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1. DEVELOPMENT OF THE POSTAL SECTOR IN BULGARIA
The postal sector in Bulgaria has entered into a new stage of its
development since 2000 which based on the establishment of up-to
date and harmonized with the EU requirements legislation
concerning public relations for the provisioning of postal services.
The strategic goals are:
 Promotion of a sustainable development of the national postal
sector by creating conditions for functioning of economically stable
postal market, fully opened to competition;
 Satisfaction of increasing users’ need through modernization of
existing and introduction of new postal services.

2. KEY TOOLS FOR DEVELOPMENT OF THE POSTAL SECTOR
The development of the postal sector is carried out by the effective
implementation of three key tools which are harmonized with the
policy of the UPU and the EU legislation in the field of postal
services.
 First of them is of strategic nature – adopted by the government
Sector Postal Policy which have to be updated at least every four
years. It sets guidelines for sustainable development of the postal
services, the postal services market and the postal infrastructure.
 The second tool related to the development of the postal sector is
the legal framework, based on the Law on Postal Services.
 The third tool is the secondary legislation related to the regulation
of the postal services.

3. STATE POLICY AND REGULATION
 The state policy in the field of postal services is carried out by the
Minister of Transport, Information Technology and
Communications. The powers of the Minister in the field of postal
services are specified in the Law on Postal Services.
 Regulation in the field of postal services is carried out by the
Communications Regulation Commission which is a specialized
independent state authority. Its functions are specified in the Law
on Postal Services.

4. DEVELOPMENT OF
POSTAL SERVICES MARKET LIBERALIZATION
 The liberalization process of postal services market was related to
the establishment of new legal and regulatory framework
harmonized with the requirement of EU Directives.
 In Bulgaria, the postal reform started with the adoption of the Law
on Postal Services in 2000. The main objective was to create
conditions for guaranteed provisioning of the UPS by the main
postal operator “Bulgarian posts” and for new players entering the
market.
 Initially, in order to ensure provisioning and safeguarding of the
UPS and its financing a state monopoly was established over the
reserved area. With the amendments of the Law in 2003, 2006 and
2008 the scope of the reserved area was reduced in accordance
with the EU Directives but at the same time the period of the state
monopoly was extended respectively until 31.12.2005, 31.12.2008
and 31.12.2010. Beside the reserved area another financial
mechanism was implemented i.e. compensation from the state
budget of proven by the “Bulgarian posts” deficit from provisioning
of the UPS.

5. HARMONIZATION OF THE LEGAL FRAMEWORK
WITH THE EU LAW
The final stage of harmonization of the Bulgarian legislation with
the Third EU Directive was the last amendment of the Law on Postal
Services in 2010. The main objective was to ensure sustainable and
permanent provision of the UPS in a fully liberalized market as from
1 January 2011.
This objective is achieved by:
 designation of a postal operator with obligation to provide the UPS
on the entire territory of the country for a long term;
 financing of the UPS by implementation of compensation
mechanism, allowed by the EU framework and compatible with the
national particularities.

6. MILESTONES IN THE LAW ON POSTAL SERVICES
The milestones in the Law on Postal Services related to the development
of postal services market in Bulgaria, are:
 Guaranteed provisioning of the UPS on the whole territory of the
country by imposing of an obligation for its provisioning;
 Safeguarding of the UPS in a liberalized postal market and its
financing;
 Legalization of the authorization procedures for provisioning of
postal services;
 Equal treatment of postal operators in a competitive environment;
 Improvement of the quality of postal services and service
efficiency;
 Differentiation of functions of the state policy and regulation
between the Ministry and the regulator;
 Ensuring the respective powers of CRC necessary to fulfill the
requirements of the EU Directives;
 Protection of users’ interests.

7. ENSURING THE UNIVERSAL POSTAL SERVICE
The obligation to provide the UPS was assigned by the Law to the
Incumbent postal operator – “Bulgarian posts”. The duration of this
obligation is 15 years as from 30 December 2010.
The obligation to provide the UPS as a service of general economic
interest comprises the following elements, which are specific only
for the designated operator:
 provision of the UPS on the entire territory of the country for all
users regardless of their geographical location;
 provision of the UPS all working days, at least 5 days per week; at
least one collection of postal items each working day from the
access points and one delivery, except for settlements located in
difficult-to-access areas.
 provision of the UPS according to the quality of service standards;
 provision of the UPS at affordable prices;
 provision of UPS free of charge in the cases, stipulated in the Law.

8. FINANCING OF THE UPS
 The state monopoly of the “Bulgarian posts” over the reserved area
of the UPS has been removed by this Law and a financing
mechanism for universal postal service was established by
compensation from the state budget when the obligation to provide
the UPS leads to net costs and represents an unfair burden for the
operator with obligation to provide the service.
 The amount of the unfair financial burden from the provisioning of
the UPS is determined by the net costs. The amount of the
compensation is determined by the Law for the State Budget of
Republic of Bulgaria for the relevant year and should not exceed the
amount of the unfair burden.

9. AMENDMENTS IN THE REGULATORY FRAMEWORK RELATED
TO THE FINANCING OF THE UPS
The requirements of the Third EU Directive regarding the financing
of the UPS have been introduced with the last amendments of the
Law on Postal Services. This required a change in the regulatory
framework regarding the System for calculation of the net costs
arising from the obligation of the provisioning of the UPS. In this
relation, the CRC developed a project for “Procedure on the
contents, the cost allocation method, and the rules and timelines for
approval of the cost allocation system of the postal operators with
the USO” (“The Procedure”). The Procedure stipulates that the
obliged operator should maintain separate accounts within its
accounting system in order of clear distinction between the
products and services within the UPS and the other postal services
and commercial activities of the same operator.

10. CALCULATION OF THE NET COSTS
The net costs from provisioning of the UPS are calculated
according to a methodology prepared by the regulatory authority
in 2011. The Methodology is based on net avoided costs. The
Methodology determines the order and the manner in which the
operator with obligation to provide the UPS on the entire country
territory through organized and managed by it postal network
shall calculate and prove the net costs from the obligation of the
provisioning of this service. The Methodology is developed
according to the Annex I of Directive 2008/6/EC “Guidance on
calculating the net cost, if any, of universal service”
“……..the net cost of universal service obligations is to be
calculated, as the difference between the net cost for a
designated universal service provider of operating with the
universal service obligations and the same postal service
provider operating without the universal service obligations……”

11. MEASURES TO AVOID OVERCOMPENSATION І
With a view to avoid an overcompensation, an independent auditor
shall make an audit of the documents, related to the calculation of the
net costs and determination of the amount of the unfair burden from
the provisioning of the UPS, as well as, an audit of the application of
the cost allocation system of the postal operation with obligation to
provide the UPS. The cost allocation system is approved by the
regulator and uses an objective approach for formation of costs by
types of services – Activity Based Costing method.

12. MEASURES TO AVOID OVERCOMPENSATION ІІ
Based on the results from calculation of the net costs and
evaluation by the auditor, the CRC shall make a decision on:
 the presence of the unfair financial burden from provisioning of the
UPS;
 the amount of the compensation owed to the postal operator with
obligation to provide the UPS.
According to the legal measures for the calculation of net costs, the
determination of the amount of the unfair financial burden and the
amount of the compensation, the possibility of overcompensation is
excluded in practice.

13. MEASURES TO REPAY OVERCOMPENSATION I
 Measures to refund (pay back) overcompensation are stipulated in
the act of the government.
 In case of presence of overcompensation, the obliged operator
should repay within one month from the notification of the
existence of overcompensation the amounts above the
compensation, calculated in accordance with the Law on Postal
Services and according to art. 5 of the Decision 2012/21/EC.
(Commission Decision of 20 December 2011 on the application of
Article 106(2) of the Treaty on the Functioning of the European
Union to State aid in the form of public service compensation
granted to certain undertakings entrusted with the operation of
services of general economic interest (2012/21/EU).
 “Member States shall require the undertaking concerned to repay
any overcompensation received”.

14. MEASURES TO REPAY OVERCOMPENSATION II
Where an undertaking has received a compensation in excess of the
amount determined in accordance with Article 5, the state shall require
the undertaking concerned to pay back any overcompensation received.
The parameters for the calculation of the compensation shall be
updated in the future. Where the amount of overcompensation does not
exceed 10 % of the amount of the average annual compensation, such
overcompensation may be carried forward to the next period and
deducted from the amount of compensation payable in respect of that
period.

15. EU LEGAL FRAMEWORK FOR SGEI I
Provisioning of services of general economic interest (SGEI) is
regulated by the legal framework of the EU. In the beginning of 2012
changes have been introduced in the tools for application of the
measures for the state aid for SGEI – European Union framework for
State aid in the form of public service compensation (ОJ, С7 of
11.01.2012) and Commission Decision of 20 December 2011 on the
application of Article 106(2) of the Treaty on the Functioning of the
European Union to State aid in the form of public service
compensation granted to certain undertakings entrusted with the
operation of services of general economic interest (2012/21/EU) (ОJ,
L 7, 11.1.2012).

16. THE EU LEGAL FRAMEWORK FOR SGEI II
According to the Decision “State aid in the form of public
service compensation that meets the conditions laid down in
this Decision shall be compatible with the internal market and
shall be exempt from the prior notification obligation provided
for in Article 108(3) of the Treaty provided that it also complies
with the requirements flowing from the Treaty or from sectoral
Union legislation”. The annual amount of the compensation
also should not exceed EUR 15 million. For the postal services
this means compatibility with the Third EU Postal Directive and
application of the methodology of net avoided costs.

17. Thank you for your attention!
ikarafizieva@mtitc.government.bg