Financial support for universal postal service
Section 44: Review of costs of universal service obligations
212.Section 44 provides that OFCOM may from time to time review the extent of the financial burden for a universal service provider of complying with its universal service obligations. These are defined as the obligations imposed on it by a designated USP condition. As part of any such review OFCOM must consider the extent to which the universal service provider is complying with those obligations cost-efficiently. No review under this section may be carried out for five years from the day this section comes into force unless the Secretary of State directs otherwise.
213.OFCOM must apply the method of calculating the burden set out in designation regulations (section 35), where those regulations require the financial burden to be taken into account in the designation decision and provide for a particular method of calculation. Where the regulations under section 35 do not provide for a particular method of calculation of the financial burden, subsection (4) provides that the financial burden shall be taken to be the net cost of compliance after allowing for market benefits of being the designated universal service provider. The conclusions of this review, and a summary of the audit, must be published.
214.This section together with section 46 transposes new Article 7 of the Directive. This new article expands the provision of former Article 9(4) to clarify a range of alternatives available to Member States when there is a need for external financing of the universal service obligations. The financing alternatives include the establishment of a compensation fund with contributions from service providers (and user’s fees), where the Member State has determined that universal services obligations entail a net cost which represents an unfair financial burden on the universal service provider(s).
Section 45: Fairness of bearing burden of universal service obligations
215.This section requires OFCOM, where they have concluded from a section 44 review that universal service obligations impose a financial burden on a universal service provider, and published that conclusion, to determine whether they consider it would be unfair for that provider to bear the whole or part of the burden.
216.OFCOM must determine whether the burden would be unfair for a provider to bear or continue to bear, and the extent (if any) to which the burden would be unfair, in accordance with regulations they have made under subsection (3). They must publish the determination.
217.If OFCOM make such a determination, they must submit a report to the Secretary of State with a recommendation for what action (if any) they consider necessary to deal with the burden. The report may make recommendations about the order in which action should be taken and whether certain actions should be contingent on other actions. The recommended action may consist of one or more of: a review under section 34 (review of minimum requirements); requiring contributions to be made in accordance with section 46; and making a procurement determination.
218.Subsection (9) sets out that a procurement determination is a determination by OFCOM as to whether any particular postal operator or operators (including the provider) could meet the universal service obligations in such a way that would mean no unfair burden or less of an unfair burden than the burden identified in OFCOM’s determination in subsection (6). Any such determination must be made in accordance with regulations made by OFCOM. Subsection (14) prevents OFCOM from making a procurement determination within ten years from the day that this Part of the Act comes into force, unless the universal service provider agrees to such a determination.
219.After receiving the report, the Secretary of State must determine what action (if any) ought to be taken to deal with the burden and can then direct OFCOM to take that action.
Section 46: Contributions for meeting burden
220.This section applies where the Secretary of State has directed OFCOM to require contributions to be made for meeting some or all of the burden concerned.
221.OFCOM may then determine that contributions for meeting that financial burden are to be made by postal operators providing services within the scope of the universal service, and/or through the charges paid by users for using a service, as provided by the Directive.
222.Subsection (3) provides that OFCOM may require contributions only from a description of postal operator or user.
223.Subsection (4) provides that the assessment, collection and distribution of contributions can only be made if it is in accordance with a mechanism in a scheme contained in regulations made by OFCOM.
224.Subsection (5) provides that in making any regulations under this section, OFCOM must seek to ensure that the assessment, collection and distribution of contributions is objective, proportionate and transparent, does not involve (or tend to give rise to) any undue discrimination, and avoids or minimises distortion of competition.
225.Subsections (6) and (7) provide that a scheme can be administrated by OFCOM or an independent person specified by OFCOM in their regulations. An independent person means independent of both universal service providers and postal operators providing postal services within the scope of the universal postal service.
226.Subsection (8) provides that Regulations setting out such a scheme are subject to consent by the Secretary of State, and to the affirmative resolution procedure.
Section 47: Report on sharing mechanism
227.This section requires that, where regulations provide for a scheme to share the burden of the universal service (section 46), OFCOM must report annually on the sharing mechanism and for the reports to be published. OFCOM are not required to publish confidential information.
