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Annex 3 – Eleven shortlist studies

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					Annex 3 – Eleven shortlist studies
Table of Contents

     Table of Contents.................................................................................................................................................2
     1.    Cable and satellite TV ................................................................................................................................4
              1.1.   Market, content and scope of the service .......................................................................................4
              1.2.   Inventory list of price components of the service ............................................................................7
              1.3.   Inventory of price-composition of the service................................................................................10
              1.4.   Suggestions for the data collection methods to be considered .....................................................13
              1.5.   Dummy target tables.....................................................................................................................14
              1.6.   Main conclusions ..........................................................................................................................17
     2.       Car insurance...........................................................................................................................................18
              2.1.   Market, content and scope of the service in EU countries ............................................................18
              2.2.   Inventory list of price components of the service ..........................................................................22
              2.3.   Inventory of price-composition of the service................................................................................24
              2.4.   Suggestions for the data collection methods to be considered .....................................................28
              2.5.   Dummy target tables.....................................................................................................................32
              2.6.   Main conclusions ..........................................................................................................................33
     3.       Car rental .................................................................................................................................................34
              3.1.   Market, content and scope of the service .....................................................................................34
              3.2.   Inventory list of price components of the service ..........................................................................36
              3.3.   Inventory of price-structure of the service .....................................................................................37
              3.4.    Suggestions for the data collection methods to be considered .....................................................40
              3.5.    Dummy target tables.....................................................................................................................41
              3.6.    Main conclusions ..........................................................................................................................43
     4.       (Internet) current account .........................................................................................................................44
              4.1.    Market, content and scope of the service .....................................................................................44
              4.2.    Inventory list of price components of the service ..........................................................................51
              4.3.    Inventory of price-composition of the service................................................................................55
              4.4.    Suggestions for the data collection methods to be considered .....................................................59
              4.5.    Dummy target tables.....................................................................................................................60
              4.6.   Main conclusions ..........................................................................................................................64
     5.       Dental hygiene practice............................................................................................................................65
              5.1.   Market, content and scope of the service .....................................................................................65
              5.2.   Inventory list of price components of the service ..........................................................................68
              5.3.   Inventory of price-composition of the service................................................................................69
              5.4.   Suggestions for the data collection methods to be considered .....................................................69
              5.5.   Information....................................................................................................................................70
              5.6.   Main conclusions ..........................................................................................................................71
     6.       Electricity..................................................................................................................................................72
              6.1.    Market, content and scope of the service in EU countries ............................................................72
              6.2.    Inventory list of price components of the service ..........................................................................76
              6.3.    Inventory of price-composition of the service................................................................................77
              6.4.    Suggestions for the data collection methods to be considered .....................................................79
              6.5.    Dummy target tables.....................................................................................................................81




  Table of Contents                                                                                                                                                   2
            6.6.   Main conclusions ..........................................................................................................................82
   7.       Internet connection at home.....................................................................................................................83
            7.1.   Market, content and scope of the service .....................................................................................83
            7.2.   Inventory list of price components of the service ..........................................................................87
            7.3.   Inventory of price composition of the service ................................................................................88
            7.4.   Suggestions for the data collection methods to be considered .....................................................92
            7.5.   Dummy target tables.....................................................................................................................93
            7.6.   Main conclusions ..........................................................................................................................95
   8.       Mobile phone calls (international) roaming included ................................................................................97
            8.1.   Market, content and scope of the service in EU countries ............................................................97
            8.2.   Inventory list of price components of the service ........................................................................100
            8.3.   Inventory of price composition and user profiles.........................................................................102
            8.4.   Suggestions for the data collection methods to be considered ...................................................104
            8.5.   Dummy target tables...................................................................................................................106
            8.6.   Main conclusions ........................................................................................................................112
   9.       Personal loan .........................................................................................................................................114
            9.1.   Market, content and scope of the service ...................................................................................114
            9.2.   Inventory list of price components of the service ........................................................................117
            9.3.   Inventory of price-composition of the service..............................................................................120
            9.4.   Suggestions for the data collection methods to be considered ...................................................122
            9.5.   Dummy variable tables ...............................................................................................................124
            9.6.   Main conclusions ........................................................................................................................124
   10.      Postal service.........................................................................................................................................125
            10.1.    Market, content and scope of the service .................................................................................125
            10.2.    Inventory list of price components of the service ......................................................................127
            10.3.    Inventory of existing price-compositions of the service.............................................................128
            10.4.    Suggestions for the data collection methods to be considered.................................................129
            10.5.    Dummy target tables.................................................................................................................131
            10.6.    Main conclusions ......................................................................................................................132
   11.      Train transport........................................................................................................................................133
            11.1.    Market, content and scope of the service in EU countries ........................................................133
            11.2.    Inventory list of price components of the service ......................................................................139
            11.3.       Inventory of price composition of the service............................................................................140
            11.4.       Suggestions for the data collection methods to be considered.................................................142
            11.5.       Dummy target tables.................................................................................................................143
            11.6.       Main conclusions ......................................................................................................................150




Table of Contents                                                                                                                                              3
1. Cable and satellite TV

   1.1.        Market, content and scope of the service

      1.1.1. Exploring the content of the service in the EU

      Although there is a trend in the TV service provision industry towards the substitution of analogue TV
                                                  1
      by digital TV and the “analogue switch-off” is currently being discussed in several countries, the
      content of the service in this chapter extends to both analogue and digital platforms. At present, the
      largest part of European TV viewers are users of analogue TV services. However, many former
      analogue operators are upgrading their networks to gradually switch to digital services. A shift from the
      analogue to the digital spectrum is expected.

      In some countries the shift has already taken place, for instance in the UK where virtually every
      household with TV access has digital television. (Out of a total of 65% of UK households receiving
      multi-channel television, 3% are subscribing to analogue cable while digital TV penetration is estimated
      around 62%. In the digital TV market, digital satellite connections account for approximately 50%,
                                                                                                           2
      whereas digital terrestrial television and digital cable have a 33% and 16.5% share, respectively). In
      some countries, the implementation of the analogue broadcasting switch-off between now and 2012
      has been agreed upon. Other countries are still in the discussion phase of the process. For instance,
      the Italian law (Legge 66/01) imposes the switch to digital television by 31 December 2006 with a
                                                                3
      countrywide coverage of 100%. Likewise, in Germany the government has set the target that by 2010
                                                                                                          4
      all analogue broadcasting is to be terminated. A recent questionnaire prepared by Ernst & Young has
      revealed that 56% of Dutch TV viewers will switch to digital television in the near future, 21% of them
      even during this year. The most important reason given by the Dutch viewers to change to digital
      television is the improved view and sound quality.

      The UK market is rather exceptional in that digital TV is the predominant technology with only a
      marginal percentage of viewers of analogue TV services. The main initiator of the shift towards the
      digital spectrum was BSkyB (Sky Digital) which launched the first subscription-based digital television
      platform in the UK. BSkyB no longer continues to offer analogue services. Sky Digital packages consist
      of a set of lists of basic channels that are available in every package. The packages further differentiate
      themselves on sports, movie and cartoon channels. Charges seem quite high if compared to a regular
      analogue cable connection in other EU countries, with the lowest package priced at EUR 28.38
      whereas Austria’s Premiere offers its cheapest package at EUR 4. There is a rather large difference
      though between these two packages. The Austrian package contains far fewer channels than the
      package offered by Sky, and this is reflected in the price.

      The Dutch market is characterised by a few large market players, followed by some smaller regional
      cable operators. UPC Holland is by far the largest supplier in the Netherlands and, as mentioned
      before, offers considerable discounts for bundled packages. UPC Holland provides both analogue and


  1 A complete list of switch-off dates of Analogue Terrestrial TV in Member States can be found in Table 1.6

  2 Ofcom Digital Television Update Q1 -2005

  3 Berlin was the first city in Germany to end all analogue TV broadcasts by 2003

  4 Ernst & Young 2005




  Cable and satellite TV                                                                                            4
    digital television, though it has plans to make a large investment in order to roll out digital TV in the
    Netherlands. The move is needed to stimulate digital viewing as well as to release network capacity.
    UPC Holland’s main competitor is Casema, which has already switched to digital for its entire range of
    television services. Versatel, a DSL broadband service provider, has revealed its plans to offer digital
    TV in the Netherlands. It has acquired the Dutch football league rights and will provide this service
    solely to its high-speed internet customers at a price of EUR 39.95. The sole (digital) satellite provider
    in the Netherlands is Canal Digitaal. It has a considerable market share of approximately one million
    customers. According to research carried out by Consumentenbond it has the lowest monthly
    subscription fee, EUR 1.67. However, the hardware that is required to receive the satellite TV costs
    around EUR 300.

    The general descriptive elements of the service are presented in table 1.1.

    Table 1.1: Service components

Country                                               AT   BE   CZ   DE   DK   ES   FR   HU   IT   NL   FI   PL   PT   SV   UK

SERVICE COMPONENTS ANALOGUE CABLE
No. of Channels available (TV and radio)                                                                      
Helpdesk availability                                                                                         
Extra billing information (Does the operator charge
for mailed bills)                                     ?    ?    ?    ?    ?    ?    ?    ?    ?    ?    ?    ?    ?    ?    

ADDITIONAL SERVICE COMPONENTS DIGITAL CABLE AND SATELLITE TV
Flexibility in adding/losing channels                                                                         
'Video on demand'                                                                                             
Interactive TV:                                 ?                          ?    ?                        ?        
Games, gambling, ordering food etc.




    1.1.2. Defining the scope of the research

    State-of-the-art technology is rapidly changing the European television market layout. A recent
    development is the introduction of Digital Terrestrial Television (DTT), which enables digital signals to
    be received by means of a conventional aerial instead of satellite or cable. This study is limited to
    analogue and digital cable and satellite TV. Both cable and satellite operators offer viewers a number of
    TV channels. However, satellite subscribers tend to have access to a larger range of channels.

    Cable operators make use of analogue and digital technologies. As to service content, analogue and
    digital cable services are not identical, as digital cable allows for the provision of a larger number of
    channels and wider range of interactive services, such as gaming, chat boxes, communication (TV e-
    mail), tickets and food ordering, etc. Besides, cable subscriptions are often bundled with other services
    such as telephony and internet connections. For example, UPC, the pan-European cable operator,
    bundles TV with broadband internet connections as well as fixed line telephony in Austria, Germany,
    the Netherlands and Poland.

    Packages offered by analogue cable are more basic than the digital ones. Analogue packages often
    have a varied number of channels available and the programming content per geographic region also
    varies (regional TV channels). Digital cable subscriptions are offered in the form of a basic package of




Cable and satellite TV                                                                                                  5
    which can be extended – in number and availability of channels – depending on the viewers’
    willingness to pay and personal preferences.

    As to service content, satellite packages are similar to the digital cable ones. The main difference,
    however, is that satellite packages do not seem to be bundled with other services such as telephony
    and internet services (the reason perhaps being the low penetration rate in mainland Europe). In the
    UK, Sky offers telephony services alongside its satellite television services, but these services are not
    bundled. Satellite can be provided on both analogue and digital (DTV) platform. The comparative
    advantage of DTV over analogue satellite is the greater radiofrequency bandwidth available, which
    allows for more channels as well as higher quality of the image. Satellite DTV providers usually offer
    packages for a large number of channels, including ‘pay-per-view’ TV.

    Additional service components offered by some operators are helpdesk availability and the possibility of
    receiving specified (more detailed) invoices. Helpdesk availability seems to be a common component of
    the content, but the quality of the service provided at the request of the customers is difficult to assess
    without conducting further research. Information on specified invoices is not readily available either and
    has been ignored in this report.

    1.1.3. The market of the service

    For cable TV providers, the quality and number of channels offered to the consumer varies notably
    across countries. In the early nineties, most of the Eastern countries had their television industry under
    full state control. The broadcasting capabilities, the quality and variety of services lag behind in Eastern
    Europe but this situation is rapidly changing due to the privatization process and the investments made
    by Western operators, which have resulted into significant upgrades.

    The content of packages may also vary across countries in accordance with local preferences. Among
    the popular packages, there are content-specific options such as sports or movies packages. Premium
    sports packages often focus on the nation’s primary football league. In the British market, Sky sports
    packages offer cricket, horseracing and darts, something generally not found in other EU countries.
    Interactive TV (computer gaming, ordering food and tickets or gambling) is also possible in digital
    packages. Another feature of many digital packagers is the pay-per-view option, where the consumer
    pays on a per movie basis. These secondary services are not well developed yet, their use is not
    commonly extended and they have been left out of the scope of the service content for the ad-hoc price
    survey methodology, i.e. for the accountability of price components and the design of the user profiles.
    However, this type of services is becoming more and more attractive to consumers who tend to go for
    tailor-made services. They are clearly of potential interest to be monitored in the future.

    A common feature of the service content is “helpdesk availability”, which consists of provider’s
    telephone or online support to the customers. A helpdesk service seems to exist in all countries and for
    all service providers and it is included in the basic price, except for the call charges. Call charges vary.
    In the Netherlands it usually requires dialling an 0900 number for UPC, at a rate of EUR 0.10 per
    minute, whereas the rate for making a call to the helpdesk of Coditel, a Belgium provider, is EUR 0.45
    per minute.

    Service content and price variables have been selected on the basis of a scan of the cable and satellite
    services information available in internet for TV operators in 15 EU countries (AT, BE, CZ, DE, DK, ES,




Cable and satellite TV                                                                                             6
    FR, HU, IT, NL, FI, PL, PT, SE, UK). Thus, within the scope selected, the content of the service seems
    to be fairly homogeneous (see table 1.1).

    The list of operators considered for each of the countries is included in Table 1.6 to this report and is
    initially based on the Directory of Television Channels in Europe as published on the website of the
    European Audio Visual Observatory (2005). As satellite signals can be received throughout Europe it is
    possible to subscribe to the Sky network, or any other satellite television provider in Europe, from any
                         5
    EU country.


 1.2.        Inventory list of price components of the service

    Tables 1.2 and 1.3 contain variables deemed relevant for the determination of the service price. The
    price is mainly determined by the number of channels available and their content. Specific thematic
    channels are usually more expensive as their customers are willing to pay a higher price. Other
    variables that affect the price are additional services such as interactive TV or gambling. The pay-per-
    view option (often for movie channels) is paid as its name indicates, on a per use basis.

    The price is also affected by variables that do not relate to the service content itself, such as the
    location of the viewer (number of channels and price may vary according to the region within one
    country), duration of the contract, payment method chosen, or even an age or occupation discount (e.g.
    the Netherlands has special offers for students). Special packages and promotional offers also affect
    the price.

    The pricing structure for the service is based on a fixed one-time down payment for subscription, which
    may vary from EUR 30 to EUR 250, depending on the country and the provider, plus a fixed monthly
    fee. On top of that, digital (cable or satellite) TV involves one more fixed one-time payment for the
    purchase of the required hardware. An extra payment may be required for the costs of installing the
    hardware but this is usually either included in the other fees or “waived”.

    When looking at the components determining the price a consumer is actually paying, it is important to
    differentiate whether the consumer has a cable or satellite connection and whether this is an analogue
    or digital connection. “Hardware costs” refer to the expenditure relating to the hardware needed to use
    the service. Set-top boxes or satellite disks, for instance, are hardware components. “Installation costs”
    usually refers to the costs of connecting all appliances. This should not be confused with “connection
    costs”, since those usually refer to the administrative fee for connecting a customer to the network.
    “Subscription costs” always refer to the annual or monthly charge required to maintain the subscription
    to the service. Researchers may often find that different interpretations are applied by different
    providers. This causes confusion as to which specific component of the service is actually being
    charged. Another problem is that these kind of charges may already be included in the annual
    subscription fee.




5 Geographic limitations may arise. Sky admits that it may occasionally fail to transmit its signal to users in Southern Europe




Cable and satellite TV                                                                                                            7
  Table 1.2: Price components - Analogue Cable

Country                                 AT          BE           CZ          DE       DK        ES         FR      HU             IT          NL        FI    PL
Provider Analogue                     Liwest       UPC          UPC       Kabel BW   TDC      Euskaltel   UPC      UPC         Fastweb       UPC        ?    UPC

PRICE COMPONENTS ANALOGUE CABLE
Connection                        € 261,62                                € 33,52       ?                  ?    € 84,04                    € 35,11
Monthly subscription               € 12,80                     € 13,60    € 14,50    € 5,07                ?       (1)                     € 15,54
No. of Channels available (tv and
                                                              10-31 (1)   40/>1000     ?                   ?        (1)                     30/39
radio)
Extra billing information             ?                           ?                    ?                   ?           ?                      NO
Duration of contract discount                                    ?          ?         ?                   ?                                   ?
Location of subscriber (1)                                                  ?         ?                   ?                                 (1)
Payment method (direct debit may                                                                                Discount                 Discount €1
be cheaper)                           ?                           ?          ?         ?                   ?        for                    for direct
                                                                                                                direct debit                 debit
Packages                                                                                                ?                                 
Package bundled with other services
                                                                                                       ?                                 
(radio, telephony and/or internet)


(1) Quantity of channels can vary per region as well as prices
* Exchange rate as 1/16/2006: 100xHUF-EUR 0.4002. Source: Bloomberg




  Cable and satellite TV                                                                                           8
   Table 1.3: Price components - Digital cable and Satellite TV

Country                                     AT           BE            CZ            DE         DK        ES            FR          HU            IT             NL           FI    PL         PT            SE                UK
Provider Satellite                       Premiere      CANAL+       UPC Direct    Premiere     CDD      Digital+       TPS       UPC Direct    Sky Italia   Canal Digitaal   CDF   Cyfra+   Multicanal   Canal Digital         SKY

PRICE COMPONENTS DIGITAL CABLE AND SATELLITE TV
Hardware cost                                                                                                                                  Disk and
                                                                                                                                                                                                                           Included in
                                                                                                                                                Satellite    Set top box
                                          €99 (2)                       ?         € 99 (2)      ?                                    ?                                                                                        annual
                                                                                                                                              Decoder not     included
                                                                                                                                                                                                                             charges
                                                                                                                                               required
Installation                                                                                                                                                                                                                Included in
                                             ?             ?            ?             ?         ?                                    ?                ?      see above                                                         annual
                                                                                                                                                                                                                              charges
Connection                               € 24,95         € 75        € 17,39      € 24,95       ?                                    ?                ?          €7                                                      € 174,96 (annual)
Monthly subscription                       € 10        € 19,81       € 23,97        € 10        ?                                    ?                ?         € 7,45                                                         € 28,43
No. of Channels available (tv and
                                                           ?          € 5,22                    ?                                    ?                ?           ?                                                            (2)
radio)
Extra billing information                                  ?            ?                       ?                                    ?                ?           ?
Location of subscriber [1]                                                                   ?                                    ?                ?           ?                                                             
Duration of contract discount            Minimum       Minimum                    Minimum
                                         contract      contract                   contract
                                                                        ?                       ?                                                    ?                                                                         
                                        duration 12   duration 12                duration 12
                                          months        months                     months
Age/occupation discount                                                                         ?                                    ?                ?           ?                                                             ?
Payment method                               ?             ?            ?             ?         ?                                    ?                ?           ?                                                        Credit card
Packages                                                                                    ?                                    ?                                                                                        
Package bundled with other services
(radio, telephony and/or internet)                                                            ?                                    ?                                                                                        ?

Flexibility in adding/losing channels                                                       ?                                    ?                ?           ?
'Video on demand'                            ?                                      ?         ?                                    ?                           ?
Interactive TV:                                                                             ?                                    ?                           ?
Games, gambling, ordering food etc.

Pay per view available?                                                                     ?                                    ?                           ?                                                             

[1] For cable TV, geographic location of subscriber may have an impact on price. For Satellite TV, size of disk required may vary with the location.
(2) Depends on package
 * Exchange rate as 1/16/2006: CZK-EUR 0.0347 and GBP-EUR 1.4580. Source: Bloomberg




   Cable and satellite TV                                                                                                                         9
 1.3.        Inventory of price-composition of the service

    The pricing structure for the provision of cable and satellite TV is not transparent. There always
    appears to be a minimum degree of bundling (of channels) that is offered by cable and satellite
    operators. TV and radio seem to be always bundled. However, in Eastern Europe, it is not common to
    have telephone and internet services bundled with cable subscriptions. As various special offers and
    discounts are available throughout the year, the actual price consumers are paying is rather difficult to
    assess.

    Although the pricing methods tend to be fairly similar in most of the Western European countries,
    services are less integrated in Eastern European countries. UPC offers integrated services in most of
    the Eastern European countries, but not all providers do so. A basic package is usually offered in both
    cable and satellite services. The content of digital cable packages can be expanded at a higher price.
    Flexibility of these switching possibilities tend to vary by provider. In Belgium, Canal+ is the main
    provider of digital television. Canal+ Digital is a package that contains a red, a blue and a yellow
    channel (all three are movie channels) and a series channel (Fezztival). The package is priced at EUR
    34.68 but an upgrade is available at a total cost of EUR 39.64. The upgrade consists of 12 channels
    that focus on sports, documentaries, kids TV, music, adult entertainment and show news. Analogue
    subscriptions tend to offer one or more basic packages without the possibility to expand or reduce the
    number of channels to suit the customers’ individual preferences.

    Prices and packages of one provider may vary across countries. In the Netherlands, for instance, the
    most basic package provided by UPC via analogue cable contains 30 TV channels and 39 radio
    channels at a price of EUR 15 per month. In Austria, UPC offers 35 TV channels and 22 radio channels
    for the price of EUR12.80 per month, whereas a competitor offers 46 TV channels and 34 radio
    channels for EUR 15.62 per month. However, these prices are not representative for the prices
    consumers are actually paying. Consumers receive considerate discounts if they subscribe for (at least)
    a 12-month period.

    Prices may also vary between geographic regions within a country. Some cable operators only operate
    in certain areas of a country. In the Netherlands and Belgium, for example, there are cable operators
    that have local monopolies and only operate in certain parts of the country or even in one city. Prices
    from a single operator may also vary within one country. The economic reason for these intra-country
    price variations may be the different geopolitical circumstances (geography, population density, etc.)
    affecting actual maintenance and installation costs. In the Netherlands, UPC has largely harmonised its
    rates, with the exception of a few cities.

    In general, the rates for an analogue cable connection mainly depend on the monthly fee charged to
    the subscriber. Connection fees are charged only once and the installation fee is often waived or
    reduced, as part of a discount. In the Czech Republic, UPC currently has an offer to charge only EUR
    0.30 for the connection costs (i.e. “activation fee”). Additional charges depend on whether it is a
    package and on the payment method chosen by the subscriber. Usually, invoice payments involve an
    extra charge and direct debits do not.




Cable and satellite TV                                                                                          10
    The price paid by digital cable subscribers has a somewhat more complicated structure. Here,
    connection costs as well as installation costs are often waived as well. The monthly fee obviously
    depends on the package type. Flexibility of adding/losing channels will come at a certain price, but also
    “Pay per View” and “Video on Demand” services affect the total price paid by the costumer. As in the
    previous example, the method of payment may make a difference for the price one pays for the service.
    “Video on Demand” provided by UPC in the Netherlands is charged at EUR 3.99 per film, compared to
    EUR 3 in Austria. Online gaming using the digital subscription is included in the price for the service. In
    Belgium, Canal+ provides “Pay per view” services at EUR 3.72 per film. Other interactive services may
    be charged if used by the consumer. However, this market is a rather marginal part of revenues.

    Satellite connections require a one-time investment to purchase the hardware required. Installation and
    connection fees are generally waived (contract terms may require a minimum subscription period of
    e.g. 12 months for this price exemption). Monthly charges are based on the package type. Satellite
    connections tend to be sold as a single product. The location of the subscriber may make a difference
    for the type of hardware required by the customers. For example, the size of the receiver dish varies
    according to the geographical location of the viewers of Sky Network. These geographic restrictions
    differ depending of the region within Europe (not necessarily coinciding with the country borders). The
    satellite signals can be received in blot shaped areas throughout Europe. Towards the boundaries of
    the blots, a larger disk size is required. Sometimes signals may be picked up in areas as far as Africa
    and Russia but not in some parts of Greece. Satellite receiver dishes are not specific to the distributor
    of the signal (such as Sky), but can be purchased at known dealers. There is also a large market for
    satellite dishes on websites such as E-bay and Bizrate, which provide us with a rough estimation of
    EUR 40 for a receiver dish.

    User profiles determined by exogenous factors such as age, occupation or interests, can be built
    accordingly, on the basis of differentiated service contents.




Cable and satellite TV                                                                                            11
Table1.4: User profiles

                                                                                  COUNTRY A

               BASIC PACKAGE, 1 YEAR CONTRACT, NO AGE/OCCUPATION DISCOUNTS, NO LOCATION EXTRA COST, CHEAPEST PAYMENT METHOD
                                                                                                                                                                    Billing
                                                                      Connection                                Options for                Video On              information
                                 Type of   Hardware   Installation   fee (only paid                Package TV     other     Pay per view   demand                (included in   1st YEAR   ANNUAL
                                 package     cost         fee            once)      Monthly fee     channles     services      option       option    Helpdesk      price)       PRICE      PRICE
Service provider 1   analogue    name       EUR         EUR             EUR           EUR         number/type    name       Y/N (EUR) Y/N (EUR) Y/N (EUR) Y/N (EUR)
Service provider 2   analogue
Service provider 1   cable
Service provider 2   cable
Service provider 1   satellite
Service provider 2   satellite

            SUPERIOR PACKAGE, 1 YEAR CONTRACT, NO AGE/OCCUPATION DISCOUNTS, NO LOCATION EXTRA COST, CHEAPEST PAYMENT METHOD
                                                                      Connection                                Options for                Video On
                                 Type of   Hardware   Installation   fee (only paid                Package TV     other     Pay per view   demand                   Billing     1st YEAR   ANNUAL
                                 package     cost         fee            once)      Monthly fee     channles     services      option       option    Helpdesk   information     PRICE      PRICE
Service provider 1   analogue
Service provider 2   analogue
Service provider 1   cable
Service provider 2   cable
Service provider 1   satellite
Service provider 2   satellite

              MOVIES CHANNEL, 1 YEAR CONTRACT, NO AGE/OCCUPATION DISCOUNTS, NO LOCATION EXTRA COST, CHEAPEST PAYMENT METHOD
                                                                      Connection                                Options for                Video On
                                 Type of   Hardware   Installation   fee (only paid                Package TV     other     Pay per view   demand                   Billing     1st YEAR   ANNUAL
                                 package     cost         fee            once)      Monthly fee     channles     services      option       option    Helpdesk   information     PRICE      PRICE
Service provider 1
Service provider 2

              SPORTS CHANNEL, 1 YEAR CONTRACT, NO AGE/OCCUPATION DISCOUNTS, NO LOCATION EXTRA COST, CHEAPEST PAYMENT METHOD
                                                                      Connection                                Options for                Video On
                                 Type of   Hardware   Installation   fee (only paid                Package TV     other     Pay per view   demand                   Billing     1st YEAR   ANNUAL
                                 package     cost         fee            once)      Monthly fee     channles     services      option       option    Helpdesk   information     PRICE      PRICE
Service provider 1
Service provider 2

               MUSIC CHANNEL, 1 YEAR CONTRACT, NO AGE/OCCUPATION DISCOUNTS, NO LOCATION EXTRA COST, CHEAPEST PAYMENT METHOD
                                                                      Connection                                Options for                Video On
                                 Type of   Hardware   Installation   fee (only paid                Package TV     other     Pay per view   demand                   Billing     1st YEAR   ANNUAL
                                 package     cost         fee            once)      Monthly fee     channles     services      option       option    Helpdesk   information     PRICE      PRICE
Service provider 1
Service provider 2




Cable and satellite TV                                                                                                                                              12
1.4. Suggestions for the data collection methods to be considered

  The internet is a reliable source of information on cable and satellite rates. However, this information is
  not exhaustive and the price actually paid by consumers is likely to vary as a result of discounts and
  special offers, not to mention the waiving of installation and connection costs. This creates a
  discrepancy between the “price actually paid by consumers” and the publicly available prices. Websites
  of Eastern European operators tend to provide less actualised and more incomplete information.
  Czechlink, for instance, a provider of satellite services, does not provide any online information on
  packages available, nor does Self Servis, a provider of analogue services in the Czech Republic. A
  survey conducted among cable and satellite TV providers would provide exhaustive and updated
  information but would not reflect the actual price paid. A survey conducted among TV viewers would
  provide information as to the actual price paid, but common issues involved in statistical surveys may
  be encountered, such as a low response rate and – very important – sample bias, which may result in
  an unrealistic outcome. The option for “mystery shopping” in the form of researchers actually
  subscribing to various TV packages across countries and across providers according to an ex ante
  defined set of parameters (e.g. in line with the user profiles tables) would solve the caveats existing in
  the other data collection methods. However, this would be a rather expensive method, which would
                                                 6
  demand a huge number of fictive consumers – depending on the number of targeted user profiles and
  service providers.

  Given the magnitude of the task the European Commission is willing to initiate and considering the
  adoption of a realistic approach to actual project feasibility, our advice is to use the internet and to
  distribute a questionnaire among TV providers as data collection methods. The questionnaire
  distributed among the operators should be designed such that the researcher are able to get as close
  as possible to the actual price paid by the consumers; e.g. it should ask about connection and
  installation price waiving schemes and about percentages sold for the different packages offered. It is
  unknown how much information they would be willing to disclose, besides the actual public price
  information.

  The design of the user profiles serves as the basic structure (pre-defined parameters) for data
  collection and survey design. Under section 1.3, some sample profiles are provided. These may be
  completed by different sets of combinations of variables. The internet would be the primary collection
  method in a first attempt to fill in the user profile tables, then the information from the questionnaires
  completed by the TV providers could be used if the researchers have not found that information on the
  internet.

  The sample of service providers either surveyed or scanned on the internet should be as complete as
  possible. The average number of service providers varies between 3 and 8 per country (except
  Belgium (26) and Finland (29)), which makes a total of 121 providers (for our 15 countries chosen but
  varying on which the 15 EU countries are under scrutiny). A 100% market coverage seems feasible.




  6 Many TV connection points in different locations are needed




  Cable and satellite TV                                                                                        13
1.5. Dummy target tables

 The dummy table below has been filled in with data from the internet for certain – randomly chosen – TV
 providers in several countries. At this first attempt, the researcher has focused on the two main price
 components: the one-time fixed fees (adding up hardware, connection and installation fees, if applicable)
 and the monthly fees (Sky charges annual connection fees). As these are the two major price components
 (in magnitude), it is illustrative of the price differences that can be found across countries.

 Additional tables could be created for shorter periods (and longer periods, although the key contract
 duration factor to receive a discount seems to be one year), additional price variables, different packages
 and alternative programme contents.




 Cable and satellite TV                                                                                        14
    Table 1.5: Dummy Table

    Country                                  AT          BE           CZ         DE         DK         ES        FR        HU         IT         NL       FI    PL      PT         SE

                                          BASIC PACKAGE, 1 YEAR CONTRACT, NO AGE/ OCCUPATION DISCOUNTS, NO LOCATION EXTRA COST, CHEAPEST PAYMENT METHOD
    Service provider analogue                    Liwest    UPC        UPC     Kabel BW TDC    Euskaltel UPC       UPC     Fastweb        UPC         ?   UPC TV Cabo         UPC
    Hardware, installation and/or connection   € 261,62                        € 33,52  ?                       € 19,95                € 35,11                             € 10,70
    Monthly subscription price                  € 12,80             € 13,63    € 14,50  ?                                              € 15,54                             € 17,12
    Service provider digital cable               name    CANAL+               Kabel BW                                                   UPC
    Hardware, installation and/or connection       €     € 75,00               € 99,90  ?                                              € 39,95
    Monthly subscription price                     €     € 34,68                € 9,00  ?                                               € 9,95
    Service provider satellite                 Premiere Het Boeket UPC Direct Premiere CDD     Digital+  TPS   UPC Direct Sky Italia Canal Digitaal CDF Cyfra+ Multicanal Canal Digital
    Hardware, installation and/or connection   € 123,95  € 75,00    € 17,50   € 123,95                          € 83,79                 € 7,00                                          € 175,08 (annual)
    Monthly subscription price                  € 10,00  € 19,81    € 24,07     € 5,00                          € 21,12                 € 7,45

                                       SUPERIOR PACKAGE, 1 YEAR    CONTRACT, NO AGE/ OCCUPATION DISCOUNTS, NO LOCATION EXTRA COST, CHEAPEST PAYMENT METHOD
    Service provider analogue                  Liwest    UPC          UPC     Kabel BW  TDC    Euskaltel UPC       UPC     Fastweb        UPC         ?   UPC TV Cabo         UPC
    Hardware, installation and/or connection     €                     ?         n.a.                                                     n.a.
    Monthly subscription price                   €                     ?         n.a.                                                     n.a.
    Service provider digital cable             name    CANAL+                 Kabel BW                                                    UPC
    Hardware, installation and/or connection     €     € 75,00                 € 99,00                                                    n.a.
    Monthly subscription price                   €     € 59, 51                € 19,90                                                    n.a.
    Service provider satellite               Premiere Het Boeket   UPC Direct Premiere  CDD     Digital+ TPS    UPC Direct Sky Italia Canal Digitaal CDF Cyfra+ Multicanal Canal Digital
    Hardware, installation and/or connection € 123,95  € 75,00      € 17,50    € 25,95                           € 83,79                € 17,00                                          € 175,08 (annual)
    Monthly subscription price                € 45,00      *        € 50,66    € 43,00                           € 46,06                € 39,95

                                         MOVIES CHANNEL, 1 YEAR CONTRACT, NO AGE/ OCCUPATION DISCOUNTS, NO LOCATION EXTRA COST, CHEAPEST PAYMENT METHOD
    Service provider 1                        Premiere CANAL+ UPC Direct Premiere     CDD     Digital+  TPS   UPC Direct Sky Italia Canal Digitaal CDF Cyfra+ Multicanal Canal Digital
    Hardware, installation and/or connection  € 123,95  € 75,00   € 17,50  € 100,95                            € 83,79                  n.a.                                           € 175,08 (annual)
    Monthly subscription price                 € 25,00  € 39,68   € 37,49   € 23,00                            € 32,89                  n.a.

                                         SPORTS CHANNEL, 1 YEAR CONTRACT, NO AGE/ OCCUPATION DISCOUNTS, NO LOCATION EXTRA COST, CHEAPEST PAYMENT METHOD
    Service provider 1                        Premiere CANAL+ UPC Direct Premiere     CDD     Digital+  TPS   UPC Direct Sky Italia Canal Digitaal CDF Cyfra+ Multicanal Canal Digital
    Hardware, installation and/or connection  € 123,95 € 75,00    € 17,50  € 100,95                            € 83,79                  n.a.                                           € 175,08 (annual)
    Monthly subscription price                 € 25,00 € 34,68    € 24,07   € 23,00                            € 34,28                  n.a.

                                          MUSIC CHANNEL, 1 YEAR CONTRACT, NO AGE/ OCCUPATION DISCOUNTS, NO LOCATION EXTRA COST, CHEAPEST PAYMENT METHOD
    Service provider 1                         Premiere CANAL+ UPC Direct Premiere    CDD      Digital+ TPS    UPC Direct Sky Italia Canal Digitaal CDF Cyfra+ Multicanal Canal Digital
    Hardware, installation and/or connection     n.a.    € 75,00  € 17,50     n.a.                                n.a.                   n.a.
    Monthly subscription price                   n.a.    € 39, 64 € 24,07     n.a.                                n.a.                   n.a.

   * Exchange rate as 1/16/2006: 100xHUF-EUR 0.4002, CZK-EUR 0.0347, GBP-EUR 1.4580, SEK-EUR 0.10706. Source: Bloomberg




Cable and satellite TV                                                                                                                     15
Table 1.6: Switch-off dates of Analogue Terrestrial TV in Member States

                                       Switch off dates of Analogue Terrestrial TV in Member States
Country              Date                           Other details
Belgium              2012 envisaged in Flanders       Switch off is planned to start in 2010
Denmark              No decision yet
Germany              2010 envisaged, however no       Berlin area switched off in 2003, other densely populated islands will follow.
                     scenario
Greece               after 2010
Spain                1 Jan. 2010
France               No decision yet
Hungary              31 Dec. 2012                     Gradual switch off of the analogue transmitters.
Ireland              No decision yet                  No spectrum scarcity identified which would call for switch off.
Italy                28-jun-05
Lithuania            Beginning in 2012                Gradual switch off, 90% of households receiving analogue terrestrial programs should be capable
                                                      to receive digital terrestrial programs before an area can be switched off.
Luxembourg           No decision yet                  One analogue channel has been switched off already.
Netherlands          No decision yet
Austria              2010 envisaged
Poland               No decision yet
Portugal             No decision yet
Finland              31 Aug 2007 proposed, same
                     date all over the country


Sweden               Final date of Feb 2008 proposed Switch off may start already earlier, by region.

Slovénia             2012
Slovakia             4-jul-05
United Kingdom 2007-2012 (tentative)                  Decision on switch off by end 2004.

Source: EU Commission, MEMO/05/166, 24th May 2005, Switchover to Digital Television by 2012: Situation in the 25 EU Member States




Cable and satellite TV                                                                                                                                  16
 1.6.        Main conclusions

         - A few service providers - seldom more than 10 - are present per country. In the case of cable TV,
           these are usually regional monopolies. In the case of satellite TV, providers are often few large
           players with international presence across member states. It is thus feasible, to create an exhaustive
           list of service providers per country. The number of service providers may however increase in the
             future as a consequence of the convergence of platforms and internet or mobile phone operators
             providing TV connection. We expect markets to be highly concentrated. However, concentration is
             not only the result of a low number of service providers but of the presence of dominant players with
             large market shares what can vary per country.

         - For TV providers, the quality and number of channels offered to the consumer varies notably across
           countries. The content of the programming itself may also vary according to local preferences.

         - The complexity of the service is not high. However, due to the existence of packages that may differ
           amongst countries, the price of the different service components often remains unknown.

         - The price to be paid is known in advance (bill known beforehand) except for certain special features
             such as the per-view option.

         - For the price monitoring exercise, full market coverage (including all TV providers) is feasible and
           advised. The sample should however be restricted to the most basic or common products as
           packages are often not comparable.

         - A reference package plus a pre-determined list of price influencing variables such as contract length,
           payment method is essential.

         - TV connection is always offered in specific programming packages. This is a caveat for service
           content comparison and in consequence, for price comparison as the price of the individual
           components is not known. Furthermore, as in the case of the number of service providers,
             complexity will increase in the future as a consequence of players offering TV, internet and
             telephony in bundles.

         - Regarding data accessibility, tariffs are available in internet. Besides, the limited number of players
           facilitates the labour of getting the data directly from the providers.

         - On the price collection method, a first scan on the Internet is advisable to get an overview on the
           different packages offered per provider and on which of these packages adjust best to the pre-
           defined reference packages. The data found on the Internet should be controlled for accuracy,
           completeness and timeliness with questionnaires sent to the TV operators.




Cable and satellite tV                                                                                               17
2. Car insurance

   2.1.       Market, content and scope of the service in EU countries

      2.1.1. Exploring the content of the service in the EU

      Car insurance is an agreement or contract with an insurance company that consumers can purchase to
      insure specific losses involving vehicle ownership and traffic related accidents. According to the
      established policy, the insured damages or losses resulting from traffic accidents or theft could cover
      physical injuries, property, medical treatment and death. Car insurance companies in the EU offer
      several services, mainly classified in third party insurances, third party fire and theft insurances and
      (fully) comprehensive insurances (see explanation 2.1.2).

      Besides the basic components of these insurances, some optional extra car related insurances are
      offered, such as a legal assistance service and passenger indemnity insurance. As the legal assistance
      insurance is of special interest to the European Commission, this service is also included in this survey
      (see 2.4).

      Although the basic third party car insurance is regulated by the European Union (see 2.1.3), there
      seems to be an enormous product variation. The information stated in the policy conditions of car
      insurance companies can be lengthy, and there are great differences between the Member States and
      even within Member States. Table 2.1 lists the most common components or content of the services,
      based on internet research and reports published concerning most of the Member States. Expectations
      are that the variables found in this research and these reports are representative for all Member States.
      In order to get a full list of variables of the services and to make a qualitative comparison possible,
      further research is needed. For now, the presented list gives an insight into the actual variables of the
      content of the services. The content of the service is defined through the variables covered in the
      contract. However, no qualitative characteristics are considered, such as the correctness and speed of
      the settlement when applicable.

      2.1.2. Defining the scope of the service for the international price comparison

      The object of this chapter is the service of car insurance companies. As mentioned above, the main
      services that car insurance companies in the EU offer are third party insurances, third party fire and
                                                               7
      theft insurances and (fully) comprehensive insurances. In general:

                                 8
      -     Third party only covers third party claims, for if you have an accident with your vehicle and
            someone gets killed or injured and/or someone’s property or vehicle gets damaged. It also applies



  7 Besides these three major classes of car insurances, some optional car related insurances or extras are offered: legal assistance service, passenger

     indemnity insurance, reduction of voluntary excess and protected no claim bonus as an extra service. These are not taken into account here,

     because they are beyond the scope of this research.




  Car insurance                                                                                                                                            18
          when you drive in someone else's car (rental cars excepted) or when others drive in your car, with
          your permission.

    -     Third party fire and theft covers everything that ‘third party only’ covers. In addition, this insurance
          covers loss of or damage to the car owned by the person insured as a result of fire, theft or
                                                                                  9
          attempted theft, lightning or explosion, and any claim by third parties.

    -     Comprehensive covers everything described under 'third party only’ and ‘third party fire and theft',
          including other (external) causes of accidents, such as collisions, sliding, getting off the road or into
          the water.




8 This insurance has different names in different countries, for example: ‘Haftpflichtversicherung’ (Germany), ‘Wettelijke aansprakelijkheidsverzekering

   (WA)’ (the Netherlands) and ‘Burgerrechtelijke Aansprakelijkheid (BA)’ (Belgium). Note that in the UK, for example, apart from Third Party, Third

   party fire and theft and Comprehensive another basic type of cover is available: Act only. This offers only the minimum service required by law: third

   party liability risks for incidents on public roads. Policies of this type are very rarely issued. Few motorists would be content to rely on them, unless

   they are unable to take out any other cover because of a poor driving record. Source: http://www.thesite.org.

9 There can be major differences between countries. For example, in Germany this insurance covers more than in the UK, namely also damage

   caused by floods, crashes with animals like deer, horses, and goats.




Car insurance                                                                                                                                                  19
    Table 2.1: Service components

                                   Country                                        AT             BE               CY        CZ   DE            DK
                                                             Content of the service Car insurance (third party only)
        damage to other people or their property
        protection against legal liabilities
        minimum amount of cover
        new car cover
        settling disagreements
        motor vehicle guarantee fund
        country coverage
        passenger indemnity
        cover against certain legal costs
        emergency medical treatment
        compensation for stolen car
        personal accident insurance
                                                        Content of the service Car insurance (third party fire and theft)
        everything covered under third party only
        any claim by third parties
        loss or damage as a result of fire
        loss or damage as a result of theft or attempted theft
        loss or damage as a result of lightning or explosion
        loss or damage as a result of floods
        loss or damage as a result of crashes with animals like deer/horses/sheep
        new car cover
        accidental damage cover
        windscreen damage
        short circuit damage (cables, wires)
        stolen or lost car keys
                                                              Content of the service Car insurance (comprehesive)
        everything covered under third party fire and theft
        medical expenses cover for anyone in the insured car
        medical expenses for who is injured in an accident
        max. compensation road accident-induced bodily injuries
        compensation for changes or factory-fitted optional extra's (accessories)
        hotel expenses
        payments for death and specified serious injuries
        covers for loss or damage to personal effects in the car (?)
                                                                        Additional car related insurances
        legal assistance service
        passenger indemnity insurance
        voluntary excess (eigen risico) + afkopen
        protected no claim bonus (extra service)




    2.1.3. The market of the service

    European and national law

    It is important to note that the minimum requirements for third party insurances are regulated by EU
    law. On the website of the European Union (http://europa.eu.int/), information about Community law in
                                                      10
    Europe concerning motor insurance can be found. The European Union website summarises:




10 See for documentation of EU legislation on third party insurances: http://europa.eu.int/comm/internal_market/insurance/motor_en.htm. For some

   countries, extra information on specific provisions by national law is available on

   http://europa.eu.int/youreurope/nav/nl/citizens/factsheets/uk/car/insurance/en.html




Car insurance                                                                                                                                       20
            The Motor Insurance Directives are a fundamental element to the free movement of vehicles in
            the European Union. With the first three directives, the Community took major steps towards
            establishing a single market in the field of motor insurance. These directives oblige all motor
            vehicles in the Community to be covered by compulsory third party insurance and ensure the
            abolition of border checks on insurance so that vehicles can be driven as easily between Member
            States as within one country. They also guarantee a better protection of victims of accidents,
            including those caused by unidentified or uninsured vehicles. All passengers in the vehicle
            (including the family of the driver) are covered by compulsory insurance.

    Furthermore, the Motor Insurance Directives provide for a mechanism to compensate the local victims
    of accidents caused by vehicles from another Member State. This is only possible because the EU
    directives build upon the private sector network of bureaux and Green Card System set up by insurers.
    The 4th Motor Insurance Directive has completed the system by establishing an efficient mechanism for
    quick settlement of claims where the accident takes place outside the victim’s Member State of
    residence (“visiting victims”). On 7 June 2002 the Commission adopted a Proposal for a
    5th Motor Insurance Directive to modernise the existing Motor Insurance Directives and improve the
    protection of victims.

    The 5th Motor Insurance Directive was adopted by the European Parliament and the Council on 11
    May 2005. The Directive significantly improves the existing provisions of the Motor Insurance
    Directives. It considerably upgrades the protection of victims by increasing the minimum insurance
    amounts for personal injuries and for damage to property. Under the Directive, pedestrians and cyclists
    are now designated as specific categories of victim, which are also entitled to compensation. The
    Directive facilitates access to insurance for European citizens buying their vehicles in another Member
    State. The Directive is due to be transposed by 11 June 2007 with the exception of the provisions on
    the new minimum insurance amounts for which the Member States can request a transitional period of
    up to 5 years from the date of implementation.

    In the individual EU countries, minimum requirements for third party insurances, based on and in
                                                                                     11
    addition to the EU requirements, are laid down in their respective national laws.

    The European insurance market

    Since the deregulation of the third party motor insurance, as a result of the introduction of the freedom
    of service principle in the insurance industry, motor insurance companies are almost free in determining
    the premium for selling their service. The deregulation was followed by an increased competition
                                                                                               .12
    among insurance companies, an intensified differentiation of premiums and lower prices




11 Most of these ‘third party laws’ can be found via the full members of the ‘Comité Européen des Assurances’, www.cea.assur.org.

12 A more extended characterization of the European car insurance market: the study by Prof. Dr. Ulrich Meyer, from the University of Bamberg, for:

   Third Party Motor Insurance in Europe. Comparative Study of the Economic-Statistical Situation (1999?). The study is available on http://web.uni-

   bamberg.de/sowi/economics/meyer/forschung/kfz/study-english.pdf.




Car insurance                                                                                                                                          21
    Table 2.4 shows the number of car insurance companies for 15 countries. This number ranges from 13
    in Finland to 158 in France (see 2.4). Customers seem to be able to choose between a wide variety
    and competitive car insurance companies.

    Depending on the specific needs of the insured party, insurance companies offer both simple and more
    complex services. In general, however, the most popular services are the ones that are simple and
    standardized. The majority of the insurance companies in the EU use the same method for calculating
    their tariff factors (see 2.3).




 2.2.        Inventory list of price components of the service

    Car insurance companies in the EU use many different factors to determine the price of their service. In
    addition, these factors can differ strongly per country. For example, in the UK many relevant price-
    components influence the price, whereas in Finland relatively little components play a part in the price
    structure. Table 2.2 contains an extended list of price-related variables.13 This table is based on a
    published research, mainly on third party motor insurances.14 A quick-scan of fully comprehensive car
    insurances showed more or less the same tariff factors. In general, the price components or tariff
    factors can be classified into three groups: personal (driver/owner) criteria, criteria relating to the
    specific use of the vehicle and vehicle-related criteria.

    Insurance models and incentives

    For this chapter, underlying insurance models were not considered, such as the premium-insurance
                                                                                                                       15
    model and the insurance-managing model or the actuarial equivalence principle, as those fall outside
    the scope of this short study. Some tariff factors serve as incentives to buy a light (as to car weight) or
    less powerful car (engine power), to drive less (annual mileage) or to drive in accordance with the traffic
    rules (motoring fines). These incentives are meant to have a risk-lowering effect. Factors without these
    kinds of incentive are age, gender, age of driving license, and marital status. No differentiations
    between these categories were made in this table, although for consumers it could be important to
    know which factors are incentives, so they can take these factors into account when purchasing a car.




13 Not all factors are mentioned in this table, because they were found in a report without being verified, like education, sexual orientation, religion, and

   distance from workplace.

14 This table is mainly based on the study conducted by Mr U. Meyer. Besides other sources on the internet, we examined car insurance policies of the

   three major car insurance companies in the United Kingdom, Germany and Belgium. Mr/Ms J. Klinckenberg conducted an extensive research on

   the Dutch situation: Verzekeren van een nieuwe auto (To insure a new car) (2005).

15 See: Elaboration of Fundamental Principles for Decisions of the EU Commission Concerning a Pan-European Third Party Motor Insurance Rating

   Structure (Tariffs in Automobile Liability Insurance). http://www.bundderversicherten.de/Wissenschaft/Car_Insur_Tariffs_E.htm




Car insurance                                                                                                                                               22
    Bonus / malus system (BMS)

    An observation should be made in connection with the bonus / malus system (BMS). The relevant table
    in the earlier referred to study conducted by U. Meyer (see note 12 on page 20) does not mention the
    BMS as a tariff criterion, but treats it separately. However, the BMS is a general practice in every EU
    member state and has a significant influence on the price of the service ‘car insurance’. Therefore, it is
    included here in the table as driver/owner classification. For a comparison of existing price
    compositions, BMS is taken into account in the reference consumers (2.3).

    Table 2.2: Price components

                                   Country                                        AT             BE               CY        CZ   DE   DK
                                                             Content of the service Car insurance (third party only)
        damage to other people or their property
        protection against legal liabilities
        minimum amount of cover
        new car cover
        settling disagreements
        motor vehicle guarantee fund
        country coverage
        passenger indemnity
        cover against certain legal costs
        emergency medical treatment
        compensation for stolen car
        personal accident insurance
                                                        Content of the service Car insurance (third party fire and theft)
        everything covered under third party only
        any claim by third parties
        loss or damage as a result of fire
        loss or damage as a result of theft or attempted theft
        loss or damage as a result of lightning or explosion
        loss or damage as a result of floods
        loss or damage as a result of crashes with animals like deer/horses/sheep
        new car cover
        accidental damage cover
        windscreen damage
        short circuit damage (cables, wires)
        stolen or lost car keys
                                                              Content of the service Car insurance (comprehesive)
        everything covered under third party fire and theft
        medical expenses cover for anyone in the insured car
        medical expenses for who is injured in an accident
        max. compensation road accident-induced bodily injuries
        compensation for changes or factory-fitted optional extra's (accessories)
        hotel expenses
        payments for death and specified serious injuries
        covers for loss or damage to personal effects in the car (?)
                                                                        Additional car related insurances
        legal assistance service
        passenger indemnity insurance
        voluntary excess (eigen risico) + afkopen
        protected no claim bonus (extra service)




Car insurance                                                                                                                              23
 2.3.       Inventory of price-composition of the service

    This chapter focuses on the composition of the prices of car insurances. As shown in chapter 2.2,
    insurance companies use a wide variety of endogenous variables and criteria to calculate the price of
    their services. Meyer states in the introduction to his study. “The comparative analysis shows that there
    are hardly any differences between the individual countries regarding the methods employed for the
                                                                        16
    calculation of third party motor insurance tariffs.” In order to calculate prices of the service, rating of
    insurances throughout the EU is based on the determination of tariff factors or rating factors.

    Tariff factors

    Tariff factors are calculated by expected loss in order to generate the average difference a criterion
    makes in terms of percentage. If for a certain criterion the expected loss is high, e.g. for young drivers,
    the price of the premium for young drivers is increased according to the extra expected loss in
                                    17
    comparison with older drivers. The analysis of tariff factors gives a general insight into the financial
    consequences of the various criteria.

    Selection of primary and major tariff criteria

    Not all listed factors in table 2.2 influence prices in the same way. Some criteria are primary rating
    factors for insurance companies, some play a major role, and some play an insignificant role. For
    example, many countries consider car type the dominant tariff factor. In addition, Germany is the only
    country where ‘Garaging’ is a major criterion. Only a few countries have ‘Age of driving license’, ‘Age of
    car’ and ‘Commercial use’ as a major criterion.

    For this part of the study, the primary and major tariff factors are the most important, since these factors
    influence the price of the service most. For a fully accurate price comparison, all tariff factors should be
    taken into account. This most comprehensive accurate way to get at comparable prices would involve
    conducting research into all tariff factors and the influence they have (in terms of percentage) on the
    price composition. This requires conducting an extensive research, along the lines done by Meyer




16 Many different formulas or wa ys are used to calculate insurance risks and prices. The dominant form of calculation is calculation of tariffs by means

   of tariff factors. For an elaborative example, see Mr U. Meyer’s study. It develops formulas and gives practical examples. For more documentation

   on formulas, for example: Scalera, D. and Zazzaro, A. (2003), From regulation to free market: the experience of the European motor insurance

   market




Car insurance                                                                                                                                               24
    In order to make the research easier, table 2.3 shows a selection of the primary and major tariff criteria
                                                                                     18
    used for price composition, based on the weighing of factors in Meyer’s study . From over 40 tariff
                                                                                                          19
    criteria, the twelve criteria mentioned in table 2.3 have the greatest influence on price composition. As
    the table shows, the tariff criteria differ strongly per country.

    Table 2.3: Tariff criteria

                     Country                        AT            BE            CY            CZ           DE            DK            ES              EE
    Age                                                                                                                             
    Gender                                                                                                                            
    Occupation                                                                                                                       
    Age of driving license
    Place of registration/residence (region)                                                                                       
    Commercial use                                   
    Annual mileage                                                                                          
    Type of car/model                                                                                                             
    Engine power/cubic capacity                                 
    Power-weight ratio
    Weight of car                                                                                                        
    Age of car                                                                                                           




    Table 2.3 (cont’d): Tariff criteria

                     Country                        FR             FI           GR           HU             IT           IE            LU              LT
    Age                                                                                                                 
    Gender                                                                      
    Occupation                                       
    Age of driving license                           
    Place of registration/residence (region)                                                                       
    Commercial use                                                                                                        
    Annual mileage                                                                                        
    Type of car/model                                                                                 
    Engine power/cubic capacity                                                                                                   
    Power-weight ratio
    Weight of car
    Age of car




18 Some countries use a mixture of car type, engine power, power-weight ratio and car weight. These factors are sometimes joined/combined/mixed in

   one or two criteria, for example car type. For example, in Sweden, in most cases the vehicle-related criteria are summarised under the rating factor

   car type, which includes about 10 criteria (see: Mr U. Me yer, p. 120, Germany p. 60). Please note that in some countries type classes and premium

   differences among type classes can vary between individual insurance companies, for example in Denmark (see: Mr U. Meyer, p. 66). Please also

   note that in Mr U. Meyer’s study, no other data than data on engine power was available for Luxembourg.

19 Only the primary and major criteria that play more than one part are mentioned in table 2.3. In some countries, there is a surcharge for motoring

   fines: France (up to more than 400%), Ireland (up to 250%), the United Kingdom (up to 100%). For making a representative and fair price

   comparison, the reference consumers or profiles are not to have any motoring fines.




Car insurance                                                                                                                                               25
    Table 2.3 (cont’d): Tariff criteria

                     Country                            LV   MT   NL   PT   PL      SE       SK      SLO         UK
    Age                                                                                                         
    Gender
    Occupation                                                                                                   
    Age of driving license                                             
    Place of registration/residence (region)                                                                
    Commercial use
    Annual mileage                                                                                             
    Type of car/model                                                                                          
    Engine power/cubic capacity                                                    
    Power-weight ratio                                                 
    Weight of car                                                    
    Age of car

    NOTE:
     = Primary rating factor or tariff criterion
     = Other major rating factor or tariff criterion



    Research based on reference consumers

    The number of insurance companies and the difficulty to compare prices and content make it difficult for
    consumers to make well considered choices. Very few consumers ask offers from all or many
    companies. This is simply not feasible. With the rise of the internet, on the other hand, there are more
    and more websites where consumers can easily compare prices, like www.independer.com in the
    Netherlands. This makes the market far more transparent for consumers. In addition, for the
    researchers on an EU scale it is also difficult to make well considered choices. It is hardly feasible to
    cover all criteria included in this report. This would result in over hundreds of thousands of different
    combinations and calculations to be made by the researchers and the insurance companies. That is the
    reason for choosing a small selection of reference consumers to get comparable prices. The most
    important tariff criteria will be indicative/decisive for constructing the user profiles or reference
    consumers. The objective of this study is to compare the prices that (reference) consumers pay for a
    car insurance in EU countries. In the following six suggested reference consumers, all most important
    tariff factors are covered. This approach will lead to a good approximation of the actual prices paid by a
    high percentage of the consumers in the European Union.

    Suggested reference consumers or profiles:

      -      Case 1: 19-year old student (male), single, Peugeot 206 1.1, 60 hp, 1,124 cc, petrol engine, year
             of manufacture 1999, 885 kgs, second-hand, annual number of kms driven 13,000. Medium
             expensive region. Type of insurance: third party only.

      -      Case 2: 31-year old clerk (male) married, 2-year old child, insured for 8 years, no claims since
             insured, Toyota Avensis, 129 hp, 1,794 cc, petrol engine, year of manufacture 2005, 1,240 kgs,
             new, annual number of kms driven 25,000, mainly business. Medium expensive region. Type of
             insurance: comprehensive.

      -      Case 3: 42-year old unemployed woman, married, 2 children (7 and 10 years old), highest rate of
             discount in bonus-malus system, Suzuki Alto, 58 hp, 993 cc, petrol engine, 725 kgs, year of
             manufacture 2002, second-hand, annual number of kms driven 11,000. Medium expensive
             region. Type of insurance: third party only.




Car insurance                                                                                                        26
      -     Case 4: 46-year old IT businessman (male), married, 3 children (9,11 and 14 years old), half way
            discount in bonus-malus system, Volvo V70 2.5 D5, 185 hp, 2,401 cc, diesel engine, 1,536 kgs,
            year of manufacture 2005, new, annual number of kms driven 30,000. Medium expensive region.
            Type of insurance: comprehensive.

      -     Case 5: 52-year old teacher (female), divorced, no children, insured for 4 years, no claims since
            then, VW Golf 1.6, 100 hp, 1,595 cc, petrol engine, 1,049 kgs, year of manufacture 2001, new,
            annual number of kms driven 15,000. Medium expensive region. Type of insurance:
            comprehensive.

      -     Case 6: 67-year old pensioner (male), married, highest rate of discount in bonus-malus system,
            BMW 5 5/H 520I, 170 hp, 2,171 cc, petrol engine, 1,495 kgs, year of manufacture 2003, new,
            annual number of kms driven 8,500. Medium expensive region. Type of insurance:
            comprehensive.

    Comment on chosen cars (and types)

                                                                                                                                20
    The choice of cars and types is based on their actual and general popularity in their class. To insure a
    car means that someone insures a certain amount of value (i.e. the car). One way to compare prices is
    to compare cars in all countries with a value of EUR 10,000. But then, the results could differ strongly
    because different types of cars (different weight, engine power, etc.) can be purchased for the same
    amount of money. With the above tariff criteria that insurance companies use, the prices of insurances
    for these different cars would not be comparable.

    Considering the above, it is best to compare insurance prices for the same car in all of the EU countries
    to get at comparable prices. The most popular type of car in its class represents the greatest group of
    consumers. For future surveys, the research can be repeated with, again, the most popular car in their
    class. This could be another car than the previous year(s). This different type of car can have different
    characteristics, for example more engine power, more weight, etc. This could result in an overall
    increase or decrease in prices paid for the insurance of a car in this specific class. But the percentage
    differences between countries will give a good (comparable) indication of the general price level. It is
    necessary to have a standardised updating mechanism, based on a well-maintained databank like the
    Dutch www.autointernationaal.nl.

    For the six reference consumers mentioned above, the following classes are chosen:

      -   Small car (Suzuki Alto)

      -   Supermini (Peugeot 206)

20 The cars used for three of the reference consumers are specifically chosen because in their class Peugeot 206 (classified as Supermini),

   Volkswagen Golf (small middelclass car), Toyota Avensis (middle class car) are the ones most sold within Europe. The choice of the other three

   cars, Suzuki Alto (small car), Volvo V70 (large middle class car) and BMW 5 (executive car) was based on the profile of the driver. A Volvo V70 is a

   typical family car, popular with business men, etc. Source: http://www.autointernationaal.nl/HTML_frames/start/verkoopcijfers.html and

   http://www.answers.com/topic/car-classification.




Car insurance                                                                                                                                             27
        -   Small middle class car (VW Golf)

        -   Middle class car (Toyota Avensis)

        -   Large middle class car (Volvo V70)

        -   Executive car (BMW 5-series)

    Further considerations

                                                                                    21
    -       The technical data refer to the specific cars sold in the year mentioned.

    -       Choice for age is based on the criteria used by insurance companies concerning young and senior
            drivers.

    -       To get at comparable prices, and to simplify analyses of data, all reference consumers are
            considered to live in a medium expensive region.

    -       All the other factors, like gender, occupation, and BMS are based on table 2.3.

    -       The above reference consumers will not have any motoring fines.




 2.4.        Suggestions for the data collection methods to be considered

    The goal of the future major data collection is to obtain reliable and relevant data for the Commission.
    The collected data must be relevant, so they must be representative for a large enough group of
    consumers. In addition, the collected prices of products should belong to products that really exist and
    are bought in large enough numbers. The chosen method must not lead to a best price for a given
    profile, and the method must not lead to niche products for non-existent consumers. In this paragraph,
    a few data collection methods are suggested.

    High coverage of market

    If the Commission wants a real price comparison, a 100% (almost) coverage is needed. If all tariff
    factors were used equally, then over 150,000 individual cases (and premiums) could be identified (even
    more when third party and comprehensive are considered separately). This is, of course, unfeasible.
    Therefore, the six reference consumers are formulated on the basis of the criteria in table 2.3. These
    should give insight into the EU market with a relatively high representation of the EU consumers. In
    order to get the best possible and realistic comparison of premiums in Europe, quotations for both a
    third party and a comprehensive insurance will not be asked for all six cases, because it is not very
    realistic for the newer cars in the profiles to ask the premium for a third party insurance (all new cars,


21 Autotrader/autoweek carbase, merkindex: www.autotrader.nl




Car insurance                                                                                                    28
    with maybe a few exceptions, will be comprehensively insured). This means a survey covering 6
    (number of profiles) x 25 (number of countries) x 70 (rough estimate number of insurance companies in
    the member states, see table 2.4) = 10,500 offers from insurance companies. This number is a rough
    estimate of a 100% sample of the six reference consumers.

    Number of motor insurance companies in Europe

    Table 2.4 shows the number of motor insurance companies in 15 Member States. The numbers are
    based on the report of Meyer, and a few figures have been updated. Even data from the situation
    between 1997-1999 give a good indication of the present numbers. 15 countries amount to about 1,040
    companies, an average of about 70 companies per country. Even without the data on the newest
    member states, we can roughly estimate the total amount of car insurance companies in the EU: 25 x
    70 = 1,750. This only gives a general idea; the average new Member State is smaller (in terms of
    population) than the 15 countries taken into consideration. On the other hand, a relatively small country
    like the Netherlands has about 150 companies, which is more than Germany (124).

    Table 2.4: Example of number of motor insurance companies in Europe

     Country     Number
    AT              32
    BE              71
    DE             124
    DK              41
    ES              90
    FR             158
    FI              13
    GR              78
    IT              96
    IE              19
    LU              8
    NL             151
    PL              54
    SE              16
    UK              90
    Total         1,041


    Questionnaire

    Collecting and analysing all data (10.500 offers) would be time-consuming and costly. An effective way
    to collect these data is by sending questionnaires to insurance companies. Insurance companies in the
    Member States will be requested to fill out these questionnaires in order to get the data for the six
    reference consumers as described in 2.3. This is a total of twelve quotations: on the basis of the six
    reference consumers – calculated on the basis of both a comprehensive and a third party insurance –
    12 prices will be gathered per insurance company. This model is based on the questionnaire that is
    used in the study conducted by Meyer.




Car insurance                                                                                                   29
    The media to be used

    Considering the importance of this survey, both for the consumer and the insurance branch, we think it
    is advisable to supply ample explanation when approaching the managements of the various insurance
    companies. It seems an efficient approach to ask the companies to fill out the questionnaires on the
    internet, on a protected website. The password can be provided on request. It must also be possible to
    download the filled out questionnaires. It must be prevented that questionnaires are filled out on paper.
    This method of data collection can also help to speed up the process, by linking the site to a databank.
    Obviously, the site must have a helpdesk with FAQs and the possibility to email questions or
    observations.

    General idea of prices, small market coverage

    If the Commission does not opt for a real price comparison, but for a general idea of prices, the number
    of companies to be approached can be limited to a representative sample of the market. For example,
    those companies that cover 60% of the market (on estimate, mostly 3-5 major companies within each
                         22
    EU Member State). This means a substantial reduction in the number of questionnaires to be filled
    out in order to get at comparable prices. If in general a number of 5 companies cover 60% of the
    market, there will be 6 (number of profiles) x 25 (number of countries) x 5 (insurance companies that
                                                                         23
    cover together 60% market share) = 750 questionnaires (or offers). Obviously, this method is much
    less costly than full market coverage. The information on market share can be obtained from the
    national or European insurance trade organisations. It is important for this method to make sure that all
    companies within the 60% market share respond to the questionnaires. Mystery shopping may help
    towards this aim (see below). The possible risk of this approach is that the most (price) competitive
    insurance companies will be excluded from the research. To compensate this, a quick-scan on
    premiums can be made via websites that compare prices on a national level, like www.independer.com
    in the Netherlands. However, it is not always clear whether commercial motives play a part on these
    websites and whether certain companies are favoured. As to the example of Independer.com, it is most
    certainly an independent and ‘consumer friendly’ platform, providing its users with a fair price
    comparison. With the use of this type of ‘approved’ website, it is possible to find the cheapest insurance
    company and to calculate the difference between the price of an insurance from this specific company
    and the average price found with the ones that cover 60% of the market. This indicates the gap with
    possible prices and actual prices paid by consumers. It is also important that the content of the service
    be taken into account. A low price could well be the result of a lesser quantity or quality of services.

    Collection methods for small data samples

    For the collection of small data samples or a small market sample, we suggest - apart from desk
    research (the internet, existing EU documents, local and international CBS like organizations, etc.) -
    using the following field research methods:


22 A few members of the ‘Comité Européen des Assurances’ (www.cea.assur.org) publish accurate data on market coverage.

23 If the European Commission is interested in ‘fire and theft’ policies and insurances, the above method and reference consumers can be used for

   surveying.




Car insurance                                                                                                                                       30
    -     Local experts. For the collection of data in the individual countries, we suggest assigning a local
          expert, who can collect data with the national bureaus of statistics.

    -     Mystery shopping. A mystery consumer collects small market samples by way of collecting offers
          from a selection of car insurance companies.

    Special note on legal assistance service

    In some countries a minimum service for legal assistance is already covered in third party only. In this
    case a full legal assistance service covers extra loss or damage caused by legal matters or gives full
    legal assistance when needed.

    The Commission has committed itself to present a report to Parliament and the Council in 2006 on the
    opportunity of amending the Motor Insurance Directives to include provisions on mandatory cover of
    legal expenses. Therefore, statistical data on availability and prices of such policies would be very
    useful. In this survey, we did not look into this subject in-depth, but nevertheless, we would like to point
    out some considerations for research.

    In the first place, research on legal assistance service should take into account both qualitative and
    price technical aspects. Questions like the following need to be answered:

    -     How many consumers make use of the service in addition to a general car insurance (third party,
          third party fire and theft, comprehensive)?

    -     What is the minimum coverage stated in these policy conditions?

    -     Is there a great variety in legal assistance policies or services in and between the countries?

    -     It seems appropriate to make a table such as table 2.1 (‘Content of the service’).

    It would also be advisable to achieve full market coverage on this particular service. It might well be that
    all insurance companies offer this service, but we do not have any evidence for this yet. A qualitative
    number or percentage in this respect, and actual use by consumers, would be useful to the
    Commission for provisions on mandatory cover of legal expenses. The method proposed for car
    insurances, 60% market coverage (3-5 companies in each country) would not give a clear insight into
    the variety of policies and the availability of the legal services. Information on the availability could be
    obtained from the national or European insurance trade organisations. It could also be that some
    countries have already made such services or insurance policies mandatory on a national level.
    However, there is no evidence in this respect yet, either.




Car insurance                                                                                                      31
    Full market coverage legal assistance service

    As mentioned, the estimated number of insurance companies in EU member countries is 1,750. Full
    market coverage would mean sending, collecting and analysing approx. 1,750 questionnaires (the ones
    that return).

    If the Commission is only interested in a smaller representative sample of the legal assistance service,
    with most consumers represented, then lesser market coverage may suffice. Collecting data on legal
    assistance service could be combined with the collection of data on car insurances.




 2.5.           Dummy target tables

    Table 2.5 shows what the possible outcome of new data research could be for the six consumer
    profiles outlined earlier (each consumer profile is labelled Case 1 to Case 6). This table contains
    average and representative prices as paid by the consumer. For this dummy table 2.5, up-to-date price
    data were not collected. The numbers in the first two rows are fictional. The same table can be made
    for both ‘third party only’ and ‘comprehensive’.

    Table 2.5: Dummy target table

     Country              AT               BE               CY               CZ                DE        DK
    Case 1               500              700
    Case 2               400              550
    Case 3               300              350
    Case 4               600              650
    Case 5               250              450
    Case 6               350              600
    Average              400              550



    The study conducted by Meyer shows a table clearly indicating what the suggested methods make
             24
    possible. The new EU members were not analysed in this study. Also, only third party-insurances
    were studied. In view of the fact that the scope is now wider, the new EU Member States and the
    comprehensive car insurances should be included.




24 See U. Meyer, p. 139. In this table six instead of five reference consumers or cases are suggested.




Car insurance                                                                                                  32
 2.6.       Main conclusions

        - The most popular services are the ones that are simple and standardized.

        - There are a large number of insurance companies. For the old 15 EU members only, there are 1,040
          companies or an average of about 70 companies per country.

        - Product variation is enormous due increased competition among insurance companies and
            intensified differentiation.

        - Consumer profiles are needed as driver/owner criteria determine the price of the insurance.

        - Criteria relating to the specific use of the vehicle and vehicle-related criteria determine prices. Some
          are primary and major, other secondary and of minor importance.

        - Sending questionnaires to insurance companies is an effective way of data collection. An efficient
          approach is to ask the companies to fill out the questionnaires on the internet, on a protected
          website.




Car insurance                                                                                                        33
3. Car rental

 3.1.        Market, content and scope of the service

    3.1.1. Exploring the content of the service in the EU

    Car rental companies offer cars, ranging from small cars to luxury vehicles, for rent. The rental services
    covered in this chapter relate to consumers– often foreign travellers (tourists and business travellers).
    Differentiated rental services exist for businesses. Specialised car rental companies (such as moving
    vans, limousine services) also fall outside the scope of this analysis.

    Different car models imply different comfort and/or security standards. Car offering varies across
    countries and locations where car segments offered [A, B,C,…etc] contain different, or fewer car
    models.

    Compulsory basic service insurance varies widely across countries.

    Rates are often higher in populated areas, such as city centres. However, this is not always the case.
                                                                                                        25
    For example, AVIS car rentals in the Netherlands apply a standardized rate throughout the country.

    Researchers may encounter certain country or city specific peculiarities, such as the “London
                         26
    congestion charge” , which are passed to the end customer. Route restrictions may apply in Europe
                                                                         27
    (e.g. Orbitz.com restricts its customers to enter certain countries). These restrictions are motivated by
    the high rate of car-thefts in those countries.




25 Telephone enquiry with AVIS headquarters in Amsterdam, the Netherlands, 22 August 2005.

26 The London Congestion Charge was introduced on 17 February 2003. There is a charge of £ 5 per day (VAT exempt) for vehicles within the zone

   between the hours of 7 am and 6:30 pm, Monday to Friday. There is no charge on Public Holidays.

27 Rentals are not allowed with Mercedes, BMW, Audi/VW and Jaguar cars into certain Eastern European Countries. See Orbitz (2005).




Car rental                                                                                                                                       34
    Table 3.1: Services Components

     Country                                                                       AT           CZ          DE           UK
                                   (1)
     Car model (segment)                                                                                              
     Car status                                                                                                       
     Car equipment (airco, comfort additionals, etc.)                                                                 
     Extras (navigator, child seat,…)                                                                                 
     Reception or return outside office hours                                                                         
     Reception location (country/city/district)                                                                       
                                                        (2)
     Return location (different from pick-up location)                                                                
     Type of reception/return location (airport, train station, inner city)                                           
     Collision Damage Waiver                                                                                          
     Cash deposit required                                                                                            
     Insurance / additional insurance                                                                                 

     (1) In all the countries a license needs to be held for a minimum of 1 year, however for some luxury car segments
         more experienced is required.

     (2) Geographic restrictions apply, sometimes it is the case that these restrictions can be waived with the agreement of the
         rental company as well as an extra charge for the increased risk they bear.




    3.1.2. Definition of the scope of the service for the research

    In the Commission’s research, the list of possible variables determining the service content for building
    the consumer profiles should be mainly based on the rent of cars of a specific segment, during a
    specific period of time, at a specific location (e.g. airport v. city centre). Insurance is an always present
    and legally required component that will be assumed to be the basic minimum as required by
    legislation.

    Car models and insurance policies are the main determinants of content differential across countries as
    they are inherent to the service itself – i.e. these two components always exist – whereas other service
    content components are additions offered to the customer in exchange for a higher price, such as infant
                                               28
    seats, sky racks or snow chains .

    One-way rentals (returning the car in a different location), out-of-office rentals (picking up or returning
    the car outside office hours) or hiring an extra driver are other options that are generally available.
    However, these can be left out of the basic content of the service.

    The good condition of cars is part of service quality but analysing the condition requires rather specific
    and locally conducted research, more qualitative than quantitative (although certain quantitative
    indicators, such as average fleet age or kilometres driven per car, could be used). The consideration of
    these features would require a separate accountability and measurement methodology as these
    features are not part of the service and price information available from the service providers. They fall
    outside the scope of the study.


28 Additional equipment may be priced per rental instead of per day.




Car rental                                                                                                                    35
    3.1.3. The market of the service

    The car rental market is an internationally oriented market with a few global players that operate on a
    pan-European scale compete with local car rental companies (see section 3.4 on how to identify these
    smaller rental companies).

    The large car rental companies usually have outlets at and around airports and train stations as well as
    at other locations in large cities. Different rates may apply to different locations, for example car rental
    at airports is usually more expensive than elsewhere. Airport locations seem to be crucial given the
    international traveller quality of the targeted customers.

    The existing service variables are rather homogenous across countries. We have found few
    divergences between national markets in this respect.




 3.2.        Inventory list of price components of the service

    In order to get a first view of the car rental market, we have compared the prices of several global
    players in 15 EU countries. Local smaller players have been left out of the price tables at this stage of
    the research and within this “Eleven shortlist studies” report. However, besides being an important
    player on the market, local providers can make a difference for the research results, as they provide
    different price levels (usually lower prices). Local car rental companies should at all times be taken into
    consideration in the actual price monitoring.

    Many of the price-influencing variables are also part of the service content, such as the car segment or
    the location of the rental outlet. Other variables, such as the number of kilometres driven, the driver’s
    age, or the “full tank” clause, are mere pricing variables. (Rental companies usually provide cars with a
                                                                                                                 29
    full tank and require their customers to either return it with a full tank again or to pay for the fuel used) .

    The table below contains price related variables and is based on a scan on the internet. The variables
    are expected to be relevant across most countries since the car rental companies are (generally) the
    same throughout Europe.




29 For AVIS Belgium the following applies: the fuel costs, including service costs amounting to EUR 9.80 (exclusive of VAT) downtown and EUR 12.00

   (exclusive of VAT) at the airport and at the railway stations, are chargeable to the hirer. You can save money and win time when returning your

   vehicle: you can opt for our refuelling service at the start of your rental. You will pay the refuelling in advance, at a preferential rate. The current

   conditions are available at our rental locations.




Car rental                                                                                                                                                    36
    Table 3.2: Price Components

     Country                                                                  AT        CZ          DE         UK

     Car Model (segment)                                                                                     
     Car equipment (airco, comfort additionals,etc.)                                                         
     Extras (navigator, child seat,…)                                                                        
     Daily fee                                                                                               
             (1)
     Per km fee                                                                                              
     Contract duration discount                                               ?          ?          ?           ?
     Week/Weekend
     Type of reception/return location (airport, train station, inner city)                                  
     Reception location (country/city/district)                                                              
     Reception or return outside office hours                                                                
     Return location (different from pick-up location)                                                       
                   (2)
     Driver's age                                                                                            
     Cost additional driver                                                                                  
     Collision Damage Waiver                                                                                 
     Additional insurance Costs                                                                              
     Full tank (difference is charged at a certain rate)                                                     
     Package offering                                                                                        

     (1) Some companies do not charge for the km driven, this varies notably within countries. Usually the first
          1000km are charged at a flat rate included in the rental price, further km's are charged at a specific rate.
     (2) In some countries certain segments can only be rented above a certain ages, apart from the general rule
         existing in every country that a minimum age of 21 years should be reached.




 3.3.        Inventory of price-structure of the service

    Prices for car rental services are mostly determined by local factors (such as local car prices,
    (environmental) taxes). For example, car rental rates in Denmark are relatively high, which is (probably)
                                                                               30
    a result of the high car taxes existing in Denmark. Car rental rates differ between rental companies
    and per country. The influence of international pricing policies on prices is also significant, as the
    companies’ specific pricing strategies are a determining factor as well.

    Some car rental companies do not use different rates within one single country, whereas others do.
    Some providers even use different rates within one and the same city. Factors that are likely to be of
    influence in this context are the location of the company in the city as well as the opening hours.
    Premium locations in the city may use higher fees (renting a car from the city centre is more convenient
    than renting one from a distance of around 5km from the city centre). Furthermore, the opening hours
    of locations vary; some rental companies are closed most of the Sunday whereas others are opened 24
    hours, 7 days a week. The Surface Deployment and Distribution Command (SDDC) from the United
    States, an organisation linked with the US army, publishes ‘target’ car rental rates per country every




30 See Table 3.4




Car rental                                                                                                          37
    couple of months for their employees. Although this list should not be considered an official rate list, it
                                                                                            31
    provides a good impression of the differences in car rental prices in various countries.

    The total price for car rental services basically depends on several key variables such as the number of
    rental days, the duration of the contract (although rates are daily rates, the duration of the rental
    contract influences the price level), the number of kilometres and the car segment. However, the total
    costs also depend on a large number of other factors such as taxes, additional insurance coverage and
    supplementary features of the service.

    Car models available in different countries are not identical. Car rental companies do not offer the same
    makes in the different countries. They often only provide an example of car models for a certain
    category and explicitly mention that the actual car and model may be different. The example is only
    used as a frame of reference for the class of the rental. Besides, different car rental companies do not
    include identical models within the same class category. For instance, in table 3.3, AVIS Netherlands
    offers the Opel Corsa model as a B-class car, whereas AVIS in Austria offers this car in its A-class
    segment.

    Table 3.3: Car segments

       Segment             NL              AT              ES
           A         Chevrolet Matiz  Opel Corsa       Opel Corsa
           B           Opel Corsa      Citroen C#     Renault Clio
           C            Opel Astra    Opel Meriva    Renault Megane
           D           Opel Vectra     Opel Astra       Audi A3
           E          Skoda Superb     Opel Zafira  Mercedes A-Class
           F        Mercedes C-class  Opel Vectra      Opel Zafira
           G            VW Gold      Mercedes C 200     Alfa 156
     Source: www.avis.com


    The recommended approach is comparing car segments rather than individual models. This is even
    more essential for local rental companies as car model differences are expected to increase.

    General characteristics of consumers may play a significant role in the pricing of car rental services.
    Consumers aged between 21 and 24 and over 65 may be charged differently (due to a higher risk level
    because of inexperience or decreased ability to respond). The specific occupation of consumers may
                                32
    also play an important part.

    Car rental companies offer a great many choices to their customers, ranging from car models to
    insurance packages or the option of returning the car in a different location. The user profile tables
    below are illustrative and presented in a format that allows for various combinations. Besides, although
    the most basic insurance modalities are assumed for the examples of consumer profiles below, and
    additional price supplements are not, a range of supplements can easily be added to the basic profiles.


31 See SDDC-International Car Rental Rates, 6 June 2005


32 To emphasise the international character of the car rental sector, people with a profession in the tourism industry get discounts.




Car rental                                                                                                                              38
Table 3.4: Consumer profiles

                                                                                 COUNTRY A

                                                                                                           Extra insurance cost(
                                                                                                             young driver, theft
                                                                                                           protection, geographic      Collision Damage                                Price per
                                       Cost per day             Cost per km            Insurance Cost           restrictions**              Waiver*          Cost additional driver       day
                              No driver age supplement, lowest segment , weekday, 100 km., city centre pick-up and delivery
Service provider 1
Service provider 2
Service provider 3
Service provider 4
Service provider 5
                              No driver age supplement, medium segment, weekday, 100 km., city centre pick-up and delivery
Service provider 1
Service provider 2
Service provider 3
Service provider 4
Service provider 5
                              No driver age supplement, highest segment, weekday, 100 km., city centre pick-up and delivery
Service provider 1
Service provider 2
Service provider 3
Service provider 4
Service provider 5
                               No driver age supplement, lowest segment, weekend, 100 km., city centre pick-up and delivery
Service provider 1
Service provider 2
Service provider 3
Service provider 4
Service provider 5
                                 Driver age supplement, lowest segment, weekday, 100 km., city centre pick-up and delivery
Service provider 1
Service provider 2
Service provider 3
Service provider 4
Service provider 5
* Collision Damage Waiver: This waives the renter's liability for damage caused only to the hired vehicle if it is involved in a collision. This waiver carries a excess/deductible or liability of
a certain amount.
** Geographic restrictions can be lifted if one is willing to pay a higher insurance premium




Car rental                                                                                                                                                                                            39
 3.4.        Suggestions for the data collection methods to be considered (revised in the input of
             the pilot)

    The European car rental market consists of two major groups: local and pan-European car rentals. The
    major car rental companies publish their rates on the internet and provide the possibility to book online.
    The smaller local rental companies have a significantly smaller geographic market and their marketing
    efforts are therefore more locally oriented (they often do have webpages but the information provided is
    somehow more limited). Choosing of the smaller rental companies requires some degree of local
    knowledge. YellowPages or similar directories are a good starting point.

    The internet is a good source of information for the large rental companies. The websites of car rental
    companies with online booking services are a better proxy for the actual price paid by customers (the
    actual price paid may vary if conditions vary, such as returning the car in another location, or later than
    planned). A further advantage of conducting research into car rental prices via the internet is that the
    rental options available are basically the same in different countries, except for minor differences (e.g.
    snow chains is a supplement which is available on the AVIS site for rental in Spain, but which is not
    available on the AVIS rental site in the UK). When comparing the price of car rentals within a certain
    city, it should be taken into account that prices may depend on where the car rental outlet is located.
    Rental companies located in suburbs may be cheaper compared to those near the city centre because
    the latter will be paying a higher price for garage rental and taxes. In addition, they offer greater
    convenience (as to location). Research could be conducted by classifying rental companies according
    to distance from the city centre.

    There are certain websites (such as Orbitz.com and Expedia.com) that provide a comparison of rates
    for the different providers within different countries in Europe. The reliability of these sites is less than
    that of the company specific sites but they may provide a good overview for a first market scan.

    It is recommended to conduct a (telephone) survey among smaller local providers to complete the
    sample and include the prices they charge. There are various factors that will affect the price and it is
    necessary to build the different consumer profiles to prepare the questionnaire. Consumer profiles (see
    table 3.4 above) of people renting from large European players do not necessarily differ from those
    renting from local suppliers. The price that local rental companies charge for car rentals could be
    obtained by sending them a questionnaire with the various consumer profiles available. Local providers
    may be identified using the Yellow Pages.

    A general survey could be conducted among consumers to find out what they are actually paying for
    renting a car at a local rental company, but that has additional disadvantages. Compared to a survey
    among car rental suppliers, a consumer survey requires quite a large sample because consumer
    profiles are not known ex ante (they are random), which creates a risk of sample bias and therefore not
    being representative for the rest of the population. The time and costs involved in a survey would
    increase substantially compared to a questionnaire, preferably through an internet panel, among rental
    companies. This method saves time and costs and, according to Consumentenbond’s experience, it is
    an effective method.




Car rental                                                                                                          40
    By using the consumer profiles, researchers can start filling out the table as table 3.4 and give a rather
    good estimation of price levels for each profile. Here, it will be interesting to see whether local suppliers
    are indeed able to compete with European suppliers. One should be aware of the fact that seasonal
    pricing may apply, as a result of which it is advisable to fill out the consumer profile tables several times
    a year in order to estimate an average by using statistical techniques.

    Since the location of the rental company can be an important factor, it is advised to find out ex ante
    where the majority of cars are rented. This information can be obtained by contacting small local and
    large pan-European rental companies (or by means of an internet panel to which the customers
    respond).




 3.5.        Dummy target tables

    For every consumer profile investigated, the Austrian market seems to have the highest average daily
    car rental rates. In the Austrian market, we have found that prices are the highest at Europcar and
    Hertz. The difference between prices is also quite significant. For instance, if we look at the price
    difference between Easycar and Europcar, there is a EUR 58 difference for economy car rentals during
    weekdays.

    The hypothetical profiles of Table 3.5 serve as a good example of how variables can be modified on the
    basis of a certain profile to allow for price comparisons. In the example below, a hypothetical consumer
    (without young-driver supplement) rents a car in the cheapest range segment, drives a total of 500
    kilometres and hires for a period of 5 days (rates may vary according to the number of renting days).
    Hertz, for instance, states on its webpage that considerable discounts apply if cars are rented for a
    longer period. This is also the case for local providers; a local rental company near Amsterdam offers a
    10% discount on the normal day price for 1 week, 20% for 2 weeks and 30% for 3 weeks. In addition,
    the table allows for variations in weekdays vs. weekend days as well as in the picking up and delivery
    locations.

    Major car rental companies of Europe have been included in the table and the relevant websites have
    been searched to obtain the rental prices. Each country’s capital (city center) and its airport have been
    used as reference.




Car rental                                                                                                          41
Table 3.5: Dummy table

Country                                                                            AT           BE        FR                                       DE                 ES          EU Average
                                                age >24, weekday/airport pick-up and drop-off/ economy model/ 500km
AVIS                                                                           €    39,47 €      33,28 €    50,22 €                                  44,38        €    57,61      €    44,99
Budget                                                                         €    45,80 €      38,07 €    56,00 €                                  41,00        €    46,00      €    45,37
Easycar                                                                        €    31,18 €      29,20 €    27,04 €                                  28,42        €    23,60      €    27,89
Europcar                                                                       €    89,67 €      45,00 €    66,40 €                                  57,60        €    43,76      €    60,49
Hertz                                                                          €    77,77 €      55,80 €    40,32 €                                  44,17        €    36,24      €    50,86
Country average                                                                €    56,78 €      40,27 €    47,99 €                                  43,11        €    41,44
                                                  age >24, weekday/city pick-up and drop-off/ economy model/ 500km
AVIS                                                                           €    38,80 €      49,01 €    39,70 €                                  41,59        €    38,80      €    41,58
Budget                                                                                     €     38,07 €    47,40 €                                  37,00        €    38,00      €    40,12
Easycar                                                                        €    31,18              €    48,92 €                                  36,17        €    30,81      €    36,77
Europcar                                                                       €    77,97 €      40,40 €    29,36 €                                  42,00        €    38,00      €    45,55
Hertz                                                                          €    68,15 €      47,84 €    34,46 €                                  40,49        €    28,20      €    43,83
Country average                                                                €    54,02 €      43,83 €    39,97 €                                  39,45        €    34,76
                                                age >24, weekend*/airport pick-up and drop-off/ economy model/ 500km
AVIS                                                                           €    37,45 €      25,76 €    45,80 €                                  38,20        €    37,45      €    36,93
Budget                                                                         €    40,40 €      23,96 €    57,00 €                                  30,15        €    38,00      €    37,90
Easycar                                                                        €    37,40 €      36,04 €    33,80 €                                  35,53        €    29,50      €    34,45
Europcar                                                                       €   109,18 €      41,73 €    29,05 €                                  41,00        €    54,71      €    55,13
Hertz                                                                          €    77,68 €      35,88 €    32,54 €                                  36,61        €    34,55      €    43,45
Country average                                                                €    60,42 €      32,67 €    39,64 €                                  36,30        €    38,84
                                                 age >24, weekend*/city pick-up and drop-off/ economy model/ 500km
AVIS                                                                           €    44,62 €      47,95 €    39,30 €                                  38,20        €    37,45      €    41,50
Budget                                                                                     €     36,11 €    48,00 €                                  30,15        €    38,00      €    38,06
Easycar                                                                        €    37,40              €    33,80 €                                  35,53        €    29,50      €    34,06
Europcar                                                                       €    64,14 €      22,25 €    38,75 €                                  41,00        €    47,89      €    42,80
                                                                                                                                                                            (1)
Hertz                                                                          €    68,14 €      35,88 €    32,10 €                                  30,92                        €    41,76
Country average                                                                €    53,57 €      35,54 €    38,39 €                                  35,16        €    38,21

(1) Blank spaces are due to unavailable cars from the economy segment
*Daily week rental prices were measured over a 5 day rental period, from 18-22 July 2005. Daily prices during the weekend are calculated based on a Fri-Mon rental period (for
 practical reason as cars can often not be returned after 1pm on Sundays.




Car rental                                                                                                                                                   42
 3.6.        Main conclusions

         - There are a few (4 or 5) global players that operate on a pan-European scale. However, each
           country is populated of large number local companies whose prices are usually lower than those of
           the large companies and that are essential for the long term price monitoring activity. Because of the
           large number of national players, markets are not expected to be very concentrated.

         - Available car models vary across countries and locations. The content of the compulsory basic
           insurance also differs reflecting differences in legislation and in the risk profile of local drivers.

         - It is not difficult to separate the basic content of the services from additional components.

         - The bill can be estimated in advance (e.g. it is possible to reserve and pay for the service via
           internet). However, this price is highly variable ex post depending on the kilometres driven, whether
           the car was delivered within the hours and at the location agreed, whether it is returned with a full
           tank, etc.

         - The main international players should always be included in the sample list but adding the top ten
           national (or regional) players to the sample is indispensable.

         - Consumer characteristics such as age may influence the price paid. Besides, some car models are
           not available to young drivers.

         - The provision of car rental is usually made independently from other services (although you might
           eventually find it tied within holiday packages or hotel stays).

         - The prices for the large providers are easily found in internet or directly from the rental companies
           that have public lists readily available. For the information on prices of the smaller players, direct
           contact with them is usually necessary to get complete and updated data.

         - Internet is an excellent source for the international car rentals. For the smaller rental companies
           (telephone) surveys are needed either to complete the information provided in their websites or as
             the only source of data available.




Car rental                                                                                                          43
4.         (Internet) current account

      4.1.        Market, content and scope of the service

         4.1.1. Exploring the content of the service in the EU

         A current account is the most basic service demanded by bank customers. Current accounts are broadly
         used to receive and make money transfers, direct order debits and cash deposits and withdrawals. On-line
         banking is clearly relevant for the recent and future development of the current account service.

         The price composition of current account services diverges across Europe. With a view on providing an
                     33
         illustration of the service, we have explored the situation of its provision in three countries, namely the
         Czech Republic, the Netherlands and Spain.

         The Dutch banking market is rather concentrated; most customers obtain their current account services
         from one of the six banks that control over 90% of the market. Fees for current account services are
                                         34
         amongst the lowest in Europe. Postbank, for instance, does not pay any interest whatsoever on its
         basic accounts. This probably explains why Postbank does not charge any maintenance fee compared
         to the other five major banks in the country. The other banks either charge a maintenance fee or waive
         it when the customer has a minimum amount of income on an annual basis. All banks provide a wide
         range of online services for which they do not directly charge their retail customers.

         The Czech Republic has a banking market characterised by a large foreign presence. Many banks
         have a majority ownership by foreign financial institutions. Online banking services seem to be rather
                                                                                        35
         well developed compared to those of other Eastern European member states. Czech banks tend to
         charge maintenance fees and electronic banking services incur a separate maintenance fee. Other
         common charges are those relating to withdrawals and cash deposits. Most transfer services come free
         unless they exceed a certain amount.

         In Spain, most common commissions are those for maintenance and for receiving and making
         payments. Cancellation commissions are more infrequent. Maintenance commission may be per
         semester or annually. Some banks charge up to EUR 30 while others do not apply a maintenance fee
         provided the average outstanding balance has been at least a specific minimum (a minimum setting of
         EUR 300 or EUR 600 is common). When the account is not used for a long time – e.g. 3 years – the
         bank may charge a periodic amount.



     33 For the aim of this report, we have randomly chosen a couple of countries. A first view on the situation of the service across member states is a

        good start for a later scrutiny of the service.



     34 Economist (2005).



     35 Czech National Bank (2005).




     (Internet) current account                                                                                                                             44
                                              36
    According to a study by Adicae , each Spanish customer pays an average of EUR 176 annually for
    bank commissions. This figure includes administration fees for the write-down of each transaction, with
    an average of 48 write-downs per year, representing an amount between EUR 23.64 (in the cheapest
                                                                          37
    case) and EUR 75.80 (in the most expensive case). The WRBR 2005 estimates an average annual
    expense in bank commissions of around EUR 104. Spanish customers are accustomed to a quite
    personalised treatment by the bank’s personnel and to negotiate commissions with their respective
    branch director. Branch directors have flexibility to discretionary exempt ’good’ customers from the
    payment of certain commissions (exemption that usually arises after the customer’s complaint).

    The table bellow shows the list of the components or variables that form the content of the service and
    their presence across 15 of the member states.




36 Asociación de Usuarios de Bancos (2004).



37 See footnote 18 supra.




(Internet) current account                                                                                    45
    Table 4.1: Service components

     Country                                                       AT     BE     CZ     FI     FR     DE     EL     ES      IE     IT   NL     PL     PT   SV   UK
     Service components
           Cash withdrawal at counter                                                                                          ?            ?     ?    ?
     Own bank ATM cash withdrawal                                                                                                ?                  ?    ?
     Inter-bank ATM cash withdrawal                                 ?                                      ?                  ?                 ?    ?
     Cash deposit at counter ( own branch, to own account)                                                                    ?                 ?    ?    
     Cash deposit at counter (different branch, to own account)
                                                                    ?                 n.a.                                   ?                ?    ?    
     Cash deposit at counter (intra-bank)                           ?                 n.a.          ?                        ?                ?    ?    
     Cash deposit at counter (inter-bank)                           ?                  ?            ?                        ?                ?    ?    
     ATM cash deposit (only intra-bank)                            n.a.         n.a.                n.a.   n.a.    ?      n.a.   ?                  ?    ?    
     Direct debit                                                                                                            ?                 ?    ?    
     Direct debit guarantee                                         ?      ?      ?      ?      ?      ?      ?      ?       ?     ?     ?      ?     ?    ?
     Intra-bank transfer                                                                                           ?            ?                  ?    ?
     Inter-bank transfer                                                                                                      ?                 ?    ?
     POS transactions                                                                                         ?                   ?            ?     ?    ?
     Giro chequebook                                                                   ?                          ?           ?            ?     ?    ?
     Postal service                                                                                                         ?                 ?    ?
     Postage- envelopes                                             ?     n.a.          ?      ?      ?      ?     n.a.?    ?     ?            ?     ?    ?
     Statements of account (once a month) 1                                                    ?                                 ?                 ?    ?
     Debit card annual fee                                                                                                  ?                  ?    ?
     Extra debit card                                                                                                                         
     Statement of debit card transaction                                                      ?                                 ?                 ?    ?
     Photograph in debit card                                      n.a.    ?     n.a.    ?     n.a.   n.a.   n.a.          n.a.   ?    n.a.   n.a.   ?    ?
     Additional Card Services (insurance, telephone information)
                                                                                ?                                          ?                ?    ?
     Replacement of lost/stolen PIN                                                                                       ?                ?    ?    
     Replacement of lost/stolen card                                                                                      ?                ?    ?    
     Internet banking (e-identifier and/or access code)                                                                       ?                  ?    ?
     Internet banking (usage)                                                                                                          
     (Giro )cheque/Direct Debit returned (lack of funds)            ?            ?      ?                                       ?    n.a.          ?    ?
     Standing order unpaid (lack of funds)                          ?            ?      ?                                        ?                  ?    ?




(Internet) current account                                                                                                    46
    4.1.2. Defining the scope of the research

    The object of this chapter is the provision of basic current account services. Due to the complexity and
    lack of transparency in the pricing structure of banking services, and with a view on ensuring service
    comparability across member states, the choice of the most basic form of bank account has been
    agreed upon with the Commission.

    The question arises around which these basic services are. The main purpose of any current account is
    to channel the functioning of means of payment. In principle, current accounts are used to receive and
    make money transfers, order direct debits and cash deposits and withdrawals. As a rule of thumb, it
    should allow the customers to handle their monthly income and expenses. We include debit cards and
    internet banking within the concept of ‘basic current account’ for the purpose of this study. Debit cards
                                                                38
    are widely used for cash withdrawals and POS payments. They have become a part of our everyday
    transactions and are, therefore, closely linked to the current account’s functionality. Credit cards are not
    a basic service but a plus. Credit cards may be directly expedited by the credit card company to the
    final customer without the intervention of the retail bank and their use is linked to the idea of money
    borrowing. In contrast, debit cards are always attached to current accounts. Online access to the
    current accounts is relevant for the recent and future development of the nature of the current account
    concept itself.

    In this regard, our basic service definition is broader and more homogenous than that of the ‘simple
                                                  39
    service’ or the ‘simplified service’ used in the report ‘An assessment of the extent of an identified need
    for simplified, standard financial services products’ from 2004, conducted on behalf of the Commission.
    Basic services in that report include the ability to make cash withdrawals at the counter and regular
    statements of accounts in all countries while the payment options varied between countries: a debit
    card is not considered in the basic bank account in Belgium while an automatic payment card is
    obligatory in France. In the present study – as stressed in our Second Interim Report – we have made
    an attempt to make service content as comparable as possible.

    Internet accounts may include regular accounts opened in a bank shop which allow for online access,
    and internet accounts stricto sensu that need to be opened online (account opening by telephone or by
    mail is also possible) and that may not be directly used for payments as they need to be attached to a
    regular current account. ‘Pure’ internet accounts also offer significantly higher interest rates.

    The abovementioned type of internet accounts is marketed with a focus on the yield offered and is
    closer to the concept of saving accounts. They will therefore be ignored for the analysis.




38 Payments made with a debit card at the ‘point of sale‘.



39 See Charles River Associates for European Commission (2003). A service is simplified when the researchers impose constraints on product terms;

   this is in contrast with simple products which are brought about by the market.




(Internet) current account                                                                                                                          47
    We will exclude cross-border money transfers – according to EU law, these should be priced equally to
                                                                     40
    domestic transactions for transactions of less than EUR 12,500. Urgent transactions, credit cards and
    cheques fall outside the scope of our concept of ‘basic transactions’ as well and shall be ignored.
    Cheques are not a basic component of the service content. Although their use is still relatively high in
    some countries, such as France or the United Kingdom, it has been greatly replaced by the use of
    cards which are the main non-cash means of payment in all countries. Besides, in other EU countries,
    such as Spain or the Netherlands, consumers have moved straight from cash to cards. Other excluded
    non-basic service components could be telephone service, mobile banking, SMS or e-mail transactions.




    4.1.3. The market of the service

    The market for retail financial services is strongly national – if not local. Interest rates are influenced
    more by a national/local competition than by an international competition. However, some banks have
    developed cross-country operations in the retail business.

    Retail markets have traditionally maintained local features based on a dense network of bank shops
    and the personal contact with the customer. Traditional branch-banking is very slowly being (partially)
    replaced by ‘remote banking’ – i.e. automated teller machines (ATM’s), electronic money, telephone
    and internet banking.

                                                                                                  41
    In a recent study – the World Retail Banking Report 2005 (WRBR) – the national retail markets of
    eight Eurozone member states (Austria, Belgium, France, Germany, Italy, the Netherlands, Portugal
    and Spain) and five non-Eurozone members (the Czech Republic, Poland, Slovakia Sweden and the
    United Kingdom) have been analysed. The focus is on the prices for basic products and services such
    as current accounts and means of payment (debit and credit cards, money overdrafts, cash
    withdrawals, etc.). Some relevant considerations for our report are the following:

    - “Pricing is very difficult to compare for customers; therefore banks only use easily comparable
       products as strategic differentiators for acquisition or retention.

    - Pricing is leveraged to convince clients to use certain products and services instead of others
      (cheques in Belgium, own bank ATM network vs. other banks’ ATM networks in many countries).


40 EC Regulation number 25 60/2001 states that banks may charge no more for a cross-border credit transfer in Europe than for a comparable

   domestic transfer. (In order to fall within the remit of the regulation both the remitter and beneficiary accounts must be located in the EU.) The

   regulation has two value phases – payments up to the €12,500 level are affected as from 1 July 2003, with this threshold rising to €50,000 as of

   December 2005. The regulation only applies to payments that are STP transactions (STP is defined as fully structured payments with the

   beneficiary's IBAN and their bank's BIC).



41 ‘World Retail Banking Report 2005‘, Capgemini, ING and the European Financial Management & Marketing Association. A price index is used with a

   view on ensuring representativity. The index is based on local consumption patterns by establishing an average frequency of use for each product

   and service for each country surveyed.




(Internet) current account                                                                                                                              48
    - Pricing strategies vary widely on a country-by-country basis and are still very much targeted at the
      domestic market only (Single Euro Payments Area?).

    - In some countries, like France, each banks seemed to have its own approach to changing prices.”

    Additionally, prices for core banking services vary widely across countries.

    According to the WRBR 2005, the number of products and services for which fees are charged, has
    risen. Charges for cash utilisation are infrequent for most old members where banks seldom charge for
    withdrawals and deposits, for example, except for withdrawals at the desk or from other banks’ ATMs.
    In 2004, three countries included in the WRBR 2005 – the Netherlands, Sweden, and the United
    Kingdom – did not charge at all for those services, and only Belgium charged fees for more than half
    the products in the cash utilisation category. In contrast, Eastern European banks charge fees for 60%
    of their cash utilisation services.

             “Banks use pricing to persuade their clients to select certain products and services rather than
             others. Banks in many countries were encouraging consumers to use ATMs, particularly their
             own. To promote their ATM systems, French banks have progressively charged more for
             transactions at the cashier’s window and for withdrawals from other banks’ ATMs. Withdrawal
             frequency at other banks’ ATMs was higher in countries where no charges were applied – for
             example, in Austria, Sweden, and the UK. In France, Norway, and Spain, banks were attempting
             to influence customer behaviour by increasing charges for withdrawing money from other banks’
             ATMs. Banks in less-mature economies, such as Slovakia, the Czech Republic, Poland were
             adopting a similar strategy by charging customers for making withdrawals from other banks’
             ATMs.”

             “Based on how difficult it was for our extensive research teams to gather comparable bank pricing
             data in each country and across countries, customers would have an even harder time comparing
             banks on the overall price of day-to-day banking services. Instead, customers compare the prices
             of specific product and service categories, such as credit and debit card fees, or for some of the
             more financially significant products, such as mortgage and savings rates. Price competition
             applies to the more easily comparable products, and banks use these as strategic differentiators
             for client acquisition and retention”.

    Due to the compounded nature of current account commissions, it is very difficult for consumers to
    compare prices across service providers, and even more across service providers in different countries
    where the offer and tariff structures change according to national preferences or habits and local
    business strategies by the relevant service providers. The graph below illustrates this point.




(Internet) current account                                                                                        49
    Graph 4.1: Tariff structures for retail banking services


                       Accounts                                  Accounts

                             FRANCE                                    SPAIN




             Packages                      Transactions
                                               Transactions    Packages                           Transactions



                      Indirect revenues                          Indirect revenues

                       Accounts                                     Accounts

                 UNITED KINGDOM                                      GERMANY




             Packages                          Transactions    Packages                           Transactions


                      Indirect revenues                          Indirect revenues




        Source: WRBR 2005


    Information provision requirements by the respective National Central Banks are present in the member
    states. Banks are obliged to publish their tariffs and have them available at customers’ request.
    However, the actual access of consumers to this information varies per country.

             “Comparative tables are used in a number of different Member States. In Finland, Ireland, Spain,
             Sweden cost tables are produced on current accounts. Typically these will cover aspects such as
             the various possible charges including transactions charges (standing order, cheques etc) and
             service charges (setting up a direct debit, issuing a replacement PIN and unauthorised overdraft
             surcharge interest rate, etc). In Sweden these tables include the functionality to input typical
             transactions and identify costs from a range of different providers. The tables are produced by
             different (often multiple) institutions in different locations including regulators (Ireland, Spain),
             banking associations (Finland) and consumer organisations (Finland, Sweden). In other countries
             (Belgium, Italy), similar approaches have been taken but with additional web-based functionality.
             Both Test Achats in Belgium and PattiChiari in Italy provide models in which consumers can enter




(Internet) current account                                                                                           50
             their typical monthly profile and obtain information on the cost from different providers. Hence
                                                                                                              42
             information on the cost for different services can be made specific to the individual consumer.”

    Furthermore, in some countries there are regulatory requirements on bank charges, either in the form
    of notifying charges before they can be applied (Spain) or requiring the permission of the regulator for
    the charges (Ireland).




 4.2.        Inventory list of price components of the service

    Below, we provide a list of the service component and price component variables. We have constructed
    this list based on the research in thirteen old members (AT, BE, FI, FR, DE, EL, ES, IE, IT, NL, PL, PT,
    SV, UK) and two new members (CZ and PL). In each of the countries, the researchers have looked at
    three or four major retail banks in each country. Two major banking groups, ING and HypoVereinsbank,
                                                          43
    have retail activities in more than five EU countries.

    When interpreting the table, the fact that a variable is present in a country does not mean that it is
    present in the offer of all service providers but that it is present in at least one of the service providers
    scanned. A variable that is empty in the table implies that it does not exist in this country (at least, to the
    best of our knowledge and for the providers scanned).

    When choosing for the major players, we have unfortunately left out the players that can most probably
    offer a comparative difference – e.g. in the form of lower tariffs or different pricing strategies – as they
    need to differentiate themselves from the major and more traditional providers.

    Interest yields are so insignificant in the context of current accounts, that we shall obviate them as they
    are not a determinant of customer’s choice for service provider. Indirect fees such as the number of
    floating days – days that the bank keeps the money without paying interest from the moment they
    receive the payment order till the moment the money is transferred – are also not accounted for. In the
    United Kingdom for instance, HSBC processes payments within three to four business days. Since the
    payment is electronic, it should be possible to make an instant transfer. As an indication of how much a
                                                                                            44
    bank ‘charges’: for a 1,000 pound payment made by a customer, 50 pence is earned. This is because
    the bank has an interest-free asset for the duration of four days instead of having to borrow money in
    the inter-banking market. Barclays differentiates between transfers made between Barclays account
    holders and those with accounts at its competitors. Transfers made between Barclays account holders
    have a floating period of two working days whereas those between other accounts have a floating


42 Charles River Associates for the European Commission (2003).



43 ING Bank in Belgium, Poland, Hungary, the Czech Republic, Greece among other EU countries; and HypoVereinsbank in Germany, Austria,

   Poland, Hungary, the Czech Republic, Slovakia and Slovenia.



44 Assuming a 4.5% inter-bank lending rate.




(Internet) current account                                                                                                               51
    period of at least three working days. Postbank in the Netherlands has instantaneous transfers between
    Postbank accounts but a floating period of three or four days is normal when transferring money to
    accounts at other banks. These hidden fees might from an economic perspective be considered as part
    of the price consumers – more or less consciously – pay for current account services.

    Negative yields, i.e. the rent the costumers pay for incurring into debit, are not considered either as they
    actually imply an interest rate paid for the use of credit line with the bank. This, again, falls outside the
    intended scope of this chapter. The mere fact of incurring in a debit position is also charged by some
    banks – which can charge a fixed fee for entering into a debit, plus a fixed percentage of the amount
    due, plus an interest rate applied to the outstanding debit and its duration. However, it seems
    reasonable to assert that a credit line is not necessarily inherent to the current account and that
    although many existing modalities include this service, it is not within the core purpose of this financial
    product. There is a wide variety of credit products that are specifically designed for this purpose.

             “The main purpose of a current account is to provide access to money transmission. The current
             account also acts as a savings vehicle, and may be used to get credit, through an overdraft. The
             money transmission services of a current account have no effective substitutes, the other two
                              45
             functions do.”

    The basic features inherent to our basic current account definition are present in all of the countries
    scanned. The complexity arises due to:

      1.     different price structures: although we can identify the same service components across the
             sample, these are priced differently. This presents a caveat for our analysis in the sense that in
             some cases, what we define as basic service components may be priced lower because this
             lower price is compensated through the higher price of non-basic components or vice versa.
             “Some countries favour detailed product charges; others pay a lower interest rate thus recouping
                                                 46
             the cost of providing the account”. Cross-subsidisation in bank tariffs (i.e. tariffs are not based-
             cost but based on business and marketing strategies) is very common. The relative price for the
             actual current account services (including the complementary features not covered by this report)
             purchased by EU consumers can be different to that of our inter-country comparisons and
             findings.

             “Austrian banks, for instance, charged their clients for 18 out of the 19 products and services in
             our survey while Italy charged for only 13, yet Italy was 30% more expensive than Austria based
             on the local profile. Similarly, banks in Eastern Europe (Poland, Slovakia, and the Czech
             Republic) typically charged for more products and services than other countries did, yet the total
             price customers paid was often lower. In those lower income countries the total price paid by




45 UK Treasury (2002).



46 Charles River Associates for the European Commission (2003)




(Internet) current account                                                                                          52
             customers was spread across all products, whereas in more mature markets, the price was
                                         47
             concentrated on just a few.”

             However, this difficulty was already pointed out in our Second Interim Report when we – with the
             agreement of the Commission – referred to the trade-off between comparability and
             representativity.

      2.     differences in terminology (not only between but also within countries), which although it is a
             source of lack of transparency, can be solved with technical and local expertise.




47 “World Retail Banking Report”, produced by Capgemini, in partnership with Efma and ING.




(Internet) current account                                                                                      53
Table 4.2: Price Components

                      Price components                                          AT       BE       CZ        FI       FR       DE       EL         ES   IE   IT   NL   PL   PT    SV   UK
Cash withdrawal at counter
Own bank ATM cash withdrawal
Inter-bank ATM cash withdrawal
Cash deposit at counter ( own branch, to own account)
Cash deposit at counter (different branch, to own account)
Cash deposit at counter (intra-bank)
Cash deposit at counter (inter-bank)
ATM cash deposit (only intra-bank)
Direct debit
Direct debit guarantee
Intra-bank transfer
Inter-bank transfer
POS transactions
Giro chequebook
Postal service
Postage- envelopes
                                         (1)
Statements of account (once a month)
Debit card annual fee
Extra debit card
Statement of debit card transaction
Photograph in debit card
Additional card services (insurance, telephone information,
Replacement of lost/stolen PIN
Replacement of lost/stolen Card
Internet banking (e-identifier and/or access code)
Internet banking (usage)
(Giro) cheque/ Direct debit return (lack of funds)
Standing order unpaid (lack of funds)
Opening charge
Maintenance charge (annual)
Administration fees (per account transaction)
Cancelation Commission
Costumer age
Promotional offers/ gifts/ prizes
Outstanding (average) balance
Regular income into the account
Packages

(1) The chargeability of the statements of account may depend on the frequency. Some banks offer the service for free up to a certain frequency
    (e.g. free for monthly statements and chargeable for every two-weeks or weekly statements)




(Internet) current account                                                                                                                                                  54
 4.3.        Inventory of price-composition of the service

    In general, three factors determine the total price consumers pay for current accounts:

    - the service components that are priced;

    - the different price components and the interrelation between them;

    - the use (type and frequency) the consumer makes of the current account.

    The first two factors are given. The third factor is based on certain consumer profiles in order to have a
    ‘price as paid by consumers’ and not mere data on tariffs and commissions.

    Generally, tariffs are based on fixed charges for account management and variable charges for usage.
    Fixed charges may be based on the outstanding balance (in order to attract and incentive higher
    positive balance from each customer). For instance, at ING Bank in the Netherlands, the customer
    does not have to pay an annual maintenance fee as long as the annual average deposit in the current
    account exceeds EUR 900. Fixed charges may also vary depending on the consumer’s age or on
    whether the costumer is a student (e.g. at Dutch Postbank or Austrian BAWAG).

    Usage charges may be applied per transaction, based on transaction amount or a combination of both.
    At KB, the third largest bank in the Czech Republic, standard internet banking transactions are charged
    on a unitary basis. However, internet banking transactions costs are EUR 0.10, compared to transfers
    via branch which are 300% more expensive. In Poland, Mbank does not charge its current account
    holder for transfers made to other Mbank accounts via the internet, transfers made via a phone
    operator cost PLZ 2. However a transfer made to an account other than Mbank incurs PLZ 0.5 or PLZ 2
    respectively. Greece’s Alpha bank has rather high charges for transfers made to non-Alpha bank
    accounts. A simple fund transfer to another bank account costs EUR 0.80. Transfers made to third
    parties’ Alpha bank accounts – intra-bank transfers – are free of charge.

    The offer and usage of product packages is more than frequent and their fixed fees are based on the
    total product package (commissions are directly related to the bank’s ability to increase revenues by the
                          48
    sale of cross-products ). Most of basic retail services such as direct debits or ATM withdrawals are
    free of charge in many – but not all - of the EU countries. In seems that banks in Eastern Europe
    usually charge for these basic services.




48 See footnote 18 supra.




(Internet) current account                                                                                       55
    Previous studies used on price comparison for retail banking services are:

    “An assessment of the extent of an identified need for simplified, standard financial services products”
    (Charles River Associates for the European Commission 2003)

    This study reports the existence of ‘simplified bank accounts’ with payment means in six countries –
    Belgium, France, Italy, the Netherlands, Portugal and the United Kingdom. The report states that these
    simplified bank accounts have been developed to provide access to all consumers (in order to avoid the
    financial exclusion of the social class with fewer resources). In many countries, legal constraints on the
    maximum charges are applicable. In France, these accounts are free of charge. In Belgium, for
    example, banks are obliged to open an account with basic payment and bank services for a maximum
    of EUR 12 per year. In Portugal, fees must be less than 1% of the minimum wage.

    The services offered include cash withdrawals at the counter and regular statements of accounts.
    “However, the exact detail of the payment options varies between the different simplified products. For
    example, in Belgium, 36 withdrawals or transfers per year are allowed, but a debit card does not
    necessarily have to be offered. In France an automatic payment card must be provided. In Italy a
    Bancomat card for cash withdrawals at one’s own bank’s ATMs or a prepaid Bancomat card for
    withdrawals at all ATMs and for POS payments must be provided, but, cheque books are not offered on
    the service.”

    “World Retail Banking Report 2005”, (Capgemini, ING and the European Financial Management &
    Marketing Association 2005)

    A price index – based on local consumption patterns by establishing an average frequency of use for
    each product and service for each country surveyed – is used.

    “Competition in UK Banking: A Report to the Chancellor of the Exchequer” (UK Treasury 2002)

    This review compares the volume of sales for each product, and compared this with price over time. As
    prices take time to adjust even in a competitive market, a high-priced product is expected to have a low
    level of sales.

    As the debt and savings elements of current accounts cross-subsidise money transmission services, a
    total current account price comparison is difficult. “It is also not meaningful to compare interest paid on
    deposits in current accounts, as this is not priced in any conventional sense. The price comparison is
    therefore confined to overdrafts.”

    The employed methodology was mystery shopping. Using August 1999 prices, a standard product –
    this was an authorised overdraft of GBP 500 for two weeks in every alternate month – was used for the
    comparison.

             “Banks make money by using the positive balances held in current accounts, on which little or no
             interest is paid. Accounts in credit in the UK in 1998 had an average positive balance of £1,175,
             each generating up to £75 income for the suppliers. Banks also charge interest and fees on




(Internet) current account                                                                                        56
             overdrafts. This implies that, overall, the provision of current accounts is a profitable activity.
             However, there is significant cross subsidy between different types of customer. The banks do
             not seem to have the data needed to quantify the degree of cross subsidy, but the direction is
             clear. The beneficiaries are customers who maintain low positive balances and make heavy use
             of high cost transactions for which they are not charged.“

             “As a result, the banks have no incentive to provide the bundle of services which constitutes a
             current account to customers who are likely to be beneficiaries of cross subsidies. This incentive
             changes for customer groups who are likely to prove profitable in the future, for example,
             students.”

    Consumer profiles already exist in previous studies (OECD, National Statistics Offices, the Ottawa and
    Voorburg Group). The Canadian Office of Consumer Affairs has in the past done studies on consumer
    profiles and their usage of banking services. These results are published in the report ‘Consumer guide
                                49
    to basic banking services’.

    A basic approach is based on the following principles:

    - Underage or student qualities of the customer are a factor that may influence the price of the fixed
       fees.

    - Average outstanding balance is also a factor.

    - For the variables fees, frequency (and face value) of the transactions play a role.

    Additional offerings of the current account service may be an extra debit card, telephone or mobile
    banking (information, SMSs, etc.) or postage-free envelopes. We will consider these features in the
    description of relevant variables in order to provide a general overview of the differences in service
    content and possibilities across countries. However, these features will not be considered for the
    calculation of the price that will be paid by the different consumer profiles.

    Based on these considerations, main user profiles for each country could be drawn up as in the
    following example. The frequency of the transactions can be varied as convenient in order to increase
    the number of user profiles. One-time payments, such as opening commission or e-identifier cost, are
    not included in the annual price but they are accounted for in the first year’s price.




49 See Canada (2002)




(Internet) current account                                                                                         57
    Table 4.3: User Profiles

                                                                                                                        COUNTRY A


                                                                                                          6 Cash deposit   6 Cash
                                       Maintenance Maintenance     6 Cash      18 Intra-bank 6 Inter-bank at counter ( at deposit at 12 ATM cash                                  12                                    (Giro)Cheque/    Internet
                             Opening     charge     debit card   withdrawals    ATM cash      ATM cash own branch, to counter ( deposit (only      24 Direct      30 POS      Statements   6 Intra-bank 12 Inter-bank    direct debit access code &
                             charge     (annual)     (annual)     at counter    withdrawals withdrawals own account) inter-bank) intra-bank)        debits     transactions   of account     transfer     transfer         returned     e-identifier

                                                                                                     >18, oustanding average balance <EUR 300
     Service provider   1
     Service provider   2
     Service provider   3
     Service provider   4
     Service provider   5
     Service provider   6
                                                                                                     >18, oustanding average balance <EUR 600
     Service provider   1
     Service provider   2
     Service provider   3
     Service provider   4
     Service provider   5
     Service provider   6
                                                                                                     >18, oustanding average balance >EUR 600
     Service provider   1
     Service provider   2
     Service provider   3
     Service provider   4
     Service provider   5
     Service provider   6
                                                                                                                             <18
     Service provider   1
     Service provider   2
     Service provider   3
     Service provider   4
     Service provider   5
     Service provider   6
                                                                                                                          Student
     Service provider   1
     Service provider   2
     Service provider   3
     Service provider   4
     Service provider   5
     Service provider   6




(Internet) current account                                                                                                                                                        58
 4.4.        Suggestions for the data collection methods to be considered (revised in the input of
             the pilot)

    Given the inherent complexity and lack of transparency of current account prices and independency of
    the elected data collection method(s), a first step should be to determine the appropriate consumer
    profiles as described in section 4.3. An option could be to directly contact the banks for consumer
    profiles. Banks often have consumer profiles of their customers and the Dutch Consumers’ Association
    ‘Consumentenbond’ knows by experience that banks are usually willing to provide such information. (A
    prerequisite is that one has a good relationship with the targeted banks).

    The best practice to obtain various consumer profiles is through questionnaires. The report
    ‘Consumer‘s guide to basic banking services’ includes a sample questionnaire used to construct the
                             50
    consumer profiles. This can be done either via paper, telephone or via an internet panel. Each
    method has its own (non-)attractive features; paper is more direct but may lead to a low response rate if
    no incentive/reward (financial) is offered; telephone response is even more direct but has the caveat
    that people find it disturbing, especially when they are called in the evening hours. Internet panels have
    the benefit that they consist out of a panel of pre-selected respondents. Usually a ‘points scheme’ is
    offered to the respondents to fill in the questionnaire. These points can be accrued and used to obtain a
    financial benefit (discount or product). The use of an internet panel raises some concerns: it could be
    that the respondents only participate to accumulate points; and old aged people are less likely to be
    captured by such a method. One minor disadvantage that is evident in all questionnaires is the well-
                                   51
    known ‘framing effect’. This is nothing to be concerned about since questionnaires can be adjusted to
    reduce this effect. Generally this would make the questionnaire longer. Hence, an appropriate balance
    needs to be found between the length of the questionnaire and quality. A lengthy questionnaire is more
    expensive to analyse and the effective response rate may decline, i.e. people are less motivated to take
    the questionnaire seriously if it is lengthy. Once these data have been acquired, one can construct
    representative consumer profiles and with it the frequency of usage of basic bank services.

    The sample of the respondents should be such that it can produce a significant statistical result.
    Different consumer groups should be targeted, but they should be pre-selected using the internet panel.
    When using an internet panel, the geographic region can also be selected. With a set of representative
    consumer profiles it should not be necessary to have a market-wide coverage. The set should be such
    that the profile represents a fair sample of the population. This can be done using statistical methods.
    Here one needs to find the right balance between a detailed profile and keeping a good oversight. By
    using the consumer profiles, one can obtain the average expenditure per usage profile and thereby
    proper cross-country comparisons can be made.




50 Financial Consumer Agency of Canada (2002). http://www.acfc.gc.ca/eng/publications/cgb/cgb_e2002.pdf



51 A framing effect occurs when different, but logically equivalent, words or phrases (e.g., 10% employment of 90% unemployment) cause individuals

   to alter their decisions. Thereby the way the questionnaire is set up may influence the reaction of the respondent.




(Internet) current account                                                                                                                           59
    Internet seems a good source to find information for the main price variables. Some National Central
    Banks impose the obligation of making all tariffs and commissions publicly available. It is nevertheless
    advisable to check with local experts as it might be risky to automatically jump to the conclusion that the
    information that we have found on the internet is exhaustive. Of course, finding proof of what does not
    exist is also not feasible but there may be commissions that are not published – at least not online – or
    that we have not found. Probably, the safest solution is to compile the General Conditions for current
    accounts and related basic operations of all the banks under scrutiny. These General Conditions are
    sometimes, but not always, available on the internet.

    The next step should be to approach banks and inquire about the prices of their basic services. It is a
    usual practice by the Consumentenbond to distribute a questionnaire among all providers (or a sample)
    in the Netherlands to obtain their prices or tariffs. The response rate would be increased by facilitating
    the responses if the researchers obtain the prices from the internet and have the respective service
    providers verify them. The price lists can then frequently be updated at a low cost.

    The option of conducting a consumer survey on prices encounters a major obstacle in that the average
    consumer is unlikely to know what the actual cost of the service is. The customer may know what the
    annual fee is for holding the bank account, but, most likely, not those specific charges that apply to for
    instance making a direct debit.

    Mystery shopping needs to be applied carefully. Consumer profiles need to be used otherwise the
    collection method may lead to the creation of a sample bias. The major disadvantage of mystery
    shopping is the costs and the time needed to acquire the data. Similarly, the bank statements of
    different customers can be analysed but from experience at the Consumentenbond this has proven to
    be very time-consuming, and thus expensive. It might be advisable to do some mystery shopping to
    check if negotiation may affect the actual application of the tariffs in some of the countries. For
    example, Spanish banks do specify in their General Conditions that the published commissions are a
    maximum but that they can be lowered according to the client’s ‘quality’ record.

    It is necessary to find a balance in the frequency of acquiring data since costs increase with frequency.
    We suggest building an index to see how high inflation of current account services actually is. In case
    the inflation is high, one may want to update the prices of the various providers more frequently.
    Equally important are the advances in IT services. It may be so that IT innovations lower the cost of
    using bank services and furthermore, new products may appear and become part of the service content
    of the basic current account.




 4.5.        Dummy target tables

    The hypothetical user profiles we created in the dummy tables can be filed out using the data acquired
    from the banks. Table 4.4 shows a consumer profile for someone who holds a basic current account, as
    defined in section 4.1., with an average outstanding balance of less than EUR 600. In reality, the
    consumer profiles will first need to be constructed by using the suggested method in section 4.4.
    Subsequently, the researcher can start to acquire data to fill in the tables with consumer profiles or




(Internet) current account                                                                                        60
    have companies fill in an online price questionnaire. Two facts are revealed in Table 4.4: in many
    countries the service is included in the annual maintenance charge (like in the Netherlands, Germany
    and Finland), and specific charges are often not available over the internet. It is therefore necessary to
    have a local research network

    An important feature included in the dummy tables is total price. The total price data allows us to look at
    what a customer pays over time; therefore we included first year price and annual price as a three-year
    average. The annual average price has the further advantage that it corrects for seasonal effects.

    As explained, retail markets are dominated by domestic players. However, it is interesting, at least for
    the dummy tables, to include an example of a non-domestic EU bank which would allow to compare its
    tariffs to those of domestic players (i.e. see if they adapt to the national price levels) and also to
    compare its tariffs abroad with its tariffs at home (i.e. to see if they keep a cross-border business
    strategy). For instance: are Dutch ING prices in Belgium similar to those of Belgian Fortis or Dexia, or
    similar to its prices in the Netherlands? (See Table 4.5).

    The UK report ‘Competition in UK Banking: A Report to the Chancellor of the Exchequer’ (2002) found
    that “the most common reason consumers gave for choosing their bank was its location near their
    home or place of work. Charges for personal consumer banking services are, by and large, set
    nationally.”




(Internet) current account                                                                                        61
    Table 4.4: Dummy variables (Table A)

                                                                                                                >18, oustanding average balance < € 600
                                                                                                                                      6 Cash
                                                                                                                                     deposit at
                                                                                                                                    counter ( at      6 Cash         12 ATM
                                                      Maintenance   Maintenance         6 Cash       18 Intra-bank   6 Inter-bank   own branch,      deposit at    cash deposit                                  12                                      (Giro)Cheque/   Internet
                                            Opening     charge       debit card     withdrawals at     ATM cash       ATM cash        to own       counter (inter- (only intra-   24 Direct      30 POS      Statements   6 Intra-bank     12 Inter-      direct debit access code 12 Internet       1st YEAR   ANNUAL
                                            charge     (annual)       (annual)         counter        withdrawals    withdrawals     account)          bank)          bank)        debits     transactions   of account     transfer     bank transfer      returned   & e-identifier transactions    PRICE      PRICE
     Austria
                 BAWAG                                 € 38,28            -               ?                -              ?              ?               ?             ?             ?                                     € 0,07                              ?             ?
                  BA-CA                                € 53,80            -               ?                -              ?              ?               ?             ?             ?                                                                         ?             ?
     Belgium
              DEXIA                                    € 9,97         € 9,50          € 0,15                          € 0,10             ?               ?             ?             ?                                                                         ?             ?
               ING                                     € 14,50                        € 0,253 4                       € 0,05 3           F               ?              4                                        4
                                                                                                                                                                                                                                                               ?             ?
     Czech Republic (CZK)
               HVB                                       720                             30               30             ?              10              10            n.a.                                       ?                                             ?             ?
                                                                                                                                                                                                                 2
              CSOB                                       600             ?               30               30             30                             30            n.a.        € 0,15                                                                       ?             ?
     Finland
                                                                                                                                                                                                                 5
             NORDEA                                     € 30          € 9,60                                                                             ?             ?                                                                                       ?             ?
                                                                                                                                                                                                                                                                             ?
     Germany
           Deutsche Bank                               € 53,88                                                                                           ?             ?                                                                                       ?             ?
             Postbank                                  € 70,80                            ?                                                              ?             ?                                                                                       ?             ?
     Greece
               NBG                                                                        ?                ?              ?              ?           € 1,20            ?             ?             ?                           ?           € 0,30              ?             ?
            Alpha Bank                                                                                                                   ?              ?              ?             ?             ?                                       € 0,80              ?             ?             ?
     Ireland
           Bank of Ireland                             € 11,40                                                                                                                                                                                                               ?
          Bank of Ireland                                                              € 0,28          € 0,28         € 0,28         € 0,28              ?             ?          € 0,28       € 0,28            ?         € 0,28          € 0,38         € 12,70            ?             ?
     Netherlands
                                                                                                                          8
            ABN AMRO                                    € 15,-         € 13,-                                                                       € 12,50           n.a.                                                                                                   ?
                                                                                                                          8
             Postbank                                   € 20,-         € 10,-                                                                       € 7,50            n.a.                                                                                                   ?
     Poland (PLN)
          Bank Pekao SA                                € 26,80                            ?                ?              ?              ?               ?             ?             ?             ?             ?             ?              ?                ?             ?
              Mbank                                                                                                                      ?               ?             ?          € 0,26 6                       ?                         € 0,13              ?             ?

     (1) First 30 are free                             26,8056                                                                                                                    0,2628                                                   0,1314
     (2) Depends on maintenance fee
     (3) First 100 are free
     (4) Service is free if through 'Self Bank'
     (5) Once a month, exta statements € 1,68 per statement
     (6) Monthly fixed charge
     (7) Withdrawing Cash from non-Link ATMs incur a cost of 1.5 % of the amount with a minimum transaction charge of £2 and a maximum of £4.50. Cashpoint Cards – 1.5% of the amount (Minimum £1.50) per transaction.
     (8) Only allowed once every 24hrs




     * Exchange rate as 1/16/2006: PLN -EUR 0.26280. Source: Bloomberg




(Internet) current account                                                                                                                                                                                           62
Table 4.4: Dummy variables (Table B)




                                                                                                                    Deutsche Bank
                             Price components                     ING (NL)   ING (BE)   FORTIS (BE)   FORTIS (NL)        (DE)       BBVA (ES)

     Opening charge
     Maintenance charge (annual)
     Maintenance debit card (annual)
     6 Cash withdrawals at counter
     18 Intra-bank ATM cash withdrawals
     6 Inter-bank ATM cash withdrawals
     6 Cash deposit at counter ( at own branch, to own account)
     6 Cash deposit at counter (inter-bank)
     12 ATM cash deposit (only intra-bank)
     24 Direct debits
     30 POS transactions
     12 Statements of account
     6 Intra-bank transfer
     12 Inter-bank transfer
     (Giro)Cheque/direct debit returned
     Internet access code & e-identifier
     12 Internet transactions

     1st YEAR PRICE
     ANNUAL PRICE




(Internet) current account                                                                            63
 4.6.        Main conclusions

         - Although the number of service providers maybe quite large is some countries (i.e. more than 20),
           largest players tend to dominate most of the market. Market concentration is quite high but varies
           across countries. In some countries such as Austria, Belgium or The Netherlands, the top 3 or 4
           players have 80% of the market. In Poland, the 3 major banks have 50% and 60% of total retail
             deposits and retail credit respectively. In Italy, the 6 largest providers have 51% of the market while
                                                                                       52
             in Spain 15 main banking groups enjoy only 60% of the total market.

         - Packages offered and tariff structures change according to national preferences or habits and local
           business strategies by the relevant service providers.

         - Due to the compounded nature of current account commissions, it is very difficult for consumers to
           compare prices across service providers, and even more across service providers in different
           countries.

         - The bill can not be known in advance as it depends on the nature and total number of transactions
           performed by the customer during the year.

         - It is advisable to include a number of service providers representative of a large part of the market.
           This numbers would vary per country (e.g. four or five players is enough in Austria or Belgium while
           the sample needs to be enlarged for Spain).

         - Consumer profiles are relevant to have a proxy for the ‘price as paid by consumers’ and not mere
           data on tariffs and commissions.

         - The use of packages where the basic current account service is tied to other products such as credit
           cards, credit lines, or even mortgages is widely extended.

         - All the banks have a set of General Conditions for current accounts and related basic operations.
           National Central Banks impose the obligation of making all tariffs and commissions publicly
             available. These General Conditions are sometimes, but not always, available on the internet.

         - Internet seems a good source to find information for the main price variables. The next step should
           be to approach banks and inquire about the prices of their basic services using a questionnaire
           among providers. The response rate would be increased by facilitating the responses if the
           researchers obtain the prices from the internet and have the respective service providers verify
           them.




52
     see the EFMA site at http://www.efma.com/retail_market.php4




(Internet) current account                                                                                             64
5.         Dental hygiene practice

      5.1.        Market, content and scope of the service

         5.1.1. Exploring the content of the service in the EU

         We will have to make a distinction between dental hygiene treatment and professional practitioners.
         Dental hygiene treatments exist throughout Europe. In some countries the treatments are carried out by
         professionals with a degree in dental hygiene and in other countries the treatments are carried out by
         dentists. In the countries where professional dental hygienists are active and accepted, their
         competences differ. Competences depend on the country where he (she) has been educated and
         where he (she) works.

         The purpose of dental hygiene treatments, and the main task for dental hygienists, is to clean the teeth
         of customers and to help customers in how to keep their teeth clean. The term “oral hygiene” is also
         used by some practitioners, to emphasize the fact that there is a link between teeth and their
         environment.

         In this desk research, we have been able to collect information on dental hygiene practices from a few
         European countries. That is why we will describe the dental hygiene practises of only 8 European
         countries (Denmark, Finland, Germany, Ireland, Italy, the Netherlands and Sweden).

                                                                                                         53
         Belgium does not have dental hygienists. Dental hygiene treatments are carried out by dentists.

         In Denmark, dental hygienists have been able to practise independently. They make pre-diagnoses,
         scaling, radiography, infection treatments, prevention and give dietary and nutritional advice. They may
         also provide regular dental hygiene services, but must refer patients to a dentist if caries or other
                                                                                        55
         problems are discovered. They have permission to administer local anaesthics .

         In Finland, dental hygienists work at dental practices either on a freelance basis or as private
         entrepreneurs. Their duty is to make dental hygiene treatment plans, provide preventive care, therapy,
         cosmetic treatments and oral health promotion lectures. They may also make pre-diagnoses and
                                                                  55
         provide local anaesthesia, in the presence of a dentist.

         In Germany, dental hygienists are fighting to be recognised. The title of dental hygienist has no legal
         protection and is not yet legally accepted as a profession. Dental hygiene in Germany is mostly
         performed by dental assistants. Independent dental hygiene practices started to come into existence as
         from 1999, but it is still a profession that is not accepted by the German government.




     53 M. Aerden, 25 July 2005




     Dental hygiene practice                                                                                        65
                                                                             54
    In Ireland, there are 285 registered dental hygienists.

    In Italy, dental hygienists may work either with dentists or independently. Their consumers are referred
    by the dentist. He can provide all service related to prevention. The dentist must prescribe the
                                            55
    preventive treatment for the customer.

    In the Netherlands, the title of dental hygienist does have legal protection. Persons that have fulfilled
    the educational requirements can start working as a dental hygienist. They are allowed to provide all
    services in the professional scope of dental hygiene, including periodontal therapy. They are allowed to
    administer local anaesthesia but need a request from a dentist first. They are also allowed to administer
    infiltration and block anaesthesia. As from next year, graduated dental hygienists will be allowed to drill
    and fill teeth. Dental hygienists in the Netherlands either have their own practise or work for a dentist.
                                                                                      55
    Customers need to be referred by a dentist to be treated by a dental hygienist.

    In Sweden, dental hygienists either rent part of a dental practice or work from their own practice. Their
    work includes clinical health promotion, educational training, and administration as well as research and
    development. In their own practise, they are also allowed to pre-diagnose caries and periodontal
    disease and plan appropriate treatments, take radiographs and perform scaling. They are allowed to
    give injections and purchase necessary materials. They may administer infiltration and mandibular
    nerve-block injections. Dentists often refer customers to a dental hygiene practice but customers do not
                         55
    need a referral note.




    5.1.2. Defining the scope of the service for international price comparison

    As mentioned before, the service exists throughout European countries, but in some countries there are
    specialized professionals that operate independently from dentists. In this shortlist study, for the sake of
    comparability, we only consider the service as offered by oral or dental hygienists. If dental hygiene is
    part of the work of a dentist, it can be assumed that prices and competences differ. The service of
    dental hygienists consists of several treatments. Unfortunately, we do not have information on dental
    hygienist treatments in Germany, Ireland and Italy. Table 5.1 sets out the treatments of only four
    European countries, as Belgium does not have dental hygienists.




54 Catherine Waldron, president of the Irish Dental Hygienists Association, mail 4 July 2005



55 Gatermann-Strober and Perno Goldie (2005)




Dental hygiene practice                                                                                            66
    Table 5.1: Contents of the service

     Country                              BE              DE       DK   FR        IE            IT       NL      SE
     Service components
                                    profession       no                      no            no
                                    does not exist   information             information   information
     pre-diagnoses                                                                                             
     treatments                                                                                                 
     radiographs                                                                                                
     periodontal therapy                                                                                 
     scaling                                                                                                   
     root planning                                                                                       
     local anaesthesia                                                                                         
     preventive care                                                   
     therapy                                                            
     cosmetic treatment                                                 
     treatment of infection                                        
     dietary advice and nutrition                                  


    Source: Report on ‘Independent Dental Hygiene Practice Worldwide’, B. Gatermann-Strobel and Maria P. Godie
    2005.


    As can be seen in table 5.1, pre-diagnoses, scaling and local anaesthesia are the most performed
    treatments. The prevention of tooth decay and dental hygiene services can be considered as the basic
    services performed by dental hygienists. This includes making pre-diagnoses and treatments plans.
    However, the kind of treatment depends on the condition of the customers’ teeth.

    5.1.3. The market of the service

   We have mentioned before that the dental hygiene practice in Europe differs. There are dental
   hygienists who work from a dental office or a health care facility, independent professional operators
   with their own office, and dental assistants who carry out the dental hygiene treatments.

    In Sweden, there are about 8,000 dentists and 2,700 certified dental hygienists. In the Netherlands,
    there are 5,800 dentists and 2,250 registered dental hygienists. Finland has 4,700 dentists and 1,400
    dental hygienists. Denmark has 4,800 dentists and 1,500 dental hygienists. Italy has 35,000 dentists
    and 1,500 certified dental hygienists. Germany has 40,000 dentists and 120 foreign registered dental
               56
    hygienists.

    The dental hygiene practice is a complex service, because the service sometimes consists of several
    treatments. The kind of treatment also depends on the condition of the patients’ teeth.

    We can distinguish three ways of price determination: a fee per time unit, e.g. EUR 100 per hour, a fee
    per treatment and a fee per session. In most countries the price is determined per hour.




56 Gatermann-Strober and Perno Goldie (2005)




Dental hygiene practice                                                                                               67
    In some countries, e.g. Denmark, the Netherlands, Italy, a referral letter is required from a dentist to be
    treated by an independent dental hygienist. In Sweden and Finland this is not required. In Germany, the
    profession of dental hygienist is not legally accepted, so dental hygiene services are carried out under
    the supervision of dentists. In some countries, the fees are (partially) paid by insurance companies.




 5.2.        Inventory list of price components of the service

    Prices are free in some countries, in other countries prices are determined by the government or
    insurance companies. The price for dental hygiene treatments in the countries described below is
    mostly determined by time unit.

    The fee for dental hygiene treatments in some European countries is as follows:

                                                                  55
    In Denmark, the normal fee is EUR 80 an hour. Private insurance companies accept invoices from
    dental hygienists but public insurance companies do not.

                                                                        55
    In Finland, treatment costs are EUR 80-90 an hour.                       The social insurance institution does not cover
    treatment.

                                                                                             55
    In Germany, dental hygienists’ fees approximate EUR 100 an hour.

    In Ireland, prices for the dental hygiene treatments are set by dentists. There is also a government
    scheme. The approximate fees are as follows: 30 minutes EUR 65; 45 minutes EUR 95; 60 minutes
               54
    EUR 120.

                                                                                                     55
    The cost for a single treatment in Italy is approximately EUR 90 per session. Dental hygienists in Italy
    have their own list of minimum fees they charge for their services. The costs are refunded by insurance
    companies.

    In the Netherlands, most customers are charged per hour. When customers are insured for dental care,
    most insurance companies pay the fees. Fees are determined individually but are about
    EUR 7.20-EUR 7.60 per 5 minutes. One insurance company (Menzis) does not refund fees per time
    unit but per treatment. Fees of dental hygienists working from a dental practise are determined by the
                                                                         55 57
    Dutch Healthcare association “College Tarieven Gezondheidszorg”.




                                                                                           55
    In Sweden, the fee is approximately EUR 60 to EUR 110 an hour. Some services are partially
    refunded by the government insurance companies and the companies pay a fixed number of certain
    services.



57 Telephone call of 30 June 2005 with Ellen Bol of the Nederlandse Vereniging van Mondhygiënisten




Dental hygiene practice                                                                                                        68
    In short, we can say that the fee is mostly determined by time of treatment (see also table 5.2).

    Table 5.2 Price of dental hygiene treatments

     Country                                     DE      DK         FR          IE         IT         NL         SE
     Price of dental hygiene treatments set by
     time                                                                                                      
     treatment                                                                                        
     session                                                                               


    Source: Report on ‘Independent Dental Hygiene Practice Worldwide’, B. Gatermann-Strobel and Maria P. Godie
    2005




 5.3.        Inventory of price-composition of the service

    The factors that determine the price of a dental hygiene treatment, are as follows:

    - type of treatment

    - time of the treatment

    - work attitude (speed of working) and experience of the dental hygienist or dentist

    - the condition of the customers’ teeth

    - extra care

    The part of the invoice that is paid by the customer depends on the way in which health care is
    organised in the specific country. Sometimes treatment costs are refunded by insurance companies
    and sometimes customers have to pay the entire amount. This also depends on the kind of insurance
    taken out by the customer. So another factor that determines the price paid by the customer is the
    national insurance policy and the content and coverage of the customers’ insurance. A the price that is
    calculated for this service is not necessarily paid by the customer.

    Knowing the rates beforehand does not mean the end price is clear for the customer, because the time
    unit for the treatment is not known in advance, nor is the kind of treatment.




 5.4.        Suggestions for the data collection methods to be considered

    The impression exist that the profession of dental hygienist still has to earn its position within the dental
    care. In some countries, it is an unrecognised job, in other countries the content of the field varies.




Dental hygiene practice                                                                                                 69
    First, we will carry out a desk research on this subject (literature, internet) and contact experts, like
    Beate Gatermann of Germany for her knowledge of the dental hygienist practice worldwide. She is
    President of the German Dental Hygienists’ Association and has written a report on the worldwide
    independent dental hygiene practice.

    Then, we will consult experts in the professional and educational segment of dental hygiene. All
    existing dental hygiene associations, not all European Union countries have such Associations, can be
    contacted personally. Data collection can be straightforward by sending a questionnaire.

    After that, we will try to make contact with associations of dentists in countries that do not have the
    profession of dental hygienist, and send them a questionnaire.

    Aspects we should discuss in the questionnaire are: the organization of hygiene dental treatment in the
    various countries, education, number of dental hygienists, obligations, list of fees as well as who
    determines the fees, the duties of insurance companies and legal requirements in the dental hygiene
    practise, etc.

    Our last note in this context is that it is currently hard to make price comparisons, because of the
    different systems of dental hygiene treatment and price determination in the Member States. As
    mentioned before, a common price comparison should be based on time units, taking into account that
    we compare prices of treatments of persons with more or less the same profile. For example:

    Table 5.3 User profiles

                                     Profile A               Profile B             Profile C
     Gender                           Female                   Male                   Male
     Age                           30 years old            40 years old           40 years old
     Treatment                     Pre-diagnose            Pre-diagnose             Scaling
     Time of treatment              30 minutes              30 minutes               1 hour

    Besides, a price may be given, but whether or not the customer pays for the service depends on other
    factors.

    Because of the reasons mentioned above, a dummy target table does not make sense in this chapter.




 5.5.        Information

    The following organisations, internet addresses and experts have helped us obtaining
    information for this study:

    - www.ifdh.org, the International Federation of Dental Hygienists

    - www.edsa.globaldent.com: a list of email addresses of European and national dental associations




Dental hygiene practice                                                                                         70
    Experts:

    - B. Gatermann, “Independent Dental Hygiene Practice Worldwide” in the International Dental Hygiene
      Journal, July 2005, gatermann@dentalhygienepraxis.de

    - President of the Irish Dental Hygienists Association: catherinewaldron@eircom.net

    - aerden.m@aerden.org




 5.6.        Main conclusions

         - It is in fact rather simple to isolate service, but because of differing regulation per country, product
           content differs.

         - The number of providers is large. Prices are free in some countries while in other countries prices
            are determined by the government or insurance companies.

         - The kind of treatment depends on the condition of the customers’ teeth. A common price
           comparison should be based on time units, taking into account that we compare prices of treatments
           of persons with more or less the same profile.

         - There are generally three ways of price determination: a fee per time unit, a fee per treatment and a
           fee per session. However, knowing the rates beforehand does not mean the end price is clear for
           the customer.

         - For price data collection, existing dental hygiene associations can be contacted personally. Data
           collection can be straightforward by sending a questionnaire.

         - Note that although there is a “price”, the service is often covered or partly refunded by insurance.




Dental hygiene practice                                                                                               71
6.          Electricity

      6.1.         Market, content and scope of the service in EU countries

          6.1.1. Exploring the content of the service in the EU

          In fact there are three suppliers involved in providing households with electricity. The production and
          physical transport (availability and maintenance of pipes, the distribution and transportation) are done
          by the producer and the distribution network operator respectively, while the electricity supplier is the
          company that sells the electricity to consumers. Suppliers send bills, deal with administration et cetera
          and are the visible party for the consumer.

          The network operator and the supplier used to be one company. Since a few years they have been
          separated, or they will be separated in the coming few years (ownership unbundling). This means that
          consumers need a contract with both types of companies in order to receive electricity. Consumers can
          choose their supplier, but they cannot choose their distribution network operator.

          Since consumers have a choice in electricity suppliers, we focus on these parties and not on the
          network operators and producers of electricity.

          The European electricity market has to be a competitive market by July 2007 at the latest. This means
          that every member has to have an open market by then. So far, according to a report of the European
          Commission, competition has only come about in Great Britain and in the Nordic countries, because
                                                                             58
          they are the only ones with enough significant market participants.

          We thoroughly studied the services of suppliers in Austria, Germany, the United Kingdom, Belgium
          (Flanders) and the Netherlands. We quickly scanned the situation in Portugal, Denmark, Greece, the
          Czech Republic and Italy because of the language problem, our information about these countries is
          limited. We used existing reports and information on the internet.

          As mentioned before, the basic service we focus on will be the supply of electricity. However, in some
          countries the supply and administration of electricity is the only service of a supplier, while in other
          countries the supplier also takes care of maintenance of the installation and visits in cases of
          emergencies. The hiring, maintenance and reading of meters is a task of some suppliers, but mostly
          the network operators practise these activities. The costs for the network operator are often being
          debited by the supplier (the consumer pays the supplier who pays the network operator).




     58 Report from the Commission – Annual Report on the Implementation of the Gas and Electricity Internal Market. Commission of the European

         Communities – January 2005.




     Electricity                                                                                                                                  72
     Therefore, when comparing prices of electricity supply, we have to be very consistent in separating
     supply from other activities.

     We postulated a ‘stable’ situation, meaning that a consumer doesn’t move to another house nor to
     another supplier.

     Regarding the supply of electricity, the service of suppliers can consist of several components. These
     are listed in table 1. For each country studied, we indicate whether each component exists in this
     country. Per country we studied two or three suppliers. If one, two or three of the suppliers have the
     specific component, we mark this in the table with a ‘’; if it is not found, the cell is left empty. Note: if a
     certain component isn’t mentioned on a website, this doesn’t necessarily mean it doesn’t exist. But
     since it was impossible to specifically ask each supplier about each component, we regard our findings
     as satisfactory.

     Table 6.1: Service components
              Country                                                       AT      BE         DE         NL            UK
              Supply of electricity                                                                                 
              Automatic access to electricity (instead of tokens you                                     
                                                                            
              have to buy at a shop)
              Choice in green/normal electricity                                                                    
              Choice in length of contract/notice                                                         
              Choice in paying period and/or method                                                                   
              Choice in fixed or variable price                                                                       
              Single tariff                                                                                         
                                                                                                                    
              Double tariff (high and low)
              Difference in low tariff (before and after e.g. 21h)                                        
              Combination of single or double tariff with only low tariff           
              Choice in standing or no standing tariff                                                                  
                                                                                                                    
              Special offers/discounts
              Price guarantee                                               

              Schemes for the elderly/disabled/poor (social contracts)                                                 

              Helpline 24/7                                                                                            
                                                                                                                     
              Visits in case of emergencies
              Maintenance of electrical installation                                                                   
              Usage (hire) of meter                                                                                     
              Maintenance of meter                                                                                      
              Reading of meter                                                                                         
              Filling in meter readings via internet                                                                 
              Specified bills (usage, different debit entries)                                           
              Paperless billing                                                                                        
              Tax (VAT like)                                                                                        

              Environmental tax                                                                         
              Insurance in case of personal damage at electrical
                                                                            
              incidents




Electricity                                                                                                              73
     Table 6.1 can be used to decide what is to be considered as the general contents of the electricity
     supply service. We need to find a collection of service contents that makes (price) comparisons
     between countries feasible.

     6.1.2. Defining the scope of the service for international price-comparison

     The object of this chapter is the service of the suppliers of electricity. The aspects of service (Table 6.1)
     can be divided into basic components and secondary components. Basic service components are the
     ones that directly relate to electricity supply, and secondary components are choice concerning the
     contract, paying method et cetera.

     The components which we refer to as basic are the components for which can be chosen in (almost) all
     countries and that should be included in the price, because they are directly related to electricity supply.
     The first is of course the supply of electricity. The other four basic components are automatic access to
     electricity, choice in green or normal electricity, choice in single and double tariff and a 24/7 helpline.
     The secondary components don’t have to be included, but the researcher has to be aware that each of
     them is a source of footnotes in price-comparing tables. The basic components as well as the
     secondary elements are shown is table 6.2. So, some of the components mentioned in table 6.1 do not
     belong to the basic components nor to the secondary components. In most cases these components
     are not common in most countries, like for example price guarantee, or don’t belong to the service of
     the supplier, like maintenance of the electricity installation.

     We advise collecting prices about the service with all basic components included. Not only to compare
     apples with apples, but also to get substantial market coverage. We expect that the international
     comparison will be relevant and feasible. In comparisons over time, the researcher has to anticipate
     changes in the secondary components of the service within the same supplier.

     Table 6.2: Service components

     Service components                                                         AT         BE         CZ         FR
     Basic components
     Supply of electricity kWh
     Automatic access to electricity
     Choice in green/normal electricity
     Choice in single and double tariff
     Helpline 24/7
     Secondary components
     Choice in length of contract/notice
     Choice in paying period or method
     Choice in fixed or variable price
     Choice in standing or no standing tariff
     Special offers/discounts
     Price guarantee
     Schemes for the elderly/disabled/poor
     Specified bills
     Paperless billing
     Difference in low tariff (before and after e.g. 21h)
     Combination of single or double tariff with only low tariff




Electricity                                                                                                           74
     6.1.3. The market of the service

     The European electricity market has to be a competitive market by July 2007 at the latest. This means
     that every member has to have an open market by then. So far, according to a report of the European
     Commission, competition has only come about in Great Britain and in the Nordic countries, because
                                                                        59
     they are the only ones with enough significant market participants.

     The liberalisation of the energy market as at 1 January 2005 has not been completely carried out in all
     EU countries. The market has been 100% opened in Austria, Denmark, Finland, Germany, the
     Netherlands, Portugal, Spain, Sweden and the UK. Other members have partly opened: Belgium
     (approx 90%), Italy (79%), France (70%), Ireland (56%), Luxembourg (57%) and also Greece (62%). In
     these countries, households cannot yet choose their supplier (industrial and commercial users can). In
     the Belgium Flanders region, households can choose their supplier; in Wallonia, they cannot, i.e. the
     market opens to large/corporate clients first and to consumers last.

     The newer member states don’t have 100% open markets. Although Latvia and Slovenia have opened
     up for approximately 75% and Slovakia and Hungary for approximately 66%, in the other countries at
                                                            60
     most half of the market has been opened.

     The amount of suppliers differs per country. In the Netherlands there are about 25 suppliers, in Belgium
     only 8 suppliers and a lot of agents who sell electricity. In the United Kingdom there are 17 suppliers (6
     major competitors).

     Providing consumers with electricity is actually a simple service. But there is some variation in the
     pricing of the service, which can make the pricing of the service complex. For example, in all countries
     consumers can choose what kind of energy they want, green or normal energy; consumers may
     choose the period of paying and paying method and decide if they want a single tariff or a double tariff.

     We distinguish three ways of electricity consumption tariff: price per kWh, price per unit/tier of kWh,
     price divided in consumption group (for example in Germany there is a distinction of tariff when you are
     single or a family). Taking the several choices mentioned above into consideration (choice of using a
     single or a double tariff, normal/green energy), there are two commonly used tariff formulas to
     determine the total price of energy consumption:

     -        Using a single meter




59 Report from the Commission – Annual Report on the Implementation of the Gas and Electricity Internal Market. Commission of the European

    Communities – January 2005.



60 Commission staff working document – Technical Annexes to the Report on the Implementation of the Gas and Electricity Internal Market.

    Commission of the European Communities – January 2005.




Electricity                                                                                                                                  75
                                                                                  61
         Total consumption (in kWh) * price per kWh single tariff                      + standing rate – discount if this is one
         amount


     -        Or when using a double meter

         Daytime consumption (in kWh) * price per kWh daytime double tariff + evening consumption (in kWh)
         * price per kWh evening double tariff + night-time/weekend consumption (in kWh) * price per kWh
         night-time/weekend tariff + standing rate – discount if this is one amount


     The content of the service and their prices depends also on some other factors, national specific
     factors. As we have mentioned earlier, the supply activity has to be separated from other activities. In
     some countries, the supplier does also the hiring, maintenance and reading of meters. It should also be
     taken into consideration that not all EU countries have a 100% open market. Some countries have a
     small number of suppliers; which means there is less competition between suppliers. So prices could
     not be determined competitively. Also the kind of supplier is something you have to be aware of. In
     Belgium there are also a lot of agents who sell electricity.




 6.2.           Inventory list of price components of the service

     The most important price-fixing variable is the consumption of electricity. In all of the countries
     approximately, the consumption defines the price you pay. Of course, the more you use, the more you
     pay. However, the way consumption determines the bill differs. There are systems where one pays the
     same price per kWh regardless of consumption. In some countries the consumption is divided in
     units/tiers of kWh. One pays more per kWh for the first say 225 kWh than for the next. Then there is a
     system where the consumption is divided in groups (e.g. if you are single or a family) and each group
     has its own tariff. Some suppliers guarantee that they assign you to the most advantageous tariff group.

     For the most common price determining variables, we looked whether the variable does influence the
     price of electricity. This is reported in table 6.3. No influence on the price is marked as ‘-‘, a small
     influence (less than or equal to 5% of the price per kWh) is marked as ‘x’ and a large influence on the
     price (more than 5% of the price per kWh) is marked as ‘X’.

     In case a variable that influences the price was found in one or some but not all suppliers in a country,
     we consider this as being a price influencing variable. This means that the mentioned variables can, but
     will not always, influence the price of a certain supplier in a certain country.




61 Tariff is based on several aspects that we mentioned in paragraph 1.2 and have to be used in composing user profiles.




Electricity                                                                                                                        76
     Table 6.3: Price components

     Price components                                                                              AT            BE        DE     NL          UK
     kWh unit                                                                                       X            X         X       X            X
     Volume of consumption (as an influence on price PER kWh)                                       -             x        x       -            x
     Type of energy (sun, wind, green, normal)                                                      X            X         X       x            -
     Social status (because of social tariff in some countries)                                     -            X         -       -            -
     Single or double meter                                                                         X            X         X       X            X
     Current capacity (3x25 amp - more than 3x25 amp)                                               ?             ?        ?       X            ?
     Length of contract                                                                             -             -        -       X            -
     Fixed or variable tariff                                                                       -             x        -       X            x
     Standing rate or not                                                                           -             -        -       -
     Paying method                                                                                  x             x        -       -          X (1)

     Frequency of paying                                                                            -             -        X       -            -
                                                                                                                                 X (2)        x/X (3)
     Gas from same supplier                                                                         -             -        -
     Entered via internet                                                                           -             -        -       -            x

       (1) Influence on costs at consumption of 3500 kWh is more than 5%
       (2) Influence on costs at consumption of 3500 kWh is less than 5%
       (3) Depending on paying method




 6.3.         Inventory of price-composition of the service

     The total price of energy is generally the result of the following formula, which we have mentioned
     before:

     When using a single meter:

                                                                                62
      Total consumption (in kWh) * price per kWh single tariff                       + standing rate – discount if this is one
      amount


     Or when using a double meter:

      Daytime consumption (in kWh) * price per kWh daytime double tariff + evening consumption (in kWh) *
      price per kWh evening double tariff + night-time/weekend consumption (in kWh) * price per kWh night-
      time/weekend tariff + standing rate – discount if this is one amount


     All prices can be given as either including or excluding VAT but since some suppliers give their prices
     including VAT or calculate the VAT over the total price at once, we advise collecting them inclusive of
     VAT. We do not include other taxes (environmental tax et cetera) in the price since the supplier does
     not always mention these.

     Since the variables listed in paragraph 1.2 all can determine the price of electricity of a supplier, we
     have to take all of them into account. Some variables will be irrelevant with most suppliers, but will be
     relevant with one or a few; therefore they have to be listed.



62 Tariff is based on several aspects that we mentioned in paragraph 1.2 and have to be used in composing user profiles.




Electricity                                                                                                                              77
     When collecting prices of electricity it is useful to work with one or more profiles, so that choices are
     made about the value of the price components. In table 6.4 we sum up the possible components of
     user profiles and make two profiles as an example.

     Table 6.4: Components of user profiles and examples of two profiles:

                                                                                      Profile user A Profile user B
       Yearly consumption in total (regardless of time a day)                           5,000 kWh       3,500 kWh
       Yearly consumption in daytime (between 7:00 and 21:00)                           2,500 kWh
       Yearly consumption in the evening (between 21:00 and 23:00)                      1,000 kWh
       Yearly consumption at night (between 23:00 and 7:00) or during weekends          1,500 kWh
       Type of meter (single or double meter)                                             Double          Single
       Connection (3x25 amp or more than 3x25 amp)                                      3 x 25 amp     3 x 25 amp
       Number of persons in household                                                         4              2
       Social benefits                                                                      Yes             No
       Source of electricity (normal, sun, wind, green)                                   Normal           Wind
       Gas from same supplier                                                               Yes             No
       Length of contract                                                                Indefinite       1 year
       Fixed or variable tariff                                                           Variable         Fixed
       Standing rate or not                                                                 Yes             No
       Paying method                                                                      Via bills   Direct Debiting
       Paying frequency                                                                Every month Every 3 months




Electricity                                                                                                       78
 6.4.            Suggestions for the data collection methods to be considered

     There are different ways to collect electricity prices. We sum up several ways in table 6.5, each with
     their pros and cons.

     Table 6.5: Different ways price collection


                   Data collection                               Pros                                     Cons
                      sources
                                                 - Inexpensive                       - Issues with interpretation of published info
                                                 - Quick, effective, reliable        - Not always the right information to compare
              Internet: information from                                               (e.g. sometimes network tariffs included)
              suppliers’ websites                                                    - Not always complete in their information



                                                 - Inexpensive                       - Often unknown sources (are they being
                                                                                      sponsored or owned by a supplier?)
                                                 - Quick, effective (when working
                                                   with user profiles)               - Can you fill in all the necessary price
              Internet: information from                                              determining components?
              price comparison websites
                                                                                     - Not always up-to-date


                                                 - Inexpensive                       - Dependence on co-operation of suppliers
                                                 - Quick, effective, reliable

              Asking suppliers their prices      - Up-to-date
                                                 - Structured
                                                 - Getting the precise data needed

                                                 - Real prices paid by consumers     - Need to ask for actual invoices
              Collecting of consumers’ bills
                                                                                     - Risk of ‘non-specified’ invoices
                                                                                     - Not always all the information you need to
                                                                                       compare
                                                                                     - Expensive


                                                 - Real price paid by consumer       - Risk of non-appropriate ex ante definition
              Mystery shopping – Data
              collectors’ call: within ex ante   - Accurate                          - Expensive
              definition parameters

                                                 - Real price paid by consumer       - More data points needed
              Mystery shopping – Data
              collectors’ (random) call: no      - Accurate                          - Less structured, difficult interpretation
              ex ante definition parameters
                                                                                     - Expensive




Electricity                                                                                                               79
     The best way to collect electricity prices is by asking suppliers their tariffs, discounts, special prices etc.
     This is the only method that guarantees that the prices will be correct, up-to-date and that certain price-
     influencing factors aren’t overlooked.

     The possible objective that asking for tariffs doesn’t provide us with real prices paid by consumers can
     be eliminated by working with profiles. This way we transform tariffs into realistic prices. If different
     profiles are being used where the important price-influencing factors (e.g. single or double meter, type
     of energy) are taken into account, we should be able to get a good range.

     The amount of suppliers differs per country. In the Netherlands there are about 25 suppliers. In Belgium
     there are only 8 suppliers with a permit. But there are also a lot of agents who sell electricity. As long as
     these agents are legal, and providing they sell unique ‘services’ (electricity or related services at tariffs
     that differ from the suppliers), all suppliers can be included in the data collection.

     Since the visited websites of suppliers differ strongly on how complete their information is, it is strongly
     advised to work with a detailed checklist, where a supplier has to fill in every cell, even if a certain
     aspect doesn’t seem applicable in his case.

     As said, the profiles have to give a good overview of the market and its possibilities. They should
     include the factors mentioned in table 6.4 (Components of user profiles).

     Since some suppliers change their prices more frequently than others, a frequency of the data
     collection has to be determined first. Therefore the suppliers have to be asked how often they revise
     their prices. If this is clear, the frequency can be decided upon.




Electricity                                                                                                            80
 6.5.          Dummy target tables
  Country                                AT                       AT                        BE                        BE                  GE             GE            …
Supplier                               1…                        …15                      1...                       20                    1            12             …

Prices basic use63

Tariff single meter                    11.4464                   9.88                     7.02                  5.27                        etc
in Eurocent

Tariff daytime in                      11.44                     9.88                     7.02                  6.05
Eurocent
                                                                                                                65
Hours daytime                     6:00-22:00 h.             6:00-22:00 h.                 ?

Tariff evening in                      7.25                      5.76                     3.49                  3.75
Eurocent

Hours evening                     22:00-6:00 h.             22:00-6:00 h.                 ?

Tariff                                 7.25                                               3.05                       2.97
night/weekend in
Eurocent

Hours                             22:00-6:00 h.             22:00-6:00 h.                 ?
night/weekend

Standing rate                          19.27                     42.12                    70.58                      65
single tariff in Euro

Standing rate                          20.84                     42.14                    98.66                      90
double tariff in
Euro

Discounts and                     One day free              EUR 12.50                 EUR 10 per                EUR 15 per
special tariffs                   elec. when                when giving               year when                 year when
                                  paying via                meter                     paying via                paying via
                                  direct debiting           readings via              direct                    direct
                                                            internet                  debiting +                debiting
                                                                                      2% discount
                                                                                      on tariffs
                                                                                      when staying
                                                                                      for at least a
                                                                                      year

Total costs per
year for profile 1

Total costs per
year for profile 2

Total costs per
year for profile 3

Total costs per
year for profile 4



63 We name here tariffs that apply to:

    - normal electricity (not green electricity);
    - consumption of 3,500 kWh a year.
   When a consumer uses electricity with different characteristics, e.g. green electricity, the price of his electricity will become clear with the calculation
    of the different profiles.
64 Included in the mentioned tariffs of this supplier are network costs.
65 Hours are dependent on network operator.




Electricity                                                                                                                                                       81
 6.6.         Main conclusions

          - Although it is a rather simple service, when supply is separated from other activities the pricing is
            often complex.

          - There are a large number of providers, but market development differs between countries because
            actual competition is only present in Great Britain and in the Nordic countries. The amount and
              character of suppliers differs per country.

          - The number of service variants increases with the evolution of the liberalisation of the market and it
            is expected to rise in the future.

          - It is useful to work with one or more user profiles. In some countries, social contracts and schemes
            are applied.

          - Given a particular use pattern and volume used, tariff is a good predictor of the price paid by the
            consumer.

          - The best way to collect electricity prices is by asking suppliers their tariffs, discounts, special prices,
            etc. This is the only method that guarantees that the prices will be correct. Because the number of
              service providers is limited, all suppliers can be included in the data collection.

          - Taxes (VAT and environmental taxes) represent a great part of the price of electricity.




Electricity                                                                                                               82
7.          Internet connection at home

      7.1.         Market, content and scope of the service

          7.1.1. Exploring the content of the service in the EU

          Internet access enables consumers to browse the worldwide web, send and receive e-mails, as well as
          using several other digital services. Internet access is based - within and across countries - on different
          technologies. This different technological base is expected to have an influence on service
          configuration and price:

          - Dial-up and ISDN Internet technology provide low-speed Internet access. The number of subscribers
            is sharply decreasing as broadband Internet (DSL and cable) is becoming increasingly affordable in
            all countries

          - DSL provides "always-on" access. Unlike traditional dial-up services, such as analogue modems and
            ISDN, where you log on to Internet when Internet is required, the consumer has immediate access to
             Internet when the computer is switched on. DSL is faster than for example: analogue modems, cable
             modems, ISDN or wireless solutions. DSL uses the existing copper wire infrastructure and can,
             therefore, be deployed almost anywhere. ADSL stands for Asymmetric Digital Subscriber Line.
             Asymmetric means that the upstream and downstream speeds differ. ADSL is meant for users
             receiving much more data than sending or transmitting. ADSL technology uses the regular telephone
             line to provide high speed Internet access to consumers as it allows using the whole bandwidth of
             standard telephone copper cabling.

          - A cable modem also offers high speed Internet access. The availability however, depends on the roll-
             out of cable TV. Cable is a considered as a shared line (neighbours share the same bandwidth that
             runs to the local cable provider), while DSL is a dedicated connection. The more neighbours on line,
             the slower the connection. Sharing a bandwidth, as cable does, can also be a security risk, whereas
             DSL ensures the privacy of the connection. Cable modems run via coaxial cable lines and the service
             is only offered by a local cable provider (usually only one choice is available). Lack of choice in
             providers can also be seen as a disadvantage of cable.

          - Wireless Internet is currently an undeveloped service, but with a promising future. Currently, wireless
            service is limited to a range around 1,000 feet from a local wireless access node. Wireless solutions
            are typically deployed by universities, hotels, airports, cafes, and the like. Wireless Internet is not
             frequently used by ‘normal’ consumers, partly owing to the limited roll-out of the technology and partly
             due to the high usage charges. Wireless access is at least twice as expensive as DSL / Cable.




     Electricity                                                                                                        83
     The following notes are examples of some countries that are illustrative and based on Internet
     research on broadband offerings since competition in the dial-up segment is mainly based on telephone
     charges, which are determined in the telecom industry (not by Internet providers).

     In Belgium, Belgacom is offered a 1 day Internet tuition with all ADSL subscriptions, if the consumer
     immediately subscribes for a year. This promotion is valid till the end of November 2005. The Belgacom
     website also makes available a searching engine to find their best Internet connection product, given
     the needs and preferences of the client.

     In the Netherlands, most Internet providers have roughly the same offerings. Some differences include
     for example free (or cheap) anti-virus or anti-spam software. Versatel is a new player on the Dutch
     market, offering high speed broadband (20Mb) in combination with digital television and exclusive live
     soccer coverage at competitive prices. Most Dutch Internet access providers of ADSL only offer fixed
     monthly fees for unlimited access (or up to a certain data limit). They do not offer ADSL subscriptions
     that charge by the time spent on Internet. Contrary to other countries, many Dutch providers have no
     data limits. In the Netherlands it is a highly competitive market with a many promotional actions, which
     makes price comparison difficult.

     The most broadband providers in the UK are (still) working with data limits. A first overview also
     indicates that the price range is typically higher than in other European countries. NTL, one of the main
     providers of cable modem Internet, charges between EUR 15 and EUR 60 for a bite rate varying
     between 1Mbp/s and 3Mbp/s, while downloading is limited to between 3-30Gb. Telewest charges about
     EUR 27 for a 512Kbp/s connection, but has no data restrictions on any of its broadband services.
     Prices for higher connection speeds may reach EUR 75 for a 4Mbp/s connection.

     Table 7.1 Internet connection service components

     Country                                NL     FI    PL     PT     UK
     Downstream speed                                   ?      ?     
     Upstream speed                                                
     Download limit                                                
     Upload limit
     Number of e-mail accounts                                     
     1
     2 to 5
     >5
     Size per email account                                        
     = 50 MB
     > 50 MB
     Access restricted to a schedule
     Helpdesk                                                      
     Firewall                                                          
     Antivirus                                                     
     Antispam                                                          
     Homepage




Electricity                                                                                                      84
     7.1.2. Defining the scope of the research

     The main content of the service discussed in this paragraph is access to the Internet. The actual
     content of the Internet access depends on the individual usage and it is not to be covered in this
     analysis.

     From a consumer’s perspective, the basic Internet connection services differentiate mainly on the
     speed of Internet access. Other sources of competition refer to the price of the modem, whether the
     modem is set up for free and the fee the consumer pays if this is not the case, the availability of free
     security measures such as anti-virus and anti-spam, the number of free e-mail addresses and web
     space in Mbs.

     The main source of content differentiation across countries is expected to be related to the different
     development paces of the Internet technologies, which logically reflect on different price levels.
     However, dial-up and ISDN Internet access represent a declining share of the market, rapidly
                                      66
     substituted by high-speed access . The latter constitutes a great qualitative difference directly affecting
     the service content. “Broadband communications is not simply a faster way to connect to the Internet -
     it fundamentally changes the way people use the Internet. Connections are immediate and large
     volumes of data can be transmitted almost instantly. The Internet's overall presentation changes,
     moving from slow, and often user-unfriendly text format, to a fast, colourful stream combining still
                                             67
     images, video, animations and sound” . Broadband includes DSL, wireless local loop, cable TV
     access (cable modem), dedicated leased lines, satellite, optical fibre, and power line technologies.
     Cable Internet access is unevenly present across EU countries as it depends on the roll-out of
     technology – plus it presents quality disadvantages with respect to DSL access. Wireless Internet
     access is yet too marginal amongst consumers. Thus, the focus of the analysis will be on ADSL – as
     the most common broadband technology choice for the EU consumer.

     “DSL has increased its importance as the predominant technology and now represents almost 80% of
                                                                                                                   68
     all broadband lines, with cable modem accounting for most of the balance” .

     This report ignores reliability of operation as part of the service content. We also ignore service
     characteristics like immediate availability of helpdesk, knowledge level of helpdesk, etc. The


66 Different approach is that of the “Internet Access Costs Via a Standard Telephone Line, ADSL, and Cable Modem” (2004) Teligen Report:

    “Although services like ADSL and cable modem that provide high-speed access to the Internet are becoming increasingly widespread in the Internet

    access market, dial up Internet access will always have a presence in the domestic market. It may in some cases only be used as back-up for the

    ever more prominent broadband services, but the significance of benchmarking these services is still very much apparent if we are to gain a

    complete picture of the variation in Internet access costs. The Commission has stipulated an analysis of the prices of dial up se rvices to ISPs via a

    standard telephone line. This therefore requires an analysis of the associated telephony charges in the 17 countries, in addition to the actual ISP

    charges, in order to find the best overall option for the types of access described by the basket profiles”.



67 Broadband access in the EU: situation at 1 January 2005, MEMO/05/185, Brussels, 1 June 2005



68 Idem.




Electricity                                                                                                                                                  85
     measurement of such service features would imply a totally different research field and dedication.
     Usually broadband access can be used all day (for a monthly flat fee rate); but in some countries ADSL
     is offered with access based on a schedule, i.e. certain ADSL offers in Spain sell access to Internet
     provided only within certain time ranges (peak hours versus off-peak hours) or during the weekend at a
     monthly price of EUR 17.00.

     Since Internet access is becoming more and more linked with other telecommunication and media
     services (double and triple play) – Internet access is offered in a package with television and telephone
     services. These three services often enter the household through the same access point/cable making
     it easy for the service providers to bundle these services. Triple play packages tend to be significantly
     cheaper than contracting the services separately. Currently triple play only holds a minor market share.
     An exception to this is the Netherlands. Here triple play is already quite popular compared to other
                                                                           69
     countries, where it only accounts for a minor segment of the market . These service bundles fall
     outside the scope of this analysis as they present a major caveat for price comparison.

     The separate components of the service content are presented in table 6.1. When making the purchase
     decision however, speed/price relationship becomes the major factor affecting the consumer’s choice.
     Downloading data limit may also play an important role. However, other components such as the
     number of e-mail accounts and capacity may have a marginal effect on the consumer’s decision, given
     the existing free offers such as the popular Hotmail, Gmail and Yahoo accounts. Secondary
     components such as homepage availability or firewalls and anti-virus programmes are usually included
     in the package’s price.

     7.1.3. The market of the service

     The service providers may be classified and chosen for the study based on market share criteria: for
                                                                         70
     ADSL services, the EU Commission imposes the obligation to the ISP of the ex-incumbent operator
     and a second major ISP offering ADSL to be identified.

     There are relatively many players on the UK and the Dutch market. Therefore it is more difficult to
     choose providers based on market shares since these market shares do not differ as sharply as in
     other countries. As a result, the larger players are less dominant in comparison to other countries
     (especially regarding the dial-up connections).

     Though the basic service seems easily comparable across EU member states, consumer preferences
     and content may differ among countries. It seems logical that the services provided are in accordance
     with the local consumer preferences and habits. Consumers in different countries might have different
     preferences with regard to the importance of the different variables. In addition some countries have
     different offerings. For example Spain and Italy have monthly broadband fees based on the time spent
     on the Internet (combined with connection speed), while in other countries monthly costs are primarily



69 See OPTA 2004



70 Internet service provider




Electricity                                                                                                      86
     based on connection speed (in some instances combined with total data downloaded). In this sense,
     the main variables on which Internet providers compete also differ by country. This might lead to
     different package offerings by country. In other countries, like in Austria, special charges apply for
     student connections, which differ from a regular account in that they have a reduced data limit.


 7.2.          Inventory list of price components of the service

     The tables under this heading contain variables deemed relevant for the determination of the service
     content and the prices. Variables have been selected based on a quick review of information provided
     on the Internet by Internet access providers. This information is generally limited to the EU 15.

     As a starting point, we have used the providers from the report “Internet Access Costs Via a Standard
                                                        71
     Telephone Line, ADSL, and Cable Modem” (2004) .

     Most price-related variables from our list below are relevant in all 15 markets as they are largely
     determined by the current technological state of art. As the primary or service-inherent variables (such
     as down/upstream speed) tend to converge – for example as a result of improved market
     transparency–, more and more emphasis is placed on secondary or supplement-related variables (such
     as firewall, spam filter, etc). This assertion varies across countries: the somewhat immature markets
     still compete on the primary service characteristics such as downstream speed and data limits, while
     more advanced (mature) markets tend to compete on additional features (e.g. firewall, spam filter, etc.).
     For example, many players in the Netherlands market their services in various ways, offering a large
     variety of ‘secondary’ variables, ranging from free anti-virus software to free modems. A high level of
     promotional actions is apparent.

                                                72
     With regard to the basic service –differentiated by down- and upload speed – in most countries there
     are around 3 to 5 different possible broadband subscriptions by Internet provider (often related to data
     limits). For example:

     -        Economy (512/128 Kbit/sec)

     -        Light (1,024/256 Kbit/sec)

     -        Basic (2,048/512 Kbit/sec)

     -        Plus (4,096/768 Kbit/sec)

     -        Extra (8,192/1024 Kbit/sec).




71 See Teligen 2004



72 Broadband capacity is defined as equal to or higher than 144Kb/s. However, in reality the vast majority of broadband offerings is at least 512Kb/s

    and often exceeds this, with speeds of 2Mb/s and over now quite common. (See European Commission Press Release 2005).




Electricity                                                                                                                                             87
     The main difference between these five subscription levels is down- and upstream speed. Downstream
     speed refers to the connection from the server to the end-user and vice versa for upstream.
     Downstream connection speed is important for home users mainly using their connection for
     downloading purposes. Upstream connection speed tends to be lower for technical reasons, but is
     important for users who have to upload data onto the web. The faster the connection, the less time
     needed to execute a certain action (more data can be requested in a shorter time). As a result, many
     consumers value the high Internet speed over regular Internet access as it is less time consuming. For
     the faster connection speeds, the data limit (the allowed amount of data requested on a monthly basis)
     also becomes more important as download capacity increases sharply. As a result, the data limit
     usually tends to increase along with connection speed. Please note that the bandwidth offered in
     different countries varies considerably, in countries with more advanced markets larger bandwidth is on
     offer (Sweden offering up to 24Mmb connections).

     The next table contains a complete list of variables with regard to Internet access services.

     Table 7.2: Price components Internet connection

     Country                                 NL    FI     PL     PT    UK
     Modem/router equipment                                        
     Installation charges                                          
     Registration/ setup costs (only once)                         
     Monthly fee                                                   
     Downstream speed                                    ?      ?    
     Upstream speed                                                
     Download limit                                                
     Upload limit
     Number of e-mail accounts                                      
     1
     2 to 5
     >5
     Size per email account                                         
     = 50 MB
     > 50 MB
     Access restricted to a schedule
     Firewall                                                           
     Antivirus                                                      
     Antispam                                                           
     Combination with other services
     (telephony, cable televison)?                                  
     Age discount                                                   

     Contract duration discount                                     
     Packages                                                       
     Exceeding download limit penalties                   ?      ?      




 7.3.         Inventory of price composition of the service

     ADSL (versus ISDN which is charged by minute) is billed on a flat rate basis. Price is structured in one-
     off payment for the hardware, connection and/or installation costs (some of these one-off costs may be




Electricity                                                                                                      88
     waived depending on the provider, the type of hardware used, special promotions, the possibility of
     auto-installation by the user, etc) plus a monthly fee. Besides, the provider may ask one fixed price for
     the hardware and the connection. Installation costs are predominantly nil.

     The various offers mainly distinguish by the down- and upstream speed (as discussed in section 6.2).
     The secondary variables are troubling or obscuring comparability, e.g. how much does it cost to have
     no download limit? Consumers can only choose from pre-defined packages, which come in bundles
     since consumers cannot buy the content features separately. It is our aim to find (more or less)
     comparable packages for all or most of the countries in our study.

     Because different packages come with different secondary features, they are not easily comparable
     and the price of the separate features remains unknown. As an example of an ADSL package, we can
     consider HetNet, a provider of dial-up and ADSL services in the Netherlands. HetNet ADSL offers four
     different packages, ranging in price from EUR 7.95 to EUR 32.95. Connection speeds range from
     288/128 Kbp/s to 1,600/512 Kbp/s. Installation services are free. The modem needed for the ADSL
     service is also free, unless a wireless router is desired, which costs EUR 80. Optional services like a
     spam filter and virus scanner are possible and for the two most expensive subscriptions the spam filter
     comes free of charge as well. Data restrictions apply for two of the packages, but extra capacity can be
     purchased in batches of 100Mb at EUR 0.50 to EUR 1.-, depending on the package. Other service
     contents such as e-mail inbox or webpage service are the same for all the packages. Another example,
     Chello (the Internet service for UPC in some of the European countries) in the Netherlands offers six
     packages. Each package has its own name, ranging in speeds from 256/128 Kbp/s to
     20Mb/1,024Kbp/s and varying in price between EUR 14.95 and EUR 79.95. Installation costs lie
     between EUR 39.95 and EUR 99.95, depending on whether the costumer completes the installation on
     his own. Data restrictions do not apply for these services.

                                                                                                            73 ,
     The report “Internet Access Costs Via a Standard Telephone Line, ADSL, and Cable Modem” (2004)
     on behalf of the Commission, compares prices for Internet access. It includes tariffs for Internet retail
     services in the EU and EEA collected from the individual operators as at 1 January 2004. Teligen used
     “baskets”, which are not based on an index but on “reference consumers”. They present prices per
     provider and then they provide a minimum, an average and a variation. However, they only report the
     “cheapest available option” for each provider. Packages contain a certain number of hours – this is
     done for off-peak hours as well as for peak hours. The three paragraphs below describe the research
     method of Teligen.

              “As specified by the Commission, the methodology […] prices has been designed to enable direct
              comparisons with the estimates of the Organisation for Economic Co-operation and Development
              (OECD) Secretariat, published in their biennial Communications Outlook […]”

              “In the analysis of ADSL and cable modem access services, the bandwidth issue makes it
              difficult to compile accurate direct comparisons between providers, as generally there is a wide
              range of bandwidths on offer. This study uses Teligen’s normalised bandwidth benchmark where


73 Produced by Teligen on behalf of the DG Information Society




Electricity                                                                                                        89
              a like-for-like comparison of cost per 1 Mbit/s of bandwidth can be found, using specifications
              provided by the Commission. This method, however, tends to favour higher bandwidth services,
              therefore a second set of data is also provided showing the lowest actual monthly price from each
              provider together with the bit rates for that offer. This way a more complete picture can be
              created from the available data”. “Results are reported in Euro, including VAT”.

     Following the advice of the European Commission (27-1-05), we decided not to perform a price
     analysis based on the comparison of normalised prices, i.e recalculating the prices to be equivalent to a
     1Mbps. Normalising is heavily biased making higher speeds appear much cheaper; hence
     normalisation of prices was avoided. The OECD has also abandoned this approach.

     In order to make price comparison feasible, we propose to build “reference consumer” tables as the
     one presented below. Secondary price variables such as a penalty for exceeding data limits will not be
     considered as they are not part of the basic service content. The tables below can be duplicated
     including and excluding special temporary discounts.




Electricity                                                                                                       90
Table 7.3: User profiles

                                                                 COUNTRY A

                                                                                               Monthly   1st month MONTHLY
                                                      Hardware     Installation Activation/c                                    MONTHLY
                                                                                                fee         free      PRICE 1st
                                                                                 onnection                                       PRICE
                                                                                                                       YEAR
                        Downloading ….GB per month, connection speed Economy (…-…. kbit/sec) , no schedule restrictions
      Service provider 1
      Service provider 2
      Service provider 3
      Service provider 4
      Service provider 5
      Service provider 6
                          Downloading ...GB per month, connection speed Basic (…-…. kbit/sec), no schedule restrictions
      Service provider 1
      Service provider 2
      Service provider 3
      Service provider 4
      Service provider 5
      Service provider 6
                          Downloading ...GB per month, connection speed Plus (…-…. kbit/sec), no schedule restrictions
      Service provider 1
      Service provider 2
      Service provider 3
      Service provider 4
      Service provider 5
      Service provider 6
                         Downloading ...GB per month, connenction speed Extra (…-…. kbit/sec), no schedule restrictions
      Service provider 1
      Service provider 2
      Service provider 3
      Service provider 4
      Service provider 5
                         Downloading ….GB per month, connection speed Economy (…-…. kbit/sec) , schedule restrictions
      Service provider 1
      Service provider 2
      Service provider 3
      Service provider 4
      Service provider 5
      Service provider 6
                           Downloading ...GB per month, connection speed Basic (…-…. kbit/sec), schedule restrictions
      Service provider 1
      Service provider 2
      Service provider 3
      Service provider 4
      Service provider 5
      Service provider 6
                            Downloading ...GB per month, connection speed Plus (…-…. kbit/sec), schedule restrictions
      Service provider 1
      Service provider 2
      Service provider 3
      Service provider 4
      Service provider 5
      Service provider 6
                           Downloading ...GB per month, connenction speed Extra (…-…. kbit/sec), schedule restrictions
      Service provider 1
      Service provider 2
      Service provider 3
      Service provider 4
      Service provider 5
      Service provider 5
      Service provider 6




Electricity                                                                                                                        91
 7.4.         Suggestions for the data collection methods to be considered

     Collecting actual prices “as paid by the consumer” can be done either by consumer surveys or by
     mystery shopping. Using the information published in the websites of the ISPs or directly surveying the
     ISPs implies the researchers would be collecting tariffs instead of actually billed prices.

     In spite of the fact that users of Internet connections should be well aware of the monthly charges they
     pay for the service, collecting the bills and analysing them is a very time consuming process.
     Furthermore the identification of the specific package characteristics could be problematic by only
     looking at the invoices. To identify and check the specifics of the package is again time consuming and
     costly. A solution to this problem would be to use an Internet panel, on which customers can fill out a
     questionnaire. An Internet panel has the advantage that it would directly target the right consumer
     group. However, the incentive given to respond could well be insufficient for some of the potential
     respondents. An Internet panel can select a fair sample with certain characteristics per consumer.

     Another option to collect actual information on actual prices would be for the researchers to subscribe
     to Internet connections. This method would first, be very costly and time-consuming and second, could
     possibly lead to a biased output – given the natural limitation in the number of observations due to
     budgetary and time constraints.

     We estimate collecting prices via a questionnaire to ISPs as a more pragmatic best approach. The
     “reference consumer” tables have to be built before contacting the service providers. The “reference
     consumer” tables needed may be available from Internet service providers – i.e. setting up an online
     questionnaire for Internet service providers and asking them to fill out the prices for several reference
     consumers - or could be acquired through online research bureaus. This method is common practice
     used by the Consumentenbond.

     This is also the approach of the Teligen report:

               “Teligen has collected tariff data from primary sources, i.e. directly from the telecom operators
              and Internet Service Providers. As a specialist in tariff information, Teligen maintains direct
              contacts with all the operators covered on a regular basis, using a unique network of personal
              contacts within the operators' organisations (liaison officers”).

     Some ISPs do not provide country-wide services which should be taken into account when making the
     target ISP list. Not all ISPs’ websites provide complete information across the 15 EU countries we have
     scanned. Websites from eastern European operators tend to provide less actualised and complete
     information. An alternative to look at ISPs’ own websites could be to search on the in Internet for
     comparison sites which contain all (or most) information on the different subscription types by Internet
     provider and improve the overall transparency of the market. However, these may be outdated and the
     reliability is unknown.




Electricity                                                                                                        92
     A major issue when collecting tariffs (versus actual prices) are the significant discounts given
     throughout the year (moreover considering that these offers usually attract a considerable number of
     consumers). On the other hand, discounts usually apply only for a couple of months, and these are
     applied in the expectation that a customer will subscribe for a certain period to an Internet provider.
     Notably a consumer subscribing to a service provider for a longer period will have a lower effective
     discount rate. Only new costumers benefit from the discounts given and only for a limited period of
     time. The questionnaires to the ISPs should therefore be designed to reflect the actual price paid by the
     reference consumer, with and without discounts. The ISPs would be reluctant to proportionate
     additional information on their actual number of costumers (with and without discounts) as this is
     sensitive information – although it would be very useful for the research to estimate the proportion of
     costumers with discounts compared to costumers paying the regular price as an indication for actual
     prices paid.

     In order to be able to compare prices between EU countries it is necessary to take similar packages as
     our point of reference. Countries or regions could be ranked according to bit rate variations.
     Geopolitical schemes may play a role in the price levels. Countries or regions with a low population
     density or a relatively lower amount of subscribers are likely to have higher distribution costs. A solution
     could be to look at the average bit rate speeds are available in a country and to classify these in three
     (or four) categories (economy, basic, plus and extra speed). The actual speed for each of the
     categories could differ across countries.




 7.5.         Dummy target tables

     It is not necessary to contact every single provider in the market to create the reference consumer
     tables. About 4-5 providers from each country will suffice. In many countries, a few 4/5 service
     providers have a combined share of more than 80% of the market. However, there are relatively many
     players in some countries such as in the UK and the Dutch market (10 or more). For these countries, it
     is more difficult to choose providers based on market shares since these market shares do not differ as
     sharply as in other countries. The questionnaire may be distributed via an Internet panel. In case there
     would be many profiles available, some of them should be merged as a large number of reference
     consumers will reduce the effective overview.

     The reference consumers will firstly be ranked according to bit rate speeds, up- and downstream.
     Subsequently we will look at the download behaviour of certain groups of customers (families with
     children, students, elderly, single persons, etc.). We will then create a table and record the prices
     charged depending on the characteristic usage of the reference consumer.




Electricity                                                                                                         93
Table 7.4: Dummy table A

                                                     A comparison of ADSL ISPs for some EU countries

                                                                                            Exceeding                                Direct MONTHLY
                                                                                                                                                      MONTHLY
                                                                       Hardware   Monthly download Package           Switching       debit  PRICE 1st
                                                                                                                                                       PRICE
                                                   Activation fee        cost      fee    limit penalty discount   contract cost   discount  YEAR
                                                                                                                                            (without extra (without extra
                                                                                                                                            cost or        cost or
                                  Downloading 1GB per month, connection speed Economy (512/128 kbit/sec)                                    discounts)     discounts)
Het Net, Netherlands                                € 35,11                  € 22,95     n.a.                        € 30,00       € 1,00
Scarlet, Belgium
Eircom, Ireland                                          € 100,00                 € 49,00                               ?          ?
Freeserve, UK
Tiscali, Germany                                                                                                                     ?
Telekom, Austria
                                   Downloading 1GB per month, connection speed Basic (2048/512 kbit/sec)
Het Net, Netherlands                                € 35,11                  € 32,95      n.a.                      € 30,00       € 1,00


Freeserve, UK                                                                     € 40,80                                           ?
Tiscali, Germany                                                                                                                     ?
Telekom, Austria                                    € 99,00                  € 49,00                                € 30,00         ?
                                   Downloading 30GB per month, connection speed Plus (4096/769 kbit/sec)
Het Net, Netherlands                                € 35,11                  € 49,95      n.a.                      € 30,00       € 1,00


Freeserve, UK                                            € 16,70                  € 55,73                                           ?
Tiscali, Germany                                                                                                                     ?
Telekom, Austria                                     € 99,00                  € 69,00                               € 30,00         ?
                                      Downloading 30GB per month, connection speed Extra (8192/1096)
Het Net, Netherlands                                 € 35,11                  € 69,95      n.a.                     € 30,00       € 1,00




* Exchange rate as 1/16/2006: GBP-EUR 1.4580. Source: Bloomberg




Electricity                                                                                                          94
 7.6.       Main conclusions

        - In many countries, a few 4/5 service providers have a combined share of more than 80% of the
          market. However, there are relatively many players in some countries such as in the UK and the
          Dutch market (10 or more). For these countries, it is more difficult to choose providers based on
          market shares since these market shares do not differ as sharply as in other countries. Market
            concentration differs across countries.

        - From a consumer’s perspective, the basic Internet connection services differentiate mainly on the
          speed of Internet access. Other sources of competition refer to the price of the modem - whether the
          modem is set up for free or the fee the consumer pays if this is not the case; the availability of free
          security measures such as anti-virus and anti-spam; and the number of free e-mail addresses and
          web space in Mbs. One main source of content differentiation across countries is expected to be
          related to the different development paces of the Internet technologies, which logically reflect on
          different price levels.

        - Internet access enables consumers to browse the worldwide web, send and receive e-mails, as well
            as using several other digital services. Thus, the basic service can be easily defined. However, as in
            many other of our short list services studied, the existence of packages and temporary promotions
            makes price comparison difficult. Consumers can only choose from pre-defined packages and
            cannot buy the content features separately.

        - The bill is known in advance at the time the subscription is made.

        - For some countries, including the 4 or 5 major ISPs will be representative of 80% of the market. For
          other countries, the number of ISPs needed for such a market share can raise up to 10.

        - Although the term "consumer profiles" has being used, these could actually be called "reference
          packages" as they refer more to package characteristics than to consumer characteristics. Actual
            consumer profiles or “reference consumer” tables may be available from Internet service providers
            (ISP’s) – i.e. setting up an online questionnaire for ISP’s and asking them to fill out the prices for
            several reference consumers.

        - Internet access is becoming more and more linked with other telecommunication and media services
          (double and triple play) where it is offered in a package with television and telephone services.
          These three services often enter the household through the same access point/cable making it easy
          for the service providers to bundle them.

        - Data on tariffs are available in all the ISPs' sites. Besides, the number of ISPs needed for the
            sample to be representative is limited and therefore, it is not too burdensome to contact them
            directly in order to get accurate and updated information.




Internet connection at home                                                                                          95
        - We estimate collecting prices via a questionnaire to ISPs as a more pragmatic best approach. The
          “reference consumer” tables have to be built before contacting the service providers for specific
          price information.




Internet connection at home                                                                                   96
8. Mobile phone calls (international) roaming included

 8.1.        Market, content and scope of the service in EU countries

    8.1.1. Exploring the content of the service in the EU

    The factual service that the consumer buys is, on the one hand, the possibility to make phone calls (or
    send text messages) through his or her cell phone and, on the other, the factual communication
    between places (the call or message he is charged for). In the European countries, these services are
    sold in pre-paid or in post-paid schemes. In pre-paid schemes, the consumer pays a certain amount of
    money and charges for the service used are deducted from this balance until it is finished. In post-paid
    schemes, the scheme is more like a subscription; the consumer agrees to pay a monthly amount of
    money for which he has the right to make a certain amount of calls and send messages. The call that
    the user is charged for may or may not be part of the scheme he bought (thus it may be debited to the
    scheme or charged on top of it). The normal way of subscription, where the consumer pays a monthly
    fee and use is charged separately and on top of that, was not found anymore in our scan of the EU
    consumer market.

    Pre-paid offers are rather straightforward in relation to costs for calling (and messages). Varieties on
    the market are making a choice between flat rate charging and peak and low hour charging. For this
    part of the study, we have looked at post-paid contracts because we had to make choices. The
    proposed method will not be different for pre-paid schemes and most likely it will be less complicated
    and with less variables. Post-paid schemes (or packages) are more complicated and interesting from a
    policy point of view because prices are less transparent and these contracts affect the larger portion of
    the EU consumers. Providers of the European market offer post-paid schemes in very different ways
    and with varying content; the one common characteristic is that the higher the use you agree upon in
    advance the lower the costs of use per unit are. Sometimes the more expensive contracts contain
    extra services.

    So we will first have to know the possible contents of the schemes and the various ways in which the
    schemes are offered. For this content check, we screened the offers of some 13 mobile telephony
    providers in 7 European countries for the basic services that they offer in their packages, such as:

    - domestic calls (mobile and landlines)

    - calls to other countries

    - calls while abroad

    - text messages (SMS) (domestic, outbound and abroad)

    - calls to free service numbers

    - operator’s customer services

    - voicemail

    - specified bills




Mobile phone calls                                                                                              97
    Data transmission and sending photos and services such as video and mobile internet are excluded
    from the scope of this service. The accompanying table presents the basic content of the service. See
    table 8.1.

    Table 8.1: Post paid package content (service component)

     Country                                AT      AT       AT      NL          NL    NL     NL             DE       UK     BE     GR        GR     ES
     Service provider                        3      T-      Tele   Orange       KPN    T-    Vodaf          Eplus   Vodafo Proxim Telestet/    Q    Amena
                                          (DREI)   Mobile   Ring                      Mobile one                      ne     us     Tim     Telecom
     Name of package                      3Deal    Relax    Mobil Free Mobiel €18,50            17,50   Time& Anytime Proxipro            120 &       Q1        Libre 18
                                           90 &    100 &    90 & 22.50 & 20 &   &                 &      More 20 & 40    &                 180                    & 30
                                           180      200     180   32,50   30  €26,50            27,50   100 &         Exprimo
                                                                                                         200
     free amount of money to use                                                                                                                       
     free minutes                                                                                                                              
     SMS national                                                                                                                          
     SMS international (outbound)                                                                                                            
     different tariff
     international calls (outbound)                                                                                                        
     roaming                                                                                                                               
     mailbox free (national)                                                                                                                        
     mailbox at normal calling costs                                                                                                            
     mailbox at divergent calling costs                                                                                                                           
     specified bill at extra cost                                                                                                                               
     low hours at discount                                                                                                                                       
     2 or 3 numbers at discount




    Most operators apply a minimal contract duration and various lengths of contract renewal. Differences
    in contract duration may have an impact on the price of the telephony package as such (in any case in
    the Netherlands). When contracts are renewed, rebates are given that are higher when the contract
    period agreed upon is longer. For the scope of this study, we will ignore this fact and classify it as
    temporal promotions.




    8.1.2. Defining the scope of the service for the international price comparison

    Packages (pre-paid or post-paid) are most common in the EU. In this scan, we did not find any
    providers that offer mobile services against a normal subscription and bill on a use-of-service basis (call
    by call). Where we did encounter call by call subscription schemes, we left them out for reasons of
    comparison of data.

    For frequent travellers there are possibilities to use the services of specialized providers that offer
    roaming cards. Travellers may also consider buying the service of a local mobile operator when abroad.
    For this report we have considered this a different service and thus we have excluded it from the scope
    of this service. For one, these services are not offered by the consumers’ own provider, but mainly by
    MVNOs and this possibility does not allow for keeping your own telephone number.

    For this study we have assumed equal network quality for all providers. So we ignore differences in
    coverage or in network quality for our price comparison. For our price study we have assume these
    service quality parameters equal over all countries and for all providers. Where relevant, however, we
    will report these quality aspects.




Mobile phone calls                                                                                                                                         98
    In the pre-paid schemes, the price for the various service components can be rather easily isolated. All
    individual service costs (the price for each call made or each text message sent) are debited to the pre-
    paid card until its balance is (almost) zero. In some pre-paid schemes, calling from abroad is impossible
    or limited to selected countries. Some schemes offer the possibility of an automatic recharge, against
    lower calling costs. Roaming (the use of a foreign network while abroad) connected to pre-paid
    schemes is offered by most of the European operators. But there are some restrictions compared to
    subscriber schemes: sometimes, an activation is needed (with or without costs). In most instances, the
    number of countries from which roaming is possible is smaller for pre-paid schemes. Some operators
    only offer “call back roaming”.




    8.1.3. The market of the service

    The mobile telephony market has evolved very fast during the past ten years, and has become a more
    or less mature market in most of the European countries.

    Some figures from the GSM Europe organization:

    - 143 operators in 50 countries/areas in Europe

    - from 0 to 454 million subscribers in Europe in ten years

    - 2-5 competing mobile operators in every country

    - 84% Average Market Penetration in Western Europe

    - Average Market Growth in 2001-2002: 36%, or 102 million new customers

    (Source: EMC World Cellular Database)


    There are 60 mobile operators in the 15 EU countries, 66 when we add the Channel Islands, the Isle of
    Man, Gibraltar and Monaco. Apart from that, we know of some 200 Mobile Virtual Network Operators
    (MVNO) at this moment. MVNOs are service providers that buy capacity from the network operators
    and operate as resellers of mobile services, often at reduced prices. Examples are Debitel, Tele2, but
    also Virgin and Ryan Air, and supermarkets such as Albert Heijn and Tesco.

    Some operators, like Vodafone or T-Mobile, are active in most, or a large part of the EU countries.
    Others operate in one or two countries only. For the consumer, however, the market is restricted by
    national boundaries. In all countries, the market seems highly competitive, characterized by a very high
    level of promotional offers. This blurs a clear view of prices.

     In the new Member States, there are 26 mobile operators. We did not look for MVNOs.




Mobile phone calls                                                                                              99
 8.2.        Inventory list of price components of the service

    On the pricelists, published by (a selection of) operators on the internet, we have found the variables as
    presented in the accompanying table. For this table we looked at private (non-business) users only, so
    contracts with a “business” name in one way or another were not screened. This first table presents the
    components for national calls. In the post-paid (contract) schemes, the price per package depends on
    the volume of minutes and/or text messages you agree upon beforehand. Prices per call depend on the
    package you buy, on the minute price, the length of the ticks, start fee, the length of the call, etc. The
    monthly bill depends on what costs you are charged for on top of your bundle, i.e. the monthly bill at
    least contains the agreed upon monthly payment, but on top of that, it could contain extra costs for
    roaming or more use than agreed upon. The table lists data from 13 operators in 7 countries.

    Table 8.2.1: Price composing factors for two price-volume comparable (post-paid) contract packages

                                    Country                                 AT        AT          AT       NL          NL     NL          NL
                                Service provider                         3 (DREI)   T-Mobile   TeleRing  Orange       KPN   T-Mobile   Vodafone
    entrance fee                                                                                                                 
    monthly payment                                                                                                              
    outside bundle different prices                                                                                       
    weekend minutes on top (at discount)
    monthly fee for exact ticking                                                              
    packages for special groups (students)
    packages for selected consumer profiles                                                                              
    minimum monthly use                                                                        
    promotional offers (e.g. free minutes for new subscribers/clients)                                                           
    extra costs for roaming                                                                   
    unused balance kept unlimited                                                                       
    unused balance lost end of next month                                                                                  
    Extra services on top of package that may be brought
    addiotnal text packages at discount                                                                                           
    additional calling at discount                                                                                                    
    additonal cheap numbers at discount                                                                                                




Mobile phone calls                                                                                                                           100
    Table 8.2.2: Price composing factors concerning call

                                        Country                                  AT        AT          AT        NL      NL     NL         NL
    Service provider                                                          3 (DREI)   T-Mobile   TeleRing   Orange   KPN   T-Mobile   Vodafone
    strat-up tariff                                                                                                            
    per minute tariff                                                                                                                 
    peak/low hours                                                                                                                        
    weekday/weekend                                                                                                                       
    national/international                                                                                                             
    to own mobile network [1]                                                                                                            
    to other mobile net                                                                                                                  
    to fixed net                                                                                                                         
    flat rate scheme                                                                                                                  
    decreasing minute price for long calls
    stepwise decreasing minute price
    special tariffs for (1 or 2) frequent numbers
    fixed tariffs (price/volume decomposition)
    free minutes                                                                                                             
    free text messages
    different minute priceoutside bundle                                                                                
    1/1 tick (3)                                                                                                                         
    60/30 sec ticks (2)                                                                                
    60/1 ticks                                                                                                          
    60/60 tick (in weekend)
    60/10 tick
    30 seconds tick
    30/1 tick                                                                                     

    (1) free to own net: T-Mobile AT: max 1000 min/month, Drei AT unlimited
    (2) T-mobile prepaid
    (3) KPN NL Prepaid



    For roaming (using one’s mobile phone from abroad) we made a separate table, because components
    differ from those of national calling. Price per call depends on: your own operator, your scheme, your
    location and destination, the network you choose, and the way in which the specific foreign operator
    calculates the costs of your call.




Mobile phone calls                                                                                                                              101
    Table 8.2.3: Roaming service/price/cost specification factors

         Country                                           AT       AT         AT          NL         UK       DE        NL        NL        BE
    Service provider                                      DREI   T-Mobile   Tele.ring   Vodafone   Vodafone   EPlus   T-Mobile   Orange   Proximus
    Incoming call while abroad through
    preferred network                                                                                                                    
            within W-Europe 3) 6)                                                                                                      
            in W-Europe to rest of world                                                                                                 
    other network                                                                                                                        
            within W-Europe 3) 6)                                                                                                        
            in W-Europe to rest of world                                                                                                 
    special roaming contract 1)2)                                                                                                         
    fixed tariffs irrespective of network                                                                                               
    foreign network tariffs                                                   
    Outgoing call while abroad through
    preferred network                                                                                                                   
            within W-Europe 3) 6)                                                                                                      
            in W-Europe to rest of world                                                                                                 
    other network                                                                                                                        
            within W-Europe 3) 6)                                                                                                        
            in W-Europe to rest of world                                                                                                
    special roaming contract 1)2)                                                                                                         
    fixed tariffs                                                                                                                      
    foreign network tariffs                                                                                  
    flat rate dependant of zone 5) 7)                                                                                                   
    call-back roaming                                                                                         
    activation payment                                                         
    25 % roaming surcharge for some countries                                                                
    Ticking in seconds first minute/next min                                                          ?         ?                            ?
    30/30
    60/1                                                                                   
    60/30                                                                                                                       
    60/60 (B,NL)                                           
    60/15 (F)                                              
    60/1 (NL Orange)                                       
    start up tariff                                                                       
    low evening weekend tariff                             
    low hours 20.00-8.00 (B, F)                            
    low hours 21.00-7.00 (NL)                              

    tariff zones                                           F        G          H           A          D         E        B         C         A
    Notes
    1) Available in 17 countries, incl. 14 European.
    2) intern. Call saver 2,50 pd per month in UK
    3) At DREI w-eu plus vs & Canada
    4) AT t-mob in ca 30 countries, otherwise call-back
    5) AT t-mobile for incoming calls 4 zones
    6) Special holiday tariff at Eplus (3 months)
    7) Eplus in 27 countries




 8.3.           Inventory of price composition and user profiles

    Some operators offer all services in the package for free, up to a contracted volume. Others only offer
    national calling and sending text messages in the contracted volume or charge for services separately.
    Some operators deploy the same rate inside and outside the contracted volume. This means that there
    are two ways to look at the mobile service. On the one hand, the price of the service package depends
    on the volume (e.g. calls) and the other services available to the customer who is buying the package.
    On the other, the actual volume you can use depends on the way in which the individual services are
    priced and debited to your post-paid package. The monthly bill depends on the contracted scheme,
    plus the way extra use of services above the contracted volume is priced and what is done with the
    unused balance (money, left over minutes or SMS) at the end of the month.




Mobile phone calls                                                                                                                               102
    In the post-paid, or subscription schemes, isolating the price for individual services that make up the
    package is more complicated. Mostly an amount per month is paid, which may consist of a number of
    calling minutes and a number of text messages, or a balance from which the costs are deducted. There
    are differences between operators as to what services a package contains and what services the
    consumer is charged for extra. Some operators debit all costs to the balance, other operators debit
    local calls and SMS only. All other costs, like calls to and from abroad, are charged in addition to the
    monthly payment. Some operators allow the balance remaining at the end of the month to be
    transferred to the following month, whereas other operators do not, so that any remaining balance is
    lost at the end of the month. Some operators charge you the same costs for individual services when
    your balance is finished, other operators charge higher costs when your balance is exceeded. Some
    operators offer the possibility to buy a number of SMSs at a reduced price, others offer the possibility to
    earmark a given part of the monthly balance for SMS. Sometimes the possibility is offered to buy an
    extra service on top of your monthly amount, which rebates calling abroad. Most operators, but not all,
    offer the possibility to use partner networks abroad, at a lower rate.

    For national calls, we can look at the service on a call-by-call basis (or message-by-message basis).
    But bearing in mind that small users normally pay higher unit tariffs, in the end we will have to make a
    choice as to which schemes or packages to compare. We can also look at the various packages that
    are on the market, pick out the more or less corresponding ones and make clear what you get when
    buying such packages. After our scan of the various offers on the market, we decided for this last
    approach, because in most countries the various packages (or contracts) on the market turned out to
    be more or less similar, at least as to the price for the various packages and/or the volumes (minutes,
    messages) of the packages on the market.

    User demand in the European countries may or may not be the same in the countries that are included
    in our study. And, therefore, we expect that the packages that are on the market in the various
    countries do not always match. For example, the number of minutes or SMSs for an Italian “heavy” user
    might be a fraction of the number of the German medium user.

    For this study, however, we do not use user profiles, because we are not interested in whether an
    Italian medium user pays the same price as a German medium user, but we want to know about what
    price consumers have to pay for comparable packages in the European countries. Or the other way
    around: whether the content of packages that cost more or less the same is comparable.

    We have chosen from the special offers of the mobile operators in the EU countries packages that
    contain ca. 100 minutes of calls per month and 200 minutes. If you get less content in one country for a
    package that costs the same in another country, there is a clear price difference. For these quantities,
    we based ourselves on the OECD baskets for digital mobile services, as provided by Teligen in the
    August 2004 T-Basket (DG INFSO Telecoms Price Development Teligen, HI Europe 2004).

    Medium usage basket with:

    -    75 outgoing calls per month + 35 SMS messages

    -    36% of calls are to fixed line phones, 64% to mobile phones




Mobile phone calls                                                                                                103
    High usage basket with:

    -       150 outgoing calls per month + 42 SMS messages

    -       40% of calls are to fixed line phones, 60% to mobile phones

    The situation of international calls seems somewhat simpler. Most operators charge the costs of
    roaming separately. For international calls, we have considered the roaming service in this study.
    Roaming: using your phone on the network of a foreign operator while abroad. At first sight, this service
    seems much simpler because it can be easily defined as a phone call from A to B with a given duration,
    where A is not the home country of the callers’ operator. From the collected data, the price of this
    service can be (easily) calculated: minutes times price per minute plus a start-up fees make up the
    price of this service, when the location of the caller, the destination and time of the day are known. We
    ignore international calls from home, because this is not considered roaming. (Roaming is by definition
    the use of a foreign network while abroad).The table in the former paragraph, however, shows that
    there will be an enormous number of possibilities. But still it seems a realistic proposition to define a
    number of connections that make it possible to compare roaming costs of the various operators for
    given phone calls that may be assumed more or less comparable.




 8.4.         Suggestions for the data collection methods to be considered

    As the number of mobile operators that provide mobile services in the EU countries does not exceed
    100 and the number of virtual network operators is about 200, a sample does not seem necessary.
    (See the annexed table with European operators). They can all be contacted personally. Data collection
    can therefore be simple and straightforward. We suggest two methods of data collection. The first one
    sending a questionnaire to all mobile operators and mobile service providers in a pre-designed lay out.
    The other one could be desk research on the internet accompanied by verification with providers and/or
    ECC’s. The format for this questionnaire will be the same as the dummy target tables, where the
    services will be clearly defined. This way the service for all providers can be brought under a common
    denominator and prices may be compared, as we have suggested in the table of section 8.1 of this
    chapter.

    Data collection by local research institutions is strongly advised, not only to avoid translation problems,
    but also, more importantly, because local organisations know their home market and market analysis
    may be less time-consuming and less costly. A central body, however, should lead this operation.

    The providers of mobile services may be periodically contacted with this (paper) questionnaire, but an
    Excel based format or a web based format is also possible. The data collected in this manner will be
    used to fill the dummy target table we have presented in the next section.

    Depending on the frequency of data collection, we need the following price data on every update:

        -     Raw data: Package or bundle prices and data on the tariffs of the service that are in the bundle,
              and data on the tariffs and services that are charged on top of that.




Mobile phone calls                                                                                                104
      -      Information and knowledge about the price composition of a specific service, or the way the
            consumers’ use is charged from his bundle balance, and what is done with remaining balance at
            the end of the period.

    Intermediate data are also needed on every update:

      -      Definitions of standardized services, which means that all packages on the market have to be
            analyzed to find the ones that may be compared between all or most countries.

      -      Definitions of consumer profiles (reference costumers) are not necessary when we compare
            package prices. This profile is needed if we want to know what a reference consumer is paying in
            various countries.

      -      Calculated prices of (complex) services in the roaming case, when a typical connection is
            defined.

      Data that are less corrupted and may be updated less frequent are:

      -      Datasets from questionnaire researches

      -     Datasets from representative consumer surveys. Development in per capita use, development in
            new techniques or new kind of usage of mobile phones.

      -      Market information

             -       Aggregated data on market shares, sales, etc.

             -       Lists of suppliers, selling locations

    Another possibility is the use of data collected by others. Teligen collects data on mobile telephony
    prices for the European Commission, Directorate General for Information Society on a regular basis.
    See the October 2004 report on telecoms price developments 1998 to 2004, which contains data on the
    costs of calling for the European countries according to given profiles/baskets. Although Teligen
    presents averages and PPPs we suppose they are based on raw price data. A drawback is that the
    reference date of the collected prices is not the same.

    On a periodical basis, an updated general market research is needed to make corrections for changing
    circumstances on the market, changing consumer habits and changing service content. Aim of this
    research is to adjust formulas in the dummy target table to changing consumer habits and to change
    variables in the same table, changing service offerings by providers. Complicating factor with roaming
    is that the pre-calculated price from the price list will not always lead to the costs charged for (see in
    Consumentengids, July 2002. In some cases, the billed phone call costs did not match with the costs
    calculated on the basis of the tariffs. Some customers were not charged at all). The only way to find the
    real costs for a phone call when roaming is through calling and checking the bill. But for the time being
    a cost calculation on the basis of tariff lists from the operators for a standardized phone call will be the
    most efficient way to compare prices.




Mobile phone calls                                                                                                 105
 8.5.        Dummy target tables

    When we studied mobile phone calls in-depth in a pilot, we have proceeded as follows. We collected
    data from all operators on 2 comparable post paid packages/schemes (which led to 60 times 2
    columns). For the purpose of price comparison between packages, we have calculated a price per
    standard volume based on a fixed combination of calling and sending text messages and for a fixed call
    pattern throughout the day and the week, an average call duration and pre-chosen destinations.
    Further, we give a formula that leads to a price per standard unit.

    The aforementioned Teligen report (DG INFSO Telecoms, Price Development Teligen, HI Europe
    2004) shows that a medium usage pattern consists of 75 phone calls of 2.5 minutes and 35 text
    messages per month. So with every minute of calling the consumer uses 0.187 text messages. We
    may define this as the standard unit.

    Orange Holland charges its consumers 20 cents per minute and 22 cents per SMS (in the EUR 22,50
    scheme). One standard unit therefore costs 24.11 cents, and the scheme contains 93 units.

    Telering Austria offers 90 free minutes of calling for EUR 25,00. Messages are charged in addition to
    that, for 12 cents a piece. One unit costs 27.8 cents per minute plus 2.24 cents for 0.187 SMS, which
    totals 30.04 cents.

    This example can be elaborated for peak hours and low hours, for different costs to different networks,
    for calling to other countries, etc. When dealing with a start-up fee, we will have to start with the call as
    a standard unit.

    The dummy target table will be the same as table 8.2.2., where the cells contain the exact tariffs per
    specifically selected package of the operator.

    In the roaming case we will work this out in depth in a separate study, where three or four dummy
    target tables are presented for three or four comparable calls made outside the network of the
    consumer’s own operator. Each table will give a different kind of call, e.g. from abroad to home, from
    America to home, from abroad to abroad within Europe, etc. The number of variables is higher,
    because more variables influence the price of a call. The formula that presents the way the variables
    are connected will lead to a price per call.

    In both cases we can find user profiles in studies that may be undertaken by Consumentenbond on the
    use of the (mobile) phone. Other profiles or baskets are presented by OECD (OECD
    telecommunications basket definition, Teligen October 2004). Local operators may also be willing to
    provide us with useful figures (composition of turnover).




Mobile phone calls                                                                                                  106
    Table 8.3: Dummy target table

                                        Country     AT   BE   CY   CZ   DE   DK   EE
    Service provider
    strat-up tariff
    per minute tariff
    peak/low hours
    weekday/weekend
    national/international
    to own mobile network [1]
    to other mobile net
    to fixed net
    flat rate scheme
    decreasing minute price for long calls
    stepwise decreasing minute price
    special tariffs for (1 or 2) frequent numbers
    fixed tariffs (price/volume decomposition)
    free minutes
    free text messages
    different minute priceoutside bundle
    1/1 tick (3)
    60/30 sec ticks (2)
    60/1 ticks
    60/60 tick (in weekend)
    60/10 tick
    30 seconds tick




Mobile phone calls                                                                     107
    Annex Section 8: Mobile operators on the European market (www.gsmworld.com)




Mobile phone calls                                                                108
Mobile phone calls   109
Mobile phone calls   110
Mobile phone calls   111
 8.6.        Main conclusions

         - Prices per call depend on the package you buy, on the minute price, the length of the ticks, start fee,
           the length of the call. Monthly bill depends on what costs you are charged for on top of your bundle
           and on actual use.

         - There are 60 mobile operators in the 15 EU countries and some 200 Mobile Virtual Network
            Operators.

         - The mobile market is highly competitive and it is characterised by a very high level of promotional
           offers.

         - The number of service variants is large. (The number of service variants (differentiation) for roaming
           is very low. For roaming, the service can be easily defined as simple. From the collected data, prices
           can be calculated through a formula for any connection).

         - The service can be analysed on a call-by-call basis, or looking at the various packages that are on
           the market and selecting the most comparable ones. In the last case, the use of user profiles is not
           necessary.

         - Service offers are often combined with the provision of free handsets. (For roaming, the (price of)
           service does not depend on other goods).

         - A price per standard volume of use may be calculated. Once the service is defined, the costs can be
           easily calculated (ex ante bill predictability)

         - A full sample coverage including all existing mobile operators does not seem necessary. (For
           roaming, full market coverage of service providers is feasible).

         - Data are practically completely available through providers’ websites. We suggest two methods of
           data collection. The first one sending a questionnaire to all mobile operators and mobile service
           providers in a pre-designed layout. The other conducting desk research on the internet accompanied
            by ex post verification with the mobile operators.

         - In the pilot that was carried out for roaming:

             -       In the first round of data gathering through the internet the method turned out to be
                     straightforward and working very well, after a first short test run. (This is always advised).
                     Runtime can be very short, which is preferred in a market where things are changing fast.
                     Actual data collection time can be a couple of days. Costs can be kept low.

             -       The second round of data gathering through a questionnaire sent directly to the local
                     headquarters turned out to work very well, but runtime is longer than in the first method.
                     Response rates make reminders necessary and the response rate after 4 weeks was still not
                     100%.




Mobile phone calls                                                                                                    112
         - Data collection by local research institutions is strongly advised with a central coordinating body.
           Centralization of data collection in the specific pilot research roaming was also the most appropriate.
           But in the pilot carried out, information was ready at hand. It was an advantage for the researchers
           to be able to compare directly during the research, results for instance for similar providers in
           different countries. This made it possible to notice and check unexpected differences.




Mobile phone calls                                                                                                   113
9.         Personal loan

      9.1.       Market, content and scope of the service

         9.1.1. Exploring the content of the service in the EU

         For consumers, there are various ways of borrowing money, such as credit cards, (unsecured) personal
         loans, store cards, overdraft facilities on bank accounts, hire purchases, secured loans, mortgages and
                                                                                                            74
         even buying goods on credit from catalogues. In this study, we will not look at the borrowing tool of
         credit cards. We realize that there are many other types of consumer credit. There is one type which
         has a variable (or floating) interest rate and an indefinite term, namely the credit card. On a monthly
         basis, a fixed interest percentage and redemption costs are paid. Another type is the credit line, which
         also has a variable interest rate and no fixed term. We will also consider the hire purchase system as a
         different kind of service and take a closer look at personal loans. The main characteristics of personal
         loans are a fixed interest rate and a fixed term.

         An unsecured personal loan is a lump sum that you usually borrow from your local bank or another
         bank, an insurance company, or the shop where you buy an expensive item, such as a car or a
         washing machine. For personal loans, you agree to redeem the loan over a fixed number of months or
         years (“the term”) by making fixed monthly payments. Terms vary from 6 months until 10 or even 20
         years. Sometimes terms are linked to the amount of money you borrow.

         In some countries (e.g. the Netherlands) loans are sometimes linked with life insurance. The cost of the
                                                                                      75
         life insurance (the premium) is mostly included in the interest rate you pay . If you should die before
         the end of the term, your relatives will not be liable to redeem the loan. As these kinds of insurance are
         expensive, banks in most countries (BE, SP, UK) prefer to offer this service optionally.

         A fixed interest rate is paid over the amount borrowed. All interest charges over the entire term of the
         loan plus the repayments of the amount borrowed (the redemptions) are added up together and then
         divided into equal monthly payments (as an annuity).

         Personal loans can be redeemed before the end of their term. This often involves paying a sum which
         equals the part of the interest that would have been paid had the loan lasted its full term. Sometimes a
         penalty – early repayment charge – has to be paid when a loan is redeemed before the end of its term.




     74 For instance, cards are a tool by means of which you can have several types of credit (with a credit card, you can have an overdraft facility, a

        revolving credit or a simple amount which is to be redeemed in fixed payments). But you can also obtain an overdraft facility when opening a bank

        account, whereas you can use the card without having access to a "credit" opportunity (you simply remain in black figures on your bank account).



     75 The premium of a life insurance depends on your sex and age. For personal loans, providers seem to cross-subsidise their products. The interest

        rate you pay for a personal loan is not linked to your age or sex.




     Personal loan                                                                                                                                          114
    It is important (and for some consumers rather difficult) to choose the term of personal loans that are
    smaller than or equal to the useful lives of the goods that the loan has been taken out for.

    The service is the same for all EU countries: an amount of money is borrowed. Basically, consumers
    have to make a choice about:

    -     the amount;

    -     the term;

    -     with or without a life insurance (if relevant);

    -     the method of payment: monthly, yearly (if relevant).

    This list of variables can be seen as “contents of the service” and enables making (price) comparisons
    between countries.

    We have studied services in Austria, Germany, the United Kingdom, Belgium, the Netherlands and
    Luxembourg. We have quick-scanned the situation in Sweden, Poland, Spain, the Czech Republic and
    Italy. We have used existing reports as well as information from the internet.

    9.1.2. Defining the scope of the service for the international price-comparison

    The service in it self is simple and straightforward. We advise collecting prices for the service with the
    basis components:

    -     the amount;

    -     the term;

    -     without the (optional) life insurance;

    -     monthly payments.

    We expect that the international comparison will be relevant and feasible, even over time.

    9.1.3. The market of the service

    European and national law

    Information on community law in Europe in relation to consumer credits can be found on the website of
    the European Union (http://europa.eu.int/). Relevant is the fact that there is a Consumer Credit
                76
    Directive . The existing Consumer Credit Directive adopted in 1987 aims to create an environment
    where consumers are sufficiently protected throughout the EU, so that they can carry out cross-border
    transactions with confidence. This Directive was amended in 1990 and 1998. It is based on minimum
    harmonisation, which means that Member States are obliged to implement at least the provisions
    contained in the Directive.


76 See http://europa.eu.int/comm/consumers/cons_int/fina_serv/cons_directive/cons_cred1a_nl.pdf




Personal loan                                                                                                    115
    Since the original Directive was passed in 1987, the consumer credit market has changed significantly
    and consumer credits have developed dramatically, both in terms of economic importance and in terms
    of instruments. There is also evidence that more needs to be done to encourage the provision of
    consumer credits across national borders. The Commission therefore issued a discussion paper on the
    basis of which hearings took place to listen to the opinions of stakeholders, in the summer of 2001. On
    11 September 2002 the Commission adopted a proposal for a Directive of the Parliament and of the
    Council on the harmonisation of laws, regulations and administrative provisions of the Member States
    regarding credits for consumers. On 28 October 2004, following the European Parliament’s first reading
    opinion; the Commission adopted its modified proposal. And that was all. An updated Consumer Credit
    Directive is still “under construction” (and there is no Code like the Mortgage Code).

                                                                                                    77
    The individual EU countries have laid down in their respective national laws                         minimum requirements
    for personal loans, based on and in addition to the EU requirements.

    The European personal loan market

                                                     78
    The World Retail Banking Report 2005 gives insight into retail banking. Some relevant quotes are:

    Table 9.1 Quotes World Banking Report 2005

           The Netherlands                  The market share of the 5 largest banking groups is more than 82%.


           Spain                            Over 60% of the total retail banking is shared by 15 groups.


           Sweden                           More than 80% of total banking is shared between 4 major Swedish banking
                                            groups.


           Czech Republic                   Foreign banks own 90% of the market.

                                            Four major banking groups dominate the Czech retail banking market, all
                                            owned by foreigners.


           Germany                          More than 85% of total retail banking is shared between 7 groups.


           Belgium                          The top 4 cover about 80% of the market via own main brand of 2nd network
                                            with distinct commercial policies.


           Austria                          More than 80% of the retail banking market is shared by 6 banks (incl. 3
                                            sectors like cooperative).


           United Kingdom                   Over 85% of the retail banking market share is held by UK’s largest 5 banks.




77 E.g. The Netherlands: Wet Consumentenkrediet, Germany: Gesetz uber das Kreditwesen



78 See Capgemini, ING and the European Financial Management & Marketing Association (2005). Figures mostly based on 2003.




Personal loan                                                                                                                   116
    The retail banking market in each of the countries seems to be dominated by a small number of groups.
    Obviously these groups have access to the market, also for consumer credit. But we see that there are
    niche players specialised in loans and that they are getting market share all over Europe. One of the
    reasons is the internet. Customers seem to be able to choose between a wide variety of channels.
    Providers of personal loans all use the same method for calculating tariff factors.

    Both (European and national) Central Banks and Statistical Offices do not keep information on the price
    for personal loans. They only collect – mostly on an aggregate level – items like the number of
    transactions, the amounts outstanding, the number of contracts, etc.




 9.2.       Inventory list of price components of the service

    The price of a personal loan is the interest rate you pay. What you pay for a personal loan can be
    expressed as an 'Annual Percentage Rate' (APR) or 'Annual Percentage Rate of Charge' (which is the
    same). It is the percentage rate your loan will cost you each year, including all charges. The APR
    includes all costs known to the lender at the time of proposing the loan, giving the consumer a fair
    picture of what would be the impact of the loan on his financial situation. An APR takes into account:

    -     the interest you have to pay;

    -     any other charges you have to pay – for example, arrangement fees or the cost of paying
          insurance; and

    -     when and how often you pay the interest and charges.

    The important thing is that APRs show the cost of borrowing on a standard basis so you can compare
    one APR with another. An APR also enables you to compare the cost of personal loans with other
    types of borrowing. A loan with a lower APR is cheaper than a loan with a higher APR. An APR does
    not take into account any charges you may have to pay, such as an early repayment charge if you pay
    off the loan before the end of its term.

    Some loans are restricted to particular uses – for example, home improvements. If you are not an
    existing banking customer, you may be required to open a current account with the lender. Some
    personal loans are secured, usually against your home. This means that, if you do not keep up the
    payments, the lender can sell your home to recover the loan. Most personal loans are unsecured. If you
                                                                    79
    do not keep up the payments the lender can take you to court . It is usually hard to borrow elsewhere if
    there is a county court judgement against the customer. In general, lenders have little interest in going
    to court and prefer other tools, such as re-negotiating the terms and conditions.




79 The court will probably order you to pay off the loan, perhaps in smaller monthly amounts spread over a longer period or may grant the lender

   permission to seize and sell some of your possessions to recover the loan.




Personal loan                                                                                                                                      117
                                                                                                                        80
    Some innovative providers offer a three month payment break every 12 months

    Optional is the payment protection insurance (“Loan payment protection”). This (partly) pays your
    monthly payments for you if you are unable to work because of illness or unemployment. This
    insurance is quite expensive and not included in the APR.

    In some countries the provider of the loan has to check your credibility at a credit facilitator (e.g.
                                             81
    Germany, Belgium and the Netherlands) . The provider can also check your income in relation to your
    expenditures. The provider may then decide to refuse your application. Other countries do not have this
                                                                                                    82
    kind of organisation (e.g. United Kingdom), but their providers make use of “credit scoring . When you
    apply for a current account, credit card, personal loan or any other type of credit, it is likely that the
    lender will 'credit score' your application. This will help the lender to decide whether or not to accept
    your application and, where relevant, to help set your maximum credit limit.

    A personal loan is easy to get and mostly cheaper on the internet. Another advantage of the internet is
    the existence of sites where various loans are compared.

     Price-related variables and their relationship

                                                                                                                                               83
    Below, we provide a list of the primary and secondary price-related variables for personal loans .




80 www.egg.co.uk



81 Organisations whose aim it is to prevent over-indebtedness; in Germany SCHUFA (which stands for “Schutzgemeinschaft für allgemeine

   Kreditsicherung” - www.schufa.de), in Belgium “Centrale voor Kredieten aan Particulieren “ (www.bnb.be) of the National Bank in Belgium or in The

   Netherlands: BKR “Bureau Krediet Registratie” (www.bkr.nl).



82 Credit scoring works by awarding 'points' on the basis of your answers to the questions on the application form. The questions are designed to help

   the lender to assess your creditworthiness. In other words, it tries to predict how big a risk it is taking by allowing you to borrow up to a certain limit.

   If your total score reaches a certain level, then you 'pass' the credit score. If you fail to score enough points, the lender may: turn down your

   application; or offer to lend you a smaller amount than you were hoping for; or charge you a higher interest rate. There are three main credit

   reference agencies in the UK - Callcredit, Equifax and Experian.



83 The optional life insurance and payment protection insurance are excluded in the personal loan because of the fact that most personal loans are

   unsecured. We focus on this variant.




Personal loan                                                                                                                                                     118
    Table 9.2 : Price-related variables for personal loans




           Primary                                           Secondary

           Term (initial duration of the contract)          - (i) Credit score, (ii) Credibility check and/or (iii)
                                                              Income in relation to expenditures (including
                                                              payments for other loans)


           Amount of money you borrow                       - Early repayment charge


                                                            - Payment break (payment holiday months)


                                                            - Secured or unsecured loan


                                                            - Minimum and maximum amount


                                                            - Maximum age at start and maximum age at end of
                                                              the contract


                                                            - The method of payments: monthly, yearly (if
                                                              possible).


                                                            - Including or excluding life insurance (remission of
                                                              remainder of the loan in case of death) and/or
                                                              payment protection insurance.


    The relation between the major price-related variables is:

                                            “Price” = function (“term”, “amount”)


    Where “price” is APR. The best criterion for comparison is the APR. The monthly payment is derived
    from this APR.

    An example:

         Amount                                                 EUR 4,000


         Term (months)                                          60


         APR                                                    10.94% (0.87% per month)


         Monthly payment (redemption + interest)                € 85.83




Personal loan                                                                                                         119
    Graphically:


                                  100

                                    80
                                                                                                                    redemption
                                    60
                                                                                                                    interest
                                    40

                                    20                                                                              redemption
                                                                                                                    + intrest
                                     0
                                         0                 20                  40                  60


                                                84
    The monthly payment (€ 85.83) is fixed for a period of 5 years. In total, you pay back: EUR 4,000
    redemption plus EUR 1,149.80 for interest, which makes a total of EUR 5,149.80.

    We have constructed this list of major and minor price-related variables based on our experience in
    researching personal loans and on a quick-scan in a number of EU Member States. We have come to
    the conclusion that there are no differences in the major price-related variables between countries.
    There are in fact some small differences on the minor variables between countries, but also between
    providers in one country. For example, in a quick-scan the “payment break” was found in one country
    (UK) and just at one provider (www.egg.co.uk). In all countries, some of the providers impose a penalty
    at early repayment, and others do not. The same applies for a remission of the remainder of the debt in
    case of death.




 9.3.       Inventory of price-composition of the service

    As shown in chapter 1.2 there are 2 major price-related variables. The minor variables may influence
    the price, but will not always do so. It will mostly depend on the provider’s policy on whether a kind of
    risk premium is added e.g. for having other debts or not having a steady job. Additional insurances will
    certainly have an impact on the price.

    For the goal of this study, various user profiles are not required. The price of a personal loan does not
    depend much on someone’s personal situation. It is rather an arbitrary choice, but for the purpose of


84 In Microsoft Excel everyone can calculate his monthly payment by using a financial function PMT. It calculates the payment for a loan based on

   constant payments and a constant interest rate. The syntax is: PMT (rate, nper, pv, fv, type), where “Rate” is the interest rate for the loan, “Nper” is

   the total number of payments for the loan and “Pv” is the present value, or the total amount that a series of future payments is worth now; also

   known as the principal. NB: the rate has to be a monthly rate, calculated as -1+ (1+ rate p. year in %) ^ (1/12). See Annex for a matrix of monthly

   payments for various terms and APRs.




Personal loan                                                                                                                                                 120
    comparison we take a person who is considering an unsecured personal loan with the following
    characteristics.

    Our suggested profile (based on questions used on application forms):

    -     Male, 40 years old, single

    -     Steady job and income, net income EUR 3,000 p/m

    -     Expenditures EUR 1,500 p/m

    -     No other debts, no health problems

    -     Loan amount: EUR 10,000 (or equivalent in other currencies)

    -     Loan term: 60 months (5 years)

    -     No final payment

                                                              85
    In some countries, we have looked at the 5 big                 providers or innovative players and/or those players
    that appear in local comparison sites.

    Table 9.3: The Netherlands (“persoonlijke lening”)
           Provider                             Website                                                         APR*
           ABN Amro bank                        http://www.abnamro.nl/nl/particulier/lenen/introductie.         9.1%
                                                html
           Postbank                             http://www.postbank.nl/ing/pp/page/product/detail/0,2           9.7%
                                                819,1859_178980,00.html
           Rabobank                             http://www.rabobank.nl/info/execute/node?node_id=5              9.4%
                                                5
           Royal Bank of Scotland               http://www.rbs.co.uk/rbsbank_nl/default.htm                     5.9%

    (Reference date: 15-07-2005)

    Table 9.4: UK (“personal loan”)
           Provider                             Website                                                         APR*
           Barclays                             http://www.personal.barclays.co.uk/                             9.9%
           Cahoot                               https://www.cahoot.com/cahoot_products/cahoot_loa               5.8%
                                                ns/cahoot_loans.html
           Egg                                  http://new.egg.com/visitor/0,,3_11104--                         7.9%
                                                View_148,00.html
           Royal Bank of Scotland               http://www.rbos.co.uk/Personal_Finances/Loans/defa              7.8%
                                                ult.htm?referer=home_page
           Virgin Money                         http://uk.virginmoney.com/personal-loans/                       6.9%


    (Reference date: 15-07-2005)




85 Source: World Retail Banking Report 2005, EFMA/Capgemini, www.efma.com/retail_market.php4




Personal loan                                                                                                             121
    Table 9.5: Belgium (“lening op afbetaling”)
       Provider                                 Website                                                   APR 86 *

       Dexia                                    http://www.dexia.be/Home_nl/dexia.htm                     10.98%

       Fortis                                   http://www.fortisbank.be/lenen/                             n.a.

       ING Belgium                              http://www.ing.be/private/showdoc.jsp?docid=025510_NL&      n.a.
                                                menopt=pro|loa|ins

       KBC                                      https://www.kbc.be/IPA/D9e01?t=BZIR8IQ,/BZIQJDK/:BZI        n.a.
                                                RMW9&langWebSite=N&idWebSite=KBC

       Royal Bank of Scotland                   http://www.rbs.co.uk/rbsdirect_be/nl/                     8.95%



    (Reference date: 15-07-2005)

    *NB: the list of providers as well as the APRs are indicative.




 9.4.       Suggestions for the data collection methods to be considered

    The goal of the future major data collection is to obtain reliable and relevant data for the Commission.
    The collected data must be relevant, i.e. must be representative for a large enough group of
    consumers. In addition, the collected prices of products should belong to products that really exist and
    are bought in large enough numbers. The method chosen must not lead to a best price for a given
    profile, and the method must not lead to niche products for non-existent consumers. In this paragraph,
    a few data collection methods are suggested.

    High coverage of market

    For a real price comparison, a 100% (or nearly 100%) coverage is needed. If all possible
    amounts and all possible terms were used, the number of APRs would be almost infinite
    which would be unrealistic. Therefore, the one consumer mentioned in chapter 1.3 (or 5
    others at a maximum) can be used.

    In order to get the best possible comparison of APRs in Europe, a quotation will be asked for all cases.
    This means a survey covering 6 (number of profiles) x 25 (number of countries) x 30 (rough estimate of
    number of providers of personal loans in the Member States) = 4,500 APRs.

    Collecting and analysing all these data (4,500 APRs) is very time consuming and costly. An effective
    way to collect these data is by questionnaire. The providers in the Member States will be requested to




86 In Belgium the minimum amount in relation to the term of 60 months is EUR 10,001 due to legislation.




Personal loan                                                                                                        122
    fill out these questionnaires, in order to get the data monthly. We advise obtaining a monthly update (at
    least) because of financial markets are quick to change.

    General idea of prices, small market coverage

    If the Commission does not opt for real price comparison, but for a general idea of prices, the number
    of providers to be approached can be limited to a representative sample of the market. For example,
    this is the case for those providers that cover 60% of the market (on estimate, mostly 5-10 major
    companies) within each EU member. This means a substantial reduction in the number of
    questionnaires to be filled out to get at comparable prices. Obviously, this method is much less costly
    than full market coverage.

    But there is a risk. The risk here is that the most competitive and/or innovative providers will be left out.
    It is possible to perform a quick scan on APRs via websites that compare prices on a national level, like
    www.independer.nl in the Netherlands or www.moneysupermarket.com in the UK. With these websites,
    however, it is not always clear if commercial motives are involved and if certain companies are
    favoured. Other questions are “Is it the whole market?” and “Are the prices applicable and/or current?”

    To conclude, we suggest cooperating with local consumer organisations or B2B companies that collect
    data from (banking) companies. In the Netherlands, this may be MoneyView Research
                                                                                              87
    (www.moneyview.nl) and in the UK, a company called Defaqto, which uses the Aequos database .




87 See: www.defaqto.com/aequosonline/new/downloads/Aequos%20Online.pdf




Personal loan                                                                                                       123
 9.5.       Dummy variable tables

    Table 9.6: Monthly payment EUR 1,000 to borrow per month


                    APR        (year)
                                6.0%      6.5%       7.0%       7.5%       8.0%       8.5%       9.0%       9.5%      10.0%
       TERM                   (month)
       (year)     (months)     0,49%     0,53%      0,57%      0,60%      0,64%      0,68%      0,72%       0,76%      0,80%
         0,5         6       € 169,52   € 169,75   € 169,98   € 170,21   € 170,44   € 170,67   € 170,90   € 171,12   € 171,35
          1         12       € 85,99    € 86,21    € 86,43    € 86,64    € 86,86    € 87,07    € 87,29     € 87,50    € 87,72
          2         24       € 44,25    € 44,46    € 44,68    € 44,89    € 45,10    € 45,31    € 45,52     € 45,74    € 45,95
          3         36       € 30,35    € 30,56    € 30,78    € 30,99    € 31,21    € 31,42    € 31,64     € 31,85    € 32,07
          4         48       € 23,41    € 23,63    € 23,85    € 24,06    € 24,28    € 24,50    € 24,72     € 24,94    € 25,16
          5         60       € 19,26    € 19,48    € 19,70    € 19,92    € 20,14    € 20,37    € 20,59     € 20,81    € 21,04
          6         72       € 16,50    € 16,72    € 16,95    € 17,17    € 17,40    € 17,62    € 17,85     € 18,08    € 18,31
          7         84       € 14,53    € 14,76    € 14,99    € 15,22    € 15,45    € 15,68    € 15,91     € 16,14    € 16,38
          8         96       € 13,06    € 13,29    € 13,53    € 13,76    € 14,00    € 14,23    € 14,47     € 14,71    € 14,95
          9         108      € 11,93    € 12,16    € 12,40    € 12,64    € 12,87    € 13,12    € 13,36     € 13,60    € 13,85
         10         120      € 11,02    € 11,26    € 11,50    € 11,74    € 11,99    € 12,23    € 12,48     € 12,73    € 12,98
         11         132      € 10,29    € 10,53    € 10,77    € 11,02    € 11,27    € 11,52    € 11,77     € 12,02    € 12,28
         12         144        € 9,68    € 9,92    € 10,17    € 10,42    € 10,67    € 10,93    € 11,18     € 11,44    € 11,70
         13         156        € 9,16    € 9,41     € 9,66     € 9,92    € 10,18    € 10,43    € 10,70     € 10,96    € 11,23
         14         168        € 8,73    € 8,98     € 9,24     € 9,49     € 9,76    € 10,02    € 10,29     € 10,55    € 10,82
         15         180        € 8,35    € 8,61     € 8,87     € 9,13     € 9,40     € 9,66     € 9,93     € 10,21    € 10,48




 9.6.       Main conclusions

        - The service is the same for all EU countries, simple and straightforward.

        - The retail banking market in each of the countries seems to be dominated by a small number of
          large groups. There are also niche players specialised in loans.

        - The number of service variants (differentiation) is small.

        - It is suggested to use consumer profiles as price depends on the characteristics of consumer
          (although it is a minor variable).

        - The price of a personal loan is the interest rate you pay expressed as an 'Annual Percentage Rate'
            (APR) which is the cost of borrowing on a standard basis. It is easy to compare one APR with
            another.

        - Selection of a sample of service provider is advised. 100 % market coverage not realistic.

        - For price collection, we suggest cooperating with local consumer organisations or B2B companies
          that collect data from (banking) companies.




Personal loan                                                                                                           124
10. Postal service

   10.1. Market, content and scope of the service

      10.1.1. Exploring the content of the services in the EU

      The EU expressed the need to guarantee the provision of a universal postal service in the Community
                                                                                       88
      with affordable prices and for all users to have access to the services provided. The EU also defines
      minimum quality norms for intra-Community cross-border postal services and demands that Member
                                                                            89
      States set service standards for postal services in their own country. Postal services are an
      elementary service of which the existence is taken for granted by most consumers. The service is
      defined in short as sending an item from one place to another. The addressee can be a natural person
      or a legal entity. These items can be addressed letters (on which confidentiality of the mail applies),
      picture postcards, printed matter like magazines and direct mail, parcels, non-addressed items and so
      on. Beside that, the Universal Service Provider is responsible for special services like registered or
      insured mail (letters and parcels).

      Though the postal service for the consumer is a fairly universal straightforward service, between the
      countries there are differences in quality in terms of speed and reliability. The time that is needed to
      deliver a letter within a country can be short for small countries, or for areas with a high population
      density, and can be longer for remote areas. According to the International Post Corporation (IPC), the
      performance of the European postal services is on a constant high level; the last three years, the
                                        90
      average was 2.2 delivery days. In these performance measures of the IPC, the new EC countries are
      omitted, but it is planned that all EU countries participate in a new measurement system.

      10.1.2. Defining the scope of the service

      There are countries with single tariffs and countries with first and second class tariffs which differ in
      speed of deliverance. There are differences in guaranteed speed performances and there are
      differences in the weight categories and categories of size of letters. A letter from 20 grams with a large
      size could be sent in one country for a basic tariff while in the other country a higher tariff category is
      charged.

      Other quality factors that affect the content of the service:



  88 Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the development of the internal

     market of Community postal services and the improvement of quality of service of 1 December 1997, amended by Directive 2002/39/EC of the

     European Parliament and of the Council of 10 June 2002 with regard to the further opening to competition of Community postal services.



  89 Ibid (Articles 17 and 18).



  90 International Post Corporation 2005.




  Postal service                                                                                                                                125
    -      Delivery on the next working day, the so-called D+1, is a standard that in the Netherlands is
           enforced by legislation. In other countries other standards prevail. Between countries in Europe,
           D+3 is the indicator for speed (EU standard 85%), and D+5 is the indicator for reliability (EU
           standard 97%).

    -      The deliveries per week vary between five and six times (days). In Spain (only urgent) mail is
           delivered on Saturdays.

    -      The infrastructure of post offices, post boxes and other postal service points in shops et cetera is
           also a quality factor that differs from country to country.

    10.1.3. The market of the service

    We are comparing the prices of postal services as paid by the consumer. This implies that the postal
    traffic from business to consumer lies out of range of the scope of this project. Also the express delivery
                                                                                                            91
    market with its relatively high prices is considered as a business market and not a consumer market.
    The consumer market of postal services is relatively small. In western European countries,
    approximately 6-10% of the sendings are to be considered as consumers’ mail. This consumer mail
    consists for a large part of greeting cards, Christmas cards and picture postcards. Another significant
    fraction of this consumer mail is directed to businesses (partly paid return) and just a tiny fraction
    relates to letters from consumers to consumers.

    It is not likely that the consumer will find relevant alternatives for the national postal service. Sometimes
    there are local or regional commercial postal services for consumers but these can hardly be
    considered as an alternative on a national or international scale. Outside this market, the consumer can
    explore alternatives such as e-mail. The use of the national mail services is therefore expected to
    diminish, a development that will have effect on prices and service levels within the public postal sector
    (provided national authorities don't interfere with price measures). The providers of postal services are
    trying to explore hybrid forms of postal traffic e.g. web-based ordered customised greeting cards that
    are delivered printed at home addresses.

    The market for parcels is still extensive. Internet shopping has created a vast stream of parcel traffic to
    the homes of consumers. The national postal service has to compete in this field with other providers of
    this service, which is, as has been said already, a business-to-consumer market.

    For consumer prices the liberalisation of the postal market may have a negative effect. The markets on
    which the competition is focussed is the business market and not the consumer market. In Sweden,
    where they have 10 years of experience with complete liberalisation of the postal market, a rebalancing
                                                              92
    of the public prices versus the business prices took place , the public prices increased with 75% and



91 Report from the Commission to the Council and the European Parliament on the application of the Postal Directive (Directive 97/67/EC as amended

   by Directive 2002/39/EC). Annex: Commission staff working paper – March 2005.



92 WIK-Consult for the European Commission, 2004.




Postal service                                                                                                                                       126
    the bulk-mail prices decreased with 50%. Indirect positive effects for consumers are first of all the
    continued existence of the infrastructure for mail delivery; something which is easily taken for granted
    but not so obvious if it was largely dependent on consumer demand. A second indirect effect of low
    bulk-mail prices that benefits consumers concerns low prices for sending magazines, papers and other
    printed matter they want to receive.




 10.2. Inventory list of price components of the service

    We found the tariffs as paid by the consumer for letters of 20g in the standard (or if appropriate the
                                                               93
    fastest) category for all European Union countries (2003). For the consumer this is the most used
    service and therefore the most important price-comparison variable.

    Within the European countries there are differences in the tariff structure. They vary in format and
    weight categories. Sometimes only the weight factor is taken into account. Another factor that plays a
    roll in the tariff structure is the lower priority service (second-class mail) within the countries and outside
    (standard and priority mail). The number of price components for consumer-mail however is small. As
    soon as the object to be send fits into an official definition of the service of the provider, there is only
    one tariff. An example of an object with an official definition is a letter of a certain weight and format
    send with the fastest service.




93 ibid.




Postal service                                                                                                        127
 10.3. Inventory of existing price-compositions of the service

    In the WIK study (study for EC, DG Internal Market, Main Developments in the European Postal Sector)
    we found out that the a letter of 20g in a standard envelope size is used for comparison. The tariffs for
    letters of 50g, 100g and 350g are presented as a percentage of the lowest weight category.

    For parcels, no standard comparison size was found.

    Other postal services like registered mail were not measured. Registered mail is a universal service
    although we found different versions per country. An unambiguous definition of the service as base of
    comparison is possible.

    Quality measurement systems do exist on national level and on European level. The control on national
    level is mostly done by the National Regulations Authority for postal services. In the Netherlands, OPTA
                                                                                           94
    (Dutch NRA) is responsible for controlling the Dutch postal service (Royal TPG-Post ). TPG-Post is
    obliged to hire an external consultant to measure their quality system.

    In our view, the prices of this service can be compared without the use of a user profile. The price of
    service depends on the kind of letter (size envelope, weight). Prices are not influenced by specific
    behavioural characteristics of a consumer.




94 Royal TPG-Post is part of TNT.




Postal service                                                                                                  128
 10.4. Suggestions for the data collection methods to be considered

    The comparison can be made based on straightforward prices for postal services. All data can be found
    in the official price lists of the providers. The number of providers is small enough to make it possible to
    collect tariffs from all providers. A consumer profile is in our view not necessary for the service we are
    considering in the sense that we have to know how many letters (groups of) people send on a
    periodical basis. We are not taking in account all kinds of indirect effects that take place on a macro
    level of which consumers can actually individually take advantage of.

    The choice for the selection of the items, however, must be rooted in the alleged relevance of the items
    for consumers. We know that the 20g letters and postcards make up for the bulk of consumer post.
    Besides that, consumers rarely use the parcel service and extra services like registered or insured post.

    To bring about the comparison of prices in the fastest standard category and standard envelope size
    (not express service, because this is not a homogeneous service within the countries involved), we
    propose measuring the next items in Euros: The weight boundaries that prevail can be different from
    country to country. In some cases one pays the same to send a letter from 20g or 60g.

    -      Postcard (Picture postcard) National

    -      Postcard (Picture postcard) Europe/International

    -      Letter of 20g (cheapest National)

    -      Letter of 20g (fastest National)

    -      Letter of 20g (Europe Priority)

    -      Letter of 20g (Europe Standard)

    -      Letter of 20g (Rest of world Priority)

    -      Letter of 20g (Rest of world Standard)

    In our view, these items are sufficient for price comparison of postal services for consumers. In
    addition, (if really wanted) the price of some standard parcel-sending can be taken.

    The prices for sending parcels:

    -      1 kg National

    -      1 kg Europe

    -      2 kg National

    -      2 kg Europe

                                                                                    95
    The prices can be obtained from the postal providers involved. The prices are also communicated on
    the websites of the providers. This can serve as an extra validity check.


95 See the International Post Corporation for a list of the providers www.ipc.be.




Postal service                                                                                                     129
    If an overall indicator is needed we propose calculating the weighted mean of these standardised items.
    The weights can be based on the relative use of the service by consumers. Although the use of postal
    services can vary for the member states, these weights seem stable enough to keep them constant
    over several years. We have to be aware though that it’s an indicator, not the actual price a consumer
    pays.




Postal service                                                                                                130
 10.5. Dummy target tables

 Table 10.1: Dummy target

                            Country                        AT       BE      …        …        UK


       Item


       Postcard (Picture postcard) Europe/International   .. cts   .. cts   .. cts   .. cts   .. cts




       Letter of 20g (cheapest National)                  .. cts   .. cts   .. cts   .. cts   .. cts




       Letter of 20g (fastest National)                   .. cts   .. cts   .. cts   .. cts   .. cts




       Letter of 20g (Europe Priority)                    .. cts   .. cts   .. cts   .. cts   .. cts




       Letter of 20g (Europe Standard)                    .. cts   .. cts   .. cts   .. cts   .. cts




       Letter of 20g (Rest of world Priority)             .. cts   .. cts   .. cts   .. cts   .. cts




       Letter of 20g (Rest of world Standard)             .. cts   .. cts   .. cts   .. cts   .. cts




       1 kg National                                      .. cts   .. cts   .. cts   .. cts   .. cts




       1 kg Europe                                        .. cts   .. cts   .. cts   .. cts   .. cts




       2 kg National                                      .. cts   .. cts   .. cts   .. cts   .. cts




       2 kg Europe                                        .. cts   .. cts   .. cts   .. cts   .. cts




       Postcard (Picture postcard) Europe/International   .. cts   .. cts   .. cts   .. cts   .. cts




Postal service                                                                                         131
 10.6. Main conclusions

         - This is a fairly universal straightforward service. There are however differences in quality between
           the countries in terms of speed and reliability.

         - There are only few service providers in the consumer market. Consumers cannot find many relevant
           alternatives for the national postal service.

         - There are differences in the tariff structure between the European countries but as soon as the
           object to be send fits into an official definition of the service of the provider, there is only one tariff
           applicable.

         - Prices are not influenced by specific “behavioural” characteristics of a consumer.

         - Price of a sending is known beforehand (ex ante bill predictability).

         - The prices can be easily obtained from the postal providers (given the small number of players
           involved) and they are available on the websites of these providers as well.

         - As a peculiarity, it is worth mentioning that approximately 6-10% of the mail sent is to be considered
           as consumers’ mail. This consumer mail consists for a large part of greeting cards.




Postal service                                                                                                           132
11. Train transport

   11.1. Market, content and scope of the service in EU countries

      11.1.1. Exploring the content of the service in the EU

                                                                               96
      Europe’s rail sector is in the process of liberalisation , although the countries are in different stages of
      liberalisation and the process is still far from complete. At this point in time, we cannot say yet that
      foreign operators can freely transport passengers on the rail network of other countries. Therefore in
      most EU countries the passenger transport service is still dominated by a single firm (at least, at the
      national level). The few exceptions are UK, Austria and Sweden with several passenger transport
      operators.

      Unlike other services analysed in the report where it was possible to define a common (basic) content
      of the service, we encountered a major difficulty in the case of train transport as different routes make
      the content of the service very heterogeneous. However, the route is intrinsic to the service content
      itself, and therefore, non-separable.

      One possible solution would be to look at the prices of international point to point trips within the EU.
      However, the price for international point to point trips within the EU does not depend on the country of
      purchase. A ticket Paris-Amsterdam or Paris-Milan has the same price whether it is bought in France,
      in the Netherlands or in Italy. This approach would make the research pointless and it was withdrawn
      after the first exploration of the service.

      Special train passes are available for international round trips. An example is the InterRail pass (only
      available for European residents and nationals, including Russia, Estonia, Latvia and Lithuania). Prices
      of e.g. the InterRail service are lower for some East-European countries but identical for residents of
      the 15 old members. Besides, the price depends in the purchase location only in that it is 50% cheaper
      when bought at the own country of residence but for the rest, the price is the same across the 15
                97
      countries .




  96 See 3rd Railway Package, proposed 3 March 2004 on Liberalisation of International Passenger Services for Gradual opening up of the market for

     international passenger services by 2010.



  97 An InterRail pass allows travel through Europe for a month either as a global ticket for whole Europe or in the chosen zones. The prices for InterRail

     in Europe can be found at http:www.interrail.net. Price discrimination is based on age. InterRail passengers have to pay supplements for high-speed

     trains as well as sleeper trains (overnight with bed).




  Train transport                                                                                                                                             133
     An alternative for a round trip are Euro Domino passes which give three to eight days travel within a one
     month period in a specific country These passes are only available to people who have lived in a
     European country for at least six months prior to travelling. However, it is not possible to purchase a Euro
     Domino ticket to travel in one’s country of residence.

     Table 11.1: Illustration of Eurodomino prices (prices valid from April 2005 to March 2006)
                                         ADULTS EURODOMINO PRICES (from 26 to 60 years)
                                                          SECOND CLASS
      PAESI                     3 days        4 days        5 days         6 days        7 days               8 days
      ATTICA Italy/Greece       98 EUR        98 EUR        98 EUR        98 EUR        98 EUR                98 EUR
      Austria                  113 EUR       128 EUR        143 EUR       158 EUR       173 EUR              188 EUR
      Belgium                   55 EUR        65 EUR        75 EUR        85 EUR        95 EUR               105 EUR
      Bulgaria                  40 EUR        48 EUR        56 EUR        64 EUR        72 EUR                80 EUR
      Croatia                   58 EUR        67 EUR        76 EUR        85 EUR        94 EUR               103 EUR
      Czech Republic            50 EUR        61 EUR        72 EUR        83 EUR        94 EUR               105 EUR
      Denmark                   77 EUR        93 EUR        109 EUR       125 EUR       141 EUR              157 EUR
      Finland                  122 EUR       142 EUR        162 EUR       182 EUR       202 EUR              222 EUR
      France                   189 EUR       223 EUR        257 EUR       291 EUR       325 EUR              359 EUR
      Germany                  189 EUR       209 EUR        229 EUR       249 EUR       269 EUR              289 EUR
      Great Britain            155 EUR       185 EUR        215 EUR       245 EUR       275 EUR              305 EUR
      Greece                    60 EUR        72 EUR        84 EUR        96 EUR        108 EUR              120 EUR
      Holland                   57 EUR        75 EUR        93 EUR        111 EUR       129 EUR              147 EUR
      Hungary                   52 EUR        65 EUR        78 EUR        91 EUR        104 EUR              117 EUR
      Ireland                   77 EUR        92 EUR        107 EUR       122 EUR       137 EUR              152 EUR
      Italy                    173 EUR       193 EUR        213 EUR       233 EUR       253 EUR              273 EUR
      Luxembourg                22 EUR        24 EUR        26 EUR        28 EUR        30 EUR                32 EUR
      Macedonian                24 EUR        27 EUR        30 EUR        33 EUR        36 EUR                39 EUR
      Morocco                   35 EUR        44 EUR        53 EUR        62 EUR        71 EUR                80 EUR
      Norway                   170 EUR       200 EUR        230 EUR       260 EUR       290 EUR              320 EUR
      Poland                    58 EUR        71 EUR        84 EUR        97 EUR        110 EUR              123 EUR
      Portugal                  72 EUR        83 EUR        94 EUR        105 EUR       116 EUR              127 EUR
      Rumania                   58 EUR        74 EUR        90 EUR        106 EUR       122 EUR              138 EUR
      Russia                    60 EUR        70 EUR        80 EUR        90 EUR        100 EUR              110 EUR
      Serbia and Montenegro     52 EUR        59 EUR        66 EUR        73 EUR        80 EUR                87 EUR
      Slovakia                  41 EUR        49 EUR        57 EUR        65 EUR        73 EUR                81 EUR
      Slovenia                  55 EUR        63 EUR        71 EUR        79 EUR        87 EUR                95 EUR
      Spain                    113 EUR       143 EUR        173 EUR       203 EUR       233 EUR              263 EUR
      Sweden                   172 EUR       194 EUR        216 EUR       238 EUR       260 EUR              282 EUR
      Switzerland (SBB/CFF)    110 EUR       122 EUR        134 EUR       146 EUR       158 EUR              170 EUR
      Turkey                    39 EUR        50 EUR        61 EUR        72 EUR        83 EUR                94 EUR


    Source: http://www.eurodomino.it. Prices include supplements payable on most (but not all) high speed trains.


    Another possibility to compare prices across countries is to compare individual country passes. For
    example, the Irish Explorer Pass for unlimited travel on Ianród Éireann trains (including DART and
    Dublin suburban services). It is not valid for cross-border services or for travel in Northern Ireland. This
    pass costs EUR 115.50 and is valid for five days of travel within a 15-days’ period. The Spanish Flexi




Train transport                                                                                                        134
      Pass is valid for unlimited travel on Renfe trains between 3 and 10 days in a two-months’ period.
                                                            98
      Supplements are required for AVE and Talgo trains

      Rail passenger services can be broken down by geographical coverage (international/national/regional
      services); funding (services under public contract/commercial services); revenues (season ticket, single
      and return fares, etc.); or service quality (punctuality, reliability, existence of statutory passengers’
      rights, etc.). Some of these characteristics either are not relevant for this study (e.g. funding of the
      service is out of the scope) or imply a too detailed analysis (e.g. the consideration and comparison of
      different passenger statutory rights across countries). In order to keep the approach as practical as
      possible, we have chosen a list of he main variables attached to the content of the service that are
      listed in table 11.1 below.

      11.1.2. Defining the scope of the research

      The object of this chapter is to develop a methodology for price collection of passenger transport
      between two places by train. For the purpose of the research, the list of possible variables determining
      the service content should mainly be based on the distance travelled, the speed and comfort of the
      train, security, punctuality and reliability.

      In this study, only national routes (within the borders of a single EU country) are considered despite the
      fact that the comparison of prices of national routes between different countries poses – from an
      economics perspective - serious methodological difficulties for the heterogeneity of different routes,
      topography, passenger frequency, etc. For the long-run monitoring activity of the Commission, it is
      advisable to:

      -    broaden the range of national routes,

      -    include routes serviced by regional operators, and

      -    include international the comparison of international routes such as Madrid-Paris, vs. London-Paris
           or Paris-Rome vs. Amsterdam-Rome.

      Distance is implicit in the elected route – a trip between the two major cities in the country -and will be
      corrected by dividing the price by the kilometres. An alternative would be to compare connections
      similar in distance. Speed, number of stops, changing train etc. may or may not influence prices.
      Besides, there is no strict relation between distance and price. The “regular” train model for each of the
      countries will be considered. In some countries such as France, Germany and the Netherlands, high-
      speed trains are the most common for the elected routes. The difference in trains refers to the speed of
      travel, the number of stops made at the various stations (e.g. does the train stop in small towns) and
      on-board facilities. Time (not real time but time according to schedule which is more feasible to gather
      information on) is also important.

      Punctuality, frequency of trains on the route and security are - based on the published info and for the
      scope of the methodology – not measured. Comfort, including the facilities at train stations, is a



98
     High speed trains.




Train transport                                                                                                     135
    qualitative variable for which measurement indicators can be determined. But it is not quantifiable in
    price (except for the first class versus second class option, which is a supplementary service, not a
                    99
    basic service). Seasonal tickets and monthly/annual subscriptions for certain routes are sometimes
    available. In general these affect the price paid by the traveller. However, these services are not part of
    the basic service and will therefore be excluded from the analysis.

    If train transportation services are temporarily cancelled due to foreseen events, the passenger cannot
    claim a refund, whereas in the case of an unforeseen event the railway company may be obliged to pay
    compensation to passengers. This refund usually depends on the price of the ticket purchased.

    Most trains offer the possibility to travel first class as opposed to the regular class (second class).
    However, this is not part of the basic service and will therefore be ignored. Restaurant, catering, bed
    coaches and additional activities for which supplements apply on top of the basic prices are also
    ignored in the report. Please note that part of the price the consumer pays for the train service is
    destined to support other facilities/services. These include also the facilities at stations of departure and
    arrival, such as shopping and catering facilities, and the quality of the waiting and service areas. These
    services are available to all passengers, are extensively used by travellers, and could thus be
    considered as part of the basic service. These features will be ignored as it would take a lot of time and
    expense to measure. It would be impossible to calculate the marginal cost of these services paid by the
    individual traveller.

    In summary, the scope of the research will focus on distance and the type of train (trains are
    differentiated by speed). Not all other service components as listed in Table 11.1 will be considered for
    the dummy tables used for price collection.




99 See OGM Report on quality issues regarding international rail transport.




Train transport                                                                                                     136
    Table 11.1: Service components

     Country Route
     Punctuality
     Reliability
     Frequency of trains for the route
     Speed 1
     Seats 2
     1st class/2nd class
     Smoking/Non-smoking
     Seats for disabled passengers
     Luggage space
     Laptop facilities
     Internet
     Availability of return tickets
     Availability of season tickets
     Availability of other products 3
     Ticket refund conditions
     Existence of statuatory passenger rights 4
     Possibility for seat reservation
     Replacement of transportation (foreseen event)
     Replacement of transportation (unforeseen event)
     Accessibility of the station
     Parking at the station
     Catering and shopping facilties at the station
     Information point
     1
       Speed accounted for the number of stops during the journey
     2
       Seats - Space between seats and seat comfort accounted for the 1st class/2nd class differentiation
     3
       Other products include motnhly or yearly subscriptions for a certain route, day tickets etc.
     4
       Includes ticket refund conditions


    11.1.3. The market of the service

    Until recently and driven by the network features of the sector, national routes were reserved to a
    monopolist provider. However, the industry is undergoing a liberalisation (3rd Railway Package,
    proposed 3 March 2004 on Liberalisation of International Passenger Services for Gradual opening up of
    the market for international passenger services by 2010). As the liberalisation of national routes has not
    yet been reached, the research should focus on the national incumbents in each country – with
    exceptions made for the UK, Austria and Sweden where several passengers transport rail operators
    are active. Regional and not national monopolies define the industry landscape in these countries.

    Rail services are often supported by national and regional governments, reflecting the fact that most
    long distance and local/regional services are regarded as essential public services rather than as
    commercial opportunities. Accordingly, to realise the social benefits being provided through public
    funding, fare increases tend to be kept at or below the rate of inflation, with pricing structures based on
    simple, distance-related criteria, and sophisticated commercial reservation and yield management
    systems being the exception rather than the rule (Steer Davies Gleave, 2004). Nearly all European
    countries have kept at least the infrastructure – less and less the service provision - under public




Train transport                                                                                                   137
    ownership. Although strongly related to prices of railways services, we will not elaborate on issues such
    as pricing in network industries and regulatory aspects in this regard.




Table 11.2: Rail operator incumbents and number of entrants for EU-15 and Poland

EU Market                     Incumbent            Number of entrants                             Comments
Austria                           OBB                     12            The number of entrants also included freight carriers
Belgium                          SNCB                     0
Denmark                           DSB                     2
Finland                         VRT Ltd.                  0
France                           SNCF                     0
Germany                          DB AG                    10            DB AG is holding company uniting three railway operators.
Greece                            OSE                     0             OSE is the single infastructure and rail operator.
Ireland                Iarnrod Eirann (Irish Rail)        0             Irish rail is the single infastructure and rail operator.
Italy                           Trenitalia                30            With the exception of FNME, all entrants are very small.
Luxemburg                         CFL                     0             Trains of operators in neighbouring countries enter Luxemburg.
The Netherlands                    NS                     4             Number does not include freight carriers.
Poland                            PKP                     0             Liberalisation in process.
Portugal                           CP                     1
Spain                            RENFE                    0
Sweden                           SJ AB                    13             Liberalised since 1988. Competition in rail infastructure as well.
United Kingdom                      -                     25            Of the 25 passenger operators, 10 offer long distance travel.
Source: Steer Davies Gleave 2003


    As can be seen from the table, in most of the countries the incumbent rail operator is still a monopolist.
    Data for other new member states was not readily available. In Ireland, Greece and Poland a single
    company is operating both the passenger sector and maintenance of the infrastructure.

    Interesting cases in the table are United Kingdom, Italy and Sweden.

    United Kingdom is considered to be the most liberalised of the European rail markets. It can be noted
    that this had no significant impact on price levels (however, from an economic point of view, price levels
    should be considered in the context of the total amount of public contributions provided to the sector).

    Italy has an impressive number of new entrants, however, FNME is the only real competitor to the
    national incumbent Trenitalia. The other railway companies, with the exception of one small regional
    passenger carrier, are all small freight carriers.

    Sweden is considered as one of the leading countries in the liberalisation of the railway sector. In 1988
    local authorities were given the freedom to issue open tenders for the providing of local passenger
    transport services (Steer Davis Gleave 2003). Railway companies have been granted access rights
    above the requirements set out in the EU Directives.




Train transport                                                                                                                    138
 11.2. Inventory list of price components of the service

    The determinants of consumer prices for passenger services are irrelevant for this study as the goal is
    to collect prices as paid by consumers. Issues such as yield management, public vs. private funding or
    the distinction between individual price increases and average price increases are ignored.

    The main service content variables affecting the price:

    -      Route (and implicitly the distance),

    -      Speed (reflected in the type of the train),

    -      Time of the year (high season vs. low season),

    -      Time of the day (peak hours vs. off-peak hours, night fares, weekend),

    -      Comfort standards,

    -      Availability and use of comfort standard such as the first class option,

    -      User characteristics (age, occupation),

    -      Discount cards (frequent travellers, also group discounts depending on the number of passengers
           booking the ticket together).

    A return ticket may be cheaper than two single tickets. This does not hold for all rail companies, routes
    and time periods between the departure and return trips. Purchase in advance may also bring a price
    reduction; however, the amount of the price reduction depends on how far in advance the passenger
    has bought the ticket. Further, for tickets purchased in advance the price reduction varies across train
    operators. Home delivery may be possible at an extra charge.

    Illustratively, in Austria ÖBB offers various fares for special user profiles. User profiles such as senior
    citizens or students and business travellers all have different tickets fares with different specifications
    (for the same route).

    In Belgium SNCB also offers various fares for different user groups (senior citizens etc.) and special
    fares for specific trips, such as day trips to the Ardennes or the beach.

    Fares for Finnish rail services are often bundled with ferry services to other parts in Finland,
    Scandinavia and Europe.

    In France there are five different reduced fare cards on offer for senior citizens, children, frequent
    users, etc.

    In the Netherlands, students pay for the tickers through their scholarships. Students have two options: a
    card granting unlimited travel in the weekdays, or a card granting unlimited travel in the weekend.




Train transport                                                                                                   139
    Table 11.3: Price components for a regular service between two large cities

     Country Route
     Route
     Train type (speed)
     Single / return ticket
     1st class / 2nd class
     Peak/low hours
     Weekdays / weekends (different prices)
     Open date / fixed date (flexibility)
     Purchase in advance
     Children / seniors / student tariffs
     Discount cards for frequent travelers
     Family ticket
     Exchangeable / refundable option
     Extra-charge for buying at the counter
     Supplements (pets / bikes etc.)



 11.3. Inventory of price composition of the service

    As can be seen from Table 11.3, in order to get an impression of the price paid by the consumer for
    train transport, even when considering a single trip between two cities within a country, consumer
    profiling is necessary.

    Eurostat has already performed research in this area, in a study entitled “Development of Price and
    Quantity Indices in Transport: User Needs and Methodological Issues for EU Transport Price
    Statistics”.

    Table 11.4: Consumer profiles as used by Eurostat (all profiles assume second class travel and the
                purchase of a single ticket)
  Consumer profiles used by Eurostat
     Profile  Single/                Weekday/                                 Seat                           Advance
              Return       Charact. weekend        No. of days   Distance   booking   Reduction   Train type booking
  Profile 1      Single      Adult    Weekday           1         60 km        -          -        Regular        -
  Profile 2      Single    Pensioner Weekday            1         60 km        -         yes       Regular        -
  Profile 3      Single      Adult    Weekday           1         120 km       -          -        Regular        -
  Profile 4      Single      Adult    Weekday           1         500 km      yes         -        InterCity      -
  Profile 5      Return      Adult    Weekday           1         60 km        -          -        Regular        -
  Profile 6         -        Adult    Weekday          30         500 km      yes        yes       InterCity   10 days
  Profile 7         -        Adult       -             30         60 km        -         yes       Regular        -
  Profile 8         -        Adult       -             365        60 km        -          -        Regular        -


    Source: Eurostat


    As can be seen from the table, the various consumer profiles have been differentiated according to
    tickets types (single/return, day of travel, distance travelled, reserved seat, purchased in advance), train
    types (regular or Intercity) and according to traveller characteristics (adult or pensioner).

    For our approach to the price comparison methodology we have built a table with designated target
    routes (a return trip between the two largest cities) across countries. As explained in section 11.1, a




Train transport                                                                                                      140
    range of national routes, routes serviced by regional operators, and international routes such as
    Madrid-Paris, vs. London-Paris or Paris-Rome vs. Amsterdam-Rome should be included for the long-
    run monitoring. The risk of using a limited number of routes is that railways operators might be temped
    to adjust their prices on the selected routes what would bias the results. Besides, the selected sample
    of routes may not be representative for the trips made by consumers in given Member State.

    Table 11.5: Target routes for price collection in this shortlist study

     Country                            Route                                Operator
     Austria                            Vienna-Graz                          ÖBB
     Finland                            Helsinki-Espoo                       VR
     France                             Paris-Lyon                           SNCF
     Germany                            Berlin-Frankfurt                     Die Bahn
     Greece                             Athens-Thessaloniki                  OSE (Griekenland)
     Hungary                            Budapest-Balaton                     Magyar Allamvasutak (MAV)
     Ireland                            Dublin- Galway                       Northern Ireland Railways
     Italy                              Rome-Milan                           Trenitalia
     Netherlands                        Amsterdam-Rotterdam                  Nederlandse Spoorwegen (NS)
     Poland                             Warszawa-Lodz                        PKP
     Portugal                           Lisbon-Faro                          CP
     Slovakia                           Bratislava - Kosice                  ZSR
     Spain                              Madrid-Barcelona                     RENFE
     Sweden                             Stockholm-Gotenburg                  SJ
     United Kingdom                     London-Birmingham                    British Rail




    Although Eurostat has only identified the “adult” and “pensioner” traveller, other traveller types such as
    students and young children also travel at a price that is different from the basic adult fare. For this
    reason child discount and senior traveller discount have also been considered.

    Ticket fares are also determined by demand and consumer’s flexibility. As recreational travellers are
    less bound by specific departure and arrival times, these consumers usually enjoy cheaper fares (off-
    peak fares) in comparison with business travellers, who often have to cope with tight schedules, and
    therefore more crowded trains (peak hours). This peak-load pricing method may take place under
                                                                                                      100
    different schemes. For instance in the Netherlands, travellers cannot use their 40% discount card
    during peak hours, while those travelling after 9.00 am obtain a discount.

    Research shows that price differentiation through the day (peak hours/otherwise) is sufficiently
    prevalent in the European passenger rail market in order to include it as a service price component.
    Other price components to be considered are the “Same day return ticket”, “Open return date ticket”
    and the “First class/second class” components.




100 The railway company NS offers a 40% discount on train tickets throughout the country on every day of the week after 9 am. In summertime this

   time restriction does not apply. The card costs around EUR 55, but the price is adjusted every year for inflation.




Train transport                                                                                                                                    141
    The webpage of Dutch railway operator NS provides the user profile of the average traveller. The
                                                                                             101
    average traveller is a 20-45 year old person with a college degree and a mean wage. Besides,
    installing trackload pricing – i.e. a higher cost per km on certain routes - has been proposed. In the UK,
    special airport express trains operate from London airports to the city centre. These trains are rather
    expensive so it could be considered as a sort of implicit “trackload pricing”. These country-specific
    examples indicate that extensive research is required into the particular rail market of each country to
    capture the specific elements instrumental to price calculation that may not hold for other countries.




 11.4. Suggestions for the data collection methods to be considered

    Railway operators offer an on-line ticket information service (it is usually possible to book and purchase
    international tickets on-line, but this may not be the case for shorter distances within a country).
    Researchers obtain fares as “to be paid” by the reference consumer (exception made for the possibility
    of an additional charge when the ticket is bought at the counter. Buying the ticket on Internet or even at
    a ticket vendor machine at the train station may be cheaper to reflect (overhead) cost savings attached
    to these methods of payment.). Because of the fact that the routes and reference consumer
    characteristics are predefined according to the tables in the previous section, price consulting activity
    on the rail operators’ websites is expected to be quick and efficient as well as reliable.

    Contacting the railway companies with a questionnaire would add little value to the data collection as
    the Internet search should in principle yield perfectly reliable price information. Most websites are
    designed in such a way that is not necessary for the researcher to interpret fare tables. Filling out the
    data for the route, time, day, etc., the applicable fare appears on the screen. Still interviewing the
    service providers could clarify existing discount schemes. Further, the number of interviewees is small
    (a single provider by country) and this significantly facilitates the task. The client information number
    provided on the websites of the railway operators is usually only valid for calls made from the country.

    Conducting a consumer survey (including the collection of tickets used) would provide data on actual
    prices paid and it would also be relatively simple considering that the research is limited to specific
    routes. Researchers may interview travellers at the predetermined times and on departure or arrival
    platforms. The survey can reflect, among others things, the proportion of business travellers and
    students, and the frequency of discount schemes in a particular country for that particular route. Note
    that the sample needs be large enough to avoid any bias. Besides, the outcome of a particular route is
    by no means extensive to other routes and if the intention is to generalise the result by country, it would
    be necessary to study the most frequently travelled distances in the national geography. Additional
    questions on service quality and comfort can also be formulated and recorded.

    A few – one for each of the reference tables - mystery “trips” by the research team members would also
    suffice to get reliable data on actual prices. This would have to be done in 15 different countries on a
    regular basis. This form of data collection would not be as representative (assuming that we have a


101 See Nederlandse Spoorwegen 2005.




Train transport                                                                                                   142
    non-biased sample) for the price consumers are actually paying for the service, as conducting a survey
    among consumers.




 11.5. Dummy target tables

    The first task of the researcher is establishing the train to be considered for each specific route. The
    notion of the “regular” train service for that route means choosing the train that covers that route most
    frequently. E.g., for the route Paris-Lyon in France this is the high-speed train TGV, as the lower speed
    train runs only twice a day and outside peak hours.

    All data collectors should buy the ticket for the same day, on the day of travel, and once or twice a
    month to compare for seasonal price effects (high vs. low season).

    In different countries the researchers may encounter different definitions of ranges for the applicability
    of the age discount or different categorisations such as enfant/child/young (e.g., infant 0-3, child 4-11,
    young 12-25). Peak/off-peak hours ranges can also vary across countries (routes) and the price of the
    ticket may significantly depend on the time of the day the trip is made. Therefore, researchers should
    have clear instructions based on traveller and schedule categories instead of on age or time (e.g., a
    return ticket in peak hours – instead of a ticket to travel at 8.00h and return at 18.00h). First class
    tickets may have the same price for peak and off-peak hours. When purchasing a ticket at the French
    SNCF website, the system informs the customer of the existence of cheaper tickets at other dates and
    times.

    Tickets may be exchangeable or refundable. This possibility may be included in the price of the ticket
    (e.g. for on-line tickets) or offered at extra cost. In any case, this can be ignored as it is not part of the
    basic content of the service. Others may offer an “open return” at any time of day or it may be possible
    to travel any time on that date. These options may or not be included in the price:

     -     If not included in the basic price, they should be ignored as falling outside of the ex ante definition
           of the reference consumer;

     -     If included, the researchers may fill out a log to collect information on these or similar issues.

    When searching for a ticket at a certain time category, there may be “direct trains” and “slow trains” on
    that route and both should be recorded.

    The price of a ticket to travel in the weekend may also depend on whether one travels on Saturday or
    Sunday. Sometimes Sunday evening tickets may be quite in demand from business travellers. The data
    collection guidelines are to avoid these situations.

    Some discount schemes can be difficult to take into account. Youth or seniority discounts are quite
    straight-forward. Student and business (frequent) traveller discounts are applicable when accompanied
    by an identification card which usually has to be paid and is only valid for a fixed period. Then, the




Train transport                                                                                                      143
    actual price paid by the traveller by trip is the price of the ticket plus the price of the card divided by the
    number of trips taken during the validity period. These schemes could be included in the price tables
    below by creating a reference consumer travelling x times a year. However, the information on these
    discount cards is of an uneven clarity in the websites of the various operators. In most cases it will be
    necessary to contact the train operator in order to exactly understand how the scheme works. There
    are also other types of discounts such as family cards or group discounts. Special offers for
    holiday/weekend promotions will be ignored.




Train transport                                                                                                       144
                  Table 11.6: Dummy table France

                                                                            Paris-Lyon


                            Ticket
                          same day Ticket open                                       Youth      Senior
                            return return date   Weekday   Peak hours   1st class   discount   discount    PRICE     Km    PRICE/km   Hours   Km/Hour
Consumer reference A                                                                                  € 199,80   462   € 0,43     1,9     243,1579

Consumer reference B                                                                                   € 130,60   462   € 0,28     1,9     243,1579

Consumer reference C                                                                                   € 130,60   462   € 0,28     1,9     243,1579

Consumer reference D                                                                                    € 114,00   462   € 0,25     1,9     243,1579

Consumer reference E                                                                                     € 114,00   462   € 0,25     1,9     243,1579

Consumer reference F                                                                                   € 57,00    462   € 0,12     1,9     243,1579

Consumer reference G                                                                                      ?


(Add reference date:dd/mm/yyyy)




              Train transport




                                                                                                                              145
                  Table 11.7: Dummy table Italy

                                                                           Rome-Milan


                            Ticket
                          same day Ticket open                                       Youth      Senior
                            return return date   Weekday   Peak hours   1st class   discount   discount    PRICE     Km     PRICE/km   Hours        Km/Hour
Consumer reference A                                                                                  € 134,28   1194   € 0,11             9     133

Consumer reference B                                                                                   € 92,96    1194   € 0,08             9     133

Consumer reference C                                                                                                     #DIV/0!            0 #DIV/0!

Consumer reference D                                                                                    € 76,34    1194   € 0,06             11    109

Consumer reference E                                                                                     € 75,40    1194   € 0,06         10,6      113

Consumer reference F                                                                                   € 46,48    1194   € 0,04             9     133

Consumer reference G                                                                                    € 37,70    1194   € 0,03         10,6      113


(Add reference date:dd/mm/yyyy)




              Train transport




                                                                                                                               146
                   Table 11.8: Dummy table Poland

                                                                          Warsov-Lodz


                           Ticket
                         same day Ticket open                                       Youth      Senior
                           return return date   Weekday   Peak hours   1st class   discount   discount    PRICE    Km    PRICE/km   Hours   Km/Hour
Consumer reference A                                                                                 € 85,14   256   € 0,33      3        85

Consumer reference B                                                                                  € 56,76   256   € 0,22      3        85

Consumer reference C                                                                                    n.a.    256     n.a.     n.a.     n.a.

Consumer reference D                                                                                   € 45,58   256   € 0,18     4,25      60

Consumer reference E                                                                                    € 56,76   256   € 0,22      3        85

Consumer reference F                                                                                    n.a.    256     n.a.     n.a.     n.a.

Consumer reference G                                                                                    n.a.    256     n.a.     n.a.     n.a.



(Add reference date:dd/mm/yyyy)




               Train transport




                                                                                                                             147
                  Table 11.9: Dummy table Austria

                                                                   Innsbruck-Wien


                            Ticket
                          same day Ticket open                                  Child     Senior
                            return return date       Peak hours   1st class   discount   discount    PRICE     Km    PRICE/km   Hours   Km/Hour
Consumer reference A                                                                            € 159,00   572   € 0,28      5       114

Consumer reference B                                                                             € 98,00    572   € 0,17      5       114

Consumer reference C                                                                             € 98,00    572   € 0,17      5       114

Consumer reference D                                                                              € 98,00    572   € 0,17      5       114

Consumer reference E                                                                               € 98,00    572   € 0,17      5       114

Consumer reference F                                                                             € 49,00    572   € 0,09      5       114

Consumer reference G                                                                               n.a.     572     n.a.     n.a      n.a.


(Add reference date:dd/mm/yyyy)




              Train transport




                                                                                                                        148
                    Table 11.10: Dummy table Sweden

                                                                           Stockholm-Gothenburg



                             Ticket
                           same day Ticket open                                          Child     Senior
                             return return date               Peak hours   1st class   discount   discount   PRICE       Km    PRICE/km   Hours   Km/Hour
Consumer reference A                                                                                     € 150,00    478   €   0,31    3       159
                                                                                                              € 119,07   478   €   0,25   4,5      106
Consumer reference B                                                                                      € 119,60    478   €   0,25    3       159
                                                                                                              € 52,80    478   €   0,11   4,5      106
Consumer reference C                                                                                      € 119,60    478   €   0,25    3       159
                                                                                                              € 52,80    478   €   0,11   4,5      106
Consumer reference D                                                                                       € 119,60    478   €   0,25    3       159
                                                                                                              € 52,80    478   €   0,11   4,5      106
Consumer reference E                                                                                        € 119,60    478   €   0,25    3       159
                                                                                                              € 52,80    478   €   0,11   4,5      106
Consumer reference F                                                                                      € 101,74    478   €   0,21    3       159
                                                                                                               € 45,13   478   €   0,09   4,5      106
Consumer reference G                                                                                       ?


(Add reference date:dd/mm/yyyy)
* Exchange rate as 1/16/2006: SEK-EUR 1.4580. Source: Bloomberg




                Train transport




                                                                                                                                   149
 11.6. Main conclusions

         - In most EU countries the passenger transport service is still dominated by a single firm (at least, at
           the national level although different regional operators for shorter distances may coexist). The few
           exceptions are UK, Austria and Sweden with several passenger transport operators. Market
           concentration tends to be very high as the liberalisation process has just started. An ex-incumbent
             usually dominates the national routes while regional monopolies are very usual in shorter distances.

         - Unlike other services analysed in the report where it was possible to define a common (basic)
           content of the service, we encountered a major difficulty in the case of train transport as different
           routes make the content of the service very heterogeneous. However, the route is intrinsic to the
           service content itself, and therefore, non-separable.

         - Serious methodological difficulties for comparison derive from the heterogeneity of different routes,
           topography, passenger frequency, etc.

         - The bill is known in advance from the moment the ticket is purchased.

         - The number of service providers to be included in the sample is driven by the number of routes
             chosen for the long term monitoring. With exception of a few countries (such as UK or Sweden),
             routes are still monopolies (national, regional or local monopolies).

         - Consumer profiles are needed as consumer characteristics such as age, occupation or the time and
           frequency of travel are important determinants of the price of the service (e.g. for discount cards).

         - The provision of the service is made independently from other services (although it might eventually
           be found tied within holiday packages).

         - Railway operators offer an on-line ticket information service (it is usually possible to book and
           purchase international tickets on-line, but this may not be the case for short distances within a
           country). Researchers obtain fares as “to be paid” by the reference consumer (exception made for
             the possibility of an additional charge when the ticket is bought at the counter. Buying the ticket on
             Internet or even at a ticket vendor machine at the train station may be cheaper).

         - Because of the fact that the routes and reference consumer characteristics are predefined according
           to consumer profiles, price consulting activity on the rail operators’ websites is expected to be quick
           and efficient as well as reliable. Contacting the railway companies with a questionnaire would add
           little value to the data collection as the Internet search should in principle yield perfectly reliable price
           information. Most websites are designed in such a way that is not necessary for the researcher to
           interpret fare tables. Filling out the data for the route, time, day, etc., the applicable fare appears on
             the screen. Still interviewing the service providers could clarify existing discount schemes. Further,
             the number of interviewees is small (often a single provider by route) and this significantly facilitates
             the task.




Train transport




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