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Iceland’s postal regulator has approved an increase in postal rates effective from the start of this month. The Post and Telecom Administration (PFS) said it approved the pricing request by Iceland Post to allow the company to respond to the continuing trend for “significant’ reductions in mail volumes from year to year.

Mail volumes have fallen by 37% since 2006 thanks to factors including e-substitution. In 2013, mail volumes in Iceland dropped by 6%. The regulator said expectations were that mail volumes will reduce by a further 5% in 2014.

The rate increase also takes into account cost increases for Iceland’s postal service seen since the last rate rise back in July 2012.

Iceland Post said along with general increasing costs in its business operations, its financing and infrastructure costs have risen and reforms to the universal service obligation have not been made as the company proposed.

From this month, the price for the basic A Mail stamp increases 8.3% to ISK 130 (EUR 0.83), with the B mail stamp increasing 8.7% to ISK 112 (EUR 0.71).

Letters from 51-100g will see rates increase by 8% to ISK 135 (EUR 0.86).

Iceland Post had asked for higher rate increases, including a 12.5% increase to A mail rates and 11.7% increase to B mail rates, but the regulator did not allow the full increase requested, concluding that on average a 9% increase will be allowed.

The PFS said compared to postal rates in the Nordic countries, Iceland Post was running the cheapest A and B mail services, in both absolute terms and in equivalent value.

According to the regulator’s statistics, while Iceland is increasing its A mail rates by 8.3% for 2014, Denmark is raising its A mail rates by 12.5% and Finland by 17.6%, with Norway’s rate increasing by 5.3% and Sweden’s remaining the same.

Iceland’s 8.7% increase in B mail rates compares to an 8.3% rise in Denmark and 20% rise in Finland, with Norway and Sweden keeping their B mail rates the same as in 2013.