Opinion of the Economic and Social Committee on the "Proposal for a European Parliament and Council Directive amending Directive 97/67/EC with regard to the further opening to competition of Community postal services"
Date: 2000-11-29
Institutions: European Economic and Social Committee
Subjects: competition law, liberalisation of the market, postal service, provision of services, single market

20.4.2001

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Official Journal of the European Communities

C 116/99

Opinion of the Economic and Social Committee on the ‘Proposal for a European Parliament and
Council Directive amending Directive 97/67/EC with regard to the further opening to competition
of Community postal services’

(2001/C 116/22)

On 25 September 2000 the Council decided to consult the Economic and Social Committee, under
Article 262 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 9 November 2000. The
rapporteur was Mr Morgan.

At its 377th plenary session (meeting of 29 November 2000) the Economic and Social Committee
adopted the following opinion by 101 votes to 10, with 11 abstentions.

1.

Introduction

2. Key provisions of the draft directive

1.1.
The ESC welcomes the opportunity to prepare an
opinion on the initiative of the Commission to propose a
Parliament and Council Directive with regard to the further
opening to competition of Community Postal Services (1).

1.2. While the ESC recognises the inevitability of further
liberalisation,
it is concerned that the process should be
managed on a controlled basis with full regard to the interests
of the various stakeholders. In addition, the Committee has a
very real concern regarding the co-lateral social impacts.

Chapter 2 contains a synopsis of the Commission’s

1.3.
rationale for the liberalisation measures proposed.

1.4.
In further chapters the Opinion examines issues relat-
ing to Universal Service, the impact on employment, the
economy and co-lateral social issues.

1.5.
In summary, the ESC views further liberalisation as a
very complex process subject at each step to the law of
unintended consequences. The status quo has served Europe
well. Departure from the present position should be under-
taken with great care. The liberalisation should take full
advantage of the length of the proposed timetable for change.

(1) See ESC previous opinions on the liberalisation of Postal Services:
OJ C 129 of 10.5.1993 (Rapporteur: Mr Pompen); OJ C 174 of
17.6.1996 (Rapporteur: Mr Farnleitner).

2.1.
‘The objective of the Commission’s proposal is to move
towards the completion of the Internal Market for Postal
Services while ensuring the maintenance of universal service.
This will allow the benefits of greater competition to improve
the service levels, in terms of both quality and the prices
available to posting customers and to strengthen the European
economy as a result. This can best be done by agreeing a
substantial step on 1 January 2003 while also providing a
timetable for decisions on further market opening’.

2.2.
Following the market opening proposed for 2003, an
additional step towards the completion of the Internal Market
should be proposed by December 2004, be agreed by Decemb-
er 2005 and be effective on 1 January 2007.

2.3.

The changes proposed for January 2003 are:

a)

b)

c)

d)

Reduction of maximum limits to be reserved to the extent
necessary to ensure universal service from 350 grams
to 50 grams for ordinary domestic correspondence,
incoming cross-border correspondence and direct mail.

Reduction of the maximum limits to zero grams for
outgoing cross-border correspondence.

Introduction of a definition for ‘special services’ and
liberalisation thereof, regardless of their weight and price.

In respect of outgoing cross-border correspondence and
express mail, the current price limit shall be abolished.

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2.4.
In the view of the Commission, this is a very gradual
step because the rationale for the 50 grams limit is that it only
represents 16 % of the revenues derived by universal service
providers and much of
this revenue will not easily or
quickly be addressed by competition. The further reduction of
employment (beyond the ongoing modernisation process) is
estimated by the Commission at 2,5 %.

d)

e)

to enhance the competitiveness of postal services vis-à-
vis electronic competition;

to avoid the exploitation of dominant monopolistic
positions by incumbents. Complementary business
opportunities can only be pursued in a competitive
environment;

f)

to facilitate transnational partnerships between Postal
Service suppliers and major customers.

2.5.
It is expected that direct mail volume growth in excess
of 5 % p.a. over the next several years will allow incumbents
and new competitors room to grow. The 50 gram limit is
proposed so that all Member States can undertake liberalisation
of direct mail to this maximum (many have not yet begun).

3. Universal service

3.1. Definition

2.6. With respect to incoming cross-border mail, the vol-
umes and the difficulty of determining its origins have led the
Commission to postpone action until further liberalisation
beyond 2003.

2.7.
The overall impact of these proposals is that 50 % of
the universal service providers’ total Postal Service revenues
will remain within the maximum area which can be reserved,
compared with 70 % at present, i.e. a 20 % additional market
opening. Based on the experience of postal markets already in
a more competitive environment, the Commission expects
over the medium term the incumbent would retain 80 to
90 percent of the market open to competition.

2.8.
The Commission’s proposal involves a commitment to
a further stage of market opening in 2007, the scope of which
is to be decided by December 2005. This intention to continue
market opening is meant to stimulate incumbents to prepare
for full competition. Considerations include:

to permit development of future arrangements, both at
an operational and at a regulatory level, so as to ensure
that the long-term financial viability of the universal
service provider is preserved through improved competi-
tiveness;

to stimulate investment, especially towards full
inte-
gration into the Information Society, so that a competitive
market share can be achieved by the present incumbents
in the wider communications and logistics markets;

a)

b)

c)

3.1.1.
extracted from the 1997 Directive on postal services (1):

The following definition of universal service is

‘A r t i c l e 3

1) Member States shall ensure that users enjoy the right to a
universal service involving the permanent provision of a
postal service of specified quality at all points in their
territory at affordable prices for all users.

2)

3)

To this end, Member States shall take steps to ensure that
the density of the points of contact and of the access
points takes account of the needs of users.

They shall take steps to ensure that the universal service
provider(s) guarantee(s) every working day and not
less than five days a week, save in circumstances or
geographical conditions deemed exceptional by the
national regulatory authorities, as a minimum:

— one clearance,

— one delivery to the home or premises of every

natural or legal person.

4)

Each Member State shall adopt the measures necessary to
ensure that the universal service includes the following
minimum facilities:

— the clearance, sorting, transport and distribution of

postal items up to two kilograms,

— the clearance, sorting transport and distribution of

postal packages up to 10 kilograms,

— services for registered items and insured items.

to achieve a level playing field in the Internal Market, by
subjecting all incumbents to the same levels of compe-
tition and transparent accounting;

(1) OJ L 15 of 21.1.1998 Directive 97/67/EC on common rules for
the development of the internal market of community postal
services.

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A r t i c l e 5

— business to household 65 %;

Each Member State shall take steps to ensure that universal
service provision meets the following requirements:

— household to business 5 %;

— it shall offer a service guaranteeing compliance with the

essential requirements,

— household to household 5 %.

— it shall offer an identical service to users under compar-

able conditions,

— it shall be made available without any form of discrimi-
nation whatsoever, it shall not be interrupted or stopped
except in cases of force majeure,

— it shall evolve in response to the technical, economic and

social environment and to the needs of users.

A r t i c l e 1 2

Member States shall take steps to ensure that the tariffs for
each of the services forming part of the provision of the
universal service comply with the following principles:

— prices must be affordable and must be such that all users

have access to the services provided,

— prices must be geared to costs; Member States may decide
that a uniform tariff should be applied throughout their
national territory,

— the application of a uniform tariff does not exclude the
right of the universal service provider(s) to conclude
individual agreements on prices with customers,

— tariffs must be transparent and non-discriminatory.

A r t i c l e 1 6

Member States shall ensure that quality-of-service standards
are set and published in relation to universal service in order
to guarantee a postal service of good quality. Quality standards
shall focus, in particular, on routing times and on the regularity
and reliability of services.’

3.1.2.
The Committee supports this definition as still being
valid. The ESC considers the universal postal service to be a
basic element in the infrastructure of European democracy.

3.2. Analysis of Traffic and Trends

Business to business traffic is a surprisingly small
3.2.2.
percentage of the total. This certainly reflects the impact of
competitive carriers (DHL etc.), messenger services, and the
widespread adoption of electronic communications — phone,
fax and Internet.

3.2.3.
Business to household is by far the biggest com-
ponent of postal traffic. The businesses involved are therefore
the most important customers of the postal services, however
the mail is produced (either in a traditional way or in an
electronic way). Most of the traffic will be direct mail, billing
or account statements. Not all of this traffic is time critical,
with the particular exception of newspapers and magazines,
but much of it is price-sensitive.

The above comments exclude packages and parcels, which
represent the delivery of goods or products from business to
household. These may use standard or value added services,
according to business need.

Only 5 % of this traffic flows in the reverse direction
3.2.4.
— household to business. Newspapers and journals are read,
accounts are filed, direct mail is thrown away and not all bills
are paid by post. Alternatives include bank giro, direct debit,
telephone banking, as well as the emerging Internet banks.
There is also some return mail order traffic.

3.2.5.
Household to household at 5 % seems low at first
sight, but letter writing is a dying art, replaced by phone
(mostly), fax and e-mail to some small extent. Most household
to household traffic is formal greeting — births, deaths,
marriage; Christmas and birthday; invitations, acceptances and
thanks; holiday postcards. Time critical correspondence is
normally handled on the phone.

3.2.1.
confirmed by the Commission, is as follows:

The general pattern of delivery volumes in the EU, as

— business to business 25 %;

3.2.6.
From the above analysis it emerges that business
generates 90 % of postal traffic and some of the traffic directed
to and from households is not time critical. Time critical
deliveries are available as an express service. In this arena
messenger services dominate business mail in many cities.

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Looking forward,

3.2.7.
it seems that most person to
person communication, whether business or private, will be
conducted by telephone, with the postal service used for
formal communications. Mobile phones are transforming and
promoting patterns of telephone use.

their ability to adapt

3.2.8.
The Committee is especially concerned by the con-
dition of older people of the current generation. There is
concern about
to newer forms of
electronic communication. There is also a great deal of
sympathy for the comfort the elderly people receive from
behaving in familiar ways. However,
the telephone does
provide a powerful alternative, especially for those for whom
reading and writing has become difficult.

3.2.9.
E-mail will continue to replace formal business
correspondence as well as making some inroads into the
personal correspondence market. In this regard, formal busi-
ness correspondence is increasingly being produced by elec-
tronic means.

3.2.10.
Order fulfilment of e-mail retail services will provide
a new parcels service opportunity in the business to household
arena. Different commodities will be more or less time critical.
The extent of demand for a coverage by such services could be
significant in the context of universal coverage in the longer
term.

3.2.11.
It is possible that as these trends develop our
thinking about the nature and structure of the universal
services will change.

3.3. Financing for the Universal Service

3.3.1.
The Commission argues that the reduction of the
reserved limit to 50 grams affects 16 % of mail. In the
Commission’s view, any reservation greater than 50 grams will
open up too small a fraction of the market to make it attractive
for competition to enter. Even at the 50 gram level the
Commission expects incumbents to compete effectively for
the business.

Incumbent postal regimes are arguing that all their profit is
made in the 16 % band and that should the reservation limit
be reduced to 50 grams, the universal service will be put in
jeopardy, because there will be not enough profit to pay for it.
As a consequence, they argue that the economic equilibrium
of the universal service provider and the employment level
will be put a risk.

The Committee is well aware that differences in the
3.3.2.
geographical and population density of member States and
other regions mean that the economics of the universal service
will be constrained in different ways in each Member State. As
it has already said previously, the Committee believes that
liberalisation must be gradual and controlled.

Therefore, it may be wiser to consider a midway stage between
the current limits and those proposed by the Commission and
to conduct a detailed study on the implications of the limits
for universal service and its quality, in order objectively to
assess their social and economic impact, e.g. on employment
and cohesion, prior to any new measures being taken.

3.2.12.
There is universal access to stamp purchase in all
Member States and also universal access to post boxes. The
more demanding access requirements relate to parcels and
other services. These need to be made physically available
within reasonable reach of households and businesses.

For the postal service to be competitive, the man-
3.2.13.
agement of postal services needs to be given commercial
freedom in the way in which it provides universal access.

The viability of the universal service will be enhanced
3.3.3.
if the economic integrity of the universal service can be
maintained. It is essential that economic value is not drained
out of the universal service by the development of spurious
‘special’ services. Similarly ‘hybrid’ services should not be
excluded from the universal service in the reserved area, unless
they are express. The ESC believes that the definition of special
services included in the draft directive needs to be tightened
up, so that the economic content of the universal service is
protected. Indeed, the proposed definition is so broad that any
competitor defining its services as ‘special’ may be able to
circumvent the reserved area, thus jeopardising the economic
viability of the universal service.

3.2.14.
Part of the commercial freedom accorded to post
office management should be the decision as to where and
how to provide universal access to postal services. Clearly the
core function of postal service access can be provided in
outlets of any kind, including mobile outlets.

3.3.4.
The viability of the new service will also be improved
by an examination of the cost and price structures of the
present services. The cost of quality will also need to be
considered. After the liberalisation of telecommunications the

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imbalance between local and long line pricing became appar-
ent. Similar imbalances are likely to exist in the postal services.
Improving profitability via cost control and pricing will make
the incumbents less vulnerable to ‘cherry picking’.

4.

Employment and Economic Growth

Another exposure to the integrity of the universal
3.3.5.
service is the liberalisation of outgoing x-border mail. This
could facilitate ‘remailing’ practices, involving domestic bulk
mail in particular. To the extent that it is necessary for the
provision of the universal service, outgoing cross-border mail
could continue to be reserved within the set weight and price
limits.

4.1.
The macro-level case for liberalisation is conceptually
attractive. There is an analogy with the liberalisation of the
telecommunications industry. While ‘mother’ telcos have seen
a decline in employment, they have seen a surge in business;
customers have hugely benefited from new technologies and
services, while a plethora of start-up companies at every stage
of the industry value chain have generated many new jobs. Yet
even such developments have been disruptive to many former
telco employees.

3.3.6.
On the other hand, the ESC is concerned about the
potential abuse of any dominant market positions. Accounting
must be transparent and cross-subsidy avoided by any market
participant.

In the case of postal services, the technological oppor-
4.2.
tunity is complementary to existing services. The transition is
therefore more difficult to make, both for incumbent regimes
and their employees. Accordingly, the process of liberalisation
must be more carefully handled and controlled.

The ESC notes that it is the view of the Commission
3.3.7.
that a compensation fund would be an effective means to
offset any residual costs related to the universal service
provision.

4.3. Postal Service Employment

3.4. Universal Service and Liberalisation

Experts representing trades unions and the postal
4.3.1.
unions have questioned the statistical bases from which the
Commission has derived the employment data used in support
of the draft directive. It would help the discussion of these
proposals if the Commission’s data could be published.

The ESC supports the objective of completing the
3.4.1.
single market
for postal services while safeguarding the
universal service in accordance with the Postal Directive and
the conclusions of the Lisbon summit.

4.3.2.
According to the data provided by the Commission,
universal service providers currently employ about 1,3 m
persons while about 400 000 are employed by private postal
operators. It has been estimated that there will be a reduction
of about 8,4 % in the sector in total between 1997 and 2007,
independent of further liberalisation.

3.4.2.
The Committee stresses that the functioning of the
universal service is a priority and underlines the need to
ensure that liberalisation does not happen too suddenly, thus
upsetting the financial balance of the universal service provider,
and undermining the interests of the community, which
include universality, continuity and full access to the service
by the users. One should also take into account the needs of
all customers, including SMEs for high quality postal services,
available throughout the Community at affordable prices.

4.3.3.
Of the five drivers of change — demand, electronic
substitution, organisational change, automation/new tech-
nologies and liberalisation — the Commission believes that
the introduction of competition is likely to have less impact
on employment than the other factors.

4.3.4.

The ESC accepts the Commission’s view that:

3.4.3.
In principle, the Committee supports liberalisation.
Therefore, the Committee accepts the Commission’s decision
on further market opening. However, the later phases must be
dependent on experience in this first phase and an assessment
of the delivery of the universal service and its adaptation to
technological developments and changing consumer demands.

a)

b)

the workforces of the incumbents need to be restructured
and retrained for the Information Society;

the gradual opening of the market allows this to be done
progressively.

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Even so,

4.3.5.
the ESC urges caution. Member states
must plan for liberalisation so that the next phase is used
constructively to manage postal business development and the
associated manpower dynamics.

5. Co-lateral Social Issues

4.4. Employment and Economic Growth

The economic challenge — and the economic oppor-
4.4.1.
tunity — now facing Europe was outlined in the ESC Opinion
for the Lisbon Summit — ‘Towards a Europe of Innovation
and Knowledge’(1). The ESC has urged the Commission and
the Member States to move quickly to adapt to the New
Paradigm and accelerate the advent of the New Economy. In
this respect,
the ESC shares the view expressed by the
Commission in its Communication on ‘Services of General
Interests in Europe’ (2), whereby ... the evolutive character of
universal service will allow access to all users of those services.

Postal Services have a central role to play in the
4.4.2.
revolution taking place. Postal Services provided the sinews
for the Old Economy from the Industrial Revolution onwards.
They must now provide the nervous system for the New
Economy. The Postal Sector, which offers a key communi-
cations infrastructure with high economic and social import-
ance, needs to develop in parallel with the major changes
taking place, otherwise it will be left behind and be seen to be
dealing increasingly with the technology of yesterday.

4.4.3.
Postal Services are at the crossroads of three markets
which are vital to the European economy: communication,
advertising and transportation/logistics. These markets are
largely open to competition already and are experiencing rapid
development driven by market demands, technological change
and the convergence of media, IT and telecommunications
industries. In particular, e-commerce creates a totally new
opportunity for transportation and logistics as goods, even
groceries are delivered directly to customers. This changes the
pattern of physical distribution. Postal Services should be well
positioned to compete, but can only be allowed to do so when
the Internal Market in postal services is open to competition.

4.4.4.
If the EU’s Postal Services are inefficient, goods
and services will not flow optimally throughout the Union,
damaging economic growth and jobs. The benefits of elec-
tronic commerce will not be fully realised if the EU’s postal
services are not first class. The ESC is concerned that in the
process of liberalising postal services full account is taken of
the economic and employment impacts on all market sectors.

(1) OJ C 117 of 26.4.2000.
(2) See COM(2000) 580 final (Annex 1).

5.1.
As the first public utility, the extent of the postal
service activity in all regions of Member States has created a
presence of considerable political and social importance.

5.2.
The presence of post-men and -women make an
important contribution to social cohesion and community life
for rural and sparsely populated areas, while local post offices
can have a political and social importance far beyond the
simple function of providing points of access to the postal
system.

5.3.
In effect, the operation of the chain of retail outlets
known as post offices has become a business unit separate
from the mail business. Post offices have, over time, become
outlets for a whole range of government services, including
savings banks, social security, licence issuance, etc.

5.4.
In general, the present trend is for such services to
decline as electronic facilities and funds transfer arrangements
move transactions out of post offices.

On the other hand, many communities feel that the
5.5.
loss of a post office presence could be terminal, often having
already lost banks to ATMs, shops to supermarkets, pubs and
bars to drink/driving laws and churches to the devil. In some
respects, this withdrawal of retail outlets from small towns
and villages creates a real danger of ‘social exclusion’.

Situations differ in each Member State, depending on
5.6.
factors such as geography, population concentration and retail
patterns. In most cases, where there are ‘withdrawal’ problems,
they will also be aggravated by limited access to public
transport.

These social

5.7.
issues need urgent action. Local and
national initiatives are needed and unconventional solutions
may be called for. In particular, there is scope for collaboration
in both retail outlets and transport and delivery systems, and
the postal service has a part to play.

5.8.
In giving its support to the liberalisation of postal
services, the ESC calls the attention of the Commission, the
Council and Parliament to these co-lateral social issues. It is
vital to address them in parallel with the liberalisation of postal
services.

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6. Conclusion

The main issues were highlighted in Chapter 1 —
6.1.
Introduction. The ESC recognises that liberalisation of postal
services should proceed cautiously and that the long-term goal
should be a Single Market in postal services taking into
consideration the following aspects:

— the integrity, maintenance and continuing development

of the universal service, to which the ESC gives priority;

— employment considerations, in general, and for postal

workers in particular;

— nature and scale of postal service involvement in the new

economy;

— resolution of the social issues attached to historic presence
of post offices and postal workers in rural and sparsely
populated areas.

Consequently, the ESC urges the Commission, the
6.2.
Council and the Parliament to give full consideration to the

issues identified and to make management and control of these
issues part of the liberalisation process.

6.3.
The Committee is particularly insistent that the priority
should be to maintain and develop the universal service,
bearing in mind the development of social and economic
needs and technologies, and that postal services should make
an active contribution to economic and social cohesion. This
is why it may be wise to consider a midway stage between the
current limits and those proposed by the Commission.

The ESC recognises that these adjustments need time.
6.4.
Therefore, we accept the Commission’s proposal that plans for
the next stage of liberalisation should come forward in 2005,
following a review of the impact of the measures to be
implemented in 2003.

6.5.
The ESC has highlighted the concern expressed by
many stakeholders regarding the Commission’s data. It encour-
ages the Commission to be more transparent in respect of this
issue.

Brussels, 29 November 2000.

The President

of the Economic and Social Committee

Göke FRERICHS