Quality of Service Objectives, Performance and Measurement in Relation to Community Universal Postal Service

Transcription

1 wik-consult Final Report Study for the European Commission Directorate-General for Internal Market Quality of Service Objectives, Performance and Measurement in Relation to Community Universal Postal Service Authors: Antonia Niederprüm Andreas Hense Dr. Gabriele Kulenkampff in cooperation with Alex Kalevi Dieke Bad Honnef, August 2003 The views and opinions expressed in this study are those of the authors and do not necessarily reflect the position of the European Commission.

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3 ACKNOWLEDGEMENTS WIK wishes to acknowledge the considerable assistance of all parties that contributed to this survey. In particular, the authors gratefully acknowledge the intense cooperation of universal service providers, national regulatory authorities, and customers representatives in the countries surveyed. Moreover, we like to thank FEDMA, ANEC, EMOTA, FAEP, IPC, CEN/TC 331 and the Customer Needs Task Force. Many invested substantial time and resources in gathering, submitting, and discussing the information without which this survey would have been impossible. WIK also gratefully acknowledges the many valuable inputs that were received from the European Commission s study team. Special thanks are extended to Jean-François Rodriguez, who co-ordinated the Commission services involvement in the study, as well as to Fernando Toledano and David Stubbs. Their challenging questions and productive comments contributed greatly to the value of this survey. Any errors, however, remain the responsibility of the authors. The views and opinions expressed in this study are those of the authors and do not necessarily reflect the position of the European Commission.

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5 Final Report I Contents Tables Figures List of acronyms and abbreviations Country Codes Executive Summary Background and purpose of the study Scope and methodology Main results of the analysis Recommendations and next steps IV VI XII XIII i i ii iii vi 1 Introduction Background and purpose of the study Outline of the study 4 2 Scope and methodology of the study Scope Methodology of the study 15 3 Description of the status quo current quality of service policies and performance The Community and international framework of QoS regulation Postal Directive (Directive 97/67/EC amended by Directive 2002/39/EC) Technical standardisation by CEN/TC UPU: Quality of Service Fund, objectives and measurement issues The national QoS framework and performance in the EU Product portfolio of the national universal service providers in the EU Definition and setting of national QoS objectives in the EU Performance and measurement of QoS in the EU Consequences of missing quality of service objectives Publication of quality of service issues National QoS framework and performance in the Accession Countries Universal postal services and other services Objectives, performance, and applied measurement methods Consequences of failure 109

6 II Quality of Service Objectives, Performance and Measurement in Relation to Community Universal Postal Service Publication Status of QSF concerning the Accession Countries Summary: status quo and resulting opportunities Legal transposition of the Postal Directive Scope and depth of QoS regulation QoS performance Sum-up: Potential adjustments of intra-community and national QoS regulation Analysis of QoS regulation on national and Community levels feasibility of regulatory amendments Transit time QoS regulation, costs and demand for postal services Analysis of objectives and performances Objective definition and compatibility on national and Community level Transit time and demand Measurement of Quality of Service Transit time measurement of single-piece items Transit time measurement of bulk mail Loss and damage of mail Treatment of complaints Customer satisfaction surveys Standardisation perspectives Deriving feasible opportunities for future QoS policies QoS regulation against market developments Development of the EU postal markets: from monopoly to competition Rationale for QoS regulation QoS regulation in monopolistic markets QoS regulation in competitive markets Consequences for QoS regulation in (stepwise) liberalised postal markets 257

7 Final Report III 6 Conclusions, policy guidelines and recommendations Conclusions Policy guidelines and derivation of recommendations Policy guidelines Derivation of recommendations Level of implementation Regulation on Community level Regulation on national level Next steps 281 References 283

8 IV Quality of Service Objectives, Performance and Measurement in Relation to Community Universal Postal Service Tables Table 2-1: Number of distributed questionnaires and return 17 Table 3-2: Weight limits of the universal service (in kg) 34 Table 3-3: Transit time and service definition 36 Table 3-4: Regulatory transit time objectives for domestic priority or 1 st class mail in Table 3-5: Transit time objectives for packages and parcels in Table 3-6: Transit time objectives for other domestic postal items in Table 3-7: Transit time objectives in the UK 47 Table 3-8: Queuing time objectives and performance in Table 3-9: Handling of complaints in Portugal 86 Table 3-10: Explicit redress procedures in Ireland 87 Table 3-11: Scope of universal service (in kg) 93 Table 3-12: Regulatory and voluntary transit time objectives for domestic 1 st class mail (2002) 96 Table 3-13: Transit time objectives and performance for non-priority mail 97 Table 3-14: Table 3-15: Table 3-16: Regulatory transit time objectives and performance (as far as measured and published) for domestic parcel services (2002) 98 Regulatory and voluntary transit time objectives for cross-border mail services 98 Transit time performance of single-piece cross-border mail. Results from UNEX Lite (full year results, 2002) 99 Table 3-17: Independent monitoring implemented in 2002 (domestic priority mail) 100 Table 3-18: Measurement method approved by NRA? 100 Table 3-19: Additional requirements regarding post offices 102 Table 3-20: Delivery conditions 103 Table 3-21: Responsibility for setting regulatory QoS objectives (NRA-answer) 109 Table 3-23: Legal commitment to publish 111 Table 3-24: Actual publication of QoS issues by USPs 111 Table 3-25: Transposition of the Postal Directive 114 Table 3-26: Regulatory objectives and requirements in the Accession Countries 120

9 Final Report V Table 3-27: Table 3-28: Table 3-29: Focus of transit time objectives within the universal service in the Member States (coverage in % of USPs providing the service) 120 Scope and depth of transit time regulation within the universal service in the Member States 123 Scope and depth of regulation of further important QoS aspects in the Member States 126 Table 3-30: Transit time performance in the present MS and the AC 131 Table 4-1: Table 4-2: Table 4-3: Table 4-4: Table 4-5: Descriptive statistic of intra-community cross-border transit time performance (country-to-country relations) 145 Feasibility of a revised intra-community cross-border objectives D+2: 80% and D+4: 97% in the view of the MS 158 Feasibility of a revised intra-community cross-border objectives D+2 80% and D+4 97% in the view of the AC 159 Implementation year of regulatory transit time objectives for domestic postal services in the EU (including EEA countries Norway and Iceland in parentheses) 172 Under- ( ) and over-performance ( ) vs. regulatory objectives (1 st class mail) 176 Table 4-6: Application of EN Table 4-7: Timeline for full transposition of EN

10 VI Quality of Service Objectives, Performance and Measurement in Relation to Community Universal Postal Service Figures Figure 1-1: Structure of the study 4 Figure 2-1: QoS dimensions relating to postal services 9 Figure 2-2: Scope of the analysis 13 Figure 2-3: Levels of the analysis 13 Figure 2-4: Point of views in the perception of quality of postal services 14 Figure 3-1: Organisation of TC Figure 3-2: Services provided within the universal service 35 Figure 3-3: Provision of 2 nd class mail 36 Figure 3-4: Possiblities of work sharing (number of Member States concerned) 37 Figure 3-5: Provision of value added services 38 Figure 3-6: Services outside the universal service 39 Figure 3-7: Extent of regulatory transit objectives in the Member States 40 Figure 3-9: Regulatory D+1 objectives for domestic 1 st class mail in the EU States in Figure 3-10: Transit time objectives for packages and parcels 43 Figure 3-11: Transit time objectives for other domestic postal items within the universal service 45 Figure 3-12: Objectives with respect to loss of mail in Figure 3-13: Measurement of lost mail 49 Figure 3-14: Regulatory requirements with respect to the access to the postal network 50 Figure 3-15: Maximum queuing time as QoS objective 51 Figure 3-16: Deliveries per week 52 Figure 3-17: Information provision 54 Figure 3-18: Statutory points of contact 55 Figure 3-19: Maximum handling times of complaints as QoS objectives 56 Figure 3-20: Maximum handling time objectives for domestic mail (in days) 57 Figure 3-21: Use of customer satisfaction surveys by the USP 58 Figure 3-22: Organisation responsible for setting regulatory QoS objectives 59 Figure 3-23: Involvement of important stakeholders in the definition process of regulatory QoS objectives 60

11 Final Report VII Figure 3-24: Other postal operators providing universal services 62 Figure 3-25: Intra-Community overall performance in D+3 (single piece items of correspondence of the fastest standard category) 63 Figure 3-26: Average delivery days intra-community cross-border mail 63 Figure 3-27: Cumulative performance in Figure 3-28: Figure 3-29: Figure 3-30: Figure 3-31: Figure 3-32: Share of bilateral mail flows meeting the cross-border D+3 objective in Country-specific number of bilateral relations missing the objective in Transit time objectives and performance for domestic 1 st class mail (D+1) 66 Objectives and performance for domestic 1 st class mail with respect to reliability 67 Transit time objectives and performance for domestic 2 nd class mail (D+3) in Figure 3-33: Transit time objectives and performance of parcels 69 Figure 3-34: Transit time objectives and performance for direct mail in Figure 3-35: Figure 3-36: Figure 3-37: Regulatory transit time objectives and performance in 2002 for other domestic services 71 Organisation responsible for the measurement of transit time of 1 st class letter items 72 Characteristics of the sample design for the transit time measurement of domestic 1 st class mail 74 Figure 3-38: Types of induction 75 Figure 3-39: Definition of loss and/or substantial delay of domestic priority mail in days 76 Figure 3-40: Monitoring of access objectives 78 Figure 3-41: Modes of delivery 81 Figure 3-42: Effective monitoring of delivery obligations 82 Figure 3-43: Channels of information provision 83 Figure 3-44: Assessment of the transparency and clarity of provided information 84 Figure 3-45: Initial acknowledgement reply 84 Figure 3-46: Categories of complaints 85 Figure 3-47: Spreading of complaints in

12 VIII Quality of Service Objectives, Performance and Measurement in Relation to Community Universal Postal Service Figure 3-48: Issues of customer satisfaction surveys 87 Figure 3-49: Application of other QoS measures 89 Figure 3-50: Threat of regulatory consequences in the view of the stakeholders 89 Figure 3-51: Kind of penalties in case of transit time failure 90 Figure 3-52: Issues of publications 92 Figure 3-53: Scope of domestic universal postal service 94 Figure 3-54: D+1 objectives and performance of domestic first class services in the AC (in %) 97 Figure 3-55: Measurement requirements of lost postal items within the AC 101 Figure 3-56: Number of outlets and street letter boxes per inhabitants 102 Figure 3-57: Information provided by the USP 104 Figure 3-58: Current use of information channels 105 Figure 3-59: Quality of information in the view of the NRAs 105 Figure 3-60: Legally required points of contact 106 Figure 3-62: Standardised handling of complaints 106 Figure 3-63: Voluntary handling time objectives of the USP 107 Figure 3-64: Use of customer satisfaction surveys in the AC 108 Figure 3-65: Involvement of interest groups in the objective setting procedure 108 Figure 3-67: Existence of penalties in case of failure to meet QoS objectives and requirements 110 Figure 3-68: Penalties with regard to the different quality dimensions 110 Figure 3-69: Use of QoS fund by the Accession Countries (in thousand $, status March 2003) 112 Figure 3-70: Deriving potential opportunities 113 Figure 3-71: Important aspects of postal services in customers view 118 Figure 3-72: Regulatory QoS objectives in postal markets 119 Figure 3-73: Customers satisfaction with different aspects of postal services 131 Figure 4-1: Analytical framework 141 Figure 4-2: Figure 4-3: Intra-Community cross-border transit time D+3 performance on country-to-country relations 145 Intra-Community cross-border D+5 transit time performance on country-to-country level (based on IPC UNEX FY 2002) 146

13 Final Report IX Figure 4-4: Figure 4-5: Figure 4-6: Expected year of achieving the overall intra-community cross-border transit time objectives (D+3 85% and D+5 97%) 147 Intra-Community cross-border transit time performance and relative country location for under-performing country-to-country relations (2002) 149 Intra-Community cross-border transit time performance and relative country location for bilateral mail flows (all MS and without EL and ES, 2002) 150 Figure 4-7: Transit time and transport of cross-border mail 151 Figure 4-8: Transit time and transport of cross-border mail: Upgrading D+3 to D Figure 4-9: Set of potential intra-community cross-border transit time objectives 165 Figure 4-10: Figure 4-11: Figure 4-12: Figure 4-13: Distribution of bilateral mail flows depending on cross-border transit time performance in relation to a D+2 intra-community cross-border objective 166 Distribution of bilateral mail flows depending on cross-border transit time performance in relation to an adjusted D+3 intra-community cross-border objective 167 Distribution of bilateral mail flows depending on cross-border transit time performance in relation to an upgraded D+5 intra-community cross-border objective 168 Distribution of bilateral mail flows depending on cross-border transit time performance in relation to an adjusted D+5 intra-community cross-border objective 168 Figure 4-14: Distribution of cross-border mail volumes related to bilateral mail flows 170 Figure 4-15: Regulatory objectives (priority mail) and published performance in the European Community since Figure 4-16: Deviations from regulatory transit time objectives (priority mail) in 2002 (with and without EL) 174 Figure 4-17: Measurement method (single piece and / or bulk mail) 176 Figure 4-18: Figure 4-19: Figure 4-20: Interrelation between transit time performance and population density (with and without EL) 180 Interrelations between transit time performance, population density, and degree of urbanisation (with and without EL) 182 The interrelationship of D+1 transit time performance, population density and degree of urbanisation 184 Figure 4-21: Stylised structure of a national postal network 186

14 X Quality of Service Objectives, Performance and Measurement in Relation to Community Universal Postal Service Figure 4-22: Figure 4-23: The interrelationship between transit time performance and mail volume per capita (with and without EL) 188 The interrelationship between the QoS environment index (based on country size, population density, degree of urbanisation and domestic mail volume per capita) and D+1 transit time performance in the EU 190 Figure 4-24: The interrelationship between the QoS environment index and D+1 transit time performance in the MS, the AC as well as Norway and Iceland 191 Figure 4-25: Transit time and transport of cross-border mail 198 Figure 4-26: Transport of incoming cross-border mail 198 Figure 4-27: Figure 4-28: Interrelation between incoming cross-border and domestic transit time performance (D+3 and D+1 respectively) in 2002 with and without Greece 200 Interrelation between outgoing cross-border and domestic transit time performance (D+3 and D+1 respectively) in 2002 (with and without Greece) 201 Figure 4-29: Change in D+3 cross-border transit time performance with respect to outgoing and incoming cross-border mail (Spain) 204 Figure 4-30: Figure 4-31: Figure 4-32: Change in cross-border transit time performance with respect to outgoing and incoming cross-border mail (Greece) 206 Incoming cross-border transit time (D+5) performances average figures (2002) 208 Example for the distribution of cross-border mail in the country of destination 209 Figure 4-33: Degree of satisfaction and importance with respect to transit time (MS) 214 Figure 4-34: Figure 4-35: Awareness of selected transit time standards and their implications in the Member States 220 Awareness of selected transit time standards and their implications in the Accession Countries 222 Figure 4-36: Intended adoption of EN in the AC 223 Figure 4-37: Implementation of CEN standard EN Figure 4-38: Awareness of the CEN-Standard EN in the AC 233 Figure 4-39: Possibility of mandatory customer satisfaction surveys in the view of the NRA 236 Figure 4-40: CEN standard for customer satisfaction measurement 236

15 Final Report XI Figure 4-41: European standardisation in the operators and regulators view 238 Figure 4-42: European standardisation in the view of customer organisations 239 Figure 4-43: Figure 4-44: Figure 4-45: Customers representative organisations' awareness of adopted CEN standards 240 Assessment of additional CEN standards interesting for implementation? 241 Importance of additional CEN standards in the view of customers representatives 241 Figure 4-46: Importance of new CEN work items in the stakeholders view 244 Figure 5-1: Impact of liberalisation on cross-border transit time in the view of USPs and NRAs (Member States) 254

16 XII Quality of Service Objectives, Performance and Measurement in Relation to Community Universal Postal Service List of acronyms and abbreviations AC ANEC B2B B2C BEUC C2B C2C ca. CEN Commission D+n EEA ECJ Ecu EFTA EMOTA EN EPG EPSI EU FAEP FEDMA GATS GDP IPC IT MS NRAs OCR O.J. OoE p.a. PLC P.O. boxes Postal Directive QoS QSF REIMS Sq. Km TC Accession Countries European Association for the Co-ordination of Consumer Representation in Standardisation ( Business to Business Business to Consumers The European Consumers' organisation ( Consumers to Business Consumers to consumers Circa European Committee for Standardisation European Commission ( Delivery n days after posting European Economic Area European Court of Justice European Currency Unit European Free Trade Area European Mail Order and Distance Selling Trade Association ( Official European Standard Parcel service guarantying a day-certain delivery European Performance Satisfaction Index European Union European Federation of Magazine Publishers ( Federation of European Direct Marketing ( General Agreement on Trade in Services Gross Domestic Product International Post Corporation ( Information Technology Member States National Regulatory Authorities Optical Character Recognition Official Journal (of the European Communities Office of exchange Per annum Public Liability Company Post Office boxes 97/67/EC Directive amended by the 2002/39/EC Directive Quality of Service Quality of Service Fund of the UPU Remuneration of Exchanges of International Mail System Square kilometre Technical Committee within CEN

17 Final Report XIII TC331 ToR TS UNEX UPU USOs USA USPs WTO CEN Technical Committee dealing with postal services ( Terms of reference Technical Specification Unipost External Monitoring System Universal Postal Union ( Universal Service Obligations United States of America Universal Service Providers World Trade Organisation Country Codes AT BE BG CY CZ DE DK EE EL ES FR HU IE IS IT LT LU LV MT NL NO PL PT RO SE SF SK Sl TR UK Austria Belgium Bulgaria Cyprus Czech Republic Germany Denmark Estonia Greece Spain France Hungary Ireland Iceland Italy Lithuania Luxembourg Latvia Malta The Netherlands Norway Poland Portugal Romania Sweden Finland Slovakia Slovenia Turkey United Kingdom

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19 Final Report i Executive Summary Background and purpose of the study This study offers the first survey of quality of service (QoS) objectives, performance and measurement in the present Member States (MS) as well as in the ten Accession Countries (AC), that will join the European Union in May QoS regulation: status and latest developments The Postal Directive 2 aims at improving quality of postal service, to foster the establishment of the internal market for postal services, to set the appropriate regulatory framework for this major reform and to allow postal operators to adapt to their changing commercial environment. To this end the Postal Directive provides for QoS rules and regulations. These are generally defined as minimum requirements for the provision of postal universal services. However, except for intra-community cross-border transit time objectives within the Postal Directive there is no precise specification of these rules. This is left to the MS. Thus, as long as the general framework provided for in the Postal Directive is respected the MS have the opportunity to reflect their national characteristics and needs in setting national QoS objectives. Since the enforcement of the Postal Directive some significant developments have been taking place. Today a wide range of QoS objectives and requirements can be observed on national level. In most countries the domestic transit time performance of priority or 1 st class letters have significantly been enhanced. The average performance of intra- Community cross-border transit time has considerably improved since The European Standardisation Committee (CEN) has been entrusted with developing European measurement methods (standards) for a number of aspects concerning the quality of postal services. These CEN standards for postal services have been developed by a dedicated Technical Committee within CEN (TC331). So far, there are five European standards available for a harmonised QoS measurement of various aspects of the quality of postal services (transit time, loss, complaints and redress procedures). Future challenges Discussing objectives, requirements and measurement methods for the quality of the universal postal service within the EU, the changing environment due to the enlargement process should be taken into account. 1 The AC are Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic, and Slovenia. 2 97/67/EC Directive amended by the 2002/39/EC Directive.

20 ii Quality of Service Objectives, Performance and Measurement in Relation to Community Universal Postal Service Furthermore, some national postal markets of the MS increasingly allow for competition. This liberalisation tendency is additionally stimulated by the enactment of the Directive 2002/39/EC. This Directive further reduces the weight and price thresholds which form the reservable area of the European postal market. Moreover, some USPs face decreasing mail volumes due to mail substitution. Changes in demand of universal services due to competition or changes in customers preferences have to be taken into account when the scope and depth of QoS regulation is reconsidered. Purpose of the study The purpose of this study is to provide a systematic review and analysis of the current QoS regulation and actual QoS performance both on national (member states and accession countries) and Community levels in order to derive recommendations for future QoS regulation and practices. Scope and methodology QoS regulation and practice encompasses different characteristics of postal services provision. The Postal Directive stresses the importance of the transit time as well as the reliability and regularity. Additionally, the Directive requires the existence of simple and inexpensive procedures for the handling of complaints. Moreover, national QoS regulation should be compatible with the objectives laid down for intra-community cross-border services. The study identifies and analyses differences and similarities between the MS and the AC with respect to the specification of the general requirements of the Postal Directive. It derives potential opportunities for future QoS regulation with respect to objectives, performance and measurement methods on Community as well as on national level. The feasibility of these opportunities is investigated by identifying and comparing costs and benefits of each opportunity on a qualitative level. A special focus is laid on the AC and their ability to adopt current as well as future QoS requirements. Recommendations are derived by balancing between consumers and customers needs, cost effects faced by the universal service provider (USP), changing postal market conditions due to mail substitution and liberalisation, and the objectives of the Postal Directive. On the basis of this analysis the study finally specifies further steps to be taken. Regulation in general and QoS regulation in particular has to weigh up the interests of the regulated organisations on the one and the needs of the customers on the other hand. Assessing the existing QoS regulation and deriving future steps these different points of view have to be taken into account. Thus, the opinions and experiences of the relevant stakeholders, comprising national regulatory authorities (NRA), universal service provider (USP), and in particular consumer and business associations, form part of the basis of the recommendations given in the study.

21 Final Report iii Hence, this study is based on following sources of information. All USPs and nearly all national regulatory authorities (NRAs) of the present MS, Norway and Iceland as well as of the ten AC completed detailed questionnaires prepared by WIK-Consult. A high number of consumer and business associations in all MS and AC were asked to complete a questionnaire or at least to provide information about experiences with postal services in their countries. WIK-Consult conducted personal interviews with representatives of USPs and NRAs of 7 selected MS and 9 AC 3. Interviews and discussions with postal experts inter alia of IPC 4 and CEN/TC331 as well as the Customers needs taskforce of CEN were conducted. Finally, hypotheses and outcomes of the study were discussed in an expert panel and two public workshops. Since the applied methodology required substantial input from all parties listed above, important difficulties arose for our analysis from a very low return rate of the consumer and business associations. Consequently, the analysis and the derived recommendations remained to a certain extent incomplete. Without opinions and experiences of consumers and business customers potential conclusions associated with a strong impact on costs and prices could not be drawn neither on national nor on Community level. Main results of the analysis The Postal Directive principally only lays down minimum standards. This policy is reflected by differences in the scope and the depth of national QoS regulation between the MS. For example, the level of transit time objectives as well as their range differs between the countries. Whereas Sweden has merely set a low transit time objective for 1 st class mail, the Portuguese NRA has set transit time objectives for almost all universal services even if they are not part of the reserved area. Such a range is also identified for other QoS issues, e.g. access to the postal network and the measurement of lost items. 3 Carried out in the course of another EU-study Survey on some main aspects of postal networks in EU adhesion candidate countries conducted by WIK-Consult on behalf of the European Commission, DG Internal Market 4 The International Postal Corporation (IPC) is responsible for the measurement of cross-border transit times. It is a cooperative association of 23 national universal service provider.

22 iv Quality of Service Objectives, Performance and Measurement in Relation to Community Universal Postal Service Compliance of national QoS objectives and requirements with the Postal Directive Although different scopes of QoS regulation can be observed in the MS, compliance with the Postal Directive is widely given. Nonetheless, some problems affecting compliance have been identified. With respect to cross-border transit time objectives Greece has currently an objective definition which does not correspond to the Community objective. Furthermore, the Spanish operator does not provide a 1 st class domestic mail service which might interfere with the cross-border transit time objective. The implemented complaint and redress procedures are differently regulated and organised in the present MS. There are differences in handling time, use of acknowledgement replies, and the definition of the formal contact points. Loss and damage of postal items is a very important issue in the view of postal customers. Objectives or even requirements to measure the number of lost items are only set in a minority of the present MS. One important incentive to meet the objectives is the publication of related performances. The Directive requires the publication of QoS objectives and performances as well as information on the number of complaints and the manner in which they have to be dealt with. In some MS publication of these issues does not take place yet. Besides the publication a clearly defined system of sanctions in case operators fail to meet the objectives could be an effective incentive mechanism. In most MS these systems are not sufficiently transparent so that even the USPs are not well informed about potential consequences of missing objectives and requirements. In the AC the degree of compliance is in general lower compared to the MS. It ought to be taken into consideration that the adoption process of their national postal legislation is still not finalised. Even if compliance with the Postal Directive is not guaranteed on the objective level, the actual performance could mitigate this shortcoming. Since the Postal Directive has come into force domestic as well as cross-border transit time performance has significantly improved in most MS. Nonetheless, in some USPs the performance with respect to domestic postal services remains low (e.g. France, Belgium, and Greece). Measurement methods The performance highly depends on how it is measured. Currently the applied methods for transit time measurement differ between the MS. Therefore, the comparability of the performance figures is limited. Nonetheless, in case that regulatory objectives are set the measurement is carried out by an independent institution. In the present MS the applied methods are approved by the NRA in case that the USP is responsible for the measurement. Missing transparent and independent measurement is one of the main problems in the majority of the AC. The methods are often not approved by the NRAs. This is mainly due to financial restrictions, an ongoing legislative process as well as to a lack of

23 Final Report v manpower. This fact hampers the identification of the actual development status of the postal networks and impedes the comparison with the present MS. Results of the analysis Based on the comparative assessment a set of opportunities for future QoS regulation and practice has been identified. They cover QoS objectives, performance and measurement in relation to a number of QoS aspects: domestic and cross-border transit time, loss of mail, complaints and redress procedures, incentive structure (publication and sanction systems) and the involvement of postal customers in the procedure of setting QoS objectives and requirements as well as in the development of measurement standards. The possibilities to amend the current intra-community cross-border objectives (upgrading and/or adjustment) have been discussed in detail. Additionally, the feasibility of the current intra-community cross-border transit time objectives within the enlarged EU has been analysed. The current cross-border objectives are seen as feasible for the present MS as well as for the AC. Currently, especially Spain and Greece must improve their cross-border transit times in order to meet their legal obligations. This is considered to be feasible as soon as the USPs endeavour to get rid of the problems related to their domestic postal networks. Logistical problems between the present MS could not be identified. But these problems are relevant for the country-to-country relations between the AC themselves as well as between the AC and the present MS. Before deciding on a transition period for the AC, information about their actual transit time performance is needed. Currently, this information is not available because cross-border transit time measurement is not carried out for all bilateral mail flows. Consequently, a reliable measurement system should be implemented before a final decision is made on the necessity of a transition period in some AC. With respect to the MS the amendment of the current cross-border transit time objectives is discussed. Due to a lack of information about quantitative cost and demand effects a final conclusion about the feasibility of the particular opportunities could not be drawn. With respect to the expected strength of cost effects either an adjustment of the D+5 objective (e.g. D+5 99%) or an adjustment/upgrading of all objectives for selected bilateral mail flows could come into question. Furthermore, the compatibility of domestic and cross-border transit time objectives and performances has been analysed. Mainly country-to-country relations including Spain or Greece missed the D+3 objectives in the last year. Whereas in Greece problems in the national postal network seems to be responsible for lowperforming cross-border and domestic transit times in Spain a D+1 service is still not on offer. Against this background the Spanish operator should consider introducing a D+1 service in order to facilitate compatibility with the cross-border transit time objectives.

24 vi Quality of Service Objectives, Performance and Measurement in Relation to Community Universal Postal Service Besides the compatibility of the speed objectives the relationship between the supplementary reliability objectives for domestic and cross-border 1 st class mail (e.g. D+2 or D+3 objectives) has been analysed. Except for four countries all MS have set respective objectives. Even without a domestic transit time objective their cross-border transit time performance meets the D+5 objective. In case that D+1 performance at domestic level and D+3 performance at cross-border level is presently good, regulatory objectives seem not to be necessary in order to be compatible. With respect to the AC a supplementary reliability objective is reasonable. Additional costs due to measurement are not expected in case measurement already takes place. The past and expected future development of the transit time performance with respect to 1 st class mail supports the opportunity to implement more aligned domestic D+1 objectives in all MS. The interrelationship between geographical as well as demographic factors and the domestic transit time performance has been analysed. Based on this partial analysis it seems that the higher the population density and the higher the degree of urbanisation the higher is the transit time performance. However, there are some important outliers. This outcome clarifies that even in case of unfavourable geographical and demographical conditions efforts could be made to overcome these restrictions. Nonetheless, these results should be cautiously interpreted due to shortcomings in the data. In particular the transit time performances which are measured by even slightly different methods are not completely comparable. The USPs of Spain, Greece, France and Belgium should consider to improve their domestic transit time. Provided that an improved transit time corresponds to postal customers needs and is reflected by a higher willingness to pay, investments in the postal network could be feasible. Recommendations and next steps In order to judge the feasibility of the identified opportunities interdependencies between QoS regulation, the costs faced by the USP, and the demand side have been analysed. Thereby, we addressed the following questions: What are the effects of changes in QoS regulation on the costs of the USP on the one hand and on the demand for universal postal services on the other? Are there further benefits on the level of the national or Community economy? When analysing these effects not only the present MS but also the situation and the perspectives of the AC had to be taken into account. Additionally, the dynamics of the postal markets have been taken into consideration. The postal market is characterised by an ongoing change of market conditions due to alterations in the behaviour of demand and increasing competitive pressure (mainly other means of communication services). Each national postal market currently faces an individual mix of these conditions due to differences in regulation, demand, and competition. Because of the planned liberalisation of postal markets in this decade, each MS has to balance the intensity of its regulatory intervention in the face of

25 Final Report vii increasing competition. Currently QoS regulation in postal markets mainly serves as a substitute for missing competition. In completely liberalised markets (under competitive circumstances) QoS regulation will more and more be an instrument to correct market results in case of identified market failure or lack of competition. Taking all this into consideration, the scope and depth of current and in particular future QoS regulation is significantly touched by this development. According to the Postal Directive QoS regulation is characterised by the setting of minimum objectives and requirements. The derived recommendations also follow this paradigm. In the following we outline the major QoS recommendations: Transit time The current intra-community cross-border transit time objectives are considered to be feasible. Currently, especially Spain and Greece have to improve their cross-border transit times in order to meet the Community s objectives. Logistical problems constitute a limitation only in the case of the AC, since economic integration is still underdeveloped in these countries. Thus, a transition period for the AC should be taken into consideration. Before finally deciding on the transition period a reliable measurement system should be implemented. It is highly probable that this period will vary between the particular AC due to differences in their development status. Reliability of cross-border postal services is a very important issue in the view of the stakeholders. In order to enhance the reliability of cross-border services an adjustment of the D+5 objective should be taken into consideration. It is highly probable that this adjustment has an impact on the organisation of national postal networks and the cooperation between the affected USP. In all present MS but Spain domestic 1 st class services with D+1 transit time objectives have been implemented. In order to support the compatibility between domestic and intra-community cross-border objectives we recommend to consider introducing a reliable D+1 service in Spain. Regulatory transit time objectives are set on different levels. Against the background of country-specific degrees of competition, geographical issues and unknown customers preferences it is not recommended to introduce harmonised D+1 objectives. Nonetheless, low-performing USPs should continue to improve their transit time performance. Thereby, the operator s cost has to be taken into account. High investment costs in the national postal networks can be potentially financed by higher prices. This requires the regulator to assess the willingness to pay of postal customers before introducing/increasing domestic transit time objectives. This aspect is also of major importance for the AC who mostly are still at the beginning of the catch-up process.

26 viii Quality of Service Objectives, Performance and Measurement in Relation to Community Universal Postal Service Regulatory transit time objectives for other than 1 st class services should only be set if there is a risk of market failure linked with a need for protection of concerned postal customers. This could be the case for single piece 2 nd class services and parcels sent by consumers and small business customers. In general, we advice to consider a restriction of transit time objectives to single-piece items even for 1 st class services in case services are provided under fairly competitive conditions. Reliable and fairly comparable measurement methods are a necessary precondition to provide reliable information about the actual transit time performance for the stakeholders. In particular, the methods should be free of arbitrary changes. Thus, we recommend to enforce the developed CEN-standards for transit time measurement of priority and non-priority single-piece letters as well as bulk mail. These standards provide a suitable basis and we suggest its application by the AC as well. In order to balance between cost of measurement on the one hand and reliable performance figures on the other we suggest to relate the statistical requirements to the respective mail volumes (especially in case of low-volume cross-border mail flows). Other important QoS issues Measurement of lost items is an important issue in the view of the customers. As it is very costly to get statistically accurate results, we advise to consider the measurement of substantial delay instead of loss. This can be done as by-product of the transit time measurement. In order to reduce the risk of excessive reactions, confidential notes to the NRA instead of publication should be taken into consideration. With regard to the access to the postal network we derived that consumers and small business customers who represent a relatively small share in terms of mail volume are most likely to suffer from an expected reduction of the number of access points. In the course of liberalisation and increasing competition, we expect USPs to reduce the density of the access network in order to save costs. In contrast to consumers, large mailers have additional possibilities to send their mail. Therefore, there will be a need for balancing between the customers needs on the one and the resulting costs with respect to the access conditions on the other hand. This issue should be carefully observed in the next years. Against this background the development of measurement standards with respect to access and delivery conditions is considered to be very important. Furthermore, these conditions are strongly linked to the transit time perception of senders and receivers. Currently, the transit time standards do not capture the actual access and delivery conditions. This gap is going to be closed by a new work item of CEN/TC331 dealing with measurement standards of access and delivery conditions. Complaints are an important medium to articulate dissatisfaction with existing services. Especially consumers and small business customers need simple, transparent and low-

27 Final Report ix cost procedures. Otherwise they would be deterred from complaining. The USPs could use the information to monitor their service performance. The application of the recently adopted CEN-standard for complaints and redress procedures supports a transparent and simple treatment and therefore is recommended to be introduced in each MS and AC. Incentive structure The Postal Directive already requires that objectives and performances have to be published regularly. By publication incentives are set to provide a satisfying QoS due to its direct effects on reputation. Currently the way and the structure how this information has to be provided differ between the countries. It has to be ensured that complete, transparent, and easily accessible information will be regularly provided by the responsible institutions. The application of already adopted CEN-standards will support a higher transparency in the structure of published measurement results. Sanctions are an alternative measure to set incentives for QoS provision. The survey reveals that the sanction systems implemented on MS level are often not as transparent as necessary. The relation between sanctions and missing QoS objectives and requirements seems not to be clearly defined in some countries. Linking the QoS performance to price regulation would be one possibility to ensure an effective and simple mechanism in order to enforce QoS requirements and objectives. We advise that the MS and the AC should take this form of target-oriented regulatory measures into consideration. Involvement of postal customers Regulation as a measure for correcting market failures should take account of the customers and consumers needs. In particular, a focus of regulation should lay on those customer groups which hardly have any bargaining power This is most likely for consumers and small business customers, but depending on the competitiveness of the respective market segments this can also hold true for large mailers. The universal service obligation is mainly set in order to protect the badly organised and thus less powerful, but numerous consumers and small business customers. Their needs should therefore be identified by the legislator and the regulatory authorities. Against the background of the future postal market development and related risks, the involvement of the associations of this group should be supported especially on national level. We suggest to institutionalise their involvement in order to enhance the importance of customers needs in the process of setting QoS requirements and objectives. The procedure how to manage this involvement highly depends on the cultural and legal history of a country. Nonetheless, in our view transparent and open procedures should be preferred.

28 x Quality of Service Objectives, Performance and Measurement in Relation to Community Universal Postal Service The involvement of these groups is also necessary for the development of measurement standards. In the past the development of measurement methods at CEN-level has been more or less operator-dominated. Most of the national consumer and business associations are even not aware of CEN. The foundation of the CEN/TC331 customers needs task force is a step in the right direction. Additionally, we suggest to strengthen the involvement of consumer and customer representatives on the level of the CEN working groups. As already outlined, the lack of information on consumer needs has restricted the extent of recommendations. Taking account of these shortcomings we recommend the following next steps: Customers and in particular consumers needs and interests should be identified on national and Community level Reliable measurement systems as precondition for identifying the transition periods of the AC (in relation to intra-community cross-border transit time objectives) should be implemented as fast as possible The implementation of the measurement standard for complaint and redress procedures should be enforced. It should be emphasised that besides QoS regulation, competitive pressure is and will become effective to guarantee a satisfying QoS provision. As far as workable competition in postal markets will emerge the scope of QoS regulation can be more and more reduced to those groups who may be most probably concerned by market failure or lack of competition. The provided assessment of potential opportunities is based on the current situation within the existing and the future MS. As already stressed, there are ongoing changes in the postal markets due to numerous challenges like liberalisation and changes in the customers preferences. In particular, the adaptation of the postal infrastructure in the AC to changes induced by the enlargement process is in full swing. Furthermore, the application of the CEN standards will provide more reliable and comparable performance figures in the future. Thus, a review of the situation in the present MS and the AC should be taken into consideration at a later stage.

29 Final Report 1 1 Introduction 1.1 Background and purpose of the study An essential objective of the 97/67/EC Directive (the Postal Directive) is to improve the quality of Community postal services. According to Article 3, Member States are obliged to ensure that users enjoy the right to a universal service involving the permanent provision of a postal service of specified quality at all points of their territory at affordable prices for all users. Against this background the Postal Directive currently provides a general framework of quality of service (QoS) regulations. In order to improve the quality of Community postal services, the Postal Directive includes a number of specific provisions (listed in Art. 16 to 19) such as: Member States shall ensure that quality-of-service objectives are set and published in relation to universal service; These objectives shall be set by the European Parliament and Council for crossborder services, and the Member States for national services; The quality of service objectives shall focus in particular on transit times and on the regularity and reliability of services; Independent performance monitoring shall take place at least once a year under standardised conditions. The universal service guidelines of the Directive are currently defined as minimum requirements. These may well be over-performed by national policies. Consequently, a harmonisation of universal service objectives and requirements on a European level may only be achieved with regard to the lower bound of QoS objectives. Thus, even in case of harmonised minimum objectives and requirements the European framework allows Member States to individually develop national QoS frameworks by setting objectives and requirements reflecting their specific characteristics and needs. With respect to the evolution of universal service over time, Member States are obliged to ensure that the provision of universal services develops in response to the technical, economic and social environment and to the needs of users. In case that customer needs (e.g. evolution of substitute means of communications to postal services), or the technical, and economic environment (e.g. increased technical efficiency of universal service providers) are changing, amendments of the framework of universal service regulation on the European as well as on the national level should have to be taken into consideration.