Open mail warfare in 2006

IN JUST under a year, private companies will be able to hire postmen, put up their own post boxes, and collect, transport and deliver letters in the biggest shakeup of the British postal service in 350 years.

In a move ending the Royal Mail’s monopoly of the 4.5 billion letters market, the industry’s watchdog, Postcomm, yesterday announced the opening-up of the market.

Until now, competition has been restricted to companies handling bulk mail, covering just 30 per cent of the market.

The full opening comes 15 months earlier than originally planned, but Postcomm officials said that Royal Mail - which controls 99 per cent of the market - was ready for it, as it was back in profit again after a period when it was losing 1 million a day in the middle of a painful restructuring plan involving 30,000 job cuts.

As well as the basic delivery services, companies could also be allowed to offer lower stamp prices, putting added pressure on Royal Mail to raise its game.

Big businesses are likely to be the first to take up the wider services, but Postcomm said benefits were also expected to feed through to domestic users.

Postcomm chairman Nigel Stapleton said Royal Mail would still be required to provide a universal postal service for first and second class mail of one delivery and one collection each working day at a uniform price throughout the UK. But it would have the freedom to compete with services provided by rival specialist operators.

Stapleton said: "We can look forward to a more innovative and efficient postal industry focused on providing customers with the services they want, rather than being told by a monopolist what services they can, and cannot, have.

"The decision gives customers a real choice and increases the pressure on Royal Mail to raise its game and take on the competition."

He added there were several barriers to competition it would still have to look at, including the fact that the Royal Mail was currently exempt from VAT while its rivals were not, giving the incumbent a significant price advantage.

Postcomm will shortly publish a code of conduct to ensure all postal firms co-operate on common operational issues such as the forwarding of mail and handling of "return to sender" mail.

Royal Mail supported the move to competition. Its chief executive, Adam Crozier, said: "We welcome faster competition as long as it comes without unfair restrictions on Royal Mail. We’re determined to continue the one-price-goes-anywhere service - which remains at the heart of what we do."

The Communication Workers Union, however, warned that the free market would threaten the universal service.

General secretary Billy Hayes said: "The Dutch and German post offices in particular must be rubbing their hands in glee at this ill-advised and regrettable decision. At a stroke they are being allowed the opportunity to compete head-on with Royal Mail while still enjoying the benefit of strong protection in their home markets."

Consumer group Postwatch insisted that full competition would "reinforce, not undermine" the delivery of the universal service.