Aiming for a compromise – post haste

Date: 04/10/01

By Peter Chapman

THE days of Europe's traditional postman - personified by children's TV character Postman Pat - are numbered as EU postal operators complete their transformation into international logistics and parcels giants, with brand names to match.

Take Pat's erstwhile employer, the UK's Royal Mail - its parent company has just christened itself Consignia.

The background to this mini-revolution-in-the-making is one of the EU's most politically charged dossiers: postal liberalisation.

While the Swedish presidency passed the parcel, so to speak, there are signs that the Belgian presidency is making a serious effort at clinching a deal on the issue.

For over a decade, member states in the European Commission and MEPs have struggled to take a decisive step to open the postal markets.

While telecom markets were fully liberalised in 1998, it has been a different story with post. By 1997 the EU could only agree to open up some of the sector - for letters weighing more than 350 grams - and promised to take another step on the road to full liberalisation at a later date. We're still waiting.

Even the most dyed-in-the-wool socialist MEPs agree that more competition in the sector has the potential to drive growth by stimulating new services and giving customers more choice of provider.

If a company can choose which telecom operator carries its voice and data, then surely it can have a say over who delivers its letters, say the disciples of liberalisation. Competition would also allow the biggest firms to find new markets overseas, while ensuring they face competition on their own patch without being able to finance acquisitions out of profits from letter market monopolies.

But the sticking point has always been how far to go. Critics, such as French giant La Poste, claimed further liberalisation will cost thousands of jobs and imperil a universal service because post offices would not earn enough to pay for loss-making deliveries to rural areas.

The same arguments came into play when Internal Market Commissioner Frits Bolkestein launched his own proposals shortly after entering office.

The Dutchman stepped back from the radical line taken in an earlier draft directive, written by his predecessor Martin Bangemann.

Nevertheless, Bolkestein was forced to water down his own proposals to get them past his fellow commissioners. He finally settled on allowing existing postal operators to keep their monopolies on the delivery of letters weighing less than 50 grams, by 2003.

This would be accompanied by full opening of direct (junk mail) and outgoing cross-border deliveries. The commissioner also promised a study focusing on the impact which liberalisation would have on universal service, with a view to taking another 'decisive step' in 2007.

MEPs savaged the proposals, calling instead for a reserved 150-gram limit for all parts of the market, and member states failed to reach a common position at a pre-Christmas telecoms ministerial meeting during the French presidency.

Ironically, while opponents of liberalisation thought Bolkestein wanted to go too far, private sector operators, and some post offices such as the Netherlands' PTT Post (see below) argued that the proposals would have achieved little without a final date for full liberalisation - which would give firms the economic certainty to invest in expansion into new markets and services.

The deadlock persuaded Stockholm to give post a wide berth during its successful six-month EU presidency in the first half of 2001.

Now the Belgian presidency thinks it may have the makings of a compromise that could break the deadlock.

Under the plan, touted by post minister Rik Daems, there would be a three-step approach. The first would open up the market for letters weighing more than 100 grams in 2003, followed by a reduction to 50 grams in 2006. Then, (and this is the innovative part), there would be a study conducted by the Commission to decide whether further liberalisation would be a good idea and if the universal service could be guaranteed.

If it were deemed an unequivocal success then markets would be fully opened in 2009 without further ado. If not, the Commission would have to come up with new proposals.

Daems hopes the plan will placate member states such as the Netherlands, Finland, Austria and Denmark who are frustrated at the slow pace of liberalisation, and staunch opponents such as the French, Luxembourgers and Greeks.

Both sides of the debate have their reasons to oppose the Belgian plan that will be on the table at the meeting of EU telecommunications ministers on 15 October. So what are the prospects of a final deal?

Experts say much hinges on the position of the UK. London will receive a report in the next week from its new independent post regulator which will consider whether further liberalisation would benefit the market. If the UK decides to side with Paris, then the pro-liberalisers stand to lose. The views of MEPs will also be instrumental in the final outcome. But splits are already starting to appear. Markus Ferber, the Christian Democrat rapporteur in charge of assessing Bolkestein's proposals, believes that the Belgians could be on to something. "A lot of things that the Belgians propose are similar to what we said in the first reading, although the timings are a little different," he said, adding that their compromise offered a gradual solution which would increase the chances of winning wide support in the Parliament.

His socialist counterpart, Brian Simpson, disagrees. He thinks the assembly will oppose any proposal that starts with 100 grams as the critical figure. "150 grams should be the first step," he said. "The other issue is an end date: at the moment we support the Parliament's line in first reading [which rejected a final date]. I feel what they are proposing would be unacceptable."

Before the proposals can come back to the Parliament, there has to be a common position in the Council of Ministers. Simpson fears that could be scuppered by the unwillingness of Bolkestein to budge from his own 50-gram proposal. "Bolkestein has been very inflexible and rigid," said the MEP. If a qualified majority of member states agree a compromise above 50 grams, Bolkestein could block it since there would have to be unanimity to overcome any Commission opposition.

Unanimity would be difficult to achieve claims Simpson, since member states' views are so divergent.

Is there a way out of the deadlock? One solution, say Parliamentary sources, would be for Bolkestein and the Council to go for 150 grams.

If they did, MEPs might be persuaded to accept a final date for full liberalisation - possibly 2010.

In the meantime, all eyes will be on Paris and London.

Article forms part of a special report on postal liberalisation.