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
From Geneva to Abidjan Königswinter,
Germany, December
The next main subjects at the UPU 9th 2019
A. Macro Developments – Global GDP
Positive growth rates in recent years, but a downward trend is settling in
4
A. Macro Developments – Regional GDP
With differences across regions
5
A. Macro Developments – Rise of E-commerce
Boosting e-commerce…
6
Source: Statista
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
A. Postal Market Developments – Impacts on Mail Flows
9
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
10UNIVERSAL 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)
11REVENUES IN EUROPE
Total revenues increased 1% on average between 2014 and 2018 (around 3
billions of euros)
Total postal revenue 2014-2018
12A. Postal Market Developments – Impacts on Revenues
Affecting the growth of postal operators…
13A. Postal Market Developments – New Competitors
14A. Postal Market Developments – Impacts on Services
…as well as their business models…
15A. 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
17A. Postal Market Developments – Opportunities
18PARCEL 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 reservedB. 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 reservedB. 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
24B. 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 reservedC. 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
26From Geneva to Abidjan Königswinter,
Germany, December
9th 2019D. 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 reservedD. 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 reservedD. 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 reservedProposals for integrated remuneration
system principles for the next work cycle
(2021-2024)
© UPU 2018 – All rights reserved
32IRS 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. 33Results 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
34Consultation on opening up the UPU
to wider postal sector players
© UPU 2019 – All rights reserved
35Opening 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.
36Special TASK Force launched
at last CA S 6
37Consultation on opening the UPU to wider
postal sector players – questionnaire
Ongoing process
Questionnaire sent to DO’s, GOV, REG and other players
38UPU high-level forum on wider postal
sector engagement
Berne, 28 January 2020
39Other issues
DPRM.REM © UPU 2019 – All rights reserved
© UPU 2010 – All rights reserveddefining 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
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