Ref. Ares(2015)5296200 - 23/11/2015
wik-Consult • final report
Study for the European Commission, DG Internal Market
Survey on Some Main Aspects of Postal Networks in EU Adhesion Candidate Countries
Part II: Country Reports
Authors: Alex Kalevi Dieke James I. Campbell Jr.
Bad Honnef, August 2003
Bad Honnef, August 2003
The views and opinions expressed in this study are those of the authors and do not necessarily reflect the position of the European Commission.
ACKNOWLEDGEMENTS
WIK wishes to acknowledge the considerable assistance of all parties that contributed to this survey. In particular, the authors gratefully acknowledge the intense cooperation of universal service providers, national regulatory authorities, and ministry officials in the thirteen countries surveyed. Many invested substantial time and resources in gathering, submitting, and discussing the information without which this survey would have been impossible.
WIK also gratefully acknowledges the many valuable inputs that were received from the European Commission’s study team. Special thanks are extended to José Luís Saramago, who co-ordinated the Commission services’ involvement in the study, as well as to Manfred Monreal, David Stubbs, and Fernando Toledano. Their challenging questions and comments contributed greatly to the value of this survey. Any errors, however, remain the responsibility of the authors.
The views and opinions expressed in this study are those of the authors and do not necessarily reflect the position of the European Commission.
Final report: Main aspects of postal networks in AC/CC I
Contents
Tables XII
Abbreviations XIV
1 BG – Bulgaria 1 1.1 Basic country information 3
1.2 Overview of postal market 4
1.3 Market players 5
1.3.1 Universal service provider 5
1.3.2 Private operators 7
1.4 Market development 8
1.4.1 Universal services – letter post and parcels 8
1.4.2 Non-universal services 9
1.5 Universal service in practice 10
1.5.1 Scope of universal service 10
1.5.2 Reserved services in practice 10
1.5.3 Access 11
1.5.4 Tariff and accounting principles 11
1.5.5 Quality of service 12
1.5.6 Complaint and redress 12
1.6 Regulatory situation 13
1.6.1 Overview of postal regulation 13
1.6.2 Universal Service 14
1.6.3 Reserved services 14
1.6.4 Regulation of non-reserved services 14
1.6.5 Access 15
1.6.6 Tariff and accounting principles 16
1.6.7 Quality of service 16
1.6.8 Complaint and redress 16
1.6.9 National regulatory authority 17 II Final report: Main aspects of postal networks in AC/CC
2 CY – Cyprus 19 2.1 Basic country information 21
2.2 Overview of postal market 22
2.3 Market players 23
2.3.1 Universal service provider 23
2.3.2 Private operators 25
2.4 Market development 25
2.4.1 Universal services – letter post and parcels 25
2.4.2 Non-universal services 27
2.5 Universal service in practice 28
2.5.1 Scope of universal service 28
2.5.2 Reserved services in practice 28
2.5.3 Access 29
2.5.4 Tariff and accounting principles 29
2.5.5 Quality of service 30
2.5.6 Complaint and redress 30
2.6 Regulatory situation 31
2.6.1 Overview of postal regulation 31
2.6.2 Universal Service 32
2.6.3 Reserved services 32
2.6.4 Regulation of non-reserved services 33
2.6.5 Access 33
2.6.6 Tariff and accounting principles 34
2.6.7 Quality of service 34
2.6.8 Complaint and redress 35
2.6.9 National regulatory authority 35
3 CZ – Czech Republic 37 3.1 Basic country information 39
3.2 Overview of postal market 40
3.3 Market players 41
3.3.1 Universal service provider 41
3.3.2 Private operators 43 Final report: Main aspects of postal networks in AC/CC III
3.4 Market development 44
3.4.1 Universal services – letter post and parcels 44
3.4.2 Non-universal services 45
3.5 Universal service in practice 45
3.5.1 Scope of universal service 45
3.5.2 Reserved services in practice 46
3.5.3 Access 46
3.5.4 Tariff and accounting principles 47
3.5.5 Quality of service 47
3.5.6 Complaint and redress 48
3.6 Regulatory situation 48
3.6.1 Overview of postal regulation 48
3.6.2 Universal Service 50
3.6.3 Reserved services 50
3.6.4 Regulation of non-reserved services 51
3.6.5 Access 51
3.6.6 Tariff and accounting principles 52
3.6.7 Quality of service 52
3.6.8 Complaint and redress 53
3.6.9 National regulatory authority 53
4 EE – Estonia 55 4.1 Basic country information 57
4.2 Overview of postal market 57
4.3 Market players 59
4.3.1 Universal service provider 59
4.3.2 Private operators 60
4.4 Market development 61
4.4.1 Universal services – letter post and parcels 61
4.4.2 Non-universal services 62
4.5 Universal service in practice 62
4.5.1 Scope of universal service 62
4.5.2 Reserved services in practice 63
4.5.3 Access 63 IV Final report: Main aspects of postal networks in AC/CC
4.5.4 Tariff and accounting principles 63
4.5.5 Quality of service 64
4.5.6 Complaint and redress 64
4.6 Regulatory situation 65
4.6.1 Overview of postal regulation 65
4.6.2 Universal Service 66
4.6.3 Reserved services 67
4.6.4 Regulation of non-reserved services 67
4.6.5 Access 68
4.6.6 Tariff and accounting principles 68
4.6.7 Quality of service 68
4.6.8 Complaint and redress 68
4.6.9 National regulatory authority 69
5 HU – Hungary 71 5.1 Basic country information 73
5.2 Overview of postal market 73
5.3 Market players 75
5.3.1 Universal service provider 75
5.3.2 Private operators 77
5.4 Market development 78
5.4.1 Universal services – letter post and parcels 78
5.4.2 Non-universal services 80
5.5 Universal service in practice 81
5.5.1 Scope of universal service 81
5.5.2 Reserved services in practice 82
5.5.3 Access 82
5.5.4 Tariffs and accounting principles 82
5.5.5 Quality of service 83
5.5.6 Complaint and redress 84
5.6 Regulatory situation 84
5.6.1 Overview of postal regulation 84
5.6.2 Universal Service 86 Final report: Main aspects of postal networks in AC/CC V
5.6.3 Reserved services 87
5.6.4 Regulation of non-reserved services 87
5.6.5 Access 88
5.6.6 Tariff and accounting principles 89
5.6.7 Quality of service 89
5.6.8 Complaint and redress 90
5.6.9 National regulatory authority 90
6 LT – Lithuania 91 6.1 Basic country information 93
6.2 Overview of postal market 93
6.3 Market players 94
6.3.1 Universal service provider 94
6.3.2 Private operators 96
6.4 Market development 96
6.4.1 Universal services – letter post and parcels 96
6.4.2 Non-universal services 98
6.5 Universal service in practice 99
6.5.1 Scope of universal service 99
6.5.2 Reserved services in practice 99
6.5.3 Access 99
6.5.4 Tariff and accounting principles 100
6.5.5 Quality of service 100
6.5.6 Complaint and redress 101
6.6 Regulatory situation 102
6.6.1 Overview of postal regulation 102
6.6.2 Universal Service 103
6.6.3 Reserved services 104
6.6.4 Regulation of non-reserved services 104
6.6.5 Access 104
6.6.6 Tariff and accounting principles 105
6.6.7 Quality of service 105
6.6.8 Complaint and redress 105
6.6.9 National regulatory authority 106 VI Final report: Main aspects of postal networks in AC/CC
7 LV – Latvia 107 7.1 Basic country information 109
7.2 Overview of postal market 109
7.3 Market players 111
7.3.1 Universal service provider 111
7.3.2 Private operators 113
7.4 Market development 113
7.4.1 Universal services – letter post and parcels 113
7.4.2 Non-universal services 115
7.5 Universal service in practice 116
7.5.1 Scope of universal service 116
7.5.2 Reserved services in practice 116
7.5.3 Access 116
7.5.4 Tariffs and accounting principles 117
7.5.5 Quality of service 117
7.5.6 Complaint and redress 118
7.6 Regulatory situation 118
7.6.1 Overview of postal regulation 118
7.6.2 Universal Service 120
7.6.3 Reserved services 120
7.6.4 Regulation of non-reserved services 121
7.6.5 Access 121
7.6.6 Tariff and accounting principles 121
7.6.7 Quality of service 122
7.6.8 Complaint and redress 122
7.6.9 National regulatory authority 122
8 MT – Malta 123 8.1 Basic country information 125
8.2 Overview of postal market 126
8.3 Market players 127
8.3.1 Universal service provider 127
8.3.2 Private operators 129 Final report: Main aspects of postal networks in AC/CC VII
8.4 Market development 129
8.4.1 Universal services – letter post and parcels 129
8.4.2 Non-universal services 131
8.5 Universal service in practice 131
8.5.1 Scope of universal service 131
8.5.2 Reserved services in practice 132
8.5.3 Access 132
8.5.4 Tariff and accounting principles 132
8.5.5 Quality of service 133
8.5.6 Complaint and redress 133
8.6 Regulatory situation 134
8.6.1 Overview of postal regulation 134
8.6.2 Universal Service 135
8.6.3 Reserved services 136
8.6.4 Regulation of non-reserved services 136
8.6.5 Access 136
8.6.6 Tariff and accounting principles 137
8.6.7 Quality of service 137
8.6.8 Complaint and redress 137
8.6.9 National regulatory authority 138
9 PL – Poland 139 9.1 Basic country information 141
9.2 Overview of postal market 142
9.3 Market players 143
9.3.1 Universal service provider 143
9.3.2 Private operators 146
9.4 Market development 146
9.4.1 Universal services – letter post and parcels 146
9.4.2 Non-universal services 148
9.5 Universal service in practice 149
9.5.1 Scope of universal service 149
9.5.2 Reserved services in practice 150
9.5.3 Access 150 VIII Final report: Main aspects of postal networks in AC/CC
9.5.4 Tariffs and accounting principles 151
9.5.5 Quality of service 152
9.5.6 Complaint and redress 152
9.6 Regulatory situation 153
9.6.1 Overview of postal regulation 153
9.6.2 Universal Service 155
9.6.3 Reserved services 156
9.6.4 Regulation of non-reserved services 156
9.6.5 Access 157
9.6.6 Tariff and accounting principles 157
9.6.7 Quality of service 158
9.6.8 Complaint and redress 158
9.6.9 National regulatory authority 159
10 RO – Romania 161 10.1 Basic country information 163
10.2 Overview of postal market 163
10.3 Market players 165
10.3.1 Universal service provider 165
10.3.2 Private operators 167
10.4 Market development 168
10.4.1 Universal services – letter post and parcels 168
10.4.2 Non-universal services 169
10.5 Universal service in practice 170
10.5.1 Scope of universal service 170
10.5.2 Reserved services in practice 171
10.5.3 Access 171
10.5.4 Tariff and accounting principles 171
10.5.5 Quality of service 172
10.5.6 -Complaint and redress 173
10.6 Regulatory situation 173
10.6.1 Overview of postal regulation 173
10.6.2 Universal Service 175 Final report: Main aspects of postal networks in AC/CC IX
10.6.3 Reserved services 175
10.6.4 Regulation of non-reserved services 175
10.6.5 Access 176
10.6.6 Tariff and accounting principles 176
10.6.7 Quality of service 177
10.6.8 Complaint and redress 177
10.6.9 National regulatory authority 177
11 SI – Slovenia 179 11.1 Basic country information 181
11.2 Overview of postal market 181
11.3 Market players 183
11.3.1 Universal service provider 183
11.3.2 Private operators 185
11.4 Market development 186
11.4.1 Universal services – letter post and parcels 186
11.4.2 Non-universal services 187
11.5 Universal service in practice 189
11.5.1 Scope of universal service 189
11.5.2 Reserved services in practice 189
11.5.3 Access 190
11.5.4 Tariffs and accounting principles 190
11.5.5 Quality of service 191
11.5.6 Complaint and redress 192
11.6 Regulatory situation 192
11.6.1 Overview of postal regulation 192
11.6.2 Universal Service 195
11.6.3 Reserved services 195
11.6.4 Regulation of non-reserved services 195
11.6.5 Access 196
11.6.6 Tariff and accounting principles 197
11.6.7 Quality of service 198
11.6.8 Complaint and redress 198
11.6.9 National regulatory authority 198 X Final report: Main aspects of postal networks in AC/CC
12 SK – Slovakia 199 12.1 Basic country information 201
12.2 Overview of postal market 201
12.3 Market players 203
12.3.1 Universal service provider 203
12.3.2 Private operators 205
12.4 Market development 205
12.4.1 Universal services – letter post and parcels 205
12.4.2 Non-universal services 207
12.5 Universal service in practice 208
12.5.1 Scope of universal service 208
12.5.2 Reserved services in practice 208
12.5.3 Access 208
12.5.4 Tariff and accounting principles 209
12.5.5 Quality of service 210
12.5.6 Complaint and redress 210
12.6 Regulatory situation 211
12.6.1 Overview of postal regulation 211
12.6.2 Universal Service 212
12.6.3 Reserved services 213
12.6.4 Regulation of non-reserved services 213
12.6.5 Access 214
12.6.6 Tariff and accounting principles 215
12.6.7 Quality of service 215
12.6.8 Complaint and redress 215
12.6.9 National regulatory authority 216
13 TR – Turkey 217 13.1 Basic country information 219
13.2 Overview of postal market 220
13.3 Market players 221
13.3.1 Universal service provider 221
13.3.2 Private operators 222 Final report: Main aspects of postal networks in AC/CC XI
13.4 Market development 223
13.4.1 Universal services – letter post and parcels 223
13.4.2 Non-universal services 224
13.5 Universal service in practice 225
13.5.1 Scope of universal service 225
13.5.2 Reserved services in practice 225
13.5.3 Access 225
13.5.4 Tariff and accounting principles 226
13.5.5 Quality of service 226
13.5.6 Complaint and redress 227
13.6 Regulatory situation 227
13.6.1 Overview of postal regulation 227
13.6.2 Universal Service 228
13.6.3 Reserved services 228
13.6.4 Regulation of non-reserved services 229
13.6.5 Access 229
13.6.6 Tariff and accounting principles 229
13.6.7 Quality of service 229
13.6.8 Complaint and redress 229
13.6.9 National regulatory authority 229
XII Final report: Main aspects of postal networks in AC/CC
Tables
Table 1-1: Estimated market 2002 (Bulgaria) 4
Table 1-2: USP volumes of universal and non-universal services (Bulgaria) 8
Table 1-3: Postage rates for domestic first class letter services (Bulgaria) 12
Table 2-1: Estimated market 2002 (Cyprus) 22
Table 2-2: USP employment, 1998-2002 (Cyprus) 24
Table 2-3: USP volumes of universal and non-universal services (Cyprus) 26
Table 2-4: Postage rates for domestic first class letter services (Cyprus) 30
Table 3-1: Estimated market 2002 (Czech Republic) 40
Table 3-2: Postage rates for domestic first class letter services (Czech Republic) 47
Table 4-1: Estimated market 2002 (Estonia) 58
Table 4-2: USP volumes of universal and non-universal services (Estonia) 61
Table 4-3: Postage rates for domestic first class letter services (Estonia) 64
Table 5-1: Estimated market 2002 (Hungary) 74
Table 5-2: USP volumes of universal and non-universal services (Hungary) 79
Table 5-3: Postage rates for domestic first class letter services (Hungary) 83
Table 6-1: Estimated market 2002 (Lithuania) 93
Table 6-2: USP volumes of universal and non-universal services (Lithuania) 97
Table 6-3: Postage rates for domestic first class letter services (Lithuania) 100
Table 6-4: Compilation of complaints (Lithuania) 101
Table 7-1: Estimated market 2002 (Latvia) 109
Table 7-2: USP volumes of universal and non-universal services (Latvia) 114
Table 7-3: Postage rates for domestic first class letter services (Latvia) 117
Table 8-1: Estimated market 2002 (Malta) 126
Table 8-2: USP volumes of universal services (Malta) 130
Table 8-3: Postage rates for domestic first class letter services (Malta) 133
Table 9-1: Estimated market 2002 (Poland) 142
Table 9-2: USP subsidiaries (Poland) 144
Table 9-3: USP volumes of universal and non-universal services (Poland) 147
Table 9-4: Postage rates for domestic first class letter services (Poland) 151 Final report: Main aspects of postal networks in AC/CC XIII
Table 10-1: Estimated market 2002 (Romania) 164
Table 10-2: USP volumes of universal and non-universal services (Romania) 168
Table 10-3: Postage rates for domestic first class letter services (Romania) 172
Table 11-1: Estimated market 2002 182
Table 11-2: USP subsidiaries (Slovenia) 184
Table 11-3: USP volumes of universal and non-universal services (Slovenia) 186
Table 11-4: Postage rates for domestic first class letter services (Slovenia) 191
Table 12-1: Estimated market 2002 (Slovakia) 201
Table 12-2: USP subsidiaries (Slovakia) 203
Table 12-3: USP volumes of universal and non-universal services (Slovakia) 206
Table 12-4: Postage rates for domestic first class letter services (Slovakia) 209
Table 12-5: USP Quality of service – Measurement results (Slovakia) 210
Table 13-1: Estimated market 2002 (Turkey) 220
Table 13-2: USP volumes of universal and non-universal services (Turkey) 223
Table 13-3: Postage rates for domestic first class letter services (Turkey) 226
Table 13-4: Compilation of complaints (Turkey) 227
XIV Final report: Main aspects of postal networks in AC/CC
Abbreviations
AC Adhesion country: Ten countries that will join the European Union in May 2004, namely Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic, and Slovenia. AT Austria
BE Belgium BG Bulgaria BGP Bulgarian Posts
CAGR Compound annual growth rate, average growth rate calculated over a multiple-year period CC Candidate country, i.e., one of 3 countries being considered for entry into the European Union, namely, Bulgaria, Romania, Turkey. CEN European Committee for Standardisation Commission European Commission CP Colis postal, parcel post CPO Competitive postal operator, i.e. postal operators other than the universal service providers (the latter being equal to the public postal operator in all countries surveyed). CY Cyprus CZ Czech Republic
D+n Delivery n days after posting DE Germany DK Denmark Dom Domestic
ECJ European Court of Justice EE Estonia EFTA European Free Trade Area EL Greece EN Official European Standard ES Spain EU European Union EU high A basket of 3 EU member state posts (DE, FR, UK ) with high letter post volumes per unit of GDP. EU low A basket of 3 EU member state posts (EL, IR, IT) with low letter post volumes per unit of GDP. Final report: Main aspects of postal networks in AC/CC XV
EU-6 LP A basket of 6 EU member state posts (ES, IR, IT, LU, PT, UK) developed to provide approximate average EU values for cross border letter post in the absence of more complete data. EU-6 CP A basket of 6 EU member state posts (EL, ES, FR, IR, IT, PT) developed to provide approximate average EU values for cross border parcel post in the absence of more complete data. EU-10 A basket of 10 EU member state posts (DK, DE, EL, ES, FR, IR, IT, LU, PT, UK) developed to provide approximate average EU values for domestic letter post in the absence of more complete data.
FR France
GDP Gross Domestic Product
HU Hungary
ICB Inbound cross border (receipt) IR Ireland IT Italy
LP Letter Post LT Lithuania LU Luxembourg LV Latvia
MT Malta na Not available, i.e., the datum does not exist. nd No data, i.e., there is no information on whether or not the datum exists. NL The Netherlands NRA National Regulatory Authority for postal services NRAQ Information received by NRAs of ministries in response to survey questionnaires.
O.J. Official Journal (of the European Communities) OCB Outbound cross border (dispatch) OCR Optical Character Recognition
XVI Final report: Main aspects of postal networks in AC/CC
Pcs Pieces (of postal items) PL Poland PLC Public Liability Company PPS Purchasing Power Standard, developed and updated by OECD/Eurostat PT Portugal
Rev Revenue RO Romania
SE Sweden SF Finland SI Slovenia SK Slovakia Sq. Km Square kilometre
TR Turkey
UK United Kingdom UNEX Unipost External Monitoring System UPU Universal Postal Union USO Universal Service Obligation USP Universal Service Provider USPQ Information received by USPs in response to survey questionnaires.
Country Report
1 BG – Bulgaria 2 Final report: Main aspects of postal networks in AC/CC Country Report Bulgaria
BULGARIA – GENERAL FACTS
Economy
GDP in EUR, 2001, (million): 15,210 GDP per capita in EUR, 2001: 1,923
GDP in PPS, 2001 (million): 45,400 GDP per capita in PPS, 2001: 5,710
GDP growth rate, 2001: 4.0% Unemployment rate, 2002: 19%
Population and geography
Population, 2001 (thousands): 7,910 Density (Persons per sq. km): 71
Land area, 2002 (square km): 110,910 Urbanisation (Pop. in urban areas): 67%
Transport and communications infrastructure
Railway network, 1999 (km): 4,290 Fixed lines per 100 households, 2002: 83
Road infrastructure, 1999 (highway km): 324 Mobile penetration rate, 2002: 25%
International airports, 2003: 3 Internet users penetration, 2002: 7% Source: Eurostat NewCronos; UN World Urbanization Prospects (2001); IBM Monitoring of EU candidate countries, telecommunications sector (2002); www.columbusguide.com.
BULGARIA – POSTAL FACTS
Universal service provider
Name of USP: Bulgarian Posts USP employment, 2002 (persons): 15,072
USP revenue, 2002 (million EUR): 53 USP employment of total workforce: 0.5%
Annual revenue growth (CAGR), 98-02: 11.3%
Volumes and tariffs
Dom. letter post volume, 2002 (million): 71 Dom. letter post per capita, 2002: 8.9
Cross border LP: OCB/ICB ratio, 2002: 114% Domestic parcels per capita, 2002: 0.12
Cross border LP: ICB/Dom ratio 2002: 7% Basic letter tariff, June 2003: 0.18 €
Postal network (access)
Postal outlets, 2002: 3,179 Letter boxes, 2002: 5,431
Outlets per 10,000 inhabitants: 4.0 Letter boxes per 10,000 inhabitants: 6.9
Outlets per 1,000 sq. km: 28.7 Letter boxes per 1,000 sq. km: 49.0
Source: WIK-Consult
Final report: Main aspects of postal networks in AC/CC 3
Country Report Bulgaria
1.1 Basic country information
Located between Romania in the north, the FYR of Macedonia and Yugoslavia in the west, and Greece, Turkey, as well as the Black Sea in the south-east, the Bulgarian landscape is highly diverse. The vast lowlands of the Danube plains dominate the north and in the south highlands and elevated plains can be found; Bulgaria’s total size is approx. 111,000 square km. The country’s population density is rather low with 71 inhabitants per square km but the country is highly urbanised: 67% of the population live in urban areas and more than one million people live in the capital Sofia. Other major cities include Plovdiv as well as the Black Sea ports Varna and Burgas.
Bulgaria was founded in 681 is one of the most ancient states on the European continent. Its rich historic heritage, coupled with beautiful natural scenery is most conducive to the development of tourism. 85% of Bulgarians are Christian Orthodox, whereas 13% of the population profess Islam. The Bulgarian ethnic group represents a majority of 85.8% of the population while major ethnic minorities include Turks (9.7%) and Roma (3.4%). After an accession to the EU, Bulgaria would be the first member state using the Cyrillic alphabet.
Bulgaria is a parliamentary republic. The latest constitution of Bulgaria was adopted in July of 1991 and features all basic principles of modern constitutionalism. While a directly elected president serves as head of state, the government is elected by parliament and headed by the Council of Ministers, chaired by the Prime Minister.
After suffering from recession during an economic crisis in 1996-97, the country has achieved macro-economic stability and has a stable currency board, low basic interest rate and substantial foreign-exchange reserves. Real economic growth (GDP growth rates) significantly accelerated from 2.4% in 1999 to 5.8% in 2000, and this trend has been confirmed by the latest 2001 data (4.2% for the third quarter). Nominal GDP was 15.2 billion EUR in 2001 or 1,923 EUR per head (5,710 PPS); thus comparable to that of Romania but substantially lower than in the AC countries on average.
The Bulgarian communication markets are fairly well developed with 83 fixed lines per 100 households (Avg. EU-15: 110) and 25% mobile penetration. In 2002, internet users penetration was as low as 7%.
Depending on further progress in complying with the membership criteria, the Copenhagen European Council stated that the objective is to welcome Bulgaria as a member of the European Union in 2007. 4 Final report: Main aspects of postal networks in AC/CC Country Report Bulgaria
1.2 Overview of postal market
Based on available information, WIK estimates the total market for domestic and outbound postal services in Bulgaria to be about 23 million EUR. The letter post segment is estimated to account for approx. 16 million EUR while the market for parcel and express services is about 7 million EUR, see Table 1-1 These estimates must be considered as very approximate.
Table 1-1: Estimated market 2002 (Bulgaria)
USP USP WIK Market Market Rev Vol Est Rev Vol 2002 2002 USP 2002 2002 EUR 000 Pieces 000 share EUR 000 Pieces 000 Letter, domestic 10,184 58,044 95% 10,720 61,099 Letter, OCB 1,667 4,674 95% 1,754 4,920 Direct mail and printed matter, domestic 1,440 12,669 80% 1,800 15,836 Direct mail and printed matter, OCB 1,301 1,042 95% 1,370 1,097 Total letter post 14,592 76,429 15,645 82,952 Parcels, domestic 736 952 70% 1,051 1,360 Parcels, OCB 703 36 80% 878 45 Total parcels 1,438 988 1,929 1,405 Express, domestic 620 352 30% 2,068 1,174 Express, OCB 431 17 15% 2,873 115 Total express 1,051 370 4,941 1,289 Unaddressed mail, domestic 77 1,742 40% 193 4,355 Total, all domestic and OCB 17,159 79,529 22,708 90,001
Source: WIK-Consult
This estimate of the size of the postal market has been developed using the following information. There appear not to be any surveys of the total market for postal services in Bulgaria. The USP has provided volume and revenue data for all market segments1 that had been requested and the USP and NRA provided assessments of the degree of competition that were generally in line with each other: Both parties report “emerging competition” in the important domestic and cross border letter segments. In addition, the NRA reported “substantial competition” for direct mail; the USP did not provide information on this segment since it does not offer DM products at present.
1 While the revenue data appears to be credible, there are some doubts about volume data. In particular, the reported volumes included substantial swings from year to year that the USP failed to explain on request. Therefore the changes might also have resulted from changing methods of volume estimates. Final report: Main aspects of postal networks in AC/CC 5
Country Report Bulgaria
“Substantial competition” was reported for the domestic and cross border parcel segments while the express segment is characterised by intense competition. The USP provided rough estimates of its market shares in various segments. WIK’s estimates of market shares which are presented in Table 4-1 are primarily based on the USP’s own estimates but have been slightly modified taking into account the NRA’s assessments as well as publicly available information on competitive operators’ activities.
In terms of market volumes (in revenues), unaddressed mail is of minor importance for the Bulgarian postal market.
The USP is the major player of its home postal market and is increasingly successful in the competitive markets for parcels and express services. However, there is a variety of both local and international operators serving this segment, see section 1.3.2.
1.3 Market players
1.3.1 Universal service provider
1.3.1.1 Legal status and subsidiaries
Since 1997, the USP Bulgarian Posts Plc, has been a limited liability company organised under normal company law. All shares are owned by government and the respective ownership rights are managed by the Ministry of Transport and Communication. In particular, the minister appoints the five members of the USP board thus supervising the activities of the USP and setting the overall financial and operational targets for the state owned company.
While there apparently were apparent talks with strategic investors about a sell-out of USP shares in 2001 and 2002,2 the NRA reported no privatisation plans.
Under the current postal act (as effective since 2003), the USP annually receives a compensation from the state budget. The transfer is meant to recover financial burdens that result from the provision of universal service and needs to be approved twice: At first, by the NRA and finally by the national anti-trust authority (Commission on Protection of Competition). During the last five years, the amount of state aid for the USP has been significantly reduced: While the subsidy was almost 5 % of the USP’s total revenues in 1998, it amounted to 1.1% of total USP revenues in 2002.
2 Source: Reuters. 6 Final report: Main aspects of postal networks in AC/CC Country Report Bulgaria
The USP is exempt from the payment of VAT in respect to the provision of some postal services. As reported by the NRA; all services paid by postal stamps are not charged VAT.
The USP reported not to have any subsidiaries.
1.3.1.2 Service portfolio
The USP in Bulgaria mainly offers traditional postal services such as letters, parcels and money orders. In additional, domestic and cross border express services are offered by the USP service as well as local courier services, cash on delivery and lettershop services (printing and enveloping). Moreover, the USP provides various financial and insurance services as an agent of commercial banks and insurance companies and also provides services for the National lottery. The USP also provides payment services for the General Tax Directorate and national administrations dealing with social benefits. Other competitive operations include press distribution and delivery of unaddressed advertisement.
The USP co-operates with the international express operator TNT in the express segment by selling TNT outbound cross border products (to some destinations).
Within the next 5 years, the USP intends to introduce special products for direct mailers, hybrid mail services, and tracking and tracing for courier and express items.
1.3.1.3 Postal infrastructure and automation
The USP appears to have made significant efforts to modernise its operations during the last years. Concerning its network structure, substantial changes were reported to be ongoing. In order to optimise sorting activities and reduce the number of transports, five main sorting centres have been established in Sofia, Gorna Orjahovica, Stara Zagora, Burgas and Varna. However, it appears that the new sorting scheme (abolishment of sorting in regional post offices) has not been fully implemented yet. In addition, former railroad transport connections were replaced by road transport. The USP is currently modernising its vehicle fleet but did not report any data concerning the average age of its fleet. An automated sorting machine is only used in one sorting centre in Sofia, which is also the major exchange office. However, the present Bulgarian mail volumes (9 domestic letter post items per capita in 2002) do not suggest that more automation of sorting processes is necessarily cost effective at this stage. Final report: Main aspects of postal networks in AC/CC 7
Country Report Bulgaria
1.3.1.4 Employment
The USP had a workforce of 15,072 persons (13,094 full time equivalents) in 2002. Since 1998, USP employment has substantially been reduced by 12% (11% in terms of FTE employment) in the course of the company’s modernisation and restructuring plan.
There appears to be no formal statement on the USP’s policy concerning employment and human resources. None of the employees are civil servants. About 36% of employees are part timers such that they account for 28% of total employment measured in FTEs. In addition, the USP reports to have increased the educational level of its staff.
1.3.2 Private operators
According to reports from the NRA, there are 29 registered private operators in the Bulgarian postal market. The most intensely competed segments are the domestic parcel market as well as the courier and express segment. Geographically, private operators mainly concentrate on the four major urban areas Sofia, Plovdiv, Varna and Burgas.
At present, there appears to be no study on private operators’ activities in Bulgaria. However, the NRA reported to prepare such a survey before the end of 2003.
There are various local parcel and express operators in Bulgaria. The most important private operators in the domestic parcel and express market were reported to include the following: City Express, Blue Express Mail, Medikalog, Tip Top Courier, Sema Express, Speedy and UPS´s subsidiary In Time. In addition, the international courier companies DHL, TNT, and FedEx were reported to serve the domestic market as well.
By contrast, the cross border express market is largely dominated by the international couriers DHL, TNT, FedEx, and UPS (by its contractor Bulgarian Parcel Service) which are joined by the largest Bulgarian private operator, City express.
As in most ACs, the USP’s competitors in the market for delivery of unaddressed items are mainly local companies. The most important appears to be the Bulgarian parcel and express company City Express; joint by Tip Top Courier and a company called Artefact.
Private operators have not provided any information about their services in Bulgaria. 8 Final report: Main aspects of postal networks in AC/CC Country Report Bulgaria
1.4 Market development
1.4.1 Universal services – letter post and parcels
Table 1-2 presents a summary of the volumes of postal items carried in the universal services from 1998 to 2002. All figures reflect postal items carried by the USP. The private operators have not submitted any data.
Table 1-2: USP volumes of universal and non-universal services (Bulgaria)
5-yr 1998 1999 2000 2001 2002 change Universal services Letter post LP Domestic Pcs-000 72,187 67,453 74,712 61,728 70,713 -2% Letters Pcs-000 na 65,058 67,129 49,510 58,044 - Printed matter and small packets Pcs-000 na 2,395 7,582 12,219 12,669 - LP per capita Pcs-000 8.7 8.2 9.1 7.8 8.9 LP per EUR 1000 GDP Pcs-000 6.3 5.5 5.5 4.1 4.6 LP Outbound cross border Pcs-000 5,242 8,253 6,941 5,862 5,716 9% Outbound/inbound 135% 156% 157% 101% 114% LP Inbound cross border Pcs-000 3,877 5,284 4,431 5,808 5,028 30% LP ICB/LP Domestic 5% 8% 6% 9% 7% Parcels Parcels, Domestic Pcs-000 661.2 710.7 875.5 919.8 951.9 44% Parcels, Outbound cross border Pcs-000 23.6 na 41.4 34.2 35.9 52% Non-universal services Express Domestic Pcs-000 308 310 381 370 352 15% Outbound cross border Pcs-000 17 15 16 17 17 0% Unaddressed mail Pcs-000 na na na 989 1,742 - Domestic LP per cap and per 1000 EUR GDP for 2002 figures use 2001 population and GDP as bases, respectively.
Source: WIK-Consult
In the light of the positive development of the Bulgarian economy in general, it appears that the universal services market still has a substantial growth potential. This is particularly true for the letter post segment. Overall letter post volume appears not to Final report: Main aspects of postal networks in AC/CC 9
Country Report Bulgaria have grown substantially in the five years ending in 2002.3 The number of domestic letter post items per cap was about 9 in 2002, i.e. 4% the average in the EU-15. The number of letters per 1000 EUR in GDP was 4.6, compared to an average of 10 in the EU-15. Bulgarian letter post volumes are thus substantially below those of the EU-15 but also below those of the 10 accession countries – both in real terms and compared to GDP. In 2002 only about 7% of all letter post delivered by the USP (i.e., domestic and inbound cross border) originated from abroad. As a result, the USP is not heavily dependent on the vagaries of terminal dues and foreign postal services.
By contrast, the development of the domestic parcel segment shows impressive growth: The USP’s domestic parcel traffic grew by 44% in the five year period. This figure may significantly understate the total market growth in parcel volumes due to the absence of data for private operators. The development of outbound cross border parcel volumes was as positive as that of the domestic segment.
In comparison to other USPs in this survey, the USP in Bulgaria provided a good level of detail about the volumes and revenues associated with different postal services. However, analysis of this data (e.g., year to year variability, comparison of average revenue to stamp prices, relation of cross border volumes to weights) raised some question marks concerning the reliability of the volume data in particular. This suggests the possibility of improvement in data collection and reporting.
1.4.2 Non-universal services
1.4.2.1 Express services
In the domestic and cross border express markets, intense competition was reported by both NRA and USP. The USP estimated its market share in the domestic market to approx. 30-50% and to 10-30% for outbound cross border items. During the last five years, the USP increased its express volumes only slightly, see Table 1-2.
However, the market for express services in Bulgaria appears to be well developed. There are various local express operators offering domestic services in Bulgaria with Blue Mail Express and City Express being the most important ones. The market for cross border express services appears to be largely dominated by the international courier companies DHL, FedEx, TNT, and UPS (by its contractor In Time).
3 However, there are serious concerns regarding the reliability of the volume data since the USP failed to explain the “roller coaster ride” of letter volumes (7% and 17% decreases in 1999 and 2001 but 11% and 15% increases in 2000 and 2002). 10 Final report: Main aspects of postal networks in AC/CC Country Report Bulgaria
1.4.2.2 Document exchanges
Neither the NRA nor the USP reported any document exchange activity.
1.4.2.3 Unaddressed items
Substantial competition was reported in the unaddressed mail market, and the USP estimates its market share at 30-50% in 2002 after having made significant efforts to increase its participation here. The most important private operators are City Express as well as Tip Top Courier and a company called Artefact.
1.5 Universal service in practice
1.5.1 Scope of universal service
The USP provides service in Bulgaria for all types of letters, newspapers, periodicals, and books weighing up to 5 kg and for domestic parcels weighing up to 10 kg. In addition, the USP provides universal delivery for heavy-weight mail for the blind (up to 7 kg), and incoming cross border parcels up to 30 kg. The USP offers registration services for all universal service items and insurance for all letters and parcels. However, there are certain hardly accessible areas where the USP delivers and collects mail less frequently. These areas with lower service quality are determined by the USP in co-ordination with local municipalities and need to be approved by the NRA. Detailed information on the share of population in these areas was not available from the USP nor from the NRA.
Delivery service is provided at least five days per week as a standard. In addition, there are six deliveries in major cities, and in the capital Sofia mail is delivered twice a day, six days a week. Letter boxes are cleared twice daily in Sofia, and once a day as a standard. However, there are fewer clearances in “hardly accessible” areas. The USP reported that 90% of all letter boxes are cleared at least five times a week; the NRA stated a share of 89% of all letter boxes. In any case, information about the clearing schedule is placed on the letter boxes.
1.5.2 Reserved services in practice
The reserved area includes domestic and all cross border letters within a weight limit of 350g and five times the basic tariff. Direct mail is not reserved. According to reports from both NRA and USP, it appears that the reserved area is enforced effectively and Final report: Main aspects of postal networks in AC/CC 11
Country Report Bulgaria there is no competition in the reserved segments. By contrast, emerging competition was reported for the liberalised direct mail segment.
1.5.3 Access
As summarised in the Part I of this report, the USP in Bulgaria provides a high level of access to postal services with respect to postal outlets; Bulgaria has 4.0 post outlets (offices or agencies) per 10,000 inhabitants. This is well above the EU-15 average of 2.4. The USP makes use of postal agencies to some extent, approx. 5% of all postal outlets are agencies. In rural areas, basic postal services are also provided by postmen (for approx. 33% of the total population). Moreover, the USP collects mail directly from the sender’s premises for large mailers.
By contrast, the USP has established less letter boxes (7 per 10,000 inhabitants) than there are in the EU-15 on average (18 per inhabitant). Of course this may also be against the background of significantly lower mail volumes in Bulgaria.
The UPS has not established targets for queuing time.
1.5.4 Tariff and accounting principles
The USP provides a uniform national rate for the collection and delivery of letter items conveyed throughout the national territory. For parcel services, there are different tariffs for local (within a municipality) and national items. In accordance with the postal act, the USP offers transparent and non-discriminatory discounts based on volume and technological aspects, e.g. pre-sorting.
The USP has established analytical accounts that make use of activity based costing and are supposed to keep separate accounts for universal and non-universal services as well as to distinguish between reserved and non-reserved services. However, it is not clear at present whether the legal requirements concerning accounting separation are fully met since the costing model has not yet been approved by the NRA. 12 Final report: Main aspects of postal networks in AC/CC Country Report Bulgaria
Table 1-3: Postage rates for domestic first class letter services (Bulgaria)
Weight up to Rate (local currency) Rate (Euro) Standard 20g 0.36 0.18 20g 0.44 0.23 100g 0.49 0.25 250g 0.71 0.36 350g 0.83 0.43 500g 0.99 0.51 1000g 1.08 0.55 2000g 1.35 0.69
Source: WIK-Consult
Table 1-3 presents the postage rates for first class letter services effective on 1 June 2003, in local currency and Euros.
1.5.5 Quality of service
The USP does not yet satisfy several norms in respect to quality of service. Quality of service targets are set out by legislation but no independent monitoring of quality of service performance has been carried out so far. The USP reported to publish performance results annually but failed to provide copies of such publications. However, the NRA provided performance results for the last two years in response to the present survey. Accordingly, D+1 routing time performance was 81% in 2001 and 79% in 2002.
It was reported by the NRA that independent monitoring is about to be established.
1.5.6 Complaint and redress
The USP does not have a specific office to deal with customer complaints. However, the USP published the total number of complaints in its annual reports.
As set out by the postal law, customers may bring their complaints to court where the USP could not satisfactorily resolve the complaint. There appear to be no legal procedures that involve regulatory institutions. However, the USP reported that in practice the complaints are dealt with both in an inspectorate within the Ministry of Transport and Communications and within the NRA. Final report: Main aspects of postal networks in AC/CC 13
Country Report Bulgaria
1.6 Regulatory situation
1.6.1 Overview of postal regulation
1.6.1.1 Postal legislation
The Postal Services Act dates of 4 August 2000 and has been amended four times since. The last amendment (SG No. 26 of 21 March 2003) entered into force on 1 January 2003. There are three implementing regulations relating to postal tariffs, postal security and to quality of services standards. In addition, the regulatory framework is further specified concerning universal service requirements by the USP’s licence. Laws and regulation were available in English translation from the NRA.
1.6.1.2 Regulatory institutions
The ministry in charge of postal legislation is the Ministry of Transport and Communications (MTC). The specific tasks of the ministry related to the postal sector were described as follows (in the words of the ministry): “The minister develops the postal sector policy setting forth the strategy and principles of development of postal services, the stages and guidelines for development of the postal market and of the postal infrastructure, and the tasks related to European integration.”4 In particular, the MTC manages the state’s ownership rights regarding the USP. The USP’s board of directors includes three MTC officials (out of five in total).
On 5 February 2002, the Communications Regulation Commission (CRC) was established as the Bulgarian NRA for the telecommunications and postal sectors. The NRA is responsible for a wide range of tasks related to the implementation of the postal sector policy including (i) ensuring universal postal service provision; (ii) promoting competition in postal markets; (iii) licensing for universal postal services; (iv) registration for non-universal postal services; (v) monitoring of quality of service; (vi) approving geographical exemptions for universal service; (vii) supervision of accounting separation and elaboration of methods to determine compensations for financial burdens resulting from universal service provision and (viii) price regulation.
4 Citation slightly edited. 14 Final report: Main aspects of postal networks in AC/CC Country Report Bulgaria
1.6.1.3 History and philosophy of postal regulation
The postal sector in Bulgaria has experienced important reforms in the last years. The incumbent operator was transformed into a state-owned joint stock company in 1997. Since 2000, the postal act and its amendments have set out a regulatory framework that is considered to transpose the acquis communautaire.
In 2002, the Council of Ministers adopted a strategy paper on postal sector policy. The main objectives of postal policy include the modernisation of the USP aimed at an efficient provision of high-quality postal services; the harmonisation of national postal legislation with EU postal policy; and the gradual liberalisation of postal markets and promotion of fair competition.
1.6.2 Universal Service
The basic legal requirements for universal service in Bulgaria are summarised in Part I of this report. The postal act appoints Bulgarian Posts PLC as the “principal postal operator” and obliges the USP to provide universal postal services throughout the national territory, “even under economically unprofitable conditions”.
The postal act (§ 33) allows the USP to offer a service level lower than demanded by the general universal service requirements in hardly accessible regions. These areas have to be determined by the USP in co-ordination with competent municipality mayors and need to be approved by the NRA.
1.6.3 Reserved services
In general, the postal act liberalises postal services entirely and sets out a state monopoly for a transitory period only. Until the end of 2005, the provision of postal services within the weight and price limits as stipulated by Directive 97/67/EC (350g and five times the standard tariff) is reserved to the USP. The reservation applies to both domestic and cross border correspondence. For cross border services, the weight limit is five times the USP’s price of airmail correspondence of the lowest weight category.
Direct mail is explicitly excluded from the reserved area.
1.6.4 Regulation of non-reserved services
Under the postal act, all providers of postal services need to either hold a licence or register with the NRA. Final report: Main aspects of postal networks in AC/CC 15
Country Report Bulgaria
For the provision of non-universal services, providers need to register. In general, the registration appears to fulfil the condition for ”general authorisations” set out by Directive 97/67/EC. However, the postal act requires providers of non-universal services to announce their tariffs to the NRA 30 days prior to their entry into force. This requirement can be considered to be in excess of the maximum requirements stipulated by the acquis communautaire. Since the NRA finances itself by licence fees, the charges for registration (approx. 2,300 EUR) are relatively high compared to other countries but cannot be considered as restrictive. The postal act clearly defines express services as opposed to universal services by outlining seven categories of value added services that should be considered as express.5 As of May 2003, 29 operators had registered.
For the provision of universal services, an individual licence is required. Licence conditions in detail are set out in the licence text; one licence has been issued (to the USP) so far. The postal act does not make specific requirements concerning licences for private operators providing non-reserved universal services. Since such conditions will only be set out when a licence is issued, it cannot be assessed at present whether the licensing regime will restrict or promote competitors’ entry to the universal services area.
1.6.5 Access
In Bulgaria, there are no specific requirements concerning access to universal services at present.
The postal act stipulated that the NRA “shall develop and adopt standards for determination of the density of the access points to the postal networks intended for universal postal service provision so their number and density to be in compliance with the customers needs”6. Apparently, such standards have not been implemented so far.
5 Postal Services Act, Supplementary provision, clause 1, item 18: “Express mail service shall be a postal service of a value added by comparison with the universal postal service. Express mail service guarantees besides faster and more reliable clearance, transport and distribution of items personally to the addressee and is furthermore characterised by the provision of some or all of the following supplementary services: (a) collection from the sender's address; (b) guarantee of delivery by a given date; (c) delivery to the addressee in person; (d) possibility of a change of destination and addressee in transit; (e) confirmation to the sender of delivery; (f) tracking and tracing of items; (g) personalised treatment for users and offer of an "a la carte" service, according to requirements as to manner and time ("on call" and "by contract").” 6 Postal Services Act, § 15 (1) 13. 16 Final report: Main aspects of postal networks in AC/CC Country Report Bulgaria
1.6.6 Tariff and accounting principles
The postal act appears to require that charges for universal postal services should be affordable, uniform throughout the national territory and geared to costs. In particular, the charges shall ensure “an economically justified profit in accordance with an adopted investment policy” for the USP. Proposals for changes in rates must be notified to the NRA, which may reject the changes. The NRA has not had occasion to review a general rate proposal until now.
The postal act further requires special tariffs for large mailers to be transparent and non-discriminatory.
Under the postal act, the USP is required to keep separate accounts for universal and non-universal services as well as for reserved and non-reserved services (as a transitory requirement until the reservation will be abolished in 2006). However, the law does not set out specific conditions regarding the appropriate cost allocation rules. The requirements concerning accounting separation have not yet been fully implemented.7
1.6.7 Quality of service
The current regulatory targets concerning routing time have been set out in December 2000 by an order of the ministry and require the USP to deliver 76% of all domestic correspondence in D+1 and 83% in D+2.
Under the postal act, the NRA is responsible to issue orders concerning quality of service targets. No such orders have been issued so far.
Moreover, the NRA is in charge of commissioning an external independent body to monitor routing time performance and publishing the results but has yet not had the occasion to do so (as of May 2003).
1.6.8 Complaint and redress
The postal act does not appear to set out specific rules regarding complaints by postal customers. The USP is not required to establish a separate office for the resolution of customer complaints. According to the law, customers may bring complaints before courts (if not satisfactorily resolved by the USP); there is no regulatory arbitration
7 Within this survey, it cannot be assessed to which extent the USP has already kept separate accounts in practice. However, there has not been any approval of the accounting systems by the NRA so far. Final report: Main aspects of postal networks in AC/CC 17
Country Report Bulgaria procedure, nor any legal requirement to publish information on the number and the manner of handling customer complaints.
1.6.9 National regulatory authority
Judging from the several criteria presented in Part I of this report, the Bulgarian NRA appears to fulfil all conditions that ensure independence of a regulatory authority.
The Council of Ministers appoints and dismisses the head of the NRA for a fixed term such that he can act independently of short term political influences. The NRA is self- financing and covers the costs of its operations from the licence and registration fees it collects. Moreover, final decision of the NRA cannot be reviewed but by the Bulgarian Supreme Administrative Court.
In the light of its extensive and important tasks, the NRA’s administrative capacity (two full time experts) appears to be limited at present. However, the NRA reported that four additional experts have been appointed recently and that the postal directorate also receives support from other departments within the NRA on demand.
Country Report
2 CY – Cyprus
20 Final report: Main aspects of postal networks in AC/CC Country Report Cyprus
CYPRUS – GENERAL FACTS
Economy
GDP in EUR, 2001, (million): 10,200 GDP per capita in EUR, 2001: 14,458
GDP in PPS, 2001 (million): 12,100 GDP per capita in PPS, 2001: 17,180
GDP growth rate, 2001: 4.2% Unemployment rate, 2002: 5.0%
Population and geography
Population, 2001 (thousands): 706 Density (Persons per sq. km): 119
Land area, 2002 (square km): 5,921 Urbanisation (Pop. in urban areas): 70%
Transport and communications infrastructure
Railway network, 1999 (km): na Fixed lines per 100 households, 2002: 130
Road infrastructure, 1999 (highway km): na Mobile penetration rate, 2002: 53%
International airports, 2003: 3 Internet users penetration, 2002: 28% Source: Eurostat NewCronos; CYSTAT, UN World Urbanization Prospects (2001); IBM Monitoring of EU candidate countries, telecommunications sector (2002); www.columbusguide.com.
CYPRUS – POSTAL FACTS
Universal service provider
Name of USP: Dept. of Postal Services USP employment, 2002 (persons): 1,762
USP revenue, 2002 (million EUR): 26 USP employment of total workforce: 0.6%
Annual revenue growth (CAGR), 98-02: 8.5%
Volumes and tariffs
Dom. letter post volume, 2002 (million): 52 Dom. letter post per capita, 2002: 74.1
Cross border LP: OCB/ICB ratio, 2002: 101% Domestic parcels per capita, 2002: 0.0002
Cross border LP: ICB/Dom ratio 2002: 20% Basic letter tariff, June 2003: 0.34€
Postal network (access)
Postal outlets, 2002: 1,109 Letter boxes, 2002: 700
Outlets per 10,000 inhabitants: 15.7 Letter boxes per 10,000 inhabitants: 9.9
Outlets per 1,000 sq. km: 187.3 Letter boxes per 1,000 sq. km: 118.2 Source: WIK-Consult
Final report: Main aspects of postal networks in AC/CC 21
Country Report Cyprus
2.1 Basic country information
Having an expand of 9.251 square km, Cyprus is the third largest island in the Mediterranean, situated in its eastern part and lying at the crossroads between Europe, Asia and Africa. With roughly 700,000 inhabitants (in the Republic of Cyprus, i.e. excluding the Turkish occupation zone), Cyprus is densely populated. Cyprus has been a centre of international trade since copper was processed on the island from 2500 BC on and became the basis of thriving exports ages ago. In ancient times, Cyprus had a vivid history and had been ruled by different powers incl. Assyrians, Egyptians, Persians, Macedonians, Romans, the Byzantine Empire, French, Venetians and the Ottoman Empire before it became a British colony in 1878. Cyprus was given independence in 1960 but suffered from conflicts between the majority of Greek Cypriots and the 20% minority of Turkish Cypriots. United Nations peacekeeping forces have been present in Cyprus since 1963. Following a military intervention by Turkey in 1974, Cyprus is de facto divided into the Republic of Cyprus - which is the about to enter the EU in 2004 - and the Turkish occupation zone. The capital Nicosia still possesses a wall like Berlin used to have. The northern part of Cyprus has not been recognised by any country in the world, except for Turkey which is stationing 30.000 army officers there. However, the ban on crossing to and from the south was lifted on 23 April 2003 for both Turkish and Greek Cypriots. During the following eight days, approximately 90.000 Greek Cypriots and 30.000 Turkish Cypriots took advantage of this situation crossing the line between the north and the south in a common sentiment of joy. No incidents were reported. On the contrary, a warm welcome was given to the visiting Greek Cypriots by Turkish Cypriots and to the visiting Turkish Cypriots by the Greek Cypriots.
The island's main economic activities are banking, tourism, craft exports and merchant shipping. Over the last years the economy gradually developed into a modern economy, with dynamic services, industrial and agricultural sectors and advanced physical and social infrastructure. Since 1998, Cyprus has resumed growth at nominal GDP growth rates around 5% p.a. The overall nominal GDP was 10.2 billion EUR in 2001, or 13,386 EUR per head (17,180 PPS). Cyprus thus has the highest GDP per capita of all AC countries and thereby is close to average of the EU-15.
The Cypriot communication markets appear to have comparably developed like those of the EU-15 with 130 fixed lines per 100 households in 2002 (Avg. EU-15: 110) and a mobile penetration of 53% (Avg. EU-15: 73%). Internet users penetration was 28% in 2002. 22 Final report: Main aspects of postal networks in AC/CC Country Report Cyprus
2.2 Overview of postal market
Based on available information, WIK estimates the total market for domestic and outbound postal services in Cyprus to be about 36 million EUR. This estimate excludes the domestic express segment and must be considered as very approximate.
This size estimate of the postal market has been developed using the following information. There appear to be no surveys of the total market for postal services in Cyprus. The USP has provided revenue data for four basic market segments: letter post, parcels, express services (EMS), and unaddressed mail. However, the USP failed to provide revenues broken down by domestic and inbound or outbound cross border services (except for express, where all revenues are related to cross border services since the USP does not offer such service domestically). For volumes, the USP provided more detailed information. The estimates of market shares mostly rely on information provided by the USP. The NRA stated not having access to detailed market information so far but provided general assessments on the degree of competition in several market segments. Moreover, the NRA provided rough estimate of the total market size and the total revenues of private postal operators.
Table 2-1: Estimated market 2002 (Cyprus)
USP USP WIK Market Market Rev Vol Est Rev Vol 2002 2002 USP 2002 2002 EUR 000 Pieces 000 share EUR 000 Pieces 000 Letter, domestic na 52,272 95% na 55,023 Letter, OCB na 10,338 95% na 10,882 Total letter post 22,792 62,609 95% 23,992 65,905 Parcels, domestic na 0,126 5% na 3 Parcels, OCB na 12,240 30% na 41 Total parcels 394 12,366 30% 1,313 43 Express, domestic 0 0 0% 5,000 na Express, OCB 1,047 52 20% 5,235 258 Total express 1,047 52 - 10,235 na Unaddressed mail, domestic 278 na 40% 696 na Total, all domestic and OCB 24,512 62,673 - 36,236 65,948
Source: WIK-Consult
The assessments on the degree of competition made by the NRA and the USP were generally in line with each other: It appears that there is slightly emerging competition in the Cypriot letter market – both for domestic and for outbound cross border items. For the segments of outbound and domestic parcel and express services, the USP reported Final report: Main aspects of postal networks in AC/CC 23
Country Report Cyprus
“intense” competition while the NRA considers competition to be “substantial”. While obviously the USP serves the vast majority of the letter market, it is far from having a dominant position in the market for parcels and express items - with the possible exception of outbound parcel services. The estimate of the size of the domestic express segment has been made by combining a rough estimate of total CPO revenues provided by the NRA and other information that was obtained from the USP. In the absence of extensive market monitoring within both USP and NRA and since private operators declined to participate in this survey, the estimates shown in Table 2-1 should be treated with an appropriate level of caution.
2.3 Market players
2.3.1 Universal service provider
2.3.1.1 Legal status and subsidiaries
The USP is the Department of Postal Services (Cyprus Post), a government department under direct supervision of the Ministry of Communication and Works.
Obviously, there are close financial relations between the state and the USP since the USP’s budget is currently not entirely separated from the general state budget. The USP stated that no information was available about whether the USP is a net receiver of financial transfers from the state budget or rather has to be considered as a net contributor.
The USP is exempt from the payment of VAT in respect to the provision of universal services.
No subsidiaries were reported by the USP.
2.3.1.2 Service portfolio
In the last years, the USP can be considered as rather reluctant to introduce new services. Its current service portfolio mainly consists of traditional postal services, i.e. letters, parcels, EMS services and postal money orders. In addition, delivery of unaddressed items is provided.
The USP reported to consider the introduction of domestic express services, hybrid mail as well as retail activities in post offices in the medium term, probably starting in 2004. 24 Final report: Main aspects of postal networks in AC/CC Country Report Cyprus
2.3.1.3 Postal infrastructure and automation
The USP appears not to make extensive use of automation so far. However, its sole sorting centre in the capital is equipped with an automated sorting machine. Moreover, its vehicle fleet appears very modern with an average age of three years. So far, not all post office, but only the headquarters, the sorting centre, and the district post offices are equipped with personal computers.
The traditional Cypriot postal infrastructure appears to be unique in Europe for two reasons: First, delivery is performed by regular employees only in urban areas while postal agents are contracted to deliver mail in rural areas. In 2002, a total of 422 agents delivered mail in rural areas, either to homes or to clustered mailboxes that are centrally located in very small villages (of less than 200 inhabitants). Second, only a part of all postal transports are facilitated by the USP own personnel and vehicles while mail to rural areas is collected from and transported to the postal agents by public transport, i.e. the bus driver drops and picks up a mailbag in every village. In this respect, the USP in Cyprus has outsourced key processes long before the trend that can be observed in Central European USP’s recently.
2.3.1.4 Employment
The USP has a workforce of 1,750 persons (837 full time equivalents). This figure includes postal agents that are used for the operation of postal agencies (i.e. to provide access to basic postal services) as well as for collection and delivery. Since 1998, the USP has increased its employment by 18% (in FTE).
Table 2-2: USP employment, 1998-2002 (Cyprus)
Type of employee 1998 1999 2000 2001 2002 Change, 98-02 Headcount Total 1,373 1,391 1,767 1,750 1,762 28% Post officers (full time) 477 474 500 516 527 10% Post officers (seasonal) 170 170 170 170 170 0% Agents 726 7471,097 1,064 1,065 47% Full Time Equivalents Total 711 719 807 821 837 18% Post officers (full time) 477 474 500 516 527 10% Post officers (seasonal) 45 45 45 45 45 0% Agents 189 200262 260 265 40%
Source: WIK-Consult Final report: Main aspects of postal networks in AC/CC 25
Country Report Cyprus
A substantial share of direct employment (“post officers”) are civil servants. The USP reports not to employ part-timers regularly. However, all postal agents do not work for the USP full time. Therefore, these contracts could be considered as a form of part time employment. Within the group of directly employed staff, there is a substantial share of seasonal employees that either work for the USP three or six months a year. Detailed information on the development of USP employment is presented in Table 2-2.
The USP reported plans to replace some postal agents with regular employment in the medium term. These plans were explained against the background of occasional quality problems concerning the agent’s operations. Moreover, it was reported that recruitment of agents was not easy since agents are hired in very rural areas where labour supply appears to be limited.
2.3.2 Private operators
No precise information on private operators in the Cypriot postal market could be provided by the USP nor by the NRA. The NRA reported not having reliable information so far since it is just about to become operational (and was formally vested with responsibility for the postal market as recently as in June 2003).
However, it appears that there is substantial competition in the domestic and cross border parcel and express market. The NRA estimates that there are approx. 10-15 national operators providing domestic services while all major international courier companies (DHL, FedEx, TNT, UPS) are present in Cyprus but appear not to offer domestic services.
Private operators have provided no information about their services in Cyprus.
2.4 Market development
2.4.1 Universal services – letter post and parcels
Table 2-3 presents a summary of the volumes of postal items carried in the universal services from 1998 to 2002. All figures reflect postal items carried by the USP. The private operators have not submitted any data. 26 Final report: Main aspects of postal networks in AC/CC Country Report Cyprus
Table 2-3: USP volumes of universal and non-universal services (Cyprus)
5-yr 1998 1999 2000 2001 2002 change Universal services Letter post LP Domestic Pcs-000 40,121 41,924 49,603 53,670 52,272 30% LP per capita Pcs-000 60.5 62.9 73.9 76.1 74.1 LP per EUR 1000 GDP 5.0 4.8 5.2 5.3 5.1 LP Outbound cross border Pcs-000 11,500 12,767 12,537 14,216 10,338 -10% Outbound/inbound 92% 111% 102% 127% 101% LP Inbound cross border Pcs-000 12,537 11,539 12,257 11,222 10,229 -18% LP ICB / (LP Dom+ICB) 31% 28% 25% 21% 20% Parcels Parcels, Domestic Pcs-000 0.5 0.3 0.2 0.1 0.1 -74% Parcels, Outbound cross border Pcs-000 10.1 10.3 10.8 11.1 12.2 21% Non-universal services Express (no domestic service by USP) Outbound cross border Pcs-000 47 48 46 48 52 10% Unaddressed mail Pcs-000 na na na na na - Domestic LP per cap and per EUR 1000 GDP for 2002 figures use 2001 population and GDP as bases, respectively.
Source: WIK-Consult
Given the very favourable economic situation of Cyprus in general, the universal services market there does not appear to be particularly well developed. The market experienced several different trends during the last years. Overall letter post volume has grown by a substantial 30% in the five years ending in 2002. The number of domestic letter post items per cap was about 75 in 2002, that is about 21% of the EU-15 average. The number of letters per EUR 1000 in GDP was approximately 5 in 2002, compared to an average of 10 in the EU-15. Thus there are more letters per capita in Cyprus than in most other AC and CC countries. However, the number of letters per GDP is significantly below the EU-15 on average and other AC countries indicating that there is substantial potential for further positive market development. Cross border volumes have been decreasing for both inbound and outbound service. Parcel volumes are very low not only in absolute value but also per capita. Moreover, the USP suffered a 74% decrease in domestic parcel volumes since 1998 which appears to be a result of increasing competition and of lost market shares by the USP. However, this result may not hold true for the overall parcel market since it does not include volumes carried by private operators.
In 2002 about 16% of all letter post delivered by the USP (i.e., domestic and inbound cross border) originated from abroad. As a result, the USP is strongly influenced by the vagaries of terminal dues and depends on foreign postal services to a certain extent. The ratio between inbound and outbound traffic oscillated around 100% in the period Final report: Main aspects of postal networks in AC/CC 27
Country Report Cyprus from 1998-2002 indicating that Cyprus is much less of a net importer of mail than other AC and CC countries. However, the same ratio - calculated from letter post weights instead of volumes – shows that Cyprus receives twice as much letter post (in kg) than it dispatches. Therefore the average weight of inbound letters to Cyprus must be substantially higher than it is for outbound. It thus appears that the outbound/inbound ratio presented in Table 2-3 may be largely influenced by the postcards sent by tourists, explaining the low weight, but high volume of outbound letter post.
In comparison to other USPs in this survey, the USP in Cyprus did not provide very detailed information about the volumes and revenues associated with different postal services. However, the USP reported that its accounting systems currently do not allow to provide more specific information. This circumstance as well as some inconsistencies in the data submitted suggest the possibility of improvement in data collection.
2.4.2 Non-universal services
2.4.2.1 Express services
In the domestic express market, the NRA and USP reported substantial or intense competition but could not name the most important competitors. The USP does not offer express products domestically. The NRA reported that approx. 10-15 local companies offer express services on a national level. In addition, local courier services are offered by many small companies or individuals in all major cities (Nikosia, Larnace, Limassol, Paphos).
For cross border express services, the USP appears not to have a dominant position and reported an estimated market share of 10-30% in the market for outbound express services. All major international courier companies (DHL, FedEx, TNT, UPS) as well as the major Arab courier Aramex are present in Cyprus. As presented in Table 2-3, the USP experienced a 10% increase in outbound EMS volumes during the last five years. However, conclusions to the total express market cannot be drawn since the USP served a limited share of the market only.
2.4.2.2 Document exchanges
No traditional document exchange activities that serve specific professional groups such as lawyers or insurance companies have been reported in Cyprus. However, there are several companies providing affordable parcel or express services that may be considered as document exchange services. The most important appear to be two companies called “Akis Express” and “Travel Express”. These companies provide transportation of parcels and documents between their offices in the three or four major Cypriot cities. Since they charge tariffs that are less than five times the basic postal tariff 28 Final report: Main aspects of postal networks in AC/CC Country Report Cyprus
and therefore might violate the reserved area, the operators have recently started asking their customers to subscribe before using the service. As a result, they fulfil the conditions to be considered as document exchange services. Since a licensing regime has not been implemented so far, the NRA has not taken a decision on the issue of these document exchange services.
2.4.2.3 Unaddressed items
Substantial or even intense competition in the market for delivery of unaddressed items was reported by the NRA and the USP. The USP reported to have a market share of approx. 40% in this segment but could not provide information on the volumes of unaddressed items carried. No information about private operators’ activities in this segment could be obtained.
2.5 Universal service in practice
2.5.1 Scope of universal service
In conformance with the universal service obligation, the USP provides service to all points in Cyprus for all types of letters, direct mail, newspapers, periodicals, and books weighing up to 2 kg and for domestic and cross border parcels weighing up to 20 kg.
In addition, the USP provides universal delivery for special items for the blind and delivers inbound cross border parcels (up to 31.5 kg). The USP offers registration services for all universal service items and insurances for all letters and parcels.
Delivery service as well as clearance of letter boxes is provided five days per week as a standard. In rural areas where clearance or delivery is performed by postal agents, service is offered six days a week. There are two principal modes of delivery employed by the USP. While mail is delivered to the addressee’s premises as a standard, villages of less than 200 inhabitants do not get home delivery. In these villages, mail is delivered to P.O. boxes that are centrally located in the village.
2.5.2 Reserved services in practice
The legal provisions concerning the reserved area in Cyprus are set out in the Telecommunications and Postal Services Law of 2002. The reserved area includes items of correspondence and direct mail up to 350g or within a price limit of five times the standard tariff, as stipulated by Directive 97/67/EC. However, postal act has only entered into force after ratification on 8 July 2003. Previously, provision of postal Final report: Main aspects of postal networks in AC/CC 29
Country Report Cyprus services was entirely reserved to the USP by law. In regulatory practice, it appears that the provisions of the 2002 postal act had been applied to assess eventual violation of the reserved area by Cypriot authorities before ratification.
The USP reported emerging competition in the reserved segments of domestic correspondence and direct mail and even substantial competition for outbound cross border mail. Before ratification, the NRA was not formally in charge of postal regulation and reported not to have the relevant information to confirm or reject the suspected eventual monopoly violation yet. Indeed, it appears that there are currently some incidents of possibly illegal competition in the reserved area. However, it can be assumed that a USP that formerly has enjoyed a monopoly in the letter market may even consider competition “substantial” where it still holds a market share around 90%.
2.5.3 Access
As summarised in the Part I of this report, the USP in Cyprus provides an outstanding level of access to postal services. Cyprus has 15.7 post outlets (offices or agencies) and 9.9 letter boxes per 10,000 inhabitants. For postal outlets, this by far exceeds the EU-15 average of 2.4 – while there are slightly more than half the number of letter boxes than in the EU-15 on average (18).
The enormous number of postal outlets is mainly a result of huge number of postal agencies: At the end of 2002, the USP operated 52 post offices but more than 1,000 postal agencies. Although the USP possibly makes use of that many agents mostly because of their delivery (and clearance) function rather than in order to provide a high level of access quality, it is clear that the Cypriot population benefits from an outstanding density of its UP’s access network.
The UPS has not established targets for queuing time.
2.5.4 Tariff and accounting principles
The USP provides a uniform national rate for the collection and delivery of all postal items conveyed in the universal service throughout the national territory. The last change in postal rates became effective in January 2003.
The USP does not maintain separate accounts for reserved, non-reserved universal, and non universal services. Moreover, it appears that currently its accounting system does not allow to implement accounting separation easily. The Ministry reported to launch a project in 2003 that will introduce an appropriate costing system and improve the USP’s bookkeeping procedures in general. 30 Final report: Main aspects of postal networks in AC/CC Country Report Cyprus
Table 2-4 presents the postage rates for first class letter services effective on 1 June 2003, in local currency and Euros.
Table 2-4: Postage rates for domestic first class letter services (Cyprus)
Weight up to Rate (local currency) Rate (Euro) 20g 0.20 0.34 100g 0.25 0.43 250g 0.30 0.51 500g 0.50 0.85 1000g 0.70 1.19 2000g 1.00 1.70
Source: WIK-Consult
2.5.5 Quality of service
The USP does not yet satisfy several norms in respect to quality of service. The USP does not establish and publish quality of service targets. In the three years period from 1999-2002, the USP contracted an independent organisation to perform monitoring of quality of service but did not publish their results. Future quality of service targets and measurement procedures will be highly dependent on the ongoing implementation of a regulatory framework following the 2002 postal act; see section 2.6.7.
As stated in Part I of this report, the USP reported a routing time performance of 21% D+1 for 2000 - but increased its performance to 49% D+1 in 2002. However, current quality of service is considered as relatively poor by the USP as well as by the NRA and was reported to be a major matter of concern to all parties involved.
2.5.6 Complaint and redress
The USP reported that customer complaints can be directed to a specific office within its headquarters. However, no standardised procedures to deal with complaints have been set out so far. The USP reported plans to implement such procedures. There is no data, published or unpublished, on the number, nature, or resolution of complaints. Since ratification of the 2002 postal act, the NRA is responsible to finally resolve customer complaints but has not become operational so far (as of June 2003). Final report: Main aspects of postal networks in AC/CC 31
Country Report Cyprus
2.6 Regulatory situation
2.6.1 Overview of postal regulation
2.6.1.1 Postal legislation
The Telecommunications and Postal Services Regulation Law of 2002 entered into force after ratification on 8 July 2003.
No implementing regulations have been issued yet, but four decrees have been prepared and are reported to be in the process of being approved: i) A regulation on fees for licences and general authorisations; ii) a regulation on licences and general authorisations; iii) a regulation on accounting systems and compensation funds; and iv) a regulation on quality of services.
2.6.1.2 Regulatory institutions
The ministry responsible for postal affairs is the Ministry of Communications and Works. In addition to the definition of postal policy and the preparation of postal legislation, the ministry is also responsible for the provision of postal services; the USP is a department within the ministry and under direct supervision of the minister. Outside the postal sector, the general responsibility of the ministry include the provision of efficient and effective frameworks for the provision of telecommunications services; road infrastructure and safety; public buildings, airports and ports as well as the maintenance of the culture and heritage of Cyprus.
The NRA is the Office of the Commissioner of Telecommunications and Postal Regulation (OCTPR). The NRA regulates both the telecommunications and postal sectors. It was formally vested with responsibility for the postal sector when the postal law became effective in July 2003. In the postal sector the NRA’s main duties include drafting of secondary legislation; issuing and administering licences and authorisations for postal operators; supervision of the USP’s accounts and tariff regulation; prevention of anti-competitive activities in the postal sector; monitoring of universal service provision; postal market monitoring as well as participation in drafting primary postal legislation.
2.6.1.3 History and philosophy of postal regulation
While the provision of postal services are still organised in a traditional way, i.e. by a government department, the legal framework for postal markets has been changed 32 Final report: Main aspects of postal networks in AC/CC Country Report Cyprus
substantially with the 2002 postal act. This act is considered to transpose the Postal Directive. The government is further considering to amend the postal act before accession in 2004 in order to comply with the provisions of the Directive 2002/39/EC, most importantly concerning the reserved area. Moreover, plans were reported to transform the USP into a state enterprise or a joint stock company in the medium term.
Although established only recently, the NRA considers its role as transitory and aimed at stimulating market powers in the postal sector:
If through the postal regulation a perfect efficient postal market is created, with perfect competition and high standards of quality, then the need for regulation of the postal market as well as the need for safeguarding the universal service obligation would be less. Until then, the regulator has a very important role to play towards that target.
2.6.2 Universal Service
The basic legal provisions concerning universal service require the USP to clear, sort, and deliver letter post items up to 2 kg and parcels up 20 kg at least five times a week and at a uniform rate. Moreover, the USP is required to provide registration and insurance for all universal service items as well as special services for the blind or partially sighted. Notwithstanding more specific requirements that may be introduced by the NRA soon, the USP appears to fulfil the US requirements at present. The postal law appears to provide the possibility for the NRA to approve certain geographic exemptions from the provision of universal service (Art. 113 (2)) as well as to define requirements concerning the mode of delivery (e.g. to the home, to P.O. boxes centrally located in villages, etc. Art. 2(1)).
The postal law explicitly designated Cyprus Post as the universal service provider and obliges the NRA to further specify the USO when issuing a licence to the USP.
2.6.3 Reserved services
According to the 2002 postal law, the right to clear, sort, and deliver domestic correspondence, direct mail and cross border mail within a weight limit of 350 g and a price limit of five times the standard tariff as well as to provide all postal services for the blind is reserved to the USP.
Document exchange services are not reserved. Final report: Main aspects of postal networks in AC/CC 33
Country Report Cyprus
2.6.4 Regulation of non-reserved services
Under the postal law, operators wishing to provide postal services need to hold either a general authorisation – for non-universal services – or an individual licence - for universal services. The licensing regime has not been implemented yet.
For the providers of universal services, the NRA should grant special licences that may include various requirements intended to secure universal service provision. The draft regulation on licenses and general authorisations further prescribes that the NRA, “after discussing with the minister, should issue a decree which states the criteria by which the applications for granting of licenses will be evaluated and the criteria and presuppositions which the applicants should apply to for granting of licenses.” At present, it cannot be assessed whether the future license conditions will promote or restrict competition for universal services. Moreover, current legislation appears not to provide appropriate definitions that allow to draw a clear line between universal services (e.g. parcels) and non-universal services (e.g. courier/express) in regulatory practice. The NRA reported not to expect much competition within the area of universal services.
According to the postal law, all non-universal postal services require a general authorisation. The draft regulation of general authorisations and special licenses stipulated that the NRA shall issue a decree “which determines the conditions, presuppositions and restrictions concerning the operation of the postal activities under general authorisation”. Although the NRA expressed to be committed to promoting competition, in particular in the courier and express segment, the draft regulation at present appears to allow for more restrictive conditions than permissible under EU law. Again, a definitive assessment of the procedures and conditions related to general authorisations will not be possible before the licensing regime will have been implemented.
The postal law provides the possibility to establish a compensation fund to share the USP’s net costs of the USO with “other public providers of postal services”. The law appears not to specify whether providers on non-universal service may also be obliged to contribute to such a compensation fund. However, neither has the fund been established so far not did the NRA report intentions to do so in the medium term.
2.6.5 Access
Concerning the quality of assess to universal services, the draft regulation on quality of postal services requires the USP to place at least one letter box in “every community or municipality in rural areas” and one letter box for every 1,000 inhabitants in urban areas. Although no monitoring of access conditions has taken place so far, it appears to be obvious that the USP does not fulfil the requirement concerning letter boxes at 34 Final report: Main aspects of postal networks in AC/CC Country Report Cyprus
present.8 The regulation does not set out specific requirements concerning the number or location of post offices but demands “a sufficient number of access points”. As stated above, the USP operates significantly more postal outlets per inhabitant than any other AC, CC, or EU member state.
The legal framework does not require the USP to grant special network access (downstream access) to its competitors.
2.6.6 Tariff and accounting principles
According to the 2002 postal law, the NRA is responsible to regulate the USP prices by determining “minimum and maximum level of prices for ensuring legitimate and healthy competition for the Cyprus Post”. In addition, the NRA reported that only reserved and universal services, including special tariffs for bulk mailers, were subject to price regulation. The postal law also requires postal tariffs to be affordable, geographically uniform, transparent, and non-discriminatory. No orders concerning price regulation have been issued so far.
The draft regulation on accounting systems and compensation funds regulations9 further requires the USP to keep separate accounts for reserved, universal and non- universal services and to allocate costs in an appropriate and reasonable manner. In particular, the USP is required to keep accounts using activity-based fully distributed costing. These requirement have not yet been implemented.
2.6.7 Quality of service
Regulations concerning quality of service are set out in the draft regulation on quality of service which is expected to enter into force by September 2003 latest. Obviously, the regulation is not yet implemented (as of July 2003); no measurement procedures are in place, and there are not any publications on performance results .
The draft regulation very precisely requires independent monitoring of routing times, the application of CEN standards for measurement of domestic quality of service and biannual publication of performance results. For 2003, the regulation sets out a routing time target for domestic correspondence of 70% D+1 and 90% D+3. Until 2005, the targets will be increased significantly to 90% D+1 and 97% D+3. Monitoring of routing time is to be financed by the NRA and equally the NRA is in charge of publishing performance results.
8 The USP reported to operate 700 letter boxes in total, i.e. approx. one letter box per 1,000 inhabitants on average. Taking into account that many rural communities or municipalities are unlikely to have 1,000 inhabitants, it results that the requirements is not met at present. 9 Based on reports of the NRA; the draft regulation was not available in English. Final report: Main aspects of postal networks in AC/CC 35
Country Report Cyprus
2.6.8 Complaint and redress
The Cypriot legal framework at present does not make specific requirements regarding the handling of customer complaints, publication of data on customer complaints, or procedures for final resolution of complaints by an independent institution.
However, the postal law stipulates that the licence to be issued to the USP shall contain general conditions underlying the relationships with postal users as well as obligations to provide various information, incl. such about customer complaints.
The postal law appears to vest in the NRA the power to finally resolve customer complaints that have not satisfactorily been dealt with by the USP (Art. 25 (1) and (4)).
2.6.9 National regulatory authority
Although proper assessing of an NRA´s independence is impossible in a brief survey, the Cypriot NRA appears to be “legally separate from and operationally independent of” the USP. The Commissioner (head of the NRA) is appointed for a period “not exceeding six years” by the Council of Ministers and cannot be dismissed except for severe reasons such as mental incapacity or systematic absence. Moreover, the NRA is not subordinated to any ministry and its budget is approved directly by the Council of Ministers. However, the NRA reported that its final decisions may be reviewed by the Minister of Communications and Works – causing potentially conflicting interests as the minister is at the same time responsible for the USP’s operations (the postal department within its ministry).10
10 The NRA refers to Art. 19 (1) of the postal law: “It is the competence and power of the Commissioner, [...] to advise the Minister on matters concerning [..] posts in Cyprus”. It is not entirely clear to WIK whether this includes the minister’s appeal authority over NRA decisions as reported by the NRA. By contrast, Art. 151 appears to stipulate that NRA decisions may be reviewed only by courts.
Country Report
3 CZ – Czech Republic
38 Final report: Main aspects of postal networks in AC/CC Country Report Czech Republic
CZECH REPUBLIC – GENERAL FACTS
Economy
GDP in EUR, 2001, (million): 63,300 GDP per capita in EUR, 2001: 6,156
GDP in PPS, 2001 (million): 140,600 GDP per capita in PPS, 2001: 13,700
GDP growth rate, 2001: 3.3% Unemployment rate, 2002: 7%
Population and geography
Population, 2001 (thousands): 10,283 Density (Persons per sq. km): 130
Land area, 2002 (square km): 78,866 Urbanisation (Pop. in urban areas): 75%
Transport and communications infrastructure
Railway network, 1999 (km): 9,444 Fixed lines per 100 households, 2002: 69
Road infrastructure, 1999 (highway km): 499 Mobile penetration rate, 2002: 76%
International airports, 2003: 1 Internet users penetration, 2002: 30% Source: Eurostat NewCronos; UN World Urbanization Prospects (2001); IBM Monitoring of EU candidate countries, telecommunications sector (2002); www.columbusguide.com.
CZECH REPUBLIC – POSTAL FACTS
Universal service provider
Name of USP: Ceská Pošta USP employment, 2002 (persons): 41,041
USP revenue, 2002 (million EUR): 507 USP employment of total workforce: 0.9%
Annual revenue growth (CAGR), 98-02: 2.6%
Volumes and tariffs
Dom. letter post volume, 2001 (million): 698 Dom. letter post per capita, 2001: 67.8
Cross border LP: OCB/ICB ratio, 2002: na Domestic parcels per capita, 2001: 1.97
Cross border LP: ICB/Dom ratio 2002: na Basic letter tariff, June 2003: 0.20€
Postal network (access)
Postal outlets, 2002: 3,427 Letter boxes, 2002: 24,311
Outlets per 10,000 inhabitants: 3.3 Letter boxes per 10,000 inhabitants: 23.6
Outlets per 1,000 sq. km: 43.5 Letter boxes per 1,000 sq. km: 308.3 Source: WIK-Consult; UPU
Final report: Main aspects of postal networks in AC/CC 39
Country Report Czech Republic
3.1 Basic country information
The Czech Republic lies between Poland, Slovakia, Austria and Germany in the heart of Central Europe and for a long time it has played a pivotal role in the history of the continent. Its location and history have formed the national character and culture, which have both Germanic and Slavic elements. The country consists of three historic regions: Bohemia, Moravia and the Czech part of Silesia and a varied landscape of hills and plains. It is about the size of Austria with close to 80,000 square km and slightly smaller than Hungary. The country is populated by 10.3 million inhabitants. Prague is the capital and the cultural and economic centre, but the county is densely populated (130 inhabitant per square km) and urbanised; the next most important cities include Plzen, Brno, and Ostrava.
Czechoslovakia entered the reform process after 1989 with favourable initial conditions as the Communist regime had maintained prudent macroeconomic policies. Since its independence in 1991, the Czech Republic experience a rapid privatisation, low unemployment and very limited inflation. Following a balance of payments crisis the country experienced a recession between 1997-1999. This revealed an unfinished reform agenda, notably concerning the financial sector where the major banks were still state-owned as well as the corporate sector which was unprofitable due to a lack of restructuring. Apart from the postal sector, the government’s privatisation programme has still not been completed in the steel, petrochemical, energy and telecoms sectors.
Since 2001, the Czech economy has resumed growth at real GDP growth rates of 3.3% in 2001, and 2.7% in 2002. Nominal GDP was 63.3 billion EUR in 2001 or 6,156 EUR per head (13,700 PPS). Comparing GDP values across all adhesion countries, the Czech Republic ranks third (behind Cyprus, Malta and Slovenia), but looking at the “bigger countries” (more than 2 million inhabitants) at first.
The Czech communication markets are very well developed in general with 69 fixed lines per 100 households (Avg. EU-15: 110) and 76% mobile penetration thus above the EU-15’s average of 73%. Internet users penetration is 30%.
Due to its size and economic strength, the Czech Republic is one of the most important adhesion countries; accounting for 15% of total GDP, 14% of total population and 11% of total land area of all 10 ACs. 40 Final report: Main aspects of postal networks in AC/CC Country Report Czech Republic
3.2 Overview of postal market
Based on available information, WIK estimates the total market for postal services in 2002 to be roughly about 350 million EUR. The market for letter post is estimated to be roughly about 235 million EUR while parcel and express services are estimated to account for roughly 115 million EUR in 2002. The market estimates are presented in Table 3-1. The estimates must be considered as particularly approximate as the Czech USP did not participate in the survey by providing data in a comparable manner as USPs from all other AC and CC countries.
Table 3-1: Estimated market 2002 (Czech Republic)
USP Rev 2002, WIK Estimate Market Rev 2002, EUR 000 USP market share EUR 000 Total letter post 223,281 95% 235,033 Total parcels and express 45,671 40% 114,178
Source: WIK-Consult
In absence of detailed USP information and reliable market monitoring by independent institutions, WIK developed the estimate of market size by using the following information: Rough estimates of USP revenues in the letter post and parcels segment were calculated from the USP’s total revenues for 2002 and information on the shares of income from letter post and “parcel post and logistics” (items 5.1 and 5.2) provided in the UPU statistics for 2001. Although the data reported to UPU cannot be regarded as entirely credible, information stated by the USP in its annual report is even less so – since service categories have been modified in the last years and only aggregate income shares have been published for a set of “postal services” that is said to include, for example, money orders for some years (but not for others).
The USP revenues from letter post and parcels have been divided by the USP’s market shares in order to estimate total market size. It should be noted that the assessments of the degree of competition - and the USP’s market shares that have been reported by the USP and the Ministry of Informatics - varied significantly. While the Ministry reported a USP market share of 70-90% for domestic and cross border letter post, and even ca. 50% for domestic direct mail, the USP reported to serve 100% of the letter segment and more than 90% of the direct mail segment. For the domestic and cross border parcels, both sources reported the USP controls slightly more than half of the market while the USP only serves approx. 10-20% of the domestic express market and even less for outbound express items. Taking into account a higher price level of the express segment but also the importance of the parcel segment (in particular the domestic one) in terms of volumes, WIK estimated the USP to have a market share of approx. 40% in the combined letter and parcel market. Final report: Main aspects of postal networks in AC/CC 41
Country Report Czech Republic
The Czech USP did not provide breakdowns of revenues or volumes by services categories. While for the purposes of this study revenues for “all postal services” were provided, this data does not appear to be in line neither with the information provided to UPU statistics (about percentage of income from letter post and parcels), nor does it match the information the USP published in its annual report 2001. The USP stated the income share of “postal services” to amount to 40.7%, 62.9%, and 76.9% in the years 1999, 2000, and 2001. As a USP representative explained, the service categories used in the annual report had been re-defined from year to year such that these data do not explain substantial changes in the USP’s operations. As stated by a USP representative, the “postal services” listed in the annual report clearly include postal money orders for some years and are therefore of little use for the purposes of this study.
Czech Post is the major player of its home postal market. While there is apparently hardly any competition in the letter segment, a company called “Mediaservis” was reported to operate in the direct mail segment. Moreover, USP and NRA reported some minor incidents of illegal competition in the reserved area. According to Czech Post, DHL and UPS provide outbound cross border letter services in the Czech Republic.
It appears that substantial competition in the domestic parcel and express markets can be found all over the country. The most important players include DHL, FedEx, TNT, and UPS as well as a company called PPL and DPD (Groupe La Poste). For outbound cross border parcel and express service, DHL, UPS and DPD have been named as the most important operators.
3.3 Market players
3.3.1 Universal service provider
3.3.1.1 Legal status and subsidiaries
The USP is Ceská Pošta; the company holds the legal status of a “state enterprise” that is different from normal private companies. However, the status guarantees a significant extent of economic and operational independence. The members of the USP’s supervisory board are mostly appointed by the Ministry of Informatics.11 Moreover, the Minister is responsible to establish operational and financial targets for the USP and
11 One third of members of the USP's supervisory board is composed by employees of the enterprise, which are elected and removed by employees of the enterprise. Two thirds of members of the supervisory board are appointed and removed by the Ministry of Informatics. 42 Final report: Main aspects of postal networks in AC/CC Country Report Czech Republic
decides on retention of profits (or recovery of losses) as well as on the sale of the government’s ownership in the USP.
The Ministry reported plans to transform the USP into a joint stock company and transfer responsibility for managing ownership right to a separate state holding company (“National Property Fund”) or to the Ministry of Finance. However it appears that these plans are still in a rather immature stage of development and not likely to be implemented in the near future.
The USP has been operating profitably for years and does not receive any subsidies from the government. Although dividends could be transferred to the state budget theoretically, no profits have been retained so far in practice.
No subsidiaries operating in postal markets have been reported by the USP.
The USP is entirely exempt from the payment of VAT. Plans to introduce VAT for postal services in accordance with EU postal policy have been reported by the Ministry.
3.3.1.2 Service portfolio
According to the Czech definition of universal postal services, the USP provides letter and parcel services and mail items for the blind as well as various kinds of money orders, payment of pensions and collection of radio and television fees.12
In addition, the USP offers several services outside the range of universal services. These non-universal postal services include express services, hybrid mail, designated products for direct mailers, and business parcel products. The USP offers EMS domestically and used to co-operate with DHL for outbound cross border express services. However, the co-operation will cease to exist in summer 2003 and be replaced by regular cross border EMS services.
Moreover, the Czech USP provides non-postal services including delivery of unaddressed advertising, newspaper distribution, various financial and insurance services (partly in co-operation with the Postal Savings Bank), services related to bill collection and payment services (e.g. for mobile network operators), address marketing and electronic certification services. International money transfers are provided in co- operation with Western Union. Apart from postal services, post offices offer press, lottery, betting, duty stamps, road toll stamps and a number of other services.
12 Technically, payment of pensions and collection of radio and television fees are not a part of the universal services, but are imposed on the USP by special acts. Final report: Main aspects of postal networks in AC/CC 43
Country Report Czech Republic
3.3.1.3 Postal infrastructure and automation
The Czech USP appears to have successfully, though gradually, introduced technology and automation. Substantial changes in the network structure have increased efficiency in the last decade. While there were approx. 80 district sorting centres in the past, the number of sorting facilities has been reduced to 17 in 2002; it is envisaged to have only 7 fully automated sorting centres by 2006.
The USP operates separate delivery networks for letter and parcel services. For letters, final sorting to delivery sequence is performed in specific delivery offices (approx. two thirds of all post offices are delivery offices). In rural areas, there is motorised delivery.
While there is one regular air transport between Prague and Ostrava (Moravia), transport is mostly performed by using trucks. It appears that the improvements of the network structure have been the main reason for a substantial reduction of routing times which were achieved over the last years.
No precise data on automation of sorting processes was provided by the USP. However, it was reported that the four major sorting centres in Prague, Brno, Plzen, and Olmouc are equipped with automated sorting machines. All post offices are equipped with personal computers and the USP offers tracking and tracing for its express/parcel products provided to business senders.
3.3.1.4 Employment
The USP has a workforce of 41,041 persons (39,265 full time equivalents). From 1998 to 2002, the USP reduced is total workforce by approx. 7%.
It appears that a formal statement of the USP’s employment policy does not exist. However, the USP reported that it has been successful in increasing the wage level and improving qualification of its staff in order to decrease fluctuation. The social climate was reported to have ameliorated significantly after a difficult period characterised by worker’s dissatisfaction and several incidents of industrial action in the very early 1990ies.
3.3.2 Private operators
Until 2002, 12 private operators have been approved to provide postal services by the Ministry of Informatics: RGW express, Doubravka Kovařiková, Jan Hándl, UPS, DHL, TNT, Inspekta (FedEx), Cargoi Transport Immobilien, CT-Parcel Express, Radek Hrehor (Sprinter), Messenges Service and Mediaservice. However, both USP and the Ministry reported to suspect more postal operators to be active without approval. 44 Final report: Main aspects of postal networks in AC/CC Country Report Czech Republic
The most important private operators for (domestic) direct mail was reported to be a company called Mediaservis. The USP reported activities of two private operators in the market for outbound cross border letters: DHL and UPS.
The USP’s competitors in the domestic parcel and express market mainly include DHL, FedEx, TNT, and UPS joined by DPD (Groupe La Poste) and two companies called Messenger and PPL. By contrast, the market for outbound parcels and express services was reported to be dominated by the international operators DHL, DPD (Groupe La Poste) and UPS.
Apart from the USP and a company called ADM, there are numerous, mostly very small operators competing for delivery of unaddressed items.
Private operators have provided no information about their services in the Czech Republic.
3.4 Market development
3.4.1 Universal services – letter post and parcels
Unlike USPs of all other 12 countries surveyed, the Czech USP declined to provide data for this study on its volumes of universal services. Also private operators did not submit such data.
Given this lack of information, the scope of analysis in this section is limited. Please note that in the sections concerning volume analysis of Part I, UPU statistical information has been used in order to facilitate inclusion of the Czech Republic to cross country comparisons.
The UPU statistical information suggests that the Czech markets for universal postal services are relatively well developed. In 2001, the number of domestic letter post items per capita was 68, about 30% of the average in the EU-15, but higher than in one current EU member state. The number of domestic letters per 1000 EUR GDP was 11 in 2001 compared to an average of 10 in the EU-15. Therefore it may be argued that the Czech letter market is slightly more developed than those of the EU-15 when the country’s economic potential is taken into account (as a pre-condition for postal market development). With a score of 85%, the ratio between outbound and inbound cross border letter post is relatively balanced indicating that the Czech USP does not receive substantially more letters from abroad than it dispatches. Approx. 8% of all letters delivered by the USP in 2001 originated from abroad. However, WIK is not able to comment on the reliability of the information provided to UPU by Czech Post such that the conclusions should be treated with an appropriate degree of caution. Final report: Main aspects of postal networks in AC/CC 45
Country Report Czech Republic
3.4.2 Non-universal services
3.4.2.1 Express services
This report cannot assess the development of express markets in the Czech Republic in detail since neither the USP nor private operators provided information about their volumes and revenues in this segment.
The USP and the Ministry report intense competition in the express segment – both domestically and cross border. In the market for domestic express services, the USP and the Ministry estimate the USP’s market share to approx. 20% while the USP estimate to serve less than 10% of the market for outbound cross border express services.
It appears that the express market is largely dominated by the major international express companies DHL, FedEx, UPS and TNT joined by a local company called “Messenger” that successfully provides domestic express services.
3.4.2.2 Document exchanges
Neither the NRA nor the USP reported any document exchange activity.
3.4.2.3 Unaddressed items
Competition in delivery of unaddressed items is considered to be intense by the USP. Apart from one major private competitor called “ADM”, there are numerous small enterprises providing such services. However, the USP was able to participate in the growth of this market segment to a substantial extent and reports to have a market share of slightly more than 50%.
3.5 Universal service in practice
3.5.1 Scope of universal service
In conformance with the universal service obligation, the USP provides service to all points in the Czech Republic for all types of letters, direct mail, newspapers, periodicals, and books weighing up to 2 kg and for domestic and cross border parcels weighing up to 15 kg. 46 Final report: Main aspects of postal networks in AC/CC Country Report Czech Republic
In addition, the USP provides universal delivery of mail items for the blind, and postal money orders that are defined as universal postal services under national legislation. The USP offers registration services for all universal service items and insurance for all letters and parcels.
Delivery service and clearance of letter boxes is provided five days per week without geographic exceptions. Information about the time of clearance are placed on all letter boxes.
3.5.2 Reserved services in practice
The reserved area in the Czech Republic includes domestic and outbound cross border letter post within a weight limit of 350g and a price limit of 5 times the standard tariff.
It appears that the reservation is enforced effectively in practice. However, the treatment of direct mail deserves special consideration: As the postal act reserves “delivery of a communication in written form” to the holder of the postal licence (i.e. the USP), but does not specify direct mail, it was reported that there was doubt whether addressed direct mail is to be considered as part of the reserved area. According to the USP, there was some competition in the direct mail segment until 2002 but mostly disappeared after it was widely agreed in this year to interpret the legal reservation as including direct mail.
3.5.3 Access
As summarised in the second section of this report, the Czech USP provides a high level of access to postal services. There are 3.3 postal outlets (offices or agencies) and 24 letter boxes per 10,000 inhabitants. This compares well with the EU-15 averages of 2.4 and 18. With respect to spatial density, the public postal network offers 43.5 postal outlets 308 letter boxes per 1,000 square km, again indicating a higher density of the access network than in the EU-15 on average (28.3 postal outlets / 204 letter boxes).
Postal agencies are not used extensively by the USP; there are only 20 agencies compared to 3,407 post offices. According to the USP, agencies are operated voluntarily (and without compensation) by shop-owners in villages that do not have a post office and only offer a very limited range of services. In addition, the USP operates five mobile post offices in the most rural parts of Southern Moravia and basic postal services (sale of stamps, acceptance of letters and parcels incl. registration and insurance as well as postal money orders) are provided by all motorised delivery personnel in rural areas.
The USP has not established targets for queuing time in post offices. Final report: Main aspects of postal networks in AC/CC 47
Country Report Czech Republic
3.5.4 Tariff and accounting principles
The USP offers a uniform national tariff for the collection and delivery all postal universal postal services. Postal tariffs effective 1 June 2003, are presented in Table 3-2.
The USP keeps separate accounts for reserved services, “basic services” (the equivalent to universal services in Czech legislation; includes postal money orders) and other services. Separation of accounts is evaluated annually by an independent auditor and reported to the Ministry of Informatics. In particular, compliance of the methods used for cost allocation with the requirements of the Acquis Communautaire and of Czech legislation are subject to evaluation by the auditor.
Table 3-2: Postage rates for domestic first class letter services (Czech Republic)
Weight up to Rate (local currency) Rate (Euro) 20g (Standard format) 6.40 0.20 20g 8.00 0.26 50g 10.00 0.32 200g 12.00 0.38 350g 14.00 0.45 500g 16.00 0.51 1000g 20.00 0.64 2000g 25.00 0.80
Source: WIK-Consult
3.5.5 Quality of service
Compared to other USP in the AC and CC countries – but also to current member states – the Czech USP provides a respectable quality of service: Always since 1999, more than 90% of all letters have been delivered within D+1. More detailed results are presented in Part I of this report.
Performance concerning routing time is measured by an independent agency called “RAYSA” and results are published by the USP in its annual report. Moreover, performance results are published in press notes or special reports occasionally.
There are well developed methods employed to measure routing time, but the USPs impressive performance may also be explained by the fact that part of the USP’s top management’s salaries is dependent on the achieved quality of service (bonuses). 48 Final report: Main aspects of postal networks in AC/CC Country Report Czech Republic
3.5.6 Complaint and redress
The USP reports to have established specialised departments to deal with customer complaints on three levels: Districts, regions and in the headquarters. Where the USP cannot satisfactorily resolve customer complaints, decisions may be taken by the Ministry of Informatics or ultimately by competent courts. In solving customer complaints, the Ministry reported a good co-operation with the USP. However, there are no publications on the total number of complaints nor are breakdowns published that summarise complaints by types of resolution. The Ministry of Informatics reported that the total number of customer complaints was approx. 100,000 in the years 2000-2002.
3.6 Regulatory situation
3.6.1 Overview of postal regulation
The basic postal law in the Czech Republic is the Act 29/2000 Coll. of 18 January 2000. This Act entered into force on 1 July 2000. There are two implementing regulations relating to the reserved area (Government Order 112/2000 Coll.) and to universal service (Decree of MTC 28 /2001 Coll.). Moreover, the treatment of state enterprises incl. The USP is considered in Act No. 77/1997 on State Enterprises.
The basic law and the regulations were provided to WIK in English translation while the Act on State Enterprises in not available in any other language but Czech.
3.6.1.1 Regulatory institutions
The institution that is mainly responsible for postal regulation is the Ministry of Informatics (MI). It has been newly created in 2002 (and became operational in 2003) and received responsibility for postal legislation from the former Ministry of Transport and Communications (MTC).
The Ministry’s general responsibilities are related to three domains: E-Government, Unification of Public Information Systems, and Electronic Communications and Postal Services. Within the postal sector, the responsibility of MI include [in the words of the Ministry]: • Regulation of access to the market, • Regulation of quality of services, • Definition of scope of US, Final report: Main aspects of postal networks in AC/CC 49
Country Report Czech Republic
• Regulation of international tariffs, • Responsibilities for postal legislation, • Responsibilities for settlement of complaints as far as basic services (US) are involved, • Responsibilities for the report that verifies the compatibility with the accounting rules for US operators according to Art. 14 of Dir. 97/67/EC, • International activities, • Issue of postage stamps.
Moreover, the Minister of Informatics manages the ownership rights incl. appointing the Director General of the USP, establishing overall financial and performance targets, and deciding on retention of profits or payment of losses incurred by the USP
A department within the MI was reported to have been designated as the national regulatory authority.
Additional competence for postal regulation is within the Ministry of Finance (MF). Most important, the MF is in charge of approving postal tariffs for domestic services.
Apart form the responsibility for price regulation (which is in the MF), all regulatory responsibilities are executed by the Ministry of Informatics – it is thus responsible for postal legislation as well as for implementation and regulation in practice and managing the state’s ownership rights relating to the USP.
With an eye on a potential conflict of interest, the MI reported that it was considered to transform the USP into a joint stock company. At the same time, ownership rights were planned to be transferred to a "National Property Fund" to avoid conflicting interests within MI. However, it appears that these plans to separate regulatory and ownership responsibilities are being discussed for a considerable period already - while still being at a very early stage.13
3.6.1.2 History and philosophy of postal regulation
In 1993, the Czech PTT was split to the telecom incumbent and the postal USP. As a state enterprise, the USP operates profitably and appears to be very well managed.
From 1993 to 2000 (date of introduction of postal act) postal regulation was developed, taking advantage of several PHARE studies and consulting programmes. According to
13 When reviewing the present document, and commenting on the premature status of USP transformation, the Ministry pointed out that "[…] there will be a tendency to implement the transformation by the adhesion to the EU of the Czech Republic." 50 Final report: Main aspects of postal networks in AC/CC Country Report Czech Republic
the MI, the regulatory framework for the postal market was completed in the year 2000 and amended twice since (by implementing decrees in 2001 and 2002). The postal act of 2000 is considered to transpose the Postal Directive.
The Ministry of Informatics describes its main regulatory objectives as follows: “Definition of postal policy, reserved area, supervision of the USP, necessary protection of US at present and in future”. In addition it was stressed that postal services “have to be provided under regulation, but separately from the State and on the self-financing principles”.
In order to comply with the Postal Directive of 2002, the MI reported plans to reduce the extent of the reserved area before accession to the EU.
3.6.2 Universal Service
The basic legal requirements for universal service in the Czech Republic are summarised in Part I of this report. As described above, the USP appears to fulfil these requirements.
In addition to postal services, the basic services decree obliges the USP to deliver literature for the blind and postal money orders as part of the “basic services”.
The postal act does not specifically oblige the Czech USP to provide “basic services” but requires so from “the postal license holder”. Although the law does not rule out that more than one postal licence could be issued, the term “postal licence” is used in singular only and it appears that only the USP qualifies for this license (section 22, postal act).
3.6.3 Reserved services
In § 18 the Postal Act reserves delivery of postal items under a weight limit of 350 g to the holder of the “postal licence”. In addition, the Government Order 112/2000 Coll. defines a price limit of 27 Kč for domestic and 45 Kč for cross border items. The price limits equal five times the current basic tariffs for these services.
However, delivery of inbound cross border mail is not reserved.
As the reservation refers to “communication in written form”, it was reported not be entirely clear whether direct mail has to be considered as a reserved service. According to the Ministry, the reservation does include addressed direct mail. Final report: Main aspects of postal networks in AC/CC 51
Country Report Czech Republic
3.6.4 Regulation of non-reserved services
Under the postal act, non-reserved postal services may only be provided following approval by the Ministry of Informatics (§ 17 (2)). The requirement to seek approval applies to all providers of postal services, irrespective of whether they are universal or non-universal services.
The Ministry’s approval appears to match the characteristics of a general authorisation as defined in the Postal Directive with two possible exceptions: First, § 17 (2) requires applicants for approval to prepare “postal terms” indicating the detailed scope of services that an operator intends to provide. Second, § 17 (3) d) implies an obligation to provide services “to everyone”, i.e. implies an obligation to contract.14
However, the scope of services that effect a need for approval is not identical to the definition of “postal services” used in the Postal Directives. Following from §§ 1 and 3 of the postal act, only providers of “communication in written form” need to be approved. In essence, this means that parcel or express operators do not need to be approved per se; approval is only necessary to deliver parcels or express items that contain “written communication”.
3.6.5 Access
The basic legal requirements for access in the Czech Republic are summarised in section of this report. In defining the access requirements, Decree 28/2001 uses criteria relating to distance and population served.
• For post offices, § 351 requires the USP to ensure that the “distance from any part of the residential district to the postal premises shall not exceed 2 km.”
• For letter boxes, the decree distinguishes between urban and rural areas: In urban areas (district with more than 10,000 inhabitants), there should be one letter box in 750 m reach from every building. In rural areas (districts with more than 1,000 inhabitants) the USP is required to have at least one letter box per 1,000 inhabitants.
However, it appears that supervision of the access requirements may be challenged in practice by two additional provisions: The USP may be exempted from the requirements concerning letter boxes for "peripheral parts with substantially less building density" (§ 351 (4)). Similarly, the obligation for post offices in § 351 (7) does not apply to all
14 However, it was reported that both requirements are not enforced in practice and therefore the conditions for granting approval cannot be regarded as restrictive. 52 Final report: Main aspects of postal networks in AC/CC Country Report Czech Republic
settlements but can be ignored where more distant post offices “are accessible by means of public regular transport or public railway transport”.
There are no special conditions governing network access of private postal operators (work sharing).
3.6.6 Tariff and accounting principles
The postal act does not set out principles for the determination of postal tariffs. Regulation of tariffs for domestic “basic services” is executed by the Ministry of Finance while the Ministry of Informatics periodically determines tariffs for the USP’s cross border services. While no details about the tariff regulation procedures were disclosed by the MI, the Ministry reported prices to be geared to costs. As further reported by the Ministry, tariffs for cross border services are regulated using a price cap formula.
There appears to be no procedure for the regulation of special tariffs the USP offers to bulk mailers and business customers.
With respect to accounting separation, the postal act does not contain but very general requirements (§ 34 (3)):
The postal licence holder shall keep, in a manner prescribed by the Ministry, continuous records of his costs related to the operation of individual basic services. The rules according to which the costs common to more activities of the postal licence holder shall be allocated to individual basic services shall be approved by the Ministry. The postal licence holder shall ensure that the adherence to such rules will be audited every year by a person independent of the postal licence holder and approved by the Ministry. The results of such audit will by published by the Ministry in the Postal Bulletin.
3.6.7 Quality of service
Quality of service targets are set by the Ministry of Informatics by annually by decree. For domestic letters items, the routing time target was 85% D+1 in 1998, and increased by one percent per year until 2003 (90% D+1).
§ 373 of Decree 28/2001 requires the USP to contract an independent agency for the measurement of its routing time. The USP appear to fulfil this requirement; measurement is carried out by an agency called RAYSA. There is no legal requirement Final report: Main aspects of postal networks in AC/CC 53
Country Report Czech Republic that concerns publication of performance results. (Although the USP publishes its performance annually.)
3.6.8 Complaint and redress
The Czech Republic has a relatively opaque procedure for addressing complaints by postal customers. The postal act does not explicitly require the USP to establish a separate office dedicated to the resolution of customer complaints. Although the Ministry reported to act as a final arbiter of customer complaints against the USP, no requirement to do so can be traced from the postal act. There are no requirements concerning the publication of the number and handling of complaints.
3.6.9 National regulatory authority
In the Czech Republic, it may be questioned whether the NRA (i.e. the Ministry’s department) is “legally separate from and operationally independent of” the USP. The NRA is obviously under direct supervision of the Minister of Informatics and does not have a separate budget. The same Minister is responsible for the USP, appoints its Director General and drafts postal legislation.
Country Report
4 EE – Estonia
56 Final report: Main aspects of postal networks in AC/CC Country Report Estonia
ESTONIA – GENERAL FACTS
Economy
GDP in EUR, 2001, (million): 6,200 GDP per capita in EUR, 2001: 4,545
GDP in PPS, 2001 (million): 12,600 GDP per capita in PPS, 2001: 9,240
GDP growth rate, 2001: 5.0% Unemployment rate, 2002: 9%
Population and geography
Population, 2001 (thousands): 1,364 Density (Persons per sq. km): 30
Land area, 2002 (square km): 45,227 Urbanisation (Pop. in urban areas): 69%
Transport and communications infrastructure
Railway network, 1999 (km): 968 Fixed lines per 100 households, 2002: 68
Road infrastructure, 1999 (highway km): 87 Mobile penetration rate, 2002: 58%
International airports, 2003: 1 Internet users penetration, 2002: 39% Source: Eurostat NewCronos; UN World Urbanization Prospects (2001); IBM Monitoring of EU candidate countries, telecommunications sector (2002); www.columbusguide.com.
ESTONIA – POSTAL FACTS
Universal service provider
Name of USP: Eesti Post USP employment, 2002 (persons): 4,344
USP revenue, 2002 (million EUR): 40 USP employment of total workforce: 0.7%
Annual revenue growth (CAGR), 98-02: 5.5%
Volumes and tariffs
Dom. letter post volume, 2002 (million): 68 Dom. letter post per capita, 2002: 50.0
Cross border LP: OCB/ICB ratio, 2002: 69% Domestic parcels per capita, 2002: 1.60
Cross border LP: ICB/Dom ratio 2002: 10% Basic letter tariff, June 2003: 0.28€
Postal network (access)
Postal outlets, 2002: 538 Letter boxes, 2002: 3,680
Outlets per 10,000 inhabitants: 3.9 Letter boxes per 10,000 inhabitants: 27.0
Outlets per 1,000 sq. km: 11.9 Letter boxes per 1,000 sq. km: 81.4 Source: WIK-Consult
Final report: Main aspects of postal networks in AC/CC 57
Country Report Estonia
4.1 Basic country information
Estonia is the smallest and most northerly of the three Baltic states. Tallinn, Estonia's capital city, is about 80 km south of Helsinki, across the Gulf of Finland. Sweden is Estonia's western neighbour across the Baltic. Russia lies to the east, Latvia to the south. The country is mostly flat, with many lakes and islands although in the south there are rolling hills. Much of the land is farmed or forested, with industrial production concentrated around Tallinn and in the Northeast. Estonia has a climate of icy, snowy winters and long light summers. In area, Estonia is about the same size as the Netherlands. It is sparsely populated with around 1.4m people or 30 persons per square kilometre.
Economically, Estonia is described by the IMF as "an outstanding performer among the transition economies", with continued commitment to market based reforms and a commitment to transparency. Estonia’s per capita GDP is EUR 9,240, a bit below the average for adhesion countries as a group and about 40 percent of the average for the EU-15. Nonetheless, Estonia is the leading country for internet connections per capita among the associate members of the European Union (with 64.7 internet hosts per 1000 persons in 2002). In August 2002 it ranked ahead of many EU Member States, including the UK, Germany, Belgium and France. The Government has led the way to E-Estonia, changing its cabinet meetings to paperless sessions using a web-based system in March 2000.
4.2 Overview of postal market
Based on available information, WIK estimates the total market for domestic and outbound postal services in Estonia to be about 32 million EUR. This estimate must be considered as very approximate. 58 Final report: Main aspects of postal networks in AC/CC Country Report Estonia
Table 4-1: Estimated market 2002 (Estonia)
USP USP WIK Market Market Rev Vol Est Rev Vol 2002 2002 USP 2002 2002 EUR 000 pieces 000 share EUR 000 pieces 000 Letter, domestic 11,289 53,360 90% 12,544 59,289 Letter, OCB 2,955 4,522 100% 2,955 4,522 Direct mail and printed matter, domestic 2,388 14,802 75% 3,184 19,736 Direct mail and printed matter, OCB Total letter post 16,632 72,684 18,683 83.547 Parcels, domestic 5,187 2,183 60% 8,645 3,638 Parcels, OCB 478 29 100% 478 29 Total parcels 5,665 2,212 9,123 3.667 Express, domestic na na 50% na na Express, OCB 160 5 10% 1,601 48 Total express 160 5 1,601 48 Unaddressed mail, domestic 1,311 73,859 60% 2,185 123,098 Total, all domestic and OCB 23,768 148,760 31,592 210,361
Source: WIK-Consult
This estimate of the size of the postal market has been developed using the following information. There appear to be no surveys of the total market for postal services in Estonia. The USP has provided credible volume and revenue data for most market segments, but the USP and NRA differ substantially on assessments of the degree of competition. The USP reports “intense” and “substantial” competition in the important domestic letter and domestic parcel markets. Generally, the USP maintains, “We do have competition almost in every segment of the postal services.” Yet, in the key domestic letter and parcel markets, the NRA reports “no competition”. Moreover, the credibility of the USP’s estimates is diminished by the USP’s failure to provide information about market share or a significant number of competitors. CPOs did not provide estimates for any postal markets in Estonia.
In light of this insubstantial and conflicting evidence, WIK has estimated the USP’s market share in postal markets as shown in Table 4-1. These estimates take into account the principle that an evaluation of the intensity of competition in a given market is likely to reflect historical expectations. For example, in the letter market where the USP has historically enjoyed a monopoly, it may consider a loss of 30 percent of the market to signify “intense” competition. In the outbound express market, traditionally dominated by international private express companies, a USP assessment of “intense” competition probably reflects a market share of less than 20 percent. Taking such factors into account, the inconsistent assessments of the NRA and USP and the absence of detailed market share estimates, the estimates provided in Table 4-1 must be considered as no more than a best guess. Final report: Main aspects of postal networks in AC/CC 59
Country Report Estonia
The major player in the Estonian postal services market is the USP. In the domestic parcel and express markets, major private competitors include Sularahakeskus (with market share of perhaps 25 percent), D2D, and Cargobus. The cross border express market is dominated by the international companies DHL, Federal Express, TPG, and UPS, joined by a company called Bizpak (a Sweden Post subsidiary).
4.3 Market players
4.3.1 Universal service provider
4.3.1.1 Legal status and subsidiaries
The USP is Eesti Post, Ltd., a limited liability company organised under normal company law. All shares are owned by government. The board of the USP appoints the managing director. A Council of officials appointed by the government supervises the activities of the USP including the setting of financial targets. The Council is composed of six members, two from the Ministry of Economic Affairs and Communications, two from the Ministry of Finance, and two other persons.
The USP receives some financial support from the government and in turn repays to the government a portion of annual profits at the end of the year. Financial support is provided in the form of a subsidy for the delivery of newspapers and periodicals in rural areas. However, the relationship between this compensation and the cost of delivery is not known. At the end of the year, the USP must pay the government a share of the profits. The NRA estimates the share of profits paid to the government to be 30 percent; the USP estimates the share to be 70 percent.
The USP is exempt from the payment of VAT in respect to the provision of universal services. In addition, no VAT is paid on services such as the distribution of state pensions and other benefits. Until April 2003, the USP was entirely exempt from VAT.
The USP participates in a joint venture with Finland Post called ElectronPost, a company providing hybrid mail and other printing services. The USP owns 51 percent of ElectronPost.
4.3.1.2 Service portfolio
The USP in Estonia offers several services outside the range of universal service. Non- universal postal services include hybrid mail; designated products for direct mailers, and express products. The USP is a major supplier of delivery services for unaddressed direct mail, newspapers, and periodicals, including virtually all rural newspapers. In addition, the USP provides non-postal services including logistic services, postal 60 Final report: Main aspects of postal networks in AC/CC Country Report Estonia
banking services in co-operation with a local commercial bank, and the sale of insurance products. Postal counters sell retail of stationary, industrial commodities, food, lottery tickets, telephone cards, packing materials, newspapers, and magazines.
4.3.1.3 Postal infrastructure and automation
The USP appears to make appropriate use of technology and automation. There is one central sorting facility in Tallinn. About 50 percent of mail is sorted automatically using a machine that reads codes applied to the mail. In 2003, the USP is planning to upgrade to a sorting machine that will not require precoding of mail. The USP has installed about 1,200 personal computers for counter services and book keeping. The average age of vehicles is 6.5 years.
4.3.1.4 Employment
The USP has a workforce of 4,344 persons (4,165 full time equivalents). None are civil servants. About 22 percent of employees are part timers. The USP has described its employment policy in the following terms:
To create a business with a working environment/culture which is able to meet its customers´ needs fully resourced with a flexible, stable, committed and productive workforce which responds positively to change, challenge and improvement. Essential elements of this objective are that the business has: an effective management which values, listens and responds to its employees; an increased ability and capacity to manage and implement change; a management/union relationship which enhances and contributes to improvement and development; [and] a workforce that is motivated, enterprising and committed to business success. We employ part-time personnel for years and will continue this policy.
4.3.2 Private operators
At the beginning of 2003, 21 companies had registered with the NRA as postal service providers: DHL International Eesti Ltd (DHL), Baltic Logistic System Eesti Ltd (Bizpak), Sularahakeskus Ltd (Falck), Rattakuller Llc, D2D Llc, Eesti Post Ltd, TNT Express Worldwide Eesti Ltd (TNT), P. Dussmann Eesti Llc, K Grupp Turvateenused Llc, Securitas Eesti Ltd, EKLT Llc (UPS), Falck Ida-Eesti Ltd, Pankrand Llc, Falck Lääne- Eesti Ltd, Rippon Valve Llc, Aivar Paat-A-Kuller, MI Kuller Llc, Kirilind Llc, Lex System Llc (FedEx), Express Post Ltd and Kirikuller FFW Llc.
A study of the activities of postal operators was reportedly prepared in 2002 but is unavailable in translation.
Private operators have provided no information about their services in Estonia. Final report: Main aspects of postal networks in AC/CC 61
Country Report Estonia
4.4 Market development
4.4.1 Universal services – letter post and parcels
Table 4-2 presents a summary of the volumes of postal items carried in the universal services from 1998 to 2002. All figures reflect postal items carried by the USP. The private operators have submitted no data.
Table 4-2: USP volumes of universal and non-universal services (Estonia)
5-yr 1998 1999 2000 2001 2002 change Universal services Letter post LP Domestic Pcs-000 43,883 56,160 56,794 60,413 68,162 55% Letters Pcs-000 43,883 42,143 43,482 46,092 53.360 Direct mail Pcs-000 0 13,339 12,978 12,677 12.790 Other printed matter Pcs-000 0 677 334 1,644 2.013 LP per capita Pcs-000 44 50 LP per EUR 1000 GDP 10 11 LP Outbound cross border Pcs-000 5,610 5,146 4,983 4,586 4,522 -19% Outbound/inbound 78% 73% 69% 66% 69% LP Inbound cross border Pcs-000 7,171 7,096 7,259 6,905 6,581 -8% LP ICB/LP Domestic 16% 13% 13% 11% 10% Parcels Parcels, Domestic Pcs-000 1,958 1,647 1,294 1,861 2,183 11% Parcels, Outbound cross border Pcs-000 0 431 475 489 478 Non-universal services Express Outbound cross border Pcs-000 0 50 52 118 160 Unaddressed mail Pcs-000 0 0 0 54,771 73,859 The USP submitted no data on domestic express services. Domestic LP per cap and per EUR 1000 GDP for 2002 figures use 2001 population and GDP as bases, respectively.
Source: WIK-Consult
The universal services market in Estonia appears to be progressing well. Overall letter post volume has grown by a substantial 55 percent in the five years ending 2002. The number of domestic letter post items per cap was about 50 in 2002, about 21% the average in the EU-15. The number of letters per EUR 1000 in GDP was approximately 11, compared to an average of 10 in the EU-15. In 2002 only about 10 percent of all letter post delivered by the USP (i.e., domestic and inbound cross border) originated from abroad. As a result, the USP is not heavily dependent on the vagaries of terminal dues and foreign postal services. Domestic parcel traffic grew by 11 percent in the same period, a less impressive but still positive result. This figure may significantly understate the growth in parcel volumes due the absence of data for private operators. 62 Final report: Main aspects of postal networks in AC/CC Country Report Estonia
In comparison to other USPs in this survey, the USP in Estonia provided a good level of detail about the volumes and revenues associated with different postal services. Based upon internal evidence (e.g., year to year variability, comparison of average revenue to stamp prices, relation of cross border volumes to weights), this information appears to be generally reliable. Nonetheless, there are some inconsistencies in the data submitted which suggest the possibility of improvement in data collection.
4.4.2 Non-universal services
4.4.2.1 Express services
In the domestic express market, the USP reports intense competition, citing a company called D2D as its main competitor. The NRA estimates that the USP has a 50 percent share of the domestic express market, citing Sularahakeskus as the major private operator. The USP gave no estimate of market share.
In the international express market, the USP reports intense competition, citing Bizpak in addition to the four major global express companies (DHL, TPG, FedEx, UPS). The NRA estimates that the USP’s market share in the international express sector is about 8 percent. The USP gave no estimate of market share.
4.4.2.2 Document exchanges
Neither the NRA nor the USP reported any document exchange activity.
4.4.2.3 Unaddressed items
The USP reports substantial competition in the unaddressed mail market, estimating its market share at 50 to 70 percent. As noted above, the USP has greatly increased its participation in this market in the last few years. Revenues from unaddressed mail grew 94 percent from 1998 through 2002.
4.5 Universal service in practice
4.5.1 Scope of universal service
In conformance with the universal service obligation, the USP provides service to all points in Estonia for all types of letters, direct mail, newspapers, periodicals, and books weighing up to 2 kg and for domestic parcels weighing up to 10 kg. The USP does not, Final report: Main aspects of postal networks in AC/CC 63
Country Report Estonia however, deliver parcels to the home unless the resident pays an extra fee; otherwise, addressees must pick up their parcels at the post office.
In addition, the USP provides universal delivery for heavy-weight mail for the blind (up to 7 kg), books (up to 3 kg) and parcels (up to 31.5 kg). The USP offers registration services for all universal service items and insurance for all letters and parcels.
Delivery service is provided six days per week with the exception of some islands that do not receive daily ferry service. The USP offers up to twice daily delivery in some urban locations because of fierce competition in newspaper delivery. The USP clears all collection boxes six days per week.
4.5.2 Reserved services in practice
There are no reserved services in Estonia.
4.5.3 Access
As summarised in the second section of this report, the USP in Estonia provides a high level of access to postal services. Estonia has 3.9 post outlets (offices or agencies) and 27 letter boxes per 10,000 inhabitants. This compares well with the EU-15 averages of 2.4 and 18. A relatively high percentage of postal outlets are agencies (21 percent). In order to save costs, the USP plans a small reduction in postal outlets in the future.
The UPS has not established targets for queuing time.
4.5.4 Tariff and accounting principles
The USP provides a uniform national rate for the collection and delivery of all postal items conveyed in the universal service throughout the national territory. The USP does, however, charge extra fee for home delivery for parcels. The last change in postal rates was in August 2000.
The USP does not maintain separate accounts for reserved, non-reserved universal, and non universal services. A new accounting system that will do so is scheduled to be introduced in 2003.
Table 4-3 presents the postage rates for first class letter services effective on June 1, 2003, in local currency and Euros. 64 Final report: Main aspects of postal networks in AC/CC Country Report Estonia
Table 4-3: Postage rates for domestic first class letter services (Estonia)
Weight up to Rate (local currency) Rate (Euro) 20g 4.40 0.28 50g 4.70 0.30 100g 5.30 0.34 250g 7.10 0.45 500g 10.50 0.67 1000g 17.60 1.13 2000g 32.00 2.05
Source: WIK-Consult
4.5.5 Quality of service
The USP does not yet satisfy several norms in respect to quality of service. The USP does not establish and publish quality of service targets. No independent monitoring of quality of service performance is provided. The USP does, however, publish quality of service performance data annually. The first report was apparently produced in 2002, the first year for which such data is available. The NRA does not consider the absence of targets or independent monitoring to be a problem due to satisfactory transit times.15
Internally, the USP has set a goal of delivering 90 percent of mail in urban areas in D+1 delivery and 90 percent of rural mail in D+2. In 2002, the USP reports that 92.7 percent of mail was delivered in D+1.
4.5.6 Complaint and redress
The USP reports that it established a separate office to deal with customer complaints in 2002. However, there are no data, published or unpublished, on the number, nature, or resolution of complaints. In principle, the USP’s handling of a complaint may be appealed to the Consumer Protection Board of Estonia. The NRA reports that there were only two complaints in 2002 and has no detailed information.
15 The NRA generally did not respond to these issues in much detail. Final report: Main aspects of postal networks in AC/CC 65
Country Report Estonia
4.6 Regulatory situation
4.6.1 Overview of postal regulation
4.6.1.1 Postal legislation
The Postal Act of June 13, 2001 entered into force on January 1, 2002. There are 10 implementing regulations relating to universal service, accounting, licenses, etc. The law and all regulations are available from the internet in English translation.
4.6.1.2 Regulatory institutions
The ministry responsible for postal affairs is the Ministry of Economic Affairs and Communications. The ministry exercises supervisory control over the NRA and issues regulations which address (in the words of the ministry):
1) the requirements for registered items and insured items, and also for the forwarding of registered items and insured items. Postal Act § 2 sub (11), 2) to establish the standard format for a notice of commencement of activities. Postal Act § 5 sub (4), 3) to establish the form of licences, applications for licences and applications for extension of licences. Postal Act § 9 sub (4), 4) to establish requirements for performance of the obligations on separation of accounts by providers of universal postal services. Postal Act § 22 sub (3), 5) to establish the list of items the forwarding of which by post is prohibited. Postal Act § 23 sub (7), 6) to establish the procedure for the registration, use and destruction of identification stamps. Postal Act § 27 sub (6), 7) to establish the requirements for and procedure of retention, sale and destruction of postal items not forwarded due to being undeliverable. Postal Act § 29 sub (5), 8) to establish the procedure for the opening of postal items. Postal Act § 31 sub (6). 66 Final report: Main aspects of postal networks in AC/CC Country Report Estonia
The ministry thus exercises a substantial regulatory role.
The NRA is the Sideamet (Estonian National Communications Board). The NRA regulates both the telecommunications and postal sectors. In the postal sector the NRA takes care of “registration of companies providing postal services and issuing operating licences for universal postal service and performing surveillance”. The NRA also handles supervision of postal tariffs, ensuring that the accounts of USP(s) meet the accounting requirements of the Postal Directive, prevention of anti-competitive activities in the postal sector, monitoring development of the postal services sector, and final decision in respect to customer complaints about the provision of universal postal service. The USP is responsible for monitoring of the quality of universal postal service. The USP and NRA are jointly responsible for ensuring that access to the universal postal service meets the requirements of the Postal Directive.
4.6.1.3 History and philosophy of postal regulation
The legal framework for postal services in Estonia has only been established recently. The first significant national law regulating postal and telecommunications services was the Communications Act of 1991. Estonia was readmitted to the UPU in 1992. The USP was established as a limited liability company in 1997. The Postal Act of 2001 is considered to transpose the Postal Directive. There exists no formal statement of the goals of postal regulation.
The government is considering amendment of the 2001 postal law. The amendments will likely establish clearer definitions and rules for express and direct mail services. In the view of the ministry, “We see universal service regulation and obligation as necessary because of huge differences between urban and rural areas (volumes of mail, density of population etc.) which cause commercial activity only in profitable urban areas.”16
4.6.2 Universal Service
The basic legal requirements for universal service in Estonia are summarised in section of this report. As described above, the USP appears to fulfil these requirements.
The obligation to provide universal service is legally vested in all operators holding a postal license, not in a single “universal service provider” designated by statute. However, as described below, only the incumbent USP appears to qualify for a license.
16 Quotation edited slightly. Final report: Main aspects of postal networks in AC/CC 67
Country Report Estonia
4.6.3 Reserved services
No postal services are formally reserved in Estonia. Nonetheless, the postal law effectively creates an exclusive license over the entire range of universal services by prohibiting any person from providing universal service without a license and attaching conditions to the license that can be met only by the incumbent USP. Under the terms of the licensing regime, a prospective new entrant must, for example, provide universal service throughout the entire national territory five days per week at uniform rates. The only services not covered by this de facto exclusive license are services considered outside the scope of universal service.
4.6.4 Regulation of non-reserved services
Under the postal law, delivery services for “postal items” as that term is used in the Postal Directive require either a license, a general authorisation, or no authorisation at all, depending on the type of services provided.
A license is required for the carriage of domestic parcels weighing more than 10 kg.17 The license is issued by the NRA. Although the terms and obligations associated with a parcel license are not entirely clear from the law, the license appears to qualify as an “individual license” rather than a “general authorisation” under the terms of the Postal Directive. 18
Providers of “postal services” that fall outside the scope of universal service and the ambit of the heavy-parcel license must comply with the terms of a notification procedure that appears to qualify as a “general authorisation” under the terms of the Postal Directive.19 The only significant type of postal service that falls in this category appears to be express services. Express service is defined unclearly in the act based on the possibility of the customer to redirect delivery after dispatch. 20 As a result, private operators who direct mail have equipped their carriers with cell phones and claimed the status of express services. The government is planning to amend the law in 2003 to clarify the status of direct mail services.
Private delivery of newspapers, periodicals, and unaddressed mail do not require any authorisation because such services are not considered “postal services”.21
17 Postal act §7. A license is also required for “performance of cash transfers and payment of state pensions, benefits and support pursuant to the procedure provided by law by means of post”. 18 Post act §§ 9-15. 19 Post act §5. 20 Post act § 2. Express service is defined as “the forwarding of addressed items by courier with the aim of expeditious and reliable delivery of the item, whereas the sender has the possibility to obtain information concerning the location of the postal item at any time during the journey of the item, to intervene in the delivery of the postal item and also to re-organise the forwarding of the item as necessary”. 21 Post act §2(5) and (6). 68 Final report: Main aspects of postal networks in AC/CC Country Report Estonia
4.6.5 Access
The basic legal requirements for access in Estonia are summarised in section of this report. As described above, the USP appears to fulfil these requirements.
4.6.6 Tariff and accounting principles
The post act appears to require that charges for universal postal services shall be based on efficient costs and uniform throughout the national territory. Proposals changes in rates must be notified to the NRA which may issue reject the changes. The NRA has not had occasion to review a general rate proposal to date.22
The post act and regulations further require that the UPS keep separate accounts universal and non-universal services and to allocate costs in an appropriate and reasonable manner. This requirement has not yet been fully implemented.23
4.6.7 Quality of service
In 2002, the minister adopted routing time requirements for the first time, over the objection of the USP. Regulation 419 requires that 90 percent of urban mail be delivered by D+1 and that 90 of rural mail be delivered by D+2.24
The post act requires the NRA to provide an independent evaluation of the quality of service in an annual report. There is, however, no requirement that this evaluation shall be published.25
4.6.8 Complaint and redress
Estonia has a relatively opaque procedure for addressing complaints by postal customers. The post act does not require the USP to establish a separate office dedicated to the resolution of customer complaints. The NRA acts are the final arbiter of customer complaints against the USP. Nor does the law require publication of the number and handling of complaints.26
22 Post act §§ 19-20. 23 Post act § 22; Regulation 97. 24 Regulation 419 § 4 (2001). 25 Post act § 38. 26 Post act §36. Final report: Main aspects of postal networks in AC/CC 69
Country Report Estonia
4.6.9 National regulatory authority
In Estonia, it may be questioned whether the NRA is “legally separate from and operationally independent of” the USP. The minister appoints the head of the NRA, who serves at the pleasure of the minister. The minister also approves the budget of the NRA. At the time, as noted above, the minister is responsible for appointing a Council that supervises key aspects of the USP’s operations and issues regulations defining the key aspects of universal service and licensing. It thus appears that the minister exercises substantial control over both the NRA and the USP. On the other hand, it appears that only the court, not the minister, is formally authorised to decide an appeal from the decision of the NRA. This procedure should give the NRA a measure of independence.
Country Report
5 HU – Hungary
72 Final report: Main aspects of postal networks in AC/CC Country Report Hungary
HUNGARY – GENERAL FACTS
Economy
GDP in EUR, 2001, (million): 57,800 GDP per capita in EUR, 2001: 5,673
GDP in PPS, 2001 (million): 124,600 GDP per capita in PPS, 2001: 12,250
GDP growth rate, 2001: 3.7% Unemployment rate, 2002: 6%
Population and geography
Population, 2001 (thousands): 10,188 Density (Persons per sq. km): 110
Land area, 2002 (square km): 93,030 Urbanisation (Pop. in urban areas): 65%
Transport and communications infrastructure
Railway network, 1999 (km): 7,642 Fixed lines per 100 households, 2002: 76
Road infrastructure, 1999 (highway km): 448 Mobile penetration rate, 2002: 57%
International airports, 2003: 1 Internet users penetration, 2002: 16% Source: Eurostat NewCronos; UN World Urbanization Prospects (2001); IBM Monitoring of EU candidate countries, telecommunications sector (2002); www.columbusguide.com.
HUNGARY – POSTAL FACTS
Universal service provider
Name of USP: Magyar Posta USP employment, 2002 (persons): 43,667
USP revenue, 2002 (million EUR): 542 USP employment of total workforce: 1.1%
Annual revenue growth (CAGR), 98-02: 12.2%
Volumes and tariffs
Dom. letter post volume, 2002 (million): 888 Dom. letter post per capita, 2002: 87.2
Cross border LP: OCB/ICB ratio, 2002: 93% Domestic parcels per capita, 2002: 1.03
Cross border LP: ICB/Dom ratio 2002: 2% Basic letter tariff, June 2003: 0.16€
Postal network (access)
Postal outlets, 2002: 3,270 Letter boxes, 2002: 16,751
Outlets per 10,000 inhabitants: 3.2 Letter boxes per 10,000 inhabitants: 16.4
Outlets per 1,000 sq. km: 35.1 Letter boxes per 1,000 sq. km: 180.1 Source: WIK-Consult
Final report: Main aspects of postal networks in AC/CC 73
Country Report Hungary
5.1 Basic country information
Hungary is a landlocked country in Central Europe, bounded by Slovakia; Ukraine; Romania; Serbia, Croatia, Slovenia; and Austria. Hungary is predominantly flat but there are Highlands along the northern border of the country; the highest peak lies in the Matra Mountains. Lake Balaton is the biggest sweet-water lake in Europe. Hungary’s population is slightly above 10 million and the country is densely populated with 110 inhabitants per square km. The capital Budapest is the largest city by far with 1.8 million inhabitants and is the cultural, economic, and industrial centre of Hungary.
Since 1997, economic growth has been impressive, with the Hungarian economy recording growth rates around 4 % a year even during the recent worldwide economic slowdown since 2001. GDP growth at 5.2 % in 2000 was the highest since transition, mainly pushed by export growth rates of over 20%. Inflation had remained high around the 10 % mark until mid 2001, but finally started to decline, to a year-on-year rate of 4.5% in February 2002. Nominal GDP per head was 5,673 EUR in 2001, but 12,250 in PPS, thus ranking fifth (behind Cyprus, Slovenia, Czech Republic and Malta) in all adhesion countries. Hungary’s telecommunications markets are well developed in general with 76 fixed lines per 100 households (Avg. EU-15: 110) and 57% mobile penetration (Avg. EU-15: 73%) while internet usage is relatively low, 16% of Hungarians use the internet.
Apart from its geographic position in the heart of central Europe, Hungary’s size and economic strength make it one of the most important adhesion countries; accounting for 14% of total GDP and population and 13% of total land area of all 10 ACs.
5.2 Overview of postal market
Based on available information, WIK estimates the total market for domestic and outbound postal services in Hungary to be about EUR 385 million in 2002. The most important segment is letter post with approx. 240 million EUR; parcel and express segments are estimated to account for 120 million EUR. Delivery of unaddressed items created revenues of 25 million EUR.
This estimate of the size of the postal market has been developed using the following information. The USP provided credible volume and revenue data broken down by market segments. Private operators did not provide information in response to WIK questionnaires. USP and NRA provided assessment of the degree of competition and estimated the USP’s market share. Both sources agree stating that there is emerging, but still little competition in the letter segment. Moreover, the assessments are close to identical for the international express market, where the USP apparently holds a very little share of the market. 74 Final report: Main aspects of postal networks in AC/CC Country Report Hungary
Table 5-1: Estimated market 2002 (Hungary)
USP USP WIK Market Market Rev Vol Est Rev Vol
2002 2002 USP 2002 2002 EUR 000 pieces 000 share EUR 000 pieces 000 Letter, domestic 176,124 756,766 95% 185,394 796,596 Letter, OCB 14,780 16,337 95% 15,558 17,197 Direct mail and printed matter, domestic 37,103 131,242 95% 39,056 138,149 Direct mail and printed matter, OCB 830 227 95% 874 239 Total letter post 228,837 904,573 240,882 952,182 Parcels, domestic 28,968 10,460 40% 72,419 26,150 Parcels, OCB 2,060 51 30% 6,867 171 Total parcels 31,028 10,511 79,286 26,321 Express, domestic 2,190 314 30% 7,300 1,048 Express, OCB 1,669 40 5% 33,372 792 Total express 3,859 354 40,672 1,840 Unaddressed mail, domestic 4,978 345,247 20% 24,892 1,726,234 Total, all domestic and OCB 268,702 1,261,146 385,732 2,708,115
Source: WIK-Consult
By contrast, USP and NRA differ substantially on assessments of the degree of competition in domestic parcel and express segments as well as for cross border parcels and unaddressed items. WIK has sought to use estimates that are compatible with both sources to the greatest extent possible. However, as this information on market shares was not backed by extensive market monitoring, the estimates for the size of the parcel and express and the unaddressed segments should be considered as rather approximate.
It should not surprise that the estimate for the total postal market is less than the USP’s total revenues from all services (approx. 540 million EUR) as the USP’s non-postal operations are quite important in terms of revenue, e.g. in financial services.
The USP is the major player of the Hungarian postal market. For letters and direct mail, no competitors were named it was reported that some, mostly small local companies entered these markets; in particular following the reduction of the reserved area to 350g. As well, the USP reported some incidents of illegal competition in the reserved area.
It appears that there is very substantial competition in the domestic parcel and express markets, most intense in Budapest. There are various types of competitors that either compete on prices (mostly national companies) or on quality by providing value added express services. Apart from the USP and the major international companies DHL, Final report: Main aspects of postal networks in AC/CC 75
Country Report Hungary
UPS, FedEx, and TNT, the most important players are General Logistics System (A Royal Mail subsidiary), Der Kurier, Pegasus, and Royal Express.
The cross border express market is largely dominated by the international companies DHL, Federal Express, TNT, and UPS. The most important competitors in delivery of unaddressed items are companies called “DM Hungary” and “Feibra” as well as several student work agencies.
5.3 Market players
5.3.1 Universal service provider
5.3.1.1 Legal status and subsidiaries
The Hungarian Post Office Limited is a Public Limited company and is entirely owned by the state. The USP is organised under normal company law.
The Director General of the USP is appointed by the Hungarian Privatisation and State Holding Company, the organisation that is in charge of managing the State’s ownership rights. The Privatisation and State Holding Company is subordinated to the Ministry of Finance. Previously, the Minister for Transport and Communication had been responsible for the Post Office but ownership rights have been transferred to the State Holding Company in order to avoid conflicting interests between postal regulation and responsibilities for postal operations.
The USP enjoys regular subsidies from the government for investments in postal infrastructure. For all years since 1998, these subsidies have been significantly less than 1% of the USP’s revenues. The Ministry of Informatics reports that the USP had claimed further compensation but these have been rejected. However, for the amounts of subsidies different figures are reported by the NRA on the one hand and the USP on the other. According to the USP, an explanation might be that not the entire amount that had been allocated to the USP out of the State budget initially was really transferred.
Moreover there are financial transfers that are related to the provision of services for the government. The NRA states that those services, e.g. payment of pensions are not exclusively performed by the USP but also by banks. The charges and conditions for providing those services are reported to be non-discriminatory; same conditions apply to private companies as the USP.
The USP is exempt from the payment of VAT in respect to the provision of “postal services” including financial services. By contrast, revenues from other services are 76 Final report: Main aspects of postal networks in AC/CC Country Report Hungary
subject to VAT. The USP reports to charge VAT for approx. 20% of its total revenues. Currently the issue of VAT exemption in debated between the USP and the Government and it appears that the USP is in favour of abolishing the current exemption. The underlying reasons include the issue of high transaction costs for separating those services that are subject to VAT and those who are not.
The USP does not have any subsidiaries that provide postal services.
5.3.1.2 Service portfolio
Within the area of universal services, the USP in Hungary offers letters and parcels; registration and insurance for postal items. Home delivery of parcels is a standard service in general but addressees in rural areas have to collect parcels from the post office (all people living outside 260 major cities).27 While currently the letter categories are content based (e.g. letter versus printed matter), the USP intends to introduce product categories of priority and non-priority in the near future.
The USP provides several services outside the range of universal service. Non- universal postal services include hybrid mail and express products incl. domestic EMS, domestic express products offered to business customers, cross border EMS. The USP reports to be currently negotiating a co-operation with an international express company concerning cross-selling of outbound cross-border services.
Moreover, the services portfolio includes delivery of unaddressed advertisements, and various services related to postal services such as philatelic products and database marketing. The USP does not hold a banking licence but offer a wide variety of financial services such as money orders, express money orders, cash on delivery, pension payments, and cash withdrawals for clients of commercial banks.
Postal counters sell various product, e.g. stationary, books, telephone cards, lottery and betting tickets, as well as newspapers and periodicals. In addition, post offices in rural areas sell a huge number of commodities such as tobacco, coffee, food, chemicals, toys and regional souvenirs in tourist areas.
5.3.1.3 Postal infrastructure and automation
In general, it appears that the Hungarian USP does not make extensive use of technology and automation so far but is well aware of its future potential. The USP uses one automated sorting machine in Budapest but construction of a new automated
27 The NRA’s arbitration committee exempted the USP from the obligation to deliver parcels to the home in rural areas. This exemption is limited until January 2004. Final report: Main aspects of postal networks in AC/CC 77
Country Report Hungary logistics centre is ongoing. Approx. 15% of mail is handled by machines. Today, mail passes through 58 sorting centres, and the USP reports inefficiencies in its production process. Against this background, a re-structuring of the network is planned that will introduce one central transportation hub near Budapest and a reduced number of sorting centres (18-30). It is expected that this re-structuring will create the opportunity to further automate the sorting process due to strengthened economies of scale and will furthermore increase quality of service. Sorting to delivery sequence is currently performed in more than 2700 locations, virtually in all post offices (excl. postal agencies). To increase process efficiency, the USP reports to consider centralising part of the sequence sorting activities in fewer locations in the medium term.
For national transportation, mostly lorries are used while there are still some rail transports. There is no motorised delivery except for express items. The average age of vehicles is 5.6 years indicating a relatively modern fleet in comparison to other AC/CC. Both back office and front office activities are supported by computers in the overwhelming majority of post offices. Automated track and trace systems have not been introduced by the USP.
5.3.1.4 Employment
Total workforce of the USP was 41,093 FTE (43,667 persons) in 2002. Since 1998, employment has remained relatively stable. There are no civil servants employed by the USP. During peak seasons and holiday periods, non-permanent staff is used to some extent; approx. 1% of all employees are non-permanent. The share of part-timers in total employment is 17.5% as of persons employed and 12.2% measured in FTE.
5.3.2 Private operators
At the beginning of 2003, 26 companies incl. the USP had registered with the NRA as postal service providers All of these companies are registered to provide either “courier” of “express” services, except for the USP being registered for substantially more service categories. A list of registered companies provided by the NRA includes, apart from some natural persons holding a licence the following: BYREX Belföldi Futár Express, Csepel Müvek Közszolgáltató, DHL, GLS General Logisticy Systems, HANDY-MAN Szolgáltató, Kovács Futár Szolgáltató, Másik Futárszolgálat, Hajtás Pajtás Aeroflotta, MOTOREXPRESS, Orient 21 Futárszolgálati és Kereskedelmi, PENTASYS Hzámitastechnikai, Royal Express, Royal-Sprint, Runner, Sprinter, Bento, Courier- FEFU, Imperial Express, PATAKI és Társa Szolgáltató és Kereskedelmi, and Redda- Motor. 78 Final report: Main aspects of postal networks in AC/CC Country Report Hungary
From statements of the NRA and USP it appears that the most important operators are
• For domestic parcel and express: Danzas, DHL, FedEx, GLS, Royal Express, UPS, and TNT.
• For outbound cross border parcel and express: Der Kurier, DHL, FedEx, General Parcel, Pegasus, UPS, and TNT.
• For unaddressed items: DM Hungary, Feibra, and several student work agencies.
Private operators in Hungary provided no information about their services to this survey.
5.4 Market development
5.4.1 Universal services – letter post and parcels
Table 5-2 presents a summary of volumes of selected postal items carried in Hungary from 1998 to 2002. All figures reflect postal items carried by the USP. The private operators have submitted no data. For some breakdowns, no time series are available as the USP introduced the necessary reporting systems later than 1998. Final report: Main aspects of postal networks in AC/CC 79
Country Report Hungary
Table 5-2: USP volumes of universal and non-universal services (Hungary)
5-yr 1998 1999 2000 2001 2002 change Universal services Letter post LP Domestic Pcs-000 533,411 757,763 784,439 850,118 888,008 66% Letters Pcs-000 421,346 602,046 642,366 707,286 756,766 80% Printed matter & small packets Pcs-000 112,066 155,717 142,073 142,832 131,242 17% Direct mail Pcs-000 0 0 0 0 11,236 Other letter post Pcs-000 0 155,717 142,073 142,832 120,006 LP per capita Pcs-000 52.7 75.3 78.3 83.4 87.2 LP per EUR 1000 GDP 12.7 16.8 15.5 14.7 15.4 LP Outbound cross border Pcs-000 20,653 20,879 19,372 18,909 16,564 -20% Outbound/inbound 85% 83% 82% 75% 93% LP Inbound cross border Pcs-000 24,287 25,184 23,575 25,253 17,890 -26% LP ICB/LP Domestic 5% 3% 3% 3% 2% Parcels Domestic Pcs-000 10,563 10,253 10,569 10,456 10,460 -1% Outbound cross border Pcs-000 70.7 44.4 52.7 82.9 51.3 -28% Non-universal services Express Domestic Pcs-000 194 216 265 293 314 62% Outbound cross border Pcs-000 47 45 44 42 40 -16% Unaddressed mail Pcs-000 260,929 299,140 379,552 364,414 345,247 32% No data for OCB parcels provided. Figures have been estimated from weight data (avg. OCB parcel: 5.5 kg).
Source: WIK-Consult
In general, postal markets in Hungary are very well developed and still enjoying enormous growth rates. This is particularly true for the letter segment where volumes almost increased by two thirds in five years. Domestic letter items per cap were close to 90 in 2002, thus at 36% of the EU average, but still higher than the volumes of one member state. Even more impressing is the value of “letter post per 1000 EUR GDP”; that measures the development of the letter market compared to general economic development. With respect to these indicators, Hungary outperforms the EU average (10 items per 1000 EUR GDP) by 50% and would rank third within the current member states. The volume data indicates that direct mail in Hungary increased at lower rates than letter post in general. However, some changes/improvements in the reporting systems concerning direct mail and “other letter post” in the last years may bias the time series such that no reliable conclusions concerning the composition of letter post in time 80 Final report: Main aspects of postal networks in AC/CC Country Report Hungary
can be drawn so far. However, it is worth noting that the Hungarian Post Office has introduced reporting systems that allowed to provide a very good level of detail compared to other AC/CC again strengthening the observation of a positive market development.
In contrast to domestic letter post, volumes of cross border mail – both inbound and outbound - have undergone slight decreases in the last five years. Relative maturity of Hungarian postal markets (and economy in general) is underlined by the fact that Hungary does not receive significantly more letters than it posts, the ration of outbound to inbound letter post has grown from 85% to 93% since 1998. Moreover, with growing domestic volumes, the share of inbound cross border as of total letters delivered decreased down to 2% stressing the fact that the big domestic market is more important in Hungary than in other AC/CC. In addition – and although terminal dues still are a major issue for the company, the USP is relatively much less dependent on the income generated by cross border than other AC/CC.
The Hungarian USP’s domestic parcel volumes have remained stable over the last years while there was a slight decrease for outbound cross border. However, as the Hungarian market for courier, express and parcels (CEP) is very competitive, no clear conclusions on market development can be drawn. According to statements of the USP as well as the NRA, the segment enjoys substantial growth suggesting that the USP’s parcel operations are both effected negatively by competitors and cannibalised by its own express products.
5.4.2 Non-universal services
5.4.2.1 Express services
Both market segments for domestic and cross border services are characterised by substantial or even intense competition and a variety of both national and international operators. As indicated in Table 5-2, the USP has increased its volumes in the domestic express market by 62% since 1998. However, the USP does by no means enjoy a dominant position in the express segment. While it serves approximately one third of the domestic market, the market share in the outbound cross border segment is significantly less than 10%. Based on the information available, WIK estimates the total size of the market for domestic and outbound international express services to be approx. 40 million EUR in 2002.
More detailed conclusions concerning market development cannot be drawn as private operators did no provide information concerning their services to this study. Final report: Main aspects of postal networks in AC/CC 81
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The most important private operators in the express segment are the four big international companies DHL, FedEx, UPS, and TNT, joined by GLS (A Royal Mail subsidiary), Der Kurier, Royal Express, and Pegasus.
5.4.2.2 Document exchanges
Document exchange services are fully liberalised in Hungary but neither the NRA nor the USP reported any document exchange activity in practice.
5.4.2.3 Unaddressed items
Both USP and NRA report substantial competition in the unaddressed mail market, estimating the USP’s market share to 10 to 30 percent. During the last years, the USP has increased its participation in this market and reports to have had approx. 5 million Euros revenues from the delivery of unaddressed items in 2002. Taking into account the very rough estimate of the USP’s market share, the market size is approx. 25 million Euros in total.
Apart from one major competitor called DM Hungary, competition is mostly from small local companies and student work agencies.
5.5 Universal service in practice
5.5.1 Scope of universal service
As required by the universal service obligation, the USP provides service to all points in Hungary for all types of letters, direct mail, newspapers, periodicals, and books weighing up to 2 kg and for domestic parcels weighing up to 10 kg. However, the USP does not deliver all parcels to the home in rural areas. While only parcels up to 2kg are delivered to the home in general, in the 260 major cities in Hungary all parcels are being delivered.28 The USP offers registration services for all universal service items and insurance for all letters and parcels and delivers literature for the blind up to 7kg on a universal basis. In addition, domestic postal money orders are provided as universal postal services as required by the Act on Communications.
Delivery service is provided five days per week in the entire territory and collection boxes are cleared at least five days per week.
28 Starting in 2004, all parcels will be delivered to the home according to the USP. 82 Final report: Main aspects of postal networks in AC/CC Country Report Hungary
5.5.2 Reserved services in practice
Current legislation reserves all letter services up to 350g to the USP. Although the USP reports emerging competition due to some illegal operations in the reserved area, it appears that these incidents are rather exceptional and the NRA enforces the reserved area effectively in general.
5.5.3 Access
Access conditions of the Hungarian public postal network are well comparable to current performance in EU member states. With 35.1 postal outlets per 1,000 share km (3.2 per 10,000 inhabitants) network coverage is slightly above average of EU-15. Postal agencies and mobile offices are used but do not play a significant part so far.
With 180 collection letter boxes per 1,000 square km and 16 per 10,000 inhabitants, there are less letter boxes in Hungary than in the EU-15 on average. The USP plans to increase the number of letter boxes significantly in the future following the introduction of regulatory requirements.
Apart from access facilities for residential customers, mail can be injected to the postal network in sorting centres and “electronic post centres”. According to the USP, 75% of all letter post is introduced directly to sorting facilities by bulk mailers.
The USP respects the regulatory requirement to ensure a maximum queuing time of 15 minutes in all post offices and at any time. Performance conserving these targets is measured and published by the USP. The USP achieved this target in 2002.
5.5.4 Tariffs and accounting principles
The USP does not apply a uniform rate for domestic letter services (up to 350g) but distinguishes between local and national mail. Moreover, the USP reports that special tariffs are offered to businesses and bulk mailers that take into account avoided costs as compared to standard services but as well “other business conditions”. It is unclear to which extent these special tariffs are transparent and non-discriminatory. However, discounts on standard tariffs are reported not to exceed 10% which is due to the fact that standard prices are relatively low (and hardly cost covering according to the USP). Postal rates increased in November 2002 the last time.
Table 5-3 presents the postage rates for first class letter services effective on June 1, 2003, in local currency and Euros. Final report: Main aspects of postal networks in AC/CC 83
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Table 5-3: Postage rates for domestic first class letter services (Hungary)
Weight up to Rate (local currency) Rate (Euro) 30g 40.00 0.16 100g 65.00 0.26 350g 87.00 0.35 500g 105.00 0.42 2000g 303.00 1.22
Source: WIK-Consult
The USP has implemented an internal accounting (controlling) system that is most likely in line with the national and European legislation. It appears that the USP has invested significant effort to implement an appropriate accounting system and the regulatory approval of the cost allocation methods is in process (as reported by the NRA in July 2003). The data provided by the USP for this survey suggests that its accounting systems produce detailed breakdowns of revenues (to reserved, universal, and non- universal services) and the USP reports that cost accounting is organised accordingly. However, the legal requirements for accounting separation were enacted as recently as December 2001 and against this background WIK assesses that the implementation of accounting separation which is to be considered as in a very advanced stage. The USP’s first accounting report – that is about to be approved – was submitted to the NRA on June 30, 2003.
5.5.5 Quality of service
From 1991 until 2001, the USP’s routing time had been measured independently by the NRA. However, there was no requirement to publish the results and the results were not published in practice. In December 2001, the new Communications Act was adopted and introduced new requirements concerning measurement of routing times. In 2002, the NRA did not measure routing time.29 Independent from the NRA, the USP has measured its routing time for years and produced different results (using different measurement methods).
The procedures for monitoring routing time (independent monitoring, annual publication) have been introduced in late 2001 and appear not to be fully implemented so far. The NRA states that 2003 will see the first publication of performance results; for the 2002 measurement period (USP’s internal monitoring). The NRA reports that it has approved the measurement methods of the USP. All parties appear to be aware of the importance of QoS issues and moreover are familiar with the relevant methods discussed within the CEN technical committee.
29 According to the 2001 postal act and an implementing decree, monitoring should be performed by an independent organisation and at the USP’s expenses. Therefore, the NRA discontinued its regular measurements activities. 84 Final report: Main aspects of postal networks in AC/CC Country Report Hungary
Measurement results are presented in section Part I of this report. In the last two years, domestic routing time for 1st class letters was below 70% according to both NRA and USP. The USP reports to be aware of some inefficiencies in its processes that currently do not allow achieving better results. As the results are not regarded as satisfactory, the USP considers process optimisation and related quality improvements as key tasks for the next years.
5.5.6 Complaint and redress
The USP operates a separate office for handling and managing customer complaints and in line with a government decree that requires it to follow the provisions of a CEN standard on complaints and redress procedures (EN 14012). Where complaints cannot be satisfactory resolved by these offices, the NRA is responsible for final resolution. The procedures, resulting from the 2001 Communications Act have been implemented.
Annual publication of complaints by the NRA is foreseen starting in 2003. In 2002, the total number of complaints was 2927; a breakdown to types of complaints and resolution is not available in English translation.
5.6 Regulatory situation
5.6.1 Overview of postal regulation
5.6.1.1 Postal legislation
Primary postal legislation in Hungary is set out in Act XL of 2001 on Communications that entered into force on December 23, 2001. Postal secondary legislation consists of nine decrees:
• Government Decree 248/2001 (XII.18.) on the Communications Authority;
• Government Decree 253/ 2001 (XII.18.) on special conditions of data processing performed by communications service providers;
• Government Decree 254/2001. (XII.18.) on the provision of postal services;
• Government Decree 255/2001. (XII.18.) on the detailed rules of the provision of telegraph services; Final report: Main aspects of postal networks in AC/CC 85
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• Government Decree 141/2002. (VI.28.) on the task and competence of the Informatics and Communications Minister;
• Decree 24/2001. (XII.22.) on the market surveillance activities of the communications authority and the amount of the market surveillance fee;
• Decree 28/2001. (XII.22.) on the detailed rules of accounts separation to be performed by postal service providers;
• Decree 29/ 2001. (XII.23.) on the administrative service fees to be paid for certain procedures;
• Decree 5/2002. (I.26.) on the maximum official tariffs of domestic postal services;
While others are not available in English translation, decrees 248/2001, 254/2001, 141/2002, and 24/2001 have been available in translation for this survey. The act and the decrees are available from the NRA’s website.
5.6.1.2 Regulatory institutions
Postal responsibility within the government is organised within the Ministry of Informatics and Communications and there is one Ministry department responsible specifically for postal services. However, another department within the Ministry (Department of Economics and Budget) is responsible for setting the prices of the reserved services. The general responsibilities of the Ministry include policy making, preparation of laws and secondary legislation in the areas of information society, telecommunications and posts. The Ministry, amongst other, works out proposals for the government on the state's postal policy, on harmonisation with European legislation, regulates prices of the reserved services, approves the USP’s yearly postage stamp issuing plan, and participates in the supervision of the USP while the ownership rights of the state in the Hungarian Post are exercised by the Hungarian Privatization and State Holding in general. Moreover the Ministry supervises the Communication Authority (NRA). Thus, the Ministry has important regulatory functions.
The Hungarian NRA is the Communication Authority (HIF - Hírközlési Felügyelet). It is a multi sector regulator that is responsible for supervision and regulation of the informatics and communications (post, telecommunication and frequency management). The NRA participates in the preparation of laws and secondary legislation, informs the Ministry of the achievement of postal policy goals, and monitors the effectiveness of postal regulations. Moreover, the NRA is responsible for authorising and licensing of postal services providers, market surveillance, and dealing with offences elated to the licensing and authorisation regime. 86 Final report: Main aspects of postal networks in AC/CC Country Report Hungary
Additional responsibilities that may affect the postal sector are embodies in the Hungarian Competition Authority, General Inspectorate for Consumer Protection, and the Ministry of Finance.
5.6.1.3 History and philosophy of postal regulation
Until 2000 the Ministry of Transport, Communication and Water Management was responsible for the postal sector. From 2000 to 2002 responsibilities were transferred to a newly created Communications department within the Prime Minister's Office until the Ministry of Informatics was created and vested with responsibilities for the postal sector in May 2002. In practice, the staff of the postal department included the same persons during the various steps of institutional reforms.
The most important milestone in postal policy (and communications policy in general) was the introduction of the Communications Act XL that specifically aimed at harmonising Hungarian postal legislation with the Acquis Communautaire.
The main objectives of postal regulation include (in the words of the Ministry): Consumer protection, opening the market for fair competition, transparency, development of services for better quality service provision, international postal cooperation, determining the elements of the universal services obligation, market and service quality surveillance as well as the continuation of the traditional governmental role in the provision of public services, and the harmonisation with the EU Postal Directive.
Currently, changes to the postal act are under preparation and are expected to pass by Parliament in late 2003. The amendments will harmonise Hungarian law with the Directive 39/2002/EC, in particular with respect to further market liberalisation.
5.6.2 Universal Service
The basic legal requirements for universal service in Hungary are summarised in Part I of this report. As described above, the USP appears to fulfil these requirements in the entire territory and without geographic exceptions.
The XL Communications Act designates the Hungarian USP as the only universal service provider and obliges the company to offer universal service at least five day a week. Besides letters, parcels, books, literature for the blind, registration and insurance of mail, universal service in Hungary comprises postal money orders. Following a Final report: Main aspects of postal networks in AC/CC 87
Country Report Hungary decision of the NRA’s arbitration committee, the USP is not obliged to deliver parcels to the home in rural areas until 1 January 2004.30
5.6.3 Reserved services
The Communications Act reserves to the USP the right to provide postal services relating to the delivery of domestic and international mail consignments and addressed advertisement items up to 350 grams and sets out a lower limit of 5 times the price of a 1st class standard letter of the lowest weight category – in line with Directive 67/97/EC.
Moreover, all postal services relating to official documents, e.g. documents sent by or to courts or formal administrative correspondence are reserved for the USP.
In addition, all universal service may only be provided by companies holding an individual licence. Although the possibility of additional legislation to license other providers of universal service is mentioned in § 3 of the Act, no such legislation has been adopted or planned. The NRA stated that a licensing regime may be adopted by the end 2003 – probably following an amendment to the postal act that is currently being prepared. Moreover, the NRA reported not having received any licence applications by private operators. Nonetheless, at present no operator but the USP is allowed to provide non-reserved but universal services, i.e. there is an exclusive licence for the entire universal service area in practical terms.
5.6.4 Regulation of non-reserved services
The NRA issues general authorisations for operators providing non-universal postal services. The procedure is described as a mere formality; there are no restrictive conditions that have to be fulfilled by the applicants. The administrative fee for registration is 2000 HUF, approx. 8.50 EUR. So far, 26 companies have registered with the NRA. However, the NRA suspects that there are some additional operators operating in postal markets suggesting that the regime of general authorisation is not entirely implemented in real terms.31
By contrast, the regime for licensing of providers operating within the area of universal services has not been implemented so far. The authorities are currently drafting the necessary legislation, but no details are available on this matter yet. According to the NRA it is likely that licence conditions will require the operators to serve a minimum
30 Parcels up to 2 kg are delivered to the home in the whole territory. Until 2004, heavier parcels are delivered to the home only in the 260 major cities in Hungary. 31 To further explain the situation, the NRA points out: “The new regulation entered into force only in 2002 and earlier the courier and express services did not belonged to the postal sector and a temporary period was necessary for operators to get aware of the new rules.” 88 Final report: Main aspects of postal networks in AC/CC Country Report Hungary
area that may be approx. one tenth of the domestic territory (one of the seven counties) and to respect the same regulations concerning network access and quality of service as the USP.32
In tune with the implementation of a licensing regime and the planned introduction of a new postal act in 2004, more specific definitions of parcel versus express/courier services shall be introduced to the postal legislation. In practice, it appears that currently many operators holding a general authorisation are providing services very similar to universal service parcels such that parcel services are not subject to licensing in practice.
Current legislation provides the possibility to introduce a compensation fund where all licensed operators may have to contribute to the cost of universal service. In practice, the fund has not been implemented and according to the Ministry will never be. It appears likely that the provisions concerning a compensation fund will be erased from the Communications Act in the course of the amendments that are currently drafted.
5.6.5 Access
Government Decree 254/2001 sets out requirements concerning the location of letter boxes as follows: The USP has to place a letter box in every “settlement” and has to ensure that a letter box is no more distance than 1 km from any building within the settlement. Monitoring of this requirement is performed by the NRA on a case-by-case basis and it appears that the USP is fulfilling the requirement in general.
With respect to post offices, the decree sets out a requirement combining a spatial and a population criterion: In every settlement with more than 600 inhabitants, the USP should provide at leas one postal outlet for each 20,000 inhabitants and the outlets have to placed in such a way that there is no more distance than 3 km from any building within the settlement to the postal outlet. Settlement with less than 600 inhabitants may either be served by a postal outlet or by “mobile service” (i.e. either mobile post offices or service provision by rural postmen). In general, the USP is free to satisfy all requirements either with post offices operated by own staff or with postal agencies.
In analogy to the telecommunications legislation (interconnection), the Communications Act provides the possibility to oblige the USP to grant downstream access to its network elements (e.g. sorting centres). However, according to the Ministry, the issue of downstream access has never been seriously taken into consideration in practice.
32 The NRA reports that the latest draft requires CPOs (within the US area) to serve either (i) one or more rural settlements; (ii) at least one county (of 7 in total) but not Budapest only; (iii) Budapest and at least three entire counties; or (iv) all of Hungary. As stated by the NRA, these restrictive requirements are meant to prevent “predatory behaviour of the [private] service providers”. Final report: Main aspects of postal networks in AC/CC 89
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According to the NRA, “the new Postal Act [expected for 2004] will define a contractual obligation for the USP and it will have to give accession to its network for the license- holders.”
5.6.6 Tariff and accounting principles
Prices for reserved services of the USP have to be approved by the Ministry of Informatics in co-operation with the Ministry of Finance (ex-ante regulation). The Ministry defines maximum tariffs for the services. § 27 (4) of the Communications Act specifies that prices should be cost-based, transparent, and non-discriminatory. There is no uniform tariff requirement and the USP applies different prices for local and national letters (up to 350g). In practice, it is not entirely clear how cost orientation is ensured in the rate cases.33
Prices for universal but non-reserved services of the USP are not regulated but, however, have to be cost-based, transparent, and non-discriminatory. The case being, violations of this legal provision may be prosecuted by the Competition Authority.
The Communications Act requires the USP to keep separate accounts at least for reserved, universal, and non-universal services. There is one decree containing more specific principles related to accounting separation which is not translated to English and could not be used for this study. According to the NRA, responsibility for the supervision of the accounts is within the NRA. As reported by the NRA, the accounting and cost allocation methods are about to be approved following a report submitted by the USP on 30 June 2003. It appears that the implementation of accounting separation is in an advanced stage and is about to be finalised.
Given the various interrelations between supervision of accounts and cost-oriented price regulation, it seem questionable whether the approach of separating responsibilities for tariff regulation on the one hand (Ministry) and supervision of accounts (NRA) could be considered as effective.
5.6.7 Quality of service
For postal items of the fastest standard category, legislation specifies a routing time target of 80% D+1 and 95% D+3 for 2003. In order to enable the USP to comply with the regulatory requirements, the targets will be accelerated gradually to 85% D+1 and 97% D+3 in 2004. The NRA is responsible to ensure independent monitoring and
33 The USP has submitted its first separated accounting report to the NRA on 30 Jun 2003. According to the NRA, tariffs will be examined based on this report and cost orientation will be assessed during rate cases accordingly. 90 Final report: Main aspects of postal networks in AC/CC Country Report Hungary
obliged to publish the results annually. However, measuring and publishing of the results do not appear to be implemented so far – but will soon be as the NRA reports.34
5.6.8 Complaint and redress
The Hungarian USP operates a specific office for handling customer complaints as required by the Communications Act. Where complaints cannot be solved satisfactory by the USP, the Act allocates the responsibility to finally resolve the complaints to the Communications Arbitration Committee within the NRA. The USP is obliged to publish compilations of customer complaints, but has not yet started to do so – a first publication is expected for 2003.
5.6.9 National regulatory authority
The institutional structure of the Hungarian NRA – HIF – appears to provide the basic features of a “legally separate operationally independent” authority. The Chairperson of the NRA is appointed for a 6 years term by the Prime Minister and cannot be easily dismissed by the government.
The NRA has an independent budget within the state budget and is financed by administrative fees paid by licensed operators – mostly from telecommunications operators. However, the NRA is supervised by the Ministry of Informatics and its decisions may be revised by the Ministry where considered to violate legal provisions.
The NRA’s postal division consists of 14 persons employed full time.
In general it appears that the NRA is in a strong position to execute its regulatory tasks due to its administrative capacity. However, significant regulatory tasks are vested in the Ministry thus altering the NRA’s position; most importantly the responsibility for tariff regulation and the supervision over the NRA including the right to revise its decision.
34 As reported by the NRA, a decree states that the USP “is obliged to have the measures made by an independent organisation and the USP launched it. Results will be published as the results will be available. The regulation is new and there was necessary a temporary period to the adjusting the previous measuring method to the requirements.”
Country Report
6 LT – Lithuania
92 Final report: Main aspects of postal networks in AC/CC Country Report Lithuania
LITHUANIA – GENERAL FACTS
Economy
GDP in EUR, 2001, (million): 8,500 GDP per capita in EUR, 2001: 3,853
GDP in PPS, 2001 (million): 31,200 GDP per capita in PPS, 2001: 8,960
GDP growth rate, 2001: 6.0% Unemployment rate, 2002: 13%
Population and geography
Population, 2001 (thousands): 3,478 Density (Persons per sq. km): 53
Land area, 2002 (square km): 65,300 Urbanisation (Pop. in urban areas): 69%
Transport and communications infrastructure
Railway network, 1999 (km): 1,905 Fixed lines per 100 households, 2002: 66
Road infrastructure, 1999 (highway km): 417 Mobile penetration rate, 2002: 37%
International airports, 2003: 3 Internet users penetration, 2002: 17% Source: Eurostat NewCronos; UN World Urbanization Prospects (2001); IBM Monitoring of EU candidate countries, telecommunications sector (2002); www.columbusguide.com.
LITHUANIA – POSTAL FACTS
Universal service provider
Name of USP: Lietuvos Paštas USP employment, 2002 (persons): 8,117
USP revenue, 2002 (million EUR): 41 USP employment of total workforce: 0.5%
Annual revenue growth (CAGR), 98-02: 11.0%
Volumes and tariffs
Dom. letter post volume, 2002 (million): 40 Dom. letter post per capita, 2002: 17.0
Cross border LP: OCB/ICB ratio, 2002: 89% Domestic parcels per capita, 2002: 0.04
Cross border LP: ICB/Dom ratio 2002: 14% Basic letter tariff, June 2003: 0.29€
Postal network (access)
Postal outlets, 2002: 954 Letter boxes, 2002: 4,311
Outlets per 10,000 inhabitants: 2.7 Letter boxes per 10,000 inhabitants: 12.4
Outlets per 1,000 sq. km: 14.6 Letter boxes per 1,000 sq. km: 66.0 Source: WIK-Consult
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6.1 Basic country information
Lithuania, the biggest of the three Baltic States, is located at the western end of the East European Plain, on the shores of the Baltic Sea. It borders Latvia, Belarus, Poland, and the Russian Federation’s Kaliningrad district. Lithuania consists predominantly of gently rolling plains and extensive forests; the country is more forested than Sweden or Finland. With 36 inhabitants per square km Lithuania is sparsely populated but the 3.5 million Lithuanians enjoy a modern highway infrastructure.
Since 1997 and against a challenging international economic backdrop Lithuania’s economic development has been generally positive. On average, real GDP has grown by 3.6% annually and exports by 7.4% annually. Low and stable inflation has been one of the main achievements of economic policy. Important steps have been taken in the area of structural reforms and the general privatisation process has been successful. In 2001, GDP per capita in Lithuania was approx. 3,853 EUR or 8,960 PPS.
6.2 Overview of postal market
Based on available information, WIK estimates the total market for domestic and outbound universal postal services in Lithuania to be about EUR 20 million. This estimate must be considered as very approximate. In addition the market for delivery of unaddressed mail is estimated to be roughly EUR 0.5 million. An estimation of the size of the express market was not possible.
Table 6-1: Estimated market 2002 (Lithuania)
USP Rev, USP Vol Market Rev, Market Vol, WIK Est 2002, 2002, 2002, 2002, USP share EUR 000 pieces 000 EUR 000 pieces 000 Total letter post 13,889 45,267 80% 17,362 56,584 Total parcels 733 106 30% 2,443 352 Unaddressed mail, domestic 208 18,369 40% 521 45,922
Source: WIK-Consult
This estimate of the size of the market for universal services has been developed using the following information. There appear to be no surveys of the total market for postal services in Lithuania. The USP reports “intense” and “substantial” competition in the important domestic letter and domestic direct mail markets. According to the USP there is a huge number of companies providing postal services without being licensed. However, neither information on types of services provided by these companies nor financial data became available such that it is not clear to which extent these companies compete in the universal services area. The NRA is not able to estimate the market structure. CPOs did not provide estimates for any postal markets in Lithuania. 94 Final report: Main aspects of postal networks in AC/CC Country Report Lithuania
In light of this insubstantial evidence, WIK has estimated the USP’s market share in some postal markets as shown in Table 6-1 These estimates take into account the principle that an evaluation of the intensity of competition in a given market is likely to reflect historical expectations. For example, in the letter market where the USP has historically enjoyed a monopoly, it may consider a loss of 20 percent of the market to signify “intense” competition. In the parcel market, where the boundaries to the express segment are not clear, the USP can be assumed to be facing significantly more competition.
The estimates of market size are based on revenues and volumes provided by the USP. It should be noted that some inconsistencies within the data set that has been provided raise important question marks. For example, the USP reports to have suffered a decrease of approx 50% in parcel volumes from 2001 to 2002 while its revenues in this segment slightly increased.35
The USP introduced domestic express services only recently such that information for 2002 is not available. For the international express market, both its assessment of intense competition and the relatively marginal volumes that have been reported suggest that the USP does not play an important part in the Lithuanian market for outbound express items. In the absence of information from private competitors, an estimation of the size of express markets could not be achieved.
6.3 Market players
6.3.1 Universal service provider
6.3.1.1 Legal status and subsidiaries
The Lithuanian USP is Lietuvos Paštas, a state enterprise holding a legal status different from private enterprises.
Ownership rights are managed by the Ministry of Transport and Communications (MTC). While the managing director of the USP is appointed by the company’s supervisory board, this body is appointed by the Ministry and currently its members include several MTC officials.
35 The USP’s annual report explains this development with an increasing share of cross border and insured within total parcels. Higher prices of these services may of course lead towards revenue increases but it seems questionable whether they can have compensated the enormous losses in domestic parcel business. Final report: Main aspects of postal networks in AC/CC 95
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The USP receives regular financial support from the government to subsidise the provision of universal services. The amount of compensation is decided annually by the Ministry of Transport and Communications and was between 2% and 7% in the last five years. However, the subsidies are balanced such that the USP can manage to stay profitable – and for three years it would have made losses without. Moreover, the USP provides various services for the State such as payment of pensions and social benefits. No details on the determination of compensations for these services were disclosed. The USP is subject to normal corporate taxation.
The USP is entirely exempt from the payment of VAT.
The USP does not have any subsidiaries or joint ventures.
6.3.1.2 Service portfolio
The USP in Lithuania offers several services outside the range of universal service. These non-universal postal services include hybrid mail; express products (“courier”) and delivery of unaddressed items. The USP is a major supplier of delivery services for unaddressed newspapers and periodicals (subscription), including virtually all rural newspapers. In addition, the USP provides non-postal services including, postal money orders, international money transfer in co-operation with Western Union, payment of social benefits and bill collection services (e.g. for mobile telecommunications operators). Postal counters sell retail of stationary, lottery tickets, telephone cards, packing materials, books, newspapers, magazines, and tickets for public transport. Moreover, value added services such as packaging of parcels is available in post offices.
6.3.1.3 Postal infrastructure and automation
The USP appears to make rather limited use of technology and automation so far. Sorting machinery is not used, and post offices are not computerised. No tracking and tracing services are provided.
With a single central sorting centre and ten regional sorting centres the network structure appears reasonable given the size of the country. Sorting is performed manually and decentralised beginning in the originating post office. The fleet of transport vehicles is relatively old with an average age of 8.1 years for cars (small transporters) and 9.2 years for lorries. 96 Final report: Main aspects of postal networks in AC/CC Country Report Lithuania
6.3.1.4 Employment
The USP has a workforce of 8,117 persons (6,686 full time equivalents). None are civil servants. There is limited use of part time personnel as well as of seasonal employment (approx. 0.5% of all employees). Total employment has decreased by 8% from 1998 to 2002.
The two largest groups within the USP’s workforce are delivery personnel (44%) and counter staff (14%). Where as drivers and sorters account for only 6%, 26% of all employees are in management or administrative function.
6.3.2 Private operators
According to the NRA, the most important private operators are DHL in the international express segment and Baltic Logistics System (a Sweden Post subsidiary) for domestic parcel/express services.
While 47 licences (registrations) have been issued for postal operators, both NRA and USP suspect additional, unlicensed, operations to a significant extent. Drawing from an internal study, the USP states that in total there are 133 companies providing postal services. Both NRA and USP state that current (non-existing) reporting requirements do not facilitate more detailed market analysis.
In the course of the present survey, no information from private operators was obtained on several requests.
6.4 Market development
6.4.1 Universal services – letter post and parcels
Table 6-2 presents a summary of the volumes of postal items carried in the universal services from 1998 to 2002. All figures reflect postal items carried by the USP. The private operators have submitted no data.
The universal services market in Lithuania appears to develop ambiguously. Where as domestic letter volume increased modestly, both inbound and outbound cross border letter volumes decreased. Domestic letter volume per capita (11.5 in 2002) is still very low compared to the average of EU-15 (240) but also compared to other pre-accession countries. Domestic letters per 1000 EUR was 3.0 in 2002 (EU-15: 10). The development of this indicator shows that the development of letter volumes did not Final report: Main aspects of postal networks in AC/CC 97
Country Report Lithuania catch up with the general economic growth and years 2000 and 2001 even saw decreasing volumes relative to GDP. The USP’s parcel volumes developed well over time but suffered a severe back-drop in 2002. The USP did not provide a satisfactory explanation for this development.
Table 6-2: USP volumes of universal and non-universal services (Lithuania)
5-yr 1998 1999 2000 2001 2002 change Universal services Letter post LP Domestic Pcs-000 30,803 31,603 32,151 35,205 40,119 30% LP per capita Pcs-000 8.3 8.5 8.7 10.1 11,5 LP per EUR 1000 GDP 3.2 3.2 2.6 2.6 3,0 LP Outbound cross border Pcs-000 6,627 6,161 5,878 5,708 5,148 -22% Outbound/inbound 60% 68% 101% 110% 89% LP Inbound cross border Pcs-000 10,975 9,096 5,829 5,172 5,778 -47% LP ICB/LP Domestic 36% 29% 18% 15% 14% Parcels Domestic Pcs-000 91.2 126.7 183.7 185.1 82.8 -9% Outbound cross border Pcs-000 10.2 9.9 12.0 16.6 22.9 124% Non-universal services Express Outbound cross border Pcs-000 7 7 8 10 12 56% Unaddressed mail Pcs-000 6.448 7,331 10,412 12,254 18,369 185% No data for domestic express
Source: WIK-Consult
Cross border volumes in Table 6-2 show a strange development: With both inbound and outbound letter volumes decreasing, the ratio between inbound and outbound changed towards more outbound letter in 2000 and “back to usual”, i.e. less outbound than inbound in 2000. However, analysis of the weights of the USP’s cross letters indicates a stable development with slightly growing volumes and a ration of outbound to inbound letters between 49% and 58%. As weights tend to be the original figure that can be observed by the USP, the changing volumes may be a mere result of adoptions concerning the methods to estimate volumes.
With 15% of all letters delivered originating from abroad, the USP depends on operations of foreign USPs to a relevant extent indicating that terminal dues are a major matter of concern for the company. 98 Final report: Main aspects of postal networks in AC/CC Country Report Lithuania
With respect to non-universal services, the USP did not provide data for domestic express services. However, the company has been successful increasing cross border EMS volumes significantly. Moreover, the company successfully participated in the growing market for delivery of unaddressed items.
6.4.2 Non-universal services
6.4.2.1 Express services
The most important market in the area of non-universal services is the express segment. An assessment of the development of the market could not be achieved as the USP did not provide any data for its domestic express operations (domestic EMS service). Neither did private operators provide information upon several requests.
However, all sources state intense competition in both the domestic and the outbound international express segment. Within of a huge number of domestic and local courier and express companies, Sweden Post’s subsidiary Baltic Logistics System appears to be the most important player. The USP carried 7,000 outbound cross border EMS items in 1998 and increased this number to 12,000 in 2002. DHL is reported the most successful operator in the segment. Due to the USP’s relatively low importance in this market (as compared to private operators) and in the absence of information on market shares or volumes carried by CPOs, conclusions concerning the overall market cannot be drawn.
6.4.2.2 Document exchanges
Neither the NRA nor the USP reported any document exchange activity.
6.4.2.3 Unaddressed items
Since 1998, the USP focussed increasingly on the delivery of unaddressed items and increased the number of items carried from 6.4 to 18.4 million items in 2002. The market is dominated by small, mostly local operators and, the most important being a company called “EI LABAS”: Final report: Main aspects of postal networks in AC/CC 99
Country Report Lithuania
6.5 Universal service in practice
6.5.1 Scope of universal service
In conformance with the universal service obligation, the USP provides service to all points in Lithuania for all types of letters, newspapers, periodicals, and books weighing up to 2 kg and for domestic parcels weighing up to 10 kg. The USP does not, however, deliver parcels to the home unless the resident pays an extra fee; otherwise, addressees must pick up their parcels at the post office. In addition, the USP provides universal delivery for literature for the blind and offers registration services for all universal service items and insurance for all letters and parcels.
While the standard frequency of delivery is 5 times a week, the USP delivers on Saturdays additionally in urban areas. This is merely a result of its important operations in newspaper distribution. The USP clears all collection boxes five days per week at least.
6.5.2 Reserved services in practice
The reserved area in Lithuania includes “postal correspondence” up to 350g and does not include direct mail (printed matter).
There appears to be substantial competition even in the reserved area. The assessment of NRA and USP vary gradually - the NRA reports “substantial competition” while the USP considers it as “intense”. Apparently enforcement of the reservation is not carried out effectively so far.
6.5.3 Access
As summarised in the second section of this report, the USP in Lithuania provides a high level of access to postal services. Lithuania has 2.7 post outlets (offices or agencies) and 12 letter boxes per 10,000 inhabitants. This compares well with to EU-15 averages of 2.4 and 18 – especially given that the country is not very densely populated. In terms of spatial density, the density is lower than EU average but still above some current member states.
Postal agencies are hardly used, only 10 out of all 954 outlets are agencies. In addition, the USP operates 6 mobile post offices in very rural areas. At the central sorting centre in Vilnius, mail can be injected 24 hours a day. The USP does not plan to change the number of its in postal outlets or letter boxes in the future.
The USP has not established targets for queuing time. 100 Final report: Main aspects of postal networks in AC/CC Country Report Lithuania
6.5.4 Tariff and accounting principles
The USP provides a uniform national rate for the collection and delivery of all postal items conveyed in the universal service throughout the national territory. The USP does, however, charge extra fee for home delivery for parcels. The last change in postal rates was in January 2000 when previous prices from January 1998 were substituted.
For large mailers, the USP applies special tariffs that are calculated based on avoided costs, e.g. for pre-sorting. The USP states that these discounts are transparent and non-discriminatory while the NRA does not want to comment on transparency prior to detailed examination which did not take place yet.
The USP does not maintain separate accounts for costs of reserved, non-reserved universal and non universal services so far. While the Directive’s requirement concerning costing has been transposed to the Postal Law, more detailed requirements have been set out by secondary legislation only recently, in May 2003.
Table 6-3 presents the postage rates for first class letter services effective on June 1, 2003, in local currency and Euros.
Table 6-3: Postage rates for domestic first class letter services (Lithuania)
Weight up to Rate (local currency) Rate (Euro) 20g 1.00 0.29 100g 1.40 0.40 250g 2.30 0.67 500g 4.00 1.16 1000g 5.40 1.56 2000g 6.80 1.97
Source: WIK-Consult
6.5.5 Quality of service
It appears that no effective implementation of routing time targets has taken place in Lithuania. While the regulator has set a target of 80% D+1 and 90% D+2 for all national correspondence, the USP applies an entirely different target. There is neither measurement nor publication of performance with respect to none of the targets – neither NRA nor USP could provide information concerning the USP’s performance.
Internally, the USP applies a routing time targets that are as follows: For all urban letter mail (100%), delivery should be within D+1 if the mail is injected before 11 AM and D+2 if the mail reaches the postal network later. Rural letter mail should be delivered within Final report: Main aspects of postal networks in AC/CC 101
Country Report Lithuania
D+3. In this case, urban letter mail means mail sent from urban areas to urban areas and rural means either mail addressed to or originating from rural areas. The USP considers approx. 230 of its 954 postal outlets as urban.
Overall, the USP applies a routing time target close to D+2 for some of the mail (“D+1” if posted before 11 AM could also be considered as D+2 from a consumer point of view) and D+3 for the remaining share of mail. Performance concerning this target is not measured nor published.
6.5.6 Complaint and redress
In legal terms, the NRA is the competent body for final resolution of customer complaints following Art. 4. 2. (3) of the Postal Law. However, it appears that it has not started fulfilling this tasks so far or that there have no complaints been directed to the NRA.
The USP does not operate a specific office for handling of customer complaints but any department accepts complaints that concern its responsibilities. No standardised procedure have been set out and published. The USP does not publish information on customer complaints regularly (and legislation does not oblige him to do so) but provided the number of complaints incl. a breakdown to types of resolution to WIK, see Table 6-4.
Table 6-4: Compilation of complaints (Lithuania)
1998 1999 2000 2001 2002 From Abroad 1101 1461 1688 979 1458 Domestic 997 1173 883 966 985 Compensation paid 211 200 250 201 281 Postage refunded 11 14 23 21 17 Denied 775 959 610 744 687 Total 3095 3807 3454 2911 3428
Source: WIK-Consult 102 Final report: Main aspects of postal networks in AC/CC Country Report Lithuania
6.6 Regulatory situation
6.6.1 Overview of postal regulation
6.6.1.1 Postal legislation
The Postal Law dates from April 15 1999 and was amended once in October 2000; the amendment became effective as of January 1st 2002. The law is available in English translation from the NRA’s internet website. In addition there are three regulations (Orders): Two orders by the Minister of Transport and Communication on “Universal and other postal service provision” and on “Authorisation issues for postal and courier service provision” as well as two orders by the NRA’s director on “Main postal network characteristics and on the quality requirements (Standards) for post and courier post services” and on “Requirements on principles for accounting system for universal service provider”.36 The law as well as both regulations are available in English translation from the NRA’s website.
It was reported that a working group has been set up that will develop amendments to the current legislation in the light of the practical experience with the acts. However, preparations are still ion an early stage such that no details or draft versions are available at present.
6.6.1.2 Regulatory institutions
The Ministry of Transport and Communications is responsible for postal sector in Lithuania. Its tasks include the development of postal policy, drafting of postal legislation, issuing licences (translation according to the Lithuanian term. These licences are rather general authorisations in terms of the Acquis Communautaire), and supervision of the access conditions of the public postal network. Thus, the Ministry performs relevant regulatory tasks amending the responsibilities of the NRA.
The amendment to the postal law vested the NRA (“RRT” – Communications Regulation Authority) with responsibility for regulation postal markets in 2002. Operationally, the Authority’s postal regulation section was established in April 2002. The NRA is a multi sector authority responsible for fixed and mobile telecommunications, radio frequency allocation and the postal sector. Its main responsibilities in the postal sector include (in the words of the NRA):
36 Translation of the regulation titles was provided by the NRA. Final report: Main aspects of postal networks in AC/CC 103
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• Developing and approving the procedure of cost accounting for the providers of universal services;
• Supervision of the tariffs of universal postal service;37
• Monitoring of compliance with the conditions of authorisations for the provision of postal and postal courier services;
• Establishing the main characteristics of the postal network for the postal and courier services;
• Setting the quality requirements (standards) for postal and courier services; and
• Examining disputes between postal services providers and users.
Moreover, the NRA participates in drafting secondary legislation and can issue regulations independently within its competence.
6.6.1.3 History and philosophy of postal regulation
The legal framework for postal services in Lithuania has only been established recently: After Lithuania’s independence, the state enterprise "Lietuvos paštas" started its activities on January 1, 1992. Still in January 1992, Lithuania restored its membership with the UPU and the statutes of the state enterprise were approved by the Government. In1995, the Seimas passed the Law on Communications and Postal Regulations came into force in 1996. The current Postal Law came into force by July 1999 and established Lithuania Post as the only universal service provider.
The latest amendment of the Postal Law dates from October 1999 and was introduced to achieve compliance with Directive 97/67/EC. There exists no formal statement of the goals of postal regulation.
6.6.2 Universal Service
The basic legal requirements for universal service in Lithuania are summarised in Part I of this report. The USP appears to fulfil these requirements. There are no geographic exceptions from the universal service obligation and the USP has to deliver universal services at least 5 days a week.
37 NRA is in charge of supervising the USP’s accounts and tariffs, but is not responsible for determining postal rates. 104 Final report: Main aspects of postal networks in AC/CC Country Report Lithuania
Universal services without the reserved area may also be provided by other operators and require a general authorisation.
6.6.3 Reserved services
In accordance with Directive 97/67/EC the Postal Law reserves universal postal services up, to 350g to the USP. Moreover, a price limit of 5 times the standard rate defines the reserved area. The law explicitly excludes “postal courier services” from the reservation irrespective of weight or price of those services.
As “postal courier” services are not reserved, the definition of this service category causes significant infringements of the reserved area, as reported by the USP. The law states courier service “means speedy services whereby the postal item and document dispatches are collected from the senders and delivered to the receivers by a courier or by other means in accordance with the procedure set by the postal service provider.” No more specific rules concerning the definition of courier services have been set out so far.
6.6.4 Regulation of non-reserved services
Under the postal law, all providers of postal services are obliges to hold a “licence”. There are not continuing specific requirements and a negligible fee of approx. 30 EUR such that the obligation has to be regarded as a general authorisation in the terms of the Directives. Authorisations are issued by the Ministry of Transport and Communication and are monitored by the NRA. So far, 47 general authorisations have been issued. However, significant operations of unauthorised companies have been reported suggesting that the authorising regime has not been fully implemented.
The Lithuanian legal framework does not distinguish between operators providing universal or non-universal services, i.e. there is an obligation to receive authorisation for all postal operators but no licence requirement within the US area.
Legislation does not provide for a compensation fund. (However, there are regular subsidies from the state budget meant to compensate for losses stemming from the provision of universal service)
6.6.5 Access
As described above, there are no legal requirements concerning the number or location of letter boxes. A regulation (order) of the NRA obliges the USP to operate no less than 944 post offices, i.e. it must not close any of its current offices (without replacing them). Final report: Main aspects of postal networks in AC/CC 105
Country Report Lithuania
There are no provisions concerning downstream network access (work sharing).
6.6.6 Tariff and accounting principles
Regulation of postal tariff lies within the responsibility of the government while the NRA is in charge of controlling whether the maximum tariffs set by the government are respected by the USP. No details of the principles underlying the rate determination have been disclosed. Interestingly, the Postal Law does not contain provisions for non- discrimination on transparency of special tariffs but, by contrast, explicitly grants to the USP the right to apply special tariffs based on individual contracts.
The last increase of postal rates became effective in 31 May 2003.
§ 6 2. (3) of the Postal Law obliges the USP to keep separate accounts for universal and non-universal services but does not require to distinguish between reserved and non-reserved services. The NRA is in charge of supervising compliance with the requirements concerning accounting separation. Although the USP states to keep its accounts according to this requirement, it appears that regulatory supervision has not been implemented yet. Moreover, the status of the USP’s implementation of accounting separation is questioned by its information that only revenues are allocated to services while costs are not.
Details concerning accounting principles and cost allocation rules have been set out by the NRA with order IV-38 “on the approval of the procedure for cost accounting of universal service providers” in May 3, 2003.
6.6.7 Quality of service
A regulation by the NRA’s Director sets out a routing time target of 80% D+1 and 90% D+2 of domestic correspondence (The USP does not use priority / non-priority categories for letter post). However, legislation does not require independent monitoring or publication of performance results. Consequently, there are currently no measurement systems in place.
6.6.8 Complaint and redress
Lithuania has a relatively opaque procedure for addressing complaints by postal customers. The Post Law does not require the UPS to establish a separate office dedicated to the resolution of customer complaints, but the NRA acts as the final arbiter of customer complaints against the USP. Legislation does not require publication of the number and handling of complaints. 106 Final report: Main aspects of postal networks in AC/CC Country Report Lithuania
6.6.9 National regulatory authority
The institutional structure of the Lithuanian NRA appears to fulfil the requirements of the Acquis Commnautaire concerning legal and operational independence form the USP. Its budget is approved as an independent position within state budget by Parliament and its decisions may only be appealed to courts.
The Director of the NRA is appointed for a five years term but may be dismissed, amongst others, “if he fails to perform properly and in a timely manner the tasks and functions assigned under this Law and other legal acts for the Communications Regulatory Authority”. However, decision about the Director’s performance cannot be made by government but the Director may only be dismissed by the President of the Republic on recommendation of the Prime Minister. These requirements ensure independence of the NRA.
With 6 persons (5 FTE), it appears that the NRA possesses appropriate administrative capacity. However, only 2 “professional staff”, a lawyer and an economist are amongst them.
Country Report
7 LV – Latvia
108 Final report: Main aspects of postal networks in AC/CC Country Report Latvia
LATVIA – GENERAL FACTS
Economy
GDP in EUR, 2001, (million): 13,400 GDP per capita in EUR, 2001: 3,609
GDP in PPS, 2001 (million): 18,300 GDP per capita in PPS, 2001: 7,750
GDP growth rate, 2001: 7.7% Unemployment rate, 2002: 13%
Population and geography
Population, 2001 (thousands): 2,355 Density (Persons per sq. km): 36
Land area, 2002 (square km): 64,589 Urbanisation (Pop. in urban areas): 60%
Transport and communications infrastructure
Railway network, 1999 (km): 2,413 Fixed lines per 100 households, 2002: 71
Road infrastructure, 1999 (highway km): na Mobile penetration rate, 2002: 31%
International airports, 2003: 2 Internet users penetration, 2002: 11% Source: Eurostat NewCronos; UN World Urbanization Prospects (2001); IBM Monitoring of EU candidate countries, telecommunications sector (2002); www.columbusguide.com.
LATVIA – POSTAL FACTS
Universal service provider
Name of USP: Latvijas Pasts USP employment, 2002 (persons): 7,229
USP revenue, 2002 (million EUR): 40 USP employment of total workforce: 0.7%
Annual revenue growth (CAGR), 98-02: 13.6%
Volumes and tariffs
Dom. letter post volume, 2001 (million): 43 Dom. letter post per capita, 2001: 12.3
Cross border LP: OCB/ICB ratio, 2001: 49% Domestic parcels per capita, 2002: na
Cross border LP: ICB/Dom ratio 2001: 18% Basic letter tariff, June 2003: 0.23€
Postal network (access)
Postal outlets, 2002: 964 Letter boxes, 2002: 2,464
Outlets per 10,000 inhabitants: 4.1 Letter boxes per 10,000 inhabitants: 10.5
Outlets per 1,000 sq. km: 14.9 Letter boxes per 1,000 sq. km: 38.1 Source: WIK-Consult
Final report: Main aspects of postal networks in AC/CC 109
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7.1 Basic country information
Latvia is located in north-eastern Europe on the Baltic Sea and has three important ports in Ventspils, Riga and Liepaja, with Ventspils being the most important of the Baltic Sea region in terms of cargo turnover. The landscape is mostly flat, marked by lowland plains and rolling hills and the country is relatively scarcely populated with 53 inhabitants per square km. Total population is close to 2.36 million with approx. 800.000 Latvians living in the capital Riga. Latvia's weather is temperate; the average summer temperature is 18 degrees Celsius, the average winter temperature -5.
Latvia’s GDP was 3,609 EUR (7,750 PPS) per capita in 2001 thus ranking at the lower end of the adhesion countries. Its most important economic sectors include electronics and mechanical engineering, chemical and pharmaceutical industries, wood processing, food processing, and textiles. The communications markets are slightly less developed than the pre-accession countries’ average with 71 fixed telephone lines per 100 households, 31% mobile penetration and 11% of the population using the internet.
7.2 Overview of postal market
Based on available information, WIK estimates the total market for domestic and outbound universal postal services (letter post and parcels) in Latvia to be about EUR 24 million in 2002. In addition, the market for delivery unaddressed items is estimated to be 3 million EUR. The estimate must be considered as very approximate. An estimation of the size of the market for express services was not possible as neither the USP nor private competitors provided financial or volume information on this market.
Table 7-1: Estimated market 2002 (Latvia)
USP Rev, 2002, WIK Estimate Market Rev, 2002 EUR 000 USP share EUR 000 Total letter post 19,000 90% 21,111 Total parcels 1,900 65% 2,923 Total, all domestic and OCB 20,900 24,034
Source: WIK-Consult
This estimate of the size of the postal market has been developed using the following information. There appear to be no surveys of the total market for postal services in Latvia. The USP has not provided credible volume and revenue data broken down by market segments. USP and NRA differ substantially on assessments of the degree of competition, where the USP in general states fiercer competition than the NRA (and the Ministry) does. 110 Final report: Main aspects of postal networks in AC/CC Country Report Latvia
As the USP reported that its accounting systems do not allow providing separate revenues for services categories, WIK estimated the USP revenues from the reported total revenue from postal services. Furthermore, USP information on its services portfolio (letters, parcels, and EMS, but no targeted direct mail products, no domestic express service with home delivery) and comparisons with the relative sizes of postal market segments Latvia’s neighbouring countries Estonia and Lithuania facilitated the estimate. WIK’s estimates for the USP revenues in the markets for letter, parcel, and express services are included in Table 7-1. Separate estimates of the market sizes for domestic and outbound cross-border could not be derived.
It is worth noting that WIK’s estimate of total postal market size is significantly lower than Latvijas Pasts’ total revenue of EUR 39.7 million. This is due to the fact that the Latvian USP obtains almost half of its revenue from non-postal services. A representative of the company reported that on many days, every second item in a postbag is a money order and in addition, the postmen deliver unaddressed newspapers.
Where as the NRA reports that there was no competition at all in the most important market for letters and direct mail, the USP state “emerging” competition. According to the USP, its competitors are more active in the direct mail segment and the USP estimates its market share in this segment as low as 50-70%. However, this estimate may refer to a tiny and still emerging market for direct mail only as the USP could not quantify its own activities in this segment. Neither could the USP provide information on a substantial number of competitors in the (mostly reserved) letter market.
In comparison to express, the parcel market is generally understood to contain all services of comparable quality to the USPs parcel products. As standard parcels do not include home delivery in Latvia, the definition of a parcel market is particularly challenging. While the USP estimated its share in the parcel market to 50-70%, the NRA assumed a market share of more than 90% but noted that it did not have extensive research results available. By contrast the express market is dominated by private operators.
In light of this insubstantial and conflicting evidence, WIK has estimated the USP’s market share in postal markets as shown in Table 7-1 These estimates take into assessments given by the USP, the NRA and the Ministry responsible for the postal sector. As this information was not backed by extensive market monitoring, and not even the USP’s revenues could be accurately broken down to market segment, the estimates provided in Table 7-1 must be considered as no more than a best guess.
The USP is the major player of the Latvian postal market. For letters and direct mail, no competitors were named but the USP suspects some competitive action in this area. In the domestic parcel and express markets, major private competitors include the local Final report: Main aspects of postal networks in AC/CC 111
Country Report Latvia operators Autopasts Terminals, DDK, and City Express. In addition, there are several minor courier companies providing local (intra-city) services such as bicycle courier delivery. The USP reports to have had little success in promoting its domestic express products so far. The cross border express market is largely dominated by the international companies DHL, Federal Express (Latvian trademark: Lex System), TNT/TPG, and UPS (Latvian trademark: EKL/LPS). These four companies are estimated to share more than 80% of the market and are joined by BLS Baltic Logistics Systems (a Sweden Post subsidiary) and the local company Autopasts Terminals. Within a co-operation agreement, the USP sells DHL outbound cross border express services in post offices.
7.3 Market players
7.3.1 Universal service provider
7.3.1.1 Legal status and subsidiaries
Latvijas Pasts, the Latvian USP is a “non-profit joint stock company” and is entirely owned by the state. While the company is organised under normal company law in general, the non-profit status exempts the company from taxation of its profits. Moreover, dividends to the state are not compliant with the non-profit status at current; all profits have to be invested in the company.
The Director General of the USP is appointed by the Minister of Transport and Communications.
At current, there are several special relations between the USP and the state. For example, cash payment of pensions for the state is a major activity for the USP (and is the only way to receive pensions for elderly people in rural areas who often do not have bank accounts) and soldiers do not have pay postage. It is reported that there are compensations for these services the USP provides for the state, but no details about the amount or the procedure of determination of these compensations was available from the USP, the Ministry of Transport and Communications, or the NRA. In particular, it is not clear whether these compensations are related to the cost incurred by the services.
Although there appears to be no direct financial support by the government, several recent cases were reported where the state granted guarantees for credits the USP needs for investments in its infrastructure.
The USP is exempt from the payment of VAT in respect to the provision of “letter correspondence” which includes all letter post in practice (items of correspondence, 112 Final report: Main aspects of postal networks in AC/CC Country Report Latvia
direct mail and small parcels). BY contrast, revenues from other services are subject to VAT. The Ministry for Transport reported to have no plans to change the fiscal policy.
The USP participates in a joint venture with Finland Post called Latvijas Elektroniskais Pasts. The USP owns 51.25 percent of the joint venture that provides hybrid mail and services.
7.3.1.2 Service portfolio
Within the area of universal services, the USP in Latvia offers letters and parcels; home delivery of parcels in no standard service but is offered to addressees at a surcharge. The USP in Latvia offers several services outside the range of universal service. Non- universal postal services include hybrid mail and cross border express products incl. EMS to the Baltic countries and DHL services to other countries offered in post offices.
Moreover, the USP provides several non-postal services in the terms of the Acquis Communautaire. As a result of its Soviet heritage, the USP has important activities concerning the delivery of newspapers and periodicals and also accepts and handles subscriptions to these publications. In rural areas, virtually all newspapers are delivered by the USP. Apart from money orders, the USP pays out pensions for the state in cash, offers bill collection (e.g. for utilities and telecommunications companies) and international money transfers in co-operation with Western Union.
In addition, postal counters sell various product, from stationary, books, telephone cards and insurances (as an agent for insurance companies), down to fishing permissions and household goods such as soap or toilet paper. The retail activities of post offices vary between regions are more extensive in rural areas.
7.3.1.3 Postal infrastructure and automation
In general, the Latvian USP does not make extensive use of technology and automation. The USP does not use automated sorting machines so far. It was reported that even in the only national sorting centre in Riga where all national mail is sorted, the mail volume would allow for an efficient use of such machinery. A USP representative stated that “even as small sorting machine would probably handle out total national volume in an hour or so”.
For national transport, lorries and small transport vehicles are used, where as delivery is by foot or bicycles. There are plans to introduce motorised delivery in rural areas in the future. In 1998, the USP stared to replace its old vehicle fleet by modern lorries and transporters. As the process is not finalised, there are still many vehicles of more than Final report: Main aspects of postal networks in AC/CC 113
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10 years age in use. In some but not all post offices, personal computers are used for the provision of financial services.
7.3.1.4 Employment
Total workforce of the USP was 7229 persons in 2001. Neither information on employment later than 2001 nor the workforce expressed in full-time equivalents could be provided by the USP. Out of the 7229 employees, 2774 or 38% were part-timers. Part-time employment is used in rural areas, where post offices have reduced opening hours and delivery routes do not allow for a full time delivery person. None of the employees are civil servants. Seasonal employment is not used extensively, but it was reported that the administrative staff of the headquarter joins the sorting centre which is located in the same building during the Christmas peak load. In delivery and counter operations, almost 100% of the employees are reported to be female, where as drivers and staff in management and administration are mostly male. There is no official statement on the future employment policies of Latvijas Pasts.
7.3.2 Private operators
At the beginning of 2003, 26 companies incl. the USP had registered with the NRA as postal service providers (some registrations were issued by the Ministry before creation of the NRA): SIA Airkargo, SIA Akmens AUTO, SIA Alberta Uznemumu Grupa, SIA Atrums M, SIA Autopasts Terminals, SIA Baltic Logistic System – Latvija, SIA Kopuznemums Baltijas Ekspress Serviss, SIA BLS-Latvija, SIA City Express, SIA DDK (Depešu Dienests Kurjerpasts), SIA DHL International (Latvia) SIA, SIA Ekspresspasts, SIA EKL/LPS, SIA Fast Forward, SIA Katalogs R, SIA KR-ES, BO VAS Latvijas Pasts, SIA Lex System, SIA MSG Kurjers, SIA Parakstišanas Un Konsaltinga Serviss, SIA Pitkevitch & Co Ltd, SIA Spedair, SIA TNT Ekspress, SIA TNT Latvia, SIA Unison, SIA Velo Informacijas Centrs. A detailed breakdown of the registered companies to the services provided was not available from national authorities.
Only two private operators have provided information about their services in Latvia – Both companies, DDT and City Express provide local courier services and have 10-15 persons employed each. The participation of private operators does not allow to draw a clear picture of the express services market structure.
7.4 Market development
7.4.1 Universal services – letter post and parcels
Table 7-2 presents a summary of the volumes of postal items carried in the universal services from 1998 to 2002. All figures reflect postal items carried by the USP. The 114 Final report: Main aspects of postal networks in AC/CC Country Report Latvia
private operators have submitted no data. The USP failed to provide several important breakdowns, in particular separate categories of letter post could not be broken down and no volume data for 2002 was provided.
Table 7-2: USP volumes of universal and non-universal services (Latvia)
4-yr 1998 1999 2000 2001 2002 change Universal services Letter post LP Domestic Pcs-000 27,045 27,908 40,472 42,712 na 58% LP per capita Pcs-000 11.0 11.5 16.7 18.1 na LP per EUR 1000 GDP 5.0 4.5 5.2 5.0 na LP Outbound cross border Pcs-000 3,760 na 3,815 3,695 na -2% Outbound/inbound 44% na 49% 49% na LP Inbound cross border Pcs-000 8,616 8,153 7,839 7,510 na -13% LP ICB/LP Domestic 32% 29% 19% 18% na Parcels Domestic Pcs-000 73.1 315.8 449.6 na na na Outbound cross border Pcs-000 6.8 7.8 10.1 10.3 na 52% Non-universal services Express Outbound cross border Pcs-000 na na na na na Unaddressed mail Pcs-000 na na na na na Notes: No data provided for 2002
Source: WIK-Consult
Although at relatively low level of volume, the universal services market in Latvia appears to be growing. There was a significant increase in domestic letter volume in the last years, and domestic letter items per cap still were 18 in 2001, approx. 8% of the EU-15 average. The number of letters per 1000 EUR GDP was slightly more than 5 in 2001 compared to an average of 10 in the EU-15. With increasing domestic volumes the share of incoming cross border decreased from 32% in 1998 to 18% in 2001 but still the USP can be considered to be relatively dependent on inbound mail as every fifth letter that is delivered is non-domestic. As a result, the revenues from letter operations are largely dependent on terminal dues and foreign postal operators.
The USP reported that in the middle of the 1990ies it had hardly any domestic parcel operations and his parcel services suffered from a bad reputation. In the last years he managed to increase its parcel volume significantly (although starting from close to nil). However, the parcel volumes provided by the USP are extremely at odds with the information provide to UPU and should be treated with an appropriate degree of caution. Conclusions regarding the development of the total Latvian market for parcel Final report: Main aspects of postal networks in AC/CC 115
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(or parcel and express) services cannot be drawn from the USP volumes as the relatively important activities of private operators could not be quantified.
Evaluation of the markets for universal services in Latvia was challenged as only incomplete data was provided by the USP. However, the USP could understandably explain that its internal accounting systems do not allow to provide more detailed data at current. In general, evaluation of the data as well as statements of USP representatives suggest that there is still large potential for development of the universal services market. The time series prove that the USP has already taken first important steps towards this positive development.
7.4.2 Non-universal services
7.4.2.1 Express services
In the domestic express market, the USP reports substantial competition, citing the following companies as its main competitors: Autopasts Terminals, Baltic Logistics Systems (A Sweden Post subsidiary) and Lex System (FedEx). The NRA estimates that the USP has approx. 50-70 percent share of the domestic express market, while the USP estimates to have only 10-30%.
In the international express market, the USP reports substantial competition while the NRA assesses competition as intense. In addition the four major global express companies (DHL, TPG, FedEx, UPS) Autopasts Terminals and Sweden Post’s subsidiary Baltic Logistic System are the most important players in this market. The NRA estimates a market share of the USP of 7-8% while the USP states 10-30%. One reason explaining the different estimations may be that the USP included the outbound DHL services sold in post offices when making its estimation while the NRA did not.
7.4.2.2 Document exchanges
Neither the NRA nor the USP reported any document exchange activity.
7.4.2.3 Unaddressed items
The USP reports substantial competition in the unaddressed mail market, estimating its market share at 30 to 50 percent. In the last few years the USP has increased its participation in this market and reports to have had approx. 1.3 million Euros revenues from the delivery of unaddressed items in 2002. Taking into account the very rough estimate of the USP’s market share, the market size is approx. 3 million Euros in total. 116 Final report: Main aspects of postal networks in AC/CC Country Report Latvia
7.5 Universal service in practice
7.5.1 Scope of universal service
In conformance with the universal service obligation, the USP provides service to all points in Latvia for all types of letters, direct mail, newspapers, periodicals, and books weighing up to 2 kg and for domestic parcels weighing up to 10 kg. The USP does not, however, deliver parcels to the home unless the resident pays an extra fee; otherwise, addressees must picking up their parcels at the post office.
In addition, the USP provides universal delivery parcels up to 31.5 kg. The USP offers registration services for all universal service items and insurance for all letters and parcels.
Delivery service is provided six days per week in the entire territory of Latvia and clears all collection boxes six days per week.38
7.5.2 Reserved services in practice
Current legislation still reserves all letter services up to 2 kg to the USP. However, the USP suspects emerging competition to some extent in this area but cannot name specific competitors.
The authorities are currently drafting a postal law that is reported to reduce the reserved area in compliance with the Acquis Communautaire to 200g before accession in 2004.
7.5.3 Access
Although Latvia is relatively scarcely populated, the USP offers a fairly good level of access to universal postal services. The public postal network provides 4.1 post offices and 10 collection letter boxes per 10,000 inhabitants, the indicators rank above EU average for postal outlets (EU-15: 2.4) and below for letter boxes (EU-15: 18). Using measures comparing the density of the access network against land area, 14.9 post offices and 38 letter boxes per 1000 square are well below EU average but state more access points that Finland.
The USP does not make use of postal agencies. The access network is amended by two mobile post offices serving very rural areas and by all postmen offering basic services such as sale of stamps. Latvian Post does not intend any changes in its access network in the near future.
38 Although the USP is only obliged to deliver five days a week as stated by the NRA, Final report: Main aspects of postal networks in AC/CC 117
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The UPS has not established targets for queuing time.
7.5.4 Tariffs and accounting principles
The USP provides a uniform national rate for the collection and delivery of all postal items conveyed in the universal service throughout the national territory. However, universal parcel service does not include home delivery but parcels may be delivered to the addressee against payment of an extra fee. The USP offers several types of discounts to bulk mailers. Discounts appear to be granted based on individual contracts such that it is not clear whether they can be considered as transparent and non- discriminatory. That last change in postal rates was In January 1999.
The USP does not maintain separate accounts for reserved, non-reserved universal and non universal services. Also it was reported that current costing methods would hardly allow for separation of accounts. Table 7-3 presents the postage rates for first class letter services effective on June 1, 2003, in local currency and Euros.
Table 7-3: Postage rates for domestic first class letter services (Latvia)
Weight up to Rate (local currency) Rate (Euro) 20g 0.15 0.26 40g 0.20 0.34 60g 0.25 0.43 80g 0.30 0.52 100g 0.35 0.60 500g 0.45 0.78 250g 0.40 0.69 1000g 0.60 1.03 2000g 0.85 1.47
Source: WIK-Consult
7.5.5 Quality of service
The USP does not yet satisfy several norms in respect to quality of service. The USP does not establish and publish quality of service targets. No independent monitoring of quality of service performance is provided. Neither does the USP publish or measure its performance concerning routing time.
National legislation currently sets out a target of D+5. Legislative changes concerning quality of service are likely for the future but no details have been disclosed so far. The NRA is formally in charge of measuring quality of service and has begun with first steps 118 Final report: Main aspects of postal networks in AC/CC Country Report Latvia
towards implementation of a measurement system in 2002. First publications on performance by the NRA are expected for late 2003.
Given the small size of Latvia, routing time does not appear to be considered as a major problem by both USP and NRA. The USP assesses that “most items are delivered in D+1” and the NRA agrees by stating the quality is “not too bad”.
7.5.6 Complaint and redress
The USP operates a separate office called “Customer Claims Service” and the NRA is in charge of finally resolving customer complaints where no sufficient resolution could be achieved between customers and USP. The NRA reports that there was only one incident where such resolution by the NRA became necessary so far. However, there are no publications on the numbers of complaints neither from USP nor NRA, let alone breakdowns by type of resolution.
7.6 Regulatory situation
7.6.1 Overview of postal regulation
7.6.1.1 Postal legislation
The current Postal Law dates from 1994 and was amended twice, the last time in December 2000. In addition there is a Law on Regulators of Public Services that established the NRA (Public Utilities Commission) in June 2001. Both laws were available in English translation from the Ministry of Transport and Communications.
There are two regulations of the Cabinet of Ministers that are not translated to any of the Commission’s working languages and could not be analysed during this survey: Postal Rules (Regulation 265) and Postal Tariffs (Regulation 131).
7.6.1.2 Regulatory institutions
The Latvian Ministry of Transport and Communications is responsible for strategic policy issues, working our draft legislation and supervising institutions below its jurisdiction in the sectors for transport (road, rail, sea and air transport), telecommunications, post, and information technologies.
In the postal sector, the Ministry’s Communications department describes its specific responsibilities as follows: Final report: Main aspects of postal networks in AC/CC 119
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• Elaborating development policy in the field of post, which determine goals corresponding to public interests and the ways of achieving them;
• Working out draft regulations of the Cabinet of Ministers, instructions and other legislative to transpose EU Postal Acquis.
Moreover, the Ministry supervises both the operations of the USP including the management of the Government’s ownership rights and the NRA. In particular, the Minister appoints the USP’s Director.
The Latvian Public Utilities Commission (PUC), an independent state institution established in 2001, is responsible for regulation of the energy, telecommunications, post and railway sectors. The authority’s postal responsibilities are described as follows:
• To provide users with high quality, continuous and safe public utilities for economically reasonable prices (tariffs),
• To stimulate efficiency and sustainable development of public utilities ensuring profitability levels consistent with the prevailing economic conditions,
• To promote economically justified competition in the regulated sectors,
• Sets the tariff calculation methodology and Approves tariffs for utilities,
• Issues licences and supervises implementation of the set conditions,
• Supervises compliance of utilities with requirements for quality and environmental protection, technical regulations, standards,
• Performs dispute out-of-court settlement, etc.
It should be noted that the Ministry is currently drafting a new postal law aiming at complying with the requirements of the Postal Directives. It is expected that this will also concern the allocation of regulatory functions. According to the Ministry, the specific tasks in postal regulation are not entirely clearly defined before the implementation of the new postal law.
7.6.1.3 History and philosophy of postal regulation
The first postal law since Latvia’s independence was adopted in 1994 and amended twice since. A strategic paper outlining postal policy goals does not exist but it appears current legislation considers the postal sector largely as part of the administration and postal operations are still widely influenced by government policy. The USP has oriented itself towards commercial interest only recently and enjoys monopoly rights for letter services up to 2 kg.
The creation of the NRA in 2001 was a milestone in postal policy and a first step towards alignment with the Acquis Communautaire. Since 2000 drafting of a new postal 120 Final report: Main aspects of postal networks in AC/CC Country Report Latvia
law is carried out in the Ministry in order to facilitate compliance with the Acquis but the Ministry did not provide a translation of the draft nor provided details of it. Adoption of the law is envisaged for late 2003.
With respect to the role of competition in postal markets, the Ministry states that “for the time being, universal postal services should be maintained also in the future. It is not yet clear which would be the best way to develop this sector in Latvia.”
7.6.2 Universal Service
The basic legal requirements for universal service in Latvia are summarised in Part I of this report. As described above, the USP appears to fulfil these requirements in the entire territory and without geographic exceptions.
The 1994 postal law defines specific tasks and duties of Latvia Post (Section 22) such that the company is interpreted as the only USP in the country. In addition to postal services in terms if the Postal Directives, the law specifies the USP’s right, but not obligation to provide various services: 1) to pay pensions and social benefits; 2) to accept subscriptions to periodical press publications and to effect delivery of press publications to the subscribers; 3) to certify the contents of postal items; 4) to accept payments for public utilities and other services; 5) to carry postal items; 6) to sell State securities; 7) to provide other services and carry out other operations provided for by the articles of association approved by the Minister for Transport in accordance with the procedures prescribed by legislative enactments.
7.6.3 Reserved services
The Postal law states that “Latvia Post has monopoly rights to accept, transfer and deliver within the borders of the State both inland and international letter-post items – letters, postcards, printed matter and small packets.”
There are no openings of the reservation (e.g. for direct mail, outbound cross border, or document exchange) but the law excludes from the monopoly “those postal services which typically contain additional service features” (Section 5.1 (1)). There appears to no regulation that provides further specification for those value-added or express services but in regulatory practice several licences to provide such services have been issued. Final report: Main aspects of postal networks in AC/CC 121
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7.6.4 Regulation of non-reserved services
Under the postal law, all postal services that are not reserved – whether universal or not - require a “licence”. However, licence conditions do not appear to be restrictive such that they should be considered as general authorisations rather than licences in terms of the Postal Directive. In practice, it appears that none of the licensed companies provides universal services.
The law does not provide a clear definition of the types of postal services that require licensing (and that are consequently not reserved). According to Section 9 of the postal law, the NRA shall determine a minimum tariff for licensed services that must not be lower than the tariff for standard universal services. The NRA has not determined this minimum tariff so far and in practice considers licensed operators as violating the monopoly if they offer lower prices than the USP. According to the NRA, there are several local couriers that are trying to charge lower prices such that regulatory intervention became necessary to enforce the reservation.
Legislation does not provide for a compensation fund.
7.6.5 Access
The Latvian postal legislation does not set out requirements concerning access to the public postal network. Equally there are no provisions concerning downstream network access (work sharing) by customers or competitors.
According to the Ministry, future legislation will contain minimum access requirement and will probably give the USP the opportunity to reduce its network’s density slightly.
7.6.6 Tariff and accounting principles
Current postal tariffs had been approved by a regulation of the Cabinet of Ministers. From the Postal Law and the Law on Regulators of Public Services it is not clear whether the NRA is already formally responsible for approving postal tariffs. However, it is expected that the new law will clearly allocate this function to the NRA: Since its establishment in 2001 the NRA has not had the opportunity to approve tariffs. There is no procedure of approval for the special tariffs that are employed by the USP.
Specific procedures for tariff regulation have not been set out so far. Moreover, current legislation does not require the USP to keep separate accounts for reserved, universal and non-universal services. However, the NRA is already working on a methodology for tariff calculation.
The postal law requires the USP to apply uniform tariffs for all domestic postal services. 122 Final report: Main aspects of postal networks in AC/CC Country Report Latvia
7.6.7 Quality of service
According to legal analysis and information from the Ministry and the NRA no targets concerning routing time have been set out so far. However, the USP mentions a requirement to deliver all domestic mail within D+5 but fails to provide legal reference.
There are no legal provisions that require measurement or publication of the USP’s routing time performance.
7.6.8 Complaint and redress
Latvia has a relatively opaque procedure for addressing complaints by postal customers. The postal law does not require the USP to establish a separate office dedicated to the resolution of customer complaints, nor does it require publication of the number and handling of complaints.
However, the Law on Regulators of Public Services requires that the “[r]egulator co- operates with public organisations for protection of consumers’ interests established in accordance with the ‘Law on Protection of Consumers rights’ and protecting consumers’ rights in regulated industries, as well as with institutions supervising and controlling observation of consumers’ rights and interests.” Although these general provisions have not been specified so far, the NRA has already acted as final arbiter at one occasion.
7.6.9 National regulatory authority
The institutional structure of the Latvian NRA – PUC – guarantees its function as a “legally separate operationally independent” authority. The Council of the NRA (its decision-making body) and its chairperson are appointed for a 5 years term by the Cabinet of Ministers and may not be dismissed except for cases of criminal offence.
The NRA has an independent budget that is approved by the Council of Ministers and its decisions may only be reviewed by courts. The NRA’s postal division consists of 13 persons including 9 professional staff (lawyers, economists, or holders of equivalent degree).
In general it appears that the PUC is in a strong position to execute its regulatory tasks – both due to its independence and its administrative capacity. However, under current postal legislation it appears that there remain some doubts concerning its exact responsibilities for postal markets.
Country Report
8 MT – Malta
124 Final report: Main aspects of postal networks in AC/CC Country Report Malta
MALTA – GENERAL FACTS
Economy
GDP in EUR, 2001, (million): 4,000 GDP per capita in EUR, 2001: 10,178
GDP in PPS, 2001 (million): na GDP per capita in PPS, 2001: na
GDP growth rate, 2001: -0.8% Unemployment rate, 2002: 8%
Population and geography
Population, 2001 (thousands): 393 Density (Persons per sq. km): 1,244
Land area, 2002 (square km): 316 Urbanisation (Pop. in urban areas): 91%
Transport and communications infrastructure
Railway network, 1999 (km): na Fixed lines per 100 households, 2002: 126
Road infrastructure, 1999 (highway km): na Mobile penetration rate, 2002: 32%
International airports, 2003: 1 Internet users penetration, 2002: 29% Source: Eurostat NewCronos; UN World Urbanization Prospects (2001); IBM Monitoring of EU candidate countries, telecommunications sector (2002); www.columbusguide.com.
MALTA – POSTAL FACTS
Universal service provider
Name of USP: Maltapost USP employment, 2002 (persons): 830
USP revenue, 2002 (million EUR): 19 USP employment of total workforce: na
Annual revenue growth (CAGR), 98-02: -0.4%
Volumes and tariffs
Dom. letter post volume, 2001 (million): 48 Dom. letter post per capita, 2001: 121.4
Cross border LP: OCB/ICB ratio, 2001: 71% Domestic parcels per capita, 2001: 0,0008
Cross border LP: ICB/Dom ratio 2001: 18% Basic letter tariff, June 2003: 0.15€
Postal network (access)
Postal outlets, 2002: 52 Letter boxes, 2002: 526
Outlets per 10,000 inhabitants: 1.3 Letter boxes per 10,000 inhabitants: 13.4
Outlets per 1,000 sq. km: 164.6 Letter boxes per 1,000 sq. km: 1,664.6 Source: WIK-Consult, UPU
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8.1 Basic country information
Located at the southern tip of Sicily, Malta lies at the crossroads between Europe and Africa and is a melting pot of civilisations in the heart of the Mediterranean since the era of the crusades. Malta boosts a rich legacy from its centuries-old history and its massive fortifications which witnessed the bravery of the Maltese people over the centuries. In 1942, the courage and endurance of the Maltese people was recognised when the United Kingdom awarded to Malta the George Cross, which is now an integral part of the national flag. As a result of its British heritage, English is the second official language in addition to the national language, Malti. The three Maltese island were populated by 393,000 inhabitants in 2001 - given the total size of only 316 square km, Malta is one of the most urbanised and most densely populated countries of the world.
Already before accession, Malta is well integrated in terms of trade into the European Union. The latter accounted for around 33% of Malta's exports and 60% of its imports in 2000 and the share of imports and exports in GDP are increasing significantly. The export base of the economy is concentrated in a few sectors, mainly in electronics, machinery and transport equipment (which generated about 75% of total exports in the first half of 2001).
Since 1995, the Maltese economy has resumed growth at nominal GDP growth rates between 3.4 and 6.2 percent. Nominal GDP was 4.0 billion EUR in 2001 or 10,178 EUR per head. Comparing nominal GDP values per capita across all adhesion countries, Malta ranks third behind Cyprus and Slovenia thus being one of the most developed AC countries. Due to its limited size, Malta accounts for only 0.04% of all AC’s land area, 0.53% of all AC population but for 0.97% of total GDP in the 10 adhesion countries.
The Maltese communication markets are very well developed: The number of 126 fixed telephone lines per 100 households is above the average of EU-15 (110), while mobile penetration was at 32% in 2002 and 29% of the Maltese population used the internet in 2002. 126 Final report: Main aspects of postal networks in AC/CC Country Report Malta
8.2 Overview of postal market
Based on available information, WIK estimates the total market for domestic and outbound postal services in Malta to be about 20 million EUR. The market for letter services (both domestic and outbound cross border) accounted for approx. 15 million EUR in 2002, while the markets for outbound parcel and express generated were about 2 million EUR each. Domestic markets for parcels and express appear to be of negligible size. The estimates must be considered as very approximate.
Table 8-1: Estimated market 2002 (Malta)
USP Rev, 2002 WIK Est. Market Rev, 2002 EUR 000 USP share EUR 000 Total letter post 14,182 95% 14,928 Total parcels 1,786 90% 1,985 Express, OCB 301 15% 2,004 Unaddressed mail, domestic 688 50% 1,376 Revenues for letter post and parcels refer to the sum of domestic and outbound services. Maltapost does not offer domestic express services.
Source: WIK-Consult
This estimate of the size of the postal market has been developed using the following information. There appear to be no surveys of the total market for postal services in Malta. The USP has provided credible revenue data for basic market segments and assessed of the degree of competition. The estimates of markets shares presented in the table below are based on assessments made by the USP during a discussion. Although the NRA reported not to have sufficient information to assess market shares yet - the authority has become responsible for the postal market very recently - those reported by the USP were considered to appear reasonable by the NRA.
The USP reports no competition in the domestic letter segments and only emerging competition in the segments for domestic direct mail and outbound cross border letters. Further, the USP reported not to face competition at all for outbound cross border parcels but emerging competition in the tiny domestic parcel market. While substantial competition in the cross border express market was reported, the USP does not offer express services domestically. In general, it appears that a domestic market for express services hardly exists in Malta. Since any domestic location in Malta can be reached in less than one hour by car, it was reported that customers rather tend to deliver urgent items on their own instead of using an express service. The same reason may explain the tiny size of the domestic parcel market (relative to both Malta’s population and wealth). The USP reported substantial competition in the market for delivery of unaddressed advertisements. Final report: Main aspects of postal networks in AC/CC 127
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As reported by Maltese parties, it appears obvious that the USP has a market share close to 100% in the letter and parcel markets for two reasons: First, private express and parcel operators appear to be reluctant to offer domestic services in Malta. Second, postal market liberalisation became effective only in 2003, such that there was no legal framework for competition until the year 2002. However, the market share estimates for the markets for outbound express services and for unaddressed items are not based on extensive research such that the estimates of market size for these two segments must be considered as no more than a “best guess”.
The major player in the Maltese postal services market is the USP Maltapost. There appear to be no private operators in the domestic letter market; but outbound cross border services are provided by TPG/TNT. The market for parcel and express services (mostly cross border) is dominated by the major global operators DHL, UPS, and TNT, joined by three local companies: Gazelle Services, Pony Express and Wing Couriers Ltd.
8.3 Market players
8.3.1 Universal service provider
8.3.1.1 Legal status and subsidiaries
The USP is Maltapost Plc; a limited liability company organised under normal company law. The majority of shares are owned by government while 35% are held by a strategic investor – New Zealand Post’s subsidiary Transend Worldwide Ltd.
The USP does not receive subsidies from the state budget. By contrast, the government is paid a licence fee of 200,000 MTL annually; approx. 0.5 million EUR or 3% of Maltapost’s total revenues in 2002. It was reported that the dividend policy agreed between the Maltese government and Transend suggests to pay out 60% of net profits given that no liquidity problems would result from the dividend. No profits have been retained in 2002 nor in the years preceding the investment of Transend.
The USP did not report to have any subsidiaries.
The USP is entirely exempt from the payment of VAT for all services it provides. 128 Final report: Main aspects of postal networks in AC/CC Country Report Malta
8.3.1.2 Service portfolio
The USP in Malta mainly offers universal services including letter and parcel products – both domestically and cross border.
In the area of non-universal services, the USP delivers unaddressed items and offers lettershop activities such as addressing and labelling to bulk mailers. The USP does not offer financial products other than money orders. While EMS is offered to foreign destinations and incoming items are delivered, the USP does not offer domestic express services. For cross border express services, plans were reported to team up with a private express company in the future in order to amend or replace the EMS products that are currently offered.
Postal counters sell telephone cards, greeting cards, lottery tickets, envelopes, cardboard boxes and stationery items. Moreover, the USP offers payment services to the state and public utilities, i.e. telephone, water, electricity, and Cable TV payments as well as VAT payments are accepted in post offices.
8.3.1.3 Postal infrastructure and automation
Having in mind the size of Malta, the USP appears to make limited but appropriate use of technology and automation. There is one central sorting facility in Marsa (near the capital Valletta). The USP reported to make substantial progress in optimising its network structure. Apart from postal outlets (self-owned “branch offices” and postal agencies), the network consists of the central sorting and transportation hub and 28 delivery offices at the end of 2002. In the medium term, plans are to reduce the number of delivery offices to five. The USP has not used automated sorting machinery since and Maltese mail volumes appear to be too low to justify the use of sorting machines at present. Domestic transport is facilitated by cars and small lorries which are reported to be relatively new, namely less than three years old.
Post offices are currently not equipped with personal computers. However, the USP reported to have plans related to computerisation “in the pipeline”. Tracking and tracing is not provided domestically but only for cross border EMS and registered items to some destinations – which is not surprising given that the USP does not offer domestic express products.
8.3.1.4 Employment
At the end of 2002, Maltapost had a total workforce of 748 full time equivalents. The USP reported not to make use of seasonal or part-time employment in general though there is a dozen of part-timers in the headquarters. Since 1998, the USP reduced its employment by 11.9% and is planning some further decreases in the future. None of the employees are civil servants. However, most employees hold a special status of Final report: Main aspects of postal networks in AC/CC 129
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(former) state employees such that these staff will return to government departments or agencies rather than being laid off.
8.3.2 Private operators
Since a licensing regime for private operators has not been implemented yet, information about private operators in Malta is limited. There appear to be no private operators in the domestic letter market so far. However, TNT (TPG) was reported to offer outbound cross border letters or direct mail. The market for parcel and express services is dominated by the major global operators DHL, UPS, and TNT, joined by three local companies: Gazelle Services, Pony Express and Wing Couriers Ltd. The most important private operator in the unaddressed segment is a company called “3D Company Ltd.”, but this service is also provided by very small companies or individuals.
Private operators have provided no information about their services in Malta.
8.4 Market development
8.4.1 Universal services – letter post and parcels
The analysis of the Maltese market for universal services was challenged by the fact that the USP reported not to be able to provide detailed information on its volumes carried. Therefore this report presents conclusion based volumes reported to the UPU as well as on other information provided by the USP.
Table 8-2 presents a summary of the volumes of postal items carried in the universal services from 1999 to 2001. All figures reflect postal items carried by the USP as reported to the UPU. There are no statistics for 2002 available and the Maltapost did not provide basic volume information to the UPU for 1998. No information about universal services provided by private operators was available within this survey. However, it appears that private operator’s activities related to universal services in Malta are negligible as there are no important letter nor parcel operators (apparently due to the small size of the country and its postal market).
It appears that the universal services market in Malta is well developed but little growth could be observed in the last years. Based on the UPU volume information and on revenues data reported by the USP, it appears that domestic letter volumes experienced a slight growth since 1999 while cross border volumes dropped slightly. The total number of domestic letter post items in 2001 was 121, about half the average in the EU-15. However, domestic letters per capita in Malta were about the same as in Spain and higher than in three countries in the EU-15 (EL, IT, PT). Comparing letter volumes to GDP, i.e. assessing letter post volumes against the economic potential of the national economy, there were 11.9 letters per 100 EUR GDP in Malta, slightly more 130 Final report: Main aspects of postal networks in AC/CC Country Report Malta
than in the EU-15 on average (10.3). Cross border letter services are of particular importance to the Maltese USP. As reported to the UPU, the ratio between incoming cross border and domestic letter post items was between 18% and 33% in the period from 1999-2001. Thus between 15% and 25% of all letter post delivered in Malta originated from abroad. The UPU statistics suggest a dramatic drop in inbound letter volumes since 1999. This might be explained by reports from the USP that periodicals and books from abroad are increasingly sent to Malta in large shipments and distributed by local agents thereafter - rather than being sent as letter post items to the readers directly. The ratio between outbound and inbound letter post presented in Table 8-2 (between 35% and 71% from 1999 to 2001) indicates that Malta receives significantly more cross border letter post that it posts itself. This is a usual phenomenon in relatively less developed countries, but may additionally be explained by Malta’s size and the resulting dependence on foreign trade (e.g., relatively more Maltese have foreign cards or read foreign press than in bigger countries). However, the increase of this ratio from 35% to 71% is mostly a result of decreasing inbound volumes that could not entirely be explained by the USP. A similar ratio derived from cross border weight data provided by the USP indicates that from 1998 to 2002, the relation of outbound and inbound letter post was relatively stable around 31% and 39%. For outbound cross border letters, the growth rate presented in the table below may significantly understate the market development as it does not contain volumes carried by private operators.
A thorough assessment of the reliability of the volume data the USP submitted to the UPU was not possible within this survey. Unlike the vast majority of USP within this survey, Maltapost claimed not to be able to report reliable volumes data to WIK. This suggests the possibility of improvement in data collection within the USP, in particular related to volume estimation.
Table 8-2: USP volumes of universal services (Malta)
3-yr 1999 2000 2001 change Universal services Letter post LP Domestic Pcs-000 44,556 45,837 47,709 7% LP per capita Pcs-000 114.8 117.5 121.4 LP per EUR 1000 GDP Pcs-000 13.1 11.8 11.9 LP Outbound cross border Pcs-000 5,231 6,611 5,918 13% Outbound/inbound 35% 64% 71% LP Inbound cross border Pcs-000 14,908 10,280 8,390 -44% LP ICB/LP Domestic 33% 22% 18% Parcels Domestic Pcs-000 0.25 0.21 0.33 33% Outbound cross border Pcs-000 12.12 11.19 11.88 -2% Source: UPU statistics. No volume information was reported by the USP. Source: WIK-Consult Final report: Main aspects of postal networks in AC/CC 131
Country Report Malta
8.4.2 Non-universal services
8.4.2.1 Express services
Following reports from both USP and NRA, there is substantial competition in the cross border express market but no competition at all for domestic express services. For outbound cross border express, the USP estimates its market share to approx. 15%. The most important private competitors in the cross border express market include DHL, TNT and UPS.
8.4.2.2 Document exchanges
Neither the NRA nor the USP reported any document exchange activity in Malta.
8.4.2.3 Unaddressed items
The USP reports emerging competition in the unaddressed mail market, estimating its market share at 50 to 70 %. The most important private competitor was reported to be a company called “3D Company Ltd.”
8.5 Universal service in practice
8.5.1 Scope of universal service
In accordance with the USO, the USP provides service to all points in Malta for all types of letters, direct mail, newspapers, and periodicals weighing up to 2 kg and for books and domestic parcels weighing up to 5 kg. In addition, the USP provides universal delivery for special mail for the blind, cross border EMS services and delivers incoming cross border parcels up to 30 kg. However, the USP does not deliver standard parcels to the home. The addressee has to collect the parcel from the post office or may have it delivered home at an extra charge.
There are no geographic exceptions to the universal service provision. The USP offers registration but not insurance for universal services. Delivery service and clearance of letter boxes is provided six days per week. 132 Final report: Main aspects of postal networks in AC/CC Country Report Malta
8.5.2 Reserved services in practice
Until the amended postal act became effective in June 2003, all postal services were reserved to Maltapost as a matter of law.
However, it appears that the provision of express services and the substantial competition in this market was tolerated by the authorities although not liberalised de jure. Similarly competitive operations in the parcel business were tolerated, but competition was reported to be less intense in this segment than for express services.
For letter services and direct mail, which were entirely reserved until June 2003, the NRA reported no competition. However, the USP reported substantial competition in the direct mail segment and emerging competition in the segments for domestic and incoming cross border letter post.
8.5.3 Access
As summarised in Part I of this report, the USP in Malta provides a very high level of access to postal services. Malta has 1.3 post outlets (offices or agencies) and 13 letter boxes per 10,000 inhabitants. This is well below the EU-15 averages of 2.4 and 18 but can easily be explained by the enormous population density and high urbanisation of Malta. With 165 postal outlets and 1,665 letter boxes per 1,000 square km, the “spatial density” of the access network is more than five times higher then in the EU-15 on average!
A high percentage of postal outlets are agencies (22 out of 52). In addition to post offices and agencies, the USP operates one mobile post office which provides postal services at main urban locations, mostly to tourists. For the future, the USP is considering to reduce the number of letter boxes slightly.
The UPS has not established targets for queuing time.
8.5.4 Tariff and accounting principles
The USP provides a uniform national rate for the collection and delivery of all postal items conveyed in the universal service throughout the national territory. The USP does, however, charge extra fee for home delivery for parcels. Current postal rates became effective in 2001.
The USP does not maintain separate accounts for reserved, non-reserved universal and non universal services. (It should be noted that there was no obligation to do so until recently, nor had universal services or the reserved area been clearly defined until June 2003.) The NRA and the USP both reported their intention to implement regulatory Final report: Main aspects of postal networks in AC/CC 133
Country Report Malta procedures (NRA) and an appropriate accounting system using separate accounts (USP) at the end of 2003.
Table 8-3 presents the postage rates for first class letter services effective on 1 June 2003, in local currency and Euros.
Table 8-3: Postage rates for domestic first class letter services (Malta)
Weight up to Rate (local currency) Rate (Euro) 50g 0.07 0.15 4c for each additional 50g, e.g. 100g 0.11 0.24 250g 0.23 0.50 500g 0.43 0.93 1000g 0.83 1.80 2000g 1.63 3.53
Source: WIK-Consult
8.5.5 Quality of service
The Maltese postal sector does not yet satisfy several norms in respect to quality of service. The USP does not establish and publish quality of service targets. No independent monitoring of quality of service performance is provided. Neither has the NRA established routing time targets or measurement procedures – nor has the Postmaster General (within the Ministry) who was responsible for postal regulation before June 2003.
Internally, the USP has set a goal of delivering 95% of domestic mail in D+1 delivery and 98% in D+2. In 2002, the USP reports that 84% of the mail was delivered in D+1 but did not disclose details about the measurements methods that had been applied.
For the measurement cross border mail, the USP participates in UNEX lite and performs diagnostic monitoring for mail flows exchanged with four European countries (D, F, I, and UK).
8.5.6 Complaint and redress
The USP operates a “customer care department” to deal with customer complaints. However, there are no data, published or unpublished, on the number, nature, or resolution of complaints.
Until June 2003, the Postmaster General was responsible to finally resolve customer complaints. However, no practical experience with this task was reported by the 134 Final report: Main aspects of postal networks in AC/CC Country Report Malta
Postmaster General. For the future, it appears that no regulatory procedures concerning the handling of customer complaints have been established yet.
8.6 Regulatory situation
8.6.1 Overview of postal regulation
8.6.1.1 Postal legislation
An amendment to the Postal Act of 9 December 1975 passed Parliament in December 2002. Only following a legal notice by the Minister of Transport and Communications the amended act entered into force as of 1 June 2003. An unofficial version of the amended law is available from the NRA’s internet website, www.mca.org.mt.
As of July 2003, there was no subsidiary legislation for the postal sector in place.
8.6.1.2 Regulatory institutions
Responsibility for the postal sector within the government is within the Ministry for Transport and Communications. Apart from postal services, the Ministry is responsible for public transport, civil aviation, maritime transport and roads as well as for telecommunications and electronic commerce.
The Ministry is the entity which determines the postal policy and is responsible for the preparation of legislation. Until June 2001, the permanent secretary occupied the post of Acting Post Master General who in part performed the function of a postal regulator.
As recently as by June 2003, the Malta Communications Authority (MCA) has been vested with responsibility to regulate the postal sector under the newly amended Postal Services Act. The MCA was set up under the Malta Communications Authority Act which was enacted in August 2000. The MCA started to operate on 1 January 2001 and is responsible for regulating the telecommunications sector, e-commerce and certain aspects relating to data protection in the communication sector.
Currently the MCA is in the process of launching its postal activities which will include licensing of postal operators, ensuring adherence with the postal legislation, ensuring Universal Service, monitoring quality of service, tariff regulation, supervision of the USP’s accounts and dealing with disputes and complaints. Final report: Main aspects of postal networks in AC/CC 135
Country Report Malta
8.6.1.3 History and philosophy of postal regulation
Until the mid-1990s, postal services in Malta were provided by a government department. Subsequently, the incumbent postal operator was transformed to a 100 per cent government owned company and certain regulatory functions were shifted to the Postmaster General operating within the Ministry for Transport and Communications. In 2002, 35% of the shares of the incumbent operator were sold to Transend Worldwide, a subsidiary of New Zealand Post.
In December 2002, the postal act was amended substantially and is considered to transpose the European postal directives.
As mentioned before, the Maltese regulatory framework is just about to be set up. The Ministry (the Postmaster General by that time) reported the following tasks to be the most important in the near future: i) Establishment of the MCA’s postal operations; ii) alignment of national legislation with the Acquis Communautaire; iii) Creation of the appeals board; and iv) Promotion of competition in order to increase quality of services and decrease prices. The NRA reported the following tasks as its major milestones for the year 2003: i) Implementation of appropriate service definitions (market segmentation) and of the licensing regime; ii) Definition of detailed universal services requirements; iii) Analysis of the USP’s accounts and development of the necessary procedures to enforce accounting separation; and iv) Setting up principles and procedures for tariff regulation.
Moreover, plans were reported to reduce the reserved area in accordance with the second postal directive before accession in May 2004.
8.6.2 Universal Service
The basic legal requirements for universal service according to the amended postal act are summarised in Part I of this report. Notwithstanding further specification of the universal service requirements by the NRA (e.g. concerning quality of service), the USP appears to fulfil the requirements with one exception: While Art. 17 (5) (d) requires the USP to provide insurance for postal items, Maltapost currently does not offer insured mail services.
Following Art. 17 (3), the Minister should impose a universal service obligation on a postal service provider after consultation with the NRA. Although no USP has been designated (as of July 2003), it appears very likely that Maltapost will be obliged to provide universal service. 136 Final report: Main aspects of postal networks in AC/CC Country Report Malta
8.6.3 Reserved services
According to Art. 20 of the postal act, clearance, sorting, transport, and delivery of domestic “articles of correspondence” as well as cross border and direct mail are reserved to the USP if falling within the weight limit of 350g or five times the basic tariff. The reservation explicitly excludes books, catalogues, newspapers and periodicals.
Document exchange services are not reserved.
The postal act allows the Minister, after consultation with the Authority, to amend or revoke the weight or price restrictions that define the reserved area without Parliamentary debate. Plans were reported to reduce the reserved area to 100g and three times the basic tariff before accession in 2004.
8.6.4 Regulation of non-reserved services
Under the postal act, there is an authorising requirement for all operators that wish to provide postal services. The licensing regime has not yet been implemented.
Operators within the universal service area need to apply for a licence. At present it cannot be foreseen whether the licence conditions will be restrictive or will aim at promoting competition in the universal services area. The NRA reported that no political decision on this matter has taken place so far.
For services outside the universal services area, the post act requires operators to apply for a “general authorisation”. However, the regulation contemplated in the act appears to exceed EU standards for “general authorisation”. Permission to operate may be conditioned on requirements concerning the quality, availability, and performance of services (Art. 8(2)(ii)) and may be denied by the Malta Communications Authority or the Minister based on inconsistency with the public interest or government policy (Art. 10(1)(a)). Whether authorisations for non-universal services will have to be considered as “licences” or as “general authorisations” (as defined in the postal directive) cannot be assessed at present, since implementing regulation has not been adopted yet.
8.6.5 Access
The postal act only includes an obligation for the USP to provide “a basic counter service throughout Malta”. Implementing regulation that will set out more specific requirements governing access to universal postal services has not been adopted yet. Final report: Main aspects of postal networks in AC/CC 137
Country Report Malta
8.6.6 Tariff and accounting principles
The postal act requires postal tariffs to be affordable, transparent, non-discriminatory, and geared to costs. However, no reference to a particular cost concept is made such that it is not clear whether prices should be geared to efficient cost or costs actually incurred to the USP. With the consent of the Minister, the NRA may impose a requirement for prices to be uniform throughout the national territory. The NRA may issue directive concerning postal tariffs only if it is of the opinion that the USP does not comply with the tariff principles set out in the postal act (ex post regulation). So far, the NRA has not had occasion to review postal rates.
For cross border services, the postal act stipulates to gear terminal dues to the costs of incoming cross border mail and the quality of service achieved: the act further requires terminal dues to be transparent and non-discriminatory.
The postal act requires that the UPS keeps separate accounts for universal and non- universal services and allocates costs in an appropriate and reasonable manner. This requirement has not yet been implemented. The act further appears to require that the USP’s accounting systems need to be approved by the NRA.
8.6.7 Quality of service
In accordance with the postal act, the NRA shall set and publish quality of service standards. Moreover, the NRA shall monitor the USP’s compliance with the quality of services standards and shall publish a report on its monitoring results from time to time.
The act further requires that the USP publishes information on its quality of service (amongst others) at least annually and “in a manner that is to the satisfaction of the Authority.”
Neither the quality of service standards nor measurement procedures have been implemented so far.
8.6.8 Complaint and redress
The postal act does not require the USP to establish a separate office dedicated to the resolution of customer complaints. However, the act more generally requires the USP to “draw up transparent, simple and inexpensive procedures to deal with complaints by users”. Moreover, the USP shall at least annually publish information on the number, types and on the handling of complaints. 138 Final report: Main aspects of postal networks in AC/CC Country Report Malta
The amended postal act - as effective since June 2003 - requires the establishment of an “appeals board” which is responsible to decide on complaints against decision taken by the NRA. It appears that this institution aims at resolving conflicts among operators or operators’ objections against NRA decisions (as observed regularly following regulatory interconnection decisions in the telecommunications sector) rather than complaints by postal users.
8.6.9 National regulatory authority
In Malta, it may be questioned whether the NRA is “legally separate from and operationally independent of” the USP.
The Minister (of Transport and Communications) appoints the board members of the NRA for a variable term between one and three years and may be dismissed by the Minister if considered as unfit to continue in office or having become incapable of properly performing their duties. The Minister also approves the budget of the NRA (within the government and in co-ordination with the Minister of Finance). Decisions taken by the NRA may be reviewed by an appeals board whose members are appointed and may be dismissed by the Minister (Art 49 (3)). It thus appears that the Minister exercises substantial control over the NRA. However, conflicting interests within the government are minimised since the State’s ownership rights in the USP are not managed by the same Minister responsible for the NRA. (The Minister for investments and information Technology manages ownership rights jointly with the minority shareholder Transend).
Country Report
9 PL – Poland
140 Final report: Main aspects of postal networks in AC/CC Country Report Poland
POLAND – GENERAL FACTS
Economy
GDP in EUR, 2001, (million): 204,100 GDP per capita in EUR, 2001: 5,282
GDP in PPS, 2001 (million): 365,500 GDP per capita in PPS, 2001: 9,410
GDP growth rate, 2001: 1.1% Unemployment rate, 2002: 20%
Population and geography
Population, 2001 (thousands): 38,638 Density (Persons per sq. km): 124
Land area, 2002 (square km): 312,685 Urbanisation (Pop. in urban areas): 63%
Transport and communications infrastructure
Railway network, 1999 (km): 22,891 Fixed lines per 100 households, 2002: 62
Road infrastructure, 1999 (highway km): 268 Mobile penetration rate, 2002: 27%
International airports, 2003: 5 Internet users penetration, 2002: 22% Source: Eurostat NewCronos; UN World Urbanization Prospects (2001); IBM Monitoring of EU candidate countries, telecommunications sector (2002); www.columbusguide.com.
POLAND – POSTAL FACTS
Universal service provider
Name of USP: Poczta Polska USP employment, 2002 (persons): 101,788
USP revenue, 2002 (million EUR): 1,431 USP employment of total workforce: 0.7%
Annual revenue growth (CAGR), 98-02: 11.7%
Volumes and tariffs
Dom. letter post volume, 2002 (million): 1,659 Dom. letter post per capita, 2002: 42.9
Cross border LP: OCB/ICB ratio, 2002: 80% Domestic parcels per capita, 2002: 0.60
Cross border LP: ICB/Dom ratio 2002: 3% Basic letter tariff, June 2003: 0.41€
Postal network (access)
Postal outlets, 2002: 8,242 Letter boxes, 2002: 57,000
Outlets per 10,000 inhabitants: 2.1 Letter boxes per 10,000 inhabitants: 14.8
Outlets per 1,000 sq. km: 26.4 Letter boxes per 1,000 sq. km: 182.3 Source: WIK-Consult
Final report: Main aspects of postal networks in AC/CC 141
Country Report Poland
9.1 Basic country information
With a population of 38.6 million and 313,000 square km, Poland is the biggest of the candidate countries. The country is mostly flat in its northern parts and becomes hillier the more one moves south. With 124 inhabitants per square km it is densely populated. Poland has a high variety of landscapes: the Baltic beaches, the Mazurian Lake District, virgin forests, the Carpathians and the Sudeten Mountains. The capital Warsaw (1.6 million inhabitants) is the country's economic and political centre today while Cracow - the country's third largest city, has been its cultural centre since the Middle Ages. Other important Polish and European cities include Gdansk, Poznan, Lódz, and Wroclaw.
Poland has a variety of natural resources including coal, copper, zinc, iron, gypsum, lignite and some oil and natural gas reserves. The rapidly developing private sector is now responsible for 70% of the country's economic activities. Dominant industries include metalwork, steel, and chemical and textile production. Increasingly trade, high technology and the service sector play an important role in for employment and restructuring of the national economy. However, about a fifth of all Poles are employed in agriculture while this sector contributes to less than 5% of the GDP. About 60% of the country's land is used for agriculture; main agricultural products include grains, potatoes, sugar beets, fodder and livestock. Almost one fourth of the population still lives on small, inefficient farms.
Poland nominal GDP was 204 billion EUR in 2001. GDP per head was 5,282 EUR in 2001 (9,410 PPS). Poland ranked very close to average GDP of all AC countries as it accounts for 50% of all AC countries’ GDP. 52% of total AC population are Poles and the country represents 42% of the AC’s land area.
The Polish communication markets are modestly developed with 62 fixed lines per 100 households (Avg. EU-15: 110) and a mobile penetration of 27% (Avg. EU-15: 73%). 22% of the population used the internet in 2002. 142 Final report: Main aspects of postal networks in AC/CC Country Report Poland
9.2 Overview of postal market
As presented in Table 9-1, and based on available information, WIK estimates the total market for domestic and outbound postal services in Poland to be about 1.3 billion EUR in 2002. The most important segment is letter post with approx. 760 million EUR; the parcel and express segment are estimated to account for 510 million EUR. Delivery of unaddressed items created revenues of 30 million EUR. No private operators provided data to this study despite several requests. Moreover, it appears that regulatory institutions are unable to assess the market structure such that the estimates have been derived exclusively from information provided by the USP. Therefore the estimates must be considered as very approximate, in particular for the market segments with high participation of private operators, e.g. parcel and express.
Table 9-1: Estimated market 2002 (Poland)
USP USP WIK Market Market Rev Vol Est Rev Vol
2002 2002 USP 2002 2002 EUR 000 Pcs-000 share EUR 000 Pcs-000 LP, domestic 687,856 1,658,752 95% 724,059 1,746,054 LP, OCB 31,704 39,973 95% 33,373 42,077 Total letter post 719,560 1,698,725 95% 757,432 1,788,131 Parcels, domestic 49,700 23,137 20% 248,500 115,683 Parcels, OCB 5,160 193 20% 25,800 965 Total parcels 54,860 23,330 20% 274,300 116,648 Express, domestic 6,836 933 5% 136,716 18,658 Express, OCB 4,917 133 5% 98,345 2,658 Total express 11,753 1,066 5% 235,061 21,316 Unaddressed mail, domestic 11,321 469,176 40% 28,303 1,172,941 Total, all domestic and OCB 797,495 2,192,297 1,295,097 3,099,036
Source: WIK-Consult
The estimate of the size of the postal market has been developed using the following information: The USP provided credible volume and revenue data broken down by market segments. Private operators did not provide information for this survey. Moreover, it appears that there are no recent detailed market studies. The USP provided its assessments of the degree of competition per segment and estimated its market share. Neither NRA nor Ministry provided such assessments. These informations have been assessed by WIK against the background of publicly available sources such as press articles, private operators' websites and annual reports in order to achieve estimates of the market structure. Final report: Main aspects of postal networks in AC/CC 143
Country Report Poland
It appears that the Polish postal markets is characterised by significant competition. Competition is most intense in both parcel and express markets. There are numerous competitors even in the domestic market that is more attractive than other AC and CC countries due to the country’s size. It appears that the USP has not been able to achieve a dominant position (> 50%) in parcel and express markets. In letter markets, there appears to be emerging competition in both the domestic market and for outbound cross border letters. Most of these operations are considered as illegal by the authorities under current legislation. However, the USP still controls the overwhelming part of the letter market. WIK’s rough estimates of market shares as well as the USP’s revenues by segment, and estimation of market size for domestic and outbound cross border letter post, parcels, express items, and unaddressed mail are presented in Table 9-1.
Information about other postal operators than the USP operating in Polish postal markets is presented in section 9.3.2 of this country report.
9.3 Market players
9.3.1 Universal service provider
9.3.1.1 Legal status and subsidiaries
The Polish USP, Poczta Polska, holds the legal status of a “public utility enterprise” and is entirely owned by the state. While the company is not subject to direct supervision of a Minister, it is neither organised under normal company law. The Ministry of Infrastructure reported not to have any plans to change the legal status or to privatise the USP.
All owner ship rights are managed by the Minister of Infrastructure. In particular, the Minister appoints the director of the USP, his deputies and the members of the USP’s council.39 Moreover, the Minister defines overall operational and financial targets for the USP, and can take decisions regarding retention of profits or recovery of losses and regarding an eventual sale of ownership to private parties.
The USP received regular subsidies for investments in its infrastructure during the last years. However, the amount of these subsidies has been decreased significantly from approx. 1.8% of the USP’s total revenues in 1998 to 0.2% of total revenues in 2002.
39 All information according to the Ministry of Infrastructure. The responsibilities are set out by a special law, “Act on Poczta Polska”, which is not available in English translation from the Ministry. 144 Final report: Main aspects of postal networks in AC/CC Country Report Poland
Apart from the subsidy, the state has not retained USP profits nor recovered losses in the last years.
Moreover, the USP provides several “services of public interest” for the state such as acceptance of passport applications or the sale of fiscal stamps. Obviously these services give rise to remuneration but details on amounts or methods used to determine the remunerations have not been provided by the Ministry.
The USP is entirely exempt from the payment of VAT.
Table 9-2: USP subsidiaries (Poland)
% of Partners Name of subsidiary Activities shares owned (if any) Bank Pocztowy Postal Bank ~ 75 % nd Financial services Pocztylion ~ 33 % nd (pension funds) Financial services Postal Leasing Fund 100 % - (leasing) PostData Software development ~ 51 % Nd Postal Agency of Financial Financial services 100 % - Services Towarzystwo Usług Mutual Funds 100 % - Wzajemnych
Source: WIK-Consult
The USP has several subsidiaries that provide postal service and such related to postal operations as well as financial and other services. The subsidiaries are presented in Table 9-2 (Only approximate information on the shares held by the USP was provided during an interview with a USP representative.).
9.3.1.2 Service portfolio
Within the area of universal services, the USP in Poland offers letters and parcels; registration and insurance for postal items. For letter services, the USP abolished the previous content based product categories in 2002 and introduces priority and non- priority categories. In addition, direct marketing and hybrid mail products are offered.
As non-universal postal services, the USP provides both domestic and cross border EMS and delivers unaddressed advertisement. For the near future, plans were reported to co-operate with a major global express operator in providing express products.
Moreover, the USP delivers postal money orders and provides several financial and insurance services as well as administrative services for the state, e.g. sale of fiscal Final report: Main aspects of postal networks in AC/CC 145
Country Report Poland stamps and acceptance of passport applications. The USP reported its ambition to introduce several “new services” such as e-commerce platforms, IT services, logistics.
Apart from the provision of postal and financial services, postal counters sell various products, such as postal accessories and other commercial goods.
9.3.1.3 Postal infrastructure and automation
The Polish USP increasingly makes efforts to optimise its network structure and increase productivity by automated processes. However, it appears that the re- structuring process is time consuming, mostly due to a lack of resources available for investments, and that there is still room for improvement.
At end of 2002, the USP operated 65 sorting centres but is about to reduce this number significantly; in May 2003, 64 centres were used. In the medium term, by 2005, plans are to have 10 or 11 fully automated sorting facilities while at present approx. 20 centres are equipped with machinery. Within the re-structuring process, the current, mostly small facilities will be closed and replaced by newly built automated centres located close to the highways or main roads. The first of these new sorting centres was opened in Warsaw in May 2003; and a second one will be opened that year. Most important, the reduction of sorting centres shall mainly create the possibility to increase efficiency by automated handling of the higher volumes per facility. Moreover, the process will lead to fewer sorting processes and a reduction of necessary transport connection thus further improving network efficiency. At present, the USP reports that mail is sorted “too many times” due to the complicated structure of the public postal network using local, sub-regional, and regional sorting centres before mail reaches the delivery office. The USP did not provide information on the share of mail that is sorted by automated machines at present but reported that a huge share of sorting of performed manually.
For national transportation, mostly lorries are used while there are some regular rail transport connections. For long distance transport of priority mail and express items, also planes are used. For delivery, cars and motorcycles are used where appropriate. The average age of vehicles is 6.7 years.
Due to the present lack of process automation the USP does not provide full tracking and tracing services.
9.3.1.4 Employment
Total workforce of the USP was 97,702 FTE (101,788 persons) in 2002. Since 1998, employment has remained relatively stable. There are no civil servants employed by the 146 Final report: Main aspects of postal networks in AC/CC Country Report Poland
USP. Approx. 14 % of all employees are part-timers (10% of all FTE) while the USP hardly uses seasonal contracting at all.
9.3.2 Private operators
In the beginning of 2003, 54 companies had registered with the NRA as postal service providers.
From statements of NRA and USP it appears that the most important operators are in the domestic letter segment (incl. direct mail) are DPWN by its subsidiaries Servisco and Stolica, and TPG, joined by local companies Eurodirect, ABC Direct Contact, and PCM. Outbound cross border letters are carried by DHL, TNT, and UPS.
The most important private players in the parcel and express segment include DPWN’s subsidiaries Servisco (parcels and express), DHL, and Stolica (messenger services) Masterlink (a Sweden Post / La Poste joint venture), TNT, UPS, Siódemka, Opek, and SPEDPOL. The German USP DPWN currently offers express service under its brand name DHL and Servicso following the takeover of the Polish company in 2002.
Private operators in Poland provided no information about their services to this survey.
9.4 Market development
9.4.1 Universal services – letter post and parcels
Table 9-3 presents a summary of volumes of selected postal items carried in Poland from 1998 to 2002. All figures reflect postal items carried by the USP. The private operators have submitted no data.
In general, the data submitted by the USP indicate a severe downward trend of the postal markets development. Not only did the volumes carried by the USP not keep track with the positive overall development of the Polish economy, but the USP experienced losses of 21% in domestic letter volume, and decreasing volumes of 12 and 13% for domestic parcel and express volumes.
However, it is surprising that at the same time when these decreases in volume take place, the USP significantly increased its revenues from theses very services. For example, revenues from domestic letter services increased by 97% from 1998 to 2002 while letter volume went down by 21%! WIK’s analysis of the Polish USP’s data set was therefore mainly concerned with explaining this phenomenon. One obvious explanation Final report: Main aspects of postal networks in AC/CC 147
Country Report Poland would be that changes in the methods to estimate volumes took place during the period or that the data set is not reliable for other reasons. The USP did not confirm this suspicion but confirmed reliability of its data.
Table 9-3: USP volumes of universal and non-universal services (Poland)
5-yr 1998 1999 2000 2001 2002 change Universal services Letter post LP Domestic Pcs-000 2,089,974 2,011,251 1,597,264 1,767,177 1,658,752 -21% LP per capita Pcs-000 54.1 52.0 41.3 45.7 42.9 LP per EUR 1000 GDP 14.8 13.8 9.0 8.7 8.1 LP Outbound cross border Pcs-000 41,036 40,999 41,283 39,834 39,973 -3%
Outbound/inbound 73% 73% 72% 75% 80% LP Inbound cross border Pcs-000 56,554 56,016 57,056 53,269 50,081 -11% LP ICB/LP Domestic 3% 3% 4% 3% 3% Parcels Domestic Pcs-000 26,357 24,619 25,087 24,086 23,137 -12% Outbound cross border Pcs-000 235 238 248 250 193 -18% Non-universal services Express Domestic Pcs-000 1,076 1,223 1,028 949 933 -13% Outbound cross border Pcs-000 119 126 73 126 133 12% Unaddressed mail Pcs-000 478,652 458,832 476,233 383,179 469,176 -2%
Source: WIK-Consult
It appears that the volume decreases are a result of substantial price increases to significant extent. From 1998 to 2002, the USP increased its postal rates annually at rates between 8% and 25% (for the lowest weight category). In real terms, postal rates in 2002 are 69% higher than in 1998. Moreover, the introduction of priority mail categories in 2002 effected a further price increase: While non-priority letters are charged at the same rate as ordinary letters previously, priority letters are 64% more expensive. In essence, the downward trend of letter volumes cannot be regarded as a negative development from a commercial point of view of the USP. It should be noted that the USP – in commenting to a draft report prepared by WIK - explained its tariff increases as a result of high inflation and neglected any relation between tariff increase and the downward trend of volumes. However, the USP failed to provide other satisfactory explanations for the situation. 148 Final report: Main aspects of postal networks in AC/CC Country Report Poland
While domestic letter volume was relatively high with 54 items per cap in 1998, it went down to 42 in 2002. This current level represents only 18% of the EU-15 average letter volume per cap. The values for domestic letter items per GDP show a similar development: Whereas in 1998, there 14.6 letters were sent per 1000 EUR GDP, in 2002 the number went down to 8.1 thus clearly below EU average (10). Again, these figures underline the decreasing trend volumes both in real terms and compared to general economic development (measure in GDP); but on the other hand they are result of a viable strategy of the USP to make profit on prices rather than on volumes.
Volumes of cross border letter mail – both inbound and outbound - have undergone slight decreases in the last five years. However, the development is similar to many other countries, e.g. Hungary and may not be directly related to development in the Polish postal market. As it is the case in most relatively less developed countries, Poland receives more cross border items than it dispatches. However, with an 80% ratio of outbound to inbound letter items in 2002, this imbalance is not very significant compared to other AC/CC countries. Due to the size of the Polish postal market, delivery of inbound cross border mail is of minor importance for the postal system: 3% of all letters delivered originate from abroad.
The domestic parcel volumes carried by the USP have been decreasing slightly from 1998 to 2002. BY contrast, volumes of outbound cross border parcels increased slightly from 1998 to 2001 but suffered a significant drop of 23% in 2002. However, this has to be seen against the background of intense and increasing competition in the parcel and express segments. Since private operators did not provide information to this survey, conclusions regarding the overall development of the parcel market cannot be drawn solely from the USP data.
9.4.2 Non-universal services
9.4.2.1 Express services
It appears that both market segments for domestic and cross border express services are characterised by intense competition and a variety of both national and international operators. In particular, the Polish express market is of major importance to all global operators both due to its own size and its importance as a gateway to neighbouring markets further east. As indicated in Table 9-3, the USP has experienced volumes decreases of 12% in the domestic and of 18% in the outbound cross border express market since 1998. As a result of intense competition, the USP plays an almost negligible part in the express segment and reported to serve less than 10% of both the domestic and the outbound cross border express segment. Based on the information available, WIK estimates the total size of the market for domestic and outbound Final report: Main aspects of postal networks in AC/CC 149
Country Report Poland international express services to be approx. 235 million EUR in 2002. However, in the absence of reliable information from private operators this estimate must be considered as very approximate.
The most important players in the Polish express market are listed in section 9.3.2 of this report. According to information from NRA and USP, DPWN is the most successful operators in the market. While no detailed information about the structure of the express market were available, it is estimated that the three DPWN companies (DHL, Stolica, Servisco) serve approx. 40% of the total market for courier, parcel, and express services. Apart form the USP, no operator was reported to have a market share higher than 5% in the total CEP market.
9.4.2.2 Document exchanges
It appears that there is no market for document exchange services in Poland; neither NRA nor USP reported to have observed any such activity.
9.4.2.3 Unaddressed items
It appears that there is competition to a significant degree in the market for delivery of unaddressed items. While NRA and ministry did not provide assessments, the USP reported intense competition in this segment. The USP reported that its major competitors in the market include two companies called “Sokól” and “ID Marketing”.
During the last five years, the USPs volumes in this segment have remained rather stable; between 380 and 480 million items delivered annually. Taking into account a very rough estimate of the USP’s market share, WIK estimates the market size to be about 30 million Euro in 2002.
9.5 Universal service in practice
9.5.1 Scope of universal service
The USP provides service to all points in Poland for all types of letters, direct mail, newspapers, periodicals, and books weighing up to 2 kg and for domestic parcels weighing up to 20 kg. The USP offers registration services for all universal service items and insurance for all letters and parcels and delivers literature for the blind up to 7kg on a universal basis. However, registration and insurance is not provided for ordinary (non- priority) letters since the introduction of priority letter products in 2002. In addition, postal money orders are provided as universal postal services as required by the 1990 Act on Posts and Telecommunications. 150 Final report: Main aspects of postal networks in AC/CC Country Report Poland
Delivery service is provided five days per week in the entire territory and all collection boxes are cleared at least five days per week. In major cities letter boxes are cleared up to seven day a week.
9.5.2 Reserved services in practice
Current legislation reserves the provision of letter services up to 2 kg to the USP.40 It appears that some infringements of the reservation occur regularly. First, it was reported that there are significant self delivery activities, amongst others by local administrations. Second, some licensed local courier companies are accused of providing letter services by the USP. In these cases, the NRA has taken measures to enforce the monopoly. The NRA reported that it has to deal with these violations of the reservation quite regularly but, however, it appears that the authority is successful in doing so.
9.5.3 Access
Access conditions of the Polish public postal network are quite similar to current performance in EU member states. However, with 26.4 postal outlets per 1,000 share km (2.1 per 10,000 inhabitants) network coverage is slightly below average of EU-15 (28.3 per 1,000sq.km / 2.4 per 10,000 inh.).
The total number of 8,242 postal outlets consists of various types of outlets used by the USP41: 5,602 post offices, 2,095 postal agencies, 52 intermediaries, 488 subsidiaries, and 5 kiosks where as
• Postal agencies are operated by shop-owners independent from the USP and provide services as agents of the USP. This type of outlet was introduced in 1996 and its used has been increasing since. The USP reported plans to replace some other postal outlets with agencies and increase the total number of agencies to approx. 2600 by 2005.
• Intermediaries, subsidiaries, and kiosks are outlets owned by the USP offering a reduced range of services. The three types differ with respect to their organisational structure, their opening hours, etc. However, these types of outlets evolved long ago and are planned to be replaced by postal agencies in the future.
40 An amendment to the postal act is currently drafted by the Ministry. Although no draft version could be provided in English translation, it was reported that the reserved area will be reduced to 350g in 2004. 41 Figures refer to postal outlets at the end of 2002. Final report: Main aspects of postal networks in AC/CC 151
Country Report Poland
With 182 collection letter boxes per 1,000 square km and 15 per 10,000 inhabitants, there are less letter boxes in Poland than in the EU-15 on average (204 per sq. km / 18 per inhabitant). The USP does currently not intend to change the number of letter boxes in the future. To business customers, the USP offer collection from the senders' premises. In addition to service in postal offices and postal agencies, basic services (collection of standard items and money orders, sale of stamps; …) are provided by delivery postmen to disabled people throughout the country and to approx. 23% of the population living in rural areas.
The USP has not established targets concerning queuing time in post offices.
9.5.4 Tariffs and accounting principles
The USP applies a uniform rate for all domestic letter services. In addition to ordinary letters, priority letter at higher rates were introduced in 2002. Table 9-4 presents the postage rates for first class (priority) letter services effective on June 1, 2003, in local currency and Euros.
Table 9-4: Postage rates for domestic first class letter services (Poland)
Weight up to Rate (local currency) Rate (Euro) 20g 1.80 0.41 50g 1.90 0.43 100g 2.10 0.48 250g 2.30 0.52 500g 2.70 0.62 1000g 3.40 0.78 1500g 4.30 0.98 2000g 5.30 1.21
Source: WIK-Consult
Moreover, the USP offers special tariffs to various customers incl. businesses and bulk mailers based on individual contracts. Although the Ministry reported that “special tariffs are provided on a transparent and non-discriminatory basis to senders depending on the amount of items and avoided costs”, it appears questionable to which extent this is the case in practice. In particular, there appears to be no procedure for regulatory approval of those tariffs. The USP reported to have its “own internal procedure on special tariffs policy”.
Whether the USP has implemented an internal accounting (controlling) system that respects the requirements of national and European legislation is not entirely clear. The USP reports that such a system in has been implemented, i.e. there are separate accounts for costs and revenues of reserved, universal, and non-universal services, although there is no legal requirement to do so. Also the USP provide quite detailed 152 Final report: Main aspects of postal networks in AC/CC Country Report Poland
information on the cost allocation principles underlying its accounting system. However, in the answer to the questionnaire for this study, the USP failed to provide a reliable breakdown of its revenues to reserved and non-reserved services. For example, revenues from direct mail products were considered as non-reserved by the USP, while the Ministry reported that direct mail is a reserved service under current legislation. During an interview, the Ministry reported that for six years, there is a co-operation between the Ministry and the USP aimed at implementing an appropriate accounting system. This co-operation was reported to be still ongoing.
However, an extensive discussion whether the Polish USP has correctly implemented accounting separation may appear displaced given that it is not clear whether there is any requirement to do so, see section 9.5.4.
9.5.5 Quality of service
Since July 1, 2002, the USP applies a routing time target of 80% D+1 to its domestic priority letters. There were no targets applied previously. According to a rough estimation by the USP, these priority letters account for approx. 12-15% of total letter volumes.
The USP reported to have achieved a performance of 94% D+1 in 2002. However, no details concerning the measurement method applied have been provided to WIK. The NRA did not provide performance results concerning routing time but reported to have started to measure routing time recently. There appear to be no publications on routing time performance so far.
9.5.6 Complaint and redress
The USP operates a separate office for handling and managing customer complaints in its headquarter and employs two persons in this unit on a part time basis.
As the present postal act does not specify this issue, it is not entirely clear which authority, if any, is responsible to finally resolve customer complaints. While the NRA reported, this was the responsibility of the itself and the “Office for Competition and Consumer Protection”, the Ministry stated that customers may seek resolution at court; while the USP reported: “Customers which are not satisfied with the resolution of their complaints or motions by the Regional Postal Directorates or Polish Post Headquarters can submit their case to the national administration bodies for example: Ministry of Infrastructure, Polish Ombudsman, Office for Competition and Consumer Protection, Office of Telecommunications and Post Regulation, which have their own established Final report: Main aspects of postal networks in AC/CC 153
Country Report Poland organisational structure and responsibilities. Customers may also refer in justified cases to the court”.
There are no publications on the number of complaints at present. However, the USP reports that an internal document containing a compilation of customer complaints is elaborated annually and is transmitted to the Minister of Infrastructure and the USP’s Director General.
9.6 Regulatory situation
9.6.1 Overview of postal regulation
9.6.1.1 Postal legislation
Primary postal legislation in Poland is set out in the Act of 23 November 1990 on Posts and Telecommunications that was amended in 1995. Other acts of special relevance to the postal sector include the Act of 30 July 1997 on state-owned public utility enterprise 'Poczta Polska'; as well a an "Act on prices" that was reported not to set out principles for prices of various goods of public interest incl. postal services.
Postal secondary legislation in Poland consists of
• The Ordinance of the Minister of Posts and Telecommunications of 15 March 1996 on the conditions of the use of universal postal services;
• The Ordinance of the Minister of Posts and Telecommunications of 13 November 1995 on the technical conditions for letterboxes and the principles of their deployment and use;
• The Ordinance of the Minister of Posts and Telecommunications of 12 December 1995 on the procedure for the opening of undelivered letters and their subsequent handling;
• The Ordinance of the Minister of Posts and Telecommunications of 27 May 1996 on the procedure for the enforcement of the statutory right of lien on postal items; and
• The Ordinance of the Minister of Infrastructure of 3 December 2002 on the provision disabled persons with access to universal postal services.
The Ministry provided an English translation of the amended postal act of 1990 but reported that no translations are available for all remaining acts and ordinances. It may 154 Final report: Main aspects of postal networks in AC/CC Country Report Poland
be noted that analysis of the Polish regulatory framework within this survey was widely challenged by the absence of translated legal sources and that no clear conclusions could be achieved in some instances.
According to the Ministry substantial amendments to the present postal act are currently discussed. A translation of a draft law dating from mid 2002 was provided for the purposes of this study. However, it appears that substantial changes have been made in this draft such that the 2002 draft does not provide a correct picture of the future postal law.
9.6.1.2 Regulatory institutions
Postal responsibility within the government is organised within the Ministry of Infrastructure. In general the Ministry is responsible for the following economic branches: Telecommunications, air transport, constructions, railways, road transport, maritime administration, and postal services.
The Ministry’s responsibilities within the postal sector were described by its representatives as follows (in its own words):
The Minister responsible for communications is a founding body of The Polish Post. He supervises the enterprise. He appoints and dismisses the Director General of The Polish Post and his deputies after receiving the opinion from the Council of the Polish Post. The Minister also settles the remuneration for the Director General of The Polish Post on the proposal of The Council of the Polish Post. The Minister controls and estimates the activity of The Polish Post and its bodies. He approves the Charter of The Polish Post adopted by the Council of The Polish Post. The prices for the international universal services are set in coordination with the Minister responsible for communications.
Moreover, the Ministry has main responsibility for drafting postal acts and. secondary legislation, participates in price determination (in co-operation with the USP), and for ensuring that access to universal services meet the requirements of the Acquis Communautaire. Thus, the Ministry has very important regulatory functions. In addition, and as stated above, the Minister is responsible for all key ownership activities related to the USP.
The Polish NRA is the Office of Telecommunications and Post Regulation (URTiP), a multi sector authority responsible for telecommunications and postal services. The NRA’s most important responsibilities for postal markets include monitoring of the markets and in particular, detection of violations of the reserved area or of licence Final report: Main aspects of postal networks in AC/CC 155
Country Report Poland conditions; monitoring of the USP’s quality of service; and several functions related to the licensing regime.
Additional responsibilities that may affect the postal sector are embodied in the Polish Office for Competition and Consumer Protection (UOKiK).
It was reported that the allocation of regulatory responsibilities may be re-organised in the new postal act that is currently drafted. However, no confirmative information details about the future design of regulatory institutions were provided to this study.
9.6.1.3 History and philosophy of postal regulation
According to the Ministry, the main objective of Polish postal policy is to assure postal services for all citizens, to develop of competition and to safeguard the interests of public postal operator and other operators. Moreover, it was reported that improving the quality of universal services is a major policy goal.
The main amendment to the Act of 23 November 1990 on Posts and Telecommunications was made in1995. From this moment private operators willing to provide courier or express services could apply for “concessions”. The parcel services market was opened as well as the market for unaddressed items. In 2001 new regulations introduced a licensing regime and the former telecommunications NRA (URT) was vested with postal responsibility (now URTiP) in April 2002.
It was reported that there will be a new postal act in 2003 aiming at the alignment with the Directives 97/67/EC and 2002/39/EC. No details about draft version that is currently debated have been provided by the authorities.42 However, it appears to be decided that the reserved area will be changed in accordance with an agreement between the European Commission and the Polish government granting a transitional period compared to the liberalisation steps set out by Directive 2002/39. From the moment of the accession, May 1st, 2004, until 31 December 2005 the limits of the reserved area will be 350 g and 3 times the standard tariff.
9.6.2 Universal Service
Under current legislation, universal services in Poland are consist of the collection, carriage and delivery of ordinary letters, registered letters, valeur declare letters and postal parcels, as well as the transmission and delivery of postal money. According to
42 Reportedly a new act passed Parliament in June or July 2003 but no translation of the act was provided by the Polish authorities. 156 Final report: Main aspects of postal networks in AC/CC Country Report Poland
the Ministry, this includes all letter post items up to 2 kg, domestic and cross border parcels up to 20kg as well as registered and insured items and services for the blind.43
The basic requirements that have been reported by the Ministry are summarised in Part I of this report.
Although the postal act does not explicitly oblige a company to provide universal services, it was reported (in absence of a translated document) that the Act of 30 July 1997 on state-owned public utility enterprise 'Poczta Polska' “provides that this entity is appointed to perform business activity in the scope of postal services, including the ensuring of continuous provision of universal postal services in the domestic and international traffic on the whole territory of the country”.
It was reported by the Ministry that the definition of universal services may be changed for parcel such that only parcel up to 10kg will be considered as US.
9.6.3 Reserved services
Currently, the reserved area set out by the Postal act, §3 (3), includes: “the provision of universal postal services consisting in the acceptance for carriage, carriage and delivery of domestic and international letters, with the exclusion of unaddressed printed matter and questionnaires, weighing up to 2,000 grams, valeur declaree letters of up to 2,000 grams, postal parcels and despatching and delivery of postal money”.
Although the act includes “postal parcels” to the reserved area, it appears that according to common interpretation of the law only parcel carried by the USP are considered as “postal parcels” while parcel carried by other operators are “non-postal”. Therefore it appears the reserved area can be correctly described by the weight limit of 2 kg.
There is no exception for document exchange services from the monopoly.
9.6.4 Regulation of non-reserved services
According to reports of the Ministry and the NRA, non-reserved universal services require a licence while non-universals only require operators to hold an authorisation. However, no details on the distinction between the two types of authorisations were available from the authorities while it was reported that both have to be considered as
43 However, the NRA stated that insurance was not part explicitly of the universal service. Final report: Main aspects of postal networks in AC/CC 157
Country Report Poland individual licences (rather the general authorisations) in terms of the Directives’ definitions.
Licence conditions are reported to be as follows: The licensed company must
• ensure the conditions for observing the postal secrecy and the secrecy about the services provided;
• ensure the delivery of items in guaranteed, fastened times and determine its responsibility for exceeding this times;
• determine transparent and non-discriminatory conditions for handling complaints;
• guarantee that its organisational and technical base matches the scope of the planned activities;
• not have criminal record for a wilful crime against documents or property (for natural persons; applies to shareholders, members of management boards, and managers for juridical persons).
The license fee amounts to 850 PLN, approx. 220 EUR. In essence, it appears from reports of the NRA that the licences are cannot be considered as very restrictive.
As was reported by the Ministry, “postal licensing” currently does only apply to “correspondence”. As a result, parcel and express operators that deliver goods only but no correspondence, may either operate with a licence issued by URTiP or choose to operate under a transport licence.
Legislation does not provide for a compensation fund.
9.6.5 Access
It appears that the regulatory framework does not set out detailed requirements concerning basic features of the public postal network, i.e. quality of access to universal services.
9.6.6 Tariff and accounting principles
As prescribed by the postal act, “the Council of Minister may impose maximum tariffs for universal postal services” while “tariffs for international postal services of a universal nature shall be set in co-ordination with the Minister responsible for Posts”. However, no details on the procedures of price determination could be provided by the Ministry. It 158 Final report: Main aspects of postal networks in AC/CC Country Report Poland
appears that the USP (or the Minister in its responsibility as USP owner) is relatively free to set prices independently.
As for standard tariffs, no procedure for approval of special tariffs appears to exist. These special tariffs are set by the USP on a case by case basis according to the NRA.
The legislation dealing with accounting separation requirements appears to be slightly confusing: According to the Ministry, a requirement to separate accounts for each services within the reserved, the universal, and the non-universal service area is set out by the “Act of 24 September 1994 on accountancy”; which could not be provided in English translation. By contrast, the NRA reports that there is no requirement to keep separate accounts as prescribed by the Acquis Communautaire in current Polish legislation.
9.6.7 Quality of service
According to the Ministry, a routing time target for priority mail is set out by “Decree nr 40 of the Director General of the Polish Post of 25 April 2002”. This decree by the USP’s managing director could not be provided in English translation. However, the target is reported to be 80% D+1.
Concerning independent monitoring of quality of service, the postal act, § 29 2. 1), states that “[t]he State Telecommunications and Postal Inspectorate (PITiP) shall […] supervise activities in the postal business […] with regard to the provision of services by Poczta Polska”.44
There is no legal requirement to publish performance results.
9.6.8 Complaint and redress
Postal legislation does not require the USP to operate a specific office dedicated to the resolution of customer complaints.
Where customer complaints cannot be satisfactorily resolved by the USP, customers may bring complaints before the Office of Competition and Consumer Protection (UOKiK) according to the NRA. In addition, the postal act prescribes that “[the] right to vindicate claims before the courts of law shall be available where all other remedies available under claim settlement procedures have failed” (§ 71 1.).
There is no legal requirement to publish complied data on customer complaints.
44 PITiP is the predecessor of the current NRA URTiP. Final report: Main aspects of postal networks in AC/CC 159
Country Report Poland
9.6.9 National regulatory authority
In general, it appears that the NRA is good position to execute its regulatory tasks due to its administrative capacity as well as the provisions safeguarding its independence. However, it appears that the scope of regulatory responsibilities of the NRA is rather limited in comparison to other AC and CC countries. Most important, the NRA is not involved in tariff regulation.
According the telecommunications law, § 109 6., the head of URTiPis appointed by the Cabinet of Ministers for a five years term and can only be dismissed for a specific list of reasons (e.g. criminal offences or gross violation of legislation). As stated by NRA and Ministry, the budget of the NRA is approved by Parliament as an independent position in the annual act on the state budget. Decisions taken by the NRA may only be reviewed by courts.
The NRA’s postal division currently consists of 10 posts, where as 7 are professional staff and 3 have administrative tasks.
As to its future tasks, the NRA stated that the “new postal law envisages enlarging the scope of activity of URTiP”.
Country Report
10 RO – Romania
162 Final report: Main aspects of postal networks in AC/CC Country Report Romania
ROMANIA – GENERAL FACTS
Economy
GDP in EUR, 2001, (million): 44,400 GDP per capita in EUR, 2001: 1,981
GDP in PPS, 2001 (million): 124,600 GDP per capita in PPS, 2001: 5,560
GDP growth rate, 2001: 5.3% Unemployment rate, 2002: 8%
Population and geography
Population, 2001 (thousands): 22,408 Density (Persons per sq. km): 94
Land area, 2002 (square km): 238,391 Urbanisation (Pop. in urban areas): 55%
Transport and communications infrastructure
Railway network, 1999 (km): 10,981 Fixed lines per 100 households, 2002: 51
Road infrastructure, 1999 (highway km): 113 Mobile penetration rate, 2002: 21%
International airports, 2003: 6 Internet users penetration, 2002: 9% Source: Eurostat NewCronos; UN World Urbanization Prospects (2001); IBM Monitoring of EU candidate countries, telecommunications sector (2002); www.columbusguide.com.
ROMANIA – POSTAL FACTS
Universal service provider
Name of USP: Posta Romana USP employment, 2002 (persons): 32,523
USP revenue, 2002 (million EUR): 145 USP employment of total workforce: 0.3%
Annual revenue growth (CAGR), 98-02: 9.3%
Volumes and tariffs
Dom. letter post volume, 2002 (million): 251 Dom. letter post per capita, 2002: 11.2
Cross border LP: OCB/ICB ratio, 2002: 97% Domestic parcels per capita, 2002: 0.23
Cross border LP: ICB/Dom ratio 2002: 5% Basic letter tariff, June 2003: 0.08€
Postal network (access)
Postal outlets, 2002: 6,738 Letter boxes, 2002: 37,645
Outlets per 10,000 inhabitants: 3.0 Letter boxes per 10,000 inhabitants: 16.8
Outlets per 1,000 sq. km: 28.3 Letter boxes per 1,000 sq. km: 157.9 Source: WIK-Consult Final report: Main aspects of postal networks in AC/CC 163
Country Report Romania
10.1 Basic country information
Romania is located between Bulgaria, Yugoslavia, Hungary, Ukraine, Moldova, and has a coastline of approx. 200 km at the Black Sea. The country is about the size of the UK and has a population density of 94 inhabitants per square km, thus being slightly less densely populated than the EU-15 on average. The total population is 22.4 million while more than two million live in the capital. Bucharest is the cultural, economic and political centre of Romania; no other city exceeds a population of 400,000 inhabitants. Romania is not highly urbanised, 45% of all Romanians live in rural areas. The dominant ethnic group are Romanians; minorities include Hungarians (7%), Roma (2%) and Germans (0.5%).
Romania experienced a dramatic recession in the late 1990ies where real GDP decreased from 1997-99. In addition, the country was struck by inflation: Between 1995 and 2000, the inflation rate was between 30% and 60% in all years, but in 1997 the inflation reached a level of 155%. However, the economic situation ameliorated after 1999 and the Romanian economy grew by more than 5% in 2001 (estimate for the period from Q3 2001 to Q3 2002). In 2001, nominal GDP was 44.4 billion EUR or 1,981 EUR per head (5,560 PPS).
The current state of Romanian communication markets reveals a substantial potential for further development: There are 51 fixed lines per 100 households (Avg. EU-15: 110) and mobile penetration was 21% in 2002, thus below the EU-15’s average of 73%. Internet users penetration was 9% in 2002.
Depending on further progress in complying with the membership criteria, the Copenhagen European Council stated that the objective is to welcome Romania as a member of the European Union in 2007.
10.2 Overview of postal market
Based on available information, WIK estimates the total market for domestic and outbound postal services in Romania to be about 47.5 million EUR. This estimate must be considered as very approximate. The letter post segment is estimated to account for about 20 million EUR, less than half of the total postal market. This may be explained by the relatively poor development of the letter segment but as well by the comparably highly developed competitive express segment. 164 Final report: Main aspects of postal networks in AC/CC Country Report Romania
Table 10-1: Estimated market 2002 (Romania)
USP Rev USP Vol WIK Market Rev Market Vol 2002 2002 Est USP 2002 2002 Pieces EUR 000 Pieces 000 share EUR 000 000 Letter, domestic na 250,589 85% na 294,810 Letter, OCB na 12,700 95% na 13,368 Total letter post 18,108 263,289 90% 20,120 308,179 Parcels, domestic 2,872 5,048 75% 3,829 6,730 Parcels, OCB 1,154 92 75% 1,539 123 Total parcels 4,026 5,140 - 5,368 6,853 Express, domestic 10,768 18,852 60% 17,946 31,421 Express, OCB 768 31 20% 3,838 154 Total express 11,535 18,883 - 21,784 31,574 Unaddressed mail, domestic 129 4,794 60% 215 7,990 Total, all domestic and OCB 33,798 292,106 - 47,487 354,596
Source: WIK-Consult
This estimate of the size of the postal market has been developed using the following information. The USP has provided volume and revenue data for most market segments that in general appears to be credible. There appear to be no published surveys of the total market for postal services in Romania. However, both USP and NRA provided very detailed assessment of the market situation. WIK’s estimated market shares, as presented in table 10-1, are primarily based on reports of both parties concerning their perceived degrees of competition, estimated market shares and information about private operators in each segment. NRA and USP provided identical market information and have reportedly developed their assessments in close co- operation. In general, it was reported that competition was virtually not existing back in 1997, but has emerged quickly since. The USP reports: “Competition has emerged in all major areas such as letters (dom. and OCB), direct mail (dom. and OCB), parcels (dom. and OCB), courier/express (dom. and OCB), and unaddressed items (domestic). For the future, we expect further competition especially in the areas of domestic direct mail and courier/express”.45 Private operators did not provide any information about their activities in Romania.
While competition is still emerging in the letter segment (that may partly be reserved by the NRA), USP and NRA reported “intense competition” in the liberalised direct mail segment and estimated the USP’s market share to be approx. 60%. However, table 10- 1 presents a joined market share estimate for the total letter post segment (i.e. letters and direct mail) since no volume or revenue information for these sub-segments was available from the USP. In the parcel segment, substantial competition was reported
45 Quotation slightly edited. Final report: Main aspects of postal networks in AC/CC 165
Country Report Romania while the USP continues to dominate the market; its market share was estimated to slightly more than 70%. As in most countries, the USP does not play a very important part in the cross border express segment which is dominated by international courier companies. However – and unlike many other USPs -, the Romanian Post was unanimously reported to be quite successful in the domestic express segment and was estimated to serve more than half of the domestic express segment and 10-30% of the cross border segment.
10.3 Market players
10.3.1 Universal service provider
10.3.1.1 Legal status and subsidiaries
The USP is Compania Nationala Posta Romana S.A. (the Romanian Post), a joint stock company fully owned by the state. Although organised as a joint stock company, some specific rules apply to the “Compania Nationala” that are different from normal company law and that are set out by government decision. All shares owned by the government and the ownership rights - including appointment of the managing director as well as the definition of overall financial and operational targets for the USP - are managed by the Ministry of Communications and Information Technology.
The USP does not receive any financial support or subsidies from the government.
The USP reported not to have any subsidiaries that provide postal services.
There is no VAT exemption for postal services in Romania; the USP is charged VAT in respect to the provision of all its services.
10.3.1.2 Service portfolio
Romania Post has made significant efforts to introduce new services and currently provides a wide range of different services.
• First, the USP provides the full range of universal services including insurance and registration for universal service items.
• Second, Romania Post offers a full portfolio of non-universal postal services. Several domestic express products are provided (Prioripost, Ultrapost) that guarantee national delivery within 6 to 36 hours – depending on the destination 166 Final report: Main aspects of postal networks in AC/CC Country Report Romania
and of course on the chosen product type. Apart from EMS, cross border express services are provided in co-operation with TNT (SkyPak). For direct mailers, the USP offers customised solutions including e.g. printing and enveloping, customer reply items and addressing (where mailers select a target group from the USP’s address database ). Moreover, the USP offer hybrid mail product to business customers as well as to residential clients in post offices. The USP also provides guaranteed day (and hour) delivery for documents and goods.
• Third, the USP provides several financial services in addition to “traditional” postal money orders such as international money transfer in co-operation with Western Union; quick “online money orders”; various payment and bill collection services, e.g. for collection of taxes, utility bills, and TV subscription rates; and for the payment of social benefits.
Fourth, various goods are sold in post offices, e.g. books, cosmetics, stationery, maps, lottery tickets, mobile and fix phone cards, mobile phones, envelopes and leaflets, video tapes, non-alcoholic beverages etc.
10.3.1.3 Postal infrastructure and automation
Romania Post appears to have introduced technology and automation to many of its operations. The company operates 9 main sorting centres and 113 local sorting centres and in total has 6 sorting machines (2 for letters and 4 for parcels). In comparison to other countries, the total number of sorting centres appears rather high – in particular with respect to the low volumes processed by the USP. 27% of all post offices are equipped with computers. Depending on the type of vehicle, the average age of the USP’s fleet varies between 4 and 10 years.
10.3.1.4 Employment
The USP has a total workforce of 34,097 persons (32,523 full time equivalents). From 1998 to 2002, the total employment has been reduced by 9% of persons or 3% measured in FTE indicating a decrease in part time employment. However, the USP reported about plans to increase the share of part timers again in the future. In tourist areas at the sea, seasonal employees are hired during summer. Final report: Main aspects of postal networks in AC/CC 167
Country Report Romania
10.3.2 Private operators
As of June 2003, 88 companies have been registered with the NRA as postal service providers underlining the statement that there appears to be emerging competition at least - but more intense competition for direct mail, parcels and express - in all segments of the Romanian postal market. According to the NRA, the major private operators are the following (broken down by market segment):
• Domestic letters and direct mail: Fan Courier Express S.R.L.46; ALO Curier Services S.R.L.; Direct Mail & Press Distribution S.R.L.; Kangaroo Express S.R.L.; 'Distributie-Incasari-Documente' S.R.L.; Pegasus Courier S.R.L.; Direct Mail Solutions S.R.L.; Trans Cat RO S.R.L.; Laurando S.R.L.; S.C. Sfera S.R.L.; S.C. Romadko S.R.L.; and S.C. Atena XXI Pres S.R.L.
• Outbound cross border letter services: DHL International Romania S.R.L.; TNT Romania S.R.L.; International Romexpress Service S.R.L. (FedEx); Trans Courier Service S.R.L. (UPS); and ALO Curier Services S.R.L.
• Domestic parcels: Pegasus Courier S.R.L.; Alo Curier Services S.R.L.; and Kangaroo Express S.R.L.
• Outbound cross border parcels: S.C. Expres Line S.R.L.; Atlassib S.R.L.; Pegasus Courier S.R.L.; DHL International Romania S.R.L.; TNT Romania S.R.L.; Euro Post Romania S.R.L.; International Romexpress Service S.R.L. (FedEx); Fan Courier Express S.R.L.; Alo Curier Services S.R.L.; Trans Courier Service S.R.L. (UPS), Romtrans S.A.; Kangaroo Express; Touring Europabus Romania S.R.L.; and Vicotrans Europe S.R.L.
• Domestic courier and express: Pegasus Courier S.R.L.; DHL International Romania S.R.L; TNT Romania S.R.L.; International Romexpress Service S.R.L. (FedEx), and Fan Courier Express S.R.L.
• Outbound cross-border courier and express: Pegasus Courier S.R.L.; DHL International Romania S.R.L.; TNT Romania S.R.L.; International Romexpress Service S.R.L. (FedEx); and Trans Courier Services S.R.L. (UPS).
Private operators have not provided any information about their services in Romania.
46 S.R.L. is the Romanian abbreviation for Ltd. 168 Final report: Main aspects of postal networks in AC/CC Country Report Romania
10.4 Market development
10.4.1 Universal services – letter post and parcels
Table 10-2 presents a summary of the volumes of postal items carried in the universal services from 1998 to 2002. All figures reflect postal items which were carried by the USP. Private operators have not submitted any data.
In general, the universal services market in Romania appears to be progressing fairly well. Domestic letter post volume has grown by 11% in the five years ending in 2002 while outbound letter post experienced a less substantial increase. The number of domestic letter post items per cap was about 11 in 2002, about 5% of the average in the EU-15. The number of letters per EUR 1000 in GDP was below 6, compared to an average of 10 in the EU-15. The figures suggest that the Romanian letter market does not only appear to be underdeveloped in terms of total volumes but is also comparably less developed than the country’s general economic potential might allow for.
Table 10-2: USP volumes of universal and non-universal services (Romania)
5-yr 1998 1999 2000 2001 2002 change Universal services Letter post LP Domestic Pcs-000 226,109 245,142 214,575 229,293 250,589 11% LP per capita Pcs-000 10.0 10.9 9.6 10.2 11.2 LP per EUR 1000 GDP Pcs-000 6.0 7.3 5.3 5.2 5.6 LP Outbound cross border Pcs-000 12,386 12,118 12,136 13,074 12,700 3% Outbound/inbound 64% 67% 67% 73% 97% LP Inbound cross border Pcs-000 19,396 18,162 18,201 17,819 13,117 -32% LP ICB/LP Domestic 9% 7% 8% 8% 5% Parcels Domestic Pcs-000 6,383 5,395 4,911 4,683 5,048 -21% Outbound cross border Pcs-000 35 51 56 68 92 162% Non-universal services Express Domestic 7,504 10,053 13,523 15,027 18,852 151% Outbound cross border 24 26 31 38 31 27% Unaddressed mail Pcs-000 12,450 7,343 3,872 6,064 4,794 -61% Domestic LP per cap and per 1,000 EUR GDP for 2002 figures use 2001 population and GDP as bases, respectively
Source: WIK-Consult
In 2002, only about 5% of all letter post delivered by the USP (i.e., domestic and inbound cross border) originated from abroad. As a result, the USP is not heavily Final report: Main aspects of postal networks in AC/CC 169
Country Report Romania dependent on the vagaries of terminal dues and foreign postal services. In addition, the “outbound to inbound ratio” shows that Romania does not receive significantly more letters than it sends abroad.47
Domestic parcel traffic decreased by 21% in the five years ending in 2002. However, sharply increasing competition in the domestic parcel market was reported such that the figures much likely indicate a loss of USP market share rather than a decrease of market volume. Conclusions concerning the development of the entire parcel segment cannot be drawn in the absence of private operator data. The data presented in Table 10-2 suggests an impressive growth of outbound parcel volumes, though on a relatively low level of volumes. It should be stressed that the USP data on revenues, weight and volumes of outbound parcels is internally consistent and appears to be reliable in respect to OCB parcels. The massive growth, in particular since 2001, is most likely a result of the USP’s increasing orientation towards business customers in the parcel segment and thereby a proof of its success in this segment.
In comparison to other USPs in this survey, the USP in Romania provided a fairly good level of detail about the volumes and revenues associated with different postal services. Based upon internal evidence (e.g., year to year variability, comparison of average revenue to stamp prices, relation of cross border volumes to weights), this information appears to be mostly reliable. Nonetheless, there are some inconsistencies in the data submitted which suggest the possibility of improvement in data collection.48
10.4.2 Non-universal services
10.4.2.1 Express services
Based on information from the USP as well as from the NRA, the Romanian express market appears to have experienced impressive growth rates since 1998. In the five years ending in 2002, the USP’s domestic express volume increased by 151%, see Table 10-2. Although the USP reports to have increased its efforts to succeed in this market segment during the last years, increasing competition was reported at the same time. This suggests a substantial growth of the domestic express segment in Romania.
Apart from the USP, the most important players of the domestic express market appear to be two international courier companies, DHL and TNT, as well as several local
47 Even though the inbound letter post volume for 2002 does not appear to be entirely credible, the ratios for previous years (around 70%) are rather balanced in comparison to other accession and candidate countries. 48 Most importantly, it appears that the sharp decline of inbound cross border letter post appears to be a result of changes in the methods used to estimate volumes from 2001 to 2002. For the same service, the weight data provided by the USP indicates a slight decrease, but not a dramatic loss as the USP’s volume information suggests. 170 Final report: Main aspects of postal networks in AC/CC Country Report Romania
operators. The most important local firms were reported to be Pegasus Courier and Fan Courier Express which have offered express services since 1999 and 1998 respectively.
As in most countries, the cross border express market is dominated by the major international courier companies DHL, FedEx (Romexpress), TNT and UPS (Trans Courier Services). However, the Romanian operator Pegasus Courier appears to provide cross border services successfully in co-operation with Airborne Express and the important Arabian courier Aramex.
10.4.2.2 Document exchanges
Neither the NRA nor the USP reported any document exchange activity in Romania.
10.4.2.3 Unaddressed items
Both NRA and USP report substantial competition in the unaddressed mail market and estimate the USP’s market share at 50 to 70%. The unaddressed volumes carried by the USP indicate a drastic decline from 1998 to 1999 and a relatively stable development since, see Table 10-2. However, the USP’s revenues related to the delivery of unaddressed mail rose by 8% in the five years ending in 2002 and increased by 9.5% from 1998 to 1999. It thus appears that the market revenue did not decease as the volumes did.49
10.5 Universal service in practice
10.5.1 Scope of universal service
In accordance with the universal service obligation, the USP provides service to all points in Romania for all types of letters, direct mail, newspapers, periodicals, books weighing up to 2 kg and for domestic parcels weighing up to 10 kg as well as for incoming cross border parcels up to 20 kg. Registration services and insurance is offered for all universal service items.
Delivery service is provided five days per week as a standard and letter boxes are cleared five times weekly, too. In some areas with exceptional geographic conditions,
49 All revenues changes have been calculated revenues which are expressed in EUR. Previously, revenues had been converted using annual average exchange rates. The results may be distorted since Romania suffered from substantial inflation up to 155% in the late 1990ies. Final report: Main aspects of postal networks in AC/CC 171
Country Report Romania there is less frequent delivery (two or three times a week) and clearance (twice a week). This geographic exemption applies to 139 villages in total, less than 1% of the total population.
10.5.2 Reserved services in practice
At present, no postal services are reserved in Romania. The postal legislation provides the possibility for the NRA to introduce a reservation that may not exceed the limits stipulated in Directive 97/67/EC (350g / 5 times basic tariff). Direct mail and documents exchange services may not be reserved. However, no reservation has been effected by the NRA so far (end of June 2003).
Within the area of services that may be reserved under present legislation, emerging competition was reported for the domestic and cross border letter segments. By contrast, competition in the liberalised direct mail segment was perceived as being intense by the USP and the NRA.
10.5.3 Access
As summarised in Part I of this report, the USP in Romania provides a high level of access to postal services. The USP operates 6,738 post offices that are all run by directly employed staff; the USP does not have any postal agencies. In Romania, there are 3.0 post offices and 15 letter boxes per 10,000 inhabitants. This compares well with the EU-15 averages of 2.4 and 18. Within the group of ACs and CCs, the Romanian access network is remarkable. While there are relatively more post offices than in the EU-15 (which is the case in many AC), there is also a number of letter boxes well comparable to the current member states.50 However, the USP expects the NRA to issue regulatory requirements concerning network access in the near future and reported to be prepared to increase the number of access points consequently.
The USP has internally established a target of five minutes for maximum queuing time in post offices.
10.5.4 Tariff and accounting principles
The USP provides a uniform national rate for the collection and delivery of all postal items conveyed in the universal service throughout the national territory. In addition to
50 There is no doubt that the high number of letter boxes is a costly endeavour for the USP. Firstly, since much lower volumes are collected from the letter boxes; and secondly, because the country is (slightly) less densely populated than the EU-15 on average. 172 Final report: Main aspects of postal networks in AC/CC Country Report Romania
priority (first class), non-priority mail is provided by the USP at a lower rate. For domestic parcels sent to or delivered in a certain area, the Danube Delta wetlands, there is a surcharge of approx. 5 EUR cents. Mostly due to high inflation, postal tariffs have been increased quite frequently, often several times a year. The latest price increase had taken place in October 2002, before the NRA was formally vested with responsibility for the postal sector.
The USP has not maintained separate accounts for reserved, non-reserved universal, and non universal services yet. A new accounting system that will do so was reported to be being developed at present.
Table 10-3: Postage rates for domestic first class letter services (Romania)
Weight up to Rate (local currency) Rate (Euro) 20g 3,000 0.08 50g 4,500 0.12 100g 5,500 0.15 500g 18,000 0.49 1000g 34,000 0.92 2000g 62,000 1.68
Source: WIK-Consult
Table 10-3 presents the postage rates for first class letter services effective on 1 June 2003, in local currency and Euros.
10.5.5 Quality of service
The USP has not satisfied several norms in respect to quality of service yet. While the USP has established quality of service targets for domestic letters internally, there is no independent monitoring of service performance quality at present. There are not any regulatory targets set neither. Consequently, there are no publications on quality of service performance.
Internally, the USP has set a goal of delivering 60% of letters in D+1, 90% in D+2 and 100% within D+4. According to performance results derived from an internal measurement, the USP achieved the targets in 2002 for the first time. However, no details about the measurement method were disclosed such that the relevance of the provided performance results can hardly be assessed. As reported by the USP itself, “the Romanian Post still has to improve the actual performance.”
For cross border letters, the USP participates in the UNEX lite measurement programme of IPC. Final report: Main aspects of postal networks in AC/CC 173
Country Report Romania
10.5.6 -Complaint and redress
Though transparent and inexpensive procedures dealing with customer complaints which have been required by postal legislation since late 2002, such mechanisms have apparently not been established yet. The USP does not operate a separate office to deal with customer complaints. There are no publications on the number, nature or resolution of complaints.
For the years 1998 to 2002, the USP reported some information about complaints. Accordingly, there were approx. 40,000 complaints in each of the five years, while less than 500 per year were considered to be “grounded” by the USP.
Both NRA and USP reported that the legal provisions concerning customer complaints are about to be established “in the near future”.
10.6 Regulatory situation
10.6.1 Overview of postal regulation
10.6.1.1 Postal legislation
The basic postal law in Romania is the Government Ordinance no. 31/2002 on postal services dated 1 February 2002 and was approved - with amendments and completions - by Law no. 642/2002 on 18 December 2002. There is one implementing regulation issued by the NRA (ANRC President's Decision no. 118/2003 on the procedure for the authorisation of the postal services providers). Law and regulation are available in English translation from the NRA’s website www.anrc.ro.
10.6.1.2 Regulatory institutions
The ministry responsible for postal affairs is the Ministry of Communications and Information Technology (MCTI). The MCTI establishes the policy and the strategy for the implementation of the universal service and also represents Romania within the Universal Postal Union. In addition, the Ministry exercises the state’s ownership rights with respect to the USP.
The NRA is the National Regulatory Authority for Communications (ANRC) that regulates both the telecommunications and postal sector. It became operative in September 2002 and was vested with responsibility for the postal sector by the postal 174 Final report: Main aspects of postal networks in AC/CC Country Report Romania
law in December 2002. The NRA describes its general fields of responsibility (including those outside the postal sector) as follows:
The main objectives that guide the activity of ANRC are to promote competition in all sectors of the electronic communications and postal services markets, to ensure the conditions for the Romanian citizens to exercise their right of access to the universal service, to protect the rights and interests of the users, to encourage efficient investments in infrastructure and to promote innovation in the electronic communications and postal services sectors, to promote media convergence and technological neutrality.
In the postal sector, the NRA implements general postal policy and is responsible for all major regulatory tasks. In particular, its fields of responsibility include the designation of a USP; the definition of USO requirements in detail, including the definition of access conditions and the approval of geographical exceptions to the USO; the implementation and administration of the licensing regime; tariff regulation; supervision of accounting separation and determination of accounting principles and cost allocation rules; and the establishment of quality of service targets as well as the monitoring of the USP’s related performance. Furthermore, it is the NRA’s decision to establish a reserved area if considered necessary. In doing so, the NRA may not exceed the maximum limits prescribed by law but may set out a monopoly of a smaller extent.
10.6.1.3 History and philosophy of postal regulation
The Romanian Post was separated from the telecoms operator in June 1991. In July 1998, the Romanian Post was transformed into a joint stock company51 while it continued to be fully state owned. The USP became one of the founding members of PostEurop in 1993.
The harmonisation of national legislation with the acquis communautaire was initiated by the Government Ordinance no.31/2002 on postal services in February 2002. As approved and emended by Law no. 591/2002 in December 2002, legislation is now considered to transpose the Postal Directive. In particular, the 2002 law created a NRA that appears to be remarkably powerful in comparison to others in ACs and CCs.
According to the 2002 postal law, the reserved area may be changed – and it intended to be changed - by secondary legislation thus allowing to harmonise with the 2002 Postal Directive without legislative initiative in Parliament. As pointed out be the NRA, the Government thereby expressed its willingness to progress towards a gradual and
51 As a ‘Compania Nationala’, some special rules, others than to a normal company, apply to the USP law. Final report: Main aspects of postal networks in AC/CC 175
Country Report Romania controlled liberalisation in the sector. As reported by the NRA, a general strategy paper on postal policy has not been available yet, but will be in an advanced state of development in July 2003.
10.6.2 Universal Service
The basic legal requirements for universal service in Romania are summarised in Part I of this report and appear to meet the conditions of the aquis communautaire.
An obligation to provide universal service has not been imposed on any provider so far. According to the postal law, it will be the responsibility of the NRA to designate a USP. For the time being, the NRA refers to Posta Romana as the de facto USP. As reported by the NRA, the designation of a USP will follow soon after the establishment of a postal policy and strategy by the ministry that is expected for summer 2003.
10.6.3 Reserved services
At present, there is no postal monopoly in Romania.
Under the postal law, the NRA may establish a reservation for the USP. Furthermore, the law defines a maximum permissible extent of the reservation (§ 12 (1)): Domestic and cross border items of correspondence may not be reserved in excess of the weight and price limits stipulated by Directive 97/67/EC (350g / 5 times the basic tariff). Moreover, a reservation may only be introduced “to the extent necessary to ensure the maintenance of universal service”; value-added services as well as direct mail and document exchange may not be reserved.
10.6.4 Regulation of non-reserved services
Under the postal law, delivery services for “postal items” - as that term is used in the Postal Directive - require either a license or a general authorisation, depending on the type of services provided.
A license is required for the provision of universal services and is to be issued by the NRA. The procedures for granting these individual licences is set out by the “ANRC President's Decision no. 118/2003 on the procedure for the authorisation of the postal services providers” (authorisation regulation) and allows the NRA to define a wide range of requirements. However, no licence has been issued to date. The NRA reported that there was only one licence application so far (by Romania Post) and that this licence will be issued soon. To date, it appears unclear whether the NRA will introduce rather restrictive licence conditions for private operators in the universal service area or, by 176 Final report: Main aspects of postal networks in AC/CC Country Report Romania
contrast, will set low requirements in order to promote competition in this segment.52 The NRA reported that the licensing regime was fully implemented in the sense that no operators (other than the USP) provide universal service without being licensed.53
Providers of “postal services” that fall outside the scope of universal service must comply with the terms of a notification procedure that appears to qualify as a “general authorisation” under the terms of the Postal Directive. The authorisation regulation that sets out the authorising regime, provides a list of services that fall under the regime of general authorisations. In particular, this list includes value added services54 such as express and courier services as well as heavy weight parcels (of more than 10 kg) and “publicity trough postal services”. The latter appears to include direct mail such that this important segment is open to competition under the general authorisations. In order to cover the costs of monitoring and administration of authorisations, authorised providers are obliged to pay annually 0.1% of their revenues to the NRA.
As of 25 June 2003, 88 companies registered with the NRA. The regime of general authorisation appears to be fully implemented.
10.6.5 Access
While the postal law contains general principles for access to universal services (orientation toward customer needs), there have not been more specific requirements so far. According to the postal law, the NRA is responsible for setting out requirement concerning access to universal services but reported not to have done so yet.
10.6.6 Tariff and accounting principles
The postal law requires that charges for universal postal services must be affordable, transparent, non-discriminatory and geared to costs . There is no requirement for tariffs to be geographically uniform but the law allows the NRA to require a USP to apply
52 It should be pointed out that direct mail - an important part of the letter post segment – appears not to be considered as a universal service and direct mail providers can operate under a general authorisation. 53 However, this is contrasted by the NRA’s perception on “emerging competition” in the letter market. 54 Value added services are defined by the postal law as follows (§ 2 w)): “postal services whose characteristics meet particular users’ requirements; such characteristics are, for instance: delivery to the addressee in person or to his authorised representative, delivery on appointment, guaranteed time of delivery, more than one attempt at delivery, delivery according to the priority or sequence specified by the sender, confirmation to the sender of delivery, the option to effect a change of destination or of addressee in course of transit or if delivery to the primary destination fails, monitoring of the postal item during the transit (tracking & tracing) and other characteristics of this kind; transmission to or receipt by a provider of postal services of a postal item’s content, by electronic means, for the purpose of sorting, printing or preparation of mail does not represent an additional characteristic within the meaning of this definition.” Final report: Main aspects of postal networks in AC/CC 177
Country Report Romania uniform tariffs. For universal services the USP needs to seek approval from the NRA before changing tariffs (ex ante regulation).55 The NRA has not had occasion to review a general rate proposal to date.
The postal law further requires the USP to keep separate accounts for universal and non-universal services as well as to distinguish clearly between reserved and non- reserved services. The cost allocation method should be either set out or approved by the NRA. This requirement has not been fully implemented yet .
10.6.7 Quality of service
According to the postal law, quality of service targets should be determined by the NRA and monitored by an independent body at the USP`s expenses, but under conditions set out by the NRA. Performance results are required to be published annually by the USP at its own expenses (again, under conditions set out by the NRA).
The legal provisions have not yet been implemented and, in particular, the NRA has not yet established quality of service targets.
10.6.8 Complaint and redress
As required by the postal law, all postal operators including the USP are obliged to draw up a transparent, simple and inexpensive procedure for dealing with users' complaints. The operator’s respective procedures need to be approved by the NRA. For universal providers, the law additionally includes a requirement to publish information regarding the number of complaints as well as the manner in which they have been dealt with.
Where users’ complaints cannot be satisfactorily resolved by the USP, customers may either file a complaint to the NRA that sets out a mediation procedure or bring their complaint to court.
The legal requirements concerning customer complaints appear not to have been fully implemented.
10.6.9 National regulatory authority
As stipulated by the Postal Directive, the Romanian NRA appears to be “legally separate from and operationally independent of” the USP: The president of the NRA as well as his deputy are appointed by the Prime Minister for a fixed term of five years and
55 Postal law, § 22. 178 Final report: Main aspects of postal networks in AC/CC Country Report Romania
may not be easily dismissed. The NRA’s budget is approved by the Council of Ministers. Its decision cannot be overruled, but may only be reviewed by an administrative court. Within the NRA, approx. five persons of the professional staff are dealing with postal issues thus not indicating any severe shortage of administrative capacity.
Country Report
11 SI – Slovenia
180 Final report: Main aspects of postal networks in AC/CC Country Report Slovenia
SLOVENIA – GENERAL FACTS
Economy
GDP in EUR, 2001, (million): 23,300 GDP per capita in EUR, 2001: 10,492
GDP in PPS, 2001 (million): 32,300 GDP per capita in PPS, 2001: 16,210
GDP growth rate, 2001: 3.0% Unemployment rate, 2002: 6%
Population and geography
Population, 2001 (thousands): 1,992 Density (Persons per sq. km): 98
Land area, 2002 (square km): 20,273 Urbanisation (Pop. in urban areas): 49%
Transport and communications infrastructure
Railway network, 1999 (km): 1,201 Fixed lines per 100 households, 2002: 90
Road infrastructure, 1999 (highway km): 399 Mobile penetration rate, 2002: 77%
International airports, 2003: 1 Internet users penetration, 2002: 41% Source: Eurostat NewCronos; UN World Urbanization Prospects (2001); IBM Monitoring of EU candidate countries, telecommunications sector (2002); www.columbusguide.com.
SLOVENIA – POSTAL FACTS
Universal service provider
Name of USP: Pošta Slovenije USP employment, 2002 (persons): 6,094
USP revenue, 2002 (million EUR): 163 USP employment of total workforce: 0.7%
Annual revenue growth (CAGR), 98-02: 7.4%
Volumes and tariffs
Dom. letter post volume, 2002 (million): 373 Dom. letter post per capita, 2002: 187.2
Cross border LP: OCB/ICB ratio, 2002: 66.7% Domestic parcels per capita, 2002: 1.68
Cross border LP: ICB/Dom ratio 2002: 3.4% Basic letter tariff, June 2003: 0.16€
Postal network (access)
Postal outlets, 2002: 552 Letter boxes, 2002: 2,843
Outlets per 10,000 inhabitants: 2.8 Letter boxes per 10,000 inhabitants: 14.3
Outlets per 1,000 sq. km: 27.2 Letter boxes per 1,000 sq. km: 140.2 Source: WIK-Consult
Final report: Main aspects of postal networks in AC/CC 181
Country Report Slovenia
11.1 Basic country information
The only EU candidate country from the former Yugoslavia, Slovenia's two million population - and its picture-book capital of Ljubljana - owe their heritage to their uninterrupted links from the early Middle Ages with the Italian- and German-speaking part of the Holy Roman and Austro-Hungarian empires. With roughly 20,000 square km, Slovenia is a small country dominated by forests and alpine mountains and has a short coastline of 32 km at the Adriatic Sea.
Always the most liberal of the republics in Yugoslavia, it has established a stable democracy and moved easily to a market economy. It is one of the most prosperous EU candidate countries, with a GDP per capita (in terms of Purchasing Power parities) higher than Greece's and close to Portugal's, and an unemployment rate lower than in Germany or France. The Slovene economy has achieved solid growth averaging 4.3 percent over the past eight years. GDP per capita has reached the level of 10.5 million EUR (16.2 million PPS) in 2001 and experienced a further GDP growth of 3.2% in 2002. However, persistently high inflation is an issue that remains to be tackled (7.5 % in 2002).
The Slovene communication markets are highly developed with 90 fixed lines per 100 households (Avg. EU-15: 110); 77% mobile penetration (Avg. EU-15: 73%), and an internet users penetration rate of 40%. Within the AC countries, Slovenia enjoys a special role due to its outstanding economic performance that is already more comparable to its neighbours Austria and Italy than to other adhesion candidate countries.
11.2 Overview of postal market
Based on available information, WIK estimates the total market for domestic and outbound letter and parcel services in Slovenia to be about 125 million EUR in 2002. The estimate breaks down to a letter market (domestic + outbound) of 101 million EUR and a parcel market of approx. 25 million EUR. However, estimates for the size of the express segment and for unaddressed items cannot be provided. 182 Final report: Main aspects of postal networks in AC/CC Country Report Slovenia
Table 11-1: Estimated market 2002
USP USP WIK Market Market Rev Vol Est Rev Vol 2002 2002 USP 2002 2002 EUR 000 Pieces 000 share EUR 000 Pieces 000 Letter post, domestic 94,178 372,820 95% 99,135 392,442 Letter post, OCB 1,750 8,420 95% 1,842 8,863 Total letter post 95,928 381,240 95% 100,977 401.305 Parcels, domestic 8,214 3,340 50% 16,428 6,680 Parcels, OCB 208 168 3% 6,945 5,600 Total parcels 8,422 3,508 23,372 12.280 Express, domestic na 180 50% na 360 Express, OCB na na na na Unaddressed mail, domestic na 226,230 50% na 452,460
Source: WIK-Consult
This estimate of the size of the postal market has been developed using the following information. The USP provided credible volume and revenue data for the letter and parcel segment, but neither credible revenues for express nor unaddressed segments. Private operators did not provide information for this survey. The NRA was established only recently and did not carry out any market monitoring so far. As a result, the estimates solely rely on the USP’s assessment of its market position. However, these estimates could be cross-checked with broader assessments provided by the NRA.
For the letter and parcel segment, the USP provided credible data on its operations. It appears that there is some, but no substantial competition in both domestic and outbound cross border segment for letter post (incl. direct mail); WIK therefore has estimated the USP’s market share to 95%. In the market for domestic parcel and express services (CEP), the USP is the most important player as well .According to both NRA and USP, there is significant competition in this segment. In the light of information provided by the USP, WIK assessed the USP’s market share to approx. 50%. A distinction between the two sub-segments was not possible for two reasons: First, neither USP not NRA provided separate information but regarded the whole of CEP as one market segment. And second, drawing a line between parcels and express is harder in Slovenia than elsewhere because the country is small (such that all “parcels” are relatively fast, i.e. close to express) and the USP’s routing time is very good in the sense that overnight delivery is almost standard for regular parcels in practice. For outbound parcel and express services, the USP reported a very low market share which is very much in line with the magnitude of the cross border volumes that have been reported.
The USP is the major player of the Slovene postal market. Competitors in the letter segment (incl. direct mail) include DHL and UPS subsidiary Intereuropa as well as four Final report: Main aspects of postal networks in AC/CC 183
Country Report Slovenia companies called, “Door-to-door” “Dnevnik”, “Delo“ and “Trimcek”. Apparently, the most important players in the domestic parcel and express segment are Royal Mail subsidiary GLS, the Austrian USP’s subsidiary Yellogistics, Intereuropa (UPS), joined by “Door to door”, “City Express”, “Business Express”, and “Slovenske železnice express” while the international express market is dominated by DHL, FedEx, TNT (brand name ACK) and UPS. Moreover, the USP sells outbound express services of DPD (Groupe La Poste). In the segment for unaddressed delivery, the USP is challenged by local companies called “Qmax”, “Eurovision”, “Vision”, and “Delo”.
11.3 Market players
11.3.1 Universal service provider
11.3.1.1 Legal status and subsidiaries
The USP Pošta Slovenije is a Public Limited Company and is entirely owned by the state. The USP is organised under normal company law.
The managing director of the USP is appointed the company’s supervisory board which in turn is appointed by the Cabinet of Ministers. Currently, the supervisory board consists of state officials from the Ministries of Finance and Information Society (the latter being responsible for postal legislation as well) and workers’ representatives. Moreover, the board is responsible for defining global financial and operational performance targets and dividend policy. Although the law allows for both dividends to the state and recovery of losses, neither profits have been extracted from the company nor losses recovered by the state budget in practice.
The USP does not receive any subsidies from the state. Interestingly, the USP received compensation payments from the Slovene telecoms incumbent during the late 199ies. While in the past “PTT era” the postal services were assumed to be cross-subsidised by the profitable telecom operations, it was apparently the other way around in Slovenia. Therefore the postal USP was compensated by the telecoms branch after the split of PTT in 1995. However, the payments were not of relevant magnitude.
The Slovene USP does not enjoy any exemption from VAT; taxes apply to all postal services. 184 Final report: Main aspects of postal networks in AC/CC Country Report Slovenia
Table 11-2: USP subsidiaries (Slovenia)
% of Partners Name of subsidiary Activities shares owned (if any) EPPS Hybrid Mail 100 - PBS Postal Bank 32 na Fenikssped Freight forwarding and logistics 49 Airport Ljubljana CITY Lease of Business Premises 5 na Sportna Loterija Lottery 20 na
Source: WIK-Consult
The USP has five subsidiaries indicating its efforts to further expand its operations to various sectors incl. banking and logistics. The subsidiaries are presented in Table 11-2.
11.3.1.2 Service portfolio
Based on its strong performance in the core market, but also having in mind the geographical limitations of the Slovene postal market, the USP has taken significant steps towards leveraging its operations to related markets.
Within the area of universal services, the USP offers letters and parcels; registration and insurance for postal items, letters for the blind, etc.
Moreover it successfully provides several domestic express services other than “traditional” EMS such as domestic same day delivery (within 8 hours from collection) and a nation-wide courier service within 4 hours, 2 hours for local delivery. In addition, the USP offers hybrid mail services (via its subsidiary EPPS), tracking and tracing for international items as well as for express services for business customers. Also non- universal delivery of unaddressed mail is provided. For cross border services, the USP is engaged in two co-operations with private operators since 1999. First, it offers outbound business parcels to the EU in co-operation with La Poste subsidiary DPD and delivers DPD parcels in Slovenia. Second, the USP sells outbound cross express products for TNT in post offices and delivers incoming express items for TNT in rural areas. As result of this co-operation, the USP discontinued to offer outbound EMS in 1999 as well.
In addition, the USP has operations offering various (heavy weight) logistics services incl. commissioning and warehousing and provides services related to its postal services such as direct marketing, geo marketing, and letter shop services (printing and enveloping ). For the future, the USP reported plans to further focus on logistics. Final report: Main aspects of postal networks in AC/CC 185
Country Report Slovenia
In the area of financial services, the USP provides traditional money orders and cash- on-delivery, banking services incl. loans in co-operation with postal bank PBS, and payment services for the state (pensions and social benefits).
Postal counters offer various products, e.g. cellular phone contracts for a mobile provider, lottery and betting tickets, and customer services as an agent for insurance companies.
11.3.1.3 Postal infrastructure and automation
The USP appears to have rationalised its operations using automation extensively. It operates two sorting centres; both are equipped with sorting machinery for letters and one also has an automated parcel sorting machines. According to the USP roughly 65% of all letter post is sorted automatically. In fall of 2003, current machinery will be replaced in order to further increase efficiency. In the sorting centres, mail is sorted to final delivery districts while sequence sorting is performed manually in 105 delivery offices.
Depending on density and geography of delivery districts, delivery personnel uses either cars (approx. 700), motorbikes, bicycles or delivers by foot in urban areas. With average ages of 3.2 to 5.1 years, the fleet of transport and delivery vehicle appears sufficiently modern. Virtually all post offices are equipped with personal computers to support processing and retail of letters, parcels, and postal financial services, as well as general organisation of clearance, delivery, and retail sale.
11.3.1.4 Employment
The USP employed 6,094 persons (5,948 FTE) in December 2002. With expansion to other business segments, employment within the company increased by more than 5% since 1998. There are no civil servant employed and the USP uses seasonal and part- time employment to a limited extent (approx. 1% of all employees for both types of employment). For the future, the USP does not intend to introduce major changes to his current employment policy.
11.3.2 Private operators
The USP is the major player of the Slovene postal market. Competitors in the letter segment (incl. direct mail) include DHL and UPS subsidiary Intereuropa as well as four companies called, “Door-to-door” “Dnevnik”, “Delo“ and “Trimcek”. Apparently, the most important players in the domestic parcel and express segment are Royal Mail subsidiary GLS, the Austrian USP’s subsidiary Yellogistics, Intereuropa (UPS), joined by “Door to door”, “City Express”, “Business Express”, and “Slovenske železnice 186 Final report: Main aspects of postal networks in AC/CC Country Report Slovenia
express” while the international express market is dominated by DHL, FedEx, TNT (brand name ACK) and UPS. In the segment for unaddressed delivery, the USP is challenged by local companies called “Qmax”, “Eurovision”, “Vision”, and “Delo”.
Private operators in Slovenia provided no information about their services to this survey.
11.4 Market development
11.4.1 Universal services – letter post and parcels
Table 11-3 presents a summary of the volumes of postal items carried in the universal services from 1998 to 2002. All figures reflect postal items carried by the USP. The private operators have submitted no data.
Table 11-3: USP volumes of universal and non-universal services (Slovenia)
5-yr 1998 1999 2000 2001 2002 change Universal services Letter post LP Domestic Pcs-000 321,590 346,920 369,640 368,640 372,820 16% Letters Pcs-000 262,070 287,370 306,930 310,010 313,780 20% Other letter post Pcs-000 59,520 59,550 62,710 58,630 59,040 -1% LP per capita Pcs-000 162 175 186 185 187 LP per EUR 1000 GDP 18.4 18.5 19.0 17.6 17.8 LP Outbound cross border Pcs-000 8,863 9,042 8,927 8,523 8,420 -5% Outbound / inbound 68.8% 67.4% 65.9% 63.3% 66.7% LP Inbound cross border Pcs-000 12,879 13,413 13,536 13,455 12,619 -2% LP ICB / LP Domestic 4.0% 3.9% 3.7% 3.6% 3.4% Parcels Parcels, Domestic Pcs-000 1,270 2,010 2,510 2,760 3,340 163% Parcels, Outbound cross border Pcs-000 146 167 155 136 168 15% Non-universal services Express Domestic Pcs-000 30 60 70 120 180 500% Outbound cross border Pcs-000 40,500 21,370 6 4 0 Unaddressed mail Pcs-000 54,130 77,610 122,230 165,610 226,230 318% Notes: No data for cross border letter volume provided. Figures inserted from UPU. 2002 vol from weight data and 2001 avg. weight used for UPU reporting.
Source: WIK-Consult Final report: Main aspects of postal networks in AC/CC 187
Country Report Slovenia
The universal services market in Slovenia appears to be well developed. Overall letter post volume has grown by 16 percent in the five years ending 2002. The number of domestic letter post items per cap was 187 in 2002, about one third over the EU-15 average of 140. The regular growth rates in the last years are even more astonishing given the high level of letter post volume already in 1998. The number of letters per EUR 1000 in GDP was approximately 18 in 2002, compared to an average of 10 in the EU-15. In 2002 only about 3 percent of all letter post delivered by the USP (i.e., domestic and inbound cross border) originated from abroad which is rather unusual for a small country as Slovenia. However, the USP is not heavily dependent on the vagaries of terminal dues and foreign postal services. As to the driving forces of letter volume (e.g. direct mail), the USP’s reporting systems currently do not allow for a more detailed analysis.
The USP’s domestic parcel volumes grew enormously by more than 160% since 1998. However, this figure may overstate the parcel market development in the absence of private operators’ data; the USP may have gained market shares from other operators. Outbound parcel volume increased by 15% since 1998, a less impressive but still positive result.
In comparison to other USPs in this survey, the USP in Slovenia provided a good level of detail about the volumes carried for different postal services. Based upon internal evidence (e.g., year to year variability, comparison of average revenue to stamp prices, comparisons to information from annual reports and UPU) this information appears to generally reliable. It should be noted that the USP did not report the cross border letter volumes presented in Table 11-3 and stated not to have exact estimations for cross border letters. However, as weights of cross border mail were provided, WIK estimated volumes based on weight information in order to facilitate analysis.
Nonetheless, there are some important figures that had not been provided, mostly concerning express operations (see non-universal services section). Given the accuracy of the USP’s data in general, it does not appear likely that this data does not exist.
11.4.2 Non-universal services
11.4.2.1 Express services
It appears that there is significant competition in the Slovene markets for domestic and cross border express services. Both NRA and USP agree in observing “intense competition” in the outbound cross border express market while the NRA considers the 188 Final report: Main aspects of postal networks in AC/CC Country Report Slovenia
domestic express market to be characterised by “substantial competition” and the USP feels that competition intense.
A thorough analysis of market development in terms of revenue and number of items could not be executed in this survey since private operators did not provide any information about their services and the USP did not provide very detailed information. However, the USP provided rough estimates of its domestic express volumes and its volumes for outbound EMS items.
The USP’s estimates of domestic express volumes are presented in Table 11-3 and indicate that it increased its express operations significantly and carried 6 times more items in 2002 than in 1998. It was reported that the entire market is experiencing significant growth as well but this growth could not be quantified. For outbound express items, the USP only provided volumes for EMS items; they went gradually down since 1998 and are zero in 2002 as the USP discontinued to provide EMS. Currently the USP offers outbound express services of the private courier DPD (Groupe La Poste) in post offices.
The Slovene appears to be relatively successful in providing express services compared to other USP of AC/CC countries. Other important operators in the express market include:
• For domestic service: Royal Mail subsidiary GLS, Yellogistics (subsidiary of the Austrian USP), Intereuropa (UPS), “Door to door”, “City Express”, “Business Express”, and “Slovenske železnice express”
• For cross border services: DHL, FedEx, TNT (brand name ACK) and UPS.
11.4.2.2 Document exchanges
There appears to be no market for document exchange services in Slovenia; no such activities have been reported.
11.4.2.3 Unaddressed items
For the segment of unaddressed mail delivery, the NRA reported “emerging competition, while the USP felt competition was intense. However, the market appears to experience substantial growth. The USP has been successful in attracting a huge share of this growth as well as in gaining market shares in this segment. The volumes of unaddressed items carried by the USP have grown by more than 300% since 1998, see Table 11-3. Final report: Main aspects of postal networks in AC/CC 189
Country Report Slovenia
While much competition in the unaddressed segment is from small operators, the most important companies in the market include “Qmax”, “Eurovision”, “Vision”, and “Delo”.
11.5 Universal service in practice
11.5.1 Scope of universal service
The USP provides service to all points in Slovenia for all types of letters, direct mail, newspapers, periodicals, and books weighing up to 2 kg and for domestic and incoming cross border parcels weighing up to 10 kg. The USP offers registration services for all universal service items and insurance for all letters and parcels and delivers mail items for the blind or partially sighted on a universal basis.
Delivery service is provided at five days per week usually but six times per week in urban areas. Similarly, letter boxes are cleared five times per week minimum, but six times per week and several times per day in urban areas. Approx. 70% of the population have mail delivered six times a week. For very scarcely populated (alpine) areas there is delivery (and clearance of letter boxes) only three times a week. According to the USP, this exception concerns approx. 0.6 % of the total population. It appears that a regional exception from delivery standards may be granted by the NRA according to current legislation – but no such regulation has been implemented so far. However; the NRA appears not to be aware of the USP’s less frequent delivery in rural areas.
11.5.2 Reserved services in practice
Letter services up to 100g are reserved in Slovenia, but not outbound cross border services. It was reported that it is currently unclear whether direct mail below 100g is reserved;56 but secondary legislation is expected to clarify the situation in 2003.
The USP reports emerging competition in the direct mail segment, but not for other letter mail domestically. Therefore is appears that the reserved area is well respected in Slovenia. However, “intense competition” for reserved incoming cross border letters is reported by the USP. The NRA did not confirm this assessment.
56 The NRA stated that DM <100g is reserved; the USP stated the opposite and reported that its competitors agree in ignoring the reservation. Before 2002, printed matter was not reserved. Although the 2002 law clearly includes DM to the reserved area, it appears that all players incl. the USP are awaiting secondary legislation to clarify the extent of reservation and continue to ignore the reservation in the meanwhile. 190 Final report: Main aspects of postal networks in AC/CC Country Report Slovenia
11.5.3 Access
The USP operates 552 post offices and 2843 letter boxes in total. Additionally, extremely rural areas are served by mobile post offices; these six vehicles serve approx. 0.16% of the total population and either stay for one hour minimum in villages or visit every farm in the area. The USP does not make use of postal agencies. In addition to post offices, all rural postmen provide basic services such as sale of stamps, acceptance of mail items incl. registration and insurance and money orders, etc. Big mailers can inject mail directly to sorting centres but there is no special network access for competitors.
Access conditions of the Slovene public postal network are well comparable to current performance in EU member states; close to the EU-15 average. The USP operates 27.2 post offices per 1,000 square km and 2.8 offices per 10,000 inhabitants (average of EU- 15: 28.3 / 2.4). On average, there are slightly less clearance letter boxes in Slovenia than in the current member states: 14 letter boxes per 1,000 square km and 140 boxes per 10,000 inhabitants (average of EU-15: 204 / 18).
The USP does not set out performance targets concerning queuing time in post offices nor does legislation.
11.5.4 Tariffs and accounting principles
The USP applies a uniform rate for all domestic universal services. In addition to weight categories, there is a special rate for "standard letters”; letters below 20g and meeting special requirements of size and format.57 The last rate increase was approved by the NRA (for the first time since it was vested with this responsibility in 2002) and became effective in January 2003.
Moreover the USP offers special tariffs to business customer based on individual contracts. Although the 2002 postal law requires that special tariffs are transparent and non-discriminatory, it appears that this requirement has not been implemented yet: The NRA reported to have “no data” on special tariffs while the USP reported that inclusion of special tariffs to the USP’s general terms and conditions required a regulatory process (publication of a “nomenclatura”, a list of all postal services) that has not been initiated by the authorities yet.
57 However, the NRA reports that this special tariffs is hardly known amongst individual users and post offices would tend not to inform about the tariff. Final report: Main aspects of postal networks in AC/CC 191
Country Report Slovenia
Table 11-4: Postage rates for domestic first class letter services (Slovenia)
Weight up to Rate (local currency) Rate (Euro) Standard 20g 38.00 0.16 20g 44.00 0.19 100g 76.00 0.33 250g 180.00 0.77 500g 420.00 1.80 1000g 890.00 3.82 2000g 1,020.00 4.38
Source: WIK-Consult
In general, postal rates in Slovenia are considered as very low by both the NRA and the USP. It is suspected that rates for letter services may not even be cost covering. Moreover, it was reported that price increases were prevented by pressure of the Ministry of Finance at several occasions in the past in order to keep down inflation. Table 11-4 presents the postage rates for first class letter services effective on June 1, 2003, in local currency and Euros.
The USP has not implemented accounting separation so far. According to Pošta Slovenije, the details of the requirement arising from the provisions of the postal act are still not sufficiently clear but have to be set out precisely by secondary legislation. This has not been initiated so far. However, it appears that the USP currently uses an accounting system that allocates cost to activities and services in line with the provisions of the Aquis Communautaire. Therefore WIK assesses that an appropriate system to satisfy the legal requirements concerning accounting separation will be implemented quickly once the regulatory requirements will be set out.
11.5.5 Quality of service
Present legislation sets out a routing time target of 100% D+3 for domestic letters. The NRA reported to be drafting a decree currently that will set out new requirements but did not provide details. However, no independent monitoring of routing time is executed currently (although required by law). The USP publishes some results of its internal measurement annually.
An assessment of the USP’s routing time quality cannot be provided in this report due to a lack of independent monitoring and the absence of reliable publications. However, the USP estimates its performance for letter items to be approx. 98% D+1. Although this estimation appears very optimistic, it was reported by the NRA that apparently a very high percentage of letter is delivered within D+1 and routing time is not a major concern for postal authorities not users in Slovenia. 192 Final report: Main aspects of postal networks in AC/CC Country Report Slovenia
11.5.6 Complaint and redress
It appears that the provisions of the Acquis Communautaire concerning complaint and redress procedures are currently not met in Slovenia. The USP does not operate an office that is specially dedicated to handling customer complaints. There are no publications on customer complaints available from the USP or the NRA. According to the legal framework the NRA is responsible for the final resolution of customer complaints. However, the authority reported to be receiving a very limited number of complaints at present.
11.6 Regulatory situation
11.6.1 Overview of postal regulation
11.6.1.1 Postal legislation
Primary postal legislation in Slovenia is set out in the Postal Services Act that entered into force on May 30, 2002. Postal secondary legislation consists of seven regulations that have been issued under the previous postal act. According to the Ministry of Information Society and the NRA, it is envisaged to replace these regulations in the near future. The regulations are as follows:
• Rules on the Organisation of the Postal Network of the Republic of Slovenia (Ur. l. RS, št. 32/00);
• Rules on the General Terms and Conditions for the Provision of Postal Services (Ur. l. RS, št. 32/00);
• Rules on the Nomenclature of Postal Services (Ur. l. RS, št. 32/00);
• Rules on the Issuing of Accountable Materials;
• Decree on the Method of performance of the Compulsory Public Utility of Postal Services (Ur. l. RS, št. 99/99);
• Resolution on Withdrawal From the Market and Use of Postage Stamps and Postage Stationery (Ur. l. RS, št. 61/97);
• Resolution on the Transformation of a Public Company Pošta Slovenije, d.o.o. into enterprise Pošta Slovenije, d.o.o. (Ur. l. RS, št. 67/02) Final report: Main aspects of postal networks in AC/CC 193
Country Report Slovenia
While the 2002 postal act is available in English translation from the Ministry of Information Society’s website, no regulation was available in translated version for this study.
11.6.1.2 Regulatory institutions
Postal responsibility within the government is organised within the Ministry of Information Society. The main responsibilities of the Ministry in the postal sector include drafting of legislation (in co-operation with the NRA for secondary legislation) and participation in the supervisory board of the USP.
The Slovene NRA is the Telecommunications, Broadcasting and Post Agency (Slovene abbreviation: ATRP). It is a multi sector regulator that is responsible for the sectors of fixed and mobile telecommunications, broadcasting contents and frequencies as well as Post. In addition to its previous tasks, the authority was vested with responsibility for postal regulation along with the 2002 postal act. At this occasion the authority was renamed (“ATR” + “P”). The NRA participated in drafting the 2002 Postal Services Act. General responsibilities of the NRA related to postal policy include:
• Licensing and Authorisations;
• Monitoring of postal market development;
• Monitoring of universal service requirements;
• Supervision of accounting separation;
• Final resolution of customer complaints;
• Standardisation in the field of postal activities; and
• Tariff regulation
The NRA participated in a “PHARE twinning light project” for training in the field of Postal activities and started working on this project in 2002.
It appears that all significant regulatory functions are concentrated within the NRA. However, the authority reported that fulfilling its tasks is currently hindered by sever under-staffing of the postal department.
11.6.1.3 History and philosophy of postal regulation
The Slovene USP was created in 1995 following the split of PTT to separate telecoms and postal operations. In 1997 a new postal act was issued with definitions of postal 194 Final report: Main aspects of postal networks in AC/CC Country Report Slovenia
services, general terms and relations between customers and providers. By this law the USP was obliged to provide “services in the public concern”.
In order to create a more competitive environment in the postal market and to harmonise national legislation with the Acquis Communautaire, the present postal act was issued in 2002. Amongst others, the reserved area was thereby reduced to 100g (and a price limit of three times the standard tariff) already before directive 2002/39/EC came into force. This may be seen as a proof of the Slovene authorities’ commitment to competition in postal markets.
However, the legal framework set out by the 2002 postal act still lacks some specifications that shall be introduced by secondary legislation. In particular, the NRA reported that its medium term work programme includes issuing the following regulations (in its own words):
• A general act to specify the affordable price;
• Rules on Quality and method of provision of universal postal services;
• A general act to determine the costs which USP may include in their claim and the method of calculating the compensation;
• A general act on the Nomenclature of Postal services (service definitions),
• Rules on the Application form and more detailed conditions for obtaining the licence;
• Rules on the method of calculating the charges;
• Rules on detailed content of the general term and conditions for the provision of postal services,
• A general act laying down the method of keeping and checking the suitability of accounting operations,
• A general act on prohibition of delivery via mailboxes;
• A general act about the level of the charges for financing the agency (NRA);
• Rules on the method of handling postal items containing the contents not permitted to be contained in postal items,
• Rules on the methods of payment of compensation Final report: Main aspects of postal networks in AC/CC 195
Country Report Slovenia
11.6.2 Universal Service
The basic legal requirements for universal service in Slovenia are summarised in Part I of this report. As described above, the USP appears to fulfil these requirements in the entire territory and without geographic exceptions.
The postal act designates the Slovene USP as the only universal service provider and obliges the company to offer universal service at least five day a week. Universal services include letters, parcels, books, literature for the blind, registration and insurance of mail. For rural areas, the act specifies that mail does not have to be delivered to the addressee’s premises but the USP may use “detached mailboxes” and a street.
11.6.3 Reserved services
The postal act reserves to the USP the right to provide “domestic routing of postal items of correspondence up to 100 g if the price is lower than tree times the price of routing a postal item of correspondence of the standard first category” (Article 8 Postal Services Act). In addition, inbound cross border letters are reserved, if within the same weight and price limits, while outbound cross border mail is entirely opened to competition.
Currently, market players reported that it is not entirely clear whether direct mail is a reserved service in practice. Although the law clearly includes DM to the reserved area, the previous law did not include “printed matter”. Therefore private operators claim not to provide direct mail, but rather “printed matter” under the old regulations. In the absence of updated secondary legislation providing services definitions (“nomenclatura”), it appears that competitive operations concerning direct mail are tolerated by the authorities.
11.6.4 Regulation of non-reserved services
Basic principles for the regulation of non-reserved (universal or non-universal) services are set out in the 2002 Postal Act. However, the regime of licensing and authorisation has not been fully implemented yet. In particular, no secondary legislation specifying the procedures for licensing and authorisation has been issued. Therefore the findings of this section cannot be definitive.
In general, the act requires any operator wishing to provide postal service to notify the NRA (§13) and provide detailed information about the services it intends to provide. Thereafter, the NRA decides whether these services have to be considered as universal services, “individual services within the US area”, or non-universal services. 196 Final report: Main aspects of postal networks in AC/CC Country Report Slovenia
For non-universal services, the notification of its operations gives a company the right to start its operations.
For universal services a licence is required following § 10. A licensed company has to provide services throughout the entire territory and licensing is subject to several conditions, including the applicant’s submission of “evidence of the provision of safe and reliable routing of postal items”. In this sense, the law may be interpreted such that universal services may only be provided under (possibly restrictive) licence condition.
However, § 13 prescribes that the NRA shall issue a “declaratory order” to companies that notified the NRA that they wish to provide services within the universal service area. Details defining the nature of such “declaratory orders” are not provided by the law, but following the statements of the NRA, they should be considered as general authorisations. This is backed by the current practice of the NRA to issue “declaratory orders” to parcel operators, i.e. to companies providing universal services. It appears that there is some contradiction between §§ 10 and 13 (licensing requirement and provisions concerning “declaratory orders”): While universal services may only be provided in the entire territory and by licensed companies; at the same time “declaratory orders” that are comparable to general authorisation should be provided to operators wishing to provide universal services. It is expected that secondary legislation planned for the future may provide some clarification in this respect. However, regulatory practice does not suggest that the licensing regime is intended or used to create barriers to entry to companies that wish to provide universal services, e.g. parcel services.
Moreover the postal act authorises the NRA to introduce a compensation fund. Details have not been developed so far and should be set out in future secondary legislation.
11.6.5 Access
For the access requirements that will apply to the USP, relevant conditions are planned to be set out by future secondary legislation.
Currently, the legal framework does not make any requirements regarding number or location of letter boxes.
For number and location of letter boxes, (old) secondary legislation, namely the “Rules on Organization of the Postal Network of the Republic of Slovenia”, set out the following requirements:58
58 Information according to the NRA, no translation of the regulation was available. Final report: Main aspects of postal networks in AC/CC 197
Country Report Slovenia
• In settlements with less than 1,000 households, the USP should operate 1 post office per 500 households, e.g. 2 post offices for a settlement with 501 households.
• In settlements with more than 1,000 but less than 3,000 households, the USP should operate 1 post office per 1,500 households, e.g. 2 post offices for a settlement with 1,501 households.
• In settlements with more than 3,000 but less than 20,000 households, the USP should operate 1 post office per 3,000 households, e.g. 5 post offices for a settlement with 12,001 households.
• In settlements with more than 20,000 but less than 50,000 households, the USP should operate 1 post office per 3,500 households, e.g. 11 post offices for a settlement with 35,001 households.
• In settlements with more than 50,000 households, the USP should operate 1 post office per 3,800 households, e.g. 21 post offices for a settlement with 76,001 households.
According to the NRA, access requirements are not monitored and compared against legal provisions regularly.
The postal act includes an obligation for the USP to grant access to its network to other providers of postal services. However, there is no practical experience with this provision so far; there are no more specific regulations on this matter.
11.6.6 Tariff and accounting principles
Previously to the current postal act, postal rates were regulated by the Cabinet of Ministers, as was reported by the Ministry of Information Society. Since 2002, the NRA is responsible for tariff regulation. Secondary legislation that will set out the procedures for tariff regulation has not been prepared so far. However, the NRA has already decided one rate case in September 2002 and approved a rate increase.
The postal act requires the USP to apply a uniform rate for domestic services.
The postal act requires includes a requirement for the USP to keep separate accounts for reserved, non-reserved universal, and non-universal services in line with the Acquis Communutaire. However, provisions concerning cost allocation principles as well as the procedures for accounts supervision have not been set out so far. 198 Final report: Main aspects of postal networks in AC/CC Country Report Slovenia
11.6.7 Quality of service
Secondary legislation concerning routing time is reported to be drafted currently. So far, it was reported that a regulation requires 100% delivery within D+3 for domestic items of correspondence. Currently, there are neither legal requirements for independent monitoring of routing time nor requirements for publication of performance results.
11.6.8 Complaint and redress
The postal act does not require the USP explicitly to operate a dedicated office to handle customer complaints. However, the introduction of transparent procedures for addressing complaints and publication of these procedures is required (§ 46). The NRA is responsible to finally resolve complaints where the USP fails to satisfy the customers' claims.
There is no requirement to compile and publish data on customer complaints.
11.6.9 National regulatory authority
The director as well as the deputy directors of the NRA is appointed by the government for a fixed term of five years. According to the Telecommunications Act, they cannot be dismissed except for reasons such as conflicting interest (e.g. employment by a regulated firm) or medical incapability to perform their tasks. The NRA’s budget is approved by the government. Its decision cannot be overruled, but may be reviewed by administrative courts.
Its institutional structure allows the NRA to operate as an independent regulators as required by the Postal Directive. In addition, the NRA is vested with a wide range of most important regulatory functions. However, it appears that the authority currently lacks administrative capacity to perform its tasks: At the end of 2002, the NRA’s postal division consisted of only one person. In spring 2003, a second person joined the division but it may be questioned whether this will ensure effective regulatory work given the extensive scope of NRA’s responsibilities. Moreover, it was reported that most work in drafting postal regulation is performed by the NRA rather than the Ministry of Information Society, thus further indicating a shortage of NRA staff.
Country Report
12 SK – Slovakia
200 Final report: Main aspects of postal networks in AC/CC Country Report Slovakia
SLOVAKIA – GENERAL FACTS
Economy
GDP in EUR, 2001, (million): 20,900 GDP per capita in EUR, 2001: 4,317
GDP in PPS, 2001 (million): 60,200 GDP per capita in PPS, 2001: 11,200
GDP growth rate, 2001: 3.3% Unemployment rate, 2002: 19%
Population and geography
Population, 2001 (thousands): 5,397 Density (Persons per sq. km): 110
Land area, 2002 (square km): 49,035 Urbanisation (Pop. in urban areas): 58%
Transport and communications infrastructure
Railway network, 1999 (km): 3,665 Fixed lines per 100 households, 2002: 66
Road infrastructure, 1999 (highway km): 295 Mobile penetration rate, 2002: 48%
International airports, 2003: 3 Internet users penetration, 2002: 14% Source: Eurostat NewCronos; UN World Urbanization Prospects (2001); IBM Monitoring of EU candidate countries, telecommunications sector (2002); www.columbusguide.com.
SLOVAKIA – POSTAL FACTS
Universal service provider
Name of USP: Slovenská Pošta USP employment, 2002 (persons): 18,260
USP revenue, 2002 (million EUR): 142 USP employment of total workforce: 0.9%
Annual revenue growth (CAGR), 98-02: 9.8%
Volumes and tariffs
Dom. letter post volume, 2001 (million): 518 Dom. letter post per capita, 2001: 96.0
Cross border LP: OCB/ICB ratio, 2002: 52% Domestic parcels per capita, 2002: 0.84
Cross border LP: ICB/Dom ratio 2002: na Basic letter tariff, June 2003: 0.29€
Postal network (access)
Postal outlets, 2002: 1,628 Letter boxes, 2002: 7,096
Outlets per 10,000 inhabitants: 3.0 Letter boxes per 10,000 inhabitants: 13.1
Outlets per 1,000 sq. km: 33.2 Letter boxes per 1,000 sq. km: 144.7 Source: WIK-Consult
Final report: Main aspects of postal networks in AC/CC 201
Country Report Slovakia
12.1 Basic country information
Located between the Czech Republic, Austria, Hungary, Poland and Ukraine, Slovakia is characterised by plains in the western part along the Danube and hills in the country’s central and eastern regions. The country has very close ties with the Czech Republic and with Austria; from the capital Bratislava a car ride to Vienna takes less than an hour. With 110 inhabitants per square km, Slovakia is relatively densely populated. The country counts 5.4 million inhabitants of which the majority of approx. 85% percent speaks Slovak, while there are Hungarians (approx. 10%) and Roma (approx. 2%) who embody important ethnic minorities.
Nominal GDP of Slovakia was 23.3 million EUR in 2001 equalling 4,317 EUR or 11,200 per head thus comparing well against other accession countries.
The Slovak communication markets are slightly less developed than those of its neighbouring countries: There are 66 fixed lines per 100 households (Avg. EU-15: 110) and mobile penetration is 48% (Avg. EU-15: 73%) while internet usage is relatively low: 14% of all Slovaks used the internet in 2002.
12.2 Overview of postal market
Based on available information, WIK estimates the total Slovak market for postal services in 2002 to be roughly about 86 million EUR. The market for letter post is estimated to be roughly about 70 million EUR while parcel and express services are estimated to account for roughly 16 million EUR in 2002. The market estimates are presented in Table 12-1. The estimates must be considered as particularly approximate as the Slovak USP did not participate in the survey by providing revenue data in a comparable manner as USPs from other AC and CC countries.
Table 12-1: Estimated market 2002 (Slovakia)
USP Rev 2002 WIK Estimate Market Rev 2002 EUR 000 USP share EUR 000 Total letter post 66,527 95% 70,029 Total parcels and express 7,077 45% 15,728
Source: WIK-Consult
There appear to be no studies or market monitoring information available from the Ministry, NRA and the USP. In absence of detailed USP information and reliable market monitoring, WIK developed the estimate of market size using the following information: Rough estimates of USP revenues in the letter post and parcels segment were calculated from the USP’s total revenues for 2002 and information on the shares of income from letter post and “parcel post and logistics” (items 5.1 and 5.2) provided in 202 Final report: Main aspects of postal networks in AC/CC Country Report Slovakia
the UPU statistics for 2001. Although the data reported to UPU cannot be regarded as entirely credible, there appears to be no other source of information. The USP failed to provide revenues broken down by basic service categories such as “letter post”, “parcel post” or “express services”. Although the USP publishes annual reports that have been subject to an independent audit, no information on the contribution of different postal products is stated therein. (Only revenues of “postal distribution” including money orders are given.)
The estimated USP revenues from letter post and parcels have been divided by the USP’s market shares in order to estimate total market size. It should be noted that no assessments of the market structure were provided by the NRA and the Ministry – both institutions reported to lack reliable information. However, more general assessments of the degree of competition in different postal market segments were made and proved to be in line with the market information provided by the USP. Based on these assessments, WIK developed rough estimates for the USPs market shares in i) the letter segment (including both domestic and cross border and domestic as well as direct mail) and ii) the segments for parcels and express services – both cross border and domestic. The estimates were derived from separate USP assessments for the various segments (letters, direct mail, parcels, express – each split to domestic and outbound cross border) and take into account a higher price level of the express segment but also the importance of the parcel segment (in particular the domestic one) in terms of volumes.
In the letter segment, there appears to be hardly any competition domestically while NRA, Ministry and USP state emerging competition for outbound cross border services. Interestingly, the USP reports no competition in the domestic letter and direct mail segments, but the Ministry states emerging competition in these segments.
The NRA has become operational only recently and reported that it started to perform market monitoring such that more detailed information will become available in the next years.
The USP is the major player of the Slovak postal market. No competitors were reported in the letter or direct mail segments (which are both reserved up to 1000g). For domestic parcel and express services, activities of several operators were reported: The major international express companies DHL, UPS, TNT were told to serve both the domestic and the cross border market while Inspekta (a FedEx subsidiary) and a national company called TEN Express operate in the domestic market. Moreover, relatively cheap parcel services are provided by the national railway company (from station to station). Several local operators were reported to provide delivery of unaddressed advertisement. Final report: Main aspects of postal networks in AC/CC 203
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12.3 Market players
12.3.1 Universal service provider
12.3.1.1 Legal status and subsidiaries
The USP is Slovenská Pošta; the company holds the legal status of a “state enterprise” that is different from normal private companies. The organisation and the legal status of the USP is set out in Act No 111/1990 on State Enterprise. As its “founder”, the Slovak Ministry of Transport, Posts and Telecommunications has a very important influence on the USP, it manages the State’s ownership rights and appoint the members of the USP’s supervisory board. Trough its representatives in this board, the Minister is responsible to establish operational and financial targets for the USP and decides on retention of profits (or recovery of losses).
The issue of privatisation and transformation of the USP to a joint stock company appears to be intensely debated in Slovakia. As current legislation includes several obstacles to the privatisation, the Ministry reported to approach this issue and intends to establish a new act on privatisation of the USP in the medium term.
The USP has profitably operated over the last years (with exception of the years 1997 and 1998) and does not receive direct subsidies from the government.
The USP reports to have two subsidiaries, see Table 12-2. Besides a minor share in the Postal Bank, the USP wholly owns a company that provides distribution of newspapers and periodicals. The latter was also part of the PTT historically, but was split from the postal USP. After bankruptcy of the newspaper delivery company, it was bought by Slovenká Pošta.
Table 12-2: USP subsidiaries (Slovakia)
% of Partners Name of subsidiary Activities shares owned (if any) Slovak Consolidation Bank, PostBank, J.S.C. Banking services 6 private shareholders Postal Newspaper Periodicals and newspaper 100 - (Distribution) Company distribution
Source: WIK-Consult
Revenues related to the provision of universal services by the USP are exempted from the payment of VAT. The USP reports that substantial accounting problems result from this provision of the VAT law. For example, for services including personal delivery to the addressee, VAT applies to the value-added part of the services (handing over to the addressee in persona) but not to the remaining part of the service (delivery of registered items: universal service). 204 Final report: Main aspects of postal networks in AC/CC Country Report Slovakia
12.3.1.2 Service portfolio
Within the range of universal services, new product categories were introduced in 2001 and since then priority and non-priority (1st class / 2nd class) letter and parcel services have been offered.
The Slovak USP offers several services outside the range of universal service. Non- universal postal services include hybrid mail; designated products for direct mailers, and express and courier products. Moreover, the USP is a major supplier of delivery services for unaddressed items, newspapers and periodicals. Apart from postal money orders, various financial services are offered as third-party services for the Postal Bank. In addition, the USP provides payment of pensions and social benefits for the state and collects television and radio fees.
Finally, postal counters sell retail of stationary, lottery tickets, telephone and mobile prepaid cards, newspapers, magazines and insurance services (as an agent of an insurance company).
12.3.1.3 Postal infrastructure and automation
With 45 regional processing centres and 4 main sorting centres the network infrastructure appears to be efficient and appropriate given the size and the postal volumes of Slovakia. Sequence sorting is performed in 1490 delivery offices, i.e. approx. 92% of all post offices serve as delivery offices.
The USP has introduced process automation to a relevant extent: Two of the four main sorting centres are equipped with automated machinery. The USP reported to offer tracking and tracing for special registered items, EMS and special international parcels (within the EPG – European Parcel Group). Approx. 12% of all post offices (i.e. 200) are equipped with personal computers to support the provision of postal and financial services. Transports are facilitated mostly by trucks, but also by railway connections. However, the USP reported that 71% of all vehicles already passed their economic period of service.
12.3.1.4 Employment
The USP has a total workforce of 18,260 persons (17,600 full time equivalents). Since 1998, the USP has slightly reduced its workforce by approx. 2%. None of the employees are civil servants. The USP makes use of part-time and seasonal employment but no details on the importance of these types of employment were available. 81% of all employees are female. Final report: Main aspects of postal networks in AC/CC 205
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There appears to exist no formal statement on the USPs employment policy. However, it was reported that a major goal of the company is to maintain social peace although some further staff reductions may become feasible in the future.
12.3.2 Private operators
By the beginning of 2003, 10 companies (other than the USP) had registered with the NRA as postal services providers: UPS, IN TIME, DHL , TNT, Inspekta (FedEx), TEN Expres, Železničná spoločnosť, M&G Spedition and M&G Expres Spedition.
It was reported that the most important operators in the parcel and express segment include DHL, UPS, TNT, TEN Expres and Inspekta (Fedex). Parcel services are also provided by the national railway company. There are numerous operators providing delivery of unaddressed items with the most important being two companies called “Shiculka & Ma-catch” and “Kolos”.
Private operators have not provided any information about their services in Slovakia.
12.4 Market development
12.4.1 Universal services – letter post and parcels
Table 12-3 presents a summary of the volumes of postal items carried in the universal services from 2000 to 2002. No data for the years preceding 2000 could be obtained. All figures reflect postal items carried by the USP. The private operators have not submitted any data.
In essence, no clear conclusions can be drawn from the volume information provided by the USP. For domestic letter post, the data suggests a severe drop of volumes in 2002. However, the USP reported that the dramatic change is merely a result of changes in the methods used to estimate volumes and alerted WIK that the time series of volume data would not be reliable. The gradual changes in volume estimation were described to be a “never ending story” but it appears likely that the methods have improved in the course of time such that the data for 2002 is the most reliable. No volume data for cross border letters could be provided by the USP. The USP confirmed that improvements in its internal data collection were necessary and that the issues have already been tackled.
In the light of partially inconsistent and conflicting information, the following paragraphs try to present conclusions from the analysis of the USP’s volume data to the possible extent. 206 Final report: Main aspects of postal networks in AC/CC Country Report Slovakia
Table 12-3: USP volumes of universal and non-universal services (Slovakia)
3-yr 2000 2001 2002 change Universal services Letter post LP Domestic Pcs-000 387,401 398,702 207,681 -46% Letters Pcs-000 362,131 369,793 171,693 -53% Direct mail Pcs-000 25,270 28,909 35,988 42% LP per capita Pcs-000 71.7 73.9 38.5 LP per EUR 1000 GDP 17.8 17.1 8.9 LP Outbound cross border Pcs-000 na na na Outbound/inbound 49% 62% 53% LP Inbound cross border Pcs-000 na na na LP ICB/LP Domestic na na na Parcels Parcels, Domestic Pcs-000 5,252.0 5,009.5 4,534.3 -14% Parcels,Outbound cross border Pcs-000 38.2 37.7 38.8 2% Non-universal services Express Domestic 22 55 90 310% Outbound cross border Pcs-000 na na na Unaddressed mail Pcs-000 49,388 96,667 96,667 96% Domestic LP per cap and per EUR 1000 GDP for 2002 figures use 2001 population and GDP as bases, respectively no volume data for cross border letter post was available from the USP. Outbound/inbound ration has been calculated from weight data. No data for years earlier than 2002 was provided by the USP.
Source: WIK-Consult
Based on verbal assessments made be USP representatives, it appears that there was no dramatic drop in Slovak letter volumes as the data may suggest. By contrast, the USP reports to suspect slight volume increase of about 3% p.a. in the last years. Assuming correctness of the data provided for 2002, the number of domestic letter post items per capita was 38.5 in Slovakia, approx. 17% of the EU-15’s average and only marginally lower than letter volumes in Greece. The number of letter post items per 100 Euro GDP was 9 in Slovakia, compared to an average of 10 in the EU-15.
Since 2000, the USP’s parcel volumes have decreased by 14%, possibly due to increasing competition in this segment. In the absence of exhaustive data from private operators, no conclusions to the overall parcel market can be derived.
Since the USP did not provide volume data for cross border services, an assessment of the USP’s dependence on cross border mail (and thereby on terminal dues and operations of other USPs in general) is hard to achieve. Analysis information on cross border weights indicates a relatively low ratio of outbound to inbound letters, around 50%. I.e., the USP delivers approx. twice as many letters from abroad than are sent Final report: Main aspects of postal networks in AC/CC 207
Country Report Slovakia from Slovakia to foreign destinations. No information on the ratio between inbound cross border and domestic letter post could be achieved, but data provided by the USP to the UPU suggests that approx. 5.5% to 7.5% of all letters delivered by the Slovak USP originate from abroad. Although this appears to be a high share for a country of the size of Slovakia at first glance, it may partly be explained by the close economic relations between Slovakia and the Czech Republic: Postal traffic with the Czech Republic accounts for a huge share of all Slovak cross border traffic (for both inbound and outbound).
In general, the market for universal postal services in Slovakia are developed to an extent that is close to the average of all AC and CC countries. However, the Slovak postal markets appear to be less developed than those of its (bigger) neighbouring countries Austria, Czech Republic and Hungary.
12.4.2 Non-universal services
12.4.2.1 Express services
Both NRA and USP state intense competition in the domestic and cross border express markets. Private express operators have not provided any information about their services in Slovakia. It appears that the most important private operators in the Slovak express market are the international courier companies DHL, UPS, TNT and FedEx subsidiary Inspekta; joined by a local company called TEN Expres.
The USP is increasingly engaged in the express market and has increased its revenues in the domestic market by more than 300% since 2000, see Table 12-3. The tremendous growth is likely to be a result of the USP’s increasing success in this market rather than of enormous total market growth. However, although catching up substantially, the USP appears not to be a dominant player and estimated to serve approx. 20% of the domestic and less than 10% of the outbound cross border market.
12.4.2.2 Document exchanges
Neither the NRA nor the USP reported any document exchange activity.
12.4.2.3 Unaddressed items
In addition to the USP the most important operators in the market for delivery of unaddressed items are two companies called “Shiculka & Ma-catch” and “Kolos”. As noted above, the USP has greatly increased its participation in this market in the last few years and almost doubled its volumes from 2000 to 2002 (see Table 12-3). 208 Final report: Main aspects of postal networks in AC/CC Country Report Slovakia
However, it is far from dominating this market and reported to have a market share of approx. 10-30% at present.
12.5 Universal service in practice
12.5.1 Scope of universal service
In conformance with the universal service obligation set out in the postal license, the USP provides service to all points in Slovakia for all types of letters, direct mail, newspapers, periodicals, books weighing up to 2 kg and for domestic parcels weighing up to 10 kg and for incoming cross border parcels up to 20 kg. In addition, the USP offers registration services for all universal service items and insurance for all letters and parcels.
Delivery service is provided five days per week and also letter boxes are cleared five times a week at least. The legal framework provides the possibility to exempt hardly accessible areas from universal delivery following approval by the NRA. While the USP reported that there is no universal delivery in very few rural areas, the NRA reported that the USP has not applied for such exemption so far.
In addition to postal services, the USP provides money orders, social benefit payments and collection of TV and broadcasting charges on a universal basis.
12.5.2 Reserved services in practice
Until the end of 2003, letter services up to 1 kg are reserved for the USP. While the Ministry reported “emerging competition” in this segment, the USP stated not to observe such violation of the monopoly. It appears that the reserved area is enforced rather effectively in Slovakia.
12.5.3 Access
The Slovak USP provides a very high level of access to postal services. The public postal network includes 1,626 post offices and 7,096 letter boxes. This equals 3.0 postal outlets per 10,000 inhabitants and 33.2 outlets per 1,000 square km; well above the average values for the EU-15 (28.3 / 2.4). There are slightly less letter boxes than in the EU-15 on average: 145 boxes per 1,000 square km and 13 per 10,000 inhabitants in Slovakia compare to values of 201 and 18 in the EU-15. Final report: Main aspects of postal networks in AC/CC 209
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The USP traditionally operated five mobile post offices that serve 19 very rural settlements. Recently two postal agencies have been set up as a pilot project. In the medium term, the USP plans to replace some of its post offices by postal agencies. In addition, basic postal services are offered by delivery postmen.
There is no special access to the public postal network for private operators.
The UPS has not established targets for queuing time in post offices.
12.5.4 Tariff and accounting principles
The USP provides a uniform national rate for the collection and delivery of all postal items conveyed in the universal service throughout the national territory. The last increase in postal rates became effective in January 2003; those were the first postal rates approved by the NRA, the Slovak Postal Office . Table 12-4 presents the postage rates for first class letter services effective on 1 June 2003, in local currency and Euros.
Table 12-4: Postage rates for domestic first class letter services (Slovakia)
Weight up to Rate (local currency) Rate (Euro) 20g 12.00 0.29 50g 13.00 0.32 500g 16.00 0.39 1000g 35.00 0.85 2000g 52.00 1.27
Source: WIK-Consult
The USP offers several special tariffs; volume and technological discounts, e.g. for pre- sorted mail. While the USP reported these special tariffs to be transparent and non- discriminatory, the NRA did not comment on this question but reported that monitoring of these tariffs is about to be tackled.
The USP reports to have an accounting system in place that keeps different accounts for reserved, universal and no-universal services. This system has been formally approved by the NRA. However, there is no independent evaluation of the accounts against legislative provisions at present; although there is an independent audit of the financial accounts. The USP has to present the “regulatory accounts” annually to the NRA; the accounts for 2002 have been submitted to the NRA by 30 April 2003.
However, the fact that the USP failed to provide breakdowns of total revenues to basic postal products for the purposes of this study, and that its methods to estimate postal volumes (that are often used to calculate cost allocation keys) appear not to be entirely satisfactory , cast some doubt on the state of implementation of accounting separation. 210 Final report: Main aspects of postal networks in AC/CC Country Report Slovakia
12.5.5 Quality of service
Table 12-5: USP Quality of service – Measurement results (Slovakia)
Routing time 2000 2001 2002 D+1 94.7% 96% 94.7% D+2 99.6% 99.5% 99.6% D+3 99.9% 99.9% 99.9% D+4 100% 100% 100%
Source: WIK-Consult
Compared to other AC and CC countries, measurement of routing times appears to be highly developed in Slovakia. For first class letters, performance is monitored by the NRA and was monitored independently by the University of Žilina before the NRA was established. Moreover, it appears that the USP provides reliable and high quality postal services. Performance within D+1 is summarised in Part I of this report and the routing time performance of the USP in the last three years is presented in more detail in Table 12-5.
In addition to first class letter, also second class letter and both first and second class parcel routing time is measured independently in Slovakia.
Performance results are published regularly in the USP’s annual report as well as in press publications and broadcasting formats. Starting later in 2003, the NRA will publish performance results on its internet website www.posturad.sk.
12.5.6 Complaint and redress
The USP does not operate a specific office to handle customer complaints but customers may complain at any post office as well as at the “Controlling and Quality Management Departments” in the USP’s headquarters and its regional directorates. There is no “regulatory procedure” in place for final resolution of complaints; customers may appeal to the courts where the USP cannot satisfactorily resolve the complaints – a rather costly procedure.
There have been no publications on complaints so far but the licence that has recently been issued to the USP sets out specific rules on this matter: In particular, the licence conditions include a requirement to report the total number of complaints as well as a breakdown to the types of resolution annually to the NRA. The first report will be due by the end of February 2004. Final report: Main aspects of postal networks in AC/CC 211
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12.6 Regulatory situation
12.6.1 Overview of postal regulation
12.6.1.1 Postal legislation
The Act No 507/2001 on Postal Services of 6 November 2001 became effective in January 2002.59 The law is available in English translation from the Ministry’s website www.telecom.gov.sk. In addition the laws on state enterprises and on privatisation include relevant legislation concerning the USP but are not available in translation. Further regulatory provisions are set out by the general authorisations and the USP’s “postal licence” that are available from the NRA’s website www.posturad.sk.
12.6.1.2 Regulatory institutions
The Slovak Ministry of Transport, Posts and Telecommunications (referred to as “Ministry”) exercises the postal responsibilities within the government. The postal act of 2001 established the Slovak Postal Office (“Posturad”) as an independent regulatory authority. The specific tasks of both institutions related to the postal sector are set out in the postal act as follows:
(1) The Ministry shall: (a) draft proposals for the state postal policy and concepts for the development of postal services, and submit them to the Government of the Slovak Republic for approval; (b) ensure international relations in the state administration of postal services at the level of members of the governments, and governmental and inter-governmental organisations; (c) approve: 1. the plan of issuing postage stamps and postal cards and envelopes with the impression of a postage stamp (hereafter referred to as 'postal stationery') and their thematic and graphic design; 2. the beginning and the end of validity of postage stamps and postal stationery specified in point 1.
(2) The Postal Office shall independently: (a) perform state regulation of postal services (hereafter referred to as 'state regulation');
59 With the exception of the provisions on reducing the reserved area that will become effective in January 2004. 212 Final report: Main aspects of postal networks in AC/CC Country Report Slovakia
(b) perform state supervision over the provision of postal services; (c) ensure international relations in the area of postal services at the level of regulatory authorities; (d) perform other activities according to this Act.
Thus virtually all tasks concerning the implementation of postal regulation (incl. licensing, tariff regulation, supervision of universal service provision, market monitoring, and standardisation) have been transferred to the NRA, while the Ministry’s responsibilities are related to drafting of postal legislation and to the management of the state’s ownership rights in the USP.
12.6.1.3 History and philosophy of postal regulation
The Slovak Post was established on 1 January 1993, at the date when the independent Slovak Republic came to existence.
Until 2000, the Ministry and the USP jointly carried out a “development project of postal services” that aimed at increasing efficiency of the USP, ensuring provision of universal service and creating a modern legislative framework for the provision of postal services. The most important change in postal legislation was introduced with the 2001 Postal Act that is considered to transpose the 1997 Postal Directive. It creates a commercially oriented environment for the postal market while maintaining regulated by universal services by the state.
A “programme declaration document” of the government was approved in November 2002 and sets out the main objectives of future postal policy as follows (in the words of the Ministry; slightly edited): (i) Creation of legislative conditions for liberalisation of postal market and transformation of Slovak Post to joint stock company (ii) Preparation of the draft concept of the development of the universal postal service (iii) Approval of the amendment of the Act No 507/2001 on the postal services in compliance with the European Parliament and Council Directives (iv) Submission of the draft of postal policy concept for comments at ministerial level and approval of postal policy.
12.6.2 Universal Service
The basic legal requirements for universal service in Slovakia are summarised in Part I of this report. While § 3 of the postal act sets out basic characteristics of universal service, more detailed requirements of the universal service obligation are set out in the licence issued by the NRA in December 2002. As described above, the USP appears to fulfil the requirements of the USO. Final report: Main aspects of postal networks in AC/CC 213
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The obligation to provide universal service is legally vested in all operators holding a postal license, not in a single “universal service provider” designated by statute. However, only the incumbent USP appears to qualify for a license and the holder of a postal licence is referred to as “the universal services provider” (in singular, §5 (3)) in the act. Apart from postal services, the USP requires the provision of postal money orders.
12.6.3 Reserved services
The 2001 postal act reserves the collection and delivery of items of correspondence and direct mail up to 350 g to the USP and sets out a weight limit of five times the tariff of a standard first class letter of the lowest weight category. Delivery of inbound cross border mail is excluded from the reservation.
In addition to items that fall within the weight and price limit, correspondence related to official proceedings60 is reserved to the USP.
The Ministry reported that it intends to amend the postal act in 2003 such that the reserved area will be reduced to 100g and 3 times the standard tariff as of 1 January 2004.
12.6.4 Regulation of non-reserved services
Under the postal law, delivery services for non-reserved “postal items” as defined in § 4 require a general authorisation. The definition of postal items includes items of correspondence, direct mail, parcels up to 31.5 kg as well as literature for the blind and is comparable to definition used in the Postal Directive except for the fact that additionally money orders are considered as postal items.
Under the general authorisations, all postal operators need to register with the NRA. There are no continuing prohibitive conditions and no fee is charged for registration such that the registration is well in line with the Directive’s concept of general authorisation.
The treatment of private operators providing universal services appears not to be entirely clear at present. According to the postal act and to current practice of the NRA,
60 The postal act specifies these documents as “items of correspondence to be delivered to the addressees in person involved in proceedings under general legislation concerning criminal proceedings, civil proceedings, administrative proceedings, proceedings concerning taxes and fees, execution proceedings, notary proceedings and proceedings at the National Bank of Slovakia.” Furthermore, the law provides more particular reference to define exactly the scope of these reserved services. 214 Final report: Main aspects of postal networks in AC/CC Country Report Slovakia
the same registration procedures apply to all operators – regardless whether their services are universal or non-universal. However, the NRA’s general authorisation requires special reporting of cost and revenue data from those operators providing services “equal to the universal service” – possibly with an eye on the compensation fund. Apparently these provisions have not been implemented so far such that all authorised operators are practically considered as providing non-universal services.
Moreover, the current postal act does not provide a clear definition of “services equal to the universal service” and it was reported by the Ministry that the planned 2003 amendment will clarify the regulations concerning private operators in the area of universal services.
The postal act enables the NRA to decide on the establishment of a compensation fund, § 13 (3) c), but no such fund has been implemented so far.
12.6.5 Access
The access requirements included in the USP’s postal licence set out very detailed requirements on the one hand - but on the other hand it appears practically impossible to monitor or enforce them.
For both letter boxes and post offices, there are different requirements for residential areas (villages, cities,...) that are either of a round shape or of a lengthy shape.61 These requirement prescribe, for example, that a post office should be in 2 km reach from any building in municipalities with more than 5,000 inhabitants (in 4 km reach for lengthy municipalities). However, less post offices are required if they are accessible by public transport. (In this case, the distance may be up to 6 km in round cities, but 10 km in lengthy cities) Moreover, the USP does not need to ensure the requirements for all buildings or inhabitants, but only has to ensure that the requirements are met for 90% of the population of each residential unit.
The detailed requirements may be found in the annex to the postal licence which is available from the NRA’s website, Articles 2, 4, 5 and 6.
However, the USP appears to provide a sufficiently dense access network as noted in section 12.5.3 of this report. In addition, the NRA can effectively control the access quality since the USP has to notify the NRA about all changes in its access network.
61 Exact definitions of the licence text: Round village: “The residential unit type I has concentrated built-up area.” Lengthy village: “The residential unit type II is the long, narrow built-up area created by the buildings alongside the roads, streams, rivers etc.” Final report: Main aspects of postal networks in AC/CC 215
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12.6.6 Tariff and accounting principles
The postal act appears to require that tariffs for universal postal services shall be based on efficient costs. The NRA is in charge of regulating prices for all universal services provided by the USP. Since its establishment, the NRA has reviewed postal tariffs and approved a rate increase once, in 2002.
§ 21 (3) of the postal act seems to suggest that tariffs of other operators than the USP that provide universal services are also subject to price regulation. However, the NRA stated that tariffs of private operators are not regulated.
The postal act further requires the USP to keep separate accounts for reserved and non-reserved services as well as for universal and non-universal services. The act does not make specific requirements concerning cost allocation principles but it was reported that the USP costing methodology was approved by the NRA. According to the postal act, the USP is obliged to report financial information to the NRA on request but it is not entirely clear to which extent the legal requirements have been fully implemented.
12.6.7 Quality of service
Quality of service targets are determined annually by the NRA in an annex to the postal licence. For 2003, the target for first class letters requires the USP to deliver 94% of all letters within D+1.
Under the postal act, the NRA is responsible for “state supervision over the provision of postal services” which appears to include the measurement of routing time performance. Although performance results have been published by the USP annually in the past and the NRA intends to publish performance results starting in 2003, there is no legal requirement for publication of routing time performance.
12.6.8 Complaint and redress
The postal act requires the USP to “regulate” customer complaints but does not set out specific rules how this requirement must be met (§25 (3)). In addition, the postal licence requires the USP’s customer complaint procedures to be simple and understandable and includes requirement to publish these procedures (Art. 13).
Customers that are not satisfied with the resolution of their complaint may bring the complaint to court. The USP is required to report the total number of complaints and information on the way they have been handled to the NRA annually starting in 2004. 216 Final report: Main aspects of postal networks in AC/CC Country Report Slovakia
12.6.9 National regulatory authority
In Slovakia, the NRA appears to be “legally separate from and operationally independent of” the USP to a considerable extent. On the one hand, the NRA can act independently as its chairman is appointed for a fixed term of six years and may only be dismissed for reasons such as criminal offence or gross violation of postal legislation. On the other hand, the Minister (of MTPT) approves the NRA’s budget and may revise NRA decisions in the course of a “remedy proceeding” (§ 41). The Ministry thus exercises substantial control over the NRA – and at the same time supervises key aspects of the USP’s operations and appoints the USP’s supervisory board.
It was reported by the Ministry and the NRA that § 41 of the postal act is currently being discussed and the Ministry’s authorisation to review NRA decisions may be abolished in the planned amendment to the postal act. During an interview with WIK, the NRA stated to hope that its position will be strengthened following the postal act amendment.
With 13 professional staff, the NRA has remarkable administrative capacity to exercise its regulatory tasks and has already made significant steps in licensing, authorising, tariff regulation, and in the development of the USO since it became operational in 2002.
Country Report
13 TR – Turkey
218 Final report: Main aspects of postal networks in AC/CC Country Report Turkey
TURKEY – GENERAL FACTS
Economy
GDP in EUR, 2001, (million): 161,800 GDP per capita in EUR, 2001: 2,356
GDP in PPS, 2001 (million): 358,700 GDP per capita in PPS, 2001: 5,230
GDP growth rate, 2001: -7.5% Unemployment rate, 2002: 10%
Population and geography
Population, 2001 (thousands): 68,670 Density (Persons per sq. km): 89
Land area, 2002 (square km): 769,604 Urbanisation (Pop. in urban areas): 66%
Transport and communications infrastructure
Railway network, 1999 (km): na Fixed lines per 100 households, 2002: 83
Road infrastructure, 1999 (highway km): na Mobile penetration rate, 2002: 32%
International airports, 2003: 7 Internet users penetration, 2002: 4% Source: Eurostat NewCronos; UN World Urbanization Prospects (2001); IBM Monitoring of EU candidate countries, telecommunications sector (2002); www.columbusguide.com.
TURKEY – POSTAL FACTS
Universal service provider
Name of USP: PTT General Directorate USP employment, 2002 (persons): 34,552
USP revenue, 2002 (million EUR): 389 USP employment of total workforce: na
Annual revenue growth (CAGR), 98-02: 6.5%
Volumes and tariffs
Dom. letter post volume, 2002 (million): 903 Dom. letter post per capita, 2002: 13.2
Cross border LP: OCB/ICB ratio, 2002: 53% Domestic parcels per capita, 2002: 0.01
Cross border LP: ICB/Dom ratio 2002: 8% Basic letter tariff, June 2003: 0.31€
Postal network (access)
Postal outlets, 2002: 4,466 Letter boxes, 2002: 2.463
Outlets per 10,000 inhabitants: 0.7 Letter boxes per 10,000 inhabitants: 0.4
Outlets per 1,000 sq. km: 5.8 Letter boxes per 1,000 sq. km: 3.2 Source: WIK-Consult
Final report: Main aspects of postal networks in AC/CC 219
Country Report Turkey
13.1 Basic country information
Located between Bulgaria and Greece at its European borders and Armenia, Azerbaijan, Georgia, Iran, Iraq, and Syria in its Asian part, Turkey is the bridge between the two continents. This becomes most obvious in the 10 million metropolis Istanbul - the country’s cultural and economic centre – which unites both continents within its city boundaries. Turkey’s size is approx. 770,000 square km - about the same as all AC countries together. Nonetheless, the country is rather highly urbanised and densely populated on average; there are 89 inhabitants per square km and 66% of the total population live in urban areas. By contrast, wide areas in Anatolia are very scarcely populated. The total population is close to 70 million; apart from Istanbul and the capital Ankara (4 million inhabitants), important cities include Izmir, Bursa, Adana, Antalya, Dyarbakir, and Samsun. Turkey has a total coastline of more than 8,000 km at the Mediterranean and the Black Sea and many important ports along both coasts.
Turkey's dynamic economy is a complex mix of modern industry and commerce along with a traditional agriculture sector that in 2001 still accounted for 40% of employment. It has a strong and rapidly growing private sector, yet the state still plays a major role in basic industry, banking, transport and communication. The most important industry - and largest export – is textiles and clothing, which is almost entirely in private hands. In recent years the economic situation has been marked by erratic economic growth and serious imbalances. Real GDP growth has exceeded 6% in many years, but this strong expansion was interrupted by sharp declines in output in 1994, 1999 and 2001. The Turkish currency has experienced tremendous inflation over the last years. However, inflation rates decreased substantially from a level of 85% in 1998 down to 45% in 2002 (annual averages). In 2002, real GDP in Turkey grew by a substantial 6.5%. Nominal GDP was 177.8 billion EUR in 2001 or 2,356 EUR per head (5,230 PPS).
Turkish communication markets appear to be developed to an extent that is close to the average of AC and CC countries. There are 83 fixed lines per 100 households (Avg. EU-15: 110) and mobile penetration was 32% in 2002; thus below the EU-15 average of 73%. However, Internet users penetration was very low in 2002 with 4%.
Turkey is of particular importance within the group of candidate countries due to its size: The Turkish population equals 92% of the ten accession countries and Turkey’s territory is even larger than the ten accession countries taken together. 220 Final report: Main aspects of postal networks in AC/CC Country Report Turkey
13.2 Overview of postal market
Based on available information, WIK estimates the total market for domestic and outbound postal services in Turkey to be about 545 million EUR. Letter services on the one hand and parcels and express services on the other hand account for half of total market revenue each. These estimates must be considered as very approximate.
Table 13-1: Estimated market 2002 (Turkey)
USP USP WIK Market Market Rev Vol Est Rev Vol 2002 2002 USP 2002 2002 EUR 000 Pieces 000 share EUR 000 Pieces 000 Letter, domestic na 761,213 95% na 801,277 Letter, OCB na 16,550 95% na 17,421 Direct mail and printed matter, domestic na 141,811 95% na 149,275 Direct mail and printed matter, OCB na 22,197 95% na 23,365 Total letter post 256,105 941,771 95% 269,584 991,338 Parcels, domestic na 859 40% na 2,148 Parcels, OCB na 38 60% na 64 Express, domestic na 7,575 40% na 18,938 Express, OCB na 110 20% na 551 Total parcels and express 110,198 8,583 40% 275,495 19,489 Total, all domestic and OCB 366,303 950,354 545,079 1,010,826
Source: WIK-Consult
This estimate of the postal market size has been developed using the following information. There appear to be no surveys of the total market for postal services in Turkey. The USP failed to provide revenues broken down by basic market segments. However, the USP reported its total revenues as well as detailed information about the services provided. In order to achieve estimates of USP revenues for two basic market segments (letter post and “parcels and express”), WIK used information that the USP reported to UPU and made some corrections. 62 For total market size in terms of volumes, more detailed estimates could be achieved, based on information provided by the USP. In Turkey, no extensive information from other sources than the USP was available since the PTT department is currently uniting both the functions of a regulator and an incumbent operator. The USP did not report estimates of market share. The market shares presented in Table 13-1 have been estimated using general assessment of competition made by the USP as well as information about private operators’ activities in various segments. In the light of significant lacks of detailed market
62 UPU item 5.1 for the calculation of letter post revenues and items 5.2 and 5.4 for “parcel and express”, both for 2001. While the USP reported a relatively high share of income related to “other services“ (to UPU), WIK assumed, based on analysis of the USP’s service portfolio, these other services to be mostly express and courier services. Final report: Main aspects of postal networks in AC/CC 221
Country Report Turkey information, the estimates provided in Table 13-1 must be considered as no more than a best guess.
Turkish PTT appears to be the dominant, if not exclusive player in the segment for letter post (incl. direct mail). By contrast, there is substantial or intense competition in the market for domestic and cross border parcels, courier and express services. Within Turkey, competition mainly concentrates on the Istanbul region and the major urban regions along the coast of the Marmara Sea and the Aegean Sea. Besides the international courier companies DHL, FedEx, TNT and UPS, important players in the express market include the local operators Yurtiçi and Aras.
13.3 Market players
13.3.1 Universal service provider
13.3.1.1 Legal status and subsidiaries
The General Directorate of PTT, the Turkish USP, is a “state economic enterprise” directly subordinated to the Ministry of Communication.
The USP is taxed by the State but on the other hand receives government support from time to time. This government support accounted for less than 1% of the USP’s total revenues in the year 2000, but for approx. 3% in 2001 and 2002.
The USP reported to be charged VAT in respect to the provision of all the services it provides. Moreover, the USP reported not to have any subsidiaries.
13.3.1.2 Service portfolio
The Turkish USP offers a rather traditional portfolio of postal and “postal financial” services including letters and printed matter, parcels, EMS services as well as postal money orders, cash-on-delivery and cheques. However, the USP offers domestic express services in addition to cross border EMS.
In addition, the USP’s annual report 2001 mentions plans to introduce a range of new services such as bill collection (e.g. for the telecommunications incumbent), hybrid mail, and sale of charging cards for cellular phones on post offices. Based on the USP’s information provided for this survey, it appears that these product innovations continue to be a future project. 222 Final report: Main aspects of postal networks in AC/CC Country Report Turkey
13.3.1.3 Postal infrastructure and automation
The USP appears to have made substantial steps towards the introduction of process automation. With only 16 sorting centres in a country of the size of Turkey, the USP is in a position to benefit from automated sorting even though mail volumes are comparably low. At present, 4 of the USP’s sorting centres are equipped with sorting machines (3 of them with OCR – optical character reading). As reported by the USP, only 6% of total mail volumes are processed by automated sorting machines. For domestic transport, the USP mainly uses road transport but also operates a number of regular flight connections. Railways are only used as an exception to the rule under special conditions.
Approx. 900 postal outlets (“post centres” or post offices) or 20% of all postal outlets are equipped with personal computers that are mainly used to the provision of financial services.
13.3.1.4 Employment
The total workforce of the USP was 34,552 persons in 2002 and had been reduced by a substantial 6.7% since 1998. The USP reported not to employ any part-time personnel nor seasonal employees.
13.3.2 Private operators
Since no licensing regime for postal operators is in place in Turkey, no comprehensive information about private market players is available. Private operators have provided no information about their services in Turkey. Moreover, the postal monopoly currently applies to all postal services without further legal specification such that private operators are understandably reluctant to provide information about their postal activities.
There appears to be substantial or intense competition in the market for domestic and cross border parcels, courier and express services. There are various types of competitors on different levels. On a local level, intra-city courier and express services are offered by a huge number of small operators often using motorbikes. On a national level, domestic parcel and express services are provided by local companies (most importantly Aras and Yurtiçi) as well as by international operators including DHL, TNT, USP and the Arabian operator Aramex. Finally, the major private courier/express companies DHL, FedEx, TNT and UPS provide cross border services in Turkey. Final report: Main aspects of postal networks in AC/CC 223
Country Report Turkey
13.4 Market development
13.4.1 Universal services – letter post and parcels
Table 13-3 presents a summary of the volumes of postal items carried in the universal services from 1998 to 2002. All figures reflect postal items carried by the USP. The private operators have not submitted any data.
Table 13-2: USP volumes of universal and non-universal services (Turkey)
5-yr 1998 1999 2000 2001 2002 change Universal services Letter post LP Domestic Pcs-000 947,574 985,751 966,604 806,939 903,024 -5% Letters Pcs-000 568,322 616,361 637,606 638,342 761,213 34% Printed matter and small packets Pcs-000 379,252 369,390 328,998 168,597 141,811 -63% LP per capita Pcs-000 15.0 15.3 14.8 11.8 13.2 LP per EUR 1000 GDP Pcs-000 5.3 5.7 4.5 5.0 5.6 LP Outbound cross border Pcs-000 83,631 59,683 58,359 51,251 38,747 -54% Outbound/inbound 58% 40% 41% 53% 53% LP Inbound cross border Pcs-000 143,840 149,235 143,731 95,816 72,471 -50% LP ICB/LP Domestic 15% 15% 15% 12% 8% Parcels Domestic Pcs-000 809.0 947.0 785.0 795.0 859.0 6% Outbound cross border Pcs-000 39.7 36.1 32.3 35.3 38.4 -3% Non-universal services Express Domestic Pcs-000 11,746 14,261 11,118 10,218 7,575 -36% Outbound cross border Pcs-000 149 151 151 144 110 -26% Domestic LP per cap and per EUR 1000 GDP for 2002 figures use 2001 population and GDP as bases, respectively
Source: WIK-Consult
During the last years, the Turkish market for universal services appears to have experienced a difficult period. Overall letter post volume has slightly decreased in the five years ending in 2002. However, mail volumes dropped significantly in 2001, a year with substantial decrease in GDP as well. The diverging trends for letters and “autres objets” (printed matter and small packets) appear to result from changes in data collection rather than from changing demand patterns. There was a substantial decrease in cross border volumes that may partly be explained by electronic substitution, in particular for business to business communication. Although subject to intense competition, the USP volumes in the parcel segment have remained relatively stable. Conclusion to the overall development of the parcels market can hardly be drawn with the absence of private operator data. 224 Final report: Main aspects of postal networks in AC/CC Country Report Turkey
The number of domestic letter post items per cap was 13.2 in 2002, about 6% of the average in the EU-15. The number of letters per EUR 1000 in GDP was approximately 6, compared to an average of 10 in the EU-15. The figures indicate that the market for letter post in Turkey is comparably underdeveloped given the country’s economic potential. In 2002 only about 7 % of all letter post delivered by the USP (i.e., domestic and inbound cross border) originated from abroad. Moreover, Turkey received approx. twice as many letters than it sent. Given the size of Turkey, cross border mail is unusually important and terminal dues account for an relevant share of the USP revenues.
Domestic parcel traffic grew by 6% in the same period while the number of outbound parcels declined by 3%. This figure may ignore a possible growth in the parcel segment since no data on parcel volumes carried by private operators is available..
While the USP failed to provide breakdowns of its revenues with respect to basic service categories, fairly detailed volume and weight data was available – even in comparison to other AC and CC countries surveyed. Based upon internal evidence (e.g., year to year variability, comparison of average revenue to stamp prices, relation of cross border volumes to weights), this information appears to be mostly reliable.63
13.4.2 Non-universal services
13.4.2.1 Express services
In the segments for domestic and cross border express delivery, there appears to be substantial competition in Turkey. Apparently, the USP does not have a dominant market position in neither one of the two segments. In the five years ending in 2002, the USP experienced significant volume decreases of 36% for domestic and 26% for outbound cross border express items. The sharpest decrease took place from 2001 to 2002, i.e. following the recession in 2001. However, it is not clear whether the downward trend indicates a shrinking of the total market or whether the USP has lost its volumes its various competitors in the market.
13.4.2.2 Document exchanges
No document exchange activities were reported in Turkey.
63 In particular, domestic volumes appear to be more reliable than those for cross border letters. For the latter, the data on cross border weights shows the same trends but a comparison suggests that “average weight factors” used to estimate volumes have been changed significantly from the year 2000 to 2001; casting some doubt on the reliability of cross border letter volumes. (For cross border letter post, weight data is more reliable than volume data in general since terminal dues are based on weights.) Final report: Main aspects of postal networks in AC/CC 225
Country Report Turkey
13.4.2.3 Unaddress
13.4.2.4 ed items
No information about the market for delivery of unaddressed items in Turkey was available within this survey.
13.5 Universal service in practice
13.5.1 Scope of universal service
The USP provides delivery of letters, printed matter, books, newspapers and parcels six days a week throughout the country. In addition, registration and insurance for postal items is offered. There appear not to be any particular regions in Turkey where universal service is not provided in the same manner as in general. However, the USP reports that clearance of letter boxes is less frequent in rural areas, where boxes are cleared only once or twice a week.
13.5.2 Reserved services in practice
The postal monopoly refers to “sealed and unsealed letters and postcards”64 and is interpreted by PTT to exclude direct mail. Some emerging competition was reported in the direct mail segment while there appears to be none in the domestic letter segment. For the reserved segment of cross border letter post, the USP reported “intense competition” (but failed to name its competitors). There appears to be substantial or intense competition in the courier/express market while it is not clear whether these services are covered by the legal reservation.
13.5.3 Access
In comparison to most EU member states, the density of the access network in Turkey is rather low. The Turkish USP has 4,466 postal outlets or 0.7 outlets per 10,000 inhabitant, compared to an average of 2.4 in the EU-15. A relatively high percentage of postal outlets are agencies (31%). In addition, the USP uses mobile post offices – mostly to provide postal products to tourists at central locations in seaside areas and
64 Statements are based on PTT reports; postal law is not available in translation. 226 Final report: Main aspects of postal networks in AC/CC Country Report Turkey
close to main tourist sites but as well to safeguard universal service provision following natural disasters such as earthquakes and in case of war.
The USP has not established targets for queuing time in post offices.
13.5.4 Tariff and accounting principles
The USP offers geographically uniform tariffs throughout the country. Discount rates are offered to bulk mailers. There appears to be no regulatory procedure for approval of postal tariffs.
The USP does not maintain separate accounts for reserved, non-reserved universal, and non universal services. Nor has it established analytical accounts using activity based costing.
Table 13-3: Postage rates for domestic first class letter services (Turkey)
Weight up to Rate (local currency) Rate (Euro) 20g 500,000 0.31 50g 750,000 0.46 100g 1,250,000 0.76 250g 1,800,000 1.10 500g 2,500,000 1.53 1000g 3,750,000 2.29 2000g 5,500,000 3.36 3000g 7,250,000 4.42 4000g 9,000,000 5.49 5000g 10,750,000 6.56
Source: WIK-Consult
Table 13-3 presents the postage rates for first class letter services effective on 1 June 2003, in local currency and Euros.
13.5.5 Quality of service
The USP has not satisfied several norms in respect to service quality yet. The USP reports to have established internal quality of service targets but does not publish these targets. Reportedly, monitoring of service quality is carried out by the “Prime Ministry Higher Audit Authority” but no results of such monitoring are available. Final report: Main aspects of postal networks in AC/CC 227
Country Report Turkey
Without reference to a particular measurement method, the USP estimates its current routing time performance to be about 60% D+1 and 100% D+2. There are not any publications on domestic routing time performance.
13.5.6 Complaint and redress
There appears to be no specific office within the USP that deals with customer complaints. The USP reports that complaints can be addressed at any post office and that postal users may appeal to the Ministry of Communication or to courts if their complaints could not be satisfactorily resolved by the USP. There are no regular publications on the number of complaints but the USP provided data on complaints to this survey, see Table 13-4.
Table 13-4: Compilation of complaints (Turkey)
1998 1999 2000 2001 2002 Compensation paid 1,514 940 903 878 345 Rejected 26,992 16,850 1,161 14,412 2,416 Total 28,506 17,790 2,064 15,290 2,761
Source: WIK-Consult
13.6 Regulatory situation
13.6.1 Overview of postal regulation
13.6.1.1 Postal legislation
The basic postal act in Turkey dates from 2 March 1950. There appear to be a number of decrees and implementing regulations. Neither the basic law not any of the regulations could be provided by the PTT in translation. Therefore all statements of section 13.5 are based on PTT reports and could not be checked against the original legal provisions.
13.6.1.2 Regulatory institutions
The ministry responsible for the postal sector is the Ministry of Communication. However, it appears that the main tasks concerning postal sector policy, including drafting of laws and secondary legislation, are performed by the PTT (that is subordinated to the Ministry) rather than by the Ministry itself. 228 Final report: Main aspects of postal networks in AC/CC Country Report Turkey
No NRA has been established in Turkey so far and it is the PTT (i.e. the USP) that represents Turkey in international regulatory organisations such as CERP.
The PTT thus represents a traditional postal administration (subordinated to the Ministry of Communication) which is responsible for postal operations as well as for postal policy and legislation.
13.6.1.3 History and philosophy of postal regulation
The Turkish USP looks back to a long tradition since the establishment of a postal organisation within a ministry of the Ottoman Empire in 1840. The PTT became a “state economic enterprise” in 1954 and was modestly reorganised in 1984. Since 1995, the “postal” PTT was named “General Directorate of Posts” and operates independently of the telecoms operator Türk Telecom. In 2000, the name of the administration was changed into "General Directorate of Posts" again.
PTT describes the regulatory model that is currently being used to regulate postal services in Turkey as follows: “Basic postal service is considered as a public service that should be supplied by the government.”65
However, PTT reports that ongoing studies focus on the restructuring that will be necessary in order to comply with the European directives. The legislative action towards harmonisation with the acquis communautaire is planned to be launched in the second quarter of 2006.
13.6.2 Universal Service
According to the PTT, the postal legislation does not provide a specific definition of universal postal service. However, the law appears to oblige the PTT to provide postal services throughout the whole country and without geographic exceptions.
13.6.3 Reserved services
According to the USP, the reserved area covers sealed and unsealed letter and postcard services without any limitation of weight. According to the USP’s interpretation of the law, the reserved area excludes direct mail.
65 Citation slightly edited. Final report: Main aspects of postal networks in AC/CC 229
Country Report Turkey
13.6.4 Regulation of non-reserved services
According to the PTT, the postal law does not include any provisions on licensing or registration of private postal operators. No licensing regime appears to be in place.
13.6.5 Access
According to PTT reports, the postal law stipulates that the number of letter boxes should depend on the needs and requirements of the customers but it does not set out more specific requirements.
13.6.6 Tariff and accounting principles
As reported by the PTT, the postal law requires postal tariffs to be uniform. Postal tariffs are independently determined by the PTT. The law does not set out any requirement to keep separate accounts for reserved or universal services nor does it specify cost allocation rules.
13.6.7 Quality of service
According to the PTT, the postal law does not set out any target concerning the quality of service. However, the “Prime Minister Higher Audit Authority” was reported to be in charge of monitor universal service provision.
13.6.8 Complaint and redress
The postal law appears not to include any provisions concerning the handling of customer complaints. However, the PTT reported that the law allows customers to bring their complaints before the Ministry of before courts if they could not be satisfactorily resolved by the PTT.
13.6.9 National regulatory authority
An NRA has not yet been established in Turkey yet.