Postal services liberalisation


The EU is entering the final stages of a 15-year process to open up its postal services to competition, having overcome differences of opinion regarding the speed of liberalisation and how to ensure a universal service for consumers. The real test will however come with the implementation phase as of 2009.

The postal sector is of major economic importance, affecting the competitiveness of other sectors, generating an annual turnover of approximately 1% of EU GDP, and providing employment to around 1.7 million people. 

Efforts towards reforming the postal market began in the early 1990s, as part of the push to create a European single market. The aim was to: 

  • get national monopolies to open up to competition in order to make postal services cheaper, faster, more efficient and more innovative – similarly to what was done in the telecom and energy sectors; 
  • harmonise performance across member states; 
  • improve the quality of cross-border services, and; 
  • respond to the rise in electronic alternatives to mail, which many feared would lead to a decline in physical mail volumes, although in reality, domestic letter post volumes have remained stable since 2002. 

The first Postal Services Directive, adopted in 1997 (97/67/EC), and a second one, adopted in 2002 (2002/39/EC), succeeded in opening up a number of postal services, including the delivery of parcels and express services, but stopped short of imposing competition for the delivery of letters weighing less than 50 grammes. 

Incumbent operators were entitled to hold onto this so-called “reserved area” – which represents more than 70% of all letter post in the EU and around 60% of all revenues from postal services – in order to keep up their role of “universal service provider” (USP). 

But, on 18 October 2006, Internal Market Commissioner Charlie McCreevy confirmed, in his 
proposal for a third Postal Services Directive
, the Commission’s intention to eliminate all remaining obstacles to a single postal market and to abolish this reserved area as of 2009 – a date already suggested in the previous Directives. 

  • 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).

MEP Markus Ferber (EPP-ED), who is rapporteur in Parliament welcomed the compromise reached between Parliament and Council on postal liberalisation. He explained that, while the two-stage approach "ensures that we take into account the interests of all member states", the reciprocity clause will help to avoid a situation where protected monopolists are able to "act as cannibals in liberalised markets".   (For a full interview with the MEP, click here). 

Francis Mary, director of France's La Poste Brussels office  welcomed the inclusion of social provisions in the directive, adding that the final text, "compared to the Commission's initial proposal, is a very positive compromise". "Earlier, people were still talking about reducing the scope of the Universal Service Obligation or of not having any mechanisms in place for financing it […] These risks have been laid aside by the current text," he said. 

Poczta Polska, the Polish postal operator, however warned that abolishing the reserved area could lead to a “decline in quality service [regarding] on-time delivery and frequency as well as in frequency of emptying collection boxes and office hours of postal outlets”. 

But, Viveca Bergstedt Sten, senior vice-president of Sweden’s Posten AB, pointed out that despite her country’s large area and sparse population, 13 years of liberalisation had proved that it was “perfectly possible” to operate the USO without any additional financing mechanisms. 

Jukka Alho, Head of Finland Post Corporation, added that restructuring measures resulting in jobs losses in the postal sector have been taking place for years as a result of electronic substitution and that flexible liberalisation is the only way to create sustainable jobs. 

Adam Crozier, CEO of the UK’s Royal Mail, said that despite his original reluctance to liberalise postal markets, he now strongly believed that competition is both good for the company and the consumer. “In three years, Royal Mail went from being a loss-making operator to a profit-making one,” he said, adding that, despite a loss of 55,000 workers, Royal Mail’s workforce was now “happier, better paid and more efficient”. The British state-owned company wants competitors to be able to choose between building alternative networks or accessing existing ones on a non-discriminatory basis, at a price related to costs. “This needs to be enshrined in any new postal services Directive,” it stated. 

Public Postal Services Providers of Sweden, Norway, Iceland, Finland and Denmark, on the other hand, do not want downstream access to be imposed by EU law. They say that imposed access will only allow for “partial and administratively-determined – rather than market-driven – opening up”, adding that only an increase in the provision of end-to-end services will ensure a viable universal service. 

For Deutsche Post Chief Executive Klaus Zumwinkel, the provisions on the universal service obligation are the real weak point of the new proposal, because they could lead to hurdles so high - such as making new market entrants choose between ‘pay or play’ - that liberalisation will remain purely theoretical. 

UNI Europa Postal, which represents Europe’s trade unions in the postal sector, says that full market opening will worsen the already downward employment trend in the sector, saying: “We have difficulties in finding any positive social impact which could result from a full market opening.” 

The Free & Fair Post Initiative (FFPI), which represents users and competitors of the public postal operators, said the directive would improve choice and quality of service for users and consumers, and will encourage innovation and dynamism in the sector. However, FFPI President Philippe Bodson warned of "backstage protectionist manoeuvres", saying: "Today's vote is historical, but is not the end of the story. The success of postal liberalisation will in fact depend on how member states will implement the Directive. Backstage manoeuvres to introduce barriers and protectionist rules that risk hampering access to new entrants in the market have to be avoided." The FFPI added that it would continue to work to ensure that "potential cases of delayed or partial market opening and regulatory requirements set up by member states that create significant barriers to entry are exposed".  

The European Postal Users Group (PUG), which represents related companies such as publishers, distance sellers, advertisers, envelope manufacturers and paper producers, agreed the directive would bring benefits to users in terms of choice and prices. Chairman Per Mortensen nevertheless cautioned: "The challenge for the 27 member states is to ensure they successfully adopt the directive's legal framework to local conditions in ways that truly benefit postal users thereby ensuring letter post's future. Therefore, PUG will follow the transposition of the directive into national law very closely".

  • 27 Feb
    . 2008: The third Postal Directive was published in the EU's Official Journal.
  • 31 Dec. 2010:  Deadline for member states to abolish existing legal monopolies on postal services (31 Dec. 2012 for nine member states that joined the EU after 2004, as well as Greece and Luxembourg).

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