Evaluating EU Policies on Public Services: A Citizens´ Perspective

This article evaluates EU policies on public services - particularly public network services - from the citizens' point of view. It is first argued that citizens´ perceptions about these services are important because they are essential for quality of life, but also because they exhibit economic characteristics such as asymmetrical information, adverse selection and positive externalities. Changing EU policy on public services is synthesised and classified into two main phases in section two. Citizen satisfaction with public services as revealed through surveys from 1997 to 2007 is explored in the third section. In the discussion, the prospects for EU policy on public services are considered and, it is argued that, from the perspectives of subsidiarity and proportionality, policy towards strengthening the common market is being increasingly uploaded to the supranational level in the form of directives, whilst cohesion and redistribution policies are being downloaded to the national level or dealt with at the supranational level by 'soft' instruments.

Although technological change has vastly reduced the requirements of high capital intensive costs for new entrants in some segments of the public network services, such as satellite, mobile telephony and cable technologies in the telecommunications sector, in the twenty-first century, important parts of public network services still exhibit non-competitive or monopolistic characteristics, such as intra-regional rail infrastructure, electricity transmission and distribution over high voltage networks, and water and sewerage. Economies of scale and scope still exist across some parts of the networks. High fixed sunk costs associated with building the network continue to deter new entrants, reducing potential for competition, whilst economies of scope allow the largest firms to offer more services. Despite the confidence placed in programmes of privatization, liberalization and unbundling to reform the network services during the 1990s, it is being increasingly recognised that there are limits to these policies because of the economic characteristics of these sectors. In practice, competition can often be introduced into parts of the network, but not across the whole network, as shown in Table 1. For instance, in the postal service sector, competition is possible in the delivery of urgent mail or in densely populated areas, but delivery of non-urgent mail in rural areas needs protecting by exclusive right, or else cream-skimming occurs whilst the periphery is neglected, as demonstrated in the Corbeau case. Table 1.

Telecommunications
Local loop services Temination of call on other networks Long-distance; Mobile; Value-added services.
Local loop to high-density areas or broadband-cable-TV

Postal
Door-to-door delivery of non-urgent mail in lower density residential areas Transportation of mail; Delivery of urgent mail or packages to high volume business in high density areas them. Even if citizens can afford these services, they may not want them, but their provision affects them indirectly through externalities via their neighbours´ access to these services. When considering questions such as affordability and accessibility of public services, distortion is introduced if only consumers´ views are included, excluding citizens or "non-consumers". However, this is what sometimes happened in some EU surveys, as is shown in section three.
Finally, public service networks exhibit problems of asymmetric information (adverse selection and moral hazard) between the regulatory authority and the firm, between firms in the same or different industry segments, as well as between citizens and the firm. Most citizens cannot properly know the quality of water they drink, nor can they appreciate the quality of electricity or gas that cooks their food or warms their home, even after repeated consumption. In this situation, the provider may decrease quality while maintaining prices (moral hazard), whilst consumers struggle to choose the superior provider (adverse selection) assuming there is competition. Hirschman's "exit-voice-loyalty" framework is of use here, since, generally speaking, "exit" for citizens is difficult (Hirschman, 1970;Costas, 2006). In the case there is dissatisfaction with a particular service, this service cannot be returned to the provider, whilst any unknown effects could have an irreversible effect on the consumer (water, energy or transport). Nor can the citizen necessarily opt for another service provider either because there is no competition, or because the perceived costs of switching provider are high, such as internet or electricity. In these cases, the need for "voice" is particularly important.  (Megginson and Netter, 2001), though privatization was often accompanied by new State regulation (Majone, 1996). From the late 1990s, there was increased recognition of the limits of privatization, liberalization and unbundling in the public services.
Generally speaking, EU policy on public services can be divided into two main phases. The first phase, from the Treaty of Rome (1957) to the beginning of the 1980s, is the "blind eye" period, since this was characterised by EC competence in the field, but neglect in practice. The Treaty of Rome aimed to create a single common market characterised by regional competition policy, where goods, and competition law, was now understood to mean that the burden of proof would fall to the provider: in other words, it would have to be proved that exposure to competition damaged SGEI provision. This became known as the "rule exemption clause", according to which competition law is the "default" and the general interest the exemption once proven (Damjanovic, 2007). This change opened the door in legal terms for the second phase of EU policy on public services, "activation".
Change in EU policy was prompted by economic and financial crises, accompanied by a shift in economic policy objectives from Keynesian "interventionism to sustain economic activity" to one based on faith in the market-oriented reforms and private ownership. In this period, the previously unresolved contradictions at the heart of policy on public services were increasingly exposed to probing, and, finally, dramatic reform. Deepened integration, combined with the global shift towards more "neo- EU transport policy is the oldest, the most heterogeneous (in terms of ownership and technology) and perhaps the most complex of all policy on public network services.
A common transport policy was included in the Treaty of Rome, as it was recognised that Europe's transport system needed to be integrated in order to facilitate market integration, so policy was less of a "blind eye" than in other sectors. Despite this, there were multiple delays and failures in implementing a common transport system as argued by Pelkmans (2006). EU transport policy needs evaluating by sub-sector due to its heterogeneity, which is beyond the aim of this paper, but a general conclusion is that there is still significant public intervention in these sub-sectors and no common European model as yet.
Postal services reform is much more recent: liberalization commenced with the reform of the PPT and was pushed further by the first and second postal directives The speed and depth of these policy reforms alarmed certain European politicians and social partners from the 1990s. The basic concern was that citizens needed some kind of guarantee to ensure their rights to satisfactory public service provision amid profound reforms. The European Centre of Enterprises with Public Participation and of Enterprises of General Economic Interest (CEEP), and the European Trade Union Confederation (ETUC), were particularly active, and were commissioned by the French and Belgian presidencies to draft a Charter for Services of General Interest (SGI) as a basis for a Framework Directive (CEEP and ETUC, 2000). These groups were not against the market reforms per se, rather, they sought to reduce uncertainties about public service provision. Public services, previously provided mostly by State ownership, had been subject to regulation enshrined in a Constitution or national legal system. Citizens had a "voice" via the universal right to vote nationally and locally. Under privatised ownership and marketdriven rules, it was feared that commercial interests would be pursued over and above the public interest, which could negatively affect public service obligations, universal service, quality, price and continuity of supply. These concerns grew when Foreign Direct Investment, in particular Mergers and Acquisitions, took off in the public network services from the end of the 1990s. Liberalization created new business opportunities to expand within the EU and beyond, whilst privatization generated new financial opportunities for Mergers and Acquisitions in these services, where size mattered, given persisting economies of scale and monopolistic competition. Newbery (2007) argues that one of the reasons for the "merger wave" in recent years is that since energy demand and thus organic growth is increasingly only slowly, electricity utility managers either have the option of returning profits to shareholders or spending them on acquisitions, the latter being more in their interest. This conflict of interests was predicted by the "principal agent" dilemma whereby, in the face of Mergers and Acquisitions, managers, shareholders, workers and citizens can all have different interests. This conflict was one of the justifications for introducing golden shares and designating the sectors of "strategic" interest.
Recently, public network service providers, bound by Nation States for the bulk of the twentieth century, have transformed into some of the world's leading  Krugman (1997) argues that, although EU trade commissioners support free trade in theory, in practice, they are inspired by mercantilism. In contemporary trade policy, the State, which must safeguard the interests of a national economy and its principal stakeholders, privileges nationally-based firms at home in order to facilitate their expansion abroad. This can be understood as a neomercantilism, in that the objective of trade policy is to achieve a trade surplus (public service exports are promoted whilst imports are blocked). Indeed, "national champion" policies at home have been one of the key developments in promoting the expansion of public network services abroad Díaz-Fuentes 2007, UNCTAD 2008).
In parallel to the increasing involvement of public service networks to liberalization, privatization and internationalization, there was a notable shift towards their "commodification", in policy reform and in the way in which public services were conceived. As part of this change, systematic efforts to survey and collect data on citizen and consumer satisfaction began in this period. During the 1990s, a decision was taken within the EU to replace the house-hold term "public service" in official discourse with SGI. The Commission (EC 1996:1) argued that this was necessary in order to avoid the ambiguity of the term "public service". This ambiguity, it was argued, lay in the fact that two things were generally understood: public ownership and a service for the public. Claiming it must adopt a neutral stance on ownership, the EC argued that SGI was a more accurate term as it expressed the service was for the "general interest" without suggesting who owned it. It will be remembered that SGEI figures in the original treaty, but SGI does not. Definitions of these two terms were fore-grounded in the Green and White Papers on SGI (EC 2003d and2004a).
Confusingly, the term SGI was used to refer to two different things: it referred to noneconomic services, and was also used as a "blanket" term to refer to both SGI and SGEI. Although the categories SGI ("non-market") and SGEI ("market") are stable theoretically, the way in which sectors are classified into "market" and "non-market" sectors is fluid and subject to change. Moreover, Member States may have different ideas about how to classify services. While it may be less controversial to justify the classification of justice and security as SGI, it is more difficult to agree on social protection and education classification. Those services not falling in the SGI category are understood as "market" services upon which specific public obligations are placed and subject to competition when this does not negatively affect service provision. Writ large, this fluidity has important consequences at the international level since the GATS rules are applicable to privately-owned services that are no longer deemed appropriate for protection from the competition at the national level (Raza, 2007).
Though, ostensibly, the terms SGI and SGEI were introduced in order to present EU policies more clearly, after more than a decade of reform, most citizens simply do not understand this terminology. Blame lies with the EU, as the terminology is confusing, and has not been communicated well. The problems are greater in countries such as Germany and the UK, which do not have similar legal equivalents at the national level, making their adoption more challenging. In some of the newer Member States such as Poland, the Czech Republic, Estonia and Slovenia, these legal categories do not even exist (Mangenot, 2005). Furthermore, SGI documentation is usually not translated into the new Eastern European languages leading to semantic confusion.
As part of this "activation" phase, systematic attention was paid, from the mid 1990s, to the opinion of citizens and consumers about public service provision. Two main influences were at play here: firstly the New Public Management school, secondly, continental legal traditions (Clifton, Comín and Díaz-Fuentes 2005;Prosser, 2005).
The next section critically analyses the major surveys on citizen and consumer satisfaction published between 1997 and 2007.
3. Evaluating satisfaction with public services: consumers, citizens and "nonconsumers" From the mid 1990s, the EC intensified efforts to produce systematically data on citizen satisfaction with public services, as well as on measuring public service performance. In regard to the latter, a horizontal, "evolutionary" method of evaluation was adopted in 2002  In what follows, the surveys will be analysed in order to extract information about citizens and consumers views on public services. Data revealing information about consumers´ and citizens´ satisfaction with SGI in general is analysed for the EU-15 (using EC, 1997;EC, 2000a andEC, 2002a), the EU-10 (EC, 2003a) and the EU-25 (EC 2005a and2007a). Attention will be paid to methodological changes, and efforts will be made to compare over time the results, by country, sector and by issue surveyed, contrasting where necessary, the "official" interpretation with an independent analysis.
The first survey (EC, 1997), entitled "Consumers´ Europe: citizens face competition of public service monopolies", was designed to understand how citizens perceived public service reform, particularly liberalization, their recent experiences with service quality and price, satisfaction with public services, and their expectations about minimum service. Services were included in this survey were quite broad, including gas, water, fixed telephony, postal services, air transport, urban transport, interurban coach transport, rail transportation and television access, in addition to nonnetwork services, such as justice, health, ambulances, road maintenance and so forth. Some 61% of European citizens stated they were aware of the opening of public services to competition, while 70% of them considered it a good thing in regard both to service quality and price. However, the vast majority claimed they had not yet witnessed improvements in price (85%) quality (76%), choice (73%) or customers´ interest protection (83%). Price reductions in the telecommunications sector were slightly better than average, since "only" 73% believed they had not enjoyed cuts yet. The UK did slightly better than the rest of the EU in terms of price reductions in telecommunications, electricity and gas distribution, though results for water, railways and postal services were very similar to the EU average. In regard to perception of service quality, EU citizens revealed strikingly different results depending on the sector: whilst 81% of EU citizens thought electricity distribution was of a good quality, only between 41% and 44% thought the same about public transport and railways respectively, as shown in Table 2. Within each sector, country responses differed: in the case of electricity distribution, percentages ranging from 53% in Greece to 97% in Denmark thought the service was satisfactory. When interpreting results, there may be a large percentage of "don't knows" (dk), particularly in certain countries for particular sectors (such as gas in Greece, Finland and Sweden where availability was limited).
Another clear trend was country differences. Countries fell into one of three categories: those with citizens having below-average satisfaction with public services (Greece, Italy, Portugal and Spain); those with above-average satisfaction (Austria, Luxemburg, Netherlands, Finland and Denmark); and those with close-toaverage satisfaction (Belgium, France, the United Kingdom, Germany, Ireland and Sweden). Despite an early start and prolonged privatisation process, and the liberalisation of many public utility monopolies, UK citizens were not, on average, relatively more satisfied with their public services in general than in the rest of the EU. Indeed, in the UK, most satisfaction was shown for postal services, which, in 1997, was still a public corporation subject to public service reform, whilst the lowest quality perceptions were perceived for railways and urban transport, where liberalisation was relatively advanced. In sum, this survey noted a paradox: European citizens had high hopes about the benefits that the liberalization of public services would bring, but most of them had not as yet experienced the benefits in terms of price, quality and choice.
The next survey (EC, 2000a) avoided the dilemma of using "citizen" or "consumer" in declared that certain questions did not concern them ("not applicable") were screened a posteriori. These citizens were "non-consumers" of services. Data on satisfaction was thus recalculated on that basis. This survey measured consumer satisfaction with access, prices, quality, information, contracts and complaint handling for SGI. Since the methodology was identical, comparative analysis of consumer satisfaction could be derived. permitting coherent sectoral and country comparisons, they also show consistent results about customers´ opinions about different SGI as revealed in the matrix of correlation between criteria (quality, price, information and contracts). This indicator was most significant between price, contracts and information, and between information and contracts, suggesting consumer concern about their rights.
In the face of enlargement, the survey "Consumers´ opinions on SGI" (EC 2003a) was published on consumer satisfaction in the ten candidate countries. This found that overall satisfaction rates with SGI were very similar in acceding countries.
Satisfaction with postal services, electricity, water, gas, urban transport and railways were rated somewhat higher than in EU-15, whilst there was less satisfaction with fixed and mobile telephony (EC 2003a). The main source of dissatisfaction by consumers from the candidate countries was the perception of high prices.
The most recent surveys on satisfaction with SGI are EC 2005a and EC 2007a.
These surveys, called simply "Services of General Interest" deal with the same sectors as the surveys from 2000, whilst they also include internet and banking.
There is an interesting change in the methodological approach in these recent surveys. Whilst EC 2000a and EC 2002a screened out non-consuming citizens from the analysis, EC 2005a and 2007a identify SGI consumers and non-consumers at the outset. Questions of access are stressed for consumers and non-consumers, and the latter were surveyed further on issues such as accessibility, affordabilityprice, quality, consumer rights protection and consumer relations. Non-consumers who nonetheless potentially had SGI provision were in particular asked about affordability and lack of knowledge. In addition, for the first time, additional socioeconomic variables of respondents were considered, including gender, age, education, household composition and "subjective" urbanisation. Another significant change is that these recent surveys seek to better understand the use of SGI. EC

Table 4. Consumer satisfaction with SGI: EU-25 average opinion on Access, Complaints and Affordability (users and non-users) in 2004 and 2006
It is interesting to contrast the official interpretation of survey findings with an independent analysis. In terms of SGI access, the latest survey is upbeat: "The results show how widely spread access is to a number of services ranging from the routine (water and electricity) to new technologies (mobile phone and internet) and services such as banking and transport….. it can be noted that at an EU level, access has not become more difficult in any sector…" (EC 2007b: 5). This optimistic scenario is largely derived from the fact that EC 2007b was compared with EC 2005b. If, however, access to SGI is considered over the longer term, as in Table 4 Satisfaction with affordability is the next category whose evolution can be assessed.
Again, EC 2007b is upbeat, asserting that, according to users' views, most services have become more affordable. This assertion is questionable. A significant proportion of consumers consider that the prices of some of the basic SGI are either not affordable or excessive (31% for electricity and 33% for gas). In addition, there is an important proportion of citizens who are excluded from SGI because they are unable to pay. Among mobile phone users, 76% claim the service is affordable, as shown in Table 4. However, of the "non-consumers", 73% think this service is excessive or unaffordable. Some 40% of non-consumers of electricity and fixed telephony find the services excessive or unaffordable. For internet users, 80% consider the service affordable, while for non-users only 38%.

Discussion
Shifting public and private involvement in public service provision has long been a feature of societies. It is argued here that EU policy on public services started as a "blind eye" one from 1957 to the late 1970s, but then became "activated". This latter phase was characterized by liberalization, deregulation, privatization and unbundling of many public service providers. Particularly from the 1990s, there has been a gradual "commodification" of public services through the stressing of consumer satisfaction, over and above citizen satisfaction. This trend has been revealed through the evolution of surveys on satisfaction with public services.
The horizontal surveys on SGI also reinforce this trend. The three latest reports published in EC 2004b, 2005b and 2007b show a gradual, but unquestionable shift to market driven and structural reforms of network industries providing SGI more than a concern to implement regulation based on citizen voice. The latest report stresses above all the issues of market policy, market structure and competition, prices and competitiveness, and the effects of market opening. The final two parts of the seven-part report deal with public service obligations and consumer views. The term "citizen" is not even used. When citing consumer views, an upbeat perspective is adopted whereby the public service reform has been an unconditional success. 5 From a policy perspective, the cure to improve network industry performance is more market. If consumers do not benefit from market reforms it is not because of any lack of enforced regulation, but rather, because competition is restricted by Member States, incumbents firms, technical, legal and other barriers, and even "consumer inertia". 6 What is needed, it is claimed, is more liberalisation, and further removal of barriers to new entrants. Market-orientated reform will cure EU sclerosis and, at the same time, increase "consumer satisfaction". Even though the creation of EU Transnational Corporations in these sectors in a monopolistic competitive market could block market integration, the EC is largely unwilling or unable to challenge this process. 7 In the energy sector, Helm (2007) has argued there is a "new energy paradigm" whereby governments are focusing on security of supply and climate change, rather than full liberalization of markets.
What of the future? If, in the middle of the 1990s, it looked possible that a Directive on SGI could be passed that focused squarely on citizens´ rights, in 2008, it seems that the EU is quietly, and gradually, abandoning the aim of protecting citizens through supranational "positive integration" (Tinbergen, 1954), downloading this to the national level, or else promoting discussion with "soft" instruments or in non-