Postcomm turns down Royal Mail's zonal pricing plan

by Daniel Farey-Jones, Brand Republic 24-Jul-07, 14:40

LONDON - Postcomm has said it will reject Royal Mail's proposal to introduce zonal pricing because it would lead to 'unreasonable' changes for customers, but has left the door open to an amended plan.

Royal Mail's plan would have led to variations in the prices of services for large volume mailers according to five types of delivery zone. For example, there would have been a 2% discount for high density zones and a 4.9% discount for business district zones, but a 4.8% premium for low density zones.

Nigel Stapleton, chairman of the postal services regulator, said: "We are proposing to reject Royal Mail's application mainly because it has put forward a pricing structure that appear to have a number of discriminatory features and would have been introduced in a way that would lead to unreasonable changes for customers."

Postcomm said it has gone public with its decision now in the interest of reducing market uncertainty. Its full explanation will be published in August in a consultation document. After this there will be a two-month consultation during which Royal Mail can amend its proposal and the industry can respond to Postcomm, which will make its final decision by the end of the year.

Stapleton said that the regulator may still approve an amended zonal-type solution and it hopes that Royal Mail can assuage the fears of rural customers.

"[Our decision] does not mean that we are ruling out any future moves towards more cost-effective pricing, including zonal structures for non-universal service products, if Royal Mail can design an application that meets the requirements of its licence and our statutory duties.

"Although any decision must be based on these tests, we note that Royal Mail's application has also proved highly unpopular with its customers -- both senders of mail and recipients in rural areas.

"We hope that, following the publication of the consultation document in August, Royal Mail will engage constructively with its customers to see whether their concerns can be addressed."