UK PAF review fuels industry fears of pricing confusion

Postcomm's review of PAF has split industry opinion. While many recognise its financial importance to Royal Mail, others fear a repeat of the 'fiasco' which followed the deregulation of directory enquiries

Regulator Postcomm's decision to start a full-scale review of Royal Mail's Postal Address File (PAF) (PM last week) has sparked major debate in the industry. One side says 'about time'; the other 'why now?'.

Originally created by Royal Mail to help postal delivery, the file – updated quarterly – has long since been adopted by businesses as a tool to locate, verify and clean customer addresses, and aid marketing. It is also used extensively within geographical information systems (GIS) to draw up location analyses.

However, criticism is never far away. More than 12 years ago, the industry was in uproar after Royal Mail terminated all licence agreements with PAF bureaux and forced them to sign new contracts. Price rises of up to 250 per cent ensued (PM October 10, 1994). Meanwhile, the current review has been sparked, in part, by a rash of complaints over unfair pricing, and concerns that Royal Mail could exploit it monopolistic position.

CCB managing director Bill Burey welcomes the move, claiming Royal Mail has become complacent through lack of competition. He comments: "There's a lot of confusion in the market, especially over how you pay for PAF.

"There's also the issue of paying extra for addresses that come onstream between the quarterly updates. Why should we be paying more for those, and why can't Royal Mail update the file more often?"

But some fear the industry regulator could put a spanner in the works by deregulating the market, in the process making it even more confusing – akin to the directory enquiries market, dubbed a 'fiasco' (PM last week).

EuroDirect group product manager Leanne Douglas states: "It's undoubtedly important for Postcomm to regulate Royal Mail to try to ensure that as many businesses as possible have access to this information to ensure equal competitive advantage. But to make it any cheaper would no doubt make it unfeasible for Royal Mail."

She continues: "PAF has huge commercial value to Royal Mail, because it has such wide-ranging applications, beyond that of its original creation. It also takes considerable maintenance.

"This undoubtedly means that it will always have to have a reasonable price tag."

Whether Postcomm will agree remains to be seen. One thing is beyond doubt, however: Royal Mail has a fight on its hands to ensure this valuable revenue stream remains intact.

Copyright: Centaur Communications Ltd. and licensors

PAF: Postcomm rules out '118-style' fiasco
Precision Marketing, p 2 02-24-2006
Postcomm has allayed industry fears of a 118-style debacle over the review of Royal Mail's Postcode Address File, by assuring the direct marketing sector it has no plans to open up the market to private operators.

Speaking to Precision Marketing, director of market infrastructure Andrew Starkey and assistant director Jeremy Cain, who are spearheading the review, stressed that it is an appraisal of Royal Mail's operation – not the market.

Starkey says: "Royal Mail has invested more than 40 years in this data, and we have no plans to deregulate the sector. We did study the directory enquiries market and held talks with the National Audit Office before deciding whether this was an option.

"There are a number of organisations which contribute to PAF, including Ordnance Survey and local government, so it would be very hard for another company to replicate the data. None of the new entrants are planning to do so."

The main objective of the review, Postcomm says, is to ensure Royal Mail is not gaining competitive and financial advantage from the scheme. Industry estimates put the revenue Royal Mail generates from PAF at more than #18m, although Postcomm refused to confirm this figure.

Cain states: "PAF prices have not increased significantly over the past few years, but usage has. At the moment, Royal Mail claims it is covering its costs and making a small profit from the service. But we want to ensure it is not dumping costs from other areas onto PAF to make it look like it is more expensive to run than it is."

The postal watchdog is also proposing that Royal Mail sets aside a proportion of PAF profits to promote its use throughout the direct marketing industry. Cain adds: "We want Royal Mail to start ploughing some money back."

Postcomm says that, so far, Royal Mail has collaborated fully with the review, although Starkey maintains: "We are driving a hard bargain."

When the review was announced (PM February 10), one industry insider commented: "The last thing we need is Postcomm wading in with its size tens and repeating the fiasco that ensued Ofcom's 118 review. Its plans to introduce competition there have backfired badly."

The closing date for responses to the consultation is May 12.