UK postal regulator Postcomm announced yesterday that it is to examine Royal Mail’s charges tocompetitors for delivering their mail over the so-called ‘final mile’.
In the country’s liberalised postal market, new entrants pay Royal Mail an access fee to usethe final leg of the universal delivery network the public postal operator is legally obliged tomaintain.
One of Royal Mail’s largest rivals and users of the “final mile”, the Dutch group TNT, hasasked the regulator to investigate the charges, saying they are too high, squeeze its margins anddistort competition by preventing it making a longer-term investment in the market.
Royal Mail, on the other hand, wants more flexibility to align its prices with its costs. Itargues that the current regulatory control of ‘access’ margins restricts it from passing on savingsit makes in the upstream part of the network to its retail customers without also passing on thosesavings to competitors by lowering access prices.
Yesterday Postcomm agreed to carry out a review of the charges and also announced it wouldseparately consider allowing Royal Mail more price flexibility for business mail.
“When a market is being opened up to competition and there is one very dominant provider, thecost of access to the ‘final mile’ of that provider’s network can be ‘make or break’,” said NigelStapleton, Postcomm chairman.
“The experience of other sectors such as telecoms showed the importance of ensuring newmarket entrants were not crushed under the weight of ‘access’ charges and Postcomm shall besimilarly vigilant,” he added.
Royal Mail said in a statement that its competitors would handle 2.5 billion letters thisyear, well ahead of expectations when the market was liberalised at the start of last year, andwhich is equivalent to 25% of bulk business mail.
“That means that this year alone rivals are carrying around 600 million more letters than hadbeen anticipated when Postcomm set the price control,” said Royal Mail.
“Although rivals require Royal Mail to deliver these letters over ‘the final mile’ to homesand businesses, the price Royal Mail is allowed to charge for doing so doesn’t cover our costs,” itadded.
Royal Mail said the price it offered customers on its key business product, Mailsort 2, was20-28% more than it charged companies competing for the same business to use the network – “meaningthey can always offer the same customers a price which clearly undercuts Royal Mail,” it pointedout.
