Clause 36: Publication of information about performance

125.     This clause provides that designated USP conditions must include provision requiring the designated universal service provider to publish information about its provision of a universal service in accordance with specified standards and may include other conditions requiring information to be published in relation to its performance in complying with specified requirements. “Specified” means specified in the condition. These conditions must also include a requirement for the provider to publish an annual performance report which must be independently audited. Information previously published must be updated and published again. When and where it is published may also be specified.

126.     The Directive requires Member States to ensure that universal service providers must publish annual reports which have been independently audited (Article 16 and 19). These provisions implement the publication requirements of those Articles.

Clause 37: USP access conditions

127.     Subsection (1) of this clause describes the access conditions that OFCOM may impose on the universal service provider requiring it to give access to other postal operators, or users of postal services, and/or to maintain accounting separation relating to access to its postal network. Access may be required to the postal network of the universal service provider and this is defined in subsection (2) as the systems and all the resources used for the purpose of complying with a designated USP condition, including arrangements made with others for the provision of any service. This is in line with Article 11a of the Directive which gives Member States the right to adopt measures to ensure access to the postal network under transparent, proportional and non-discriminatory conditions.

128.     Subsection (3) provides that OFCOM may not impose a USP access condition unless it appears to OFCOM that it is appropriate to promote efficiency, effective competition and/or to confer significant benefits on the users of postal services.

129.     Subsections (4) provides that OFCOM may not impose a USP access condition that imposes price controls unless it appears to them that the universal service provider might charge excessively high prices or impose a price squeeze.

130.      Subsection (5) provides that in imposing a USP access condition imposing a price control, OFCOM must have regard to such of the costs incurred in the provision of that network, or part of that network, as OFCOM consider appropriate. This will allow OFCOM to consider both actual and efficient costs.

131.     Subsection (6) provides that when imposing price controls, OFCOM may have regard to the prices at which services are available in comparable competitive markets and determine what they consider to be efficiency by using cost accounting methods.

132.     Subsection (7) provides that in deciding what USP access conditions to impose, OFCOM must take account of a number of factors, including technical and economic viability, feasibility, investment made by the universal service provider, the need to secure effective competition in the long term, and intellectual property rights.

133.     Subsection (8) provides that for the purposes of this clause reference to giving a person access to the postal network includes giving a person an entitlement to use, be provided with or become a party to any services, facilities or arrangements comprised in that network.

134.     This clause is supplemented by the provisions in Schedule 3, which provide for the kind of matters that may be included in USP access conditions and the resolution of access disputes by OFCOM.

Clause 38: USP accounting conditions

135.     Subsection (1) of this clause describes the USP accounting conditions that OFCOM may impose on the universal service provider to maintain separate accounts between different matters as directed by OFCOM, to comply with rules about cost identification and orientation or the use of accounting systems in relation to those matters and to have compliance with those systems audited annually by a qualified independent auditor. This is in line with Article 14 of the Directive on the separation of accounts of universal service providers.

136.     Subsection (2) provides that when OFCOM imposes a USP accounting condition requiring accounting separation, the condition may provide for accounting separation to be maintained for different services, facilities or products (including in different areas) and may impose requirements about the accounting methods to be used.

137.     Subsection (3) provides that when OFCOM imposes a USP accounting condition requiring compliance with rules about cost identification or the use of accounting systems, the condition may include the application of presumptions on fixing or determining costs and charges and may require publication of the accounts and other information related to the condition. Additionally, when the USP accounting condition relates to the use of cost accounting systems, subsections (5) and (6) provide that OFCOM may require a description of the accounting system be made publicly available, including details of the cost categories and rules of cost allocation.

138.     Subsection (4) provides that when OFCOM imposes a USP accounting condition requiring the auditing of the provider’s compliance with accounting systems, OFCOM may require the universal service provider to meet the costs of the audit.

139.     This clause does not restrict the power of OFCOM to impose other USP accounting conditions.

Persons providing services within scope of universal postal service

Clause 39: Services within scope of the universal postal service

140.     This clause defines the meaning of “services within the scope of the universal postal service”. This definition is relevant to those who may be subject to general universal service conditions under clause 40. This definition is also relevant to those who may be subject to the recovery of administrative charges incurred by OFCOM (clause 41) and to general access conditions (clause 47).

141.     A service is within the scope of the universal service, first, if it falls within the description of a service set out in the universal postal service order made under clause 32. Second, a service is within the scope of the universal service if it would fall within the description of a service set out in the universal postal service order, but collection and delivery are not provided on each of the days required under clause 32, or the service is not provided throughout the UK, or the service is not provided at an affordable uniform price. Finally, a service is also within the scope of the universal postal service if OFCOM believe it is inter-changeable from users’ point of view with one set out in the universal postal service order.

Clause 40: General universal service conditions

142.     Subsection (1) of this clause defines a general universal service condition. It is either a condition OFCOM consider necessary for the purpose of securing that a universal service is provided in accordance with the standards set out in the universal postal service order, or it is a condition imposed for the purposes of sharing the financial burden of universal service obligations.

143.     Subsection (2) sets out some of the things that general universal service conditions may require postal operators providing services within the scope of the universal service to do. Subsection (2) provides that they may require persons to make contributions towards the costs of complying with designated USP conditions, in accordance with clause 43. Subsection (3) provides that, where there is a designated universal service provider, OFCOM cannot impose conditions under this clause requiring a person to provide services required by clause 32.

144.     Subsection (4) provides that a general universal service condition may be applied to every postal operator providing a service within the scope of the universal service or to specified descriptions of such operators.

Clause 41: Recovery of administrative charges incurred by OFCOM

145.     OFCOM may impose charges on postal operators providing services within the scope of the universal postal service to meet OFCOM’s costs in regulating postal services. Schedule 4 contains further provision about these charges.

Financial support for universal service

Clause 42: Review of costs of universal service obligations

146.     Clause 42 provides that OFCOM must from time to time review the extent of the financial burden for the universal service provider of complying with its universal service obligations. These are defined as the obligations imposed on it by a designated USP condition. As part of this review OFCOM must consider the extent to which the universal service provider is complying with those obligations cost-efficiently. The first of these reviews must be carried out within 5 years of this section coming into force, and every subsequent review must be within 5 years of the previous one.

147.     OFCOM must apply the method of calculating the burden set out in designation regulations (clause 34), where those regulations require the financial burden to be taken into account in the designation decision and provide for a particular method of calculation. Where the regulations under clause 34 do not provide for a particular method of calculation of the financial burden, clause 42(5) provides that the financial burden shall be taken to be the net cost of compliance after allowing for market benefits of being the designated universal service provider. The conclusions of this review, and the audit, must be published.

148.     This clause together with clause 43 transposes new Article 7 of the Directive. This new article expands the provision of former Article 9(4) to clarify a range of alternatives available to Member States when there is a need for external financing of the universal service obligations. The financing alternatives include the establishment of a compensation fund with contributions from service providers (and user’s fees), where the Member State has determined that universal services obligations entail a net cost which represents an unfair financial burden on the universal service provider(s).

Clause 43: Sharing of burden of universal service obligations

149.     This clause requires OFCOM, where they have concluded from a clause 42 review that universal service obligations impose a financial burden on the universal service provider, to determine whether they consider it would be unfair for that provider to bear the whole or part of the burden.

150.     OFCOM must make determinations of whether the burden would be unfair for the provider to bear or continue to bear, and the extent (if any) to which the burden would be unfair, in accordance with regulations they have made under subsection (3).

151.     If they determine that the financial burden is unfair, OFCOM may then determine that contributions for meeting that financial burden are to be made by providers within the scope of the universal service, and/or through the charges paid by users for using a service, as provided by the Directive.

152.     Subsection (5) provides that the assessment, collection and distribution of contributions can only be made if it is in accordance with a mechanism in a scheme contained in regulations made by OFCOM.

153.     Subsection (6) provides that in making any regulations under this clause, OFCOM must seek to ensure that the assessment, collection and distribution of contributions is objective and transparent, does not involve (or tend to give rise to) any undue discrimination, and avoids or minimises distortion of competition.

154.     Subsection (7) provides that a scheme can be administrated by OFCOM or an independent person specified by OFCOM in their regulations.

155.     Subsection (8) provides that Regulations setting out such a scheme are subject to consent by the Secretary of State, and to the affirmative resolution procedure.

Clause 44: Report on sharing mechanism

156.     This clause requires that, where regulations provide for a scheme to share the burden of the universal service (clause 43), OFCOM must report annually on the sharing mechanism and for the reports to be published. OFCOM are not required to publish confidential information.

Postal operators generally

Clause 45: Notification by postal operators

157.     Postal operators are not required to notify OFCOM prior to providing postal services, however this clause provides that the Secretary of State may make regulations (subject to the negative resolution procedure) requiring them to do so. These provisions may make provisions corresponding with any of the provisions of sections 33 to 37 of the Communications Act 2003.

158.     Subsection (4) provides that the maximum penalty that can be imposed by the regulations for failure to comply must not exceed the maximum under section 37(6) of the Communications Act 2003 (currently £10,000).

159.     Subsections (5) and (6) provide that if, after consulting OFCOM, the Secretary of State decides to make such regulations, OFCOM must establish and maintain a register to record every notification. OFCOM must publish a notice outlining when the register can be seen by the public and what fees, if any, must be paid to do so.

Clause 46: Essential conditions

160.     As stated in clause 30, the conditions that OFCOM may impose on those providing postal services include “essential conditions”. This clause describes what “essential conditions” can be imposed and on whom.

161.     Subsection (1) provides that the essential conditions can be imposed for one of five reasons: to secure confidentiality of sending, conveying and delivery of letters, to safeguard security where dangerous goods are transported; to safeguard confidentiality of information conveyed; to guard against theft or loss of or damage to postal packets; and to secure the delivery of postal packets to the intended addresses.

162.     Subsection (2) provides that these conditions may be applied to every postal operator or to those of a particular description specified in the condition.

Clause 47: General access conditions

163.     This clause describes the general access conditions that OFCOM may impose on any postal operator requiring it to give access to other postal operators, or users of postal services, and/or to maintain accounting separation relating to this access. Access may be required to the postal operator’s postal infrastructure, including both physical infrastructure (such as letter boxes) and non-physical infrastructure (such as information relating to postcodes), or any service which the postal operator provides within the scope of the universal postal service. This clause transposes the first part of Article 11a of the Directive.

164.     Subsection (3) provides that a general access condition may only be imposed if it appears to OFCOM that it is necessary to protect the interests of the users of postal services and/or to promote effective competition.

165.     Subsection (4) provides that in deciding what general access conditions to impose, OFCOM must take account of a number of factors, including technical and economic viability, feasibility, investment made by the postal operator, the need to secure effective competition in the long term, and intellectual property rights.

166.     Subsection (5) provides that for the purposes of clause 47, reference to giving a person access to an operator’s postal infrastructure includes giving a person an entitlement to use, be provided with or become a party to any services, facilities or arrangements comprised in the infrastructure.

167.     This clause is supplemented by the provisions in Schedule 3, which set out the kind of matters that may be included in general access conditions and the resolution of access disputes by OFCOM.

Clause 48: Consumer protection conditions

168.     Subsection (1) of this clause describes the consumer protection conditions that OFCOM can impose on any postal operator. These include conditions requiring the postal operator to assume liability for loss or damage of postal packets and/or to establish and maintain procedures, standards and policies for consumer protection matters and/or make payments relating to qualifying consumer expenses of the National Consumer Council or the Office of Fair Trading.

169.     Subsection (2) provides that consumer protection matters include the handling of complaints, resolution of disputes, provision of remedies and redress, information about service standard and users rights.

170.     Subsection (3) provides that the reference to qualifying consumer expenses of the National Consumer Council or the Office of Fair Trading is to such of their expenses as the Secretary of State considers reasonable having regard to the functions exercisable in relation to users of postal services.

171.     Subsection (4) provides that in imposing a consumer protection condition, OFCOM must, as far as they consider appropriate, secure that the procedures are easy to use, transparent, effective and facilitate the settling of disputes fairly and promptly, that they are free of charge to users and that where postal operators contravene the condition the operator follows the procedure as may be required in the condition.

172.     Subsection (5) provides that the Secretary of State may direct OFCOM to include provision within consumer protection conditions relating to the payment of expenses of the National Consumer Council or the Office of Fair Trading.

173.     Article 19 of the Directive provides that Member States must ensure that transparent, simple and inexpensive procedures are made available for dealing with postal users’ complaints. This clause therefore implements this provision.

Clause 49: Provision that may be made by consumer protection conditions

174.     This clause provides that postal operators may be required to be members of a redress scheme under which complaints may be made to and investigated by an independent person. Redress schemes are approved in accordance with Schedule 5.

175.     Postal operators may be required to publish information about the number of complaints made about them, how they were dealt with, and to provide OFCOM with information about their compliance with standards for handling complaints. In the case of the designated universal service provider, a consumer protection condition must include a requirement to publish information about the number of complaints made about them. This is required by and implements Article 19.2 of the Directive.

General provisions

Clause 50: Imposition, modification or revocation of regulatory conditions

176.     This clause introduces Schedule 6, which provides for the imposition, modification or revocation of regulatory conditions.

Clause 51: Appeals against price control decisions

177.     This clause provides for an appeal to the Competition Commission against a price control decision on the grounds that OFCOM has made a material error (or errors).

178.     An appeal must be made within two months of the original decision and must be made in accordance with the requirements of the Commission on the form of appeals or the way in which they must be made. The making of an appeal against a decision does not suspend the effect of the decision whilst the appeal is being considered.

179.     Subsection (6) provides that on determining the appeal, the Commission must either dismiss the appeal or allow the appeal and make its own decision on the subject matter of the appeal.

180.     Subsection (8) provides that the Commission may investigate any matter or do any other thing in order to allow the appeal or reach its own decision.

181.     Subsection (9) provides that OFCOM must give effect to any decision of the Commission as soon as is reasonably practicable after it is made.

182.     Subsection (10) defines a price control decision.

Clause 52: Appeals under section 51: supplementary

183.     This clause provides a power for the Competition Commission to make rules regulating the conduct of appeals under clause 51.

184.     Subsection (2) provides that the rules may impose time limits and other restrictions on the taking of evidence and the making of representations or observations at an oral hearing.

185.     Subsection (5) provides that the Commission must consult in the making of its rules, and subsection (4) provides that the Commission must publish the rules that it makes.

186.     Subsection (6) provides for the Secretary of State by order to apply the investigation powers the Commission currently has under the Enterprise Act 2002 in relation to its appeal function under clause 51 and make provision for extending the period within which appeals must be determined when requirements as to attendance of witnesses and production of documents have not been complied with.

Clause 53: Enforcement of regulatory requirements

187.     This clause introduces Schedule 7, which provides for the enforcement of regulatory requirements imposed on postal operators by OFCOM.

Clause 54: Information

188.     This clause introduces Schedule 8, which provides for requirements to provide information to OFCOM, the enforcement of those requirements and supplementary provisions.

189.     Subsection (3) provides that nothing in Schedule 7 of the Postal Services Act 2000 (disclosure of information) prevents Postcomm from disclosing information to OFCOM for the purposes of OFCOM’s functions in relation to postal services.

Clause 55: General restriction on disclosure of information

190.     This clause prohibits the disclosure of information obtained by virtue of Part 3 that relates to an individual or particular business during their lifetime or so long as the business is carried on, except as permitted by the clause.

191.     Subsection (2) provides that disclosure is permitted: with the consent of those concerned; to facilitate the carrying out of functions of OFCOM, the Secretary of State, the Treasury or the Competition Commission or to facilitate the carrying out by a person prescribed (by order of the Secretary of State) of functions under an enactment prescribed (by order of the Secretary of State); in relation to criminal investigations or proceedings; in relation to civil proceedings brought by virtue of Part 3 of the Bill or any enactment prescribed (by the Secretary of State by order); to meet EU obligations; or other circumstances or purposes prescribed by the Secretary of State by order. An order by the Secretary of State is subject to the affirmative resolution procedure.

192.     Subsection (4) provides that this clause does not apply to information made public in circumstances in which, or for a purpose for which, disclosure is not precluded by clause 55. The clause does not apply either to information obtained by OFCOM for its competition functions or to information obtained by the National Consumer Council, as this information is subject to the disclosure regime in Part 9 of the Enterprise Act 2002 (c. 40).

193.     Subsections (5) and (6) provide that it is an offence to disclose information in contravention of the prohibition in this clause, punishable by a fine or imprisonment of no more than two years.

Supplementary and consequential provisions

Clause 56: Duties in relation to social and environmental matters

194.     This clause enables the Secretary of State to give guidance to OFCOM about its contribution to social or environmental policies set out in the guidance, in which case OFCOM must have regard to that guidance.

Clause 57: Orders, schemes and regulations made by OFCOM

195.     This clause provides for section 403 of the Communications Act 2003 (c.21) to apply to any power of OFCOM under Part 3 to make an order, a scheme or regulations. This secures that the orders, scheme and regulations are made by statutory instrument. OFCOM are required to follow a notification procedure before exercising the powers to which this section applies.