1. The development of postal legislation and regulation
Istanbul
March 13, 2018
EU and US

2. EU and US: current legislative and regulatory framework
EU Postal Reform and current situation
1992 Green Paper: defining the long term objectives
Directives: putting legislation in place
Main definitions and concepts
Postal vs Courier, Express and Parcel
legal cases and jurisprudence
Compensation fund: its complicated
USO and compensation fund in practice
: current legislative framework
Future developments
US Postal Framework
The marketplace
The regulatory framework

3. EU Postal Directives 1992 Green Paper: defining long term objectives
1992 Green Paper: Single Market for Postal Services as part of 4 EU freedoms
Work towards a market based solution for the provision of delivery services – letters and parcels
Application of Competition Rules
Lex Specialis to manage the exception: monopoly and USO
Harmonize national markets, align the various practices in different EU Member States
Reduce and ultimately eliminate the reserved area (letter mail monopoly) and rely on competition and markets
Provide for basic postal service: if market fails, rely on Universal Service Obligation (USO)
EU standards for access, tariff regulation, accounting methods, quality of service for USO

4. EU Postal Directives: 1997-2007 Directives putting legislation in place
Delivery Services Market
Directives lead to gradual elimination of reserved area
USO for letter mail (items of correspondence) and basic parcel services: 5x week, affordable, access, quality
USO excludes added value express and transportation services
Gradual reduction of letter mail monopoly: weight and price element – exclude business mail, direct mail, bulk mail
Postal Sector subject to competition rules and policy
Reserved Area provides scale and scope necessary to support USO
Introduction of regulatory framework: USO cost allocation, transparency of accounts, financing of USO burden, licenses and authorizations
Express/Added Value
Non-USO
value
1997: 350
USO
Parcel Services
2002: 100
2008: 50
2011: no reserved area
weight

5. EU Postal Directives: Main Definitions with reserved area– 1997/2008
Postal Services: clearance, sorting, transport and delivery of postal items
Postal Items: item in the final form carried by the universal service provider
Universal Service: permanent provision of a postal services for users at affordable rates, easy to access, daily delivery and clearance for letters up to 2kgs and parcels up to 10/20 kgs
Universal Service Obligation (USO): the Member State (Government) has the obligation to ensure provision of this service (not the operator – it is not a “monopoly”)
Universal Service Provider (USP): the public of private entity – operator – that provides the universal service
Reserved Services (monopoly): to the extent necessary to ensure maintenance of the universal service, services reserved for the universal service provider covering the collection, sorting, transportation, delivery of items of domestic correspondence (letters) up to 350 grams priced at 5x public tariff for the first weight step of the standard service

6. EU Postal Directive: impact of non-USO providers
With services converging, regulators look for funding from non-USO service providers
Universal Service Obligation
Individual License (art 9.2 EU PSD)
Price Regulation
Affordability check
Separate Accounts
Obligation to ensure basic service
Compensation for service obligation
Contribution to cost of regulation
Services outside scope of USO
Authorization (art 9.1 EU PSD)
No Price Regulation
No Affordability check
No Separate Accounts
No obligation
No Compensation for service obligation
Administrative fee for regulation

7. EU Postal Directives: Key Features – Licensing and Authorizations
Licences and general authorisations
Only general authorisations
Only licences
For these countries, normally only providers of US need a licence

8. EU Postal Directives: Main Definitions without reserved area– after 2008
The 2008 directive calls for elimination of the reserved area (monopoly). The directive provides for two financing mechanisms for covering the cost of USO: direct funding or sharing the net cost of the universal service obligation (compensation fund) as alternative to the monopoly.
Direct funding: government will directly compensate the USP for any proven net cost related to the provision of the universal service. Cost calculation is subject to the rules identified in the directive and application of Annex 1.
Compensation fund: contributors can be other operators that are also involved in the provision of the Universal Service and comply with the provisions related to the US. Commercial carriers are not included because they are not involved in the permanent provision of the service and also provide added value services. Contributions are only needed if there is a clear net cost burden for the USP
Role of the regulator: the principle role of the regulator is control the USP’s accounts and ensure correct cost allocation of activities related to the provision of the Universal Service. Annex 1 of the directive provides guidance on the USO cost calculation

9. EU Postal Directives: Postal vs Courier, Express and Parcel
How to make a legal distinction between postal services and other CEP services?
1997 Directive: recital 18 – value added character of express services result in a market price that is usually higher than 5x basic postal tariff
1997 Directive: recital 21 – new services are not part of the universal service and cannot be reserved
Corbeau Case (1991): services with features (collection, time and day definite delivery) that are not part of the reserved area
With full market opening the thinking has evolved: Post provides parcel or express services in addition to being the USP
Are CEP services part of the Universal Service or Universal Service Obligation?
The universal service is not a service definition as such. It is a public service objective to ensure that citizens have access to a basic letter mail and parcel service at affordable rates and with certain quality standards.
Government can decide to license an operator to fulfil these service requirements – at a cost. This does not exclude other operators from providing delivery services for items that have the same weight/size characteristics as the universal service.
CEP services are therefor not part of Universal Service or Universal Service Obligation

10. EU Postal Directives: legal cases - State Aid
Chronopost Case ( ): A complaint filed by the French Express Association against Chronopost/La Poste France in 1991
The issue:
Chronopost Services compete with express delivery service but use La Poste’s infrastructure: road transport, offices and other facilities without having to pay the real cost
The use of La Poste Infrastructure below cost creates indirect State Funding (State Aid) and give Chronopost a competitive advantage
Complaint went to the EU level but finally died due to the lack of a clear decision on the issue.
Today Chronopost and DPD are the main pillars of Geopost, the European express and parcel delivery network of the La Poste Group

11. EU Postal Directives: legal cases - postal operator status and regulatory fees
Austrian Case (2016): A complaint filed against the Austrian Regulator (RTR) on the application of article 9 of the EU Postal Directive: postal operator status
The issue:
RTR charged a revenue based fee to all express companies in Austria to fund the cost of regulation. The legal basis for this was the fact that express companies are involved in providing postal services outside the scope of universal service.
Certain express delivery operators argued that they are not a postal operator and went to court to challenge the fee.
Austrian and European Courts concluded that express operators can be considered as postal operators involved in the provision of services outside the scope of universal service and:
That these service providers can be required to contribute to the cost of regulation (not to be confused with a compensation fund).

12. EU Postal Directives: legal cases - postal operator and compensation fund
Italy – ongoing: a new Italian regulation provided the regulator with the possibility to require “authorized operators” to contribute to the compensation fund. Express operators challenged the regulation as being incompatible with EU law.
The issue:
The regulation used a broad definition of authorized operators and did not make the distinction between those involved in universal service and others.
This created a risk for express operators re compensation fund contributions, they decided to challenge the Italian regulation
The European Court’s opinion did not provide further clarity and did not state that the Italian regulation was wrong: it only stated that a general authorization system can be used for register operators.
Legal uncertainty remains and we continue to challenge requests for contributions to the compensation fund.

13. EU Postal Directives: Compensation Fund – its complicated In reality: not activated, does not work and source of legal conflict
National rules indicate that express carriers could be required to pay in: AT, CY, GR, IT, MT
All postal providers
Only providers of US services
No compensation fund
EE: US fund applies only to licensed providers
BUT: CJEU (DHL case) says only providers of services within scope of US can be required to contribute
But: first the net burden needs to be established conform rules
DK, FI, FR: Express carriers considered to be outside scope of regulation LU CY MT

14. EU Postal Directives: USO and compensation in practice – efficient operators
Country
Germany
France
Netherlands
Italy UK
Poland
Monopoly No
Compensation fund included in legislation?
Yes – only USO
Yes
Does compensation fund cover burden USP
Has the compensation fund been activated?
Annual evaluation
Are CEP companies required to contribute to the comp fund
Within scope of US
Courier services excluded
Does the post receive direct state funding for universal service
Profitable Commercial Operator

15. Practical example: Poland
Courier shipments excluded from USO
Definition: courier shipment must fulfil all below characteristics:
Direct pickup
Direct delivery (to addressee or authorized person)
Tracking
Guaranteed delivery time
Collection of signature, in written or electronic forum, upon delivery
Requirements 1 & 2 bring parcel lockers solutions into USO

16. EU Postal Directives: current legislative and regulatory framework
2011: Full Market Opening (some Member States to follow in 2013)
Provision of services relies on the market and competition principles
Government has obligation to ensure universal service: mostly through license/contract/concession for postal operators
Eventual cost burden USO to be financed by government (Annex 1 - PSD) if burden has been approved
Regulatory framework: focus on Universal Service provision
Individual License for Universal Service Provider
Accounting standards: transparency, separate accounts and correct cost allocation Universal Service
Affordability: price cap mechanism – indexation linked
Compensation USO burden subject to regulatory control and State Aid rules
Avoid competitive distortion resulting from market dominance
General Regulatory tasks: market surveillance
Other operators – register
Market trends – general data

17. EU Postal Directives: future developments?
Main trend: decline in letter mail and growing parcel volumes
Government role to ensure provision of letter mail – lack of market justifies Universal Service Obligation
Market to provide affordable parcel delivery solutions – no need for USO style approach
Competition to ensure quality, consumer satisfaction and competitive pricing for parcel delivery
Letter Mail and Parcel volumes are predominantly commercial
Postal Services: Communication or Transport
Letter Mail: traditional communication service being substituted by digital solutions – and social media
Parcels: goods are relying on efficient transportation solutions – benefit from increased digitalization of commerce
Rethink regulatory framework to address two separate issues
Ecommerce and Digital Agenda:
Shape requirements to support ecommerce growth: payment services, internet access, consumer protection
Rely on market and competition principles to ensure provision of parcel delivery
EU cross border parcel regulation

18. US Postal Regulatory Framework
The United States Postal Service’s (USPS) function is to provide postal services to bind the Nation together through personal, educational, literary, and business correspondence
The Postal Service has two monopolies:
Monopoly on First Class Letter mail delivery (primarily letters containing personal information)
Exclusive access to deliver mail into mailboxes (parcels are not likely included)
Postal law allows the Postal Service to compete in the parcel market, but requires that it prioritize letter mail delivery over all other products (including parcels)
As a regulated monopoly, the Postal Service is overseen by the Postal Regulatory Commission (PRC), an independent government agency appointed by the President and confirmed by the Senate
Other Federal Agencies oversee portions of the Postal/package supply chain, but they focus on activities and are not Postal-specific
Occupational Safety and Health Administration (OSHA) – regulates safety in the workplace
Department of Transportation – regulates highway and vehicle safety

19. US Postal Marketplace
Letter mail is declining steadily, but the U.S. Postal Service still delivers 150 billion letters and 5 billion parcels annually
Postal law is designed to protect monopoly-bound letter mailers and parcel delivery competitors from monopoly abuse
Authorizes the PRC to regulate letter mail delivery
Allows the Postal Service flexibility to compete in the parcel market space
It is illegal to use letter mail revenues to pay for parcel deliveries
The U.S. Government keeps the package delivery market open to competition and without regulation to foster innovation and maintain low delivery costs
There is no government regulator for parcel deliveries
Universal Service Obligation exists primarily for letter mail
Allows competition for parcel deliveries to drive market innovation, maintain high service levels, and low prices
No USO fees paid by parcel delivery companies as it will promote inefficiencies, slow competitive innovation, and result in higher parcel delivery costs

20. Thank you

21. EU Postal Directives: how are some regulatory provisions currently applied?
Licensing and authorizations:
different application of licensing and authorization requirements across Member States
obligation to register for non postal operators is limited or non-existent in most markets
National regulators limit requests to annual market survey
Compensation for universal service provider
Compensation replaces Monopoly/Reserved Area as financing mechanism
EU State Aid Mechanism – direct funding by the State is possible
Compensation fund mechanism might be included in legislation but is not activated
Results in competitive distortion
Smaller operators cannot fund incumbents financial need
Lack of correct market test and accounting principles
Market monitoring:
Annual collection of general market data
Limited to relevant market