|Is it a good idea to break Royal Mail's monopoly of postal delivery?
6 Feb 2002
I am concerned at the possible impact of this on rural deliveries in my constituency. The risks are set out in the following letter I got from Consignia (alias Royal Mail)
Postcomm proposals for postal market competition
Last week Postcomm, the UK postal services regulator, announced its proposals for allowing competitors to operate in more of the UK mail market. One of the main proposals is to open up 30 per cent of the mail market to more competition on 1 April 2002- just eight weeks time -with the entire market being opened to full competition within four years. The 30 per cent figure relates to Consignia's market share by revenue which translates to 40 per cent of the market by volume.
The details of Postcomm's three-phase process are:
Phase One: between April 2002 and April 2004, Postcomm will grant licences for operators wishing to provide bulk mailing services (minimum 4,000 items, with a restriction on acceptance of mail from licensed consolidators), consolidation licences to allow for the consolidation of mail from a number of users for delivery by Consignia, and limited licences for 'defined' services, such as local deliveries or other specialised services.
Phase Two: between 1 April 2004 and 31 March 2006, Postcomm will lower the threshold for large mailings from 4,000 items to a threshold between 500 to 1,000 items. The restriction in large mailing licences preventing the acceptance of consolidated mail will also be reviewed.
This stage will open up a further 30 per cent of revenues to competition (a total of 70 per cent by volume).
Phase Three: will take place on or before 31 March 2006 when all restrictions on market entry will be lifted.
We are quite clear that these proposals will allow competitors to 'cherry-pick' the most profitable customers and services, which substantially pay for the 'one-price-anywhere-in-the-country' promise of the universal postal service at a uniform tariff.
We recognise that the introduction of competition can benefit customers and we are certainly not afraid of seeing more competitors in the mail market. Our concern is the timing and degree of market opening. While further competition will certainly provide some benefits, there is a need for a balance to be struck so as not to undermine potential customer benefits by introducing full-blown competition too quickly, and with no constraints, while effectively tying our hands behind our back.
Postcomm's route for introducing competition into the UK mail market is quite different from the steps being taken by the European Union which al115 European public postal operators have accepted In October 2001, EU Ministers agreed to start liberalisation across the EU from 2003 Under these proposals which have now been submitted to the European Parliament for its second reading Member States would have to open up to competition
From 2003, letters weighing more than 100 grams or costing more than three times the price of a standard letter (Consignia currently holds the licence to handle items weighing less than 350 grams in the UK)
From 2006 letters weighing more than 50 grams or costing more than two and a half times the price of a standard letter
With a review in 2007 which will produce proposals for any further liberalisation in 2009
While Consignia has long-advocated the introduction of gradual and controlled competition into the postal services sector across the EU, Postcomm’s proposals put an unnecessary and dangerous degree of pressure on the UK’s universal service and the principle of a uniform tariff. Bear in mind that European operators will have a degree of access to the UK market, whilst we will not in their domestic market.
The Postcomm proposals also come at a time when Consignia's financial position is already unsustainable. We are losing more than £1 million a day largely due to the fact that on average it costs us 28p to deliver a letter with a 27p stamp. This is why we are taking radical steps to save £1.2 billion by March 2003. We must do this to pay for essential customer service improvements and better reward our people who have a critical part to play in the future success of the company.
These steps have been communicated widely and include:
Bringing our UK parcels business into profit
Making our mail delivery operation more flexible to cope with the demands of our customers
Creating a viable network of Post Office branches
Reviewing the way we provide support services to the business
Reviewing our transport network
We will respond to the Postcomm proposals. We will say that the market should be opened up -at a pace and in a way that gives customers more choice -but also gives us a realistic chance to compete effectively and maintain the UK's universal postal service at a uniform tariff.