Postcomm seeks views on Royal Mail’s plan to charge more for stamps than for franked business post

Postcomm today (4 November 2004) sought views on Royal Mail’s intention to charge customers different prices depending on how they pay for their post. From 1 April 2005, Royal Mail proposes to charge customers who pay for postage using a meter/franking machine, or Printed Postage Impression (PPI), less than those who stick a stamp on an envelope.

Royal Mail’s current intention is to introduce a 1p differential between the payment methods. Similar changes would be made to its international Airmail and Surface Mail products.

Royal Mail is able to make these changes under its current price control. Therefore, Postcomm is principally seeking views on the wider implications of Royal Mail charging different prices depending on how customers pay for their postage. This will help inform Postcomm’s views about how this issue should be addressed in the next Royal Mail price control, which is expected to be effective from April 2006. In particular, Postcomm is seeking views as to whether further differentiation of prices depending on payment method would be appropriate in future.

Postcomm is asking for feedback to this consultation by 13 December. This is a shorter period than usually allowed. Although Royal Mail does not need permission to make these changes, Postcomm wants to consider stakeholders’ views on the wider issue before the end of December 2004. Royal Mail is required under its price control to publish by the end of December 2004 the prices it intends to charge from April 2005.

Notes
There are currently three main methods of paying for postage – stamps, franking machines and PPI. Royal Mail has based its proposals on an analysis of its cost information, which it believes shows that stamped mail is more expensive to process and handle than mail paid for using meters/ franking machines and PPI – for example stamps have to be cancelled to prevent them being used twice.

Under the price control Royal Mail can introduce the change to its pricing either by:

– increasing the price for customers using stamps from 28p to 29p, but leaving the price for customers using meters/ franking machines and PPI at 28p; or

– increasing the price for customers using meters/ franking machines and PPI to 29p and for customers using stamps to 30p.