Panel: Royal Mail needs to change to survive

“In the two years since 2006, competition in the
collection, sorting and transportation of bulk mail from
businesses has expanded rapidly-and much more quickly than even
the regulator had anticipated.” That’s the view of an
independent panel appointed by the Department of Business,
Enterprise and Regulatory Reform (BERR) to look into the postal
services sector. The panel’s initial response, published on 6th
May, also noted that whilst competition was quick to expand,
modernising Royal Mail was a slow process.

The review found that the 50 companies that make the most use of postal services account for 40 per cent of the market. They and other large businesses noted the report, “have seen clear benefits from liberalisation: choice, lower prices and more assurance about the quality of the mail service”. In contrast, smaller businesses have seen “no significant benefits”.

The panel also concluded that small and midsize enterprises (SMEs), which the report defines as organisations with fewer than 250 employees, had “no choice in provider and are paying higher stamp prices”-a point with which postal company TNT Post disagrees. According to a statement from TNT, liberalisation has provided flexibility, cost savings and new products to the SME market, though it does agree that “significant changes are required” to enable the market to grow and prosper.

Royal Mail, the report continued, still has “virtually no competition” in the delivery of addressed letters, although some observers believe that alternative carriers already have the volumes necessary to invest in delivery, perhaps twice a week, in urban centres.

The report says it needs to consider the possibility of this sort of competition, along with the “risk that more extensive competition could make the universal service unsustainable”. Universal service includes standards that must be made available to all 28 million addresses in the UK-for instance, one price for a First Class stamp regardless of its destination. Royal Mail said in a statement that it welcomed the report and “absolutely agrees” with its conclusion that the one-price-goes-anywhere universal service is at the heart of a successful postal service.

Following the initial conclusions that the “status quo is not tenable” and the way in which the postal sector is regulated will need to change, the full review will concentrate on how best to create a sustainable future for Royal Mail and the universal service. BERR expects to deliver its final review later this year.

Dan Croxen-John, an advisory board member of the Catalogue Exchange and a director of marketing agency The Ideas Collective, told Catalogue/?e-business that in this first phase of liberalisation companies ought to be careful of what they wish for regarding increased postal competition. “Should we see a weakened Royal Mail, slowly undermined by competitors and encumbered by an intransigent workforce, then ultimately we will all pay the price,” he warned, “as costs for delivery for the last mile will inevitably have to rise.”


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