Postal sector issues: clarification by MCA

Various Letters concerning facets of the Maltese postal sector have been published recently. They have touched on several issues, and have at times taken the MCA to task, as should be the case where such is warranted.

Several arguments I am about to address here have already been broached, to varying degrees, in the introductory consultation document on postal services, which may be viewed on our Website (mca.org.mt), together with the document containing our rounding up on the consultation process.

Although the regulatory environments in the telecommunications and postal sectors present similarities (universal service obligations being one of these), the emphasis on postal sector regulation is different from that approach adopted with respect to the telecommunications sector when it comes to service quality. This fundamental difference in approach stems from the EU Directives, which are in turn a reflection of the experiences of the member states in the respective fields.

Whereas in the case of telecommunications the priority has been on competition as the driver to improved services to the customer - with quality of service standards as an important corollary - the drive on postal regulation has been primarily focused on ensuring the quality of services given by the Universal Service Provider (USP; Maltapost in the case of Malta) via standards, measures and audits.

The emphasis has therefore been on mechanisms that compensate for the relative lack of take-up of competition in the postal sector, even in the most progressive countries. One might mention Sweden as a classical case. Sweden has had a fully liberalised sector since 1994 but until recently the take-up from alternative postal operators made up around 5% of the market.

Full liberalisation of the postal sector as a mandatory requirement is not envisaged by the EU until around 2009, and even this date is indicative. Full liberalisation should come about by a gradual reduction of the postal area that is reserved for the USP.

Quality of service standards

The setting of quality of service standards for postal services has therefore assumed priority to make up for the lacuna in competition. Some of these standards have already been set by the EU whereas others are in the process of being formalised. This aspect constitutes one of the elements of the MCA work-programme for postal services during 2004.

It will involve measurement on the part of the USP in line with established methodologies and auditing by a specialised independent body. The intention is to have a feel of the service standards being reached by the USP. To its credit, Maltapost is already measuring some aspects of its performance. This pro-active stance bodes well for the future, when measures for further services that are provided will be required.

Some correspondents have complained that the services provided by the Posts Department, a number of years back, were more efficient. But at what price, one may ask? There is a fundamental question of sustainability that is common to all commercial enterprises, and Government-owned or controlled ones are not exempt from the harsh laws dictated by the bottom line.

An operator has to look towards being lean and profitable just as much as it has to make sure it is efficient in utilising its resources. This is an objective fact of life that postal operators Europe-wide (and beyond) have had to face up to. At the same time it is undeniable that a quality service should be provided and we shall be working on this front to ensure, to the extent possible, that such is the case.

Unaddressed mail

There have been several exchanges in the press on the issue of unaddressed mail and the level and extent of MCA's potential involvement in all this. The definition of a postal item under the Postal Services Act excludes unaddressed mail, as does the relative EU directive. Unaddressed mail is unlikely, therefore, to constitute a postal service. We have tackled this matter in the above-mentioned consultation document.

In the meantime we have also been in contact with several of our counterparts in various European jurisdictions, and it transpires that this area is outside of their regulatory remit. This tallies with the stance taken in the consultation document, that it is unlikely that unaddressed mail would be an area that is under the regulatory purview of the MCA.

In the consultation paper we touched on allegations of cross-subsidisation between addressed and unaddressed mail on the part of the Universal Services Provider. Immaterial of whether it is eventually the MCA or, more likely, the Consumer and Competition Division that will deal with this matter, the cost base of the various services provided by the USP can only come about following a comprehensive accounting separation exercise. This takes time. It is not a question of erring on the side of caution. The experience in the electronic communications sector has taught us that the timeframes are substantial. There may be instances where an ad hoc investigation could yield indicative results.

Unaddressed mail has also been a talking point on a separate issue. One argument has focused on the fact that it constitutes an invasion of privacy and should be made illegal and curbed accordingly. The parallel has been made with unsolicited e-mail. The EU has taken a hard stance with regard to unsolicited e-mail, or spam, which is a term used exclusively for the electronic domain. This is because this phenomenon is becoming so massive that it is endangering the integrity of electronic communications networks and is wasteful on these resources. On top of this it costs the sender next to nothing.

The ultimate burden of the cost is on users of electronic communications who have to pay higher rates for additional electronic communications infrastructural requirements. But in addition there is the burden on the consumer.

The parallel between spam and unaddressed mail is not one that can be drawn. Unaddressed mail may be considered a nuisance but does not create a critical communications problem, as in the case of spam. Unaddressed mail is also costly to the organisations that decide to resort to this form of advertising. Thus it is the sender who pays for the initiative and not the citizen through a more costly service, as in the case of spam. There are to our knowledge no EU directives that consider unaddressed mail as an illegal practice and there are no legislative provisions to this effect in Malta either.

Postal regulatory framework

The MCA will, next year, work to establish the postal regulatory framework on a sound footing. The impatience of some operators in the sector is justified, as much as it is a welcome sign, but has to be tempered by an awareness that it takes time and resources to build the necessary expertise even before addressing the regulatory "nuts and bolts". There are also elements of short-term expertise that have to be brought in from outside.

On this front the MCA is finalising a twinning arrangement with a European entity that works in the same field. This arrangement will be financed by EU pre-accession funds. We are confident that the process will be finalised over the coming days. We look forward to working with all parties concerned in as collaborative a manner as our mandate allows. We are confident that this will be the case.

Mr Vella is Chief, Policy and Planning, Malta Communications Authority (MCA)