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Mail delivery implementation rate already almost hundred per cent – penalty payment unfounded

07.11.2016

Posti considers the authority’s interpretation of the obligations of the current Postal Act unreasonable.

- A penalty payment has been imposed on Posti to insist that it reaches a 99.8 per cent quality level in the five-day delivery of universal service letters, while competitors can freely deliver letters without any obligations. The implementation rate of our delivery services is already over 99 per cent. In order to comply with the interpretation of the legislation, we would need to do the impossible, says Kaj Kulp, Vice President at Posti's Mail Services.

Posti is very much concerned about the sustainability of the current universal service in view of the national economy. Due to stringent regulation, the unit costs in mail delivery are becoming unbearably high, considering that digitalization is reducing the number of letters by almost 10% a year. The Ministry of Transport and Communications has reacted to the pressure for change caused by digitalization. Today, the ministry has requested opinions on reform of the Postal Act and according to which regulation will be made less stringent in order to better address customers' needs.

However, the Postal Act is being interpreted even more strictly at the same time. The Finnish Communications Regulatory Authority now insists that Posti must reach a 99.8% quality level in the five-day delivery of universal service letters by the end of April. If it cannot, the Finnish Communications Regulatory Authority will impose a 100,000 euro penalty payment on Posti.

The implementation rate of Posti's delivery services is already 99 per cent

According to Kaj Kulp, Vice President at Posti's Mail Services, the average implementation rate of the five-day delivery is more than 99 per cent, as indicated by a reporting model that has been in use since spring 2015. Apart from a few unfortunate local disruptions in delivery, as a whole such a high implementation rate can be considered excellent.

- In reality, the 99.8% quality requirement is very tight, in fact impossible. A security of supply of almost one hundred per cent means that we should have a stand-by deputy for each employee available immediately upon call. This would increase mail delivery costs considerably, by as much as tens of millions of euros each year, says Kulp.

If we intend to reach the 99.8% quality level, the resulting extra costs will in fact be paid by Posti's customers. As a public company, Posti does not receive any support from the state.

According to the requirement, the percentage of undelivered universal service letters may not exceed 0.2 per cent a month. In practice, this means that for each postal code in Finland, at most only one stamped letter a week can remain undelivered. Annually, about 100 million universal service letters are delivered in Finland.

Mail is delivered by people - sick leave should be taken into consideration

Kulp asks why human factors, such as the mail deliverer falling ill or the break down of a sorting machine, are not taken into consideration in the requirement level. Sick leave at Posti amounted to 6.8% of regular working time in September, and the amount varies daily. During the influenza wave in winter, hundreds of mail deliverers can fall ill at a day's notice.

- A disruption in delivery is often due to unexpected sick leave. The fact is that a one hundred per cent quality level cannot be sustainably achieved in any industrial operations. The work is done by people, not machines.

According to Kulp, the legislation should be fair in free competition in letter mail deliveries. He points out that as a result of the amendment to the Postal Act, which entered into force in June, Posti's competitors may freely deliver mail anywhere and at any time without any specific delivery day obligations.

Mail delivery complies with the legislation based on delivery speed

According to Posti, mail delivery complies with the legislation if measured on the basis of delivery speed. Last year, 95.9% of 2nd class letters were delivered on the second day following the mailing date, while the legislation requires a 95% level.

- Internationally, the quality requirements for postal operations have been established. The obligation is not defined as a numerical value, but quality is monitored with a survey measuring item delivery speed. According to the survey, Posti's delivery services meet the quality requirements set for universal service letters, Kulp underlines.

Posti has proposed continuous development actions to the Finnish Communications Regulatory Authority in order to prevent disruptions. It can be indicated on the basis of postal code-specific statistics that Posti's actions have been efficient, though there are still some regional disruptions in delivery. Posti's delivery operations are undergoing a constant change. New challenges appear as operating policies change, at the same time as earlier disruptions are eliminated.

- We understand that the Finnish Communications Regulatory Authority is only doing its job. However, the timing is unusual, because the obligations of universal service are currently being reformed, says Kulp.

Delivery costs can be mitigated by lightening regulation

According to Kulp, the cost efficiency of the five-day delivery of universal service letters will decrease considerably when the amount of printed mail is decreasing strongly. A recent example of the additional costs caused by the Postal Act is the five-day delivery implemented in the archipelago off Turku. The interpretation of the legislation leads to a situation where the delivery of a single postcard can even cost hundreds of euros.

- Customers expect to receive moderately priced basic postal services. This requires that regulation must be promptly lightened, Kulp says.

Facts about universal service: