In the coming years, the delivery of printed newspapers should be secured by a fixed-term State aid in rural areas. Also the renewal of the postal regulation should be continued in order to meet the need and expectations of a changing market. In addition, the operating conditions for domestic E-commerce and logistics need to be strengthened.
The postal and media industry is undergoing a dramatic transformation. The number of letters delivered in Finland has decreased by half within ten years, and the delivery volume of printed newspapers has fallen to 1950s’ levels. An average, Posti delivers to Finnish households only 8 delivery items per week. In the coming years, the amount of mail continues to decrease rapidly as the communication of citizens, companies and public sector becomes digital.
Posti has compiled a list of solution proposals for decision makers on how to secure newspaper delivery and Postal services also in future and how to strengthen operating conditions of domestic parcel- and logistics market as international competition is tightening.
“Posti is very concerned about how to secure the distribution of newspapers and the universal postal service, and how to arrange the delivery especially in sparsely populated areas in the next few years as letter volumes are falling rapidly. For subscribers and publishers printed newspapers play still a major role. We need to have a sustainable bridge to digital era,” says Heikki Malinen, President and CEO of Posti Group Corporation.
Securing newspaper delivery in rural areas by a fixed-term State aid
In particular, in order to solve the issue of newspapers delivery, State needs to provide structural solutions so that media industry can overcome the transition period of digitalization. In the coming years, it´s printed newspapers which require five-day delivery.
Posti proposes that the delivery of printed newspapers should be supported by temporary State aid, which would enable pluralism of information and possibility to read newspapers also in rural areas. In the coming years printed newspapers continue to play a key role for citizens in terms of access to information and freedom of speech.
“State could compensate the newspaper delivery by arranging a public tender between various delivery operators in the areas defined by FICORA, where the early delivery of subscribed newspapers on commercial terms has not been implemented. Belgium and Norway provide successful examples of compensation for newspapers. As another solution, State could compensate commercially non-viable postal services by an outsourced service model,” Malinen suggests.
Currently Finland is one the few countries in Europe State is not giving any compensation for mail or newspaper delivery. The European Commission allows member countries to take national measures to improve the financial stability of newspapers. Until 1995, newspaper delivery was supported with a delivery aid. At its largest, the aid was approximately EUR 60 million in a year.
The rapid decrease in delivery volumes increases the delivery unit costs for newspapers to unsustainable level. As the number of letters decreases, addressed and unaddressed publication items alike have to cover an increasing portion of the delivery network’s costs. Newspaper delivery is not regulated by the Postal Act, and it is an entirely commercial business.
In sparsely populated areas, mail delivery costs are, on average, over twice as high as in densely populated areas – and, at their highest, over tenfold compared to cities. Without government compensation, the conditions for the operation of some newspapers in rural areas are threatened to disappear because of high distribution costs.
Posti is not financed by taxpayers money – renewing regulation needs to be continued
The current Postal Act requires that letters with postage stamps are delivered five days a week in areas without early-morning newspaper delivery. Universal service covers only approximately 4% of all mail delivered by Posti.
In Posti’s opinion, the seriousness of volume development requires urgently continuation of easing postal regulation, in order to restrain the rising costs of mail delivery and to secure services for the citizens at the level they are needed in the future.
“Easing the universal service obligations would be logical step from the amendments made to the Postal Act in 2016 and in 2017. The purpose of the current legislation was to ensure that Posti is able to manage its universal service duties without financial aid from the state. However, the current Postal Act did not provide a permanent solution to the issue of universal service, merely bought a few years of additional time,” Malinen reminds.
Continuing universal service without public compensation requires considerable reduction of obligations.
Citizens are also in favor of the renewal of postal services. Approximately 2,000 Finns responded to Posti’s stakeholder survey last November. More than 60% of the consumers who responded to Posti’s stakeholder survey are in favor of reforming postal services in a way that universal service needs to be funded by tax revenues. The survey shows that Finns would ideally like to see mail delivery continue on market terms. About 44% of consumers agreed with the idea of supporting the newspapers delivery by State transport aid.
Supporting Finnish e-commerce and securing well-functioning logistics
One of Posti’s central goals is to improve the operating conditions for Finnish e-commerce.
“It is important to get Finnish e-commerce to growth path as well. Finnish e-commerce needs its own growth program,” Malinen suggests.
Currently, the trade balance for Finnish e-commerce is very unbalanced, because e-commerce items are more imported to Finland than exported. Customs clearance during flights should be made possible as well. This helps consumers and ensures effective implementation of future changes in VAT.
As e-commerce increases, service levels can be raised to the level of international major cities and we could begin delivering parcels six or seven days a week.
Posti highlights the importance to focus on improving transport and logistics conditions in the coming years.
“With effective logistics, we can improve the competitiveness for Finnish companies. Regulation and taxation must be competition neutral to all players in the sector, as competition in logistics is international. Road maintenance must also be guaranteed. For instance, Posti vehicles drive over 100 million kilometers every year, so the good condition of the Finnish road infrastructure is essential.”
Proposals for improving the operating conditions of the postal and logistics sectors:
- Securing newspaper delivery with a State aid in rural areas. State procures publication delivery through competitive tendering or outsourced services. Alternatively, a paper or digital newspaper order could be supported by granting a tax deduction from the order price.
- Continuing renewal of the Postal Act in order to maintain the universal service without public compensation.
- Creating a growth program for Finnish e-commerce. As the international competition increases there is need to improve operating conditions and export opportunities for the Finnish e-commerce and small businesses.
- Improving the operating conditions for logistics. Efficient logistics improve the competitiveness of Finnish companies. Regulation and taxation must be competitive neutral for all operators in the sector.
Source: Posti Group