Eesti Post could charge more for slower service in future

Eesti Post would be allowed to charge cost-based prices instead of ensuring affordability in the future under a new proposed legal change and delivery times could take longer. Discussions about prices are ongoing.
Sending a standard letter domestically costs €1.30. But bosses at Eesti Post have argued for years that far higher fees should be charged for both letter and parcel delivery as the service costs are significantly higher.
The maximum price for universal postal services is currently set by the minister for regional affairs, and the law states that the price must remain affordable. If Eesti Post finds the cost of providing the service exceeds its revenue, it can request additional funds from the Universal Postal Service Fund, administered by the Competition Authority.
However, Eesti Post is essentially the only contributor to this fund, meaning that regardless of how money circulates, the state-owned company continues to incur losses.
The draft legislation prepared by the Ministry of Regional Affairs aims to change the system so that politicians would play a smaller role in price setting. Instead, the provider of universal postal services would propose prices, which would then need to be approved by the Competition Authority.
Politicians would still have an indirect say in the price of postal services. Sigrid Soomlais, deputy secretary general at the Ministry of Regional Affairs, said the Competition Authority would base its pricing decisions on a methodology established by ministerial regulation.
"This methodology must take into account market demand, the general economic situation, and the costs of providing the service," she explained. "The regulation will be developed in collaboration with stakeholders, ensuring that price formation is predictable over time."
Expected price increase remains uncertain.
Soomlais explained that work on the regulation's content is just beginning, so it is unclear how much the cost of universal postal services might rise. The explanatory memorandum for the draft postal law suggests that the cost-based price for sending a standard letter could be €1.70. The Competition Authority has suggested the price could be €2.20.
"We need to determine the exact fair price for a letter during discussions on the methodology," the official said.
The draft proposal notes that 70 percent of the costs of providing universal postal services consist of labor expenses. Eesti Post CEO Mart Mägi said that low fees for universal postal services prevent the company from raising employee wages. Employees have even threatened the state-owned company with a strike.
Soomlais did not specify the extent to which labor costs would be included in the future pricing formula. She noted that wage levels are an internal matter for the company but admitted that the service is currently underfunded.
"At the same time, we must ensure that the service does not become prohibitively expensive for people," Soomlais said. "We need to strike a balance between these two aspects."
The draft law also provides for a transition period to the new pricing model. Until 2030, prices for universal postal services would not be allowed to increase by more than 20 percent per year.
Delivery speed would be agreed upon by ministers
In addition to allowing the company to charge more for letter and parcel delivery, the draft law would relax the rules on how the service is provided.
For example, current legislation stipulates that a €1.30 standard letter must be delivered within three business days, while a €2.30 express letter must arrive within one business day. Under the new rules, Eesti Post would have up to five business days to deliver a standard letter and three days for an express letter.
"Perhaps the current strict delivery speed requirements are excessive in some cases," said Soomlais, noting that letters no longer carry time-sensitive information as they once did. "Our research shows that 90 percent of letters sent are Christmas cards, so speed is not as critical anymore."
In addition to easing delivery speed requirements, these rules would be moved from legislation to ministerial regulation, making it easier to adjust them. "The idea is that aspects requiring greater flexibility should be regulated through ministerial orders," Soomlais said.
The current requirement for delivering periodicals, such as newspapers and magazines, six days a week would also be removed from the law. Instead, the regulation would mandate delivery at least five days a week, allowing for easier adjustments in the future.
Eesti Post had requested even more freedom, such as the ability to deliver letters in some areas only three days a week. This proposal was not supported by the Ministry of Regional Affairs, meaning the requirement to ensure letter and parcel delivery at least five days a week will remain in the law.
"The main goal is to ensure people's confidence that this service will remain accessible," Soomlais said.
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Editor: Helen Wright