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Call to tighten up on rivals is rejected

Ofcom says ‘no threat’ to uniform post (updated)

Ofcom has contradicted Royal Mail boss Moya Greene’s recent claim that the group would find it difficult to maintain a same-price delivery service across the UK.

The watchdog said this morning that the universal postal service is “not currently under threat” and has rejected Royal Mails call for rougher regulatory measures on its rivals.

Royal Mail responded by saying it was disappointed that the regulator did not share its view that “unfettered direct delivery poses to the future sustainability of the universal service.”

Ofcom has, however, launched a review of factors affecting Royal Mail’s ability to continue delivering post anywhere at a uniform price and has instigated a number of measures to help short up the service.

In its annual monitoring update on Royal Mail it found that productivity is improving, but the rate of progress was flat on the previous year and below the company’s own targets. Royal Mail has also lost volumes in the parcels sector.

In a statement, Ofcom said:  “Having carefully assessed this evidence, including the confidential business plans of Royal Mail and its largest competitor Whistl, Ofcom does not believe the universal service is currently under threat from competition in the ‘direct delivery’ market, where operators collect and deliver letters themselves without using Royal Mail’s network.”

It has therefore decided not to impose new regulatory conditions on Royal Mail’s direct-delivery competitors. It believes competition is likely to provide Royal Mail with a further incentive to become more efficient.

“Continued progress on efficiency is crucial if the universal postal service is to be financially sustainable in the longer term,” it said.

Ofcom continues to monitor the development of direct delivery competition, and its effect on the universal postal service, as it has done since taking on responsibility for postal regulation in October 2011. Ofcom will intervene swiftly to secure the universal service if it finds that competition is threatening its future.

Ofcom may still conduct a further review of competition near the end of 2015 if necessary.

Ed Richards, Ofcom chief executive, said: “Ofcom’s Board has considered all the evidence in the postal market carefully over the past few months. We have concluded that there is no present risk to the financial sustainability of the universal service. This conclusion is based on Royal Mail’s own business plan and evidence as well as a range of other data.

“We take our duty to secure the universal service extremely seriously. Ofcom will continue to monitor carefully any risks that may arise and, if necessary, will act accordingly.”

Royal Mail said it welcomed Ofcom’s undertaking to intervene swiftly to safeguard the universal service where appropriate.

“However, Royal Mail is disappointed that Ofcom does not share the company’s view on the threat that unfettered direct delivery poses to the future sustainability of the universal service,” it said in a statement.

The company said it will play its full part in Ofcom’s broader review of Royal Mail’s ability to deliver the universal service, including efficiency and parcels delivery. 

“Royal Mail welcomes competition and operates in the most liberalised postal market in the EU. No other EU country has the combination of significant mandated access and direct delivery. In addition, the ongoing decline in letter volumes means that the incentives on Royal Mail to reduce costs are already strong. Royal Mail’s efficiency measures mean that more than 50,000 colleagues have left the company since 2003 and at least 3,000 people are expected to leave the business this financial year.”

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