What will the consequences be for a scaled-back rural mail service?

By Bruce Wills

NZ Post’s announcement it wants to modernise did not come as a shock to many in town, or for that matter, in the country.

In 2002 NZ Post arguably hit ‘peak mail,’ handling 1.1 billion items, but 2002 sums up the challenges NZ Post now faces.

With shades of KimDotCom, a US court had ordered the closure of music site Napster. That ironically came only a year after Apple had launched a device called the ‘IPod’.

Then there was an emerging company called Google; commentators said it was one to watch.

By 2003, a year before Facebook launched, there were only 12,000 broadband subscribers in New Zealand but a year after Twitter launched, in 2006, this was 700,000.

Today, there well are over 1.5 million broadband subscribers so you don’t need to be an analyst to see where this is heading.

Last year NZ Post’s mail volumes had dropped to 835 million items and it is not hard to understand why; I am typing on it and you are reading this on a website.

The challenge to Government rests with the Rural Broadband Initiative.

Rural is nowhere near the penetration or ambitious speed for the big jump. Even the most optimistic projections mean that some 86,000 rural New Zealanders will be left offline.

Now we could subsidise postal services but that smacks of trying to protect the ice box from the refrigerator. Instead of subsidising physical mail, more money for faster deeper rural broadband makes sense.

Yet there will always be a place for physical mail delivery.

While parcel numbers have exploded thanks to the internet, bulkier items do not compensate for the ever decreasing numbers of individual mail.

So if we lay NZ Post’s status quo to one side, the three choices facing it are some tweaking but that will buy it only a limited amount of time.

It could right-size into a stable modern business but that entails radical changes to mail delivery.

Finally, it could be cut free allowing market forces to work things out.

Against this backdrop, NZ Post deserves praise for returning a group profit in 2011/12 of $169 million. Compare that to the US$15.9 billion lost last year by the US Postal Service.

Federated Farmers will of course consult our members on which of the realistic options are acceptable to them. But whatever they say and whatever happens, the physical delivery of mail is changing.

At least NZ Post has been refreshingly honest and open about it. Its 2011/12 Annual Report telegraphed the proposed options now before us and they have been into see us, Rural Woman NZ and other rural stakeholders. We are not talking a low level either, but at board level, led by Sir Michael Cullen himself.

The one bottom line we have is that as long as a Universal Service Obligation exists, Federated Farmers will resist any separate ‘rural delivery fee’.

We went through the 1990’s in the courts with NZ Post until it was realised it did not work. The signals are there that NZ Post and the Government know this.

Commercially, NZ Post’s business model must either evolve or face extinction because losses of the magnitude now being booked by the US Postal Service could rebuild a big slice of Christchurch.

If fewer delivery days do emerge, it will not only affect NZ Post’s business model but that of the traditional print media; especially the provincial daily papers. This has the potential to radically change the ‘old’ media into a ‘newer media’. While the likes of the NZ Herald, Dominion Post and Christchurch Press are heavily urban, that changes when you consider the Otago Daily Times right up to the Northern Advocate.

Rural people are not only heavy subscribers but the type of consumers who attract advertising and this advertising pays for editorial content. If that relationship is affected, say by newspaper distribution changing from six days to three, then papers will likely have to become thinner or mirror the postal schedule. That could well see a mix of ‘light’ urban editions reinforced by ‘full’ editions encompassing that attractive rural customer base. The current distinction between weekly and daily starts to blur.

In thinking about how the newspapers will respond, it may hasten the move to paid online newspaper subscriptions.

Yet another reason to supercharge rural broadband.

The proposed changes to mail means receivers of rural mail are not the only stakeholders but the senders, staff and contractors too. The rural postie is a contractor who delivers more than the mail, but everything from newspapers to courier items and parts to groceries and even milk.

While no Rural Post contractor I know relies only on their mail contract to make ends meet, they are invaluable glue in our rural community. I also wonder how Fairfax, APN, Allied Press and the independents will respond to NZ Post.

I cannot predict the future, or what our members may say when we ask them, but change is coming and it is coming in the post.

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Bruce Wills is the President of Federated Farmers. You can contact him here »