wik-Consult • Final Report Study for the European Commission DG Internal Market The Evolution of the Regulatory Model for European Postal Services Authors: James I. Campbell Jr. Alex Kalevi Dieke Antonia Niederprüm Bad Honnef, July 2005 The views and opinions expressed in this study are those of the authors and do not necessarily represent the position of the European Commission. ii Regulatory Model for European Postal Services Preface It is rare for government to pause during preparation of a new economic measure to consider the principles of good governance. Nonetheless, the craft of governance is fundamental to successful implementation of economic and social policies. In the last several years, the European Union has launched several initiatives to improve governmental processes in the Community. Of particular relevance to this study is a pioneering report on administrative practice by a group of experts established by European ministers of public administration and chaired by an official of the French government, Dieudonné Mandelkern. This study represents an extension of these efforts to the task of regulating postal services in Europe. It considers how, in light of the experience of several years of reform and a flowing tide of technological change, governmental policies can be implemented efficiently and effectively in the postal sector. This study offers no conclusions as to precisely what those governmental policies should be. The ‘new regulatory model’ described in the report illustrates the application of sound regulatory principles to accomplishing the objectives of current Community policy. In the final chapter, we consider how this regulatory model could be modified to accommodate other policy objectives. Choosing among possible policy objectives is the task of policy makers. What remains is the proposition—the central thesis of this study—that sound regulatory principles are fundamentally important because, over a wide range of policy objectives, attention to the principles of sound regulation can ease the burden of regulation on postal operators, protect the integrity of government, and, ultimately, enhance the quality of services delivered to the users of postal services. iv Regulatory Model for European Postal Services Acknowledgments Above all, we must acknowledge the vision of the European Commission in undertaking this study in the first place. ‘Sound regulatory principles’ seemed a rather abstract and academic concept at the beginning of this study. Having worked our way through the analysis, we conclude that sound regulatory principles have much useful to say about the future of postal policy, and we are grateful for the opportunity to consider these issues. We express our specific appreciation for the comments made by Jörg Reinbothe, Hughes de la Motte, and Manuel Iglesias-Roa from DG Internal Market. In preparing this report, we have made extensive use of reports prepared by and for the European Commission. We have referred frequently to thoughtful studies submitted to the European Council by high level groups under the chairmanship of Wim Kok, Dieudonné Mandelkern, and André Sapir. We are, as well, heavily indebted to the diligent efforts of several of the national regulatory authorities for postal services. This study would have been impossible without this vast body of official insights. This study has also drawn frequently and deeply upon the work of scholars and industry participants presented in three continuing series of rewarding seminars conducted by the Center for Research in Regulated Industries of Rutgers University, the Institut d’Economie Industrielle (IDEI), and the Wissenschaftliches Institute für Kommunikationsdienste (WIK). In addition, in the course of this study, we have benefitted greatly from comments received in two public workshops held in Brussels, in workshops held at WIK’s offices in Bonn, and in many conversations with and written comments submitted by a wide range of postal operators, regulators, policy experts, scholars, and users. Some, indeed, were especially generous with their time, offering not merely expert advice, but patience, enthusiasm, and good will; to these colleagues, we are particularly grateful. Needless to say, although whatever merits may be found in this study represent the fruit of many, the specific findings and conclusions, demerits and all, are ours alone. Summary of Contents Executive Summary............................................... 1 1 Sound Regulatory Principles ..................................... 15 1.1 Context and purpose of this study ............................ 15 1.2 Sources of sound regulatory principles ........................ 16 1.3 Sound regulatory principles for the postal sector ................. 23 1.4 Summary: user empowerment ............................... 29 2 Current Regulatory Model – Community Level...................... 31 2.1 Specific purpose .......................... 31 2.2 Policy Coherence......................................... 36 2.3 Necessity and proportionality ................................ 37 2.4 Market transparency....................................... 69 2.5 Administrative fairness..................................... 71 2.6 Competency ............................................. 72 2.7 Legal certainty ........................................... 75 2.8 Summary................................................ 77 3 Current Regulatory Model – Member States ........................ 79 3.1 Specific Purpose.......................................... 80 3.2 Necessity and proportionality ................................ 81 3.3 Market transparency....................................... 96 3.4 Administrative fairness..................................... 97 3.5 Summary................................................ 98 4 Recent Market Developments ................................... 101 4.1 Competition ............................................ 101 4.2 Public postal operators.................................... 104 4.3 Universal service provision ................................ 106 4.4 Demand for postal services ................................ 107 4.5 Mail volume development ................................. 110 4.6 Likely changes in market structure .......................... 111 4.7 Summary............................................... 113 5 A New Regulatory Model For Current Policy Objectives ............. 115 5.1 Overview of the new model................................ 115 5.2 Objectives of the new regulatory model....................... 119 5.3 Postal services generally .................................. 121 5.4 Universal services generally................................ 129 5.5 Universal services provided under market dominant conditions .... 141 5.6 Supplemental universal services ............................ 155 5.7 National regulatory authorities .............................. 164 5.8 Community-level committees .............................. 166 vi Regulatory Model for European Postal Services 6 Towards a New Postal Directive .................................169 6.1 Role of sound regulatory principles in the next directive ..........169 6.2 Transitional issues posed by the new regulatory model ...........173 6.3 Alternative policy objectives................................181 6.4 Conclusions with respect to a new postal directive...............187 Appendix: Comparison of Current and New Regulatory Models...........189 Bibliography ...................................................229 Index .........................................................233 Full Contents Executive Summary............................................... 1 1 Sound Regulatory Principles ..................................... 15 1.1 Context and purpose of this study ............................ 15 1.2 Sources of sound regulatory principles ........................ 16 1.2.1 EC Treaty .......................................... 17 1.2.2 Community development of general regulatory principles .......................................... 19 1.2.3 Community development of sectoral regulatory principles .......................................... 22 1.3 Sound regulatory principles for the postal sector ................. 23 1.3.1 Specific purpose ..................................... 23 1.3.2 Policy coherence ..................................... 24 1.3.3 Necessity and proportionality ........................... 25 1.3.4 Market transparency .................................. 27 1.3.5 Administrative fairness ................................ 28 1.3.6 Competency ........................................ 28 1.3.7 Legal certainty ...................................... 29 1.4 Summary: user empowerment ............................... 29 2 Current Regulatory Model – Community Level...................... 31 2.1 Specific purpose .......................... 31 2.1.1 Failure to specify .................................... 31 2.1.2 Inferred objectives of current Community postal policy ............................................. 31 2.1.3 Other interpretations of the objectives of current Community postal policy.............................. 34 2.2 Policy Coherence......................................... 36 2.3 Necessity and proportionality ................................ 37 2.3.1 Rules on provision of services .......................... 37 a) Postal services included in universal service............ 37 b) Designation of universal service providers............. 39 c) Access to universal service ......................... 41 d) Frequency of universal