Competitors line up for Royal Mail
Royal Mail Group faces the biggest competitive challenge in its more than 300-year history when the postal regulator releases plans for new seven-year licences for private firms as early as tomorrow.
The state-owned Royal Mail, which is losing pounds 1.2m a day, argued vociferously against the proposals in favour of a slower pace of market liberalisation.
But Postcomm, already embroiled in a fierce battle with the group over price controls, has ignored its advice and will push ahead by announcing terms and conditions for the new long-term licences to be introduced from January in place of the current 12 month permits.
Royal Mail has already received applications for the seven-year agreements from a number of the current licence holders, which include Hays, Express Dairies and TPG, the Dutch postal group.
The new permits will cover only business bulk mail, defined by individual mailings of 4,000 items or more – 30% of the entire postal market in value terms – until 2005.
Between then and 2007 a further 30% of the market will be opened up, with all the barriers protecting Royal Mail competition dropped after that.
Despite intense criticism of the Postcomm proposals during a consultation period, the regulator’s final document will remain true to the bulk of its original proposals.
Royal Mail, which is shedding 30,000 jobs, has been threatening to go to court over price controls on a range of its products and services in return for being given a 1p rise in basic postal rates.
Tomorrow, the business led by Allan Leighton will obtain a small boost from a senior postal economist, Ian Senior. He intends to rip into Post comm saying the regulator should not intervene directly on prices and should eventually be wound up.
At a lecture for the Royal Society of Arts, Mr Senior will argue that Royal Mail already offers the lowest prices in Europe and to cap them at 29.1p across all services would be “fundamentally flawed”.
The regulator defended itself last night, saying that leaving pricing to Royal Mail with a grip on nearly 99% of the market would be a recipe for disaster.
