Postcomm sent from pillar to post
While the Royal Mail is struggling through its busiest week of the year (120m letters and cards on Monday alone), Postcomm, the postal services regulator, will be meeting to talk about that most festive of subjects, price controls. In the nine months or so since the Royal Mail asked for a penny increase on the price of first and second class stamps, there has been a lot of bitter argument about what controls should accompany the increase. The nub of the disagreement is that Postcomm wants a freeze on "average" prices – which, according to Allan Leighton, the chairman of the Royal Mail, would cost the business pounds 460m. Now I reckon Postcomm will give in to Leighton's demands for a simpler control on individual postal services, not least because there are much bigger issues to be resolved. And because the more radical Postcomm wants to be, the louder Leighton will shout. The most important among these issues is whether the Royal Mail should be split up so that a separated delivery network (including vans, posties and maybe sorting offices) can be used by any number of companies that want to supply postal services. This is not rocket science. It has happened in most UK industries (except telecoms) where the incumbent service provider owns all the infrastructure, simply because it is seen as the only way to get fair play for new market entrants. Just ask any bruised telecoms business that has struggled over the years to compete with the enduring might (and huge legal department) of unreconstructed BT. There are two separate questions here. One is whether there is a case for splitting the Royal Mail. Although to do so right now could be a bit previous, I believe the answer over the long term is probably yes. The second is whether the regulator, having reached whatever conclusion he reaches, has the guts and the competence to follow it through.
This leads me to the strange case of some furious back-peddling by the postal regulator.
Two weeks ago, after a meeting with Martin Stanley, chief executive of Postcomm, and Nick Fincham, his director of regulation, I wrote that Postcomm would, within the next six months or so, consider whether there should be such a split at Royal Mail. To quote Fincham: "We will look, in the first half of next year, at whether to separate infrastructure and services to get clarity of costs. It is something we have to look at. Postwatch [the consumer group] wants it and some rivals say there is no other way to get price transparency." Leighton went ballistic. He made it clear that meddling to that extent in his business would not be tolerated. He has, after all, lots of other things he could be doing instead of trying to turn the shambolic Royal Mail around. As head of a loss-making regulated company that kind of reaction is almost part of the job. What surprised me more was a statement that appeared on Postcomm's website within hours of the story appearing. "We have no plans currently to consider separation. We have our hands full at the moment setting Royal Mail's prices," the regulator declared. All a bit odd. Stanley later tried to clarify the situation. The story, he told me, could not be allowed to run, "otherwise we would have Allan running rampage all over the newspapers". They had, Stanley tells me, "accidentally given [me] a story which was too strong". Hmmm. Is this considered, impartial regulation? Not in my book. Maybe Leighton should try shouting even louder. It may not be the most sophisticated way of conducting a debate, but it has Postcomm on the run. THE European Commission is about to spend an awful lot of time and money investigating whether Ryanair, the no-frills airline, got illegal state aid when it set up a base at government-controlled Charleroi airport in Belgium. The allegation is that Ryanair got cheap landing fees and other benefits including staff training and accommodation. Now I may be wrong, but it strikes me that Charleroi was doing no more than any privately owned regional airport would do to attract low-cost carriers. Nor am I convinced that Charleroi's deal with Ryanair was exclusive. Bien sur, the EC has little choice but to investigate when potentially illegal aid is brought to its notice (presumably in this case by one of Europe's lumbering flag carriers), but this smacks of pettiness. It also looks worryingly like a sop to the much larger Olympic Airways, the Greek state-owned airline, which last week was told to pay back subsidies worth ×194m. The commission says that this is in no way an attack on low-cost carriers that have brought much-needed competition to a horribly rigged market. Really? My reflections on this are unprintable.
