Privatizing the Italian Postal Services Governance Structure, Property Rights and Monopoly Rents

Abstract

The view that public service monopolies only serve to permit the exploitation of the rents that derive from the exclusive nature of the licence granted is increasingly accepted by economists and the public in the main industrial countries. Perhaps more than any other, the postal monopoly has allowed interest groups to benefit directly or indirectly, and sometimes very considerably¹. However, the evidence of serious operational inefficiencies — a normal consequence of the exploitation of monopolistic rents — does not mean that the problem can be overcome simply by turning the service over to the market on the assumption that, unlike the public operator, private firms will be subject to a set of internal and external incentives that will result in the efficiency loss being made good. Nor is there any good reason why the interest groups that have acquired significant rent positions should disappear in this post-monopoly scenario. Rather, they can be expected to adapt to the change in the institutional setting and focus their attention on the many opportunities to establish rent positions that exist independently of the extent of the reserve. These include: the setting of charges in the public service that permit the survival of productive inefficiencies and cross-subsidization; the scope for private operators to cherry pick while leaving the public operator to provide a universal service, as they already do today, sometimes by trespassing on the monopoly; protected markets for the supply industry with exclusive access to tenders and contracts for the running of highly specialized equipment; and the possibility for organized groups of users to continue to benefit from preferential prices by ensuring the maintenance of conditions of service that match their requirements or the inclusion of their products in categories subject to low charges. The key to the problem thus becomes the fundamental issue of regulation.

The author is a research economist at Istituto di studi sulle regioni.

The Author wishes to thank Enrico Buglione, Mauro Mare and Diego Piacentino for their useful suggestions offered during the drafting of this paper; Giampiero Galli and Vincenzo Martini of Ente Poste for the information and data kindly supplied. Naturally, the author bears sole responsibility for the contents of the paper.