UK Mail will look to trial end-to-end postal deliveries in Britain if access prices for competitorsto Royal Mail’s delivery network rise further next year, according to CEO Guy Buswell.
He told this week’s The Future of UK Postal Services conference: “Downstream access pricesare likely to rise next year to around 22p, which means they have more than doubled in the lastseven years.” If there are further increases to its access prices next year, this would cause UKMail to look seriously into piloting its own end-to-end mail deliveries, he said.
“We have the real prospect of more increases in price, threatening to further reduce mailvolumes,” he said. “I believe keeping innovation to the forefront of our minds is the way tomitigate price rises to our customers. I believe it is the right time for UK Mail to revisit theseoptions again, and to look at piloting end-to-end. At 22p for access per delivery, it makes sensefor us to at least look at it.
“Hopefully Ofcom would see the benefit of that. We have sufficient volume and customersrequiring better value. I believe a pilot delivery would meet Ofcom’s requirements. So maybe thatis the change that the UK market will soon see.”
Buswell also claimed that mail has failed to improve its efficiency in the way that theparcels sector has over the last 10 years, because it has lacked the discipline of the privatesector. “If we look at parcel prices today, they are still lower than they were 10 years ago, andyet people still make a profit. That is because people look hard at being more efficient, forexample taking costs out of our network. Being a private company means we have to have discipline.”Buswell said UK Mail’s staff had accepted pay freezes, for example, which in real terms meant areduction in their earnings.
The CEO said UK Mail was “a big fan of Royal Mail and we are very grateful for its deliveryof mail on our behalf”. He wanted the new UK postal regulatory regime, expected to be introduced inApril, to deliver a financially sustainable Royal Mail and USO, and believed this required RoyalMail to “become a proper, private company”, and that it needed to become more customer friendly.
Buswell agreed with much of the new structure for Royal Mail proposed by postal minister EdDavey, but with some adjustments, including the sale of GLS. “While we agree with many of thesechanges, Royal Mail should make a contribution to its own future,” said Buswell. “I think itsoverseas assets should be realised. This would give the UK operations a much better capitalstructure.” He believed this would also mean the EC would have no problem agreeing to the state-aidrequest currently being examined in Brussels.
Buswell said the time had also come to stop blaming competition for Royal Mail’s problems,and rejected claims by Royal Mail CEO Moya Greene that her company was subsidising privatecompanies, saying Royal Mail’s failure to profit from downstream access was due to its owninefficiencies.
“Downstream access should be a benefit, not a problem, and should be used to generateadditional revenue from fixed costs. I am pleased to see this reflected in the regulator’s words,who said downstream has been good for Royal Mail.”
He welcomed much of the new regulatory structure proposed by Ofcom, but said there wasinsufficient protection for downstream access customers. “Royal Mail said that this was notnecessary, but I am not prepared to rely on Royal Mail’s best behaviour – and the regulatory courseis too slow to employ. There must remain some obligation on Royal Mail, to protect against certainactions.”
Buswell said there was still insufficient detail in the proposed new regulatory regimeregarding pricing for downstream access operators, or the key difference between downstream andupstream costs. “I would really like to know what is included in my access bill,” he said.
