Bulk mail removed from UK's universal service obligation

The UK’s postal regulator, the Postal Services Commission (Postcomm) has amended Royal Mail’s licence to remove bulk mail from its universal service obligation. The decision made last week will keep mail redirection services and the mail holding services in the universal service, while certified mail and recorded mail services will be included as add-on services.

But other services including Printed Postage Impression First and Second class should not be part of the universal service, Postcomm said, although a version based on single mailpieces could qualify for universal service status – and Royal Mail has indicated will be in place by spring 2012.

Royal Mail’s operating licence has been changed so that its universal service obligations are much more based on single piece mail.

The changes take effect immediately, except for those affecting Mailsort 1400 First and Second class services, which will see changes taking effect on December 6.

Postcomm has been consulting with stakeholders since February about the composition of the universal postal service in the UK ahead of the transfer of its regulatory powers to the communications industry regulator Ofcom. The redefined universal service will be a central pillar for Ofcom’s regulatory framework, which is to be established by spring 2012 ahead of a potential privatisation of Royal Mail.

The universal service refers to the minimum level of service expected of the postal operator – and will be an important “backstop” when Royal Mail is sold into private ownership.

Some of the potential impacts of removing bulk mail from the universal service would be that the services would no longer be exempt from VAT, and also that Royal Mail could choose to move from a six-day to a five-day delivery week for bulk mail.

Industry “Supportive”

Postcomm said industry groups responding to its consultation had been generally supportive of removing bulk mail from the universal service, except for the Federation of Small Businesses and the Communication Workers Union, which were concerned about the potential impact on postal rates.

Consumer group Consumer Focus also expressed concerns about the impact on small businesses and First Class bulk mail users, particularly in rural areas.

They warned that Royal Mail would most likely adopt zonal pricing for bulk mail, that could lead to “social exclusion for people living in areas where mail is more expensive”.

Postcomm suggested that the Royal Mail would be unlikely to reduce its delivery of bulk mail because of the potential revenue it generates.

Regulatory powers

Powers are being transferred from Postcomm to Ofcom under the terms of the postal reform legislation, The Postal Services Act 2011, adopted earlier this summer.

The legislation aims to bring the postal service more in line with the regulation of electronic communications companies, but requires that the terms of the universal service must be “substantially the same” under Ofcom as they were under Postcomm – which is why the terms are being changed under Ofcom.

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2 Comments

  1. Dan Derry

    It’s about time. I would also suggest that VAT on Bulk Mail is very likely now, which will cause great consternation to organizations who cannot reclaim VAT. Given its current running costs and lack of profits, I do see Royal Mail changing its operation to a 5-day week. With all that said however, this does now open up the possibilities of true end-to-end competition for Royal Mail.

  2. POSTMAN ROYALMAILCHAT

    End to end competition for Royal Mail? be careful what you wish for!

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