EUROPEAN COMMISSION Brussels, 8.11.2021 SWD(2021) 309 final COMMISSION STAFF WORKING DOCUMENT



EVALUATION

of Directive 97/67/EC on common rules for the development of the internal market of Community postal services and the improvement of quality of service amended by Directives 2002/39/EC and 2008/6/EC































(Postal Services Directive) accompanying the REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL



on the application of the Postal Services Directive

(Directive 97/67/EC as amended by Directive 2002/39/EC and 2008/6/EC) {COM(2021) 674 final} - {SEC(2021) 388 final} - {SWD(2021) 310 final}



Table of Contents 1.Introduction 2.Background 2.1History of the Postal Services Directive 2.2Main provisions of the Directive 2.3The Baseline 3.State of Play 3.1Implementation of the Directive 3.2Current trends in the postal services market 4.Method 4.1Short description of methodology 4.2Limitations and robustness of findings 5.Analysis and answers to the evaluation questions 5.1Effectiveness Q1:Has the Directive ensured the provision of a postal universal service available at all points across the EU territory, at affordable prices and specified quality? Q2: Has the Directive contributed to the achievement of an internal market for domestic and cross-border postal services? Has the Directive stimulated fair and effective competition in the internal market for postal services? Q3: Has the Directive led to an expected level of harmonised regulation of postal services across the European Union? 5.2Efficiency

Q1: Do benefits associated with the application of the Directive outweigh the costs? Q2: Is there scope for a more cost-efficient application of any provisions of the Directive, including for simplification and burden reduction? 5.3Coherence Q1: To what extent is the Directive internally coherent as well as coherent with the Regulation on cross-border parcel delivery services? Q2: To what extent is the Directive coherent and complementary with other EU-level legislation and horizontal policy as well as international postal policy? 5.4Relevance Q1: How well do the original objectives, scope and definitions of the Directive still correspond to the needs of EU postal users in the current technical, economic and social conditions? Q2: How relevant are the provisions of the Directive for achieving its main objectives (i.e., related to universal service, internal market and harmonised principles)? Q3: In the context of the new developments in the postal markets, are there other relevant objectives for regulatory intervention at European level in the field of postal services? 5.5EU Added Value Q1: Would the benefits delivered by the Directive have been achieved in the absence of EU-level intervention? Q2: What would be the most likely consequences of withdrawing the Directive? 6.CONCLUSIONS 6.1Conclusions on the fitness of the Directive 6.2Lessons learned 7.Annex 1: Procedural information 8.Annex 2: Stakeholder consultation 1.The consultation strategy 1.1Objectives 1.2Stakeholders consulted

1.3 Consultation activities 2.Synopsis of consultation activities 2.1Consultations of Member States 2.2 Consultations of National Regulatory Authorities 2.3 Consultation of social partners in the context of the Social Dialogue Committee for the Postal Sector 2.4 Public Workshops 2.5 Open Public Consultation 2.5.1Introduction 2.5.2Overview of respondents 2.5.3Summary of responses 9.Annex 3: Methods and Information Sources 10.Annex 4: Analysis of the Application of the Postal Services Directive, in view of the sixth Application Report to the European Parliament and the Council 1.The Market (Overview of the Postal Sector in Europe) 1.1Volumes 1.2Main drivers of change in the postal sector 1.3Changing User Needs 1.4Prices 1.5Competition, operators, ownership, performance, profitability 1.6Employment 1.7Environment

2.Application of the Directive 2.1Transposition of the Directive 2.2The Universal Service 2.3Protection of users - complaints resolution 2.4Level Playing Field and Competition 2.5Interoperability for the Postal Sector/Standardisation 2.6Data Collection 11.Annex 5: Coherence 12.Annex 6: Bibliography Figures Figure 1 The Intervention logic of the Directive Figure 2 Real prices of domestic parcels and letters and transit times for letters, annual percentage differences 2012-2018 Figure 3 Delivery of intra-EU cross-border mail (percentage of items of the fastest standard category delivered 3 days after posting – EU target is 85 percent): Figure 4 Price developments within the EU, Australia and the US Figure 5 Respondents by Stakeholder Group Figure 6 Respondents by country of origin Figure 7 Is the Directive still fit for purpose?

Figure 8 Letter mail volumes, 2008-2019 Figure 9 Letter mail per capita, 2018 Figure 10 Growth rate parcels, domestic and international service -dispatch, EU 27 Figure 11 Parcels per capita, domestic and inbound, 2018 Figure 12 Parcel volumes, EU28, 2018 Figure 13 Percentage of enterprises sending e-invoices suitable for automated processing (2018) Figure 14 Individuals’ internet use to participate in social networks, 2014-2018 Figure 15 Individuals’ internet use to interact with public authorities in the last 12 months, 2014-2018 Figure 16 Use of hybrid mail solutions in future (respondents using hybrid mail, in per cent) Figure 17 Stakeholders’ expectations of letter volume development over the next 10 years Figure 18 Real price for priority domestic letter 20g: CAGR 1998-2019 Figure 19 Public tariff for domestic priority letter 20g (real prices, Euro) Figure 20 Parcel prices in EUR, 2 kg, domestic and intra-EEA, 2019 Figure 21 Number of geographical zones applied for the pricing of intra-EEA standard 2kg parcel, 2018 Figure 22 Average universal service provider profitability in mail operations, by country group Figure 23 Sources of operating revenues, average for years 2016, 2017 and 2018 Figure 24 Number of postal service providers with more than 1 percent of the postal market in 2019 Figure 25 Share of turnover from letters and parcels, 2018 Figure 26 Persons employed in postal and courier activities Figure 27 National approaches to implementing the Postal Services Directive

Figure 28 Percentage of domestic priority letters delivered next day Figure 29 D+3 performance development 1997-2019 for international mail Figure 30 Transit time performance D+3 Figure 31 Price developments within the EU, Australia and the USA Figure 32 Developments of public tariffs in selected countries (20g letter, fastest standard category) Figure 33 Complaints received by universal service providers per 1,000 inhabitants, 2017-2019 Figure 34 Complaints received by regulators per 10,000 inhabitants, 2017-2019 Figure 35 Complaints received by universal service providers about cross-border services, 2017-2019 Tables Table 1 Evolution of the main provisions of the Directive Table 2 Expected outcome of the Directive since the last revision in 2008 Table 3 Evolution of the carbon-efficiency for letter and parcel delivery between 2013 and 2019 Table 4 Delivery/collection requirements and exceptions/derogations Table 5 Calculated net cost / compensation for SGEI provision Table 6 Total budgets of regulators for postal regulation (figures from 2017 or 2018) Table 7 Profitability of universal service providers (EBIT margin (Earnings before interest and taxes), letter and parcel segment) Table 8 The costs and benefits of universal service provision and regulation Table 9 Relevance of the universal service features and quality requirements, present and future

Table 10 Revisions to the SWD following the RSB recommendations Table 11 Timing of consultation activities Table 12 Were the objectives of the Directive achieved? Are they still relevant? Table 13 Costs and benefits of universal service provision and regulation Table 14 Total budgets of regulators for postal regulation (figures from 2017 or 2018) Table 15 Costs of regulation (universal service providers) Table 16 EU-28 costs for compliance with the Directive per capita Table 17 Stakeholders benefitting from universal service provision Table 18 Operating profit/loss of universal service providers, all activities, in mio Special Drawing Rights Table 19 Shares of universal service providers on the domestic letter market Table 20 Scope of universal services 2018 Table 21 EEA Transit time objectives for domestic single-piece priority letter mail Table 22 Number of universal service providers that achieved domestic transit time targets (FSC) Table 23 Implementation of pricing principles, 2018 Table 24 Method of price regulation Table 25 Universal service providers’ complaint procedures Table 26 Access to postal infrastructure Table 27 Product scope Table 28 Application of the mandatory standards for transit time measurement Table 29 Coherence and complementarity between the Directive and other key pieces of legislation





Glossary Access points Physical facilities, including letter boxes provided for the public either on the public highway or at the premises of the postal service provider(s), where postal items, such as letters and parcels, may be deposited with or collected from the postal network. B2B Business-to-business B2C Business-to-consumer B2X Business-to-everybody (consumers, businesses, government) Bulk letters Letters that are posted in significant quantity. Note that there is no legal definition of which number of letters constitute bulk mail. Bulk mail Physical mail that is commercial in nature, prepared in large volumes and mailed at reduced postage costs. Bulk mail may consist of letters, newsletters, pamphlets, and other similar products. Bulk parcels Parcels that are prepared and sent in significant quantity, such as those mailed by e-commerce operators. Note that there is no legal definition of which number of parcels constitute bulk parcels. C2B Consumer-to-business (mainly, returns from e-commerce) C2C Consumer-to-consumer C2X Consumer-to-everybody (consumers, businesses, government) CAGR Compound average growth rate. CEN Comité Européen de Normalisation – European Committee for Standardisation CEP Courier, express and parcels Consolidator Operator that collects postal items from different senders and inserts them into the postal network for sorting, transport and delivery Clearance The operation of collecting postal items by a postal service provider Cross-border mail Mail from or to another Member State or from or to a third country D+1 Routing time where mail is delivered the first working day after posting D+3 Routing time where mail is delivered the third working day after posting Direct mail Direct mail is a communication consisting solely of advertising, marketing or publicity material and comprising an identical message, except for the addressee’s name, address as well as other modifications which do not alter the nature of the message, which is sent to a significant number of addressees. Bills, invoices, financial statements and other non-identical messages shall not be regarded as direct mail. A communication combining direct mail with other items within the same wrapping shall not be regarded as direct mail. Distribution The process from sorting at the distribution centre to delivery of postal items to their addressees. Eurostat Statistical Office of the European Communities FSC Fastest standard category GDP Gross domestic product Item of correspondence Communication in written form on any kind of physical medium to be conveyed and delivered at the address indicated by the sender on the item itself or on its wrapping. Books, catalogues, newspapers and periodicals shall not be regarded as items of correspondence. National regulatory authority The body or bodies, in each Member State, to which the Member State entrusts, inter alia, the regulatory functions falling within the scope of the Directive Package Also referred to as “packets”, packages are postal items containing goods. These can be either parcels (up to 10kg) or ‘small packages’ which are E-format items conveyed in the letter post. Postal item An item addressed in the final form in which it is to be carried by a postal service provider. In addition to items of correspondence, such items also include for instance books, catalogues, newspapers, periodicals and postal parcels containing merchandise with or without commercial value. Postal network The system of organisation and resources of all kinds used by the universal service provider(s) for the purposes in particular of: -the clearance of postal items covered by a universal service obligation from access points throughout the territory, -the routing and handling of those items from the postal network access point to the distribution centre, -distribution to the addresses shown on items. Postal services Services involving the clearance, sorting, transport and distribution of postal items Postal service provider Undertaking that provides one or more postal services PostEurop Trade association representing European public postal operators (universal service providers) Receiver Also referred to as “recipient”, it is a natural or legal person to which a postal item is addressed. It is currently not defined in the EU legal texts. Remuneration of International Mails Agreements (REIMS), INTERCONNECT Remuneration Agreement – Europe The Remuneration of International Mails Agreements is the Terminal Dues framework developed by International Post Cooperation and its members since 1999. It complements the Terminal Dues framework of the Universal Postal Union. Recently it has been complemented by INTERCONNECT Remuneration Agreement – Europe which is the first multi-lateral Terminal Dues agreement covering both letters and parcels products and focusing on e-commerce. The agreement is signed by 24 designated postal operators, including all major European designated postal operators. One of the main objectives targeted under the INTERCONNECT Remuneration Agreement – Europe was to lower the Terminal Dues level in order for postal operators to be more competitive on the e-commerce market. Reserved area The reserved area means those parts of the letter mail market where the clearance, sorting, transport and delivery within certain weight and price limits was limited to the designated universal service provider. Sender A natural or legal person responsible for originating postal items SME Small and medium sized enterprises SMMS The Sustainability Measurement and Management System (SMMS) programme is the successor to the Environmental Measurement and Monitoring Programme (EMMS) by International Post Corporation. Terminal dues The remuneration of universal service providers for the distribution of incoming cross-border mail comprising postal items from another country Transit time Also called “routing time”, is a quality indicator measuring the number of working days elapsed between the date of deposit of a postal item with an access point and that of its delivery to the addressee. Universal Postal Union The Universal Postal Union is the United Nation’s specialised agency for the postal sector. The Universal Postal Union coordinates postal policies among member nations, in addition to the worldwide postal system and is a standard setter. Universal service obligation The totality of services and conditions a universal service provider is designated to provide and respect Universal service provider The public or private postal service provider providing a universal postal service or parts thereof to every citizens within a Member State, the identity of which has been notified to the Commission VAT Value added tax 1.Introduction The EU postal services sector is a key enabler of the economy and trade, underpinning other sectors and contributing to the resilience of the EU economy. Companies of all sizes use it to build their business, supply goods and receive payments. All levels of government and public administrations rely on it for public communications. Vulnerable users and citizens in remote areas need it to remain connected to an increasingly digitalised economy. The postal services sector hence plays a key role in promoting social and economic cohesion and connecting EU citizens and businesses. In 2018 the sector employed around 1.5 million persons across the EU, among which an estimated 950 thousand in postal activities falling under the universal service obligation. However, over the last two decades, the EU postal sector has been facing significant structural changes. Digital means of communication have been replacing paper-based ones, impacting demand for letters and leading to significantly lower volumes. At the same time, the increase in online shopping (and e-commerce in general) and the possibility of having goods delivered to one’s home has increased the demand for parcels and packets delivery. Postal users’ needs today are hence different from what they were 24 years ago when the first Postal Services Directive was adopted in 1997. These developments have created challenges and opportunities for the postal sector. Article 23 of the Postal Services Directive (hereinafter the “Directive”) requires the European Commission (“Commission”) to “submit a report to the European Parliament (“Parliament”) and the Council on the application of the Directive, including appropriate information on developments in the postal services sector. The latest report was adopted by the Commission in November 2015 and concluded that the Directive was still fit for purpose. It nevertheless highlighted that close monitoring and further analysis were necessary as the postal services sector is evolving continuously and rapidly. Considering the significant changes in the postal services sector and the changing needs of postal users, the Commission announced an evaluation of the Directive in its 2020 work programme. The objective is to assess whether the Directive is still fit for purpose and responds to the present and future needs of EU citizens and businesses and will continue to do so in the foreseeable future. To this end the present evaluation examines the universal service obligation, its financing, the quality of services, designation of the universal service providers and the regulation of tariffs of universal services. It also examines the impact of the Directive on market opening and competition in the EU and national postal markets, as well as the level of harmonization achieved by the Directive. The evaluation covers developments since the adoption of the last revision of the Directive in 2008 until 2019/20. It covers all the then 28 Member States although in some instances also the European Economic Area (EEA) countries are included. On occasion information and data refers to a limited sample of Member States. The Directive has been evaluated against its general objectives to guarantee the provision of affordable, high-quality universal postal service to all users, a well-functioning and competitive internal market and the harmonisation of principles of regulating postal services. In line with Better Regulation principles, the effectiveness, efficiency, coherence, relevance and EU added value of the Directive have been assessed. 2.Background 2.1 History of the Postal Services Directive The Directive was adopted in 1997 to address the lack of harmonization of postal services at EU level which negatively impacted on cross-border communications which were vital to commercial and social life in the EU. The objectives of the EU postal policy were, on the one hand, the completion of the single market for postal services through gradual and controlled liberalisation, a higher level of harmonisation and, on the other hand, the maintenance of a reliable, affordable and good-quality postal services available to all users across the EU. This Directive hence established a common level of universal service with minimum requirements regarding: (1) the scope of the universal service (e.g., what products to be covered, minimum delivery frequency requirements and density of the access point network); (2) quality of service standards (in particular as regards transit times and reliability of services), (3) a number of tariff principles for universal service (“price regulation”); and (4) the creation of independent national regulatory authorities. An essential element of the Directive was the start of a gradual and controlled liberalisation of the market and the establishment on an internal market for postal services. The Directive provided Member States with a certain margin of discretion to adapt their domestic postal services to their own specificities. Exceptions to the minimum requirements on frequency and point of delivery were allowed for in extraordinary circumstances or geographical conditions. The next steps towards liberalisation were made by Directive 2002/39/EC, amending the 1997 Directive. It further reduced the product scope and price of services that Member States could reserve to universal service providers. In particular, it put priority on measures designed to promote market entry, continuing the gradual establishment of competition in domestic and cross-border letter markets (especially through the transparent and non-discriminatory application of special tariffs offered by incumbent postal operators to senders of bulk mail). The Directive was set to expire on 31 December 2008, setting 2009 as the target date for full market opening. A last set of amendments were adopted with the Directive 2008/6/EC to achieve full market opening. The Directive removed the area of postal services that Member States could still reserve for the universal service provider (statutory monopoly) and provided for full liberalisation. The amendment set out an agreed deadline for full market opening by 31 December 2010 for 16 Member States and 31 December 2012 for the remaining ones.

2.2 Main provisions of the Directive The below table sets out the main provisions of the Directive and explains how the provisions of the 1997 Directive have changed with the two subsequent amendments. OBJECTIVES PROVISIONS 1997 Directive 2002 Directive 2008 Directive Guarantee the sustainable provision of affordable, high-quality universal postal service to all users throughout the EU Universal postal service for all users, comprising collection, sorting, transport, and distribution at least five working days per week of: (i) postal items (e.g., letters, parcels, catalogues, newspapers) weighing up to 2 kilograms and (ii) postal packages (e.g., parcels) up to 10 kilograms (which may be increased for parcels up to 20 kilograms) as well as services for registered items and insured items in both categories. No change No change Affordable, cost-oriented, transparent and non-discriminatory tariffs for universal services. No change No change Quality of service targets (transit time) for cross-border mail (85% for D+3, 97% for D+5 for the fastest standard category of service), Member States to set compatible national targets for domestic mail. No change No change Consumer protection measures, particularly with regard to complaints and redress procedures for user complaints in the universal service. Consumer protection rules may be extended to all postal operators (not only the universal service provider). Consumer protection rules extended to all postal operators and rules to encourage out-of-court dispute resolution schemes for disputes between users and postal operators. The financing of the universal service was done by reserving an area of the business exclusively to the designated provider, (financing was limited to the extent necessary to ensure the provision of the universal service). No change Clarification that Member States may for the financing of the net cost of the universal service that represents an unfair burden use a compensation fund in addition to the use of public funds. as well as the relevant conditions (notably: interchangeability) Requirement for Member States to ensure that the universal service is guaranteed and to notify the Commission of the designated universal service provider. No change Introduction of additional options to ensure the provision of universal services: (i) by market forces, i.e. the government does not appoint any universal service provider(s), but trusts that the providers in the market place are willing to provide universal services and that they do so in the most cost efficient way; and (ii) by public procurement. Possibility to designate several universal service providers. Establish a well-functioning and competitive Internal Market for postal services Clear limits for reserved services (i.e., letter products reserved for exclusive handling by the universal service provider). Gradual reduction of the reserved area; tentative date for the full opening of the letter market. Elimination of remaining reserved area; 31 December 2010 deadline for full letter market opening (derogation granted to 11 Member States, 31 December 2012). Transparent and separate cost accounting principles to be applied by universal service providers; separate accounts for reserved and non-reserved universal services, discouraging cross-subsidies from the reserved letter services to the competitive area. No change Measures preventing discriminatory tariffs and cross-subsidization from universal services to non-universal services - - Introduction of the possibility for Member States to regulate access to elements of infrastructure or services of the universal service provider, in the interest of users and/or to promote competition. Set harmonised principles for the regulation Introduction of definitions to ensure harmonisation of concepts. No change Some definitions removed in order to adapt the open market environment. Introduction of the possibility for the European Committee for Standardisation to issue technical standards for greater inter-operability between postal networks, taking into account standardisation measures at international level such as those issued by the Universal Postal Union. No change No change Establishment of independent national regulatory authorities to ensure compliance with the Directive. No change Powers to request information and data from all postal operators (compliance with Directive and market monitoring). Intervention logic The Directive has three main objectives:(1) guaranteeing the sustainable provision of affordable, high-quality universal postal service to all users throughout the EU; (2) establishing a well-functioning and competitive internal market for postal services; and (3) harmonising principles for the regulation of postal services. These objectives are linked to a set of inputs that also correspond to given articles of the Directive. Some of the inputs may link to more than one objective: ·the definition of the minimum scope of the common level of universal service (Article 3); ·the conditions of the provision of the universal service, in particular the possibility to designate universal service providers and to grant financial compensation for those providers (Articles 4 to 8); ·the setting and monitoring of certain quality requirements for the provision of the universal service and the establishment of complaint handling procedures (Articles 16 to 19); ·the regulation of tariffs for the universal service that should be affordable, cost-oriented, transparent and non-discriminatory (Articles 12 and 13); ·the reduction of entry barriers, such as defining conditions for general authorisation and individual licences, and the requirement for Member States to ensure transparent, non-discriminatory access conditions to certain elements of the postal infrastructure or services within the scope of the universal service (Articles 10 to 12); ·the development of technical standards (Article 20); ·the creation of common minimum definitions (Article 2); ·the establishment of national regulatory authorities to ensure compliance with the objectives of the Directive (Article 22). As a result of the transposition and application of these inputs, the following outputs were expected: ·the provision of a minimum level of an affordable postal universal service offered at similar service levels to postal users across the EU; ·a universal service complying with harmonised quality requirements, and a better protection of the postal user’s interests by requiring all providers to offer transparent, simple and inexpensive procedures for complaint resolution; ·the opening of postal markets to competition by facilitating entry and expansion of alternative providers and providing for conditions to establish a level playing field; ·postal services compliant with harmonised technical standards;

·harmonised concepts; ·the improvement of national regulatory oversight. In turn, those outputs should lead to the following results: ·more efficient postal networks; full market opening would result in a more cost-efficient use of the postal networks for the provision of affordable universal services; ·wider access for users and other postal operators to the postal infrastructure; ·effective competition as full market opening would enable competing postal operators to enter the former statutory monopoly market for letter mail services and compete at level playing field; ·improved quality of postal services through the quality requirements and increased innovation (e.g., track and trace) spurred by competition and technological developments; ·an Internal Market for postal services. Finally, there are several external factors outside the remit of the Directive. These include digitisation, e-commerce and new business models. Moreover, the harmonisation in the EU following the Directive has the following broader impact: ·more social and territorial cohesion throughout the EU; ·increased postal users’ satisfaction in the EU; ·innovation and development of new business models in the EU. The figure below provides an overview of the intervention logic for the EU postal sector showing the expected sequence of general and specific objectives, inputs, outputs and the intended results and broader impact of the Directive. 2.3 The Baseline The baseline for this evaluation is the situation in 2008, the adoption of the 2008 amendment to the 1997 Directive. There are several reasons why 2008 is chosen as the baseline instead of 1997, namely: a fundamental motive for the Directive was to open up the postal services sector fully and establish an internal postal services market. That only happened as of 2008 with the complete abolition of the statutory monopoly still prevailing in Member States with part of the letter mail services being “reserved” to universal service providers. The requirements regarding the universal service obligation have not changed since 1997 and the objectives of the Directive also remain the same. Events following 2008 therefore capture the changes that the Directive has brought over time. Before discussing developments at the time of the baseline, it is necessary to consider the extent to which the key objectives from 1997 had been achieved in 2008. In 1997, postal services in many Member States were provided by inefficient loss-making postal entities with a lack of customer orientation and low and heterogeneous quality of services. Only a few Member States had abolished the letter monopoly/reserved area and opened up their letter mail segment to competition: Finland (1991) and Sweden (1992). The 1997 Directive introduced competition in a gradual and more harmonized manner in order to increase the quality of services, lower prices and encourage economic and employment growth. Following the 2002 amendment, most Member States partially opened their domestic markets by reducing the weight and price thresholds. United Kingdom (2006) and Germany (2008) proceeded to full market opening. In addition, all outgoing cross-border mail was opened to competition as of January 1, 2003. Over the period 1998 to 2007, letter volumes increased by about 0.52 percent annually. Real prices of the most commonly used letter mail service increased on average by 0.48 percent per year. This moderate price evolution changed after the financial crisis in 2008 when price increases started to accelerate. Profitability in this period improved for the wide majority of universal service providers. By 2006, 87 percent of Member States considered postal services affordable. Service quality improved considerably in some Member States between 2000 and 2003, while a few faced a deterioration of performance. By 2005, next day delivery had increased to exceed 90 percent of the mail volume for domestic priority mail in more than half of the Member States. The average quality of service remained stable between 2005 and 2008. Between 1997 and 2008, the Remuneration of International Mails Agreements played a relevant role in the substantial improvements in the cross-border quality services level. Specifically, the cross-border quality service levels (transit time) between 1997 and 2008 increased from 83.5 percent to 94.6 percent of mail being delivered on time. Regarding regulatory harmonisation, between 1997 and 2008 the number of technical standards developed by the European Committee for Standardization was only eight compared to 35 standards developed after 2008. The lacking independence of some national regulatory authorities and the absence of regulatory harmonisation prior to 2007 was reported as major constraints on the attainment of an internal market for postal services. The first 10 years of application of the Directive had therefore coincided with volume increase, improved quality of service, real price decrease and the preservation of the universal service already prevailing across the EU. The development of competition and the level of harmonisation in the internal market were, however, faulting.

Around 2008, the EU postal sector started to undergo significant and wide-ranging change. The most important drivers of change were gradual regulatory market opening, technological development which lead to the rapid growth and falling costs of other means of communication (in particular digitisation, e-mail, mobile telephony and internet), new automation technology, and new market developments with growing parcel volumes and increasingly demanding owners/shareholders of postal operators. This put increasing pressure on the postal sector operators. Although there was emerging competition in many national markets, national universal service providers were still the key players with large shares of the domestic letter mail segment. By that time, the impact of the then existing Directive on the level of competition in letter mail markets was very limited, in particular in those Member States which had not yet opened their letter mail market. The situation was substantially different for the delivery of parcels. Although parcels form part of the universal service obligation up to a certain weight limit, the parcel delivery segment had never been part of a statutory monopoly and had therefore seen the entry of a number of courier and express service operators. The parcel delivery segment was at the time already more heterogeneous and complex than the letter mail segment The impact assessment accompanying the 2008 amendment of the Directive mentioned that although some Member States had taken initial steps to redefine the universal service, EU consumers were overall satisfied with the affordability, accessibility and quality of postal services. However, due to Member States opening up their postal markets at different speeds and some implementing below the minimum obligations set by the Directive (particularly in terms of frequency and quality of service), there was increasingly a fragmented market for postal services in the EU. Moreover, the implementation of the provisions in the Directive relating to complaint and redress had not been fully satisfactory for all consumers. In practice there was still discontent about handling of postal complaints. The below table 2 sets out the expected outcome of the 2008 Directive with regard to certain main areas. The expected positive outcomes are highlighted in the table, but also the risk of facing negative ones, which is consistent with the analysis carried out in the impact assessment that preceded the 2008 amendment. The negative impacts were however deemed at the time to be less likely or less substantial than the expected positive impacts. Provision Expected outcome Abolition of the reserved area and possibility of alternative financing mechanisms (State Aids, compensation funds) Positive ·More effective competition in the letter mail segment can lead to lower prices, better quality of service and more efficient national postal operators. ·Permitting a broad range of financing mechanisms can ensure the maintenance of universal services. Negative ·Competitive pressure may lead to the incumbent limiting loss-making national universal services provided in parallel to the EU universal service obligations, which could in turn have an impact on social and territorial cohesion. Universal service scope: no modification to SMEs and consumers’ access to basic products, and existing flexibility for Member States Positive ·Citizens and SMEs can have access to basic postal products. ·Flexibility to adapt the scope of national universal service in light of market changes can lead to closer alignment of prices to costs, and in turn of users’ needs to willingness to pay for the service. Negative ·Too much, or inconsistent, specification of prices and service obligations may result in inefficient market intervention and the need for complex supervision/regulation at national level. Universal service standards: no modification in current level of minimum harmonisation (5 days/week collection and delivery frequency of postal items, and uniform tariff only permitted for consumer/single-piece items) Positive ·Can contribute to fostering efficient market entry. Negative ·In some instances may be inconsistent with the principle of “least market intervention” as it authorises ex-ante regulation on uniform tariffs where the same would probably be achieved through a commercial decision-making. Obliging national regulatory authority to identify the essential means to assess if access to infrastructure/network is necessary, and maintaining current rules on non-discriminatory access Positive ·Can ensure business and consumer protection. ·Can allow for risks of distortion to be checked at Member State level. ·Can enable transparency of access costs. ·The market place is allowed to determine the appropriate competitive model (either access to incumbent’s network or building alternative networks). ·Flexibility can allow for zonal pricing. Negative ·Downstream access tariffs may not entirely cover upstream fixed costs. ·May create some incremental costs of opening up these facilities that will need to be shared (by users). ·Lower prices offered by competitors may result in substantial savings only to higher volume mailers. 3.State of Play 3.1 Implementation of the Directive Since 2008 the Commission has initiated infringement proceedings against two Member States, Belgium and Croatia, for inaccurate transposition. Furthermore, infringement procedures were started against ten Member States for non-communication of transposition measures. All procedures were closed before reaching the Court of Justice of the EU as Member States either conformed or notified the transposition measures. Until today 11 Member States have used the possibility of derogating from minimum requirements on frequency and delivery points. 11 Member States have also departed from the minimum level of requirements regarding quality of services. Based on Article 22 of the Directive, the Commission established the European Regulators Group for Postal Services in 2010. This Group serves as a body for reflection, discussion and advice to the Commission in the postal services field. Its task is to facilitate consultation, coordination and cooperation among the independent national regulatory authorities, and between the national regulatory authorities and the Commission with a view to consolidating the internal market for postal services and ensuring the consistent application of the Directive in all Member States. 3.2 Current trends in the postal services market Size of the postal services sector Since 2008 there has been an average yearly letter mail decline of -4.9 percent in the EU (See Figure 8 in Annex 4). This decline is widespread and occurring in almost all Member States. The contraction of the economy due to the COVID-19 pandemic, where letter mail volumes dropped between -12 and -26 percent has accelerated the structural letter mail volume decline. Member States with strong e-government initiatives such as, for example, Denmark and Estonia have experienced a steeper and steadier decrease in letter mail volume per capita than those where the level of digitisation of the government is relatively lower. In contrast, parcel delivery services have been growing because of the significant increase in e-commerce. The cross-border share of parcel deliveries represents almost 24 percent of total online sales in Europe. On average, parcel delivery has grown by an estimated 9 percent per year ever since 2008. This growth notwithstanding, cross-border e-commerce delivery may still raise issues from a consumer perspective. Globally, the average growth in parcel volumes in the second quarter of 2020, during the COVID-19 lockdown, was 43 percent. The trend has continued throughout the rest of the year. At the same time, international (extra EU) mail fell by 27 percent, especially flows from China. Before the pandemic, global online sales were predicted to roughly double between 2019 and 2024, but recent trends suggest the COVID-19 crisis will push this timeline forward and a stronger growth of intra-community parcel traffic than of incoming international traffic is likely. These two major developments are expected to continue and intensify over the coming years. If the developments of the recent years continue to the same extent, the EU letter mail segment will lose around 12 percent of revenue and 32 percent in volume by 2025. At the same time, the revenue in the EU parcel segment will more than double and volumes will increase by around 46 percent. Structure of the market

The letter mail segment is highly concentrated and in certain countries there is only one single letter services provider. In 2018, 15 out of 28 universal service providers had market shares above 95 percent and only four out of 28 had market shares below 80 percent . Most of the alternative postal operators are active only on the parcel and express markets. Many are growing thanks to the dynamic competitive market. The universal service providers have much lower market shares in the parcel segment than in the letter segment, with an average around 28 percent for the period 2014 to 2018. The dynamics of the letter segment is very different. Price developments and qualityof service Source: EC postal statistics Domestic prices for universal letter mail have increased constantly in real terms since the major drop in volumes in connection with the financial crisis in 2007, but the largest increase occurred after 2014. Universal service providers adjusted their pricing strategy to keep letter mail revenues stable in an environment characterised by an accelerated volume decline. For universal service parcel delivery there was a moderate real price increase in this period. More recent information from the web tool on cross-border parcel prices covering the prices for 1400 of parcel and express services from more than 378 operators shows a marginal increase overall for parcels, and for certain operators a small price decrease between 2019 and 2020. Until 2008 service levels for letter mail had improved in terms of domestic and cross-border delivery and transit time. This was particularly evident in the case of cross-border delivery of letter mail. The percentage of letters delivered on time however started to drop right from 2008. In the case of domestic delivery of letter mail, the number of universal service providers who achieved their targets reached its maximum in 2013, when targets were exceeded for priority letters in most Member States and for non-priority mail in virtually all Member States. This number has been decreasing constantly since then. The profitability of universal service providers The postal business model essentially relies on delivering large volumes of small items. As letter mail volumes fall, the unitary cost of delivery increases. It also pushes up the cost of the universal service obligation, making universal service providers look for ways to increase efficiency and improve customer-oriented solutions. They maintain their profitability by cutting (mainly labour) costs, increasing productivity through technological innovation (for example automated sorting systems), and/or increasing prices. With only a few exceptions, letter mail operations have been profitable for universal service providers throughout the period 1998 to 2017, while profit margins have on average declined since 2007/08, with decline starting even earlier for some postal operators. With few exceptions, universal service providers report positive earnings before interest and taxes, (EBIT) margins up to 5 percent, some even higher than 10 percent (e.g., in Belgium, Cyprus, Netherlands and Portugal) in the period 2013-2016. Employment As the postal sector is very labour-intensive, with rising labour costs across Europe, significant restructuring (including job losses but also job creation) has taken place in several Member States. According to the latest available data by Eurostat, the total employment related to activities falling under the universal service obligation has been decreasing since 2011, while the number of persons employed for other postal and courier activities has been increasing, in particular since 2014. The Eurostat data suggests that the total number of persons employed in other postal and courier activities is almost equal to the number of persons employed for postal universal service activities. In other words, the job creation for parcel activities at other operators seems to compensate for the job losses at universal service providers. As regards the quality of employment, Copenhagen Economics reports that an increase in new and more flexible employment models has been observed, as well as models building on outsourcing (subcontracted workers and self-employment), which are used by the majority of universal service providers. Second, there have been changes in working conditions with the introduction of new wage structure (e.g. performance pay). More detailed information is available in chapter 1.6 (Employment). Stakeholders that responded to the Commission’s consultation have expressed mixed views about employment developments in the postal sector. While some argue that market opening has meant employment cuts at universal service providers and a deterioration of working conditions, others argue that it has also partly facilitated the creation of new jobs by new operators. Environment Between 2008 and 2020, a majority of universal service providers in the EU undertook measures to limit the negative environmental impacts of postal service provision. The most common measures implemented were measures to reduce the energy consumption of buildings, CO2 emissions of vehicles, improve the performance of the transport fleet by eco-driving schemes and use bio fuels. The 2020 Postal Sector Sustainability Report indicates that carbon efficiency of letter mail delivery has decreased over the last seven years, albeit unevenly, while the CO2 efficiency for parcels has increased. Given the fact that most of the reporting operators are EU universal service providers, this may be related to the compulsory minimum frequency of delivery of 5 days a week, which, with fewer letter mail items to deliver, may lead to inefficiencies both in terms of cost and CO2 emissions. This is a preliminary assumption that would merit to be looked into further and be substantiated by additional data. Delivery efficiency 2013 2014 2015 2016 2017 2018 2019 Target 2025 Letter mail (grams CO2 per item) 37.5 38.1 38.7 38.8 38.1 38.9 40.1 30.0 Parcel (grams CO2 per item) 539.0 495.0 485.2 474.3 466.0 481.9 496.2 431.2 Source, IPC, https://www.ipc.be/-/media/documents/public/sustainability/reports/ipc-postal-sector-sustainability-results-2020.pdf

Several challenges increasingly affect the delivery industry: ·rising parcel volumes pose a challenge on carriers regarding the carbon footprint of delivery; ·last-mile delivery contributes to congestion and local air pollution, as urban freight is responsible for up to 50% of urban NOx emissions; ·traffic is also the main cause of local noise pollution, which can cause a variety of health problems. Non-universal service providers have also increasingly acted to reduce the environmental effects of parcel delivery due to growing e-commerce. Measures focused on lowering the environmental effects of cross-border and domestic parcel delivery, mainly by improving fuel and network efficiency, and by introducing alternative vehicles and fuels. 4.Method 4.1 Short description of methodology A number of external support studies served as input to this evaluation prepared by the Commission. No modelling was carried out, but information and evidence was gathered and assessed. The present evaluation covers the time period 2008 until 2020. External studies The Commission commissioned a number of external studies, among which: ·Study on the Main Developments in the Postal Sector 2013-2016 carried out by Copenhagen Economics (Copenhagen Economics/CE (2018)). It included extensive data collection based on literature review and stakeholder consultation by means of surveys and interviews. ·Study on User Needs in the Postal Sector carried out by WIK Consult (WIK (2021)). The study looks at the changing societal and user needs related to postal services, and included a systematic review of 64 user needs surveys in 16 Member States. It also incorporated the results of a dedicated online stakeholder survey that collected 418 responses, of which 44 from regulators, 44 from operators, and 331 from postal users. It also provided a first attempt to evaluate the main provisions of the directive. ·Study on International Postal Services, Remuneration and Regulation (2011-2020) carried out by WIK Consult (WIK (2020)) focused on how the global system for terminal dues (fees that postal operators charge each other for delivery of international letters) were likely to affect the market for international postal services. ·Study on the Development of cross-border e-commerce through parcel delivery (2013-2017) carried out by WIK Consult (WIK (2019)) explored trends in the supply of and demand for delivery solutions in the context of cross-border e-commerce. These studies were presented at conferences where stakeholders could also discuss the main findings. Stakeholder consultations The Commission launched the evaluation on the Directive with the publication of the roadmap in March 2020. In total, 22 comments on the roadmap were received, which were taken into account in the following steps. The Commission also organised a stakeholder consultation, in accordance with a consultation strategy established at the beginning of the evaluation process. A 16-week online public consultation took place between 13 July and 9 November 2020. There were only 119 responses to the consultation. That puts a clear limitation to the conclusion that can be drawn from it. Evidence from the WIK (2021) online stakeholder survey has therefore been used to complement, where possible, the limited information obtained through the public consultation. The contributions and a factual summary report of the main points raised were published on the Better Regulation Portal. Other consultations included: ·meetings of the Postal Directive Committee , consisting of representatives of Member States and national regulatory authorities, which was established by the Directive; The Postal Directive Committee has discussed the review of the Directive based on specific questions tabled by the Commission at six dedicated meetings (on 3/12/2018, 3/6/2018, 3/6/2019, 4/12/2019, 6/6/2020 and 1/12/2020);

·joint contributions from the Social Partners at the European Sectorial Social Dialogue Committee for the postal sector on 6 December 2019, and on 13 November 2020. Input from the European Regulators Group for Postal Services The European Regulators Group for Postal Services advises and assists the Commission in consolidating the internal market for postal services. It also provided useful input to the consultation with annual report on core indicators for monitoring the European Postal markets, annual report on quality of services, reports on, among others, cross-subsidisation practices and network developments. Other sources The present evaluation also incorporates information on the implementation of the Directive and trends affecting the main indicators based on the following sources: ·the Commission’s postal statistics database (2014 to 2019) and the Universal Postal Union statistical data base (2008 to 2018); ·the national regulators’ statistical reports; ·previous five application reports on the implementation of the Directive; ·study on “Postal services in the EU” commissioned by the European Parliament (TRAN Committee) in 2019. 4.2 Limitations and robustness of findings The following limitations should be taken into account: ·the Commission’s public consultation did not produce the expected results in terms of participation and can therefore not be used to draw any firm conclusion, in particular with regard to user needs and satisfaction; ·the evaluation suffers from a substantial lack of quantitative data. Postal operators often keep their business related data confidential, in particular financial data or volumes of the universal service. The evidence base underpinning WIK (2021) builds mainly on qualitative research: information collection and review, desk research and stakeholder interaction. There was no quantitative work carried out, including data gathering and modelling; Moreover, the surveys and consultations are based on a limited number of responses; ·the reports prepared by the European Regulators Group for Postal Services depend on the replies and data available from national regulatory authorities. These data are often partial in coverage and suffer from diverging interpretation; ·limited information is available on the net cost of the universal service obligation; ·disaggregation of data between parcels and letters is sometimes artificial as parcels can be delivered under a letter format and are therefore counted as letters. Market data and statistics on letters and parcels is often reported on together and not separately, This affects the possibility to differentiate between the two segments; ·the data for the baseline is limited. This concerns in particular the data for cost-benefit analysis, where time series data of the indicators (relevant costs of regulators and operators) is not available; ·there are generally no quantifications (or estimates of monetary values) available as concerns societal benefits of the universal service. Publicly available data on the costs of various regulatory aspects are used in this evaluation, and opinions from stakeholders provide quantitative, where possible, as well as qualitative input on the cost amounts induced by the Directive. The Commission uses the work of the national regulatory authorities for its own data publication. However, a lack of consistent data on regular variables such as volumes, prices or employment continues to prevail. The Directive does not allow for the collection of a harmonised set of data. Further co-ordination of such data collection within the European Regulators Group for Postal Services would be desirable. The Regulation on cross-border parcel delivery services requires parcel delivery service providers to report certain key information about their activities including turnover, volumes, and staffing to the national regulatory authority where they are established. There are no similar requirements for the letter market. In addition, there are usually no quantifications available as concerns societal benefits. Such issues can partly be addressed through more regular stakeholder surveys. More detailed information on the methodology and its limitations is available in Annex 3.



5.Analysis and answers to the evaluation questions 5.1 Effectiveness Q1:Has the Directive ensured the provision of a postal universal service available at all points across the EU territory, at affordable prices and specified quality? The Directive has contributed to maintaining the provision of universal postal services nationwide in each Member State. However, in recent years, Member States have increasingly reduced the scope of the universal service and extended the scope of derogations allowed by the Directive, which indicates that requirements in the Directive are not always aligned with market expectations (i.e., expectations of users and operators). While adaptations to the scope through the use of derogations may have been an expected outcome, the increase in the extent of derogations was not. The Directive has also triggered substantial improvements in quality of service (transit time) compared to 1997, but was not effective enough to prevent a deterioration of cross-border transit time performance after the 2008 baseline. In this regard the Directive has only partly delivered on what it was expected to achieve, i.e., a permanent improvement of cross-border quality of service. While in the letter mail segment relevant price increases took place, the tariff provisions seems to have contributed to avoiding even steeper increases, ensuring cost-orientation, sustainability and affordability. Scope of minimum universal service requirements The 1997 Directive did not substantially alter the existing national requirements in relation to the universal service obligation. It simply harmonised a minimum level of universal services obligations leaving Member States with the possibility to regulate other universal services at national level (for e.g., newspapers or magazines). The level of harmonisation and the scope of harmonised products and services has not changed with the subsequent amendments to the 1997 Directive. The Directive requires that universal service obligations must evolve in response to the technical, economic and social context and the needs of users. A significant number of Member States have used the flexibility offered by the Directive by taking into account the relevant factors, not only of a geographical nature, but also those that relate to the changing needs of the public as a result of new electronic means of communication and the need to ensure the economic viability of the service to adjust the universal service obligation. This was an expected outcome stemming from the flexibility provided by the Directive. Changing user (i.e., business and bulk mailers, individual users, consolidators, receivers) needs have been the starting point for any adjustment of the universal service by Member States. Any derogation is generally preceded by an in-depth analysis of user needs carried out by national regulatory authorities (and sometimes also by the universal service provider) before it is granted, and this is followed by a careful monitoring of the implementation to ascertain that the requirements of all user groups are satisfied. The letter mail segment of the postal sector was subject to a legal monopoly until 2013, while parcel delivery has always been open to competition. The continuous decline in letter mail volumes has raised concerns about what the universal service should comprise. In some Member States this has led to changes in national postal legislation and reduced universal service obligations to reflect changing postal user needs. Product scope Basic domestic letter mail, registered mail, insured mail, basic domestic parcel post, and cross border letter mail and parcels are generally included within the universal service obligation. However, there are Member States, such as the Czech Republic, Finland or the Netherlands, where the scope is more limited and only single-piece mail and parcels are ensured as a universal service. The status of newspapers and periodicals as universal or non-universal service remains diverse among Member States. Compared to the baseline the level of heterogeneity in product scope of the universal service has remained very similar; as shown by Copenhagen Economics there have been only very minor changes in relation to the products under the universal service scope in 2008; at the same time, there is no indication that the scope will converge more among Member States. There has been a trend in recent years to reduce the scope of services ensured as universal services. The European Regulators Group for Postal Services has reported that only half of Member States ensure bulk letters (that were originally supposed to be part of the universal service) as a universal service, and in about 9 Member States direct mail falls outside the scope of universal service. A wider scope of universal services has been maintained mainly in Member States where the decline of letter mail volumes has been relatively low. The divergences in the scope of the universal service are to be expected given the country-specific differences regarding broadband coverage, digitalisation and e-government initiatives. There is no evidence or complaints that the existing divergences have resulted in any significant issues with respect to the delivery of cross-border letter mail. This is also the conclusion of WIK which finds that divergences have not caused major problems in the past. Expectations in 2008 were also that there would be a positive economic impact if Member States have the possibility to adapt the scope in light of market changes. Beyond the basic universal service, universal service providers increasingly offer an additional range of services/products that are further differentiated and addressed to specified user needs. In particular in the context of e-commerce, providers offer specific services/products for business senders which are commonplace in the market (e.g., track and trace). This development seems predominantly triggered by fierce competitive pressure in the parcel delivery segment, especially in relation to e-commerce delivery which has significantly increased during the last five years in all Member States. The intense and dynamic competition in the parcel delivery segment raises the question whether it has been necessary to keep parcel delivery in the scope of the universal service or whether postal users could have been equally served at the same (or lower) price without a universal service obligation. Available evidence suggests that the response may differ depending on the Member State (or indeed part of Member State) and depending on whether one is considering business to business parcels, business to consumer parcels or consumer sent parcels. The majority of business to business parcels and business to consumer parcels are bulk parcels (representing the vast majority of all parcels sent), while consumer sent parcels are single piece (representing only a negligible part of the overall parcel delivery segment). Available evidence suggests that the majority of businesses have had and still have many alternatives to the universal service provider for the provision of parcel delivery services, especially in recent years, and can choose from more than 10 parcel delivery operators. The average number of operators per country serving this customer segment has almost doubled compared to 2012. One study also suggests that e-commerce shoppers in a sample of eight Member States had access to parcel delivery to the home address irrespective of where they lived. Moreover, in nearly all markets the delivery prices and services levels were the same irrespective of the e-shopper’s location. One tentative conclusion to be drawn from this is that having kept business to business parcels and business to consumer parcels within the scope of the universal service may not have been optimal from an effectiveness point of view. The fact that many Member States have excluded bulk parcels from the scope of the universal service corroborates this conclusion. The question whether it was necessary to keep consumer sent parcels within the universal service obligation appears to generate a different answer. Available evidence suggests that there have been (and still are) individual consumers in some Member States, or parts of Member States, that were not aware (and may still not be aware) of the variety of parcel delivery operators available. They have therefore relied on the universal service provider for parcel delivery. There are consumers that relied on the universal service provider out of convenience, as it is the most familiar and hence the easier, "simple" option available. For all these consumers there is a good base to argue that it has been effective to have at least single piece parcels within the universal service obligation. This has also kept prices affordable as parcels that fall within the universal service obligation have benefitted from a VAT exemption and have been subject to price control under the Directive’s tariff rules. Available evidence has not allowed this evaluation to conclude on this topic. Frequency of delivery and collection Within the reference period all Member States in general complied with the minimum requirements of collection and delivery at least five days a week, bearing in mind that the extent of derogations in relation to delivery frequency has increased (see below). In 2008 11 Member States even had a six-day frequency. In 2019 only three Member States exceeded the minimum collection/delivery frequency and have a six-day collection/delivery (i.e., France, Germany and Malta). The Directive provides for two types of exceptions to the minimum requirement: first, the derogation from the five-day delivery principle for exceptional geographical circumstances and, second, one concerning the modalities of distribution, which must in principle take place at the home of any natural or legal person. Compared to 2008, the number of Member States that have granted derogations from the five day delivery frequency has remained stable while the extent of derogations related to delivery frequency has increased during this period.

# of countries Countries Notes 6 day delivery 2004 10 DE, DK, EE, ES, FR, IT, LT, MT, NL, SI 6-day delivery 2019 3 DE, FR, MT Also in AT for newspapers, in BG (only in capital) for letters Exceptions/derogations from daily delivery (2010) 11 BG, HR, EE, FR, DE, EL, IE, RO, SK, SI, SE Exceptions/derogations from daily delivery (2019) 11 BG, DK, EE, EL, FI, FR, HR, IT, RO, SK, SE Thereof exceptions/derogations due to… Mountains or island areas 9 BG, DK, EE, FI, FR, HR, EL, RO, SE Population density 6 BG, HR, IT, RO, SK, SE Low traffic volumes 2 IT, RO Cost of service 5 RO, SK, FI, DK, IT Poor infrastructure 2 BG, RO Extreme weather conditions 2 RO, EL Sources:Based on WIK (2021), European Regulators Group for Postal Services (20) 22 and (11) 19, adapted. The most prominent derogation granted until today concerns Poste Italiane. The Italian Regulatory Authority authorized an alternate delivery model for postal items within the scope of the universal service setting specific criteria regarding the areas where this model may apply. This concerned services to an important part of the population (20 million) in absolute and relative terms. While it is important to bear in mind that operators’ needs were an important driving force behind the request for the derogation the needs of users were assessed before and monitored after. According to a research in 2014, before the derogation was approved, 74.4 percent of a representative sample for the Italian population found the alternate delivery day model adequate for their needs. Moreover, the national regulator also closely monitored the gradual implementation by Poste Italiane. Sweden is also envisaging an alternate delivery model (with reduced delivery frequency for certain postal items within a geographically specified area) for 2021 which adds to models in Denmark and Finland. The study carried out by the Swedish regulatory authority before allowing PostNord to introduce its new delivery model indicated that any changes in the frequency of the delivery of letters with written content would have rather limited negative consequences. Some 60 percent of both private individuals and enterprises do not think changing the frequency of delivery to two days a week would cause them any problems at all, but almost 50% of the enterprises in rural areas are concerned about mail delays affecting their operations. It also confirmed that reliability would be more important than five day delivery for businesses and authorities, and that for small businesses, the elderly and socio-economic vulnerable groups it is important that changes are well communicated. These cases are the ones that present the most relevant and substantial derogations from the standard model of five-day-delivery. While the provisions of the Directive allow for considerable flexibility, they were intended for circumstances deemed exceptional. The ever increasing scope of and number of important derogations suggests that the requirements in the Directive are not well aligned in certain Member States with market needs (i.e., that of users and operators) and raises questions about the effectiveness of the current requirements on frequency of delivery and collection. This is even more so taking into consideration that additionally a number of Member States such as, for example, Estonia, Finland, the Netherlands and Portugal have launched initiatives in recent years to start a discussion with stakeholders on the modernisation of the universal service in the light of changing users’ and operators’ needs. The vast majority of the Member States consulted via the Postal Directive Committee indicated the frequency of delivery as the first feature of the universal service that should be more flexible and allow adaptation to national needs. From this perspective, current practice by Member States were not expected in 2008. Contrary to the letter mail segment, parcel delivery frequency and options for delivery of postal items have not been reduced but rather evolved and increased compared to the baseline. Today most universal service providers offer a number of options for delivery, such as delivery within a specific time window, evening and/or Saturday delivery, delivery at neighbors, pick-up points or/and parcel lockers. These innovative improvements are not due to regulatory intervention, but are the result of competition, consumer demand and expectations and the rapid increase of e-commerce. Density of access points The Directive states that postal services must be provided “at all points in the territory” without being explicit about how such points are to be identified. It only provides that the density of contact points must take account of the needs of users. This leaves a wide margin of discretion to Member States. Access points are used here to encompass both own post offices as well as places such as shops, petrol stations and kiosks that provide for the deposit and pick-up of letters and parcels. Compared to the overall number of access points in 2006/8 there has not been any fundamental change in the number of access points per inhabitants. In 2006 the number of postal access points in the EU was 151,821 (3.3 par 10,000 inhabitants), in 2018 the number was 169,026 (3.3 per 10,000 inhabitants). The increase in the number of access points is due to the increase in Member States and population of the EU. However, large disparities seem to exist among Member States as in 2018 this ratio ranged 1.19 postal establishments per 10,000 persons in Belgium to 12.5 in Cyprus. The increased use of franchised or sub-contracted access points is largely a response to the different demand for postal services by consumers and small enterprises which are the main users of postal access points. While, over the last four years leading up to 2019, the overall number of postal access points of universal service providers has remained fairly stable, access points with longer and different opening hours than traditional post offices are becoming more relevant, considering the increasing importance of the postal access network for parcel delivery services, in particular pick-up and returns. The postal access network is also of particular importance for e-commerce and parcel delivery services (in particular regarding pick-up and returns), which is why the European Regulators Group for Postal Services has also described the various improvements as regards access to postal services by disabled persons and has started monitoring the evolution of parcel lockers. Compared to the baseline, the users’ expectation regarding ubiquity of access for parcels and letter mail has remained largely the same. Moreover, from a service point of view, while post offices might in general offer a broader range of services than subcontractors, the latter offer more convenient opening hours (e.g., week-ends, evening) and a variety of locations (petrol stations, shopping centres). Designation of universal service provider(s) The 2008 amendment provided possible additional ways of designating the universal service provider (by way of public procurement procedures) as well as the scope for the provision of universal services (e.g., a specific geographic area). However, these new options have not been used in practice by any Member State except in limited cases where a public procurement procedure took place for the distribution of newspapers. Member States have continued to designate (by law or administrative act) a single provider for the entire national territory. While the basic decision to require universal provision for the entirety of a territory is for Member States to take, it may also be motivated by the desire to ensure uniformity of services and avoid interconnection issues. There is no sufficient evidence available to allow for a proper assessment of why the public procurement procedure has not been used by Member States, either to procure services for the entire territory of a Member State or for parts of it. This merits further consideration as it cannot be excluded that greater recourse to public procurement procedures could have contributed to increasing competition. The assessment also raises a question whether it would have been more effective to require that Member States analyse whether the designation for the entirety of the national territory is needed, appropriate and respects the principle of least market distortion prior to making any decisions on designation and the scope of designation. Quality of service regulation (transit time) Regarding cross-border letter mail services, a majority of Member States set targets for monitoring cross-border transit times following the targets set by the Directive. After 2008, the situation concerning cross-border transit time has however been continuously deteriorating. According to WIK, the deterioration of transit-time quality can be explained by several reasons, such as the effect of the financial crisis 2008 that reduced letter mail volume or the switch to electronic communication. These exogenous factors were stronger than the incentives by the Directive and the obligations/benefits under different international mail agreements as the volume decline reduced the economies of scale and scope. This negative evolution of volumes has had various effects, such as finding less costly ways of operating (for example by reducing night-shifts and using ground transport instead of flights) which in turn have led to lower transit time performance as evidenced in Figure 3 below. It illustrates how quality levels of cross-border letter mail increased following the adoption of the Directive only to diminish considerably as of 2008.





Period of volume growth Period of volume declines Period of volume growth Period of volume declines Period of volume growth Period of volume declines Period of volume growth Period of volume declines Source:WIK (2021), based on Copenhagen Economics (2018), IPC, UNEX CEN module 2018 results In any event, the actions taken by universal service providers and Member States in response to decreasing letter volumes raise doubts regarding the effectiveness of the current high quality standards for intra Community cross-border mail. It seems that for quite some while, the fastest standard category has not been aligned to user needs and market context. Regarding domestic letter mail, the Directive only requires Member States to set targets for the domestic transit time and to monitor, independently measure and publish transit time performance. This has contributed to improving significantly the transparency on the quality of service in national postal markets creating incentives for universal service operators to improve their quality of domestic services. Domestic quality targets set by Member States have been largely met by the universal service providers and stayed on a similar level since 2009 (between 80 to 95 percent for D+1 delivery, i.e., a very high target to achieve) with variations among Member States. Since 2013, the number of universal service providers that achieved their targets in the fastest standard category has diminished, but remains at a still high level,). The reasons for the decrease in the last years are the same as discussed for cross-border letter mail, the continuing volume decrease and progressive change in users’ needs. Although most national regulatory authorities publish monitoring results, not all of them are in a position to sanction the universal service providers if quality targets are not achieved. However, the Directive has not been fully effective in ensuring consistent high-quality service levels for domestic letter mail. Effective sanction powers for regulators may be one possible solution to address lack of quality compliance. Complaint procedures Information on complaints issues in 2008 is limited and cannot be compared with the analysis the European Regulators Group for Postal Services undertakes today. According to a 2008 study undertaken by Ecorys postal users were fairly negative about the processing of complaints by universal service providers. In its 2019 Report on complaint handling, the European Regulators Group for Postal Services confirmed that national regulatory authorities are now in most cases competent to handle (external) complaints procedures. Furthermore, the majority of Member States had requirements in place for providers to publish information regarding complaint procedures, compensation schemes and dispute resolution. In recent years, the number of Member States where, in addition, alternative (out-of-court) dispute resolution mechanisms are available to consumers, has continuously been increasing (now in 25 Member States). The European Regulators Group for Postal Services has also devised a quality indicator based on the publication of the number of complaints received and the number of resolved/unresolved complaints (both for letters and parcels). There have been relevant improvements in relation to the situation in 2008 (when the complaint procedures were strengthened in the Directive), particularly regarding monitoring and transparency of such complaints. However, there are still certain Member States where measuring of complaints and publishing complaints is not carried out. Complaint procedures can therefore be said to only have been partially effective throughout the reference period. While the overall number of consumers that responded to the Commission’s public consultation was low, the majority are of the view that the complaint handling procedure of the provider was not at all or only to some extent easy to find and simple to file, and almost all of the ones who responded state that it is very much free of charge or inexpensive but many state that the procedure was not at all effective in addressing the matter and not at all fast. Only a third of the regulators that responded to WIK’s online survey fully agree that the Directive has increased consumer protection in their country, and only 15 percent of the operators completely agree (47 percent of regulators and 54 percent of the universal service providers partly agree) . Application of tariff principles for universal services: affordability, cost orientation, transparency and non-discrimination. The definition and application of the cost orientation principle is left to Member States. Different approaches have been followed by referring either to individual tariffs, and/or services, or the full scope of universal service or a specific selection of products (i.e., a product basket). The principle of cost orientation for universal service tariffs was also meant to limit price increases. As illustrated in Annex 4 (1.4 Prices), retail letter mail prices in the EU have increased annually by 2.7 percent on average in real terms between 2008 and 2019. The 20 gram letter of the fastest standard category used in this comparison is an item that is often used by individual users and hence representative for the development of prices. The role played by the application of the cost-orientation principle in limiting price increase is difficult to demonstrate given the absence of a counterfactual scenario where an uncontrolled monopoly would set its prices freely or where universal service providers would operate in a competitive environment. However, this principle has contributed to keeping price levels limited to the level of cost increases. This is confirmed by recent decisions of regulators to reject price increases proposed by the universal service providers. Furthermore, the application of the cost-orientation principle to the wholesale tariff that providers pay one-another for the delivery of cross-border items cannot effectively be made as the provisions in the current Directive do not provide the Commission and national regulatory authorities with any oversight instruments to verify the tariffs established under bilateral and multilateral agreements. Given that the volumes of cross-border e-commerce deliveries continue to rise this seems all the more important. The principle of transparency, has been effectively applied across the EU since 2008. The majority of Member States require universal service providers to publish tariffs online, while the German de facto universal service provider reports tariffs to the national regulatory authority. In practice though it appears that all universal service providers (including Germany) publish at least single-piece tariffs online. Finally, the principle of non-discrimination implies that users who post under similar conditions cannot be treated differently with respect to tariffs or other associated conditions. This means in practice that discounts are subject to publications and operators have done so.

National regulatory authorities ensure that the affordability requirement is respected by applying a price regulation mechanism. This can take the form of ex-ante price approval or ex-ante price cap regulation (i.e., setting a maximum for prices, taking into account several factors such as costs, inflation and efficiency gains). Notwithstanding the limitations of the cost orientation principle in the current market context, it seems that expenses related to universal postal services only constitute a negligible part of today’s household expenses. As today, less than 6 percent of all letter mail is generated by individual users, it can thus be assumed that from the average number of letters per capita of 108 (ranging from 306 in Finland to five in Bulgaria) only approximately 7 letters on average will be originating from individual users. While there is no comprehensive study over time how the expenses for postal items have developed, every five years the German statistical office assesses expenses of private households in Germany. In 2008, they were EUR 5.52 for letters and parcels, in 2013 they were EUR 4.79 EUR and in 2018 they were EUR 4.44. This would indicate that over time the share of postal expenditure in overall household expenditure is very minor, and that tariffs of the universal service have remained affordable compared to 2008. The results of the German assessment can also be applied mutatis mutandis to the other Member States. Furthermore, on average the corresponding time that an industrial worker needs to work to buy a standard letter is 3.66 minutes in the EU (ranging from 1.33 minutes in Malta to 8.37 minutes in Italy). The assessment of the affordability criteria for parcels will depend on the number of parcel items sent (most items are again originating with business senders, particularly in e-commerce) as well as household income. Given the substantially higher tariffs of parcels these might not always be affordable for everybody. As far as business, including small and medium sized entities are concerned, they generally benefit from discounts and in many cases from individually negotiated tariffs that are much lower than single piece prices. Moreover, individually negotiated tariffs do not fall under the universal service obligations relating to pricing principles. Taking the above elements into account it can be said that in general the Directive has been effective in ensuring the provision of affordable universal services. This is confirmed by the majority of providers and regulators surveyed by WIK: 82 percent and 89 percent of them respectively consider that overall the Directive has effectively ensured the universal services. The Postal Directive Committee also confirmed recently that the objectives of the Directive in relation to the universal service had been achieved. Most Member States however argue for the need to adjust the universal service and in particular to give more flexibility to Member States in view of the changed user needs and to need to keep the universal service sustainable. In the Commission’s public consultation 77 percent of all respondents agree completely or partially that the Directive has ensured the universal service to all citizens across the territory. Cross-subsidisation Cross-subsidisation occurs when high prices from one set of services allows a postal operator to make sufficient profits to set low prices on another set of services. Not all forms of cross-subsidisation are considered harmful from a regulatory point of view. For example, uniform prices for universal postal services cross-subsidises services in remote and rural areas using the higher profits generated from the services in densely populated and metropolitan areas. Moreover, revenues from non-universal services can be used to finance universal services. Harmful cross-subsidisation may occur when a postal operator charges excessive prices in market segments where it has market power, and uses the revenues it generates from such prices to engage in predatory pricing in other market segments (i.e., revenues from the universal service are used in the non-universal service market segments). Before the full opening of the postal services market, cross-subsidisation was allowed as a source of financing the universal service. As the 2008 amendment was motivated by fully opening the postal service sector to competition, the Directive strengthened and clarified the requirement that universal service prices shall be cost-oriented (provisions on tariff principles) and adapted the provision on the transparency of accounts (cost allocation) to prevent harmful cross-subsidisation from taking place. This also provided national regulatory authorities with the appropriate tools to monitor for and detect such cross-subsidisation. Most national authorities also have such tools through national law, and in most Member States harmful cross-subsidisation is considered illegitimate. While national regulatory authorities use various tools in practice to monitor, detect and prevent harmful cross-subsidisation, in response to a survey carried about by the European Regulators Group for Postal Services in 2019, it emerged that among the tools used the application of the cost allocation principles, and prices through the tariff principles are the most important ones. When found to be harmful, national regulatory authorities have powers to address cross-subsidies (e.g., imposing modifications, or penalties or price changes). In 2019 only five of the national regulatory authorities surveyed by the European Regulators Group for Postal Services, considered that there was a need to regulate further with regard to preventing harmful cross-subsidisation. Possible additional tools comprised: monitoring system especially for ex-post regulated services, prohibition of cross-subsidisation in regulation, more competences in price control and single piece tariff regulation. Some raised the concern that given that competition in the letter mail segment is generally declining and prices increasing, the risk of using pricing strategies to skim the letter mail segment and cross-subsidisation should still be a priority concern. In the last ten years, a few national regulatory authorities have conducted ex-post investigations into specific cases of cross-subsidisation. Q2: Has the Directive contributed to the achievement of an internal market for domestic and cross-border postal services? Has the Directive stimulated fair and effective competition in the internal market for postal services? Contrary to the expectations underlying the full market opening that took place in 2008, the Directive has only contributed marginally to the achievement of an internal market and stimulating effective competition in postal services. Competition in the letter mail segment has remained very limited and the incumbent universal service postal operators have kept their strong market position. The most important reasons for the lack of competition appear to be high entry costs, the need for substantial economies of scale and scope and strong volume declines that do not stimulate market entry. In addition to these factors, Member States rely on very different models regarding access to the postal network, and there also seems to be only limited transparency as far as access conditions are concerned. The Directive does not contain provisions regarding the transparency of access conditions and it also does not provide national regulatory authorities with tools allowing them to set terms for access to the network thereby providing for the possibility to introduce ex ante competition. As the parcel segment was already fully open to competition in 2008, the description of the effects of the Directive in the following section refers to the (formerly reserved) letter mail segment. The conditions governing the provision of universal postal services were harmonised at a minimum level so that postal operators would be able to operate in all Member States to provide all postal services (i.e., not just the already liberalised parcel services but also the letter mail services) under conditions that are similar. In 2008 a few Member States had already opened the letter mail segment using different approaches. For example, Sweden had opened up parts of its letter mail market in 1993 and Germany fully opened its letter mail market in 2008. Estonia, the Netherlands and the United Kingdom accomplished full market opening before the 2011 deadline established by the Directive. By 2013 all Member States had fully opened the letter mail segment. From a purely legal perspective, the minimum conditions for establishing an internal market were in place and were implemented by Member States. However, it is clear that full market opening did not result in effective competition in the EU letter mail segment. With very few exceptions the universal service incumbents have increased or maintained their position across national letter mail segments. In certain Member States, the universal service provider is de facto the only operator in this segment such as in Ireland, Finland, the United Kingdom and Cyprus. In other Member States the universal service provider has a market share ranging from 95 to 99 percent (Austria, Belgium, Denmark, Hungary, Lithuania, Portugal, Latvia, Malta, Poland and Slovakia). In Italy and the Netherlands the takeover of competitors was authorised in 2020 and as a result the universal service providers now holds shares equivalent to around 95 to 100 percent. Overall market shares have remained relatively constant over the period 1998 to 2018. In Member States where the liberalisation of letter mail markets happened in a time of increasing letter mail volumes (i.e., shortly before the financial crisis of 2008), competitive entry materialised. In this regard, the price level also played an important role: in Germany the price level was relatively high at the time of market opening in 2008 and this had at the time allowed competitors to offer attractive prices. Other factors that have offered competitors opportunities to compete include the low quality of postal services of the universal service provider. These were very specific market conditions that created opportunities to enter the postal services market. Where some form of competition on the letter mail segment has occurred over the last 12 years, it has taken mainly the form of access competition whereby alternative operators collect postal items from senders and insert them in the universal service provider’s network for delivery, and end-to-end competition where letters are collected, processed and delivered directly to the recipient in direct competition with the incumbent operator without the necessity to use the incumbent's network, or access competition in addition to end-to-end competition. The requirement in the Directive to give all postal operators access to “elements of postal infrastructure” has only been complied with by 18 Member States. In only 16 Member States competitors actually rely on the possibility to use the incumbent’s network. In most Member States where network access exists, it is interpreted as requiring the incumbent to offer bulk mail tariffs to bulk mailers, competitors or intermediaries in a transparent and non-discriminatory way. This has amongst others resulted in a certain specialisation in the postal market in that it has opened up possibilities for providers to specialise in specific mail preparation activities (such as pre-sorting of postal items and consolidation of postal items from different senders). National experiences have been mixed and in the most prominent case of imposed access regulation by the national regulatory authority (namely the United Kingdom) end-to-end competition did not, even after a long period of such regulation, materialise at substantial levels.

Even if there are clear limitations to the comparison between the postal sector and the telecommunications sector, as telecommunications are largely technology based while much of the postal business (letters) relies heavily on staff and offers very few opportunities for the development of new types products and services, the one lesson from the telecommunication sector that appears directly relevant for the postal sector is that clear and transparent access provisions arguably contributed to competitive entry. There may be a base to argue that increased transparency on access and procedural rules in this regard might have the potential to constitute a non-invasive and pro-competition instrument. The Directive currently does not provide national regulatory authorities with tools allowing them to set terms for access to the network thereby providing for the possibility to introduce ex ante competition. The Directive also does not provide them with the tools to handle dispute resolution for situations when commercial negotiations break down between access seekers and the universal service provider. To the extent national regulators have such tools (i.e., in Germany and the Netherlands), this depends on national postal legislation and on the type of responsibility granted to each regulatory authority at domestic level. In its Opinion on the review of the regulatory framework for postal services, the European Group of Regulators for Postal Services is strongly advocating that a continued focus on promoting competition in the letter mail market is relevant and that national regulatory authorities should have the powers to intervene ex-ante in case of actual or potential competition problems. This entails sufficient powers to define, monitor and analyse markets and, in particular, the competence to impose regulatory obligations such as access to the network and its components. In a 2020 Report on the suitability of regulatory tools to promote competition, the European Group of Regulators for Postal Services also analysed 29 different regulatory tools used to promote competition in various different industries and sectors (including the postal sector) to see what national postal regulators thought could be effective for promoting competition. The Report concluded that most of the known and common regulatory tools such as access obligation, price regulation, non-discrimination and transparency are still perceived as suitable and effective tools to promote competition in the postal sector, even considering the transitioning postal market. At the same time it should be recognised that in a period characterised by digitisation and declining letter mail volumes, it is becoming more difficult for smaller rivals to enter on a sustainable basis. Universal service providers have a long term experience, may enjoy market power, well-structured (adaptable) networks and are often equipped with higher bargaining power and in certain circumstances the ability to set strategic prices for non-universal services. Very few competing operators can maintain a market presence in this situation. Regarding access to international postal networks, a recent report of the European Regulators Group for Postal Services on interconnection models and access illustrate that in a cross-border context there seems to exist a plurality of options available to postal operators to access international postal networks (e.g., direct access, bilateral/multilateral agreements etc.). This suggests that the current provisions of the Directive do not constitute a barrier to cross-border competition even though it does not actively promote competition. In response to the Commission’s public consultation, the vast majority of regulators along with the majority of associations representing non-universal service postal operators stated that there is no or insufficient competition in the single piece letter mail segment. In contrast, around half of the universal service providers that responded to the public consultation are of the opinion that there is significant co