Postal regulation dogged by delays

Differences within the European Commission are delaying the publication of a long-awaited notice stating how the EU's rules of competition should apply to post offices.

Officials cannot agree whether to tighten up the regulations banning post offices from using profits made from services they monopolise to cross-subsidise businesses where they have to compete with private operators.

The notice, which Competition Commissioner Karel van Miert had promised to release by the end of last year, has only just left the Directorate-General for competition (DGIV) for discussion with other departments. Commissioners' private offices have still not seen it.

'We will be considering several changes that may be made and this will take a few extra weeks,' said Van Miert last week.

All that Commissioners will say publicly in the meantime is that alterations had to be made to the text of the notice to take account of the conclusions of the special meeting of EU communications ministers in December.

They agreed that a directive should be drawn up which would allow post offices to maintain their monopolies on the transport, sorting and delivery of mail which costs less than five times the standard postal rate and weighs less than 350 grammes.

A draft directive which was the basis of the original competition notice published last year specified then that cross-border post and direct commercial mail should be opened to the market from 2001.

Instead, ministers - at the instigation of the French and German governments - agreed that by January 2000, they would decide whether to open up this market or reduce the mail weight and tariff thresholds with effect from 2003.

Commission officials say that this simple job of changing the timetable for further liberalisation was completed before Christmas. The delay in publication of the revised text has been caused by differences of opinion over the cross-subsidy issue, and there are even suggestions that Van Miert's officials want to go further than the Commissioner in tightening the rules.

The draft notice, which was circulated among interested parties, stated that monopoly profits should not seep into competitive sectors.

Separate accounts should be held to identify the distinct costs and revenues from different operations and also to permit outsiders to judge the size of outright subsidies from the state.

However, the draft notice allowed certain loopholes to remain. For example, it stated that a cross-subsidy could be permitted if it could be justified by 'the cost of universal service obligations' or in special cases such as the provision of 'cultural mail' or services to the disabled.

Express delivery services - such as DHL, Federal Express and UPS from the United States or Business Post in the UK and SFEI in France - are keen for these rules to be made tougher.

In particular, they want the Commission to transfer the guidelines on cross-subsidy which apply to telecommunications firms into the postal sector wholesale. These would ensure that post offices guaranteed a 'proportionate' distribution of costs between monopoly and open-market services, and that these costs included research and development, running facilities and overheads.

Such a move could make life difficult for the post offices, since most of them heavily cross-subsidise their competitive services.

DGIV made its position clearer in November through the conditions it set for allowing Koniklijke PTT Nederland NV (KPN), the Netherlands' privatised post and telecoms operator, to buy one of the world's biggest express delivery firms, TNT, for 1.2 billion ecu.

In a letter to the Merger Task Force, KPN promised to 'abstain from using the revenues earned from its national exclusive postal concession or from its exclusive rights in respect of voice-telephony for as long as they remain exclusive [until January 1998] to subsidise the operational costs of assets and activities of TNT'.

DGIV is already sitting on a series of complaints filed by the various express firms against payments of state aids, cross-subsidies and abuses of dominant positions.

Once they obtain clarity on the rules as they apply to post offices, the private operators are expected to refine these grievances and even come forward with new complaints which would have a better chance of being upheld.

However, Van Miert and his staff are walking a political tightrope. While they may want to make the rules stricter, they have to take account of tough political opposition.

French President Jacques Chirac felt so strongly about the original liberalisation directive that he raised it at the Dublin summit in December and managed to change it. The European Parliament has also passed a resolution calling for the withdrawal of the notice since it believes that the Commission is overstepping its powers.