DMA View on: Facts on… Royal Mail review
The furore over the impending shake-up to Royal Mail’s pricing under its PiP (Pricing in Proportion) initiative has dominated the headlines in recent months. So it’s little wonder that its Price and Service Quality Review has slipped under the wire.
But the proposals put forward by Postcomm in June this year to regulate Royal Mail’s prices and the quality of its service are of real importance.
In its consultation document, Postcomm proposed a price cap on products for business customers of RPI (retail price index) minus two per cent per year. This means that an annual inflation rate of 2.5 per cent would freeze average prices – good news for the industry.
“It could lead to some real downward pressure in prices, for the first time in the era of regulated prices,” says David Robottom, DMA director of postal affairs and industry development. The balance that Postcomm needs to achieve, he adds, is incentivising Royal Mail to improve its effectiveness at the same time as ensuring a downward pressure on prices for users.
Postcomm has also overhauled the existing service targets, reducing the existing 16 to 10. Compensation will still have to be paid if any of these targets are missed – a figure that topped £40 million to business customers in the financial year ended April 2004.
Four new targets have been proposed, including one that relates to overseas mail. Eighty five per cent of mail destined for European countries should be delivered within three days.
On the thorny topic of regulating the price Royal Mail charges to competitors accessing the last mile of delivery, there might, at last, be some clarity.
At present, access prices are outside of the scope of the price control and Postcomm has expressed concern that unless it is realistically priced, competition and innovation will be suppressed.
Postcomm is due to publish its access proposals later this month, along with the final price control proposal. Robottom predicts access prices will be bought within the price control, offering competitors to Royal Mail some protection when it comes to negotiating on access terms.
