New Royal Mail price proposals to incorporate size and format leave 70% of mail unaffected

Royal Mail today published new proposals for pricing mail mainly based on size, which could affect up to 20% of items sent by consumers, and up to 30% of the UK’s total business and consumer mailbag. The changes, which are subject to regulatory approval, would not be introduced until April 2006. They would move postal prices in line with costs by removing some of the hidden cross subsidies funded by high charges to customers sending certain items which are cheaper for postal operators to handle.

UK mail prices have historically been set purely on the basis of weight, even though the size and shape of items are what largely determine the costs of collecting, sorting and delivering letters and packets. The new prices would be mainly based on the format of the item being sent.

Royal Mail’s Commercial Pricing Director, Lorna Clarkson, said: “Mail prices have been unfair for a long time. From January customers will, rightly, have increasing choices about who they give their mail to. They will expect to pay prices which fairly reflect the costs that postal companies incur. They will take business away from anyone overcharging them – regardless of the history behind the pricing.

“These proposals start to redress the balance. They don’t affect the universal service – the geographic cross subsidies that enable us to operate a ‘one-price-goes-anywhere’ system will remain. The biggest effects will be felt by business customers – who will be targeted by competitors when the market opens fully in January 2006. Over 80% of mail sent by consumers won’t see any changes.

“As people become familiar with the new structures we are confident that they will find the new prices simple to understand – especially because they are based on easy to judge sizes and formats, not just precise weight measurements.”

Royal Mail has revised its original proposals to accommodate many of the issues raised by the business customers most likely to be affected. In particular, the new proposals will treat items of a thickness up to 25mm as standard large letters. Previous proposals set the maximum thickness for standard large letters at 10mm. The change will mean fewer changes for companies and individuals mailing items such as CDs and DVDs.

Lorna Clarkson said, “Changes are essential, but we’ve taken the opportunity to make amendments where we think it will make things more straightforward for our customers. All these changes need to be considered by the regulator and none can, in any case, be implemented until next April. If the regulator gives the go ahead, Royal Mail will launch a major communication campaign to ensure that all affected customers understand, and have time to prepare for, the changes. Our help lines and staff in Post Office branches will be available to help everyone get used to the new prices”

Similar pricing systems combining weight and size already exist in Belgium, Denmark, Finland, Greece, Italy, Luxembourg, Australia, Canada, Japan, and the USA. The following countries also have forms of size based pricing – Austria, Germany, the Netherlands, Poland, Slovenia, Switzerland, Hong Kong, New Zealand, and South Africa.

Ends

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Notes to editors:

Royal Mail first applied to Postcomm for the introduction of size into postal prices in August 2003. Further details including proposed business prices are available at www.royalmail.com/pricebysize

Royal Mail’s pricing proposals – these prices are indicative, and may change before size based pricing is introduced

The amendments to the initial proposals are:
· Thickness of large letter increased to 25mm, up from 10mm
· Thickness of large letter response service increased to 35mm, up from 10mm
· Maximum weight for First and Second Class large letters increased to 750g, up from 500g
· Four weight steps for large letters, up from two weights– now 0-100g, 101-250g, 251-500g, 501-750g
· Five weight steps for packets, up from two weights – now 0-100g, 101-250g, 251-500g, 501-750g, 751g-1kg.