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Decision No. 2008 - 1286 Of 18 November 2008 On The Characteristics Of Multiannual Framework For Benefits Of Universal Postal Service Rates

Original Language Title: Décision n° 2008-1286 du 18 novembre 2008 relatif aux caractéristiques d'encadrement pluriannuel des tarifs des prestations du service universel postal

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JORF n°0303 of 30 December 2008
text No. 160



Decision No. 2008-1286 of 18 November 2008 on the multi-year framework of tariffs for universal postal service benefits

NOR: ARTR0829619S ELI: Not available


The Autorité de régulation des communications électronique et des postes,
Based on the Post and Electronic Communications Code, including its article L. 5-2 (3°) ;
Vu la Decision No. 2006-0576 of the Electronic Communications and Post Regulatory Authority dated 1 June 2006 on the multi-year framework of tariffs for universal postal service benefits;
In view of La Poste's proposal for multi-year supervision of the tariffs of the universal postal service dated 13 November 2008, received on 14 November 2008;
After deliberating on 18 November 2008,
According to Article L. 5-2 of the Code of Posts and Electronic Communications, "the Authority for the Regulation of Electronic Communications and Positions: [...] 3° decides, after consideration of La Poste's proposal or, in the absence of a proposal, ex officio after informing it, of the characteristics of multi-year supervision of the rates of services of the universal service, which may, if necessary, distinguish the consignments from the egregated consignments [...]".
As of 1 June 2006, the Authority had set for the first time the modalities for the supervision of the annual evolution of the tariffs of the universal service of La Poste. It was decided that this guidance would extend from 1 January 2006 to 31 December 2008. At the end of this period, the characteristics of a new tariff framework must be developed. As a result, in the third quarter of 2008, the Authority and La Poste conducted a set of work to revise the tariff framework.
The revision of this framework takes place at a time when the decrease in volumes appears to be confirmed in postal markets. Postcomm announced a 2 per cent decrease in the UK mail market in 2007. In the United States, where the evolution of volumes becomes less than demographic factors, the postal regulator (the Postal Regulatory Commission) mentioned a decrease of 1.6% of the priority mail volumes for 2007. This evolution of volumes will be the important constraint for postal operators who will have to adapt the level of their loads to this new environment. The period will also be marked by the total openness to the postal market as of January 1, 2011.
The Autorité considers that the principles of the second tariff framework must take into account this new context and the first tariff framework.
The Authority retains a number of objectives on which both parties had agreed for the first supervision. The Authority considered that the following requirements should be maintained:
- the rate frame must allow the operator to maintain its margin, provided that it achieves the efficiency gains provided by the contract in the current market environment, and ensure that part of these gains benefit users;
– it must give the operator multi-year visibility; this visibility will enable it to change the pricing structure in accordance with the tariff principles of the universal postal service;
―it must be incentive for the operator, allowing the efficiency gains that it achieves beyond the strictly necessary level of compliance with the supervision constraint to return to it in its entirety;
―it must take into account the evolution of the context of the mail markets, characterized by a decrease in the volume of mail sent;
―he must understand the risk of this evolution on the operator's economic equation, spreading it fairly between the operator and the users.
In view of the significant risk represented by the decrease in mail volumes processed by La Poste, the Autorité has carefully studied the structure of La Poste margins. The analyses carried out on the basis of La Poste's tariff applications during the first tariff framework were introduced in the joint work carried out between La Poste and the Autorité.
The Autorité has conducted analyses of La Poste's tariff policy and the structure of the margins of all product families of the universal service offer. These analyses made it possible to point out that La Poste consistently increased all of the egregated products with very different margins. Thus, the uniform increase in egregated products mechanically amplifies the margin of products already having significant margins. The Autorité wishes that the postal operator pursue a goal of rebalancing the results of all products. It was therefore necessary to add to the general constraint on the evolution of prices a sub-traint that will focus on the egregated products at higher margins, that is, products freed by machine to free.
At the end of the joint work, La Poste submitted to the Authority a proposal concerning the multi-year supervision of the tariffs of the universal postal service, namely an overall increase in the rates of services under the universal postal service of 2.3% on average annually over the period from 1 January 2009 to 31 December 2011 with a limited increase of 2% on average annual on the prices of egregated products released by machine.
The forwarded file includes information to assess the context in which La Poste is located and to assess the assumptions, relating to the evolution of charges and the evolution of volumes, formulated by La Poste to support its proposed tariff framework.



I. ― The basis of the tariff framework


The tariff framework is a contract between the regulator and the regulated entity, whose objective is to regulate the tariff trajectory of all or part of the products in the sector on which the regulation relates, with a view to maintaining, through an efficiency effort, the margin rate of the constant company over a specified period of time. The choice of a three-year time horizon seemed to be wise given that Article L. 5-2 of the Post and Electronic Communications Code imposes a minimum of two years and that a higher period, for example, five years, appeared too long with regard to the possible forecast of major economic indicators.


I-1. The principle of supervision


The Autorité retains the general principle of supervision developed in 2006, but introduces the conclusions of its analyses based on La Poste's tariff applications during the first tariff framework.
The margin rate is maintained constant if, at any expense variation, corresponds to an identical change in turnover. The evolution of each of these two variables is determined by several factors.
The increase in turnover depends on the combined evolution of volumes and rates. The elasticity of demand in relation to the price, however, moderates the purely mechanical effects of price change. The loads, on the other hand, follow a basic trend that modulates to the margin, on the one hand, the possible variation of the efficiency effort (endogenous factor), on the other hand, the possible modification of the natural trend of the volume of activity (basically exogenous factor). When the natural evolution of the volume of activity is stable and correctly anticipated, and when the efficiency effort is set at its tendential level, the equalization of the rate of change in turnover to the reference evolution of the loads structurally ensures the retention of the margin rate.
This harmonization of income and expense changes leads to the expression of the rate of tariff supervision based on the rate of inflation and the required effort of efficiency, taking into account the natural evolution of the volume, required to maintain the rate of profitability. This relationship is no other than the rate frame contract.
Taking into account the AMF's analysis of La Poste's tariff applications, it was possible to identify that La Poste increased uniformly all of the egregated products with very different margins.
The overall result of La Poste in 2007 on products of the universal service (excluding press and import mail) presents a margin rate in full cost of [...]. This result can be decomposed by shipments according to the type of transmitters (SMEs, large transmitters and individuals). The family of products composed by the letter machine to affranchir, the ecopli machine to affranchir and the recommended letter machine to affranchir, whose transmitters are rather SMEs, presents a margin rate in full cost of [...] while it is of [...] for industrial shipments issued by large transmitters. Finally, a third family made up of products, industrial products and freed by a flawed machine and rather emitted by households has a deficit of [...].
Analysis of these results shows that products freed by affranchir machine have the highest margin rates. Yet, La Poste evenly increases the egregated products freed by postage stamp and by a flawed machine. This choice mechanically amplifies the margin of the latter while they already have the most important margins. The AMF wishes that the postal operator rebalances the results of all products and, to do so, a specific constraint is introduced for the supervision of the prices of the egregated consignments making the highest margins, i.e., the consignments freed by machine to affranchir.


I-2. Layout formulas


The annual rate of price change imposed by the rate frame is dp/p = i ― X where i refers to the rate of inflation and X refers to the efficiency factor. This formula applies to all rates of a global basket made up of universal service products.
This formula gives La Poste flexibility of tariff evolution of the various services that compose the global basket. However, with a view to rebalancing the margin rates, a sub-panar is forced more strongly; This is the basket of the egregated products freed by affranchir machine. Thus, the average annual price evolution of this basket is written dpm/pm = i where i refers to the rate of inflation.
After analyzing the determinants of postal costs and the evolution of postal rates over the recent period, the Autorité chose as a reference to inflation the Consumer Price Index.


I-3. Factor X


The factor X is equal to the evolution of the average cost expressed in real terms, corrected by the effect of the elasticity of the demand, namely X = (i + t ― dc/c)/(1 + e), where t is the natural trend of the volume (the evolution of the volume that would be observed if the prices followed inflation), dc/c is the evolution of the charges and e is the elasticity of the demand
The contracting variable is factor X; if the actual effort is greater than the minimum effort required, then the profitability gain obtained is acquired from the company; if the change in expenses results in an effort made less than the minimum effort required, the company suffers the resulting loss of profitability.
Therefore, at the initial date of the contract, it is necessary to calculate the evolution of the expected loads over the period under review and to anticipate the value of the two exogenous variables that are the rate of inflation and the natural trend of the volume: the authorized evolution of the rates is deducted from the minimum required level of the efficiency effort.


II. ― Average values for 2009-2011


The increase in consumer price index was estimated at 2% per year.
The assumptions used by the AMF to set the value of the maximum increase in rates are an evolution of La Poste charges by 0.9 per cent per year and an evolution of the volume of ― 1.3 per cent per year that is consistent with the trend observed on economic volumes.
Hence factor X equals (2 ― 1.3 ― 0.9/(1 ― 0.28) = ― 0.3. This reflects the fact that La Poste, despite sustained productivity efforts, is located in an area where productivity gains are offset by a forecast to decrease its volume of activity and the rigidity of its loads.


III. ― Adjustment


The adjustment covers two parameters: inflation and volume. The implementation of this adjustment will not be automatic but will be triggered either at the request of the Authority or at the request of La Poste. The inflation adjustment covers the overall basket as well as the subpanier while the volume adjustment only covers the overall basket.
The value of inflation for the rate frame corresponds to the forecast of the finance bill. This forecast known in the previous fall of the year of application allows La Poste to establish its forecasts of tariff changes. Thus, the estimate of the inflation rate of 2.0 per cent with initialization will be updated for the second and third years of the supervision. In addition, there was a need to make an adjustment in the event that the observed inflation would deviate from the increase or decrease of more than 25% of the inflation provided by the Finance Act. Thus, in the event of a significant increase in inflation observed in relation to the forecasting of the finance bill, the tariff constraint is released, whereas in the case of a significant decrease the rate frame is tightened. In both cases, the adjustment is limited to 50% of the observed deviation.
In the event of a decrease in volumes above the estimated trend for a given year, the tariff constraint is released to allow La Poste to adjust its revenues. Conversely, if the observed evolution is more favourable, the rate frame is tightened and the gain of efficiency acquired mechanically benefits the consumer. In both cases, the adjustment is limited to 50% / (1 ― 0.28), or % of the observed deviation.


IV. ― Other provisions


The Post and the Authority agreed to make a regular point on prices and volumes, at least twice a year, on the basis of information provided by La Poste. The Authority will report on an annual basis on the tariff framework for the past year.
The multi-year rate framework for the universal postal service is established for the period from January 1, 2009 to December 31, 2011 on a basis that corresponds to the general environment and to forecasts of evolution prevailing to date. If one or more components of this environment were to be substantially altered during the period, questioning the underlying economic balance, the device would be re-examined, on the proposal of La Poste or ex officio at the initiative of the Authority, to adapt, as appropriate, the terms and conditions for the execution of the tariff frame. In particular, in the event of a change in the tax system of benefits subject to the decision, the tariff framework would be reviewed,
Decides:

Article 1


The multi-year supervision of tariffs for the universal postal service will be carried out in accordance with the terms set out in the document annexed to this decision.

Article 2


The Director General of the Authority is responsible for notifying La Poste this decision and ensuring its execution. It will be made public, subject to secrets protected by law, and published on the AMF website and in the Official Journal of the French Republic.

  • Annex

    A N N E X E
    MODALITIES OF THE POSTAL UNIVERSAL SERVICE TARIFS
    I. ∙ The device

    The period and year of reference:
    The contract covers the period 2009-2011, three years. The year 2008 is the base year.
    The overall tariff framework:
    The average annual price change for universal postal service over the period (1) is equal to:
    dp/p = i ― X
    where:
    i is the annual reference inflation over the period;
    X is the efficiency factor.
    The tariff frame applied on a restricted basket:
    To this global constraint, is added a substraint on a restricted basket composed of egregated products freed by a flawed machine. The average annual price of this basket is equal to:
    dpm/pm = i
    i is the annual reference inflation over the period.
    The changes in the conditions of access to this mode of postage that may have an effect on the composition of the basket are brought to the attention of the Authority.

    II. ― Initialization

    For the period 2009-2011, factor X is equal to 0.3 as follows:
    inflation = 2% per year;
    ― evolution of volume = ― 1.3% per year.
    The value attributed to the multi-year change in tariffs for the universal postal service is therefore 2.3% on an annual average.
    The value attributed to the multi-year evolution of the restricted basket rates is therefore equal to 2% on an annual average.
    Measuring the annual price of universal service:
    For a specific year (n), the annual evolution of the price of universal service is calculated as the evolution of the average price in year (n) compared to the year (n ― 1) of the basket of the year (n ― 2):
    (dp/p)n = Σ [(Pn―Pn).n-2 /∑/[Pn-1.Qn-2]
    The calculation of the annual average price of a basket is made prorated by the number of days.
    The Post will communicate annually the detailed composition of this basket according to the decomposition of the tariff grid (approximately 500 items). The synthesis evaluations will be built in the attached format. This information will be prepared by La Poste from its regulatory accounting.
    Measuring the evolution of volumes:
    The volume considered is the volume sent by La Poste on the perimeter of the basket determined for the rate frame. Its evolution is measured by a Paasche index weighting traffics (physical quantity of objects) by prices,
    (dq/q)n = Σ[Pn.(Qn ―Qn―1)]/∑[Pn.Qn―1]
    what is equivalent to the evolution of turnover (dr/r) at constant prices:
    (dq/q)n = (dr/r)n ― (dp/p)n.
    This is the last formula that will be used for the calculation.

    III. - Adjustment mechanisms

    Inflation Adjustment Mechanism:
    Inflation changes are taken into account annually by taking as a new benchmark the inflation rate assumed by the finance law (in). In addition, an additional patch is applied in year n when the actual inflation rate (in-1) was more than 25% of the inflation rate of the finance law that was retained in the previous year (in-1).
    The adjustment is made in the form below (2):
    n = 1 : i 1 * = i1
    n = 2 or 3 in* = In if in-1/in-1< = 25%
    in* = in + Δin-1/2 if Δin-1/in-1
    with Δin-1 = În-1 - In-1
    where ΔIn-1 refers to the difference between the inflation rate actually observed for the year (n ― 1) and the inflation rate of the finance law in the year (n ― 1).
    This adjustment mechanism is implemented for the overall basket and under basket. The implementation of this mechanism is not automatic but triggered at the request either from La Poste or the Autorité.
    Volume Adjustment Mechanism:
    The volume adjustment mechanism is implemented to take into account the discrepancies between observed values and initialized values.
    The volume prediction adjustment is based on the formula below (3):
    p1 = i1* ― X;
    p2 = (i2* ― X) - b. Δ1 ;
    p3 = (i3* ― X) - b. Δ2 ;
    with b = 0.7.
    Δ n means the difference between evolution (dq/q) measured on average slippery over three years, i.e. over the period [n ― 2, n], on the one hand, and the initialization hypothesis, on the other. Thus, the first adjustment will be made in 2010 (year 2), with the measurement for 2009 (year 1) of the difference (Δ)1) between the average over the period (2007-2009) of the volume variation and ―1.3%.
    This adjustment mechanism is only about the overall basket. The implementation of this mechanism is not automatic but triggered at the request either from La Poste or the Autorité.

    IV. - Reporting

    Four annual volume statistics will be reported annually by La Poste:
    – no later than May 30 of the year (n + l) for the year (n), the number of objects and the overall turnover corresponding to aggregates:
    ― letter (out of election) in isolating machine modality to affranchir;
    ―ecopli (excluding election) by isolating machine modality to affranchir;
    ― postage;
    • recommended letter (in isolating the machine modality to affranchir) and declared value;
    – international mail export;
    – Universal service package;
    - no later than September 15 of the year (n + l) for the year n, the detailed annual statistics (number of objects or products and sales) corresponding to the basket of the universal service;
    - no later than September 15 of the year (n + l) for the year n, the detailed annual statistics (number of objects or products and turnover) corresponding to the restricted basket;
    – no later than September 15 of the year (n + l) for the year n, a complete information (number and turnover) on the total of the items routed by La Poste, by distinguishing the mail flows from those of the parcel and, on the perimeter of the universal service, a complete information on the passage of the revenue calculated from the statistics transmitted by La Poste in the context of this rate-accounting device. The methods of allocation followed will need to be explained by a detailed study to ensure that the revenue calculated under the tariff framework and that of regulatory accounting will be realized. It will be reviewed as part of the annual regulatory audit.

    V. - Management of the device

    The rate constraint is defined on an annual average over the entire period, allowing annual movements to be, within the reasonable limits, below or beyond the average annual change.
    The deferral mechanism, more or less, from one year to another, is consistent with this property: if the actual evolution, the year n, of the price of the universal postal service deviates from the fixed course, adjustments including, for this year n, the deviation is deferred the following year in the appropriate sense.
    In the event of a change in the tax system of benefits subject to the decision, the tariff framework would be reviewed.
    After consultation with La Poste's services, AMF will provide an annual balance sheet of the last year's tariff framework.

    VI. - The synthetic composition of the global basket

    I. - Letter (out of elections):
    - postage stamp;
    ― machinery to be freed;
    - industrial.
    II. - Ecopli:
    - postage stamp;
    ― machinery to be freed;
    - industrial.
    III. - Publipostage :
    non-industrial;
    - industrial.
    IV. - Recommended letter and declared value.
    V. - International export mail.
    VI. - Colis of universal service out of import.
    VII. - Mobility range (number of contracts).

    VII. - Synthetic composition of the restricted basket

    Letter machine to clear (4).
    Ecopli machine affranchir (5).
    Recommended letter machine to clear (6).

    (1) The average annual price evolution of the Universal Postal Service over the period is defined as the geometric mean of annual price changes of the Universal Postal Service in the years 2009, 2010 and 2011.
    (2) It should be noted that factor X remains unchanged over the period.
    (3) It should be noted that factor X remains unchanged over the period.
    (4) In terms of regulatory accounting.
    (5) In terms of regulatory accounting.
    (6) In terms of regulatory accounting.


Done in Paris, November 18, 2008.


The president,

P. Champsaur


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