Ofcom relax Royal Mail price control to safeguard the Universal Service

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Ofcom have this week announced proposals which could remove the price caps on what Royal Mail charge their customers. (Ofcom has just taken over from the now defunct Postcomm).

The news has been full of horror stories suggesting that in no time at all Royal Mail will be charging as much as £1 for a 1st class stamp, but that’s unlikely to happen in the near future. The price of a 2nd class letter stamp (currently 36p) will still be capped by the regulators and too high a differential between 1st and 2nd class would simply result in customers abandoning 1st class post.

What the relaxation will do is to remove some of the restrictions which don’t allow Royal Mail to effectively compete with their competitors, whilst retaining the Universal Delivery Service which ensures they deliver to every household in the country six days a week.

The price proposed for deregulation are:

  • First Class deliveries – letters, large letters (A4 in size and up to 750g in weight) and parcels
  • Second Class deliveries – for large letters and parcels up to 1Kg in weight
  • standard parcels
  • business mail – metered or franked mail and pre-printed envelopes
  • bulk mail – mainly large businesses sending a large volume of post in a single mailing for example, bank statements

Royal Mail will still be required to provide access to their competitors, meaning that the likes of TNT Post and UK Mail will still be able to get your credit card bills delivered. Royal Mail would have the freedom to set the wholesale price to their competitors for access to its network but would be subject to rules regarding the allowed margin between the wholesale and retail prices so they won’t be able to price them out of the market.

Royal Mail’s chief executive Moya Greene has insisted that maintaining the universal services and not having freedom to set prices would mean the company couldn’t survive. The latest proposals which are now subject to 11 weeks consultation should go some way towards addressing her concerns.

What is likely to concern online retailers is how much the cost of sending packages could rise. The good news however is that Royal Mail now have so many competitors in the packet delivery space that that alone should ensure Royal Mail have to remain competitive if they want to keep your business.

It’s worth remembering that Royal Mail have to provide a more comprehensive Universal Service than anywhere else in Europe. With that in mind if you want to make your voice heard you can submit your response to the public Universal Postal Service consulation on Ofcom’s website up until the 5th January 2012.

19 Responses

  1. An open market place would seem to be the way to go. Let the market place dictate the cost of postal service and who should deliver it.
    Quality, value for money and customer service will float the best company to the top spot.
    Who would be a postal worker? Not I. Snow, rain, heat, wind,mad dogs. 4am start, extended hours…

  2. That is fine as long as a postal operator is obligated to provide a universal service at universal prices before being granted a licence to operate.

    At the moment they don’t and are not obligated to. Everybody wants to offer a service within London.

    Nobody wants to offer a service to the Outer Hebrides.

  3. “Who would be a postal worker? Not I. Snow, rain, heat, wind,mad dogs. 4am start, extended hours…”

    Who would be an ebay seller
    Snow, rain, heat, wind,mad buyers. 4am start,and no finish

  4. Its the right thing to do, but we need to remember that prices we have been paying have already increased over several years by a rate above that of general inflation.
    That may say that we were in effect subsidised at one stage – and we’ll only know that when there is effective private sector competition.

  5. See the postal service going the way of utilities and trains. Over inflated prices and pricing that customers don’t understand. Already in my local post office I constantly hear the staff wrongly selling products and selling customers products that they don’t need.

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