Watchdog chases off Consignia's defence of mail monopoly

By Rosie Murray-West Section: City

POSTCOMM, the postal regulator, yesterday shot down the Post Office’s favourite argument against the removal of its monopoly, saying the cost of providing a one-price mail delivery service across the UK was “negligible”.

Graham Corbett, head of PostComm, said: “I’m not surprised that they are making a lot of noise about it, but the actual cost of providing this is very, very modest indeed.” The Post Office, which is now known as Consignia, is facing competition in the mail delivery market for the first time as other companies are invited to apply for licences to deliver letters within the traditional “reserved” area occupied by the government-owned organisation. Consignia has argued that a removal of its monopoly on letters and parcels worth under a pound or weighing under 350g would jeopardise the principle of the universal service, which delivers letters to all areas of the UK for the same price. Mr Corbett said yesterday that Consignia’s recent results and performance figures were “pretty appalling”. Consignia produced full-year profits pounds 88m below the government’s performance targets this week. John Roberts, its chief executive, said he was “disappointed” with the performance, which was impaired by rail problems and unofficial industrial action. “Until Consignia is actually faced with the reality of competition, I’m not sure whether it will find it possible to make the necessary improvements,” Mr Corbett said. He added that he hoped that this week’s results would be a “wake up call”. However, he said it would not be “realistic” or “responsible” to fully liberalise the postal system in the shortterm. He was speaking as the regulator published two consultation documents on its plans to open up the postal market to other companies. These documents suggest that milkmen and supermarkets deliver letters along with milk and groceries. “The logic is that if milk delivery is under threat, one of the ways to provide a bigger business is to deliver mail,” he said. “This isn’t just some suggestion of ours, we have already had preliminary discussions with some of these companies.” Express Dairies, the biggest dairy business in Britain, yesterday declined to comment on reports it may be applying for a postal licence to deliver letters. The company has already completed a trial with Consignia’s Parcelforce operation, and plans to roll-out a business that could see it delivering 10,000 parcels a day. Business services company Hays and delivery group TNT are known to have applied for licences to operate in various parts of the reserved area. Mr Corbett said yesterday that replies to the consultation documents are expected by September, and that licences could be granted by the first half of next year. “This is the moment at which we really move into business and find ways of bringing competition into the market,” he said. Peter Carr, chairman of postal watchdog Postwatch, said: “I welcome the fact that the regulator has done a thorough analysis of the costs of providing the Universal Service, and has exposed the myth that being a universal service provider is a burden.” A spokesman for Consignia said:

“Consignia is firmly committed to continue providing a universal service at a uniform and affordable price.”