Report from the Commission to the European Parliament and the Council on the application of the Postal Directive (97/67/EC Directive)
Date: 2002-11-25
Institutions: European Commission
Subjects: application of EU law, impact study, liberalisation of the market, national implementing measure, postal service

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 25.11.2002
COM(2002) 632 final

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND
THE COUNCIL

on the application of the Postal Directive (97/67/EC Directive)

   
EXECUTIVE SUMMARY

This report is to meet the requirement of the 97/67/EC Directive (“Postal Directive”) that “the
Commission  shall  submit  a  report  to  the  European  Parliament  and  the  Council  on  the
application of this Directive, including the appropriate information about developments in the
sector,  particularly  concerning  economic,  social,  employment  and  technological  aspects,  as
well  as  about  quality  of  service”.  In  this  context,  the  Commission  has  undertaken  its  own
review of the transposition of the Postal Directive in the Member States and has launched a
number  of  studies  to  look  more  deeply  into  several  aspects  of  the  transposition  and
application  of  the  Postal  Directive1.  These  studies  have  been  used  extensively  in  the
preparation of this report and they are now available on the Commission web site2.It should
be noted that the recently adopted 2002/39/EC Directive3, amending the 97/67/EC Directive,
includes  the  requirement  for  the  Commission  to  submit  regularly  a  report  to  the  European
Parliament  and  the  Council  on  the  application  of  the  Postal  Directive.  However,  as  the
2002/39/EC Directive has not yet come into effect in the Member States, this report does not
seek  to  consider  the  application  of  the  Postal  Directive,  as  amended  by  the  2002/39/EC
Directive, but focuses exclusively on that of the sole 97/67/EC Directive.

The importance of postal services

The postal services market is significant in scale. In 2000, EU postal revenues were about €85
billion  or  about  1%  of  EU  GDP.  Direct  postal  sector  employment  is  substantial,  with  more
than  1.6  million  directly  employed  and  at  least  another  1  million,  whose  employment  is
indirectly related to postal services.4 Direct employment is still  mainly in Universal Service
Providers (USPs) - about 1.2 million - while nearly 500,000 are employed in the courier and
express industry. Overall Pls Ramboll estimate that over 5 million jobs are directly dependent,
closely related to, or induced by the postal sector.

Postal  services  are  also  strategically  important  as  part  of  the  wider  communications  and
distributions  market.  Many  key  sectors,  such  as  e-commerce,  publishing,  mail  order,
insurance,  banking  and  advertising  depend  closely  on  the  postal  infrastructure,  and  the
universal postal service is an essential element of social cohesion.

1

2

3

4

These included the CTcon studies on “the conditions governing access to universal postal services and
networks” and “the cost accounting systems of the providers of the universal postal service”, and that
by Omega Partners on ‘the impact of certain aspects of the application of the Directive 97/67/EC on the
postal sector”. The Commission has also launched a study into employment trends in the postal sector,
the preliminary findings from which were recently presented by the consultants Pls-Rambøll
http://europa.eu.int/comm/internal_market/en/postal/index.htm
Directive  2002/39/EC  of  the  European  Parliament  and  of  the  Council  of  10  June  2002  amending
Directive  97/67/EC  with  regard  to  further  opening  to  competition  of  Community  postal  services  –
OJ L 176, 05.07.2002 p 21.
According to the findings of Pls Rambøll.

2

                                                
The background to the Postal Directive

Prior  to  the  Postal  Directive,  postal  services  in  the  Member  States  varied  widely  across
Member  States.  However,  they  could  be  characterised  as  being  primarily  delivered  through
loss-making  and  sometimes  inefficient  public  sector  monopolies  providing  standard
commodity services of a widely variable quality and efficiency. This variability was creating
distortions in  other sectors and  a  ‘frontier’  effect,  where  the  national  quality  of  service  was
low.5  Volumes  of  letter  mail  items  had  been  growing  in  absolute  terms  but  at  a  rate
significantly below that for other communications and distribution sectors. Further, the USPs
appeared  vulnerable  to  volume  loss  in  their  traditional  products.  Traditional  letter  mail
services represented more than  80%  of their  revenues and they were losing  market  share  in
other market segments (e.g. parcel services).

However, there were also positive signs. Direct mail volumes, whilst substantially below US
levels,  were  growing  relatively  quickly,  and  new  global  customer  needs  for  postal  services
were emerging, facilitating steady growth in the parcels, express and courier segments.

The Postal Directive

The  main  objectives  of  Community  policy  for  postal  services  have  been  to  improve  the
quality  of  service  and  to  implement  the  internal  market  for  postal  services.  Towards  these
objectives,  and  in  line  with  the  principle  of  subsidiarity,  the  Postal  Directive  set  in  place  a
limited harmonisation of EU postal services. It established regulatory provisions including the
definition  of  a  minimum  universal  service,  a  maximum  reservable  area,  the  conditions
governing the provision of non-reserved services and access to the network, tariff principles
and  the  transparency  of  accounts,  quality  of  service  requirements  and  the  harmonisation  of
technical  standards.  These  provisions,  which  mainly  focus  on  principles  and  boundaries,
established a Community framework for Member States to adapt to their national context.

Assessing the application of the Postal Directive

In  assessing  the  application  of  the  Postal  Directive,  this  report  considers  how  the  Postal
Directive  is  applied  in  Member  States,  analyses  relevant  market  developments  since  the
adoption of the Postal Directive and assesses the overall impact of the Postal Directive6.

The transposition of the Postal Directive

The transposition of the Postal Directive into  the national  legislative  framework  of Member
States,  has  been  a  lengthy  process.  However,  transposition  of  the  Postal  Directive  is  now
almost complete and the Postal Directive  can be  considered  (overall)  as implemented in the
Member  States.  Though  some  conformity  issues  remain,  such  as  those  regarding  the
independence of National Regulatory Authorities (NRAs) and the Commission has launched a
number of infringement procedures against Member States.7

5

6

7

See the Green Paper on the Development of the Single Market in Postal services – COM(91) 476 final.
Adopted 11.6.1992.
It  should  be  noted  that  the  Postal  Directive  represents  part  of  a  process  begun  at  the  Council  of
Ministers in 1992 and, to avoid an unrealistic and artificial separation, it is the impact of this process as
a whole which should be considered.
See Page 15, footnote 21.

3

                                                
The regulatory application of the Postal Directive

The Postal Directive has led to the following changes:

(cid:1)  A largely achieved implementation of a Community universal postal service;
(cid:1) 

Implementation of a common maximum reserved area across the Community;

(cid:1) 

Implementation of additional safeguards for the universal service in most Member States;

(cid:1)  Definition of national requirements for a good and reasonable access to national postal services;

(cid:1) 

Implementation of transparent and clearly separated cost accounting systems by USPs;

(cid:1)  Definition of quality of service targets both for domestic and cross-border mail;

(cid:1)  Harmonised arrangements for customer complaints;
(cid:1)  On-going definition of European technical standards;

(cid:1)  Establishment of independent national regulatory authorities (NRAs).

Therefore,  the  application  of  the  Postal  Directive  has  achieved  measures  of  regulatory
codification  and  harmonisation.  However,  the  regulatory  harmonisation  has  been  limited  by
the varied application of the Community framework in the Member States. Further, whilst the
Postal  Directive  has  laid  the  foundations  for  further  steps  towards  the  internal  market  for
postal services, there  are  concerns  about the role of  the  NRAs, particularly  as the market is
opened to competition.

The universal service and the quality of service

Postal  services  have  an  important  social  dimension,  and  the  universal  postal  service  is  an
essential  service  for  many  customers8.  Therefore,  the  Commission  has  paid  particular
attention  to  both  the  universal  service  and  to  the  quality  of  services,  launching  two  studies
specifically on these topics. These concluded that the provision of universal postal services in
Member  States was safeguarded  and remains  significantly  higher  than  level  required  by  the
Postal  Directive,  and  that  the  current  level  of  access  to  postal  services  is  more  than
satisfactory in terms of the network density and its conditions.

The Postal Directive, together with the REIMS terminal dues agreement, has led to significant
improvements in the quality of service. 92.3% of Community cross-border priority mail was
delivered in D+3 in 2001 (compared with only 69.1% in 1996)9. Further, the harmonisation of
the USPs’ performance, both cross-border and domestic,  has  mitigated  the  “frontier  effect”.
Quality  of  service  measurement  standards  being  developed  by  CEN  should  further  enhance
monitoring and performance. Domestic quality of service also appears to have improved.

The economic development of the market

The implementation of the Postal Directive has been mirrored by rapid market development:
(cid:1)  The  postal  services  market  has  continued  to  be  characterised  by  growth  in  all  market

segments;

8

9

In the context of this report, customers are all users of postal services (I.e. private and business users -
see footnote 24 for the definition of users).
Source: UNEX results (International Post Corporation)

4

                                                
(cid:1)  There has been only limited competition in the mail market segment, but the parcels and
express  markets  are  fiercely  competitive.  The  USPs  have  maintained  their  market
dominance in the mail market still largely protected by reservation in most Member States,
and  some  of  the  USPs  have  expanded,  through  mergers  and  acquisitions,  into  ancillary
competitive markets;

(cid:1)  There  has  been  a  trend  towards  the  corporatisation  of  the  USPs,  which  has  led  them  to
adopt new business strategies focusing on cost efficiency, profitability, diversification and
expansion. However  this  trend  has  varied  across  Member  States  and  arguably  those  who
have moved furthest along this route have enjoyed some first mover advantage. However,
most  USPs  have  become  commercial  and  profitable  business  organisations  even  though
levels of productivity vary;

(cid:1)  The  USPs’  movement,  from  commodity  service  operators  to  delivery  service  providers,
has  changed  their  activity  portfolios,  generally  reducing  their  dependence  on  the  mail
market segment;

(cid:1)  Expansion,  product  innovation  and  the  use  of  outsourcing  are  blurring  the  traditional

boundaries of the postal sector.

These developments carry clear benefits, e.g. increased quality of service, increased efficiency
increased profitability and greater innovation in the sector. As a result the USPs are now in a
far stronger position to cope with the demands of a more competitive market.

But, the developments have also involved costs and risks. The strong position of USPs in the
mail  market  segment  has  incentivised  other  postal  operators  to  operate  in  niche  markets.
Further,  the  continuing  cohabitation  of  reservation  with  profit-oriented  USPs,  may  create
clear  concerns  about  fair  competition  and  state  aids,  and  it  is  noticeable  that  there  have
already been a number of competition cases in the sector.

Technological aspects

Rapid  technological  change  has  created  significant  opportunities  and  threats  for  postal
operators.  On  the  one  hand,  the  increasing  potential  for  substitution  of  traditional  mail
products  presents  a  challenge.  On  the  other,  the  technological  change  offers  potential
efficiency  gains  and  provides  the  opportunity  for  new  added-value  postal  services  and  e-
commerce related products.

Until  recently,  there  has  been  positive  growth  for  mail  volumes  overall  in  most  Member
States and this underlying trend for volume growth and the reduced dependence of the USPs
on  traditional  letter  mail  revenues,  may  be  making  them  less  vulnerable  to  the  impact  of
substitution.  Nevertheless,  it  appears  that  the  threat  of  e-substitution  is  becoming  more
significant, and countering this threat increases the importance for postal operators of greater
customer responsiveness and cost efficiency.

Here,  the  advances  in  technology  have  provided  opportunities,  for  example  in  sorting
automation,  though,  there  remains  a  variability  in  the  take-up  of  potential  efficiency  gains
across  Member  States.  Postal  operators  are  also  making  greater  use  of  Information
Technology (IT) and increasingly adopting standard business practices, for example moving
from traditional proprietary or in-house development of IT solutions and using off-the- shelf
products and outsourcing. Further, product innovations related to technological  change have
led  to  the  development  of  new  services  such  as  hybrid  mail  services,  the  use  of  internet

5

technology  and  e-commerce  services.  In  this  context,  the  experience  and  network  access  of
the postal services operators, as end-to-end distributors, appears to be a valuable asset.

The employment dimension of postal services

Postal  services  also  have  an  important  internal  social  dimension.  Though  the  courier  and
express  providers  and  alternative  postal  operators  have  experienced  direct  employment
growth,  direct  employment  in  the  USPs  has  been  experiencing  a  continuous  erosion  over
recent years. In the USPs the positive impact created by the emergence of new services and
the new business development strategies, has so far been outweighed by the moves towards
greater efficiency, through increased automation and outsourcing. Although, here again, there
are significant variations across the USPs.10 However, it is also important to place these losses
in  the  wider  perspective  and  to  consider  also  the  greater  employment  growth  in  the
Competing  Private  Operators,  the  development  of  indirect  employment  and  the  induced
effects of changes in the postal sector, where greater efficiency in the postal sector may have
increased wider employment. The independent study undertaken for the Commission suggests
that these developments have more than offset the employment losses in the USPs11.

The market impact of the Postal Directive

In  practice,  it  is  difficult  to  identify  the  specific  impacts  of  the  Postal  Directive  on  market
development,  and  to  isolate  precise  causal  relationships  between  the  two  .  However,  it  is
reasonable  to  assert  that  the  Postal  Directive,  as  part  of  the  wider  Community  regulation
process begun in 1992, has been significant for the development of the postal services market.

In  establishing  a  minimum  harmonised  universal  postal  service  it  has  ensured  that,  in  the
future development of the market, this service of general interest will be safeguarded. Further,
in promoting an improving quality of service through measures such as the quality of service
targets  and  the  common  European  standards,  the  Postal  Directive  has  helped  to  ensure  that
there  has  been  an  improving  quality  of  service  and  that  any  “frontier  effects”  have  been
reduced.

Finally, the Postal Directive has helped to create an expectation of further measures of market
opening, and this expectation has increased both the pace of national postal reform and that of
the restructuring of the postal sector towards concentration, efficiency and profitability.

Conclusion and Recommendations

The Postal Directive has largely been implemented in Member States and its application has
had  significant  regulatory  and  market  impacts.  In  doing  so  it  has  reached  its  objectives  of
setting in place a basic harmonisation of the EU postal services market and of improving the
quality  of  service.  Furthermore,  by  setting  long  term  objectives  for  the  postal  sector,  the
Postal Directive, as part of the wider Community regulatory process begun in 1992, has had a
significant  contribution  to  the  development  of  the  market,  not  least  as  the  first  step  in  the
longer process towards the internal market.

10

11

Pls Rambølls Study of Employment Trends in the Postal Sector 1995-2000.
Pls Rambøll

6

                                                
Given  the  current  situation,  the  safeguarding  of  the  provision  of  a  universal  service  across
Member States  confirmed by Postal Directive 2002/39/EC, there are no recommendations for
a further update of the Community regulatory framework at this stage.

However, the level of harmonisation achieved remains limited across the Community beneath
the umbrella of the basic regulatory framework set out by the Postal Directive. For example,
the  regulatory  practice  varies  significantly  between  Member  States,  and  this  may  have
limited, both the actual development of competition in the EU postal services market and, the
level of harmonisation in the efficiency of the USPs. This in turn has limited improvements in
EU competitiveness.

Continuing  regulatory  asymmetry  threatens  to  distort  the  market  as  further  steps  are  taken
towards the full accomplishment of the internal market, and there have already been a number
of infringement cases on this issue. Further, the coexistence of reservation, variable regulation
and  competitive  market  segments  has  produced  perverse  incentives  for  market  players  and
when combined with the corporatisation and the privatisation of the USPs, clear issues of fair
competition have emerged.

In  light  of  the  above,  the  Commission  calls  for  the  Member  States  to  “ensure  effective
independence,  adequate  capacity  and  effectiveness  of  the  (competition  and)  regulatory
authorities”12, in particular in the postal sector.

Finally,  the  Commission  calls  for  the  Member  States  to  prepare  the  implementation  of  the
European standards currently being developed by the CEN, particularly with regard to quality
of service measurement methods, which will help to ensure that quality of service monitoring
and performance are further improved for the benefit of all customers.

12

See  the  Commission  recommendation  in  the  2002  broad  guidelines  of  the  Economic  Policies  of  the
Member States and the Community. ECFIN/210/02

7

                                                
CONTENTS

1.

1.1.

1.2.

1.3.

1.4.

1.5.

1.6.

2.

2.1.

2.2.

2.3.

3.

3.1.

3.2.

3.3.

3.4.

3.5.

4.

4.1.

4.2.

4.3.

4.4.

4.5.

4.6.

4.7.

4.8.

4.9.

Introduction and background ..................................................................................... 10

The purpose of the report ........................................................................................... 10

The scope of the report............................................................................................... 10

The approach to assessing the application of the Postal Directive ............................ 10

Timing considerations................................................................................................ 11

The European postal market prior to the Postal Directive ......................................... 12

The regulatory framework before the Postal Directive.............................................. 13

The Postal Directive................................................................................................... 14

The aims of the Postal Directive ................................................................................ 14

The requirements of the Postal Directive................................................................... 14

The limited harmonisation required by the Postal Directive ..................................... 14

The status of legal transposition................................................................................. 15

A long transposition process ...................................................................................... 15

Transposition is almost complete............................................................................... 15

Some conformity issues remain ................................................................................. 15

Transposition of the Postal Directive by the EFTA States ........................................ 16

Transposition by the Accession Countries................................................................. 16

The application and regulatory impact of the Postal Directive.................................. 16

The universal service.................................................................................................. 16

The reserved area / special rights ............................................................................... 17

Authorisation, licensing and compensation funds ..................................................... 18

Access to universal postal services and networks...................................................... 19

Transparency of accounts and tariffs principles......................................................... 19

The quality of service................................................................................................. 19

Complaints and redress procedures............................................................................ 21

Technical standards.................................................................................................... 22

National Regulatory Authorities ................................................................................ 23

4.10.

The implementation of the Postal Directive in the EFTA States ............................... 23

5.

5.1

The developments in the postal sector ....................................................................... 24

Economic aspects ....................................................................................................... 24

8

5.2.

5.3.

5.4.

6.

6.1.

6.2.

6.3.

6.4.

Market growth and segmentation............................................................................... 24

Technological aspects ................................................................................................ 33

Social and employment aspects ................................................................................. 36

Conclusions and recommendations............................................................................ 38

The long transposition process almost completed ..................................................... 38

Practical application and impact of the Postal Directive ........................................... 38

The market impact of the Postal Directive................................................................. 39

Recommendations ...................................................................................................... 39

Appendix: Index of abbreviations ............................................................................................ 41

9

1.

INTRODUCTION AND BACKGROUND

1.1.

The purpose of the report

The  purpose  of  this  report  is  to  meet  the  requirement  of  the  97/67/EC13  Directive  (“Postal
Directive”) that,  “three years after  the date  of  entry  into  force  of  this  Directive,  and  in  any
event no later than 31 December 2000, the Commission shall submit a report to the European
Parliament and the Council on the application of this Directive”. The delay in completing the
report reflects the pro-longed timetable for the transposition of the Postal Directive.

1.2.

The scope of the report

The  Postal  Directive  required  a  report  “on  the  application  of  this  Directive,  including  the
appropriate information about developments in the sector, particularly concerning economic,
social, employment and technological aspects, as well as about quality of service”. Therefore,
the  Commission  undertook  its  own  review  of  the  transposition  of  the  Postal  Directive,  the
results  from  which  were  discussed  with  the  Member  States  within  the  Postal  Directive
Committee14 on 16 May 2001. In addition, the Commission launched a number of studies to
look  more  deeply  into  several  aspects  of  the  transposition  and  application  of  the  Postal
Directive15, the results from the latest of which on employment are now becoming available.
These studies, and the results of the Commission services’ own review of transposition, have
been used extensively in the preparation of this report. Other sources used for this report are
referenced throughout the document.

It should be noted that the recently adopted 2002/39/EC Directive16, amending the 97/67/EC
Directive,  includes  the  requirement  for  the  Commission  to  submit  regularly  a  report  to  the
European Parliament and the Council on the application of the Postal Directive. However, as
the 2002/39/EC Directive has not yet come into effect in the Member States, this report does
not seek to consider the  application of  the  Postal Directive, as  amended  by  the  2002/39/EC
Directive, but focuses exclusively on that of the sole 97/67/EC Directive.

1.3.

The approach to assessing the application of the Postal Directive

The approach adopted in this report is to assess the Postal Directive in terms of the objectives
which underpinned the Postal Directive; the extent of its legal transposition and its regulatory
application  and  its  market  impact.  Market  developments  will  be  assessed  in  terms  of  their
economic, technological and social aspects.

13

14

15

16

Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common
rules for the development of the internal market of Community postal services and the improvement of
quality of service – OJ L 15, 21/02/1998 p 14.
Regulatory Committee established by Art. 21 of the Postal Directive.
Studies  on  “the  conditions  governing  access  to  universal  postal  services  and  networks”  and  “the  cost
accounting  systems  of  the  providers  of  the  universal  postal  service”  by  CTcon  and  ‘the  impact  of
certain aspects of the application of the Directive 97/67/EC on the postal sector” by Omega Partners.
The results of these studies are available at
http://europa.eu.int/comm/internal_market/en/postal/index.htm.  The  Commission  has  also  launched  a
study  into employment trends in the postal  sector, the preliminary  findings  from  which  were  recently
presented by the consultants Pls-Rambøll to the Commission and the main industry stakeholders.
Directive  2002/39/EC  of  the  European  Parliament  and  of  the  Council  of  10  June  2002  amending
Directive  97/67/EC  with  regard  to  further  opening  to  competition  of  Community  postal  services  –
OJ L 176, 05.07.2002 p 21.

10

                                                
1.4.

Timing considerations

The  Postal  Directive  is  the  result  of  a  lengthy  legislative  process  dating  back  to  the
Telecommunications Council of Ministers of May1992. This process includes the 1992 Green
Paper  on  the  development  of  the  single  market  for  postal  services17,  the  Commission
Communication  of  199318,  the  resolutions  of  the  European  Parliament19  that  year  and  the
Council  Resolution20  of  1994  followed  by  a  Commission  proposal21  in  1995.  Important
principles  of  the  Postal  Directive,  (e.g.  gradual  and  controlled  liberalisation  of  postal
services),  had  already  been  adopted  as  Community  objectives  before  the  Postal  Directive.
Further,  the  Postal  Directive  set  out  a  long-term  perspective  towards  the  completion  of  the
internal market for postal services that cannot always be assessed in the short term.

The postal services market is significant in scale. In 2000, EU postal revenues were about €85
billion or about 1% of the EU GDP and postal services. Direct postal sector employment is
substantial with more than 1.6 million employees, and probably at least another 1 million jobs
closely  related  to,  or  dependent  upon,  postal  services.22  Direct  employment  is  still  mainly
within Universal Service Providers (USPs) - about 1.2 million- while nearly 500,000 people
are  employed  in  the  courier  and  express  industry.  However,  employment  in  other  postal
service  providers  remains  fairly  marginal  despite  recent  increases.  The  recent  study  on
employment suggests that more than 5 million jobs in the EU may be directly dependent on,
closely related to or induced by the postal sector.

Postal services are also important strategically to the EU economy. As is shown in  Figure 1
below,  they  are  at  the  cross-roads  of  three  vital  markets:  communication,  advertising  and
transportation/logistics. Financial services is also  an important activity  area  for  many  of  the
USPs.

Figure 1: The strategic location of the postal services market

Communication

Market

E-mail,

phone,

Internet

Fax,
...

Advertising
Market

Postal
Industry

Transportation/
Logistics market

Press, radio,

TV,

Internet...

e-commerce,

    fulfillment...

17

18

19

20

21

22

COM(91) 476 Final, 11.06.1992
COM(93) 247 Final, 2.06.93
OJ C 42, 15.02.1993 p. 240, OJ C 194, 19.07.1993 p. 397, OJ C 315, 22.11.1993 p. 643
OJ C 48, 16.02.1994 p. 22
OJ C 322, 02.12.1995 p. 3
According to the preliminary findings of Pls Rambøll.

11

                                                
1.5.

The European postal market prior to the Postal Directive

However, the market faced a number of challenges prior to the Postal Directive:

A growing market but one in relative decline

The volumes  of  postal items had been  growing in absolute  terms,  but  at  a  rate  significantly
below that for other communications and distribution sectors, resulting in physical mail losing
market share.

Figure 2: The communications market of Western Europe and North America and the
expected percentage change by 2005

Physical mail

Fax

Telephone

E-mail

Hybrid mail

1995

27.9%

8.2%

51.7%

12.2%

0.0%

100%

2005

19.8%

6.5%

49.4%

23.7%

0.6%

100%

Change from 1995 to
2005

-8.1%

-1.7%

-2.3%

+11.5%

+0.6%

0%

Source: Universal Postal Union (1997)

Loss making and sometimes inefficient public sector incumbents

National  postal  markets  in  Member  States  were  largely  dominated  by  public  sector
monopolies, which provided standard commodity services of a widely variable quality to their
customers. Most postal employees were still working in a Civil Service type organisation and
many  of  the  USPs  were  loss-making,  with  80%  of  them  repeatedly  producing  losses  of  an
average of 12% of their revenues. They varied in their level of automation and were not  all
achieving cost effectiveness and efficiency.

Varying and inadequate levels of the quality of service

The quality of service for national and cross border services varied considerably and this was
creating  distortions  in  other  sectors  and  a  ‘frontier’  effect  limiting  the  development  of  the
internal  market.23  Further,  it  was  difficult  to  accurately  compare  performance  between
Member States, as measurement systems were not standardised.

Reliance on traditional products by USPs

Traditional  letter  mail  services  represented  more  than  80%  of  USP  revenues  and  the  USPs
were losing market share in other market segments (e.g. parcel services).

However, there were also a number of positive developments occurring in the market

Postal operators were increasingly offered the potential of global customer needs. Innovation
and customer responsiveness in the competitive parcels and express segment was generating

23

See the Green Paper on the Development of the Single Market in Postal services - 1992, COM(91) 476
final, 11.6.1992

12

                                                
healthy growth and profit opportunities. Further, in some Member States there were moves to
corporatise the incumbents and increase their cost efficiency.

1.6.

The regulatory framework before the Postal Directive

The  national  regulatory  frameworks  were  not  harmonised  and  contained  the  following
features:

Protected mail monopolies co-existing with competitive postal markets

The incumbents retained monopolies for letters (generally up to 1 or 2 kilograms) which co-
existed with competitive market segments, such as parcels and this created the possibility of
competition issues arising. Further, the remuneration for  cross-border mail was  regulated by
State measures, (i.e. the Terminal Dues system).

Emerging national regulation

Though, the separation of regulatory from operational functions was beginning to occur in the
early  1990s  in  some  Member  States,  the  National  Regulatory  Authorities  varied  in  their
approach, and in their level of independence.

The lack of a regulatory single market for postal services

The market lacked harmonisation, for example, of universal service definition and the quality
of service measurements varied widely. As such this lack of harmonisation created distortion
and  could  represent  a  significant  obstacle  to  the  future  development  of  the  market.  For
example:
(cid:1)  The  lack  of  a  harmonised  minimum  universal  service  could  mean  that  this  service  of

general interest may not in the future be available in all Member States;

(cid:1)  The  continued  monopoly  and  public  nature  of  the  incumbents  did  not  favour  efficiency

improvements and innovation in the market;

(cid:1)  Varying  quality  of  service  levels  for  national  and  cross-border  services  could  create  a
‘frontier  effect’  whereby  some  postal  services  were  effectively  stopped  at  the  borders  of
some  Member  States  due  to  their  relatively  poor  standard  of  service  or  divergent
regulation;

(cid:1)  The  split  between  reserved  and  non  reserved  postal  products  could  create  issues  of  fair

competition where monopoly mail operators were present in competitive segments.

13

2.

THE POSTAL DIRECTIVE

2.1.

The aims of the Postal Directive

The key objectives were:
(cid:1)  To improve the quality of European postal services;
(cid:1)  To implement the internal market for postal services.

The key principles were:
(cid:1)  To introduce a gradual and controlled market opening to competition;
(cid:1)  To ensure the provision across the EU of a minimum universal postal service.

2.2.

The requirements of the Postal Directive

To achieve these objectives and key principles, the Postal Directive required Member States
to  implement  a  number  of  Community  requirements  into  their  national  regulatory
frameworks.

Main requirements of the Postal Directive:

(cid:1)  All Member States provide a universal postal service for all users24 comprising of at least one delivery and

collection five days a week;

(cid:1)  The  maximum  part  of  the  market  reservable  for  the  Universal  Service  Provider  in  each  Member  State  be

350g in weight or five times the basic tariff of an item of correspondence;

(cid:1)  Member  States  could  establish  authorisation  procedures,  which  may  include  individual  licences  and  a

compensation fund in the universal service area;

(cid:1)  Member States should ensure that all users have a reasonable and good access to the postal network, and that

this access should be transparent and non discriminatory;

(cid:1)  USPs  should  consistently  apply  transparent  and  separated  cost  accounting  principles,  and  provide  separate

accounts for reserved and non-reserved universal services and non-universal services;

(cid:1)  The Postal Directive set quality of service targets for cross-border mail (85% for D+3, 97% for D+5 for the

fastest standard category of service) and required Member States to define compatible national targets;

(cid:1)  Member States to ensure that adequate consumer protection measures were in place, particularly with regard

to complaints and redress procedures;

(cid:1)  The  Postal  Directive  aimed  to  promote  greater  inter-connectivity  between  postal  networks  through  greater

technical standardisation;

(cid:1)  Member States to establish National Regulatory Authorities independent from the postal operators.

2.3.

The limited harmonisation required by the Postal Directive

As the first step towards the internal market for EU postal services, the Postal Directive only
required  a  limited  harmonisation  across  Member  States.  The  Postal  Directive  provisions,
which  mainly  focus  on  principles  and  boundaries,  established  a  Community  framework  for
Member States to adapt to their national context, making use of the subsidiarity principle. For

24

Users:  any  natural  or  legal  person  benefiting  from  universal  service  provision  as  a  sender  or  an
addressee (Art. 2 of the 97/67/EC Directive).

14

                                                
example  Member  States  were  free  to  set  a  definition  of  the  universal  service  above  the
minimum required by the Postal Directive.

3.

THE STATUS OF LEGAL TRANSPOSITION

3.1.

A long transposition process

The Postal Directive required that its transposition should be  effective in Member  States  by
February  1999  at  the  latest  and,  in  practice,  this  been  more  time  consuming  than  was
envisaged in the original timetable.

3.2.

Transposition is almost complete

However, this process is now almost complete. All Member States have now modified their
primary legislation to transpose the Postal Directive provisions (last law adopted in December
2000).  Figure  3  below  shows  the  current  status  of  transposition.  Secondary  legislation,  and
detailed  regulations,  are  still  under  development  in  some  Member  States.  Therefore,  more
information is still needed from some Member States in  order  to  assess  the  transposition  in
depth. Where particular problems have emerged the Commission has instigated infringement
proceedings against Member States.25

Member

States

Status on transposition

Completed

Conformity

BE

DK

DE

EL

ES

FR

IR

IT

LU

NL

AT

PT

SF

SE

UK

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

*

Yes

Yes

*

*

*

Yes

*

Yes

Yes

Yes

Yes

Yes

Yes

Yes

* Conformity issues identified and being discussed

Figure 3: The status of transposition of the Postal Directive

3.3.

Some conformity issues remain

From  Figure  3  above  it  can  be  seen  that  a  range  of  conformity  issues  has  arisen  from  the
transposition of the Postal Directive in 5 Member States. These are mainly in relation to the
independence of the National Regulatory Authorities, the authorisation and licensing system,
the operation of compensation funds and the extension of monopoly.

25

For example infringement proceedings have recently been initiated against France and Belgium for lack
of independent regulation.

15

                                                
3.4.

Transposition of the Postal Directive by the EFTA States

The  Postal  Directive  was  incorporated  into  the  EEA  Agreement  on  25  September  1998
through Decision 91/98 of EEA Joint Committee. The Postal Directive is referred in point 5d
of Annex XI to the EEA Agreement. Following the fulfilment of constitutional requirements
by the EFTA States, the decision entered into force on 1 May 1999, which was also the date
by  which  it  was  to  be  transposed  by  the  EFTA  States.  The  EFTA  States  have  notified  the
transposition  of  the  Postal  Directive.  The  EFTA  Surveillance  Authority  is  in  the  process  of
examining the transposition measures notified.

3.5.

Transposition by the Accession Countries

In general transposition has been initiated, and in some cases is quite advanced. However, as
transposition requires a range of legislative measures, the process is delayed in a number of
countries.

4.

THE APPLICATION AND REGULATORY IMPACT OF THE POSTAL DIRECTIVE

4.1.

The universal service

A  main  objective  of  the  Postal  Directive  was  to  establish  a  Community  universal  service,
defining  minimum  requirements  to  be  met  in  all  Member  States  (e.g.  daily  collection  and
delivery at least 5 days a week for items of correspondence up to 2kg and parcels up to 10kg).

Figure 4: The universal service in Member States

Member

States

Days/

Week

Parcels weight (kg)

Dom.*

ICB*

Uniform

tariff

BE

DK

DE

EL

ES

FR

IR

IT

LU

NL

AT

PT

SF

SE

UK

5

6

6

5

5

6

5

5

5

6

5

5

5

5

6

10

20

20

20

10

20

20

20

10

10

20

20

10

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No***

Yes

Yes

*Domestic, **Incoming cross-border, ***Applied in practice

The universal service in Member States exceeds that required by the Postal Directive

Figure  4  above  shows  that  the  universal  service  exceeds  the  minimum  requirements  of  the
Postal Directive in most Member States. For example, 10 Member States have adopted a 20kg
maximum  limit  for  parcel  delivery  within  the  universal  service  area.  However,  there  are
marginal  exceptions  to  the  universal  service  minimum  requirements  as  set  by  the  Postal
Directive.

16

The  Postal  Directive  requirements  for  a  delivery  every  working  day  are  met  in  all  Member
States and out-performed in 5 Member States, and a collection (clearance) is provided in all
Member States, either at the level required by the Postal Directive or above. There is a single
operator  entrusted  with  the  provision  of  the  universal  service  in  all  Member  States  and  it
should  be  noted  that  the  uniform  tariff  remains  a  cornerstone  of  the  universal  service  in  all
Member States (even if it is not a regulatory requirement in all of them).

USPs use geographically averaged uniform tariffs for universal postal service in all Member
States.  Assessing price evolution over the  period  considered  in  this  report  is  constrained  by
the  diversity  of  the  initial  situations  (e.g.  quality  of  service,  service  features)  which  would
make straight forward comparisons meaningless and possibly misleading. The harmonisation
underway  should  allow  for  more  useful  information  to  become  available  in  the  next
application report.

The  objective  of  establishing  a  minimum  Community  universal  service  has  been  achieved.
The  regulatory  impact  of  the  Postal  Directive  has  been  significant.  The  transposition  of  the
Postal  Directive  has  ensured  that  essential  requirements  of  the  universal  service  are  now
established by legislation in all Member States for the first time. Further these requirements
are now harmonised in line with the Community requirements.

4.2.

The reserved area / special rights

The  Postal  Directive  set  the  maximum  reserved  area  for  Member  States  for  items  of
correspondence at 350g and at 5 times the basic tariff.

All  Member  States  have  now  a  reserved  area  at,  or  below,  the  maximum  required  by  the
Postal Directive and seven Member States have a reserved area below it, either through lower
weight/price  limits  or  further  opening  of  specific  market  segments  (e.g.  direct  mail  and
outgoing cross-border mail).

Figure 5: The reserved area in the Member States

Member

Items of correspondence

Weight limit

Price limit

(*basic tariff)

Specific

Direct Mail

Opening*

Specific

Outgoing Cross Border
Mail

BE

DK

DE

EL

ES

FR

IR

IT

LU

NL

AT

PT

SF

SE

UK

350gr

250gr

200gr

350gr

350gr**

350gr

350gr

350gr

350gr

100gr

350gr

350gr

0gr

0gr

350gr

5

5

5

5

5

5

5

5

5

3

5

5

0

0

1£

* Definition of direct mail varies between Member States

**In Spain, local mail is excluded from the reserved area

50gr

Open envelopes

10.000 items

0gr

0gr

0gr

17

Opening

0gr

0 gr

0gr

0gr

0gr

The objective of harmonising and reducing the areas reserved to the postal monopolies in all
Member States at, or below, a maximum of 350gr/5 times the basic tariff has been achieved.
The regulatory impact has been significant, requiring legislation in most Member States.

4.3.

Authorisation, licensing and compensation funds

The  Postal  Directive  allowed  that  Member  States  could  establish  authorisation  procedures,
which may include individual licences for services and a compensation fund in the universal
service area.

Figure 6 shows that authorisation systems (applying outside the universal service area) are in
place  in  8  Member  States.  Most  of  them  are  just  declaration  systems  (I.e.  no  approval
required). 7 Member States do not have any authorisation system outside the universal service
area  (I.e.  free  market  access).  Provisions  for  licensing  systems  within  the  universal  service
area exist in 9 Member States.

Figure 6: Authorisation and licensing in Member States

Member States

General authorisation
system (outside the
universal service area)

Licensing system
(within the universal
service area)

Provisions for compensation

Fund (*=active)

BE
DK
DE
EL
ES
FR
IR
IT
LU
NL
AT
PT
SF
SE
UK

Yes
Yes
Yes
Yes
Yes
No
No
Yes
Yes
No
No
Yes
No
No
No

Yes
No
Yes
Yes
Yes
No
No
Yes
No
No
No
Yes
Yes
Yes
Yes

Yes
No
Yes
Yes
Yes(*)
No
No
Yes
No
No
No
Yes
No**
No
No

**Fiscal measure

7  Member  States  have  introduced  provisions  for  a  compensation  fund  in  their  national
regulatory framework, of which only one has firm plans to activate such a fund. This suggests
that there is no need for compensation funds at present. So far, the Commission has initiated
infringement  procedures  against  two  Member  States  for  implemented  wrongly  the  Postal
Directive provisions in this area.

The  objective  of  establishing  additional  safeguards  for  the  universal  service  has  been
achieved, as most Member States have implemented at least some of the available measures.
However, current implementation in the Member States suggests that the universal service is
not at risk. The regulatory impact has been significant as most Member States have changed
their legislation.

18

4.4.

Access to universal postal services and networks

The Postal Directive aimed to  ensure  that  all  customers  should  have  a  reasonable  and  good
access  to  the  postal  network  and  to  ensure  that  this  access  should  be  transparent  and  non-
discriminatory.  A  dedicated  study26  concluded  that  the  requirements  of  the  Postal  Directive
are  largely  implemented  by  all  Member  States  into  their  national  legislation,  although  it
emphasised  the  potential  for  discrimination  and  the  need  for  transparency  in  access
arrangements. The Postal Directive entrusts the NRAs to deal with any problems which may
occur in this respect. The objective of ensuring reasonable and good access has been achieved
and  the  regulatory  impact  has  been  significant,  as  most  Member  States  have  changed  their
legislation. (For further details see section 5.4.1).

4.5.

Transparency of accounts and tariffs principles

The Postal Directive aimed to establish transparent and clearly separated  cost  accounting  as
the basis for price regulation and fair competition. Article 14 of the Postal Directive required
USPs  to  consistently  apply  cost  accounting  principles  to  provide  separate  accounts  for
reserved and non-reserved universal services, and for non-universal services.

The Commission, which has conducted a dedicated study27 for this purpose, concludes that all
Member  States  have,  or  will  have  soon,  implemented  the  Postal  Directive  requirements.  14
out  of  the  15  USPs  are  applying  a  cost  accounting  system  which  is  in  line  with  the  main
aspects of Article 14.

The  objective  of  the  Postal  Directive  has  been  largely  achieved  in  Member  States.  The
regulatory  impact  has  been  significant.  Whilst  the  nature  of  the  implementation  differs,  all
Member  States  have  (or  will  soon  have)  implemented  the  requirements  in  accordance  with
Article 14.

4.6.

The quality of service

The Postal Directive aimed for the improvement of the quality of postal services. To achieve
this it set quality of service targets for cross border mail (85% for D+3 and 97% for D+5 for
the fastest standard category of service) and required Member States to define national targets
compatible with the Community cross-border targets.

The Member States have notified the quality of service standards for both cross-border mail
and national mail. The quality of service standards set for cross-border mail comply with the
Postal Directive requirements in all Member States, with the exception of Greece. As far as
national mail is concerned, the target delivery performance for the fastest standard category of
service exceeds 80% D+1 delivery in all but three of the Member States, where the quality of
service targets are defined.

26

27

Study on the conditions governing access to universal postal services and networks – CTcon, 2001
Study on ‘the cost accounting systems of providers of the universal postal services – CTcon, 2001

19

                                                
There has been a steady improvement of the cross-border mail quality of service

The  application  of  the  Postal  Directive  and  the  related  REIMS  agreement  have  led  to
significant improvements in the quality of service for cross-border mail.

The  measurement  of  the  USPs’  quality  of  service  for  single-piece  priority  and  first  class
cross-border  mail,  as  monitored  by  the  UNEX  measurement  programme  performed  on  a
continuous  basis  by  International  Post  Corporation,  shows  that  the  performance  has
consistently improved over the past few years and now exceeds, on average, the Community
targets set by the Postal Directive28.

Figure 7: The quality of service for cross border mail (D+3)

100

90

80

70

60

50

EU target

1994 1995 1996 1997 1998 1999 2000 2001

In  2001,  92.3%  of  priority  cross-border  mail  was  delivered  in  D+3  (speed  indicator)
compared  with  only  69.1%  in  1994.  Moreover,  98,7%  was  delivered  in  D+5  (reliability
indicator), compared with 92.4% in 1994. The average number of days for end-to-end transit
time was 2,3 in 2001.

Figure 8: The quality of service for cross border mail

3,2
3

2,8
2,6

2,4
2,2
2

1994

1995

1996

1997

1998

1999

2000

2001

This  steady  improvement  is  the  result  of  the  targets  set  by  the  Postal  Directive  and  of  the
implementation,  between  all  the  EU  USPs  but  one,  of  the  REIMS  terminal  dues  agreement
(which introduced, as required by the Postal Directive, a direct connection between the level
of  remuneration  to  the  USPs  for  delivering  cross-border  mail,  and  the  achieved  quality  of
service  performance).  It  should  also  be  noted  that  the  average  D+2  delivery  performance
reached  74,3%  in  2001.  This  means  that  there  is  now  more  cross-border  priority  mail
delivered in D+2 than was delivered in D+3 in 1994.

Further,  the  harmonisation  of  the  USPs’  performance  at  cross-border  level  (as  well  as  at
national level), and the reduction in the performance  gap between cross-border and national
transit  times,  has  mitigated  the  “frontier  effect”.  However,  it  should  be  noted  that  further

28

UNEX Results for year 2001, IPC

20

                                                
efforts still need to be made in order to improve the quality of service for a number of cross-
border routes.

The quality of service for domestic mail has also improved

The  quality  of  service  for  domestic  mail  has  improved  in  parallel  to  that  for  cross-border
mail29:

(cid:1)  The  improvement  in  the  cross-border  mail  service  has  improved  the  domestic  quality  of
service as, once in the domestic pipeline, mail is treated the same, whether it is domestic or
foreign mail;

(cid:1)  The  improvement  in  the  domestic  quality  of  service  has  also  been  facilitated  by  the
requirement  of  the  Postal  Directive  for  the  introduction  of  independent  performance
monitoring;

(cid:1)  The  improvement  in  the  domestic  quality  of  service  was  also  facilitated  by  the

implementation of national quality standards, as required by the Postal Directive.

The  improving  quality  of  service  from  postal  operators  has  been  achieved  at  price  levels
which have generally not grown in line with inflation.30 The greatest improvements have been
achieved in those Member States with lower quality of service, allowing a harmonisation of a
satisfactory level of service quality throughout the Community. However, a remaining issue is
the lack of a harmonised method for measuring the quality of service in the Member States,
but  this  is  about  to  be  resolved,  as  the  European  Committee  for  Standardisation  (CEN)  has
adopted a standard for the end-to-end measurement of the quality of service for single-piece
priority and first class mail. It is essential that Member States prepare implementation of the
CEN standards so that all customers can continue enjoying  an  increasing  quality  of  service,
beyond cross-border priority and first class mail services.

The objective of the Postal Directive has been largely achieved and the regulatory impact has
been significant, as most Member States have changed their legislation.

4.7.

Complaints and redress procedures

The  Postal  Directive  required  Member  States  to  ensure  that  there  are  adequate  consumer
protection measures in place.

According to a  recent study31, ‘the implementation of the consumer protection  provisions of
the  Postal  Directive  varies…  However,  it  does  appear  that  consumers32  are  adequately
protected."

The  regulatory  impact  of  this  aspect  of  the  Postal  Directive  has  been  significant,  as  the
legislation in Member States has largely made postal regulators responsible for dealing with

29

30

31

32

This  is  generally  accepted  as  having  occurred  although  the  performance  data  is  not  comparable  as
independent monitoring of service performance was not undertaken in Member States prior to 1992. For
example, the Eurobarometer 53 – Europeans and the services of general interests (INRA, October 2000,
available  at  http://europa.eu.int/comm/dgs/health_consumer/library/surveys/index_en.html)  found  a
high level of satisfaction with domestic postal service quality.
Though there are significant variations across Member States, due in part to different VAT conditions.
Study on the impact of certain aspects of the application of the 97/67/EC – Omega Partners, 2001
In the context of this report, consumers are private users.

21

                                                
complaints. Although in many Member States many of the provisions for customer protection
relate to existing legislation, that is not specific to the postal sector.

4.8.

Technical standards

The  Postal  Directive  aimed  to  improve  the  interconnectivity  between  Community  postal
networks,  in  part,  through  greater  technical  standardisation.  The  European  Committee  for
Standardisation (CEN) is entrusted with drawing up technical standards, which take account
of  the  harmonisation  measures  adopted  at  international  level,  and  particularly  those  of  the
Universal  Postal  Union  (UPU).  The  Postal  Directive  also  required  the  Postal  Directive
Committee to assist the Commission in developing measures on technical standardisation.

The Commission  had  entrusted CEN to develop European standards for the  postal  sector  in
1996 through the Commission mandate M/240, which originally included 15 work items. This
is carried out by a dedicated CEN Technical Committee (CEN/TC331). Standardisation  is a
long  process  but  the  work  of  TC331  is  progressing  well.  Draft  standards  are  available  for
most  work  items  of  the  M/240  mandate,  two  thirds  of  which  have  passed,  or  are  currently
undergoing, the formal adoption process. The first European standard for postal services was
adopted during the year 200033 and three more have been adopted since then34.

Figure 9: Status on current CEN mandate

Standards formally adopted

Draft standards under formal enquiry

Draft standards available

Draft standards under development

Total

4

12

2

7
2535

16%

48%

8%

28%

100%

Most  of  the  work  items  should  result  in  European  standards  by  the  end  of  the  year  2003.
Based on the achievements within the existing mandate, a consultation process was initiated
by  the  CEN/TC331,  supported  by  the  Commission,  in  order  to  come  up  with  proposals  for
future European standardisation activities. A draft CEN mandate has been worked out based
on the CEN/TC331 proposals, which was endorsed by the Postal Directive Committee and the
Committee established by the 98/34/EC Directive36. Based on the Committees’ endorsement,
the  Commission  issued  a  new  CEN  mandate  for  postal  services  (M/312).  Moreover,  a
memorandum of understanding was signed in 2001 between the CEN and the UPU in order to
enhance existing co-operation.

Finally,  the  adoption  of  the  first  official  European  standards  will  involve  a  new  phase  of
the  Member  States.  This
regulatory  enforcement  and 
implementation  phase  is  being  kicked  off  by  the  Commission  in  co-operation  with  the
Member States also involving the Postal Directive Committee. It is now crucial that Member

implementation 

technical 

in 

33

34

35

36

TS13712 – Postal Services – forms – harmonisation of vocabulary.
TS14014  –  Postal  services  -  Hybrid  mail  -  Document  type  definitions  for  customer  to  operator:  a
common  set  of  default  tags,  EN13850  –  Postal  services  –  measurement  of  transit  time  of  end  to  end
services  for  single  piece  priority  and  first  class  mail  and  EN13724  –  Postal  Services  –  Aperture  of
private letter boxes and letter plates – Requirements and test methods.
The  work  items  have  been  modified  by  resolutions  of  the  CEN/TC331  Plenary  meetings  based  on
technical and operational ground (e.g. splitting and merging of work items, new work items).
Directive  98/34/EC  of  the  European  Parliament  and  of  the  Council  of  22  June  1998  laying  down  a
procedure  for  the  provision  of  information  in  the  field  of  technical  standards  and  regulations  OJ  L  204  ,
21.07.1998 P. 0037.

22

                                                
States  prepare  the  implementation  of  the  standards  being  developed  by  the  CEN  for  postal
services.

At  a  regulatory  level  the  impact  of  the  Postal  Directive  has  been  significant,  as  the  official
European standards for postal services will become national standards and as a number of the
ones  rooted  in  the  Postal  Directive  will  become  mandatory  for  the  USPs,  ensuring  some
operational harmonisation.

4.9.

National Regulatory Authorities

The  Postal  Directive  required  Member  States  to  separate  regulatory  functions  from  the
operator.

All Member States have established National Regulatory Authorities (NRAs) legally distinct
from all operators including the USPs.

the  full
However,  notifications  and  supplementary 
independence of the NRA from the USPs is not applied in all Member States, as there is not
always a clear distinction between ownership issues and postal regulatory powers.

investigations  have  shown 

that 

Figure 10: National Regulatory Authorities

BE

DK
DE
EL
ES
FR

IR
IT
LU
NL
AT
PT
SF

SE
UK

NRA
Ministry of Telecommunications and Institut Belge des services postaux et des
télécommunications (IBPT)
Ministry of Transport and Postttilsynet (Inspectorate for Postal Services)
Regulierungsbehörde für Telekommunikation und Post (RegTP)
Ministry of Transport and Communications (EETT)
Ministerio de Fomento
Ministère de l’Economie, des Finances et de l’industrie
Direction Générale de l’industrie, des technologies de l’information et des postes
Office of the Director of Telecommunications Regulations
Ministero delle Communicazioni
Institut Luxembourgeois de Régulation
Ministry of Transport and Public Works & OPTA
Federal Ministry for Transport Innovation and Technology
Autoridade Nacional de Comunicações (ANACOM)
Ministry of Transport and Communication
& Telecommunications Administration Centre
Posts and Telecom Agency (PTS)
Postal Services Commission (Postcomm)

Full Independence
No

Yes
Yes
No
Yes
No

Yes
Yes
Yes
Yes
Yes
Yes
Yes

Yes
Yes

The  impact  at  regulatory  level  has  been  significant.  All  Member  States  have  established
National Regulatory Authorities (NRAs) legally separate from the USPs.

However,  there  are  significant  discrepancies  between  the  competence  and  resources  of  the
NRAs and, in general, there are concerns about the role of the NRAs, and possible regulatory
asymmetry, particularly in the future, as the market is opened to competition.

4.10.

The implementation of the Postal Directive in the EFTA States

The EFTA Surveillance Authority is in the process of  examining the transposition measures
notified. It is the first impression of the Authority’s services that the Postal Directive has been
correctly implemented, but a thorough analysis has yet to been done. The Authority intends to
examine the tables of correspondence from the EFTA States this autumn.

23

5.

THE DEVELOPMENTS IN THE POSTAL SECTOR

5.1.

Economic aspects

Figure 11: Key market indicators

EU postal services revenues : about € 85 Billion or about 1% of EU GDP.
EU postal services employment: USPs’ employment is about 1.2 million jobs. Private express and
courier operators’ employment is estimated at about 440,000 jobs. Over 1 million more jobs are
assessed to be closely related to or dependent on postal services.
USPs’ turnover is split between mail (64%) and Parcels and express (36%).
A growing market-

 +4% revenues, +3% volumes (per annum 1995-2000).
Mail-
Direct Mail revenues +5% revenues (per annum 1995-2000).
Parcels- more than +8% revenue growth (per annum 1995-2000.
Most USPs are now profitable. The largest USPs are Deutsche Post World

A profitable market-
Net (€32.7 billion), French La Poste (€16 billion) and Consignia (€13.2 billion) followed by TPG (€9.9
billion). These represent 78% of all USPs’ revenues.

5.2.

Market growth and segmentation

Continued growth in all market segments

The  postal  services37  market  has  continued  to  be  characterised  by  growth  for  all  market
segments.

Letter  mail  revenues  of  USPs  have  grown  at  4%  on  average  from  1995  until  2000  (3%  for
mail volumes). Within this letter mail segment, direct mail, at 5% per annum, has continued
to  outstrip  traditional  mail  growth.  In  general,  as  illustrated  in  the  Figure  12  below  for  10
Member States, the growth of the letter mail volumes remains largely related with GDP.

Figure 12: GDP per capita (market prices) and mail volume per capita, 1999

s
m
e
t
i

r
e
t
t
e
L

500
450
400
350
300
250
200
150
100
50
0

G
r
e
e
c
e

I
t

a
y

l

S
p
a
n

i

P
o
r
t
u
g
a

l

l

I
r
e
a
n
d

G
e
r
m
a
n
y

i

K
n
g
d
o
m

U
n
i
t
e
d

D
e
n
m
a
r
k

L
u
x
e
m
b
o
u
r
g

l

i

F
n
a
n
d

45000
40000
35000
30000
25000
20000
15000
10000
5000
0

R
U
E

F
r
a
n
c
e

t

N
e
h
e
r
l
a
n
d
s

l

B
e
g
u
m

i

Letter items per capita

GDP per capita (EUR)

Source: Eurostat Yearbook (2001) and UPU (2002). The figures concern domestic mail only and include letters, postcards, printed papers,
small packets, literature for the blind, commercial papers, samples of merchandise, "Phonoost" items, and postal packets.

37

Postal services: services involving the clearance, sorting, transport and delivery of postal items (items
addressed  in  the  final  form  in  which  it  is  to  be  carried  by  the  USP.  In  addition  to  the  items  of
correspondence, , such items also include for instance books, catalogues, newspapers, periodicals and
postal packages containing merchandise with or without commercial value), Art. 1 paragraphs 1 and 7
of the Postal Directive.

24

 
                                                
 
 
 
 
 
 
 
 
 
 
 
 
 
 
However, over recent months, mail volumes have levelled off in some Member States, partly
due to e-substitution, and the UPU forecasts that mail growth, up to 2005, will slow down to
2-3% per year.

In  the  parcels  market,  there  has  been  growth  over  the  last  five  years  of  more  than  8%  per
annum. The total value of the EU courier and express parcels market was ca. €31  billion  in
2000, compared to €21 billion in 1995. This represents an increase of ca. 48%. The business
to business (B2B) part of this market is the most significant, the fastest growing and the most
profitable,  though  the  other  market  segments,  B2C  (business  to  consumer)  and  C2B/C
(consumer to business or consumer) are also significant, and of potential strategic importance,
for example in terms of e-commerce.

5.2.1. Market shares and structures

A variable degree of competition

Figure 13: Degree of competition in various market segments

Market
segments

Domestic
mail

Cross-
border
mail

Parcel
services

Express
services

New
services

Degree of
competition

Emerging

Substantial
(controlled by
USPs)

Intense
(consolidation led
by USPs)

Intense (mergers
and acquisitions
led by USPs)

Emerging

Outline description of competition

Competition remains limited due to remaining large reserved areas in most Member States.

Main competitors are mostly niche market players, competition in direct mail and local markets.

Despite  de jure  reservation  still  in  place in  10 Member  States, competition is  substantial  and  mainly
involving USPs, consolidators and large mail generators.

USPs are consolidating and extending their (very often leading) market positions through alliances and
acquisitions of private operators. This fuels market concentration and has led to pan-European or even
international private/public networks. USPs are also developing their presence in logistics.

This  market  segment,  with  a  substantial  presence  of  private  operators  (integrators)  is  undergoing  a
concentration led by USPs who are developing partnerships and acquisitions.

This new market segment is still characterised by a fragmented competition and a strongly contested
delimitation for value added services.

The USPs, still largely protected by reservation, have maintained their market dominance
in  the  mail  market  and  expanded  it  into  ancillary  markets  such  as  parcels,  express  and
courier services

In the letter mail market, USPs had a market share of ca. 84% in 2000, reflecting the level of
reservation in Member States. Even where the market has been opened, USP dominance has
remained.

Example 1: In Germany, 25% of the total letter mail market is open to competition since 1998. After 3 years, the
1.070 license holders have captured 9% of the open market segment I.e. 2% of the total letter mail market38.

Example 2: In Spain, 62% of the letter mail market was opened to competition several decades ago. About 2.000
competitors of Correos have captured 13% of the open market segment I.e. 8% of the total letter mail market39.

Example 3: In Sweden, 100% of the letter mail market was opened to competition in 1993. After 7 years, about
50 competitors of Sweden Post has only a 5.2 % market share.

In  most  Member  States,  private  operators  can  only  provide  niche  services,  e.g.  document
exchanges or distribution services for letters over 200g, but they sometimes play an important
role in sub-segments.

38

39

Annual report 2001, RegTP
KEP Meldungen, 3/5/2001

25

                                                
Example: CityMail in Sweden has a market share of 4.8% of the Swedish mail market but has reached 25% in
the sub-segment of computer generated business mail40.

In the  courier and  express market the  USPs  have  increased  significantly  their  market  share,
which  now  reaches  ca.  40%.  All  of  the  top  five  operators  are  USPs,  apart  from  the  United
Parcel Service (UPS).

Figure 14: The European courier and express market 2000

E u ro p e a n  c o u r ie r-e x p re s s  &  p a rc e l m a rk e t 2 0 0 0

5 7 %

1 5 %

9 %

8 %

6 %

5 %

D P W N

G ro u p  L a  P o s te

T P G

U P S

C o n s ig n ia

o th e rs

In  the  parcels  market,  the  USPs  have  been  historically  the  dominant  players  for  national
services  to  consumers  and  small  business  customers.  On  the  other  hand,  competition  from
private  firms,  developing  national  and  sometimes  pan-European  networks,  has  been  intense
on the business parcel service. In this context, the USPs have been consolidating their market
positions  over  the  past  few  years  and  have  developed  pan-European  strategies  through
alliances and acquisitions. This has fuelled market concentration and positioned some of the
USPs as European parcel operators.

Example 1: In Germany, the USP consolidated its leadership market position with a 22% market share (more
than the double as the next competitor) in an increasingly concentrated market where 3 other USPs are now in
the top 5 players (La Poste, Consignia and TPG).

Example  2:  In  Sweden,  the  USP  strengthened  its  market  leadership  through  acquisitions  and  alliances  while
foreign USPs became increasingly active (Deutsche Post, Consignia, La Poste, Post Danmark, Norway Post).

Example 3: In Spain, Correos, which had only a 6% market share, aims at becoming a market leader by more
than doubling its market share by 2004 in a market still mostly in the hands of national private operators.

5.2.2.

The development of the USPs

The Universal Service Providers have increasingly become PLCs rather than public bodies

Figure 15: Organisational status of the USPs in 1991 and 2002

Public
organisation

State owned
enterprise

Fully owned
by the state

Fully owned by
the state

State owned
limited
company
Fully owned by
the state (holds
all shares)

AT, DK,
EL, IT, LU
-

BE, DE, EL, FR,
PT, SE, SF, UK
DK, EL, LU, FR,
ES

IR, NL

UK, SE, SF,
BE, AT, IT, PT

Description
of
ownership

1991

2002

State controlled
PLC

Privately
controlled PLC

Privately
owned PLC

State holds
majority of
shares. Privates
hold the minority
-

State holds a
minority of
shares. Privates
hold the majority
-

DE, IR*

NL

Privates
hold all the
share

-

-

Source: Green Paper and Pls Rambøll preliminary findings based on annual reports
*An Post is currently handing over 14.9% of shares to the employees. An Post is not quoted on the stock exchange.

40

Uniform  tariff  and  prices  geared  to  costs,  Report  from  the  National  Post  and  Telecom  Agency,
1 July 2001

26

                                                
Figure 15 above  shows that there  has been a  significant movement towards Private  Limited
Company  Status,  and  it  is  notable  that  Denmark,  Greece  and  Italy  have  recently  indicated
future movement  away from state ownership. This corporatisation  has  had  many  significant
effects, which  are outlined below.  and it is worth  noting  that the  variation  in the adaptation
across  the  Member  States  may  have  created  particular  market  advantages,  (First  Mover
Advantage), for those in the forefront of corporatisation.

The  USPs  have  been  actively  involved  in  the  wave  of  mergers  and  acquisitions  in  the
market, creating European-wide parcels networks

Many  of  the  leading  USPs,  have  bought  private  parcel  operators  to  consolidate  and  expand
market  presence  nationally  and  in  other  Member  States.  Deutsche  Post  (DPWN),  TPG,
French La Poste and Consignia have all built up European-wide parcel delivery capability for
business parcels.

The USPs’ revenues have grown and their composition has become less mail dependent

The total revenues of the USPs have increased by 66% from  1995  to 2000. This significant
increase is a direct result of their corporatisation. There have been higher growth rates in the
parcels, courier and express market segments combined with external growth through mergers
and acquisitions, which have boosted total USPs’ revenues, and the USPs have pursued new
aggressive business strategies, moving into new markets such as logistics. By 2000 logistics
accounted for 10% of USP revenues.

Figure 16: Share of traditional letter mail in total USPs revenues

20%

1992

80%

36%

Letter mail
services

Other
services

64%

2000

As  shown  in  Figure  16,  these  trends  have  led  to  a  substantial  decrease  in  the  proportion  of
revenues that the USPs derive from their traditional mail products.

USPs have increased their management focus on costs and customer needs

The  corporatisation  of  the  USPs  has  naturally  increased  their  management  focus  on  cost
efficiency, profitability and customer needs. Some of the USPs have moved away from fixed
cost  to  variable  cost  structures  using  outsourcing  of  non-core  activities.  They  have  also
focused  on  organisational  improvements  and  increasing  their  orientation  towards  meeting
customer  needs.  A  natural  point  of  attention  has  been  the  counters’  network  and  Figure  17
below illustrates the increasing use of franchises and agencies, which now account on average
for 34% of the total number of postal outlets.

27

Figure  17:  Number  of  postal  outlets  (post  offices  &  agencies)  per  10.000  inhabitants,
CTcon-2001

IR L
P
* S
U K
A
F IN
E
F
I
L
D K 0 %

0 %

0 %

3 %

7 %

1 7 %

9 5 %

5 ,2

3 ,5

7 2 %

1 0 0 %

9 7 %

3 ,1
3 ,1
3 ,1

3 ,0

2 ,8
2 ,8

6 3 %

2 ,5
2 ,5

2 ,1

0 %

D
B
N L
E L

5 8 %

1 ,7

6 7 %

3 4 %

1 ,4
1 ,4

1 ,3

Ø  E U : 2 ,4

S h a re  o f a g e n c ie s

*  S w e d e n  c u rre n tly  re o rg a n is e  its  p o s ta l o u tle t n e tw o rk . P la n n e d  fig u re  a s  a t S e p te m b e r 2 0 0 2 .

Some USPs have also particularly embraced the opportunities offered by automation

Another  essential  way  to  improve  both  cost  efficiency  and  the  quality  of  service  lies  in
automation.  Technology  changes  are  discussed  in  more  detail  later  in  this  Chapter  but  it  is
worth  noting  here  that  several  of  the  USPs  have  particularly  embraced  the  opportunities
offered  by  automation  to  reduce  their  costs  as  illustrated  in  Figure  18  below.  (Though  it  is
noted that the market size and the changes prior to 1995 may need to be taken into account in
comparing between Member States).

Figure 18: Number of sorting machines with automatic address reading

Change from
1995 to 2000
+300%
+90%
0%
Nd.
+85%
Nd.
Nd.
0%
+250%
Nd.
+25%
+771%
+167%
+50%
Nd.

1995

1996

1997

1998

1999

2000

Austria
Belgium
Denmark
Finland
France
Germany
Great Britain
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden

Source: UPU (2002)

3
10
26
11
113
82
Nd.
0
2
nd.
3
14
3
4
29

Nd.
10
26
Nd.
Nd.
285
Nd.
0
3
Nd.
3
Nd.
5
4
45

8
12
26
14
150
Nd.
191
0
3
Nd.
3
113
5
4
Nd.

12
19
26
Nd.
199
Nd.
273
0
7
22
4
126
8
6
Nd.

12
19
26
Nd.
209
Nd.
273
0
7
22
4
122
8
6
Nd.

8
19
26
20
192
Nd.
191
0
5
Nd.
3
113
6
4
Nd.

28

There remains scope for further progress in the productive efficiency of USPs

The increasing use of automation has allowed continued improvement of productivity:

Figure 19: The development in productivity and automation levels 1995 – 2000

y
t
i
v
i
t
c
u
d
o
r
P

l

e
m
u
o
v
l
i
a
m

(

l

)
e
e
y
o
p
m
e
r
e
p

70
65
60
55
50

10

5

0

n
o
i
t
a
m
o
t
u
A

e
r
o
c
s
x
e
d
n

I

)
8
1
-
1
(

1995 1996 1997 1998 1999 2000

Average productivity
Average score on Automation Index

However, Figure 19also shows that not all the available productivity gains have been taken up
by the USPs.

This  is  confirmed  by  Figure  20  below,  which  shows  that  wide  variations  exist  between  the
USPs (from 49 % to 82%) with regard to wages as a proportion of their total costs.

Figure 20: Wages as a proportion of total costs 1995,2000.

Ireland

Greece

Austria

Denmark

Finland

France
Italy41
Luxembourg42

Netherlands

Portugal

Sweden

1995

71,6

84

N/A

63,8

53

68,3

79

73

N/A

72,9

61,1

2000

68,9

82

75,3

62,3

49

64,5

73

70

62

68,7

52,1

Source: PLS RAMBOLL survey (2002)

In  light  of  their  increasing  revenues  and  greater  cost  focus  the  USPs  have  become  more
profitable

41

42

Italy is using 1999 figures
Luxembourg is using 1999 figures

29

 
 
 
 
 
                                                
Figure 21: USPs financial performance

1988
profit/(loss) (million ecu)

2000
profit/(loss) (million euro)

Belgium

Denmark

Germany

Greece

Spain

France

Ireland

Italy
Luxembourg

The Netherlands

Portugal

UK

Austria 

Finland

Sweden

(249)

(35)

(1210)

(23)

(308)

(498)

(1)

(1058)
(3)

47

(36)

160

N.D.

N.D.

N.D.

  100

    66

2038

    13

      2

   N.D.

    44

   (51)
  N.D.

  803

    10

    80

    39

    92

  162

In 1992 most of the USPs were loss making, with 80% of them repeatedly producing losses of
an  average  of  12%  of  their  revenues.  Figure  21  shows  that  by  2000,  most  USPs  were
profitable.

Overall,  the  USPs  are  stronger,  and  are  poised  to  take  advantage  of  new  market
opportunities

Increased commercial freedom has led to more effective cost control and to the development
of pan-European parcels and express networks. This has allowed the USP activity portfolios
to  become  less  dependent  on  letter  mail  services  and  more  balanced,  as  shown  in  the  BCG
analysis43 below.

43

The  BCG  Matrix,  name  after  the  Boston  Consulting  Group,  graphically  portrays  differences  among
activities in terms of relative market share position and industry growth rate. Cash cows are activities
where a company has high market share but the market is mature, slow growing or even declining; in
principle,  these  activities  should  be  “milked”  to  provide  cash  for  investment  in  future  product  areas.
Stars  represents  those  activities  which  the  company  has  a  high  market  share  in  a  growing  market;  in
principle, they should be invested in further to maintain the growth (they can become the cash cows of
tomorrow).  Dilemmas  are  those  activities  in  which  a  company  has  a  low  market  share  but  where  the
market is beginning to take off or has significant growth potential. They need to be watched closely and
adequately managed as they can either become the stars of tomorrow, or turnout as dogs. Dogs absorb
cash  without  any  perspective  justifying  continuation;  in  principle,  they  should  be  dropped  to  release
funds for investment in more attractive opportunities.

30

     
                                                
Figure 22: BCG analysis of USPs

High
growth

Stars

Un-addressed
direct mail

Dilemmas

Addressed
direct mail

Parcels

Express

Cash cows

Dogs

Electronic
services

Logistics

Retail
services

Letters

Low
growth

Dominant
Market position

Marginal
Market position

But there are threats as well as opportunities

Overall,  the  USPs’  situation  improved  as  they  have  converted  former  weaknesses  into
strengths  (e.g.  improved  quality  of  service  greater  customer  focus,  increased  efficiency  and
profitability), adding to their traditional strengths such as branding, ubiquity and economies of
scale.  However,  productivity  remains  variable,  some  of  the  USPs  are  constrained  in  their
ability to manage their costs, some dependence on monopoly profits remains, and there is the
threat of mail substitution.

Figure 23: SWOT analysis (USPs)

OPPORTUNITIES:

(cid:1) Positive growth for letters for most USPs;
(cid:1) Significant growth potential for direct mail and parcels;
(cid:1) Significant growth potential for express;
(cid:1) E-commerce business potential;
(cid:1) Business potential for logistics

THREATS:

(cid:1) Mail substitution threat;
(cid:1) Increasing competition;

STRENGTHS:

WEAKNESSES:

(cid:1)  Branding;
(cid:1)  Ubiquitous delivery network;
(cid:1)  Economies of scale;
(cid:1)  Commercial statutes;
(cid:1)  Commercial orientation;
(cid:1)  Profitability;
(cid:1)  Converting fixed costs into variable costs;
(cid:1)  Strengthened market share for parcels;
(cid:1)  Quality of service;
(cid:1)  Diversified revenues;
(cid:1)  Ahead in the world-wide postal reform;
(cid:1)  Emerging pan-European networks (parcels and express)

(cid:1) Productivity;
(cid:1) Dependence on monopoly profits;
(cid:1) Flexibility on employment
(cid:1) State administrations
(cid:1) Limited commercial orientation
(cid:1) Non profitable organisations;
(cid:1) Lack of network flexibility
(cid:1) Decreasing market share for parcels;
(cid:1) Quality of service;
(cid:1) Revenues depending on monopoly;
(cid:1) Decreasing mail volumes from consumers;
(cid:1) Limited flexibility to manage the USOs;
(cid:1) No pan-European networks (letters)

NOTE:  Other  postal  operators  enjoy  similar  opportunities  and  are  confronted  with  they  same  threats.  However,  the  considerable
strengthening of the USPs will most likely make their business entry and development more challenging.

31

5.2.3.

Links with world-wide trends

Beyond  Europe,  the  world-wide  postal  market  is  also  rapidly  changing  under  the  impact  of
globalisation,  increasing  competition,  rapid  technological  change  and  changing  customer
needs.  Postal  reform  is  a  world-wide  trend  and  is  supported  by  international  organisations
such  as  the  UPU  and  the  World  Bank.  The  UPU  Congress44  has  called  for  governments,
postal  administrations  and  the  Union's  bodies  to  transform  the  postal  service  from  a
government department into a business enterprise, endowed with management autonomy and
financial  self-sufficiency.  Postal  reform  is  also  part  of  the  globalisation  of  trade.  WTO
agreements  are  in  place,  and  in  some  administrations,  negotiations  are  underway,  or
imminent, on opening access to the postal market and the globalisation of services is moving
with the GATS.

In this context the development of the market has put Europe at the forefront of world-wide
postal services reform. “The most notable development of the past few years [regarding postal
operators]  has  been  the  transformation  of  four  former  national  postal  administrations  into
postal,  express  and  logistics  enterprises.  They  are  Deutsche  Post,  TPG,  Consignia  and  La
Poste  (F)  and  are  sometimes  referred  as  “superposts”.  They  are  now  taking  their  place
alongside major private sector operators like UPS and FedEx”45.

5.2.4.

The blurring of traditional sector boundaries

The  market  development  is  changing  significantly  the  configuration  of  the  postal  sector,
blurring  former  boundaries  such  as  the  traditional  border  separating  public  from  private
operators due to:
(cid:1)  The corporatisation (and sometimes privatisation) of the USPs;
(cid:1)  The  significant  change  in  the  USPs  positioning  (from  administrations  operating  a

commodity service to business organisations providing delivery services);

(cid:1)  The USPs’ moves beyond traditional mail services into e.g. courier and express  services,

transportation, logistics, retail, e-commerce;

(cid:1)  The acquisitions and alliances involving all market players.
The increasing use by USPs of outsourcing  concerning components  of the traditional  postal
value chain is also largely blurring traditional limits once considered immutable.

5.2.5.

The market development has clear benefits but also involves costs and risks

There are clear benefits connected with the market developments: increased quality of service,
increased  efficiency,  greater  profitability  and  reduced  dependence  on  mail  revenues.  As  a
result, the medium and long term business prospects of the USPs, which are able to manage
their businesses as commercial organisations, are continuously improving.

44

45

Postal Strategy recommendations from the Seoul UPU Congress, 1994
Environmental  Developments  and  Postal  Responses  at  2001,  a  discussion  paper,  draft  5  April  2001,
International Bureau of UPU, Bern.

32

                                                
However,  there  are  also  downsides  and  risks  involved  with  the  current  trends.  The
increasingly  commercial  attitude  of  the  USPs  (e.g.  individual  contracts  with  large  mailers)
involves risks of reduced transparency and potential discrimination. Further, the strengthened
USPs’  dominance  in  the  mail  market  confines  other  operators  to  niche  markets,  and  may
make it difficult for new entrants to take advantage of future market opening.

Moreover, the recent USPs’ development creates the need for close monitoring, as the “cash
cows” of the USPs’ product portfolio enjoy dominant positions in markets still protected by
large  reserved  areas.  In  this  context,  adequate  regulatory  frameworks  and  regulatory
mechanisms (e.g. price control) are becoming essential, even if they  will most likely not, in
themselves be sufficient. The continuing cohabitation of sometimes large reserved areas with
commercially-oriented  USPs’  moving  into  ancillary  markets,  raises  clear  concerns  of
potential  abuses  of  monopoly,  which  have  already  materialised  in  a  number  of  competition
cases as shown in Figure 24 and concerns over unwarranted state aid in favour of the USPs.

Figure 24: Recent competition cases46

Types

Antitrust

Recent case

DPAG I

Abuse  of  dominant  position  by  granting  fidelity  rebates  and  engaging
predatory pricing for business parcel services

Comments

DPAG II

(ECJ)  Abuse  of  dominant  position  in  the  German  letter  mail  market  by
intercepting, surcharging and delaying incoming international mail

Hays / La Poste
(B)

Abuse  of  dominant  position  by  making  a  preferential  tariff  in  the  letter  mail
services subject to a supplementary contract for a new B2B service

Hybrid Mail case

Extension  of  monopoly  by  reserving  added  value  services  different  from
traditional delivery services

SNELPD

Lack of independent national regulation on access conditions

UPS vs.
DPAG/DHL

(ECJ) Court of first instance  confirmed  Commission  clearance  of  acquisition
of  DHL  by  DPAG.  Reserved  services  do  not  prevent  incumbents  to  make  a
profit  or  acquisitions.  However,  funds  used  for  this  purpose  must  not  derive
from excessive pricing or other unfair practises in the reserved area

5.3.

Technological aspects

Technology is increasingly important to the postal sector

Technological  change  offers  customers  greater  choice  both  within,  and  outside,  the  postal
services market, and it creates opportunities for postal operators for greater productivity and
new revenues. The ability of postal operators to respond to technological change is becoming
critical to their success.

46

The references for these cases are as follows:
DPAG I;C147/97 and C148/97
DPAG II; COMP/36.915
Hays/la Poste (B); COMP/37.859
Hybrid Mail case; COMP/37.721
SNELPD: COMP/37.133
UPS vs. DPAG (DHL); COMP 35.141

33

                                                
5.3.1. Mail substitution

There is now, increasingly,  greater opportunity for customers to choose alternatives to mail.
This is due to the increasing variety of cost efficient communication media available, and also
to the new communications infrastructure such as increasing PC and Internet penetration.

As a result, the market share of traditional mail within
the overall communication market is continuing to
shrink  (from  20%  in  1995  to  15%  in  200547).
However,  all  market  segments  of  the  mail  market
are not equally exposed to substitution: if financial
statements  are  vulnerable,  other  segments  (e.g.
direct mail) still  appear to have significant  growth
potential in the medium term.

100%
80%
60%

40%
20%
0%

Figure  25  The  communications
market

e-m ail

Fax

Telephone

Hybrid m ail

Physical m ail

UPU, POST 2005, 1997

1995

2005

Nevertheless  despite  some  tangible  evidence  of
mail  substitution  taking  place,  the  impact  on
traditional  mail  volumes  overall  has  been  limited.  Up  to  now,  the  intrinsic  growth  of
traditional  mail  volumes  resulting  from  GDP  increases,  combined  with  the  new  volumes
generated by services such as direct mail, has ensured positive growth rates for mail volumes
in  most  Member  States.  Combined  with  the  reduced  dependence  of  their  revenues  on
traditional  letter  mail,  this  underlying  trend  for  growth  may  make  USPs  less  vulnerable  to
substitution.

However,  some  of  the  USPs  have  started  experiencing  negative  growth  rates  in  some  mail
market  segments,  which  they  attribute  to  mail  substitution  (e.g.  USA,  Sweden),  and  the
impact of mail substitution on mail volumes in the future remains unpredictable at this stage.

5.3.2.

Process automation for postal items and operations

Operators are incentivised to use new technology for increased productivity

A USP producing a 5% net margin would double its profit by slashing 5% of its costs whilst
achieving the same result by increasing its business would require doubling its revenues. This
is  quite  an  incentive  for  greater  productivity  and  explains  the  significant  ongoing
developments.

Letter mail process automation

During the 1980s, all USPs aimed at automating the sorting centres and automated sorting of
standard  letters  (except  the  manuscript  addressed  ones)  was  largely  effective  in  all  USPs  a
decade ago.

The main efforts since then have been aimed at:

-  Increasing  the  proportion  of  manuscript  addressed  mail  and  ‘flats’  that  can  be  processed
automatically; (e.g. by improvement of OCR48 capabilities or video coding technology);

- Extending the automated sorting to automate sorting in the delivery centres, where there are
significant costs, (sorting down to delivery rounds and even sequencing the delivery rounds).

47

48

UPU, “Post 2005”, 1996.
Optical Character Recognition

34

                                                
Today, it is estimated that more than 90% of the USPs’ letter mail items involve automated
processing, of which approximately 20% are sequenced within the delivery rounds. Another
current area of development is ID-tagging technology, which allows all letter mail items to be
individually  identified  i.e.  ‘track  and  traced’  along  the  whole  process.  By  the  end  of  the
decade,  close  to  all  the  USPs’  letter  mail  could  be  sorted  automatically  down  to  delivery
round sequences and ID-Tagged.

Parcel mail process automation

The technology to automate the sorting of small/medium size parcels is available. However,
due  to  the  scale  of  the  required  investment,  implementation  has  concentrated  on  the  points
where  large  volumes  are  processed.  It  can  be  estimated  that  about  half  of  the  USPs’
small/medium size parcels are processed automatically. The scale effect in automation may be
fuelling  the  ongoing  concentration  trend.  Bulkier/heavier  parcels  are  still  mostly  manually
processed.  All  the  USPs  are  now  working  on  implementing  track/trace  features  for  their
parcel services through bar coding and laser flashing.

Other process automation

Other  applications  include  management  software  solutions  and  counter  automation.  USPs
have implemented counter automation and are replacing internal IT systems with off-the-shelf
software.

Examples:  7  USPs  in  the  EU  implemented  an  off-the-shelf  solution  for  counter  automation.  An  increasing
number  of  USPs  are  implementing  standard  Enterprise  Resource  Planning  systems  (ERPs)  for  management
purposes e.g. accounting, finance.

Using  such  standard  open  systems  not  only  decreases  risks  and  costs,  but  also  plays  an
important role in the context of consolidating operations from various companies within the
same USP’s Group.

5.3.3. Other technology developments

e-commerce and supply chain:

The emergence of e-commerce is creating business opportunities for postal operators:
(cid:1)  Transportation and logistics services: The development of e-commerce is boosting remote

selling;

(cid:1)  Building  Customer  relations:  The  USPs  can  add  value  to  services  (track/trace),  or  re-
engineer  traditional  processes  to  improve  efficiency,  costs  and  convenience,  (e.g.  digital
postage);

(cid:1)  New  business  opportunities  arising  from  new  technology  based  services:  This  involves
using  the  traditional  positioning  of  postal  operators  for  the  new  economy  e.g.  as  trusted
third parties;

(cid:1)  Opportunities to re-engineer back office processes: Here the USPs can enhance efficiency
and  productivity  (e.g.  implementation  of  e-commerce  technology  into  subcontracting
arrangements).

35

5.4.

Social and employment aspects

5.4.1.

Access to the universal service

An extensive access infrastructure

The conditions of access to universal postal services and networks were the subject of a recent
study by CTcon for the Commission. The study found that there is possibly an over-provision
in European postal access infrastructure. Postal items are cleared daily at more than 750.000
access points, and there are 165 million delivery points served everyday, throughout the EU.
Ctcon noted that Europe has 40% more access points per inhabitant than the USA and 5 times
more access points per sq. Km. However, this usage of the postal network reveals a potential
access paradigm:

- Most access points are tailored for consumers with extensive geographical coverage;

-  Most  volumes  are  generated  by  geographically  concentrated  business  customers  (0,1%  of
the access points are clearing 68% of the postal items).

This  suggests  an  emerging  difficulty  for  the  USPs,  which  have  to  fulfil  universal  service
obligations and to serve adequately their predominately urban business customers.

An adapting access infrastructure

Access  infrastructures  are  being  adapted  by  USPs  to  meet  changing  customer  needs  and  to
improve efficiency. (As previously outlined in section 4.4 - 4.4.
Access  to  universal  postal
services and networks). However, the USPs remain constrained in their ability to adapt, (e.g.
rural  post  offices  are  often  regarded  as  politically  sensitive),  and  the  level  of  flexibility
allowed to the USPs to manage their access infrastructure is clearly important if they are to
cope with the access paradigm in the long run.

5.4.2.

Employment aspects within the postal sector

Employment in the USPs is about 1.2m49. Other operators (mainly courier and express service
providers)  employ  nearly  than  0,5m  people.  However,  as  a  result  of  outsourcing  and
franchising  there  are  now  significant  areas  of  direct  postal  employment  outside  traditional
sector boundaries.

Preliminary figures from the forthcoming employment study suggest that direct employment
in postal services is at least 1.57 million and indirect employment50 is estimated to be at least
1.77  million.  Further  the  study  estimates  that  the  induced  effect  of  postal  employment  on
wider employment is about 1.98 million. This suggest that over 5 million jobs in the EU are
dependent on, closely related to, or induced by the postal sector.

e.g.  the  European  mail  ordering  and  distance  selling  industry  represents  more  than  150.000  permanent  jobs
which are tightly connected to the postal sector51.

49

50

51

According to the UPU as Full Time Equivalents.
Indirect employment includes employment in areas dependent on or closely related to postal services.
Source: European Mail Order and Distance Selling Trade Association (EMOTA)

36

                                                
The  evolution  of  postal  employment  is  tightly  connected  to  the  market  and  technological
developments outlined in sections 5.1 - 5.1. Economic aspects and 5.3 - 5.3.

Technological aspects.

A structural employment erosion

The evolution of the total number of  USPs employees  is the  result  of  the  interplay between
positive drivers (e.g. development of new services, mail volumes growth) and with negative
drivers (e.g. automation).

Figure  26  overleaf  shows  the  evolution  of  USPs  employment.52  The  decrease  in  the  total
numbers  suggests  that  the  combination  of  the  employment  drivers  is  resulting  into  an
employment erosion overall for the USPs, but also that there is significant variance between
the  USPs.  The  main  underlying  reasons  for  the  total  USPs’  employment  evolution  are
outlined below Figure 26.

Figure 26: The evolution of employment in USPs

Austria
Belgium
Denmark*
Finland
France
Germany
Great Britain
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden**
Total in EU

1995

1996

1997

1998

1999

2000

34003
44462
25030
24600
289250
308459
208810
11572
8062
190404
1697
55263
15527
65140
55722
1338001

34599
44292
25478
23221
286793
292027
209079
10834
8063
181379
1698
54427
16041
64855
53178
1305964

37562
43399
25981
24184
286914
269530
213259
11643
9309
181262
1696
57260
15962
65127
51804
1294892

38271
41637
25485
26448
287348
263342
212500
11135
8647
178649
1696
58209
16348
64896
51793
1286404

33536
41182
25700
25347
287479
304265
213414
10931
8952
173722
1707
60285
16861
64515
50174
1318070

33421
39933
24867
24763
291812
319988
210267
11438
9391
166102
1714
63255
17160
58817
49986
1322914

% change
1995-2000
-1,71
-10,19
-0,65
0,66
0,89
3,74
0,70
-1,16
16,48
-12,76
1,00
14,46
10,52
-9,71
-10,29
-1,13

UPU  (2002).  *Time  series  data  in  full-time  equivalents.  **Time  series  data  based  on  annual  reports  (inserted  by  PLS
RAMBØLL).

Note: the paragraphs below only outline the main underlying reasons for the total USPs’ employment evolution,
as  more  detailed  data  is  currently  being  collected  within  the  ongoing  study  of  the  employment  trends  in  the
European postal sector by Pls Rambøll for the Commission.

The demand for postal labour

Increased demand for postal services is the main positive employment driver (estimated at 2-3
% a year). Whilst mergers and acquisitions bring new employment to the sector, this effect is
rather artificial, as the resulting increase in consolidated employment does not reflect genuine
employment  creation.  Market  opening  has  also  created  jobs.  For  example,  the  German
National  Regulatory  Authority  estimates  that  more  than  16.000  full-time  or  part-time  jobs
were  created  by  private  operators  following  partial  opening  and  employment  has  also  been
created by the development of new services.

52

These figures are slightly different to Pls -Ramboll's as Pls have used Full Time Equivalents rather than
headcount data.

37

                                                
Increased automation

The  increasing  potential  of  automation,  (see  Section  5.3),  has  allowed  postal  operators  to
improve their productivity and efficiency by meeting the demand for greater postal volumes,
whilst  decreasing  the  size  of  the  workforce.  There  is,  though,  evidence  of  considerable
variance between Member States in the take-up of the available efficiency gains.

Business development strategies

New corporate structures have led to the implementation of new and diverse USPs’ strategies.
The varied nature and level of ambition of these new strategies explain, to some  extent,  the
differences  between  the  USPs'  employment  evolution  (for  instance,  the  most  aggressively
cost-cutting,  automating  and  outsourcing  USPs  probably  reduced  employment  the  most).
With regard to the future evolution of the USPs’ employment, it can be reasonably assumed
that business development strategies will play a major role and that, therefore, discrepancies
among USPs’ in terms of evolution will further increase. However, Pls Ramboll forecast that
overall postal employment will continue to grow.

6.

CONCLUSIONS AND RECOMMENDATIONS

6.1.

The long transposition process almost completed

All  Member  States  have  modified  their  primary  legislation,  and  secondary  legislation  and
detailed regulations are well under way for completion. Overall, apart from some conformity
issues identified in some Member States, the regulatory framework set by the Postal Directive
can be considered as implemented in the Member States.

6.2.

Practical application and impact of the Postal Directive

Member States have largely adapted the Community framework to national requirements and
this has had a number of positive impacts.

(cid:1)  A significant regulatory impact: The Postal Directive had a significant impact, as Member States have had

to modify their legislation.

(cid:1)  Enhanced  Community  harmonisation:  The  Postal  Directive  has  achieved  a  limited  Community

harmonisation. e.g. in terms of reservation.

(cid:1)  Improved quality of service:  The Postal  Directive  contributed  to  improving  the  quality  of  service  both  for
domestic  and  cross-border  mail,  this  has  harmonised  quality  of  service  levels  throughout  the  Community.
Moreover,  The  Postal  Directive  supported  the  ongoing  development  of  European  standards  for  postal
services, including a range of quality of service measurement methods.

(cid:1)  Increased the pace of postal reform: The Postal Directive increased governmental focus on the postal sector

and the pace of postal reform.

(cid:1)  Provided  incentives  for  greater  efficiency  and  customer  focus  by  postal  operators:  The  Postal  Directive

gave an incentive for new USP business strategies and greater cost efficiency.

(cid:1)  Allowed for a move towards the internal market in postal services: The limited market opening required by

the Postal Directive led to a fuller market opening in some Member States.

(cid:1)  Established Independent National Regulators in Member States : The establishment of independent NRAs
in Member States has created a new level of regulatory rigour to emerge beneath the Community regulatory
framework.

38

However,  there  are  some  areas  where  the  Postal  Directive  had  little  or  no  impact.  For
example: the Postal Directive  implementation  by  Member States has not  so much  increased
the  universal  service  obligations  as  entrenched  existing  obligations,  and  the  existing
regulatory framework and provisions for consumer protection were often in accordance with
the principles of the Postal Directive.

Further, the Postal Directive may not have moved as quickly towards the internal market as
could  have  been  safely  achieved  and  this  may  have  had  a  number  of  negative  impacts.  For
example, the Postal Directive did not foster efficiency improvements e.g. by benchmarking or
competitive  tendering  and  the  EU  is  still  relatively  inefficient  compared  to  the  USA.  The
Postal Directive only introduced limited competition and it did not prevent competition issues
from developing.

6.3.

The market impact of the Postal Directive

The Postal Directive has clearly been important to the development of the market.

Prior  to  1992  the  postal  sector  was  lagging  behind  other  utility,  communications  and
distributions sectors, and it was clear that it would have to enter a process of modernisation to
safeguard  the  productive  efficiency  of  the  EU,  and  to  maintain  the  relevance  of  universal
service provision. This modernisation would inevitably have to combine market change with
regulatory  change.  A  regulatory  framework  that  did  not  allow  appropriate  market
development  would  not  only  distort  the  sector,  and  provide  perverse  incentives  for  players,
but  it  would  also  spread  this  distortion  to  other  sectors.  In  this  context  the  Postal  Directive
was  indispensable  to  unlock  the  barriers  to  market  development.  Its  achievements,  a  basic
harmonisation of the Community regulatory  framework  and a limited  market opening, were
essential  pre-requisites  to  existing  and  future  market  developments.  Further,  the  clear
direction set by the  Postal Directive  towards the full  accomplishment of  the internal market
provided the signal for organisational change in the postal sector.

Finally,  the  application  of  the  Postal  Directive  has  demonstrated  that  there  was  no  tension
between  the  level  of  market  opening  achieved  and  the  safeguarding  of  universal  service
provision.  Several Member States have  gone  further  in opening up their  markets,  and, from
this,  it  could  be  argued  that  the  Postal  Directive  could  safely  have  gone  further  towards
accomplishment of the internal market.

6.4.

Recommendations

Given  the  current  situation-  the  safeguarding  of  the  provision  of  a  universal  service  across
Member States in the short term, and the new measures in the new Postal Directive 2002/39
extending  this  safeguarding-  there  are  no  recommendations  for  a  further  update  of  the
Community regulatory framework at this stage.

However, this is not to say that the Postal Directive has set in place a regulatory framework
fully in tune with the needs of the developing market. Distortions remain, where reservation
and dominant position is abused. Instances which have led to a number of competition cases.
Further, there remain issues of regulatory independence in some Member States, and it could
be  argued  that  a  varied  national  regulation  has  not  encouraged  all  the  USPs  to  become
efficient. In any case, it is clear that efficiency in postal service provision remains variable.

39

The  Commission  calls  for  the  Member  States  to  “ensure  effective  independence,  adequate
capacity and effectiveness of the (competition and) regulatory  authorities”53, in  particular in
the postal sector.

Finally,  the  Commission  calls  for  the  Member  States  to  prepare  the  implementation  of  the
European standards currently being developed by the CEN, particularly with regard to quality
of service measurement methods, which will help to ensure that quality of service monitoring
and performance are further improved for the benefit of all customers.

53

See  the  Commission  recommendation  for  the  2002  broad  guidelines  of  the  Economic  Policies  of  the
Member States and the Community. ECFIN/210/02

40

                                                
Index of abbreviations

ANNEX

AT
B2B
B2C
BE
C2B
C2C
ca.
CEN
Commission
DE
DK
D+n
EEA
ECJ
Ecu
EFTA
EL
EN
ES
EU
FR
GATS
GDP
IR
IT
IT
LU
NL
NRAs
OCR
O.J.
p.a.
PLC
Postal Directive
PT
REIMS
SE
SF
Sq. Km
TC
TS
UK
UNEX
UPU
USOs
USA
USPs
WTO

Austria
Business to Business
Business to Consumers
Belgium
Consumers to Business
Consumers to consumers
Circa
European Committee for Standardisation
European Commission
Germany
Denmark
Delivery n days after posting
European Economic Area
European Court of Justice
European Currency Unit
European Free Trade Area
Greece
Official European Standard
Spain
European Union
France
General Agreement on Trade in Services
Gross Domestic Product
Ireland
Italy
Information Technology
Luxembourg
The Netherlands
National Regulatory Authorities
Optical Character Recognition
Official Journal (of the European Communities
Per annum
Public Liability Company
97/67/EC Directive
Portugal
Terminal dues agreement between a number of European USPs
Sweden
Finland
Square kilometre
Technical Committee
Technical Specification
United Kingdom
Unipost External Monitoring System
Universal Postal Union
Universal Service Obligations
United States of America
Universal Service Providers
World Trade Organisation

41

FINANCIAL STATEMENT

1.

2.

3.

4.

5.

5.0

5.1

DATE:
APPROPRIATIONS:
N/A

BUDGET HEADING:
B5-3001
TITLE:
Report from the Commission to the European Parliament and the Council on the application of the Postal
Directive (97/67/EC Directive)
LEGAL BASIS:
Art. 23 of the 97/67/EC Directive
AIMS:
To keep the European Parliament and the Council informed on the development of the internal market
for postal services
FINANCIAL IMPLICATIONS
Not Applicable (see observations below)

12 MONTH
PERIOD

CURRENT
FINANCIAL
YEAR
(EUR million)

FOLLOWING
FINANCIAL
YEAR
(EUR million)

CHARGED TO THE EC BUDGET

NATIONAL AUTHORITIES
OTHER

EXPENDITURE
-
(REFUNDS/INTERVENTIONS)
-
-
REVENUE
-
(LEVIES/CUSTOMS DUTIES)
NATIONAL
-

OWN RESOURCES OF THE EC

(EUR million)
N/A

N/A

N/A

N/A

N/A

N/A

5.0.1 ESTIMATED EXPENDITURE
5.1.1 ESTIMATED REVENUE
5.2 METHOD OF CALCULATION:

[n+2]
N/A
N/A

[n+3]
N/A
N/A

[n+4]
N/A
N/A

6.0

6.1

Not Applicable
CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN THE
RELEVANT CHAPTER OF THE CURRENT BUDGET?
CAN THE PROJECT BE FINANCED BY TRANSFER BETWEEN CHAPTERS OF
THE CURRENT BUDGET?

[n+5]
N/A
N/A

N/A

N/A

6.2 WILL A SUPPLEMENTARY BUDGET BE NECESSARY?
6.3 WILL APPROPRIATIONS NEED TO BE ENTERED IN FUTURE BUDGETS?
OBSERVATIONS:
This report, requested by Art. 23 of the 97/67/EC Directive, is reviewing the application of this Directive.
Based  on  the  information  collected,  the  report  makes  no  recommendations  for  any  further  update  of  the
Community  regulatory  framework  at  this  stage  or  any  other  action  involving  the  Commission.  The  only
recommendations made in the report are intended for the Member States.
Therefore, the report has no financial implications for the Commission

N/A
N/A

42