Katy has called on Ofcom to carry out an urgent review into the universal postal service obligation and to bring forward proposals to protect it and the commercial viability of Royal Mail against the threat posed by unfair competition
Royal Mail is the current universal postal service provide and is obliged to provide a six days a week letters service across the United Kingdom at an affordable and uniform price. Following the Postal Services Act 2011 there has been a rapid increase in the ‘cherry picking’ of profitable routes in the ‘end to end’ market by private providers such as TNT. Concerns have been raised by Royal Mail, the Communication Workers’ Union and others that should this continue the universal service will be put at risk. Katy secured a debate on the subject in the House of Commons which took place on Thursday 18th July.
Speaking during the debate Katy said
“Royal Mail is the UK’s universal service provider. It is required under the Postal Services Act 2011 to deliver to 29 million UK addresses six days a week, and five days a week for other packets, all being delivered at an affordable, geographically uniform price.
TNT Post is currently Royal Mail’s main competitor in the end-to-end market. In 2012, it launched a direct delivery trial providing a full end-to-end service in west London. Since then, it has rapidly expanded into other parts of London and into Manchester and Liverpool. It plans, by the end of 2017, to cover over 42% of households in the UK, although only about 8.5% of the UK’s geographical area.
This expansion is a direct threat to the universal service because Royal Mail needs the universal service in order to be able to use revenues that it generates in areas where it is easier to deliver mail. In the areas I mentioned—London, Manchester and Liverpool—it is easier to deliver mail and therefore easier to generate profits. It is necessary for Royal Mail to use that work to generate profits to help to cover the rest of the national network.
I represent a large rural constituency in Scotland with islands and many small communities. In many parts of it, the costs of providing a mail delivery service will be quite considerable, no matter how we organise postal services. That is why the universal service is so important. It is also important that we ensure that stamp prices are kept at a level that is affordable in all parts of the country.
At the moment, Royal Mail still delivers 99% of mail in the UK. My concern is that that situation could change very quickly given the current expansion plans of TNT, in particular, and perhaps other providers as well. Royal Mail itself estimates that TNT’s expansion strategy could result in a reduction of more than £200 million in Royal Mail revenue by 2017-18. The reality is that much of the most profitable section of the market, namely the business mail, is already handled by companies other than Royal Mail. Indeed, that has been the case for a considerable period. There has also been a significant reduction in the volume of letters over the past decade, which also continues to put pressure on the universal service obligation.
Royal Mail is subject to vigorous and rigorous performance standards. Its competitors are not subject to the same standards. There are also many concerns about the terms and conditions of the work force, which are considerably worse than those of the Royal Mail work force.
I ask Ofcom to consider whether a compensation fund could be established to support the provision of the universal service, which could be used to collect contributions from those that benefit from providing en-to-end service without the requirements of meeting the universal service. I also ask Ofcom to consider whether the general service conditions that currently apply specifically to Royal Mail alone should be extended to apply also to other operators. We should also consider removing the requirement on Royal Mail to allow other operators to access to its network. There is no doubt that that requirement to deliver mail for others has been a burden on Royal Mail.
There is a great deal of complacency on this issue from not only Ofcom, but the Government. We are seeing the warning signs now and we need the Government to make it very clear that we believe there is a real threat to the universal service. Ofcom needs to look at the matter urgently, carry out a full review and come up with proposals to ensure a level playing field in the postal services market and to protect the universal service.
We have had 10 years of competition, but the lesson that we have learned is that the market does not respond well to competition. The current regime is not protecting the services that we receive. The reality is that we have fewer services now than we did when competition came in. We all remember Sunday collections and twice-a-day deliveries. The road that we are on is extremely dangerous and is a threat to postal services in all parts of the UK. I hope that the Government will take on board the emotion and passion of hon. Members’ contributions today and insist that Ofcom urgently carry out a speedy review.”
In response to Katy’s debate the Minister stated that she would request that representatives from Ofcom meet with MPs to discuss how it can protect the universal service obligation.
Katy has called on Ofcom to carry out an urgent review into the universal postal service obligation and to bring forward proposals to protect it and the commercial viability of...