Tag: Europe

Falling mail volumes and intensifying competition are putting massive pressures on Royal Mail’s ability to keep delivering a one-price-goes-anywhere service for every customer, the company said today. It urged the postal regulator to allow Royal Mail to compete freely and fairly while ensuring everyone can continue to post to the UK’s 27 million addresses at uniform, affordable prices.

Royal Mail’s comments came as it published its detailed response to Postcomm’s strategy review on the future of the UK postal industry. Royal Mail’s response proposes four steps which Postcomm should take to create a fairer market:

• The one-price-goes-anywhere Universal Service should be re-focused specifically on stamped mail rather than including business products.
• Cross-subsidies should be removed to create transparency for business customers and to ensure that competition is sustainable.
• Business mail services should be fully deregulated because competition has now replaced the need for regulatory constraints.
• Operational integration of the postal network should continue as separation would create confusion, introduce complex and costly interfaces, endanger quality of service and jeopardise Royal Mail’s modernisation programme.

Royal Mail is to call for a 6p rise in UK first and second class stamp prices under a radical relaxation of regulatory controls the state-owned postal operator will argue is necessary to its survival. Businesses would also lose the legal right to have franked mail delivered to every address in the UK according to the proposals, which Royal Mail will this week put to Postcomm, its regulator. Royal Mail wants this “universal service obligation” (USO) to apply to stamped mail only.

The operator is also calling for an end to all regulatory controls on bulk business mail, such as lucrative junk mailings. The proposals will anger small businesses, which benefit from existing price controls. Royal Mail’s relatively high prices for bulk mailings cross-subsidise other services, such as the 6p loss incurred on each stamped letter. But Adam Crozier, Royal Mail’s chief executive, said the changes were needed to ensure the company’s financial viability and hence its ability to continue to deliver post to far-flung and unprofitable corners of the UK.

Royal Mail argued yesterday that Postcomm should rethink its proposed price controls for 2008 and beyond because the impact of competition in the UK has been “faster and greater” than the regulator expected. The UK is acting as a test bed for the proposed liberalisation of other major European postal markets. Its price controls are allowing competitors from those markets – such as Germany’s Deutsche Post and the Netherlands’ TNT – to cherrypick the best UK business, the UK operator believes.