Tag: UK

A new study commissioned by nine postal operators concludes that it could be better to keep the below-50 gramme mail monopoly in the EU rather than opening up the reserved area to full competition.

The European Commission wants the 50g reserved area in the EU’s 27 member states opened to full competition by 2009, as long as the so-called universal service obligation (USO) – delivery to all households and businesses irrespective of their geographical location – is retained in each country.

While backed by five member states – the Netherlands, Germany, the UK, Sweden and Finland – the plan is opposed by a nine-strong group of state-owned postal operators who feel the Commission’s current proposals would make it impossible for them to maintain the USO and remain competitive at the same time.

A study from UK consultants Oxera – commissioned by the postal services of France, Belgium, Luxembourg, Italy, Spain, Greece, Poland, Hungary and Cyprus – concludes that keeping the reserved area might be the best way of guaranteeing the USO.

“The reserved area scores well against the criteria of certainty and practicability. Moreover, given the low administrative costs, it would have the advantage of simplicity compared with other funding,” the study’s authors write.

“Mechanisms such as compensation funds funded with profit taxes, uniform access with allowed bypass, and forms of competitive tendering that auction the provision of the USO on a regional or national basis are likely to receive a low score,” they say.

The option of maintaining the reserved area is compared with other ways of funding the USO, some of them suggested by the Commission, such as compensation schemes to address any “unfair financial burden” on the state operator in providing the USO, state funding and competitive tendering.

Compensation funds have often been used to finance USO burdens, for example in the telecoms and electricity sectors in Australia, USA, France and Canada, the report points out. But any funding mechanism that involves some form of government funding subsidised from tax revenue would come under the EU state aid microscope, it adds.

Alternatively, competitive tenders could be designed as ‘reverse auctions’ where the winner is the operator asking for the lowest subsidy.

The report concludes: “If practicability is a key consideration of the authorities, the reserved area, access charges and, to a certain extent, state funding could provide an attractive solution.

“By contrast, mechanisms such as competitive tendering are unlikely to score well against this criterion. Therefore, the question of which mechanism is the most relevant to the postal sector is empirical, and one that may differ from country to country.”

The operators who commissioned the report have called for the Commission to present detailed studies on how the USO can be financed so that the European Parliament can have a full debate on the “risk” of liberalisation.