Year: 2005

Postcomm is to change the way it regulates Royal Mail by establishing price controls linked to efficiency improvements and freezing average prices until 2010. The proposals, published today, toughen up existing controls on Royal Mail less than a month after it announced record profits of Pounds 537m from operations. The plans, which also include changing Royal Mail’s service standards to reflect customer needs better, are to be introduced in April 2006, three months after the market is opened up to full competition. But Royal Mail reacted angrily and vowed to fight the proposals, if necessary, through the Competition Commission. It claimed they threatened universal service, the commitment to deliver to every household, and encouraged cherry-picking by rivals. The price controls, based on an asset value for Royal Mail of Pounds 2.2bn, would allow the company to make a regulated profit of about Pounds 285m a year until 2010, although it could improve this by raising its efficiency levels and growing volumes.