Country sheet: Slovakia

Transcription

1 Country sheet: Slovakia 1.1 Summary Mail market characteristics The following market characteristics are relevant to the Slovak postal market: (i) The country is not densely populated (110 inhabitants/km 2 ); (ii) The reserved area encloses all items of correspondence up to 50g including direct mail, but excluding books, catalogues, newspapers, and periodicals; (iii) Inbound correspondence and direct mail up to 50g are free if such an item is distributed within the domestic service by a postal company that has collected this item abroad; (iv) The current total volume of the addressed mail market is, with 280 million items, rather limited; inhabitants receive only 44 (addressed) letter mail items per capita. TNT observes that the Slovak market seems to surpass normal market development trends; transactional mail volumes seem to decline. This observation is not confirmed by the NRA and the NPO. According to them transactional mail volumes are growing, despite e-substitution. Regulatory development The reserved area was reduced from 100g to 50g as of 1 January In 2005, ECORYS reported that the Ministry was aiming at liberalisation in line with the future EC postal directives, but at the same time the Government decided to look for ways to accelerate the process of liberalisation. In 2006 the debate in Slovakia regarding the liberalisation and the financial compensation for providing the universal service resulted in the decision not to opt for early liberalisation. Slovakia has the opportunity to liberalise in 2013, two years after the general European liberalisation date. In February 2008 the Slovak parliament revised the Postal Act 2001, because this act gave supposedly too much room for interpretation of the scope of the reserved area. Parliament feared that the stability of the universal postal service could be threatened by circumvention of the Postal Act 2001 by cherry-picking competitors. The Postal Act 2001 provided room for operators to deliver mail within the reserved area (items up to 50g) when such mail items could be defined as hybrid mail. This loophole was closed in the revision of February 2008 (effective from 1 April 2008), which clarified some stipulations and added that the reserved area shall not apply to correspondence and direct mail items if such an item is delivered by way of self delivery and document exchange. Market parties like TNT Post claim that this decision goes against the (European) developments and further strengthens the position of Slovenská pošta, a.s. In June 2008 the EC has requested Slovakia to clarify these recent amendments to its Postal Country sheet: Slovakia 803

2 Law. The EC informed Slovakia that it might adopt interim measures to require the new provisions to be suspended so as to prevent serious and irreparable harm to competition. Market developments Slovenská pošta, a.s. still is the dominant postal operator with a market share of 98.1% and 99% in domestic addressed mail and international letter mail, respectively. The effects of the reduced threshold for the reserved area from 100g to 50g seem to be small. TNT Post, Kolos, SMS and Prvá doručovacia are the main competitors in the addressed mail market. TNT Post Slovensko is one of the challengers of Slovenská pošta, a.s. and started a distribution service for addressed (bulk) mail. In their opinion, the addressed mail market is still closed for alternative operators. In the other segments, Slovenská pošta, a.s. faces far more competition. TNT Post is market leader (66%) in the unaddressed market segment, and Kolos (a subsidiary of Austrian Post) has a 10% market share in unaddressed mail. In the domestic parcel segment Slovenská pošta, a.s. has a market share of around 65%; for international parcels it is about 72%. In addition to the large international operators like DHL, TNT, and Fedex (Inspekta Slovakia), several national market players are also present. In the first half of 2008, there are 21 registered alternative postal operators (mainly in the parcel & express segments), realising a joined turnover of 4.8 billion SKK ( 146 million) in 2006, circa 47% of the total market (in 2005 circa 38%). The direct mail market segment seems to be underdeveloped (at least in comparison to various Western-European countries); further liberalisation of the market may result in more initiatives and innovation and growing postal streams. It is expected that because of (international) investments further developments will be stimulated. At the moment the total turnover in direct mail is SKK 1.3 billion ( 45.5 million) and the expected growth rate is 10%. TNT Post indicates that consumers ask for more services, but that their possibilities and ambitions are limited because of the existing reserved area. Discussion points The Slovakian discussion whether hybrid mail should be part of the reserved area is a very interesting one, stretching out beyond the interests of just Slovakia. It seemed that the delivery of hybrid mail under 50g was not part of the reserved area. Competitors like TNT Post Slovensko anticipated this and used the delivery of hybrid mail as one of the mechanisms to challenge Slovenská pošta. The revision of the Postal Act in February 2008 makes clear that delivery of hybrid mail is part of the reserved area, and definitely will limit the further development of competition in this segment. ECORYS is not in the position to make a definitive judgement on this (legal) topic, but it should be made clear whether the hybrid mail segment was part of the reserved area in the past or not. Monopolisation of a previously liberalised segment is not in line with the Postal Directive and the path to full market opening. It is important that this issue is clarified by the Slovak government, as requested already by the EC. 804 Annex II: Main Developments in the Postal Sector ( )

3 Further, ECORYS observes that the current reserved area seems to be quite profitable (14% in 2006). Therefore one can question whether it is really necessary that hybrid mail is part of the reserved area in order to safeguard the availability of the universal service in Slovakia. ECORYS questions whether this hybrid-mail discussion is really focussing on the availability of the universal service, or is in fact a more political discussion related to the (future) position of Slovenská pošta. Summary information on market developments: Postal market segment / aspect Competition (market shares) Main competitors / remarks Express Competitive Parcel (main players) NPO (65%) DPD, UPS, DHL, TNT, TEN Express and smaller operators Unaddressed NPO (< 24%) TNT Post (66%), Kolos (10%) Cross border mail Letters: NPO (99%) Parcels: NPO (72%) TNT, DHL, Fedex, UPS, TEN Express and smaller operators Addressed mail (market share CPOs)* 1.9% (2006) TNT Post, Kolos, Prvá doručovacia, SMS Population density (inhabitants/km 2 ) 110 Total addressed mail market (items) 281 million (2006) Addressed mail volume per capita 52 Status of NPO In 2004 the state-owned The state owns 100% of the stock Slovenská pošta, a.s. was transformed into a joint stock company Main divisions of NPO Sales and marketing division, operations division The operations division includes (amongst others) mail, express, hybrid mail, international mail and the post offices Note: * The market share of CPOs refers to the combined market share of CPOs in domestic addressed mail delivery, excluding newspaper delivery. All figures refer to 2007 unless indicated otherwise. Summary information on the implementation of the Postal Directive: Aspect Universal service and its financing Reserved area Licensing and network access Implementation and remarks In 2002, the universal service obligation was designated to Slovenská pošta, a.s. The costs of the universal service are assessed by a costing model allocation using the so-called ABC method. Before the cost allocation, the economically non-justified costs are excluded from the allocation. The net cost of the universal service obligation has not been calculated yet. The reserved area encloses all items of correspondence up to 50g, including direct mail. Books, catalogues, newspapers, and periodicals are not regarded as items of correspondence. Also outbound cross-border mail is part of the reserved area. Inbound correspondence and direct mail up to 50g are free if such an item is distributed within the domestic service by a postal company that has collected this item abroad. The authorisation for delivering universal services was granted to Slovenská Country sheet: Slovakia 805

4 Aspect Tariff principles and transparency of accounts Quality of services The national regulatory authority Implementation and remarks pošta, a.s. There are 21 registered operators who are allowed to operate within the universal service and outside the reserved area. The Postal Act 2001 does not give the opportunity for postal operators other than Slovenská pošta, a.s. (the license holder) to use the public postal network. However, access to the postal network can be negotiated. The postal services that are part of the universal service (and the execution of the postal payment service) are subject to ex-ante price regulation on a costplus basis. The NRA regulates prices on the basis of objective results of the past year and expected developments in costs for the next year. The NRA designates the level of economically justified costs (non-justified costs are excluded from the calculation) adjusted for inflation and the profit level. The NRA uses these to set the maximum prices for the next period. Transparency of accounts is ensured by the costing model using the ABC method and by analytical accounting of revenues with separated accounts for universal services and other services. The quality requirements regarding universal services are laid down in the annex of the postal license of Slovenská pošta, a.s. and include requirements with regard to the transit time, the accessibility of postal services and information on the universal service, security of the items and handling of complaints. In 2006, 96.5% of the 1 st class letters were delivered the next day. The national regulatory authority is the Postal Regulatory Office which has a full set of regulatory powers. In 2006, 12 people in the NRA were dealing with postal affairs. 1.2 General information Slovakia is a rather small country with an average population density (110 inhabitants/km 2 compared to the European average of 113 inhabitants/km 2 ) and a low degree of urbanisation. Circa 17% of the 5.4 million inhabitants live in the five largest cities, of which Bratislava is the largest with circa 419,000 inhabitants (see Table 0.1). Table 0.1 General country information (2007) Slovakia Population (in million) 5.4* Size of the country (1,000 km 2 ) 49.0* Population density (inhabitants/km 2 ) 109.9* Degree of urbanisation 56.2** Number (and percentage) of inhabitants 5 largest cities 0.9 million (17%)*** Sources: * UPU (2006), ** UN (2005), *** World Gazetteer (2008 estimation). 806 Annex II: Main Developments in the Postal Sector ( )

5 1.3 Regulatory developments Postal law and regulation The main act regarding the Slovakian postal market is Act No. 507/2001 Coll. on postal services (Postal Act 2001). This act was updated in December 2003 (Act No. 15/2004 Coll.), effective from 1 May The reduction of the reserved area from 100g to 50g was effected on the basis of the Act No. 15/2004 Coll. (effective 1 January 2006). In the 2003 update, the name of the national Postal Office was changed to Postal Regulatory Office (Poštový Regulačný Úrad), the national regulatory authority. The Ministry of Transport, Posts and Telecommunication (hereafter: the Ministry) is the responsible actor for postal legislation. In 2005, ECORYS reported that the Ministry was aiming at liberalisation in line with the future EC postal directives, but at the same time the Government decided to look for ways to accelerate the process of liberalisation. 1 A study was conducted that looked at the feasibility of further liberalisation and drafted proposals to accelerate the liberalisation of the postal market. On 10 May 2005 the Slovak government approved the study. It was decided that the liberalisation process of the postal market would be speeded up and that the prevailing weight and price limits of the reserved area would be cancelled as of 1 January However, in 2008 a reserved area still exists. During 2006 the ongoing debate on liberalisation and financial compensation for the universal service resulted in a postponement of (early) liberalisation (The Spectator, November 2006). The article in The Spectator further indicates that the need for a balanced regulatory framework was very important for both the Ministry and the NRA. The postponement gave them more time to ensure the smooth operation of the universal service. 2 In February 2008 the Slovak parliament revised the Postal Act 2001, because this act gave supposedly too much room for interpretation of the scope of the reserved area. Parliament feared that the stability of the universal postal service could be threatened by circumvention of the Postal Act 2001 by cherry-picking competitors. The Postal Act 2001 provided room for operators to deliver mail within the reserved area (so, items up to 50g) when such mail items could be defined as hybrid mail. This loophole was closed in the revision of February 2008 (effective from 1 April 2008), which clarified some stipulations and adds that the reserved area shall not apply to correspondence and direct mail item if such an item is delivered by way of self delivery and document exchange. According to the NRA, the Ministry and Slovenská pošta, the Postal Act 2001 never had any stipulation concerning hybrid mail ECORYS (2005a). Country sheet: Slovakia 807

6 Discussion on hybrid mail During 2007 and 2008 there was some discussion whether the delivery of hybrid mail fell under the reserved area. The Slovak National Party (SNS) stated that there were loopholes in the legislation and that alternative postal service providers had been picking off Slovenská pošta, a.s. 's most profitable clients for mail delivery up to 50g, and were thus violating Slovenská pošta, a.s. 's exclusive right to deliver. In fact, the main question was whether hybrid mail, prepared and distributed by an external supplier, had to be considered as a postal consignment, and hence fall under Slovenská pošta, a.s. 's exclusive right to deliver. 4 In December 2007 the NRA gave his view on this matter. It considered that (i) the postal reservation is specified by the weight and price limit of the defined kind of postal items, (ii) the Postal Act does not regulate the activities foregoing the conclusion of the contract on the provision of the postal service or before creation the postal item, and (iii) the relevant service regarding hybrid mail from creating the postal item up to its delivery is the postal service. The conclusion of the NRA was that the delivery of hybrid mail is part of the reserved area. 5 Alternative operators, like TNT Post Slovensko, claim that this decision strengthens the position of Slovenská pošta, a.s. which unambiguously goes against current developments in the postal services markets in the European Union, ( ) and is in fact a step backwards. Slovenská pošta, a.s. and the government state that this is not true: Hybrid mail or rather part of it - the actual delivery of consignments - will not become part of the exclusive right to deliver from April 1, because it has actually always been part of it. 6 TNT Post Slovensko is very pessimistic about the liberalisation process and the main (regulatory) actors. They state that the postal regulator is heavily on the side of Slovenská pošta, a.s. and extremely anti-liberalisation. Moreover, TNT Post Slovensko observes that the Slovak state together with Slovenská pošta, a.s. are anti-liberalisation, aiming at bringing already liberalised segments back under the reserved area referring to the above discussion about hybrid mail above. In their view, the revised law brings the liberalised segment of hybrid mail (in their view the segment was previously outside the reserved area) under the reserved area as of April TNT Post Slovensko considers the change as opposing the EC directive (article 82, dominant market position) and is prepared to contest this at EC level. 7 In June 2008 the Commission announced that they have requested Slovakia to clarify the recent amendments to its Postal Law because it may infringe the EC Treaty rules on (i) the abuse of dominant market positions (article 82) in conjunction with (ii) the rules requiring Member States to ensure that measures concerning public undertakings and undertakings to which Member States give special or exclusive rights comply with all rules including the antitrust rules (Article 86). According to the Commission, the amendments in question extend the monopoly of Slovenská Pošta to the delivery of socalled 'hybrid mail' services while this activity was open to competition before the amendments Spectator (2008b). Postal regulatory Office (2007b). Spectator (2008b). ECORYS questionnaire TNT Post Slovensko. European Commission (2008). 808 Annex II: Main Developments in the Postal Sector ( )

7 The main postal laws and regulation are listed in Table 0.2. Table 0.2 Postal law and regulation Postal law and regulation Date of Date of latest Remarks introduction amendment Act No 507/2001 Coll. on Postal Services December 2001 December 2003 (act No 15/2004 Coll.) The main legal document: main definitions, the universal service, the reserved area, role of the State, role of the NRA, registration, postal license, etc. Statute of the Postal Regulatory Office January 2002 Applies only to the NRA: role, sphere of action, responsibilities, etc. General Authorisation May 2002 December 2006 Applies to all the postal operators: general conditions of providing postal services. On the basis of the general regulation, the postal operators providing the services within the scope of the universal postal service are obliged to be registered Postal license December 2002 December 2007 Applies to the universal service provider only. Integral part of the postal license are the requirements for the quality of the universal service provision Source: legal acts, ECORYS desk research, ECORYS questionnaire NRA, Ministry, Slovenská pošta, a.s. The Postal Act 2001 defines the object and scope of the act, as it regulates (article 1): the conditions for providing postal services on the market for postal services market and state regulation thereof; the extent and conditions for providing the universal postal service and the rights and duties of a provider and users thereof; the access to the public postal network and requirements for density and equipment of access points of public postal network; the powers of the state administration bodies in the area of postal services and state supervision over the provision of the postal services provision. The Statute of the Postal Regulatory Office determines (amongst others) the sphere of action and the responsibilities of the NRA. Beside that, it gives the principles of activity and ordering of the Office. The consulted parties (the NRA, Ministry and Slovenská pošta, a.s. ) indicate that, regarding the liberalisation process, Slovakia will proceed in accordance with the third postal directive and will observe the final date of full accomplishment of the postal Country sheet: Slovakia 809

8 market. 9 They further state that the Slovak regulatory regime, in particular in the field of authorisation and licensing, can be considered as a very liberal one Universal service obligation The Postal Act 2001 arranges the granting of a postal license, this is the right (or obligation) to provide the universal service, and states the scope and conditions of its provision (article 16). In December 2002 the NRA granted the postal licence to Slovenská pošta, a.s. for ten years. The postal license was updated in May 2004, November 2005 and in December In the Postal Act 2001 the universal service is defined as a set of postal services that the provider of the universal service is obliged to permanently provide at access and contact points under the same conditions, at a determined quality and at affordable prices to all users on every working day, with at least one clearance and delivery per day. The range of the universal service is part of the postal license and determined at: clearance (collection) and distribution of postal items up to two kg in weight; clearance (collection) and distribution of parcels up to fifteen kg in weight; services linked with registered items and insured items; distribution of parcels up to twenty kg in weight, if they are posted abroad by a foreign universal service provider. Postal items are defined as (i) letter items (including items of correspondence, direct mail and literature for the blind), (ii) parcels, (iii) periodical items and (iv) money orders of the postal payment service. In the annex to the postal license the requirements for the quality of the universal service provision (last updated in November 2005) are recorded, for example, the accessibility of the public postal network, the opening hours of the postal offices, delivery conditions, the security of the postal items and handling of complaints. Regarding delivery, the annex states that the letter boxes should be cleared at least once every working day and that the postal items shall be delivered every working day, at least once a day up to 16.00h. Financing the universal service The source of financing the universal service obligation is the reserved area. In addition, the tax exemption (Slovenská pošta, a.s. is exempted from VAT) can attribute to financing the USO. The universal service provider has uniform tariffs, i.e. high-cost delivery to the distance area is subsidised by low-cost delivery in urban area. The burden of the universal service obligation has not been calculated yet Annex II: Main Developments in the Postal Sector ( )

9 1.3.3 Reserved area Table 0.3 shows the liberalised markets and the reserved area. At the moment the reserved area encloses the clearance and distribution of (article 7): items of correspondence and direct mail items up to 50 g in weight; items of correspondence to be delivered to addressees in person involved in legal proceedings and procedures before administrative bodies. Books, catalogues, newspapers, and periodicals shall not be regarded as items of correspondence but they may be included in the content of letter items or parcels, according to the Postal Act Table 0.3 Liberalisation of postal services and the reserved area (2008) Postal product Within reserved area Remarks (Yes, no, partially or unclear) Bulk mail and consolidation Yes Items of correspondence and direct B2B non-bulk mail Yes mail up to 50 gram * Individual item mail Yes Addressed mail Cross border mail Partially Only outbound cross-border mail items of correspondence up to 50 gram - is part of the reserved area; inbound cross-border mail is (partially) liberalised * Unaddressed mail No Parcel mail No Express mail No Source: legal acts, ECORYS desk research, ECORYS questionnaire NRA, Ministry, Slovenská pošta, a.s.. Note: * inbound correspondence and direct mail up to 50 g are liberalised only if such an item is distributed within the domestic service by a postal company that has collected this item abroad. Competitors are allowed to collect and distribute items of correspondence and direct mail up to 50 g if (i) the postal charge for such an item is equal to or more than two and a half times the rate charged by Slovenská pošta, a.s. for items of correspondence (1 st class) and (ii) such an item is a document accompanying items delivered at the same time; or (iii) such an item is distributed within the domestic service by a postal company that has cleared (collected) this item abroad (article 7 sub 2). The Ministry stressed that inbound correspondence and direct mail up to 50 g are liberalized only if such an item is distributed within the domestic service by a postal company that has collected this item abroad. 11 Along with this stipulation it is necessary to take into consideration Art. 29 (1) (b) point 3 of the Act No. 507/2001 Coll. on postal services as amended preventing the circumvention. According this article the universal service provider has the right to refuse 11 ECORYS questionnaire Ministry. Country sheet: Slovakia 811

10 to conclude the agreement if the postal item is from the sender established in the Slovak Republic and addressed to the addressee established in the Slovak Republic, but it is posted in bulk abroad at a lower postal charge. 12 Further, the NRA indicates that the author (or an employee if it is business mail) of an postal item subject to the reserved service, is allowed to deliver its own items, because the law does not consider this activity as an postal service according to the Postal Act As to the further liberalisation process, Slovakia will proceed in accordance with the third postal directive and will observe the final date of full accomplishment of the postal market NRA The national regulatory authority involved here is the Postal Regulatory Office. According to the Postal Act 2001 (article 11) the NRA has five tasks: (i) to perform state regulation of postal services, (ii) to perform state supervision over the provision of postal services, (iii) to ensure international relations in the area of postal services at the level of regulatory authorities, (iv) contact to (among others) bodies of the European Union and to relevant bodies of the member countries of the European Union, and (v) to perform other activities according to the Postal Act In practice, the NRA activities are mainly (NRA website, questionnaire): 15 issuing the general authorisation for providing the postal services, the registration of postal companies; issuing licenses for providing the universal postal service, including the determination of the requirements for the universal postal service and the standards of universal service quality; deciding about amendment, expiration and revocation of licenses for providing the universal postal service and postal payment services; deciding about price regulation of universal service including the approval of charges for providing the universal postal service and postal payment services; deciding about temporary changes in terms and conditions for providing postal services; methodical management of statistics and statistical data collection; state supervision over the provision of universal postal service, mainly controlling of the quality and accessibility of universal postal service; handling of complaints. Table 0.4 provides a survey of the main regulatory powers of the NRA ECORYS questionnaire Ministry. NRA website. NRA website, 812 Annex II: Main Developments in the Postal Sector ( )

11 Table 0.4 Regulatory powers NRA Powers Yes/No/Unclear Remarks Require data from USP Yes The USP is obliged to provide the NRA (on request) with information on expenses and revenues from reserved area activities and from the provision of the universal service (art. 22, 37 of the Postal Act 2001). The NRA is responsible to require the statistical data according to the Act No. 540/2001 Coll. on State statistics Require accounting system Yes At least, the USP is obliged to record in his accounting system separately expenses and revenues from the reserved area, from the provision of the universal service, from other postal services and from other services provided through the public postal network (art. 21, 22 of the Postal Act 2001) Require new data studies Yes Act no. 540/2001 Coll. on State statistics and art 37 of the Postal Act 2001 Cancel unlawful rates Yes Art. 21 of the Postal Act 2001 and Act No. 18/1996 Coll. on Prices Levy Fines Yes Article 39 Postal Act 2001 gives the NRA the possibility to impose fines Seek judicial order Yes Set new rates for USP Yes Act No. 18/1996 Coll. on Prices Require downstream access No Require data from non-usps Yes Art. 37 (3) of the Postal Act 2001, Statistical data according to the Act No. 540/2001 Coll. on State statistics Source: ECORYS desk research,. Capacity of the NRA The NRA reported that at the end of 2006 the number of (physical) employees was 17, while the average during the year was The physical capacity of the NRA with respect to postal issues was 12 persons in The NRA has determined the Guideline on principles of recording the separate accounting. The provisions of this guideline are in compliance with the Article 14 of the European Directive. The NRA controls every year the transparency of accounts and imposes (if necessary) measures for observing transparency of accounts and allocation rules. The NRA does not regulate network access because in Slovakia the access of other providers to the public postal network is not adopted in the legislation (access to the postal network can be performed on a negotiated basis between postal companies) Country sheet: Slovakia 813

12 In 2006, total expenditures were 11.3 million SKK ( 344, ), nearly 20% higher than in The most important NRA activities were the state regulation (e.g. decisions on licenses and registrations, the universal service provision) and state supervision (handling of complaints, price control, observation of postal conditions), with respectively 26% and 60% of the total expenditures. Complaints and redress procedures The NRA is entitled and obliged to accept and handle complaints, petitions, incentives, proposals and other claims, mainly due to the Postal Act 2001, the act on complaints (Act No. 152/1998) and the act on petitioner rights (Act No. 242/1998). In 2006, the NRA received 207 claims of which 53 complaints. The NRA handled 44 complaints and 18 of them were justified. These complaints were oriented on the nonfulfilment of postal service liability and quality of postal service. In 2006, the USP registered 3,814 justified complaints concerning the provision of the universal postal service. Compared to 2005, the number of these decreased by 5,857 ones. In 2006, the USP paid financial compensations amounting to 1.12 million SKK ( ) for 2,286 damaged and lost postal items. 19 Further, postal operators are obliged to provide regulations on complaints, in which it at least arranges the details of the extent of the user s right to complain, the method and time limit of making complaints and the time limit of handling complaints. Every registered postal company shall annually publish a report about the received complaints (article 25) Licenses Alternative postal operators do not need a postal license and only have to register. The only postal license (including the universal service) was granted to Slovenská pošta, a.s. Registration Postal operators are allowed to provide postal services under the trade license and within the scope of the general authorization. The trade license is the state allowance for entrepreneurs to provide business; the trade license is autonomous of the General Authorization. All postal providers are obliged to hold a trade license and they are obliged to provide postal services in the line with the General Authorization setting the general conditions for postal services provision. 21 In 2002 the NRA published the general authorization for providing postal services in which it stipulates general conditions of providing postal services on the territory of the Slovak Republic. The conditions of the authorizations are non-restrictive, that is, it is mostly a registration The exchange rate Slovakian Kurona/Euro used throughout used is 100 SKK against 3.05 euro (d.d. 26 February 2008). Postal Act 2001, article Annex II: Main Developments in the Postal Sector ( )

13 On the basis of the general authorization the postal operators are obliged to register when they provide one of the next services (more or less related to the universal service): (i) clearance (collection) and distribution of postal items up to 10 kg in weight, (ii) clearance (collection) of postal items up to 20 kg in weight for delivery abroad, and (iii) distribution of items up to 20 kg in weight if they are posted abroad. There are some (general) conditions related to the registration, e.g. a postal company must account for completeness, reliability and quality of the provided service, is obliged to ensure personal data protection and acts in accordance with the own conditions and regulations on complaints and tariffs, etc. Registration costs are SKK (circa 150,-) Postal license Beside the registration, the NRA grants a postal license, a decision giving the right or imposing the obligation to provide the universal service and stating the scope and conditions of its provision (article 16). The license holder is allowed to provide the postal services that are part of the reserved area. Since 2002 the holder of the postal license is Slovenská pošta, a.s. At the moment 21 postal operators are registered, including Slovenská pošta, a.s. (see Table 0.5). Table 0.5 Entry regulations Instrument Services allowed under Conditions for obtaining Number of licences the license the licence approved (2007) Postal License Universal service, 1) To be the postal 1 (Slovenská pošta, a.s. ) Art. 16 (1) Postal Act including reserved area company in the meaning 2001 of art. 5 of the Postal Act ) To comply with the requirements stipulated by art. 16 and art. 17 of the Postal Act 2001 Registration Postal services within the 1) To be the postal On the basis of the Art. 14 (1) Postal Act scope of the universal company in the meaning General Authorisation 2001 and the General service and outside the of art. 5 of the Postal Act there were 21 registered Authorisation reserved area 2001 postal operators. 2) To comply with the requirements stipulated by art15 of the Postal Act 2001 Source: ECORYS desk research, NRA website, ECORYS questionnaire NRA, Ministry and Slovenská pošta, a.s Access The Postal Act 2001 does not give the opportunity for other postal operators than Slovenská pošta, a.s. (the license holder) to use the public postal network, a system of organisation and a complex of facilities used by the USP at his access points for clearance Country sheet: Slovakia 815

14 and distribution of postal items (article 6). The access to the postal network can be performed on a negotiated basis between postal companies. Table 0.6 Network access Upstream/downstream Form of access Regulated? (Yes, No, Unclear) Upstream Access to street letter boxes No Access to outward sorting centres No Downstream Access to inward sorting centres No Access to delivery offices Access to PO boxes No No Source: WIK 2006, ECORYS questionnaire Price regulation The postal services that are part of the universal service (and the execution of the postal payment service) are subject to price regulation. More detailed regulation is laid down in the Act No. 18/1996 Coll. on Prices 22 as amended, and the Decree of the Ministry of Finance No. 87/1996 Coll. 23 as amended by Decree No. 375/1999 Coll., 276/2001 Coll., 536/2003 Coll. 24 The NRA performs state regulation of postal charges of the domestic universal service and postal payment service under 21 of the Act on Postal Services No. 507/2001 Coll. and Act No. 18/1996 Coll. on Prices. Postal charges of international universal service are regulated under the particular regulations Acts of Universal Postal Union (Universal Postal Convention, Letter Post Regulations and Parcel Post Regulation). The NRA regulates prices on the basis of objective results of past years and the NRA designates the level of economically justified costs (e.g. costs not directly related to the universal service are excluded from calculation) adjusted for inflation and a certain profit level. Hereby the NRA designates maximum prices for the next period. 25 The NRA provided specific decisions regarding the regulation of maximum prices and the conditions of price regulation in November 2005 and November 2006, both for the domestic postal service and for the domestic postal payment service. The decision of the The content of the Act No. 18/1996 Coll. on Prices as amended is the specification of the economically justified costs and reasonable profit ( 2), proceedings for prevention the unacceptable price development of regulated prices, manners of price regulation ( 4, 5, 6), decisions in issues of regulated prices ( 11, 12), price evidence, price control ( 16, 17, 18) and responsibilities of price bodies ( 20). The Decree of the Ministry of Finance No. 87/1996 Coll. as amended regulates the particulars of price arrangements, proceedings at price regulation, price evidence and calculation. This decree designates the economically non-justified costs that must be excluded from cost allocation for the purpose of price regulation (mainly penalties, compensations of damage, amortization of statute-barred debts, paid share of profit, dividends and rewards for members of statutory body, mistakes in accounts and others). The Decree also designates how to prove the reasonable profit. The act on prices and the decrees are not available in English. 816 Annex II: Main Developments in the Postal Sector ( )

15 NRA contents the list of regulated products/services and relevant price. The prices are maxima and cannot be exceeded. 26 The NRA revaluates prices if necessary. There is no tariff basket regulation. Apart from regulating process of universal service products the NRA also regulates prices of domestic postal payment services according to the Article 21 of the Postal Act. The obligation to provide postal payment services is imposed on the USP in the postal license according to Article 18 of the Postal Act. The USP argues that prices for the provision of postal payment services should not be regulated. This issue is under review in cooperation with the Anti-Trust Office of the Slovak Republic. 27 Slovenská pošta, a.s. uses (but that is not an obligation) uniform tariffs high cost delivery to rural areas is cross-subsidised by low-cost delivery in urban areas. 28 Transparency of accounts is ensured by the costing model using the ABC method and by analytical accounting for revenues (financial accounting of the Slovenská pošta, a.s., a.s.) with separated accounts for US and other services. The NRA regularly controls the transparency and correctness of costs and revenues Quality of service The quality requirements regarding the universal services are laid down in the annex of postal license (Requirements for the quality of the universal postal service) and it includes requirements of the transit time, accessibility of the postal services and information on the universal service, security of the items and handling of complaints. In addition, there are quality standards for postal money orders (1 st class (D+1) 94 %, 2 nd class (D+2) 94 %). In general, 99 % of all postal items having standard D+1 should be delivered within D+2 and similarly 99 % of all postal items having standard D+2 should be delivered within D+4 at the latest. 30 Table 0.7 shows the performance of Slovenská pošta, a.s. in Country sheet: Slovakia 817

16 Table 0.7 Quality of service USP (2006) Standard Threshold Performance USP Remarks 1 st class mail delivery within 24 hours (D+1) 96% 96.5 % 2 nd class mail delivery within 48 hours (D+2) 1 st class parcel delivery within 48 hours (D+2) 94% 95.5 % 96.0 % 98.8 % 2 nd class parcel delivery within 72 hours (D+3) 95.5 % 98.1 % Direct mail (D+4) 94% 99,96% % of lost mail 0,002 % * Source: Annex to the postal license No. 589/001/2004, NRA annual report 2006, p ; * Slovenská pošta, a.s. annual report 2006, p.36. The NRA is obliged to supervise the fulfilment of the conditions set in the postal license and therefore it is also responsible for the surveillance over these quality standards. In 2006 the NRA reported that Slovenská pošta, a.s. met the quality standards regarding mail, parcels and postal money orders. The USP has to ensure the measurement of the transit time in the range set by the Requirements and in compliance with CEN standards. Standards EN 13850, EN and EN are implemented with regard of national condition and by agreement with the NRA The mail market Mail market overall In 2006, total postal revenue was circa 10.1 billion SKK ( 309 million), an increase of 23% compared to Since 2002, the total revenues grew by circa 45%. The main development of the mail market was concentrated in express mail and unaddressed mail. Later, direct mail developed towards a substantial market segment. Nowadays (see Table 0.9) the main part of postal market consists of addressed letter mail (mainly distributed by Slovenská pošta, a.s.), the second part is unaddressed mail (mainly distributed by other postal providers then Slovenská pošta, a.s.) and the third part is parcels, distributed by all market players. International providers as UPS, DHL, TNT, Fedex and In Time were the first to enter the Slovak mail market Annex II: Main Developments in the Postal Sector ( )

17 In 2006 the postal operators delivered on average 44.4 letter items per capita. 33 ECORYS estimates this at circa 52 items per capita at the moment. 34 Table 0.8 and Table 0.9 show the size of the Slovak market in terms of turnover and volume. Data regarding the turnover per segment is not available. 35 Table 0.8 Size of the mail market in turnover (million Euro) Postal product Bulk mail and consolidation n.a. n.a. B2B non-bulk mail n.a. n.a. Individual item mail n.a. n.a. Addressed mail n.a. n.a. Cross border mail n.a. n.a. Unaddressed mail n.a. n.a. Parcel mail n.a. n.a. Express mail n.a. n.a. Total SKK 8.2 billion / 250 million SKK 10.1 billion/ 309 million Source: Source: Postal Regulatory Office, State statistical investigation. Note: n.a. is not available. Table 0.9 Size of the mail market in physical terms (million items) Postal product Bulk mail and consolidation n.a. n.a. B2B non-bulk mail n.a. n.a. Individual item mail n.a. n.a. Addressed mail Cross border mail Unaddressed mail Parcel mail Express mail Total Source: Source: Postal Regulatory Office, State statistical investigation. Note: addressed mail includes delivery of catalogues, magazines and periodicals. N.a. is not available. Regarding unaddressed mail, TNT Post Slovensko considers that the market is currently stagnant due to changes on the retail market (mergers, divestment). The unaddressed market is volatile and price sensitive, very often viewed more as a commodity than as a service Circa 281 million items divided by 5.4 million inhabitants. The NRA indicates that they receive from private postal operators only data on their total annual turnover. ECORYS questionnaire TNT Post Slovensko. Country sheet: Slovakia 819

18 1.4.2 B vs C The consulted parties (the NRA, NPO and Ministry) report that these postal streams for addressed mail are not monitored as presented below. The figures presented are estimations by Slovenská pošta, a.s. The total addressed mail market generated in 2006 a turnover of 2.7 billion SKK ( 82.6 million). Both in turnover and volume the B2B and B2C-streams enclosed circa 71% of the market in 2006 (see Table 0.10 and Table 0.11). Table 0.10 Postal streams in the market for addressed mail in turnover (million Euro) Postal stream 2006 B2B 1,016 million SKK/ 31 million B2C 910 million SKK/ 27.8 million C2B 219 million SKK/ 6.7 million C2C 564 million SKK/ 17.2 million Total 2,709 million SKK/ 82.6 million Source: Own measurement of USP product managers and USP products exclusively. The data cover 1st and 2nd Class letters and parcels. Table 0.11 Postal streams in the market for addressed mail in physical terms (million items) Postal stream 2006 B2B 87 B2C 78 C2B 19 C2C Source: Own measurement of USP product managers and USP products exclusively. The data cover 1st and 2nd Class letters and parcels Market opening At the moment the reserved area encloses the clearance and distribution of (article 7): items of correspondence and direct mail items up to 50 g in weight; items of correspondence to be delivered to addressees in person involved in legal proceedings and procedures before administrative bodies. Books, catalogues, newspapers, and periodicals are not regarded as items of correspondence but they may be included in the content of letter items or parcels, according to the Postal Act Further, outbound cross-border mail (up to 50 gram) is part of the reserved area. Unaddressed mail, parcels and express mail are de jure fully open for competition. Slovenská pošta, a.s. (annual report 2006, p.7) reports that they provide approximately 75% of all products and services in the Slovak Republic. The next table shows the market shares of Slovenská pošta, a.s. and alternative operators. The latest reduction of the reserved area gave competitors the possibility to gain some 820 Annex II: Main Developments in the Postal Sector ( )

19 market share regarding domestic letters (increase from 0.2% to 1.9%) while competition on both the domestic and international parcel segment increased too. For the addressed mail segment it is not exactly clear who is the main competitor. 37 Table 0.12 Overview market share, based on the contribution of number of items (in %) Domestic letters - Slovenská pošta, a.s others Domestic parcels - Slovenská pošta, a.s others International letters - Slovenská pošta, a.s. 99 * 99 * - others 1 1 International parcels - Slovenská pošta, a.s others Source: ECORYS questionnaire NRA and Ministry; * annual report NRA of 2006 (in the English version of 2006, the figure of 2005 is used). Note: The NRA indicates that the data in the NRA reports are not fully correct, as the annual report has to be published at the beginning of the new year and the NRA at this time does not have statistical data of the previous year. So in NRA reports include statistical data of the 1st half of the previous years (as the statistical data are accounted at the 1st half of the year and at the end of the year). As to the statistical data of the international parcels of the years published in the NRA reports, Slovenská pošta, a.s. is not included in these data consignment. TNT Post Slovensko indicates that the market for addressed mail is in fact (nearly fully) closed for alternative operators and competition, because the Slovak government protects the monopoly of Slovenská pošta, a.s. 38 When we consider the total market turnover, the alternative postal operators have a market share of 47% (2005: 38%). 39 This percentage indicates that the turnover the CPOs realise is mainly based on high value added services Cross border mail The market for outbound cross-border mail grew very fast the last years. In 2004 only 9.1 million letter items were posted, while in 2006 this was 33.7 million items. However, it should be mentioned that after 1996 (26.9 million items) the volume decreased ECORYS questionnaire Ministry. The Ministry indicates that because of the national legislation (Act No. 540/2001 Coll.) they are not allowed to reveal the name of the dominant operator of the private sector. ECORYS questionnaire TNT Post Slovensko. ECORYS questionnaire NRA and Ministry. Country sheet: Slovakia 821

20 dramatically, to 8.9 million items in The same trend is visible for parcels: since 2003 (30,296 items) the segment grew by nearly 300%, to 101,470 items in The inbound cross-border mail segment also shows increasing volumes. Regarding letter items the market was quite stable until 2005 (13 million items), but increased to 17.7 million items in 2006 (+ 33%). The volume of delivered parcels rose from 87, 733 to 103, 134 items (+18%). Outbound letters up to 50 gram are still part of the reserved area. The market share of the registered (competitive) postal operators is 28% on the market for (incoming and outgoing) international parcels (see the table above). The main international operators are UPS, TNT, Fedex and DHL Impact of innovation The different stakeholders indicate that there is no information or data available concerning innovation and electronic substitution. The growth-path of the Slovak market might indicate that the impact of electronic substitution is rather limited. However, TNT Post indicates that, besides the fact that the volume of the Slovak market is still relatively small, it looks like the Slovaks skip certain normal developments related to growing markets. For example: transaction mail is declining, while one would expect it to grow in line with economic activities. 40 This observation is not confirmed by the other parties consulted. They observe that transactional mail has a tendency to grow, despite the development of e-substitution. However, they do confirm that the main senders of the transactional mail (banks, telecommunication operators, etc.) stimulate their clients to use e-substitute products which could, together with the development of the competition, influence the pace of growth of transactional mail. They state that especially the C2C stream was influenced by e-substitution and therefore shows a declining tendency. 41 Further, TNT Post Slovensko states that innovation is limited due to the fact that the addressed mail market is in fact closed for competition. Regarding unaddressed mail they observe that the market is currently stagnant due to changes on the retail market (mergers, divestment) Interview wit TNT Post (European mail Network). ECORYS questionnaire TNT Post Slovensko. 822 Annex II: Main Developments in the Postal Sector ( )