The residual monopoly
Pillars of finance for the universal service
After several steps to open up the parcel and letter market, Swiss Post has still held a residual monopoly for domestic letters below 50 grams since 2009. The proceeds from domestic letter business up to 50 grams provide an important contribution to financing the universal service.
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Switzerland currently enjoys a reliable, high-quality and reasonably priced universal service for postal services and payment transaction services, which is financed using proceeds from Swiss Post’s services and the residual monopoly.
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Without this residual monopoly, the funding of the universal service would be called into question as far as Swiss Post is concerned. In light of declining letter volumes, Swiss Post revenues alone will not suffice in the long term. The contribution from the residual monopoly would need to be offset. There are, however no alternatives of equal value in sight. The inevitable consequence would therefore be a reduction in performance and quality in relation to the provision of the universal service.
At the same time, the widespread expectation that full market deregulation would lead to falling prices is impracticable in the case of the letters market. Swiss Post expects that the opposite would happen, with steadily rising prices, because the declining volumes would lead to higher unit costs (see also the Pricing dossier). While in terms of the monopoly – the applicable law sets fixed price caps – prices are regulated by the Federal Council, without the monopoly, prices would generally need to be determined by the market. For these reasons, Swiss Post has concluded that the ending of the residual monopoly would also bring more disadvantages than advantages to its customers.
Steps for reform/opening up the market
Swiss Post holds the following viewpoints
- With the exception of the residual monopoly on letters up to 50 g, Swiss Post is subject to competition. For instance, it faces major competition in the parcels market.
- The residual monopoly makes a contribution towards financing the universal service. In order to finance the universal service obligations, Swiss Post already contributes a share of its earnings from services outside the universal service.
- If the residual monopoly were to be ended, this financial contribution would have to be offset by alternative sources. There are, however no alternatives of equal value in sight. Adjusting the universal service obligations would therefore be inevitable.
- The expectation of falling prices following deregulation is impracticable in the letters market.
- The disadvantages of ending the residual monopoly far outweigh the advantages.