Full liberalisation in 2009, 2011 or 2013
While the goal of liberalisation was more or less accepted all around, the speed of doing so was worrisome to some.
Commissioner McCreevy had originally insisted that 2009 be the final deadline for all member states to open up. He was supported by the so-called ‘Northern countries’ or ‘group of front-runners’, including Sweden, Finland and the UK – which are already fully liberalised – as well as Germany and the Netherlands – where full market opening is expected in 2008. They insisted the process had already gone on too long and wanted to open up new market opportunities for their national operators in other EU countries.
However, countries such as France, Italy, Spain, Greece, Belgium, Hungary and Poland (the so-called ‘Southern group’) were afraid that rapid liberalisation could destroy their public operators, resulting in a weaker customer service and huge job losses.
In a final compromise, MEPs and member states agreed to delay full liberalisation for all countries until 1st January 2011, or even until 2013 for:
- new member states;
- countries with "a particularly difficult topography or many islands", such as Greece, and;
- countries "with a small population and a limited geographical size" - ie Luxembourg.
In order to prevent distortions of competition, Parliament and Council also agreed on the introduction of a 'reciprocity clause', that forbids postal operators in countries that maintain a reserved area from entering markets that have already been fully opened (EURACTIV 18/06/07).
The Universal Service Obligation (USO):
The USO means that, under EU law, all citizens must have their mail collected and delivered at least once a day, five days a week. But, universal service providers are concerned that it will be impossible to do this under full competition.
Providing such a frequent and ubiquitous service to all citizens – whether they live in the city centre, up a mountain or on a small island – is expensive and, up till now, the “reserved area” was the main mechanism that allowed incumbent operators to finance the cost.
Indeed, the reserved area enabled incumbents to maintain a lucrative monopoly over the delivery of letters weighing less than 50 grammes, thereby allowing them to offset losses made on high-cost customers with profits made on low-cost ones.
Once this monopoly is abolished, the fear is that new market entrants will grab hold of the most profitable activities – such as business-to-business deliveries in cities – while neglecting more isolated customers. This would cause incumbent operators to lose the necessary resources for servicing the more vulnerable.
The final directive however identifyies a number of flanking measures that countries can use in order to ensure that the provision of universal service remains financially viable in a competitive market.
Such measures could include funding mechanisms, such as direct state subsidies, cross-subsidisation from profit-making to loss-making activities or the creation of a compensation fund through the introduction of fees on new service providers or users.
Flexible funding for USO:
The new Directive would allow governments to finance the cost of providing a universal service in the way that best suits their particular situation, so long as it does not distort the market. The Commission is even open to allowing state aid.
But traditional operators are wary of this option because, in the long term, national budgets are always under pressure. Instead, they favour a “competitor-pays” system, where market entrants would be charged fees, in exchange for market or infrastructure access. Such a ‘compensation fund’ is not endorsed by private companies.
Following a request from Parliament, the Directive includes an amendment requiring the Commission to issue 'detailed guidance' on how to calculate the net cost of the universal service in order to create legal certainty, ensure a level playing field among operators and avoid violations of competition law.
For more information on the various funding alternatives, see our LinksDossier on Financing Universal Service.
Guaranteeing social standards vs. a level playing field:
MEPs strongly underlined the fact that increased competition could put downward pressure on the quality of employment and increase the risk of social dumping through the exploitation of low-cost labour. Parliament therefore requested that basic working conditions applicable in a member state, such as minimum pay and the right to strike, remain unaffected by the Directive - a demand that was taken up by Council.
The clause was originally intented to avoid competition taking place purely on the basis of salary dumping. However, there are already concerns that the establishment of minimum social standards is being used to shield incumbents from competition, notably in countries where liberalisation has already gone ahead, such as Germany (EURACTIV 1/02/08).