TNT Post in the changing postal landscape: Opportunities and Challenges
Post matters. It is important for the productivity of the economy and for social cohesion. The European postal landscape is rapidly changing in the face of technological innovation and ongoing liberalisation efforts by the European Union (EU). Technological innovation has led to diminishing postal volumes, which are a challenge to all postal operators. At the same time, the liberalisation of the postal market creates challenges for companies in their “domestic market”, while it also generates opportunities for these companies in new markets. TNT is also confronted by these developments. In order to successfully research them TNT Post has drafted the following research question; “In how far is it possible, under the current regulating regime, to at the one hand ensure the universal postal service, while at the other hand simultaneously anticipating on the changing postal market?”
Regarding the liberalisation of the postal market, one should take into account the position of the European Union on public utilities services, which postal services are. From the European level, public utilities were justifiable excluded from the internal market during the 1980s, but the view of the European Commission changed rapidly with the introduction of the internal market program in 1992. The commissions’ rationale was that liberalisation of national monopolies and the introduction of cross-border trade as a logical corollary to the internal market program and as a policy would foster the competiveness of the European industry. For instance, reducing the price of electricity would result in lower costs for the manufacturing industry, and a thriving telecommunications market would spur an innovative economy. At the same time, the economic and political winds in the Member States began to change, introducing more and more (neo-) liberal thinking in their policies towards public utilities.
The attempt of the EU to create a competitive, Europe-wide market for utilities has been opposed regularly by those concerned that efficiency is in conflict with the public service obligation that utility companies have had. The EU manages the relationship between the economic objectives and the social objectives of public service provision in three ways: first by stating that certain public services, in particular those closely associated with the welfare state, fall outside the scope of EU competition law; second, by tolerating certain anticompetitive arrangements when these are necessary to finance the provision of public services; third, by imposing minimum public service obligations to be provided in all Member States.
The European Court of Justice has explicitly confirmed that the rules of EU competition law also apply to the national universal postal service of the Member States. In particular, the players in the postal market are subject to the competition rules contained in articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) and to preventative control of mergers and acquisitions as regulated in the EC Merger Control Regulation.
Article 101 TFEU prohibits agreements between undertakings, decisions by associations of undertakings and concerted practices, if these may affect trade between Member States and if they have as their object or effect the prevention, restriction or distortion of competition. Article 102 TFEU contains a prohibition of the abuse of a dominant position of one undertaking (or of two or more connected undertakings), which may affect trade between Member State. National competition authorities and national courts have been empowered to apply articles 101 and 102 in full in close operation with the European Commission in order to ensure the effective and uniform enforcement of these competition rules.
Public services were usually provided for by the state as it is difficult to tempt the private sector to step in: the cost of providing a postal service to all citizens at affordable rates is usually higher or equal to the revenues that can be generated. The European Court in its litigation has thus recognised that financing public services through restrictions of competition (for example granting exclusive rights, thereby creating a monopoly position) might be unavoidable. The Court has interpreted article 106 (2) of the Treaty on the Functioning of the European Union in a manner that accommodates this financing. In order for state laws to benefit from this exemption when there is a service of general economic interest, the performance whereof would not be ensured under economically acceptable conditions? There is no European definition of a ‘service of general economic interest’, Member States are (under certain criteria) allowed to define for themselves what services fit in that category. There is a strong consensus that services provided by network industries, which postal services are, fall under this category and are thus (partly) exempted from the competition law of the EU.
As the European Court of Justice has recognised the right of Member States to suspend the application of competition law to ensure the efficient provision of public services, the Council, in its liberalisation directives, has begun to establish EU-wide public service obligations. While respectful of national concerns, “EU public service law’ has two features that distinguish it from national public service law: an emphasis on consumer interest, and a preference for market solutions.
The European notion of public services embodies the following characteristics: universality (the service must be available to all consumers throughout the territory); continuity; quality; affordability; user and consumer protection. The liberalisation directives identify universal service obligations in each sector. For the postal sector, the postal service’s Directives are relevant. The Universal Service Obligation (USO) as established in the European directive, guarantees a certain set of criteria regarding the quality of service on the postal market. The criteria for a universal service are vaguely defined and the Member States have much room to manoeuvre. For example, Member States have to ensure that the price for the postal services will be affordable for all users. What ‘affordable’ is, is not defined by the directive. More concrete are the obligations about sorting and delivery of postal items, which have to contain not less than five working days a week, one clearance and one delivery to the home or premises of every person. These include the clearance, sorting, transport and distribution of postal items up to two kilograms and postal packages up to 10 kilograms. The USO affects the competitiveness of the Universal Service Provider, as well as of the challengers. The provider has to adhere to the conditions set by the government, while the challengers are sometimes faced by protective measures by the government in order to safeguard the USO. The historical evolutions of these postal Directives are analysed in the first part of this research.
The question on how to maintain the universal service is at the heart of this research. The question for TNT Post is how to ensure collection from pillar-boxes and post offices and delivery to all addresses, in other words fulfilling the universal service obligation, in a changing postal landscape. The liberalizing postal market gives rise to discussion on both the national and the European level. One thing is certain from the discussions on liberalizing the postal market: there does not exist a one-size-fits-all solution. While the Commission at the EU-level strives to provide a mechanism to guarantee true level-playing field, it has set the framework in European directives, and left it to the Member States to proceed with its transposition, implementation and enforcement. A unique mechanism for safeguarding the universal service cannot apply for all Member States, since it is supposed to be related to the special characteristics of each country, its economic status and mail traffic, its geographic specificities and the special conditions of the local postal market.
This is precisely the reason for providing an analysis of the postal markets in four different countries. By a comparison of the level of competitiveness and the way the Universal Service for the postal market is designed in the Netherlands, the United Kingdom, France and Germany this research aims to formulate an answer on the research question.
The final stage of the research will include an assessment of the actions TNT can take to change the position of stakeholders towards a more positive and constructive partner. It is important to know what these stakeholders want and how their goals can be reconciled with the goals of TNT and other stakeholders. This stage will also include recommendations on how to influence the evolving postal market and particularly the legislative and regulatory environment.
 Regulation 139/2004/EC.
 Directive 2008/6/EC of the European Parliament and the Council of 20 February 2008 amending Directive 97/67/EC with regard to the full accomplishment of the internal market of Community postal services, art. 3 and 4. Official Journal L052, February 27, 2008, p.003 – 0020.