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You are in: Press Releases |
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| Independent Specialist Services to
the Mail Express Freight and Logistics Industries |
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01 February 2002 |
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UK Postal Regulator (Postcomm) announces “dramatic” introduction of competitionTriangle Opinion – “Competition is going to be slow in coming” |
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Postcomm’s approach to the introduction of competition in UK postal services is considerably more cautious than appears at first glance. Although Postcomm states that its “vision [is] to achieve more effective competition in the UK [than in Sweden or New Zealand]” its proposals are not going to bring this about unless Royal Mail totally fails to respond to the competitive threat it is facing. Postcomm is proposing to open 40% of Royal Mail’s volumes to competition from April 2002. After years of 100% competition in Sweden and New Zealand their post offices have still managed to maintain market shares of over 95% (higher than the 90% described by Postcomm). This clearly demonstrates the difficulty which private operators face entering markets dominated by formerly monopolistic post offices. Triangle’s opinion is that there is no structural reason for competition to develop any faster in the UK than in other countries and that Royal Mail’s market share will not fall below 90% in the coming ten years. Although 40% of Royal Mail’s volume is about 32 million letters each day it will take a long time for private operators to win significant shares of this volume. High employment levels will restrict their ability to recruit suitable staff and, therefore, restrict their geographical scope of operation. Low initial volumes will force them to consolidate deliveries and deliver to each address only once or twice each week. Even in the bulk mail market there are many subsectors and private operators will be forced to compete for business from the limited number of mailers who send mail to other businesses or who have mailings with fall patterns which closely match the operators’ geographical delivery capabilities. Unless Royal Mail’s performance continues to deteriorate or its services are gravely disrupted by strike action customer inertia will be difficult for private operators to overcome. The ability of private operators to deliver some mail themselves whilst paying Royal Mail fair prices to deliver the rest will be crucial if they are to establish themselves in the market. Although Postcomm has not explicitly addressed the market for social mail it has provided a possible opportunity for operators to enter this market by means of “defined activity licences”. If Postcomm is serious about encouraging applications for these licences it will have to be considerably more explicit and prescriptive about their nature so that smaller operators are not drowned in regulatory procedures and negotiations. Most operators entering the market would be best recommended to apply for all three licences proposed by Postcomm. BackgroundOn 31st January 2002 the Postal Services Commission (Postcomm) published its proposals for promoting effective competition in UK postal services. Postcomm has a duty to ensure that customers continue to benefit from a universal service whilst furthering the interests of postal users, wherever possible by promoting effective competition. Postcomm is proposing to introduce competition in three phases. Phase 1 will commence in April 2002 and will create three types of postal licence:-
Phase 2 will commence in April 2004 and will revise the limit for bulk mail licences downwards to between 500 and 1000 items. Postcomm believes that this will expose 60% of Royal Mail’s letter revenues (70% of volume) to competition. Phase 3 will commence in or before March 2006 and will abolish all restrictions on market entry.
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For more information on Triangle or about this article please contact Paul Jackson via email (PaulJ@triangle.eu.com) or telephone at +44 (0)870 950 7900 . |
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