OPTA to monitor TPG cross-subsidies

OPTA has upheld its decision to regulate any cross-subsidisation undertaken by TPG. OPTA has done so by declaring TPG’s objections to the conditions for the postal allocation system to be deficient. These conditions pertain to the manner in which TPG allocates income, expenditure and assets. TPG’s allocation system contains insufficient guarantees to prevent cross-subsidies from occurring.

Cross-subsidisation

TPG has a legal duty to separate its financial reporting in respect of its reserved postal deliveries (its postal monopoly), its other assigned postal deliveries and its commercial services. Its monopoly encompasses the exclusive delivery of letters of up to 100 grams. Its other assigned postal deliveries refer to the delivery of post which is mandatory in TPG’s case but is optional for its competitors, for example, letters and printed matter of up to 2 kg and parcels of up to 10 kg. Commercial services are those which anyone is allowed to provide. The duty to maintain separate financial accounts follows from the relevant European directive and Dutch postal legislation, and its aim is to prevent the reserved and other assigned postal deliveries, on the one hand, and the commercial services, on the other, from cross-subsidising each other. This prevents unfair competition in the commercial arena. As it happens, the cross-subsidisation rules are less extensive than in the case of KPN Telecom, because there are only three categories of services in the postal sector and cost-orientation does not apply to individual services as in the case of telecommunications.

Earnings

One aspect of the allocation system is that it is required to produce relevant earnings figures. The latter reveal the profitability of the various categories of postal deliveries which TPG is required to keep separate from each other. A flow of funds from its monopoly capital to its commercial operations could be an indication of unlawful cross-subsidisation. By maintaining separate financial accounts it will be possible for such a flow to become visible. A flow of this nature may have an impact on the company’s capital and its profitability may therefore be an important indicator of potential illicit cross-subsidisation.