Definition of the postal infrastructure in Sweden.

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1 DATE August, 2000 Definition of the postal infrastructure in Sweden. Post- och telestyrelsen (National Post and Telecom Agency) P.O. Box 5398 SE Stockholm, Sweden Phone: , Fax: Internet:

2 Definition of the postal infrastructure in Sweden...2 Background...2 The postcode system...3 P.O.-boxes...3 Changes of address...4 Forwarding of mail items...5 Appendix...7 National Post and Telecom Agency - Postal Department 1

3 Definition of the postal infrastructure in Sweden Background In 1993, the State monopoly of postal services was abolished and a hitherto sheltered market was opened for competition from independent postal operators. On March 1 st 1994, the former Swedish Postal administration was transformed into the State-owned limited liability Company, Sweden Post. However, new private operators will meet with considerable difficulties when entering this market which is still overwhelmingly dominated by the former monopoly holder. The postal market had to be thoroughly analysed in order to identify the spots where new postal operators could face obstacles. The aim was to establish market terms, which would be reasonable, unbiased and non-discriminatory for the competitors. When reference is made to "private operators", it implies that they run postal businesses as defined in the Postal Services Act and that they have a licence issued by the PTS. The definition of the postal infrastructure comprises the structures and facilities necessary to guarantee the consumers an effective and reliable mail conveyance in the country. It is thus for the benefit of the consumers that the examination of the postal infrastructure has been conducted since the public mustn't be subjected to any negative consequences following the deregulation of the postal market and the presence of new competing postal operators. The attention has focused on four crucial points in the mail conveyance, namely the postcode system, postoffice boxes, forwarding of mail items and the change of address. These points were considered to constitute a possible bottleneck for private operators when entering the postal market. Yet, the definition doesn't include what is designated as "down stream access", such as access to other operators' postal terminals, letter-sorting equipment and staff. The major part of the postal infrastructure is still in the hands of Sweden Post. Until July 1 st 1999, the Postal Services Act didn't provide any rules stipulating how access to the postal infrastructure should be guaranteed. From the outset, the idea was that this issue ought to be settled through voluntary agreements between the parties concerned. The solution with voluntary agreements proved, however, not to be satisfactory. The National Post and Telecom Agency carried out an investigation with the objective to make proposals for the administration of and regulatory framework for the postal infrastructure. The Swedish Parliament approved several of the suggested amendments to the Postal Services Act, which came into effect on July 1 st 1999 (se appendix). The government bill dealt with the four following subjects: National Post and Telecom Agency - Postal Department 2

4 The postcode system The postcode system was established in 1968 by the former Postal Administration with a view to make the sorting of mail items more efficient. Since then, the postcode system has also proved to be very useful for other users than postal operators such as the government body responsible for the national registration, the National Tax Board and the Central Office of the National Land Survey. A legal definition of the postcode system was introduced in Under section 3a of the Postal Services Act, the postcode system is said to be "a system of numberseries used for the purpose of mail conveyance and dividing the country into postcode areas". It also says that the postcode system shall enable efficient sorting and nation-wide conveyance of mail. Since Sweden Post at present is the designated universal service provider, the Government has decided that Sweden Post is to provide and administer the postcode system. When changes are being made to the postcodes, which affect more than a few postal addresses, these changes have to be approved by the PTS. According to the Government, the postcode system is such an important part of the postal infrastructure that it is necessary for all postal operators to have access to the system on equal terms. Sweden Post is, however, now according to law obliged to allot private operators postcodes for P.O.-box facilities if the operators request so. Otherwise a private operator who intends to set up other post-box facilities wouldn't be able to allot them new postcodes since this is still a prerogative of Sweden Post. The clients would therefore be obliged to accept a c/o address of the private operator in charge of the post-box facility, a solution deemed unacceptable by most clients. The right for all postal operators to get access to each other's P.O.-boxes on equal terms was thereby enhanced. Sweden Post has changed its routines and procedures for decision-making about major alterations in the postcode system and initiated the forming of a postcode council in order to develop and strengthen the co-operation between the parties affected by the postcode system. P.O.-boxes For historic reasons most of the postal infrastructure is in the hands of the former monopolist. Sweden Post has sole control of the service for the provision of the P.O.-boxes, which is a part of the distribution network used by Sweden Post. Through legislation the private operators have been given the right to obtain postal codes for P.O.-boxes of their own. This enables them to offer their National Post and Telecom Agency - Postal Department 3

5 customers P.O.-boxes with a unique P.O.-box address including the necessary unique postal code. The National Post and Telecom Agency has been given a statutory role as mediator in disputes over the access to P.O.-boxes. Further, the terms for access shall be reasonable, neutral from a competitive point of view and nondiscriminatory in relation to the routines and practices. Sweden Post and the special interest organisation for the private postal operators, FPF, have entered upon an agreement where the conditions for the access of the boxes are set out. According to this agreement, an operator has to pay SEK 0,75 for each letter delivered to another operator's boxes. The starting point of the principles for setting the prices is that an operator shall be compensated for any work that is done on behalf of another operator. It is a question of the additional cost caused by the handling in question. The price shall be based upon "price according to performance". The routines applied will have to be as cost-efficient as possible, which means that the competitors' letters that are addressed to P.O. boxes may not be handled in a more costly manner than their own mail. The profit margin may not exceed the demands applied for the rest of the licenceholder's activities. Changes of address In 1993, Sweden Post and City Mail decided to set up a joint company called Svensk Adressändring AB, SvAAB, using a system by which the public by phone make their report and request for redirection of mail or storing of mail. The aim was to create a body that would provide the postal operators with vital information in order to assure a high level of quality in the mail conveyance. This would also make it easier for people wishing to make either a temporary or a permanent change of address since just one notification to SvAAB would be enough to make the change known to all postal operators as well as the authorities. The company acts as an agent for the operators, providing the services mentioned above. Nowadays the public can make their reports either by phone, mail or over the internet. If it is a permanent change of address, a confirmation is exchanged in addition to the report. The information obtained by SvAAB is available to all postal operators that sign an agreement with SvAAB. The larger operators receive information as often as twice a day, while some of the smallest operators only receive it twice a week. The system itself has proved reliable and well suited to its purpose. Compensation is paid by SvAAB to each operator for the services he has performed. SvAAB has gained an excellent reputation for quality and has also proved to be of considerable value for government bodies such as the Swedish Competition National Post and Telecom Agency - Postal Department 4

6 Authority and the National Tax Board when updating the national registration record. SvAAB is jointly owned by Sweden Post and City Mail, with the other private operators also being on the board, to ensure that the company will remain impartial in relation to the different operators on the market. It was decided that the ownership had to be modified, giving Sweden Post an 85% share of the stocks, leaving the rest to City Mail. In order not to let the majority holder gain complete control over the board, it was also decided that Sweden Post should have two representatives on the board whereas City Mail and FPF (association of independent postal operators) should each elect one member. Furthermore, the meetings of the board are to be led by an independent chairman and SvAAB will remain under the supervision of the National Post and Telecom Agency. The shareholder agreement includes a disposition stipulating that several important decisions require unanimity, thereby preventing Sweden Post from using its majority share to the detriment of the smaller operators. The board will thus have a considerable liberty of decision. The assessment made by the National Post and Telecom Agency is that the agreement concerning ownership, right to decision-making and influence on SvAAB tally with the demands of the Government for competitive impartiality in relation to affiliated operators. Forwarding of mail items Since the majority of the private operators are only active within a limited geographical area, this circumstance has given rise to difficulties when mail has to be forwarded outside the delimited area of distribution. In order to overcome this problem, the private operators have to a large extent concluded agreements with Sweden Post to forward their mail outside the own distribution area as Sweden Post still is the only operator with a national distribution network. The universal service provider then invoices the private operators for the postage charges. A somewhat more circumstantial and onerous procedure is the forwarding of the items with the stamps of Sweden Post by the private operator himself. Another difficulty has been the so-called private forwarding by individuals, which compels Sweden Post to forward other operators' mail without financial compensation. A procedure for assessing the quantity of privately forwarded items has been drawn up so that Sweden Post can subsequently charge the private operators a standard fee. There has been a controversy as to the size of the fee charged by Sweden Post for the redirecting of other operators' mail. However, an agreement has now been successfully concluded between Sweden Post and City Mail concerning this fee and the procedures for redirecting mail. Another agreement of much the same tenor has also been concluded between Sweden Post and FPF, the body National Post and Telecom Agency - Postal Department 5

7 defending the interests of the private operators. Sweden Post and City Mail will continue to apply previous routines for private forwarding. The National Post and Telecom Agency considers these agreements to be fair and non-discriminatory without prejudice to any of the operators present on the postal market. National Post and Telecom Agency - Postal Department 6

8 Appendix The amendments as from July 1st 1999 made to the Postal Services Act (1993:1684) concerning issues relating to the postal infrastructure. 3 a In this Act, postcode system means a system of digit series relating to the subdivision of the country into postcode areas expedient for mail delivery. The postcode system shall be designed so as to enable an effective sorting and distribution of items of mail in the entire country. Ordinance (1999:571) 5 d A licence holder is obliged to make it possible for mail items which have been conveyed by other licence holders to reach the facilities for mail delivery to addressees that the licence holder is in possession of. The pertinent conditions shall be reasonable and unbiased as to competition and non-discriminatory with respect to the professional activities of the licence holder. Ordinance (1999:571) 7 a The Government shall appoint a licence holder who is a universal service provider to provide and administer the postcode system as well. The Government or, if authorised by the Government, the licensing authority may issue more detailed regulations concerning the requirements under the first and second paragraph. Ordinance (1999:571). 7 c The party providing the postcode system is on request from other licence holders obliged to allot them postcodes for postbox facilities within the requested postcode area. The licensing authority may under certain circumstances accord an exception to the obligation under the first paragraph if allotment of a requested postcode would considerably hamper an effective use of the postcode system. Ordinance (1999:571). 7 d The approval of the licensing authority is requested for alterations of the postcode system if the alteration is not merely restricted to an individual postal addressee. The licensing authority shall in this matter consult other licence holders, authorities responsible for national registration, the real estate directory and local authorities concerned. An alteration may be effected six months at the earliest following the approval of the licensing authority. If particular reasons exist, the authority may decide that the alteration may be effected on an earlier occasion. Ordinance (1999:571). In the event of a dispute about such agreements, the licensing authority shall without delay inquire into the circumstances and if no particular reason indicates otherwise, reconcile the parties. The authority may in such a dispute express an opinion if this is requested by one of the parties concerned. Ordinance (1999:571). 16 a The licensing authority shall when conducting supervision, devote particular attention to the fact that agreements are reached stipulating that mail National Post and Telecom Agency - Postal Department 7

9 items conveyed by a licence holder reach other licence holders' facilities for mail delivery to addressees. 17 c Has a party been charged to pay a fee for competition damages under section 26 of the Competition Act (1993:20) or has he been sentenced to pay a fine under section 59 of the said Act, a fine under section 17 b in this Act may not be imposed for the same action. Ordinance (1999:571). 25 A decision of the licensing authority under section 7 d may not be appealed against. Other rulings by the licensing authority under this Act or under regulations issued under this Act may be contested by appeal to the Administrative Court of Appeal. National Post and Telecom Agency - Postal Department 8

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