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Tag Archives: Australia Post

Australia Post cannibalising mail and print for its own benefit

By Mel Mac

On August the 28th Australia Post (AustPost) applied to the Australian Competition Consumer Commission (ACCC) to increase not only the price of a stamp from seventy cents to one dollar but business mail pricing of up to 48% from January the 4th. This is on top of price hikes of 5-9% for Print Post, which is used to post publications such as newspapers, magazines and catalogues, let alone bulk mail price rises of 2.8-5% this month as a CPI increase. There was wide spread industry concern that AustPost would use the 42% stamp price increase as an excuse for business mail rises next year, it seems they had good reason to be concerned.

AustPost wants small pre-sort mail, being the category most used for bulk mail and is 38% of mail volume, to rise 37.5% for the regular service and 48.5% for the priority service. They also want to raise Print Post again by 15% for the priority service under 125gm and 13% for the rest, with the regular small service up 13% and the rest at 11%. A couple of days later the Print Industry Association of Australia (PIAA) launched a planned and researched national campaign to win political support for AustPost reforms. PIAA CEO Jason Allen, said “The price increase issues are a major concern and they are the tip of an iceberg threatening the future viability of the entire mailing industry and all the associated sectors whose economic livelihoods are under threat by Post’s blindsiding tactics,” and that “Post has consistently failed to consult and to make an economic and social business case substantiating its actions. It has failed to highlight any improvements and benefits that businesses would be expected to provide their clients with accompanying any price increase. We believe it has failed to meet the criteria of the Australian Government’s Cost Benefit Analysis. It has avoided quantifying the impacts of its actions across the community and failed to provide economic and social evaluation in monetary terms of its proposed actions.”

Mr Allen believes that it is the duty of the Parliament to hold AustPost to account and that his campaign is geared to do this “From the end of this week politicians around the country will be receiving our report on the Economic Contribution of the Australian Mailing Industry and our plea to pull this monopolistic, national service provider into line and into compliance. Members of Parliament need to understand the consequences of Posts actions on the employment of as many as 150,000 people who contribute $14.1 billion in Gross Value Added to the Australian economy not just the 30,000 people Australia Post employs” he said.

Subsequent meetings over the first couple of weeks of September were held with printers and mail-houses in Sydney and Melbourne, and they have thrown their support behind the campaign. Mr Allen also said they would be making a substantial industry submission to the ACCC for the Thursday 15th October 2015 deadline. On the 17th September the AustPost newsroom announced that they would establish a new industry working group to support the implementation of letters regulatory reform and consider other strategic issues facing the postal sector. The group, is to be chaired by former Victorian Senator Helen Kroger, and will include representatives from the printing industry, mail houses, licensed post office (LPO) network and employee unions. This was actually a recommendation from a Senate inquiry from a year ago into the LPO network, wanting the establishment of a strategy group of industry stakeholders. The inquiry also recommended restoring the ACCC oversight of business mail price changes and an independent review of AustPost’s community service obligations.

Interestingly Ms Kroger is the former wife of Michael Kroger who is currently the Liberal Party state President of Victoria. In 2012 Ms Kroger was bumped from first place on the Senate ticket by Mitch Fifield, who was recently made Minister for communications taking over from the current Prime Minister, Malcolm Turnbull. In January this year when Mr Turnbull was communications MP, he made it clear that AustPost was not establishing the government’s digital shopfront. He conceded his e-government plans “undermines the economics of my other responsibility – Australia Post” but that this was inevitable because “the letters business doesn’t have a great future”.

AustPost obviously wants to position its self as digital innovators with the AustPost Digital Mailbox cloud storage launched in October 2012, and to focus on parcel deliveries with its acquisition of Star Track Express couriers in December 2012. Many found it curious when they decided to move away from the famous red and white logo for blue and white when they rebranded its parcel division and the Star Track fleet last year. AustPost also launched an iphone app in 2012 called Australia Post Postcards, allowing you to send images from your phone as postcards anywhere in the world. “Australia Post is continually looking for ways to make our products and services a helpful part of our customers’ lives both physically and digitally” said Catriona Larritt, the former Australia Post’s General Manager Post Digital, at the time. It has come out this year though that the app has many problems such as long delays for the cards to arrive or them not arriving at all.

In 2013 Ms Larritt said that if the Digital Mailbox was successful, it would accelerate the decline of its letters business and that it was a question she was often asked. “The answer is yes, it’s clear that if we’re successful, over the next couple of years we’ll accelerate the decline of letters.” And “That obviously will have a material economic impact on Australia Post, but we made a decision as a business that this was happening anyway and we may as well cannibalise our own business rather than have someone else do it to us. That was a hard decision organisationally”. But Ms Larritt also said that there were billions of letters still sent, so for the next three to five years it would be about ramping up the migration to the Digital Mailbox and “providing a multi-channel communications offer”.

In April this year AustPost launched its new Apple watch app that enables customers to view delivery information and track their parcels on an Apple Watch. “The new Apple Watch app is the latest in a series of digital innovations Australia Post has been working on to provide easy to use experiences for customers who want greater flexibility in management delivery services” Andrew Walduck, executive general manager, information & digital technology at Australia Post, said in a statement. Also in April it was revealed that AustPost’s state of the art sorting machines had misdirected an estimated 40,000 parcels each day. And in May this year it had a meltdown in its computer system leaving millions of online bill payments frozen meaning companies were unable to receive customer payments for a week.

A week ago they came out with a campaign to help small businesses reach international as well as local audiences through e-commerce. And as of yesterday, Mr Walduck will now head the new ‘trusted e-commerce solutions’ division. AusPost CEO Ahmed Fahour, said of the move “We are increasingly clear that trusted services opportunities within e-commerce, which we have been deliberately and carefully investing in over the past four years, are core to our future business”.

Physical business mail such as direct mail still has its role in marketing and advertising, variable data printing is a great example of this. This technique is favoured for elections, charities and business. It is clear Mr Fahour has heavily invested in digital and parcels and wants to take AustPost in that direction now, he is not interested in letters or bulk mail. Wanting something and their being successful are two completely different things as we have seen with the numerous digital glitches quoted above. AustPost admitted in 2013 that they cannibalised their own business which has brought about an even faster decline in letters. Let’s also not forget the fact that these price hikes affect 150,000 people who contribute $14.1b in gross value added to the economy not just the 30,000 that Mr Fahour employs. In business it’s generally best to nail down what you are good at before you branch into other areas, and they are struggling with logistics which should be their core market. In my own personal experience their parcel division leaves a lot to be desired and is a common joke between my customers and other suppliers. I’m also not sure about their return on investment (ROI) with their Apple app either. A very small segment will own them and will they care enough to download it to track parcels considering their web version of this also leaves a lot to be desired?

Digital marketing embraces traditional such as print and billboards and uses these channels to direct you to online offerings. Magazines, as well as catalogues are also still popular and viable, which I think is at least partly due to only being able to read so much with artificial light. This is also why I think books will survive.

Until we live in the offline world Tron style, the digital world and the physical offline world should be complimentary.

This article was originally published on Political Omniscience.

 

Selling the Golden Geese

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Roll up, Roll up, Round two of the Great Howard Fire Sale is here!

We’re under New Management, so let’s have a look at what we have on the block today.

We’ve got Medibank, ACS, AGS (don’t worry about acronyms, we’ll get to them later), Australia Post, Australian Rail and state power companies.  Get your bargains here!

The Liberals and Nationals have wasted no time setting up shop again in the temple.  Apparently not satisfied with the billions of public assets sold under the Howard/Costello stewardship, the new government is looking at selling off anything that even appears to compete with private businesses, regardless of any contribution to the public good or the public purse.

Sales of public assets are often touted as solutions to a debt crisis.  The reality is they are a sugar hit for politicians to improve their numbers, and corporations to receive handouts from the public purse.

One thing always missing from the conversations about debt and privatisation is the public interest. For example, was it truly in the public interest to sell Telstra’s copper infrastructure, our major airports, or most of our gold reserves?

Public assets are historically undervalued, and when sold often undergo massive downsizing and service retractions.  In the brave new world of asset stripping and collateralized debt obligations the Australian public needs to take a closer look at what Public Corporations are, what services they provide, what they represent, and what impact their sale would have on the current shareholder… the Australian public.

ACS pty ltd
Formerly known as the Australian Submarine Corporation, this is the primary naval defence contractor for the nation, responsible for the ongoing maintenance of the Collins class submarine fleet, and is currently building our next generation Air Warfare Destroyers.

The company engages thousands of people and businesses, mainly in South & Western Australia, and took many years and billions of tax-payer investment to build it to its current capability.

A quick look at the annual report for 2013 shows that in addition to maintain and building our defence capabilities it made a reasonable return and now holds over $619 million in assets:

Return on equity         4.2%
Dividend                      $8.9 Million
Paid taxes worth         $3.2 Million

This company is a monopoly.  It is the only company in the nation capable of building military class naval vessels and the only one who can service our submarines.  This means any changes of ownership will have a direct impact on our national security.

No other company will ever be able to compete with ACS due to the massive infrastructure investment required.  How can a government put a sale price on that kind of leverage?

If the sale does go ahead, how convenient that ex-Indi rep Sophie Mirabella has been given a golden parachute to corporate boardship.   One wonders which of the large foreign defence contractors would end up owning our naval fleet capabilities, and what Mirabella’s position would be on national security versus company profits.

AGS
The Australian Government Solicitor provides legal advice to the government; it was established at Federation and set up explicitly to act in the national interest.

This is a legal practice wholly owned by the commonwealth, which has access to some of the deepest policy secrets of the government.

The AGS website proudly proclaims that it beats private firms due to its knowledge and experience of government work. The sale of the firm would be a wholesale delivery of a huge amount of expertise and knowledge into private hands.  How can there be a meaningful price tag attached to the information bank, integrity & goodwill belonging to this firm?

The high potential for conflict of interest or corruption gives pause enough.  And given that the beneficiaries would only be lawyers able to charge the tax-payer higher rates for their services; how would it be in the public interest to sell?

Australian Rail Track Corporation Ltd
Responsible for over 8 thousand kilometres of interstate rail, the ARTC was established as a single entity for business to contact to arrange freight by rail throughout Australia.  Such was the importance placed on the rail that carries our mining and farming products to port, that both state and federal governments agreed to establish the integrated body.

Privatisation of rail has failed in the UK, with service cuts, fare hikes, and under-investment in infrastructure.  A situation many in Australian urban centres would be familiar with.

Similar stories of sales or deregulation of freight & mass transit exist all over the world.  In the USA the iconic Greyhound bus service now completely gutted thanks to deregulation and forced to cut services to thousands of rural towns.  The cities fare no better, with large cuts to bus & rail that disproportionally impact on low-pay workers.

Land and agricultural resources are vital to the Australian economy, this puts rail infrastructure into the ‘national security’ category.  To sell the ARTC, most likely to a foreign multinational, is to put our future prosperity up for ransom.

Medibank Private
The sale of Medibank is apparently justified by the fact that it is competing with private businesses.  The same argument could be made that Police are competing with private security firms, so should we be selling the police as well?
Medibank covers 29% of the Australian market, or approximately 3.8 Million people.  There are few health insurers who would not want a piece of that pie.  The annual report is positively glowing:

Return on equity         15.4%
Dividend                      $450 Million
Paid taxes worth         $82 Million

As part of servicing a public need Medibank launched AHM, the only insurance that actually spells out (literally in black & white) what cover you need to avoid the Medicare levy, and to stop the Lifetime Health Cover age tax.

Medibank is not a drain on the public purse; it is a leader and award winner in promoting community health; and a leader in the insurance community for high standards.

Finally, it is paying millions of dollars every year in dividends into the public purse.  Given the constant cat-calls for government to be run like a business, it is surprising that there should be opposition to a government property that is making money… for the government.  The only argument for selling Medibank is ideological, as there is no benefit to the public interest.

Australia Post
On the one hand the Liberals and Nationals want the local postie to process your Centrelink forms, on the other they want to sell it.

Given that the coalition wants to shut down the Clean Energy Finance Corp, which is currently earning the tax-payer $200 million per year. It is perhaps unsurprising that they also want ape their UK Tory counterparts who forced a partial privatization of the Royal Mail in the UK in spite of increasing profits.

Some articles are already inserting misinformation about Australia Post having an “ailing bottom line”, the same tactic used by the UK Tories.  The reality is Aus Post paid a massive 18.5% return on equity last year, all “during a period when addressed letters are declining”.

Compare this to the struggles of U.S. Mail.  Some have been arguing that the problems at U.S. Mail are due to unions and no lay-off clauses.  The reality is that the organisation has been reliant on low-skill, low-pay workers to keep overheads down and failed to automate or innovate. In addition U.S. Mail has to contend with government laws that prevent managers making sensible business decisions to restructure or diversify their business base.

This is the success of the Australia Post Corporation; it continues to deliver it’s regulated community service obligations while turning a profit. It has shaken off the assumption that it was an out-of-date institution and built itself into a truly modern business that is making serious money for the tax-payer:

Return on equity         18.5%
Dividend                      $243.7 Million
Paid taxes worth         $447.3 Million

Australia Post is another huge monopoly, with massive infrastructure and service commitments. Regional Australia and many urban communities rely heavily on their post office for far more that buying stamp or sending parcels.

When you read current CEO Ahmed Fahour commenting that community service obligations are ‘stifling’ business, it is easy realise that after privatisation regional and ‘unprofitable’ services would be the first items to be stripped bare.

As illustrated above, ideologically driven arguments for privatisation do not balance when weighed against the Public Good.  Interest rates for government loans are at historical lows so debt hysteria is completely invalid.  And why sell money-making enterprises that will assist in paying back the debt?  Why sell the golden geese?

An interesting attribute that is common across all of these commonwealth companies is that they are flagships in their arenas.  This is because they serve a public need and are capable of having long-term goals beyond mere money making.  These public bodies create new markets and build new products & innovations that private enterprise does not have the courage or resources to accomplish.

The entire premise of establishing a public corporation is to allow essential services like remote mail services, or secure rail transport, to be funded by the profits from the corporation’s unregulated activities.  Australia Post is a classic example; in 2013 regulated services lost money, other services covered the loss and made a profit overall.  The original NBN Co was another; it planned to use profits from urban areas to subsidise connectivity in Regional Australia.

Far from being a two-step process toward privatisation, public corporations need to be maintained as fiscally responsible ways for government to provide for the needs of the nation and spurring innovation, while giving private businesses the opportunity to benefit from new markets and reliable delivery infrastructure.

The corporations and political enablers that prey on these public assets do not care about the base-line services that they provide, only in the short-term profits that they can cleave.

Before Australia sells off its hard-bought Tax-Payer assets, perhaps we should take a closer look and see why private corporations are so eager to get their hands on them.

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