Looking to the future....

Postwatch has today published its response to Postcomm’s Strategy Review. This document outlines our vision for the postal market and details our position on key areas such as universal service provision, competition, deregulation and separation.

Our vision for the UK postal market is of a dynamic and thriving industry in which all customers benefit from a universal level of provision, an overall decline in prices in real terms, improving quality of service, greater choice of provider and products, and increasing innovation.

The main messages in our submission – to both Postcomm and any successor to Postwatch – are as follows:

· Social consumers, and most especially vulnerable consumers, need the universal service obligation to be protected. This does not mean that its scope and funding cannot be reviewed in the light of changing circumstances over the next decade, but it does mean that the USO must reflect properly-determined consumer needs and be adequately funded.

· Royal Mail has responded to the new competitive environment by commencing a programme of rebalancing of tariffs in order to achieve more cost-reflectivity. While we understand the logic of aligning prices more closely to costs, we believe that this has to be done in a phased manner in order that services remain affordable to all consumers.

· Competition has already started to reduce Royal Mail's market share and this has happened at a time when overall mail volumes have ceased to rise and look likely to experience a gradual but sustained decline. While we certainly favour a level playing field, reduced barriers to entry and greater competition, such changes must be introduced gradually with proper regard to the impact on social customers and the implications for the funding of the USO and in a manner that ensures that competitors are not undermined before they have properly established themselves.

· Although the consultation document does not mention the post office network, we see this network as an integral part of the delivery of postal services and therefore an essential part of the strategy review. The Government, the regulator and other relevant stakeholders need to form a common strategic view of what social outcomes are desired from the post office network and how those can be achieved. It is essential to ensure reasonable accessible to postal services by all customers, but with a particular focus on the needs of vulnerable customers.

· Separation is a term often used very loosely and the idea is sometimes seen as the easy or obvious route to a more competitive framework. However, we believe that it is absolutely essential to define precisely what problem one is seeking to address before considering whether one of the many forms of separation might be a net advantage to the market as a whole and to consumers in particular.

· Given that competition is so new and fragile and that the postal market has so many differences from other regulated markets, we see a continued need for a sector-specific regulator and indeed sector-specific expertise in consumer representation (wherever that might be located organisationally). The regulator needs to make decisions based on evidence, be transparent in decision-making, and work closely with all stakeholders including the statutory representative of postal consumers.

We expect that this stage of Postcomm's strategy review is the beginning of a dialogue and more thinking by the regulator, prior to the determination of some specific policies, and we stand ready to play a full part in a continuation of this important dialogue on the future of postal regulation, so that we collectively achieve the best outcome for consumers.