Traditional Regulatory Approaches and the Postal Service Market

Abstract

For discussions of postal regulation, often telecommunications regulation is used as a reference framework. Both the postal and the telecommunications market frameworks aim at fostering effective competition and innovations for the further development of the so-called Information Society. Recent trends in the EU show that postal service markets are likely to be regulated as if they essentially shared the characteristics with the telecommunications sector. In both industries, regulators follow the strategy to phase-in competition, supported by regulatory interventions. The first objective of the paper is to review the underlying economic rationale and justification for regulation in network infrastructure industries, namely natural monopolies and essential facilities and the result, that entry barriers may exist and unregulated competition would be inefficient. Second, the paper assesses the two instruments downstream access and retail price regulation, typically used in telecommunications regulation from a postal sector perspective. Comparing these two industries and providing transparent illustration of the different characteristics of postal and telecommunications networks allow to highlight the specifics of postal markets. Third, we discuss the transferability of standard practices and conclusions on the scope for postal industry regulation are drawn.