2. Price proposal compliance check

The price of items of correspondence in the national service weighting less than 50 g, sent by users of the occasional segment¹ (basic prices), must comply with the uniform tariff principle, a single price being applied throughout the national territory (paragraph 2 of article 3 of pricing criteria).

For the purpose of the application of the uniform tariff principle, the following service modalities are taken into account, in their various formats and weight steps (paragraph 3 of article 3 of pricing criteria):

a) Priority/blue mail;
b) Non-priority/standard mail;
c) Easy mail;
d) Registered mail and insured mail;
e) Legal summons and notifications service (reserved services).

Having CTT’s price proposal been analysed, the conclusion is that it complies with the uniform tariff principle.

The average weighted variation of prices of the bundle of services that includes correspondence¹, editorial mail² and parcel services must not exceed, in 2018, CPI + CPICF + 1.6% + TCF, in average nominal terms (paragraph 3 of article 8 of pricing criteria).

Consumer price index (CPI) value

According to paragraph 2 of article 2 of pricing criteria, the CPI value (for 2018) corresponds to the inflation forecasted by the Government (for 2018) and as such entered in the State Budget Report (for 2018), which is 1.4%³.

CPICF value

Taking into account paragraph 3 of article 2 of the pricing criteria, the CPICF corresponds to the difference between the inflation value forecasted in the 2018 State Budget Report for 2017, which is 1.2%⁴, and the inflation value that had been forecasted for 2017 in the 2017 State Budget Report, which was 1.5%⁵, the upper threshold value for this difference being limited to 2.5%.

As such, and bearing in mind the values mentioned above, the CPICF value is -0.3% [=1.2% - 1.5%]

TCF value

TCF, traffic correction factor, is a correction factor of the maximum price variation that takes into account deviations that take place between traffic forecasted for 2017 when the pricing criteria were defined⁶ (which was forecasted to correspond to -3.7%) and traffic that actually occurs (which was found to be -8.5%, according to the calculation formula provided for in paragraph 4 of article 2 of pricing criteria).

As a deviation by -4.8% occurs [= -8.5% - (-3.7%)], the TCF value amounts to -1.8% (=0.375 * (-4.8%)]⁷.

Maximum price variation value

Consequently, the average weighted variation of prices of the correspondence, editorial mail and parcel bundle of services must not exceed, in 2018, 4.5% [= 1.4% - 0.3% + 1.6% + 1.8%].

The price proposal presented by CTT results in an overall average annual variation by 4.5%, thereby complying with the applicable maximum price variation.

The table below shows a summary of price variations proposed by CTT, according to service, destination and segment.

Source: CTT’s Price proposal, of 15.02.2018.

Notes

nt_title

 
¹ Except for tariffs that apply in the scope of the special price regime, which is governed by article 14-A of the Postal Law, and for the notifications and postal summonses service (postal services reserved to CTT), which are applied a specific maximum price variation.
² For the sake of convenience, in the scope of this decision, “editorial mail” corresponds to all of CTT’s offerings applicable to books, newspapers, periodicals and editorial mail, in the scope of the universal postal service.
³ 2018 State Budget Report, page 18, available at Orçamento do Estado 2018 http://www.dgo.pt/politicaorcamental/Paginas/OEpagina.aspx?Ano=2018&TipoOE=Proposta+de+Or%u00e7amento+do+Estado&TipoDocumentos=Lei+%2f+Mapas+Lei+%2f+Relat%u00f3rio.
⁴ 2018 State Budget Report, page 18.
⁵ 2017 State Budget Report, page 21, available at Orçamento do Estado 2017 https://www.dgo.pt/politicaorcamental/Paginas/OEpagina.aspx?Ano=2017&TipoOE=Or%u00e7amento+Estado+Aprovado&TipoDocumentos=Lei+%2f+Mapas+Lei+%2f+Relat%u00f3rio.
⁶ In ANACOM’s determination of 21.11.2014.
⁷ By applying the respective calculation formula, laid down in paragraph 4 of article 2 of the pricing criteria.

Without prejudice to compliance with the maximum annual price variation of the correspondence, editorial mail and parcel bundle of services, in case of service modalities that present a negative margin, prices notified by CTT must result in an increase of the margin or, ultimately, the maintenance of the margin of the service modality (paragraph 5 of article 8 of pricing criteria).

ANACOM takes the view that this rule is not complied with where the margin¹ is negative in 2016 (last year for which annual data of CTT’s cost accounting system² is available) and it is estimated that it will further deteriorate up to 2018³. That is:

• Margin 2016 < 0, and
• Margin 2016 > Margin 2017 > Margin 2018.

According to the referred analysis methodology and available information, no situations where this rule is not complied with have been found.

Under article 9 of the pricing criteria, the average annual price variation of non-priority/standard mail up to 20g, in the national service, paid with stamps and postage stamps at postal establishments, must not exceed 7.5%, in nominal terms.

CTT propose for the price of stamps and postage stamps for national standard mail up to 20g, in the occasional segment (basic prices), a one-off variation, on 01.04.2018, by 6.0% (increasing from €0.50 to €0.53), which means an average annual price variation by 6.1% (Table 2) for this service, which is thus in compliance with the rule laid down.

(a) Taking into account the price of 0.47 euros that was in force from 01.01.2017 to 31.03.2017 and the price of 0.50 euros that was in force as from 01.04.2017.
(b) Taking into account the price of 0.50 euros that is in force from 01.01.2018 to 31.03.2018 and the price of 0.53 euros to be in force as from 01.04.2018.

Source: CTT letter No. 50714, of 15.02.2018

The average weighted variation of prices for reserved services (postal summonses and notifications service) must not exceed, in 2018, CPI + CPICF - 3.5%+ TCF, in average nominal terms (paragraph 2 of article 10 of pricing criteria).

CPI and CPICF correspond, respectively, to 1.4% and to -0.3% (according to the analysis already carried out in chapter 2.2).

TCF value

TCF, traffic correction factor, is a correction factor of the maximum price variation that takes into account deviations that take place between traffic forecasted for 2017, when the pricing criteria were defined (which was forecasted to correspond to -4.0%)¹ and traffic that actually occurs (which has been found to be -11.9%, according to the calculation formula provided for in paragraph 4 of article 2 of pricing criteria).

As a deviation by -7.9% occurs [= -11.9% - (-4.0%)], the TCF value amounts to 1.9%².

Maximum price variation value

This means that the maximum price variation of reserved postal services equals -0.5% [= 1.4% - 0.3% - 3.5% + 1.9%]).

CTT proposes for reserved services a nominal decrease of prices by -0.5%, in compliance with the applicable maximum price variation (Table 3).

Source: CTT and ANACOM.

Prices of postal services that integrate the universal service provision must comply with the principle of cost-orientation of prices, so as to encourage an efficient provision of the universal service [point b) of paragraph 1 of article 3 of pricing criteria].

Without prejudice to the application of specific provisions provided for in articles 8, 9 and 10 of pricing criteria, already analysed in preceding chapters, in a first analysis this Authority considers that the general principle of cost orientation of prices is not complied with where the following conditions occur:

a) Where the margin is positive in 2017 and increases in 2018;

b) Where the margin is negative and 2017 and deteriorates (is even more negative) in 2018.

Furthermore, where an increase of the positive margin or a deterioration of the negative margin is estimated, this Authority considers that the principle of cost orientation of prices is nonetheless complied with where one of the following situations occurs:

a) The price proposal represents an increase of average annual prices for a service the margin of which deteriorates;

b) The price proposal represents a reduction of average annual prices for a service the margin of which increases;

c) The margin of the service is close to zero, a margin in the range of [-5%; 5%] being deemed to be a “close to zero margin”;

d) The margin estimated for 2018 is very close to the margin for 2017, the margin being deemed to be “close” where the margin variation, in percentage points (p.p.) lies in the range of [-1 p.p.; 1 p.p.];

e) The service concerned has an irrelevant weight in the amount of total revenues of the universal postal service (weight not exceeding 0.5%).

In the light of the above, according to the referred methodology of analysis and taking into account estimates and forecasts presented by CTT for 2017 and 2018 , in the scope of the price proposal under analysis, no situations of failure to comply with the principle of cost orientation of prices were identified (Table 4).

Although it is estimated that the positive margin for a service will increase in percentage terms (international standard mail), this increase is in the range [-1 p.p.; 1 p.p.]. Moreover, the margin for this service is close to zero, given that it lies in the range [-5%; 5%]. As such, according to the referred analysis methodology and available information, it is deemed that the price proposal for this service complies with the principle of cost-orientation of prices.

Services for which the negative margin is estimated to further deteriorate (to become more negative) have not been estimated.

Source: CTT’s letter of 27.02.2018.

Prices of postal services that integrate the universal service provision must comply with the principle of affordability for all users [point a) of paragraph 1 of article 3 of pricing criteria].

When applying and checking the general principle of affordability for all users, and without prejudice to the application of specific rules provided for in articles 8, 9 and 10 of pricing criteria, analysed earlier, ANACOM must into account, in particular (article 7 of pricing criteria):

a) Family expenditure with postal services;

b) Information collected by ANACOM in the scope of postal service consumption and satisfaction surveys (for example residential and business customers);

c) Price increases that, while required in the scope of the application of the principle of cost-orientation of prices, may put at risk the commercial viability of users (companies) of the service, as the service is a critical input to their activity and service expenses play a relevant role to their financial position;

d) The need to prevent price increases from entailing sharp traffic falls, namely due to the elasticity of demand and/or its transfer to electronic communications means, with a subsequent increase of unit costs, which could lead to a spiral process jeopardizing the economic and financial viability of the universal service provision.

According to available data from the 2015/2016 Enquiry on Family Expenses pursued by INE (the National Statistical Institute), postal services have but a negligible weight in the shopping basket of Portuguese families (around 3€ in a total of 23 635 Euros per year, that is, they represent in average 0.013% of total annual expenses)¹.

Moreover, according to the survey on the use of postal services carried out by ANACOM between November 2016 and January 2017², it was found that, in average, the average monthly expense of respondents with postal services was around 1.79 Euros (this expense reached 2.6 Euros per month in 2014³). Note that only 29% of survey respondents (389 out of 1340 respondents) referred that they had used postal services in the 12 months preceding the date of the interview.

This last result is in line with the study on the needs of postal service consumers, of May 2017, carried out by IMR - Instituto de Marketing Research (Institute of Marketing Research) for ANACOM⁴, which concluded that, in the last 12 months that preceded the interview, 31% of residential respondents had sent correspondence. IMR’s study also concludes that residential users are pleased with the price of postal correspondence.

In view of the above analysis, and taking also into account the overall application of pricing criteria (namely established maximum price variations and the application of the principle of cost-orientation of prices), it is deemed that, as a whole, CTT’s price proposal complies with the principle of affordability for all users.

Notes

nt_title

 
¹ Orçamentos Familiares - Inquérito às despesas das famílias - 2015 / 2016 - Ano de Edição: 2017 https://www.ine.pt/xportal/xmain?xpid=INE&xpgid=ine_publicacoes&PUBLICACOESpub_boui=277098526&PUBLICACOESmodo=2.
² Survey on the use of postal services 2016 - residential populationhttps://www.anacom.pt/render.jsp?contentId=1404531.
³ Source: ANACOM, “Survey on the Use of Postal Services - 2014”.
⁴ Study available at Needs of postal service consumershttps://www.anacom.pt/render.jsp?contentId=1413422.

Pricing criteria lay down that prices of postal services must comply with the principles of transparency and non-discrimination [point c) of paragraph 1 of article 3 of pricing criteria], being incumbent on CTT to publish in an appropriate manner and to regularly supply users and postal service providers with accurate and up-to-date information on prices, discounts and conditions associated to services that integrate the universal service provision (paragraph 1 of article 4 of pricing criteria).

The language used in the referred publication must be clear, allowing any user to understand and calculate the price to be paid, irrespective of the service and available mail modalities. This publication must be made, at least, at a specific address at CTT’s website, which must be permanently updated, and it must also be available at any location where services are provided (including post stations and post offices). Any alterations to prices, discounts and respective conditions must be disclosed by CTT to users prior to their entry into force (paragraph 2 read in conjunction with paragraphs 3, 6 and 7 of the referred article 4).

CTT must also notify ANACOM of the referred Internet address, the latter being entitled to create at its own website a direct electronic link to that address. Note that ANACOM already provides at its website a direct link to CTT’s website where the universal postal service tariffs are available.

It is deemed that the disclosure and publication of prices, discounts and other associated conditions, in the terms referred above, will contribute to the compliance with the principle of transparency, as well as to prevent any anti-competitive and discriminatory behaviour, given that, from the outset, prices and other conditions are known by competitors and by the regulator.

ANACOM will continue to monitor compliance by CTT with disclosure and publication obligations laid down in article 4 of pricing criteria.

Under paragraph 1 of article 5 of the pricing criteria, CTT is required to notify ANACOM on an annual basis of prices to be applied for postal services integrating the universal service provision, including any alteration thereto, at least 30 days ahead of the date on which such prices take effect.

This price notification must be attached to a document demonstrating that tariff principles and pricing criteria are complied with (paragraph 2 of the same article 5).

By the referred 30-day deadline, in case ANACOM deems that prices presented fail to comply with principles and criteria referred to in this determination, it shall request CTT, based on a substantiated decision, to revise such prices within 15 working days (paragraph 6 of the same article 5). In case ANACOM remains silent by the deadline set out for the purpose, CTT is entitled to practise notified prices (paragraph 9 of the referred article 5).

The calculation of the time period in the course of which ANACOM must reply is suspended:

• Where the referred document attesting compliance with pricing principles and criteria is not attached to the pricing communication, or where ANACOM considers that the document presented by CTT does not contain sufficient information, in which case ANACOM must request missing information within 10 working days from the date of reception of the price notification or of the defective document (paragraph 7 of article 5 of pricing criteria);
• Where ANACOM requests clarifications or additional elements of CTT (paragraph 10 of article 5 of pricing criteria).

In these situations, the calculation of the time period is resumed on the day following the reception of the attesting document without shortcomings and on the day following the reception of CTT’s reply, respectively.

Alterations to prices, discounts and respective conditions must be disclosed by CTT to users prior to their entry into force (paragraph 7 of article 4 of pricing criteria). ANACOM is entitled to determine a minimum period of advance notice of any price alterations, as well as the terms for such disclosure (paragraph 8 of the same article 4).

In the present case, CTT’s price proposal was submitted to ANACOM on 15.02.2018. CTT intends new prices to take effect on 01.04.2018, in compliance with the period of advance notice to ANACOM.

ANACOM sent CTT a request for information on the referred document demonstrating compliance with defined principles and criteria, which resulted in the suspension of the referred 30-day period of time, which had started on the day the price proposal was presented. CTT received the information request from ANACOM on 26.02.2018, having ANACOM received the requested information the next day. As such, this period was suspended on 27.02.2018. As such, the 30-day period of time during which ANACOM is required to assess CTT’s proposal ends on 02.04.2018.

Taking into account the interests and protection of users, in the pursue and fulfilment of objectives and principles established in paragraphs 1 c) and 2 d) of article 2 of the Postal Law, ANACOM, carrying out the tasks entrusted to it under paragraph 8 of article 4 of pricing criteria, considers that there would be a strong interest in the application of a minimum five-working-day advance notice of price alterations. Note that in the recent past, namely by decisions of 12.02.2015, 20.01.2016 and 28.03.2017, this Authority also defined a five-working time-limit as the minimum period of advance notice of alterations to prices.