USO could suffer in Jersey, says Carr

Jersey Post has said it is confident it can compete with rival operators “as long as its hands aren’t tied” by current USO obligations. Post&Parcel reported earlier this week that Citipost and Hub Europe have been given licences by the Jersey Competition Regulatory Authority (JRCA) to provide postal services in the fulfilment sector.

Speaking to Post&Parcel, Jersey Post chief executive Ian Carr said that the decision is “a clear signal that the competition regulator is intent on opening up the postal market”, which, in turn, “has forced the radical reform of the traditional postal operator”.

Carr said that Jersey Post has been preparing for the liberalisation for a number of years, including the incorporation of the business in 2006, when it was setup to be run commercially by a board of directors.

Furthermore, the decision to open up the market led to Jersey Post implementing an overall £4.9m cost-cutting programme to be completed by the end of 2011, which included 90 redundancies and plans to reduce the scope of the USO moving to 5 day deliveries, and one all island collection daily.

Carr said: “We knew we had to reshape things, we knew we had to cut costs, to compete effectively in that marketplace. The Regulators initial decision to virtually open the whole of the market, published in April this year, meant that, although we were already on the journey, we needed to have more radical and expedient plans in place.”

This week’s announcement by the regulator limits that opening to the packet market initially with the large letter market to be fully opened in January 2012.

Jersey Post’s USO obligations are funded by the revenue generated from the fulfillment industry, and it does not receive any government subsidy in providing the USO. Carr said that this particular market represents more than 55% of Jersey Post’s total mail volumes handled.

He said: “There is a fine balance to be had. The challenge for Jersey Post is to manage the cost of the USO to as low as possible. This includes reducing its scope, our manpower costs, and the very high cost or regulation we currently face, so we can compete effectively beside those competitors coming into the market place. We can compete as long as our hands are not tied by the current USO obligations, and the political support exists on the Island to face up to the sensitive challenges of reducing the size of the sub post office network, and number of delivery days.

“Success will also include migrating customers to new access channels through our internet portal taking access to our products into their homes, and providing value add services which support basic delivery products.

“This challenge comes at a time when we are already facing a monumental decline in letter mail volumes, and consequently, supporting a very high cost USO network with rapidly falling economies of scale, with the added challenge of driving radical change through what is still perceived as very traditional industry with a very public emotional attachment to it.

“By 2012, when the market is opened-up fully, if we cant compete effectively and  the government is not prepared to fund the USO, then there is no other option from a commercial perspective other than to half the size of the USO, and move to, at most  three days a week delivery, and what would mean many more redundancies.”