POSTAL and DELIVERY SERVICES: Pricing, Productivity, Regulation and Strategy Topics in Regulatory Economics and Policy Series
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POSTAL AND DELIVERY SERVICES: Pricing, Productivity, Regulation and Strategy Topics in Regulatory Economics and Policy Series Michael A. Crew, Editor Center for Research in Regulated Industries Graduate School of Management, Rutgers University Newark, New Jersey, U.S.A. Previously published books in the series: Crew,M.: Pricing and Regulatory Innovations Under Increasing Competition Crew, M., and Kleindorfer, P.R.: Managing Change in the Postal Delivery Industries Awerbuch, S. and Preston, A.: The Virtual Utility Gabel, D. and Weiman, D.: Opening Networks to Competition: The Regulation and Pricing ofAccess Zaccour, G.: Deregulation ofElectric Utilities Young, W.: Atomic Energy Costing Crew,M.: Regulation Under Increasing Competition Crew, M.A. and Kleindorfer, P. R.: Emerging Competition in Postal and Delivery Services Cherry, B.A.: The Crisis in Telecommunications Carrier Liability: Historical Regulatory Flaws and Recommended Riform Loomis, D.G. and Taylor, L. D.: The Future of the Telecommunications Industry: Forecasting and Demand Analysis Alleman, J. and Noam, E.: The New Investment Theory ofReal Options and its Implications for Telecommunications Economics Crew, M. and Kleindorfer, P. R: Current Directions in Postal Reform Faruqui, A. and Eakin, K. Pricing in Competitive Electricity Markets Lehman, D. E. and Weisman, D. L. The Telecommunications Act of 1996: The "Costs" ofManaged Competition Crew, Michael A. Expanding Competition in Regulated Industries Crew, M. A. and Kleindorfer, P. R.: Future Directions in Postal Reform Loomis, D.G. and Taylor, L.D. Forecasting the Internet: Understanding the Explosive Growth ofData POSTAL AND DELIVERY SERVICES: Pricing, Productivity, Regulation and Strategy edited by Michael A. Crew Center for Research in Regulated Industries Graduate School of Management Rutgers University Newark, New Jersey, U. S. A. and Paul R. Kleindorfer Risk Management and Decision Process Center The Wharton School University of Pennsylvania Philadelphia, Pennsylvania, U. S. A. ..... Kluwer" Academic Publishers BostoniDordrechtILondon Distributors for North, Central and South America: Kluwer Academic Publishers 101 Philip Drive Assinippi Park Norwell, Massachusetts 02061 USA Telephone (781) 871-6600 Fax (781) 871-6528 E-Mail <[email protected]> Distributors for aU other countries: Kluwer Academic Publishers Group Distribution Centre Post Office Box 322 3300 AH Dordrecht, THE NETHERLANDS Telephone 31 78 6392 392 Fax 31 786546474 E-Mail <[email protected] > " Electronic Services <http://www.wkap.nl> Library of Congress Cataloging-in-Publication Data ISBN-13:978-1-4613-7962-1 e-ISBN-13:978-1-4613-0253-7 DO I: 10.1007/978-1-4613-0253-7 Copyright ~ 2002 by Kluwer Academic Publishers. Softcover reprint of the hardcover 1st edition 2002 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, mechanical, photo copying, recording, or otherwise, without the prior written permission of the publisher, Kluwer Academic Publishers, 101 Philip Drive, Assinippi Park, Norwell, Massachusetts 02061 Printed on acid-free paper. CONTENTS Authors vii Sponsors xi Preface and Acknowledgements xiii Liberalization and the Universal Service Obligation 1. Putty-Putty, Putty-Clay or Humpty-Dumpty? 3 Michael A. Crew and Paul R. Kleindorfer 2. Funding the Universal Service Obligation under Liberalisation 31 Philippe De Donder, Helmuth Cremer, and Frank Rodriguez 3. Assessing Liberalization in Context 53 Michael Bradley, Jeff Colvin and Mary Perkins 4. Sustainability of USO in a Liberalized Postal Market 75 Anna Lundgren 5. A Comparison of the Burden of Universal Service in Italy 87 and the United States Robert Cohen, Carla Pace, Matthew Robinson, Gennaro Scarfiglieri, Rossana Scocchera, Vincenzo Visco Comandini, John Waller, and Spyros Xenakis 6. The Welfare Economics of Universal Service Standards 107 and Service Quality Ian Reay 7 . Two-Tier Pricing under Liberalization 127 Michael A. Crew and Paul R. Kleindorfer Cost and Demand Studies 8. Postal Services Cost Modeling 145 Jose Soares, Joao Con/raria, and Alberto Pimenta 9. An Econometric Study of Cost Elasticity in the Activities 161 of Post Office Counters Catherine Cazals, Pascale Duchemin, Jean-Pierre Florens, Bernard Roy and Olivier Vialaneix 10. Mail Demand in the Long and Short Term 171 Jean-Pierre Florens, Sarah Marcy, and Joiille Toledano vi CONTENTS 11. Productivity and the Substitution between Labor 191 and Capital in Postal Organizations Heikki Nikali 12. Disaggregated Letter Traffic Demand in the UK 203 John Nankervis, Sophie Richard, Soterios Soteri, and Frank Rodriguez Strategic Issues 13. People and Privatization 221 Mary S. Elcano, Robert A.F. Reisner, R. Andrew German and Margaret P. Crenshaw 14. Modern Postal Reform Laws 247 James I. Campbell, Jr. 15. Evaluation of a Public Post Office: A Canadian Experience 271 Dale Clark and Geoff Bickerton 16. Saturday Delivery: Who Provides It? Who Needs It? 299 John Haldi, and John T. Schmidt 17. Postal Administrations and Non-Postal Products 317 Robert W. Mitchell 18. USPS Finances: Is there a financially viable future 331 Alan Robinson and David Rawnsley 19. Postal Infrastructures and Economic Development 355 Tim Walsh 20. Assessment and Responses of Postal Sector Operators 373 to Electronic Diversions Alan R. Kane, David E. Treworgy, Edward L. Gamache and Ellen Y. Wong AUTHORS Geoff Bickerton, Director of Research, Canadian Union of Postal Workers (CUPW) Michael D. Bradley, Professor of Economics, George Washington University James I. Campbell, Jr., Attorney Catherine Cazals, Assistant Professor of Economics, GREMAQ and IDE!, University of Toulouse Dale Clark, National President, Canadian Union of Postal Workers (CUPW) Robert Cohen, Director, Rates Analysis & Planning, United States Postal Rate Commission Jeff Colvin, Manager, Product Cost Analysis, United States Postal Service Joao Confraria, Board Member, Instituto das Comunica~5es de Portugal Helmuth Cremer, Professor of Economics, GREMAQ and IDEI, University of Toulouse and Institut universitaire de France Margaret P. Crenshaw, Manager, United States Postal Service Michael A. Crew, Professor of Economics and Director of the Center for Research in Regulated Industries, Graduate School of Management, Rutgers University Philippe De Donder, Assistant Professor of Economics, GREMAQ and IDEI, University of Toulouse Pascale Duchemin, GREMAQ and IDE!, University of Toulouse Mary S. Elcano, Partner, Sidley Austin Brown & Wood LLP . Jean-Pierre Florens, Professor of Mathematics, GREMAQ and IDEI, University of Toulouse viii AUTHORS Edward L. Gamache, Manager, United States Postal Service R. Andrew German, Managing Attorney, United States Postal Service John Baldi, President, Haldi Associates, Inc. Allen R. Kane, Senior Vice President, United States Postal Service Paul R. Kleindorfer, Universal Furniture Professor of Economics and Decision Sciences and Co-Director of Center for Risk Management, Wharton School, University of Pennsylvania Anna Lundgren, Postal Advisor, National Posts and Telecom Agency, Sweden Sarah Marcy, Researcher, IDEI, University of Toulouse Robert W. Mitchell, Special Assistant to the Commission, United States Postal Rate Commission John Nankervis, Reader in Econometrics, University of Surrey Beikki Nikali, Research Director, Finland Post Corp. Carla Pace, Poste Italiane SpA Mary Perkins, Graduate Associate Professor of Economics, Howard University, Washington, D.C. Alberto Pimenta, crr Correios de Portugal SA David Rawnsley, President, Postal Services International Ian Reay, Liberalisation and Monopoly Policy Manager, Consignia pIc Robert A.F. Reisner, Vice President, Strategic Planning, United States Postal Service Sophie Richard, Senior Economist, Consignia pIc AUTHORS ix Alan Robinson, President, Direct Communications Group Matthew Robinson, Postal Rate & Classification Analyst, United States Postal Rate Commission Frank Rodriguez, Head of Economics, Consignia pIc Bernard Roy, Head of the Economic Modelling Department, La Poste Gennaro Scarfigiieri, Poste Italiane SpA John T. Schmidt, Director - Postal Regulatory Affairs, Pitney Bowes, Inc. Rossana Scocchera, Poste Italiane SpA Jose Soares, Adviser to the Board, Instituto das Comunica\!oes de Portugal Soterios Soteri, Senior Economist, Consignia pIc Joelle Toledano, Head of Economics and Mail Strategy, Strategic Direction, La Poste David E. Treworgy, Partner, PricewaterhouseCoopers Olivier Vialaneix, La Poste Vincenzo Visco Comandini, Director, Economic Analysis and Regulation Unit, Poste ltaliane SpA John Waller, Postal Rate & Classification Specialist, United States Postal Rate Commission Tim Walsh, Director International Affairs, Consignia pIc Ellen Y. Wong, Consultant, PricewaterhouseCoopers Spyros Xenakis, Economist, United States Postal Rate Commission SPONSORS CRRI, Graduate School of Management, Rutgers University Center for Risk Management, University of Pennsylvania Consignia pIc (formerly) Royal MaiI/U.K. Post Office United States Postal Service Deutsche Post FedEx LaPoste R.R. Donnelley & Sons Company United Parcel Service United States Postal Rate Commission CTT Correios (Portuguese Post) Pitney Bowes Postcomm - Postal Services Commission PostenAB PricewaterhouseCoopers Siemens Electrocom Finland Post Canada Post Corporation Correos y Teh~grafos (Spanish Post) ICP - Instituto das Comunica~oes de Portugal Linx (A Division of EDS) Post Danmark Poste Italiane DMA - Direct Marketing Association National Association