Post Office to face hundreds of competitors in radical shake-up

Post Office to face hundreds of competitors in radical shake-up
From The Independent February 19th, 2001

Michael Harrison Business Editor POSTAL DELIVERIES are to be thrown open to competition in towns and
villages across the country under radical plans by Britain's post regulator to
license hundreds of new local mail operators. The shake-up poses the biggest challenge to the Post Office in 350
years. It will also see a number of national operators given the right to
begin long-distance postal deliveries. Graham Corbett, chairman of PostComm, gets his new powers to start
licensing rivals on 26 March when the Post Office, now renamed Consignia,
becomes a plc. In an exclusive interview with The Independent, Mr Corbett said that
"serious" competition in postal services could be in operation as early as
this autumn. The licences for local mail operators are likely to be issued for
periods of three to four years, but national operators will get long-term
licences lasting seven to 10 years. Mr Corbett said he would like Britain to follow the example of Sweden,
where in many towns there are two or three rival companies delivering local
mail. He also said he had held informal discussions with bus operators who
were interested in offering mail delivery services in the regions they serve,
particularly in isolated rural areas. The new licensed private operators will be allowed to issue their own
stamps and to install their own post boxes. Because they will have much
smaller overheads, they are expected to undercut the Royal Mail massively on
price, delivering letters for perhaps half of the current 27p cost of a
first-class stamp. PostComm has not yet decided whether the Royal Mail will be allowed to
compete directly with the other operators on price. When it converts to plc
status, it will still have a universal service obligation requiring it to
deliver to every address in the country at a uniform price. The regulator has a duty to ensure that the Royal Mail can fulfil that
universal service obligation, which may restrict the extent to which private
sector competitors will be allowed to "cherry-pick" its most lucrative
business areas. Martin Stanley, the chief executive of PostComm, said: "The question
is how brave can we be in allowing competition to take business away from the
Post Office. That in turn depends on whether we decide that the universal
service obligation is indeed an obligation, in which case there need to be
cross-subsidies, or whether it is in fact a net benefit." Mr Corbett said that there were ways the Post Office could compete
other than on price. For example, it could start offering a same-day service,
or several deliveries a day rather than the present two deliveries. Four or five national operators are likely to be licensed initially,
delivering mail between large cities such as London, Manchester, Birmingham
and Glasgow. Mr Corbett said that he would like to see at least two new entrants
offering competing services on the same long-distance routes. "It is going to
be an experiment, a `suck it and see' process," he said. There is growing concern in the Post Office that the recent wave of
unofficial wildcat strikes could leave it vulnerable to losing its monopoly
altogether in some parts of the country. Since October it has lost 30,000 man
days due to unofficial action, and there have been 120 separate disputes. Mr Corbett said: "If we see a situation developing where the Post
Office was simply not able to meet its universal service obligation, then we
as a regulator would have a duty to see if there was an alternative way of
providing that service." He added: "The moment the wildcat strikers realise that there is an
alternative is the moment they will learn a very difficult lesson." As well as imposing a two-year price freeze on the Royal Mail, Mr
Corbett will have powers to levy fines of up to 10 per cent of turnover if it
fails to match performance targets. The current target is to deliver 92.5 per
cent of first-class mail the following day. Mr Corbett intends to set a higher target, but not for two or three
years until the Royal Mail has met the current one. Next-day letter delivery
has fallen to about 85 per cent because of the disruption on the country's
rail network. Caption: The Post Office is facing the biggest competitive upheaval in
its 350-year history, possibly from as early as this autumn. The new
regulator, PostComm, gains its powers to start licensing rival deliverers next
monthINDEPENDENT, 19th February 2001