Postal market to open to full competition next year

by Daniel Farey-Jones, Brand Republic 18-Feb-05, 07:00

LONDON – Postcomm is to subject the postal market to full competition on January 1 2006, having judged that Royal Mail is strong enough to face competition before April 2007, the date originally planned.

Licensed operators will be able to collect and deliver any mail, from single letters to bulk mailings, in competition with Royal Mail. They can set up collection boxes, run collections and deliveries between businesses, and offer tracked mail services or mail deliveries at a guaranteed time.

The regulator's recent three-month consultation revealed most respondents wanted to bring the date forward. April 2007 was proposed in 2002 when Royal Mail, then Consignia, was losing £1m a day.

Nigel Stapleton, the chairman of Postcomm, said: "Today's decision gives customers a real choice and increases the pressure on Royal Mail to raise its game and take on the competition.

"However, this is only the first step in a process which the commission hopes will eventually see market forces replace regulation as the main driver of an efficient mail industry."

Postcomm intends to remove Royal Mail's privileges, such as its VAT exemption, which are barriers to competition.

The regulator will soon publish arrangements for the liberalised market, including a code of practice ensuring cooperation on forwarded and returned mail, and a separate code to safeguard the integrity of the mail.

The status quo of limiting competition to 30% by value of the letters market and to companies handling bulk mail in batches of at least 4,000 letters will continue until 2006.

In its response, Royal Mail said that the decision to completely liberalise the UK's postal marked a new phase for everyone in the postal industry and one that it was ready for.

Adam Crozier chief executive of Royal Mail, said: "We're ready. We recognise that the Regulator is getting on with his job, and welcome faster competition as long as it comes without unfair restrictions on Royal Mail.

"What we now want to see is a successful transition to full competition. For customers, that means proper safeguards to avoid a damaging free-for-all and to ensure that all mail is secure, and that it is clear who has collected and delivered it and who is responsible for sorting out problems.

He added that Royal Mail wanted to be able to compete fully and fairly from the start and that it was determined to earn business in the new market so that it can continue to finance the one-price-goes-anywhere universal service.

"This remains at the heart of what we do. We can only do this if the handcuffs come off," he said.

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