COMMISSION STAFF WORKING DOCUMENT Accompanying the document Report from the Commission to the European Parliament and the Council on the application of the Postal Services Directive (Directive 97/67/EC as amended by Directive 2002/39/EC and Directive 2008/6/EC)
Date: 2015-11-17
Institutions: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, European Commission
Subjects: delivery, electronic mail, freight rate, postal charges, postal service, price regulations, provision of services, single market, universal service

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 17.11.2015  SWD(2015) 207 final   COMMISSION STAFF WORKING DOCUMENT Accompanying the document Report from the Commission to the European Parliament and the Council on the application of the Postal Services Directive (Directive 97/67/EC as amended by Directive 2002/39/EC and Directive 2008/6/EC) {COM(2015) 568 final}  
 
 
Contents 

1. 

INTRODUCTION AND BACKGROUND ................................................................ 4 

1.1.  Postal Services in the Digital Age ..................................................................... 4 
1.2.  The Postal Services Directive ............................................................................ 5 
1.3.  Purpose and Scope of the Fifth Application Report and Staff Working 

Document .......................................................................................................... 6 

2.  APPLICATION OF THE POSTAL SERVICES DIRECTIVE 2008/6/EC ............... 8 

2.1.  Transposition and Application of Directive 2008/6/EC .................................... 8 
2.2.  Regulation of Postal Services ............................................................................ 8 
2.2.1.  National Regulatory Authorities .......................................................... 8 
2.2.2.  Authorisation and Licensing Regimes ............................................... 10 
2.3.  The Universal Service: Basic Postal Services for All ..................................... 13 
2.3.1.  Designation of Universal Service Provider(s) ................................... 13 
2.3.2.  Services Provided under the Universal Service Obligation .............. 14 
2.3.3.  Frequency of the Universal Service .................................................. 15 
2.3.4.  Studies on User Needs and the Universal Service Obligation .......... 16 
2.3.5.  Tariffs for Universal Service Products .............................................. 17 
2.3.6.  Price Regulation ................................................................................ 21 
2.4.  Financing the Universal Service Obligation .................................................... 23 
2.4.1.  Regulatory Accounting ...................................................................... 23 
2.4.2.  Net Cost of the Universal Service Obligation ................................... 24 
2.5.  Access to Postal Services, Network and Infrastructure ................................... 26 
2.5.1.  Access Points ..................................................................................... 26 
2.5.2.  Access to Postal Infrastructure .......................................................... 27 
2.5.3.  Access to the Postal Network ............................................................ 29 
2.6.  Quality of Service ............................................................................................ 31 
2.7.  Protection of Users .......................................................................................... 33 
Internal Market for Postal Services: the Cross-Border Dimension ................. 34 
2.8. 
2.8.1.  Legal Obligations and Regulatory Oversight .................................... 34 
2.8.2.  Tariff Principles ................................................................................. 35 
2.8.3.  Customs and Security Controls ......................................................... 36 
2.9.  Data Collection ................................................................................................ 37 
2.10.  Value Added Tax (VAT) ................................................................................. 38 
2.11.  Application of Competition Rules ................................................................... 41 

3.  MARKET DEVELOPMENTS IN THE POSTAL SECTOR ................................... 43 

3.1.  Sector Overview .............................................................................................. 43 
3.1.1.  Ownership Structures of Universal Service Providers ...................... 44 
3.1.2.  Financial Position of Postal Operators .............................................. 45 
3.2.  Letter Post Markets .......................................................................................... 46 
3.2.1.  Letter Volumes and Revenues ........................................................... 46 

2 

 
 
 
3.2.2.  Competition in Letter Post Markets .................................................. 52 
3.2.3.  Cross-border Letter Post .................................................................... 54 
3.2.4.  Outlook .............................................................................................. 55 
3.3.  Parcel and Express Markets ............................................................................. 56 
3.3.1.  Parcel and Express Markets Overview .............................................. 56 
3.3.2.  Parcel Volumes and Revenues .......................................................... 60 
3.3.3.  Competition in Parcel Markets .......................................................... 64 
3.3.4.  Cross-border Parcel Delivery ............................................................ 66 
3.4.  Employment in the Postal Sector .................................................................... 68 
3.4.1.  Overview ........................................................................................... 68 
3.4.2.  Employment in Universal Service Providers .................................... 69 
3.4.3.  Type of Employment and Working Conditions ................................ 72 
3.4.4.  Social Partners and Industrial Relations ............................................ 73 
3.4.5.  Managing Restructuring .................................................................... 74 

4.  CONCLUSION ......................................................................................................... 77 

5.  ANNEX  ON  THE  CALCULATION  OF  THE  NET  COST  OF  THE 

POSTAL UNIVERSAL SERVICE OBLIGATION ................................................. 83 

3 

 
 
 
 
 
 
 
 
 
 
1. 

INTRODUCTION AND BACKGROUND 

1.1. 

Postal Services in the Digital Age 

Postal services1 have a central role in creating and sustaining an effective and dynamic 
single  market  and  are  vital  for  the  wider  economy.  In  2013,  the  most  recent  year  for 
which statistics are available, the universal service area alone (i.e. products and services 
falling within the scope of the universal service) accounted for more than EUR 23 billion 
for  the  EU28.2  Over  85  billion  letter  post  items  were  dispatched  by  universal  service 
providers in the EU, as were nearly 2 billion parcels.3 The postal services sector is also 
an  important  employer  with  about  1.2  million  people  employed  by  universal  postal 
service providers (USPs) in 2013,4 plus those working for other letter and parcel delivery 
operators.  The  European  Express  Industry  was  estimated  to  employ  272,000  in  2010, 
predicted to grow to 300,000 by 2020.5 

The role of postal services is however changing rapidly and fundamentally, even more so 
since  2008. On  one  hand  paper-based  communications  have  declined  in  many  Member 
States, while electronic-based communication witnessed significant growth. On the other 
hand,  new  technologies  make  shopping  online  more  convenient  and  therefore  increase 
the number of packages and parcels conveyed by postal operators. Consequently parcel 
and express revenues now account for more than half of the postal sector's total revenues, 
compared to 2007 when letter post was responsible for over half.6  

With  full  market  opening  in  the  postal  sector  accomplished  in  all  Member  States,  the 
universal  service  providers  now  face  the  possibility  of  competition  from  new  market 
entrants  in  the  letter  segment,  though  in  reality  the  level  of  competition  differs 
significantly  between  Member  States  and  is  relatively  low  in  majority  of  them.  In  the 
parcel  segment,  competition  appears  to  be  intensifying  to  take  advantage  of  the 
opportunities offered by e-commerce.  

In response, universal service providers have increased their efficiency and restructured 
their operations to reduce costs. Many postal operators and other delivery companies are 
now  more  innovative  and  have  developed  new  services,  such  as  apps  to  track  parcel 
delivery  and  electronic  document  exchange  solutions.  As  a  result  however,  postal 
workers' jobs and the skills needed for them have changed and overall employment (and 
in particular employment at universal service providers) has decreased.7 

1 This Report, in line with the terminology in WIK-Consult, Main Developments in the Postal Sector (2010-2013), Bad 
Honnef, Germany 2013, p3 uses the term “postal services” to refer to any general delivery service whether provided by 
a (former) public or private operator. The major sub-segments of postal services are the letter post and the parcel and 
express  services.  The  delivery  services  sector  also  includes  non-postal  delivery  services  that  consist  of  services  for 
items  not  prepared  in  a  manner  suitable  for  posting,  such  as,  inter  alia,  the  distribution  of  unaddressed  mail,  early 
delivery of newspapers and courier services. 
2 European Commission, postal statistics. Figure does not include Germany and Romania.  
3  Universal  Postal  Union  (UPU)  estimates  for  EU27  Number  of  letter  post  items  domestic  service  and  international 
service, and number of ordinary parcels domestic and international dispatch.  UPU statistics include items dispatched 
by designated operators (i.e. universal service providers) only. 
4  The  indicator  of  domestic  employment  refers  to  the  number  of  persons  employed  in  postal  services  within  the 
economic territory of the Member State of reference from the universal service providers. 
5  Oxford  Economics  The  Economic  Impact  of  Express  Carriers  in  Europe,  2011  Oxford,  UK.  No  statistics  are 
available that cover the whole postal (including parcel) market. 
6 WIK-Consult, Main Developments in the Postal Sector (2010-2013) p163. See section 3.1 for more details.  
7 See section 3.4 for further details 

4 

 
 
 
 
 
 
 
                                                 
Nevertheless,  a  high  quality  universal  service  at  affordable  prices  is  provided  in  all 
Member  States.  Further  improvements  have  been  made  in  the  quality  of  service, 
innovation and customer orientation, business efficiency, the work of national regulatory 
authorities and collaboration with social partners. Shifts in the communications landscape 
and  the  advent  of  the  Digital  Single  Market  do  however  mean  that  the  needs  of  postal 
users will continue to evolve  and both  legislation and regulatory  oversight  will need to 
keep pace with these developments, particularly to ensure the ongoing protection of all 
users and the sustainability of the postal sector.   

1.2.  The Postal Services Directive 

The  overall  objective  of  European  postal  policy  is  to  ensure  that  efficient,  reliable  and 
high-quality  postal  services  are  available  on  at  least  five  working  days  per  week 
throughout the EU to all its citizens and businesses at affordable prices. In line with the 
principles of subsidiarity and the differences in the postal markets of Member States, the 
Postal  Services  Directive  is  a  framework  directive  which  gives  a  considerable  degree  of 
flexibility to the Member States, allowing them to adapt elements of domestic postal services 
to their own particular needs.  
The First Postal Services Directive, Directive 97/67,8 was adopted in 1997 after a lengthy 
period of analysis and consultation. It followed the broad aims set out in the Green Paper 
on  the  development  of  the  single  market  for  postal  services  published  in  June  1992,9 
which  inter  alia  stated  that  the  analysis  showed  a  sector  with  underlying  structural 
problems,  wide  divergences  between  Member  States  and  the  absence  of  a  clear 
Community-wide  approach.  Consequently  the  First  Postal  Services  Directive  aimed  to 
improve domestic and intra-EU postal services by addressing the low quality of service 
and  efficiency;  the  lack  of  customer  focus,  choice  and  innovation;  limited  cooperation 
between operators; and ongoing state subsidies. 

Among the key elements of the First Postal Services Directive were the establishment of 
a universal service, with minimum scope, frequency and quality of service requirements, 
a  number  of  tariff  principles  and  the  creation  of  independent  national  regulatory 
authorities  (NRAs)  for  postal  services.  An  essential  element  of  the  modernisation 
strategy  was  the  ‘gradual  and  controlled  liberalisation  of  the  market’.10  In  2002,  as  a 
further  step  in  that  direction,  the  Second  Postal  Services  Directive,  among  other 
amendments, reduced the price and weight limits for the reserved area, thus reducing the 
scope of the monopoly of the national postal operators.  

In  February  2008  the  Council  and  the  European  Parliament  adopted  the  Third  Postal 
Services  Directive11  which  introduced  the  legal  basis  for  the  accomplishment  of  the 
internal market for postal services by providing for a last legislative step in the process of 
gradual  market  opening.  It  set  an  agreed  deadline  for  full  market  opening  of  31 
December 2010 for 16 Member States12 and 31 December 2012 for the (then) remaining 

8 Directive 97/67/EC 
9 European Commission, Green Paper on the Development of the Single Market for Postal Services, COM/1991/0476  
10 Directive 97/67/EC, Recital 8 
11 Directive 2008/6/EC   
12  Austria,  Belgium,  Bulgaria,  Denmark,  Estonia,  Finland,  France,  Germany,  Ireland,  Italy,  Netherlands,  Portugal, 
Slovenia, Spain, Sweden and UK. 

5 

 
 
 
 
 
 
 
                                                 
11 Member States.13 References to the Postal Services Directive (PSD) or 'the Directive' 
refer to the consolidated Postal Services Directive (unless otherwise stated).14  

In  addition  to  setting  a  timetable  for  full  market  opening,  the  Third  Postal  Services 
Directive  modified  other  provisions  of  the  Directive  to  render  them  more  compatible 
with ‘full market opening’. Revisions and additions included strengthening the tasks and 
competences  of  NRAs;  changes  in  the  manner  in  which  universal  service  could  be 
provided  and  financed;  requiring  certain  elements  of  the  postal  infrastructure  (such  as 
address databases and letter boxes) to be accessible to multiple operators; strengthening 
and broadening the legal requirements for information and data collection by NRAs; and 
extending  consumer  protection  provisions.  The  Directive  also  contains  a  specific 
provision  requiring  the  Commission  to  provide  assistance  to  Member  States  on  its 
implementation,  including  on  the  calculation  of  any  net  cost  of  the  universal  service, 
which was initially set out in Annex (I) entitled "Guidance on calculating the net cost, if 
any,  of  universal  service"  and  is  further  addressed  as  an  Annex  to  this  Staff  Working 
Document.   

1.3. 

Purpose and Scope of  the  Fifth Application Report and  Staff  Working 
Document  

This  Staff  Working  Document  accompanies  the  Application  Report  and  provides  more 
detailed information on how the Directive has been implemented, market developments 
and calculations of the net cost of the Universal Service Obligation that have been found 
to be consistent with the Directive.  

The  Application  Report  and  Staff  Working  Document  cover  developments  from  late 
2008  (when  the  Fourth  Application  Report  was  published)15  to  2015,  although  official 
postal statistics are only available up to  2013 due to the time  lag in  gathering data and 
some  other  estimates,  in  particular  those  for  the  parcel  sectors,  are  for  earlier  years. 
Sources used for this Report include studies commissioned by the Commission on Main 
Developments  in  the  Postal  Sector  (2008-2010),16  Pricing  behaviour  of  postal 
operators17  and  Main  Developments  in  the  Postal  Sector  (2010-2013),18    a  number  of 
reports by the European Regulators Group for Postal Services (ERGP),19 contributions in 
the  context  of  the  Postal  Directive  Committee  (PDC)  and  the  Postal  User  Forum,20 
documents  and  contributions  linked  to  the  2012  Green  Paper,  An  integrated  parcel 
delivery  market  for  the  growth  of  e-commerce  in  the  EU,  21  and  the  2013 

13 Cyprus, Czech Republic, Greece, Hungary, Latvia, Lithuania, Luxembourg, Malta, Poland, Romania and Slovakia. 
Although Croatia formerly joined the EU on 1 July 2013, its postal market was fully opened from 1 January 2013.   
14 References to 'Articles' where no directive is specified also refer to the consolidated Postal Services Directive.  
15 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 (2008) 884 final and SEC (2008) 3076. 
16 Copenhagen Economics, Main Developments in the Postal Sector (2008-2010), Copenhagen, Denmark, 2010 
17 Copenhagen Economics, Pricing behaviour of postal operators, Copenhagen, Denmark, 2012 
18 WIK-Consult, Main Developments in the Postal Sector (2010-2013)  
19  For  further  information  about  the  ERGP,  including  their  reports  see  http://ec.europa.eu/growth/sectors/postal-
services/ergp/index_en.htm 
20 This dialogue group was created by Michel Barnier, the former Commissioner for the Internal Market and Services, 
in  2011.  It  brings  together  postal  services  users  (end  consumers,  SMEs,  businesses  and  e-retailers),  postal  operators 
and trade unions to analyse the effects of market opening and seek constructive ways to deliver better postal services to 
customers.  The  Forum,  which  takes  place  in  Brussels  at  yearly  basis,  is  intended  as  a  means  of  obtaining  direct 
feedback  from  customers  on  the  effects  of  the  European  postal  reform,  requirements  for  sustainability  in  the  postal 
sector and on the direct link to e-commerce.  
21  European  Commission,  Green Paper  –  An  integrated  parcel  delivery  market  for  the  growth  of e-commerce in  the 
EU, 29.11.2012, COM (2012) 698 final. 

6 

 
 
 
 
 
 
 
                                                 
Communication,  A roadmap  for  completing  the  single  market for  parcel  delivery Build 
trust in delivery services and encourage online sales.22 Eurostat data up to 201123 and the 
Commission's  own  statistics,  for  period  after  2012  when  Eurostat  decided  to  stop 
dedicated  collection  of  statistical  data  for  the  postal  sector,  have  also  been  used24.  The 
latter  are  referred  to  in  the  Report  and  Staff  Working  Document  as  'European 
Commission Postal Statistics.25 Universal Postal Union statistics have also been used.26    

The period late 2008 to 2015 is of particular significance for the postal sector in the EU 
for two main reasons. First, the Application Report and Staff Working Document cover 
the  period  in  the  run  up  to  and  directly  after  full  market  opening  in  all  EU  Member 
States.    Second,  there  are  profound  changes  in  the  communications  and  postal  sector, 
compounded by the economic situation following the 2007/08 financial crisis, which are 
fundamentally  impacting  the  postal  market.  Letter  volumes  have  fallen  substantially 
since  2008  in  most  Member  States  and  by  around  40%  in  the  one  most  affected 
(Denmark).  Parcel  deliveries  are  increasing,  but  require a  different  postal  infrastructure 
as well as different skills and patterns of employment for employees.   

22  European  Commission,  A  roadmap  for  completing  the  single  market  for  parcel  delivery  Build  trust  in  delivery 
services and encourage online sales   16.12.2013. COM (2013) 886 final 
23 http://ec.europa.eu/eurostat/statistics-explained/index.php/Postal_service_statistics_-_universal_service_providers 
24 global estimates were made on the basis of a data update of August 2015 
25 http://ec.europa.eu/growth/sectors/postal-services/index_en.htm 
26  UPU  Postal  Statistics  present  data  collected  annually  from  member  designated  operators  of  the  Universal  Postal 
Union.  In  all  cases,  at  the  European  level,  those  members  are  the  National  Postal  Operators,  i.e.  other  providers  of 
postal  services  are  not  included.  As  well  as  country  data,  UPU  produces  regional  estimates,  which  at  the  European 
Level refer to EU27.  http://www.upu.int/en/resources/postal-statistics/about-postal-statistics.html 

7 

 
 
 
 
 
 
 
 
 
                                                 
2.  APPLICATION OF THE POSTAL SERVICES DIRECTIVE 2008/6/EC 

2.1.  Transposition and Application of Directive 2008/6/EC 

All  EU  Member  States  have  now  transposed  Directive  2008/6/EC.  This  Staff  Working 
Document covers the EU Member States only, unless stated otherwise. 

The three European Free Trade Area (EFTA) Members of the European Economic Area 
(EEA),  Iceland  (IS),  Lichtenstein  (LI)  and  Norway  (NO),  are  not  covered  by  this  Staff 
Working  Document  as  they  have  not  yet  transposed  Directive  2008/6/EC.  It  should, 
however,  be  noted  that  the  Norwegian  government  submitted  the  bill  for  a  new  Postal 
Service  Act  to  the  national  parliament  (i.e.  Storing)  on  24  April  2015;  this  bill  is 
implementing  Directive  2008/6/EC  and  also  contains  certain  changes  to  the  universal 
service.  

The  Commission  continues  to  monitor  whether  the  legislative  measures  adopted  by 
Member  States  constitute  a  complete  transposition  of  the  Directive  and  if  the  different 
elements  of  the  Directive  are  implemented  correctly.  Since  2008  the  Commission  has 
initiated  infringement  proceedings  against  two  Member  States,  namely  Belgium  and 
Croatia, on issues of content (rather than timing) in the postal acquis.  

2.2. 

 Regulation of Postal Services 

2.2.1.  National Regulatory Authorities 

Independent  national  regulatory  authorities  (NRAs)  play  a  key  role  as  they  are  the 
competent bodies who – after an appropriate implementation into national legislation27 – 
oversee  the  Directive's  application.  NRAs  are  defined  as  "the  body  or  bodies,  in  each 
Member  State,  to  which  the  Member  State  entrusts,  inter  alia,  the  regulatory  functions 
falling within the scope of this Directive" (Article 2 (18)). They “have as a particular task 
ensuring compliance with the obligations arising from this Directive (…)” and “may also 
be charged with competition rules in the postal sector” (Article 22).  

All EU Member States have established an independent NRA for the postal sector. Most 
Member  States  combine  the  regulation  of  the  post  and  electronic  communications 
sectors, in some cases alongside other network industries (e.g. rail transport and energy). 
The  model  of  a  multi-sector  regulator  has  gained  further  momentum  in  the  reporting 
period and regulators who cover the postal sector alone are the now the exception.28 

Regulatory independence can be reinforced through qualifications, fixed terms of office 
and legal protection against dismissal without cause. Senior NRA officials should not be 
permitted to work for the public postal  operator or  other interested parties immediately 
after  serving  with  the  NRA  in  order  to  prevent  any  actual  or  perceived  conflict  of 
interest. In general the organisational set-up of most NRAs is likely to foster regulatory 
independence,  though  there  is  still  room  for  improvement  to  bring  some  governance 

27 In some Member States ,NRAs are also involved in the implementation process. WIK-Consult, Main Developments 
in the Postal Sector (2010-2013), p8-9  
28 WIK-Consult, Main Developments in the Postal Sector (2010-2013), pp18-19 

8 

 
 
 
 
 
 
 
 
                                                 
procedures  in  line  with  best  practices,  for  example  where  the    minister  responsible  for 
postal policy  is able to appoint or dismiss the head of the NRA and approves the NRA's 
budget.29 

To help ensure effective regulatory oversight, the PSD requires that NRAs are provided 
with  all  necessary  resources  in  terms  of  staffing,  expertise  and  financial  means  for  the 
performance of their tasks. Overall, available figures suggest that combined resources for 
postal NRAs have changed little or decreased slightly since 2008, with an estimated 344  
people employed and a budget of EUR 35 million in 201230 for the EEA. The financial 
and  personnel  resources  available  to  NRAs  vary  substantially  between  Member  States. 
Larger Member States with bigger postal sectors have larger NRAs, although the increase 
in resources is not proportional to market size.31 The postal sector’s role in facilitating e-
commerce, the growth of the parcel segment and rapid changes in technology means that 
NRAs should be ready and equipped to face new challenges as they arise.  

To  ensure  compliance  with  the  obligations  arising  from  the  Directive,  NRAs  require 
sufficient  enforcement  powers.  In  some  Member  States  enforcement  powers  are 
comprehensive,  for  example  where  the  NRA  can  levy  significant  fines,  issue  remedial 
orders  or  seek  court  enforcement,  though  in  some  instance  these  powers  are  more 
limited.32   

The  vast  majority  of  NRAs  appear  to  have  satisfactory  procedures  in  terms  of 
transparency, fairness and clarity.  Examples of such procedures include the publication 
of  key  documents  in  national  languages,  opportunities  for  the  public  to  comment  on 
proposals and public reporting. At least fifteen NRAs (EU and EEA) show a high level of 
transparency.33  

Member  States  must  also,  if  appropriate,  provide  for  coordination  between  the  NRAs, 
National  Competition  Authorities  (NCAs)  and  the  consumer  protection  authorities 
(Article  22(1)).34  From  a  procedural  point  of  view,  Member  States  may  entrust 
enforcement of the competition rules to the NRA, the NCA, or both. Competition rules 
tend to be delegated to the NCA alone, though six Member States give the NRA equal or 
exclusive authority over application of the competition rules in the postal sector.35 In 21 
Member States the NRA and NCA are obliged to provide each other with the information 
necessary  for  the  application  of  the  Postal  Directive  and  the  competition  rules  in  the 
postal  sector  and  /or  regularly  consult  each  other  on  the  application  of  the  competition 
law to the postal sector.36  

29 WIK-Consult, Main Developments in the Postal Sector (2010-2013), pp19-22   
30WIK-Consult,  Main  Developments  in  the  Postal  Sector  (2010-2013),  p22.  Copenhagen  Economics,  Main 
Developments in the Postal Sector (2008-2010), p64 estimated that NRA resources totalled about EUR 38 million and 
290 persons in  2009. An earlier study. WIK-Consult, The Role of Regulators in a More Competitive Postal Market, 
Bad Honnef, Germany, 2009, p56 implied that NRA resources totalled about EUR 39 million and 440 persons in 2008.  
31 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p22-27  
32  WIK-Consult, Main Developments in the Postal Sector (2010-2013), p30  
33 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p31 
34  PSD,  Article  22(1):  ‘Member  States  shall  ensure,  where  appropriate,  consultation  and  cooperation  between  those 
authorities and national authorities entrusted with the implementation of competition law and consumer protection law 
on matters of common interest’. Protection of users in the postal sector is the responsibility of the NRA in almost all 
Member States; in few MS they share their task with the NCPA (National Consumer Protection Authority). 
35 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p32 
36 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p32 

9 

 
 
 
 
 
 
 
 
                                                 
Main institutional regulatory developments since 2008: 

  On  10  August  2010  the  Commission,  on  the  basis  of  Article  22  of  the  Postal 
Services  Directive,  and  with  the  full  support  of  Member  States  and  NRAs, 
established  the  European  Regulators  Group  for  Postal  Services  (ERGP).37  The 
ERGP serves as a body for reflection, discussion and advice to the Commission in 
the  postal  services  field.  Its  task  is  to  facilitate  consultation,  coordination  and 
cooperation between the independent NRAs in the Member States, and between 
NRAs and the Commission, with a view to consolidating the internal market for 
postal  services  and  ensuring  the  consistent  application  of  the  Postal  Services 
Directive in all Member States. The ERGP is an advisory group. Membership is 
limited to independent NRAs of Member States and the EEA and EU candidate 
countries  participate  as  observers.    Participation  takes  places  at  a  high  level 
(Heads of independent NRAs) and the chair is elected from the membership. The 
Commission is an observer and provides the Secretariat. Since it was established, 
the  ERGP  has  played  an  important  role  in  postal  reform  and  oversight. 
including  membership  and 
Comprehensive 
publications is available here: 

information  about 

the  ERGP 

http://ec.europa.eu/growth/sectors/postal-services/ergp/index_en.htm 

the  UK  communications 

  Since 2010, several NRAs have been fundamentally reorganized.   In the UK, the 
Postal  Services  Act  201138  transferred  responsibility  for  regulation  of  postal 
services from the single-sector regulator Postcomm to Ofcom (the regulation and 
the 
competition  authority  for 
Netherlands,  a  new  regulator,  the  Netherlands  Authority  for  Consumers  and 
Markets (ACM) was created from a merger on 1 April 2013 of the Netherlands 
Consumer  Authority,  the  Netherlands  Competition  Authority  (NMa)  and  the 
Netherlands Independent Post and Telecommunications Authority (OPTA).  40 In 
Spain  the  former  postal  NRA  was  merged  with  other  national  regulators 
(electronic  communications,  energy,  media,  airports  and  railways)  and  the 
Spanish  Competition  Authority  (CNC)  creating  the  Spanish  Markets  and 
Competition Authority (Comisión Nacional de los Mercados y de la Competencia 
(CNMC)).41  

industries).39  In 

2.2.2.  Authorisation and Licensing Regimes 

Article 9 sets out the types of regulatory regime and the conditions that Member States 
may  impose  to  ensure  the  provision  of  a  certain  level  of  postal  services.  For  services 
outside  the  scope  of  the  Universal  Service  Obligation  (USO)  "Member  States  may 
introduce  general  authorisations  to  the  extent  necessary  to  guarantee  compliance  with 
the essential requirements". General authorisations do not require operators to obtain an 
explicit decision from the NRA before starting to offer the service concerned.42  

For  services  within  the  scope  of  the  USO,  Member  States  may  go  beyond  a  general 
authorisation  and  introduce  more  stringent  conditions,  "to  the  extent  necessary  to 
guarantee  compliance  and  to  ensure  the  provision  of  the  universal  service".  These 

37

 Commission Decision of 10 August 2010 establishing the Regulators Group for Postal Services, OJ C 217 of 

11.8.2010, p7 
38 Available from www.legislation.gov.uk/ukpga/2011/5/contents  
39 For further information see http://stakeholders.ofcom.org.uk/post/ 
40 ACM website: www.acm.nl/en/ 
41 CNMC website: www.cnmc.es 
42 2008/6/EC Article 9. 

10 

 
 
 
 
 
 
 
                                                 
requirements  may  include  an  individual  licensing  regime,  where  providers  must  obtain 
permission  from  the  NRA  before  offering  a  service.  In  turn  the  license  may  contain 
specific  rights  and  obligations  in  line  with  Article  9(2),  for  example  setting  certain 
standards for quality, availability and performance of services; requiring contributions to 
the financing of the universal service; and imposing technical or operational conditions.43 

Concerns  have  been  expressed  that  authorisation  procedures  for  postal  operators  have 
been used to expand regulatory controls and erect barriers to market entry following the 
abolition  of  the  reserved  area,  rather  than  to  enable  new  operators  to  benefit  from  full 
market  opening.44  In  some  Member  States  new  regulatory  requirements  have  been 
created as  individual  licences have been  introduced for services  which were  previously 
outside the scope for regulatory control.45 Wherever possible, authorisations should be in 
the form of general authorisations applicable to all postal operators in order to minimise 
barriers to market entry and create the least market distortion.   

Figure 1:  Designated and authorised postal operators and licensing/authorisation 
procedures (2010-2012) 

Source: WIK-Consult, Main Developments in the Postal Sector (2010-2013), p37 and 43.46 

The chart above shows whether Member States use a licensing regime (indicated by L) or 
a general authorisation (G) and the number of authorisations granted for 2010, 2011 and 
2012. Most Member States continue to use a licensing regime. Ten Member States (BG, 
CY, EE, EL, ES, HU, IT, LU, MT and PT) continue to maintain licence requirements for 
the entire USO area, while six additional Member States (AT, DE, BE, FI, FR and SE), 
require licenses for portions of the universal service area.47  Since 2008, LT, LV, PL, RO, 

43 2008/6/EC Articles 2 and 9  
44  WIK-Consult,  Main  Developments  in  the  Postal  Sector  (2010-2013),  WIK-Consult,  The  Role  of  Regulators  in  a 
More  Competitive  Market,  2009.  The  latter  study  reported  that  not  all  of  the  justifications  given  by  NRAs  for 
introducing authorisation procedures were clear and convincing.  
45 WIK-Consult, The Role of Regulators in a More Competitive Postal Market, p113, 289, 290 
46 Ireland has implemented a new postal framework and has at least eight operators who have made a notification under 
the relevant section of the (Irish) Postal Services Act 2011.  
47 WIK-Consult, Main Developments in the Postal Sector (2010-2013),pp 37-38.  The Role of Regulators in a More 
Competitive Postal Market p109 found that 12 Member States require an individual license for all services within the 
universal service area.  

11 

 
 
 
 
 
 
 
                                                 
SI  and  UK  have  replaced  licenses  with  a  general  authorisation.  While  most  Member 
States have granted more than one authorisation, the number of active operators is lower 
than the number of licenses.48  

Ten Member States appear to apply conditions relating to the ‘quality, availability, and 
performance’  of  services  provided  by  authorised  postal  operators  other  than  designated 
universal  service  providers  (USPs).49  Conditions  are  permitted  by  the  Postal  Services 
Directive,  but  only  if  they  are  not  comparable  to  ‘universal  service  obligations’  and  if 
they are strictly ‘necessary and justified’ to accomplish some other objective of the Postal 
Services  Directive,  such  as  protecting  users.  In  particular  they  are  subject  to  the 
proportionality requirement under Article 9(3). 

For  example,  the  current  Belgian  legislation  imposes  strict  licence  conditions  on 
providers  of  postal  services.  After  two  years  of  operation,  operators  are  required  to 
deliver twice a week and after five years to serve all three regions of Belgium, expanding 
in line with minimum percentages for population coverage, as well as applying a uniform 
rate throughout the country. Given that these conditions erect high barriers to entry they 
appear to protect the USP from competition rather than specifying necessary and justified 
requirements.50  In  November  2014  the  Commission  started  an  infringement  procedure 
against Belgium and addressed a letter of formal notice to the Kingdom of Belgium. A 
study commissioned by the Belgian Institute for Postal Services and Telecommunications 
(BIPT),51  the  NRA,  confirmed  that  the  above  requirements  are  neither  necessary  nor 
justified.52  In  April  2015,  Belgium  indicated  to  the  Commission  that  it  would  bring 
forward legislative proposals in 2015 to remove these requirements by amending current 
national legislation. 

Eleven  Member  States  appear  to  have  several  authorisation  conditions  which  duplicate 
the  confidentiality  of 
legislation,  for  example  covering 
requirements  of  other 
correspondence.53  In  principle  the  implementation  of  the  PSD  should  not  duplicate 
conditions which are applicable through other non-sector specific national legislation.54 

48 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p37 
49 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p39 
50 WIK-Consult, Review of the postal market three years after full market opening on 1 January 2011,  pp22-24 
51  Institute  belge  des  services  postaux  et  des  télécommunications/  Belgisch  Instituut  voor  postdiensten  en 
telecommunicatie 
52 WIK-Consult, Review of the postal market three years after full market opening on 1 January 2011, 2015 
53 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p42  
54 2008/6/EC Article 9 (2) 

12 

 
 
 
 
 
 
 
 
                                                 
2.3.  The Universal Service: Basic Postal Services for All  

Article 3 of the PSD requires Member States to safeguard the provision of certain basic 
postal services (the “universal service”). This is key to ensuring reliable and affordable 
postal services for all users across the EU. As a minimum, Member States must ensure a 
universal  service  that  provides  for  the  collection,  sorting,  transport,  and  distribution  at 
least five working days per week of (i) postal items weighing up to 2 kilograms and (ii) 
postal packages up to 10 kilograms,55 as well as services for registered items and insured 
items  in  both  categories.  Within  these  boundaries  Member  States  have  flexibility  to 
decide  what  exactly  constitutes  a  universal  service  to  fit  their  domestic  circumstances. 
The  universal  service  covers  both  national  and  cross-border  services  (Article  3, 
paragraph  7).  Cross-border  postal  services  are  specifically  addressed  in  section  2.8 
whereas the focus of sections 2.3 to 2.7 is primarily domestic (universal) postal services.  

Many  commonly  used  postal  services  are  not  part  of  the  universal  service,  even  where 
they  are  provided  by  the  universal  service  provider.  Such  services  include  for  example 
value-added  services  like  track  and  trace  capability  or  delivery  within  a  specified  time 
window.  Other  services  such  as  bulk  mail  or  periodicals  are  part  of  the  USO  in  some 
Member States, but not in all.  

2.3.1.  Designation of Universal Service Provider(s) 

The provision of the universal service must be ensured by Member States using one or 
more of three mechanisms: market forces; the designation of one or more undertakings to 
provide  different  elements  of  the  universal  service  or  to  cover  different  parts  of  the 
territory; or the public procurement of universal services (Article 4 (2)). Member States 
are  to  determine  themselves  the  "most  efficient  and  appropriate"  mechanism  while 
non-discrimination, 
objectivity, 
respecting 
proportionality  and  least  market  distortion  necessary  to  ensure  the  free  provision  of 
postal  services  in  the  internal  market",56  taking  into  account  national  needs  and 
conditions.  

transparency, 

principles 

"the 

of 

Directive  2008/6/EC  changed  the  historic  preference  for  the  designation  of  a  particular 
operator, to encourage greater competition and choice in postal services. Nevertheless, all 
Member  States  still  designate  a  single  universal  service  provider  (USP),  with  the 
exception of Germany, which in principle57 relies on market forces for the provision of 
the universal service. In all Member States the universal service provider is the historical 
public postal operator or its corporate successor. 

Reliance  on  market  forces  requires  the  least  regulatory  intervention,  but  there  may  be 
grounds to justify one of the other solutions.58 Designating a universal service provider 
(USP) also has implications beyond the provision of the universal service. For example, 
the  different  legal  status  that  results  from  the  designation  can  trigger  different  VAT 
treatment (for a certain limited scope of postal items).  

55 National Regulatory Authorities may increase the weight limit of universal service coverage for postal parcels to any 
weight not exceeding 20kg.  
56 2008/6/EC Recital 23 
57 The historically designated universal service provider has a specific responsibility to inform the national regulatory 
authority in case it would cease to provide the service it was historically ensuring on the basis of the designation before 
full market opening on 1 January 2008. 
58  In  particular,  the  principles  of  proportionality  and  least  market  distortion  require  a  Member  State  to  refrain  from 
introducing regulatory constraints greater than necessary to achieve the public objectives sought; for example  see the 
assessment of WIK-Consult, Main Developments in the Postal Sector (2010-2013), pp131-137. 

13 

 
 
 
 
 
 
                                                 
To prevent undue distortions Article 4(2) PSD states that any entrustment should be used 
proportionately  that  is,  only  to  the  extent  objectively  necessary  to  ensure  the  universal 
service  and  should  be  ‘based  on  the  principles  of  transparency,  non-discrimination  and 
proportionality’,  while  taking  into  account  that  the  duration  of  this  designation  should 
provide a sufficient period for return on investments. When Member States conduct the 
periodic  review  required  by  Article  4(2)  they  will  need  to  engage  in  an  objective, 
transparent,  and  non-discriminatory  analysis,  as  stated  by  Recital  23,  and  to  consider 
carefully  if  continued  reliance  on  a  historic  designation  model  is  appropriate  or 
necessary.  

2.3.2.  Services Provided under the Universal Service Obligation 

There  is  flexibility  in  the  services  that  can  be  provided  under  the  universal  service 
obligation (USO) providing that Member States ensure a universal service that provides 
for the collection, sorting, transport, and distribution of (i) postal items weighing up to 2 
kilograms and (ii) postal packages up to 10 kilograms, as well as services for registered 
items and insured items in both categories. There is therefore significant variation in how 
Member States define the universal service obligation and the services that are included 
within  the  universal  service  obligation  have  changed  over  time.  All  Member  States 
include single piece letters and parcels.59 Eleven member states (c. 56% of the EU/EEA 
letter post market) include only single piece items, while others also include bulk letters 
(potentially  including  bulk  mail,  direct  mail  and  periodicals),  bulk  parcels  and  other 
items.60 

Table 1: Variations in the Scope of the Universal Service Obligation (2013) 61 

Scope  
Single Piece Only  
Single  Piece  and  Bulk 
Letters  
All  

Number   Member State 
9  
7 

BG, CZ, DE, EE, HK, LT, NL, PL, UK.  
EL, FR, IT, CY, LV, SE, SI.  

11 

AT,  BE,  DK,  ES,  HU,  IE,  LU,  MT,  PT, 
RO, SK.  

Source: ERGP, Report on the Benchmarking of the universal service tariffs, ERGP (14) 23, 2014 

There appears to be a trend towards a narrower scope for the universal service obligation. 
Fewer  Member  States  now  include  bulk  letters,  direct  mail  and  periodicals  than 
previously, though more now include bulk parcels in the universal service obligation.62   

The  designation  of  services  as  part  of  the  universal  service  obligation  requires  a  set  of 
obligations stemming from the Directive to be fulfilled. The broader the range of services 
included in the universal service, the broader the responsibility  of the Member State to 
ensure cost-orientation, non-discrimination, transparency, service quality, etc.  

The Directive currently provides for NRA tasks regarding non-universal postal services 
in three areas: complaints, statistics, and supervision of the regulatory accounts of USPs. 
Article  19  requires  Member  States  to  ensure  that  all  postal  operators,  i.e.  not  only 
universal  service  providers,  maintain  certain  measures  to  protect  the  rights  of  users. 

59 Single piece refers to individual items or aggregated items of sufficiently low volume that they do not qualify for 
bulk discounts so the price and service offered is the same as for individual items.   
60 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p130 
61 FI not included in the study 
62 See Copenhagen Economics, Main Developments in the Postal Sector (2008-2010), p126 by way of comparison.   

14 

 
 
 
 
 
 
 
                                                 
Article  22a  that  was  introduced  by  Directive  2008/6/EC  requires  all  postal  services 
providers  to  provide  information  for  clearly  defined  statistical  purposes  and  to  ensure 
conformity with the Postal Services Directive to the NRA. Article 14 provides that USPs 
must account for common costs incurred in providing universal and non-universal postal 
services (in order to be able to check for any cross-subsidies).  

As bulk postal services have in more and more Member States been excluded from the 
universal  service  obligation,  the  NRAs’  authority  to  control  pricing  in  bulk  postal 
markets has receded. However, as outlined in section 3.2.2, in most Member States the 
universal service provider faces little effective competition. If these products and services 
are no longer subject to a sector specific regulatory regime, a universal service provider 
may  be  able  to  block  market  entry,  for  example  by  denying  access  to  elements  of  the 
postal  infrastructure  or  denying  competitors  non-discriminatory  access  to  downstream 
services ("last mile delivery").  

Ongoing  monitoring  is  needed  to  ensure  that  the  provisions  in  the  Directive  which 
protect  competition  in  the  universal  service  area  remain  sufficient  as  postal  services 
evolve.    Further  statistical  information  for  non-universal  parcel  services  and  increased 
regulatory  oversight  of  cross-border  services,  given  the  growing  importance  of  parcel 
delivery for e-commerce, are areas of particular focus.   

2.3.3.  Frequency of the Universal Service 

Article  3  specifies  that  the  universal  service  should  be  guaranteed  not  less  than  five 
working  days  a  week  save  in  circumstances  or  geographical  conditions  deemed 
exceptional.    Most  Member  States  guarantee  the  collection  and  delivery  of  letters  and 
parcels on five working days, though some exceed this requirement, some for letters and 
some for both letters and parcels.  Some USPs choose to delivery more often than they 
are formally required to do, for example in Germany where there is delivery on six days 
but the legal requirement for five. The table below sets out delivery frequencies.  

Table 2: Collection and Delivery Frequencies for the Universal Service Obligation 

Collection and delivery frequency  Member State 
5  days  for  letters  not  specified  for 
parcels 
5    days  for  letters,  5  days  for 
parcels 
6 for letters, 5 for parcels 
6 for letters, 6 for parcels 

CY, SE,  
AT*, BE, BG, ES, CZ, EE, FI, EL, HK, HU, 
IE, IT, LV, LT, LU, NL, PL, PT, RO, SK, SI,  
DK, UK 
FR, DE, MT 

* In Austria newspapers are delivered 6 days a week and all other products on 5 days.  

Source: WIK-Consult, Main Developments in the Postal Sector (2010-2013) and ERGP, (14)23 Report on 
the Benchmarking of the Universal Service Tariffs updated 

The importance the Directive attaches to the delivery frequency and thus also the limits 
to the derogation relating to circumstances or geographical situations deemed exceptional 
has  been  reflected  in  the  wording  of  Recital  21  of  Directive  2008/6/EC,  which  states 
explicitly:  "The  universal  service  guarantees,  in  principle,  one  clearance  and  one 
delivery  to  the  home  or  premises  of  every  natural  or  legal  person  every  working  day, 
even  in  remote  or  sparsely  populated  areas."  Therefore,  it  is  clear  that  any  derogation 

15 

 
 
 
 
 
 
 
 
 
granted by the NRA in accordance with Article 3(3) of the Directive must be based on 
clear  and  objective  criteria  and  be  subject  to  regular  monitoring  as  to  its  scope  and 
effects.  

The possibility to provide exemptions from the minimum obligation due to exceptional 
circumstances or geographical conditions has to date been used in a restricted manner, as 
was  the  Directive's  intention.  16  Member  States  apply  the derogation  as  allowed  under 
Article  3(3)  of  the  Postal  Services  Directive  but  most  exceptions  are  limited  to  the 
exclusion of less than 1% of the population from daily home delivery.63 An ERGP study 
on  best  practice  recommended  that  exemptions  should  be  based  on  objective  and 
published criteria, monitored regularly and subject to control mechanisms.64    

Main developments: 

  From 1 January 2014 Post NL reduced the number of collection and delivery days 
from six to five. Reductions were also proposed to the number of post boxes and 
postal agencies required.65 

 

In Denmark the law allowed in 2014 for the universal service provider to change 
the  delivery  frequency  so  that  first  class  letters  are  not  delivered  to  private 
households on Mondays (only Tuesday-Saturday).66  

  Posti (then Itella) in Finland conducted a trial in autumn 2014 where it delivered 
non-USO  products  four  days  a  week  while  continuing  to  deliver  USO  products 
five days a week. Delivery routes were also changed. Following the trial, 70% of 
recipients  felt  that  delivery  was  working  well  and  80%  thought  that  the  mail 
delivery  was  normal.  Almost  two  thirds  were  ready  to  see  the  delivery  model 
expanded permanently to the rest of the country.67  

2.3.4.  Studies on User Needs and the Universal Service Obligation 

Given the ongoing decline in letter post volumes, and the increasing accessibility and use 
of e-commerce, some Member States (and other organisations) have conducted reviews 
of the USO and user needs.  

Studies include: 

  A 2010 study commissioned by the Irish NRA ComReg68 observed a diminishing 
importance  of  letter  post  and  the  use  of  electronic  substitutes  among  residential 
customers  and  SMEs.  In  contrast,  large  businesses,  governmental  bodies  and 
NGOs  still  relied  on  letter  post.  Both  residential  and  organisational  customers 
emphasised the importance of delivery to every address and the reliability of the 
service (i.e. at the same time of the day). Residential customers and SMEs were 

63  ERGP,  (14)24  ERGP  Report  2014  on  the  quality  of  service  and  end-user  satisfaction,  WIK-Consult,  Main 
Developments in the Postal Sector (2010-2013) Country Reports 
64 ERGP, (13)32 Rev1 Best practices in the field of consumer protection, quality of service and complaint handling, 
2014 
65 Ministry of Economic Affairs, The Dutch Postal Market and the Postal Directive,, 2014 
http://www.ancom.org.ro/en/uploads/links_files/2_Jeroen_Sas_-
_The_Dutch_Postal_Market_and_the_Postal_Directive.pdf 
66 https://www.retsinformation.dk/Forms/R0710.aspx?id=161868 
67  Posti  (2015)  Finnish  Experiences  on  a  Product  Specific  Delivery  Experience,  Presentation  to  15th  Königswinter 
Seminar 11 February 2015. 
68  The  Research  Perspective/ComReg  (2010),  Findings  from  qualitative  research  into  the  national  need  for 
communication and distribution services, prepared by The Research Perspective Ltd on behalf of The Commission for 
Communications Regulation. 

16 

 
 
 
 
 
 
                                                 
found  to  have  lower  requirements  that  the  universal  service  specified,  but 
customers were rather dissatisfied with service quality in terms of parcels. 

 

In  2012  Michel  Barnier,  the  former  Commissioner  for  the  Internal  Market  and 
Services,  used  the  “Postal  User  Forum”  as  a  forum  for  a  debate  between  postal 
users and various stakeholders (including mail-and parcel users, on-line retailers, 
internet service providers, postal and courier operators) to identify today's needs 
and  experiences  on  mail  and  parcel  delivery  and  solutions  for  the  future.  The 
service levels of the universal service definition were questioned by stakeholders 
in  different  contexts,  including  the  context  of  digitalisation  and  letter  volume 
decline.  

  A  2012/13  Ofcom  study69    concluded  that  the  postal  market  was  meeting  the 
reasonable  needs  of  users  in  the  UK  although  tolerance  of  changes  to  the 
universal  service  was  quite  high.  Users  wanted  more  convenient  delivery  of 
parcels.  When  questioned  about  possible  future  scenarios,  residential  customers 
were willing to consider a single tier postal service, slightly more expensive than 
current  second class but quicker, a reduction in frequency  from six  to  five days 
and  greater  flexibility  in  delivery/collection  times.  Customers  were  willing  to 
accept  significant  changes  in  the  service  in  order  to  maintain  prices.  They  were 
not willing to have differences in local and national services.70 

  The  ERGP  published  a  discussion  paper  which  set  out  the  key  challenges  and 
held  a  public  consultation  on  the  universal  service  obligation  in  view of  market 
developments  in  autumn  2014.71  Many  of  those  who  responded  to  the 
consultation  called  for  a  reduction  in  the  scope  of  the  USO,  at  least  at  the 
European level, in order to give Member States greater flexibility given the nature 
of their domestic letter markets.72 ERGP work in this area is continuing in 2015.   

2.3.5.  Tariffs for Universal Service Products 

Article  12  of  the  PSD  requires  universal  postal  services  to  be  affordable  for  all  users, 
prices  to  be  cost-oriented  and  transparent  and  provision  to  be  on  a  non-discriminatory 
basis.  Member  States  have  a  certain  margin  of  discretion  as  to  how  to  interpret  these 
principles. All Member States apply some form of price control and most Member States 
have included the principles in their national postal legislation.73 

The aim of affordability is to ensure basic postal services are within everyone's means. In 
some  Member  States  the  existence  of  a  price  cap  is  deemed  sufficient  to  ensure 
affordability,  though  in  some  cases  affordability  is  tested,  for  example  by  regulatory 
approval  of  price  changes,  multi  criteria  assessments  and  consultations.74  Some 
regulators publish the results of their affordability tests.75 

Comparisons of 'affordability' across Member States need to take into account the impact 
of exchange rates, standards of living and the domestic postal product mix.  To compare 

69  Ofcom  (2012),  Review  of  postal  users'  needs  An  assessment  of  the  reasonable  needs  of  buyers  in  relation  to  the 
market for the provision of services in the United Kingdom, Statement, 27 March 2013. 
70 Iposos Mori (2012) Postal User Needs Qualitative Research 
http://stakeholders.ofcom.org.uk/binaries/research/post/deliberative-oct2012/main.pdf 
71 ERGP, (14)16 Discussion Paper on the implementation of Universal Service in the postal sector and the effects of 
recent changes in some countries on the scope of the USO.   
72  See http://www.ancom.org.ro/en/presentations_5328 
73  See  WIK-Consult,  Main  Developments  in  the  Postal  Sector  (2010-2013),  p137;  Copenhagen  Economics,  Pricing 
behaviour of postal operators, 2012, pp193-207 
74 Copenhagen Economics, Pricing behaviour of postal operators p196. There was no answer from BG, CY, and DK. 
75 ERGP, (14)22 ERGP Report on Tariff Regulation in a context of declining volumes, , 2014.   

17 

 
 
 
 
 
 
                                                 
affordability, the ERGP used a range of measures which showed that for single piece 20g 
domestic priority letters, Latvia was the most expensive and Malta the cheapest of the 26 
Member States  that were  included in a survey using a daily net earnings comparison.76 
Using the published price at adjusted exchange rates and excluding VAT, Latvia (EUR 
1.22)  was  the  most  expensive  and  Malta  (EUR  0.35)  was  the  cheapest  again.  The  size 
and  weight  categories  and  their  corresponding  prices  were  however  not  always 
compatible,  for  example  Poland's  first  weight  category  is  for  letters  up  to  350  grams 
rather  than  20  grams,  and  some  Member  States  also  offer  cheaper  'non-priority' 
alternatives.  

Figure 2: Domestic letter price (20g, priority) as proportion of daily net earnings (‰)  

Source: ERGP (14) (23) ERGP Report on the benchmarking of the universal service tariffs. 

For  a  heavier  weight  category,  a  domestic  priority  letter  weighing  up  to  500g  using 
adjusted  exchange  rates,  Italy  (EUR  5.18)  was  the  most  expensive  and  Cyprus  (EUR 
0.75)  the  cheapest  Member  State.  When  compared  to  daily  net  earnings,  Romania  was 
the most expensive and Luxembourg the cheapest.77 

For a domestic single piece 2kg parcel, Sweden (EUR 13.47) was the most expensive and 
Denmark  (EUR  1.06)  the  cheapest,  adjusted  for  exchange  rates.  Compared  to  daily 
earnings, Denmark was the cheapest and Hungary the most expensive.78  

76 ERGP, (14)23 Report on the Benchmarking of the universal service tariffs, ERGP, p37. No information for EE and 
ES.  
77 ERGP, (14)23 Report on the Benchmarking of the universal service tariffs, pp43-45 for 26 Member States, excluding 
EE and ES.  
78  ERGP,  (14)23,  Report  on  the  Benchmarking  of  the  universal  service  tariffs,  pp52-54  for  26  Member  States, 
excluding EE and ES.  

18 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Figure 3: Domestic letter price (20g priority in 2013) using purchasing power parity  

1,20

1,00

0,80

0,60

0,40

0,20

0,00

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

AT BE DE DK FI FR IE LU NL SE UK CY EL ES IT MT PT BG CZ EE HR HU LT LV PL RO SI SK

Western

Southern

Eastern

Source: European Commission Postal Statistics, own calculations on the basis of the prices of 2013 

In terms of affordability, PPP79 prices in the eastern Member States appear to be higher 
than prices in the southern or western Member States, although when comparing nominal 
prices the exact opposite is observed.  

Average price trends in EU28 show an average price increase for 2012 to 2013 of 5.4%80 
that  is  distributed  unevenly  across  Member  States.  In  southern  Member  States  higher 
the  eastern  or  western  ones. 
price 

increases  are  observed  compared 

to 

To  help  compensate  for  declining  volumes,  some  universal  service  providers  have 
significantly increased their basic tariffs in recent years, including in Denmark, Estonia, 
Luxembourg,  Hungary  and  the  UK,  though  in  many  cases  these  Member  States 
previously had postal tariffs that were stable or declining in real terms.81   For example in 
Estonia, in the first price change since 2011, Eesti Post announced a 22% increase in the 
cost  of  sending  a  domestic  standard  letter  from  1  September  2014  and  the  price  of  all 
universal  services  (including  international  letters  and  parcels  up  to  20kg)  also  rose  by 
18%  on  average.82  In  Southern  and  Eastern  Member  States  between  2010  and  2012 
tariffs usually remained stable or declined in real terms, though since then some universal 
service  providers  have  announced  notable  increases,  including  Malta  Post  and  Poczta 
Polska.  

79 Purchasing power parities (PPPs) are indicators of price level differences across countries. PPPs indicate how many 
currency units a particular quantity of goods and services costs in different countries. PPPs can be used to eliminate the 
effect of price level differences across countries. 
80 European Commission, Postal Statistics Database 
81 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p207 
82 Even with these tariff increases Eesti Post still expected to make a EUR 2m loss on the universal service in 2015.  
Source:  Omniva presss release 14/7/2014.   
https://www.omniva.ee/about_us/news/all_news/cost_of_a_stamp_will_increase_from_1_september  
19 

 
 
 
 
 
 
 
 
                                                 
Non-priority letter services allow for more flexibility in postal operations and are a way 
to  reduce  network  cost  and  help  mitigate  declining  volumes  as  well  as  ensuring  the 
continued availability of an affordable service. In around half of the Member States USPs 
offer non-priority basic letter post services that are delivered the second or the third day 
after  posting  (second  fastest  standard  category:  SSC),  rather  than  on  the  next  day.  In 
2011  Austrian  Post  launched  an  economy/  D+3  service  for  business  customers,  having 
previously offered only a next day service. La Poste (France) has also  introduced a D+2 
letter (‘lettre verte’) for consumers and business customers additional to its D+1 service 
(‘lettre  prioritaire’)  and  D+3/4  service  (‘l’écopli’).  In  Denmark,  the  UK  and  Hungary 
tariffs for second class letters have increased substantially less than those for first class 
letters, in order to help maintain the affordability of basic services. In Denmark and the 
UK the second class letter is still subject to ex ante price regulation while the first class 
letter is not. The price difference between first and second class letters in most Member 
States is more than 10% and can be as large as 37.5% (Romania).83 

The cost-orientation requirement aims not only to prevent prices of basic postal services 
from being too high, but also to prevent pricing below service specific costs, which could 
restrict  competition  and  could  therefore  lead  to  higher  prices  in  the  long  run.  NRAs 
measure  and  test  cost-orientation  in  different  ways,  for  example  by  scrutinising 
individual prices, the price of a level of service (i.e. counting the different size or weight 
steps) or the price of a basket of services, and using regulatory and financial accounts.84 
To test the principle of cost-orientation, some NRAs regard price caps as sufficient, while 
others monitor specific criteria for cost-orientation or perform other tests, primarily using 
either the regulatory or financial accounts of the USP. Stakeholders other than the USP 
are usually not involved and the results of these tests are rarely published.85 

ERGP  analysis  of  the  determinants  of  pricing  found  that  around  20%  of  the  observed 
difference in letter prices is due to population density. The correlation between price and 
degree of urbanisation was not statistically significant but the relationship with dwelling 
type (detached houses, flats etc) was significant. Labour costs accounted for 36.7% of the 
variation in prices.86 

Most Member States ensure transparency by requiring the USP to publish prices, in line 
with  the  European  Committee  for  Postal  Regulation's  (CERP)  recommendation,87 
although around half do not have defined criteria for 'transparency'.88 A small number go 
further than publication alone, for example by requiring pricing models to be submitted 
to 
the 
disclosure/publication of individually negotiated prices.89 Some USPs also publish tariffs 
outside  the  scope  of  the  universal  service90  and  some  publish  information  in  other 
languages.  

the  publication  of  pricing  principles  and/or 

regulator, 

requiring 

the 

83 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p208 
84  ERGP,  ERGP  Report  on  Tariff  Regulation  in  a  context  of  declining  volumes,  (14)  22,  Copenhagen  Economics, 
Pricing behaviour of postal operators, Copenhagen, Denmark, 2012 pp199-201 
85 Copenhagen Economics, Pricing behaviour of postal operators, pp200-202 
86 ERGP, (14)23 Report on the Benchmarking of the universal service tariffs, p35 
87 European Committee for Postal Regulation (CERP), Recommendation on best Practices for Price Regulation (2 Oct 
2009), PL 2009/2 Doc 5 (2 Oct 2009). 
88 Copenhagen Economics, Pricing behaviour of postal operators (2012) p206, WIK-Consult, Main Developments in 
the  Postal  Sector  (2010-2013),  p139.  Only  in  HU  and  NL  is  there  neither  a  definition  of  transparency  nor  NRA 
measures in place to ensure transparency.  
89    See  Copenhagen  Economics,  Pricing  behaviour  of  postal  operators  (2012)  for  details.    MS  known  to  require 
measures beyond publication of price lists are EE, IE, LT, RT, SE and SE.  
90 ERGP, (14)22, ERGP Report on Tariff Regulation in a context of declining volumes, , pp34-36 

20 

 
 
 
 
 
 
 
                                                 
The aim of the principle of non-discrimination of tariffs is that customers in comparable 
conditions should be able to benefit from equivalent tariffs and conditions. A wide range 
of  potential  criteria  can  be  used  to  define  non-discrimination,  e.g.  geographical 
distribution, volumes, levels of pre-sortation, or access for certain user groups. NRAs in 
almost  all  Member  States  take  steps  to  ensure  non-discriminatory  tariffs  with  the 
exception of Hungary.91 Non-discrimination is usually tested through ex-ante instruments 
or ex-post testing.92 There have been a number of legal cases related to the principle of 
non-discrimination, see section 2.11 for further details.   

2.3.6.  Price Regulation 

Ex  ante  approvals  can  help  to  ensure  that  prices  of  universal  services  are  cost  oriented 
and are therefore necessary where emerging competition might be damaged by universal 
service  providers  setting  unreasonably  low  prices  or  consumers  of  universal  service 
products  or  services  might  be  damaged  by  universal  service  providers  setting 
unreasonably high prices. On the other hand, the administrative burden of ex ante price 
regulation is relatively high and postal operators have limited commercial freedom under 
such  a  regime.93  Certain  studies  suggest  that  in  a  market  with  declining  volumes  in 
particular, some degree of pricing flexibility and a lighter touch regulatory regime may 
be  more  likely  to  meet  the  aims  of  affordability  and  competition  than  price  cap 
regulation.94 

Member States  use both ex ante and ex  post price control methods, though  to  different 
extents.  The  majority  rely  more  on  ex  ante  price  regulation  than  on  ex  post  control.  
Single piece postal items (letters and parcels) are the items most often subject to ex ante 
control.    Price  caps  are  also  used  in  many  Member  States,  again  most  commonly  on 
single piece items.  Several Member States apply other price control measures in addition 
to ex ante approvals and price caps, for example checking (ex post) the prices subject to a 
cap.95  Even  where  price  controls  are  not  currently  used,  NRAs  may  have  the  power  to 
introduce or extend them, in the event that they are deemed necessary in the future. 

91 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p140 
92 See Copenhagen Economics, Pricing behaviour of postal operators (2012)  p207 
93  Ex  ante  approval  may  also  prevent  cross-subsidisation  between  services  for  which  competition  is  low  (risk  of 
excessive prices) and services for which competition is higher (risk of predatory pricing).  
94 Copenhagen Economics Pricing behaviour of postal operators, p217 
95 WIK-Consult, Main Developments in the Postal Sector (2010-2013), pp141-144 

21 

 
 
 
 
 
 
 
 
                                                 
Table 3: Products Subject to and Methods of Price Regulation 

Single 
piece 
letters 

AT, BG, 
CY, EL, 
ES, IE, 
LT, LU, 
LV, 
MT***, 
RO, SI, 
SK 
AT, BE, 
DE**, 
EE, FR, 
HU, IE, 
IT, NL, 
PL, PT 
DK, FI, 
HU, SE 

Ex ante 
approval 

Price 
cap 

Ex post 
control 

Bulk 
letters 

Direct 
mail 

Newspapers 
magazines 

Non-priority 
correspondence 

AT, 
CY, 
EL, 
LU, 
LV, 
MT*** 
RO, SK 

FR, IE, 
IT, PT 

AT, EL, FR, 
MT***, RO, 
SI 

BG, EL, LT, LV, 
RO, SK,  

AT, 
CY, 
EL,  
MT*** 
RO, SK 

FR, PT 

IT 

BE, FR, HU, PL, 
UK 

Bulk 
parcels 

AT, EL, 
MT***, 
RO, SK 

FR 

Single 
piece 
parcels 

AT, BG, 
CY, EL, 
ES, LT, 
LU, LV, 
MT*** 
RO, SI, 
SK 

BE, EE, 
FR, IE, 
IT, NL, 
PL, PT  

DE, 
ES, SE 

DE, 
DK, SE 

DE, SE, SK  DK, FI, SE 

DE, DK, 
FI, HU, 
SE 

DK, ES, 
HU, SE 

Source WIK-Consult, Main Developments in the Postal Sector (2010-2013), p14196 

Main developments: 

 

In  2011  Bundesnetzagentur  (BNetzA),  the  German  NRA,  deemed  the  tariffs  of 
Deutsche  Post’s  (fully  owned)  subsidiary  First  Mail  to  be  discriminatory  and 
anticompetitive. First Mail offered regional letter services for business customers 
using  separate  delivery  to  that  of  Deutsche  Post  in  densely  populated  areas  in 
Germany  and  in  competition  with  other  postal  service  providers.  The  other 
operators accused First Mail of setting prices too low and hindering competition.  
In  its  decision,  the  NRA  concluded  that  prices  offered  by  a  subsidiary  of  a 
regulated firm cannot be assessed separately from the parent, and that Deutsche 
Post  and  its  subsidiary  should  be  considered  as  one  entity.  First  Mail  was 
therefore obliged to set prices no lower than prices for downstream access at the 
inward mail centre of Deutsche Post. Following the BNetzA decision, Deutsche 
Post ended First Mail’s operations at the end of 2011. 

 

In  April  2012  the  UK  NRA,  Ofcom,  substantially  reduced  the  scope  of  ex  ante 
price  regulation.  The  goal  was  to  give  Royal  Mail  greater  pricing  flexibility  in 
order to sustain its financial viability and ensure the provision of universal service 
in  view  of  changing  market  conditions.  Next  day  ('first  class')  letters  and 
downstream  access  prices  are  no  longer  capped.  To  protect  the  affordability  of 
universal  services  for  elderly  people  and  low  income  customers  in  particular, 

96  **Price cap only for services of a market dominant incumbent, otherwise ex post; ***Ex ante approval for services 
of a market dominant incumbent, otherwise price cap; PT: prices for items of correspondence and direct mail up to 50g 
are subject to a price cap, all other prices are controlled ex post; HU: price cap for items of correspondence up to 50g in 
single piece service and conveyance of official documents. 

22 

 
 
 
 
 
 
 
  
 
 
                                                 
Ofcom maintained a "safeguard" cap on prices for second class mail (two to three 
day delivery) only.97 

  The  Commission  for  Communications  Regulation  (ComReg),  the  Irish  NRA, 
introduced a price cap for the universal service in 2014. This is the first time the 
Irish  USP,  An  Post,  has  been  subject  to  a  price  cap  control.  The  price  cap  is 
effective  for  five  years  and  sets  an  upper  limit  on  the  amount  that  An  Post  can 
charge, rather than setting actual prices. The cap is indexed to the consumer price 
index,  minus  an  adjustment  to  encourage  the  efficient  provision  of  postal 
services.98 

 

 

In  Portugal,  the  NRA  issued  a  decision  in  2014  on  the  criteria  for  setting 
universal  service  prices  which  will  be  applied  from  2015  until  2017. 
Correspondence,  editorial mail  and  parcel basket of services are controlled by a 
price  cap,  as  well  as  legal  summons  and  notifications  service.  For  all  other 
universal postal services, CTT has to notify the NRA of prices to be introduced at 
least 30 days ahead of the date on which prices take effect and show it complies 
with  the  tariff  principles  (affordability,  cost-orientation,  transparency  and  non-
discrimination) and pricing criteria defined in the decision.  If the NRA deems the 
proposed prices do not comply with the principles and criteria the USP is notified 
based on a substantiated decision, so that company may revise such prices within 
15 days. If on the other hand the NRA remains silent, then the USP is entitled to 
introduce the notified prices (when the notification period has elapsed). 99  

In France ARCEP approved higher limits for price changes (concerning the price 
cap period from 2013 to 2015) than in previous price cap periods due to expected 
falling revenues of the regulated services. Following a subsequent review in light 
of  declining  mail  volumes,  La  Poste  and  ARCEP  implemented  a  new  pricing 
framework  equal  to  the  consumer  price  index  increased  by  3.5  points  a  year  on 
average  for  universal  service  prices.  La  Poste  announced  an  average  price 
increase of 7% for mail from 1 January 2015.100  

2.4. 

Financing the Universal Service Obligation  

2.4.1.  Regulatory Accounting 

Article  14  requires  universal  services  providers  to  keep  separate  accounts  for  universal 
service and non-universal service products and NRAs to ensure compliance with the cost 
allocation principles set out in the Directive. The primary aim is to require accounts to be 
kept that can be used to determine any net cost or unfair financial burden created by the 
universal service, though separate accounts can also help the NRA to determine whether 
the USP is acting according to the tariff principles set out in Article 12 and, for example, 
not engaging in discriminatory pricing.   

ComRes 

(2014)  Decision 

97 http://stakeholders.ofcom.org.uk/consultations/review-of-regulatory-conditions/statement/ 
98 
cap 
http://www.comreg.ie/_fileupload/publications/ComReg1459i.pdf 
99ANACOM's decision of 21.11.2014,  Pricing criteria for postal services that comprise the universal service, 
http://www.anacom.pt/render.jsp?contentId=1346132&languageId=1  
100 La Poste was permitted price increases of inflation plus 1% instead of inflation plus 0.3%.  ARCEP Decision 2012 
No. 1353   http://www.arcep.fr/uploads/tx_gsavis/12-1353.pdf ; La Poste, Annual Report 2014¸ 2015.  

universal 

services 

control 

postal 

price 

for 

on 

a 

23 

 
 
 
 
 
 
 
 
 
 
 
                                                 
In the majority of the Member States, regulatory accounts cover non-universal services or 
even non-postal services (such as unaddressed items or financial services), as well as the 
universal service area. This fits with the totality principle identified by the ERGP that the 
regulatory accounts should cover any activity that is used by both universal services and 
non-universal services.101 

The main cost basis that is used for regulatory accounting is historical costs (as opposed 
to  current  costs  which  are  used  only  in  Finland).102  Most  NRAs  use  activity  based 
costing.103  The  ERGP  has  clarified  that  activities  should  be  based  on  causality,  but  the 
USO should not be regarded as a cost driver without being fully evidenced by the USP 
and agreed by the NRA. 104 

Given  that  the  postal  infrastructure  is  used  for  both  USO  and  non  USO  products,  the 
correct allocation of joint costs and common costs is vital.  NRAs use different methods 
for  common  cost  allocation  which  may,  but  need  not  be,  based  on  activity  based 
costing.105  The  most  widespread  methodology  seems  to  be  equi-proportional  mark-up 
(EPMU)  which  allocates  all  common  costs  according  to  their  proportion  of  total  costs 
and  is  therefore  consistent  with  Article  14(3)(b)(iii).  EMPU  does  not  however  reflect 
how common costs are actually incurred. The long run (average) incremental cost (LRIC) 
approach may be more accurate and are used in addition or instead of EPMU in several 
Member States.   

In  general,  cost  allocation  methods  are  not  public.  Few  NRAs  publish  which  cost 
allocation  method  they  use106  and  the  structure  of  regulatory  financial  reporting  also 
tends  not  to  be  public.  The  NRAs  in  France  and  the  UK  have  however  published 
templates for their regulatory cost accounts.107 

In  May  2013  the  European  Regulators  Group  for  Postal  Services  (ERGP)  published  a 
common  position  on  cost  accounting  rules.  This  followed  an  earlier  ERGP  report  and 
public consultation in 2012.108 

2.4.2.  Net Cost of the Universal Service Obligation 

According to the 2008/06/EC Postal Services Directive, "Member States should be given 
further flexibility to determine the most efficient and appropriate mechanism to guarantee 
the  availability  of  the  universal  service,  while  respecting  the  principles  of  objectivity, 
transparency, non-discrimination, proportionality and least market distortion necessary to 
ensure  the  free  provision  of  postal  services  in  the  internal  market".  In  this  context  the 
Postal Services Directive recognised that "the external financing of the residual net costs 
of  the  universal  service  may  still  be  necessary  for  some  Member  States."  The  2008 

101 Copenhagen Economics Pricing behaviour of postal operators (2012) p222, ERGP, (11)16 Rev 1 ERGP Report on 
Common Costs Allocation, 2012, p7 
102 ERGP, (11)16 Rev 1 ERGP Report on Common Costs Allocation,  2012, p. 7. 
103  ERGP,  (12  28  Rev.1  ERGP  Common  Position  on  Cost  Allocation  Rules;  ERGP,  (11)16  Rev  1  ERGP  Report  on 
Common  Costs  Allocation,  2012,  p.  7.    his  result  of  the  ERGP  is  supported  by  Copenhagen  Economics  Pricing 
behaviour of postal operators, p.222. 
104 ERGP, (12)28 Rev.1, ERGP Common Position on Cost Allocation Rules 
105  According  to  European  Committee  for  Postal  Regulation  (CERP),  Recommendation  on  best  Practices  for  Price 
Regulation (2 Oct 2009), PL 2009/2 Doc 5 (2 Oct 2009), p. 13, both EPMU and LRIC cost allocation may be founded 
on activity based costing. 
106 Copenhagen Economics, Pricing behaviour of postal operators, p226 
107 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p148 
108  ERGP,  (13)28  ERGP  Report  on  Specific  Issues  Related  to  Cost  Allocation;  and  ERGP,  (12)28  Rev.1  ERGP 
Common Position on Cost Allocation Rules  

24 

 
 
 
 
 
 
 
                                                 
Directive therefore introduced Annex 1, Guidance on calculating the net cost, if any, of 
the universal service.  

Annex I of the Postal Services Directive provides the general methodological framework 
for calculating the net costs of the Universal Service Obligation (USO). The details of the 
calculation and the methodological alternatives available however, are not dealt with by 
the Directive.  

The  European  Commission  commissioned  a  study  in  2012  to  evaluate  how  Member 
States  have  assessed  the  net  costs  of  the  universal  service  obligation  to  date.109  At  the 
same  time,  the  European  Regulators  Group  for  Postal  Services  (ERGP)  had  been 
conducting related research in this field.110 There are also a number of state aid decisions 
already adopted by the European Commission concerning postal operators which apply 
Annex I to calculate the net cost of the universal service obligation.111 

Following  previous  studies112  and  relevant  case  law  and  in  line  with  its  obligation  to 
provide  assistance  (Article  23a),  an  Annex  to  this  Report  is  included  that  sets  out 
different approaches to calculate the net costs of the Postal Universal Service Obligation 
that have been found to be consistent with Annex I of the Postal Services Directive. 

The estimated cost of the universal service in western Member States has been estimated 
to be around five per cent of the overall cost of the USO, whereas in the eastern Member 
States  it  is  thought  to  be  much  higher  and  in  the  region  of  30%  to  70%.  There  is  also 
some evidence the net cost of the USO is increasing over time, particularly given falling 
mail volumes.113  

Article  7  of  the  Directive  provides  mechanisms  in  the  event  that  any  net  cost  of  the 
universal service obligation represents an unfair financial burden on the universal service 
provider.  The  alternative  mechanisms  are  compensation  from  public  funds  (i.e.  general 
taxation) or a cost-sharing mechanism, potentially a compensation fund "for the sharing 
of the net cost…between providers of services and/or users." 

Several  Member  States114  have  deemed  the  universal  service  obligation  to  be  an  unfair 
burden.  Some  Member  States  (including  IT  and  PL)  compensate  the  universal  service 
provider through public funds and others (CY, EE, HK, IT and SK) have established a 
compensation  fund,  although  a  further  18  have  authorised  the  use  of  a  compensation 
fund.115 Concerns have been raised that the establishment of a compensation fund could 
create  a  barrier  to  entry,  and  developments  in  this  respect  will  need  to  be  closely 
monitored.  

109 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, London, UK, 2013 
110 ERGP (2014) Exploration of challenges to overcome when implementing a net cost calculation methodology based 
on a reference scenario – Benchmark of experiences;  ERGP (2012) Report on net Cost of USP – VAT exemption as a 
benefit or a burden; ERGP  (2011) Report on "net cost calculation and evaluation of a reference scenario" 
111 In particular Hellenic Post - ELTA (OJ C 348, 19.09.2014, p.48), Belgian Post – bpost (OJ C 279, 27.09.2013, p.1), 
UK Post Office Limited (OJ C 121, 26.04.2012, p.1), and French La Poste (OJ C 280, 22.08.2014, p.16). 
112  Frontier  Economics,  Study  on  the  principles  used  to  calculate  the  net  costs  of  the  postal  USO,  Copenhagen 
Economics  Main  Developments  in  the  Postal  Sector  2008-2010),  European  Regulators  Group  for  Postal  Services 
(11)17 Rev 1. Other studies have also been published on net cost calculations for particular operators/ Member States. 
113 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p153 
114 WIK-Consult, Main Developments in the Postal Sector (2010-2013 ), p153 
115 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p154. 

25 

 
 
 
 
 
 
 
                                                 
2.5.  Access to Postal Services, Network and Infrastructure 

2.5.1.  Access Points  

Article 3(2) requires Member States to ensure that the density of the points of contact and 
access  points  takes  account  of  the  needs  of  users,  including  where  appropriate  a 
minimum  number  of  services  at  the  same  access  point  and  an  appropriate  density  of 
access points to postal services in rural and remote regions.116 Access points are physical 
facilities, including letter boxes and the premises of the postal service provider, such as 
post offices, where postal items may be deposited into the postal network.117 Rural postal 
points  can  provide  an  important  infrastructure  network  for  access  to  electronic 
communications and e-commerce (for both retailers and consumers).  

In 2013 there were around 700,000 post boxes in the EU.118 In some Member States the 
number of post boxes has remained relatively stable. In other Member States it has fallen, 
notably in DK, PT, and PL where  the number of post boxes  fell  by over 10% between 
2010 and 2013. Germany is the only Member State where there is a significant number of 
street letter boxes for other operators as most business customers who use providers other 
than  the  USP  for  bulk  mail  services  in  other  Member  States  will  have  mail  collected 
directly from their premises rather depositing it in a post box or at a post office.  Not all 
Member States have legal requirements specifying a minimum number of post boxes.   

In 2013 there were about 145,000 post offices119 (of USPs) in Member States. Numbers 
have continued to decline slightly: by 1.6% since 2010 compared to an average of 1.1% 
between  1998  and  2007  for  the  EU  25,  and  by  0.3%  between  2012  and  2013.  In  some 
Member  States,  however,  the  decline  has  been  significantly  higher,  for  example  in 
Estonia, Portugal and the UK.120 

The nature of access points/post offices is evolving alongside changes in the product mix. 
Some  Member  States  have  reduced  their  post  office  networks  as  letter  volumes  have 
fallen and government and other services (e.g. bill payment) have moved from over the 
counter  services  to  online  transactions.  The  agency  model  of  post  office  provision  has 
become  more  popular  as  it  spreads  costs  over  a  wider  product  offering  which  can  also 
drive  footfall  (e.g.  AT,  FR  and  PL).  Some  Member  States  already  had  a  high  share  of 
agencies,  though  others  have  retained  full  ownership  of  the  network,  perhaps  in  some 
circumstances  due  to  the  provision  of  financial  services  requiring  increased  security 
alongside a traditional postal offering.121  

Parcels  also  provide  opportunities  for  post  offices  and  other  retailers,  as  customers 
become more willing to have their parcels delivered to locations other than their homes, 
or legislation is passed which permits this. In some instances post office opening hours 
have increased to offer more convenient parcel collection (and sending) times, offering a 
better  service  to  customers.  Retail  networks  and/or  customer  collection  points  are  also 
being developed by other postal operators as express operators and other parcel delivery 
companies seek to establish a consumer-facing presence.  

116  See also Recital 19, 20 and 22 to the Postal Services Directive.  
117 Article 2 (3) 
118 European Commission, Postal Statistics. 
119 European Commission, Glossary for Postal Statistics: Offices open to the public refer to offices to which customers 
may apply for all postal services. They include mobile or fixed offices. 
120  WIK-Consult,  Main  Developments  in  the  Postal  Sector  (2010-2013),  p190  and  House  of  Commons  Library, 
Numbers of Post Office Branches SN/EP/02585, 2014 
121 WIK-Consult, Main Developments in the Postal Sector (2010-2013) pp191-192. Member states with agencies 
include DE, EE, NL, UK, CY, IE, UK, those with full ownership include. BE, IT ES, and RO.  

26 

 
 
 
 
 
 
                                                 
 

In  2012  UPS  bought  Kiala,  a  network  of  collection  points  inside  retail  outlets. 
UPS  have  expanded  the  network  under  UPS  branding  and  there  are  now  over 
13,000 collection points in nine Member States.122  

  DHL's  Packstations  are  machines  that  allow  customers  to  collect  and  return 
packages 24/7. There are 2,750 packstations in over 1,600 locations in Germany 
and  they  are  being  installed  in  other  European  countries.  DHL  also  have  a 
physical  presence  in  other  EU  markets,  through  for  example  through  DHL 
Service points (of which there are 45,000 worldwide).123 

 

InPost  offers  click  and  collect  parcel  lockers  which  offer  24/7  tracked  delivery. 
They operate in 22 international markets with over 3,500 parcel terminals.124  

2.5.2.  Access to Postal Infrastructure 

The Third Postal Directive introduced, in Article 11a, a requirement for Member States 
to  ensure  transparent,  non-discriminatory  access  conditions  to  certain  elements  of  the 
postal infrastructure or services within the scope of the universal services such as address 
databases,  post  office  boxes,  delivery  boxes,  change  of  address  information  and 
redirection services and return to sender services. Access to such  facilities is  becoming 
increasingly important given competition in the postal sector and the contemporary uses 
of postcode and address services such as navigation systems and personalised transport 
timetables. The table below summarises the types of access offered.  

122www.pressroom.ups.com;  http://www.ups.com/accesspoint/ 
123 Deutsche Post DHL, Annual Report 2014 
124 https://integer.pl/en/global-operations 

27 

 
 
 
 
 
 
 
 
 
 
 
                                                 
Table 4: Access to Postal Infrastructure 

Type of access 

Member States 

No answer  Number  % survey market 

Access to post 
codes 

Access to post 
office boxes 

AT*, BE*, BG, CY, CZ, DE*, 
DK, EE, FI, FR, HU, LT, LU, 
MT, PL, SE, SI, UK 

CY, CZ, DE, DK, EE, FR, IT, 
LT, LU, LV, MT, NL, PL, SE, 
SI 

AT, IE, 
HR 

Access to delivery 
boxes 

AT, BE*, BG, CY, DE*, DK, 
ES, FR, HU, IE, IT, LT, LU, 
PL, PT, SK 

HR 

Access to address 
database 

CY, CZ, DE, DK, EL*, FR, 
LT, LU*, SI, UK 

AT, IE, 
HR 

18 

15 

16 

10 

78% 

59% 

65% 

64% 

Access to change 
of address database 

AT, CY, CZ, DE, DK, EL*, 
FR, LT*, LU*, SI 

IE, HR 

10 

47% 

Access to USP 
redirection and 
return services 

CZ, DE, DK, EE, EL*, FR, 
LT, LU, MT, SI 

IE, HR 

10 

43% 

* indicates different answers by USP and NRA.  

Source: WIK-Consult, Main Developments in the Postal Sector (2010-2013), p45.  Percentage of survey 
market includes EEA countries surveyed.  

In  around  half  the  Member  States  there  is  access  to  no  more  than  two  elements  of  the 
postal  infrastructure.125  Given  new  innovations  in  the  sector  (such  as  dedicated  parcel 
delivery boxes) it will be even more important that NRAs have the powers and regulatory 
instruments to assure access to elements of the postal infrastructure wherever necessary 
to protect the interest of users and/or to promote effective competition. 

Main developments include:  

  Section  34  of  the  Postal  Market  Act  in  Austria  came  into  effect  on  1  January 
2011.  This  required  all  postal  service  providers  to  be  able  to  access  letter  and 
curbside  delivery  boxes,  including  those  within  buildings.  Previously  only  the 
universal service provider, Oesterreichishe Post AG, had been able to access all 
letter boxes. Following a decision of the constitutional court in 2012 letter boxes 
were exchanged for ones which can be accessed by all operators.126  

 

In Slovenia information on postcodes and address databases was only available in 
paper  format  until  the  end  of  2012.  The  information  is  now  available 
electronically.127 

  The  ERGP  held  a  public  consultation  on  access  to  the  postal  network  and 
infrastructure  in  2012.  The  aim  was  to  identify  different  approaches  rather  than 
recommending  one  particular  model  for  all  Member  States.  For  access  to 

125 Including downstream access 
126 WIK-Consult, Main Developments in the Postal Sector (2010-2013) p47 
127 WIK-Consult, Main Developments in the Postal Sector (2010-2013) p47 

28 

 
 
 
 
 
 
 
 
 
 
 
                                                 
infrastructure the report found that there was no widespread detailed regulation of 
access,  with  national  legislation  tending  to  establish  principles  and  detailed 
arrangements  resulting  from  negotiation  between  parties.  Nevertheless,  even  in 
the  absence  of  a  legal  obligation,  operators  tended  to  offer  access  to  the 
network.128 

2.5.3.  Access to the Postal Network 

Article  12  of  the  Directive  allows  USPs  to  conclude  individual  tariffs  with  users, 
provided  that  such  tariffs  and  their  associated  conditions  are  transparent  and  non-
discriminatory  and  are  available  to  all  users  posting  under  similar  conditions.  Member 
States  are  not  obliged  to  require  their  USPs  to  provide  access  to  their  network  in  this 
way, though most who offer some form of access do legally require the USP to offer this 
service.129 In Member States where it is offered, access mail can constitute a significant 
proportion of mail volumes.  

There  are  different  stages  at  which  USPs  can  provide  access  to  their  network  and  the 
associated special tariffs. These are summarised in the diagram below.  Bulk mail access 
points  allow  access  for  business  users  with  middle  sized  volumes  (with  restrictions  on 
permissible  amounts).  Alternatively  the  USP  -  or  its  competitors  -  can  collect  mail 
directly from business customers. Where permissible, consolidators or other competitors 
can  then  deposit  mail  into  the  USP's  network  for  local  distribution  and  delivery.  This 
usually requires much larger volumes and a higher degree of sorting that mail deposited 
with  the  USP  for  outward  processing.  In  Germany,  France  and  the  UK  most  of  the 
'access'  volumes  come  from  consolidators  and  competitors,  rather  than  business 
customers (as they do in Belgium). 

Figure 4: Structure of Access Operations 

Source: WIK-Consult 

Almost all Member States' universal service providers offer special tariffs. Special tariffs 
are  common  for  bulk  parcel  services  and  direct  mail,  as  well  as  bulk  letter  services.130 
Discounts  are  usually  offered  for  volume  and/or  the level  or  preparatory  work,  such  as 
pre-sorting.  They  are  also  sometimes  offered  for  early  drop-off  times  or  deposits  of 
deliveries notified in advance.131  

128 ERGP (2012) (36) ERGP Report on "access" to the postal network and elements of postal infrastructure.  
129 ERGP (2012) (36) ERGP Report on "access" to the postal network and elements of postal infrastructure. 
130 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p49 
131 ERGP (14)23 Report on the benchmarking of the universal service tariffs 

29 

Collection(for bulk mail)OutwardprocessingTrunk NetworkInward processingLocal distributionDeliveryDeutsche PostLa PosteRoyal MailDeutsche PostLa PosteRoyal MailLa Postebpost 
 
 
 
 
 
 
 
 
                                                 
Table 5: Access to Special Tariffs 

Bulk Letter Mail 
AT,  BE,  BG,  CY,  DE, 
DK, EE, EL, FI, FR, HU, 
IE, IT, LT, LU, MT, NL, 
PL, PT, RO, SE, SI, SK, 
UK 

NA:  ES, HR 
AT,  BE,  BG,  CY,  DE, 
DK, EE, EL, FI, FR, HU, 
IE, IT, LT, LU, MT, NL, 
PL, PT, RO, SE, SI, SK, 
UK 
AT,  BE,  BG,  DE,  DK, 
EE,  EL,  FI,  FR,  HU,  IE, 
IT,  LT,  LU,  MT,  PT, 
RO, SE, SI, SK 
NA:  UK 

AT,  BE,  BG,  DE,  DK, 
EE,  EL,  FI,  FR,  HU,  IE, 
IT, LT, LU, MT, NL, PT, 
RO, SE, SI, SK, UK 
NA:  UK 

Direct Mail 
AT,  BE,  CY,  DE,  DK, 
EL,  FR,  HU,  LU,  NL, 
PL, RO, SE, SK, UK 

Bulk Parcels 
AT,  BE,  BG,  CY,  DE, 
DK,  EE,  EL,  HU,  LU, 
NL, PL, PT, RO, SE, SK, 
UK 

NA:    BG,  CZ,  EE,  ES, 
FI, IE, IT, LT, PT, SI 
AT,  BE,  CY,  DE,  DK, 
EL,  FR,  HU,  LU,  NL, 
RO, SE, SK, UK 

NA:    CZ,  ES,  FI,  FR, 
HR, IE, IT, LT 
AT,  BE,  DE,  DK,  EE, 
EL,  HU,  LU,  PL,  PT, 
RO, SK 

NA:  BG, SE, UK 

AT,  BE,  DE,  DK,  EL, 
FR,  HU,  LU,  NL,  RO, 
SE, SK, UK 

AT,  BE,  BG,  CY,  DE, 
DK,  EE,  EL,  HU,  LU, 
NL, PL, PT, RO, SK 

NA:  BG, SE, UK 

AT,  BE,  DE,  DK,  EL, 
FR,  HU,  LU,  NL,  SE, 
SK, UK 

AT,  BE,  BG,  DE,  DK, 
EE,  EL,  HU,  LU,  NL, 
PL, PT, SK, UK 

NA:  SE, UK 

USP offers 
special tariffs? 

Transparent and 
non-
discriminatory?* 

Available to 
consolidators?* 

Available to 
other postal 
operators?* 

* required by law and/or verified in practice 
Source: WIK-Consult, Main Developments in the Postal Sector (2010-2013, p49 

Transparent  and  non-discriminatory  access  to  special  tariffs  is  required  by  law  and 
verified in practice by most Member States. How Member States verify the application of 
these  principles  does  however  vary  significantly,  for  example  Belgium  requires 
publication whereas others including Sweden and the UK do not. Special tariffs are not 
available to consolidators or other postal operators in a few Member States.   

Developments include:  

  ACS SA, a provider of courier and postal services for business mailers in Greece, 
filed  a  complaint  with  EETT,  the  Greek  NRA  in  2009,  alleging  that  ELTA,  the 
Greek USP had not been transparent and discriminated against ACS SA regarding 
the downstream access it already provided to its own subsidiary Tachymetafores 
Elta.  EETT  fined  ELTA  in  July  2012  for  abuse  of  its  dominant  position  and 
obliged ELTA to provide non-discriminatory access.132  

 

In  2010  bpost  (Belgium)  introduced  price  changes  which  limited  discounts  for 
consolidators  and  mail  handlers  according  to  their  individual  clients'  volumes 
instead  of  aggregating  them  (so  called  "per  sender  model").  In  2011  BIPT,  the 
NRA,  took  the  view  that  this  new  price  system  (that  was  not  based  on the  total 
volume  deposited  by  the  intermediaries)  was  contrary  to  the  postal  legislation, 
based  on  a  previous  judgement  of  the  Court  of  Justice.133  In  parallel  bpost  was 
judged  by  the  Belgian  Competition  Authority  to  have  acted  contrary  to 
competition law (Article 102 TFEU) in relation to the same pricing model. bpost 

132 ERGP (12)36 ERGP Report on "access" to the postal network and elements of the postal infrastructure 
133 Case C-292/06 (Vedat Deniz). 

30 

 
 
 
 
 
 
 
  
                                    
                                                 
appealed  against  BIPT’s  decision  to  the  Cour  d’appel  de  Bruxelles.  The  latter 
referred the case to the European Court of Justice (CJEU). In its judgment of 11 
February  2015  (C-340/13)  the  CJEU  stated  that  a  model  based  on  quantity 
discounts per sender is allowed under Article 12, fifth indent of the Directive and 
that bulk mailers and consolidators are not in comparable situations as regards the 
objectives  pursued  by  the  system  of  quantity  discounts  per  sender.134  The 
referring court has now to decide on the merits; and the competition case on this 
issue  is  still  pending.  Furthermore,  the  ERGP  is  examining  the  possible 
implications  of  this  judgment  for  the  development  of  competition  on  the  postal 
market. It is  nevertheless  clear that discount  models will have to  continue to  be 
compatible with Article 12 of the Postal Service Directive and competition law, 
although 
interdependency  between  quantitative  and 
qualitative discounts needs to be carefully assessed. 

the  relationship  and 

  APEK, the Slovenian NRA, ordered Pošta Slovenije in 2010 to provide discounts 
of  16.8%  -  48.4%  for  access  services,  following  complaints  by  a  prospective 
consolidator.  The  Postal  Services  Act  in  Slovenia  requires  the  USP  to  provide 
access  at  the  request  of  an  alternative  postal  operator  (a  provider  of 
interchangeable  postal  services).  Pošta  Slovenije  does  however  allege  that  as  a 
consequence some bulk senders have registered as postal operators themselves in 
order to benefit from these discounts.  

 

In 2012 PTS, the Swedish NRA, introduced as a licence condition that Posten AB 
(the USP) publish prices and discounts for universal services products in full on 
its website. Posten AB appealed this decision.  

  The ERGP has conducted analysis of the list prices for bulk mail, although they 
caution  that  criteria  for  bulk  mail  services  differ  between  Member  States.  Their 
2014  report found  that  the  cost-orientation  principle is  implemented  in  different 
ways, including for bulk mail. Bulgaria, Sweden and Malta are the Member States 
with the lowest bulk mail (letter) prices.135 

2.6.  Quality of Service 

Improving the quality of postal services across the EU has been one of the core aims of 
EU  postal  reform  since  its  inception.    Article  16  requires  quality  of  service  standards 
focussing on routing times, regulatory and reliability to be set and published in relation to 
the universal service, and to be subject to independent monitoring. Member States have 
the  flexibility  to  determine  standards  for  domestic  post  providing  they  are  compatible 
with  those  for  intra-Community  cross-border  services  which  are  set  by  the  Directive. 
Article 18 and Annex II set out the requirements for intra-Community cross border letter 
mail services: 85% D+ 3. i.e. delivery within three working days after the date of deposit 
(D) and 97% D+5, delivery within five working days after deposit.   

Transit  time  standards  are  most  common  for  single  piece  services.  All  Member  States 
have transit time standards for single piece priority letters, though only twelve are known 

134 C-340/13 (bpost SA v Institut belge des services postaux et des télécommunications (IBPT). 
135  ERGP,  (14)22  ERGP  Report  on  Tariff  Regulation  in  a  context  of  Declining  Volumes  and  ERGP,  (14)23  ERGP 
Report on the benchmarking of universal service tariffs, 2014  

31 

 
 
 
 
 
 
 
                                                 
to have them for non-priority letters. Routing time standards are more common for single 
piece parcels than for bulk.136   

All  Member  States  have  a  defined  domestic  D+1  target  except  Spain  which  has  only  a 
D+3 target. D+1 targets are between 80% and 97%.137 Transit time data is published in 
different ways, including special quality reports by NRAs, annual reports of NRAs, USP 
publications and market studies.138  

Figures 5: Priority (D+1) Single Piece Letter Services Quality Achieved Against Target 
by Country 2012/13 

Source: ERGP (14) 23 Report on benchmarking of universal service tariffs, 2014 

Figure 6: Non-priority (D+2 or D+3) Single Piece Letter Services Quality Achieved 
Against Target by Country 2012/13 

Source: ERGP (14) 23 Report on benchmarking of universal service tariffs, 2014 

Where  there  are  defined  transit  time  targets  for  national  mail,  this  is  measured  by 
universal service providers in accordance with the CEN standard EN 13850 which covers 

136 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p155.  Not all NRAs responded to the question 
about single piece non priority mail.   
137 ERGP, (14)23 Report on benchmarking of universal service tariffs 
138 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p154 

32 

30%40%50%60%70%80%90%100%30%40%50%60%70%80%90%100%AchievedTarget50%55%60%65%70%75%80%85%90%95%100%50%55%60%65%70%75%80%85%90%95%100%AchievedTargetFulfilled D+3Fulfilled D+2 
 
 
 
 
 
                                                 
single piece priority mail. Use of standard EN 14508, which covers non priority mail, is 
less  common.  Time  performance  measurement  of  parcels  that  is  compliant  with  the 
technical report TR 15472 takes place only three member states.139  

Intra-EU  post  is  measured  by  the  International  Postal  Cooperation  (IPC),  whose 
measurement  is  compliant  with  CEN  EN  13850.  In  2014  the  average  time  for  mail 
delivery in Europe was 2.4 days, with 90.6% delivered within the three days of posting 
and 97.8% within five days,  exceeding,  for the 17th year, the respective targets  of 85% 
and 97%.140  Even allowing for a change in the measurement standards which caused an 
estimated 1% reduction in performance, an adjusted D+3 performance of 91.6% (rather 
than 90.6%) was nevertheless the lowest performance since 1999 (90.7%). The fall can 
be  explained  in  part  by  operators  seeking  to  make  efficiency  improvements  to 
compensate for falling mail volumes. By way of comparison in 2013 D+ 3 performance 
was 92.5% and D+5 98.2% and since 2008 D+3 performance has ranged varied between 
90.6% (2014, unadjusted) and 94.6% (2008).   

If transit time targets for letter post are not achieved, most Member States are able to take 
corrective action. The reverse is true for parcels where a minority of Member States have 
the competence to address failures to meet standards for parcels.141  

One  of  the  six  priorities  in  the  annual  Union  work  programme  for  European 
Standardisation  for  2015  is  postal  services.  The  Commission  aims  to  issue  a 
standardisation request concerning the specific features of parcel delivery services and is 
also considering whether a request for the revision of any existing European standards is 
needed.142 

2.7. 

Protection of Users 

Article 19 of the Directive requires Member States to ensure that  transparent, simple and 
inexpensive  procedures  for  dealing  with  complaints  are  available  from  all  postal 
operators, and not only from universal service providers. Where warranted, a system of 
reimbursement and/or compensation is also required. The universal service provider, and 
where appropriate other undertakings providing services within the scope of the universal 
service area, are required to publish the number of complaints they receive and how they 
have  been  dealt  with  alongside  the  annual  report  on  performance  against  service 
standards required by Article 16.  

In  the  reporting  period  the  CJEU  (Case  C-148/10)  ruled  that  Article  19  must  be 
interpreted as "not precluding national legislation which imposes on providers of postal 
services  which  are  outside  the  scope  of  the  universal  service  a  mandatory  external 
procedure for dealing with complaints from users of those services". The case arose from 
DHL  International  NV's  opposition  to  mandatory  participation  in  the  financing  of  the 
external complaints scheme (in this case an ombudsman within the NRA and financed by 

139 ERGP, (13)32 Rev 1 Best practices in the field of consumer protection, quality of service and complaint handling 
140  http://www.ipc.be/~/media/Documents/PUBLIC/UNEX/Full%20Year%20Results/UNEX_leaflet_2014_EN.pdf  The  EN13850 
CEN  Standard  version  of  December  2012  required  a  change  in  the  calculation  of  transit  times  which  has  been 
estimated  to  have  causes  the  appearance  of  a  1%  drop  in  performance.    International  Post  Corporation  (2014) 
International Mail Quality of Services Monitoring UNEXTM 2014 results. 
141 ERGP, (13)31 ERGP Report 2013 on the Quality of Service and End User Satisfaction 
142 COM (2014) 500 final European Commission, Communication from the Commission to the European Parliament, 
the Council and the European Economic and Social Committee The annual Union work programme for European 
standardisation for 2015  

33 

 
 
 
 
 
 
 
                                                 
fees on qualifying undertakings), claiming that the express delivery services it provided 
were not postal services.143  

All Member States have extended user protection to cover other postal service providers 
as  well  as  the  universal  service  provider.  Most  universal  service  providers  have 
introduced a system of compensation. Most Member States have appointed a 'competent 
national authority', usually the NRA or ombudsman, to review complaints that have not 
been  satisfactorily  resolved  by  the  USP.  Less  than  half  of  the  Member  States  comply 
with  the  (voluntary)  European  Committee  for  Standardisation  (CEN)  standards  EN 
14012  for  handling  complaints  and  providing  redress.  Enforcement  in  over  half  of  the 
Member  States  is  by  the  NRA  and  national  consumer  protection  authority  (NCPA),  by 
the NRA alone in just under half of the Member States and the NCPA alone one Member 
State.144  

To  improve  dispute  resolution,  the Directive  also  requires Member  States  to  encourage 
the use of out-of-court schemes. In addition implementation by the Member States of the 
Alternative  Dispute  Resolution  Directive145  by  mid-2015,  the  launch  of  the  Online 
Dispute  Resolution  Platform146  in  January  2016  will  help  to  encourage  cross-border  e-
commerce.  

The ERGP Report, Best practices in the field of consumer protection, quality of service 
and complaint handling sets out best practices in a range of areas. Noting the diversity of 
legislative  and  regulatory  frameworks  in  Member  States,  the  principles  focus  on 
transparency  and  meeting  the  needs  of  users.  Suggested  best  practices  include  research 
regarding  consumer  needs,  measurement  of  consumer  satisfaction  and  complaint 
handling information and procedures.147  

2.8. 

Internal Market for Postal Services: the Cross-Border Dimension 

2.8.1.  Legal Obligations and Regulatory Oversight 

Article 3(7) of the Directive clarifies that the universal service covers cross-border148 and 
domestic  services.  Therefore  the  pricing  principles  contained  in  Article  12  of  the 
Directive are to be applied to both national and international services. In addition, Article 
13  requires  Member  States  to  encourage  universal  service  providers  to  respect  the 
following  principles  in  cross-border  terminal  rates  (also  known  as  terminal  dues  or 
inward  land  rates  in  Universal  Postal  Union  (UPU)  terminology):149  cost  orientation, 
remuneration  related  to  quality  of  service,  transparency  and  non-discrimination.  Any 
deviation from these principles must be restricted to the minimum required and limited to 
any  transitional  arrangements  while  the  principles  are  being  implemented.  Article  12, 
covering tariff principles, is also applicable to cross-border services which are part of the 

143 C-148/10 
144 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p157-161 
145Directive 2013/11/EU  
146 Regulation  2009/22/EC 
147 ERGP (13) 32 Rev1 Best practices in the field of consumer protection, quality of service and complaint handling 
148 The term cross-border is used here to refer to intra-EU postal services and services between the EU and the rest of 
the world. 
149  The  term  'terminal  dues'  is  used  throughout  to  refer  to  the  charges  for  both  letters  and  parcels,  although  UPU 
terminology distinguishes between terminal dues (for letters, including packets up to 2kg that fit a 'letter' format) and 
inward land rates (for parcels). 

34 

 
 
 
 
 
 
 
                                                 
universal service obligation or the result of a special tariff.  Article 18 and Annex II to 
the Directive set out specific intra-EU quality of service standards. 

A  number  of  aspects  of  postal  services  are  also  subject  to  regulation  by  the  UPU,  a 
specialised  agency  of  the  United  Nations.150  EU  law  and  UPU  law  overlap  to  some 
degree, for example they both address the rates public postal operators can charge each 
other  for  cross-border  services,  the  scope  of  the  universal  service  obligation,  the 
designation  of  the  universal  service  provider/designated  operator,  quality  of  service 
standards, customs and security and competition. In the UPU it is the individual Member 
States  who  represent  themselves  and  conclude  agreements.  The  European  Commission 
gained the status of formal observer in the 2012 UPU Congress in Doha.  

Member  States  declare  at  UPU  Congresses  that  UPU  Acts  will  be  implemented  in 
accordance with Member States obligations arising from the Treaty on the Functioning of 
the European Union in general and the Union acts implementing them, which include the 
Postal Services Directive. The aim to ensure consistency between the regulatory regimes 
and the full respect of EU law is  not  limited  to  aspects contained directly in  the postal 
acquis but extends also inter alia, to customs and security controls.    

Almost all NRAs oversee both intra- and extra-EU postal services, as well as domestic 
ones. Only the Dutch NRA seems to be restricted to intra-EU matters.151  

2.8.2.  Tariff Principles 

As  noted  above,  Article  13  of  the  Directive  requires  Member  States  to  encourage 
universal  service  providers  to  reflect  the  principles  of  cost  orientation,  remuneration 
related  to  quality  of  service,  transparency  and non-discrimination  for  their  cross-border 
transactions  within  the  EU.  Evidence  does  however  suggest  that  NRAs  monitor  USPs' 
application  of  these  principles  less  closely  for  cross-border  prices  that  they  do  for 
domestic ones.152  

Most European universal service providers are parties to the REIMS V agreement, which 
sets  terminal  dues  among  participating  European  operators,  and  came  into  force  in 
2012.153 On 23 October 2003 the Commission adopted a decision under EU competition 
rules,  notably  Article  81  EC  Treaty  (now  Article  101  TFEU),  prolonging  for  an 
additional  five  years  the  exemption  of  the  REIMS  II  agreement  under  EU  competition 
rules  subject  to  a  condition  that  non-discriminatory  access  to  REIMS  terms  and 
conditions  would  be  provided  to  third  parties.154  Following  the  adoption  of  Regulation 
1/2003155 and modernisation of EU competition rules, the parties to an agreement have to 
ensure its compliance with EU competition rules ("self-assessment" mechanism).   

Concerns about whether cross-border parcel prices are affordable arise from the frequent 
number  of  surveys  of  both  customers  and  e-retailers  that  cite  the  high  cost  of  cross-
border delivery and returns to be a barrier to e-commerce: the most common difficulties 

150  For  further  information  on  the  UPU  see  www.upu.int  See  WIK-  Consult  and  Cambell,  J,  Study  on  the  External 
Dimension of the EU Postal Aquis,  Bad Honnef, Germany, 201 for analysis of the role of EU Member States in the 
UPU. 
151 WIK-Consult, Main Developments in the Postal Sector (2010-2013),p91 
152 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p93 
153 http://www.ipc.be/en/operational-services/intercompany_pricing/reims_v 
154  See http://ec.europa.eu/competition/publications/cpn/2004_1_25.pdf, Official Journal L 275 , 26/10/1999 P. 0017 – 0031, 
Official  Journal  of  the  European  Union,  C  94,  23  April  2003,  Case  COMP/C/38.170  and  WIK-Consult,  Main 
Developments in the Postal Sector (2010-2013), p 94 and 95 for further background. 
155 Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid 
down in Articles 81 and 82 of the Treaty, OJ L 1, 4.1.2003, p. 1–25. 

35 

 
 
 
 
 
 
                                                 
companies encounter when selling online to other countries are related to their costs for 
delivery.  Companies  already  selling  online  (cross-border)  are  concerned  that  delivery 
costs are too high (51%), that guarantees and returns are too expensive (42%), and that 
resolving complaints and disputes cross-border are too expensive (41%). Companies that 
don’t sell online, but are currently trying to do so, are more likely to cite these problems, 
with 62% having concerns that delivery costs are too high, 62% that resolving complaints 
and disputes cross-border are too expensive and 58% that guarantees and returns are too 
expensive.156 High cross-border deliveyr costs and high return shipping costs are the top 
two concerns with buying cross-border, each being mentioned by around one quarter or 
respondents.157 Several studies and the Commission's own research indicates that the list 
prices  for  single-piece  products  are  often  two  to  five  times  higher  than  the  prices  for 
domestic delivery.158  

High  prices  are  commonly  attributed  to  low  volumes  and  lack  of  bargaining  power  by 
low volume senders, typically SMEs and consumers. Low volumes generate a higher cost 
per item, though on the other hand the higher prices may also reflect weak competitive 
pressure  in  the  cross-border  market  segment.  Given  the  growing  importance  of  cross-
border  parcel  delivery,  and  in  the  framework  of  its  Digital  Single  Market  Strategy  for 
Europe,159 the Commission services launched a public consultation on 6 May 2015 and 
are  considering  what  actions  may  be  needed.  This  is  in  addition  to  the  actions  already 
undertaken by the Commission and different stakeholders following the adoption by the 
Commission  in  December  2013,  of  the  Roadmap  for  completing  the  single  market  for 
parcel delivery.160 See section 3.3.5 for further details.  

2.8.3.  Customs and Security Controls 

Universal service providers also benefit from a number of other advantages in the cross-
border  dimension  compared  to  other  postal  operators,  for  example  simplified  customs 
procedures. The Universal Postal Union governs such procedures which are the same for 
all countries and not available to other providers of postal services 

The Union Customs Code (UCC) was adopted on 9 October 2013 as Regulation (EU) No 
952/2013 of the European Parliament and Council.161 It entered into force on 30 October 
2013 and repealed Regulation (EC) No 450/2008 of the European Parliament and of the 
Council  of  23  April  2008  laying  down  the  Community  Customs  Code  (Modernised 
Customs Code). The substantive provisions of the UCC will apply only on 1 May 2016, 
once  the  UCC  related  Commission  acts  (Delegated  and  Implementing  Acts)  (UCC 
DA/IA) are adopted and have entered into force.  

The  UCC  legal  framework,  thus  established,  will  limit  the  current  exemptions  which 
postal operators enjoy regarding the requirements for an advance data submission for the 
purposes of safety and security. Transitional measures will be put in place to allow posts 
to adjust to these changes. 

156 Flash Eurobarometer 413, Companies Engaged in Online Activities 2015  
157 European Commission, Consumer survey identifying the main cross-border obstacles to the Digital Single Market 
and where they matter most, 2015 (forthcoming) 
158  FTI  Consulting,  Intra-Community  cross-border  parcel  delivery,  2011,  Copenhagen  Economics,  E-commerce  and 
Delivery, 2013, p27 
159COM(2015) 192 final Communication from the Commission to the European Parliament, the Council, the European 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions.  A  Digital  Single  Market  Strategy  for  Europe. 
http://ec.europa.eu/priorities/digital-single-market/index_en.htm 
160  European  Commission,  A  roadmap  for  completing  the  single  market  for  parcel  delivery  Build  trust  in  delivery 
services and encourage online sales, COM (2013) 886 final, 2013 
161 OJ L 269, 10 October 2013, p1. 

36 

 
 
 
 
 
 
                                                 
These rules are also in accordance with the UPU framework. In September 2012, on the 
basis of a proposal supported by EU Member States and in close coordination with the 
Commission, the UPU Doha Congress amended Article 9 of the Convention in order to 
align  security  controls  for  postal  items  sent  by  universal  postal  operators  with 
requirements  imposed  on  other  comparable  flows.  The  implementation  of  this  general 
provision  by  UPU  Contracting  Parties  has  however  incurred  substantial  delays  though 
are still on the agenda.  

As regards the customs clearance of postal items, the UCC delegated regulation, adopted 
by the Commission  and  the current draft UCC implementing  act include rules that will 
allow postal operators to gradually adjust but also to be able to better cope with the large 
volumes of postal items. A possibility for the lodging of a declaration with a reduced data 
set is provided.  

2.9.  Data Collection 

Article  22a  was  introduced  in  the  Third  Postal  Services  Directive  to  ensure  the 
availability  of  reliable  and  up-to-date  postal  statistics.  Member  States  are  therefore 
required  to  ensure  that  postal  service  providers  supply  financial  information  and 
information on the provision of the universal service, in particular to NRAs where such 
information  is  required  to  ensure  conformity  with  the  Directive  or  for  clearly  defined 
statistical purposes. The Article in question, as the Postal Service Directive in general, is 
neither  limited  to  the  scope  of  the  universal  service  nor  to  designated  postal  service 
providers.  This  point  is  increasingly  important  given  the  variation  in  the  scope  of  the 
universal  service,  the  growing  market  for  parcels  and  competition  in  the  letter  markets 
which  mean  that  an  understanding  of  the  evolution  of  the  postal  market  as  a  whole  is 
needed to monitor the sustainability of the sector and in particular the universal service.  

Eurostat (which was the main information point for postal statistical information) decided 
in  2013  to  terminate  data  collection  on  postal  services.162  From  2014  the  Commission 
Directorate-General  for  the  Internal  Market,  Industry,  Entrepreneurship  and  SMEs  has 
assumed the role of compiling statistics at the European level. This data is collected using 
a  slightly  different  methodology  to  Eurostat,  so  some  sections  of  this  Staff  Working 
Document  include  two  tables,  one  showing  figures  up  to  2011  (from  Eurostat  or  other 
sources)  and  another  for  2012  and  2013  (using  data  collected  by  the  European 
Commission).  2013  is  the  most  recent  year  for  which  postal  statistics  are  available, 
whether  produced  by  the  European  Commission  or  the  Universal  Postal  Union.  The 
Commission  statistics  are  collected  in  collaboration  with  NRAs,  who  receive  the  data 
only after universal service providers publish their accounts. Data is then validated and 
complied at the EU level.  

Overall, Article 22a has been implemented with respect to data for ensuring compliance 
with  the  Directive  (clause  1a).163  Some  NRAs  do  however  still  lack  the  authority  to 
obtain certain information from other postal operators and some NRAs cannot or do not 
collect data from operators other than the universal service provider. 164   

162 Eurostat postal data refer up to reference year 2011, and are available at: 
http://ec.europa.eu/eurostat/web/postal-services/data/database  
163WIK-Consult, Main Developments in the Postal Sector (2010-2013), pp28-29 p331 
164European Commission Postal Statistics Survey 2014 

37 

 
 
 
 
 
 
 
                                                 
Collection  of  market  data  is  not  uniform  and  it  is  not  necessarily  considered  an  aim  of 
regulation or a key duty by NRAs in all Member States. Member States have interpreted 
Article 22a (1)(b) in different ways. In practice, although all Member States collect some 
statistics  from  their  USPs  there  is  a  strong  focus  on  services  within  the  scope  of  the 
USO.165  Data  on  the  parcel  and  express  segment  of  the  postal  market  is  far  less 
comprehensive  and  reliable  than  information  on  the  letter  market  because  most  NRAs 
have until now not systematically collected data on domestic and cross-border parcel and 
express services outside the universal service obligation. While there is already a general 
collection of information on basic parcel delivery offers in most Member States, based on 
Article  22a  of  the  Directive,  this  does  not  currently  provide  a  broad  picture  of  the  full 
postal  market.  Some  regulators  have  confirmed 
they  do  not  or  cannot 
comprehensively  collect  data  on  parcels,  whether  for  legal  or  resourcing  reasons.166 
Historically NRAs have focussed on the letter market (that was dominated by universal 
service providers) rather than the parcel market which has a larger number of operators 
and has been assumed to be more competitive. 

that 

The ERGP, in its reports on the cross-border parcel delivery market concluded that there 
was no need for a full market analysis or a collection of information based on full formal 
definition of the market and found no indication of a competition problem that it believed 
could  best  be  dealt  with  by  ex-ante  regulation.  The  ERGP  did  however  observe  that 
comprehensive  information  to  understand  the  functioning  of  the  parcel  market  and 
possible  competition  problems  in  it  could  be  useful.  Differences  between  NRAs  in  the 
level  of  monitoring  and  type  of  data  collected  on  the  parcel  market  have  also  been 
noted.167  

Given  the  increasing  importance  of  e-commerce  related  parcels  for  all  postal  operators 
and the need to ensure a single market in cross border parcel delivery, an improved and 
targeted data collection is imperatively needed to show developments in the market and 
help ensure effective competition.   

2.10.  Value Added Tax (VAT) 

According  to  the  VAT  Directive168  Member  States  shall  exempt  the  supply  of  public 
postal  services  from  VAT.  In  2003  the  European  Commission  adopted  a  proposal  to 
amend the (former) Sixth VAT Directive,169 with the objective to tax postal services and 
sales of postage stamps.170 This proposal was driven by the Commission’s concern that 
the  VAT  exemption  for  public  postal  services  might  create  distortions  on  the  postal 
market. After several years of negotiations in Council, no consensus was reached on this 
proposal  and  the  Council agreed  in December  2010  that  the  only  realistic  way  forward 
was  to  keep  the  ‘status  quo’.  As  a  consequence,  the  Commission  withdrew  this 
proposal.171  Furthermore,  the  CJEU  has  –  in  the  meantime  -  clarified  the  scope  of  the 

165European Commission Postal Statistics Database   
166 European Commission Postal statistics survey 2014 
167  ERGP,  (14)26  ERGP  Opinion  on  a  better  understanding  of  European  cross-border  e-commerce  parcels  delivery 
market(s) and the functioning of competition., ERGP (13)37 ERGP Opinion on cross-border parcel delivery 
168 Council Directive 2006/112/EC of 28 November 2006, Article 132 (1) (a) 
169 Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover 
taxes - Common system of value added tax: uniform basis of assessment, OJ L145, 13 Jun 1977 
170 COM(2003)234, Proposal for a Council Directive amending Directive 77/388/EEC as regards value added tax on 
services provided in the postal sector, 2003.  
171 OJ 2013-C109, p7, 8 

38 

 
 
 
 
 
 
 
                                                 
VAT  exemption  for  public  postal  services.172  Nevertheless,  the  situation  remains 
unsatisfactory in relation to the VAT treatment of the postal sector. 

The exemption, as interpreted by the CJEU, generally covers postal services supplied by 
universal  service  providers  in  their  capacity  as  such.  Following  full  market  opening  in 
particular,  the  exemption  creates  a  distortion  because  non–universal  service  providers 
(USPs)  are  obliged  to  charge  their  customers  VAT  (unlike  the  USP),  which  increases 
prices  for  consumers  who  are  unable  to  claim  back  VAT,  thereby  reducing  the 
attractiveness of using providers who do not qualify as a USP. On the other hand, since 
the USP is not able to claim back VAT yet must pay VAT on its inputs, there is some 
'hidden VAT' which is passed on to consumers in the USPs' prices – and which cannot be 
claimed back by those who are eligible to do so.  The VAT exemption could therefore be 
characterised both a benefit and a burden.173 

implement 

Member  States  also 
in  different  ways,  potentially 
the  exemption 
compounding the distortions already created through national variations in the scope of 
the USO. In responses to the 2012 consultation on parcel delivery, the VAT exemption 
was cited as one of the main barriers to a level playing field for e-commerce and parcel 
delivery by competitors of the universal service providers. 

Figure 7: Scope of VAT Exempt Postal Services as a Percentage of EU/EEA Market 

9% 

5% 

No services
(SE)

44% 

35% 

7% 

Single piece
(BG, CZ, DE, EE, FI, IT, NL,
RO)
Single pieces and bulk letters
(DK, ES, SI)

Single piece, bulk letters, direct
mail or bulk parcels (CY, FR, IE,
LT, LV, MT, PL, PT, UK)
All services
(AT, BE, EL, HU, LU, SK)

Source: WIK-Consult, Main Developments in the Postal Sector (2010-2013) 174 

Since  2008  there  has  been  a  trend  towards  a  reduction  in  the  scope  of  the  VAT 
exemption as a number of Member States have reduced the respective universal service 
scope. For example in Austria the VAT exemption was lifted from non-universal service 
products,  that  were  understood  to  be  all  products  not  posted  in  a  post  office  or  a 
collection  box.    In  Germany  and  the  UK  bulk  mail  is  no  longer  VAT  exempt,  as  are 
money  orders  in  Bulgaria  and  industrial  direct  marketing  mail  in  France.  However, 
despite these changes the differences between Member States continue. 

Other developments: 

172 CJEU, judgment of 23/04/2009, C-357/07, TNT Post UK Ltd. 
173 ERGP, (12) 29 ERGP Report on net cost of USO – VAT exemption as a benefit or a burden 
174 Only EU countries are named by percentage is based on EU27 and EEA market size. Croatia was not included.  

39 

 
 
 
 
 
 
 
 
 
                                                 
 

 

 

 

In February 2013, an appellate court excluded Deutsche Post from consideration 
in a tender procedure involving delivery of court documents due to its failure to 
include VAT in its bid. This followed Deutsche Post's lack of compliance with a 
2010  decision  that  required  VAT  to  be  charged  for  the  delivery  of  court 
documents.175 

In December 2012 the European Regulators Group for Postal Services published 
and consulted on a Report on the VAT exemption for postal services.  The report 
found  that  the  situation  differs  between  Member  States,  including  exempted 
services,  exempted  operators  and  the  tax  rate  for  non-exempted  postal  services. 
The VAT exemption was judged to affect competition, prices, welfare, make-or-
buy decisions of operators, and the relative cost of postal services and competitive 
options open to different segments of customers.176 

In  the  context  of  the  review  of  the  VAT  rules  for  the  public  sector  which  is 
currently being carried out, in January 2013 the Commission Directorate-General 
for Taxation and Customs Union published a study on VAT in the public sector 
and exemptions in the public interest, including postal services. The study found 
that the VAT exemption did create distortions, notably reducing the incentive to 
outsource  and  affecting  the  competitiveness  of  public  and  private  entities.177  A 
subsequent public consultation (finalised in 2014) received some responses from 
the postal sector.178 

In April 2013 the Italian Competition Authority found Poste Italiane had failed to 
charge  VAT  on  services  which  were  no  longer  part  of  the  USO  including  bulk 
mail, registered mail certified mail and direct mail. Poste Italiane was instructed 
the 
to 
aforementioned  ruling  of  the  CJEU  ruling  that  individually  negotiated  tariffs 
should not be VAT exempt.179 

individually  negotiated 

include  VAT 

following 

in  all 

tariffs, 

  There  is  a  long  standing  series  of  court  cases  brought  by  TNT  Post  UK  (now 
Whistl) who challenge Royal Mail's VAT exemption (as the UK USP).  The High 
Court  in  the  UK  ruled  in  October  2014  that  the  UK  Government  was  right  to 
exempt Royal Mail's mandated access services from VAT, though the Judge has 
said  the  case  could  ultimately  be  referred  to  the  CJEU  for  a  ruling,  suggesting 
there  were  sufficient  implications  on  postal  market  liberalisation  in  other  EU 
Member States. 

  On 21 April 2015 the ECJ stated in Case C-114/14 "[...] that, by failing to exempt 
from  value  added  tax  the  supply  by  the  public  postal  services  of  services  other 
than  passenger  transport  and  telecommunications  services,  and  the  supply  of 
goods incidental thereto, and the supply at face value of postage stamps valid for 
use  for  postal  services  within  national  territory,  the  Kingdom  of  Sweden  has 
failed  to  fulfil  its  obligations  under  Articles  132(1)(a)  and  135(1)(h)  of  Council 

175 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p63 
176 ERGP (12)29 ERGP Report on net cost of USO – VAT exemption as a benefit or a burden  
177  Copenhagen  Economics,  VAT  in  the  Public  Sector  and  Exemptions  in  the  Public  Interest  FINAL  REPORT  FOR 
TAXUD/2011/DE/334, 2013 
178  The 
the 
http://ec.europa.eu/taxation_customs/common/consultations/tax/2013_vat_public_bodies_en.htm 
179  WIK-Consult,  Main  Developments  in  the  Postal  Sector  (2010-2013),p73,  CJEU,  judgment  of  23/04/2009,  C-
357/07, TNT Post UK Ltd. 

consultation 

following 

summary 

report 

found 

under 

can 

the 

be 

of 

link:  

40 

 
 
 
 
 
 
 
 
 
 
 
                                                 
Directive  2006/112/EC  of  28  November  2006  on  the  common  system  of  value 
added tax. 

2.11.  Application of Competition Rules 

The  prevention  of  anti-competitive  behaviour  and  the  effective  application  of 
competition law are critical if consumers are to benefit from full market opening in the 
postal  sector.  This  section  summarises  the  main  anti-trust  cases,  as  well  as  rulings  on 
mergers and acquisitions and State aid cases related to the postal sector, both at EU and 
national level. 

In several Member States, national authorities (national competition authorities (NCAs) 
or  national  regulatory  authorities  (NRAs),  where  the  latter  have  competition  powers), 
have  ruled  that  the  universal  service  provider  has  abused  its  dominant  position.  Most 
cases alleged that the universal service provider had offered selective and discriminatory 
rebates in order to drive competitors out of the market, or to erect high barriers to entry. 
The other main type of case dealt with situations where operators had 'refused to  deal', 
i.e. refused to grant access to non-replicable parts of the network. Cases therefore tended 
to relate to 'access' issues, following from Articles 11, 11a or 12. Many decisions were 
appealed in national courts. The Commission did not adopt any decision on the abuse of 
dominant  position  but  fined  one  cartel  in  the  freight  forwarding  sector  which  involved 
postal (express) operators.180  

Summary of cases:181 

 

 

 

In six Member States (DK, ES, IT, RO, SE, UK) NCAs took the view that rebates 
(or  an  equivalent  failure  to  charge  VAT)  offered  by  the  designated  universal 
service  provider  hindered  or  excluded  competitors.  In  2012,  in  Post  Danmark  v 
Konkurrencerådet, the CJEU clarified the application of the competition rules to 
rebates  by  ruling  that  for    price  discrimination  to  breach  competition  rules  it  is  
necessary  to  show  that  ‘that  pricing  policy,  without  objective  justification, 
produces an actual or likely exclusionary effect, to the detriment of competition 
and,  thereby,  of  consumers’  interests’.  Prices  below  average  total  costs  in 
themselves are not sufficient.182  

In  Ireland  the  Competition  Authority  concluded  that  between  March  2012  and 
February  2013  the  way  in  which  An  Post  implemented  its  pricing  scheme  for 
publishers had the same effect as granting an exclusivity discount and was likely 
to a breach of Section 5 of the (Irish) Competition Act 2002 and/or Article 102 of 
the Treaty of the functioning of the European Union.183  

In  two  Member  States  (Spain  in  April  2013184  and  Luxembourg  in  December 
2012185),  NCAs  condemned  public  postal  operators  for  ‘refusal  to  deal’,  i.e.  a 
refusal  to  provide  certain  services  to  particular  customers  without  objective 

180 Case COMP/39.462, Decision 2012/ C375/ 05.   
181WIK-Consult,  Main  Developments  in  the  Postal  Sector  (2010-2013),  p  67-77  and  Copenhagen  Economics  (2010) 
p97 have further details.  
182 C-209/10, judgement of 27 March 2012.  
183 http://www.tca.ie/images/uploaded/documents/E-14-001%20An%20Post%20Enforcement%20Decision.pdf 
184 RESOLUCION Expte. S/0341/11, CORREOS 
185  Décision  nO2112-E-07  du  18  décembre  2012  concernant  une  procédure  rendant  obligatoires  des  engagements 
présentés par l'Entreprise des Postes et Télécommunications  

41 

 
 
 
 
 
 
 
 
                                                 
justification. 

 

 

In  France,  in  2011,  the  Autorité  de  la  concurrence,  the  NCA,  rejected  an 
agreement  between  public  postal  operators  and  networks  of  retail  outlets.  
Although  the  agreement  was  non-exclusive,  the  NCA  concluded  that  the 
agreement would substantially lessen competition.186 

In  2012,  the  Commission  found  that  an  agreement  between  freight  forwarders, 
including  Deutsche  Post,  involving  shipments  between  the  EU  and  China 
amounted 
to  an  anticompetitive  price-fixing  agreement.  The  agreement 
established the prices that all parties would charge customers for services such as 
document preparation, currency conversion, and peak season surcharges. 

In  the  reporting  period,  three  significant  merger  cases  in  the  postal  sector  were  the 
subject of decisions by the Commission.187  

 

 

 

 

In May 2009 the Commission approved, subject to conditions and obligations, the 
merger  between  Posten  (Sweden)  and  Post  Danmark.  The  decision  was 
conditional  on  the  commitment  of  the  parties  to  divest  assesses  and  customer 
contracts  covering  their  entire  overlap  in  the  domestic  standard  business  to 
business (B2B) parcel delivery services market in Denmark.188 

In  July  2012,  the  Commission  cleared,  subject  to  conditions,  the  creation  of 
Asendia, a joint venture between the French La Poste and Swiss Post to provide 
international mail services in various Member States.189 

In  January  2013,  the  Commission  prohibited  the  proposed  acquisition  of  TNT 
Express by UPS because it found the merger would reduce the number of major 
competitors  from  three  to  two  and  would  significantly  impede  effective 
competition in 15 national markets.190  

In  April  2015  FedEx  Corporation  and  TNT  Express  N.V.  announced  they  had 
reached  conditional  agreement  on  a  merger.  The  Commission  subsequently 
announced  the  proposal would  be  subject to  a  merger  approval  investigation  by 
the Commission.191 

Article 7 of the Postal Service Directive permits the financing of the net cost of the 
universal service through general taxation. A number of public postal operators have 
been  recipients  of  state  aid,  often  justified  by  cost  of  providing  postal  networks  in 
remote  and  rural  regions.  Several  operators  have  received  aid  for  restructuring 
purposes. While such aid may be permissible, a level playing field between universal 
service  providers  (who  were  frequently  heavily  subsidised  in  the  past)  and 
competitors  is  an  important  requirement  for  the  success  of  market  opening  –  and 

186 Décision n° 11-MC-01 du 12 mai 2011 relative à la demande de mesures conservatoires présentée par les sociétés 
Kiala France et Kiala SA dans le secteur de la livraison de colis 
187  Other  proposed  mergers  cleared  by  the  Commission  in  the  Postal  and  logistics  sector  included  the  acquisition  of 
joint control over TNT Post UK by Lloyds Banking Group alongside the (then) current parent PostNL (M.7052 Lloyds 
Development Capital/ PostNL/ TNT Post); the change of control of the undertaking De Post NV/La Poste SA M.5523 
– CVC/ The Belgian State / De Post- La Poste  
188 Case M.5152 Posten AB/ Post Danmark A/S 
189 Case M.5603 La Poste/ Swiss Post/ JV 
190 Case M.6570 UPS/ TNT Express 
191http://investors.fedex.com/news-and-events/investor-news/news-release-details/2015/FedEx-and-TNT-Express-Agree-on-
Recommended-All-Cash-Public-Offer-for-All-TNT-Express-Shares/default.aspx Case M.7630 Fed Ex/ TNT Express,  

42 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
lower prices for consumers. By setting out approaches that are consistent with Annex 
1 to the Postal  Services Directive, the Annex on the Calculation of the Net Cost  of 
the  Postal  Universal  Service  Obligation  aims  to  create  greater  certainty  over 
methodologies for the net cost calculation. 

State aid decisions 2009-2015:192 

  Seven Member States (Belgium, France, Germany, Greece, Italy, Poland and the 
UK) had compensation approved for compensation for providing services such as 
maintaining the postal network in unprofitable areas and providing low tariffs for 
certain types of mail (e.g. press or election material) or for certain customers (e.g. 
the blind and partially sighted). The Commission found aid justifiable in all cases 
except  Belgium  where  it  concluded  that  overcompensation  was  paid  to  bpost 
(though some aid was also justified).193 

  Three cases concerned compensation for the high costs of previous public sector 
pension  systems  (Belgium,  Germany  and  the  UK).  Such  aid  is  considered 
justifiable if the result is that the public postal operator still has to finance from its 
own  revenues  an  amount  of  social  security  contributions  that  are  equivalent  to 
those  of  private  competitors.  In  one  case  the  Commission  ordered  the  State  to 
recover part of the aid as the beneficiary (Deutsche Post) was finally paying less 
than competitors in terms of social security contributions.194  

  Two  cases  (Greece  and  UK)  dealt  with  aid  for  corporate  restructuring  and 
modernisation. These were considered compatible with EU competition rules.195 

One case involved the French government’s guarantee of the debts of the public 
postal operator. The Commission concluded that debt guarantees gave La Poste 
an economic advantage over its competitors. France lost its appeal of this decision 
and the CJEU upheld the General Court's judgement that confirmed the 
Commission’s finding that La Poste's status as an EPIC (Établissement Public à 
caractère Industriel et Commercial) resulted in an advantage to the undertaking 
in the form of an implicit unlimited guarantee.196  

3.  MARKET DEVELOPMENTS IN THE POSTAL SECTOR 

3.1. 

Sector Overview197 

Between 2007 and 2011 the overall value of the EU postal sector decreased slightly from 
EUR  94  billion  to  EUR  91  billion  (accounting  for  0.72%  of  EU28  GDP).  While  the 

to 

be 

can 

links 

found 

details, 

Further 

including 

documentation, 

192 
case 
http://ec.europa.eu/competition/sectors/postal_services/overview_en.html  
193  See  cases  N1/2013  and  SA.14588  (BE);  SA.  17653  (DE);  SA.32562  and  SA.35608  (EL);  SA.34027;  (FR); 
SA.33989 (IT) C21/2005; (PL); N508/2010, SA.33054 and SA.38788 (UK).  
194 Cases SA.15488(BE); SA.17653 (DE); and SA.31479 (UK) 
195 SA.32562 (EL) and SA.31479 (UK) 
196 State aid case C56/2007 and CJEU  case C-559/12P 
197 The information provided in this chapter is sourced form WIK Main Developments in the Postal Sector (2010-2013)   
that covers the period up to 2011, and the European Commission Postal Statistics Database (which is managed by DG 
GROW) that provided additional information for years 2012 and 2013. Direct comparisons between the two sources 
should be avoided due to the differences in the survey design and the definitions that apply. Details on the definitions 
and on the survey methodology of the European Commission Postal Statistics Survey can be found on the Glossary of 
Postal  Statistics 
  http://ec.europa.eu/growth/sectors/postal-
services/index_en.htm .  

(technical  notes),  which  will  be  published  here: 

here 

43 

 
 
 
 
 
 
 
 
 
 
                                                 
revenues  in  the  parcel  and  express  sector  have  grown,  demand  and  revenues  for  letter 
post  services  have  declined.  Changes  in  the  overall  structure  of  the  postal  sector  have 
continued and accelerated: parcel and express revenues accounted for more than half the 
total revenues generated in the sector in 2011, compared to 44% in 2007. This proportion 
is likely to have increased given the ongoing decline in letter volumes and growth in the 
parcel market.198 

In 2013 the universal service area alone (i.e. products and services falling within the 
scope of the universal service) accounted for more than EUR 23 billion for the EU28.199 
Over 85 billion letter post items were dispatched in the EU by universal service providers 
in 2013, as were nearly 2 billion parcels.200 

3.1.1.  Ownership Structures of Universal Service Providers 

The Directive does not require any particular ownership structure for the postal operators 
providing  the  universal  service.  Nevertheless,  in  all  Member  States  except  Cyprus  the 
USP  is  organised  as  a  corporation  under  normal  corporate  law  or  related  governance 
arrangements  for  state-owned  enterprises.  Cyprus  Post  is  a  ministerial  (government) 
department.201 

  The majority of universal service providers remain publicly owned at least in 
part: Post NL, Malta Post and CTT Correios (Portugal) are the only wholly 
privately owned operators. The proportion of government ownership has however 
diminished since 2008 with several governments selling a partial stake or more in 
their national operator.  Greece announced plans to sell a 39% stake in Hellenic 
Post in 2010. 

  Royal Mail (UK) was privatised in October 2013. 60% was sold to institutional 

and retail investors and 10% was allocated to eligible employees for free. The UK 
government announced in June 2015 that it would sell its remaining shares and 
sold half its remaining stake later that month.  

  CTT Correios was fully privatised in September 2014 when the Portuguese 

Government sold its final 31.5% stake. 

  The Romanian state decided in 2012 to begin the privatisation of Romanian post. 
A non-binding offer, submitted by bpost, was accepted for the acquisition of a 
51% stake in February 2015. This agreement enabled due diligence to start, prior 
to the submission of any binding offer.202  

 

Italy envisages the privatisation of Poste Italiane in 2015. An application for 
listing on the Milan Stock Exchange was made in August 2015.203  

198 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p163. Based on WIK survey,   
WIK-Consult  and  ITA  Consulting,  Evolution  of  the  European  Postal  Market  since  1997,  2009  and  AT  Kearney, 
Europe's CEP Market: Growth on New Terms, 2012  
199 European Commission, postal statistics. Figure does not inlcude Germany and Romania.  
200  UPU,  data  for  EU27  plus  Croatia.  Number  of  letter  post  items  domestic  service  and  international  service.  No 
comparable date with 2007 and 2011 estimates of overall size of EU postal sector.    
201 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p16 
202 www.posta-romana.ro/posta-romana/centru-de-presa/comunicate/comunicat02022015.html 
203 www.posteitaliane.it/ol/comunicatostampa.do?id=835 

44 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.1.2.  Financial Position of Postal Operators 

Figure 8: Profitability of USPs (EBIT margin, total business) 

Source: WIK-Consult, Main Developments in the Postal Sector (2010-2013), p201204 

It  is  difficult  to  discern  trends  in  the  profitability  of  universal  service  providers:  some 
have become more profitable others less so. Other postal operators do not always publish 
their  financial  results,  and  where  they  do  they  are  often  not  on  a  comparable  basis  to 
those of the universal service providers so comparisons different types of operator can be 
difficult. Market developments, for example the experiences of Bring Citymail and many 
German competitors; the market exits of Adrexxo from the French letter post market; and 
TNT  Post's  withdrawal  from  some  Eastern  and  the  Austrian  letter  post  markets  and 
suspension of end to end delivery in the UK, have been interpreted as an indication that 
new  entrants  may  be  less  profitable  than  some  universal  service  operators,205  though 
there could also be other factors at play.  

The  decline  in  letter  post  volumes  affects  the  economic  situation  of  postal  operators, 
particularly  universal  service  providers  which  have  diversified  less  into  other  sectors 
such  as  financial  services.  The  immediate  effect  of  declining  volumes  is  shrinking 
revenue, particularly in the short term before business practices and/or prices can adapt 
and affected by the high share of fixed costs that are typical of postal operators with high 
frequency  national  networks.  One  model  of  the  financial  impact  on  postal  operators  of 
the  decline  in  letter  volumes  suggests  that  smaller  providers  who  have  lower  mail 
volumes are likely to face a higher impact on their costs for a given percentage decline in 

204Post Danmark and Swedish Posten – Group results of PostNord; ROUSP: 2011: -14% 
205 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p205 

45 

-10%-5%0%5%10%15%20%ATBEDEDKFIFRIELUNLSEUKISLINOCHCYELESITMTPTBGCZEEHRHULTLVPLROSISKWestern USPSouthern USPEastern USPEBIT margin201020112012 
 
 
 
 
 
 
 
                                                 
volumes  as  the  fixed  element  of  the  costs  are  concentrated  on  a  smaller  number  of 
items.206 

3.2.  Letter Post Markets 

The key players in the letter post sector are still the universal service providers. In most 
Member States  they retain  market shares  above 95%  in  terms of volume and  revenues. 
Nevertheless,  in  some  domestic  letter  post  markets  delivery  competition  with  market 
shares  above  5%  has  emerged,  notably  in  Estonia,  Croatia,207  Germany,  Italy,  the 
Netherlands, Denmark, Poland, Spain and Sweden.208 

3.2.1.  Letter Volumes and Revenues 

Two major dynamics have fundamentally altered the letter post markets since 2008: the 
economy  and  e-substitution.  The  first  has  often  reinforced  the  latter  as  governments, 
businesses and individuals have sought to save costs and therefore switched to electronic 
means of communication and the provision of information and services, which have also 
become increasingly convenient for individuals (and businesses) to access as technology 
has developed.  

Economic  activity  was  historically  the  main  driver  of  letter  volumes.209  Countries  with 
higher  levels  of  GDP  had  higher  quantities  of  mail  per  capita.  Although  economic 
activity does still affect mail demand to some extent, the rate of e-substitution is also now 
a  key  determinant  of  letter  volumes.  Factors  affecting  e-substitution  include  price, 
internet  availability  and  penetration,  user  habits,  reliability  of  services  and  security 
concerns.  Communication  between  individuals  has  already  been  replaced  by  electronic 
communication to a significant extent, whereas concerns about the security of electronic 
communication  may  be  responsible  for 
in 
communications between businesses and consumers.210   

the  slower  rate  of  e-substitution 

In  2011  the  EU  letter  post  sector  accounted  for  a  total  of  EUR  44  billion  or  0.34%  of 
EU27 GDP. This compared to EUR 52.3 billion in 2007.211  

206 WIK-Consult, Main Developments in the Postal Sector (2010-2013), pp 194-200.  
207 CityEx as main competitor of Croatian Post recently announced significant reduction of its services scope (focusing 
on  parcel  delivery)  and  layover  of  employees  (http://www.jutarnji.hr/zasto-city-ex-mora-otpustiti-700-radnika--i-tko-
ce--zbog-toga---profitirati-/1362122/).  
208 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p165, European Commission Postal Statistics 
Database 
209 See Hooper, R et al, Saving the Royal Mail's universal postal service in the digital age, 2010, for an analysis of the 
UK showing a strong correlation of growth in letters and economic growth until approximately 1999/2000.   
210 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p172 
211 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p163 

46 

 
 
 
 
 
 
 
 
 
 
                                                 
Figure 9: Estimated Number of Letter Post Items 2008 to 2013 

s
n
o
i
l
l
i

B

120

100

107.6 

102.9 

98.4 

93.9 

89.8 

85.5 

European Union - 27 Number of
letter-post items, international
service - dispatch

European Union - 27 Number of
letter-post items, domestic service

80

60

40

20

0

2008

2009

2010

2011

2012

2013

Source: UPU estimate for EU27. Shows letter post items dispatched by designated operators (i.e. universal 
service providers) only.212 

212 UPU estimates may include advertising items and hybrid mail as well as addressed mail. See UPU Postal Statistics -  
Technical Notes for further details www.upu.int/en/resources/postal-statistics/query-the-database.html  
47 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 
Figure 10: Domestic letter post items per capita (2007 and 2011)  

Source: WIK-Consult, Main Developments in the Postal Sector (2010-2013), p167213 

 Figure 11: Total letter post items per capita (2012 and 2013)214 

350

300

250

200

150

100

50

0

3
1
0
2
d
n
a
2
1
0
2
,
a
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e
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1
0
2

2
1
0
2

AT BE DE DK FI FR IE LU NL SE UK CY EL ES IT MT PT BG CZ EE HR HU LT LV PL RO SI SK

Western

Southern

Eastern

Source: European Commission Postal Statistics Database 

213 2007 data missing for BE (confidential), HR, IS and LI; 2007 and 2011 figures of CH not comparable due to change 
in measurement method.  
214Own calculations, EU28 AT, BE, SI, NL, FI, NL, SE, IT, SK, LT confidential, others not presented: missing or not 
applicable. 

48 

0100200300400500600ATBEDEDKESFIIELUNLSEUKISLINOCHCYELFRITMTPTBGCZEEHULTLVPLROSISKHRWestern countriesSouthern countriesEastern countriesLetter post items per capita20072011 
 
 
 
 
 
 
 
                                                 
 
 
 
 
 
 
 
 
The  Western  Member  States215  still  have  on  average  the  highest  letter  post  volume  per 
capita  with  217  items  per  capita  in  2013.  Residents  of  the  Southern216  and  Eastern217 
Member States received only 72 letter post items and 53 letter post items respectively per 
year on average. In the European Union (EU28) in 2013 the average was about 141 items 
per capita.218   

In  2011,  the  largest  letter  post  markets  in  terms  of  absolute  revenue  and  volume  were 
Germany, the UK and France followed by Italy and Spain in terms of revenue share and 
Spain and the Netherlands respectively in terms of volume share.219  

In 2013 the largest letter post markets in terms of volume were Germany, France and the 
UK. 220 

Figure 12: Average change rate per year for domestic and cross-border inbound letter 
post volumes 2007-2011 

Source: WIK-Consult, Main Developments in the Postal Sector (2010-2013), p169. 221 

Between 2007 and 2010 letter volumes declined on average by 4.3% per year and letter 
revenues by 5.2% per year. Between 2010 and 2011 the letter decline slowed to 3.3% in 
terms of volumes and 1.4% for revenues.  

215 Western Member States are AT, BE, DE, DK, FR, FI, IE, LU, NL, SE and UK.  Grouping follows WIK-Consult, 
Main  Developments  in  the  Postal  Sector  (2010-2013),  applied  to  EU28.  Source:  European  Commission  Postal 
Statistics Database; own calculations.  
216 Southern Member States are CY, EL, ES, IT, MT and PT.  
217 Eastern Member States are BG, CZ, EE, HR, HU, LT, LV, PL, RO, SI and SK.  
218 Estimates on the basis of the European Commission Postal Statistics Database  
219 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p164 
220  Estimates  using  European  Commission  Postal  Statistics  Database.  Further  detail  not  available  for  reasons  of 
confidentiality.  
221Data from WIK survey and WIK research. BE is confidential, CY, HR, IS and LI; 2007 and 2011 figures of CH are 
not comparable due to change in measurement method.  

49 

-12%-10%-8%-6%-4%-2%0%2%ATBEDEDKESFIIELUNLSEUKISLINOCHCYELFRITMTPTBGCZEEHULTLVPLROSISKHRWestern countriesSouthern countriesEastern countriesAverage change rate per year (2007-2011) 
 
 
 
 
 
 
                                                 
Figure 13: Changes in total letter mail 2012 -2013 

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

AT BE DE DK FI FR IE LU NL SE UK CY EL ES IT MT PT BG CZ EE HR HU LT LV PL RO SI SK

Western

Southern

Eastern

8,00%

6,00%

4,00%

2,00%

0,00%

-2,00%

-4,00%

-6,00%

-8,00%

-10,00%

-12,00%

-14,00%

Source: European Commission Postal Statistics Database222 

Between  2012  and  2013  the  decline  of  letter  volume  is  estimated  to  be  4.85%  for 
EU28.223 On the basis of the latest information, there are indications suggesting that the 
decline of letter mail revenues may have bottomed-out. However, it is still early to draw 
firm conclusions at this stage, not least as volumes continue to decline.   

The  decline  in  the  volume  of  letters  is  not  uniform  across  the  EU.  Between  2007  and 
2011 the average decline in western Member States224 was 3.9%. Denmark experienced 
an  average  annual  decline  of  over  10%  and  the  UK  average  reductions  of  over  6%, 
whereas Austria, Finland and Luxembourg saw declines of less than 2%. Although they 
started  from  a  lower  baseline,  in  percentage  terms  both  southern  Member  States225  and 
eastern  Member  States226  saw  higher  rates  of  decline,  with  an  average  of  6%  and  8% 
respectively. Bulgaria, Estonia, Lithuania and Latvia all saw letter volumes fall by over 
8% (and Romania was just under 8%).  

The picture between 2012 and 2013 is slightly different. Mail decline is smoother in most 
of  the  Member  States  and  some  Member  States  experienced  marginal  growth.  On  the 

222Own calculations, EU28. AT, BE, SI, NL, FI, NL, SE, IT, SK, LT confidential, others not presented: missing or not 
applicable. 
223 Estimate using European Commission Postal Statistics Database  
224 Includes IS, LI, NO and CH as well as western Member States (AT, BE, DE, DK, FR, IE, LU, NL, SE, and UK). 
See Figure 12 from WIK-Consult, Main Developments in the Postal Sector (2010-2013), p169  
225 CY, EL, ES, IT, MT and PT. 
226 CZ, EE, HR, HU, LT, LV, PL, RO, SI and SK. 

50 

 
 
 
 
 
 
 
 
                                                 
other hand, Cyprus, Greece and Spain experienced a significant decline, potentially as a 
result of economic circumstances.  

Nevertheless, some Member States continue to experience steep declines in the number 
of  letters.  For  example  in  the  Netherlands  addressed  mail  volumes  declined  by  around 
8%in  2014227  and  by  13%  for  the  first  quarter  of  2015.228  Mail  volumes  in  the 
Netherlands are less than half than they were in 2000, and overall volumes are predicted 
to fall between 32% and 49% between 2010 and 2020.229 In Finland addressed mail fell 
by 10% between January and September 2014 and the number of letters, bulk mail and 
magazines is estimated to fall from 1400 million in 2010 to 1000 million in 2015 to 350 
million in 2013.230  

Figure 14: Decline in Addressed Letter Volumes 2000 - 2014 for Selected Member States 

Source: Posti analysis 

Two of the Member States with highest rates of decline in letter volumes, Denmark and 
Estonia are two of the most digitally advanced. Since January 2012 almost 90% of 
Estonian inhabitants have had an ID card that links them to online services and acts as a 
ticket for public transport. Electronic voting in elections has been an option since 2005, 
with 24% using this method in 2011. Over 90% of income tax declarations are now done 
online, as are 98% of banking transactions.231 According to 2013 projections, by the end 
of 2014 the volume of stamped standard mail sent within Estonia was expected to fall by 

227 Post NL, Annual Report 2014, 2015 
228 Post NL, Results Post NL Q1 2015, 2015.  Full year addressed mail volume decline for 2015 was expected to be in 
the guided range of 9-12%. Q1 adjusted was -12.5% 
229 WIK – Consult, Developments in the Dutch Postal Market, 2011 
230 Posti  
231 http://estonia.eu/about-estonia/economy-a-it/e-estonia.html 

51 

 
 
 
 
 
 
                                                 
 
43% compared to the year 2011232 and during 2014 turnover from the domestic letter 
service fell by 8%.233 

Digital services are becoming mandatory for interactions between the Danish 
Government and citizens in four stages finishing in 2015. 234 Municipalities and regional 
authorities, as well as many utility companies and financial services organisations 
communicate with citizens/customers via "e-boks"an electronic communications system 
jointly owned by Post Danmark and Nets A/S, a Danish payment systems provider. 235 
Mail volumes declined by 12% in 2014 and by 15% in Q1 2015 in Denmark.236 

3.2.2.  Competition in Letter Post Markets 

Overall,  despite  the  gradual  process  of  full  market  opening  across  the  EU,  the  level  of 
competition  for  letters  remains  limited  in  most  Member  States,  in  both  domestic  and 
international markets.   

Of the Member States that fully opened their markets before 2011, eight Member States 
had  over  5%  competition  by  2013.  Bulgaria,  Estonia,  the  Netherlands  and  Sweden  had 
more  than  5%  end  to  end  competition;  Slovenia  and  the  UK  had  more  than  5%  access 
competition;  Germany  had  over  5%  by  volume  of  end-to-end  and  access  competition; 
and Spain had over 5% competition (of an unspecified type). Several Member States who 
opened  their  markets  later  were  known  to  have  competition  in  over  5%  of  the  letters 
market by mid-2013, including Latvia, Lithuania, Poland, Romania and Slovakia.237 

Explanations for the slow development of competition will vary between Member States. 
Reasons  include  combinations  of  declining  letter  volumes,  access  regimes  and  special 
tariffs, other regulatory features and the cost of setting up a distribution network or the 
existence  of  other  operators  in  adjacent  markets  (for  example  newspaper  delivery).  An 
ERGP report, on a preliminary evaluation, found that the level of end-to-end competition 
did  not  appear  to  have  been  influenced  by  letter  volumes,  population  density  or 
urbanisation.  The  level  of  urbanisation  did  not  appear  to  have  an  impact  on  the 
development of access competition.238  

232 Eesti Post, Annual Report 2013 
233 Turnover from international services grew, probably due to small e-commerce shipments sized as letters or packets. 
https://www.omniva.lv/about_us/news/all_news/e_commerce_promotes_growth_of_omnivae28099s_turnover 
234 https://joinup.ec.europa.eu/community/nifo/og_page/egovernment-factsheets 
235 www.e-boks.dk/Default.aspx WIK-Consult, Main Developments in the Postal Sector (2010-2013), p173 
236 Post Nord, Annual and Sustainability Report 2014, 2015; Post Nord, Interim Report Q1 2015, 2015.  
237 ERGP, (13)38 rev1 Report on End-to-End Competition and Access in European Postal Markets 
238 ERGP, (13)38 rev1 Report on End-to-End Competition and Access in European Postal Markets. The report noted 
that findings should be seen as hypotheses as to limited statistics and a small sample meant that firm conclusions could 
not be reasonably made. 

52 

 
 
 
 
 
 
 
 
 
                                                 
Table 6: Level of End to End and Access Competition in 2013 

Year of full 
market 
opening 

Member State 
2011 
Austria 
2011 
Belgium 
2011 
Bulgaria 
2013 
Cyprus 
2013 
Czech Republic 
2011 
Denmark 
Before 2008 
Estonia 
Before 2008 
Finland 
2011 
France 
Before 2008 
Germany 
2013 
Greece 
2013 
Hungary 
2011 
Ireland 
2011 
Italy 
2013 
Latvia 
2013 
Lithuania 
2013 
Malta 
2009 
Netherlands 
2013 
Poland 
2012 
Portugal 
2013 
Romania 
2012 
Slovakia 
2011 
Slovenia 
2011 
Spain 
Before 2008 
Sweden 
United Kingdom  Before 2008 

More than 5% end-to-
end competition by 
volume 

More than 5% access 
competition by 
volume 

No 
No 
Yes 
No 
No 
No 
Yes 
No 
No 
Yes 
No 
No 
No 
No 
Yes 
Yes 
No 
Yes 
Yes 
No 
Yes 
Yes 
No 
Unknown* 
Yes 
No 

No 
No 
No 
No 
No 
No 
No 
No 
No 
Yes 
No 
No 
No 
No 
No 
No 
No 
No 
No 
No 
No 
No 
Yes 
Unknown 
No 
Yes 

Source: ERGP, (13) 38 rev1 Report on End-to-End Competition and Access in European Postal Markets. 
*Spain  has  more  than  5%  competition  but  was  unable  to  define  whether  this  was  end  to  end  or  access 
competition. 

Examples of competition in the letter market include the following: 

  Netherlands: two main competitors Sandd, a privately owned mail company and 
Selekt  Mail  (owned  by  Deutsche  Post  Global  Mail)  slowly  gained  market  share 
from 2002. Selekt Mail was taken over by Sandd in 2012 and combined they had 
a market share of between 10 and 20% in 2012. 239 PostNL (formerly TNT Post) 
also offers low budget mail services via its subsidiary Netwerk VSP. Competition 
is primarily for direct mail and periodicals. 

239 ERGP, (13)38 rev1 Report on End-to-End Competition and Access in European Postal Markets 

53 

 
 
 
 
 
 
 
                                                 
  Germany: The CITIPOST Verbund, founded in 2009, consists of 28 local postal 
operators and delivers to around 5.5 million households in Germany in both rural 
and urban areas. The cooperation partners deliver on average half a million items 
per  day,  five  days  a  week,  via  12,000  delivery  routes.  In  2012  they  delivered 
around 125 million letter post items in total.240  

  Poland:  By  2013,  InPost  was  delivering  letters  and  parcels  to  about  75%  of 
households in Poland and was forecast to deliver up to 230 million letters and up 
to  5  million  parcels.  241  By  the  end  of  2014  Interger,pl  SA  Group  (the  parent 
company) had 8,300 customer service centres in Poland.242  

  Spain:  Competitors  in  Spain  have  a  high  market  share  of  more  than  18% 
(volume-based),243  with  Unipost  the  largest  alternative  postal  provider  covering 
70% of the population.244 Unipost specialises in the delivery of direct mail up to 
500g but also delivers correspondence, registered mail, small packets and parcels 
received from its international stakeholder DHL. 

  Croatia: City Ex, owned by the private equity company Bancroft PE since 2011, 
delivered  more  than  60  million  documents  per  year.245  However,  it  recently 
announced that it will withdraw from the letter mail  market, lay off around 700 
employees  and  focus  on  parcel  delivery  services.  Austrian  Post  also  operates  in 
Croatia.  

3.2.3.  Cross-border Letter Post 

While in many Member States there is limited or no competition in the cross-border letter 
post market, in other cases, usually western or southern Member States, there was more 
competition  in  the  international  than  the  domestic  letter  market.  Where  there  is 
competition  it  is  usually  concentrated  in  the  business  or  bulk  mail  markets  where  mail 
can  be  collected  directly  from  customers  rather  than  from  a  network  of  collection 
points.246 

Where  there  are  competing  operators  for  cross-border  letter  post,  they  tend  to  be 
universal  service  providers  or  their  subsidiaries  from  other  Member  States,  such  as 
Spring Global Mail (a joint venture of Royal Mail and TNT), Asendia (joint venture of 
La Poste and Swiss Post) and Deutsche Post Global Mail. IMX, based in France, is the 
only  independent  operator  with  a  significant  market  share.  These  operators  are  active 
mainly  in  western  and  southern  Member  States.  The  intensity  of  competition  differs 
between locations.247  

240 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p185 
241 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p187 
242 Integer.pl Grupa Kapitałowa, Management report on the Operations of Integer.pl SA Group for the period from 1 
January 2014 to 31 December 2014, 2015 
243 CNMC (2014), ANÁLISIS DEL SECTOR POSTAL Y DEL SECTOR DE LA MENSAJERÍA Y PAQUETERÍA: 
METODOLOGÍA UTILIZADA Y RESULTADOS OBTENIDOS,  
http://www.cnmc.es/Portals/0/Ficheros/Transporte_Postales/informes_postal/2014/141218_An%C3%A1lisis%20del%20sector%20po
stal%20mensajer%C3%ADa%20y%20paqueter%C3%ADa.pdf  and ERGP(13) 38 rev1 Report on End-to-End Competition 
and Access in European Postal Markets 
244Unipost website http://www.unipost.es/unipost-en-cifras [5.6.2013]. 
245WIK-Consult, Main Developments in the Postal Sector (2010-2013), p186 
246 Member States in where there is limited or no competition for cross-border letter mail include BG, CY, CZ, EE, EL, 
HR, HU, LT, LU, LV, MT, PL, RO, SI and SK. WIK-Consult, Main Developments in the Postal Sector (2010-2013) 
p188-189. 
247 WIK-Consult, Main Developments in the Postal Sector (2010-2013,) pp188-190 

54 

 
 
 
 
 
 
                                                 
3.2.4.  Outlook 

Studies predicting future changes in mail volumes anticipate that transactional/bulk mail 
will be the most affected between 2010-2020, with estimates ranging from a fall of 1.9% 
to  9.5%  in  the  compound  annual  growth  rate  (CAGR).  Social  mail,  'office  mail'  and 
government communications are all expected to decline, as is marketing/advertising mail, 
though to lesser extents.248  

Table 7: Forecast change in volumes per letter market segment 

Segment 

Forecast 
period 

CAGR min 

CAGR max 

Copenhagen 
Institute for 
Futures Studies 
(Europe) 

WIK-Consult 
(NL) 

Transactional mail 

Gov2C 

Marketing communication 

2010-2020 

Media content 

Social communication 

Social mail 

Office mail 

Transaction mail 

Advertising  

Periodicals 

International mail 

2010-2020 

-3 % 

-2.5 % 

-1.1 % 

-1.8 % 

-2.3% 

-2.7 % 

-2.6 % 

-5.3 % 

-1.6 % 

-2.1 % 

-4 % 

-3 % 

-1.7 % 

-2.7 % 

-5.3 % 

-6.2 % 

-9.5 % 

-4.3 % 

-4.5 % 

-1.5 % (inbound), 
-1.5 % (outbound) 

-3,9 % (inbound), 
-4,1 % (outbound) 

Koppe/Hömstreit 
(AT) 

Transaction mail 

2009-2025 

-1.9 % 

-5.7 % 

Source: WIK-Consult, Main Developments in the Postal Sector (2010-2013), p180. 

248 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p180. Using WIK-Consult, Developments in 
the Dutch Postal Market, Study for the Ministry of Economic Affairs, Agriculture and Innovation, Directorate-General 
for Energy, Telecoms and Markets The Netherlands, 2011; Copenhagen Institute for Futures Studies, Role of Mail 
2020, Report prepared for the International Post Corporation by the Copenhagen Institute for Futures Studies, 2011. 

55 

 
 
 
 
 
 
 
 
 
 
 
                                                 
Figure 15: Trend forecast for total universal service mail volumes in the Netherlands 
2010-2020 

Source: WIK-Consult, Developments in the Dutch Postal Market, 2011249  

3.3. 

Parcel and Express Markets 

3.3.1.  Parcel and Express Markets Overview 

The  parcel  and  express  market  is  more  heterogeneous  than  the  letter  market  and  more 
complex. There are five main types of operator. The parcel, express and courier market 
did  not  form  part  of  the  reserved  area  for  universal  service  providers  prior  to  market 
opening. 

Universal service providers are required by the Postal Services Directive to arrange for 
the  clearance,  sorting,  transport  and  distribution  of  postal  packages  up  to  10kg,  and 
potentially  up  to  20kg.  This  obligation  includes  domestic  and  international250  parcel 
services. In addition to the basic parcel services, which fall within the scope of the Postal 
Services Directive, universal service providers usually also offer a range of value-added 
services,  for  example  track  and  trace  and  guaranteed  delivery  times.  Such  services 
compete with those offered by integrators and other domestic and international carriers.   

Providers of postal services other than the universal service provider are covered by the 
Postal Services Directive notably: 

  Article 9 permits services falling outside the scope of the universal service to be 
covered  by  a  general  authorisation  condition.  This  may  include  requirements 
concerning  the  quality,  availability  and  performance  of  the  relevant  services,  if 

249 Total domestic mail volumes were expected to decline by 26%, 36% and 47% in the paper matters, base case and 
digital world scenarios respectively.   
250  International  services  within  the  EU  fall  within  the  scope  of  the  Postal  Services Directive.  International  Services 
outside the EU are covered by the Universal Postal Union.   

56 

 
 
 
 
 
 
 
 
                                                 
necessary  and  justified;  be  subject  to  an  obligation  to  make  a  financial 
contribution to the national regulatory authority's operational costs referred to in 
Article  22;  be  made  subject  to  or  impose  an  obligation  to  respect  working 
conditions; and be subject to an obligation to make a financial contribution to the 
sharing  mechanism  (to  the  extent  that  services  offered  are  within  the  universal 
service area). 

  Article 19 requires that all postal service providers have transparent, simple and 

inexpensive procedures for dealing with postal users' complaints.   

  Article  22a  requires  all  postal  service  providers  to  prove  all  the  information,  in 
particular  to  national  regulatory  authorities,  to  ensure  conformity  with  the 
directive  and  for  clearly  defined  statistical  purposes.  The  information  requested 
by NRAs should be proportionate to its tasks.  

"Integrator" is the term used to refer to the four main international express carriers, DHL 
(part of Deutsche Post DHL group), Fed EX, TNT and UPS who combined account for 
87%  of  the  international  express  market.251  Copenhagen  Economics  estimated  that  the 
integrators  had  a  42%  market  share  in  e-commerce  deliveries  (compared  to  40%  for 
universal  service  providers),  rising  to  a  50%  share  for  cross-border  e-commerce 
shipments.252  The  four  companies  operate  on  a  global  scale  and  have  either  full 
ownership  or  operational  control  of  their  networks,  including  transport  assets  such  as 
aircraft and IT. These companies offer 'express' services with guaranteed delivery times 
and tracking both within and between countries. Traditionally much of their business was 
in  the  B2B  segment,  though  they  are  now  expanding  into  B2C  markets  following  the 
emergence  of  e-commerce.  In  the  B2B  segment,  the  four  integrators  have  a  combined 
market share in the intra-European cross-border express segment of approximately 90%. 
The largest market player in the European international; express market is DHL with an 
estimated market share of 41%, followed by UPS with an estimated market share of 25%, 
TNT with estimated 12%. FedEx is the smallest player with approximately 10% market 
share.253 FexEx and TNT announced a proposed merger in April 2015 after the European 
Commission ruled against the proposed takeover of TNT by UPS in 2014.  

Pan  European  parcel  networks  created  by  national  operators,  including  DPD,  the 
international  parcel  delivery  network  of  Le  Groupe  La  Poste  and  Global  Logistics 
Systems  (GLS)  a  European  delivery  company  and  subsidiary  of  Royal  Mail.  Both 
companies have a road-based pan European parcel network.  

Other  national  operators  /  universal  service  providers  also  have  some  degree  of  parcel 
capability  to  fulfil  the  requirements  of  the  universal  service  obligation.  They  therefore 
have  to  provide  basic  domestic  and  cross-border  parcel  services,  though  in  many  cases 
the  latter  end  at  the  border  where  the  parcel  in  question  is  handed  over  to  the  national 
operator  of  the  recipient  country.  Some  national  operators  also  have  regional  networks 
that  provide  domestic  and  cross-border  services,  though  not  on  the  same  scale  as  the 
integrators  or  DPD  or  GLS.  Examples  include  Austrian  Post's  European  Distribution 
Network  EURODIS,  Eesti  Post/Omniva,  Post  Nord  and  Post  NL.  Around  36%  of  the 

251 AT Kearney, Europe's CEP Market: Growth on New Terms 
252 Copenhagen Economics, E-commerce and delivery - Study on the state of play of EU parcel markets with particular 
emphasis on e-commerce, 2013, p20 
253 Deutsche Post DHL Group (2015) Annual Report 2014. The country base is AT, DE, DK, ES, FR, IT, NL, RO, TR 
and UK.  

57 

 
 
 
 
 
 
 
 
 
 
                                                 
parcel market is held by universal services providers, and only around 10% of the parcel 
market  falls  under  the  universal  service  obligation.254  Reflecting  their  wider  (i.e.  non 
USO)  parcel  offering,  USPs  have  been  estimated  to  have  a  35%  market  share  for  the 
delivery  of  B2C  packets  and  parcels,  growing  to  54%  in  the  more  mature  e-commerce 
markets.255 Their share of the domestic parcel and express market has been estimated at 
20%.256  

Many  privately  owned  small  and  medium  sized  courier  companies  provide  courier, 
express and parcel (CEP) services. These are usually on a B2B basis such as Nightline 
(IE), Siodemka (PL) and MRW (ES and PT). Crowdsourcing is also starting to appear as 
a possibility for parcel delivery through services such as bring.BUDDY (in conjunction 
with DHL).  

Finally,  the  increase  in  e-commerce  has  led  to  a  growth  in  new  parcel  delivery 
companies,  or  the  development  of  those  created  for  catalogue  shopping.  Examples 
include Hermes (DE) and Yodel (UK). Competitors in letter markets such as Sandd (NL), 
InPost (PL) and City Ex (HR) have also begun to enter the parcel market.   

The main players in the European CEP market are shown below. 

Figure 16: European CEP Market for the Express and Deferred Segments in Revenue 

Source: Effigy Consulting European CEP Market Research.257  

There  is  no  up  to  date  comprehensive  information  or  consensus  about  the  size  of  the 
European parcel and express market. This is mainly due to different market definitions, 
especially  regarding  the  weight  limit  of  shipments  and  the  service  characteristics, 

254 European Commission, Green Paper – An integrated parcel delivery market for the growth of e-commerce in the 
EU, 29.11.2012, COM (2012) 698 final. 
255 Copenhagen Economics, E-commerce and delivery - Study on the state of play of EU parcel markets with particular 
emphasis on e-commerce, 2013, p20 
256 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p239 
257 Figure 16 (European CEP Market for the Express and Deferred Segments in Revenue) was provided to the 
Commission by Effigy Consulting which remains the copyright holder. Accordingly, Commission Decision 
2011/833/EU on the reuse of Commission documents does not apply to this information. Any requests for reproduction 
or further distribution should be sent to Effigy Consulting. 

58 

 
 
 
 
 
 
 
 
 
                                                 
different  methodologies  as  well  as  a  lack  of  data.    Many  smaller  packages,  usually 
weighing  less  than  2kg and  which  fit  a  ‘large  letter’  format,  including  books,  CDs  and 
DVDs are classified as 'packets' and therefore posted as 'letters' rather than parcels. This 
may  to  result  in  the  understatement  of  e-commerce  growth  since  such  packets  are 
particularly convenient for e-commerce as they will often fit through a letter box rather 
than requiring specific collection arrangements.   

Estimates of the size of the parcel market include:  

  TNT Express estimated that the European parcel and express market had a value 
of  EUR  60  billion  in  2010.258  The  European  Express  Association  estimated  the 
European express market was  worth EUR 38 billion in 2010.259 

  A 2011 A.T. Kearney study estimated the parcel market to be worth around EUR 

47 billion.260 

  A 2013 WIK study estimated a market size of EUR 37 billion for the European 

parcel and express market in 2011.261  

  Copenhagen Economics valued the European courier, express and parcel market 

at EUR 46 billion in 2011.262  

  La Poste estimated the intra-European parcel and express market generated EUR 
37 billion in 2011263 and valued the courier, express and parcel market was worth 
EUR42.8 billion in 2012. 264 

  DHL Deutsche Post, estimated a market size of EUR 6.8 billion for the European 

express market in 2011.265  

  Apex  estimated  the  European  parcel  market  to  be  worth  EUR  53.5  billion  in 

2014.266  

258 See TNT Express (2012), 4Q 2011 Analysts presentation: 2011 Highlights and Strategy update, 21 February 2012. 
259 See European Express Association, Economic impact of Express Carriers in Europe, 2011, p 6. 
260 AT Kearney, Europe's CEP Market: Growth on New Terms, 2012 
261 WIK-Consult, Main Developments in the Postal Sector (2010-2013), pp222-223 which also explains the reasons for 
different estimates of the size of the parcel and express sector.   
262 Copenhagen Economics, E-commerce and delivery - Study on the state of play of EU parcel markets with particular 
emphasis on e-commerce, 2013 
263 Le Groupe La Poste (2012), Registration document 2012, p34. 
264 La Poste, Annual Report 2013, 2014 
265  DHL  Deutsche  Post  Annual  Report  2012,  2013  p  59.  The  segment  refers  to  TDI,  i.e.  time  definite  international 
services. 
266 Apex Insight, European Parcels: Market Insight Report 2015, 2015 

59 

 
 
 
 
 
 
                                                 
Figure 17: Parcel and Express Market Segments (2011)  

Source: WIK-Consult, Main Developments in the Postal Sector (2010-2013), p225267 

Figure 15 illustrates the heterogeneous structure of national parcel and express markets 
within  Europe.  Overall,  express  services  only  account  for  one  quarter  of  domestic  but 
more  than  half  of  the  cross-border  market  segments.  It  appears  that  in  Member  States 
with  relatively  ‘slow’  standard  parcel  services  (i.e.  delivery  times  of  two  or  more 
working days), e.g. in Spain, Italy and France, domestic express services have a greater 
market  share  than  in  Member  States  with  high-quality  standard  services  (i.e.  next  day 
delivery of standard parcels) e.g. in Germany and the UK. 

3.3.2.  Parcel Volumes and Revenues 

In contrast to the letter post sector, the EU parcel and express sector is growing rapidly. 
Parcel volumes increased to around 6.4 billion items in 2011 (up from 4.8 billion items in 
2008, i.e. by 33%). Parcel volumes per capita were highest in the Western Member States 
with 20 parcels per person per year on average, though in reality only Germany and the 
UK  exceeded  this  average  with  over  25  parcels  per  capita  each  in  2011.  This  is  not 
surprising because distance selling and e-commerce are well established in these Member 
States. In Southern and the Eastern Member States there were five and two parcels per 
person  (respectively)  in  2011,  and  in  the  European  Union  (EU27)  the  average  was  13 
parcel items per capita.268  

267  Based  on  A.T.Kearney,  Internationales  Segment  wächst  starker  als  Inlandsmarkt,  (International  segment 
outperforms domestic markets), 2012. 
268 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p225 

60 

0%10%20%30%40%50%60%70%80%90%100%ATBEDEFRNLSEUKNOCHESITCZPLWestern countriesSoutherncountriesEasterncountriesParcel and express market segmentsStandard domesticExpress domesticStandard internationalExpress international 
 
 
 
 
 
 
 
 
 
 
                                                 
The proportion of domestic express and parcel services has been estimated to be roughly 
70%  of  total  revenues  and  90%  of  total  volumes.269  10%  of  cross-border  and  43%  of 
domestic volumes were estimated to have come from B2C shipments in 2010.270  

Figure 18: Parcel Market Size (EUR billion) and Growth (CAGR) by Country 

60,0

50,0

40,0

30,0

20,0

10,0

0,0

n
o
i
l
l
i
b
R
U
E
e
u
n
e
v
e
R

48.2 

49.8 

44.8 

46.3 

9,1 

1,3 
1,2 
2,1 
2,9 

4,5 

5,7 

7,6 

9,5 

1,4 
1,2 
2,1 
2,9 

4,6 

6,0 

7,7 

9,6 

1,5 
1,3 
2,2 
3,0 

4,7 

6,3 

8,2 

10,1 

1,5 
1,3 
2,2 
3,0 

4,6 

6,6 

8,7 

51.3 

10,5 

1,6 
1,3 
2,2 
3,0 

4,6 

6,8 

9,1 

53.4 

11,0 

1,7 
1,4 
2,2 
3,1 

4,6 

7,0 

9,8 

10,4 

10,9 

11,4 

11,8 

12,2 

12,6 

2009

2010

2011

2012

2013

2014

CAGR 2009-2014 

Other Europe 3.8%

PL 4.6%

BE 3.3%

NL 1.6%

ES 1.4%

IT 0.7%

FR 4.1%

UK 5.3%

DE 4.0%

Source: Apex, European Parcels: Market Insight Report 2015. Key shows CAGR 2009-2014. Figures 
inside each column show revenue in EUR billion for that Member State (according to the key). Figures 
above each column show European parcels market size in EUR billion.  

Estimates of the market structure and relative sizes also differ, though both A.T. Kearny 
and WIK-Consult estimate that the three biggest markets (Germany, France and the UK) 
account for more than half of the European parcel and express sector.271 

269 AT Kearney, Europe's CEP Market: Growth on New Terms 
270 AT Kearney, Courier, Express and Parcel: Can it Keep the Momentum?, 2011, p5 
271 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p223 

61 

 
 
 
 
 
 
 
 
 
 
                                                 
 
 
 
Figure 19: Estimated Number of Ordinary Parcels Dispatched by Universal Service 
Providers 2008-2013 

1,648m  1,679m 

1,765m 

1,844m 

1,901m  1,957m 

European Union - 27 Number
of ordinary parcels,
international service - dispatch

European Union - 27 Number
of ordinary parcels, domestic
service

s
n
o
i
l
l
i

M

2500

2000

1500

1000

500

0

2008

2009

2010

2011

2012

2013

Source: UPU estimate for EU27. Shows ordinary parcels dispatched by UPU designated operators (i.e. 
universal service providers) only.272 

Figure 20: Parcels per capita (2011) 

Source: WIK-Consult, Main Developments in the Postal Sector (2010-2013), p225273 

272 http://www.upu.int/en/resources/postal-statistics/query-the-database.html 
273 2010 figure for NL, 2012 figures for AT, PT and RO. 

62 

051015202530DEUKATCHFRNLNOSEFIESITELPTMTSKEECZLTSIPLROHRLVWestern countriesSouthern countriesEastern countriesParcels per capita 2011Average EU-28 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 
Figure 21: Domestic ordinary parcels per capita delivered by USPs (2012 and 2013) 

3,5

3

2,5

2

1,5

1

0,5

0

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

2
1
0
2

AT BE DE DK FI FR IE LU NL SE UK CY EL ES IT MT PT BG CZ EE HR HU LT LV PL RO SI SK

Western

Southern

Eastern

Source: European Commission Postal Statistics Database274 

Western Member States have on average a higher per capita distribution compared to the 
eastern  and  southern  Member  States.  As  did  letter  volumes,  parcel,  and  particularly 
express,  volumes  and  revenues  dropped  substantially  in  the  aftermath  of  the  2007/08 
financial crisis. European courier, express and parcel revenues fell by 9% between 2008 
and  2009  and  volumes  declined  by  2%  as  businesses  sought  to  negotiate  cheaper 
contracts, switched from express to less expensive services and the proportion of lighter 
B2C  shipments  increased.  Cross-border  shipments  were  more  affected  than  domestic 
ones.  However  by  2010  volumes  had  recovered  to  their  2008  levels,  though  revenues 
continued  to  be  lower  than  they  previously  were.  In  2010  and  2011  the  European CEP 
market grew by 6% in volume and 4% in revenue.275 Per capita volumes for (ordinary) 
parcels276  between  2012  and  2013  also  suggest  that  there  is  an  observable  overall 
increasing trend, though growth was clearly much stronger in some Member States than 
others. 

Christmas 2014 generated record volumes for European postal and parcel operators. For 
example in Finland Posti delivered 9% more packages in December than in 2013, e-retail 
over  the  Christmas  period  in  the  UK  grew  by  13%  (compared  to  2013)  and  in  the  UK 
online retail is expected to continue double digit growth at 12% in 2015. On one day in 
December  2014  Austria  Post  delivered  a  record  470,000  parcels,  40,000  more  than  in 
2013  and  almost  double  the  usual  daily  volume.  Post  Nord  also  posted  a  new  volume 

274 2012-2013. AT, BE, FR, NL, SE, IT, ES, EE, LT, RO, SI and SK confidential, others not presented: missing or not 
applicable. Ordinary parcels are defined as items normally containing merchandise and sent by a standard/ ordinary 
service, i.e. non-express and non-courier, and are carried by the designated USP or other postal operators. Small 
packets are included as 'ordinary parcels. The upper weight limit is 10kg or 20kg in line with national legislation.  
275 AT Kearney, Courier, Express and Parcel: Can it Keep the Momentum, p2. 
276 Ordinary parcels are defined as items normally containing merchandise and sent by a standard/ordinary service, i.e. 
non-express and non-courier, and are carried by the designated USP or other postal operators.  

63 

 
 
 
 
 
 
 
                                                 
record,  delivering  around  455,000  parcels  in  one  day,  almost  30,000  more  than  the 
previous record in 2012.277 

3.3.3.  Competition in Parcel Markets 

Although the parcel market is usually thought to be more competitive than the letter post, 
in many Member States it is dominated by the larger operators who in many cases have a 
combined market share of over 60%.278 

The  international  cross-border  parcel  and  express  market  accounts  for  approximately 
30%  of  the  revenues  and  9%  of  the  volume  of  the  parcel  and  express  market.279  This 
segment is highly concentrated with an average market share of the biggest operators of 
approximately 75 to 95% depending on the Member State under consideration.280 Cross-
border parcel and express services are dominated by B2B shipments.281  

Table 8: Market Share of Universal Service Providers in Domestic Parcel and Express 
Markets (2011) 

<10% market share 

10-20% market share 

>20% market share 

Bulgarian Post (BG) 
Cyprus Post (CY) 
ELTA (EL) 
Correos (ES) 
Polish Post (PL) 
CNPR  Compania  Nationala 
Posta Româna (RO) 

bpost (BE) 
Croatian Post (HR) 
An Post (IE) 
Poste Italiane (IT) 
Lithuanian Post (LT) 
Latvijas Pasts (LV) 
MaltaPost (MT) 

Österreichische Post (AT) 
Česká pošta (CZ) 
Deutsche Post DHL (DE) 
PostDanmark/PostNord 
(DK) 
Eesti Post (EE) 
Itella (FI) 
La Poste (FR) 
Magyar Posta (HU) 
PostNL (NL) 
CTT Correios (PT) 
Posten/PostNord (SE) 
Slovenian Post (SI) 
Slovenska Posta (SK) 
Royal Mail Group (UK) 

Source: WIK-Consult, Main Developments in the Postal Sector (2010-2013), p239 

Table  6  shows  estimates  of  the  market  position  of  universal  service  providers  in  their 
respective domestic parcel and express markets. Most universal service providers have a 
market  share  above  20%  in  their  domestic  parcel  and  express  market.  However,  their 
relatively  strong  position  is  mainly  supported  by  their  dominance  in  the  B2C  segment 
(parcel  delivery)  and  less  by  their  role  in  the  B2B  segment  and,  in  particular,  in  the 
express segment where national postal operators usually play a minor role.  

277 IPC, Market Flash Issue 501,  22 January 2015 
278 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p237. Figures for 2011 
279 AT  Kearney, KEP Markt Studie 2011 - Internationales Segment wächst stärker als Inlandsmarkt, 2012 
280 See European Commission (2013), C(2013) 431 final, Case No Comp/M.6570 – UPS/TNT Express, p130  
281 AT Kearney, Courier, Express and Parcel: Can it Keep the Momentum p5 

64 

 
 
 
 
 
 
 
 
 
                                                 
Table 9: Main alternative operators active in domestic and cross-border B2C delivery 

AT 

BE 

BG 

CY 

CZ 

DK 

EE 

FI 

FR 

DE 

EL 

HU 

IE 

IT 

LV 

LT 

LU 

MT 

NL 

PL 

PT 

RO 

SK 

SI 

ES 

SE 

UK 

Number 
of 
operators 
4 

5 

5 

6 

1 

2 

3 

2 

3 

6 

5 

3 

5 

3 

3 

2 

4 

3 

4 

3 

4 

7 

3 

3 

5 

3 

12 

in 
Main  operators  active 
domestic  B2C  delivery  except 
USP and integrators  
DPD, GLS, Hermes, Asendia 
DPD,  GLS,  PostNL,  Kiala, 
Mondial Relay 
DPD,  Econt  Express  OOD,  Tip 
Top  Courier  AD,  M&BM 
Express OOD, GLS 
ASC Courier  

DPD, GLS 

DPD, GLS, Bring 

DPD, Itella  
DB  Schenker,  Matkahuolto  Oy 
AB, Posten Åland 
Colis  Privé,  Kiala,  Mondial 
Relay,  Relais  Colis,  Exapaq, 
Hermes 
DPD,  GLS,  GO!  General 
Overnight  Service,  Hermes,  Pin 
Mail AG 
ACS S.A., TACHYMETAFO-
RES ELTA S.A., GENIKI 
TACHYDROMIKI, Speedex, 
ACS Courier 
DPD, SPRINTER Kft., GLS 
DPD,  Nightline,  GLS,  Citypost, 
DB Schenker 
GLS,  Hermes,  BRT  Corriere 
Espresso 
DPD, Itella, GreenCarrier 

DPD, Itella 
DPD,  Kiala,  Hermes,  Mondial 
Relay 
GLS,  Arrow  Express,  Miles 
Express 
DPD, Kiala, GLS, Hermes 

GLS, Siódemka, InPost, DPD 
GLS,  Nacex,  Enviália,  MRW, 
Torrestir 
DPD, Cargus International, GLS, 
Fan  Courier  Express,  Sprint 
Curier Expres, Urgent Curier 
DPD, GLS, ReMax 

DPD, GLS, Doortodoor 
Kiala,  GLS,  Enviália,  Tourline 
Express, Mondial Relay 
DB Schenker, Bussgods, Bring  
DPD,  Hermes,  HDNL/Yodel, 
City  Link,  UK  Mail,  Interlink, 
Nightfreight,  APC,  DX,  City 

65 

Number 
of 
operators 
3 

6 

2 

1 

2 

4 

2 

3 

3 

5 

3 

4 

5 

3 

2 

2 

3 

1 

3 

4 

6 

7 

2 

2 

4 

2 

9 

Main  operators  active  in  cross-
border  B2C  delivery  except  USP 
and integrators 
DPD, GLS, Hermes 
PostNL, GLS, G3 Worldwide, Swiss 
Post, Hermes, DPD 

GLS, DPD 

ASC Courier  

GLS, DPD 

DPD, GLS, Bring, DB Schenker 

DPD, Itella 

DPD, DB Schenker, GLS 

Kiala, Exapaq, Hermes 

DPD,  GLS,  GO!  General  Overnight 
Service, Hermes 

World  Courier,  Speed  Air,  ACS 
Courier 

DPD, GLS, SPRINTER Kft., GTR 
DPD, Nightline, GLS, Citypost, DB 
Schenker 
GLS,  BRT  Corriere  Espresso, 
Hermes 
DPD, Itella 

DPD, Itella 

GLS, DPD, Hermes 

GLS 

DPD, GLS, Hermes 

DPD, GLS, Siódemka, Hermes 
Enviália, MRW, Nacex, Chronopost 
International, Torrestir 
DPD,  Cargus  International,  GLS, 
Fan  Courier  Express,    Sprint  Curier 
Expres, Urgent Curier S.R.L. 
DPD, GLS 

Chronopost 

DPD, GLS, Doortodoor 
GLS, 
Enviália, 
International, Tourline Express 
DB Schenker, Bring  
DPD,  HDNL/Yodel,  City  Link,  UK 
Mail, Nightfreight, DX, City Sprint, 
(to  Austria  and 
XDP,  Hermes 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sprint, XDP   

Germany) 

Source:  Copenhagen  Economics,  E-commerce  and  delivery  -  Study  on  the  state  of  play  of  EU  parcel 
markets with particular emphasis on e-commerce, 2013, p118 

E-commerce is however driving change. B2C delivery has specific requirements notably 
regarding  cost-efficient  organisation  of  the  last  mile  (delivery  to  consumers)  and  the 
management of returns, notably the necessity to provide reliable C2B return channels as 
clothes  and  shoes  become  increasingly  popular  online  purchases.  Some  examples  of 
market developments include: 

  Web-based delivery: web-based delivery solutions which connect e-retailers to same 
day  delivery  companies  (e.g.  Shutl,  now  owned  by  ebay)  or  provide  an  e-retailer 
integration with a range of carrier networks (e.g. Metapack).  

  More frequent delivery options: from September 2014 Royal Mail started delivering 
parcels  within  the  M25 area  of  London  and  opening  around  100  enquiry  offices  on 
Sundays.  GLS  has  also  started  evening  and  Saturday  delivery  services  in  selected 
cities in Germany.282 

  Cross-border  cooperation  to  enter  new  markets,  for  example  Hermes  and  Austrian  

Post's cooperation with Hermes Logistik Gruppe.  

  Many  postal  operators  are  rolling  out  parcel  lockers  which  enable  customers  to 
collect and return parcels from a bank of lockers at a convenient location, such as a 
train  station.  Lockers  might  be  accessible  24/7  and  the  consumer  will  enter  a  code 
(valid for a set period of time) to gain access to the locker. Bpost for example have 
lockers at 125.283    

  Postal  operators  are  also  making  use  of  retail  outlets  where  customers  can  collect 
their  parcels,  in  addition  to  retailers  offering  'click  and  collect'  services  whereby 
consumers buy online but collect their item from a (physical) retail outlet.   

  Parcel  delivery  drones  have  been  trialled  by  La  Poste,  Amazon  and  other  delivery 

operators. DHL have trialled a 'parcel copter'.284  

3.3.4.  Cross-border Parcel Delivery 

The 2012 Communication on e-commerce and online services identified the delivery of 
goods  purchased  online  as  one  of  the  five  main  priorities  to  boost  e-commerce.285 
Following this, a Green Paper consultation An integrated parcel delivery market for the 
growth of e-commerce in the EU was published to seek further details of the problems in 
the  market  and  possible  solutions  to  address  them.286  Cross-border  delivery  was 

282  Royal  Mail  plc:  Financial  Report  for  the  half  year  ended  28  September 2014, 2014.    Sunday  appeared  to  be  the 
third busiest day for collection, based on a study of 34 open offices.  
283 bpost, Annual Report 2014, 2015  
284www.dhl.com/en/press/releases/releases_2014/group/dhl_parcelcopter_launches_initial_operations_for_research_pu
rposes.html 
285 European Commission, A coherent framework to build trust in the Digital Single Market for e-commerce and online 
services, COM (2011) 942 final, 2012  
286 European Commission, An integrated parcel delivery market for the growth of e-commerce in the EU, COM (2012) 
698 final, 2012 

66 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
considered to be an obstacle by 57% of retailers287 and almost half of consumers worried 
about  the  delivery  element  of  cross  border  transactions.  In  the  resulting  discussion,  a 
broad consensus seemed to emerge about the urgent need to address certain issues.  

The 2013 Roadmap288 set out a series of actions to improve the availability, affordability 
and accessibility of cross-border parcel delivery services. Central to this was an industry 
initiative  by  universal  service  providers  to  improve  the  quality  of  service:  because  the 
parcel  services  provided  by  universal  service  providers  have  developed  primarily  for 
their  domestic  market,  systems  and  operating  practices  were  often  incompatible.  This 
resulted for example in the need to re-label items on arrival in a different Member State 
and  a  lack  of  cross-border  track  and  trace  services.    The  'Interconnect'  programme 
developed  by  universal  service  providers  is  comprised  of  five  areas:  flexible  delivery 
options:  easy  and  seamless  return  solutions:  track  and  trace  capability  for  lightweight 
products; improved customer services and harmonised labelling. These features are being 
rolled out on an operator-by-operator basis so they will be at introduced at different times 
in different Member States. The Commission is monitoring the extent to which these new 
products  and  services  meet  customer  needs,  following  the  expiry  of  the  18  month 
deadline  in  June  2015  envisaged  by  the  Roadmap  and  will  include  an  assessment  of 
progress in the forthcoming Impact Assessment for the cross-border parcel initiative that 
forms part of the Digital Single Market Strategy. 

Recent  studies  continue  to  show  customers  want  flexible  delivery  options  and  one  in 
three consumers prefer to have packages delivered somewhere other than their home.289 
This  is  not  surprising  given  that  17%  of  home  deliveries  fail  on  first  attempt,  rising  to 
over  50%  in  some  Member  States  and  98%  of  e-retailers  think  successful  delivery  is 
important for repeat purchases.290 As well as benefitting customers (who get their parcel 
earlier), by providing fixed time-windows for the delivery or alternative delivery points 
such as collection points or parcel lockers, the parcel operators also gain as they decrease 
their  delivery  costs  for  the  last  mile,  e.g.  by  avoiding  failed  delivery  attempts  and 
consolidating  delivery  locations.  Easy  and  effective  'returns'  solutions  also  benefit  e-
retailers as they help them to attract and retain customers. Improving returns solutions is 
especially important in the context of cross-border purchases. In a recent survey of online 
consumers about obstacles to the Digital Single Market, high delivery costs, high return 
shipping costs, long delivery times and non-delivery were among the top concerns. Low 
delivery costs, convenient delivery options (such as time and place of delivery) and the 
possibility  of  delivery  to  the  country  of  the  consumer  were  amount  the  seven  most 
frequently  reported  reasons  for  consumers  choosing  a  certain  website.291  (See  section 
2.8.2 on the internal market and tariff principles for further information about the price of 
cross-border delivery services.)  

Alongside  the  Digital  Single  Market  Strategy,  the  Commission  services  launched  a 
public  consultation  on  cross-border  parcel  delivery  to  seek  views  from  all  interested 
parties on the main issues and possible areas for improvement. The consultation closed in 

287  Eurobarometer,  Business  attitude  towards  cross-border  sales  and  consumer  protection  Analytical  Report,    Flash 
Eurobarometer 244, July 2008  
288  European  Commission,  A  roadmap  for  completing  the  single  market  for  parcel  delivery  Build  trust  in  delivery 
services and encourage online sales, COM (2013) 886 final, 2013  
289 UPS/ Comscore, UPS Pulse of the Online Shopper, A consumer experience study, 2015 
290 Copenhagen Economics, E-commerce and delivery - Study on the state of play of EU parcel markets with particular 
emphasis on e-commerce, 2013, p207, p218 
291 European Commission, Consumer survey identifying he main cross-border obstacles to the Digital Single Market 
and where they matter most 

67 

 
 
 
 
 
 
 
                                                 
August  2015  and  the  responses  will  be  used  to  inform  the  Impact  Assessment  for  the 
cross-border parcel initiative. 

3.4.  Employment in the Postal Sector 

3.4.1.  Overview 

The Postal Services Directive is "without prejudice to the competence of Member States 
to  regulate  employment  conditions  in  the  postal  services  sector"  although  it  also  notes 
that  the  Directive  "should  not  lead  to  unfair  competition"  and  "social  considerations 
should be taken into account when preparing the opening of the postal market".292  Sector 
specific labour regulations do not appear to be used as a barrier to competition, though in 
some  Member  States  labour  requirements  form  part  of  the  license/authorisation  by  the 
regulator.  

The labour market in the postal sector has undergone significant restructuring in recent 
years,  primarily  driven  by  the  falling  number  of  letters  as  a  result  of  e-substitution. 
Technological  advances  have  also  brought  about  modernisation  and  increasing 
automation  and  e-commerce  is  increasing  the  number  of  parcels.  In  the  run  up  to  and 
following  full  market  opening  across  the  EU  from  2013,  many  national  postal  services 
restructured  their  operations,293  while  in  parallel  new  entrants  are  expanding  their 
activities  and  creating  jobs.294  Recent  announcements  illustrate  outsourcing  and 
diversification into parcel networks in response to changes in customer demands  295 and 
there is also a shift in mix of products that postmen and women deliver as the number of 
parcels  increases  while  the  number  of  letters  falls.  As  a  consequence,  the  job  profiles, 
tasks  and  skills  needed  of  postal  workers  are  changing  and  overall  employment,  in 
particular USP employment, has decreased. Many postal operators are also taking steps 
to create a more flexible workforce better adapted to declining volumes.  

Nevertheless,  despite  these  structural  changes,  postal  companies  continue  to  employ 
large  numbers  of  people.  In  2013  about  1.2  million  people  were  employed  directly  by 
national postal operators 296 and in some Member States the national postal operators still 
had a notable proportion of total employment.297 Other postal operators have also created 
jobs,  though  the  overall  amount  cannot  be  quantified  due  to  a  lack  of  definition  of  the 
sector and unreliable data so the net effect of market opening and changes in letter and 
parcel volumes on employment cannot be quantified with certainty.  

The  creation  of  a  significant  number  of  jobs  following  gradual  market  opening  could 
only have been anticipated if competitors had invested in their own end-to-end delivery 
networks  as  delivery  is  the  most  labour-intensive  activity.  Limited  comparable 
information is however available about the size of operators' workforces, other than for 
universal service providers.  

The growth  in  parcel volumes,  together  with  product and service  diversification is  also 
having  an  impact  on  employment.  One  study  found  that  direct  employment  in  the 
European  Express  market  had  grown  from  240,000  to  272,000  (full  time  equivalent) 

292 Postal Services Directive (2008/6/EC) Recital 16 
293 Eurofound, ERM Quarterly, October 2013. 
http://www.eurofound.europa.eu/sites/default/files/ef_publication/field_ef_document/ef1390en.pdf 
294 Accenture, Achieving High Performance in the Postal Industry – Research and Insights 2013, 2013. 
295 http://postandparcel.info/64675/news/retail-news/posti-group-to-cut-380-jobs-under-post-office-outsourcing-plan/ 
296 European Commission Postal Statistics Database, 2013, own calculations 
297 European Commission Postal Statistics Database, 2013, own calculations AT, FR, NL, RO confidential 

68 

 
 
 
 
 
 
 
                                                 
between  2003  and  2010,  a  rise  of  over  12%,  and  predicted  that  by  2020  the  express 
delivery industry would directly employ 300,000 people.298 

3.4.2.  Employment in Universal Service Providers 

Overall employment by universal service providers is declining, driven by declining mail 
volumes, restructuring and automation.  

The  figure  below  shows  the  number  of  people  employed  by  the  universal  service 
provider in each Member State (where the data is available).299 

Figure 22: Total Universal Service Provider domestic employment (headcount) 2013300 

160000

140000

120000

100000

80000

60000

40000

20000

0

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

UK SE NL LU IE FR FI DK DE BE AT PT MT IT ES EL CY SK SI RO PL LV LT HU HR EE CZ BG

Western

Southern

Eastern

Source: European Commission Postal Statistics Database 

Universal Service Providers nevertheless remain large employers and despite workforce 
reductions, still account for a notable proportion of total employment in  some  Member 
States,  especially  the  Czech  Republic,  Slovakia  and  Denmark.  However  the  overall net 
effect  on  employment  of  market  opening  and  changes  in  letter  and  parcel  volumes  is 
difficult  to  quantify,301  due  to  a  lack  of  definition  of  the  sector  and  unavailability  of 
relevant data, in particular in the parcel and express segment.  

298 Oxford Economics, The Economic Impact of Express Carriers in Europe 
299 European Commission Glossary for Postal Statistics, technical notes (2014): The indicator of domestic employment 
refers  to  the  number  of  persons  employed  in  postal  services  within  the  economic  territory  of  the  Member  State  of 
reference. 
300 AT, FR, NL, RO, MT confidential, others not presented: missing or not applicable  
301 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p255-256. 

69 

 
 
 
 
 
 
 
 
                                                 
Figure 23: Share of Universal Service Providers' domestic employment as percentage of 

total employment in EU Member States, 2013302 

1,40%

1,20%

1,00%

0,80%

0,60%

0,40%

0,20%

0,00%

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

AT BE DE DK FI FR IE LU NL SE UK CY EL ES IT MT PT BG CZ EE HR HU LT LV PL RO SI SK

Western

Southern

Eastern

Source: European Commission Postal Statistics Database 

Figure 24: Average Annual Change in USP Employment 2008-2011 303 

15,00%

10,00%

5,00%

0,00%

-5,00%

a
i
r
t
s
u
A

m
u
i
g
l
e
B

k
r
a
m
n
e
D

d
n
a
l
n
i
F

e
c
n
a
r
F

d
n
a
l
e
r
I

y
n
a
m
r
e
G

n
e
d
e
w
S

g
r
u
o
b
m
e
x
u
L

s
d
n
a
l
r
e
h
t
e
N

m
o
d
g
n
i
K
d
e
t
i
n
U

s
u
r
p
y
C

e
c
e
e
r
G

y
l
a
t
I

a
t
l
a

M

n
i
a
p
S

l
a
g
u
t
r
o
P

a
i
t
a
o
r
C

a
i
r
a
g
l
u
B

a
i
v
t
a
L

a
i
n
o
t
s
E

y
r
a
g
n
u
H

a
i
n
a
u
h
t
i

L

d
n
a
l
o
P

a
i
n
a
m
o
R

a
i
k
a
v
o
l
S

a
i
n
e
v
o
l
S

c
i
l
b
u
p
e
R
h
c
e
z
C

-10,00%

Western

Southern

Eastern

-15,00%

Source: Eurostat 

302 AT, FR, NL, RO, MT confidential, others not presented: missing or not applicable 
303 Eurostat database: post_ps_empn 

70 

 
 
 
 
 
 
 
 
 
                                                 
 
 
Figure 25: Employment Change in Universal Service Providers between 2012-2013304 

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

3
1
0
2

AT BE DE DK FI FR IE LU NL SE UK CY EL ES IT MT PT BG CZ EE HR HU LT LV PL RO SI SK

Western

Southern

Eastern

0,02

0

-0,02

-0,04

-0,06

-0,08

-0,1

-0,12

Source: European Commission Postal Statistics Database 

Based  on  the  most  recent  data  available,  overall,  postal  employment  decreased  on 
average  by  4.4%  in  the  EU28305  between  2012  and  2013  and  several  universal  service 
providers  reduced  employment  by  over  8%  over  the  same  period.  Recent  significant 
reductions have often (though not always) occurred in Member States which liberalised 
their  postal  markets  later,  which  have  been  working  to  restructure  and  streamline  their 
universal service providers in order to meet the challenge of increased competition as a 
result of market opening and technology advances.306  

Most USPs have a predominantly male workforce.307 In November 2012 the Commission 
proposed legislation with the aim of attaining 40% of the under-represented sex in non-
executive  board-member  positions  of  publicly  listed  companies,  excluding  SMEs.308 
Posti, Poste Italiane, Post NL and Correios de Portugal CTT have at least a 40% share of 
female  executives.  Lietuvos  pastas,  Post  NL  and  Royal  Mail,  are  run  by  female  chief 
executives.  In  some  instances  policies  are  in  place  to  encourage  female  management 
talent,  for  example  in  Deutsche  Post  and  Post  Nord.  The  CEO  of  Post  NL,  Herna 
Verhagen, has recently been voted the most powerful woman in the Netherlands by the 
magazine Opzij.309 

304  Postal  Statistics  Database  2012-2013.  AT,  FR,  NL,  RO,  MT  confidential,  others  not  presented:  missing  or  not 
applicable 
305 Estimated value on the basis of the Postal Statistics Database 
306 Eurofound, ERM Quarterly, October 2013. 
307  International  Post  Cooperation,  Global  Postal  Industry  Report,  October  2014,  International  Post  Cooperation, 
Brussels, Belgium. p54-55 
308http://ec.europa.eu/justice/gender-equality/files/womenonboards/communication_quotas_en.pdf  
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2012:0614:FIN:en:PDF 
309 http://www.opzij.nl/nl/artikel/41983/herna-verhagen-is-de-machtigste-vrouw-van-nederland.html 
71 

 
 
 
 
 
 
 
                                                 
Throughout  the  European  Union,  the  majority  of  employees  of  universal  service 
providers  are  over  40,  however  in  many  Member  States,  employees  over  50  comprise 
over 50% of the workforce. The International Post Corporation estimate the average age 
is 44.7 across the industry.310 In order to raise awareness on the impact of demographic 
challenges on the postal industry, the EU sectorial social partners have run a joint project 
funded  by  the  European  Commission  "Managing  demographic  challenges  and  finding 
sustainable solutions by the social partners in the postal sector" which aims at analysing 
the  impact  of  demographic  changes  on  the  postal  industry,  share  managerial  practices 
regarding age management, both in terms of continued employment for older workers as 
well as promoting employability and occupational health.311  

3.4.3.  Type of Employment and Working Conditions 

Although proportions vary due to outsourcing and diversification of operations, such as 
financial services, in general a large proportion of universal service providers' employees 
are  involved  in  delivery  operations  which  is  the  most  labour-intensive  activity  of  the 
postal value chain. In at least six Member States, this leads to more than half the USPs' 
staff are active in delivery. However in at least five other Member States, less than 30% 
of all employees are delivery staff.312 Delivery operations also make up the bulk of USP's 
costs,  estimated  to  account  for  around  60-80%  of  the  total,  depending  on  the  Member 
State. It is now rare for universal service providers to be staffed by civil servants.313 

In  the  majority  of  EU  Member  States  national  minimum  wage  levels  exist.  There  are 
postal sector specific minimum wages in a small number of Member States.314 There are 
two  Member  States  where  competitors  in  the  postal  sector  are  neither  subject  to 
collective labour agreements nor binding national wage floors.315 Two universal service 
providers have workers with contracts not subject to social insurance contributions316 

Overall there has however been a move towards more flexible employment contracts, for 
example  part-time  employment, 
temporary  agency  employment  or  even  self-
employment.317 This is linked to the fact that operators are seeking to reduce costs and to 
respond  to  falling  letter  volumes  although  some  employees  may  prefer  more  flexible 
contracts which enable them to balance work with caring responsibilities.318 Fixed term 
contracts comprise around 20% of the workforce in a small number of universal service 
providers  and  around  10%  in  nearly  a  quarter.  Some  universal  service  providers  make 
use  of  agency  workers,  and  in  a  small  number  of  cases  they  form  over  10%  of  the 
workforce.319  The  average  share  of  part-time  employees  in  USPs  has  largely  remained 
stable at around 20% since 2002. There is however significant variance between Member 

310 International Post Cooperation, Global Postal Industry Report, October 2014, p51 
311 http://www.postsocialdialog.org/index.php?option=com_content&task=view&id=98# 
312 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p262.  
313  WIK-Consult,  Main  Developments  in  the  Postal  Sector  (2010-2013)  Country  Reports,  2013.  Percentages  are 
rounded to the nearest 10%. There are no civil servants employed by the USP in BG, HK, FI, HU, LT, MT, NL, PL, 
PT, RO, SK, UK. Data not available for all Member States.   
314 WIK-Consult, Main Developments in the Postal Sector (2010-2013, p276 
315  DE and DK. WIK-Consult, Main Developments in the Postal Sector (2010-2013), p276 
316 IE and RO. WIK-Consult, Main Developments in the Postal Sector (2010-2013), p267 
317 WIK-Consult, Main Developments in the Postal Sector (2010-2013), pp 265-269; PIQUE: Privatisation of Public 
Services  and  the  Impact  on  Quality,  Employment  and  Productivity  (PIQUE),  Summary  Report,  2009,  p.  26; 
Copenhagen Economics, Main Developments in the Postal Sector (2008-2010), pp151-188.  
318  Schmeißer,  Claudia  et  al.,  Atypische  Beschäftigung  in  Europa  1996  –  2009,  WZB-DiscussionPaper  -2012001, 
Berlin, Juni 2012, p. 12 from WIK-Consult, Main Developments in the Postal Sector (2010-2013) 
319 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p267 

72 

 
 
 
 
 
 
                                                 
States,  with  some  USPs  having  over  40%  of  their  employees  on  part-time  contracts 
whereas other have a very low proportion of part-time staff. 320 

The extent and the type of flexible employment differs from Member  State to  Member 
State,321 determined largely by demand for such contracts but also by national or sectoral 
social  and  labour  legislation.  While  such  contracts  may  be  appealing  to  employees 
seeking flexibility, 'flexible' contracts may also provide less job security and lower wages 
than  permanent  full  time  employees  at  the  universal  service provider.  This  trend  in  the 
postal sector towards non-standard employment contracts is consistent with more general 
trends towards such flexible forms of employment in the wider economy.322 

The  increasing  number  of  parcels  is  likely  to  continue  to  have  an  impact  on  the  postal 
employee’s daily work. Non-standard employment contracts are already commonly used 
by  parcel  operators  who  also  use  subcontractors  and  self-employed  delivery  staff. 
Working and employment conditions in the courier, parcel and express sector have been 
criticized in several Member States because of low wage levels and low social security of 
employees working either as subcontractors or as virtually self-employed delivery staff.  

 

In  Germany,  many  competitors  do  not  use  their  own  delivery  personnel  but 
outsource  delivery  to  business  partners,  in  some  cases  even  outsourcing  sorting 
activities.323  In  light  of  public  criticism  of  working  conditions  in  the  German 
parcel  market,  some  companies  have  established  measures  to  improve  their 
working  conditions.  In  June  2012,  Hermes  Europe,  a  subsidiary  of  Germany’s 
biggest  distance-seller  Otto,  introduced  a  code  for  “employees  and  business 
partners in parcel delivery”. This code stipulates minimum hourly wages of EUR 
8.50. Breaches of the code or of legal requirements on working conditions will be 
prosecuted and may lead to termination of contract with business partners. 

 

In  May  2013,  DPD,  a  subsidiary  of  La  Poste’s  international  parcel  provider 
GeoPost, agreed on a “Corporate Social Responsibility Charter” with unions. The 
charter  defines  social  minimum  standard  at  GeoPost-companies  and  serves  as  a 
benchmark for business partners. 

3.4.4.  Social Partners and Industrial Relations  

Wages  and  working  conditions  at  universal  service  providers  tend  to  be  covered  by 
collective  labour  agreements  and  working  conditions  are  strongly  regulated  in  all  EU 
Member  States.  Collective  agreements  are  less  common  for  other  postal  service 
providers. Where they do not exist new market entrants agree individually on wages and 
working conditions with employees, though in some Member States such as Austria and 

320 Comparison of WIK’s recent survey results, WIK-Consult, Main Developments in the Postal Sector (2010-2013), 
p266, to Ecorys, Main developments in the postal sector (2006-2008) Final report, Rotterdam, Netherlands, p215. See 
also Universal Postal Union Statistics.  
321 For the details see WIK-Consult, Main Developments in the Postal Sector (2010-2013), pp265-; Schmid, Günther, 
Non-Standard  Employment  and  Labour  Force  Participation:  A  Comparative  View  of  the  Recent  Development  in 
Europe;  IZA – Institute for the Study of Labour, Discussion Paper No. 5087, Bonn, Juli 2010; Schmeißer, Claudia et 
al.,  Atypische Beschäftigung in Europa 1996 – 2009, WZB-DiscussionPaper -2012001, Berlin, Juni 2012. 
322 European Commission, Employment and Social Developments in Europe 2014 
http://ec.europa.eu/social/main.jsp?langId=en&catId=89&newsId=2172&furtherNews=y 
323  Deutsche  Post  DHL  may  outsource  at  maximum  only  10%  of  its  delivery  areas  in  the  parcel  business  due  to  a 
collective  agreement  with  unions.  In  Germany,  also  UPS  has  own  delivery  staff  and  is  therefore  subject  to  the 
collective labour agreement of the transport and logistics sector. 

73 

 
 
 
 
 
 
                                                 
Italy, collective labour agreements of neighbouring sectors apply (e.g. transport or trade 
sector).324 

Examples:  

 

 

In  Sweden  an  agreement  governs  working  conditions  for  employees  of  the 
universal service provider as well as competitors in Sweden and therefore ensures 
homogenous  labour  conditions  for all market participants.325 Similar approaches 
for a sector-wide accord have been initiated in several other Member States.326 

In the Netherlands, the postal law of 2009 contained an option for the government 
to be able to issue a decree on working conditions in the postal sector if all of the 
following  circumstances  apply:  (i)  conditions  of  labour  contracts  are  socially 
inacceptable  (ii)  the  issue  is  temporary  and  limited  to  the  postal  sector  (iii)  the 
issue  cannot  be  resolved  by  means  of  an  agreement  between  employers  and 
representatives  of  employees.  This  provision  was  included  in  the  postal  law  in 
order to prevent pressure on labour conditions of the universal service provider in 
case  of  full  market  opening  due  to  self-employed  delivery  staff  at  competitive 
postal operators.  

 

In  some  Member  States  collective  agreements  include  provisions  to  help 
specifically  young  workers.  La  Poste  signed  an  agreement  in  2008  seeking  to 
alleviate  the  difficulties  of  young  workers,  especially  those  from  disadvantaged 
groups, such as those living in areas of high unemployment.327 

3.4.5.  Managing Restructuring 

In order to mitigate the effects of the declines in letter volumes, reduce costs and adapt 
working  methods  to  growing  parcel  volumes,  many  postal  operators  have  restructured 
their operations and invested in new technology. Significant restructuring, including job 
losses  but  also  job  creation,  has  taken  place  especially  in  those  Member  States  which 
opened their postal markets later.328 

  Posta  Romana,  Romania’s  universal  service  provider,  announced  in  mid-July 
2013 that it intended to cut its workforce of almost 33,000 employees by 3,650. 
This  followed  a  previous  restructuring  plan  under  which  the  organisation  cut 
around 600 jobs in early 2012 in an effort to reduce costs. Conversely, in April 
2013,  a  private  postal  services  company,  Total  Post,  announced  the  creation  of 
180 new jobs as a result of network expansion and market opening. 

 

In Hungary Magyar Posta announced in August 2013 that it had cut 875 jobs in 
the first quarter of 2013. This was carried out by means of a series of gradual job-
reduction  measures  on  the  basis  of  mutual  agreement.  The  company  previously 
opened a centralised logistics centre at Budapest airport in 2011, with the creation 
of around 270 new jobs. 

In  some  Member  States  (such  as  Germany,  the  Netherlands,  and  Sweden),  which  fully 
opened their postal markets ahead of the 2010 deadline, operators such as Deutsche Post 

324 Cf. European Social Dialogue Committee of the Postal Sector 2011, p19. 
325 Copenhagen Economics, Main Developments in the Postal Sector (2008-2010), p165 
326 European Social Dialogue Committee of the Postal Sector 2011, p19.  
327 European Commission, Industrial Relations in Europe 2014, 2015 
328 Eurofound, ERM Quarterly, October 2013 

74 

 
 
 
 
 
 
 
                                                 
and  Post  NL329  automated  many  of  their  processes  relatively  early  and  continue  to 
modernise their operations.   

  Deutsche  Post  invested  c.  EUR  400m  between  2009  and  2012  to  increase 
automation  in  its  82  mail  centres.  Around  EUR  750m  was  also  invested  in  its 
parcel operations (to 2014), more than doubling capacity.330 

  La  Poste  launched  a  EUR  3.4bn  modernisation  project  in  2004  which  by  2011 
covered  90%  of the country. Delivery times  improved,  though employment was 
reduced by one fifth.  La Poste invested EUR 1.65m in 2013 and EUR 997m in 
2014 in its parcels and express services.331 

  Post NL have reduced the number of mail preparation locations from 260 to 145 
and  announced  plans  to  abolish  the  area  structure  and  instead  centrally  manage 
staff.332 

  Post Nord stated in late 2014 that profitability was unsatisfactory and further cost 
savings were needed. A programme of cost reductions was planned from Q4 2014 
which  was  expected  to  reduce  the  number  of  employees  in  administration  and 
support  functions  by  700-800  and  make  annual  cost  savings  of  SEK  500 
million.333 

In  many  cases  the  universal  service  provider  has  worked  constructively  with  the  trade 
union  to  manage  change  in  a  socially  responsible  way.  Early  retirement,  voluntary 
departure  and  natural  attrition  have  frequently  been  used  to  reduce  the  number  of 
compulsory  redundancies.  Measures  to  improve  further  education  or  training  have  also 
been  introduced  to increase the external mobility of employees. In  return  for refraining 
from forced layoffs, trade unions have in some cases approved lower starting salaries for 
newly  employed  staff  and  agreed  to  increases  in  contracts  with  more  flexible 
employment conditions.  

  Bpost, in Belgium, reduced its employees by around 30% between 2005 and 2012 
from  35,000  to  25,675  full-time  employees.  Measures  negotiated  through 
collective  agreements  included  options  for  part  time  employment,  early 
retirement, performance-based payments, limited hiring of additional staff and a 
lower wage for new employees. 

  A  far-reaching  reorganisation  of  TNT  and  PostNL  took  place  on  the  basis  of  a 
social partnership and with a series of collective labour agreements. The mobility 
programme  agreed  in  2007  was  generally  met  with  approval  and  viewed  as 
unavoidable by the social partnership, and was accepted as a socially responsible 
instrument  for  downsizing.  According  to  information  from  PostNL  the  actual 
number of compulsory redundancies to June 2013 has been less than forty.334  

329 In 2007 Deutsch Post labour costs were 27.9% of revenues and 32.7% in the Netherlands. In BE, FR, UK and ES 
labour costs were over 60% (Western Europe only). 7.8% of the gap in operating profits between Royal Mail and its 
competitors was assessed to be due to a lack of modernisation in the UK. Source: Hooper et al Modernise or decline: 
Policies to maintain the universal postal service in the United Kingdom, 2008 
330 Deutsche Post, Deutsche Post: 400 Millionen Euro in Briefnetz investiert, 2012 
http://www.pressrelations.de/new/standard/result_main.cfm?r=503019&aktion=jour_pm (26/1/15) 
331 Le Groupe La Poste,  Annual Results 2013 Investor Presentation, 2014  
332 Post NL, Annual Report 2013, 2014 
333 Post Nord, Interim report for January – September 2014, 2014 
334 WIK-Consult, Main Developments in the Postal Sector (2010-2013), p287 

75 

 
 
 
 
 
 
                                                 
  Royal  Mail  agreed  a  Business  Transformation  agreement  with 

the 
Communication  Workers  Union  in  2010  (following  from  the  2007  Pay  and 
Modernisation Agreement).  Half of the 64 mail centres in 2010 are likely to have 
closed  by  2016.  Investment  continues  in  parcel  capability,  with  £130m  bring 
invested over five years in handheld technology.335 

On the European level, structural changes in the postal sector and its social organisation 
are  discussed  by  the  European  social  dialogue  committee  represented  by  PostEurop 
(employers'  organisation)  and  UNI  Europa  (workers'  organisation).  In  April  2012,  the 
European  Social  Dialogue  Committee  for  the  Postal  Sector  (Working  Group  on  Postal 
Sector Evolution) issued a new ‘joint declaration’ emphasising the significance of social 
dialogue  in  the  postal  sector  and  its  function  as  a  ‘social  observatory’  at  the  European 
level  and  in  2013  conducted  a  project  on  "Developing  a  quality  postal  service  in  the 
digital age.336  

335 www.royalmailgroup.com/royal-mail-announces-major-investment-hand-held-technology 
336 www.postsocialdialog.org. 

76 

 
 
 
 
 
 
 
 
 
                                                 
4.  CONCLUSION 

Transposition of the Postal Services Directive 

All  Member  States  have  transposed  and  implemented  the  Postal  Services  Directive  as 
modified by 2008/6/EC. The latter Directive has not been implemented in the European 
Economic Area.   

Regulation of Postal Services 

All Member States have independent National Regulatory Authorities, often combining 
post  with  the  wider  communications  market.  National  Regulatory  Authorities  have  a 
crucial role and in some cases the structural separation between regulatory activities and 
other  aspects  of  postal  policy  could  be  improved.  The  European  Regulators  Group  for 
Postal  Services  (ERGP)  has  improved  coordination,  consultation  and  co-operation 
between Member States and provided valuable advice to the Commission. 

Licenses  remain  more  common  than  general  authorisations  and  while  some  Member 
States  have  introduced  general  authorisations,  there  have  also  been  instances  where 
licenses  have  been  introduced  for  services  which  were  previously  not  part  of  the 
licensing  regime.  Some  license  conditions  appear  to  go  beyond  what  is  necessary  and 
justified in the interests of protecting users or achieving another aim of the Directive.  

National Regulatory Authorities continue their historic focus on the letters market. More 
comprehensive  regulatory  oversight  of  the  parcel  market  may  be  needed  given  the 
growing number of parcels to develop the full potential of the Digital Single Market and 
to get a full and accurate picture of developments in the overall postal market.  

The Universal Service 

All Member States except Germany continue to formally designate the universal service 
provider,  instead  of  using  one  of  the  other  mechanisms  provided  by  the  Directive.  All 
Member States provide for collection and delivery on at least five working days a week. 
Some  go  beyond  this,  but  for  letters  this  is  becoming  less  common.  The  scope  of  the 
universal  service  obligation  in  each  Member  State  varies.  Some  include  bulk  mail  and 
periodicals,  as  well  as  single  piece  letters  and  parcels,  although  again  there  is  a  trend 
towards  the  reduction  of  the  types  of  item  which  fall  under  the  universal  service 
obligation.  Some  studies  on  user  needs  have  shown  that  in  general  consumers  would 
accept changes to the universal service, but they want improved parcel delivery services. 

To  help  compensate  for  declining  volumes,  some  universal  service  providers  have 
significantly  increased  their  basic  tariffs  in  recent  years,  though  in  many  cases  these 
Member  States  previously  had  postal  tariffs  that  were  stable  or  declining  in  real  terms. 
National  Regulatory  Authorities  use  both  ex-ante  and  ex-post  approvals  to  ensure 
affordability and/or cost-orientation, with single piece domestic tariffs most likely to be 
subject  to  ex-ante  controls.  For  single  piece  domestic  items,  the  tariff  principles  of 
affordability, cost-orientation, non-discrimination and transparency tend to be met.  

Financing the Universal Service Obligation 

Regulatory  accounts  cover  both  universal  and  non-universal  services  provided  by  the 
universal  service provider in the majority of Member States.  Where detailed regulatory 
accounts cover only the universal service area, consideration should be given to how this 

77 

 
 
 
 
 
 
fits  with  the  'totality  principle'  identified  by  the  ERGP,  i.e.  the  scope  of  the  regulatory 
financial  reporting  should  cover  the  totality  of  all  the  activities  which  contribute  to  the 
provision of the universal service, even if some of these activities also contribute also to 
the provision of products or services outside the USO. 

The  Annex  to  this  Report  contains  information  for  Member  States  about  different 
approaches to calculate the net costs of the Postal Universal Service Obligation that have 
been  found  to  be  consistent  with  Annex  I  of  the  Postal  Services  Directive.  Clear 
regulatory  accounts  and  consistent  calculations  of  the  net  cost  and  any  unfair  financial 
burden are essential given that Member States may opt to use State aid as compensation 
for any unfair financial burden resulting from the universal service obligation. 

Access to Postal Services, Networks and Infrastructure 

In  2013  there  were  around  700,000  post  boxes  in  the  EU28  and  about  145,000  postal 
offices (for the universal service provider).  Since 2010 number have remained stable or 
declined,  in  some  Member  States  by  a  considerable  amount.  Other  postal  operators  are 
also  expanding  their  physical  presence,  for  example  through  partnership  with  retail 
outlets or the creation of parcel collection facilities.  

It appears that several Member States  have  made significant  progress towards ensuring 
more  non-discriminatory  access  to  the  postal  infrastructure.  Not  all  Member  States 
require  downstream  access,  though  almost  all  universal  service  providers  offer  special 
tariffs.  Transparent  and  non-discriminatory  access  where  special  tariffs  are  offered  is 
required in most Member States, though there have been several cases where it has been 
alleged that the postal operator does not offer access on such terms.     

In several Member States national competition authorities have condemned the provider 
of  the  universal  service  for  abuse  of  a  dominant  position.  Cases  include  the  giving  of 
illegal  rebates  to  business  customers,  margin  squeeze  and  predatory  pricing  with  the 
consequence of restricting competition. Competition has also been discouraged through 
some  regulatory  practices,  such  as  the  imposition  of  far-reaching  license  conditions  for 
new entrants.  

Quality of Service 

All universal service providers measure transit time for (domestic and cross-border) letter 
mail  in  accordance  with  CEN  standard  EN  13850.  While  transit  time  targets  have 
remained  largely  unchanged  since  2010,  overall  domestic  transit  time  performance 
improved  between  2010  until  at  least  2013  and  in  most  Member  States  targets  are 
exceeded for priority letters, and in virtually all Member States for non-priority mail. The 
proportion of intra-EU letter mail exceeding targets did however fall in 2014, although at 
90.6% for D+3 in 2014, targets were still being exceeded.   

Fewer  Member  States  measure  the  transit  time  for  parcels  and  where  there  are  targets, 
fewer  national  regulatory  authorities  have  the  ability  to  take  corrective  action  than  for 
letters if  targets  are  not  achieved.  Intra-EU  cross-border  parcel  delivery  performance  is 
not  currently  measured.    With  the  growing  importance  of  parcel  delivery,  better 

78 

 
 
 
 
 
 
 
performance  measurement  of  parcels337  as  well  as  the  ability  of  NRAs  to  tackle  parcel 
delivery performance issues may be developed. 

Protection for Users 

All Member States have extended user protection obligation to all postal operators, and 
almost all Member States have appointed a competent national authority to review users’ 
complaints  that  have  not  been  satisfactorily  resolved  by  the  universal  service  provider. 
All Member States ensure that providers of postal services have a transparent, simple and 
inexpensive  procedure  for  dealing  with  complaints  from  users,  and  most  universal 
service providers have a system of compensation. 

Internal Market for Postal Services 

Concerns  are  often  raised  by  consumers  and  e-retailers  about  the  high  cost  of  cross-
border delivery services. List tariffs for individual parcels (within the EU) are estimated 
to  be  two  to  five  times  higher  than  domestic  prices.  Improving  cross-border  parcel 
delivery  is  part  of  the  Commission's  Digital  Single  Market  Strategy  for  Europe  and  a 
public consultation was launched in May 2015 to help identify ways the market could be 
improved.  

Data Collection 

Although Article 22a has been implemented and information with respect to letters and 
the  universal  service  area  is  comprehensive,  there  is  a  lack of  data  regarding the  wider 
postal sector. An understanding of the postal market as a whole is essential to understand 
market  developments  and  the  sustainability  of  the  sector,  especially  given  the  growing 
number  of  parcels  resulting  from  e-commerce.  This  is  being  addresses  as  part  of  the 
Digital Single Market parcel initiative.  

Value Added Tax 

The VAT exemption for public postal services is implemented in different ways across 
Member  States,  compounding  the  differences  in  the  scope  of  the  USO  and  creating 
distortions. However, the postal sector is - among others - subject to the ongoing review 
of the VAT rules of the public sector. 

Competition Cases 

There have been a number of findings of anti-competitive behaviour, notably in relation 
to pricing practices of universal service providers, by National Competition Authorities 
since  2009.  Reasons  for  this  could  include  opening  up  of  markets  to  competition,  and 
hence  the  behaviour  of  incumbents  designed  to  protect  their  market  share  and/or  more 
competitors  resulting  in  an  increasing  number  of  challenges  of  incumbents'  behaviour. 
The Commission did not adopt any antitrust decisions between 2008 and early 2015.  

On  7  April  2015  a  planned  merger  of  FedEX  and  TNT  was  announced,  subject  to 
approval by competition authorities.  

State  aid  continues  to  be  used  in  some  Member  States,  in  particular  to  ensure  the 

337 The CEN Committee, with contributions of expert working groups such as CERP, have already started to identify 
additional  regulatory  needs  in  the  parcel  segment  which  will  be  reflected  through  new  standards.  The  ERGP  will 
equally focus on (cross-border) parcel delivery in the coming years. 

79 

 
 
 
 
 
 
 
 
                                                 
provision  of postal services in  rural  areas, low tariffs for certain types of  mail  (e.g. for 
electoral candidates) and for restructuring and modernisation. Two decisions found that 
the undertaking concerned had been overcompensated and some repayment was required. 
The Annex to this Staff Working Document contains information about approaches to the 
net  cost  methodology  that  have  been  found  to  be  compatible  with  Annex  I  of  the 
Directive.     

Letter Post 

While  parcel  and  express  revenues  have  grown,  demand  for  letter  post  services  has 
declined  substantially.  The  number  of  letter  post  items  dispatched  by  EU27  universal 
service  providers  has  fallen  from  an  estimated  107.6  billion  in  2008  to  85.5  billion  in 
2013.338  Average  EU  letter  mail  decline  was  4.85%  between  2012  and  2013,  although 
some Member States have experienced much steeper annual declines, in some cases over 
10%  per  annum.  In  general  direct  mail  (advertising)  and  publications  have  been  less 
affected than letters. 

Demand  for  postal  services  in  the  Member  States  is  heterogeneous  and  reflects 
differences in economic development. The Western Member States continue to have the 
highest  letter  post  and  parcel  volumes,  on  average  212  letter  post  items  per  capita  in 
2013,339  although  these  are  often  the  countries  experience  the  greatest  decline.  In 
contrast, citizens of the Southern and the Eastern Member States received only 72 and 53 
letter post items per capita in 2013 on average. In the EU28 the average annual per capita 
volume for 2013 was 141 letter post items.340 

Despite full market opening across the EU by 2013, competition in the letters market has 
been  slow  to  develop  in  most  Member  States  and  only  in  a  few  Member  States  have 
competitors  been  able  to  achieve  market  shares  above  10%.  Markets  for  cross-border 
letter post are still dominated largely by universal service providers from some Member 
States.  

Parcel Post 

Estimates of the size of the European parcel market range from EUR 60 billion in for the 
combined European courier, parcel and express markets in 2010341 to £47 billion (which 
includes  shipments  up  to  2,500kg)  to  EUR  37  billion  in  2011342  to  EUR  50  billion  in 
2015.343  In  contrast  to  shrinking  letter  post  markets,  parcel  and  express  markets  are 
growing substantially. The number of parcels dispatched by universal service providers 
alone has grown from an estimated 1.65 billion ordinary parcels in 2008 for the EU27 to 
around  1.96  billion  in  2013.344  Studies  coving  the  full  market  show  growth  from  EUR 
44.7  billion  in  2009  to  EUR  53.4  billion  in  2014.345  Growth  in  parcel  and  express 
volumes is generally higher than the increase in revenues. This results primarily from a 
shift from express to deferred parcel services, a higher proportion of B2C shipments, and 

338Universal Postal Union, number of letter post items domestic service and international service dispatch estimates for 
EU27. Universal Postal Union statistics include member designated operators of the universal postal union only.   
339 European Commission Postal Statistics Database; own calculations 
340 European Commission Postal Statistics Database; own calculations 
341 TNT Express (2012), 4Q11 Analysts presentation: 2011 Highlights and Strategy update, 21. February 2012 
342 WIK-Consult, Main Developments in the Postal Sector (2010-2013) 
343 Apex Insight, European Parcels: Market Insight Report 2015, 2015 
344 Universal Postal Union, Number of ordinary parcels, domestic service and number of ordinary parcels, international 
service – dispatch estimates for EU27. . Data only collected from designated operators of the universal postal union.  
345 Apex Insight, European Parcels: Market Insight Report 2015, 2015 

80 

 
 
 
 
 
 
                                                 
increasing  price  competition.  Innovation  in  the  market,  for  example  through  more 
convenient delivery and return options, also makes ordering online more appealing.  

Domestically,  B2C  parcel  volumes  are  higher  in  high  income  Member  States  with  a 
tradition of mail ordering and distance selling. Demand is not as strong in many southern 
and  eastern  Member  States  that  have  lower  incomes  and  lack  a  tradition  of  mail  order 
services. However, growth rates in online sales in these markets are high, indicating that 
e-commerce  is  also  a  major  driver  here.    Cross-border  e-commerce  is  much  rarer  than 
domestic, and lack of delivery features and high prices for cross-border delivery services 
are repeatedly amongst the top concerns for both consumers and e-retailers. This is being 
addressed  in  the  framework  of  the  Digital  Single  Market  Strategy  adopted  on  6  May 
2015,346 following on from the 2012 Green Paper347 and the 2013 Roadmap.348  

Employment 

In 2013 around 1.2 million people were employed by universal service providers in the 
EU  and  in  some  Member  States  universal  service  providers  were  responsible  for  a 
notable proportion of domestic employment. 349 Other postal operators increase this total, 
with an estimated 272,000 people directly employed by the express industry in 2010.350 
E-substitution  is  however  leading  to  reductions  in  the  number  of  people  employed  by 
universal service providers, as are modernisation and growing automation. Between 2008 
and 2013 the estimated total number of staff employed by universal service providers fell 
by  around  250,000.351  Employment  by  universal  services  providers  decreased  at  an 
average rate of 4.4% in the 28 Member States between 2012 and 2013. 352   

Pay  levels  offered  for  new  entrants  has  in  some  Member  States  decreased  and  overall 
there  is  a  trend  towards  more  flexible  forms  of  employment  contracts.  Operators  other 
than universal service providers appear more likely to use such contracts and they appear 
to be more prevalent in the parcel sector in which more operators are active. Wages and 
working  conditions  at  USPs  tend  to  be  covered  by  labour  agreements  and  in  many 
instances trade unions have been important partners as postal operators have modernised 
their  operations.  In  many  instances  modernisation  has  been  managed  in  a  socially 
responsible way alongside the trade union and early retirements and voluntary departures 
have been used to minimise the number of compulsory redundancies. Despite reductions, 
a large proportion of staff continue to be involved in delivery operations. 

Final Conclusions  

Overall  the  two  core  aims  of  European  postal  policy,  namely  a  minimum  range  of 
services  of  specified  quality  at  affordable  prices  for  all  users  and  market  opening  with 
fair  conditions  of  competition,  have  broadly  been  achieved,  though  concerns  about  the 
cross-border  parcel  market  persist.  Nonetheless,  the  postal  market  continues  to  evolve 
rapidly and ongoing close monitoring of the overall postal market and the effects of the 
regulatory framework are needed. This is particularly important in view of the impact, on 
the universal service obligation, of the decline in letter volumes and the growing number 
of parcels, and in order to be able to respond, if necessary, to changes in the technical, 

346 COM(2015)192 final 
347 COM (2012)698 final 
348 COM (2013)886 final 
349 European Commission Postal Statistics Database, 2013, own calculations 
350 Oxford Economics The Economic Impact of Express Carriers in Europe, 2011. Employment data for operators 
other than the universal service providers is not included in the European Commission postal statistics,  
351 UPU estimates for EU27.  http://www.upu.int/en/resources/postal-statistics/query-the-database.html 
352 European Commission Postal Statistics Database, 2013, own calculations 

81 

 
 
 
 
 
 
                                                 
economic and social environment, and to the needs of users. This is all the more the case 
given the fundamental need to ensure the sustainability of the sector and its contribution 
to society. The Commission will publish statistics annually from 2016 to provide regular 
updates on developments in the letter and parcel markets in the European Union.   

82 

 
 
 
 
 
 
 
 
5.  ANNEX  ON  THE  CALCULATION  OF  THE  NET  COST  OF  THE  POSTAL  UNIVERSAL 

SERVICE OBLIGATION 

Annex  I  of  the  Postal  Services  Directive  (  as  amended  by  2008/6/EC)  provides  the 
general methodological framework for calculating the net costs of the Universal Service 
Obligation  (USO).  The  details  of  the  calculation  and  the  methodological  alternatives 
available  are  however  not  dealt  with  by  the  Postal  Services  Directive,  but  have  been 
studied and applied in practice.  

The  European  Commission,  in  2012,  commissioned  a  study  to  evaluate,  among  others, 
how Member States calculate the net costs of the universal service obligation to date.353 
At the same time, the European Regulatory Group for Postal Services (ERGP) had been 
conducting  related  research  in  this  field.354  In  addition,  there  are  a  number  of  state  aid 
decisions355 already adopted by the European Commission related to state aid claims  of 
postal  operators  who  apply  Annex  I  to  calculate  the  net  cost  of  the  universal  service 
obligation or of other services of general economic interest (SGEIs).356 

This  Annex  presents  the  different  approaches  to  calculate  the  net  costs  of  the  Postal 
Universal Service Obligation that have been found to be consistent with Annex I of the 
Postal  Services  Directive  (2008/6/EC).  Those  approaches  are:  the  Profitability  Cost 
Approach (PC)357 and the Net Avoided Cost Approach (NAC).358 This Annex aims at 
clarifying how those concepts could be applied in line with Annex I.  
Although this Annex presents the general methodologies for calculating the net costs of 
the USO, the particularities of a given case may justify departing from the methodologies 
described below. In all cases, any departures from the concepts below need to be clearly 
and  objectively  justifiable.  In  this  event,  the  net  cost  methodology  used  should  be 
adapted to meet the particularities of each specific case.  

BASIC CONCEPTS AND TERMINOLOGY 

Before addressing the key features of the two calculation approaches (PC and NAC) it is 
useful  to  present  the  key  concepts  of  Annex  I  of  the  Postal  Services  Directive 

353  Frontier  Economics,  Study  on  the  principles  used  to  calculate  the  net  costs  of  the  postal  USO,  prepared  for  the 
European Commission, 2012 
354 ERGP (14)15 Exploration of challenges to overcome when implementing a net cost calculation methodology based 
on a reference scenario – Benchmark of experiences 
ERGP, (13)28 Report on specific issues related to cost allocation 
ERGP, (12)29 Report on net Cost of USP – VAT exemption as a benefit or a burden 
ERGP, (12)28 Rev 1 ERGP Common Position on Cost Allocation Rules 
ERGP, (11)16 ERGP Report on common costs allocation 
ERGP, (11)17 Rev1 Net cost calculation and evaluation of a reference scenario 
See: http://ec.europa.eu/internal_market/ergp/documentation/documents/index_en.htm  
355 Hellenic Post - ELTA (OJ C 348, 19.09.2014, p.48), Belgian Post  – bpost (OJ C 279, 27.09.2013, p.1), UK Post 
Office Limited (OJ C 121, 26.04.2012, p.1), and French La Poste (OJ C 280, 22.08.2014, p. 16). 
356  State  aid  rules  and  in  particular  the  2012  SGEI  Framework  (OJ  C  8,  11.01.2012,  p.  15)  foresee  that  in  order  to 
assess whether SGEI compensation falling within its scope is proportionate to the net cost of a given SGEI, such net 
cost should be calculated using the principles described in Annex I of the Postal Services Directive (2008/6/EC). 
357  Panzar  John  (2000)  "A  methodology  for  Measuring  the  costs  of  the  universal  Service  Obligations"  information 
Economics and Policy 12(3), 211-220 Cremer, Helmuth, Andre Grimaud and Jean Jacques Laffont (2000) "the Cost of 
Universal  Service  in  the  Postal  Sector,  Current  Directions  in  Postal  Reform,  ed.  By  Micheal  A.  Creaw  and  Paul  R. 
Kleindorfer, Kluwer, p47-68 
358 Nera Costing and Financing of the Universal Service Obligation in the European Union, a study prepared for the 
Commission, 1998 
The term NAC in the context of this study is more restrictive than the term Net Avoided (NAC) Methodology in the 
SGEI Framework as, in the latter document; it covers also the PC approach. 

83 

 
 
 
 
 
 
                                                 
(2008/6/EC)359 and other relevant elements that the calculation should take into account 
in all cases, irrespectively of the actual methodology applied in practice.  

1.  The Concept of Counterfactual Scenario360 

Annex I of the Postal Services Directive introduces the concept of counterfactual market 
scenario for the calculation of the net costs of the universal service obligation which is 
incorporated in the "counterfactual methodology". The "counterfactual methodology" is 
an  analytical  exercise  (put  forward  by  the  postal  operator  and  verified  by  the  relevant 
national  regulatory  authority)  that  compares  a  baseline  scenario  of  a  universal  service 
provider  designated  to  provide  the  universal  service  obligation  with  a  hypothetical  but 
well  justified  counterfactual  market  situation  (counterfactual  scenario)  where  the  same 
operator would not be required to provide the obligation, in a liberalised market.  

2.  Relevant  Elements  for  the  calculation  of  the  net  cost  of  the  postal  Universal 

Service Obligation 

Part B of Annex I of the Postal Services Directive sets out a series of relevant elements 
that the calculation of the net costs of the universal service obligation takes into account, 
namely:  

(a)  intangible  and  market  benefits,  which  accrue  to  a  designated 

universal service provider,  

(b) the entitlement to a reasonable profit and  

(c)  incentives for cost efficiency.  

(a) Intangible and market benefits361 

Designated  universal  service  providers  may  enjoy  certain  intangible  and  market 
benefits over their rivals due to their specific position in the postal market. 

In  order  for  an  element  to  be  considered  a  benefit  (intangible  or  market),  the 
following conditions are applied: 

(a) 

(b) 

The designated universal service provider enjoys an advantage over its 
rivals; 

This  benefit  has  a  demonstrable  causal  link  to  the  universal  service 
obligation. 

Intangible and market benefits can include a number of elements, such as: 

(c) 

(d) 

(e) 

Brand  value  effects:  (when  operators  can  achieve  higher  sales  due  to 
brand recognition) 

Economies  of  scale  and  scope:  (when  operators  can  achieve  lower 
average costs in providing USO and non-USO products)  

VAT exemption: (when operators can achieve higher sales to customers 
who cannot reclaim VAT)362 

359 'relevant elements'  
360  Termed  'reference  scenario'  in  ERGP,  (14)15  ERGP  Report  on  the  experiences  of  the  challenges  when 
implementing a methodology for the net cost calculation based on a reference scenario, 2014, Chapter 4 
361 Intangible and Market Benefits” are the benefits that a designated universal service provider would enjoy due to the 
existence  of  the  Universal  Service  Obligation  and  which  cannot  be  directly  or  at  least  fully  quantified  via  the 
company’s financial records and/or cost accounting systems, 
362 ERGP, (12)29 ERGP Report on net Cost of USO -  VAT exemption as a benefit or a burden, 2012 
84 

 
 
 
 
 
 
                                                 
(f) 

(g) 

Ubiquity:  (when  operators  can  achieve  better  customer  retention  and 
acquisition when mailers move addresses etc.) 

Demand  complementarities:  (when  operators  can  achieve  higher  sales 
on other non-USO products and so on)363 

(b) Reasonable profits364 

Incorporating the entitlement to a reasonable profit in the net cost calculation is 
meant to provide to the universal service provider adequate incentives to invest. 
The  cost  of  capital  concept  is  used  as  a  reasonable  economic  measurement  of 
profitability. The Weighted Average Cost of Capital (WACC) is commonly used 
as  a  cost  of  capital  concept.365  It  indicates  the  rate  of  return  which  must  be 
generated in order to ensure that investors are willing to maintain their investment 
under competitive conditions.366 The WACC associated with the provision of the 
universal  service  is  appropriate  to  ensure  that  all  relevant  costs  of  the  universal 
service  provider  are  taken  into  account.  When  justified,  profit  level  indicators 
other  than  the  WACC  could  instead  be  used  to  determine  what  the  reasonable 
profit should be, such as the Return on Equity (RoE), the Return on Assets (RoA) 
or the Return on Sales (RoS).367 
(c) Incentives for Cost Efficiency368 

The net cost calculation should, as much as possible, reflect costs corresponding 
to  the  efficient  delivery  of  the  universal  postal  service.  While  from  a  State  aid 
viewpoint, efficiency is not a prerequisite for compensation,369 when calculating 
the  net  costs  of  the  universal  service  obligation,  designated  universal  service 
provider(s)  should  effectively  demonstrate  that  they  have  included  in  their 
calculations sufficient efficiency incentives.370 

3.  Double Counting371 

Controlling for double-counting is a methodological consideration that has to be 
taken  into  account  at  all  steps  of  the  calculation  methodology,  particularly 
because  failing  to  control  for  double  counting  may  result  in  a  serious 
overestimation of the true benefits or costs of the universal service provision and 
hence,  create  distortive  effects  to  the  development  of  competition.  This  risk  is 
particularly  evident  when  the  Universal  Service  Specification  comprises  more 
than one dimension (product and service).372 

363 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, p110 
364  Reasonable  Profit  means  the  rate  of  return  on  capital  that  would  be  required  by  a  typical  company  considering 
whether or not to provide the service in question. 
365 ERGP, (13)28 ERGP report on specific issues related to cost allocation, 2013,Chapter I 
366 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, pp. 99-100 
367 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, Annex 6, p.205 
368  “Efficient  Costs”  mean  the  costs  incurred  by  a  typical  well-run  operator  if  it  was  to  adequately  provide  the 
universal service in a competitive market. 
369 Case T-106/95 FFSA and others v Commission ECLI:EU:T:1997:23, para 108, Case T-275/11 TF1 v Commission 
ECLI:EU:T:2013:535, para 130-134, and Case T-137/10 CBI v Commission ECLI:EU:T:2012:584, para 300 
370  Annex  I,  Directive  (2008)  National  regulatory  authorities  are  to  consider  all  means  to  ensure  that  appropriate 
incentives for postal service providers (designated or not) to provide universal service obligations cost efficiently. The 
calculation itself shall take all other relevant elements including … incentives for cost efficiency. 
371  Particular  attention  with  respect  to  double-counting  needs  to  be  taken  when  postal  universal  service  obligations 
overlap with other services of general economic interest, and when postal operators deploy separate methodologies for 
calculating  the  net  costs  of  the  individual  SGEI.  For  more  information  see  Frontier  Economics  (2012),  Annex  1, 
pp177-189 
372 Further guidance on the treatment of double counting is given in the sections that follow 

85 

 
 
 
 
 
 
                                                 
METHODOLOGIES FOR CALCULATING THE NET COSTS OF THE UNIVERSAL 
SERVICE OBLIGATION 

1. Profitability Cost Approach (PC) 

Annex  I,  part  B,  states  that  "The  net  cost  of  universal  service  obligations  is  to  be 
calculated,  as  the  difference  between  the  net  cost  for  a  designated  universal  service 
provider of operating with the universal service obligations and the same postal service 
provider operating without the universal service obligations, in a liberalised market".373 
Several elements are to be taken into account when calculating the PC approach: 

i.  Counterfactual Scenario under the PC approach 

According  to  the  PC  approach  the  counterfactual  scenario  is  “an  unconstrained 
re-specification  of  the  designated  universal  service  provider’s  operations  and 
product offer, in a hypothetical situation where the Universal Service Obligation 
is  not  imposed  to  any  postal  operator,  with  the  aim  of  maximizing  profits  as  a 
whole”.374 

From the above definition, the net costs of the USO are given by the difference 
between the profit levels of an operator, operating with and without the USO, in a 
liberalised market, and can be expressed as stated below: 

Net Cost of the USO = Π w/uso- Π w-o/uso, where: 

Π w/uso=R w/uso -C w/uso 
Π w-o-/uso = R w-o/uso -C w-o/uso375 

When  defining  the  hypothetical  situation  of  a  designated  universal  service 
provider  operating  without  the  universal  service  obligation  a  number  of 
hypothetical but well justified situations can be taken into account, for example: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

A reduction in the size or ownership of the counters network, 

A reduction in frequency of delivery (locally or nationally), 

The withdrawal of free mail for the blind, where applicable,  

The removal of nationwide or local delivery,  
The removal of 1st class mail, where applicable,  
The reduction in quality of service targets.376 

Designated  universal  service  providers  should  justify  that  the  counterfactual 
situation  they  present  is  feasible  and  reliable.  This  could  be  achieved  either  for 
example  by  systematically  assessing  the  commercial  postal  market  of  specific 
Member States in similar contexts, or by anchoring the counterfactual scenario to 
the current operational (business) strategy.377  

ii.  Cost Concept 

373 Panzar John (2000) " A methodology for measuring the costs of Universal Service Obligations",  Information and 
Economics Policy 12 (3), 211-220 
Cremer et al (2000) "the cost of Universal Service in the Postal Sector", Current Directions in Postal Reform ed. By 
Michel Crew and Paul Kleindorfer, Kluwer 47-68. 
374 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, pp. 43-44 
375 If the USP is compensated for the difference, then it would be indifferent about whether to provide the USO or not, 
in a liberalised market. 
376 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, pp. 56-59 
377  The  Alternative  Commercial  Strategy  applied  in  Norway  and  the  Alternative  Commercial  Profitability  Approach 
applied in Denmark (both variants of the PC approach), provide further guidance on this.  
Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, Annex 2, pp. -191-196 

86 

 
 
 
 
 
 
                                                 
The  profitability  cost  approach  uses  a  Long  Run  Incremental  Cost  (LRIC) 
concept to estimate the avoidable costs, absent the Universal Service Obligation. 
The LRIC of an increment of output is the additional cost that an operator would 
incur for providing that increment in the long run.378 

When a LRIC model is deployed, accounting data (cost and financial accounting 
information)  may  be  supplementary  used  to  calibrate  model  data,  provided  that 
the quality and the granularity of the accounting information allows for that.379 

iii.  Demand Effects 

The  PC  approach  studies  explicitly  how  demand  (non-price  demand  effects), 
market  shares  (non-price  market  share  effects)  and  prices  (price  effects)  are 
affected if the Universal Service Obligation will be relaxed.380 

iv. 

Intangible and Market Benefits 

In accordance with the Profitability Cost Approach intangible and market benefits 
should  only  be  incorporated  in  the  net  cost  calculation  through  an  ex-post 
adjustment  to  the  net  result,  if  and  only  if,  following  a  reasoned  justification, 
their  effect  has  not  already  been  taken  into  account  in  the  definition  of  the 
counterfactual  scenario.  The  contrary  will  lead  to  double  counting  of  their 
effect.381  

v. 

Entitlement to a Reasonable Profit 

Allowing for reasonable profits when applying the Profitability Cost approach, 
transforms the respective net cost formula as follows:382 

Net Cost of the USO = (Π w/uso -CC w/uso )- (Π w-o-/uso -CC w-o/uso), where: 

CC w/uso = Capital Costs w/uso = WACC w/uso * Capital employed w/uso  

Π w/uso=R w/uso -C w/uso 

Π w-o-/uso = R w-o/uso -C w-o/uso 

CC w-o/uso = Capital Costs w-o/uso = WACC w-o/uso *Capital employed w-o/uso 

In  certain  cases,  in  particular  when  the  capital  employed  does  not  vary 
significantly  between  the  two  scenarios,  the  impact  of  the  difference  in  capital 
costs when moving from the baseline to the counterfactual scenario [CC w/uso - CC 
w-o/uso] might not be considered substantial or material. 

vi. 

Incentives to cost efficiency  

As  the  PC  approach  uses  model  cost  data  in  the  net  cost  calculation,  efficiency 
incentives  are  already  embedded  in  the  calculation.  In  the  event  that  the 
Profitability  Cost  Approach  uses  real  cost  data  for  the  calculation,  as  any 
inefficiencies  are  already  included  in  both  the  baseline  and  the  counterfactual 

378  Long  Run  Incremental  Cost  Concept  (LRIC);  refers  to  a  cost  standard  which  assumes  that  all  costs  -  based  on 
efficient  network  costs-  are  variable  in  the  long  run  and  associates  a  long-term  horizon  with  incremental  cost.  For 
instance it would include the operating costs of providing that increment (e.g. salary costs) and any investment needed 
(capital costs), Frontier (2012) pp 74, 145 
379 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, p. 134 
380 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, p. 46 
381 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, pp. 113-114 
382 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, pp. 97-98 

87 

 
 
 
 
 
 
 
 
                                                 
scenario,  then  the  impact  of  the  existence  of  any  inefficiencies383  might  be 
considered to have a second order effect to the result of the calculation.384 

vii.  Double Counting 

Controlling for double counting while implementing the Profitability Cost 

(1) 
approach is essential, particularly in the events when  

a)  The  USO  definition  has  more  than  one  dimension  and  involves  both 

product and service specifications. 

b)  Treating intangible and market benefits.385 

If  the  counterfactual  scenario  is  comprised  by  more  than  one  dimension  (i.e. 
product/service),  the  calculation  of  the  net  cost  should  follow  a  sequential 
approach in order to avoid the double counting of any direct and indirect benefits 
and costs.386 

2. Net Avoided Cost Approach (NAC)387 

Although  the  Profitability  Cost  is  considered  to  be  the  most  appropriate  method  for 
determining the net costs of a universal service obligation, there may be cases where its 
use  is  not  feasible  or  appropriate.  That  might  be  the  case  where  there  are  serious  data 
gaps or market uncertainty that would deem the framing of the counterfactual definition, 
under the PC approach,  rather  unrealistic.388  In  such  cases,  alternative methods  may be 
applied, focusing on the profitability of individual products or services rather than the 
profitability of the company as a whole. 

Part B of Annex I of the Postal Directive sets out that the net cost can be calculated as 
the sum of the net costs of individual universal service products or services. 

The following elements should be taken into account when using the NAC approach: 

i.  Counterfactual Scenario under the NAC approach389 

With reference to the net avoided cost methodology, the counterfactual scenario 
in  this  case  is  defined  as  a  situation  where  the  designated  universal  service 
provider  would  cease  operations  in  the  unprofitable  (loss  making)  universal 
services and product categories. 

According  to  the  definition  above  the  net  cost  of  the  Universal  Service 
Obligation, is given by the sum of the net losses of the loss making mail flows 
or mailing routes of the USO products/services,390,391 i.e. 

Net Cost of the USO = Σi (Ci-Ri), for each Ri-Ci < 0,392 where: 

Ci= total operating costs associated with the USO provision of mail flow i 

383 C w/uso-C w-o/uso  
384 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, p103 
385 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, p113 
386 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, pp. 80-83 
387 Nera, Costing and Financing of the Universal Service Obligation in the European Union, a study prepared for the 
Commission 
388 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, p155 
389 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, p45 
390 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, pp. 38-41 
391 More simplified (less granular) NAC approaches can be acceptable provided that they take effectively into account 
all  other  relevant  elements  of  Annex  I,  particularly  the  entitlement  to  reasonable  profits,  the  incentives  for  cost 
efficiency the inclusion of intangible and market effects as well as the control for double counting. 
392 As mail flows are rarely independent. Consider point iii. demand effects below.  

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Ri = revenues associated with the USO provision of mail flow i 

The identification of the loss making flows would be subject to certain constraints 
(see points ii –iii below). 

ii.  Cost Concept under the NAC approach 

Applied practice of the NAC approach has shown that the NAC method can use 
the Fully Allocated Cost (FAC) concept instead of the LRIC.393 In this event due 
attention has to be given to the treatment of fixed and common costs associated 
with  the  USO  products/services.  In  this  case,  common  costs  which  have  been 
attributed  across  services  should  in  principle  be  excluded  unless  duly  justified, 
before informing the judgment of which services, mail flows or products are loss 
making.  The  discontinuation  of  the  loss  making  universal  services  should  be 
justified and accounted at the most appropriate aggregate level.394 

iii.  Demand Effects 

The  revenue  to  be  taken  into  account  in  the  calculation  includes  the  recorded 
revenue  directly  earned  from  the  services  attributed  to  the  USO.  However,  the 
designated universal service providers should also study the demand effects and 
the  market  share  effects  of  the  impact  of  the  cessation  of  delivery  of  those 
unprofitable  traffic  flows  on  the  profitability  of  other  (USO  or  non-USO) 
commercial market segments.395 

iv.  Reasonable Profits 

Allowing  for  reasonable  profits  when  applying  the  NAC  approach  transforms 
the respective net cost equation as follows:396 

Net Cost of the USO = Σi (Ci+ CCi-Ri), for each Ri -Ci- CCi- <0, where: 

Ci= operating costs associated with the USO provision of mail flow i 

Ri = revenues associated with the USO provision of mail flow i 

CCi =cost of capital associated with the provision of USO mail flow i 

v. 

Efficiency incentives 

If the costs incorporated in the net cost calculation formula above do not provide 
adequate incentives for efficiency, an ex post efficiency397 adjustment should be 
instead  performed,  in  a  level  capable  to  effectively  promote  incentives  to  the 
designated  universal  service  provider(s)  to  provide  universal  services  cost 
efficiently.  

393 Fully Distributed/ Allocated Cost Concept (FAC or FDC) refers to a cost standard which attributes all categories of 
costs directly or indirectly to specific services or products, so that no costs are left unallocated. ERGP, ERGP report on 
specific issues related to cost allocation, ERGP(13)28, 2013, p.39 
394 If the counterfactual instead of withdrawing individual unprofitable services considers the discontinuation of the 
universal services altogether (i.e. both profitable and unprofitable) in a given zone (e.g. delivery area) the likelihood of 
overestimation from using fully allocated costs can be materially reduced: Frontier Economics, Study on the principles 
used to calculate the net costs of the postal USO, p. 77. 
395 Just as costs may be interdependent so can revenues. This can occur in two main ways (1) if some people do not 
receive mail delivery they can post fewer letters so there may be fewer letters posted to low delivery cost addresses 
from residents of high delivery cost areas, and (2) mailers may derive benefits from knowing that they can mail to 
every address in the country. If this is the case their willingness to use postal services to serve the remaining part of the 
network may be reduced. NERA (1998), p.38, and Frontier Economics, Study on the principles used to calculate the 
net costs of the postal USO, pp. 83-85 
396 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, p 96 
397 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO), p105 
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Efficiency incentives can be designed in different ways to suit best the specificity 
of each case by performing an  ex post efficiency adjustment. This can be based 
either  on  a  benchmark  analysis  of  an  appropriately  justified  selected  range  of 
efficiency indicators, or on historical trends used for forward looking purposes.398 
Efficiency incentives should always take into consideration the quality standards 
of  the  Universal  Service  Obligation  on  domestic  and  cross  border  targets  on 
transit  times,  as  set  out  in  Annex  II  of  the  Postal  Services  Directive  and  in  the 
relevant national legislation.  

vi. 

Intangible and Market Benefits 

With reference to the NAC approach, the consideration of intangible and market 
benefits,  in  principle,  should  net-off  the  net  cost  result  following  an  ex-post 
adjustment  to  the  net  cost  calculation,  unless  there  are  methodological 
considerations that could justify the contrary.399,400 

Net Cost of the USO = Σi(Ci-Ri)- Σi (Intangible Benefitsi) 

UNFAIR FINANCIAL BURDEN  

(1) 

(2) 

(3) 

Article  7(3)  of  the  Postal  Services  Directive  suggests  that  the  assessment  of  the 
unfairness  of  the  financial  burden  follows  the  net  cost  calculation.401  In  this 
context,  the  assessment  of  whether  the  calculated  net  cost  of  the  Universal 
Service Obligation constitutes an unfair financial burden, is applied to a net cost 
result that already took into consideration any intangible and market benefits and 
after the costs have been adjusted to reflect the entitlement for reasonable profit 
and incentives for cost efficiency.402 
In  C-222/08  European  Commission  vs.  Kingdom  of  Belgium403,  6/10/2012  the 
Court of Justice defines unfair burden as "… a burden which for each undertaking 
concerned,  is  excessive  in  view  of  the  undertaking's  ability  to  bear  it,  account 
being taken for all the undertaking's own characteristics, in particular the quality 
of its equipment, its economic and financial situation and its market share". 

According to ERGP (11) 17, Rev. 1 chapter 5, the mixed set of criteria informing 
the  judgment  on  the  unfairness  of  the  burden  could  refer  to  the  current  market 
conditions,  the  financial  standing  of  the  enterprise,  and  the  profitability  of  the 
service providers as well as other relevant policy considerations as defined by the 
Member States.404 

Therefore the concept of unfairness of the burden is mainly linked with the ability of the 
designated operator  to  bear it.405  The assessment of unfairness  of the financial  burden 
should  analyse  a  number  of  factors  that  broadly  relate  to  the  market  position  of  the 
enterprise, the market conditions, the degree of competition and the level of profitability 
in the market.  

398 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO, Annex 8, p 213 
399 Frontier Economics, Study on the principles used to calculate the net costs of the postal USO p 113 
400 The calculation of intangible and market benefits can include the demand and market shares effects as described in 
point (iii) above. 
401  See Article 7(3) of the Postal Services Directive.  
402 ERGP, ERGP (11)17 Rev.1 Net Cost Calculation and Evaluation of a Reference Scenario, 2011, Chapter 5 
403 ECJ C-222/08. 
404  See Article 7(3) of the Postal Services Directive.  
405 The burden of the USO can be considered unfair if the USP's market power is not sufficient to counterbalance the 
weight  of  the  USO  to  maintain  a  reasonable  profit  and  is  financially  unsustainable  if  the  USP  incurs  losses,  see: 
Boldron,  François,  Claire  Borsenberger,  Denis  Joram,  Sébastien  Lecou,  and  Bernard  Roy.  “A  Dynamic  and 
Endogenous Approach for Financing USO in a Liberalized Environment.” Progress in the Competitive Agenda in the 
Postal and Delivery Sector ed. by Michael A. Crew and Paul R. Kleindorfer, Edward, 2009  

90