UPU Third Extraordinary Congress and International Mail Markets - Siva Somasundram, Director Policy, Regulation and Markets Directorate Jack ...
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UPU Third Extraordinary Congress and International Mail Markets Siva Somasundram, Director Policy, Regulation and Markets Directorate Jack Hamande Co Chair Committee 2 – Council of Administration © UPU 2019 – All rights reserved 1
Presentation Outline A. Macro and postal market developments B. Background to Third Extraordinary Congress C. Outcomes of Third Extraordinary Congress D. Remuneration Horizon 2
A. Macro Developments – Global GDP Positive growth rates in recent years, but a downward trend is settling in 4
A. Macro Developments - Connectivity Postal services are among the few areas with growing connectivity Traditional trade and cross- border investments are either stagnating or retreating. Connectivity is only rising in aviation, postal services and telecommunications. 7
A. Postal Market Developments – Impacts on Mail Flows …and transforming the nature of the demand for postal services… DOMESTIC INTERNATIONAL LETTERS PARCELS 8
VOLUMES EVOLUTION IN EUROPE Total traffic volume has fallen 3% annually since 2014 on average, 13% accumulated (loss of 10 billion items) 90,000 80,000 70,000 60,000 50,000 40,000 30,000 Figure 26– Total Postal Volumes and the percentage change 2017-18 and 2014-18 20,000 10,000 0 2014 2017 2018 Total Traffic 80,489 73,164 70,437 Total Letter Mail 73,588 65,188 61,918 Total Parcels 6,901 7,977 8,518 Total Postal Volumes in 2014, 2017 and 2018 10
UNIVERSAL SERVICE IN EUROPE: QUALITY The average value of the QoS of single piece priority mail regarding D + 1 delivery is going down Evolution of the average value of quality of service of single piece priority mail regarding D+1 delivery (2018) 11
REVENUES IN EUROPE Total revenues increased 1% on average between 2014 and 2018 (around 3 billions of euros) Total postal revenue 2014-2018 12
A. Postal Market Developments – Impacts on Revenues Affecting the growth of postal operators… 13
A. Postal Market Developments – New Competitors 14
A. Postal Market Developments – Impacts on Services …as well as their business models… 15
A. Postal Market Developments – Strength of Postal Sector Yet, the postal sector remains a powerful infrastructure 256 billion SDR in 85.8% of population revenues receiving mail at 2016-2017: +4.0% home 668’445 5.26 million post offices Employees 2016-2017: -0.4% 2016-2017: -1.1% Source: UPU Statistics 16
A. Postal Market Developments – Competition Perspective The current market structure is informative of the degree of competition Market share of DOs in letter post Market share of DOs in parcel post 17
A. Postal Market Developments – Opportunities 18
PARCEL MARKET STRONGLY GROWING
PARCELS & EXPRESS HAVING THE MAIN SHARE
A. Postal market developments - Recap ✓ Letter-post (documents) volumes are declining ✓ Small packet (goods) volumes have soared driven by e-commerce ✓ Small packets are lightweight items (158g on average) falling into the USO-related letter-post category ✓ Posts are trying to compensate for losses in the letter stream (documents) with e-commerce-generated items (goods) and other diversified services ✓ Stiff competition with new players such as E-commerce super giants emerging ✓ Opportunities abound ✓ Costs coverage and competition effects have become a focus for policy makers © UPU 2019 – All rights reserved
B. Third Extraordinary Congress - Background US officially notified its intent to withdraw from the UPU on 17 Oct 2018 (effective one year from that date) due to concerns on: ▪ lack of cost coverage ▪ sovereignty to set international inbound rates ▪ market distortions Several other countries expressed similar concerns © UPU 2019 – All rights reserved
B. Third Extraordinary Congress - Background ✓ Accelerated POC and CA work plan following US announcement ✓ Resulted in Options A and B ✓ Creation of Remuneration Convergence Discussion Group (RCDG) that led to Option C ✓ DG Consultation Group ✓ Representatives from 34 Member Countries from different regions, of various levels of economic development as well as those that were outspokenly favourable to Options A, B or C ✓ Meetings held on Sunday and Monday ✓ Additional consultations ✓ Extensive consultations held with Options A, B and C supporters on Tuesday and Wednesday ✓ Objective: Maintain the integrity of the Union and build consensus for solutions that address the concerns raised over the terminal dues ✓ Building blocks for compromise Compromise package drawing on existing elements: ✓ Non-contentious parameters of Councils’ Option C. ✓ Compromises on those contested parameters of Councils’ Option C ✓ Compromises on other issues raised by member country amendment proposals to Councils’ Option C 24
B. Third Extraordinary Congress – Background Options pre-Geneva - Acceleration of the implementation of the current Terminal Dues System. Option A - 2021 provisions to apply in 2020. - Group IV countries in the target system for E-format remuneration. - Self-declared rates (optional) in 2020, based on 100% of 11 domestic tariffs and business rules. Option B - Group IV countries not affected, if flows below 50 tons. Two-step approach to self-declared rates (optional): 1) 2021 conditions to apply in 2020 at higher rate levels Option C 2) Self-declared rates in 2021, based on 70% of 11 domestic tariffs and business rules. Group IV countries not affected, if flows below 100 tons. © UPU 2019 – All rights reserved
C. Third Extraordinary Congress – Outcomes – Option V • Implementation of self-declared rates on an optional basis effectively from 1 January 2021 • Countries may choose not to self-declare; current methodology would apply in this instance • Self-declared rates subject to a number of constraints between 2021-2025 • Ceiling rates based on domestic tariff proxies. Self-declarated rates cannot exceed these ceiling rates • Maximum revenue increases • To mitigate price hikes and to assist with transition of the markets • Possibility of acceleration of implementation – 75000 tonne threshold and $40m AIC – 1 July 2020 • Overall, there is likely to be an increase in the terminal dues rates for ePackets. Whether this will translate into higher retail postal prices nor a reduction in traffic not clear at this stage 26
From Geneva to Abidjan Königswinter, Germany, December 9th 2019
D. Remuneration Horizon Integrated Remuneration Plan Phase Main deliverable Status Phase I 2016 Istanbul Congress decided on terminal dues Completed remuneration reflective of format (P/G vs E format) (implementation and content (documents and goods). 1.1.2018) Phase II Development of the Integrated Remuneration Plan Completed. Adopted roadmap by the 2018 Extraordinary Congress (resolution C 6/2018) Phase III Implementation of the IRP with development Ongoing. After S6: of proposals for an Integrated Remuneration regional and global System. round tables; approval by POC/CA at S7 for presentation to 2020 Congress. © UPU 2019 – All rights reserved
D. Remuneration Horizon IRP - timeline Review E format rates before 2020 Congress (Third Extraordinary Congress) 2016 Istanbul 2018 Addis Ababa 2020 Abidjan Congress Extraordinary Congress Congress Phase I Phase II Phase III • E format rates 2018-2021 • EC adopted IRP (resolution C 6/2018) • Proposals for rates 2022 – • Group III > target system • Roadmap to develop Integrated 2025 • Mandate IRP (Integrated Remuneration System (IRS) by 2020 • Proposals for IRS (Integrated Remuneration Plan) Remuneration System) © UPU 2019 – All rights reserved
D. Remuneration Horizon Phase III: implementation of the 2nd Extraordinary Congress resolution C 6/2018 ‒ Modernizing, rationalizing and integrating the remuneration systems: ‒ Proposals for remuneration of basic letter-post services (P/G and E format items), parcel-post items (inward land rate system), ECOMPRO parcels; ‒ Remuneration of supplementary services and other product features: ‒ Proposals for remuneration of registered, insured and tracked items, M bags, returned undeliverable items and remuneration response to IPP; ‒ Transition: ‒ Proposals for harmonization of rates and thresholds of different groups by 2025 to ensure integration. ‒ Pay for performance: ‒ Proposals to link remuneration of all postal items (including E format and parcels) with quality of service © UPU 2019 – All rights reserved
Proposals for integrated remuneration system principles for the next work cycle (2021-2024) © UPU 2018 – All rights reserved 32
IRS principles (work cycle 2017-2020) • Ensuring the provision of an affordable and viable universal postal service through sustainable remuneration to delivery designated operators; • Supporting the efficient and economically viable provision of international postal services in line with market conditions, customer interests and regulatory requirements; • Differentiating the various UPU-regulated postal products based on service specifications and market needs; • Supporting the interoperability, sustainability and development of the global postal network under the least market-distortive terms by: − Being transparent, straightforward and mindful of the different resource and implementation constraints among UPU members while incentivizing improved service performance; − Ensuring non-discriminatory access to destination markets according to country-specific, cost-based remuneration rates, while : • respecting, in particular, the right to affordable access to international postal services for the least developed member countries with limited international mail volumes, • preventing the abusive practice of remailing, • respecting the need for higher remuneration for the processing and delivery of inbound international mail in cases where domestic rates are set below cost owing to social or similar policies. 33
Results from consultation CA C 2 ETR CA C 2 ETR members were invited to review • The current Integrated Remuneration System principles (of current work cycle) • The results of the market impact survey (CA C 2 2019.1-Doc 7a) and the financial and operational impact survey (CA C 2 2019.2-Doc 7) • Propose amendments to the IRS principles Results from consultation: • Current principles are still valid as most CA C 2 ETR members either confirmed their continued relevance or did not propose amendments 34
Consultation on opening up the UPU to wider postal sector players © UPU 2019 – All rights reserved 35
Opening is already ongoing.. But…. Access policy for UPU products and services (CA C 2 2019.2–Doc 2) The International Bureau (IB) presented document CA C 2 2019.2–Doc 2 and its annexes, covering the progress report of work regarding access to UPU products and services by wider postal sector stakeholders, as approved by previous CA sessions: .POST solutions, POST*Net Finance postal payment solutions, supply chain management solutions, Trainpost, Global Monitoring System (GMS), UPU*Clearing, and the Online Solution for Carbon Analysis and Reporting (OSCAR). Committee 2 noted the work on developing the access policy followed the phased approach agreed by Committee 2, and the mandate set out in Congress Resolution C10/2016. Following the presentation, several members and observers expressed their support of the work on developing the access policy to UPU products and services, and volunteered to take part in a pilot programme to make OSCAR available to wider postal sector players. Committee 2 noted that all deliverables scheduled for S6 had been completed. The International Bureau was instructed to monitor and report on the progress of the activities towards implementation of the access policy for the approved products and services. 36
Special TASK Force launched at last CA S 6 37
Consultation on opening the UPU to wider postal sector players – questionnaire Ongoing process Questionnaire sent to DO’s, GOV, REG and other players 38
UPU high-level forum on wider postal sector engagement Berne, 28 January 2020 39
Other issues DPRM.REM © UPU 2019 – All rights reserved © UPU 2010 – All rights reserved
defining the scope of the Universal Postal Service in a way that is reflective of the evolving and disparate approaches that member countries are taking to defining their own domestic universal service obligations
Thank you DPRM.REM © UPU 2019 – All rights reserved © UPU 2010 – All rights reserved
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