Universal mail service 'not at risk'

Written By Unknown on Selasa, 02 Desember 2014 | 15.36

2 December 2014 Last updated at 08:25

The universal postal service, which obliges the Royal Mail to deliver across the country for a single price, is not under threat, Ofcom has said.

The regulator said it saw no reason to overhaul rules to force rivals to take on part of that obligation.

However, Ofcom said it would review the factors affecting Royal Mail's ability to deliver the universal service.

The Royal Mail has been complaining competitors are allowed to cherry pick more lucrative delivery areas.

Under postal market reforms, rivals can apply for a licence to collect, sort and deliver bulk mail.

Other competitors, including Whistl, pay Royal Mail an access fee for it to deliver to customers.

The government has guaranteed that the universal service will continue at least until 2021.

Last week, Moya Green, the Royal Mail's chief executive, told a committee of MPs that the universal service cost £7.2bn a year to finance, so needed cross-subsidy from profitable urban deliveries.

She said Royal Mail had already seen a "structural" decline of between 4% and 6% in the volume of letters it handles every year.

Efficiency incentive

Royal Mail said it would comment on Ofcom's announcement later on Tuesday.

Ed Richards, chief executive of Ofcom, said: "Ofcom's board has considered all the evidence in the postal market carefully over the past few months.

"We have concluded that there is no present risk to the financial sustainability of the universal service. This conclusion is based on the Royal Mail's own business plan and evidence as well as a range of other data."

He added that Ofcom took its duty to secure the universal delivery service very seriously and would be monitoring risks carefully.

The regulator has started a broader review of the factors affecting the Royal Mail's ability to deliver the universal service, which it will complete next year.

Ofcom said Royal Mail's productivity was improving, but the rate of progress was unchanged from the previous year and "below the company's own targets".

It also said that, in its view, "competition is likely to provide Royal Mail with a further incentive to become more efficient".

"Continued progress on efficiency is crucial if the universal postal service is to be financially sustainable in the longer term."

Review

Ms Greene had called for the regulator, Ofcom, to bring forward a review of the universal service, which it had been planning for next year.

She told a parliamentary committee last week that she believed the competitive framework of the UK market now meant that the Universal Service Obligation was becoming uneconomic.

But she was been accused of "scaremongering" by the Business Secretary, Vince Cable.

Whistl, formerly known as TNT Post, has been making deliveries in urban areas such as London and Manchester since 2012, but relies on Royal Mail to deliver in rural areas, where costs are higher.


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