FAQs on the EU Postal Policy
Why is it necessary to create an internal market for the postal sector?
Postal services are a key element of the so called network industries (energy, transport and telecommunications) which were opened to competition in the 1990s in accordance with Treaty provisions providing for the free movement of products and services. Prior to the 1997 Directive, postal services were often fragmented across the EU. Ownership was usually vested in public corporations and while some services within the sector were open to competition (express services) others were not (letter mail). At the same time, the sector as a whole was operating at a loss while much of its infrastructure required modernisation and fresh investment.
In order to overcome these shortcomings and to put the sector on a firmer footing, a new approach was needed. Retention of the status quo was not a viable option as it would perpetuate fragmentation and possibly lead to stagnation in the sector. Creating an internal market on the other hand was expected to complement similar initiatives in parallel sectors (network industries), reconcile the interest of postal users and service providers and pave the way towards a more sustainable, adaptable and innovative postal sector.
- What is the economic significance of the postal sector?
In 2002, EU postal revenues totalled about €88 billion or roughly 1 % of EU GDP. In terms of employment, over 5 million jobs are estimated to be directly dependent on or closely related to the postal sector. The Universal Service Providers (USPs) generate the bulk of direct employment in the sector and in 2002, employed about 1.85 million.
More generally, postal services provide vital infrastructural support for commercial, governmental and social activities across the EU and many USPs play an important role in the provision of financial services through their affiliated post banks.
- Is creating an internal market for postal services more likely to disrupt and distort the operation of the postal sector?
The internal market is slowly taking shape and assuming that it will be completed by 2009, postal operators and users will have had a period of 12 years to adjust to the necessary changes. All major changes are being phased in as the process continues and their impact is carefully monitored.
Rather than disrupting the sector, Community policy tries to reconcile the interests of a number of key stakeholders - national postal operators, the current postal operators, "would be" new entrants and users/consumers and to strike the right balance between increasing competition and the diminution of existing monopolies.
Current rules on access (to postal services) for users, quality of service standards and pricing levels are all designed to ensure that citizens and businesses get value for money while at the same time providing postal operators with a stable environment and the opportunity to invest in new products and services.
- What benefits has the internal market generated for citizens?
Citizens continue to be significant users of postal services and their interests are being protected in a number of different ways. For example, as regards the costs of postal services, Directive 97/67/EC establishes that prices must be both affordable so as to ensure maximum access and geared to costs thus minimising opportunities for excessive charges while at the same time ensuring the economic viability of the service. It also stipulates that postal operators providing universal postal services must not apply discriminatory tariffs and allows for the application of uniform tariffs.
As regards quality, the 1997 Directive requires Member States to set (quality) standards governing access to postal services and delivery targets. In the event of failures to deliver on these targets, Member States may take corrective action including the imposition of fines. Community rules establish quality standards for cross border mail. It also stipulates that postal users should have a simple and low cost (but effective and accountable) redress system which can deal with their complaints about access or quality of service.
Survey data shows that three out of four citizens/ consumers are satisfied with the standard of (postal) services provided to them and rank postal services as number one compared to other services of general interest (78 % for EUR 10).
- Although the 1997 Directive provides definitions for key concepts, it contains a number of terms/elements which are difficult to grasp. Two examples are universal service and the reserved area.
- Universal Service
Universal implies something which is available or accessible everywhere and to everyone and on the same conditions. In practice, this means relatively easy access to certain postal services, the most common being letter and parcel post. In other words, citizens/businesses located in rural areas should enjoy broadly the same or at least comparable access to that available to their urban counterparts.
Within the postal sector, universal services involve the permanent and obligatory provision of a service at sufficient points within a national boundary so as to take account of the needs of users. Such services must also meet specified quality targets and be available at affordable prices. The new Commission proposal maintains these obligations. It also reinforces consumer protection and increases the role of national regulatory authorities.
- Reserved Area
This is the segment of postal services which is reserved to those postal operators (which may be either public or private) providing universal services within national boundaries. In practice, this means that letter mail/parcel under certain weight and cost limits can only be handled by those operators who are bound by universal service obligations described above. The rationale behind the reserved area is that it is an appropriate form of compensation for taking on the uneconomic burden of universal service, when this burden has been shown to exist. The size of the reserved area is being progressively reduced and might not be retained in the context of a fully liberalised sector. In line with the target date set out in the current Directive the new Commission proposal confirms the final step in this long reform process and recommends the removal of remaining reserved areas in all Member States by 2009.
- Reform of the postal sector has been underway for sometime. What has been achieved since the Postal Directive was adopted in 1997?
The first thing to note is that the reform process is on track. The sector has moved forward under increased market opening and in key areas is becoming more competitive and efficient. Challenging universal service obligations continue to be met and customers are broadly satisfied with the quality of services. The regulatory framework set out in the Postal Directive is in place and national regulators are well placed to ensure compliance by postal operators.
The pace of competitive entry is slower than originally anticipated and national postal operators have retained their dominant positions in markets open to competition. The Commission and Member States are continuing to identify and propose ways to dismantle remaining market barriers and a study by external consultants on these issues has been presented recently.
- Have prices of postal services increased or decreased as a result of EU Postal policy?
Prices for consumer letter mail have generally increased in recent years. Prices for business users (which generate three quarters of mail volumes) have decreased overall. In general, consumers are satisfied with the quality of postal services and find that prices although rising, are at a generally acceptable level. However, prices for consumer letter mail vary significantly across Europe. As of early 2004, the average price of a 20 gram stamp for first class letter service ranged from € 0.15 in Malta to € 0.65 in Finland. In general, higher than average stamp prices do not deter customers from using postal services and their average annual postage bill (in the 6 most expensive Member States) would come to only about € 47 per capita or about one-tenth of one percent of annual income.
- How are letter postal services facing up to the challenge posed by new forms of communication such as e-mail?
Postal services are continuing to evolve and this evolution is being shaped by changes in closely related communications, advertising and transportation sectors. While it is true that the use of e-mail has increased in recent years and that letter mail is declining as a percentage of overall message volumes, many key sectors, such as e-commerce, publishing, mail order, insurance, banking and advertising depend on the postal infrastructure. Businesses are increasingly finding mail to be an exceptionally effective medium for forging and strengthening commercial relationships. Nowadays, the bulk of mail deliveries are no longer dominated by private, person to person communications but by business to business and business to customer communications. In short, mail continues to have a bright future as a key communication channel.
- What role do national postal regulators play in the implementation of the Community postal policy?
National regulators are entrusted with a wide range of regulatory functions which stem from the EU and national legislation. These extend from more specific functions such as ensuring compliance with quality standards and price setting to broader and more far reaching tasks such as creating the conditions for the growth of competition and paving the way for new entrants into the sector.
The office of postal regulator is now well established across the EU and most are endowed with the sufficient resources and the power to monitor and sanction postal operators for non compliance with their obligations.
What will the new proposal do?
The Commission's proposal, which takes the form of a new amending Directive, does not, in any way, alter the obligation on Member States to ensure universal service to citizens. Neither does it lower standards which this service must meet. In particular, the proposed new Directive:
- removes the concept of ‘reservable areas' and confirms that the market should be fully open by 2009
- maintains the main provisions of the existing Postal Directive, including the universal service obligation regarding services that must be provided (letters and parcels) and standards which must be met
- offers Member States a menu of means to finance universal service provision in this new context, and offers greater flexibility/clarity on how it can be achieved. It is for Member States to decide which model best suits their needs. The options provided for include, for example, state aids, public procurement, compensation funds, cost sharing etc.
- provides for retention of uniform tariffs (i.e. tariffs which are equal irrespective of the location of the addressee) for consumer/single-piece mail or for public policy reasons, but restricts their use in other circumstances
- reduces unjustified barriers to the entrance of new operators
- strengthens consumer protection, including by extending mandatory complaints procedures to all operators.
- What are the next policy steps towards the internal postal market?
The new Commission proposal, as well as the supporting documents, have been submitted to the European Parliament and Council for adoption in accordance with the co-decision procedure (Article 251 EC) and transmitted to the European Economic and Social Committee and the Committee of the Regions for their opinion.