Spurring Competition in the Postal Industry : The Liberalization of the Mailbox and Collection Network

ABSTRACT

Though there has been much progress in the debate on the privatization of Japan Post, not enough has been said on the question of how to create competition in the postal service. When the mailing operation, which accounts for over 80% of the postal service market, was incorporated in April of 2003, private businesses were officially allowed to enter the market. Up to date, however, no private company has entered the primary division of the mailing service market and the monopoly on this service continues. The number of conditions required for entry, and the amount of leeway given to the Ministry of Internal Affairs and Communications (MIC) in granting permission are two important reasons for this.

Introducing competition into the mailing service market will enrich the community through lowered costs and diversification of services. First and foremost, however, this will require that the infrastructure extending from the mailboxes to the regional branch offices be put back under national ownership when Japan Post is privatized. This arrangement will make it possible for all those operations that deal with the collection of mail from the mailboxes, the processing of the mail up until it reaches the regional branch offices, and the sorting of mail for the various private mailing businesses to be commissioned to private companies through general competitive bidding. The privatization of Japan Post will be the only opportunity to so liberalize this infrastructure.

Moreover, in order to further stimulate competition, the government must undo the regulations that say consignments, agreements, and contracts in the mailing services are allowed only under "special" conditions; all those companies that satisfy a single set of consistent standards should be free to do business. In other words, in terms of permission to enter into the nation-wide delivery network, business consortiums should be treated the same way as single businesses. In order to minimize the arbitrariness in the MIC's decision making, the government must also review the regulations governing entry. It will be important to eliminate some, ease others, and then put the essential provisions into law. Finally, it will be important, amidst the development of substitute communication methods - e.g. fax, Internet, mobile phone - to think about easing the requirements for universal service, and to expand the private company's freedom to design new business models.