Brussels, 10th December 2001
Commission publishes working document assessing the performance of industries providing services of general economic interest
A working document produced by the European Commission's services on the performance of industries providing services of general economic interest (telecommunications, energy, post and transport) concludes that prices have fallen but that consumer satisfaction remains limited. Former monopoly service providers retain high market shares. It is not possible, so far, to assess the long-term impact of liberalisation on services of general interest. But, on the basis of available information, liberalisation seems to have had a positive net impact on overall market performance, and on the affordability of universal services, while the provision of these services has not been adversely affected.
Internal Market Commissioner Frits Bolkestein said "This report provides initial evidence of progress in improving the performance of some of the services that everybody needs and in getting better value for money for both industrial and private consumers. But there is a long way to go. I am confident that liberalisation within the Internal Market will lead to further improvements." According to Pedro Solbes, Commissioner for Economic and Monetary affairs "the report confirms that further work is needed in these sectors in Europe. It is only by modernising further our economies that we can increase our growth potential and create employment over the medium term".
The report was produced at the suggestion of the Nice European Council (2000) and complements the Report on Services of General Interest adopted by the Commission on 17 October for the Laeken European Council in mid-December 2001 (see IP/01/1427). It offers a first attempt to evaluate how sectors providing services of general economic interest are performing.
The report is not meant to evaluate the impact of liberalisation although, whenever possible, reference is made to the first wave of effects resulting from the opening up of markets to competition. Future evaluations will be based on a methodology that the Commission will define next year.
Evaluation of consumer satisfaction with the main public services
Source: OPTEM, "Qualitative study carried out in the 15 Member States on peoples' attitudes to services of general economic interest", 2001.
In telecommunications, incumbent operators' market shares have shrunk most in countries where liberalisation started earliest, especially in international calls and mobile telecommunications. However, incumbent former monopolists still maintain high market shares. The entry of new firms into the market has led to more effective competition except for local calls. Prices have fallen by about 3% per year between 1996 and 1998, then by 7.5% between 1999 and 2001, making services more affordable for Europeans of all income levels. Employment in the sector has increased.
Europe's postal services offer higher ratios of provision in terms of population and geographic density of the network than the USA. Universal service is a reality in telecommunications and postal services. However, quality indicators give a more mixed picture of the performance of such services.
Universal service in postal services: Access conditions in the EU and the USA
In energy sectors, few new firms have entered the market and incumbent operators still enjoy considerable market shares. Electricity prices have fallen, but households have benefited less than commercial consumers. Significant price differences across Europe point to continuing fragmentation in the Internal Market for energy.
Gas prices reflect differing prices at the origin of the supply and divergent conditions in domestic markets. Gas market integration is needed to tackle physical bottlenecks and inadequate national de-regulation. For example, in some countries, access to interconnection capacity remains non-market based. Regulation plus strict application of competition rules could be the key to ensuring fair competition and good market performances in the near future.
Of all the services studied, gas and electricity registered the highest consumer satisfaction ratings for services provided, although satisfaction with electricity prices is relatively low.
Affordability indices for low income households (2001-1996)
In the road and railway transport sectors. consumers value quality and do not think they always get it. Consumer satisfaction with railways is generally low. though some Member States are exceptions (e.g. Finland. Denmark. Austria. Spain and Portugal). In urban transport. there are indications that "controlled competition" (i.e. an open tendering process where the successful bidder gets exclusive access to the network for a fixed period of time) performs better than full deregulation or public provision of the service. In air transport. consumers acknowledge that competition has led to significant price cuts.
Annual change in bus and urban rail usage during the 1990s (big EU cities)
* The figure for each country corresponds to the total public sector contribution to cover for the cost of the service and the figure below corresponds to the amount of aid notified according to Regulation 1191/69.