Delve deep into your memory and you will remember the other day I was arguing that the roads should all be sold off to the highest bidder. Many of you came back with good arguments as to why this shouldn’t happen. There is a good case to say that certain infrastructure which, due to its very nature, has a natural monopoly. We wouldn’t, for example, expect a business to rip up the roads and buildings in order to connect a competing water pipe to our homes. It’s probably unlikely that road or rail companies would build directly competing parallel routes.
So, that said, what is the best way of organising our natural monopolies? Is a privately owned, regulated monopoly (e.g. water) better than a contrived market (e.g. gas and electricity)? Can the wholesale part of an industry be separated from the retail section (e.g. fixed-line telephones and broadband)?
The privatisation of the phones has largely been judged a success. The cost of phone calls has collapsed since the introduction of the slogan “it’s you we answer to” and the quality of the service has improved significantly. We now have a choice of who we route our calls via and a choice of who we buy our broadband from. But it’s not perfect: the local loop is owned by a hived off bit of BT which has to deal with the retail bit through a contrived system so as not to give the retail arm an unfair advantage over other providers. That means, as I can personally attest, that sorting out a line problem is incredibly inefficient and time consuming. No longer can a BT call centre simply take details and send an engineer out to investigate.
The gas and electricity setup seems to work reasonably well, but within regions the pipes and wires are a regulated monopoly. Sorting out a case of mistaken meter identity is a nightmare, I can tell you. Accusations are constantly made that the big players fix the retail market to their advantage.
I can’t say that the water system is particularly praise-worthy. Customers seem to be the water companies’ absolute lowest priority. The railways seem to have become very much more expensive than they used to be without the service improving a great deal. The tracks and trains have absorbed a huge amount of subsidy since privatisation, whereas beforehand the profitable routes were able to cross subsidise the less-used ones.
You can guess where this is leading. What to do about the blasted Royal Mail?
Up until quite recently the Mail provided a good service for a reasonable price. It even made a profit. Then various things happened and now it provides a terrible service at price which seems to be increasing much faster than inflation. Mail goes missing or turns up badly damaged or at the wrong destination. Often there is simply no service at all. I am in trouble with Bill Quango MP for criticising the service, but I don’t think it’s good enough to simply roll over and say “nevermind, didn’t need that letter anyway!”. We need a good postal service. A service which delivers to every address in the country seems to me to lend itself to a public monopoly like the roads.
If we are to have a public monopoly, though, there must be some way to ensure that customers get the service they need. We can’t go on with a producer led industry as we have been. This is being driven home by these strikes. There seems nothing customers can do to get around the dispute between the management and the unions. Perhaps public monopolies such as the post, fire service and NHS should work under a different set of employment rules from private sector employees. There should be no strikes permitted in the public sector. There should be proper oversight of the way the system is managed – either by Parliament or a regulator. There should be service guarantees and a way for customers to be compensated when it goes wrong.
It isn’t as simple as public v private. It’s about organising services so that they provide the kind of service that people need and want rather than the kind of service that the employees feel like providing. It’s about having a sensible and transparent framework so that people can see what they are getting and how they are paying for it.
If something is indeed a “natural” monopoly, what this should mean is that it is a basic service where the economics suggest a single supplier would be the most efficient. In that case the corollary is for the management and running to be kept as simple and straightforward as possible, and diected to the persons who need the service. This was lost sight of in the old nationalised industries which became effectively private empires with no thought for the customer or the future. Quite how you do organise it, I am not sure, but someone somewhere in the world must have managed it.
I would not know where to to start with a list of my local postal service’s faults…whatever happens it can never get any worse and I do mean never.
Gas is not a contrived market !!
and in well-designed regulatory regimes, neither is electricity
believe it or not, the (natural monopoly) pipes-&-wires aspect of the UK’s energy market are the envy of the world
ND – whoops I made my point badly. You are right, the wholesale market is a market. I mean the pipes and wires to our homes – they are heavily regulated to contrive to provide free competition between suppliers but it works but only up to a point. If you have a problem with the physical side of the equation (as I did) there is no incentive for anyone to sort it out in a customer friendly manner.
It is impossible to have a state mail carrier monopoly anymore due to EU regulation. Unless we leave the EU the mail must accept competition. That is the situation.
The competition does not have to face the same challenges and costs as Royal Mail.They have no requirement to deliver to every household, to have to collect from 12,500 post offices and every post box in the land every day as a minimum.
So the competition takes the profitable bits and dumps the unprofitable on RM. This much we know, and helps explain why it is like it is.
You want a service similar to the modern BT that has taken 25 years to achieve. BT went through the same process that RM will have to go through. Privatised in 1984 the telecoms market was only opened to proper competition in 1991. BT had a long time to get itself ready. Even then it nearly went under in 2001 with £30BN of debts. This year it lost 1.3bn.RM has been opened to competition without the luxury of building up profits and gradually reducing workforce to ensure smooth transition. BT had 235,000 workers in 1985 and 100,00 in 2004.{figures from CWU, ironically the old GPO’s, including BT, union} This despite Telecoms being THE growth sector of the 1990’s.
Anyway, that is for the future.
On the specific point of service, which I am not criticising you on BE, just have a different outlook, RM could be a lot better. Much better. But.. you know the but is coming.. it does deliver 80 million items each day.
Couriers leave items at the wrong addresses, in the rain, on the doorstep etc every day. My business posted 1000 packets by parcelforce last year and one went astray. In Lithuania, where RM has no control over who delivers but has to pay me out anyway.
My insurance company sent me a policy with someone else’s name on it. The airline lost our bags on the last trip. The car dealer didn’t order my new car and consequently the special deal was lost. The bank didn’t direct transfer the money for a property deal costing thousands.. I bought a CD from HMV and it had a different CD in the box.
Mrs Q just had Laser eye surgery that a} didn’t work properly, b} cost far more than advertised because of {a} and C}, left her with an infection in both eyes that required hospitalisation for a fortnight, blinded. This from the top eye hospital in the country. All within the last few months.Nothing to do with price, just the human element and RM has more of that than most.
So RM delivered you a letter in a plastic bag because it tore, or got wet? They delivered it.Isn’t that the important bit? Everyone screws up and when it happens to you its a problem. But, the point I was trying to get across, is within their field, when not on strike, their hit rate is very good, despite all the problems, many self inflicted, that they have.
RM has a huge warehouse in Belfast where people are employed to decipher handwriting, search items for clues of origin and try to match the mail to the envelope of the one that has come unglued. If they really didn’t care why would they not just chuck them all in a furnace?
As for RM compensation every letter carries up to £39.00 compensation for free. 100 x compensation for the item you bought, a stamp at 39p. What compensation do you get when you buy something of equal value like a packet of starburst?
Why am I defending them? They are my least favourite client after CWU. Sod ‘em both.
One wonders if it is not all deliberately orchestrated, making sacrifical lambs out of red herrings like the post office and other side issues to keep people foaming about the small potatoes ,overlooking what they are really pulling.
Shoot the lot of them!
BQ, I don’t think you can blame BT’s debt crisis at the turn of the millenium on anything to do with the UK retail market. Didn’t they go on a big debt-fuelled international buying spree? Further to that, aren’t their recent losses mainly due to their ‘Global Services’ division?
As for ‘proper competition’ in 1991, I worked in outbound consumer sales at BT in 1999, our prices were fixed by the government and we weren’t allowed to mention the names of any other companies. It’s different now of course, but this regulatory tug of war between telecoms companies, with OFGEM trying to referee, is set to continue.
Now BT want the goverment to force the mobile networks to allow them access (because they made the blunder of selling BT Cellnet?) and for consumers not to be allowed to leave their landlines without a ‘pin code’, which they say will stop ’slamming’. The cynic in me would ask whether the real intention is that they want customers to have to speak to a retentions team before they leave?
That’s a very good question.
I have not even returned the worth of my toaster, let alone my car or TV.
Good luck with the exam. Success in this will give you seperateness from the proles.
Ignore my previous comment which is posted in the wrong place.
One thing that needs to be considered with regards to telephones is that privatisation coincided with huge technological leaps. This could be conflated with improvement because of privatisation – there is no other technology in which such huge bounds have been made.
“The tracks and trains have absorbed a huge amount of subsidy since privatisation, whereas beforehand the profitable routes were able to cross subsidise the less-used ones.”
Don’t forget that British Rail also used to be subsidised (e.g. £518 million in 1989/90 – see http://www.parliament.the-stationery-office.co.uk/pa/cm199091/cmhansrd/1991-01-21/Writtens-5.html).
And after privatisation, the number of poeple using the railways increased sharply (number of passenger journeys up 25% from 1996 to 2000), afer decades of decline under State-owned British Rail.