This document summarizes the regulatory aspects of financing the universal postal service. It discusses the mechanism for compensating net costs from providing the universal postal service if it represents an unfair burden. It outlines the methodology for calculating net costs, including defining the universal service obligation, reference scenarios, cost centers, and accounting for intangible benefits. It also describes the role of the regulatory commission in verifying net cost calculations and determining compensation amounts. Finally, it notes some problems faced in previous compensation procedures, such as coordinating reference scenarios and delays in auditing.

1. Regulatory aspects
of financing the universal postal
service
Veselin Bozhkov, Associate professor
Chairman of Communications Regulation Commission
UPU, 09 April 2014, Bern

2. Content
Mechanism for financing of the universal postal service
Methodology for the calculation of the net costs from the
provision of the universal postal service
Role of the CRC within procedure for USO compensation
Existing practice
Problems faced during the procedures for compensation of
the USO
09 April 2014 , Bern

3. Mechanism for financing of the universal postal service
09 April 2014, Bern
As of 1st January, 2011
The UPS is compensated if the
obligation for its provision leads
to net costs and represents an
unfair burden for the operator with
USO.
Enhancement of the role of the
regulator concerning USO
compensation.
Net cost calculations –
Methodology is introduced.
The UPS is compensated if its
provision will lead to a deficit.
The deficit is calculated as a
difference between the expected
revenue and the costs adjusted
with the forecasted value of the
financial accounts settlement
balance with foreign
administrations.
The deficit built up when the
revenue from the UPS does not
cover the costs of its provision.

4. Methodology for the calculation of the net costs from the
provision of the universal postal service
The Methodology
reflects:
provisions of the
Annex I of Directive
2008/6/EC and
existing regulatory
practice.
Milestones of methodology
Definition of the universal service
obligation and its components.
Elaboration of the reference scenario by
USP (using components of the USO for
its activity when operating without an
USO).
Defining of cost centers used for the
purpose of net costs calculations and
rules for distribution of revenue and
costs by cost centers.
Accounting of all other relevant
elements (including intangible benefits
and incentives for cost efficiency).
Calculations of the net costs and
determination the amount of the unfair
burden/if any.
09 April 2014, Bern

5. Methodology for the calculation of the net costs –
USO definition and scope of the UPS
Elements of the USO
provision of the UPS on the whole territory of the country.
provision of the UPS at a certain number of access points
within the defined working time and with frequency of
collection and delivery.
provision the UPS with quality in line with defined standards.
provision of the UPS at affordable prices, uniform on the
whole territory of the country.
provision of the UPS free of charge in the defined cases.
Components of USO:
Geographical coverage.
Services within the scope of UPS.
Prices of services of the UPS.
Quality of the UPS.
Delivery frequency.
Postal network.
Scope of the UPS
items of correspondence
(incl. postcards) up to 2 kg
small packets up to 2 kg
printed matters up to 5 kg and
secograms up to 7 kg
acceptance, transport, and
delivery of domestic and
international postal parcels
up to 20 kg
additional services
(registered mail” and
“declared value”.)
09 April 2014, Bern

6. Methodology for the calculation of the net costs –
steps for net costs calculations
1. Elaboration of the reference scenario (based on
components of the USO).
2. Calculation of the net costs for the components
of the USO included into the reference
scenario.
3. Definition and calculation of the intangible
benefits.
4. Definition and assessment of the incentives for
cost efficiency.
5. Calculation of the final result for net costs after
taking into account the other relevant elements.
6. Assessment whether USO represents an unfair
financial burden.
7. Determination of the amount for compensation.
Net costs are
calculated as a
difference
between the net
costs of the obliged
operator operating
with the USO and
operating without
the USO
09 April 2014, Bern

7. The obliged operator elaborates the draft of
reference scenario
The operator submits before the CRC the draft of
reference scenario by the 1st of March
CRC issues a decision whether the scenario is
reliable and applicable by the end of April.
09 April 2014, Bern
1. Role of the CRC within the procedure
for USO compensation

8. The operator with USO submits before CRC an
application with the amount of net costs, calculated on a
basis of approved scenario by the 31st of May.
CRC organizes public procurement procedure in order to
ensure that the presented documents for net costs
calculations are verified by the independent auditor.
09 April 2014, Bern
2. Role of the CRC within the procedure
for USO compensation

9. CRC issues a decision of:
assessment of the existence of the unfair financial burden
from the provision of the UPS;
the amount of the compensation owed to the postal operator
with USO.
09 April 2014, Bern
3. Role of the CRC within the procedure
for USO compensation

10. Existing practice
Actions done:
The obliged operator has applied for
the compensation of the USO twice
(for 2011 and for 2012).
CRC has organized 2 audit
procedures for verification of the
documents related with net costs
calculation for 2011 and for 2012.
CRC has issued 2 decisions for the
amount of compensation owed to
the obliged operator for 2011 and
for 2012 .
Net costs from the
provision of UPS have
calculated twice (for
2011 and for 2012)
09 April 2014, Bern

11. Problems faced during the procedures for
compensation of the USO
Difficulties with the coordination of the reference scenario.
Submission of incomplete applications for the compensation
by the USP.
Delays in audit procedures.
09 April 2014, Bern

12. Thank you for your attention!
Contacts:
Tel: +359 2 949 27 71
e-mail: iraykova@crc.bg
www.crc.bg
09 April 2014, Bern