COI\1r\1ISSION OF THE EUROPEAN CO:Mt\1UNITIES 
COM(91) 476 final 
Brusseis.11 June 19q2 
GREEN PAPER 
ON THE DEVELOPMENT OF THE SINGLE MARKET 
FOR POSTA:L SERVICES 
(Communication from the Commission) 
&ecutive Summary page 1 
EXECUTIVE SUMMARY 
1. NATURE OF DOCUMENT/CONSULTATION 
A Green Paper is a discussion document. This Green Paper seeks to launch the debate 
on the Community's postal sector. To do so, it has the following objectives: 
to provide a thorough-going analysis of the current situation; 
to discuss what should be the Community objectives for its postal sector and 
whether action is needed a Community level to achieve them; 
and (assuming that action is needed) to discuss how these objectives could be 
achieved and suggest detailed options. 
During the preparation of the Green Paper, there was extensive consultation, 
particularly with the governments of the Member States. The publication of the Paper 
will now launch a period of even wider consultation during which the Commission will 
seek the views of all interested parties -including representatives of Member States' 
governments, of users (from individual consumers to large users), of operators (both 
public and private) and of trade unions. All parties will be invited to consider whether 
the analysis of the current situation is correct; whether the Community objectives 
proposed are the right ones; and whether the means proposed for achieving these 
objectives will be effective. Detailed discussion of the potential economic and social 
impact of possible proposals will also be encouraged. 
The Community's postal sector is subject to many forces. Technological change in other 
sectors has promoted indirect competition with postal services. Within the sector, there 
has been a sue.cession of competition cases. Most importantly, customer needs are 
evolving, probably more rapidly than in the past. Action therefore seems imperative. If 
it is not taken, events will significantly alter the landscape, and it will become less and 
less easy for the Community to play its full part in helping to shape a sector which is so 
important to its commercial and social life. 
Following the consultation period, the Commission will define its views on what 
proposals should be made in the light of views and information received during the 
consultations. If appropriate, it will then draw up draft directives. This implies that 
there is much detailed work still to be undertaken. The Green Paper is not intended to 
contain this level of detail, but, as is appropriate for a discussion document, presents 
options at a more general level. 
In determining what action should be taken, the central guiding principle must be the 
maintenance and, if appropriate, the development of a universal postal service which 
would provide collection and delivery facilities throughout the Community, at prices 
affordable to all and with a satisfactory quality of service. Then, provided that the 
universal service is secured, there should be as much freedom of choice as possible. 
2. THE COMMUNITY'S POSTAL SECTOR 
The Community's postal sector contributed nearly 1.3% of its GDP (in 1989), and 
presently employs 1. 7 million of its citizens. Some key facts are as follows: 
page2 
Size: Executive Summary 
Including postal financial services, the postal operators (public and private 
together) generate some ECU 59 billion annually. 
Mail services are provided both in the reserved area (letters) and in the 
non-reserved (parcels and express services). Trends in all three products 
are moving upwards (in the range of 3% to 10% growth per year). 
The ratio of turnover between services provided by postal administrations 
and those provided by private operators is approximately 60:40. The 
postal administrations' share of the Community's GDP is similar to that 
held in the US by the postal administration there; the share of private 
operators, however, is substantially smaller in Europe. 
Segments: The sector's most important market segments are publishing, mail order 
and direct mail, the latter two being responsible for 0.7% of the 
Community GDP. Other major segments include business in general and 
the financial services sector (including banking) in particular. 
Operators: Postal administrations provide services in all three product areas -letters, 
express and parcels. The private operators are located mainly in parcels 
and express, but also offer some cross-border letter services (sometimes in 
apparent contravention of national postal law). 
The non-reserved areas, particularly express, are very profitable. Letters, 
where they are profitable, are priced on a cost-plus basis; however, many 
printed paper services are heavily loss-making. 
3. WHY SHOULD THE COMMUNl1Y BE INVOLVED? 
The analysis of the existing situation identifies several problems that would seem to 
justify action at Community level. Many of these problems concern the variability of the 
quality of universal services. Resolution of such quality related problems is paramount. 
Broadly, there are five areas of concern for the Community. 
3.1 Present lack of harmonisation 
The operations providing universal service in each Member State have evolved 
independently, with the effect that there are now many operational differences 
between them. This can lead to significant problems for mail passing between 
Member States; it can also have opportunity costs. Most obviously, the universal 
service is defined differently in different Member States with the effect that 
customers cannot confidently post similar items in different Member States. But 
problems of inter-operability are to be found at every level. At a more detailed 
level, for example, problems are encountered because of lack of harmonised 
norms for envelopes. 
3.2 Single market implications 
Service performance for universal service varies greatly between different postal 
administrations. There are some Member States where next day delivery 
performance reaches the generally accepted target of 90%; in others, performance 
is 15%/16%; in others, performance is between the two (but tending more 
towards the former). The generally accepted, but not very demanding, service 
Executive Summary page3 
target for cross border mail is delivery within three working days; performance is 
currently measured at an average of only about 40%, and with large variations 
between different postal administrations. 
Such variations have particular implications for the parts of the Community's 
commercial and social life that are heavily reliant on postal services. Large senders 
of mail include the key sectors of publishing, financial services, mail order and 
advertising. For such sectors variability in performance of universal services can 
lead to market distortions. For example, it would be much easier to sell insurance 
services to an individual household in a Member State where the performance is 
90% rather than in another Member State where it is 16%. It would be more 
difficult for a company to market its products by post in another Member State 
than for a company that was based in that Member State. 
For example, it does not appear co-incidental that one of the Member States with 
very poor service has a mail order sector only one fifth the size of that of other 
Member States of comparable economic size. This harms the mail order 
companies' prospects. Significantly, it also reduces the choice of the individual 
consumer. Those who live in regions disadvantaged by poor postal services -and 
there are many -are therefore isolated not jusL from the personal contact that can 
be achieved through mail, but also from the services that can be provided through 
the mail. 
Such disruptions of the Single Market affect not only senders but also receivers of 
mail. If a particular region of the Community is thought to have an unreliable 
universal service, companies (such as mail order) would be less interested in trying 
to market their products there. The consumers (as potential recipients) would 
therefore have a reduced choice. 
3.3 Cross-border service performance 
In terms of number of days taken from collection to delivery, a domestic item 
takes an average of 1.5 to 2.0 working days, whereas a cross-border item within the 
Community takes an average of 4.0 days. A small part of the gap is explained by 
operational practicalities. But the larger part of the gap cannot be explained in this 
way. This quality gap effectively creates a "frontier effect". Expressed in terms of 
achievement against target, service performance for postal administrations' cross­
border letter services within the Community has been measured at an average of 
40%. Behind this average lie significant variations. 
This level of service probably falls short of user expectations. Indeed, it should be 
mentioned that expectations are likely to become more demanding as cross-border 
communication increases. Relative to user demand, static performance would be 
perceived as worsening. In fact, there appear to have been some improvements, 
stimulated particularly by the introduction of competition (partly in breach of 
exclusive rights which were unenforced). However, there is still a large gap 
between the targets which postal administrations set themselves (either on the 
basis of customer requirements or operational practicalities) and the reality. 
Since effective cross-border communications are essential for the commercial and 
social life of the Community, it is a matter of concern to the Community that 
service performance for cross-border services is so unreliable. 
page 4 Executive Summary 
3.4 Divergences 
One of the objectives of the Community is to ensure its own cohesion. Clearly, the 
wide divergences to be found in the postal sector do not help the achievement of 
this objective. Postal services provide one way in which messages can be 
communicated and goods delivered. Any regions having unreliable postal services 
would therefore be disadvantaged in terms of their communications and goods 
delivery requirements. Both individuals and businesses in such regions could feel 
cut off. 
This situation of being disadvantaged would not be only by reference to their 
requirements. It would also be relative to the conditions enjoyed in other parts of 
the Community where the performance of the universal service was more reliable. 
3.5 Market distortions 
In the comments on the single market implications, it was noted that divergences 
in the service levels of universal services in different regions can contribute to 
market distortions in other sectors which are reliant on postal services. However, 
it should be noted that there are potential market distortions within the postal 
sector itself. These could be caused in the case of the scope of the exclusive rights 
being larger than was needed to ensure the universal service. In order to prevent 
such distortion, Member States therefore need to apply the proportionality 
principle. An example of its application is the transferring by some Member 
States of direct mail to the non-reserved area. 
4. OBJECTIVES OF GREEN PAPER 
The Green Paper therefore has two general objectives. 
to provide a status report of the present situation, identifying problems and 
challenges that already exist and those that are likely to arise in the future; 
to discuss possible solutions and responses, and to lay out detailed options for the 
future, the final proposals needing to be defined after the consultation process 
which will follow publication of the Green Paper. 
The paper is therefore divided into four sections: 
1. description of the postal sector (Chapters 2-6 ); 
2. summary of problems and challenges (Chapter 7); 
3. possible solutions to the problems and challenges (Chapter 8); 
4. policies that are proposed (Chapter 9). 
It must be emphasised that the Green Paper is a discussion document. Naturally, it 
represents the views of the Commission as at the present moment, and after some 
extensive consultation with Member States and certain other interested parties. 
Publication of the Green Paper will start a period of wider consultation to which all 
interested parties will be invited to contribute. After this consultation period, the 
Commission will need to draw up its proposals, taking account of the contributions 
received. 
Executive Summary page5 
5. POLICY FUNDAMENTALS 
It is agreed by everyone that the absolute policy fundamental is the need to ensure the 
continuation of the universal service, and thus to ensure that the postal administrations' 
public service mission is carried out in good economic and financial conditions. The 
main concrete meaning of this universal service requirement is that there should 
continue to be a postal service available throughout the Community, both for national 
services within a Member State and for cross-border services linking two Member States. 
This universal service must be provided at an affordable price, have good quality of 
service and be accessible to everyone. Then, provided that the universal service is 
secured, there should be as much freedom of choice as possible, as far as it respected, in 
accordance with the principle of subsidiarity, the pursuit of the public service mission. 
Naturally, the Green Paper needs to discuss these policy fundamentals, as well as any 
subsidiary objectives, in the context of Community legislation and policy. As well as 
considering the implications of the single market, it must also take into account the 
possible implications of both political and economic union. It should also discuss the 
application of the relevant articles of the Treaty of Rome. 
6. GENERAL OPTIONS 
There are certain general options as means to achieving these broad objectives. 
(Naturally, the implications of taking no action should also be considered.) In broad 
terms, there are two paths -that of liberalisation and that of harmonisation. 
The sector is already significantly liberalised -about 50% of the revenue generated in the 
sector relates to non-reserved services. The present position results from a longer-term 
trend to open the market, and the Green Paper options seek further ways to ease 
restrictions. By contrast, levels of harmonisation (by reference to possible Community 
objectives) are rather low. As a result, the Community has a postal sector with many 
divergences -not only regulatory, out also in terms of such important customer aspects 
as access, service provided and tariffs. 
Possibilities for reform can be approached by first considering the extreme options of 
complete liberalisation and of complete harmonisation. These two options are 
effectively at opposite ends of a spectrum of different possible scenarios. The option of 
taking no action at all should also be examined. The last option to be discussed is that 
which seeks an equilibrium combining the benefits of both progressive opening of the 
market and selective harmonisation. Within this option many variants exist; some of 
these are discussed below at Paragraph 6.4. 
6.1 Complete liberalisation 
The normal market condition is that of the free market. However, complete 
liberalisation of the postal sector would lead to the loss of the universal service, 
certainly at prices affordable to all. Initially, there were a few proponents of this 
solution. Now, nobody seriously believes that the universal service imperative 
would be met if there was complete liberalisation. Certainly, no private operators 
seem interested in providing a standard letter service to all parts of any national 
territory. 
page 6 Executive Summary 
6.2 Complete harmonisation 
If it was intended to have a postal sector that was completely harmonised, it would 
be necessary to have a single operational body that ensured that such 
harmonisation was implemented. Such an operator -effectively a single postal 
administration covering all the Community -would have overall responsibility for 
all aspects of what was considered to be the public administration part of the 
Community's postal sector. 
Total harmonisation would imply the same tariff being applied throughout the 
Community, as well as the same access conditions and the same levels of service. 
A single tariff (for which there appears to be no demand) would cause 
overwhelming problems. It would also be impractical, demanding cross-subsidies 
of massive proportions. (Tariffs presently vary by as much as a factor of three.) 
Central co-ordination of policies relating to areas such as marketing or personnel 
would be likely to lead to an over-rigidity which could not respond to local 
conditions. Further, the implementing body, the single postal administration, 
would be a costly additional overhead. 
In summary, complete harmonisation would lead to many restrictions , but few 
benefits. Further, it should be emphasised that nobody is now asking for the single 
operational body that would be needed to implement harmonisation at this level. 
6.3 Status quo 
If this theoretical option were to be exercised, the result would be a widening of 
the gap between already very divergent positions, and, in view of what was noted 
at Paragraph 3, make more difficult the proper functioning of the Single Market. 
This would lead to a "two-speed" Europe in postal services. In short, the Single 
Market in postal services would not be achieved, with significant indirect effects 
on other sectors particularly served by postal services. It would also probably not 
be the appropriate response to the implications of political and economic union. 
6.4 Equilibrium: further opening of market/strengthening of universal service 
This option accepts that in order to ensure the universal service it is necessary to 
have some restriction of the free market. This would be in the form of the 
establishment of a set of reserved services that confer some special and exclusive 
rights on national postal administrations. However, the scope of the reserved area 
must be strictly proportional to the universal service objective. At the same time, 
the regulatory control of part of the market (reserved services granted to ensure 
universal service) would make possible certain harmonisation measures to ensure 
that the universal service operates effectively in all twelve Member States. 
Each Member State already reserves certain services in order to achieve a 
universal service objective; but the scope of such reserved services is usually larger 
-sometimes significantly -than is necessary to meet the objective. Further, the 
actual objective (including service performance) must be achieved in practice. In 
addition, there are gains to be obtained from simply clarifying what is reserved 
and what is not. 
It is proposed that there should be a Community definition of the universal service 
that should be provided throughout the Community. This definition has not yet 
been drawn up. However, it is possible to indicate how the market should, under 
Executive Summary page 7 
this option, be partially liberalised without threatening the universal service 
objective. 
Under this option of seeking equilibrium, certain services should be removed from 
the reserved area (if, indeed, they presently form part). These are express services 
and publications. (Parcel services are already liberalised in all twelve Member 
States.) Based on the analysis that has been made to date, the liberalisation of 
cross-border letters and, a priori, of direct mail would also be envisaged. In both 
cases, it will be necessary to ensure that the appropriate regulatory control systems 
are in place to prevent such liberalising measures leading to circumvention of 
legitimate exclusive rights of reserved service providers. Particularly in the case of 
direct mail, it will be necessary fully to analyse the economic implications for the 
universal service of such a liberalisation measure. 
The liberalisation process ought to be implemented in a gradual manner. It 
should take into account the necessary phases for adaptation in order to maintain 
the economic and financial balance needed for the provision of the universal 
services. 
For the services which remain as potentially reserved -which would broadly cover 
personal and business correspondence -it would be possible to establish clear 
limits that indicated the precise scope of the reserved area. These limits would be 
defined in terms of weight and price. 
It should be emphasised that if any Member State were concerned that specific 
proposals might prejudice its universal service objective, it could consider applying 
a more restrictive solution, provided that it was still proportional to the objective 
and conformed to Community law. 
Turning to the harmonisation measures to be implemented in parallel with these 
liberalisations, they must spring from the fundamental Community objective that 
there should be a universal service of sufficient quality and at affordable prices. 
As mentioned above, there is not yet a Community definition of the universal 
service required across the Community. It seems clear that such a definition is 
needed and that, when drawing it up, potential users -including consumer 
representatives -should be consulted. However, certain harmonisation 
requirements are already clear. 
Universality implies easy access, and this is presently often not the case. Given 
the present divergences in service performance, some harmonisation would be 
needed in this respect also. Tariffs appear to be generally affordable; however, in 
certain cases, the tariffs do not reflect the costs, and such tariff-setting, as applied 
by the postal administrations, could, in the long term, jeopardise the economic 
viability of the universal service network. Further, it is right that the postal 
administration should be able to use the universal service network to provide non­
mandatory services, but at present there are no common rules for this. 
These present and future problems indicate that harmonisation measures for 
universal services are appropriate in the following areas: 
access: rules should be the same for all users meeting the same conditions; for 
the access needs of other service providers (either other postal 
administrations or private operators), there may need to be specific 
technical measures to ensure inter-operability; 
page8 
service: 
tariffs: Executive Summary 
standards should be set for all universal seivices; performance should 
be measured by a common system that accurately reflects users' 
experience of the seivice; results should be published; 
prices for each service should be related to the average costs of that 
seivice; present differences in tariff structures should be reduced in 
order to diminish present market distortions. 
These harmonisation measures could be implemented, considering that basic 
customer requirements would be likely to be very similar in each Member State. 
7. PROPOSED SCENARIO 
The last option is the preferred scenario since it finds the appropriate balance. It 
combines gradual opening of the market with the implementation of harmonisation 
measures to meet Community objectives. It will therefore ensure the universal service 
under proper conditions, whilst providing optimum freedom of choice for users. It will 
be noted that there is no single solution, but rather a set of measures which provide the 
common structure needed. Each proposal is therefore part of a coherent whole; at the 
same time individual proposals do respond to certain specific problems. 
In summary, the Green Paper considers that the universal service objective can justify 
the establishment of a set of reserved seivices, which would help to ensure the financial 
viability of the universal service network. In this way, the public service mission, which is 
and will remain a feature of universal postal services, would be guaranteed. The scope of 
the reserved seivices, which would confer some special and exclusive rights on the 
universal service provider, should be directly proportional to the objective. The 
universal service objective would thus be secured, and there would be as much freedom 
of choice as possible for potential users. 
It should be mentioned that some advance comments have been received on recent 
drafts of the options. On the basis of these comments, it seems that there could be a 
consensus on the general orientations. However, there appear to be certain points that 
cause concern to some interested parties. These points seem to relate to the need for 
adaptation periods and also to certain liberalisation proposals, such as for direct mail, 
intra-Community cross-border mail and international mail. The debate during the 
consultation period that will follow the publication of the Green Paper may well 
concentrate on such points. However, the balance of the whole set of policy options 
presented should be considered. 
It should be emphasised that this broad option of further market opening combined with 
strengthening the universal service could itself be implemented in a number of ways. 
The intention is that the main remaining choices will be made in the light of the debate 
that will follow the publication of the Green Paper. More detailed work will thus be 
needed before implementation. Much of this will involve discussions with user groups in 
order to identify their requirements in more detail, particularly with regard to the ways 
in which they may need greater freedom of choice. As mentioned, a Community 
definition of the universal service is required. Further analysis is also required before 
the weight and price limits for the reserved area can be defined. Service thresholds for 
the universal seivices need to be agreed. More detailed work is also required to 
implement the principle that tariffs should be related to average costs. 
However, even though this more detailed work remains to be undertaken, the set of 
policy options is presented in the confidence that the common structure proposed, by 
linking liberalisation and harmonisation, would ensure the universal service and give 
optimum freedom of choice. 
The main policy objectives for the Community•s postal sector are shown in the table 
overleaf: 
page 10 Executive Summary 
1. TO ENSURE PROVISION OF UNIVERSAL POSTAL SERVICE THROUGHOUT THE 
COMMUNITY AT PRICES AFFORDABLE TO ALL THROUGH THE ESTABLISHING 
(INASMUCH AS IT WAS NEEDED IN MEMBER STATES INDIVIDUALLY) OF A SET OF 
RESERVED SERVICES WHICH WOULD CONFER SOME SPECIAL AND EXCLUSIVE RIGIITS, 
IN ORDER TO MAINTAIN THE RESOURCES NECESSARY FOR THE UNDERTAKING OF THE 
PUBLIC SERVICE MISSION IN GOOD CONDmONS; AT THE SAME TIME, CONSISTENT 
WITH THIS OBJECTIVE, TO HA VE THE LARGEST POSSIBLE PART OF THE SECTOR 
OPERATING IN FREE COMPETITION. 
2. TO HAVE COMMON OBLIGATIONS FOR THE UNIVERSAL SERVICE OPERATORS OF THE 
COMMUNITY IN RESPECT OF THE SPECIAL AND EXCLUSIVE RIGHTS GRANTED TO 
THEM BY THE RESERVED SERVICES IN ORDER TO ENABLE THEM TO PROVIDE 
UNIVERSAL SERVICES, IN PARTICULAR WITH REGARD TO THE QUALITY OF SERVICE 
PROVIDED. 
3. TO MAKE ANY NECESSARY EFFORTS TOWARDS COMMUNITY COHESION THROUGH 
APPROPRIATE HARMONISATION MEASURES. 
These main policy objectives therefore treat general regulatory issues, the obligations of 
the reserved service provider and, thirdly, the subjects of harmonisation and cohesion. 
These are in turn translated into detailed options under three headings, each relating to 
one of the main policy objectives: 
Part I: GENERAL REGULATORY ISSUES 
Part II: OBLIGATIONS OF UNIVERSAL SERVICE PROVIDERS 
Part III: HARMONISATION AND COHESION 
These options are put forward in the confidence that they would have a very positive 
effect on the Community's postal sector -on all customers, large and small, and all 
operators, public and private. In short, they will create a dynamic single market in postal 
services. 
Executive Summary page 11 
PART I: GENERAL REGULATORY ISSUES 
I. ESTABLISH A SET OF UNIVERSAL SERVICES 
The key social requirement for postal services is the maintenance of the universal service. 
Universal service without any conditions about price can be provided in the competitive 
(non-reserved) sector. But, in order for the service to be at a price affordable to all, it is 
necessary to have sufficient economic returns to scale. These can only be achieved through 
the granting of some special and exclusive rights -hence the need for reserved services. 
(Although it is possible for there to be more than one reserved service provider in each 
Member State, this is unlikely; for the sake of simplicity, all the proposals refer to only one 
reserved service provider -assumed to be the postal administration -in each Member State.) 
2. DEVELOP THE DEFINITION OF UNIVERSAL AND RESERVED SERVICES 
Detailed work is still needed before such a Community definition of the possible set of 
reserved services can be made. Throughout this analysis, the objective will be to seek the 
least restrictive solution. Conditions in some Member States may permit the scope of the 
reserved services there to be less than the set defined at a Community level, but always 
consistent with the objective of ensuring universal service. Whatever the result, the 
definitions must be such as to distinguish clearly between what is in the reserved area and 
what in the non-reserved area .. 
3. ENSURE COMPATIBILITY OF OTHER MEMBER STATE COMMITMENTS 
WITH COMMUNITY LEGISLATION AND POLICIES 
As with all sectors, efforts need to be made to reduce the possible tensions between, on the 
one hand, Community law and policies and, on the other, potential obligations arising 
from other conventions or treaties that Member States may have signed 
4. SEPARATE REGULATORY AND OPERATIONAL FUNCTIONS 
In order to ensure that the user's interests are best served through the impartial treatment 
of all operators, it is essential that regulatory and operational functions should be 
separated The independence of the regulatory function will better enable it to achieve the 
best balance between public and private operators, and between reserved and non-reserved 
service providers. It will monitor the effectiveness of the reserved services, in tenns of the 
service provider both maintaining a good universal service and meeting its other 
obligations shown below at Proposals 5, 6 and 8. If the situation arises, it will need to 
consider what action may be necessary in the case of performance failing short of the 
obligations. 
page 12 Executive Summary 
PART II: OBLIGATIONS OF UNIVERSAL SERVICE PROVIDERS 
5. ACCESS CONDITIONS TO UNIVERSAL SERVICES TO BE SAME FOR ALL 
The rule must be equality of treatment of users (customers) of universal services. Within 
this rule, it is recognised that customers have varying requirements and can co-operate 
with universal service providers to varying extents. This is partly a function of size, but 
particularly of the ability to prepare mail in ways that are beneficial to the postal operation 
of the universal service provider, thus allowing the latter to off er discounts. 
6. TARIFFS OF UNIVERSAL SERVICES TO BE RELATED TO AVERAGE COSTS 
The guiding principle should be that tariffs should be related to average costs. The 
consistent application of this 'principle is the best guarantee of the financial soundness of 
the postal services. Cross-subsidies can be permitted across geographic areas in order to 
allow the perequation tarifaire and from the non-reserved area to the reserved area. 
There could also be cross-subsidies from the reserved to the non-reserved area if they were 
necessary to assure the universal service and if they were compatible with competition 
rules. With these exceptions, in order to ensure fair treatment for all, cross-subsidies, 
whether from one service to another or, because of discounts, from one group of customers 
to another, should be minimised and phased out. 
7.-INTER-ADMINISTRATION COMPENSATION TO REFLECT DELIVERY COSTS 
The existing system of charging between postal administrations (called terminal dues) is 
not cost based, leading to significant distortions between remuneration and actual delivery 
costs incurred The same principle of basing on tariffs on costs should apply to the 
financial compensation system between postal administrations .. 
8. SERVICE STANDARDS FOR UNIVERSAL SERVICES TO BE SET AND 
PERFORMANCE MONITORED 
The justification for establishing a set of reserved services is based on the social 
requirement for universal service. The actual service performance is the ref ore crucial in 
ensuring that the social requirements are met. Standards the ref ore need to be set for the 
universal services, performance monitored and control systems put in place. It is 
important to note that such standards are only thresholds -universal service providers 
should still try to have a performance higher than the standards. 
Executive Summary page 13 
PART III: HARMONISATION AND COHESION 
9. HARMONISATION APPROPRIATE WHERE BENEFICIAL TO CUSTOMERS 
The more tangible the benefit for the consumer, the stronger the case for hannonisation. 
The clearest benefits would seem to be gained from some hannonisation of access 
conditions and from hannonisation of seTVice standards and perf onnance monitoring 
(described above at Proposal 8 ). 
10. COHESION ASPECTS TO BE TAKEN INTO ACCOUNT 
It is important always to keep in mind the need to ensure that the Community throughout 
has an effective postal sector that properly meets the postal needs of the whole of the 
Community. Most of the improvements necessary can be gained through better 
management. However, some capital investment could be needed, which, particularly in 
less favoured regions, could entail a significant financial burden. 
page 14 Executive Summary 
page 15 
page 16 
Contents page 17 
Summary Table of Contents 
CHAPTER 1. Introduction 
CHAPTER 2. The Postal Sector 
CHAPTER 3. The Postal Regulatory Environment 
CHAPTER 4. Commercial Aspects 
CHAPTER 5. Economic and Operational Aspects 
CHAPTER 6. Social Aspects 
CHAPTER 7. Existing Situation: The Problems and the Challenges 
CHAPTER 8. Discussion of Possible Solutions 
CHAPTER 9. Policy Options 
ANNEXES 
GLOSSARY 
page 18 Contents 
Full Table of Contents 
CHAPTER 1: INTRODUCTION 
CHAPTER 2: THE POSTAL SECTOR 
1. GENERAL 
2. IMPORTANCE TO COMMUNITY 
3. CUSTOMER TRENDS 
4. SERVICES PROVIDED 
5. PRESENT LEGISLATION 
6. ECONOMICS 
7. EMPLOYMENT 
8. COMMUNITY DIMENSION 
CHAPTER 3: THE POSTAL REGULATORY ENVIRONMENT 
1. INTRODUCTION 
2. TERMINOLOGY 
Contents page 19 
3. EXISTING MEMBER STATE LEGISLATION 
3.1 GENERAL 
3.2 LEGAL STATUS OF POSTAL ADMINISTRATIONS 
3.3 SCOPE OF RESERVED AREAS 
3.4 DEFINITION OF SERVICES 
3.5 MAIL PREPARATION BY INTERMEDIARIES 
3.6 POSTING AND DELIVERY BY SELF 
3.7 HYBRID SERVICES 
3.8 CROSS-BORDER MAIL 
3.9 SPECIFICS OF NATIONAL LEGISLATION 
4. REGULA TORY STRUCTURES 
4.1 SEPARATION OF REGULATORY AND OPERATIONAL FUNCTIONS 
4.2 RESPONSIBILITY OF REGULATOR 
4.3 RESPONSIBILITY OF OPERATOR 
5. INTERNATIONAL REGULATORY DIMENSION 
5.1 UNIVERSAL POST AL UNION (UPU) 
5.2 GENERAL AGREEMENT ON TARIFF AND TRADE (GATT) 
5.3 CONFERENCE OF EUROPEAN POSTAL AND TELECOMMUNICATIONS 
ADMINISTRATIONS (CEPT) 
6. THE COMMUNITY REGULATORY DIMENSION 
6.1 TREATY OF ROME 
6.2 APPLICATION OF COMPETITION RULES 
6.3 TREATY OF ROME AND UPU CONVENTION 
6.4 OTHER COMMUNITY POLICIES 
CHAPTER 4: COMMERCIAL ASPECTS 
1. INTRODUCTION 
2. MARKET OVERVIEW 
page 20 Contents 
3. CUSTOMERS 
3.1 CUSTOMER REQUIREMENTS 
3.2 PROPENSITY TO USE SERVICES 
3.3 MARKETS 
3.4 SEGMENTS 
4. SERVICES AND OPERATORS 
4.1 LETIERS 
4.2 PARCELS 
4.3 EXPRESS 
5. FINANCIAL FIGURES 
5.1 PRESENT POSITION 
5.2 TRENDS 
6. SERVICE FEATURE -ACCESS 
6.1 PRIVATE OPERATORS 
6.2 POSTAL ADMINISTRATIONS 
7. SERVICE FEATURE -QUALITY OF SERVICE 
7.1 NATIONAL QUALITY 
7.2 CROSS-BORDER QUALITY 
8. TARIFFS 
8.1 BASIC TARIFFS 
8.2 PRICE STRUCTURES 
8.3 DISCOUNTS 
8.4 CONCESSIONARY RATES (PREFERENTIAL TARIFFS) 
9. EFFECT OF SINGLE MARKET 
9.1 GENERAL ECONOMIC EFFECTS 
9.2 CUSTOMER STRATEGY 
9.3 CUSTOMER EXPECTATIONS OF POSTAL SERVICES 
9.4 PARTICULAR EFFECTS ON POSTAL OPERATIONS 
Contents 
CHAPTER 5: ECONOMIC AND OPERATIONAL ASPECTS 
1. INTRODUCTION 
2. UNIVERSAL SERVICE PROVISION 
3. POSTAL OPERATION -GENERAL DESCRIPTION 
3.1 SELLING OF SERVICE 
3.2 COLLECTION 
3.3 OUTWARD SORTING 
3.4 TRANSPORT 
3.5 INWARD SORTING 
3.6 DELIVERY 
3.7 OTHER 
4. CROSS-BORDER SERVICES 
4.1 OUTWARD MAIL 
4.2 INWARD MAIL 
5. COSTS 
6. PROFITABILITY AND TARIFF-SETTING 
6.1 PEREQUATION TARIFAIRE 
6.2 ACCOUNTING 
6.3 PREFERENTIAL TARIFFS 
7. FUNDING 
7.1 CROSS-SUBSIDIES 
7.2 CENTRAL FUNDING 
8. TERMINAL DUES 
9. REMAIL 
9.1 A-B-C REMAIL 
9.2 A-B-B REMAIL 
9.3 A-B-A REMAIL 
10. INVESTMENT AND TECHNOLOGY 
10.1 TECHNOLOGY 
10.2 INVESTMENT -POSTAL ADMINISTRATIONS 
10.3 PRIVATE OPERATOR INVESTMENTS AND OPPORTUNITIES page 21 
page 22 Contents 
CHAPTER 6: SOCIAL ASPECTS 
1. INTRODUCTION 
2. EXTERNAL CUSTOMER ASPECTS 
2.1. PRESENT REQUIREMENTS 
2.2. PRESENT SERVICES 
2.3. NEW CUSTOMER REQUIREMENTS 
2.4. COMMUNITY DIMENSION 
3. EMPLOYMENT 
3.1. PRESENT CONDITIONS 
3.2. EMPLOYMENT DEMAND 
3.3. TRENDS IN PERSONNEL POLICIES AND WORKING CONDITIONS 
3.4. TRAINING 
4. THE CHALLENGE 
CHAPTER 7: EXISTING SITUATION: THE PROBLEMS AND THE CHALLENGES 
1. INTRODUCTION 
2. THE CUSTOMER'S PERSPECTIVE 
2.1 DEFINITIONS 
2.2 ACCESS 
2.3 SERVICE 
2.4 TARIFFS 
2.5 CUSTOMER SATISFACTION 
3 THE OPERATOR'S PERSPECTIVE 
Contents page 23 
3.1 JURIDICAL 
3.2 ACCESS 
3.3 QUALITY OF SERVICE 
3.4 TARIFFS 
3.5 EMPLOYMENT 
3.6 TECHNICAL 
4. THE NATIONAL REGULATOR'S PERSPECTIVE 
4.1 RESERVED AREA 
4.2 OBLIGATIONS OF UNIVERSAL SERVICES 
5. 1992 IMPACT 
6. WHAT HAPPENS IF NOTHING IS DONE? 
7. THE COMMUNITY'S PERSPECTIVE 
7.1 REGULATORY /OPERATIONAL SPLIT 
7.2 DEFINITION OF UNIVERSAL SERVICE 
7.3 SCOPE OF RESERVED AREA 
7.4 APPLICATION OF RESERVED SERVICES RIGHTS 
7.5 ACCESS CONDITIONS 
7.6 SERVICE PERFORMANCE 
7.7 TARIFFS 
7.8 HARMONISATION 
7.9 COHESION 
7.10 LONGER-TERM ISSUES 
CHAPTER 8: DISCUSSION OF POSSIBLE SOLUTIONS 
1. INTRODUCTION 
2. NEED FOR ACTION AT COMMUNITY LEVEL 
3. COMMUNITY OBJECTIVES 
3.1 BASIC PRINCIPLES 
page 24 Con.tents 
3.2 IMPLEMENTATION 
4. DETERMINING THE RESERVED AREA 
5. DELIVERY AND POSTING BY SELF 
5.1. DELIVERY BY SELF 
5.2. POSTING BY SELF 
6. MANDATORY SERVICES 
6.1 MANDATORY SERVICES AT COMMUNITY LEVEL 
6.2 MANDATORY SERVICES AT NATIONAL LEVEL 
6.3 FINANCING 
7. NEW SERVICES 
8. CROSS-BORDER MAIL 
8.1 INTRA-COMMUNITY MAIL 
8.2 INTERNATIONAL MAIL 
8.3 OTHER ISSUES 
9. SCOPE OF RESERVED SERVICES -PARTICULAR ISSUES 
9.1 PROBLEMS OF DEFINITION 
9.2 SLOWER POST AL STREAMS 
9.3 ELECTRONIC COMMUNICATION 
9.4 MAIL PREPARATION 
10. PROPOSED CRITERIA 
10.1 MEDIUM TERM 
10.2 SHORTER TERM 
10.3 LONGER TERM 
11. COMPATIBILITY OF POSTAL LEGISLATION WITH COMMUNITY TREATIES AND POLICIES 
12. THE ROLE OF THE REGULA TORY BODY 
13. UNIVERSAL SERVICE OBLIGATIONS -ACCESS 
13.1 PUBLICATION OF POSTING CONDITIONS 
13.2 CONTRACT CONDITIONS FOR LARGE CUSTOMERS 
13.3 MAIL PREPARATION 
13.4 ACCESS FOR PRIVATE OPERATORS 
13.5 ACCESS FOR OTHER POSTAL ADMINISTRATIONS 
14. UNIVERSAL SERVICE OBLIGATIONS -SERVICE ST AND ARDS 
14.1 STANDARDS SETTING 
14.2 PERFORMANCE MONITORING 
14.3 CONTROL 
15. UNIVERSAL SERVICE OBLIGATIONS -TARIFFS (INCLUDING TERMINAL DUES) 
15.1 RELATIONSHIP TO COSTS 
15.2 SUBSIDIES 
15.3 TERMINAL DUES 
16. NON-RESERVED SERVICES 
16.1 PRICE 
16.2 OTHER 
17. POSSIBLE AREAS FOR HARMONISATION 
17.1 ACCESS CONDITIONS/CONTRACT TERMS 
17.2 QUALITY OF SERVICE 
17.3 TARIFF STRUCTURES 
17.4 CUSTOMER INTERFACE 
17.5 OPERATIONAL 
17.6 EMPLOYMENT 
18. COMMUNITY COHESION 
19. POLICY IMPLEMENTATION 
20. POSTAL FINANCIAL SERVICES 
21. OTHER ISSUES 
21.1 SINGLE POSTAL ADMINISTRATION 
21.2 COMMON TARIFFS 
21.3 COMMON STAMPS 
page 26 
CHAPTER 9: 
INTRODUCTION 
PART I: 
PART II: 
PART Ill: POLICY OPTIONS 
GENERAL REGULATORY ISSUES 
OBLIGATIONS OF UNIVERSAL SERVICE PROVIDERS 
HARMONISATION AND COHESION Contents 
Contents page 27 
ANNEXES 
1. OVERVIEW OF POSTAL SERVICES 
2. THE POSTAL SECTOR IN STATISTICS 
3. MAIL OPERATIONS AND NETWORKS 
4. SUMMARY OF LEGAL SITUATION IN MEMBER STATES 
5. COMMUNITY TEXTS ON POSTAL SERVICES 
6. UPU CONVENTION -KEY ARTICLES 
7. QUALITY OF SERVICE 
8. TERMINAL DUES 
9. RE MAIL 
10. POSTAL OPERATORS' CODES 
11. POSTAL EQUIPMENT INDUSTRY 
12. POSTAL ELECTRONIC MAIL 
13. CULTURAL MAIL 
14. TARIFF ISSUES 
15. INTRA-COMMUNITY MAIL 
16. DISCUSSION OF CRITERIA TO DEFINE RESERVED AREA 
GLOSSARY 
page 28 Contents 
Chapter 1: Introduction (Revised version 3-25/03/92) page 29 
CHAPTER 1: INTRODUCTION 
A Green Paper is a discussion document. This Green Paper on Postal Services is published as 
the basis for discussion of what changes need to be made to the Community's postal sector in 
order to achieve the Single Market in postal services. 
In co-operation with Member States, the Commission has invested a significant amount of 
time and effort in the preparation of this paper. This investment is appropriate because of 
the importance of the postal sector to the commercial and social well-being of the 
Community. The Single Market can only function with good communications and distribution 
channels. Effective postal services have an essential part to play in providing these channels. 
An analysis of today's postal services in the Community shows a sector with many tensions 
and divergences. After 1992, if nothing were to be done, these problems would increase to a 
level that would be incompatible with the objectives of the Single Market. 
The fundamental difficulty is that there is presently no Community approach. The Green 
Paper is the first step to resolving this. It presents policy options, when implemented, would 
help to give the Community the effective postal services that it requires. 
In order to arrive at the policy options, the present situation needs to be analysed in detail to 
determine what the important issues are. Possible solutions then need to be discussed, and 
proposals made. Some readers of the Green Paper may be less familiar with the postal 
sector, and so the analysis is preceded by a general introduction to the sector. 
To prepare the Green Paper, the Commission has received information and opinions from all 
the Member States. The postal administrations have also contributed, as have trade 
associations representing the larger private operators. Some user groups have also given their 
views. In addition, several reports, some initiated by the Commission, have helped the 
preparation of the paper. 
A few words are appropriate concerning mention of Member States in the paper. In all cases, 
the English name is used. When the Member States are listed in tabular form, the order used 
follows the Community practice of an alphabetic order using the names in the native 
language. Specifically regarding Germany, it should be noted that all figures relate to the 
Federal Republic pre-unification. 
page 30 Chapter 1: Introduction 
Chapter 2: The postal sector page 31 
CHAPTER 2: THE POSTAL SECTOR -BRIEF DESCRIPTION 
1. GENERAL 
Postal services provide one way in which messages can be communicated and goods 
delivered. They therefore play a vital role in modern society, and will continue to do so. 
Good postal services are an engine for economic growth; poor postal services have a 
debilitating effect, both economically and socially. 
However, the role played by postal services will change as society's requirements for 
communicating messages and having its goods delivered change. Demand for postal 
services will be affected by the competition from other communication media and 
delivery channels. It will also depend on society's view of the quality of service provided 
by postal services. 
2. IMPORTANCE TO COMMUNITY 
In the EC, mail services of the postal administrations and private operators combined 
generate an estimated annual turnover of some ECU 46 billion, postal administrations 
contributing ECU 26 billion and private operators ECU 20 billion. Postal 
administrations also have counter operations and financial services which generate a 
further ECU 13 billion. In total, therefore, the turnover of the Community's postal 
services is ECU 59 billion -or 1.3% of the EC's Gross Domestic Product (GDP). 
The Community's mail order and direct mail industries, which are closely linked to the 
postal services, generate a further ECU 26.4 billion and ECU 6.4 billion respectively. 
Together, this is 0.8% of the Community's GDP. 
Combining these figures with those of the revenue of the postal operators themselves, 
the share of the GDP is 2.0% (allowing for some overlap in the revenue generated). 
This figure does not take into account the commercial value of the postal services. An 
effective postal infrastructure is not only an objective in itself, but also necessary to 
support commerce and administration. Mail volumes and revenues have been growing 
consistently in recent years, certainly keeping up with the growth in the Community's 
GDP. 
It should also be remembered that postal services bring benefits which cannot be 
quantified in financial terms. They are an important means by which individuals can 
page 32 Chapter 2: The postal sector 
communicate with each other, or receive information. Because of their universal 
coverage, postal services make a significant contribution to the social cohesion of the 
Community. 
Put simply, postal services are a vital part of the Community's economic and social life. 
3. CUSTOMER TRENDS 
The average EC citizen receives 260 mail pieces annually, the greater proportion of them 
generated by business or other organisations. 
In terms of general use of postal services, more than 80% of mail is generated by 
business or other organisations. Table 1 shows the approximate composition of senders 
and recipients of letters; it indicates that more than half the items are delivered to 
individuals. In a very real sense the "customer" of a mail service is the recipient of the 
item as well as the sender. 
Table 1: Letters users matrix 
TO 
ORGANISATION INDIVIDUAL 
FROM 
ORGANISATION 35% 45% 
INDIVIDUAL 10% 10% 
Source: CEC Estimation (1990) 
The postal requirements of the "organisation-to-organisation" sector may contract 
somewhat as a result of new communication technologies. However, total volumes are 
likely to remain stable as a result of growth in other sectors, particularly the business-to­
individual sector (and the individual-to-business mail thus stimulated). 
At a more detailed level, some market sectors are especially dependent on mail services. 
As their name implies, mail order (part of the distribution/sales sector) and direct mail 
(a form of advertising) rely heavily on them. Other sectors, such as publishing and 
finance, are also significant users. In some cases -particularly that of publishing -usage 
Chapter 2: The postal sector page33 
varies between Member States because of the different tariff policies applied. All three 
sectors are forecast to continue to grow. 
It is important to note that customer (user) perceptions of the efficiency of the postal 
service will affect the kinds of use for which postal services may be thought appropriate. 
If a customer in one country is almost certain that a business communication will arrive 
next day, he may well use the ordinary letter post for sending such a message. However, 
a customer in another country may perhaps not have the same degree of confidence in 
the service, and will choose another medium by which to send a similar message. 
4. PRESENT LEGISLATION 
No two Member States have postal legislation exactly alike. However, there is a 
progressive trend throughout the Community to separate regulatory and operational 
functions. Thus postal administrations should be simply public opera tors. The 
regulatory powers are vested in a government body, although this sometimes operates 
under the same organisational umbrella as the postal administration. 
In no Member State is there any monopoly over parcel services. Express services are 
now under the monopoly in only three out of the twelve Member States. 
Although the legal position is still evolving, letters up to a certain weight or a certain 
price are reserved as state monopolies for domestic (inland) services. These monopolies 
cover the mandatory provision of all reserved items universally across the territory of 
the reserved service provider. 
In addition to letter services which postal administrations have to provide as mandatory 
reserved services, administrations are often obliged to provide certain other services 
universally -such as parcel services up to a certain weight -even though these fall in the 
competitive sector. 
Where services are in the non-reserved (competitive) sector, postal administrations and 
private operators compete. The private operators include, among others, express 
(including urgent deliveries of documents and/or parcels) companies, freight forwarders 
and international letter mail companies. 
Parcels and, in particular, express are two markets that have been growing significantly. 
The practical effect of both these markets being non-reserved is that approximately 43% 
of the postal sector's revenue is now generated by private operators. If the postal 
page 34 Chapter 2: The postal sector 
administrations' revenue from non-reserved services is added, the non-reserved services 
account for rather more than half the revenue of the postal sector. 
The regulatory aspects of the postal sector are studied in detail in Chapter 3. 
5. SERVICES PROVIDED 
The services provided by postal administrations can be divided into mail services and 
services provided at post office counters. The latter consist of mail facilitating services 
(stamp sales etc.) and financial services such as Giro or carrying out financial 
transactions for the government and the public. However, the counter services are 
provided in competition (and besides should be considered more as part of the financial 
services market). This Green Paper therefore concentrates on mail services. 
Figure 1: Shares of the postal sector 
By volume By revenue 
• PRIVATE OPERATORS 
~ POSTAL ADMINISTRATIONS 
Customers trends and the services provided are studied in more detail in Chapter 4. 
These services presently divide into the product segments of letters, express and parcels 
(although other services are emerging). Letters and express services provide postal 
services for communication items, and parcels and express services provide postal 
services for goods-bearing items. There are significant overlaps between the services. 
Chapter 2: The postal sector page 35 
Letters services are provided almost exclusively by postal administrations. With limited 
exceptions, parcel and express services are in free competition. Postal administrations 
tend to be market leaders in parcel services, but not in express. Figure 1 shows the 
operators' shares of the postal sector, measured by volume and by revenue. 
For all services, by far the largest part is for delivery within the same Member State 
where the communication or goods originated. Access to postal services provides use of 
an important medium for communicating messages and of a channel for distributing 
goods. It is therefore of concern that the access conditions can vary significantly between 
Member States. This is the result as much of decisions taken by the regulatory bodies 
concerned as of the differences in posting rules applied by the postal administrations. 
6. ECONOMICS 
The usage of postal services is closely related to the general economic situation -m 
terms of both comparative usage in different Member States and usage trends. 
Productivity varies significantly between the postal administrations of Member States, 
being partly affected by the different levels of usage, but also reflecting different levels of 
efficiency. These differences in productivity are one of the factors that cause wide 
ranges in tariffs between Member States for what are broadly similar services. Another 
factor is the differing cost of labo.ur, personnel costs accounting for some 70% of the 
cost of providing letter services. 
It is clear that there are also significant differences in the principles applied to setting 
tariffs. This is evident, for example, from the varying approaches towards subsidies and 
cross-subsidies. However, the apparent wide range of tariffs that these factors 
collectively cause becomes less broad if the relative spending power of the citizens of 
different Member States is taken into account. Further, the postal administration of 
each Member State structures its tariffs as unitary rates covering the whole of its 
territory. 
While the network that provides the universal service is not physically inter-connected in 
the way that the telecommunications network is, the universal postal operation has 
significant network costs that do not change with volume. In order to provide the 
universal service at an affordable price, it is important that high volumes are put through 
the universal service network and sufficient revenue generated to assure the economic 
viability of the network. 
page 36 Chapter 2: The postal sector 
All Member States have decided that, in order to ensure sufficient volumes, some 
services ought to be reserved, thus granting the postal administrations some special and 
exclusive rights. However, there are significant divergences in the scope of the reserved 
areas of the different Member States. A potential user who has the same postal 
requirements in all Member States may well find that the regulatory and operational 
·rules for meeting these requirements are different in each Member State. 
The economics of postal sen;ices will be discussed fully in Chapter 5. 
7. EMPLOYMENT 
Postal services are significant employers in the Community. The public postal 
administrations employ 1.35 million staff, and private operators a further 0.35 million 
staff. Because postal operations are so labour intensive, they are particularly sensitive to 
personnel trends. The changing demographics of the Community could have a 
significant effect on the availability of staff that the postal operators will continue to 
need to recruit. This in turn may affect pay levels in the sector. Combined with new 
market and technological trends, it will put still greater emphasis on the need for 
effective training. 
The social aspects of the postal sector will be studied further in Chapter 6. 
8. COMMUNITY DIMENSION 
It is now accepted that a Community approach is needed to establish a single market in 
postal services. This is necessary in order to resolve the issues that have arisen and will 
arise in the sector. It is also needed to ensure that the policy for the postal sector aids 
the creation of the Single Market in other sectors which have particular reliance on the 
postal sector -examples being the printing/publishing and advertising industries. 
In summary, the objective of the Green Paper is to propose how to achieve the dynamic, 
customer-oriented postal sector that the Community needs. 
Chapter 3: Regulatory environment 
CHAPTER 3: 
1. INTRODUCTION THE REGULATORY 
ENVIRONMENT page37 
The aim of this chapter is to examine the existing regulatory situation in the Member 
States, putting this in its international and Community context. In particular, it will 
analyse common aspects of Member States' legislation, as well as the differences. 
Whether present legislation is well adapted to the future Community regulatory 
requirements will be discussed in more detail in Chapters 7 and 8. 
2. TERMINOLOGY 
All countries have some services that are provided as monopoly services by some public 
undertakings. Such services are more correctly called "reserved services", meaning that 
the provision of the services are reserved to one or more operators. Such reserved 
services are normally the subject of some special and exclusive rights (these rights in 
effect curtailing the normal operation of the free market). In the postal sector, the 
reserved service operator in each Member State is the postal administration. 
The granting of these special and exclusive rights is often called a concession, implying 
that this privilege of being awarded the reserved services carries obligations, for instance 
regarding the standard of service provided. 
Figure 1: Division between reserved and non-reserved, and between mandf.ltory services 
with universal requirement and non-mandatory services without universal 
requirement. 
UNIVERSAL 
REQUIREMENT 
N 0 UNIVERSAL 
REQUIREMENT Reserved 
Services not reserved are called, naturally, non-reserved services. Such services are 
therefore provided in the competitive sector, and the laws of the market apply. 
page 38 Chapter 3: Regulatory environment 
If a service is reserved, there is an obligation on the part of the operator to whom it is 
reserved to provide the service. In the postal sector, reservation of services is inter­
linked with the requirement for a service to be provided universally at an affordable 
price across the territory covered by the reserved service provider. 
All services that an operator (or operators) have to provide universally are therefore 
called mandatory services (the phrase "obligatory services" being synonymous). Some of 
these services may be provided as reserved services. Others would then be non-reserved 
-that is, obligatory non-reserved services which have to be provided by operators upon 
whom the obligation is placed, but in the competitive part of the market. 
In the postal sector, all postal administrations have obligations placed upon them by 
international agreements to provide services beyond the limits of their reserved services. 
It should be noted that in the non-reserved area some Member States require operators 
other than their postal administrations (perhaps the national railway operator) to 
provide some obligatory services. 
These obligatory non-reserved postal services have to provided universally by the 
operator( s) upon whom the obligation is placed. However, the competitors do not have 
such a universal obligation (although they can provide universal service if they decide to 
do so for their own commercial reasons). 
All other services (which are therefore non-obligatory) will be provided in the 
competitive sector. Postal administrations can compete in this area if they choose to do 
so. 
3. EXISTING MEMBER STATE LEGISLATION 
The postal legislation of Member States is discussed here comparatively, with particular 
regard to the status of the postal administrations and the extent of their reserved areas. 
In addition, the postal administrations have their own regulations that expand on 
national legislation, or can even add to it. The effect of these postal regulations is also 
analysed. 
3.1 GENERAL 
Each Member State has separately determined that the most important objective 
concerns the provision of a universal postal service at affordable tariffs throughout 
its territory. Each also requires a universal service to be provided for certain 
Chapter 3: Regulatory environment page39 
items collected on its territory, but for delivery in another country, and for such 
items collected in another country but for delivery on its own territory. 
To ensure provision of the universal service, each Member State, again separately, 
has decided to impose the obligation to provide the universal service on its postal 
administration. In order to provide financial support for the universal service, or 
indeed to ensure its financial viability, each Member State has decided to establish 
some reserved services which confer special and exclusive rights to the postal 
administration. 
It must be emphasised that the scope of the universal services is not (or is not 
necessarily) the same as that of the reserved services. In practice, all Member 
States impose on their postal administrations obligations of universal service that 
go beyond the scope of their reserved services. 
However, the scope of the reserved services varies from Member State to Member 
State. In all cases, these reserved services are stated in national legislation. Most 
national postal laws do not state how these definitions were arrived at. Although 
the establishing of reserved services is connected integrally with the universal 
service obligation, the postal law of some Member States implies the connexion, 
while that of others states it explicitly. 
3.2 LEGAL STATUS OF POSTAL ADMINISTRATIONS 
Table 1 below summarises the legal status of the postal administrations. (See 
Annex 4 for a more detailed summary.) 
page 40 Chapter 3: Regulatory environment 
Table 1: Legal status of postal administrations ( 1991) 
STATUS FINANCIAL MEMBER 
AUTIIORfIY STATE 
Limited Ireland 
Public Independent Netherlands 
Company 
Belgium 
Gem1any 
Public Financial Greece 
Enterprise autonomy Po11ugal 
United Kingdom 
Public Financial 
autonomous autonomy France I 
establishment 
Separate Denmark 
budget 
State --------------------------------- 1------------------------------------------
Administration No financial Spain 
autonomy Italy 
Luxembourg 
--
Source: European Research Associates study (with updates) 
3.3 SCOPE OF RESERVED AREAS 
Table 2 overleaf summarises the scope of the reserved area of each of the 
Member States. It should be noted that this represents the juridical position, the 
de facto position sometimes being less restrictive. (The table here is intended to 
give a general perspective; it is reproduced at Annex 4 with all the necessary 
qualifying notes.) 
Chapter 3: Regulatory environment page 41 
Table 2: Member States' reserved services -juridi.cal position (1990) 
MEMBER 
STATES 
Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United 
Kingdom 
Note 1: 
Note 2: 
Note 3: 
Note 4: 
Note 5: 
Note 6: 
Note 7: 
Source: ' 0TIIER SERVICES UNDER MONOPOLY 
LETIERS 
UPTO PRINTED SMALL FAX EXPRESS PARCELS STAMP 
PAPERS (1) PACKETS (PUBLIC) MAIL SALES 
2kg • -- - -• 
1 kg N/a (2) -- - --
1 kg • -• - - -
2kg • -- - --
2 kg (3) - - - • (4) --
2 kg • • • - - -
2 kg • • -• --
2kg - -• -• (5) -
2 kg - -- - --
500 g (6) - - -- - -
2kg N/a (2) -• • -• 
£1 (7) N/a (2) -- - --
This column refers to those administrations that apply a categorisation between letters 
and printed papers. 
Not applicable, because postal administration applies a first class/second class 
categorisation. 
Letters for collection and delivery in the same town (intra-urban traffic) are not 
reserved in Spain. Post cards are not reserved. 
Inter-urban express services are under the monopoly; intra-urban and cross-border 
express services are non-reserved. 
Although Italy has placed parcel services in the non-reserved area, the transport of 
parcels between large cities remains reserved. 
There is also a price limit operating in combination with the weight limit of 500 g. 
(The price limit presently proposed is DFl 8.20 (ECU 3.60) for domestic services, but 
this is currently being reviewed by the court in Luxembourg.) Post cards are not a 
reserved service. 
Price limit of £1 (ECU 1.45) is applied (with no weight limic). Reduction to a limit of 
about £ 0.33 (ECU 0.48) is said to be being considered. 
European Research Associates study 
page 42 Chapter 3: Regulatory environment 
All Member States reserve letters (up to certain limits that vary between Member 
States). Some (Belgium, Germany, Greece, France and Ireland) reserve printed 
papers to some degree, and some (Spain, Ireland and Portugal) some or all 
express services. (Under the Spanish legislation, express services between Spanish 
towns or cities are reserved, while intra-urban and cross-border express services 
are non-reserved; in Ireland, the juridical monopoly over express services is said 
not to be enforced.) The parcel services of all Member States are now non­
reserved. 
It should be emphasised that Table 2 above summarises the current situation in 
terms of the different services of the postal administrations. When possible uses 
of services are examined, the position may become more complex. An example of 
this is direct mail. For those Member States that operate a categorisation 
between letters and printed papers, direct mail would normally fall into the 
category of printed papers. Five of these administrations have a monopoly over 
this category. In addition, the three administrations which categorise into first and 
second class mail would regard direct mail simply as "letters": if direct mail met the 
normal criteria for being reserved, it would be treated as such. 
The existing position results from trends that continue to change the legal 
situation of the postal sector. Italy was the last Member State to make parcel 
services non-reserved (although, rather surprisingly, the Italian legislation still 
considers the transport of parcels to be reserved). Several Member States 
formerly treated express services as reserved, but only three now hold this 
position. The European Commission has played an important role in these 
changes in national postal legislation, either through administrative interventions 
or through formal decisions (see below at Paragraph 6.2). 
In order to define the limits of their reserved areas, Member States use a variety 
of criteria. Although it is difficult to control in practice, all Member States apply 
some form of a contents criterion. Parcels are defined as goods-bearing items, 
and items containing goods are excluded from the reserved area. (However, some 
Member States regard a parcel that is accompanied by an individual 
communication as a letter.) 
As part of the definition of the reserved area, most Member States also apply a 
weight criterion. The limit applied ranges from 500 g (in the case of the 
Netherlands) to 2 kg (in the case of several Member States). 
Chapter J: Regulatory environment page 43 
Other Member States apply a price criterion. For example, in the UK the upper 
limit for the reserved area is set at a value of £ 1. (The British government is said 
to be considering reducing this limit substantially.) In the case of the Netherlands, 
there is a price limit that operates in conjunction with the weight limit. ·In 
Germany, a weight limit of 1 kg has been set (but probably to be reduced to 500g), 
and a price limit has also been set at ten times the tariff for the ordinary letter 
service. 
Table 3 below shows the practical effect of these different limits in terms of the 
entry price thresholds for express services (or other services that the customer 
perceives to be qualitatively superior to the normal letter service). Where 
Member States have formally established price levels as the limits for their 
reserved areas, these limits are divided by the basic tariff to show the factor. (As 
an example, the United Kingdom's £1 limit is divided by the then basic tariff of 
£0.20, giving a factor of five times.) For other Member States, the price limit is 
assumed to be the tariff for a letter of 2 kg (taken as the practical limit of the 
letter ·monopoly, even if a postal administration states that it has a monopoly over 
all letters whatever their weight). To determine the factor, the tariff at 2 kg is 
divided by the basic tariff. 
Table 3: Monopoly limits expressed as factor of basic tariff (at 1990 tariff levels) 
Source: UNITED KINGDOM 
DENMARK 
NETHERLANDS 
GERMANY 
BELGIUM . I 
·I 
·_.: I 
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IRELAND ,__ ____ ·_··_.·_: _. _-:,_':_.'·_.:__,:I 
SPAIN 
FRANCE ' .·. . I 
PO RTU G .AL -~--· ~: ·-----. :· -:-'-. '---'--. ~· ------"--'------· ~· 1 
GREE CE t--'-~-'---'-· ..__· -:'---. _-: .-'---.....:.' ·..;....::'--'-.· ::...;.__. _·:· ·_..._.....:.....;_c.._;_...;._~l 
ITALY +=·=··· ==t===='==t=='=====t====+-==·=·=·===t~==- · ~---t 
0 5 10 15 20 25 30 
CEC (using information from postal administrations) 
page 44 Chapter 3: Regulatory environment 
This diversity highlights how unharmonised the sector is in legal terms -even 
though the postal sector of one Member State would normally be thought of as 
being very similar to that of another Member State. 
3.4 DEFINITION OF SERVICES 
Although all Member States affirm that their reserved services include some or all 
letters, some do not define what is meant by a "letter". Of those that do define a 
letter, the definitions are not always clear and differ from one another. The 
problem here is that what an operator understands by this word may well be 
different from what a layman might understand. 
Firstly, there is no proper distinction between a letter and a parcel. Under the 
operators' definition "letters" include packets. But it is not clear how a packet 
differs from a parcel, since both are goods-bearing. The service performance of 
parcel and packet services is more or less the same. If a customer posts an item as 
a packet it is reserved, but if the same item is posted as a parcel it is non-reserved. 
Express services pose another problem. Described approximately, such services 
involve the rapid shipment of documents and parcels, often with additional 
features provided such as special collections and the tracking of the items during 
transit. 
Most Member States state that they intend express services to be in the non­
reserved sector. However, no postal legislation offers a definition of what is 
express. It is indeed difficult to state clearly what differentiates express services 
from ordinary letters (or parcel) services. 
Rather than trying to define· express services, some Member States simply use a 
price limit (as mentioned above at Paragraph 3.3) to ensure that such services are 
placed in the non-reserved area. 
3.5 MAIL PREPARATION BY INTERMEDIARIES 
Some postal administrations grant contracts to operators who may collect maiJ 
from the original customer, prepare the mail in some way, and then post the mail 
with the postal administration. Such operators are called consolidators, mailing 
houses or mail preparers. 
Chapter 3: Regulatory environment page 45 
This pre-mailing process can range from printing the items and preparing them for 
posting to simple enveloping. If the item was reserved, this intermediate operator 
would be obliged by law to post the item with the postal administration for final 
delivery. Since the intermediary is carrying out some activities which would save 
the postal administration some costs, these contracts usually include discount 
arrangements. 
On the other hand, other administrations do not permit third party operators to 
act as intermediaries in this way. 
At least one administration insists on pre-sortation as a condition of access to 
certain postal services, but states that discounts are not permitted by law. 
However, the services concerned are printed paper services which receive 
preferential tariffs. (Such tariffs are discussed in detail below at Chapter 4, 
Paragraph 8.4 and at Chapter 5, Paragraph 6.3.) 
It is not always clear whether these differences arise from the varying legislative 
positions in different Member States or from variations in commercial attitudes to 
the provision of postal services. 
3.6 POSTING AND DELIVERY BY SELF 
It now seems accepted by all Member States (in practice, if not always in law) that 
any citizen or organisation has the right to deliver his or its own mail to the 
intended addressees. At the same time, there is an understandable concern as to 
how this principle might be interpreted with regard to subsidiaries posting on 
behalf of parent companies. In the latter example, a number of "parent" 
companies might each have, for example, only a 10% stake in the company 
specialising in postal deliveries. 
This "self-delivery" principle seems applicable either within a national territory or 
cross-border (where the originator of the mail delivers it to an address in another 
country). However, for the right of posting of items that would be reserved if they 
were for delivery in the national territory, a distinction seems to be drawn by some 
Member States between posting in one's own country or elsewhere. 
Subject to contract conditions, anyone can post where he likes m a national 
territory if the item is for delivery within that territory. However, some national 
legislation forbids the same item being taken across a border into another country 
page 46 Chapter 3: Regulatory environment 
and then posted there for delivery in that country. (The Member States which 
hold this position are amongst those who consider such mail crossing borders to be 
part of the reserved area -see below at Paragraph 3.8.) 
If such activities are forbidden by the postal legislation of certain Member States, 
the same legislation would also forbid the originator of the mail to take it across a 
border into a second country and post it there for delivery either back in his own 
country or in a third country -whether the motivation was to reduce postage costs 
or to improve the quality of service. 
Such restrictions will need to be viewed in the context of obligations under the 
Treaty of Rome. In particular, it would be relevant to consider the obligation to 
permit freedom to pro:Vide services in the Single Market and the obligation to 
make restrictions of the free market proportionate to the objective of the public 
undertaking concerned (see below at Paragraph 6.1 ). 
3.7 HYBRID SERVICES 
There are, or may be, certain services that combine features of the ordinary letter 
service with those of another service, which may or may not involve the same item 
being in the same physical state. 
Postal administrations offer a service called "postal electronic mail". This service 
and its commercial viability are discussed in detail at Annex 12. Briefly, it involves 
the transmission of an electronic image of a document or its conversion in digital 
format and transmission to a distant point, where the image is printed out, 
enveloped and sent to the addressee (or addressees if the same image is sen! to a 
number of addresses). 
Postal electronic mail therefore provides an example of a hybrid service which 
involves the item changing its physical form: when it is enveloped and addressed, it 
becomes a postal item. A delivery facility is added to a service that is non­
reserved. 
The regulatory authority will therefore first need to determine whether postal 
electronic mail is an integrated service or not. If it were, the regulatory view 
would be that it was wholly reserved or wholly non-reserved. Alternatively, the 
authority might decide that the two elements should, from a regulatory point of 
view, be considered as separate. Under the latter view, if the item to be delivered 
Chapter 3: Regulatory environment page 47 
meets the criteria of being placed in the reserved area, the delivery element could 
be reserved to the postal administration: in this way, a hybrid service could 
combine reserved and non-reserved elements. 
3.8 CROSS-BORDER MAIL 
The legislation of most Member States does not distinguish between destinations 
of the items with which the legislation is concerned -whether the destinations are 
in the national territory (in the case of domestic mail) or outside (in the case of 
cross-border mail). 
However, with minor restrictions, both the Netherlands and the United Kingdom 
place cross-border mail in the non-reserved sector. Two other administrations 
(those of Belgiu~ and Denmark) permit private companies offering international 
letter mail services to operate using the postal systems of their national postal 
administrations. 
Ten Member States (including Belgium and Denmark) have legislation that places 
out-going cross-border letter mail in the reserved area if it meets the same criteria 
(weight and/or price) that determines the reserved area for domestic mail. 
However, the majority of these Member States (or the postal administrations of 
those States) have chosen not to enforce the exclusive rights of the postal 
administration with regard to this mail, or have been ineffective in doing so. 
3.9 SPECIFICS OF NATIONAL LEGISLATION 
3.9.J CITY MAIL 
"City-mail" involves the provision of postal services within a particular city, that is, 
where mail is both collected and delivered in the same city. In most countries such 
activities are illegal, but Spanish postal legislation specifically permits it. 
Some private operators offering international letter mail services use city mail­
type operations to deliver mail in certain cities. (This is discussed at Chapter 5, 
Paragraph 9.2.) 
3.9.2 DOCUMENT EXCHANGES 
Document exchanges involve the delivering of mail by exchange users directly into 
the boxes of other exchange users, these boxes being provided in a Post Office 
page 48 Chapter 3: Regulatory environment 
box-type facility. The operation of such exchanges by private operators are 
permitted in some national legislations. For example, such exchanges and the 
transfer of mail between them are specifically permitted in the United Kingdom's 
legislation. 
3.9.3 TRANSPORT 
Most national legislation places the transport of mail m the reserved area 
(assuming that the delivery of the mail is reserved). 
In practice, all postal administrations sub-contract part of the transport of the mail 
to other carriers -to national railway companies in the case of domestic mail, and 
to seafreight or airline companies for cross-border mail. 
In addition, as noted at Paragraph 3.6 above, all national legislation permits a 
customer to post his mail where he wishes (at least within his own national 
territory). If third party intermediaries are permitted to function, they can 
negotiate contracts to post the mail anywhere in the national territory. In either 
case, the customer or the intermediary can choose to post the mail at the point 
nearest to the delivery office, thus obviating the need for the postal administration 
to transport the mail between sorting centres. 
The postal legislation of at least one Member State (that of the United Kingdom) 
now places the transport of mail in the non-reserved area. 
3.9.4 OTHER 
All national legislation places unaddressed items in the non-reserved area. In 
addition, Member States may place certain very specific items in the non-reserved 
area. An example here is the delivery of Christmas cards, which the Netherlands 
legislation has put in the competitive area. 
4. REGULATORY S.~RUCTURES 
Most markets are self-regulating. However, where there is reserved service operator, it 
is necessary to have some body responsible for regulating the market. It is important to 
distinguish between such a regulatory role and any operational function -particularly 
because the same body often used to carry out both functions. 
Chapter 3: Regulatory environment page 49 
4.1 SEPARATION OF REGULATORY AND OPERATIONAL FUNCTIONS 
In the recent past, postal administrations were responsible for the regulatory 
function governing the postal sector, as well as being the public operator. This has 
been recognised by more and more Member States to be inappropriate. Most 
Member States have now separated the regulatory authority from any operational 
function. 
In some Member States, the ministry responsible for regulation is organisationally 
entirely separate from the operator. In others, the operator and regulator are 
both placed under the umbrella of the one ministry. The latter relationship causes 
some concern amongst private operators that there could be a danger of what has 
elsewhere been termed "regulatory capture" (where the regulator becomes in some 
way beholden to an operator). 
The regulator in each Member State is a department in the relevant ministry. The 
British government is currently considering establishing an Office of Postal 
Services. This would be a semi-autonomous regulatory body, similar to the Office 
of Telecommunications (Oftel) which is the regulatory body for the United 
Kingdom's telecommunications sector. If and when the Office for Postal Services 
is established, its main tasks will be to monitor the quality of the universal service, 
and to advise the Minister on the appropriate extent of the postal administration's 
reserved area. 
4.2 RESPONSIBILITY OF REGULATOR 
The functions of the different national regulators vary, but there are some 
responsibilities that should be common to all: 
-advising the government on the scope of the universal services required, and on 
the means for meeting this requirement (for instance, through some reserved 
services); 
-ensuring that the special rights of the reserved service operators are observed; 
-ensuring satisfactory quality of service on the part of the reserved service 
provider; 
-ensuring fair competition in the non-reserved area. 
All these responsibilities are important, but the last mentioned is becoming key. 
page 50 Chapter 3: Regulatory environmellt 
Some national regulators oversee the obligations placed on the reserved service 
providers. The scope of these obligations varies between public operators, thus 
itself causing the responsibilities of the regulators to diverge. 
For example, there are variations in the attitude on the part of regulators to 
overseeing aspects such as access conditions. Regarding the setting of tariffs, no 
regulator claims any involvement; while this may be the formal position, it is 
probable that some of the national regulators do exert some influence. 
In several Member States there is also a formal obligation placed upon the postal 
administration that tariffs for the basic letter service and some other services 
should be set at a unitary rate for delivery covering the national territory (rather 
than having tariffs related to distance or the location of the addressee). This 
principle is called the ''perequation tarifaire", and is discussed at Chapter 5, 
Paragraph 6.1. (In 1979, the Commission made a recommendation that the 
principle ought also to be applied to the basic letters -up to 20g -going to other 
Community countries -see Annex 5.) 
At present, no national regulator appears to make service performance a 
condition of the reserved services. Most postal administrations set themselves 
published targets, and then issue details of their performance against those 
targets. It is not known how any regulator views either the targets or the 
performance. 
4.3 RESPONSIBILITY OF OPERATOR 
The obligations placed on the public operator (that is, the postal administration) 
vary between Member States. In some, they have simply to provide universal 
service and equal access for potential users (assuming all conditions are the same). 
Others have more detailed obligations. Some also have specific "missions" placed 
on them -for instance relating to the distribution of publications. 
Most public operators also share with their national regulators the responsibility 
for the defence of their special and exclusive rights. This situation may evolve as 
the role of the regulator becomes more defined. 
In the non-reserved sector, public operators have a particular responsibility to 
ensure that the power that they enjoy as a result of the reserved services is in no 
Chapter 3: Regulatory environment page 51 
way allowed to give them an unfair advantage in the market for the non-reserved 
services. 
5. THE INTERNATIONAL REGULATORY DIMENSION 
In terms of regulation, the postal sector has important international and Community 
dimensions. Here, the international dimension linking Community and non-Community 
countries is studied first. The Community dimension and the relationship with the 
international dimension is discussed below at Paragraph 6. 
5.1 UNIVERSAL POSTAL UNION (UPU) 
The UPU is a special agency of the United Nations. AH Member States are 
members of the UPU by virtue of being signatories to the United Nations Charter. 
The UPU holds a congress every five years at which it reviews its Convention, the 
articles of which, if retained, are then re-confirmed. 
After each Congress, the new Convention is signed by the members of the UPU. 
Each signatory signs as representing the Government of his country. Previously, 
postal administrations signed alone; now, both the national regulator and the 
postal administration tend to sign together. 
The Convention provides the framework for the operational relations between the 
postal administrations of the world in the exchange of mail. The articles of the 
Convention are divided into rules and recommendations. Because the Convention 
has the status of a treaty into which its government has entered, each member of 
the UPU must treat the rules as having a binding force. 
Here, it is important only to emphasize those articles which may need further 
discussion later in the Green Paper. For example, Article 20 of the Convention 
refers to the weights of items that administrations should accept in the 
international letter post system, thus imposing obligations on the "inward" 
administrations to deliver these items. (Here and elsewhere, the article 
numbering system of the 1989 Convention is used; the text of all the articles 
mentioned is shown in full in Annex 5.) 
Article 25 deals with the subject of international items letters posted outside of the 
country of origin of the letters. This article is therefore important for the 
discussion of one of the areas of real or potential competition in the Community's 
page 52 Chapter 3: Regulatory enl'ironment 
postal sector. The compatibility of Article 25 with the Treaty of Rome is discussed 
below at Paragraph 6.3. (The potential application of Article 25 is studied in more 
detail in Annex 6.) 
Closely related to Article 25 is Article 73, laying down the normal rules to be 
applied to compensation arrangements (known as terminal dues) between postal 
administrations for the delivery of letter items on each other's behalf. 
5.2 GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) 
The GA TI was established after the second world war, with the intention of 
gradually reducing the protectionist measures that acted as barriers to trade. The 
Community negotiates as a single trading entity with its other trading partners. 
Periodic negotiating "rounds" take place to liberalise trade. The current "Uruguay" 
Round, launched in 1986 in Punta del Este, was intended to be completed in 
December 1990 in Brussels; this was not possible due to a number of divergences 
between participants, notably in the agricultural sector. 
The Uruguay Round constitutes the first attempt to extend the basic trade­
liberalising principles in the GA TI to international trade in services. The 
framework for the coverage of services will be called the General Agreement on 
Trade in Services (GA TS). Although negotiations have not been completed the 
main principles of the GA TS are already clear. 
The key principle for reserved service providers is that they should provide access 
to users of the services on equal terms, regardless of the national base of the 
potential users. In the postal sector for example, if a large customer based in the 
country of a postal administration warranted preferential tariffs, a similar 
customer based outside but meeting the same posting conditions should have 
access on the same terms. 
If sectors have special characteristics that call for either modification or specific 
interpretation of some of the framework rules, these sectors would be the subject 
of an annex to the GA TS. Whether or not a sectoral annex is agreed, the GA TS 
framework would apply to all service sectors -and therefore to the postal sector. 
In terms of the application of GA TS principles to the postal sector, the main point 
of concern relates to the possibility that any change in the structure of terminal 
Chapter 3: Regulatory environment page 53 
dues within the Community could give private operators an unfair opportunity if 
they collected cross-border mail from one Community country and took it outside 
the Community to another country for remailing back into a second Community 
country. 
The Community would need to decide how to react to such a practice if it were to 
come about. The Community may need to discuss this potential problem with its 
trading partners in the general context of GA TS, but without seeking to establish a 
sectoral annex to deal with it. 
5.3 CONFERENCE OF EUROPEAN POSTAL AND TELECOMMUNICATIONS 
ADMINISTRATIONS (CEPT) 
The CEPT is a body representing the public postal and telecommunications 
operators of most countries of Europe. Its membership includes the 
administrations of all the Member States and all EITA countries. It also includes 
Czechoslovakia, Hungary, Yugoslavia, Turkey, as well as the smaller states of 
Monaco, San Marino and the Vatican. Other countries, from central and eastern 
Europe, have expressed their intention to apply for membership. 
As stated in the preamble to its constitution, the CEPT was established in view of 
"the importance and difficul~y of the common problems confronting the various 
European postal and telecommunications administrations" and " the desirability of 
establishing a wide measure of co-operation between the administrations". The 
CEPT is now divided into postal and telecommunications sections. 
The CEPT (posts) carries on its activities in accordance with Article 8 of the UPU 
Constitution which permits UPU members to form groups for their own purposes, 
providing that these are compatible with their obligations to the UPU. (Such 
groups are called "unions restreintes".) Since 1969 there has been a formal link 
between the CEPT and the UPU. 
The CEPT is presently reviewing its organisation, partly in response to the 
development <.•t 1 (\•!11lll• inity postal policy. The CEPT is primarily a forum for 
public operators. However, it also covers some regulatory questions, and the 
CEPT may consider it appropriate to separate the two aspects in line with the 
trend in Member States and elsewhere to separate operational and regulatory 
functions. 
page 54 Chapter 3: Regulatory environment 
6. THE COMMUNITY REGULATORY DIMENSION 
Whilst the Green Paper should not seek to provide a comprehensive legal background to 
its consideration of possible proposals for the postal sector, it is appropriate here to 
identify some of the most relevant rules as well as to record previous judgements which 
also have relevance to the present debate. It is also appropriate to discuss the 
compatibility of other treaty commitments with obligations under the Treaty of Rome. 
Although, until the present time, the Community has not developed a regulatory policy 
for its postal sector, general principles have been applied in decisions and interventions 
relating to postal services. These decisions, as well as relevant resolutions of the 
European Parliament, are summarised in Annex 5. 
6.1 TREATY OF ROME 
Two basic principles of the Treaty of Rome are that there should be no 
restrictions on the trade of goods between Member States (Article 30) and that 
the objective is that there should be freedom to provide services within the 
Community (Article 59). Closely connected is the freedom for nationals of a 
Member State to establish themselves in another Member State (Article 52). 
However, the Court of 1 ustice recognises that, in certain circumstances and for 
reasons of public interest of a non-economic nature, Member States may grant 
special or exclusive rights. Such rights constitute exceptions to the freedom to 
trade in goods and to the freedom to provide services. 
Such exceptions, which would be derogations from Articles 30 or 59, could be 
permitted only if two further conditions were met. Firstly, it should be 
demonstrated that the same objectives could not be met by less restrictive means. 
Secondly, the scope of the special or exclusive rights must be as small as is needed 
to achieve the objectives (this being known as the rule of proportionality). Of 
course, once special or exclusive rights have been awarded, the manner in which 
they are exercised must still be fully in accord with the rules of the Treaty. 
Member States ought therefore to seek the least restrictive option to achieve the 
objectives identified. In particular, the restrictions to the principles of free 
movement of goods and services should only be applied to the "relevant" market. 
Chapter 3: Regulatory environment page 55 
Undertakings entrusted with reserved services in the "general economic interest" 
must still abide by the general competition rules that forbid cartel-like behaviour 
(Article 85) and the abuse of dominant market positions (Article 86). In addition, 
any state aid granted by a Member State government which could distort 
competition is incompatible with the common market (Article 92). 
Article 90 refers to public undertakings and those to which Member States give 
special or exclusive rights. In its first clause, Article 90 states that each Member 
State must ensure that its national legislation regarding such undertakings is 
compatible with all the Articles of the Treaty, particularly the competition rules 
(contained in Articles 85-94) and the rule forbidding discrimination on the 
grounds of nationality (Article 7). 
However, in its second clause. Article 90 recognises that undertakings entrusted 
with the operation of services of general economic interest or having the character 
of a revenue-producing monopoly will be subject to the Treaty's rules, in particular 
to those relating to competition, in so far as the application of the rules does not 
obstruct the performance, in law or in fact, of the particular tasks assigned to 
them. The development of trade must not be affected to such an extent as would 
be contrary to the interests of the Community. 
In its third clause, Article 90 obliges the Commission to ensure that the provisions 
of Article 90 are properly applied, and, if necessary, to issue directives or decisions 
to this end. It should, in particular, adopt necessary measures, laying out in 
general terms the obligations of Member States in relation to Article 90.1, in order 
to ensure that the scope of the exclusive rights awarded to undertakings in the 
Member States is appropriate to their objectives and in accordance with the 
provisions of the Treaty of Rome. If appropriate, the Commission may also issue 
decisions to reduce the scope of such exclusive rights, by reference to the 
obligations of Member States under Article 90.1. The right of the Commission to 
apply Article 90.3 by means of directives was upheld in a judgement given in 
March 1991 by the European Court of Justice with regard to telecommunications 
terminal equipment. 
At the same time, the Council, acting on proposals from the Commission, should 
implement whatever harmonisation measures are needed to achieve the internal 
market (Article lOOa ). The internal market is described as an area without 
page 56 Chapter 3: Regulatory environment 
internal frontiers in which there would be free movement of goods, people, 
services and capital (Article 8a ). 
Article 222 recognises the right of Member States to organise the system of 
property ownership within their own territory by declaring the Treaty's neutrality 
on the subject. Therefore, a Member State may opt for a system of public or 
private ownership of companies. However, Article 222 does not exempt either 
from the rules of the Treaty which will apply equally to both. This has been 
confirmed by the Court of Justice in a series of judgements underlining that such 
companies, whether private or public, remain subject to Community law where 
applicable. 
Another article which would be important in the present debate is Article 234, 
which stipulates that rights and obligations arising from agreements concluded 
before the entry into force of the Treaty of Rome between one or more Member 
States on the one hand and one or more third countries on the other, shall not be 
affected by the provisions of the Treaty of Rome. 
Article 234 further provides that, to the extent that such agreements would not be 
compatible with the Treaty of Rome, the Member State or States concerned 
should take all appropriate steps to eliminate the incompatibilities established. 
6.2 APPLICATION OF COMPETITION RULES 
Case law has been built up, interpreting how the competition articles (that is, 
Articles 85 to 94) should be applied to the postal sector. 
Since 1984, the Commission has investigated the legal status of express services in 
Belgium, Denmark, France, Germany and Italy. Each of these Member States had 
previously considered express services to be part of its postal administration's 
reserved area. Following intervention from the Commission, each made express 
services non-reserved. 
The postal authorities had interpreted these services as being standard postal 
services and therefore within their national monopolies. The ruling in each case 
was that . these were different (or value-added) services which should be 
considered non-reserved. Decisions based on similar grounds have been 
addressed to the Dutch and Spanish authorities in respect of their postal laws 
Chapter 3: Regulatory environment page 57 
relating to express services. The Court of Justice overturned the first of these 
decisions on procedural grounds, without challenging its substance. 
One particular concern on the part of the Commission is that if a price limit is 
used to help define the border between reserved and non-reserved areas, it should 
be applied equally between the competitors in the non-reserved area -both the 
postal administration and private operators. In order to apply this principle, a 
regulator needs to understand fully the nature of the competition in the sector for 
which it is responsible. Where there is direct competition between services that 
are very similar, it would be unreasonable if one of the competing services was 
regarded as reserved. This would permit such a service to have a tariff lower than 
the price limit set as the "floor" price for the other competing services. 
Another case currently being studied by the Commission concerns the postal law 
of Denmark which is being examined under Article 90 procedures in order to 
determine whether it is inconsistent for the law to forbid private operators to offer 
remail services in competition with the postal administration, while at the same 
time the postal administration provides remail facilities for mail generated outside 
the country. 
A further important case m course concerns a complaint by an association 
representing several private operators, the International Express Carriers' 
Conference (IECC). The IECC complained that a new system of terminal dues 
agreed between several Member States' postal administrations (and others outside 
the EC) and also certain uses of Article 25 of the UPU Convention were intended 
to impede their members' remail activities, and therefore constituted an abuse of 
dominant position (contrary to Article 85 and 86 of the Treaty of Rome). 
Following investigation, the Commission has decided to open formal proceedings 
under the competition rules. 
(Terminal dues and remail are described at Annexes 8 and 9, and discussed in 
detail at Chapter 5, Paragraphs 8 and 9.) 
6.3 TREATY OF ROME AND UPU CONVENTION 
As indicated above at Paragraph 5.1, the agreement of national governments to 
the UPU Convention is renewed every five years. This clearly has relevance in 
terms of the application of Article 234 of the Treaty of Rome. 
page 58 Chapter 3: Regulatory environment 
The debate concerning this compatibility of the UPU Convention with the Treaty 
of Rome centres on Article 25 of the UPU Convention (previously Article 23 ). 
This article contains two separate provisions: 
Article 25.1 states that no UPU member country is obliged to deliver postal 
items that were transported out of the country, posted in a second country, for 
mailing back into the first country for delivery (a practice often described as 
A-B-A remail); 
Article 25.4 permits UPU member countries to turn back mail which they 
receive from another administration if the items originated from a third 
country but were not posted in that third country (usually called A-B-C 
remail). 
The intention of Article 25.1 is that it should protect the domestic postal 
monopolies of the UPU members. Whether Article 25.1 is compatible with the 
Treaty of Rome depends on certain conditions and interpretations. 
Firstly, it is important to know whether the regulator alone has the responsibility 
to protect the monopoly. Article 25.1 refers to action to protect the monopoly 
being taken by "the member country". This poses the question: who is the main 
signatory of each member country to the UPU Convention -the national 
government or the postal administration? Further, Article 25.1 could be used to 
send back items that were not included in the domestic monopoly of the inward 
administration. 
The issue of compatibility with the Treaty of Rome is clearer in the case of Article 
25.4. Its use involves a postal administration whose exclusive rights have not been 
infringed helping a postal administration whose monopoly has been infringed. In 
other cases, the use of Article 25.4 could well break the commercial law of the 
country where the original customer was situated. 
An example could be taken of a customer who was located in a country where 
there was no monopoly over international mail. If his mail was remailed through 
another country, it is possible that his mail could be consolidated with material 
from third countries where the postal law included international mail within the 
reserved area. In such circumstances, it seems highly unlikely that the postal 
operator in the country of delivery would be able to distinguish between the mail 
originating in the countries which were (in the sense of their attitude to the 
Chapter 3: Regulatory environment page 59 
juridical position of international mail) less restrictive and those that were more 
restrictive. 
6.4 OTHER COMMUNITY POLICIES 
Some articles of the Treaty of Rome were formally modified by the Single 
European Act. This initiated work in several areas which has significance to the 
postal sector. (In addition, as noted above, the Single Market needs to be 
achieved in the postal sector itself.) The most relevant such areas are shown 
below. (The possible effects of the Single Market on the users of postal services 
are discussed in detail at Chapter 4, Paragraph 9.) 
6.4.l TRANSPORT 
The Commission has recently drawn up regulations and also made further 
proposals concerning the air transport industry. Initially the initiatives on 
market access have concentrated on freight-only air transport services (known as 
"full freighters"). It is intended to extend the same principles to passenger 
aircraft that carry freight. 
The regulations will directly affect the express segment of the postal sector. They 
may also increase the flexibility for letter and parcel mail transported by air, and 
reduce the costs. 
The Commission is proposing m the third package that there should be free 
operating access within the Community market. With the agreement of the third 
country outside the Community, there should be freedom to fly from an EC 
country to a third (non-EC) country -the so-called "fifth freedom". Subject to 
health and safety requirements, there would be no restrictions on the frequency 
of service, the type of aircraft or the volume of the cargo carried. 
There are currently many restrictions on international air traffic in force outside 
the Community. The Community will need to negotiate, on a reciprocal basis, 
reductions in these restrictions by offering parallel reductions within the 
Community. The present liberalising measures therefore apply only to air 
transport companies incorporated in a Member State. 
In parallel with such measures in the air transport sector, there have also been 
certain liberalisations relating to road transport. In particular, there is now 
page 60 Chapter 3: Regulatory environment 
greater freedom to provide cabotage services which permit a transport operator 
to both collect and deliver on trunking journeys carried out completely outside 
the country in which the operator is based. This liberalisation measure should be 
important for postal operators wishing to establish truck networks beyond the 
borders of their own countries. 
6.4.2 CUSTOMS AND VAT 
The simplification of customs procedures and the eventual elimination of 
internal borders will facilitate the speedy movements of all mail between 
Member States. 
For the longer term the proposals for VAT are that it should be charged in the 
Member State of departure and deducted in the Member St.ate of arrival, with a 
"clearing house" system to equalise the tax receipts of the Member States 
themselves. In the interim, VAT should be applied at the rate in force in the 
country of the taxable organisation taking receipt of the goods or services. 
Concerning intra-Community distance selling (including mail order) to 
customers who are either individuals, non-taxable institutional bodies or 
exempted taxable persons, the regime applicable will, in principle, be that of 
taxation at the rate appropriate in_ the country of the customer. In this case, the 
provider of the goods or services would have either to become registered in that 
country or to appoint a fiscal agent there. 
For individuals, the tax, in principle, will otherwise be that charged m the 
Member State of departure. 
VAT will continue to be applied to the services of transport for goods or letters 
imported from third countries into the Community in the same way as at present. 
Concerning intra-Community trade, the VAT on transport services will be 
applied in principle in the Member State of departure. However, when the 
customer is a taxable person identified for VAT in a Member State other than 
the Member State of departure, the principle of reverse charging, and VAT will 
only be due to be paid by that customer at the rate in force in the Member State 
where he is identified for VAT purposes. Therefore, the procedure of the eighth 
directive will not be necessary for the re-imbursement of VAT. 
Chapter 3: Regulatory environment page 61 
The Commission has recognised that neither VAT nor customs charges should 
be a source of competitive advantage or disadvantage to any of the different 
postal operators, either public or private, where they compete in the non­
reserved sector. Accordingly, the Commission will be reviewing the competitive 
interface between the services of the public operators and those of the private 
express carriers, in order to ensure that the fiscal treatment is equal where there 
is direct competition. 
6.4.3 DATA PROTECTION 
In 1990, the Commission published a draft directive on data protection, and is 
currently amending it following consultation. The directive, which will have 
particularly significant effects on direct mail and mail order companies, treats 
the subject of the obtaining, storing, processing and transmitting data of a 
personal nature. 
Following amendments, the directive is likely now to permit companies to 
process and transfer such data, provided that it is not of a sensitive nature and 
provided that the person about whom the data is held has been given 
opportunities to know that the data has been collected and, if he so chooses, to 
stop any further use of the data. 
6.4.4 INTER-OPERABILITY 
The Commission is concerned with developing proposals for technical standards 
in telecommunications and information technology. In terms of standards that 
may have an importance in the postal sector, standards have been developed for 
EDI. Progress has been slower on inter-operable standards for bar-coding 
systems for distribution. Elsewhere, proposals are being developed for postal 
electronic mail to normalise on the X-400 standard. 
page 62 Chapter 3: Regulatory environment 
Chapter 4: Commercial aspects page 63 
CHAPTER 4: COMMERCIAL ASPECTS 
1. INTRODUCTION 
This chapter describing the commercial aspects of the postal services discusses the 
postal sector from the user's perspective: it therefore concentrates on those aspects 
which are more ''visible" to the user. Naturally, it is very much linked to the succeeding 
chapter which analyses the economic and operational aspects -that is, those parts which, 
though "invisible" to the user, underlie the services that are provided to him. 
The current chapter analyses the overall market and studies customer requirements. It 
gives an overview of the postal services which are intended to meet these market 
requirements, and also surveys the indirect competition (particularly of 
telecommunications-based services) which may be attempting to satisfy the same 
requirements. 
No chapter on the commercial aspects of the postal sector would be complete without an 
analysis of the possible effects of 1992 on the sector, and this analysis is included in the 
last paragraph. 
In summary, the chapter deals with the relationship between customers of postal services 
and the operators of those services. The following chapter will look behind the 
operations that provide these services, in particular studying their costs and profitability. 
2. MARKET OVERVIEW 
Postal services operate in the communications and distribution markets. There are also 
postal financial services, but these are provided in the financial services market, which is 
fully competitive, and therefore less in need of detailed analysis of their own. (They 
would anyway demand a more specialised analysis in their natural context.) The Green 
Paper on postal services -and, indeed, this chapter -concentrates on mail services. 
The communication market covers all the ways in which organisations and/or individuals 
communicate with each other -telecommunications, television, radio, written media and 
the post. The users of these different media include the advertising industry. 
The distribution market is very different, particularly in terms of the customer base. 
Distribution involves the transport and delivery of goods to the addressee. Postal 
page 64 Chapter 4: Commercial aspects 
distribution through parcel services is a specialised segment within the sector, 
concentrating particularly on delivery of individual packages, but now also covering 
larger consignments. 
This global description of the markets in which postal services operate is important in 
order to be aware of the indirect forms of competition with which postal services 
compete. Thus, for example, an advertiser can choose to use any or all (or a 
combination) of the communication media mentioned in order to convey his message to 
the potential consumers: postal services (in the form of direct mail) provide only one 
possible medium for his message. A company wanting to send a piece of business 
correspondence could send it by telefacsimile (usually called fax), by express mail or by 
the standard letter service. 
This multiplicity of choice is also true for other communication needs. Figure 1 overleaf 
shows some, if not most, of the options available to different sorts of users for their 
various communication needs. 
The figure analyses different communication needs and mentions some of the means by 
which these needs could be met. The means are divided into postal and non-postal 
(many of the latter being based on telecommunications). The final column shows the 
trends in demand for the postal means corresponding to the different communication 
needs. 
The figure divides potential customers into three groups: large organisations (in terms of 
level of communications requirements), small organisations and individuals. 
It should be noted that which medium of communication could be used depends not only 
on what facilities are available to the customer originating the message, but also on the 
facilities at the disposal of the receiver of the communication. At a simple level, a 
telephone can be used to communicate only if the intended receiver of the message has 
access to a telephone. 
The choice made by the large organisation with significant communication requirements 
will be similarly affected. Often the means available to the intended receiver of the 
communication will be a function of size. An individual will have access to postal 
services, and probably also to telephone services. A small organisation may well in 
addition have a fax terminal by which he may receive messages from the large 
organisation. 
Chapter 4: Commercial aspects page 65 
Figure 1: Communication "matrix" 
CUSTOMER COMMUN- COMMUNICATION MEDIUM POSTAL 
SECTOR ICATION DEMAND 
NEED NON-POSTAL POSTAL TRENDS 
lARGE FlNANCIAL Automated Banking Letters (to large businesses) 
Fax declining 
OR GANIS- Electronic Mail (to small businesses/ 
EDI individuals) 
ATIONS stable 
---- ------------------------------------- -----------------------------
BUSINESS Telephone Leners Stable 
CORRES- -but could decline 
POND ENCE Fax Express Strong growth 
--- --------------------------------------------- ----------------------------
ADVERTISING Television Direct Mail 
Radio Strong growth 
Bill-boards 
Tele-marketing Catalogues 
Newspapers 
Magazines 
SMALL FlNANCIAL Fax Leners Growth 
ORGAN- ----------------------------------------------- 1------------------------------
ISATIONS BUSINESS Fax Letters Growth 
CORRES- Telephone Express 
POND ENCE 
---- -------------------------------------------------- ------------------------------
ADVERTISING Newspapers Direct Mail Growth 
Magazines Catalogues 
INDIV- TO BUSINESSES Telephone Letters Growth 
Business reply cards 
IDUALS 
-------------------------------- 1---------------------------
TO INDIVIDUALS Telephone Letters Stable 
Cards 
Source: CEC 
page 66 Chapter 4: Commercial aspects 
A large organisation will have these facilities, and may well also have other sophisticated 
systems for communicating data or payments (including automated banking processes 
and perhaps Electronic Data Interchange -EDI). 
For the distribution of goods, there is less indirect competition because in all cases the 
goods have to arrive physically at the desired point. However, postal services compete or 
collaborate in this market with other transport operations -including freight forwarders 
and other general transport expediters. Within the scope of postal services, there is 
considerable competition amongst express and non-express parcel carriers, and between 
public and private operators. 
There are three main different types of postal (here meaning "mail") services: letters, 
parcels and express. Because of definitions that are not clear, there are significant 
overlaps between these services (see Chapter 3, Paragraph 3.4 ). Where such overlaps 
exist, there is competition amongst postal services (for instance between the letter packet 
service and the parcel service). In addition, express services compete directly with letters 
(for the delivery of documents) and with ordinary parcel services (for the movement of 
goods). 
3. CUSTOMERS 
Customers have their own individual needs, but these are likely to be shaped by the 
services that are actually offered. These services may be responding to an active demand 
that already exists, or, in the case of new services, may stimulate a demand that was 
previously latent. 
3.1 CUSTOMER REQUIREMENTS 
The fundamental requirement is that all citizens should have access to postal 
services. For potential users, it is important to know that all potential addressees 
can be accessed by the universal system. 
All customers are looking for a good service/price combination. For the universal 
service, this will include a fair service, easy access conditions and simple tariff 
structures. 
Large customers want service providers to have a flexible approach, and, where 
appropriate, to tailor service packages to the needs of their individual 
organisations. 
Chapter 4: Commercial aspects page 67 
3.2 PROPENSITY TO USE SERVICES 
Most products and services have a life-cycle; after maturity, they tend towards 
decline. However, although many postal services are long-established, user 
acceptance appears stable. Against that, since they are already well-established, 
there will not be an explosion in user acceptance in the way that has recently been 
experienced by fax machines. Figure 2 below shows these trends graphically. 
This stability in user acceptance may obscure the need for "traditional" postal 
services continually to develop themselves (for instance, in the way in which they 
are marketed), and for other services -such as express -to evolve. 
Figure 2: 
A 
c 
c 
E 
p 
T 
A 
N 
c 
E Service acceptance trends 
TIME INTERNATIONAL LETTER MAIL 
INTERNATIONAL PARCELS 
1970"s 
.....__-----------------------~~----------~ 
Source: CEC 
That mail is accepted as an important medium for communication and an 
important channel for distribution is demonstrated by the fact that the average EC 
citizen received 260 mail pieces in 1990 (243 in 1988). By comparison, the average 
US citizen receives 650 pieces annually. 
Within the Community, there are wide variations in usage. Figure 3 below shows 
per capita usage in each Member State. It compares this to Gross Domestic 
page 68 Chapter 4: Commercial aspects 
Product per capita. There is some correlation between GDP per capita and usage. 
(The figures used in formulating the figure are to be found at Annex 2, Table 6). 
Figure 3: Posting levels/ GDP per capita (1988) 
ltema/lnhabltant GDP per capl ta 
800 ..................................................................................................... . ............... 2150 
&00 ····································································································· ................ 200 
400 ··································································· .......................... . 
HSO 
300 
200 
100 ao 
o.___...___ ........................ ~ ........ .-.......-..:~ ........ C.0.....-llLL...l .......... _._~..._..--......_..._.~o 
GR P E IRL I D UK F 8 L NL DK EC USA JAP 
-It.ma/ Inhabitant ~ GDP Index per aaplta 
(EC awrage•244' Item•) (EC awrage•100) 
Source: Sofres study and CEC Economic Report n° 38 
3.3 MARKETS 
Tables 1 and 2 below show in broad terms the break-down of who (or what) posts 
mail items and who receives them The first matrix shows the composition of 
senders and receivers of letters, and the second of parcels. 
Chapter 4: Commercial aspects page 69 
Table 1: Letters users matrix 
TO 
ORGANISATION INDIVIDUAL 
FROM 
ORGANISATION 35% 45% 
INDIVIDUAL 10% 10% 
Source: CEC estimation ( 1990) 
Table 2: Parcels users matrix 
TO 
ORGANISATION INDIVIDUAL 
FROM 
ORGANISATION 25% 60% 
--------
INDIVIDUAL 5% 10% 
Source: CEC estimation (1990) 
These analyses of the average break-down cover quite significant variations 
between Member States. Table 3 shows the percentages of letters originated by 
organisations (sometimes loosely described as the "business" market) and by 
individuals. 
page 70 Chapter 4: Commercial aspects 
Table 3: Origination of letter volumes 
PERCENTAGE SPREAD OF VOLUMES (LE1TERS) 
MEMBER STATES ORGANISATION MARKET INDMDUALS MARKET 
Belgium 71.0% 29.0% 
Denmark 60.0% 40.0% 
Germany 76.4% 23.6% 
Greece 50.5% 49.5% 
Spain 75.0% 25.0% 
France 81.5% 18.5% 
Ireland 69.0% 31.0% 
Italy 56.2% 43.8% 
Luxembourg 71.0% 29.0% 
Netherlands 86.0% 14.0% 
Portugal 79.9% 20.1% 
United Kingdom 74.5% 25.5% 
Source: Sofres study -1988 
3.4 SEGMENTS 
The analysis above reveals the global picture. At a more detailed level, Table 4 
shows the break-down of organisational customers by business sector. A 
comparison is made between the postal administrations' experience of the market 
(primarily providing letter services) and that of private operators (mostly 
providing parcel and express services). 
Table 4: Users: relative importance to operators 
CUSTOMER CATEGORY POSTAL ADMINISTRATIONS PRIVATE OPERATORS 
Mail order 15% 20% 
Advertising 12% 15% 
Press 20% 5% 
Banking 10% 14% 
Insurance 10% 9% 
Public seivices (Note 1) 10% N/a 
Industry 
Rest 
TOTAL 
Note 1: 
Note 2: 
Source: (Note 2) 5% 25% 
18% 12% 
100% 100% 
While some private services are used by public administrations, the percentage overall is 
too small to be appreciable. 
The principal industrial clients are the automobile, computer and petrol sectors. 
Sofres study 
Chapter 4: Commercial aspects page 71 
As indicated above, mail order, advertising (in this case meaning direct marketing) 
and publishing are the three most significant users of postal services. These 
individual segments are analysed in Paragraphs 3.4.1-3 below. 
3.4.1 MAIL ORDER 
Mail order is the "distant selling" of goods as an alternative to retail. It is 
integrally linked to the postal sector. Here postal services could provide one-stop 
shopping for the mail order companies -customer communication, catalogue 
distribution, statement sending and goods distribution (the last item now being 
undertaken increasingly by the private sector). 
Mail order started as an outlet for the clothing industry. It has now expanded into 
other areas, the fastest growing presently being the distance selling of music (by 
compact disc), films (by video) and computer software (by floppy disk). A related 
area is "distance learning" services provided by correspondence schools. 
Mail order provides competition with retail companies. In view of the Single 
Market, an increasingly important dimension is that it provides ready access cross­
border to goods that may not be available locally. 
Figures for the mail order industry within the Community have been obtained for 
the seven Member States with the largest mail order markets (Belgium, Denmark, 
Germany, France, Italy, the Netherlands and the United Kingdom). Together, 
mail order revenue in these countries was worth some ECU 26.4 billion in 1989. 
This equated to 0.7% of the GDP of those Member States. By way of comparison, 
in 1989, the mail order in the EFf A countries was worth some ECU 3.6 billion, in 
the USA ECU 123 billion and Japan ECU 12.6 billion. 
Table 5 below summarises figures provided by the European Mail Order Trader 
Association (EMOTA) for the seven Member States with the largest turnover, and 
compares them with figures for EFf A, Japan and the US. 
page 72 Chapter 4: Commercial llspects 
Table 5: Mail order turnover in 1989 
TuRNOVER TURNOVER 
COUNTRY -TOTAL PER CAPITA 
(million ECU) (ECU) 
Belgium 535 55 
Denmark 522 102 
Germany 12 284 199 
France 5 585 100 
Italy 1 127 20 
Netherlands 780 53 
United Kingdom 5 585 96 
Total (of 7 Member States) 2h 418 102 
Total EFTA 3 651 111 
USA 122 850 508 
Japan 12 640 104 
Source: EMOTA 
3.4.2 DIRECT MAIL 
Direct mail involves the sending of a targetted message to an individual (whether 
as a private person or as a particular post-holder in an organisation), as part of a 
strategy to send the same or similar messages to other specific individuals. (There 
is another form of direct mail that is less important in terms of revenue, but still 
significant -unaddressed mail which is delivered to targetted areas, rather than to 
targetted individuals.) It therefore operates in the advertising/communications 
market. 
Direct mail was responsible for 11.7% of advertising spending in 1989 -that is, 
ECU 6.4 billion out of a total of ECU 54.5 billion. (This figure excludes the 
revenue generated by unaddressed direct mail.) This was virtually the same 
percentage as in 1984 even though total advertising spending increased 87% in the 
meantime. These figures indicate that direct mail is presently responsible for 
0.15% of the EC's GDP (excluding extra revenue gained for the advertisers). 
Chapter 4: Commercial aspects page 73 
In 1989, the average EC citizen received 43 direct mail items. By way of 
comparison, his US counterpart received about 170 -nearly four times as many. 
Operationally, direct mail is very important to Community postal administrations. 
Addressed direct mail presently accounts for approximately 18.5% of their 
volumes. It is likely to become increasingly important as other sources of mail, 
perhaps particularly the business-to-business segment, may reduce their demand. 
(See Figure 1 above at Paragraph 2.) 
3.4.3 PUBLISHING 
Letter post services are also important for the publishing industry. All 
publications can be sent by post -newspapers, magazines and books. Postal 
distribution of publications competes with the retail channels such as book shops 
or news stand sales, and with local deliveries of newspapers. 
The Federation Internationale de la Presse Periodique (FIPP) estimates that total 
postal distribution of press items within the Community currently accounts for 
15.2 billion items annually. Of this figure, approximately 92% is for delivery in the 
country where the publication was produced. 
In addition to the intra-Community cross-border postal distribution of press items 
(estimated to be 1.1 billion items), there is also a significant international element. 
In particular, there are large flows of magazines in each direction between North 
America and Europe. 
The use of postal services to distribute publications varies from Member State to 
Member State, usually depending on the preferential tariffs that are available for 
this use (see at Paragraph 8.4 below and at Annex 13 ). They tend to prove less 
effective for daily publications where the publisher demands complete reliability of 
delivery. 
However, some markets -such as technical publications -have the majority of 
their copies delivered by post. In general, postal services can be the most effective 
method of distribution for publications, either where small numbers are involved 
or the subscribers are dispersed. 
page 74 Chapter 4: Commercial aspects 
4. SERVICES AND OPERATORS 
The main mail service categories are letters (including printed papers), parcels and 
express. There are certain other services, which tend to be either intermediate between 
these categories (such as special letter delivery services -the "Lettre expres") or hybrid 
services linking mail services with other forms of communication (an example being 
postal electronic mail -see Annex 12). These other services are not very important when 
measured by the revenue they generate (but might become more so in the future). 
The estimated revenue of the main categories is shown in Table 6. 
Table 6: Mail services -estimated revenue share by service category 
SERVICE POSTAL PRIVATE TOTAL 
CATEGORY ADMINISTRATIONS OPERATORS 
(ECUs billion) (ECUs billion) (ECUs billion) 
LETIERS 21.0 1.0 22.0 
PARCELS 3.0 5.0 8.0 
EXPRESS 2.0 14.0 16.0 
TOTAL 26.0 20.0 46.0 
Source: CEC (from several sources) 
Mail services refer to the postal movement of all types of packages weighing up to 30 kg. 
They comprise letters, documents, packages and parcels, etc. (See Annex 1 for a more 
detailed list.) 
The postal administrations are the public postal operators of each Member State. The 
description "private operators" is more wide-ranging. It covers large companies which 
have significant international volumes -such as DHL, Federal Express, TNT and UPS. 
It also covers other operators -such as freight forwarders -for whom postal work is 
somewhat marginal to their main business. A third category covers those private parcel 
and express carriers which tend to concentrate on domestic deliveries within one 
national territory. This last category probably generates the largest amount of revenue, 
but is also very diversified with many companies sharing the market. 
It should be recognised that the distinction between the express and parcels markets is 
somewhat blurred. Thus, while the total figure for the sector is accurate, those for 
express and parcel services (especially those provided by private operators) are 
necessarily more approximate. 
Chapter 4: Commercial aspects page 75 
4.1 LETTERS 
The letter services are mostly subject to the exclusive rights of postal 
administrations. The small proportion of letters revenue gained by private 
operators is due to the activities -whether juridically permitted or not -of 
remailers, city mailers and document exchanges. (The first two of these activities 
are discussed at Chapter 5, Paragraph 9; document exchanges were mentioned at 
Chapter 3, Paragraph 3.9.) 
According to special surveys in the various Member States, a break-down of the 
senders and receivers of ordinary letter mail items shows that organisations 
account for slightly over 80% of items sent (see Table 1 at Paragraph 3.3 above for 
a more detailed break-down), but only 45% of those received. 
Table 7 shows the reasons for posting found by a 1989 sample. (The results are 
intended to be illustrative rather than broadly representative.) 
Table 7: Reasons for mailing 
23.6% 
18.4% 
17.9% 
123% 
10.6% 
17.2% Direct mail 
Sending of money/ cheques 
Business correspondence 
Invitation/notifications of events 
Personal communications/greecings 
Other (including printed papers) 
Source: Postal administration sample 
Turning to cross-border letter mail, the intra-Community market generated about 
5% of the postal administrations' turnover in 1990. It is therefore worth some 
ECU 1.6 billion. If extra-EC mail is added, the total cross-border mail generated 
by postal administrations would be worth about ECU 3.2 billion in total. To this 
should be added the revenue gained by the private operators through their cross­
border letter operations. This is probably worth an additional ECU 0.4 billion. 
4.2 PARCELS 
In all Member States, parcel services are m free competition. Most postal 
administrations are obliged, as a part of the mandatory area, to off er a universal 
page 76 Chapter 4: Commercial aspects 
(domestic) delivery service of parcels up to certain weight limits. These limits vary 
considerably within the Community. 
Private operators offering domestic parcel service rely as much as possible on 
their own collection and delivery networks. For certain deliveries, especially to 
some remote areas, private operators have the option of posting items with the 
postal administrations. 
The postal administrations' domestic parcel delivery services have in recent years 
faced a severe test from the rapidly growing private sector. In fact, the total 
volume of parcels handled by postal administrations within the Community 
declined from 1980 to 1990, when the trend was finally reversed. Although postal 
administrations are usually the market leaders in their national parcel markets, 
their overall market share is now about 38%. 
As with domestic parcel services, the international parcels market is in free 
competition. It is divided into surface movements (tending to be dominated by 
the larger transport companies and freight forwarders) and air movements 
(tending to be dominated by the large express companies). The postal 
administrations attempt to compete in each segment. Some are obliged to offer a 
service up to a certain weight limit. 
Private operators offering international parcel service rely as much as possible on 
their own networks. Sub-contractors are used by smaller operators, or by larger 
operators in countries generating or receiving smaller volumes. 
43 EXPRESS 
Express services have existed in one form or another for at least 100 years. (One 
derivative of this earlier phase is the special letter delivery -the "Lettre expres" in 
French). The modern express services, however, have evolved in the market gap 
that was created by the general perception that postal administrations' service was 
declining at the very time that customer service needs were becoming more 
demanding. 
As their name indicates, express services are intended to provide fast delivery. 
Strangely enough, relatively few operators provide guarantees of delivery times. 
However, their general reputation is one of speed and, perhaps more importantly, 
reliability. 
Chapter 4: Commercial aspects page 77 
Each operator naturally tries to maintain a competitive advantage over his 
competitors who then may follow any initiative. Thus, collection on demand, 
credit facilities and account management have become standard. Price can 
sometimes play a part, since operators may have different costs depending on 
their volumes and the scope of their operations. Relative speed and reliability (as 
well as image) are also important. 
In general, however, the terrain for seeking competitive advantage seems to be 
moving. The ability to offer "tracking and tracing" is now becoming very 
important. This facility involves a network where the progress of each document 
or package through the process from collection to delivery is noted electronically. 
Tracking and tracing involves heavy investment, but offers the reward of being 
able to know where each item is in the process. 
The second important area is the "dove-tailing" of the express operation into the 
customer's operation. Thus, express operators may offer warehousing and 
distribution facilities to help customers reduce stock-holding costs, or may provide 
other facilities to support customers' "just-in-time" strategies. They may also be 
able to offer themselves as the single distributive source for retailers, thus 
obviating the need for a retail outlet to receive a number of smaller deliveries. 
A third area of potential comparative advantage is that of customs-clearance (for 
cross-border items). Efficient customs-clearance operations ensure that customs 
procedures impose the minimum possible delay on the package to be delivered. 
However, for express services within the Community, the scope for gaining 
competitive advantage from fast customs clearance will diminish after 1992. 
As stated above, the overall express market in the Community is worth some ECU 
16.0 billion. (The qualifying remark that there is a potential overlap with parcels 
revenue figures bears repeating here.) Of this figure, 11 % is generated by cross­
border services. 
The US market is said to be at least three times as large as the EC market. 
Efficient express services, by overcoming the geographical spread of the major 
centres, are seen to be indispensable to the well-functioning of American business. 
In terms of distance, many of the movements in the US market are similar to 
cross-border movements in Europe. The US market size and continued growth 
indicates that the EC market has far to go before its potential is reached. 
page 78 Chapter 4: Commercial aspects 
Domestic express markets are served by a diverse spread of operators. Cross­
border operations are more concentrated. At the European level DHL is the 
biggest cross-border operator with 26% of the market. Next is TNT which, 
including the revenue from its subsidiary XP, has about a 22% share of the 
market, followed by Federal Express and UPS, each with around 10% of the 
market. Private operators tend to specialise in moving either documents or goods 
packages. For example, DHL tend to specialise in documents, and TNT in goods. 
In terms of cross-border express services, the Community's postal administrations 
have a relatively small market share. Presently, this averages about 10% of the 
international express mail originating in their individual countries. One way in 
which they hope to increase this share is through Unipost, an independent 
company founded in 1989 by some CEPT members and other associated postal 
administrations to provide centralised cross-border operational management. 
Domestically, the EC's postal administrations have been more successful -a share 
of 15% or more is not unusual. Postal administrations' delivery operations for 
express items vary. Some provide express services whose provision is completely 
dependent on the universal network of the basic letter service. Others have 
express networks that are almost entirely independent of the basic network. 
5. FINANCIAL FIGURES 
Chapter 5 examines the operational and economic facts that underlie the services 
provided to customers. Here, the services provided are summarised as volumes and 
revenues gained by operators. First the figures are given showing the present posjtion, 
and then at Paragraph 5.2 the possible effects of the discernible trends are discussed. 
5.1 PRESENT POSITION 
Table 8 shows the volume and revenue generated by the Community's postal 
administrations in 1988. (It omits the 5 billion unaddressed items also handled in 
that year, since these items tend to have a distorting effect.) 
Chapter 4: Commercial aspects page 79 
Table 8: Postal administration volumes and revenues (1988) 
MEMBER LETTERS PARCELS EXPRESS REVENUE 
STATE (inc printed 
papers) 
millions millions millions mill ECU 
Belgium 3 145 3 4.5 824 
Denmark 1573 33 0.4 806 
Germany 14 262 500 8.0 7000 
Greece 451 1 3.2 100 
Spain 5 014 9 0.8 692 
France 15 894 311 6.2 7 340 
Ireland 494 4 1.5 188 
Italy 10 534 49 5.4 2651 
Luxembourg 168 1 0.2 42 
Netherlands 5 408 110 3.3 1 778 
Portugal 596 6 0.3 135 
UK 13 774 191. 11.95 4 643 
TOTAL 71313 1 216 45.75 26199 
-
Source: Sofres study 
In addition to the figure shown above of ECU 26 billion generated from their mail 
services, postal administrations generate a further ECU 13 billion from their 
postal financial services. (Se~ Chapter 5, Paragraph 7 .1.) 
Private operators in the postal sector generate an estimated ECU 20 billion. 
Table 9 shows how this figure is broken down between the major players, and 
compares the revenue earned in the Community with that earned worldwide. 
Table 9: Total turnover of four big private operators in billion ECU ( 1990) 
OPERATOR WORLDWIDE COMMUNITI' 
·-
DHL 2 0.5 
1Nf 3 1 
UPS 12 4 
Federal Express 7 1.5 
Other 16 13 
TOTAL 40 20 
Note: The market shares mentioned at Paragraph 43 above refer only to the cross-border 
express market: they will therefore not correlate with the figures shown here. 
Source: Several 
page 80 Chapter 4: Commercial aspects 
5.2 TRENDS 
Mail is likely to remain the mass-communication medium for any company which 
needs to convey a large number of individual messages, domestically or 
internationally. This would be particularly true of the financial services sector (of 
which postal financial services form only a small part) where statements, standing 
order renewals, premium notifications, dividend payments, etc need to be sent to 
individual addresses. 
Recent annual volume growth rates of postal administrations are shown at 
Table 10. 
Table 10: Postal administrations: recent annual volume trends (1985-1989) 
MEMBER STATES PERCENTAGE 
Belgium + 5.1% 
Denmark + 3.2% 
Germany Note 1 + 3.5% 
Greece + 3.1% 
Spain Note 2 + 6.7% 
France + 5.1% 
Ireland + 2.1% 
Italy + 7.8% 
Luxembourg + 4.8% 
Netherlands Nol'e 1 + 5.7% 
Ponugal + 7.6% 
United Kingdom + 6.8% 
AVERAGE + 6.1% 
Note 1: Full figures are noc available for Germany and the Netherlands. The trend 
figures shown for them were extrapolated from a shorter period, a-nd are 
therefore excluded from the average. 
Note 2: Spanish trend extrapolated from period 1984-1988. 
Source: Postal administrations 
Because of confidentiality, the trend figures for private operators are not so 
readily available. However, all the main cross-border express operators, both 
private and public, pronounce themselves confident of strong revenue growth in 
the Community. These growth predictions range from 15% to 25% per annum. 
Chapter 4: Commercial aspects page 81 
The effect of all these trends on the different parts of the postal sector can be 
combined to make revenue projections for the whole sector together. The trends 
used tend towards the lower end of the range. For example, only 3% growth per 
annum is assumed for letters (less than the recent growth experienced and 
allowing for reducing unit revenues). For express, a 10% annual growth rate is 
assumed; this assumes that the domestic express market grows at a smaller rate 
than the forecasts for cross-border services mentioned above. The forecast 
combined effect of these trends is shown in Table 11. (These projections assume 
no change in the juridical position of any of the services.) 
Table 11: Present and forecast revenue shares (billion ECUs and percentages) 
SEGMENT OPERATOR PRESE:NT 
(NOTE 1) 
LETIERS -PA 
-PO 
PARCELS -PA 
-PO 
EXPRESS -PA 
-PO 
TOTAL -PA 
-PO 
SHARE -PA 
-PO 
Note 1.: PA = Postal Administrations 
PO = Private Operators 
Source: Several 
6. SERVICE FEATURE -ACCESS 21.0 
1.0 
3.0 
5.0 
2.0 
14.0 
26.0 
20.0 
57.0% 
43.0% FORECAST FORECAST -~-I 
-5 YEARS -10 YEARS 
----
24.3 28.2 
1.2 1.3 
4.2 5.9 
7.0 9.8 
3.2 5.2 
22.6 36.3 
"·----
31.7 39.3 
30.8 47.4 
51.0% 45.0o/c 
49.0% 55.0% 
Access conditions refer to the conditions by which potential users can gain access to the 
postal services. There are three important aspects: 
-the availability to customers of information on what services are available and how to 
use them; 
page 82 Chapter 4: Commercial aspects 
-the method by which the services are paid for; 
-the method by which the items are actually posted. 
In a certain perspective, the access conditions for using services offered by private 
operators vary from those for services provided by postal administrations. Since private 
operator services all operate in the competitive sector, their access conditions are 
formulated as a result of competitive pressures and the profitability of their services. 
In some cases this is also true of the services offered by the postal administrations. 
However, the access conditions for using many of the services of the latter have evolved 
over a period of time, and may owe more to this evolution than competitive pressures. 
6.1 PRIVATE OPERATORS 
While it is difficult to generalise, the service information provided by private 
operators must be at least adequate; otherwise, customers would not use the 
services, or would not continue to use them. 
These services are targetted at organisational customers (and then usually at the 
larger customers). For such customers, private operators collect the material from 
their premises, and payment is usually made on an account basis. Some private 
opera tors are starting to off er more general access to their services, by permitting 
members of the public to post items at their operational offices. (In the United 
States, posting at such "lodging points" is much more common.) 
In some countries, some private operators offer universal collection and delivery 
service to their customers. If they do not, they may contract with other private 
operators to provide part of their "network". Alternatively, for remote areas, they 
could post the items with the postal administration, usually at ordinary tariffs. 
6.2 POSTAL ADMINISTRATIONS 
Postal administrations are· now investing to increase the ways in which potential 
customers can gain information about their services. Thus, service brochures are 
more widely available and customer service answering services are being 
established. However, at least for individual customers, the main source of 
information about postal administrations' mail services will remain the post office 
counters. 
Chapter 4: Commercial aspects page 83 
The "accessibility" of postal services, particularly for the individual customer, will 
therefore much depend on factors such as customer queuing times at counters 
and, indeed, the politeness of the staff. 
For large customers, once they have decided to use a service, access to postal 
administrations' services can be the same as for private operators. Large 
customers can normally have contract facilities enabling them to have their mail 
collected and, in most countries, to pay on account for a large proportion of the 
postal services used. 
Other customers pay for their postage in advance. Organisational customers may 
use franking machines which put a "meter" impression on the envelope, while 
others use stamps. Credit for meter machines is usually bought at post office 
counters. 
Individuals will almost always use stamps. These can now be bought in a variety of 
retail outlets -not only post office counters. (The present position results from a 
long-term trend; whereas many postal administrations previously permitted only 
their own counters to sell stamps, this is now the situation only in Belgium and 
Portugal.) 
If customers have to post their mail themselves, they do so either at post office 
counters or in posting boxes available in public places. The concept of universal 
service implies that these counters and posting boxes must be available throughout 
the territory. (The relative availability of counters is studied in Chapter 6, 
Paragraph 2.2.) 
There are two particular subjects relating to access to the postal administrations' 
services that need to be discussed. The first concerns "mail preparation" and the 
use of private operators to undertake this work; the second concerns the access to 
printed paper services and the availability of discounts. 
6.2.1 MAIL PREPARATION 
Almost all postal admm1Mrations encourage customers to undertake activities that 
reduce the work content for the postal administrations themselves. The most 
obvious example of such an activity that could "save" the administration work is 
that of pre-sorting of mail. This involves the carrying out of all or most of the 
outward sorting process (and even part of the inward sorting process). Normally, 
page 84 Chapter 4: Commercial aspects 
these processes are part of the "invisible" element of the postal operation, and are 
therefore discussed in detail at Chapter 5, Paragraph 3. 
As mentioned at Chapter 3, Paragraph 3.5, some postal administrations permit 
private operators to act as intermediaries between the customers originating the 
mail and themselves. The private operator could undertake different activities 
which the customer himself may not be able to carry out, before the material is 
posted (at least in the case of reserved service items) with the postal 
administration. The postal administration then carries out whatever parts of the 
postal operation are still necessary. 
However, there are some administrations that do not permit such operators to act 
as intermediaries in this way. Why they do not allow this is not clear. It is possible 
that they believe that the mail process comprises different activities which are 
indissociable. Alternatively, they might be trying to maximise the productivity of 
their sorting centres -particularly if they are mechanised. Whatever the reason, 
the prevention of the use of such intermediaries may reduce the flexibility for 
customers, and may prevent them from gaining access to certain discounts. 
6.2.2 POSTING CONDITIONS 
All postal administrations have "tiering" systems which classify their letter mail 
into two categories. In the case of the majority, the classification is between 
letters and cards ("lettres et cartes" in French or LC) and printed papers/small 
packets (called "autres objets" in French or AO). 
This classification is therefore on the basis of the contents of the item. In other 
countries (Denmark, the Netherlands and the UK) in the Community but also 
several important administrations outside, the tiering is based on the choice of 
speeds offered to the customer. Usually, these classifications are titled first class 
and second class. 
The second important area relating to posting conditions concerns the different 
definitions of what are printed papers, and what publications qualify for certain 
discounts. 
A frequently used definition of printed papers refers to the requirement that the 
text should be identical between the different items sent in a posting. This would 
therefore place invoices and bank statements (where the figures shown refer to 
Chapter 4: Commercial aspects page 85 
the individual account of the addressee) in the category of letters. However, some 
postal administrations place such items in the printed papers category. 
This is not only a question of different tariffs paid by the customer or different 
revenues received by the postal administration. In most countries, it also affects 
whether the mail should be considered reserved or not (see Table 2 at Chapter 3, 
Paragraph 3.3 ). 
All administrations have definitions of a newspaper which determine what 
discounts a publication receives. The two main criteria are the percentage of 
editorial content in the publication and the frequency of publication. However, 
the application of these criteria varies greatly between Member States. Thus what 
may be considered a newspaper in one country would not qualify in another. 
Access to discounts (whether for newspapers or other services) often depends on 
the volumes posted. But, again, the volume levels needed vary between Member 
States. (The structuring of discounts will vary almost inevitably because of the 
different operational systems; the crucial factor is the level of pre-sorting that is 
made possible by the different post-code systems -see Annex 10.) 
7. SERVICE FEATURE -QUALITY OF SERVICE 
Quality of service can be defined as giving the customer what he wants. However, what 
the customer wants can vary widely. As indicated elsewhere, customer expectations arise 
from a somewhat circular chain. If a postal administration provides good quality, then 
this comes to be expected, and customers therefore entrust important and/or urgent 
items to the letter service. 
If the postal service then falls below the expectations which its previous performance had 
encouraged, customers are likely to be that much more aware of the failure. If, 
conversely, the services as experienced by the customers are (and were) poor, customers 
are likely to become less and less demanding in terms of what they require of the service. 
Conventionally, postal qua.i., y [ 1 ~ervice has been measured in terms of time taken for 
the item, as measured across all or part of the span from collection to delivery. It is 
increasingly recognised that using this as the only measurement of quality does not give a 
complete picture of service reliability. For example, while 90% of items may be 
page 86 Chapter 4: Commercial aspects 
delivered by the target date, are the remaining 10% delivered the next day or within the 
next ten days? 
Another feature of the quality of postal services relates to the customer "interface". This 
Luuld be measured in several ways. For instance, how long does it take to buy a stamp 
(or gain other access to the postal services); how easy is it to get information on how to 
use services; how readily are enquiries or complaints answered? 
Although few, if any, regulatory bodies impose quality of service obligations on their 
reserved service providers (that is, their postal administrations), it is clear that the 
administrations themselves consider that they are under some obligation not only to set 
themselves service targets, but also (in most cases) to give information publicly on 
service performance. 
This obligation is felt with regard to the universal services only: neither private operators 
nor their postal administration competitors publicly give details of performance of 
parcels or express services. (Surprisingly few express operators state guaranteed transit 
times.) As a result, the further description below relates only to letter services. 
7.1 NATIONAL QUALITY 
Annex 7 discusses the ways that targets are set and how performance is measured 
against target. 
Impartial surveys carried out by consumer groups or other operationally 
disinterested organisations, all using end-to-end systems, have measured service 
performance of most of the postal administrations of the Community. 
These results can be compared with those published by the postal administrations 
themselves (in each case, the results are for performance against the target stated 
by each postal administration). As Annex 7 indicates, postal administrations use a 
variety of different measuring systems, most of them measuring only the time 
taken by internal processes. 
Table 12 below shows the results of postal administrations' performance against 
their advertised targets for their faster letter services (letters or first class letters). 
With the exception of Spain, the target is for next day delivery. One reason for the 
differences noted in the results in Table 12 is that the independent surveys 
Chapler 4: Commercial aspec1s page 87 
measure the whole process from collection to delivery (reflecting the customer's 
experience of the service) while most postal administrations' systems do not. 
If there is a quality of service problem perceived by customers, it will not be 
resolved unless it is also recognised by the operator providing the service. In this 
regard, some postal administrations have found that the introduction of end-to­
end measuring systems can lead to a painful confrontation with a reality worse 
than that previously perceived by themselves, but a confrontation that was 
necessary to improve service. For example, when the Irish postal administration 
in late 1988 introduced end-to-end surveys carried out by an external agency, the 
first results (which were published) showed a performance of 52% against target. 
Measured in the same way, current performance is now 94%. 
Table 12: Postal administrations' service: targets and perfomzance ( 1988/89) 
t 
MEMBER STATES TARGET RESULTS INDEPENDE1''T 
PROVIDED BY SURVEY 
POSTAL RESULTS 
ADMINISTRATIONS (Note 1) 
---
Belgium 90% 83% 68% 
Denmark (Note 2) 97% 97% N/a 
Germany 90% 91% 81% 
Greece 90% 44% N/a 
Spain (Note 3) 100% 80% 38% 
France 81% 78% 70% 
Ireland 90% 90% 84% 
Italy 90% 55% 17% 
Luxembourg 100% 97% N/a 
Netherlands 94% 93% 93% 
Portugal 92% 85% N/a 
United Kingdom (Note 2) 90% 80% 80%. 
Note L 
Note 2. 
Note 3. 
Source: The independent results were mostly obtained by national consumer organisations 
Results from a survey carried out by Research International have also been used. No 
independent survey results arc to hand for Denmark, Greece, Luxembourg or 
Portugal. 
The table shows letter service performance (first class letters in Denmark and the 
United Kingdom). 
The target for Spain is for delivery two working days after posting. All other targets 
are for next day delivery. 
CEC from several sources 
page 88 Chapter 4: Commercial aspects 
As mentioned above, a single figure showing the performance against target is 
insufficient. It does not reveal how long or short is the quality of service "tail" -the 
(usually) diminishing percentages in the succeeding days. 
Table 13 below shows the percentage of mail that was undelivered after one, two 
and five working days after posting. (The results for the last column are only 
partial. It should also be recalled that Spain has a service target of D + 2.) 
Table 13: The quality "tail" ( 1988/89) 
SPREAD OF MAIL NOT DELIVERED BY 
MEMBER STA TES DAY+ 1 DAY+ 2 DAY+ 5 
Belgium 23.5% 3.5% 0.2% 
Denmark 3.0% 0.5% • 
Germany 10.0% • • 
Greece 56.0% 20.0% N/a 
Spain (Note 1) 44.0% 15.0% 22.6% 
France 23.5% 6.5% • 
Ireland 15.0% 1.0% • 
Italy 83.0% 63.3% 18.8% 
Luxembourg 1.0% • • 
Netherlands 4.0% • • 
Portugal 20.0% 4.0% • 
United Kingdom 23.5% 6.0% • 
• = Not appreciable N/a = Figure not available 
Note 1: The figures for Spain in the first two columns are the official published figures, and in the 
third that produced by a consumers' group. The latter produced figures of 96.5% 
undelivered by D + 1, and 62% by D + 2. 
Source: CEC from several sources 
As can be seen, administrations which have good quality of service figures for 
performance against target generally have short quality of service tails. 
7.2 CROSS-BORDER QUALITY 
Only about half of the Community's postal administrations publish any targets for 
mail crossing borders either within the Community or connecting with other 
countries.· However, almost all administrations have internal operational targets, 
perhaps based on recommendations of the CEPT. 
Chapter 4: Commercial aspects page 89 
The principle is that cross-border mail should receive the same quality of service 
as the equivalent mail handled domestically for the outward operation and for the 
inward operation. Thus the usual target for inward cross-border letter mail is that 
it should receive a 90% delivery on the first working day (D + 1) after reception 
by the inward administration. 
The CEPT oversees a survey assessing the quality of service crossing borders. The 
target of delivery by the third working day after posting is a composite of D + 1 in 
both the outward and inward countries, and a day for the transport between the 
two. 
Interestingly, the CEPT employs an outside agency to measure end-to-end on a 
sample basis. The results to date have not been good. Just 40% of mail achieves 
the target. Expressed in another way, the average delivery time was 4.05 days. 
The detailed break-down of the survey is not available. However a group 
representing the consumers' unions of Europe, the Bureau Europeen des Unions de 
Consommateurs (BEUC), undertook a similar survey in March 1990. Using 
sampling procedures which would favour the postal administrations (for instance 
by only sending mail between capitals), it found that the performance figures were, 
respectively, 51 % and 3.96 days. This sample revealed the results shown in Table 
14. (Services from/to Luxembourg were not measured. There were abnormal 
conditions in Greece during part of the sample period, and the results for Greece 
were excluded.) 
page 9U Chapter 4: Commercial aspects 
Table 14: Average delivery time (days) within the Community for standard letters 
(1990) 
COUNTRY OF DESTINATION Average 
B DK D E F IRL I NL p UK FROM 
COUNTRY B -2.1 2.6 3.0 2.2 3.7 3.1 2.0 4.6 2.4 2.9 
OF DK 2.1 -3.8 4.2 3.8 4.1 5.3 2.7 4.6 3.0 3.7 
ORIGIN D 2.6 2.6 --3.2 2.7 4.8 5.1 2.1 4.3 3.0 3.4 
E 3.5 3.3 4.8 ---4.2 4.2 7.9 4.1 4.4 5.7 4.7 
F 3.0 3.8 3.2 4.8 --4.8 5.0 2.7 4.6 4.0 4.0 
IRL 3.0 2.9 4.6 4.8 4.5 ---9.2 3.3 4.0 2.1 4.3 
. I 4.5 4.1 5.4 6.3 6.5 5.6 ---5.1 5.0 5.1 5.3 
NL 2.8 2.1 2.2 3.0 3.0 4.1 7.1 ---4.5 3.9 3.6 
p 3.4 3.0 4.4 3.6 3.6 4.2 8.0 4.1 ---3.9 4.2 
UK 2.7 3.2 4.6 4.3 3.8 2.7 4.4 2.8 4.0 --- 3.6 
-. 
Average TO 3.1 3.0 4.0 4.1 3.8 4.2 6.1 3.2 4.4 3.7 3.96 
Source: BEUC 
8. TARIFFS 
The question of tariffs can be approached from two different directions. The prices that 
the customer pays are "visible" (using the distinction used in the introduction at 
Paragraph 1 ). What he does not see, however, are the costs and tariff principles applied. 
Together the costs and principles applied lead to the prices that the customer pays. 
Here, the "visible" aspects of tariffs will be discussed. The elements that are "invisible" to 
the customer -that is, the costs and tariff setting policies -will be discussed in Chapter 5, 
Paragraphs 5 and 6. 
The discussion concentrates solely on services that are presently reserved, or are subject 
to special tariff policies. The key aspects from the perspective of customers are the level 
of the basic tariffs; the structuring of the tariffs; the availability of discounts and, lastly, 
preferential tariffs. 
Chapter 4: Commen:.ia/ aspects page 91 
8.1 BASIC TARIFFS 
In the Community, the tariffs for the basic letter service (for letters weighing up to 
20g) vary by a factor of more than 3 -from 0.14 ECU to 0.50 ECU. If these prices 
are adjusted for the purchasing power within each Member State, the spread of 
prices reduces somewhat, as shown by Table 15. 
Whether the citizens/customers of different Member States consider these prices 
to be good or bad value for money is not very much researched. 
All postal administrations apply a single unitary tariff for letters, the same price 
being paid for delivery anywhere in the territory. (Exceptionally, the Spanish 
postal administration also offers separate local tariffs for items for local delivery.) 
This principle -called the ''perequation tarif a ire" -has been extended by nine out of 
the twelve Member States to mail going to other Community countries. (Amongst 
these postal administrations, eight offer this perequation tarifaire for the basic 
letter up to 20 g; France offers it up to 100 g.) However, as Chapter 5, Paragraph 
6.1 discusses, perequation may imply a need for regulatory protection in order to 
prevent cream-skimming. The question would then need to be posed whether the 
potential liberalisation of cross-border services was more or less important than 
the principle of perequation for such services. 
page 92 Chapter 4: Commercial aspects 
Table 15: 1990 tariffs in ECU, for a letter from 0 to 20 g. 
COUNTRIES NATIONAL PuRC HASING POWER 
LEITER MAIL ADJUSTED (Note 1) 
Belgium 0.33 
Denmark 0.47 
Germany 0.50 
Greece 0.17 
Spain (Note 2) 0.15 
France 0.33 
Ireland 0.36 
Italy 0.50 
Luxembourg 0.28 
Netherlands 0.32 
Portugal 0.18 
United Kingdom (Note 3) 0.28 I 0.31 
0.50 
0.45 
0.30 
0.19 
0.31 
0.57 
0.56 
0.24 
0.31 
0.31 
0.26 
EC Average 
Japan 
United States 
Note 1. 
Note 2. 
Note 3. 0.32 
-
0.34 
0.19 
.. I 
1---. 0.32 
0.40 
0.36 
Purchasing power adjustment made by applying private consumption/purchasing power 
standard index. (See EC Annual Economic Report No 42, Table 16.) 
Spain: The price of ECU 0.15 is that for a letter sent between two towns (inter-urban). 
The price for a letter within the same town (intra-urban) is ECU 0.08. 
Price shown for first class lener up to 60g. 
Source: Postal administrations ( 1990) 
8.2 PRICE STRUCTURES 
Prices other than the tariffs for the basic letters are also "visible" to customers. It 
is noticeable that the price increments for higher weights vary significantly 
between the different postal administrations. Table 16 shows the tariffs at higher 
weight steps, but expressed as a factor of the basic letter tariff (for a 20g letter). 
Chapter 4: Commercial aspects page 93 
Table 16: 1990 tariffs for higher weights -factor of basic tariff 
MEMBER PRJCE AS FACTOR OF BASIC TARJFF 
STATES 
lOOg 250g 500g 
Belgium 2.40 3.30 5.80 
Denmark 1.36 2.40 4.00 
Germany 2.40 3.20 4.00 
Greece 1.40 2.00 4.00 
Spain 1.95 4.25 8.50 
France 2.50 5.20 6.50 
Ireland 1.50 2.20 3.70 
Italy 2.70 5.10 8.90 
Luxembourg 2.10 4.20 5.80 
Netherlands 3.00 4.00 6.00 
Portugal 3.75 6.88 12.34 
United Kingdom 1.50 2.70 5.10 
=-~~~~ 
Source: Postal administrations 
8.3 DISCOUNTS 
Attitudes towards discounts vary significantly. At least one administration does 
not permit discounts because of legal restrictions. Others do grant discounts, but 
their structures are likely to vary for two reasons. Firstly, the operations of 
different countries vary, thus causing a discount which one administration might 
offer in order to encourage cost savings to be inappropriate for another. For 
example, the United Kingdom offers discounts if addresses can be read by optical 
character readers; other countries do not offer such discounts, either because their 
criteria for discounts are different or because they do not have the same 
technology. 
The second important point is whether the discount structure is published, and 
whether further discounts can be gained in addition. Here, again, there are 
different approaches. About half the administrations publish discount structures 
for letters and printed papers, from which sales staff are not allowed to vary; 
others prefer to permit negotiations on a customer-by-customer basis. 
The problem with the latter approach is that it could stimulate large discounts in 
the reserved area. Above a certain level of discount, the discount awarded to one 
customer may have to be cross-funded from the revenue from another. This, for 
page 94 Chapter 4: Commercial aspects 
example, would result from a discount of 76% that was granted by one postal 
administration to a government ministry. 
Such a tariff is very preferential indeed. However, the phrase "preferential tariffs" 
is usually used to describe the concessionary rates granted particularly to 
publishers, as discussed below. 
8.4 CONCESSIONARY RATES (PREFERENTIAL TARIFFS) 
Many countries within the Community have concessionary rates (also called 
preferential tariffs) for certain sorts of traffic, particularly publications. More 
detail on such "cultural mail" is to be found in Annex 13. Here it should be noted 
that such tariffs are usually supported by government subsidy or by cross-subsidy 
by the postal administration. The principle is that they should encourage the 
spread of communication. It is the addressees who are being encouraged by lower 
prices to want to receive more such communication. 
It is therefore consistent with these objectives that such subsidies should be made 
available to publishers based in other countries (not just other Member States of 
the Community) who want to distribute newspapers and magazines to the same 
addressees. 
The position is by no means so· clear in terms of concessionary tariffs for 
international mail. The political objective appears to be different: presumably the 
dissemination of publications of one's own language to other countries. It should 
be noted, however, that private operators help publishers from other countries to 
take advantage of such tariffs. 
Private operators (either courier /remail companies or freight forwarders) collect 
mail in one country, take it to a second country where the tariffs are lower for 
posting onto a third country. In some cases, the administration in the second 
country may encourage such practice because it is profitable. However, for 
concessionary tariffs below cost, such incremental traffic is unwelcome for the 
postal administration. 
Some countries offering preferential tariffs have evolved the rates over a period of 
time. Others try to apply fixed discounts to regulate the difference between the 
preferential tariffs and the regular letter rate. For example, the UPU 
Chapter 4: Commercial aspects page 95 
recommends a 50% discount for certain categories of cross-border printed paper 
setv1ces. 
The overall position is that some postal administrations offer preferential tariffs, 
while others do not. Those that do offer them have evolved their prices separately 
from each other. Those that do not offer such discounted prices based solely on 
contents tend to have special prices based on mail preparation of publications. 
These varying approaches have led to a wide range of prices paid for the same 
service. Table 17 shows the price for domestic delivery of a 350g magazine in 
seven of the Member States. (Figures for the other five Member States were not 
given.) It also shows these prices as a factor of the basic tariff. 
Table 17: 
POSTAL Postal administration prices: domestic delivery of 350 g magazine 
(1989) 
~-·---
NOTES PRICE PRICE PRICE AS ORDINARY 
FACTOR OF LE1TER 
BASIC LE1TER TARIFF 
ADMINISTRATION TARIFF (note 1) 
National 
Money ECU ECU 
--->--~--
Denmark 2 Kr 2.90 0.37 0.79 1.41 
Germany 3 DM 1.50 0.74 1.48 1.96 
Spain Pta 2 0.02 0.13 0.53 
France FF 1.79 0.26 0.79 2.22 
Italy 4 Lire 39 0.03 0.o7 3.86 
Netherlands Dfl 0.64 0.28 0.88 1.96 
United Kingdom 5 GBL 0.38 0.51 1.82 0.96 
Notes: 1. This column shows the letter tariff for a 350g letter. It provides a comparison that is 
not quite direct. The prices shown here are for a faster service without any pre­
sorting. 
2. Rate for a publication of more than 30 issues per year. 
3. Streifbandzeitung rate shown. Postvertriebstuck rate of DM 0.45 (ECU 0.22) could 
also be appropriate. 
4. For monthly publication. 
5. Second class publication service, basic pre-sort. 
Source: Periodical Publishers' Association (UK) 
page 96 Chapter 4: Commercial aspects 
Almost all postal administrations that offer loss-making preferential tariffs are 
trying to raise the prices in real terms in order to reduce the loss incurred or even 
put the services in profit (but still with lower margins than for ordinary letters). 
Because of the previous discounts awarded, this process can take a long time. For 
example, the Deutsche Bundespost has now come to an agreement with the 
publishing industry in Germany that 60% of costs should be covered by 1994. By 
way of comparison, in 1974 -twenty years before -the cost coverage was only 28%. 
Naturally, the publishers would want any real price increases to be phased in. 
However, they tend to accept that the prices offered by postal administrations are 
low in comparison to retail prices. If a magazine is sold through the 
wholesale/retail chain, the cost to the publisher is usually a percentage of the 
cover price. This percentage when applied to even a mid-priced magazine will 
often be higher than the standard letter rate. Against that, hand delivery 
companies, by providing services in only high density areas, can often under-cut 
the unit prices offered by the postal administrations. 
In many instances, it seems clear that preferential tariffs of postal services are 
used by publishers only to provide universal coverage of their publications. Thus, 
for example, one survey found that 7.5% of daily newspapers delivered to an 
address were delivered by mail. 
The problem for postal administrations is likely to be that these newspapers are 
for delivery only in less urban (that is, more high cost) areas. The more urban 
areas where there are lower costs are also more convenient for the publisher to 
arrange delivery himself. If the unit revenue of the preferential tariffs for those 
items for "urban" delivery exceeds the unit marginal costs, this selective use of 
postal services for newspaper delivery makes the losses incurred by the postal 
administrations on such tariffs that much greater. 
Postal administrations seem to find it impossible to impose exclusivity clauses on 
their customers, even when the latter are enjoying these preferential tariffs. 
Further, it is not possible for postal administrations to control how much the 
services are used. If a service is offered where the revenue gained from each item 
carried is less that the marginal cost of carrying the item, it is the total usage of the 
customers that dictates the losses incurred. 
Chapter 4: Commercial aspects page 97 
Nor is it possible for administrations to prevent access for publishers for whom the 
preferential tariffs were not intended: this is particularly true for cross-border 
services where publishers from one country post the non-domestic copies of their 
publications in a second country in order to take advantage of the loss-making 
preferential tariffs there for delivery in a third country. (The latter effect of the 
tariffs set is discussed again below at Chapter 5, Paragraph 9.1.) 
Some postal administrations also have obligations to deliver certain categories of 
material for free on behalf of their governments. For example, most 
administrations deliver electoral material for free. 
9. EFFECT OF SINGLE MARKET 
Some of the anticipated effects of the Single Market are already being felt. Companies 
are beginning to re-align their strategies to take advantages of the potential benefits, 
particularly in terms of marketing and distribution. The investments that have been and 
are being made in order to implement their strategies are already stimulating economic 
growth. 
Postal services will be affected directly by changes that the achievement of the Single 
Market will bring about. More importantly, the requirements of their customers and 
potential customers will change, thus having an indirect effect on postal services. 
9.1 GENERAL ECONOMIC EFFECTS 
It is estimated that the achievement of the Single Market will reduce present costs 
by an average of between 4.5% and 7% across all sectors. Since the costs which 
will be saved do not presently add value (being incurred because of extra 
documentation, the present inability to achieve returns to scale, and the like), the 
saving of these cost should result in lower real prices. These in turn should 
generate increased economic activity, which in turn should stimulate a "multiplier" 
process. 
This growth in economic activity will increase demand for postal services. The 
"1992 effect" may particularly benefit the service industries, and they are already 
disproportionately heavy users of postal services. Further, it seems quite probable 
that the benefits coming from the Single Market may help companies in a way 
proportionate to their size -the larger the company the greater the potential 
page 98 Chapter 4: Commercial aspects 
benefits. Users of postal services are also concentrated in large companies (which 
will also look for substitute services). Thus, if 1992 will cause a particularly 
significant increase in the activity of large companies, this could have an 
important effect on demand for postal services. 
9.2 CUSTOMER STRATEGY 
The abolition of customs controls, combined with the reduction in technical 
barriers to entry to national markets, will greatly enhance the flexibility of 
organisations in their choice of location. This in turn will be influenced by the 
need for concentration of activities in order to gain greater returns to scale. 
The effect of this is that companies can locate activities further from the market 
being served, and, indeed, other parts of the organisations being served by those 
activities. 
Such location strategies, as stimulated by 1992, will cause many services which are 
presently domestic to be carried out in future "cross-border" between Member 
States. To this trend should be added the certainty that 1992 will increase trade 
between Member States, and make all "domestic" markets more competitive. 
A good example of the likely application of such location strategies is financial 
services, whether selling services to customers or servicing them with invoices, 
statements, etc. Increasingly, organisations are likely to centralize the locations of 
their financial service operational activities, while ensuring that these locations can 
still communicate effectively with whatever entities or persons necessary (such as 
other institutions, other information holders or customers). 
For such strategies to work, effective communication channels are absolutely vital 
-including cross-border. For manufacturers and for "distance sellers" (particularly 
mail orders companies) effective distribution channels are also essential. 
9.3 CUSTOMER EXPECTATIONS OF POSTAL SERVICES 
In order for their communication and distribution needs to be met at the more 
demanding level suggested by their policies for 1992, companies and other 
organisations will need efficient postal services throughout the Community with 
the appropriate degree of flexibility. 
Chapter 4: Commercial aspects page 99 
For example, in the domain of distribution (where parcels and express parcels 
services operate), application of "just-in-time" policies will become more 
widespread as the location-at-distance strategies described at Paragraph 9.2 re­
inforce the need to keep stock-holdings at the minimum feasible level. 
There has been a long-term trend that has been reducing the attitude that cross­
border services are particularly special. The achievement of the internal market 
will accelerate this trend. If services provided to cross-border destinations are 
significantly inferior to those provided domestically within a national or regional 
territory, customers are likely to become impatient, and seek alternative means of 
communication or distribution. 
In short, the achievement of the Single Market is likely to raise the expectations of 
what customers expect of their postal services (whether letters, parcels or express). 
Postal operators will have to satisfy these raised expectations or suffer. 
9.4 PARTICULAR EFFECTS ON POSTAL OPERATIONS 
In addition to this raising of customer expectations, there is likely to be a change 
in the profile of traffic. The point of origin of traffic that is presently domestic 
may move cross-border. 
This has important economic effects on those operators who sub-contract the 
delivery outside their own territory (which more or less describes the position for 
mail exchanged between postal administrations). Each such operator would find 
their cross-border traffic increasing, that is apparently increasing the proportion of 
variable costs (that is, the tariff/compensation paid to the delivery operator). 
At the same time, each operator has the (more or less) same fixed cost of his own 
network, and therefore will be increasingly reliant on sufficiently high volumes of 
traffic being generated outside his territory for delivery within it. 
The abolition of customs controls in the internal market will represent a windfall 
gain for all carriers. The savings could be passed on to customers in the form of 
reduced tariffs. More likely, they could be re-invested in adding value to services. 
An example would be extending the "pipe-line" principle where distribution 
(whether contracted out or undertaken by an in-house agency) is seen not as a 
bolt-on activity, but rather as an integral part of the process. 
page 100 Chapter 4: Commercial aspects 
The ability to clear through customs quickly is a skill which can give companies 
that are effective in this a competitive advantage. For goods circulating in the 
internal market, this is a skill that will no longer be required. Such companies will 
therefore have to seek other ways in which to maintain a competitive advantage. 
If not, their services will tend towards "commodity" status. Such commodity 
services are then sold on price, thus depressing profitability. 
In short, postal operators (whether public or private) will need to establish fully 
effective cross-border services. The increased reliance of delivery networks on 
volume generated outside the territory will make absolutely necessary the putting 
in place of adequate tariff/compensation systems. 
Chapter 5: Economic and opera.tiona/ aspects page 101 
CHAPTER 5: ECONOMIC AND OPERATIONAL ASPECTS 
1. INTRODUCTION 
The previous chapter concentrated on the relationship between the postal operators 
and their customers. This chapter now describes the operations that provide the 
postal services, and analyses the economics that underlie the operations. 
It attempts to identify the ways in which the main services -letters, parcels and express 
-are similar, and in what ways different. The chapter pays particular attention to the 
economics of those services for which there is a universal service requirement. 
In discussing the economics of the postal operation, the intention is not to go into 
detailed theory. Rather, only general concepts are discussed in so far that they might 
have a bearing on the drawing up of proposals in the Green Paper. 
The economic terms used are therefore straightforward. Where the term profitability 
is used, this refers to the margins of income less costs, whether the result is in surplus 
or in deficit. Costs are divided into fixed and variable costs. 
Fixed costs are defined here as those costs that do not vary with changes in volume. 
Variable costs do vary in this way: They are the costs that could be avoided if the 
incremental volume was not handled. (It is accepted that this general discussion does 
not allow for the sensitivities of semi-variability and the changes in cost status that can 
occur over time.) 
Marginal costs are the costs incurred if an additional activity is carried out (or an 
additional volume sold): they therefore cover variable costs plus any capital cost 
related to the additional activity. 
2. UNIVERSAL SERVICE PROVISION 
As stated above at Chapter 4, Paragraph 3, the foundation of any policy for the postal 
sector -either at national or Community level -is the need to ensure universal service 
across the whole territory concerned. 
Each Member State presently considers that the way to ensure this is to have some set 
of services reserved to the postal administration. The special and exclusive rights thus 
page 102 Chapter 5: Economic and operational aspects 
granted give the postal administration the protection it needs to provide the reserved 
services even in those areas where the provision of such services is loss-making. The 
protection in the reserved area usually makes possible universal provision also of 
some services that are non-reserved. 
The fundamental point is that universal service should be provided at ·prices 
affordable to all -that each citizen or organisation of the Community should have 
access to a postal service at prices which he can readily afford for his main postal 
communication needs. (Usually, this is represented as a single tariff covering the 
whole of the territory concerned.) To ensure this affordability, sufficient volumes and 
revenues need to be guaranteed to the operator providing the universal service. The 
lower unit costs thus achieved can be translated into affordable prices. 
The reason for this protection is that, while a postal administration can gain increasing 
returns to scale with greater volumes (for domestic mail, but much less for cross­
border mail -see Paragraphs 3 and 4 below), it is not a natural monopoly. Without 
protection, competitors would be able to concentrate on the low-cost, profitable areas, 
leaving postal administrations only with the rump. 
It might be considered that postal administrations could react by offering cost-plus 
prices for services in each locality. However, because of the need to have a tariff 
understandable to all potential users, the postal administration would not be able 
easily to stipulate the different tariffs that would apply. It would therefore want to 
have at least sub-regional tariffs covering several towns as well as some rural areas. 
Since this would still lead to some averaging of prices, competitors could still enter 
and cream-skim the most profitable services. 
The other result of adopting a cost-plus approach for small localities is that the price 
for some areas would increase very significantly. If this happened, the objective of 
universal affordability would not be achieved. This would effectively discriminate in 
an unacceptable manner against those citizens who happened to live in the regions of 
the Community which are more expensive for the postal operators to serve. To 
mitigate the problem, a further reaction could be to reduce service levels in the 
unprofitable areas, but such a course of action would move further and further from 
the basic principle of universal service. 
It perhaps could be argued that this problem could be overcome by central subsidies. 
But it would need to be considered whether this approach would cause more problems 
Chapter 5: Economic and operational aspects page 103 
than it solved. What would be the problems associated with trying to define the areas 
that justified such a subsidy, and then to calculate what the subsidy should be; what 
policing would be needed to prevent unfair manipulation of the subsidies particularly 
with regard to competitive services? Presumably, the decision would vary from year to 
year; they would also vary from Member State to Member State. 
In order to portray the context in which the Green Paper's proposals are drawn up, it 
is necessary to discuss in detail the economics of the sector. This discussion is 
provided in the paragraphs below. Here, it is necessary to add two further points 
concerning universal service. 
Firstly, it is a requirement that each postal administration should accept alJ mail 
posted. It therefore needs to be flexible enough to respond to peaks and troughs of 
demand. With significant peaks in demand, it may be inevitable that there is some 
diminution in the service. However, generally, service levels must be maintained. 
Secondly, while universal service of the ordinary letter service is the key objective, it 
would be a worthwhile by-product if other services could be provided universally 
through the more intensive use of the network that provided universal letter provision. 
In this way, it may be possible for parcel and express services to be provided 
universally. The effect of this more intensive use of the network is that it would be 
more productive in terms of both lpwer unit costs and increased total revenue. This 
might enable the set of reserved services (if it was decided that such a set should be 
established) to be reduced in scope and/or the prices of such services to be lowered. 
The combined effect would be to achieve economies of scale, the benefits of which 
could be passed on to potential customers. At the same time, if a reserved service 
network was established and was used also for non-reserved services, there could be a 
danger of unfair cross-subsidies that would disrupt the free competition in the non­
reserved area. This subject is discussed further below at Paragraph 7.1. 
3. POSTAL OPERATION -GENERAL DESCRIPTION 
Almost all postal operations demand five operational phases. These phases are: 
collection, outward sorting and despatch, transport, inward sorting and, lastly, delivery. 
Collection and outward sorting are sometimes referred to as the "outward" part of the 
operation, and inward sorting and delivery as the "inward" part. To these five phases 
page 104 Chapter 5: Economic and operational aspects 
can be added a sixth which precedes the whole process -that is, the selling of the 
service to the customer. The whole process is shown graphically in Figure 1 below: 
Figure 1: The connexion between different operational phases 
Collection -> Outward 
Sorting C U S T 0 M E R S 
-> Transport -> Inward 
Sorting -> Delivery 
With the possible exception of the dispatch rider who undertakes the whole operation 
on his own, these phases are operationally distinct from one another. While they 
follow each other sequentially, they are not a "seamless" operation. This is 
demonstrated by the fact that five different operators could carry out the different 
phases. (Even if one organisation undertakes all the phases, it often uses different 
staff for each phase.) 
Such complex operations necessita~e the use of networks. Annex 3, in describing the 
postal operation, analyses the different types of networks employed in the postal 
sector. These networks provide the links between the different phases of the 
operation. The letter mail operation requires a network with a high level of 
interaction between all the different points of the network, However, in this case as 
well as for the other postal services, the operational phases linked by the networks 
remain distinct. 
Postal administrations accept this reality that the operational phases are distinct from 
one another. Most offer contract facilities where customers can undertake some form 
of mail preparation which reduces the work that would otherwise be done by the 
postal administration. Some administrations contract out some of the transport 
operation (for example to the national railway operator). 
For cross-border mail (discussed in more detail below at Paragraph 4 ), the transport 
phase is usually contracted out to a transport operator, and the inward part of the 
operation is undertaken by another postal administration. 
Chapter 5: Economic and operational aspects page 105 
Very approximately, the relative costs of the different phases of the letters process are 
as shown in Table 1 (which averages figures provided by several postal 
administrations). 
Table 1: Approximate composition of letter mail operational costs 
Collection 10% 
Outward sorting 18% 
Transport 2% 25% 
Inward sorting 5% 
Delivery 65% 
Source: Several postal administrations 
This break-down is very approximate. The break-down will vary from operator to 
operator; the proportion of costs of the outward and transport stages of express and 
parcel services may be somewhat higher than the figures shown above. Of all but the 
delivery phase, each phase -but most likely to be outward sorting -could be 
substituted by work carried out by the customer before posting. However, overall, the 
percentage for the mail work, whether carried out before or after posting, should be 
broadly accurate. 
The percentages shown above are for the actual mails operation. They therefore 
exclude the pre-operation selling/posting phase. The cost to the operator of this pre­
operation phase can vary from almost nothing to up to 10% of costs. 
The different phases, and their economic implications, are discussed briefly below. (A 
more detailed description of the letter operation is to be found at Annex 3.) In this 
discussion, a division is drawn between fixed and variable costs. Throughout it should 
be remembered that the m(ljority of postal operational costs (70% on average for 
postal administrations, somewhat less for private operators) are labour costs. The 
employment aspects of the sector are discussed in Chapter 6. 
3.1 SELLING OF SERVICE 
Postal services are paid for by the customers in one of three ways: by contract 
with retrospective billing, by meter machine (which prints out on the envelope 
the tariff paid by the customer) or by stamps. 
page 106 Chapter 5: Economic and operational aspects 
The contract payments facility is a fixed cost to the postal operator, whether 
private or public; the cost of credit to him is variable in relation to the revenue. 
For letter services, these contract costs are usually negligible in proportion to 
total costs. For parcel and express operators, the proportions can be higher. 
Payments by meter machine have a similar economic profile (with the exception 
that the payment facility is bought in advance), and is also a negligible 
proportion of the overall cost. 
Payment by stamps incurs a more significant proportion of mail costs. If the 
stamps are sold under contract by another vendor, the cost of the sale is 
variable to the postal administration. Even if the sale is made by the postal 
administration's own counters organisation, the cost may be represented 
internally as a variable charge to the mail organisation. 
3.2 COLLECTION 
Collections are carried out from three different places. Both postal 
administrations and private operators collect direct from customers' premises; 
for regular such collections the costs are fixed, with (at least for postal 
administrations) low unit costs. 
Collections are also made by postal administrations from their own counters 
and from road-side collection boxes. Again, the costs are fixed. However, 
because of the lower volumes, the unit costs are higher (and in the case of 
collection from road-side boxes, much higher). 
If demand increases in a particular area, it is possible that a new collection 
facility may need to be established -new boxes, or even a new collection round. 
Such incremental increases in costs after a significant increase in volume are 
often called "lumpy inputs". 
Once established, their running costs become part of the fixed costs. Such 
additions to (or subtractions from) the collection network will affect demand at 
other collection points, but do not need to affect the structure of the rest of the 
collection network. In this way, collection networks are different from the 
sorting office networks which by their nature are more inter-active -as 
discussed below in more detail at Paragraph 3.3. 
Chapter 5: Economic and operational aspects page 107 
It should be noted that in rural areas (or less urban areas), collections are often 
combined with deliveries. Whether combined or not, volumes at each rural 
collection point tend to be low, with commensurately higher unit costs of 
collection. 
3.3 OU1WARD SORTING 
Outward sorting involves the reception of material collected and then carrying 
out whatever processes are necessary to send the mail to the centre responsible 
for delivery (or the intermediate centre responsible for forwarding the mail to 
the final delivery office). 
This activity has a high variable element. This is especially true for the mail 
that can be handled the day after collection. Mail which needs to be forwarded 
straightaway may need a higher fixed element because the volumes cannot be 
predicted in advance. (But even here, it is likely that overtime will be used as a 
"float" to align man-hours spent with volume.) 
It should be noted that mechanisation increases the proportion of fixed costs. 
Mechanised sorting demands regular engineering coverage, as well as having 
hard-ware running costs not related to volume. 
In terms of networks, sorting offices (or the dispatching centres of private 
operators) and delivery offices are entirely inter-active. If the network planners 
add or subtract a centre, all other offices need to be aware, and adjust their 
sorting patterns accordingly. 
3.4 TRANSPORT 
If an operator undertakes his own transport (between the outward and inward 
parts of the operation), the costs are not volume-related (subject to the addition 
or subtraction of "lumpy inputs"). If, however, the transport operation is 
contracted out, the costs are represented to the postal operator as variable, if 
the contract terms are on payment by volume. 
For light-weight items (such as letters), the unit cost of transport is negligible. 
Even for heavy-weight items, the expensive elements of the transport process 
are despatching and unloading: the incremental cost associated with increases 
in distance transported is very slight. 
page 108 Chapter 5: Economic and operational aspects 
However, increases in distances can have an indirect effect in increasing costs. 
This is because the further the address point is from the point of collection, the 
more likely it is that there will be a greater complexity in routeing the postal 
item. 
Thus, if an item collected is for delivery in the same area, it will be brought into 
the outward sorting office which will also be the "inward" sorting office 
responsible for feeding the delivery office to which the latter should be routed. 
If a letter was being sent from one large town to another, two sorting centres 
would be involved. If a letter was being sent from one rural area to another 
area at some distance, there would be a greater likelihood that the item would 
be aggregated into an intermediate sorting centre, thus increasing the handling. 
Any extra handling (as well as the additional time needed for transport between 
the handling centres) carries the danger of decreasing quality of service. 
It is often stated that postal services have costs that are not distance-related. In 
a strict sense (in terms of transport costs as a proportion of total costs) this is 
true. However, on a practical level, distance implies greater operational 
complexity, and can carry higher costs -both monetarily and qualitatively. 
3.5 INWARD SORTING 
The economic profile of inward sorting is very similar to that of outward 
sorting. Theoretically, the work demand should be more predictable if the 
outward offices informed the inward offices of the volumes despatched. The 
sorting will have a high variable content. This is particularly true of the slower 
streams -such as printed paper (AO) or second class letters -if they do not 
have to be sorted immediately. 
It should be noted that inward sorting is not usually carried out by automatic 
sorting machinery. The exceptions to this are the Netherlands and the United 
Kingdom where the post-coding system permits such automatic inward sorting 
(but even in these countries -less in the case of the Netherlands -the 
proportions of inward mail sorted automatically are not high). As noted at 
Paragraph 3.3 above, mechanised sorting has a higher fixed element than 
manual sorting -but this is less relevant to inward sorting. 
Chapter 5: Economic and operational aspects page]()<) 
3.6 DELIVERY 
Delivery costs are, in effect, mostly fixed. There is no variation in costs if there 
are two items rather than one to be delivered to an address point passed on a 
delivery round. If the extra volume demands that an extra delivery point must 
be accessed, there would be no increase in costs in the case of town letter 
deliveries. 
Even in those cases where extra delivery access would be more noticeable (such 
as on delivery rounds for small-volume parcel or express operators) there is 
likely to be spare capacity that could assimilate the extra delivery points. Even 
in rural letter deliveries, some extra address points could be added without 
increasing costs. 
It is important also to look at the effects on delivery costs of possible declines in 
traffic. Again, costs would be unlikely to be saved, unless there were significant 
movements in traffic. 
It is estimated that some 65% of operational costs are accounted for by delivery 
costs (somewhat less for express), and these costs are almost all fixed. In the 
rural areas where delivery productivity is inevitably low, the unit costs will be 
significantly higher than average. 
3.7 OTHER 
The non-operational costs are overheads which, for the purposes of tariff 
setting, must be allocated to the different postal services and indeed to the faces 
of the operations that comprise those services. While there are some sunk costs 
(in such items as accommodation, machinery and operational planning), they 
are relatively few, since the postal industry is "low technology", at least by 
comparison with other sectors of the communications industry. However, at 
least in the short/medium term, the overhead running costs tend to be "fixed". 
4. CROSS-BORDER SERVICES 
The operations described above at Paragraph 3 were essentially those of an operator 
(such as a postal administration) providing domestic services within a national 
territory. When mail crosses a border, the economics of the service usually become 
page 110 Chapter 5: Economic Q/td operational aspects 
different. To put this in the context of the revenue of the operators (both public and 
private), the proportions are approximately as shown in Table 2. 
Table 2: Proportions of volume and revenue 
SERVICES VOLUME REVENUE 
Domestic 93% 90% 
Intra-Community 4% 5% 
International 3% 5% 
Sources: Several 
For analysis of the economics involved, it should be noted that there are two different 
types of cross-border service: either one operator handles all the phases from 
collection to delivery or the operator in the "outward" country entrusts the mail to 
another operator for delivery in the "inward" country. 
In the first of these examples (which describes the position of certain large private 
express operators), the economics are essentially the same as those of the domestic 
operations -that is, there are significant network fixed costs so that the marginal effect 
of increases or decreases in traffic is slight. 
Because such an operator probably has local subsidiary companies in each of the 
countries involved, there may well be an internal charging system that allocates cost 
with the effect that managers in the outward country see the costs as being variable. 
The second example describes the position of almost all cross-border letter operations 
and many parcel operations (whether private or public). Here, the outward operator 
contracts with another operator for the delivery to be affected in the inward country. 
In the case of postal administrations, delivering material on behalf of other 
administrations, the "contracting" rules are determined by the Universal Postal Union 
(see Chapter 3, Paragraph 5.1 ). The economics of these "exchanges" of mail need to 
be viewed from the outward and inward perspectives separately. 
4.1 OU1WARD MAIL 
For such exchanges of mail, the charge made by the delivery operator is a 
variable cost for the outward operator. The variable charge takes different 
Chapter 5: &anomic and opero.tional aspects page 111 
forms. For letter mail exchanged between postal administrations, the charges 
take the form of "terminal dues", which themselves are a complex issue and are 
discussed in more detail below at Paragraph 8. Such terminal dues are usually 
charged at the same rate for both postal administrations that exchange mail 
between each other. 
For parcels exchanged between administrations, the system is different. Here, 
each administration charges the other "land rates" -but these are determined by 
the delivery administration, and are not the same in both directions. The 
system for postal administrations delivering each other's express items is similar 
to that of land rates: again, the delivery administration determines the charges . 
. For private operators contracting with another operator for delivery, the 
delivery costs are also variable, whether the operator is private or is the postal 
administration in the country of delivery. 
4.2 INWARD MAIL 
Essentially, the "inward" operator continues to have the same network fixed 
costs. Thus delivering more traffic in his delivery area will not increase costs 
proportionally; conversely, if there is a decline in the cross-border traffic that he 
receives in his country, the inward operator would not be able to make 
proportionate savings. 
This point is perhaps particularly important for the letter delivery networks of 
the postal administrations. Presently, cross-border traffic accounts for an 
average of 7% of letter volume (up to 47% in Luxembourg). Slightly more than 
half this figure is made up of traffic passing between Community Member 
States. 
This volume therefore helps to keep unit costs at affordable levels. However, 
because of the imbalance in the current terminal dues system (discussed in 
more detail below at Paragraph 8) between delivery unit costs and 
compensation received, most Member States find that their unit costs for 
delivering this traffic are not covered. 
This situation is barely supportable whilst cross-border volumes are at their 
current levels (and while part of the revenue gained on the outward traffic is 
used to cross-subsidise the inward losses). But, as Chapter 4 Paragraph 9 
page 112 Chapter 5: Economic and operational aspects 
indicates, the cross-border volumes are predicted to increase, perhaps 
dramatically, as a result of the Single Market strategies of large customers. 
A large proportion of this increase could be at the expense of domestic traffic. 
This change in the structure of delivery traffic will have a very significant effect 
on the tariff policy. If terminal dues continue to under-compensate delivery 
unit costs, there might well have to be real increases in the tariffs for domestic 
mail. 
S. COSTS 
What then affects the costs of the Community's different operators? Concentrating 
on the postal administrations, it has been noted that, on average, labour costs 
comprise about 75% of operational costs. Naturally, the labour unit costs (that is, the 
cost of labour per hour) will vary from country to country. 
They will be affected by local labour market conditions, which are in turn affected by 
the prevailing economic situation of each Member State, as well as previous trends. 
(Thus, even taking a modest perspective of changes, one can note that real 
compensation in the Netherlands remained constant in the 1980s, whereas in the UK 
it rose by 23%.) 
They are also affected by the relative position of postal staff in the informal ranking 
order of different occupations. It is therefore inevitable that there will be differences 
in the cost of a labour hour. 
What is produced in each labour hour expended will also vary because of the different 
through-puts that are achieved. These through-puts are calculated by dividing the 
numbers of items (or the revenue gained from them) by the numbers of labour units 
(either total staff or their work-hours, or either expressed in terms of their monetary 
costs). Figure 2 below shows a simple productivity measure of the total number of 
postal items (excluding unaddressed direct mail, but including express items as single 
items) divided by the total number of employees of the postal administrations' mail 
services. 
Chapter 5: Economic and operational aspects page 113 
Figure 2: 
Note: 
Source: Items per mails employee in thousands (1988) 
200 ···························································································································· 
160 ···························································································································· 
100 ................................................................ . 
'50 
0 
B DK D GR E F IRL I L NL P UK EC USA JAP 
The employees figures refer only to mails employees, and therefore exclude the staff 
employed on postal financial.services. 
Sofres study 
The employees figure used as a denominator in the calculation refers only to postal 
administration staff employed on mail services. It relates to costs which are (as 
described above at Paragraph 3) significantly fixed. Movements in through-puts may 
therefore be very much dependent on the volumes posted. (It must be stressed that 
the table is intended to give only an impression: apparent productivity will he affected 
by, among the factors, relative population density and varying levels of pre-sorting 
carried out by customers; further, no link is made here with the quality of service 
achieved.) 
This poses an important question: to what extent is the propensity of "the average 
citizen" to post items with the postal administration a function of the ex1 c1 nal 
economic environment, and how much is it related to factors within the control ·, r the 
postal administration? 
page 114 Chapter 5: Economic and operational aspects 
Figure 3 at Chapter 4, Paragraph 3.2 shows that there is some direct link between 
general economic activity and the propensity to post mail items. However, in terms 
only of factors within their control, some postal administrations are more efficient 
than others. Each administration, of course, has the capacity to reduce its costs; if 
these reductions are then represented in lower real prices, an increase in volume will 
result. This can lead to an upward "virtuous" spiral where the higher volumes lead to 
lower unit costs, which in turn restrain the need for price increases. 
A second important point is that the quality of the service perceived by the potential 
customer has a direct effect on the profile of the mail posted. The higher the 
perception of the quality, the more likely that customers will post the higher value 
items in the mass-volume ordinary stream -items such as business letters, invoices, 
statements, etc. These items may incur higher costs because they demand a greater 
degree of priority, but their tariffs are set at a proportionately higher rate with 
adequate profit margins. 
The converse is also true. The worse the customer perception of the quality of 
service, the more the postal administration will be used as the "distributor of last 
resort". It will become more and more the receptacle for the low-value bulk postings, 
which are often attracted by preferential tariffs (see below at Paragraph 6.3) which 
themselves are often loss-making. 
In short, simple productivity measures do not suffice. The profile of traffic is all­
important to the revenue/cost structure and this is directly affected by the potential 
customer's perception of the quality provided. 
6. PROFITABILITY AND TARIFF-SETTING 
Table 3 shows the profitability of the Community's postal administrations in terms of 
their surpluses and deficits. These figures exclude the results of the generally 
profitable postal financial services provided by the postal administrations (see below 
at Paragraph 7.1 ). (Profit figures are not available for the Community operations of 
the private operators.) 
Chapter 5: Economic and operational aspects page 115 
Table 3: Profitability of mail services of EC postal administrations (1988) 
SURPLUS/ 
TOTAL TOTAL SURPLUS/ DEF1CIT AS 
MEMBER COSTS REVENUE DEFICIT PERCENTAGE OF 
STATES REVENUE 
Million ECU Million ECU Million ECU % 
Belgium (note 1) 745.9 503.1 -242.8 -48.3 
Denmark 840.9 806.4 -34.5 -4.3 
Germany 8 210.0 7 000.0 -1,210.0 -17.3 
Greece 123.5 100.3 -23.2 -23.l 
Spain 1 000.0 692.3 -307.7 -44.4 
France 7 838.0 7 340.0 -498.0 -6.8 
Ireland 189.0 187.7 -1.3 -0.7 
Italy 3 709.5 2 651.1 -1,058.4 -39.9 
Luxembourg 45.0 42.3 -2.7 -6.4 
Netherlands 1 731.0 1 778.0 + 47.0 + 2.6 
Portugal 169.8 134.0 -35.8 -26.7 
United Kingdom 4 484.0 4 643.0 + 159.0 + 3.4 
TOTAL 29 086.1 25 878.0 3 208.4 -12.4 
Note 1. The income for the Belgium does not include a payment of ECU 321 million received from 
the central government in respect of loss-making services provided. (See Paragraph 7.2 
below.) 
Source: Sofres study 
What causes these variations in profitability? Differences in commercial expertise 
and in efficiency are important. However, the different tariff policies applied also play 
an important part. 
There seems to be a direct relationship between the revenue gained per item and the 
relative profitability of the different administrations. Table 4 below compares the 
statistical order of the profitability margins and the average income received per item. 
The profitability margins are placed in statistical order according to the percentage 
return on revenue. The average income received per item is ranked alongside. This is 
calculated by dividing the total revenue by the number of items (excluding 
unaddressed items). 
page 116 Chapter 5: Economic 011d operational aspects 
Table 4: Potential link between profitability and tariff-setting 
REVENUE SURPLUS/ PERCE1''T AGE STAT- REVENUE STAT-
MEMBER DEFICIT MARGIN ISTICAL PER ln:~·I ISTICAI 
STATE ORDER ORDER 
(Mill ECU) (Mill ECU) (ECU) 
----~~~--
Belgium 503.1 -242.8 -48.3% 12 0.26 7 
Denmark 806.4 -34.5 -43% 4 0.50 I 
Germany 7 000.0 -I 210.0 -173% 7 0.47 2 
Greece 100.3 -23.2 -23.1% 8 0.21 10 
Spain 692.3 -307.7 -44.4% 11 0.14 12 
France 7 340.0 -498.0 -6.8% 6 0.45 3 
Ireland 187.7 -1.3 -0.7% 3 0.36 4 
Italy 2651.1 -1 058.4 -39.9% 10 0.25 8= 
Luxembourg 42.3 -2.7 -6.4% 5 0.25 8= 
Netherlands 1 778.0 +47.0 + 2.6% 2 0.31 6 
Portugal 134.9 -35.8 -26.5% 9 0.19 
I 11 
United Kingdom 4 643.0 + 159.0 + 3.4% 1 0.33 s I ~ I I 
Source: CEC analysis 
What causes these variations in tariffs? Of course, there are cost differences beyond 
the control of the postal administrations. However, the main cause is the different 
attitudes to tariff-setting. Table 5 below, which compares average revenue received 
with the basic letter tariffs, is illuminating. 
It is not altogether surprising that some administrations have an average revenue per 
item less than the basic tariff. All administrations have large customers who may 
deserve discounts in return for work that saves the administrations costs. However, 
the greater explanation is in terms of the preferential tariffs that are awarded on the 
basis of the content. (In the case of Italy, there must also be a question either whether 
the figures are accurate or whether there are revenue protection problems.) 
It is also the case that there are varying degrees of pressure brought to bear on postal 
administrations to hold down prices -even if it is known that price increases are 
necessary to ensure cost coverage. Over a period of time, the cumulative effect is to 
engender substantial losses. To bring the postal administration back to break-even 
could take a long period of gradual real prices increases. 
Chapter 5: Economic and operational aspects page 117 
Table 5: Postal administration revenue per mail item 
1 2 
MEMBER REVENUE BASIC INDEX 
STATE PER ITEM LETfER TARI FF 
(ECU's) (ECU's) [COL 1ICOL2] 
Belgium 0.26 0.33 0.788 
Denmark 0.50 0.47 1.064 
Germany 0.47 0.50 0.940 
Greece 0.21 0.17 1.235 
Spain 0.14 0.15 0.823 
France 0.45 0.33 1.360 
Ireland 0.36 0.36 1.000 
Italy 0.25 0.50 0.500 
Luxembourg 0.25 0.28 0.890 
Netherlands 0.31 0.32 0.969 
1 Portugal 0.22 0.18 1244 J j United Kingdom 0.33 0.28 1.179 --- -~----
Source: CEC analysis 
The particular points of the perequation tarifaire, accounting principles, transparency 
and preferential tariffs are discussed below. 
6.1 PEREQUATION TARIFAIRE 
All Community postal administrations represent their public tariffs for letter 
delivery in their national territories as a single unitary tariff which makes 
distinctions only on the basis of different weights, not on the basis of the 
different locations of either senders or receivers of the mail. (In addition to 
having a single tariff covering the national territory, the Spanish administration 
also offers a separate rate for delivery within the town where the mail is 
collected.) This "single unitary tariff' is usually referred to by the more succinct 
French description of the ''perequation tarifaire". 
The principle underlying the perequation tarifaire is that the different costs 
associated with , o!\•:·t · , in/delivery to different areas should be "averaged 
out". The alternative WC!.lld be to adopt strict cost-plus pricing based on the 
actual costs associated with different geographic areas. This could lead to a 
multiplicity of prices, and would probably be thought to fall unfairly on those 
who live in what, in postal terms, are higher cost areas. 
page 118 Chapter 5: Economic and operational aspects 
Naturally, the average applied in the perequation tarifaire would be higher than 
the actual cost in low-cost areas, such as town centres. It would also be lower 
than the costs in the more rural (or less urbanised) areas. The latter tend to be 
more expensive because the volumes are lower (for instance for collections), but 
also because the access points (posting boxes for collections or address points 
for deliveries) are simply more spread out, and therefore more expensive to 
reach. 
lt should be noted that the extremes of costs, when expressed as factors of the 
average, are significantly different. One postal administration has calculated 
that the cheapest total process (from collection to delivery) incurs 70% of the 
average costs, whereas the most expensive incurs more than 10 times the 
average. Against that, the volumes in the lower cost areas far out-weigh those 
in the higher cost areas. 
Figure 3: Perequation of profitable and loss-making areas 
Source: DEJJVERY 
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~AICON~l!llFU----------<) ill.AS \\Tl1! UGifl 
(l!fJ.\'YTRAflC) l'IKTAI lRAFJ( "' I 
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Chapter 5: Economic and operational aspects page 119 
The averaging principle applied in setting the same tariff for an item across a 
national territory carries dangers for the universal service provider offering 
such a perequation tarifaire, if other operators can enter the market and select 
which areas they will serve. This danger, sometimes called "cream-skimming", is 
shown graphically in Figure 3. 
The X-axis shows the different collection/delivery areas, while the Y-axis shows 
the unit cost of delivery. The cost of delivery is therefore a curve which is 
lowest in the heavily urban areas, rises gently in the gradually less urbanised 
areas, but then increases steeply in the very rural areas. The perequation 
tarifaire is shown as a single horizontal line. Above the line, where the unit 
revenues do not cover costs, is the area which would be unlikely to be of interest 
to an operator seeking to enter the market. Below the line, where the costs of 
service are below average, is likely to be more attractive. (Just how attractive 
would depend on whether the overall service provided by the postal 
administration was in surplus or in deficit, and on differences in operational 
costs between public and private operators for directly comparable services.) 
If another operator enters the market and concentrates on those areas where 
the postal administration's actual costs are below its average costs (that is, the 
relatively profitable areas), any success on the part of the new operator in 
taking away volume from the· postal administration would raise the average cost 
line of the latter. The increase could be fairly gradual if all the costs were 
variable. However, since a large proportion is in fact fixed, the upward shift in 
the average cost line would be very marked. 
It is in order to safeguard the universal service that each of the Member States 
has established a set of reserved services. It is usually considered to be at least 
a useful by-product that postal administrations, as the reserved service 
providers, can offer a perequation tarifaire for domestic services. (Certain 
Member States go further, in stating that the provision of the perequation 
tarifaire is an obligation placed on the postal administration as reserved service 
provider.) 
For domestic services, it may be less necessary to separate the possible reasons 
for having a set of reserved services (between the safeguarding of universal 
services and the possible need for a perequation tarifaire ). However, it will 
become more important for cross-border mail. In effect, the universal service 
page 120 Chapter 5: Economic and operational aspects 
for the cross-border mail between Member States is presently safeguarded by 
having domestic services (including the delivery of inward cross-border mail) 
placed in the reserved area. 
All postal administrations offer such services to other Community countries at a 
single unitary tariff. (In fact, at present, the ranges of cost differences between 
different destinations are probably less than each postal administration 
experiences for its domestic mail; this situation could change if terminal dues 
were more closely linked to domestic tariffs.) Nine out the twelve Community 
administrations offer delivery of the 20 g letter to other Community countries at 
the same tariff as for domestic delivery. (In fact, this initiative was in response 
to a recommendation made by the Commission in 1979 that inland tariffs 
should apply to intra-Community letters at least up to the first weight step.) Of 
the nine administrations, the French postal administration offers the same 
tariffs as for domestic mail for intra-Community for letters up to 100 g. 
6.2 ACCOUNTING 
As with other sectors, an associated feature of different attitudes to tariff­
setting is the different accounting principles that are used in different Member 
States. However, the impression is given that there are different degrees of 
understanding of costs on th~ part of the different postal administrations. In 
particular, it is not clear to what extent fixed costs are allocated correctly to the 
different postal "streams" (or services) that use the network that incurs the fixed 
costs. 
A related subject is that of the relative degree of transparency. This is 
important to identify the losses that many administrations incur on preferential 
tariffs for printed papers (see below at Paragraph 6.3 ). 
Some transparency may also be appropriate for those non-reserved services that 
are provided partly by using the reserved service network. The national 
regulator may wish to be able to investigate the way that tariffs are set to ensure 
that they cover at least the marginal costs that they incur. 
6.3 PREFERENTIAL TARIFFS 
Preferential tariffs are defined here as those tariffs that offer discounts 
unrelated to cost savings made possible by the presentation of the mail posted. 
Chapter 5: Economic and operational aspects page 121 
The previous chapter described at Paragraph 8.4 the policies (on the part either 
of national governments or of the postal administrations themselves) that have 
led to preferential tariffs being awarded. Here the intention is to study the 
economic effects of this tariff policy. 
The offering of preferential tariffs 1s a political decision. They result in 
significant losses for the postal administrations that offer them. These losses 
have to be funded from somewhere -either by cross-subsidies from other postal 
customers (and sometimes telecommunications customers) or by direct 
subsidies from the government. They present an important control problem: 
the sizes of the total losses incurred are decided by the use that customers make 
of the tariffs, rather than being controlled by the postal administrations 
themselves. 
Preferential tariffs offered by postal administrations also need to be viewed 
from the perspective of private operators. Table 6 below shows the relationship 
between the level of discounts offered and the percentage of publications in the 
total letter mail. 
Table 6: Postal administrations -printed papers distribution cost coverage 
COVERAGE PERCENTAGE OF 
MEMBER OF COSTS l't'EWSPAPERS/MAGAZJ]';ES 
STATES IN TOTAL LETfER MAIL 
% % 
Belgium 18.5 22 
Denmark 51.9 29.3 
Germany 56 11.5 
Greece 98 24.5 
Spain 5 3.1 
France 33 11.8 
Ireland 80 n/a 
Italy 6 35.7 
Luxembourg 19.3 23.5 
Netherlands 75 13.7 
Portugal 40 11.0 
United Kingdom 100 3.0 
Source: Universal Postal Union (1989) 
With the exception of Greece and Spain (perhaps because of quality of service 
requirements), there seems to be a close correlation between cost coverage and 
page 122 Chapter 5: Economic and operational aspects 
the percentage of newspapers and magazines m the letter mail. If the 
preferential tariffs discourage users from using private operators, they have the 
effect of hindering the establishment of possible alternative networks for 
newspaper and magazine distribution. 
Where quality of service is paramount, the cheaper prices of the postal 
administrations will not prevent a publisher (for instance, of a daily newspaper) 
from trying to secure faster delivery by alternative means even if these means 
are more expensive. However, for other publications (such as monthly issues or 
trade magazines), quality of service is not so important, and price is the key 
determinant of the decision on which service to use. 
In such cases, the low prices of the postal administrations prove attractive. 
Since these prices are usually made available at a loss to the administration, the 
subsidies or cross-subsidies that fund the losses are effectively preventing other 
operators from entering the market. The other operators would need to 
achieve a profit and, even if they might have some lower unit costs than the 
postal administration, they may well not be able to compete on the prices 
actually presented to the market place. 
7. FUNDING 
How are the losses of the individual services, particularly those with preferential 
tariffs, funded? Further, how are the losses on mail services shown at Table 3 above 
(a total of ECU 3.2 billion in 1988) funded? There are two sources -cross-subsidies 
and central funding. 
7.1 CROSS-SUBSIDIES 
Clearly, the services that do not offer preferential tariffs cross-subsidise those 
services that do offer such tariffs. But, as Table 3 indicated, either the tariffs of 
the former are not high enough to make this cross-subsidy and still achieve a 
net surplus, or the discounts for the preferential tariffs are so high that they 
exceed the ability of the non-preferential tariffs to subsidise them. (Effectively, 
these are two sides of the same coin.) 
Chapter 5: Economic and operational aspects page 123 
Another important source of revenue is the postal financial services offered by 
postal administrations. They are generally profitable and, as Table 7 below 
shows, help to reduce the overall losses or turn them into net surpluses. 
The overall effect of these postal financial services is to reduce the overall loss 
of ECU 3.2 billion incurred by the Community's postal administrations to ECU 
1.95 billion for their operations combined. The loss is thus reduced from 12.4% 
of turnover to 5.1 %. 
Table 7: Postal administrations: funding from postal financial se1Vices ( 1988 -
Million ECUs) 
--
POSTAL FINANCIAL SER\1CES MAIL NET 
SER\1CES EFFECT 
MEMBER -----------··--
STATES Surplus/ Surplus/ 
Costs Revenue Surplus Deficit Deficit 
(Note 1) 
Belgium 299.8 270.3 -29.5 + 78.2 + 48.7 
Denmark 271.5 350.0 + 78.5 -34.5 + 44.0 
Germany 2,180.0 2,180.0 ---1,210.0 -1,210.0 
Greece 30.0 35.7 + 5.7 -23.2 -17.5 
Spain 300.0 488.0 + 188.0 -307.7 -119.7 
France 4,381.0 5,026.0 t 645.0 -498.0 + 147.0 
Ireland 56.0 59.0 + 3.0 -1.3 + 1.7 
Italy 1,422.0 l,436.0 + 14.0 -1,058.4 -1,044.4 
Luxembourg 8.0 10.4 + 2.4 -2.7 -0.3 
Netherlands 1,070.0 1,320.0 + 250.0 + 47.0 + 297.0 
Portugal 19.0 20.0 + 1.0 -35.8 -34.8 
United Kingdom 1,684.0 1,783.0 + 99.0 + 159.0 + 258.0 
------
TOTAL i 1,721.3 12,978.4 + 1,257.1 -2,887.4 -1,630.3 
Note 1: The mail services surplus figure for Belgium shows the result after receipt 
of central subsidy of ECU 321 million 
Source: Sofres study 
Another source of cross-subsidy within the organisation, m the case of some 
postal administrations, has been funding from profits made by the sister 
telecommunications administrations. (In most Member States, the 
telecommunication administration and the postal administration report to the 
same Ministry.) Such cross-subsidies are likely to end in the near future as 
page 124 Chapter 5: Economic and operational aspects 
governments increasingly wish to ensure that telecommunications 
administrations are operationally entirely distinct. 
Such cross-subsidies (from one service to another, from one operational 
function of the postal administration to another, or from the 
telecommunications administration to the postal administration) all ask the 
same fundamental question. To what extent do the providers of those services 
that contribute the cross-subsidies have a "mandate" to charge higher than 
necessary prices for the "giving" services in order to carry out the cross-subsidy? 
Such a mandate could be in the form of a formally stated or instructed political 
decision, or in the form of a clear commercial statement that such cross­
subsidies are being funded in this way. 
Where the services that made the contribution are provided in the competitive 
non-reserved area (as is the case with express services provided by postal 
administrations or their postal financial services), market forces will provide the 
checks needed; it is then an internal decision if the profits gained in the 
competitive market are used to fund losses in other areas. 
However, different questions are raised if the contributing services are in the 
reserved area -especially if the loss-making services to be cross-subsidised are 
in the non-reserved area ( a.s is the case of most printed paper services in 
existing national legislation). 
As discussed above at Paragraph 6.1, the perequation tarifaire involves 
geographic cross-subsidies. In that case, however, it is usually clearly stated that 
the reserved service protection is required in order to permit such a sharing of 
costs between profitable and unprofitable areas. Further, most customers have 
posting requirements in both sorts of areas. 
This is rather different from the case where a customer of one sort of service is 
paying a higher price than might otherwise be set in order to cross-subsidise the 
customer (either the sender or the recipient) of another service. 
7.2 CENTRAL FUNDING 
If, despite such cross-subsidies, the postal administration is still m loss, the 
other source of funds is the government. 
Chapter 5: Economic and operational aspects page 125 
In at least one case -that of Belgium -this funding is carried out on a 
commercial basis. The government instructs the postal administration to carry 
out certain "missions", which it knows are loss-making. The numbers of items 
that are carried in these streams are calculated each year, and a tariff applied. 
The government then pays the postal administration the amount thus 
calculated. In 1988, the Belgian government paid its postal administration ECU 
321 million in this way. 
Other administrations receive funding on a less transparent basis. It is assumed 
that they negotiate annually with their governments on the size of the central 
subsidy required. Presumably, the type of calculations made by the Belgian 
administration are also used in this discussion. 
By contrast, some administrations are net contributors to their governments. 
For example, the Danish administration in 1988 had to pay ECU 86 million to 
its government out of its revenues, this figure turning a profit of ECU 44.1 
million into a final loss of ECU 41.4 million. The British postal administration 
not only has to pay corporation tax on its profits, but also has to buy a 
proportion of government stock each year (the latter varying each year, and 
earning interest revenue for the postal administration). 
8. TERMINAL DUES 
Cross-border letter mail compnses letters posted in one country for delivery in 
another. When a customer posts such a letter, it is the "outward" administration that 
receives the revenue from the customer, while the "inward" administration does not. 
However, it is the inward administration that incurs the costs associated with the 
delivery of the item, and these costs may well comprise more than half the total cost of 
the whole operation (outward, transport and inward costs together). 
For a long time, the UPU members applied the principle that cross-border mail was in 
balance, making the assumption that the same volume and the same type of mail was 
going in both directions of any "exchange" between two postal administrations. 
However, it became clear that such a principle, which was probably never valid, was 
leading to significant under-compensation for some delivery administrations. 
ln 1969, the UPU therefore introduced a compensatory system called "terminal dues", 
which compensated the delivery administration on the basis of the total weight of the 
page 126 Chapter 5: Economic and operational aspects 
items to be delivered. These charges, which tended to favour less developed countries 
(which predominate in the UPU), were increased in real terms at successive 
conferences. 
The subject of terminal dues is rather complex. A fuller description is given at Annex 
8. Here, it is sufficient to note that any system based purely on weight will inevitably 
lead to differences between actual delivery costs incurred and the compensation 
payments made. Firstly, delivery costs are related more to the numbers of items 
delivered rather than their total weight. Secondly, the same compensation was paid 
regardless of the level of delivery service required. Thirdly, a single universal system 
ignores the reality that unit costs will vary -and mostly for reasons unrelated to 
efficiency. 
Figure 4 below indicates the disparity between a weight-based system and average 
costs. The weight based terminal dues line rises steeply from zero, whereas the 
average cost line shows the reality of a unit cost for each item handled with a gently 
rising cost increment as the weight increases. The effect is that at very light weights 
there is under-compensation, and at heavier weights there is over-compensation. 
These disparities have relevance to the phenomenon of remail (described in detail at 
Paragraph 9). At the risk of over-simplification, the under-compensation area creates 
cost conditions that encourage A-B-C remail, and the over-compensation that 
encourage A-B-B remail. 
The net effect was that many administrations incurred far more inward delivery costs 
than they received in terminal dues. (This is the case with the majority of Community 
administrations.) They had to fund these losses out of higher than normal profit 
margins on outward traffic. As long as administrations retained their outward traffic, 
the situation might have remained tolerable. 
However, the very inequity at the heart of the terminal dues system encouraged the 
rise of remail as a competitive force that started to erode the outward revenue of most 
postal administrations. 
It was, and is, inevitable that the terminal dues disparity should be addressed. In 1987, 
several CEPT administrations established a different system of terminal dues which 
included a charge per item (as well as a charge by weight that is lower than the UPU 
weight charge). It should therefore give a compensation closer to actual delivery 
costs. 
Chapter 5: Economic and operational aspects 
Figure 4: Tenninal dues: comparison of costs and compensation 
REMUNERATION 
UPU 
Under 
Compensation Over 
Compensation 
'-------------------------------
Source: CEC (using UPU data) WEIGHT page 127 
Many of the largest trading postal administrations are partners in this "CEPT" 
scheme. It now covers not only six of the largest EC countries (in terms of 
international mail), but also all the EFf A countries (with the exception of Austria), as 
well .as Australia, Canada and the US. 
It must be emphasised, however, that an organisation representing several private 
sector operators, the International Express Carriers Conference (IECC), has lodged a 
complaint at the European Commission that this arrangement is anti-competitive in 
that it sought to discourage remailing activities. An investigation has been carried out 
by the Commission under the Community's competition rules, and formal proceedings 
have been opened. 
page 128 Chapter 5: Economic and operational aspects 
The CEPT system, while closer to costs than the UPU system, is still based on an 
average across the administrations participating. This has the benefit of being easier 
to administer and provides some stimulus for the countries to improve the cost 
efficiency of their delivery systems. However, it does not recognise the significant cost 
and tariff differences that exist between administrations (even between European 
administrations). 
The postal administrations of the five Nordic Union countries (including Denmark) 
have implemented for mail flows between them a system which compensates the 
delivery administration on the basis of a percentage of the latter's actual delivery 
tariffs. Certain other administrations are investigating, in pairs, the practicality of 
using national tariffs as the basis for charging each other. 
In the meantime, the UPU has also addressed part of the problem of terminal dues. 
For most mail flows (unless otherwise agreed), there are now different charges for 
letters and for printed papers. This system is still based entirely on weight, and 
therefore very much reliant on the global average item weight in each stream (that is, 
in letters and also in printed papers). 
The UPU has also added another charging system for mail flows where the average 
weight is significantly different from the global average. This system is based on a 
charge per item and a charge by weight; however, it is not clear how this system could 
actually be applied in practice. 
It is thus clear that there is already considerable will to improve the terminal dues 
systems. It is recognised that some terminal dues system will continue to be necessary 
to provide compensatory arrangements between the 170 countries that are members 
of the UPU. Further, it would probably not be practical to charge on the basis of each 
item exchanged at the tariffs of the delivery administration. For compensatory 
purposes, some "bulking" will remain necessary. If, therefore, terminal dues are 
necessary, the optimum system or systems need to be sought. 
In this, the need to establish a terminal dues system that properly compensates the 
delivery administration will become yet more urgent. The different remail systems (as 
described below) have already shown up the weaknesses of the UPU system. Some of 
the likely effects of the Single Market on the profile of traffic (as discussed above at 
Chapter 4, Paragraph 9), by causing existing core domestic traffic to become cross­
border, will add to this exposure. 
Chapter 5: Economic and operational aspects page 129 
It may also prove necessary to implement a system that relates more closely to the 
domestic access conditions of each administration, in order to demonstrate that the 
entry conditions are equal for users, no matter how they wish to gain access to the 
reserved services of the delivery country (whether directly into the domestic system or 
indirectly through a cross-border system). 
9. REMAIL 
Remail is a cross-border mail service offered by private operators in competition with 
the services offered by the postal administration in the country of the customer. The 
remail operation usually involves the cooperation of a postal administration -either 
that of the country of delivery or that of a third country. 
Annex 9 lays out the history of remail. It shows how remail evolved partly as the 
result of an established market need (poor quality of service for printed papers from 
the United States) and partly as a result of exploitation of the weaknesses of the UPU 
terminal dues system. Like all services, remail is sold on the basis of a price/service 
combination. The weighting of these features partly depends on the type of remail 
service used. It is sometimes said that remail is a price-cutting service. While it is 
true that remail prices are often lower than those of the competing services offered by 
postal administrations, it is also the case that remail can offer better service or 
improved facilities. 
There are conventionally thought to be three types of remail. The original, and still 
the most important, is A-B-C remail. This involves a private operator collecting the 
international letter mail of large customers (in country A), freighting it to another 
country (country B) and posting it with the administration there for onward 
transmission to, and delivery in, a third country (country C). 
In the case of A-B-C remail, the price paid is based on terminal dues, as paid by 
administration B to the administration in country C. A second type of remail is based 
on the domestic tariffs of the delivery administration. In the case of this typ~ of 
remail (called A-B-B), the private operator collects the mail in country A, transports it 
to the delivery country (B) and posts it there with the delivery administration (B). 
A third type of remail involves mail being transported from country A to country B for 
remailing back to country A. If the mail is physically transported out of country A and 
it meets the reserved service criteria of that country, this remailing system (called A-
page 130 Chapter 5: Economic and operational aspects 
B-A) contravenes the monopoly of country A (as discussed above at Chapter 3, 
Paragraphs 5.1 and 6.3 ). However, there are different variations of this system of 
remail, for which the legal position is not so clear-cut. 
The present legal position of remail is discussed at Chapter 3, Paragraph 3.8. That 
discussion also refers to the position of mail which is generated in one Member State, 
is then remailed through the postal administration of a non-Community country for 
mailing back into the Community for delivery in a second Member State. (Such a 
practise might become more prevalent, depending on what decisions were taken on 
the terminal dues system that should operate within the Community -see Chapter 3, 
Paragraph 5.2.) 
All three types of remail systems are discussed in detail below. 
9.1 A-B-C REMAIL 
It is said that the main commercial attraction of A-B-C remail is the cost savings 
that can be offered to customers on the basis of exploitation of the inequities 
inherent in the terminal dues system. This statement is generally correct, but it 
needs to be qualified somewhat. 
9.1.l COSTS AND PRICES 
Firstly, in a direct comparison of costs between a postal administration and a 
private operator offering competitive remail services, the costs of the postal 
administration should, theoretically at least, be cheaper. 
The main variable cost is the terminal dues payment. Formerly, this was the 
same UPU charge for all -whether the administration in country A or the 
remailing administration in country B -but now it may be different. The freight 
charges should be higher for the private operator, because he has to freight into 
the remailing country, as well as paying the onward freighting costs of the 
remailing administration. 
The other main variable element -that of handling and sorting -again should 
favour the postal administrations, which ought to be able to exploit the 
(admittedly limited) returns to scale of the sorting operation. In addition, the 
remailing administration should logically be charging a margin on its services -
again which should be passed on to the remailers' customers. 
Chapter 5: &onomic and operational aspects page 131 
How, then, can remailers be cheaper? As indicated above, postal 
administrations have traditionally priced up their outward cross-border services 
in order to fund through cross-subsidy the losses that they make on inward 
cross-border services (the latter being the negative difference between terminal 
dues compensation and the actual costs of delivery). This loss can be important. 
For example, the average delivery cost of a 20 g letter for an EC administration 
is in the range of 0.25 to 0.28 ECUs. The UPU compensation is 0.18 ECUs 
(and, before 1991, it was only 0.06 ECUs). Examples of light-weight costs 
perhaps show the more extreme cases of such disparities. However, one 
administration calculated that its total inward loss was significantly more than 
10% of its total international revenue. 
These losses have to be funded. By comparison, neither the private operator, 
nor the remailing administration that the private operator uses, actually carries 
out any delivery. The delivery is delegated to the administration in country C, 
and is paid at a fixed rate through the terminal dues system. 
The second possible cause for remailing operations being cheaper is that 
remailing administrations sometimes offer prices which are below cost. This is 
either due to ignorance of actual costs (and, in particular, a lack of 
understanding of marginal costs) or due to a tariff policy that depresses prices. 
The latter refers particularly to printed paper prices. 
Most administrations have low-cross-border printed paper prices because of the 
political pressure from their domestic printing/publishing industry (and 
sometimes because of UPU recommendations). Often the prices are below 
cost. At least one EC administration offers printed paper reduced rates below 
the cost of terminal dues -before the addition even of other variable costs. 
Private operators can exploit these different prices. In effect, the different 
prices offered by all administrations become part of a "spot" market for the 
"commodity" of the postal distribution of printed papers. In this way, 
administrations, often unintentionally, can become remailing administrations 
(and may even be unaware that this is happening). 
page 132 Chapter 5: Economic and operational aspects 
9.1.2 SERVICE 
In general, it should be expected that A-B-C remail would produce slower 
transit times than those that the postal administration in country A should be 
able to provide. Most obviously, there is an extra freighting journey involved 
(between country A and country B). 
Secondly, for mail services carried by air, the direct flights available from 
country A would have evolved for commercial and historical reasons, and would 
normally be expected to align more closely with the mailing destinations of the 
customer rather than would the direct flights available from country B. 
However, it would be wrong to generalise about the relative quality of service of 
remailers. This varies depending on the number of remailing centres used, and 
on their proximity to final destinations. Thus, for example, mail from the US 
for European destinations, if remailed through Puerto Rico would receive a 
poor service, but if remailed through Amsterdam would probably receive a good 
service. 
This perspective of customers outside the Community wishing to have mail 
delivered across the Community is important: they may well prefer to 
concentrate their European distribution requirements in one location m 
Europe, rather than with one operator in North America which then transports 
separately to all the European destination countries. 
In all these instances, the main point of comparison is with the competing postal 
administration, and it should be remarked that some postal administrations are 
worse than others in terms of transit times (see Chapter 4, Paragraph 7.2 for 
comparisons between the EC's administrations). 
In general, if the postal administration is effective in its outward operation, it 
should be able to beat the transit times of the private operators. This is 
demonstrated by comparative tests undertaken by some large customers. 
However, where the postal administration has a relatively weak operation, the 
private operators may often be superior. This is indicated by the fact that 
private operators selling in certain countries can sell at prices higher than those 
of the competing administration, and can still maintain market share. 
Chapter 5: Economic and operational aspects page 133 
To add a general point that applies to the other remailing systems as well, 
service is more than simply transit times. It includes all other aspects that the 
customer perceives -such as the flexibility of collections, accounting procedures, 
credit availability, treatment of complaints, the effectiveness of sales account 
management, etc. (It could also include bolt-on features such as business reply 
service; a private operator has set up such a service that covers certain countries 
not covered by the postal administrations' own reply service.) 
In these other aspects, it is by no means clear that the postal administrations 
have an advantage. In some cases they may have a definite disadvantage. For 
example, some administrations do not offer credit, but remailing 
administrations often do: thus a customer may have access to credit only if he 
uses a private operator. Generally, however, there is no reason why postal 
administrations should not match the private operators among these aspects -
and some do. 
9.2 A-B-B REMAIL 
As described above, the cost motivation for A-B-C remail is the difference 
between delivery costs and terminal dues. For A-B-B remail, the cost 
motivation is the difference between domestic tariffs and terminal dues. The 
cost of terminal dues rises more steeply at each incremental weight step than 
most domestic letter tariffs. This encourages heavier cross-border mail 
collected by private operators to be posted domestically in the country of 
delivery. Similarly, the preferential rates offered for printed paper streams may 
make such items cheaper to post domestically. 
There is also an important service motivation behind the evolution of A-B-B 
remail. Any mail going through the conventional international letter mail 
system between postal administrations (including A-B-C remail) has to go 
through at least two "offices of exchange". These are special offices used by 
postal administrations to despatch or receive cross-border mail. In order to 
give returns to scale -including in the expertise on handling international mail -
each administration has only a small number of such offices, thus running the 
danger of bottle-necks. 
Private operators, by contrast, can. post A-B-B remail at any office they wish -
one that it is convenient to them and has good quality of service. If they choose, 
page 134 Chapter 5: Economic and operational aspects 
they can post the mail for one country at several different offices thus improving 
transit times further. They may also be able to accelerate such mail by 
transporting from the outward country to the inward using their own air services 
(if they already have these available for their express services). 
Some private operators, having freighted such cross-border mail into a country, 
may prefer to deliver some or all of it themselves. This delivery element is 
sometimes called "city-mailing" and was mentioned m Chapter 3, 
Paragraph 3.9.1. While such delivery systems may possibly be quicker (because 
they involve no transfer between operators) and cheaper (because they tend ~o 
deliver only in high density city centre areas), some of the letters so delivered 
almost certainly belong to the reserved area of the local postal administration. 
By delivering only in certain areas and posting the higher cost material with the 
postal administration, such a system is effectively "creaming-off' the more 
profitable traffic. What at the moment may only be a relatively minor irritant to 
postal administrations could become very important if domestic mail starts to 
become cross-border mail (as speculated at Chapter 4, Paragraph 9). 
Another derivative of A-B-B remailing is the concept of local posting which 
involves an operation carried out entirely within one country. Under this 
system, a private operator collects the mail from the customers and sorts by 
major town; the mail is then transported to these major towns and posted there 
for delivery in the local area by the postal administration. 
Underlying this system is the reality that the local quality of service tends to be 
very good, regional less good, and long distances less good still. However, for 
such a service to be competitive either on service grounds or on price (since it is 
likely to be more expensive than the conventional service offered by the postal 
administration), there would need to be a wide perception of poor quality of 
service on the part of the postal administration. Such systems operate widely in 
the United States, and there is anecdotal evidence that they are growing in Italy. 
9.3 A-B-A REMAIL 
As described above, "physical" A-B-A remail involves a mail item being taken 
out of a country, posted with the postal administration of a second country for 
posting back into (and delivery in) the first country. Assuming that such mail 
meets the criteria for being placed in the reserved area of the country of 
Chapter 5: &onomic and opera.tiona/ aspects page 135 
delivery, such a practice contravenes the exclusive rights of the reserved service 
provider. 
Such practices are particularly dangerous for high tariff administrations whose 
prices can easily be under-cut by competitive prices based on an averaged 
terminal dues system. Strangely enough, all private operators and all remailing 
postal administrations abhor the practice -and yet it continues to exist. 
However, there are other movements of mail about which there have been 
similar controversies, but which need to be viewed in a different way. It is not 
uncommon for publishers to centralise the printing of a European-wide 
magazine in one location, even if the publication is in different languages. If the 
material is then posted in the same country as the printer, it should be treated 
by the receiving administration as ordinary cross-border mail -even though it 
might otherwise have the appearance of domestic mail in the country of 
delivery. 
This phenomenon of centralised production which could turn domestic mail 
into cross-border mail is likely to increase as customers modify their location 
and buying strategies as a result of the Single Market. Thus, a bank might 
centralise its statement-producing operation in one location (rather than 
producing the statements in each different country served), and then post all the 
mail out of the one location. Similarly, an advertiser may wish to produce all its 
direct mail in one location, and post there. 
The fact that such mail might formerly have been domestic and therefore 
subject to domestic monopolies causes some people to contemplate whether 
such movements of mail thus caused should be considered an infraction of 
domestic monopolies unless the items concerned are posted in the country of 
delivery. Briefly, the question that should be put is as follows: should the single 
market in printing, electronic data and advertising adjust to possible 
interpretations of postal rules, or the converse? 
A different question is posed by the possible implications of the single market in 
distribution. An example here could be of an advertising agency that wishes to 
carry out a European-wide mailing, including for the country in which it itself is 
based. If the agency prints all the material locally and then contracts the 
distribution to a postal administration in another country, how should the 
page 136 Chapter 5: Economic and operational aspects 
material that was for delivery in the advertiser's own country be treated? Is 
such mail part of the postal administration's reserved area or not? 
IO. INVESTMENT AND TECHNOLOGY 
Investments are made in the reserved sector to improve service and/ or reduce costs. 
In the non-reserved sector, there is the added stimulus of trying to increase or 
maintain competitive advantage, and thus improve profits; here, investments may also 
be made to launch new services, to expand networks and to take over companies. 
Below are discussed the technological requirements of the different parts of the postal 
sector. The investment perspectives of postal administrations (particularly in regard 
to their role as reserved service providers) and of private operators are then discussed 
in turn. For the latter, some analysis of the market structure is also needed. 
IO.I TECHNOLOGY 
For all product segments -letters, parcels and express -the basic fact is that the 
collection and delivery phases, which together account for the largest part of 
operating costs, cannot easily be mechanised. All these services will therefore 
continue to have a substantial manual element. 
Beyond this reality, the essential technology requirements of the postal sector 
vary considerably between those of the express and parcel services on the one 
hand, and those of letter services on the other. 
The main technological investment made in the letters segment is that of 
automated sorting machinery. The results have been mixed, and it is clear that 
such technology is of very much secondary importance by comparison with the 
need for effective management. By comparison, for value-added services such 
as express, it already seems an essential prerequisite for success. For cross­
border letter mails, technological applications may play an important role in the 
future in helping to improve the present poor levels of service. 
10.J.1 EXPRESS/PARCEL REQUIREMENTS 
Express and parcel services tend to require more technological applications, 
partly because of their nature (the items being larger), but mostly because the 
service providers need to seek competitive advantages through different 
Chapter 5: Economic and operational aspects page 137 
facilities that are made possible through technology. (Express and parcels 
operate in non-reserved markets.) These include tracking and tracing, which 
may become the key determinant of success for the larger players over the 
medium term. 
10.1.2 LETTERS -REQUIREMENTS FOR NATIONAL SERVICE 
For ordinary domestic letter services, by contrast, the application of technology 
is far less necessary. Although the majority of postal administrations have 
invested in mechanised sorting technology, the letter operation will continue to 
be very labour intensive: personnel costs are 75% of total costs, while 
investment in mechanised plant accounts for less than 1 % of revenue. This 
reflects the reality that standard letter services will remain predominantly based 
on manual operations. More importantly, the results of such investment have 
been mixed in terms of cost reduction, and, particularly, in terms of trying to 
improve quality of service. 
There are several examples (the clearest being that of Italy) where heavy 
investment in such technology has not led to good quality; other examples (such 
as Ireland) demonstrate that it is possible to have high levels of service with no 
such investment at all. This seems to suggest that effective network 
management is the main guarantee of success. 
Further evidence is provided by the example of the United Kingdom, where the 
postal administration, having previously invested heavily in mechanised sorting 
equipment, has recently improved its quality substantially with hardly any extra 
investment in mechanisation. 
10.1.3 LETTERS -REQUIREMENTS FOR CROSS-BORDER SERVICE 
For cross-border letter mail, use of technology may be more appropriate m 
order to help ensure the effective inter-action of the networks of the two 
different service providers involved (usually the two postal administrations). 
Here, the important need is for diagnostic tools to identify what quality of 
service is achieved where. For this, technological applications similar to that of 
tracking and tracing systems used by express operators could help to provide the 
necessary network information. 
page 138 Chapter 5: Economic and operational aspects 
Unipost, a company subsidiary of the CEPT, has recently passed the first stage 
of approval under the European Nervous System (ENS) programme to initiate 
a pilot project providing an information network overseeing the movement of 
letter mails between five countries. The cost of the project is ECU 48 million, 
spread over two to three years. 
In summary, for ordinary domestic letters, there is no essential technological 
requirement (although many postal administrations may choose to try to exploit 
technological possibilities). 
10.1.4 FUTUREAPPL/CATIONS 
Investment is a cyclical process. In the non-reserved sector, companies which 
have not made the investment in new techniques may now do so in order not to 
be left behind. In the meantime, those companies who presently have a 
competitive advantage obtained through past investment will probably seek 
areas to gain new advantage from technology to be developed. 
In the reserved area providing the standard letter service, technological 
development is likely to progress more slowly. It appears that several 
administrations are in the "mature" phase of an investment cycle, where they 
have already invested in the ~utomated equipment that is presently available for 
processing letters. For the short/medium term, postal administrations may well 
find that the most effective investment is in selective applications of information 
technology to help modernise the management of the letter networks and thus 
improve quality of service. 
10.2 INVESTMENT -POSTAL ADMINISTRATIONS 
Whilst most reserved service providers are in deficit, they continue to make 
significant investments. This investment tends to fall into four categories: 
buildings, vehicles, information technology and mechanised plant. (The latter 
includes both automatic sorting machinery and mechanical handling 
equipment.) 
As stated, reserved service providers make investments for the commercial aims 
of reducing costs or improving service. For the former, commercial principles 
of assessing return on capital should still be used. In this regard, it should be 
remembered that costs (particularly labour costs) will vary significantly from 
Chapter 5: Economic and operational aspects page 139 
country to country. This variation should have an effect on investment 
decisions. 
Figure 5 shows the average investment carried out by the postal administrations 
in the years 1985-1988 (expressed as a percentage of turnover). The graph 
should be interpreted with some caution: it is quite possible to increase certain 
expenditure -for instance on staffing levels -to improve service, without 
appearing to make any investment. (The figures on which the graph is based 
are shown in Annex 11, Paragraph 4.) 
Figure 5: Investments made by postal administrations (1985 -1988) -
average investment as percentage of turnover 
115 .......................................................................... . 
10 ··········································································· 
0 
B DK D QR E F IRL L NL P UK USA 
Source: UPU 
It should be observed that there is no direct statistical link between, on the one 
hand, the relative investments made over the previous period indicated and, on 
the other hand, the quality of service given to customers. Two contrasting 
examples support this observation. Italy, one of the heaviest investors, has the 
page 140 Chapter 5: Economic and operational aspects 
worst quality of service, while Denmark, one of the lower investors, has the 
second highest quality of service in the Community. 
Similarly, there appears to be no link between quality of service and investment 
specifically in mechanised sorting offices (the figures for the latter being 
appended at Annex 2). It should also be mentioned that there appears to be no 
relationship between investment recorded and unit costs (even if variations in 
the cost of labour are excluded). 
Significant past investments have also been made in post-codes systems by all 
but one postal administration (the exception being Ireland). (Postal codes are 
discussed in more detail in Annex I 0.) The investment was and is in the form of 
post-code planning, public awareness campaigns and data-base up-dating. In 
most mechanised sorting systems, the post-codes system was necessary to 
enable the sorting to be carried out. However, the newer generation of 
machines that permit sorting by Optical Character Reading systems will be able 
to "read" whole addresses, and will use post-codes as a checking device only. 
Of course, investments in post-coding systems are still valuable, both for quality 
of service and for advertising purposes. It will therefore be necessary still to 
maintain existing systems. However, there does not seem to be a need to 
transform existing systems into an integrated European system. Against this, 
the implementation of more detailed systems in those countries which presently 
do not have them would enable the postal administrations there to offer greater 
facilities for pre-sorting by their customers. 
For the future, the key investment for all postal operators would seem to be in 
network management and in the appropriate systems that will facilitate it. 
10.3 PRIVATE OPERATOR INVESTMENTS AND OPPORTUNITIES 
The image of the non-reserved part of the postal sector is that it is dominated 
by a few large companies, all of which have parent companies based outside the 
Community. In fact, the greater part of the market is held by companies which 
are from within the Community. Further, some shareholdings in the large 
companies with non-Community parents have recently been sold to groupings 
which include substantial Community interests. Besides, the new techniques 
which the large operators have brought to the Community, and the significant 
Chapter 5: Economic and opero.tional aspects page 141 
investment which has enabled them to be introduced, all serve to benefit the 
Community. 
10.3.1 MARKETCOMPOSIT/ON 
While a few companies of non-European origin (such as DHL, Federal Express, 
TNT and UPS) are the well-known international players, the reality is that the 
larger part of the community parcels and express market is held by the smaller 
domestic operators who are almost all European in origin. In fact, the few 
companies named above, have a total market share of only 23% between them, 
much of this being generated by their cross-border services. 
10.3.2 NEW TECHNIQUES 
These larger companies have been effective in providing cross-border services 
by bringing the concept of the "integrator" to cross-border services in Europe -
that is the concept of a single operator providing end-to-end service himself 
without sub-contracting to another operator. They have introduced Europe­
wide air-based hub-and-spoke networks, which were originally pioneered by 
Federal Express in the United States. Tracking and tracing technology, first 
introduced by DHL and UPS separately, is now becoming more common in 
Europe. 
Customer service facilities based on computers were developed particularly by 
the airlines, but it was Federal Express that made the first successful wide­
spread application in the postal sector in the US, and is said to be 
contemplating a similar investment in Europe. It was also Federal Express that 
pioneered techniques which permitted express operators to offer integrated 
warehousing and distribution facilities. Together, these innovations have 
collectively benefited European business, particularly for cross-border trade. 
10.3.3 INVESTMENT TRENDS 
All the large companies have also made significant investments in their network 
infrastructures. For reasons of commercial confidentiality, the investment 
figures have not been released, but it is thought that only one of the four 
companies is presently making a return on its investment. Some of their 
investment is, however, obvious. For example, TNT has invested heavily in the 
page 142 Chapter 5: Economic and operational aspects 
purchase of a fleet of freight aircraft from British Aerospace. Tracking and 
tracing technology has also involved heavy expenditure. 
Heavy investments are also being made in central and eastern Europe in order 
to ensure comprehensive express networks across the whole continent. 
10.3.4 MARKET RESTRUCTURING 
There have been several take-overs, now leaving four key private operators in 
the cross-border express market (DHL, Federal Express, TNT and UPS) as well 
as the postal administrations (most of which share in the operations of a 
combined company, Unipost). 
To reduce the financial burden, some companies have been ~eeking outside 
investment. Thus, DHL (Europe) has sold 58% of its shares to two airlines 
(Lufthansa and Japan Air Lines). TNT Worldwide Express is in the process of 
being merged into a new joint venture which is 50% owned by 5 postal 
administrations, including those of France, Germany and the Netherlands. 
10.3.5 FUTURE DEVELOPMENTS 
Private operators, both large and small, are likely to encounter both 
opportunities and threats as a result of future market developments. The 
liberalisation of cross-border mail will give some new openings if private 
operators can offer services superior to those of the postal administrations. 
However, the incremental opportunities as a result of formal liberalisation may 
be few, since this market segment is already substantially liberalised de facto. 
Similarly, the liberalisation of direct mail is unlikely to lead to massive amounts 
of such mail being won by private operators. It is not clear that many private 
operators would want to make the investment in universal networks to make 
them directly competitive with postal administrations. Further, the private 
operators would be competing against prices which are usually significantly 
discounted because of content or volume and pre-sorting. (In the case of both 
cross-border mail and direct mail, satisfactory controls will need to be put in 
place to protect the letter mail that remained reserved.) 
Against these apparently limited opportunities, private operators may find the 
appeal of their express services gradually being eroded by the likely diminution 
Chapter 5: Economic and operational aspects page 143 
of the seivice differential between the performance of their products and that of 
the ordinary letter mail. This may happen in relation to both their domestic 
seivices and, perhaps particularly, their cross-border express services. In the 
case of the latter, the quality of ordinary letter services should improve 
considerably as a result of the measures proposed in the Green Paper. 
page 144 Chapter 5: Economic and operational aspects 
Chapter 6: Social aspects page 145 
CHAPTER 6: SOCIAL ASPECTS 
1. INTRODUCTION 
This chapter discusses the social aspects of the postal sector from two perspectives. 
Firstly, it will view the sector from the outside looking in -that is to say, taking the 
perspective of the customers. As discussed in Chapter 4, the "customers" can vary from 
large organisations with very big communication requirements to individuals sending 
single messages. While large organisations generate the greatest proportion of mail, 
here the perspective tends more towards the requirements of the individual customers or 
small enterprises. At the same time, it needs to he recognised that all customers (but 
particularly the larger customers) have needs that extend beyond the basic services. 
Secondly, to complement this external perspective, the discussion will turn to the social 
aspects from an internal perspective -that is, the employment aspects related to the 
postal operators and their employees. 
The function of postal operators is to provide service to their customers. The two 
perspectives should therefore meet together so that they become two ways of viewing the 
same situation. The changes in s~ciety (economic -including the effects of the Single 
Market -and social) influence the demands placed on postal operators, for example in 
terms of the proximity of access to customers, the quality of service or the ability of 
operators to provide "tailor-made" services. 
As these requirements change, operators must adapt to them. This in turn requires that 
their employees should also adapt to changes in demand. At the same time, social 
developments regarding working conditions in the Community will also affect how postal 
operators function. 
2. EXTERNAL CUSTOMER ASPECTS 
It is, of course, not possible comprehensively to describe customer needs and analyse 
how well presently available services meet those needs. However, two points are clear: 
firstly, customers require a universal postal service, and, secondly, they need a flexibility 
of approach on the part of the postal operators. This need for flexibility is likely to grow 
stronger in the future. 
page 146 Chapter 6: Social aspects 
2.1 PRESENT REQUIREMENTS 
As stated in Chapter 4, the basis for all national policies for the postal sector is the 
provision of universal service at an affordable price. Further, the universal service 
must provide a quality which customers r~ognise as satisfactory. 
Beyond the universal service, there is a demand for specialised services. A by no 
means exhaustive list would include such specialised services as deferred delivery 
services, deliveries on Saturdays for mail order companies, deliveries before 0730 
on week-days to businesses, special rates for bulk campaigns, targetted 
unaddressed mail campaigns, direct marketing diagnostic services (where the 
postal operator analyses the effectiveness of an advertising campaign on behalf of 
the direct mail user), database leasing, etc. 
2.2 PRESENT SERVICES 
Although it has been stated that the fundamental basis for postal policy is the 
requirement to achieve universal service at an affordable price, often not stated 
explicitly is what this universal service implies in terms of accessibility by or to 
customers -that is, how easily potential customers should be able to post material 
and how regularly delivery points ought to be accessed by the universal service 
operator. 
In this context, access should be interpreted widely. It therefore refers to the ease 
with which potential customers can find out about postal services. More 
particularly, it refers to the ability to buy the means of posting items (for most 
people, this meaning stamps) and then actually to post those items. 
Post offices (post office counters operated by the postal administration itself or on 
a sub-contract basis by self-employed operators) provide an important source of 
information concerning postal services. (Naturally, they need to be supplemented 
by telephone enquiry numbers and enquiry addresses, by which potential 
customers can seek information on services.) As well as selling stamps, these post 
offices also contain posting boxes for customers to post their mail items. In 
addition, there are posting boxes placed in streets or public places. (For larger 
customers·, mail is also collected from premises.) 
Some aspects of accessibility of postal services are summarised in Table 1 below. 
Chapter 6: Social aspects page 147 
Table 1: The postal ''presence" -postal administrations (1989) 
NUMBER OF AVERAGE POST 
POST POPULATION PER OFFICES 
MEMBER STATE OFFICES POST OFFICE PER 
(Note 1) 100 KM2 
Belgium 1850 5 330 6.07 
Denmark 1300 3 939 3.02 
Germany 17 500 3 489 7.04 
Greece 929 10 72B 0.70 
Spain 12 985 2 978 2.57 
France 17 ()()() 3 258 3.10 
Ireland 2 075 1 711 2.95 
Italy 14 353 3 987 4.76 
Luxembourg 106 3 472 4.08 
Netherlands 2624 5 550 6.28 
Port4gal 1 050 9 881 1.14 
United Kingdom 21 ()()() 2 704 8.60 
EC average 92 772 3 484 4.10 
Note 1 The numbers of post offices shown for Ireland and the United Kingdom include sub­
contracted post offices. It is thought that other countries also have similar sub-contracted 
offices. If they were excluded from the figures shown for Ireland and the United Kingdom, 
the number of offices would be, respectively, 124 and 1 500. 
Source: Sofres study 
Accessibility, however, does not refer only to the universal service. It also refers to 
the need to have as wide a variety of services as necessary. Accessibility is 
therefore also important for non-mandatory services (where there is no obligation 
to provide a universal service placed on any operator). 
Such services can be provided either by postal administrations or by private 
operators. It is understood that the geographic spread of these services will 
depend on the profitability of the different areas, with scarcer provision in less 
populated areas. It is also evident that some customers will be more profitable 
than others irrespective of where they are located. (However, this type of 
customer is usually concentrated in the business centres of the larger towns and 
cities.) 
2.3 NEW CUSTOMER REQUIREMENTS 
When considering future customer requirements, an affordable universal service 
of sufficient quality will remain the basis. Beyond that, it should be frankly 
page 148 Chapter 6: Social aspects 
admitted that customer requirements are not known in detail. It therefore seems 
to follow that the postal domain should have the maximum possible freedom of 
choice (consistent with the maintenance of universal service) to enable service 
providers to meet the new needs of customers as they develop. 
Over the medium and longer term, customers expect services to improve in quality 
and reduce in price (at least in real terms) or to maintain the price level. Their 
expectation of "normal" service will itself become more demanding over time. 
Customers expect to be treated more on an individual basis. The larger the 
customers, the more likely that they will expect services to be "tailored" to their 
needs. 
Customers want to know what they are buying in terms of quality of the service 
not only in the meaning of speed and reliability but also in terms of regularity. 
They also expect the suppliers of services to be easily accessible. (By this is meant 
not the regulatory aspects of access, but rather the facility for customers to find 
out what services best fit their needs and then for the supplier to be responsive 
after the service has been bought.) Customers expect an increasing variety of 
choice, and anticipate regular innovation in the market place to improve service 
and widen choice. 
The changing shape of society will lead to changes in communication patterns. As 
an example, perhaps the newer generations will be less ready to write letters, but 
more willing to experiment with technological forms of communication. Perhaps 
the increasing proportion of the elderly within the population may increase the 
demand for direct mail, life assurance and other financial services, and buying by 
mail. 
Demographic changes may also affect the postal operation. In most countries the 
movement from rural areas to towns has been halted, and in some countries is 
now being reversed. 
General economic trends will affect demand for postal products. However, the 
sub-trends in different market sectors may be more significant. For example, if 
the mail order sector were to grow faster than the economic average, this would 
probably have a particular effect on postal growth. 
Chapter 6: Social aspects page 149 
2.4 COMMUNITY DIMENSION 
2.4.l COMMUN/IT SOCIAL RE,QUJRE,MENTS 
A universal service of a sufficient quality and at an affordable price must be 
achieved. If this is a Community objective (and it seems clear that it should he), it 
must be achieved throughout the Community. At the same time, the means used 
to achieve this objective must leave the greatest possible flexibility for the 
provision of whatever specialised services the market may demand. 
The Community will therefore need to define what universal service it requires. 
This definition will need to comprehend the different service aspects that are 
relevant, in particular the quality required. The Community will also need to state 
how this will be achieved, and what area will remain for the provision of the more 
specialised services. 
2.4.2 COHESION 
As the discussion above concludes, universal service has little meaning without 
proper access throughout the territory. Similarly, universal service becomes a 
shadow phrase if its provision does not imply some threshold quality of service 
standards to be applied throughout the Community. Thus, a delivery once a week 
to a post office box collection point 10 kilometres away of items which have taken 
one week to arrive does not meet the standards for universal service that the 
Community would seem to require. 
The Community therefore needs to ensure that all regions are sufficiently served 
by a universal service network. While it is operationally inevitable that the quality 
of service in rural areas will be less than in urban areas, it is important to ensure 
that the rural areas -or even whole regions -do not suffer unduly poor quality. If 
they did, this could have the effect of marginalising them. As noted elsewhere, 
good postal services are essential for commercial effectiveness: without them, 
economic growth in some regions of the Community could be held back. 
Chapter 4 investigateu the quality of service in the different Member States (see, 
for example, Tables 12-14 of that chapter). It should be remembered, however, 
that these results are national averages. There are variations in service 
performance between different areas in the same country, and some of these 
page 150 Chapter 6: Social aspects 
variations could be significant. This implies that the quality of setvice in the less 
performing areas of the less performing Member States could be extremely poor. 
How should this be overcome? The most feasible option appears to be 
organisational improvement on the part of the setvice provider, stimulated by the 
threat of regulatory action if the setvice does not improve. It is also just possible 
that the setvice provider responsible for the regions disadvantaged by severely 
poor postal setvices does not have the resources -in terms either of management 
or finance -to make the improvements necessary. 
It is therefore appropriate that an assessment of the particular problems faced by 
less performing areas should be made. The result obtained could be an additional 
stimulus for the postal administrations responsible for setving such areas to do 
their utmost to align themselves with the average setvice performance in the 
Community, thus improving cohesion within the Community. 
3. EMPLOYMENT 
The postal sector is labour intensive. It is possible, depending on return on capital, for 
some phases -particularly inside sorting centres -to be mechanised. However, even 
when mechanised, these phases still demand a significant labour input. 
Other phases can hardly be mechanised. These are the phases that the customer sees -
the collections and deliveries. Together accounting for probably about 75% of total 
operational costs of all operators, these two phases are particularly labour intensive. As 
indicated in Chapter 5, these costs tend not to adjust easily to different volumes. 
3.1 PRESENT CONDITIONS 
The postal sector is one of the largest employers in the Community. Table 2 
shows employment by Member State for postal administrations. 
Chapter 6: Social aspects page 151 
Table 2: Postal administration employment ( 1988) 
MAIL POSTAL 
SERVICES FINANCIAL TOTAL 
MEMBER STATE SERVICES 
(thousands) (thousands) (thousands) 
Belgium 45.2 3.5 48.6 
Denmark 27.6 2.2 29.8 
Germany 313.8 27.0 340.8 
Greece 10.2 1.3 11.5 
Spain 63.5 4.2 67.7 
France 269.8 29.5 299.3 
Ireland 9.7 1.2 10.9 
Italy 208.2 25.4 233.6 
Luxembourg 1.5 0.1 1.6 
Netherlands 58.9 10.5 69.4 
Portugal 14.5 1.8 16.3 
United Kingdom 184.8 45.5 230.3 
-· 
EC TOTAL 1 207.7 152.2 1 359.9 
Source: Sofres study 
Private postal operators are also substantial employers in the Community. They 
employ some 350,000 staff in their Community operations. The majority of these 
are employed by the smaller express and parcel operators operating within 
national territories. Some 87,000 are employed within the Community by the 
four largest operators (DHL, Federal Express, TNT and UPS), many being 
employed on cross-border operations. 
Total employment in the postal sector represents about 1 % of the Community's 
work-force. Of postal administrations' total costs, approximately 70% are labour 
costs. For private operators, the percentage is somewhat less, but still very 
significant. 
In the case of both public and private operators, employees are becoming more 
productive as volumes increase. (For example, total postal administration 
staffing stayed almost exactly the same in the four years to 1989, while volumes 
increased by some 13% on average.) At the same time, increasing flexibility has 
led to operations that are more well adapted to customer demands. 
page 152 Chapter 6: Social aspects 
However, there seem some significant differences in terms of general conditions 
of employment. For postal administrations, the emphasis until now has tended 
to be placed on what have traditionally been considered the social advantages of 
public sector jobs -aspects such as full-time employment, with protection of jobs. 
Pay levels tend to be above the industry average. Private operators, by 
comparison, tend to rely on a higher proportion of part-time staff. They also 
tend to expect a high turnover of staff. 
These employer attitudes either respond to or cause the different attitudes to 
skill levels within the job. Generally, postal administrations build higher skill 
contents into jobs, and expect a greater degree of employee commitment. 
Private operators, while some of their jobs are highly technically based, tend to 
rely heavily on unskilled, but reliable, staff who can be trained quickly. 
Private operators tend to think that postal administration employees are over­
protected. Postal administrations (and, indeed, the trade unions representing 
their employees), conversely, tend to consider that, for the most part, private 
operators function at close to the lowest level of protection for employees (in 
terms of general conditions, pensions, sick benefits, career structures, etc). 
To some extent, the employment policies of each are reacting to their different 
circumstances. However, the preferred future trend may be for each to move 
closer towards each other (while still maintaining different policies as necessary). 
3.2 EMPLOYMENT DEMAND 
The experience of the recent past has been that volume growth in the sector, even 
allowing for increases in productivity, has led to an increase in overall employment 
in the sector. 
It is not a simple task to predict likely future employment trends in the sector. 
The volume trends are generally upwards. At the same time, regardless of any 
developments at the community level, each postal operator is likely to be seeking 
productivity improvements. Thus, against a long-term growth trend of 6% 
compound increases per year in volume, employment might be expect to increase 
by perhaps 2-3% per year (the difference being the increased productivity). 
Within this overall picture of a stable or rising employment, there are likely to be 
gradual changes in the proportions of staff employed by public and private 
Chapter 6: Social aspects page 153 
operators. Part of the environment that will cause such movements is the on-going 
liberalisation of the sector, brought about partly by regulatory decisions and partly 
by the faster growth of the non-reserved sector. 
Regulatory decisions to implement liberalisation measures do not reach their 
maximum effect immediately. Postal administrations would therefore have time 
to make any necessary adjustments as a result of such measures. In this regard, it 
may be informative to draw on the example of the British postal administration 
which probably has a longer experience of competition than most other 
administrations. Despite facing increasing competition during the last five years 
as a result of deregulation, staff numbers actually increased by 10% during this 
period while productivity grew by 15% per employee. The Spanish postal 
administration has had to react to much more radical liberalisation (where local 
postal deliveries were made non-reserved), but still maintains a universal service. 
For private operators, it would be necessary to establish new networks (or extend 
their existing networks) in order to take advantage of liberalisation measures. 
Initially, at least, these networks would not have the same economies of scale of 
the postal administrations' networks. The result would be that they would 
probably actually increase employment in the sector. (This would happen even if, 
against predictions, total volume did not increase.) 
However, although total employment in the sector overall, and amongst postal 
administrations in particular, is likely to remain stable, there will be certain 
difficulties caused by the evolution of the sector. Naturally, certain new skills will 
become needed, while some other traditional skills will become less necessary. 
Since employers would presumably prefer to retain existing staff to undertake the 
new tasks, there will be a particular emphasis placed on effective training. 
3.3 TRENDS IN PERSONNEL POLICIES AND WORKING CONDITIONS 
Demography 
Many countries are experiencing zero population growth, with the elderly making 
up· an increasing proportion of the population, and the young a decreasing 
proportion. This is particularly significant for the postal operators who 
traditionally recruit large numbers of young unskilled or semi-skilled staff. In 
several Member States this has not been very difficult because of relatively high 
unemployment levels, the EC average unemployment rate being 9.5% in 1990. 
page 154 Chapter 6: Social aspects 
Competition for labour 
However, for the future, postal administrations will find that competition from 
their traditional rivals for this supply of labour will become more intense. They 
will also find that other companies (particularly office-based employers) will start 
to recruit heavily from this part of the labour market, and to train their recruits 
(whereas in the past they may have tended ·to recruit staff who had been partially 
trained before). 
The potential effects for postal operators could be significant. Indeed, it is 
possible to envisage the provision of the universal service -which has been stated 
to be the main plank of the Community's postal policy -being threatened in 
certain regions if no solution could be found. 
Effects on costs 
The most obvious way for an employer to improve his attractiveness to a shrinking 
labour supply is to increase pay. However, with labour costs being a significant 
proportion of total costs, this could be very difficult for postal operators to do. 
Operators would not want to increase prices in real terms for fear of discouraging 
volume growth and going into a downward spiral. 
It is not clear how much scope postal operators have for making themselves more 
capital-intensive (and less labour-intensive). Assuming that there is an adequate 
return on capital or that quality would be improved, they may invest heavily in new 
equipment. However, as noted already, the mostly costly phases -collection and 
delivery -will continue to be labour intensive. Because of operational necessity, 
the postal sector will remain comparatively less capital intensive than many other 
service industries. 
Changing emphases 
These labour supply problems will also emphasise the importance of retaining 
staff. Again, pay will be important. But so will other factors -such as training, job 
enrichment, career planning and internal communication. 
Total employment demand appears, at the least, to be stable. However, there may 
be some ~hifts within that overall picture. Firstly, skill factors are likely to 
increase. Secondly, some jobs could be switched from postal administrations to 
Chapter 6: Social aspects page 155 
customers/partners (such as consolidators involved in mail preparation). In other 
cases, jobs may be reduced in the mail rooms of customers of the postal operators, 
as the latter take over certain tasks previously carried out by customers. Thirdly, 
all operators want to ensure optimum use of all their resources to maximise 
efficiency. 
Employment amongst private operators such as courier companies and parcel 
carriers is likely to increase, perhaps partially at the expense of employment in 
postal administrations. But, as in the past, many of the private operators' new jobs 
will create additional employment in the sector. These new employment 
opportunities will result specially from finding new market niches to be served. 
Postal operators: the context of the economy 
It could be instructive to draw a comparison between an administration in a 
Member State with a relatively high GDP per capita and heavy mail usage and 
another Member State less favoured in these respects. For purely illustrative 
purposes, the table below compares some key statistics for Greece and the 
Netherlands. 
Table 3: Illustrative comparison between two postal administrations 
PARAMETERS . UNITS GREECE NETIIERLA.NDS 
Ext em al economic factors 
GDP per capita EC index 38 100 
Mail usage per capita Items 47 409 
Employee statistics 
Revenue per employee ECU 8 722 29 202 
Mail per employee Items 40.5 100.7 
Postal administration networks 
Sorting offices mechanised % 0% 100% 
Post offices automated % 0% 99% 
Source: CEC analysis 
The link between investment and quality of service improvement is not proven by 
past experience (see Chapter 5, Paragraph 10). However, capital investment will 
usually give more flexibility to the organisation making the investment. This 
flexibility will be quantitative, in that it will be easier to respond to increased 
volumes. It would also be qualitative, since it would be easier to offer different 
page 156 Chapter 6: Social aspects 
facilities to customers. These facilities might include the availability of discounts 
for OCR-readable mail; the possibility of reporting to customers on the progress 
of his mail (through tracing and tracing technology); or the ability to offer 
enveloping and other "mail-room" services. 
Naturally, service industries will reflect the surrounding economic situation. 
However, it should be recognised, particularly in the case of public service 
industries, that their health can affect the external economic environment. Large 
economies tend to help create healthy service industries; healthy service industries 
will help to provide the efficiency needed to enable the overall economy to grow. 
If an economy has service requirements that are not met, it will tend to look for 
alternative outlets. Thus, to take examples from the postal sector, customers in 
the US and in Italy evidently do not find their national public postal services very 
satisfactory; this has contributed to the rapid growth of providers of alternative 
postal services (as well as providers of services in indirect competition). 
These apparently external aspects have important effects on employees, whether 
of public or private operators. It demands an adaptability and a willingness to 
train into new skills. Greater mechanisation will also change the environment in 
which postal employees work. 
Cost/Quality balance 
Naturally, one of the important requirements for all postal operators is to drive 
down costs as much as possible, while maintaining quality. One aspect which will 
need particular study is the proportion of management and administrative staff 
needed. 
In their efforts to make real cost savings, postal administrations may not find it so 
appropriate to make economies in total operational expenditure (since traffic is 
forecast to continue to grow). Instead, they may find it more practical to examine 
administrative expenditure. Table 4 shows the variations between the different 
postal administrations concerning the proportions of operational and other staff. 
Chapter 6: Social aspects 
Table 4: Postal administrations: mails employment proportions 
MEMBER STATE 
Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom POSTMEN 
% 
60.8 
41.7 
59.3 
65.6 
72.2 
54.5 
42.0 
66.6 
80.4 
81.0 
60.1 
79.8 ADMINISTRATIVE 
STAFF 
% 
28.5 
40.9 
30.0 
28.3 
26.3 
41.5 
31.4 
30.0 
9.5 
17.2 
36.3 
11.2 
~--------+----------+---- --~~ 
EC average 64.3 28.9 page 157 
l\1.ANAGERS 
% 
-------~ 
10.7 
17.4 
10.7 
6.1 
1.5 
4.0 
26.6 
3.4 
10.1 
1.2 
3.6 I 
6.8 9.0 . J 
~----------'----------
Source: Sofres study 
It seems clear from the table that there are different criteria being used to define 
the administrative staff. However, it needs to be emphasised that quality and 
productivity involve all staff from the chief executive to the person delivering the 
mail (and certainly all manag~rial and administrative staff in between). Everybody 
employed has to add value to the process. 
Technical change 
One of the dominant forces driving organisational change in both postal 
administrations and private organisations in the last decade has been technical 
change. This has permitted different or modified services to be offered; at the 
same time, it has placed greater emphasis on the skill of the operators' staff. 
This trend towards greater skill content is partly in response to customer needs -
for services based on improving productivity or with value-adding components. 
Specific examples could include the computer-based jobs increasingly to be found 
in post office counters, or the operation of tracking and tracing systems. 
In a broader sense, there will be a need for staff to have the appropriate marketing 
skills, and for counters staff to be fully conversant with the wider (and probably 
more complex) range of services that will be offered to meet new customer needs. 
page 158 Chapter 6: Social aspects 
In the future, the need for greater skill content may also be in response to a 
strategic need for operators to become more flexible. This need for flexibility may 
well encourage operators to become more capital-intensive (within the practical 
limits imposed by the operation). 
3.4 TRAINING 
Several of the trends noted above -particularly for the need for more or new 
marketing and technical skills -will give an even greater emphasis to training. 
This is likely to take several forms: 
Training for customer orientation 
The past years have seen significant changes in the postal sector. The future, with 
more indirect competition (for instance from telecommunications) is likely to see 
a quickening in the pace of change. Customer expectations will change rapidly, 
and they will demand quicker responses to their needs as they develop. 
This will necessitate all staff being flexible in their approach in. order to be truly 
customer oriented. Such flexibility does not come easily. Staff education 
combined with effective internal communication will be essential. 
Training for new machinery 
It is clear that postal operations will become technically more complicated. Not 
only will training on new machinery be particularly important, but also training to 
make more efficient use of staff through modem working methods. 
Training for new services 
The success of new services depends on the skills of the staff who operate them. 
Postal electronic mail provides one example that shows how new services will 
demand skills quite removed from traditional postal skills. 
Management development 
There is likely to be an increased emphasis on management development, 
particularly within specialisms (for example, operations, finance, marketing or 
personnel). Perhaps the most important managerial skill will be the ability to 
·manage change. 
Chapter 6: Social aspects page 159 
4. THE CHALLENGE 
In summary, the Community needs to ensure a sufficient service throughout -in all its 
regions. Beyond that, there ought to be the maximum freedom of action to enable 
customers' detailed requirements -whatever they may be -to be met. 
This has implications for all those involved in the provision of services in the postal 
sector: regulators, operators and their staff, and the Community. While the Green 
Paper will not present specific options concerning the employment aspects, the 
Commission has launched a consultative committee, the Comite Paritaire, which will 
enable the views of both employer and employee representatives to be made known on 
the possible implications of the Community's policy for its postal sector (as the policy 
develops). 
For the customer aspects, the social needs of their market requirements raise regulatory 
issues: what universal service is required and how should it be guaranteed while at the 
same time ensuring the greatest flexibility possible, according to the social needs and 
market requirements? There is also the specific issue of Community cohesion to be 
studied; this would need to embrace the possible need to invest Community funds to 
improve services in regions presently disadvantaged by poor postal services. 
page 160 Chapter 6: Social aspects 
Chapter 7: Existing situation: the problems and the challenges page 161 
CHAPTER 7: EXISTING SITUATION: 
THE PROBLEMS AND THE CHALLENGES 
1. INTRODUCTION 
This chapter seeks first to summarise what are the problems inherent in the existing 
situation. For this, it adopts different perspectives: in order, that of the customer, then 
that of the operator, and then that of the national regulator. In identifying problems to 
be addressed, the analysis will tend to concentrate on divergences between Member 
States. Throughout, however, it should be borne in mind that there are certain common 
points which already lend coherence to the Community's postal sector. Chief among 
these is the policy agreed by all Member States that throughout the Community there 
should be a universal service at prices affordable to all and with a sufficient quality. (At 
the same time, as the analysis below will reveal, the way in which this policy is presently 
implemented does vary considerably.) 
The effects of 1992 and the coming of the Single Market are then overlaid on the 
analysis. The "status quo" option is then studied by asking what would be the result if 
nothing was done to change the existing situation. To conclude, the whole is then viewed 
from the Community's perspective. 
Possible solutions to the different problems will be discussed in the next chapter, 
together with the implications of the likely environment in which the postal sector will be 
operating. 
2. THE CUSTOMER'S PERSPECTIVE 
To gain the clearest view of the problems that customers may encounter as a result of 
the existing situation, it is best to adopt the perspective of a mailer who wishes to post 
mail with destinations spread throughout the countries of the Community. 
Such a perspective enables a comparison to be made between the services available in 
the different Member States. (The intention here is more to compare domestic services; 
cross-border services are becoming increasingly important, but presently account for only 
about 10% of the sector's turnover.) 
page 162 Chapter 7: Existing situation: the problems and the challenges 
2.1 DEFINITIONS 
The definitions of postal items vary -there is no Community definition of a 
standard "letter". 
Some Member States divide their mail on the basis of letters and printed papers, 
others on the basis of first and second class. (In both cases in addition to parcels 
and express.) 
In most Member States the limits are defined using the criterion of weight, in 
others the criterion of value, and others both. The actual application of each 
criterion can vary: the application of the weight criterion varies between 500 g and 
2 kg. 
In all countries, if the customer was sending a parcel (a goods-bearing item), he 
would have the choice permitted by the market in the non-reserved sector. 
However, the maximum weight of parcel that he could send to all addresses would 
agam vary. 
In all Member States this choice of how to send a parcel includes that of sending it 
as a letter packet (subject to the maximum weight permitted in the letter service). 
Thus an item which is in the non-reserved area may be sent by a service that is 
reserved. 
As for using express services, the customer would find that in three Member States 
these are the monopoly of the postal administration. In six others, where there is 
no clear definition of the threshold for non-reser-Yed services, it might not be clear 
whether a particular item was inside or outside the monopoly. 
No specific regulatory position has been taken by Member States concerning new 
services in the postal sector. A special approach may be needed in the case of 
hybrid services such as postal electronic mail. 
2.2 ACCESS 
Access conditions for potential users of postal services are on two levels. On the 
regulatory· level, they relate to the postal law of the Member State concerned. 
There is also an operational level on which the postal administration controls the 
posting conditions under which a customer may post his mail. 
Chapter 7: Existing situation: the problems and the challenges page 163 
2.2.1 REGULATORY 
There are variations between Member States as to whether private operators may 
act as intermediaries between him and the postal administrations. 
As for his cross-border (intra-Community or international) mail, almost all 
Member States state that this is part of the postal administration's reserved area, 
although most regulatory bodies and/or postal administrations have chosen not to 
enforce, or not been effective in enforcing, this stated monopoly. 
All Member States have universal service. There are some differences m the 
availability of mail facilitating services such as the sale of stamps. Collection 
facilities vary in terms of the density of posting boxes and the number of 
collections. There is less divergence in delivery facilities; all postal administrations 
in the Community deliver either five or six days per week, while some also deliver 
more than once per day at least in some areas. 
2.2.2 POSTING CONDITIONS 
The customer is likely to be confused on occasion by the diversity of posting rules 
applied. The rules concerning printed papers can be particularly diverse for 
example concerning the qualifications for treatment as a newspaper (and 
therefore for preferential postal tariffs). 
Different posting conditions can act (intentionally or otherwise) as a restriction on 
entry to the postal system. In the customer's perspective, such restrictions are 
relative: if a postal administration gives fewer facilities than another, it will seem 
restrictive by comparison. This can distort the market, and cause some mailers to 
post into (or via) some countries but not others. 
2.3 SERVICE 
Customers, of course, are seeking some combination of quality of service, price 
and range of service. In reserved services there are presently wide variations. 
2.3.1 PERFORMANCE 
The service which the customer receives varies between postal administrations. 
One administration registers 99% ~ervice performance inland, another 15%. For 
page 164 Chapter 7: Existing situation: the problems and the challenges 
cross-border mail no official figures are available (although administrations do 
measure service for internal operational purposes). 
2.3.2 MEASUREMENT SYSTEMS 
The customer presently finds that almost all postal administrations have stated 
(but not enforceable) targets for national (domestic) mail, but not for intra­
Community or international mail. The targets for inland letter mail relate to 
speed of transport, but not to any other aspects of quality. 
Of the different service performance measurement schemes in use, the end-to-end 
measurement scheme is the most relevant because it relates to the customer's 
actual experience. End-to-end studies have tended to show significant over­
estimation of actual performance by the other schemes employed by postal 
administrations. Customers may have more confidence in measurement schemes 
carried out independently. 
2.4 TARIFFS 
The customer will see that basic tariffs for a 20g inland letter vary from ECU 0.15 
to ECU 0.50. It is possible that he may not find this surprising because the lower 
tariffs tend to be in those countries where the cost of living is lower. 
However, he may find more difficult to understand the variations in prices beyond 
those of the basic tariff. In particular, the different preferential tariffs that are 
available increase the price differences in some cases, but in other cases 
unexpectedly reduce them (so that a country with a high cost of living becomes 
cheaper than a traditionally lower cost country). 
2.5 CUSTOMER SATISFACTION 
From the diversity described above, it will be clear that the customer wishing to 
reach addresses in all countries of the Community is unlikely to find the existing 
situation very satisfactory. However, it does not follow that all customers 
everywhere are unhappy with the quality of their postal service. 
The level of satisfaction will depend on how customers define quality of service 
and how effective the postal operator( s ), in the public and/ or the private sector, 
is/are in achieving the desired level of quality. This level of satisfaction is likely to 
Chapter 7: Existing situation: the problems and the challenges page 165 
vary depending on the location of the customer. It will also depend on the efforts 
the postal administration makes to provide guidance on the use of its services. 
Naturally, the use that potential customers make of the postal services available 
will depend on how effectively the customer thinks his needs will be met by those 
services. In short, experience of a service gives a certain expectation of likely 
service which itself will dictate usage. These experiences and expectations will 
vary between Member States and, indeed, between regions of the Community. 
A customer residing in a Member State where the postal administration provides 
99% reliability of service (see Paragraph 2.3.1 above) may well entrust an 
important business letter to the ordinary postal services; one living in the Member 
State with only 15% reliability would be much less likely to do so. 
Thus different expectations will lead to different usage patterns, and therefore to 
different perceptions of what postal services should be used for. In addition, 
competition (particularly indirect competition) may also change perceptions. 
2.5.1 CROSS-BORDER SERVICES 
It is likely that a customer having cross-border requirements would not find very 
satisfactory the services attempting to respond to these needs. 
This would be partly because of the complexity of dealing with several 
administrations -should the customer chose to do so in order to achieve delivery 
in different Member States served by those administrations. It would also be 
partly because of the indifferent quality of service for such mail (the latter being 
detrimental to the idea of the common market). 
2.5.2 ATTITUDES TO COMPETITION 
If a customer feels that his reasonable service expectations are consistently not 
being met, he may prefer to see increased competition, or the introduction of 
competition. Against this, he would be unlikely to be willing that anything be done 
that might jeopardise the universal service. 
Customers in most regions of the Community have access to express services 
(provided in most Member States on the basis of free competition). They may 
wish to use such a service when seeking a special service need above that which 
could be met by an effective standard service. 
page 166 Chapter 7: Existing situation: the problems and the challenges 
However, elsewhere, they may turn to such services when the standard letter 
service is simply not good enough to satisfy basic postal needs. In such cases, the 
express operators are likely to be able to charge higher prices because of the lack 
of competition from the standard letter services. 
2.5.3 MOBILITY OF CUSTOMER EXPECTATIONS 
Customer expectations tend always to move upwards. They are also likely to 
become increasingly individualised in nature. In general, such "mobile" 
expectations would probably be met better where the maximum competition was 
permitted (consistent with safeguarding the universal service). That this may not 
presently be the case may well be a source of some frustration for several 
customers. 
3. THE OPERATOR'S PERSPECTIVE 
The commentary below concentrates on the pos1t10n of postal administrations as 
reserved service providers in the face of the problems which they now need to address. 
3.1 JURIDICAL 
It is not clear that it is the Member State, rather than the postal administration, 
that makes agreements in the framework of the UPU, even when they have the 
force of law. 
It should be noted that decisions of the UPU (and perhaps even the 
recommendations of the CEPT) can potentially be in conflict with the Treaty of 
Rome. 
3.2 ACCESS 
There should be no great problem in carrying out some simplifications and 
modifications in order to make access conditions -at least for standard services -
more uniform across the Community. However, more far-reaching attempts at 
harmonisation might well meet resistance from both administrations and 
consumers unless there were clear consumer and operational benefits. 
Examples could include attempts to implement a norm of all the Community's 
postal administrations having either an LC/ AO split or a first class/second class 
Chapter 7: F.xisting situation: the problems and the challenges page 167 
split -rather than some having the former and the others having the latter. A 
further example might be a wish to introduce obligatory standard letter 
dimensions with standard weight steps. 
Another area requiring a consistent policy is that of private operators entering the 
reserved service network as users. Some administrations try to discourage such 
access while other administrations treat them as large customers (like domestic 
"consolidators"). 
3.3 QUALITY OF SERVICE 
However they define quality of service, all customers consider it as being the most 
important characteristic of the service. Presently, the service they receive from 
universal service providers is variable, and some of the performance results 
published are not considered by all customers to be reliable. 
3.3.l PERFORMANCE 
The official figures of some administrations show that they are achieving the 
targets that they have set themselves for inland quality of service (although some 
of these administrations are considering changing to the more exacting end-to-end 
measuring system). Other administrations show themselves to be falling short of 
their targets by a greater or lesser extent. 
The problem of improving service performance is made more difficult by the need 
to control costs. All postal administrations experience regular tensions between 
the pressure to control costs and the requirement to improve service. 
Enhancing quality of service can be more difficult in services where the operator 
cannot manage the demand, but instead has to react to it. This is essentially the 
position of the public postal operators who are obliged to accept all mail that is 
posted with them. They therefore have to assimilate peaks and troughs of demand 
as best they can, without unnecessary increases in costs or unacceptable reductions 
in quality of service. 
Attainment of service objectives may have been hampered m some 
administrations by insufficient or delayed investment in mechanised plant or 
information technology systems. However, such an investment is not a guarantee 
of either better service or lower costs. 
page 168 Chapter 7: Existing situation: the problems and the challenges 
The CEPT members have set an informal target of D + 3 (third working day after 
posting) for cross-border mail (including intra-Community mail). Although they 
are not formally published, the intra-Community results reveal that presently only 
about 40% of items meet this target. This demonstrates the shortfall of service 
performance that needs to be remedied. 
3.3.2 MEASUREMENT 
There are three different measurement schemes used in the Community (to say 
nothing of the differences in sampling techniques). It seems to be generally 
acknowledged that end-to-end measurement is the only effective system. 
Postal administrations have not yet been willing to publish results of their 
performance on intra-Community mail. 
3.4 TARIFFS 
Tariffs vary because of the different cost conditions in the countries of the 
Community, and also because of the different pricing principles applied (including 
different approaches to required levels of profitability and to cross-subsidies). 
3.4.1 ACCOUNTING 
There are different accounting conventions and rules applying in different 
countries of the Community. These will therefore affect any comparisons being 
made in the postal sector. Such differences will themselves tend to lead to 
differences in tariff-setting and, indeed, in managerial control. They will also 
make it more difficult to apply uniform principles concerning tariffs. 
It is also the case that, within the confines imposed by the national accounting 
conventions, the cost data available varies greatly between the postal 
administrations of the different Member States. 
3.4.2 COSTS 
The different postal administrations have cost structures which may vary between 
one another. However, they are all subject to the same "squeeze" effect caused by 
the need to hold down prices while at the same time resisting upward cost 
pressure. 
Chapter 7: Existing situation: the problems and the challenges page 169 
The differences in cost structures have various causes. Population density and the 
effectiveness of the existing transport infrastructure are key external factors 
affecting productivity. Productivity is also affected by the customers' propensity to 
use postal services, as well as by investments previously made in efficient systems 
or in mechanised plant. The cost of the key resource -that of labour -is greatly 
influenced by the pay environment which varies between Member States. 
However, the operator will continue to face upward cost pressure through the real 
increases in the cost of labour. This pressure is likely to be accentuated by 
anticipated reductions in the supply of labour. 
In the longer term, achievement of the Single Market may reduce the present 
variations in parts of the cost structure. However, as noted, some factors (such as 
population density) are out of the control of the operators. In certain other areas 
(such as the pay environment) variations in costs are unlikely to reduce quickly. 
3.4.3 DISCOUNTS 
Most postal administrations offer preferential tariffs for printed papers, the tariffs 
usually being set at rates which are loss-making. These administrations therefore 
cannot either forecast or control the extent of their losses, since these will be 
determined by the volumes posted by publishers. 
Most administrations (but not necessarily the same ones) offer discounts for 
reserved services for work carried out by the mailers. In some cases, it appears 
that the discounts given may go beyond the costs saved. In addition to revenue 
protection problems, the danger here is that such discounts in the reserved area 
could act as incentives for custom in the non-reserved area. 
3.4.4 CROSS-SUBSIDIES 
All administrations try to market their inland letter services on the basis of a 
unitary tariff, thus necessitating some geographical cross-subsidies. Further cross­
subsidies are stimulated by the pressure from "missions" that are imposed on some 
administrations either in the enabling legislation that gave the postal 
administrations their exclusive rights or as a result of political decisions taken by 
their governments. 
page 170 Chapter 7: Existing situation: the problems and the challenges 
In some cases, cross-subsidies are (or could be) the result of tariff-setting 
procedures which are not flexible enough. Furthermore, if discount structures are 
not reviewed regularly, over time the discounts awarded may diverge from the 
actual costs saved. 
3.4.5 TERMINAL DUES 
In summary, there are three major failings in the UPU terminal dues system: 
-the same compensation is paid per kilo regardless of the numbers of items that 
the kilo comprises; 
-the standard terminal dues system does not allow for the different levels of 
service required for the delivery; 
-the structure is a universal system, and therefore suffers from the problem of 
averages. 
Whatever the view about the value of the remail service that has evolved out of 
these disparities, no system such as that operating for terminal dues, with such a 
distorted financial basis, is a secure foundation for the movement of intra­
Community and international mail. Since the former particularly will become 
more and more important, the method of compensation needs to be 
fundamentally overhauled. 
A revised scheme, which introduces a charge per item, has been initiated by 
several CEPT administrations, among them seven EC administrations. 
Whether this scheme could be considered an acceptable intermediate step towards 
the ultimate solution is considered elsewhere. That analysis also asks the question 
whether the CEPT scheme is an unacceptable breach of competition rules (and 
therefore whether it needs to be reviewed urgently). 
3.5 EMPLOYMENT 
Postal operators (public and private together) are significant employers -
employing approximately 1.7 million staff in the EC. This causes employment in 
the postal sector (but particularly in the public sector part of it) to be very 
important in the wider social context. 
Chapter 7: Existing situation: the problems and the challenges page 171 
In the postal sector, operational changes responding to the different trends in 
consumer demands will have some impact in terms of employment demand. At 
the same time postal operators will need to react to the social, and particularly the 
demographic, environment. 
3.5.l DEMOGRAPHIC TRENDS 
The demographic trends will change the customer base, but, perhaps more 
importantly, they will have an effect on the supply of labour from which the 
operators need to draw. 
3.5.2 IMBALANCES IN LABOUR SUPPLY 
The total demand for staff in the postal sector (public and private operators 
together) is likely to remain stable. However, there could be instances where new 
employment demand does not match closely the old labour supply. 
3.5.3 TRAINING 
The trends noted above will give added emphasis to training. This is likely to be in 
the form of training for better customer orientation, for using new machinery, for 
the operation of new services and for management development. 
3.6 TECHNICAL 
Any form of harmonisation needs to be justified in terms of the possible consumer 
benefits. The potential impact on customers of any changes therefore needs to be 
assessed. 
Private operators have tended to invest a greater proportion of their income in 
new technology and mechanisation than postal administrations. This was 
particularly necessary in the creation of new services (such as express). 
However there is now an "investment momentum" driven by the need to gain 
competitive advantage through exploitation of technology (such as tracking and 
tracing or EDI), and through better operational control gained through improved 
network management systems. 
page 172 Chapter 7: Existing situation: the problems and the challenges 
4. THE NATIONAL REGULATOR'S PERSPECTIVE 
In the majority of Member States the regulatory and operational functions have been 
separated; in other Member States there are plans to do so. 
4.1 RESERVED AREA 
All Member States have established a set of reseived postal seivices which grant 
some exclusive rights to the national postal administration. Their objectives were: 
-to safeguard the universal seivice; 
-to have a satisfactory quality of seivice in the reseived area (the quality in the 
non-reseived sector being stimulated by competition); 
-and to have low, generally affordable tariffs in the reseived area. 
National regulators do not necessarily agree on the means to achieve the 
objectives (that is, the scope of the reseived seivices), but they do now generally 
agree that the reseived area should be the smallest possible compatible with the 
universal seivice objective. 
The differences in the scope of the reseived area anse probably less from the 
different circumstances in different Member States than from differences in the 
way in which the necessity for reseived seivices is analysed in the different 
Member States. 
There are certain specific problems that need to be resolved. Each involves a 
question of definition. 
4.1.1 PARCELS 
Several Member States have reserved seivice limits that embrace medium-weight 
items. These are no longer what is commonly understood by "letters". However, 
these "packets" are grouped by postal administrations under the general title of 
"letters". 
Despite this, the reality is that these packet seivices operate in competition with 
parcel seivices. The practical effect of this is that the limit of the postal monopoly 
in several Member States is in fact lower than it may appear in their postal laws. 
Chapter 7: Existing situation: the problems and the challenges page 173 
Some national regulators also require their postal administrations to provide 
universal service beyond the scope of the reserved services up to a specified 
weight. However, such an obligation is not placed on all the postal 
administrations, and, where it is, the maximum weight set by the regulator varies. 
4.1.2 PRINTED PAPERS 
There is no clear definition of what is intended by "printed papers", even amongst 
those Member States whose postal administrations apply a tiering system dividing 
into the classifications of "lettres et cartes" and "autres objets", the latter including 
printed papers. For such administrations, one question is whether printed forms 
which include individual text or numbers (such as invoices or bank statements) 
should be classified as printed papers. 
There is also the wider problem of direct mail. The view of most Member States 
is that printed publications should be in the non-reserved area. However, the 
regulatory view on direct mail is rather different. More than half the Member 
States seem to consider such mail as reserved. 
Part of the reason is that, for at least threeJviember States, no distinction is drawn 
between letters and direct mail. Partly, also, there appears to be a concern that, if 
this mail was made non-reserved, a significant portion of direct mail could leave 
the universal service network. This in turn could perhaps put the economics of the 
network and the low unit costs of individual items in some jeopardy. 
4.1.3 EXPRESS 
A particular problem relates to the express segment. Nine out of the 12 Member 
States presently consider express to be free market services. However, very few 
have given a satisfactory definition of what they mean by "express" services. 
4.1.4 HA-B-A" REMAIL 
The exclusive rights awarded to the postal administrations are intended to prevent 
"creaming off'. Where the items would have been covered by the reserved services 
of the country of origin and where the items are physically moved to another 
country for remailing back, this is a clear breach of the monopoly of the country of 
origin. 
page 174 Chapter 7: Existing situation: the problems and the challenges 
However, there are other circumstances where the mail is not actually physically 
moved out of the country of origin for mailing back. For example, a company may 
decide to have its direct mail printed and posted in another country for delivery 
only in its own country (or as part of a wider mailing requiring delivery in other 
countries). 
4.2 OBLIGATIONS OF UNIVERSAL SERVICES 
The main regulatory concerns will naturally concentrate on any reserved services. 
However, regulators ought also to consider what regulatory conditions should be 
established for mandatory non-reserved services. 
Below are laid out the principal questions relating to possible obligations that 
could be placed on the 'reserved service provider. The regulator will also need to 
examine how far these are appropriate for the provider(s) of mandatory services 
that are non-reserved. 
4.2.J ACCESS CONDITIONS 
The regulator needs to be aware of his postal administration in the context of the 
wider international market. Access rules can act as a facilitator or a barrier to use 
of the service by potential customers. 
Most regulatory bodies readily agree to the principle of transparency. There 
should not be many problems in terms of the general applications -for instance, i.n 
terms of the publication of posting conditions, tariffs and (if available) service 
target and performance information. However, there could still be questions in 
terms of the detailed application, especially concerning tariff and discount 
information for contracts. 
A particularly important aspect is the use by postal administrations of the same 
network to provide both reserved services and non-reserved services. Evidently, 
there could be a danger here of unfair cross-subsidies from the reserved sector 
which would enable the postal administrations to offer non-reserved services at 
prices below their proper cost. 
However, this suggests that there should be sufficient controls to prevent such 
possible unfair practices. It is important that postal administrations ought to be 
able to use the reserved service network in this way. Firstly, it increases the use of 
Chapter 7: Existing situation: the problems and the challenges page 175 
the network and gains returns to scale; this should bring benefits either in terms of 
having a smaller reserved area or having lower prices for reserved services. 
Secondly, such parallel usage almost certainly increases the availability of non­
reserved services. Indeed, in several Member States, it has enabled the postal 
administration to provide universal service for its express product. 
4.2.2 SERVICE STANDARDS 
The regulatory bodies of some Member States consider that service performance 
is a matter between the postal administration and its customers. 
However, if the regulator considers a satisfactory quality of service (however 
defined) to be a fundamental obligation of the exclusive rights granted to the 
postal administration, he would need to agree the service targets and then oversee 
the performance monitoring system (including agreeing which system should be 
used). 
Less than half of the Community's postal administrations are achieving their 
quality of service targets (if the results of the mostly internal measures are taken 
on trust), and virtually none achieve their service targets for cross-border mail. 
For the regulator the question is how to stimulate the improvements necessary. 
4.2.3 TARIFFS 
Regulatory bodies approve, or are at least consulted about, tariff revisions. In 
order to carry out this function fully, it will be necessary for the regulator to have 
access to detailed cost information. It is not always clear that the necessary 
information is available, even to the postal administration itself. 
At the same time, there does not always appear to be an appropriate balance 
between the standard tariffs and the discounted tariffs available to some users. 
5. 1992 IMPACT 
The Single Market will have a very significant effect on the postal sector. The 
achievement of the Single Market in postal services will also have positive effects on all 
other sectors, particularly those heavily reliant on postal services. In short, the aims of 
the Single Market cannot be achieved except with a communications infrastructure that 
functions efficiently, and postal services form part of that infrastructure. 
page 176 Chapter 7: Existing situation: the problems and the challenges 
Besides the growth in postal volumes that may result from increases in the Community's 
economy arising from the achievement of the Single Market, certain segments of the 
postal sector could benefit partiCularly. Mail order, direct mail and financial services 
sent through the mail are all likely to expand. 
In general, the postal sector will need to react to the changing demands made on it by 
customers. The most important factor would seem to be customer location. Location 
policy is likely to be affected by the dynamics of distribution and of communication. 
More emphasis will be placed on cross-border mail (which anyway will grow as the 
companies begin to exploit the greater potential outside their own domestic markets). 
The importance of this should not be under-estimated. This relative increase in cross­
border mail and relative decline in domestic traffic would lead to changes in emphasis 
and priorities for the postal operators. They could also severely aggravate tensions 
which already exist -in particular for the compensation systems between postal 
administrations for cross-border mail. 
In resolving these problems, those involved will need to ensure that they are helping the 
Single Market to be achieved (or at least not hindering it from being achieved) in other 
sectors some of which are significant users of postal services. These sectors include 
printing/publishing, advertising, financial services and telecommunications. 
There will be other more specific effects on the postal sector as a result of the 
development of policy in certain key areas. These include air transport, customs and 
VAT, competition policy, technical norms and data protection. 
6. WHAT HAPPENS IF NOTHING IS DONE? 
Essentially, the problems identified remain. Two particular results should be noted: 
-the degree of the problems will increase. Without Community impetus, divergences 
(for instance, in terms of the scope of reserved services or the service performance 
achieved) will become larger; 
-there will be opportunity costs, particular in terms of the Single Market objectives 
summarised above. 
There could therefore be a danger of "two-speed" Europe as far as postal services are 
concerned. This would be unacceptable. Postal services play an important part in the 
Chapter 7: Existing situation: the problems and the challenges page 177 
EC's communications infrastructure. Poor postal services can contribute to the 
marginalising of certain regions. 
Large companies would be less likely to establish themselves in a particular area if it is 
known that postal services from that area are poor. Small and medium enterprises 
would be less likely to flourish. 
Similarly, companies from elsewhere would be less likely to market their goods through 
postal services to areas where those services were poor. Further, mail order companies 
would be less likely to deliver their goods there. 
The Single Market will create new opportunities in the postal sector. With the existing 
divergences in posting conditions, service performance and tariff structures, it seems 
quite possible that the ability to take advantage of the opportunities may not be evenly 
distributed. 
To some extent, this is only natural. However, the situation must be avoided where the 
different abilities to react to the opportunities in the single postal market begin to have 
secondary effects on the economies served by those postal services. 
In sum, the danger is of having a two-speed Europe in postal services. This must be 
prevented at all costs. 
Action is therefore needed to prevent further divergences, and, indeed, to draw together 
the different elements (but without sacrificing quality standards). 
7. THE COMMUNITY'S PERSPECTIVE 
Within the context of the Single Market, the Community would want to ensure that the 
postal sector is sufficiently harmonised to meet the needs of the EC's citizens and 
organisations. The aim is to ensure that the Community's reserved area is as small as 
possible, consistent with the objective of ensuring universal service. 
Secondly, it appears necessary that there should be some Community-wide standards for 
the reserved service providers' obligations. These would concern access, tariffs and, in 
particular, service performance. 
page 178 Chapter 7: F.xisting situation: the problems and the challenges 
In representing these interests, the Community will have some regulatory role to play. 
In some matters (particularly operational), it will act more as a conduit of information 
and ideas. 
7.1 REGULATORY/OPERATIONAL SPLIT 
Although not all Member States yet have their regulatory function separated from 
any operational responsibility, this is very much the trend, as the recent postal 
laws passed in several Member States have shown. However, it is not clear that all 
Member States have the same idea for the role of their regulatory bodies. 
A particular case in point is the relationship with the UPU, where it seems 
essential that the regulator signs any agreements on behalf of his country's 
government. This also raises the question of the compatibility of postal law 
(including that of the UPU) with Community law and policy. 
7.2 DEFINITION OF UNIVERSAL SERVICE 
The level of universal service required is not well-defined in certain Member 
States. Although it is evident that reserved services have to be provided 
universally, it is not always clear what services must be provided universally 
beyond the scope of the reserved services. Most importantly, there is no 
Community-wide definition of the universal service to be provided throughout the 
Community. 
7.3 SCOPE OF RESERVED AREA 
The Community's desire is to seek the least restrictive set of reserved services 
consistent with maintaining a Community-wide universal service of satisfactory 
quality. 
There are very significant differences between Member States in the definitions of 
the reserved area. This suggests firstly that it is necessary to reduce such 
divergences in the context of the Single Market. Secondly, it suggests that either 
some postal legislation may be unnecessarily restrictive or perhaps even that other 
legislation may be too "loose" (with the effect that it could not safeguard with 
confidence the universal service). The different criteria used by different Member 
States to define their reserved areas has contributed to this diversity. 
Chapter 7: Existing situation: the problems and the challenges page 179 
Any Community perspective is clouded by the lack of a common definition of the 
basic letter. The reasons for the existing limits defined for the reserved area in 
each Member State are not always clear. In most cases they were established 
some time in the past, and would anyway need to be reviewed in the light of 
changing circumstances. 
In order to provide stability to the regulatory terrain, it is necessary also to take a 
stance on new services that may evolve (but which are not yet known). 
7.4 APPLICATION OF RESERVED SERVICES RIGHTS 
In addition to the divergences in the legislative scope of reserved services as noted 
above, there are also some variations in the application of the exclusive rights. 
The clearest example of this concerns international mail (including cross-border 
mail within the Community). 
Almost all Member States state that such mail should be in the reserved area. 
This is because covering intra-Community mail under exclusive rights is seen as an 
extension of the principles of universal service applying to national traffic. 
However, m most of these Member States, such exclusive rights are not 
rigourously enforced. 
7.5 ACCESS CONDITIONS 
There are not equal access conditions covering the whole Community. Some 
postal administrations permit private operators to act as mail preparers, others do 
not. 
The detailed posting rules can also vary significantly. This makes it that much 
more difficult for customers with mail delivery needs in several or all of the 
Member States to fulfil those needs except through the "international'' mail system 
(that is, posting through the international mail services of one postal 
administration for delivery by another). This may not be the most effective way of 
despatching the mail. 
7.6 SERVICE PERFORMANCE 
It is difficult to compare service performance because of the different 
measurement systems used. There are also different targets used. Some postal 
page 180 Chapter 7: Existing situation: the problems and the challenges 
administrations measure against a target of next working day delivery, and others 
the second working day. 
Most postal administrations only publish performance figures for their faster 
standard letter service (LC or first class) even though some administrations 
register higher volumes for the slower services (AO or second class). 
There are presently very significant divergences in service performance, ranging 
from 15% to 99% for national services. 
These average figures probably obscure some regions where the performance may 
be even worse. The concern is that certain regions, which may already feel 
themselves remote from the mainstream (either economically or culturally) may 
become further marginalised through being badly served by poor postal services. 
The Community should also take a close interest in intra-Community letter 
services. As a priority it would need a uniform, reliable measuring system. The 
results recorded should be published. It will need to be decided what form this 
oversight by the Community of the quality of the universal service should take. 
However, it is known that the existing results are far from re-assuring. Against the 
D + 3 target, only 40% of mail is delivered within the target time. Performance on 
some other routes (linking the Community with non-Community countries) has 
also been measured -again with results that are not encouraging. 
7.7 TARIFFS 
There are differences in the pricing principles that are applied by the different 
Member States. This is partly because of different accounting conventions, but 
mostly because of different tariff policies. 
Tariffs are often not related to costs. There are several instances of hidden cross­
subsidies. In other cases, there are specific political decisions to support the tariffs 
of certain postal items (usually press publications). These lead to wide differences 
in tariffs for the same item. There are also instances where central government 
decisions are taken to support losses made by the postal administration. 
The UPU general terminal due system will continue to lead to distortions. Until 
compensation payments are based on the actual delivery costs incurred, there will 
·not be a sound financial basis for the future. 
Chapter 7: Existing situation: the problems and the challenges page 181 
From the Community's perspective, the concern is to ascertain whether the 
consumers of the different Member States are obtaining value for money. For 
this, it would be necessary to remove from the analysis those external factors 
which make costs greater or lesser. Then the core cost structure can be compared 
with the service performance achieved. 
7.8 HARMONISATION 
The Community may need to take a more active role m recommending what 
harmonisation measures may be appropriate in order to help make services 
function more effectively throughout the Community. Naturally, such a role 
would need to pay due attention to the principle of subsidiarity -that decisions 
that should properly be taken at Member State level should indeed be taken at 
that level. 
7.9 COHESION 
It should be recognised that good postal services are an important cohesive factor, 
both socially and economically. But, as previously noted, postal services do not 
always perform satisfactorily. It is therefore necessary to promote this cohesive 
factor, and this will require an assessment of the extent of the problems which 
would need to be overcome if a satisfactory level of cohesion is to be achieved. 
7.10 LONGER-TERM ISSUES 
The issues identified above are essentialJy those that relate to the existing 
situation or to a future situation that can be predicted to evolve out of the present. 
It is also appropriate to consider more radical issues -which could be considered 
as potential solutions to the problems identified or as potential objectives in 
themselves. 
Such issues would include the question of whether a single postal administration 
should be established to cover the whole of the Community; whether the aim 
should be to have a common tariff applicable throughout the Community; and 
whether there should be a common stamp. 
The possible solutions to the issues raised in this chapter are discussed in the next chapter. 
page 182 Chapter 7: F.xisting situation: the prr:>blems and the challenges 
Chapter 8: Discussion of possible solutions page 183 
CHAPTER 8: DISCUSSION OF POSSIBLE SOLUTIONS 
1. INTRODUCTION 
The previous chapter summarised the problems and challenges to be found in the 
Community's postal sector. This chapter discusses the possible solutions to the problems 
identified (and the policies needed to meet the challenges). 
2. WHY SHOULD THE COMMUNITY BE INVOLVED? 
The analysis of the existing situation identifies several problems that would seem to 
justify action at Community level. Many of these problems concern the variability of the 
quality of universal services. Resolution of such quality related problems is paramount. 
Broadly, there are five areas of concern for the Community. 
2.1 Present lack of harmonisation 
The operations providing universal service in each Member State have evolved 
independently, with the effect that there are now many operational differences 
between them. This can lead to significant problems for mail passing between 
Member States; it can also have opportunity costs. Most obviously, the universal 
service is defined differently in different Member States with the effect that 
customers cannot confidently post similar items in different Member States. But 
problems of inter-operability are to be found at every level. At a more detailed 
level, for example, problems are encountered because of lack of harmonised 
norms for envelopes. 
2.2 Single market implications 
Service performance for universal service varies greatly between different postal 
administrations. There are some Member States where next day delivery 
performance reaches the generally accepted target of 90%; in others, performance 
is 15%/16%; in others, performance is between the two (but tending more 
towards the former). The generally accepted, but not very demanding, service 
target for cross border mail is delivery within three working days; performance is 
page 184 Chapter 8: Discussion of possible solutions 
currently measured at an average of only about 40%, and with large variations 
between different postal administrations. 
Such variations have particular implications for the parts of the Community's 
commercial and social life that are heavily reliant on postal services. Large 
senders of mail include the key sectors of publishing, financial services, mail order 
and advertising. For such sectors variability in performance of universal services 
can lead to market distortions. For example, it would be much easier to sell 
insurance services to an individual household in a Member State where the 
performance is 90% rather than in another Member State where it is 16%. It 
would be more difficult for a company to market its products by post in another 
Member Sate than for a company that was based in that Member State. 
For example, it does not appear co-incidental that one of the Member States with 
very poor service has a mail order sector only one fifth the size of that of other 
Member States of comparable economic size. This harms the mail order 
companies' prospects. Significantly, it also reduces the choice of the individual 
consumer. Those who live in regions disadvantaged by poor postal services -and 
there are many -are therefore isolated not just from the personal contact that can 
be achieved through mail, but also from the services that can be provided through 
the mail. 
Such disruptions of the Single Market affect not only senders but also receivers of 
mail. If a particular region of the Community is thought to have an unreliable 
universal service, companies (such as mail order) would be less interested in trying 
to market their products there. The consumers (as potential recipients) would 
therefore have a reduced choice. 
2.3 Cross-border service performance 
In terms of number of days taken from collection to delivery, a domestic item 
takes an average of 1.5 to 2.0 working days, whereas a cross-border item within the 
Community takes an average of 4.0 days. A small part of the gap is explained by 
operational practicalities. But the larger part of the gap cannot be explained m 
this way. This quality gap effectively creates a "frontier effect". Expressed m 
terms of achievement against target, service performance for postal 
administrations' cross-border letter services within the Community has been 
measured at an average of 40%. Behind this average lie significant variations. 
Chapter 8: Discussion of possible solutions page 185 
This level of setvice probably falls short of user expectations. Indeed, it should be 
mentioned that expectations are likely to become more demanding as cross-border 
communication increases. Relative to user demand, static performance would be 
perceived as worsening. In fact, there appear to have been some improvements, 
stimulated particularly by the introduction of competition (partly in breach of 
exclusive rights which were unenforced). However, there is still a large gap 
between the targets which postal administrations set themselves (either on the 
basis of customer requirements or operational practicalities) and the reality. 
Since effective cross-border communications are essential for the commercial and 
social life of the Community, it is a matter of concern to the Community that 
setvice performance for cross-border setvices is so unreliable. 
2.4 Divergences 
One of the objectives of the Community is to ensure its own cohesion. Clearly, the 
wide divergences to be found in the postal sector do not help the achievement of 
this objective. Postal setvices provide one way in which messages can be 
communicated and goods delivered. Any regions having unreliable postal setvices 
would therefore be disadvantaged in terms of their communications and goods 
delivery requirements. Both individuals and businesses in such regions could feel 
cut off. 
This situation of being disadvantaged would not be only by reference to their 
requirements. It would also be relative to the conditions enjoyed in other parts of 
the Community where the performance of the universal setvice was more reliable. 
2.5 Market distortions 
In the comments on the single market implications, it was noted that divergences 
in the setvice levels df universal setvices in different regions can contribute to 
market distortions in other sectors which are reliant on postal setvices. However, 
it should be noted that there are potential market distortions within the postal 
sector itself. These could be caused in the case of the scope of the exclusive rights 
being larger than was needed to ensure the universal setvice. In order to prevent 
such distortions, Member States therefore need to apply the proportionality 
principle. An example of its application is the transferring by some Member 
States of direct mail to the non-resetved area. 
page 186 Chapter 8: Discussion of possible solutions 
3. COMMUNITY OBJECTIVES 
In order to discuss postal policy, it is necessary first to discuss what are the Community's 
objectives for its postal sector. 
3.1. BASIC PRINCIPLES 
It is a basic social requirement that all the citizens, businesses and organisations of 
the Community should have access to means of communication, of which postal 
services form a part. All citizens, businesses and organisations of the Community 
therefore have an acquired right to a universal postal service at affordable tariffs. 
At the same time, there should be maximum freedom of choice, provided that the 
universal service is safeguarded. 
Universal service provides access for all into the postal system through collection 
facilities which can be readily used. It also provides access for the postal system to 
all through the provision of deliveries to all addresses in the Community. 
Accessibility for all also implies low, affordable tariffs. 
Universal provision could be required of different types of service (or different 
uses made of services). These different types of service will naturally have an 
order of priority in terms of the importance of ensuring that they are safeguarded. 
In this regard, the fundamental imperative is that universal service must be 
ensured for postal communication items of a personal or individualised nature 
(defined in more detail at Paragraph 9.1.2 below). 
The description of the universal service also needs to include certain service 
standards such as the frequency of access to collection and delivery points. It also 
needs to cover standards for speed and reliability as well as for liabilities 
(including the investigation and answering of complaints), in order to meet the 
reasonable customer expectations of a standard letter service. The universal 
service requirement is therefore based on user needs, which may vary over time. 
3.2 IMPLEMENTATION 
Universal service causes network costs because of the need to balance out 
differences in costs of providing services in different areas. Such universal 
networks have significant costs that do not change with volume -particularly for 
collections and deliveries. 
Chapter 8: Discussion of possible solutions page 187 
In order to ensure the viable continued provision of the universal service network, 
protection is needed to ensure that these network "fixed" costs are spread over a 
sufficiently large number of units that the resulting unit prices are affordable to all. 
This protection can be given in the form of reserved services, granting special and 
exclusive rights to a service provider or providers. 
It would be very costly if more than one service provider established parallel 
networks for standard services. (There might also be some diminution of service if 
service standards were reduced in an effort to save costs.) It should further be 
noted that operators other than postal administrations do not seem interested in 
providing a universal service through an independent network. On the other hand, 
if costs are shared through joint use of a single universal network, for instance by 
the postal administration providing both reserved and non-reserved services 
through its one universal network, a smaller reserved area is made possible. 
One of the benefits of the granting of exclusive rights is that it can enable the 
reserved service provider to continue to offer a single unitary tariff (perequation 
tarifaire). However, this is not itself a justification for establishing a set of 
reserved services. 
It is by no means the case that all items which are distributed through the 
universal network should be reserved. There will be some items which, although 
they should mandatorily be provided universally, do not need to have the 
protection of being reserved. 
Further, there are other, more specialised services which, although they may use 
the universal network, do not provide a justification for it. Such services (such as 
express services, or certain postal financial services such as manda.ts de poste ), all 
provided in competition, would help to share the costs of the network, and could 
therefore help to reduce the scope needed for reserved services. 
Where different services, reserved and non-reserved, share the same network, 
proper accountancy controls and systems will be needed. Exactly what such 
controls would comprise would need to be agreed. 
page 188 Chapter 8: Discussion of possible solutions 
4. DETERMINING THE RESERVED AREA 
The objective is to seek the least restrictive solution that will safeguard the standard 
service network that provides universal service to all the citizens and organisations of the 
Community. 
The general principle is that there should be Community-defined limits for the scope of 
the reserved area. However, the reserved area in a Member State could vary from the 
Community limits in one of two ways. 
Firstly, the regulator and/or the national government of each Member State is obliged 
(by the Treaty of Rome and, generally, by the national legislation) to define a reserved 
area directly proportional to the objectives which justified the establishing of reserved 
services. (This principle of proportionality effectively calls for the greatest level of 
competition consistent with the achievement of the objectives set.) For some Member 
States, the application of this principle of proportionality could well indicate that a 
reserved area smaller than that defined at Community level was appropriate. 
Secondly, other Member States, where the application of Community law would obstruct 
the universal service objective, might benefit from an exception to the application of 
Community law to the extent provided by Article 90.2. 
Standard service refers to the universal service of basic postal items. These include both 
communications (letters, postcards and printed papers) an~ goods-bearing items 
(packets and parcels). 
The phases of the standard service can be approximately described as the collection, 
sorting, transporting and delivery to the addressee (or handing over to another 
administration for delivery to the addressee). These phases are operationally distinct. 
The economics of the different phases also vary. Reserved services are justified 
economically in order to provide sufficient volume over which the fixed cost elements of 
the network can be spread, in order to achieve low unit costs and thus prices affordable 
to all. The major fixed cost element of the letter post operation is delivery. Collection 
from road-side posting boxes also incurs significant fixed costs. 
Service levels vary, but service performance is not normally guaranteed (unlike in the 
case of many exp~ess services). For letters, standard service also includes the possibility 
of registration and of delivery to a poste restante address. 
Chapter 8: Discussion of possible solutions page 189 
Regulators should ensure that such standard service continues to be provided universally 
up to a certain weight. Part of this service (for instance, for parcels and heavier-weight 
letters or packets) will be provided in the non-reserved sector. (Such mandatory non­
reserved services are discussed in more detail at Paragraph 7 below.) 
Although a Community definition of what universal service should be provided 
obligatorily has not yet been drawn up, it should be emphasised that the scope of the 
universal services will almost certainly be larger than that of the reserved services. 
Further, it seems clear that the reserved services should be centred on those items for 
which universal provision is absolutely essential -that is, on the postal communication 
items of a personal or individualised nature. (This description requires further 
clarification -see below at Paragraph 9.1.2.) 
The criteria (including those of weight and price) for defining what part of standard 
postal communication items of a personal or individualised nature should be reserved 
are discussed in detail below in Paragraph 10. Any kind of service not falling within this 
definition falls outside the reserved area; if necessary, however, restrictive conditions 
could apply for these services in justified cases. 
The reserved area therefore concerns addressed, standard items not containing printed 
papers or goods. Although the list below is not comprehensive, the following items are 
not in the reserved area: 
-newspapers, magazines or books (because they are printed papers); 
-parcels (because they contain goods); 
-express items (because they receive a non-standard service); 
-unaddressed items (because they are not addressed). 
In order to elucidate the general propositions outlined here, it would be useful to expand 
upon the principle of posting or delivery by the customer himself (in Paragraph 5), on 
the concept of mandatory services (in Paragraph 6) and on the regulatory position of 
new services (Paragraph 7). It is then appropriate to ask whether some cross-border 
services should be in the reserved area (Paragraph 8). At that point, the definition of the 
reserved area can then be discussed in more detail. 
page 190 Chapter 8: Discussion of possible solutions 
5. DELIVERY AND POSTING BY SELF 
Customers delivering their own mail have rights which prevail over those of the 
operators. Customers also have certain special rights when posting on their own behalf. 
5.1 DELIVERY BY SELF 
Mailers ought to be able to deliver their own mail, whether in their own country or 
in another Member State. The application within the Community of the principle 
of self-delivery becomes somewhat more complicated in the case of subsidiaries of 
companies. Again, the application is less clear in the case of sister companies in 
other countries delivering mail on each other's behalf. 
Another interesting case concerns document exchanges. These are buildings 
where exchange members may hire boxes into which fellow members may deliver 
their mail directly and from which the mail may be collected. (Of course, it would 
be relatively simple -at least in terms of the extra skills needed if not the extra 
accommodation -for postal administrations to extend their post office box or 
"paste restante" facilities to offer similar services in competition with private 
exchanges.) 
Member States should therefore permit the functioning of document exchanges as 
described above. Further, in order to enhance flexibility available to customers, 
each Member State should permit document exchanges to transfer mail between 
each other, unless it was convinced that such a step would harm the universal 
service provision of the postal administration. However, where the items would 
otherwise meet the criteria of reservation, items may not either be collected. from 
the poster's premises or delivered to the addressee's premises by anyone other 
than the reserved service provider (presumably the postal administration) or the 
customer who originated the letter. 
5.2 POSTING BY SELF 
Regarding the rights of potential users to post their mail, some clarification is 
needed, in terms of where they may post their mail and for what destinations. It 
should be emphasised that the discussion here re~ers to posting (with a postal 
administration) by the customer himself, with no intermediate operator involved 
in the country of the customer. 
Chapter 8: Discussion of possible solutions page 191 
Each Member State accepts that a customer based in its territory can post a 
reserved item wherever he likes in the national territory, if the item is for delivery 
within that territory. Each postal administration applies this principle subject, if 
necessary, to contract conditions. (Contracts normally stipulate the agreed office 
of posting.) 
Regarding mail taken by customers across a border for posting with the postal 
administration for domestic delivery in that administration's territory, the view 
taken by Member States and postal administrations has been somewhat 
inconsistent in the past. As a receiving (or "inward") administration, each postal 
administration has, in practice, accepted such a practice. However, the 
administrations in the "outward" country have sometimes considered this practice 
to be in breach of the monopoly. Now, the practice appears to be accepted by all 
postal administrations. 
In addition, it will be seen that the Green Paper discusses the possibiJity of placing 
cross-border services in the non-reserved area (see below at Paragraph 8). The 
customer would therefore also have the option of giving his cross-border mail to a 
private operator, rather than posting it himself in another country. Certainly, the 
regime for a customer posting on his own behalf should not be more restrictive 
than that for a third party operator providing services in the country of the 
customer. 
For domestic mail for delivery in the same territory in which a customer is based, 
the customer might wish to have the option of taking the mail to another country 
and posting it there for delivery back in his own country. It is important that any 
exclusive rights awarded to the reserved service provider do not impinge on the 
customer's ability to exercise this option and thereby benefit from the principle of 
the freedom to provide services. 
However, measures must be taken to ensure that such a practice on the part of the 
customer did not undermine the universal service objective in the customer's 
country. It must therefore be ensured that the postal administration in the 
delivery country actually delivers such mail (if it would otheiwise meet the criteria 
for being reserved). Secondly, the tariff paid to the delivery administration for the 
work that it carries out must properly compensate the delivery administration for 
its delivery costs. 
page 192 Chapter 8: Discussion of possible solutions 
As stated, this discussion concerning mail posted in a second country for delivery 
back in the customer's country refers to the rights of the customer posting on his 
own behalf. Third party operators are in a different juridical position, and this is 
discussed in more detail below at Paragraph 8.3. 
6. MANDATORY SERVICES 
If a service is obliged to be provided, this can be called a mandatory service. In the 
postal sector, this concept is usually linked with an obligation of universal service, so that 
a mandatory service is usually a service which one operator (or several operators 
together) must provide across the territory. 
As discussed at Paragraph 3 above, the fundamental reason for establishing a set of 
reserved services is the need to provide universal service throughout the territory. From 
this it follows that all reserved services must be provided universally. Such services are 
therefore mandatory reserved services. 
There are likely to be other services that are mandatory, but non-reserved. Such 
obligations may be needed in order to meet Community and/ or national service 
objectives. These are discussed separately below. Because such services will operate in 
the competitive (non-reserved) area, some discussion of their financing is also 
appropriate. 
Reserved services are mandatory, and will imply certain obligations for the reserved 
service provider. The possible such obligations are discussed below in Paragraphs 13-15. 
Consideration would need to be given to how much these obligations would also be 
appropriate for mandatory services. The decision might be dependent on whether the 
services are mandatory at the Community level or at the national level. 
6.1 MANDATORY SERVICES AT COMMUNITY LEVEL 
A Community-wide definition of the reserved area will be made. This will be 
made by reference to a weight limit applying throughout and to a price limit that 
will be established in each Member State. (This is discussed in more detail below 
at Paragraph 10.) 
Each Member State will have the right to define for its territory a reserved area 
that is smaller than that defined at Community level. However, it must still ensure 
Chapter 8: Discussion of possible solutions page 193 
that universal service in its territory is provided at least up to the limits that the 
Community defines. 
The full set of reserved services as defined at the Community level therefore 
forms part of the mandatory services. While Member States can decide to make 
some of these services non-reserved, they will remain mandatory. 
6.2 MANDATORY SERVICES AT NATIONAL LEVEL 
A Member State may wish to have universal service ensured beyond the 
Community limits. Again, this obligation could be placed on a single operator 
(usually the postal administration) or several operators working collectively to 
provide universal service. 
In deciding whether to have such mandatory non-reserved services, Member 
States will naturally need to investigate what their national requirements are. 
They will also need to take account of obligations imposed by the UPU 
convention. In this regard, Article 20 of the Convention (previously Article 19) 
appears to oblige all member postal administrations to provide universal service 
up to 2 kg, and up to 5 kg for certain printed papers. The Community weight limit 
for its reserved area will be set clearly below both these weights. 
6.3 FINANCING 
It is important to consider the financial implications of these obligations. These 
implications will depend largely on the profitability of the services. The 
profitability will be affected by, among other things, the tariffs and the proportion 
of traffic gained. 
Correctly priced, there is no reason why non-reserved mandatory services should 
not be profitable. They will become a financial burden only if the price levels are 
set below cost as a preferential rate and/or when the potential traffic is cream­
skimmed where the price offered is on the basis of a perequation tarifaire. 
In respect of the second of these possibilities, since these services operate in the 
non-reserved sector, it does not seem unreasonable to offer volume posters either 
a differential rate by region or a single country-wide rate but with an enforceable 
exclusivity clause. 
page 194 Chapter 8: Discussion of possible solutions 
If, despite these points, the non-reserved mandatory services are still not 
profitable, it will be necessary as a last resort to consider financing from other 
sources. This would take the form either of an external subsidy (preferably from 
the body that imposed the obligation) or of a cross-subsidy. 
In both cases, it will be necessary to identify where the mandatory services are in 
loss (rather than simply describing the services as being in overall loss). It should 
be possible to localise the losses to particular geographical regions and to quantify 
the revenue and costs associated with the provision of mandatory non-reserved 
services in those regions. (These would tend to be the regions where the 
operators not obliged to provide universal service were less interested in 
competing.) Any subsidy or cross-subsidy could and should therefore be made 
transparent. (See also at Paragraph 15.2 below.) 
7. NEW SERVICES 
The overall objective of achieving universal service at affordable prices has led to the 
view that some reserved services will provide the protection needed to ensure sufficiently 
low unit costs. This revenue/volume level should be achieved by present and foreseeable 
volumes. 
It therefore seems to follow that new services which add incremental volume to the 
postal sector should be outside the reserved area. However, in some cases it may not be 
clear that the volume is incremental -rather that part of the volume of the new service 
could be volume that had been attracted away from the "traditional" service. 
The juridical view will need to be well defined. It will not be sufficient for a new service 
to be slightly different from the reserved activity. (It should be noted that some of the 
mail preparation activities described at Paragraph 9.4 below could meet such a limited 
criterion.) 
It would be necessary instead for a new service to be significantly different before it 
could be decided that it should be in the non-reserved area. In this way, a document 
exchange service appears appropriate to be placed in the non-reserved area, but an 
ordinary letter f~r national delivery which involved collection from customers' premises 
rather than from street boxes would remain reserved. 
The regulatory body of each Member State (and possibly the Community) will need to 
decide the meaning of the word "significantly" on a case-by-case basis. Naturally, any 
Chapter 8: Discussion of possible solutions page 195 
such decisions would need to be taken in accordance obligations under the Treaty of 
Rome, in particular the principle of freedom to provide services and the competition 
rules of the Community. 
If a new service becomes a necessary element in the achievement of the universal 
service, it is possible to envisage its integration into the reserved area in line with the 
criteria established at Paragraph 4 above. 
8. CROSS-BORDER MAIL 
It is necessary to ask whether the reserved area ought to comprehend domestic and 
cross-border services alike, or whether a distinction ought to be made between them. In 
the discussion here, intra-Community and international cross-border services are 
considered separately. 
8.1 INTRA-COMMUNITY MAIL 
The fundamental reason for establishing a set of reserved services is social -to 
ensure universal service. This implies an economic reason -protection by 
exclusive rights to safeguard the universal service network. This economic 
reason is based on the economic realities of "fixed cost" networks. Significant 
reductions in volume would increase unit costs, thereby making use of the system 
less affordable and ultimately putting the network in danger of becoming 
unviable. 
For intra-Community mail, the economics are different because of the high 
proportion of variable costs. The fixed network elements involved (the road-side 
collections in the outward country and the deliveries in the inward country) are 
protected. In terms of economics, the only reason to prevent liberalisation 
appears to be that the delivery administration may not be properly compensated 
for its costs (although this problem already occurs under the UPU system). 
However, the postal administrations have already taken some steps to remedy 
this, and this paper proposes further reforms. 
There do not seem to be significant economic reasons for including intra­
Community services in the reserved area, and there are service reasons for not 
doing so. 
page 196 Chapter 8: Discussion of possible solutions 
The reality in terms of operational performance is that the level of service 
provided by the postal administrations for cross-border services is less 
satisfactory than that provided for domestic services. The Community objective 
is to close this gap (and therefore diminish the "frontier effect"). The regulatory 
regime chosen must meet this objective. This points to a liberalisation of the 
market as a means to stimulating service improvements. 
There could be certain regulatory concerns about such a liberalisation. In 
particular, there might be a danger of ordinary domestic mail, to the extent that 
it meets the criteria for being reserved, being passed off as cross-border mail in 
order to circumvent the reserved services. Clearly such circumventing of policy 
could endanger the economics on which the provision of the universal services is 
based, and must be prevented. 
In summary, the arguments for giving customers the possibility of better service 
through wider choice are compelling. The placing of intra-Community mail the 
non-reserved area would therefore be envisaged. If a Member State is concerned 
that such a measure might jeopardise its universal service, it might benefit from 
an exception to the application of Community law to the extent provided by 
Article 90.2. The concern about regulatory control is recognised, and adequate 
control systems will be established. The Commission, with Member States' help, 
will propose the systems needed. 
It is accepted that, if it is not presently non-reserved, certain Member States may 
need an adaptation period to implement the change. The length of the 
adaptation period would need to be defined in each case. 
Although the orientation of the Green Paper is towards placing intra­
Community cross-border mail in the non-reserved area, there would still be a 
universal service obligation for such mail. The postal administration in the 
outward country would have the obligation to provide universal service in the 
form of collection facilities for cross-border mail that customers chose to post 
there. The postal administration in the inward country would still need to 
provide universal delivery services for mail originating from another Community 
country if this was required by the customer or the operator or the outward 
postal administration. 
This discussion concerning whether or not intra-Community mail should be 
placed in the reserved area is expanded upon in Annex 15. 
Chapter 8: Discussion of possible solutions page 197 
8.2 INTERNATIONAL MAIL 
International mail is mail that either originates m the EC for delivery in a 
country outside the EC or originates outside the EC for delivery in a Member 
State (respectively "outward" and "inward" international mail). In both cases, it 
would be envisaged to place these mail flows in the non-reserved area. A 
Member State that was concerned that placing this mail in the non-reserved area 
might prejudice its universal service might benefit from an exception to the 
application of Community law to the extent provided by Article 90.2. The 
liberalisation of inward international mail could raise similar concerns about 
regulatory control as might also apply to the liberalisation of intra-Community 
cross-border mail. Adequate control systems wilJ therefore also need to be 
established for such mail. 
For certain Member States, if this mail is presently reserved, it is possible that 
some adaptation period may be needed. However, it should be noted that there 
would probably be less need for such adaptation periods for international mail 
than for intra-Community cross-border mail. 
8.2.J OUTWARD 
For outward international mail, the economics are almost the same as for intra­
community mail, with two exceptions. Firstly, the transport costs are likely to be 
greater (owing to the higher proportion transported by air, and the greater 
distances involved); it should be noted that these costs are almost all variable. 
Secondly, outward international mail tends to be very profitable, although part of 
the profits is used by postal administrations to fund th~ losses incurred on inward 
cross-border traffic the delivery cost of which tends not to be properly 
compensated by terminal dues. Of course, the fact of existing cross-subsidies is 
not a justification for adopting a specific future regulatory position. 
While the economics of international mail are similar to those of intra­
Community mail, the political position is different. For intra-Community mail, it 
could be argued that Paris-Marseilles mail should be treated the same as that for 
Paris-Brussels. However, no such argument can be used for international mail. 
It should be added that the argument concerning expertise in air transport 
(shown at Annex 15, Paragraph 2.3) may be stronger in the case of international 
mail. Because of the higher proportion transported by air and the potential 
page 198 Chapter 8: Discussion of possible solutions 
greater complexity of routeing, it is quite possible that private operators, many of 
whom tend to be specialists in air transport, could achieve a (perhaps 
significantly) better quality of service than certain postal administrations. 
Should the option of using a private operator for international mail be denied to 
the Community's consumers? Alternatively, it may be the case that some postal 
administrations have more effective transport arrangements for cross-border 
mail than others: again, it would seem helpful if potential customers had access 
to the organisations which had demonstrated superior expertise and service. 
In summary, there is a particularly strong argument for outward international 
mail being placed in the non-reserved area. It would therefore be envisaged to 
place such mail in the non-reserved area. 
8.2.2 INWARD 
The issue of inward international mail also needs to be addressed. Here, large 
mailers based outside the Community may wish to concentrate their mailings for 
the EC on one distribution centre within the EC. As with other cross-border 
mail flows, the placing of this mail in the non-reserved area would be envisaged. 
However, as discussed for intra-Community traffic, adequate regulatory controls 
should be established to prevent domestic reserved mail being sent through the 
international mail system in order to circumvent the reserved service provider's 
exclusive rights. 
It should be noted that, from the perspective of the Member State of final 
destination, this mail could have the appearance of being intra-Community mail. 
However, the time scale that is appropriate for outward international mail should 
also apply to inward international mail. 
8.2.3 CATS 
The implementation of the tariff proposals described at Paragraph 15 below may 
create an artificial problem whereby, in order to undercut the intra-EC terminal 
dues to which all the EC postal administrations could be committed, intra­
Community mail could be transported out of the EC for remailing back in at 
UPU rates. (For certain items the UPU rates would be lower than the rates paid 
between EC postal administrations.) 
Chapter 8: Discussion of possible solutions page 199 
Such a practice, which added no value but was intended solely to circumvent 
Community policy, would be unacceptable. 
The disciplines and obligations currently envisaged for the GA TS would not 
oblige the Community to allow circumvention of its policy. Possible solutions 
should be discussed with trading partners if this situation were to change in the 
future. This tariff/terminal dues issue aside, Member States will need to make 
whatever adjustments are necessary to meet GA TS commitments, especially 
concerning access to reserved services. 
8.3 OTHER ISSUES 
In general, of course, there should be freedom to provide services. This general 
principle also applies in the case of the practice of transporting mail by third 
party operators out of a country and mailing it in a second country for delivery 
back in the first country (often called A-B-A remail), particularly if some extra 
service is provided in the second country that adds substantial value to the whole 
service. 
However, if the items thus transported would otherwise have met the criteria for 
being reserved items of domestic mail in the first country (Country A), such an 
activity would infringe the special and exclusive rights of the reserved service 
provider in that country. This would be because a private operator collecting 
such mail in Country A would be competing with the postal administration of 
that country in the reserved area. 
This statement refers specifically to the physical movement of such mail items. 
The situation is different in the case where the first part of the chain 
(transporting out of the country A) is not physical. Here the transport is 
"metaphorical": copy is generated in country A and then sent to country B. The 
material is then converted into direct mail (or into a publication for mailing) 
through printing and enveloping. The material may then be posted in the 
country where the printing was carried out for delivery in the country where the 
original copy was generated. 
How~ver, in postal terms, the mail should be treated as items originating in the 
country of printing. Not to treat the mail in this fashion would be to permit 
decisions by some postal managers to affect the Community's trade in printing. 
page 200 Chapter 8: Discussion of possible solutions 
A similar point can be made about text, data or images that are transmitted 
electronically across a border for conversion into hard copy which may then be 
sent back as a letter to the first country. Here, postal rules must not be allowed 
to influence trade in information or in telecommunications. (Assessing flows of 
information can be an important factor in the location strategy of companies.) 
Of course, it may be the case that part of the price package that influenced the 
placing of the print order was the postage price in the country of printing. This 
possibility re-enforces the point that terminal dues must be closely related to 
actual delivery costs. 
9. SCOPE OF RESERVED SERVICES -PARTICULAR ISSUES 
Certain potentially problematic details concerning the scope of the reserved area are 
discussed below. 
9.1 PROBLEMS OF DEFINITION 
It was stated above that letters could be possible reserved services, but that parcels 
and express services should not be. However, in practice, it may not be so simple 
to distinguish between them. Customers and laymen refer to several items as 
"letters"; for them it is a general description of a communication that can be sent 
by different means (including ordinary mail, express or fax). Here, the term 
"letter" is employed as used by operators -that is, meaning a communication item 
sent by ordinary mail. 
However, this description requires further elucidation. 
Postal communication items comprise letters and post cards, but not publications 
or goods-bearing items. They can be used for personal or business (including 
organisational) co~respondence. A postal item is not sent by telecommunications. 
However, a communication originally sent by telecommunications can be 
converted into a postal item by being printed, enveloped and despatched for 
delivery (see discussion of "electronic transmission" below at Paragraph 9.3). 
For legislative purposes, a more precise definition will be required. However, the . 
intention here is not to seek the ultimate definition of a letter or a postal 
communication item. The definition given above is intended to be more general 
in nature, in order to indicate the general approach required. In addition, the 
Chapter 8: Discussion of possible solutions page 201 
analysis below highlights certain specific problems met in defining the limits of 
letters. The discussion emphasises particularly services which are not ordinary 
letters. 
9.1.1 LEITERS/EXPRESS 
In what way can an express item be easily distinguished from a letter? Its 
dimension, weight and contents may be the same. Even the speed of delivery may 
be similar. 
The essential difference lies in the value (whatever form it takes) added by express 
service providers and perceived by customers. The most effective way of 
determining the extra value perceived is to consider the extra price that customers 
are prepared to pay. 
9.1.2 INDIVIDUALISED COMMUNICATION 
Since the criterion of the individuality of an item is so important from a regulatory 
point of view, it is necessary to define here what is meant by an "individualised 
communication". The essential point is that the text in the ·communication should 
relate to the business or personal affairs of the addressee (either an individual, an 
organisation or a position within an organisation) with sufficient individuality that 
it is clear that the text (excluding the address and any appellation) refers 
specifically to the addressee. 
Direct mail is becoming increasingly "personalised". However, since the same or a 
similar message is being sent to other addressees, it is clear that it would not pass 
the test of referring specifically to the affairs of the addressee. However, this 
trend of personalising direct mail entails that the traditional criterion of 
determining whether or not the text was identical is probably no longer sufficient. 
Invoices and statements have text (the figures used in each item) that vary from 
copy to copy. It seems to follow that they are usually individualised, according to 
the definition used above. However, it may be remarked that in some Member 
States such mail is considered as printed papers, and may be therefore be treated 
as being non-reserved. 
In assessing whether an item is individualised or not, the important criterion is 
that of the contents, not of the means of production. If an advertiser chooses to 
send a number of hand-written items with identical text, they cannot be regarded 
page 202 Chapter 8: Discussion of possible solutions 
as individualised. Conversely, an invoice containing a number of details specific to 
the addressee appears to be individualised, whether the figures it contains are 
printed out by computer or hand-written. 
9.1.3 "PRINTED PAPERS" 
Proposals for the regulatory position of printed papers should be formulated by 
reference to the basic principles of the universal service provision. The absolutely 
fundamental policy imperative is that postal communications of a personal or 
individualised nature should be collected and delivered universally. Such mail 
would include all items where the text is not identical, and would therefore include 
all personal correspondence and individualised business correspondence (see 
above at Paragraph 9.1.2). It seems appropriate that the set of reserved services 
that would be established to safeguard the universal service should be based on 
such items of an individualised nature. 
A priori, this would exclude all printed papers from the set of possible reserved 
services. Such a position should certainly not pose problems for publications. The 
regulatory position for publications (magazines, newspapers and books) in most 
Member States is that their distribution should be placed in the non-reserved area. 
The probable de facto position in the few Member States whose postal legislation 
places such publications in the reserved area is that their distribution is no longer 
carried out exclusively by the postal administration. 
In addition, there is a general will to assist the plurality of th~ press. However, the 
high discounts often awarded by postal administrations to publications can create 
a de facto monopoly for the administrations over home delivery of publications of 
certain types or to certain areas. At first sight, such discounts can appear to 
encourage the widening of readerships. 
However, over a longer period, they can serve to discourage other operators from 
providing services in what is, in most Member States, a non-reserved market. 
They can therefore have the strategic effect of reducing the options for publishers, 
and may actually limit readership. In summary, such discounts not only are 
unhelpful for the economics of the universal network, but also can make a non­
reserved service effectively a monopoly, to the possible ultimate detriment of all. 
By comparison with publications, the position of direct mail in relation to the 
economics of the universal service network could be rather different. Direct mail 
Chapter 8: Discussion of possible solutions page 203 
often attracts printed paper discounts -but of a much lower level than those 
associated with publications. It constitutes an estimated 18.5% of the volume of 
the Community's postal administrations' domestic mail. If the placing of this 
category of mail in the non-reserved area were to cause a significant proportion of 
volume to be lost from the universal service network, it might jeopardise the 
economics of the network, and put at risk the central objective of achieving an 
affordable price for the universal service. 
In summary, there are strong arguments for placing direct mail in the non­
reserved sector. However, it should be recognised that there could be difficulties. 
Firstly, the increasingly personalised nature of direct mail gives rise to growing 
difficulty in distinguishing direct mail from ordinary letters. Secondly, direct mail 
presently generates a significant, and rapidly growing, proportion of postal 
administrations' total business, and its economic relevance to the universal service 
obligation should be analysed in detail. 
These issues need to be analysed in order to assess whether the problems noted 
above -regulatory or economic -would actually occur in practice. In the light of 
this analysis, the Commission will, with the help of Member States, need to 
propose specific measures, for example with regard to adequate control 
mechanisms for preventing ordinary mail being passed off as direct mail. 
Moreover, if a Member State· was concerned that such a measure might jeopardise 
its universal service, it might benefit from an exception to the application of 
Community law to the extent provided by Article 90.2. 
9.1.4 SMALL PACKETS/PARCELS 
A different problem is posed with parcels. Many definitions of letters in their 
broadest sense suggest that they range up to 2 kg. Within this definition of a 
letter falls the "small packet". 
What is the distinction between a small packet and a parcel? (In practice, it is 
made not so much by reference to regulatory criteria, but rather is decided by the 
customer himself usually on the basis of price.) 
The criterion of contents should be applied: if a packet contains goods rather 
than a communication, it should be treated as non-reserved just as a parcel 
(because the customer has a choice how to send it). This distinction should be 
page 204 Chapter 8: Discussion of possible solutions 
reinforced by the use of a weight limit. (In fact, a low weight limit would reduce 
the significance of this problem.) 
9.2 SLOWER POSTAL STREAMS 
A word of clarification is needed concerning what could be included within the 
reseived seivices. They include not only the quicker standard streams (LC in 
some Member States, first class in others), but also streams that are slower. 
The latter include printed papers and second class letters (depending on which 
countries offer a LC/ AO split and which a first class/second class split), as well 
as rebate (a bulk service with a longer delivery standard) and deferred postings. 
These are all intentionally slower streams, with advertised slower standards. 
(The question of poor performance against seivice standards is therefore entirely 
separate, and is discussed below at Paragraph 14.3.) 
93 ELECTRONIC COMMUNICATION 
Communications made by electronic means are outside the postal sector. Where 
they are combined with some form of seivice provided by postal operators, such 
communications are usually called postal electronic mail. 
One such seivice provides facilities to the public to send a message from a fax 
machine provided by an operator, and for the fax to be collected from a distant 
fax machine by the intended receiver of the faxed message. Such an operation 
does not involve any mail seivice, and should clearly be considered non-reseived. 
Another form of electronic mail combines electronic mail with mail seivices. 
Ordinary electronic mail (facsimile transmission or distance printing of 
individual or bulk messages) is non-reserved. However, if the hard copy then 
needs to be delivered to a third party as a separate distribution process, this extra 
element is arguably a letter delivery service. The letter delivery element might 
therefore be considered reseived (provided that it met all the other criteria for 
reseivation ), while the electronic transmission would be non-reserved. 
9.4 MAIL PREPARATION 
Certain postal administrations permit "consolidators" to act as intermediaries 
between the original mailer and themselves. These consolidators act primarily as 
mail preparers, but also offer other facilities such as credit. 
Chapter 8: Discussion of possible solutions page 205 
The consolidators compete with each other, although they have certain special 
rights since it is necessary for them either to be approved by the regulatory body 
or to enter into a contract with the postal administration. The activities of the 
consolidators before the mail is actually posted with the postal administration do 
not make the mail non-reserved. However, it is interesting to note that the 
permitting by the postal administrations of such activities under contract implies 
their acceptance that the postal operation is not a seamless process which cannot 
be viewed in terms of its component parts. 
The activities of such "intermediaries can add flexibility for the customer who 
originates the mail. They may also save the postal administrations costs, savings 
which could be reflected in discounts that would benefit both the original 
customer and the intermediary. 
Intermediaries do not compete with the two high fixed cost activities of the postal 
administrations -either with collections from public posting boxes and post office 
counters or with deliveries. Their operations are therefore compatible with the 
objective of maintaining universal service. 
There is no reason for this facility not to be available to all users, and all postal 
administrations therefore ought to make contractual facilities available to all 
such operators. In view of ~he similarity between the operations of the different 
postal administrations (and therefore of the cost saving work that intermediaries 
might be able to carry out), there seems scope for establishing a Community 
minimum set of contract facilities that should be made available. (See below at 
Paragraph 17.) 
It should be emphasised that the postal processes carried out by such 
intermediary operators are mostly substitutes for similar processes carried out by 
postal administrations. They do not add value in a way that is significant from a 
regulatory point of view. Mail preparation services therefore do not usually 
constitute "new services", as described at Paragraph 7 above. 
If the mail handled by such intermediary operators would meet the criteria for 
being reserved, it would remain reserved in the sense that, following the 
processes undertaken by the intermediary, the mail would then have to be posted 
with the postal administration for whatever postal processes remained (including 
final delivery). Such items therefore could not be transported out of the country 
page 206 Chapter 8: Discussion of possible solutions 
by a third party operator for mailing back under an A-B-A remail system (see 
above at Paragraph 8.3 ). 
IO. PROPOSED CRITERIA 
As stated above (at Paragraph 4 ), some items cannot be reserved. These include heavier 
parcels, heavier publications, express items and all unaddressed mail. Some items for 
which there may be a universal service requirement also cannot be reserved -for 
example, lighter weight parcels and printed papers. 
The possible reserved area is therefore restricted to individual communication items 
(see Paragraph 9.1). These comprise letters and post cards. In order to exclude goods 
and publications from the reserved area, it is necessary first to apply a contents criterion. 
Having identified specifically the communication items of a personal or individualised 
nature, the scope of the reserved area within these items needs to be defined by using 
other criteria. The efficacy of the other criteria to be used is discussed in detail in Annex 
16. In summary, only the criteria of weight and price will be effective in defining which 
of the individual communication items that could be reserved should be reserved. 
Indeed, they need to be applied in combination, with some link between the weight limit 
(which should be a single upper limit applied across the Community) and the price limit 
(which would be determined separately in each country by reference to the tariff at the 
weight limit). 
The application first of the contents criterion, and then of the price and weight criteria, 
is shown diagrammatically in Figure 1 below. Three regulatory categories, based on 
whether or not there was a universal service obligation, are shown. As noted at 
Paragraph 9.1.3 above, the placing of addressed direct mail in the non-reserved area 
would, a priori, be envisaged. The issues need to be analysed in order to assess whether 
this measure would threaten the universal service, either through weakening its financial 
viability or through the possible abuse of such a liberalising measure if proper regulatory 
controls were not in place. On the assumption that the status of direct mail as non­
reserved was confirmed, it would be included on the second line in the figure. 
It should be noted that the intention of the price limit is not simply to ensure that 
express services are placed in the non-reserved sector. This would be to view the future 
market only in terms of the products that are available today. Rather, it is intended to 
set the price limit at a level that is sufficient to embrace only those services that need to 
be protected. 
Chapter 8: Discussion of possible solutions page 207 
Figure 1: Definition of reserved area -application of contents, weight and price criteria. 
UNIVERSAL REQUIREMENT -
PER.SONAL/INDMDUALISED 
COMMUNICATION 
UNIVERSAL REQUIREMENT 
-GOODS/PRINTED PAPERS 
No UNIVERSAL 
REQUIREMENT 
D Weight/price criteria 
LEITERS/POSTCARDS 
Reserved D . Non-reserved 
In this way, other services that may not yet exist but would be priced in mid-range (above 
the price of the "basic" service, but below the prices associated with express) would 
definitely be placed in the non-reserved sector. This would make their position clearer 
rather than through a debate about whether such services were or were not "significantly" 
different (see Paragraph 7 above). Put graphically, the approach to the price criterion 
should not be "top-down" (working down from the perspective of express items), but 
"bottom-up" (working up from the perspective of basic letters). 
The proposals here perhaps refer more to the medium term. For the longer term, 
further liberalisation may well be possible. For the shorter term, work would need to be 
undertaken to achieve the medium term aim of having a Community-established set of 
reserved services. 
While Community medium and longer term proposals are being developed, the 
Community's competition rules, based on the principles of free provision of services and 
of undistorted competition, will continue to be applied throughout to services as they are 
actually provided. As noted at Paragraph 4 above, each Member State is obliged to seek 
the least restrictive solution appropriate to its postal sector, and this may imply a 
reserved area with a smaller scope than that defined by the Community-set limits. (In 
the other direction, if a Member State considered that application of the Community 
limits would jeopardise the universal service in its territory, it might benefit from an 
exception to the application of Community law to the extent provided by Article 90.2.) 
page 208 Chapter 8: Discussion of possible solutions 
Once the criteria to be used have been chosen, detailed studies of the economics of the 
universal service network will be necessary in order to develop the actual limits to be 
applied to delineate the reserved area. 
10.1 MEDIUM TERM 
A contents criterion should be used to exclude all goods-containing items. Then, 
a weight criterion should be used, allied to a price criterion. The weight limit 
should be set Community-wide. The regulatory bodies in individual Member 
States should set the price limits. In any event, the price should not exceed the 
standard letter (that is, LC or first class) public tariff equivalent of whatever 
weight limit is set. 
10.2 SHORTER TERM 
In the shorter term, there may need to be a transitional period in order to 
achieve the objective described above. Activities that may be necessary m 
relation to formulating and implementing Community weight and price limits are 
described below: 
10.2.1 WEIGHT LIMIT 
The Community-wide weight limit would almost certainly be below the existing 
monopoly weight limits of some Member States. Implementation of such a 
weight limit should therefore not necessarily be immediate, but after a period to 
permit time for the administrations concerned to make adjustments (particularly 
in the tariffs for items which presently fall within the monopoly limits, but would 
come above the Community limits, and would therefore be non-reserved. 
In practice, this may not prove to be too great a problem. Most of these items -
heavier-weight packets -could presently be sent as parcels. To the extent that 
the customer has the choice of how to send such items, they ar~ already outside 
the monopoly. This point also indicates that the weight limit for the reserved 
area should almost certainly be less than 500g. 
10.2.2 PRICE LIMIT 
The price limit indicated by taking the price equivalent of the weight limit may be 
a significant reduction on the price limits that are presently in force. Of course, 
this refers only to those countries that already have such limits: the majority of 
Chapter 8: Discussion of possible solutions page 209 
Member States permit the existence of competitive courier/ express services but 
without a quantitative definition of such services. 
It might therefore be difficult to introduce this price limit immediately. In the 
interim period, the price limit could be set as a maximum at, for example, 1.5 
times or even twice the price equivalent of the weight limit. Thus, for example, if 
the Community weight limit was x grams and the letter price at that weight was y 
ECUs, the interim price threshold for non-reserved services would be set at up to 
1.5y ECUs or 2y ECUs. 
In the longer term, progress towards monetary union may enable a common 
price limit to be set in ECUs. 
10.3 LONGER TERM 
In the longer term, Member States would be expected to experiment with 
introducing more competition, with the objective of gradually reducing the scope 
of the reserved services. In several years' time, the Community should assess the 
balance struck between universal service requirements and the need to open up 
the postal sector to greater competition. This assessment would need to be made 
in the light of the market or service developments as they occur. 
11. COMPATIBILITY OF POSTAL LEGISLATION WITH COMMUNITY TREATIES 
AND POLICIES 
All Member States' postal legislation and the Community's policy for its postal sector 
must be fully compatible with the Treaty of Rome. Where this has not been the case in 
the past, the Commission has found necessary to take appropriate measures, particularly 
with regard to express services. 
However, in addition to national postal legislation, Member States have other 
obligations under Treaties that have been signed. Notably, all Member States are 
signatories to the UPU Convention through their membership of the United Nations. 
The UPU Convention long pre-dates the Treaty of Rome or the General Agreement on 
Trades and Tariffs. However, it is reviewed by the UPU Congress every five years. 
Each Convention provides that its articles should remain in force until the activation of 
the next Convention after the succeeding Congress. This has potential implications in 
terms of Article 234 of the Treaty of Rome. 
page 210 Chapter 8: Discussion of possible solutions 
From the point of view of competition law, the main concerns in relation to the UPU 
Convention are the level of terminal dues agreed each five years and, in particular, the 
use of Article 25 (using the enumeration of the i989 UPU convention). The use of 
Article 25 can only be sanctioned if it is in protection of the reserved services of the 
Member State whose regulatory body is applying the sanction. 
(It is said that Article 25 is used in order to gain the correct compensation for the 
delivery administration. This, however, does not seem correct for two reasons. Firstly, 
Article 25 long predates terminal dues in the UPU rules. Secondly, Article 25 has been 
applied in the past even when the compensation received by the delivery administration 
would have been the same, regardless of whether the mail came directly from the 
administration in the country of origin or indirectly through another administration.) 
In terms of competition rules, it seems inappropriate for one postal administration to 
turn back mail posted by a private operator who is competing with another postal 
administration, whether the exclusive rights of the latter are being infringed or not. If 
the exclusive rights of the outward administration are infringed, it is for the regulatory 
body in that country to take legal action -not to seek assistance from another 
administration whose exclusive rights are not infringed. The use of Article 25.4 (which 
refers to A-B-C remail) therefore seems clearly inappropriate. 
The intention of Article 25.1 is that it should protect the legitimate domestic monopoly 
of member countries. However, in terms of compatibility with Community policy and 
law, there are three problems associated with its use. 
Firstly, as Paragraph 12 below makes clear, it is for the regulatory body to take the 
appropriate final actions against infractions of the special rights. If the postal 
administration receives mail which it suspects is A-B-A remail, it can choose to provide 
evidence to the regulatory body. The latter may then authorise the postal administration 
(that is, of Country A) to return the mail to the administration with which the items were 
posted (in Country B). In returning the mail in this way, the postal administration may 
state that it is doing so under Article 25.1. 
It is possible that, on one interpretation of Article 25.1, its application would follow the 
procedure described above. The clause refers to "a member country" not being bound to 
forward or deliver such mail, and this could be taken to refer to a decision taken by the 
regulatory body. However, in the past, Article 25 has been applied by postal 
administrations often without reference to the national regulatory body (if it exists). 
Chapter 8: Discussion of possible solutions page 211 
The second problem associated with Article 25. l is that its scope appears to permit a 
member country to turn back mail items (such as heavier publications) even if these 
items did not fall within the postal administration's exclusive rights. However, provided 
that the national regulator is properly involved in any decision on action to be taken to 
protect special rights, the apparently wider than necessary scope of the Article would be 
unlikely to be misused. 
Thirdly, Article 25.1 would restrict the ability of a customer himself to transport his mail 
into another country and post it there for delivery back in his own country. As discussed 
at Paragraph 5.2 above, customers ought to be permitted to do this, provided that the 
administration in the delivery country received the mail (if the mail met the criteria for 
being reserved in the customer's country) and was properly compensated for its delivery 
costs. The use of Article 25.1 should therefore be confined, at most, to A-B-A remail -
that is, mail transported out by a third party operator for mailing back -if this mail 
would normally be covered by the exclusive rights of the postal administration in 
Country A. 
Certainly, if any action were to be taken to turn back mail, such action must be capable 
of justification under the Community's competition rules. The regulator should also 
ensure that no mail is turned back if it was printed in the country in which is was mailed, 
even if the content was in some way formulated before printing in the territory covered 
by the regulator. 
The Community and the regulatory bodies will need to ensure that the GATS is properly 
applied. At the same time, it may wish to put in place rules that forbid any unfair 
exploitation of the Community's policy on tariff principles (a possibility discussed at 
Paragraph 8.2.3). If problems arise, this issue needs to be addressed within the context 
of the GATS. It is clear that it should also be discussed in a wider context -certainly in 
the framework of the UPU, but probably also the CEPT. 
A key question to be answered concerns whether mail, which originated in a Community 
country and was then remailed through a non-Community administration for mailing 
back to another Community country for delivery there, should be considered "A-B-A­
like" remail. 
In this context, it should be noted that postal charges can be an important determinant in 
the location strategy for certain types of operators (such as in mail order, bill processing, 
printing or direct mail). There could be a danger that the application of the principle of 
prices related to cost put posters in the Community at a disadvantage in comparison with 
page 212 Chapter 8: Discussion of possible solutions 
those posting outside the Community if the price of the latter was lower simply because 
they were based on traditional terminal dues set at below delivery costs. This could have 
the effect of encouraging certain industries that were heavily reliant on postal services to 
relocate outside the Community, simply to take advantages of the prices that did not 
reflect the costs of the total operation. This would clearly not be in the Community's 
interest. 
12. THE ROLE OF THE REGULATORY BODY 
The postal sector presently comprises both a reserved area and a non-reserved, 
competitive area. In the future, there will continue to be the two areas, although their 
scope will probably be different from that at present. 
A regulatory body has roles to fulfil in both areas: 
-in the reserved area, it will want to ensure that the exclusive rights have the smallest 
possible scope consistent with the objective of ensuring universal service at an 
affordable price (in other words, the application of the principle of "proportionality"); 
it will also need to ensure that the reserved service provider meets its obligations; 
-in the non-reserved area, it will need to ensure that the line between reserved and 
non-reserved areas is clearly identified;. it will need to ensure that the reserved service 
provider does not gain an unfair competitive advantage in the non-reserved area 
through cross-subsidising from the first to the second. 
After ensuring that the dividing line between the two areas is clearly identified, the key 
role of the regulatory body would be to ensure that the reserved service provider meets 
its obligations. These obligations are discussed in detail below at Paragraphs 13, 14 and 
15. 
In order to achieve this impartiality, it is essential that the regulatory body be separated 
from any operational function. It would seem preferable if the regulatory body was a 
completely separate institution from the reserved service provider (so that, for example, 
it was not common for individuals' careers to move frequently from one to the other). 
However, the more important point is that all concerned (the consumers, the reserved 
service provider( s) and the private operators) are all convinced of the regulatory body's 
impartiality. If this is achieved, even if the reserved service operator and the regulatory 
body both appear to come under the umbrella of a single organisation, there should be 
few complaints. 
Chapter 8: Discussion of possible solutions page 213 
Enforcement of special and exclusive rights is also a significant function. It is important 
that the responsibilities of the regulator and reserved service operator in this regard are 
clearly defined. The reserved service operator may initiate action, in terms of 
investigating (within limits defined by national law) possible infractions of its special 
rights, assembling the evidence and then providing the evidence to the regulator. It is 
then for the regulator actually to take the appropriate action against the operator that 
breached the special rights. 
It is not thought that there is a problem concerning the protection of the privacy of mail. 
However, since this privacy is a basic right of the Community's citizens, it seems 
desirable that the regulator seeks appropriate undertakings as to its safeguarding by the 
universal service operator. 
13. UNIVERSAL SERVICE OBLIGATIONS -ACCESS 
There are three basic principles for access to reserved services. Firstly, access 
conditions should be the same for all, assuming the potential users present their mail in 
the same way. Secondly, potential users ought to know exactly what they are buying -
not just in terms of the posting conditions they must meet and the prices they must pay 
but also in terms of the service that they will receive. Thirdly, access conditions should 
try to optimise flexibility for the cu~tomer (while ensuring that the reserved services are 
protected). These principles can be translated into more detailed proposals for access as 
shown further below. 
For mandatory non-reserved services, it appears that the access conditions should be 
similar to those for reserved services. 
13.1 PUBLICATION OF POSTING CONDITIONS 
Each administration should publish the conditions of posting into its reserved 
service network. The conditions should be as simple as possible. Most 
importantly, they must not unfairly discourage (either by tariffs or other means) 
potential customers from using the network. 
These potential customers may well include private operators, with whom the 
postal administration (the provider of the reserved service) may be competing in 
the non-reserved sector. The rule. should be that no conditions for access to the 
reserved services should be set specifically that would disfavour the private 
operator in the non-reseived sector. 
page 214 Chapter 8: Discussion of possible solutions 
13..2 CONTRACT CONDITIONS FOR LARGE CUSTOMERS 
All postal administrations should have contract services available for large 
customers. There is significant scope for making the main contract conditions 
(dealing, in particular, with what preparation work needs to be carried out by the 
customer in order to earn discounts) similar between the different postal 
administrations. (See below at Paragraph 17.1.) 
13.3 MAIL PREPARATION 
Several postal administrations already permit private operators to act as 
intermediaries between the customer who originates the mail and the postal 
administration who carries out the latter part of the mail process (including 
delivery). 
The availability of such mail preparing services is to be welcomed. It gives greater 
flexibility and choice to customers, even when the mail is eventually channelled 
into a reserved service (on the assumption that the mail meets the criteria for 
being placed in the reserved area). Since the delivery element (the key fixed cost 
phase of the postal process) is still protected and therefore the volume going 
through this phase is maintained, the activity of such mail preparation is entirely 
consistent with the universal service objective. (See also the longer discussion at 
Paragraph 9.4 above.) 
In the light of these benefits to potential customers, Member States should be 
expected to authorise such intermediate operators, unless there are compelling 
reasons to the contrary. To ensure the quality of service provided by such 
intermediaries before the mail is posted with the postal administration, the latter 
could licence authorised intermediaries. (Of course, the intermediaries would be 
in competition with each other.) The rules for obtaining such licences ought to be 
clearly laid down, to avoid the claim of abuse of dominant position if the postal 
administration grants a licence to one operator but not to another. 
13.4 ACCESS FOR PRIVATE OPERATORS 
If a potential user wishes to use the reserved services and can meet the conditions 
for doing so, then he should be permitted access. This entails that if a private 
operator chooses to use the reserved service and then add some value to it in 
order to compete in the non-reserved sector, he should be allowed to do so. 
Chapter 8: Discussion of possible solutions page 215 
13.5 ACCESS FOR OTHER POSTAL ADMINISTRATIONS 
For the ordinary international mail operation involving two postal administrations, 
it is accepted that there is some element of the relationship between the 
administrations involved that is different from the ordinary commercial 
relationship between a postal administration and a large customer. It therefore 
follows that, for such an operation, postal administrations should continue to have 
access into each others' delivery operations on special conditions (including the 
compensation arrangements -see below at Paragraph 15.3 ). 
At the same time, however, outward postal administrations should he able to have 
access, should they choose, on similar conditions as thosr~ on which other large 
users gain access. In this way, as an example, the expc-ditors originating the mail in 
the outward country can have access to the preferential tariffs for delivery in the 
inward country (if such tariffs are available). 
14. UNIVERSAL SERVICE OBLIGATIONS -SERVICE STANDARDS 
It is insufficient simply to state that universal service must be provided. The quality of 
the universal service must also be stipulated, using whatever criteria of 4uality are 
appropriate. Below arc discussed the quality standards that need to be set for the 
reserved services, the system for monitoring performance against those standards. and 
the control mechanisms that would be needed in the event of performance falling short 
of the standards set. 
Consideration will need to be given as to how far this quality control system also ought to 
apply to mandatory non-reserved services. Cle<irly, such services that were ohliged 
because they were part of the set of reserved sen'ices defined at the Community level 
should have the same service obligations as the reserved services. These obligations 
would include havir1g the same standards as the reserved services 
Those non-reserved services that were determined hy <1 Member State to be mandatory 
would also carry the ohligation to tell the customer wkit service standards were applied 
to them. However, in the latter case, it is accepted that the standards set would not 
necessarily be the same as for the reserved services. 
Intra-Community mail is a special case. The discussion <i bove (at Paragraph 8.1) 
concludes that the placing of this mail in the non-reserved area wouid be envisaged 
(while at the same time it will be necessary to establish certain safeguards). However, 
page 216 Chapter 8: Discussion of possible solutions 
there would be a universal service obligation (placed on the two postal administrations 
involved) for such mail up to the weight limit used in the Community's definition of the 
set of reserved services. This universal service obligation implies the same quality of 
service disciplines as for the domestic services that the Community determines have to 
be provided mandatorily. Of course, as discussed below, the standards would be 
different from those set for domestic mail. 
14.1 STANDARDS SETTING 
All Member States agree that the granting of reserved service rights implies an 
obligation to perform well. However, uniform standards for good performance 
have not yet been defined. 
There should be minimum Community service standards to be applied within· 
each Member State. (There might be scope for regional flexibility within 
Member States, reflecting variations between urban concentrations or rural 
areas.) It should be emphasised that these standards would be the threshold 
levels for acceptable performance only. For the faster standard services (that is, 
either LC or first class), the appropriate threshold standard could be 90% 
delivery by the first working day after posting (known as D + 1 ). 
There should also be standards for cross-border items within the Community. In 
the interim, these could be calculated by aggregating the service standards for the 
outward (expedition), transport and delivery elements. The interim standard 
would therefore be 81 % delivery by the third working day after posting (known 
as D + 3, and calculated by allowing a 90% achievement of an outward despatch 
by the day after posting, and 90% delivery in the inward country within two 
working days of receipt). 
Further, there should also be standards for dealing with complaints -both in 
terms of the maximum time that should be taken to deal with a complaint and in 
terms of a policy for possible remedies that a customer may claim. (The UPU 
itself has suggested standards.) The time requirement for dealing with 
complaints implies time standards for administrations to reply to each other in 
the case of complaints concerning intra-Community mail. Regulatory bodies 
must ensure that there are clear procedures laid down for the resolution of 
disputes. 
Chapter 8: Discussion of possible solutions page 217 
14.2 PERFORMANCE MONITORING 
It is clear that the monitoring system needs to produce results that reflect as 
closely as possible the customer's experience. 
Systems for measuring "operational" performance do not paint the whole picture. 
These are samples carried out within the operational span (usually from receipt 
in the outward office to some point before the item is taken out by the delivery 
postman). 
The customer's experience of the postal service is "door-to-door" (or "end-to­
end") -that is, from being put in a posting box (or collected from the customer's 
premises) to being delivered at the destination address. The only effective 
measuring system which accurately will reflect the consumer's experience is one 
that also measures end-to-end. 
Further, for the sake of impartiality, this should be a system monitored by an 
outside organisation. Such a system has been adopted by some EC postal 
administrations, and is being seriously considered by others for introduction. 
The CEPT has accepted that this system should be used for measuring cross­
border quality of service. 
It seems clear that some body will be needed to monitor service across the 
Community. Because this would be for regulatory more than operational 
reasons, it does not, at first sight, seem appropriate to delegate such a task to the 
CEPT, which is an operators' group. However, provided that the CEPT employs 
an impartial independent agency to monitor performance and is willing to 
publish the results, it seems acceptable to continue with the CEPT system on an 
experimental basis. 
Availability of service performance information to actual or potential customers 
is essential: it is part of the access obligation that the universal service provider 
must meet, so that customers know what they are buying. Postal administrations 
therefore ought to be able readily to provide information on service targets and 
actual performance for national, intra-Community and international mail. 
To make the information as relevant as possible to the requirements of different 
customers, performance averages should be supplemented by further details -for 
instance, giving local and regional results for national mail, and information by 
the main destination countries for cross-border mail. 
page 218 Chapter 8: Discussion of possible solutions 
Further, the regulatory body should guard against using average transit times or 
percentages as the sole indicator of the effectiveness of the universal service. It 
therefore seems desirable that each regulatory body should establish a group 
comprising representatives of users (from the individual consumer to large users) 
to give the regulator a more "rounded" picture of the service. In addition, the 
regulatory body of each Member State must ensure that there are clear 
procedures for claims and compensation, for instance in the case of loss. 
14.3 CONTROL 
Following the principle of "subsidiarity", control functions should primarily be the 
responsibility of the national regulatory bodies. The emphasis here should be on 
encouraging improvements where they are necessary. If the performance 
indicates a significant shortfall, the regulatory body would probably want to agree 
with the postal administration a phasing period for improving service, with 
intermediate targets to be achieved at each phase. 
However, what should happen in the case of persistent failure to meet service 
targets? The ultimate sanction- would be for the national regulatory body, 
perhaps under pressure from the Community, to seek tenders from different 
operators (both the postal administration and interested private operators) for 
the provision of the service. In this event, tenders would be invited for provision 
of the service where performance was particularly poor. However, in the case of 
absolute network break-down, tenders could be invited for the national service. 
It must be stressed that this a pessimistic scenario. However, it should always be 
remembered that the privilege of exclusive rights carries obligations of service. 
Service to the customer is paramount. 
15. UNIVERSAL SERVICE OBLIGA TlONS -TARIFFS (INCLUDING TERMINAL DUES) 
For mandatory non-reserved services prices will he determined by market forces. These 
forces might lead towards regionalised pricing. However~ the postal administrations, or 
other operators upon which are placed the universal service obligation for these items, 
may choose to take the marketing decision to offrT these services at a single unitary 
tariff covering the whole of the territory. Alternatively~ the regulatory body or the 
government may take the political decision that there should be a 'j;erequation tarifaire" 
for such items. 
Chapter 8: Discussion of possible solutions page 219 
Even if they (the postal administrations and any other operators with a universal 
obligation) had the choice and decided not to offer a "perequation tarifaire", they would 
still want to have a uncomplicated tariff structure in order to aid comprehension on the 
part of potential customers. At the same time, they would want to guard against the 
danger of being used simply as the distributor of last resort by organisations that 
required universal service of parcels up to a certain weight. 
It should be mentioned here in parenthesis that postal administrations should be 
encouraged to use the ECU as much as possible in their activities. Early discussion of 
the use of the ECU to clear terminal due accounts seems appropriate. 
In addition to the discussion below, tariff issues are studied in detail in Annex 14. 
15.1 RELATIONSHIP TO COSTS 
All Member States agree that tariffs should be based on costs. More detailed 
analysis is needed to ensure a common understanding of what different costs 
there are, and to which of them this tariff principle should he applied. The 
general rule should be that tariffs ought to be based on average costs; tariffs for 
any service must cover at least the marginal costs associated with that service. 
If the standard (public) tariff is to be related to costs, it follows that contract 
prices should also be thus related. It also follows that discounts should relate to 
cost savings. 
15.2 SUBSIDIES 
A view will need to he taken of how subsidies should he paid. At first sight, the 
preference could he for central subsidies paid to administrations directly related 
to the volume in the streams to be subsidised. An example of such use would he 
for preferential tariffs. 
The general rule should be that cross-suhsidies should he reduced to a minimum. 
The main exception would be the "natural" geographic cross-subsidies permitted 
by a unitary tariff structure. As discussed at Paragraph 7 above, it may, in certain 
limited circumstances, also be necessary to permit cross-subsidies from the 
reserved sector to enable mandatory non-reserved services, that have to be 
available universally, tu be provided in loss-making operations in certain localised 
areas. Such cross-subsidies would need to be the subject of vigorously 
transparent treatment. 
page 220 Chapter 8: Discussion of possible solutions 
Of course, profits gained in the non-reserved sector can be used to cross­
subsidise the reserved services. However, cross-subsidies from the reserved to 
the non-reserved areas that are for other purposes than to ensure universal 
services should be phased out, unless they are compatible with competition rules. 
At any event, such cross-subsidies that enable predatory pricing in the non­
reserved area are illegal. 
The minimising of cross-subsidies will become even more important if, as is 
proposed below, terminal dues are based on inland tariffs. 
15.3 TERMINAL DUES 
The case for using inland tariffs as a basis for compensatory systems for mail 
exchanged between postal administrations rests on two principles: firstly the 
principle of having tariffs related to costs, and secondly the principle of taking 
action to avoid distortions of competition. 
Whether Community mail is considered reserved or not, it will continue to be 
very difficult to control the international mail activities of private operators 
(assuming that such control was desirable). Further, it is becoming increasingly 
difficult to define the border between what are genuine international items and 
those items (A-B-A remail) which contravene inland monopolies. 
Inland tariff based terminal dues would remove most of the financial ill-effects of 
this lack of distinction. 
There should be two objectives. Firstly, cost distortions should be ~moved. 
However, genuine competitive differences should not be affected by regulation. 
Secondly, the operational partner not involved in the competition in the market 
place in the country where the mail originated -that is, the reserved service 
provider in the country of delivery -should be taken out of the competitive 
terrain by having his costs properly compensated. (However, if the delivery 
reserved service provider choses to offer preferential tariffs, these should be 
available to the outward administration using these delivery services.) 
There are some arguments against such a system. It would involve an increase in 
costs for some countries which have a certain profile of traffic and lower tariffs. 
It would take some time before each administration properly understood each 
others' charging systems. The greatest long-term problem could be that of costs 
Chapter 8: Discussion of possible solutions page 221 
differing greatly between different destinations, thus making zonal pricing for the 
whole of the Community more difficult. 
For the longer term, the benefits of using inland tariffs as the basis for terminal 
dues outweigh the problems. The key tariff principle is that of relating tariffs to 
costs. 
There is no reason why this principle should not be applied to cross-border 
Community mail. The problems noted above argue for a phasing-in period 
rather than rejecting the principle of using inland tariffs. This phasing-in period 
would also allow for the time that will be needed for the transition towards a 
proper cost basis for inland tariffs. It would also permit time for preparation of 
the appropriate mechanisms to prevent unfair under-cutting of intra-Community 
postal prices by remailing through a non-Community country at terminal dues set 
below the true costs of delivery (see above at Paragraph 11 ). 
16. NON-RESERVED SERVICES 
Mandatory non-reserved services will carry certain obligations for the operators to whom 
the universal service commitment is entrusted for such services. These obligations were 
discussed in Paragraphs 13-15. 
For non-mandatory services, the policy is simpler. The over-riding principle should be 
that the laws of the free market should be left to act themselves. It therefore seems 
unnecessary to introduce licensing in order to guarantee minimum levels of service. If it 
were to be introduced, administrative systems would need to be established to measure 
service given. 
Licensing therefore does not seem appropriate in the non-reserved sector. Licensing 
should only be used in the reserved sector if it was decided to introduce more than one 
operator. 
However, a certain level of regulation may be necessary. Below is a short discussion of 
regulation that could be thought to be appropriate in the non-reserved sector. 
16.1 PRICE 
If a price limit is used to define the limit of reserved services, it will determine the 
minimum price that can be charged in the non-reserved sector. 
page 222 Chapter 8: Discussion of possible so/uh"ons 
Price is often a reflection of service (however perceived by the customer). A price 
threshold for non-reserved services should make any service standards 
unnecessary. 
There will need to be a special regulatory interest where the reserved service 
provider uses its universal network to provide non-reserved services. The 
regulatory body must insist on sufficient transparency to prevent any cross­
subsidies from the reserved to the non-reserved area that permit predatory pricing 
in the latter. 
16.2 OTHER 
Naturally, providers of non-reserved services, like all postal operators, must 
observe Community arid national legislation on data protection. Beyond this, 
there seems no need to impose obligations of privacy on non-reserved service 
providers. If any operator developed a reputation for not respecting the privacy of 
contents, he would rapidly lose business. 
In addition to this, the providers of non-reserved services operating their own 
transport services will also have to respect all existing and future Community and 
national legislation directly related to the provision of transport services. 
17. POSSIBLE AREAS FOR HARMONISATION 
Harmonisation could take place on different levels, between customers and operators or 
among operators. The important areas to be discussed with reference to possible 
harmonisation relate particularly to universal services. These are discussed below. · 
17.1 ACCESS CONDITIONS/CONTRACT TERMS 
It has been stated above that moves ought to be made to harmonise access 
conditions in the Community. This implies that it should be possible to make 
some movement towards harmonisation of contract terms. 
Of course, some contract terms relate to the specific postal operation which will 
differ in each country. However, in general, postal operations are similar; in 
principle, therefore, there should be significant scope to harmonise terms. 
This would imply that there ought to be some harmonisation of definitions. This 
would anyway seem desirable from a regulatory perspective. 
Chapter 8: Discussion of possible solutions page 223 
17.2 QUALITY OF SERVICE 
The most important harmonisation actions for quality of service are the setting of 
Community standards and the implementation of a single Community measuring 
system (as discussed at Paragraph 14). 
There may also be scope for having some shared operational standards in order to 
improve service. An example here would be the volume of mail that justifies mail 
being sent directly from an outward office to the delivery office. If the quantities 
of mail sent to intermediary offices either for additional sorting or transiting was 
reduced significantly, this could have a dramatic effect to improve quality. 
17.3 TARIFF STRUCTURES 
Connected with the development of more uniform access conditions, it would be 
beneficial to analyse the scope for making tariff structures more uniform also. 
This would become more practical when the proposals for common tariff 
procedures (as discussed at Paragraph 10.2.2 above) are implemented. 
17.4 CUSTOMER INTERFACE 
Many innovations relating to the customer "interface" are most easily introduced 
in co-operation with large customers. By its nature, harmonisation is much more 
all-embracing -hence making introduction more difficult and results possibly more 
tenuous. 
Examples of such possible forms of harmonisation could be where all 12 Member 
States: 
have a standard tiering system, using either an LC/ AO split or a first/second 
class split (not so~e one, some the other); 
have the same standards for envelope sizes; 
have a uniform post code system. 
There would have to be significant consumer benefits foreseeable (in either the 
shorter or longer term) before it would be worth pursuing such possible 
harmonisations. Any harmonisation of this sort would be difficult to implement. 
In terms of developing a more integrated Community postal policy, the most 
page 224 Chapter 8: Discussion of possible solutions 
valuable of these examples of harmonisation measures could be that of 
introducing a standard tiering system. 
Analysis of possible benefits would need to include the effects of new 
developments. For example, a uniform post code might seem to have some 
operational attractions in the short term. However, benefits from its introduction 
would be significantly reduced in the medium term by the advent of the next 
generation of optical character reader (OCR) sorting machines, which can read 
whole addresses, rather than just post codes. 
17.S OPERATIONAL 
In general, the Community ought to have less to say about what happens away 
from the customer interface. Normally, it is for the operators to try to agree 
operational standards -for instance for mechanisation equipment, where such 
standards could bring the operators some savings in research and development 
expenditure. 
However, where the standards used may directly affect users beneficially, there is 
more of a case for a Community role in encouraging harmonisation. Two 
pertinent examples here are the possible introduction of uniform routeing bar­
codes (which would allow different ~perators to be involved in the transmission of 
a single item) and the X-400 standard for electronic mail (which would facilitate 
international transmission of postal electronic mail). 
Uniform routeing codes could be part of a strategy for creating inter-operability 
between operators. More than one operator is involved in cross-border letter mail 
services. Increasingly, intermediaries are being used for domestic mail (see 
Paragraph 9.4). The achievement of the Community's objectives on quality of 
service will therefore be partly reliant on the ability of the systems (whether 
computer-based or not) of the two different operators involved in each 
operational relationship to be able to share relevant information. 
17.6 EMPLOYMENT 
The evolution of the Community's social policy will have effects on the postal 
sector. This will probably be the greatest stimulus towards making employment 
and other working conditions more uniform. 
Chapter 8: Discussion of possible solutions page 225 
The possible need for operational harmonisation mentioned above may make a 
certain level of co-operation in training necessary. An example could be the need 
for shared training between two operators (such as postal administrations that 
exchange large volumes of mail) who decide to co-operate in an operational 
management information system covering such exchanges. 
18. COMMUNI'IY COHESION 
The provision of a reserved service network providing universal service implies the 
setting of service standards. This necessitates maintenance and improvement of the 
network, as well as the development of new services. 
The present situation varies widely between Member States. The basic infrastructure 
varies because of external factors such as population density, geographic constraints and 
economic differences as well as more internal factors such as past investment policy. 
One indication of this is the different level of mechanisation in the different Member 
States. This may suggest that it would be unlikely that the investment required would be 
made in certain areas. However, it should be noted that there is not necessarily a direct 
link between investment in mechanised plant and quality of service. Improvements can 
be achieved through better management systems and the implementation of suitable 
quality control systems. 
If improvements in quality of service generally were not made in such areas, the gap 
between them and more favoured areas could widen, not only in terms of the quality of 
postal services, but also in terms of general business activity which good postal services 
help to stimulate. Therefore, the lack of a postal service up to modern standards in 
these areas would have an adverse effect, particularly on small and medium enterprises 
located there. 
It should also not be forgotten that there are, in addition, potentially significant social 
implications. The trends in the postal sector are likely to create some imbalances 
between its existing and future demand for staff, in terms of both their geographical 
distribution and their skills. 
The consequences of failure to meet the universal service targets in these regions should 
therefore be considered during the development of the Community's postal policy. 
page 226 Chapter 8: Discussion of possible solutions 
19. POLICY IMPLEMENTATION 
The Green Paper is intended to discuss policy issues and make proposals for the future 
of the Community's postal sector. It therefore seems inappropriate here to discuss in 
more than general terms the possible legal instruments that could be used to implement 
Community policy as it develops following publication of the Green Paper and after 
appropriate consultation. 
The proposals could be developed into draft directives to be submitted to the Council as 
harmonisation measures under Article 100 (for unanimous approval) or Article 100a (for 
approval by qualified majority for measures relating to the achievement of the Single 
Market). The proposals concerning aspects related to competition or the establishing of 
the common market could be developed into draft directives to be issued under Article 
90.3. 
Because of the varying nature of the different actions involved, a combination of these 
procedures seems most likely. 
20. POSTAL FINANCIAL SERVICES 
The sale of services at the counters of postal administrations is, in almost every instance, 
offered in competition with the sale of the same or similar services elsewhere. 
The network of post office counters has different dynamics to the postal network that 
provides mail services. In the case of the latter, the different parts of the network are 
completely inter-dependent: a letter collected at one point in the network needs to be 
delivered in another. 
In the case of counter services, the same is not true: another location can be added to, or 
subtracted from, the network without the same need to re-arrange the management of 
the network. As with mail services, there can be a problem in identifying who are the 
customers. In the case of counter services, is the customer the service provider whose 
services are provided through the counter, or is it the users of those services who visit 
the counters to gain access to those services? 
Both networks (mail and counters) have high fixed costs (even where some of the work is 
sub-contracted). The counters networks are a resource that is important to the whole 
Community, especially in rural areas. It is therefore in the interest of the Community 
that the counters network is as financially viable as possible. Here, a comparison of the 
Chapter 8: Discussion of possible solutions page 227 
different services offered by the different postal administrations at their counters shows 
a remarkable diversity. 
Because postal financial services operate in the non-reserved area, there is less need to 
develop regulatory proposals for them. However, while not being the subject of formal 
proposals, there are some areas in which the introduction of a greater degree of 
uniformity may be helpful. 
Subject to certain restrictions (such as national law on the sale of lotteries), it seems 
desirable that postal administrations should be as free as possible to provide the 
broadest range of services at their counters. (But this statement does not imply the 
creation of a postbank if it does not already exist.) There seems no reason why the 
service sold at counters should be restricted, as it is in certain Member States, to services 
transacted on behalf of public sector organisations. These services would normally be 
provided in competition, and such a diversity, providing that there was no distortion of 
competition, would help to ensure the financial viability of the network of counters. 
There is also some scope for making some services more flexible cross-border. For 
example, Post-cheques issued in some countries are accepted for encashment in some, 
but not all, other Member States. Greater flexibility in this respect could provide useful 
competition to the banks' cross-border encashment facilities. The latter tend to be 
somewhat expensive, particularly for low values. 
In summary, postal financial services are important financially to postal administrations. 
However, since they operate almost always in competition with the same or similar 
services available through other means, there is less of a regulatory question to discuss. 
For the reader requiring a more detailed discussion of the Community's financial sector, 
it should be mentioned that the Commission published in September 1990 a discussion 
paper on "Making Payments in the Internal Market" (reference COM(90)447). 
Following this discussion paper, the Commission has presented a work programme for 
improving cross-border payments in the Community (reference SEC(92 )621 ). 
21. OTHER ISSUES 
The views as expressed m a Green Paper are necessarily influenced by the current 
environment. However, the environment will change, for instance as a result of 
monetary union or political union. It is therefore difficult to forecast what would be the 
page228 Chapter 8: Discussion of possible solut1"ons 
implications of such changes in the environment. Below are discussed subjects which of 
necessity are of a more speculative nature. 
21.l SINGLE POSTAL ADMINISTRATION 
It is appropriate to discuss the question of a single postal administration covering 
the whole of the Community, since the subject has been mentioned by some of the 
actors in the debate on the present postal sector. Naturally, the discussion here 
will be somewhat "a priori". 
The first task in this discussion is to define in more detail the objectives and 
structure of such a single postal administration. There would appear to be two 
possibilities -one more short-term (and therefore more "tactical"), and the other 
more long-term (and more "strategic"). 
The more tactical version is that of the present postal ad inistrations continuing, 
with a supplementary body at Community level being us d to address operational 
issues that could not be handled by individual postal a ministrations acting on 
their own or in limited cooperation with other adm nistrations. The more 
strategic version would have a more integrated structu e, with a unified central 
management at Community level. 
If a single postal administration were to come about, it w uld probably at that time 
be considered to be closely linked to full political union. The second -the more 
strategic -of the possibilities therefore would seem them re appropriate structure 
to meet these requirements, and most of the discussi n below relates to that 
version. Before that, however, the format and possi le benefits of the more 
tactical version are discussed. 
The tactical version, as described above, would have 1. ited, mostly operational, 
objectives. It should be noted that such a supplementa body (which would not 
limit involuntarily the freedom of action of individua postal administrations) 
could be established now if there was an operational ne d (and without requiring 
any political approval on the part of national government ). 
To a certain extent, the Unipost company (established b certain CEPT members 
to provide some central operational management for some cross-border mail 
services) could be an indicator of how such an organisati n could work. Of course, 
it would be essential that the establishment of such an operational organisation 
did not cause the regulatory position to change in order t accommodate it. 
Chapter 8: Discussion of possible solutions page 229 
Such an organisation would be appropriate if the objectives were limited, and of 
an operational nature only. The more important analysis here seems to concern 
the more strategic version of a single postal administration. 
The first question to be asked is what would be the benefits such a single postal 
administration. It is not clear how the establishing of a single postal 
administration would improve quality of service more than could be achieved 
through the best practice being involved by the existing (or future) operators in 
the postal sector. 
This best practice on the one side takes the form of improved cooperation -for 
instance between a postal administration and the users of its services (including 
other postal administrations). On the other side, it takes the form of trying to 
establish competitive advantage, either through adopting measures used 
successfully in other organisations (competitors or not) or through innovation. 
It is also not clear that a single postal administration would significantly add to a 
Community spirit within the EC. As discussed below, it would not be possible to 
introduce a single tariff (even if it was desirable to do so) because of the massive 
cross-subsidies and accountancy problems that would be involved. In effect, a 
single postal administration would have to be a supra-national body which would 
still need to delegate significantly to the national public operators (which 
presumably would remain very similar to the present postal administrations). 
It also seems improbable that the establishing of a single postal administration 
would lead to savings of costs. Theoretically an integrated single postal 
administration would be able to make streamlining savings -for instance in 
avoiding the duplication of administrative functions in the different postal 
administrations. In practise, it is difficult to see this happening: for example, 
personnel administration would still need to be carried out in each of the national 
operators, even though there would be a supplementary personnel department in 
the central body of the single postal administration. 
In effect, therefore, the establishing of a single postal administration would lead to 
the super-imposing of another layer of administration without apparent cost 
savings below to compensate. There would be the cost of establishing a single 
headquarters, the necessary communication links, the changes of the national 
systems to conform with a single model and the sheer management cost of 
imposing uniformity. In addition, there would also be the cost to consumers if an 
page 230 Chapter 8: Discussion of possible solutions 
attempt to apply a highly uniform Community service led to national operators 
being less responsive to the requirements of the customers in their territory. 
Of course, in any consideration of a single postal administration, it would still be 
essential to continue to seek the least restrictive option. The concept of a single 
postal administration therefore definitely does not imply the establishing of a large 
set of reserved services covering all cross-border movements of letters and printed 
papers. As stated above, the single postal administration would need to delegate 
substantially to each national public operator. In recognition of the different 
conditions, the national regulatory bodies would still have the option of defining a 
smaller reserved area than the Community norm. 
In summary, the benefits of a single postal administration do not, a priori, seem 
substantial, but the costs to he passed on to customers or tax-payers could be 
significant. 
If a single public postal operator does not seem a feasible option, some 
Community body to monitor service could still be necessary. 
21.2 COMMON TARIFFS 
Setting a common tarification in all Member States for some or all classes of mail 
would meet many problems. These are, frankly, insuperable, at least for the 
foreseeable future. 
Firstly, it would have to overcome the different accounting practices which 
underlie the existing tariffs set by each postal administration. 
Secondly, a common tariff could only be achieved by cross-subsidies on a massive 
scale. These would be far larger than any cross-subsidies presently made to 
achieve perequation made within national territories. This would go against one of 
the main themes running through the Green paper -the need for tariffs to be 
related closely to costs. 
Thirdly, the establishing of common tariffs would have to be preceded by 
harmonised product classifications and contract conditions. Even if the hope was 
to have a common tariff only at the first weight step, there would have to be some 
harmonisation of the service tiering principles used. This is not an argument 
against (see above at Paragraph 17.3), but rather an indication of the work that 
would need to come first. 
Chapter 8: Discussion of possible solutions page 231 
Lastly, and most importantly, the effect on customers would be substantial. It 
would be extremely difficult to explain to customers in several Member States that 
their tariffs would have to rise from their traditionally low levels (which might be 
based on lower costs -for instance of labour), in order to conform with a standard 
Community price. The alternative to taking an average would be to harmonise on 
a lower tariff -but this would involve direct subsidies of simply unthinkable 
proportions. 
Common tariffs should only start to be discussed if there was some clear 
probability of establishing a single postal administration. However, even then, 
establishing the latter would not imply the former. 
21.3 COMMON STAMPS 
The introduction of stamps usable in all the countries of the Community seems 
something that could be realised in the nearer future. As soon as the ECU is used 
for every day transactions (as it increasingly will, as full monetary union 
approaches), stamps of national administrations could be sold in ECUs. These 
would be stamps of the value indicated in national currency, paid at the prevailing 
ECU exchange rate. 
A practical problem here is to ensure that the revenue gained is matched with the 
costs incurred for the services bought. In fact, there would not appear to be too 
great a problem since there would be no financial incentives to buy stamps (in 
ECUs) in one Member State for use in another. It would still be necessary to pay 
the postal tariff in the country of posting. If, despite the arguments against, there 
was a common Community tariff, there would still be no incentive to buy stamps in 
another Member State. 
Operational problems would probably also relate to revenue protection. There 
would be a need to train sorting office staff in the checking of values in ECUs. 
This should not be an insuperable problem, certainly within the Community. 
However, there could be greater difficulty in persuading postal administrations 
outside the Community to accept stamps with denominations only in ECUs. 
In summary, there might be some small displacement between revenue and costs. 
However, it is possible that there is a market need for such stamps -this would 
need to be investigated by market research. If there was such a need, the 
practicality of such common stamps should be examined in more detail. In this 
regard, the telecard/phonecard, which will be able to be used in different Member 
page 232 Chapter 8: Discussion of possible solutions 
States (despite there being a greater possibility of a revenue/cost displacement) 
could be an instructive example. 
Chapter 9: Policy options page 233 
CHAPTER 9: POLICY OPTIONS 
INTRODUCTION 
All the citizens and organisations of the Community should have access to good, reliable 
postal services. Implementation of these policy options will achieve this. They will create 
the conditions for the Community's postal sector to satisfy fully and effectively the postal 
needs of the Community's citizens and organisations. When implemented, they will meet 
the Community's objectives while giving the user the widest freedom of choice consistent 
with these objectives. 
The cornerstone of the Community's policy for the postal sector should be the universal 
seivice. The universal service required throughout the Community needs to be defined. 
The main concrete meaning of this universal seivice requirement is that there should 
continue to be a postal seivice available throughout the Community, both for national 
seivices within a Member State and for cross·border seivices linking two Member States. 
This universality implies certain more specific requirements: that the prices for the seivices 
should be affordable to all, that the service should be of good quality and it should be 
readily accessible to all. 
It is concluded that this universal service objective can justify the establishment of a set of 
reserved services (subject to the decision of each Member State individually that this was 
necessary), which would help to ensure the financial viability of the universal service 
network. The scope of these reserved seivices, which could confer some special and 
exclusive rights on the universal service providers, should be directly proportional to the 
objective. In this way, the universal service objective would be secured, and there would be 
as much freedom as possible for potential users. 
General Options 
There are certain general options as means to achieving these broad objectives. (Naturally, 
the implications of taking no action should also be considered.) In broad terms, there are 
two paths · that of liberalisation and that of harmonisation. 
The sector is already significantly liberalised · about 50% of the revenue generated in the 
sector relates to non·reserved seivices. The present position results from a longer·term 
trend to open the market, and the Green Paper options seek further ways to ease 
restrictions. By contrast, levels of harmonisation (by reference to possible Community 
page 234 Chapter 9: Policy options . 
objectives) are rather low. As a result, the Community has a postal sector with many 
divergences -not only regulatory, but also in terms of such important customer aspects as 
access, service provided and tariffs. 
Possibilities for reform can be approached by first considering the extreme options of 
complete liberalisation and of complete harmonisation. These two options are effectively 
at opposite ends of a spectrum of different possible scenarios. The option of taking no 
action at all should also be examined. The last option to be discussed is that which seeks an 
equilibrium combining the benefits of both progressive opening of the market and selective 
harmonisation. Within this option many variants exist, some of which are discussed below. 
Complete liberalisation 
The normal market condition is that of the free market. However, complete 
liberalisation of the postal sector would lead to the loss of the universal service, 
c~rtainly at prices affordable to all. At the same time, no private operators seem 
interested in providing a standard letter service to all parts of any national territory. 
Complete harmonisation 
If it was intended to have a postal sector that was completely harmonised, it would be 
necessary to have a single operational body that ensured that such harmonisation was 
implemented. Such an operator -effectively a single postal administration covering all 
the Community -would have overall responsibility for all aspects of what was 
considered to be the public administration part of the Community's postal sector. 
Total harmonisation would imply the same tariff being applied throughout the 
Community, as well as the same access conditions and the same levels of service. A 
single tariff with the same price being applied in all Member States (for which there 
appears to be no demand) would cause overwhelming problems. It would also be 
impractical. demanding cross-subsidies of massive proportions. (Tariffs presently vary 
by as much as a factor of three.) Central co-ordination of policies relating to areas 
such as marketing or personnel would be likely to lead to an over-rigidity which could 
not respond to local conditions. Further, the implementing hody, the single postal 
administration, would be a costly additional overhead. 
In summary, complete harmonisation would lead to many restrictions , but few 
benefits. Further, it should be emphasised that nobody is now asking for the single 
operational body that would be needed to implement harmonisation at this level. 
Chapter 9: Policy options page 235 
Status quo 
If this theoretical option were to be exercised, the result would be a widening of the 
gap between already very divergent positions, and make more difficult the proper 
functioning of the Single Market.. This would lead to a "two-speed" Europe in postal 
services. In short, the Single Market in postal services would not be achieved, with 
significant indirect effects on other sectors particularly served by postal services. It 
would also probably not be the appropriate response to the implications of political 
and economic union. 
Equilibrium: further opening of market/strengthening of universal service 
This option accepts that in order to ensure the universal service it is necessary to have 
some restriction of the free market. This would be in the form of the establishment of 
a set of reserved services that confer some special and exclusive rights on national 
postal administrations. However, the scope of the reserved area must be strictly 
proportional to the universal service objective. At the same time, the regulatory 
control of part of the market (reserved services granted to ensure universal service) 
would make possible certain harmonisation measures to ensure that the universal 
service operates effectively in all twelve Member States. 
Each Member State already reserv_es certain services in order to achieve a universal 
service objective; but the scope of such reserved services is usually larger -sometimes 
significantly -than is necessary to meet the objective. Further, the actual objective 
(including service performance) must be achieved in practice. ln addition, there are 
gains to be obtained from simply clarifying what is reserved and what is not. 
It is proposed that there should be a Community definition of the universal service 
that should be provided throughout the Community. This definition has not yet been 
drawn up. However, it is possible to indicate how the market should, under this 
option, be partially liberalised without threatening the universal service objective. 
Under this option of seeking equilibrium, certain services should he removed from the 
reserved area (if, indeed, they presently form part). These are express services anJ 
publications. (Parcel services are already liberalised in all twelve Member States.) 
Based on the analysis that has been made to date. the liberafo:ation of cross-border 
letters and, a priori, of direct mail would also he envisaged. Jn both cases. it will be 
necessary to ensure that the appropriate reguiatory control systems are in place to 
prevent such liberalising measures leading to circumvention of legitimate exclusive 
page 236 Chapter 9: Policy options 
rights of reserved service providers. Particularly in the case of direct mail, it will be 
necessary fully to analyse the economic implications for the universal service of such a 
liberalisation measure. 
The liberalisation process ought to be implemented in a gradual manner. It should 
take into account the necessary phases for adaptation in order to maintain the 
economic and financial balance needed for the provision of the universal services. 
For the services which remain as potentially reserved -which would broadly cover 
personal and business correspondence -it would be possible to establish clear limits 
that indicated the precise scope of the reserved area. These limits would be defined in 
terms of weight and price. 
It should be emphasised ·that if any Member State were concerned that specific 
proposals might harm its universal service objective, it could consider applying a more 
restrictive solution, provided that it was still proportional to the objective and 
conformed to Community law. 
Turning to the harmonisation measures to be implemented in parallel with these 
liberalisations, they must spring from the fundamental Community objective that 
there should be a universal service of sufficient quality and at affordable prices. As 
mentioned above, there is not yet. a Community definition of the universal service 
required across the Community. It seems clear that such a definition is needed and 
that, when drawing it up, potential users -including consumer representatives -should 
be consulted. However, certain harmonisation requirements are already clear. 
Universality implies easy access, and this is currently often not the case eve1., w1lere in 
the Community. Given the present divergences in service performance, some 
harmonisation would be needed in this respect also. Tariffs appear to be generally 
affordable; in certain cases, the tariffs do not reflect the costs, and such tariff-setting, 
as applied by the postal administrations, could, in the long term, jeopardise the 
economic viability of the universal service network. Further, it is right that the postal 
administration should be able to use the universal service network to provide non­
mandatory services, but at present there are no common rules for this. 
These present and future problems indicate that harmonisation measures for 
universal services are appropriate in the following areas: 
Chapter 9: Policy options page 237 
access: rules should be the same for all users meeting the same conditions; for the 
ac.cess needs of other service providers (either other postal administrations 
or private operators), there may need to be specific technical measures to 
ensure inter-operability; 
service: standards should be set for all universal services; performance should be 
measured by a common system that accurately reflects users' experience of 
the service; results should be published; 
tariffs: prices for each service should be related to the average costs of that service; 
present differences in tariff structures should be reduced in order to 
diminish present market distortions. 
These harmonisation measures could be implemented, considering that basic 
customer requirements would be likely to be very similar in each Member State. 
Proposed scenario 
The last option is the preferred scenario since it finds the appropriate balance. It combines 
gradual opening of the market with the implementation of harmonisation measures to meet 
Community objectives. It will therefore ensure the universal service under proper 
conditions, whilst providing optimum freedom of choice for users. It will be noted that 
there is no single solution, but rather a set of measures which provide the common 
structure needed. Each proposal is therefore part of a coherent whole; at the same time 
individual proposals do respond to certain specific problems. 
It should be mentioned that some advance comments have been received on recent drafts 
of the options. On the basis of these comments, it seems that there could be a consensus 
on the general orientations. However, there appear to be certain points that cause concern 
to some interested parties. These points seem to relate to the need for adaptation periods 
and also to certain liberalisation proposals -such as for direct mail (at Proposal 2.7 below), 
intra-Community cross-border mail (Proposal 2.13) and international mail (Proposal 2.14). 
The debate during the consultation period that will follow the publication of the Green 
Paper may well concentrate on such points. However, the balance of the whole set of policy 
options presented should be considered. 
It should be emphasised that this broad option of further market opening combined with 
strengthening the universal service could itself be implemented in a number of ways. The 
page 238 Chapter 9: Policy options 
intention is that the main remaining choices will be made in the light of the debate that will 
follow the publication of the Green Paper. More detailed work will thus be needed before 
implementation. Much of this will involve discussions with user groups in order to identify 
their requirements in more detail, particularly with regard to the ways in which they may 
need greater freedom of choice. As mentioned, a Community definition of the universal 
service is required. Further analysis is also required before the weight and price limits for 
the reserved area can be defined. Service thresholds for the universal services need to be 
agreed. More detailed work is also required to implement the principle that tariffs should 
be related to average costs. 
However, even though this more detailed work remains to be undertaken, the set of policy 
options is presented in the confidence that the common structure proposed, by linking 
liberalisation and harmonisation, would ensure the universal service and give optimum 
freedom of choice. 
Chapter 9: Policy options page 239 
The main objectives for the Community's postal sector are shown in Table 1: 
Table 1: Main objectives for postal sector 
1. To ESTABLISH A COMMUNfIY DEFINmON OF THE UNIVERSAL POSTAL SERVICE 
REQUIRED; THEN TO ENSURE ITS PROVISION THROUGHOlIT THE COMMUNfIY AT 
PRICES AFFORDABLE TO ALL THROUGH THE ESTABLISHING (INASMUCH AS IT WAS 
NEEDED IN MEMBER STA TES INDIVIDUALLY) OF A SET OF RESERVED SERVICES 
WHICH WOULD CONFER SOME SPECIAL AND EXCLUSIVE RIGHTS, IN ORDER TO 
MAINTAIN THE RESOURCES NECESSARY FOR THE UNDERTAKING OF THE PUBLIC 
SERVICE MISSION IN SOUND CONDillONS; AT THE SAME TIME, CONSISTENT WITH THIS 
OBJECTIVE, TO HAVE THE LARGEST POSSIBLE PART OF THE SECTOR OPERATING IN 
FREE COMPETITION 
2. TO HAVE COMMON OBLIGATIONS FOR TIIE UNIVERSAL SERVICE OPERATORS OF THE 
COMMUNilY IN RESPECT OF THE SPECIAL AND EXCLUSIVE RIGHTS GRANTED TO 
THEM BY THE RESERVED SERVICES IN ORDER TO PROVIDE UNIVERSAL SERVICES, IN 
PARTICULAR WITH REGARD TO THE QUALITY OF SERVICE PROVIDED. 
3. TO MAKE ANY NECESSARY EFFORTS TOWARDS COMMUNITY COHESION THROUGH 
APPROPRIATE HARMONISATION MEASURES. 
These main policy objectives therefore treat general regulatory issues, the obligations of 
the reserved service provider and, thirdly, the subjects of harmonisation and cohesion. 
Under these three headings, the main policy options break down into the detailed options 
shown in Table 2 below. 
page 240 Chapter 9: Policy options 
Table 2: Detailed options 
PARTI: GENERAL REGULATORY ISSUES 
1. ESTABLISH AND ENSURE THE COMMUNITY SET OF UNIVERSAL 
SERVICES 
2. DEVELOP THE DEFINITION OF UNIVERSAL AND RESERVED 
SERVICES 
3. ENSURE COMPATIBILITY OF OTHER MEMBER STATE 
COMMITMENTS WITH COMMUNITY LEGISLATION 
AND POLICIES 
4. SEPARATE REGULATORY AND OPERATIONAL FUNCTIONS 
PARTII: OBLIGATIONS OF UNIVERSAL SERVICE PROVIDER 
5. ACCESS CONDITIONS TO UNIVERSAL SERVICES TO BE 
SAME FOR ALL 
6. TARIFFS OF UNIVERSAL. SERVICES TO BE RELATED TO COSTS 
7. INTER-ADMINISTRATION COMPENSATION TO REFLECT 
DELIVERY COSTS 
8. SERVICE STANDARDS FOR UNIVERSAL SERVICES 
TO BE SET AND PERFORMANCE MONITORED 
PART III: HARMONISATION AND COHESION 
9. HARMONISATION APPROPRIATE WHERE 
BENEFICIAL TO CUSTOMERS 
10. COHESION ASPECT'S TO BE TAKEN INTO ACCOUNT 
These detailed options can, in tum, be translated into implementation proposals, and these are 
shown in the succeeding pages. 
Chapter 9: Policy options page 241 
PART I: GENERAL REGULATORY ISSUES 
1. ESTABLISH A SET OF UNIVERSAL SERVICES 
The key social requirement for postal services is the maintenance of the universal service. 
Universal service without any conditions about price can be provided in the competitive 
(non-reserved) sector. But, in order for the service to be at a price affordable to all, it is 
necessary to lulve sufficient economic returns to scale. These can only be achieved 
through the granting of some special and exclusive rights -hence the need for reserved 
services. (Although it is possible for there to be more than one reserved service provider in 
each Member State, this is unlikely; for the sake of simplicity, all the proposals refer to 
only one reserved service provider -assumed to be the postal administration -in each 
Member State.) 
1.1 A reference definition should be decided for the universal service to be applied 
throughout the Community. This definition will need to take into account the 
Community's social and economic requirements, as well as other commitments, 
notably to the Universal Postal Union (UPU). A Member State would still be 
able to extend the definition to be applied in its own territory, in line with its 
legitimate public interests. 
1.2 In order to ensure universal service at a price affordable to all, a set of 
reserved services must be established. The list of services that could be 
included in this set of reserved services should be established at Community 
level. 
1.3 In accordance with the principle of proportionality, the size of this set of 
reserved services should be no larger than is needed to secure the universal 
service objective. 
1.4 Outside the reserved area, all services will be provided in free competition. 
The postal administrations could also provide non-reserved services. 
page 242 Chapter 9: Policy options 
2. DEVELOP THE DEFINITION OF UNIVERSAL AND RESERVED SERVICES 
The reserved services must be defined clearly in order to distinguish plainly between what 
is in the reserved area and what in the non-reserved area. This definition of the set of 
reserved services requires much more work which should be undertaken in the light of the 
competition rules as laid out in the Treaty of Rome. 
Throughout this analysis, the objective will be to seek the least restn"ctive solution. 
Conditions in some Member States may permit the scope of the reserved services there to 
be less than the set defined at a Community level, but always consLfltent with the objective 
of universal service provision, thus ensuring that the public service mission is carried out in 
sound economic and financial conditions. Conversely, other Member States might 
possibly find that the Community set of reserved services might not be sufficient to 
guarantee the universal service; in. such a case, the Member State concerned may then 
consider applying a more restrictive solution that will still be compatible with Community 
law. 
The universal services defined at Community level will have to be provided obligatorily in 
all Member States. The regulatory body of each Member State, taking account of all 
commitments, may well decide that universal service should be provided obligatorily 
beyond the scope of the reserved area. Thus, in addition to resen1ed universal services 
which have to be provided numdatorily, there are likely to be some mandatory non­
reserved services for which universal service is also required, this obligation being delegated 
by the regulatory authority to one or more operators. 
Some other operators may decide for commercial reasons also to provide universal service. 
The important distinction is the obligation underlying the provision of the universal 
service. Throughout these proposals mention of the universal sen1ice provider refers to the 
operator who is obliged to provide the universal service. 
Each postal administration will therefore be obliged to provide universal service, as it will 
be defined at national and Community levels. This obligation should not impose an 
unfair financial burden on the postal administrations. Proper tariff-setting systems are 
therefore important (see below at Paragraphs 7 and 8 ). 
Chapter 9: Policy options page 243 --- ·-------------------
Self-delivery and self-posting (delivery and posting of one's own mail by oneseU) 
2.1 Any individual or organisation has the right to deliver his/its own mail 
himself/itself anywhere in the Community, or to transport it himself/itself for 
posting directly with the postal administration in the country of delivery. 
2.2 Any individual or any organisation also has the right to post his/its mail with a 
postal administration of another country for delivery in a third country or back 
in his/its own country. In the latter case, if the item would otherwise have met 
the criteria for being reserved in the individual's/organisation's country, the 
mail must be given to the postal administration for delivery, and its delivery 
costs must be properly compensated. 
2.3 To aid the interpretation of the proposals at Paragraphs 2.1-2 above, the 
Community will need to develop rules regarding the delivery or posting of mail 
by sister or subsidiary organisations in the same or another Member State. 
Non-reserved area 
2.4 When new services (such as electronic mail) are evolved that are significantly 
different from the existing reserved standard services, such new services need 
to be considered as being in the non-reserved sector. However, this may need 
to be reviewed for particular cases. During the consultation that will follow 
publication of the Green Paper, the economic and financial effects of this will 
be analysed. 
2.5 If a new service subsequently becomes a necessary element in the achievement 
of the universal service, it is possible to envisage its integration into the 
resen·ed area in line with the criteria mentioned at Paragraph 2.16-17 below. 
2.6 Any service that is not within the reserved area is therefore non-reserved. and 
should be provided in free competition. 
The reserved area 
2. 7 The Community must complete the development of the definition of the set of 
services that could be considered .reserved. The set will cover some standard 
postal communication items (including letters and postcards) up to certain 
page 244 Chapter 9: Policy options 
limits described below. It will not include, for example, publications, goods­
bearing items or express (courier) items. The placing of addressed direct mail 
in the non-reserved area would, a priori, be envisaged. The economic 
implications for the universal service of the liberalisation of direct mail should 
be analysed (see below at Paragraph 2.9); it will also be necessary to establish 
appropriate regulatory control systems to prevent possible abuse. 
2.8 Since the establishment of a set of reserved services is justified by the need to 
ensure universal service at affordable prices, the definition of the scope of the 
universal service required across the Community needs to be finalised. (The 
universal service requirement will be defined in terms of user needs, which 
may vary over time.) Both the scope of the universal services and that of the 
reserved area will need to be subject to regular review. 
2.9 The Commission, with the help of the Senior Officials' Group on Posts, will 
establish a working group to analyse in detail: the economics of universal 
service provision in the Community; the size necessary for the reserved area; 
and the set of controls needed to protect the reserved area. The working group 
will also analyse the economic implications for the universal service of each 
liberalisation measure. The working group should complete its work within 
one year of the publication of the Green Paper. Its analysis will also lead to 
orientations concerning the· limits of the reserved area defined at Community 
level. (Proposals for defining these limits are shown below at Paragraphs 2.16 
-2.17.) 
2.10 The regulatory body of each Member State will wish to define the universal 
service that must be provided obligatorily in its territory. In doing so, it will 
need to take account of the universal service obligations defined at Community 
level. 
2.11 Member States can decide to have a reserved area smaller than the Community 
limits, but will still have to ensure universal service up to the Community 
limits for the universal services. 
Chapter 9: Policy options page 245 
Reserved services -additional issues 
2.12 National (domestic) mail that would come within the scope of the reserved 
services of a Member State must not be transported out of the Member State 
by a third party operator for mailing back into the Member State. However, 
mail that is physically generated in a particular country (for example, through 
the handling of data or the printing of the contents there), or is in some way 
subject there to a process that adds substantial value, should be treated as mail 
originating in that country. 
2.13 The placing of intra-Community cross-border mail (mail crossing from one 
Member State to another) in the non reserved area would be envisaged. If a 
Member State was convinced that such a liberalisation might prejudice the 
universal service, it could apply a more restrictive solu~ion provided that it was 
proportional to the objective and compatible with Community law. It wili be 
necessary to establish appropriate regulatory control systems to ensure that 
domestic mail that would otherwise have been reserved is not fed into the 
cross-border system through third party operators (see Paragraph 2.12 above). 
It is accepted that certain Member States may need a certain adaptation period 
to implement this measure; the need for such an adaptation period and its 
length (which may vary from Member State to Member State) should be 
discussed during the consultation period following the publication of the Green 
Paper. 
2.14 The placing of international mail (either mail originating in a Member State 
with a destination outside the Community or originating outside the 
Community for delivery in a Member State) in the non-reserved area would be 
envisaged. If a Member State was convinced that such a liberalisation might 
prejudice the universal service, it could apply a more restrictive solution 
provided that it was proportional to the objective and compatible with 
Community law. It will be necessary to establish appropriate regulatory 
control systems to ensure that domestic mail that would otherwise have been 
reserved is not fed into the cross-border system through third party operators 
(see Paragraph 2.12 above). Certain Member States may need a certain 
adaptation period to implement this measure; the need for such an adaptation 
period and its length (which may vary from Member State to Member State) 
page 246 Chapter 9: Policy options 
should be discussed during the consultation period following the publication of 
the Green Paper. 
2.15 The fact that a service is part of the set of reserved services as defined at 
Community level does not automatically imply that a Member State should 
integrate the service into its reserved area. 
Criteria for definition of limits 
2.16 Only services with a universal obligation could be considered reserved. 
However, services providing delivery of goods-bearing items and printed papers 
(under the reserve of the orientations on direct mail at Paragraph 2.7 above) 
should not be reserved, even if these services are provided under a universal 
service obligation. A contents criterion will be needed to ensure that goods­
bearing items and printed papers are placed in the non-reserved area. 
2.17 The items that will remain as items that possibly could be reserved are 
standard postal communication items. Within these, the criteria to be used for 
defining the scope of the reserved services will be both weight and price. There 
will be a link between the two criteria; this link needs to be quantified. (In the 
medium/longer term, price limits alone may well be sutl1cient.) 
3. ENSURE COMPATIBILITY OF OTHER MEMBER STATE COMMITMENTS 
\VJTH COMMUNITY LEGISLATION AND POLICIES 
Naturally, all postal operators (both private and public) providing services in the 
Community must comp(v with Communi1y legislation. Of particular importance to the 
postal sector are (or ri·il/ he) direcrives on data protection, indirect taxation and customs 
procedures. As with all sectors, efforts need to be made to reduce the possible tensions 
betl·veen, on the one hand, Community law and policies and, on the other, potential 
ohligatimzs arising from other conventions or treaties that Member States nwy have signed. 
To this end, the Community should be involved in the development of legislation and mies 
that may affect its postal sector. It should therefore apply to both the UPU and the CEPT 
to gain observer status. The UPU is an agency of the United Nations, and the Community 
has ohserver status at the UN. 
Chapter 9: Policy options page 247 
3.1 The Community should be actively involved in future congresses of the UPU, to 
help to ensure that there are no tensions between congress decisions and 
obligations under the Treaty of Rome, other Community legislation or the 
Community's postal policy. 
3.2 In particular, use of Article 25 of the UPU Convention is not appropriate for 
use within the Community. It seems necessary to replace it with a less 
restrictive measure that still makes clear that the physical transport by a third 
party operator of mail out of a Member State for mailing back into it is 
forbidden if the exclusive rights of the postal administration in that Member 
State are thereby infringed (as stated above at 2.12 ). 
3.3 The Community should seek to acquire observer status at the Universal Postal 
Union (UPU). 
3.4 The Community will investigate and then propose how to prevent mail being 
taken out of the Community for mailing back in with the sole intention or 
circumventing the Community's policies on tariffs and terminal dues (set> 
proposals helow at Paragraphs 6 and 7 ). 
4. SEPARATE REGULATORY AND OPERATIONAL Ft!NCTIONS 
Jn order to ensure that the user's interests are hest served through the impartial tn:otmcm 
of all operators, it is essential that regulatory and operational fiwctions should he 
separated. The independence of the regulmmy jimction h'tlf hctter l!nahle it w achiei e the 
best balance benveen public and private operators, and hen-veen rescfl'ed and nnn--resetved 
seTVice providers. It will monitor the effectiveness of the resen cd \ervices. in terms of the 
scTVice provider hoth maintaininJ; a good universul servic(' and meeting its other 
obligations shown belmv at Proposals 5. 6 wul 8. (Ir will aisn n1·nl to oversee th(· 
obligation of privacy.) If the situation arises, it ivill need ro consida H'/zat action may he 
necessary in the case ofpcrfonnam_·e fulling short of the ohligations. 
4.1 Each Member State must have a regulatory body that is st.·parated from an~ 
operational function. 
4.2 Regulatory bodies are responsihle for the national application of Communit_y 
policy on postal sen'ices. particularly the principle that the resenred senice 
page 248 Chapter 9: Policy options 
area must be proportional to the universal service objective (as stated at 
Paragraph 1.2 above). 
4.3 The regulatory body of each Member State will be responsible for ensuring that 
national legislation states clearly what services are reserved domestically 
within the Community set of possible reserved services. All other services 
should be considered non-reserved. 
4.4 The regulatory body will ensure that other operators respect the exclusive 
rights that are defined for the reserved service provider. 
4.5 The regulatory body will need to ensure that the reserved service provider 
meets its service obligations, including providing equality of treatment. 
4.6 The regulatory body should seek firm undertakings from the universal service 
provider(s) with regard to the privacy of mail. 
4. 7 The regulatory body will need to agree with the universal service provider(s) 
what commitment the latter must give concerning the quality of service that it 
will provide. The regulatory body needs to be able to undenvrite the reliability 
of any service performance results that are published. 
4.8 Appropriate levels of transparency need to be determined, both for access to 
the network and for the costs underlying the prices for access. 
4.9 If the reserved service provider is competing in the non-reserved sector, it can, 
for economic and commercial reasons, provide these services through the 
universal service network that is also used for the reserved services. The 
regulatory body must ensure that there is no cross-subsidy from the reserved 
area to the non-reserved area. 
4.10 The regulatory body must ensure that private operators (who may be 
competing with the postal administration in the non-reserved area) have access 
to reserved services insofar as private operators need such access to provide 
the non-reserved services that they offer. (See also Paragraph 5.3 below.) 
4.11 The appropriate authorities, whether at national or Community level, need to 
ensure that application of general legislation to the postal sector's non­
reserved services does not unfairly advantage or disadvantage any operators 
competing in the non-reserved area. 
Chapter 9: Policy options page 249 
PART II: OBLIGATIONS OF UNIVERSAL SERVICE PROVIDER 
5. ACCESS CONDITIONS TO UNIVERSAL SERVICES TO BE SAME FOR ALL 
The rule must be equality of treatment of users (customers) of universal services. Within 
this rule, it is recognised that customers have varying requirements and can co-operate 
with universal service providers to varying extents. This is partly a function of size, but 
particularly of the ability to prepare mail in ways that are beneficial to the postal operation 
of the universal service provider, thus allowing the latter to off er discounts. 
5.1 Where customers meet the same posting conditions, access conditions for 
universal services ought to be the same for all. 
5.2 Each universal service provider should make available contract facilities for 
large customers. (See also Paragraph 9.3 below.) 
5.3 Universal service providers must offer these services equally to all potential 
customers, even if these customers may be their competitors in the non­
reserved sector. 
5.4 For ordinary cross-border exchanges between postal administrations through 
the international mail system, it is accepted that there is some element in this 
relationship that is not purely commercial, so that access conditions for one 
postal administration posting into another could need to be different from the 
normal commercial conditions. However, the outward postal administration 
should also be able to have access as a customer to the domestic universal 
services of the inward postal administration. This access will be on the same 
terms as for other similar users. 
5.5 Posting conditions, taritTs (including standard discounts) and service targets 
for universal services must all be published. 
6. TARIFFS OF UNIVERSAL SERVICES TO BE RELATED TO AVERAGE COSTS 
The guiding principle should be that tariffs should be rela.ted to average costs. The 
consistent application of this principle is the best guarantee of the financial soundness of 
the postal services. In order to ensure fair treatment for all, cross-subsidies, whether from 
page 250 Chapter 9: Policy options 
one sen;ice to another or, because of discounts, from one group of customers to another, 
should be minimised and phased out. (However, geographical cross-subsidies continue to 
be permissible.) Policy on discounts is particularly important: in general, they should be 
linked to cost savings (which may include reductions in unit costs brought about by 
increases in volume). 
6.1 Tariffs for universal services ought to be related closely to costs. The objective 
is for tariffs for each service to be based on average costs for that service. 
Preferential tariffs need to cover at least marginal costs. 
6.2 If subsidies are considered necessary, their objectives, their value and their 
scope should be transparent. 
6.3 Preferential tariffs, if justified, must be made available in a transparent 
manner to all users that qualify for them, regardless of the country in which 
they are located. 
6.4 Cross-subsidies which are made from reserved sen,ices to non-reserved 
services are, in general, unacceptable. However, cross-subsidies can be 
permitted across geographic areas in order to allow the perequation tarifaire 
(see below at Paragraph 6.5) and from the non-reserved area to the reserved 
area. There could also be cross-subsidies from the reserved to the non­
reserved area if they were necessary to assure the universal service and if they 
were compatible with competition rules (sec below at Paragraph 6.6). 
6.5 Geographic cross-subsidies are permissible if needed to achieve a single 
unitary tariff for a specific service where that is considered desirable. 
6.6 It is possible that some mandatory non-reserved services can only be provided 
at a loss in certain geographic areas. In this case, the losses should be isolated 
to specific areas, and could he funded either by subsidy· from outside or b)· 
cross-subsidy. Such funding needs to be completely transparent in order to 
prevent any unfair pricing by the provider of the mandatory non-resen·ed 
service. 
6.7 In the resen·ed (non-competitive) sector, discounts provided to large customers 
(usually on account of the mail preparation that they can undertake) must, in 
general, be related to cost savings which the service pnH'ider will derive. Postal 
administrations must avoid giving customers of universal services discounts 
Chapter 9: Policy options page 251 
which are not related to savings in costs. They must avoid contractual linkage 
between conditions for using universal services and those for using non­
reserved non-mandatory services. 
6.8 Tariffs set at very preferential or free rates as a result of government decisions 
(such as for delivery of press material and books, electoral mail and blind 
persons' mail) need to be the subject of transparent treatment. 
7. INTER-ADMINISTRATION COMPENSATION TO REFLECT DELIVERY COSTS 
Revenue for mail posted is paid to the operator who collects the mail. In the case of cross­
border mail collected hy one postal administration and delivered by another, it is the 
outvvard administration that receives the revenue from the customer. Hmvever, a 
substantial part of the costs involved are incurred by the inward administration in 
deliven·ng the mail. Some charging system is therefore necessa1y to provide financial 
compensation to the delivery administration for its delivery costs. 
The existing syste1nr; of charging between postal administrations (called termilwl dues) is 
not cost based, leading to significant distortions benveen remuneration and actual delivery 
costs incurred The same principle of basing tariffs on costs should apply to the financial 
compensation .system het.,,veen postal administrations. 
7.1 The compensation charges between postal administrations for delivering each 
other's mail (terminal dues) ought to reflect actual inward costs. 
7.2 Since inland tariffs will be related to costs, the compensation charges between 
postal administrations ought to be based on the delivery proportion of the 
inland tariff, with some supplement for the extra handling necessar,y and for 
profit. 
7.3 A working group should be established lo prepare the basis for a revised 
compensation scheme to he applied within the Communit). The group should 
present its proposals within tv.:elYc months of being established. 
7.4 Efforts should be made to extend the Communit)"s principle of basing inter­
administration compensation arrangements on costs to other admmistrations 
with whom mail is exchanged. These efforts could be made within the 
page 252 Chapter 9: Policy options 
framework of the UPU and the Conference of European Postal and 
Telecommunications authorities (CEPT). 
8. SERVICE STANDARDS FOR UNIVERSAL SERVICES TO BE SET AND 
PERFORMANCE MONITORED 
The justification for establishing a set of resen1ed sen1ices is based on the social 
requirement for universal sen1ice. The actual sen1ice performance is therefore crucial in 
ensuring that the social requirements are met. Standards there/ ore need to be set, 
perf onnance monitored and control systems put in place. It is important to note that such 
standards are only thresholds -universal sen1ice providers should still try to have a 
perf onnance higher than the standards. 
8.1 Community service standards need to be set for services for which there is a 
universal service obligation defined at the Community level. Performance, of 
both national and intra-Community mail, must be monitored and the results 
published. 
8.2 Member States will need to decide whether there should be national standards 
for mail for which there is a ~niversal service obligation defined at the national 
level (and beyond the Community dermition). If required, any standards 
established at national level that are different from those established at the 
Community level should collectively be more exacting than the Community 
standards. 
8.3 In order to establish the Community standards, the Commission should set up 
a working group with Member State representation. The group would need 
contributions from regulators, reserved service providers, contract users and 
consumers. 
8.4 The service performance standards should be stretching, but achievable. They 
will be based on the Community dermition of universal service. This requires 
collection from all posting boxes and counters at least once in each working 
day, and delivery coverage of all addresses at least once each working day. 
Exceptions, if any, to this general requirement should only result from extreme 
cases, and should be scrutinised very carefully. 
Chapter 9: Policy options page 253 
8.5 The Community must have a single system for monitoring delivery service 
performance. This system needs to measure "end-to-end" performance because 
this is the only system that accurately measures customers' experience of the 
service. 
8.6 Where existing service falls significantly short of the desired standard, those 
regulatory bodies responsible for ensuring that the operators meet their 
obligations will need to set intermediate targets that progress towards the 
standard. 
8.7 Each national regulatory body should be assisted by a committee representing 
users. The committee membership should be drawn from a representative 
cross-section of users, including consumer representatives. 
8.8 Community-wide standards are also needed for customer care, in particular 
the maximum acceptable period for dealing with enquiries or complaints. 
Different standards may be necessary for national and intra-Community mail. 
PART III: HARMONISATION AND COHESION 
9. HARMONISATION APPROPRIATE WHERE BENEFICIAL TO CUSTOMERS 
The more tangible the benefit for the consumer, the stronger the case for hannonisation. 
The clearest benefits would seem to be gained from some hannonisation of access 
conditions and from hannonisation of seTVice standards and perf onnance monitoring 
(described above at Proposal 8). Jn the reseTVed area, if the benefits of harmonisation 
were sufficiently great, implementation might even have a mandatory force; in the non­
reseTVed area, it could only have the force of a recommendation. 
9.1 The Community must encourage the appropriate level of harmonisation which 
will improve service and help the potential customer. 
9.2 Access conditions for using the universal services of the Community's postal 
administrations should be made as similar as possible. 
9.3 All the Community's postal administrations should offer contracts for access to 
universal services by larger users. There should be a minimum set, common to 
page 254 Chapter 9: Policy options 
all the postal administrations, of contract conditions available to possible 
contractual users. This would include discounts for pre-sorting. The scale of 
the discounts would vary between postal administrations. 
9.4 Tariff structures need to be investigated with a view to making them more 
similar. 
9.5 The Community will investigate whether it would be beneficial to make the 
service tiering system used more uniform. (At present, some administrations 
operate a contents-based product split between letters and printed papers, 
others a speed-based split between first and second class.) 
9.6 Desirable operational harmonisation relates to the demand for essential inter­
operability. Agreement on certain technical standards (for instance for postal 
electronic mail or operational bar-coding systems) is needed in order to 
improve service. 
9.7 A working group should be established to analyse what potential 
harmonisation measures are either necessary or desirable. The working group 
will need contributions from representatives of users (including those of 
consumers), private operators and postal administrations. 
10. COHESION ASPECTS TO BE TAKEN INTO ACCOUNT 
It is important always to keep in mind the need to ensure that the Community throtighout 
has an effective postal sector that properly meets the postal need<> of the whole of the 
Community. Most of the improvements necessary can be gained through better 
rnanagement. However, some capital investment could be needed, which, particularly in 
less favoured regions, could entail a significant financial burden. 
10.l Further work will determine the exact scale of the economic and financial 
consequences of the orientations indicated, in terms of reinforcing economic 
and social cohesion. 
page 255 
page 256 
List of 01111exeJi page 257 
LIST OF ANNEXES 
I. Overview of postal services 
2. The postal sector in statistics 
3. Mail operations and networks 
4. Summary of legal situation in Member States 
5. Community texts on postal services 
6. UPU Convention -ke)' articles 
7. Qualit)' of service 
8. Terminal dues 
9. Remailing 
10. Postal operators· codes 
11. Postal equipment industr.y 
12. Postal electronic mail 
13. Cultural Mail 
14. Tariff issues 
15. Intra-Community Mail 
16. Discussion of criteria to define reserved area 
Glossary 
page 258 
.------------------------------------- ·----------~-
Annex I: Ove1view <fpostal se1viccs page 259 
ANNEX 1: OVERVIEW OF POSTAL SERVICES 
I. INTRODUCTION 
Postal services comprise hoth mail services (provided by hoth postal administrations 
and pri\'ate operators) and post(-11 financi(-11 services (provided by postal 
administr;1tions). In terms of turnover, mail services generate 78% of the postal 
sector's revenue, and postal financial services 22% (the l;1tter including transaction 
revenue from mail focilit'1ting and certain miscellaneous services}. For postal 
administrations alone. the proportions of revenue between mail services and postal 
financial services is (J7:JJ. 
The Green Paper concentrntes on mail services. Post<il fin;rncial services should be 
viewed more in the context of the fi na ncia I sector over a II. In add it ion. the rel!.ula torv 
issues an: more comp I ica ted for ma ii. How ever. th is ;111 nc\ seeks to give ;, hroa~l 
perspccti\c of huth types of postal sen·ice. It also seeks to give an overview of related 
services 
2. MAIL SERVICES 
2.1 DEFl:\ITIONS 
There are three categories of m<1il service -letters. parcels ;1nd express. There 
are seve1-ctl overlaps between these services. 
Letters can he distinguished from parcels sometimes hy weight (with a 
somc\\'h;1t artificial distinction between the two being set sometimes at 2 kilos). 
or sum ct imes by contents (the distinct ion being t h;1 t letters carry 
communications and parcels goods). Express services include both express 
letters (documents) and express parcels (packages). They ;ire distinguished 
from ordinary letter and parcel services primarily by the speed or the perceived 
rel iahility of their services. 
2.2 SERVICE PROVIDERS 
LFTlFRS 
f.::-or letter-.. postal administr~1tions have an almost complete monopoly. A-. 
d iscusst:d i 11 t ht· 111;1 in text. there ct re some competing kt lt.'r St,rvices provided hy 
private opera tors. whet her legally or not. These include city mailers, document 
e\changes and rem;1iling -see below at Paragraph 1.~ 
For letter ma ii services offered by post a I adm in ist rat ions, a II adrn in istrations 
categorise their mail into two operational "tiers". In nine Member States the 
t\vo c1tegories are letters <rnd postcards (often refared to as LC -"Lett res et 
Cart es" in French) on the one hand and printed papers and small packets (often 
referred to as AO -"Autres Objets" in French) on the other. Three postal 
administrations -those of Denmark, Portugal and the United Kingdom -
categorise their mail according to speed, divided into first class ~ind second class 
(or priority and non-priority). The latter distinction more closely reflects 
operation<tl costs and. it could be argued, consumer preferences. 
page 26<J A1111e.t" J: O"en•iew of postal sen•ice.f 
Most postal administrations make available contract facilities which permit 
larger customers to undertake part of the mail process. (The rnain examples of 
such activities would he pre-sorting -undertaking part of the sorting process 
before posting · and enveloping.) Certain administrations also permit third 
party operators to carry out such activities on behalf of the customers who 
originate the mail. In addition, particularly in the case of the direct mail, the 
physical generation of mail can he undertaken by specialist operators. 
PARCELS 
Parcel services usually refer to the movement of individua I goods items up to a 
limit of. say. JO kilos. However. parcel carriers including some postal 
administrations, now Ctlso move much larger consignments. usually packed on 
palettes. Parcel carriers normally offer customers a choice of speeds for the 
delivery of parcels. 
Parcels se1vices operate in free compet1tmn. With the exception of two 
administrations. the postal administrations of all Member States compete in the 
pCtrcel markets of their countries. 
EXPRESS 
Concerning express services. the norm is that they ;art· l)ffcred in free 
competition. (Only in three Member States do postal administr;1ti(lth still have 
a monopoly over such services.) There is a tendency for express organisations 
to concentrate either on recional. national or cross-border st~rviccs. There is 
also some specialisation between the express movement of don1ments (postal 
communications sent by express means) and "non-documents" (goods-hearing 
express parcels). 
2-' APPLICATIONS 
Letters &md express provide communication services. (Alternative means are 
therefore telephones. fax and EDI. all of which provide indirect competition to 
postal services.) Parcels Ctnd express provide gorn.ls-ddivering services (other 
types of delivery service providing alternatives). 
Beyond this general statement. two particular applications are worth 
mentioning here. Mail order (for selling of material to customers by post) use 
parcel sesvices for the distribution of the goods. Advertisers use letter services 
to send direct mail. 
2.4 SUBSIDIARY LETTER SERVICES 
While all services tend to have the flexibility to he "tailored" to the requirements 
of large customers. the letter services provided by the postal administrations 
include some specific variants. certain of whid1 have particular legal 
importance. Perhaps the most significant are as follows: 
-registered letters: 
-recorded letters: 
-certificate of posting/ advice of delivery ; 
A1111e~ 1: Oven,iew of postal !iet,,iC'es page 261 
-special delivery (where, for a supplement. the speed is normally hetter than 
the standard letter service); 
-direct bags (sometimes called the M-bag service). used for sending a hag 
containing a quantity of printed papers to a particular destination; 
-post office box (where a customer can hire a hox at a post office to which his 
mail is delivered): 
-poste restante (where for a temporary period mail as held at a post office 
pending collection hy the nominated individual). 
2.5 OTHER MAIL SERVICES 
Some other services are beginning to evolve. Generally. new services are 
provided in free competition. The juridical position of certain of the services 
mentioned -notably remail -is the subject of debate. Other services -such as 
city mail -appear to he illegal (except. in that case. in Spain). hut continue to 
operate. 
POSTAL ELECTRONIC MAIL 
Described further at Annex 12. a "hybrid" service that provides tde­
transmission of a message. distance printing and then postal delivery. Postal 
administrations also provide a public fax service l'alled Bureaufax. Some also 
now provide a service based on EDI. 
DOCUMENT EXCHANGES 
Post office box-type facility permitting exchange users to deliver mail directly 
into the boxes of other users. and to collect their own mail similarly posteu by 
other users. In at least the United Kingdom. it is permissible for different 
exchanges to transfer mail between each other. 
REMA IL 
Cross-border letter mail service. Provided by private operators. usually an 
cooperation with at least one postal administration. 
HAND DELIVERY 
Delivery of urgent publications by private operators. usually in city centres. 
CITY MAIL 
Delivery of letters in the city /town m which they were collected. (Legally 
permitted in Spain.) 
UNADDRESSED DIRECT MAIL 
Delivery of unaddressed auvertising material to targeted ~areas. (By 
comparison. addressed direct mail is delivered to the targeted individual or 
organisation.) · 
I page 262 A1111<:'x I: 011<:'1vie111 of postal services 
2.6 OPERATIONS 
The operations underlying these services are described in detail at Annex 3. 
Here, it is important to note that the items sent in each of the three service 
categories are not homogeneous. For example, letters can vary between 
ordinary items of C5 size, through items of A4 size (sometimes called "flats"), 
through to packets weighing up to 2 kg or even hooks weighing up to 5 kg. 
Parcels services cover the range in weight from the very light-weight (half kg) up 
to palletised consignments. Express services cover this range as well, hut have 
the additional complication of often needing to separate between documents 
(express letters) and goods (express pa reels). 
This lack of homogeneity of ilt'rns processed makes the operations underlying 
mail st:T\'ices more complex th:1n might he supposed (seL' Annex ~ for a more 
detailed description oft he ope Lit ion) 
2.7 SUMMARY 
The rn:1jority of mail is ge1wr<1tcd hy organisations In terms of applications 
(that is. the market segments th;1t use mail sen·iccs). tht: following are the main 
st.~gments (I isted in order of rc\'L'll ue generated): 111;1 i I order, advertising. 
publishing, financial services. industn' :ind public administr<1tion. 
Tahk I below indicates approxi111;1tdy the revenue generdted in the different 
mail services categories ( shm' n in 1w1-centagt·s of the total mail services 
tLirno,·t~r): 
Table !: 
l';srt·..:1-.. 
l;\fllL"'" 
Source: Mail sen!iC<'S -n·\·e1111c /h'rct'lltllgcs hy s<'glll<'m und opemtor ( 1988) 
j()l) 17 -l 
3.1 7 
4;) 100.0 
CEC (from sever:tl sources) 
The main mail services are summarised in Table 2. Concernin!.!. letter services, 
it should be mentioned that the distinction between LC and AO services can 
sometimes he blurred. Further, it should not be thoul!,ht that each of the 
services mentioned is homo11,eneous in itself. Annex 1 d~scrihes in detail the 
operational differences hetw~en different sorts of mail which may he posted in 
one mail service "stream''. 
Annex 1: Ove1,,iew ofposwl sen•ices page 263 
Table 2: Summwy of mail se1vices 
A. LETn:Rs 
A.J STANDARD LE'ITER SERVICES (offered by postal adminis1ra1ions) 
"Higher streams" 
either "lettrcs ct cartcs" (LC). covering letters and post-cards: 
or "first class", covering items for next working day dclin:r.· 
"Lower streams" 
either "autrcs objets" (AO). covering primed papers ~rnd small pai:keis; 
or "second class". covering items for slower deliver;. (with 1:irgcts of either 1wo or 
1hrec working days afler collection) 
Standard lcner sef\·ices arc offered for ho1h domestic and cr11~s-hnrdl.'r sernccs. For cross­
hordcr ... cf\·ices. 1he seivicc diffcrcn1iation is usually LC/AO. in ac1..·11rdan1.:c with Uni\'crsal 
l'ostal Union ( Ul'U) guidelines. 
A.2 SllHSll>IAln· Ll·TH:I{ SERVICl·:S ( 11lkrcd by postal :sdm1n1 .... 1 r;1111111' I 
rcg1 ... 1cr1..·d k111..·r-.: 
recorded lcth.:r .... 
l..'.ert1ficatc of pos1ing/:u.hxc 111' ddin:ry: 
special dcliw1y 
direct hags (also called ··l\t-bag~·"). 
post office boxes; 
poste rcstamc 
A.3 NEW LETH:I{ SERVICES 
New (or newer) ser\'ices indude 
H. PAR<.: ELS posl:tl dci:trnnic mail (induding nurcaufax): 
document exchanges: 
remail: 
'"hand delivery": 
"city mail": 
unaddresscd direct mail. 
Normallv up to ."W kg pl..'.r itl..'.lll. bu1 ... l..'.n:il..'.cs for heavier 1ll"lll" 1111" L"u111m1111 
U ... u;!IJ\· offering cho1n.: of SCf\'ICe spccd-. 
C. EXPRESS 
Oflcn di' idcd 111111 
do1.:umc1Hs (posl;il n11nmun11.:a11ons st.:nt by c:xprc-. ... I. 
non-don1ments (goods-hearing express parl..'.cb) 
page 264 Annex l: Ove1view of postal se1vices 
3. FINANCIAL SERVICES PROVIDED BY POSTAL ADMINISTRATIONS 
Financial services can be split into two main categories: postal financial services (such 
as mail orders. postal cheques, etc.) and other financial products (like those related to 
savings hank operations and those known as "giro"). 
Postal administrations have traditionally played the role of providing readily available 
financial services. both within individual Member States and internationally. The 
more traditional services in this area include money and postal orders, postal cheques 
and savings hank operations. The full list of financial services provided by postal 
administrations is shown at Table 1 below. 
The revenues coming from these help the administrations to balance their operating 
figures. 
The extent to which the services are used varies from Member State to Member State 
and is influenced by such factors as: 
-the spread of commercial banking facilities, mainly in remote areas, and their inter­
nperahility: 
-public attitudes to the use of hanks and their facilities, which themselves tend to 
reflect the type of community and its hanking system development: 
government regulations either promoting or limiting giro and savings hank 
development. 
Nevertheless. in the Community the situation is not uniform. In some Member States 
national girohanks provide full hanking services in line with the commercial hanks, 
whereas in other Member States giro activity is limited to postal cheque services and 
in at least one country even this last activity is not authorised. 
In almost all administrations the wide spread of postal counter facilities has resulted 
in their heing used for government services, often providing for such facilities as the 
payment of pensions. welfare services. licence and taxation payments and ·payments 
for utilities such as water and telephones. 
When such arrangements are in force, they are generally provided free of charge to 
the government. hut there is an argument for introducing some charges based on the 
cost of providing the services. 
A1111ex 1: Oven1iew of postal sen1ices page265 
Table 3: Summary of financial services provided by postal admi11iwrc1ti01u 
A. POSTAL f'INANCIAL SERVICES 
A.I POSTAL PA\'J\·1ENT MEANS 
• Money Orders. lntcrmuionc.al Money Orders 
• Postal Orders 
• Postal Cheques 
• "Vc.aleurs dcclarccs" 
n. Gl·:NERAL FINANCIAL SERVICES 
IU (;IROHANK OPERATIONS 
• T clc-paymcnt 
-credit \.'.~m..ls 
-ATM Ciirohank cards 
• lmcrior c.accoun1s/dcposits/pay-out 
• Foreign curren\.~' 
• Mortgage 
H.2 SAVINGS HANK OPl·:RATIONS 
• Homc-sc.avings invesl mcm 
• Common funds in\'cstmcnt 
H_l OTH 1£ R PA \'l\·1 E NTS 
• Pensions 
• Welfare services 
• Licence fTaxat ion 
• l'ublic p<tymcnts 
4. MAIL FACILITATING SERVICES 
For postal administrations' mail services. the most important services provill°ed at the 
post office counters relate to the selling of stamps and the provision of information 
relating to use of mail services. With the exception of Belgium and Portugal. all postal 
administrations now permit stamps to he sold in other as well as post office counters. 
Post offic;e counters can also be used to give credit for postage "meter" machines, and 
then accept postings paid for with "meter" impressions. There are also other more 
specialist services available, such as the sale of philatelic products, or containers in 
which to post items. 
As with postal administrations, the great majority of priv1tte operators' volume comes 
from larger customers, whose postal items are collected directly from their premises. 
Increasingly, however, private operators are establishing fa~ilities which enable 
smaller customers (or even individuals) to use their services. Several private 
page 266 Annex I: 0"'!1view of postal se1vices 
operators now have franchised offices which accept smaller postings; in addition 
investment is being made in "lodging points" established for the same purpose. 
Table 4 below gives a summary of the mail facilitating services. 
Table 4: Summary of mail facilitating .mvices 
POSTAL ADMINISTRATIONS 
-Stamp s:.tlcs 
Meter credits 
-Phila11.:lic products 
Coma1ner sales 
Franch1~ed access poims (IRL and UK) 
5. OTHER TRANSPORT SERVICES PRIVATE OPERATORS 
-Franchised access points 
-Lodging point~ 
Most private operators who provide postal services have transport services as their 
main business. The parcel services that they provide are usually part of their general 
transport operation (although they may he processed through separate networks). If 
they offer express services, these are generally provided entirely separately. 
While private operators have extended down to smaller consignments. some postal 
administrations have started to move into the general transport market. Thus. several 
now accept items well beyond the "traditional" weight maximum for parcels of 30 kilos. 
Sometimes, such large consignment services are provided through the ordinary parcel 
network. but usually through separate networks. 
Parcel/express operators are now increasingly offering warehousing facilities to aid 
the "just-in-time" strategies of their customers. They are therefore becoming 
increasindv involved in controlling stock on behalf of customers. and even carrying 
out simple -assembly operations. "' 
T<thle =' bclO\\' summarises these other transport services rekv<tnt to the postal sector. 
Transport mu/ other sell'ices 
·---·------- ... --··-·-" -··--·------ .. ----... ·--·· -··---·~------ .. -.. .----·-... ------~ 
TRANSP<HH AND DELl\'Elff ASSOCIATED ACTIVITIES 
-<1encr;ll transron -Warehousing 
-Freight fnrv.'arding -Stock l'.Pnt rill 
-Specialist delivery services -Just-in-time scr'.·iccs 
--------·---·---- ·-----
6. MISCELLANEOUS -POSTAL ADMINISTRATIONS 
The post office counters network is now being used increasingly for selling services 
beyond the traditional government services and mail facilitating services. They are 
now selling services on behalf of a range of public sector institutions and utilities. To 
give an impression of the breadth of this range, these may include bus. train or airline 
Annex 1: Ove1vieiv ofpostnl se1vices 
tickets (or passes), phonecards. fishing licences and Red Cross bonds, as well as 
lottery tickets. Some are also now selling fin<incial services other than hanking -
insurance presently being the main example. 
The range of services sold is crucially affected by the legislation ~!fleeting each postal 
administration. Table (> below summarises the miscellaneous services sold at the 
counters of at least some postal administrations. 
Table 6: Summa01 of misce/lanc>uu . ..,· services sold at post oftice counters 
..--------------- .. --·---------
TICKETS INSURANCE 
-Transport tickets/passes 
-Non-guvernmenlJI licences 
-Phoncrnrds 
-Lnucry tickets 
I -. J ___ ---------. 
A1111e~ I: Ot1eniew of postal se1vices 
t 
Annex 2: Tire postal ~ctor in s1a1is1i,·s 
ANNEX 2: THE POSTAL SECTOR IN STATISTICS 
1. INTRODUCTION 
This annex is intended to provide an introduction in figures 10 the Community' postal 
sector. Following an over~view of the sector as a whole, it then puts the se<..1or in the 
context of the Community's overall economy. Next. it examines in more detail the 
mail services. and then the postal financial services. (Unles.~ otherwise stated. the 
figures are those of 1988. in order to ensure comparahility of information.) 
2. OVERALL FIGURES 
Tahle I helow gives the main figures for the postal sector. The revenue and 
employment figures rdate lo the whole sector. while the volume figures relate to m&til 
services only. 
Tahle I: Community:!\ J'O-"llll .\ntor -.ntmmary in figure.\ 
VOl.U.lll:· 
Items per year 7N billion 
hems per working c.h1y :?'JO million 
Items per inhabitant/year 244 
R~uc: Dumcs1ic/Communi1y/ln1crnational 'J.l '.; I 4':: I .1';·; 
Ul:Vl-.'SUI:· 
Maib. scrvil:cs 
- Postal ac.1mm1s1rat1om .. ECU ~•bn 
- Private opera I urs EC..:U 20hn 
l'ostal financial s~rvict.·s 
l'ust~I ;u.lmin1~1ralh•lb t:t.:u 1.1 hn 
---------------
TOTAi. f.ClJ ~'> halliun 
l:"Ml'/.())"Ml:"l\f'/ 
Postal administrations 
- Mail services 1.207.000 
- financial service~ 153.000 
l.3'10.000 
Private operators .150,0110 
-------------
TOTAL 1.710.000 
Source: Sofres study 
I page 270 A1111ex 2: The posral sector in sratistics 
3. ECONOMIC IMPORTANCE 
The postal services provided by the public and private operators generate a total 
revenue of ECU 59 billion, the equivalent of 1.46% of the Community's GDP. (This 
figure excludes directly associated industries -such as those of direct mail and mail 
order -which generate another 0.5% of the Community's GDP.) Of this. mail services 
generated ECU 46 billion, and postal financial services ECU 1.1 billion. 
However, about half the postal administrations operate at a loss. As well as showing 
the economic importance of postal services to the different national economies, Table 
2 below also shows the external funding that is needed to make up these losses. The 
profitable postal administrations together earned surpluses of ECU 748 million, while 
the loss-making administrations recorded a combined loss of ECU 1HJ9 million. The 
combined effect was a net loss of ECU 1,951 million. 
Table 2: lmpmtance (~(postal services to overall economy ( 1900) 
·--· ·-------- --r---.... --------------
ME!\IUER GROSS T(H,\I. l:\11•0Rt.\'< T 1-
1 St Rl'll ~/ 
11 C< >'TIHB-
STATES l><>\11-:STI<. Tl'R\C>VER HI l>ITI< Tl l II<>'\ 
PROl>U .. I (;l>P I IU CDP 
I 
ECU billions ECU millions ' I L'f "l' . I I.~ J 111Jll11111 .... 
---·-------··- -~--------·- ---~~--
Uclgium 12-L8 77.U 0.<12 -272 -~ -() 21 
Denmark 9 I J 1.15<1..:t 127 1 4-Ul 
-l.2lllll + () ():" 
(icrmany 1,0201 9,180.0 l) 1)(1 -ll. l 2 
Circccc 44.7 136.0 
Spain W4.8 1180.3 
France 795.0 12.366.0 
Ireland 26.:5 246.7 
Italy 689.7 4.087.1 0.30 
0.41 
1.56 
0.93 
0.59 -l 7.5 
-119 7 
+I-PO 
+ I 7 
-1.044 4 -0.04 
-0 .04 
~ 0.02 
+ 0 0 I 
-II 15 
Luxembourg 5.6 52.7 0.94 -() 3 -0.01 
Netherlands 189.1 3098.0 1.64 + 297.0 
-34.8 
+ 258.0 + 0.16 
-0.10 
+ 0.04 Portugal 34.7 154.9 0.45 
United Kingdom 670.8 6.426.0 0.96 
EC 
Notes: 3.978.I 3~.857.5 0.98 
~~L--.. -------- ·--···-·---··--l .950.9 . -_J_ _______ _ 
The table above excludes the lU!'lltl\'a generated by rrivatc Uj)L'fdlllL' Thi~ I~ 1.:~11111~111..:d [ti he 
some ECU 20 billion per y<.:~ir Added to the FCU 31) hJllH1n gl·ncr;1tL·d h\ the p11s1;!1 
ad1111nistrations. the total 1uri111\-cr would be fCU )9 billion -ur I 4(1', 11!' I·(· ( i l)f> 
The figures include re\·cnuc \lr FCU U billion gL~ner~llcd by p1hLJI ~1drn1n1,tr~111u1h f1nanc1al 
servic<.:s 
The turnover figures for Hclg1um <.:xcluuc ECU 321 111ill1on paid by lhL· lklg1~1n gmernnKnl to the 
posL<..11 administration to cumpen~ate it for lnsst.:s incurred un ccr1<1in scf\·1ccs which the 
go\'ernmem required ii to prt1\'icle 
The figure for Denmark is before all!1\1.·ance ror a spcci<.11 tax of FCU S<1 rnill111n . 
Source: CEC analysis 
A1111ex 2: The postal sector in swtistics page 271 
The figures shown in Table 2 need to he set in the context of a comparison with the 
two largest postal administrations outside the Community (those of Japan and the 
United States) and with the largest private operators. Table .1 below seeks to give this 
comparison. (It should he noted that the figures given for the revenue generated by 
the private openttors in the Community market are estimates only: figures for the 
postal administrations include revenue from fin Ci ncial services.) 
Table J: Revenue of largest private operators and 12011-Community postal 
administratim zs ( 1988) 
Rt:n:,n: <a-:,t:R:\Tt-:1) (ECU Hll.UO:") 
CATE<;OR\' O>l''."TRY/ 
C< >'ll'A'.\"Y " OlTSll>E TOTAi. 
COMMU1'11'\' C<>'l'll:'."rrY \\'ORI.I)\\ l DE 
Postal Japan N/a l) 5 9.) 
Administrations United State~ N/a 30 tl )() 0 
Private DHL 05 15 2 .0 
Operators Fcdcr~d Exprc~s 15 5 s 70 
TNT 1.0 2.0 .HI 
UPS -LO KO 12.0 
N /a Nut applicahlc 
Source: Several 
4. MAIL SERVICES 
Mail services are provided both by postal administrations <ind by private operators. 
AH the ECU 20 billion revenue of private operators is generated hy non-reserved 
services. Of their revenue. postal administrations earn some ECU 21 billion from 
letter services. the majority being reserved. 
PUBLIC AND PRIVATE OPERATORS 
Table 4 shows how the mails market is divided up between postal administrations (the 
public postal operators) and private operators. It also indicates how postal 
administrations. bv generating most of their revenue from ordinarv letters. have 
relatively high th~o~ghputs per employee (compared to private ~)perators) hut 
relatively low revenue. The experience of private operators. who generate almost all 
their revenue in the express and parcels segments. is the converse. As the table 
indicates, private operators hold an estimated 43% of the total postal market. In the 
parcel and express segments. their share is much larger -an estim<1ted (llSf; and 870,'r, 
respectively. 
""' 272 Aimer 2: Tiie postal sector i11 statistics 
Table 4: Mail services -compc1rism1 of postal administration.f and private operators 
Pt:1tc:tXl'AGt: ms·rRmL:-noN Pt:R MAll.S 1-:1\WLO\'l-:t: 
Oft:RA T<NlS 
VOl.Dtt: Rt:n:sn: STAtl-' ITt:MS Rt:n:sut: 
(thousands) (F.CU) 
Postal 
Administrations ')(,,:; 57':} 7Wl 62.0 21,500 
Private 
Operators .,it: .n·; 2ir: ~ t) )7.1 )ti 
·-
Source: CEC analysis 
UNIVERSAL SERVICE 
Postal administrations have a universal service obligation. (In all Member States, they 
have been granted some special and exclusive rights with the intention that they 
should be able to meet this obligation.) Universal service refers to the access hy which 
every citizen or organisation may post items into the public postal service: it also 
refers to the ability of tht.• postal service to gain access to all addresses in the 
Community in order to deliver postal items. Table 5 below seeks to give an 
impression of the implications of this obligation. 
Table 5: Univer.ml .\·en-ice -wllectiom· am/ ddfrerie1 
C1tnum,~ T<HAI. ISllAIUTASTS 
Pt:R l:sn 
(Note I) 
Post office counh.:rs 9~.772 -'A90 
Colkctions poi111~ (puhl1() l<•.HIOO 1.700 (Note 2) 
Dclin:ry round:-. ~ l~.000 1.ll IO 
Note I The total populat111n of the Community divided by the numbers of units mcn11oncd 
(coun1crs. (ollcc1i11n 1>oin1:-. and delivery rounds). 
Note 2: The number of public collection poin1s includes the posting boxes available in post 
office counters. 
Source: Postal administrations 
Population density and concentrntion is also important in terms of the universal 
service ohligialion. The Community's avernge density is 14J inhabitants per square 
kilometre, the range for individual Member States going from 50 to ]50 inhabitants 
per square kilometre. 
MAIL USAGE 
Annex 2: The postal sec·1or i11 su11is1ics page 273 
80% of letters posted originate from businesses and other organisations (the 
percentage being even higher for express and parcels services). It is therefore not 
surprising that there appears to be a link between the number of letters per inhabitant 
and GDP per capita. Table 6 compares the statistical order for these two criteria. 
(The same point is made graphically -using the same data -at Chapter 4. Paragraph 
3.2 of the ma in text.) 
Table <>: Comparison r~f letter mail usage and GDP per capita 
l'\'1D-IHEI~ ITE'.\IS STATISTICAL Gl>P ST-\ Tl STU ~Al. 
STATE l'ER ()RDER l'U~ ORB ER 
CAPITA C\1'11-\ 
(,,.,,. 11 
Belgium ·'-~:' 4 1112 h 
Dcnm~irk -134 I 1.\4 I 
( ier111;11w 24K (1 12K ) -
Ci rcec~: 47 12 _,s 11 
Spain Ull 10 (17 t) 
France ·'·'2 ) 112 4 
Ireland 14S 9 (14 Ill 
Italy I '>h ~ 111(1 ') 
Luxcmhtiurg 3-l<I ... 120 ' _} 
Netherland~ 4(lt) 2 I Otl 7 
Portuga! l1S 11 ...... 12 ·'·' 
United Kingdom 2)h 7 9) s 
Nolet· This column shows the indcxa111u1 with the EC avcrngc (iDP per capita equalling 100. 
Source: CEC analysis 
T4RIFFS i I I 
I 
As well as general economic acti\ ity. two other impurL111t Ltcturs <1tlecting le\'ds uf 
use are quctlity of service and prices. Figure I shows thL' h;1sic domc'stic letter taritt .... 
(for J<J<J()) offered hy the Community's postal administr<1tio11s. For sonw 
administrations. this is the basic price for their lllctin letter services (hut with discounts 
usually he ing ava ilahle for larger users). Other <1dm in ist r;1 t ions. hmvevL'r. otle1 
substantial discounts if the contents are printed papers (including newsp<1pers ). 
page 274 Annex 2: Tire postal sector in statistics 
Figure I: Comparison of basic letter tariffs ( 1990) 
B DK D GR E F IRL I L NL P UK EC JAP USA 
-Tar If fa In ECU 
Source: Post~tl administrations 
NAT/OlVAL AND CROSS-BORDER MARKETS 
For all mail services, domestic markets are far larger than cross-border markets. 
Table 5 below shows how letter volumes are composed in the different Member 
States. (A distinction is made for cross-border mail between , on the one hand, mail 
going from one Member State to another and, on the other, mail going to or coming 
from outside the Community.) For reasons of commercial confidentiality, similarly 
detailed information is not available for parcels and express services. 
Table 7 shows that 7% of letter mail is cross-border traffic, 4% being "intra­
Community" and 1% being "extra-Community" mail. In revenue terms, the cross­
border share is slightly higher -about 10% of letter revenue. For parcel and express 
services, the cross-border mail is worth about 11 % of revenue. 
Annex 2: The postal sector in statistics page 275 
Table 7: Traffic composition between domestic and cross-horder 
.--=-~--
MEMHER Do~n:s11c l:"'TR.\- EXTRA-
STATI: Co,mt·,n1 C< >\l\tt:'."ffl"\. 
Belgium 86.o<:< K~'; 5 (lu;. 
Denmark 95.w:~ 2.Y; 1.9<( 
Gcrmanv 96.2';} 1.9'.: I <)',~ 
Greece 74_()',:( 14 ~'.; I I.()'; 
Spain 8~.4';:; () 7'; ~ 9'; 
France 95.3',i 2 (1'; 2 I•; 
Ireland 69.9'.( 2~ t)'; ") ~'; 
Italy n.w·; ~ (i' I 2 h' ; 
Luxembourg 53.2'; JS 2'. I 11 h' I 
Netherlands 90.~'' 7 (11
' 
I 2 ()' ' 
l'onugal K<17'.; K I' I .; ~' I 
United Kingdom <>2.w; 2 :-\'. I .; ) t .• 
I -' 
Average (weighted) 9Jf,( -T-----
·'',( 4'' I 
I 
Source: Sofres study 
SORTING MECHANISATION 
Many postal operators have made significant investments in sorting m;1ch inery. Parcel 
and express operators have specialised sorting equipment which is increasingly linked 
to bar-coding systems. These bar-codes may also be used for "tr;1cking-and-tracing" 
systems for following the progress ~f individual items through the whole process. 
Postal administrations have made substantial investments in letlcr sorting equipment 
(see Annex 11. Paragraph 5). This equipment is presently hea\'ily rdi:tnt on sorting by 
the post-code. (The subject of post-codes is discussed in deta ii in Annex I 0.) Figure 2 
below shows the rercentage of letter mail that is automaticilly sortt.·d h~ the different 
postal administrations of the Community (The figures exdudc m;1il that has been 
pre-sorted by customers before posting.) 
page 276 A1111ex 2: The postal sector in statistics 
Figure 2: Percentage of letter mail sorted mechanically 
B DK D GR E F IRL I L NL P UK USA JAP 
'--------------------------·---·---·--------------' 
Source: Ernst and Young study 
5. POSTAL FINANCIAL SERVICES (INCLUDING SA/I OF MAIL SERVICES AT 
COUNTERS) 
The Green Paper concentrates on mail services. However, it is important to be aware 
of the importance of the financial services provided hy postal administrations. The 
size of the postal financial services segment (proportionate to the postal 
administration's total revenue) varies significantly between Member States. 
There appear to he two reasons for this. Firstly, some postal administrations have a 
post hank as an integral part of their operation (others may not have had one, while 
some other administrations have sold off their respective postbanks). Secondly, while 
general economic activity is important, so too is the flexibility permitted to postal 
administrations in the enabling legislation for their postal financial services. The 
financial or other services which postal administrations are permitted to sell at their 
counters varies between Member States. 
Annex 2: The postal sector in staristics page 277 
MVENUE 
Postal financial services generate revenue of ECU 12.7 billion. This equates to 21 % 
of the total revenue of the sector, and to 33% of the revenue of the postal 
administrations. Table 8 shows the revenue of different administrations. as well as the 
rate of growth. 
Table 8: Revenue and grmvrll o(poswl financial sen-iCl's 
MEMHER 
STATES 
Belgium 
Dennrnrk 
Germany 
Greece 
Spain 
France 
I re land 
I wly 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 
EC Total 
Source: 
RANGE OF SERVICES T<>TAI 
Kt-:n::\l 
(FCU mill 
2 
' ' 
2.1 
-1 
).ll 
1.4 
u 
1.7 
. --· 
12.7 
-
Sot re:-. :-..t ud\ ·1-: 
inns) RFH'l I· 
TRl·:'l;D 
--1 .;; ( ; 
I-('\ ()'; 
. :-.; ()' ' 
i\. ;1 
. 20 !l' ' 
-(t -~·' 
T .;; ()' I 
+ -1 2'; 
+ ISW, 
+ 21 ()'' 
~ (> ()'' S.-\\T\c;s A'.\D 
J'l;VESDll-::'\TS 
( t-:CU millions) 
2 
2.400 
18.500 
-1 
3.280 
45.500 
945 
9,000 
370 
11.500 
16 
13.400 
I 0-1.917 
---.__ __________ ~ 
The financial .services undert~1k.e11 cm·er a very bro~1d r;1nge. They include paying out 
pensions and other benefits on behalf of the government. They also collect revenue 
for different government institutions. lncreasinglv. \vhere the enabling legislation 
permits, other ..... services such as insura nee a re now s~1f d ..... ..... 
To pick out two important examples of services <1vailahk, they include cheque 
payments and money orders. Access to accounts is <tlso made easier through the 
increasing availahility of Automatic Teller Machine (AT\1) cards issued by postal 
administrations. The volumes ;111d (for cheques and monev orders, the revenue 
throughput), are shown in Table 9 he low. 
page 278 Annex 2: Tire postal sector i11 statistics 
Table 9: Financial sen1ices -some volumes and tumovers 
Cllt:Qt:t:s Mo~t:\' ORDERS 
ATM 
MEMHER CARl>SI~ Nt::'•IHt:R I:\ TOTAL Nt:;\IUt:R I~ TfffAI. 
STATES CIRCt:l.ATI< >:\ CIRCTl.ATIO~ VALUE CIRC:lil.ATIO:\ VALUE 
(Millions) ( ECU millions) (Millions) (ECU millions) 
Belgium 110 5,500.0 550,000 1) 260 
Denmark --- 0.3 38 1.2 263 
Germany 100 800 169 2.lO 2.000 
Greece --- 0 0 S.C> l.160 
Spain 450 7.0 4,000 24.C> 2.036 
France 8)0 2.700.0 128,000 87.6 121.250 
Ireland --- 0 0 03 7 
Italy --- 0 0 24.0 2.000 
Luxembourg 4 0.2 12 0.2 20 
Netherlands 125 164.S 20.000 0.9 153 
Portugal --- 0 IS 28.8 2.500 
United Kingdom 1 S<J 82.4 S.925 50.6 417 
EC I. 7'>S -~.)84 7 70S. l S1J .:!4S 0 l ."t~.066 
Source: So fr es sl udy 
COUNTERS NETWORK 
The sale of postal financial services is heavily reliant on the coverage of post office 
counters. Table I 0 quantifies the coverage in the Community. 
Tahle 10: Coverage of post office coullters 
Post office counters 92.772 
Inhabitant:-. per post office .~.490 
Post offices per 100 km·· 410 
Source: Sofres study 
The latter two fo!_ures in Table (, are averaces. The coveral!.e in terms ot inhabitants 
per post office 1~111ges in the Community 'f·rom 1.700 inh<tl)itants per post office in 
Ireland to 10.700 in Greece. For geographical coverage. the range is from ~.(, post 
offices per JOO km·· in the United Kingdom to 0.7 in Greece. 
As Tahle 11 below shows, some postal administrations have begun to invest in 
facilities to "automate" their counters. The intention is to broaden the scope of 
services that can be provided, as well as improving the quality of service to their 
Annex 2: The postal sector in statistics page 279 
largest customers. At the same time, the administrations should gain the additional 
benefit of improving their management information. 
Table 11: Automation of post office counters (1988) 
Wrrn OTllER FACILITIES 
ME.\llU-:R NmmEROF EQt:IPPED EQUP;\IE:'\T 
STATES COUNTERS \\Tm COU1'TER RATE AlT<)\IATI<: e<>\·11•vrER 
At:TOMATIO:\ (%) TELi.ER TER\11:\Al.S H>R 
\t\Clll'.\ES \IA:\A<;f:.\IE:\T 
Belgium 1.850 --- --- 110 ---
Denmark 1.300 --- --- --- 120 
( jermanv 17.500 ..t.259 2-tY,; I 00 N/a 
< in:ecc 929 --- --- --- ---
Spain 12.9XS --- --- -l)ll ---
Fr:111cc 17 ,000 ".2<>S ~I ti' ; xso ~.900 
I rel;tnd 2.(175 111 --- -- --·- ---
ltalv l-l.373 1)0 I l'; --- ---
Luxcmlwurg 106 22 211 :-\' ( -l N/<.t 
Netherlands 2.624 2,WO l)t) l l'., 12) ---
l'onuual 1.050 30 2 l)'; --- -~() :::> 
United Kingdom 21.000 (I) 230 15.L 159 N/a 
FC 92,772 12,5)() 17(1',; 1,79~ -UlSO 
----~--
Note l The number of counters shown for Ireland and the Unned Kingdom include sub-conlractcd 
pose offices. The number of post offices wholly owned by the Irish and British pose al 
administrations is. respectively, 124 and l,500. The lat1er figure is used in the calculation of the 
equipment rate for the British postal administration (The EC figure 1s also ad1ustcd) 
N /a: Data not available 
Source: Sofres study 
page 280 Annex 2: The posro/ sector in statistics 
Annex 3: Mail operations and 11e11-vorks page 281 
ANNEX 3: MAIL OPERATIONS AND NETWORKS 
1. INTRODUCTION 
This annex descrihes in detail the letter mail operation. both domestic and cross­
border. It considers what can cause cost variations hetween the items posted. It then 
reviews parcels and express operations, in order to identify structural similarities to, 
or differences from, the letter operation. Lastly. it discusses what networks are 
appropriate for mails operations. 
The letter mail operation comprises five ma in phases: collection, sorting (divided into 
outward sorting and inward sorting), transport and delivery. The approximate cost 
breakdown is shown in Table l. 
Table I: Approximate composition of letter mail operational costs 
Collection 10% 
-----~~------
Outward sorting l 8o/t: 
Transport 29r ,-a _.) ,r; 
lmvard sorting 5% 
Delivery ())Cfr: 
----.. -·-- -~-----
Source: . Average values from several postal administrations 
Before describing these phases the annex first studie~ the v.--ork that customers can 
undertake before actually posting their mail. 
2. PRE-POSTING 
What work has been carried out on the mail hefore posting affects what processes are 
necessary after posting and before final delivery of the items posted. 
At the simplest level, a customer may divide his mail between the categories 
determined by the postal administration (that is, letters/printed papers or first/second 
class). This would save on the "segregation" process described helow at Paragraph 4. 
A customer could also ensure that all the mail was presented in the same way, thus 
saving on the "facing" process. If the mail was posted under contract or had been 
franked with the customer's meter impression, this could save the task of "cancelling" 
the stamps. 
The most important task that the customer could carry out would he the pre-sorting of 
items. The level of-the pre-sort will depend not only on the customer's facilities (and 
volumes), hut also on the information that the postal administration can give to the 
customer on its sorting requirements. This inform<ttion will depend cruci<tlly on the 
depth of the post-codes system (see Annex IO for a more detailed description). Some 
post-coding systems enable pre-sorting only down to towns or general <treas. others to 
individual streets or the delivery rounds (known as "walks") of the individual postman. 
page 282 Amre< 3: Mail operations and 11e1wo1*.< J 
Allied to the latter depth of pre-sorting facility, it would be possible for customers to 
have the choice of posting in one location. or in several locations, with the aim of 
improving service. 
3. COLLECTIONS 
Collections are made from posting boxes in the street (sometimes called road-side 
collections), post office counters or other public places and from the premises of 
customers. In towns. the road-side collections. particularly in the afternoon. tend to 
be separate operations. In rural areas, they are often comhined with deliveries. 
All collections from post boxes and from counters are regular. Collections from 
customers' premises hy post offices are also usually carried out on a regular basis. 
However. companies may ha\·e irregular requirements and may ask for "ad hoc" 
collections. 
Collections from customer prt.'m1ses ;ire also made hy other operators. These 
operators may he offering sen·ices that compete with those of the postal 
administrations. Alternatively. they may he offering a service that is required before 
the mail is lodged with the postal administration. An example of this form of "mail 
preparation" is that of a "mail shop" pre-sorting mail on behalf of the originator of the 
mail. (However, as part of facility management, postal administrations will also offer 
special kinds of "mail preparation" to the customer. a facility sometimes called mail­
room service".) 
The collection function is vital to the overall process, but its importance is often 
under-stated. It accounts for about I 0% of costs. These costs can he seen as "lumpy 
inputs", that is to say that ead1 collection that is added or taken away has an effect on 
costs. However, costs do not vary according to the number of units (letters that are 
actually collected). 
The collection function can abo he under-estimated in terms of its importance for 
quality of service. Certain administrations experience problems with the potential 
irregularity of post boxes being "cleared" (that is. collected from). A problem here is 
that quality of service figures often measure only from the time when the sorting 
process starts in the sorting centre. 
A letter that is delivered hy the t;1rget date (measured from after the arrival of the 
letter at the outward sorting centre) would he considered a success even though it may 
have heen delayed by a day if the hox had not been cleared. (The only solution to this 
measurement problem is to have a system that measures "end-to-end".) 
4. OUTWARD SORTING 
Outward sorting is the process that ensures that mail collected in a sorting office's 
catchment area is despatched to the appropriate office either for delivery or for 
further sorting and then onward distribution to the delivery office. 
Annex 3: Mail operations and networks page 283 
4.1 THE BASIC PROCESSES 
The treatment in the sorting centre consists of the following set of operations: 
Segregating 
Facing 
Cancelling 
Sorting 
De.\f}(ltc/zing 
4.2 MECHANISATION Dividing items between letters and packets. They are 
also streamed (if streams are applied) -for instance 
into letters and printed papers, urgent and non-urgent; 
first and second class~ machinable and non­
machinable, or with a postcode and without a 
postcode. 
Ensuring that alJ letters are presented in the same way 
(with the stamp in the top right hand corner). 
Covering the stamp with a post office mark indicating 
the date and often the time. (For mail with customers' 
frankings, either "meter" mail or "pre-paid" mail, this 
operation consists of checking that all items are 
correctly marked.) 
Items are divided into groups according to the iin<il 
delivery offices. The pron:·ss is undertaken manually 
or hy machine -see below. There are oper~ttional 
differences depending on the size of the items ln he 
sorted (see Paragraph tJ .. ~ ). In the c1se nf destinations 
which attract little m<1il from the particular outward 
sorting centre, the ma ii may he sent to an inter­
mediate office which consolidates mail for the smaller 
destinations in its region. 
Items are then put into containers (usually bags. hut 
sometimes into trays) ready for conveyance. 
Most of these processes can he carried out either manually or mechanically. 
(This is less true of the materials handling processes needed to take the mail 
from one process to another.) Technological changes to mechanised processing 
have recently concentrated mostly on the sorting process. However, it should 
be emphasised that a significant manual input is still needed even in processes 
that are descrihed as "automated". 
Mechanised sorting entails mail being presented to coding operators. who use a 
keyboard to enter the postcode or destination address of the item. This 
information is then converted ("translated") by computer into a technical code 
(which is in hi nary form) to he printed (in ha rs or dots) on letters. v>'h ich can 
then he sorted '1Utomatically hy machines which can ''read" the binary code. 
(The subject of coding systems used hy postal operators is discussed in more 
de ta ii at Annex I 0.) 
Advances in Optical Character Reader (OCR) technol0!:,1)' now make it 
technically feasible to have the address scanned hy an electronic "eye". and to 
send the information to be ·translated into a binary code. which was formally 
input by the coding operator. 
page 284 Annex 3: A1ail oper(lfions and networks 
Different packet-sorting machines have been trialled at intervals. Some packet 
sorters use the "tilted-band" techniques, where packets are fed along a band at 
an angle. The packets are sorted by a flap opening below the hand, at a point 
determined by the code input by the operator. Other machines use trays that 
tilt up at the correct point. Administrations have generally found such 
machines less easy to justify financially than the technol0!:,1)' for sorting letters. 
In both cases, this financial viability is measured by comparison with manual 
productivity. 
In order to help make the mechanisation more financially feasible. 
administrations have tended to "concentrate" into large mechanised centres the 
mail which would formerly have been handled in several manual centres. (As a 
very approximate guide, a volume of more than 10 million items per year is 
sometimes considered as the threshold figure required for a modern 
mechanised letter sorting centre.) There could be dangers from over­
concentration which could._ already affect quality of service. However, the cost 
of mechanisation for smaller centres is decreasing, and there may now be a 
period of "de-concentra.tion". 
Of the different parts of the mail process, outward sorting is the operation with 
the greatest element of variable costs (the next being inward sorting). 
Conventionally, sorting offices have regular staffing set at a level slightly below 
that required for handling the volume to be processed. Surges of volume are 
then handled hy injecting overtime. It therefore needs cc1reful cdculation to 
arrive ~1t the most cost-effective mix of regular time and overtime. 
Introduction of mechanisation has increased the proportion of fixed costs. The 
on-costs of the machines (engineering costs, electricity. etc.) are largely fixed 
although the staff time of the postal operators using the machines stiJI has a 
high variable element, as with manual sorting. Optical Character Reader 
machines again have increased the fixed costs, by replacing more of the manual 
element hy mechanical process .. 
5. TRANSPORT 
MaiJ is transported by road, rail, air and sea. With increases in volume and (in some 
cases) increases in the real costs of using contractual transport systems, post offites 
have invested heavily in their own transport systems (primarily rail and road). These 
are "lumpy inputs" which together make a mostly fixed cost network. 
Where transport is contracted out, charges tend to he entirely variable. or a fixed price 
with a lighter charge per unit (or per weight). 
In terms of the overall analysis. the transport studied here is that between offices, and 
does not include the transport involved in the collection and delivery processes. In 
absolute money terms, the costs are very large. However. relative to the overall costs. 
they are less significant. 
6. INWARD SORTING 
The transport process brings the mail as far as the inward sorting office. This office 
will have its own "dependent" delivery offices to which some of the mail may be sorted 
(although much will simply be sent on in hags already made up by the outward sorting 
Annex 3: Mail opera/ions and 11e1wo1-ks page 285 
office). Both the main office and the delivery offices will h<1ve their own delivery 
rounds (known as "walks") operating from them. The second inv.'ard sorting process is 
sorting between the different deliverv rounds. If the irw.'ard sorting office is 
mech£7nised (and if the post code sy:tem is sufficiently "deep''). this v.':'alk-sorting 
process could be carried out mechanically. 
Sorting offices have hoth outward and inward sorting functions. The description 
above assumes that the inward mail received was despatched from another sorting 
office. For local mail (mail for delivery in the same area in which it was collected), 
quite possibly the same office will perform hoth outward <tnd inward functions 
(without. of course, a transport process between). 
7. DELIVERY 
The walk-sorting process thus brings the mail to the postman who\\ ill actu<tlly deliver 
the mail. The postman responsible for the delivery round then prepares the mail 
according to the order in which he will carry out the round. Thi..' postman then 
actually deliveries the mail. 
For significant movements 111 mail, it may be possible to nwdit~ the staffing levels. 
However, mostly. the staffing will not change according to volume. As <1n indic<1tion of 
this. postmen would normally he expected to deliver to ~1 cerL1 in numher ot houses 
throughout the year. and to cope with the peaks <1nd troughs of the' olumt.· that would 
occur during the year. (It is assumed here that there i-.. ;1 m1111mum service 
requirement -that is. that a delivery should he m;1dt:' to ;in~ Lkli\cry point e<1ch 
working day when there is mail for that address.) 
Deliveries are normallv intended to be made on a once-a-dav basis. ln business 
districts or other area~ where the volume of correspondenc~ is especially great. 
however, deliveries are made two or even three times a dav. However, as with 
coHections, companies may have .irregular requirements and 'mav ask for "ad hoc" 
deliveries. 
8. CROSS-BORDER LETTER MAIL 
When letter mail is sent from one postal administration to ;111other through the 
international letter mail svstem. the mail is said to he "exchdll!.!ed". There are 
specialised centres that dispatch mail on behalf of one administratior~ ;111d receive it on 
behalf of another. These centres are called "off ices ol cxchanl!e". Postal 
administrations mav have "out\vard" offices of exchan!!.e ;1nd "in\\arJ" offices of 
exchange (which m~y be in different cities). The locatiZrn of offices also may vary 
depending on whether the mail is being sent by air or surfoce means. 
There are relatively fe\v such offices. For ex;,1mple. the l.iern1'111 post;tl ;1dministration 
has eight offices of exchange as against fifty major sorting centres. The intention is 
that there should be gre<1ter control. particularly for dispatching Lo air-lines and for 
customs clearance. As well as l!i\·in!.! some cost economies. there ;ire also returns to 
scale in terms of the specialist k~owl~dge needed. 
Each office of exchange has a "catchment" area. Cross-border mail is collected. 
separated out (hy sorting) in the sorting centre and then dispatched to the outward 
office of exchange. There, the full sortation is carried out, and the mail is then 
dispatched by the chosen means of transport. For the inward process. the mail is 
page 286 Annex 3: Moil operations and networks 
cleared through customs and then dispatched by the inward office of exchange to the 
appropriate local sorting centres for any necessary sorting before sending on to the 
delivery offices. 
The danger of having apparently so few offices of exchange is that they could act as 
bottle necks. particularly during peaks of traffic. Some limited action has been taken 
to alleviate this potential problem. For example, when Italy first invested in 
mechanisation at one of its inward offices of exchange, it wanted all inward cross­
border mail due for delivery in Italy to pass through this centre. Following the 
resulting decline in quality, other postal administrations asked for an increase in the 
number of inward offices. The number was increased to four, and now to seven. For 
both inward and outward operations. the size of the catchment area for offices of 
exchange is very important for service. 
9. CAUSES OF DIFFERENCES IN COSTS 
There are four main causes of cost variations between the different letter items sent: 
the speed required, size and di'stance. 
9.1 CONCENTRATION OF MAIL USERS 
For the letter service. the different levels of concentr:1tion of mail users affect 
the unit costs of the two ph~1ses of the mail process that connecrs the public with 
the letter operation -that is. collections ~ind deliveries 
Town centre posting boxes tend to be relatively close to one another and 
relatively heavily used. By comparison. in less urban/more rural :1reas. they are 
spread further apart. and the level of usage is relatively light (so that the 
number of items per box collected is much less than is the case for collections in 
more urban areas). 
For deliveries, the key cost criterion is the distance between each delivery point. 
Clearly, there will be more points accessed in a delivery round in a town centre 
and less in rural areas. 
This discussion tends to contrast the two extremes of town centres and rural 
areas~ in reality, there is a continuum between the t\vo. However. this contrast 
helps to give an impression of the different cost effects on collections and 
deliveries, both of which tend to be fixed cost operati<.ms. The number of units 
put through each of the operations will therefore affect the unit costs. 
9.2 SPEED REQUIRED 
Most administrations offer a letters/printed papers tiering classification. 
However, they still operate a system of setting priorities for handling the traffic. 
Priorities are more ohviouslv set hv those administrations \vhich classifv their 
.I ·' •' 
tiers oi1 the basis of the speed required. (Within each of these categori.es, speed 
is a relative concept. Postal administrations achieve different performances in 
terms of speed, and it is therefore possible that the speed rt.~quired will have 
different cost implications for different administrations.) 
Since most priority mail is collected late in the afternoon and is expected for 
delivery in the mid-morning, it follows that al! the operations necessary for such 
between coUection and delivery need to take place late in the evening, at night 
Annex 3: Mail operations and networks page 287 
or in the early morning. In all Member States. extra shift allowances are paid 
for working at night (and productivity is usually less). If there are traffic peaks, 
it may be possible that the capacity of any mechanisation equipment available is 
exceeded; the unplanned use of manual sorting as a support can he expensive. 
Non-priority mail can be held over and handled in the outward office the day 
after collection at a time when spare capacity is available. To a certain extent, 
the other offices involved in the process can also use such mail as "in-fill" when 
their capacity allows -that is, when there is staff or machinery available and 
there is no priority mail to he handled. 
9.3 SIZE 
Operationally, letters are regarded as being in three different sizes: short 
letters. large letters and large "tlats"/packets. Large "flats" are envelopes 
containing an unfolded document (or publication) of at least A4 size. A long 
letter is an envelope which could contain a document up to the A4 size. but 
folded into three. A short letter is an envelope containing up to an A4 
document, but folded into half and then half again. ( N~1turally, market demands 
will affect envelope sizes used: presently, there are i1Kre~1sing volumes of the C5 
size (approximately half the size oi A4.) 
The differences in sizes <t ffech the sorting costs ;1 nd. much less significantly. the 
cost of the delivery ph;1se. Letters. whether shun m long. can he sorted on 
automatic sorting machinery: tbts and p<1ckets. if sorted mechanically. need 
separate automatic sorting m;1chinery. If the items are sorted manually, the 
items are handled in different fittings. the ergonomics of which affect sorting 
speeds, typical standards ranging from 1200 short letters sorted per hour to 450 
"flats" or packets sorted per hour. 
Short letters more .or less correspond to items up to 20 g. Long letters could 
weigh up to 80/90 g. and packets more. Flats Me unusual. in that they can vary 
across several weight hands. 
It will therefore he remarked that tariff structures based on weight, while 
perhaps being more convenient and understand~1hle. are not directly related to 
these cost differences. 
9.4 DISTANCE 
As will have been seen in -L1hle I above. transport costs are a small proportion 
of total costs. For lie.ht-weight items they are an e\·en smaller proportion. At 
first sight. therefore~· dista1;ce does not seem to he an important cause of 
variability of costs. 
However. distance cin cause additional complexity in routeing. For letters. 
approximately 22c;.-of the volume is for local delivery. perh<tps .1Y:~(-; for delivery 
to ~djoining areas. and the remainder to distant areas. It therefore follows that 
the further away the destination of a particul<1r item. the smaller the volume 
that is likely to he sent with it to the same destination. (Of course, this wiJJ vary 
from country to country: where countries -such as Canad<l -have the 
population concentrated in relatively few urban <1reas far from each other -the 
assumption made here m~1y he less valid.) 
page 288 Anne< 3: Mail operaliom anti 11e1works J 
The sm<dler the volumes going from one office to a particular destination, the 
greater the economic case for consolidating this volume with other volume at an 
intermediate office. For such mail, it is not just the sorting that would be 
double-handled, but also all the materials handling, including dispatching and 
receiving. It should he mentioned also that basic sorting processes are often 
required to be repeated for mail going to destinations with small volumes. 
10. OTHER MAIL SERVICES 
Parcels and express operations also comprise the same five phase of C~)llection. 
outward sorting. transport, inward sorting and delivery. Although the cost-breakdown 
is similar. some possible differences should he noted. 
10.l PARCELS 
Because of the greater average weight of items. parcel transport costs as a 
proportion of the total are likely to he higher. As with letter operations. parcels 
(and. indeed. express) operations range from the manual to the automated. 
The automated sorting technology is similar for both (and similar to the packet­
sorting machinery ment inned at Paragraph 4.2 above). 
Hl.2 EXPRESS 
For express services, delivery costs are likely to be less than the percentage for 
letters. and collection costs proportionally more (because of the smaller 
volumes per collection and the greater concentration of the likely delivery 
points). 
Increasingly, express operators, and also some parcel operators, are using 
"tracking and tracking systems". These keep an electronic record of each item 
from the time of receipt by the .operator up to the delivery of the item to the 
addressee. Such systems are based on bar-code labels attached to the individual 
items. These labels can also be used in the sorting process. 
For cross-border shipments, great emphasis is placed on the need for fast 
customs clearance. This would anyway be important for goods-bearing express 
packages or parcels (which are dutiable). It is also a source of potential 
competitive advantage, particularly for express documents (even though these 
are non-dutiable). 
II. NETWORKS 
The transport of a large number of items. including the delivery of each to a final 
destination, necessitates the use of networks. There ;ire essentially tV·iO sorts of 
networks that are to be found in the postal sector. The first is called the hub-and­
spoke system, and the second is sometimes called a "spider's-web" network. The two 
are shown below diagrammatically. 
Annex 3: Mail operations and networks page 289 
Figure J: Huh:..a11d-spoke and Spider:'> web networks 
Hub-and-Spoke Spider·s Web 
In these examples. there are six points that need to he connected In the huh-and­
spoke system. items from each of the po·ints are transported into the central huh 
\vhere they ~ire snrkd h) destination. and then fed had~ <dong the spoke-., to the end 
points 
In the spider''>-\\L'l1 11el\\Ork. there is no central huh. R<1ther. eaL·h point send-., 1tl.'ms 
directly to each uther pnlllt. ;ind receives items h;1ck tor deliver~ 
It should he noted th;tt. it th1:'se rwtworks represent a suftici1:.·ntly L1rge ;1n·;1 (such as a 
country or a group of countriL~s). e;1ch point on the exterior o1 the nt:.·tworks shown will 
he the central point of the ;1rea it serves with its O\\'n suhsididry points: it will normally 
he connected to these suhsidiMy f10ints by a huh-and-spoke system 
Some more detailed point\ need to he added to complete the description of networks. 
I I.I APPLICATION OF NETWORKS 
There are different criteria used for choosing between the two styks of 
networks. The adv;1ntage of the hub-and-spoke system is that it should make 
more efficient the use of transport capacity. It also permits returns to scale ot 
the expertise of the staff of the huh -particularly important. it connecting. into 
cross-border distribution 
Against that, there is the danger that twn points that are close to each other 
may he connected only hy t\vo long journeys to and from the huh. There i~ 
therefore the possibility that speed of transit could sutler. 
page 290 Annex 3: A1ail operations <llld networks 
The choice is dictated by service targets, operational deadlines to meet. the· 
efficiency of the transport system used and volumes. The sorting capacity of the 
hub is, of course, crucial -especially if the time potential is limited. (Indeed. if 
it is mechanised, the volumes gained through concentration may he needed to 
give an adequate return on the capital invested in the machinery.) 
Most express operators operate huh-and-spoke systems. They can achieve the 
service targets that they set themselves, and also find that the concentration 
using fewer routes is more cost-effective. However. the operators with larger 
volumes are now starting to experiment with some direct routing where volumes 
permit (for instance; to take a cross-horder example. Lisbon-Madrid instead nf 
Lisbon-German hub-Madrid). 
For letter operations, postal operations tend to use spider's-web type net'"•orks. 
Their far greater volumes tend to necessitate much later deadlines. Such 
deadlines make impossible the use of essential huh: only direct transport links 
make possible the achievement of service targets. In addition. the volumes of 
the letter operations between the different points enah.le these direct links to he 
cost effective. 
Different parcel operators use one or other system. The lower voiumes l hy 
comparison to letter operations) enable huh-and-spoke systems to orwrate 
effectively. Perhaps more common is a spider's-web network connecting 
regional humps, but each regional huh being the centre for the whole of its 
territory on a hub-and-spoke system. 
11.2 INTER-ACTION 
It is important to note that the use to which networks are put demands different 
levels of inter-action. Each point on a spider's-web network must know the 
routing for all the possible destination points; if any point changes. all the other 
points need to adjust their operation. In a huh-and-spoke system. it is 
essentially the hub that makes the adjustments necessary. 
An interesting contrast can be drawn with the network of post office counters 
and other outlets for selling postal services. In that case. if an outlet opens or 
doses, there will be an adjustment in customer demand between the options 
available. However. the other outlets themselves do not need to adjust their 
activities (with the exception of anticipating higher or lower demand in their 
particular catchment area). 
11.3 HIERARCHY 
It should be noted that networks are often layered upon on~ ;1nother in a 
"hierarchy". Thus, a letter addressed to a neighbouring town would probably be 
routed through the local sorting office. A letter going to a distant village would 
probably be ;outed vi<t an inte;mediate office where ~it was "concentrated" with 
other letters for villages in the same area. 
If the same Jetter was being sent to another country through the conventional 
international mail system, it would pass through an "office of exchange" (a 
specialised sorting office which handles out-going and in-coming cross-border 
mail). 
Annex 3: Mail opemtions and networks page 291 
Express and parcel operators tend to have similar hierarchies. In particular, 
cross-border items tend to pass through specialist centres. The advantages and 
disadvantages at the top of such hierarchies are similar to those of huh-and­
spoke systems generally. 
There are returns to scale on expertise and on <tny specialised equipment 
installed at the centre through which the m<lil is channelled. and there may he 
better use of transport capacity. 
Against that, the journeys feeding into and out of such centres may cause the 
mail to he sent along very indirect routeings. Further, the fewer the number of 
such centres for the higher levels of the hierarchy. the greater the danger of 
bottle-necks, even though the hicher levels tend to h<tndle much less traffic than 
the lower levels of the h._ierarchy~ 
A particular example of an expertise which operators (both postal 
administrations and private operators) tend to concentrate is that of customs 
clearance. If this is undertaken effectively. it can give <Ill operator a competitive 
advantage~ if not, the loss of quality of service Giil he suhst<intial. 
page 292 /11111ex 3: A1ail operations and 11et1-vorks · 
.__A_n_n_e..t_· 4_:_s_"_11_11_1u_"_Y_<>_f_le_g_al~s-ir_u_a_ri<_n_1 _i,_1 ._·H_e_",_''_e,_· ._\·1_0_1e_s _______ ~----------p-agc N3 J 
ANNEX 4: SUMMARY OF LEGAL SITUATION 
IN MEMBER STATES 
I. INTRODUCTION 
This annex gives a short description of the legal situation in each ot the Member 
States. In particular, it describes the legal status of the postal administr;1tion. as well 
as those items that are reserved to it. It also states the position ut the regulator~ 
bodies (where they exist). It is intended that the annex reflects the current situation 
(in Spring 1 <)91 ). 
The items that are reserved to the postal administration are also st1r11m;irisL·d in tlw 
table at Paragraph ~-
2. LEGAL SITUATION I~ EACH !VIEMBER STATE 
2.1 BELGIUM 
The Belgian Pust Office (de Post/la Poste) is now ;1 puhlil· L'l1ll'lpr isc. \\ith tull 
administrative and fin a ncia I autonomy. ( Hrnve\'er, there ;1 r1..· L'L'!L1 in "m issiPn\" 
imposed on it by the government. for which the governnwnt compensate'.'> the 
Post Office.) The General Manager is responsible for the gluhal rnanagt.'nwnt 
of the post. The postal monoroly covers letter, postcard and printed paper mail 
up to 2 kg. Justification for the monopoly is implied in thl' lklgi;111 legislation 
by the universal postal service being rendered in the public inkrcst 
2.2 DENMARK 
The regulatory body 1s the General Dirt.'Ctor;1lL' ut Post ;111d 
Telecommunications. The rublic operator, the Danish Post OtfiL·e (Post 
Tjenesten ). forms part of the state administration. HoW1...'\ l.'l. it r..:11jo~·" rcl;1ti\ L' 
autonomy in administrative and financial matters. The Director Gt:rH:Ltl h;is 
overall responsihil ity for the management and oper;i t ion ut t hL· Pu\t Office 
The post;tl monopoly covers letter and c1rd mail up tu l k~. ;111d i.-., justitiL·d l)ll 
the basis of the univers;tl service obligation of the post Till· llt'\\ post;il Lt\\ i:-. 
being examined hy the Commission ot the Europe;in ('nm1m111itil''-. in p;11t1l'l1L11 
concerning the regu l;i tory posit ion ot LTUss-hurLkr let l t' I 111.1 ii 
2.3 GERMANY 
The German Post Office (Deutsche Bundespost Postdien\l) is part ot the sl<lte 
administration organised in a ·regie· with a separate hudg1...·t The top official 
responsible for the overall management of the postal sen·in~s is the Director 
General. The Ministry for Post and Telecommunie<ttions holds the regul;1tory 
responsibility covering the postal services and the associaled operating di\·isions 
(Telekom and Postbank). 
-... 
page 294 A1111ex 4: Summmy of legal si1umio11 i11 Member States 
In Germany. letters. postcards and printed matters fall un~ler the monopoly, as 
well as parcels and packets containing a personal messa·ge. The weight limit is 
currently 1 kg, hut is likely shortly to he lowered to 500 g: this works in 
conjunction with a price limit set at ten times the hasic·tetter tariff (that is, at 
OM 10 for items up to 20 g). The Bundespost refers to the universal service 
requirement as the justification for the monopoly. 
2.4 GREECE 
., --·=' The regulatory body for postal affairs is the Ministry of Transport and 
Telecommunications. As a civil service department. the Greek Post Office 
(Hellenic Post) is set up as a public enterprise headed by a Director General 
who reports to the Minister of Transport and Telecommunications. Although 
post and telecommunications for the most part function separately, the public 
tele~ommunications operator, OTE subsidises the deficit incurred by the postal 
services. 
Letters. postcards and printed papers up to 2 kg fall under the postal monopoly 
whic_h is justified in the legislation on the grounds of the .post. being a public 
ser\'1ce. 
SPAIN 
The regulatory body is the Ministry ot Transport. Tourism and 
Communications. The public operator is the Spanish Post Office (Correos) 
which forms part of the same ministry. It is a state administration. and does not 
h:1,·e financial autonomy. It is headed by a Director Gener~tl. 
The postal monopoly includes letters and postcards up to 2 kg. if the items are 
for inter-urban deliverv. (Intra-urban items are non-reserved.) No 
justification is provided- for the monopoly. Caja Postal (the postal financial 
hank) is a separate entity. 
2.6 FRANCE 
The French Post Office (la Poste) is one of the operational divisions of the 
Ministry of Posts, Telecommunications and Space, the other operational 
di,·ision being France Telecom. The Direction de la Reglementation Generale, 
the regulatory division of the Ministry, is the regulatory body responsible for all 
postal services in France. whether provided by public or private operators. 
Although within the structure of the Ministry. the French Post Office is a public 
autonomous establishment ( etablissement autonorne de droit public). having a 
separate budget and headed by a director general. Services falling .under the 
postal monopoly include letters, postcards and packets up to 2 kg. French 
legislation does not provide a justification for the monopoly. Over and above 
the monopoly, the postal administration has a univers<tl service obligation for 
items up to 7 kg. 
A1111e.x 4: Summmy of legal situation in Member States page 295 
2.7 IRELAND 
The Irish Post Office (An Post) is a limited corporation with all shares owned 
by the government. The Chief Executive Officer has responsihility for the 
global management and operation of the postal services. The postal 
department of the Ministry of Justice and Communic1tions is the regulatory 
body supervising the quality and reliability of the postal sen·ices. 
The postal monopoly covers letters. postcards. packets. printed papers and 
express items up to 2 kg plus p;1rcels which cont:1in ;1 personal message. The 
monopoly is justified as allov.'ing the cross-suhsidisat ion 1wcessary for providing 
a national postal service. 
2.8 ITALY 
As part of the state administrntion. the Italian Post Office (p<art of PTI Italia) is 
administered as a civil service department without <1dministrative or financial 
autonomy. The top official responsible for the post;tl sen·ices is the director 
general. 
The postal monopoly covers letters and poste<1rds up to ~ kg. While co11ection 
and delivery of parcels are not part of the post<il ;administration's monopoly. the 
transport of parcels between large towns rem<1 ins p;1 rt of it No justification is 
provided for the monopoly. 
2.9 LUXEMBOURG 
The Luxembourg Post Office is part of the government administration and has 
no administrative or financial autonomy. The Director General is responsible 
for its overall management and the head of the postal division is in charge of 
the operational side of the postal services. Letter ;and postcard mail (up to 2 
kg) fall under the scope of the monopoly No just i fic1 t ion is provided for the 
llll)nl)jl()ly. 
2.IO NETHERLANDS 
The Ministry of Transport is the regulatory body which -;upervises the postal 
sector in the Netherlands. Since January i '-JXtJ the PTT. covering posts and 
telecommunications. has been established as " limited corporation (NV), the 
shares of which are owned l()()C( by the government. P1T Nederland has 
different operating companies. PTT-Post being responsible for postal services. 
The General Managing Director of PTr-Post therefore st ill reports to the 
board of PTT Nederland. 
The justification given for the monopoly, which under Dutch law is regarded as 
a "concession", is the need to safeguard the qu<tlity of postal services. The 
monopoly includes letter and post card mail weighing up to 500 g and with a 
postal service price of less than Dtl 8.20 (for domestic services). The European 
Commission. acting under Article 90.1 of the Treaty of Rome. has issued a 
decision that the scope and application ot the monopoly limits were 
incompatible with the EC's competition rules. This decision is presently being 
disputed before the Court in Luxembourg by both the Ministry of Transport 
and PTT-Post. 
-
page 296 A1111ex 4: Summwy <~(legal siJU{//ion in /\1emher States 
2.11 PORTUGAL 
As a civil service department, the Portuguese Post Office ( Correios) is 
established as a public enterprise and in particular under the form of a holding 
company. It is headed by a general manager and its operational side is run hy a 
director general. The ICP -Institute of Communications -is developing an 
active regulation role. The postal monopoly covers letters. postcards and 
express items up to 2 kg. No justification is given for the monopoly. 
2.12 UNITED KINGDOM 
The regulatory body for the United Kingdom's postal sector is the postal section 
of the Department of Trade and Industry. There is a !so ;1 "q u;1si-governrnen ta I" 
body, the Post Office Users' National Council. which also h;1s some supervisory 
role to play -hut only in terms of the services provided h~' the public operator. 
the British Post Office Proposals are presently being studied to set up an 
independent body, the Office of Post;d Services. \vh ich \\nu Id oversee the 
quality of the universal service provided. as well as advising thL' government on 
the appropri;1lt.' scope of the post;tl nrnnopnly 
The Post Office is ;1 st;1 t utory corpor;1 t ion which is mg;1 n ised i 11 to three ma in 
businesses -Letters. P;1rcels. and Counters. (The hanking di\ision -Girobank. 
was established as a \vholly-mvned subsidiary company in I (J,')5 ~rnd privatised in 
July 1 <J<JO. having been purch;1sed hy a building society.) The ( 'uunters Business 
was established as a whollv owned suhsidiarv. Post Office. Counters Ltd: in 
October I 987. Royal Ma (J (Letters) and p,~ rcelforce are nut separate legal 
entities. hut they have their own internal accounts and are organisationally 
distinct. 
Royal Mail Letters has a monopoly over the carriage of letters when the service 
costs .t.: I or less. (A significant reduction of this limit is said to he being studied 
by the government.) There are specific derogations concerning international 
mail, the delivery of Christmas cards and document exchanges. 
-~· SUMMARY OF ITEMS UNDER MONOPOLY 
Table I below summ;1rises tht:> items under the monopoly in e:ich Member State. This 
is the same table as shown in Ch;1ptt:'r -~of the main text: hrn'e'n. here all the 
qualifying remarks are ;1dded 
....... 
Annex 4: Summary of legal situation in Member Srmes 
Tahle I: 
ME\IBER 
STATES 
lklg1u111 
( icrmdm 
( i reecc 
Srarn 
France 
lrcl:md 
Ne! hcrl~11Hb Member States' reserved .\'e1vices -juridical position ( J 990) 
LETrERS 
Cl' TO 
2 ko 
::::> 
ko 0 
ko ::> 1"1 
2 kg 
') kn ((>j -~ 
2 ku_ 1'1· I 
I 
I 
I 
I 2 k!,! ! 
:(l:~g . "· I PRIYn:n 
l'.\l'FR~ 1I1 
• 1.?1 
'\ / :1 l ~I 
• 
• 
• i \ 
• 
• 1.!1 
I ",." . , . 
I OTHER sun·1cEs t:'\nER \l<>:"<>P<>LY 
S\IALL 
I'·\( ·.,;t-:TS 
• 
• FAX 
(PllllJ(') 
• 
• 
• 
• EXPRESS PARCELS 
\J.\11. 
• (?\) 
• 
• ( 111 
• page 297 
STA.\11' 
SALE~ 
• i ~I 
• 
,___l.J-'1_1_1t_c_d_l\._· ,_11_~_·l_h_1_11-1~-l._l. __ '_' J __ " ~----"---····· ~----.... J _______ ~-------··- -------
Note 4. ThL·sc adm1111s1ra1111ns cl:1ss;f\ l>ctwcL'l1 first cl:1ss :ind second cl<Jss letters Items which could 
elsewhere he cbsscd :1-. printed p:1pcr, \\·ould be -..1111pl\ lc1tcrs. and thcrcfurc puss1bly rcscrn:d 
Note S-Also :1 price lim11 dppl1cd -set :1t ill times has1c tarilf (thcrcton: Dr-..·t 10 -ur ECU . .l,t)O -lur 20g 
item). The (icrm:1n lllllll\lpdlv ;1pplics tu all mail , .. ·11h a persun<d and topical message. ;111d aisu 111 
mdil with pcrsun:tl mc-..s:1gc-., 111 p:1rccls ur p:1ckci... Huv.cver, if :-.uch a mess:1gc refers 1(1 the 
cuntents ul !hc p~irccl ()r packet. this mail docs no! Lill Ulldcr the monoroly 
Note 6 [)pc, not include c11v-111:11I (111r 1n1r:1--urh:111 111;111 f11r 'kl1,·cn 111 -..~1111c c1l\ as culku1un) Uoc~ nt11 
co,·c r post-cards 
Note?{ Cu rrc111 Iv being rc\·1scd 111 c11111JL·r:11 :1111 \\ 11 h l hL' C(l111pc11t 11111 -.,c1' ice-., 111 the Fu ropc~111 Com1111s~1un 
Likely l hdl nwn(lpuly m-cr exp re'' 'L'r,·1cL'' "ill lJL' wi1 hdr;I\\ n 
page 298 Anne"C 4: Summary of legal silllation in Member States 
Note 9: Universal service obligation up to 7 kg. 
Note 10: Contents: packets and documents nn1 exceeding I kg. 
Note 11: While Italy has placed parcel services in the non-reserved area. the transport of parcels between 
large cities remains reserved. 
Note 12: There "·ill also be a price limit operating in combination with the weight limit of 500g. (The price 
limit presently proposed is Dll 8.20 (ECU 3.60) for domestic services, but this is currently being 
reviewed by the court in Luxembourg). Postcards are not a reserved service. 
Note 13: Price limit of[) (ECU 1.45) is applied (with no weight limit) Rcduc11on tu a limit ol about f033 
(ECU 0 .:ll\) is being considered. 
Source: European Research Associates study 
Amia 5: Community texts 011 postal se1vices page 299 
ANNEX 5: COMMUNITY TEXTS ON POSTAL SERVICES 
1. INTRODUCTION 
This annex lists the references for documents or statements. issued officially by the 
different Community institutions. that are directly related to the postal sector. It is 
divided into: 
legislation issued by the Council; 
legislation and decisions issued by the Commission; 
resolutions made and opinions given hy the Parliament. 
The list does not cover documents and statements which. though relevant, are not 
directly related to the postal sector. It also does not mention occasions when action 
has been taken following co-operation between the Commission and individual 
Member St(1tes if this action did not result in a formally issued document or 
statement. (For example, the list does not mention the instances where, acting on 
advice from the Commission, the governments of Belgium, France, Germany and Italy 
decided in turn to allow the free operation of express services.) 
2. LEGISLATION ISSUED BY THE COUNCIL 
TYPE REF DATE 
regulation ~(J4 /9 I /EEC 4 /tr2/9 J 
3. LEGISLATION ISSUED BY THE COMMISSION 
TYPE REF DA TE 
regulation 222/77 13/ 12/76 
(Title V) 
recommendation 79/570/CEE 29/05/79 
directive 79 /695 /CEE 24 /07 /79 
regulation 1224/80 28/05/80 DESCRIPTION 
"on the operation of air cargo 
services between Member States" 
DESCRIPTION 
"on Community transit -Special 
provisions applying to postal 
consignments" 
"on the application of inland 
postal rates to certain mail 
between Member States" 
"on the harmonisation of 
procedures for the release of 
goods for free circulation" 
"on the valuation of goods for· 
customs purposes" 
page 300 
TYPE REF DATE 
regulation 3179/80 5/12/80 
directive 81I177 /CEE 24 /02/81 
regulation (>78/85 18/02/85 
regulation l ?CJ7 /8(> 9 /0(>/8(> 
decision 87 /415/CE~ 15/06/87 
recommendation 88/590/EEC 24/ 11/88 
regulation 4151/88 21/12/88 
decision lJ(l/ 1<1/CEE 20/12/XtY 
regulation 14/05/90 
decision 90/45C>/CEE 1/08/90 
communication COM(90)447 2C>/09/90 Annex 5: Community texts on postal se1vices 
DESCRIPTION 
"on postal charges to be taken into 
consideration \vhen determining 
the customs value of goods sent by 
post" 
"on the harmonization of 
procedures for the export of 
Community goods" 
"simplifying tormalities in trade in 
goods within the Community" 
"abolishing ct'rL1in pnsLtl tees tor 
custums prescnL1 l H lf1" 
"conccTn i ng t hL' l.:ond usion o1 a 
Convent ion het ween the 
European Community. the 
Republic of Austria. the Republic 
of Finland. the Rerublic of 
Iceland. the Kingdom of Norway, 
the Kingdom of Sweden and the 
Swiss Confederation on a 
commori transit procedure" 
"concerning raymenl systems, and 
in particular the relationship 
between cardlrnlder and card 
issuer" 
"laying down the prov1s1ons 
applicable tu gomls brought into 
the customs tl'.rritorv of the 
Commun it\''' 
"concerning the prm 1s1on in the 
NetherLrnlb ut c\prcss deliven· 
services" 
'';1mending Regulation (EEC) No 
:; 1 ?CJ /SO on postal charges to he 
taken into consideration when 
determining the customs value of 
goods sent hy post" 
"concerning the provision in Spain 
of interna t ion a I express courier 
services" 
"making payments 1n the internal 
market" 
A1111ex 5: Community texts 011 postal se1vices 
TYPE 
directive 
(draft) 
directive 
(draft) 
directive REF DATE 
COM(90)~ 14 14 /()<) /90 
COM(<>0)-117 20/09/90 
<J0/504/CEE ()<J/ 10/90 page .WJ 
DESCRIPTION 
"concerning the protection of 
individuals in relation to the 
processing of personal data" 
"concerning certain aspects of the 
organisation of working time" 
"on the harmonization of 
procedures for the release of 
goods for free circulation" 
4. RESOLUTIONS AND OPl~IONS OF THE PARLl.-\\lENT 
TYPE REF 
resolution 524/S2/PARI. 
resolution ('2(>2:'1"7 
resolution 2-%h/S4 
resolution 2-1 yq /S.5 
resolution 
resolution 
resolution 
resolution 
resolution 2-1<>1/8(1 
resolution 2-207 /86 DATE 
Jl)/7/82 
14/10/S2 DES( 'RI PTION 
"Lu rope an postage stamp" 
on lega 1 prov1s1ons tor 
Community standards for letter 
hoxcs" 
"on Lurorail express items" 
"on a common market for postal 
ch~1 rges" 
"on the introduction of a uniform 
postage rate within the EEC for 
periodicctls and printed papers. 
Committee asked for its opinion: 
youth, culture, education. 
infurm<1tion and sport" 
un the cre;1tiun of a true 
Lurt1jh.:'.~tn post~1ge "re"" 
"011 the rise of postal charges in 
Belgium ~111d its adverse effects in 
the cultural sphere" 
on postal arrangements for 
printed matter in the European 
Community" 
"on Belgian postal charges and 
their threat to the European 
cultural area" 
page302 Annex 5: Community texts 011 postal se1vices 
TYPE REF DATE DESCRIPTION 
resolution 2-1362/86 "on printing the words 'European 
Community' on all Member 
States' postage stamps and the 
need to expedite the 
standardisation and 
uniform iza t ion of postal services 
and charges in the Community" 
r eso l u t ion 2-638/87 "on the issuing of stamps in ECU" 
opm10n PE 118.194/fin 4/2/87 "postage rates for periodicals" 
opinion PE 119.050 16/12/87 "on the compatibility with 
Community law of the State 
monopolies .rn the postal and 
telecommunications sector 
resolution 2-354/88 "on the issue of a postage stamp 
of uniform value in the EC" 
resolution 2-259/88 11/11/88 "on posts and 
telecommunications" 
Annex 6: UPU Convention -key a11ic/es page 303 
ANNEX 6: UPU CONVENTION -KEY ARTICLES 
1. INTRODUCTION 
The titles of etll the key articles that are relevant to the discussion in the main text are 
as shown in Table I. (Throughout, the article numbering system of Convention signed 
at the 1989 Washington Congress is used.) 
Table I: Key articles (~f" U PU Convention 
UPU Article N° 
20 
25 
T!i-74 Description of Contents 
Freedom of transit. 
Definition of letter post items. 
General conditions concerning postal charges 
and weight limits. 
Posting abroad of letter-post items. 
Terminal dues 
The full text of these articles (as in the 1989 UPU Convention) is shown at Paragraph 
2 below 
Because ot the central importance of Article 25 (previously Article n) to the debate 
concerning the compatibility of the Convention \vith the Treaty of Rome. the 
evolution and implications of this article are discussed in Paragraph .1. 
2. TEXT OF RELEVANT ARTICLES 
2.1 ARTICLE I: FREEi>OM OF TRANSIT 
l. Freedom of transit, the principle of which is set forth in Article I of the 
Constitution, shall carry with it the obligation for each postal 
administration to forward always by the quickest routes which it uses 
for its own items, closed mail and cl decouvert letter-post items which 
are passed to it by another administration. This obligation shall also 
apply to airmail correspondence, whether or not the intermediate 
postal administrations take part in reforwarding it. 
page 304 
2. 
3. 
4. Annex 6: UPU Conve111io11 -key a111des 
Member countries w~ich do not part1c1pate in the exchange of letters 
containing perishable biological substances or radioactive substances 
shall have the option of not admitting these items in transit iz <il~couvert 
through their territory. The same shall apply to the items referred to 
in Article 41, Paragraph 9. 
Member countries not providing the insured letters service or not 
accepting liability for insured letters carried by their sea or air services 
shall nonetheless be bound to forward, by the quickest route, closed 
mails passed to them by other administrations. hut their liability shall 
he limited to that la id down for registered items. 
Freedom of transit for postal parcels to he forwarded hy l<tnd and sea 
routes shall he limited to the territory of the countries taking part in 
th is service. 
5. Freedom of transit for air parcels shall he guaranteed throughout the 
territory of the Un ion. Nevertheless. member count r ics '" h il·h ;1 re not 
parties to the Postal Parcels Agreement shall not hL' required to 
forward air parcels hy surface. 
(L M_emher countries which 11re parties to the Postal P:1rcL·h .'\~rc:ement 
hut which do not provide an insured p<11-cels service or '' hiL·h do not 
accept liability for insured items carried hy their sea 01 ~1i1 services, 
shall nonetheless he hound to forward. hy the quickest rnute. closed 
mails passed to them by other administrations. hut their li;1hility shall 
he limited to that laid down for uninsured parcels of the same' weight. 
2.2 ARTICLE 19: LETTER-POST ITEMS 
l. Letter-post items shall consist of: 
a) letters and postcards, together called "LC": 
b) printed papers, literature for the blind and small p<1ckcts. together 
called "AO". 
2. Special hags containing newspapers. pt:.'.rimlictls. hooks and other 
printed papers for the same addressee at the s<11T1e address shall he 
called "M hags". 
~. Letter-post iten1s conveyed by air \\,.ith priority sh~dl he c~tll~d "airn1ail 
correspondence" 
4. Surface iterns conveyed hy a 11 \J...•it h red uL·ed pr 1ur1t ~ "h;i 11 ht~ ca lied 
"SAL" (Surface Air Litt). 
Annex 6: UPU Co11ve11tio11 -key w1iclcs . ~~--- ~og<·· ~~;,~-] 
------
5. Based upon the speed of their treatmcnL letter-post items may he 
divided into: 
a) priority items. i.e. itt:ms cunveved hv the quickest route (air or 
surface) with priority: 
h) non-priority items. i e. items for which the sender has chosen a 
lower rate, implying ;1 lon~er delivery tiriw 
(L Administrations of transit and destinati<'n shall treat priority items as 
airmail correspondence: on the hasis of bilateral rules. administrations 
may also give the same tre;1tment to surface LC items when no better 
service is offered to the sender Similarlv. no distinction shall he made 
between non-priority items :tnd surface AO items. or surface AO 
conveyed hy air with reduced priority ( S_;\ I.) 
2.J ARTICLE 20: POSTAGE CHARGES A~D Ll\llTS OF WEICHT AND SIZE. 
GENERAL CONDITIONS 
l. The postage charge for the con\·eyance ot letter-post items throughout 
the entire extent of the Union shall he fixed for guideline purposes in 
accordance with columns 1. 2 and 1 of the t;1hle I below. The limits of 
weight and size shall !w fixed in ;1cnm..L1nct· with L·nlumns --l and ) ot 
the ta hie below. (This u1hlt.' i.\ rer)fwfllct'd ur rlze end o( rlzi.\ annex.) 
Except in the case provided for in .:\rtiL·k 2~. P;1r;1g1:1ph (i. they shall 
cover delivery of the items to ttw pL1ct._· t)! ;iddrl'Ss pn)\'ided that this 
delivery service is nperatt:d in the· country Pl destin;1tiun tor the items 
in question 
2 The Executive Council sh;tll he ;iuthorizc:d to r c\·isL· ;111d to ;unend the 
basic charges in column _) once hetwn·n t\\O ( ·ongresses. The revised 
charges shall he based on the mnktn \·;tlut' ot the chMges fixed by the 
members of the Union fur inlL'rn;ition;tl items from their countries. 
They shall come into for ct~ l )n a d:1 t t' t ixed h~ the (.._\L'CUt ive Council 
1. Member countries may, exL·L·ption;tlly. rnmlity the weight-step structure 
shown in Paragraph I. subject to the ft)lluwing L'()nditions: 
a) for any category. the minimum \\ e igh r \t cp -..;h;tl I ht~ that shown 1 n 
Paragraph l; 
b) for any category. the last weight step sha 11 nnt exceed the maximum 
weight shown in Paragraph I. 
4 Member countries which have ;1hulisht·d postc1rds. printed papers 
and/or small packets as sep;1rak c1teguries ot letter-post item in thei1 
internal service may do the sanw in respc::~·r ut m;1il tor ;1hrtl;1d 
I page 306 
5. 
6. 
7. 
8. 
9. 
10. 
1 1. Annex 6: UPU Convention -key a11icles 
Each administration may admit aerogrammes, which are airmail letters 
consisting of a sheet of paper suitably folded and gummed on all sides. 
However, notwithstanding Paragraph 1, the dimensions in that form 
shall not exceed 110 x 220 mm and the length shall he at least equal to 
the width multiplied hy the square root of 2 (approximate value: 1.4 ). 
Notwithstanding Paragraphs I and 3 (a), postal administrations may 
apply a first weight step of 50 g to printed papers. 
The charges adopted within the limits laid down in Paragraph I shall as 
far as possible bear the same relation to one another as the basic 
charges. Exceptionally, and within the limits prescribed in Paragraph 
I. each postal <1dministration shall be free to <tpply to the charges for 
postcards, printed papers or small packets a rate of increase or 
reduction different from that which it applies to the charges for letters. 
Each postal administration may allow, for newspapers and periodicals 
published in its country, a reduction of not more than 50 percent of the 
tariff applicable to the letter-post category used for the item, while 
reserving the right to restrict this reduction to newspapers and 
periodicals which fulfil the conditions required by internal regulations 
for transmission at the tariff for newspapers. This reduction shall not 
extend to commercial printed papers such as catalogues, prospectuses, 
price lists, etc, no matter ho»' regularly they a re issued; the same shall 
apply to advertisements printed on sheets annexed to newspapers and 
periodicals, unless they consist of detached advertising inserts to be 
considered as integral parts of the newspaper or periodical. 
Administrations mav likewise concede the same reduction for books 
and pamphlets, for ;nusic scores and for maps. provided they contain 
no publicity matter or advertisement other than that appearing on the 
cover or the fly leaves. 
Newspapers, periodicals, hooks and other printed papers for the same 
addressee at the same address may he inserted in one or more special 
hags (M hags). The charge applicable to such hags shall be calculated 
by weight steps of I kg up to the toLtl weight of each hag. 
Administrations may allow a reduction for such hags of up to 20 
percent of the charge payable for the category of item used. This 
reduction may be independent of the reduction provided for in 
Paragraphs 8 and 9. M hags shall not be subject to the limits of weight 
laid down in Paragraph I. However, they shall not exceed the 
maximum weight of ~O kg per hag. 
The administration of origin may, within the limits laid down in 
Paragraph l, apply to non-standardized items charges different from 
those applicable to standardized items. 
A1111e.x 6: UPU Co111'e11tio11 -key tmicle' page 307 
12. The comhininl!. in one item of articles on which different charges are 
payable shall l;e authorized on condition that the total weight d;es not 
exceed the maximum weight of the categorv whose weight limit is the 
highest. The charge applicable on such 7rn item shall. at the option of 
the originating administration. be that of the category with the highest 
rate or the sum of the separate charges applicable to each article in the 
item. Such items shall bear the endorsement "Emmis mi.xtes" 
("Combination mailing"). 
13. The letter-post items sent on postal service as mentioned in Article l () 
shall not be subject to the limits of weight and size laid down m 
Paragraph l. However, they shall not exceed the maximum weight of 
30 kg per bag. 
14. Administrations may i.tf1ply to letter-post items posted in their 
countries the maximum I im it ot weight Lt id down for articles of the 
same kind in their internal ser\'ice pn)\'ided th:1t such items do not 
exceed the limit ot weight mentioned in P;iragraph I. 
15. Post a I adm in ist r;1 t ions m;1y a I Im\ red un:d charges based on thei1 
internal legisl<ttion tor letter-post ilL'ms posted in their country. They 
may. for inst:1nce. give prekrenti:tl r;1tt.·s tu major users of the Post. 
Such preferent ia I r:1 tes may not. hm\ t.'\ t.T he lower than those applied 
in the internal service t~) items presenting the some characteristics 
(category. quantity . handling time. etc) 
2.4 ARTICLE 25: POSTING ABROAD OF LETTER-l\lAIL ITElVIS 
1. A member country shall not he hound to forward or deliver to the 
addressee letter-rost items which senders resident in its territory post 
or cause to be posted in a foreign country \vith the ohject of profiting 
hy the lower charges in force there. The s:1me shall arply to such items 
posted in larges quantities. whether or not such postings are made with 
a view to henefi ting from lower charges 
2. Paragraph shall he applied \\ itlrnut distinction hoth to 
correspondence made up in the countr: where the sender resides and 
then carried across the frontier and tu correspondence made up in a 
foreign country 
J. The administration concerned ma~· either return its items to origin or 
charge postage on the items at its intern;tl r;1tes. If the sender refuses 
to pay the poslitge. the items m"! he disposed ot in accordance with 
the interna I legisl"t ion of the adm in ist '" t iun concerned. 
4. A memher country shall not he hound tu ;1n:ept. forward or deliver to 
the '.l q-t~ tter-post items which senders post or cause to he 
posted in lar5~ 1uantities in a country other than the country where 
they reside. The administration concerned may send back such items 
to origin or return them to the senders v.:ithout repaying the prepaid 
charge. 
/11111ex 6 UJ>U Cn111·e11tio11 -key mt1cles 
1.5 ARTICLE 7J: TERMINAL DUES 
Suhject tu Artick 7), L'ach ;1dministration which, in its exchanges hy air 
and surface means with another <1dministration. receives a larger 
qu;111titv of letkr-m;1il items than it send shall have the right to collect 
!rum the disp;1tching administration. as compensation, a ~payment for 
the costs it incurs for the e\cess international mail received_ 
The payment provided for in Paragraph I shall he fixed as follows: 
( :1) When two ;1dministrations exchange with each other. hy air and 
surface (SAL included). a total weight of LC/ AO mail less than or 
equal to 150 tonnes a year in e<1ch direction. the rate applied per kg 
shall he 2.<> .. rn SDR for LC/ AO items (uniform rate). excluding the 
printed papLTS sent hy special hags ( M hags) referred to in Article 
20. Par;1graph 10_ 
( h) When two administrations exchange with each other. hy air and 
su rfoce (Sr\ L included). a tot;tl weight of LC/ AO ma ii greater than 
150 tonnes ;1 year in each direction, the rate applied per kg shall he 
S. I 15 Sf) R for LC ite1T1s and 2.058 SD R for AO items (separate 
r;1 tt._· for e:h:h c;1 tc~ory ), ex cl udi ng the printed papers sent by special 
h<1~s ( M ha~.s) rekrred to in Article 20. Paragraph I 0 
(1._·) When tllL' threshold ot l)O tonnes is exceeded in a single direction. 
the administr;1tion rt'ceiving this tr;1ffic in excess of 150 tonnes may 
choose. fur the ;1ccountin12. uf the termin;il dues relatinl!. tu the mail 
rt.:'.cei\'L'lL une ut the t\;,O p;1yment systems descril~ed in Suh­
p;1ragraph...; :1) :tnd h) ;1hovc. In the :1hsence of bilateral :1greement. 
the mail sent hy thL· :1dministration disp:1tching less than 150 tonnes 
:1 year -.;hall in :di c;1ses ht> brought to ;1ccount in accordance with 
the singk r:1lL' l;1id down in Suh-paragraph a). 
(d) For prinlL'd p;1pers sent in M-hags, tht..~ rate to be applied shall be 
0.(l).~ SDRs p1:.·r kg. irrespective of the <1nnual weight of mail 
exchanged hc·t \\ een two adm in istra t il rns. 
When. in ;1 l!.i\L'll 1 elation, an administration which is paid in 
:1L-cord;111ce \\ itl1 the ditfrrenti<1ted LC and AO rates of terminal dues 
indicated in paragr;1ph ~ establishes that the average number of items 
(LC and/ or AO) contained in one kilogram of mail received is higher 
th;tn the world avera!!e which is 4K LC items and 5.6 AO items. it rnav 
ha\·e the correspumling r;1tes revised if compared with this worl~i 
;tvL·rage· 
the n umhe1 ot LC i kms 1s more than I) percent h 112.her ( i .e more 
th;tn )) items) and/or 
the numhn ot AO item.., is mnre th;rn 2.)c; (i.e. rnure th;1n 7 items) 
I: th is c;1se. the lt.'rrn ina I dut:s a muu n t p;1ya hie by the debtor 
:1<..l: :!1istratiun sh<tll he equ;tl tl1 the difference het\veen the sums owed 
h:· '--"t,_.h :1dministr;1tiun fur it-.; tot:tl mail flow :1fter application of the 
A1111ex 6: UPU Co111•c1111011 -key a11iclc' 
appropriate rates. The rev1s1on shall he C:ll ried uut on the krm:--i 
specified in Article 187 ot the Detailed Regulatiuns (see footnott>') 
4. Any administration may waive wholly or in p<1rt tl1·. 1 "'_' ment pn)\'it.kd 
for in Paragraph I. 
5. The administrations concerned m;1\. h\ hil:ill'r:il ur nuiltiLill'ral 
agreement. apply other p;iyment system-..; frn thl· '-L'ttkn1t:'nt ot tcrmin;il 
dues accuu 11 h 
2.6 ARTICLE 74: TER\11'\:\L IH'ES FOR PRIORITY. '\O'\-PRlORITY ITE\IS 
AND CO\JBINED JTF\IS 
I. \V hen , 1 u 11 ii , i 1 111 1.1 tc I u I LC , ,. \ U 1k111 '> 1.., u.., u I u 1 ll...! u th c pl u \ i >, i l > 1 h 1.) l 
Artick· :~ !>;11 .t_!.2I:1pli ~-.1) .11lll 1.· 1 th.it 1.1lt" -.,lull :tl-.,1• .1pph· tl1 r11 iur it\ 
item:--. 1H111-p1 i1l1 it\ ill'11h ;111'! ,·, Hnl)i1it·1..I 1!t"111.__, 
' When sep;11;1te 1 ;1tc:--tu1 l ( item'> :rnd .. \( > ikm:--;ire used under the 
provision ot Article 7_). Par;1graph ~( h) ;1ml :2l L. ). the country ut origin 
and the country of destination ma>. hy hilatnal agreement. decide that 
the rates ;1pplicahle to priority ikms and non-priority items shall he 
fixed on the hasis of the actu;d structure of the traffic. In the absence 
of an ;1greL·ment, the provisions l<1id dPwn in Article 7"°?>. Par;1graphs 
2(h). 2(c) ;111d -~ shall apply. In thi" c1sc. priority items shall he 
assimilated to l C ;ind noi1-priority ilL'ms to r\O 
:t For corn hi nL'd i terns exchanged u mkr the pmvision ut Article 20. 
Paragraph I~. terminal dues \h:tll ht· ">L'lllnl hy hilatL'r;tl ;12-!recment 
between thL' ~:ountries concernL·d 
4. When an ;1dmi11istr;1tion dl'cilk" tu di:--L·onlirlllL' ">cp;1ration ol mail intu 
LC ;llld .:\0 in Li\·mir of a s>'ill'm h:1...,L'll on priorit>. ;1nd the latter 
produce'> ;111 dkct on termin;tl duL·..., ;1c1..·urdin~ (() P;1r;igraph :2. tht' ne\\ 
system 1..:;111 ht.· introdun~d 011 till' tir"t Pl J;111u;11: Pr the first of July 
only. pro\ iding till· l11te111atiun;tl Bu1r.:,1u li;1-., h1..Tll ...,u informed ;1t le;1st 
three mrnllh-., i11 ;1Lh·;1111..·c· 
3. ARTICLE 25 
Article 25 ot the Convent ion dea Is with wh;1 t is 110\\ k1W\\ n a" re111;1 i I It states that nu 
postal administration of ;1 \;km her State of tht.' l; PL is hound tu convey or delivL'.r 
letter mail originating \\ithin its hound<trie:-- hut llLtik·d tu rt:cipients there trnm a 
foreign country. And it adds that they c:tn also rdusc tu h"ndle mail depositeU with it 
from ahroad and destined tor third countries 
Under Article 11\7 of 1he Detaticd 1Zegul;1t11)1h. lhe tcrn1111;il duL·' 111.it L11uld l)L· :1ppl1nl lu ~uch 1te11b !all111~ 
oulside the r~rngcs defined :rn.: c1kul:111.·d 111 SD Rs :1~ lullo\\' 
LC: !(Average number ot 1te111:--per kg x ll Ill) -r ti :-;SI' l 4~ 
I page . >I 0 /l1111c:x fr U/)U Co111'e111io11 -key anicles 
3.1 EVOLUTION 
The original intention of this article was to prevent senders in one country from 
presenting letter mail to the postal service in another country for delivery in the 
country of origin in order to henefit form the lower tariffs in the foreign 
country. It was also aimed at preserving the structure of terminal dues. 
The scope of the article was extended hy the UPU congress of Ottawa in 1957 
to items deposited ahroad in large quantities whether or not the intention is to 
benefit from lower tariffs. 
It was further extended by the Rio de Janeiro congress in 1 <)79 which gave 
postal administrations the right to refuse to handle mail received from or 
deposited with it by senders from another country when it is destined not only 
for the sender's country but for third countries as well The Rio congress added 
the fourth paragraph to Article 25. 
J.2 APPLICATION 
In practice, postal administrations will have one or two reasons for applying 
Article 25: 
either in the application of Article 25. l, they believe that the mail is domestic 
mail and therefore their own inland rates are payahle (in order to 
protect their legal monopoly", the practice having been encouraged by 
the terminal dues being lower than the inland rates): 
or in the application of Article 25.4, they wish to display solidarity with 
the postal administration in which the sender is established which has 
not been used. They therefore feel they should have received the mail 
from country A and not from country B, even if the level of payment is 
the same. The principle is that country A is losing income to which it 
has a right as a national postal administration. 
Against this background. it may seem understandable that postal 
administrations are concerned by remailing in its various forms. However it 
may be questioned whether a legalistic approach through the use of the UPU 
convention is the most appropriate response to what others might see rather as 
a commercial problem 
The m"in text of the Green P;1per discusses whether the UPU instruments 
against remail are properly aligned with the competition rules or the Treaty of 
Rome and with the objectives of the Single Market 
Annex 6: UPU Co11ve11tiun -key a11iclc.' 
Table 1: 
ITEMS 
1 
LEITER.S 
POST-
CARDS 
PRl!"TED 
PAPERS 
CECO-
GRA'.\IS 
SMALL 
PACKETS Article 20 -recommended weight steps, hasic rates, nuuimum weights and 
dimensions 
WEIGHT 
STEPS 
2 
up to 20 g 
from 20 g to 100 g 
from 100 g to 250 g 
from 250 g to 500 g 
from 500 g lo 1000 g 
from 1000 g lo 
2000 g 
I 
--~~-
up to 20 g 
from 20 g to I 00 g 
from 100 g to 250 g 
from 250 g ro 500 g 
from 500 g lo 1000 g 
from 1000 g lo 
2000 g 
for each suppkmcnldf\ 
I 000 o 0 
sec Anick IK 
up lo I 00 g 
from 100 g to 250 g 
from 250 g lo 500 g 
from 500 g to 1000 g 
from 1000 g to 
2000 g BASIC 
RATE 
(SDR) 
3 
--···-~-
lU7 
0 88 
l.76 
-,.:;s 
5 SS 
l) )(, 
u .2(1 
-----~---
0 IS 
() 40 
l) 7-1 
I .,1 _,._ 
2 21 
) ! )l) 
I )-) 
~I 
---
() 4!l 
074 
1.32 
2.21 
3 09 
-WEIGHT 
Ll'.\llTS DIME:"SIO'."'S 
4 5 
2 kg "1:1x1ma Ieng.th_ w1Jth anJ Jcpth combined 
900 111m but the: g.reatc-.1 Jimens1on may no! 
excecJ 1100 mm with a tolerance of 2 mm. 
2 kg 
(f(ir ht111b, 
and p:tm­
phlcts 
5 kg th1~ 
limit ol 
wcighr m;!\ 
he ra1~cd tu 
l!lkg ~liter 
agreement 
between the In'''" !01111 length pfu., twice the Jiamctcr. 
l(~O 111111 but the g.rc;1te~1 Jimcn'>lon 111:1) 
111 >t ch ccJ '100 mm with a tolcr;ince ol 2 
ill Ill 
\11111111.1 '" h;1\l' .1 '-Urfacl' measuring. lll)I 
dl.lllll'll'I I 70 111111 but lhl' ~ll'<lll'sl 
\l:i,1111.1 10:' \ 1-t.S 111m with a lolcr;ince o! 2 
111111 
\11111111;1 90 \ 140 111111. wtlh a tolcr;111ce L)f 2 
111111 
l l'ngth ;it le;..,! e4ual to the w1<lth multiplied 
tw J2 t apto\imale value 1.-t )_ 
\b\ltll:t ll'ngth wiJth anJ Jcplh co111b1nc<l 
•100 111111 but lhl' 1!rc:1tc'>t Jimen'>i<>ll 111:1y lltH 
L'\<.L'l'd hOO 111111 \\ 1!h ;1 tokr:1nn.· ol 2 111111 
In 11>11 ln>111 kng.lh plu-. twice the J1;i111ele1 
10-tO 111111. but the g.rc:itcst Jimens1on 111;r,. 
111'1 t'\Cl'l'd '100 111111 with ;1 tolcr:1ncc of 2 
111111 
111111 In ,,,JI h>r111 Ieng.th plus 1w1n· !he 
I :o 111111 but lht: gre;11c,.,1 
dn11n1'>tr:1t1t>ll~ d111ll'1h1,111 m.I\ nut be les'> th;111100111111 
page 312 ---------------------------
Ann ex 6 L' /' U (-,:,, "'° '"" ~ 1 k_-eJ_' :_11_c_I e_, _J 
I Anne< 7: Qua/;n-of semce pogi: 313 
ANNEX 7: QUALITY OF SERVICE 
1. INTRODUCTION 
When considering the meaning ot "quality". 1t 1s important for all service providers to 
consider each of the main phases t h;i t make up the tot<il service. and in pa rt icular 
those phases that the customer directly experiences. Thus. <ilthough the time that an 
item takes to he delivered is essentiaL other aspects of quality could also he important 
to the customer. 
To highlight a tew such aspects. the:-.e could include the attitude ot sales staft, the 
availability of credit, the flexibility of collections, the smartness of delivery staff, the 
reaction when an item cannot he delivered. and the prompt availability of service 
performance information: in short. the different aspects of how customer-oriented an 
operator actually is. 
Further. the definition of quality i:-. likely to become ever more demanding for 
operators. \Vhat may h<tve been accepted as satisfactory quality until recently may 
now appear inferior. As an example, many operators in the recent past considered 
customer service as an operation<il function. where a member of the operational staff 
would answer personal or telephone enquiries; now it is likely to he a specially trained 
customer service operator. (At the same time. of course. all staff who help to provide 
a service are, in S()me sense. part of the ri1arketing of that service.) 
Providing quality requires the e:-.tahlishing of a cycle which repeats itself. Standards 
need to he set (internally. externally. or both). performance needs to he measured 
against the standards. The comparison of performance against standard then needs to 
be analysed. and action t<1ken to make up any shortfall between standard and 
performance 
Below, some turthe1 L·ommenh ;i1 e gi' en un t;irget-setting <1nd performance 
measurement. These cummenh p;irticubrly rt:fer w ktter services. since they are the 
services for which there is the m;1in univers;d '>cn iL·e obligation. (Some Memher 
States also impose a juridictl m "de Ltctn" univers<il obligation for light-weight 
parcels.) The quality of other services is stimulated mostly by competitive pressures. 
(The subjects of target-setting and perform<tnce measurement. as well as the control 
function, are also discussed in Chapter 4, Par<tgraph 7.) 
2. STANDARDS 
Most, hut not all, of the Community's postal administrations have publicly stated 
targets for domestic letter mail. However. these targets are not the same. For letters 
(th;t is, excluding either printed papers or second cl;;ss letters), performance is usually 
measured against a next working day (known as D + 1) target. (The target for the 
Spanish postal administration is D + 2.) The percentage to he delivered by this target 
date varies between 81 % and I OOS1r. 
Some of the administrations who have a letter /printed paper tiering system set lower 
standards for postcards and printed papers. Those who have a first class/second class 
tiering system naturally have slower standards for second class. 
page 314 ."11111cx 7: Qualiry of service 
3. MEASURING SYSTEMS 
Most measuring systems used to produce figures for publication are carried out by the 
postal administrations themselves. Two administrations have contracted outside 
agencies to carry out the work. (In addition, postal administrations may undertake on 
a regular basis other internal studies to provide further information on service 
performance.) 
There are several different measuring systems used in the Community. (The public is 
not aware of the different systems -only of the perceived reliability or otherwise of the 
results produced.) 
One system measures from the point that the mail collected arrives in the sorting 
office to the point where it is prepared in the delivery office for delivery. Another 
measures from the time the collected mail arrives in the sorting office to the time it is 
received in the delivery office (hut before preparation for deli~ery). Another system 
measures from the time the mail is posted by the customer until it arrives at the final 
delivery point. 
The third of these systems (which is usually called "end-to-end") measures the 
complete span of the process. as experienced by the customer. Any other system 
(including the two others mentioned here) will measure only part of the process. The 
difference in results can he substantial. One administration that had previously 
carried out its survey from sorting office to the preparation stage in the delivery office 
then changed to a contracted-out survey system measuring end-to-end. The latter 
system revealed that quality of service was more than l 0% less than the results of the 
former system. 
The break-down of results measured vary significantly. Some administrations publish 
only average national results. Others break the results down into performance within 
the locality, regionally and nationally. Some results even show differences in 
performance depending on how the mail was paid for (by contract, by meter postings 
or by stamp -see Annex 1. Paragraph 2 and at Chapter 5, Paragraph 4. I for a further 
description). Presumably. some administrations which do not puhlish such a detailed 
hreak-down have the figures hut use them only for intern~tl operational purposes. 
4. OTHER ASPECTS OF QUALITY 
As indicated above, the quality of all aspects of the service provided can be measured. 
Here. emphasis is given to certain aspects that relate to pre-posting and post-delivery. 
4.1 PRE-POSTING 
For ordinarv individual customers, access to mail services concerns the 
availahility of' stamps and of information regarding the use of the services (and 
then the proximity of the posting boxes). The wide availability of sales points 
for stamps is therefore important. 
However, the vast majority of stamp sales is likely to continue to be made 
through post offices counters (particularly if posting information is needed). 
The length of time spent queueing for service is therefore important, as is -and 
this cannot be over-emphasised -the politeness of staff. Both aspects can be 
measured (for instance by using "mystery shoppers" who anonymously use the 
I Anne< 7, Qua/fry of mvice page 315 
services of different counters, and then measure performance). and compared 
against internal standards. 
4.2 DELIVERY AND POST-DELIVERY 
For many organisations, the rromptness of the daily delivery by the postal 
administration is very important. Indeed, certain postal administrations have a 
special service (for which a fee is charged) which assures delivery before 07:30 
each morning. Some administrations also provide two deliveries per day at 
least in core areas. 
Effective after-service treatment is also essential. The way in which complaints 
or queries are handled after an item has been delivered is also important. 
Again, it is possible to set standards and measure performance. (Here. the 
standards should he published.) 
All complaints should, of course, he dealt with as promptly as possible. This is 
equally important for complaints concerning cross-border as for domestic 
services. In the case of cross-border mail, investigations can be made more 
difficult because two operators are involved. Some decisions may he required 
as to what the acceptable time limit should be for a reply to he given. (At 
rresent, the CEPT standard is six months.) 
Consideration should perhaps also he given to whether there should he 
standard procedure~ regarding co·mpensation for lost or damaged items. (The 
actual limits of compensation will continue to vary.) 
Postal administrations should have a declared policy on whether they publish 
figures for lost or dam;iged items, or for mis-routed or mis-delivered items. 
page 316 ''"""-' 7. Q1wli1y of mvice J 
I Annex 8. ·rc,,,,;,,,,1 dun 
ANNEX 8: TERMINAL DUES 
l. INTRODUCTION 
For many years mail was "traded" between countries without any accounting system. 
Any trading imbalance in volume was "written off'. Then, a system of charging the 
expediting administration was introduced. Rather than both administrations involved 
in each trading relationship paying the charges due, it was agreed that only the net 
expediter should pay on the net volume sent to the net receiving country. Because of 
this, the compensatory system became known :1s "imbalance charges" 
These charges were introduced purely on the basis ot weight. The assumption was 
presum<1bly made that the average kilo traded bet\veen any two countries \vould have 
more or less the same contents. The charging system did not t;1ke into account either 
the number of items or the service desired 
The charges are known as termin<il dues. They \Vere. ;ind are. overseen hy the UPU. 
Terminal dues are measured in gold francs (gt} a notional currency which has a fixed 
exchange rate with the Speci<tl Drawing Right ( Droit de Ti rage Special). The fixed 
rate is I SOR = :1.0(d gf. (A gold franc equates to approximately ECU 0 .. ~5.) The 
terminal dues are reviewed at each UPU cone.ress. held every five vears. The 
progression of terminal dues is shown in Table I. ~ 
Table I: Past incrt!ases (~{ tc:mzinnl dues 
Congress Years applied Rate 
Copenhagen l <J7)-I 979 l 5 gf/kg 
Rio de fa neiro 5.0 gt/kg 
Hamburg X.() gt/kg 
'------------------------ ------- -
Source: UPU Con\·entions ( l(J74. jl)7l) and JlJX4) 
The increases have tended to he ;1 matter negotiation rather than an attemrt to reflect 
cost accurately. The less developed countries (\\·ho h;1\·e the same voting rights in the 
congress <ts the developed countries) <1re in the majority. The are also net recipients 
in terms of weight (typically. perhaps receiving heavy printed matter and sending hack 
light-weight items). The less developed countries appear to have a vested interest in 
the retention of a weight-based compensation system. Not surprisingly, they appear to 
have heen tempted to raise the rates as high as the "market" (that is. the developed 
countries) would hear. 
The international mail system controlled by the UPU operates only between postal 
administrations. The U PU does not recognise the role of private operators in the 
system. If a private operator wishes to gain access to this system. it has to do so 
page 318 /1nnex 8. Te1111i110/ dues 
through the services of at least one postal administration. Since terminal dues would 
be an important cost element for th<1t postal administration. they will make up a· 
significant proportion of the price paid by the private operator to the postal 
administration for access to the international mail system. 
2. CURRENT TERMINAL DUE RATES 
In the last Congress in Washington in December 1989, a more complex structure of 
terminal dues was agreed. The full UPU text relating to this structure is shown at 
Annex 6 (under Article 73 of the U PU Convention). 
The new structure differentiates between traffic flows of more than or less than 150 
tonnes annually (a significant figure which would apply only to major postal trading 
partnerships). If traffic exceeded this figure in both directions, there would be 
separate charges per kilo for LC and AO traffic; if less. there would remain a unitary 
charge applying to both. In addition. if the average weight of the traffic of an 
"outward" postal administration was found to diffrr significantly from the world-wide 
average, the "inward" adminis_tration could charge a different r~1te based on a charge 
per item. 
ln the meantime, certain CEPT members ;ind other postal administrations had 
initiated their own scheme which involved both a unit charge and a weight charge. 
This at least partly would overcome one ot the problem~ (noted at Paragraph 3.1 
below) with the UPU system -that ot ha\;ing the charging ~ystem based solely on 
weight. However, investigations into this scheme "re currently being carried out 
following a complaint that the scheme is unfairly anti-competitive against private 
operators. 
As a result of the decision of the Washington Congress (and the earlier CEPT 
initiative), there are now at least five different svstems orerating in parallel in the 
Community: 
the CEPT system (operating. for example. between France and the UK) -
0.37 gf/item rlus '?t.75 gt/item; 
above 150 tonnes each way (for example. between Italy and Federal Republic) -
24.85 gt/kg for LC and (d gt/kg for AO: 
less than 150 tonnes in one direction (for example. Greece to France), but more 
than 150 tonnes in the other -either ()gt/kg in both directions or only in one 
direction and the split rate in the other; 
less than 150 tonnes in both directions (perh~1ps between Greece and Portugal): 
9 gt/kg for both LC and AO: 
deviation from the LC/ AO "norm" (perl1ars from the Netherlands to France: 
0.44 gt/item plus 3.85 gt/kg. 
In addition to the UPU and CEPT systems. there could always he other bilateral or 
multilateral agreements agreed between two individual postal administrations. (The 
UPU Convention permits such agreements willingly entered into by the postal 
administrations concerned.) 
I Annex 8: Tem1;,wf dues --- -------·-------------~ 
page 319 
3. RELATIONSHIP BETWEEN TERMINAL DUES AND COSTS 
There appear to be three areas where a single universal system of terminal dues does 
not seem to accurately reflect costs, and a fourth where it makes no allowance for the 
pricing structure. 
3.1 ITEMS/WEIGHT 
Before the Washington Congress the same compensation was paid in kilos 
regardless of the number of items of that the kilo comprised. Thus, a kilo that 
contained 100 x 10 g letters merited the same payment as a kilo that comprised 
2 x 500 g books. 
Of course, the delivery costs for the receiving administration are vastly 
different. Heavier items are generally more costly to deliver (although the 
more important factor is size), but certainly the percentage cost increment is 
much less than the percentage weight increment. 
As reflected in the public tariff structure of each administration, a more 
accurate reflection is a unit cost with a gradual weight increment. 
3.2 SERVICE REQUIRED 
The standard terminal dues system does not allow for the different service 
levels required. Thus, a newspaper requiring speedy delivery will attract the 
same compensation as a printed paper item of the same weight, for which a 
slower delivery could be sufficient. In general. the items requiring speedy (first 
class) delivery are light-weight items: items requiring slower (second dass) 
delivery tend to he heavier. This therefore accentuates the variation between 
the compensation received and actual costs. 
3.3 STANDARD RATES 
The structure is a universal system, and therefore suffers from the problem of 
averages. (It is suggested above in Para l that the rates set are not guided by an 
assessment of average costs.) I nevitahly. actual delivery costs will vary 
significantly from country to country. Productivity varies for several reasons, 
some of which are not in the control of the administration. The effectiveness of 
the transport systems varies -often reflected past government policy. Most 
crucially, labour rates vary between countries, and this is mostly outside the 
control of the administrations. 
3.4 DISCOUNTS 
The UPU Convention suggests that postal administrations offer discounts 
(usually 50%) on printed paper reduced rate items, such as books (see Annex 
13 and at Annex 6 under Article 20 of the Convention). However, many of 
these items are the very items which incur the heaviest terminal dues. Margins 
are therefore s4ueezed by upward cost pressure and downward price pressure. 
Indeed. there is no knowledge of any administ1«1tion th<tt has preferential rates 
for such items that cover direct costs. 
I page 320 ---------------------- -------.--1 
/11111ex 8: le1111i110/ dues 
4. EXAMPLE OF MULTI-LATERAL SCHEME -NORDIC UNION SCHEME 
As noted at Paragraph 2 above. any group of postal administrations can enter into a 
scheme which. hy their mutual agreement. varies from the UPU system of terminal 
dues. This permits some essential flexibility since the postal administrations of most 
"developed" countries recognise that the UPU system is very deficient. The CEPT 
scheme is an example of a multi-lateral scheme. Another interesting example is that 
operating hetween the members of the Nordic Union. 
Since 1989, the postal administrations of the Nordic Union (comprising Denmark, 
Finland, Iceland. Norway and Sweden) have applied between themselves (and invited 
other postal administrations to join) a compensatory system based on the domestic 
tariffs of the delivery country. The profile of the traffic is determined through 
sampling. and the charges are then cilcuL1ted hy applying prices set at ()()Cf: of the 
domestic tariff of the countn· of deliverv - -
Interestingly. for thi:-. scheme. it i:-. the po:-.t;tl ;1dmi1rn,tratiun in the origin<1ting country 
that determines the speed ot deli,ery It should he noted. lw contr<1st. that in 
relationships betv.ieen other pairs ot pusLil ;1dministr<1tions there are often "streaming" 
problems concerning cross-border mail exch;1nged between post;tl administrations if 
one applies an LC/ AO classific;1tion ;1ml the other ;1 first class/second class system. 
I A1111ex 9: Remaili11R pa,f!,(' 321 
ANNEX 9: REMAILING 
I. DEFINITION 
Remailing refers to the cross-hon.fer letter services provided hy private operators. 
The remailing element relates to the activity of the private operator, which involves 
the collaboration of at least one postal administration. In almost all cases the 
common factor is final delivery through the postal administration in the destination 
country. 
In essence. there are three main different types of remailing (the order given below 
reflecting what is thought to he the relative importance of each in terms of revenue): 
A-B-C: 
A-B-B: 
A-B-A: The private operator collects the mail from the customer. consolidates it 
with other such mail from the same country (A). and freights it to 
another country ( B ). There. it is posted (rem ailed) with the postal 
administration. which then sends it through the international mail system 
to the postal administration in the destination country ( C) for delivery 
there. 
The private operator collects the mail from the customer (in country A), 
freights it to the country of delivery ( 8 ). and posts it there with the postal 
administration which then delivers to the addressee (still in country 8). 
A v<1riation of this is when the private operator himself delivers the items 
to the addressee. 
The private operator collects domestic mail in country A. freights it to 
another country ( 8) for posting with the postal administration there. The 
postal administration sends the mail through the international postal 
system hack to country A for delivery there. (It seems dear that this 
activity is illegal for items which foll within the reserved area of country 
A.) 
In summary. A-8-C involves cross-border mail using the international mail system 
between postal administrations. A-8-8 involves cross-horder mail using the domestic 
system of the delivery administration. A-B-A involves domestic mail hut which goes 
through the international mail system between administrations. 
Figure I helow puts A-B-C and A-B-B remail in the context of the other services 
against which they compete. The route on the ldt using POs (private operators) 
represents the A-8-B process. The next route using ;1 combination of PO and PA 
(postal administration) represents the A-8-C process. The next route reflects the 
option of a customer transporting his mail into the country of delivery anu posting 
directly with the administration there. The last route reflects the conventional route 
of posting with the national postal administration which then sends the mail through 
the international mail system to the postal administration in the destination country 
for delivery there. 
1 page322 
Figure 1: Cross-border routeing 
ADD RESSE~ _ _] 
PA: Postal Administration 
PO: Private Operator 
PA*: Postal administration in intermediate country 
(Broken lines signifying a national border) 
2. ORIGIN AND EVOLUTION Annex 9: Remailing 
c E 
0 x 
u p 
N E 
T D 
R I 
v T 
I 
0 0 
F N 
c D 
0 E 
u L 
N I 
T v 
R E 
v R 
v 
0 
F 
Remailing probably existed long before it was given the name. For· many years, 
publishers and their agents have transported publications into the destination country 
for posting there. (This has since come to be known as A-B-B remail.) The advantage 
was the access to the preferential tariffs that are usually available for domestically 
posted publications. Locally posted print remail is still almost certainly the largest 
I A1111<.t 9· lkmailm.~ pagt· 323 
segment of the remail market, measured by volume. It may also be the largest 
measure<l by revenue. 
In the 1970s. the airline KLM started its Puhlications Distrihution Service, serving the 
US publishing industry's cross-border requirements, particularly for distrihution in 
Europe. KLM used Amsterdam as its ''huh", injecting the mail into the international 
postal system through the Netherlands Post Office (as the "remailing" administration). 
KLM remains the market leader for US-originated publications air-shipped for 
delivery in Europe. 
By the mid 1980s, their traffic was said to he 20.000 tonnes per year -a volume that 
helped to optimise use of spare freighting capacity. The A-B-C remail system 
pioneered by KLM and the Netherlands Post Office was hased on the inequities of the 
terminal dues system (discussed in Annex 8). However. because publications tend to 
he heavier than the average item. terminal due c:osts were still high. and margins 
therefore low. 
Much !are.er margins were available for light-weil!ht traffo.:. which tends to he letters 
rather th7in printed papers. (In most ~<.lUntri;s. there tends to he a regulatory 
difference between the two.) Prices for letters tend to he much higher than for 
printed papers. The costs, hasetl on terminal dues. ~ilso were much lower. For 
example. against a delivery cost of perhaps ECU 0.24 for a :w g item, the terminal 
dues operating in the years 1980-85 provided a compensation to the delivery 
administration of only ECU 0.04. and th~1se in the years I lJXS-1990 only ECU 0.06. 
Around I <J8J /84 several US operators. most of them sma IL started to offer rem a ii 
services for letters. Initially, the only postal administrations who woultl offer suc:h A­
B-C facilities to remailing operators were not located favourably for service -two 
examples being Panama and Puerto Rico. 
The situation changed when. in the mid 1980s. an express company. TNT. signed a 
remail contract, covering both letters and print. with tlw Belgian Post Office. The 
Netherlands Post Office responded hy relaxing rules on what w.is permitted to he 
posted through its printetl paper remail contracts (and later offering some letter 
remail contrach). 
By the second halt of the llJXOs. several other postal administrations were offering 
remail facilities. Outside Europe. the most in1portant were Hong Kong. Dubai and 
Bahrain. Within Europe, the British Post Office entered the market for print remail. 
while the airline SAS offered letter and print remail focilitit:s in conjunction with the 
Danish Post Office. More recently, the Hungarian Post Office has started to offer 
remail facilities. 
3. COSTS AND PRICES 
Remail enters the mail streams of a postal administration in different ways, with 
prices varying according to the different ways. As the destination administration 
which delivers the items, a postal administration would receive terminal dues for 
delivering A-B-C remail (or A-B-A remail if it is accepted). For A-B-B remail, the 
delivery postal administration would receive the appropriate domestic tariffs. 
As mentioned above, some postal administrations offer remail facilities to enahle mail 
collected by private operators to enter the international mail system (as operated 
hetween postal administrations). Most postal administrations offering such facilities 
I P"ll' 324 Annex 9: /~emailing 
specifically exclude their use for posting items collected in their national territory. 
They therefore tend to see such remail as providing incremental volume and revenue. 
Pricing tends to he set on a oasis of marginal costs plus a small margin for profit. 
For the private operator pricing his services to potential customers. the prices will he 
determined hy market conditions. These will depend primarily on two points. Firstly. 
how many other private operators are l'ompeting'! Secondly. has the postal 
administration (which provides the benchmark for both prices and service) reacted to 
the competition by introducing spL'cial contract facilities frn large customt'rs with 
cross-border ma ii needs'! 
Generally. charges paid to postal administr.1tions for letter remail facilities account for 
ahout 4oq-of the prices that private opt.·rators can achieve. Out of this. he has to p11y 
for his sales. collection, freighting and customer servicing cost. Assuming satisfactory 
volumes. he should he able to achieve good profits. 
4. SERVICE 
Whether remailcrs provide a hctlt'r or worst.• service than the postal administration 
depends. naturally. on both their own efficiency (and that of the postal administration 
with which they post) and the relati\·e efficiency of the postal administration against 
which they arc competing. 
Rema ii evolved in the UnilL'd St;1tes partly hl.·cause the size of the market there made 
it an attractive proposition and p:1rtly because the postal administration (the United 
States Postal Service) was pern.•i\·l.'d to ht.· providing sw.:h poor service. Interestingly. 
the USPS prices its services hdow its competitors for both letter and printed paper 
cross-border ser\'ices. hut privatt' opL·rators nrntinue to ha\'e a significant market 
share. 
If the postal :1dministration is rt·;1..,un;ihl~ dfo:ient. it should lw ;1hk to provide a helter 
service than a remaik·r usinl! ;111 :\-B-< · w ... ll.·m (lwc1us1 .. : tlw l:1tlL'r i1l\'ohes at least two 
freighting journeys). How~·\ t•r. .·\-B-B. rL·ma ii 111;1~ \\ell ht· ;1hk· to offer a service 
superior to that of the postal ;1dministr;1tion (At the s;1me time. it should he noted 
that A-B-B re ma ii is often mot i\·atl.'ll lllllrL' hy thL' all ract ion of being a hie to post 
items -often the heavier ones -at till.' domestic tariffs ot the ddiverv administration. 
since these knd to he lower than tlw rde\ant than tht: rt:k·vant tcrmi,-rnl dues.) 
Of course. service covers much more than transit times. Private operators have 
tended to lead the way in offering many other features. These indude more flexible 
accounting facilities. credit and flexible collections. Perhaps the greatest contribution 
made has hcen in encour<u.!irn.! the increased or helter use of sales account 
management. Of course. nor;c ~lf these additional features are monopolies of the 
private operators. and some post;al :u.lministrations have responded hy improving their 
own standards (arguably. in some cases. improving on standards sd hy private 
operators). 
A1111e.t JO: l'o.-.wl ope1111or~' cocles 
ANNEX 10: POSTAL OPERATORS' CODES 
I. INTRODUCTION 
This description of postal operators· codes covers the two main types of codes: 
-functional: 
codes): 
-technical: which are publicised externally for use by tht..' public (that is. posl-
for the inh:rnal operational use of postal opt.·rators. 
The annex also seeks to discuss how each type is applied and what is the operational 
importance of each. Because the post-codes for public use arc those that are more 
readily known. the discussion concentrates mainly on these. 
2. FUNCTIONAL CODES 
Functional codes are the designation for the post-codes used by the t·ustomers of 
postal administrations. at the request of the hatter. 
Most levds of postal automation cannot operate without the use of functional codes. 
These codes can he divided into three· categories: route-sorting codes. distribution 
codes and mixed codes. 
The roule-sorring code focilicates the automatit· sorting of mail going from one city to 
another. To permit sorting down to a more detailt=d levd -to the postman's "walk" (or 
delivery round). a distribution sort code is needed. A codt.• that combines the two 
functions is termed a mixed code. 
2.1 CODING SYSTEMS CllOSE1' 
Experience of post-codes and the ways in which thl.'y may devdop are 
influenced hy the coding systems that have heen established. Wht=n considering 
the introduction of post-codes. postal administrations essentially had two 
choices: either a system \\1hose codes were eas\' to memorise (all numeric with 
perhaps up to 6 -digits) or a system that pe~mittcd the maximum sorlation 
possihle. The different systems actually applied by the post<tl administrations of 
the Member States and of certain other countries are summarised in Table I. 
The henefits and problems are assessed hdow: 
2.1. I EASY TO MEMORISE CODES 
Examples of countries that introduced such codes are Belgium and the Federal 
Republic of Germany (hoth 4 digits), and France &and Italy (hoth 5 digits). 
These codes permit sortation down to suhurh or small town level. These levels 
of sortation equate to sorting down to the first level of the "inward•' codes 
descrihed below. In general. these codes quickly gained e1 high degree of public 
&acceptance. The rate of use (the "penetrntion rate") isl)(>% in France and more 
than 90% in the Federal Republic .. 
'------------------------------------------
Ta hie l: Post-code structures 
l:Ol!NTR\' l>t'.SCIUl"TIO' ()t" POST-COl>t: S\'SU'.\I 
t-------------1----------------------------- ---------------~~-----____. 
Belgium 
I kn mark 
< icrmany 
< irecn: 
Spam I I I 
f· r:ancc 
Ireland 
Italy (2) 
! uxcmbourg 
United Kingdum 
USA 
fa pan 
Note 1 lndudc:s Andorra 12.~-t Name of City 
123..t _ Name of City Copcnhugen will be followed hv K or V (office of 
delivery) and Frcdcrikshorg followed by C.N 11r 0 
123..t N;1mc ol C11y. for thl' l;1rgc n11c ... 111.:L· lh:rl111. r'-.lunich. Frankfurt, 
oll11..°I.: 11f ddi\'cry m;1r!.;cd \\'"llh I 1lr 12. '11 l11r cx:1rnpk KOOOO l\fonich 12 
1~3-t~ J-ir,t l\\11 d1;1r:11.:11.:r' 1:11rr1..·,p1111d 111 1k'p.ir11.:111c1H m1mbcr Off1cc 111 
dc11n:~ ( m11,t I~ t hi.: -.;im1..· ;1" name 111 r1.."-.Hlc111.1.· l cdi:.\ spcc1;1I delivery for 
(11mp;1111i:' w11h !"1t."11\1..' I'<> lu1\1.''- 111 -.111111.· 1.;1,1.·, !1ill11wcd tw 12 for P:tris. 
I.yon and i\Lir,nlk 
12.1..t N;1mc uf Cit\ 
charactcr .. ) 
Con-.1-.1 .. 111 l\\11 ckm1..·111' The 'c1.·111HI '' 1h1.· 111\\;1rd p;1r1 111 c11dc. and 
:ilwav" c11n-.1.'1' 111 1hrL"l" L'hara..:11.:r' (1H1111L·r11._ .ilph;1. alpha) The fir-.,1 
ckmcn1 '" lhl' 11ul\\;1rd p:111 111 1h1..· 1..11lk 11 -.1.1rt' w11h 11nc or 1w11 alrha 
d1~1ral't1..·r, ... 1gn11v111g th1.: 111..·:1r1..·,1 l;11g1..· 111\\11 1"111' 1-. lh<:n comb11h.:LI w11h 
11111..· 1>r l\\11 nu1111..'fll' ch;11;1L11..·r,_ ;111d -.11m1..·111111..·, .1 lurth<:r alph;1 The 
p11, .. 1f>1li111..·.,;1r1..·th1.:rl'l1111..··\BI< 21ll .\12 ~IH .\Bl2 ~BC.ABI 2CD 
Note 2 lndudc-. San Marino and the V&1ti~an 
Source: Postal administrations 
A1111ex JO: J'm·tal npcmwrs ·codes -----~- -----------~] 
pogi: 327 
. -----
2.1.2 CODES FOR MAXIMUM SORTATION 
The only EC postal administrations that have implemented such codes for 
maximum sortation are the Netherlands and the United Kingdom. The typical 
code for the latter can he expressed as AB I 2CD -that is. <1lpha, alpha, num, 
then num, alpha, alpha. The first part (the "outward" code) sorts to the post 
town and its surrounding area (or the suhurh of a large city). The second part 
(the "inward" code) sorts down to a section of a street (covering, on average, 15 
houses). 
Canada has a similar (>-character alpha-numeric coding system The US has 
introduced a supplementary code called "Zip + 4": to the standard digit Zip 
code have been added 4 more digits. All four systems permit sortation down to 
the indivitlual postman's walk (or what is known in the US 4.IS ~•"carrier route"). 
These levels of complex icy <1re required i11 mLkr lu g1\ e lht: required number of 
variables for detailed sortation. (The US syslL'm h<1s llHJ111 v~1ri;1bles for a 
population of ~<>Om.) The d isadva ntag.e i-.. t h;i l the codes ;1 re difficult to 
memorise. p<1rticul~1rly in tht'. cc1se of ;dph;1 ch;1r;1ctcr-. Thi-.. e\pl;1i11s the low 
penetr<t t ion rates. The US rate has Li lien hack tu )5c;... The lJ K rate is now 
75cr-. having gradually incre;1sed from ;1hout )(JC( In both c:1\cs. the levels of 
penetration have resulted particularly from the \()lumes ot tr;itfic posted with 
the aid of computerised rn;1iling list'.. ( encour;1ged in both countries by 
discounts). 
2.2 OPERATIONAL 
It is obviously the case that the shorter the post-cm!e. the shorter the time spent 
on the initial keying process (where manual coding desks ;ire used) which 
relates to the number of key depressions. The inclusion of a lph;1 cha ractcrs ( ;1s 
in the UK system) slows the key depression rate. It rn;1v ;llso increase the 
likelihood of mis-keying. 
For the future, two developments \viii aftect the a:-.-.e-.smt.·nt of different sorting 
systems. Firstly, the incre;1sed use of Optical Ch;1r;1ctcr Re:1dcrs (OCRs) will 
reduce the differential in sorting time:-. het\\een ~,imple ;ind complex codc~ .. ;1:-. 
well as perhaps reducing the potent ia ! m is-kt.·yi ng prnhkm ot the l:i t tt.:r. 
Secondly. the trend of decre<1sing capit<d costs i-. likt.·ly tu 111:1ke it \-i;1hk tu 
introduce mechanised sorting equipment in '>lll:ilkr di'>trihutiun ;111d deliVL~ry 
centres. Both developments m;1y permir grelllt'I prudul·ti\ ity g;1ir1-. tu he rn;1de 
from more complex post-L·mk systt.·rns 
23 COMMERCIAL ASPECTS 
The use of the post-code has ;1dvantages for thc husineso., 111,1 iler, whether ot 
individually produced items such as invoices or hulk-prmluced direct mailings. 
It may permit him to pre-sort before lodging the rna ii with the Post Office (or 
private operator, if permitted). ~ind thus gain discounts. Perhaps more 
importantly, it enahles him to divide his address list on ;1 geogrdphic hasis, using 
generally accepted codes. (Before post-codes, some ma ii order houses used 
their own geographic coding systems.) Post-codes are nnw an essential tool for 
any company with a large address datahase. The comrlete absence of a post­
coding system in Ireland (outside a limited area coding system in Dublin) 
therefore inhibits computer manipulation of address data for th;1t country. 
pt1gt: 328 Annex JO: p,,_.,fCll ''J'CITllt>I~· t·o,/e.t 
3. TECHNICAL CODES 
Technical codes relate directly to the operational use made of coding systems. Tht!re 
are two such systems, one rdating to codes printed on letters to enable! automatic 
sorting and the other relating to har-codes used in the processing of individual items. 
3.1 CODES FOR AUTOMATIC SORTING OF LEITERS 
Firstly. the ordinary functional codes need to he converted into technical codes 
before automatic sorting can take -place. The functional code is therefore 
"translated" from the functional code's format (numeric or alpha-numeric) into 
a technical code, expressed in hinary. consisting entirely of the characters Os and 
ls. This binary code rders to exactly the same destination co-ordinates as the 
functional code. 
When printed on the envdope to he sorted automatically. lhese hinary 
characters are represented by spaces for the Os and either docs or hars for the 
Is. If only an outward post-code is in use. these markings will he printed in a 
short line at the foot of the Idler. If both outward and inward codes are used. 
either an extended line is printed. or two lines are printed. the upper line being 
for the inward code. These technical codes can then he "read" hy the autom«1tic 
sorting machines. 
It should he noted that LJ PU rult::-. do not permit the printing of technical code!s 
by che "outward" postal adminislratior1 on cross-border letter items. in case the 
markings may hecomc nmfused with the technical <:odes which the "inward" 
administration may wish to print on the same items. 
3.2 BAR-CODES 
Bar-codes tend to he used for individual. larger items. Examples are parcels, 
express items. or even hags containing letters. The bar codes not only include 
destination identifiers. hut may also include other data such as information 
concerning the customer. the scrvi<:e used. the originating operational centre or 
the date of posting. The bar codes are either printed directly onto items or 
printed onto labels which themsdves are then affixed to the items. 
The bar-codes can he r~ad hv scanners. so thal the items can he sorted 
automatically. The same tech~mlogy can also he used to provide the dat«1 
needed to operate "tracking-and-tracing" systems. Such systems require that 
items are scanned at distinct poinls in the process between <:ollection and 
delivery. progress being noted ele<:tronically. They therdore permit individual 
items to he tracked throughoul the whole process. information being availahle 
on when each poinl -up to delivery -w;1s reached. 
Sorting through using bar-code systems is becoming increasingly common for 
both parcds and express operations. Tracking-;ind-tracing systems are used 
more in the express sector. hut similar systems are also to found in some parcels 
operations. 
4. IMPACT OF CODES USED 
Most postal administrations have committed themselves to investing in automated 
sorting machinery. and then trying to maximise the percentage of items sorted 
automatically. However. the results for those administrations thus committed to 
A1111et /(): /10 ... 111/ openllors' co,/es page 329 
mechanisation have been variable -between 8% and 50% being sorted automatically. 
(The sorting carried out can vary between a simple sort by post-town to detailed 
sortation down to each delivery round.) The differences are attributable to a number 
of factors. including the different percentages of mail pre-sorted by customers. 
However, differences in use of post-codes has also in the past been an important 
factor. 
Through comparisons hetween different postal administrations in the world. it is clear 
that administrations have taken varying approaches in the attempt to reach the 
highest levels of post-code "penetration". Some rely on sustained campaigns. and 
investing in maintaining the post-code data hase (an investment which costs one large 
administration ECU 60 million per year). 
For others. the post-code is simply part of the standard address: if it is not included. 
the item is incorrectly addressed. Still other postal administrations have taken 
different measures to try to improve the rate -such as the initiative hy Canada Post of 
encour41ging envelope manufacturers to print on envdopes a hox for the sender to 
write/type in the post-code. 
In the future, for certain postal administrations able to make the investment. the level 
of post-code penetration will he important more as an aid to qu41lity of service. New 
generations of optical character reader (OCR) equipment will be able to "read" the 
relevant details from the address (and convert them into the necessary technical code 
for sorting). using the (functional) post-code only as 41 checking device. Other 
administrations. which continue to use· automatic sorting machinery not based on 
OCR, wiJI still need to use post-codes as the hasis for their automated sorting 
processes. 
However. post-codes will also remain important for reasons beyond the automated 
sorting process in postal administrations' sorting centres. Firstly. post-code systems 
are an invaluable help for all express operators who use har-coding systems to provide 
track-and-tracing facilities. 
Secondly. large customers undertaking pre-sorting usually <.:omputer sort their mail 
through the post-code. Further. in those countries that permit customers to print bar­
codes on envelopes to assist the automated sorting of the postal administration. these 
har-codes are themselves translations of the post-codes. 
In relation to the levels of sortation made possible through the post-code. a 
comparison c<m he drawn between the simple post-codes which sort down to towns or 
general &1reas. and the more detailed post-coding systems which will permit sorting 
down to individual delivery offices within towns. and indeed to individual delivery 
rounds (also known as postmen's walks). In this perspective. those administrations 
which presently have the more simple post-codes may wish to make their systems 
more detailed (as, for instance. the United States postal service has done). in order to 
permit either a more detailed. sortation hy themselves or a more detailed pre-sortation 
by the customer. 
All these benefits can he «•ttained without any recourse to a single integrated 
. European post-code system. (A knowledge of the different systems is sufficient for 
customers to carry out the different pre-sortations required.) However. there do seem 
some pos..~ibly significant benefits in having a standard format for writing addresses 
(for instance. in terms of the placement of the initial(s) identifying the country). 
I page 330 .·l1111c·' JO l'u.'itol operatm'' (De/es 
As with other aspects of potential harmonisation. the Commission. in cooperation 
with Memher States, will investigate with the interested parties the benefits and costs 
of harmonisation measures that may be necessary. 
"----------------------------------- pm!,e 331 J 
---~-------- __ ' ___ _ A1111et 11: Postal L'<flll/JJ11e111 industry 
ANNEX 11: POSTAL EQUIPMENT INDUSTRY 
l. INTRODUCTION 
This (tnne:x seeks to provide an introductory analysis of the postal equipment industry. 
This is the industrial sector which produces installations and equipment for the postal 
process and which produces t r~111sport ~1 nd storage foci I it ies for use hy post~tl services_ 
2. EQUIPMENT USED 
Investment in e4uipment used for postal operational purposes falls into three 
categories: 
specialised postal equipment: 
customised equipment (hut with general purpose origin): 
~-other equipment. 
The main users of such equipment in the postal sector are the operators. both public 
and private. However. it should he noted that this equipment is also used hy large 
Or!.!<I n isa t ions which have sufficient Iv large volumes that the\' have invested in their 
ov;n post a I processing de pa rt rnt·n ts -For~ many such mg;i n is;1 t ions. the equipment is 
used for pre para t ion ot the ma ii he fore it is posted with the opera tors. Others -
particularly in the mail order industry -can G1rrv out m<1m of the m;1in postal 
operational functions themselves. 
Examples of equipment in the thrt.'t' c;1teg.ories ;ire .... tHmn in the three t:1hk" hl'IO\\/. 
Speciufi.,t!<I pwtof t'1;11i1mu·11t 
Fqu1r111c111 that is used (lnl\ IJ\ p11:--L1I opcr;i111r:--. bL·c:1u"c 11! th1..· p;1rt1nil;1r111c-. (l! the scr,·1..:c" the\ 
;ire prnviding: 
Fr;inking m:1..:h1nc-. (u-.cd c1llh'.l Ii\ !Hhl;d llpcr:1l1•r" •'r br~cr .._u:-1111ncr-.) 
Sr amp vending ma..:hi111..·-. 
Pust i ng boxes 
Culler /foccr /ca nccl le r-. 
Pre-sorting m:ich111c" 
.-\u1nm.Jtic lc11er -.11ni11g 111;1Ll1111L·:--. 
Autom:it 1c p.ickct /p:1rCL'I -,11rt 111g m:ich111c:­
,.\ssllci:Jtcd softv,:1rc dcvcl11p111c111 
~------- ----· -------------
page J.l2 Annex I/. />o.wtrl eqllipmelll i11d11s11y 
Table 2: Customised equipmem 
Equipmcnl thal is used in other sectors. but requires specialized customisation for postal 
applical ions: 
Table 3: Automated rerminals for post office counlcrs 
Self-service vending machines 
Optical character reader (OCR) 
Video coding system 
Bar code soncr 
Tracking ~and &racing system!\ 
Customised weighing m&echinl·s 
Artificial intclligcncc/roho1ic!\ 
Bells and conveyors 
Plastic .:onvl."yan.:c h••xcs 
Other equipmem 
Other equipment widely used for gcncr.al purposes. 1h;11 a d\.·mand for a rcl<.itivcly small 
au1oma1iza1ion (if any) and for which 1hc postal opcr;11or!it purch;a"-' only l'or ;1 small percentage of 
total sales: 
Computers 
Primers etc. 
Telecommunications Clfuipmcn1 
Weighing machines 
Lifting machines 
Transport 
Of the equipment mentioned ahove. perhi1ps the two most signilki1nt innovatory 
applications to the postal seclor are 1hose of OCR ;tnd of tracking-and-tracing 
systems. The batter en.1hles greal improvements to ht> made in the facili1ies thi1t can 
be provided to customers {particularly of express ser\'ict:s ). The former is having a 
significant effect on the letter operation. Whereas tr;1ditional "mech;111is;1tion" may 
well sometimes have hi1d only a marginal dfec:t in terms ul raising. service or ~ ving 
costs, OCR may permit importanl operational advanl·es to he made. • 
The importance of customised software should also ht: emphasised. Because postal 
operators often do not have 1he in-house capacity to generatt> the software needed. 
the task is frequently contrnc:ted out. This expense can he ~• significant proportion of 
development costs. 
Less obvious is the gradue1I evolution in materials handling during the letters 
operation. Trays are more and more replacing hags as c:onlainers for letters. This 
increases the opportunities for mechanising the movements hetween the component 
processes during the letter operation. 
Amiex 11: Po.-.111/ t•quipmem i11t/11.'it1~· "''·~.tu 
3. SUPPLIERS 
Tahle 4 shows the largest suppliers of the specialist postal processing e'-luipment. 
(They tend also to cover applications of the customised equipment -for example. 
integrating optical character reader technology into automatic sorting systems.) 
Table 4: Survey of most importcmt .mppliers of postal machinery 
COlil\TR\' MA.~U•"AC.Tl'R•:R 
Denmark Kosan Crisphant 
Cicrmany AEG Elcctrocom 
Eisenmann 
Manncsm;mn Dcma'-· 
Schicrholl 
Siemens 
S1and.ard Ele..:ari..: l.orc111 
Fm nee Akal cl 
C< iA-Ho11..:hk1s' Brandt 
f.lcl.HnlllllUC Scrg'"· f>a,,1uh 
Tckfkx 
TITN 
lrnly t:MI. 
Elsag 
Otive11i 
N ct her I•• nds Philips 
Rupistan van der Lande 
United Kingdom Ci EC-Avery 
Pia m .. •y Bowes 
Plcss'-1· 
Swiazcrland Gilgcn 
Japan Nippon Elc..:1ri..: tNH .. , 
To"hiba 
USA AE<i 
Bell ITI 
Bell & Howell 
lki 
Source:CEC 
-··---------------------~----------, I page 334 Annex 11: l)uswl equipment i11dus11y 
4. PURCHASERS 
The largest purchasers of specialised postal equipment are the postal administrations. 
Private operators and certain large customers have also made substantial investments 
(although accurate information on the total investment has not been published). 
Private operators' sorting machinery relates to their packet/parcel sorting 
requirements. The larger express orerators (and some of the rared companies) have 
also invested heavily in tracking-and-tracing systems. Since these are based on bar­
coding systems. the same bar-codes can also be used for sorting. Priv~1te operators 
also have substantial materials handling requirements. 
Of the large customers, the major investors have been the mail order companies. It 
should be remembered that, in terms of revenue, large ma ii order companies are 
bigger than smaller postal administrations. Because their operations are more 
concentrated, they can achieve great returns to scale from their capital investment. 
Mail order companies' primary specialist requirement is for parcel sorting machinery. 
The result is that mail order companies' operations are often technically more 
sophisticated than the parcels.operations of postal administrations. 
5. INVESTMENT BY POSTAL ADMINISTRATIONS 
As indicated. financial data concerning capital investments m~1de hy private operators 
and larger customers are not readily av~1 ilahle. However. th rough the lJ n ivers;i I Po~ta I 
Union. some in format ion is ava ilahle on postal adm in istr;i t ion-.;· investment. 
Table 5 below shows the investment made hy Community posLil ~1dministrations in the 
years 1985-1%i8. and then. to ttid comparison. expresses the ;1ver<tge investment m<tde 
as a rercentage of the revenue <1chieved in 1988. The average im·estment over the 
four year reriod is expressed as a percentage of the revenue ot J<J88. (Because of 
insufficient <.Lita. Ireland and Luxembourg Me not included in the EC average.) 
Annex 1 J: />u.'ital equipmem i11clus11y page 335 
Table 5: Postal administration investment (I 985 -I 988) 
l'.\"Vt:ST'.\lt:'.'liTS b"\1tSl'Mt:NT 
Mt::\llU-:R (millions ECU) AS PERCENTAGE OF 
STAn:s A;o.;:"'UAL 
1985 19&, 1987 19AA Rt:\'E:'\Ut: --
Belgium 23.1 2D 33.6 2:\.2 34<;·; 
Denmark -12.6 2<• 0 51.3 115.6 5.1 <;·; 
Cierman~ .B7.3 -141 :\ -l85 2 504 l) 4.w,:.; 
Greece 7 l) 59 1.4 19 3.2':''t 
Spain 29.(, hlh n/a 22 -I .\.I<.-'< 
Franc\.· ~I K h n/~1 l.H '> 717 2 2w: 
Ireland 11/;1 11/a 109 11/;1 11/a 
Ital\ -)KO) 7-lfrll K3h) .l."}.7 ti 1)2'.; 
Luxcmb11ur~ 11/i.J n/i.l n/a Ill() n/a 
Netherland~ l l<l h 123) IO<lll 2)0.') 4 w:·; 
P11rtu!.!al 13.-l 15.7 IJ.) 1) 1 9.4',:~ 
United K1ngd11m 20K-l 5 159.2 227.0 257 () 10.6'.:( 
·-
Total .15-17.1 1605.4 1899.3 22-1) 2 6.1 <;~ 
-· --
United State:- 1090.5 IJ63.9 181~8 I.OSI I 3.8';"{ 
Source: Universal Postal Union (UPU). 1989 
A significant proportion of this investment has heen made in automated sorting 
processes. For about half the EC's postal administrations. the "hack-hone" of their 
network is the mech<'tnised sorting centres. Table 6 show::-, lhe number of such offices 
in each ;1dministration. 
page336 Annc.·x I I: l'o ... wl equipm~111 i11c/11.t1ll)' 
Table 6: Mechanised sorting celttres 
TOTAL O•· AU. SORTING CEl\TitES <>•· MECllASIS•:o ct:l'~nu:s 
Mt:MRt:R NUMD•:ao•· 
STAn:s SORTISG MECHA~•s•:o MANUAL \~lTH Will I< n:1· 
CEJllffRES CF.NTRES C..T.lliTitES OCR OCR 
Belgium 17 7 10 {, I 
Denmark 12 I 11 0 I 
Germany 129 50 7') 0 50 
Greece 22 0 22 0 0 
Spain 85 6 79 (, 0 
Frant:e 131 AA 43 70 I~ 
Ireland 8 0 8 0 0 
lrnly 201 .l I 170 0 .l 1 
Luxcmbc•urg I I 0 ti I 
Nc1hcrlandi- 12 12 Cl 0 12 
Portug<1l 7 .. -l .l 0 ·' 
Uni1cd Kingdom IJO X() 50 C..l 17 
Source: So fr es study 
It should again he emphasised that what is called automated sorting still has, in reality. 
a significant manual element. Much of the materials handling between processes is 
carried out manually. Similarly, the "facing" operation is often undertaken manually. 
If OCR is not used, the encoding of addresses needs to he carried out by the staff. All 
machines need minders. Because sorting machinery has capacity ceilings. peaks of 
traffic often necessitate the supplementary use of manual sorting. 
6. TRENDS 
As would he expected. levels of "mechanisation" differ between the various postal 
administrations of the Community. The administrations st.·em lO fall into three 
groups: 
those who had completed their initial mechanisation programme hy l'J90: 
those who are in the process of mechanising their operations: 
those who currently do not have plans to mechanise their operations. 
For those postal administrntions whose strate!,'Y is to have a network which is 
"mechanised" to the maximum feasible level, there may he certain junctures when a 
mechanisation programme appears complete. However, in reality, investment needs 
to continue. This is partly to replace depreciated plant. More importantly. it is to 
ensure that the equipment used employs the most appropriate modern technolo!,'Y· 
Thus. sorting technolo&'Y has seen first generation equipment replaced by second 
generation equipment; the latter is now in the process of heing replaced hy OCR 
technolo!,'Y· In summary. for such postal administrations. the investment c.-ycle is 
driven mainly hy the need to replace plant which is physically or technically 
obsolescent, as well as to purchase innovative equipment that can improve quality, 
and/or reduce cost. 
A1111ex 1 J: Posto/ equipmelll iJl(/us11y 
For other postal administrations who have not pursued the same strategy of maximum 
mechanisation but who are embarked on a mechanisation programme. it will be 
necessary to decide what proportion of the network needs to he mechanised. For 
most postal administrations, there is little re4uirement for "technical inter-operability" 
in the way that, for instance, different parts of telecommunications network need to he 
able to inter-operate with one another. 
The only exceptions to this are those postal administrations which are attempting to 
use a single reading of the post-code/address to permit hoth the outward and inward 
sorting to take place. While automatic sorting is reliant on the "depth of the post 
code" (see Annex 10), of the Community postal administrations only the Netherlands 
and British Post Offices are able to achieve this. (Even for these administrations -
particularly for the British post Office -the level of inw;1rd sorting thus permitted is 
not suhsL1ntial.) The picture may change as OCR technology improves, so that more 
of the address can he read -even where the post-code is not sufficiently deep to 
permit ;iutumatic inward sorting. 
For most ;idm in ist rat ions. the rea I ity will continue to hL' t h;1 t rnecha n ised ;ind m;i n u;tl 
offices c;1 n ( ;1 nd must) co-exist in the same postal network. Post a I adm in i~tr;1 t ions ctn 
therefore examine each sorting centre individually to determine \vhether it needs to he 
mechanised. (There may he reduced investment costs per centre if there is a larger 
mechanisation rrogramme.) There are two criteria that need to he used in reaching a 
decision: improvement of quality of service and reduction of costs. 
Almost all mechanisation will reduce operational labour costs. However. the decision 
would need to he based on whether the reduction in costs was sufficient to justify the 
carital expenditure involved. (The calculations will vary not only between sorting 
centres. hut also between countries, since labour costs and productivity levels vary.) 
Regarding. service. mechanisation does not hy itself guarantee improvements. unless 
allied to careful operational planning and effective network management. While 
faster sorting times would appear to lead to more reliable deliveries. this might not 
necessarily he so. In order to maximise the throughputs of mechanised sorting 
centre~. mail is "concentrated" from a wide area. The greater the concentration area. 
the longer the extra distances involved and, at least theoretically. the greater the 
danger of loss of 4uality of service. For the future. the reducing capit<tl costs may 
permit ;1 trend towards de-concentration (as well as greater flexibility in the planning 
of techni1.:;tl developments). 
Th is sen 11.:e /cost reduct ion equ;1 t ion could alter ~ign i tic1 nt ly when the potential 
implications of OCR <ire understood. Because OCR may permit much higher levels of 
productivity. there is a much improved possibility of achieving good returns on 
investment and enhancing quality at the same time. 
In the competitive sector, cost effectiveness and quality improvement are also the two 
criteria which drive investment decisions. However. there, the presence of 
competition causes these criteria to be more relative: the stimulus is to gain 
competitive advantage, or to reduce the advantage previously gained hy a competitor. 
What are satisfactory cost/price levels and what is satisfactory service will therefore 
change. often 4uite rapidly, over time. What was an extra facility soon becomes a 
standard feature. 
Two examples suffice. 
I P"g< 33X .· l1111l'-' 11 I>,"'"' eqwpmellf 111du.,t1y 
The more well-known examrle is that of tracking-and-tracing systems which are 
now becoming incre~1singly common in the exrress sector. Increasingly, 
customers will simply expect this facility to he available as part ot the standard 
service. 
The second, rerhaps less obvious. example concerns customer service facilities. 
In order to he ahle to compete. orerators have to he responsive. Thus, they will 
need to provide prices immediately for all possible routes and services; to give 
information on how services are routed: to decide on what collection facilities 
can he arranged. This information was traditionally provided by staff with local 
knowledge. The growing complexity of customer requirements is now 
encouraging operators to centralise their customer service operations. 
Such demands for tracking and tracing and on customer service necessitate not only 
highly professional staff (who are an investment in themselves) hut also computer 
systems to provide the information needed. Increasingly, private operators are likely 
to invest in integrated computer networks (comhining tracking and tracing 
requirements with those of customer service) so that customers anywhere in the 
territory cm·ered receive the same level of responsiveness. 
Annex J 2: J>oswl dectn m ic mail page .).l9 
ANNEX 12: POSTAL ELECTRONIC MAIL 
l. INTRODUCTION 
Postal electronic mail services are based on the technology ot analogue or digital 
transmission of text and images. In foct. "postal electronic mail" is a general term 
covering tde-printing services. EDI (Electronic Data lnterl"hangL') and a fax service 
operated hy postal administrations. hut \\ith bolt-on additions that cre~1h..· added value 
over a standard fax bureau. For this reason. postal electronic m~1il is usually described 
as a "hybrid" service. 
Postal electronic m<1il services have been developed in each EC postal .administration. 
Italy has seen the most successful growth of its service. It also has the largest network. 
This annex discusses the future commercial attractiveness of postal electronic mail, 
and addresses the issue of standardisation. 
2. DIFFERENT FORMS 
There are three main forms of postal electronic mail: 
-The text (and/or image) is transmit_tt·d to a postal administration operated fax 
machine close to the addressee. Tht.· postal administration then envelopes the 
message (now in hard l·opy). and ddivers it to the addressee. Normally. the 
messagt.> would have ht.»en senl from a fox machine operated hy a postal 
administration. hut not nect.»ssarily. (It is possible for the postal administration to 
provide the "oulward" service direct to er private fox machine. hut this is 
comparatively rare.) 
-In addition to the individual llll'ss;1~t.· ddin:ry service described ahove. postal 
dectroni<..· mail Gtn also ht.' u~ed tor hulk distribution of one message. The customer 
can give the postal administration an ;H.ldrt.·ss list (usually on t<qw or disk) together 
with the messagL' to he st.•nt. Both tht.· mt.·ss;agL' and the list are transmitted to the 
distant office. which then prints out the message in individually addressed letters. 
These are then enveloped and delivered. This could therefore he considered to he 
an electronic equivalent of direct mail 
-EDI (Electronic Data Interchange) opcrate<..I hy postal administrations as a value 
added telecommunication centre for EDI. 
3. COMMERCIAL A·n·RACTION 
It is clear that postal electronic mail operates in the "urgent message" market. where 
fax, telex and courier (EMS) services also operate. This market is expanding rapidly 
(in some sectors at a rate of 20<} per year). However. it is not dear whether postal 
electronic mail will share in this expansion. and hecome a major servin: in the postal 
administrations' portfolios. 
page 3./0 /11111cx 12: Postal t'lcctnmic mail 
The <.lirect competitor to postal dectronic mail is ordinary fax and private business 
EDI terminals. Fax machines are now becoming accepted as essential business 
equipment. Increasingly. there are installed not on a one-per-company basis. but 
rather one for each department. down to small groups. This growth has been 
encouraged by: 
-increased awareness (almost up to the level of awareness of telephones); 
-the declining costs (down to 170 EC Us in Japan): 
-the variability of lhe postal adminislrations' <.1ualicy of service. 
To lhese pressures should he added the general consumer impression thal everything 
oughl to happen fasler. Negative poinls about present fax machines may recede. 
These rend to conn~rn al"l'es-.. to machilles either for transmission or receipt of 
messages (as wdl ~ts mis-transmission). 
-it is already possible to store nH:ssages for transmission later: 
-Group 4 machines will spet.•d transmission times significantly. as well as reducing 
mis-transmission: 
-the installalion of lhe ISDN nelwork will enable work stations to communicate with 
each other: 
-Electronic Data Interchange will make order and invoice sending more rdiahle. 
These factors tend to suggest that access to private fax machines (or other means of 
communication with similar benefits) and their capacity will increase. This may take 
away the main atlractions of poscal eleclronic mail -the "universal network" and its 
capacity. But. frankly. one cannot he sure. Customers may continue to perceive 
benefits in postal electronic mail. More importantly, postal electronic mail itself may 
evolve as a result of lhc devdopmerlls in dectronics and communications. 
It would therdore ht..· wrong to "v. rite off' postal electron it: mail -particularly since all 
EC administrations offer the service with some success. most not<thly in Italy. Indeed. 
given the prt..•sent demand. postal dectroni<..· mail ctn hl.' seen a~ part of the 
communicati(HlS intrastructurt..·. 
-i. DEVELOPMENT OF NETWORKS :\ND STANDARDS 
As described above. postal det:tronic mail involves the electronic transm1ss1on of a 
message which is then converted into "hard copy", and then delivered as a postal item. 
It therefore involves two intcr-rdatcd technical specialisms. These are message 
handling systems (usually known hy the initials M HSs) and physical delivery systems 
(PDSs). 
Each network involves providing access to a system for the message sender and then 
from the system to the addressee. In the first of these relationships. the sender gains 
access through the user &agent ( UA). and his message is communicated into the system 
through a message transfer agent ( MTA ). 
A1111ex 12: Po!ttal c:/('<'lnmic mail page 341 
In the second of the relationships. the system communic;ates through another MTA to 
the intended receiver (the latter receiving the message through a different UA ). In 
order for the message to he sent and understood correctly. each UA and MTA must 
he working to the same protm:ols. These protol.'ols will cover aspects such as terminal 
identifiers. start and end signals. and page-hrcak signals. 
If a company wishes to set up ilS own dectrnnit· mail network. it can do so hy leasing 
lines from a telecommunications servin~s supplier. It ctn then use the protocols it 
chooses for the transmission of messages that it controls. However. problems could 
arise if this network wishes to communit·att: with another electronic mail network. If 
inter-operability is required between networks. some standards arc necessary. The 
normal European standard for electronic mail is the X-400 (•md now the more recent 
X-500 standard). This norm effectively provides the "bridge" between the system 
architecture (of the MHS) to the al'tual output (PDS). 
It should also he noted that there are different levels of standards. This is illustrated 
hy the example of a customer and supplier in a certain industry sel'tor wishing to use 
electronic data interchange (EDI) to communil'atc financial data through an 
electronil' mail network. The electronic mail network might use the X-400 srandard 
for access. The financial data might he presented in the standardised format that 
conforms with the EDIFACT norm. This might he further refined to a customised 
EDI format that was used specifically in tht:ir industrial sector. 
S. POTENTIAL PROBLEMS 
All electronic ma ii operators ( whethcr postal or otherwise) arc free to cswhlish their 
own networks using k~1scd lines. l.'lluipmcnt which they d10ose for their own needs 
am.I their own access protocols. However. as notl.'d. this latitude Giil l'ause problems 
luter if these same opcrators wish to h;1n· their networks communicating with other 
networks. The problems may he summarisL'd ;as follows:. , 
-much cquipnwnt and many products do not nmform to international standards; 
-standards are not detailed enough to guarantee end-to-end transmission. 
particularly for international connections: 
cross-border inter-operability between national networks 1s impossible without 
shared standards (usually international standards); 
-sl<lndards have evolved separntdy. and new standards must take into account what 
the future requirements are likely to he: 
-specific applications meeting users' customised rel1uircments arc likely to move 
away from standards. 
6. ACTION HY COMMISSION 
The Commission is engaged in the implementation of a general Community-wide 
standardisation polit·y for tdel.'ommunil'ations. Establishing stc1ndards for dectronil' 
mail is just one part of this overall policy: 
r;:. 3./2 .'11111ex I 2 PoslO/ elc:ctrmric mail 
The Commission has therefore initiated certain "horizontal" actions. such as in the 
legal sphere. At the same time, it is investigating the needs of certain market sectors. 
and. after making a financial analysis of options, recommending solutions to certain 
problems identified. An example of this overall approach is the TEDIS programme. 
Regarding electronic mail in general. and postal electronic mail in particular. one of 
the options is for network operators to connect to the standard telecommunications 
networks usually through the X-400 and X·SOO norms. Alternatively. electronic.: mail 
network providers can link together their own nelworks through lines which they lease 
themselves. for which they can use their own access protocols. For the latter. there 
could he the self.evident problem of inter-operability between the different networks 
that will have evolved separaldy. 
-·-· -----------------------J 
f'{/g(' )4 l 
-~-----------------··--~~-·-.11111ex 13.-Cul111ml mail 
....__ __________________ ---------------- ---------- ---------
ANNEX 13: CULTURAL MAIL 
l. INTRODUCTION 
The Community's publishing and information industries are economically very 
important. Since it is likely that mail will remain the mass-communication medium 
for many companies needing physically to convey messages tn individuals. mail 
services will continue to he important for the puhlishing industry. However. because 
the puhlishing industry comprises ditferent segments, the requirements of each 
segment may well vary. 
The collaboration between postal services and the publishing industry is long-standing. 
It is supported hy the desire expressed hy the Universal Poswl Union to facilitate 
circulation of "works of the mind" hy the possible appl ic1 t ion ot reduced in tern<1 tional 
postal tariffs to hooks. newsp;1 per'>. pcriodica ls and journa Is To get her. these items 
are loosdv c'tlled cu.ltuml JJuul. 
This annex discusse'> how t h1.: crnH .. 't.•pt ot cu It ura I m;1 i I L'\'ulved. ;1 ml a n~ilyse'> the 
economic effects of t lw prckrL'lll i.il Lt r it!-.. pft en ;1-.. ..... t H.:i<1 lL'd with such rn;i ii It l hen 
summarises the issues\\ h id1 nenl to hi.:' ;iddrc...,...,t.·d 
2. ARRANGEMENTS 
The legislation of certain Memlx.T States requires that special and favourable 
treatment he given to tbilY papers and similar periodictls in order to promote the 
right to infor~ation impli~d in the freedom ot speech guar;111teed hy the national 
con st itut i()ns. 
This special treatment has also hcen encour~1ged hy the lJPU. as can he seen from 
Article 20 of the ConH.·nt ion (Sec Annex 5 for the tu II text.) Th is a rt icle (at 
Paragraphs 8 and t)) suggests t h;i t post a I adm in ist r;1 t ions may a I low a )()(}. rt.·duct ion 
on the full letter tariff to he.· applied to printed p;1pers (particularly newspapers. 
periodicals and books). hut nut tu comnwrcial printed p:1p1..T'\ such "" c1t;tlugues. 
3. THE TERM "ClJLTlJR:\l. \l:\IL" 
The mission to promote t reedom l ll -.;pcech ;111d pl u ra I ity ot 1 n form;i t ion i rnpl it:s the 
need to seek the widest. most etl1..·ctivt.· \\;ty'> ut ditlu-..ing mL'n·s thoughts \fail services 
used to help att;1in this uhjL'ctin· c111 ht: termed "cultur;tl m;1il". It thcrdort.' covt.'rs 
items such as newsr<1per'>. perimlic1b. hooks ;tnd juurn;ih 
However, the term "cultural rn;1il" ha" become more ;ind more v;11..?.ue O\'er the course 
of time. More and more advenisinl! messages are brnueht umler the umbrella of 
culture. Publications which are dlectivdv ma;ketinc devic~s ;ire increasindv trving to 
enjoy the preferential ta riffs that h;1d he en i nten~ted tor pu hi j.._·;i t ions ~)t a . pu~ely 
cultural nature. 
page 344 A1111cx 13: Cultural moil 
4. PREFERENTIAL TARIFFS 
In most Member States the preferential tariff (or special rates) for daily papers and 
periodicals was introduced in the past as a political decision. for example with the 
intention of enhancing the multiformity of the press. Such special rates were at first 
limited to fXtpers which could influence public opinion on political matters. Later it 
has been extt_·nded to include papers giving information of a general cultural nature. 
When these preferential tariffs were introduced. the postal administrations were part 
of their respective governments. Each of the governments that decided that its postal 
administration should offer such tariffs was effectively deciding that there should be a 
government subsidy for the daily papers and periodicals that were delivered at the 
reduced rate. 
The extent to which such subsidies were granted can he seen in the rates applied in the 
various Member States. There are considerable differences in this regard. The rates 
in Spain. for example, are very low. (See Chapter 4, Paragraph 8.4. Table 17.) They 
can also v~try over time: as the German postal administration seeks progressively to 
decrease the scale of the subsidy. the subsidy has reduced from T2% of costs to the 
present 44c.r: (with further reductions planned). 
In general. standard postal services are operated on small profit margins or at a loss. 
For those ;1dministracions that offer them. the preferential tariffs cause the prices to 
he loss-making. Table I shows the stated financial position for printed paper services 
in ll)8)/8(l (Although so111ewh;1t historical. these figures indicate the general 
fin a nL·ia 1 posit ion.) 
Tahk I: Printed pupen: percenwge C<ll'emge of cost.\ (I <J8(>) 
l\lt:'.\tnt:H SHTI·: Pt:H< ·tsL\l a: 
Belgium I~.)'., 
Denmark ) I .lJ•,; 
< icrmany s .. u·; 
<ircccc 9(1.)'.; 
Spain < I 0' ; 
France _B,3'.; 
I rclc.1nd 100': 
11~ily < 1w; 
I .uxcmhou rg Jl)j',; 
Nc1hcrlc.1nds 7)'; 
l'onugal -ltl' ; 
United Kingdom 100'; 
Source: Universal Postal Union ( UPU) 
For post;tl adm'inistrations. it is not simply a matter of prices for printed papers 
perhaps being set below stantbrd rates similar items (that is. for letters). At the same 
time. printed papers tend to he bulky items. which usually cost more than letters to 
Annex 13: Cultural moil page345 
process. For example, many magazines are posted unfolded in A4 size envelopes or 
covers. One administration found that such items cost 50% more to process than the 
same item posted in a more traditional "letter" shape (assuming that the contents 
could be folded). Newspapers cctn be even more expensive to process since 
operationally they are given LC or first class treatment (or. in some cases, a special 
treatment above even these "streams"). 
The nine administrations which provided figures showed a combined loss on their 
printed paper services of ECU 964.2 million. 
One conse4uence of these low rates is that they could have the effect of distorting 
compet1t10n. The lower the rate, the less interesting it is for private carriers to 
operate in this field. This competition-distorting effect could be one of the reasons for 
introducing commercial rates within the European Community, allowing for possible 
differences between countries because of different costs. But it must be continually 
taken into account that the tariffs for newspapers and periodicals should be set 
equitably so that fair competition is possible between all postal providers. 
It would seem preferable for postal administrations not to provide the publishing 
industry with a service at a price below the costs. It would therefore seem more 
effective to find methods other than the preferential postal tariffs to provide 
government aid to the publishing industry. A possible solution could he transparent 
state subsidy. If paid to the postal distributor, such subsidies should he available 
equally to both postal administrations and private operators. 
5. IMPORTANCE OF MARKET 
By far the largest part of the cultural mail market is the publishing sector. This 
comprises newspapers, magazines and books. For the future. the definition probably 
ought to be broadened to cover modern methods of storing information for 
distribution (such as CD and video), but here the term "publishing" is used as a 
general description of the providers of material sent as cultural mail. 
For most postal administrations, the publishing industry is the largest single business 
sector.. Table 2 shows what proportion of inland mail is made up of newspapers and 
magazines. 
From figures provided by the Federation Internationale de la Presse Periodique 
(FIPP), it is estimated that the total number of items distributed by mail in the 
Community is 15.2 billion units annually. Of these, some 14 billion are for domestic 
delivery, and a further 1.2 billion for cross-border delivery. (The average circulation is 
calculated to be between .25,000 and 30,000 subscribers per title. although the 
statistical deviation around this average is very high.) 
In addition to its economic importance, the publishing industry (and, in particular, the 
"press") is also very influential. Individual titles can have an influence out of all 
proportion to their postal volume. in terms either of approaches directly to the postal 
administration concerned or indirectly perhaps via the government. In addition, the 
influence of publishers is often expressed effectively through trade associations .. 
page 346 
Table 2: Cultural mail -prop01tio11 of mail 
MEMBEH STATE 
Belgium 
Gcrmam· 
Den marl-: 
(jrccce 
Spain 
France 
Ireland 
Italy 
Luxembtiu rg 
Netherlands 
Portugal 
United Kingdom '* OF DOMESTIC MAii. 
22.0 
11.5 
2') J 
2-1.5 
J.I 
11.8 
N/<i 
JS.7 
23.5 
12.5 
11.0 
3.0 
~---------·----- -,__ __ ·----·-
N/a = not avail<thll' 
Source: CEC 
6. THE FlJTU RE A1111ex 13: Cultural mail 
A'·IOlSI" I\ 
\111.LIO\S <>t" El.'.U 
18J.2 
2J7.7 
I'> 9 
0.007 
N/a 
466.7 
N/a 
N/a 
131 
42.5 
12.9 
N/a 
Certain trends ;ire notice;1hk in lht· printing and publishing sectors. They are 
undergoing ~1 period of signific;int concentration of ownership, the numbers of 
proprietors being reduced. This concentration must have an implication for the 
influence of the press (for instance on postal administrations). hut it is difficult to 
predict what it will he. 
Present technology makes available shorter print runs, en~1bling publishers to produce 
magazines for small market segments. Specialised magazines with small circulations 
are often heavily reliant on postal distribution. Another (external) trend which will 
have an indirect effect (as competition) on publishing is the multiplication of the 
televisual media. 
In the light of these trends and. indeed. of the financial difficulties that the 
preferential tariffs may cause. there seems to he a consensus that the following issues 
should he studied and solutions developed. 
Firstly. the present scope of the definition of cultural mail seems to have moved 
significantly beyond the original concept -that it concerned only the independent 
press. In this context. it should be noted that clearer definitions of both newspapers 
and periodicds are needed. 
Secondly. it should be recognised that different tariff policies applied by different 
postal <tdministr~1tions (and possibly intluenced by their governments) have led to wide 
variations in tariffs for similar services (certainly far beyond cost differences). It 
Annex 13: Cultural mail page 347 
needs to he recognised that these variations can themselves cause Jistortion of 
competition. 
Thirdly, a harmonised approach is needed towards quality of service. Threshold 
standards should be applied, and a consistent quality measurement system put in 
place. 
Lastly, and very importantly, efforts should be made to simplify (and make more 
similar) the access conditions for posting with the different postal administrations. 
Particular attention should he given to resolving any present conditions that can act as 
harriers to trade or as distortions of competition. 
page 348 An11e:c 13: Cu/tum/ mail 
I Annex 14: Toiiff is.'"'-' page 349 
ANNEX 14: TARIFF ISSUES 
1. INTRODUCTION 
Tariffs are lhe prices chargetl to customers. The tariff issues to he stutlied wiJI 
comprehc::ntl the principles that are presently applied to the calculation of tariffs, the 
differences in cost conditions and the way in which tariffs may vary according to 
different sorts of customer. 
Customers also include other operators and post~I administrations, and therefore 
certain aspects of the discussion are relevant to the question of terminal dues. 
However, in their present form, terminal dues do not seem quite to he tariffs. Their 
structure and level is agreed on a multi-lateral· (usually global) basis. They are not 
· presently set in relation to the different costs to be found in different localities, nor do 
they reflect local market forces. If terminal dues are made more closely related to 
domestic tariffs. then they will themselves become mc)re like tetriffs. 
The discussion below seeks to analyse how tariffs are set and what cost conditions 
underlie the tariff principles applied. Petrticular attention is pa id to tariff-setting for 
reserved services. 
2. CALCULATION OF TARIFFS 
The two main bases for calculating tariffs are the relationship with costs and the 
competitive forces coming from the market. To these art: added general tariff setting 
policies. It should also he recognised that external (usually polilical) de<,:isions may 
affect prices in some way. For contracts, prices are often decided through negotiation, 
which can protluce results beyond those that would he derived only from the other 
forces at work. 
2.1 COST BASIS 
In the relative absence of market forces, it would be expected that the 
relationship to costs would he the main criterion for tariff-setting. (Factors 
affecting cost conditions are studied below at Paragraph ]. ) Following such a 
principle. a percentage margin for profit would be added (known as cost-plus 
pricing); alternatively a profit target might be expressed as a percentage of 
turnover. These are similar principles, although the first is more detailed in 
that in can he applied to individual services provided. 
However. this principle of basing tariffs directly on the relevant costs is 
frequently not put into effect. for reasons often decided hy the government. 
Alternatively, the government may set other targets. These two effects are 
discussed below at Paragraph 2.4. 
Because of requirements plac:ed upon them by the governments or because of 
their own policies. nrnny poswl administrations practise cross-subsidies. These 
can he between services, between groups of customers or between geographical 
areas. 
A further problem is that the accounting conventions used vary between 
Member St<ates. In particular. there are ttifferent approaches to the way in 
I page 350 .-1 n m:x I 4: Tmifl" issues 
which fixed costs should he allocated. These accountinc. differences would have 
the effect that exactly the same cost conditions (an~t tariff-setting policies) 
might produce different prices in different Member States. 
In reality, however, the cost conditions vary greatly between Member States -as 
is indicated in Paragraph 1 below. 
2.2 PEREQUATION TARIFAIRE 
Regarding prices for individual services. the most important principle that the 
postal administrations apply is that of the single unitary tariff (the perequation 
tar~faire). This gives the same price for an item across a territory. regardless of 
where it needs to he delivered within the territory. The perequation tarifaire 
relies on a sharing of a range of costs equ<tlly between the items to which the 
principle is applied. 
2.3 COMMERCIAL STRATEGY 
It might not be immediately obvious how reserved services may have market 
forces hearing upon them. The main competitive forces have been from 
indirect competition particularly from telecommunications for 
communications and press for advertising. Recently. there has been more 
direct competition, perhaps the most notable example being companies' 
delivering their own mail. 
However, whether the competition is direct or indirect. there could be a 
tendency for customers to over-state the attractions of competitive services. A 
particular example could he the comparison between press advertising and 
direct mail. Customers might compare the relative costs of reaching 1,000 
potential customers. a comparison which might appear to disfavour direct mail. 
However, the real comparison should he with the relative effectiveness with 
which the message reaches those potential customers and with which revenue is 
generated. 
Most postal administrations have responded to customer requirements by 
offering contract facilities. Of these postal administrations most have a firm 
discount structure from which their salesmen are not allowed to depart. 
Relatively few postal administrations permit negotiation of prices for rest!rved 
services. 
Where negotiation is permitted. it may well he hased on a combination of the 
principles or influences mentioned above. It is also likely to he related to the 
economic importance of the customer to the postal administration. The 
problem is that the most important customers have a tendency to push the 
postal administration negoti<iting hack onto margin<tl cost pricing. In one 
extreme case, a postal administration conceded a discount of 76% -the 
resulting price barely covering marginal costs. 
Such a marginal costing policy for the largest customers has the effect of making 
other customers p<ty for a disproportionate amount of the fixed costs. In this 
way. if discounts for larger customers are not related to cost s<ivings, individual 
customers may actually cross-subsidise l<trger customers. Alternatively, such 
discounts may simply add to the postal administration's operating deficit. 
I A1111a 14: ra,;1r i.«ue.< page 351 
Secondly. there will he concern that the flexibility permitted in negotiating 
prices for reserved services may have effects on the sale of non-reserved 
services. Bluntly, discounts on reserved services may become hidden discounts 
for non-reserved services. 
In terms of general pricing policy. hecause such a high proportion of costs 
associated with reserved services is fixed, it is tempting for postal 
administrations to lower prices in real terms in order to encourage growth, and 
thus reduce unit costs. This policy works well if the lower prices are hased on 
productivity improvements. However, because of the relationship between 
prices and volumes (the price elasticity of demetnd ), such a strateb')' not based 
on productivity improvements can he hazardous. 
Price elasticity measures the change in demand (expressed in volume) against 
different movements in price. Postal services are relatively inelastic, and the 
price elasticity might approximate to -0.4 (that is. for a I% change m price, 
there would be a 0.4e:~;; movement of volume in the opposite direction). 
2.4 EXTERNAL DECISIONS 
National governments may make certain decisions that could affect the tariff­
setting policies of postal administration. Thesl'. decisions fall into two 
categories. 
Firstly, they may set targets to be achieved. These may he broadly financial, 
such as a return to be made on investment, or the level of investment that the 
postal administration has to fund out of its own resources. Alternatively, they 
may have a more direct applicettion to prices: the government may set a ceiling 
for prices in relation to the inflation index. 
Secondly, some governments become involved themselves in the tariff-setting 
process (either directly or indirectly by bringing influence to hear on the 
regulatory hody). They may encourage prices to he held down when normally 
some increase would he justified. Such a policy applied over a period of time 
can lead to suhstetntial losses being incurred. Even if it is then decided to bring 
prices hack to a break-even level, this can only be achieved over a period of 
several years. 
Some governments also give their postal administrations "missions" to provide 
certain services at below co.st. These missions concern particularly the 
distribution of ne\\'spapers and other printed papers. hut may also include the 
requirement to deliver government mail and electoral material. Either postal 
administrations are expected to fund such losses or loss-m<tking services 
themselves. or they will need to approach their governments for central 
subsidies. 
3. FACTORS AFFECTING COST CONDITIONS 
Differences in costs are discussed here. It is important to identify whether the causes 
of the differences are within the control of the postal administrations or outside. The 
discussion is particularly relevant to the debate about whether there should he a single 
common tariff applied across the Community. 
I page352 
3.1 Annex 14: Tanff issues 
LABOUR 
The key difference in costs is the cost of labour (measured in cost per la hour 
hour). Inevitably, this will continue to vary greatly hetween the different 
Member States. Since some 70% of postal administrations' total costs are 
labour costs, these differences are very significant. 
3.2 PROPENSITY TO POST 
Levels of use of postal services will be affected by the surrounding economic 
situation. (Usage of postal services in the different Member States varies 
between 47 and 434 items per head.) These in turn affect throughputs. and 
therefore unit costs (and probably unit prices). However, usage levels are also 
affected by relative price levels. and these are in turn affected by productivity. 
(See below at Paragraph 1.5.) 
3.3 DENSITY AND CONCENTRATION OF POPULATION 
Collection and delivery costs. together accounting for about three quarters of all 
costs. vary depending on how concentrated or spread out the population is. The 
important factor here is not so much average popul<1t ion density, hut rather how 
concentrated the different centres of the population are. Thus. in the case of 
Greece. it may be less rek\';111t that the populatiun density is half the EC 
average than that 55c; of l he tot;sl population reside in the A thens/ Piraeus 
conurhanity. 
3.4 TRANSPORT 
The quality of the n<1tional lr;111spon infrastructure h;1s a significant impact on 
postal quality of service in each Member State. It will also affect costs. It is also 
therefore the case that the size of ;1 country will affect quality and costs. 
3.5 PRODUCTIVITY 
Productivity is affected by levels of use of postal services. However, it is also 
within the control of postal administrations to improve productivity by seeking 
ways to optimise the use of their rl.'.sources. This is essential in order to try to 
gain access to the upward spiral of productivity improvements allowing real 
price decreases. which in turn encourage higher volumes and productivity. 
4. CUSTOMERS 
Customers vary between the individual posting a few items per year to large specialist 
organisations posting millions of items. (In terms of post~sl costs. size relates more to 
the volume of an organisation·s posting requirements. rather than to its overalJ size.) 
The larger the user, the more likely that he \•viii he ahle to prepare the mail in ways 
that facilitate the task of the postal administration after posting. 
This preparation of the mail. whether undertaken by the customer who originated the 
mail or by an intermediary acting on behalf of the original customer. may well lead to 
savings in costs on the part of the postal administration. Usually postal 
administrations that offer contract facilities pass on a significant proportion of these 
cost savings back to the user in the form of a discount. 
I Anna 14: Tmijf issues page 353 
These savings may relate rarticul;1rly to the way that the m;1il is "presented" or rre­
sorted. A more delicate question concerns volumes. If a customer posts large 
volumes, this by itself does not enable the postal administration to make savings. 
However, increases in volume will make the network fixed costs more productive. and 
wiU lower unit costs. 
A few postal administrations argue that pricing policy for reserved services must be 
aware of the cost of alternative services (for instance. of self-delivery) and be able to 
offer discounts beyond those justified only hy cost savings~ if such volume was lost to 
the universal service network, all users would lose because unit costs would increase 
for all. However, while it is agreed that market forces have to he taken into some 
account when setting tariffs, th~ese forces tend to differ from one large customer to 
another. Any concession of non-standard discounts would therefore need the tightest 
co.ntrol. There is some evidence that such control has not always been exercised. 
In principle, if discounts are given for reserved services. they should be rt>lated to cost 
savings. Otherwise, as noted above at Paragraph 2.5, customers th;1t did not receive 
discounts (including all individual customers) would he in danger of cross-subsidising 
those that did. 
S. HARMONISED APPROACH TO TARIFF ISSUES 
5.1 TARIFF PRINCIPLES 
Implementation of some common tariff principles for reserved services appears 
quite practicable. The corner-stone would be the basing ot tariffs closely on 
costs. This would imply that there should be no cross-subsidies -certainly from 
the non-reserved area to the reserved area, from one customer to another, or 
from one service "stream" to another. It would also he important that any 
central subsidies, if any are considered necessary, should he \vholly transparent. 
It is also important that tariffs should he related to the quality of service 
provided. It is clear that quality postal services should he profitable. Poor 
services become .the "distributor of last resort", with low t<1riffs and resulting 
losses. 
5.2 TARIFF STRUCTURES 
If a comparison is made from one Member State to another. it would he seen 
that the postal operation providing the universal service is similar (<tllowing for 
different approaches to mechanisation). In order to made the reserved services 
of each Member State as responsive as possible to customer needs. it is 
desirable that each postal administration draws on the commercial experience 
of other administrations. In this way. each would he pursuing "best practise". 
and this practise. when applied by all administrations. would le;1d to certain 
facilities being available to all customers of reserved services in each of the 
Member States. 
The appropriate approach might be to study the most comprehensive possible 
set of contract facilities, and then ask why each facility should not be offered. If 
there was not a valid reason for not offering the facility. it should be adopted. 
Using this approach, the first point is that there should he a set of contract 
facilities available to users of each postal administration (although the facilities 
I page354 A1111ex J 4: Tllliff issu~s 
might vary between postal administrations). The facilities should indude. as a 
minimum, the possibility for users to pre-sort their mail in return for discounts. 
5.3 TARIFF LEVELS 
It is clear that there will continue to be significant differences in the costs of the 
domestic services of the Community's po~tal administrations. At the same time. 
tor the future he«tllh of the Community's postal sector. the Green Paper 
proposes that tariffs ought to he related closely to costs. Together, these two 
st<1tements imply that there cannot he any harmonisation on any single tariff. 
(This conclusion \\'ould apply at least until there w~1s a significant convergence 
ot costs, and this does not seem likely even in the medium/longer term). 
Ot course, it would be theoretically possible to take a political decision that such 
a harmonised tariff should he put in place. Any body taking such a decision 
would need first be aware of the extra costs involved. the extent of the cross­
subsidies needed and. indeed. the likely negative reaction of consumers. 
Such a harmonised tariff would he based either on " Community "average" cost 
or on the costs of the lowest cost country in the Communitv. The former would 
involve simply massive cross-suhsiuies (the Community's r~served postal sector 
presently being worth some ECU 20 hill ion) between "losing" and "gaining" 
administrations. The latter option would involve not only cross-subsidies. hut 
also central subsidies. In short. a common taritl would imply a Common Poswl 
Policy. 
Apart from the extra administrative costs. such ;1 policy could 'well lead to <1 
reduced flexibility in terms of the ability to achieve Single Market objectives. 
A1111c:."" I.~: /111m-Co111numi1y mnil 
ANNEX 15: INTRA-COMMUNITY MAIL 
I. INTRODUCTION 
Ch;1pter 8 discusses the desirahle regulatory pos1tmn for intra-Community and 
international mail (at Paragraph 8). That discussion was itself linked to a detailed 
analysis of the phenomenon of remail (at Chapter 5. Pare.graph 9). This annex is 
intended to supplement the discussion by furnishing more dewiled argumentation. 
Below are laid out the main &arguments for &rnd against the inclusion of intrn· 
Community mHil in the reserved area. (The points made ..re laid out &1s if statements 
made on each side of a debate.) In terms of length of text. it could seem that the 
argumentation is inclined in favour of exclusion. However. this is not 11 comment on 
the weight or worth of the individual arguments. 
2. ARGUMENTS FAVOURING INCLUSION 
2.1 IMPLICATIONS Of SINGLE MARKET 
The principle of the single market is that of a Communitv without internal 
trading frontiers. It could seem strange ii ditlcrcnt regulatory rules applied 
between nationetl and intra-Community mail. 
As the Community develops. the subject of a single postal ildministration 
covering the whole Community may he raised. In fact. there seem strong 
&-arguments against establishing such etn administration (See Chapter 8, 
Paragraph 21. I). If. however. it was to hl' crealed, its existence might lend 
support to the argument that. if reserved s~rvices are justified at a national 
level. they could seem to he justified ac a Cnmmunity level 
2.2 REMAIL HASED ON TERMINAL DUE I NEQl Tri ES 
It is claimed that remail is based on tht· i1wquitv in the terminal dues svstem 
he tween compens<1 t ion P" id "nd aclU&d tkl j,·L·1 ... y co:-.h. (Such " sta t~mcnt 
presumably would not apply to A-B-B rem;1il which pays inland tariffs to the 
delivery administration.) 
3. ARGUMENTS FAVOURING EXCLUSION 
3.1 COMPETITION EXISTING 
In most Member States. competition alre,idy exists in practice in the intra· 
Community and international letter mail segments. It would he wrong now ·10 
deprive customers of the choice to which they have become accustomed. 
3.2 SERVICE IMPROVEMENTS 
The postal administrations have been slow to invest in improving the quality uf 
service of international (including intrn-Community) mail. They are now 
doing so mostly as a result of competitive pressure. 
page 356 .-11111c.r 15 /111ra-Co11111u111i1y nwil 
A performance measuring system has now been put in place. However, this 
shows that present performance is not good. The CEPT has adopted an 
informal tc1rget of 0+3 (third working day after posting). hut recent samples 
show that only 40% of items are meeting this target. 
The privil te opero tors competing with the post a I admin ist r;i t ions' internal ion a I 
ma ii systems do not puhl ish qua Ii ty of service resu Its. H O\l.'ever. costs of the 
different operators will soon become very similar. Then iill service providers 
(including private orerators) would he selling on the basis of service. 
Normally A-B-B remail might well achieve foster end-to-end times than mail 
sent through the postal administration's system. There could he two reasons 
for th is. 
Firstly. the private operator may he more effective in e<1rrying out the outward 
sorting and then freighting to the country of delivery (for the latter 
operation. he may he able to use night flights.) 
Secondly. he posts directly into the inland system ul the deliVery 
administr;1tion. presenting the mail ;1t a strategically chosen sorting office in 
the format determined by that office. By comp<1rison. the postal 
administration's mail goes through one of very few "offices of exch<111ge" which 
can often he bottlenecks. It is certainly the case that domestic quality of 
service (for the national mail stream into which the private operators post) is 
superior to that of inward international mail. 
3.3 POSSESSION OF EXPERTISE 
In the c<1se of domestic traffic, the postal administration is the single 
recognised exrert. This is not necessarily the case in terms of international 
mail. It is no accident that the remail companies <ire in the main either airline 
freight suhsid ia ries or air exrress ca·rriers. 
In other words. they are air transrort experts 111 ;1 \\41)' 111 which postal 
administr;1tions ;ire not. For the proportion of mail which 1-.. forw;1rded hy 
surface, again other carriers are speci<ilists 
Further. hec;1use m;1ny rriv;1te oper;1tor-.. de;tl with posLd <1drrnni ... tr;1tiuns on 
;rn indi\idu;d h"sis (;it le;1st in the c;1sL· of 1\-H-B "rem;1il"). thL·y l)ften l\nov.: 
more <thou t the delivery opera lions of de st i 11;1 I ion :1d min i..,t r ;1 t inns than do 
other posLtl adm in ist r<1 t ions. 
3.4 PROFITS NO LONGER NEEDED TO CROSS-SUBSIDISE 
Such cross-subsidies were unsatisfactory anyway. and should have been phased 
out. Even if such cross-subsidies were acceptable. the profits from 
international mail will no longer be of the same order as in the past. 
The CEPT terminal dues scheme has tended to increase outward direct costs. 
If terminal dues were based on inland tariffs, these costs would also tend to 
increase. Conversely, administrations would be properly compensated for 
their inward volume, and would therefore no longer need to cross-suhsidise 
from outward revenues to ray for inward losses. 
Annex 15: /111ra-Co111mu11ity mail page 357 
Even before the terminal dues issue is resolved, the outward administration 
should be theoretically ahle to be price-competitive with an A-8-C remailer. 
In practice, they may not he because postal administrations feel the need to 
have high outward rates in order to cross-subsidise inland losses. 
3.5 COMPETITION WITHOUT DAMAGING UNIVERSAL SERVICE 
When a company changes its practise from undertaking. a task itself and 
instead contracts the work out, the effect is almost ;dways to increase the 
variable cost of the task. For mail generated in its country the outward postal 
administration "contracts" for another postetl administration to undertake the 
delivery. Although many of the delivery costs incurred by the inward 
administration etre fixed, these same costs are charged to the outward 
administration as varietble costs. 
Provided that remail is collected from company premises and is delivered 
through the network of the postal administration in the country of the 
addressee, the two key fixed cost elements of the univers;tl service network are 
not affected or harmed by remail: 
-road-side collections: 
-deliveries: the international traffic in question is collected 
from customers' premises~ 
remail still respects the exclusive rights of the 
reserved service provider in the country of 
delivery. 
3.6 EXTENSION OF CUSTOMER CHOICE 
Some of the questions concerning intra-Community (cross-border) m;1il need 
to be put in the context of an evolving continuum ot n1stomer choices for 
letters: 
The usual relationship for letter mail is that of a customer posting it with 
the postal administration, which then delivers it to the addressee. 
The customer also has the option of himself delivering it directly to the 
addressee. 
The usual relationship for intra-Community mail is for the customer to 
post the mail with his own country's postal administration which then has 
the mail transported to the delivery country's postal administration which 
then delivers the mail to the addressee. 
For intra-Community metil. the customer also has the option of delivering 
the mail directly to the addressee. 
The customer can post his mail with the delivery country's postal 
administration, which then delivers the ma ii to the addressee. 
Returning to customer options within the customer's own country. in 
several most Member States the customer can give his mail to a private 
operator which is permitted to act as a "mail preparer": the private 
operator then posts the mail with the post;tl administration. which delivers 
it to the addressee. 
pagt: 35X /l1111cx 15: /111ra-Commu11ity mail 
For intra-Community mail, a customer might put the mail with private 
operator based in the delivery country; the private operator then posts the 
mail with the postal administration which then delivers it. 
The customer might put the mail with a private operator in his own 
country; the private operator might then transfer the mail to a private 
operalOr in the delivery country; the mail is then posted with the delivery 
country postal administration, which then delivers it to the addressee. 
It seems to follow from this continuum that such an option. which still respects 
the exclusive rights of the reserved service provider in the country of delivery. 
should be permitted. 
Annex 16: Di ... cussio11 of nit<'tia to cl<'jil1<' rt'.'"''''-'" arc.·11 
ANNEX 16: DISCUSSION OF CRITERIA 
TO DEFINE RESERVED AREA 
1. INTRODUCTION f'O,'i!,t' 359 
The key policy ohjective is to safeguard the universal service. To achieve this. it is 
proposed that a Community set of reserved services should he est;1hlished. Reserved 
services, as well as certain non-reserved services, would carry a uni\'ersal obligation. 
Other services -such as those of express or heavier parcels -would not he reserved. 
and would not have a universal service obligation. 
To achieve the universal service objective, the proposed means is the establishment of 
a set of reserved services. This set of reserved services should he as small as possible. 
Although some parcels may have a universal obligation. it is dear that they should not 
be included in the set of possible reserved services. (They are alrL';1dy non-reserved in 
alJ Member States.) The same is also true of printed papl.·r:-.~ ~•It hou~h thL'y may ha\'e 
some universal service obligation. they should he non-reserved 
2. CONTENTS 
It therefore seems clear that the first niterion to he applied. among universal services. 
is that of contents, in order to place items containing printed p••pl.'rs or goods dearly 
in the non-reserved sector. Whal remains after the application of this contents 
criterion would be all the postal communication items of a personal or individualised 
nature. But this would still he larger than was needed for the reserved services. 
Therefore, following application of the contents criterion. some further criteria (or 
criterion) must be applied in order to ensure that the reserved area is as small as 
possihle. 
Below is discussed what these further criteria (or criterion) should he. 
3. PRICE 
Because of the range of tariffs (and costs) of standard lettt.-r services in different 
Member States. it would be impossible to have a single price limit (expressed in local 
currency) for reserved services covering the whole Community. 
If there was a single price limit set in each Member State. it could he gr&tdually eroded 
by inflation. The regulatory body might nmsider this to hl.' dc.:sirahk. If not. the 
regulatory body might wish to review the limit perimlicc11ly 
The price limit could he set by reference to the tariff struclllrl.' for the basic letter 
service. For example, it could he set at the price equivalent of whatever weight limit is 
proposed, or in a fixed relationship with the tariff equivalent of the weight limit 
(perhaps to 1.5 times the tariff equivalent). 
There could be a danger of the operator effectively setting the regulatory threshold for 
non-reserved services. However. this may not he a cause for too great concern. since 
the regulatory authorities have to approve. or at least seek justifications for. changes 
in tariff levels. In particular, they will need to pay attention to tariff structures -for 
page .~60 A1111ex 16: Di."""·"·"ion of nite1ia I<> define ll!sen•ed area 
instance. to t•nsure that price increments at different weight steps are linked to cost 
increments. 
A possihle solution to this regulator /operntor problem would he to set the price limit 
initially by reference to the tariff for the weight limit. Thereafter, the limit could he 
indexed. never heing increased by more than the inflation rate over the period of 
indexation. (The base for the indexation would always he the previous price limit.) Of 
course. the regulator could always decide on a limit lower than the indexed increase. 
4. QUALITY 
Postal quality ctn he defined in different ways. The method most used is the 
quantification of speed of delivery from point of collection (or despatch). However. 
the use of this measurement to define the distinction hetween letters and express 
would he problematical. 
If the distinction were made on the hasis of service performance, this would introduce 
a retrospective: element. For example, if an ordinary letter were delivered in less than 
24 hours. should it then retrospectively he considered a non.reserve<.! item? If an 
express item w"s not delivered for 2/J days (as happens from time to time) should this 
item retrnspL·ct ively he considered a standard letter. and therefore a reserved service'! 
The difficulty ol retrospection. panicularly in the second e<ase. sugge~ts that the focus 
should he on customer expectations. rather than actual performance (although. of 
course. the SL'Cond afkcts the first). 
Customt:r t:xpectations in this field are hest measured by the price that they are 
prepared to pay. 
The use ol prin:. rathL·r than delivery speed. as a criterion would have the further 
advantage that it would cfft:ctivdy recognise other forms of <.1uality that customers 
value and for which they are prepared to pay more. 
S. WEIGllT 
Because it mt.·asures an ahsolutc. a weil!ht criterion would not suffer from some of the 
defects mentioned above for the price ~riterion (essentially concerning the mobility of 
a price criterion on its own). However. it must he recognised that a weight criterion 
would not he sufficient in itself. since it would not be able to exclude lighter-weight 
express items. It would thcrdore need to he used in conjunction with a price 
criterion. 
6. WEIGHT/PRICE COMBINATION 
Only a combination of the use of weight and price criteria (after the application of the 
contents criterion) will achieve the objective of having the s1raallcst feasible reserved 
area (amongst the services for which there is a universal service obligation) that will. 
at the same time. safeguard the universal service. The items that will then remain as 
being possible reserved services would he ordinary letters. post·cards and addressed 
direct mail -and these only up to a certain price and weight. 
Annex 16: Dis«ussion of c1i1elia to d~jitrf.' 1v ... e1wtl 111w1 f>ll.S:<' 361 
A single weight limit could he applied Community-wide. and then. in view of the 
presently widely varying tariffs, the price limits calculated in each Member State hy 
reference to the weight limit. In the medium/longer term, if there was a sufficient 
convergence of costs and tariffs, a price limit might suffice on its own. 
pag<' .162 /l1111ex 16: /Ji.licll!ii.liion of oitc:nll to tit-fine n:sc1ve<I m-ea 
I Glossmy page 363 J 
GLOSSARY 
AO 
"Autres objets" in French -a UPU classification that comprises printed papers and 
small packets. Used in all classifications of postal administrations· cross-border letter 
services. Several administrations also use it as one of the two classifications for their 
domestic mail, the other being LC (see below). 
CEPT 
The Conference of European Postal and Telecommunications ~1dministrations. 
Covers administrations of all Member States. and of most of the other European 
countries. Now divided between postal and telecommunications. CEPT (Posts) 
presently represents the postal administrations as operators. hut there is now some 
indication that there may be a separate CEPT group representing pnst;tl regulators. 
City mail 
This is a service operated by private operators. It usually refers to mail which is 
collected in an urban area for delivery in that Me<t. It cm also refer to the delivery 
element of cross-border mail. where the mail is delivered by a priv;1te operator rather 
than the postal administration of the country of delivery. 
Collection 
Mail can be collected from three different sorts of locations: from the premises of the 
customer (or a third party working on his behalf), from a post office counter or from a 
public postal collection box. Collection from the last ot these is often ca lied "road-side 
colJection". 
Concessionar_y tariffs 
Certain customers benefit from rates that are lower than those that normally apply. 
The difference between the two rates is a discount. 
Discounts are usually a\varded for volumes posted and/or costs sa\'ed. Some lower 
tariffs are offered not because of costs saved. hut hecc1use of the content of the items 
posted -usually where the items contain printed p<1pers. (Lower t~1ritls tor electoral 
material give another example.) Such lower tariffs can he ctlled "concession~1ry" or 
"preferential". 
I page364 Gloss01y 
Consolidation 
Consolidation literally refers to the gathering together of items from different sources 
and (in terms of transport) then despatching the items in hulk. In terms of mail, 
consolidators collect mail from different customers. hulk it together and then despatch 
it to the operator chosen for the next phases (transport and delivery). 
Consumers 
See under "Customers". 
Customers 
Consumers ~ire individuals who (in the context of the Green Paper) post items on their 
own behalf: the total volume that a consumer posts is likely to he small. Customers 
include both consumers and organisations posting on their own behalf: the posting 
requirements of the latter may range from low to massive volumes. The word users 
embraces both customers posting on their behalf and third party operators acting on 
behalf of customers; such third party operators act as "intermediaries" between 
customers and the operator (often the postal administrntion) that delivers the mail 
Deferred mail 
Some postal administrations offer the facility where a customer making a particularly 
large posting can make the posting over a period of time, hut agree the date (or range 
of dates) for the delivery to the addressees. This service is mostly for direct mail, and 
is usually connected with advertising campaigns that use other media as well. 
Delivery 
The final phase of the postal process. it brings the item to the addressee. Deliveries 
usu<11ly cover certain specified areas. Coverage of this area is usually called a delivery 
round. Postal administrations use the expression a "postman's walk". even if the round 
is motorised. (In the United States. this is called a "carrier route".) Because of the 
universal service requirement, all the postmen's walks together must potentially pass 
all possible delivery points. 
Direct mail 
A form of advertising, involving the sending of a publicity message by mail direct to 
the individual intended. Therefore intended to be more specifically targetted than 
other advertising channels. The trend is now for addressed mail to become more 
"personalised" (see below). However, there is also a less targetted variant, 
unaddressed mail (see below). 
Direct marketing 
A generic phrase, sometimes also referred to as "distance selling", it covers hoth the 
advertising of products to people in their own homes (or offices) as well as the 
I Glossat)' page 365 
delivery of products direct to homes. It therefore comprises direct mail. telemarketing 
and ma ii order. 
Document exchange 
EDI Facility offered by specialist private operators, whereby the customers can deliver mail 
directly into the boxes of other exchange users and collect the mail similarly posted 
into their own boxes. In some countries, groups of such exchanges also transfer mail 
between each other. 
Electronic Data Interchange. An electronic method for trnnsmiuing quantitative 
information. Relies on information being input in strictly formatted fashion. 
Particularly interesting to large companies exche:mging large amounts of quantitative 
information. Will therefore compete with postal services for transmission of items 
such as orders, statements and invoices. Can also he used by postal operators to 
communicate with their customers. 
Express services 
Flat The services offered by courier companies and express parcels companies (many 
companies operating both services). Also called express delivery services. They cover 
the express movement respectively of documents and parcels ( lhe latter being goods­
bearing, and often called "non-documents"). The companies offering these services 
comprise both private operators and public postal administrations. These services are 
qualitatively quite distinct from ordinary letter or parcel services. (Note: these 
services are also completely different from the "lettres expres" -see below.) 
A letter (or publication) of A4 size that is sent unfolded. A distinction is drawn 
because of the extra size complicates the sorting process and increases sorting costs. 
GATT/GATS 
GDP The General Agreement op Trade and Tariffs (GA lT). a worldwide multi-l<tteral 
agreement to try to reduce harriers to trade. Now intended to cover services as well. 
the framework agreement for services being called General Agreement on Trade in 
Services (GATS)~ ... ... 
Gross Domestic Product -the sum total of revenue generated hy a national economy 
in a financial year. 
1 page366 Gloss01y 
Hand deliver~' 
The delivery of newspapers and magazines by private operators to suhscrihers. The 
publisher contracts directly with tht> operators concerned, and the items carry the full 
address of the subscriber. 
Individualised 
As used in the Green Paper. the word "individualised" refers to communication items 
that relate to the husiness or personal affairs of the addressee with sufficient 
individuality that it is dear that the text refers specifically to the addressee. 
Individualised items. which are therefore not printed papers. include business 
correspondance, statements and invoices. 
Inward 
LC Refers to the latter part of the postal operation. including delivery to the addressee. It 
therefore refers to the operation carried out by the "receiving" operational centre in 
an integrated network or by the "receiving" postal administration (or other sub­
contracted agent) in a joined network. 
"Lettres L'l cartes" in F'rend1 -UPU classifa:ation covering letters and cards (and 
therefore t.•xduding printed papers -see AO a hove). Used for cross-border services 
between postal administrations. and by some postal administrations for classifying 
their domestic services. 
Letter 
There is no single definition. Users mean an individual readable communication 
which can he sent by different means. Muse refer to the personal or business affairs of 
the sender and/or the addressee. In the sense of the "letter mail" which includes 
printed papers and small packets, postal administrations sometimes refer to the UPU 
definition which covers all postal communications weighing up to 2 kg. 
Letter shop 
This describes the consolidation and mail preparation activities carried out hy certain 
operators. The use of this term is usually associated with the production of direct niail 
and other printed papers. After the mail has been created and printed. it is then sent 
to the lettershop for prep<&r<&tion for posting. 
Lettre expres 
Service provided by postal administratio1{s: a letter which receives special treatment. 
Usually receives faster treatment (sometimes with money-hack guarantee if not 
delivered on time) and recorded at sending and Jelivery. 
Glossary page 367 
Local posting 
The poscing of cross-border mail in the country of delivery under the access terms and 
at the tariffs that apply to domestic mail in that country. Also sometimes called 
"direct injection". It is also the final part of the "A-B-B" remail operation. 
Mail order 
The selling and provision of products to individuals in their own homes. Competes 
with retail selling. An important user of letter and parcel services. Also significant in 
its own right -generates 0.5% of the Community's GDP. 
Mail preparation 
This is the <1cli\'ity undertaken hy a third party operator who ;1cts as an intermediary 
between the original customer who generated the mail and the postal administration. 
Mail preparers therefore operate with the agreement of the postal administration, 
with which they usually hold contracts. 
The most important mail preparation activity is sorting the mail in advance of posting 
(pre-sorting). It can also include handling subscriber lists and enveloping. Some or all 
of these activities can also he undertaken by letter shops (see a hove). 
Mail room 
A facility ser\'ing an office building or comp<111y. The 111<1 ii room collects mail. and 
prepares it tor posting with the operators concerned (including the postal 
administration). Some postal operators are beginning tu ntkr lo undertake this 
activity ;.1s a third party agency woi:king for the or get n is" t ions t h;.1 t generate the ma ii. 
Such a st:T\'ice cin he part of a wider involvement of Lhe postal administrations to 
manage the whole pre-posting process on behalf of largt:· custonwrs 
Mandator_y service ( obligator.Y scrvkc) 
OCR Any services that an operator is obliged by the regubtory body to undertake are called 
mandatory services. (The term "obligatory services" is synonynwus.) Usually have to 
be provided across the whole territory covered by the operator upun whom the 
obligation is placed -that is. he has an obligation to prm·ide ~' universal service for all 
items that come within the definition of the obligation. Some mandatory services are 
reserved (giving the operator exclusive rights to provide them). others are non­
reserved and open to competition. 
Optical Character Recognition. Scanning device which can "re~1d" ch;ir<1cters and (in 
the case of postal operations) translate them into binary codes \vhich can then he used 
for automated sorting. 
I PllJ,'<! 368 G/o_,._.i<ll)' 
Ollice of exchange 
Specialised sorting office through which international mail between postal 
administrations passes. There are both "outward" offices of exchange responsible for 
despatching mail from the country of posting, and "inward" offices responsible for 
receipt in the country of delivery. Offices of exchange are located near to airports for 
air-mail and sea-ports and or rail-heads for surface mail. 
Outward 
Comprises the initial phases of the postal operation. Covers collection. outward 
sorting and despatch. 
Packet 
Goods-hearing item weighi~1g up to 2 kg. Considered by postal ~1dministrations and 
UPU to he part of letter mail (being part of AO classification -~L'l.' 11hovl.' ). 
Parcel 
Goods-hearing item for delivery to address point. Technically. no upper weight limit, 
but usually considered to he 30 kg. (Above this weight. items are usually palletised 
"consignments".) 
Perequation tarifaire 
Practice of applying the same tariff across a whole territory. There 1s no succinct 
English equivalent, the closest translation being "single unitary tariff'. 
"Personalised" 
"Personalised" is a word that describes how a direct mail item mav indudt 1.ext that 
will he more relevant to the addressee. However. since the text is n.ot entirely specific 
to the addressee (with the exception of the address and the appelation ). the item 
would not he considered "individualised" as defined above. 
Postal electronic mai.1 
A "hyhrid" service which combines both telecommunications and postal services. An 
item is sent by telecommunications (either as text or as an image) to a convenient 
point where it is then converted into a paper version ("hard copy"), enveloped and 
addressed. lt therefore becomes a postal item. which then will he delivered. 
Poste Restante 
A facility which enables a customer to arrange to have items addressed to him held at 
a nominated post office. The customer picks up his mail directly from the post office 
nominated. 
Gloss my pag<.' 369 
Printed papers 
Items where the text is identical. Usually refers to publications (newspapers. 
magazines and hooks), but can also include direct mail. 
Rebate ser\'ice 
Generic name for discounted service, usually for publications. where the advertised 
delivery times are slower than the norm. 
Re mail 
A cross-border letter mail service offered by pr~vate operators. usually in co-operation 
with a postal administration. There are three different sorts of remail operation. 
A-B-C remail involves mail being collected in the country of the customer (A), 
freighted lo a second country ( B) where it is posted into the international mail system 
for onward transmission to (and delivery in) a third country (C). A-B-B remail 
involves collection in the country of the customer (A). freighting to the country of 
delivery ( B) and delivering to the addressee there (B). usually hy posting with the 
postal administration there. A-B-A remail involves domestic mail being taken from 
the country of the customer (A) to a second country (B) for mailing hack to the first 
country (A). 
Reserved service 
A service the provision of which is obliged to an operator (in fact always the postal 
administration. in the case of postal services) who in turn is granted some special and 
exclusive rights. These rights almost always state that this operator has the sole right 
to provide the services in the territory to which the reservation applies. 
Routeing 
The route and method of transport chosen to transport items between two 
geographically distinct locations. 
Self-deliver)· 
Taking one's own mail to the destination point and delivering it oneself to the 
addressee. From a regulatory point of view, there might he different views taken 
depending on whether the destination address was in the same country or not. (If the 
destination was in another·country. there might he different different regulatory views 
are possible depending on whether the countries involved were inside or outside the 
Community.) 
Self-posting 
The posting of one's own mail by oneself. Although this seems a straightforward 
concept. it raises regulatory issues. particularly for contract users. The different 
1 page370 Glus.'im)' 
possibilities for posting one's own mail with a postal administration are: posting 
locally, posting at a distant point (perhaps under a contractual arrangement) in the 
same national territory; taking one's mail across a horder for posting with the postal 
administration of another country for delivery there; taking one's mail across a horder 
for posting with the postal administration of another country for delivery in a country 
other than one's own; and taking mctil across a border for posting with the postal 
administration of that country for delivery hack in one's own country. (It should be 
noted for the last three examples that different regulatory views are possible 
depending on whether the countries involved are inside or outside the Community.) 
Senior Oflicials' Group on Posts 
A consultative committee established to hdp the Commission devdop proposals for 
the Community's postal sector. Its establishment was proposed by the Council of 
Telecommunications Ministers in September 1989. and has been meeting regularly 
since December 1989. Each Member State is represented. The group is chaired hy 
the Commission. 
Sorting 
Activity which causes an item to be grouped with other items for a particular 
destination. The first sorting process ("outward" sorting) will group together items for 
a particular destination town or area. In the "inward" office. sorting will divide the 
mail into more detailed areas, and then allocate the mail to the person responsible for 
delivery. 
Special letter delivery services 
In the Green Paper. this phrase refers to the "lettre expres" (see above). 
Stream 
An operational category of mail which requires that the items in the categorv are 
segregated from other mail and treated separately. Examples include LC. A.o:·first 
class mail. second class mail and cross-horder mail. 
Telemarketing 
The selling of products by telephone. Certain aspects of this form of marketing are 
illegal in certain Member States. 
Terminal dues 
The system of compensation applying to exchanges of international mail between 
postal administrations. The "outward" administration receives all the revenue from 
the customer. It then compensates the "inward" administration for the costs incurred 
in delivering the mail. 
I G/omuy page 371 
Tiering system 
Most postal administrations dassit)' their maiJ into at least two "tiers". MaiJ in each 
tier has different tariffs for the same weights, and usually receives different levels of 
service. 
Some administrations classify on the basis of the contents of the items posted. Here, a 
distinction is drawn between letters and post cards on the one hand, and printed 
papers (and small packets) on the other. Under the Universal Postal Union 
classification these tiers are called respectively LC (lettres et cartes) and AO (autres 
objets). 
Other administrations have tiering system that distinguishes on the basis of the speed 
required hy the customer. This system i~ referred to either as first class/second class 
or as 24 / 48 hours. 
Unaddresscd mail 
A form of direct mail. Advertising material is delivered unaddressed to all the 
addresses in the area dc.:.·termined by tl1e advertiser. 
Universal ser\'ice 
UPU The obligatory /mandatory prov1s1on of postal services throughout the territory to 
which the obligation applies. This implies accessibility to collections by which maiJ 
being sent can be input into the mail network as well as delivery to every address in 
the territory. It also implies affordable prices and good quality of service. 
Although other operations may provide services throughout the territory, the phrase 
"universal service" refers in the Green Paper only to those operations which have to 
provide universally as a regulatory obligation. 
The Universal Postal Union. This is a United Nations hodv that regulates the 
international movement ol mail by postal administrations. Its Convention is re­
confirmed at its congress~s which are hdd every five years. 
Users 
See under "Customers". 


ISSN 0254-1475 
COM(91) 476 final 
DOCUMENTS 
EN 10 
Catalogue number: CB-C0-92-263-EN-C 
Office for Official Publications of the European Communities 
L-2985 Luxembourg ISBN 92-77-45007-X