GREEN PAPER ON THE DEVELOPMENT OF THE SINGLE MARKET FOR POSTAL SERVICES (Communication from the Commission)
Date: 1992-06-11
Institutions: European Commission
Subjects: cross-border dimension, customers, delivery, post office financial services, postal charges, postal service, provision of services, regulatory policy, single market, universal service

COI\1r\1ISSION  OF  THE  EUROPEAN  CO:Mt\1UNITIES 

COM(91)  476  final 

Brusseis.11 

June  19q2 

GREEN  PAPER 

ON  THE DEVELOPMENT OF THE SINGLE MARKET 

FOR  POSTA:L  SERVICES 

(Communication  from  the Commission) 

&ecutive Summary 

page 1 

EXECUTIVE SUMMARY 

1.  NATURE OF DOCUMENT/CONSULTATION 

A  Green Paper is  a discussion  document.  This Green  Paper seeks to launch the debate 
on the Community's postal sector.  To do so, it has the following objectives: 

to provide a thorough-going analysis of the current situation; 

to  discuss  what  should  be  the  Community  objectives  for  its  postal  sector  and 
whether action is needed a Community level to achieve them; 

and  (assuming  that  action  is  needed)  to  discuss  how  these  objectives  could  be 
achieved and suggest detailed options. 

During  the  preparation  of  the  Green  Paper,  there  was  extensive  consultation, 
particularly with  the governments  of the  Member States.  The publication  of the Paper 
will  now  launch  a  period  of even  wider consultation  during which  the  Commission will 
seek  the  views  of all  interested  parties  - including  representatives  of Member  States' 
governments,  of users  (from  individual  consumers  to  large  users),  of operators  (both 
public and private) and of trade unions.  All parties will  be invited to consider whether 
the  analysis  of  the  current  situation  is  correct;  whether  the  Community  objectives 
proposed  are  the  right  ones;  and  whether  the  means  proposed  for  achieving  these 
objectives  will  be  effective.  Detailed  discussion  of  the  potential  economic  and  social 
impact of possible proposals will also be encouraged. 

The Community's postal sector is subject to many forces.  Technological change in other 
sectors has promoted indirect competition with  postal services.  Within  the sector, there 
has  been  a  sue.cession  of competition  cases.  Most  importantly,  customer  needs  are 
evolving, probably more rapidly than in  the past.  Action therefore seems imperative.  If 
it  is  not taken,  events will  significantly alter  the  landscape,  and  it  will  become less  and 
less easy for  the Community to play its full  part in  helping to shape a  sector which  is  so 
important to its commercial and social life. 

Following  the  consultation  period,  the  Commission  will  define  its  views  on  what 
proposals  should  be  made  in  the  light  of views  and  information  received  during  the 
consultations.  If appropriate,  it  will  then  draw  up  draft  directives.  This  implies  that 
there is  much detailed work still  to be  undertaken.  The Green  Paper is  not intended to 
contain  this  level  of detail,  but,  as  is  appropriate  for  a  discussion  document,  presents 
options at a more general level. 

In  determining what  action  should  be  taken,  the  central  guiding  principle  must  be the 
maintenance  and,  if appropriate,  the  development  of a  universal  postal  service  which 
would  provide  collection  and  delivery  facilities  throughout  the  Community,  at  prices 
affordable  to  all  and  with  a  satisfactory  quality  of  service.  Then,  provided  that  the 
universal service is secured, there should be as much freedom of choice as possible. 

2.  THE COMMUNITY'S POSTAL SECTOR 

The  Community's  postal  sector  contributed  nearly  1.3%  of  its  GDP  (in  1989),  and 
presently employs 1. 7 million of its citizens.  Some key facts are as follows: 

page2 

Size: 

Executive Summary 

Including postal financial  services, the postal operators (public and private 
together) generate some ECU 59 billion annually. 

Mail  services  are provided  both  in  the  reserved  area  (letters)  and  in  the 
non-reserved  (parcels  and  express  services).  Trends  in  all  three products 
are moving upwards (in the range of 3% to 10% growth per year). 

The ratio of turnover between services provided by postal administrations 
and  those  provided  by  private  operators  is  approximately  60:40.  The 
postal  administrations'  share  of the  Community's  GDP  is  similar  to  that 
held  in  the  US  by  the  postal  administration  there;  the  share  of private 
operators, however, is substantially smaller in Europe. 

Segments: 

The sector's  most  important  market  segments  are  publishing,  mail  order 
and  direct  mail, 
the  latter  two  being  responsible  for  0.7%  of  the 
Community GDP.  Other  major segments include business  in  general and 
the financial services sector (including banking) in  particular. 

Operators: 

Postal administrations provide services  in  all  three product areas - letters, 
express  and  parcels.  The private  operators are located  mainly  in  parcels 
and express, but also offer some cross-border letter services (sometimes in 
apparent contravention of national postal law). 

The non-reserved areas, particularly express,  are very  profitable.  Letters, 
where they  are profitable,  are priced  on  a  cost-plus basis;  however,  many 
printed paper services are heavily loss-making. 

3. WHY SHOULD THE COMMUNl1Y BE INVOLVED? 

The  analysis  of the  existing  situation  identifies  several  problems  that  would  seem  to 
justify action  at Community level.  Many of these problems concern the variability of the 
quality of universal services.  Resolution of such quality related problems is paramount. 

Broadly, there are five  areas of concern for the Community. 

3.1 

Present lack of harmonisation 

The  operations  providing  universal  service  in  each  Member  State  have  evolved 
independently,  with  the  effect  that  there  are  now  many  operational  differences 
between  them.  This  can  lead  to  significant  problems  for  mail  passing  between 
Member States;  it  can  also  have  opportunity costs.  Most  obviously,  the  universal 
service  is  defined  differently  in  different  Member  States  with  the  effect  that 
customers cannot  confidently post  similar  items  in  different  Member  States.  But 
problems  of inter-operability  are  to  be  found  at  every  level.  At  a  more detailed 
level,  for  example,  problems  are  encountered  because  of  lack  of  harmonised 
norms for envelopes. 

3.2 

Single market implications 

Service performance  for  universal  service varies  greatly between  different  postal 
administrations.  There  are  some  Member  States  where  next  day  delivery 
performance reaches the generally accepted target of 90%; in others, performance 
is  15%/16%;  in  others,  performance  is  between  the  two  (but  tending  more 
towards  the  former).  The  generally  accepted,  but  not  very  demanding,  service 

Executive Summary 

page3 

target for cross border mail is  delivery within  three working days;  performance is 
currently  measured  at  an  average  of only  about  40%,  and  with  large  variations 
between different postal administrations. 

Such  variations  have  particular  implications  for  the  parts  of  the  Community's 
commercial and social life that are heavily reliant on postal services.  Large senders 
of mail  include  the  key  sectors  of  publishing,  financial  services,  mail  order  and 
advertising.  For  such  sectors  variability  in  performance  of universal  services  can 
lead to  market distortions.  For example,  it  would be much  easier to sell insurance 
services to  an  individual  household  in  a  Member State where  the  performance is 
90%  rather  than  in  another  Member  State  where  it  is  16%.  It  would  be  more 
difficult  for  a  company  to  market  its  products  by  post  in  another  Member  State 
than for a company that was based in that Member State. 

For example,  it does not appear co-incidental that one of the  Member States with 
very  poor  service  has  a  mail  order sector  only  one fifth  the  size  of that  of other 
Member  States  of  comparable  economic  size.  This  harms  the  mail  order 
companies'  prospects.  Significantly,  it  also  reduces  the  choice  of  the  individual 
consumer.  Those who  live  in  regions disadvantaged  by  poor postal services - and 
there are many - are therefore isolated not jusL  from  the personal contact that can 
be achieved through  mail, but also  from  the services that can be  provided  through 
the mail. 

Such disruptions of the Single Market affect  not only senders but also  receivers of 
mail.  If a  particular  region  of  the  Community  is  thought  to  have  an  unreliable 
universal service, companies (such as mail order) would be less interested in  trying 
to  market  their  products  there.  The  consumers  (as  potential  recipients)  would 
therefore have a reduced choice. 

3.3  Cross-border service performance 

In  terms  of  number  of days  taken  from  collection  to  delivery,  a  domestic  item 
takes an average of 1.5  to 2.0 working days, whereas a cross-border item within the 
Community takes  an  average  of 4.0  days.  A  small  part of the gap  is  explained  by 
operational practicalities. But the larger part of the gap cannot be explained in  this 
way.  This  quality gap  effectively creates a  "frontier effect".  Expressed  in  terms of 
achievement against  target, service performance for  postal  administrations' cross 
border letter services within  the Community  has been  measured  at  an  average of 
40%. Behind this average lie significant variations. 

This level  of service probably falls  short of user expectations.  Indeed,  it  should  be 
mentioned that expectations are likely to become more demanding as cross-border 
communication increases.  Relative  to  user  demand,  static performance  would  be 
perceived  as  worsening.  In  fact,  there  appear  to  have  been  some  improvements, 
stimulated  particularly  by  the  introduction  of  competition  (partly  in  breach  of 
exclusive  rights  which  were  unenforced).  However,  there  is  still  a  large  gap 
between  the  targets  which  postal  administrations  set  themselves  (either  on  the 
basis of customer requirements or operational practicalities) and the reality. 

Since effective cross-border communications are essential for  the commercial and 
social  life  of the  Community,  it  is  a  matter  of  concern  to  the  Community  that 
service performance for cross-border services is so unreliable. 

page 4 

Executive Summary 

3.4  Divergences 

One of the objectives of the Community is to ensure its own cohesion. Clearly, the 
wide divergences to be found  in the postal sector do  not help  the achievement of 
this  objective.  Postal  services  provide  one  way  in  which  messages  can  be 
communicated and goods delivered. Any regions having unreliable postal services 
would  therefore  be  disadvantaged  in  terms  of their  communications  and  goods 
delivery  requirements.  Both  individuals  and businesses  in  such  regions could  feel 
cut off. 

This  situation  of  being  disadvantaged  would  not  be  only  by  reference  to  their 
requirements. It would  also  be relative to the conditions enjoyed  in  other parts of 
the Community where the performance of the universal service was more reliable. 

3.5  Market distortions 

In  the comments on  the single  market implications,  it  was  noted  that divergences 
in  the  service  levels  of universal  services  in  different  regions  can  contribute  to 
market distortions in  other sectors which  are reliant on  postal services.  However, 
it  should  be  noted  that  there  are  potential  market  distortions  within  the  postal 
sector itself.  These could be caused in  the case of the scope of the exclusive rights 
being larger than was  needed to ensure the universal service.  In  order to prevent 
such  distortion,  Member  States  therefore  need  to  apply  the  proportionality 
principle.  An  example  of  its  application  is  the  transferring  by  some  Member 
States of direct mail to the non-reserved area. 

4.  OBJECTIVES OF GREEN PAPER 

The Green Paper therefore has two general objectives. 

to  provide  a  status  report  of  the  present  situation,  identifying  problems  and 
challenges that already exist and those that are likely to arise in  the future; 

to discuss possible solutions and responses, and to lay out detailed options for  the 
future,  the  final  proposals  needing  to  be  defined  after  the  consultation  process 
which will follow publication of the Green Paper. 

The paper is therefore divided into four sections: 

1. 

2. 

3. 

4. 

description of the postal sector (Chapters 2-6 ); 

summary of problems and challenges (Chapter 7); 

possible solutions to the problems and challenges (Chapter 8); 

policies that are proposed (Chapter 9). 

It  must  be  emphasised  that  the  Green  Paper  is  a  discussion  document.  Naturally,  it 
represents  the  views  of  the  Commission  as  at  the  present  moment,  and  after  some 
extensive  consultation  with  Member  States  and  certain  other  interested  parties. 
Publication  of the  Green  Paper  will  start  a  period  of wider  consultation  to  which  all 
interested  parties  will  be  invited  to  contribute.  After  this  consultation  period,  the 
Commission  will  need  to  draw  up  its  proposals,  taking  account  of  the  contributions 
received. 

Executive Summary 

page5 

5. 

POLICY FUNDAMENTALS 

It is  agreed by  everyone that the absolute policy fundamental  is  the  need  to  ensure the 
continuation of the universal service, and thus to ensure that the postal administrations' 
public  service  mission  is  carried  out  in  good  economic  and  financial  conditions.  The 
main  concrete  meaning  of  this  universal  service  requirement  is  that  there  should 
continue to  be a  postal service  available  throughout  the Community,  both  for  national 
services within a Member State and for cross-border services linking two  Member States. 
This  universal  service  must  be  provided  at  an  affordable  price,  have  good  quality  of 
service  and  be  accessible  to  everyone.  Then,  provided  that  the  universal  service  is 
secured, there should be as much freedom of choice as possible, as far  as it  respected, in 
accordance with the principle of subsidiarity, the pursuit of the public service mission. 

Naturally,  the  Green  Paper  needs  to  discuss  these  policy  fundamentals,  as  well  as  any 
subsidiary  objectives,  in  the  context  of Community  legislation  and  policy.  As  well  as 
considering  the  implications  of  the  single  market,  it  must  also  take  into  account  the 
possible  implications  of both  political  and  economic  union. 
It should  also  discuss  the 
application of the relevant articles of the Treaty of Rome. 

6.  GENERAL OPTIONS 

There  are  certain  general  options  as  means  to  achieving  these  broad  objectives. 
(Naturally,  the  implications  of taking  no  action  should  also  be  considered.)  In  broad 
terms, there are two paths - that of liberalisation and that of harmonisation. 

The sector is already significantly liberalised - about 50% of the revenue generated in the 
sector relates to non-reserved services.  The present position  results  from  a  longer-term 
trend  to  open  the  market,  and  the  Green  Paper  options  seek  further  ways  to  ease 
restrictions.  By  contrast,  levels  of harmonisation  (by  reference  to  possible  Community 
objectives)  are  rather low.  As  a  result,  the  Community  has  a  postal  sector  with  many 
divergences - not  only  regulatory,  out also  in  terms of such  important customer aspects 
as access, service provided and tariffs. 

Possibilities  for  reform  can  be  approached  by  first  considering  the  extreme  options  of 
complete  liberalisation  and  of  complete  harmonisation.  These  two  options  are 
effectively at opposite ends of a  spectrum of different possible scenarios.  The option of 
taking no action  at  all  should  also  be examined.  The last  option  to  be  discussed  is  that 
which  seeks  an  equilibrium  combining  the  benefits  of both  progressive  opening  of the 
market  and  selective  harmonisation.  Within  this  option  many  variants  exist;  some  of 
these are discussed below at Paragraph 6.4. 

6.1 

Complete liberalisation 

The  normal  market  condition  is  that  of  the  free  market.  However,  complete 
liberalisation  of the postal  sector would  lead  to  the loss  of the  universal  service, 
certainly at  prices affordable  to all.  Initially,  there were  a  few  proponents of this 
solution.  Now,  nobody  seriously  believes  that  the  universal  service  imperative 
would be met if there was complete liberalisation.  Certainly, no private operators 
seem interested  in  providing a  standard  letter  service to  all  parts of any  national 
territory. 

page 6 

Executive Summary 

6.2 

Complete harmonisation 

If it was intended to have a postal sector that was completely harmonised, it would 
be  necessary  to  have  a  single  operational  body 
that  such 
harmonisation  was  implemented.  Such  an  operator  - effectively  a  single  postal 
administration covering all  the Community - would  have overall responsibility for 
all  aspects  of  what  was  considered  to  be  the  public  administration  part  of  the 
Community's postal sector. 

that  ensured 

Total  harmonisation  would  imply  the  same  tariff  being  applied  throughout  the 
Community,  as well  as  the same access conditions and the  same levels  of service. 
A  single  tariff  (for  which  there  appears  to  be  no  demand)  would  cause 
overwhelming problems.  It would  also  be impractical,  demanding cross-subsidies 
of massive  proportions.  (Tariffs presently vary  by  as  much  as  a  factor  of three.) 
Central co-ordination  of policies relating to areas such  as  marketing or personnel 
would  be  likely  to  lead  to  an  over-rigidity  which  could  not  respond  to  local 
conditions.  Further,  the  implementing  body,  the  single  postal  administration, 
would be a costly additional overhead. 

In  summary,  complete  harmonisation  would  lead  to  many  restrictions  ,  but  few 
benefits.  Further, it should be emphasised that nobody is now asking for the single 
operational body that would be needed to implement harmonisation at this level. 

6.3 

Status quo 

If this  theoretical  option were to  be  exercised,  the  result  would  be  a  widening of 
the gap between  already very divergent  positions,  and,  in  view  of what was  noted 
at  Paragraph 3,  make  more difficult  the proper functioning of the Single  Market. 
This would  lead  to  a  "two-speed"  Europe in  postal services.  In  short,  the Single 
Market  in  postal services  would  not  be achieved,  with  significant  indirect  effects 
on  other sectors particularly served by  postal services.  It would  also  probably not 
be the appropriate response to the implications of political and economic union. 

6.4 

Equilibrium: further opening of market/strengthening of universal service 

This option  accepts that in  order to ensure the universal service it  is  necessary to 
have  some  restriction  of  the  free  market.  This  would  be  in  the  form  of  the 
establishment of a  set of reserved  services that confer some special and  exclusive 
rights on national postal administrations.  However, the scope of the reserved area 
must be strictly proportional to the universal service objective.  At the same time, 
the  regulatory  control of part  of the  market  (reserved  services  granted  to  ensure 
universal service) would  make possible certain  harmonisation  measures to  ensure 
that the universal service operates effectively in  all twelve Member States. 

Each  Member  State  already  reserves  certain  services  in  order  to  achieve  a 
universal service objective; but the scope of such reserved services is  usually larger 
- sometimes  significantly  - than  is  necessary  to  meet  the  objective.  Further,  the 
actual  objective  (including service performance)  must  be achieved  in  practice.  In 
addition,  there  are  gains  to  be  obtained  from  simply  clarifying what  is  reserved 
and what is  not. 

It is proposed that there should be a Community definition of the universal service 
that should  be provided  throughout  the Community.  This  definition  has  not  yet 
been drawn  up.  However,  it  is  possible to  indicate how  the market should,  under 

Executive Summary 

page  7 

this  option,  be  partially  liberalised  without  threatening  the  universal  service 
objective. 

Under this option of seeking equilibrium, certain services should be removed from 
the reserved area (if, indeed, they presently form part).  These are express services 
and  publications.  (Parcel services  are  already  liberalised  in  all  twelve  Member 
States.)  Based  on  the  analysis  that  has  been  made  to  date,  the liberalisation  of 
cross-border letters and, a priori, of direct  mail  would  also  be envisaged.  In both 
cases, it will be necessary to ensure that the appropriate regulatory control systems 
are  in  place  to  prevent  such  liberalising  measures  leading  to  circumvention  of 
legitimate exclusive rights of reserved service providers.  Particularly in  the case of 
direct  mail,  it  will  be necessary fully  to  analyse  the economic  implications for  the 
universal service of such a liberalisation measure. 

The  liberalisation  process  ought  to  be  implemented  in  a  gradual  manner. 
It 
should take into account the necessary phases for  adaptation  in  order to  maintain 
the  economic  and  financial  balance  needed  for  the  provision  of  the  universal 
services. 

For the services which  remain as potentially reserved  - which would  broadly cover 
personal  and  business  correspondence  - it  would  be  possible  to  establish  clear 
limits that indicated the precise scope of the reserved area.  These limits would  be 
defined in terms of weight and price. 

It  should  be  emphasised  that  if any  Member  State were  concerned  that  specific 
proposals might prejudice its universal service objective,  it could consider applying 
a  more restrictive solution,  provided that  it was  still proportional  to  the objective 
and conformed to Community law. 

Turning to the harmonisation  measures  to be implemented  in  parallel  with  these 
liberalisations,  they  must  spring from  the  fundamental  Community objective that 
there should  be a  universal  service  of sufficient  quality  and  at  affordable  prices. 
As  mentioned  above,  there  is  not  yet  a  Community  definition  of  the  universal 
service  required  across  the Community.  It  seems  clear  that  such  a  definition  is 
needed  and  that,  when  drawing  it  up,  potential  users  - including  consumer 
representatives  -
However,  certain  harmonisation 
requirements are already clear. 

should  be  consulted. 

Universality  implies  easy access,  and  this  is  presently  often  not  the  case.  Given 
the  present  divergences  in  service  performance,  some  harmonisation  would  be 
needed in  this respect also.  Tariffs appear to be generally affordable;  however,  in 
certain cases,  the tariffs do not  reflect  the costs, and such  tariff-setting,  as  applied 
by  the  postal  administrations,  could,  in  the  long  term,  jeopardise  the  economic 
viability  of  the  universal  service  network.  Further,  it  is  right  that  the  postal 
administration should be able to use the universal service network to provide non 
mandatory services, but at present there are no common rules for this. 

These  present  and  future  problems  indicate  that  harmonisation  measures  for 
universal services are appropriate in the following areas: 

access: 

rules should be the same for  all users meeting the same conditions;  for 
the  access  needs  of  other  service  providers  (either  other  postal 
administrations  or  private  operators),  there  may  need  to  be  specific 
technical measures to ensure inter-operability; 

page8 

Executive Summary 

service: 

tariffs: 

standards should  be  set  for  all  universal seivices;  performance should 
be  measured  by  a  common  system  that  accurately  reflects  users' 
experience of the seivice; results should be published; 

prices  for  each  service  should  be  related  to  the  average  costs  of that 
seivice;  present  differences  in  tariff structures  should  be  reduced  in 
order to diminish present market distortions. 

These  harmonisation  measures  could  be  implemented,  considering  that  basic 
customer requirements would be likely to be very similar in  each Member State. 

7. 

PROPOSED SCENARIO 

The  last  option  is  the  preferred  scenario  since  it  finds  the  appropriate  balance. 
It 
combines  gradual  opening  of  the  market  with  the  implementation  of  harmonisation 
measures to  meet Community objectives.  It will  therefore ensure  the universal  service 
under proper conditions, whilst  providing optimum  freedom  of choice for  users.  It will 
be noted that there is no single solution,  but  rather a  set of measures which  provide the 
common structure needed.  Each proposal is therefore part of a  coherent whole;  at  the 
same time individual proposals do respond to certain specific problems. 

In  summary,  the Green  Paper considers  that  the  universal  service  objective  can justify 
the establishment of a  set of reserved seivices, which would  help  to ensure the financial 
viability of the universal service network.  In this way, the public service mission, which is 
and will remain a feature of universal postal services, would be guaranteed.  The scope of 
the  reserved  seivices,  which  would  confer  some  special  and  exclusive  rights  on  the 
universal  service  provider,  should  be  directly  proportional  to  the  objective.  The 
universal  service objective would  thus be secured, and there would  be as much  freedom 
of choice as possible for potential users. 

It  should  be  mentioned  that  some  advance  comments  have  been  received  on  recent 
drafts  of the options.  On  the basis  of these  comments,  it  seems that  there could  be  a 
consensus on  the general orientations.  However, there appear to be certain points that 
cause concern  to  some  interested parties.  These points seem  to relate  to  the  need  for 
adaptation  periods  and  also  to certain  liberalisation  proposals,  such  as  for  direct  mail, 
intra-Community  cross-border  mail  and  international  mail.  The  debate  during  the 
consultation  period  that  will  follow  the  publication  of  the  Green  Paper  may  well 
concentrate  on  such  points.  However,  the  balance  of the  whole  set  of policy  options 
presented should be considered. 

It should be emphasised that this broad option of further market opening combined with 
strengthening  the  universal  service  could  itself  be  implemented  in  a  number  of ways. 
The intention is  that the main remaining choices will  be made in  the light  of the debate 
that  will  follow  the  publication  of the  Green  Paper.  More  detailed  work  will  thus  be 
needed before implementation.  Much of this will involve discussions with user groups in 
order to identify their requirements in  more detail,  particularly with  regard to the ways 
in  which  they  may  need  greater  freedom  of  choice.  As  mentioned,  a  Community 
definition  of the  universal service  is  required.  Further analysis  is  also  required before 
the weight and price limits for the reserved area can be defined.  Service thresholds for 
the  universal  seivices  need  to  be  agreed.  More  detailed  work  is  also  required  to 
implement the principle that tariffs should be related to average costs. 

However,  even  though  this  more  detailed  work  remains  to  be  undertaken,  the  set  of 
policy  options  is  presented  in  the confidence  that  the common  structure proposed,  by 

linking  liberalisation  and  harmonisation,  would  ensure  the  universal  service  and  give 
optimum freedom of choice. 

The  main  policy  objectives  for  the  Community•s  postal  sector  are shown  in  the  table 
overleaf: 

page  10 

Executive Summary 

1. 

TO 

ENSURE  PROVISION  OF  UNIVERSAL  POSTAL  SERVICE  THROUGHOUT  THE 

COMMUNITY  AT  PRICES  AFFORDABLE  TO  ALL  THROUGH  THE  ESTABLISHING 

(INASMUCH  AS  IT  WAS  NEEDED  IN  MEMBER  STATES  INDIVIDUALLY)  OF  A  SET  OF 

RESERVED SERVICES  WHICH WOULD  CONFER SOME SPECIAL AND  EXCLUSIVE RIGIITS, 

IN ORDER TO MAINTAIN THE RESOURCES  NECESSARY  FOR THE UNDERTAKING  OF THE 

PUBLIC  SERVICE  MISSION  IN  GOOD  CONDmONS;  AT  THE  SAME  TIME,  CONSISTENT 

WITH  THIS  OBJECTIVE,  TO  HA VE  THE  LARGEST  POSSIBLE  PART  OF  THE  SECTOR 

OPERATING IN  FREE COMPETITION. 

2. 

TO HAVE  COMMON  OBLIGATIONS  FOR THE  UNIVERSAL  SERVICE  OPERATORS  OF THE 

COMMUNITY  IN  RESPECT  OF  THE  SPECIAL  AND  EXCLUSIVE  RIGHTS  GRANTED  TO 

THEM  BY  THE  RESERVED  SERVICES  IN  ORDER  TO  ENABLE  THEM  TO  PROVIDE 

UNIVERSAL  SERVICES,  IN  PARTICULAR  WITH  REGARD  TO  THE  QUALITY  OF  SERVICE 

PROVIDED. 

3. 

TO  MAKE  ANY  NECESSARY  EFFORTS  TOWARDS  COMMUNITY  COHESION  THROUGH 

APPROPRIATE HARMONISATION MEASURES. 

These main policy objectives therefore treat general regulatory issues,  the obligations of 
the  reserved  service  provider  and,  thirdly,  the subjects  of harmonisation  and  cohesion. 
These are in  turn  translated  into detailed options under three headings,  each relating to 
one of the main policy objectives: 

Part I: 

GENERAL REGULATORY ISSUES 

Part II: 

OBLIGATIONS OF UNIVERSAL SERVICE PROVIDERS 

Part III: 

HARMONISATION AND COHESION 

These  options  are  put  forward  in  the  confidence  that  they  would  have  a  very  positive 
effect  on  the  Community's  postal  sector  - on  all  customers,  large  and  small,  and  all 
operators, public and private.  In short, they will create a  dynamic single market in postal 
services. 

Executive Summary 

page 11 

PART I:  GENERAL REGULATORY ISSUES 

I.  ESTABLISH A SET OF UNIVERSAL SERVICES 

The key social requirement for postal services  is  the  maintenance of the  universal service. 
Universal  service  without  any  conditions  about price  can  be  provided  in  the  competitive 
(non-reserved)  sector.  But,  in  order for  the  service  to  be  at a price  affordable to  all,  it is 
necessary to  have sufficient economic returns to scale.  These can only be achieved through 
the  granting  of some  special  and  exclusive  rights  - hence  the  need for  reserved  services. 
(Although  it  is  possible  for  there  to  be  more  than  one  reserved  service  provider  in  each 
Member State,  this is  unlikely; for the sake of simplicity,  all the proposals refer to  only one 
reserved service provider - assumed to be the postal administration - in each Member State.) 

2.  DEVELOP THE DEFINITION OF UNIVERSAL AND RESERVED SERVICES 

Detailed work  is  still  needed before  such  a  Community definition  of the possible  set of 
reserved services  can be made.  Throughout this analysis,  the objective  will  be  to  seek the 
least restrictive solution.  Conditions in  some Member States may permit the scope  of the 
reserved  services  there  to  be  less  than  the  set defined  at a  Community  level,  but always 
consistent  with  the  objective  of ensuring  universal  service.  Whatever  the  result,  the 
definitions must be such as to  distinguish clearly between what is in  the reserved area  and 
what in the non-reserved area .. 

3.  ENSURE  COMPATIBILITY  OF  OTHER  MEMBER  STATE  COMMITMENTS 

WITH COMMUNITY LEGISLATION AND POLICIES 

As with all sectors,  efforts need to be made to reduce the possible tensions between,  on the 
one hand,  Community  law  and policies  and,  on  the  other,  potential  obligations  arising 
from other conventions or treaties that Member States may have signed 

4. 

SEPARATE REGULATORY AND  OPERATIONAL FUNCTIONS 

In order to ensure that the  user's interests are  best served through  the  impartial treatment 
of all  operators,  it  is  essential  that  regulatory  and  operational  functions  should  be 
separated  The independence of the regulatory function  will better enable it to achieve the 
best balance between public and private operators,  and between reserved and non-reserved 
service providers.  It  will monitor the effectiveness of the reserved services,  in  tenns of the 
service  provider  both  maintaining  a  good  universal  service  and  meeting  its  other 
obligations shown  below at  Proposals  5,  6 and 8.  If the situation  arises,  it  will  need to 
consider what  action  may  be  necessary  in  the  case  of performance  failing  short  of the 
obligations. 

page 12 

Executive Summary 

PART II:  OBLIGATIONS OF UNIVERSAL SERVICE PROVIDERS 

5.  ACCESS CONDITIONS TO UNIVERSAL SERVICES TO BE SAME FOR ALL 

The rule  must be equality of treatment of users  (customers)  of universal services.  Within 
this  rule,  it  is  recognised  that  customers  have  varying  requirements  and can  co-operate 
with  universal  service  providers  to  varying  extents.  This  is partly  a  function  of size,  but 
particularly of the ability to prepare mail in  ways that are beneficial to the postal operation 
of the universal service provider,  thus allowing the latter to off er discounts. 

6.  TARIFFS OF UNIVERSAL SERVICES TO BE RELATED TO AVERAGE COSTS 

The  guiding  principle  should  be  that  tariffs  should  be  related  to  average  costs.  The 
consistent application  of this 'principle  is  the  best guarantee of the financial soundness of 
the postal services.  Cross-subsidies  can  be permitted across geographic areas in  order to 
allow  the  perequation  tarifaire  and from  the  non-reserved  area  to  the  reserved  area. 
There could also be cross-subsidies from  the reserved to the non-reserved area if they were 
necessary  to  assure  the  universal  service  and  if they  were  compatible  with  competition 
rules.  With  these  exceptions,  in  order  to  ensure  fair  treatment  for  all,  cross-subsidies, 
whether from  one service to another or,  because of discounts, from  one group of customers 
to another, should be minimised and phased out. 

7.-

INTER-ADMINISTRATION COMPENSATION TO REFLECT DELIVERY COSTS 

The  existing system  of charging  between postal administrations  (called  terminal dues)  is 
not cost based,  leading to significant distortions between remuneration and actual delivery 
costs  incurred  The  same  principle  of basing  on  tariffs  on  costs  should  apply  to  the 
financial compensation system between postal administrations .. 

8. 

SERVICE  STANDARDS  FOR  UNIVERSAL  SERVICES  TO  BE  SET  AND 
PERFORMANCE MONITORED 

The  justification  for  establishing  a  set  of  reserved  services  is  based  on  the  social 
requirement for  universal service.  The  actual service performance  is  the ref ore  crucial  in 
ensuring that the social requirements are  met.  Standards the ref ore  need to  be set for the 
universal  services,  performance  monitored  and  control  systems  put  in  place. 
It  is 
important  to  note  that  such  standards  are  only  thresholds  - universal  service  providers 
should still try to have a performance higher than the standards. 

Executive Summary 

page 13 

PART III:  HARMONISATION AND COHESION 

9.  HARMONISATION APPROPRIATE WHERE BENEFICIAL TO CUSTOMERS 

The  more tangible  the  benefit for the  consumer,  the stronger the case for hannonisation. 
The  clearest  benefits  would  seem  to  be  gained  from  some  hannonisation  of access 
conditions  and  from  hannonisation  of seTVice  standards  and  perf onnance  monitoring 
(described above at Proposal 8 ). 

10.  COHESION ASPECTS TO BE TAKEN INTO ACCOUNT 

It is  important always to keep in mind the need to ensure that the Community throughout 
has an  effective postal sector  that properly  meets  the postal  needs  of the  whole  of the 
Community.  Most  of  the  improvements  necessary  can  be  gained  through  better 
management.  However,  some capital investment could be  needed,  which,  particularly in 
less favoured regions,  could entail a significant financial burden. 

page  14 

Executive Summary 

page  15 

page  16 

Contents 

page  17 

Summary Table of Contents 

CHAPTER  1. 

Introduction 

CHAPTER 2. 

The  Postal  Sector 

CHAPTER 3. 

The Postal  Regulatory Environment 

CHAPTER 4. 

Commercial Aspects 

CHAPTER 5. 

Economic and Operational Aspects 

CHAPTER 6. 

Social Aspects 

CHAPTER  7. 

Existing Situation: The Problems and the Challenges 

CHAPTER 8. 

Discussion of Possible Solutions 

CHAPTER 9. 

Policy Options 

ANNEXES 

GLOSSARY 

page  18 

Contents 

Full Table of Contents 

CHAPTER 1: 

INTRODUCTION 

CHAPTER 2: 

THE POSTAL SECTOR 

1.  GENERAL 

2. 

IMPORTANCE TO COMMUNITY 

3. 

CUSTOMER TRENDS 

4. 

SERVICES PROVIDED 

5. 

PRESENT LEGISLATION 

6. 

ECONOMICS 

7. 

EMPLOYMENT 

8. 

COMMUNITY DIMENSION 

CHAPTER 3: 

THE POSTAL REGULATORY ENVIRONMENT 

1. 

INTRODUCTION 

2. 

TERMINOLOGY 

Contents 

page 19 

3. 

EXISTING MEMBER STATE  LEGISLATION 

3.1 

3.2 

3.3 

3.4 

GENERAL 

LEGAL STATUS OF POSTAL ADMINISTRATIONS 

SCOPE OF RESERVED AREAS 

DEFINITION OF SERVICES 

3.5  MAIL PREPARATION  BY INTERMEDIARIES 

3.6 

3.7 

3.8 

3.9 

POSTING AND  DELIVERY BY SELF 

HYBRID SERVICES 

CROSS-BORDER  MAIL 

SPECIFICS OF NATIONAL LEGISLATION 

4. 

REGULA TORY STRUCTURES 

4.1 

4.2 

4.3 

SEPARATION OF REGULATORY AND OPERATIONAL FUNCTIONS 

RESPONSIBILITY OF REGULATOR 

RESPONSIBILITY OF OPERATOR 

5. 

INTERNATIONAL REGULATORY DIMENSION 

5.1 

UNIVERSAL POST AL UNION  (UPU) 

5.2 

GENERAL AGREEMENT ON TARIFF AND TRADE  (GATT) 

5.3 

CONFERENCE  OF 
ADMINISTRATIONS  (CEPT) 

EUROPEAN 

POSTAL 

AND 

TELECOMMUNICATIONS 

6. 

THE COMMUNITY REGULATORY  DIMENSION 

6.1 

6.2 

6.3 

TREATY OF ROME 

APPLICATION OF COMPETITION  RULES 

TREATY OF ROME AND UPU CONVENTION 

6.4  OTHER COMMUNITY POLICIES 

CHAPTER 4: 

COMMERCIAL ASPECTS 

1. 

INTRODUCTION 

2.  MARKET OVERVIEW 

page 20 

Contents 

3. 

CUSTOMERS 

3.1 

3.2 

CUSTOMER REQUIREMENTS 

PROPENSITY TO USE SERVICES 

3.3  MARKETS 

3.4 

SEGMENTS 

4. 

SERVICES AND OPERATORS 

4.1 

4.2 

4.3 

LETIERS 

PARCELS 

EXPRESS 

5. 

FINANCIAL FIGURES 

5.1 

PRESENT POSITION 

5.2 

TRENDS 

6. 

SERVICE  FEATURE - ACCESS 

6.1 

6.2 

PRIVATE OPERATORS 

POSTAL ADMINISTRATIONS 

7. 

SERVICE FEATURE - QUALITY OF SERVICE 

7.1 

NATIONAL QUALITY 

7.2 

CROSS-BORDER QUALITY 

8. 

TARIFFS 

8.1 

8.2 

8.3 

BASIC TARIFFS 

PRICE STRUCTURES 

DISCOUNTS 

8.4 

CONCESSIONARY RATES  (PREFERENTIAL TARIFFS) 

9. 

EFFECT OF SINGLE MARKET 

9.1 

9.2 

9.3 

9.4 

GENERAL ECONOMIC EFFECTS 

CUSTOMER STRATEGY 

CUSTOMER EXPECTATIONS OF POSTAL SERVICES 

PARTICULAR  EFFECTS ON  POSTAL OPERATIONS 

Contents 

page 21 

CHAPTER 5: 

ECONOMIC AND OPERATIONAL ASPECTS 

1. 

INTRODUCTION 

2. 

UNIVERSAL SERVICE PROVISION 

3. 

POSTAL OPERATION - GENERAL DESCRIPTION 

3.1 

SELLING OF SERVICE 

3.2 

COLLECTION 

3.3 

3.4 

3.5 

3.6 

3.7 

OUTWARD SORTING 

TRANSPORT 

INWARD SORTING 

DELIVERY 

OTHER 

4. 

CROSS-BORDER SERVICES 

4.1 

OUTWARD MAIL 

4.2 

INWARD MAIL 

5. 

COSTS 

6. 

PROFITABILITY AND TARIFF-SETTING 

6.1 

6.2 

6.3 

PEREQUATION TARIFAIRE 

ACCOUNTING 

PREFERENTIAL TARIFFS 

7. 

FUNDING 

7.1 

7.2 

CROSS-SUBSIDIES 

CENTRAL FUNDING 

8. 

TERMINAL DUES 

9. 

REMAIL 

9.1 

9.2 

9.3 

A-B-C REMAIL 

A-B-B REMAIL 

A-B-A REMAIL 

10. 

INVESTMENT AND TECHNOLOGY 

10.1  TECHNOLOGY 

10.2 

INVESTMENT - POSTAL ADMINISTRATIONS 

10.3  PRIVATE OPERATOR  INVESTMENTS AND OPPORTUNITIES 

page 22 

Contents 

CHAPTER 6: 

SOCIAL ASPECTS 

1. 

INTRODUCTION 

2. 

EXTERNAL CUSTOMER ASPECTS 

2.1. 

2.2. 

PRESENT REQUIREMENTS 

PRESENT SERVICES 

2.3.  NEW CUSTOMER REQUIREMENTS 

2.4.  COMMUNITY DIMENSION 

3. 

EMPLOYMENT 

3.1. 

PRESENT CONDITIONS 

3.2. 

EMPLOYMENT DEMAND 

3.3. 

TRENDS  IN  PERSONNEL POLICIES AND WORKING CONDITIONS 

3.4. 

TRAINING 

4. 

THE CHALLENGE 

CHAPTER 7: 

EXISTING SITUATION: THE  PROBLEMS AND THE CHALLENGES 

1. 

INTRODUCTION 

2. 

THE CUSTOMER'S PERSPECTIVE 

2.1 

2.2 

2.3 

2.4 

2.5 

DEFINITIONS 

ACCESS 

SERVICE 

TARIFFS 

CUSTOMER SATISFACTION 

3 

THE OPERATOR'S PERSPECTIVE 

Contents 

page 23 

3.1 

3.2 

3.3 

3.4 

3.5 

JURIDICAL 

ACCESS 

QUALITY OF SERVICE 

TARIFFS 

EMPLOYMENT 

3.6 

TECHNICAL 

4. 

THE NATIONAL REGULATOR'S  PERSPECTIVE 

4.1 

4.2 

RESERVED AREA 

OBLIGATIONS OF UNIVERSAL SERVICES 

5. 

1992 IMPACT 

6.  WHAT HAPPENS IF  NOTHING IS DONE? 

7. 

THE COMMUNITY'S PERSPECTIVE 

7.1 

7.2 

7.3 

7.4 

7.5 

7.6 

7.7 

7.8 

7.9 

REGULATORY /OPERATIONAL SPLIT 

DEFINITION OF UNIVERSAL SERVICE 

SCOPE OF RESERVED AREA 

APPLICATION OF RESERVED  SERVICES RIGHTS 

ACCESS CONDITIONS 

SERVICE PERFORMANCE 

TARIFFS 

HARMONISATION 

COHESION 

7.10  LONGER-TERM ISSUES 

CHAPTER 8: 

DISCUSSION OF POSSIBLE SOLUTIONS 

1. 

INTRODUCTION 

2. 

NEED FOR ACTION  AT COMMUNITY LEVEL 

3. 

COMMUNITY OBJECTIVES 

3.1 

BASIC PRINCIPLES 

page 24 

Con.tents 

3.2 

IMPLEMENTATION 

4. 

DETERMINING THE RESERVED  AREA 

5. 

DELIVERY AND POSTING  BY SELF 

5.1.  DELIVERY BY SELF 

5.2. 

POSTING  BY SELF 

6.  MANDATORY SERVICES 

6.1 

MANDATORY SERVICES AT COMMUNITY LEVEL 

6.2  MANDATORY SERVICES AT  NATIONAL LEVEL 

6.3 

FINANCING 

7. 

NEW SERVICES 

8. 

CROSS-BORDER MAIL 

8.1 

8.2 

8.3 

INTRA-COMMUNITY MAIL 

INTERNATIONAL MAIL 

OTHER ISSUES 

9. 

SCOPE OF RESERVED  SERVICES - PARTICULAR  ISSUES 

9.1 

9.2 

9.3 

9.4 

PROBLEMS OF DEFINITION 

SLOWER  POST AL STREAMS 

ELECTRONIC COMMUNICATION 

MAIL PREPARATION 

10.  PROPOSED CRITERIA 

10.1 

MEDIUM TERM 

10.2 

SHORTER TERM 

10.3 

LONGER TERM 

11.  COMPATIBILITY OF POSTAL LEGISLATION WITH  COMMUNITY TREATIES AND POLICIES 

12.  THE  ROLE  OF THE REGULA TORY BODY 

13.  UNIVERSAL SERVICE OBLIGATIONS -ACCESS 

13.1 

PUBLICATION OF POSTING CONDITIONS 

13.2 

CONTRACT CONDITIONS FOR  LARGE CUSTOMERS 

13.3  MAIL PREPARATION 

13.4 

ACCESS FOR  PRIVATE OPERATORS 

13.5 

ACCESS FOR  OTHER  POSTAL ADMINISTRATIONS 

14.  UNIVERSAL SERVICE OBLIGATIONS - SERVICE ST AND ARDS 

14.1 

STANDARDS SETTING 

14.2 

PERFORMANCE MONITORING 

14.3 

CONTROL 

15.  UNIVERSAL SERVICE OBLIGATIONS -TARIFFS (INCLUDING TERMINAL DUES) 

15.1 

RELATIONSHIP TO  COSTS 

15.2 

SUBSIDIES 

15.3 

TERMINAL DUES 

16.  NON-RESERVED SERVICES 

16.1 

PRICE 

16.2 

OTHER 

17.  POSSIBLE AREAS  FOR  HARMONISATION 

17.1 

ACCESS CONDITIONS/CONTRACT TERMS 

17.2  QUALITY OF  SERVICE 

17.3 

TARIFF STRUCTURES 

17.4 

CUSTOMER INTERFACE 

17.5  OPERATIONAL 

17.6 

EMPLOYMENT 

18.  COMMUNITY COHESION 

19.  POLICY IMPLEMENTATION 

20.  POSTAL FINANCIAL SERVICES 

21.  OTHER ISSUES 

21.1 

SINGLE POSTAL ADMINISTRATION 

21.2 

COMMON TARIFFS 

21.3 

COMMON STAMPS 

page 26 

Contents 

CHAPTER 9: 

POLICY OPTIONS 

INTRODUCTION 

PART I: 

GENERAL REGULATORY ISSUES 

PART II: 

OBLIGATIONS OF UNIVERSAL SERVICE PROVIDERS 

PART Ill: 

HARMONISATION AND COHESION 

Contents 

ANNEXES 

page 27 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

10. 

11. 

12. 

13. 

14. 

15. 

16. 

OVERVIEW OF POSTAL SERVICES 

THE POSTAL SECTOR IN  STATISTICS 

MAIL OPERATIONS AND NETWORKS 

SUMMARY OF LEGAL SITUATION IN  MEMBER STATES 

COMMUNITY TEXTS ON  POSTAL SERVICES 

UPU CONVENTION - KEY ARTICLES 

QUALITY OF SERVICE 

TERMINAL DUES 

RE MAIL 

POSTAL OPERATORS' CODES 

POSTAL EQUIPMENT INDUSTRY 

POSTAL ELECTRONIC MAIL 

CULTURAL MAIL 

TARIFF ISSUES 

INTRA-COMMUNITY MAIL 

DISCUSSION OF CRITERIA TO DEFINE RESERVED AREA 

GLOSSARY 

page 28 

Contents 

Chapter 1: Introduction  (Revised version 3- 25/03/92) 

page 29 

CHAPTER 1: 

INTRODUCTION 

A  Green Paper is  a discussion document.  This Green Paper on Postal Services is  published as 

the basis for  discussion  of what changes need to be made to the Community's postal sector in 

order to achieve the Single Market in postal services. 

In  co-operation  with  Member  States,  the  Commission  has  invested  a  significant  amount  of 

time and  effort  in  the preparation  of this  paper.  This  investment  is  appropriate  because  of 

the  importance  of  the  postal  sector  to  the  commercial  and  social  well-being  of  the 

Community.  The Single Market can only function with good communications and distribution 

channels.  Effective postal services have an essential part to play in  providing these channels. 

An  analysis  of today's  postal services  in  the  Community shows  a  sector  with  many  tensions 

and divergences.  After  1992,  if nothing were to  be done, these problems would  increase to  a 

level that would be incompatible with the objectives of the Single Market. 

The  fundamental  difficulty  is  that  there  is  presently  no  Community  approach.  The  Green 

Paper is  the first  step to  resolving this.  It presents policy  options, when  implemented, would 

help to give the Community the effective postal services that it  requires. 

In order to  arrive at the policy options,  the present situation needs to  be analysed  in  detail to 

determine what  the  important  issues  are.  Possible  solutions  then  need  to  be discussed,  and 

proposals  made.  Some  readers  of  the  Green  Paper  may  be  less  familiar  with  the  postal 

sector, and so the analysis is preceded by  a general introduction to the sector. 

To prepare the Green Paper, the Commission has  received information and opinions from  all 

the  Member  States.  The  postal  administrations  have  also  contributed,  as  have  trade 

associations representing the larger private operators.  Some user groups have also given  their 

views. 

In  addition,  several  reports,  some  initiated  by  the  Commission,  have  helped  the 

preparation of the paper. 

A  few words are appropriate concerning mention of Member States in  the paper.  In all cases, 

the English name is used.  When the Member States are listed in tabular form,  the order used 

follows  the  Community  practice  of  an  alphabetic  order  using  the  names  in  the  native 

language.  Specifically  regarding  Germany,  it  should  be  noted  that  all  figures  relate  to  the 

Federal Republic pre-unification. 

page 30 

Chapter 1:  Introduction 

Chapter 2:  The postal sector 

page 31 

CHAPTER 2: 

THE POSTAL SECTOR  - BRIEF DESCRIPTION 

1.  GENERAL 

Postal  services  provide  one  way  in  which  messages  can  be  communicated  and  goods 

delivered.  They therefore play a  vital role  in  modern society, and will  continue to  do so. 

Good  postal  services  are  an  engine  for  economic  growth;  poor  postal  services  have  a 

debilitating effect, both economically and socially. 

However,  the  role  played  by  postal  services  will  change  as  society's  requirements  for 

communicating  messages  and  having  its  goods  delivered  change.  Demand  for  postal 

services  will  be  affected  by  the  competition  from  other  communication  media  and 

delivery channels.  It will  also  depend on society's view  of the quality  of service provided 

by  postal services. 

2. 

IMPORTANCE TO COMMUNITY 

In  the  EC,  mail  services  of the postal  administrations  and  private  operators  combined 

generate an  estimated  annual  turnover  of some  ECU  46  billion,  postal  administrations 

contributing  ECU  26  billion  and  private  operators  ECU  20  billion. 

Postal 

administrations  also  have  counter  operations  and  financial  services  which  generate  a 

further  ECU  13  billion. 

In  total,  therefore,  the  turnover  of  the  Community's  postal 

services is ECU 59 billion - or 1.3% of the EC's Gross Domestic Product (GDP). 

The Community's  mail  order  and  direct  mail  industries,  which  are closely  linked  to  the 

postal  services,  generate  a  further  ECU  26.4  billion  and  ECU  6.4  billion  respectively. 

Together, this is 0.8% of the Community's GDP. 

Combining these  figures  with  those  of the  revenue  of the  postal  operators  themselves, 

the  share  of the  GDP  is  2.0%  (allowing  for  some  overlap  in  the  revenue  generated). 

This figure  does  not  take  into  account  the commercial value  of the  postal services.  An 

effective  postal  infrastructure  is  not  only  an  objective  in  itself,  but  also  necessary  to 

support commerce  and  administration.  Mail  volumes  and  revenues  have  been  growing 

consistently  in  recent  years,  certainly  keeping  up  with  the  growth  in  the  Community's 

GDP. 

It  should  also  be  remembered  that  postal  services  bring  benefits  which  cannot  be 

quantified  in  financial  terms.  They  are  an  important  means  by  which  individuals  can 

page 32 

Chapter 2:  The postal sector 

communicate  with  each  other,  or  receive  information.  Because  of  their  universal 

coverage,  postal  services  make  a  significant  contribution  to  the  social  cohesion  of  the 

Community. 

Put simply, postal services are a vital part of the Community's economic and social life. 

3.  CUSTOMER TRENDS 

The average EC citizen receives 260 mail pieces annually, the greater proportion of them 

generated by business or other organisations. 

In  terms  of  general  use  of  postal  services,  more  than  80%  of  mail  is  generated  by 

business or other organisations.  Table  1 shows the approximate composition of senders 

and  recipients  of  letters;  it  indicates  that  more  than  half  the  items  are  delivered  to 

individuals.  In  a  very  real  sense the "customer"  of a  mail  service  is  the  recipient  of the 

item as well as the sender. 

Table 1: 

Letters users matrix 

TO 

ORGANISATION 

INDIVIDUAL 

FROM 

ORGANISATION 

35% 

45% 

INDIVIDUAL 

10% 

10% 

Source: 

CEC Estimation (1990) 

The  postal  requirements  of  the  "organisation-to-organisation"  sector  may  contract 

somewhat  as  a  result  of new  communication  technologies.  However,  total  volumes  are 

likely to remain stable as a  result of growth in  other sectors,  particularly the  business-to 

individual sector (and the individual-to-business mail thus stimulated). 

At a  more detailed level, some market sectors are especially dependent  on mail services. 

As their name implies,  mail order (part of the distribution/sales sector)  and  direct  mail 

(a  form  of  advertising)  rely  heavily  on  them.  Other  sectors,  such  as  publishing  and 

finance, are also significant  users.  In some cases  - particularly that  of publishing - usage 

Chapter 2:  The postal sector 

page33 

varies between  Member States because of the different tariff policies applied.  All three 

sectors are forecast to continue to grow. 

It  is  important  to  note that  customer  (user)  perceptions of the efficiency  of the  postal 

service will  affect the kinds of use for which postal services  may be thought appropriate. 

If a  customer  in one country is  almost certain that a  business communication will  arrive 

next day,  he may well  use the ordinary letter post for sending such a  message.  However, 

a customer  in  another country  may perhaps not  have  the same degree  of confidence in 

the service, and will choose another medium by which  to send a similar message. 

4. 

PRESENT LEGISLATION 

No  two  Member  States  have  postal  legislation  exactly  alike.  However,  there  is  a 

progressive  trend  throughout  the  Community  to  separate  regulatory  and  operational 

functions.  Thus  postal  administrations  should  be  simply  public  opera tors.  The 

regulatory  powers  are  vested  in  a  government  body,  although  this  sometimes  operates 

under the same organisational umbrella as the postal administration. 

In  no  Member State  is  there  any  monopoly  over parcel  services.  Express  services  are 

now under the monopoly in only three out of the twelve  Member States. 

Although  the  legal  position  is  still  evolving,  letters  up  to  a  certain  weight  or  a  certain 

price are reserved as state monopolies for domestic (inland) services.  These monopolies 

cover  the  mandatory provision  of  all  reserved  items  universally  across  the  territory  of 

the reserved service provider. 

In addition to letter services which  postal administrations  have to  provide as  mandatory 

reserved  services,  administrations  are  often  obliged  to  provide  certain  other  services 

universally - such as parcel services up  to a  certain weight  - even though  these  fall  in  the 

competitive sector. 

Where services  are in  the non-reserved  (competitive) sector,  postal  administrations and 

private  operators  compete.  The  private  operators  include,  among  others,  express 

(including urgent deliveries of documents and/or parcels) companies,  freight  forwarders 

and  international letter mail companies. 

Parcels and,  in  particular,  express are two  markets that  have  been growing significantly. 

The practical effect of both these markets being non-reserved is  that approximately 43% 

of  the  postal  sector's  revenue  is  now  generated  by  private  operators. 

If the  postal 

page 34 

Chapter 2:  The postal sector 

administrations' revenue from  non-reserved services is added, the non-reserved  services 

account for rather more than half the revenue of the postal sector. 

The regulatory aspects of the postal sector are studied in detail in Chapter 3. 

5. 

SERVICES PROVIDED 

The services  provided  by  postal  administrations  can  be  divided  into  mail  services  and 

services provided  at post office counters.  The latter consist  of mail  facilitating  services 

(stamp  sales  etc.)  and  financial  services  such  as  Giro  or  carrying  out  financial 

transactions  for  the  government  and  the  public.  However,  the  counter  services  are 

provided in  competition (and besides should be considered  more as  part of the  financial 

services market).  This Green Paper therefore concentrates on mail services. 

Figure 1:  Shares of the postal sector 

By  volume 

By  revenue 

• 

PRIVATE  OPERATORS 

~ 

POSTAL  ADMINISTRATIONS 

Customers trends and the services provided are studied in more detail in  Chapter 4. 

These services presently divide  into the product segments of letters,  express and  parcels 

(although  other  services  are  emerging).  Letters  and  express  services  provide  postal 

services  for  communication  items,  and  parcels  and  express  services  provide  postal 

services  for  goods-bearing  items.  There  are  significant  overlaps  between  the  services. 

Chapter 2:  The postal sector 

page 35 

Letters services  are provided  almost exclusively by postal administrations.  With limited 

exceptions,  parcel and  express  services  are in  free  competition.  Postal administrations 

tend  to  be  market  leaders  in  parcel  services,  but  not  in  express.  Figure  1  shows  the 

operators' shares of the postal sector, measured by volume and by revenue. 

For  all  services,  by  far  the  largest  part  is  for  delivery  within  the  same  Member  State 

where the communication or goods originated.  Access to postal services provides use of 

an  important  medium  for  communicating  messages  and  of  a  channel  for  distributing 

goods.  It is therefore of concern that the access conditions can vary significantly between 

Member States.  This  is  the  result  as  much  of decisions taken  by  the  regulatory  bodies 

concerned as of the differences in posting rules applied by  the postal administrations. 

6. 

ECONOMICS 

The  usage  of  postal  services  is  closely  related  to  the  general  economic  situation  - m 

terms of both comparative usage in different Member States and usage trends. 

Productivity  varies  significantly  between  the  postal  administrations  of Member  States, 

being partly affected by the different levels of usage,  but also  reflecting different levels of 

efficiency.  These  differences  in  productivity  are  one  of  the  factors  that  cause  wide 

ranges in  tariffs between  Member States for what  are  broadly similar services.  Another 

factor 

is  the  differing cost  of labo.ur,  personnel costs  accounting for  some 70%  of the 

cost of providing letter services. 

It  is  clear  that  there are  also  significant  differences  in  the  principles  applied  to  setting 

tariffs.  This is  evident,  for  example, from  the varying approaches towards subsidies and 

cross-subsidies.  However,  the  apparent  wide  range  of  tariffs  that  these  factors 

collectively  cause  becomes  less  broad  if  the  relative  spending  power  of  the  citizens  of 

different  Member  States  is  taken  into  account.  Further,  the  postal  administration  of 

each  Member  State  structures  its  tariffs  as  unitary  rates  covering  the  whole  of  its 

territory. 

While the network that provides the universal service is  not physically inter-connected in 

the  way  that  the  telecommunications  network  is,  the  universal  postal  operation  has 

significant  network  costs  that  do  not  change  with  volume. 

In  order  to  provide  the 

universal service at an affordable price, it is important that high volumes are put through 

the universal  service  network  and  sufficient  revenue generated  to  assure  the  economic 

viability of the network. 

page 36 

Chapter 2:  The postal sector 

All  Member  States  have  decided  that,  in  order  to  ensure  sufficient  volumes,  some 

services ought to be reserved, thus granting the postal administrations some special and 

exclusive rights.  However,  there are significant divergences in  the scope of the reserved 

areas  of  the  different  Member  States.  A  potential  user  who  has  the  same  postal 

requirements  in  all  Member  States  may  well  find  that  the  regulatory  and  operational 

·rules for meeting these requirements are different in each Member State. 

The economics of postal sen;ices will be discussed fully in Chapter 5. 

7. 

EMPLOYMENT 

Postal  services  are  significant  employers  in  the  Community.  The  public  postal 

administrations  employ  1.35  million  staff,  and  private  operators  a  further  0.35  million 

staff.  Because postal operations are so labour intensive,  they are particularly sensitive to 

personnel  trends.  The  changing  demographics  of  the  Community  could  have  a 

significant  effect  on  the  availability  of staff  that  the  postal  operators  will  continue  to 

need  to  recruit.  This  in  turn  may  affect  pay  levels  in  the  sector.  Combined  with  new 

market  and  technological  trends,  it  will  put  still  greater  emphasis  on  the  need  for 

effective training. 

The social aspects of the postal sector will be studied further in  Chapter 6. 

8.  COMMUNITY DIMENSION 

It  is  now accepted  that a  Community approach  is  needed  to establish  a  single  market  in 

postal services.  This  is  necessary  in  order to  resolve  the issues  that  have  arisen  and will 

arise  in  the sector.  It  is  also  needed  to  ensure that  the  policy  for  the  postal  sector aids 

the creation of the Single  Market  in  other sectors which  have  particular  reliance on  the 

postal sector - examples being the printing/publishing and advertising industries. 

In summary, the objective of the Green Paper is  to propose how to achieve the dynamic, 

customer-oriented postal sector that the Community needs. 

Chapter 3:  Regulatory environment 

page37 

CHAPTER 3: 

THE REGULATORY 
ENVIRONMENT 

1. 

INTRODUCTION 

The aim  of this  chapter  is  to  examine  the  existing  regulatory  situation  in  the  Member 

States,  putting  this  in  its  international  and  Community  context. 

In  particular,  it  will 

analyse  common  aspects  of  Member  States'  legislation,  as  well  as  the  differences. 

Whether  present  legislation  is  well  adapted  to  the  future  Community  regulatory 

requirements will be discussed in  more detail in  Chapters 7 and 8. 

2. 

TERMINOLOGY 

All countries have some services that are provided as  monopoly services by  some public 

undertakings.  Such services  are  more correctly called  "reserved  services",  meaning that 

the  provision  of  the  services  are  reserved  to  one  or  more  operators.  Such  reserved 

services  are  normally  the  subject  of some  special  and  exclusive  rights  (these  rights  in 

effect  curtailing  the  normal  operation  of  the  free  market). 

In  the  postal  sector,  the 

reserved service operator in each Member State is the postal administration. 

The granting  of these  special  and  exclusive  rights  is  often  called  a  concession,  implying 

that this privilege of being awarded the reserved services carries obligations, for  instance 

regarding the standard of service provided. 

Figure 1: 

Division  between  reserved  and non-reserved,  and  between  mandf.ltory  services 
with  universal  requirement  and  non-mandatory  services  without  universal 
requirement. 

UNIVERSAL 
REQUIREMENT 

N 0  UNIVERSAL 
REQUIREMENT 

Reserved 

Services  not  reserved  are  called,  naturally,  non-reserved  services.  Such  services  are 

therefore provided in the competitive sector, and the laws of the market apply. 

page 38 

Chapter 3:  Regulatory environment 

If a  service is  reserved,  there  is  an obligation  on  the part  of the operator to whom  it  is 

reserved  to  provide  the  service. 

In  the  postal  sector,  reservation  of services  is  inter 

linked  with  the  requirement  for  a  service  to  be  provided  universally  at  an  affordable 

price across the territory covered by the reserved service provider. 

All  services  that  an  operator  (or  operators)  have  to  provide  universally  are  therefore 

called mandatory services (the phrase "obligatory services" being synonymous).  Some  of 

these services may be provided as reserved services.  Others would then be non-reserved 

- that  is,  obligatory  non-reserved  services which  have to  be provided  by  operators  upon 

whom the obligation is placed, but in the competitive part of the market. 

In  the  postal  sector,  all  postal  administrations  have  obligations  placed  upon  them  by 

international agreements to provide services beyond the limits of their reserved services. 

It should  be noted that in  the non-reserved  area some Member States require operators 

other  than  their  postal  administrations  (perhaps  the  national  railway  operator)  to 

provide some obligatory services. 

These  obligatory  non-reserved  postal  services  have  to  provided  universally  by  the 

operator( s)  upon whom  the obligation is  placed.  However, the competitors do  not  have 

such a  universal obligation (although they can provide universal service  if they decide to 

do so for their own commercial reasons). 

All  other  services  (which  are  therefore  non-obligatory)  will  be  provided 

in 

the 

competitive sector.  Postal administrations can compete in  this  area  if they choose  to  do 

so. 

3. 

EXISTING MEMBER STATE LEGISLATION 

The postal legislation of Member States is  discussed  here comparatively, with  particular 

regard to  the status of the postal administrations and  the extent  of their  reserved  areas. 

In  addition,  the  postal  administrations  have  their  own  regulations  that  expand  on 

national legislation,  or can  even  add  to  it.  The  effect  of these  postal  regulations  is  also 

analysed. 

3.1  GENERAL 

Each  Member State has separately determined  that  the  most  important objective 

concerns the provision of a  universal postal service at affordable tariffs throughout 

its  territory.  Each  also  requires  a  universal  service  to  be  provided  for  certain 

Chapter 3:  Regulatory environment 

page39 

items collected  on  its  territory,  but  for  delivery  in  another  country,  and  for  such 

items collected in another country but for delivery on its own territory. 

To ensure provision of the universal service, each  Member State, again separately, 

has decided  to  impose the obligation  to provide the  universal  service on  its postal 

administration.  In order to  provide financial  support for  the universal service,  or 

indeed to ensure its financial viability, each Member State has decided to establish 

some  reserved  services  which  confer  special  and  exclusive  rights  to  the  postal 

administration. 

It  must  be  emphasised  that  the  scope  of the  universal  services  is  not  (or  is  not 

necessarily)  the  same  as  that  of  the  reserved  services.  In  practice,  all  Member 

States impose on  their  postal administrations  obligations of universal service that 

go beyond the scope of their reserved services. 

However, the scope of the reserved services varies from  Member State to Member 

State.  In  all cases,  these reserved services are stated in  national legislation.  Most 

national postal laws  do  not state how these definitions were arrived  at.  Although 

the  establishing  of  reserved  services  is  connected  integrally  with  the  universal 

service obligation,  the postal  law  of some  Member States  implies  the  connexion, 

while that of others states it explicitly. 

3.2 

LEGAL STATUS OF POSTAL ADMINISTRATIONS 

Table  1  below  summarises  the  legal  status  of  the  postal  administrations. 

(See 

Annex 4 for a more detailed summary.) 

page 40 

Chapter 3:  Regulatory environment 

Table 1: 

Legal status of postal administrations ( 1991) 

STATUS 

Limited 
Public 
Company 

Public 
Enterprise 

Public 
autonomous 
establishment 

State 
Administration 

FINANCIAL 
AUTIIORfIY 

Independent 

Financial 
autonomy 

Financial 
autonomy 

Separate 
budget 

MEMBER 
STATE 

Ireland 
Netherlands 

Belgium 
Gem1any 
Greece 
Po11ugal 
United Kingdom 

France 

I 

Denmark 

--------------------------------- 1------------------------------------------

No financial 
autonomy 

Spain 
Italy 
Luxembourg 

--

Source: 

European Research Associates study (with updates) 

3.3 

SCOPE OF RESERVED AREAS 

Table  2  overleaf  summarises  the  scope  of  the  reserved  area  of  each  of  the 

Member States.  It should  be noted  that this  represents  the juridical position,  the 

de facto  position  sometimes being less  restrictive.  (The  table  here  is  intended  to 

give  a  general  perspective;  it  is  reproduced  at  Annex  4  with  all  the  necessary 

qualifying notes.) 

Chapter 3: Regulatory environment 

page 41 

Table 2:  Member States' reserved services - juridi.cal position (1990) 

' 

0TIIER SERVICES UNDER MONOPOLY 

MEMBER 

LETIERS 

STATES 

UPTO 

PRINTED 

SMALL 

FAX 

EXPRESS 

PARCELS 

PAPERS (1) 

PACKETS 

(PUBLIC) 

MAIL 

STAMP 

SALES 

Belgium 

Denmark 

Germany 

Greece 

2kg 

1 kg 

1 kg 

2kg 

Spain 

2 kg 

(3) 

France 

Ireland 

Italy 

2 kg 

2 kg 

2kg 

Luxembourg 

2 kg 

Netherlands 

500 g  (6) 

• 

N/a 

(2) 

• 

• 

-

• 

• 

-

-

-

-

-

-

-

-

• 

• 

-

-

-

Portugal 

2kg 

N/a 

(2) 

United 
Kingdom 

£1 

(7) 

N/a  (2) 

-

-

-

-

• 

-

-

• 

-

• 

-

-

• 

-

-

-

-

-

•  (4) 

-

• 

-

-

-

• 

-

-

-

-

-

-

-

-

•  (5) 

-

-

-

-

• 

-

-

-

-

-

-

-

-

-

• 

-

Note 1: 

Note 2: 

Note 3: 

Note 4: 

Note 5: 

Note 6: 

This column refers to those administrations that apply a  categorisation between letters 
and printed papers. 

Not  applicable,  because  postal  administration  applies  a  first  class/second  class 
categorisation. 

Letters  for  collection  and  delivery  in  the  same  town  (intra-urban  traffic)  are  not 
reserved in Spain.  Post cards are not reserved. 

Inter-urban  express  services  are  under  the  monopoly;  intra-urban  and  cross-border 
express services are non-reserved. 

Although  Italy  has  placed  parcel  services  in  the  non-reserved  area,  the  transport  of 
parcels between large cities remains reserved. 

There  is  also  a  price  limit  operating  in  combination  with  the  weight  limit  of 500  g. 
(The price limit  presently proposed is  DFl 8.20 (ECU 3.60)  for domestic services,  but 
this  is  currently  being  reviewed  by  the  court  in  Luxembourg.)  Post  cards  are  not  a 
reserved service. 

Note 7: 

Price limit  of £1  (ECU 1.45) is applied (with no weight  limic).  Reduction to a limit of 
about £ 0.33  (ECU 0.48) is said to be being considered. 

Source: 

European Research Associates study 

page 42 

Chapter 3:  Regulatory environment 

All Member States reserve letters (up to certain limits that vary between  Member 

States).  Some (Belgium,  Germany,  Greece,  France and  Ireland)  reserve printed 

papers  to  some  degree,  and  some  (Spain,  Ireland  and  Portugal)  some  or  all 

express services.  (Under the Spanish legislation, express services between Spanish 

towns  or cities  are  reserved,  while  intra-urban  and  cross-border  express  services 

are non-reserved;  in  Ireland,  the juridical  monopoly  over  express  services  is  said 

not  to  be  enforced.)  The  parcel  services  of  all  Member  States  are  now  non 

reserved. 

It  should  be emphasised  that Table  2  above  summarises  the  current  situation  in 

terms of the different  services  of the  postal administrations.  When  possible  uses 

of services are examined, the position  may become more complex.  An example of 

this  is  direct  mail.  For  those  Member  States  that  operate  a  categorisation 

between  letters  and  printed  papers,  direct  mail  would  normally  fall  into  the 

category of printed  papers.  Five  of these  administrations  have  a  monopoly  over 

this category.  In addition,  the three administrations which categorise into first  and 

second class mail would regard direct mail simply as "letters":  if direct mail met the 

normal criteria for being reserved, it would be treated as such. 

The  existing  position  results  from  trends  that  continue  to  change  the  legal 

situation  of  the  postal  sector.  Italy  was  the  last  Member  State  to  make  parcel 

services  non-reserved  (although,  rather  surprisingly,  the  Italian  legislation  still 

considers  the  transport  of  parcels  to  be  reserved).  Several  Member  States 

formerly  treated  express  services  as  reserved,  but  only  three  now  hold  this 

position.  The  European  Commission  has  played  an  important  role  in  these 

changes in  national  postal  legislation,  either  through  administrative  interventions 

or through formal decisions (see below at Paragraph 6.2). 

In  order to  define the limits of their reserved  areas,  Member States use  a  variety 

of criteria.  Although  it  is  difficult  to control  in  practice,  all  Member States apply 

some  form  of a  contents  criterion.  Parcels  are  defined  as  goods-bearing  items, 

and items containing goods are excluded from  the reserved area.  (However, some 

Member  States 

regard  a  parcel 

that 

is  accompanied  by  an 

individual 

communication as a letter.) 

As  part  of the  definition  of the  reserved  area,  most  Member  States  also  apply  a 

weight  criterion.  The  limit  applied  ranges  from  500  g  (in  the  case  of  the 

Netherlands) to 2 kg (in the case of several Member States). 

Chapter J: Regulatory environment 

page 43 

Other Member States apply  a  price criterion.  For example,  in  the  UK the upper 

limit for  the reserved area is  set at a value of £ 1.  (The British government  is said 

to be considering reducing this limit substantially.)  In the case of the Netherlands, 

there  is  a  price  limit  that  operates  in  conjunction  with  the  weight  limit. 

·In 

Germany, a weight limit of 1 kg  has been set (but probably to be reduced  to 500g), 

and  a  price limit  has  also  been  set  at  ten  times  the  tariff  for  the  ordinary  letter 

service. 

Table 3  below shows  the practical  effect  of these different  limits  in  terms  of the 

entry  price  thresholds  for  express  services  (or  other  services  that  the  customer 

perceives  to  be  qualitatively  superior  to  the  normal  letter  service).  Where 

Member  States  have  formally  established  price  levels  as  the  limits  for  their 

reserved areas,  these limits  are divided  by  the basic  tariff to show the factor.  (As 

an  example,  the  United  Kingdom's £1  limit  is  divided  by  the  then  basic  tariff of 

£0.20,  giving  a  factor  of five  times.)  For  other  Member  States,  the price  limit  is 

assumed  to  be  the  tariff  for  a  letter  of 2  kg  (taken  as  the  practical  limit  of the 

letter ·monopoly,  even  if a postal administration states that it  has a  monopoly over 

all  letters  whatever  their  weight).  To  determine  the  factor,  the  tariff  at  2  kg  is 

divided by the basic tariff. 

Table 3:  Monopoly limits expressed as factor of basic tariff (at 1990 tariff levels) 

UNITED  KINGDOM 

DENMARK 

NETHERLANDS 

.  I 
·I 

GERMANY 

BELGIUM 

·_.: 
•  ...  '·  ·~·  ·1 

I 

• . 

LUXEMBURG  i-----~--· --'. ·-·~·· ·'""'-::__,·,~ 

IRELAND 

,__ ____  ·_··_.·_: _. _-:,_':_.'·_.:__,:I 

SPAIN 

FRANCE 

' 

.·. 

.  I 

PO RTU G .AL  -~--· ~: ·-----. 

:· -:-'-. '---'--. ~· ------"--'------· ~· 1 

GREE CE 

t--'-~-'---'-· ..__· -:'---. _-: .-'---.....:.' ·..;....::'--'-

.·  ::...;.__. _·:· ·_..._.....:.....;_c.._;_...;._~l 

ITALY  +=·=··· ==t===='==t=='=====t====+-==·=·=·===t~==-· ~---t 
30 

15 

10 

20 

0 

5 

25 

Source: 

CEC (using information from postal administrations) 

page 44 

Chapter 3: Regulatory environment 

This  diversity  highlights  how  unharmonised  the  sector  is  in  legal  terms  - even 

though  the  postal  sector  of one  Member  State would  normally  be  thought  of as 

being very similar to that of another Member State. 

3.4  DEFINITION OF SERVICES 

Although all  Member States affirm  that their reserved services include some or all 

letters,  some do  not define what  is  meant  by  a  "letter".  Of those  that  do  define  a 

letter,  the  definitions  are  not  always  clear  and  differ  from  one  another.  The 

problem  here  is  that  what  an  operator  understands  by  this  word  may  well  be 

different from what a layman might understand. 

Firstly,  there  is  no  proper  distinction  between  a  letter  and  a  parcel.  Under  the 

operators'  definition  "letters"  include  packets.  But  it  is  not  clear  how  a  packet 

differs  from  a  parcel,  since  both  are goods-bearing.  The  service  performance  of 

parcel and packet services is more or less the same.  If a  customer posts an item as 

a packet it is reserved, but if the same item is posted as a parcel it  is non-reserved. 

Express  services  pose  another  problem.  Described  approximately,  such  services 

involve  the  rapid  shipment  of  documents  and  parcels,  often  with  additional 

features  provided such  as  special collections and  the tracking of the  items  during 

transit. 

Most  Member  States  state 

that  they  intend  express  services  to  be  in  the  non 

reserved  sector.  However,  no  postal  legislation  offers  a  definition  of  what  is 

express.  It  is  indeed  difficult  to  state clearly what  differentiates  express  services 

from ordinary letters (or parcel) services. 

Rather  than  trying  to  define· express  services,  some  Member  States  simply  use  a 

price limit  (as mentioned above at  Paragraph  3.3)  to ensure that such  services are 

placed in the non-reserved area. 

3.5  MAIL PREPARATION BY INTERMEDIARIES 

Some  postal  administrations  grant  contracts  to  operators  who  may  collect  maiJ 

from the original customer, prepare the mail in  some way,  and then post the mail 

with  the  postal  administration.  Such  operators  are  called  consolidators,  mailing 

houses or mail preparers. 

Chapter 3: Regulatory environment 

page 45 

This pre-mailing process can range from printing the items and preparing them for 

posting to simple enveloping.  If the item was reserved, this intermediate operator 

would  be obliged  by  law  to  post  the  item with  the postal administration  for  final 

delivery.  Since the intermediary is  carrying out some  activities which  would  save 

the  postal  administration  some  costs,  these  contracts  usually  include  discount 

arrangements. 

On  the  other  hand,  other  administrations  do  not  permit  third  party  operators to 

act as  intermediaries in this way. 

At  least  one  administration  insists  on  pre-sortation  as  a  condition  of  access  to 

certain  postal  services,  but  states  that  discounts  are  not  permitted  by  law. 

However,  the  services  concerned  are  printed  paper  services  which  receive 

preferential  tariffs. 

(Such  tariffs  are  discussed  in  detail  below  at  Chapter  4, 

Paragraph 8.4  and at Chapter 5,  Paragraph 6.3.) 

It is  not  always  clear  whether  these  differences  arise  from  the varying  legislative 

positions in  different  Member States or from variations in commercial attitudes to 

the provision of postal services. 

3.6 

POSTING AND  DELIVERY BY SELF 

It now seems accepted by  all Member States (in practice, if not always in law)  that 

any  citizen  or  organisation  has  the  right  to  deliver  his  or  its  own  mail  to  the 

intended addressees.  At  the same time,  there is  an understandable concern  as  to 

how  this  principle  might  be  interpreted  with  regard  to  subsidiaries  posting  on 

behalf  of  parent  companies. 

In  the  latter  example,  a  number  of  "parent" 

companies  might  each  have,  for  example,  only  a  10%  stake  in  the  company 

specialising in  postal deliveries. 

This "self-delivery"  principle seems applicable either within  a  national territory or 

cross-border (where the originator of the mail delivers  it  to an address  in  another 

country).  However, for  the right  of posting of items that would be reserved if they 

were for delivery in the national territory, a distinction seems to be drawn by some 

Member States between posting in  one's own country or elsewhere. 

Subject  to  contract  conditions,  anyone  can  post  where  he  likes  m  a  national 

territory if the item  is  for  delivery within  that  territory.  However, some national 

legislation forbids  the same item being taken across a  border into another country 

page 46 

Chapter 3:  Regulatory environment 

and  then  posted  there  for  delivery  in  that  country.  (The  Member  States  which 

hold this position are amongst those who consider such mail crossing borders to be 

part of the reserved area - see below at Paragraph 3.8.) 

If such activities are forbidden  by  the postal legislation of certain  Member States, 

the same legislation would also forbid  the originator of the mail to  take it across a 

border into a  second country and  post  it  there for  delivery  either back  in  his  own 

country or in  a  third country - whether the motivation was to reduce postage costs 

or to improve the quality of service. 

Such  restrictions  will  need  to  be  viewed  in  the  context  of obligations  under  the 

Treaty of Rome.  In  particular,  it  would  be relevant  to  consider the obligation  to 

permit  freedom  to  pro:Vide  services  in  the  Single  Market  and  the  obligation  to 

make restrictions  of the  free  market  proportionate to  the  objective  of the public 

undertaking concerned (see below at Paragraph 6.1 ). 

3.7  HYBRID  SERVICES 

There are, or may be, certain services  that combine features of the ordinary letter 

service with those of another service, which may or may not involve the same item 

being in the same physical state. 

Postal administrations offer a  service called  "postal electronic  mail".  This service 

and its commercial viability are discussed in  detail at Annex  12.  Briefly,  it  involves 

the transmission  of an  electronic image of a  document  or its conversion  in  digital 

format  and  transmission  to  a  distant  point,  where  the  image  is  printed  out, 

enveloped and sent to  the addressee (or addressees if the same image is  sen!  to a 

number of addresses). 

Postal  electronic  mail  therefore  provides  an  example  of  a  hybrid  service  which 

involves the item changing its physical form: when it  is  enveloped and addressed,  it 

becomes  a  postal  item.  A  delivery  facility  is  added  to  a  service  that  is  non 

reserved. 

The  regulatory  authority  will  therefore  first  need  to  determine  whether  postal 

electronic  mail  is  an  integrated  service  or  not. 

If it  were,  the  regulatory  view 

would  be  that  it  was  wholly  reserved  or  wholly  non-reserved.  Alternatively,  the 

authority might  decide that  the  two  elements  should,  from  a  regulatory  point  of 

view, be considered as separate.  Under the latter view,  if the item to be delivered 

Chapter 3:  Regulatory environment 

page 47 

meets the criteria of being placed  in  the reserved area, the delivery element could 

be  reserved  to  the  postal  administration:  in  this  way,  a  hybrid  service  could 

combine reserved and non-reserved elements. 

3.8  CROSS-BORDER MAIL 

The legislation  of most  Member States  does  not  distinguish  between destinations 

of the  items with which  the legislation  is  concerned - whether the destinations are 

in  the  national  territory  (in  the  case  of domestic mail)  or outside  (in  the case of 

cross-border mail). 

However, with  minor  restrictions,  both  the  Netherlands and  the United  Kingdom 

place  cross-border  mail  in  the  non-reserved  sector.  Two  other  administrations 

(those of Belgiu~ and  Denmark) permit  private companies offering international 

letter  mail  services  to  operate  using  the  postal  systems  of their  national  postal 

administrations. 

Ten Member States (including Belgium and Denmark) have legislation that places 

out-going cross-border letter mail in  the reserved area if it meets the same criteria 

(weight  and/or  price)  that  determines  the  reserved  area  for  domestic  mail. 

However,  the  majority  of these  Member  States  (or  the  postal  administrations  of 

those  States)  have  chosen  not  to  enforce  the  exclusive  rights  of  the  postal 

administration with regard to this mail, or have been ineffective in doing so. 

3.9 

SPECIFICS OF NATIONAL LEGISLATION 

3.9.J 

CITY MAIL 

"City-mail" involves  the provision  of postal services within a  particular city,  that is, 

where mail is  both collected and delivered in the same city.  In most countries such 

activities are illegal, but Spanish postal legislation specifically permits it. 

Some  private  operators  offering  international  letter  mail  services  use  city  mail 

type operations to  deliver  mail  in  certain cities.  (This  is  discussed  at  Chapter 5, 

Paragraph 9.2.) 

3.9.2 

DOCUMENT EXCHANGES 

Document exchanges involve  the delivering of mail by exchange users directly into 

the  boxes  of other  exchange  users,  these  boxes  being  provided  in  a  Post  Office 

page 48 

Chapter 3:  Regulatory environment 

box-type  facility.  The  operation  of  such  exchanges  by  private  operators  are 

permitted  in  some  national  legislations.  For  example,  such  exchanges  and  the 

transfer of mail between  them are specifically permitted  in  the United Kingdom's 

legislation. 

3.9.3 

TRANSPORT 

Most  national  legislation  places  the  transport  of  mail  m  the  reserved  area 

(assuming that the delivery of the mail is reserved). 

In practice, all postal administrations sub-contract part of the transport of the mail 

to other carriers - to national railway companies in  the case of domestic mail,  and 

to seafreight or airline companies for cross-border mail. 

In  addition,  as  noted  at  Paragraph  3.6  above,  all  national  legislation  permits  a 

customer  to  post  his  mail  where  he  wishes  (at  least  within  his  own  national 

territory). 

If third  party  intermediaries  are  permitted  to  function,  they  can 

negotiate contracts  to  post  the  mail anywhere  in  the  national  territory.  In  either 

case,  the  customer or  the intermediary  can  choose  to  post  the  mail  at  the  point 

nearest to the delivery office, thus obviating the need for  the postal administration 

to transport the mail between sorting centres. 

The postal legislation of at least one Member State (that of the United  Kingdom) 

now places the transport of mail in the non-reserved area. 

3.9.4 

OTHER 

All  national  legislation  places  unaddressed  items  in  the  non-reserved  area. 

In 

addition, Member States may place certain very specific items in  the non-reserved 

area.  An example here is  the delivery of Christmas cards, which  the Netherlands 

legislation has put in  the competitive area. 

4.  REGULATORY S.~RUCTURES 

Most markets are self-regulating.  However, where there is  reserved  service operator,  it 

is necessary to have some body responsible for  regulating the market.  It is  important to 

distinguish  between  such  a  regulatory  role  and  any  operational  function  - particularly 

because the same body often used to carry out both functions. 

Chapter 3:  Regulatory environment 

page 49 

4.1 

SEPARATION OF REGULATORY AND OPERATIONAL FUNCTIONS 

In  the  recent  past,  postal  administrations  were  responsible  for  the  regulatory 

function governing the postal sector, as well as being the public operator.  This has 

been  recognised  by  more  and  more  Member  States  to  be  inappropriate.  Most 

Member States have now separated the regulatory authority from any operational 

function. 

In some Member States, the ministry responsible for  regulation  is organisationally 

entirely  separate  from  the  operator. 

In  others,  the  operator  and  regulator  are 

both placed  under the umbrella  of the one ministry. The latter relationship causes 

some concern amongst  private operators that there could be a  danger of what  has 

elsewhere been termed "regulatory capture" (where the regulator becomes in some 

way beholden to an operator). 

The regulator in  each  Member State is  a  department in the relevant ministry.  The 

British  government  is  currently  considering  establishing  an  Office  of  Postal 

Services.  This would  be a  semi-autonomous regulatory body,  similar to  the Office 

of  Telecommunications  (Oftel)  which  is  the  regulatory  body  for  the  United 

Kingdom's telecommunications sector.  If and when the  Office for  Postal Services 

is established,  its  main tasks will  be to  monitor the quality of the universal service, 

and to advise the Minister on the appropriate extent of the postal administration's 

reserved area. 

4.2 

RESPONSIBILITY OF REGULATOR 

The  functions  of  the  different  national  regulators  vary,  but  there  are  some 

responsibilities that should be common to all: 

- advising the government on the scope of the universal  services required, and on 

the  means  for  meeting  this  requirement  (for  instance,  through  some  reserved 

services); 

- ensuring that the special rights of the reserved service operators are observed; 

- ensuring  satisfactory  quality  of  service  on  the  part  of  the  reserved  service 

provider; 

- ensuring fair competition in the non-reserved area. 

All these responsibilities are important, but the last mentioned is becoming key. 

page 50 

Chapter 3:  Regulatory environmellt 

Some  national  regulators  oversee  the  obligations  placed  on  the  reserved  service 

providers.  The  scope  of these  obligations  varies  between  public  operators,  thus 

itself causing the responsibilities of the regulators to diverge. 

For  example,  there  are  variations  in  the  attitude  on  the  part  of  regulators  to 

overseeing aspects  such  as  access conditions.  Regarding the  setting of tariffs,  no 

regulator  claims  any  involvement;  while  this  may  be  the  formal  position,  it  is 

probable that some of the national regulators do exert some influence. 

In several  Member States there is  also a  formal  obligation  placed upon  the postal 

administration  that  tariffs  for  the  basic  letter  service  and  some  other  services 

should be set  at a  unitary  rate  for  delivery covering  the national  territory (rather 

than  having  tariffs  related  to  distance  or  the  location  of  the  addressee).  This 

principle  is  called  the  ''perequation  tarifaire",  and  is  discussed  at  Chapter  5, 

Paragraph  6.1. 

(In  1979,  the  Commission  made  a  recommendation  that  the 

principle ought also  to  be applied  to  the basic letters  - up  to  20g  - going to  other 

Community countries - see Annex 5.) 

At  present,  no  national  regulator  appears  to  make  service  performance  a 

condition  of  the  reserved  services.  Most  postal  administrations  set  themselves 

published  targets,  and  then  issue  details  of  their  performance  against  those 

targets. 

It  is  not  known  how  any  regulator  views  either  the  targets  or  the 

performance. 

4.3 

RESPONSIBILITY OF OPERATOR 

The obligations placed  on  the  public  operator  (that  is,  the  postal  administration) 

vary  between  Member  States. 

In  some,  they  have  simply  to  provide  universal 

service and equal access for potential users (assuming all conditions are the same). 

Others have more detailed  obligations.  Some also  have specific "missions" placed 

on them - for  instance relating to the distribution of publications. 

Most  public  operators  also  share  with  their  national  regulators  the  responsibility 

for  the defence of their special  and  exclusive  rights.  This  situation  may evolve  as 

the role of the regulator becomes more defined. 

In  the  non-reserved  sector,  public  operators  have  a  particular  responsibility  to 

ensure that the power  that they  enjoy as  a  result  of the  reserved  services  is  in  no 

Chapter 3: Regulatory environment 

page 51 

way  allowed  to give  them  an  unfair advantage in  the market for  the non-reserved 

services. 

5.  THE INTERNATIONAL REGULATORY DIMENSION 

In  terms  of  regulation,  the  postal  sector  has  important  international  and  Community 

dimensions.  Here,  the international dimension linking Community and  non-Community 

countries  is  studied  first.  The  Community  dimension  and  the  relationship  with  the 

international dimension  is  discussed below at Paragraph 6. 

5.1  UNIVERSAL POSTAL UNION  (UPU) 

The  UPU  is  a  special  agency  of  the  United  Nations.  AH  Member  States  are 

members of the UPU by virtue of being signatories to the United Nations Charter. 

The UPU holds  a congress every five  years at which  it  reviews  its Convention, the 

articles of which,  if retained, are then re-confirmed. 

After each  Congress,  the  new  Convention  is  signed  by  the  members of the  UPU. 

Each signatory  signs  as  representing the  Government  of his  country.  Previously, 

postal  administrations  signed  alone;  now,  both  the  national  regulator  and  the 

postal administration tend to sign together. 

The Convention provides the framework for  the operational relations between the 

postal  administrations  of the  world  in  the  exchange  of mail.  The  articles  of the 

Convention are divided  into rules and recommendations.  Because the Convention 

has  the status of a  treaty  into which  its  government  has entered,  each  member of 

the UPU must treat the rules as having a  binding force. 

Here,  it  is  important  only  to  emphasize  those  articles  which  may  need  further 

discussion  later  in  the  Green  Paper.  For example,  Article  20  of the  Convention 

refers  to 

the  weights  of  items  that  administrations  should  accept 

in 

the 

international  letter  post  system,  thus  imposing  obligations  on  the  "inward" 

administrations  to  deliver  these 

items. 

(Here  and  elsewhere, 

the  article 

numbering  system  of  the  1989  Convention  is  used;  the  text  of  all  the  articles 

mentioned is shown in full  in Annex 5.) 

Article 25  deals with the subject of international items letters posted outside of the 

country  of  origin  of  the  letters.  This  article  is  therefore  important  for  the 

discussion of one of the areas of real or potential competition in  the Community's 

page 52 

Chapter 3:  Regulatory enl'ironment 

postal sector.  The compatibility of Article 25 with the Treaty of Rome is discussed 

below at Paragraph 6.3.  (The potential application of Article 25  is studied in  more 

detail in  Annex 6.) 

Closely  related  to  Article  25  is  Article  73,  laying  down  the  normal  rules  to  be 

applied  to  compensation arrangements  (known  as  terminal dues)  between  postal 

administrations for the delivery of letter items on each other's behalf. 

5.2  GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) 

The  GA TI was  established  after  the  second  world  war,  with  the  intention  of 

gradually reducing the protectionist measures that acted as barriers to trade.  The 

Community negotiates as a single trading entity with  its other trading partners. 

Periodic negotiating "rounds" take place to liberalise trade.  The current "Uruguay" 

Round,  launched  in  1986  in  Punta  del  Este,  was  intended  to  be  completed  in 

December 1990  in  Brussels;  this was  not possible due to a  number of divergences 

between participants, notably in the agricultural sector. 

The  Uruguay  Round  constitutes  the  first  attempt  to  extend  the  basic  trade 

liberalising  principles  in  the  GA TI  to  international  trade  in  services.  The 

framework  for  the coverage  of services  will  be called  the  General Agreement  on 

Trade in  Services  (GA TS).  Although  negotiations  have  not  been  completed  the 

main principles of the GA TS are already clear. 

The key principle for  reserved service providers is  that they should provide access 

to  users  of  the  services  on  equal  terms,  regardless  of  the  national  base  of  the 

potential users.  In  the postal sector for  example,  if a  large customer based in  the 

country  of  a  postal  administration  warranted  preferential  tariffs,  a  similar 

customer  based  outside  but  meeting  the  same  posting  conditions  should  have 

access on the same terms. 

If sectors  have special  characteristics that  call  for  either modification  or  specific 

interpretation of some of the framework  rules,  these sectors would  be the subject 

of an  annex to  the GA TS.  Whether or not a  sectoral annex  is  agreed,  the GA TS 

framework would apply to all service sectors - and therefore to the postal sector. 

In terms of the application of GA TS principles to the postal sector, the main point 

of concern  relates  to  the  possibility  that  any  change  in  the  structure  of terminal 

Chapter 3:  Regulatory environment 

page 53 

dues within  the Community could  give  private  operators an  unfair opportunity if 

they collected cross-border mail from  one Community country and took it  outside 

the Community  to  another  country  for  remailing back  into  a  second  Community 

country. 

The Community would  need to decide how to react to such a  practice if it were to 

come about.  The Community may  need  to  discuss  this potential problem with  its 

trading partners in  the general context of GA TS, but without seeking to establish a 

sectoral annex to deal with  it. 

5.3 

CONFERENCE  OF  EUROPEAN  POSTAL  AND  TELECOMMUNICATIONS 

ADMINISTRATIONS  (CEPT) 

The  CEPT  is  a  body  representing  the  public  postal  and  telecommunications 

operators  of  most  countries  of  Europe. 

Its  membership 

includes 

the 

administrations of all  the Member States and all  EITA countries.  It also includes 

Czechoslovakia,  Hungary,  Yugoslavia,  Turkey,  as  well  as  the  smaller  states  of 

Monaco, San  Marino and  the  Vatican.  Other countries,  from  central and  eastern 

Europe, have expressed their intention to apply for  membership. 

As stated in  the preamble to its constitution, the CEPT was established  in  view of 

"the  importance  and  difficul~y  of the  common  problems  confronting  the  various 

European postal and telecommunications administrations" and " the desirability of 

establishing a  wide  measure  of co-operation  between  the  administrations".  The 

CEPT is now divided into postal and telecommunications sections. 

The CEPT (posts) carries on its activities in  accordance with Article 8 of the UPU 

Constitution which permits UPU members to form  groups for their own purposes, 

providing  that  these  are  compatible  with  their  obligations  to  the  UPU. 

(Such 

groups  are  called  "unions  restreintes".)  Since  1969  there  has  been  a  formal  link 

between the CEPT and the UPU. 

The  CEPT  is  presently  reviewing  its  organisation,  partly  in  response  to  the 

development  <.•t  1  (\•!11lll• inity  postal  policy.  The  CEPT is  primarily  a  forum  for 

public  operators.  However,  it  also  covers  some  regulatory  questions,  and  the 

CEPT may  consider  it  appropriate  to  separate  the  two  aspects  in  line  with  the 

trend  in  Member  States  and  elsewhere  to  separate  operational  and  regulatory 

functions. 

page 54 

Chapter 3:  Regulatory environment 

6.  THE COMMUNITY REGULATORY DIMENSION 

Whilst the Green Paper should not seek to provide a  comprehensive legal  background to 

its  consideration  of  possible  proposals  for  the  postal  sector,  it  is  appropriate  here  to 

identify some of the most  relevant  rules  as well  as  to  record  previous judgements which 

also  have  relevance  to  the  present  debate. 

It  is  also  appropriate  to  discuss  the 

compatibility of other treaty commitments with obligations under the Treaty of Rome. 

Although,  until  the present  time,  the  Community  has  not  developed  a  regulatory  policy 

for  its  postal sector,  general  principles  have  been applied  in  decisions and  interventions 

relating  to  postal  services.  These  decisions,  as  well  as  relevant  resolutions  of  the 

European Parliament, are summarised in  Annex 5. 

6.1 

TREATY OF ROME 

Two  basic  principles  of  the  Treaty  of  Rome  are  that  there  should  be  no 

restrictions  on  the  trade  of goods  between  Member  States  (Article  30)  and  that 

the  objective  is  that  there  should  be  freedom  to  provide  services  within  the 

Community  (Article  59).  Closely  connected  is  the  freedom  for  nationals  of  a 

Member State to establish themselves in  another Member State (Article 52). 

However,  the  Court  of 1 ustice  recognises  that,  in  certain  circumstances  and  for 

reasons  of  public  interest  of a  non-economic  nature,  Member  States  may  grant 

special  or  exclusive  rights.  Such  rights  constitute  exceptions  to  the  freedom  to 

trade in goods and to the freedom  to provide services. 

Such  exceptions,  which  would  be  derogations  from  Articles  30  or  59,  could  be 

permitted  only 

if  two  further  conditions  were  met. 

Firstly,  it  should  be 

demonstrated that  the same objectives could  not  be  met  by  less restrictive  means. 

Secondly, the scope of the special  or exclusive  rights must  be as small as is  needed 

to  achieve  the  objectives  (this  being  known  as  the  rule  of  proportionality).  Of 

course,  once  special  or  exclusive  rights  have  been  awarded,  the  manner  in  which 

they are exercised must still be fully  in accord with  the rules of the Treaty. 

Member States ought  therefore  to  seek  the least  restrictive  option  to  achieve  the 

objectives  identified. 

In  particular,  the  restrictions  to  the  principles  of  free 

movement of goods and services should only be applied to the "relevant" market. 

Chapter 3:  Regulatory environment 

page 55 

Undertakings entrusted with  reserved  services  in  the "general  economic  interest" 

must  still  abide by  the  general competition  rules  that  forbid  cartel-like behaviour 

(Article 85)  and the abuse of dominant market positions (Article 86).  In  addition, 

any  state  aid  granted  by  a  Member  State  government  which  could  distort 

competition is incompatible with the common market (Article 92). 

Article  90  refers  to  public  undertakings  and  those  to which  Member  States  give 

special or exclusive  rights.  In  its  first  clause,  Article  90  states that  each  Member 

State  must  ensure  that  its  national  legislation  regarding  such  undertakings  is 

compatible with  all  the  Articles  of the  Treaty,  particularly  the  competition  rules 

(contained  in  Articles  85-94)  and  the  rule  forbidding  discrimination  on  the 

grounds of nationality (Article 7). 

However,  in  its  second  clause.  Article  90  recognises  that  undertakings  entrusted 

with the operation of services of general economic interest or having the character 

of a  revenue-producing monopoly will  be subject to the Treaty's rules, in particular 

to  those  relating to  competition,  in  so  far  as the  application  of the  rules  does  not 

obstruct  the  performance,  in  law  or  in  fact,  of  the  particular  tasks  assigned  to 

them.  The development  of trade  must  not  be affected  to such an extent as would 

be contrary to the interests of the Community. 

In its third clause, Article 90  obliges the Commission  to ensure that the provisions 

of Article 90  are properly applied, and,  if necessary, to issue directives or decisions 

to  this  end. 

It  should,  in  particular,  adopt  necessary  measures,  laying  out  in 

general terms the obligations of Member States in  relation to Article 90.1,  in  order 

to  ensure  that  the  scope  of  the  exclusive  rights  awarded  to  undertakings  in  the 

Member  States  is  appropriate  to  their  objectives  and  in  accordance  with  the 

provisions of the Treaty of Rome.  If appropriate,  the Commission may also  issue 

decisions  to  reduce  the  scope  of  such  exclusive  rights,  by  reference  to  the 

obligations of Member States under Article 90.1.  The right  of the Commission  to 

apply  Article  90.3  by  means  of  directives  was  upheld  in  a  judgement  given  in 

March  1991  by  the  European  Court  of Justice with  regard  to  telecommunications 

terminal equipment. 

At the same time,  the Council,  acting on  proposals from  the Commission,  should 

implement whatever  harmonisation  measures  are  needed  to  achieve  the  internal 

market  (Article  lOOa ).  The  internal  market  is  described  as  an  area  without 

page 56 

Chapter 3: Regulatory environment 

internal  frontiers  in  which  there  would  be  free  movement  of  goods,  people, 

services and capital (Article 8a ). 

Article  222  recognises  the  right  of  Member  States  to  organise  the  system  of 

property ownership within  their own  territory by  declaring  the Treaty's neutrality 

on  the  subject.  Therefore,  a  Member  State  may  opt  for  a  system  of  public  or 

private  ownership  of companies.  However,  Article  222  does  not  exempt  either 

from  the  rules  of  the  Treaty  which  will  apply  equally  to  both.  This  has  been 

confirmed by  the Court  of Justice  in  a  series of judgements underlining that such 

companies,  whether  private  or  public,  remain  subject  to  Community  law  where 

applicable. 

Another  article  which  would  be  important  in  the  present  debate  is  Article  234, 

which  stipulates  that  rights  and  obligations  arising  from  agreements  concluded 

before the entry into force  of the Treaty of Rome between one or more  Member 

States on the one hand  and one or more third  countries on the other, shall  not be 

affected by the provisions of the Treaty of Rome. 

Article 234  further provides  that, to the extent that such agreements would not  be 

compatible  with  the  Treaty  of  Rome,  the  Member  State  or  States  concerned 

should take all appropriate steps to eliminate the incompatibilities established. 

6.2  APPLICATION OF COMPETITION RULES 

Case  law  has  been  built  up,  interpreting  how  the  competition  articles  (that  is, 

Articles 85  to 94) should be applied to the postal sector. 

Since 1984,  the Commission has investigated  the legal status of express services in 

Belgium, Denmark, France, Germany and Italy.  Each of these Member States had 

previously  considered  express  services  to  be  part  of  its  postal  administration's 

reserved  area.  Following  intervention  from  the  Commission,  each  made  express 

services non-reserved. 

The  postal  authorities  had  interpreted  these  services  as  being  standard  postal 

services  and  therefore within  their  national  monopolies.  The  ruling  in  each  case 

was  that .  these  were  different  (or  value-added)  services  which  should  be 

considered  non-reserved.  Decisions  based  on  similar  grounds  have  been 

addressed  to  the  Dutch  and  Spanish  authorities  in  respect  of  their  postal  laws 

Chapter 3: Regulatory environment 

page 57 

relating  to  express  services.  The  Court  of Justice  overturned  the  first  of these 

decisions on procedural grounds, without challenging its substance. 

One particular  concern  on  the  part  of the  Commission  is  that  if a  price  limit  is 

used to help define the border between reserved and non-reserved areas,  it should 

be  applied  equally  between  the  competitors  in  the  non-reserved  area  - both  the 

postal  administration  and  private  operators. 

In  order  to  apply  this  principle,  a 

regulator needs to  understand fully  the nature of the competition in  the sector for 

which  it  is  responsible.  Where  there  is  direct  competition  between  services  that 

are very  similar,  it  would  be  unreasonable  if  one  of  the  competing  services  was 

regarded as  reserved.  This would  permit such a  service to have a  tariff lower than 

the price limit set as the "floor" price for the other competing services. 

Another case currently  being  studied  by  the  Commission  concerns  the postal  law 

of Denmark  which  is  being  examined  under  Article  90  procedures  in  order  to 

determine whether it  is  inconsistent for the law to  forbid private operators to offer 

remail  services  in  competition  with  the  postal  administration,  while  at  the  same 

time the postal administration provides remail facilities for mail generated outside 

the country. 

A  further  important  case  m  course  concerns  a  complaint  by  an  association 

representing  several  private  operators, 

the  International  Express  Carriers' 

Conference  (IECC).  The  IECC complained  that  a  new  system  of terminal  dues 

agreed between several  Member States' postal administrations (and others outside 

the EC) and also certain uses of Article 25  of the UPU Convention were intended 

to impede their members'  remail activities,  and  therefore constituted an  abuse of 

dominant  position  (contrary  to  Article  85  and  86  of  the  Treaty  of  Rome). 

Following investigation,  the Commission  has  decided  to  open formal  proceedings 

under the competition rules. 

(Terminal  dues  and  remail  are  described  at  Annexes  8  and  9,  and  discussed  in 

detail at Chapter 5,  Paragraphs 8 and 9.) 

6.3 

TREATY OF ROME AND UPU CONVENTION 

As  indicated  above  at  Paragraph  5.1,  the  agreement  of  national  governments  to 

the  UPU  Convention  is  renewed  every  five  years.  This  clearly  has  relevance  in 

terms of the application of Article 234 of the Treaty of Rome. 

page 58 

Chapter 3:  Regulatory environment 

The debate concerning this compatibility of the UPU Convention with  the Treaty 

of  Rome  centres  on  Article  25  of the  UPU  Convention  (previously  Article  23 ). 

This article contains two separate provisions: 

Article 25.1  states  that  no  UPU  member  country  is  obliged  to  deliver  postal 

items that were transported out of the country, posted in a second  country, for 

mailing back  into  the  first  country  for  delivery  (a  practice  often  described  as 

A-B-A remail); 

Article  25.4  permits  UPU  member  countries  to  turn  back  mail  which  they 

receive  from  another  administration  if  the  items  originated  from  a  third 

country  but  were  not  posted  in  that  third  country  (usually  called  A-B-C 

remail). 

The  intention  of  Article  25.1 

is  that  it  should  protect  the  domestic  postal 

monopolies  of the  UPU  members.  Whether  Article  25.1  is  compatible  with  the 

Treaty of Rome depends on certain conditions and interpretations. 

Firstly,  it  is  important to  know  whether the  regulator alone  has  the responsibility 

to  protect  the  monopoly.  Article  25.1  refers  to  action  to  protect  the  monopoly 

being taken  by  "the  member  country".  This  poses  the  question:  who  is  the  main 

signatory  of  each  member  country  to  the  UPU  Convention  -

the  national 

government or  the  postal  administration?  Further, Article  25.1  could  be  used  to 

send  back  items  that  were  not  included  in  the  domestic  monopoly  of the  inward 

administration. 

The issue of compatibility with  the Treaty of Rome is clearer in  the case of Article 

25.4.  Its use involves a  postal administration whose exclusive  rights have not  been 

infringed  helping a  postal administration whose  monopoly  has  been  infringed.  In 

other  cases,  the  use  of Article  25.4  could  well  break  the  commercial  law  of  the 

country where the original customer was situated. 

An  example  could  be  taken  of  a  customer  who  was  located  in  a  country  where 

there was  no  monopoly  over  international  mail.  If his  mail was  remailed  through 

another country,  it  is  possible  that  his  mail  could  be  consolidated  with  material 

from  third  countries where  the postal  law  included  international  mail  within  the 

reserved  area. 

In  such  circumstances,  it  seems  highly  unlikely  that  the  postal 

operator in  the country  of delivery would  be  able  to  distinguish  between  the mail 

originating  in  the  countries  which  were  (in  the  sense  of  their  attitude  to  the 

Chapter 3: Regulatory environment 

page 59 

juridical  position  of international  mail)  less  restrictive  and  those  that  were more 

restrictive. 

6.4  OTHER COMMUNITY POLICIES 

Some  articles  of  the  Treaty  of  Rome  were  formally  modified  by  the  Single 

European Act.  This  initiated work  in  several  areas which  has  significance  to  the 

postal  sector. 

(In  addition,  as  noted  above,  the  Single  Market  needs  to  be 

achieved  in  the  postal  sector  itself.)  The  most  relevant  such  areas  are  shown 

below.  (The possible  effects  of the Single  Market  on  the  users  of postal services 

are discussed in detail at Chapter 4,  Paragraph 9.) 

6.4.l 

TRANSPORT 

The  Commission  has  recently  drawn  up  regulations  and  also  made  further 

proposals  concerning  the  air  transport  industry. 

Initially  the  initiatives  on 

market access have concentrated on  freight-only  air transport services (known as 

"full  freighters"). 

It  is  intended  to  extend  the  same  principles  to  passenger 

aircraft that carry freight. 

The regulations will directly affect the express segment of the postal sector.  They 

may also  increase the flexibility  for  letter and parcel mail  transported by  air,  and 

reduce the costs. 

The  Commission  is  proposing  m  the  third  package  that  there  should  be  free 

operating access within the Community market.  With the agreement of the third 

country  outside  the  Community,  there  should  be  freedom  to  fly  from  an  EC 

country  to  a  third  (non-EC)  country  - the  so-called  "fifth  freedom".  Subject  to 

health  and  safety  requirements,  there would  be  no  restrictions on  the  frequency 

of service, the type of aircraft or the volume of the cargo carried. 

There are currently many restrictions  on  international air  traffic in  force  outside 

the Community.  The  Community will  need  to  negotiate,  on  a  reciprocal  basis, 

reductions  in 

these  restrictions  by  offering  parallel  reductions  within  the 

Community.  The  present  liberalising  measures  therefore  apply  only  to  air 

transport companies incorporated in  a  Member State. 

In  parallel with  such  measures  in  the  air  transport  sector,  there  have  also  been 

certain  liberalisations  relating  to  road  transport. 

In  particular,  there  is  now 

page 60 

Chapter 3: Regulatory environment 

greater freedom  to provide cabotage services which  permit a  transport operator 

to  both  collect  and  deliver  on  trunking journeys carried  out  completely  outside 

the country in which the operator is based.  This liberalisation measure should be 

important  for  postal  operators  wishing  to  establish  truck  networks  beyond  the 

borders of their own countries. 

6.4.2  CUSTOMS AND VAT 

The  simplification  of  customs  procedures  and  the  eventual  elimination  of 

internal  borders  will  facilitate  the  speedy  movements  of  all  mail  between 

Member States. 

For the longer term  the proposals for  VAT are that  it  should  be charged  in  the 

Member State of departure and deducted  in  the Member St.ate  of arrival, with  a 

"clearing  house"  system  to  equalise  the  tax  receipts  of  the  Member  States 

themselves.  In  the  interim,  VAT should  be  applied  at  the  rate  in  force  in  the 

country of the taxable organisation taking receipt of the goods or services. 

Concerning 

intra-Community  distance  selling 

(including  mail  order) 

to 

customers  who  are  either  individuals,  non-taxable 

institutional  bodies  or 

exempted  taxable  persons,  the  regime  applicable  will,  in  principle,  be  that  of 

taxation at  the rate appropriate in_  the country of the customer.  In  this case,  the 

provider of the goods or services would  have either to become registered  in  that 

country or to appoint a fiscal agent there. 

For  individuals,  the  tax,  in  principle,  will  otherwise  be  that  charged  m  the 

Member State of departure. 

VAT will  continue to  be applied  to  the services of transport for  goods or letters 

imported from third countries into the Community in the same way as at present. 

Concerning  intra-Community  trade,  the  VAT  on  transport  services  will  be 

applied  in  principle  in  the  Member  State  of  departure.  However,  when  the 

customer is  a  taxable  person  identified  for  VAT in  a  Member  State  other than 

the Member State of departure,  the principle of reverse charging,  and  VAT will 

only be due to be paid by  that customer at the rate in  force in  the Member State 

where he is identified for VAT purposes.  Therefore, the procedure of the eighth 

directive will not be necessary for the re-imbursement of VAT. 

Chapter 3:  Regulatory environment 

page 61 

The Commission  has  recognised  that  neither  VAT nor  customs charges  should 

be  a  source  of  competitive  advantage  or  disadvantage  to  any  of  the  different 

postal  operators,  either  public  or  private,  where  they  compete  in  the  non 

reserved sector.  Accordingly,  the Commission will  be reviewing the competitive 

interface between  the  services  of the  public  operators  and  those  of the private 

express carriers, in  order to ensure that the fiscal  treatment  is equal where there 

is direct competition. 

6.4.3  DATA PROTECTION 

In  1990,  the  Commission  published  a  draft  directive  on  data  protection,  and  is 

currently  amending  it  following  consultation.  The  directive,  which  will  have 

particularly  significant  effects  on  direct  mail  and  mail  order  companies,  treats 

the  subject  of  the  obtaining,  storing,  processing  and  transmitting  data  of  a 

personal nature. 

Following  amendments,  the  directive  is  likely  now  to  permit  companies  to 

process and  transfer  such  data,  provided  that  it  is  not  of a  sensitive  nature  and 

provided  that  the  person  about  whom  the  data 

is  held  has  been  given 

opportunities to  know  that  the  data  has  been  collected  and,  if he so  chooses,  to 

stop any further use of the data. 

6.4.4 

INTER-OPERABILITY 

The Commission  is  concerned with  developing proposals for  technical standards 

in  telecommunications  and  information  technology.  In  terms  of standards  that 

may have an  importance  in  the postal sector,  standards have been developed for 

EDI.  Progress  has  been  slower  on  inter-operable  standards  for  bar-coding 

systems  for  distribution.  Elsewhere,  proposals  are  being  developed  for  postal 

electronic mail to normalise on the X-400 standard. 

page 62 

Chapter 3:  Regulatory environment 

Chapter 4:  Commercial aspects 

page 63 

CHAPTER 4:  COMMERCIAL ASPECTS 

1. 

INTRODUCTION 

This  chapter  describing 

the  commercial  aspects  of  the  postal  services  discusses  the 

postal  sector  from  the  user's  perspective:  it  therefore  concentrates  on  those  aspects 

which  are more ''visible"  to the user.  Naturally,  it  is  very  much  linked  to  the succeeding 

chapter which  analyses the economic and operational aspects - that  is,  those parts which, 

though "invisible" to the user, underlie the services that are provided to him. 

The current chapter analyses  the overall  market  and  studies customer  requirements.  It 

gives  an  overview  of  the  postal  services  which  are  intended  to  meet  these  market 

requirements, 

and 

also 

surveys 

the 

indirect 

competition 

(particularly  of 

telecommunications-based  services)  which  may  be  attempting  to  satisfy  the  same 

requirements. 

No chapter on the commercial aspects of the postal sector would  be complete without an 

analysis  of the possible effects of 1992  on  the sector,  and  this  analysis  is  included  in the 

last paragraph. 

In summary, the chapter deals with the relationship between customers of postal services 

and  the  operators  of  those  services.  The  following  chapter  will  look  behind  the 

operations that provide these services,  in  particular studying their costs and profitability. 

2.  MARKET OVERVIEW 

Postal services operate in  the communications and  distribution  markets.  There are also 

postal financial  services,  but these are provided  in  the financial  services market, which  is 

fully  competitive,  and  therefore  less  in  need  of  detailed  analysis  of  their  own. 

(They 

would anyway  demand a  more specialised  analysis  in  their  natural context.)  The Green 

Paper on postal services - and,  indeed, this chapter - concentrates on mail services. 

The communication market covers all  the ways  in  which organisations and/or individuals 

communicate with  each other - telecommunications,  television,  radio,  written media and 

the post.  The users of these different media include the advertising industry. 

The  distribution  market  is  very  different,  particularly  in  terms  of  the  customer  base. 

Distribution  involves  the  transport  and  delivery  of  goods  to  the  addressee.  Postal 

page 64 

Chapter 4:  Commercial aspects 

distribution 

through  parcel  services 

is  a  specialised  segment  within 

the  sector, 

concentrating  particularly  on  delivery  of  individual  packages,  but  now  also  covering 

larger consignments. 

This global  description  of the  markets  in  which  postal services  operate is  important  in 

order  to  be  aware  of  the  indirect  forms  of  competition  with  which  postal  services 

compete.  Thus,  for  example,  an  advertiser  can  choose  to  use  any  or  all  (or  a 

combination) of the communication media mentioned in  order to convey  his  message to 

the  potential  consumers:  postal  services  (in  the  form  of direct  mail)  provide  only  one 

possible  medium  for  his  message.  A  company  wanting  to  send  a  piece  of  business 

correspondence could  send  it  by  telefacsimile  (usually called  fax),  by  express  mail  or  by 

the standard letter service. 

This multiplicity of choice is also true for  other communication needs.  Figure  1 overleaf 

shows  some,  if  not  most,  of  the  options  available  to  different  sorts  of  users  for  their 

various communication needs. 

The figure  analyses different communication needs and  mentions some of the means by 

which  these  needs  could  be  met.  The  means  are  divided  into  postal  and  non-postal 

(many  of the  latter  being  based  on  telecommunications).  The  final  column  shows  the 

trends  in  demand  for  the  postal  means  corresponding  to  the  different  communication 

needs. 

The figure divides potential customers into three groups: large organisations (in terms of 

level of communications requirements), small organisations and individuals. 

It should be noted that which medium of communication could be used depends not only 

on  what  facilities  are available  to  the customer  originating the  message,  but also  on  the 

facilities  at  the  disposal  of  the  receiver  of  the  communication.  At  a  simple  level,  a 

telephone can be used  to communicate only  if the  intended  receiver of the  message  has 

access to a  telephone. 

The choice made by the large organisation with significant communication requirements 

will  be  similarly  affected.  Often  the  means  available  to  the  intended  receiver  of  the 

communication  will  be  a  function  of  size.  An  individual  will  have  access  to  postal 

services,  and  probably  also  to  telephone  services.  A  small  organisation  may  well  in 

addition  have  a  fax  terminal  by  which  he  may  receive  messages  from  the  large 

organisation. 

Chapter 4:  Commercial aspects 

page 65 

Figure 1:  Communication "matrix" 

CUSTOMER 
SECTOR 

COMMUN-
ICATION 
NEED 

COMMUNICATION MEDIUM 

NON-POSTAL 

POSTAL 

POSTAL 
DEMAND 
TRENDS 

lARGE 

FlNANCIAL 

OR GANIS-

ATIONS 

Letters 

Automated Banking 
Fax 
Electronic Mail 
EDI 

(to large businesses) 
declining 
(to small businesses/ 
individuals) 
stable 

----

------------------------------------- -----------------------------

BUSINESS 
CORRES-
POND ENCE 

Telephone 

Leners 

Fax 

Express 

Stable 
- but could decline 
Strong growth 

---

--------------------------------------------- ----------------------------

ADVERTISING 

Television 
Radio 
Bill-boards 
Tele-marketing 
Newspapers 
Magazines 

Direct Mail 

Catalogues 

Strong growth 

SMALL 

FlNANCIAL 

Fax 

Leners 

Growth 

ORGAN-

ISATIONS 

BUSINESS 
CORRES-
POND ENCE 

----------------------------------------------- 1------------------------------

Fax 
Telephone 

Letters 
Express 

Growth 

----

-------------------------------------------------- ------------------------------

ADVERTISING 

Newspapers 
Magazines 

Direct Mail 
Catalogues 

INDIV-

TO BUSINESSES 

Telephone 

Letters 
Business reply cards 

IDUALS 

Growth 

Growth 

-------------------------------- 1---------------------------

TO INDIVIDUALS 

Telephone 

Letters 
Cards 

Stable 

Source:  CEC 

page 66 

Chapter 4:  Commercial aspects 

A large organisation will have these facilities,  and may well also have other sophisticated 

systems  for  communicating  data  or  payments  (including  automated  banking  processes 

and perhaps Electronic Data Interchange -EDI). 

For the distribution  of goods,  there is  less  indirect competition  because in  all  cases  the 

goods have to arrive physically at the desired point.  However, postal services compete or 

collaborate in  this  market with  other transport  operations - including freight  forwarders 

and  other  general  transport  expediters.  Within  the  scope  of  postal  services,  there  is 

considerable competition amongst express and non-express parcel carriers,  and  between 

public and private operators. 

There are  three  main  different  types  of postal  (here  meaning  "mail")  services:  letters, 

parcels  and  express.  Because  of  definitions  that  are  not  clear,  there  are  significant 

overlaps between  these services  (see Chapter 3,  Paragraph  3.4  ).  Where such  overlaps 

exist,  there is competition amongst postal services (for instance between the letter packet 

service and the parcel service).  In addition, express services compete directly with letters 

(for the delivery of documents)  and with  ordinary parcel services  (for the movement of 

goods). 

3.  CUSTOMERS 

Customers  have  their  own  individual  needs,  but  these  are  likely  to  be  shaped  by  the 

services that are actually offered.  These services may be responding to an active demand 

that  already  exists,  or,  in  the  case  of  new  services,  may  stimulate  a  demand  that  was 

previously latent. 

3.1  CUSTOMER REQUIREMENTS 

The  fundamental  requirement  is  that  all  citizens  should  have  access  to  postal 

services.  For potential users,  it  is  important  to  know  that all  potential addressees 

can be accessed by the universal system. 

All customers are looking for  a good service/price combination.  For the universal 

service,  this  will  include  a  fair  service,  easy  access  conditions  and  simple  tariff 

structures. 

Large customers  want  service  providers  to  have  a  flexible  approach,  and,  where 

appropriate, 

to 

tailor  service  packages 

to 

the  needs  of  their 

individual 

organisations. 

Chapter 4:  Commercial aspects 

page 67 

3.2 

PROPENSITY TO USE SERVICES 

Most  products  and  services  have  a  life-cycle;  after  maturity,  they  tend  towards 

decline.  However,  although  many  postal  services  are  long-established,  user 

acceptance appears  stable.  Against  that,  since  they  are  already well-established, 

there will not be an explosion  in  user acceptance in  the way  that has recently been 

experienced by fax  machines.  Figure 2 below shows these trends graphically. 

This  stability  in  user  acceptance  may  obscure  the  need  for  "traditional"  postal 

services continually to develop  themselves  (for  instance,  in  the way  in  which  they 

are marketed), and for other services - such as express - to evolve. 

Figure 2: 

Service acceptance trends 

INTERNATIONAL LETTER MAIL 

INTERNATIONAL PARCELS 

A 
c 
c 
E 
p 
T 
A 
N 
c 
E 

1970"s 

TIME 

.....__-----------------------~~----------~ 

Source: 

CEC 

That  mail  is  accepted  as  an  important  medium  for  communication  and  an 

important channel for distribution is  demonstrated by  the fact  that the average EC 

citizen received 260  mail pieces in  1990  (243 in  1988).  By comparison, the average 

US citizen receives 650 pieces annually. 

Within the Community, there are wide variations in  usage.  Figure 3 below shows 

per  capita  usage  in  each  Member  State. 

It  compares  this  to  Gross  Domestic 

page 68 

Chapter 4:  Commercial aspects 

Product per capita.  There is some correlation between GDP per capita and usage. 

(The figures used in formulating the figure are to be found at Annex 2,  Table 6). 

Figure 3: 

Posting levels/ GDP per capita (1988) 

ltema/lnhabltant 

GDP per  capl ta 

800 

..................................................................................................... 

. ...............  2150 

&00 

····································································································· 

................  200 

400 

··································································· 

.......................... . 

300 

200 

100 

HSO 

ao 

o.___...___ ........................ ~ ........ .-.......-..:~ ........ C.0.....-llLL...l .......... _._~..._..--......_..._.~o 

GR  P  E  IRL 

I  D  UK  F 

8 

L  NL  DK 

EC 

USA 

JAP 

It.ma/ Inhabitant  ~ GDP Index  per aaplta 

-
(EC  awrage•244' Item•) 

(EC  awrage•100) 

Source: 

Sofres study and CEC Economic Report n° 38 

3.3  MARKETS 

Tables 1 and 2  below show in broad terms the break-down of who  (or what) posts 

mail  items  and  who  receives  them  The  first  matrix  shows  the  composition  of 

senders and receivers of letters, and the second of parcels. 

Chapter 4:  Commercial aspects 

page 69 

Table 1: 

Letters users matrix 

TO 

ORGANISATION 

INDIVIDUAL 

FROM 

ORGANISATION 

35% 

45% 

INDIVIDUAL 

10% 

10% 

Source: 

CEC estimation ( 1990) 

Table 2: 

Parcels users matrix 

TO 

ORGANISATION 

INDIVIDUAL 

FROM 

ORGANISATION 

25% 

60% 

INDIVIDUAL 

5% 

10% 

- - - - - - - -

Source: 

CEC estimation (1990) 

These  analyses  of  the  average  break-down  cover  quite  significant  variations 

between  Member  States.  Table  3  shows  the  percentages  of letters  originated  by 

organisations  (sometimes  loosely  described  as  the  "business"  market)  and  by 

individuals. 

page  70 

Chapter 4:  Commercial aspects 

Table 3:  Origination of letter volumes 

PERCENTAGE SPREAD OF VOLUMES (LE1TERS) 

MEMBER STATES 

ORGANISATION MARKET 

INDMDUALS MARKET 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 

71.0% 
60.0% 
76.4% 
50.5% 
75.0% 
81.5% 
69.0% 
56.2% 
71.0% 
86.0% 
79.9% 
74.5% 

Source: 

Sofres study - 1988 

3.4 

SEGMENTS 

29.0% 
40.0% 
23.6% 
49.5% 
25.0% 
18.5% 
31.0% 
43.8% 
29.0% 
14.0% 
20.1% 
25.5% 

The analysis  above  reveals  the global  picture.  At  a  more  detailed  level,  Table 4 

shows  the  break-down  of  organisational  customers  by  business  sector.  A 

comparison is  made between the postal administrations' experience of the  market 

(primarily  providing  letter  services)  and  that  of  private  operators  (mostly 

providing parcel and express services). 

Table 4:  Users:  relative importance to operators 

CUSTOMER CATEGORY 

POSTAL ADMINISTRATIONS 

PRIVATE OPERATORS 

Mail order 
Advertising 
Press 
Banking 
Insurance 
Public seivices 
Industry 
Rest 

TOTAL 

(Note 1) 
(Note 2) 

15% 
12% 
20% 
10% 
10% 
10% 
5% 
18% 

100% 

20% 
15% 
5% 
14% 
9% 
N/a 
25% 
12% 

100% 

Note 1: 

While some private services  are used by public administrations,  the percentage overall is 
too small to be appreciable. 

Note 2: 

The principal industrial clients are the automobile, computer and petrol sectors. 

Source: 

Sofres study 

Chapter 4:  Commercial aspects 

page 71 

As indicated above,  mail order, advertising (in this case meaning direct marketing) 

and  publishing  are  the  three  most  significant  users  of  postal  services.  These 

individual segments are analysed in Paragraphs 3.4.1-3 below. 

3.4.1  MAIL ORDER 

Mail  order  is  the  "distant  selling"  of  goods  as  an  alternative  to  retail. 

It  is 

integrally linked  to the postal sector.  Here postal services could  provide one-stop 

shopping  for  the  mail  order  companies  - customer  communication,  catalogue 

distribution,  statement  sending  and  goods  distribution  (the  last  item  now  being 

undertaken increasingly by the private sector). 

Mail order started as an outlet for the clothing industry.  It  has  now expanded into 

other areas,  the fastest  growing presently  being  the  distance  selling  of music  (by 

compact disc), films  (by video) and computer software  (by  floppy  disk).  A  related 

area is "distance learning" services provided by correspondence schools. 

Mail  order  provides  competition  with  retail  companies. 

In  view  of  the  Single 

Market, an increasingly important dimension is  that it  provides ready access cross 

border to goods that may not be available locally. 

Figures for  the mail order industry within  the Community have  been obtained for 

the seven Member States with the largest mail order markets  (Belgium, Denmark, 

Germany,  France,  Italy,  the  Netherlands  and  the  United  Kingdom).  Together, 

mail order  revenue in  these countries  was  worth  some  ECU 26.4  billion  in  1989. 

This equated to 0.7% of the GDP of those Member States.  By way of comparison, 

in  1989, the mail order in  the EFf A  countries was worth some ECU 3.6 billion,  in 

the USA ECU 123 billion and Japan ECU 12.6 billion. 

Table 5 below summarises figures  provided  by  the European  Mail  Order Trader 

Association (EMOTA) for the seven  Member States with  the largest turnover, and 

compares them with figures for EFf A, Japan and the US. 

page  72 

Chapter 4:  Commercial llspects 

Table 5:  Mail order turnover in 1989 

COUNTRY 

Belgium 
Denmark 
Germany 
France 
Italy 
Netherlands 
United Kingdom 

535 
522 
12 284 
5 585 
1 127 
780 
5 585 

Total (of 7 Member States) 

2h 418 

3 651 

122 850 
12 640 

Total EFTA 

USA 
Japan 

Source: 

EMOTA 

3.4.2 

DIRECT MAIL 

TuRNOVER 

-TOTAL 

TURNOVER 

PER CAPITA 

(million ECU) 

(ECU) 

55 
102 
199 
100 
20 
53 
96 

102 

111 

508 
104 

Direct mail  involves the sending of a  targetted  message to  an  individual  (whether 

as a  private person  or as a  particular post-holder in  an organisation),  as  part of a 

strategy to send the same or similar messages to other specific individuals.  (There 

is  another form  of direct  mail  that  is  less  important  in  terms of revenue,  but  still 

significant - unaddressed mail which  is  delivered to targetted areas,  rather than to 

targetted  individuals.) 

It  therefore  operates  in  the  advertising/communications 

market. 

Direct  mail  was  responsible  for  11.7%  of  advertising  spending  in  1989  - that  is, 

ECU  6.4  billion  out  of  a  total  of  ECU  54.5  billion. 

(This  figure  excludes  the 

revenue  generated  by  unaddressed  direct  mail.)  This  was  virtually  the  same 

percentage as in  1984 even though total advertising spending increased 87% in the 

meantime.  These  figures  indicate  that  direct  mail  is  presently  responsible  for 

0.15% of the EC's GDP (excluding extra revenue gained for the advertisers). 

Chapter 4:  Commercial aspects 

page 73 

In  1989,  the  average  EC  citizen  received  43  direct  mail  items.  By  way  of 

comparison, his US counterpart received about 170 - nearly four times as many. 

Operationally, direct  mail is very  important to Community postal administrations. 

Addressed  direct  mail  presently  accounts  for  approximately  18.5%  of  their 

volumes.  It  is  likely  to  become  increasingly  important  as  other  sources  of  mail, 

perhaps particularly the business-to-business  segment,  may  reduce  their  demand. 

(See Figure 1 above at Paragraph 2.) 

3.4.3 

PUBLISHING 

Letter  post  services  are  also  important  for  the  publishing  industry.  All 

publications  can  be  sent  by  post  - newspapers,  magazines  and  books.  Postal 

distribution  of publications competes with  the retail channels such  as  book shops 

or news stand sales, and with local deliveries of newspapers. 

The Federation  Internationale  de  la  Presse  Periodique  (FIPP)  estimates  that  total 

postal  distribution  of  press  items  within  the  Community  currently  accounts  for 

15.2 billion items annually.  Of this figure,  approximately 92% is  for delivery in the 

country where the publication was produced. 

In addition to  the intra-Community cross-border postal distribution  of press items 

(estimated to be  1.1  billion items), there is also a  significant  international element. 

In particular,  there are large flows  of magazines  in  each  direction  between  North 

America and Europe. 

The use of postal services to distribute publications varies from  Member State to 

Member State,  usually depending on  the preferential tariffs  that  are available for 

this  use  (see at  Paragraph  8.4  below  and  at  Annex  13 ).  They  tend  to  prove less 

effective for daily publications where the publisher demands complete reliability of 

delivery. 

However,  some  markets  - such  as  technical  publications  - have  the  majority  of 

their copies delivered by post.  In general, postal services can be the most effective 

method of distribution  for  publications,  either where  small  numbers are  involved 

or the subscribers are dispersed. 

page 74 

Chapter 4: Commercial aspects 

4. 

SERVICES AND  OPERATORS 

The  main  mail  service  categories  are  letters  (including  printed  papers),  parcels  and 

express.  There are certain other services, which tend to be either intermediate between 

these  categories  (such  as  special  letter  delivery  services  - the  "Lettre  expres")  or  hybrid 

services  linking  mail  services  with  other  forms  of  communication  (an  example  being 

postal electronic mail - see Annex 12).  These other services are not very important when 

measured by  the revenue they generate (but might become more so in the future). 

The estimated revenue of the main categories is shown in Table 6. 

Table 6:  Mail services - estimated revenue share by service category 

SERVICE 

CATEGORY 

POSTAL 

PRIVATE 

TOTAL 

ADMINISTRATIONS 
(ECUs billion) 

OPERATORS 
(ECUs billion) 

(ECUs billion) 

LETIERS 
PARCELS 
EXPRESS 

TOTAL 

21.0 
3.0 
2.0 

26.0 

1.0 
5.0 
14.0 

20.0 

22.0 
8.0 
16.0 

46.0 

Source:  CEC (from several sources) 

Mail services refer to the postal movement of all types of packages weighing up to 30  kg. 

They comprise letters,  documents,  packages and parcels,  etc.  (See Annex  1 for  a  more 

detailed list.) 

The postal administrations are the public  postal operators of each  Member State.  The 

description  "private  operators"  is  more wide-ranging.  It covers  large  companies which 

have significant  international volumes  - such  as  DHL,  Federal Express,  TNT and UPS. 

It  also  covers  other  operators  - such  as  freight  forwarders  - for  whom  postal  work  is 

somewhat marginal to their main business.  A  third category covers those private parcel 

and  express  carriers  which  tend  to  concentrate  on  domestic  deliveries  within  one 

national territory.  This last category probably generates the largest amount of revenue, 

but is also very diversified with many companies sharing the market. 

It should  be recognised  that  the distinction  between  the express and  parcels markets is 

somewhat  blurred.  Thus,  while  the  total  figure  for  the  sector  is  accurate,  those  for 

express  and  parcel  services  (especially  those  provided  by  private  operators)  are 

necessarily more approximate. 

Chapter 4:  Commercial aspects 

page 75 

4.1 

LETTERS 

The  letter  services  are  mostly  subject 

to 

the  exclusive  rights  of  postal 

administrations.  The  small  proportion  of  letters  revenue  gained  by  private 

operators  is  due  to  the  activities  - whether  juridically  permitted  or  not  - of 

remailers, city  mailers and document exchanges.  (The first  two  of these activities 

are discussed  at Chapter 5,  Paragraph 9;  document  exchanges were mentioned at 

Chapter 3,  Paragraph 3.9.) 

According to  special surveys  in  the various  Member States,  a  break-down  of the 

senders  and  receivers  of  ordinary  letter  mail  items  shows  that  organisations 

account for slightly over 80% of items sent (see Table 1 at Paragraph 3.3 above for 

a more detailed break-down), but only 45% of those received. 

Table 7 shows  the reasons for  posting found  by  a  1989  sample.  (The results  are 

intended to be illustrative rather than broadly representative.) 

Table 7: 

Reasons for mailing 

23.6% 

18.4% 

17.9% 

123% 

10.6% 

17.2% 

Direct mail 

Sending of money/ cheques 

Business correspondence 

Invitation/notifications of events 

Personal communications/greecings 

Other (including printed papers) 

Source: 

Postal administration sample 

Turning to cross-border letter mail,  the intra-Community market generated about 

5%  of the  postal  administrations'  turnover  in  1990. 

It  is  therefore worth  some 

ECU 1.6  billion.  If extra-EC mail  is  added,  the total cross-border  mail generated 

by  postal administrations would  be worth  about  ECU 3.2  billion  in  total.  To  this 

should be added  the revenue gained by  the private operators through  their cross 

border letter operations.  This is probably worth an additional ECU 0.4 billion. 

4.2 

PARCELS 

In  all  Member  States,  parcel  services  are  m  free  competition.  Most  postal 

administrations are obliged,  as  a  part of the  mandatory area,  to off er a  universal 

page  76 

Chapter 4:  Commercial aspects 

(domestic) delivery service of parcels up to certain weight limits.  These limits vary 

considerably within the Community. 

Private  operators  offering  domestic  parcel  service  rely  as  much  as  possible  on 

their  own  collection  and  delivery  networks.  For  certain  deliveries,  especially  to 

some  remote  areas,  private  operators  have  the  option  of posting  items  with  the 

postal administrations. 

The postal administrations' domestic parcel delivery services  have  in  recent years 

faced  a  severe  test  from  the  rapidly  growing  private  sector. 

In  fact,  the  total 

volume  of  parcels  handled  by  postal  administrations  within  the  Community 

declined from  1980  to  1990, when  the trend was finally  reversed.  Although  postal 

administrations  are  usually  the  market  leaders  in  their  national  parcel  markets, 

their overall market share is now about 38%. 

As  with  domestic  parcel  services,  the  international  parcels  market  is  in  free 

competition.  It  is  divided  into  surface  movements  (tending  to  be  dominated  by 

the  larger  transport  companies  and  freight  forwarders)  and  air  movements 

(tending  to  be  dominated  by 

the  large  express  companies). 

The  postal 

administrations attempt to compete in each segment.  Some are obliged  to offer a 

service up to a certain weight limit. 

Private operators offering international parcel service  rely as  much  as  possible on 

their  own  networks.  Sub-contractors  are used  by  smaller  operators,  or  by  larger 

operators in countries generating or receiving smaller volumes. 

43 

EXPRESS 

Express services  have existed  in  one form  or another for  at least  100 years.  (One 

derivative of this  earlier phase  is  the  special  letter delivery  - the "Lettre  expres"  in 

French).  The modern  express services,  however,  have  evolved  in  the  market  gap 

that was created by  the general perception that postal administrations' service was 

declining  at  the  very  time  that  customer  service  needs  were  becoming  more 

demanding. 

As  their  name  indicates,  express  services  are  intended  to  provide  fast  delivery. 

Strangely  enough,  relatively  few  operators  provide  guarantees  of delivery  times. 

However, their general reputation is one of speed and, perhaps more importantly, 

reliability. 

Chapter 4:  Commercial aspects 

page 77 

Each  operator  naturally  tries  to  maintain  a  competitive  advantage  over  his 

competitors  who  then  may  follow  any  initiative.  Thus,  collection  on  demand, 

credit  facilities  and  account  management  have  become  standard.  Price  can 

sometimes  play  a  part,  since  operators  may  have  different  costs  depending  on 

their volumes and the scope of their operations.  Relative speed and reliability (as 

well as image) are also important. 

In  general,  however,  the  terrain  for  seeking  competitive  advantage  seems  to  be 

moving.  The  ability  to  offer  "tracking  and  tracing"  is  now  becoming  very 

important.  This facility  involves  a  network where  the progress  of each  document 

or package through  the process from  collection  to  delivery  is  noted  electronically. 

Tracking  and  tracing  involves  heavy  investment,  but  offers  the  reward  of  being 

able to know where each item is in  the process. 

The second  important area  is  the "dove-tailing"  of the  express  operation  into  the 

customer's  operation.  Thus,  express  operators  may  offer  warehousing  and 

distribution facilities  to  help customers reduce stock-holding costs,  or may provide 

other facilities  to  support  customers'  "just-in-time"  strategies.  They  may  also  be 

able  to  offer  themselves  as  the  single  distributive  source  for  retailers,  thus 

obviating the need for a retail outlet to receive a number of smaller deliveries. 

A  third  area of potential comparative advantage is  that of customs-clearance (for 

cross-border  items).  Efficient  customs-clearance  operations ensure  that  customs 

procedures impose  the  minimum  possible  delay  on  the  package  to  be  delivered. 

However,  for  express  services  within  the  Community,  the  scope  for  gaining 

competitive advantage from fast customs clearance will diminish after  1992. 

As stated above, the overall express market in the Community is worth some ECU 

16.0  billion.  (The qualifying remark  that there is  a  potential overlap with  parcels 

revenue figures  bears repeating here.)  Of this  figure,  11 %  is  generated  by  cross 

border services. 

The  US  market  is  said  to  be  at  least  three  times  as  large  as  the  EC  market. 

Efficient  express  services,  by  overcoming  the  geographical  spread  of  the  major 

centres, are seen to be indispensable to the well-functioning of American business. 

In  terms  of distance,  many  of  the  movements  in  the  US  market  are  similar  to 

cross-border  movements  in  Europe.  The  US  market  size  and  continued  growth 

indicates that the EC market has far to go before its potential is reached. 

page 78 

Chapter 4:  Commercial aspects 

Domestic  express  markets  are  served  by  a  diverse  spread  of operators.  Cross 

border  operations  are  more  concentrated.  At  the  European  level  DHL  is  the 

biggest  cross-border  operator  with  26%  of  the  market.  Next  is  TNT  which, 

including  the  revenue  from  its  subsidiary  XP,  has  about  a  22%  share  of  the 

market,  followed  by  Federal  Express  and  UPS,  each  with  around  10%  of  the 

market.  Private operators tend to specialise in  moving either documents or goods 

packages.  For example, DHL tend to specialise in documents, and TNT in goods. 

In terms of cross-border express services,  the Community's postal administrations 

have  a  relatively small  market  share.  Presently,  this  averages  about  10%  of the 

international  express  mail  originating  in  their  individual  countries.  One  way  in 

which  they  hope  to  increase  this  share  is  through  Unipost,  an  independent 

company  founded  in  1989  by  some  CEPT  members  and  other  associated  postal 

administrations to provide centralised cross-border operational management. 

Domestically, the EC's postal administrations have been more successful  - a  share 

of  15%  or  more  is  not  unusual.  Postal  administrations'  delivery  operations  for 

express  items vary.  Some provide express services whose  provision  is  completely 

dependent  on  the  universal  network  of  the  basic  letter  service.  Others  have 

express networks that are almost entirely independent of the basic network. 

5. 

FINANCIAL FIGURES 

Chapter  5  examines  the  operational  and  economic  facts  that  underlie  the  services 

provided  to  customers.  Here,  the  services  provided  are  summarised  as  volumes  and 

revenues gained  by  operators.  First  the figures  are given  showing  the present  posjtion, 

and then at Paragraph 5.2 the possible effects of the discernible trends are discussed. 

5.1 

PRESENT POSITION 

Table  8  shows  the  volume  and  revenue  generated  by  the  Community's  postal 

administrations in  1988.  (It omits the 5 billion  unaddressed  items also  handled in 

that year, since these items tend to have a distorting effect.) 

Chapter 4:  Commercial aspects 

page 79 

Table 8: 

Postal administration volumes and revenues (1988) 

MEMBER 

STATE 

LETTERS 
(inc printed 
papers) 

PARCELS 

EXPRESS 

REVENUE 

millions 

millions 

millions 

mill ECU 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
UK 

3 145 
1573 
14 262 
451 
5 014 
15 894 
494 
10 534 
168 
5 408 
596 
13  774 

3 
33 
500 
1 
9 
311 
4 
49 
1 
110 
6 
191. 

TOTAL 

71313 

1 216 

Source: 

Sofres study 

4.5 
0.4 
8.0 
3.2 
0.8 
6.2 
1.5 
5.4 
0.2 
3.3 
0.3 
11.95 

45.75 

824 
806 
7000 
100 
692 
7 340 
188 
2651 
42 
1 778 
135 
4 643 

26199 

-

In addition to the figure shown above of ECU 26  billion generated from  their mail 

services,  postal  administrations  generate  a  further  ECU  13  billion  from  their 

postal financial services.  (Se~ Chapter 5,  Paragraph 7 .1.) 

Private  operators  in  the  postal  sector  generate  an  estimated  ECU  20  billion. 

Table  9  shows  how  this  figure  is  broken  down  between  the  major  players,  and 

compares the revenue earned in the Community with that earned worldwide. 

Table 9: 

Total turnover of four big private operators in billion ECU ( 1990) 

OPERATOR 

WORLDWIDE 

COMMUNITI' 

·-

DHL 
1Nf 
UPS 
Federal Express 
Other 

TOTAL 

2 
3 
12 
7 
16 

40 

0.5 
1 
4 
1.5 
13 

20 

Note: 

The market  shares mentioned  at  Paragraph 43 above  refer  only  to  the cross-border 
express market: they will therefore not correlate with the figures shown here. 

Source:  Several 

page 80 

Chapter 4:  Commercial aspects 

5.2 

TRENDS 

Mail is  likely to remain the mass-communication  medium for  any company which 

needs  to  convey  a 

large  number  of  individual  messages,  domestically  or 

internationally.  This would  be particularly true of the financial  services sector (of 

which postal financial  services form  only a  small part) where statements, standing 

order renewals,  premium  notifications,  dividend  payments,  etc need  to  be  sent  to 

individual addresses. 

Recent  annual  volume  growth  rates  of  postal  administrations  are  shown  at 

Table 10. 

Table 10: 

Postal administrations: recent annual volume trends (1985-1989) 

MEMBER  STATES 

PERCENTAGE 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Ponugal 
United Kingdom 

AVERAGE 

Note 1 

Note 2 

Nol'e  1 

+  5.1% 
+ 3.2% 
+  3.5% 
+  3.1% 
+ 6.7% 
+  5.1% 
+  2.1% 
+  7.8% 
+  4.8% 
+  5.7% 
+  7.6% 
+ 6.8% 

+ 6.1% 

Note 1: 

Full  figures  are noc  available  for  Germany and  the Netherlands.  The trend 
figures  shown  for  them  were  extrapolated  from  a  shorter  period,  a-nd  are 
therefore excluded from  the average. 

Note 2: 

Spanish trend extrapolated from period 1984-1988. 

Source:  Postal administrations 

Because  of  confidentiality,  the  trend  figures  for  private  operators  are  not  so 

readily  available.  However,  all  the  main  cross-border  express  operators,  both 

private  and  public,  pronounce  themselves  confident  of strong  revenue  growth  in 

the Community.  These growth predictions range from  15% to 25% per annum. 

Chapter 4:  Commercial aspects 

page 81 

The  effect  of all  these  trends  on  the  different  parts  of the  postal  sector  can  be 

combined to  make revenue projections for  the whole sector  together.  The trends 

used  tend  towards the lower  end  of the range.  For example,  only 3% growth per 

annum  is  assumed  for  letters  (less  than  the  recent  growth  experienced  and 

allowing  for  reducing  unit  revenues).  For  express,  a  10%  annual  growth  rate  is 

assumed;  this  assumes  that  the  domestic  express  market  grows  at  a  smaller  rate 

than  the  forecasts  for  cross-border  services  mentioned  above.  The  forecast 

combined effect  of these  trends  is  shown  in Table  11.  (These projections assume 

no change in the juridical position of any of the services.) 

Table 11: 

Present and forecast revenue shares (billion  ECUs and percentages) 

SEGMENT 

OPERATOR 

PRESE:NT 

FORECAST 
- 5 YEARS 

FORECAST  -~-I 
- 10 YEARS 

- - - -

21.0 
1.0 

3.0 
5.0 

2.0 
14.0 

26.0 
20.0 

24.3 
1.2 

4.2 
7.0 

3.2 
22.6 

31.7 
30.8 

28.2 
1.3 

5.9 
9.8 

5.2 
36.3 

39.3 
47.4 

" · - - - -

57.0% 
43.0% 

51.0% 
49.0% 

45.0o/c 
55.0% 

LETIERS 

PARCELS 

EXPRESS 

TOTAL 

SHARE 

(NOTE 1) 

- PA 
-PO 

- PA 
-PO 

- PA 
-PO 

- PA 
-PO 

- PA 
-PO 

Note 1.: 

PA  =  Postal Administrations 
PO  =  Private Operators 

Source: 

Several 

6. 

SERVICE FEATURE -ACCESS 

Access conditions refer to  the conditions by which  potential  users can gain  access  to  the 

postal services.  There are three important aspects: 

-

the availability to customers of information on what services are available  and  how  to 

use them; 

page 82 

Chapter 4:  Commercial aspects 

-

-

the method by which the services are paid for; 

the method by which the items are actually posted. 

In  a  certain  perspective,  the  access  conditions  for  using  services  offered  by  private 

operators vary from  those for  services provided by postal administrations.  Since private 

operator  services  all  operate  in  the  competitive  sector,  their  access  conditions  are 

formulated as a  result of competitive pressures and the profitability of their services. 

In  some  cases  this  is  also  true  of  the  services  offered  by  the  postal  administrations. 

However,  the  access conditions for  using  many of the services of the latter have  evolved 

over a  period of time, and may owe more to this evolution than competitive pressures. 

6.1 

PRIVATE OPERATORS 

While  it  is  difficult  to  generalise,  the  service  information  provided  by  private 

operators  must  be  at  least  adequate;  otherwise,  customers  would  not  use  the 

services, or would not continue to use them. 

These services  are  targetted  at  organisational  customers  (and  then  usually  at  the 

larger customers).  For such customers, private operators collect the material from 

their  premises,  and  payment  is  usually  made  on  an  account  basis.  Some  private 

opera tors are starting to off er more general access to  their services, by  permitting 

members of the public  to  post  items  at  their  operational offices.  (In  the  United 

States, posting at such "lodging points" is  much more common.) 

In  some countries,  some  private  operators  offer  universal  collection  and  delivery 

service  to  their  customers.  If they  do  not,  they  may  contract  with  other  private 

operators to provide part of their "network".  Alternatively, for  remote areas,  they 

could post the items with the postal administration, usually at ordinary tariffs. 

6.2 

POSTAL ADMINISTRATIONS 

Postal  administrations  are· now  investing  to  increase  the  ways  in  which  potential 

customers can gain  information  about  their  services.  Thus,  service  brochures are 

more  widely  available  and  customer  service  answering  services  are  being 

established.  However,  at  least  for  individual  customers,  the  main  source  of 

information about  postal administrations'  mail services will  remain the post office 

counters. 

Chapter 4:  Commercial aspects 

page 83 

The "accessibility"  of postal  services,  particularly  for  the  individual customer, will 

therefore  much  depend  on  factors  such  as  customer  queuing  times  at  counters 

and, indeed, the politeness of the staff. 

For  large  customers,  once  they  have  decided  to  use  a  service,  access  to  postal 

administrations'  services  can  be  the  same  as  for  private  operators.  Large 

customers can  normally  have  contract facilities  enabling them  to  have  their  mail 

collected  and,  in  most  countries,  to  pay  on  account  for  a  large  proportion  of the 

postal services used. 

Other customers pay for  their postage  in  advance.  Organisational customers may 

use  franking  machines  which  put  a  "meter"  impression  on  the  envelope,  while 

others  use  stamps.  Credit  for  meter  machines  is  usually  bought  at  post  office 

counters. 

Individuals will almost always use stamps.  These can now be bought in  a variety of 

retail outlets - not  only  post  office counters.  (The present  position  results  from  a 

long-term  trend;  whereas  many  postal  administrations  previously  permitted  only 

their  own  counters  to  sell  stamps,  this  is  now  the  situation  only  in  Belgium  and 

Portugal.) 

If customers  have  to  post  their  mail  themselves,  they  do  so  either  at  post  office 

counters or  in  posting boxes  available  in  public  places.  The concept  of  universal 

service implies that these counters and posting boxes must be available throughout 

the  territory. 

(The  relative  availability  of  counters  is  studied  in  Chapter  6, 

Paragraph 2.2.) 

There are  two  particular  subjects  relating  to  access  to  the postal  administrations' 

services  that  need to  be discussed.  The first  concerns  "mail  preparation"  and  the 

use of private operators to undertake this work;  the second concerns the access  to 

printed paper services and the availability of discounts. 

6.2.1 

MAIL PREPARATION 

Almost all  postal admm1Mrations encourage customers to undertake activities that 

reduce  the  work  content  for  the  postal  administrations  themselves.  The  most 

obvious  example  of such  an  activity  that  could  "save"  the  administration  work  is 

that  of pre-sorting  of mail.  This  involves  the  carrying  out  of all  or  most  of the 

outward sorting process (and  even part of the inward  sorting process).  Normally, 

page 84 

Chapter 4:  Commercial aspects 

these processes are part of the "invisible" element of the postal operation, and are 

therefore discussed in detail at Chapter 5,  Paragraph 3. 

As  mentioned  at  Chapter  3,  Paragraph  3.5,  some  postal  administrations  permit 

private  operators  to  act  as  intermediaries  between  the customers  originating  the 

mail  and  themselves.  The  private  operator  could  undertake  different  activities 

which  the  customer himself  may  not  be  able  to  carry  out,  before  the  material  is 

posted  (at 

least 

in 

the  case  of  reserved  service 

items)  with 

the  postal 

administration.  The postal  administration  then  carries  out  whatever parts of the 

postal operation are still necessary. 

However, there are some administrations that  do  not permit such operators to act 

as intermediaries in  this way.  Why they do not allow this is  not clear.  It is possible 

that  they  believe  that  the  mail  process  comprises  different  activities  which  are 

indissociable.  Alternatively,  they  might  be  trying  to  maximise  the productivity  of 

their sorting centres  - particularly  if  they  are  mechanised.  Whatever  the  reason, 

the  prevention  of  the  use  of  such  intermediaries  may  reduce  the  flexibility  for 

customers, and may prevent them from gaining access to certain discounts. 

6.2.2 

POSTING CONDITIONS 

All  postal  administrations  have  "tiering"  systems  which  classify  their  letter  mail 

into  two  categories. 

In  the  case  of  the  majority,  the  classification  is  between 

letters  and  cards  ("lettres  et  cartes"  in  French  or  LC)  and  printed  papers/small 

packets (called "autres objets"  in  French or AO). 

This classification  is  therefore  on  the  basis  of the  contents  of the  item.  In  other 

countries  (Denmark,  the  Netherlands  and  the  UK)  in  the  Community  but  also 

several  important  administrations  outside,  the  tiering  is  based  on  the  choice  of 

speeds offered  to  the  customer.  Usually,  these  classifications are  titled  first  class 

and second class. 

The  second  important  area  relating  to  posting  conditions  concerns  the  different 

definitions  of what  are  printed  papers,  and  what  publications  qualify  for  certain 

discounts. 

A  frequently  used  definition  of printed  papers  refers  to  the  requirement  that  the 

text should  be  identical  between  the  different  items sent  in  a  posting.  This would 

therefore  place  invoices  and  bank  statements  (where  the  figures  shown  refer  to 

Chapter 4:  Commercial aspects 

page 85 

the individual account of the addressee) in the category of letters.  However, some 

postal administrations place such items in the printed papers category. 

This  is  not  only  a  question  of different  tariffs  paid  by  the  customer  or  different 

revenues received  by  the  postal  administration.  In  most  countries,  it  also  affects 

whether the mail should be considered  reserved or not  (see Table 2 at  Chapter 3, 

Paragraph 3.3 ). 

All  administrations  have  definitions  of  a  newspaper  which  determine  what 

discounts  a  publication  receives.  The  two  main  criteria  are  the  percentage  of 

editorial  content  in  the  publication  and  the  frequency  of publication.  However, 

the application of these criteria varies greatly between Member States.  Thus what 

may be considered a  newspaper in  one country would  not qualify in  another. 

Access  to  discounts  (whether  for  newspapers  or other services)  often  depends on 

the volumes posted.  But,  again,  the volume  levels  needed  vary between  Member 

States.  (The  structuring  of discounts  will  vary  almost  inevitably  because  of  the 

different  operational  systems;  the  crucial  factor  is  the  level  of pre-sorting  that  is 

made possible by the different post-code systems - see Annex 10.) 

7. 

SERVICE FEATURE - QUALITY OF SERVICE 

Quality of service can be defined  as  giving  the customer what he wants.  However, what 

the customer wants can vary widely.  As indicated elsewhere, customer expectations arise 

from  a  somewhat circular chain.  If a  postal  administration  provides  good  quality,  then 

this  comes  to  be  expected,  and  customers  therefore  entrust  important  and/or  urgent 

items to the letter service. 

If the postal service then falls below the expectations which  its previous performance had 

encouraged,  customers  are  likely  to  be  that  much  more  aware  of  the  failure. 

If, 

conversely, the services as experienced by  the customers are (and were) poor, customers 

are likely to become less and less demanding in  terms of what they require of the service. 

Conventionally, postal  qua.i.,  y  [ 1  ~ervice has  been  measured  in  terms  of time  taken  for 

the  item,  as  measured  across  all  or  part  of the  span  from  collection  to  delivery. 

It  is 

increasingly recognised that using this as the only measurement of quality does not give a 

complete  picture  of  service  reliability.  For  example,  while  90%  of  items  may  be 

page 86 

Chapter 4:  Commercial aspects 

delivered by  the target  date, are the remaining  10% delivered the next  day or within the 

next ten days? 

Another feature of the quality of postal services relates to  the customer "interface".  This 

Luuld  be measured  in  several ways.  For  instance,  how  long does  it  take  to  buy  a  stamp 

(or gain  other access  to the postal services);  how easy is  it  to get  information on  how to 

use services; how readily are enquiries or complaints answered? 

Although  few,  if  any,  regulatory  bodies  impose  quality  of  service  obligations  on  their 

reserved  service  providers  (that  is,  their  postal  administrations),  it  is  clear  that  the 

administrations themselves consider that  they  are  under some obligation  not  only  to set 

themselves  service  targets,  but  also  (in  most  cases)  to  give  information  publicly  on 

service performance. 

This obligation is  felt with  regard to the universal services only:  neither private operators 

nor  their  postal  administration  competitors  publicly  give  details  of  performance  of 

parcels or express services.  (Surprisingly  few  express operators state guaranteed transit 

times.)  As a  result, the further description below relates only to letter services. 

7.1 

NATIONAL QUALITY 

Annex 7  discusses the ways  that targets are set and  how performance is  measured 

against target. 

Impartial  surveys  carried  out  by  consumer  groups  or  other  operationally 

disinterested  organisations,  all  using  end-to-end  systems,  have  measured  service 

performance of most of the postal administrations of the Community. 

These results can be compared with  those published  by  the postal  administrations 

themselves (in  each case,  the  results are for  performance against  the target stated 

by each postal administration).  As Annex 7  indicates, postal administrations use a 

variety  of  different  measuring  systems,  most  of  them  measuring  only  the  time 

taken by internal processes. 

Table  12  below  shows  the  results  of postal  administrations'  performance  against 

their advertised  targets for  their faster  letter services  (letters or first  class letters). 

With  the exception of Spain, the target is  for  next  day delivery.  One reason for the 

differences  noted  in  the  results  in  Table  12  is  that  the  independent  surveys 

Chapler 4:  Commercial aspec1s 

page 87 

measure the  whole  process  from  collection  to  delivery  (reflecting  the  customer's 

experience of the service) while most postal administrations' systems do not. 

If there  is  a  quality  of  service  problem  perceived  by  customers,  it  will  not  be 

resolved unless  it  is  also  recognised  by the operator providing the service.  In  this 

regard,  some  postal  administrations  have  found  that  the  introduction  of  end-to 

end  measuring  systems  can  lead  to  a  painful  confrontation  with  a  reality  worse 

than  that  previously  perceived  by  themselves,  but  a  confrontation  that  was 

necessary to  improve service.  For  example,  when  the  Irish  postal  administration 

in  late  1988  introduced  end-to-end surveys  carried out  by  an  external  agency,  the 

first  results  (which were  published)  showed  a  performance of 52%  against  target. 

Measured in the same way, current performance is  now 94%. 

Table 12: 

Postal administrations' service: targets and perfomzance ( 1988/89) 

MEMBER STATES 

t 

TARGET 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 

(Note 2) 

(Note 3) 

(Note 2) 

90% 
97% 
90% 
90% 
100% 
81% 
90% 
90% 
100% 
94% 
92% 
90% 

RESULTS 

PROVIDED  BY 

POSTAL 

ADMINISTRATIONS 

INDEPENDE1''T 

SURVEY 

RESULTS 
(Note 1) 

---

83% 
97% 
91% 
44% 
80% 
78% 
90% 
55% 
97% 
93% 
85% 
80% 

68% 
N/a 
81% 
N/a 
38% 
70% 
84% 
17% 
N/a 
93% 
N/a 
80%. 

Note L 

Note 2. 

Note 3. 

The  independent  results  were  mostly  obtained  by  national  consumer  organisations 
Results from  a  survey carried out  by  Research  International have also  been  used.  No 
independent  survey  results  arc  to  hand  for  Denmark,  Greece,  Luxembourg  or 
Portugal. 

The  table  shows  letter  service  performance  (first  class  letters  in  Denmark  and  the 
United Kingdom). 

The target  for  Spain  is  for  delivery two  working days  after posting.  All  other targets 
are for next  day delivery. 

Source: 

CEC from  several sources 

page 88 

Chapter 4:  Commercial aspects 

As  mentioned  above,  a  single  figure  showing  the  performance  against  target  is 

insufficient.  It does not reveal how long or short is  the quality of service "tail" - the 

(usually) diminishing percentages in the succeeding days. 

Table  13  below shows  the  percentage  of mail  that  was undelivered  after  one,  two 

and  five  working  days  after  posting. 

(The  results  for  the  last  column  are  only 

partial.  It should also be recalled that Spain has a  service target of D  +  2.) 

Table 13: 

The quality "tail" ( 1988/89) 

MEMBER STA TES 

DAY+  1 

DAY+  2 

DAY+  5 

SPREAD OF MAIL NOT DELIVERED BY 

(Note  1) 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 

23.5% 
3.0% 
10.0% 
56.0% 
44.0% 
23.5% 
15.0% 
83.0% 
1.0% 
4.0% 
20.0% 
23.5% 

3.5% 
0.5% 
• 
20.0% 
15.0% 
6.5% 
1.0% 
63.3% 
• 
• 
4.0% 
6.0% 

0.2% 
• 
• 
N/a 
22.6% 
• 
• 
18.8% 
• 
• 
• 
• 

•  = 

Not appreciable 

N/a  =  Figure not available 

Note 1: 

The figures  for Spain  in  the first  two columns are the official published figures,  and in the 
third  that  produced  by  a  consumers'  group.  The  latter  produced  figures  of  96.5% 
undelivered by D + 1,  and 62%  by  D + 2. 

Source: 

CEC from  several sources 

As  can  be  seen,  administrations  which  have  good  quality  of  service  figures  for 

performance against target generally have short quality of service tails. 

7.2 

CROSS-BORDER QUALITY 

Only about  half of the Community's postal administrations publish any targets for 

mail  crossing  borders  either  within  the  Community  or  connecting  with  other 

countries.·  However,  almost  all  administrations  have  internal  operational  targets, 

perhaps based on recommendations of the CEPT. 

Chapter 4:  Commercial aspects 

page 89 

The principle is  that cross-border  mail should  receive  the  same quality of service 

as the equivalent mail handled domestically for  the outward operation and for the 

inward operation.  Thus the usual  target for inward cross-border letter mail is that 

it  should  receive a  90%  delivery  on  the  first  working day  (D  +  1)  after reception 

by the inward administration. 

The CEPT oversees a survey assessing the quality of service crossing borders.  The 
target of delivery by  the third working day after posting is  a composite of D  + 1 in 

both  the  outward  and  inward  countries,  and  a  day  for  the  transport  between  the 

two. 

Interestingly,  the  CEPT  employs  an  outside  agency  to  measure  end-to-end  on  a 

sample basis.  The results  to  date have  not  been good.  Just 40%  of mail achieves 

the target.  Expressed in  another way,  the average delivery time was 4.05  days. 

The  detailed  break-down  of  the  survey  is  not  available.  However  a  group 

representing the consumers' unions of Europe, the Bureau Europeen des  Unions  de 

Consommateurs  (BEUC),  undertook  a  similar  survey  in  March  1990.  Using 

sampling procedures which  would  favour  the  postal  administrations  (for  instance 

by only sending mail between capitals), it found  that the performance figures were, 

respectively, 51 %  and 3.96 days.  This sample revealed  the  results shown  in  Table 

14. 

(Services  from/to  Luxembourg  were  not  measured.  There  were  abnormal 

conditions in  Greece during part of the sample period,  and the results for  Greece 

were excluded.) 

page 9U 

Chapter 4:  Commercial aspects 

Table 14:  Average delivery time (days)  within the Community for standard letters 

(1990) 

COUNTRY OF DESTINATION 

Average 

B 

DK  D 

E 

F 

IRL 

I 

NL 

p  UK 

FROM 

COUNTRY 

B 

-

2.1 

2.6 

3.0 

2.2 

3.7 

3.1 

2.0 

4.6 

2.4 

OF 

DK  2.1 

-

3.8 

4.2 

3.8 

4.1 

5.3 

2.7 

4.6 

3.0 

ORIGIN 

D 

E 

F 

2.6 

2.6 

--

3.2 

2.7 

4.8 

5.1 

2.1 

4.3 

3.0 

3.5 

3.3 

4.8 

---

4.2 

4.2 

7.9 

4.1 

4.4 

5.7 

3.0 

3.8 

3.2 

4.8 

--

4.8 

5.0 

2.7 

4.6 

4.0 

IRL  3.0 

2.9 

4.6 

4.8 

4.5 

---

9.2 

3.3 

4.0 

2.1 

. I 

NL 

p 

4.5 

4.1 

5.4 

6.3 

6.5 

5.6 

---

5.1 

5.0 

5.1 

2.8 

2.1 

2.2 

3.0 

3.0 

4.1 

7.1 

---

4.5 

3.9 

3.4 

3.0 

4.4 

3.6 

3.6 

4.2 

8.0 

4.1 

---

3.9 

UK  2.7 

3.2 

4.6 

4.3 

3.8 

2.7 

4.4 

2.8 

4.0 

---

-

. 

2.9 

3.7 

3.4 

4.7 

4.0 

4.3 

5.3 

3.6 

4.2 

3.6 

Average TO 

3.1 

3.0 

4.0 

4.1 

3.8 

4.2 

6.1 

3.2 

4.4 

3.7 

3.96 

Source: 

BEUC 

8.  TARIFFS 

The question of tariffs can be approached from  two  different directions.  The prices that 

the  customer  pays  are  "visible"  (using  the  distinction  used  in  the  introduction  at 

Paragraph  1 ).  What he does not see, however, are the costs and tariff principles applied. 

Together the costs and principles applied lead to the prices that the customer pays. 

Here, the "visible"  aspects of tariffs will  be discussed.  The elements that are "invisible" to 

the customer - that is,  the costs and tariff setting policies - will  be discussed  in  Chapter 5, 

Paragraphs 5 and  6. 

The discussion concentrates solely on services that are presently reserved,  or are subject 

to special tariff policies.  The key aspects from  the perspective of customers are the level 

of the basic tariffs;  the structuring of the  tariffs;  the  availability  of discounts  and,  lastly, 

preferential tariffs. 

Chapter 4:  Commen:.ia/ aspects 

page 91 

8.1 

BASIC TARIFFS 

In the Community, the tariffs for the basic letter service (for letters weighing up to 

20g) vary by  a factor of more than 3 - from  0.14  ECU to 0.50  ECU.  If these prices 

are adjusted  for  the  purchasing power  within  each  Member  State,  the  spread  of 

prices reduces somewhat, as shown by Table  15. 

Whether the citizens/customers of different  Member States consider these prices 

to be good or bad value for money is  not very much researched. 

All  postal  administrations  apply  a  single  unitary  tariff  for  letters,  the  same price 

being  paid  for  delivery  anywhere  in  the  territory. 

(Exceptionally,  the  Spanish 

postal administration also offers separate local tariffs for  items for local delivery.) 

This principle - called the ''perequation  tarif a ire"  - has been extended by  nine out of 

the twelve Member States to mail going to other Community countries.  (Amongst 

these  postal  administrations,  eight  offer  this  perequation  tarifaire  for  the  basic 

letter up to 20 g;  France offers it  up  to  100  g.)  However,  as Chapter 5,  Paragraph 

6.1  discusses, perequation  may  imply  a  need  for  regulatory  protection  in  order  to 

prevent cream-skimming.  The question would  then need  to be posed whether the 

potential liberalisation  of cross-border  services  was  more  or  less  important  than 

the principle of perequation for such services. 

page  92 

Chapter 4:  Commercial aspects 

Table 15: 

1990 tariffs in ECU, for a letter from  0 to 20 g. 

COUNTRIES 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 

EC Average 

Japan 
United States 

(Note 2) 

(Note 3) 

NATIONAL 

LEITER MAIL 

PuRC HASING  POWER 

ADJUSTED 

(Note 1) 

0.33 
0.47 
0.50 
0.17 
0.15 
0.33 
0.36 
0.50 
0.28 
0.32 
0.18 
0.28 

0.32 

0.34 
0.19 

.. 

0.31 
0.50 
0.45 
0.30 
0.19 
0.31 
0.57 
0.56 
0.24 
0.31 
0.31 
0.26 

0.32 

0.40 
0.36 

I 
I 
1---

-

. 

Note 1. 

Note 2. 

Purchasing power adjustment made by  applying private  consumption/purchasing power 
standard index.  (See EC Annual Economic Report  No 42, Table 16.) 

Spain: The price of ECU 0.15  is  that  for  a  letter sent  between two  towns  (inter-urban). 
The price for  a letter within the same town (intra-urban)  is  ECU 0.08. 

Note 3. 

Price shown for first  class lener up to 60g. 

Source: 

Postal administrations ( 1990) 

8.2 

PRICE STRUCTURES 

Prices other than the tariffs for  the basic letters are also  "visible"  to customers.  It 

is  noticeable  that  the  price  increments  for  higher  weights  vary  significantly 

between the different postal  administrations.  Table  16  shows  the  tariffs at  higher 

weight steps, but expressed as a factor of the basic letter tariff (for a  20g letter). 

Chapter 4:  Commercial aspects 

page 93 

Table 16: 

1990 tariffs for higher weights - factor of basic tariff 

MEMBER 

STATES 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 

PRJCE AS  FACTOR OF BASIC TARJFF 

lOOg 

250g 

500g 

2.40 
1.36 
2.40 
1.40 
1.95 
2.50 
1.50 
2.70 
2.10 
3.00 
3.75 
1.50 

3.30 
2.40 
3.20 
2.00 
4.25 
5.20 
2.20 
5.10 
4.20 
4.00 
6.88 
2.70 

5.80 
4.00 
4.00 
4.00 
8.50 
6.50 
3.70 
8.90 
5.80 
6.00 
12.34 
5.10 

=-~~~~ 

Source: 

Postal administrations 

8.3  DISCOUNTS 

Attitudes  towards  discounts  vary  significantly.  At  least  one  administration  does 

not  permit discounts because of legal  restrictions.  Others  do  grant  discounts,  but 

their  structures  are  likely  to  vary  for  two  reasons.  Firstly,  the  operations  of 

different  countries  vary,  thus  causing a  discount  which  one  administration  might 

offer  in  order  to  encourage  cost  savings  to  be  inappropriate  for  another.  For 

example, the United Kingdom  offers discounts  if addresses can  be read  by  optical 

character readers; other countries do not offer such discounts, either because their 

criteria  for  discounts  are  different  or  because  they  do  not  have  the  same 

technology. 

The  second  important  point  is  whether  the  discount  structure  is  published,  and 

whether  further  discounts  can  be  gained  in  addition.  Here,  again,  there  are 

different approaches.  About  half the  administrations  publish  discount  structures 

for  letters  and  printed  papers,  from  which  sales  staff  are  not  allowed  to  vary; 

others prefer to permit negotiations on a customer-by-customer basis. 

The problem with the latter approach  is  that  it  could  stimulate  large  discounts  in 

the reserved area.  Above a  certain level  of discount,  the discount awarded  to one 

customer may have to  be cross-funded  from  the  revenue from  another.  This,  for 

page 94 

Chapter 4:  Commercial aspects 

example,  would  result  from  a  discount  of  76%  that  was  granted  by  one  postal 

administration to a government ministry. 

Such a  tariff is very preferential indeed.  However,  the phrase "preferential tariffs" 

is  usually  used  to  describe  the  concessionary  rates  granted  particularly  to 

publishers, as discussed below. 

8.4  CONCESSIONARY RATES (PREFERENTIAL TARIFFS) 

Many  countries  within  the  Community  have  concessionary  rates  (also  called 

preferential  tariffs)  for  certain  sorts  of  traffic,  particularly  publications.  More 

detail on  such "cultural mail"  is  to be found  in  Annex  13.  Here it  should  be noted 

that such  tariffs  are  usually  supported  by  government  subsidy  or  by  cross-subsidy 

by  the  postal  administration.  The  principle  is  that  they  should  encourage  the 

spread of communication.  It is  the addressees who are being encouraged by  lower 

prices to want to receive more such communication. 

It is  therefore consistent with  these objectives that such  subsidies  should be  made 

available  to  publishers  based  in  other countries (not just  other  Member States  of 

the  Community)  who  want  to  distribute  newspapers  and  magazines  to  the  same 

addressees. 

The  position  is  by  no  means  so·  clear  in  terms  of  concessionary  tariffs  for 

international mail.  The political objective appears to  be different:  presumably the 

dissemination of publications of one's own  language to  other countries.  It should 

be noted,  however,  that private operators help  publishers from  other countries  to 

take advantage of such tariffs. 

Private operators  (either courier /remail  companies or  freight  forwarders)  collect 

mail  in  one  country,  take  it  to  a  second  country  where  the  tariffs  are  lower  for 

posting  onto  a  third  country. 

In  some  cases,  the  administration  in  the  second 

country  may  encourage  such  practice  because  it  is  profitable.  However,  for 

concessionary  tariffs  below  cost,  such  incremental  traffic  is  unwelcome  for  the 

postal administration. 

Some countries offering preferential tariffs have evolved the rates over a  period of 

time.  Others try  to  apply  fixed  discounts  to  regulate  the  difference  between  the 

preferential  tariffs  and  the  regular  letter  rate. 

For  example, 

the  UPU 

Chapter 4:  Commercial aspects 

page 95 

recommends a  50% discount for  certain  categories of cross-border printed  paper 

setv1ces. 

The overall  position  is  that some  postal  administrations  offer preferential  tariffs, 

while others do not.  Those that do offer them have evolved their prices separately 

from  each  other.  Those  that  do  not  offer such  discounted  prices based  solely  on 

contents tend to have special prices based on mail preparation of publications. 

These varying  approaches  have  led  to  a  wide  range  of  prices  paid  for  the  same 

service.  Table  17  shows  the  price  for  domestic  delivery  of  a  350g  magazine  in 

seven of the Member States.  (Figures for  the  other five  Member States were  not 

given.)  It also shows these prices as a factor of the basic tariff. 

Table  17: 

Postal  administration  prices:  domestic  delivery  of 350  g  magazine 
(1989) 

NOTES 

PRICE 

PRICE 

PRICE AS 

ORDINARY 

~-·- --

POSTAL 

ADMINISTRATION 

Denmark 
Germany 
Spain 
France 
Italy 
Netherlands 
United Kingdom 

2 
3 

4 

5 

FACTOR OF 

BASIC LE1TER 

TARIFF 

National 
Money 

Kr 2.90 
DM  1.50 
Pta 2 
FF 1.79 
Lire 39 
Dfl 0.64 
GBL 0.38 

ECU 

--->--~--

0.37 
0.74 
0.02 
0.26 
0.03 
0.28 
0.51 

0.79 
1.48 
0.13 
0.79 
0.o7 
0.88 
1.82 

LE1TER 

TARIFF 
(note 1) 

ECU 

1.41 
1.96 
0.53 
2.22 
3.86 
1.96 
0.96 

Notes: 

1. 

This column  shows the letter tariff for  a  350g letter.  It  provides a  comparison  that  is 
not  quite  direct.  The  prices  shown  here  are  for  a  faster  service  without  any  pre 
sorting. 

2. 

3. 

4. 

5. 

Rate for a  publication of more than 30 issues per year. 

Streifbandzeitung  rate  shown.  Postvertriebstuck  rate  of DM  0.45  (ECU  0.22)  could 
also be appropriate. 

For monthly publication. 

Second class publication service, basic pre-sort. 

Source: 

Periodical Publishers' Association (UK) 

page 96 

Chapter 4:  Commercial aspects 

Almost  all  postal  administrations  that  offer  loss-making  preferential  tariffs  are 

trying to  raise the prices in  real terms in order to reduce the loss  incurred or even 

put  the  services  in  profit  (but  still with  lower  margins  than  for  ordinary  letters). 

Because of the previous discounts awarded,  this process can take a  long time.  For 

example,  the  Deutsche  Bundespost  has  now  come  to  an  agreement  with  the 

publishing  industry in  Germany that  60%  of costs should  be covered  by  1994.  By 

way of comparison, in  1974  - twenty years before - the cost coverage was only 28%. 

Naturally,  the  publishers  would  want  any  real  price  increases  to  be  phased  in. 

However, they tend to accept  that the prices offered by  postal administrations are 

low 

in  comparison 

to  retail  prices. 

If  a  magazine 

is  sold 

through 

the 

wholesale/retail  chain,  the  cost  to  the  publisher  is  usually  a  percentage  of  the 

cover  price.  This  percentage  when  applied  to  even  a  mid-priced  magazine  will 

often  be  higher  than  the  standard  letter  rate.  Against  that,  hand  delivery 

companies,  by  providing  services  in  only  high  density  areas,  can  often  under-cut 

the unit prices offered by  the postal administrations. 

In  many  instances,  it  seems  clear  that  preferential  tariffs  of  postal  services  are 

used by  publishers only  to  provide  universal coverage of their publications.  Thus, 

for  example,  one  survey  found  that  7.5%  of  daily  newspapers  delivered  to  an 

address were delivered by  mail. 

The problem  for  postal  administrations  is  likely  to  be  that  these  newspapers  are 

for  delivery  only  in  less  urban  (that  is,  more  high  cost)  areas.  The  more  urban 

areas where  there  are  lower  costs  are also  more convenient  for  the  publisher  to 

arrange  delivery  himself.  If the  unit  revenue  of the  preferential  tariffs  for  those 

items  for  "urban"  delivery  exceeds  the  unit  marginal  costs,  this  selective  use  of 

postal  services  for  newspaper  delivery  makes  the  losses  incurred  by  the  postal 

administrations on such tariffs that much greater. 

Postal  administrations seem to  find  it  impossible  to  impose exclusivity  clauses  on 

their  customers,  even  when  the  latter  are  enjoying  these  preferential  tariffs. 

Further,  it  is  not  possible  for  postal  administrations  to  control  how  much  the 

services are used.  If a  service is  offered where the revenue gained from each item 

carried is less that the marginal cost of carrying the item, it  is the total usage of the 

customers that dictates the losses incurred. 

Chapter 4:  Commercial aspects 

page 97 

Nor is it possible for administrations to prevent access for publishers for whom the 

preferential  tariffs  were  not  intended:  this  is  particularly  true  for  cross-border 

services where publishers from  one country post the non-domestic copies of their 

publications  in  a  second  country  in  order  to  take  advantage  of  the  loss-making 

preferential tariffs  there for  delivery  in  a  third country.  (The latter effect  of the 

tariffs set is discussed again below at Chapter 5,  Paragraph 9.1.) 

Some postal administrations also  have obligations  to  deliver  certain categories of 

material  for  free  on  behalf  of  their  governments. 

For  example,  most 

administrations deliver electoral material for free. 

9.  EFFECT OF SINGLE MARKET 

Some of the anticipated  effects of the Single  Market are already being felt.  Companies 

are  beginning  to  re-align  their  strategies  to  take  advantages  of  the  potential  benefits, 

particularly in  terms of marketing and distribution.  The investments that have been and 

are being made in  order to  implement  their strategies are already stimulating economic 

growth. 

Postal  services  will  be  affected  directly  by  changes  that  the  achievement  of the  Single 

Market  will  bring  about.  More  importantly,  the  requirements  of their  customers  and 

potential customers will change, thus having an indirect effect on postal services. 

9.1  GENERAL ECONOMIC EFFECTS 

It is estimated that the achievement of the Single Market will  reduce present costs 

by  an  average of between  4.5%  and  7% across  all  sectors.  Since  the costs  which 

will  be  saved  do  not  presently  add  value  (being  incurred  because  of  extra 

documentation, the present inability to achieve  returns to  scale,  and  the  like),  the 

saving  of  these  cost  should  result  in  lower  real  prices.  These  in  turn  should 

generate increased economic activity, which in turn should stimulate a  "multiplier" 

process. 

This  growth  in  economic  activity  will  increase  demand  for  postal  services.  The 

"1992  effect"  may particularly  benefit  the  service  industries,  and  they  are  already 

disproportionately heavy users of postal services.  Further, it  seems quite probable 

that  the  benefits  coming  from  the  Single  Market  may  help  companies  in  a  way 

proportionate  to  their  size  - the  larger  the  company  the  greater  the  potential 

page 98 

Chapter 4:  Commercial aspects 

benefits.  Users of postal services are also concentrated in large companies (which 

will  also  look  for  substitute  services).  Thus,  if  1992  will  cause  a  particularly 

significant  increase  in  the  activity  of  large  companies,  this 

could  have  an 

important effect on demand for postal services. 

9.2  CUSTOMER STRATEGY 

The  abolition  of  customs  controls,  combined  with  the  reduction  in  technical 

barriers  to  entry  to  national  markets,  will  greatly  enhance  the  flexibility  of 

organisations  in  their  choice  of location.  This  in  turn  will  be  influenced  by  the 

need for concentration of activities in  order to gain greater returns to scale. 

The effect  of this  is  that  companies can  locate  activities  further  from  the  market 

being served,  and,  indeed,  other  parts  of the organisations  being served by  those 

activities. 

Such location strategies, as stimulated by  1992,  will  cause many services which  are 

presently  domestic  to  be  carried  out  in  future  "cross-border"  between  Member 

States.  To  this  trend  should  be  added  the certainty  that  1992 will  increase trade 

between Member States, and make all "domestic" markets more competitive. 

A  good  example  of  the  likely  application  of such  location  strategies  is  financial 

services,  whether  selling  services  to  customers  or  servicing  them  with  invoices, 

statements, etc.  Increasingly, organisations are likely to centralize the locations of 

their financial service operational activities, while ensuring that these locations can 

still communicate effectively with  whatever entities or persons  necessary (such  as 

other institutions, other information holders or customers). 

For such  strategies to  work,  effective communication channels are absolutely vital 

- including cross-border.  For manufacturers and for "distance sellers" (particularly 

mail orders companies) effective distribution channels are also essential. 

9.3 

CUSTOMER EXPECTATIONS OF POSTAL SERVICES 

In  order  for  their  communication  and  distribution  needs  to  be  met  at  the  more 

demanding  level  suggested  by  their  policies  for  1992,  companies  and  other 

organisations will  need  efficient  postal  services  throughout  the  Community with 

the appropriate degree of flexibility. 

Chapter 4:  Commercial aspects 

page 99 

For  example,  in  the  domain  of  distribution  (where  parcels  and  express  parcels 

services  operate),  application  of  "just-in-time"  policies  will  become  more 

widespread  as  the  location-at-distance  strategies  described  at  Paragraph  9.2  re 

inforce the need to keep stock-holdings at the minimum feasible level. 

There has  been  a  long-term trend  that  has been  reducing the attitude  that  cross 

border services  are particularly special.  The achievement  of the  internal  market 

will  accelerate  this  trend.  If services  provided  to  cross-border  destinations  are 

significantly inferior  to  those  provided  domestically within  a  national  or  regional 

territory, customers are likely to become impatient,  and seek alternative means of 

communication or distribution. 

In short, the achievement of the Single Market is likely to raise the expectations of 

what customers expect of their postal services (whether letters, parcels or express). 

Postal operators will have to satisfy these raised expectations or suffer. 

9.4 

PARTICULAR EFFECTS ON POSTAL OPERATIONS 

In addition  to  this  raising of customer expectations,  there is  likely to  be a  change 

in  the  profile  of traffic.  The point  of origin  of traffic  that  is  presently  domestic 

may move cross-border. 

This  has  important  economic  effects  on  those  operators  who  sub-contract  the 

delivery outside their own  territory (which  more or less  describes  the position  for 

mail exchanged  between  postal  administrations).  Each  such  operator would  find 

their cross-border traffic increasing, that is apparently increasing the proportion of 

variable costs (that is,  the tariff/compensation paid to the delivery operator). 

At the same time,  each operator has the (more or less) same fixed  cost of his  own 

network,  and therefore will  be increasingly  reliant  on  sufficiently  high  volumes of 

traffic being generated outside his territory for delivery within  it. 

The abolition  of customs controls in  the  internal  market will  represent  a  windfall 

gain  for  all  carriers.  The savings could  be passed  on  to customers in  the  form  of 

reduced tariffs.  More likely,  they could be re-invested  in  adding value  to  services. 

An  example  would  be  extending  the  "pipe-line"  principle  where  distribution 

(whether contracted  out  or  undertaken  by  an  in-house  agency)  is  seen  not  as  a 

bolt-on activity, but rather as an integral part of the process. 

page  100 

Chapter 4:  Commercial aspects 

The ability  to  clear  through  customs  quickly  is  a  skill  which  can  give  companies 

that  are  effective  in  this  a  competitive  advantage.  For  goods  circulating  in  the 

internal market,  this is  a skill  that will  no  longer be required.  Such companies will 

therefore have  to  seek  other ways  in  which  to  maintain  a  competitive  advantage. 

If not,  their  services  will  tend  towards  "commodity"  status.  Such  commodity 

services are then sold on price, thus depressing profitability. 

In  short,  postal  operators  (whether public  or private)  will  need  to  establish  fully 

effective  cross-border  services.  The  increased  reliance  of delivery  networks  on 

volume generated outside the territory will  make absolutely necessary the putting 

in place of adequate tariff/compensation systems. 

Chapter 5: Economic and opera.tiona/ aspects 

page 101 

CHAPTER 5: 

ECONOMIC AND OPERATIONAL ASPECTS 

1. 

INTRODUCTION 

The previous  chapter concentrated  on  the  relationship  between  the  postal  operators 

and  their  customers.  This  chapter  now  describes  the  operations  that  provide  the 

postal services, and analyses the economics that underlie the operations. 

It attempts to identify the ways in which the main services - letters, parcels and express 

- are similar,  and in  what ways different.  The chapter  pays particular attention  to  the 

economics of those services for which there is  a  universal service requirement. 

In  discussing  the  economics  of the  postal  operation,  the  intention  is  not  to  go  into 

detailed theory.  Rather, only general concepts are discussed  in  so  far that they might 

have a bearing on the drawing up of proposals in  the Green Paper. 

The economic terms used are therefore straightforward.  Where the  term profitability 

is used, this refers to the margins of income less costs,  whether the result  is  in  surplus 

or in deficit.  Costs are divided into fixed  and variable costs. 

Fixed costs  are defined  here as  those costs  that  do  not vary with  changes  in  volume. 

Variable costs  do  vary  in  this  way:  They  are  the  costs  that  could  be  avoided  if the 

incremental volume was not handled.  (It  is  accepted that this general  discussion  does 

not allow for the sensitivities of semi-variability and the changes in cost status that can 

occur over time.) 

Marginal  costs  are  the  costs  incurred  if  an  additional  activity  is  carried  out  (or  an 

additional  volume  sold):  they  therefore  cover  variable  costs  plus  any  capital  cost 

related to the additional activity. 

2.  UNIVERSAL SERVICE PROVISION 

As stated above at Chapter 4,  Paragraph 3,  the foundation  of any policy for the postal 

sector - either at national or Community level - is  the need to ensure universal service 

across the whole territory concerned. 

Each Member State presently considers that the way to ensure this is  to have some set 

of services reserved to the postal administration.  The special and exclusive rights thus 

page 102 

Chapter 5: Economic and operational aspects 

granted give the postal administration the protection it  needs to provide the reserved 

services even  in  those areas where the provision  of such services is  loss-making.  The 

protection  in  the  reserved  area  usually  makes  possible  universal  provision  also  of 

some services that are non-reserved. 

The  fundamental  point  is  that  universal  service  should  be  provided  at  ·prices 

affordable  to  all  - that  each  citizen  or  organisation  of  the  Community  should  have 

access  to  a  postal  service  at  prices  which  he  can  readily  afford  for  his  main  postal 

communication  needs. 

(Usually,  this  is  represented  as  a  single  tariff  covering  the 

whole of the territory concerned.)  To ensure this affordability, sufficient volumes and 

revenues  need  to  be guaranteed  to  the operator providing the  universal  service.  The 

lower unit costs thus achieved can be translated into affordable prices. 

The reason for this protection is  that, while a postal administration can gain increasing 

returns  to  scale  with  greater  volumes  (for  domestic  mail,  but  much  less  for  cross 

border mail  - see Paragraphs 3  and  4  below),  it  is  not  a  natural  monopoly.  Without 

protection, competitors would  be able to concentrate on the low-cost,  profitable areas, 

leaving postal administrations only with the rump. 

It  might  be  considered  that  postal  administrations  could  react  by  offering  cost-plus 

prices  for  services  in  each  locality.  However,  because  of  the  need  to  have  a  tariff 

understandable  to  all  potential  users,  the  postal  administration  would  not  be  able 

easily  to  stipulate  the  different  tariffs  that  would  apply. 

It  would  therefore  want  to 

have  at  least  sub-regional  tariffs  covering  several  towns  as well  as  some  rural  areas. 

Since  this  would  still  lead  to  some  averaging  of prices,  competitors could  still  enter 

and cream-skim the most profitable services. 

The other result  of adopting a  cost-plus  approach  for  small  localities  is  that  the price 

for  some  areas  would  increase  very  significantly.  If this  happened,  the  objective  of 

universal affordability would  not  be  achieved.  This  would  effectively  discriminate  in 

an unacceptable manner against  those citizens who  happened  to  live  in  the regions of 

the  Community  which  are  more  expensive  for  the  postal  operators  to  serve.  To 

mitigate  the  problem,  a  further  reaction  could  be  to  reduce  service  levels  in  the 

unprofitable areas,  but such  a  course  of action  would  move  further  and  further from 

the basic principle of universal service. 

It perhaps could  be argued  that this problem could  be overcome by  central subsidies. 

But it would need to be considered whether this approach would cause more problems 

Chapter 5: Economic and operational aspects 

page 103 

than it solved.  What would be the problems associated with trying to define the areas 

that justified  such  a  subsidy,  and  then  to  calculate what  the subsidy  should  be;  what 

policing would be needed to prevent unfair  manipulation  of the subsidies particularly 

with regard to competitive services?  Presumably, the decision would vary from year to 

year; they would also vary from  Member State to Member State. 

In order to portray the context in which the Green Paper's proposals are drawn  up,  it 

is  necessary  to  discuss  in  detail  the  economics  of  the  sector.  This  discussion  is 

provided  in  the  paragraphs  below.  Here,  it  is  necessary  to  add  two  further  points 

concerning universal service. 

Firstly,  it  is  a  requirement  that  each  postal  administration  should  accept  alJ  mail 

posted.  It  therefore  needs to  be flexible  enough  to  respond to peaks and  troughs  of 

demand.  With significant  peaks  in  demand,  it  may  be  inevitable  that  there  is  some 

diminution in the service.  However, generally, service levels must be maintained. 

Secondly, while  universal  service  of the ordinary letter  service is  the  key  objective,  it 

would  be  a  worthwhile  by-product  if  other  services  could  be  provided  universally 

through the more intensive use of the network that provided universal letter provision. 

In  this  way,  it  may  be  possible  for  parcel  and  express  services  to  be  provided 

universally.  The effect  of this  more  intensive  use of the  network is  that  it  would  be 

more productive in  terms of both  lpwer  unit  costs and  increased  total  revenue.  This 

might  enable  the set  of reserved  services  (if it  was  decided  that  such  a  set  should  be 

established) to be reduced in scope and/or the prices of such services to be lowered. 

The combined  effect  would  be  to  achieve  economies  of scale,  the  benefits  of which 

could  be  passed  on  to  potential  customers.  At  the  same  time,  if  a  reserved  service 

network was established and was  used  also for  non-reserved services,  there could  be a 

danger of unfair cross-subsidies  that  would  disrupt  the  free  competition  in  the  non 

reserved area.  This subject is discussed further below at Paragraph 7.1. 

3. 

POSTAL OPERATION - GENERAL DESCRIPTION 

Almost  all  postal  operations  demand  five  operational  phases.  These  phases  are: 

collection, outward sorting and despatch, transport, inward sorting and, lastly, delivery. 

Collection and outward sorting are sometimes referred to as the "outward" part of the 

operation, and inward sorting and delivery  as the "inward"  part.  To these five  phases 

page 104 

Chapter 5: Economic and operational aspects 

can  be  added  a  sixth  which  precedes  the  whole  process  - that  is,  the  selling  of the 

service to the customer.  The whole process is shown graphically in Figure 1 below: 

Figure 1: 

The connexion between different operational phases 

C  U  S  T  0  M E  R  S 

Collection 

-> 

Outward 
Sorting 

-> 

Transport 

-> 

Inward 
Sorting 

-> 

Delivery 

With the possible exception of the dispatch  rider who undertakes the whole operation 

on  his  own,  these  phases  are  operationally  distinct  from  one  another.  While  they 

follow  each  other  sequentially,  they  are  not  a  "seamless"  operation.  This  is 

demonstrated  by  the  fact  that  five  different  operators  could  carry  out  the  different 

phases.  (Even  if one  organisation  undertakes  all  the  phases,  it  often  uses  different 

staff for each phase.) 

Such complex operations  necessita~e the  use  of networks.  Annex 3,  in  describing the 

postal  operation,  analyses  the  different  types  of  networks  employed  in  the  postal 

sector.  These  networks  provide  the  links  between  the  different  phases  of  the 

operation.  The  letter  mail  operation  requires  a  network  with  a  high  level  of 

interaction between  all  the  different  points of the  network,  However,  in  this  case as 

well  as  for  the  other  postal  services,  the  operational  phases  linked  by  the  networks 

remain distinct. 

Postal administrations accept  this reality that the operational phases are distinct from 

one another.  Most offer contract facilities where customers can undertake some form 

of  mail  preparation  which  reduces  the  work  that  would  otherwise  be  done  by  the 

postal  administration.  Some  administrations  contract  out  some  of  the  transport 

operation (for example to the national railway operator). 

For cross-border mail  (discussed  in  more detail  below  at Paragraph  4 ),  the transport 

phase  is  usually  contracted  out  to  a  transport  operator,  and  the  inward  part  of the 

operation is undertaken by another postal administration. 

Chapter 5: Economic and operational aspects 

page 105 

Very approximately, the relative costs of the different phases of the letters process are 

as  shown 

in  Table  1  (which  averages 

figures  provided  by  several  postal 

administrations). 

Table 1:  Approximate composition of letter mail operational costs 

Collection 

Outward sorting 
Transport 
Inward sorting 

Delivery 

18% 
2% 
5% 

10% 

25% 

65% 

Source: 

Several postal administrations 

This  break-down  is  very  approximate.  The  break-down  will  vary  from  operator  to 

operator; the proportion  of costs  of the outward  and  transport  stages  of express  and 

parcel services may be somewhat higher than the figures  shown  above.  Of all but the 

delivery  phase,  each  phase  - but  most  likely  to  be  outward  sorting  - could  be 

substituted by work carried out by  the customer before posting.  However, overall,  the 

percentage for  the mail  work,  whether  carried  out before or after posting,  should be 

broadly accurate. 

The  percentages  shown  above  are  for  the  actual  mails  operation.  They  therefore 

exclude the pre-operation selling/posting phase.  The cost  to the operator of this pre 

operation phase can vary from almost nothing to up to  10% of costs. 

The different phases, and their economic implications, are discussed briefly below.  (A 

more detailed description  of the letter operation is  to be found  at Annex 3.) 

In  this 

discussion, a  division  is  drawn between fixed  and variable costs.  Throughout it  should 

be  remembered  that  the  m(ljority  of  postal  operational  costs  (70%  on  average  for 

postal  administrations,  somewhat  less  for  private  operators)  are  labour  costs.  The 

employment aspects of the sector are discussed in Chapter 6. 

3.1 

SELLING OF SERVICE 

Postal services are paid for  by  the customers in  one of three ways:  by  contract 

with  retrospective  billing,  by  meter machine (which  prints out  on the envelope 

the tariff paid by the customer) or by stamps. 

page 106 

Chapter 5: Economic and operational aspects 

The contract  payments  facility  is  a  fixed  cost  to  the  postal  operator,  whether 

private or public;  the cost of credit to  him is  variable in relation to  the revenue. 

For letter  services,  these  contract costs  are  usually  negligible  in  proportion  to 

total costs.  For parcel  and  express  operators,  the  proportions  can  be  higher. 

Payments by meter machine have a similar economic profile (with the exception 

that  the  payment  facility  is  bought  in  advance),  and  is  also  a  negligible 

proportion of the overall cost. 

Payment by  stamps  incurs  a  more  significant  proportion  of mail  costs.  If the 

stamps  are  sold  under  contract  by  another  vendor,  the  cost  of  the  sale  is 

variable  to  the  postal  administration.  Even  if  the  sale  is  made  by  the  postal 

administration's  own  counters  organisation,  the  cost  may  be  represented 

internally as a variable charge to the mail organisation. 

3.2  COLLECTION 

Collections  are  carried  out  from 

three  different  places. 

Both  postal 

administrations and  private  operators collect  direct  from  customers'  premises; 

for  regular  such  collections  the  costs  are  fixed,  with  (at  least  for  postal 

administrations) low unit costs. 

Collections  are  also  made  by  postal  administrations  from  their  own  counters 

and  from  road-side  collection  boxes.  Again,  the  costs  are  fixed.  However, 

because  of  the  lower  volumes,  the  unit  costs  are  higher  (and  in  the  case  of 

collection from road-side boxes,  much higher). 

If demand  increases  in  a  particular  area,  it  is  possible  that  a  new  collection 

facility may need to be established - new boxes,  or even a  new collection  round. 

Such  incremental  increases  in  costs  after  a  significant  increase  in  volume  are 

often called "lumpy inputs". 

Once  established,  their  running  costs  become  part  of  the  fixed  costs.  Such 

additions to (or subtractions from)  the collection  network will  affect  demand at 

other collection points, but do not need to affect the structure of the rest of the 

collection  network. 

In  this  way,  collection  networks  are  different  from  the 

sorting  office  networks  which  by  their  nature  are  more  inter-active  - as 

discussed below in more detail at Paragraph 3.3. 

Chapter 5:  Economic and operational aspects 

page 107 

It should be noted that in  rural areas (or less urban areas), collections are often 

combined  with  deliveries.  Whether  combined  or  not,  volumes  at  each  rural 

collection  point  tend  to  be  low,  with  commensurately  higher  unit  costs  of 

collection. 

3.3  OU1WARD SORTING 

Outward sorting involves  the  reception of material collected  and  then carrying 

out whatever processes are necessary to send the mail  to the centre responsible 

for  delivery  (or the intermediate centre responsible  for  forwarding the mail  to 

the final delivery office). 

This  activity  has  a  high  variable  element.  This  is  especially  true  for  the  mail 

that can be handled the day after collection.  Mail which  needs to be forwarded 

straightaway may  need  a  higher  fixed  element because  the volumes cannot  be 

predicted in  advance.  (But even here, it  is  likely  that overtime will  be used as a 

"float" to align man-hours spent with volume.) 

It should  be noted  that  mechanisation  increases  the  proportion of fixed  costs. 

Mechanised  sorting  demands  regular  engineering  coverage,  as  well  as  having 

hard-ware running costs not related to volume. 

In  terms  of  networks,  sorting  offices  (or  the  dispatching  centres  of  private 

operators) and delivery offices are entirely inter-active.  If the network planners 

add  or  subtract  a  centre,  all  other  offices  need  to  be  aware,  and  adjust  their 

sorting patterns accordingly. 

3.4  TRANSPORT 

If an operator undertakes his  own  transport  (between  the outward  and  inward 

parts of the operation), the costs are not volume-related (subject to the addition 

or  subtraction  of  "lumpy  inputs"). 

If,  however,  the  transport  operation  is 

contracted out,  the costs  are represented  to  the  postal  operator as variable,  if 

the contract terms are on payment by volume. 

For light-weight  items  (such  as letters),  the  unit cost  of transport  is  negligible. 

Even  for  heavy-weight  items,  the  expensive  elements  of the  transport  process 

are despatching  and  unloading:  the incremental  cost  associated  with  increases 

in distance transported is very slight. 

page 108 

Chapter 5: Economic and operational aspects 

However,  increases in  distances can  have  an indirect  effect  in increasing costs. 

This is  because the further the address point is from  the point of collection,  the 

more likely  it  is  that  there will  be  a  greater complexity  in  routeing  the postal 

item. 

Thus, if an item collected is  for delivery in  the same area, it will  be brought into 

the  outward  sorting  office  which  will  also  be  the  "inward"  sorting  office 

responsible for feeding the delivery office to which the latter should be routed. 

If a  letter was  being sent  from  one  large town  to  another,  two  sorting centres 

would  be  involved.  If a  letter was  being sent  from  one  rural  area  to  another 

area  at some distance,  there would  be a  greater likelihood  that  the item  would 

be aggregated into an intermediate sorting centre, thus increasing the handling. 

Any extra handling (as well as the additional time needed for transport between 

the handling centres) carries the danger of decreasing quality of service. 

It is often stated that postal services have costs that are not distance-related.  In 

a  strict  sense (in  terms of transport costs  as  a  proportion  of total costs)  this is 

true.  However,  on  a  practical  level,  distance  implies  greater  operational 

complexity, and can carry higher costs - both monetarily and qualitatively. 

3.5 

INWARD SORTING 

The  economic  profile  of  inward  sorting  is  very  similar  to  that  of  outward 

sorting.  Theoretically,  the  work  demand  should  be  more  predictable  if  the 

outward  offices  informed  the  inward  offices  of the  volumes  despatched.  The 

sorting will  have a  high variable content.  This  is  particularly true of the slower 

streams  - such  as  printed  paper  (AO)  or  second  class  letters  - if  they  do  not 

have to be sorted immediately. 

It should  be noted  that  inward  sorting  is  not  usually  carried  out  by  automatic 

sorting machinery.  The exceptions  to  this  are the  Netherlands  and  the  United 

Kingdom where  the post-coding system  permits such  automatic  inward  sorting 

(but  even  in  these  countries  - less  in  the  case  of  the  Netherlands  - the 

proportions  of inward  mail  sorted  automatically  are  not  high).  As  noted  at 

Paragraph  3.3  above,  mechanised  sorting  has  a  higher  fixed  element  than 

manual sorting - but this is less relevant to inward sorting. 

Chapter 5: Economic and operational aspects 

page]()<) 

3.6  DELIVERY 

Delivery costs are,  in effect,  mostly fixed.  There is  no variation in  costs if there 

are two  items rather than  one  to  be delivered  to  an  address point  passed  on  a 

delivery  round.  If the extra volume demands that an  extra delivery  point  must 

be  accessed,  there  would  be  no  increase  in  costs  in  the  case  of  town  letter 

deliveries. 

Even in  those cases where extra delivery access would be more noticeable (such 

as  on  delivery  rounds  for  small-volume  parcel  or  express  operators)  there  is 

likely to be spare capacity that could assimilate the extra delivery points.  Even 

in  rural  letter  deliveries,  some  extra  address  points  could  be  added  without 

increasing costs. 

It is  important also to look at the effects on delivery costs of possible declines in 

traffic.  Again, costs would  be unlikely to be saved,  unless there were significant 

movements in traffic. 

It is estimated that some 65% of operational costs are accounted for by delivery 

costs  (somewhat less  for  express),  and  these costs  are  almost  all  fixed.  In  the 

rural areas  where  delivery  productivity  is  inevitably  low,  the  unit  costs  will  be 

significantly higher than average. 

3.7  OTHER 

The  non-operational  costs  are  overheads  which,  for  the  purposes  of  tariff 

setting, must be allocated to the different postal services and indeed to the faces 

of the operations that comprise those services.  While there are some sunk costs 

(in  such  items  as  accommodation,  machinery  and  operational  planning),  they 

are  relatively  few,  since  the  postal  industry  is  "low  technology",  at  least  by 

comparison with  other  sectors  of  the  communications  industry.  However,  at 

least in the short/medium term, the overhead running costs tend to be "fixed". 

4.  CROSS-BORDER SERVICES 

The operations described  above  at Paragraph 3 were essentially those of an operator 

(such  as  a  postal  administration)  providing  domestic  services  within  a  national 

territory.  When mail crosses  a  border,  the economics  of the  service  usually  become 

page 110 

Chapter 5: Economic Q/td operational aspects 

different.  To put this in the context  of the revenue of the operators (both public and 

private), the proportions are approximately as shown in Table 2. 

Table 2: 

Proportions of volume and revenue 

SERVICES 

VOLUME 

REVENUE 

Domestic 

Intra-Community 

International 

Sources: 

Several 

93% 

4% 

3% 

90% 

5% 

5% 

For analysis of the economics involved,  it should  be noted  that there are two  different 

types  of  cross-border  service:  either  one  operator  handles  all  the  phases  from 

collection  to  delivery  or  the  operator  in  the  "outward"  country  entrusts  the  mail  to 

another operator for delivery in the "inward" country. 

In  the  first  of these  examples  (which  describes  the  position  of certain  large  private 

express  operators),  the economics  are essentially  the  same  as  those  of the  domestic 

operations - that is, there are significant network fixed costs so that the marginal effect 

of increases or decreases in traffic is slight. 

Because  such  an  operator  probably  has  local  subsidiary  companies  in  each  of  the 

countries involved,  there may  well  be  an  internal  charging system  that  allocates  cost 

with the effect that managers in the outward country see the costs as being variable. 

The second example describes the position of almost all  cross-border letter operations 

and many parcel operations (whether private or public).  Here,  the  outward  operator 

contracts with another operator for the delivery to be affected in  the inward country. 

In  the  case  of  postal  administrations,  delivering  material  on  behalf  of  other 

administrations, the "contracting" rules  are determined by  the Universal  Postal Union 

(see Chapter 3,  Paragraph 5.1 ).  The economics of these  "exchanges"  of mail  need to 

be viewed from the outward and inward perspectives separately. 

4.1  OU1WARD MAIL 

For  such  exchanges  of  mail,  the  charge  made  by  the  delivery  operator  is  a 

variable  cost  for  the  outward  operator.  The  variable  charge  takes  different 

Chapter 5: &anomic and opero.tional aspects 

page 111 

forms.  For letter  mail exchanged  between postal administrations,  the charges 

take the form  of "terminal dues",  which themselves are a complex issue and are 

discussed  in  more detail below at Paragraph 8.  Such terminal dues are usually 

charged  at  the  same  rate  for  both  postal  administrations  that  exchange  mail 

between each other. 

For parcels exchanged between  administrations,  the system  is  different.  Here, 

each administration charges the other "land rates" - but these are determined by 

the  delivery  administration,  and  are  not  the  same  in  both  directions.  The 

system for postal administrations delivering each other's express items is similar 

to that of land rates: again, the delivery administration determines the charges . 

. For  private  operators  contracting  with  another  operator  for  delivery,  the 

delivery costs are also variable, whether the operator is  private or is  the postal 

administration in the country of delivery. 

4.2 

INWARD  MAIL 

Essentially,  the  "inward"  operator  continues  to  have  the  same  network  fixed 

costs.  Thus delivering  more traffic  in  his  delivery  area  will  not  increase costs 

proportionally; conversely, if there is  a decline in the cross-border traffic that he 

receives  in  his  country,  the  inward  operator  would  not  be  able  to  make 

proportionate savings. 

This point  is  perhaps particularly  important  for  the letter delivery  networks  of 

the  postal  administrations.  Presently,  cross-border  traffic  accounts  for  an 

average of 7% of letter volume (up to 47% in Luxembourg).  Slightly more than 

half  this  figure  is  made  up  of  traffic  passing  between  Community  Member 

States. 

This volume  therefore  helps  to  keep  unit  costs  at  affordable  levels.  However, 

because  of  the  imbalance  in  the  current  terminal  dues  system  (discussed  in 

more  detail  below  at  Paragraph  8)  between  delivery  unit  costs  and 

compensation  received,  most  Member  States  find  that  their  unit  costs  for 

delivering this traffic are not covered. 

This  situation  is  barely  supportable  whilst  cross-border  volumes  are  at  their 

current  levels  (and  while  part  of the  revenue  gained  on  the  outward  traffic  is 

used  to  cross-subsidise  the  inward  losses).  But,  as  Chapter  4  Paragraph  9 

page 112 

Chapter 5: Economic and operational aspects 

indicates, 

the  cross-border  volumes  are  predicted 

to 

increase,  perhaps 

dramatically, as a result of the Single Market strategies of large customers. 

A  large proportion of this  increase could be at the  expense of domestic traffic. 

This change in  the structure of delivery traffic will  have a very  significant effect 

on  the  tariff policy.  If terminal  dues  continue  to  under-compensate  delivery 

unit costs,  there might well  have to be real increases  in  the  tariffs  for  domestic 

mail. 

S.  COSTS 

What  then  affects  the  costs  of the  Community's  different  operators?  Concentrating 

on  the  postal  administrations,  it  has  been  noted  that,  on  average,  labour  costs 

comprise about 75% of operational costs.  Naturally,  the labour  unit costs (that is,  the 

cost of labour per hour) will vary from country to country. 

They will  be affected  by  local labour  market conditions, which  are  in  turn  affected  by 

the prevailing  economic situation  of each  Member State,  as well  as  previous  trends. 

(Thus,  even  taking  a  modest  perspective  of  changes,  one  can  note  that  real 

compensation in  the Netherlands remained constant in  the  1980s,  whereas in  the UK 

it rose by 23%.) 

They are also  affected  by  the  relative  position  of postal  staff in  the  informal  ranking 

order of different occupations.  It is  therefore inevitable that  there will  be differences 

in the cost of a labour hour. 

What is produced in each labour hour expended will also vary because of the different 

through-puts  that  are  achieved.  These  through-puts  are  calculated  by  dividing  the 

numbers of items (or the revenue gained  from  them)  by  the numbers  of labour  units 

(either total staff or their work-hours,  or either expressed  in  terms of their monetary 

costs).  Figure  2  below  shows  a  simple  productivity  measure  of the  total  number  of 

postal items (excluding unaddressed  direct  mail,  but including express  items as single 

items)  divided  by  the  total  number  of employees  of the  postal  administrations'  mail 

services. 

Chapter 5: Economic and operational aspects 

page 113 

Figure 2: 

Items per mails employee in thousands (1988) 

200 

···························································································································· 

160 

···························································································································· 

100 

................................................................ . 

'50 

0 

B  DK  D  GR  E 

F 

IRL 

I 

L  NL  P  UK 

EC 

USA 

JAP 

Note: 

The  employees  figures  refer  only  to  mails  employees,  and  therefore  exclude  the  staff 
employed on postal financial.services. 

Source: 

Sofres study 

The  employees  figure  used  as a  denominator  in  the  calculation  refers  only  to  postal 

administration  staff  employed  on  mail  services. 

It  relates  to  costs  which  are  (as 

described  above at  Paragraph  3)  significantly  fixed.  Movements  in  through-puts  may 

therefore be  very  much  dependent  on  the volumes  posted.  (It  must  be stressed  that 

the table is  intended to give  only an  impression:  apparent  productivity will  he affected 

by,  among  the  factors,  relative  population  density  and  varying  levels  of  pre-sorting 

carried  out  by  customers;  further,  no  link  is  made  here  with  the  quality  of  service 

achieved.) 

This  poses  an  important  question:  to  what  extent  is  the  propensity  of  "the  average 

citizen"  to  post  items  with  the  postal  administration  a  function  of  the  ex1 c1  nal 

economic environment, and  how much is  it  related to factors within  the control  ·, r the 

postal administration? 

page  114 

Chapter 5:  Economic and operational aspects 

Figure  3  at  Chapter  4,  Paragraph  3.2  shows  that  there  is  some  direct  link  between 

general economic  activity  and  the propensity  to  post  mail  items.  However,  in  terms 

only  of  factors  within  their  control,  some  postal  administrations  are  more  efficient 

than  others.  Each  administration,  of course,  has  the  capacity  to  reduce  its  costs;  if 

these reductions are then  represented  in  lower  real  prices,  an  increase  in  volume will 

result.  This can lead to  an  upward  "virtuous"  spiral where the higher volumes lead  to 

lower unit costs, which in  turn restrain the need for price increases. 

A  second  important point  is  that  the quality  of the service perceived  by  the  potential 

customer  has  a  direct  effect  on  the  profile  of  the  mail  posted.  The  higher  the 

perception  of  the  quality,  the  more  likely  that  customers  will  post  the  higher  value 

items  in  the  mass-volume  ordinary  stream  - items  such  as  business  letters,  invoices, 

statements,  etc.  These  items  may  incur  higher  costs  because  they  demand  a  greater 

degree  of  priority,  but  their  tariffs  are  set  at  a  proportionately  higher  rate  with 

adequate profit margins. 

The  converse  is  also  true.  The  worse  the  customer  perception  of  the  quality  of 

service,  the  more  the  postal  administration  will  be  used  as  the  "distributor  of  last 

resort".  It will  become more and  more the receptacle for  the low-value bulk  postings, 

which  are  often  attracted  by  preferential  tariffs  (see  below  at  Paragraph  6.3)  which 

themselves are often loss-making. 

In  short,  simple  productivity  measures  do  not  suffice.  The  profile  of  traffic  is  all 

important  to  the  revenue/cost  structure  and  this  is  directly  affected  by  the  potential 

customer's perception of the quality provided. 

6. 

PROFITABILITY AND TARIFF-SETTING 

Table 3  shows the profitability of the  Community's postal  administrations  in  terms of 

their  surpluses  and  deficits.  These  figures  exclude  the  results  of  the  generally 

profitable postal  financial  services  provided  by  the  postal  administrations  (see  below 

at Paragraph 7.1 ).  (Profit figures  are  not  available  for  the  Community  operations  of 

the private operators.) 

Chapter 5:  Economic and operational aspects 

page  115 

Table 3: 

Profitability of mail services of EC postal administrations (1988) 

MEMBER 

STATES 

(note  1) 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 

TOTAL 

COSTS 

TOTAL 

REVENUE 

SURPLUS/ 

DEFICIT 

SURPLUS/ 

DEF1CIT AS 

PERCENTAGE OF 

REVENUE 

Million ECU 

Million ECU 

Million  ECU 

% 

745.9 
840.9 
8 210.0 
123.5 
1 000.0 
7 838.0 
189.0 
3 709.5 
45.0 
1 731.0 
169.8 
4 484.0 

503.1 
806.4 
7 000.0 
100.3 
692.3 
7 340.0 
187.7 
2 651.1 
42.3 
1 778.0 
134.0 
4 643.0 

- 242.8 
- 34.5 
- 1,210.0 
- 23.2 
- 307.7 
- 498.0 
- 1.3 
- 1,058.4 
- 2.7 
+  47.0 
-35.8 
+  159.0 

- 48.3 
- 4.3 
-17.3 
- 23.l 
- 44.4 
- 6.8 
- 0.7 
- 39.9 
- 6.4 
+ 2.6 
- 26.7 
+  3.4 

- 12.4 

TOTAL 

29 086.1 

25 878.0 

3 208.4 

Note 1. 

The income  for  the  Belgium  does  not  include  a  payment  of ECU  321  million  received  from 
(See  Paragraph  7.2 
the  central  government  in  respect  of  loss-making  services  provided. 
below.) 

Source: 

Sofres study 

What  causes  these  variations  in  profitability?  Differences  in  commercial  expertise 

and in  efficiency are important.  However, the different tariff policies applied also play 

an important part. 

There seems to be a  direct  relationship  between  the revenue gained per item  and  the 

relative  profitability  of  the  different  administrations.  Table  4  below  compares  the 

statistical order of the profitability margins and the average income received per item. 

The  profitability  margins  are  placed  in  statistical  order  according  to  the  percentage 

return on revenue.  The average income received per item is  ranked alongside.  This is 

calculated  by  dividing  the  total  revenue  by 

the  number  of  items  (excluding 

unaddressed items). 

page  116 

Chapter 5:  Economic 011d operational aspects 

Table 4: 

Potential link between profitability and tariff-setting 

MEMBER 

STATE 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 

REVENUE 

SURPLUS/ 

PERCE1''T AGE 

STAT-

REVENUE 

DEFICIT 

MARGIN 

ISTICAL 

PER ln:~·I 

ORDER 

STAT-

ISTICAI 

ORDER 

(Mill  ECU) 

(Mill  ECU) 

503.1 
806.4 
7 000.0 
100.3 
692.3 
7 340.0 
187.7 
2651.1 
42.3 
1 778.0 
134.9 
4 643.0 

- 242.8 
- 34.5 
- I  210.0 
- 23.2 
- 307.7 
- 498.0 
- 1.3 
- 1 058.4 
- 2.7 
+47.0 
- 35.8 
+  159.0 

- 48.3% 
-43% 
-173% 
- 23.1% 
- 44.4% 
-6.8% 
-0.7% 
- 39.9% 
- 6.4% 
+  2.6% 
- 26.5% 
+ 3.4% 

12 
4 
7 
8 
11 
6 
3 
10 
5 
2 
9 

1 

~ 

I 

(ECU) 

---- ~~~--

0.26 
0.50 
0.47 
0.21 
0.14 
0.45 
0.36 
0.25 
0.25 
0.31 
0.19 

0.33 

7 
I 
2 
10 
12 
3 
4 
8= 
8= 
6 
11 

s  I 

I 

I 

Source: 

CEC analysis 

What causes these variations in  tariffs?  Of course,  there are cost  differences  beyond 

the  control  of the  postal  administrations.  However,  the  main  cause  is  the  different 

attitudes  to  tariff-setting.  Table 5  below,  which  compares  average  revenue  received 

with the basic letter tariffs, is illuminating. 

It  is  not altogether surprising that some administrations  have  an  average  revenue per 

item  less  than  the  basic  tariff.  All  administrations  have  large  customers  who  may 

deserve  discounts  in  return  for  work  that  saves  the  administrations  costs.  However, 

the greater explanation  is  in  terms  of the  preferential  tariffs  that  are  awarded  on  the 

basis of the content.  (In the case of Italy, there must also be a  question either whether 

the figures are accurate or whether there are revenue protection problems.) 

It  is  also  the case that there are varying degrees of pressure brought  to  bear on  postal 

administrations  to  hold  down  prices  - even  if  it  is  known  that  price  increases  are 

necessary to  ensure cost  coverage.  Over a  period  of time,  the cumulative effect  is  to 

engender  substantial  losses.  To  bring  the  postal  administration  back  to  break-even 

could take a long period of gradual real prices increases. 

Chapter 5:  Economic and operational aspects 

page 117 

Table 5: 

Postal administration revenue per mail item 

MEMBER 

STATE 

1 

REVENUE 

PER ITEM 

2 

BASIC 

LETfER TARI FF 

INDEX 

(ECU's) 

(ECU's) 

[COL 1ICOL2] 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 

1 
j  United Kingdom 

Source: 

CEC analysis 

0.26 
0.50 
0.47 
0.21 
0.14 
0.45 
0.36 
0.25 
0.25 
0.31 
0.22 
0.33 

0.33 
0.47 
0.50 
0.17 
0.15 
0.33 
0.36 
0.50 
0.28 
0.32 
0.18 
0.28 

0.788 
1.064 
0.940 
1.235 
0.823 
1.360 
1.000 
0.500 
0.890 
0.969 

1244  J 

1.179 
- - - -~----

The  particular  points  of  the perequation  tarifaire,  accounting  principles,  transparency 

and preferential tariffs are discussed below. 

6.1 

PEREQUATION TARIFAIRE 

All  Community  postal  administrations  represent  their  public  tariffs  for  letter 

delivery  in  their  national  territories  as  a  single  unitary  tariff  which  makes 

distinctions  only  on  the  basis  of  different  weights,  not  on  the  basis  of  the 

different  locations  of  either  senders  or  receivers  of  the  mail. 

(In  addition  to 

having a  single  tariff covering the national  territory,  the Spanish administration 

also  offers  a  separate  rate  for  delivery  within  the  town  where  the  mail  is 

collected.)  This "single unitary tariff' is  usually  referred to by  the more succinct 

French description of the ''perequation  tarifaire". 

The  principle  underlying  the  perequation  tarifaire  is  that  the  different  costs 

associated  with  , o!\•:·t · 

,  in/delivery  to  different  areas  should  be  "averaged 

out".  The  alternative  WC!.lld  be  to  adopt  strict  cost-plus  pricing  based  on  the 

actual  costs  associated  with  different  geographic  areas.  This  could  lead  to  a 

multiplicity  of prices,  and  would  probably  be  thought  to  fall  unfairly  on  those 

who live in what,  in  postal terms, are higher cost areas. 

page 118 

Chapter 5:  Economic and operational aspects 

Naturally,  the average applied  in  the perequation  tarifaire  would  be  higher  than 

the actual cost  in  low-cost  areas,  such  as  town  centres.  It would  also  be lower 

than the costs in the more rural (or less urbanised)  areas.  The latter tend to be 

more expensive because the volumes are lower (for instance for collections), but 

also  because  the access  points  (posting  boxes  for  collections  or address  points 

for  deliveries)  are  simply  more  spread  out,  and  therefore  more  expensive  to 

reach. 

lt should be noted  that  the  extremes of costs, when  expressed  as  factors  of the 

average,  are  significantly  different.  One  postal  administration  has  calculated 

that  the  cheapest  total  process  (from  collection  to  delivery)  incurs  70%  of the 

average  costs,  whereas  the  most  expensive  incurs  more  than  10  times  the 

average.  Against  that,  the volumes  in  the  lower cost  areas  far  out-weigh  those 

in the higher cost areas. 

Figure 3:  Perequation  of profitable and loss-making areas 

DEJJVERY 
(!ITT 
ru 
ITTM 

SINGU urnuY TUITT 1 "CRf.AM-Sr.rMM!W ARB  ~---~ 

------

"' I 
I 
!~ 
~l ll'l l'~ I 
I 

I 
I 

URBAHlfAS 
AIFAS 'IVIT'i  l!lG 
~AICON~l!llFU----------<) ill.AS \\Tl1!  UGifl 
(l!fJ.\'YTRAflC) 

.ltUIW. A~ 

l'IKTAI  lRAFJ( 

Source: 

CEC 

Chapter 5:  Economic and operational aspects 

page 119 

The averaging principle  applied  in  setting  the same  tariff for  an  item  across  a 

national  territory  carries  dangers  for  the  universal  service  provider  offering 

such  a  perequation  tarifaire,  if other  operators can  enter  the  market  and  select 

which areas they will serve.  This danger, sometimes called "cream-skimming", is 

shown graphically in  Figure 3. 

The X-axis shows  the different collection/delivery areas, while the  Y-axis shows 

the  unit  cost  of  delivery.  The  cost  of  delivery  is  therefore  a  curve  which  is 

lowest  in  the  heavily  urban  areas,  rises  gently  in  the  gradually  less  urbanised 

areas,  but  then  increases  steeply  in  the  very  rural  areas.  The  perequation 

tarifaire  is  shown  as  a  single  horizontal  line.  Above  the  line,  where  the  unit 

revenues do not cover costs,  is  the area which would be unlikely to be of interest 

to  an  operator seeking to  enter the  market.  Below the line,  where  the costs of 

service  are  below  average,  is  likely  to  be  more  attractive.  (Just  how  attractive 

would  depend  on  whether 

the  overall  service  provided  by 

the  postal 

administration  was  in  surplus  or  in  deficit,  and  on  differences  in  operational 

costs between public and private operators for directly comparable services.) 

If another  operator  enters  the  market  and  concentrates  on  those  areas where 

the postal  administration's  actual  costs  are below  its  average costs  (that is,  the 

relatively  profitable  areas),  any  success  on  the  part  of  the  new  operator  in 

taking away volume from  the· postal administration would raise the average cost 

line  of  the  latter.  The  increase  could  be  fairly  gradual  if  all  the  costs  were 

variable.  However,  since  a  large  proportion  is  in  fact  fixed,  the  upward  shift  in 

the average cost line would be very marked. 

It  is  in  order to  safeguard  the universal  service  that each of the  Member States 

has established  a  set  of reserved services.  It  is  usually considered  to be at  least 

a  useful  by-product  that  postal  administrations,  as 

the  reserved  service 

providers,  can  offer  a  perequation  tarifaire  for  domestic  services. 

(Certain 

Member  States  go  further,  in  stating  that  the  provision  of  the  perequation 

tarifaire  is  an obligation  placed on  the postal administration  as  reserved  service 

provider.) 

For domestic services,  it  may be less  necessary to separate the possible  reasons 

for  having  a  set  of  reserved  services  (between  the  safeguarding  of  universal 

services  and  the  possible  need  for  a  perequation  tarifaire ).  However,  it  will 

become more  important for  cross-border  mail.  In  effect,  the  universal  service 

page 120 

Chapter 5:  Economic and operational aspects 

for  the  cross-border  mail  between  Member  States  is  presently  safeguarded  by 

having  domestic  services  (including  the  delivery  of  inward  cross-border  mail) 

placed in  the reserved area. 

All postal administrations offer such services to other Community countries at a 

single unitary tariff.  (In fact,  at present,  the ranges of cost differences  between 

different  destinations  are  probably  less 

than  each  postal  administration 

experiences  for  its  domestic  mail;  this  situation  could  change  if  terminal  dues 

were  more closely  linked  to  domestic  tariffs.)  Nine  out  the  twelve  Community 

administrations offer delivery of the 20 g letter to other Community countries at 

the same  tariff as  for  domestic delivery.  (In fact,  this  initiative was  in  response 

to  a  recommendation  made  by  the  Commission  in  1979  that  inland  tariffs 

should apply  to  intra-Community letters at least  up  to  the first  weight  step.)  Of 

the  nine  administrations,  the  French  postal  administration  offers  the  same 

tariffs as for domestic mail for  intra-Community for letters up to  100 g. 

6.2  ACCOUNTING 

As  with  other  sectors,  an  associated  feature  of  different  attitudes  to  tariff 

setting is  the different  accounting principles that  are  used  in  different  Member 

States.  However,  the  impression  is  given  that  there  are  different  degrees  of 

understanding of costs  on  th~ part  of  the  different  postal  administrations.  In 

particular, it  is  not clear to what  extent fixed  costs are allocated  correctly to  the 

different postal "streams" (or services)  that use the network that incurs the fixed 

costs. 

A  related  subject  is  that  of  the  relative  degree  of  transparency.  This  is 

important to identify the losses  that many administrations incur  on  preferential 

tariffs for printed papers (see below at Paragraph 6.3 ). 

Some transparency may also be appropriate for those non-reserved services that 

are  provided  partly  by  using  the  reserved  service  network.  The  national 

regulator may wish  to be able to investigate the way that  tariffs are set to ensure 

that they cover at least the marginal costs that they incur. 

6.3 

PREFERENTIAL TARIFFS 

Preferential  tariffs  are  defined  here  as  those  tariffs  that  offer  discounts 

unrelated to cost savings  made possible by  the  presentation  of the mail  posted. 

Chapter 5:  Economic and operational aspects 

page 121 

The previous chapter described at Paragraph 8.4 the policies (on the part either 

of national governments or of the postal administrations themselves)  that  have 

led  to  preferential  tariffs  being  awarded.  Here  the  intention  is  to  study  the 

economic effects of this tariff policy. 

The  offering  of  preferential  tariffs  1s  a  political  decision.  They  result  in 

significant  losses  for  the  postal  administrations  that  offer  them.  These  losses 

have to be funded  from  somewhere - either by cross-subsidies from  other postal 

customers  (and  sometimes 

telecommunications  customers)  or  by  direct 

subsidies  from  the  government.  They  present  an  important  control  problem: 

the sizes of the total losses incurred are decided by the use that customers make 

of  the  tariffs,  rather  than  being  controlled  by  the  postal  administrations 

themselves. 

Preferential  tariffs  offered  by  postal  administrations  also  need  to  be  viewed 

from  the perspective of private operators.  Table 6 below shows the relationship 

between the level  of discounts offered and the percentage of publications in  the 

total letter mail. 

Table 6: 

Postal administrations - printed papers distribution  cost coverage 

MEMBER 

STATES 

COVERAGE 

PERCENTAGE OF 

OF COSTS 

l't'EWSPAPERS/MAGAZJ]';ES 

IN TOTAL LETfER MAIL 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 

% 

18.5 
51.9 
56 
98 
5 
33 
80 
6 
19.3 
75 
40 
100 

% 

22 
29.3 
11.5 
24.5 
3.1 

11.8 
n/a 
35.7 
23.5 
13.7 
11.0 
3.0 

Source: 

Universal Postal Union (1989) 

With  the exception  of Greece and Spain  (perhaps because of quality of service 

requirements), there seems to be  a  close correlation between cost coverage and 

page  122 

Chapter 5:  Economic and operational aspects 

the  percentage  of  newspapers  and  magazines  m  the  letter  mail. 

If  the 

preferential tariffs discourage users from  using private operators,  they  have the 

effect  of  hindering  the  establishment  of  possible  alternative  networks  for 

newspaper and magazine distribution. 

Where  quality  of  service  is  paramount,  the  cheaper  prices  of  the  postal 

administrations will  not prevent a  publisher (for instance, of a  daily newspaper) 

from  trying  to  secure  faster  delivery  by  alternative  means  even  if these  means 

are more expensive.  However, for other publications (such as monthly issues  or 

trade  magazines),  quality  of service  is  not  so  important,  and  price  is  the  key 

determinant of the decision on which service to use. 

In  such  cases,  the  low  prices  of  the  postal  administrations  prove  attractive. 

Since these prices are usually made available at  a loss to the administration,  the 

subsidies or cross-subsidies that  fund  the losses are effectively preventing other 

operators  from  entering  the  market.  The  other  operators  would  need  to 

achieve  a  profit  and,  even  if  they  might  have  some  lower  unit  costs  than  the 

postal  administration,  they  may  well  not  be  able  to  compete  on  the  prices 

actually presented to the market place. 

7. 

FUNDING 

How  are  the  losses  of  the  individual  services,  particularly  those  with  preferential 

tariffs,  funded?  Further,  how  are the losses  on  mail  services shown  at Table 3  above 

(a  total  of ECU 3.2 billion  in  1988)  funded?  There are two  sources - cross-subsidies 

and central funding. 

7.1 

CROSS-SUBSIDIES 

Clearly,  the  services  that  do  not  offer  preferential  tariffs  cross-subsidise  those 

services that do offer such tariffs.  But,  as Table 3 indicated, either the  tariffs of 

the former  are  not  high  enough  to  make  this  cross-subsidy  and  still  achieve  a 

net  surplus,  or  the  discounts  for  the  preferential  tariffs  are  so  high  that  they 

exceed the ability of the non-preferential tariffs  to subsidise them.  (Effectively, 

these are two sides of the same coin.) 

Chapter 5: Economic and operational aspects 

page 123 

Another important source of revenue  is  the postal financial  services offered by 

postal  administrations.  They  are  generally  profitable  and,  as  Table  7  below 

shows,  help to reduce the overall losses or turn them into net surpluses. 

The overall effect  of these postal  financial  services  is  to  reduce the overall loss 

of ECU 3.2 billion  incurred by  the Community's postal administrations to  ECU 

1.95  billion for  their operations combined.  The loss is  thus reduced from  12.4% 

of turnover to 5.1 %. 

Table 7: 

Postal  administrations:  funding  from  postal financial  se1Vices  ( 1988  -
Million  ECUs) 

POSTAL FINANCIAL SER\1CES 

-

-

MEMBER 

STATES 

Costs 

Revenue 

Surplus 

MAIL 
SER\1CES 
- - - - - - - - - - -··--
Surplus/ 
Deficit 
(Note 1) 

NET 

EFFECT 

Surplus/ 
Deficit 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 

299.8 
271.5 
2,180.0 
30.0 
300.0 
4,381.0 
56.0 
1,422.0 
8.0 
1,070.0 
19.0 
1,684.0 

270.3 
350.0 
2,180.0 
35.7 
488.0 
5,026.0 
59.0 
l,436.0 
10.4 
1,320.0 
20.0 
1,783.0 

- 29.5 
+ 78.5 
--
+  5.7 
+  188.0 
t  645.0 
+ 3.0 
+  14.0 
+  2.4 
+ 250.0 
+  1.0 
+  99.0 
------

+  78.2 
- 34.5 
- 1,210.0 
- 23.2 
- 307.7 
- 498.0 
- 1.3 
- 1,058.4 
- 2.7 
+  47.0 
- 35.8 
+  159.0 

+  48.7 
+  44.0 
-1,210.0 
- 17.5 
- 119.7 
+  147.0 
+  1.7 
- 1,044.4 
- 0.3 
+  297.0 
- 34.8 
+  258.0 

TOTAL 

i 1,721.3 

12,978.4 

+  1,257.1 

- 2,887.4 

- 1,630.3 

Note 1: 

The  mail  services surplus  figure  for  Belgium  shows the  result  after  receipt 
of central subsidy of ECU 321  million 

Source:  Sofres study 

Another  source  of cross-subsidy  within  the  organisation,  m  the  case  of some 

postal  administrations,  has  been  funding  from  profits  made  by  the  sister 

telecommunications  administrations. 

(In  most  Member  States, 

the 

telecommunication  administration  and  the  postal  administration  report  to  the 

same  Ministry.)  Such  cross-subsidies  are  likely  to  end  in  the  near  future  as 

page  124 

Chapter 5:  Economic and operational aspects 

governments 

increasingly  wish 

to 

ensure 

that 

telecommunications 

administrations are operationally entirely distinct. 

Such  cross-subsidies  (from  one  service  to  another,  from  one  operational 

function 

of 

the  postal 

administration 

to 

another,  or 

from 

the 

telecommunications  administration  to  the  postal  administration)  all  ask  the 

same fundamental  question.  To what  extent  do  the providers of those services 

that  contribute  the  cross-subsidies  have  a  "mandate"  to  charge  higher  than 

necessary prices for  the "giving"  services in order to carry out the cross-subsidy? 

Such a  mandate could  be in  the form  of a  formally  stated or instructed  political 

decision,  or  in  the  form  of  a  clear  commercial  statement  that  such  cross 

subsidies are being funded  in  this way. 

Where the services  that  made the contribution  are  provided  in  the competitive 

non-reserved  area  (as  is  the  case  with  express  services  provided  by  postal 

administrations or their postal financial  services),  market forces will  provide the 

checks  needed;  it  is  then  an  internal  decision  if  the  profits  gained  in  the 

competitive market are used to fund losses in  other areas. 

However,  different  questions  are  raised  if the  contributing  services  are  in  the 

reserved  area - especially  if the loss-making  services  to  be cross-subsidised  are 

in  the  non-reserved  area  ( a.s  is  the  case  of  most  printed  paper  services  in 

existing national legislation). 

As  discussed  above  at  Paragraph  6.1, 

the  perequation 

tarifaire 

involves 

geographic cross-subsidies.  In that case, however,  it  is  usually clearly stated that 

the reserved  service protection  is  required  in  order to  permit  such  a  sharing of 

costs between profitable and  unprofitable areas.  Further,  most customers have 

posting requirements in  both sorts of areas. 

This is  rather different from  the case where a  customer of one sort  of service  is 

paying a higher price than might otherwise be set in  order to cross-subsidise  the 

customer (either the sender or the recipient) of another service. 

7.2  CENTRAL FUNDING 

If,  despite  such  cross-subsidies,  the  postal  administration  is  still  m  loss,  the 

other source of funds is the government. 

Chapter 5:  Economic and operational aspects 

page 125 

In  at  least  one  case  - that  of  Belgium  - this  funding  is  carried  out  on  a 

commercial basis.  The government  instructs  the postal  administration  to  carry 

out certain  "missions",  which  it  knows  are loss-making.  The  numbers  of items 

that  are carried  in  these streams  are calculated  each year,  and  a  tariff applied. 

The  government 

then  pays 

the  postal  administration 

the  amount 

thus 

calculated.  In  1988,  the Belgian government paid its postal administration ECU 

321  million  in  this way. 

Other administrations receive funding on a  less transparent basis.  It  is  assumed 

that  they  negotiate  annually  with  their  governments  on  the  size  of the  central 

subsidy  required.  Presumably,  the  type  of calculations  made  by  the  Belgian 

administration are also  used in  this discussion. 

By  contrast,  some  administrations  are  net  contributors  to  their  governments. 

For example,  the  Danish  administration  in  1988  had  to  pay  ECU  86  million  to 

its  government  out  of  its  revenues,  this  figure  turning  a  profit  of  ECU  44.1 

million  into  a  final  loss  of ECU 41.4  million.  The British  postal  administration 

not  only  has  to  pay  corporation  tax  on  its  profits,  but  also  has  to  buy  a 

proportion  of  government  stock  each  year  (the  latter  varying  each  year,  and 

earning interest revenue for the postal administration). 

8. 

TERMINAL DUES 

Cross-border  letter  mail  compnses  letters  posted  in  one  country  for  delivery  in 

another.  When  a  customer posts such  a  letter,  it  is  the "outward" administration that 

receives the  revenue  from  the  customer,  while  the  "inward"  administration  does  not. 

However,  it  is  the  inward  administration  that  incurs  the  costs  associated  with  the 

delivery of the item, and  these costs may well comprise more than half the total cost of 

the whole operation (outward, transport and inward costs together). 

For a  long time, the  UPU members applied the principle that cross-border mail was in 

balance,  making the assumption  that  the same volume  and  the same type  of mail was 

going  in  both  directions  of  any  "exchange"  between  two  postal  administrations. 

However,  it  became clear  that  such  a  principle,  which  was  probably  never  valid,  was 

leading to significant under-compensation for some delivery administrations. 

ln  1969,  the  UPU therefore introduced a compensatory system called "terminal dues", 

which compensated  the delivery  administration on  the basis of the total weight  of the 

page  126 

Chapter 5:  Economic and operational aspects 

items to be delivered.  These charges, which  tended to favour less developed countries 

(which  predominate  in  the  UPU),  were  increased  in  real  terms  at  successive 

conferences. 

The subject of terminal dues is  rather complex.  A  fuller description is  given  at Annex 

8.  Here,  it  is  sufficient  to  note that  any system  based  purely on weight  will  inevitably 

lead  to  differences  between  actual  delivery  costs  incurred  and  the  compensation 

payments  made.  Firstly,  delivery  costs  are  related  more  to  the  numbers  of  items 

delivered  rather  than  their  total  weight.  Secondly,  the  same  compensation  was  paid 

regardless  of the level  of delivery  service  required.  Thirdly,  a  single  universal  system 

ignores  the  reality  that  unit  costs  will  vary  - and  mostly  for  reasons  unrelated  to 

efficiency. 

Figure  4  below  indicates  the  disparity  between  a  weight-based  system  and  average 

costs.  The  weight  based  terminal  dues  line  rises  steeply  from  zero,  whereas  the 

average cost  line  shows  the  reality  of a  unit  cost  for  each  item  handled  with  a  gently 

rising cost  increment  as  the weight  increases.  The effect  is  that  at  very light  weights 

there is under-compensation, and at heavier weights there is  over-compensation. 

These disparities  have  relevance  to  the phenomenon of remail  (described  in  detail  at 

Paragraph 9).  At the risk of over-simplification, the under-compensation area creates 

cost  conditions  that  encourage  A-B-C  remail,  and  the  over-compensation  that 

encourage A-B-B remail. 

The net  effect was  that  many administrations incurred  far  more inward  delivery costs 

than they received in  terminal dues.  (This is  the case with  the majority of Community 

administrations.)  They  had  to  fund  these  losses  out  of  higher  than  normal  profit 

margins on  outward traffic.  As long as administrations retained  their outward  traffic, 

the situation might have remained tolerable. 

However,  the very  inequity  at  the  heart  of the  terminal  dues  system  encouraged  the 

rise of remail as a competitive force that started to erode the outward revenue of most 

postal administrations. 

It was,  and is,  inevitable that the terminal dues disparity should be addressed.  In  1987, 

several  CEPT  administrations established  a  different  system  of terminal  dues  which 

included a  charge per item  (as well  as  a  charge by weight  that  is  lower  than  the UPU 

weight  charge). 

It  should  therefore  give  a  compensation  closer  to  actual  delivery 

costs. 

Chapter 5: Economic and operational aspects 

page 127 

Figure 4: 

Tenninal dues: comparison of costs and compensation 

REMUNERATION 

Over 
Compensation 

UPU 

Under 
Compensation 

WEIGHT 

' - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Source: 

CEC (using UPU data) 

Many  of  the  largest  trading  postal  administrations  are  partners  in  this  "CEPT" 

scheme. 

It  now  covers  not  only  six  of  the  largest  EC  countries  (in  terms  of 

international mail),  but also all  the EFf A  countries (with  the exception of Austria),  as 

well .as Australia, Canada and the US. 

It  must  be  emphasised,  however,  that  an  organisation  representing  several  private 

sector operators, the International Express Carriers Conference (IECC), has lodged a 

complaint  at  the European  Commission  that  this  arrangement  is  anti-competitive  in 

that it sought to discourage remailing activities.  An investigation has been carried out 

by the Commission under the Community's competition rules, and formal proceedings 

have been opened. 

page 128 

Chapter 5:  Economic and operational aspects 

The  CEPT  system,  while  closer  to  costs  than  the  UPU  system,  is  still  based  on  an 

average across the administrations participating.  This has  the benefit of being easier 

to  administer  and  provides  some  stimulus  for  the  countries  to  improve  the  cost 

efficiency of their delivery systems.  However, it does not recognise the significant cost 

and  tariff  differences  that  exist  between  administrations  (even  between  European 

administrations). 

The  postal  administrations  of the  five  Nordic  Union  countries  (including  Denmark) 

have  implemented  for  mail  flows  between  them  a  system  which  compensates  the 

delivery  administration  on  the  basis  of  a  percentage  of  the  latter's  actual  delivery 

tariffs.  Certain  other  administrations  are  investigating,  in  pairs,  the  practicality  of 

using national tariffs as the basis for charging each other. 

In  the  meantime,  the  UPU  has  also  addressed  part  of the  problem  of terminal  dues. 

For  most  mail  flows  (unless  otherwise  agreed),  there  are  now  different  charges  for 

letters  and  for  printed  papers.  This  system  is  still  based  entirely  on  weight,  and 

therefore very  much  reliant on  the global  average item weight  in  each stream (that is, 

in letters and also in printed papers). 

The UPU  has  also  added  another charging  system  for  mail  flows  where  the  average 

weight  is  significantly  different  from  the  global  average.  This  system  is  based  on  a 

charge per item and a charge by weight;  however,  it  is  not clear how this system could 

actually be applied in practice. 

It  is  thus  clear  that  there  is  already  considerable  will  to  improve  the  terminal  dues 

systems.  It is  recognised that some terminal dues system will continue to  be necessary 

to  provide  compensatory arrangements  between  the  170  countries  that  are  members 

of the UPU.  Further, it would  probably not be practical to charge on the basis of each 

item  exchanged  at  the  tariffs  of  the  delivery  administration.  For  compensatory 

purposes,  some  "bulking"  will  remain  necessary. 

If,  therefore,  terminal  dues  are 

necessary, the optimum system or systems need to be sought. 

In  this,  the  need  to  establish  a  terminal  dues  system  that  properly  compensates  the 

delivery administration will  become yet  more urgent.  The different remail systems (as 

described below) have already shown  up  the weaknesses of the UPU system.  Some of 

the likely effects of the Single  Market  on  the profile of traffic  (as  discussed  above  at 

Chapter 4,  Paragraph  9),  by  causing  existing  core  domestic  traffic  to  become  cross 

border, will add to this exposure. 

Chapter 5: Economic and operational aspects 

page  129 

It  may  also  prove  necessary  to  implement  a  system  that  relates  more  closely  to  the 

domestic access  conditions  of each  administration,  in  order  to  demonstrate  that  the 

entry conditions  are  equal  for  users,  no  matter  how  they  wish  to  gain  access  to  the 

reserved services of the delivery country (whether directly into the domestic system or 

indirectly through a cross-border system). 

9.  REMAIL 

Remail is  a  cross-border mail service offered by  private operators in competition with 

the services  offered by  the postal  administration  in  the country of the customer.  The 

remail  operation  usually  involves  the cooperation  of a  postal  administration  - either 

that of the country of delivery or that of a  third country. 

Annex  9  lays  out  the  history  of  remail. 

It  shows  how  remail  evolved  partly  as  the 

result  of an  established  market  need  (poor quality  of service  for  printed papers from 

the United States) and partly as  a  result of exploitation of the weaknesses of the  UPU 

terminal  dues system.  Like  all  services,  remail  is  sold  on  the basis of a  price/service 

combination.  The weighting  of  these  features  partly  depends  on  the  type  of  remail 

service  used.  It  is  sometimes  said  that  remail  is  a  price-cutting  service.  While  it  is 

true that remail prices are often lower than  those of the competing services offered by 

postal  administrations,  it  is  also  the  case  that  remail  can  offer  better  service  or 

improved facilities. 

There are  conventionally  thought  to  be  three  types  of remail.  The  original,  and  still 

the most  important,  is  A-B-C  remail.  This  involves  a  private operator collecting  the 

international  letter  mail  of  large  customers  (in  country  A),  freighting  it  to  another 

country  (country  B)  and  posting  it  with  the  administration  there  for  onward 

transmission to,  and delivery in,  a third country (country C). 

In  the  case  of  A-B-C  remail,  the  price  paid  is  based  on  terminal  dues,  as  paid  by 

administration B to the administration  in  country C.  A  second type of remail is  based 

on  the  domestic  tariffs  of  the  delivery  administration. 

In  the  case  of  this  typ~ of 

remail (called A-B-B),  the private operator collects the mail  in  country A, transports it 

to the delivery country (B) and posts it  there with the delivery administration (B). 

A third type of remail involves mail being transported from country A  to country B for 

remailing back to country A.  If the mail is  physically transported out of country A  and 

it  meets the reserved  service criteria  of that country,  this  remailing system  (called A-

page 130 

Chapter 5: Economic and operational aspects 

B-A)  contravenes  the  monopoly  of  country  A  (as  discussed  above  at  Chapter  3, 

Paragraphs 5.1  and  6.3 ).  However,  there  are  different  variations  of this  system  of 

remail, for which the legal position is not so clear-cut. 

The present  legal  position  of remail  is  discussed  at  Chapter  3,  Paragraph  3.8.  That 

discussion also refers to the position of mail which is  generated in  one Member State, 

is  then  remailed  through  the postal  administration  of a  non-Community  country for 

mailing back  into  the  Community  for  delivery  in  a  second  Member  State.  (Such  a 

practise might  become  more prevalent,  depending  on  what  decisions were  taken  on 

the terminal dues system  that should  operate within  the Community - see Chapter 3, 

Paragraph 5.2.) 

All three types of remail systems are discussed in detail below. 

9.1  A-B-C REMAIL 

It is said that the main commercial attraction of A-B-C remail is the cost savings 

that can  be offered  to  customers  on  the  basis  of exploitation  of the  inequities 

inherent in  the terminal dues system.  This statement is  generally correct,  but it 

needs to be qualified somewhat. 

9.1.l 

COSTS AND PRICES 

Firstly,  in  a  direct  comparison  of costs between  a  postal  administration  and  a 

private  operator  offering  competitive  remail  services,  the  costs  of  the  postal 

administration should,  theoretically at least, be cheaper. 

The  main  variable  cost  is  the  terminal  dues  payment.  Formerly,  this  was  the 

same  UPU  charge  for  all  - whether  the  administration  in  country  A  or  the 

remailing administration in  country B - but now it  may be different.  The freight 

charges should be higher for  the private operator, because he has to freight  into 

the  remailing  country,  as  well  as  paying  the  onward  freighting  costs  of  the 

remailing administration. 

The other  main variable  element - that  of handling  and  sorting - again  should 

favour  the  postal  administrations,  which  ought  to  be  able  to  exploit  the 

(admittedly limited)  returns to  scale  of the sorting operation.  In  addition,  the 

remailing administration should logically  be charging a  margin  on  its  services -

again which should be passed on to the remailers' customers. 

Chapter 5: &onomic and operational aspects 

page 131 

How, 

then,  can  remailers  be  cheaper? 

As 

indicated  above,  postal 

administrations have traditionally priced up their outward cross-border services 

in  order  to  fund  through  cross-subsidy  the  losses  that  they  make  on  inward 

cross-border services (the latter being the negative difference between terminal 

dues compensation and the actual costs of delivery).  This loss can be important. 

For example, the average delivery cost  of a  20  g letter for  an  EC administration 

is  in  the  range  of 0.25  to  0.28  ECUs.  The  UPU  compensation  is  0.18 ECUs 

(and,  before  1991,  it  was  only  0.06  ECUs).  Examples  of  light-weight  costs 

perhaps  show  the  more  extreme  cases  of  such  disparities.  However,  one 

administration calculated  that  its  total  inward  loss  was  significantly  more than 

10% of its total international revenue. 

These losses  have  to  be  funded.  By  comparison,  neither  the  private  operator, 

nor the remailing administration  that  the private operator  uses,  actually carries 

out any delivery.  The delivery  is  delegated  to  the  administration  in  country C, 

and is paid at a fixed  rate through the terminal dues system. 

The  second  possible  cause  for  remailing  operations  being  cheaper  is  that 

remailing administrations sometimes offer prices which  are below cost.  This is 

either  due  to  ignorance  of  actual  costs  (and, 

in  particular,  a 

lack  of 

understanding of marginal costs)  or due to a  tariff policy  that  depresses  prices. 

The latter refers particularly to printed paper prices. 

Most administrations have low-cross-border printed paper prices because of the 

political  pressure  from 

their  domestic  printing/publishing  industry  (and 

sometimes  because  of UPU  recommendations).  Often  the  prices  are  below 

cost.  At least one EC administration  offers  printed  paper reduced  rates below 

the cost of terminal dues - before the addition even of other variable costs. 

Private  operators  can  exploit  these  different  prices. 

In  effect,  the  different 

prices  offered  by  all  administrations  become  part  of  a  "spot"  market  for  the 

"commodity"  of  the  postal  distribution  of  printed  papers. 

In  this  way, 

administrations,  often  unintentionally,  can  become  remailing  administrations 

(and may even be unaware that this is  happening). 

page  132 

Chapter 5: Economic and operational aspects 

9.1.2 

SERVICE 

In  general,  it  should  be  expected  that  A-B-C  remail  would  produce  slower 

transit  times  than  those  that  the  postal  administration  in  country A  should  be 

able  to  provide.  Most  obviously,  there  is  an  extra  freighting  journey involved 

(between country A and country B). 

Secondly,  for  mail  services  carried  by  air,  the  direct  flights  available  from 

country A would  have evolved for commercial and historical reasons, and would 

normally be expected  to  align  more closely with  the  mailing destinations of the 

customer rather than would  the direct flights available from country B. 

However,  it would  be wrong to generalise about the relative quality of service of 

remailers.  This varies depending on  the  number of remailing centres used,  and 

on  their  proximity  to  final  destinations.  Thus,  for  example,  mail  from  the  US 

for  European  destinations,  if  remailed  through  Puerto  Rico  would  receive  a 

poor service, but if remailed through Amsterdam would probably receive a good 

service. 

This  perspective  of  customers  outside  the  Community  wishing  to  have  mail 

delivered  across  the  Community  is 

important: 

they  may  well  prefer  to 

concentrate  their  European  distribution  requirements  in  one  location  m 

Europe, rather than with  one operator in  North America which  then transports 

separately to all  the European destination countries. 

In  all  these instances, the main point of comparison is with  the competing postal 

administration, and  it  should  be remarked  that some postal  administrations are 

worse  than  others  in  terms  of  transit  times  (see  Chapter  4,  Paragraph  7.2  for 

comparisons between the EC's administrations). 

In  general,  if the  postal  administration  is  effective  in  its  outward  operation,  it 

should  be  able  to  beat  the  transit  times  of  the  private  operators.  This  is 

demonstrated  by  comparative  tests  undertaken  by  some  large  customers. 

However, where  the  postal  administration  has  a  relatively weak  operation,  the 

private  operators  may  often  be  superior.  This  is  indicated  by  the  fact  that 

private operators selling in  certain countries can sell  at prices higher than  those 

of the competing administration, and can still maintain market share. 

Chapter 5: Economic and operational aspects 

page  133 

To  add  a  general  point  that  applies  to  the  other  remailing  systems  as  well, 

service is  more than  simply  transit  times.  It includes all  other aspects  that  the 

customer perceives - such as the flexibility  of collections, accounting procedures, 

credit  availability,  treatment  of complaints,  the  effectiveness  of  sales  account 

management, etc.  (It could also  include bolt-on  features  such  as business  reply 

service; a private operator has set up such a service that covers certain countries 

not covered by the postal administrations' own  reply service.) 

In  these  other aspects,  it  is  by  no  means  clear  that  the  postal  administrations 

have an advantage.  In  some cases they  may  have a  definite  disadvantage.  For 

example, 

some  administrations  do  not  offer 

credit,  but 

remailing 

administrations often  do:  thus  a  customer  may  have  access  to  credit  only  if  he 

uses  a  private  operator.  Generally,  however,  there  is  no  reason  why  postal 

administrations  should  not  match  the  private  operators  among  these  aspects  -

and some do. 

9.2  A-B-B  REMAIL 

As  described  above,  the  cost  motivation  for  A-B-C  remail  is  the  difference 

between  delivery  costs  and  terminal  dues. 

For  A-B-B  remail,  the  cost 

motivation  is  the difference  between  domestic  tariffs  and  terminal  dues.  The 

cost  of terminal  dues  rises  more  steeply  at  each  incremental  weight  step  than 

most  domestic  letter  tariffs. 

This  encourages  heavier  cross-border  mail 

collected  by  private  operators  to  be  posted  domestically  in  the  country  of 

delivery.  Similarly, the preferential rates offered for  printed paper streams may 

make such items cheaper to post domestically. 

There  is  also  an  important  service  motivation  behind  the  evolution  of A-B-B 

remail.  Any  mail  going  through  the  conventional  international  letter  mail 

system  between  postal  administrations  (including  A-B-C  remail)  has  to  go 

through  at  least  two  "offices  of  exchange".  These  are  special  offices  used  by 

postal  administrations  to  despatch  or  receive  cross-border  mail. 

In  order  to 

give returns to scale - including in  the expertise on handling international mail -

each administration  has  only  a  small  number  of such  offices,  thus  running  the 

danger of bottle-necks. 

Private operators,  by  contrast,  can. post  A-B-B  remail  at  any  office  they  wish  -

one that it  is convenient to them and has good quality of service.  If they choose, 

page  134 

Chapter 5:  Economic and operational aspects 

they can post the mail for one country at several different offices thus improving 

transit  times  further.  They  may  also  be  able  to  accelerate  such  mail  by 

transporting from  the outward country to the inward using their own air services 

(if they already have these available for their express services). 

Some private operators, having freighted  such cross-border mail  into a  country, 

may  prefer  to  deliver  some  or  all  of  it  themselves.  This  delivery  element  is 

sometimes 

called 

"city-mailing" 

and  was  mentioned  m  Chapter 3, 

Paragraph 3.9.1.  While such delivery systems  may possibly be quicker (because 

they involve  no transfer between  operators)  and cheaper (because they tend  ~o 

deliver only  in  high  density city  centre  areas),  some of the letters  so  delivered 

almost certainly belong to the reserved area of the local postal administration. 

By delivering only  in certain areas and posting the higher cost material with  the 

postal  administration,  such  a  system  is  effectively  "creaming-off'  the  more 

profitable traffic.  What at the moment may only be a  relatively minor irritant to 

postal  administrations  could  become  very  important  if domestic  mail  starts  to 

become cross-border mail (as speculated at Chapter 4,  Paragraph 9). 

Another  derivative  of A-B-B  remailing  is  the  concept  of  local  posting  which 

involves  an  operation  carried  out  entirely  within  one  country.  Under  this 

system,  a  private  operator  collects  the  mail  from  the  customers  and  sorts  by 

major town;  the mail is  then  transported to these major towns and posted there 

for delivery in  the local area by the postal administration. 

Underlying this  system is  the reality  that the local quality of service tends to be 

very good,  regional  less  good,  and  long  distances less good  still.  However,  for 

such a service to be competitive either on service grounds or on price (since it is 

likely  to be more expensive than  the conventional service offered  by  the postal 

administration),  there  would  need  to  be  a  wide  perception  of  poor  quality  of 

service on the part of the postal administration.  Such systems operate widely in 

the United States, and there is anecdotal evidence that they are growing in Italy. 

9.3  A-B-A  REMAIL 

As  described  above,  "physical"  A-B-A  remail  involves  a  mail  item  being taken 

out of a  country,  posted with  the postal administration of a  second country for 

posting back into  (and  delivery  in)  the first  country.  Assuming  that  such  mail 

meets  the  criteria  for  being  placed  in  the  reserved  area  of  the  country  of 

Chapter 5: &onomic and opera.tiona/ aspects 

page 135 

delivery, such a practice contravenes the exclusive rights  of the reserved service 

provider. 

Such practices  are particularly  dangerous for  high  tariff administrations whose 

prices  can  easily  be  under-cut  by  competitive  prices  based  on  an  averaged 

terminal dues system.  Strangely enough,  all  private operators and all  remailing 

postal administrations abhor the practice - and yet it continues to exist. 

However,  there  are  other  movements  of  mail  about  which  there  have  been 

similar controversies, but which  need to  be viewed  in  a  different way.  It  is  not 

uncommon  for  publishers  to  centralise  the  printing  of  a  European-wide 

magazine in one location, even if the publication is  in  different languages.  If the 

material is  then posted  in  the same country as  the printer,  it  should  be treated 

by  the  receiving administration  as  ordinary  cross-border  mail  - even  though  it 

might  otherwise  have  the  appearance  of  domestic  mail  in  the  country  of 

delivery. 

This  phenomenon  of  centralised  production  which  could  turn  domestic  mail 

into  cross-border  mail  is  likely  to  increase  as  customers  modify  their  location 

and  buying  strategies  as  a  result  of  the  Single  Market.  Thus,  a  bank  might 

centralise  its  statement-producing  operation  in  one  location  (rather  than 

producing the statements in each different country served), and then post all the 

mail out of the one location.  Similarly, an advertiser may wish  to produce all its 

direct mail in one location, and post there. 

The  fact  that  such  mail  might  formerly  have  been  domestic  and  therefore 

subject  to  domestic  monopolies  causes  some  people  to  contemplate  whether 

such  movements  of  mail  thus  caused  should  be  considered  an  infraction  of 

domestic  monopolies  unless  the  items  concerned  are  posted  in  the  country  of 

delivery.  Briefly,  the question that should be put is  as follows:  should the single 

market 

in  printing,  electronic  data  and  advertising  adjust 

to  possible 

interpretations of postal rules, or the converse? 

A different question is posed by the possible implications of the single market in 

distribution.  An example here could be of an  advertising agency that wishes  to 

carry out a European-wide mailing,  including for  the country in  which it  itself is 

based. 

If the  agency  prints  all  the  material  locally  and  then  contracts  the 

distribution  to  a  postal  administration  in  another  country,  how  should  the 

page 136 

Chapter 5:  Economic and operational aspects 

material  that  was  for  delivery  in  the  advertiser's  own  country  be  treated?  Is 

such mail part of the postal administration's reserved area or not? 

IO. 

INVESTMENT AND TECHNOLOGY 

Investments are made in  the reserved  sector to  improve service  and/ or reduce costs. 

In  the  non-reserved  sector,  there  is  the  added  stimulus  of  trying  to  increase  or 

maintain competitive advantage,  and thus improve profits;  here,  investments may also 

be made to launch new services, to expand  networks and to take over companies. 

Below are discussed the technological  requirements of the different parts of the postal 

sector.  The  investment  perspectives  of postal  administrations  (particularly  in  regard 

to their role as reserved service providers) and of private operators are then discussed 

in  turn.  For the latter, some analysis of the market structure is  also needed. 

IO.I  TECHNOLOGY 

For all  product segments - letters, parcels and express - the basic fact  is  that the 

collection  and  delivery  phases,  which  together  account  for  the  largest  part  of 

operating costs,  cannot  easily  be  mechanised.  All  these  services  will  therefore 

continue to have a substantial manual element. 

Beyond  this  reality,  the  essential  technology  requirements  of the  postal  sector 

vary considerably  between  those  of the  express  and  parcel  services  on  the  one 

hand, and those of letter services on the other. 

The  main  technological  investment  made  in  the  letters  segment  is  that  of 

automated sorting machinery.  The results  have been  mixed,  and  it  is  clear that 

such  technology  is  of very  much  secondary importance  by  comparison with  the 

need  for  effective  management.  By  comparison,  for  value-added  services  such 

as  express,  it  already  seems  an  essential  prerequisite  for  success.  For  cross 

border letter mails,  technological applications may play an important  role in  the 

future in helping to improve the present poor levels of service. 

10.J.1  EXPRESS/PARCEL REQUIREMENTS 

Express  and  parcel  services  tend  to  require  more  technological  applications, 

partly because of their  nature  (the  items  being larger),  but  mostly  because  the 

service  providers  need  to  seek  competitive  advantages  through  different 

Chapter 5:  Economic and operational aspects 

page 137 

facilities  that  are  made  possible  through  technology. 

(Express  and  parcels 

operate  in  non-reserved  markets.)  These  include  tracking  and  tracing,  which 

may  become  the  key  determinant  of  success  for  the  larger  players  over  the 

medium term. 

10.1.2  LETTERS - REQUIREMENTS FOR NATIONAL SERVICE 

For ordinary domestic letter services,  by  contrast,  the application of technology 

is  far  less  necessary.  Although  the  majority  of  postal  administrations  have 

invested in  mechanised sorting technology,  the letter operation will  continue to 

be  very  labour  intensive:  personnel  costs  are  75%  of  total  costs,  while 

investment  in  mechanised  plant  accounts  for  less  than  1 %  of  revenue.  This 

reflects the reality that standard letter services will  remain predominantly based 

on  manual  operations.  More  importantly,  the  results  of such  investment  have 

been  mixed  in  terms  of cost  reduction,  and,  particularly,  in  terms  of trying  to 

improve quality of service. 

There  are  several  examples  (the  clearest  being  that  of  Italy)  where  heavy 

investment in  such  technology has not led to good quality;  other examples (such 

as Ireland)  demonstrate that  it  is  possible  to  have high  levels of service with no 

such  investment  at  all. 

This  seems  to  suggest 

that  effective  network 

management is  the main guarantee of success. 

Further evidence is  provided  by  the example of the United Kingdom, where the 

postal administration,  having  previously  invested  heavily  in  mechanised  sorting 

equipment, has  recently  improved  its  quality substantially with  hardly any extra 

investment in  mechanisation. 

10.1.3  LETTERS - REQUIREMENTS FOR CROSS-BORDER SERVICE 

For  cross-border  letter  mail,  use  of  technology  may  be  more  appropriate  m 

order  to  help  ensure  the  effective  inter-action  of  the  networks  of  the  two 

different  service  providers  involved  (usually  the  two  postal  administrations). 

Here,  the  important  need  is  for  diagnostic  tools  to  identify  what  quality  of 

service is  achieved where.  For this,  technological applications similar to that  of 

tracking and tracing systems used by express operators could help to provide the 

necessary network information. 

page 138 

Chapter 5: Economic and operational aspects 

Unipost, a  company subsidiary of the CEPT,  has recently passed the first  stage 

of approval under the European Nervous System  (ENS) programme to  initiate 

a  pilot  project providing  an  information  network overseeing  the  movement  of 

letter mails between five  countries.  The cost  of the  project  is  ECU 48  million, 

spread over two to three years. 

In  summary,  for  ordinary  domestic  letters,  there  is  no  essential  technological 

requirement (although many postal administrations may choose to try to exploit 

technological possibilities). 

10.1.4  FUTUREAPPL/CATIONS 

Investment is  a  cyclical  process.  In  the  non-reserved  sector, companies which 

have not made the investment in new techniques may now do so in  order not to 

be  left  behind. 

In  the  meantime,  those  companies  who  presently  have  a 

competitive  advantage  obtained  through  past  investment  will  probably  seek 

areas to gain new advantage from technology to be developed. 

In  the  reserved  area  providing  the  standard  letter  service,  technological 

development  is  likely  to  progress  more  slowly. 

It  appears  that  several 

administrations are  in  the  "mature"  phase  of an  investment  cycle,  where  they 

have already invested in the ~utomated equipment that is presently available for 

processing letters.  For the short/medium term, postal administrations may well 

find  that the most effective investment is in selective applications of information 

technology to help  modernise the management  of the letter  networks and  thus 

improve quality of service. 

10.2 

INVESTMENT - POSTAL ADMINISTRATIONS 

Whilst  most  reserved  service  providers  are  in  deficit,  they  continue  to  make 

significant  investments.  This  investment  tends  to  fall  into  four  categories: 

buildings,  vehicles,  information  technology  and  mechanised  plant.  (The  latter 

includes  both  automatic  sorting  machinery  and  mechanical  handling 

equipment.) 

As stated, reserved service providers make investments for the commercial aims 

of reducing costs or improving service.  For the former,  commercial principles 

of assessing  return on capital should  still  be used.  In  this  regard,  it  should  be 

remembered  that  costs  (particularly  labour  costs)  will  vary  significantly  from 

Chapter 5: Economic and operational aspects 

page 139 

country  to  country.  This  variation  should  have  an  effect  on  investment 

decisions. 

Figure 5 shows the average investment carried out by the postal administrations 

in  the  years  1985-1988  (expressed  as  a  percentage  of  turnover).  The  graph 

should be interpreted with some caution:  it  is  quite possible to increase certain 

expenditure  - for  instance  on  staffing  levels  - to  improve  service,  without 

appearing to  make any  investment.  (The figures  on which  the graph  is  based 

are shown in Annex 11, Paragraph 4.) 

Figure 5: 

Investments  made  by  postal  administrations  (1985  - 1988)  -

average investment as percentage of turnover 

115 

.......................................................................... . 

10  ··········································································· 

0 

B  DK  D  QR  E 

F 

IRL 

L  NL  P  UK 

USA 

Source: UPU 

It should be observed that there is  no direct statistical link  between, on the one 

hand, the relative investments made over the previous period indicated and, on 

the  other  hand,  the  quality  of  service  given  to  customers.  Two  contrasting 

examples support this observation.  Italy,  one of the heaviest investors,  has the 

page 140 

Chapter 5: Economic and operational aspects 

worst  quality  of service,  while  Denmark,  one  of  the  lower  investors,  has  the 

second highest quality of service in the Community. 

Similarly, there appears to be no link between quality of service and investment 

specifically  in  mechanised  sorting  offices  (the  figures  for  the  latter  being 

appended at Annex 2).  It should also be mentioned  that there appears to be no 

relationship  between  investment  recorded  and  unit  costs  (even  if variations  in 

the cost of labour are excluded). 

Significant  past  investments  have  also  been  made in  post-codes systems  by  all 

but one postal administration  (the exception  being Ireland).  (Postal codes  are 

discussed in  more detail in Annex  I 0.)  The investment was and is  in  the form of 

post-code  planning,  public  awareness  campaigns  and  data-base  up-dating. 

In 

most  mechanised  sorting  systems,  the  post-codes  system  was  necessary  to 

enable  the  sorting  to  be  carried  out.  However,  the  newer  generation  of 

machines that permit sorting by  Optical Character Reading systems will  be able 

to "read" whole addresses, and will  use post-codes as a checking device only. 

Of course, investments in post-coding systems are still valuable, both for quality 

of service  and  for  advertising  purposes.  It will  therefore  be  necessary  still  to 

maintain  existing  systems.  However,  there  does  not  seem  to  be  a  need  to 

transform  existing  systems  into  an  integrated  European  system.  Against  this, 

the implementation of more detailed systems in  those countries which presently 

do not have them would enable the postal administrations there to offer greater 

facilities for pre-sorting by their customers. 

For the future,  the key  investment for  all  postal operators would  seem  to be in 

network management and in the appropriate systems that will facilitate  it. 

10.3  PRIVATE OPERATOR INVESTMENTS AND OPPORTUNITIES 

The image of the  non-reserved  part  of the postal  sector is  that  it  is  dominated 

by a  few  large companies, all of which have parent companies based outside the 

Community.  In fact,  the greater part of the market is  held by companies which 

are  from  within  the  Community.  Further,  some  shareholdings  in  the  large 

companies with  non-Community parents  have recently  been  sold  to  groupings 

which  include  substantial  Community  interests.  Besides,  the  new  techniques 

which  the  large operators  have brought  to  the  Community,  and  the  significant 

Chapter 5:  Economic and opero.tional aspects 

page 141 

investment  which  has  enabled  them  to  be  introduced,  all  serve  to  benefit  the 

Community. 

10.3.1  MARKETCOMPOSIT/ON 

While a few companies of non-European origin (such as DHL, Federal Express, 

TNT and  UPS)  are the well-known  international players,  the reality  is  that  the 

larger part of the community parcels  and  express  market  is  held  by  the smaller 

domestic  operators  who  are  almost  all  European  in  origin. 

In  fact,  the  few 

companies named above,  have a  total market share of only 23% between them, 

much of this being generated by  their cross- border services. 

10.3.2  NEW TECHNIQUES 

These larger  companies  have  been  effective  in  providing cross-border  services 

by  bringing the concept  of the "integrator"  to  cross-border services  in  Europe -

that  is  the  concept  of  a  single  operator  providing  end-to-end  service  himself 

without  sub-contracting  to  another  operator.  They  have  introduced  Europe 

wide  air-based  hub-and-spoke  networks,  which  were  originally  pioneered  by 

Federal  Express  in  the  United  States.  Tracking  and  tracing  technology,  first 

introduced  by  DHL  and  UPS  separately,  is  now  becoming  more  common  in 

Europe. 

Customer service  facilities  based  on  computers  were  developed  particularly by 

the  airlines,  but  it  was  Federal  Express  that  made  the  first  successful  wide 

spread  application 

in 

the  postal  sector 

in 

the  US,  and 

is  said  to  be 

contemplating a  similar investment  in  Europe.  It  was also  Federal Express that 

pioneered  techniques  which  permitted  express  operators  to  offer  integrated 

warehousing  and  distribution  facilities.  Together,  these  innovations  have 

collectively benefited European business, particularly for cross-border trade. 

10.3.3 

INVESTMENT TRENDS 

All the large companies have also  made significant  investments in  their network 

infrastructures.  For  reasons  of  commercial  confidentiality,  the  investment 

figures  have  not  been  released,  but  it  is  thought  that  only  one  of  the  four 

companies  is  presently  making  a  return  on  its  investment.  Some  of  their 

investment is,  however,  obvious.  For example, TNT has  invested  heavily in  the 

page 142 

Chapter 5: Economic and operational aspects 

purchase  of a  fleet  of freight  aircraft  from  British  Aerospace.  Tracking  and 

tracing technology has also involved heavy expenditure. 

Heavy investments are also  being made in central and eastern Europe in  order 

to ensure comprehensive express networks across the whole continent. 

10.3.4  MARKET RESTRUCTURING 

There have been several  take-overs,  now  leaving  four  key  private  operators  in 

the cross-border express market (DHL, Federal Express, TNT and UPS) as well 

as  the  postal  administrations  (most  of  which  share  in  the  operations  of  a 

combined company, Unipost). 

To  reduce  the  financial  burden,  some  companies  have  been  ~eeking outside 

investment.  Thus,  DHL  (Europe)  has  sold  58%  of  its  shares  to  two  airlines 

(Lufthansa and Japan Air Lines).  TNT Worldwide  Express is  in  the process of 

being  merged  into  a  new  joint  venture  which  is  50%  owned  by  5  postal 

administrations, including those of France, Germany and the Netherlands. 

10.3.5  FUTURE DEVELOPMENTS 

Private  operators,  both  large  and  small,  are  likely 

to  encounter  both 

opportunities  and  threats  as  a  result  of  future  market  developments.  The 

liberalisation  of  cross-border  mail  will  give  some  new  openings  if  private 

operators  can  offer  services  superior  to  those  of  the  postal  administrations. 

However, the incremental opportunities as a  result of formal  liberalisation may 

be few,  since this market segment is already substantially liberalised de facto. 

Similarly, the liberalisation  of direct mail is  unlikely  to lead  to massive amounts 

of such  mail being won  by  private operators.  It  is  not  clear  that  many  private 

operators would  want  to  make  the  investment  in  universal  networks  to  make 

them  directly  competitive  with  postal  administrations.  Further,  the  private 

operators  would  be  competing  against  prices  which  are  usually  significantly 

discounted because of content or volume and pre-sorting.  (In  the case of both 

cross-border  mail  and  direct  mail,  satisfactory  controls  will  need  to  be  put  in 

place to protect the letter mail that remained reserved.) 

Against these apparently limited  opportunities,  private  operators  may  find  the 

appeal of their express services gradually being eroded by  the likely diminution 

Chapter 5: Economic and operational aspects 

page 143 

of the seivice differential between the performance of their products and that of 

the ordinary  letter  mail.  This  may  happen  in  relation  to  both  their  domestic 

seivices  and,  perhaps  particularly,  their  cross-border  express  services.  In  the 

case  of  the  latter,  the  quality  of  ordinary  letter  services  should  improve 

considerably as a result of the measures proposed in the Green Paper. 

page 144 

Chapter 5:  Economic and operational aspects 

Chapter 6:  Social aspects 

page 145 

CHAPTER 6: 

SOCIAL ASPECTS 

1. 

INTRODUCTION 

This chapter discusses the social aspects of the postal sector from  two perspectives. 

Firstly,  it  will  view  the  sector  from  the  outside  looking  in  - that  is  to  say,  taking  the 

perspective of the customers.  As discussed  in  Chapter 4,  the "customers"  can vary from 

large  organisations  with  very  big  communication  requirements  to  individuals  sending 

single  messages.  While  large  organisations  generate  the  greatest  proportion  of  mail, 

here the perspective tends more towards the requirements of the individual customers or 

small  enterprises.  At  the same  time,  it  needs  to  he  recognised  that  all  customers  (but 

particularly the larger customers) have needs that extend beyond the basic services. 

Secondly,  to complement  this  external  perspective,  the  discussion  will  turn  to  the social 

aspects  from  an  internal  perspective  - that  is,  the  employment  aspects  related  to  the 

postal operators and their employees. 

The  function  of  postal  operators  is  to  provide  service  to  their  customers.  The  two 

perspectives should therefore meet together so that they become two ways of viewing the 

same situation.  The  changes  in  s~ciety (economic  - including  the  effects  of the  Single 

Market  - and  social)  influence  the  demands  placed  on  postal  operators,  for  example  in 

terms  of  the  proximity  of access  to  customers,  the  quality  of  service  or  the  ability  of 

operators to provide "tailor-made" services. 

As these requirements change,  operators must  adapt  to  them.  This in  turn  requires that 

their  employees  should  also  adapt  to  changes  in  demand.  At  the  same  time,  social 

developments regarding working conditions in  the Community will  also affect  how postal 

operators function. 

2. 

EXTERNAL CUSTOMER ASPECTS 

It  is,  of course,  not  possible  comprehensively  to  describe  customer  needs  and  analyse 

how well  presently available  services  meet  those  needs.  However,  two  points  are clear: 

firstly,  customers require a  universal postal service,  and,  secondly,  they need a  flexibility 

of approach on the part of the postal operators.  This need for  flexibility is  likely to grow 

stronger in the future. 

page 146 

Chapter 6:  Social aspects 

2.1 

PRESENT REQUIREMENTS 

As stated in Chapter 4,  the basis for all national policies for the postal sector is the 

provision of universal service at an affordable price.  Further, the universal service 

must provide a quality which customers r~ognise as satisfactory. 

Beyond the universal service,  there is  a  demand for  specialised services.  A  by  no 

means exhaustive list would  include such  specialised services  as  deferred delivery 

services,  deliveries on Saturdays for  mail  order companies,  deliveries before 0730 

on  week-days 

to  businesses,  special  rates  for  bulk  campaigns, 

targetted 

unaddressed  mail  campaigns,  direct  marketing  diagnostic  services  (where  the 

postal operator analyses the effectiveness of an advertising campaign on behalf of 

the direct mail user), database leasing, etc. 

2.2 

PRESENT SERVICES 

Although  it  has  been  stated  that  the  fundamental  basis  for  postal  policy  is  the 

requirement to  achieve  universal  service  at  an  affordable  price,  often  not  stated 

explicitly  is  what  this  universal  service  implies  in  terms  of  accessibility  by  or  to 

customers - that is,  how easily potential customers should  be able to post material 

and  how  regularly  delivery  points  ought  to  be  accessed  by  the  universal  service 

operator. 

In this context, access should be interpreted widely.  It therefore refers to  the ease 

with  which  potential  customers  can  find  out  about  postal  services.  More 

particularly,  it  refers  to  the  ability  to  buy  the  means  of posting  items  (for  most 

people, this meaning stamps) and then actually to post those items. 

Post offices (post office counters operated by the postal administration  itself or on 

a  sub-contract  basis  by  self-employed  operators)  provide an  important  source  of 

information concerning postal services.  (Naturally,  they need to be supplemented 

by  telephone  enquiry  numbers  and  enquiry  addresses,  by  which  potential 

customers can seek information on services.)  As well as selling stamps, these post 

offices  also  contain  posting  boxes  for  customers  to  post  their  mail  items. 

In 

addition,  there  are  posting boxes  placed  in  streets  or  public  places.  (For larger 

customers·, mail is also collected from premises.) 

Some aspects of accessibility of postal services are summarised in Table 1 below. 

Chapter 6:  Social aspects 

page  147 

Table 1: 

The postal ''presence" - postal administrations (1989) 

MEMBER STATE 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Port4gal 
United Kingdom 

EC average 

NUMBER OF 

AVERAGE 

POST 

OFFICES 
(Note 1) 

POPULATION PER 

POST OFFICE 

POST 

OFFICES 

PER 
100 KM2 

1850 
1300 
17 500 
929 
12 985 
17 ()()() 
2 075 
14 353 
106 
2624 
1 050 
21  ()()() 

92 772 

5 330 
3 939 
3 489 
10 72B 
2 978 
3 258 
1 711 
3 987 
3 472 
5 550 
9 881 
2 704 

3 484 

6.07 
3.02 
7.04 
0.70 
2.57 
3.10 
2.95 
4.76 

4.08 

6.28 
1.14 
8.60 

4.10 

Note 1 

The  numbers  of  post  offices  shown  for  Ireland  and  the  United  Kingdom  include  sub 
contracted post  offices.  It  is  thought  that  other countries  also  have  similar  sub-contracted 
offices.  If they were excluded  from  the figures  shown  for  Ireland  and the  United Kingdom, 
the number of offices would be, respectively,  124 and 1 500. 

Source: 

Sofres study 

Accessibility, however, does not refer only to the universal service.  It also refers to 

the  need  to  have  as  wide  a  variety  of  services  as  necessary.  Accessibility  is 

therefore also important for  non-mandatory services (where there is  no  obligation 

to provide a universal service placed on any operator). 

Such  services  can  be  provided  either  by  postal  administrations  or  by  private 

operators. 

It  is  understood  that  the  geographic  spread  of  these  services  will 

depend  on  the  profitability  of the  different  areas,  with  scarcer  provision  in  less 

populated  areas.  It  is  also  evident  that  some  customers  will  be  more  profitable 

than  others  irrespective  of  where  they  are  located. 

(However,  this  type  of 

customer is  usually  concentrated  in  the  business centres  of the  larger  towns  and 

cities.) 

2.3  NEW CUSTOMER REQUIREMENTS 

When considering  future  customer  requirements,  an  affordable  universal  service 

of  sufficient  quality  will  remain  the  basis.  Beyond  that,  it  should  be  frankly 

page  148 

Chapter 6:  Social aspects 

admitted that customer requirements are not  known  in  detail.  It therefore seems 

to  follow  that  the  postal  domain  should  have  the  maximum  possible  freedom  of 

choice  (consistent  with  the  maintenance  of  universal  service)  to  enable  service 

providers to meet the new needs of customers as they develop. 

Over the medium and longer term, customers expect services to improve in quality 

and  reduce  in  price  (at  least  in  real  terms)  or  to  maintain  the  price  level.  Their 

expectation of "normal" service will  itself become more demanding over time. 

Customers  expect  to  be  treated  more  on  an  individual  basis.  The  larger  the 

customers,  the  more likely  that  they  will  expect  services  to  be  "tailored"  to  their 

needs. 

Customers want  to  know  what  they  are buying  in  terms  of quality  of the  service 

not  only  in  the  meaning  of speed  and  reliability  but  also  in  terms  of  regularity. 

They also expect the suppliers of services to be easily accessible.  (By this is  meant 

not  the  regulatory  aspects  of access,  but  rather  the  facility  for  customers  to  find 

out  what  services  best  fit  their  needs  and  then  for  the  supplier  to  be  responsive 

after  the  service  has  been  bought.)  Customers  expect  an  increasing  variety  of 

choice,  and  anticipate  regular  innovation  in  the  market  place  to  improve  service 

and widen choice. 

The changing shape of society will lead to changes in communication patterns.  As 

an  example,  perhaps the  newer generations will  be less  ready  to write letters,  but 

more willing  to  experiment with  technological  forms  of communication.  Perhaps 

the  increasing  proportion  of the  elderly  within  the  population  may  increase  the 

demand  for  direct  mail,  life  assurance  and  other  financial  services,  and  buying by 

mail. 

Demographic changes may  also  affect the postal operation.  In  most countries the 

movement  from  rural  areas  to  towns  has  been  halted,  and  in  some  countries  is 

now being reversed. 

General  economic  trends  will  affect  demand  for  postal  products.  However,  the 

sub-trends  in  different  market  sectors  may  be  more  significant.  For  example,  if 

the  mail  order sector were to  grow  faster  than  the  economic  average,  this  would 

probably have a  particular effect on postal growth. 

Chapter 6:  Social aspects 

page 149 

2.4  COMMUNITY DIMENSION 

2.4.l 

COMMUN/IT SOCIAL RE,QUJRE,MENTS 

A  universal  service  of  a  sufficient  quality  and  at  an  affordable  price  must  be 

achieved.  If this is  a Community objective (and it  seems clear that  it  should he),  it 

must be achieved throughout  the Community.  At  the same  time,  the  means used 

to  achieve  this  objective  must  leave  the  greatest  possible  flexibility  for  the 

provision of whatever specialised services the market may demand. 

The Community  will  therefore  need  to  define  what  universal  service  it  requires. 

This  definition  will  need  to  comprehend  the  different  service  aspects  that  are 

relevant, in particular the quality required.  The Community will  also  need to state 

how this will be achieved, and what area will  remain  for  the provision  of the more 

specialised services. 

2.4.2 

COHESION 

As  the  discussion  above  concludes,  universal  service  has  little  meaning  without 

proper  access  throughout  the  territory.  Similarly,  universal  service  becomes  a 

shadow  phrase  if  its  provision  does  not  imply  some  threshold  quality  of service 

standards to be applied throughout the Community.  Thus, a  delivery once a  week 

to a  post office box collection point  10  kilometres  away of items which  have  taken 

one  week  to  arrive  does  not  meet  the  standards  for  universal  service  that  the 

Community would seem to require. 

The Community therefore  needs  to  ensure that  all  regions  are  sufficiently  served 

by a  universal service network.  While it  is  operationally inevitable that the quality 

of service in  rural  areas will  be  less  than  in  urban  areas,  it  is  important  to  ensure 

that the rural areas - or even whole  regions - do not suffer  unduly poor quality.  If 

they  did,  this  could  have  the  effect  of  marginalising  them.  As  noted  elsewhere, 

good  postal  services  are  essential  for  commercial  effectiveness:  without  them, 

economic growth in some regions of the Community could be held back. 

Chapter 4  investigateu  the quality  of service  in  the different  Member States  (see, 

for  example,  Tables  12-14  of that  chapter).  It  should  be  remembered,  however, 

that  these  results  are  national  averages.  There  are  variations  in  service 

performance  between  different  areas  in  the  same  country,  and  some  of  these 

page 150 

Chapter 6:  Social aspects 

variations could  be significant.  This  implies  that  the quality  of setvice in  the less 

performing areas of the less performing Member States could be extremely poor. 

How  should  this  be  overcome?  The  most  feasible  option  appears  to  be 

organisational improvement  on  the part of the setvice provider,  stimulated by the 

threat of regulatory action  if the setvice does  not  improve.  It is  also just possible 

that  the  setvice  provider  responsible  for  the  regions  disadvantaged  by  severely 

poor postal setvices does not have  the resources - in  terms either of management 

or finance - to make the improvements necessary. 

It  is  therefore appropriate that an  assessment of the particular problems faced  by 

less performing areas should be made.  The result obtained could be an additional 

stimulus  for  the  postal  administrations  responsible  for  setving  such  areas  to  do 

their  utmost  to  align  themselves  with  the  average  setvice  performance  in  the 

Community, thus improving cohesion within the Community. 

3. 

EMPLOYMENT 

The postal sector is  labour intensive.  It  is  possible,  depending on  return on capital,  for 

some  phases  - particularly  inside  sorting  centres  - to  be  mechanised.  However,  even 

when mechanised, these phases still demand a significant labour input. 

Other phases can  hardly be mechanised.  These are the phases that  the customer sees -

the  collections  and  deliveries.  Together  accounting  for  probably  about  75%  of total 

operational costs of all  operators, these two  phases are particularly labour intensive.  As 

indicated in  Chapter 5,  these costs tend not to adjust easily to different volumes. 

3.1 

PRESENT CONDITIONS 

The  postal  sector  is  one  of the  largest  employers  in  the  Community.  Table  2 

shows employment by  Member State for postal administrations. 

Chapter 6:  Social aspects 

page  151 

Table 2: 

Postal administration employment ( 1988) 

MEMBER STATE 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 

MAIL 
SERVICES 

POSTAL 

FINANCIAL 

SERVICES 

TOTAL 

(thousands) 

(thousands) 

(thousands) 

45.2 
27.6 
313.8 
10.2 
63.5 
269.8 
9.7 
208.2 
1.5 
58.9 
14.5 
184.8 

3.5 
2.2 
27.0 
1.3 
4.2 
29.5 
1.2 
25.4 
0.1 
10.5 
1.8 
45.5 

48.6 
29.8 
340.8 
11.5 
67.7 
299.3 
10.9 
233.6 
1.6 
69.4 
16.3 
230.3 
-· 

EC TOTAL 

1 207.7 

152.2 

1 359.9 

Source:  Sofres study 

Private postal operators are also substantial employers  in  the Community.  They 

employ some 350,000 staff in their Community operations.  The majority of these 

are  employed  by  the  smaller  express  and  parcel  operators  operating  within 

national  territories.  Some  87,000  are  employed  within  the  Community  by  the 

four  largest  operators  (DHL,  Federal  Express,  TNT  and  UPS),  many  being 

employed on cross-border operations. 

Total employment in  the postal sector  represents about  1 %  of the Community's 

work-force.  Of postal administrations' total costs, approximately 70% are labour 

costs.  For  private  operators,  the  percentage  is  somewhat  less,  but  still  very 

significant. 

In the case of both  public and  private operators,  employees  are  becoming  more 

productive  as  volumes  increase. 

(For  example,  total  postal  administration 

staffing stayed  almost  exactly  the same in the four  years  to  1989,  while volumes 

increased by some 13%  on average.)  At the same time,  increasing flexibility  has 

led to operations that are more well adapted to customer demands. 

page  152 

Chapter 6:  Social aspects 

However, there seem some significant differences in  terms of general conditions 

of employment.  For  postal  administrations,  the  emphasis  until  now  has  tended 

to be placed on what  have  traditionally been considered  the social advantages of 

public sector jobs - aspects such as full-time  employment, with  protection of jobs. 

Pay  levels  tend  to  be  above  the  industry  average. 

Private  operators,  by 

comparison,  tend  to  rely  on  a  higher  proportion  of part-time  staff.  They  also 

tend to expect a  high turnover of staff. 

These  employer  attitudes  either  respond  to  or  cause  the  different  attitudes  to 

skill  levels  within  the  job.  Generally,  postal  administrations  build  higher  skill 

contents  into  jobs,  and  expect  a  greater  degree  of  employee  commitment. 

Private operators,  while  some  of their jobs  are  highly  technically  based,  tend  to 

rely heavily on  unskilled, but reliable, staff who can be trained quickly. 

Private  operators  tend  to  think  that  postal  administration  employees  are  over 

protected.  Postal  administrations  (and,  indeed,  the  trade  unions  representing 

their  employees),  conversely,  tend  to  consider  that,  for  the  most  part,  private 

operators  function  at  close  to  the  lowest  level  of  protection  for  employees  (in 

terms of general conditions, pensions, sick benefits, career structures, etc). 

To some  extent,  the  employment  policies  of each  are reacting  to  their  different 

circumstances.  However,  the  preferred  future  trend  may  be  for  each  to  move 

closer towards each other (while still maintaining different policies as necessary). 

3.2 

EMPLOYMENT DEMAND 

The experience of the recent past has been that volume growth in  the sector, even 

allowing for  increases in  productivity,  has led to an increase in  overall employment 

in  the sector. 

It  is  not  a  simple  task  to  predict  likely  future  employment  trends  in  the  sector. 

The  volume  trends  are  generally  upwards.  At  the  same  time,  regardless  of  any 

developments at  the community level,  each  postal  operator  is  likely  to  be seeking 

productivity  improvements.  Thus,  against  a  long-term  growth  trend  of  6% 

compound increases per year in volume,  employment  might be expect to  increase 

by perhaps 2-3% per year (the difference being the increased productivity). 

Within this  overall picture of a  stable or rising employment,  there are likely  to  be 

gradual  changes  in  the  proportions  of  staff  employed  by  public  and  private 

Chapter 6:  Social aspects 

page 153 

operators.  Part of the environment that will cause such movements is  the on-going 

liberalisation of the sector, brought about partly by regulatory decisions and partly 

by the faster growth of the non-reserved sector. 

Regulatory  decisions  to  implement  liberalisation  measures  do  not  reach  their 

maximum  effect  immediately.  Postal  administrations  would  therefore  have  time 

to make any necessary adjustments as a  result  of such  measures.  In  this  regard,  it 

may  be  informative  to  draw  on  the  example  of the  British  postal  administration 

which  probably  has  a 

longer  experience  of  competition 

than  most  other 

administrations.  Despite  facing  increasing competition  during  the  last  five  years 

as  a  result  of deregulation,  staff  numbers  actually  increased  by  10%  during  this 

period  while  productivity  grew  by  15%  per  employee.  The  Spanish  postal 

administration  has  had  to  react  to  much  more  radical  liberalisation  (where  local 

postal deliveries were made non-reserved), but still maintains a  universal service. 

For private operators,  it  would be necessary to  establish  new  networks  (or extend 

their  existing  networks)  in  order  to  take  advantage  of  liberalisation  measures. 

Initially,  at  least,  these  networks  would  not have  the  same  economies  of scale  of 

the  postal  administrations'  networks.  The  result  would  be  that  they  would 

probably actually  increase employment in  the sector.  (This would  happen  even if, 

against predictions, total volume did not increase.) 

However,  although  total  employment  in  the  sector  overall,  and  amongst  postal 

administrations  in  particular,  is  likely  to  remain  stable,  there  will  be  certain 

difficulties caused by  the evolution  of the sector.  Naturally,  certain new  skills will 

become  needed,  while  some  other  traditional  skills  will  become  less  necessary. 

Since employers would presumably prefer to  retain existing staff to  undertake the 

new tasks, there will be a particular emphasis placed on effective training. 

3.3 

TRENDS IN PERSONNEL POLICIES AND WORKING CONDITIONS 

Demography 

Many countries are experiencing zero population growth,  with  the elderly  making 

up·  an  increasing  proportion  of  the  population,  and  the  young  a  decreasing 

proportion. 

This  is  particularly  significant  for 

the  postal  operators  who 

traditionally  recruit  large  numbers  of young  unskilled  or  semi-skilled  staff. 

In 

several  Member  States  this  has  not  been very  difficult  because  of relatively  high 

unemployment levels,  the EC average unemployment rate being 9.5% in  1990. 

page 154 

Chapter 6:  Social aspects 

Competition for labour 

However,  for  the  future,  postal  administrations  will  find  that  competition  from 

their  traditional  rivals  for  this supply  of labour  will  become  more intense.  They 

will  also  find  that other companies (particularly office-based  employers) will  start 

to  recruit  heavily  from  this  part of the labour  market,  and  to  train  their  recruits 

(whereas in  the past they may have tended ·to  recruit staff who  had been partially 

trained before). 

The  potential  effects  for  postal  operators  could  be  significant. 

Indeed,  it  is 

possible to  envisage the provision of the universal service - which  has been stated 

to  be  the  main  plank  of  the  Community's  postal  policy  - being  threatened  in 

certain regions if no solution could be found. 

Effects on costs 

The most obvious way for  an employer to improve his attractiveness to a shrinking 

labour supply  is  to  increase  pay.  However,  with  labour  costs  being  a  significant 

proportion  of  total  costs,  this  could  be  very  difficult  for  postal  operators  to  do. 

Operators would  not want to increase prices in real terms for  fear  of discouraging 

volume growth and going into a downward spiral. 

It is  not clear how  much  scope postal operators have for  making themselves more 

capital-intensive (and  less labour-intensive).  Assuming that there  is  an  adequate 

return on capital or that quality would be improved, they may invest heavily in new 

equipment.  However,  as  noted already,  the mostly  costly phases - collection  and 

delivery - will  continue  to  be  labour  intensive.  Because  of operational  necessity, 

the postal sector will  remain comparatively less capital intensive than  many other 

service industries. 

Changing emphases 

These  labour  supply  problems  will  also  emphasise  the  importance  of  retaining 

staff.  Again, pay will be important.  But so will other factors - such as training, job 

enrichment, career planning and internal communication. 

Total employment demand appears, at the least, to be stable.  However, there may 

be  some  ~hifts  within  that  overall  picture.  Firstly,  skill  factors  are  likely  to 

increase.  Secondly,  some jobs  could  be  switched  from  postal  administrations  to 

Chapter 6:  Social aspects 

page 155 

customers/partners (such as consolidators involved in  mail preparation).  In  other 

cases, jobs may be reduced in the mail rooms of customers of the postal operators, 

as  the latter take over certain tasks previously carried out by  customers.  Thirdly, 

all  operators  want  to  ensure  optimum  use  of  all  their  resources  to  maximise 

efficiency. 

Employment  amongst  private  operators  such  as  courier  companies  and  parcel 

carriers  is  likely  to  increase,  perhaps  partially  at  the  expense  of employment  in 

postal administrations.  But, as in the past, many of the private operators' new jobs 

will  create  additional  employment  in  the  sector.  These  new  employment 

opportunities will result specially from finding new market niches to be served. 

Postal operators: the context of the economy 

It  could  be  instructive  to  draw  a  comparison  between  an  administration  in  a 

Member State  with  a  relatively  high  GDP  per  capita  and  heavy  mail  usage  and 

another  Member  State  less  favoured  in  these  respects.  For  purely  illustrative 

purposes,  the  table  below  compares  some  key  statistics  for  Greece  and  the 

Netherlands. 

Table 3: 

Illustrative comparison between two postal administrations 

PARAMETERS 

.  UNITS 

GREECE 

NETIIERLA.NDS 

Ext em al economic factors 

GDP per capita 
Mail usage per capita 

EC index 
Items 

Employee statistics 

Revenue per employee 
Mail per employee 

ECU 
Items 

Postal administration networks 
Sorting offices mechanised 
Post offices automated 

% 
% 

Source:  CEC analysis 

38 
47 

8 722 
40.5 

0% 
0% 

100 
409 

29 202 
100.7 

100% 
99% 

The link between  investment and quality of service  improvement  is  not proven by 

past experience (see Chapter 5,  Paragraph  10).  However,  capital  investment will 

usually  give  more  flexibility  to  the  organisation  making  the  investment.  This 

flexibility  will  be  quantitative,  in  that  it  will  be  easier  to  respond  to  increased 

volumes.  It would  also  be  qualitative,  since  it  would  be  easier  to  offer  different 

page  156 

Chapter 6:  Social aspects 

facilities  to customers.  These facilities  might  include the availability  of discounts 

for  OCR-readable  mail;  the possibility  of reporting to  customers on  the  progress 

of  his  mail  (through  tracing  and  tracing  technology);  or  the  ability  to  offer 

enveloping and other "mail-room" services. 

Naturally,  service  industries  will  reflect  the  surrounding  economic  situation. 

However,  it  should  be  recognised,  particularly  in  the  case  of  public  service 

industries, that  their  health  can  affect  the external economic environment.  Large 

economies tend to  help create healthy service industries; healthy service industries 

will  help to provide the efficiency needed to enable the overall economy to grow. 

If an  economy  has  service  requirements  that  are not  met,  it  will  tend  to  look  for 

alternative  outlets.  Thus,  to  take  examples  from  the  postal  sector,  customers  in 

the US  and  in  Italy evidently  do  not  find  their national public postal services very 

satisfactory;  this  has  contributed  to  the  rapid  growth  of  providers  of alternative 

postal services (as well as providers of services in indirect competition). 

These  apparently  external  aspects  have  important  effects  on  employees,  whether 

of public  or  private  operators. 

It  demands  an  adaptability  and  a  willingness  to 

train  into  new  skills.  Greater mechanisation will  also  change  the environment  in 

which postal employees work. 

Cost/Quality balance 

Naturally,  one  of the  important  requirements  for  all  postal  operators  is  to  drive 

down costs as  much  as  possible,  while  maintaining quality.  One aspect which will 

need  particular  study  is  the  proportion  of management  and  administrative  staff 

needed. 

In their efforts to  make real cost savings,  postal administrations  may  not  find  it  so 

appropriate  to  make  economies  in  total  operational  expenditure  (since  traffic  is 

forecast to continue to grow).  Instead, they may find  it more practical to  examine 

administrative  expenditure.  Table  4  shows  the  variations  between  the  different 

postal administrations concerning the proportions of operational and other staff. 

Chapter 6:  Social aspects 

page 157 

Table 4: 

Postal administrations: mails employment proportions 

POSTMEN 

ADMINISTRATIVE 

l\1.ANAGERS 

MEMBER STATE 

Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 

% 

60.8 
41.7 
59.3 
65.6 
72.2 
54.5 
42.0 
66.6 
80.4 
81.0 
60.1 
79.8 

~--------+----------+---- - -~~ 

EC average 

64.3 

STAFF 

% 

28.5 
40.9 
30.0 
28.3 
26.3 
41.5 
31.4 
30.0 
9.5 
17.2 
36.3 
11.2 

28.9 

% 

-------~ 

10.7 
17.4 
10.7 
6.1 
1.5 
4.0 
26.6 
3.4 

10.1 
1.2 

3.6 

9.0 

. 

6.8 

I 

J 

Source: 

Sofres study 

~----------'----------

It seems clear from  the table  that there are different criteria  being used to  define 

the  administrative  staff.  However,  it  needs  to  be  emphasised  that  quality  and 

productivity involve all  staff from  the chief executive  to  the person  delivering the 

mail (and certainly all manag~rial and administrative staff in between).  Everybody 

employed has to add value to the process. 

Technical change 

One  of  the  dominant  forces  driving  organisational  change  in  both  postal 

administrations  and  private  organisations  in  the  last  decade  has  been  technical 

change.  This  has  permitted  different  or  modified  services  to  be  offered;  at  the 

same time, it has placed greater emphasis on the skill of the operators' staff. 

This trend towards greater  skill  content  is  partly  in  response  to  customer  needs  -

for  services  based  on  improving  productivity  or  with  value-adding  components. 

Specific examples could  include the computer-based jobs increasingly  to  be  found 

in post office counters, or the operation of tracking and tracing systems. 

In a broader sense, there will be a  need for staff to have the appropriate marketing 

skills,  and  for  counters  staff to  be fully  conversant  with  the  wider  (and  probably 

more complex) range of services that will be offered to meet new customer needs. 

page 158 

Chapter 6:  Social aspects 

In  the  future,  the  need  for  greater  skill  content  may  also  be  in  response  to  a 

strategic need for operators to become more flexible.  This need for flexibility  may 

well  encourage  operators  to  become  more  capital-intensive  (within  the  practical 

limits imposed by the operation). 

3.4 

TRAINING 

Several  of  the  trends  noted  above  - particularly  for  the  need  for  more  or  new 

marketing  and  technical  skills  - will  give  an  even  greater  emphasis  to  training. 

This is likely to take several forms: 

Training for customer orientation 

The past years have seen significant changes in  the postal sector.  The future, with 

more indirect competition (for  instance from  telecommunications)  is  likely  to see 

a  quickening  in  the  pace  of change.  Customer expectations  will  change  rapidly, 

and they will demand quicker responses to their needs as they develop. 

This will  necessitate  all  staff being  flexible  in  their approach  in. order  to  be truly 

customer  oriented.  Such  flexibility  does  not  come  easily. 

Staff  education 

combined with effective internal communication will be essential. 

Training for new machinery 

It  is  clear  that  postal  operations will  become technically  more complicated.  Not 

only will  training on  new machinery be particularly important, but also training to 

make more efficient use of staff through modem working methods. 

Training for new services 

The success  of new  services  depends  on  the skills  of the staff who  operate them. 

Postal  electronic  mail  provides  one  example  that  shows  how  new  services  will 

demand skills quite removed from traditional postal skills. 

Management development 

There  is  likely  to  be  an  increased  emphasis  on  management  development, 

particularly  within  specialisms  (for  example,  operations,  finance,  marketing  or 

personnel).  Perhaps  the  most  important  managerial  skill  will  be  the  ability  to 

·manage change. 

Chapter 6:  Social aspects 

page 159 

4.  THE CHALLENGE 

In summary,  the Community needs to  ensure a  sufficient service  throughout  - in  all its 

regions.  Beyond  that,  there  ought  to  be  the  maximum  freedom  of  action  to  enable 

customers' detailed requirements - whatever they may be - to be met. 

This  has  implications  for  all  those  involved  in  the  provision  of  services  in  the  postal 

sector:  regulators,  operators  and  their  staff,  and  the  Community.  While  the  Green 

Paper  will  not  present  specific  options  concerning  the  employment  aspects, 

the 

Commission  has  launched  a  consultative  committee,  the  Comite  Paritaire,  which  will 

enable the views of both employer and  employee  representatives to  be made known  on 

the possible  implications  of the  Community's policy  for  its  postal  sector  (as  the  policy 

develops). 

For the customer aspects, the social  needs of their market  requirements raise regulatory 

issues:  what  universal service  is  required  and  how should  it  be guaranteed while  at  the 

same  time  ensuring  the  greatest  flexibility  possible,  according  to  the  social  needs  and 

market  requirements?  There  is  also  the  specific  issue  of Community  cohesion  to  be 

studied;  this  would  need  to  embrace  the  possible  need  to  invest  Community  funds  to 

improve services in regions presently disadvantaged by poor postal services. 

page 160 

Chapter 6:  Social aspects 

Chapter 7:  Existing situation: the problems and the challenges 

page 161 

CHAPTER 7: 

EXISTING SITUATION: 
THE PROBLEMS AND THE CHALLENGES 

1. 

INTRODUCTION 

This  chapter  seeks  first  to  summarise  what  are  the  problems  inherent  in  the  existing 

situation.  For this,  it  adopts different  perspectives:  in  order,  that  of the customer,  then 

that of the operator,  and then  that of the  national  regulator.  In  identifying problems to 

be  addressed,  the  analysis  will  tend  to  concentrate  on  divergences  between  Member 

States.  Throughout,  however, it should be borne in  mind that there are certain common 

points which  already  lend  coherence  to  the  Community's  postal  sector.  Chief among 

these  is  the policy  agreed  by  all  Member States  that  throughout  the Community  there 

should be a  universal service at prices affordable to all  and with a  sufficient quality.  (At 

the same time,  as the analysis  below will  reveal,  the way  in  which  this policy is  presently 

implemented does vary considerably.) 

The  effects  of  1992  and  the  coming  of  the  Single  Market  are  then  overlaid  on  the 

analysis.  The "status  quo"  option  is  then  studied  by  asking what  would  be the  result  if 

nothing was done to change the existing situation.  To conclude, the whole is  then viewed 

from the Community's perspective. 

Possible  solutions  to  the  different  problems  will  be  discussed  in  the  next  chapter, 

together with the implications of the likely environment in  which the postal sector will be 

operating. 

2.  THE CUSTOMER'S PERSPECTIVE 

To gain  the  clearest view  of the problems  that  customers  may  encounter  as  a  result  of 

the existing  situation,  it  is  best  to  adopt the  perspective of a  mailer who wishes  to  post 

mail with destinations spread throughout the countries of the Community. 

Such  a  perspective enables  a  comparison  to  be  made  between  the  services  available  in 

the different Member States.  (The intention here is  more to compare domestic services; 

cross-border services are becoming increasingly important, but presently account for only 

about 10% of the sector's turnover.) 

page 162 

Chapter 7:  Existing situation: the problems and the challenges 

2.1  DEFINITIONS 

The  definitions  of  postal  items  vary  - there  is  no  Community  definition  of  a 

standard "letter". 

Some Member States divide  their  mail on  the basis of letters and  printed papers, 

others on  the basis of first  and second class.  (In both cases in  addition to  parcels 

and express.) 

In  most  Member  States  the  limits  are  defined  using  the  criterion  of weight,  in 

others  the  criterion  of  value,  and  others  both.  The  actual  application  of  each 

criterion can vary:  the application of the weight criterion varies between 500 g and 

2 kg. 

In  all  countries,  if  the  customer was  sending a  parcel  (a  goods-bearing  item),  he 

would  have  the  choice  permitted  by  the  market  in  the  non-reserved  sector. 

However, the maximum weight of parcel that he could send to all addresses would 

agam vary. 

In all Member States this choice of how to send a  parcel includes that of sending it 

as a  letter packet  (subject to the maximum weight  permitted in  the letter service). 

Thus an  item which  is  in  the  non-reserved  area  may  be sent  by  a  service that  is 

reserved. 

As for using express services, the customer would find that in three Member States 

these are the monopoly  of the  postal administration.  In six  others, where  there is 

no clear definition  of the threshold  for  non-reser-Yed  services,  it might  not be clear 

whether a particular item was inside or outside the monopoly. 

No specific regulatory position  has been  taken by  Member States concerning new 

services  in  the  postal  sector.  A  special  approach  may  be  needed  in  the  case  of 

hybrid services such as postal electronic mail. 

2.2  ACCESS 

Access conditions for  potential  users of postal services  are on  two  levels.  On the 

regulatory·  level,  they  relate  to  the  postal  law  of  the  Member  State  concerned. 

There is  also  an operational level  on which  the postal administration controls the 

posting conditions under which a customer may post his mail. 

Chapter 7:  Existing situation: the problems and the challenges 

page 163 

2.2.1 

REGULATORY 

There are variations between  Member States as to whether private operators may 

act as intermediaries between him and the postal administrations. 

As  for  his  cross-border  (intra-Community  or  international)  mail,  almost  all 

Member States state that  this  is  part  of the postal administration's  reserved  area, 

although most  regulatory bodies and/or postal administrations have chosen not  to 

enforce, or not been effective in  enforcing, this stated monopoly. 

All  Member  States  have  universal  service.  There  are  some  differences  m  the 

availability  of  mail  facilitating  services  such  as  the  sale  of  stamps.  Collection 

facilities  vary  in  terms  of  the  density  of  posting  boxes  and  the  number  of 

collections.  There is less divergence in  delivery facilities;  all postal administrations 

in the Community deliver either five  or six  days per week,  while some also  deliver 

more than once per day at least in some areas. 

2.2.2 

POSTING CONDITIONS 

The customer is  likely  to be confused  on occasion by  the diversity of posting rules 

applied.  The  rules  concerning  printed  papers  can  be  particularly  diverse  for 

example  concerning  the  qualifications  for  treatment  as  a  newspaper  (and 

therefore for preferential postal tariffs). 

Different posting conditions can act  (intentionally or otherwise) as  a  restriction on 

entry  to  the  postal  system. 

In  the  customer's  perspective,  such  restrictions  are 

relative:  if a  postal  administration gives  fewer  facilities  than  another,  it  will  seem 

restrictive by  comparison.  This can distort the market, and cause some mailers to 

post into (or via) some countries but not others. 

2.3 

SERVICE 

Customers,  of course,  are  seeking  some  combination  of quality  of  service,  price 

and range of service.  In reserved services there are presently wide variations. 

2.3.1 

PERFORMANCE 

The  service  which  the  customer  receives  varies  between  postal  administrations. 

One administration registers  99%  ~ervice performance inland,  another  15%.  For 

page  164 

Chapter 7:  Existing situation: the problems and the challenges 

cross-border  mail  no  official  figures  are  available  (although  administrations  do 

measure service for internal operational purposes). 

2.3.2  MEASUREMENT SYSTEMS 

The  customer  presently  finds  that  almost  all  postal  administrations  have  stated 

(but  not  enforceable)  targets  for  national  (domestic)  mail,  but  not  for  intra 

Community  or  international  mail.  The  targets  for  inland  letter  mail  relate  to 

speed of transport, but not to any other aspects of quality. 

Of the different service performance measurement schemes in  use,  the end-to-end 

measurement  scheme  is  the  most  relevant  because  it  relates  to  the  customer's 

actual  experience.  End-to-end  studies  have  tended  to  show  significant  over 

estimation  of  actual  performance  by  the  other  schemes  employed  by  postal 

administrations.  Customers  may  have  more confidence in  measurement  schemes 

carried out independently. 

2.4 

TARIFFS 

The customer will  see that basic tariffs for  a  20g inland letter vary from  ECU 0.15 

to ECU 0.50.  It  is  possible that  he  may  not  find  this surprising because the lower 

tariffs tend to be in  those countries where the cost of living is lower. 

However, he may find  more difficult  to understand the variations in  prices beyond 

those  of  the  basic  tariff. 

In  particular,  the  different  preferential  tariffs  that  are 

available  increase  the  price  differences  in  some  cases,  but  in  other  cases 

unexpectedly  reduce  them  (so  that  a  country  with  a  high  cost  of living  becomes 

cheaper than a  traditionally lower cost country). 

2.5  CUSTOMER SATISFACTION 

From  the  diversity  described  above,  it  will  be  clear  that  the  customer wishing  to 

reach  addresses  in  all  countries of the  Community is  unlikely  to  find  the existing 

situation  very  satisfactory.  However,  it  does  not  follow  that  all  customers 

everywhere are unhappy with  the quality of their postal service. 

The  level  of satisfaction  will  depend  on  how  customers  define  quality  of service 

and  how  effective  the  postal  operator( s ),  in  the public  and/ or  the  private  sector, 

is/are in achieving the desired level of quality.  This level of satisfaction is likely to 

Chapter 7:  Existing situation: the problems and the challenges 

page 165 

vary depending on the location of the customer.  It will also depend  on the efforts 

the postal administration makes to provide guidance on the use of its services. 

Naturally,  the  use that  potential customers  make of the  postal  services  available 

will depend  on how  effectively the customer thinks  his  needs will  be met by  those 

services. 

In  short,  experience  of  a  service  gives  a  certain  expectation  of  likely 

service  which  itself will  dictate  usage.  These  experiences  and  expectations  will 

vary between Member States and, indeed, between regions of the Community. 

A  customer residing in  a  Member State where the postal administration provides 

99%  reliability  of  service  (see  Paragraph  2.3.1  above)  may  well  entrust  an 

important business letter to the ordinary postal services;  one living in  the Member 

State with only  15% reliability would be much less likely to do so. 

Thus different  expectations will  lead  to  different  usage  patterns, and  therefore to 

different  perceptions  of  what  postal  services  should  be  used  for. 

In  addition, 

competition (particularly indirect competition) may also change perceptions. 

2.5.1 

CROSS-BORDER SERVICES 

It  is  likely  that  a  customer  having cross-border  requirements would  not  find  very 

satisfactory the services attempting to respond to these needs. 

This  would  be  partly  because  of  the  complexity  of  dealing  with  several 

administrations - should  the customer chose  to  do so  in  order to  achieve  delivery 

in  different  Member  States  served  by  those  administrations. 

It  would  also  be 

partly because  of the  indifferent  quality  of service for  such  mail  (the  latter being 

detrimental to the idea of the common market). 

2.5.2 

ATTITUDES TO COMPETITION 

If a  customer  feels  that  his  reasonable  service  expectations  are  consistently  not 

being  met,  he  may  prefer  to  see  increased  competition,  or  the  introduction  of 

competition.  Against this,  he would be unlikely to be willing that anything be done 

that might jeopardise the universal service. 

Customers  in  most  regions  of  the  Community  have  access  to  express  services 

(provided  in  most  Member  States  on  the  basis  of free  competition).  They  may 

wish  to  use such  a  service  when  seeking a  special  service  need  above  that  which 

could be met by an effective standard service. 

page  166 

Chapter 7:  Existing situation: the problems and the challenges 

However,  elsewhere,  they  may  turn  to  such  services  when  the  standard  letter 

service is  simply not good enough  to  satisfy basic postal needs.  In  such cases,  the 

express operators are likely  to  be able to charge higher prices because of the lack 

of competition from  the standard letter services. 

2.5.3  MOBILITY OF CUSTOMER EXPECTATIONS 

Customer  expectations  tend  always  to  move  upwards.  They  are  also  likely  to 

become  increasingly 

individualised 

in  nature. 

In  general,  such  "mobile" 

expectations would  probably  be  met  better where  the  maximum  competition was 

permitted  (consistent with  safeguarding the  universal  service).  That this  may  not 

presently  be  the  case  may  well  be  a  source  of  some  frustration  for  several 

customers. 

3.  THE OPERATOR'S PERSPECTIVE 

The  commentary  below  concentrates  on  the  pos1t10n  of  postal  administrations  as 

reserved service providers in  the face of the problems which they now need to address. 

3.1 

JURIDICAL 

It  is  not  clear  that  it  is  the  Member State,  rather  than  the  postal  administration, 

that  makes  agreements  in  the  framework  of the  UPU,  even  when  they  have  the 

force of law. 

It  should  be  noted 

that  decisions  of  the  UPU  (and  perhaps  even 

the 

recommendations  of  the  CEPT)  can  potentially  be  in  conflict  with  the Treaty of 

Rome. 

3.2  ACCESS 

There  should  be  no  great  problem  in  carrying  out  some  simplifications  and 

modifications in order to  make access  conditions - at least  for  standard services -

more  uniform  across  the  Community.  However,  more  far-reaching  attempts  at 

harmonisation  might  well  meet  resistance  from  both  administrations  and 

consumers unless there were clear consumer and operational benefits. 

Examples  could  include  attempts  to  implement  a  norm  of  all  the  Community's 

postal administrations  having either  an  LC/ AO  split  or a  first  class/second  class 

Chapter 7:  F.xisting situation: the problems and the challenges 

page 167 

split  - rather  than  some  having  the  former  and  the  others  having  the  latter.  A 

further  example  might  be  a  wish 

to  introduce  obligatory  standard  letter 

dimensions with standard weight steps. 

Another area requiring a consistent policy is that of private operators entering the 

reserved  service  network  as  users.  Some  administrations  try  to  discourage  such 

access  while  other  administrations  treat  them  as  large  customers  (like  domestic 

"consolidators"). 

3.3  QUALITY OF SERVICE 

However they define quality of service,  all customers consider it  as being the most 

important characteristic  of the  service.  Presently,  the  service  they  receive  from 

universal  service  providers  is  variable,  and  some  of  the  performance  results 

published are not considered by all customers to be reliable. 

3.3.l 

PERFORMANCE 

The  official  figures  of  some  administrations  show  that  they  are  achieving  the 

targets that they have set themselves for  inland  quality of service  (although  some 

of these administrations are considering changing to the more exacting end-to-end 

measuring system).  Other administrations show  themselves  to  be falling  short  of 

their targets by a greater or lesser extent. 

The problem of improving service performance is  made more difficult  by  the need 

to  control  costs.  All  postal  administrations  experience  regular  tensions  between 

the pressure to control costs and the requirement to improve service. 

Enhancing quality of service can  be  more difficult  in  services where  the operator 

cannot  manage the demand,  but  instead  has  to  react  to  it.  This  is  essentially  the 

position  of the public  postal operators  who  are  obliged  to  accept  all  mail  that  is 

posted with them.  They therefore have to assimilate peaks and troughs of demand 

as best they can, without unnecessary increases in costs or unacceptable reductions 

in quality of service. 

Attainment  of  service  objectives  may  have  been  hampered  m 

some 

administrations  by  insufficient  or  delayed  investment  in  mechanised  plant  or 

information technology systems.  However, such  an  investment  is  not  a  guarantee 

of either better service or lower costs. 

page 168 

Chapter 7:  Existing situation: the problems and the challenges 

The CEPT members have set an  informal target  of D + 3  (third working day after 

posting)  for  cross-border  mail  (including  intra-Community  mail).  Although  they 

are not formally published, the intra-Community results reveal that presently only 

about  40%  of items  meet  this  target.  This  demonstrates  the  shortfall  of service 

performance that needs to be remedied. 

3.3.2  MEASUREMENT 

There are  three different  measurement  schemes  used  in  the Community  (to  say 

nothing  of  the  differences  in  sampling  techniques). 

It  seems  to  be  generally 

acknowledged that end-to-end measurement is the only effective system. 

Postal  administrations  have  not  yet  been  willing  to  publish  results  of  their 

performance on intra-Community mail. 

3.4 

TARIFFS 

Tariffs  vary  because  of  the  different  cost  conditions  in  the  countries  of  the 

Community, and  also  because of the different pricing principles applied (including 

different approaches to required levels of profitability and to cross-subsidies). 

3.4.1 

ACCOUNTING 

There  are  different  accounting  conventions  and  rules  applying  in  different 

countries of the Community.  These  will  therefore  affect  any  comparisons  being 

made  in  the  postal  sector.  Such  differences  will  themselves  tend  to  lead  to 

differences  in  tariff-setting  and,  indeed,  in  managerial  control.  They  will  also 

make it  more difficult  to apply uniform principles concerning tariffs. 

It  is  also  the  case  that,  within  the  confines  imposed  by  the  national  accounting 

conventions, 

the  cost  data  available  varies  greatly  between 

the  postal 

administrations of the different Member States. 

3.4.2 

COSTS 

The different  postal administrations  have cost  structures which  may vary between 

one another.  However, they are all subject to the same "squeeze" effect caused by 

the  need  to  hold  down  prices  while  at  the  same  time  resisting  upward  cost 

pressure. 

Chapter 7:  Existing situation: the problems and the challenges 

page 169 

The differences in cost structures have various causes.  Population density and the 

effectiveness  of  the  existing  transport  infrastructure  are  key  external  factors 

affecting productivity.  Productivity is  also affected by the customers' propensity to 

use postal services,  as well  as by  investments previously made in  efficient systems 

or in  mechanised  plant.  The cost  of the  key  resource  - that  of labour - is  greatly 

influenced by the pay environment which varies between Member States. 

However, the operator will continue to face upward cost pressure through the real 

increases  in  the  cost  of  labour.  This  pressure  is  likely  to  be  accentuated  by 

anticipated reductions in  the supply of labour. 

In  the  longer  term,  achievement  of  the  Single  Market  may  reduce  the  present 

variations in  parts of the cost structure.  However, as  noted, some factors  (such  as 

population density)  are out of the control of the operators.  In  certain other areas 

(such as the pay environment) variations in costs are unlikely to reduce quickly. 

3.4.3 

DISCOUNTS 

Most postal administrations offer preferential tariffs for printed papers, the tariffs 

usually being set at  rates which  are loss-making.  These administrations therefore 

cannot  either  forecast  or  control  the  extent  of  their  losses,  since  these  will  be 

determined by the volumes posted by publishers. 

Most  administrations  (but  not  necessarily  the  same  ones)  offer  discounts  for 

reserved  services  for  work  carried  out  by  the  mailers.  In  some cases,  it  appears 

that  the  discounts given  may go  beyond  the  costs saved.  In  addition  to  revenue 

protection problems,  the danger  here is  that  such  discounts  in  the  reserved  area 

could act as incentives for custom in the non-reserved area. 

3.4.4 

CROSS-SUBSIDIES 

All  administrations  try  to  market  their  inland  letter  services  on  the  basis  of  a 

unitary tariff,  thus necessitating some geographical cross-subsidies.  Further cross 

subsidies are stimulated by the pressure from "missions" that are imposed on some 

administrations  either 

in 

the  enabling 

legislation 

that  gave 

the  postal 

administrations their  exclusive  rights  or as a  result  of political  decisions taken  by 

their governments. 

page  170 

Chapter 7:  Existing situation: the problems and the challenges 

In  some  cases,  cross-subsidies  are  (or  could  be)  the  result  of  tariff-setting 

procedures which are not flexible enough.  Furthermore, if discount structures are 

not  reviewed  regularly,  over  time  the  discounts  awarded  may  diverge  from  the 

actual costs saved. 

3.4.5 

TERMINAL DUES 

In summary, there are three major failings  in  the UPU terminal dues system: 

-

the same compensation  is  paid per kilo  regardless of the numbers of items that 

the kilo comprises; 

-

the  standard  terminal  dues  system  does  not  allow  for  the  different  levels  of 

service required for the delivery; 

-

the structure  is  a  universal  system,  and  therefore  suffers from  the problem  of 

averages. 

Whatever the  view  about  the value  of the  remail  service  that  has  evolved  out  of 

these disparities,  no  system  such  as  that  operating for  terminal  dues,  with  such  a 

distorted  financial  basis,  is  a  secure  foundation  for  the  movement  of  intra 

Community  and  international  mail.  Since  the  former  particularly  will  become 

more  and  more 

important, 

the  method  of  compensation  needs 

to  be 

fundamentally overhauled. 

A  revised  scheme,  which  introduces  a  charge  per  item,  has  been  initiated  by 

several CEPT administrations, among them seven EC administrations. 

Whether this scheme could be considered an acceptable intermediate step towards 

the ultimate solution is considered elsewhere.  That analysis also asks the question 

whether  the  CEPT  scheme  is  an  unacceptable  breach  of competition  rules  (and 

therefore whether it needs to be reviewed urgently). 

3.5 

EMPLOYMENT 

Postal  operators  (public  and  private  together)  are  significant  employers  -

employing approximately  1.7  million  staff in  the EC.  This causes  employment in 

the  postal  sector  (but  particularly  in  the  public  sector  part  of  it)  to  be  very 

important in the wider social context. 

Chapter 7:  Existing situation: the problems and the challenges 

page 171 

In  the  postal  sector,  operational  changes  responding  to  the  different  trends  in 

consumer demands  will  have  some impact  in  terms  of employment  demand.  At 

the same time postal operators will need to react to the social,  and particularly the 

demographic, environment. 

3.5.l 

DEMOGRAPHIC TRENDS 

The  demographic  trends  will  change  the  customer  base,  but,  perhaps  more 

importantly,  they  will  have  an  effect  on  the  supply  of  labour  from  which  the 

operators need to draw. 

3.5.2 

IMBALANCES IN LABOUR SUPPLY 

The  total  demand  for  staff  in  the  postal  sector  (public  and  private  operators 

together) is likely to remain stable.  However,  there could  be instances where new 

employment demand does not match closely the old labour supply. 

3.5.3 

TRAINING 

The trends noted above will give added emphasis to training.  This is likely to be in 

the form  of training for better customer orientation,  for  using new machinery, for 

the operation of new services and for management development. 

3.6  TECHNICAL 

Any form of harmonisation needs to be justified in  terms of the possible consumer 

benefits.  The potential impact on customers of any changes therefore needs to be 

assessed. 

Private  operators  have  tended  to  invest  a  greater  proportion  of  their  income  in 

new  technology  and  mechanisation  than  postal  administrations.  This  was 

particularly necessary in the creation of new services (such as express). 

However  there  is  now  an  "investment  momentum"  driven  by  the  need  to  gain 

competitive  advantage  through  exploitation  of technology  (such  as  tracking  and 

tracing or EDI),  and  through better operational control gained  through  improved 

network management systems. 

page 172 

Chapter 7:  Existing situation: the problems and the challenges 

4.  THE NATIONAL REGULATOR'S PERSPECTIVE 

In  the  majority  of Member  States  the  regulatory  and  operational  functions  have  been 

separated; in other Member States there are plans to do so. 

4.1 

RESERVED AREA 

All  Member States have  established  a  set  of reseived  postal  seivices which  grant 

some exclusive rights to the national postal administration.  Their objectives were: 

-

-

to safeguard the universal seivice; 

to  have a  satisfactory quality of seivice  in  the  reseived  area  (the quality  in  the 

non-reseived sector being stimulated by competition); 

- and to have low, generally affordable tariffs in  the reseived area. 

National  regulators  do  not  necessarily  agree  on  the  means  to  achieve  the 

objectives (that  is,  the  scope  of the  reseived  seivices),  but  they  do  now  generally 

agree that  the reseived  area  should  be  the  smallest  possible  compatible with  the 

universal seivice objective. 

The  differences  in  the  scope  of  the  reseived  area  anse  probably  less  from  the 

different  circumstances  in  different  Member  States  than  from  differences  in  the 

way  in  which  the  necessity  for  reseived  seivices  is  analysed  in  the  different 

Member States. 

There  are  certain  specific  problems  that  need  to  be  resolved.  Each  involves  a 

question of definition. 

4.1.1 

PARCELS 

Several  Member States have  reserved seivice limits  that embrace medium-weight 

items.  These are no longer what  is  commonly  understood  by  "letters".  However, 

these  "packets"  are  grouped  by  postal  administrations  under  the  general  title  of 

"letters". 

Despite this,  the reality  is  that  these packet  seivices operate  in  competition  with 

parcel seivices.  The practical effect of this is  that the limit of the postal monopoly 

in several Member States is  in fact lower than it may appear in their postal laws. 

Chapter 7:  Existing situation: the problems and the challenges 

page 173 

Some  national  regulators  also  require  their  postal  administrations  to  provide 

universal  service  beyond  the  scope  of  the  reserved  services  up  to  a  specified 

weight. 

However,  such  an  obligation 

is  not  placed  on  all 

the  postal 

administrations, and, where it is,  the maximum weight set by the regulator varies. 

4.1.2 

PRINTED PAPERS 

There is  no clear definition  of what is  intended by  "printed papers", even amongst 

those Member States whose postal administrations apply a  tiering system  dividing 

into the classifications of "lettres et cartes" and "autres objets",  the latter including 

printed papers.  For such  administrations,  one  question  is  whether printed  forms 

which  include  individual  text  or  numbers  (such  as  invoices  or  bank  statements) 

should be classified as printed papers. 

There is  also the wider problem of direct  mail.  The view  of most  Member States 

is  that  printed  publications  should  be  in  the  non-reserved  area.  However,  the 

regulatory view  on  direct  mail  is  rather  different.  More  than  half the  Member 

States seem to consider such mail as reserved. 

Part of the reason is  that, for at least threeJviember States, no distinction  is  drawn 

between letters and direct mail.  Partly, also,  there appears to be a concern that, if 

this mail was  made  non-reserved,  a  significant  portion  of direct  mail  could  leave 

the universal service network.  This in  turn could perhaps put the economics of the 

network and the low unit costs of individual items in some jeopardy. 

4.1.3 

EXPRESS 

A  particular problem relates  to  the express segment.  Nine out of the  12  Member 

States presently  consider  express  to  be  free  market  services.  However,  very  few 

have given a satisfactory definition of what they mean by "express" services. 

4.1.4 

HA-B-A" REMAIL 

The exclusive rights awarded to the postal administrations are intended to prevent 

"creaming off'.  Where the items would have been covered by the reserved services 

of  the  country  of  origin  and  where  the  items  are  physically  moved  to  another 

country for remailing back, this is a clear breach of the monopoly of the country of 

origin. 

page 174 

Chapter 7:  Existing situation: the problems and the challenges 

However,  there are other circumstances where  the  mail  is  not  actually  physically 

moved out of the country of origin for mailing back.  For example, a  company may 

decide to  have  its  direct  mail  printed  and  posted  in  another  country for  delivery 

only  in  its  own  country  (or  as  part  of a  wider mailing  requiring  delivery  in  other 

countries). 

4.2  OBLIGATIONS OF UNIVERSAL SERVICES 

The main  regulatory concerns will  naturally concentrate on  any  reserved  services. 

However,  regulators  ought  also  to  consider what  regulatory conditions  should  be 

established for mandatory non-reserved services. 

Below  are  laid  out  the  principal  questions  relating  to  possible  obligations  that 

could  be placed on  the 'reserved service provider.  The  regulator will  also  need to 

examine how  far  these  are appropriate for  the  provider(s)  of mandatory services 

that are non-reserved. 

4.2.J 

ACCESS CONDITIONS 

The regulator needs to be aware of his  postal administration  in  the context of the 

wider international market.  Access rules can act as a  facilitator or a barrier to use 

of the service by potential customers. 

Most  regulatory  bodies  readily  agree  to  the  principle  of  transparency.  There 

should not be many problems in  terms of the general applications - for instance, i.n 

terms  of  the  publication  of  posting  conditions,  tariffs  and  (if  available)  service 

target  and  performance  information.  However,  there  could  still  be  questions  in 

terms  of  the  detailed  application,  especially  concerning  tariff  and  discount 

information for contracts. 

A  particularly  important  aspect  is  the  use  by  postal  administrations  of the  same 

network  to  provide  both  reserved  services  and  non-reserved  services.  Evidently, 

there could  be  a  danger  here  of  unfair  cross-subsidies  from  the  reserved  sector 

which  would  enable  the  postal  administrations  to  offer  non-reserved  services  at 

prices below their proper cost. 

However,  this  suggests  that  there  should  be  sufficient  controls  to  prevent  such 

possible  unfair  practices.  It  is  important  that  postal  administrations  ought  to  be 

able to use the reserved service network in this way.  Firstly,  it increases the use of 

Chapter 7:  Existing situation: the problems and the challenges 

page 175 

the network and gains returns to scale; this should bring benefits either in terms of 

having  a  smaller  reserved  area  or  having  lower  prices  for  reserved  services. 

Secondly,  such  parallel  usage  almost  certainly  increases  the  availability  of  non 

reserved  services. 

Indeed,  in  several  Member  States,  it  has  enabled  the  postal 

administration to provide universal service for its express product. 

4.2.2 

SERVICE STANDARDS 

The regulatory bodies of some Member States consider  that service  performance 

is a matter between the postal administration and its customers. 

However,  if  the  regulator  considers  a  satisfactory  quality  of  service  (however 

defined)  to  be  a  fundamental  obligation  of  the  exclusive  rights  granted  to  the 

postal administration, he would need to agree the service targets and then oversee 

the  performance  monitoring  system  (including  agreeing  which  system  should  be 

used). 

Less  than  half  of  the  Community's  postal  administrations  are  achieving  their 

quality of service targets  (if the results of the mostly  internal measures are  taken 

on  trust),  and  virtually  none  achieve  their  service  targets  for  cross-border  mail. 

For the regulator the question is how to stimulate the improvements necessary. 

4.2.3 

TARIFFS 

Regulatory  bodies  approve,  or  are  at  least  consulted  about,  tariff  revisions.  In 

order to carry out this function  fully,  it will  be necessary for  the regulator to  have 

access  to  detailed  cost  information. 

It  is  not  always  clear  that  the  necessary 

information is available, even to the postal administration itself. 

At  the  same  time,  there  does  not  always  appear  to  be  an  appropriate  balance 

between the standard tariffs and the discounted tariffs available to some users. 

5. 

1992 IMPACT 

The  Single  Market  will  have  a  very  significant  effect  on  the  postal  sector.  The 

achievement of the Single  Market  in  postal services will  also  have positive effects on  all 

other sectors, particularly those heavily  reliant  on postal  services.  In  short,  the  aims  of 

the Single Market cannot be achieved  except with  a  communications infrastructure that 

functions efficiently, and postal services form part of that infrastructure. 

page 176 

Chapter 7:  Existing situation: the problems and the challenges 

Besides the growth in postal volumes that may result from  increases in  the Community's 

economy  arising  from  the  achievement  of  the  Single  Market,  certain  segments  of  the 

postal  sector  could  benefit  partiCularly.  Mail  order,  direct  mail  and  financial  services 

sent through the mail are all likely to expand. 

In general,  the postal sector will  need  to  react  to  the changing demands  made  on  it  by 

customers.  The most  important  factor  would  seem  to  be customer  location.  Location 

policy  is  likely  to  be  affected  by  the  dynamics  of  distribution  and  of communication. 

More  emphasis  will  be  placed  on  cross-border  mail  (which  anyway  will  grow  as  the 

companies begin to exploit the greater potential outside their own domestic markets). 

The importance  of this  should  not  be  under-estimated.  This  relative  increase  in  cross 

border mail  and  relative  decline  in  domestic  traffic  would  lead  to  changes  in  emphasis 

and  priorities  for  the  postal  operators.  They  could  also  severely  aggravate  tensions 

which  already  exist  -

in  particular  for  the  compensation  systems  between  postal 

administrations for cross-border mail. 

In resolving these problems, those involved will  need to ensure that they  are helping the 

Single Market to be achieved (or at least  not  hindering it from  being achieved)  in  other 

sectors  some  of which  are  significant  users  of  postal  services.  These  sectors  include 

printing/publishing, advertising, financial services and telecommunications. 

There  will  be  other  more  specific  effects  on  the  postal  sector  as  a  result  of  the 

development  of policy  in  certain  key  areas.  These  include  air  transport,  customs  and 

VAT, competition policy, technical norms and data protection. 

6.  WHAT HAPPENS IF NOTHING IS DONE? 

Essentially, the problems identified remain.  Two particular results should be noted: 

-

the degree  of the  problems will  increase.  Without  Community  impetus,  divergences 

(for  instance,  in  terms  of the  scope of  reserved  services  or  the  service  performance 

achieved) will become larger; 

-

there will  be  opportunity  costs,  particular  in  terms  of  the  Single  Market  objectives 

summarised above. 

There could  therefore be  a  danger  of "two-speed"  Europe as  far  as  postal  services  are 

concerned.  This would  be  unacceptable.  Postal  services play  an  important  part  in  the 

Chapter 7:  Existing situation: the problems and the challenges 

page 177 

EC's  communications  infrastructure. 

Poor  postal  services  can  contribute  to  the 

marginalising of certain regions. 

Large companies would  be less  likely  to  establish  themselves  in  a  particular area  if it  is 

known  that  postal  services  from  that  area  are  poor.  Small  and  medium  enterprises 

would be less likely to flourish. 

Similarly,  companies from  elsewhere would  be less  likely  to  market  their goods through 

postal services to areas where those services were poor.  Further,  mail  order companies 

would be less likely to deliver their goods there. 

The Single  Market will  create new  opportunities in  the postal  sector.  With  the existing 

divergences  in  posting  conditions,  service  performance  and  tariff  structures,  it  seems 

quite possible that the ability  to  take  advantage of the  opportunities  may  not  be  evenly 

distributed. 

To some extent,  this  is  only  natural.  However,  the situation  must  be avoided  where the 

different  abilities to react  to the opportunities  in  the single postal  market  begin  to  have 

secondary effects on the economies served by those postal services. 

In  sum,  the  danger  is  of having  a  two-speed  Europe  in  postal  services.  This  must  be 

prevented at all costs. 

Action is  therefore needed to prevent further divergences, and,  indeed, to draw together 

the different elements (but without sacrificing quality standards). 

7. 

THE COMMUNITY'S PERSPECTIVE 

Within the context of the Single  Market,  the Community would  want  to  ensure  that  the 

postal  sector  is  sufficiently  harmonised  to  meet  the  needs  of  the  EC's  citizens  and 

organisations.  The aim  is  to  ensure  that  the  Community's  reserved  area  is  as  small  as 

possible, consistent with the objective of ensuring universal service. 

Secondly, it appears necessary that  there should be some Community-wide standards for 

the reserved  service providers'  obligations.  These would  concern  access,  tariffs  and,  in 

particular, service performance. 

page 178 

Chapter 7:  F.xisting situation: the problems and the challenges 

In  representing  these interests,  the Community will  have  some  regulatory  role  to  play. 

In some matters (particularly  operational),  it  will  act more as  a  conduit  of information 

and ideas. 

7.1 

REGULATORY/OPERATIONAL SPLIT 

Although not all  Member States yet  have their regulatory function separated from 

any  operational  responsibility, 

this  is  very  much  the  trend,  as  the  recent  postal 

laws passed in  several Member States have shown.  However, it  is  not clear that all 

Member States have the same idea for the role of their regulatory bodies. 

A  particular  case  in  point  is  the  relationship  with  the  UPU,  where  it  seems 

essential  that  the  regulator  signs  any  agreements  on  behalf  of  his  country's 

government.  This  also  raises  the  question  of  the  compatibility  of  postal  law 

(including that of the UPU) with Community law and policy. 

7.2  DEFINITION OF UNIVERSAL SERVICE 

The  level  of  universal  service  required  is  not  well-defined  in  certain  Member 

States.  Although  it  is 

evident  that  reserved  services  have  to  be  provided 

universally,  it  is  not  always  clear  what  services  must  be  provided  universally 

beyond  the  scope  of  the  reserved  services.  Most  importantly,  there  is  no 

Community-wide definition  of the universal service to  be provided  throughout the 

Community. 

7.3 

SCOPE OF RESERVED AREA 

The  Community's  desire  is  to  seek  the  least  restrictive  set  of  reserved  services 

consistent  with  maintaining  a  Community-wide  universal  service  of  satisfactory 

quality. 

There are very significant differences between Member States in  the definitions of 

the  reserved  area.  This  suggests  firstly  that  it  is  necessary  to  reduce  such 

divergences  in  the context  of the Single  Market.  Secondly,  it  suggests  that  either 

some postal legislation may be unnecessarily restrictive or perhaps even that other 

legislation  may  be  too  "loose"  (with  the  effect  that  it  could  not  safeguard  with 

confidence the universal service).  The different criteria used by  different Member 

States to define their reserved areas has contributed to this diversity. 

Chapter 7:  Existing situation: the problems and the challenges 

page 179 

Any Community perspective is  clouded by  the lack of a  common definition  of the 

basic letter.  The  reasons for  the existing  limits  defined  for  the  reserved  area  in 

each  Member  State  are  not  always  clear. 

In  most  cases  they  were  established 

some  time  in  the  past,  and  would  anyway  need  to  be  reviewed  in  the  light  of 

changing circumstances. 

In order to provide stability to the regulatory terrain,  it  is  necessary also  to  take a 

stance on new services that may evolve (but which are not yet known). 

7.4  APPLICATION OF RESERVED SERVICES RIGHTS 

In addition to the divergences in  the legislative scope of reserved services as noted 

above,  there  are  also  some  variations  in  the  application  of  the  exclusive  rights. 

The clearest  example  of this  concerns  international  mail  (including  cross-border 

mail within the Community). 

Almost  all  Member  States  state  that  such  mail  should  be  in  the  reserved  area. 

This is because covering intra-Community mail under exclusive rights is seen as  an 

extension  of  the  principles  of  universal  service  applying  to  national  traffic. 

However,  m  most  of  these  Member  States,  such  exclusive  rights  are  not 

rigourously enforced. 

7.5  ACCESS CONDITIONS 

There  are  not  equal  access  conditions  covering  the  whole  Community.  Some 

postal administrations permit private operators  to act as mail preparers, others do 

not. 

The  detailed  posting  rules  can  also  vary  significantly.  This  makes  it  that  much 

more  difficult  for  customers  with  mail  delivery  needs  in  several  or  all  of  the 

Member States to fulfil  those needs except through the "international'' mail system 

(that 

is,  posting 

through 

the 

international  mail  services  of  one  postal 

administration for delivery by another).  This may not be the most effective way of 

despatching the mail. 

7.6 

SERVICE PERFORMANCE 

It 

is  difficult 

to  compare  service  performance  because  of  the  different 

measurement systems  used.  There are  also  different  targets  used.  Some  postal 

page  180 

Chapter 7:  Existing situation: the problems and the challenges 

administrations measure against a  target of next  working day delivery,  and  others 

the second working day. 

Most  postal  administrations  only  publish  performance  figures  for  their  faster 

standard  letter  service  (LC  or  first  class)  even  though  some  administrations 

register higher volumes for the slower services (AO or second class). 

There  are  presently  very  significant  divergences  in  service  performance,  ranging 

from  15% to 99% for national services. 

These average figures  probably obscure some regions where the performance may 

be  even  worse.  The  concern  is  that  certain  regions,  which  may  already  feel 

themselves  remote  from  the  mainstream  (either  economically  or  culturally)  may 

become further marginalised through being badly served by  poor postal services. 

The  Community  should  also  take  a  close  interest  in  intra-Community  letter 

services.  As  a  priority  it  would  need  a  uniform,  reliable  measuring system.  The 

results  recorded  should  be  published.  It  will  need  to  be  decided  what  form  this 

oversight by the Community of the quality of the universal service should take. 

However,  it  is  known that the existing results are far from  re-assuring.  Against the 

D + 3 target,  only 40% of mail is delivered within the target time.  Performance on 

some  other  routes  (linking  the  Community  with  non-Community  countries)  has 

also been measured - again with  results that are not encouraging. 

7.7 

TARIFFS 

There  are  differences  in  the  pricing  principles  that  are  applied  by  the  different 

Member  States.  This  is  partly  because  of  different  accounting  conventions,  but 

mostly because of different tariff policies. 

Tariffs are often  not  related to costs.  There are several instances of hidden cross 

subsidies.  In other cases, there are specific political decisions to support the tariffs 

of certain postal items (usually press publications).  These lead to wide differences 

in  tariffs  for  the same  item.  There  are  also  instances  where  central  government 

decisions are taken to support losses made by the postal administration. 

The  UPU general terminal due system will  continue to  lead  to  distortions.  Until 

compensation payments are based  on the actual delivery costs incurred,  there will 

·not be a sound financial basis for the future. 

Chapter 7:  Existing situation: the problems and the challenges 

page 181 

From  the  Community's  perspective,  the  concern  is  to  ascertain  whether  the 

consumers  of  the  different  Member  States  are  obtaining  value  for  money.  For 

this,  it  would  be  necessary  to  remove  from  the  analysis  those  external  factors 

which make costs greater or lesser.  Then the core cost structure can be compared 

with the service performance achieved. 

7.8  HARMONISATION 

The  Community  may  need  to  take  a  more  active  role  m  recommending  what 

harmonisation  measures  may  be  appropriate  in  order  to  help  make  services 

function  more  effectively  throughout  the  Community. 

Naturally,  such  a  role 

would  need  to  pay  due  attention  to  the  principle  of  subsidiarity  - that  decisions 

that  should  properly  be  taken  at  Member  State  level  should  indeed  be  taken  at 

that level. 

7.9  COHESION 

It should  be recognised  that good postal services are an  important cohesive factor, 

both  socially  and  economically.  But,  as  previously  noted,  postal  services  do  not 

always  perform  satisfactorily.  It is  therefore  necessary  to  promote  this  cohesive 

factor,  and  this  will  require  an  assessment  of  the  extent  of  the  problems  which 

would need to be overcome if a satisfactory level of cohesion is  to be achieved. 

7.10  LONGER-TERM ISSUES 

The  issues  identified  above  are  essentialJy  those  that  relate  to  the  existing 

situation or to a future situation that can be predicted to evolve out of the present. 

It  is  also  appropriate  to consider  more radical  issues  - which  could  be considered 

as  potential  solutions  to  the  problems  identified  or  as  potential  objectives  in 

themselves. 

Such  issues  would  include  the  question  of whether  a  single  postal  administration 

should  be  established  to  cover  the  whole  of  the  Community;  whether  the  aim 

should  be  to  have  a  common  tariff  applicable  throughout  the  Community;  and 

whether there should be a common stamp. 

The possible solutions to the issues raised in  this chapter are discussed in the next chapter. 

page 182 

Chapter 7:  F.xisting situation: the prr:>blems and the challenges 

Chapter 8:  Discussion of possible solutions 

page 183 

CHAPTER 8: 

DISCUSSION OF POSSIBLE SOLUTIONS 

1. 

INTRODUCTION 

The  previous  chapter  summarised  the  problems  and  challenges  to  be  found  in  the 

Community's postal sector.  This chapter discusses the possible solutions to the problems 

identified (and the policies needed to meet the challenges). 

2.  WHY SHOULD THE COMMUNITY BE INVOLVED? 

The  analysis  of  the  existing  situation  identifies  several  problems  that  would  seem  to 

justify action  at Community level.  Many of these problems concern the variability of the 

quality of universal services.  Resolution of such quality related problems is  paramount. 

Broadly,  there are five  areas of concern for the Community. 

2.1 

Present lack of harmonisation 

The  operations  providing  universal  service  in  each  Member  State  have  evolved 

independently,  with  the  effect  that  there  are  now  many  operational  differences 

between  them.  This  can  lead  to  significant  problems  for  mail  passing  between 

Member States;  it  can  also  have opportunity costs.  Most  obviously,  the  universal 

service  is  defined  differently  in  different  Member  States  with  the  effect  that 

customers cannot confidently post  similar items  in  different  Member  States.  But 

problems of inter-operability  are  to  be found  at  every  level.  At  a  more  detailed 

level,  for  example,  problems  are  encountered  because  of  lack  of  harmonised 

norms for envelopes. 

2.2 

Single market implications 

Service  performance  for  universal  service varies  greatly  between  different  postal 

administrations.  There  are  some  Member  States  where  next  day  delivery 

performance reaches the generally accepted target of 90%; in  others,  performance 

is  15%/16%;  in  others,  performance  is  between  the  two  (but  tending  more 

towards  the  former).  The  generally  accepted,  but  not  very  demanding,  service 

target for cross border mail  is  delivery within  three working days;  performance is 

page 184 

Chapter 8:  Discussion of possible solutions 

currently  measured  at  an  average  of only  about  40%,  and  with  large  variations 

between different postal administrations. 

Such  variations  have  particular  implications  for  the  parts  of  the  Community's 

commercial  and  social  life  that  are  heavily  reliant  on  postal  services.  Large 

senders of mail  include the key sectors of publishing,  financial  services, mail order 

and  advertising.  For such  sectors variability  in  performance of universal  services 

can  lead  to  market  distortions.  For  example,  it  would  be  much  easier  to  sell 

insurance  services  to  an  individual  household  in  a  Member  State  where  the 

performance  is  90%  rather  than  in  another  Member  State  where  it  is  16%. 

It 

would  be  more difficult  for  a  company  to  market  its  products  by  post  in  another 

Member Sate than for a company that was based in  that Member State. 

For example,  it  does  not appear co-incidental  that one of the  Member States with 

very  poor  service  has  a  mail  order sector  only  one  fifth  the  size  of that  of other 

Member  States  of  comparable  economic  size.  This  harms  the  mail  order 

companies'  prospects.  Significantly,  it  also  reduces  the  choice  of  the  individual 

consumer.  Those who  live  in  regions disadvantaged  by  poor postal  services  - and 

there are many - are therefore isolated not just from the personal contact that can 

be achieved through  mail,  but also from  the services that can  be provided  through 

the mail. 

Such disruptions of the Single Market affect not only senders  but also  receivers of 

mail.  If a  particular  region  of  the  Community  is  thought  to  have  an  unreliable 

universal service, companies (such as mail order) would be less interested in  trying 

to  market  their  products  there.  The  consumers  (as  potential  recipients)  would 

therefore have a  reduced choice. 

2.3  Cross-border service performance 

In  terms  of  number  of  days  taken  from  collection  to  delivery,  a  domestic  item 

takes an average of 1.5  to 2.0 working days, whereas a cross-border item within  the 

Community takes an  average of 4.0  days.  A  small  part  of the gap  is  explained  by 

operational  practicalities.  But  the larger  part  of the gap  cannot  be  explained  m 

this  way.  This  quality  gap  effectively  creates  a  "frontier  effect".  Expressed  m 
terms  of  achievement  against 

service  performance 

for  postal 

target, 

administrations'  cross-border  letter  services  within  the  Community  has  been 

measured at an average of 40%.  Behind this average lie significant variations. 

Chapter 8:  Discussion of possible solutions 

page 185 

This level of setvice probably falls  short of user expectations.  Indeed,  it should be 

mentioned that expectations are likely to become more demanding as cross-border 

communication  increases.  Relative  to  user demand,  static performance would be 

perceived  as  worsening.  In  fact,  there  appear  to  have  been  some improvements, 

stimulated  particularly  by  the  introduction  of  competition  (partly  in  breach  of 

exclusive  rights  which  were  unenforced).  However,  there  is  still  a  large  gap 

between  the  targets  which  postal  administrations  set  themselves  (either  on  the 

basis of customer requirements or operational practicalities) and the reality. 

Since effective cross-border communications are essential for  the commercial and 

social  life  of  the  Community,  it  is  a  matter  of  concern  to  the  Community  that 

setvice performance for cross-border setvices is so unreliable. 

2.4  Divergences 

One of the objectives of the Community is to ensure its own cohesion.  Clearly, the 

wide  divergences to  be found  in  the postal sector do  not  help  the  achievement of 

this  objective. 

Postal  setvices  provide  one  way  in  which  messages  can  be 

communicated and goods delivered. Any  regions  having unreliable  postal setvices 

would  therefore  be  disadvantaged  in  terms  of  their  communications  and  goods 

delivery requirements.  Both  individuals and businesses  in  such  regions could feel 

cut off. 

This  situation  of  being  disadvantaged  would  not  be  only  by  reference  to  their 

requirements.  It would also be relative to the conditions enjoyed in  other parts of 

the Community where the performance of the universal setvice was more reliable. 

2.5  Market distortions 

In  the comments on  the single  market  implications,  it  was  noted  that  divergences 

in  the  setvice  levels  df  universal  setvices  in  different  regions  can  contribute  to 

market distortions in  other sectors which are reliant on postal setvices.  However, 

it  should  be  noted  that  there  are  potential  market  distortions  within  the  postal 

sector itself.  These could be caused in  the case of the scope of the exclusive  rights 

being larger  than was  needed to  ensure the universal setvice.  In  order to  prevent 

such  distortions,  Member  States  therefore  need  to  apply  the  proportionality 

principle.  An  example  of  its  application  is  the  transferring  by  some  Member 

States of direct mail to the non-resetved area. 

page 186 

Chapter 8:  Discussion of possible solutions 

3.  COMMUNITY OBJECTIVES 

In order to discuss postal policy, it  is  necessary first  to discuss what are the Community's 

objectives for its postal sector. 

3.1.  BASIC PRINCIPLES 

It is  a basic social requirement that all  the citizens, businesses and organisations of 

the Community  should  have  access  to  means of communication,  of which  postal 

services form  a  part.  All citizens,  businesses and organisations of the Community 

therefore have an acquired  right  to a  universal  postal service at affordable  tariffs. 

At the same time, there should be maximum freedom  of choice,  provided  that  the 

universal service is safeguarded. 

Universal service provides access  for  all  into  the postal system  through collection 

facilities which can be readily used.  It also provides access for the postal system  to 

all  through  the  provision  of  deliveries  to  all  addresses  in  the  Community. 

Accessibility for all also implies low,  affordable tariffs. 

Universal  provision  could  be  required  of different  types  of service  (or  different 

uses  made  of services).  These  different  types  of service  will  naturally  have  an 

order of priority in  terms of the importance of ensuring that they are safeguarded. 

In  this  regard,  the  fundamental  imperative  is  that  universal  service  must  be 

ensured  for  postal  communication  items  of  a  personal  or  individualised  nature 

(defined in more detail at Paragraph 9.1.2 below). 

The  description  of  the  universal  service  also  needs  to  include  certain  service 

standards such as the frequency of access to collection and  delivery points.  It  also 

needs  to  cover  standards  for  speed  and  reliability  as  well  as  for  liabilities 

(including  the  investigation  and  answering  of complaints),  in  order  to  meet  the 

reasonable  customer  expectations  of  a  standard  letter  service.  The  universal 

service requirement is therefore based on user needs, which may vary over time. 

3.2 

IMPLEMENTATION 

Universal  service  causes  network  costs  because  of  the  need  to  balance  out 

differences  in  costs  of  providing  services  in  different  areas. 

Such  universal 

networks  have  significant  costs  that  do  not  change with  volume  - particularly  for 

collections and deliveries. 

Chapter 8:  Discussion of possible solutions 

page 187 

In order to ensure the viable continued provision of the universal service network, 

protection  is  needed  to  ensure  that these  network  "fixed"  costs  are spread  over  a 

sufficiently large number of units that the resulting unit prices are affordable to all. 

This protection can be given  in  the form  of reserved services, granting special and 

exclusive rights to a service provider or providers. 

It  would  be  very  costly  if  more  than  one  service  provider  established  parallel 

networks for standard services.  (There might also be some diminution of service if 

service  standards  were  reduced  in  an  effort  to  save  costs.)  It  should  further  be 

noted  that  operators other than postal  administrations do  not  seem  interested  in 

providing a universal service through an independent network.  On the other hand, 

if costs  are shared  through joint use of a  single  universal  network,  for  instance by 

the  postal  administration  providing  both  reserved  and  non-reserved  services 

through its one universal network, a smaller reserved area is  made possible. 

One  of  the  benefits  of the  granting  of exclusive  rights  is  that  it  can  enable  the 

reserved  service  provider to  continue to  offer  a  single  unitary  tariff (perequation 

tarifaire).  However,  this  is  not  itself  a  justification  for  establishing  a  set  of 

reserved services. 

It  is  by  no  means  the  case  that  all  items  which  are  distributed  through  the 

universal  network  should  be reserved.  There will  be some  items which,  although 

they  should  mandatorily  be  provided  universally,  do  not  need  to  have  the 

protection of being reserved. 

Further,  there are other,  more specialised  services  which,  although  they  may  use 

the universal  network,  do  not provide a justification for  it.  Such  services  (such  as 

express services,  or certain  postal financial  services such  as manda.ts de  poste ),  all 

provided  in  competition,  would  help  to share the costs of the  network,  and  could 

therefore help to reduce the scope needed for reserved services. 

Where  different  services,  reserved  and  non-reserved,  share  the  same  network, 

proper  accountancy  controls  and  systems  will  be  needed.  Exactly  what  such 

controls would comprise would need to be agreed. 

page  188 

Chapter 8:  Discussion of possible solutions 

4.  DETERMINING THE RESERVED AREA 

The  objective  is  to  seek  the  least  restrictive  solution  that  will  safeguard  the  standard 

service network that provides universal service to all the citizens and organisations of the 

Community. 

The general principle is  that there should be Community-defined limits  for  the scope of 

the  reserved  area.  However,  the  reserved  area  in  a  Member State could  vary  from  the 

Community limits in one of two ways. 

Firstly,  the  regulator and/or  the  national  government  of each  Member  State  is  obliged 

(by  the Treaty of Rome and,  generally,  by  the  national legislation)  to  define  a  reserved 

area  directly  proportional  to  the  objectives  which  justified  the  establishing  of  reserved 

services. 

(This  principle  of proportionality  effectively  calls  for  the  greatest  level  of 

competition consistent with  the  achievement  of the  objectives  set.)  For some  Member 

States,  the  application  of  this  principle  of  proportionality  could  well  indicate  that  a 

reserved area smaller than that defined at Community level was appropriate. 

Secondly, other Member States, where the application of Community law would obstruct 

the  universal  service  objective,  might  benefit  from  an  exception  to  the  application  of 

Community law to the extent provided by Article 90.2. 

Standard service refers to the universal service of basic postal items.  These include both 

communications  (letters,  postcards  and  printed  papers)  an~  goods-bearing  items 

(packets and parcels). 

The  phases  of  the  standard  service  can  be  approximately  described  as  the  collection, 

sorting,  transporting  and  delivery  to  the  addressee  (or  handing  over  to  another 

administration  for  delivery  to  the  addressee).  These  phases  are  operationally  distinct. 

The  economics  of  the  different  phases  also  vary.  Reserved  services  are  justified 

economically in  order to provide sufficient volume over which  the fixed  cost elements of 

the network can be spread,  in  order to  achieve low  unit costs  and  thus  prices affordable 

to  all.  The  major fixed  cost  element  of the  letter post  operation  is  delivery.  Collection 

from  road-side posting boxes also incurs significant fixed  costs. 

Service levels  vary,  but  service  performance  is  not  normally  guaranteed  (unlike  in  the 

case of many exp~ess services).  For letters, standard service  also  includes the possibility 

of registration and of delivery to a poste restante  address. 

Chapter 8:  Discussion of possible solutions 

page 189 

Regulators should ensure that such standard service continues to be provided universally 

up  to  a  certain weight.  Part of this  service  (for  instance,  for  parcels and  heavier-weight 

letters or  packets) will  be provided  in  the  non-reserved  sector.  (Such  mandatory  non 

reserved services are discussed in  more detail at Paragraph 7 below.) 

Although  a  Community  definition  of  what  universal  service  should  be  provided 

obligatorily  has  not  yet  been  drawn  up,  it  should  be emphasised  that  the  scope  of the 

universal  services  will  almost  certainly  be  larger  than  that  of  the  reserved  services. 

Further,  it  seems clear  that  the  reserved  services  should  be centred  on  those  items  for 

which  universal  provision  is  absolutely  essential  - that  is,  on  the postal  communication 

items  of  a  personal  or  individualised  nature. 

(This  description  requires  further 

clarification - see below at  Paragraph 9.1.2.) 

The  criteria  (including  those  of weight  and  price)  for  defining  what  part  of  standard 

postal  communication  items  of a  personal  or  individualised  nature  should  be  reserved 

are discussed  in  detail below in  Paragraph  10.  Any  kind of service not  falling within  this 

definition  falls  outside  the  reserved  area;  if  necessary,  however,  restrictive  conditions 

could apply for these services in justified cases. 

The reserved  area  therefore concerns addressed,  standard  items  not containing printed 

papers or goods.  Although  the  list  below  is  not  comprehensive,  the following  items  are 

not in  the reserved area: 

- newspapers, magazines or books (because they are printed papers); 

- parcels (because they contain goods); 

- express items (because they receive a  non-standard service); 

- unaddressed items (because they are not addressed). 

In order to elucidate the general propositions outlined here, it would be useful  to  expand 

upon  the  principle of posting or  delivery  by  the customer  himself (in  Paragraph  5),  on 

the  concept  of mandatory  services  (in  Paragraph  6)  and  on  the  regulatory  position  of 

new  services  (Paragraph  7). 

It  is  then  appropriate  to  ask  whether  some  cross-border 

services should be in the reserved area (Paragraph 8).  At that point, the definition of the 

reserved area can then be discussed in  more detail. 

page 190 

Chapter 8:  Discussion of possible solutions 

5.  DELIVERY AND  POSTING BY SELF 

Customers  delivering  their  own  mail  have  rights  which  prevail  over  those  of  the 

operators.  Customers also have certain special rights when posting on their own behalf. 

5.1  DELIVERY BY SELF 

Mailers ought to be able to deliver their own  mail, whether in  their own country or 

in another Member State.  The application within  the Community of the principle 

of self-delivery becomes somewhat more complicated in the case of subsidiaries of 

companies.  Again,  the  application  is  less  clear in  the case of sister companies  in 

other countries delivering mail on each other's behalf. 

Another  interesting  case  concerns  document  exchanges.  These  are  buildings 

where exchange members may  hire boxes  into which  fellow  members  may  deliver 

their mail directly and from which  the mail may be collected.  (Of course,  it  would 

be relatively  simple - at  least  in  terms  of the  extra  skills  needed  if  not  the  extra 

accommodation  - for  postal  administrations  to  extend  their  post  office  box  or 

"paste  restante"  facilities  to  offer  similar  services  in  competition  with  private 

exchanges.) 

Member States should therefore permit the functioning of document exchanges as 

described  above.  Further,  in  order  to  enhance  flexibility  available  to  customers, 

each  Member State should  permit  document  exchanges  to  transfer  mail  between 

each  other,  unless  it  was  convinced  that  such  a  step  would  harm  the  universal 

service  provision  of the  postal  administration.  However,  where  the  items would 

otherwise meet the criteria of reservation,  items may  not  either be collected. from 

the  poster's  premises  or  delivered  to  the  addressee's  premises  by  anyone  other 

than  the  reserved service provider  (presumably  the postal  administration)  or  the 

customer who originated the letter. 

5.2 

POSTING BY SELF 

Regarding  the  rights  of  potential  users  to  post  their  mail,  some  clarification  is 

needed,  in  terms of where they  may post  their mail  and  for  what  destinations.  It 

should  be  emphasised  that  the  discussion  here  re~ers  to  posting  (with  a  postal 

administration) by  the customer  himself,  with  no  intermediate operator  involved 

in the country of the customer. 

Chapter 8:  Discussion of possible solutions 

page 191 

Each  Member  State  accepts  that  a  customer  based  in  its  territory  can  post  a 

reserved item wherever he likes in the national territory,  if the item  is  for delivery 

within  that  territory.  Each  postal administration  applies  this principle subject,  if 

necessary,  to  contract conditions.  (Contracts  normally stipulate the agreed  office 

of posting.) 

Regarding  mail  taken  by  customers  across  a  border  for  posting  with  the  postal 

administration  for  domestic  delivery  in  that  administration's  territory,  the  view 

taken  by  Member  States  and  postal  administrations  has  been  somewhat 

inconsistent  in  the  past.  As  a  receiving (or "inward")  administration,  each  postal 

administration  has, 

in  practice,  accepted  such  a  practice.  However, 

the 

administrations  in  the "outward" country have sometimes considered  this  practice 

to  be in  breach  of the  monopoly.  Now,  the practice appears  to be accepted by  all 

postal administrations. 

In  addition, it  will  be seen that the Green Paper discusses the possibiJity of placing 

cross-border services  in  the  non-reserved  area  (see  below  at  Paragraph  8).  The 

customer would  therefore also have the option of giving his cross-border mail  to a 

private operator,  rather than  posting it  himself in  another country.  Certainly,  the 

regime  for  a  customer  posting  on  his  own  behalf should  not  be  more  restrictive 

than  that  for  a  third  party  operator  providing  services  in  the  country  of  the 

customer. 

For domestic  mail for  delivery  in  the same territory in which  a  customer is  based, 

the customer  might wish  to  have the option of taking the  mail  to another country 

and posting it  there for  delivery back in  his  own  country.  It is  important  that  any 

exclusive  rights  awarded  to  the  reserved  service  provider  do  not  impinge  on  the 

customer's ability  to exercise this  option and thereby benefit from  the principle of 

the freedom to provide services. 

However, measures must be taken to ensure that such a practice on the part of the 

customer  did  not  undermine  the  universal  service  objective  in  the  customer's 

country. 

It  must  therefore  be  ensured  that  the  postal  administration  in  the 

delivery country actually delivers such mail (if it would  otheiwise meet the criteria 

for being reserved).  Secondly,  the tariff paid to the delivery administration for  the 

work that  it  carries out must  properly compensate the delivery  administration for 

its delivery costs. 

page  192 

Chapter 8:  Discussion of possible solutions 

As stated,  this discussion  concerning mail posted  in  a  second country for  delivery 

back in  the customer's country  refers  to the  rights of the customer posting on  his 

own  behalf.  Third party operators are in  a  different juridical position,  and  this  is 

discussed in more detail below at Paragraph 8.3. 

6.  MANDATORY SERVICES 

If a  service  is  obliged  to  be  provided,  this  can  be  called  a  mandatory  service. 

In  the 

postal sector, this concept is  usually linked with an obligation  of universal service, so that 

a  mandatory  service  is  usually  a  service  which  one  operator  (or  several  operators 

together) must provide across the territory. 

As  discussed  at  Paragraph  3  above,  the  fundamental  reason  for  establishing  a  set  of 

reserved services is  the need to  provide universal service throughout the territory.  From 

this  it  follows  that  all  reserved  services  must  be provided  universally.  Such  services  are 

therefore mandatory reserved services. 

There  are  likely  to  be  other  services  that  are  mandatory,  but  non-reserved.  Such 

obligations  may  be  needed  in  order  to  meet  Community  and/ or  national  service 

objectives.  These are discussed separately below.  Because such  services will  operate  in 

the  competitive  (non-reserved)  area,  some  discussion  of  their  financing 

is  also 

appropriate. 

Reserved  services  are  mandatory,  and  will  imply  certain  obligations  for  the  reserved 

service provider.  The possible such obligations are discussed below in  Paragraphs  13-15. 

Consideration  would  need  to  be  given  to  how  much  these  obligations  would  also  be 

appropriate for  mandatory  services.  The decision  might  be  dependent  on whether  the 

services are mandatory at the Community level or at the national level. 

6.1  MANDATORY SERVICES AT COMMUNITY LEVEL 

A  Community-wide  definition  of  the  reserved  area  will  be  made.  This  will  be 

made by  reference to  a  weight  limit  applying  throughout  and  to  a  price limit  that 

will be established in each Member State.  (This is  discussed  in  more detail below 

at Paragraph 10.) 

Each  Member State will  have  the  right  to  define  for  its territory  a  reserved  area 

that is smaller than that defined at Community level.  However, it must still ensure 

Chapter 8:  Discussion of possible solutions 

page 193 

that universal  service  in  its  territory  is  provided  at  least  up  to  the limits  that  the 

Community defines. 

The  full  set  of  reserved  services  as  defined  at  the  Community  level  therefore 

forms  part of the  mandatory services.  While  Member States can decide to  make 

some of these services non-reserved, they will  remain mandatory. 

6.2  MANDATORY SERVICES AT  NATIONAL LEVEL 

A  Member  State  may  wish  to  have  universal  service  ensured  beyond  the 

Community  limits.  Again,  this  obligation  could  be  placed  on  a  single  operator 

(usually  the  postal  administration)  or  several  operators  working  collectively  to 

provide universal service. 

In  deciding  whether  to  have  such  mandatory  non-reserved  services,  Member 

States  will  naturally  need  to  investigate  what  their  national  requirements  are. 

They  will  also  need  to  take  account  of  obligations  imposed  by  the  UPU 

convention. 

In  this  regard,  Article  20  of the  Convention  (previously  Article  19) 

appears  to  oblige  all  member postal  administrations  to  provide  universal  service 

up to 2 kg,  and up to 5 kg  for certain printed papers.  The Community weight limit 

for its reserved area will be set clearly below both these weights. 

6.3 

FINANCING 

It  is  important  to  consider  the  financial  implications  of these  obligations.  These 

implications  will  depend  largely  on  the  profitability  of  the  services.  The 

profitability will  be affected  by,  among other things,  the tariffs and the proportion 

of traffic gained. 

Correctly priced,  there  is  no  reason why  non-reserved  mandatory services  should 

not be profitable.  They will  become a  financial  burden  only if the price levels  are 

set  below  cost  as  a  preferential  rate  and/or  when  the  potential  traffic  is  cream 

skimmed where the price offered is on the basis of a perequation tarifaire. 

In  respect  of the second  of these  possibilities,  since  these services  operate in  the 

non-reserved sector,  it does not  seem unreasonable to offer volume posters either 

a  differential  rate by  region  or a  single country-wide  rate but with  an  enforceable 

exclusivity clause. 

page 194 

Chapter 8:  Discussion of possible solutions 

If,  despite  these  points,  the  non-reserved  mandatory  services  are  still  not 

profitable,  it  will  be  necessary  as  a  last  resort  to  consider  financing  from  other 

sources.  This would  take the form  either of an  external subsidy  (preferably from 

the body that imposed the obligation) or of a cross-subsidy. 

In both cases,  it  will  be necessary to  identify where the  mandatory services are in 

loss (rather than simply describing the services as being in  overall loss).  It should 

be possible to localise the losses to  particular geographical regions and to quantify 

the  revenue  and  costs  associated  with  the  provision  of  mandatory  non-reserved 

services  in  those  regions. 

(These  would  tend  to  be  the  regions  where  the 

operators  not  obliged  to  provide  universal  service  were  less  interested  in 

competing.)  Any  subsidy  or  cross-subsidy  could  and  should  therefore  be  made 

transparent.  (See also at Paragraph 15.2 below.) 

7.  NEW SERVICES 

The overall  objective  of achieving  universal  service  at  affordable  prices  has  led  to  the 

view that some reserved services will provide the protection needed to ensure sufficiently 

low unit costs.  This revenue/volume level should be achieved by present and foreseeable 

volumes. 

It therefore  seems  to  follow  that  new  services  which  add  incremental  volume  to  the 

postal sector should be outside the reserved area.  However, in  some cases it may not be 

clear that  the volume  is  incremental - rather  that  part  of the volume of the new service 

could be volume that had been attracted away from the "traditional" service. 

The juridical view will need to be well defined.  It will  not be sufficient for  a  new service 

to  be slightly  different  from  the  reserved  activity.  (It  should  be  noted  that some  of the 

mail preparation  activities  described  at  Paragraph  9.4  below could  meet  such  a  limited 

criterion.) 

It  would  be  necessary  instead  for  a  new  service  to  be  significantly  different  before  it 

could  be  decided  that  it  should  be  in  the  non-reserved  area.  In  this  way,  a  document 

exchange  service  appears  appropriate  to  be  placed  in  the  non-reserved  area,  but  an 

ordinary letter f~r national  delivery which  involved  collection  from  customers' premises 

rather than from street boxes would remain reserved. 

The regulatory body of each  Member State  (and  possibly  the  Community) will  need  to 

decide  the  meaning  of the  word  "significantly"  on  a  case-by-case  basis.  Naturally,  any 

Chapter 8:  Discussion of possible solutions 

page 195 

such  decisions  would  need  to  be  taken  in  accordance  obligations  under  the  Treaty  of 

Rome,  in  particular  the  principle  of freedom  to  provide  services  and  the  competition 

rules of the Community. 

If a  new  service  becomes  a  necessary  element  in  the  achievement  of  the  universal 

service,  it  is  possible  to  envisage  its  integration  into  the  reserved  area  in  line  with  the 

criteria established at Paragraph 4 above. 

8.  CROSS-BORDER MAIL 

It  is  necessary  to  ask  whether  the  reserved  area  ought  to  comprehend  domestic  and 

cross-border services alike,  or whether a  distinction ought to be  made between  them.  In 

the  discussion  here,  intra-Community  and  international  cross-border  services  are 

considered separately. 

8.1 

INTRA-COMMUNITY MAIL 

The fundamental  reason  for  establishing a  set  of reserved  services  is  social  - to 

ensure  universal  service.  This  implies  an  economic  reason  - protection  by 

exclusive  rights  to  safeguard  the  universal  service  network.  This  economic 

reason  is  based  on  the  economic  realities  of  "fixed  cost"  networks.  Significant 

reductions in  volume would increase unit costs,  thereby making use of the system 

less  affordable  and  ultimately  putting  the  network  in  danger  of  becoming 

unviable. 

For  intra-Community  mail,  the  economics  are  different  because  of  the  high 

proportion of variable costs.  The fixed  network  elements involved  (the road-side 

collections  in  the  outward  country and  the  deliveries  in  the  inward  country)  are 

protected. 

In  terms  of  economics,  the  only  reason  to  prevent  liberalisation 

appears to  be that  the delivery administration  may not  be properly compensated 

for  its  costs  (although  this  problem  already  occurs  under  the  UPU  system). 

However,  the  postal  administrations  have  already  taken  some  steps  to  remedy 

this,  and this paper proposes further reforms. 

There  do  not  seem  to  be  significant  economic  reasons  for  including  intra 

Community services  in  the  reserved  area,  and  there  are  service  reasons  for  not 

doing so. 

page 196 

Chapter 8:  Discussion of possible solutions 

The  reality  in  terms  of  operational  performance  is  that  the  level  of  service 

provided  by 

the  postal  administrations  for  cross-border  services 

is 

less 

satisfactory than  that provided  for  domestic services.  The Community objective 

is  to  close this gap  (and therefore diminish the "frontier effect").  The regulatory 

regime  chosen  must  meet  this  objective.  This  points  to  a  liberalisation  of the 

market as a means to stimulating service improvements. 

There  could  be  certain  regulatory  concerns  about  such  a  liberalisation. 

In 

particular,  there might  be a  danger of ordinary domestic mail,  to  the extent that 

it  meets the criteria  for  being reserved,  being passed  off as cross-border  mail  in 

order to  circumvent  the  reserved  services.  Clearly  such  circumventing of policy 

could endanger the economics on which  the provision of the  universal services  is 

based, and must be prevented. 

In  summary,  the arguments  for  giving  customers  the  possibility of better service 

through  wider choice  are compelling.  The placing of intra-Community mail  the 

non-reserved area would therefore be envisaged.  If a  Member State is concerned 

that such  a  measure  might jeopardise  its  universal  service,  it  might  benefit from 

an  exception  to  the  application  of  Community  law  to  the  extent  provided  by 

Article 90.2.  The concern  about  regulatory  control  is  recognised,  and adequate 

control systems will be established.  The Commission, with  Member States' help, 

will propose the systems needed. 

It  is  accepted that, if it is  not presently non-reserved, certain Member States may 

need  an  adaptation  period  to  implement  the  change.  The  length  of  the 

adaptation period would  need to be defined in  each case. 

Although  the  orientation  of  the  Green  Paper  is 

towards  placing 

intra 

Community  cross-border  mail  in  the  non-reserved  area,  there  would  still  be  a 

universal  service  obligation  for  such  mail.  The  postal  administration  in  the 

outward  country  would  have  the  obligation  to  provide  universal  service  in  the 

form  of collection  facilities  for  cross-border  mail  that  customers  chose  to  post 

there.  The  postal  administration  in  the  inward  country  would  still  need  to 

provide universal delivery services for  mail originating from  another Community 

country  if this  was  required  by  the  customer  or  the  operator  or  the  outward 

postal administration. 

This  discussion  concerning  whether  or  not  intra-Community  mail  should  be 

placed in the reserved area is expanded upon in Annex 15. 

Chapter 8:  Discussion of possible solutions 

page 197 

8.2 

INTERNATIONAL MAIL 

International  mail  is  mail  that  either  originates  m  the  EC  for  delivery  in  a 

country outside  the  EC  or originates  outside  the  EC for  delivery  in  a  Member 

State  (respectively "outward"  and "inward"  international  mail).  In  both cases,  it 

would  be  envisaged  to  place  these  mail  flows  in  the  non-reserved  area.  A 

Member State that was concerned that  placing this  mail  in  the non-reserved area 

might  prejudice  its  universal  service  might  benefit  from  an  exception  to  the 

application  of  Community  law  to  the  extent  provided  by  Article  90.2.  The 

liberalisation  of  inward  international  mail  could  raise  similar  concerns  about 

regulatory  control  as  might  also  apply  to  the  liberalisation  of intra-Community 

cross-border  mail.  Adequate  control  systems  wilJ  therefore  also  need  to  be 

established for such  mail. 

For certain  Member  States,  if this  mail  is  presently  reserved,  it  is  possible  that 

some adaptation period may  be needed.  However,  it  should be noted  that there 

would  probably  be  less  need  for  such  adaptation  periods  for  international  mail 

than for intra-Community cross-border mail. 

8.2.J  OUTWARD 

For outward  international  mail,  the  economics are almost  the same as  for  intra 

community mail,  with  two  exceptions.  Firstly,  the transport costs are likely to  be 

greater  (owing  to  the  higher  proportion  transported  by  air,  and  the  greater 

distances involved); it  should be noted that these costs are almost all variable. 

Secondly, outward international mail  tends to  be very profitable, although part of 

the profits is  used by  postal administrations to fund  th~ losses incurred on inward 

cross-border  traffic  the  delivery  cost  of  which 

tends  not  to  be  properly 

compensated by  terminal  dues.  Of course,  the  fact  of existing cross-subsidies  is 

not a justification for adopting a specific future regulatory position. 

While  the  economics  of  international  mail  are  similar  to  those 

of  intra 

Community mail,  the political position is  different.  For intra-Community mail,  it 

could be argued  that Paris-Marseilles mail should be treated the same as that for 

Paris-Brussels.  However, no such argument can be used for international mail. 

It  should  be  added  that  the  argument  concerning  expertise  in  air  transport 

(shown at Annex  15,  Paragraph 2.3)  may be stronger in  the case of international 

mail.  Because  of  the  higher  proportion  transported  by  air  and  the  potential 

page  198 

Chapter 8:  Discussion of possible solutions 

greater complexity of routeing, it  is quite possible that private operators, many of 

whom  tend  to  be  specialists  in  air  transport,  could  achieve  a  (perhaps 

significantly) better quality of service than certain postal administrations. 

Should the option of using a  private operator for  international mail be denied  to 

the Community's consumers?  Alternatively,  it  may be the case that some postal 

administrations  have  more  effective  transport  arrangements  for  cross-border 

mail  than  others:  again,  it would  seem  helpful  if potential customers  had  access 

to the organisations which had demonstrated superior expertise and service. 

In  summary,  there  is  a  particularly  strong  argument  for  outward  international 

mail  being placed  in  the  non-reserved  area.  It would  therefore  be  envisaged  to 

place such mail in the non-reserved area. 

8.2.2 

INWARD 

The issue  of inward  international  mail  also  needs  to  be  addressed.  Here,  large 

mailers based outside the Community may wish to concentrate their mailings  for 

the  EC  on  one  distribution  centre  within  the  EC.  As  with  other  cross-border 

mail flows,  the placing of this  mail  in  the non-reserved  area would  be envisaged. 

However, as discussed for  intra-Community traffic,  adequate regulatory controls 

should  be  established  to  prevent  domestic  reserved  mail  being sent  through  the 

international mail  system  in  order to  circumvent  the  reserved  service provider's 

exclusive rights. 

It  should  be  noted  that,  from  the  perspective  of  the  Member  State  of  final 

destination, this  mail could  have the appearance of being intra-Community mail. 

However, the time scale that is appropriate for outward international mail should 

also apply to inward international mail. 

8.2.3  CATS 

The implementation of the tariff proposals described at  Paragraph  15  below may 

create an  artificial problem whereby,  in  order to  undercut  the  intra-EC terminal 

dues  to  which  all  the  EC  postal  administrations  could  be  committed,  intra 

Community  mail  could  be  transported  out  of  the  EC  for  remailing  back  in  at 

UPU rates.  (For certain items the UPU rates would be lower than the rates paid 

between EC postal administrations.) 

Chapter 8: Discussion of possible solutions 

page 199 

Such  a  practice,  which  added  no  value  but  was  intended  solely  to  circumvent 

Community policy, would be unacceptable. 

The  disciplines  and  obligations  currently  envisaged  for  the  GA TS  would  not 

oblige  the  Community  to  allow  circumvention  of  its  policy.  Possible  solutions 

should be discussed  with  trading  partners  if this  situation were  to change  in  the 

future.  This tariff/terminal  dues  issue  aside,  Member States will  need  to  make 

whatever  adjustments  are  necessary  to  meet  GA TS  commitments,  especially 

concerning access to reserved services. 

8.3 

OTHER ISSUES 

In general,  of course,  there should  be freedom  to  provide services.  This general 

principle  also  applies  in  the  case  of  the  practice  of  transporting  mail  by  third 

party operators  out  of a  country  and  mailing  it  in  a  second country for  delivery 

back  in  the first  country  (often  called  A-B-A  remail),  particularly  if some  extra 

service is  provided in  the second country that adds substantial value to the whole 

service. 

However, if the items thus transported would otherwise have met  the criteria for 

being reserved  items  of domestic  mail  in  the  first  country  (Country A),  such  an 

activity  would  infringe  the  special  and  exclusive  rights  of  the  reserved  service 

provider  in  that  country.  This  would  be  because  a  private  operator  collecting 

such  mail  in  Country  A  would  be  competing  with  the  postal  administration  of 

that country in the reserved area. 

This  statement  refers  specifically  to  the  physical  movement  of such  mail  items. 

The  situation  is  different  in 

the  case  where  the  first  part  of  the  chain 

(transporting  out  of  the  country  A)  is  not  physical.  Here  the  transport  is 

"metaphorical":  copy  is  generated  in  country A  and  then  sent to country B.  The 

material  is  then  converted  into  direct  mail  (or  into  a  publication  for  mailing) 

through  printing  and  enveloping.  The  material  may  then  be  posted  in  the 

country where the printing was carried out  for  delivery  in  the country where the 

original copy was generated. 

How~ver, in  postal  terms,  the mail should  be  treated as  items  originating in  the 

country  of  printing.  Not  to  treat  the  mail  in  this  fashion  would  be  to  permit 

decisions by some postal managers to affect the Community's trade in printing. 

page 200 

Chapter 8:  Discussion of possible solutions 

A  similar  point  can  be  made  about  text,  data  or  images  that  are  transmitted 

electronically across  a  border for  conversion  into  hard  copy which  may  then  be 

sent back as a  letter to  the first  country.  Here, postal  rules  must not be allowed 

to  influence trade in  information  or in  telecommunications.  (Assessing flows  of 

information can be an important factor in the location strategy of companies.) 

Of course,  it  may  be the case  that  part  of the price  package  that  influenced  the 

placing of the print  order was  the postage price in  the country of printing.  This 

possibility  re-enforces  the  point  that  terminal  dues  must  be  closely  related  to 

actual delivery costs. 

9. 

SCOPE OF RESERVED SERVICES - PARTICULAR ISSUES 

Certain  potentially  problematic  details  concerning  the  scope  of  the  reserved  area  are 

discussed below. 

9.1 

PROBLEMS OF DEFINITION 

It was stated above that letters could be possible reserved services,  but that parcels 

and express services should  not be.  However,  in  practice,  it  may not be so simple 

to  distinguish  between  them.  Customers  and  laymen  refer  to  several  items  as 

"letters";  for  them  it  is  a  general description  of a  communication that can  be sent 

by  different  means  (including  ordinary  mail,  express  or  fax).  Here,  the  term 

"letter" is  employed as used by  operators - that is,  meaning a communication item 

sent by ordinary mail. 

However, this description requires further elucidation. 

Postal communication  items comprise letters and  post cards,  but  not  publications 

or  goods-bearing  items.  They  can  be  used  for  personal  or  business  (including 

organisational) co~respondence.  A  postal item  is  not sent by  telecommunications. 

However,  a  communication  originally  sent  by 

telecommunications  can  be 

converted  into  a  postal  item  by  being  printed,  enveloped  and  despatched  for 

delivery (see discussion of "electronic transmission" below at Paragraph 9.3). 

For legislative purposes,  a  more precise definition will  be required.  However,  the . 

intention  here  is  not  to  seek  the  ultimate  definition  of  a  letter  or  a  postal 

communication  item.  The definition given  above is  intended  to be more general 

in  nature,  in  order  to  indicate  the  general  approach  required.  In  addition,  the 

Chapter 8: Discussion of possible solutions 

page 201 

analysis  below  highlights  certain  specific  problems  met  in  defining  the  limits  of 

letters.  The  discussion  emphasises  particularly  services  which  are  not  ordinary 

letters. 

9.1.1 

LEITERS/EXPRESS 

In  what  way  can  an  express  item  be  easily  distinguished  from  a  letter? 

Its 

dimension, weight and contents may be the same.  Even the speed of delivery may 

be similar. 

The essential difference lies in  the value (whatever form  it  takes) added by express 

service  providers  and  perceived  by  customers.  The  most  effective  way  of 

determining the extra value perceived  is to consider the extra price that customers 

are prepared to pay. 

9.1.2 

INDIVIDUALISED COMMUNICATION 

Since the criterion of the individuality of an item  is  so  important from  a regulatory 

point  of view,  it  is  necessary  to  define  here what  is  meant  by  an  "individualised 

communication".  The essential  point is  that the text  in  the ·communication should 

relate to the business or personal  affairs of the addressee  (either an individual,  an 

organisation or a position within an organisation) with  sufficient  individuality that 

it  is  clear  that  the  text  (excluding  the  address  and  any  appellation)  refers 

specifically to the addressee. 

Direct mail is  becoming increasingly "personalised".  However, since the same or a 

similar message  is  being sent  to  other addressees, it  is  clear that  it would  not  pass 

the  test  of  referring  specifically  to  the  affairs  of  the  addressee.  However,  this 

trend  of  personalising  direct  mail  entails  that 

the  traditional  criterion  of 

determining whether or not the text was identical is probably no longer sufficient. 

Invoices and  statements have  text  (the  figures  used  in  each  item)  that  vary  from 

copy to copy.  It seems to follow  that  they are usually  individualised,  according to 

the definition  used  above.  However,  it  may  be  remarked  that  in  some  Member 

States such  mail  is  considered as printed papers,  and  may be therefore be treated 

as being non-reserved. 

In  assessing  whether  an  item  is  individualised  or  not,  the  important  criterion  is 

that of the contents,  not  of the means of production.  If an  advertiser chooses  to 

send a  number of hand-written  items with  identical  text,  they  cannot be regarded 

page 202 

Chapter 8:  Discussion of possible solutions 

as individualised.  Conversely, an invoice containing a number of details specific to 

the  addressee  appears  to  be  individualised,  whether  the  figures  it  contains  are 

printed out by computer or hand-written. 

9.1.3 

"PRINTED PAPERS" 

Proposals  for  the  regulatory  position  of printed  papers  should  be  formulated  by 

reference to the basic principles of the universal service provision.  The absolutely 

fundamental  policy  imperative  is  that  postal  communications  of  a  personal  or 

individualised  nature  should  be  collected  and  delivered  universally.  Such  mail 

would include all items where the text  is  not identical, and would therefore include 

all  personal  correspondence  and  individualised  business  correspondence  (see 

above  at  Paragraph 9.1.2).  It seems  appropriate that  the set  of reserved  services 

that would  be  established  to  safeguard  the  universal  service  should  be  based  on 

such items of an individualised nature. 

A  priori,  this  would  exclude  all  printed  papers  from  the  set  of possible  reserved 

services.  Such a position should certainly not pose problems for publications.  The 

regulatory  position  for  publications  (magazines,  newspapers  and  books)  in  most 

Member States is that their distribution should be placed in  the non-reserved area. 

The probable de facto  position  in  the few  Member States whose postal legislation 

places such  publications in  the reserved area  is  that their distribution is  no longer 

carried out exclusively by the postal administration. 

In addition, there is a general will  to assist the plurality of th~ press.  However, the 

high  discounts  often  awarded  by  postal administrations to  publications can create 

a de facto  monopoly for  the administrations over home delivery of publications of 

certain  types  or  to  certain  areas.  At  first  sight,  such  discounts  can  appear  to 

encourage the widening of readerships. 

However, over a  longer period, they can serve to discourage other operators from 

providing  services  in  what  is,  in  most  Member  States,  a  non-reserved  market. 

They can therefore have the strategic effect of reducing the options for publishers, 

and  may  actually  limit  readership. 

In  summary,  such  discounts  not  only  are 

unhelpful for  the economics  of the  universal  network,  but  also  can  make  a  non 

reserved service effectively a monopoly, to the possible ultimate detriment of all. 

By  comparison  with  publications,  the  position  of  direct  mail  in  relation  to  the 

economics of the universal service network could be rather different.  Direct mail 

Chapter 8:  Discussion of possible solutions 

page 203 

often  attracts  printed  paper  discounts  - but  of  a  much  lower  level  than  those 

associated with  publications.  It constitutes  an  estimated  18.5%  of the volume  of 

the  Community's  postal  administrations'  domestic  mail. 

If the  placing  of  this 

category of mail in the non-reserved area were to cause a significant proportion of 

volume  to  be  lost  from  the  universal  service  network,  it  might  jeopardise  the 

economics  of  the  network,  and  put  at  risk  the  central  objective  of achieving  an 

affordable price for the universal service. 

In  summary,  there  are  strong  arguments  for  placing  direct  mail  in  the  non 

reserved sector.  However,  it  should be recognised that  there could be difficulties. 

Firstly,  the  increasingly  personalised  nature  of direct  mail  gives  rise  to  growing 

difficulty in  distinguishing direct  mail  from  ordinary letters.  Secondly,  direct  mail 

presently  generates  a  significant,  and  rapidly  growing,  proportion  of  postal 

administrations' total business,  and its economic relevance to  the universal service 

obligation should be analysed in  detail. 

These issues  need  to  be  analysed  in  order  to  assess  whether  the problems  noted 

above - regulatory or economic - would  actually  occur  in  practice.  In  the light  of 

this  analysis,  the  Commission  will,  with  the  help  of  Member  States,  need  to 

propose  specific  measures,  for  example  with  regard 

to  adequate  control 

mechanisms  for  preventing  ordinary  mail  being  passed  off  as  direct  mail. 

Moreover, if a  Member State· was concerned that such a  measure might jeopardise 

its  universal  service,  it  might  benefit  from  an  exception  to  the  application  of 

Community law to the extent provided by Article 90.2. 

9.1.4 

SMALL PACKETS/PARCELS 

A  different  problem  is  posed  with  parcels.  Many  definitions  of letters  in  their 

broadest sense  suggest  that  they  range  up  to  2  kg.  Within  this  definition  of a 

letter falls  the "small packet". 

What  is  the distinction  between  a  small  packet  and  a  parcel?  (In  practice,  it  is 

made not so much by  reference to regulatory criteria, but rather is decided by the 

customer himself usually on the basis of price.) 

The criterion  of contents  should  be  applied:  if  a  packet  contains  goods  rather 

than  a  communication,  it  should  be  treated  as  non-reserved  just  as  a  parcel 

(because the customer  has  a  choice  how  to  send  it).  This  distinction  should  be 

page 204 

Chapter 8:  Discussion of possible solutions 

reinforced by  the use of a weight limit.  (In fact,  a  low weight limit would  reduce 

the significance of this problem.) 

9.2 

SLOWER POSTAL STREAMS 

A  word  of clarification  is  needed concerning what  could  be  included within  the 

reseived  seivices.  They  include  not  only  the  quicker  standard  streams  (LC  in 

some Member States, first class in  others), but also streams that are slower. 

The latter  include printed  papers and  second class  letters  (depending on  which 

countries offer a  LC/ AO  split  and  which  a  first  class/second  class split),  as well 

as rebate (a bulk service with a longer delivery standard) and deferred postings. 

These  are  all  intentionally  slower  streams,  with  advertised  slower  standards. 

(The question of poor performance against seivice standards is  therefore entirely 

separate, and is discussed below at Paragraph  14.3.) 

93 

ELECTRONIC COMMUNICATION 

Communications made by electronic means are outside the postal sector.  Where 

they are combined with  some form  of seivice provided by  postal operators, such 

communications are usually called postal electronic mail. 

One such  seivice provides  facilities  to  the public  to  send  a  message  from  a  fax 

machine provided by  an  operator,  and  for  the fax  to  be collected  from  a  distant 

fax  machine  by  the  intended  receiver  of the  faxed  message.  Such  an  operation 

does not involve any mail seivice, and should clearly be considered non-reseived. 

Another  form  of  electronic  mail  combines  electronic  mail  with  mail  seivices. 

Ordinary  electronic  mail  (facsimile 

transmission  or  distance  printing  of 

individual  or  bulk  messages)  is  non-reserved.  However,  if the  hard  copy  then 

needs to be delivered to a third party as a separate distribution process, this extra 

element is  arguably  a  letter  delivery  service.  The letter  delivery  element  might 

therefore be considered  reseived  (provided  that  it  met all  the  other criteria  for 

reseivation ), while the electronic transmission would be non-reserved. 

9.4 

MAIL PREPARATION 

Certain  postal  administrations  permit  "consolidators"  to  act  as  intermediaries 

between the original mailer and themselves.  These consolidators act primarily as 

mail preparers, but also offer other facilities such as credit. 

Chapter 8:  Discussion of possible solutions 

page 205 

The consolidators  compete  with  each  other,  although  they  have  certain  special 

rights since it  is  necessary for  them either to be approved by  the  regulatory body 

or to  enter into  a  contract  with  the  postal  administration.  The activities  of the 

consolidators before the mail  is  actually posted with  the postal administration do 

not  make  the  mail  non-reserved.  However,  it  is  interesting  to  note  that  the 

permitting by  the postal administrations of such  activities  under contract implies 

their acceptance that the postal operation is  not a seamless process which cannot 

be viewed in  terms of its component parts. 

The  activities  of such  "intermediaries  can  add  flexibility  for  the  customer  who 

originates the mail.  They may  also  save  the postal  administrations costs, savings 

which  could  be  reflected  in  discounts  that  would  benefit  both  the  original 

customer and the intermediary. 

Intermediaries do not compete with  the two  high fixed  cost activities of the postal 

administrations - either with collections from public posting boxes and post office 

counters or with  deliveries.  Their operations  are therefore compatible with  the 

objective of maintaining universal service. 

There is  no  reason  for  this  facility  not  to  be  available  to  all  users,  and all  postal 

administrations  therefore  ought  to  make  contractual  facilities  available  to  all 

such operators.  In view  of ~he similarity between  the operations of the different 

postal administrations (and therefore of the cost  saving work that  intermediaries 

might  be  able  to  carry  out),  there  seems  scope  for  establishing  a  Community 

minimum set of contract facilities  that  should  be  made available.  (See below  at 

Paragraph 17.) 

It  should  be  emphasised 

that  the  postal  processes  carried  out  by  such 

intermediary operators are mostly substitutes for similar processes carried out by 

postal administrations.  They do  not  add value in  a  way  that  is  significant from  a 

regulatory  point  of view.  Mail  preparation  services  therefore  do  not  usually 

constitute "new services", as described at Paragraph 7 above. 

If the  mail  handled  by  such  intermediary operators would  meet  the  criteria for 

being  reserved,  it  would  remain  reserved  in  the  sense  that,  following  the 

processes undertaken by the intermediary, the mail would then have to be posted 

with the postal administration for whatever postal processes remained (including 

final delivery).  Such items therefore could  not be transported out of the country 

page 206 

Chapter 8:  Discussion of possible solutions 

by  a  third  party operator for  mailing  back  under  an  A-B-A  remail  system  (see 

above at Paragraph 8.3 ). 

IO.  PROPOSED CRITERIA 

As stated above (at Paragraph 4 ),  some items cannot be reserved.  These include heavier 

parcels,  heavier  publications,  express  items  and  all  unaddressed  mail.  Some  items  for 

which  there  may  be  a  universal  service  requirement  also  cannot  be  reserved  - for 

example, lighter weight parcels and printed papers. 

The  possible  reserved  area  is  therefore  restricted  to  individual  communication  items 

(see Paragraph 9.1).  These  comprise letters and  post cards.  In  order to  exclude goods 

and publications from the reserved area, it is  necessary first to apply a contents criterion. 

Having  identified  specifically  the  communication  items  of a  personal  or  individualised 

nature,  the  scope of the reserved  area  within  these  items  needs  to  be defined  by  using 

other criteria.  The efficacy of the other criteria to be used is discussed in detail in Annex 

16.  In  summary,  only  the criteria  of weight and price will  be effective in  defining which 

of  the  individual  communication  items  that  could  be  reserved  should  be  reserved. 

Indeed, they need to be applied in combination, with some link between the weight limit 

(which should be a  single upper limit applied across  the Community) and the price limit 

(which  would  be determined separately in  each country by  reference  to  the  tariff at  the 

weight limit). 

The application  first  of the contents criterion,  and  then  of the price and weight  criteria, 

is  shown  diagrammatically  in  Figure  1  below.  Three  regulatory  categories,  based  on 

whether  or  not  there  was  a  universal  service  obligation,  are  shown.  As  noted  at 

Paragraph  9.1.3  above,  the  placing  of  addressed  direct  mail  in  the  non-reserved  area 

would, a priori, be envisaged.  The issues  need  to be analysed  in  order to assess whether 

this measure would  threaten the universal service,  either through weakening its financial 

viability or through the possible abuse of such a  liberalising measure if proper regulatory 

controls  were  not  in  place.  On  the  assumption  that  the  status  of direct  mail  as  non 

reserved was confirmed, it would be included on the second line in  the figure. 

It  should  be  noted  that  the  intention  of  the  price  limit  is  not  simply  to  ensure  that 

express services are placed in  the non-reserved sector.  This would be to view  the future 

market only  in  terms of the products that are available  today.  Rather,  it  is  intended  to 

set the price limit at a  level that is  sufficient to embrace only those services that need to 

be protected. 

Chapter 8:  Discussion of possible solutions 

page 207 

Figure 1: 

Definition of reserved area - application of contents,  weight and price criteria. 

Weight/price criteria 

LEITERS/POSTCARDS 

UNIVERSAL REQUIREMENT -

PER.SONAL/INDMDUALISED 

COMMUNICATION 

UNIVERSAL REQUIREMENT 

- GOODS/PRINTED PAPERS 

No UNIVERSAL 

REQUIREMENT 

D 

Reserved 

D . 

Non-reserved 

In this way,  other services that may not yet exist but would be priced in  mid-range (above 

the  price  of  the  "basic"  service,  but  below  the  prices  associated  with  express)  would 

definitely be placed  in  the non-reserved  sector.  This would  make  their  position clearer 

rather than through a debate about whether such services were or were not "significantly" 

different  (see  Paragraph  7  above).  Put  graphically,  the  approach  to  the  price  criterion 

should  not  be  "top-down"  (working  down  from  the  perspective  of  express  items),  but 

"bottom-up" (working up from the perspective of basic letters). 

The  proposals  here  perhaps  refer  more  to  the  medium  term.  For  the  longer  term, 

further liberalisation  may well be possible.  For the shorter term, work would  need to be 

undertaken to  achieve  the  medium term  aim  of having  a  Community-established set  of 

reserved services. 

While  Community  medium  and  longer  term  proposals  are  being  developed,  the 

Community's competition rules,  based on the principles of free provision  of services and 

of undistorted competition, will continue to be applied throughout to services as  they are 

actually provided.  As  noted at Paragraph 4 above,  each Member State is  obliged to seek 

the  least  restrictive  solution  appropriate  to  its  postal  sector,  and  this  may  imply  a 

reserved area  with  a  smaller  scope  than  that  defined  by  the Community-set  limits.  (In 

the  other  direction,  if a  Member  State  considered  that  application  of the  Community 

limits  would  jeopardise  the  universal  service  in  its  territory,  it  might  benefit  from  an 

exception to the application of Community law to the extent provided by Article 90.2.) 

page 208 

Chapter 8:  Discussion of possible solutions 

Once the criteria to be used have been chosen,  detailed studies of the economics of the 

universal  service  network  will  be  necessary  in  order  to  develop  the  actual  limits  to  be 

applied to delineate the reserved area. 

10.1  MEDIUM TERM 

A contents criterion should be used  to exclude all goods-containing items.  Then, 

a  weight  criterion  should  be  used,  allied  to  a  price  criterion.  The weight  limit 

should  be  set  Community-wide.  The  regulatory  bodies  in  individual  Member 

States should set the price limits.  In  any  event,  the price should  not  exceed  the 

standard  letter  (that  is,  LC  or  first  class)  public  tariff  equivalent  of whatever 

weight limit is set. 

10.2 

SHORTER TERM 

In  the  shorter  term,  there  may  need  to  be  a  transitional  period  in  order  to 

achieve  the  objective  described  above.  Activities  that  may  be  necessary  m 

relation to formulating and implementing Community weight and  price limits are 

described below: 

10.2.1 

WEIGHT LIMIT 

The Community-wide  weight  limit  would  almost  certainly be  below  the  existing 

monopoly  weight  limits  of  some  Member  States. 

Implementation  of  such  a 

weight limit  should therefore not necessarily be immediate, but after a  period to 

permit time for the administrations concerned to make adjustments (particularly 

in  the tariffs for items which  presently fall within the monopoly limits,  but would 

come above the Community limits, and would therefore be non-reserved. 

In  practice,  this may  not prove to be too great a  problem.  Most  of these  items  -

heavier-weight  packets  - could  presently  be  sent  as  parcels.  To  the  extent  that 

the customer has the choice of how  to send such  items,  they  ar~ already outside 

the  monopoly.  This  point  also  indicates  that  the weight  limit  for  the  reserved 

area should almost certainly be less than 500g. 

10.2.2 

PRICE LIMIT 

The price limit indicated by taking the price equivalent of the weight limit may be 

a significant reduction on the price limits that are presently in force.  Of course, 

this refers  only  to  those countries  that  already  have such  limits:  the  majority  of 

Chapter 8: Discussion of possible solutions 

page 209 

Member States permit the existence of competitive courier/ express services but 

without a quantitative definition of such services. 

It  might  therefore be  difficult  to  introduce  this  price limit  immediately.  In  the 

interim  period,  the  price  limit  could  be  set  as  a  maximum  at,  for  example,  1.5 

times or even twice the price equivalent of the weight limit.  Thus, for  example, if 

the Community weight limit was x grams and  the letter price at that weight was y 

ECUs, the interim price threshold for  non-reserved services would  be set at up to 

1.5y ECUs or 2y ECUs. 

In  the  longer  term,  progress  towards  monetary  union  may  enable  a  common 

price limit to be set in  ECUs. 

10.3 

LONGER TERM 

In  the  longer  term,  Member  States  would  be  expected  to  experiment  with 

introducing more competition, with  the objective of gradually  reducing the scope 

of the reserved services.  In several years' time, the Community should assess the 

balance struck between  universal  service  requirements  and  the  need  to  open  up 

the postal sector to greater competition.  This assessment would need to be made 

in the light of the market or service developments as they occur. 

11.  COMPATIBILITY  OF  POSTAL  LEGISLATION  WITH  COMMUNITY  TREATIES 

AND POLICIES 

All  Member  States'  postal  legislation  and  the  Community's  policy  for  its  postal  sector 

must be fully  compatible with  the Treaty of Rome.  Where this  has  not  been  the case in 

the past, the Commission has found necessary to  take appropriate measures, particularly 

with regard to express services. 

However,  in  addition  to  national  postal  legislation,  Member  States  have  other 

obligations  under  Treaties  that  have  been  signed.  Notably,  all  Member  States  are 

signatories  to  the  UPU  Convention  through  their  membership  of the  United  Nations. 

The UPU Convention long pre-dates the Treaty of Rome or the General Agreement on 

Trades  and  Tariffs.  However,  it  is  reviewed  by  the  UPU  Congress  every  five  years. 

Each Convention provides that its articles should  remain  in  force  until  the activation  of 

the next  Convention  after  the succeeding  Congress.  This  has  potential  implications  in 

terms of Article 234 of the Treaty of Rome. 

page 210 

Chapter 8:  Discussion of possible solutions 

From  the  point  of view  of competition  law,  the  main  concerns  in  relation  to  the  UPU 

Convention are  the level  of terminal  dues  agreed  each five  years  and,  in  particular,  the 

use  of Article  25  (using  the  enumeration  of  the  i989  UPU  convention).  The  use  of 

Article  25  can  only  be  sanctioned  if it  is  in  protection  of the  reserved  services  of  the 

Member State whose regulatory body is applying the sanction. 

(It  is  said  that  Article  25  is  used  in  order  to  gain  the  correct  compensation  for  the 

delivery  administration.  This,  however,  does  not  seem correct  for  two  reasons.  Firstly, 

Article 25  long predates terminal  dues  in  the  UPU  rules.  Secondly, Article 25  has been 

applied in  the past even when  the compensation  received  by  the delivery  administration 

would  have  been  the  same,  regardless  of  whether  the  mail  came  directly  from  the 

administration in the country of origin or indirectly through another administration.) 

In  terms  of competition  rules,  it  seems  inappropriate  for  one  postal  administration 

to 

turn  back  mail  posted  by  a  private  operator  who  is  competing  with  another  postal 

administration,  whether  the  exclusive  rights  of the  latter  are  being  infringed  or  not.  If 

the  exclusive  rights  of the  outward  administration  are  infringed,  it  is  for  the  regulatory 

body  in  that  country  to  take  legal  action  - not  to  seek  assistance  from  another 

administration whose exclusive  rights  are  not  infringed.  The  use  of Article 25.4  (which 

refers to A-B-C remail) therefore seems clearly inappropriate. 

The intention  of Article 25.1  is  that  it  should  protect  the legitimate domestic  monopoly 

of member  countries.  However,  in  terms  of compatibility with  Community  policy  and 

law,  there are three problems associated with  its use. 

Firstly,  as  Paragraph  12  below  makes  clear,  it  is  for  the  regulatory  body  to  take  the 

appropriate  final  actions  against  infractions  of  the  special  rights. 

If  the  postal 

administration  receives mail which  it  suspects  is  A-B-A  remail,  it  can choose to  provide 

evidence to the regulatory body.  The latter may then authorise the postal administration 

(that is,  of Country A) to return the mail to the administration with which the items were 

posted (in  Country B).  In  returning the  mail  in  this way,  the  postal administration  may 

state that it  is  doing so under Article 25.1. 

It  is  possible that,  on one interpretation  of Article 25.1,  its  application would  follow  the 

procedure described above.  The clause refers to "a  member country"  not being bound to 

forward  or deliver such  mail,  and this could  be taken  to refer to  a  decision  taken  by  the 

regulatory  body.  However,  in 

the  past,  Article  25  has  been  applied  by  postal 

administrations often without reference to the national regulatory body (if it exists). 

Chapter 8: Discussion of possible solutions 

page 211 

The second  problem  associated  with  Article  25. l  is  that  its  scope  appears  to  permit  a 

member  country  to  turn  back  mail  items  (such  as  heavier  publications)  even  if  these 

items did  not fall  within  the postal administration's exclusive  rights.  However,  provided 

that the national regulator  is  properly  involved  in  any  decision  on  action  to  be  taken  to 

protect special  rights,  the apparently wider than necessary scope of the Article would  be 

unlikely to be misused. 

Thirdly, Article 25.1  would  restrict  the ability of a customer himself to  transport  his mail 

into another country and post it there for  delivery back  in  his  own country.  As discussed 

at Paragraph  5.2  above,  customers ought  to  be  permitted  to  do  this,  provided  that  the 

administration  in  the delivery country received  the mail  (if the  mail  met  the criteria  for 

being reserved  in  the customer's country) and was properly compensated  for  its  delivery 

costs.  The use  of Article  25.1  should  therefore be confined,  at  most,  to  A-B-A  remail  -

that  is,  mail  transported  out  by  a  third  party  operator  for  mailing  back  - if  this  mail 

would  normally  be  covered  by  the  exclusive  rights  of  the  postal  administration  in 

Country A. 

Certainly, if any action  were  to  be taken  to  turn  back  mail,  such  action  must  be capable 

of justification  under  the  Community's  competition  rules.  The  regulator  should  also 

ensure that no mail is  turned back if it was printed in  the country  in  which  is  was  mailed, 

even  if the content was  in  some way  formulated  before printing  in  the  territory covered 

by the regulator. 

The Community and the regulatory bodies will  need to ensure that  the GATS  is  properly 

applied.  At  the  same  time,  it  may  wish  to  put  in  place  rules  that  forbid  any  unfair 

exploitation  of  the  Community's  policy  on  tariff  principles  (a  possibility  discussed  at 

Paragraph 8.2.3).  If problems arise,  this  issue  needs to be addressed  within  the context 

of the GATS.  It  is  clear that  it  should  also be discussed  in  a  wider context - certainly in 

the framework of the UPU, but probably also the CEPT. 

A  key question to be answered concerns whether mail,  which  originated in  a  Community 

country  and  was  then  remailed  through  a  non-Community  administration  for  mailing 

back  to  another  Community  country  for  delivery  there,  should  be  considered  "A-B-A 

like" remail. 

In this context,  it should be noted that postal charges can be an important determinant in 

the location strategy for certain types of operators (such as in  mail order, bill  processing, 

printing or direct mail).  There could be a  danger that the application of the principle of 

prices related to cost put posters in  the Community at a disadvantage in  comparison with 

page 212 

Chapter 8: Discussion of possible solutions 

those posting outside the Community if the price of the latter was lower simply because 

they were based on traditional terminal dues set at below delivery costs.  This could have 

the effect of encouraging certain industries that were heavily reliant on postal services to 

relocate  outside  the  Community,  simply  to  take  advantages  of the  prices  that  did  not 

reflect  the  costs of the total  operation.  This would  clearly  not  be  in  the  Community's 

interest. 

12.  THE ROLE OF THE REGULATORY BODY 

The  postal  sector  presently  comprises  both  a  reserved  area  and  a  non-reserved, 

competitive area.  In  the future,  there will  continue  to  be the two  areas,  although  their 

scope will  probably be different from that at present. 

A regulatory body has roles to fulfil in both areas: 

-

in  the  reserved  area,  it will  want to  ensure that  the exclusive  rights  have  the  smallest 

possible  scope  consistent  with  the  objective  of  ensuring  universal  service  at  an 

affordable price (in other words,  the application of the principle of "proportionality"); 

it will also need to ensure that the reserved service provider meets its obligations; 

-

in  the  non-reserved  area,  it  will  need  to  ensure  that  the  line  between  reserved  and 

non-reserved areas is clearly identified;. it will need to ensure that the reserved service 

provider  does  not  gain  an  unfair  competitive  advantage  in  the  non-reserved  area 

through cross-subsidising from the first to the second. 

After ensuring that the dividing line between  the  two  areas is  clearly identified,  the key 

role of the regulatory body would  be to ensure that  the reserved service provider meets 

its obligations.  These obligations are discussed in  detail below at Paragraphs  13,  14  and 

15. 

In  order to achieve this impartiality, it  is essential that the regulatory body be separated 

from  any  operational function.  It  would  seem  preferable  if the  regulatory  body  was  a 

completely separate institution from  the reserved service provider (so that, for example, 

it  was  not  common  for  individuals'  careers to  move  frequently  from  one to  the other). 

However,  the  more  important  point  is  that  all  concerned  (the consumers,  the  reserved 

service provider( s) and the private operators) are all convinced of the regulatory body's 

impartiality.  If this is  achieved,  even if the reserved service operator and the regulatory 

body both appear to come under the umbrella  of a  single organisation,  there should be 

few complaints. 

Chapter 8: Discussion of possible solutions 

page 213 

Enforcement of special and exclusive rights is also a  significant function.  It is  important 

that the responsibilities of the regulator and reserved service operator in  this regard are 

clearly  defined.  The  reserved  service  operator  may  initiate  action,  in  terms  of 

investigating  (within  limits  defined  by  national  law)  possible  infractions  of  its  special 

rights,  assembling  the evidence and  then  providing  the evidence  to  the  regulator.  It  is 

then for  the  regulator actually  to  take the  appropriate action  against  the operator  that 

breached the special rights. 

It is  not thought that there is a problem concerning the protection of the privacy of mail. 

However,  since  this  privacy  is  a  basic  right  of  the  Community's  citizens,  it  seems 

desirable that the regulator seeks appropriate undertakings as to  its safeguarding by  the 

universal service operator. 

13.  UNIVERSAL SERVICE OBLIGATIONS - ACCESS 

There  are  three  basic  principles  for  access  to  reserved  services.  Firstly,  access 

conditions should be the same for all, assuming the potential  users  present their mail  in 

the same way.  Secondly,  potential users  ought  to  know  exactly what  they  are buying -

not just in  terms of the posting  conditions they must  meet and the prices they  must pay 

but also  in terms of the service that they will receive.  Thirdly, access conditions should 

try to optimise flexibility for  the cu~tomer  (while ensuring that the reserved services are 

protected).  These principles can be translated into more detailed proposals for access as 

shown further below. 

For mandatory  non-reserved  services,  it  appears  that  the  access  conditions  should  be 

similar to those for reserved services. 

13.1  PUBLICATION OF POSTING CONDITIONS 

Each  administration  should  publish  the  conditions  of  posting  into  its  reserved 

service  network.  The  conditions  should  be  as  simple  as  possible.  Most 

importantly, they must  not  unfairly  discourage  (either by  tariffs  or other means) 

potential customers from  using the network. 

These  potential  customers  may  well  include  private  operators,  with  whom  the 

postal administration  (the provider of the  reserved service)  may be competing in 

the non-reserved  sector.  The rule. should  be  that  no  conditions for  access to  the 

reserved  services  should  be  set  specifically  that  would  disfavour  the  private 

operator in the non-reseived sector. 

page 214 

Chapter 8:  Discussion of possible solutions 

13..2  CONTRACT CONDITIONS FOR LARGE CUSTOMERS 

All  postal  administrations  should  have  contract  services  available  for  large 

customers.  There  is  significant  scope  for  making  the  main  contract  conditions 

(dealing,  in  particular, with what  preparation work  needs to  be carried  out  by  the 

customer  in  order  to  earn  discounts)  similar  between  the  different  postal 

administrations.  (See below at Paragraph  17.1.) 

13.3  MAIL PREPARATION 

Several  postal  administrations  already  permit  private  operators  to  act  as 

intermediaries  between  the  customer  who  originates  the  mail  and  the  postal 

administration  who  carries  out  the  latter  part  of  the  mail  process  (including 

delivery). 

The availability of such  mail preparing services is  to be welcomed.  It gives greater 

flexibility  and  choice  to  customers,  even  when  the  mail  is  eventually  channelled 

into  a  reserved  service  (on  the  assumption  that  the  mail  meets  the  criteria  for 

being placed  in  the reserved area).  Since the delivery  element (the key fixed  cost 

phase  of  the  postal  process)  is  still  protected  and  therefore  the  volume  going 

through  this  phase  is  maintained,  the  activity  of such  mail  preparation  is  entirely 

consistent with  the  universal  service  objective.  (See  also  the  longer discussion  at 

Paragraph 9.4  above.) 

In  the  light  of  these  benefits  to  potential  customers,  Member  States  should  be 

expected  to  authorise  such  intermediate  operators,  unless  there  are  compelling 

reasons  to  the  contrary.  To  ensure  the  quality  of  service  provided  by  such 

intermediaries before the  mail  is  posted with  the  postal  administration,  the  latter 

could  licence  authorised  intermediaries.  (Of course,  the  intermediaries would  be 

in  competition with  each other.)  The rules for  obtaining such licences ought to be 

clearly  laid  down,  to  avoid  the  claim  of abuse  of  dominant  position  if the  postal 

administration grants a  licence to one operator but not to another. 

13.4  ACCESS FOR PRIVATE OPERATORS 

If a  potential user wishes to use the reserved services and can  meet  the conditions 

for  doing  so,  then  he  should  be  permitted  access.  This  entails  that  if  a  private 

operator  chooses  to  use  the  reserved  service  and  then  add  some  value  to  it  in 

order to compete in the non-reserved sector, he should be allowed to do so. 

Chapter 8:  Discussion of possible solutions 

page 215 

13.5  ACCESS FOR OTHER POSTAL ADMINISTRATIONS 

For the ordinary international mail operation involving two postal administrations, 

it  is  accepted  that  there  is  some  element  of  the  relationship  between  the 

administrations 

involved 

that 

is  different 

from 

the  ordinary  commercial 

relationship  between  a  postal  administration  and  a  large  customer.  It  therefore 

follows that,  for  such  an operation,  postal administrations should continue to have 

access  into  each  others'  delivery  operations  on  special  conditions  (including  the 

compensation arrangements - see below at  Paragraph  15.3 ). 

At the same time,  however,  outward  postal administrations should he able to  have 

access,  should  they  choose,  on  similar  conditions  as  thosr~  on  which  other  large 

users gain access.  In this way,  as an example, the expc-ditors originating the mail  in 

the outward  country can  have  access  to  the  preferential  tariffs  for  delivery  in  the 

inward country (if such tariffs are available). 

14.  UNIVERSAL SERVICE OBLIGATIONS - SERVICE STANDARDS 

It is  insufficient  simply  to  state  that  universal  service  must  be  provided.  The  quality  of 

the  universal  service  must  also  be  stipulated,  using  whatever  criteria  of  4uality  are 

appropriate.  Below  arc  discussed  the  quality  standards  that  need  to  be  set  for  the 

reserved  services,  the system  for  monitoring  performance  against  those  standards.  and 

the control  mechanisms  that  would  be  needed  in  the  event  of performance falling  short 

of the standards set. 

Consideration will  need  to be given as to how far this quality control system also ought to 

apply  to  mandatory  non-reserved  services.  Cle<irly,  such  services  that  were  ohliged 

because  they  were  part  of the  set  of  reserved  sen'ices  defined  at  the  Community  level 

should  have  the  same  service  obligations  as  the  reserved  services.  These  obligations 

would  include havir1g the same standards as the  reserved services 

Those non-reserved  services  that  were  determined  hy  <1  Member State  to  be  mandatory 

would  also  carry the  ohligation  to  tell  the  customer wkit  service  standards were  applied 

to  them.  However,  in  the  latter  case,  it  is  accepted  that  the  standards  set  would  not 

necessarily be the same as for  the reserved services. 

Intra-Community  mail  is  a  special  case.  The  discussion  <i bove  (at  Paragraph  8.1) 

concludes  that  the  placing  of  this  mail  in  the  non-reserved  area  wouid  be  envisaged 

(while at  the  same  time  it  will  be  necessary  to  establish  certain  safeguards).  However, 

page 216 

Chapter 8:  Discussion of possible solutions 

there would  be a  universal  service  obligation  (placed  on the  two  postal  administrations 

involved) for  such mail up  to the weight limit  used  in  the Community's definition  of the 

set  of  reserved  services.  This  universal  service  obligation  implies  the  same  quality  of 

service disciplines  as for  the domestic services  that  the Community determines  have  to 

be  provided  mandatorily.  Of  course,  as  discussed  below,  the  standards  would  be 

different from  those set for domestic mail. 

14.1 

STANDARDS SETTING 

All  Member  States agree  that  the granting of reserved  service  rights  implies  an 

obligation  to  perform well.  However,  uniform  standards for  good  performance 

have not yet been defined. 

There  should  be  minimum  Community  service  standards  to  be  applied  within· 

each  Member  State. 

(There  might  be  scope  for  regional  flexibility  within 

Member  States,  reflecting  variations  between  urban  concentrations  or  rural 

areas.) 

It should  be  emphasised  that  these  standards  would  be  the  threshold 

levels for  acceptable performance only.  For the faster  standard services (that is, 

either  LC  or  first  class),  the  appropriate  threshold  standard  could  be  90% 

delivery by the first working day after posting (known as D + 1 ). 

There should also be standards for cross-border items within the Community.  In 

the interim, these could be calculated by aggregating the service standards for the 

outward  (expedition),  transport  and  delivery  elements.  The  interim  standard 

would  therefore be 81 %  delivery  by  the third  working day after  posting (known 

as  D + 3,  and calculated  by  allowing  a  90%  achievement  of an  outward despatch 

by  the  day  after  posting,  and  90%  delivery  in  the  inward  country  within  two 

working days of receipt). 

Further,  there  should  also  be  standards  for  dealing  with  complaints  - both  in 

terms of the maximum time that should be taken to  deal with  a  complaint and in 

terms of a  policy  for  possible  remedies  that  a  customer may claim.  (The  UPU 

itself  has  suggested  standards.)  The  time  requirement  for  dealing  with 

complaints  implies  time standards  for  administrations  to  reply  to  each  other in 

the  case  of complaints  concerning  intra-Community  mail.  Regulatory  bodies 

must  ensure  that  there  are  clear  procedures  laid  down  for  the  resolution  of 

disputes. 

Chapter 8:  Discussion of possible solutions 

page 217 

14.2 

PERFORMANCE MONITORING 

It  is  clear  that  the  monitoring  system  needs  to  produce  results  that  reflect  as 

closely as possible the customer's experience. 

Systems for measuring "operational" performance do not paint the whole picture. 

These are samples carried out within  the operational span  (usually  from  receipt 

in  the outward office  to some point before the item  is  taken  out  by  the delivery 

postman). 

The  customer's  experience  of  the  postal  service  is  "door-to-door"  (or  "end-to 

end") - that is,  from  being put in  a  posting box (or collected from  the customer's 

premises)  to  being  delivered  at  the  destination  address.  The  only  effective 

measuring system which  accurately will  reflect  the consumer's experience  is  one 

that also measures  end-to-end. 

Further,  for  the  sake  of  impartiality,  this  should  be  a  system  monitored  by  an 

outside  organisation.  Such  a  system  has  been  adopted  by  some  EC  postal 

administrations,  and  is  being  seriously  considered  by  others  for  introduction. 

The CEPT has  accepted  that  this  system  should  be  used  for  measuring  cross 

border quality of service. 

It  seems  clear  that  some  body  will  be  needed  to  monitor  service  across  the 

Community.  Because  this  would  be  for  regulatory  more  than  operational 

reasons, it does not, at first sight, seem appropriate to delegate such a  task to the 

CEPT, which is an operators' group.  However, provided that the CEPT employs 

an  impartial  independent  agency  to  monitor  performance  and  is  willing  to 

publish the results,  it  seems acceptable to continue with  the CEPT system  on an 

experimental basis. 

Availability of service performance information  to actual or potential customers 

is  essential:  it  is  part of the access obligation  that the  universal  service provider 

must meet, so that customers know what they are buying.  Postal administrations 

therefore ought to be able readily  to  provide  information  on  service targets and 

actual performance for national, intra-Community and international mail. 

To make the information as relevant as possible to the requirements of different 

customers, performance averages should be supplemented by further details - for 

instance,  giving  local and  regional  results  for  national  mail,  and  information  by 

the main destination countries for cross-border mail. 

page 218 

Chapter 8:  Discussion of possible solutions 

Further,  the regulatory body should guard  against  using average transit times or 

percentages as  the sole indicator of the effectiveness of the universal  service.  It 

therefore  seems  desirable  that  each  regulatory  body  should  establish  a  group 

comprising representatives of users (from the individual consumer to large users) 

to  give  the  regulator  a  more  "rounded"  picture  of  the  service.  In  addition,  the 

regulatory  body  of  each  Member  State  must  ensure  that  there  are  clear 

procedures for claims and compensation, for  instance in the case of loss. 

14.3 

CONTROL 

Following the principle of "subsidiarity", control functions should primarily be the 

responsibility of the national regulatory bodies.  The emphasis here should be on 

encouraging  improvements  where  they  are  necessary. 

If  the  performance 

indicates a  significant shortfall, the regulatory body would probably want to agree 

with  the  postal  administration  a  phasing  period  for  improving  service,  with 

intermediate targets to be achieved at each phase. 

However,  what  should  happen  in  the  case  of  persistent  failure  to  meet  service 

targets?  The  ultimate  sanction- would  be  for  the  national  regulatory  body, 

perhaps  under  pressure  from  the  Community,  to  seek  tenders  from  different 

operators  (both  the  postal  administration  and  interested  private  operators)  for 

the provision of the service.  In  this event, tenders would be invited for  provision 

of the service where performance was particularly poor.  However,  in  the case of 

absolute network break-down, tenders could be invited for the national service. 

It  must be stressed that  this  a  pessimistic scenario.  However, it  should always be 

remembered  that  the  privilege  of  exclusive  rights  carries  obligations  of service. 

Service to the customer is paramount. 

15.  UNIVERSAL SERVICE OBLIGA TlONS - TARIFFS  (INCLUDING TERMINAL DUES) 

For mandatory  non-reserved services prices will  he determined  by  market  forces.  These 

forces  might  lead  towards  regionalised  pricing.  However~ the  postal administrations,  or 

other operators  upon  which  are  placed  the  universal  service  obligation  for  these  items, 

may  choose  to  take  the  marketing  decision  to  offrT  these  services  at  a  single  unitary 

tariff  covering  the  whole  of  the  territory.  Alternatively~  the  regulatory  body  or  the 

government  may take the  political  decision  that  there should  be  a  'j;erequation  tarifaire" 

for such items. 

Chapter 8:  Discussion of possible solutions 

page 219 

Even  if  they  (the  postal  administrations  and  any  other  operators  with  a  universal 

obligation)  had  the choice  and  decided  not  to offer  a  "perequation  tarifaire",  they would 

still want  to have a  uncomplicated  tariff structure in  order to  aid comprehension  on  the 

part  of potential  customers.  At  the  same  time,  they  would  want  to  guard  against  the 

danger  of  being  used  simply  as  the  distributor  of  last  resort  by  organisations  that 

required universal service of parcels up to a certain weight. 

It  should  be  mentioned  here  in  parenthesis  that  postal  administrations  should  be 

encouraged  to  use  the  ECU  as  much  as possible  in  their  activities.  Early  discussion  of 

the use of the ECU to clear terminal due accounts seems appropriate. 

In addition to the discussion below, tariff issues are studied in  detail in Annex  14. 

15.1 

RELATIONSHIP TO COSTS 

All  Member  States  agree  that  tariffs  should  be  based  on  costs.  More  detailed 

analysis  is  needed  to  ensure  a  common  understanding  of  what  different  costs 

there  are,  and  to  which  of  them  this  tariff  principle  should  he  applied.  The 

general rule should  be  that  tariffs ought  to be based  on  average costs;  tariffs  for 

any service must cover at least the marginal costs associated with that service. 

If the  standard  (public)  tariff  is  to  be  related  to  costs,  it  follows  that  contract 

prices should also  be thus  related.  It  also  follows  that  discounts should  relate  to 

cost savings. 

15.2 

SUBSIDIES 

A  view  will  need  to  he  taken  of how  subsidies  should  he  paid.  At  first  sight,  the 

preference could  he for  central subsidies  paid  to  administrations  directly  related 

to  the volume in  the streams to  be subsidised.  An  example  of such  use would  he 

for preferential tariffs. 

The general  rule should be that cross-suhsidies should  he reduced to a  minimum. 

The main  exception  would  be  the  "natural" geographic cross-subsidies  permitted 

by a  unitary tariff structure.  As discussed at Paragraph 7 above,  it  may,  in  certain 

limited  circumstances,  also  be  necessary  to  permit  cross-subsidies  from  the 

reserved  sector  to  enable  mandatory  non-reserved  services,  that  have  to  be 

available universally,  tu be provided in  loss-making operations in  certain localised 

areas. 

Such  cross-subsidies  would  need  to  be  the  subject  of  vigorously 

transparent treatment. 

page 220 

Chapter 8:  Discussion of possible solutions 

Of  course,  profits  gained  in  the  non-reserved  sector  can  be  used  to  cross 

subsidise  the  reserved  services.  However,  cross-subsidies  from  the  reserved  to 

the  non-reserved  areas  that  are  for  other  purposes  than  to  ensure  universal 

services should be phased out, unless they are compatible with competition rules. 

At  any  event,  such  cross-subsidies  that  enable  predatory  pricing  in  the  non 

reserved area are illegal. 

The  minimising  of  cross-subsidies  will  become  even  more  important  if,  as  is 

proposed below, terminal dues are based on inland tariffs. 

15.3 

TERMINAL DUES 

The case  for  using  inland  tariffs  as  a  basis  for  compensatory  systems  for  mail 

exchanged  between  postal  administrations  rests  on  two  principles:  firstly  the 

principle  of having  tariffs  related  to  costs,  and  secondly  the  principle  of taking 

action to avoid distortions of competition. 

Whether  Community  mail  is  considered  reserved  or  not,  it  will  continue  to  be 

very  difficult  to  control  the  international  mail  activities  of  private  operators 

(assuming that such control was desirable).  Further,  it  is  becoming increasingly 

difficult  to  define the border between what  are genuine international  items and 

those items (A-B-A remail) which contravene inland monopolies. 

Inland tariff based terminal dues would remove most of the financial ill-effects of 

this lack of distinction. 

There  should  be  two  objectives.  Firstly,  cost  distortions  should  be  ~moved. 

However, genuine competitive  differences should  not  be affected  by  regulation. 

Secondly,  the operational partner not involved  in  the competition in  the market 

place  in  the  country  where  the  mail  originated  - that  is,  the  reserved  service 

provider  in  the  country  of  delivery  - should  be  taken  out  of  the  competitive 

terrain  by  having  his  costs  properly  compensated. 

(However,  if  the  delivery 

reserved  service  provider  choses  to  offer  preferential  tariffs,  these  should  be 

available to the outward administration using these delivery services.) 

There are some arguments against such a system.  It would involve an increase in 

costs for some countries which  have a  certain profile of traffic and lower tariffs. 

It would  take  some  time  before  each  administration  properly  understood  each 

others' charging systems.  The greatest long-term problem could be that of costs 

Chapter 8: Discussion of possible solutions 

page 221 

differing greatly between different destinations, thus making zonal pricing for the 

whole of the Community more difficult. 

For the longer term,  the benefits  of using inland  tariffs as the basis for  terminal 

dues outweigh  the problems.  The key  tariff principle is  that of relating tariffs to 

costs. 

There  is  no  reason  why  this  principle  should  not  be  applied  to  cross-border 

Community  mail.  The  problems  noted  above  argue  for  a  phasing-in  period 

rather than rejecting the principle of using inland  tariffs.  This phasing-in period 

would  also  allow  for  the  time  that  will  be  needed  for  the  transition  towards  a 

proper cost basis for  inland  tariffs.  It would also  permit time for  preparation of 

the appropriate mechanisms to  prevent unfair under-cutting of intra-Community 

postal prices by remailing through a non-Community country at terminal dues set 

below the true costs of delivery (see above at Paragraph  11 ). 

16.  NON-RESERVED SERVICES 

Mandatory non-reserved services will carry certain obligations for the operators to whom 

the universal service commitment is  entrusted for  such services.  These obligations were 

discussed in Paragraphs 13-15. 

For non-mandatory services,  the  policy  is  simpler.  The over-riding  principle  should  be 

that  the  laws  of the  free  market  should  be  left  to  act  themselves. 

It therefore  seems 

unnecessary to introduce licensing in  order to guarantee minimum levels of service.  If it 

were to be introduced,  administrative systems would  need  to be  established  to  measure 

service given. 

Licensing  therefore  does  not  seem  appropriate  in  the  non-reserved  sector.  Licensing 

should only be used  in  the reserved  sector if it was  decided  to  introduce more than one 

operator. 

However,  a certain level  of regulation  may  be necessary.  Below  is  a  short  discussion  of 

regulation that could be thought to be appropriate in the non-reserved sector. 

16.1  PRICE 

If a  price limit is used to define the limit of reserved services,  it will  determine the 

minimum price that can be charged in the non-reserved sector. 

page 222 

Chapter 8:  Discussion of possible so/uh"ons 

Price is often a reflection of service (however perceived by the customer).  A  price 

threshold 

for  non-reserved  services  should  make  any  service  standards 

unnecessary. 

There  will  need  to  be  a  special  regulatory  interest  where  the  reserved  service 

provider  uses  its  universal  network  to  provide  non-reserved  services.  The 

regulatory  body  must  insist  on  sufficient  transparency  to  prevent  any  cross 

subsidies from  the reserved to the non-reserved area that permit predatory pricing 

in the latter. 

16.2  OTHER 

Naturally,  providers  of  non-reserved  services,  like  all  postal  operators,  must 

observe  Community  arid  national  legislation  on  data  protection.  Beyond  this, 

there  seems  no  need  to  impose  obligations  of privacy  on  non-reserved  service 

providers.  If any operator developed a  reputation for not respecting the privacy of 

contents, he would rapidly lose business. 

In  addition  to  this,  the  providers  of  non-reserved  services  operating  their  own 

transport services will  also  have  to  respect  all  existing and  future Community and 

national legislation directly related to the provision of transport services. 

17.  POSSIBLE AREAS FOR HARMONISATION 

Harmonisation could  take place on different levels, between customers and  operators or 

among  operators.  The  important  areas  to  be  discussed  with  reference  to  possible 

harmonisation relate particularly to universal services.  These are discussed below.  · 

17.1  ACCESS CONDITIONS/CONTRACT TERMS 

It  has  been  stated  above  that  moves  ought  to  be  made  to  harmonise  access 

conditions  in  the  Community.  This  implies  that  it  should  be  possible  to  make 

some movement towards harmonisation of contract terms. 

Of course,  some contract  terms  relate  to  the  specific  postal  operation  which  will 

differ  in  each  country.  However,  in  general,  postal  operations  are  similar;  in 

principle, therefore, there should be significant scope to harmonise terms. 

This would  imply  that  there ought  to be some harmonisation of definitions.  This 

would anyway seem desirable from a regulatory perspective. 

Chapter 8:  Discussion of possible solutions 

page 223 

17.2  QUALITY OF SERVICE 

The most important harmonisation actions for quality of service are the setting of 

Community standards and  the  implementation  of a  single  Community  measuring 

system (as discussed at Paragraph 14). 

There may also  be scope for having some shared operational  standards in  order to 

improve service.  An example here would  be the volume of mail that justifies mail 

being sent directly from  an  outward office to the delivery  office.  If the quantities 

of mail sent  to  intermediary offices  either for  additional sorting  or transiting was 

reduced significantly, this could have a  dramatic effect to improve quality. 

17.3  TARIFF STRUCTURES 

Connected with  the  development  of more  uniform  access  conditions,  it  would  be 

beneficial  to  analyse  the  scope  for  making  tariff  structures  more  uniform  also. 

This  would  become  more  practical  when  the  proposals  for  common  tariff 

procedures (as discussed at Paragraph 10.2.2 above) are implemented. 

17.4  CUSTOMER INTERFACE 

Many  innovations  relating to  the customer "interface"  are  most  easily  introduced 

in  co-operation with  large customers.  By  its  nature,  harmonisation  is  much  more 

all-embracing - hence making introduction more difficult and results possibly more 

tenuous. 

Examples of such  possible forms  of harmonisation could  be where all  12  Member 

States: 

have  a  standard tiering system,  using either an  LC/ AO split  or  a  first/second 

class split (not so~e one, some the other); 

have the same standards for  envelope sizes; 

have a uniform post code system. 

There would  have  to  be  significant  consumer  benefits  foreseeable  (in  either  the 

shorter  or  longer  term)  before  it  would  be  worth  pursuing  such  possible 

harmonisations.  Any  harmonisation  of this  sort  would  be difficult  to  implement. 

In  terms  of  developing  a  more  integrated  Community  postal  policy,  the  most 

page 224 

Chapter 8: Discussion of possible solutions 

valuable  of  these  examples  of  harmonisation  measures  could  be  that  of 

introducing a standard tiering system. 

Analysis  of  possible  benefits  would  need  to  include 

the  effects  of  new 

developments.  For  example,  a  uniform  post  code  might  seem  to  have  some 

operational attractions in  the short term.  However, benefits from  its introduction 

would  be  significantly  reduced  in  the  medium  term  by  the  advent  of  the  next 

generation  of optical  character  reader  (OCR)  sorting  machines,  which  can  read 

whole addresses, rather than just post codes. 

17.S  OPERATIONAL 

In general,  the  Community  ought  to  have  less  to  say  about  what  happens  away 

from  the  customer  interface.  Normally,  it  is  for  the  operators  to  try  to  agree 

operational  standards  - for  instance  for  mechanisation  equipment,  where  such 

standards  could  bring  the  operators  some  savings  in  research  and  development 

expenditure. 

However, where the standards used  may directly affect users beneficially,  there is 

more  of  a  case  for  a  Community  role  in  encouraging  harmonisation.  Two 

pertinent  examples  here  are  the  possible  introduction  of uniform  routeing  bar 

codes (which would  allow different ~perators to be involved in  the transmission of 

a  single  item)  and  the X-400  standard  for  electronic  mail  (which  would  facilitate 

international transmission of postal electronic mail). 

Uniform  routeing  codes could  be part  of a  strategy for  creating  inter-operability 

between operators.  More than one operator is involved in cross-border letter mail 

services. 

Increasingly,  intermediaries  are  being  used  for  domestic  mail  (see 

Paragraph  9.4).  The  achievement  of  the  Community's  objectives  on  quality  of 

service  will  therefore  be  partly  reliant  on  the  ability  of  the  systems  (whether 

computer-based  or  not)  of  the  two  different  operators  involved 

in  each 

operational relationship to be able to share relevant information. 

17.6  EMPLOYMENT 

The  evolution  of the  Community's  social  policy  will  have  effects  on  the  postal 

sector.  This will  probably  be  the  greatest  stimulus  towards  making employment 

and other working conditions more uniform. 

Chapter 8: Discussion of possible solutions 

page 225 

The possible  need  for  operational  harmonisation  mentioned  above  may  make  a 

certain level of co-operation  in  training necessary.  An example could be the need 

for  shared  training  between  two  operators  (such  as  postal  administrations  that 

exchange  large  volumes  of  mail)  who  decide  to  co-operate  in  an  operational 

management information system covering such exchanges. 

18.  COMMUNI'IY COHESION 

The  provision  of  a  reserved  service  network  providing  universal  service  implies  the 

setting  of  service  standards.  This  necessitates  maintenance  and  improvement  of  the 

network, as well as the development of new services. 

The present  situation  varies  widely  between  Member  States.  The  basic  infrastructure 

varies because of external factors such  as population density,  geographic constraints and 

economic differences as well as more internal factors such as past investment policy. 

One  indication  of this  is  the  different  level  of mechanisation  in  the  different  Member 

States.  This may suggest that it would  be unlikely that the investment  required would  be 

made in certain areas.  However, it should be noted that there is  not  necessarily a  direct 

link between  investment in  mechanised  plant and quality of service.  Improvements can 

be  achieved  through  better  management  systems  and  the  implementation  of  suitable 

quality control systems. 

If improvements  in  quality  of service  generally  were  not  made  in  such  areas,  the  gap 

between them and  more favoured  areas could widen,  not only  in  terms of the quality of 

postal services,  but also  in  terms of general business  activity which  good  postal  services 

help  to  stimulate.  Therefore,  the  lack  of a  postal  service  up  to  modern  standards  in 

these areas would  have  an adverse effect,  particularly on small  and  medium  enterprises 

located there. 

It should  also  not  be forgotten  that  there  are,  in  addition,  potentially  significant  social 

implications.  The  trends  in  the  postal  sector  are  likely  to  create  some  imbalances 

between  its  existing  and  future  demand  for  staff,  in  terms  of both  their  geographical 

distribution and their skills. 

The consequences of failure to meet the universal service targets in  these regions should 

therefore be considered during the development of the Community's postal policy. 

page 226 

Chapter 8:  Discussion of possible solutions 

19.  POLICY IMPLEMENTATION 

The Green Paper is  intended  to  discuss  policy  issues and  make proposals for  the future 

of the  Community's postal  sector.  It therefore  seems  inappropriate  here  to  discuss  in 

more than general terms the possible legal  instruments that could be used  to implement 

Community  policy  as  it  develops  following  publication  of  the  Green  Paper  and  after 

appropriate consultation. 

The proposals could be developed  into draft directives to be submitted to  the Council as 

harmonisation measures under Article 100 (for unanimous approval) or Article 100a (for 

approval  by  qualified  majority  for  measures  relating  to  the  achievement  of the  Single 

Market).  The proposals concerning aspects  related to competition or the establishing of 

the common  market could  be developed  into  draft  directives  to  be issued  under Article 

90.3. 

Because of the varying  nature of the  different  actions  involved,  a  combination  of these 

procedures seems most likely. 

20.  POSTAL FINANCIAL SERVICES 

The sale of services at the counters of postal administrations is,  in  almost every instance, 

offered in competition with the sale of the same or similar services elsewhere. 

The network  of post  office  counters  has  different  dynamics  to  the  postal  network  that 

provides mail  services.  In  the  case  of the latter,  the different  parts of the  network  are 

completely  inter-dependent:  a  letter  collected  at  one point  in  the  network  needs  to  be 

delivered in another. 

In  the case of counter services, the same is  not true:  another location can be added to, or 

subtracted from,  the  network  without  the  same  need  to  re-arrange  the  management  of 

the network.  As  with  mail  services,  there can  be a  problem  in  identifying who  are the 

customers.  In  the case of counter  services,  is  the customer  the  service provider  whose 

services are  provided  through  the  counter,  or  is  it  the  users  of those  services who  visit 

the counters to gain access to those services? 

Both networks (mail and counters) have high fixed  costs (even where some of the work is 

sub-contracted).  The counters  networks  are  a  resource  that  is  important  to  the whole 

Community,  especially  in  rural  areas.  It  is  therefore  in  the  interest of the Community 

that the counters network is  as financially viable as  possible.  Here, a comparison of the 

Chapter 8:  Discussion of possible solutions 

page 227 

different services offered by  the different  postal administrations at  their counters shows 

a remarkable diversity. 

Because postal financial  services  operate in  the  non-reserved  area,  there is  less  need  to 

develop  regulatory proposals for  them.  However,  while  not being  the subject  of formal 

proposals,  there  are  some  areas  in  which  the  introduction  of  a  greater  degree  of 

uniformity may be helpful. 

Subject  to  certain  restrictions  (such  as  national  law  on  the  sale  of lotteries),  it  seems 

desirable  that  postal  administrations  should  be  as  free  as  possible  to  provide  the 

broadest  range  of services  at  their  counters. 

(But  this  statement  does  not  imply  the 

creation  of a  postbank  if  it  does  not  already  exist.)  There  seems  no  reason  why  the 

service sold at counters should be restricted, as it is in certain Member States, to services 

transacted  on  behalf of public  sector  organisations.  These  services  would  normally  be 

provided  in  competition,  and  such  a  diversity,  providing that  there was  no  distortion  of 

competition, would  help to ensure the financial viability of the network of counters. 

There  is  also  some  scope  for  making  some  services  more  flexible  cross-border.  For 

example,  Post-cheques  issued  in  some countries  are  accepted  for  encashment  in  some, 

but not  all,  other Member States.  Greater flexibility  in  this respect  could provide useful 

competition  to  the  banks'  cross-border  encashment  facilities.  The  latter  tend  to  be 

somewhat expensive, particularly for  low values. 

In summary,  postal financial services are  important financially  to postal administrations. 

However,  since  they  operate  almost  always  in  competition  with  the  same  or  similar 

services available through other means, there is less of a  regulatory question to discuss. 

For the reader requiring a  more detailed discussion of the Community's financial sector, 

it  should  be  mentioned  that  the  Commission  published  in  September  1990  a  discussion 

paper  on  "Making  Payments  in 

the  Internal  Market"  (reference  COM(90)447). 

Following this  discussion  paper,  the Commission  has  presented  a  work  programme  for 

improving cross-border payments in  the Community (reference SEC(92 )621 ). 

21.  OTHER ISSUES 

The  views  as  expressed  m  a  Green  Paper  are  necessarily  influenced  by  the  current 

environment.  However,  the  environment  will  change,  for  instance  as  a  result  of 

monetary union or political  union.  It  is  therefore difficult to forecast what would  be the 

page228 

Chapter 8: Discussion of possible solut1"ons 

implications of such changes in  the environment.  Below are discussed subjects which of 

necessity are of a more speculative nature. 

21.l  SINGLE POSTAL ADMINISTRATION 

It is appropriate to discuss the question of a  single postal administration covering 

the whole of the Community, since the subject  has been mentioned by some of the 

actors  in  the  debate  on  the  present  postal  sector.  Naturally,  the  discussion  here 

will be somewhat "a priori". 

The  first  task  in  this  discussion  is  to  define  in  more  detail  the  objectives  and 

structure of such  a  single  postal  administration.  There would  appear to  be  two 

possibilities - one more short-term  (and therefore  more "tactical"),  and  the other 

more long-term (and more "strategic"). 

The more tactical version  is  that of the present postal ad 

inistrations continuing, 

with a  supplementary body  at Community level being us  d  to  address operational 

issues  that  could  not  be  handled  by  individual  postal  a  ministrations  acting  on 

their  own  or  in  limited  cooperation  with  other  adm nistrations.  The  more 

strategic version  would  have  a  more  integrated  structu  e,  with  a  unified  central 

management at Community level. 

If a single postal administration were to come about, it w  uld probably at that time 

be considered  to  be  closely  linked  to  full  political  union.  The second  - the more 

strategic - of the possibilities therefore would seem them  re appropriate structure 

to  meet  these  requirements,  and  most  of  the  discussi  n  below  relates  to  that 

version.  Before  that,  however,  the  format  and  possi  le  benefits  of  the  more 

tactical version are discussed. 

The tactical  version,  as  described  above,  would  have  1. 

ited,  mostly  operational, 

objectives.  It should  be noted  that  such  a  supplementa  body  (which would  not 

limit  involuntarily  the  freedom  of  action  of  individua  postal  administrations) 

could be established  now  if there was  an  operational ne  d  (and without  requiring 

any political approval on the part of national government  ). 

To a  certain extent,  the Unipost company (established  b  certain CEPT members 

to  provide  some  central  operational  management  for  some  cross-border  mail 

services) could be an indicator of how such an organisati  n could work.  Of course, 

it  would  be  essential  that  the  establishment  of such  an  operational  organisation 

did not cause the regulatory position to change in order t  accommodate it. 

Chapter 8: Discussion of possible solutions 

page 229 

Such an  organisation  would  be appropriate if the objectives  were limited,  and  of 

an  operational  nature only.  The  more important analysis  here seems to concern 

the more strategic version of a single postal administration. 

The first  question  to  be asked  is  what would  be  the  benefits such  a  single  postal 

administration. 

It  is  not  clear  how  the  establishing  of  a  single  postal 

administration  would  improve  quality  of  service  more  than  could  be  achieved 

through  the  best  practice  being  involved  by  the  existing  (or future)  operators  in 

the postal sector. 

This best  practice on  the one  side takes  the form  of improved  cooperation  - for 

instance between  a  postal  administration  and  the  users  of its  services  (including 

other postal  administrations).  On  the  other  side,  it  takes  the  form  of trying  to 

establish  competitive  advantage,  either 

through  adopting  measures  used 

successfully in other organisations (competitors or not) or through innovation. 

It is  also  not clear that a  single  postal administration  would  significantly add  to a 

Community spirit within  the EC.  As discussed  below,  it would  not  be possible to 

introduce a single tariff (even  if it  was desirable to do so) because of the massive 

cross-subsidies  and  accountancy  problems  that  would  be  involved. 

In  effect,  a 

single postal  administration would  have to  be a  supra-national body which  would 

still  need  to  delegate  significantly  to  the  national  public  operators  (which 

presumably would remain very similar to the present postal administrations). 

It  also  seems  improbable  that  the  establishing  of a  single  postal  administration 

would  lead  to  savings  of  costs.  Theoretically  an  integrated  single  postal 

administration  would  be  able  to  make  streamlining  savings  - for  instance  in 

avoiding  the  duplication  of  administrative  functions  in  the  different  postal 

administrations. 

In  practise,  it  is  difficult  to  see  this  happening:  for  example, 

personnel administration would still need to be carried out in  each of the national 

operators, even  though  there would be a  supplementary personnel department  in 

the central body of the single postal administration. 

In effect, therefore, the establishing of a single postal administration would lead to 

the  super-imposing  of  another  layer  of  administration  without  apparent  cost 

savings  below  to  compensate.  There  would  be  the  cost  of establishing  a  single 

headquarters,  the  necessary  communication  links,  the  changes  of  the  national 

systems  to  conform  with  a  single  model  and  the  sheer  management  cost  of 
imposing uniformity.  In  addition, there would also  be the cost to consumers if an 

page 230 

Chapter 8:  Discussion of possible solutions 

attempt  to  apply  a  highly  uniform  Community service  led  to  national  operators 

being less responsive to the requirements of the customers in their territory. 

Of course,  in  any  consideration  of a  single postal administration,  it would  still be 

essential  to  continue to  seek  the least  restrictive option.  The concept  of a  single 

postal administration therefore definitely does not imply the establishing of a large 

set of reserved services covering all cross-border movements of letters and printed 

papers.  As stated above,  the single  postal administration would  need to  delegate 

substantially  to  each  national  public  operator. 

In  recognition  of  the  different 

conditions, the national regulatory bodies would still  have  the option of defining a 

smaller reserved area than the Community norm. 

In  summary,  the  benefits  of a  single  postal  administration  do  not,  a priori,  seem 

substantial,  but  the  costs  to  he  passed  on  to  customers  or  tax-payers  could  be 

significant. 

If  a  single  public  postal  operator  does  not  seem  a  feasible  option,  some 

Community body to monitor service could still be necessary. 

21.2  COMMON TARIFFS 

Setting a  common tarification  in  all  Member States for  some or all classes of mail 

would  meet  many  problems.  These  are,  frankly,  insuperable,  at  least  for  the 

foreseeable future. 

Firstly,  it  would  have  to  overcome  the  different  accounting  practices  which 

underlie the existing tariffs set by  each postal administration. 

Secondly, a  common  tariff could  only  be achieved  by  cross-subsidies on  a  massive 

scale.  These  would  be  far  larger  than  any  cross-subsidies  presently  made  to 

achieve perequation  made within  national territories.  This would go  against one of 

the  main  themes  running  through  the  Green  paper  - the  need  for  tariffs  to  be 

related closely to costs. 

Thirdly,  the  establishing  of  common  tariffs  would  have  to  be  preceded  by 

harmonised product classifications and contract conditions.  Even  if the hope was 

to have a common tariff only  at the first  weight  step, there would  have to be some 

harmonisation  of  the  service  tiering  principles  used.  This  is  not  an  argument 

against  (see  above  at  Paragraph  17.3),  but  rather  an  indication  of  the work  that 

would need to come first. 

Chapter 8:  Discussion of possible solutions 

page 231 

Lastly,  and  most  importantly,  the  effect  on  customers  would  be  substantial. 

It 

would be extremely difficult to explain to customers in several Member States that 

their tariffs would  have  to  rise  from  their traditionally low levels  (which  might  be 

based on lower costs - for  instance of labour), in  order to conform with a  standard 

Community price.  The alternative to taking an average would be to harmonise on 

a  lower  tariff  - but  this  would  involve  direct  subsidies  of  simply  unthinkable 

proportions. 

Common  tariffs  should  only  start  to  be  discussed  if  there  was  some  clear 

probability  of  establishing  a  single  postal  administration.  However,  even  then, 

establishing the latter would not imply the former. 

21.3  COMMON STAMPS 

The  introduction  of stamps  usable  in  all  the  countries  of the  Community  seems 

something that could be realised  in  the nearer future.  As soon as the ECU is used 

for  every  day  transactions  (as  it 

increasingly  will,  as  full  monetary  union 

approaches),  stamps  of national  administrations  could  be  sold  in  ECUs.  These 

would be stamps of the value  indicated in  national currency,  paid at the prevailing 

ECU exchange rate. 

A  practical problem here is  to ensure that the revenue gained  is  matched with  the 

costs incurred  for  the  services  bought.  In  fact,  there would  not  appear to  be  too 

great  a  problem  since  there  would  be  no  financial  incentives  to  buy  stamps  (in 

ECUs) in  one Member State for  use in  another.  It would still  be necessary to  pay 

the postal  tariff in  the country of posting.  If, despite the arguments against,  there 

was a common Community tariff, there would still be no incentive to buy stamps in 

another Member State. 

Operational  problems  would  probably  also  relate  to  revenue  protection.  There 

would  be  a  need  to  train  sorting  office  staff  in  the  checking  of values  in  ECUs. 

This  should  not  be  an  insuperable  problem,  certainly  within  the  Community. 

However,  there  could  be  greater  difficulty  in  persuading  postal  administrations 

outside the Community to accept stamps with denominations only  in  ECUs. 

In summary,  there might  be some small  displacement  between  revenue and costs. 

However,  it  is  possible  that  there  is  a  market  need  for  such  stamps - this  would 

need  to  be  investigated  by  market  research. 

If there  was  such  a  need,  the 

practicality of such common  stamps should  be  examined  in  more  detail.  In  this 

regard, the telecard/phonecard, which will  be able to be used in  different  Member 

page 232 

Chapter 8:  Discussion of possible solutions 

States (despite  there being  a  greater  possibility  of a  revenue/cost  displacement) 

could be an instructive example. 

Chapter 9:  Policy options 

page 233 

CHAPTER 9: 

POLICY OPTIONS 

INTRODUCTION 

All  the citizens and  organisations  of the Community  should  have access  to good,  reliable 

postal services.  Implementation of these policy  options will  achieve  this.  They will  create 

the conditions  for  the Community's  postal sector  to satisfy fully  and effectively  the  postal 

needs of the Community's citizens  and organisations.  When  implemented,  they will  meet 

the Community's  objectives while  giving  the  user  the widest  freedom  of choice consistent 

with these objectives. 

The cornerstone  of the Community's  policy  for  the  postal sector  should  be  the  universal 

seivice.  The  universal  service  required  throughout  the  Community  needs  to  be  defined. 

The  main  concrete  meaning  of  this  universal  seivice  requirement  is  that  there  should 

continue  to  be  a  postal  seivice  available  throughout  the  Community,  both  for  national 

seivices within  a  Member State and  for  cross·border seivices linking  two  Member States. 

This universality implies certain more specific requirements: that the prices for the seivices 

should  be  affordable  to  all,  that  the  service  should  be  of good  quality  and  it  should  be 

readily accessible to all. 

It is  concluded that this universal service objective can justify the establishment of a  set of 

reserved  services  (subject  to  the decision  of each  Member State individually  that  this was 

necessary),  which  would  help  to  ensure  the  financial  viability  of  the  universal  service 

network.  The  scope  of  these  reserved  seivices,  which  could  confer  some  special  and 

exclusive  rights  on  the  universal  service  providers,  should  be  directly  proportional  to  the 

objective.  In this way,  the universal service objective would be secured, and there would be 

as much freedom as possible for potential users. 

General Options 

There are certain general options as means to achieving these broad objectives.  (Naturally, 

the implications of taking no action should also be considered.)  In  broad terms,  there are 

two paths ·  that of liberalisation and that of harmonisation. 

The sector is already significantly liberalised ·  about 50% of the revenue generated  in  the 

sector  relates  to  non·reserved  seivices.  The  present  position  results  from  a  longer·term 

trend  to  open  the  market,  and  the  Green  Paper  options  seek  further  ways  to  ease 

restrictions.  By  contrast,  levels  of  harmonisation  (by  reference  to  possible  Community 

page 234 

Chapter 9:  Policy options . 

objectives)  are  rather  low.  As  a  result,  the  Community  has  a  postal  sector  with  many 

divergences - not only  regulatory,  but also  in  terms of such  important customer aspects as 

access, service provided and tariffs. 

Possibilities  for  reform  can  be  approached  by  first  considering  the  extreme  options  of 

complete liberalisation  and  of complete harmonisation.  These  two  options  are  effectively 

at  opposite  ends  of a  spectrum  of different  possible  scenarios.  The  option  of taking  no 

action at all should also be examined.  The last option to be discussed is that which seeks an 

equilibrium combining the benefits of both progressive opening of the market and selective 

harmonisation.  Within this option many variants exist, some of which are discussed below. 

Complete liberalisation 

The  normal  market  condition  is  that  of  the  free  market.  However,  complete 

liberalisation  of  the  postal  sector  would  lead  to  the  loss  of  the  universal  service, 

c~rtainly at  prices  affordable  to  all.  At  the  same  time,  no  private  operators  seem 

interested in providing a standard letter service to all  parts of any national territory. 

Complete harmonisation 

If it was intended to have a postal sector that was completely harmonised, it  would be 

necessary to have a  single operational body  that  ensured  that such  harmonisation was 

implemented.  Such  an operator - effectively a single postal administration covering all 

the  Community  - would  have  overall  responsibility  for  all  aspects  of  what  was 

considered to be the public administration part of the Community's postal sector. 

Total  harmonisation  would  imply  the  same  tariff  being  applied  throughout  the 

Community, as  well  as  the same access  conditions  and  the same levels  of service.  A 

single  tariff with  the same price being applied  in  all  Member States  (for which  there 

appears  to  be  no  demand)  would  cause  overwhelming  problems. 

It  would  also  be 

impractical. demanding cross-subsidies of massive proportions.  (Tariffs presently vary 

by  as  much  as  a  factor  of three.)  Central  co-ordination  of policies  relating  to  areas 

such as marketing or personnel would  be likely  to lead  to  an  over-rigidity which  could 

not  respond  to  local  conditions.  Further,  the  implementing  hody,  the  single  postal 

administration, would be a costly additional overhead. 

In  summary,  complete  harmonisation  would  lead  to  many  restrictions  ,  but  few 

benefits.  Further,  it  should  be  emphasised  that  nobody  is  now  asking  for  the single 

operational body that would be needed to implement harmonisation at this level. 

Chapter 9:  Policy options 

page 235 

Status quo 

If this  theoretical  option were to  be  exercised,  the result  would  be a  widening of the 

gap  between  already  very  divergent  positions,  and  make  more  difficult  the  proper 

functioning of the Single Market..  This would  lead  to  a  "two-speed"  Europe in  postal 

services.  In  short,  the Single  Market in  postal services  would  not  be  achieved,  with 

significant  indirect  effects  on  other  sectors  particularly  served  by  postal  services.  It 

would  also  probably  not  be  the  appropriate  response  to  the  implications  of political 

and economic union. 

Equilibrium: further opening of market/strengthening of universal service 

This option accepts that in order to ensure the universal service it  is  necessary to have 

some restriction of the free market.  This would be in the form  of the establishment of 

a  set  of reserved  services  that  confer  some  special  and  exclusive  rights  on  national 

postal  administrations.  However,  the  scope  of  the  reserved  area  must  be  strictly 

proportional  to  the  universal  service  objective.  At  the  same  time,  the  regulatory 

control of part  of the  market  (reserved  services  granted  to  ensure universal  service) 

would  make  possible  certain  harmonisation  measures  to  ensure  that  the  universal 

service operates effectively in all  twelve Member States. 

Each  Member  State already  reserv_es  certain  services  in  order  to  achieve  a  universal 

service objective; but the scope of such  reserved services is  usually larger - sometimes 

significantly  - than  is  necessary  to  meet  the  objective.  Further,  the  actual  objective 

(including service  performance)  must  be achieved  in  practice. 

ln  addition,  there  are 

gains to be obtained from simply clarifying what  is  reserved and what is  not. 

It  is  proposed  that  there  should  be  a  Community  definition  of the  universal  service 

that should  be provided  throughout  the  Community.  This definition  has  not yet  been 

drawn  up.  However,  it  is  possible  to  indicate  how  the  market  should,  under  this 

option, be partially liberalised without threatening the universal service objective. 

Under this option of seeking equilibrium, certain services should he removed from  the 

reserved  area  (if,  indeed,  they  presently  form  part).  These  are  express  services  anJ 

publications.  (Parcel  services  are  already  liberalised  in  all  twelve  Member  States.) 

Based  on  the  analysis  that  has  been  made  to  date.  the  liberafo:ation  of cross-border 

letters and,  a  priori,  of direct  mail  would  also  he  envisaged.  Jn  both  cases.  it  will  be 

necessary  to  ensure  that  the  appropriate  reguiatory  control  systems  are  in  place  to 

prevent  such  liberalising  measures  leading  to  circumvention  of  legitimate  exclusive 

page 236 

Chapter 9:  Policy options 

rights of reserved  service  providers.  Particularly  in  the case  of direct  mail,  it  will  be 

necessary fully to analyse the economic implications for the universal service of such a 

liberalisation measure. 

The liberalisation  process ought  to  be  implemented  in  a  gradual  manner.  It  should 

take  into  account  the  necessary  phases  for  adaptation  in  order  to  maintain  the 

economic and financial balance needed for the provision of the universal services. 

For  the  services  which  remain  as  potentially  reserved  - which  would  broadly  cover 

personal and  business correspondence  - it  would  be possible  to  establish clear limits 

that indicated the precise scope of the reserved area.  These limits would be defined in 

terms of weight and price. 

It  should  be  emphasised ·that  if  any  Member  State  were  concerned  that  specific 

proposals might harm its universal service objective,  it  could consider applying a more 

restrictive  solution,  provided  that  it  was  still  proportional  to  the  objective  and 

conformed to Community law. 

Turning  to  the  harmonisation  measures  to  be  implemented  in  parallel  with  these 

liberalisations,  they  must  spring  from  the  fundamental  Community  objective  that 

there should  be a  universal  service  of sufficient  quality  and  at  affordable prices.  As 

mentioned  above,  there  is  not  yet. a  Community  definition  of the  universal  service 

required  across  the Community.  It  seems clear that  such  a  definition  is  needed and 

that, when drawing it up, potential users - including consumer representatives - should 

be consulted.  However, certain harmonisation requirements are already clear. 

Universality implies easy access,  and this is currently often not  the case eve1., w1lere in 

the  Community.  Given  the  present  divergences  in  service  performance,  some 

harmonisation would  be  needed  in  this  respect  also.  Tariffs  appear  to  be  generally 

affordable; in  certain cases,  the  tariffs do  not  reflect  the costs,  and  such  tariff-setting, 

as  applied  by  the  postal  administrations,  could,  in  the  long  term,  jeopardise  the 

economic viability of the universal service  network.  Further, it  is  right that the postal 

administration  should  be  able  to  use  the  universal  service  network  to  provide  non 

mandatory services, but at present there are no common rules for this. 

These  present  and  future  problems  indicate  that  harmonisation  measures  for 

universal services are appropriate in the following areas: 

Chapter 9: Policy options 

page 237 

access: 

rules should  be the same for  all  users meeting the same conditions; for  the 

ac.cess  needs of other service providers (either other postal administrations 

or private operators),  there  may  need  to  be specific  technical  measures to 

ensure inter-operability; 

service: 

standards  should  be  set  for  all  universal  services;  performance  should  be 

measured by  a common system  that accurately reflects  users' experience of 

the service; results should be published; 

tariffs: 

prices for each service should be related to the average costs of that service; 

present  differences  in  tariff  structures  should  be  reduced  in  order  to 

diminish present market distortions. 

These  harmonisation  measures  could  be  implemented,  considering  that  basic 

customer requirements would be likely to be very similar in  each Member State. 

Proposed scenario 

The last option is the preferred scenario since it finds the appropriate balance.  It combines 

gradual opening of the market with the implementation of harmonisation measures to meet 

Community  objectives. 

It  will  therefore  ensure  the  universal  service  under  proper 

conditions,  whilst  providing  optimum  freedom  of choice  for  users.  It  will  be  noted  that 

there  is  no  single  solution,  but  rather  a  set  of  measures  which  provide  the  common 

structure needed.  Each proposal is  therefore part of a  coherent whole;  at  the  same time 

individual proposals do respond to certain specific problems. 

It should be mentioned  that some advance comments have been received  on  recent  drafts 

of the options.  On the basis of these comments,  it  seems that there could  be a  consensus 

on the general orientations.  However, there appear to be certain points that cause concern 

to some interested parties.  These points seem to relate to the need for  adaptation  periods 

and also  to certain liberalisation proposals - such as for direct mail (at Proposal 2.7 below), 

intra-Community cross-border mail (Proposal 2.13) and international mail (Proposal 2.14). 

The debate  during  the  consultation  period  that  will  follow  the  publication  of  the  Green 

Paper may well concentrate on such points.  However, the balance of the whole set of policy 

options presented should be considered. 

It should  be  emphasised  that this  broad  option  of further  market  opening combined  with 

strengthening the universal service could  itself be implemented in  a  number of ways.  The 

page 238 

Chapter 9:  Policy options 

intention is that the main remaining choices will be made in  the light of the debate that will 

follow the publication of the Green Paper.  More detailed work will  thus  be needed before 

implementation.  Much of this will  involve discussions with  user groups  in  order to identify 

their requirements  in  more detail,  particularly with  regard  to  the  ways  in  which  they  may 

need greater freedom  of choice.  As  mentioned,  a  Community definition  of the  universal 

service is  required.  Further analysis  is  also  required before the weight and  price limits for 

the reserved  area can be defined.  Service thresholds for  the  universal  services  need  to  be 

agreed.  More detailed work  is  also  required  to  implement the principle that  tariffs should 

be related to average costs. 

However, even  though  this  more detailed work  remains to be  undertaken,  the set of policy 

options  is  presented  in  the  confidence  that  the  common  structure  proposed,  by  linking 

liberalisation  and  harmonisation,  would  ensure  the  universal  service  and  give  optimum 

freedom of choice. 

Chapter 9:  Policy options 

page 239 

The main objectives  for the Community's postal sector are shown in Table 1: 

Table 1:  Main objectives for postal sector 

1. 

To  ESTABLISH  A  COMMUNfIY  DEFINmON  OF  THE  UNIVERSAL  POSTAL  SERVICE 

REQUIRED;  THEN  TO  ENSURE  ITS  PROVISION  THROUGHOlIT  THE  COMMUNfIY  AT 

PRICES  AFFORDABLE  TO  ALL  THROUGH  THE  ESTABLISHING  (INASMUCH  AS  IT  WAS 

NEEDED  IN  MEMBER  STA TES  INDIVIDUALLY)  OF  A  SET  OF  RESERVED  SERVICES 

WHICH  WOULD  CONFER  SOME  SPECIAL  AND  EXCLUSIVE  RIGHTS,  IN  ORDER  TO 

MAINTAIN  THE  RESOURCES  NECESSARY  FOR  THE  UNDERTAKING  OF  THE  PUBLIC 

SERVICE MISSION IN  SOUND CONDillONS; AT THE SAME TIME, CONSISTENT WITH THIS 

OBJECTIVE,  TO  HAVE  THE  LARGEST  POSSIBLE  PART  OF THE  SECTOR  OPERATING  IN 

FREE COMPETITION 

2. 

3. 

TO HAVE  COMMON  OBLIGATIONS  FOR  TIIE  UNIVERSAL  SERVICE  OPERATORS  OF THE 

COMMUNilY  IN  RESPECT  OF  THE  SPECIAL  AND  EXCLUSIVE  RIGHTS  GRANTED  TO 

THEM  BY  THE  RESERVED  SERVICES  IN  ORDER  TO  PROVIDE  UNIVERSAL  SERVICES,  IN 

PARTICULAR WITH REGARD TO THE QUALITY OF SERVICE PROVIDED. 

TO  MAKE  ANY  NECESSARY  EFFORTS  TOWARDS  COMMUNITY  COHESION  THROUGH 

APPROPRIATE HARMONISATION  MEASURES. 

These  main  policy  objectives  therefore  treat  general  regulatory  issues,  the  obligations  of 

the  reserved  service  provider  and,  thirdly,  the  subjects  of  harmonisation  and  cohesion. 

Under these three headings,  the main  policy  options break down  into  the detailed  options 

shown in Table 2 below. 

page 240 

Chapter 9:  Policy options 

Table 2:  Detailed options 

PARTI: 

GENERAL REGULATORY ISSUES 

1. 

ESTABLISH  AND  ENSURE  THE  COMMUNITY  SET  OF  UNIVERSAL 
SERVICES 

2.  DEVELOP  THE  DEFINITION  OF  UNIVERSAL  AND  RESERVED 

SERVICES 

3. 

ENSURE COMPATIBILITY OF OTHER MEMBER STATE 
COMMITMENTS WITH COMMUNITY LEGISLATION 
AND POLICIES 

4. 

SEPARATE REGULATORY AND OPERATIONAL FUNCTIONS 

PARTII: 

OBLIGATIONS OF UNIVERSAL SERVICE PROVIDER 

5.  ACCESS CONDITIONS TO UNIVERSAL SERVICES TO BE 

SAME FOR ALL 

6. 

7. 

8. 

TARIFFS OF UNIVERSAL. SERVICES TO BE RELATED TO COSTS 

INTER-ADMINISTRATION COMPENSATION TO REFLECT 
DELIVERY COSTS 

SERVICE STANDARDS FOR UNIVERSAL SERVICES 
TO BE SET AND PERFORMANCE MONITORED 

PART III: 

HARMONISATION AND COHESION 

9.  HARMONISATION APPROPRIATE WHERE 

BENEFICIAL TO CUSTOMERS 

10.  COHESION ASPECT'S TO BE TAKEN INTO ACCOUNT 

These detailed options can,  in tum,  be translated into implementation proposals,  and these are 

shown in the succeeding pages. 

Chapter 9:  Policy options 

page 241 

PART I: 

GENERAL REGULATORY ISSUES 

1. 

ESTABLISH A SET OF UNIVERSAL SERVICES 

The key social requirement for postal services  is  the maintenance of the universal service. 

Universal service  without any  conditions about price  can  be  provided  in  the  competitive 

(non-reserved)  sector.  But,  in  order for the service to  be at a price  affordable  to  all,  it is 

necessary  to  lulve  sufficient  economic  returns  to  scale.  These  can  only  be  achieved 

through  the  granting  of some  special  and exclusive  rights  - hence  the  need for  reserved 

services.  (Although  it is possible for there to  be more than  one reserved service provider in 

each  Member  State,  this  is  unlikely;  for  the  sake  of simplicity,  all  the proposals  refer  to 

only  one  reserved  service  provider  - assumed  to  be  the  postal  administration  - in  each 

Member State.) 

1.1  A reference definition should be decided for the universal service to be applied 

throughout the Community.  This definition will  need to  take  into account the 

Community's social and economic requirements, as well as other commitments, 

notably to the Universal Postal Union  (UPU).  A  Member State would  still  be 

able to extend the  definition to  be applied  in  its own  territory,  in  line  with  its 

legitimate public interests. 

1.2 

In  order  to  ensure  universal  service  at  a  price  affordable  to  all,  a  set  of 

reserved  services  must  be  established.  The  list  of  services  that  could  be 

included  in  this  set  of reserved  services  should  be  established  at  Community 

level. 

1.3 

In  accordance  with  the  principle  of  proportionality,  the  size  of  this  set  of 

reserved  services  should  be  no  larger  than  is  needed  to  secure  the  universal 

service objective. 

1.4  Outside  the  reserved  area,  all  services  will  be  provided  in  free  competition. 

The postal administrations could also provide non-reserved services. 

page 242 

Chapter 9:  Policy options 

2.  DEVELOP THE DEFINITION OF UNIVERSAL AND RESERVED  SERVICES 

The  reserved services  must be defined clearly in  order to  distinguish  plainly between  what 

is  in  the  reserved  area  and  what  in  the  non-reserved  area.  This  definition  of the  set  of 

reserved services  requires much more work  which should be undertaken in  the light of the 

competition rules as laid out in  the Treaty of Rome. 

Throughout  this  analysis,  the  objective  will  be  to  seek  the  least  restn"ctive  solution. 

Conditions  in  some Member States may permit the scope of the  reserved services  there  to 

be less  than the set defined at a  Community level,  but always consLfltent  with  the  objective 

of universal service provision,  thus ensuring that the public service mission  is  carried out in 

sound  economic  and  financial  conditions.  Conversely,  other  Member  States  might 

possibly  find  that  the  Community  set  of reserved  services  might  not  be  sufficient  to 

guarantee  the  universal  service;  in.  such  a  case,  the  Member  State  concerned  may  then 

consider applying a  more restrictive solution  that will still be  compatible with  Community 

law. 

The universal services defined at Community level  will have to  be provided obligatorily in 

all  Member  States.  The  regulatory  body  of each  Member  State,  taking  account  of all 

commitments,  may  well  decide  that  universal  service  should  be  provided  obligatorily 

beyond the  scope  of the  reserved  area. 

Thus,  in  addition  to  resen1ed  universal  services 

which  have  to  be  provided  numdatorily,  there  are  likely  to  be  some  mandatory  non 

reserved services for which universal service is  also required,  this obligation being delegated 

by the regulatory authority to one or more operators. 

Some other operators may decide for commercial reasons also  to provide universal service. 

The  important  distinction  is  the  obligation  underlying  the  provision  of the  universal 

service.  Throughout  these proposals mention of the universal sen1ice  provider refers  to  the 

operator who is obliged to provide the universal service. 

Each postal administration  will therefore  be  obliged to provide  universal service,  as  it  will 

be  defined  at  national  and  Community  levels.  This  obligation  should  not  impose  an 

unfair financial  burden  on  the  postal  administrations.  Proper  tariff-setting  systems  are 

therefore important (see  below at Paragraphs  7 and 8 ). 

Chapter 9:  Policy options 

page 243 
- - - ·-------- - - - - - - - - - - -

Self-delivery and self-posting (delivery and posting of one's own  mail by oneseU) 

2.1  Any  individual  or  organisation  has  the  right  to  deliver  his/its  own  mail 

himself/itself anywhere  in the  Community, or to transport  it  himself/itself for 

posting directly with  the postal administration in the country of delivery. 

2.2  Any  individual or any organisation also has the right to post his/its mail with a 

postal administration of another country for delivery in  a  third country or back 

in his/its own  country.  In the latter case, if the  item would  otherwise have met 

the  criteria  for  being  reserved  in  the  individual's/organisation's  country,  the 

mail  must  be  given  to  the  postal  administration  for  delivery,  and  its  delivery 

costs must be properly compensated. 

2.3 

To  aid  the  interpretation  of  the  proposals  at  Paragraphs  2.1-2  above,  the 

Community will  need  to develop  rules  regarding the delivery or posting of mail 

by sister or subsidiary organisations in the same or another Member State. 

Non-reserved area 

2.4  When  new  services  (such as  electronic  mail)  are evolved  that  are  significantly 

different  from  the  existing  reserved  standard  services, such  new  services  need 

to  be considered as  being in the non-reserved  sector.  However,  this  may  need 

to  be  reviewed  for  particular cases.  During  the  consultation  that  will  follow 

publication of the Green  Paper,  the  economic  and  financial  effects  of this  will 

be analysed. 

2.5 

If a  new  service subsequently becomes  a  necessary element  in  the achievement 

of  the  universal  service,  it  is  possible  to  envisage  its  integration  into  the 

resen·ed area in  line with the criteria mentioned at Paragraph 2.16-17  below. 

2.6  Any  service that  is  not within  the reserved  area  is  therefore  non-reserved. and 

should be provided in free competition. 

The reserved area 

2. 7  The Community  must complete  the development of the  definition of the set  of 

services that could  be considered .reserved.  The  set  will  cover  some  standard 

postal  communication  items  (including  letters  and  postcards)  up  to  certain 

page 244 

Chapter 9:  Policy options 

limits  described  below.  It will  not  include,  for  example,  publications, goods 

bearing items or express  (courier) items.  The placing of addressed direct mail 

in  the  non-reserved  area  would,  a  priori,  be  envisaged.  The  economic 

implications for the universal service of the liberalisation of direct mail should 

be analysed  (see below at Paragraph 2.9);  it will  also  be  necessary to establish 

appropriate regulatory control systems to prevent possible abuse. 

2.8 

Since the establishment of a  set of reserved services  is justified by  the need  to 

ensure universal service at affordable prices, the definition  of the scope of the 

universal service  required  across  the  Community  needs  to  be  finalised.  (The 

universal  service  requirement  will  be  defined  in  terms  of  user  needs,  which 

may  vary  over time.)  Both  the scope of the universal  services and  that of the 

reserved area will need to be subject to regular review. 

2.9 

The  Commission,  with  the  help  of the  Senior  Officials'  Group  on  Posts,  will 

establish  a  working  group  to  analyse  in  detail:  the  economics  of  universal 

service  provision  in  the  Community;  the size  necessary  for  the  reserved  area; 

and the set of controls needed to protect the reserved area.  The working group 

will  also  analyse  the  economic  implications  for  the  universal  service  of each 

liberalisation  measure.  The  working  group  should  complete  its  work  within 

one year of the  publication  of the  Green  Paper.  Its  analysis  will  also  lead  to 

orientations concerning the· limits  of the  reserved  area  defined  at  Community 

level.  (Proposals for  defining these limits are shown  below at  Paragraphs 2.16 

- 2.17.) 

2.10  The  regulatory  body  of each  Member  State will  wish  to  define  the  universal 

service that  must  be  provided  obligatorily  in  its  territory.  In  doing  so,  it  will 

need to take account of the universal service obligations defined at Community 

level. 

2.11  Member States can decide to have a  reserved area smaller than the Community 

limits,  but  will  still  have  to  ensure  universal  service  up  to  the  Community 

limits for the universal services. 

Chapter 9: Policy options 

page 245 

Reserved services - additional issues 

2.12  National  (domestic)  mail  that  would  come  within  the  scope  of  the  reserved 

services of a  Member State  must not  be transported out of the  Member State 

by  a  third party  operator for  mailing back  into the  Member State.  However, 

mail that is physically generated  in a  particular country (for example, through 

the handling of data or the  printing of the  contents  there), or is  in  some way 

subject there to a process that adds substantial value, should be treated as mail 

originating in that country. 

2.13  The  placing  of  intra-Community  cross-border  mail  (mail  crossing  from  one 

Member State  to another)  in  the  non  reserved area would  be  envisaged.  If a 

Member  State  was  convinced  that  such  a  liberalisation  might  prejudice  the 

universal service, it could apply a  more restrictive solu~ion provided that it was 

proportional to  the objective  and  compatible  with  Community  law.  It wili  be 

necessary  to  establish  appropriate  regulatory  control  systems  to  ensure  that 

domestic  mail  that  would  otherwise  have  been  reserved  is  not  fed  into  the 

cross-border system through third party operators (see  Paragraph 2.12 above). 

It is accepted that certain Member States may need a certain adaptation period 

to  implement  this  measure;  the  need  for  such  an  adaptation  period  and  its 

length  (which  may  vary  from  Member  State  to  Member  State)  should  be 

discussed during the consultation period following the publication of the Green 

Paper. 

2.14  The placing  of international  mail  (either  mail  originating  in  a  Member State 

with  a  destination  outside  the  Community  or  originating  outside  the 

Community for delivery in a  Member State) in  the non-reserved area would  be 

envisaged.  If a  Member State was  convinced  that  such a  liberalisation  might 

prejudice  the  universal  service,  it  could  apply  a  more  restrictive  solution 

provided  that  it  was  proportional  to  the  objective  and  compatible  with 

Community  law. 

It  will  be  necessary  to  establish  appropriate  regulatory 

control systems  to ensure that domestic  mail  that would  otherwise  have  been 

reserved is not fed  into the cross-border system through third party operators 

(see  Paragraph  2.12  above).  Certain  Member  States  may  need  a  certain 

adaptation period to implement this measure; the need for such an adaptation 

period and  its  length  (which  may  vary from  Member State to  Member State) 

page 246 

Chapter 9:  Policy options 

should be discussed during the consultation period following the publication of 

the Green Paper. 

2.15  The  fact  that  a  service  is  part  of  the  set  of  reserved  services  as  defined  at 

Community  level  does  not  automatically  imply  that  a  Member  State  should 

integrate the service into its reserved area. 

Criteria for definition of limits 

2.16  Only  services  with  a  universal  obligation  could  be  considered  reserved. 

However, services providing delivery of goods-bearing items and printed papers 

(under the  reserve  of the  orientations  on  direct  mail  at  Paragraph  2.7  above) 

should  not  be  reserved,  even  if  these  services  are  provided  under  a  universal 

service  obligation.  A  contents  criterion  will  be  needed  to  ensure  that  goods 

bearing items and printed papers are placed  in  the non-reserved area. 

2.17  The  items  that  will  remain  as  items  that  possibly  could  be  reserved  are 

standard postal communication  items.  Within these, the criteria to be used for 

defining the scope of the reserved services will  be both weight and price.  There 

will be a  link between the two  criteria;  this  link  needs to  be quantified.  (In the 

medium/longer term, price limits alone may well  be sutl1cient.) 

3. 

ENSURE  COMPATIBILITY  OF  OTHER  MEMBER  STATE  COMMITMENTS 

\VJTH  COMMUNITY LEGISLATION AND  POLICIES 

Naturally,  all  postal  operators  (both  private  and  public)  providing  services  in  the 

Community must  comp(v  with  Communi1y  legislation.  Of particular  importance  to  the 

postal sector are  (or  ri·il/  he)  direcrives  on  data  protection,  indirect  taxation  and customs 

procedures.  As with  all sectors,  efforts  need  to  be  made to  reduce  the  possible  tensions 

betl·veen,  on  the  one  hand,  Community  law  and  policies  and,  on  the  other,  potential 

ohligatimzs arising from  other conventions or treaties that Member States nwy have signed. 

To  this end,  the Community should be involved in  the development of legislation and mies 

that may affect its postal sector.  It  should therefore apply to  both  the  UPU and the CEPT 

to gain observer status.  The  UPU is an agency of the United Nations,  and the Community 

has ohserver status at the  UN. 

Chapter 9:  Policy options 

page 247 

3.1 

The Community should be actively involved in future congresses of the UPU, to 

help  to  ensure  that  there  are  no  tensions  between  congress  decisions  and 

obligations  under  the  Treaty  of  Rome,  other  Community  legislation  or  the 

Community's postal policy. 

3.2 

In  particular,  use  of Article 25  of the  UPU  Convention  is  not  appropriate  for 

use  within  the  Community. 

It  seems  necessary  to  replace  it  with  a  less 

restrictive measure that still makes clear that the physical transport by  a  third 

party  operator  of  mail  out  of  a  Member  State  for  mailing  back  into  it  is 

forbidden  if the  exclusive  rights  of the  postal  administration  in  that  Member 

State are thereby infringed (as stated above at 2.12  ). 

3.3 

The Community should seek to acquire observer status at the  Universal  Postal 

Union (UPU). 

3.4 

The  Community  will  investigate  and  then  propose  how  to  prevent  mail  being 
taken  out  of  the  Community  for  mailing  back  in  with  the  sole  intention  or 
circumventing  the  Community's  policies  on  tariffs  and  terminal  dues  (set> 

proposals helow at Paragraphs 6 and 7 ). 

4. 

SEPARATE REGULATORY AND OPERATIONAL Ft!NCTIONS 

Jn  order to ensure  that the  user's  interests are  hest served  through  the  impartial tn:otmcm 

of all  operators,  it  is  essential  that  regulatory  and  operational  fiwctions  should  he 

separated.  The independence of the regulmmy jimction  h'tlf hctter l!nahle  it  w  achiei e the 

best balance benveen public and private operators,  and hen-veen  rescfl'ed and nnn--resetved 

seTVice  providers.  It  will  monitor the  effectiveness  of the  resen cd  \ervices.  in  terms  of the 

scTVice  provider  hoth  maintaininJ; 

a  good  universul  servic('  and  meeting  its  other 

obligations  shown  belmv  at  Proposals  5.  6  wul  8. 

(Ir  will  aisn  n1·nl  to  oversee  th(· 

obligation of privacy.)  If the situation  arises,  it  ivill  need ro  consida  H'/zat  action  may he 

necessary in  the case ofpcrfonnam_·e fulling short of the ohligations. 

4.1 

Each  Member  State  must  have  a  regulatory  body  that  is  st.·parated  from  an~ 

operational function. 

4.2 

Regulatory  bodies  are  responsihle  for  the  national  application  of Communit_y 

policy  on  postal  sen'ices.  particularly  the  principle  that  the  resenred  senice 

page 248 

Chapter 9:  Policy options 

area  must  be  proportional  to  the  universal  service  objective  (as  stated  at 

Paragraph 1.2 above). 

4.3 

The regulatory body of each Member State will be responsible for ensuring that 

national  legislation  states  clearly  what  services  are  reserved  domestically 

within  the  Community  set  of  possible  reserved  services.  All  other  services 

should be considered non-reserved. 

4.4 

The  regulatory  body  will  ensure  that  other  operators  respect  the  exclusive 

rights that are defined for the reserved service provider. 

4.5 

The  regulatory  body  will  need  to  ensure  that  the  reserved  service  provider 

meets its service obligations, including providing equality of treatment. 

4.6 

The  regulatory  body should seek firm  undertakings from  the universal service 

provider(s) with regard to the privacy of mail. 

4. 7  The  regulatory  body  will  need  to  agree with  the  universal  service  provider(s) 

what commitment the latter must give  concerning the  quality of service that it 

will provide.  The regulatory body needs to be able to undenvrite the reliability 

of any service performance results that are published. 

4.8  Appropriate  levels  of transparency  need  to  be  determined,  both  for  access  to 

the network and for the costs underlying the prices for access. 

4.9 

If the reserved service provider is competing in the non-reserved sector, it can, 

for  economic  and  commercial  reasons,  provide  these  services  through  the 

universal  service  network  that  is  also  used  for  the  reserved  services.  The 

regulatory body  must ensure  that there is  no cross-subsidy from  the  reserved 

area to the non-reserved area. 

4.10  The  regulatory  body  must  ensure  that  private  operators  (who  may  be 

competing with the postal administration in the non-reserved area) have access 

to  reserved  services  insofar as  private  operators  need  such  access  to  provide 

the non-reserved services that they offer.  (See also Paragraph 5.3  below.) 

4.11  The appropriate authorities, whether at national or Community level,  need  to 

ensure  that  application  of  general  legislation  to  the  postal  sector's  non 

reserved  services  does  not  unfairly  advantage  or  disadvantage  any  operators 

competing in the non-reserved area. 

Chapter 9: Policy options 

page 249 

PART II: 

OBLIGATIONS OF UNIVERSAL SERVICE PROVIDER 

5.  ACCESS CONDITIONS TO UNIVERSAL SERVICES TO BE SAME FOR ALL 

The  rule  must be equality of treatment of users  (customers)  of universal services.  Within 

this  rule,  it  is  recognised  that  customers  have  varying  requirements  and can  co-operate 

with  universal service  providers  to  varying  extents.  This  is partly a  function  of size,  but 

particularly of the ability to prepare mail in  ways that are beneficial to the postal operation 

of the universal service provider,  thus allowing the latter to off er discounts. 

5.1  Where  customers  meet  the  same  posting  conditions,  access  conditions  for 

universal services ought to be the same for all. 

5.2 

Each  universal  service  provider  should  make  available  contract  facilities  for 

large customers.  (See also Paragraph 9.3  below.) 

5.3  Universal  service  providers  must  offer  these  services  equally  to  all  potential 

customers,  even  if these  customers  may  be  their  competitors  in  the  non 

reserved sector. 

5.4 

For ordinary cross-border exchanges  between  postal  administrations  through 

the international mail system, it is accepted that there  is  some element in this 

relationship  that  is  not  purely commercial,  so  that  access  conditions  for  one 

postal administration posting into another could  need  to be different from  the 

normal  commercial  conditions.  However,  the  outward  postal  administration 

should  also  be  able  to  have  access  as  a  customer  to  the  domestic  universal 

services of the  inward  postal administration.  This access  will  be on the same 

terms as for other similar users. 

5.5 

Posting conditions,  taritTs  (including  standard  discounts)  and  service  targets 

for universal services must all be published. 

6.  TARIFFS OF UNIVERSAL SERVICES TO BE RELATED TO AVERAGE COSTS 

The  guiding  principle  should  be  that  tariffs  should  be  rela.ted  to  average  costs.  The 

consistent application of this principle is  the best guarantee of the financial soundness of 

the postal services.  In order to ensure fair treatment for all,  cross-subsidies,  whether from 

page 250 

Chapter 9:  Policy options 

one sen;ice  to  another or,  because  of discounts,  from  one group  of customers to  another, 

should be minimised and phased out.  (However,  geographical cross-subsidies continue to 

be permissible.)  Policy  on discounts  is particularly important:  in  general,  they should be 

linked  to  cost  savings  (which  may  include  reductions  in  unit  costs  brought  about  by 

increases in  volume). 

6.1 

Tariffs for  universal services ought to be related closely to costs.  The objective 

is  for  tariffs  for  each  service  to  be  based  on  average  costs  for  that  service. 

Preferential tariffs need to cover at least marginal costs. 

6.2 

If subsidies  are  considered  necessary,  their  objectives,  their  value  and  their 

scope should be transparent. 

6.3 

Preferential  tariffs,  if justified,  must  be  made  available 

in  a  transparent 

manner to  all users  that qualify  for  them,  regardless  of the  country  in  which 

they are located. 

6.4  Cross-subsidies  which  are  made  from  reserved  sen,ices  to  non-reserved 

services  are,  in  general,  unacceptable.  However,  cross-subsidies  can  be 

permitted across  geographic areas  in  order  to  allow  the  perequation  tarifaire 

(see  below  at  Paragraph  6.5)  and  from  the  non-reserved  area  to  the  reserved 

area.  There  could  also  be  cross-subsidies  from  the  reserved  to  the  non 

reserved area  if they were  necessary  to  assure the  universal service and  if they 

were compatible with competition rules  (sec below at Paragraph 6.6). 

6.5  Geographic  cross-subsidies  are  permissible  if  needed  to  achieve  a  single 

unitary tariff for a  specific service where that is considered desirable. 

6.6 

It is  possible that  some  mandatory  non-reserved  services  can  only  be  provided 

at a  loss  in  certain geographic areas.  In this case, the losses  should be  isolated 

to  specific  areas,  and  could  he  funded  either  by  subsidy·  from  outside  or  b)· 

cross-subsidy.  Such  funding  needs  to  be  completely  transparent  in  order  to 

prevent  any  unfair  pricing  by  the  provider  of  the  mandatory  non-resen·ed 

service. 

6.7 

In  the resen·ed  (non-competitive) sector, discounts provided  to  large customers 

(usually on  account of the  mail  preparation  that  they  can  undertake)  must,  in 

general, be related to cost savings which the service pnH'ider will  derive.  Postal 

administrations  must  avoid  giving  customers  of  universal  services  discounts 

Chapter 9: Policy options 

page 251 

which are not related  to savings  in costs.  They must avoid contractual  linkage 

between  conditions  for  using  universal  services  and  those  for  using  non 

reserved non-mandatory services. 

6.8 

Tariffs set at very  preferential or free  rates as a  result of government decisions 

(such  as  for  delivery  of  press  material  and  books,  electoral  mail  and  blind 

persons' mail)  need to be the subject of transparent treatment. 

7. 

INTER-ADMINISTRATION  COMPENSATION TO REFLECT DELIVERY COSTS 

Revenue for mail posted is paid to  the operator who collects the mail.  In  the case of cross 

border  mail  collected  hy  one  postal  administration  and  delivered  by  another,  it  is  the 

outvvard  administration  that  receives  the  revenue  from  the  customer.  Hmvever,  a 

substantial  part  of  the  costs  involved  are  incurred  by  the  inward  administration  in 

deliven·ng  the  mail.  Some  charging  system  is  therefore  necessa1y  to  provide  financial 

compensation to the delivery administration for its delivery costs. 

The  existing syste1nr;  of charging  between postal administrations  (called  termilwl dues)  is 

not cost based,  leading to  significant distortions  benveen  remuneration and actual delivery 

costs incurred  The  same principle of basing tariffs  on costs should apply to  the financial 

compensation .system  het.,,veen postal administrations. 

7.1 

The compensation  charges  between  postal  administrations  for  delivering  each 

other's mail  (terminal dues)  ought to reflect actual  inward costs. 

7.2 

Since inland  tariffs  will  be  related  to  costs, the compensation  charges  between 

postal  administrations  ought  to  be  based  on  the  delivery  proportion  of  the 

inland  tariff,  with  some  supplement  for  the  extra  handling  necessar,y  and  for 

profit. 

7.3  A  working  group  should  be  established  lo  prepare  the  basis  for  a  revised 

compensation  scheme  to  he  applied  within  the  Communit).  The group  should 

present its proposals within  tv.:elYc  months of being established. 

7.4 

Efforts  should  be  made  to  extend  the  Communit)"s  principle  of  basing  inter 

administration  compensation  arrangements  on  costs  to  other  admmistrations 

with  whom  mail  is  exchanged.  These  efforts  could  be  made  within  the 

page 252 

Chapter 9: Policy options 

framework  of  the  UPU  and  the  Conference  of  European  Postal  and 

Telecommunications authorities (CEPT). 

8. 

SERVICE  STANDARDS  FOR  UNIVERSAL  SERVICES  TO  BE  SET  AND 

PERFORMANCE MONITORED 

The  justification  for  establishing  a  set  of  resen1ed  sen1ices  is  based  on  the  social 

requirement for  universal sen1ice.  The  actual sen1ice performance  is  therefore  crucial in 

ensuring  that  the  social  requirements  are  met.  Standards  there/ ore  need  to  be  set, 

perf onnance monitored and control systems put in place.  It is important to note that such 

standards  are  only  thresholds  - universal  sen1ice  providers  should  still  try  to  have  a 

perf onnance higher than the standards. 

8.1  Community  service  standards  need  to  be  set  for  services  for  which  there  is  a 

universal service  obligation  defined  at the  Community  level.  Performance, of 

both  national  and  intra-Community  mail,  must  be  monitored  and  the  results 

published. 

8.2  Member States will need  to  decide whether there should be national standards 

for mail for which there is a  ~niversal service obligation defined at the national 

level  (and  beyond  the  Community  dermition). 

If  required,  any  standards 

established  at  national  level  that  are  different  from  those  established  at  the 

Community  level  should  collectively  be  more  exacting  than  the  Community 

standards. 

8.3 

In order to establish the Community standards, the Commission should set up 

a  working  group  with  Member  State  representation.  The  group  would  need 

contributions  from  regulators,  reserved  service  providers,  contract  users  and 

consumers. 

8.4 

The service performance standards should be stretching, but achievable.  They 

will  be  based on the Community dermition of universal service.  This  requires 

collection  from  all  posting  boxes  and  counters  at  least  once  in  each  working 

day,  and  delivery  coverage  of all  addresses  at  least  once  each  working  day. 

Exceptions, if any, to this general requirement should only result from extreme 

cases, and should be scrutinised very carefully. 

Chapter 9: Policy options 

page 253 

8.5  The  Community  must  have  a  single  system  for  monitoring  delivery  service 

performance.  This system needs to measure "end-to-end" performance because 

this is  the only system  that accurately  measures  customers' experience of the 

service. 

8.6  Where  existing service  falls  significantly  short  of the  desired  standard, those 

regulatory  bodies  responsible  for  ensuring  that  the  operators  meet  their 

obligations  will  need  to  set  intermediate  targets  that  progress  towards  the 

standard. 

8.7 

Each  national  regulatory body should  be assisted  by a  committee  representing 

users.  The  committee  membership  should  be  drawn  from  a  representative 

cross-section of users, including consumer representatives. 

8.8  Community-wide  standards  are  also  needed  for  customer  care,  in  particular 

the  maximum  acceptable  period  for  dealing  with  enquiries  or  complaints. 

Different standards may be necessary for national and intra-Community mail. 

PART III: 

HARMONISATION AND  COHESION 

9.  HARMONISATION APPROPRIATE WHERE BENEFICIAL TO CUSTOMERS 

The more tangible  the  benefit for the consumer,  the stronger the case for hannonisation. 

The  clearest  benefits  would  seem  to  be  gained  from  some  hannonisation  of access 

conditions  and  from  hannonisation  of seTVice  standards  and  perf onnance  monitoring 

(described  above  at  Proposal 8).  Jn  the  reseTVed  area,  if the  benefits  of harmonisation 

were  sufficiently great,  implementation  might even  have  a  mandatory force;  in  the  non 

reseTVed area,  it could only have the force of a recommendation. 

9.1 

The Community must encourage the appropriate level  of harmonisation which 

will improve service and help the potential customer. 

9.2 

Access  conditions for  using the universal  services  of the  Community's  postal 

administrations should be made as similar as possible. 

9.3  All the Community's postal administrations should offer contracts for access to 

universal services by larger users.  There should be a  minimum set, common to 

page 254 

Chapter 9:  Policy options 

all  the  postal  administrations,  of  contract  conditions  available  to  possible 

contractual users.  This would  include  discounts  for  pre-sorting.  The scale of 

the discounts would vary between postal administrations. 

9.4 

Tariff structures  need  to  be  investigated  with  a  view  to  making  them  more 

similar. 

9.5 

The  Community  will  investigate  whether  it  would  be  beneficial  to  make  the 

service tiering system  used  more  uniform.  (At  present,  some administrations 

operate  a  contents-based  product  split  between  letters  and  printed  papers, 

others a speed-based split between first and second class.) 

9.6  Desirable operational harmonisation relates  to  the demand for  essential inter 

operability.  Agreement on certain  technical  standards  (for instance for  postal 

electronic  mail  or  operational  bar-coding  systems)  is  needed  in  order  to 

improve service. 

9.7  A  working  group 

should  be  established 

to  analyse  what  potential 

harmonisation measures are either necessary or desirable.  The working group 

will  need  contributions  from  representatives  of  users  (including  those  of 

consumers), private operators and postal administrations. 

10.  COHESION ASPECTS TO BE TAKEN  INTO ACCOUNT 

It is  important always to  keep  in  mind the need to ensure  that the  Community throtighout 

has an  effective postal sector  that  properly  meets  the  postal  need<>  of the  whole  of the 

Community.  Most  of  the  improvements  necessary  can  be  gained  through  better 

rnanagement.  However,  some capital investment could be  needed,  which,  particularly in 

less favoured regions,  could entail a significant financial burden. 

10.l  Further  work  will  determine  the  exact  scale  of  the  economic  and  financial 

consequences  of  the  orientations  indicated,  in  terms  of  reinforcing  economic 

and social cohesion. 

page 255 

page 256 

List of 01111exeJi 

page 257 

LIST OF ANNEXES 

I. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

10. 

11. 

12. 

Overview of postal services 

The postal sector in statistics 

Mail operations and networks 

Summary of legal situation in Member States 

Community texts on postal services 

UPU  Convention - ke)' articles 

Qualit)' of service 

Terminal dues 

Remailing 

Postal operators· codes 

Postal equipment  industr.y 

Postal electronic mail 

13. 

Cultural Mail 

14. 

Tariff issues 

15. 

Intra-Community Mail 

16. 

Discussion of criteria to define  reserved area 

Glossary 

page 258 

. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ·----------~-

Annex I:  Ove1view <fpostal se1viccs 

page 259 

ANNEX 1:  OVERVIEW OF POSTAL SERVICES 

I. 

INTRODUCTION 

Postal  services  comprise  hoth  mail  services  (provided  by  hoth  postal  administrations 
(provided  by  postal 
and  pri\'ate  operators)  and 
administr;1tions). 
In  terms  of  turnover,  mail  services  generate  78%  of  the  postal 
sector's  revenue,  and  postal  financial  services  22%  (the  l;1tter  including  transaction 
revenue  from  mail  focilit'1ting  and  certain  miscellaneous  services}. 
For  postal 
administrations  alone.  the  proportions  of  revenue  between  mail  services  and  postal 
financial  services is  (J7:JJ. 

financi(-11 

services 

post(-11 

The  Green  Paper  concentrntes  on  mail  services.  Post<il  fin;rncial  services  should  be 
viewed  more  in  the  context  of the  fi na ncia I sector  over a II. 
In  add it ion.  the  rel!.ula torv 
issues  an:  more  comp I ica ted  for  ma ii.  How ever.  th is  ;111 nc\  seeks  to  give  ;,  hroa~l 
perspccti\c of huth  types of postal  sen·ice.  It  also  seeks to give  an  overview  of related 
services 

2.  MAIL  SERVICES 

2.1 

DEFl:\ITIONS 

There are  three  categories of m<1il  service  - letters.  parcels  ;1nd  express.  There 
are seve1-ctl  overlaps between  these services. 

sum ct imes  by  contents 

Letters  can  he  distinguished  from  parcels  sometimes  hy  weight  (with  a 
somc\\'h;1t  artificial  distinction  between  the  two  being set  sometimes at  2  kilos). 
or 
letters  carry 
communications  and  parcels  goods).  Express  services  include  both  express 
letters  (documents)  and  express  parcels  (packages).  They  ;ire  distinguished 
from  ordinary  letter and  parcel services  primarily by  the  speed  or the  perceived 
rel iahility of their services. 

(the  distinct ion  being 

t h;1 t 

2.2 

SERVICE PROVIDERS 

LFTlFRS 

letter-..  postal  administr~1tions  have  an  almost  complete  monopoly.  A-. 
f.::-or 
d iscusst:d  i 11  t ht·  111;1 in  text.  there  ct  re  some competing kt lt.'r  St,rvices  provided  hy 
private opera tors.  whet her  legally  or  not.  These  include  city  mailers, document 
e\changes and  rem;1iling - see  below at  Paragraph  1.~ 

For  letter  ma ii  services  offered  by  post a I  adm in ist rat ions,  a II  adrn in istrations 
In  nine  Member  States  the 
categorise  their  mail  into  two  operational  "tiers". 
t\vo  c1tegories  are  letters  <rnd  postcards  (often  refared  to  as  LC  - "Lett res  et 
Cart es"  in  French)  on  the one  hand  and printed  papers and  small  packets (often 
referred  to  as  AO  - "Autres  Objets"  in  French)  on  the  other.  Three  postal 
those  of  Denmark,  Portugal  and  the  United  Kingdom  -
administrations  -
categorise their  mail  according to speed, divided  into first  class ~ind second class 
(or  priority  and  non-priority).  The  latter  distinction  more  closely  reflects 
operation<tl costs and.  it  could  be argued, consumer preferences. 

page 26<J 

A1111e.t"  J:  O"en•iew of postal sen•ice.f 

Most  postal  administrations  make  available  contract  facilities  which  permit 
larger customers to  undertake part of the mail  process.  (The  rnain  examples of 
such  activities  would  he  pre-sorting  - undertaking  part  of  the  sorting  process 
before  posting  ·  and  enveloping.)  Certain  administrations  also  permit  third 
party  operators  to  carry  out  such  activities  on  behalf  of  the  customers  who 
originate  the  mail.  In  addition,  particularly  in  the  case  of the  direct  mail,  the 
physical generation of mail can he undertaken by specialist operators. 

PARCELS 

Parcel services  usually  refer  to  the  movement of individua I goods  items up  to a 
limit  of.  say.  JO  kilos.  However.  parcel  carriers  including  some  postal 
administrations,  now  Ctlso  move  much  larger  consignments.  usually  packed  on 
palettes.  Parcel  carriers  normally  offer  customers  a  choice  of  speeds  for  the 
delivery of parcels. 

Parcels  se1vices  operate  in  free  compet1tmn.  With  the  exception  of  two 
administrations. the postal administrations of all  Member States compete in  the 
pCtrcel  markets of their countries. 

EXPRESS 

is 

Concerning  express  services.  the  norm 
in  free 
competition.  (Only  in  three  Member States  do postal administr;1ti(lth still  have 
a  monopoly over such  services.)  There  is  a  tendency  for  express  organisations 
to  concentrate  either  on  recional.  national  or  cross-border  st~rviccs.  There  is 
also  some  specialisation  between  the  express  movement  of  don1ments  (postal 
communications  sent  by  express  means)  and  "non-documents"  (goods-hearing 
express parcels). 

l)ffcred 

they 

that 

;art· 

2-'  APPLICATIONS 

Letters &md  express  provide  communication  services. 
(Alternative  means  are 
therefore telephones.  fax  and  EDI. all  of which  provide  indirect  competition  to 
postal  services.)  Parcels  Ctnd  express  provide  gorn.ls-ddivering  services  (other 
types of delivery service providing alternatives). 

this  general  statement. 

Beyond 
two  particular  applications  are  worth 
mentioning  here.  Mail  order (for selling of material  to customers  by  post)  use 
parcel sesvices for  the  distribution  of the goods.  Advertisers  use  letter services 
to send direct  mail. 

2.4 

SUBSIDIARY LETTER SERVICES 

While all  services tend to  have the  flexibility  to he "tailored" to the requirements 
of  large  customers.  the  letter  services  provided  by  the  postal  administrations 
legal 
include  some  specific  variants.  certain  of  whid1  have  particular 
importance.  Perhaps the  most  significant are as follows: 

-

-

registered letters: 

recorded letters: 

- certificate of posting/ advice of delivery ; 

A1111e~ 1:  Oven,iew of postal !iet,,iC'es 

page 261 

-

special  delivery  (where,  for  a  supplement.  the  speed  is  normally  hetter  than 
the standard letter service); 

- direct  bags  (sometimes  called  the  M-bag  service).  used  for  sending  a  hag 

containing a  quantity of printed papers to a  particular destination; 

- post office box  (where a  customer can  hire a  hox  at  a  post office  to which  his 

mail  is delivered): 

- poste  restante  (where  for  a  temporary  period  mail  as  held  at  a  post  office 

pending collection hy  the nominated  individual). 

2.5  OTHER MAIL SERVICES 

Some  other  services  are  beginning  to  evolve.  Generally.  new  services  are 
provided  in  free  competition.  The  juridical  position  of certain  of the  services 
mentioned  - notably  remail  - is  the subject  of debate.  Other services  - such  as 
city  mail  - appear  to  he  illegal  (except.  in  that  case.  in  Spain).  hut  continue  to 
operate. 

POSTAL ELECTRONIC MAIL 

Described  further  at  Annex  12.  a  "hybrid"  service 
that  provides  tde 
transmission  of a  message.  distance  printing  and  then  postal  delivery.  Postal 
administrations also  provide  a  public  fax  service  l'alled  Bureaufax.  Some  also 
now provide a  service based on  EDI. 

DOCUMENT EXCHANGES 

Post  office  box-type  facility  permitting  exchange  users  to  deliver  mail  directly 
into  the  boxes of other  users.  and  to collect  their  own  mail  similarly  posteu  by 
other  users. 
In  at  least  the  United  Kingdom.  it  is  permissible  for  different 
exchanges to transfer mail  between each other. 

REMA IL 

Cross-border  letter  mail  service.  Provided  by  private  operators.  usually  an 
cooperation with at least  one postal administration. 

HAND DELIVERY 

Delivery of urgent  publications by  private operators. usually in city centres. 

CITY MAIL 

Delivery  of  letters  in  the  city /town  m  which  they  were  collected. 
permitted in  Spain.) 

(Legally 

UNADDRESSED DIRECT MAIL 

(By 
Delivery  of  unaddressed  auvertising  material 
comparison.  addressed  direct  mail  is  delivered  to  the  targeted  individual  or 
organisation.) 

targeted  ~areas. 

to 

· 

I page  262 

2.6  OPERATIONS 

A1111<:'x  I:  01 1<:'1vie111  of postal services 

The  operations  underlying  these  services  are  described  in  detail  at  Annex  3. 
Here,  it  is  important  to  note  that  the  items  sent  in  each  of  the  three  service 
For  example,  letters  can  vary  between 
categories  are  not  homogeneous. 
ordinary  items  of C5  size,  through  items  of A4  size  (sometimes  called  "flats"), 
through  to packets weighing up  to 2 kg or even hooks weighing up to 5  kg. 

Parcels services cover the  range  in  weight  from  the very  light-weight  (half kg)  up 
to  palletised consignments.  Express  services  cover  this  range  as  well,  hut  have 
the  additional  complication  of  often  needing  to  separate  between  documents 
(express letters) and goods (express pa reels). 

This  lack  of  homogeneity  of  ilt'rns  processed  makes  the  operations  underlying 
mail  st:T\'ices  more  complex  th:1n  might  he  supposed  (seL'  Annex  ~  for  a  more 
detailed description oft he ope Lit ion) 

2.7 

SUMMARY 

The  rn:1jority  of  mail  is  ge1wr<1tcd  hy  organisations 
In  terms  of  applications 
(that  is.  the  market  segments  th;1t  use  mail  sen·iccs).  tht:  following are the  main 
in  order  of  rc\'L'll ue  generated):  111;1 i I  order,  advertising. 
st.~gments  (I isted 
publishing,  financial  services.  industn' :ind  public administr<1tion. 

Tahk  I  below  indicates  approxi111;1tdy  the  revenue  generdted  in  the  different 
in  1w1-centagt·s  of  the  total  mail  services 
mail  services  categories  ( shm' n 
tLirno,·t~r): 

Table  !: 

Mail sen!iC<'S  - n·\·e1111c /h'rct'lltllgcs  hy s<'glll<'m und opemtor ( 1988) 

l';srt·..:1-.. 

l;\fllL"'" 

j()l) 

17  -l 
3.1  7 

4;) 

100.0 

Source: 

CEC (from  sever:tl  sources) 

The  main  mail  services  are summarised  in  Table  2.  Concernin!.!.  letter  services, 
it  should  be  mentioned  that  the  distinction  between  LC  and  AO  services  can 
sometimes  he  blurred.  Further,  it  should  not  be  thoul!,ht  that  each  of  the 
services  mentioned  is  homo11,eneous  in  itself.  Annex  1  d~scrihes in  detail  the 
operational  differences  hetw~en different  sorts of mail  which  may  he  posted  in 
one mail service "stream''. 

Annex 1:  Ove1,,iew ofposwl sen•ices 

page 263 

Table 2: 

Summwy of mail se1vices 

A. 

LETn:Rs 

A.J 

STANDARD LE'ITER SERVICES (offered by postal adminis1ra1ions) 

"Higher streams" 

either "lettrcs ct  cartcs" (LC). covering letters and post-cards: 

or "first  class",  covering items for next  working day dclin:r.· 

"Lower streams" 

either "autrcs objets" (AO). covering primed papers ~rnd small  pai:keis; 
or "second  class".  covering items for slower deliver;.  (with 1:irgcts of either 1wo  or 

1hrec working days afler collection) 

Standard  lcner  sef\·ices  arc  offered  for  ho1h  domestic  and  cr11~s-hnrdl.'r  sernccs.  For  cross 

hordcr  ... cf\·ices.  1he  seivicc  diffcrcn1iation  is  usually  LC/AO.  in  ac1..·11rdan1.:c  with  Uni\'crsal 
l'ostal  Union ( Ul'U) guidelines. 

A.2 

SllHSll>IAln· Ll·TH:I{ SERVICl·:S ( 11lkrcd by  postal  :sdm1n1 .... 1 r;1111111' I 

rcg1 ... 1cr1..·d  k111..·r-.: 

recorded  lcth.:r .... 
l..'.ert1ficatc  of pos1ing/:u.hxc 111'  ddin:ry: 
special  dcliw1y 

direct  hags (also called ··l\t-bag~·"). 

post  office boxes; 

poste  rcstamc 

A.3 

NEW LETH:I{ SERVICES 

New (or newer) ser\'ices indude 

posl:tl  dci:trnnic mail  (induding nurcaufax): 
document  exchanges: 

remail: 

'"hand  delivery": 
"city  mail": 

unaddresscd direct  mail. 

H. 

PAR<.: ELS 

Normallv up  to ."W  kg pl..'.r  itl..'.lll.  bu1  ... l..'.n:il..'.cs  for  heavier 1ll"lll" 1111"  L"u111m1111 
U ... u;!IJ\·  offering cho1n.:  of SCf\'ICe  spccd-. 

C. 

EXPRESS 

Oflcn di' idcd  111111 

do1.:umc1Hs  (posl;il n11nmun11.:a11ons  st.:nt  by  c:xprc-. ...  I. 

non-don1ments (goods-hearing express parl..'.cb) 

page 264 

Annex l: Ove1view of postal se1vices 

3. 

FINANCIAL SERVICES PROVIDED  BY  POSTAL ADMINISTRATIONS 

Financial services can  be split  into  two  main categories:  postal  financial services (such 
as mail  orders.  postal cheques, etc.)  and other financial  products (like  those  related to 
savings hank operations and those known as "giro"). 

Postal administrations  have  traditionally  played the  role of providing  readily available 
financial  services.  both  within  individual  Member  States  and  internationally.  The 
more traditional  services  in  this area  include  money and postal  orders,  postal  cheques 
and  savings  hank  operations.  The  full  list  of  financial  services  provided  by  postal 
administrations  is  shown at Table 1  below. 

The  revenues  coming from  these  help  the  administrations  to  balance  their  operating 
figures. 

The extent  to which  the services are  used  varies from  Member State  to  Member State 
and  is  influenced by  such factors as: 

-

the spread of commercial banking facilities,  mainly  in  remote areas, and  their  inter 
nperahility: 

- public  attitudes  to  the  use  of  hanks  and  their  facilities,  which  themselves  tend  to 

reflect  the type of community and  its  hanking system development: 

government  regulations  either  promoting  or 
development. 

limiting  giro  and  savings  hank 

Nevertheless.  in  the  Community the situation  is  not  uniform.  In  some  Member States 
national  girohanks  provide  full  hanking  services  in  line  with  the  commercial  hanks, 
whereas  in  other  Member  States giro  activity  is  limited  to  postal  cheque  services and 
in  at  least one country even  this last  activity  is  not authorised. 

In  almost  all  administrations  the  wide  spread  of postal  counter  facilities  has  resulted 
in  their  heing  used  for  government  services,  often  providing  for  such  facilities  as  the 
payment  of  pensions.  welfare  services.  licence  and  taxation  payments  and  ·payments 
for  utilities such as water and telephones. 

When  such  arrangements  are  in  force,  they  are generally  provided  free  of charge  to 
the government.  hut  there  is  an  argument  for  introducing some charges  based  on  the 
cost of providing the services. 

A1111ex 1: Oven1iew of postal sen1ices 

page265 

Table 3: 

Summary of financial services provided by postal admi11iwrc1ti01u 

A. 

POSTAL f'INANCIAL SERVICES 

A.I  POSTAL PA\'J\·1ENT MEANS 

•  Money Orders.  lntcrmuionc.al  Money Orders 
•  Postal Orders 
•  Postal Cheques 
•  "Vc.aleurs dcclarccs" 

n. 

Gl·:NERAL FINANCIAL SERVICES 

IU  (;IROHANK OPERATIONS 

•  T clc-paymcnt 

credit  \.'.~m..ls 

-
- ATM  Ciirohank cards 

lmcrior c.accoun1s/dcposits/pay-out 

• 
•  Foreign curren\.~' 
•  Mortgage 

H.2  SAVINGS HANK OPl·:RATIONS 

•  Homc-sc.avings invesl mcm 
•  Common funds in\'cstmcnt 

H_l  OTH 1£ R PA \'l\·1 E NTS 

•  Pensions 
•  Welfare services 
•  Licence fTaxat ion 
l'ublic p<tymcnts 
• 

4.  MAIL FACILITATING  SERVICES 

For postal  administrations'  mail  services.  the  most  important  services provill°ed  at  the 
post  office  counters  relate  to  the  selling of stamps and  the  provision  of  information 
relating to  use of mail services.  With  the exception of Belgium and  Portugal. all postal 
administrations now permit stamps to he sold in other as well as post office counters. 

Post offic;e  counters can  also  be  used to give credit  for  postage "meter" machines, and 
then  accept  postings  paid  for  with  "meter"  impressions.  There  are  also  other  more 
specialist  services  available,  such  as  the  sale  of philatelic  products,  or  containers  in 
which  to post  items. 

As with  postal  administrations,  the great  majority of priv1tte  operators' volume comes 
from  larger customers, whose  postal  items  are collected  directly  from  their  premises. 
Increasingly,  however,  private  operators  are  establishing  fa~ilities  which  enable 
Several  private 
smaller  customers  (or  even  individuals)  to  use  their  services. 

page 266 

Annex I:  0"'!1view of postal se1vices 

operators  now  have  franchised  offices  which  accept  smaller  postings;  in  addition 
investment  is  being made in "lodging points" established for  the same purpose. 

Table 4  below gives a  summary of the mail facilitating services. 

Table 4: 

Summary of mail facilitating .mvices 

POSTAL ADMINISTRATIONS 

PRIVATE OPERATORS 

- Stamp s:.tlcs 

-

Meter credits 
Phila11.:lic  products 
Coma1ner sales 
Franch1~ed access poims (IRL and  UK) 

-

-

Franchised access points 

Lodging point~ 

5.  OTHER TRANSPORT SERVICES 

Most  private  operators  who  provide  postal  services  have  transport  services  as  their 
main  business.  The  parcel  services  that  they  provide  are  usually  part  of their general 
transport  operation  (although  they  may  he  processed  through  separate  networks).  If 
they offer express services, these are generally provided entirely separately. 

While  private  operators  have  extended  down  to  smaller  consignments.  some  postal 
administrations have started to  move  into the general  transport  market.  Thus. several 
now accept  items well  beyond the "traditional" weight  maximum  for  parcels of 30 kilos. 
Sometimes, such  large consignment  services are  provided  through  the ordinary parcel 
network.  but  usually through separate networks. 

Parcel/express  operators  are  now  increasingly  offering  warehousing  facilities  to  aid 
the  "just-in-time"  strategies  of  their  customers.  They  are  therefore  becoming 
increasindv  involved  in  controlling  stock  on  behalf of customers.  and  even  carrying 
out simple -assembly operations. 

"' 

T<thle  ='  bclO\\'  summarises these other transport services  rekv<tnt  to the  postal sector. 

Transport mu/ other sell'ices 

· - - - · - - - - - - -...  - - ··-·-"  -··--·------ .. ---- ...  ·- -··  -··---·~------.. -.. . - - --·- ... ------~ 

TRANSP<HH AND DELl\'Elff 

ASSOCIATED ACTIVITIES 

-

-

-

<1encr;ll  transron 

Freight  fnrv.'arding 
Specialist  delivery services 

- Warehousing 

-

-

Stock  l'.Pnt rill 
Just-in-time scr'.·iccs 

- - - -----·---·---- ·-----

6.  MISCELLANEOUS - POSTAL ADMINISTRATIONS 

The  post  office  counters  network  is  now  being  used  increasingly  for  selling  services 
beyond  the  traditional  government  services  and  mail  facilitating  services.  They  are 
now selling services on  behalf of a  range  of public sector  institutions and  utilities.  To 
give an  impression  of the breadth  of this  range,  these  may  include  bus.  train  or airline 

Annex 1:  Ove1vieiv ofpostnl se1vices 

tickets  (or  passes),  phonecards.  fishing  licences  and  Red  Cross  bonds,  as  well  as 
lottery  tickets.  Some  are  also  now  selling  fin<incial  services  other  than  hanking  -
insurance presently being the  main example. 

The  range  of services  sold  is  crucially  affected  by  the  legislation  ~!fleeting each  postal 
administration.  Table  (>  below  summarises  the  miscellaneous  services  sold  at  the 
counters of at  least some postal  administrations. 

Table 6: 

Summa01 of misce/lanc>uu . ..,·  services sold at post oftice counters 

. . - - - - - - - - - - - - - - - .. - - · - - - - - - - - -

TICKETS 

INSURANCE 

- Transport  tickets/passes 
- Non-guvernmenlJI  licences 
- Phoncrnrds 
- Lnucry tickets 

I 

- . J ___  ---------. 

A1111e~ I:  Ot1eniew of postal se1vices 

t 

Annex 2:  Tire postal ~ctor in s1a1is1i,·s 

ANNEX 2:  THE POSTAL SECTOR IN STATISTICS 

1. 

INTRODUCTION 

This annex  is  intended to provide an  introduction in  figures 10 the Community' postal 
sector.  Following an  over~view of the sector as a  whole, it  then puts the se<..1or  in  the 
context  of the  Community's  overall  economy.  Next.  it  examines  in  more  detail  the 
mail  services.  and  then  the  postal  financial  services.  (Unles.~ otherwise  stated.  the 
figures are those of 1988. in order to ensure comparahility of information.) 

2.  OVERALL FIGURES 

Tahle  I  helow  gives  the  main  figures  for  the  postal  sector.  The  revenue  and 
employment  figures  rdate lo the whole  sector. while  the volume  figures  relate to  m&til 
services only. 

Tahle  I: 

Community:!\ J'O-"llll .\ntor - .ntmmary in figure.\ 

VOl.U.lll:· 

Items per year 
hems per working c.h1y 
Items per inhabitant/year 
R~uc: Dumcs1ic/Communi1y/ln1crnational 

7N  billion 
:?'JO  million 
244 
'J.l '.;  I 4'::  I .1';·; 

Ul:Vl-.'SUI:· 

Maib. scrvil:cs 
-
-
l'ostal financial  s~rvict.·s 

Postal ac.1mm1s1rat1om .. 
Private opera I urs 

l'ust~I ;u.lmin1~1ralh•lb 

TOTAi. 

l:"Ml'/.())"Ml:"l\f'/ 

Postal administrations 
-
Mail services 
-
financial  service~ 

1.207.000 
153.000 

Private operators 

TOTAL 

Source:  Sofres study 

ECU ~•bn 
EC..:U  20hn 

t:t.:u  1.1  hn 
---------------

f.ClJ  ~'> halliun 

l.3'10.000 
.150,0110 

-------------

1.710.000 

I page 270 

A1111ex  2:  The posral sector in  sratistics 

3.  ECONOMIC IMPORTANCE 

The  postal  services  provided  by  the  public  and  private  operators  generate  a  total 
revenue  of ECU  59  billion,  the  equivalent  of 1.46%  of the  Community's  GDP.  (This 
figure  excludes  directly  associated  industries  - such  as  those  of direct  mail  and  mail 
order - which  generate another 0.5% of the Community's GDP.)  Of this.  mail  services 
generated ECU 46  billion, and postal financial  services ECU  1.1  billion. 

However,  about  half the  postal  administrations operate at  a  loss.  As  well  as  showing 
the economic  importance of postal services  to the different  national  economies, Table 
2  below  also  shows  the  external  funding  that  is  needed  to  make  up  these  losses.  The 
profitable postal  administrations together earned surpluses of ECU  748  million,  while 
the loss-making administrations  recorded a  combined  loss of ECU 1HJ9  million.  The 
combined effect was a  net  loss of ECU  1,951  million. 

Table 2: 

lmpmtance (~(postal services to overall economy ( 1900) 

·--· 

T(H,\I. 

Tl'R\C>VER 

·--------

l:\11•0Rt.\'< T 1-

HI 
(;l>P 

1 

GROSS 

l><>\11-:STI<. 

PROl>U .. I 

St Rl'll ~/ 
l>ITI< Tl 

--r- -- .... --------- -----

ME!\IUER 

STATES 

Uclgium 

Denmark 

(icrmany 

Circccc 
Spain 
France 

Ireland 

Italy 

Luxembourg 

Netherlands 

Portugal 

United Kingdom 

EC 

Notes: 

ECU  billions 
--- ·--- ---- ··-

ECU  millions 

' I 

L'f "l' 
I.~  J  111Jll11111 .... 

. 

-~-- - - - - - - · - ---~~--

12-L8 
9 I J 

1,0201 

44.7 

W4.8 
795.0 
26.:5 
689.7 
5.6 
189.1 

34.7 

670.8 

77.U 

1.15<1..:t 

9,180.0 

136.0 

1180.3 

12.366.0 

246.7 

4.087.1 

52.7 

3098.0 

154.9 
6.426.0 

3.978.I 

3~.857.5 

0.<12 
127 
l) 1)(1 

0.30 

0.41 

1.56 

0.93 

0.59 

0.94 

1.64 
0.45 
0.96 

0.98 

~~L--.. - - - - - - - - · - - · · · - · - - - · · -

- 272  -~ 
1  4-Ul 

- l.2lllll 

- l 7.5 

- 119  7 

+I-PO 

+  I  7 

- 1.044  4 
- ()  3 

+  297.0 

- 34.8 
+  258.0 

- l .950.9 
. - _J_ _______ _ 

C< >'TIHB-

l  II<>'\ 

IU CDP 

1 

1
I 
I 

I 

- ()  21 

+  ()  ():" 

- ll. l 2 

- 0.04 

- 0 .04 

~  0.02 

+  0 0 I 

- II  15 

- 0.01 

+  0.16 

- 0.10 

+  0.04 

The  table  above  excludes 
some  ECU  20  billion  per  y<.:~ir 
ad1111nistrations.  the  total  1uri111\-cr  would  be  fCU  )9 billion  - ur  I  4(1',  11!'  I·(· ( i l)f> 

Added  to  the  FCU  31

)  hJllH1n  gl·ncr;1tL·d  h\ 

the  lU!'lltl\'a generated  by  rrivatc  Uj)L'fdlllL'  Thi~ I~  1.:~11111~111..:d  [ti  he 

the  p11s1;!1 

The  figures  include  re\·cnuc  \lr  FCU  U  billion  gL~ner~llcd  by  p1hLJI  ~1drn1n1,tr~111u1h  f1nanc1al 

servic<.:s 

The  turnover  figures  for  Hclg1um  <.:xcluuc  ECU  321  111ill1on  paid  by  lhL·  lklg1~1n gmernnKnl  to  the 

posL<..11  administration 

to  cumpen~ate  it 

for 

lnsst.:s 

incurred  un  ccr1<1in  scf\·1ccs  which 

the 

go\'ernmem  required  ii  to  prt1\'icle 

The  figure  for  Denmark  is  before all!1\1.·ance  ror  a  spcci<.11  tax  of FCU S<1  rnill111n  . 

Source:  CEC analysis 

A1111ex 2:  The postal sector in swtistics 

page 271 

The figures  shown  in  Table  2  need  to  he  set  in  the  context  of a  comparison  with  the 
two  largest  postal  administrations  outside  the  Community  (those  of  Japan  and  the 
United States) and with  the  largest  private operators.  Table .1  below seeks to give  this 
comparison.  (It should  he  noted  that  the  figures  given  for  the  revenue  generated  by 
the  private  openttors  in  the  Community  market  are  estimates  only:  figures  for  the 
postal administrations include  revenue from  fin Ci ncial services.) 

Table J: 

Revenue  of 
administratim zs  ( 1988) 

largest  private  operators  and  12011-Community  postal 

CATE<;OR\' 

O>l''."TRY/ 

C< >'ll'A'.\"Y 

Rt:n:,n: <a-:,t:R:\Tt-:1)  (ECU  Hll.UO:") 

" 

COMMU1'11'\' 

OlTSll>E 

TOTAi. 

C<>'l'll:'."rrY 

\\'ORI.I)\\ l DE 

Postal 

Japan 

Administrations 

United  State~ 

Private 

Operators 

DHL 

Fcdcr~d Exprc~s 
TNT 
UPS 

N/a 
N/a 

05 
15 
1.0 
-LO 

l) 5 
30 tl 

15 
5 s 
2.0 
KO 

9.) 

)() 0 

2 .0 
70 
.HI 
12.0 

N /a 

Nut  applicahlc 

Source:  Several 

4.  MAIL SERVICES 

Mail  services  are  provided  both  by  postal  administrations  <ind  by  private  operators. 
AH  the  ECU  20  billion  revenue  of  private  operators  is  generated  hy  non-reserved 
services.  Of  their  revenue.  postal  administrations  earn  some  ECU  21  billion  from 
letter services. the majority being reserved. 

PUBLIC AND PRIVATE OPERATORS 

Table 4 shows how  the  mails  market  is  divided  up  between  postal administrations (the 
public  postal  operators)  and  private  operators. 
indicates  how  postal 
administrations.  bv  generating  most  of  their  revenue  from  ordinarv  letters.  have 
relatively  high  th~o~ghputs  per  employee  (compared  to  private  ~)perators)  hut 
relatively  low  revenue.  The  experience  of private  operators.  who  generate  almost  all 
their  revenue  in  the  express  and  parcels  segments.  is  the  converse.  As  the  table 
indicates,  private  operators  hold  an  estimated  43%  of the  total  postal  market.  In  the 
parcel  and  express  segments.  their  share  is  much  larger  - an  estim<1ted  (llSf;  and  870,'r, 
respectively. 

It  also 

""' 272 

Aimer 2:  Tiie postal sector i11  statistics 

Table 4: 

Mail services - compc1rism1 of postal administration.f and private operators 

Oft:RA T<NlS 

Postal 
Administrations 

Private 
Operators 

Pt:1tc:tXl'AGt: ms·rRmL:-noN 

Pt:R MAll.S 1-:1\WLO\'l-:t: 

VOl.Dtt: 

Rt:n:sn: 

STAtl-' 

ITt:MS 

(thousands) 

Rt:n:sut: 
(F.CU) 

')(,,:; 

.,it: 

57':} 

7Wl 

62.0 

21,500 

.n·; 

2ir: 

~ t) 

)7.1 )ti 

·-

Source:  CEC analysis 

UNIVERSAL SERVICE 

Postal administrations have a  universal  service obligation.  (In all  Member States, they 
have  been  granted  some  special  and  exclusive  rights  with  the  intention  that  they 
should be able to meet this obligation.)  Universal service refers to the access hy  which 
every  citizen  or  organisation  may  post  items  into  the  public  postal  service:  it  also 
refers  to  the  ability  of  tht.•  postal  service  to  gain  access  to  all  addresses  in  the 
Community  in  order  to  deliver  postal  items.  Table  5  below  seeks  to  give  an 
impression of the implications of this obligation. 

Table 5: 

Univer.ml .\·en-ice  - wllectiom· am/ ddfrerie1 

C1tnum,~ 

T<HAI. 

ISllAIUTASTS 

Pt:R  l:sn 
(Note  I) 

Post  office counh.:rs 

Colkctions poi111~ (puhl1() 

Dclin:ry round:-. 

9~.772 

l<•.HIOO 

~ l~.000 

-'A90 
1.700  (Note 2) 
1.ll IO 

Note  I 

The  total  populat111n  of  the  Community  divided  by  the  numbers  of  units  mcn11oncd 

(coun1crs. (ollcc1i11n  1>oin1:-.  and delivery rounds). 

Note 2: 

The  number  of  public  collection  poin1s  includes  the  posting  boxes  available  in  post 
office counters. 

Source:  Postal administrations 

Population  density  and  concentrntion  is  also  important  in  terms  of  the  universal 
service  ohligialion.  The  Community's  avernge  density  is  14J  inhabitants  per  square 
kilometre,  the  range  for  individual  Member  States going  from  50  to  ]50  inhabitants 
per square kilometre. 

MAIL USAGE 

Annex 2:  The postal sec·1or i11  su11is1ics 

page  273 

80%  of  letters  posted  originate  from  businesses  and  other  organisations  (the 
It  is  therefore  not 
percentage  being  even  higher  for  express  and  parcels  services). 
surprising that there appears to  be a  link  between  the number of letters per  inhabitant 
and  GDP  per  capita.  Table  6  compares  the  statistical  order  for  these  two  criteria. 
(The same  point  is  made  graphically  - using  the  same  data  - at  Chapter 4.  Paragraph 
3.2 of the ma in  text.) 

Table <>: 

Comparison  r~f letter mail usage and GDP per capita 

l'\'1D-IHEI~ 

STATE 

Belgium 

Dcnm~irk 
( ier111;11w 
Ci rcec~: 

Spain 

France 

Ireland 

Italy 

Luxcmhtiurg 

Netherland~ 

Portuga! 

United  Kingdom 

ITE'.\IS 

l'ER 

CAPITA 

STATISTICAL 

()RDER 

·'-~:' 
-134 

24K 

47 

Ull 

·'·'2 

14S 
I '>h 
3-l<I 

4(lt) 

l1S 

2)h 

4 

I 

(1 

12 

10 

) 

9 

~ 
... 
_} 

2 
11 
7 

Gl>P 

l'U~ 

C\1'11-\ 

(,,.,,.  11 

1112 

1.\4 

12K 
_,s 
(17 

112 

(14 

111(1 

120 

I Otl 
...... 
·'·' 
9) 

ST-\ Tl STU ~Al. 

ORB ER 

i 
I 
I 
I 

h 

I 
) -
11 
t) 

4 

Ill 

') 

' 

7 

12 
s 

Nolet· 

This column  shows the  indcxa111u1  with  the  EC avcrngc (iDP per capita equalling  100. 

Source:  CEC analysis 

T4RIFFS 

J<J<J())  offered  hy 

As  well  as  general  economic  acti\ ity.  two  other  impurL111t  Ltcturs  <1tlecting  le\'ds  uf 
use  are  quctlity  of service  and  prices.  Figure  I  shows  thL'  h;1sic  domc'stic  letter  taritt .... 
For  sonw 
(for 
administrations.  this  is  the  basic  price  for  their  lllctin  letter services  (hut  with  discounts 
usually  he ing  ava ilahle  for  larger  users).  Other  <1dm in ist r;1 t ions.  hmvevL'r.  otle1 
substantial discounts  if the contents are printed papers (including newsp<1pers ). 

the  Community's  postal  administr<1tio11s. 

page 274 

Annex 2:  Tire postal sector in  statistics 

Figure  I: 

Comparison of basic letter tariffs  ( 1990) 

B  DK  D  GR  E  F 

IRL 

I 

L  NL  P  UK 

EC 

JAP 

USA 

-

Tar If fa  In  ECU 

Source: 

Post~tl administrations 

NAT/OlVAL AND CROSS-BORDER MARKETS 

For  all  mail  services,  domestic  markets  are  far  larger  than  cross-border  markets. 
Table  5  below  shows  how  letter  volumes  are  composed  in  the  different  Member 
States.  (A  distinction  is  made  for  cross-border  mail  between  ,  on  the  one  hand,  mail 
going from  one  Member  State  to  another  and,  on  the  other,  mail  going  to  or coming 
from  outside  the  Community.)  For  reasons  of commercial  confidentiality,  similarly 
detailed  information  is  not available  for  parcels and express services. 

is  cross-border  traffic,  4%  being  "intra 
Table  7  shows  that  7%  of  letter  mail 
Community"  and  1%  being  "extra-Community"  mail. 
In  revenue  terms,  the  cross 
border  share  is  slightly  higher  - about  10%  of letter  revenue.  For  parcel  and  express 
services,  the cross-border mail  is  worth about  11 %  of revenue. 

Annex 2:  The postal sector in statistics 

page  275 

Table 7: 

Traffic composition between domestic and cross-horder 

.--=-~--

MEMHER 

STATI: 

Belgium 
Denmark 
Gcrmanv 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
l'onugal 
United  Kingdom 

Average (weighted) 

Do~n:s11c 

l:"'TR.\-
Co,mt·,n1 

EXTRA-

C< >\l\tt:'."ffl"\. 

86.o<:< 

95.w:~ 
96.2';} 
74_()',:( 

8~.4';:; 

95.3',i 

69.9'.( 
n.w·; 
53.2'; 

90.~'' 
K<17'.; 
<>2.w; 

9Jf,( 

K~'; 
2.Y; 
1.9'.: 
14  ~'.; 
()  7'; 
2 (1'; 

2~ t)'; 

~ (i'  I 

JS  2'. 
7 (1 1

' 

K  I' I 
2 :-\'. 

4'' 

5 (lu;. 

1.9<( 

I  <)',~ 

I I.()'; 

~ 9'; 
2 I•; 

")  ~'; 

2 h' ; 

11  h' I 

2 ()' ' 

.;  ~'  I 

.• 

.;  )  t 
- ' 

·'',( 

I 
I 
I 
-T-----
I 

I 
I 

Source:  Sofres study 

SORTING MECHANISATION 

Many postal operators have made significant  investments in  sorting m;1ch inery.  Parcel 
and express  operators  have specialised  sorting equipment  which  is  increasingly  linked 
to  bar-coding  systems.  These  bar-codes  may  also  be  used  for  "tr;1cking-and-tracing" 
systems for  following the progress ~f individual  items through  the whole  process. 

Postal  administrations  have  made  substantial  investments  in  letlcr  sorting equipment 
(see Annex  11.  Paragraph 5).  This equipment  is  presently  hea\'ily  rdi:tnt  on  sorting by 
the post-code.  (The subject  of post-codes  is  discussed  in  deta ii  in  Annex  I 0.)  Figure 2 
below shows  the  rercentage of letter  mail  that  is  automaticilly  sortt.·d  h~  the  different 
postal  administrations  of  the  Community 
(The  figures  exdudc  m;1il  that  has  been 
pre-sorted by customers before posting.) 

page 276 

A1111ex 2:  The postal sector in  statistics 

Figure 2: 

Percentage of letter mail sorted mechanically 

B  DK  D  GR  E 

F 

IRL 

I 

L  NL  P  UK 

USA 

JAP 

' - - - - - - - - - - - - - - - - - - - - - - - - - - · - - - · - - - · - - - - - - - - - - - - - - '  

Source:  Ernst and  Young study 

5. 

POSTAL  FINANCIAL  SERVICES  (INCLUDING  SA/I  OF  MAIL  SERVICES  AT 
COUNTERS) 

The Green  Paper concentrates on  mail  services.  However,  it  is  important to be aware 
of the  importance  of the  financial  services  provided  hy  postal  administrations.  The 
size  of 
the  postal 
services  segment 
administration's total  revenue) varies significantly between  Member States. 

(proportionate 

the  postal 

financial 

to 

There  appear  to  he  two  reasons  for  this.  Firstly,  some  postal  administrations  have  a 
post hank  as  an  integral  part  of their  operation  (others  may  not  have  had  one,  while 
some other administrations  have sold  off their  respective  postbanks).  Secondly,  while 
general  economic  activity  is  important,  so  too  is  the  flexibility  permitted  to  postal 
administrations  in  the  enabling  legislation  for  their  postal  financial  services.  The 
financial  or  other  services  which  postal  administrations  are  permitted  to  sell  at  their 
counters varies between  Member States. 

Annex 2:  The postal sector in staristics 

page 277 

MVENUE 

Postal financial  services generate  revenue  of  ECU  12.7  billion.  This  equates  to  21 % 
of  the  total  revenue  of  the  sector,  and  to  33%  of  the  revenue  of  the  postal 
administrations.  Table 8  shows  the  revenue  of different  administrations. as well  as  the 
rate of growth. 

Table 8: 

Revenue and grmvrll  o(poswl financial sen-iCl's 

MEMHER 

STATES 

Belgium 

Dennrnrk 

Germany 

Greece 

Spain 

France 

I re land 

I wly 

Luxembourg 

Netherlands 

Portugal 

United Kingdom 

EC Total 

-

T<>TAI 

Kt-:n::\l 

·1-: 

RFH'l I· 

TRl·:'l;D 

(FCU  mill 

inns) 

S.-\\T\c;s A'.\D 

J'l;VESDll-::'\TS 

( t-:CU  millions) 

2 
' ' 
2.1 

-1 

).ll 

1.4 

u 

1.7 
.  --· 

12.7 

- -1 

.;; ( ; 

I-

('\  ( ) ' ;  

.  :-.;  ()'  ' 
i\. ;1 

.  20 !l' ' 

- (t  -~·' 

T 

.;;  ()'  I 

+  -1  2'; 
+  ISW, 

+  21  ()'' 

~  (>  ()'' 

2 
2.400 
18.500 
-1 

3.280 
45.500 
945 
9,000 
370 
11.500 

16 

13.400 

I 0-1.917 

.__ __________ ~ 

-

- -

Source: 

Sot re:-.  :-..t ud\ 

RANGE OF SERVICES 

The financial  .services  undert~1k.e11 cm·er  a  very  bro~1d r;1nge.  They  include  paying out 
pensions  and  other  benefits  on  behalf  of the  government.  They  also  collect  revenue 
for  different  government  institutions. 
lncreasinglv.  \vhere  the  enabling  legislation 
permits, other ..... services such  as  insura nee  a re  now s~1f d 

..... 

..... 

To  pick  out  two  important  examples  of  services  <1vailahk,  they  include  cheque 
payments  and  money  orders.  Access  to  accounts  is  <tlso  made  easier  through  the 
increasing  availahility  of  Automatic  Teller  Machine  (AT\1)  cards  issued  by  postal 
administrations.  The  volumes  ;111d  (for  cheques  and  monev  orders,  the  revenue 
throughput), are shown  in  Table 9  he low. 

page 278 

Annex 2:  Tire postal sector i11  statistics 

Table 9: 

Financial sen1ices  - some volumes and tumovers 

ATM 

Cllt:Qt:t:s 

Mo~t:\' ORDERS 

MEMHER 

STATES 

CARl>SI~ 

Nt::'•IHt:R  I:\ 

CIRCt:l.ATI< >:\ 

CIRCTl.ATIO~ 

TOTAL 

VALUE 

Nt:;\IUt:R  I~ 

CIRC:lil.ATIO:\ 

TfffAI. 

VALUE 

(Millions) 

( ECU  millions) 

(Millions) 

(ECU  millions) 

Belgium 

Denmark 

Germany 

Greece 

Spain 

France 

Ireland 

Italy 

Luxembourg 

Netherlands 

Portugal 

United  Kingdom 

110 
---
100 
---
450 
8)0 
---
---
4 

125 
---
1 S<J 

5,500.0 

0.3 

800 
0 

7.0 

2.700.0 

0 

0 

0.2 

164.S 

0 

82.4 

550,000 
38 
169 
0 

4,000 
128,000 
0 

0 

12 

20.000 

IS 

S.925 

1) 
1.2 
2.lO 

S.C> 

24.C> 

87.6 

03 

24.0 

0.2 

0.9 

28.8 
50.6 

260 

263 

2.000 
l.160 
2.036 

121.250 

7 

2.000 

20 

153 

2.500 

417 

EC 

I. 7'>S 

-~.)84 7 

70S. l S1J 

.:!4S  0 

l ."t~.066 

Source: 

So fr es sl udy 

COUNTERS NETWORK 

The  sale  of postal  financial  services  is  heavily  reliant  on  the  coverage  of post  office 
counters.  Table  I 0 quantifies the coverage  in  the Community. 

Tahle  10: 

Coverage of post office coullters 

Post  office  counters 

Inhabitant:-.  per post  office 

Post  offices per  100  km·· 

Source:  Sofres study 

92.772 

.~.490 

410 

The  latter  two  fo!_ures  in  Table  (,  are  averaces.  The  coveral!.e  in  terms  ot  inhabitants 
per  post  office  1~111ges  in  the  Community 'f·rom  1.700  inh<tl)itants  per  post  office  in 
Ireland  to  10.700  in  Greece.  For  geographical  coverage.  the  range  is  from  ~.(,  post 
offices per  JOO  km··  in  the  United  Kingdom  to 0.7  in  Greece. 

As  Tahle  11  below  shows,  some  postal  administrations  have  begun  to  invest  in 
facilities  to  "automate"  their  counters.  The  intention  is  to  broaden  the  scope  of 
services  that  can  be  provided,  as  well  as  improving  the  quality  of  service  to  their 

Annex 2:  The postal sector in  statistics 

page 279 

largest  customers.  At  the  same  time,  the  administrations should  gain  the  additional 
benefit of improving their management information. 

Table  11: 

Automation of post office counters (1988) 

ME.\llU-:R 

STATES 

Belgium 

Denmark 

( jermanv 

< in:ecc 

Spain 

Fr:111cc 

I rel;tnd 

ltalv 

Luxcmlwurg 

Netherlands 

l'onuual 

:::> 

United  Kingdom 

FC 

NmmEROF 

EQt:IPPED 

EQUP;\IE:'\T 

COUNTERS 

\\Tm COU1'TER 

At:TOMATIO:\ 

RATE 

(%) 

AlT<)\IATI<: 

e<>\·11•vrER 

TELi.ER 

TER\11:\Al.S  H>R 

\t\Clll'.\ES 

\IA:\A<;f:.\IE:\T 

Wrrn OTllER FACILITIES 

1.850 
1.300 

17.500 

929 
12.9XS 

17 ,000 

2.(175 

111 

l-l.373 
106 

2.624 
1.050 
21.000 

92,772 

(I) 

---

---
..t.259 

---

---
".2<>S 
-- -
1)0 
22 
2,WO 

30 
230 

---
---
2-tY,; 

---

---

~I  ti' ; 

--

I  l'; 
211  :-\'  ( 
l)t)  l l'., 
2 l)'; 

15.L 

110 

---

I 00 

---

-l)ll 
xso 

--·-

---

-l 

12) 

---

159 

---
120 

N/a 
---
---

~.900 
---
---
N/<.t 
---

-~() 

N/a 

12,5)() 

- -- -~-

-

17(1',; 

1,79~ 

-UlSO 

Note  l 

The  number  of  counters  shown  for  Ireland  and  the  Unned  Kingdom  include  sub-conlractcd 

pose  offices.  The  number  of  post  offices  wholly  owned  by  the  Irish  and  British  pose al 

administrations is.  respectively,  124  and  l,500.  The  lat1er  figure  is  used  in  the  calculation  of the 

equipment  rate  for the  British  postal  administration  (The  EC  figure  1s  also  ad1ustcd) 

N /a: 

Data  not  available 

Source:  Sofres study 

page  280 

Annex 2:  The posro/ sector in statistics 

Annex 3:  Mail operations and 11e11-vorks 

page 281 

ANNEX 3:  MAIL OPERATIONS AND NETWORKS 

1. 

INTRODUCTION 

This  annex  descrihes  in  detail  the  letter  mail  operation.  both  domestic  and  cross 
border.  It considers what can  cause cost  variations hetween  the  items  posted.  It then 
reviews  parcels  and  express  operations,  in  order  to  identify  structural  similarities  to, 
or  differences  from,  the  letter  operation.  Lastly.  it  discusses  what  networks  are 
appropriate for  mails operations. 

The letter  mail  operation comprises five  ma in  phases: collection,  sorting (divided  into 
outward  sorting  and  inward  sorting),  transport  and  delivery.  The  approximate  cost 
breakdown  is  shown  in  Table  l. 

Table  I: 

Approximate composition of letter mail operational costs 

Collection 

Outward sorting 
Transport 
lmvard sorting 

Delivery 

l 8o/t: 
29r 
5% 

10% 

-----~~------

,-a 

_.)  ,r; 

())Cfr: 

- -

--

.. 

- ·-- -~-----

Source: 

. Average values from  several postal administrations 

Before  describing  these  phases  the  annex  first  studie~  the  v.--ork  that  customers  can 
undertake before actually  posting their  mail. 

2. 

PRE-POSTING 

What work  has  been carried out  on  the  mail  hefore  posting affects what  processes are 
necessary after posting and before final  delivery of the  items posted. 

At  the  simplest  level,  a  customer  may  divide  his  mail  between  the  categories 
determined by  the postal administration  (that  is,  letters/printed papers or first/second 
class).  This would  save  on  the  "segregation"  process described  helow  at  Paragraph  4. 
A  customer  could  also  ensure  that  all  the  mail  was  presented  in  the  same  way,  thus 
If the  mail  was  posted  under  contract  or  had  been 
saving  on  the  "facing"  process. 
franked with  the  customer's  meter  impression,  this could  save  the  task  of "cancelling" 
the stamps. 

The most  important  task that  the customer could carry out would  he  the pre-sorting of 
items.  The level  of-the  pre-sort  will  depend  not  only on  the customer's facilities  (and 
volumes),  hut  also  on  the  information  that  the  postal  administration  can  give  to  the 
customer  on  its  sorting  requirements.  This  inform<ttion  will  depend  cruci<tlly  on  the 
depth of the  post-codes system  (see  Annex  IO  for  a  more detailed description).  Some 
post-coding systems enable  pre-sorting only down  to  towns  or general  <treas.  others to 
individual  streets or the delivery rounds (known as "walks") of the  individual  postman. 

page 282 

Amre< 3:  Mail operations and 11e1wo1*.<  J 

Allied  to  the  latter  depth  of pre-sorting facility,  it  would  be  possible  for  customers  to 
have  the  choice  of  posting  in  one  location.  or  in  several  locations,  with  the  aim  of 
improving service. 

3.  COLLECTIONS 

Collections  are  made  from  posting  boxes  in  the  street  (sometimes  called  road-side 
collections),  post  office  counters  or  other  public  places  and  from  the  premises  of 
customers.  In  towns.  the  road-side  collections.  particularly  in  the  afternoon.  tend  to 
be separate operations.  In  rural  areas,  they are often comhined with  deliveries. 

All  collections  from  post  boxes  and  from  counters  are  regular.  Collections  from 
customers'  premises  hy  post  offices  are  also  usually  carried  out  on  a  regular  basis. 
However.  companies  may  ha\·e  irregular  requirements  and  may  ask  for  "ad  hoc" 
collections. 

Collections  from  customer  prt.'m1ses  ;ire  also  made  hy  other  operators.  These 
operators  may  he  offering  sen·ices 
the  postal 
administrations.  Alternatively.  they  may  he  offering a  service  that  is  required  before 
the  mail  is  lodged  with  the  postal  administration.  An  example  of  this  form  of  "mail 
preparation" is  that  of a  "mail  shop"  pre-sorting mail  on behalf of the originator of the 
mail.  (However,  as  part  of facility  management,  postal  administrations will  also  offer 
special  kinds  of "mail  preparation"  to  the  customer.  a  facility  sometimes  called  mail 
room service".) 

that  compete  with 

those  of 

The  collection  function  is  vital  to  the  overall  process,  but  its  importance  is  often 
under-stated.  It accounts  for  about  I 0%  of costs.  These costs can  he  seen  as  "lumpy 
inputs",  that  is  to say that  ead1  collection  that  is  added or  taken  away  has an  effect  on 
costs.  However,  costs  do  not  vary  according  to  the  number  of units  (letters  that  are 
actually collected). 

The  collection  function  can  abo  he  under-estimated  in  terms  of  its  importance  for 
quality  of  service.  Certain  administrations  experience  problems  with  the  potential 
irregularity  of post  boxes  being "cleared"  (that  is.  collected  from).  A  problem  here  is 
that  quality  of  service  figures  often  measure  only  from  the  time  when  the  sorting 
process starts in  the sorting centre. 

A  letter  that  is  delivered  hy  the  t;1rget  date  (measured  from  after  the  arrival  of  the 
letter at  the outward sorting centre) would  he considered a  success even  though  it  may 
have heen delayed by  a  day  if the  hox  had  not  been cleared.  (The only  solution  to  this 
measurement problem  is  to have a  system  that  measures "end-to-end".) 

4.  OUTWARD SORTING 

Outward  sorting  is  the  process  that  ensures  that  mail  collected  in  a  sorting  office's 
catchment  area  is  despatched  to  the  appropriate  office  either  for  delivery  or  for 
further sorting and then onward distribution  to the delivery office. 

Annex 3: Mail operations and networks 

page 283 

4.1 

THE  BASIC  PROCESSES 

The treatment  in  the sorting centre consists of the following set  of operations: 

Segregating 

Facing 

Cancelling 

Sorting 

Dividing  items  between  letters  and  packets.  They  are 
also  streamed  (if  streams  are  applied)  - for  instance 
into letters and printed papers,  urgent and non-urgent; 
first 
non 
machinable,  or  with  a  postcode  and  without  a 
postcode. 

class~  machinable  and 

second 

and 

Ensuring that alJ  letters are  presented in  the same way 
(with the stamp in  the top right  hand corner). 

Covering the stamp with  a  post  office  mark  indicating 
the date and often the time.  (For mail with customers' 
frankings,  either  "meter"  mail  or  "pre-paid"  mail,  this 
items  are 
operation  consists  of  checking  that  all 
correctly marked.) 

Items  are  divided  into  groups  according  to  the  iin<il 
delivery  offices.  The  pron:·ss  is  undertaken  manually 
or  hy  machine  - see  below.  There  are  oper~ttional 
differences  depending  on  the  size  of  the  items  ln  he 
sorted (see  Paragraph  tJ .. ~ ). 
In  the c1se  nf destinations 
which  attract  little  m<1il  from  the  particular  outward 
sorting  centre,  the  ma ii  may  he  sent  to  an  inter 
mediate office which  consolidates  mail  for  the  smaller 
destinations in  its  region. 

De.\f}(ltc/zing 

Items  are  then  put  into  containers  (usually  bags.  hut 
sometimes into trays)  ready for conveyance. 

4.2  MECHANISATION 

Most  of  these  processes  can  he  carried  out  either  manually  or  mechanically. 
(This  is  less  true  of the  materials  handling  processes  needed  to  take  the  mail 
from  one process to  another.)  Technological changes to  mechanised  processing 
have  recently  concentrated  mostly  on  the  sorting  process.  However,  it  should 
be  emphasised  that  a  significant  manual  input  is  still  needed  even  in  processes 
that  are descrihed as "automated". 

Mechanised sorting entails  mail  being presented  to coding operators. who  use  a 
keyboard  to  enter  the  postcode  or  destination  address  of  the  item.  This 
information  is  then  converted  ("translated")  by  computer  into  a  technical  code 
(which  is  in  hi nary  form)  to  he  printed  (in  ha rs  or  dots)  on  letters.  v>'h ich  can 
then  he  sorted  '1Utomatically  hy  machines  which  can  ''read"  the  binary  code. 
(The  subject  of  coding  systems  used  hy  postal  operators  is  discussed  in  more 
de ta ii  at  Annex  I 0.) 

it 
Advances  in  Optical  Character  Reader  (OCR) 
technically  feasible  to  have  the  address  scanned  hy  an  electronic  "eye".  and  to 
send  the  information  to  be  ·translated  into  a  binary  code.  which  was  formally 
input by  the coding operator. 

technol0!:,1)'  now  make 

page 284 

Annex 3:  A1ail oper(lfions and networks 

Different packet-sorting  machines  have  been  trialled  at  intervals.  Some packet 
sorters  use  the  "tilted-band"  techniques,  where  packets are  fed  along a  band  at 
an  angle.  The  packets are  sorted  by  a  flap  opening below  the  hand,  at  a  point 
determined  by  the  code  input  by  the  operator.  Other  machines  use  trays  that 
tilt  up  at  the  correct  point.  Administrations  have  generally  found  such 
machines  less  easy  to  justify  financially  than  the  technol0!:,1)'  for  sorting  letters. 
In  both  cases,  this  financial  viability  is  measured  by  comparison  with  manual 
productivity. 

financially 

to  help  make 

the  mechanisation  more 

In  order 
feasible. 
administrations have  tended  to  "concentrate"  into  large  mechanised  centres the 
mail  which  would  formerly  have  been  handled  in  several  manual centres.  (As a 
very  approximate  guide,  a  volume  of  more  than  10  million  items  per  year  is 
for  a  modern 
threshold 
sometimes  considered  as 
mechanised  letter  sorting  centre.)  There  could  be  dangers  from  over 
concentration  which  could._ already  affect  quality  of service.  However,  the  cost 
of  mechanisation  for  smaller  centres  is  decreasing,  and  there  may  now  be  a 
period of "de-concentra.tion". 

required 

figure 

the 

Of the  different  parts of the  mail  process,  outward  sorting  is  the  operation with 
the  greatest  element  of  variable  costs  (the  next  being 
inward  sorting). 
Conventionally,  sorting offices  have  regular  staffing set  at  a  level  slightly  below 
that  required  for  handling  the  volume  to  be  processed.  Surges  of volume  are 
then  handled  hy  injecting  overtime. 
It  therefore  needs  cc1reful  cdculation  to 
arrive  ~1t  the  most cost-effective  mix  of regular time and overtime. 

Introduction  of mechanisation  has  increased  the  proportion  of fixed  costs.  The 
on-costs  of  the  machines  (engineering  costs,  electricity.  etc.)  are  largely  fixed 
although  the  staff  time  of  the  postal  operators  using  the  machines  stiJI  has  a 
high  variable  element,  as  with  manual  sorting.  Optical  Character  Reader 
machines again  have  increased  the  fixed  costs,  by  replacing  more  of the  manual 
element  hy  mechanical  process .. 

5. 

TRANSPORT 

MaiJ  is  transported  by  road,  rail,  air and  sea.  With  increases  in  volume  and  (in  some 
cases)  increases  in  the  real  costs  of  using  contractual  transport  systems,  post  offites 
have  invested  heavily  in  their  own  transport  systems  (primarily  rail  and  road).  These 
are "lumpy  inputs" which  together make a  mostly fixed  cost  network. 

Where transport  is  contracted out, charges tend to he entirely variable. or a  fixed  price 
with a  lighter charge per unit  (or per weight). 

In  terms of the overall  analysis.  the  transport  studied  here  is  that  between  offices,  and 
does  not  include  the  transport  involved  in  the  collection  and  delivery  processes. 
In 
absolute  money  terms,  the costs are very  large.  However.  relative  to  the  overall  costs. 
they are less significant. 

6. 

INWARD SORTING 

The transport  process  brings  the  mail  as  far  as  the  inward  sorting  office.  This  office 
will  have its own  "dependent" delivery  offices to which  some of the mail  may  be sorted 
(although much  will  simply be sent  on  in  hags already  made  up  by  the outward sorting 

Annex 3:  Mail opera/ions and 11e1wo1-ks 

page 285 

office).  Both  the  main  office  and  the  delivery  offices  will  h<1ve  their  own  delivery 
rounds (known  as "walks") operating from  them.  The second  inv.'ard  sorting process  is 
sorting  between  the  different  deliverv  rounds. 
is 
mech£7nised  (and  if  the  post  code  sy:tem  is  sufficiently  "deep'').  this  v.':'alk-sorting 
process could be carried out  mechanically. 

irw.'ard  sorting  office 

If  the 

Sorting  offices  have  hoth  outward  and  inward  sorting  functions.  The  description 
above  assumes  that  the  inward  mail  received  was  despatched  from  another  sorting 
office.  For  local  mail  (mail  for  delivery  in  the  same  area  in  which  it  was  collected), 
inward  functions 
quite  possibly  the  same  office  will  perform  hoth  outward  <tnd 
(without. of course, a  transport  process between). 

7.  DELIVERY 

The walk-sorting process  thus brings  the  mail  to  the  postman  who\\ ill  actu<tlly  deliver 
the  mail.  The  postman  responsible  for  the  delivery  round  then  prepares  the  mail 
according  to  the  order  in  which  he  will  carry  out  the  round.  Thi..'  postman  then 
actually deliveries the mail. 

For  significant  movements  111  mail,  it  may  be  possible  to  nwdit~  the  staffing  levels. 
However,  mostly.  the  staffing will  not change according to volume.  As <1n  indic<1tion  of 
this.  postmen  would  normally  he  expected  to  deliver  to  ~1  cerL1 in  numher  ot  houses 
throughout  the year.  and  to  cope with  the  peaks <1nd  troughs of the' olumt.·  that  would 
;1  m1111mum  service 
occur  during  the  year. 
requirement  - that  is.  that  a  delivery  should  he  m;1dt:'  to  ;in~  Lkli\cry  point  e<1ch 
working day when  there  is  mail  for  that address.) 

is  assumed  here  that  there 

(It 

i-.. 

Deliveries  are  normallv  intended  to  be  made  on  a  once-a-dav  basis. 
ln  business 
districts  or  other  area~  where  the  volume  of  correspondenc~  is  especially  great. 
however,  deliveries  are  made  two  or  even  three  times  a  dav.  However,  as  with 
coHections,  companies  may  have  .irregular  requirements  and  'mav  ask  for  "ad  hoc" 
deliveries. 

8.  CROSS-BORDER LETTER  MAIL 

When  letter  mail  is  sent  from  one  postal  administration  to  ;111other  through  the 
international  letter  mail  svstem.  the  mail  is  said  to  he  "exchdll!.!ed".  There  are 
specialised centres that dispatch  mail  on  behalf of one administratior~ ;111d  receive  it  on 
behalf  of  another. 
Postal 
administrations  mav  have  "out\vard"  offices  of  exchan!!.e  ;1nd  "in\\arJ"  offices  of 
exchange  (which  m~y be  in  different  cities).  The  locatiZrn  of  offices  also  may  vary 
depending on whether the  mail  is  being sent by air or surfoce  means. 

These  centres  are  called  "off ices  ol  cxchanl!e". 

There are  relatively  fe\v  such  offices.  For  ex;,1mple.  the  l.iern1'111  post;tl  ;1dministration 
has  eight  offices  of exchange  as  against  fifty  major  sorting  centres.  The  intention  is 
that  there  should  be  gre<1ter  control.  particularly  for  dispatching  Lo  air-lines  and  for 
customs clearance.  As  well  as  l!i\·in!.!  some  cost  economies.  there  ;ire  also  returns  to 
scale  in  terms of the specialist  k~owl~dge needed. 

Each  office  of  exchange  has  a  "catchment"  area.  Cross-border  mail  is  collected. 
separated  out  (hy  sorting)  in  the  sorting centre  and  then  dispatched  to  the  outward 
office  of  exchange.  There,  the  full  sortation  is  carried  out,  and  the  mail  is  then 
dispatched  by  the  chosen  means  of  transport.  For  the  inward  process.  the  mail  is 

page 286 

Annex 3:  Moil operations and networks 

cleared  through  customs and  then  dispatched  by  the  inward  office  of exchange  to  the 
appropriate  local  sorting  centres  for  any  necessary  sorting  before  sending  on  to  the 
delivery offices. 

The  danger  of having  apparently  so  few  offices  of exchange  is  that  they  could  act  as 
bottle  necks.  particularly during peaks of traffic.  Some  limited  action  has  been  taken 
to  alleviate  this  potential  problem. 
invested  in 
mechanisation  at  one  of  its  inward  offices  of  exchange,  it  wanted  all  inward  cross 
border  mail  due  for  delivery  in  Italy  to  pass  through  this  centre.  Following  the 
resulting decline  in  quality,  other  postal  administrations  asked  for  an  increase  in  the 
number of inward offices.  The  number was  increased  to  four,  and  now  to seven.  For 
both  inward  and  outward  operations.  the  size  of  the  catchment  area  for  offices  of 
exchange  is  very  important for  service. 

For  example,  when  Italy  first 

9.  CAUSES OF DIFFERENCES IN COSTS 

There  are  four  main  causes  of cost  variations  between  the  different  letter  items  sent: 
the speed required, size and di'stance. 

9.1 

CONCENTRATION OF MAIL USERS 

For  the  letter  service.  the  different  levels  of concentr:1tion  of  mail  users  affect 
the  unit  costs of the  two  ph~1ses of the  mail  process  that  connecrs  the  public with 
the  letter operation - that  is.  collections ~ind deliveries 

Town  centre  posting  boxes  tend  to  be  relatively  close  to  one  another  and 
relatively  heavily  used.  By  comparison.  in  less  urban/more  rural :1reas.  they are 
spread  further  apart.  and  the  level  of  usage  is  relatively  light  (so  that  the 
number of items per box  collected  is  much  less  than  is  the case for  collections  in 
more urban areas). 

For deliveries, the key cost  criterion  is  the distance  between each delivery point. 
Clearly,  there will  be  more  points  accessed  in  a  delivery  round  in  a  town  centre 
and less  in  rural areas. 

This  discussion  tends  to  contrast  the  two  extremes  of  town  centres  and  rural 
areas~ in  reality,  there  is  a  continuum  between  the  t\vo.  However.  this  contrast 
helps  to  give  an  impression  of  the  different  cost  effects  on  collections  and 
deliveries,  both  of which  tend  to  be fixed  cost  operati<.ms.  The  number of units 
put through each of the operations will  therefore affect  the unit costs. 

9.2 

SPEED  REQUIRED 

Most  administrations  offer  a 
letters/printed  papers  tiering  classification. 
However,  they still  operate a  system  of setting priorities for  handling  the traffic. 
Priorities  are  more  ohviouslv  set  hv  those  administrations  \vhich  classifv  their 
tiers oi1  the  basis of the speed  required.  (Within  each  of these categori.es,  speed 
is  a  relative concept.  Postal  administrations  achieve  different  performances  in 
terms  of  speed,  and  it  is  therefore  possible  that  the  speed  rt.~quired  will  have 
different cost  implications for different administrations.) 

·' 

.I 

•' 

Since  most  priority  mail  is  collected  late  in  the  afternoon  and  is  expected  for 
delivery in  the  mid-morning,  it  follows  that al!  the operations  necessary for such 
between  coUection  and  delivery  need  to  take  place  late  in  the  evening,  at  night 

Annex 3:  Mail operations and networks 

page 287 

or  in  the  early  morning.  In  all  Member States.  extra  shift  allowances  are  paid 
for working at  night  (and  productivity  is  usually  less).  If there are  traffic peaks, 
it  may be possible that  the capacity of any mechanisation  equipment available  is 
exceeded; the unplanned  use of manual sorting as a  support can  he expensive. 

Non-priority  mail  can  be  held  over  and  handled  in  the  outward  office  the  day 
after  collection  at  a  time  when  spare  capacity  is  available.  To  a  certain  extent, 
the other  offices  involved  in  the  process can  also  use  such  mail  as "in-fill"  when 
their  capacity  allows  - that  is,  when  there  is  staff  or  machinery  available  and 
there  is  no priority mail  to he  handled. 

9.3 

SIZE 

Operationally,  letters  are  regarded  as  being  in  three  different  sizes:  short 
letters.  large  letters  and  large  "tlats"/packets.  Large  "flats"  are  envelopes 
containing an  unfolded  document  (or  publication)  of at  least  A4  size.  A  long 
letter  is  an  envelope  which  could  contain  a  document  up  to  the  A4  size.  but 
folded  into  three.  A  short  letter  is  an  envelope  containing  up  to  an  A4 
document, but folded  into  half and  then  half again.  ( N~1turally, market demands 
will  affect  envelope sizes  used:  presently,  there  are  i1Kre~1sing volumes of the C5 
size  (approximately half the size oi A4.) 

The differences  in  sizes  <t ffech  the  sorting costs ;1 nd.  much  less  significantly.  the 
cost  of  the  delivery  ph;1se.  Letters.  whether  shun  m 
long.  can  he  sorted  on 
automatic  sorting  machinery:  tbts  and  p<1ckets.  if  sorted  mechanically.  need 
If  the  items  are  sorted  manually,  the 
separate  automatic  sorting  m;1chinery. 
items  are  handled  in  different  fittings.  the  ergonomics  of  which  affect  sorting 
speeds,  typical  standards  ranging from  1200  short  letters sorted  per  hour  to  450 
"flats" or packets sorted  per hour. 

Short  letters  more .or  less  correspond  to  items  up  to  20  g.  Long  letters  could 
weigh  up  to  80/90 g.  and  packets  more.  Flats  Me  unusual.  in  that  they can  vary 
across several weight  hands. 

It  will  therefore  he  remarked  that  tariff  structures  based  on  weight,  while 
perhaps  being  more  convenient  and  understand~1hle. are  not  directly  related  to 
these cost differences. 

9.4  DISTANCE 

As will  have  been  seen  in  -L1hle  I  above.  transport  costs are  a  small  proportion 
of total  costs.  For  lie.ht-weight  items  they  are  an  e\·en  smaller  proportion.  At 
first  sight.  therefore~· dista1;ce  does  not  seem  to  he  an  important  cause  of 
variability of costs. 

However.  distance  cin  cause  additional  complexity  in  routeing.  For  letters. 
approximately 22c;.- of the  volume  is  for  local  delivery.  perh<tps  .1Y:~(-;  for  delivery 
to  ~djoining areas.  and  the  remainder  to distant  areas. 
It therefore  follows  that 
the  further  away  the  destination  of  a  particul<1r  item.  the  smaller  the  volume 
that  is  likely  to  he sent with  it  to  the  same destination.  (Of course,  this wiJJ  vary 
from  country  to  country:  where  countries  - such  as  Canad<l  - have  the 
population concentrated  in  relatively  few  urban  <1reas  far  from  each  other - the 
assumption  made  here  m~1y he  less valid.) 

page 288 

Anne< 3:  Mail operaliom anti 11e1works  J 

The sm<dler  the volumes  going  from  one  office  to  a  particular  destination,  the 
greater the economic case for consolidating this volume with  other volume at an 
intermediate  office.  For  such  mail,  it  is  not  just  the  sorting  that  would  be 
double-handled,  but  also  all  the  materials  handling,  including  dispatching  and 
It  should  he  mentioned  also  that  basic  sorting  processes  are  often 
receiving. 
required to be repeated for  mail  going to destinations with small volumes. 

10.  OTHER MAIL SERVICES 

Parcels  and  express  operations  also  comprise  the  same  five  phase  of  C~)llection. 
outward sorting.  transport,  inward sorting and  delivery.  Although  the cost-breakdown 
is similar. some possible differences should he noted. 

10.l  PARCELS 

Because  of  the  greater  average  weight  of  items.  parcel  transport  costs  as  a 
proportion of the  total are  likely  to  he  higher.  As with  letter operations.  parcels 
(and.  indeed.  express)  operations  range  from  the  manual  to  the  automated. 
The automated sorting technology  is  similar  for  both  (and similar  to  the  packet 
sorting machinery ment inned at  Paragraph 4.2  above). 

Hl.2  EXPRESS 

For express  services,  delivery  costs  are  likely  to  be  less  than  the  percentage  for 
letters.  and  collection  costs  proportionally  more  (because  of  the  smaller 
volumes  per  collection  and  the  greater  concentration  of  the  likely  delivery 
points). 

Increasingly,  express  operators,  and  also  some  parcel  operators,  are  using 
"tracking and  tracking systems".  These  keep  an  electronic  record  of each  item 
from  the  time  of receipt  by  the .operator  up  to  the  delivery  of  the  item  to  the 
addressee.  Such systems are based on  bar-code labels attached to the  individual 
items.  These labels can also be  used  in  the sorting process. 

For  cross-border  shipments,  great  emphasis  is  placed  on  the  need  for  fast 
customs clearance.  This would  anyway  be  important  for  goods-bearing express 
packages  or  parcels  (which  are  dutiable). 
It  is  also  a  source  of  potential 
competitive  advantage,  particularly  for  express  documents  (even  though  these 
are non-dutiable). 

II.  NETWORKS 

The  transport  of  a  large  number  of  items.  including  the  delivery  of  each  to  a  final 
destination,  necessitates  the  use  of  networks.  There  ;ire  essentially  tV·iO  sorts  of 
networks  that  are  to  be  found  in  the  postal  sector.  The  first  is  called  the  hub-and 
spoke system,  and  the  second  is  sometimes called  a  "spider's-web"  network.  The  two 
are shown  below diagrammatically. 

Annex 3:  Mail operations and networks 

page 289 

Figure  J: 

Huh:..a11d-spoke  and Spider:'>  web networks 

Hub-and-Spoke 

Spider·s Web 

In  these  examples.  there  are  six  points  that  need  to  he  connected 
In  the  huh-and 
spoke  system.  items  from  each  of  the  po·ints  are  transported  into  the  central  huh 
\vhere  they  ~ire  snrkd  h)  destination.  and  then  fed  had~ <dong  the  spoke-.,  to  the  end 
points 

In  the  spider''>-\\L'l1  11el\\Ork.  there  is  no  central  huh.  R<1ther.  eaL·h  point  send-.,  1tl.'ms 
directly  to  each  uther  pnlllt.  ;ind  receives  items h;1ck  tor  deliver~ 

It  should  he  noted  th;tt.  it  th1:'se  rwtworks  represent  a  suftici1:.·ntly  L1rge  ;1n·;1  (such  as  a 
country or a  group of countriL~s). e;1ch  point  on  the  exterior o1  the  nt:.·tworks  shown  will 
he  the central  point  of the  ;1rea  it  serves with  its  O\\'n  suhsididry  points:  it  will  normally 
he connected  to  these  suhsidiMy  f10ints  by a  huh-and-spoke system 

Some more detailed  point\  need  to  he  added  to complete the description  of networks. 

I I.I  APPLICATION  OF NETWORKS 

There  are  different  criteria  used  for  choosing  between  the  two  styks  of 
networks.  The  adv;1ntage  of the  hub-and-spoke  system  is  that  it  should  make 
It  also  permits  returns  to  scale  ot 
more  efficient  the  use  of transport  capacity. 
the  expertise  of the  staff of the  huh  - particularly  important.  it  connecting.  into 
cross-border distribution 

Against  that,  there  is  the  danger  that  twn  points  that  are  close  to  each  other 
may  he  connected  only  hy  t\vo  long  journeys  to  and  from  the  huh.  There  i~ 
therefore the  possibility  that  speed of transit could  sutler. 

page 290 

Annex 3:  A1ail operations <llld networks 

The  choice  is  dictated  by  service  targets,  operational  deadlines  to  meet.  the· 
efficiency of the transport system  used and volumes.  The sorting capacity of the 
hub  is,  of course,  crucial  - especially  if  the  time  potential  is  limited.  (Indeed.  if 
it  is  mechanised,  the  volumes  gained  through  concentration  may  he  needed  to 
give an adequate return on the capital  invested  in  the  machinery.) 

Most  express operators  operate  huh-and-spoke  systems.  They  can  achieve  the 
service  targets  that  they  set  themselves,  and  also  find  that  the  concentration 
using  fewer  routes  is  more  cost-effective.  However.  the  operators  with  larger 
volumes are now starting to experiment with some direct  routing where volumes 
permit  (for  instance;  to  take  a  cross-horder  example.  Lisbon-Madrid  instead  nf 
Lisbon-German hub-Madrid). 

For letter  operations,  postal  operations  tend  to  use  spider's-web type  net'"•orks. 
Their  far  greater  volumes  tend  to  necessitate  much  later  deadlines.  Such 
deadlines  make  impossible  the  use  of essential  huh:  only  direct  transport  links 
make  possible  the  achievement  of service  targets. 
In  addition.  the  volumes  of 
the  letter operations between  the different  points enah.le  these direct  links  to  he 
cost  effective. 

Different  parcel  operators  use  one  or  other  system.  The  lower  voiumes  l hy 
comparison  to  letter  operations)  enable  huh-and-spoke  systems  to  orwrate 
effectively. 
is  a  spider's-web  network  connecting 
regional  humps,  but  each  regional  huh  being  the  centre  for  the  whole  of  its 
territory on a  hub-and-spoke system. 

Perhaps  more  common 

11.2 

INTER-ACTION 

It is  important  to note that  the  use to which  networks are put  demands different 
levels  of  inter-action.  Each  point  on  a  spider's-web  network  must  know  the 
routing for  all  the possible destination  points;  if any point  changes. all  the other 
points  need  to  adjust  their  operation. 
is 
essentially the hub that  makes the adjustments necessary. 

In  a  huh-and-spoke  system.  it 

An  interesting  contrast  can  be  drawn  with  the  network  of post  office  counters 
and  other outlets for  selling  postal  services.  In  that  case.  if an  outlet  opens  or 
doses,  there  will  be  an  adjustment  in  customer  demand  between  the  options 
available.  However.  the  other  outlets  themselves  do  not  need  to  adjust  their 
activities  (with  the  exception  of  anticipating  higher  or  lower  demand  in  their 
particular catchment area). 

11.3  HIERARCHY 

It  should  be  noted  that  networks  are  often  layered  upon  on~ ;1nother  in  a 
"hierarchy".  Thus,  a  letter addressed  to a  neighbouring town  would probably be 
routed through  the  local  sorting office.  A  letter  going to  a  distant  village  would 
probably  be ;outed  vi<t  an  inte;mediate  office  where ~it  was  "concentrated" with 
other letters for villages  in  the same area. 

If the  same Jetter  was  being sent  to  another  country  through  the  conventional 
international  mail  system,  it  would  pass  through  an  "office  of  exchange"  (a 
specialised  sorting  office  which  handles  out-going  and  in-coming  cross-border 
mail). 

Annex 3:  Mail opemtions and networks 

page 291 

In  particular, 
Express  and  parcel  operators  tend  to  have  similar  hierarchies. 
cross-border  items  tend  to  pass  through  specialist  centres.  The  advantages and 
disadvantages  at  the  top  of  such  hierarchies  are  similar  to  those  of  huh-and 
spoke systems generally. 

There  are  returns  to  scale  on  expertise  and  on  <tny  specialised  equipment 
installed  at  the  centre  through  which  the  m<lil  is  channelled.  and  there  may  he 
better use of transport capacity. 

Against  that,  the journeys  feeding  into  and  out  of such  centres  may  cause  the 
mail  to  he sent along very  indirect  routeings.  Further,  the  fewer  the  number of 
such  centres  for  the  higher  levels  of  the  hierarchy.  the  greater  the  danger  of 
bottle-necks, even  though  the  hicher  levels tend  to  h<tndle  much  less traffic than 
the lower levels of the h._ierarchy~ 

A  particular  example  of  an  expertise  which  operators 
(both  postal 
administrations  and  private  operators)  tend  to  concentrate  is  that  of customs 
clearance.  If this is  undertaken effectively.  it  can give  <Ill  operator a  competitive 
advantage~ if not,  the loss of quality of service Giil  he suhst<intial. 

page 292 

/11111ex  3:  A1ail operations and 11et1-vorks  · 

.__A_n_n_e..t_· 4_:_s_"_11_11_1u_"_Y_<>_f_le_g_al~s-ir_u_a_ri<_n_1 _i,_1 ._·H_e_",_''_e,_· ._\·1_0_1e_s _______  ~----------p-agc N3  J 

ANNEX 4:  SUMMARY OF LEGAL SITUATION 

IN MEMBER STATES 

I. 

INTRODUCTION 

This  annex  gives  a  short  description  of  the  legal  situation  in  each  ot  the  Member 
States.  In  particular,  it  describes  the  legal  status of the  postal  administr;1tion.  as  well 
It  also  states  the  position  ut  the  regulator~ 
as  those  items  that  are  reserved  to  it. 
It  is  intended  that  the  annex  reflects  the  current  situation 
bodies  (where  they  exist). 
(in  Spring  1 <)91 ). 

The  items  that  are  reserved  to  the  postal  administration  are  also  st1r11m;irisL·d  in  tlw 
table at  Paragraph  ~-

2. 

LEGAL SITUATION  I~ EACH  !VIEMBER  STATE 

2.1 

BELGIUM 

The  Belgian  Pust  Office  (de  Post/la  Poste)  is  now  ;1  puhlil·  L'l1ll'lpr  isc.  \\ith  tull 
administrative  and  fin a ncia I autonomy.  ( Hrnve\'er,  there  ;1 r1..·  L'L'!L1 in  "m issiPn\" 
imposed  on  it  by  the  government.  for  which  the  governnwnt  compensate'.'>  the 
Post  Office.)  The  General  Manager  is  responsible  for  the  gluhal  rnanagt.'nwnt 
of the  post.  The postal  monoroly covers letter,  postcard and  printed paper  mail 
up  to  2  kg.  Justification  for  the  monopoly  is  implied  in  thl'  lklgi;111  legislation 
by  the universal  postal  service being rendered  in  the public  inkrcst 

2.2  DENMARK 

1s 

body 

regulatory 

The 
;111d 
Telecommunications.  The  rublic  operator,  the  Danish  Post  OtfiL·e  (Post 
Tjenesten ).  forms  part  of the  state  administration.  HoW1...'\ l.'l.  it  r..:11jo~·"  rcl;1ti\ L' 
autonomy  in  administrative  and  financial  matters.  The  Director  Gt:rH:Ltl  h;is 
overall  responsihil ity  for  the  management and oper;i t ion  ut  t hL·  Pu\t  Office 

the  General  Dirt.'Ctor;1lL' 

Post 

ut 

The  post;tl  monopoly  covers  letter  and  c1rd  mail  up  tu  l  k~.  ;111d  i.-.,  justitiL·d  l)ll 
the  basis  of the  univers;tl  service  obligation  of the  post  Till·  llt'\\  post;il  Lt\\  i:-. 
being examined hy  the  Commission  ot the  Europe;in  ('nm1m111itil''-.  in  p;11t1l'l1L11 
concerning the  regu l;i tory  posit ion  ot  LTUss-hurLkr  let l t' I  111.1 ii 

2.3  GERMANY 

The German  Post  Office  (Deutsche  Bundespost  Postdien\l)  is  part  ot the  sl<lte 
administration  organised  in  a  ·regie·  with  a  separate  hudg1...·t  The  top  official 
responsible  for  the  overall  management  of  the  postal  sen·in~s  is  the  Director 
General.  The  Ministry  for  Post  and  Telecommunie<ttions  holds  the  regul;1tory 
responsibility covering the  postal  services and  the  associaled operating di\·isions 
(Telekom and  Postbank). 

- ... 

page 294 

A1111ex 4:  Summmy of legal si1umio11  i11  Member States 

In  Germany.  letters.  postcards and  printed  matters  fall  un~ler the  monopoly,  as 
well  as  parcels  and  packets containing a  personal  messa·ge.  The weight  limit  is 
currently  1  kg,  hut  is  likely  shortly  to  he  lowered  to  500  g:  this  works  in 
conjunction  with  a  price  limit  set  at  ten  times  the hasic·tetter  tariff (that  is,  at 
OM  10  for  items  up  to  20  g).  The  Bundespost  refers  to  the  universal  service 
requirement as the justification for  the  monopoly. 

2.4  GREECE 

The  regulatory  body  for  postal  affairs  is  the  Ministry  of  Transport  and 
Telecommunications.  As  a  civil  service  department.  the  Greek  Post  Office 
(Hellenic  Post)  is  set  up  as  a  public  enterprise  headed  by  a  Director  General 
who  reports  to  the  Minister  of Transport  and  Telecommunications.  Although 
post  and  telecommunications  for  the  most  part  function  separately,  the  public 
tele~ommunications operator,  OTE subsidises the deficit  incurred by  the  postal 
services. 

Letters.  postcards and  printed  papers up  to 2  kg fall  under the  postal  monopoly 
whic_h  is  justified  in  the  legislation  on  the  grounds  of  the .post.  being  a  public 
ser\'1ce. 

.,  -
-·=' 

SPAIN 

regulatory  body 

The 
and 
Communications.  The  public  operator  is  the  Spanish  Post  Office  (Correos) 
which  forms  part  of the same ministry.  It  is  a  state administration. and does not 
h:1,·e  financial  autonomy.  It  is  headed by  a  Director Gener~tl. 

ot  Transport.  Tourism 

the  Ministry 

is 

inter-urban  deliverv. 

The  postal  monopoly  includes  letters  and  postcards  up  to  2  kg.  if the  items are 
No 
for 
justification  is  provided- for  the  monopoly.  Caja  Postal  (the  postal  financial 
hank)  is  a  separate entity. 

items  are  non-reserved.) 

(Intra-urban 

2.6 

FRANCE 

The  French  Post  Office  (la  Poste)  is  one  of  the  operational  divisions  of  the 
Ministry  of  Posts,  Telecommunications  and  Space,  the  other  operational 
di,·ision  being  France Telecom.  The  Direction  de  la  Reglementation  Generale, 
the  regulatory  division  of the  Ministry,  is  the  regulatory  body  responsible for  all 
postal  services in  France. whether provided by  public or private operators. 

Although  within  the structure of the  Ministry. the  French  Post  Office  is  a  public 
autonomous  establishment  ( etablissement  autonorne  de  droit  public).  having  a 
separate  budget  and  headed  by  a  director  general.  Services  falling .under  the 
postal  monopoly  include  letters,  postcards  and  packets  up  to  2  kg.  French 
legislation  does  not  provide  a  justification  for  the  monopoly.  Over  and  above 
the  monopoly,  the  postal  administration  has  a  univers<tl  service  obligation  for 
items  up  to 7  kg. 

A1111e.x 4:  Summmy of legal situation in  Member States 

page 295 

2.7 

IRELAND 

The  Irish  Post  Office  (An  Post)  is  a  limited  corporation  with  all  shares  owned 
by  the  government.  The  Chief  Executive  Officer  has  responsihility  for  the 
The  postal 
global  management  and  operation  of  the  postal  services. 
department  of  the  Ministry  of  Justice  and  Communic1tions  is  the  regulatory 
body supervising the quality and  reliability of the  postal  sen·ices. 

The  postal  monopoly  covers  letters.  postcards.  packets.  printed  papers  and 
express  items  up  to  2  kg  plus  p;1rcels  which  cont:1in  ;1  personal  message.  The 
monopoly  is  justified  as allov.'ing  the  cross-suhsidisat ion  1wcessary  for  providing 
a  national  postal service. 

2.8 

ITALY 

As part of the state administrntion.  the  Italian  Post  Office  (p<art  of PTI Italia)  is 
administered  as  a  civil  service  department  without  <1dministrative  or  financial 
autonomy.  The  top  official  responsible  for  the  post;tl  sen·ices  is  the  director 
general. 

The  postal  monopoly  covers  letters  and  poste<1rds  up  to  ~  kg.  While  co11ection 
and delivery of parcels are  not  part  of the  post<il  ;administration's monopoly.  the 
transport  of parcels  between  large  towns  rem<1 ins  p;1 rt  of it  No  justification  is 
provided for  the  monopoly. 

2.9 

LUXEMBOURG 

The  Luxembourg  Post  Office  is  part  of the  government  administration  and  has 
no  administrative  or  financial  autonomy.  The  Director  General  is  responsible 
for  its  overall  management  and  the  head  of  the  postal  division  is  in  charge  of 
the  operational  side  of  the  postal  services.  Letter  ;and  postcard  mail  (up  to  2 
kg)  fall  under  the  scope  of the  monopoly  No just i fic1 t ion  is  provided  for  the 
llll)nl)jl()ly. 

2.IO  NETHERLANDS 

The  Ministry  of  Transport  is  the  regulatory  body  which  -;upervises  the  postal 
sector  in  the  Netherlands.  Since  January  i '-JXtJ  the  PTT.  covering  posts  and 
telecommunications.  has  been  established  as  "  limited  corporation  (NV),  the 
shares  of  which  are  owned 
l()()C(  by  the  government.  P1T  Nederland  has 
different  operating  companies.  PTT-Post  being  responsible  for  postal  services. 
The  General  Managing  Director  of  PTr-Post  therefore  st ill  reports  to  the 
board of PTT Nederland. 

The justification  given  for  the  monopoly,  which  under  Dutch  law  is  regarded  as 
a  "concession",  is  the  need  to  safeguard  the  qu<tlity  of  postal  services.  The 
monopoly  includes  letter  and  post  card  mail  weighing  up  to  500  g  and  with  a 
postal service  price of less  than  Dtl  8.20  (for domestic services).  The  European 
Commission.  acting  under  Article  90.1  of  the  Treaty  of  Rome.  has  issued  a 
decision 
limits  were 
incompatible  with  the  EC's  competition  rules.  This  decision  is  presently  being 
disputed  before  the  Court  in  Luxembourg  by  both  the  Ministry  of  Transport 
and  PTT-Post. 

the  scope  and  application  ot 

the  monopoly 

that 

-

page 296 

A1111ex  4:  Summwy <~(legal siJU{//ion  in  /\1emher States 

2.11  PORTUGAL 

As  a  civil  service  department,  the  Portuguese  Post  Office  ( Correios) 
is 
established as  a  public  enterprise  and  in  particular  under  the  form  of a  holding 
company.  It  is  headed  by  a  general  manager and  its  operational side  is  run  hy  a 
director  general.  The  ICP  - Institute  of  Communications  - is  developing  an 
active  regulation  role.  The  postal  monopoly  covers  letters.  postcards  and 
express items up  to 2  kg.  No justification  is  given  for  the  monopoly. 

2.12  UNITED KINGDOM 

The  regulatory body for  the  United  Kingdom's  postal sector  is  the  postal section 
of the  Department  of Trade and  Industry.  There  is  a !so  ;1  "q u;1si-governrnen ta I" 
body,  the  Post  Office  Users'  National  Council.  which  also  h;1s  some  supervisory 
role  to  play  - hut  only  in  terms  of the  services  provided  h~'  the  public  operator. 
the  British  Post  Office 
Proposals  are  presently  being  studied  to  set  up  an 
independent  body,  the  Office  of  Post;d  Services.  \vh ich  \\nu Id  oversee  the 
quality  of the  universal  service  provided.  as  well  as  advising  thL'  government  on 
the appropri;1lt.'  scope of the  post;tl  nrnnopnly 

The  Post  Office  is  ;1  st;1 t utory  corpor;1 t ion  which  is  mg;1 n ised  i 11 to  three  ma in 
businesses  - Letters.  P;1rcels.  and  Counters.  (The  hanking  di\ision  - Girobank. 
was established  as  a  \vholly-mvned  subsidiary company  in  I (J,')5  ~rnd privatised  in 
July  1 <J<JO.  having  been  purch;1sed  hy  a  building society.)  The  ( 'uunters  Business 
was  established  as  a  whollv  owned  suhsidiarv.  Post  Office.  Counters  Ltd:  in 
October  I 987.  Royal  Ma (J  (Letters)  and  p,~ rcelforce  are  nut  separate  legal 
entities.  hut  they  have  their  own  internal  accounts  and  are  organisationally 
distinct. 

Royal  Mail  Letters  has  a  monopoly  over the carriage of letters when  the service 
costs .t.:  I  or  less.  (A  significant  reduction  of this  limit  is  said  to  he  being studied 
by  the  government.)  There  are  specific  derogations  concerning  international 
mail,  the delivery of Christmas cards and  document  exchanges. 

-~· 

SUMMARY OF ITEMS UNDER MONOPOLY 

Table  I  below  summ;1rises  tht:>  items  under  the  monopoly  in  e:ich  Member State.  This 
is  the  same  table  as  shown  in  Ch;1ptt:'r  -~of  the  main  text:  hrn'e'n.  here  all  the 
qualifying remarks are ;1dded 

....... 

Annex 4:  Summary of legal situation in  Member Srmes 

page 297 

Tahle  I: 

Member States' reserved .\'e1vices  - juridical position ( J 990) 

ME\IBER 

STATES 

lklg1u111 

LETrERS 

OTHER sun·1cEs t:'\nER  \l<>:"<>P<>LY 

Cl' TO 

PRIYn:n 

S\IALL 

FAX 

EXPRESS 

PARCELS 

STA.\11' 

l'.\l'FR~ 1I1 

I'·\( ·.,;t-:TS 

(PllllJ(') 

\J.\11. 

SALE~ 

2 ko ::::> 

ko 
0 

• 

1.?1 

'\ / :1 

l  ~I 

•  i  ~I 

( icrmdm 

ko 
::> 

1"1 

( i reecc 

2  kg 

Srarn 

')  kn 
-

~ 

((>j 

France 

2 ku_ 

1'1· 

lrcl:md 

2 k!,! 

• 

• 

• 

• 

• 

I 
I 
I 
I 

I 

! 

Ne! hcrl~11Hb 

:(l:~g . "·  I 

i 

\ 

1.!1 

• 

• 

• 

• 

• 

• 

(?\) 

• 

• 

( 111 

,___l.J-'1_1_1t_c_d_l\._· ,_11_~_·l_h_1_11-1~-l._l. __  '_' J __ " ~----"---·····  ~--- -....  J _______ ~-------··- -------

• 

• 

• 

I  ",."  . , . 
I 

Note 4.  ThL·sc  adm1111s1ra1111ns  cl:1ss;f\  l>ctwcL'l1  first  cl:1ss  :ind  second  cl<Jss 

letters 

Items  which  could 

elsewhere  he  cbsscd  :1-.  printed  p:1pcr, \\·ould  be  -..1111pl\  lc1tcrs.  and  thcrcfurc puss1bly  rcscrn:d 

Note S- Also  :1  price  lim11  dppl1cd  - set  :1t  ill  times  has1c  tarilf  (thcrcton:  Dr-..·t  10  - ur  ECU  . .l,t)O  - lur  20g 

item).  The  (icrm:1n  lllllll\lpdlv ;1pplics  tu  all  mail  , .. ·11h  a  persun<d  and  topical  message.  ;111d  aisu  111 

mdil  with  pcrsun:tl  mc-..s:1gc-.,  111  p:1rccls  ur  p:1ckci...  Huv.cver,  if  :-.uch  a  mess:1gc  refers  1(1  the 

cuntents ul !hc  p~irccl ()r  packet.  this  mail  docs  no!  Lill  Ulldcr  the  monoroly 

Note 6 

[)pc,  not  include  c11v-111:11I  (111r  1n1r:1--urh:111  111;111  f11r  'kl1,·cn  111  -..~1111c  c1l\  as  culku1un)  Uoc~ nt11 

co,·c r  post-cards 

Note?{  Cu rrc111 Iv  being  rc\·1scd  111  c11111JL·r:11  :1111  \\ 11  h  l hL'  C(l111pc11t 11111  -.,c1'  ice-.,  111  the  Fu ropc~111 Com1111s~1un 

Likely  l hdl  nwn(lpuly m-cr  exp re'' 'L'r,·1cL'' "ill lJL'  wi1 hdr;I\\ n 

page 298 

Anne"C  4:  Summary of legal silllation in Member States 

Note 9:  Universal service obligation  up to 7  kg. 

Note 10:  Contents:  packets and documents nn1  exceeding  I  kg. 

Note 11:  While  Italy  has  placed  parcel  services  in  the  non-reserved  area.  the  transport  of parcels  between 

large cities remains reserved. 

Note  12:  There "·ill  also  be a  price  limit  operating  in  combination  with  the weight  limit  of 500g.  (The price 
limit  presently  proposed  is  Dll  8.20  (ECU  3.60)  for  domestic  services,  but  this  is  currently  being 
reviewed by the court  in  Luxembourg).  Postcards are  not  a  reserved service. 

Note  13:  Price  limit  of[)  (ECU  1.45)  is  applied  (with  no  weight  limit)  Rcduc11on  tu a  limit  ol about  f033 

(ECU 0 .:ll\)  is  being considered. 

Source: 

European  Research  Associates study 

Amia 5:  Community texts 011  postal se1vices 

page 299 

ANNEX 5:  COMMUNITY TEXTS ON POSTAL SERVICES 

1. 

INTRODUCTION 

This  annex  lists  the  references  for  documents  or  statements.  issued  officially  by  the 
different  Community  institutions.  that  are  directly  related  to  the  postal  sector. 
It  is 
divided  into: 

legislation  issued by  the Council; 

legislation and decisions issued by  the Commission; 

resolutions made and opinions given hy  the Parliament. 

The  list  does  not  cover  documents  and  statements  which.  though  relevant,  are  not 
directly  related  to  the  postal  sector.  It  also  does  not  mention  occasions  when  action 
has  been  taken  following  co-operation  between  the  Commission  and  individual 
Member  St(1tes  if  this  action  did  not  result  in  a  formally  issued  document  or 
statement.  (For  example,  the  list  does  not  mention  the  instances  where,  acting  on 
advice  from  the Commission, the governments of Belgium,  France, Germany and  Italy 
decided  in  turn  to allow the free operation of express services.) 

2. 

LEGISLATION ISSUED BY THE COUNCIL 

TYPE 

REF 

DATE 

DESCRIPTION 

regulation 

~(J4 /9 I /EEC 

4 /tr2/9 J 

"on 
the  operation  of  air  cargo 
services between  Member States" 

3. 

LEGISLATION ISSUED BY THE COMMISSION 

TYPE 

REF 

DA TE 

DESCRIPTION 

regulation 

222/77 
(Title V) 

13/ 12/76 

"on  Community  transit  - Special 
provisions 
to  postal 
applying 
consignments" 

recommendation 

79/570/CEE 

29/05/79 

directive 

79 /695 /CEE 

24 /07 /79 

the  application  of 

"on 
postal 
between  Member States" 

inland 
to  certain  mail 

rates 

harmonisation 

"on 
the 
procedures  for 
goods for  free circulation" 

of 
release  of 

the 

regulation 

1224/80 

28/05/80 

the  valuation  of  goods  for· 

"on 
customs purposes" 

page 300 

Annex 5:  Community texts on postal se1vices 

TYPE 

REF 

DATE 

DESCRIPTION 

regulation 

3179/80 

5/12/80 

"on  postal  charges to  be  taken  into 
consideration 
\vhen  determining 
the customs value of goods sent by 
post" 

directive 

81I177 /CEE 

24 /02/81 

regulation 

(>78/85 

18/02/85 

regulation 

l ?CJ7 /8(> 

9 /0(>/8(> 

decision 

87 /415/CE~ 

15/06/87 

recommendation 

88/590/EEC 

24/ 11/88 

regulation 

4151/88 

21/12/88 

decision 

lJ(l/ 1<1/CEE 

20/12/XtY 

regulation 

14/05/90 

decision 

90/45C>/CEE 

1/08/90 

communication 

COM(90)447 

2C>/09/90 

"on 
the 
procedures 
Community goods" 

harmonization 
for 

of 
the  export  of 

"simplifying  tormalities  in  trade  in 
goods within  the Community" 

"abolishing  ct'rL1in  pnsLtl  tees  tor 
custums  prescnL1 l H lf1" 

l.:ond usion  o1  a 
"conccTn i ng  t hL' 
the 
het ween 
Convent ion 
European 
the 
Community. 
Republic  of Austria.  the  Republic 
the  Rerublic  of 
of  Finland. 
Iceland.  the  Kingdom  of  Norway, 
the  Kingdom  of  Sweden  and  the 
Swiss 
a 
Confederation 
commori  transit  procedure" 

on 

particular 

"concerning raymenl  systems,  and 
relationship 
in 
card 
between  cardlrnlder 
issuer" 

and 

the 

the 

down 

"laying 
prov1s1ons 
applicable  tu  gomls  brought  into 
the  customs 
the 
Commun it\''' 

tl'.rritorv  of 

"concerning  the  prm 1s1on 
in  the 
NetherLrnlb  ut  c\prcss  deliven· 
services" 

'';1mending  Regulation  (EEC)  No 
:;  1 ?CJ /SO  on  postal  charges  to  he 
taken 
into  consideration  when 
determining  the  customs  value  of 
goods sent  hy  post" 

"concerning the  provision  in  Spain 
of  interna t ion a I  express  courier 
services" 

"making  payments  1n  the  internal 
market" 

A1111ex 5:  Community texts  011  postal se1vices 

page .WJ 

TYPE 

directive 
(draft) 

REF 

DATE 

DESCRIPTION 

COM(90)~ 14 

14 /()<) /90 

"concerning 
individuals 
to 
in 
processing of personal data" 

the  protection  of 
the 

relation 

directive 
(draft) 

COM(<>0)-117 

20/09/90 

"concerning certain  aspects  of the 
organisation  of working time" 

directive 

<J0/504/CEE 

()<J/ 10/90 

harmonization 

"on 
the 
procedures  for 
goods for  free circulation" 

of 
release  of 

the 

4.  RESOLUTIONS AND  OPl~IONS OF THE PARLl.-\\lENT 

TYPE 

REF 

DATE 

DES( 'RI PTION 

resolution 

524/S2/PARI. 

Jl)/7/82 

"Lu rope an  postage  stamp" 

resolution 

('2(>2:'1"7 

14/10/S2 

resolution 

2-%h/S4 

lega 1 

prov1s1ons 
on 
Community  standards  for 
hoxcs" 

tor 
letter 

resolution 

2-1 yq /S.5 

"on  Lurorail express  items" 

resolution 

resolution 

resolution 

resolution 

resolution 

2-1<>1/8(1 

resolution 

2-207 /86 

"on  a  common  market  for  postal 
ch~1 rges" 

"on  the  introduction  of a  uniform 
postage  rate  within  the  EEC  for 
periodicctls  and  printed  papers. 
Committee  asked  for  its  opinion: 
education. 
youth, 
infurm<1tion  and sport" 

culture, 

the 

un 
Lurt1jh.:'.~tn  post~1ge "re"" 

cre;1tiun  of  a 

true 

"011  the  rise  of  postal  charges  in 
Belgium  ~111d  its  adverse  effects  in 
the cultural  sphere" 

postal 

on 
for 
printed  matter  in  the  European 
Community" 

arrangements 

"on  Belgian  postal  charges  and 
their 
the  European 
threat 
cultural area" 

to 

page302 

Annex 5:  Community texts 011  postal se1vices 

TYPE 

REF 

DATE 

DESCRIPTION 

resolution 

2-1362/86 

"on  printing  the  words  'European 
all  Member 
Community'  on 
States'  postage  stamps  and  the 
the 
need 
standardisation 
and 
uniform iza t ion  of  postal  services 
and charges in  the Community" 

expedite 

to 

r eso l u t ion 

2-638/87 

"on  the issuing of stamps in  ECU" 

opm10n 

opinion 

PE  118.194/fin  4/2/87 

"postage rates  for  periodicals" 

PE  119.050 

16/12/87 

the 

"on 
Community 
monopolies  .rn 
telecommunications sector 

compatibility  with 
law  of 
the  State 
the  postal  and 

resolution 

2-354/88 

resolution 

2-259/88 

11/11/88 

"on  the  issue  of  a  postage  stamp 
of uniform value  in  the  EC" 

"on 
telecommunications" 

posts 

and 

Annex 6:  UPU Convention - key a11ic/es 

page 303 

ANNEX 6:  UPU CONVENTION - KEY ARTICLES 

1. 

INTRODUCTION 

The titles  of etll  the  key  articles that are relevant  to the discussion  in  the main  text  are 
as shown  in  Table  I.  (Throughout,  the article  numbering system  of Convention signed 
at the  1989  Washington  Congress is  used.) 

Table  I: 

Key articles  (~f" U PU Convention 

UPU Article N° 

Description of Contents 

Freedom of transit. 

Definition of letter post  items. 

20 

25 

General conditions concerning postal charges 
and weight  limits. 

Posting abroad of letter-post  items. 

T!i-74 

Terminal dues 

The full  text  of these  articles  (as  in  the  1989  UPU Convention)  is  shown  at  Paragraph 
2 below 

Because  ot  the  central  importance  of Article  25  (previously  Article  n) to  the  debate 
concerning  the  compatibility  of  the  Convention  \vith 
the  Treaty  of  Rome.  the 
evolution and  implications of this article are discussed  in  Paragraph .1. 

2. 

TEXT OF RELEVANT ARTICLES 

2.1 

ARTICLE  I:  FREEi>OM OF TRANSIT 

l. 

Freedom of transit,  the principle of which  is  set  forth  in  Article  I of the 
Constitution,  shall  carry  with 
the  obligation  for  each  postal 
it 
administration  to  forward  always  by  the  quickest  routes  which  it  uses 
for  its  own  items,  closed  mail  and  cl  decouvert  letter-post  items  which 
are  passed  to  it  by  another  administration.  This  obligation  shall  also 
apply  to  airmail  correspondence,  whether  or  not  the  intermediate 
postal administrations take part in  reforwarding it. 

page 304 

Annex 6:  UPU  Conve111io11  - key a111des 

2. 

3. 

4. 

5. 

(L 

Member countries  w~ich do  not  part1c1pate  in  the  exchange  of  letters 
containing  perishable  biological  substances  or  radioactive  substances 
shall  have  the option of not  admitting these  items  in  transit iz  <il~couvert 
through  their  territory.  The  same shall  apply  to  the  items  referred  to 
in  Article 41,  Paragraph 9. 

Member  countries  not  providing  the  insured  letters  service  or  not 
accepting liability  for  insured  letters carried  by  their  sea  or  air  services 
shall  nonetheless  be  bound  to  forward,  by  the  quickest  route,  closed 
mails  passed  to  them  by  other  administrations.  hut  their  liability  shall 
he limited  to  that  la id  down  for  registered  items. 

Freedom  of transit  for  postal  parcels  to  he  forwarded  hy  l<tnd  and  sea 
routes  shall  he  limited  to  the  territory  of  the  countries  taking  part  in 
th is  service. 

Freedom  of transit  for  air  parcels  shall  he  guaranteed  throughout  the 
territory of the  Un ion.  Nevertheless.  member count r ics  '" h il·h  ;1 re  not 
parties  to  the  Postal  Parcels  Agreement  shall  not  hL'  required  to 
forward  air  parcels hy  surface. 

M_emher  countries  which  11re  parties  to  the  Postal  P:1rcL·h  .'\~rc:ement 
hut  which  do  not  provide  an  insured  p<11-cels  service  or  '' hiL·h  do  not 
accept  liability  for  insured  items  carried  hy  their  sea  01 
~1i1  services, 
shall  nonetheless  he  hound  to  forward.  hy  the  quickest  rnute.  closed 
mails  passed  to  them  by  other  administrations.  hut  their  li;1hility  shall 
he  limited  to  that  laid  down  for  uninsured parcels of the  same' weight. 

2.2  ARTICLE  19:  LETTER-POST ITEMS 

l. 

Letter-post  items shall consist of: 

a) 

letters and postcards,  together called "LC": 

b)  printed  papers,  literature  for  the  blind  and  small  p<1ckcts.  together 

called "AO". 

2. 

~. 

4. 

Special  hags  containing  newspapers.  pt:.'.rimlictls.  hooks  and  other 
printed  papers  for  the  same  addressee  at  the  s<11T1e  address  shall  he 
called "M  hags". 

Letter-post  iten1s  conveyed  by  air  \\,.ith  priority  sh~dl  he  c~tll~d  "airn1ail 
correspondence" 

Surface  iterns  conveyed  hy  a 11 
"SAL" (Surface Air  Litt). 

\J...•it h  red uL·ed  pr 1ur1t ~  "h;i 11  ht~  ca lied 

Annex 6:  UPU Co11ve11tio11  - key w1iclcs 

. ~~--- ~og<·· ~~;,~-] 

- - - - - -

5. 

Based  upon  the  speed  of  their  treatmcnL  letter-post  items  may  he 
divided  into: 

a)  priority  items.  i.e.  itt:ms  cunveved  hv  the  quickest  route  (air  or 

surface) with  priority: 

h)  non-priority  items.  i e.  items  for  which  the  sender  has  chosen  a 

lower  rate,  implying ;1  lon~er delivery  tiriw 

(L 

Administrations  of  transit  and  destinati<'n  shall  treat  priority  items  as 
airmail correspondence:  on  the  hasis  of  bilateral  rules.  administrations 
may  also  give  the  same  tre;1tment  to  surface  LC  items  when  no  better 
service is  offered  to  the sender  Similarlv.  no  distinction  shall  he  made 
between  non-priority  items  :tnd  surface  AO  items.  or  surface  AO 
conveyed hy air with  reduced  priority ( S_;\ I.) 

2.J 

ARTICLE  20:  POSTAGE  CHARGES  A~D Ll\llTS OF WEICHT AND  SIZE. 
GENERAL CONDITIONS 

l. 

2 

1. 

4 

The  postage charge  for  the  con\·eyance  ot  letter-post  items  throughout 
the  entire  extent  of the  Union  shall  he  fixed  for  guideline  purposes  in 
accordance with  columns  1.  2 and  1  of the  t;1hle  I  below.  The  limits  of 
weight  and  size  shall  !w  fixed  in  ;1cnm..L1nct·  with  L·nlumns  --l  and  )  ot 
(This  u1hlt.'  i.\  rer)fwfllct'd  ur  rlze  end  o( rlzi.\  annex.) 
the  ta hie  below. 
Except  in  the  case  provided  for  in  .:\rtiL·k  2~.  P;1r;1g1:1ph  (i.  they  shall 
cover  delivery  of the  items  to  ttw  pL1ct._·  t)!  ;iddrl'Ss  pn)\'ided  that  this 
delivery  service  is  nperatt:d  in  the·  country  Pl  destin;1tiun  tor  the  items 
in  question 

The  Executive  Council  sh;tll  he  ;iuthorizc:d  to  r c\·isL·  ;111d  to  ;unend  the 
basic  charges  in  column  _)  once  hetwn·n  t\\O  ( ·ongresses.  The  revised 
charges shall  he  based  on  the  mnktn  \·;tlut'  ot  the  chMges  fixed  by  the 
members  of  the  Union  fur  inlL'rn;ition;tl  items  from  their  countries. 
They shall come  into for ct~  l )n  a  d:1 t t'  t ixed  h~  the  (.._\L'CUt ive  Council 

Member countries  may,  exL·L·ption;tlly.  rnmlity  the weight-step structure 
shown  in  Paragraph  I.  subject  to  the  ft)lluwing  L'()nditions: 

a)  for  any  category.  the  minimum  \\ e igh r  \t cp  -..;h;tl I  ht~  that  shown  1 n 

Paragraph  l; 

b)  for  any category.  the  last  weight  step sha 11  nnt  exceed  the  maximum 

weight shown  in  Paragraph  I. 

Member  countries  which  have  ;1hulisht·d  postc1rds.  printed  papers 
and/or small  packets  as  sep;1rak c1teguries  ot  letter-post  item  in  thei1 
internal  service  may do  the sanw  in  respc::~·r  ut  m;1il  tor ;1hrtl;1d 

I page 306 

Annex 6:  UPU Convention  - key a11icles 

5. 

6. 

7. 

8. 

9. 

10. 

Each administration  may admit aerogrammes, which  are airmail letters 
consisting of a  sheet of paper suitably  folded  and  gummed  on  all  sides. 
However,  notwithstanding  Paragraph  1,  the  dimensions  in  that  form 
shall  not  exceed  110  x  220  mm  and  the length  shall  he  at  least  equal  to 
the width  multiplied hy  the square root of 2  (approximate value:  1.4 ). 

Notwithstanding  Paragraphs  I  and  3  (a),  postal  administrations  may 
apply a  first weight step of 50 g  to printed papers. 

The charges adopted within  the limits  laid  down  in  Paragraph  I shall  as 
far  as  possible  bear  the  same  relation  to  one  another  as  the  basic 
charges.  Exceptionally,  and  within  the  limits  prescribed  in  Paragraph 
I.  each  postal  <1dministration  shall  be  free  to  <tpply  to  the  charges  for 
postcards,  printed  papers  or  small  packets  a  rate  of  increase  or 
reduction different  from  that which  it  applies to  the charges for  letters. 

to  restrict 

Each  postal  administration  may  allow,  for  newspapers  and  periodicals 
published  in  its country,  a  reduction of not  more  than 50  percent of the 
tariff  applicable  to  the  letter-post  category  used  for  the  item,  while 
reserving  the  right 
this  reduction  to  newspapers  and 
periodicals which  fulfil  the  conditions  required  by  internal  regulations 
for  transmission  at  the  tariff for  newspapers.  This  reduction  shall  not 
extend  to  commercial  printed  papers such  as  catalogues,  prospectuses, 
price lists,  etc,  no  matter  ho»'  regularly  they  a re  issued;  the  same  shall 
apply  to  advertisements  printed  on  sheets  annexed  to  newspapers  and 
periodicals,  unless  they  consist  of  detached  advertising  inserts  to  be 
considered as  integral parts of the newspaper or periodical. 

Administrations  mav  likewise  concede  the  same  reduction  for  books 
and  pamphlets,  for  ;nusic  scores  and  for  maps.  provided  they  contain 
no  publicity  matter  or  advertisement  other  than  that  appearing  on  the 
cover or the fly  leaves. 

Newspapers,  periodicals,  hooks  and  other  printed  papers  for  the  same 
addressee at  the  same  address  may  he  inserted  in  one  or  more  special 
hags  (M  hags).  The  charge  applicable  to  such  hags  shall  be  calculated 
by  weight  steps  of  I  kg  up 
toLtl  weight  of  each  hag. 
to 
Administrations  may  allow  a  reduction  for  such  hags  of  up  to  20 
percent  of  the  charge  payable  for  the  category  of  item  used.  This 
reduction  may  be  independent  of  the  reduction  provided  for 
in 
Paragraphs 8  and  9.  M  hags shall  not  be  subject  to  the  limits of weight 
laid  down 
I.  However,  they  shall  not  exceed  the 
maximum weight  of ~O kg per hag. 

in  Paragraph 

the 

1 1. 

The  administration  of  origin  may,  within  the  limits  laid  down  in 
Paragraph  l,  apply  to  non-standardized  items  charges  different  from 
those applicable to standardized items. 

A1111e.x  6:  UPU Co111'e11tio11  - key tmicle' 

page 307 

12. 

13. 

14. 

15. 

The  comhininl!.  in  one  item  of articles  on  which  different  charges  are 
payable shall  l;e  authorized  on  condition  that  the  total  weight  d;es not 
exceed  the  maximum  weight  of the  categorv  whose  weight  limit  is  the 
highest.  The charge  applicable  on  such 7rn  item  shall.  at  the  option  of 
the originating administration.  be  that  of the category  with  the  highest 
rate or the sum of the separate charges applicable  to each  article in  the 
the  endorsement  "Emmis  mi.xtes" 
item. 
("Combination  mailing"). 

items  shall  bear 

Such 

The  letter-post  items sent  on  postal  service  as  mentioned  in  Article  l () 
shall  not  be  subject  to  the  limits  of  weight  and  size  laid  down  m 
Paragraph  l.  However,  they  shall  not  exceed  the  maximum  weight  of 
30 kg per bag. 

Administrations  may 
their 
countries  the  maximum  I im it  ot  weight  Lt id  down  for  articles  of  the 
same  kind  in  their  internal  ser\'ice  pn)\'ided  th:1t  such  items  do  not 
exceed  the  limit  ot weight  mentioned  in  P;iragraph  I. 

items  posted 

letter-post 

i.tf1ply 

to 

in 

Post a I  adm in ist r;1 t ions  m;1y  a I Im\  red un:d  charges  based  on  thei1 
internal  legisl<ttion  tor  letter-post  ilL'ms  posted  in  their  country.  They 
may.  for  inst:1nce.  give  prekrenti:tl  r;1tt.·s  tu  major  users  of  the  Post. 
Such  preferent ia I  r:1 tes  may  not.  hm\ t.'\ t.T  he  lower  than  those  applied 
in  the  internal  service  t~)  items  presenting  the  some  characteristics 
(category.  quantity .  handling time.  etc) 

2.4  ARTICLE 25:  POSTING  ABROAD  OF LETTER-l\lAIL  ITElVIS 

1. 

2. 

J. 

4. 

A  member  country  shall  not  he  hound  to  forward  or  deliver  to  the 
addressee  letter-rost  items which  senders  resident  in  its  territory  post 
or cause  to  be  posted  in  a  foreign  country  \vith  the  ohject  of  profiting 
hy  the lower charges in  force  there.  The s:1me  shall  arply to  such  items 
posted  in  larges  quantities. whether or  not  such  postings are  made with 
a  view to henefi ting from  lower charges 

shall 

Paragraph 
to 
correspondence  made  up  in  the  countr:  where  the  sender  resides  and 
then  carried  across  the  frontier  and  tu  correspondence  made  up  in  a 
foreign  country 

distinction  hoth 

\\ itlrnut 

applied 

he 

The  administration  concerned  ma~·  either  return  its  items  to  origin  or 
charge  postage  on  the  items  at  its  intern;tl  r;1tes. 
If the  sender  refuses 
to  pay  the  poslitge.  the  items  m"!  he  disposed  ot  in  accordance  with 
the  interna I legisl"t ion  of the adm in ist '" t iun  concerned. 

q-t~ 

A  memher  country  shall  not  he  hound  tu  ;1n:ept.  forward  or  deliver  to 
tter-post  items  which  senders  post  or  cause  to  he 
the  '.l 
posted  in  lar 5~  1uantities  in  a  country  other  than  the  country  where 
they  reside.  The  administration  concerned  may  send  back  such  items 
to  origin  or  return  them  to  the  senders  v.:ithout  repaying  the  prepaid 
charge. 

/11111ex  6  UJ>U  Cn111·e11tio11  - key mt1cles 

1.5  ARTICLE  7J:  TERMINAL  DUES 

Suhject  tu  Artick  7),  L'ach  ;1dministration  which,  in  its  exchanges hy  air 
and  surface  means  with  another  <1dministration.  receives  a  larger 
qu;111titv  of letkr-m;1il  items  than  it  send  shall  have  the  right  to  collect 
!rum  the  disp;1tching  administration.  as  compensation,  a ~payment for 
the costs  it  incurs for  the e\cess international  mail  received_ 

The  payment  provided for  in  Paragraph  I  shall  he  fixed  as  follows: 

( :1)  When  two  ;1dministrations  exchange  with  each  other.  hy  air  and 
surface  (SAL  included).  a  total  weight  of LC/ AO  mail  less  than  or 
equal to  150  tonnes a  year  in  e<1ch  direction.  the  rate applied  per kg 
shall  he  2.<> .. rn  SDR for  LC/ AO  items  (uniform  rate).  excluding  the 
printed  papLTS  sent  hy  special  hags  ( M  hags)  referred  to  in  Article 
20.  Par;1graph  10_ 

( h)  When  two  administrations  exchange  with  each  other.  hy  air  and 
su rfoce  (Sr\ L  included).  a  tot;tl  weight  of LC/ AO  ma ii  greater  than 
150  tonnes ;1  year  in  each  direction,  the  rate  applied  per  kg shall  he 
S.  I 15  Sf) R  for  LC  ite1T1s  and  2.058  SD R  for  AO  items  (separate 
r;1 tt._·  for  e:h:h  c;1 tc~ory ),  ex cl udi ng  the  printed  papers sent by  special 
h<1~s ( M  ha~.s) rekrred  to  in  Article  20.  Paragraph  I 0 

(1._·)  When  tllL'  threshold  ot  l)O  tonnes  is  exceeded  in  a  single  direction. 
the administr;1tion  rt'ceiving this  tr;1ffic  in  excess  of  150  tonnes  may 
choose.  fur  the  ;1ccountin12.  uf the  termin;il  dues  relatinl!.  tu  the  mail 
rt.:'.cei\'L'lL  une  ut 
t\;,O  p;1yment  systems  descril~ed  in  Suh 
p;1ragraph...;  :1)  :tnd  h)  ;1hovc.  In  the :1hsence  of bilateral  :1greement. 
the  mail  sent  hy  thL·  :1dministration disp:1tching  less  than  150  tonnes 
:1  year  -.;hall  in  :di  c;1ses  ht>  brought  to  ;1ccount  in  accordance  with 
the singk  r:1lL'  l;1id  down  in  Suh-paragraph  a). 

the 

(d)  For  prinlL'd  p;1pers  sent  in  M-hags,  tht..~  rate  to  be  applied  shall  be 
irrespective  of  the  <1nnual  weight  of  mail 

0.(l).~  SDRs  p1:.·r  kg. 
exchanged  hc·t \\ een  two  adm in istra t il rns. 

;1 

in 

l!.i\L'll  1 elation,  an  administration  which 
When. 
in 
:1L-cord;111ce  \\ itl1  the  ditfrrenti<1ted  LC  and  AO  rates  of terminal  dues 
indicated  in  paragr;1ph  ~ establishes  that  the  average  number  of  items 
(LC  and/ or  AO)  contained  in  one  kilogram  of mail  received  is  higher 
th;tn  the  world  avera!!e  which  is  4K  LC  items and  5.6  AO  items.  it  rnav 
ha\·e  the  correspumling  r;1tes  revised  if  compared  with  this  worl~i 
;tvL·rage· 

is  paid 

the  n umhe1  ot  LC  i kms  1s  more  than  I)  percent  h 112.her  ( i .e  more 

th;tn  )) items)  and/or 

the  numhn ot  AO  item..,  is  mnre  th;rn  2.)c;  (i.e.  rnure  th;1n  7  items) 

the  debtor 
th is  c;1se. 
I: 
:!1istratiun  sh<tll  he  equ;tl  tl1  the  difference  het\veen  the sums  owed 
:1<..l: 
h:·  '--"t,_.h  :1dministr;1tiun  fur  it-.;  tot:tl  mail  flow  :1fter  application  of  the 

lt.'rrn ina I  dut:s  a muu n t  p;1ya hie  by 

the 

A1111ex 6:  UPU  Co111•c1111011  - key a11iclc' 

appropriate  rates.  The  rev1s1on  shall  he  C:ll ried  uut  on  the  krm:--i 
specified  in  Article  187  ot  the  Detailed  Regulatiuns (see footnott>') 

4. 

5. 

Any  administration  may waive  wholly  or  in  p<1rt  tl1·. 
for  in  Paragraph  I. 

1  "'_' ment  pn)\'it.kd 

The  administrations  concerned  m;1\.  h\  hil:ill'r:il  ur  nuiltiLill'ral 
agreement.  apply  other  p;iyment  system-..;  frn  thl·  '-L'ttkn1t:'nt  ot  tcrmin;il 
dues accuu 11 h 

2.6  ARTICLE  74:  TER\11'\:\L  IH'ES  FOR  PRIORITY.  '\O'\-PRlORITY  ITE\IS 

AND CO\JBINED  JTF\IS 

I. 

' 

:t 

4. 

\V hen  , 1  u 11  ii , i 1 111  1.1 tc  I u I  LC ,  ,. \  U  1k111 '>  1..,  u.., u  I u 1 ll...! u 
1.) l 
Artick·  :~  !>;11  .t_!.2I:1pli  ~- .1)  .11lll  1.·  1  th.it  1.1lt"  -.,lull  :tl-.,1•  .1pph·  tl1  r11  iur  it\ 
item:--.  1H111-p1  i1l1  it\  ill'11h  ;111'!  ,·,  Hnl)i1it·1..I  1!t"111.__, 

th c  pl u \  i >, i l  > 1 h 

tu1 

l  ( 

item'>  :rnd  .. \( >  ikm:-- ;ire  used  under  the 
When  sep;11;1te  1 ;1tc:--
provision  ot Article  7_).  Par;1graph  ~( h)  ;1ml  :2l L.  ).  the  country  ut origin 
and  the  country  of destination  ma>.  hy  hilatnal  agreement. decide  that 
the  rates  ;1pplicahle  to  priority  ikms  and  non-priority  items  shall  he 
fixed  on  the  hasis  of  the  actu;d  structure  of the  traffic.  In  the  absence 
of an  ;1greL·ment,  the  provisions  l<1id  dPwn  in  Article  7"°?>.  Par;1graphs 
2(h).  2(c)  ;111d 
thi"  c1sc.  priority  items  shall  he 
-~  shall  apply. 
assimilated  to  l  C  ;ind  noi1-priority  ilL'ms  to  r\O 

In 

For  corn hi nL'd 
the  pmvision  ut  Article  20. 
Paragraph  I~.  terminal  dues  \h:tll  ht·  ">L'lllnl  hy  hilatL'r;tl  ;12-!recment 
between  thL'  ~:ountries concernL·d 

i terns  exchanged  u mkr 

When  an  ;1dmi11istr;1tion  dl'cilk"  tu  di:--L·onlirlllL'  ">cp;1ration  ol  mail  intu 
LC  ;llld  .:\0  in  Li\·mir  of  a  s>'ill'm  h:1...,L'll  on  priorit>.  ;1nd  the  latter 
produce'> ;111  dkct on  termin;tl  duL·...,  ;1c1..·urdin~ (()  P;1r;igraph  :2.  tht'  ne\\ 
system  1..:;111  ht.·  introdun~d  011  till'  tir"t  Pl  J;111u;11:  Pr 
the  first  of  July 
only.  pro\ iding  till·  l11te111atiun;tl  Bu1r.:,1u  li;1-.,  h1..Tll  ...,u  informed  ;1t  le;1st 
three  mrnllh-.,  i11  ;1Lh·;1111..·c· 

3.  ARTICLE 25 

Article 25  ot  the Convent ion  dea Is  with  wh;1 t  is  110\\  k1W\\ n  a"  re111;1 i I  It  states that  nu 
postal  administration  of  ;1  \;km her  State  of  tht.'  l; PL  is  hound  tu  convey  or  delivL'.r 
letter  mail  originating  \\ithin  its  hound<trie:-- hut  llLtik·d  tu  rt:cipients  there  trnm  a 
foreign  country.  And  it  adds  that  they  c:tn  also  rdusc  tu  h"ndle  mail  depositeU  with  it 
from  ahroad and  destined  tor  third countries 

Under Article  11\7  of  1he  Detaticd  1Zegul;1t11)1h.  lhe  tcrn1111;il  duL·'  111.it  L11uld  l)L·  :1ppl1nl  lu  ~uch 1te11b  !all111~ 

oulside  the  r~rngcs defined :rn.:  c1kul:111.·d  111  SD Rs  :1~  lullo\\' 

LC: 

!(Average  number  ot  1te111:-- per  kg x  ll  Ill)  -r  ti :-;SI'  l  4~ 

I page . >I 0 

3.1 

EVOLUTION 

/l1111c:x  fr  U/)U  Co111'e111io11  - key anicles 

The original  intention  of this  article was to  prevent senders  in  one country from 
presenting letter mail  to  the  postal  service in  another country for  delivery in  the 
country  of  origin  in  order  to  henefit  form  the  lower  tariffs  in  the  foreign 
country.  It was also aimed at preserving the structure of terminal dues. 

The  scope  of the  article  was  extended  hy  the  UPU  congress  of Ottawa  in  1957 
to  items  deposited  ahroad  in  large  quantities whether  or  not  the  intention  is  to 
benefit  from  lower tariffs. 

It  was  further  extended  by  the  Rio  de  Janeiro  congress  in  1 <)79  which  gave 
postal  administrations  the  right  to  refuse  to  handle  mail  received  from  or 
deposited  with  it  by  senders  from  another  country  when  it  is  destined  not  only 
for  the sender's country but  for  third  countries as well  The  Rio congress added 
the  fourth  paragraph  to Article  25. 

J.2  APPLICATION 

In  practice,  postal  administrations  will  have  one  or  two  reasons  for  applying 
Article 25: 

either 

in  the  application  of Article  25. l, they  believe  that  the  mail  is  domestic 
mail  and  therefore  their  own  inland  rates  are  payahle  (in  order  to 
protect  their  legal  monopoly",  the  practice  having  been  encouraged  by 
the terminal dues being lower than  the  inland  rates): 

or 

in  the  application  of Article  25.4,  they  wish  to  display  solidarity  with 
the  postal  administration  in  which  the  sender  is  established  which  has 
not  been  used.  They therefore  feel  they  should  have  received  the  mail 
from  country A  and  not  from  country  B,  even  if the  level  of payment  is 
the  same.  The  principle  is  that  country  A  is  losing  income  to which  it 
has a  right  as a  national  postal administration. 

this  background. 

Against 
postal 
administrations  are  concerned  by  remailing  in  its  various  forms.  However  it 
may  be  questioned  whether  a  legalistic  approach  through  the  use  of the  UPU 
convention  is  the  most  appropriate  response  to  what  others  might  see  rather  as 
a  commercial  problem 

seem  understandable 

it  may 

that 

The  m"in  text  of  the  Green  P;1per  discusses  whether  the  UPU  instruments 
against  remail  are  properly  aligned  with  the  competition  rules  or  the  Treaty  of 
Rome and with  the objectives of the Single  Market 

Annex 6:  UPU Co11ve11tiun  - key a11iclc.' 

Table  1: 

Article  20  - recommended  weight  steps,  hasic  rates,  nuuimum  weights  and 
dimensions 

BASIC 

WEIGHT 

DIME:"SIO'."'S 

ITEMS 

WEIGHT 

STEPS 

1 

2 

LEITER.S 

up  to 20  g 
from  20 g  to  100 g 
from  100 g  to 250 g 
from  250 g  to  500 g 
from  500 g lo  1000 g 
from  1000 g  lo 
2000 g 

Ll'.\llTS 

4 

2 kg 

RATE 

(SDR) 

3 

--···-~-

lU7 
0 88 

l.76 
-,.:;s 
5 SS 

l)  )(, 

I 

--~~-

u .2(1 

5 

"1:1x1ma  Ieng.th_  w1Jth  anJ Jcpth  combined 

900  111m  but  the:  g.reatc-.1  Jimens1on  may  no! 

excecJ  1100  mm  with  a  tolerance  of  2  mm. 

In'''"  !01111 

length  pfu.,  twice  the  Jiamctcr. 

l(~O  111111  but  the  g.rc;1te~1  Jimcn'>lon  111:1) 

111 >t  ch ccJ  '100  mm  with  a  tolcr;ince  ol  2 

ill Ill 

\11111111.1 

'"  h;1\l' 

.1 

'-Urfacl'  measuring.  lll)I 

dl.lllll'll'I 

I 70 

111111 

but 

lhl' 

~ll'<lll'sl 

\l:i,1111.1  10:'  \  1-t.S  111m  with  a  lolcr;ince  o!  2 

111111 

\11111111;1  90  \  140  111111.  wtlh  a  tolcr;111ce  L)f  2 

111111 

l  l'ngth  ;it  le;..,!  e4ual  to the  w1<lth  multiplied 
tw  J2 

t apto\imale value  1.-t )_ 

up  to 20  g 
from  20  g  to  I 00  g 
from  100  g  to 250 g 
from  250 g ro  500 g 
from  500 g  lo  1000 g 

from  1000 g  lo 

2000 g 
for  each suppkmcnldf\ 
I 000  o 

0 

-----~---

0  IS 
()  40 

l) 7-1 
I  .,1 _,._ 

2 21 

2 kg 

(f(ir  ht111b, 

and  p:tm 
phlcts 
5 kg  th1~ 

limit  ol 

\b\ltll:t  ll'ngth  wiJth  anJ  Jcplh co111b1nc<l 

•100  111111  but  lhl'  1!rc:1tc'>t  Jimen'>i<>ll  111:1y  lltH 

L'\<.L'l'd  hOO  111111  \\ 1!h  ;1  tokr:1nn.·  ol  2  111111 

In  11>11  ln>111  kng.lh  plu-.  twice  the  J1;i111ele1 

10-tO  111111.  but  the  g.rc:itcst  Jimens1on  111;r,. 

111'1 

t'\Cl'l'd  '100  111111  with  ;1 

tolcr:1ncc  of  2 

)  ! )l) 

wcighr  m;!\ 

111111 

he  ra1~cd tu 

I  )-) 

l!lkg  ~liter 

agreement 

111111 

between  the 

In  ,,,JI  h>r111 
I :o 

Ieng.th  plus  1w1n·  !he 

111111 

but 

lht: 

gre;11c,.,1 

~I 

dn11n1'>tr:1t1t>ll~  d111ll'1h1,111  m.I\  nut  be  les'>  th;111100111111 

sec Anick  IK 

- - -

up lo  I 00 g 
from  100 g  to 250 g 
from  250 g  lo 500 g 
from  500 g to  1000 g 
from  1000 g  to 
2000 g 

()  4!l 

074 

1.32 
2.21 

3 09 

-

POST-

CARDS 

PRl!"TED 

PAPERS 

CECO-

GRA'.\IS 

SMALL 

PACKETS 

page 312 

---------------------------

Ann ex 6  L' /' U (- ,:,, "'° '"" ~ 1 

k_-eJ_' :_11_c_I e_, _J 

I Anne<  7:  Qua/;n- of semce 

pogi: 313 

ANNEX 7:  QUALITY OF SERVICE 

1. 

INTRODUCTION 

When considering the  meaning ot "quality".  1t  1s  important  for  all  service  providers  to 
consider  each  of  the  main  phases  t h;i t  make  up  the  tot<il  service.  and  in  pa rt icular 
those  phases  that  the  customer  directly  experiences.  Thus.  <ilthough  the  time  that  an 
item  takes to  he delivered  is  essentiaL  other  aspects of quality could  also  he  important 
to  the customer. 

To  highlight  a  tew  such  aspects.  the:-.e  could  include  the  attitude  ot  sales  staft,  the 
availability  of  credit,  the  flexibility  of  collections,  the  smartness  of  delivery  staff,  the 
reaction  when  an  item  cannot  he  delivered.  and  the  prompt  availability  of  service 
performance  information:  in  short.  the  different  aspects of how  customer-oriented an 
operator actually  is. 

likely  to  become  ever  more  demanding  for 
Further.  the  definition  of  quality  i:-. 
operators. 
\Vhat  may  h<tve  been  accepted  as  satisfactory  quality  until  recently  may 
now  appear  inferior.  As  an  example,  many  operators  in  the  recent  past  considered 
customer service  as  an  operation<il  function.  where  a  member of the  operational  staff 
would answer personal  or  telephone enquiries;  now  it  is  likely  to  he a  specially trained 
customer service  operator.  (At  the  same  time.  of course.  all  staff who  help  to  provide 
a  service are,  in  S()me  sense.  part  of the  ri1arketing of that service.) 

Providing quality  requires  the  e:-.tahlishing  of  a  cycle  which  repeats  itself.  Standards 
need  to  he  set  (internally.  externally.  or  both).  performance  needs  to  he  measured 
against  the standards.  The comparison  of performance against  standard then  needs to 
to  make  up  any  shortfall  between  standard  and 
be  analysed.  and  action 
performance 

t<1ken 

turthe1  L·ommenh 

;i1  e  gi' en  un 
Below,  some 
t;irget-setting  <1nd  performance 
measurement.  These cummenh p;irticubrly  rt:fer  w  ktter services.  since  they  are  the 
services  for  which  there  is  the  m;1in  univers;d  '>cn iL·e  obligation. 
(Some  Memher 
States  also  impose  a  juridictl  m  "de  Ltctn"  univers<il  obligation  for  light-weight 
parcels.)  The  quality  of other  services  is  stimulated  mostly  by  competitive  pressures. 
(The  subjects  of target-setting  and  perform<tnce  measurement.  as  well  as  the  control 
function,  are also discussed  in  Chapter 4,  Par<tgraph  7.) 

2. 

STANDARDS 

Most,  hut  not  all,  of  the  Community's  postal  administrations  have  publicly  stated 
targets for  domestic  letter  mail.  However.  these  targets are  not  the  same.  For letters 
(th;t is,  excluding either printed  papers or second cl;;ss  letters),  performance  is  usually 
measured  against  a  next  working  day  (known  as  D  +  1)  target.  (The  target  for  the 
Spanish  postal  administration  is  D + 2.)  The  percentage  to  he  delivered  by  this  target 
date varies between 81 %  and  I OOS1r. 

Some of the  administrations who  have  a  letter /printed  paper  tiering system  set  lower 
standards for  postcards and  printed  papers.  Those who  have a  first  class/second class 
tiering system  naturally  have slower standards for second class. 

page 314 

."11111cx  7:  Qualiry of service 

3.  MEASURING SYSTEMS 

Most measuring systems used to  produce figures  for  publication  are carried out by  the 
postal  administrations  themselves.  Two  administrations  have  contracted  outside 
agencies to carry out the work.  (In  addition,  postal administrations  may undertake on 
a  regular  basis  other  internal  studies  to  provide  further  information  on  service 
performance.) 

There are several  different  measuring systems  used  in  the Community.  (The public is 
not aware of the different systems - only of the perceived reliability or otherwise of the 
results produced.) 

One  system  measures  from  the  point  that  the  mail  collected  arrives  in  the  sorting 
office  to  the  point  where  it  is  prepared  in  the  delivery  office  for  delivery.  Another 
measures from  the  time  the collected  mail  arrives  in  the  sorting office  to  the time  it  is 
received  in  the  delivery  office  (hut  before  preparation  for  deli~ery).  Another  system 
measures from  the  time  the  mail  is  posted  by  the  customer  until  it  arrives at  the final 
delivery  point. 

The  third  of  these  systems  (which 
is  usually  called  "end-to-end")  measures  the 
complete  span  of  the  process.  as  experienced  by  the  customer.  Any  other  system 
(including the  two  others mentioned  here) will  measure  only part  of the  process.  The 
difference  in  results  can  he  substantial.  One  administration  that  had  previously 
carried out its survey from  sorting office  to  the preparation  stage  in  the  delivery office 
then  changed  to  a  contracted-out  survey  system  measuring  end-to-end.  The  latter 
system  revealed  that  quality  of service was  more  than  l 0%  less  than  the  results  of the 
former system. 

The break-down  of results  measured vary  significantly.  Some administrations publish 
only average  national  results.  Others break the  results down  into  performance within 
the  locality,  regionally  and  nationally. 
Some  results  even  show  differences  in 
performance depending on  how  the  mail  was  paid  for  (by  contract,  by  meter  postings 
or by  stamp - see Annex  1.  Paragraph  2  and  at  Chapter  5,  Paragraph  4. I  for  a  further 
description).  Presumably.  some  administrations which  do  not  puhlish  such  a  detailed 
hreak-down  have the figures  hut  use them  only  for  intern~tl operational  purposes. 

4.  OTHER ASPECTS OF QUALITY 

As  indicated  above,  the quality  of all  aspects of the service  provided can  be  measured. 
Here. emphasis is  given  to certain aspects that  relate  to  pre-posting and  post-delivery. 

4.1 

PRE-POSTING 

For  ordinarv 
individual  customers,  access  to  mail  services  concerns  the 
availahility of' stamps and  of information  regarding the  use  of the  services  (and 
then  the  proximity  of the  posting  boxes).  The  wide  availability  of sales  points 
for stamps is  therefore  important. 

However,  the  vast  majority  of  stamp  sales  is  likely  to  continue  to  be  made 
through  post  offices  counters  (particularly  if  posting  information  is  needed). 
The length  of time spent queueing for  service  is  therefore  important, as  is  - and 
this  cannot  be  over-emphasised  - the  politeness  of staff.  Both  aspects  can  be 
measured  (for  instance  by  using  "mystery  shoppers"  who  anonymously  use  the 

I Anne< 7,  Qua/fry of mvice 

page 315 

services  of different  counters,  and  then  measure  performance).  and  compared 
against  internal standards. 

4.2  DELIVERY  AND  POST-DELIVERY 

For  many  organisations,  the  rromptness  of  the  daily  delivery  by  the  postal 
administration  is  very  important.  Indeed,  certain  postal  administrations have  a 
special  service  (for which  a  fee  is  charged)  which  assures  delivery  before  07:30 
each  morning.  Some  administrations  also  provide  two  deliveries  per  day  at 
least  in  core areas. 

Effective after-service  treatment  is  also  essential.  The way  in  which complaints 
or  queries  are  handled  after  an  item  has  been  delivered  is  also  important. 
Again,  it  is  possible  to  set  standards  and  measure  performance. 
(Here.  the 
standards should he published.) 

All  complaints  should,  of course,  he  dealt  with  as  promptly  as  possible.  This  is 
equally  important  for  complaints  concerning  cross-border  as  for  domestic 
services. 
In  the  case  of  cross-border  mail,  investigations  can  be  made  more 
difficult  because  two  operators  are  involved.  Some  decisions  may  he  required 
as  to  what  the  acceptable  time  limit  should  be  for  a  reply  to  he  given. 
(At 
rresent, the CEPT standard  is  six  months.) 

Consideration  should  perhaps  also  he  given 
to  whether  there  should  he 
standard  procedure~ regarding co·mpensation  for  lost  or  damaged  items.  (The 
actual  limits of compensation will  continue to  vary.) 

Postal  administrations  should  have  a  declared  policy  on  whether  they  publish 
figures for  lost  or dam;iged  items, or for  mis-routed or mis-delivered  items. 

page 316 

''"""-' 7.  Q1wli1y of mvice  J 

I Annex 8.  ·rc,,,,;,,,,1 dun 

ANNEX 8:  TERMINAL DUES 

l. 

INTRODUCTION 

For  many  years  mail  was  "traded"  between  countries  without  any  accounting  system. 
Any  trading  imbalance  in  volume  was  "written  off'.  Then,  a  system  of charging  the 
expediting administration  was  introduced.  Rather  than  both  administrations  involved 
in  each  trading  relationship  paying  the  charges  due,  it  was  agreed  that  only  the  net 
expediter should  pay on  the  net  volume  sent  to  the  net  receiving country.  Because  of 
this,  the compensatory system  became  known  :1s  "imbalance charges" 

These  charges  were  introduced  purely  on  the  basis  ot  weight.  The  assumption  was 
presum<1bly  made  that  the  average  kilo  traded  bet\veen  any  two  countries  \vould  have 
more or  less  the same contents.  The  charging system  did  not  t;1ke  into  account  either 
the  number of items or the service desired 

The charges  are  known  as  termin<il  dues.  They  \Vere.  ;ind  are.  overseen  hy  the  UPU. 
Terminal dues  are  measured  in  gold  francs  (gt} a  notional  currency  which  has  a  fixed 
exchange  rate  with  the  Speci<tl  Drawing  Right  ( Droit  de  Ti rage  Special).  The  fixed 
rate  is  I  SOR  =  :1.0(d  gf. 
(A  gold  franc  equates  to  approximately  ECU  0 .. ~5.)  The 
terminal  dues  are  reviewed  at  each  UPU  cone.ress.  held  every  five  vears.  The 
progression  of terminal dues  is  shown  in  Table  I.  ~ 

Table  I: 

Past incrt!ases  (~{ tc:mzinnl dues 

Congress 

Years applied 

Rate 

Copenhagen 

l <J7)- I 979 

Rio de fa neiro 

Hamburg 

' - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Source:  UPU  Con\·entions ( l(J74.  jl)7l) and  JlJX4) 

l  5 gf/kg 

5.0 gt/kg 

X.()  gt/kg 

The  increases have  tended  to  he  ;1  matter negotiation  rather than  an  attemrt  to  reflect 
cost accurately.  The  less  developed  countries  (\\·ho  h;1\·e  the  same voting  rights  in  the 
congress  <ts  the  developed  countries)  <1re  in  the  majority.  The  are  also  net  recipients 
in  terms of weight  (typically.  perhaps receiving  heavy  printed  matter  and sending hack 
light-weight  items).  The  less  developed  countries  appear  to  have  a  vested  interest  in 
the  retention of a  weight-based compensation system.  Not surprisingly,  they appear to 
have  heen  tempted  to  raise  the  rates  as  high  as  the  "market"  (that  is.  the  developed 
countries) would  hear. 

The  international  mail  system  controlled  by  the  UPU  operates  only  between  postal 
administrations.  The  U PU  does  not  recognise  the  role  of  private  operators  in  the 
If a  private  operator  wishes  to  gain  access  to  this  system.  it  has  to  do  so 
system. 

page 318 

/1nnex 8.  Te1111i110/  dues 

through  the  services  of at  least  one  postal  administration.  Since  terminal  dues  would 
be  an  important  cost  element  for  th<1t  postal  administration.  they  will  make  up  a· 
significant  proportion  of  the  price  paid  by  the  private  operator  to  the  postal 
administration for  access to  the  international  mail  system. 

2.  CURRENT TERMINAL DUE  RATES 

In  the  last  Congress  in  Washington  in  December  1989,  a  more  complex  structure  of 
terminal  dues  was  agreed.  The  full  UPU  text  relating  to  this  structure  is  shown  at 
Annex 6  (under Article 73  of the  U PU Convention). 

The  new  structure  differentiates  between  traffic  flows  of  more  than  or  less  than  150 
tonnes  annually  (a  significant  figure  which  would  apply  only  to  major  postal  trading 
If  traffic  exceeded  this  figure  in  both  directions,  there  would  be 
partnerships). 
separate charges  per  kilo  for  LC  and  AO  traffic;  if less.  there  would  remain  a  unitary 
charge  applying  to  both. 
In  addition.  if  the  average  weight  of  the  traffic  of  an 
"outward"  postal  administration  was  found  to  diffrr  significantly  from  the  world-wide 
average,  the  "inward"  adminis_tration  could  charge  a  different  r~1te  based  on  a  charge 
per item. 

ln  the  meantime,  certain  CEPT  members  ;ind  other  postal  administrations  had 
initiated  their  own  scheme  which  involved  both  a  unit  charge  and  a  weight  charge. 
This  at  least  partly  would  overcome  one  ot  the  problem~ (noted  at  Paragraph  3.1 
below)  with  the  UPU  system  - that  ot  ha\;ing  the  charging  ~ystem  based  solely  on 
weight.  However,  investigations  into  this  scheme  "re  currently  being  carried  out 
following  a  complaint  that  the  scheme  is  unfairly  anti-competitive  against  private 
operators. 

As  a  result  of  the  decision  of  the  Washington  Congress  (and  the  earlier  CEPT 
initiative),  there  are  now  at  least  five  different  svstems  orerating  in  parallel  in  the 
Community: 

the  CEPT  system  (operating.  for  example.  between  France  and  the  UK)  -
0.37 gf/item rlus '?t.75  gt/item; 

above  150  tonnes each  way  (for example.  between  Italy  and  Federal  Republic)  -
24.85 gt/kg for  LC and (d gt/kg for  AO: 

less than  150  tonnes  in  one direction  (for example.  Greece to  France),  but  more 
than  150  tonnes  in  the  other  - either  ()gt/kg  in  both  directions  or  only  in  one 
direction  and  the split  rate  in  the other; 

less than  150  tonnes  in  both  directions  (perh~1ps between  Greece and  Portugal): 
9 gt/kg for  both  LC and AO: 

deviation  from  the  LC/ AO  "norm"  (perl1ars  from  the  Netherlands  to  France: 
0.44 gt/item  plus 3.85 gt/kg. 

In  addition  to  the  UPU  and  CEPT systems.  there  could  always  he  other  bilateral  or 
multilateral  agreements  agreed  between  two  individual  postal  administrations.  (The 
UPU  Convention  permits  such  agreements  willingly  entered  into  by  the  postal 
administrations concerned.) 

I Annex 8:  Tem1;,wf dues 

- - - -------·-------------~ 

page 319 

3.  RELATIONSHIP BETWEEN TERMINAL DUES AND COSTS 

There appear  to  be  three areas where a  single  universal  system  of terminal  dues does 
not seem  to  accurately  reflect costs,  and  a  fourth  where  it  makes  no allowance  for  the 
pricing structure. 

3.1 

ITEMS/WEIGHT 

Before  the  Washington  Congress  the  same  compensation  was  paid  in  kilos 
regardless of the  number  of items  of that  the  kilo  comprised.  Thus,  a  kilo  that 
contained  100  x  10  g  letters  merited  the  same payment  as  a  kilo  that comprised 
2 x 500 g  books. 

Of  course,  the  delivery  costs  for 
the  receiving  administration  are  vastly 
different.  Heavier  items  are  generally  more  costly  to  deliver  (although  the 
more  important  factor  is  size),  but  certainly  the  percentage  cost  increment  is 
much  less than  the  percentage weight  increment. 

As  reflected  in  the  public  tariff  structure  of  each  administration,  a  more 
accurate  reflection  is  a  unit cost with  a  gradual weight  increment. 

3.2 

SERVICE  REQUIRED 

The  standard  terminal  dues  system  does  not  allow  for  the  different  service 
levels  required.  Thus,  a  newspaper  requiring  speedy  delivery  will  attract  the 
same  compensation  as  a  printed  paper  item  of  the  same  weight,  for  which  a 
slower delivery  could  be  sufficient.  In  general.  the  items  requiring speedy  (first 
class)  delivery  are  light-weight  items:  items  requiring  slower  (second  dass) 
delivery  tend  to  he  heavier.  This  therefore  accentuates  the  variation  between 
the compensation  received and actual costs. 

3.3 

STANDARD  RATES 

The  structure  is  a  universal  system,  and  therefore  suffers  from  the  problem  of 
averages.  (It  is  suggested above  in  Para  l  that  the  rates set  are  not guided by an 
I nevitahly.  actual  delivery  costs  will  vary 
assessment  of  average  costs.) 
significantly  from  country  to  country.  Productivity  varies  for  several  reasons, 
some of which  are not  in  the control  of the  administration.  The effectiveness of 
the  transport  systems  varies  - often  reflected  past  government  policy.  Most 
crucially,  labour  rates  vary  between  countries,  and  this  is  mostly  outside  the 
control of the administrations. 

3.4  DISCOUNTS 

The  UPU  Convention  suggests  that  postal  administrations  offer  discounts 
(usually  50%)  on  printed  paper  reduced  rate  items,  such  as  books  (see  Annex 
13  and  at  Annex  6  under  Article  20  of  the  Convention).  However,  many  of 
these  items are  the  very  items which  incur  the  heaviest  terminal  dues.  Margins 
are  therefore  s4ueezed  by  upward  cost  pressure  and  downward  price  pressure. 
Indeed.  there  is  no  knowledge  of any  administ1«1tion  th<tt  has  preferential  rates 
for  such  items that cover direct costs. 

I page 320 

---------------------- -------.--1 

/11111ex  8:  le1111i110/  dues 

4. 

EXAMPLE OF  MULTI-LATERAL SCHEME - NORDIC  UNION  SCHEME 

As  noted  at  Paragraph  2  above.  any  group  of postal  administrations can  enter  into  a 
scheme  which.  hy  their  mutual  agreement.  varies  from  the  UPU  system  of  terminal 
dues.  This  permits  some  essential  flexibility  since  the  postal  administrations  of most 
"developed"  countries  recognise  that  the  UPU  system  is  very  deficient.  The  CEPT 
scheme  is  an  example  of a  multi-lateral  scheme.  Another  interesting  example  is  that 
operating hetween  the  members of the  Nordic  Union. 

Since  1989,  the  postal  administrations  of  the  Nordic  Union  (comprising  Denmark, 
Finland,  Iceland.  Norway  and  Sweden)  have  applied  between  themselves  (and  invited 
other  postal  administrations  to  join)  a  compensatory  system  based  on  the  domestic 
tariffs  of  the  delivery  country.  The  profile  of  the  traffic  is  determined  through 
sampling.  and  the  charges  are  then  cilcuL1ted  hy  applying  prices  set  at  ()()Cf:  of  the 
domestic tariff of the countn· of deliverv 
-

-

Interestingly.  for  thi:-.  scheme.  it  i:-.  the  po:-.t;tl  ;1dmi1rn,tratiun  in  the  origin<1ting  country 
that  determines  the  speed  ot  deli,ery 
It  should  he  noted.  lw  contr<1st.  that  in 
relationships betv.ieen  other  pairs ot  pusLil  ;1dministr<1tions  there  are  often  "streaming" 
problems  concerning  cross-border  mail  exch;1nged  between  post;tl  administrations  if 
one applies an  LC/ AO classific;1tion  ;1ml  the  other ;1  first  class/second class system. 

I A1111ex 9:  Remaili11R 

ANNEX 9:  REMAILING 

I.  DEFINITION 

pa,f!,('  321 

Remailing  refers  to  the  cross-hon.fer  letter  services  provided  hy  private  operators. 
The  remailing  element  relates  to  the  activity  of  the  private  operator,  which  involves 
In  almost  all  cases  the 
the  collaboration  of  at  least  one  postal  administration. 
common  factor  is  final  delivery  through  the  postal  administration  in  the  destination 
country. 

In  essence.  there  are  three  main  different  types  of remailing  (the  order  given  below 
reflecting what  is  thought to he the relative importance of each  in  terms of revenue): 

A-B-C: 

A-B-B: 

A-B-A: 

The  private  operator collects  the  mail  from  the  customer.  consolidates  it 
with  other  such  mail  from  the  same  country  (A).  and  freights  it  to 
another  country  ( B ).  There.  it 
is  posted  (rem ailed)  with  the  postal 
administration. which  then  sends it  through  the  international  mail  system 
to  the  postal  administration  in  the  destination  country  ( C)  for  delivery 
there. 

The private operator collects  the  mail  from  the  customer  (in  country A), 
freights  it  to the country of delivery ( 8 ).  and  posts it  there with  the postal 
administration  which  then  delivers  to  the  addressee  (still  in  country  8). 
A  v<1riation  of this  is  when  the private operator himself delivers  the  items 
to the addressee. 

The  private  operator  collects  domestic  mail  in  country  A.  freights  it  to 
another country ( 8) for  posting with  the postal administration there.  The 
postal  administration  sends  the  mail  through  the  international  postal 
system  hack  to  country  A  for  delivery  there. 
(It  seems  dear  that  this 
activity  is  illegal  for  items  which  foll  within  the  reserved  area  of country 
A.) 

In  summary.  A-8-C  involves  cross-border  mail  using  the  international  mail  system 
between postal  administrations.  A-8-8 involves cross-horder  mail  using the domestic 
system  of the  delivery  administration.  A-B-A  involves  domestic  mail  hut  which  goes 
through the  international mail  system between administrations. 

Figure  I  helow  puts  A-B-C  and  A-B-B  remail  in  the  context  of  the  other  services 
against  which  they  compete.  The  route  on  the  ldt  using  POs  (private  operators) 
represents  the  A-8-B  process.  The  next  route  using  ;1  combination  of  PO  and  PA 
(postal  administration)  represents  the  A-8-C  process.  The  next  route  reflects  the 
option  of  a  customer  transporting  his  mail  into  the  country  of  delivery  anu  posting 
directly with  the administration  there.  The  last  route  reflects  the  conventional  route 
of posting with  the  national  postal  administration  which  then  sends  the  mail  through 
the  international  mail  system  to  the  postal  administration  in  the  destination  country 
for delivery there. 

1 page322 

Annex 9:  Remailing 

Figure 1:  Cross-border routeing 

E 
x 
p 

E 
D 
I 
T 
I 
0 
N 

D 
E 
L 
I 
v 
E 
R 
v 

c 
0 
u 
N 
T 
R 
v 

0 
F 

c 
0 
u 
N 
T 
R 
v 

0 
F 

ADD RESSE~ _ _] 

Postal Administration 
Private Operator 

PA: 
PO: 
PA*:  Postal administration in  intermediate country 
(Broken lines signifying a national border) 

2.  ORIGIN AND  EVOLUTION 

Remailing  probably  existed  long  before  it  was  given  the  name.  For· many  years, 
publishers and  their agents have transported publications into  the destination country 
for posting there.  (This has since come to be known as A-B-B remail.)  The advantage 
was  the  access  to  the  preferential  tariffs  that  are  usually  available  for  domestically 
posted  publications.  Locally  posted  print  remail  is  still  almost  certainly  the  largest 

I A1111<.t  9· lkmailm.~ 

pagt· 323 

segment  of  the  remail  market,  measured  by  volume. 
measure<l by revenue. 

It  may  also  be  the  largest 

In  the  1970s.  the airline  KLM  started its  Puhlications Distrihution Service, serving the 
US  publishing  industry's  cross-border  requirements,  particularly  for  distrihution  in 
Europe.  KLM  used  Amsterdam  as  its ''huh",  injecting the  mail  into  the  international 
postal system  through  the  Netherlands Post  Office (as the "remailing" administration). 
KLM  remains  the  market  leader  for  US-originated  publications  air-shipped  for 
delivery in  Europe. 

By  the  mid  1980s,  their  traffic  was  said  to  he  20.000  tonnes  per  year  - a  volume  that 
helped  to  optimise  use  of  spare  freighting  capacity.  The  A-B-C  remail  system 
pioneered by  KLM  and the  Netherlands Post  Office was hased on the  inequities of the 
terminal  dues  system  (discussed  in  Annex  8).  However.  because  publications  tend  to 
he  heavier  than  the  average  item.  terminal  due  c:osts  were  still  high.  and  margins 
therefore  low. 

Much  !are.er  margins  were  available  for  light-weil!ht  traffo.:.  which  tends  to  he  letters 
rather  th7in  printed  papers. 
(In  most  ~<.lUntri;s.  there  tends  to  he  a  regulatory 
difference  between  the  two.)  Prices  for  letters  tend  to  he  much  higher  than  for 
printed  papers.  The  costs,  hasetl  on  terminal  dues.  ~ilso  were  much  lower.  For 
example.  against  a  delivery  cost  of  perhaps  ECU  0.24  for  a  :w  g  item,  the  terminal 
dues  operating  in 
the  years  1980-85  provided  a  compensation  to  the  delivery 
administration of only  ECU 0.04. and th~1se in  the years  I lJXS- 1990 only  ECU 0.06. 

Around  I <J8J /84  several  US  operators.  most  of  them  sma IL  started  to  offer  rem a ii 
services  for  letters.  Initially,  the  only  postal  administrations  who woultl  offer  suc:h  A 
B-C  facilities  to  remailing  operators  were  not  located  favourably  for  service  - two 
examples being  Panama and  Puerto  Rico. 

The  situation  changed  when.  in  the  mid  1980s.  an  express  company.  TNT.  signed  a 
remail  contract,  covering  both  letters  and  print.  with  tlw  Belgian  Post  Office.  The 
Netherlands  Post  Office  responded  hy  relaxing  rules  on  what  w.is  permitted  to  he 
posted  through  its  printetl  paper  remail  contracts  (and  later  offering  some  letter 
remail contrach). 

By  the  second  halt  of  the  llJXOs.  several  other  postal  administrations  were  offering 
remail  facilities.  Outside  Europe.  the  most  in1portant  were  Hong  Kong.  Dubai  and 
Bahrain.  Within  Europe,  the  British  Post  Office entered  the  market  for  print  remail. 
while  the  airline  SAS  offered  letter  and  print  remail  focilitit:s  in  conjunction  with  the 
Danish  Post  Office.  More  recently,  the  Hungarian  Post  Office  has  started  to  offer 
remail  facilities. 

3.  COSTS AND PRICES 

Remail  enters  the  mail  streams  of  a  postal  administration  in  different  ways,  with 
prices  varying  according  to  the  different  ways.  As  the  destination  administration 
which  delivers  the  items,  a  postal  administration  would  receive  terminal  dues  for 
delivering  A-B-C  remail  (or  A-B-A  remail  if  it  is  accepted).  For  A-B-B  remail,  the 
delivery postal administration would receive the appropriate domestic tariffs. 

As mentioned above, some postal administrations offer  remail  facilities  to enahle mail 
collected  by  private  operators  to  enter  the  international  mail  system  (as  operated 
hetween  postal  administrations).  Most  postal  administrations  offering such  facilities 

I P"ll' 324 

Annex 9:  /~emailing 

specifically  exclude  their  use  for  posting  items  collected  in  their  national  territory. 
They therefore  tend  to see such  remail  as providing incremental  volume and  revenue. 
Pricing tends to he set on a  oasis of marginal costs plus a  small  margin  for  profit. 

For the  private operator  pricing his  services  to  potential customers.  the  prices will  he 
determined hy  market conditions.  These will  depend primarily on two  points.  Firstly. 
how  many  other  private  operators  are  l'ompeting'! 
Secondly.  has  the  postal 
administration  (which  provides  the  benchmark  for  both  prices  and service)  reacted  to 
the  competition  by  introducing  spL'cial  contract  facilities  frn 
large  customt'rs  with 
cross-border ma ii  needs'! 

Generally. charges paid to postal administr.1tions for  letter  remail  facilities account  for 
ahout 4oq- of the prices that  private opt.·rators can achieve.  Out  of this.  he  has  to p11y 
for  his  sales. collection,  freighting and customer servicing cost.  Assuming satisfactory 
volumes.  he should he able to achieve good profits. 

4. 

SERVICE 

Whether  remailcrs  provide  a  hctlt'r  or  worst.•  service  than  the  postal  administration 
depends.  naturally.  on  both  their own  efficiency (and  that  of the  postal administration 
with  which  they  post)  and  the  relati\·e  efficiency  of the  postal  administration  against 
which  they arc competing. 

Rema ii  evolved  in  the  UnilL'd  St;1tes  partly hl.·cause  the size  of the  market  there made 
it  an  attractive  proposition  and  p:1rtly  because  the  postal  administration  (the  United 
States  Postal  Service) was  pern.•i\·l.'d  to  ht.·  providing sw.:h  poor  service.  Interestingly. 
the  USPS  prices  its  services  hdow  its  competitors  for  both  letter  and  printed  paper 
cross-border  ser\'ices.  hut  privatt'  opL·rators  nrntinue  to  ha\'e  a  significant  market 
share. 

If the postal :1dministration  is  rt·;1..,un;ihl~  dfo:ient.  it  should lw ;1hk to provide a  helter 
service than a  remaik·r  usinl! ;111  :\-B-< · w ... ll.·m  (lwc1us1 .. :  tlw  l:1tlL'r  i1l\'ohes at  least  two 
freighting  journeys).  How~·\ t•r.  .·\- B- B. rL·ma ii  111;1~  \\ell  ht·  ;1hk·  to  offer  a  service 
superior  to  that  of the  postal  ;1dministr;1tion 
(At  the  s;1me  time.  it  should  he  noted 
that  A-B-B  re ma ii  is  often  mot i\·atl.'ll  lllllrL'  hy  thL'  all ract ion  of  being  a hie  to  post 
items  - often  the  heavier  ones  - at  till.'  domestic  tariffs  ot the  ddiverv administration. 
since these knd to he lower  than  tlw  rde\ant  than  tht:  rt:k·vant  tcrmi,-rnl  dues.) 

Of  course.  service  covers  much  more  than  transit  times.  Private  operators  have 
tended  to  lead  the  way  in  offering  many  other  features.  These  indude  more  flexible 
accounting facilities.  credit  and  flexible  collections.  Perhaps  the  greatest  contribution 
increased  or  helter  use  of  sales  account 
made  has  hcen 
management.  Of course.  nor;c  ~lf  these  additional  features  are  monopolies  of  the 
private operators. and some post;al  :u.lministrations have  responded hy  improving their 
own  standards  (arguably.  in  some  cases.  improving  on  standards  sd  hy  private 
operators). 

in  encour<u.!irn.!  the 

A1111e.t  JO:  l'o.-.wl ope1111or~' cocles 

ANNEX 10: 

POSTAL OPERATORS' CODES 

I. 

INTRODUCTION 

This description of postal operators· codes covers the two main  types of codes: 

- functional: 

which  are  publicised  externally  for  use  by  tht..'  public  (that  is.  posl-

codes): 

- technical: 

for the inh:rnal operational use of postal opt.·rators. 

The annex  also  seeks  to discuss  how  each  type  is  applied and what  is  the  operational 
importance  of each.  Because  the  post-codes  for  public  use  arc  those  that  are  more 
readily known.  the discussion concentrates mainly on these. 

2. 

FUNCTIONAL CODES 

Functional  codes  are  the  designation  for  the  post- codes  used  by  the  t·ustomers  of 
postal administrations. at the request of the hatter. 

Most  levds of postal  automation cannot  operate without  the  use  of functional  codes. 
These  codes  can  he  divided  into  three· categories:  route-sorting  codes.  distribution 
codes and mixed codes. 

The roule-sorring code focilicates  the automatit· sorting of mail  going  from  one city  to 
another.  To permit sorting down  to a  more detailt=d  levd  - to the postman's "walk" (or 
delivery  round).  a  distribution  sort  code  is  needed.  A  codt.•  that  combines  the  two 
functions  is  termed a  mixed code. 

2.1 

CODING SYSTEMS CllOSE1' 

in  which 

Experience  of  post-codes  and  the  ways 
thl.'y  may  devdop  are 
influenced hy  the coding systems that  have heen established.  Wht=n  considering 
the  introduction  of  post-codes.  postal  administrations  essentially  had  two 
choices:  either a  system  \\1hose  codes were  eas\'  to  memorise  (all  numeric  with 
perhaps  up  to  6  -digits)  or  a  system  that  pe~mittcd  the  maximum  sorlation 
possihle.  The different systems actually applied by  the post<tl  administrations of 
the  Member  States  and  of certain  other countries  are  summarised  in  Table  I. 
The henefits and problems are assessed hdow: 

2.1. I 

EASY TO MEMORISE CODES 

Examples of countries that  introduced such  codes are  Belgium  and  the  Federal 
Republic  of  Germany  (hoth  4  digits),  and  France  &and  Italy  (hoth  5  digits). 
These codes permit  sortation  down  to suhurh or small  town  level.  These  levels 
of sortation  equate  to  sorting  down  to  the  first  level  of  the  "inward•'  codes 
descrihed below.  In  general. these codes quickly gained  e1  high  degree of public 
&acceptance.  The rate of use (the "penetrntion rate")  isl)(>%  in  France and more 
than 90% in  the Federal  Republic .. 

'------------------------------------------

Ta hie  l: 

Post-code structures 

l:Ol!NTR\' 

l>t'.SCIUl"TIO' ()t" POST-COl>t: S\'SU'.\I 

t-------------1----------------------------- ----- ----------~~-----____. 

12.~-t  Name of City 

123..t  _ Name  of City  Copcnhugen  will  be  followed  hv  K  or  V  (office  of 
delivery) and  Frcdcrikshorg followed  by C.N  11r  0 

123..t  N;1mc  ol  C11y.  for  thl'  l;1rgc  n11c ...  111.:L· 
oll11..°I.:  11f  ddi\'cry  m;1r!.;cd  \\'"llh  I  1lr  12.  '11  l11r  cx:1rnpk  KOOOO  l\fonich  12 

lh:rl111.  r'-.lunich.  Frankfurt, 

Belgium 

I kn mark 

< icrmany 

< irecn: 

Spam 

I  I I 

f· r:ancc 

1~3-t~  J-ir,t  l\\11  d1;1r:11.:11.:r'  1:11rr1..·,p1111d  111  1k'p.ir11.:111c1H  m1mbcr  Off1cc  111 

dc11n:~ ( m11,t I~  t hi.:  -.;im1..·  ;1"  name  111  r1.."-.Hlc111.1.· 
(11mp;1111i:'  w11h  !"1t."11\1..'  I'<> 
I.yon  and  i\Lir,nlk 

lu1\1.''- 111 

l  cdi:.\  spcc1;1I  delivery  for 
-.111111.·  1.;1,1.·,  !1ill11wcd  tw  12  for  P:tris. 

Ireland 

Italy 

(2) 

! uxcmbourg 

12.1..t  N;1mc  uf Cit\ 

charactcr .. ) 

United Kingdum 

Con-.1-.1 ..  111 

l\\11  ckm1..·111'  The  'c1.·111HI  ''  1h1.·  111\\;1rd  p;1r1  111  c11dc.  and 

:ilwav"  c11n-.1.'1'  111  1hrL"l"  L'hara..:11.:r'  (1H1111L·r11._ 

.ilph;1.  alpha)  The  fir-.,1 

ckmcn1  '"  lhl'  11ul\\;1rd  p:111  111  1h1..·  1..11lk 

11  -.1.1rt'  w11h  11nc  or  1w11  alrha 

d1~1ral't1..·r,  ... 1gn11v111g  th1.:  111..·:1r1..·,1 

l;11g1..·  111\\11 

1"111'  1-.  lh<:n  comb11h.:LI  w11h 

-.11m1..·111111..·, 
.\12  ~IH  .\Bl2  ~BC.ABI 2CD 

lurth<:r  alph;1 

.1 

The 

l\\11  nu1111..'fll'  ch;11;1L11..·r,_ 

11111..·  1>r 
p11, .. 1f>1li111..·.,;1r1..·th1.:rl'l1111..··\BI<  21ll 

;111d 

USA 

fa pan 

Note  1 

lndudc:s Andorra 

Note 2 

lndudc-. San  Marino and the  V&1ti~an 

Source:  Postal administrations 

A1111ex  JO:  J'm·tal npcmwrs ·codes 

-----~- -----------~] 

. 

pogi: 327 
- - - - -

2.1.2 

CODES FOR MAXIMUM SORTATION 

The  only  EC  postal  administrations  that  have  implemented  such  codes  for 
maximum  sortation  are  the  Netherlands  and  the  United  Kingdom.  The  typical 
code  for  the  latter  can  he  expressed  as  AB I  2CD  - that  is.  <1lpha,  alpha,  num, 
then  num,  alpha,  alpha.  The  first  part  (the  "outward"  code)  sorts  to  the  post 
town  and  its  surrounding area  (or  the  suhurh of a  large  city).  The  second  part 
(the "inward" code)  sorts down  to a  section of a  street  (covering,  on  average,  15 
houses). 

Canada  has  a  similar  (>-character  alpha-numeric  coding  system  The  US  has 
introduced  a  supplementary  code  called  "Zip  +  4":  to  the  standard  digit  Zip 
code have  been  added 4  more digits.  All  four  systems  permit  sortation  down  to 
the  indivitlual  postman's walk  (or what  is  known  in  the  US  4.IS  ~•"carrier route"). 

(The  US  syslL'm  h<1s 
i-.. 

These  levels of complex icy  <1re  required  i11  mLkr  lu  g1\ e  lht:  required  number of 
variables  for  detailed  sortation. 
llHJ111  v~1ri;1bles  for  a 
the  codes  ;1 re  difficult  to 
population  of  ~<>Om.)  The  d isadva ntag.e 
memorise.  p<1rticul~1rly  in  tht'.  cc1se  of  ;dph;1  ch;1r;1ctcr-.  Thi-..  e\pl;1i11s  the  low 
penetr<t t ion  rates.  The  US  rate  has  Li lien  hack  tu  )5c;...  The  lJ K  rate  is  now 
75cr-.  having  gradually  incre;1sed  from  ;1hout  )(JC( 
In  both  c:1\cs.  the  levels  of 
penetration  have  resulted  particularly  from  the  \()lumes  ot  tr;itfic  posted  with 
in  both  countries  by 
the  aid  of  computerised  rn;1iling 
list'.. 
discounts). 

( encour;1ged 

t h;i l 

2.2  OPERATIONAL 

It  is  obviously  the case  that  the  shorter the  post-cm!e.  the  shorter the  time spent 
on  the  initial  keying  process  (where  manual  coding  desks  ;ire  used)  which 
relates to  the  number of key  depressions.  The  inclusion  of a lph;1  cha ractcrs  ( ;1s 
in  the  UK  system)  slows  the  key  depression  rate. 
It  rn;1v  ;llso  increase  the 
likelihood of mis-keying. 

For  the  future,  two  developments \viii  aftect  the  a:-.-.e-.smt.·nt  of  different  sorting 
systems.  Firstly,  the  incre;1sed  use  of Optical  Ch;1r;1ctcr  Re:1dcrs  (OCRs)  will 
reduce  the  differential  in  sorting  time:-.  het\\een  ~,imple ;ind  complex  codc~ ..  ;1:-. 
well  as  perhaps  reducing  the  potent ia !  m is-kt.·yi ng  prnhkm  ot  the 
l:i t tt.:r. 
Secondly.  the  trend  of  decre<1sing  capit<d  costs  i-. 
likt.·ly  tu  111:1ke  it  \-i;1hk  tu 
introduce  mechanised  sorting  equipment  in  '>lll:ilkr  di'>trihutiun  ;111d  deliVL~ry 
centres.  Both  developments  m;1y  permir  grelllt'I  prudul·ti\ ity  g;1ir1-.  tu  he  rn;1de 
from  more complex  post-L·mk  systt.·rns 

23  COMMERCIAL ASPECTS 

The  use  of  the  post-code  has  ;1dvantages  for  thc  husineso.,  111,1 iler,  whether  ot 
individually  produced  items  such  as  invoices  or  hulk-prmluced  direct  mailings. 
It  may  permit  him  to  pre-sort  before  lodging  the  rna ii  with  the  Post  Office  (or 
if  permitted).  ~ind  thus  gain  discounts. 
private  operator, 
Perhaps  more 
importantly,  it  enahles  him  to  divide  his  address list  on  ;1  geogrdphic hasis,  using 
(Before  post-codes,  some  ma ii  order  houses  used 
generally  accepted  codes. 
their own  geographic coding systems.)  Post-codes are  nnw  an  essential  tool  for 
any  company  with  a  large  address  datahase.  The  comrlete  absence  of  a  post 
coding  system  in  Ireland  (outside  a  limited  area  coding  system  in  Dublin) 
therefore  inhibits computer manipulation of address data  for  th;1t  country. 

pt1gt:  328 

Annex  JO:  p,,_.,fCll ''J'CITllt>I~· t·o,/e.t 

3.  TECHNICAL CODES 

Technical codes  relate directly  to  the  operational  use  made of coding systems.  Tht!re 
are  two  such  systems,  one  rdating  to  codes  printed  on  letters  to  enable!  automatic 
sorting and the other relating to har-codes used in  the processing of individual  items. 

3.1  CODES FOR AUTOMATIC SORTING OF LEITERS 

Firstly.  the ordinary functional  codes need  to he converted  into  technical codes 
before  automatic  sorting  can  take -place.  The  functional  code  is  therefore 
"translated" from  the functional  code's format  (numeric or alpha-numeric)  into 
a  technical code, expressed  in  hinary. consisting entirely of the characters Os  and 
ls.  This binary code  rders  to exactly  the same  destination  co-ordinates as the 
functional code. 

When  printed  on  the  envdope  to  he  sorted  automatically.  lhese  hinary 
characters are  represented  by  spaces  for  the  Os  and  either  docs  or hars  for  the 
If only  an  outward  post-code  is  in  use.  these  markings  will  he  printed  in  a 
Is. 
short  line  at  the  foot  of the  Idler.  If  both  outward  and  inward codes are  used. 
either an  extended  line  is  printed.  or two  lines are printed.  the  upper  line being 
for  the inward code.  These technical codes  can  then  he "read" hy  the autom«1tic 
sorting machines. 

It should  he  noted that  LJ PU  rult::-.  do  not  permit  the printing of technical code!s 
by  che  "outward"  postal  adminislratior1  on cross-border  letter  items.  in  case  the 
markings  may  hecomc  nmfused  with  the  technical  <:odes  which  the  "inward" 
administration may wish  to print on the same items. 

3.2 

BAR-CODES 

Bar-codes  tend  to  he  used  for  individual.  larger  items.  Examples  are  parcels, 
express  items.  or even  hags containing letters.  The  bar codes  not  only  include 
destination  identifiers.  hut  may  also  include  other  data  such  as  information 
concerning the customer.  the scrvi<:e  used.  the originating operational centre or 
the  date  of  posting.  The  bar  codes  are  either  printed  directly  onto  items  or 
printed onto labels which  themsdves are then affixed  to the items. 

The  bar-codes  can  he  r~ad  hv  scanners.  so  thal  the  items  can  he  sorted 
automatically.  The  same  tech~mlogy  can  also  he  used  to  provide  the  dat«1 
needed  to  operate  "tracking-and-tracing"  systems.  Such  systems  require  that 
items  are  scanned  at  distinct  poinls  in  the  process  between  <:ollection  and 
delivery.  progress being noted  ele<:tronically.  They  therdore  permit  individual 
items  to  he  tracked  throughoul  the  whole  process.  information  being  availahle 
on when each poinl  - up  to delivery - w;1s  reached. 

Sorting  through  using  bar-code  systems  is  becoming  increasingly  common  for 
both  parcds  and  express  operations.  Tracking-;ind-tracing  systems  are  used 
more in  the express sector. hut  similar systems are also to found  in  some parcels 
operations. 

4. 

IMPACT OF CODES USED 

Most  postal  administrations  have  committed  themselves  to  investing  in  automated 
sorting  machinery.  and  then  trying  to  maximise  the  percentage  of  items  sorted 
automatically.  However.  the  results  for  those  administrations  thus  committed  to 

A1111et  /():  / 10 ... 111/  openllors' co,/es 

page 329 

mechanisation  have been variable - between 8% and 50% being sorted automatically. 
(The  sorting  carried  out  can  vary  between  a  simple  sort  by  post-town  to  detailed 
sortation down  to each delivery  round.)  The differences are attributable to a  number 
of  factors.  including  the  different  percentages  of  mail  pre-sorted  by  customers. 
However,  differences  in  use  of  post-codes  has  also  in  the  past  been  an  important 
factor. 

Through comparisons hetween  different postal administrations  in  the world.  it  is clear 
that  administrations  have  taken  varying  approaches  in  the  attempt  to  reach  the 
highest  levels  of  post-code  "penetration".  Some  rely  on  sustained  campaigns.  and 
investing in  maintaining the post-code data  hase (an  investment which  costs one large 
administration ECU 60 million  per year). 

For others.  the  post-code  is  simply  part  of the standard address:  if  it  is  not  included. 
the  item  is  incorrectly  addressed.  Still  other  postal  administrations  have  taken 
different  measures to try  to  improve the  rate - such  as the  initiative hy  Canada  Post of 
encour41ging  envelope  manufacturers  to  print  on  envdopes  a  hox  for  the  sender  to 
write/type in  the post-code. 

In  the future,  for certain postal  administrations able  to make  the investment. the level 
of post-code  penetration will  he  important  more as  an  aid  to  qu41lity  of service.  New 
generations of optical  character  reader  (OCR)  equipment  will  be  able  to  "read"  the 
relevant details from  the address (and convert them  into the necessary  technical code 
for  sorting).  using  the  (functional)  post-code  only  as  41  checking  device.  Other 
administrations.  which  continue  to  use·  automatic  sorting  machinery  not  based  on 
OCR,  wiJI  still  need  to  use  post-codes  as  the  hasis  for  their  automated  sorting 
processes. 

However.  post-codes  will  also  remain  important  for  reasons  beyond  the  automated 
sorting process  in  postal  administrations'  sorting centres.  Firstly.  post-code  systems 
are an  invaluable help for  all  express operators who  use  har-coding systems to provide 
track-and-tracing facilities. 

Secondly.  large  customers  undertaking  pre-sorting  usually  <.:omputer  sort  their  mail 
through the post-code.  Further.  in  those countries that  permit customers to print bar 
codes on  envelopes to assist  the automated sorting of the  postal administration.  these 
har-codes are themselves translations of the post-codes. 

In  relation  to  the  levels  of  sortation  made  possible  through  the  post-code.  a 
comparison c<m  he  drawn  between  the simple  post-codes which  sort  down  to towns or 
general  &1reas.  and  the  more  detailed  post-coding  systems  which  will  permit  sorting 
down  to  individual  delivery  offices  within  towns.  and  indeed  to  individual  delivery 
In  this  perspective.  those  administrations 
rounds  (also  known  as  postmen's  walks). 
which  presently  have  the  more  simple  post-codes  may  wish  to  make  their  systems 
more detailed (as,  for  instance.  the  United States postal service  has done).  in  order to 
permit either a  more detailed. sortation hy themselves or a  more detailed pre-sortation 
by the customer. 

All  these  benefits  can  he  «•ttained  without  any  recourse  to  a  single  integrated 
.  European  post-code  system.  (A  knowledge  of the  different  systems  is  sufficient  for 
customers to carry out the different pre-sortations required.)  However. there do seem 
some  pos..~ibly  significant  benefits  in  having  a  standard  format  for  writing  addresses 
(for instance.  in  terms of the placement of the initial(s)  identifying the country). 

I page 330 

.·l1111c·'  JO  l'u.'itol operatm'' (De/es 

As  with  other  aspects  of  potential  harmonisation.  the  Commission.  in  cooperation 
with  Memher States, will  investigate with  the  interested  parties  the  benefits and  costs 
of harmonisation  measures that  may be  necessary. 

A1111et  11:  Postal L'<flll/JJ11e111  industry 

"-----------------------------

-

pm!,e  331  J 

---- -
- --~-------- __ ' ___ _ 

ANNEX 11: 

POSTAL EQUIPMENT INDUSTRY 

l. 

INTRODUCTION 

This (tnne:x  seeks  to provide  an  introductory analysis  of the  postal  equipment  industry. 
This  is  the  industrial  sector which  produces  installations and  equipment  for  the  postal 
process and which  produces t r~111sport  ~1 nd  storage  foci I it ies for  use  hy  post~tl services_ 

2. 

EQUIPMENT USED 

Investment 
categories: 

in  e4uipment  used  for  postal  operational  purposes  falls 

into  three 

specialised postal  equipment: 

customised equipment  (hut with  general purpose origin): 

~-

other equipment. 

The  main  users  of such  equipment  in  the  postal  sector  are  the  operators.  both  public 
and  private.  However.  it  should  he  noted  that  this  equipment  is  also  used  hy  large 
Or!.!<I n isa t ions  which  have  sufficient Iv  large  volumes  that  the\'  have  invested  in  their 
ov;n  post a I  processing  de pa rt rnt·n ts  - For~ many  such  mg;i n is;1 t ions.  the  equipment  is 
used  for  pre para t ion  ot  the  ma ii  he fore  it  is  posted  with  the  opera tors.  Others  -
particularly  in  the  mail  order  industry  - can  G1rrv  out  m<1m  of  the  m;1in  postal 
operational  functions  themselves. 

Examples of equipment  in  the  thrt.'t'  c;1teg.ories  ;ire  .... tHmn  in  the  three  t:1hk"  hl'IO\\/. 

Speciufi.,t!<I pwtof t'1;11i1mu·11t 

Fqu1r111c111  that  is  used  (lnl\  IJ\  p11:--L1I  opcr;i111r:--.  bL·c:1u"c  11! 

th1..·  p;1rt1nil;1r111c-.  (l!  the  scr,·1..:c"  the\ 

;ire  prnviding: 

Fr;inking m:1..:h1nc-.  (u-.cd  c1llh'.l  Ii\ !Hhl;d  llpcr:1l1•r"  •'r  br~cr .._u:-1111ncr-.) 

Sr amp vending ma..:hi111..·-. 
Pust i ng  boxes 

Culler /foccr /ca nccl le r-. 

Pre-sorting m:ich111c" 

.-\u1nm.Jtic  lc11er  -.11ni11g  111;1Ll1111L·:--. 

Autom:it 1c  p.ickct /p:1rCL'I  -,11rt 111g  m:ich111c: 

,.\ssllci:Jtcd  softv,:1rc  dcvcl11p111c111 

~------- ----· ---- ---------

page J.l2 

Annex I/.  />o.wtrl eqllipmelll i11d11s11y 

Table 2: 

Customised equipmem 

Equipmcnl  thal  is  used  in  other  sectors.  but 
applical ions: 

requires  specialized  customisation  for  postal 

Automated rerminals for  post  office counlcrs 
Self-service vending machines 
Optical character reader (OCR) 
Video coding system 
Bar code soncr 
Tracking ~and &racing system!\ 
Customised weighing m&echinl·s 
Artificial intclligcncc/roho1ic!\ 
Bells and conveyors 
Plastic .:onvl."yan.:c h••xcs 

Table 3: 

Other equipmem 

Other  equipment  widely  used 
for  gcncr.al  purposes.  1h;11  a  d\.·mand  for  a  rcl<.itivcly  small 
au1oma1iza1ion  (if any)  and  for which  1hc  postal  opcr;11or!it  purch;a"-'  only  l'or  ;1  small  percentage  of 
total sales: 

Computers 
Primers etc. 
Telecommunications Clfuipmcn1 
Weighing machines 
Lifting machines 
Transport 

Of  the  equipment  mentioned  ahove.  perhi1ps  the  two  most  signilki1nt  innovatory 
applications  to  the  postal  seclor  are  1hose  of  OCR  ;tnd  of  tracking-and-tracing 
systems.  The batter  en.1hles greal  improvements to  ht>  made  in  the  facili1ies  thi1t  can 
be  provided  to  customers {particularly  of express  ser\'ict:s ).  The  former  is  having  a 
significant  effect  on  the  letter  operation.  Whereas  tr;1ditional  "mech;111is;1tion"  may 
well  sometimes  have  hi1d  only  a  marginal  dfec:t  in  terms  ul  raising.  service  or  ~  ving 
• 
costs, OCR may permit importanl operational advanl·es to he made. 

The  importance  of customised  software should  also  ht:  emphasised.  Because  postal 
operators often  do  not  have  1he  in-house  capacity  to  generatt>  the  software  needed. 
the task  is  frequently contrnc:ted out.  This expense can  he  ~•  significant  proportion of 
development costs. 

Less  obvious  is  the  gradue1I  evolution  in  materials  handling  during  the  letters 
operation.  Trays  are  more  and  more  replacing  hags  as  c:onlainers  for  letters.  This 
increases  the  opportunities for  mechanising the  movements hetween  the  component 
processes during the letter operation. 

Amiex 11:  Po.-.111/ t•quipmem i11t/11.'it1~· 

"''·~.tu 

3.  SUPPLIERS 

Tahle  4  shows  the  largest  suppliers  of  the  specialist  postal  processing  e'-luipment. 
(They  tend  also  to  cover  applications  of  the  customised  equipment  - for  example. 
integrating optical character reader technology into automatic sorting systems.) 

Table 4: 

Survey of most importcmt .mppliers of postal machinery 

COlil\TR\' 

Denmark 

Cicrmany 

Fm nee 

lrnly 

N ct her I•• nds 

United Kingdom 

MA.~U•"AC.Tl'R•:R 

Kosan Crisphant 

AEG Elcctrocom 
Eisenmann 
Manncsm;mn  Dcma'-· 
Schicrholl 
Siemens 
S1and.ard  Ele..:ari..:  l.orc111 

Akal cl 
C< iA-Ho11..:hk1s'  Brandt 
f.lcl.HnlllllUC  Scrg'"·  f>a,,1uh 
Tckfkx 
TITN 

t:MI. 
Elsag 
Otive11i 

Philips 
Rupistan van der Lande 

Ci EC-Avery 
Pia m .. •y  Bowes 
Plcss'-1· 

Swiazcrland 

Gilgcn 

Japan 

USA 

Source:CEC 

Nippon  Elc..:1ri..:  tNH .. , 
To"hiba 

AE<i 
Bell  ITI 
Bell &  Howell 
lki 

I page 334 

4. 

PURCHASERS 

-··---------------------~----------, 

Annex 11:  l)uswl equipment i11dus11y 

The largest  purchasers of specialised postal  equipment  are the  postal  administrations. 
Private operators and certain  large  customers  have  also  made  substantial  investments 
(although accurate  information on  the  total  investment  has not  been  published). 

sorting 
Private  operators'  sorting  machinery 
requirements.  The larger express orerators (and some of the  rared companies)  have 
also  invested  heavily  in  tracking-and-tracing systems.  Since  these  are  based  on  bar 
coding  systems.  the  same  bar-codes  can  also  be  used  for  sorting.  Priv~1te  operators 
also  have substantial  materials handling requirements. 

their  packet/parcel 

relates 

to 

Of the  large  customers,  the  major  investors  have  been  the  mail  order companies. 
It 
should  be  remembered  that,  in  terms  of  revenue,  large  ma ii  order  companies  are 
bigger  than  smaller  postal  administrations.  Because  their  operations  are  more 
concentrated,  they  can  achieve  great  returns  to  scale  from  their  capital  investment. 
Mail  order companies'  primary specialist  requirement  is  for  parcel  sorting machinery. 
The  result 
is  that  mail  order  companies'  operations  are  often  technically  more 
sophisticated  than  the  parcels.operations of postal administrations. 

5. 

INVESTMENT BY  POSTAL ADMINISTRATIONS 

As  indicated.  financial  data  concerning capital  investments  m~1de hy  private  operators 
and larger customers are  not  readily  av~1 ilahle.  However.  th rough  the  lJ n ivers;i I Po~ta I 
Union. some  in format ion  is  ava ilahle  on  postal adm in istr;i t ion-.;·  investment. 

Table 5  below shows the  investment  made hy  Community posLil  ~1dministrations in  the 
years  1985-1%i8.  and  then.  to  ttid  comparison.  expresses  the  ;1ver<tge  investment  m<tde 
as  a  rercentage  of  the  revenue  <1chieved  in  1988.  The  average  im·estment  over  the 
(Because  of 
four  year  reriod  is  expressed  as  a  percentage  of  the  revenue  ot  J<J88. 
insufficient  <.Lita.  Ireland and  Luxembourg Me  not  included  in  the  EC average.) 

Annex 1 J:  />u.'ital  equipmem i11clus11y 

page 335 

Table 5: 

Postal administration investment (I 985 - I 988) 

Mt::\llU-:R 

STAn:s 

Belgium 
Denmark 

Cierman~ 
Greece 
Spain 
Franc\.· 
Ireland 
Ital\ 

Luxcmb11ur~ 

Netherland~ 

P11rtu!.!al 
United  K1ngd11m 

l'.\"Vt:ST'.\lt:'.'liTS 
(millions ECU) 

1985 

19&, 

1987 

19AA 

23.1 

-12.6 
.B7.3 
7 l) 

29.(, 

~I K h 
11/;1 
-)KO) 

11/i.J 
l l<l  h 

13.-l 
20K-l  5 

·-

2D 
2<•  0 
-141  :\ 
59 

hlh 

n/~1 
11/a 
7-lfrll 

n/i.l 
123) 

15.7 

159.2 

33.6 
51.3 
-l85  2 

1.4 
n/a 
l.H '> 
109 

K3h) 
n/a 
IO<lll 

IJ.) 

227.0 

2:\.2 
115.6 
504  l) 
19 
22  -I 
717  2 
11/;1 
.l."}.7  ti 

Ill() 

2)0.') 

1)  1 

257 () 

Total 

.15-17.1 

1605.4 

1899.3 

22-1)  2 

-· 

United State:-

1090.5 

IJ63.9 

181~8 

I.OSI  I 

b"\1tSl'Mt:NT 

AS PERCENTAGE OF 

A;o.;:"'UAL 

Rt:\'E:'\Ut: 

- -

34<;·; 
5.1 <;·; 

4.w,:.; 

3.2':''t 
.\.I<.-'< 
2w: 
11/a 
1)2'.; 

n/a 
4  w:·; 

9.4',:~ 

10.6'.:( 

6.1 <;~ 

3.8';"{ 

- -

Source: 

Universal  Postal  Union (UPU).  1989 

A  significant  proportion  of  this  investment  has  heen  made  in  automated  sorting 
processes.  For  about  half  the  EC's  postal  administrations.  the  "hack-hone"  of  their 
network  is  the  mech<'tnised  sorting centres.  Table  6  show::-,  lhe  number  of such  offices 
in  each ;1dministration. 

page336 

Annc.·x  I I:  l'o ... wl equipm~111 i11c/11.t1ll)' 

Table 6: 

Mechanised sorting celttres 

Mt:MRt:R 

STAn:s 

Belgium 
Denmark 
Germany 
Greece 

Spain 
Frant:e 

Ireland 
lrnly 
Luxcmbc•urg 
Nc1hcrlandi-
Portug<1l 
Uni1cd  Kingdom 

TOTAL 

NUMD•:ao•· 

SORTISG 

CEJllffRES 

O•· AU. SORTING CEl\TitES 

<>•· MECllASIS•:o ct:l'~nu:s 

MECHA~•s•:o 

MANUAL 

CF.NTRES 

C..T.lliTitES 

\~lTH 

OCR 

Will I< n:1· 

OCR 

17 
12 
129 
22 
85 
131 
8 
201 
I 
12 
7 

IJO 

7 
I 
50 

0 
6 
AA 
0 
.l I 

I 
12 
.. 
·' 
X() 

10 
11 
7') 
22 
79 
43 
8 
170 
0 

Cl 

-l 
50 

{, 

0 
0 
0 

(, 

70 

0 

0 

ti 

0 

.l 

C..l 

I 
I 
50 
0 

0 

I~ 

0 
.l 1 
I 
12 
0 

17 

Source: 

So fr es study 

It should again  he emphasised that what  is called automated sorting still  has,  in  reality. 
a  significant  manual  element.  Much  of the  materials  handling  between  processes  is 
carried out  manually.  Similarly,  the "facing"  operation  is  often  undertaken  manually. 
If OCR is  not  used,  the encoding of addresses needs to he carried out  by  the staff.  All 
machines  need  minders.  Because  sorting  machinery  has  capacity  ceilings.  peaks  of 
traffic often necessitate the supplementary use of manual sorting. 

6. 

TRENDS 

As  would  he  expected.  levels  of  "mechanisation"  differ  between  the  various  postal 
administrations  of  the  Community.  The  administrations  st.·em 
into  three 
groups: 

lO  fall 

those who  had completed their  initial  mechanisation  programme hy  l'J90: 

those who are in  the process of mechanising their operations: 

those who currently do not  have plans to mechanise their operations. 

For  those  postal  administrntions  whose  strate!,'Y  is  to  have  a  network  which  is 
"mechanised"  to  the  maximum  feasible  level,  there  may  he  certain  junctures  when  a 
mechanisation  programme  appears complete.  However,  in  reality,  investment  needs 
to  continue.  This  is  partly  to  replace  depreciated  plant.  More  importantly.  it  is  to 
ensure  that  the  equipment  used  employs  the  most  appropriate  modern  technolo!,'Y· 
Thus.  sorting  technolo&'Y  has  seen  first  generation  equipment  replaced  by  second 
generation  equipment;  the  latter  is  now  in  the  process  of  heing  replaced  hy  OCR 
In  summary.  for  such  postal  administrations.  the  investment  c.-ycle  is 
technolo!,'Y· 
driven  mainly  hy  the  need  to  replace  plant  which 
is  physically  or  technically 
obsolescent,  as  well  as  to  purchase  innovative  equipment  that  can  improve  quality, 
and/or reduce cost. 

A1111ex  1 J:  Posto/ equipmelll iJl(/us11y 

For other postal administrations who  have  not  pursued the same strategy of maximum 
mechanisation  but  who  are  embarked  on  a  mechanisation  programme.  it  will  be 
necessary  to  decide  what  proportion  of  the  network  needs  to  he  mechanised.  For 
most postal  administrations,  there  is  little  re4uirement for  "technical  inter-operability" 
in  the way  that, for  instance, different  parts of telecommunications network  need to he 
able to  inter-operate with  one another. 

The  only  exceptions  to  this  are  those  postal  administrations  which  are  attempting  to 
use a  single  reading of the  post-code/address  to  permit  hoth  the  outward  and  inward 
sorting  to  take  place.  While  automatic  sorting  is  reliant  on  the  "depth  of  the  post 
code" (see  Annex  10),  of the  Community  postal  administrations  only  the  Netherlands 
and  British  Post  Offices  are  able  to  achieve  this.  (Even  for  these  administrations  -
particularly  for  the  British  post  Office  - the  level  of  inw;1rd  sorting  thus  permitted  is 
not  suhsL1ntial.)  The  picture  may  change as  OCR  technology  improves,  so  that  more 
of  the  address  can  he  read  - even  where  the  post-code  is  not  sufficiently  deep  to 
permit ;iutumatic inward sorting. 

For  most  ;idm in ist rat ions.  the  rea I ity  will  continue  to  hL'  t h;1 t  rnecha n ised  ;ind  m;i n u;tl 
offices c;1 n  ( ;1 nd  must) co-exist  in  the same postal  network.  Post a I adm in i~tr;1 t ions ctn 
therefore examine each sorting centre  individually to determine \vhether  it  needs to  he 
mechanised.  (There  may  he  reduced  investment  costs  per  centre  if  there  is  a  larger 
mechanisation  rrogramme.)  There are two criteria  that  need  to  he  used  in  reaching a 
decision:  improvement of quality of service and  reduction of costs. 

Almost  all  mechanisation  will  reduce operational  labour  costs.  However.  the  decision 
would  need  to  he  based  on  whether  the  reduction  in  costs was  sufficient  to justify  the 
(The  calculations  will  vary  not  only  between  sorting 
carital  expenditure  involved. 
centres.  hut  also between countries, since labour costs and  productivity levels vary.) 

Regarding.  service.  mechanisation  does  not  hy  itself  guarantee  improvements.  unless 
allied  to  careful  operational  planning  and  effective  network  management.  While 
faster  sorting  times  would  appear  to  lead  to  more  reliable  deliveries.  this  might  not 
necessarily  he  so. 
In  order  to  maximise  the  throughputs  of  mechanised  sorting 
centre~. mail  is  "concentrated"  from  a  wide  area.  The greater  the  concentration  area. 
the  longer  the  extra  distances  involved  and,  at  least  theoretically.  the  greater  the 
danger  of  loss  of  4uality  of  service.  For  the  future.  the  reducing  capit<tl  costs  may 
permit  ;1  trend  towards  de-concentration  (as well  as  greater  flexibility  in  the  planning 
of techni1.:;tl  developments). 

Th is  sen 11.:e /cost  reduct ion  equ;1 t ion  could  alter  ~ign i tic1 nt ly  when  the  potential 
implications of OCR <ire  understood.  Because OCR  may  permit  much  higher  levels of 
productivity.  there  is  a  much  improved  possibility  of  achieving  good  returns  on 
investment  and enhancing quality at  the same time. 

investment  decisions. 

In  the competitive sector, cost  effectiveness and quality  improvement  are  also  the  two 
the  presence  of 
criteria  which  drive 
to  gain 
competition  causes  these  criteria  to  be  more  relative:  the  stimulus  is 
competitive advantage,  or  to  reduce  the  advantage previously gained  hy  a  competitor. 
What  are  satisfactory  cost/price  levels  and  what  is  satisfactory  service  will  therefore 
change.  often  4uite  rapidly,  over  time.  What  was  an  extra  facility  soon  becomes  a 
standard feature. 

However. 

there, 

Two examples suffice. 

I P"g< 33X 

.· l1111l'-'  11  I>,"'"' eqwpmellf 111du.,t1y 

The more well-known  examrle  is  that  of tracking-and-tracing systems which  are 
Increasingly, 
now  becoming  incre~1singly  common 
customers will  simply  expect  this  facility  to  he  available  as  part  ot the  standard 
service. 

the  exrress  sector. 

in 

The second,  rerhaps less  obvious.  example concerns customer  service  facilities. 
In  order to  he ahle  to compete. orerators have  to he  responsive.  Thus,  they will 
need  to  provide  prices  immediately  for  all  possible  routes  and  services;  to  give 
information  on  how  services  are  routed:  to  decide  on  what  collection  facilities 
can  he  arranged.  This  information  was  traditionally  provided by  staff with  local 
knowledge. 
is  now 
encouraging operators to centralise their customer service operations. 

The  growing  complexity  of  customer  requirements 

Such  demands  for  tracking  and  tracing  and  on  customer  service  necessitate  not  only 
highly  professional  staff  (who  are  an  investment  in  themselves)  hut  also  computer 
systems  to  provide  the  information  needed.  Increasingly,  private  operators are  likely 
to 
tracing 
requirements  with  those  of  customer  service)  so  that  customers  anywhere  in  the 
territory cm·ered  receive  the same  level  of responsiveness. 

integrated  computer  networks 

tracking  and 

(comhining 

invest 

in 

Annex J 2:  J>oswl  dectn m ic mail 

page .).l9 

ANNEX 12: 

POSTAL ELECTRONIC MAIL 

l. 

INTRODUCTION 

Postal  electronic  mail  services  are  based  on  the  technology  ot  analogue  or  digital 
transmission  of  text  and  images. 
In  foct.  "postal  electronic  mail"  is  a  general  term 
covering  tde-printing  services.  EDI  (Electronic  Data  lnterl"hangL')  and  a  fax  service 
operated hy  postal  administrations.  hut  \\ith  bolt-on  additions that  cre~1h..·  added value 
over a  standard fax  bureau.  For  this reason.  postal electronic  m~1il is  usually described 
as a  "hybrid" service. 

Postal electronic  m<1il  services have  been  developed  in  each  EC postal .administration. 
Italy  has seen  the most  successful growth of its service.  It  also  has the largest  network. 
This  annex  discusses  the  future  commercial  attractiveness  of  postal  electronic  mail, 
and addresses the  issue of standardisation. 

2.  DIFFERENT FORMS 

There are three  main  forms of postal electronic mail: 

- The  text  (and/or  image)  is  transmit_tt·d  to  a  postal  administration  operated  fax 
machine  close  to  the  addressee.  Tht.·  postal  administration  then  envelopes  the 
message  (now  in  hard  l·opy).  and  ddivers  it  to  the  addressee.  Normally.  the 
fox  machine  operated  hy  a  postal 
messagt.>  would  have  ht.»en  senl  from  a 
administration.  hut  not  nect.»ssarily.  (It  is  possible  for  the  postal  administration  to 
provide  the  "oulward"  service  direct 
is 
to 
comparatively  rare.) 

er  private  fox  machine.  hut 

this 

-

In  addition  to  the  individual  llll'ss;1~t.·  ddin:ry  service  described  ahove.  postal 
dectroni<..·  mail  Gtn  also ht.'  u~ed tor  hulk  distribution of one message.  The customer 
can give  the  postal  administration  an  ;H.ldrt.·ss  list  (usually on  t<qw  or disk)  together 
with  the  messagL'  to  he  st.•nt.  Both  tht.·  mt.·ss;agL'  and  the  list  are  transmitted  to  the 
distant  office.  which  then  prints  out  the  message  in  individually  addressed  letters. 
These are  then  enveloped  and  delivered.  This could  therefore  he considered  to  he 
an electronic equivalent of direct  mail 

- EDI  (Electronic  Data  Interchange)  opcrate<..I  hy  postal  administrations  as  a  value 

added telecommunication centre for  EDI. 

3.  COMMERCIAL A·n·RACTION 

It  is  clear  that  postal  electronic  mail  operates  in  the "urgent  message"  market.  where 
fax,  telex  and  courier  (EMS) services  also  operate.  This  market  is  expanding  rapidly 
(in  some  sectors  at  a  rate  of 20<}  per  year).  However.  it  is  not  dear  whether  postal 
electronic  mail  will  share  in  this  expansion.  and  hecome  a  major  servin:  in  the  postal 
administrations' portfolios. 

page 3./0 

/11111cx  12:  Postal t'lcctnmic mail 

The  <.lirect  competitor  to  postal  dectronic  mail  is  ordinary  fax  and  private  business 
EDI  terminals.  Fax  machines  are  now  becoming  accepted  as  essential  business 
equipment. 
Increasingly.  there  are  installed  not  on  a  one-per-company  basis.  but 
rather  one  for  each  department.  down  to  small  groups.  This  growth  has  been 
encouraged by: 

-

-

-

increased awareness (almost  up to the level of awareness of telephones); 

the declining costs (down to  170  EC Us in  Japan): 

the variability of lhe postal adminislrations' <.1ualicy  of service. 

To lhese  pressures should  he  added  the general  consumer  impression  thal  everything 
oughl  to happen  fasler.  Negative poinls about  present  fax  machines may  recede. 

These  rend  to  conn~rn  al"l'es-..  to  machilles  either  for  transmission  or  receipt  of 
messages (as wdl  ~ts mis-transmission). 

-

it  is  already possible to store nH:ssages  for  transmission  later: 

- Group  4  machines  will  spet.•d  transmission  times  significantly.  as  well  as  reducing 

mis-transmission: 

-

the installalion  of lhe  ISDN  nelwork  will  enable work stations to communicate with 
each other: 

- Electronic Data  Interchange will  make order and invoice sending more rdiahle. 

These  factors  tend  to  suggest  that  access  to  private  fax  machines  (or other  means of 
communication  with  similar  benefits)  and  their  capacity will  increase.  This  may  take 
away  the  main  atlractions  of poscal  eleclronic  mail  - the  "universal  network"  and  its 
capacity.  But.  frankly.  one  cannot  he  sure.  Customers  may  continue  to  perceive 
benefits  in  postal  electronic  mail.  More  importantly,  postal  electronic  mail  itself may 
evolve as a  result  of lhc devdopmerlls in  dectronics and communications. 

It would  therdore ht..·  wrong to "v. rite  off' postal  electron it:  mail  - particularly since all 
EC administrations offer  the service with  some success.  most  not<thly  in  Italy.  Indeed. 
given  the  prt..•sent  demand.  postal  dectroni<..·  mail  ctn  hl.'  seen  a~  part  of  the 
communicati(HlS  intrastructurt..·. 

-i.  DEVELOPMENT OF NETWORKS :\ND STANDARDS 

As  described  above.  postal  det:tronic  mail  involves  the  electronic  transm1ss1on  of a 
message which  is  then converted  into "hard copy",  and  then delivered as a  postal  item. 
It  therefore  involves  two  intcr-rdatcd  technical  specialisms.  These  are  message 
handling systems  (usually  known  hy  the  initials  M HSs)  and  physical  delivery  systems 
(PDSs). 

Each  network  involves  providing access  to  a  system  for  the  message  sender and  then 
from  the system  to  the addressee.  In  the  first  of these  relationships.  the sender gains 
access through the user &agent  ( UA). and  his message  is communicated  into the system 
through a  message transfer agent ( MTA ). 

A1111ex  12:  Po!ttal c:/('<'lnmic mail 

page 341 

In  the second of the relationships.  the system  communic;ates through another  MTA  to 
the  intended  receiver  (the  latter  receiving  the  message  through  a  different  UA ). 
In 
order for  the  message  to  he  sent  and  understood  correctly.  each  UA  and  MTA  must 
he working to the same protm:ols.  These protol.'ols will  cover aspects such as terminal 
identifiers. start and end signals. and page-hrcak signals. 

If a  company wishes  to  set  up  ilS  own  dectrnnit·  mail  network.  it  can  do  so  hy  leasing 
It  ctn  then  use  the  protocols  it 
lines  from  a  telecommunications  servin~s supplier. 
chooses  for  the  transmission  of  messages  that  it  controls.  However.  problems  could 
arise  if  this  network  wishes  to  communit·att:  with  another  electronic  mail  network.  If 
inter-operability  is  required  between  networks.  some  standards  arc  necessary.  The 
normal  European standard  for  electronic mail  is  the  X-400 (•md  now the  more  recent 
X-500  standard).  This  norm  effectively  provides  the  "bridge"  between  the  system 
architecture (of the MHS) to the al'tual output (PDS). 

It  should  also he  noted  that  there are  different  levels  of standards.  This  is  illustrated 
hy  the example  of a  customer  and supplier  in  a  certain  industry sel'tor  wishing  to  use 
electronic  data 
through  an 
electronil'  mail  network.  The  electronic  mail  network  might  use  the  X-400  srandard 
for  access.  The  financial  data  might  he  presented  in  the  standardised  format  that 
conforms  with  the  EDIFACT  norm.  This  might  he  further  refined  to  a  customised 
EDI  format  that was used specifically in  tht:ir  industrial sector. 

to  communil'atc  financial  data 

interchange  (EDI) 

S.  POTENTIAL PROBLEMS 

All  electronic  ma ii  operators  ( whethcr  postal  or otherwise)  arc  free  to cswhlish  their 
own  networks  using  k~1scd lines.  l.'lluipmcnt  which  they  d10ose  for  their  own  needs 
am.I  their  own  access  protocols.  However.  as  notl.'d.  this  latitude  Giil  l'ause  problems 
luter  if  these  same  opcrators wish  to  h;1n·  their  networks  communicating  with  other 
networks.  The problems may he summarisL'd ;as  follows:. 

, 

- much cquipnwnt and  many products do not  nmform to international standards; 

- standards  are  not  detailed  enough 

to  guarantee  end-to-end 

transmission. 

particularly for  international connections: 

cross-border  inter-operability  between  national  networks  1s 
shared standards (usually international standards); 

impossible  without 

sl<lndards  have  evolved separntdy.  and  new standards must  take  into account  what 
the future  requirements are likely to he: 

specific  applications  meeting  users'  customised  rel1uircments  arc  likely  to  move 
away from  standards. 

-

-

6.  ACTION  HY  COMMISSION 

The  Commission  is  engaged  in  the  implementation  of  a  general  Community-wide 
standardisation  polit·y  for  tdel.'ommunil'ations.  Establishing  stc1ndards  for  dectronil' 
mail is just one part of this overall policy: 

r;:. 3./2 

.'11111ex  I 2  PoslO/ elc:ctrmric mail 

The  Commission  has  therefore  initiated  certain  "horizontal"  actions.  such  as  in  the 
legal sphere.  At  the same time,  it  is  investigating the needs of certain  market  sectors. 
and.  after  making a  financial  analysis  of options,  recommending solutions  to  certain 
problems identified.  An example of this overall approach is  the TEDIS programme. 

Regarding electronic  mail  in  general.  and  postal  electronic  mail  in  particular.  one  of 
the  options  is  for  network  operators  to connect  to  the  standard  telecommunications 
networks  usually  through  the  X-400  and  X·SOO  norms.  Alternatively.  electronic.:  mail 
network  providers can link  together their own  nelworks through  lines which  they lease 
themselves.  for  which  they  can  use  their  own  access  protocols.  For  the  latter.  there 
could  he  the  self.evident  problem  of inter-operability  between  the  different  networks 
that will  have evolved separaldy. 

.11111ex  13.- Cul111ml mail 

....__ __________________ ----------------

-·-· 

---- -------------------J 

f'{/g('  )4 l 

---------- ---------

-~-----------------··--~~-·-

ANNEX 13: 

CULTURAL MAIL 

l. 

INTRODUCTION 

industries  are  economically  very 
information 
The  Community's  publishing  and 
important.  Since  it  is  likely  that  mail  will  remain  the  mass-communication  medium 
for  many  companies  needing  physically  to  convey  messages  tn  individuals.  mail 
services  will  continue  to  he  important  for  the  puhlishing  industry.  However.  because 
the  puhlishing  industry  comprises  ditferent  segments,  the  requirements  of  each 
segment  may well vary. 

The collaboration between  postal services and  the  publishing industry  is  long-standing. 
It  is  supported  hy  the  desire  expressed  hy  the  Universal  Poswl  Union  to  facilitate 
circulation of "works of the  mind"  hy  the  possible  appl ic1 t ion  ot reduced  in tern<1 tional 
postal  tariffs  to  hooks.  newsp;1 per'>.  pcriodica ls  and  journa Is  To get her.  these  items 
are loosdv c'tlled cu.ltuml JJuul. 

This  annex  discusse'>  how  t h1.:  crnH .. 't.•pt  ot  cu It ura I  m;1 i I  L'\'ulved.  ;1 ml  a n~ilyse'>  the 
economic  effects  of  t lw  prckrL'lll i.il  Lt r it!-..  pft en  ;1-.. ..... t H.:i<1 lL'd  with  such  rn;i ii 
It  l hen 
summarises the  issues\\ h id1  nenl  to hi.:'  ;iddrc...,...,t.·d 

2.  ARRANGEMENTS 

The  legislation  of  certain  Memlx.T  States  requires  that  special  and  favourable 
treatment  he  given  to  tbilY  papers  and  similar  periodictls  in  order  to  promote  the 
right  to  infor~ation  impli~d  in  the  freedom  ot  speech  guar;111teed  hy  the  national 
con st itut i()ns. 

This  special  treatment  has  also  hcen  encour~1ged hy  the  lJPU.  as  can  he  seen  from 
Article  20  of  the  ConH.·nt ion 
text.)  Th is  a rt icle  (at 
Paragraphs  8  and  t))  suggests  t h;i t  post a I  adm in ist r;1 t ions  may  a I low  a  )()(}.  rt.·duct ion 
on  the  full  letter  tariff  to  he.·  applied  to  printed  p;1pers  (particularly  newspapers. 
periodicals and books).  hut  nut  tu comnwrcial  printed  p:1p1..T'\  such  "" c1t;tlugues. 

(Sec  Annex  5  for  the  tu II 

3. 

THE TERM  "ClJLTlJR:\l. \l:\IL" 

The  mission  to  promote  t reedom  l ll  -.;pcech  ;111d  pl u ra I ity  ot  1 n form;i t ion  i rnpl it:s  the 
need  to seek  the widest.  most  etl1..·ctivt.·  \\;ty'>  ut  ditlu-..ing mL'n·s  thoughts 
\fail services 
used  to  help  att;1in  this  uhjL'ctin·  c111  ht:  termed  "cultur;tl  m;1il". 
It  thcrdort.'  covt.'rs 
items such as  newsr<1per'>.  perimlic1b.  hooks ;tnd juurn;ih 

However,  the  term  "cultural  rn;1il"  ha"  become  more  ;ind  more  v;11..?.ue  O\'er  the  course 
of  time.  More  and  more  advenisinl!  messages  are  brnueht  umler  the  umbrella  of 
culture.  Publications which  are dlectivdv ma;ketinc devic~s ;ire  increasindv  trving to 
enjoy  the  preferential  ta riffs  that  h;1d  he en  i nten~ted  tor  pu hi j.._·;i t ions  ~)t  a  . pu~ely 
cultural  nature. 

page 344 

A1111cx  13:  Cultural moil 

4. 

PREFERENTIAL TARIFFS 

In  most  Member  States  the  preferential  tariff  (or  special  rates)  for  daily  papers  and 
periodicals  was  introduced  in  the  past  as  a  political  decision.  for  example  with  the 
intention  of enhancing  the  multiformity  of the  press.  Such  special  rates  were  at  first 
limited  to  fXtpers  which  could  influence  public  opinion  on  political  matters.  Later  it 
has been extt_·nded  to  include  papers giving  information of a  general cultural  nature. 

When  these  preferential  tariffs were  introduced.  the  postal  administrations were  part 
of their  respective  governments.  Each  of the governments  that  decided  that  its  postal 
administration should  offer such  tariffs was  effectively deciding that  there  should  be a 
government  subsidy  for  the  daily  papers  and  periodicals  that  were  delivered  at  the 
reduced  rate. 

The extent  to which such subsidies were granted can he seen  in  the  rates applied  in  the 
various  Member States.  There are  considerable differences  in  this  regard.  The rates 
in  Spain.  for  example,  are very  low.  (See  Chapter 4,  Paragraph  8.4.  Table  17.)  They 
can  also  v~try over  time:  as  the  German  postal  administration  seeks  progressively  to 
decrease  the  scale  of  the  subsidy.  the  subsidy  has  reduced  from  T2%  of costs  to  the 
present 44c.r:  (with  further  reductions planned). 

In  general.  standard  postal  services  are  operated  on  small  profit  margins  or  at  a  loss. 
For  those  ;1dministracions  that  offer  them.  the  preferential  tariffs  cause  the  prices  to 
he  loss-making.  Table  I  shows the  stated  financial  position  for  printed  paper services 
in 
indicate  the  general 
fin a nL·ia 1 posit ion.) 

(Although  so111ewh;1t  historical.  these  figures 

ll)8)/8(l 

Tahk  I: 

Printed pupen: percenwge C<ll'emge  of cost.\  (I <J8(>) 

l\lt:'.\tnt:H SHTI·: 

Pt:H< ·tsL\l a: 

Belgium 

Denmark 
< icrmany 
<ircccc 

Spain 

France 

I rclc.1nd 

11~ily 

I .uxcmhou rg 

Nc1hcrlc.1nds 

l'onugal 

United  Kingdom 

I~.)'., 
)  I .lJ•,; 
s .. u·; 
9(1.)'.; 

<  I 0' ; 
_B,3'.; 

100': 
<  1w; 
Jl)j',; 

7)'; 

-ltl' ; 

100'; 

Source:  Universal  Postal  Union  ( UPU) 

For  post;tl  adm'inistrations.  it  is  not  simply  a  matter  of  prices  for  printed  papers 
perhaps being set  below stantbrd  rates similar  items (that  is.  for  letters).  At  the same 
time.  printed  papers  tend  to  he  bulky  items.  which  usually  cost  more  than  letters  to 

Annex 13:  Cultural moil 

page345 

process.  For  example,  many  magazines  are  posted  unfolded  in  A4  size  envelopes  or 
covers.  One administration  found  that  such  items cost  50%  more to  process than  the 
same  item  posted  in  a  more  traditional  "letter"  shape  (assuming  that  the  contents 
could  be  folded).  Newspapers  cctn  be  even  more  expensive  to  process  since 
operationally  they  are  given  LC  or  first  class  treatment  (or.  in  some  cases,  a  special 
treatment above even these "streams"). 

The  nine  administrations  which  provided  figures  showed  a  combined  loss  on  their 
printed paper services of ECU 964.2  million. 

One conse4uence  of  these  low  rates  is  that  they  could  have  the  effect  of distorting 
compet1t10n.  The  lower  the  rate,  the  less  interesting  it  is  for  private  carriers  to 
operate in  this field.  This competition-distorting effect could be one of the reasons for 
introducing commercial  rates within  the  European  Community,  allowing for  possible 
differences  between  countries  because  of different  costs.  But  it  must  be  continually 
taken  into  account  that  the  tariffs  for  newspapers  and  periodicals  should  be  set 
equitably so that fair competition  is  possible between all  postal  providers. 

It  would  seem  preferable  for  postal  administrations  not  to  provide  the  publishing 
industry  with  a  service  at  a  price  below  the  costs. 
It  would  therefore  seem  more 
effective  to  find  methods  other  than  the  preferential  postal  tariffs  to  provide 
government  aid  to  the  publishing  industry.  A  possible  solution  could  he  transparent 
If  paid  to  the  postal  distributor,  such  subsidies  should  he  available 
state  subsidy. 
equally to both  postal administrations and private operators. 

5. 

IMPORTANCE OF MARKET 

By  far  the  largest  part  of  the  cultural  mail  market  is  the  publishing  sector.  This 
comprises  newspapers,  magazines  and  books.  For  the  future.  the  definition  probably 
ought  to  be  broadened  to  cover  modern  methods  of  storing  information  for 
distribution  (such  as  CD  and  video),  but  here  the  term  "publishing"  is  used  as  a 
general description of the providers of material sent as cultural  mail. 

For most  postal  administrations,  the  publishing  industry  is  the  largest  single  business 
sector..  Table  2  shows what  proportion  of inland  mail  is  made  up  of newspapers  and 
magazines. 

From  figures  provided  by  the  Federation  Internationale  de  la  Presse  Periodique 
(FIPP),  it  is  estimated  that  the  total  number  of  items  distributed  by  mail  in  the 
Community  is  15.2  billion  units  annually.  Of these,  some  14  billion  are  for  domestic 
delivery, and a  further  1.2  billion  for cross-border delivery.  (The average circulation is 
calculated  to  be  between  .25,000  and  30,000  subscribers  per  title.  although  the 
statistical deviation around this average is very high.) 

In addition  to  its economic importance, the publishing industry (and,  in  particular, the 
"press")  is  also  very  influential. 
Individual  titles  can  have  an  influence  out  of  all 
proportion  to  their postal  volume.  in  terms  either of approaches directly  to  the postal 
administration  concerned  or  indirectly  perhaps via  the  government.  In  addition,  the 
influence of publishers is  often expressed effectively through  trade associations .. 

page 346 

A1111ex  13: Cultural mail 

Table 2: 

Cultural mail - prop01tio11  of mail 

MEMBEH STATE 

'* OF DOMESTIC MAii. 

A'·IOlSI" I\ 

\111.LIO\S <>t"  El.'.U 

22.0 

11.5 
2') J 
2-1.5 

J.I 

11.8 
N/<i 
JS.7 
23.5 
12.5 
11.0 
3.0 

18J.2 
2J7.7 
I'>  9 
0.007 
N/a 
466.7 

N/a 
N/a 
131 
42.5 

12.9 

N/a 

Belgium 

Gcrmam· 

Den marl-: 
(jrccce 

Spain 
France 
Ireland 
Italy 
Luxembtiu rg 

Netherlands 

Portugal 

United Kingdom 

~---------·----- - ,__ __  ·----·-
N/a  =  not  avail<thll' 

Source: CEC 

6. 

THE FlJTU RE 

Certain  trends  ;ire  notice;1hk  in 
lht·  printing  and  publishing  sectors.  They  are 
undergoing  ~1  period  of  signific;int  concentration  of  ownership,  the  numbers  of 
proprietors  being  reduced.  This  concentration  must  have  an  implication  for  the 
influence  of  the  press  (for  instance  on  postal  administrations).  hut  it  is  difficult  to 
predict what  it  will  he. 

Present technology  makes available shorter print  runs,  en~1bling publishers to produce 
magazines  for  small  market  segments.  Specialised  magazines  with  small  circulations 
are  often  heavily  reliant  on  postal  distribution.  Another  (external)  trend  which  will 
have  an  indirect  effect  (as  competition)  on  publishing  is  the  multiplication  of  the 
televisual  media. 

In  the  light  of  these  trends  and. 
indeed.  of  the  financial  difficulties  that  the 
preferential  tariffs  may  cause.  there seems to he  a  consensus that  the  following  issues 
should he studied and solutions developed. 

Firstly.  the  present  scope  of  the  definition  of  cultural  mail  seems  to  have  moved 
significantly  beyond  the  original  concept  - that  it  concerned  only  the  independent 
In  this  context.  it  should  be  noted  that  clearer  definitions  of both  newspapers 
press. 
and periodicds are needed. 

Secondly.  it  should  be  recognised  that  different  tariff  policies  applied  by  different 
postal  <tdministr~1tions (and possibly  intluenced by  their governments) have led to wide 
It 
variations  in  tariffs  for  similar  services  (certainly  far  beyond  cost  differences). 

Annex 13:  Cultural mail 

page 347 

needs  to  he  recognised  that  these  variations  can  themselves  cause  Jistortion  of 
competition. 

Thirdly,  a  harmonised  approach  is  needed  towards  quality  of  service.  Threshold 
standards  should  be  applied,  and  a  consistent  quality  measurement  system  put  in 
place. 

Lastly,  and  very  importantly,  efforts  should  be  made  to  simplify  (and  make  more 
similar)  the  access  conditions  for  posting  with  the  different  postal  administrations. 
Particular attention should  he given  to  resolving any  present conditions that can act  as 
harriers to trade or as distortions of competition. 

page 348 

An11e:c  13:  Cu/tum/ mail 

I Annex 14:  Toiiff is.'"'-' 

page 349 

ANNEX  14: 

TARIFF ISSUES 

1. 

INTRODUCTION 

Tariffs  are  lhe  prices  chargetl  to  customers.  The  tariff  issues  to  he  stutlied  wiJI 
comprehc::ntl  the  principles that  are presently  applied  to  the  calculation  of tariffs,  the 
differences  in  cost  conditions  and  the  way  in  which  tariffs  may  vary  according  to 
different sorts of customer. 

Customers  also  include  other  operators  and  post~I  administrations,  and  therefore 
certain  aspects  of  the  discussion  are  relevant  to  the  question  of  terminal  dues. 
However,  in  their present  form,  terminal  dues do  not  seem  quite  to  he  tariffs.  Their 
structure  and  level  is  agreed  on  a  multi-lateral·  (usually  global)  basis.  They  are  not 
· presently set in  relation to the different costs to be found  in  different  localities,  nor do 
If  terminal  dues  are  made  more  closely  related  to 
they  reflect  local  market  forces. 
domestic tariffs. then they will  themselves become mc)re like  tetriffs. 

The discussion  below  seeks  to  analyse  how  tariffs  are  set  and  what  cost  conditions 
underlie  the  tariff principles  applied.  Petrticular  attention  is  pa id  to  tariff-setting for 
reserved services. 

2.  CALCULATION OF TARIFFS 

The  two  main  bases  for  calculating  tariffs  are  the  relationship  with  costs  and  the 
competitive forces coming from  the market.  To these  art:  added general  tariff setting 
It  should  also  he  recognised  that  external  (usually  polilical)  de<,:isions  may 
policies. 
affect prices in  some way.  For contracts, prices are often decided through  negotiation, 
which  can  protluce  results  beyond  those  that  would  he  derived  only  from  the  other 
forces at work. 

2.1 

COST BASIS 

it  would  be  expected  that  the 
In  the  relative  absence  of  market  forces, 
relationship  to  costs  would  he  the  main  criterion  for  tariff-setting. 
(Factors 
affecting cost  conditions  are  studied  below  at  Paragraph  ]. )  Following such  a 
principle.  a  percentage  margin  for  profit  would  be  added  (known  as  cost-plus 
pricing);  alternatively  a  profit  target  might  be  expressed  as  a  percentage  of 
turnover.  These  are  similar  principles,  although  the  first  is  more  detailed  in 
that  in  can he applied to individual services provided. 

However.  this  principle  of  basing  tariffs  directly  on  the  relevant  costs  is 
frequently  not  put  into  effect.  for  reasons  often  decided  hy  the  government. 
Alternatively,  the  government  may  set  other  targets.  These  two  effects  are 
discussed below at  Paragraph 2.4. 

Because of requirements  plac:ed  upon  them  by  the  governments  or  because  of 
their own  policies.  nrnny  poswl  administrations  practise cross-subsidies.  These 
can he  between services,  between groups of customers or between  geographical 
areas. 

A  further  problem  is  that  the  accounting  conventions  used  vary  between 
In  particular.  there  are  ttifferent  approaches  to  the  way  in 
Member  St<ates. 

I page 350 

.-1 n m:x  I 4:  Tmifl" issues 

which  fixed  costs should  he allocated.  These accountinc. differences would have 
the  effect  that  exactly  the  same  cost  conditions  (an~t  tariff-setting  policies) 
might produce different  prices in  different  Member States. 

In  reality,  however,  the cost conditions vary greatly between  Member States - as 
is  indicated  in  Paragraph 1  below. 

2.2 

PEREQUATION TARIFAIRE 

Regarding  prices  for  individual  services.  the  most  important  principle  that  the 
postal  administrations  apply  is  that  of the  single  unitary  tariff (the perequation 
tar~faire).  This gives  the same  price  for  an  item  across a  territory.  regardless of 
where  it  needs  to  he  delivered  within  the  territory.  The  perequation  tarifaire 
relies  on  a  sharing of a  range  of costs  equ<tlly  between  the  items  to  which  the 
principle is  applied. 

2.3  COMMERCIAL STRATEGY 

It  might  not  be  immediately  obvious  how  reserved  services  may  have  market 
forces  hearing  upon  them.  The  main  competitive  forces  have  been  from 
indirect 
for 
communications  and  press  for  advertising.  Recently.  there  has  been  more 
direct  competition,  perhaps  the  most  notable  example  being  companies' 
delivering their own  mail. 

telecommunications 

competition 

particularly 

from 

However,  whether  the  competition  is  direct  or  indirect.  there  could  be  a 
tendency  for  customers  to  over-state  the  attractions  of competitive services.  A 
particular  example  could  he  the  comparison  between  press  advertising  and 
direct  mail.  Customers  might  compare  the  relative  costs  of  reaching  1,000 
potential customers.  a  comparison  which  might  appear  to disfavour direct  mail. 
However,  the  real  comparison  should  he  with  the  relative  effectiveness  with 
which  the  message  reaches those  potential customers and with  which  revenue  is 
generated. 

Most  postal  administrations  have  responded  to  customer  requirements  by 
offering  contract  facilities.  Of  these  postal  administrations  most  have  a  firm 
discount  structure  from  which  their  salesmen  are  not  allowed  to  depart. 
Relatively  few  postal  administrations  permit  negotiation  of  prices  for  rest!rved 
services. 

Where  negotiation  is  permitted.  it  may  well  he  hased  on  a  combination  of the 
It  is  also  likely  to  he  related  to  the 
principles or  influences  mentioned  above. 
economic  importance  of  the  customer  to  the  postal  administration.  The 
problem  is  that  the  most  important  customers  have  a  tendency  to  push  the 
In  one 
postal  administration  negoti<iting  hack  onto  margin<tl  cost  pricing. 
the 
extreme  case,  a  postal  administration  conceded  a  discount  of  76%  -
resulting price barely covering marginal costs. 

Such a  marginal costing policy for  the largest customers has the effect of making 
other customers  p<ty  for  a  disproportionate  amount  of  the  fixed  costs.  In  this 
way.  if discounts for  larger customers are  not  related  to  cost  s<ivings,  individual 
customers  may  actually  cross-subsidise  l<trger  customers.  Alternatively,  such 
discounts may simply add to  the postal administration's operating deficit. 

I A1111a  14:  ra,;1r i.«ue.< 

page 351 

Secondly.  there  will  he  concern  that  the  flexibility  permitted  in  negotiating 
prices  for  reserved  services  may  have  effects  on  the  sale  of  non-reserved 
services.  Bluntly,  discounts  on  reserved  services  may  become  hidden  discounts 
for  non-reserved services. 

reserved  services 

In  terms  of  general  pricing  policy.  hecause  such  a  high  proportion  of  costs 
associated  with 
for  postal 
is 
administrations to  lower  prices  in  real  terms  in  order to encourage growth,  and 
thus  reduce  unit  costs.  This  policy  works well  if  the  lower  prices are  hased  on 
productivity  improvements.  However,  because  of  the  relationship  between 
prices and  volumes  (the  price  elasticity  of demetnd ),  such  a  strateb')'  not  based 
on productivity improvements can he hazardous. 

tempting 

fixed, 

is 

it 

Price  elasticity  measures  the  change  in  demand  (expressed  in  volume)  against 
different  movements  in  price.  Postal  services  are  relatively  inelastic,  and  the 
price  elasticity  might  approximate  to  -0.4  (that  is.  for  a  I%  change  m  price, 
there would be a  0.4e:~;;  movement of volume  in  the opposite direction). 

2.4 

EXTERNAL DECISIONS 

National  governments  may  make  certain  decisions  that  could  affect  the  tariff 
two 
setting  policies  of  postal  administration. 
categories. 

Thesl'.  decisions  fall 

into 

Firstly,  they  may  set  targets  to  be  achieved.  These  may  he  broadly  financial, 
such  as a  return  to  be  made  on  investment,  or  the  level  of  investment  that  the 
postal  administration  has  to  fund  out  of  its  own  resources.  Alternatively,  they 
may  have a  more  direct  applicettion  to  prices:  the  government  may set  a  ceiling 
for  prices in  relation  to the  inflation  index. 

Secondly,  some  governments  become  involved  themselves  in  the  tariff-setting 
process  (either  directly  or  indirectly  by  bringing  influence  to  hear  on  the 
regulatory  hody).  They  may  encourage  prices  to  he  held  down  when  normally 
some  increase  would  he  justified.  Such  a  policy  applied  over  a  period  of time 
can  lead to suhstetntial  losses being incurred.  Even  if  it  is  then  decided  to  bring 
prices  hack  to  a  break-even  level,  this  can  only  be  achieved  over  a  period  of 
several years. 

Some governments  also  give  their  postal  administrations  "missions"  to  provide 
certain  services  at  below  co.st. 
These  missions  concern  particularly  the 
distribution  of  ne\\'spapers  and  other  printed  papers.  hut  may  also  include  the 
requirement  to  deliver  government  mail  and  electoral  material.  Either  postal 
administrations  are  expected  to  fund  such 
losses  or  loss-m<tking  services 
themselves.  or  they  will  need  to  approach  their  governments  for  central 
subsidies. 

3. 

FACTORS AFFECTING COST CONDITIONS 

Differences in  costs are discussed  here.  It is  important  to  identify whether the causes 
of the differences are within  the control of the postal  administrations or outside.  The 
discussion  is  particularly  relevant to the debate about whether there should  he a  single 
common tariff applied across the Community. 

I page352 

3.1 

LABOUR 

Annex 14:  Tanff issues 

The  key  difference  in  costs  is  the  cost  of  labour  (measured  in  cost  per  la hour 
hour). 
Inevitably,  this  will  continue  to  vary  greatly  hetween  the  different 
Member  States.  Since  some  70%  of  postal  administrations'  total  costs  are 
labour costs, these differences are very significant. 

3.2 

PROPENSITY TO POST 

Levels  of  use  of postal  services  will  be  affected  by  the  surrounding  economic 
situation. 
(Usage  of  postal  services  in  the  different  Member  States  varies 
between  47  and  434  items  per  head.)  These  in  turn  affect  throughputs.  and 
therefore  unit costs (and  probably  unit  prices).  However,  usage  levels are also 
affected  by  relative  price  levels.  and  these  are  in  turn  affected  by  productivity. 
(See below at  Paragraph 1.5.) 

3.3 

DENSITY AND CONCENTRATION OF POPULATION 

Collection and delivery costs.  together accounting for  about  three quarters of all 
costs. vary depending on  how concentrated or spread out  the population  is.  The 
important factor  here  is  not  so much  average popul<1t ion  density,  hut  rather how 
concentrated  the  different  centres  of  the  population  are.  Thus.  in  the  case  of 
Greece.  it  may  be  less  rek\';111t  that  the  populatiun  density  is  half  the  EC 
average  than  that  55c;  of  l he  tot;sl  population  reside  in  the  A thens/ Piraeus 
conurhanity. 

3.4 

TRANSPORT 

The quality  of the  n<1tional  lr;111spon  infrastructure  h;1s  a  significant  impact  on 
postal quality of service  in  each  Member State.  It will  also affect costs.  It is  also 
therefore the case that  the size of ;1  country will  affect  quality  and costs. 

3.5 

PRODUCTIVITY 

Productivity  is  affected  by  levels  of  use  of  postal  services.  However,  it  is  also 
within  the control  of postal  administrations  to  improve  productivity  by  seeking 
ways  to  optimise the  use  of their  rl.'.sources.  This  is  essential  in  order  to  try  to 
gain  access  to  the  upward  spiral  of  productivity  improvements  allowing  real 
price decreases. which  in  turn encourage  higher volumes and productivity. 

4.  CUSTOMERS 

Customers vary  between  the  individual  posting a  few  items per year to  large specialist 
organisations posting  millions  of items.  (In  terms of post~sl costs.  size  relates more  to 
the volume  of an  organisation·s  posting  requirements.  rather  than  to  its  overalJ  size.) 
The  larger  the  user,  the  more  likely  that  he  \•viii  he  ahle  to  prepare  the  mail  in  ways 
that facilitate  the task of the postal  administration  after posting. 

This preparation  of the  mail.  whether  undertaken  by  the  customer who  originated  the 
mail  or by  an  intermediary acting on  behalf of the  original  customer.  may  well  lead  to 
savings 
Usually  postal 
administrations  that  offer  contract  facilities  pass  on  a  significant  proportion  of these 
cost savings back to the  user  in  the  form  of a  discount. 

the  part  of  the  postal  administration. 

in  costs  on 

I Anna 14:  Tmijf issues 

page 353 

These  savings  may  relate  rarticul;1rly  to  the  way  that  the  m;1il  is  "presented"  or  rre 
sorted.  A  more  delicate  question  concerns  volumes. 
If  a  customer  posts  large 
volumes,  this  by  itself  does  not  enable  the  postal  administration  to  make  savings. 
However, increases  in  volume  will  make  the  network  fixed  costs  more  productive.  and 
wiU  lower unit costs. 

A  few  postal  administrations  argue  that  pricing  policy  for  reserved  services  must  be 
aware  of the cost  of alternative  services  (for  instance.  of self-delivery)  and  be  able  to 
offer discounts  beyond  those justified  only  hy  cost  savings~ if  such  volume  was  lost  to 
the  universal  service  network,  all  users  would  lose  because  unit  costs  would  increase 
for  all.  However,  while  it  is  agreed  that  market  forces  have  to  he  taken  into  some 
account  when  setting  tariffs,  th~ese  forces  tend  to  differ  from  one  large  customer  to 
another.  Any concession  of non-standard  discounts would  therefore  need  the  tightest 
co.ntrol.  There is  some evidence that such control has not always been exercised. 

In  principle,  if discounts are given  for  reserved  services.  they  should be  rt>lated  to cost 
savings.  Otherwise,  as  noted  above  at  Paragraph  2.5,  customers  th;1t  did  not  receive 
discounts  (including  all  individual  customers)  would  he  in  danger  of cross-subsidising 
those that did. 

S.  HARMONISED APPROACH  TO TARIFF ISSUES 

5.1 

TARIFF PRINCIPLES 

Implementation of some common  tariff principles  for  reserved  services appears 
quite  practicable.  The  corner-stone  would  be  the  basing  ot  tariffs  closely  on 
costs.  This would  imply  that  there  should  be  no cross-subsidies  - certainly from 
the  non-reserved  area  to  the  reserved  area,  from  one  customer  to  another,  or 
It  would  also  he  important  that  any 
from  one  service  "stream"  to  another. 
central subsidies,  if any are considered  necessary, should he \vholly  transparent. 

It  is  also  important  that  tariffs  should  he  related  to  the  quality  of  service 
It  is  clear  that  quality  postal  services  should  he  profitable.  Poor 
provided. 
services  become  .the  "distributor  of  last  resort",  with  low  t<1riffs  and  resulting 
losses. 

5.2 

TARIFF STRUCTURES 

If a  comparison  is  made  from  one  Member  State  to  another.  it  would  he  seen 
that  the  postal  operation  providing the  universal  service  is  similar  (<tllowing  for 
different approaches to  mechanisation).  In  order to  made  the  reserved  services 
of  each  Member  State  as  responsive  as  possible  to  customer  needs.  it 
is 
desirable  that  each  postal  administration  draws  on  the  commercial  experience 
of other  administrations. 
In  this  way.  each  would  he  pursuing  "best  practise". 
and  this  practise.  when  applied  by  all  administrations.  would  le;1d  to  certain 
facilities  being  available  to  all  customers  of  reserved  services  in  each  of  the 
Member States. 

The appropriate  approach  might  be  to  study  the  most  comprehensive  possible 
set of contract facilities,  and  then ask why each  facility  should  not  be offered.  If 
there was  not  a  valid  reason  for  not  offering the  facility.  it  should  be  adopted. 
Using  this  approach,  the  first  point  is  that  there  should  he  a  set  of  contract 
facilities  available  to  users  of each  postal  administration  (although  the  facilities 

I page354 

A1111ex  J 4:  Tllliff issu~s 

might  vary  between  postal  administrations).  The  facilities  should  indude.  as a 
minimum, the possibility for  users to pre-sort their mail  in  return for discounts. 

5.3 

TARIFF LEVELS 

It  is  clear that  there will  continue to  be significant  differences  in  the costs of the 
domestic services of the Community's po~tal administrations.  At  the same time. 
tor  the  future  he«tllh  of  the  Community's  postal  sector.  the  Green  Paper 
proposes  that  tariffs  ought  to  he  related  closely  to  costs.  Together,  these  two 
st<1tements  imply  that  there  cannot  he  any  harmonisation  on  any  single  tariff. 
(This conclusion  \\'ould  apply  at  least  until  there  w~1s a  significant  convergence 
ot costs, and  this does not  seem likely even  in  the  medium/longer term). 

Ot course,  it  would  be  theoretically possible to take a  political decision that such 
a  harmonised  tariff  should  he  put  in  place.  Any  body  taking  such  a  decision 
would  need  first  be  aware  of  the  extra  costs  involved.  the  extent  of the  cross 
subsidies needed and.  indeed. the likely  negative  reaction  of consumers. 

Such  a  harmonised  tariff would  he  based  either on  "  Community "average" cost 
or on  the costs of the  lowest  cost  country  in  the Communitv.  The former would 
involve  simply  massive  cross-suhsiuies  (the  Community's  r~served postal  sector 
presently  being  worth  some  ECU  20  hill ion)  between  "losing"  and  "gaining" 
administrations.  The  latter  option  would  involve  not  only  cross-subsidies.  hut 
also central  subsidies.  In  short.  a common  taritl would  imply a  Common  Poswl 
Policy. 

Apart  from  the  extra  administrative  costs.  such  ;1  policy  could 'well  lead  to  <1 
reduced  flexibility  in  terms of the ability to achieve Single  Market objectives. 

A1111c:.""  I.~:  /111m-Co111numi1y mnil 

ANNEX  15: 

INTRA-COMMUNITY MAIL 

I. 

INTRODUCTION 

Ch;1pter  8  discusses  the  desirahle  regulatory  pos1tmn  for  intra-Community  and 
international  mail  (at  Paragraph  8).  That  discussion  was  itself  linked  to  a  detailed 
analysis  of  the  phenomenon  of  remail  (at  Chapter  5.  Pare.graph  9).  This  annex  is 
intended to supplement  the discussion  by  furnishing more dewiled argumentation. 

Below  are  laid  out  the  main  &arguments  for  &rnd  against  the  inclusion  of  intrn· 
Community mHil  in  the  reserved  area.  (The points made ..re laid  out  &1s  if statements 
made  on  each  side  of a  debate.)  In  terms  of length  of  text.  it  could  seem  that  the 
argumentation is  inclined  in  favour  of exclusion.  However.  this  is  not  11  comment on 
the weight  or worth of the  individual  arguments. 

2.  ARGUMENTS FAVOURING  INCLUSION 

2.1 

IMPLICATIONS Of SINGLE MARKET 

The  principle  of  the  single  market  is  that  of  a  Communitv  without  internal 
trading  frontiers. 
It  could  seem  strange  ii  ditlcrcnt  regulatory  rules  applied 
between nationetl  and  intra-Community mail. 

As  the  Community  develops.  the  subject  of  a  single  postal  ildministration 
covering  the  whole  Community  may  he  raised. 
In  fact.  there  seem  strong 
&-arguments  against  establishing  such  etn  administration  (See  Chapter  8, 
If.  however.  it  was  to  hl'  crealed,  its  existence  might  lend 
Paragraph  21. I). 
support  to  the  argument  that.  if  reserved  s~rvices are  justified  at  a  national 
level.  they could seem  to  he justified ac  a Cnmmunity level 

2.2  REMAIL HASED ON TERMINAL DUE I NEQl Tri ES 

It  is  claimed  that  remail  is  based  on  tht·  i1wquitv  in  the  terminal  dues  svstem 
(Such  "  sta t~mcnt 
he tween  compens<1 t ion  P" id  "nd  aclU&d  tkl j,·L·1 ... y  co:-.h. 
presumably  would  not  apply  to  A-B-B  rem;1il  which  pays  inland  tariffs  to  the 
delivery administration.) 

3.  ARGUMENTS FAVOURING  EXCLUSION 

3.1 

COMPETITION  EXISTING 

In  most  Member  States.  competition  alre,idy  exists  in  practice  in  the  intra· 
Community and  international  letter  mail  segments.  It  would  he  wrong now ·10 
deprive customers of the choice to which  they have become accustomed. 

3.2 

SERVICE IMPROVEMENTS 

The postal administrations have been slow  to  invest  in  improving the quality uf 
service  of  international  (including  intrn-Community)  mail.  They  are  now 
doing so mostly as a  result  of competitive pressure. 

page 356 

.-11111c.r  15 

/111ra-Co11111u111i1y  nwil 

A  performance  measuring system  has  now  been  put  in  place.  However,  this 
shows  that  present  performance  is  not  good.  The  CEPT  has  adopted  an 
informal  tc1rget  of 0+3  (third  working  day  after  posting).  hut  recent  samples 
show  that  only 40% of items are meeting this target. 

The privil te  opero tors  competing with  the  post a I admin ist r;i t ions'  internal ion a I 
ma ii  systems  do  not  puhl ish  qua Ii ty  of service  resu Its.  H O\l.'ever.  costs  of the 
different  operators  will  soon  become  very  similar.  Then  iill  service  providers 
(including private orerators) would  he selling on  the basis of service. 

Normally  A-B-B  remail  might  well  achieve  foster  end-to-end  times  than  mail 
sent  through  the  postal  administration's  system.  There  could  he  two  reasons 
for  th is. 

Firstly.  the  private operator may  he  more  effective  in  e<1rrying  out  the  outward 
sorting  and  then  freighting  to  the  country  of  delivery 
(for  the  latter 
operation.  he  may  he  able  to  use  night  flights.) 

into 

inland 

format  determined  by 

Secondly.  he  posts  directly 
the  deliVery 
the 
administr;1tion.  presenting  the  mail  ;1t  a  strategically  chosen  sorting  office  in 
the  postal 
the 
administration's mail  goes  through  one of very  few  "offices of exch<111ge"  which 
can  often  he  bottlenecks. 
It  is  certainly  the  case  that  domestic  quality  of 
service  (for  the  national  mail  stream  into  which  the  private  operators  post)  is 
superior to  that  of inward  international  mail. 

By  comp<1rison. 

that  office. 

system  ul 

3.3 

POSSESSION  OF EXPERTISE 

the  c<1se  of  domestic  traffic, 

In 
the  single 
recognised  exrert.  This  is  not  necessarily  the  case  in  terms  of  international 
mail.  It  is  no  accident  that  the  remail  companies <ire  in  the  main  either airline 
freight  suhsid ia ries or air exrress ca·rriers. 

the  postal  administration 

is 

111  which  postal 
In  other  words.  they  are  air  transrort  experts  111 
administr;1tions  ;ire  not.  For  the  proportion  of  mail  which  1-..  forw;1rded  hy 
surface,  again  other carriers are speci<ilists 

\\41)' 

;1 

Further.  hec;1use  m;1ny  rriv;1te  oper;1tor-..  de;tl  with  posLd  <1drrnni ... tr;1tiuns  on 
;rn  indi\idu;d  h"sis  (;it  le;1st  in  the  c;1sL·  of  1\-H-B  "rem;1il").  thL·y  l)ften  l\nov.: 
more  <thou t  the  delivery  opera lions  of  de st i 11;1 I ion  :1d min i..,t r ;1 t inns  than  do 
other posLtl  adm in ist r<1 t ions. 

3.4 

PROFITS  NO  LONGER NEEDED TO CROSS-SUBSIDISE 

Such  cross-subsidies were  unsatisfactory anyway.  and  should  have  been  phased 
the  profits  from 
out. 
international  mail  will  no  longer be of the same order as  in  the  past. 

if  such  cross-subsidies  were  acceptable. 

Even 

The CEPT terminal  dues  scheme  has  tended  to  increase  outward  direct  costs. 
If terminal  dues  were  based  on  inland  tariffs,  these  costs  would  also  tend  to 
increase.  Conversely,  administrations  would  be  properly  compensated  for 
their  inward  volume,  and  would  therefore  no  longer  need  to  cross-suhsidise 
from  outward  revenues to  ray for  inward  losses. 

Annex 15:  /111ra-Co111mu11ity mail 

page 357 

Even  before  the  terminal  dues  issue  is  resolved,  the  outward  administration 
should  be  theoretically  ahle  to  be  price-competitive  with  an  A-8-C  remailer. 
In  practice,  they  may  not  he  because  postal  administrations  feel  the  need  to 
have high outward rates in  order to cross-subsidise inland  losses. 

3.5  COMPETITION WITHOUT DAMAGING UNIVERSAL SERVICE 

When  a  company  changes  its  practise  from  undertaking.  a  task  itself  and 
instead  contracts  the  work  out,  the  effect  is  almost  ;dways  to  increase  the 
variable cost  of the  task.  For  mail  generated  in  its country  the  outward  postal 
administration  "contracts"  for  another  postetl  administration  to  undertake  the 
delivery.  Although  many  of  the  delivery  costs  incurred  by  the  inward 
administration  etre  fixed,  these  same  costs  are  charged  to  the  outward 
administration as varietble costs. 

Provided  that  remail  is  collected  from  company  premises  and  is  delivered 
through  the  network  of  the  postal  administration  in 
the  country  of  the 
addressee, the two  key  fixed  cost elements of the  univers;tl  service  network  are 
not affected or harmed by  remail: 

-

road-side collections: 

the  international  traffic  in  question  is  collected 
from customers' premises~ 

- deliveries: 

remail  still  respects  the  exclusive  rights  of  the 
reserved  service  provider 
the  country  of 
delivery. 

in 

3.6 

EXTENSION OF CUSTOMER CHOICE 

Some  of the  questions  concerning  intra-Community  (cross-border)  m;1il  need 
to  be  put  in  the  context  of  an  evolving  continuum  ot  n1stomer  choices  for 
letters: 

The  usual  relationship  for  letter  mail  is  that  of a  customer  posting  it  with 
the postal administration, which  then delivers  it  to the addressee. 

The  customer  also  has  the  option  of  himself  delivering  it  directly  to  the 
addressee. 

The  usual  relationship  for  intra-Community  mail  is  for  the  customer  to 
post  the  mail  with  his  own  country's  postal  administration  which  then  has 
the  mail  transported  to  the  delivery  country's  postal  administration  which 
then delivers the mail  to the addressee. 

For  intra-Community  metil.  the customer also  has  the  option  of delivering 
the mail directly to the addressee. 

The  customer  can  post  his  mail  with 
administration, which  then delivers the  ma ii  to the addressee. 

the  delivery  country's  postal 

Returning  to  customer  options  within  the  customer's  own  country.  in 
several  most  Member  States  the  customer  can  give  his  mail  to  a  private 
operator  which  is  permitted  to  act  as  a  "mail  preparer":  the  private 
operator then  posts  the  mail  with  the  post;tl  administration. which  delivers 
it  to the addressee. 

pagt: 35X 

/l1111cx  15:  /111ra-Commu11ity mail 

For  intra-Community  mail,  a  customer  might  put  the  mail  with  private 
operator based  in  the delivery country;  the private operator then  posts the 
mail with  the postal administration which  then delivers it. 

The  customer  might  put  the  mail  with  a  private  operator  in  his  own 
country;  the  private  operator  might  then  transfer  the  mail  to  a  private 
operalOr  in  the  delivery  country;  the  mail  is  then  posted  with  the  delivery 
country postal administration, which  then delivers  it  to the addressee. 

It seems to  follow  from  this  continuum that such  an  option. which still  respects 
the exclusive  rights of the  reserved  service  provider  in  the country of delivery. 
should  be permitted. 

Annex 16:  Di ... cussio11  of nit<'tia to cl<'jil1<' rt'.'"''''-'" arc.·11 

f'O,'i!,t'  359 

ANNEX 16:  DISCUSSION OF CRITERIA 

TO DEFINE RESERVED AREA 

1. 

INTRODUCTION 

The  key  policy  ohjective  is  to  safeguard  the  universal  service.  To  achieve  this.  it  is 
proposed that a  Community set of reserved services should  he  est;1hlished.  Reserved 
services,  as  well  as  certain  non-reserved  services,  would  carry  a  uni\'ersal  obligation. 
Other services  - such  as  those  of express or  heavier  parcels - would  not  he  reserved. 
and would  not have a  universal service obligation. 

To achieve  the  universal service objective,  the proposed means  is  the  establishment of 
a set of reserved services.  This set  of reserved  services should  he  as small as possible. 
Although some parcels  may  have a  universal  obligation.  it  is  dear that  they  should not 
be included in  the set of possible  reserved services.  (They are alrL';1dy  non-reserved  in 
alJ  Member States.)  The same  is  also  true of printed  papl.·r:-.~  ~•It hou~h thL'y  may  ha\'e 
some universal service obligation. they should he non-reserved 

2.  CONTENTS 

It therefore seems clear that  the first  niterion to he applied.  among universal  services. 
is  that  of contents,  in  order  to  place  items containing printed  p••pl.'rs  or goods dearly 
in  the  non-reserved  sector.  Whal  remains  after  the  application  of  this  contents 
criterion  would  be  all  the postal communication  items of a  personal or  individualised 
nature.  But  this  would  still  he  larger  than  was  needed  for  the  reserved  services. 
Therefore,  following  application  of the  contents  criterion.  some  further  criteria  (or 
criterion)  must  be  applied  in  order  to  ensure  that  the  reserved  area  is  as  small  as 
possihle. 

Below is discussed what  these further criteria (or criterion) should he. 

3.  PRICE 

Because  of  the  range  of  tariffs  (and  costs)  of  standard  lettt.-r  services  in  different 
Member States.  it  would  be  impossible  to  have  a  single  price limit  (expressed  in  local 
currency) for  reserved services covering the whole Community. 

If there was a single  price  limit  set  in  each  Member State. it  could he gr&tdually  eroded 
by  inflation.  The  regulatory  body  might  nmsider  this  to  hl.'  dc.:sirahk. 
If not.  the 
regulatory body might  wish  to  review the limit  perimlicc11ly 

The  price  limit  could  he  set  by  reference  to  the  tariff struclllrl.'  for  the  basic  letter 
service.  For example,  it  could he set at  the price equivalent of whatever weight  limit  is 
proposed,  or  in  a  fixed  relationship  with  the  tariff  equivalent  of  the  weight  limit 
(perhaps to  1.5  times the tariff equivalent). 

There could be a  danger of the operator effectively setting the regulatory threshold for 
non-reserved services.  However.  this may  not he  a  cause  for  too great concern. since 
the  regulatory  authorities  have  to  approve.  or  at  least  seek  justifications for.  changes 
in  tariff levels.  In  particular,  they  will  need  to  pay  attention  to  tariff structures  - for 

page .~60 

A1111ex  16:  Di."""·"·"ion  of nite1ia I<>  define ll!sen•ed area 

instance.  to  t•nsure  that  price  increments  at  different  weight  steps  are  linked  to  cost 
increments. 

A  possihle  solution  to  this  regulator /operntor problem would  he  to set  the  price limit 
initially  by  reference  to  the  tariff  for  the  weight  limit.  Thereafter,  the  limit  could  he 
indexed.  never  heing  increased  by  more  than  the  inflation  rate  over  the  period  of 
indexation.  (The base for  the  indexation would always he the previous price limit.)  Of 
course. the  regulator could always decide on a  limit  lower than  the  indexed  increase. 

4.  QUALITY 

Postal  quality  ctn  he  defined  in  different  ways.  The  method  most  used  is  the 
quantification  of speed  of delivery  from  point  of collection  (or  despatch).  However. 
the  use  of  this  measurement  to  define  the  distinction  hetween  letters  and  express 
would he  problematical. 

If the distinction  were  made on  the hasis of service performance, this would  introduce 
a  retrospective:  element.  For example, if an ordinary letter were delivered  in  less than 
24  hours.  should  it  then  retrospectively  he  considered  a  non.reserve<.!  item? 
If  an 
express item w"s not delivered  for  2/J days (as happens from  time to time) should this 
item  retrnspL·ct ively  he considered a standard letter. and therefore a  reserved service'! 

The difficulty  ol retrospection.  panicularly  in  the  second  e<ase.  sugge~ts that  the  focus 
should  he  on  customer  expectations.  rather  than  actual  performance  (although.  of 
course. the SL'Cond  afkcts the first). 

Customt:r  t:xpectations  in  this  field  are  hest  measured  by  the  price  that  they  are 
prepared to pay. 

The  use  ol  prin:.  rathL·r  than  delivery  speed.  as  a  criterion  would  have  the  further 
advantage  that  it  would  cfft:ctivdy  recognise  other  forms  of  <.1uality  that  customers 
value and for which  they are prepared to pay more. 

S.  WEIGllT 

Because it  mt.·asures an ahsolutc.  a weil!ht  criterion would not  suffer from  some of the 
defects mentioned above  for  the price ~riterion (essentially concerning the  mobility of 
a  price criterion  on  its  own).  However.  it  must  he  recognised  that  a  weight  criterion 
would  not  he  sufficient  in  itself.  since  it  would  not  be  able  to  exclude  lighter-weight 
It  would  thcrdore  need  to  he  used  in  conjunction  with  a  price 
express  items. 
criterion. 

6.  WEIGHT/PRICE COMBINATION 

Only a combination of the  use of weight  and  price criteria  (after  the application of the 
contents criterion)  will  achieve  the  objective  of having  the  s1raallcst  feasible  reserved 
area  (amongst  the  services  for  which  there  is  a  universal  service obligation)  that  will. 
at  the  same  time.  safeguard the  universal  service.  The  items that  will  then  remain  as 
being  possible  reserved  services  would  he  ordinary  letters.  post·cards  and  addressed 
direct  mail  - and these only up  to a certain price and weight. 

Annex 16:  Dis«ussion of c1i1elia to d~jitrf.' 1v ... e1wtl 111w1 

f>ll.S:<'  361 

A  single  weight  limit  could  he  applied  Community-wide.  and  then.  in  view  of  the 
presently widely  varying  tariffs,  the  price  limits  calculated  in  each  Member  State  hy 
In  the  medium/longer  term,  if  there  was  a  sufficient 
reference  to  the  weight  limit. 
convergence of costs and tariffs, a  price limit  might suffice on  its own. 

pag<'  .162 

/l1111ex  16:  /Ji.licll!ii.liion  of oitc:nll to tit-fine n:sc1ve<I m-ea 

I Glossmy 

GLOSSARY 

AO 

page 363  J 

"Autres  objets"  in  French  - a  UPU  classification  that  comprises  printed  papers  and 
small  packets.  Used  in  all  classifications of postal  administrations· cross-border  letter 
services.  Several administrations also  use  it  as  one of the  two  classifications  for  their 
domestic mail, the other being LC (see below). 

CEPT 

The  Conference  of  European  Postal  and  Telecommunications  ~1dministrations. 
Covers  administrations  of  all  Member  States.  and  of  most  of  the  other  European 
countries.  Now  divided  between  postal  and  telecommunications.  CEPT  (Posts) 
presently  represents  the  postal  administrations  as  operators.  hut  there  is  now  some 
indication that  there may  be a  separate CEPT group representing pnst;tl  regulators. 

City mail 

It  usually  refers  to  mail  which  is 
This  is  a  service  operated  by  private  operators. 
It  cm  also  refer  to  the  delivery 
collected  in  an  urban  area  for  delivery  in  that  Me<t. 
element of cross-border  mail.  where the  mail  is  delivered  by  a  priv;1te  operator rather 
than  the postal administration of the country of delivery. 

Collection 

Mail can  be collected from  three different sorts of locations:  from  the  premises of the 
customer (or a  third party working on  his behalf), from  a  post office counter or from  a 
public postal collection  box.  Collection from  the  last  ot these  is  often ca lied  "road-side 
colJection". 

Concessionar_y tariffs 

Certain  customers  benefit  from  rates  that  are  lower  than  those  that  normally  apply. 
The difference between the two  rates is  a  discount. 

Discounts  are  usually  a\varded  for  volumes  posted  and/or  costs  sa\'ed.  Some  lower 
tariffs are  offered  not  because  of costs saved.  hut  hecc1use  of the  content  of the  items 
posted  - usually  where  the  items  contain  printed  p<1pers.  (Lower  t~1ritls  tor  electoral 
material  give  another  example.)  Such  lower  tariffs  can  he  ctlled  "concession~1ry" or 
"preferential". 

I page364 

Consolidation 

Gloss01y 

Consolidation literally  refers  to  the gathering together of items from  different sources 
and  (in  terms  of  transport)  then  despatching  the  items  in  hulk. 
In  terms  of  mail, 
consolidators collect mail  from  different customers. hulk  it  together and then despatch 
it  to the operator chosen for  the next phases (transport and delivery). 

Consumers 

See under "Customers". 

Customers 

Consumers  ~ire individuals who (in  the context of the Green  Paper) post  items on  their 
own  behalf:  the  total  volume  that  a  consumer  posts  is  likely  to  he  small.  Customers 
include  both  consumers  and  organisations  posting  on  their  own  behalf:  the  posting 
requirements of  the  latter  may  range  from  low  to  massive  volumes.  The  word users 
embraces  both  customers  posting on  their  behalf and  third  party  operators  acting on 
behalf  of  customers;  such  third  party  operators  act  as  "intermediaries"  between 
customers and the operator (often  the postal administrntion) that delivers the mail 

Deferred  mail 

Some postal  administrations offer  the facility  where a  customer  making a  particularly 
large posting can  make the posting over a  period of time,  hut  agree the date (or range 
of dates)  for  the delivery  to  the addressees.  This service is  mostly  for direct  mail,  and 
is  usually connected with  advertising campaigns that use other media as well. 

Delivery 

The  final  phase  of the  postal  process.  it  brings  the  item  to  the  addressee.  Deliveries 
usu<11ly  cover certain  specified  areas.  Coverage of this area  is  usually called a  delivery 
round.  Postal administrations use  the expression a  "postman's walk".  even  if the round 
is  motorised.  (In  the  United  States.  this  is  called  a  "carrier  route".)  Because  of the 
universal  service  requirement,  all  the  postmen's  walks  together  must  potentially  pass 
all  possible delivery points. 

Direct mail 

A  form  of advertising,  involving  the  sending of a  publicity  message  by  mail  direct  to 
the  individual  intended.  Therefore  intended  to  be  more  specifically  targetted  than 
other  advertising  channels.  The  trend  is  now  for  addressed  mail  to  become  more 
"personalised"  (see  below). 
targetted  variant, 
unaddressed  mail  (see below). 

is  also  a 

However, 

there 

less 

Direct  marketing 

A  generic  phrase,  sometimes  also  referred  to  as "distance  selling",  it  covers  hoth  the 
advertising  of  products  to  people  in  their  own  homes  (or  offices)  as  well  as  the 

I Glossat)' 

page 365 

delivery of products direct  to homes.  It therefore comprises direct  mail.  telemarketing 
and ma ii  order. 

Document exchange 

Facility offered by specialist private operators, whereby the customers can deliver mail 
directly  into  the  boxes  of other  exchange  users  and  collect  the  mail  similarly  posted 
into  their  own  boxes.  In  some countries,  groups of such  exchanges also  transfer  mail 
between each other. 

EDI 

Electronic  Data  Interchange.  An  electronic  method  for  trnnsmiuing  quantitative 
information.  Relies  on  information  being  input 
in  strictly  formatted  fashion. 
Particularly  interesting  to  large  companies exche:mging  large  amounts  of quantitative 
information.  Will  therefore  compete  with  postal  services  for  transmission  of  items 
such  as  orders,  statements  and  invoices.  Can  also  he  used  by  postal  operators  to 
communicate with  their customers. 

Express services 

The  services  offered  by  courier  companies  and  express  parcels  companies  (many 
companies operating both  services).  Also called express delivery services.  They cover 
the express  movement  respectively  of documents and  parcels ( lhe  latter being goods 
bearing,  and  often  called  "non-documents").  The  companies  offering  these  services 
comprise both private operators and public postal administrations.  These services are 
(Note:  these 
qualitatively  quite  distinct  from  ordinary  letter  or  parcel  services. 
services are also completely different from  the "lettres expres" - see below.) 

Flat 

A  letter  (or  publication)  of  A4  size  that  is  sent  unfolded.  A  distinction  is  drawn 
because of the extra size complicates the sorting process and increases sorting costs. 

GATT/GATS 

The  General  Agreement  op  Trade  and  Tariffs  (GA lT).  a  worldwide  multi-l<tteral 
agreement  to  try  to  reduce  harriers to  trade.  Now  intended  to cover services as  well. 
the  framework  agreement  for  services  being  called  General  Agreement  on  Trade  in 
Services (GATS)~ 

... 

... 

GDP 

Gross Domestic Product  - the sum  total  of revenue generated  hy  a  national  economy 
in  a financial year. 

1 page366 

Hand  deliver~' 

Gloss01y 

The delivery  of  newspapers  and  magazines  by  private  operators  to  suhscrihers.  The 
publisher contracts directly with  tht>  operators concerned, and  the  items carry the  full 
address of the subscriber. 

Individualised 

As used  in  the  Green  Paper.  the word "individualised"  refers  to communication  items 
that  relate  to  the  husiness  or  personal  affairs  of  the  addressee  with  sufficient 
is  dear  that  the  text  refers  specifically  to  the  addressee. 
individuality  that 
Individualised  items.  which  are  therefore  not  printed  papers. 
include  business 
correspondance, statements and invoices. 

it 

Inward 

Refers to the  latter part of the postal operation. including delivery to the addressee.  It 
therefore  refers  to  the  operation  carried  out  by  the  "receiving"  operational  centre  in 
an  integrated  network  or  by  the  "receiving"  postal  administration  (or  other  sub 
contracted agent)  in  a joined network. 

LC 

"Lettres  L'l  cartes"  in  F'rend1  - UPU  classifa:ation  covering  letters  and  cards  (and 
therefore  t.•xduding  printed  papers  - see  AO  a hove).  Used  for  cross-border  services 
between  postal  administrations.  and  by  some  postal  administrations  for  classifying 
their domestic services. 

Letter 

There  is  no  single  definition.  Users  mean  an  individual  readable  communication 
which can he sent by  different  means.  Muse  refer to the personal or business affairs of 
the  sender  and/or  the  addressee. 
In  the  sense  of  the  "letter  mail"  which  includes 
printed papers and small  packets,  postal administrations sometimes refer  to  the  UPU 
definition which covers all  postal communications weighing up to 2  kg. 

Letter shop 

This describes  the consolidation  and  mail  preparation  activities  carried out  hy  certain 
operators.  The use of this term  is  usually associated with  the production of direct  niail 
and other  printed papers.  After  the  mail  has  been created  and  printed.  it  is  then  sent 
to the  lettershop for  prep<&r<&tion  for  posting. 

Lettre expres 

Service  provided  by  postal  administratio1{s:  a  letter  which  receives  special  treatment. 
Usually  receives  faster  treatment  (sometimes  with  money-hack  guarantee  if  not 
delivered on time) and recorded at sending and Jelivery. 

Glossary 

Local  posting 

page 367 

The poscing of cross-border mail  in  the country of delivery  under the  access terms and 
at  the  tariffs  that  apply  to  domestic  mail  in  that  country.  Also  sometimes  called 
"direct  injection".  It  is  also the final  part of the "A-B-B" remail operation. 

Mail order 

The  selling  and  provision  of products  to  individuals  in  their  own  homes.  Competes 
with  retail  selling.  An  important  user of letter and  parcel services.  Also  significant  in 
its own  right  - generates 0.5% of the Community's GDP. 

Mail preparation 

This  is  the  <1cli\'ity  undertaken  hy  a  third  party  operator  who  ;1cts  as  an  intermediary 
between  the  original  customer who  generated  the  mail  and  the  postal  administration. 
Mail  preparers  therefore  operate  with  the  agreement  of  the  postal  administration, 
with which  they  usually  hold contracts. 

The most  important  mail  preparation activity  is  sorting the  mail  in  advance  of posting 
(pre-sorting).  It can also  include handling subscriber lists  and  enveloping.  Some or all 
of these activities can also he  undertaken by  letter shops (see a hove). 

Mail room 

it 

tor  posting  with 

A  facility  ser\'ing  an  office  building  or  comp<111y.  The  111<1 ii  room  collects  mail.  and 
the  postal 
prepares 
administration).  Some  postal  operators  are  beginning  tu  ntkr  lo  undertake  this 
activity  ;.1s  a  third  party  agency  woi:king  for  the  or get n is" t ions  t h;.1 t  generate  the  ma ii. 
Such  a  st:T\'ice  cin  he  part  of  a  wider  involvement  of  Lhe  postal  administrations  to 
manage  the whole  pre-posting process on  behalf of largt:·  custonwrs 

the  operators  concerned  (including 

Mandator_y service ( obligator.Y scrvkc) 

Any services that  an operator is obliged  by  the  regubtory body to  undertake are called 
mandatory services.  (The  term  "obligatory  services"  is  synonynwus.)  Usually  have  to 
be  provided  across  the  whole  territory  covered  by  the  operator  upun  whom  the 
obligation  is  placed  - that  is.  he  has an  obligation  to  prm·ide  ~'  universal  service  for  all 
items that  come within  the  definition  of the obligation.  Some  mandatory  services are 
reserved  (giving  the  operator  exclusive  rights  to  provide  them).  others  are  non 
reserved and open  to competition. 

OCR 

Optical  Character  Recognition.  Scanning device  which  can  "re~1d" ch;ir<1cters  and  (in 
the case of postal operations) translate them  into binary codes \vhich  can  then  he  used 
for automated sorting. 

I PllJ,'<!  368 

Ollice of exchange 

G/o_,._.i<ll)' 

Specialised  sorting  office 
international  mail  between  postal 
administrations passes.  There are  both "outward" offices of exchange  responsible  for 
despatching  mail  from  the  country  of  posting,  and  "inward"  offices  responsible  for 
receipt  in  the country of delivery.  Offices of exchange are located  near to airports for 
air-mail and sea-ports and or rail-heads for surface mail. 

through  which 

Outward 

Comprises  the  initial  phases  of  the  postal  operation.  Covers  collection.  outward 
sorting and despatch. 

Packet 

Goods-hearing  item  weighi~1g up  to  2  kg.  Considered  by  postal  ~1dministrations and 
UPU to he part of letter mail  (being part of AO classification - ~L'l.'  11hovl.' ). 

Parcel 

Goods-hearing item  for  delivery  to address  point.  Technically.  no  upper weight  limit, 
(Above  this  weight.  items  are  usually  palletised 
but  usually  considered  to  he  30  kg. 
"consignments".) 

Perequation tarifaire 

Practice  of  applying  the  same  tariff  across  a  whole  territory.  There  1s  no  succinct 
English equivalent, the closest translation being "single unitary tariff'. 

"Personalised" 

"Personalised"  is  a  word  that  describes  how  a  direct  mail  item  mav  indudt  1.ext  that 
will  he  more  relevant  to the  addressee.  However.  since the  text  is  n.ot  entirely specific 
to  the  addressee  (with  the  exception  of  the  address  and  the  appelation ).  the  item 
would  not  he considered "individualised" as defined above. 

Postal electronic mai.1 

A  "hyhrid"  service  which  combines  both  telecommunications  and  postal  services.  An 
item  is  sent  by  telecommunications  (either  as  text  or  as  an  image)  to  a  convenient 
point  where  it  is  then  converted  into  a  paper  version  ("hard  copy"),  enveloped  and 
addressed.  lt therefore becomes a  postal  item. which  then will  he delivered. 

Poste Restante 

A  facility  which  enables a  customer to arrange to have  items addressed to  him  held  at 
a  nominated  post  office.  The customer picks  up his  mail  directly  from  the post office 
nominated. 

Gloss my 

pag<.' 369 

Printed papers 

Items  where  the  text 
magazines and hooks), but can also  include direct  mail. 

is 

identical.  Usually  refers  to  publications  (newspapers. 

Rebate ser\'ice 

Generic  name  for  discounted  service,  usually  for  publications.  where  the  advertised 
delivery times are slower than the norm. 

Re mail 

A cross-border letter  mail service offered by pr~vate operators. usually  in  co-operation 
with  a  postal administration.  There are three different sorts of remail operation. 

A-B-C  remail  involves  mail  being  collected  in  the  country  of  the  customer  (A), 
freighted  lo a  second country ( B)  where  it  is  posted  into the  international  mail system 
for  onward  transmission  to  (and  delivery  in)  a  third  country  (C).  A-B-B  remail 
involves  collection  in  the  country  of  the  customer  (A).  freighting  to  the  country  of 
delivery  ( B)  and  delivering  to  the  addressee  there  (B).  usually  hy  posting  with  the 
postal  administration  there.  A-B-A  remail  involves  domestic  mail  being  taken  from 
the country of the customer (A)  to a  second country  (B)  for  mailing  hack  to  the  first 
country (A). 

Reserved service 

A  service  the  provision  of which  is  obliged  to  an  operator  (in  fact  always  the  postal 
administration. in  the case  of postal  services) who  in  turn  is  granted some special  and 
exclusive  rights.  These  rights  almost  always state  that  this  operator has  the sole  right 
to provide the services in  the territory to which the  reservation applies. 

Routeing 

The  route  and  method  of  transport  chosen 
geographically distinct  locations. 

to  transport 

items  between 

two 

Self-deliver)· 

Taking  one's  own  mail  to  the  destination  point  and  delivering  it  oneself  to  the 
addressee.  From  a  regulatory  point  of  view,  there  might  he  different  views  taken 
depending on  whether  the destination  address was  in  the same country or not.  (If the 
destination was  in  another·country.  there  might  he different  different  regulatory views 
are  possible  depending on  whether  the  countries  involved  were  inside  or  outside  the 
Community.) 

Self-posting 

The  posting  of  one's  own  mail  by  oneself.  Although  this  seems  a  straightforward 
concept.  it  raises  regulatory  issues.  particularly  for  contract  users.  The  different 

1  page370 

Glus.'im)' 

possibilities  for  posting  one's  own  mail  with  a  postal  administration  are:  posting 
locally,  posting  at  a  distant  point  (perhaps  under  a  contractual  arrangement)  in  the 
same  national  territory;  taking  one's  mail  across  a  horder  for  posting with  the  postal 
administration of another country for delivery there; taking one's mail  across a  horder 
for  posting with  the  postal  administration  of another country for  delivery  in  a  country 
other  than  one's  own;  and  taking  mctil  across  a  border  for  posting  with  the  postal 
administration  of that  country  for  delivery  hack  in  one's  own  country.  (It  should  be 
noted  for  the  last  three  examples  that  different  regulatory  views  are  possible 
depending on whether the countries involved are  inside or outside the Community.) 

Senior Oflicials' Group on  Posts 

A  consultative  committee  established  to  hdp  the  Commission  devdop  proposals  for 
the  Community's  postal  sector. 
Its  establishment  was  proposed  by  the  Council  of 
Telecommunications  Ministers  in  September  1989.  and  has  been  meeting  regularly 
since  December  1989.  Each  Member  State  is  represented.  The group  is  chaired  hy 
the Commission. 

Sorting 

Activity  which  causes  an  item  to  be  grouped  with  other  items  for  a  particular 
destination.  The first  sorting process ("outward" sorting) will  group together items for 
a  particular  destination  town  or  area. 
In  the  "inward"  office.  sorting will  divide  the 
mail  into more detailed areas,  and then allocate  the mail  to the person  responsible for 
delivery. 

Special letter delivery services 

In  the Green  Paper.  this phrase refers to the "lettre expres" (see above). 

Stream 

An  operational  category  of  mail  which  requires  that  the  items  in  the  categorv  are 
segregated  from  other  mail  and  treated  separately.  Examples  include  LC.  A.o:·first 
class mail. second class mail  and cross-horder mail. 

Telemarketing 

The  selling  of products  by  telephone.  Certain  aspects  of this  form  of  marketing  are 
illegal  in  certain  Member States. 

Terminal dues 

The  system  of  compensation  applying  to  exchanges  of  international  mail  between 
postal  administrations.  The  "outward"  administration  receives  all  the  revenue  from 
the customer. 
It  then compensates  the "inward"  administration  for  the costs  incurred 
in  delivering the  mail. 

I G/omuy 

Tiering system 

page 371 

Most  postal  administrations dassit)'  their  maiJ  into  at  least  two  "tiers".  MaiJ  in  each 
tier  has  different  tariffs  for  the  same  weights,  and  usually  receives  different  levels  of 
service. 

Some administrations classify on the basis of the contents of the  items posted.  Here, a 
distinction  is  drawn  between  letters  and  post  cards  on  the  one  hand,  and  printed 
papers  (and  small  packets)  on  the  other.  Under  the  Universal  Postal  Union 
classification  these  tiers are  called  respectively  LC (lettres et  cartes)  and  AO  (autres 
objets). 

Other administrations  have  tiering system  that  distinguishes on  the  basis of the speed 
required hy  the customer.  This system  i~  referred  to either as  first  class/second class 
or as 24 / 48  hours. 

Unaddresscd  mail 

A  form  of  direct  mail.  Advertising  material  is  delivered  unaddressed  to  all  the 
addresses in  the area dc.:.·termined  by tl1e  advertiser. 

Universal ser\'ice 

The  obligatory /mandatory  prov1s1on  of  postal  services  throughout  the  territory  to 
which  the  obligation  applies.  This  implies  accessibility  to  collections  by  which  maiJ 
being sent  can  be  input  into  the  mail  network  as  well  as delivery  to  every  address  in 
the territory.  It  also  implies affordable prices and good quality of service. 

Although  other  operations  may  provide  services  throughout  the  territory,  the  phrase 
"universal  service"  refers  in  the  Green  Paper  only  to  those  operations  which  have  to 
provide universally as a  regulatory obligation. 

UPU 

The  Universal  Postal  Union.  This  is  a  United  Nations  hodv  that  regulates  the 
international  movement  ol  mail  by  postal  administrations. 
Its  Convention  is  re 
confirmed at  its congress~s which  are hdd every five  years. 

Users 

See under "Customers". 

ISSN 0254-1475 

COM(91) 476 final 

DOCUMENTS 

EN 

10 

Catalogue number: CB-C0-92-263-EN-C 

ISBN 92-77-45007-X 

Office for Official Publications of the European Communities 

L-2985 Luxembourg