UK Royal Mail proposes letters to be priced by size
Royal Mail wants the postal regulator, Postcomm, to allow it to price mail by size, rather than purely by weight. However, the price for sending three-quarters of mail would not change under these proposals.
Royal Mail’s proposals would introduce a fairer and simpler pricing system, which more accurately reflects the costs of handling mail. This is because the size and shape of most mail is a more important factor in the cost of mail sorting and delivery than weight.
The changes are needed so that Royal Mail can continue to provide a one-price-goes-anywhere universal postal service, and can compete fairly with competitors in the 21st century.
The proposals should be simpler for customers since there would be only five stamp prices for First and Second class mail instead of the current 16 for First class and 13 for Second class.
David Dale, Royal Mail’s Head of Size Based Pricing, explained: “Most letters and cards wouldn’t cost any more to post. In fact 74 per cent of the mail would be totally unaffected. And this isn’t an increase in our prices – overall the proposals are revenue neutral for Royal Mail.”
He added: “These proposals would bring our prices more in line with our costs. In the new competitive postal market it is commercially impossible for Royal Mail to keep its traditional pricing structure, which gives large cross-subsidies. While there will always be some cross-subsidies in a business that provides a one-price-goes anywhere service, it is important to have a level playing field in the emerging competitive postal market.
“The current pricing structure has been in place for decades and is inherited from a time when all mail was hand-sorted, and so is increasingly out of date. Most other postal administrations already use size in pricing mail, because this is the key cost factor in the modern postal industry.”
He continued: “These changes would not increase the nation’s total post bill. While most customers wouldn’t see any changes, some would have price cuts and others rises.”
Large lightweight and bulky items such as posters in cylindrical packing would cost more to send since they cost Royal Mail more to handle – as they have to be hand-sorted and take up more space in mailbags and vans. However heavier compact items, such as books, would cost less to send.
David Dale said: “Since there would be just five prices for First and Second Class letters, these changes would make it easier for people to work out what stamps to use as they would be able to price most of their mail at a glance.”
Royal Mail has already done extensive work to ensure these changes are as fair as possible for customers. It has carried out a 12-month consultation with business customers to find out what they think of these changes, and has taken on board any major concerns where possible. It found that around 80 per cent of larger companies are in favour or neutral about the proposals. And a National Opinion Poll survey found that 74 per cent of ordinary customers and 68 per cent of small businesses were positive or neutral about the changes.
The aim is to implement these changes from September 2005, and to give customers as much notice as possible of any change.
