Brussels, 06/02/2007 (Agence Europe) - Nine incumbent postal services published research in January by the OXERA consultancy in the UK into the future funding of universal postal services. The study does not argue in favour of any of the six funding models analysed (only two models were considered in the European Commission's draft directive, see EUROPE 9289). Highlighting the sheer complexity of the funding of universal postal services in a competitive environment, the study was commissioned in order to feed the debate surrounding full liberalisation of postal services and fill the gap left by the Commission's failure to produce analysis. The European Commission suggested in October 2006 to conclude the introduction of a single market in postal services with the scrapping in 2009 of the final area that could be reserved for public post offices, namely the handling and delivery of letters weighing less than 50 grammes (see EUROPE 9289). Aware of the controversial nature of this move, the Commission decided that the same degree of universal postal service should be kept in a competitive environment. The universal postal service foresees the provision of high quality postal services, provided permanently and everywhere in the country at affordable prices, along with the collection of post and home delivery to every person or company every working day and no less than five days a week.
According to the study, the funding of universal service obligations (USO) raises several fundamental questions. How much do USOs cost? Who should meet USOs and how should they be funded? Six USO funding mechanisms were assessed - keeping a reserved sector, several types of compensation fund, public subsidies, 'play or pay', taxing access to the historic operator's network and a call for tender. The six mechanisms were analysed according to criteria like economic efficiency, neutrality from the competition viewpoint, maintaining social equity (affordable prices, for example), compatibility with EU state aid rules, proportionality, transparency, ease of implementation and guaranteed financial security for operators.
The study looks at the 'play or pay' funding mechanism which was not considered by the European Commission. This mechanism raises two questions - who should provide USOs and how should they be funded? Unlike a standard compensation fund where a single operator provides universal public postal services, play or pay allows several companies to be involved in areas where delivery costs are high. If an operators plays (whether the historic operator or a new company) its contribution to the fund will be reduced or scrapped. Otherwise, it will have to contribute to the compensation fund through, for example, a tax on its turnover, a tax on its profits, or a standard charge. The study considers two different options - either an entrant decides to meet all USOs or where the contribution of an entrant to the fund depends on the particular obligations it has decided to meet.
The authors of the study explain that one of the main advantages of a play or pay scheme is that it allows competition to be established in areas where otherwise it would not develop. They say it would appear possible to apply the play or pay mechanism to postal services since it seems to be highly performing in terms of economic efficiency and competition neutrality. It also seems more appropriate for Member States where a huge area to cover has to be covered by universal service and where regulators have demonstrated that they have teeth. Its implementation raises several problems with regard to transparency and financial security, however. Deciding on the tax levels required to finance the compensation fund required for play or pay would be very controversial because they would have to both finance some USOs and influence the decision by new operators of whether or not to cover high cost areas. OXERA says it would not find anywhere (in other industries or other parts of the world) where play or pay mechanisms were actually being used.
The study concludes that the efficient functioning of various mechanisms for the privatisation of other industries (telecoms and industry) did not mean that those mechanisms would be efficient when it comes to universal postal services. The special nature of postal services and the particular characteristics of various national markets hugely influence the relevance and efficiency of mechanisms to fund USOs. Moreover, the objectives of the regulatory authorities may well differ, which would have a bearing on how privatisation would be introduced in the field.
On the legislative procedures, discussions have been launched at the EP with an initial debate at the European Parliament's Transport and Tourism Committees where Markus Ferber (EPP-ED, Germany) is the rapporteur. At the Council, a working group has already started examining draft legislation. It will meet each month during the German Presidency, which aims to reach political agreement on this issue in the first half of 2007 (see EUROPE 9325). (mb)