Discussion Papers

Alex Kalevi Dieke, Sonja Schölermann

Ex-ante-Preisregulierung nach vollständiger Marktöffnung der Briefmärkte

Nr. 294 / April 2007


In European postal regulation as well as in economic literature there is no common sense about the appropriate scope of ex ante price regulation in liberalised markets. In some EU member states all universal services of the incumbent are subject to ex ante price regulation. In others, ex ante price control is restricted to e. g. monopoly services or single piece mail. According to the German postal law, ex ante price regulation will be limited to single piece mail (less than 50 pieces) after full market opening.

The study aims at determining the appropriate scope of ex ante price regulation in German letter market after full market opening (scheduled for 2008). For this purpose, relevant concepts for market definition, market analysis and the assessment of significant market power under the Community regulatory framework for electronic communications have been applied to German letter market.

The geographically relevant market is the whole German territory. We have identified eleven relevant product markets, thereof three markets for private customers (national letters, international letter, registered) and eight business customer and worksharingmarkets. The term “private customer” refers to both households and low-volume business customers. Worksharing products cover only parts of the postal value chain and require pre-sorting or other preparatory work from senders. All market definition and analysis has been conducted using publicly available information.

A product market may is susceptible for ex ante regulation only if (i) high and nontransitory entry barriers exist, (ii) the market does not tend towards effective competition and (iii) the application of competition law alone is insufficient. According to our analysis, all three criteria are met only for three markets: markets for private customers. The key barriers to entry in these Main markets are substantial sunk costs for access networks and marketing. These sunk costs are significant in relation to the small size of the market for private customers. In addition, there are economies of scale in mail delivery which alone, however, we do not regard as barriers to entry in the German market. For a relevant time horizon following full market opening, a tendency towards effective competition in private customer markets cannot be expected . The application of competition law alone does appears insufficient to address the market failures. We have not found significant and non-transitory barriers to entry in other markets (business customers, worksharing).

In markets for private customers, Deutsche Post AG has significant market power and ex ante price regulation is necessary. By contrast, ex ante price regulation seems inappropriate for German markets for business customers and worksharing products– for a lack of high and non-transitory entry barriers. The current provision of the German postal law–to limit ex ante price control single piece mail—generally appears adequate. Yet, the dividing line of 50 pieces should be re-considered based on a customer survey. [only a german version available]

Diskussion Paper is available for download.

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