Falling mail volumes drive Iceland Post fee increases

Rising prices and sharply lower mail volumes are driving increases in Iceland Post charges, Hjalti Árnason of the Regional Development Institute told mbl.is.

Hjalti, director of the institute’s legal division, said the lightest letter category, weighing up to 50 grams, became 4.75 percent more expensive at the end of last month. Charges have risen by 39 percent over a period of just over eight months.

He said Iceland Post must base its prices on the cost of providing the service. With the number of letters falling significantly, the cost per item has risen sharply, increasing the pressure to recover more expenses through the price schedule.

Mail distribution has declined from 90 million items in 2011 to five million today, despite the distribution network remaining almost unchanged. Hjalti described letter delivery as a dying service, saying that the final stage of maintaining delivery through letterboxes could be difficult.

The state has stopped sending paper mail, and people must specifically request documents on paper. The government’s policy is for banks, pension funds and larger companies to send correspondence electronically.

Iceland Post has been required to provide universal postal services since a 2020 decision. The country is divided into service areas, and packages weighing up to 10 kilograms that are affected by the current increase fall under area four, which includes rural farms. Distribution costs in that area are partly subsidised by a state contribution of about 800 million Icelandic krónur this year.

Other areas are subject to competition and do not receive state funding for postal distribution, Hjalti said.