Royal Mail given extra pricing flexibility

Postcomm has proposed that Royal Mail be given extra flexibility to increase some retail prices but has decided to leave access margins unchanged in response to the company’s request to review some aspects of the 2006-10 Price Control.

Royal Mail will be allowed to increase prices on certain loss-making products in April 2008 and April 2009 by more than was originally agreed when its four year price control was set. If it wishes, Royal Mail will be able to raise the price of a second class stamp to 29p by 2010, subject to inflation (the original price cap was 26p). The price cap on a first class stamp will not be affected by these proposals.

Postcomm is rejecting requests from TNT and UK Mail to widen the margin between Royal Mail’s prices for bulk mail products and the amount Royal Mail charges them for access to its network and delivery of bulk mail over the ‘final mile’. Royal Mail had also made an application on access, to narrow the margin. However the company has not provided sufficient evidence to support this application and has been unable to justify the level of loss it claims it is making on access mail.

Postcomm’s Interim Review document contains information extracted from Royal Mail’s regulatory accounts which were submitted to the regulator on 31 July in accordance with Royal Mail’s license obligation. Royal Mail has informed Postcomm that the sections of the regulatory accounts, which it normally makes public, will be published by no later than 15 August.