THE Royal Mail has warned that its six-day-a-week service is under threat from rival firm TNT Post’s “cherry picking” of the postal market.
Concerns that the rival firm is planning to expand into the Capital and other areas of the UK have prompted mail chiefs to call on Ofcom to bring forward its review of the effect of competition on the Universal Service Obligation (USO). Under its USO, Royal Mail is legally required to deliver letters to the whole of the UK – a requirement not forced upon competitors who are free to provide rival services where they choose.
One of the main competitors is TNT Post UK which has launched its own direct letters delivery service in Manchester, London and Liverpool with mooted plans to expand into Edinburgh.
Royal Mail believe such competition could lead it to suffer a loss of revenue in the region of £200m a year by 2017-18.
However, TNT Post UK has stated that the Royal Mail needs to “focus on their inefficiencies to address this issue, not attack embryonic competition”.
At present, the USO requires Royal Mail to deliver post six days a week to any address in the UK for the same price, which it does by subsidising less profitable areas such as the Highlands and Islands with more profitable services and routes.
Rob Jenson, Royal Mail operations director north, said: “We all know the communications market is changing – and changing fast. Royal Mail has been meeting the challenge of declining letter volumes.
“Now we face a new threat. This is not competition in the normal sense of the word. Unlike true competition, direct delivery doesn’t provide an extra spur to make the postal market more competitive and efficient. Royal Mail cannot choose not to deliver in certain areas or on certain days – the universal service requires postmen and women to walk every street, six days a week, whatever the mail volume.
He added: “As a consequence, we fear that a point could soon be reached where direct delivery competition leads to the universal service being unviable. Were this to happen, it could represent the loss of a vital service upon which thousands of communities up and down the UK rely.”
In its regulatory submission to Ofcom, Royal Mail called upon Ofcom to “undertake a full review of direct delivery as a matter of urgency and to determine quickly the regulatory changes needed to protect the Universal Service”.
However, a spokesman for the regulator said that while it would consider Royal Mail’s submission carefully, all of the evidence it had “including business plans and forward looking data from all of the operators” suggested that there was no current threat to the Universal Service.
He added: “We have said that we will review the direct delivery market next year and unless we have evidence that we should do that sooner our position will remain unchanged. At the moment we simply don’t see any immediate threat to the Universal Service.”
A TNT Post UK spokesman said: “There is not a shred of evidence that postal delivery competition is a threat to the USO.”