ACM: cutbacks to the postal service inevitable, reliability of all postal services must improve though

Without any changes, the Dutch postal service in the future will be structurally loss-making. Cutbacks to the postal service are inevitable for keeping it affordable. That means reduced delivery speeds in combination with greater safeguards for the assurance that mail will be delivered at the agreed upon time (reliability) of all types of mail. That combination does the most justice to society’s interests as identified by ACM. That has been revealed by a study into the Dutch postal market (titled in Dutch: ‘De postmarkt in transitie – Bouwstenen voor een visie op de postmarkt’), which was published today by the Netherlands Authority for Consumers and Markets (ACM).

This study was commissioned by the Dutch Ministry of Economic Affairs (EZ), and serves as input for the political decision-making process regarding the Dutch postal market. ACM studied the needs of senders and receivers, the costs and quality, as well as the market trends and developments.

Manon Leijten, Member of the Board of ACM, explains: “If we wish to make the Dutch postal service ready for the future, concessions need to be made somewhere. That’s inevitable. Our study shows that, for consumers and business users alike, reliability is the number one priority. So you can’t compromise on that. Therefore, if you want to make changes, it’s the most logical to look at delivery speeds or prices first. However, it’s ultimately up to lawmakers to make the final decisions. With this study, we offer the building blocks for those decisions.”

Reliability of the postal service is crucial and has been safeguarded insufficiently

Approximately 15 percent of all mail that is sent falls under the ‘Universal Service Obligation’ (USO). Postal operator PostNL has been charged with this USO, and only the mail items that fall under the USO are protected in terms of reliability, delivery speeds, and affordability. Senders and receivers indicate that reliability (the assurance that mail will arrive at the agreed upon time) is the most important aspect for them. However, the target reliability rate of 95 percent has not been achieved for years. Business mail (including mail from government agencies) are not statutorily protected, while senders and receivers find it important that those mail items, too, arrive on time. The National Ombudsman, too, recently pointed out the fact that people regularly run into problems if letters from government agencies do not arrive on time. One of the options that ACM presents is to include general statutory reliability requirements in the Dutch Postal Act for all types of mail, including business mail.

Delivery speeds can be reduced

Reliability is the number one priority among users, but affordability and delivery speeds also matter, albeit to a lesser extent. Several scenarios relating to delivery speeds and reliability were tested in ACM’s study. On the basis of the study, reducing the delivery speed is the most obvious scenario. At the moment, mail carriers need to go door-to-door five days a week. That frequency may thus go down in the future.

Uncertainty over affordability

On the basis of the study, it is difficult to determine with certainty what the exact impact of the changes to delivery speed and reliability will be on PostNL’s financial position. That is why it is also difficult to say with certainty what the effect will be on the affordability of the postal service. ACM emphasizes that the study is not suited for assessing PostNL’s recent subsidy request. However, should the legislature wish to grant a subsidy, it is important to set, in any case, clear conditions to reliability and delivery speeds.

Long-term market trends and developments

Senders and receivers say that, in the future too, they wish to keep on using paper mail. In fact, a large group of individuals relies on it because digital alternatives do not work that well for them. In its framework coalition agreement, the Dutch cabinet, too, emphasizes the importance of non-digital communication. It is not realistic to see a full-fledged competitor emerge in the short term, one with the capabilities to offer a postal network with nationwide coverage, too. However, ACM does see that the transition towards a so-called ‘broad delivery market’ is well under way. In the future, parcel and flyer networks are expected to compete more with the traditional mail network. This is already happening in some local markets. In its study, ACM offers several options for the government to further stimulate this trend, such as keeping a reasonable form of access to PostNL’s network for regional postal operators.

Research plan and methods

For this study, ACM looked into various aspects, and, in that process, collaborated with several external agencies and other experts. The user needs were based on discussions with government agencies and other major senders, as well as on surveys conducted by Centerdata and Ipsos I&O. The financial impact of changes was based on data submitted by PostNL, which had been assessed by EY. The market trends and developments were identified following discussions with senders, postal operators (including potential ones), and European regulators, as well as a study into the market organization conducted by e-Conomics. In addition, ACM explored possible adjustments to rules and regulations.