Report from the Commission to the Council and the European Parliament on the application of the Postal Directive (Directive 97/67/EC as amended by Directive 2002/39/EC) {SEC(2005) 388}
Date: 2005-03-23
Institutions: European Commission
Subjects: competition, postal service, provision of services, report, universal service

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.03.2005 
COM(2005) 102 final 

REPORT FROM THE COMMISSION 
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT 

on the application of the Postal Directive  
(Directive 97/67/EC as amended by Directive 2002/39/EC) 

{SEC(2005) 388} 

EN 

   EN 

 
 
 
  
 
 
 
 
Report from the Commission to the Council and the European Parliament 
on the application of the Postal Directive  

(Directive 97/67/EC as amended by Directive 2002/39/EC) 

1. 

THE IMPORTANCE OF POSTAL SERVICES AND THEIR CHANGING ROLE  

In  2002,  EU  postal  revenues  amounted  to  about  €88  billion  or  roughly  0.9%  of  EU  GDP. 
Over 5 million jobs are estimated to be directly dependent on or closely related to the postal 
sector.  Direct  employment  is  still  mainly  in  Universal  Service  Providers  (USPs)  and, 
according to a recent study by Wik-Consult1, amounted to about 1.85 millions in 2002. 

Postal  services  provide  vital  infrastructural  support  for  the  commercial,  governmental, 
intellectual, and social activities in the European Union. In addition, many of the USPs have 
an important role in the provision of financial services (post banks). 

Postal services are evolving rapidly. This is due to internal pressures within the sector and to 
the  influence  of  the  closely  related  communications,  advertising,  and  transportation  sectors, 
each of which is open to competition and undergoing rapid evolution. 

Postal services are essential for communication and trade and as such have an important role 
to play in the economic and social cohesion of the EU. They 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 on the postal 
infrastructure.  The  key  role  played  by  the  postal  sector  places  it  at  the  heart  of  the  Lisbon 
Agenda2. 

The  recent  Kok  Report3  emphasises  that  there  is  still  enormous  scope  for  further  market 
integration  and  greater  economic  gains  for  both  consumers  and  enterprises  in  the  Internal 
Market.  The  Commission  communication  on  the  Lisbon  Midterm  Review4  recognizes  that 
public services have a central role in an effective and dynamic single market. Providing high 
quality services of general interest to all citizens at affordable prices is also necessary. Postal 
services  are  a  good  example  of  where  such  gains  can  be  made.  In  close  cooperation  with 
Member  States,  the  Commission  will  look  at  effective  and  innovative  means  of  removing 
barriers to competition in the postal sector so as to boost innovation and efficiency which in 
turn should benefit consumers, while preserving the universal service. 

These efforts are all the more important as the image of the traditional postal services is now 
industrial 
changing.  Postal  services  providers  have  evolved 
organisations,  benefiting  from  technology  developments  that  create  new  opportunities  for 
more innovative, tailored, value added services in the interest of both commercial customers 
and end consumers.  

into  complex  modern 

1 
2 
3 
4 

“The Study of the Main Developments in the European Postal Sector” by WIK-Consult, July 2004. 
Lisbon European Council, Presidency Conclusions, March 2000. 
Facing the challenge, Report from the High Level Group chaired by Wim Kok, November 2004. 
COM (2005) 24 – Working Together for Growth and Jobs – A new Start for the Lisbon Strategy, p17. 

EN 

2 

   EN 

 
                                                 
One  example  of  this  change  is  the  key  role  played  by  postal  operators  in  the  fast  growing 
home  shopping  business.  Post,  together  with  other  communication  media,  is  now  a  vital 
player  when  it  comes  to  channelling  information  and  goods  to  the  consumer.  The  image  of 
mail as a dying media is no longer a valid one in this new environment where market forces 
and regulatory incentives create the conditions for developing the value and future prospects 
of the mail media. 

2. 

THE PURPOSE OF THIS REPORT 

The  Community  framework  for  EU  postal  services  is  set  out  by  Directive  97/67/EC  as 
amended by Directive 2002/39/EC (hereafter referred as “the Postal Directive”)5. Article 23 
of  Directive  2002/39  requires  the  Commission  to  report  on  the  application  of  the  Postal 
Directive to the European Parliament and Council “every two years”. It also requires that this 
report should include “appropriate information” on market developments including technical, 
social, employment and quality of service aspects. 

This  Report  is  a  follow-up  to  the  first  Commission  Report  on  the  Application  of  Postal 
Directive 97/67 which was submitted at the end of 20026. The Report presents the summary 
of the main conclusions drawn from the analysis provided in the Commission Staff Working 
Paper  [SEC(2005)  388]  which  assesses  in  details  the  overall  transposition  of  the  Postal 
Directive  in  Member  States,  the  application  of  key  elements  of  the  Directive  as  well  as 
general  market  trends  (including  economic,  technical,  social,  employment  and  quality  of 
services aspects). In addition, it provides an outline of the perspective and recommendations 
for future policy development. 

An  important  role  of  this  Report  is  also  to  assess  the  achievements  of  the  objectives  of  the 
Directive,  and,  as  such,  it  serves  as  a  general  evaluation  of  the  Directive.  The  regular 
evaluation of activities and results in achieving policy objectives is an essential element of the 
new policy-driven decision –taking mechanism. 

The Report confirms that, in sum, the reform of the postal sector in the EU is well on track. 
Though  not  yet  completed,  it  has  already  resulted  in  a  number  of  significant  improvements 
notably  as  regards  quality  of  services,  improved  business  efficiency,  and  the  separation  of 
regulators from operators. The role of postal services remains vital in delivering the benefits 
of the Internal Market to citizens, consumers and business. 

The Report is being presented against the background of continuing dynamic regulatory and 
market development in the postal sector and the timetable set out in the Postal Directive for 
the Commission to make a proposal by the end of 2006, “confirming if appropriate the date of 
2009 for the full accomplishment of the postal internal market or determining any other step”. 

5 

6 

Directive 97/67/EC of the European Parliament and 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;  Directive  2002/39/EC  of  the  European  Parliament  and  of  the  Council  of  10  June 
2002  amending  Directive  97/67/EC  with  regard  to  the  further  opening  to  competition  of  Community 
postal services. 
Report on the application of the Postal Directive (97/67/ EC), COM (2002) 632 final of 25.11.2002. 

EN 

3 

   EN 

 
                                                 
3. 

THE APPLICATION OF THE POSTAL DIRECTIVE 

The  transposition  of  the  Community  framework  is  now  largely  complete  although  there  are 
still some problems which affect in particular a number of the new Member States.  

However,  transposition  is  merely  the  first  step  in  the  process  of  full  implementation  of  the 
Community  framework.  The  practical  implementation  of  some  of  the  more  complex 
regulatory  requirements  of  the  Postal  Directive  (tariff  control,  transparency  of  accounts, 
authorisation and licensing) still requires further efforts and attention from Member States and 
the Commission. 

There  is  in  particular  a  clear  need  for  Member  States,  and  more  specifically  National 
Regulatory Authorities (hereafter referred to as NRAs), to become more active in reviewing 
the  separation  of  accounts,  cost  allocation,  and  monitoring  prices  of  universal  services  by 
conducting  investigations  into  the  major  areas  of  tariff  policy,  including  special  tariffs, 
terminal dues, and cross subsidies. 

In addition, there have been significant regulatory developments in the EU, which go beyond 
the transposition and application of the EU regulatory framework, with some NRAs taking the 
lead  in  introducing  new  approaches  on  key  issues  such  as  price  control,  access  pricing  and 
licensing.  The  framework  harmonisation  nature  of  the  Directive  has  thus  provided 
possibilities for Member States to pursue distinctive paths. 

In the 2002 Application Report, a concern was raised about the lack of effective regulation in 
some Member States and an emerging regulatory asymmetry that could in turn foster market 
asymmetry  in  the  Member  States.  Even  if  there  has  been  good  progress  towards  greater 
independence  for  NRAs  and  effective  regulation  at  national  and  Community  level,  there  is 
still  a  significant  risk  that  inadequate  regulation  in  some  Member  States  could  prevent  the 
emergence of a single market for postal services. 

Finally, the overall evolution of the sector may now require the introduction of more precise 
definitions so that the legislation better reflects the realities of the sector. 

4. 

MARKET TRENDS 

Broadly  speaking,  the  postal  market  has  continued  to  move  towards  a  one  way  distribution 
market  and  away  from  the  more  traditional  two  way  communications  model.  If  this  trend 
continues  into  the  future,  there  may  be  the  need  to  review  the  modalities  of  the  current 
universal  service  obligations,  with  a  view  to  allow  for  some  additional  flexibility  while 
continuing  to  guarantee  consumer  rights.  This  trend  also  highlights  the  potential  for 
developing  a  dynamic  postal  market  which  can  exploit  opportunities  in  the  wider 
communication market (home shopping, e- commerce, hybrid mail and value added services) 
in the interest of all customers. 

However, competition has yet to develop in the addressed mail market segment outside niche 
services,  and  this  suggests  that  limited  initial  market  opening  combined  with  sometimes 
limited  regulatory  capacity  or  certainty,  advantages  enjoyed  by  incumbents,  and  regulatory 
asymmetries have all combined to deter entry. 

EN 

4 

   EN 

 
Among  these  regulatory  asymmetries,  the  different  tax  liabilities  faced  by  incumbents  and 
market entrants as regards VAT is of particular concern. In most Member States7, most if not 
all  services  provided  by  the  national  Universal  Service  Provider  are  VAT  exempt,  while 
services supplied by its competitors are subject to VAT at the standard rate. In practice this 
leads to an increase in the scope of services, beyond those mentioned in article 7 of the Postal 
Directive, where competition is de facto not possible, so as to include all services provided to 
customers  who  cannot  deduct  VAT  such  as  financial  institutions  and  the  public  sector.  In 
2003  the  Commission  proposed  amending  the  VAT  Directive8  in  order  to  restore  tax 
neutrality. However, the Council has not reached yet an agreement on that proposal. 

There  are  indications  that  the  absence  of  competition  has  also  affected  the  pace  of  the 
modernisation  of  the  sector.  One  such  indication  is  the  differing  infrastructural  costs  across 
Member States. 

Similarly,  regulatory  asymmetry  and  the  continued  protection  for  incumbents  have  affected 
mail market development. This has been varied across Member States. In some, the Universal 
Service  Providers  (USPs)  continue  to  enjoy  high  profit  margins  and  can  exploit  key  market 
developments. In other Member States, USPs face more difficult conditions. To a large extent 
this  variation  can  be  explained  by  the  different  types  of  market  intervention,  different 
ownership and incentive structures, and different price levels set for services in a market with 
low price elasticity and traditionally captive customers. 

In  the  competitive  parcels  and  express  markets,  margins  remain  tight,  but  consolidation  has 
continued with some of the more profitable USPs acquiring dominance in this market segment 
and  also  moving  increasingly  into  ancillary  markets  to  control  the  entire  value  chain.  This 
suggests  that  continued  reservation  and  distortion  in  the  mail  market  may  be  affecting 
ancillary  markets  and  reinforces  concerns  over  potential  breaches  of  competition  law  by 
dominant suppliers. 

All  this  reinforces  the  need  to  consider  how  to  move  towards  more  effective  and  better 
regulation and an Internal Market for postal services in order to ensure better services for all 
consumers,  including  commercial  customers  and  end  consumers  (greater  choice,  access, 
innovation, quality, price options, etc). 

5. 

THE MARKET IMPACT OF THE POSTAL DIRECTIVE 

The  implementation  of  the  Postal  Directive  by  Member  States  and  its  application  has  had 
significant  regulatory  and  market  impacts.  The  legislation  has  been  a  major  driver  in 
improving quality of service and has reached its broad objective of securing universal service 
while gradually opening the market. By laying out the milestones towards the achievement of 
the  Internal  Market  for  postal  services,  the  legislation  has  contributed  to  a  dynamic  reform 
process,  greater  efficiency  and  the  development  of  the  market  in  the  interests  of  the 
customers. 

This in turn has led to the development of competition, which has generated further flexibility 
in the operations of universal service providers increased their ability to meet customer needs, 
and has thus had a positive effect on universal service. External forces have also contributed 

7 
8 

Sweden, Finland and Slovenia are the only exceptions. 
COM (2003) 234 later amended by COM (2004) 465. 

EN 

5 

   EN 

 
                                                 
to  the  pace  of  reforms.  The  effects  of  increasing  electronic  substitution  on  universal  postal 
service seem to act as an incentive which is partly similar to the effects generated by market 
opening. 

On  the  demand  side,  according  to  recent  Eurobarometer  surveys9,  consumer  satisfaction  as 
regards postal services ranks first, compared to other services of general interest. Overall, the 
majority of European consumers (74 %) are satisfied with the postal services that are provided 
to  them.  However,  end  consumers  in  some  Member  States  express  concerns  and,  rightly  or 
wrongly, perceive the current evolution of postal services rather negatively. 

The Postal Directive has created an expectation of further market opening, which would have 
a positive impact on the market. As noted from the analysis above, the postal market is at a 
crucial stage in its development. Further steps are needed to promote actual competition in the 
market, while addressing the end-consumer concerns, as well as much needed innovations in 
order to promote continued market developments of the postal sector in the wider and quickly 
evolving communication market. 

6. 

THE PERSPECTIVES FOR THE FUTURE 

Facilitate the conditions for further modernisation 

The postal market is evolving quickly. The clear challenge for regulators and operators is to 
seize  the  opportunities.  Postal  organisations  are  becoming  increasingly  flexible  in  the 
provision  of  tailored  services  to  clients.  Some  of  the  public  postal  operators  have  taken 
advantage of the gradual opening of the market provided by the Directive to reorganise and 
modernise.  Some  others  may  not  have  prepared  themselves  as  carefully  so  as  to  meet  the 
challenges ahead. Those who did not seize the opportunities of the last few years and commit 
themselves  to  reforms  are  now  coming  under  market  pressure  to  do  so.  Further  regulatory 
initiatives may be needed to secure the benefits of a postal internal market for all customers. 

Respect the timetable set in the Directive 

In order to ensure that consumers can continue to enjoy the benefits of the Internal Market, it 
is essential to maintain (in parallel) the pace of regulatory reform and respect the timetable set 
in  the  Directive  for  accomplishing  the  Internal Market  for  postal  services.  Developments  to 
date  provide  no  evidence  supporting  the  need  for  a  change  of  the  deadlines  set  out  in  the 
Postal Directive. 

Monitor carefully regulatory developments 

Stronger regulatory scrutiny is needed from Member States and the Commission to sustain the 
drive  towards  the  adoption  of  appropriate  regulatory  models.  On  critical  issues,  such  as 
market  opening,  universal  service  (quality  of  services,  prices,  accessibility  from  the 
perspective  of  the  various  stakeholders  categories)  the  Commission  will  carefully  monitor 
developments, and where appropriate take the necessary steps to ensure that Member States 
meet the requirements set out in the Postal Directive. 

9 

At  EU  level,  see  Eurobarometer  (2002)  in  EU  15,  Eurobarometer  (2003)  in  the  most  recent  Member 
States and Qualitative study on European consumers and services of general interest (EU-25) (Optem - 
2003). 

EN 

6 

   EN 

 
                                                 
Intensify cooperation on regulatory issues 

In  order  to  tackle  the  more  complex  technical  issues  (such  as  licensing,  access,  regulatory 
accounting,  or  market  data),  the  Commission  intends  to  assist  NRAs  by  working  on  two 
levels: 

–  Bilateral co-operation between the services of the Commission and the NRA, and notably 

with the new Member States; 

–  Technical cooperation at the European level within the framework of the Postal Directive 
Committee  in  order  to  assist  the  Commission  in  developing  appropriate  benchmarking 
together with national regulators. 

Promote an in depth debate on the future postal policy 

In  light  of  the  rapid  evolution  of  the  global  communication  market,  and  in  the  view  of  the 
2006 deadline, it is necessary to open as soon as possible the debate on the future of postal 
policies  to  a  wide  audience,  including  all  stakeholders  (public  and  private  operators, 
customers, consumer associations, social partners, NRAs, Ministries, experts, academics, and 
industry) at national level as well as at EU level. 

In addition to analysing the merits of retaining or removing the reserved area, the debate will 
need to address key issues such as how to best promote the postal sector, how to ensure the 
financing of the universal service, and what kind of postal universal service is needed in the 
future.  It  will  also  be  necessary  to  assess  the  situation  in  the  Member  States  where  the 
reserved services have been removed, including from an end-consumer perspective. 

With  this  in  mind,  the  Commission  is  launching  two  studies,  on  the  development  of 
competition  and  the  evolution  of  the  regulatory  model  for  European  postal  services. 
Stakeholders are  invited to participate in two workshops to comment on the  progress  of  the 
two studies, and to provide feedback to the Commission on the conclusions of the consultants. 
Towards the end of 2005, the Commission will launch the study on the impact on universal 
service  of  the  full  accomplishment  of  the  postal  internal  market  Stakeholders  will  be 
consulted in the same manner as outlined above. Extensive debate will pave the way for the 
development of the future of postal sector policy. 

EN 

7 

   EN