Postal Monopoly to Be Removed - 17 November 1994
[ Last Updated 26 October 2005 ]
Media Statement from Hon Maurice Williamson, Minister Of Communications
17 November 1994
New Zealand Post's monopoly on the delivery of letters will be removed next year, Communications Minister, Maurice Williamson, announced today.
The Government will introduce legislation in 1995 to abolish NZ Post's statutory monopoly on the standard letter. Under the Postal Services Act 1987, NZ Post has the sole right to deliver letters weighing less than 200 grammes, for which a charge of 80c or less is made. Once the monopoly removed, other postal operators will be free to compete in allsectors of the postal market.
"Removing the monopoly will allow full competition and will offer substantial benefits topostal users," Mr Williamson says. "Prices for bulk mail can be expected to fall, and consumers will have increased choice in service providers and types of service."
"The entry of new operators into the market can also be expected to create some employment opportunities".
The decision follows an extensive review of the postal market completed last year. At that time, the Government announced that it would retain the monopoly for the time being, until concerns over maintenance of universal service and service quality could be addressed.
"The Government was conscious at the time that there was some public concern that removal of the monopoly would result in some services, especially to remoter rural areas, being reduced or lost. There were also concerns that the present levels of service, which provide 5 or 6 day a week delivery to most places, could be eroded. These concerns have now been addressed."
New Zealand Post has given undertakings to the Government that it will maintain its current service levels when further competition is introduced next year. A new Deed of understanding will be established between the Government and the Company, which will ensure that NZ Post:
- maintains its current delivery network nationwide;
- maintains its nationwide network of Post Shops and postal outlets;
- continues to provide five or six day a week mail delivery to the majority of delivery points, as now;
- continues to provide rural delivery service at the same frequency of delivery as now.
As well, NZ Post will not increase the price of the standard letter above the present 45c for a period of three years following the introduction of full competition.
"This will hold the stamp price at the level enjoyed by consumers since 1991, and will provide continued price stability for the foreseeable future" Mr Williamson says.
"The Government is committed to seeing an early date for the introduction of increased competition. Prospective new operators, however, will need to await the passage of legislation to abolish NZ Post's statutory monopoly before they are able to enter the letter delivery market."
Until the law is changed some time in 1995, NZ Post will continue to have exclusive right to deliver standard letters. If Parliament consents, the Government will seek to have new legislation in place to remove the monopoly by 1 July 1995.
Enquiries: John Spavin, Press Secretary (04) 471 9409
Proposed Postal Services Regime: An Outline
The following sets out the key elements that are proposed for inclusion in the new postal services regime, to be introduced in 1995.
- An amended Postal Services Act which:
- removes NZ Post's present monopoly on the standard letter post; and
- allows full competition in postal services from a given date (indicatively July 1995, subject to Parliament's approval);
- a transitional information disclosure regime to ensure that New Zealand Post;
- continues to meet social obligations provided under the Deed of understanding (discussed below); and provides access to its network for competitors on fair and reasonable terms;
- provisions securing the integrity of the postal system will continue, but will be extended to new operators, including requirements to pass on misdirected or wrongly addressed mail, and penalties for unlawfully opening letters;
- provides for regulations to assist the coordination of box numbers and address information if necessary.
- A new Deed of Understanding in which NZ Post undertakes to:
(i) maintain its service levels and scope of the present network at current levels, including:
- 6 day a week deliveries to more than 95% of delivery points;
- 5 or 6 day a week deliveries to more than 99.8% of delivery points;
- 1 to 4 day a week deliveries to the remainder of delivery points;
- a network of at least 880 postal outlets and post centres (excluding stamp retailers);
(ii) hold the stamp price of the 45c letter at 45c for three years;
(iii) make changes to delivery service levels only in clearly defined circumstances, such as shifts in population, at the request of a community in a particular area; or where an alternative operator provides equivalent services under contract to NZ Post;
(iv) to enable competing operators to offer nationwide service, NZ Post will provide access to its network for competitors on terms and conditions that are no less favourable than those offered to customers.
- The Deed will ensure continuity and stability in services to the public while competition develops. The Deed will be established for an indefinite period, but with provision for a review after three years, to ensure that the required levels of service remain appropriate as new competitors enter the market and begin to provide alternative services.
- In return for continuing to meet the above social obligations, NZ Post will continue to be designated as New Zealand's official postal administration to the Universal Postal Union (the international organisation of postal operators which maintains the international postal network) for at least ten years. New Zealand Post will also retain the exclusive right to issue "official" New Zealand postage stamps for philatelic purposes. This exclusive arrangement will initially be for a period of 5 years, after which time the Government may, if appropriate, nominate additional carriers for UPU purposes.
Postal Regulatory Environment: Key Issues
1. What benefits can be expected from removing NZ Post's monopoly on the delivery of letters?
Removing the monopoly and allowing further competition will offer benefits in terms of:
- lower prices for a range of customers, particularly business users. This will lower businesses' operating costs generally, thus increasing the competitiveness of our business sector. It should also help export competitiveness;
- further improved performance and efficiency for NZ Post. The company has performed extremely well since corporatisation. Increased competition will, however, provide a spur to achieving even greater efficiency and responsiveness to consumers;
- new entrants to the market, providing both new services, disciplines on prices to consumers and some additional employment.
- increased consumer choice.
- there have been demonstrable benefits in other industries where competition has been introduced, such asairlines and telecommunications.
- for air/transport, benefits have included lower prices, introduction of air bridges, additional flights and in-flight meals.
- in telecommunications, prices for toll calls have fallen by some 50 percent and service standards have improved substantially.
2 The Government announced last year, following an extensive review of postal services, that it would retain the status quo. Why has it now decided to remove the letter post monopoly?
- When the Government announced its decision last year, it did not rule out the possibility of introducing further competition at some time in the future.
- The Government said at that time that there would be benefits from removing the postal monopoly, but that further consideration needed to be given to social issues, particularly to ensure that a reliable nationwide postal service was maintained and that there would be no reduction in the present level of services offered to postal users. These concerns have now been addressed.
3 Will universal service and service quality be at risk if NZ Post's monopoly is removed?
- No. The Government is committed to ensuring that all New Zealanders continue to enjoy a high quality, reliable postal service, nationwide.
- NZ Post has undertaken to maintain the extent of its delivery network, its network of post shops and postal outlets, and current frequency of delivery (that is, 5 or 6 days a week to most delivery points in New Zealand).
- A new Deed of Understanding will be established between the Government and NZ Post to confirm these undertakings from the date at which the monopoly is removed.
4 Is NZ Post able to support ongoing social obligations?
- Yes. NZ Post is now a very profitable and efficient business.
- It has progressively been passing some benefits of its increased profitability to customers, for example reducing prices for business mail last year.
- Mail volumes are showing continued growth.
- NZ Post is therefore expected to compete successfully and to be able to maintain service levels as specified in the Deed.
5 What will removal of the monopoly mean for the price of the standard (45c) letter?
- The price of the 45c letter will be capped at this level for a period of three years, to ensure that casual mail continues to enjoy the price stability. This will maintain the stamp price at the same level at which it has been held since 1991.
- Prices for bulk users of the mail service can be expected to fall as competitors enter the market.
- Further price reductions for the standard 45c letter are likely to depend upon competitors establishing efficient new services.
6 How will the rural delivery network be affected?
- NZ Post Ltd will continue to provide a nationwide service, on the basis of the delivery network that it now has in place. Customers already receiving rural delivery will continue to do so at the same frequency of delivery currently provided.
- NZ Post's decision to abolish the rural delivery fee from 1 April 1995 will remain in place.
- At the same time, other postal operators will be free to provide services to rural residents in competition to NZ Post, should they wish to do so. In some areas of the rural network, this may lead to increased choice or flexibility of service for rural customers.
7 Is removal of the monopoly a first step towards privatising NZ Post?
- The Government stated last year that it did not intend to privatise NZ Post.
- The Government will continue to retain ownership of the company for the foreseeable future.
- Increased competition is being introduced as it will provide clear benefits for postal customers and for the economy. These benefits can be obtained without privatisation.
8 Increased competition will mean that there are more postal operators in the market. Could this mean risks for the security of mail and the integrity of the postal service?
- This is most unlikely. Other forms of mail delivery, such as couriers, already operate in competition with NZ Post, and there have been no major problems over security and integrity of service.
- New operators will, in any case, be bound by provisions in the Postal Services Act, which currently apply only to NZ Post, concerning the handling of mail (ie prohibitions on opening of mail by an employee of the operator, except in certain circumstances prohibitions on the carriage of dangerous substances; prohibition on divulgence of information concerning the contents of mail). Similarly the public will continue to be bound by existing provisions in the Act concerning requirements to return incorrectly addressed mail and unlawful opening of postal articles intended for another person.
9 Will removal of the monopoly mean job losses?
- It will not automatically lead to a loss of jobs. Competition will provide scope for new operators to enter the market. This should also provide opportunities for some new job creation.
- New opportunities should also be generated by strong growth in postal volume and expanded rural delivery arrangements.
10 Will other operators be able to have access to NZ Post's network, in order to offer nationwide service?
- Yes. NZ Post has provided undertakings that it will offer access to its network to other operators on the same favourable terms and conditions that it offers to customers.
- These undertakings will be included in the Deed of Understanding which will be established between the Government and the company when the monopoly is removed.
11 Could we expect to see the same problems on access as have arisen in the telecommunications sector?
- Postal interconnection is a relatively straightforward matter and does not present the same technical complexity as telecommunications.
- Competitors do not therefore face the same problems of duplicating Facilities as arises in the telecommunications network.
- The Government is studying the outcome of the recent Privy Council decision on telecommunications.
- General competition law will continue to apply to NZ Post, to help assure new entrants.
12 Does the decision to abolish the monopoly have any implications for the announcement by NZ Post last week that it will no longer be charging a fee for rural delivery?
- The two issues are quite separate. The decision to abolish the RD fee was a commercial decision, taken by NZ Post.
- Removal of the postal monopoly will not alter the company's decision on the fee.
13 How soon will other operators be able to begin offering letter delivery services in competition with NZ Post?
- New operators will be able to offer letter delivery services from the date at which the monopoly is removed. This will require a change to the Postal Services Act 1987, which the Government aims to introduce in 1995. Until the new legislation enters into effect, New Zealand Post will continue, by law, to have a monopoly on the delivery of all items weighing less than 200 grammes, for which a charge of 80c or less is made.
- While the Government is keen to see competition permitted as soon as possible, prospective new entrants to the market should be aware that they will not be able to compete with NZ Post until the necessary legislative changes to the monopoly have been made.
14 What precedents are there for introducing full competition?
- A number of other countries have introduced full Competition in postal services, namely Sweden, Argentina and Finland. In Sweden, the entry of City Mail into the market in competition with Sweden Post (a state-owned corporation) has seen prices drop between 25 and 30 percent for computer addressed mail. City Mail currently provides urban services but is also looking at entry into rural delivery services,
15 What will the removal of the monopoly mean for philately?
- NZ Post will continue to be designated as New Zealand's postal administration to the Universal Postal Union (the international organisation which maintains the international postal network).
- This designation will also carry the exclusive right for NZ Post to issue official New Zealand postage stamps for UPU purposes for a period of at least five years.
ends.
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