Royal Mail Reaches Landmark Deal With Rival

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In the first deal of its kind in Europe, Royal Mail will deliver business mail collected by UK Mail, a subsidiary of Business Post.

UK Mail, which provides business mail services across the United Kingdom, will use Royal Mail for services including Business Class, in which mail is delivered on the morning of the second business day, and Day Definite, where mail is delivered on the day specified by the sender.

The agreement will cover large business customers of UK Mail that typically post more than 10,000 presorted letters daily.

Starting in April, Royal Mail will charge UK Mail a fee for each letter -- about 24 to 25 cents depending on weight and sortation level -- to carry mail over the "final mile."

"The contract we've signed today gives Royal Mail a commercial income stream without undermining our ability to continue providing a one-price-goes-anywhere universal service to the UK's 27 million addresses," Royal Mail chief executive Adam Crozier said yesterday. "Those are the key considerations. We've demonstrated that it's possible to reach a commercial agreement on access while safeguarding the universal service."

Royal Mail and Business Post have been negotiating for two years on the price Royal Mail should charge.

"This is the first agreement of its kind and a landmark for competition in postal services in the UK," said Nigel Stapleton, chairman of Postcomm, the British postal regulator. "It enables UK Mail, a rival operator, to pay Royal Mail to use its nationwide delivery network. It also sets a valuable benchmark for other customers and licensed operators who may wish to use Royal Mail's extensive network in a similar manner."

Other deals are expected to follow with organizations including Deutsche Post and TPG, the Dutch post office.

Under Postcomm's plans, postal competition comes in three phases. The first, which began Jan. 1, lets competitors such as UK Mail deliver 4,000 items or more, or to collect together mail from a number of customers, sort it and hand it over to Royal Mail for delivery. Phase 2 in 2005 is to reduce the lower limit on bulk items. Postcomm wants to open 60 percent of the market by 2005.

In other news, Royal Mail said yesterday that a change to the weight limit of its standard parcel service would begin in June as opposed to April 1, when it was previously scheduled.

Royal Mail, in agreement with Postcomm, is changing the weight limit for the standard parcel service from 30 kilograms to 20. The change affects less than 1 percent of the 4.5 million standard parcels yearly.

Royal Mail will continue to deliver parcels weighing up to 20 kilograms at a standard, uniform price to all addresses across the UK.

The date of the change was put back to June following feedback from the consumer watchdog Postwatch that some posters advising customers of the change had not been displayed in all post office branches from the beginning of January, as had been previously agreed.

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