Universal service providers
Section 35: Designation of universal service providers
178.OFCOM may designate one or more postal operators as universal service providers. They may only designate more than one universal service provider in two situations. The first situation is following a procurement determination under section 45. The second situation is following a postal administration order under Part 4. OFCOM must publish each designation. OFCOM may also review the designation(s) and consider what (if any) designated USP conditions (see section 36) should continue to apply to the designated universal service provider(s).
179.The procedure for making designations must be provided in regulations made by OFCOM. The procedures must be efficient, objective, proportionate, and transparent and should not give rise to any undue discrimination. These regulations must provide that if all of the universal service conditions that apply to a designated universal service provider are revoked then the designation should cease to have effect.
180.Subsection (11) specifies that OFCOM must notify the European Commission of each designation and the identity of each person designated. They must also notify the European Commission when designations cease to have effect. Article 4 of the Directive provides that each Member State must ensure the provision of the universal service and that member States may designate one or more undertakings as universal service providers so that the whole of the country is covered.
181.Article 4 of the Directive also provides that member States must notify the European Commission of the identity of universal service providers that they designate and that designations shall be subject to periodic review. This section therefore implements these provisions of the Directive.
Section 36: Designated USP conditions
182.Subsections (1) and (2) describe the designated USP conditions that OFCOM may impose on a universal service provider designated under section 35. OFCOM may impose one or more of the following types of requirement on the designated universal service provider. The first, under sub-section (2)(a), is a requirement to provide a universal service or part of such a service, throughout or in a specified part of the UK, in accordance with the standards set out in the universal postal service order. The second is to provide, or make arrangements for the provision of, access points for the purposes of a universal postal service. The third is to provide, to other postal operators and postal services users, specified information about the services it is required to provide under subsection (2)(a). OFCOM may also impose a requirement to do anything else that they consider appropriate for the purposes of or in consequence of the preceding requirements.
183.Subsection (3) provides that a designated USP condition may only be imposed if it appears to OFCOM it is necessary to do so in order to secure the provision of the universal service in accordance with the standards as set out in the universal service order (made under section 30).
184.Subsections (4) and (5) provide that a designated USP condition may also set tariffs (price controls) for the provision of a universal service or part of a universal service. OFCOM must ensure that the prices that are set are affordable, take account of the costs of providing the service or part of a service, and that they incentivise the service to be provided efficiently.
185.Subsection (6) provides that a designated USP condition may also impose performance targets.
186.Subsection (7) provides that where there is more than one universal service provider, OFCOM must ensure that universal service obligations imposed on the providers do not overlap, and designated universal service provider conditions can include requirements on providers to make arrangements that will help ensure a uniform and effective universal postal service throughout the UK.
Section 37: Publication of information about performance
187.This section provides that designated USP conditions must include provision requiring a designated universal service provider to publish information about its provision of a universal service in accordance with specified standards, and may include other conditions requiring information to be published in relation to its performance in complying with specified requirements. “Specified” means specified in the condition. These conditions must also include a requirement for the provider to publish an annual performance report which must be audited by a person who is independent of both OFCOM and universal service providers for accuracy and, if there are two or more universal service providers, for its usefulness in comparing information published by another provider. Information previously published must be updated and published again. When and where it is published may also be specified.
188.The Directive requires Member States to ensure that universal service providers publish annual reports which have been independently audited (Article 16 and 19). These provisions implement the publication requirements of those Articles.
Section 38: USP Access conditions
189.This section provides for OFCOM to set a condition which enables other postal operators or users to access the network of the universal service provider and to require the universal service provider to maintain separate accounts so that costs of access can be accurately calculated.
190.Subsection (2) describes the access condition that OFCOM may impose on the universal service provider requiring it to give access to other postal operators, or users of postal services, and/or to maintain accounting separation relating to access to its postal network. Access may be required to the postal network of the universal service provider and this is defined in subsection (3) as the systems and all the resources used for the purpose of complying with its universal service obligations, including arrangements made with others for the provision of any service. This is in line with Article 11a of the Directive which gives Member States the right to adopt measures to ensure access to the postal network under transparent, proportional and non-discriminatory conditions.
191.Subsection (4) provides that OFCOM may not impose a USP access condition unless it appears to them that it is appropriate to promote efficiency, effective competition and to confer significant benefits on the users of postal services.
192.Subsection (5) provides that OFCOM may not impose any price controls on the universal service provider unless it appears to them that the USP might charge excessively high prices or impose a price squeeze.
193.Subsection (6) provides that in imposing price controls in a USP access condition, OFCOM must have regard to such of the costs incurred in the provision of that network, or part of that network, as OFCOM consider appropriate. This will allow OFCOM to consider both actual and efficient costs.
194.Subsection (7) provides that when imposing price controls, OFCOM may have regard to the prices at which services are available in comparable competitive markets and determine what they consider to be efficiency by using cost accounting methods.
195.Subsection (8) provides that in deciding what obligations to impose in a USP access condition, OFCOM must take account of a number of factors in addition to their overarching duty to secure the provision of the universal postal service set out in section 29. These include technical and economic viability, feasibility, investment made by the universal service provider, the need to secure effective competition in the long term, and intellectual property rights.
196.Subsection (9) clarifies that the giving of access to the postal network includes giving a person an entitlement to use, be provided with or become a party to any services, facilities or arrangements comprised in that network.
197.This section is supplemented by the provisions in Schedule 3, which provide for the kind of matters that may be included in USP access conditions and the resolution of access disputes by OFCOM.
Section 39: USP accounting conditions
198.Subsections (1) and (2) of this section describe the USP accounting conditions that OFCOM may impose on a universal service provider to maintain separate accounts between different matters as directed by OFCOM, to comply with rules about cost identification and orientation or the use of accounting systems in relation to those matters and to have compliance with those systems audited annually by a qualified independent auditor. This is in line with Article 14 of the Directive on the separation of accounts of universal service providers.
199.Subsection (3) provides that when OFCOM imposes a USP accounting obligation that requires accounting separation, the obligation may provide for accounting separation to be maintained for different services, facilities or products (including in different areas) and may impose requirements about the accounting methods to be used.
200.Subsection (4) provides that when OFCOM imposes a USP accounting obligation that requires compliance with rules about cost identification or the use of accounting systems, the obligation may include the application of presumptions on fixing or determining costs and charges and may require publication of the accounts and other information related to the condition. Additionally, when the USP accounting condition relates to the use of cost accounting systems, subsections (6) and (7) provide that OFCOM may require a description of the accounting system be made publicly available, including details of the cost categories and rules of cost allocation.
201.Subsection (5) provides that when OFCOM imposes a USP accounting condition requiring the auditing of a provider’s compliance with accounting systems, OFCOM may require the universal service provider concerned to meet the costs of the audit.
202.Subsection (8) provides that the reference to a ‘qualified independent auditor’ in subsection (2) means a person qualified to act as a statutory auditor under the Companies Act 2006 and one who can be classified as independent under that Act.
