Royal Mail loses bid to bring in zonal pricing
Royal Mail’s hopes of boosting flagging profits by shaking up its charging structure were dealt a blow yesterday, when the regulator threw out its plans for zonal pricing.
Postcomm said it would reject Royal Mail’s proposal to charge according to the costs of delivering in certain areas because it would be “discriminatory”.
Rivals to the postal group complained that the plan would enable it to price them out of the market because it could lead prices down in lucrative, city centre locations. Consumers also feared that services to rural areas would suffer as Royal Mail charged more for going there.
Only business customers would have been affected by a switch to zonal pricing.
This was the cornerstone of its moves to increase competitiveness as it faces more rivals and a declining postal market. The group has also asked for rises in the price of stamps for domestic mail.
Nigel Stapleton, Postcomm chairman, said: “We are proposing to reject Royal Mail’s application mainly because it has put forward a pricing structure that appears to have a number of discriminatory features and would have been introduced in a way that would lead to unreasonable changes for customers.”
A Royal Mail spokesman said: “We are disappointed at the decision. This was a proposal that only affected large business users.”
Postcomm will next month publish a report setting out its objections to zonal pricing, after which there has to be a two-month consultation. But the rejection will be backed by Royal Mail’s customers so is unlikely to be reversed.
The regulator will also soon adjudicate in a row between Royal Mail and its rivals over the amount the state operator can charge competitors to use its infrastructure for the last mile delivery. Rivals say it is charging too much so they cannot make a sufficient margin, while it says it does not make enough profit on the arrangement.
Royal Mail’s wranglings with the regulator come as it faces a fresh round of strikes tomorrow.
The Communication Workers Union will begin a two-week programme of walkouts across Royal Mail’s operations in a dispute over pay. No talks are planned between the two sides to avert the action.
The union has already staged two national walkouts and now aims to escalate its action by rolling strikes across different postal operations.
Royal Mail has offered a 2.5 per cent pay increase while the union wants pay brought in line with the national average which would mean a 27 per cent increase over five years.
