The Impact of the Electronic Services to the Universal Postal Services

Abstract

Advances in technology are blurring the boundary between the delivery of communications via physical and electronics means. E-substitution has impacted the development of postal markets across the world. Postal operators are faced with the challenge to construct medium/long term projection in a rapidly evolving market with e-substitution of postal services. Because of economies of scale in the sector, as mail volumes decline average costs increase ceteris paribus (mail volume reduction, in turns, causes a continuous uptrend in the unit costs of mail, since fixed costs of production are spread over fewer volumes). Increasing prices may not be the good answer. The requirement to provide a universal service (national geographically delivery coverage, five or six days a week service) imposes a number of rigidities on the cost structure that seriously threaten its financial viability. This article assess the impact of universal service obligation constraints on the universal service providers cost structure as well as their combined effect, in a market environment characterized by the shrinking of volumes due to e-substitution. In the article will be uses a hedonic function to estimate the impacts from a reduction of delivery frequency, as well as quantify the impact on cost through an econometric model.