Country sheet: Iceland - CIRCABC · Addressed mail volume per capita 167 Status of NPO State owned Main divisions of NPO Mail, parcels, express, counter and financial services Note:

Country sheet: Iceland 437

Country sheet: Iceland

1.1 Summary

Mail market characteristics

(i) Iceland is a very sparsely populated island;

(ii) The Icelandic postal market is small compared to other European countries.

Regulatory developments

• Having signed the Agreement on the European Economic Area, Iceland has made a commitment to adopt all of the EC Directives in the fields of electronic communications and postal services. Consequently, the reserved area has been reduced to 50g per 1 January 2006 and Iceland has defined the universal service in line with the EC directives. Direct mail and cross border mail weighing less than 50g are part of the reserved area.

• The NPO is required to publish accounts and within them there must be an analysis

between revenues and expenses across reserved, USO non-reserved and non-USO non-reserved services. All areas recorded an operating profit in 2006 and 2007.

Market developments

• Because of the size and demographics of Iceland, the mail market is not developed as in other Western European States. There is one competitor (Pósthúsid), which mainly deals with unaddressed items.

• Iceland Post remains the dominant player in all postal market segments including

express where it is an agent for TNT. TNT Express is run as a separate division within Iceland Post with separate accounting. Iceland Post owns the print firm Samskipti.

• According to a ruling of the Competition Authority, private operators have

downstream access to Iceland Post’s network for transport and delivery of letter mail items outside the scope of the reserved area in towns with 500 addresses or less.

• Pósthúsid uses downstream access for unaddressed items, direct mail and

newspapers/periodicals. Pósthúsið offers its customers a variety of services, including delivery of magazines and mass mailings, packing and handling of goods and delivery.

• In the short term, it is unlikely that competition will develop in the addressed mail

market because of the reserved area.

Annex II: Main Developments in the Postal Sector (2006-2008) 438

Other issues

• Iceland Post has calculated the cost of the USO as the cost of maintaining the current level of postal services (post offices and delivery) in towns and areas where competition is unlikely to develop (villages and rural areas). Iceland Post receives no funding towards the cost of the USO other than through postal tariffs. The NRA has not calculated the cost of the USO from an economic perspective.

• Based on an ECORYS calculation using Iceland Post’s 2007 Annual Report, from an

accounting perspective, in 2007 the operating cost (accounting – not net cost) of the USO services was reported as 38m euro in 2007, and 35.7m euro in 2006. This was an increase of 6.4%. In the same period labour costs increased by 10.5%.

• All employees, except top-level management, are unionised. The relationship

between management and unions is cooperative. Icelandic labour unions are decentralised and non-political. For many years some of them have broadly supported wage restraint under tripartite agreements with employers and the government.

Discussion Points

• The development of competition is substantially hindered by both the geographic conditions and the reserved area.

• There seem to be some uncertainty concerning the individual license, as article 15 of

the Postal Services Act states that a licence may include “one or more” of the mentioned requirements. ECORYS is of the opinion that ambiguity concerning an individual license is a source of legal uncertainty and, hence, a barrier to entry to competitor postal operators.

Summary information on market developments: Postal market segment / aspect Competition (market shares) Main competitors / remarks

Express NPO > 95% The NPO is an agent for TNT

Express

Parcel (main players) NPO > 95%

Unaddressed NPO > 90% Pósthúsið

Cross border mail NPO > 95%

Addressed mail (market share CPOs)* < 2 Pósthúsið

Population density (inhabitants/km2) 2.9

Total addressed mail market (items) 0.05 billion items

Addressed mail volume per capita 167

Status of NPO State owned

Main divisions of NPO Mail, parcels, express, counter

and financial services

Note: * The market share of CPOs refers to the combined market share of CPOs in domestic addressed mail

delivery, excluding newspaper delivery. All figures refer to 2007.


Summary information on the implementation of the Postal Directive: Aspect Implementation and remarks

Universal service and its

financing

The USO is in excess of minimum requirements included in the EC postal

directives. The published accounts show the USO to be profit making The NRA

has not calculated the economic cost of the USO.

Reserved area Iceland implemented the 50g limit in 2006; the reserved area includes bulk (direct)

mail and cross-border mail.

Licensing and network

access

Postal services may not be operated without a general authorisation or individual

licence, as granted by the NRA, except in the case of postal items sent within a

company, including those sent between different places of business of that

company.

Downstream access is available to other operators via a ruling by the Competition

Authority.

Tariff principles and

transparency of accounts

Iceland Post is required through legislation to publish accounts and within them

there must be an analysis between revenues and expenses across reserved, USO

non-reserved and non-USO non-reserved services.

The tariff of an individual licence holder for providing universal services (the NPO)

is subject to supervision by the NRA [ex post] and individual licence holder’s tariffs

for services covered by exclusive rights (the reserved area) are subject to the

NRA’s [ex ante] approval.

Quality of services Targets of 85% next day delivery and 97% delivery within three days of posting

have been set by the NRA. Other targets are in line with EC requirements. CEN

standards are applied.

All national and cross border targets have been met or bettered.

The national regulatory

authority

The NRA is the Post and Telecom Administration (PTA). PTA is responsible for

administration of electronic communications and postal affairs in Iceland, as

provided for in the Act on the Post and Telecom Administration and other

legislation. PTA is an independent institution under the ultimate administration of

the Minister of Communications.

1.2 General information1

Iceland is the most sparsely populated country in Europe with an average of about three inhabitants per square kilometre. Almost four-fifths of the country is uninhabited and mostly uninhabitable, the population being concentrated in a narrow coastal belt, valleys and the southwest corner of the country. In July 2006 Iceland's population totalled 304,334 people of which around 190,000 lived in the capital, Reykjavik, and surrounding areas. Iceland achieved an impressive economic record for most of the 1990s, with one of the highest consistent growth rates in the world and low inflation and unemployment. Among

1 Source: www.iceland.is.


the factors contributing to economic growth have been successful resource management in the mainstay fisheries sector, price stability, diversification of industry, privatisation, liberalization and deregulation, development of the Iceland Stock Exchange, growth in foreign investment and business-friendly tax reforms. The Ministry of Communications deals with matters concerning: • Planning of land, air and sea transport operations; • Roads and road construction; • Surface transportation and vehicle monitoring; • Aviation and airports; • Navigation and legal registration of seamen and their occupational rights; • Lighthouses, harbours and breakwaters; • Safety in transportation and accident inspection; • Telecommunications; • Postal services. In terms of employment, the services sector in Iceland is by far the most important, covering 71.8% of the workforce in 2005. This figure is comparable to those in the other OECD countries. The major individual sectors are health services (15.2%), wholesale and retail trade (13.9%), real estate and business activities (9.3%), education (7.4%) and transport and communications (7.2%). The postal sector provides less than 1% of employment

Table 0.1 General country information (2007)

Iceland

Population (in million) 0.3*

Size of the country (1,000 km2) 103.0*

Population density (inhabitants/km2) 2.9*

Degree of urbanisation 92.8**

Number (and percentage) of inhabitants 5 largest cities 0.2 million (69%)***

Sources: * UPU (2006), ** UN (2005), *** World Gazetteer (2008 estimation).

1.3 Regulatory developments

The Postal Services Act was introduced in April 2002 and applies to postal services consistent with the Directive. The responsibilities and powers of the NRA were established in 2003 with the Act on the Post and Telecom Administration

1.3.1 Postal law and regulation

The legal framework for postal services is influenced by the directives of the European Commission. Having signed the Agreement on the European Economic Area Iceland has


made a commitment to adopt all the EC Directives in the fields of electronic communications and postal services. 2 The Electronic Communications Act and the Act on the Post and Telecom Administration (PTA), both of which were passed in 2003, implement the major provisions of the EU Communications Directive package of 2002.

Similarly the Act on Postal Services from 2002 implements especially with respect to universal services the corresponding provisions of the Postal Directive. The Act contains a number of provisions either mandating or authorising the Minister of Transport and Communications to issue regulations to complement the Acts. In some cases the PTA (the NRA) is either mandated or authorised to issue rules about the implementation of certain aspects of the Acts.

Table 0.2 Postal law and regulation

Postal law and

regulation

Date of introduction Date of latest

amendment

Remarks

Postal Services Act 3rd April 2002 Amended by Act

136/2002 (entered into

force 1 Jan. 2003; EEA

legislation: Annex XI.

Directive 97/39/EC).

This Act shall apply to

postal services, including

the clearance, sorting,

transport and delivery of

postal items for payment,

and related activities.

Act on the Post and

Telecom Administration

25th July 2003 1

st January 2007 The Post and Telecom

Administration (PTA) is

responsible for

administration of

electronic

communications and

postal affairs in Iceland,

as provided for in this Act

and other legislation.

PTA is an independent

institution under the

ultimate administration of

the Minister of

Communications.

Source: The Post and Telecom Administration in Iceland (PTA).

1.3.2 Universal Service Obligation

The universal service includes, as a minimum, access to postal delivery and postal services for addressed items of correspondence and messages, other addressed items,

2 Source: The Post and Telecom Administration in Iceland (PTA).


direct mail and daily newspapers, weeklies, periodicals, addressed books and catalogues, registered items, insured items, financial items and Braille material up to two kg in weight and postal parcels of up to 20 kg in weight. The Universal service includes both domestic and cross-border postal items. Providers of universal services must deliver within Iceland postal parcels received from abroad weighing up to 20 kg.3 Other than the requirement referenced above that the USO includes postal services for Braille material, there does not appear to be any other special provisions for blind and partially sighted persons. Iceland Post has calculated the cost of the USO as the cost of maintaining the current level of postal services (post offices and delivery) in towns and areas where competition is unlikely to develop (villages and rural areas). 4 Iceland Post receives no funding towards the cost other than through postal tariffs. The PTA has not calculated the economic cost of the USO. From an accounting perspective, in 2007 the operating cost (accounting – not net cost) of the USO services was reported as 38m euro in 2007, and 35.7m euro in 2006, an increase of 6.4%.5 In the same period labour costs increased by 10.5%

1.3.3 Reserved area

From 1 January 2003 to 1 January 2006, the Icelandic state had exclusive rights to postal services for items of correspondence of up to 100 g in weight, provided the postage fee for the item is less than three times the minimum charge applicable for ordinary items of correspondence within Iceland.6 The same applies to distribution within Iceland of letters from abroad within these same limits.

As of 1 January 2006 (Act No. 136/2002, Article 1) the weight limits provided for in the Article were changed to 50 g and the value 2.5 times the minimum postage fee, (cf. Article 7 of the same Act). The Icelandic state has exclusive rights to issue postage stamps.

The Icelandic state has exclusive rights to place letterboxes in publicly accessible locations. The NRA may, however, grant other individual licence holders than those entrusted with the state’s exclusive rights, authorisation to set up letter boxes in publicly accessible locations, provided they are clearly marked as belonging to the individual licence holder concerned. The NRA (PTA) may adopt rules on the number and location of letterboxes, which individual licence holders may set up.

3 Source: PTA Website.

4 Source: ECORYS questionnaire to Iceland Post.

5 Source: ECORYS calculation using Iceland Post 2007 Annual Report.



Table 0.3 Liberalisation of postal services and the reserved area (2008)

Postal product Within reserved area

(Yes, no, partially or unclear)

Remarks

Bulk mail and consolidation

(addressed)

Yes When deemed to be “items of

correspondence” and below 50

grams

B2B non-bulk mail Partially Inter company mail excluded when

carried by that company and items

of correspondence above 50 grams

Individual item mail Yes Under 50 grams only

Cross border mail Partially Includes items of correspondence

below 50 grams, inbound only

Unaddressed mail No

Parcel mail No

Express mail No


There are no plans currently for any changes to the reserved area in advance of the requirements of the new Directive (2008-06).

1.3.4 NRA

The Post and Telecom Administration (PTA) is responsible for administration of electronic communications and postal affairs in Iceland, as provided for in the Act on the Post and Telecom Administration and other legislation.7 The PTA is an independent institution under the ultimate administration of the Minister of Communications. The PTA and the Competition and Fair Trade Authority jointly adopt guidelines

on procedures concerning and resolution of cases covered both by Acts on postal and electronic communications affairs and the Competition Act. These rules are made public.

The NRA has authorised an individual licence holder to exercise the state’s exclusive rights as provided for in the Act. Capacities of the NRA

The NRA is responsible for:8 1. Implementing the Postal Service Act and supervising postal services, as provided

for in detail in the respective Acts. The NRA is required to enforce the Acts and support the achievement of their objectives;




2. Encouraging competition in postal services and prevent unfair business practices, for instance, by working to prevent distortion or limitation of competition on postal service markets;

3. Participating in developing the market for postal service for instance, by: a. Working to remove obstacles to the provision postal services; b. Contributing to ensuring non-discriminatory treatment of postal operators

in similar circumstances; 4. Safeguarding the public interest, for instance, by:

c. Working to ensure that all Icelanders have access to universal service; d. Contributing to protection of consumers in their dealings postal operators; e. Working on measures to protect personal data and privacy; f. Contributing to the publication of clear and comprehensible information

for users and demanding transparent prices and conditions for the use of postal services;

g. Protecting the interests of users, including individual social groups, such as the disabled, to the greatest extent possible with regard to selection, price and quality;

h. Ensuring that the integrity and security of public communications networks are maintained.

5. Serving as an advisor to the authorities and ministries in the area postal affairs and ensuring that Iceland always fulfils the obligations set out in international agreements on postal affairs. If necessary, the NRA willl make recommendations to the Minister of Communications for amendments to Acts and Regulations;

6. Participating in co-operation resulting from international obligations in postal affairs;

7. Other activities connected to the implementation of postal affairs. Iceland Post pays an annual fee of 0.25% of the company’s turnover to the NRA. 9 The Postal Services Act requires that: 10 • Individual licence holders shall draw up rules on handling of complaints from users; • Postal operators are not obliged to pay compensation if postal items are delayed; • Postal operators are not obliged to pay compensation for the total or partial loss of

general postal items. However, a sender of registered items and postal parcels is entitled to compensation for such items, which are completely or partially lost or destroyed in the custody of postal operators. The compensation shall reflect the value of the items. The NRA sets rules on the maximum liability for which postal operators are responsible in this area. Insured items are also covered to the value of insurance. Compensation for cross-border postal items is made as provided for in the applicable international agreements.

9 Source: ECORYS questionnaire to Iceland Post.



The NRA may, in special instances, instruct a postal operator, in spite of the limits on liability, to pay compensation for postal items if the loss is the result of intent or gross negligence on the part of the operator or its employees. The NRA will also take complaints from consumers with the aim of providing a resolution. The following table provide the mail regulatory powers of the NRA.

Table 0.4 Regulatory powers NRA

Powers Yes/No/Unclear Remarks

Require data from USP Yes Postal operators are obliged to deliver to PTA, within the

reasonable time limit that it decides, statistical information on

their activities, including the total number of posted items in

various service and weight classes, figures on the quantities

handled by individual access points, information on distribution

at various locations, etc.

The PTA may demand from parties pursuing activities covered

by the Act on postal services all information considered

necessary to investigate individual cases.

Require accounting

system

Yes In their accounts, individual licence holders must keep income

and expenses arising from universal service separate from

other services. An individual licence holder, entrusted with the

state’s exclusive rights must keep separate accounts of income

and expenses for those types of service covered by the

exclusive rights and for universal service. Postal operators

carrying out licensed operations in other areas as well must

keep income and expenses from their postal operations

separate from other income and expenses.

The annual financial statements of individual licence holders

shall be prepared as provided for by the Acts on Accounting

and on Annual Financial Statements and shall be made public

Require new data studies Yes See “Requires Data from USP”

Cancel unlawful rates Unclear May be covered by Articles 9 (Resolution of disputes between

electronic communications undertakings and postal operators)

and 10 (Complaints) of the Act on the Post and Telecom

Administration

Levy Fines Yes PTA may impose and collect fines postal operators failing to

fulfil the obligations prescribed for them or other commitments

imposed upon them in accordance with the Postal Services Act.

Fines may be from ISK 50,000 (∈540) to ISK 500,000 per day

(∈5400)

Seek judicial order Yes Rulings by PTA may be referred to a special committee, the

Rulings Committee for electronic communications and postal

affairs. The Rulings Committee for electronic communications

and postal affairs shall be comprised of three persons

appointed by the Minister of Transport and Communication and

an equal number of alternates, all of them following nominations


Powers Yes/No/Unclear Remarks

by the Supreme Court of Iceland. The Chairman and alternate

Chairman shall fulfil the conditions of eligibility for Supreme

Court judges.

Set new rates for USP Yes covered by Articles 9 (Resolution of disputes between electronic

communications undertakings and postal operators) and 10

(Complaints) of the Act on the Post and Telecom

Administration. Although tariffs for the reserved area to have to

be approved by the PTA

Require downstream

access

Yes

Require data from non-

USPs

Yes


1.3.5 Licenses

Licence and authorisation procedures;

Postal services may not be operated without a general authorisation or individual licence, as granted by the PTA, except in the case of postal items sent within a company, including those sent between different places of business of that company. 11

A general authorisation confers the right to operate, in accordance with the provisions of the Postal Services Act and rules adopted by PTA, postal services other than universal service. General authorisations do not confer special rights. Parties to whom PTA has granted individual licences after application may only provide services included under universal service.

Table 0.5 Entry regulations

Instrument Services allowed

under the license

Conditions for obtaining the

licence

Number of licences

approved (2007)

General Authorisation Non USO Parties intending to operate postal

services under a general

authorisation shall notify PTA of their

intention no later than four weeks

prior to commencing services. The

PTA shall be notified as to what

persons are behind the activities, their

holdings, the financial status of the

party and what services are

envisaged. PTA shall, within three

weeks, notify the party concerned

1

11

Source: PTA Website.


Instrument Services allowed

under the license

Conditions for obtaining the

licence

Number of licences

approved (2007)

whether it will be required to apply for

an individual licence or else register

the party as a postal operator with a

general authorisation.

Individual Licence USO The application must give details of

those persons making the application,

their holdings, financial status and

what services are envisaged. In

granting licences, PTA may impose

obligations to provide universal

service throughout Iceland or specific

aspects of universal service in a

specified area.

Postal items under 50 grms are

Reserved to the State.

2


Analysis of requirements

The requirements for the General Authorisation are relatively minimal and seem to be primarily based upon financial stability. It would appear that only Express and Parcels over 20kg are out-with the USO definition. Individual Licence requirements are more onerous and are covered by Article 15 of the Postal Services Act; The conditions for individual licences may include one or more of the following: 12

a. Ensuring that the public have access to universal service; b. That the individual licence holder assume the obligations of the state

arising from its exclusive rights; c. That the tariff of an individual licence holder for universal service be

subject to supervision by the PTA and that an individual licence holder’s tariffs for services covered by exclusive rights be subject to the PTA’s approval;

d. That the individual licence holder keeps its accounts as provided for in Article 18 and provides PTA with any information it requests on the accounts and access to them;

e. That requirements concerning quality and service are fulfilled; f. That the individual licence holder may be subjected at all times to

supervision by the PTA of its financial position, with respect to possible risk of discontinuation of operations;

12

Source: PTA\Website.


g. That a guarantee is provided for payment of cost arising from the delivery of postal items to their addressee in the case of bankruptcy or discontinuation of the operations of the individual licence holder;

h. That international agreements in the field of postal affairs concluded by the state are respected;

i. That the requirements of the second paragraph of Article 6 are fulfilled; j. The payment of a licence fee and operating fee in accordance with the

Post and Telecom Administration Act and the Act concerning Miscellaneous State Revenues.

PTA may set additional conditions if considered necessary. Such conditions must be justified when adopted. The conditions for individual licences may be altered if their premises have changed. Conditions may also be added or altered to comply with changes to Acts and rules adopted on their basis, and when international agreements give cause thereto. The PTA may also set the condition that an individual licence holder, entrusted with providing universal services, ensures that the public in certain locations is provided with access to postal services in accordance with rules

on the location and arrangements of access points adopted by PTA with regard for public needs.

Degree of uncertainty. A potential problem with the Individual Licence requirements is that the Postal Services Act says that a Licence may include “one or more” of the above requirements.

1.3.6 Access

Access to universal postal services (and access criteria)

Under the Postal Service Act, the Icelandic State is required to ensure all persons equal rights to access to certain aspects of postal services, universal service, of specified quality and at affordable prices. This requirement is delegated to the PTA, through the Ministry of Communications. The PTA shall ensure that the universal service, which one or more individual licence holders provide, fulfils the following requirements:

a. That the service offered fulfils the essential requirements; b. That all users in comparable circumstances are offered the same service; c. That the service is provided without discrimination of any sort, especially

without political, religious or ideological discrimination; d. That service will not be suspended, except due to unforeseen

circumstances; e. That the service will evolve in response to changes in the technological,

economic and social environment and needs of users.


There does not appear to be any specific requirement as to minimum standards for access to USO services i.e. availability of Post Office counters or Letter Boxes, although the State has exclusive rights re the latter as to the sighting of. Third party access: regulated vs. negotiated

According to a ruling of the Competition Authorities private operators have downstream access to Iceland Post’s network for transport and delivery of letter mail items outside the scope of the reserved area in towns with 500 addresses or less. Pósthúsid uses downstream access for unaddressed items, direct mail and newspapers/periodicals. Details on access terms and conditions have not been made available. Iceland Post’s view on downstream access is that there is no need for a regulated downstream access as the delivery pipeline is not an essential facility and there is no entry barrier in distribution.

Table 0.6 Network access

Upstream/downstream Form of access Regulated?

(Yes, No, Unclear)

Upstream Access to street letter boxes Yes – any Individual Licence Holder

may apply to sight Letter Boxes so

long as these are clearly marked as

belonging to that Licence Holder

Access to outward sorting centres n.a.

Downstream Access to inward sorting centres Yes

Access to delivery offices Yes

Access to P.O. Boxes Not clear

Source:

Note: n.a. is not available.

1.3.7 Price regulation

There is general provision made for price regulation within the Postal Services Act as follows. Tariffs for universal service shall be based on the actual costs of providing the service plus a reasonable margin of profit. Tariffs must be easy to comprehend and non-discriminatory. PTA may require individual licence holders to account for the cost basis of their tariffs. Fees for universal service shall be affordable to the general public and ensure its access to the service. [An individual licence holder may set a special tariff for parties submitting large quantities of postal items at once or companies collecting postal items from various customers and submitting them to the individual licence holder. Such special tariffs shall be based on the expense saved as compared to usual postal services.] An individual licence holder, entrusted with the state’s exclusive rights, must issue a special tariff for services covered by exclusive rights. [Income from services covered by


exclusive rights may not be used to subsidise fees for universal service not covered by exclusive rights unless it has been demonstrated that this is directly necessary to comply with special universal service obligations to which an individual licence holder is subject.]

The tariff must be submitted to PTA for approval no later than 15 working days prior to its entry into force. Postal items, which are carried without charge in accordance with international agreements, shall also be free of charge within Iceland. In addition to the above, an Individual Licence holder has the following requirement; That the tariff of an individual licence holder for universal service be subject to supervision by the PTA and that an individual licence holder’s tariffs for services covered by exclusive rights be subject to the PTA’s approval. 13 Given that all but Express and heavy Parcels are within the definition of the USO, then the vast majority of postal services are subject to a watching brief by the PTA and in the case of reserved services, an approval process, although with a review period of just 15 days, this would appear to leave little time for any in depth analysis. Transparency of USP accounts and price regulation, application of tariff principles.

The USP is required by legislation to publish accounts and within them there is an analysis between revenues and expenses across the Reserved, USO non- reserved and non-USO non-reserved. All area recorded an operating profit in 2006 and 2007. The Post- and Telecom Administration, the State Auditor and the Competition Authorities approve Iceland Post’s cost accounting system.

1.3.8 Quality of service

Regulation: Setting standards;

The NRA sets standards of quality for universal service.14 Such standards shall, for instance, prescribe the maximum time limit from clearance of mail to its delivery (end-to-end routing) based on a specific percentage, the minimum opening hours for access points, the number of collections from letter boxes each day, the maximum time from the arrival of mail in the country to its delivery and the maximum time limit from clearance of cross-border mail until its delivery to the transporter. The NRA may grant exemptions from quality standards in individual cases due to geographical factors or due to the distribution network of an individual licence holder.

13

Source: PTA Website. 14



Monitoring performance;

The PTA shall monitor compliance with quality standards.15 Each year PTA shall examine the quality of universal service and publish a report on its conclusions. Monitoring compliance with CEN standards

Individual licence holders shall be guided by technical standards for postal services approved by Icelandic Standards (IST). 16 The same shall apply to standards published in the EU Official Journal, in particular when their contents are covered by the provisions of Article 22 Transit time for domestic priority mail (for the latest full year)

Quality of service for domestic mail has been consistently above target and in 2006 achieved 89% compared to a target of 85%.

% of lost mail;

No information is available on the percentage of lost mail. Transit time for cross-border priority mail for the latest full year

In 2006 performance dipped to 90% for the J +3 service (from 93%) although this as still above the target of 85%.

Table 0.7 Quality of service USP

Standard Threshold Performance USP Remarks

D + 1 (domestic) 85% 89% 2006 results. Performance

from 2002 to 2005 was

steady at 88%

D + 3 (domestic) 97% 100% 2006 results. Performance

from 2002 to 2005 was

steady at 99%

[% of lost mail]

J + 3 (outbound Europe) 85% 90% 2006 result. Performance

dropped from an average

of 93% over the preceding

four years

J + 5 (outbound Europe) 97% 97% 2006 result.

Source: Iceland Post.

No information was available to ascertain if the quality of service results are measured as per CEN standards although the NRA has the following on its website.

15

Source: PTA Website. 16



“The quality of service objectives that apply in Iceland take account of the objectives set by the EU- directives for delivery between Member States. The PTA may in special cases give exemptions from the objectives on account of geographical conditions or because of limitations of the distribution network of the operator.”

1.4 The mail market

1.4.1 Mail market overall

No information was provided for the analysis of the mail market in value therefore ECORYS has estimated the breakdown based upon the revenue received by Iceland Post in 2005 and the UPU statistics for that year. The latter was not available for 2006.

Table 0.8 Size of the mail market in turnover (million Euro) values are for Iceland Post only and are for postal services

Postal product 2005 2006


B2B non-bulk mail

Individual item mail

Registered

27.5

1.4

Cross border mail 3.5

Unaddressed mail 5.5

Parcel mail

Express mail

Other

0.6

Total 38.5 44.5

Source: Iceland Post 2006 Annual Report and ECORYS estimates.

Table 0.9 Size of the mail market in physical terms (million items) – NPO data



B2B non-bulk mail


Registered

55.0

0.3

No UPU stats available for 2006

Cross border mail Outbound

Inbound

1.8

4.1

Unaddressed mail 55.4

Parcel mail

Express mail

Total 116.6

Source: UPU Statistics.

For 2007, Iceland Post reported revenues of 46.5m euro. GDP is estimated to be in the region of 8,000m euro which would suggest that the postal sector contributes in the region of 0.6% to GDP. Letter items per capita is estimated at 167.


1.4.2 B vs C

No analysis was available for the mix of business and consumer mail.

1.4.3 Market opening

The reserved area remains at 50g for the majority of addressed items and as such it is unlikely that the market open to competition is above 10% with actual competition limited to one company, dealing mainly in unaddressed items. Actual market size being competed for is likely to be less than 2% likely. There is no indication of any unlicensed or unauthorised competition.

1.4.4 Cross border mail

The only information available on cross border volumes was from the UPU statistics for 2005, which gave 1.8 million items outbound and 4.3 million items inbound.

1.4.5 Impact of innovation

There is no information available to assess any potential impact of innovation on the mail market. There is no information available on new services other than the following extract from the Iceland Post 2007 Annual Report.

“Iceland Post’s Card Web appeared on the Internet before Christmas, 2005. Customers can use the

website to order and send Christmas cards and many other types of cards. Iceland Post will see to the

rest.”

1.5 Market structure and competition

1.5.1 National postal operator/Universal Service Provider

Iceland Post is a public limited company owned 100% by the state. The financial accounts are presented between postal services and other. The latter represented nearly 11% of revenue in 2007


Table 0.10 Postal network of the national postal operator

Iceland Post 2007

Number of post offices 42

Number of postal agencies 41

Number of street letter boxes 265

Source : ECORYS questionnaire to Iceland Post.

Iceland Post does not operate banking or giro services. Services other than mail services are retail services.17 They constitute a minor part of the Post Office costs. Iceland Post has started closing some of the smallest agencies and entrusting the postal service to rural postmen (mobile post offices). This change has been successful and our customers are generally satisfied with it. Currently 5 agencies have been closed and the village/area is serviced by rural postmen.

No information was available to analyse the postal service revenues across different segments.

Table 0.11 Division of turnover of the national postal operator per market segment

Postal product 2006

(in million Euro)

%


(addressed mail)

B2B non-bulk mail


Cross border mail

Unaddressed mail

Parcel mail

Express mail

All services 45.1

Source: Iceland Post Annual Report.

The above value is the total revenues reported in the 2006 annual report. In 2007 the overall revenues had increased to 46m euro (2%). In 2007, Iceland Post reported a profit (EBIT) of 2.4m euro. Iceland Post owns the print firm Samskipti.18 Links with unaddressed mail delivery, express and logistic services operators

Iceland Post is an agent for TNT in Iceland.19 TNT Express is run as a separate division within Iceland Post with separate accounting. 17

Source: ECORYS questionnaire to Iceland Post. 18


Source: ECORYS questionnaire to Iceland Post.


Table 0.12 Overview alliances and partnerships of the national postal operator (2007)

Country Mail Express Logistics

Sweden DPD

Denmark and Norway PNL


1.5.2 Competitor postal operators

Table 0.13 Overview of main competitors on the postal market (2007)

Postal

operator

Market Volume mail

/ Turnover

mail

# of

employees

Service level

(number of

deliveries per

week)

Coverage

Pósthúsið Unaddressed

mail

Direct Mail

700 Main towns plus

use of

downstream

access

The following is from the Pósthúsið website:

“Pósthúsið is young but big and is a strong and powerful delivery company in the field of papers,

magazines and product deliveries. Our employees is about 700 in total and is growing stronger and

bigger. Our delivery area is the overall Capital area, Akureyri, Suðurnes, Selfoss and Hveragerði.”

1.5.3 Competition

Only one competitor appear active in Iceland, although Iceland Post does act as an agent for TNT Express.

Table 0.14 Number of competitors and degree of competition (2006)

Postal product Market share USP Number of

competitors

Concentration ratio

C3

Bulk mail and consolidation NPO > 99%

B2B non-bulk mail NPO > 99%

Individual item mail NPO > 99%

Cross border mail NPO > 95%

Unaddressed mail NPO > 90% 1

Parcel mail NPO > 95%

Express mail NPO > 95%

Total

Source: ECORYS estimates.


1.5.4 Competition issues

The main competition issues will be the retention of the reserved area plus the difficult geography of the country. The competition authority did rule on access for Pósthúsið to gain access to Iceland Post’s postal facilities in terms of delivery to outlying areas. No other issues were identified.

1.5.5 Results of competition

The results of competition appear to be minimal.

1.6 Customer needs

Iceland Post undertakes customer satisfaction surveys on alternate years for individuals and businesses.20 The results have not been published.

1.7 Price performance

1.7.1 Tariffs

Table 0.15 Public tariffs (in Euro)

Postal product 2005 2006 2007

Letter post 1st class 0.41 0.45 0.49

Letter post 2nd

class n.a. n.a. n.a.

Letter post cross-border 0.57 0.61 0.65

Parcels 3.97 4.29 4.66

Parcels cross border 5.55 (+1.54 per kilo) 6.03 (+1.66 per kilo) 6.56 (+1.8 per kilo)

Registered item 4.62 4.82 5.27

Insured item No longer offered. No longer offered. No longer offered.

Bulk mail, 20g Between 2.5% and

30% discount.

Between 2.5% and

30% discount.

Between 2.5% and

30% discount.


25% discount.

Between 2.5% and

25% discount.

Between 2.5% and

25% discount.


25% discount.

Between 2.5% and

25% discount.

Between 2.5% and

25% discount.

Total



20



Table 0.16 Public tariffs (in PPP)

Postal product 2005 2006 2007

Letter post 1st class 0.28 0.32 0.33

Letter post 2nd

class n.a. n.a. n.a.

Letter post cross-border 0.39 0.43 0.44

Parcels 2.71 3.02 3.18

Parcels cross border 3.78 (+1.05 per kilo) 4.24 (+1.17 per kilo) 4.47 (+1.23 per kilo)

Registered item 3.15 3.39 3.59

Insured item No longer offered. No longer offered. No longer offered.


30% discount.

Between 2.5% and

30% discount.

Between 2.5% and

30% discount.


25% discount.

Between 2.5% and

25% discount.

Between 2.5% and

25% discount.


25% discount.

Between 2.5% and

25% discount.

Between 2.5% and

25% discount.

Total

Source: conversion rate based on Eurostat data.


Evolution of public and special prices for main services

The standard tariff item increased in price by 8.9% in 2007 over 2006. Cross border items at the first weight step increased by 6.6%.

1.8 Employment aspects

1.8.1 Employment

Table 0.17 Employment in the sector, in employees and [FTE]

Operator 2005 Staff 2005 FTE 2006 Staff 2006 FTE

Iceland Post

- permanent

- flexible – part time or temporary

1184

708

476

1042

708

334

700

1058

Pósthúsið

Total

Source: Iceland post annual reports and UPU Stats.

Table 0.18 Employment by universal service provider per segment, total and [% flexible]


Mail

Express

Logistics

Total 1042 FTE

1184 SIP (40% part time)

1058 FTE

Source: Iceland Post Annual Reports 2006, 2007.


FTE in 2007 for Iceland Post was 1055. In 2005, the staff of Iceland Post represented 0.7% of the total labour force.

1.8.2 Employment conditions

Role of social partners, trade union and sector based collective agreements

The Icelandic labour market is highly unionised with more than 85% of employees belonging to unions. The major labour organisation is the Icelandic Federation of Labour (ASÍ). In all, there are 82 unions affiliated to ASÍ federations and 5 unions belonging directly to it. Total membership of these 82 unions and branches was 88,905 at the end of 2005. Private non-banking sector employers are organized into The Confederation of Icelandic Employers (Samtök atvinnulífsins, SA). SA tasks include negotiation of contracts with unions on wages and working conditions, and the interpretation and communication of decisions by governmental authorities that directly affect the financial performance of businesses at both domestic and international level. SA includes about 2,000 corporations and businesses and the organization accounts for approximately 55,100 salary-paid employees. The State is by far the largest employer in Iceland. Many of the local authorities - Reykjavik being an important exception - conduct their wage bargaining through a joint negotiation committee, and so do the banks. Labour Relations

Icelandic labour unions are decentralised and non-political. For many years some of them have broadly supported wage restraint under tripartite agreements with employers and the government. Contractual wage agreements cover general terms of employment, including a basic minimum wage, but specific terms are usually negotiated on a more job-specific basis. Collective bargaining power, in both the public and the private sectors, rests with individual labour unions. Many rights are handled by the central federations (ASÍ, BSRB and BHM). Some companies in Iceland have also introduced workplace pay agreements. In recent negotiations growing emphasis has been put on education and training for employees with the establishment of mutual educational funds and institutions. The Industrial Relations Act specifies the conditions for lawful industrial action. A strike (or other permitted form of industrial action) may be called on condition that at least 20% of the trade union members vote secretly and that the majority accepts the strike. Formal announcement of the industrial action must be sent to a mediator and the employer with 7 days' notice. Industrial action is not allowed over disputes under the jurisdiction of the Labour Court. Furthermore, the Act prohibits solidarity strikes in support of unions on illegal strikes, and bans political strikes outright.


Table 0.19 Wages as proportion of total costs (in %)

Operator 2006 2007

Iceland Post 58% 62%

Pósthúsið No data available No data available

Source : Iceland Post Annual Reports 2006, 2007.

Note: The presented percentages are including counter services; no figures excluding counter services are

available.

Iceland Post undertakes employee satisfaction surveys every year.21 Satisfaction has been increasing for the last 4 years. Results of the most recent survey (2007) show that Iceland Post is graded at 4,15 out of 5 by its employees, the average for Icelandic businesses being 4,17 out of 5. All employees, except top-level management, are unionised. The relationship between management and unions is cooperative.

1.8.3 Productivity

Table 0.20 Productivity (in items/FTE)

Operator 2005 2006

Iceland Post 111,900 No information available

Sector average

1.9 Technological developments and environment

1.9.1 External

Table 0.21 Percentage of letter mail in the communications’ market (turnover)

2005 2006

Market share letter mail No data available No data available

1.9.2 Internal

The following table represents the level of automation of Iceland Post.

21



Table 0.22 Percentage of letter mail automatically processed

2005 2006

Percentage 70% 70%

Iceland Post reported that there were no plans at present for further automation.22 However they did predict that 10-15% fewer postmen would be needed if they were to increase this percentage for example by using sorting machines to sort into delivery routes. Iceland Post does not foresee that new products in development will have any significant effect on employment levels.

1.9.3 Environment

Iceland Post’s environmental policy mainly focuses on the use of environmentally friendly energy and fuel and the recycling of waste. 23 Recent actions taken are for instance the purchase of methane cars for the delivery services and the carbon offsetting of Iceland Post’s fleet of vehicles in cooperation with the Kolvidur project. Currently 10% of the car fleet use methane as fuel. Delivery vehicles use special software that shows fuel consumption in relation to how the driver operates the vehicle (soft vs. hard acceleration etc.) All buildings use electricity from renewable sources (hydro energy) and are heated with geothermal water from renewable sources.

1.10 Sources

• ECORYS questionnaire to Iceland Post 7th April 2008. • Iceland Post 2007 Annual Report. • Iceland Post 2006 Annual Report. • www.iceland.is. • UPU 2006 Statistics. • The Post and Telecom Administration in Iceland (PTA). • PTA Website www.pta.is. • ECORYS estimates. • Invest in Iceland Agency www.invest.is. • www.posthusid.is. • Postal Services Act No. 19, 18 March 2002. • Act on the Post and Telecom Administration No. 69, 24 March 2003.

22



Documents

Country sheet: Iceland - CIRCABC · Addressed mail volume per capita 167 Status of NPO State owned Main divisions of NPO Mail, parcels, express, counter and financial services Note: