O UNIVERSAL SERVICE OBLIGATION n January 1, 2024, the universal service obligation (USO) was removed in Denmark due to a change in Danish postal law, reigniting a decades-long debate concerning the suitability of USOs worldwide in an increasingly digital market that has seen letter volumes plummet in recent years. Denmark’s drastic action could mark the start of a new stage of postal sector regulation, with rules relaxed around universal service, which typically requires a national postal operator to deliver letters to all its citizens throughout the country on a set number of days. In Denmark, PostNord has had the task of providing the universal postal service for almost 400 years. In recent years, however, this has been an increasingly challenging task. Since the start of this millennium, Denmark has seen a 90% reduction in letter volumes; the country was the fastest in the world to digitalize its mail. Maintaining the USO became extremely expensive, with the post receiving compensation from the Danish state since 2020 to cover any losses incurred. In 2023, this compensation was estimated to amount to Dkr150m (US$22.5m). Danish changes Recognizing the dwindling mail market, in 2023 the Danish government made the bold move to amend the Postal Act and allow the market to take care of providing a nationwide postal service from the start of 2024. Exceptions apply to mail for small islands and visually impaired people, and international mail, for which procurement processes are currently being carried out. PostNord Denmark is negotiating a transitional agreement with the Danish state to ensure delivery of such items of mail until the procurement processes have been completed. “The move has no immediate impact on PostNord’s parcel operations in Denmark,” PostNord said in a statement. The new law, however, creates a “new reality, which in turn means the implementation of a series of changes to our prices, offerings and organization,” the organization added. Specific details of this “new reality” are yet to be revealed by PostNord, which was unable to provide further comment to Parcel and Postal Technology International regarding the abolishment of the USO. It did, however, confirm that, “The adaptation of the mail business will be carried out in line with continuing market developments in Denmark.” It remains to be seen how customers will react to the new situation, but what is evident is that Denmark has sparked discussion around a potential new era of postal regulation, with other countries now also exploring how their USOs can be altered to help national postal operators survive in a highly competitive market. “USOs once provided an opportunity to build additional services onto a letter delivery spine, but as that operational backbone erodes it becomes an Alan Barrie, Delivering London/YEEP! expensive liability rather than an asset,” and Stamp Free says Alan Barrie, chair at Delivering London/YEEP! Lockers and chair at Stamp Free. “Postal operators can no longer justify an everyday service to all addresses, and they are exposed in an increasingly competitive parcel market.” POSTAL OPERATORS CAN NO LONGER JUSTIFY AN EVERYDAY SERVICE TO ALL ADDRESSES” The UK situation ABOVE: The rise in parcel volumes was a catalyst in PostNord’s decision to move away from the USO RIGHT: Changing consumer habits mean the USO is not fit for purpose Other countries currently considering changes to their USOs include the UK, Australia and Germany. In the UK, the postal regulator Ofcom has recently called for a national debate on the future of the universal postal service, stating that reform is necessary to secure the service’s long-term future. According to Ofcom’s Post monitoring report: Postal services in the financial year 2022-23 , the overall trend for letters has seen accelerated decline in 2022-2023 following the post-pandemic recovery in 2021-2022, with UK addressed letter volumes decreasing by 9.5% to 7.3 billion items in 2022-2023. This compares with an average 5% yearly fall between 2015-2016 and 2019-2020. Ofcom is currently inviting views from interested parties on its analysis of the USO and on two primary options for change, in particular. Those options are 40 www.ParcelandPostalTechnologyInternational.com March 2024