Changes to collection plates

Royal Mail is making changes to collection plates as a result of two separate initiatives, namely:

SUNDAY AND BANK HOLIDAY COLLECTIONS - CHANGES TO COLLECTION PLATES

Part of the agreement given by Postcomm to Royal Mail’s request to stop Sunday and Bank Holiday collections was for Royal Mail to amend the information on the collection plates.

Postwatch has been advised by Royal Mail that the removal of all references to Sunday and Bank Holiday collections to its collection plates will be completed by 25 February.

CHANGING COLLECTION PLATES TO SHOW FINAL COLLECTIONS AS CLOSE TO 12.00 MIDDAY (MONDAY – FRIDAY) AS POSSIBLE

In response to Postcomm’s Decision Document on its review of Royal Mail’s collection and delivery times Royal Mail has undertaken a review of collection points that have a collection time before 12:00 midday (Monday – Friday) to move as many back to midday or later where it was reasonably practical and make economic sense to do so. However, there will be some instances where it may not be possible in every instance due to practical and commercial restraints (further details are attached).

Royal Mail has advised us that all reviews are due to be completed by end of February/early March.

New postal licence framework

Postcomm, the regulator for postal services, today announced changes that will simplify procedures for licensing non-universal service operators. (The universal service is the geographically uniform postal service that is provided by Royal Mail.)

The changes described in today's document - Amendment of the 2006 licensing framework - include a reduction in application fees from £1000 to £50, which it is hoped will help encourage small businesses to enter the market, and the removal of the licence requirement on all licensees to have guarantees or contractual arrangements in place to ensure the delivery of mail if an operator fails so that, in future, other operators can respond directly to what the market demands, rather than to regulatory requirements.

Responses to "Emerging Themes"

Postcomm has now published on its web site all the responses it received to its latest consultation document on its strategy review entitled "Emerging Themes". In fact, there are only nine: Royal Mail & CWU, BERR & HMRC, Mail Competition Forum, DX, TNT & UK Mail, and Postwatch.

You can access all these documents here.

Strategy Review document published

Postcomm, the postal regulator, has published emerging findings of its strategy review.

The document, which has a deadline for responses of 26 November Postwatch, is available here.

Postwatch will take its time considering the substance of the report, and our response will be published on our website. One immediate comment is that we welcome the regulator’s confirmation that the universal postal service is in a healthy state and there is no need at the moment to consider how it could be alternatively funded. We are also pleased Postcomm has highlighted the need for Royal Mail to address its costs, and for the mail industry as a whole to put more energy into producing innovative solutions to attract and retain customers.

On the downside, it is disappointing that post offices are not considered in the report. The network plays an integral role in providing access to parts of the universal postal service. Ignoring this results in an incomplete picture of the issue.

Regulator proposes 2nd class stamp price rise

Postcomm, the postal regulator, has proposed to allow Royal Mail to raise the price of 2nd class stamps to 29 pence in April 2009. 2nd class stamps currently cost 24 pence.

Price rises are never good news for customers, and Postwatch will be asking the regulator to justify its proposal. We believe the priority should not be allowing Royal Mail to impose further inflation-busting price hikes, but exploring ways to make efficiency gains.

All Going on a Summer Holiday?

August/September is usually a relatively quiet period in the world of post, however, this year is somewhat different with Postcomm publishing a range of consultations in the coming weeks. Please see timetable below (dates are approximate):

Interim Review (Price Control):
Publication date - 9th August
Running for 2 months (early October deadline)

Zonal Pricing:
Publication date - 16th August
Running for 2 months (mid October deadline)

Strategy Review:
Publication date - 23rd August
Running for 3 months (late November deadline)

Those interested in any of the above should check the Postwatch and Postcomm websites regularly as well as national press for full documents and further information.

No Postcomm Consumer Panel

In Spring 2006, the then Department of Trade & Industry (DTI) held a consultation on future forms of consumer representation. This suggested a number of possible models for bringing together the working of the National Consumer Council, Postwatch, Energywatch, the Ofcom Consumer Panel and the Financial Services Authority Consumer Panel. At that time, Sarah Chambers, Chief Executive of the postal regulator Postcomm, sent a submission to DTI which stated: "A well resourced Consumer Panel can provide effective, evidence-based advice and information to a regulator. If Postwatch is abolished, then Postcomm would support the establishment of a Postal Services Panel."

Now that Parliament has approved the Consumers, Estate Agents And Redress Act - which will merge Postwatch with Energywatch and the NCC - we sought clarification from Postcomm as to whether it was in fact their intention to create a Consumer Panel. Sarah Chambers writes:

"You asked about Postcomm’s position on the various ideas that have been put forward about Consumer Panels. The response we sent in April 2006 to the Government’s consultation was, as we stated at the time, based on the fact that DTI had told us that its preferred option was to have specialist panels established by sectoral regulators (ie Option 3 in the consultation document); our comments were therefore made in that context. Our response pointed out that any Panel would have to be able to identify and get access to sufficient sources of information about postal issues in order to be effective. We also pointed out that the implications for additional funding for Postcomm’s enhanced role both in terms of assessing and approving an Ombudsman scheme and establishing and servicing a Panel did not appear to have been addressed.

The Government’s decision recognised “the significantly different role” that the Financial Services Consumer Panel and the Ofcom Consumer Panel play in their respective regulatory frameworks and decided that they would be left unchanged. Although the decision left it open for other regulators to establish their own consumer panels if they wished to, no additional funding has been provided for Postcomm to do this and no evidence has been provided that such a Panel is necessary. The requirement to assess Ombudsman schemes is a statutory one and Postcomm has therefore had to reallocate resources to deal with this additional area of regulation.

The government has decided that the nature of consumer representation in post is to change. Postcomm looks forward to working closely on postal issues with the new consumer body. We will seek to ensure that they are brought up to speed on postal issues and have an active input into our policy development."

The Future of UK Postal Services

Last Monday the Institute of Economic Affairs held their 6th annual conference on The Future of UK Postal Services in London. Although the media have honed in on the fact that Sarah Chambers, Chief Executive of Postcomm, stated that the number of deliveries received each week, currently six, could be an area for future discussion, there were also a number of other interesting points that were raised.

It's clear that a debate on the Universal Service Obligation (USO) is desired by Royal Mail, their competitors and Postcomm. This is likely to include which products are included in the future, with Royal Mail envisaging only stamped mail enjoying USO protection. There are also debates to be had on delivery methods and access points as the way we work and live continue to evolve. The way the USO is funded was also touched on and this will be an area of concern for the industry as a whole, and a real challenge for Postcomm.

The post will always be an emotive issue but it’s important that any future debate considers all options, however far reaching, to ensure that the outcome really is the very best it can be for customers.

Postwatch are already in the process of carrying out extensive research on the value of the USO and will be at the forefront of this debate as it develops.

Postcomm (3): the USO

The afternoon section of this year's Postcomm London Forum, held earlier this week, consisted of a series of discussion panels. Postwatch's contribution came in the panel on the future of the universal service obligation.

Speaking for us, Council member Roger Darlington argued that there was no evidence of political or consumer wishes to make significant changes in the USO at the present time, but he acknowledged that falling mail volumes and loss of market share by Royal Mail was likely to make the funding of the USO increasingly problematic.

Postcomm (2): zonal pricing

This week, as part of its fourth annual London Forum, Postcomm held a workshop on Royal Mail's proposals for a new system of zonal pricing.

A presentation was made by Postwatch Council member Judith Donovan, supported by Postwatch Council David Bland, which was strongly critical of the proposals.

You can find a summary of the event here.

Postcomm (1): Annual Report

This week, the postal regulator Postcomm published its annual report.

You can access the report here.

Zonal Pricing: who wins?

Postwatch has submitted its response to Postcomm's consultation on Zonal Pricing.

Postwatch understands the need and principle behind Zonal Pricing but this must be balanced with the potential impact on customers. The potential benefit of Zonal Pricing is outweighed by the potential disadvantages to customers, especially rural dwellers and competitors. Postwatch is not aware of any customer who has openly welcomed the proposals. Furthermore, Royal Mail may be damaging its own interests by potentially reducing mail volumes and revenues.

Based on the customer focused criteria, that the new system should not be introduced in a manner that avoids unreasonable changes for users of the services, we are concerned at the potential impact this initiative may have on:
- the future of the universal service,
- large mailers,
- mail volumes,
- competition,
- London, and
- rural dwellers (senders & recipients).

In addition, we have concerns surrounding:
- Potential zone anomalies,
- Cost reflectivity and revenue neutrality, and
- Communication and Implementation.

Postcomm will publish a further consultation in July/August 2007.

The full Postwatch response can be viewed here.

Regulatory ruminations

Today was the second and final day of the 27th annual World Mail & Express Europe conference here in London. This morning, the conference was addressed by John Ivers, the Director Licensing Framework & Market Intelligence at the regulator Postcomm.

He spent quite a lot of time analysing the volume and composition of UK mail. He explained that, since 2001, the historic relationship between GDP growth and growth in overall mail volumes has broken down with actual declines in total volumes in the last two yrears. The UK has the second highest number of items posted per household in Europe and he speculated that the UK mail industry may now have reached maturity.

On the other hand, he insisted that decline in mail volume is "not a natural law" and that some parts of the market - such as business to consumer mail and fulfillment - are still growing. Drawing on research by Pitney Bowes, he argued that "Internet users receive more physical mail than those who do not use the Internet" (although those not on the Net tend to be older and poorer consumers).

Touching on the universal service obligation, he said that the USO should be "one evolving in scope and service to meet the changing needs of customers in an increasingly dynamic market" - which seems somewhat coded.

Finally looking more to the future, he referred to Postcomm's Strategy Review which was launched with a consultation document as long ago as August 2006. He said that an "Emerging Views" document would be published "around July". In the Q&A session, Postwatch Council member Roger Darlington expressed disappointment that submissions on the orginal discussion document on the review were required by 9 November 2006 and no new document would be available for eight months after those views were submitted.

Postcomm has a London Forum on 12 June and Postwatch would have expected the "Emerging Views" document to have been published before that event, so that public discussion could have begun at the Forum. After all in the Foreword to the original discussion document, Postcomm Chairman Nigel Stapleton stated: "Our plan is to provide feedback to this consultation as early as possible in 2007".

Prices under control?

Postwatch has submitted its response to Postomm's consultation on revisiting certain aspects of the price control.

For Postwatch (and for Postcomm also) it is imperative that the outcome of these applications should be a price control that is balanced fairly between customers, efficiency, competition and protecting the universal service.

To achieve this, Postcomm needs:
- sufficient and reliable data on Royal Mail’s internal workings;

- sufficient and reliable data on trends in (and beyond) the mail market; and

- to apply a rigorous, independent and transparent analysis of such data to test the applications by Royal Mail and UK Mail/TNT.


Postwatch believes that Postcomm is essentially being asked to re-set:

- the price control,

- Royal Mail’s charges for access to its upstream business (through access arrangements), and

- Royal Mail’s charges for use of its downstream delivery business, and the apportionment of those charges between wholesale and retail customers (zonal pricing).

These issues affect every aspect of Royal Mail’s business and go the heart of the mail service as a regulated industry. We urge Postcomm to undertake a transparent and objective analysis not only of the data supplied in these applications but also of the data omitted from it - and to publish the results of this analysis before they make their decision.

At that point, and only at that point, we believe Postcomm will be in a position to determine how far granting or refusing these applications will reconcile the aims of protecting the universal service, promoting efficiency within Royal Mail and ensuring the maximum consumer benefit from competition. Until then, it is difficult to look favourably at an application which seeks major changes to a price control agreed little more than a year ago.

The full text of the response can be viewed here.

Royal Mail: All out of PAF?

Postcomm has announced new safeguards for the future management of the postcode and address data contained in Royal Mail’s Postcode Address File (PAF).

PAF lists details of every postal address and postcode in the United Kingdom. As such, it is a very valuable asset for Royal Mail, since many other organisations - including new postal operators, banks, insurance companies and firms offering home delivery - need to use the information it contains.

The four key issues covered in the document - “Royal Mail’s future management of PAF” – are:

The definition of PAF – what information should Royal Mail be obliged to supply? Postcomm considers that ‘PAF data’ is not only made up of postcode details, but also includes other information needed to allow users to identify specific addresses.

The creation of an advisory board. Royal Mail has agreed to set up an advisory board to represent the views of PAF users, and has already started the recruitment process for the board’s independent chairman.

Ringfencing of PAF. As competition develops in the mail market – and also with other suppliers of similar address data – it is crucial that Royal Mail ringfences PAF from its other activities, in order to avoid potential conflicts of interest.

Profits. There is increasing demand for PAF data from a wide range of organisations, which rely very heavily on the information it provides. This puts Royal Mail in a very powerful position where setting prices is concerned. Although PAF does not fall within the ‘price control’ that Postcomm uses to set a pricing and service quality framework for Royal Mail, the company has agreed to aim for an operating profit margin in the range of 8-10%. If profits exceed this range, the excess would be either returned to customers or reinvested in PAF.

Today’s report follows a three month consultation last year, which asked PAF users for comments on a series of proposals designed to make sure that the database is managed – and made available to other organisations wishing to use it - on fair and reasonable terms. Following the consultation, Postcomm held discussions with Royal Mail, which has agreed to implement all the decisions outlined in the report.

The full report can be found HERE

London: In a zone all of its own!

Postcomm has now begun consulting on zonal pricing. On 20 February 2007 – following numerous exchanges with Postcomm over information to support their application – Royal Mail submitted a revised zonal pricing application. This ‘modified the pricing structure and the discount and surcharge levels proposed, [but] all other aspects of the application remained unchanged’.

Specifically, the revised application ‘merged’ rural zones D and E, and created a new ‘Greater London’ zone approximating to the area within the M25 motorway. As in the original proposal, discounts would be given to bulk business mail customers for deliveries to higher density zones [outside Greater London] where delivery costs are lower than average, and surcharges made for deliveries to low density zones where delivery costs are higher than average.

According to Royal Mail, a surcharge would be necessary in the Greater London zone (covering AL, BR, CR, DA E, EC, EN, HA, IG, KT, N, NW, RM, SE, SM, SW, UB, TW, W, WC, WD) to reflect the cost differences between locations that were not caused by geographical factors but by the amount that it costs to supply the relevant resource – principally pay rates, but also inward Mail Centre costs, indoor delivery office work and other delivery office costs.
The pricing differentials now appear thus:

Revised price differentials proposed by Royal Mail Zones:

A	B	C	D	LONDON
-4.9%	-2.0%	-1.7%	+4.8%	+2.5%

The consultation is open until 7th May and all customers are encouraged to respond. Further details can be found at www.postcomm.gov.uk