UK post service rivals reach surprise pact

ROYAL Mail and Business Post shocked the postal regulator yesterday by agreeing to an eleventh hour deal on access pricing. The companies, which have been wrangling for nearly two years over how much Business Post must pay to access the so-called "final mile" of Royal Mail's delivery network, announced they had signed heads of terms on the issue. However, the details of the deal are likely to remain confidential until January. The news came as a surprise to Graham Corbett, the outgoing chairman of postal regulator Postcomm. He had been due to publish a decision on access pricing tomorrow, after the two companies had asked the regulator to mediate on the issue. "This is like being on the courtroom steps," he said. "They have suddenly found themselves thinking that they don't want a deal imposed on them by a judge or a regulator." He added that this was "the most exciting day of my time in Postcomm", because it was the first time Royal Mail had taken an active role in fostering competition. Royal Mail declined to comment on the terms of the access price, which chairman Allen Leighton had previously said "would have the biggest implication on the finances of our mail business". Adam Crozier, the chief executive, said yesterday that he was confident that the organisations "have the basis to proceed to an agreement that will work for Royal Mail and our postmen and women". Guy Buswell, managing director of Business Post subsidiary UK Mail, said that the deal would lead to the first serious new entrant into the mail delivery market "for some three hundred years. It's exciting and daunting." However, Peter Carr, head of Government-funded consumer mail watchdog Postwatch, was more cautious. He was concerned that the Postwatch investigation into the issue, which he said would have cost "hundreds of thousands of pounds", would not be published. "The regulator was due to announce a decision in just two days' time and this would set a standard for other companies wishing to compete in the UK postal market," he said. "It is important that Postcomm publishes this information as planned so that other operators can now proceed to make decisions on market entry. More than one competitor is needed to provide choice to customers." Mr Corbett said that the full details of Business Post and Royal Mail's agreement would be made public in the New Year and added that Postcomm would publish a set of guidelines on access pricing following its extensive consultation. Royal Mail operates under a licence that demands that it provide access to the "final mile" of its delivery network – meaning the postmen and women – to its competitors. Business Post was one of the first to demand this access and the two have wrangled ever since about how much it would cost Business Post. Postcomm unveiled an access pricing arrangement in May, suggesting a weighted average tariff of 14.5p a letter. Royal Mail had been pushing for a 21p price for the service and said that the pricing threatened the long-standing "one price goes anywhere" service that the Royal Mail provided. The proposals were then subject to extensive consultation.

From The Guardian, 18 Dec
GUARDIAN (UK) 18th December 2003
POST MARKET ACCESS AGREED

Postal workers will be delivering letters collected by a private company for the first time under a deal signed by Business Post and the Royal Mail after two years of wrangling.

The state-owned group, which had bitterly opposed proposals from the industry regulator for providing access to its competitors, insisted yesterday that it was not surrendering to the inevitable.

"Access arrangements are new territory for Royal Mail," said chief executive Adam Crozier. "But I am confident we have the basis to proceed to an agreement that will work for Royal Mail and our postmen and women."

The outline agreement comes days before regulator Postcomm publishes its latest views on access charges.

Postcomm had suggested Business Post should pay between 11.46p and 406p per item for access to the Royal Mail network, but the state-owned group said those charges were so low as to endanger the policy of one price for delivery anywhere in Britain.

Postcomm has now postponed its ruling while Business Post's UK Mail subsidiary and the Royal Mail work on finalising a deal which will allows the private firm to use the state-owned local sorting and final delivery network.

Neither side was willing to provide any financial details but Business Post insisted they were similar to the form suggested by Postcomm in May.

"It's far better for two parties to deal together with goodwill," said Guy Buswell, the managing director of UK Mail. "The working relationship, we believe, is going to be great going forward."

The company said that if talks went well it hoped to have the new service running by April or June. Its shares rose 3.5% to 507.5p yesterday.

Postcomm chairman Graham Corbett predicted the deal would trigger further competition in the mail sector.

Royal Mail said it was not negotiating with other rivals and denied it had been forced to accept disappointing terms. "We have never been opposed to competition but we did need to have realistic prices, and we are negotiating a deal here which both sides will be happy with," a spokeswoman said.

Peter Carr, the chairman of the watchdog Postwatch, said he hoped to see a full agreement between Business Post and Royal Mail before the end of January.

guardian.co.uk/post

Copyright © 2003 Guardian Newspapers Limited.