International Price Regulation
Our report finds that postal price regulation has been modernized in Australia, Canada, France, Germany, and the United Kingdom. In all countries but Canada, postal operators were given more commercial freedom to respond more flexibly to changing market conditions. Moreover, the scope of ex ante price regulation was generally reduced and today is typically limited to single-piece mail only.
Price cap systems with flexible X-factors that are reviewed by regulators periodically to ensure prices remain in line with cost trends have proven to be effective regulatory instruments. In many countries, negative X factors had been determined by regulators lately, reflecting increasing unit cost. Postal unit costs increase when volumes decline as fixed costs must now be shared by fewer postal items. As a result, postal regulators have approved prices increase above inflation.
The study is available for download.