At the beginning of March, Swiss Post announced its results for the 2018 financial year. The news of a decline in earnings hardly came as a surprise to industry experts: Swiss Post is caught in a constrictive web of regulation dating back to the last century, a time when a very different business reality prevailed. Switzerland still affords itself the unique and costly luxury of universal postal services the like of which cannot be found anywhere else in the world – a solution less and less able to meet the consumer needs of the public. PostFinance can no longer match the profitability levels of yesteryear, and is suffering from a combination of low interest rates and a ban on granting loans and mortgages. Last but not least, Switzerland has the only postal service in the world that still operates a bus company.
Streamline, unbundle, and privatize
In our latest study, Avenir Suisse competition economist Samuel Rutz calls for a redefinition of public postal services. Comprehensive reforms are necessary in all three areas of Swiss Post’s business:
- In the classic postal business (letters, packages, and post offices) the main question is how many basic postal services are still needed in the digital world, and how these services should be funded. Besides reducing the scope of basic services and tendering them out on a technology-neutral basis, Swiss Post’s remaining monopoly on letters up to 50 grams should be abolished. This would increase the competitive pressure on Swiss Post and open the door to modernizing the postal sector – even if Swiss Post were to continue as the sole provider of basic services in Switzerland for the time being.
- PostFinance should be completely privatized and liberated from its regulatory fetters. In the prevailing low-interest environment, the ban on loans and mortgages poses a growing threat to PostFinance. The institution should be converted into a private joint-stock company, and then Swiss Post should relinquish its majority interest. The overhauled mandate to provide basic payment services is a remnant from the past and should also be done away with.
- The postal bus scandal exemplified the risks this corporate arrangement poses to the state and taxpayers. PostBus Ltd, which does not have a basic service mandate, should be privatized and sold, and the ban on profits in the regional passenger transport business should be reviewed.
The overall conclusion is that the longer the long-due reforms of the postal sector are postponed, the greater the risk that taxpayers will end up having to foot the bill.