Government launches postal competition inquiry

Simon Nias
Tuesday, September 30, 2014

The government has announced an inquiry into competition in the UK postal sector, including downstream access and end-to-end delivery, as well as the impact of parcel delivery services on the universal service.

The inquiry, which is being led by the BIS select committee, will hear evidence from Royal Mail, TNT and industry regulator Ofcom, in addition to any written submissions made by the 24 October deadline.

Royal Mail called on Ofcom to bring forward next year's planned review of competition on the end-to-end delivery market in June, claiming that the Universal Service Obligation (USO) was being threatened by "cherry picking arbitrage" by its main rival TNT Post, which rebranded as Whistl earlier this month.

Royal Mail has cited the rapid expansion of Whistl's end-to-end delivery service, which currently covers most of London, Manchester and Liverpool, and its alleged plan to deliver to 42% of UK addresses by 2017 as evidence of the need for intervention to protect the USO.

A Whistl spokesman said: "We are happy to take any opportunity to explain the benefits of competition in the UK postal sector and its important role in ensuring Royal Mail continues to work towards meeting its productivity targets, which it has so far failed to do.

"We are proud to deliver innovative, quality and value for money services that our clients want and are creating much needed new jobs across the UK."

Ofcom's latest Communications Market Report revealed that in 2013 competitors to Royal Mail's end-to-end delivery service represented less than 0.4% of the market.

Dave Broadway, managing director of CFH Docmail, which offers a bicycle collection and delivery mail service (Velopost) in Bath, Bristol and Edinburgh, accused Royal Mail of disingenuity.

"Royal Mail fail to disclose that the USO provides them with a huge advantage in the parcels and packets market, which any of their competitors would be pleased to enjoy," said Broadway.

"The accusation of 'cherry picking' is particularly silly. Royal Mail have such a huge advantage in volume and mail revenue that the vast majority of competitors could only possibly compete in cities since mail density is the critical factor in efficient delivery."

He added: "The fact that such smaller competitors can compete with Royal Mail at all highlights their inefficient systems and high prices."

The decision to include parcel delivery services in the inquiry is seemingly in response to the fact that, in it's Q1 results statement, Royal Mail revealed that parcels revenue for the full year was likely to be lower than expected as a result of competitors "aggressively reducing prices" and Amazon carrying out more deliveries using its own network.

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