APPENDIX 11
Supplementary memorandum by the Mail Competition
Forum
RESPONSES ARISING
OUT OF
ORAL EVIDENCE
Comparison of universal service obligations in
the EU (Q273)
Enclosed is an extract from a study published
in June 2005 which as conducted by Professor Dr Matthias Finger,
Ismail Alyanak and Dr Pierre Rossel of the Ecole Polythechnique
Federale de Lausanne entitled "The Universal Postal Service
in the Communications Era. Adapting to Changing Markets and Customer
Behavior". The extract gives an overview of the universal
service obligation in 20 European countries.
Direct marketing trends market by market (Q284)
The report to which Mr Wells referred in his
evidence was carried out by FEDMA and was published in 2003. The
data covers the period from 1995 to 2002. This is the latest FEDMA
published data we have available and, although not very recent
data, they do provide interesting and, we believe, useful historical
trend data in respect of direct mail.
Pension deficit to be met out of cashflow—CWU
statement (Q286)
Enclosed is a copy of a press release dated
10 November 2005 which I have downloaded from the CWU website.[4]
The paragraphs to which Mr Sibbick referred in his evidence are
highlighted.
Impact on the MCF members of the removal of Royal
Mail's VAT exempt status and the imposition of a five or 17.5%
VAT rate on postage?
It is difficult to make any precise impact analysis
as the Mail Competition Forum members are not privy to most of
the relevant information. Based upon statistics published by the
independent regulator, Postcomm, 40% (by value) of customers are
VAT exempt and close to one letter in two (by volume) is sent
by a customer who is unable to recover VAT.[5]
As a VAT exempt operator, Royal Mail is unable to recover its
input VAT. Taking these two factors into account, when Royal Mail
is dealing with a VAT exempt customer its prices are around 13%
cheaper[6]
than those of its competitors, all other things being equal.
As customers currently demand significant discounts
in return for using a competitor of Royal Mail, this has the effect
of making our members' services uncompetitive for VAT exempt customers.
We have been advised by Queen's Counsel that all competing postal
services ought to be subject to VAT at 17.5% on the basis that
the current legislation breaches the principle of fiscal neutrality
by treating the providers of competing services in dissimilar
ways so as to distort fair competition.
The principal concern of the members of the
Mail Competition Forum is that they are, currently, unable to
compete on a level playing field.
To that extent, the application of 17.5% VAT
on all competing postal services provided by Royal Mail (broadly
speaking, this currently means business mail but not stamped mail)
would, at least, permit all operators to compete under fiscally
neutral conditions, since Royal Mail's competitors currently have
to charge VAT at 17.5%.
We do not currently consider there to be any
material distortion of competition arising from Royal Mail's unique
VAT exemption in respect of social mail (ie full tariff, stamped
mail sent by private individuals). Accordingly, for the time being
and for so long as it does not distort competition, there would
be a lesser concern about Royal Mail retaining an exemption in
respect of only full-tariff, stamped mail.
However, any solution on VAT which results in
lower prices for all customers is good for the mail industry as
a whole. For that reason, there is, we believe, much to commend
the application of a lower rate of VAT to all postal services.
This would lead to an effective 12.5% price reduction of our members's
services (assuming that the reduction in VAT rate would not affect
the current ability to fully recover input VAT) when providing
services to customers who are unable to recover VAT.
Postcomm has conducted independent modelling
on the impact of VAT on Royal Mail's prices and concluded that
Royal Mail's prices (excluding VAT) would drop by 2.6%, since
Royal Mail would be able to recover its input VAT.[7]
Although this would make Royal Mail's VAT exclusive prices cheaper
and thus make competition marginally more difficult for the business
of customers who are able to recover VAT, our objective is to
secure fair competition in an undistorted market and, accordingly,
we would accept this as a necessary and fair consequence. The
application of a reduced rate to all postal services would, more
significantly, remove an unacceptable distortion in respect of
VAT exempt customers for whom the competitors' prices are subject
to a 13% pricing distortion in favour of Royal Mail. The concern
about this possible solution is that the application of a reduced
rate of VAT (5% in the UK) depends upon an EU Directive which,
in turn, requires unanimity among the 25 EU Member States. Although
such a Directive has been proposed by the EU Commission, it has
foundered.
This means that, for so long as a Directive
permitting the application of a reduced rate of VAT is awaited,
the possible situations are:
(a) to impose VAT at 17.5% on all postal
services;
(b) to impose VAT at 17.5% on all Royal Mail's
competing mail services which, as stated above, we are advised
Her Majesty's Government is required to do; or
(c) to continue with a distorted market place
in which VAT exempt customers, representing the senders of one
out of every two letters, will be deprived the benefits of competition.
Many of our members hold the view that the only
viable and correct position under the current state of the law
is set out in paragraph (b).
The impact of being barred from accessing 40%
of the market (by value) is highly signficant, though impossible
to quantify precisely, in an industry where volumes are critical
for the supply of cost effective mail distribution services. It
is, however, safe to say that the inaccessibility of half of the
UK letter volumes will reduce significantly the level of investment
and creation of employment by Royal Mail's competitors.
I would like to take this opportunity to thank
the Committee for having invited the Mail Competition Forum members
to present evidence and we hope that the Mail Competition Forum
can be of assistance to the Committee in the future.
23 November 2005
Comparison of universal service obligations in
the EU (Q273)
CURRENT DEFINITION OF NATIONAL UNIVERSAL
POSTAL SERVICE OBLIGATIONS
|
| Network requirements |
| Postal outlets
| Letter boxes |
|
| AT | closing of post offices only under very restrictive conditions
| one letter box within 1km in populated areas
|
| BE | one outlet per municipality
relevant changes to the existing network
have to be approved by the regulator
| no regulatory requirements |
| CZ | one postal outlet in each residential district
| residential district < 1,000 inhabitants one letter box
residential district < 10,000 inhabitants one letter box to every 1,000 inhabitants
residential district > 10,000 inhabitants letter boxes within 750 metres (except outskirts)
|
| DE | minimum 12,000 (5,000 with own staff)
residential areas > 2,000 inhabitants: one outlet
residential areas > 4,000 inhabitants: one outlet within 2km
one outlet within 80km2
all other areas to be covered by mobile post service
| in urban areas maximum 1km to the next letter box
minimum 108,000
|
| DK | one outlet per municipality
> 5,000 inhabitants: maximum 5km to the
next outlet
2,000-5,000 inhabitants: existing outlets not
to be closed
outlets can not be closed, if that increases the distance to the next outlet by more than 10km
| sufficient number nationwide |
| ES | no regulatory requirements
| no regulatory requirements |
| FI | one outlet per municipality
| one within reasonable distance |
| FR | > 90% of the population of each county need to have a post office within 5km and 20 minutes by car (under local traffice conditions)
| no regulatory requirements |
| GB | countryside > 95% of all users within 5km of an access point
in every post code area > 95% of all users within 10km of an access point
| in regions > 200 delivery points per km2—> 99% of inhabitants within 500m of a letter box
|
| GR | no regulatory requirements
| no regulatory requirements |
| HU | towns < 600 inhabitants a mobile post office
towns > 600 inhabitants one fixed post office (exemptions possible in towns with less than 1,000 inhabitants, if the local administration agrees).
one post office per 20,000 inhabitants of a city
in cities one post office within 3 km reach (exemption: outskirts)
the distance between post offices should not exceed 6km
| in cities one letter box within a 1km reach (exemption: outskirts)
the distance between letter boxes should not exceed 2km
|
| IE | in towns > 1,500 inhabitants one posting point in the centre
| towns > 1,500 inhabitants one posting point in the centre
posting points for single piece mail in standard
envelopes within 1km in towns and within 3km in rural areas
a facility to buy postage stamps within 100m of the letter box
|
| IT | no regulatory requirements
| no regulatory requirements |
| LU | changes to the existing network have to be approved by the regulator
| changes to the existing network have to be approved by the regulator
|
| NL | residental centres > 5,000 inhabitants, one outlet within 5km
residential centres > 50,000 an (additional outlet) for every 50,000 inhabitants
one outlet within 5km for >95% of all inhabitants of The Netherlands
| residential centres > 5,000 inhabitants one letterbox within 500 m
other, one letterbox within 2,500m
|
| PL | at least 8,240 outlets across the country
one outlet per 7,000 inhabitants in urban areas
one outlet per 65km2 in rural areas
one outlet in each district
districts <2,500 inhabitants: mobile point of contact or outlet in the neighbouring district
| no regulatory requirements |
| PT | changes to the existing network and to opening hours have to be approved by the regulator
| no regulatory requirements |
| SE | changes to the existing network have to be approved by the regulator
| no regulatory requirements |
| SI | no regulatory requirements
| no regulatory requirements |
| SK | residential unit > 2,000 inhabitants mobile post office or secondary office
residential unit > 5,000 inhabitants one post office
in each residential unit one post office within 6km
change to the post office network has to be approved by the regulator
| residential unit with 300-500 inhabitants: one letter box within 4km
residential unit with 500-2,000 inhabitants: one letter box within the unit
residential unit > 2,000 inhabitants: one letter box for each 2,000 inhabitants
in the centre of the residential unit > 10,000 inhabitants the distance between the letter boxes is <500m
in the centre of the residential unit > 10,000 inhabitants the distance from any pert of the unit (except outskirts) to the nearest letter box is < 1,500m
|
|
|
| Service requirements |
| | | |
|
| Scope
| Quality* | Deliveries per week
| Other |
| AT |
postal items < 2kg
parcels < 20kg
registered + insured items | D+1 95% D+2 98% | 5
|
opening hours of the post offices
> 20 hours/week |
| BE |
postal items < 2kg
parcels < 10kg
ingoing int parcels < 20kg
registered + insured items
newspapers, magazines | D+1 94% D+2 97% | 5
|
average waiting time in Post offices <4min |
| CZ |
letters < 2kg
registered + insured items
< 2kg
parcels < 15kg | D+1 90% | 5
|
residential district > 10,000 inhabitants clearance of certain letter boxes on Saturdays
residential district > 100,000 inhabitants clearance of certain letter boxes on Sundays
residential district > 250,000 inhabitants clearance of certain letter boxes every day up to midnight |
| DE |
letter items < 2kg
parcels < 20kg
newspapers + magazines
register + insured items
cash-on-delivery item | D+1 80% D+2 90% | 6
|
post offices are opened throughout the entire year (self-commitment)
the opening hours of very small post offices will be more than 50% above the actual customer's demand
(self-commitment) |
| DK |
addressed mail, catalogues, brochures, newspapers and periodicals < 2kg
parcels < 20kg
literature for the blind < 7kg
registered + insured items | D+1 93% | 6 (letters) 5 (parcels)
| |
| ES |
postal items < 2kg
parcels < 10kg
newspapers, magazines, books
registered + insured items | D+3 90% D+5 98% | 5
| |
| FI |
items of corr < 2kg
parcels < 10kg
ingoing int parcels < 30kg
registered + insured items | D+1 95% | 5
| |
| FR |
letter mail < 2kg
parcels < 20kg
addressed newspapers and magazines | D+1 85% D+2 95% | 6
| |
| GB |
mail items < 2kg
2nd class parcels < 20kg
registered + insured items
a range of support services (redirection, Post Restante, etc) | D+1 93% | 6 (letters) 5 (parcels)
| |
| GR |
postal items < 2kg (including newspapers, magazines etc)
postal packages < 20kg
registered + insured items | | 5 |
|
| HU |
items of corr < 2kg
postal packages < 20kg
registered + insured items | D+1 85% D+3 97% | 5
|
Maximum queuing time in post offices: 15 minutes
Post offices have to be open a minimum of 2 hours a day. In cities with more than 15,000 inhabitants they have to be open on workdays a minimum of 6 hours per day, with one opening hour either before 8 am or after 5 pm |
| IE |
postal items < 2kg
packages < 20kg
registered + insured items | D+1 94% D+3 99.5% | 5
| |
| IT |
mail items < 2kg
parcels < 20kg
registered + insured items | D+1 87% D+2 98% D+3 99% |
5 | |
| LU |
postal items < 2kg
parcels < 10kg
registered + insured items | D+ 1 95% D+2 99% | 5
| |
| NL |
items of corr < 2kg
domestic parcels < 10kg
int parcels < 20kg
registered + insured items
PO Boxes
bulk mail is not part of the USO | D+1 95% | 6
| |
| PL |
letter mail < 2kg
registered + insured letters < 2kg
parcels < 10kg
insured parcels < 10kg
ingoing int parcels < 20kg
money orders | D+1 82% D+2 90% D+3 94% |
5 | |
| PT |
correspondence, books, catalogues, newspapers
< 2kg
postal packages of up to
20 kg
registered + insured items | D+1 93% D+10 < 2,600 items
| 5 |
maximum waiting time in post offices under 10 minutes > 70% |
| SE |
addresses items < 20kg
registered + insured items | D+1 85% D+3 97% | 5
| |
| SI |
postal items < 2kg
parcels < 20kg
registered + insured items | | 5 |
|
| SK |
letter mail < 2kg
parcels < 15kg
inging int parcels < 20kg
registered + insured items | D+1 96% | 5
|
the average queuing time in post offices during the peak hours < 12 minutes
details requirements for post office opening hours |
|
| * Quality requirements concerning domestic first class letter mail
|
4
not printed. Back
5
Competitive Market Review-Proposals for tackling barriers to
entry in postal services: November 2005 at page 52 www.psc.gov.uk Back
6
Op cit at page 51. Back
7
Competitive Market Review-Proposals for consultation: September
2004 at page 66. Back
|
