Postcomm issues documents on introducing competition and the cost of the universal postal service

Postcomm issues documents on introducing competition and the cost of the universal postal service
The competition consultation document issued on 28 June 2001 assesses a wide variety of options for giving customers the power to choose who provides their postal services and invites comments from operators, customers and consumer organisations. Their responses will be used to frame Postcomm’s proposals later this year for a new competitive regime.
The document suggests that reducing the upper limit of the licensed area — the traditional approach — may not be the most effective way to promote competition. Alternatives canvassed include:
· Opening up the postal services market completely.
· Opening up particular segments of the market to competition, such as direct mail and bulk mail.
· Introducing competition into separate parts of Consignia’s postal supply chain.
Potential entrants to the market could include existing postal operators, or non-post companies with an existing network that could be adapted to provide a postal service.
Businesses already engaged in a network-based industry – newspaper distributors, logistics-based and freight operators, milk delivery firms, supermarkets – could be licensed to convey mail as an add-on or extension of their core activities.
There could be room for newcomers too, as in Sweden, where most of the 100 new entrants into the market are involved in local delivery, providing innovative services that customers appreciate.
Postcomm has an over- riding duty to ensure the provision of a universal postal service. The consultation document considers the extent to which each option for introducing competition might be compatible with that duty.
Also, Postcomm has simultaneously published a discussion document on the cost of providing the Universal Postal Service. Consignia’s data suggests that no universal service product type (i.e. First Class, Second Class mail) in aggregate is loss-making. There are loss-making elements within each product category, and the total cost of all these elements is about 1.5% of Consignia’s operating costs. But it would be difficult or impossible for Consignia to disentangle and discontinue any individual element. And Consignia derives considerable benefit from delivering a one-stop mail service with an easily understood tariff.
Interim approach to licensing.
Postcomm is inviting operators to apply for interim licences to provide postal services in competition to those offered by Consignia, formerly the Post Office. The licences are expected to last about a year.
Postcomm has announced its interim approach to licensing, designed to meet the needs of the industry until it develops a longer term policy on introducing competition. The interim licences will enable companies to continue to undertake some existing activities, to start niche novel services and to pilot other services in competition with Consignia. They are expected to provide benefits to customers and to reveal valuable information on the market and the ways in which competition might develop.
The full statement of Postcomm's interim approach to licensing can be viewed in the licensing section of our web site.
Consignia's application for a price increase.
Postcomm received, in April, a request from the Royal Mail for increases in a wide range of postage rates, including a penny on first and second class post. This request was made under the provisions of the licence we recently issued to Consignia. Following discussions with Consignia, the company has asked that we suspend our consideration of the application. All work on it has consequently ceased.
Job Losses?
It is sometimes claimed that the introduction of competition would "put 50,000 Royal Mail jobs at risk". However, by this definition, the vast majority of UK jobs are "at risk", in that the employer faces competition.
Too many postmen?
Remember the "bus wars"? Will Postcomm's activities lead to postmen fighting on the nation's doorsteps?
We don't think so. Although (subject to preserving the universal service) we may well see new local postal services, it is very unlikely that any town could sustain more than two or three operators who deliver mail door to door.
Background
Postal Services play a vital role in today's modern fast-moving information-based economy.
The Government is therefore giving the Post Office greater commercial freedom in order to help it modernise and respond to changing consumer demands, new competitors and new technologies. In return, it wants the Post Office put under greater competitive pressure so that it gives customers a better deal. It has therefore set up an independent regulator – the Postal Services Commission (Postcomm).
Like the other economic regulators (e.g. Oftel), the Postcomm is a non-Ministerial Government Department, and not part of a mainstream department such as DTI. The Commission has 7 members, including its Chair, Graham Corbett.
Postcomm's principal duties are to:
ensure the continued provision of a UK-wide universal postal service at a uniform tariff,
promote effective competition for the Royal Mail,
control Royal Mail prices and service standards, and
advise the Government on how to maintain the network of rural and deprived urban post offices.

Postcomm recognises that its work is of the highest social, economic and political importance, and that it needs to balance a number of competing interests. It is therefore impartial, open and considered.
Postcomm particularly recognises that:
almost every citizen interacts almost every day with Post Office services,
there is great political and social interest in the future of the rural post office network, and
postal services are of vital importance to many companies, for whom the Royal Mail is their main communication channel with their customers.

Key Facts
The Royal Mail and Parcelforce together deliver 80 million items every working day.
They are both owned by Consignia (formerly "The Post Office").
The Post Office/Consignia employs around 200,000 people
As almost everyone in the UK is a customer of Consignia, the company currently has 55 million customers. And of course most businesses rely heavily on Consignia when communicating with their customers, suppliers, account holders etc.
There are about 18,000 post offices, most of which are independent businesses, not owned by The Post Office.
About 28 million people are served each week at post office counters around the UK.
Further Information
….is available from:-
Chris Webb: 020 7593 2114 & Email [email protected]
(Out of hours 01923 231 503 or mobile 07779 635 881),
Jonathan Rooper, Cardew & Co.: 020 7766 1210 & Email [email protected]
(Out of hours: pager 07693 352 732),
in our Frequently Asked Questions,
and in our Business Plan.

Postcomm
7593 2120Postcomm issues documents on introducing competition and the cost of the universal postal service
The competition consultation document issued on 28 June 2001 assesses a wide variety of options for giving customers the power to choose who provides their postal services and invites comments from operators, customers and consumer organisations. Their responses will be used to frame Postcomm’s proposals later this year for a new competitive regime.
The document suggests that reducing the upper limit of the licensed area — the traditional approach — may not be the most effective way to promote competition. Alternatives canvassed include:
· Opening up the postal services market completely.
· Opening up particular segments of the market to competition, such as direct mail and bulk mail.
· Introducing competition into separate parts of Consignia’s postal supply chain.
Potential entrants to the market could include existing postal operators, or non-post companies with an existing network that could be adapted to provide a postal service.
Businesses already engaged in a network-based industry – newspaper distributors, logistics-based and freight operators, milk delivery firms, supermarkets – could be licensed to convey mail as an add-on or extension of their core activities.
There could be room for newcomers too, as in Sweden, where most of the 100 new entrants into the market are involved in local delivery, providing innovative services that customers appreciate.
Postcomm has an over- riding duty to ensure the provision of a universal postal service. The consultation document considers the extent to which each option for introducing competition might be compatible with that duty.
Also, Postcomm has simultaneously published a discussion document on the cost of providing the Universal Postal Service. Consignia’s data suggests that no universal service product type (i.e. First Class, Second Class mail) in aggregate is loss-making. There are loss-making elements within each product category, and the total cost of all these elements is about 1.5% of Consignia’s operating costs. But it would be difficult or impossible for Consignia to disentangle and discontinue any individual element. And Consignia derives considerable benefit from delivering a one-stop mail service with an easily understood tariff.
Interim approach to licensing.
Postcomm is inviting operators to apply for interim licences to provide postal services in competition to those offered by Consignia, formerly the Post Office. The licences are expected to last about a year.
Postcomm has announced its interim approach to licensing, designed to meet the needs of the industry until it develops a longer term policy on introducing competition. The interim licences will enable companies to continue to undertake some existing activities, to start niche novel services and to pilot other services in competition with Consignia. They are expected to provide benefits to customers and to reveal valuable information on the market and the ways in which competition might develop.
The full statement of Postcomm's interim approach to licensing can be viewed in the licensing section of our web site.
Consignia's application for a price increase.
Postcomm received, in April, a request from the Royal Mail for increases in a wide range of postage rates, including a penny on first and second class post. This request was made under the provisions of the licence we recently issued to Consignia. Following discussions with Consignia, the company has asked that we suspend our consideration of the application. All work on it has consequently ceased.
Job Losses?
It is sometimes claimed that the introduction of competition would "put 50,000 Royal Mail jobs at risk". However, by this definition, the vast majority of UK jobs are "at risk", in that the employer faces competition.
Too many postmen?
Remember the "bus wars"? Will Postcomm's activities lead to postmen fighting on the nation's doorsteps?
We don't think so. Although (subject to preserving the universal service) we may well see new local postal services, it is very unlikely that any town could sustain more than two or three operators who deliver mail door to door.
Background
Postal Services play a vital role in today's modern fast-moving information-based economy.
The Government is therefore giving the Post Office greater commercial freedom in order to help it modernise and respond to changing consumer demands, new competitors and new technologies. In return, it wants the Post Office put under greater competitive pressure so that it gives customers a better deal. It has therefore set up an independent regulator – the Postal Services Commission (Postcomm).
Like the other economic regulators (e.g. Oftel), the Postcomm is a non-Ministerial Government Department, and not part of a mainstream department such as DTI. The Commission has 7 members, including its Chair, Graham Corbett.
Postcomm's principal duties are to:
ensure the continued provision of a UK-wide universal postal service at a uniform tariff,
promote effective competition for the Royal Mail,
control Royal Mail prices and service standards, and
advise the Government on how to maintain the network of rural and deprived urban post offices.

Postcomm recognises that its work is of the highest social, economic and political importance, and that it needs to balance a number of competing interests. It is therefore impartial, open and considered.
Postcomm particularly recognises that:
almost every citizen interacts almost every day with Post Office services,
there is great political and social interest in the future of the rural post office network, and
postal services are of vital importance to many companies, for whom the Royal Mail is their main communication channel with their customers.

Key Facts
The Royal Mail and Parcelforce together deliver 80 million items every working day.
They are both owned by Consignia (formerly "The Post Office").
The Post Office/Consignia employs around 200,000 people
As almost everyone in the UK is a customer of Consignia, the company currently has 55 million customers. And of course most businesses rely heavily on Consignia when communicating with their customers, suppliers, account holders etc.
There are about 18,000 post offices, most of which are independent businesses, not owned by The Post Office.
About 28 million people are served each week at post office counters around the UK.
Further Information
….is available from:-
Chris Webb: 020 7593 2114 & Email [email protected]
(Out of hours 01923 231 503 or mobile 07779 635 881),
Jonathan Rooper, Cardew & Co.: 020 7766 1210 & Email [email protected]
(Out of hours: pager 07693 352 732),
in our Frequently Asked Questions,
and in our Business Plan.

Postcomm
7593 2120