UK regulator must balance competition and obligation

Postcomm, the regulator created in 2000 to oversee the postal market’s opening up to competition, has two tasks to balance.

The first is to develop a competitive market and ensure that Royal Mail, the former monopoly, does not stifle rivals. The second is to preserve the universal service obligation, allowing anyone in the UK to post letters and parcels to any other part of the country at the same affordable rates.

So far, it has managed to meet both these targets.

Postcomm’s strategy re-view, set up last summer, is examining policy options and is expected to publish its preliminary thoughts within a few weeks.

These will include whether it should require the separation of Royal Mail’s retail arm, which collects and sorts post, from the wholesale operation that delivers the mail for it and other postal operators.

It is also asking whether changes are needed to the universal service obligation, which covers more than half the post – including much of the bulk mail sent by business users.

This guarantees daily delivery of mail for every UK household and business, six days a week, and one collection per day, every day except Sunday.

Royal Mail has already requested a change in its licence in order to limit the obligation to stamped mail, which is about 10 per cent of the total, saying the present rules hinder its ability to compete with private sector operators.

Sarah Chambers, Postcomm’s chief executive, appeared sympathetic to the request in her address to Institute of Economic Affairs conference on the future of the postal services.

The strategic review is considering reducing the number of products covered by the obligation as growing competition begins to increase the choices available to users.

She said Postcomm was exploring reducing the obligation to deliver to the front door six days a week. Such changes would require amendments to the Postal Services Act, which opened the mail to competition.

The European Union directive on postal services specifies that countries should maintain a universal service every working day, but other European countries have limited their coverage to Monday-to-Friday.

Ms Chambers told the conference that lifting the requirement to deliver on Saturday would not stop weekend deliveries, while retaining it could fetter the development of better services – including, possibly, Sunday deliveries by some mail companies.