IP/05/1690

Brussels, 22 December 2004

EU driven reforms of services of general interest benefit consumers and improve performance

Reforms of services of general economic interest (SGEI), such as telecommunications, air transport and postal services, have produced clear benefits for European consumers in terms of lower prices, choice and better services a European Commission report shows. However, current progress is slow and there remain obstacles to competition and to the completion of the European single market. These issues should be tackled by both the Commission and Member States. Increasing competition in these industries is also key for the Member States that joined in 2004 in order to avoid any inflationary pressures resulting from the catching-up process.

Internal Market and Services Commissioner Charlie McCreevy said: "This report shows that EU rules enabling more competition are having a positive effect on the essential services that Europeans use every day. The results for new Member States are particularly encouraging. But there is no room for complacency – overall progress could be much quicker and many market barriers still remain."

The report into the so-called network industries covers electricity, gas, telecommunications, postal services, air, road and rail transport sectors in the 25 Member States of the EU.^[1] Together, these sectors represent around 6-8% of the value added and 5% of EU employment.

This is the second time the Commission assesses progress to improve the performance of network industries in the EU. The first one was published in 2002. This year’s report also compares market performance between 'old' and 'new' Member States.

The main conclusions of the report are:

• Opening markets to competition is responsible for a large part of the improvements in performance: i.e. leading to lower prices and higher productivity. In addition, countries with high levels of market opening tend to perform better over time in terms of prices and productivity.
• The benefits of market opening spill-over into the rest of economy and have a positive impact on employment. An economic simulation has shown that between 1990 and 2001 the creation of half a million jobs throughout the EU was linked to regulatory changes in network industries.
• Prices for SGEI are similar in new and old Member States, but these prices are less affordable in many new Member States due to lower per-capita incomes. However, affordability of services in the new Member States continues to improve faster than in the original EU15. This is likely to have a beneficial impact on living standards in most new Member States.
• Important results have been achieved, but there are still many obstacles to competition and the completion of the Internal Market. The Commission is taking steps to address these obstacles and Member States have an important role to play as many decisions regarding the regulatory framework and infrastructure investment remain with them. In addition, there is an important role for competition policy.
• Consumers are very satisfied but improvements are still needed. Satisfaction levels in new Member States are similar to those in the original EU15, ranging from 77% for postal to 66% for rail services. Consumers in new Member States are worried that EU membership will lead to price rises but they also expect quality improvements due to competition. Whilst the majority of EU citizens are highly satisfied with the provision of these services, considerable numbers remain dissatisfied with certain aspects. For example 17% - 35% of consumers find the price they pay either excessive or not affordable. It is also clear that providers can improve their services.

The full text of the report and a detailed annex are available at:

http://ec.europa.eu/internal_market/en/update/economicreform/index.htm

^[1] In some cases the water sector is also included due to the aggregation of data sources (e.g. in the area of employment the aggregated data for electricity, gas and water was used).