THE Office of Utility Regulation has a warm and cuddly acronym – OUR.
The question is how much its approach really reflects ‘our’ (as in the people of Guernsey’s) aspirations. In some ways, it has to, because the broad-brush policy for the OUR is laid down by the States. However, that still leaves it plenty of latitude to decide more detailed policy, which can have a huge impact on the island’s utilities. Of course, it’s right it should have that autonomy – what’s the point in the States owning a dog and wagging its own tail? The real issue is whether the way the OUR is using those powers is to the benefit of Guernsey consumers or not.
The answer to that question will depend on one’s own philosophical view of the benefits of competition. Those who feel that all competition is a good thing will have considerable sympathy with the OUR. Despite its remit being regulation – which sounds like the opposite of competition – there is no doubt that the OUR has a very strong free-market bent.
This was graphically demonstrated during discussion of a possible ‘open skies’ policy. One OUR employee mused that if, because of deregulation, some key links with the UK became seasonal rather than year-round, that mightn’t be such a bad thing. From a purely academic, free market, supply-and-demand perspective, that’s quite correct. From the point of view of islanders wanting a good set of robust, year-round links to England, it was nonsense.
Perhaps the real question is, how much of the received wisdom of regulation in larger communities can be sensibly applied to a small, isolated island? And that brings us to the current row over the postal monopoly.
I’m no expert, but it seems to me we have two competing imperatives here. For those who feel that maintaining the traditional, blanket postal service at a reasonable cost is the main driver, then it’s best to leave well alone. Delivering a postcard to Mrs Le Page at Chouet is definitely not profitable. The post office has to supply these loss-making services under its Universal Service Agreement – competitors don’t. Obviously if you are going to provide some loss-making service and yet break even, there needs to be a cross-subsidy from more profitable business. Hence the justification for the post office’s monopoly on low-value packages.
That traditional approach is obviously great for Mrs Le Page from Chouet, and for the post office, but it’s bad news for the big customers providing that subsidy. In large part, that is the bulk mailers from Guernsey’s increasingly important ‘fulfilment’ industry. From their point of view, they are being held back by being forced to use the post office when other providers, free of a duty to Mrs le Page, would be cheaper. So the narrowing of that monopoly as suggested by the OUR will be good news for them and a boost to a growing sector of our economy. To the free marketers, that’s a clinching argument. ‘What’s good for General Motors…’ and all that.
Arriving at the right answer requires us to balance how much damage the current monopoly is doing to the bulk mailers against how much damage eroding that monopoly would do to the post office. The problem is that we are being fed totally different information on these issues by the OUR and the post office.
It’s all a very long way from the old days when postal services were run and regulated by the States, through a political board of deputies. I am not advocating returning to that system, but there is a certain irony. The States now pays both a commercial board to direct this publicly-owned company and the OUR to regulate it. Yet these two publicly-funded bodies seem to be locked in a grim mortal combat and if that battle ends up in the courts, you know who will pick up the legal costs for both sides. There simply must be a better way of doing things.
Come on PAC (or Scrutiny, I don’t care), this is surely a task for you. This battle is costing us all money and if the wrong solution is reached, it will cost us in other ways too. I know you can’t intervene in this particular scrap, which must go through due process, but for goodness sake look at best practice in other small jurisdictions to avoid any repeat of this farce.
Never mind OUR, what about our interests?
THE Office of Utility Regulation has a warm and cuddly acronym – OUR.
The question is how much its approach really reflects ‘our’ (as in the people of Guernsey’s) aspirations. In some ways, it has to, because the broad-brush policy for the OUR is laid down by the States. However, that still leaves it plenty of latitude to decide more detailed policy, which can have a huge impact on the island’s utilities. Of course, it’s right it should have that autonomy – what’s the point in the States owning a dog and wagging its own tail? The real issue is whether the way the OUR is using those powers is to the benefit of Guernsey consumers or not.
The answer to that question will depend on one’s own philosophical view of the benefits of competition. Those who feel that all competition is a good thing will have considerable sympathy with the OUR. Despite its remit being regulation – which sounds like the opposite of competition – there is no doubt that the OUR has a very strong free-market bent.
This was graphically demonstrated during discussion of a possible ‘open skies’ policy. One OUR employee mused that if, because of deregulation, some key links with the UK became seasonal rather than year-round, that mightn’t be such a bad thing. From a purely academic, free market, supply-and-demand perspective, that’s quite correct. From the point of view of islanders wanting a good set of robust, year-round links to England, it was nonsense.
Perhaps the real question is, how much of the received wisdom of regulation in larger communities can be sensibly applied to a small, isolated island? And that brings us to the current row over the postal monopoly.
I’m no expert, but it seems to me we have two competing imperatives here. For those who feel that maintaining the traditional, blanket postal service at a reasonable cost is the main driver, then it’s best to leave well alone. Delivering a postcard to Mrs Le Page at Chouet is definitely not profitable. The post office has to supply these loss-making services under its Universal Service Agreement – competitors don’t. Obviously if you are going to provide some loss-making service and yet break even, there needs to be a cross-subsidy from more profitable business. Hence the justification for the post office’s monopoly on low-value packages.
That traditional approach is obviously great for Mrs Le Page from Chouet, and for the post office, but it’s bad news for the big customers providing that subsidy. In large part, that is the bulk mailers from Guernsey’s increasingly important ‘fulfilment’ industry. From their point of view, they are being held back by being forced to use the post office when other providers, free of a duty to Mrs le Page, would be cheaper. So the narrowing of that monopoly as suggested by the OUR will be good news for them and a boost to a growing sector of our economy. To the free marketers, that’s a clinching argument. ‘What’s good for General Motors…’ and all that.
Arriving at the right answer requires us to balance how much damage the current monopoly is doing to the bulk mailers against how much damage eroding that monopoly would do to the post office. The problem is that we are being fed totally different information on these issues by the OUR and the post office.
It’s all a very long way from the old days when postal services were run and regulated by the States, through a political board of deputies. I am not advocating returning to that system, but there is a certain irony. The States now pays both a commercial board to direct this publicly-owned company and the OUR to regulate it. Yet these two publicly-funded bodies seem to be locked in a grim mortal combat and if that battle ends up in the courts, you know who will pick up the legal costs for both sides. There simply must be a better way of doing things.
Come on PAC (or Scrutiny, I don’t care), this is surely a task for you. This battle is costing us all money and if the wrong solution is reached, it will cost us in other ways too. I know you can’t intervene in this particular scrap, which must go through due process, but for goodness sake look at best practice in other small jurisdictions to avoid any repeat of this farce.
Article posted on 30th November, 2009 - 2.25pm