Postcomm defines debate on postal competition

28 June 2001

A world in which letters could be collected and delivered by the local supermarket or milkman, where independent postal operators could link up with the Royal Mail, and where customers would be able shop around for a good deal on price and service quality, is envisaged in a document published today by Postcomm.

The consultation document assesses a wide variety of options for giving customers the power to choose who provides their postal services and
invites comments from operators, customers and consumer organisations. Their responses will be used to frame Postcomm’s proposals later this year for a new competitive regime.

Reducing the upper limit of the licensed area -- the traditional approach -- may not be the most effective way to promote competition. Alternatives canvassed include:

• Opening up the postal services market completely.
• Opening up particular segments of the market to competition, such as direct mail and bulk mail.
• Introducing competition into separate parts of Consignia’s postal supply chain.

Potential entrants to the market could include existing postal operators, or non-post companies with an existing network that could be
adapted to provide a postal service.

Businesses already engaged in a network-based industry – newspaper distributors, logistics-based and freight operators, milk delivery firms, supermarkets – could be licensed to convey mail as an add-on or extension of their core activities.

There could be room for newcomers too, as in Sweden, where most of the 100 new entrants into the market are involved in local delivery, providing innovative services that customers appreciate.

Postcomm has an over- riding duty to ensure the provision of a universal postal service. The consultation document considers the extent to which each option for introducing competition might be compatible with that duty.

A separate discussion paper* also issued today by Postcomm on the costs and benefits of the universal service, suggests that the universal service may not be a significant cost and could be an overall benefit to Consignia.

Notes for Editors

*Consignia’s data, and independent analysis by consultants Andersen, suggests that no universal service product type (i.e. First Class, Second Class mail) in aggregate is loss-making. There are loss-making elements within each product category, and the total cost of all these elements is about 1.5% of Consignia’s operating costs. But it would be difficult or impossible for Consignia to disentangle and discontinue any individual element. And Consignia derives considerable benefit from delivering a one-stop mail service with an easily understood tariff.

Copies of Promoting Effective Competition in UK Postal Services, and An Assessment of the Costs and Benefits of Consignia’s Universal Service Provision, can be accessed from Postcomm’s website: www.psc.gov.uk. Hard copies are available from Postcomm at 6 Hercules Road, London SE1 7DB.