On 13th April, the government published a number of amendments to
the Postal Services Bill that incorporate feedback from MPs,
Lords, Royal Mail, other postal operators and the Communication
Workers Union. The amendments aim to give clarity to the
regulatory regime and safeguard the universal service so that
Royal Mail can continue to deliver to the UK’s 28 million
addresses, six days a week.
The Postal Services Bill, which has been approved by the House of
Commons and is currently being considered by the House of Lords,
is designed to secure the long-term future of Royal Mail. It will
enable private sector investment into Royal Mail, and will see
the government take on the company’s historic pension deficit.
The Bill will also transfer regulatory responsibility from
Postcomm to Ofcom, the communications regulator.
The amendments include giving new powers to regulator Ofcom to
allow it to better monitor threats to the universal service
(one-tariff-goes-anywhere promise) arising from increased
competition. They have also instructed that Royal Mail will
remain the sole provider of the universal service for at least
the next decade and that the regulator will be required to
“have regard” for the universal service provider to
have a “reasonable commercial rate of return on the
provision of that service”.
Decluttering bulk mail
A further step towards deregulation saw Postcomm accept a request
from Royal Mail in February to increase the price of its bulk
mail service. This, said a Postcomm statement, will “help
maintain the pace of the modernisation programme required to
safeguard the provision of the universal postal service”.
The decision was announced at the same time as Postcomm published
its proposals to deregulate certain services including packets
and parcels weighing more than 2kg and removal of retail price
controls from second class presorted bulk mail services.
According to Postcomm, this will give Royal Mail greater freedom
to compete in the presorted bulk mail market, “where the
company has lost significant volumes to competitors”.
Following the announcement, Postcomm began a consultation period
to seek views on whether bulk mail should be removed from the
universal service. In a statement, Postcomm said it found that
the needs of bulk mail users show that they prioritise the
importance of low price bulk products, but appear less attached
to the key features of the universal service, in particular
uniform pricing. Nigel Swabey, chief executive of multititle
catalogue firm Scotts & Co agrees. Already, Scotts & Co has moved
all its packets away from Royal Mail to more competitively priced
lifestyle couriers. With a deregulated postal market, and
potentially better prices elsewhere, there won’t be much stopping
Scotts & Co from moving its catalogue mailings out of Royal
Mail’s system too.
And yet, at the Mail & Express Delivery Show in April, Royal
Mail’s media director Mark Thomson said the company had no
immediate plans to change from one-price-goes-anywhere if bulk
mail services were deregulated. At the same conference session,
however, Alex Walsh of the DMA and Ian Paterson of mail and
parcel carrier UK Mail believed zonal pricing was a real
possibility-and essential if Royal Mail wants to compete on a
level playing field. For Swabey, this means cost-reflective
pricing; if it costs more to deliver to Truro or Inverness, then
Royal Mail should charge more. Mailers targeting those areas
specifically can either factor those costs into their circulation
strategy or use mailing houses nearer to the final destination in
order to take advantage of local-rate discounts-“let the
math determine who you mail,” says Swabey.
Postcomm expects a decision about removing bulk mail from the
universal service in early 2012 and the new regulatory framework
to take effect in spring 2012.
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