs increase, and delivery will become more and more expensive, even in the five-day model.

Posti wants to combine different services in sparsely populated areas

Posti's principle is that newspaper delivery should continue to be commercial. If the central government wants to support the delivery of newspapers not covered by universal services, this should be a separate decision that is made independently of the Postal Act. Several EU member states have adopted measures to support a profitable digitization of publications.

- Publication delivery could also be renewed by combining the delivery of mail and goods and other home services in rural areas. This would be an excellent opportunity to use local service providers, such as delivery companies, taxis and other enterprises. Combining these services would also secure the availability of services for senior citizens, Kulp suggests.