Royal Mail 'Ready' as Monopoly Will End Early

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Britain's postal service market opens to full competition Jan. 1, 15 months earlier than planned, the independent UK postal regulator Postcomm said Friday.


The move completes the process of removing the monopoly enjoyed by Royal Mail Group PLC for more than 350 years.


"We're ready," said Adam Crozier, Royal Mail's chief executive. "We recognize that [Postcomm] is getting on with [its] job, and welcome faster competition as long as it comes without unfair restrictions on Royal Mail."


Licensed companies other than Royal Mail will be able to collect, transport and deliver any mail, from single letters to bulk mailings, in competition with Royal Mail and charge customers for the service. They can set up collection boxes, provide collections and deliveries between businesses, offer tracked mail services or mail deliveries at a guaranteed time, among other services.


Companies including Hays Commercial Services Ltd., TPG Post (UK) Ltd., UK Mail Ltd. and Express Ltd. have operated in the bulk mail delivery sector since January 2003 when rival operators were permitted to handle bulk mail up to batches of 4,000 letters, or more for business clients. But domestic letter services are currently the exclusive domain of Royal Mail.


Open competition originally was set for April 2007. When this was proposed in 2002, Royal Mail -- then Consignia -- was losing $1.9 million daily and struggling to introduce a three-year renewal plan. Royal Mail since has returned to profitability and continues to dominate the UK licensed letters market with a share surpassing 99 percent. This part of the market is worth about $8.5 billion yearly.


Royal Mail cut jobs, closed post offices and scrapped its second daily delivery to reduce costs and prepare for increased competition.


Postcomm chairman Nigel Stapleton said Postcomm will publish arrangements for the multi-operator market soon. They will include a code of practice to ensure that all mail companies cooperate on common operational issues such as forwarding of mail and handling mail that is returned to sender, as well as a separate code to safeguard the mail's integrity.


Several barriers to competition must be removed, Stapleton said, and Postcomm must address several privileges enjoyed by Royal Mail.


Royal Mail still will be required to provide universal service for first- and second-class mail of one delivery and one collection each working day at a uniform price throughout the UK, and provide a business mail service on universal service terms. But it will have the freedom to compete with services provided by rival specialist mail operators.


Postcomm will continue to regulate Royal Mail's prices and services. But as competition develops, Postcomm expects to reduce the amount of regulation.


Royal Mail said Postcomm regulates 90 percent of its revenue and controls the price and terms and conditions for nearly all its mail services, including bulk services aimed only at big business customers. No such restrictions will be placed on other providers of postal services.


Crozier said Royal Mail wants to see a smooth 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 said. "Royal Mail must have the freedom and flexibility to set the right prices, based on real costs. If that happens, I think the new competitive environment will succeed. Competitors are already targeting profitable business mail. We need to compete with them on price as well as service if we are to keep the universal service in business."


Big businesses are likely to be the first to use the services that will be introduced by competitors, but they are also expected to be used by consumers.


Even in the limited competitive market that already exists, Royal Mail has seen some of its business customers switch to other postal service providers, and in response has tightened its own service standards.


Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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