Price regulation and the cost orientation principles

Transcription

1 Belgian Institute for Postal Services and Telecommunications Price regulation and the cost orientation principles Jack Hamande Member of the BIPT council MAY COPENHAGEN BIPT

2 Postal Service Directive and tariffs principles Maintain the price to cost margin Ensure prices comply with the criteria of affordability and cost-orientation Limit the risk of abuse in the form of excessive pricing or cross-subsidization Services be grouped together in one or more price-capped baskets Source: ERGP report on tariff regulation in a context of declining volumes 2014 Post

3 Scope of the universal service in different countries Scope of the universal service may be quite different from one country to another. The Directive actually sets a minimum requirement for the universal service and gives room for Member states to specify in the country what products belongs to the postal universal service. Source: ERGP report on tariff regulation in a context of declining volumes 2014 BIPT

4 Source: ERGP report on tariff regulation in a context of declining volumes 2014 BIPT

5 Universal Service Which products? Postal items < 2 kg National postal parcels < 10 kg International postal parcels < 20 kg Registered items Insured items Which obligations? Uniform and affordable tariffs Cost Orientation Postal items delivery to all the houses of the Kingdom One access point per municipality Per municipality: at least one collection, one sending and one delivery 5 days/week (except in case of exceptional situation) Post

6 Test for cost orientation Small users basket : Source: ERGP report on tariff regulation in a context of declining volumes domestic priority and non-priority items up to 2 kg - priority or non-priority outgoing cross-border postal items up to 2 kg - outgoing domestic and cross-border postal parcels up to 10 kg - registered items and outgoing domestic and cross-border insured items Post

7 Tariff principles till 2017 BELGIAN POSTAL LAW OF 21 MARCH 1991, WITH THE FOLLOWING TARIFF PRINCIPLES: Affordability Cost orientation Uniform tariffs Transparency and non-discriminatory Verified by PRICE CAP MECHANISM Compensation for inflation Added quality bonus

8 Price decision of 2017 QUALITY BONUS ALLOWED PRICE INCREASES HIGH ABOVE INFLATION: => FOR 2017 THE BIPT CONDUCTED A THOROUGH EXAMINATION REGARDING THE PRINCIPLE OF COST ORIENTATION

9 Price decision of ROS (RETURN ON SALES) MARGINS OF SIX SEGMENTS OF PRODUCTS AND THE COMPLETE SMALL USERS BASKET WERE CALCULATED 2. INFORMATION WAS GATHERED ON WHAT COULD BE CONSIDERED A REASONABLE MARGIN (INFO OF THE EUROPEAN COMMISSION ON SGEI, MARGINS OF STRICTLY COMMERCIAL PARCEL OPERATORS) 3. A BENCHMARK OF ROS (RETURN ON SALES) MARGINS WAS MADE WITH COMPARABLE EUROPEAN INCUMBENTS => GIVEN THE CURRENT MARKET, A ROS MARGIN OF 15% WAS CONSIDERED TO BE THE MAXIMUM IN ORDER TO COMPLY TO THE PRINCIPLE OF COST ORIENTATION. => THE BIPT HAD TO REFUSE ANY PRICE INCREASE GIVEN THAT ALL SEGMENTS AND THE SMALL USERS BASKET AS A WHOLE WERE ABOVE A ROS MARGIN OF 15%

10 Price decision of 2017 => FOLLOWING THIS DECISION OF THE BIPT, THE BELGIAN UNIVERSAL SERVICE PROVIDER BPOST BROUGHT AN ACTION AGAINST THIS DECISION BEFORE THE MARKET COURT. THE MARKET COURT CONFIRMED BIPT S DECISION, STATING THAT THE BIPT: did not exceed its powers; was bound to investigate both affordability and cost orientation given that these principles have different and autonomous meanings; correctly interpreted the meaning of cost orientation as a lower (below cost) and upper (above cost including a reasonable margin) limit; is allowed to determine the reasonable margin, given the lack of an exact formulation in Belgian law; did not make an appreciation error when determining the reasonable margin.

11 Tariff principles 2018 BELGIAN POSTAL LAW OF 26 JANUARY 2018 SHOULD RESPECT THE FOLLOWING TARIFF PRINCIPLES: Affordability Cost orientation Uniform tariffs Transparency and non-discriminatory Transparency and non-discriminatory (special tariffs) Verified by PRICE CAP MECHANISM Compensation for inflation Compensation for volume changes within the small users basket => THE BIPT CRITICIZED THIS COST ORIENTATION APPROACH VIA AN OPINION

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