Discussion Papers

Mark Oelmann, Sonja Schölermann

Die Anwendbarkeit von Vergleichsmarktanalysen bei Regulierungsentscheidungen im Postsektor

Nr. 284 / Dezember 2006

Summary

Benchmark analysis is used as a tool for regulatory decision making in many regulated network industries. In some cases, benchmarking is an integrated element of the regulatory design. In other cases, benchmarks serve as one of several inputs for regulatory decisions or are used to evaluate information submitted by a regulated firm. Consequently, benchmarks can be used in different ways: the formal concept of Yardstick Competition on the one hand, and other, less formal, applications on the other hand. This discussion paper analyses the potential for further development of benchmarking techniques for postal regulation in Germany. Our analysis concludes that Yardstick Competition is currently unapt for application in the postal sector due to the small number of relevant operators in the postal market. Consequently, the focus of this paper is on less formal applications of benchmarking techniques.

In a first step, the paper analyses the theoretical background of regulatory benchmarking as well as the role it is given by postal legislation in Germany and the part it played in past decisions by the Federal network Agency. It goes on to discuss, as an excursus, the practical implementation of Yardstick Competition in the United Kingdom . This excursus yields a number of suggestions for less formal benchmarking that could be applied in postal regulation.

The paper then discusses the concrete potential for further development of benchmarking techniques for postal regulation in Germany. Such techniques are discussed for three possible applications: First, benchmarking can inform the design of services baskets within the German price cap regime. Second, benchmark analysis of prices can support price control decision. Related to access prices, we argue that comparisons of prices structures, rather than price levels alone, should be considered. This method may as well provide indications for predatory prices. Third, various benchmarking techniques can inform decisions about X-factors used by price cap mechanisms. The paper distinguishes between methods that assess expected efficiency gains immediately after liberalization ("special potential") on the one hand, and methods for assessing the "regular efficiency gains" for an industry on the other hand. For the first case, the paper compares development of total factor productivity in liberalized network industries. For the second case, “nature-of-work” models develop benchmarks without using detailed information from other postal operators. This method uses data about productivity in sectors that have long been exposed to competition. It therefore offers the opportunity to overcome typical problems of benchmark analysis in the postal sector that relate to the lack of effective competition and the small number of firms operating in the market. [Full text available in German only]

Diskussion Paper is available for download.

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