Tag: UK

While the Royal Mail is struggling through its busiest week of the year (120m letters and cards on Monday alone), Postcomm, the postal services regulator, will be meeting to talk about that most festive of subjects, price controls. In the nine months or so since the Royal Mail asked for a penny increase on the price of first and second class stamps, there has been a lot of bitter argument about what controls should accompany the increase. The nub of the disagreement is that Postcomm wants a freeze on “average” prices – which, according to Allan Leighton, the chairman of the Royal Mail, would cost the business pounds 460m. Now I reckon Postcomm will give in to Leighton’s demands for a simpler control on individual postal services, not least because there are much bigger issues to be resolved. And because the more radical Postcomm wants to be, the louder Leighton will shout. The most important among these issues is whether the Royal Mail should be split up so that a separated delivery network (including vans, posties and maybe sorting offices) can be used by any number of companies that want to supply postal services. This is not rocket science. It has happened in most UK industries (except telecoms) where the incumbent service provider owns all the infrastructure, simply because it is seen as the only way to get fair play for new market entrants. Just ask any bruised telecoms business that has struggled over the years to compete with the enduring might (and huge legal department) of unreconstructed BT. There are two separate questions here. One is whether there is a case for splitting the Royal Mail. Although to do so right now could be a bit previous, I believe the answer over the long term is probably yes. The second is whether the regulator, having reached whatever conclusion he reaches, has the guts and the competence to follow it through.

Allan Leighton, chairman of the Royal Mail, yesterday won the backing of Government in his fight with the postal regulator over price controls.

In a move that raised questions about the independence of Postcomm, the Department of Trade and Industry urged the regulator to modify its price proposals.

Mr Leighton believes Postcomm’s controls could jeopardise his recovery plan for the Royal Mail and the promise of Pounds 3 billion in state funding for the troubled postal group.

He will be pleased at having government support, but the issue has sparked controversy about whether the department was putting undue pressure on an independent regulator.