ERGP (14) 20 – ERGP activity report
Draft outline of the ERGP activity report for the period 2011 - 2013
Foreword from the ERGP Chair
This activity report seeks to outline and present the main activities and deliverables of
European Regulators Group for Postal Services (ERGP) in the period 2011 - 2013.
The ERGP was formally set up by the Commission Decision on 10 August 20101 and started
its work on 1 December 2010 when the inaugural meeting took place.
In the three years of its functioning the institutional framework has been firmly established
and ERGP benefited from the active participation of all national regulatory authorities
(NRAs) for the postal sector in the EU, including candidate countries and countries of the
European Economic Area.
This can especially be observed through the deliverables of ERGP in the last three years that
dealt with numerous important regulatory issues through which the ERGP members shared
the regulatory expertise among each other and with the European Commission.
Furthermore, in 2013 the ERGP also, for the first time since commencing its work, provided
its first formal opinion to the Commission concerning the cross-border parcel delivery, which
represents an important policy area in view of emerging e-commerce and opportunities and
challenges this trend provides for the broader delivery sector.
As ERGP Chair 2014, I would like to thank the colleagues from the NRAs who participated in
the work of ERGP on all levels and from the European Commission for the active
participation and secretarial support for the activities of ERGP.
Especially the various Expert Working Groups are the basis for the successful work in ERGP
and the fulfilment of its work programme in last three years and I am confident that the work
that was successfully initiated with Work Programme of ERGP in 2011 will continue in the
future.
Catalin Marinescu
ERGP Chair 2014
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Available here : http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:217:0007:0009:EN:PDF.
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ERGP (14) 20 – ERGP activity report
1. Introduction
This activity report gives an overview of the activities of ERGP in the period 2011 - 2013 and
represents first report of this kind. It seeks to provide a short overview of the ERGP activities
in one single document in order to report on ERGP activities to the stakeholders on one hand
and to the European Commission on the other hand (as also envisaged by Article 6 of the
Commission Decision establishing ERGP).
The purpose of this activity report is not to give a comprehensive and detailed overview and
analysis of the work of ERGP in the reported period as all the documents that were prepared
by the ERGP, and are cited below, are publicly accessible on the ERGP website2.
Finally, this activity report follows the established institutional structure of the ERGP, which
is also reflected in the Work Programmes of the reported period.
2. Work Programmes in the reported period
As envisaged by Article 11 of the Rules of Procedure of ERGP public consultation on the
draft Work Programmes was held for years 2012 and 2013, while exceptionally the Work
Programme of ERGP for 2011 was adopted without public consultation (as specifically
envisaged by the Rules of Procedure) after the consultation with the European Commission.
While in both cases public consultation ran throughout the period of six (6) weeks no
contribution from stakeholders was received as to the possible topics for the Work
Programme or specific observations to the proposed work streams. This could suggest that a
more pro-active communication strategy of ERGP to make the consultation and other
documents better known may be needed.
The Work Programme of ERGP for 2013 was also presented in a public workshop to the
stakeholders, but no specific input was received during the workshop and later during the
public consultation itself.
Following the initial Work Programme adopted at the inaugural meeting of ERGP, and the
institutional structure set, the work of ERGP in the reporting period was organized around
five main substantive topics in five expert working groups:

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the allocation of common costs and price regulation (Regulatory accounting subgroup);
http://ec.europa.eu/internal_market/ergp/documentation/documents_en.htm.
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ERGP (14) 20 – ERGP activity report

the net cost calculation of universal service obligation (USO) with special emphasis on
the effects of VAT exemption (Net cost calculation sub-group);

the end user satisfaction and monitoring of market outcomes (End user satisfaction
sub-group);

the cross-border parcel delivery (Cross-border sub-group);

end-to-end competition and access regulation (Access sub-group).
Throughout its work in the reporting period ERGP was fulfilling its main tasks envisaged by
the Commission Decision, notably:

to advise and assist the Commission in consolidating the internal market for postal
services or any other matter related to postal services within its competence;

to advise and assist the Commission as to the development of the internal market for
postal services and as to the consistent application in all Member States of the
regulatory framework for postal services.
Furthermore, the ERGP facilitated the cooperation among NRAs, which also enhanced
exchange of experience with different regulatory practices and development of common
regulatory principles.
3. Main areas of work and deliverables
i.
The allocation of common costs and price regulation
As in many network industries, the level of common costs is significant in the postal sector.
Thus the appropriate allocation of these costs to different products and services has a material
effect on many fundamental regulatory decisions (e.g. price regulation, universal service net
cost calculation, competitive assessment) and it strongly influences market outcomes.
In order to develop best practice guidance on common costs allocation methods, the ERGP
has been reviewing the area of cost allocation principles in the period 2011 – 2012, which
lead to adoption of two documents:
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
ERGP Report on common cost allocation adopted in 20113; and

ERGP Common Position on cost allocation rules adopted in 20124.
http://ec.europa.eu/internal_market/ergp/docs/documentation/ergp-11-16-rev-1_en.pdf.
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ERGP (14) 20 – ERGP activity report
The Common Position prepared by ERGP defines principles as regards the scope of
regulatory accounting, the classification of costs on allocation rules and the verification of the
accuracy and reliability of the regulatory accounts, to obtain a satisfactory cost allocation, in
particular as regards common costs.
Finally, in 2013 the work of the ERGP focused on analysis of specific issues related to cost
allocation, notably:

the use of cost of capital and rates of return standards in the postal sector in Europe;

the elements relevant for the cost allocation for the delivery process;

the importance of the retail network of post offices in the cost allocation process; and

the traffic measurement practices by the different universal service providers (USPs).
This lead to the adoption of the ERGP Report on specific issues related to cost allocation.5
ii.
The net cost calculation of universal service obligation (USO) with special emphasis
on the effects of VAT exemption
According to the Postal Services Directive the provision of the universal service shall be
ensured in the most cost-effective manner and the financing of net costs – if any – should be
competitive neutral (“the least market distortive”).
Therefore the ‘unfair’ financial burden of having to provide the universal postal services
needs to be calculated by also taking into account the intangible and market benefits as well
as the VAT exemption that applies to the provision of public postal services.
As the latter is often considered as providing for one of the main remaining distortive effects
of the market it has been considered important by the European Commission to, if technically
feasible, evaluate its net effects (advantage / disadvantage) in view of net cost calculation.
Based on this request ERGP conducted two step analysis of this question in the period 2011 –
2013:

stocktaking of the existing scope of USO in Member States and experience with net
costs of USO calculations so far and regulatory approach to this exercise in view of
the regulatory requirements laid down in Annex I of the Postal Services Directive.
4
http://ec.europa.eu/internal_market/ergp/docs/documentation/2012/ergp-12-28rev1-common-position-on-cost-allocation-rules_en.pdf.
5
http://ec.europa.eu/internal_market/ergp/docs/documentation/2013/131129_specific-cost-allocation-issues_en.pdf.
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ERGP (14) 20 – ERGP activity report
This resulted in the ERGP Report on net cost calculation and evaluation of a reference
scenario;

stocktaking of the existing application of the VAT exemption to public postal services
in the European Union (EU) and its effects on the postal markets.
The work conducted is presented in the ERGP Report on net costs of USO – VAT
exemption as a benefit or a burden6.
iii.
The end user satisfaction and monitoring of market outcomes
Improving quality of postal services has been one of the main objectives of EU postal reform.
In this context the Postal Services Directive defines as a particular task for the national
regulatory authorities (NRAs) to ensure compliance with the obligation arising from the
Postal Directive, in particular through the supervision of quality of service issues.
Quality standards focus in particular on routing times and on the regularity and reliability of
services. NRAs in this context need to ensure that independent performance monitoring is
carried out, that the results are justified, and that corrective action is taken where necessary.
All postal service providers are also obliged to implement transparent, simple and inexpensive
procedures for dealing with postal users’ complaints, particularly in cases involving loss,
theft, damage or non-compliance with service quality standards.
In the context of monitoring of different developments and solutions concerning these two
aspects of the quality of service in different Member States the ERGP prepared the following
annual reports: ERGP Report on the quality of service and end-user satisfaction covering
years 20117, 20128 and 20139.
In 2012 ERGP has made a detailed analysis regarding consumer protection and assessment of
complaint handling procedures which has resulted in the ERGP Report on the assessment of
complaints handling procedures and consumer protection in 201210.
Besides following the developments of the quality of postal services it is also imperative to
ensure accurate broader understanding of the evolution of the markets in order to enable
6
http://ec.europa.eu/internal_market/ergp/docs/documentation/2012/ergp-12-29-report-net-costs-of-vat_en.pdf.
7
http://ec.europa.eu/internal_market/ergp/docs/documentation/ergp-11-19_en.pdf.
8
http://ec.europa.eu/internal_market/ergp/docs/documentation/2012/121130_ergp-12-30-quality-service-end-users-draft-report_en.pdf.
9
http://ec.europa.eu/internal_market/ergp/docs/documentation/2013/2013_qos-indicators_en.pdf.
10
http://ec.europa.eu/internal_market/ergp/docs/documentation/2012/121130_ergp-12-31-complaints-hanling-draft-report_en.pdf.
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ERGP (14) 20 – ERGP activity report
NRAs to perform their task as well as to allow for a European benchmark of the market
developments.
Article 22a of the Postal Services Directive gives NRAs powers to request information from
postal service providers in order to carry out their regulatory tasks and for collection of clearly
defined statistical purposes. The same provision also envisages that, upon request, NRAs shall
provide the European Commission with appropriate and relevant information necessary for it
to carry out its tasks under the Postal Directive.
In context of this work in 2012 ERGP prepared a report on identifying indicators to monitor
market developments11, following and further developing an initial report that had been
prepared in 201112.
On the basis of the reports above the ERGP has done a data collection exercise in 2012,
resulting in the ERGP Report on data on market indicators13, which was prepared adopted in
2013. In 2013 the ERGP has also started a data collection exercise, whose report is expected
to be adopted in 2014.
Furthermore ERGP had also developed activities in order to collaborate with EUROSTAT in
data collection exercises. In 2013 these activities have however been ceased after
EUROSTAT decided to stop the collection of postal data.
iv.
European cross-border e-commerce parcels delivery
The E-commerce Communication14 adopted by the European Commission on 11 January
2012 addressed various issues which are important for building consumer trust in the ecommerce environment (payment, delivery, consumer protection and information) and further
growth of online services.
As a follow-up to this the European Commission adopted in November 2012 the Green
Paper15 on an integrated parcels delivery market addressed issues specific to delivery to help
facilitate e-commerce. Finally, on 16 December 2013 the European Commission adopted
roadmap for completing the single market for parcel delivery.16
11
http://ec.europa.eu/internal_market/ergp/docs/documentation/2012/121130_ergp-12-32-indicators-postal-market-report_en.pdf.
12
http://ec.europa.eu/internal_market/ergp/docs/documentation/ergp-11-20_en.pdf
13
http://ec.europa.eu/internal_market/ergp/docs/documentation/2012/ergp-12-33-report-on-market-data-on-indicators_en.pdf.
14
http://eur-lex.europa.eu/resource.html?uri=cellar:87375c7c-1bd0-445d-b251-60599af8c73b.0009.03/DOC_1&format=PDF.
15
http://ec.europa.eu/internal_market/consultations/docs/2012/parcel-delivery/121129_green-paper-parcel-delivery_en.pdf.
16
http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:52013DC0886.
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ERGP (14) 20 – ERGP activity report
As part of this process the European Commission asked the ERGP in 2013 to provide it with
its advice on how, if this was ever judged necessary, a market analysis of European crossborder e-commerce parcels delivery from an ex-ante sectoral regulation point of view could
be carried out and on related steps.
In its Opinion17 the ERGP concluded that it has no indication of a specific competition
problem on European cross-border e-commerce parcels delivery market(s) that may be best
dealt with by ex-ante regulation.
The work conducted did not indicate a need for full formal market analysis or regulation at
the present time, noting at the same time that there is no mandate for such a task and it would
not be a question for NRAs to address this issue in the present context (who do not decide
whether to regulate a given sector). Given that the markets concerned are not well known,
however, it did indicate that it could be useful, in a proportionate fashion, to consider them
further in 2014.
v.
Assessment of status quo and development of access and end-to-end competition
In 2012, the ERGP looked specifically at access competition, its role and limitations in
European countries. In 2013, the group looked more widely at both end-to-end and access
competition in the market for letters and packets below 350 grams in member states,
considering whether it was possible to identify the factors that encourage competition in one
form or another and if so, how the alternative forms of competition might interact.
The report presents various factors (mail make-up, demographics, origin of competitors) that
may have supported the emergence of competition and considers whether they may have been
relevant in the eight countries that have more than 5% competition by volume.
Generally, however, few patterns emerged, perhaps notably due to the small size of the
sample. That said, the examination does offer some insights (demographic factors may be less
significant than imagined; the scale of bulk mail could be linked to competition; market entry
may often come from companies already engaged in mail preparation or logistics in the
country or, particularly, from incumbents in other states (the three countries having the
highest per cent of end-to-end competition all have foreign incumbents operating in their
markets)).
The development of competition may have been based on factors that are “country or time
specific” and so less relevant for other countries or for the present day. To the extent that
17
http://ec.europa.eu/internal_market/ergp/docs/documentation/2013/131129_cross-border-parcel_en.pdf.
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ERGP (14) 20 – ERGP activity report
some limited patterns are present, the small sample size, again, limits the ability to draw
general conclusions of cause and effect.
The working group observed that in those countries which have recently liberalised the early
entry competitors have been end-to-end based. This could be due to the fact that access
competition is more directly reliant on supporting regulation which needs time to be enforced
effectively, though there is no specific supporting evidence for this.
Though there are few examples of markets where there are both active end-to-end and access
competition evidence as to their interaction is very limited. It could be argued that, provided
access pricing and terms and conditions are structured appropriately, access and end-to-end
competition are complementary. On the other hand, it could be argued that there is a risk that
encouraging access competition could reduce the incentives for operators to compete end-toend. The group cannot draw conclusion on this point, which may vary from country to
country.
4. Conclusions and way forward
After three years of its establishment ERGP has reached a stable institutional structure and
manages well-functioning working processes. It benefited from the participation of all
national regulators in its work, which is also very well in the number of documents prepared
and adopted by its Members.
However, two specific challenges lie ahead of the ERGP that will need further reflection,
notably:

in view of the overall constraints on financial and human resources in public
administration it is becoming increasingly challenging to ensure necessary
commitments by individual members; and

broader and more active involvement of stakeholders in the work of ERGP, especially
through responses to public consultations on different documents, which have so far
been rather limited.
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