Price Letters by Size, Royal Mail Says

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Royal Mail announced this week that it wants Postcomm, the UK postal regulator, to allow it to price mail by size rather than by weight as it does now.


Royal Mail said its proposals would introduce a fairer, simpler pricing system that more accurately reflects the costs of handling mail, since the size and shape of most mail is a more important factor in the cost of sorting and delivery than weight.


It costs more to sort, handle and deliver big envelopes and packages, Royal Mail said, and it wants stamp prices to take account of the size of the envelope.


Postcomm this week began three months of consultation on the plans.


"Most letters and cards wouldn't cost any more to post," said David Dale, Royal Mail's head of size-based pricing. "In fact, 74 percent of the mail would be totally unaffected. And this isn't an increase in our prices. Overall, the proposals are revenue-neutral for Royal Mail."


Lightweight but large or bulky items such as posters in cylindrical packing would cost more to send because they cost Royal Mail more to handle. But heavier, compact items such as books would cost less to send.


Dale added that these proposals would bring "our prices more in line with our costs. In the new, competitive postal market it is commercially impossible for Royal Mail to keep its traditional pricing structure, which gives large cross-subsidies. While there will always be some cross-subsidies in a business that provides a one-price-goes-anywhere service, it is important to have a level playing field in the emerging competitive postal market."


Royal Mail said the proposals should be simpler for customers because there would be only five stamp prices for First- and Second-Class mail instead of the current 16 for First Class and 13 for Second Class.


The current pricing structure has been in place for decades, Royal Mail said, and was inherited from when all mail was hand-sorted. Most other postal administrations already use size in pricing mail.


Countries that consider size in their prices include Austria, Belgium, Denmark, Germany, Greece, Finland, Italy, Ireland, Luxembourg, the Netherlands, Poland, Slovenia, Switzerland, Australia, Canada, Hong Kong, Japan, New Zealand, South Africa and the United States.


Royal Mail said it conducted a 12-month consultation with business customers to learn what they think of these changes. It found that 80 percent of larger companies are in favor of or neutral to the proposals. And a national opinion poll found that 74 percent of ordinary customers and 68 percent of small businesses were positive or neutral.


Royal Mail wants to implement these changes from September 2005. Postcomm, however, said in a statement that any change was unlikely to be introduced before April 2006.


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