Postcomm gives Consignia an extra year to adjust to full competition.

There will be a fully competitive market in postal services in the UK from April
2007 – one year later than originally proposed — Postcomm, the postal services
regulator announced today. Competition will be introduced gradually, beginning
on 1 January 2003.
In a decision document, which takes account of almost 2000 responses to its 31
January consultation on competition, Postcomm says that competition will be
introduced in three phases, as follows:
•Phase 1, from 1 January 2003 – 31 March 2005: bulk mail above 4000
items (from a single site in a similar format), around 30% of the UK letter
market by value, together with consolidation services and niche services.
•Phase 2, from 1 April 2005 – 31 March 2007: the bulk mail threshold
will be adjusted to open up a total of 60% of the market by value.
•Phase 3, from 1 April 2007: all restrictions on market entry abolished.
Graham Corbett, chairman of Postcomm said:
“Today’s decision is good news for customers. Competition in the postal market
will provide more reliable and more innovative customer services.
“At the same time we have been listening carefully to the debate on our
proposals. While keeping the essential framework intact we have made a
number of detailed changes which collectively add up to a material shift in the
balance of risk in Consignia’s favour.
“We want to see a robust and competitive Consignia at the core of a robust and
competitive postal market. That can only strengthen the universal postal service.
“During the transition period to full market opening in 2007 we will actively
monitor the market. And if we do need to intervene to preserve the universal
service, we have the tools to do so.”
Today’s decision maintains the main elements of Postcomm’s approach to
competition published for consultation on 31 January this year. But after
considering all the responses, the end date for competition has been put back
by one year and phase one lengthened so that Consignia will face only a modest
level of competition while it implements its three-year renewal plan.
Postcomm has also dropped plans in its original proposals to look at speeding up
the introduction of full competition. The new fixed end date of 2007 will
provide clarity and certainty for the industry. This end date will be incorporated
into operators’ licences so that if, in the unlikely event it were necessary to
postpone the end-date to preserve the universal service, this would call into play
detailed mechanisms designed to protect licensees’ interests, including reference
to the Competition Commission.
Postcomm has also defined bulk mail more clearly to ensure that the phase one
opening is restricted to 30% of the letters market as originally announced.
Notes for editors
The decision document sets out Postcomm’s policy for achieving effective
competition within the postal market for items weighing less than 350g and
costing less than £1. Until March last year the Royal Mail had a monopoly of all
UK mail in this area. It is now licensed by Postcomm to provide these services
and delivers around 80 million items a day throughout the UK.
Today’s decision follows two years of extensive research and investigation into
the postal service market.
Postcomm’s original competition proposals suggested a tighter timetable for the
introduction of competition, with an end-date of March 2006. The press notice
on these proposals can be accessed in the media brief section of the Postcomm
website: www.postcomm.gov.uk.
The European Postal Services Directive. Postcomm’s three-phase decision builds
on the approach to liberalisation adopted by the European Union. The European
approach is to open up the market by progressively reducing the weight/price
threshold of services “reserved” to the national postal operator. The Postal
Services Directive reduces the reserved limit to100g on 1 January 2003 and to
50g on 1 January 2006, but does not commit to an end date for the abolition of
all restrictions.
Postcomm does not consider the price/threshold approach on its own will
achieve an orderly transition to full market opening in the UK. Most letters weigh
less than 100g, and would-be competitors would have to split their mail, passing
items below 100g to Consignia to deliver. For that reason Postcomm has decided
to supplement the European requirements with the measures set out above.
The universal postal service requires one delivery and one collection of post
throughout the UK on each working day at a geographically uniform tariff.
Bulk mail is used by large organisations to deliver bills, bank statements,
cheques, advertising mail, government information and other pieces of
correspondence. The top 500 bulk mailers – banks, government departments,
credit card companies, mail order companies and advertisers – between them
send out 40 million postal items a day, which accounts for around half of all
mail. At present Royal Mail handles virtually all bulk mail traffic. The market for
bulk mail above 4000 items per mailing is estimated to be worth around £1.4
billion a year.
Consolidation allows operators to collect mail from a number of sources – for
example from companies on an industrial estate – pre-sort it so that it qualifies
for bulk mail discounts, and send it to Consignia to deliver.
Niche services are expected to be small- scale specialist business services, such
as providing mailroom facilities for companies that do not have one.
Licence applications can be made from June this year, but the new licences will
only come into operation from 1 January 2003. Holders of interim 12-month
licences will be able to apply for long-term licences. Up to now Postcomm has
issued nine interim 12-month licences for pilot schemes. Details of all current
licences can be found in the licensing section of the Postcomm website.
All long-term licences issued by Postcomm will be for an indefinite period
subject to a three-year notice period, which can only be exercised in or after the
fourth year.
Post offices. Competition is expected to have little effect on the network of post
offices, which are part of Post Office Limited, a separate business owned by
Consignia and not subject to regulation by Postcomm. There are three reasons
for this. First, post offices handle only a small proportion of the mail that is
posted each day. Second, mail represents only a small proportion of the business
transacted by most post offices. Third, that business is typically packets and
specialist mail from individuals and small firms, which will not be subject to
competition until 2007.
Postcomm – the Postal Services Commission – is an independent regulator. It
has been set up to further the interests of users of postal services. Postcomm’s
main tasks are to:
•Seek to ensure a universal postal service at an affordable uniform tariff
•Encourage competition in postal services
•License postal operators
•Control postal prices and quality of service
•Give advice on the future of the post office network.
Postcomm’s policies are steered by a board of seven commissioners, headed by
the chairman, Graham Corbett CBE.
More information: Chris Webb Tel 020 7593 2114
Mobile 07779 635881
E [email protected].
or [email protected]
Jonathan Rooper Tel 020 7766 1210
Pager 07693 352732
E [email protected]
ENDS