2.7 General principle of affordability to all users

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

In the application and verification of the general principle of affordability to all users, and without prejudice to the application of pricing rules provided for in articles 8, 9 and 10, analysed earlier, ICP-ANACOM must into account, specifically (article 7):

a)  Family expenditure with postal services;
b) Information collected by ICP-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, in case 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 data from the 2010/2011 Enquiry to 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 20 thousand Euros per year, that is, they represent in average 0.02% of total annual expenses; on the contrary, expenses with communication services amount in average to around 662€ per year).

Moreover, according to the Survey on the Use of Postal Services developed by ICP-ANACOM between November and December 2014¹, it was found that, in average, the average monthly expense of respondents with postal services was around 2.6 Euros. Note that around 50.4% of respondents that addressed the question on average monthly expenses with postal services referred that they have no monthly expenses with postal services.

On the other hand, the price increase proposed by CTT for the delivery of books, newspapers and periodicals in the national service, which according to CTT benefit from the reading encouragement arrangement or are integrated in the framework of an agreement concluded between CTT and press associations, must be stressed. For these postal items, which represent the majority of traffic and revenues with the delivery of newspapers and periodicals distributed by CTT in the scope of the universal service and a little less than (BCI) (ECI) % of total revenues of the whole proposal under analysis, CTT propose a price change, on 01.06.2015, by around 15%, which corresponds, in average annual terms, to a change by 12.1%.

This service has presented a highly negative margin, which leads to the need to improve this margin, given the application in parallel of the general principle of cost orientation of prices and likely implications in the development of effective competition.

In this scope, the affordability of the service may be hindered with the introduction of high increases in prices aimed to eliminate the service’s negative margin, in case these increases are introduced at short notice and within a short time period, due to the impact of these price increases on users of the service and the subsequent ability of the latter to pass on these increases in good time, specifically in the amount of subscription of newspapers and periodicals. In this specific case, this aspect is safeguarded by the fact that the increase proposed by CTT is already provided for since 2013, in an agreement concluded between CTT and press associations, as well as by the fact that this service may enjoy a co-payment (ex- paid mail) by the State, and as such the price effectively invoiced by CTT to editors is lower than the established price.

In the light of the above, it is deemed that the price proposal presented by CTT for the delivery of books, newspapers and periodicals in the national service, complies with the principle of affordability of prices, and does not question the affordability of the service on the part of users, especially of editors.

In view of the above analysis, and taking also into account the overall application of pricing criteria (namely established maximum price changes 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 to all users.