Universal service in a digital world: The demise of postal services

This paper examines the impact of substitution of postal services with electronic communications and how this challenges the possibilities to maintain ubiquitous postal services with universal coverage. Denmark is used as an example, as this is one of the leading countries with regard to implementation of substitution of postal services with electronic communications. Postal service is a public utility like telecom, electricity, railways etc., and the postal sector has been subject to the same kind of market reforms, as those seen within other public utility sectors. These include the introduction of more competition and privatization. Within the EU, the guidelines for such reforms were formulated in the Green Paper on postal services (EU, 1991) From an institutional point of view, postal and telecom services have been closely related, as they have been part of the same public entity (the former PTTs). The first step in the telecom reform was in many countries to separate postal and telecom services, as telecom was considered better suited to be provided on market-based conditions, and to avoid cross subsidization from telecom to postal services. However, the point of departure for the two sectors is very different. While telecom in general is a profitable business, public subsidies have been necessary to ensure the provision of postal services. In addition, the basic service of letter distribution is challenged by digital alternatives...