such separability of functions among different providers. $ ^{13} $ Thus, while higher-speed and higher-cost services naturally tend toward greater vertical integration, the lower-cost, lower-speed services provided by regular postal services can be shared among several different service providers. This presents opportunities to allow private companies to compete to share the workload involved in providing the service. Such worksharing would subject the service to competitive forces that would apply downward pressure to costs and encourage innovation. Vertical integration of this service, by contrast, results in extremely high inefficiency losses that ultimately impact the prices paid by consumers.

From a pro-poor standpoint, the letter mail monopoly acts to set a price floor in terms of delivery – deregulation might actually lead to greater choice and lower prices. The notion that the Post is somehow to be equated with very intensive capital cost industries such as electricity, telecommunications and gas is misleading. The industry instead is closer to trucking or airlines, where a large percentage of the costs is actually labor cost, as well as any legacy labor costs. Neither of these industries sinks much capital into a network. In the case of postal in the US, labor costs are 80% of the total costs. In the comparable industries of airlines and trucking, deregulation has taken place and has led to dramatic changes in pricing and cost structures. The Post does have to contend with inflated labor costs (at least in the US) and a large amount of political power derived from the size of the labor force.

Other ways of reducing costs include access pricing. Access pricing comes into play when it is possible for other companies to share the workload of the Post, thus reducing the Post's costs, and getting a better rate as a result. This would include, for example, where a company delivers mail to a central post office, thus eliminating one leg of the journey that the Post would have to engage in to lower costs. Discounts can also be applied for large pre-sort mailers in the case of the USPS. However, from the perspective of postal services, the more options are given to lower access charges, the greater the problem of stranded costs, as certain dedicated assets are left unutilized for greater periods.

Future mail delivery is a platform that admittedly now competes with other ways of sending out information, or, for example, paying bills. There are advantages to conventional “snail mail,” compared with e-mail, such as privacy and identity theft concerns. It is likely in the future that postal bill paying may be competitive with e-bill paying. The important thing in terms of delivery of benefits to consumers is that these platforms are able to compete well against each other, following the theory of monopolistic competition.

### 5. Potential Barriers to Effective Competition

### a. State Aids and Regulated Industries

State aid has deleterious effects by subsidizing certain national champions. Competition is not furthered by having some companies compete against certain companies that receive substantial government subsidies in regulated industries and that use such subsidies to create barriers for entry to competitors. Indeed, politicians might resort to state aids when the previously state-owned