Postcomm talks up early competition for Royal Mail

LONDON – Nigel Stapleton, chairman of postal regulator Postcomm, has warned that competition in postal services should be speeded up because Royal Mail has been missing service targets.

Speaking at the UK Mail Summit in London yesterday, Stapleton said: "Royal Mail has missed all its service targets for last year and the first quarter of this year. That is effectively a covert price increase and suggests competition should be speeded up so customers have more choice."

Postcomm is consulting on bringing forward the introduction of full competition in postal services by 15 months to January 1 2006.

His speech covered the challenges to new entrants in the face of Royal Mail's near-monopoly. He said the 80m items a day handled by Royal Mail, together with its daily national coverage, allow substantial economies of scale and act as barriers to competition.

New entrants also need to overcome customer inertia, a lack of knowledge of the new competing products and Royal Mail's VAT advantage -- it is exempt from VAT, whereas competitors must add VAT to their prices.

Stapleton said: "We won't hesitate to use our powers to deal with unfair attempts to prevent the new entrants from gaining a foothold in the market."

If competition was stifled, he did not rule out the separation of Royal Mail's collection and delivery operations.

Royal Mail's next price control, which will operate from 2006, will include a framework for progressive deregulation once the market becomes more competitive, Stapleton said. Postcomm will also look at new quality of service targets for Royal Mail, which may be linked to the prices it can charge.

If you have an opinion on this or any other issue raised on Brand Republic, join the debate in the Forum here.