UK postal regulator Postcomm has accepted Royal Mail’s request to increase bulk mail prices inorder to generate additional revenues to finance modernisation and secure the universal postal
service.The regulator also plans to approve several other measures designed to lighten regulation ofRoyal Mail and give it more commercial freedoms in response to the slump in mail volumes andincreased competition.
Postcomm stated: “Royal Mail will have greater freedom to compete in the pre-sorted bulk mailmarket, where the company has lost significant volumes to competitors. Furthermore, in agreeing toRoyal Mail’s request for additional allowed revenue and reducing headroom, we are substantiallyaddressing Royal Mail’s concern that it makes a loss on each item of mail delivered on behalf ofits competitors and helping to ensure that access will no longer be loss-making,” Postcommexplained.
“We have also decided upon a range of deregulatory measures which will give Royal Mail greatercommercial freedom in markets where competition is growing. In particular, in reaching our finaldecision, we have taken account of Royal Mail’s position on our proposed pilot for accountingseparation.”
Postcomm said it intends to implement the following measures:
•Deregulation of packets and parcels weighing more than 2 kg, as anticipated
•Removal of retail price controls from all packets and parcels weighing more than 1 kg andfrom second class pre-sorted bulk mail services
•Reduction in access headroom for letters to 3p, but still working on a price point basis ascurrently
•Removal of headroom controls from all packets and parcels weighing more than 1kg
•Move to a ‘wholesale-led’ form of price control for second class pre-sorted bulkproducts
The postal regulator referred to the Hooper Report, published in December 2008 and updated inSeptember 2010, which clearly identified that the universal service will remain under seriousthreat if Royal Mail fails to modernise and tackle its long standing inefficiency. “We agree withthis assessment. We have therefore concluded on the basis of the information presently availablethat agreeing to Royal Mail’s request will provide a much needed contribution to funding thecompany’s ongoing modernisation programme.” This decision will have no impact on the price changesalready announced by Royal Mail for first and second class stamps, Postcomm added.
Postcomm said it will publish a decision document setting out its final position on all thesemeasures this week. Revised licence conditions are expected to be settled by the end of March 2011,in time for the beginning of Royal Mail’s financial year. Any price increases resulting from itsapplication for additional allowed revenue are expected to be implemented in early May.
“We will continue to engage with interested parties on the development of a new regulatoryframework for implementation in April 2012. It is hoped that further progress can be madeimplementing necessary safeguards, which would support further deregulation in any givenlegislative context,” Postcomm concluded.
The Communication Workers Union (CWU) welcomed Postcomm’s decision. However, it argued that moreneeds to be done to level the playing field in the postal market as current arrangements threatenthe future of the universal service.
Dave Ward, CWU deputy general secretary, said: “This is, in reality, just a small step in whatis a bigger picture. There’s much more still to be done to create the level playing field that ourindustry needs. New market entrants have had guaranteed profit margins at the expense of Royal Mailand the universal service obligation (USO) and this cannot be allowed to continue.”
