Promoting Competition at the Digital Age with an Application to Belgium

In this paper, we develop a fully-fledged postal market model to assess the extent of competition in the mail market in a context of declining mail volumes due to e-substitution. Our focus will be on the Belgian market situation that is interesting for at least two reasons. First, the homogenous nature of the country implies that the extent of the entrant's market coverage will be either limited to the few very densely populated areas or large covering the whole country at the exception of the few very sparely populated areas. Second, because strong licensing requirements -including coverage constraints- are imposed on competing postal operators and they may constitute barrier to entry. Our model allows us to estimate the extent of entry, the cost of meeting the licensing requirements for potential entrants and the impact of entry on the cost of the universal service.