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End of an era

October 2, 2014

Dr Franklin Ali PhD (left) presented 'Universal Postal Service in the 21st century: the new world order' at the Customer, retail and payment solutions session during the Post-Expo Innovation Conference in Stockholm in September 2014. Elmar Toime (right) moderated the event.

 

The global postal sector is faced with great uncertainties about mail volumes, technological changes, and a widening gap between the industrialized countries and the developing countries. The postal sector has undergone a significant transformation and the landscape has changed dramatically in recent years. The new information and communication technology will continue to reshape the postal industry.

According to a report published by the International Telecommunications Union, by the end of 2014 it is forecasted that there will be over 3 billion internet users; representing 40% of the world population and reflective of over 200% increase since 2009. Similarly, mobile broadband subscriptions is expected to be at 2.3 billion; representing over 400% increase since 2009. By the end of 2014, it is expected that 76% of online adults worldwide will be using social media. The increasing reliance on internet and social media will continue to reshape the way postal customers behave in the market.

Against this background there is a growing need to improve the quality and efficiency of the postal network to satisfy the ever-demanding customers of post. Therefore it is a necessity that postal administrations engage in postal transformation both in the industrialized and developing world. Greater competition, dynamic technological changes, globalization and higher customer expectations have created a robust environment for postal reform. The unique challenge facing the sector is the holistic development of universality of the global postal network. The widening gap between industrialized and developing countries must be arrested, as a matter of urgency.

In this scenario the continued provision of the traditional universal postal service (UPS) in line with the spirit and intent of the Universal Postal Union (UPU) Conventions becomes increasingly difficult, even impossible. It is evident that the postal environment cannot sustain the traditional UPS and to continue to do so would only serve to make UPS increasingly irrelevant. The UPS needs to be rescued and resuscitated by employing dynamic and innovative solutions that are applicable and relevant to the needs of postal stakeholders, customers and investors interacting in the increasingly sophisticated and complex global society of the 21st. century.

The UPS is a contentious and highly complex concept; given that it seeks to fulfil the basic needs of postal customers and stakeholders in the global postal fraternity of 192 countries affiliated to the UPU. Herein resides the fundamental weakness of the UPS; simply put it is a prescriptive model that seeks to address a multiplicity of needs in a turbulent and dynamic postal environment. In addition, information and communication technologies (ICTs) have drastically changed social and business communication and have engendered a strong decline in the traditional letter mail business. The counter to this threat is the need for postal operators worldwide to adopt ICT infrastructure within the framework of the universal postal service and build capacity to diversify into new e-services to their customers.

Faced with competition from private operators on the one hand, and faster alternative means of communications on the other, the traditional mail business of most public postal operators is under threat. As a result, postal operators are searching for new business opportunities, particularly in e-commerce and related ICT solutions.

In addition to the economic and technological upheavals, there is much disparity in application of the UPS across various regions. Many countries continue to hold on to the traditional UPS, even though their markets have outgrown it. Postal revenues from reserved services, owing to declining volumes in most geographic zones, are not sufficient to meet the universal service obligation (USO) costs, far less profitability targets of postal operators. Stringent cost reductions measures by some postal operators are not arresting the spiralling losses; rather they serve only to dilute an already weakened UPS. The complexity of the universal postal service requires a flexible, dynamic and innovative solution to make it more relevant and applicable to the global postal sector of today and in the future.
The diagram below contains the overall framework for the redefining and refocusing of the UPS to better meet the future needs of the global postal sector in the 21st. century. 


Above: The Capacity/Market Based Model for Postal Services

 

As depicted, the Capacity Based Model for Developing Countries is on the lowest end of the postal development continuum on the left, while the Market Based Model for Developing Countries is on the highest end of the continuum to the right.

It should be noted that the continuum for the evolution of the universal postal service provides a flexible framework for the redefining and refocusing of the UPS to better meet the future needs of the global postal sector. In essence the model recognizes that member countries of the UPU are at different stages of development across the world. Countries that are at the lower end of the continuum have the opportunity, over time, to aspire to postal development that can move these postal entities up the continuum closer to developed country status.

The continuum recognizes postal reform plans can stall or fail and this can result in such postal entities sliding down the scale of postal development. Subsequent improvements by these postal entities will see, once again, an upward movement closer to a market based approach for the universal postal service.
It is the flexibility and adaptability of the capacity/market based model that makes it particularly applicable and relevant in the quest to refocus and redefine the universal postal service in keeping with the needs of the postal markets in the 21st. century.

In summary, the model recognizes that member countries of the UPU are at different stages of development across the world. Many developing countries have been left behind in the technology race and with limited investment capital; any hope of voluntarily catching up any time soon is extremely unrealistic. By including an ICT component in the revised definition of the UPS deemed binding to member countries, the UPU will, in effect, place a stronger mandate to its membership to have the ICT component included under “basic postal services”. This is vital going forward, since growing numbers of postal customers now and in the future will come to expect these services and failure to meet their needs will simply result in them seeking out other service providers. This is the push-pull effect that will lead to the strengthening of the weaker links in the global postal “chain”, that for so long has been touted as the single greatest asset of the collective UPU membership.

October 2, 2014

 

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