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Government to review Royal Mail's core business

LONDON - The government is to begin a review of Royal Mail's core services, to improve its efficiency and competitiveness against non-public sector rivals.

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The review, which is being conducted by John Hutton, the Business and Enterprise Secretary, will address fears that Royal Mail is being irreparably damaged by increased competition from rival postal companies that have no public service obligations.

The areas likely to be debated in the review include how Royal Mail can improve its efficiency and flexibility levels to meet changing customer needs, and how it can maintain a "universal service rate" for UK post in remote regions where it is uneconomical to do so.

Postcomm, the postal regulator, will be involved during the process, and has said the review is timely in considering the effects from increased competition not only from rival postal companies but the internet and other media.

Royal Mail has so far been unsuccessful in pushing for a zonal pricing plan for UK mail, having had its proposed measures rejected by Postcomm in July because it said they would lead to "unreasonable" and "discriminatory" changes for customers.

A potential outcome of the review is that non-public sector postal companies such as TNT, DHL and Business Post would have to make a contribution to maintain Royal Mail's universal service remit.

Nigel Stapleton, chairman of Postcomm, said: "This review is timely in considering, not only the effects of competition between mail operators, but also competition from email, the internet and other media.

"Postcomm itself is in the middle of a high-level review of our regulatory strategy which is looking at all aspects of the regulated postal services market."

Stapleton added that the review process would ensure the public "continues to benefit from an evolving universal service" that provides efficient and reliable services meeting user needs.

Royal Mail and the Communication Workers Union welcomed the review.

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