Royal Mail has nothing to fear from competition, says Postcomm

Royal Mail will be able to withstand any loss of the delivery market it faces when competition is opened up, a senior member of the postal watchdog claimed yesterday.

The UK's biggest mail company has voiced fears that it could be hit hard by proposals by the industry regulator, Postcomm, for a cap on stamp charge rises.

The watchdog is also planning measures which could see Royal Mail having to pay out refunds worth £280million if it fails to reach performance targets.

The proposals have been put on the table before full competition comes into the postal services in January.

Postcomm's chief executive, Sarah Chambers, said she was convinced the universal service obligation to deliver to all addresses for the same stamp price meant that rural deliveries would not suffer from the effects of competition.

But Royal Mail said Postcomm should not forget the extent to which remote and rural communities in Scotland depended on the company.

Ms Chambers was speaking exclusively to the Press and Journal before she held meetings with business groups, Enterprise Minister Nicol Stephen and a group of MSPs.

Postcomm has mooted a cap of 4p on first-class stamp charges and 2p for second class by 2010 and the ideas have been out for consultation.

Last week, Royal Mail chief executive Adam Crozier said the regulator was the biggest threat facing the business and described its current proposals as unacceptable.

But Ms Chambers said this did not mean that negotiations with the company had reached deadlock, as evidence was still being assessed and further proposals would be produced in November.

She was sceptical of Royal Mail's concerns about losing out under price rises, because losses of market share could be offset by growth in market size.

"At the end of the price-control period we still expect them to have a substantial market share," she said.

"We wouldn't want to sit back and watch their business go down the drain and think it's fine because competitors could lap it up. That wouldn't be fine if it were a threat to the universal service."

The prospect of competitors cream-skimming profitable deliveries was not necessarily a bad thing, Ms Chambers said. "You would think Adam Crozier was losing all his business in urban areas, but it's nothing like that. They will have over 70% to 80% and will still have a broader, deeper valuable network than anyone else.

"They will also have the value of the VAT exemption, which competitors won't have, and that will give them an enormous price advantage.

"There's no danger of rural services being left on the shelf. There's an absolute duty under their licence to continue with delivering a universal, affordable tariff and we have a duty to ensure they keep doing so."

A Royal Mail spokesman said an economic-impact study last week showed the cost of delivering a letter was 625% higher in a rural area than an urban area.

"It is vital, therefore, that Royal Mail is allowed to compete fairly in the open market for the more profitable business mail which helps to sustain these services."

Postal rivals get stamp of approval
Evening Times, 1, Sec. News, p 21 09-15-2005
POSTAL watchdogs have defended their controversial decision to allow private firms to collect, transport and deliver letters in competition with Royal Mail.

It came when Postcomm, the independent regulator for Britain's postal services, met dozens of people during a briefing in Glasgow.

Officials wanted to outline their proposals and listen to the views of stakeholders, community groups, politicians and the private sector.

The meeting at One Devonshire Gardens follows the decision to allow the private sector to compete with Royal Mail from January 1.

The watchdogs insisted that potential rivals would have to match Royal Mail by offering new customers deliveries six-days a week, a network of post boxes and a "one-price goes anywhere" stamp.

However, rivals can bring in more expensive stamps if they introduce a range of new services including special deliveries between two cities, such as Glasgow and Edinburgh.