Ofcom sets out measures to protect the universal postal service

By Simon Nias, Wednesday 27 March 2013

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Royal Mail's competitors could face regulatory intervention in future if Ofcom considers them to be posing a "material threat to the provision of the universal service".

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Ofcom has set out how it will protect the universal postal service

Any intervention will only apply to competitors that are providing an end-to-end service rather than downstream access (DSA) providers who deliver mail to one of Royal Mail’s inbound mailing centres for final mile delivery.

In its final guidance on end-to-end competition, published this morning (27 March), Ofcom outlined the possible interventions it might take if it considered there to be a "material threat" to the universal service.

These include the possible imposition of general universal service conditions (GUSC) on Royal Mail’s competitors and the potential for a universal service compensation fund.

According to Ofcom, the two most likely forms of GUSC would be a minimum number of delivery days per week (up to a maximum of five) for the area entered, or a minimum geographic coverage.

This later measure could require the entrant to deliver to a nationally representative proportion of the population – in other words the same ratio of urban, suburban and rural addresses as Royal Mail.

This type of GUSC has been designed to address the concerns raised by the likes of the Communication Workers Union (CWU) that new end-to-end entrants will simply cherry-pick the most profitable routes and leave the high cost rural routes to Royal Mail.

The alternative to imposing a GUSC on Royal Mail’s rivals would be to establish a universal service compensation fund, which would require the intervention of the Secretary of State.

This fund could be contributed to by postal operators, based on mail volumes or revenues, or their customers, via a surcharge on postal products.

Other options that Ofcom has said it might consider include requiring end-to-end competitors to provide access to their own networks and the possibility of the universal service being competitively tendered, although this could not be done before 2021 without the consent of Royal Mail.

Ofcom has said that it will actively monitor the postal sector for any signs of a threat to the universal service and it has committed to undertake a review of the impact of end-to-end competition towards the end of 2015, if a review has not already been undertaken by that time as a result of competition.

Meanwhile, Ofcom has also announced this morning that it is not proposing any changes to the scope of the universal postal service and that it is proposing new protection against the removal of postal boxes in rural areas.

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