Royal Mail's postcode database reveals its profitable side

Tucked away at the end of an 83-page report by Postcomm, the regulator which oversees postal services in the UK, is an annexe that contains some very important figures: the profit and loss account for the Royal Mail’s operation of its Postcode Address File.

PAF, as it is known, contains the details for 27m addresses in the UK. It is a very valuable file, for as it underpins a huge part of the economy: not just the delivery of more than 80m postal items per day (which underpins Royal Mail’s annual GBP 9bn revenue), but also third-party businesses that rely on postcodes. Direct marketing is one, but there is a burgeoning market too for postcodes in vehicle satellite navigation systems, location-aware devices and a panoply of distance and search sites.

So how much does it cost Royal Mail to run and update PAF, and how profitable is it? The figures acquired by Postcomm show that for 2005-06, the PAF unit within Royal Mail had an income of GBP 18.4m and costs of GBP 16.8m, more than half of the latter coming from maintaining it. The result: a profit of GBP 1.6m, or 8.6% of revenues. That, Postcomm says, is about the right level for PAF profitability, which it suggests should be between 8% and 10% of revenues.

But there is trouble brewing over at PAF – specifically, over the input that local authorities provide to it. When a new address is created, the local authority is obliged to tell Royal Mail; the new address is then assigned a postcode. Ordnance Survey also then “locates” the postcode on its own maps. The local authorities then pay for PAF and OS data built on the information they provided. That has led an increasingly militant approach: Leeds City Council suggested to Postcomm that local authorities should have unrestricted access to PAF; another suggested they should be given PAF free because they help maintain it. (The Postcomm data doesn’t say what proportion of PAF revenue comes from the public sector.)

If local government withdraws cooperation or begins exerting intellectual property rights over PAF, things could become very turbulent indeed, endangering a key national resource even though its profits are minuscule within Royal Mail.

Royal Mail said it is “happy” to start paying for the information from local authorities and is “confident of a successful outcome in the very near future.” But will that push up the cost of PAF? On that, there was no comment.
The Free Our Data campaign has a simpler solution: make PAF free online and remove the copyright restrictions on reselling it. The revenue impact on Royal Mail would be minimal; yet as well as engendering a lot of goodwill inside the public sector, doing so could encourage new private sector businesses presently put off by the cost. It’s government-owned data; we should all get its benefit.

• Join the debate at the Free Our Data blog: freeourdata.org.uk/blog