6. Conclusion
This paper has reviewed the conditions necessary for services to be removed from price controls for the postal sector, consistent with the present regulatory environment in the UK. In particular, it has developed the approach used by UK regulators outside of the postal sector into one that places more emphasis on testing whether a market is likely to be prospectively competitive within the price-control period. First, the assumptions used by the USP in its forecasts for the price-control period can be assessed to see if they are consistent with there being no significant market power for any service within that period (Test A). In particular, the paper illustrates with an example of magazine mail how the critical demand elasticity values could be derived from the USP business plan for comparison with actual values in assessing whether Test A is satisfied. Second, the observations of the market can be used to confirm whether the USP’s forecasts contained in the business plan are indeed reasonable and compatible with the developments of the market (Test B). The removal of services then requires costs to be allocated between competitive and non-competitive markets to enable the coverage of the main control to shrink over time as the competitive market develops.
The analysis contained in this paper reflects the views of the authors. These views are not necessarily those of Oxera and the Royal Mail Group.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsPreview
Unable to display preview. Download preview PDF.
References
Cazals, Catherine, Jean-Pierre Florens, Bernard Roy. 2001. “An Analysis of Some Specific Cost Drivers in the Delivery Activity.” In Future Directions in Postal Reform, edited by M.A. Crew and P.R. Kleindorfer, Boston, MA: Kluwer Academic Publishers.
Cazals, Catherine, Frederique Fève, Patrick Fève, Jean-Pierre Florens. 2003. “Simple Structural Econometrics of Price Elasticity.” Economics Letters.
Cazals, Catherine, Jean-Pierre Florens, Soteri Soterios. 2005. “Delivery Costs for Postal Services in UK: Some Results on Scale Economies with Panel Data.” In Regulatory and Economics Changes in the Postal and Delivery Sector, edited by M.A. Crew and P.R. Kleindorfer, Boston, MA: Kluwer Academic Publishers.
Cohen, Robert, Matthew Robinson, Renee Sheehy, John Waller and Spyros Xenakis. 2004. “An Empirical Analysis of the Graveyard Spiral.” In Competitive Transformation of the Postal Delivery Sector, edited by M.A. Crew and P.R. Kleindorfer, Boston, MA: Kluwer Academic Publishers.
Commission of the European Communities. 2002. “Commission Guidelines on Market Analysis and the Assessment of Significant Market Power under the Community Regulatory Framework for Electronic Communications Networks and Services”, July 9th.
Crew, Michael A. and Paul R. Kleindorfer. 2002. “Balancing Access and the Universal Service Obligation.” In Postal and Delivery Services: Delivering on Competition, edited by M.A. Crew and P.R. Kleindorfer, Boston, MA: Kluwer Academic Publishers.
Crew, Michael A. and Paul R. Kleindorfer. 2005. “Competition, Universal Service and the Graveyard Spiral.” In Regulatory and Economics Changes in the Postal and Delivery Sector, edited by M.A. Crew and P.R. Kleindorfer, Boston, MA: Kluwer Academic Publishers.
De Donder, Philippe, Helmuth Cremer, and Frank Rodriguez. 2002. “Funding the Universal Service Obligation under Liberalisation.” In Postal and Delivery Services: Delivering on Competition, edited by M.A. Crew and P.R. Kleindorfer, Boston, MA: Kluwer Academic Publishers.
Fève, Frédérique, Patrick Fève, Jean-Pierre Florens. 2003. “Attribute Choices and Structural Econometrics of Price Elasticity of Demand.” IDEI working paper.
Hill, Roger, Richard Robinson and Frank Rodriguez. 2005. “The Financial Equilibrium of Universal Service Providers in a Liberalized Postal Market.” In Regulatory and Economics Changes in the Postal and Delivery Sector, edited by M.A. Crew and P.R. Kleindorfer, Boston, MA: Kluwer Academic Publishers.
HM Government. 2000. “The Postal Services Act”.
Laffont, Jean-Jacques and Jean Tirole. 1996. “Creating Competition through Interconnection: Theory and Practice.” Journal of Regulatory Economics 10(3): 227–256.
Ofgem. 2000. “Review of British Gas Trading’s Price Regulation: Initial Proposals”, December.
OFT. 1999. “Assessment of Market Power”, OFT 415, Office of Fair Trading, September.
Oftel. 2000. “Implementing Oftel’s Strategy: Effective Competition Review Guidelines,” August.
Oftel. 2002. “Protecting Consumers by Promoting Competition: Oftel’s Conclusions.”
Newbery, David. 1997. “Privatisation and Liberalisation of Network Utilities”, European Economic Review 41: 357–383.
Postcomm. 2003a. “Assessing Competitiveness in Postal Services: Postcomm’s Proposed Criteria.” Consultation Document, November.
Postcomm. 2003b. “Royal Mail Group Licence Condition 19(17) on 23 March 2001 and amended on 1 April 2003.”
Postcomm. 2003c. “Proposed Changes to Royal Mail’s Standard Parcels and Special Delivery Products — Decision Document.” October.
Postcomm. 2003d. “Access by UK Mail: Nature of Proposed Determination, Reasons.” Consultation Document, May.
Postcomm. 2004. “Decision Document: The UK’s Universal Postal Service.” June.
Ward, Michael. 1995. “Measurement of Market Power in Long Distance Telecommunications.” Bureau of Economics Staff Report, Federal Trade Commission, Washington, April.
Werden, Gregory. 1998. “Demand Elasticities in Antitrust Analysis.” Antitrust Law Journal 66(2): 364–414.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2005 Kluwer, Inc.
About this paper
Cite this paper
Dudley, P., Jenkins, H., Mautino, L., Richard, S. (2005). Competition and the Coverage of Price Controls in the Postal Sector. In: Crew, M.A., Kleindorfer, P.R. (eds) Regulatory and Economic Challenges in the Postal and Delivery Sector. Topics in Regulatory Economics and Policy, vol 48. Springer, Boston, MA. https://doi.org/10.1007/0-387-23637-6_6
Download citation
DOI: https://doi.org/10.1007/0-387-23637-6_6
Publisher Name: Springer, Boston, MA
Print ISBN: 978-1-4020-7972-6
Online ISBN: 978-0-387-23637-7
eBook Packages: Business and EconomicsEconomics and Finance (R0)