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(2006) 1293}
Date: 2006-10-18
Institutions: European Commission
Subjects: application of EU law, national implementing measure, postal service, report

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 18.10.2006 
COM(2006) 595 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(2006) 1293} 

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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) 

(Text with EEA relevance) 

1. 

THE IMPORTANCE OF POSTAL SERVICES AND THEIR CHANGING ROLE  

In 2004, postal services in the EU earned about 90 billion EUR or 0.9% of the gross domestic 
product  (GDP).  The  postal  sector  is  thus  of  significant  importance  for  the  economy  of  the 
European Union. Postal services are labour intensive and are also one of the principal public 
employers  in  Europe.  Employment  in  the  sector  is  fairly  stable  with  about  1.71  million 
persons in 2004 employed by universal service providers (USPs) according to the most recent 
estimation by WIK-Consult1. However, roughly 5 million jobs are related to postal activities, 
i.e. directly dependent on, closely related to or induced by the postal sector2.  

Postal  services  are  an  essential  vehicle  of  communication  and  trade  and  are  vital  for  many 
economic  and  social  activities.  The  Internal  Market,  international  trade  and  commerce,  can 
only function given good communication and distribution channels. Many key sectors, such 
as  e-commerce,  publishing,  mail  order,  insurance,  banking  and  advertising  depend  on  the 
postal infrastructure. It should also be noted that  postal services bring social benefits which 
cannot  always  be  qualified  in  economic  terms  (e.g.  by  contributing  to  regional  and  social 
cohesion). In addition, many of the USPs have an important role to play in the provision of 
other services (e.g. financial services) to EU citizens. 

Postal services are changing fast. The sector is at the crossroads of three markets which are 
vital  to  the  European  economy:  communications,  advertising  and  transportation/logistics. 
Sector  boundaries  are  blurring  and  adjacent  sectors  –  which  are  fully  open  to  competition  - 
have  to  be  taken  into  account.  There  are  a  number  of  drivers  for  change  within  the  postal 
sector, the five most important are: changing customer demand, organisational change, market 
opening, automation/new technologies and electronic substitution.  

Postal services are an important element of the Internal Market for Services3 and are included 
in the framework of the Lisbon Strategy (fundamentally re-launched in 20054) as a source for 
economic  growth  and  job  creation.  According  to  the  Lisbon  Strategy,  the  Internal  Market 
must be made fully operational5, while preserving the European social model, an element of 
which  is  the  provision  of  effective  and  high  quality  Services  of  General  Economic  Interest 
(SGEI).  This  is  a  key  component  of  the  European  welfare  state.  Postal  services  are  an 
to 
essential  element 

territorial  cohesion  and  contribute 

for  ensuring  social  and 

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WIK Consult, Main Developments in the Postal Sector (2002-2004), 2006. 
Pls Rambøll, Employment trends in the EU postal sector, October 2002. 
Communication from the Commission, Internal Market Strategy – Priorities 2003-2006 - COM(2003) 
238, p. 13. 
Presidency Conclusions, Brussels European Council, 22/23 March 2005. 
Presidency Conclusions, Brussels European Council, 23/24 March 2006. 

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competitiveness6. Modern postal services continue to defy pervasive assumptions made some 
years ago that the sector was bound to decline due to the introduction of new and alternative 
communication  technologies.  Postal  providers  have,  instead,  taken  advantage  of  innovative 
technology to increase productivity and offer new products. Some segments of postal services 
such as direct mail and home shopping have significant growth potential. At the same time, 
substitution (e.g. of transaction mail) is not materialising at the rate forecast some years ago. 
Mail is still relevant, but in order for this to continue to be the case further action is required. 
In the postal sector, gains arising from reform also need to be compared, as in other sectors, 
with the costs of not adapting or doing nothing. Examples of such costs might be increasing 
substitution,  less  use  of  technological  innovations,  less  focus  on  the  customer  needs  and  in 
general a negative market dynamic. 

2. 

BACKGROUND AND PURPOSE OF THIS REPORT 

Article 23 of Directive 2002/39/EC (hereafter referred to as “the Postal Directive”)7 asks the 
Commission  to  report on the  application  of the Postal Directive to the European Parliament 
and Council “every two years”. 

The  Commission  provided  its  first  Application  Report  in  November  20028  and  its  second 
Application  Report  in  March  20059.  As  in  the  case  of  the  2005  Application  Report,  this 
Report  provides  a  comprehensive  assessment  of  the  overall  transposition  of  the  Postal 
Directive in Member States, including the application of key elements of the Directive as well 
as detailed market trends (including economic, technical, social, employment and quality of 
services  aspects).  A  more  detailed  assessment  is  presented  in  a  Commission  Staff  Working 
Paper. This Report from the Commission to the Council and the European Parliament on the 
Application  of  the  Postal  Directive  summarises  and  pulls  together  the  main  elements  and 
findings of the Commission Staff Working Paper. 

Despite the relatively short period which has elapsed since the last Application Report/Staff 
Working Paper, there have been some important achievements and significant changes have 
occurred in the postal sector. 

A series of preparatory works for the new Postal Directive were undertaken in 2005/2006 by 
the  Commission;  they  are  described  in  detail  in  the  annexed  Staff  Working  Paper  (see  in 
particular  Chapter  1.3).  In  addition,  the  Commission  has  drafted  a  Prospective  Study  and  a 
Proposal for a Directive amending the current Postal Directive. All these documents are being 
submitted  to  the  legislator  at  the  same  time.  This  third  Application  Report  and  the 

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Communication  from  the  Commission,  Common  Actions  for  Growth  and  Employment:  The 
Community Lisbon Programme - COM(2005) 330. 
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  from  the  Commission  to  the  European  Parliament  and  the  Council  on  the  Application  of  the 
Postal Directive (97/67/EC) - COM(2002) 632. 
Report  from  the  Commission  to  the  European  Parliament  and  the  Council  on  the  Application  of  the 
Postal  Directive  (97/67/EC  as  amended  by  Directive  2002/39/EC)  -  COM(2005)  102  and  SEC(2005) 
388. 

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accompanying  Commission  Staff  Working  Paper  therefore  have  to  be  read  in  conjunction 
with the Prospective Study and the legislative proposal. 

At the same time, this Report and the accompanying Commission Staff Working Paper can be 
distinguished  from  the  Prospective  Study  and  the  proposal  for  a  new  Directive  since  this 
Application  Report  looks  back  and  assesses  the  impact  of  the  Postal  Directive  during  the 
years 2004-2006 (hereafter: the "reference period"). Ex post evaluations are the counterpart of 
impact  assessments  and  they  examine,  at  regular  intervals,  whether  EU  policies  and 
programmes have achieved their objectives10. This is of particular importance in the context 
of the above initiatives in the postal sector due in 2006. 

This Report confirms that postal reform in the EU is advancing well. Improvements have been 
made particularly as regards quality of services, customer orientation, business efficiency, and 
the separation of regulators from operators. The Commission believes that good results have 
been achieved so far – and in particular in the last 5 years. These achievements are illustrated 
in detail in the Commission Staff Working Paper and clearly show that further gains can be 
made through continued reform. 

3. 

THE APPLICATION OF THE POSTAL DIRECTIVE AND REGULATORY DEVELOPMENTS 

Currently all Member States have notified the transposition of the Postal Directive including 
those which joined the Community in 2004. Also, the further reduction of the reserved area on 
1 January 2006 (to 50g) has been transposed in all Member States. 

However,  transposition  is  merely  the  first  step  in  the  process  of  full  implementation  of  the 
Community  framework.  Clearly  the  legislative  implementation  has  had  a  positive  impact 
particularly  on  the  achievement  of  core  aims  of  the  Directive,  such  as  a  substantial  and 
measurable improvement of the quality of postal services, the establishment of a harmonised 
minimum level of universal service and the introduction of a gradual and controlled opening 
of the postal market to competition. It should, for example, be emphasised that throughout the 
reference period of this report service quality among postal operators in Europe – measured in 
delivery time – continued at a high level and exceeded the EU's performance objectives for 
delivery  of  85%  of  intra-EU  mail  within  three  days,  and  97%  within  five  days.  Another 
important  element  triggered  by  the  Postal  Directive  is  the  independence  of  National 
Regulatory Authorities (NRAs) from the operators; the independence (understood in a broader 
sense) of the NRAs was further strengthened in the reference period. However, when it comes 
to successfully implementing some of the more complex elements of the Postal Directive such 
licensing/authorisation  schemes,  price  control  and  accounting,  a  very  varied 
as 
implementation by Member States can be observed. As a possible misinterpretation of these 
conditions could constitute a barrier to market entry, a review of national practices together 
with  competent  authorities  of  the  Member  States  should  be  discussed.  Administrative 
cooperation  as  regards  pricing  and  transparency  of  accounts  seems  to  be  of  particular 
importance. 

Significant regulatory developments have also occurred in several Member States. These go 
beyond what is required by the EU regulatory framework. In particular on 1 January 2006 one 
Member  State  –  the  United  Kingdom  –  fully  opened  up  its  postal  market  (joining  the  other 

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Commission Legislative and Work Programme 2006 - COM(2005) 531. 

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two Member States that have de jure already fully opened their postal sector to competition: 
SE, FI). Equally Germany and the Netherlands have confirmed their plans to proceed faster 
than  envisaged  in  the  Postal  Directive.  Taking  these  developments  into  account  and 
combining  them  with  previous  ones,  around  60%  of  the  EU  letter  post  will  effectively  be 
opened  up  to  competition  by  the  end  of  2007.  The  complete  abolition  of  a  reserved  area  in 
some Member States, its significant reduction in some others and the firming up of plans in 
several others gives a strong impetus to those Member States still applying a reserved area to 
move rapidly in the same direction. 

4. 

MARKET TRENDS 

During  the  reference  period  the  postal  market  has  continued  to  evolve  towards  a  one  way 
distribution  market  and  away  from  the  more  traditional  two  way  communications  model. 
Today,  more  than  87.5%  of  letter  post  items  (EU  wide)  are  sent  by  businesses  and 
organisations  rather  than  individuals;  the  business  to  consumer  (B2C)  segment  of  the  letter 
post  alone  now  accounts  for  62%  of  total  volume,  up  from  60.5%  in  2004.  This  trend  is 
expected  to  continue  as  the  growth  rates  of  the  connected  products  (unaddressed  and 
addressed direct mail) are substantively higher than that of traditional letter mail as such. This 
is also one important element of optimism for the sector as a whole, but only if the pace of 
postal reform is maintained. Compared to other world economies, like the USA for example, 
there appears to be significant growth potential in the market (particularly in some of the EU-
10  Member  States).  However,  only  a  modern  and  dynamic  postal  market  will  be  able  to 
release the full potential of the sector. This potential has also to be seen in the broader context 
of the wider communications market which contains many new products and services (home 
shopping, e- commerce, hybrid mail11 and value added services). 

The postal sector has undergone a remarkable transformation in the last decade. A number of 
European  postal  companies  have  risen  to  the  challenge.  Growth  oriented  strategies  and  the 
prospect  of  gradual  market  opening  have  inter  alia  resulted  in  postal  operators  entering 
adjacent sectors. Political decisions in the 1990s started a process that has now gained its own 
momentum.  The  developments  seen  in  the  postal  sector  are  not  unique.  Other  sectors  have 
already  gone  through  equally  far  reaching  changes.  The  evolution  of  the  postal  market  is 
expected to continue and the pace of change is expected to quicken. 

Growth in terms of revenue as well as in terms of profit margins has increased in the reference 
period.  According  to  the  available  information,  the  profit  rates  achieved  in  the  letter  post 
business  have  been  significantly  higher  than  the  rates  in  the  more  competitive  parcel  and 
express segment. In the letter post segment profit margins can vary between 10% and 20%, 
while in the parcel and express segment profit margins can be between 2.5% and 10%12. 

Meaningful  competition  in  the  letter  post  market  has  yet  to  develop.  Objective  analysis  of 
market shares of competitors as well as subjective perception of key players both confirm that 
even  in  cases  where  the  monopoly  has  been  completely  abolished  or  substantively  reduced, 
real  competition  is  only  emerging.  This  concerns  particularly  letter  post,  items  of 
correspondence as well as – with some notable exceptions – direct mail. Between 2000 and 

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"[This]  involves  the  transmission  of  an  electronic  image  of  a  document  or  its  conversion  in  digital 
format  and  transmission  to  a  distant  point,  where  the  image  is  printed  out,  enveloped  and  sent  to  the 
addressee." – COM(91) 476, p. 46. 
Particularly figure 4.2.19 in WIK, Main Developments, 2006. 

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2005 there seems to have been no significant growth in competition in this segment of postal 
services and this must be seen as giving rise to some concern. 

Nevertheless,  the  mere  prospect  of  market  opening  has  created  considerable  momentum 
within  the  postal  sector  and  is  likely  to  further  generate  changes  (e.g.  operationally  and 
customer focused). There seems to be broad agreement that postal services do not constitute 
natural monopolies. Competition is not an end in itself, but a means to promote innovation, 
investment and consumer welfare. Consequently, both static benefits, i.e. the efficient use of 
resources and capital goods at a given time – and dynamic benefits, i.e. the possibility of new 
and more efficient uses of resources and of capital goods over time – could be brought about 
by increasing competition. 

Market opening of network industries, including the postal sector, was explicitly mentioned in 
the Kok Report13 as an important part of the Lisbon agenda. If a functioning Internal Market 
in postal services is to be attained, a plurality of actions by different actors on the Community 
and national level will be required. This is in line with the understanding that Member States 
have a crucial role to play and that they must take full ownership of the Internal Market14. 

5. 

THE MARKET IMPACT OF THE POSTAL DIRECTIVE 

The  reference  period  is  particularly  illustrative  of  the  positive  achievements  of  the  postal 
Directive; its implementation and application has had a major regulatory and market impact. 
In  the  reference  period  the  further  reduction  of  the  reserved  area  to  50g  (for  letters)  by  1 
January  2006  has  opened  up  an  additional  7%  of  volume  to  competition.  The  planned  and 
gradual process of full market opening and the outlook generated by the target date of 2009 
for  the  achievement  of  full  market  opening  has triggered a dynamic reform process, greater 
efficiency and the development of a far more customer-oriented market.  

Market opening  is  but one  element that  has resulted from  the Postal Directive. At  the  same 
time, the availability of a wide range of high quality universal services available throughout 
the  Community  has  been  confirmed  in  the  reference  period.  While  constituting  a  minimum, 
the requirements enshrined in the Postal Directive have been an important reference point for 
all stakeholders.  

In general there is evidence that the positive effects of postal reform include more customer 
focused services. Consumer  satisfaction as regards postal services ranks high15 compared to 
all other services of general interest. 

The postal sector, which offers a key communications infrastructure with high economic and 
social importance, also needs to develop in harmony with the major changes taking place in 
the communications, advertising and transportation/logistics markets or it will be left behind. 
The Postal Directive has so far ensured that this did not materialise but the pace of change in 
the wider communications markets needs to be followed. 

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Report from the High Level Group chaired by Wim Kok, Facing the challenge, 2004, p. 23. 
Commissioner McCreevy, Speech on 2 February 2005 in the Legal Affairs Committee of the European 
Parliament;  Communication  from  the  Commission  to  the  Council,  the  European  Parliament,  the 
European Economic and Social Committee and the Committee of the Regions - Second Implementation 
Report of the Internal Market Strategy 2003-2006 - COM(2005) 11.  
Special Eurobarometer, Services of General Interest, 2006. 

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The Postal Directive has been one of several forces contributing to postal reform in Europe. 
Based  on  the  positive  results  so  far  –  described  in  detail  in  the  annexed  Commission  Staff 
Working Paper – further steps are needed at this crucial moment of development. 

6. 

CONCLUSION  

Confirmation of the timetable in the Postal Directive: finalise the construction site 

All  the  intermediate  policy  results  of  the  Postal  Directive  have  been  achieved  to  date:  first, 
monopolies  have  been  progressively  reduced  by  either  implementing  the  gradual  market 
opening calendar enshrined in the Postal Directive (e.g. reduction of the reserved area to 50g 
on  1  January  2006)  or  by  additionally  opening  important  segments  (such  as  direct  mail)  or 
fully opening the postal market (UK, SE, FI). Second, competition has grown and in the most 
advanced  Member  States  the  market  shares  of  the  incumbents  have  been  reduced  to  around 
90% and the perceived degree of competition has generally grown between 2000 and 200516. 
Still  competition  has  not  grown  as  much  as  hoped.  Third,  universal  service  providers  have 
restructured  and  successfully  adapted  to  the  regulatory  and  market  developments.  This  is 
underpinned  by  the  generally  positive  trend  as  regards  overall  revenue  and  profitability 
growth17.  Fourth  –  as  already  illustrated  -  the  quality  of  service  has  improved,  consumer 
satisfaction is high and the universal service has been maintained.  

Developments to date provide no evidence supporting the need for a change of the deadline of 
2009  as  set  out  in  the  Postal  Directive.  On  the  contrary,  the  important  regulatory 
developments in the reference period of this report provide a strong impetus to those Member 
States that have not fully opened up their postal markets to follow suit. In addition the market 
conditions are favourable and the window of opportunity they present should be used. 

Main focus: High level of universal service and consumer needs  

The  present  Postal  Directive  is  based  on  the  principle  of  minimum  harmonisation.  It  has 
already  given  Member  States  a  number  of  possibilities  to  adapt  universal  service  to  the 
specific  needs  of  the  country  in  question.  The  reference  period  has  given  some  examples 
where  business  oriented  products  –  that  are  commercially  appealing  –  no  longer  had  to  be 
considered as part of the universal service since the market fully ensures their provision. 

On the other hand, the need to fully assure universal service rights for consumers and small 
businesses  is  generally  uncontested.  Individual  consumers  (including  SMEs)  and  citizens 
must enjoy the same quality of service – if not better – after full market opening. Their needs, 
including  future  ones,  must  be  the  guideline.  This  also  requires  that  their  rights,  when  it 
comes  to  treating  their  complaints,  should  be  strengthened  (e.g.  by  extending  appeal 
procedures  to  all  operators).  Furthermore,  greater  cooperation  between  National  Regulatory 
Authorities  could  also  enhance  best  practice.  This  might  concern  benchmarking  and 
information exchange in relation to consumer complaints (i.e. by profiting from the practices 
of  Member  States  that  have  more  experience  in  dealing  with  complaints)  or  in  relation  to 
authorisation procedures and accounting.  

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See Chapter 4.1 and 4.6 of the Commission Staff Working Paper. 
See Chapter 4.4 of the Commission Staff Working Paper. 

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