11 meet this goal.<sup>16</sup> The justification for the monopoly is not practicable, the results of the monopoly are poor-quality services and low use.<sup>17</sup> It should be noted that the monopoly USO model _can_ work. Trinidad and Tobago has increased household delivery to approximately 95 percent of population under the model, for example, as part of a broader reform effort that saw postal volumes and revenues approximately double, and quality of service and consumer satisfaction increase.<sup>18</sup> But even in a wealthier developing country, where the postal monopoly is delivering a comparatively efficient cost-related service and where the monopoly-funding-USO model may plausibly raise sufficient funds to support rural access, it is still far from the best way of extending access.

# **What Drives Postal Performance?**

While postal incumbents in most developing countries may be unable to provide universal service, they can still provide better service. Supply and demand factors will both play a role in determining the number of letters sent per capita. On the demand side, income is clearly an important factor. Perhaps literacy levels might also play a role. On the supply side, one might plausibly expect price, extent, efficiency, and quality of service to have an impact—indeed, such relationships have been found in developed country postal services (Nankervis et. al., 1999). It is also possible that a post office network offering a range of ancillary services and/or services aimed at the needs of businesses would attract a larger clientele that might post more letters.

To examine these questions, we have chosen to use a dataset that covers as many countries as possible. As a result, and as we shall see, data limitations force the use of proxy or imperfect indicators. Furthermore, we do not have cross-country comparable data on price. We do have various measures of extent (measures of population covered and post offices per square kilometer), efficiency, and quality of services, however.

Efficiency variables include ratio of revenues to expenditures, postal revenues per staff, and letters delivered per employee and post office. Looking at potential determinants of efficiency, the general level of development may allow for economies of scale or more efficient postal institutions. Urban postal delivery is more straightforward than rural delivery, as we have seen, and so heavily urbanized economies will be at an advantage. Private competitive involvement has been found to correlate with improved service delivery (including reduced prices) in a number of sectors, and this includes studies of the postal sector in developed markets (Frontier Economics, 2002). All of these factors may impact overall efficiency.

> 16 Furthermore, such efforts appear fraught with computational difficulties in practice and require far more market intelligence than most developing country regulators (where there are such regulators) possess (see Andress, 2004) 17 Again, the history of the British postal network may provide a suggestive example here—enforcement of the postal monopoly by Charles I was one of many grievances of Parliament that led to the English Civil War (Ogilvie, 1893).  In 16<sup>th</sup> century Britain, the monopoly was used to “farm” profits, whereas today in many developing countries it has some role as a source of government employment.  In both cases, however, it is likely that the disadvantage to the consumer is greater than the advantage to the monopoly beneficiary.

> 18 Walsh, 2001 and comments by Juan Ianni.  From 1999 to 2003 delivery times fell from one week to nearly all mail by D+2, volumes rose 133 percent, revenues 75 percent, and a consumer satisfaction index went from 50 percent to approximately 85 percent.