Profits from paper harder to achieve

[TrueBlueTerrier]

http://www.ft.com/cms/s/0/a239db46-fc68 ... 07658.html

Everyone involved in the postal business agrees that the UK industry is at a crossroads, but as the independent government-backed review of the postal services sector is rapidly discovering, there is little agreement on the way forward.

One in five letters is now handled by private sector operators, just more than two years after full competition was introduced - providing large savings for big mail users such as banks.

Yet there is frustration among the new operators over what they see as limited opportunities for further expansion in a market where innovation is essential to tackle falling volumes. The slow erosion has begun to accelerate, as users switch to e-mail to send out bills and marketing materials.

Meanwhile, Royal Mail, which still delivers more than 99 per cent of addressed letters, warns that the increasing pace of competition threatens its ability to collect mail and deliver it to every address six days a week. When Royal Mail had its monopoly, it was able to cross-subsidise the "universal service obligation" from the handling of bulk mail for big users.

Today it can no longer do that, with the rapid growth of competitors who have won lucrative contracts to collect and sort mail for those big users. Royal Mail's fear is that it is losing the most profitable business.

Its competitors hand over most of the post they handle to Royal Mail for final delivery under so-called Access arrangements that the state-owned group says do not fully cover the cost of reaching every address and hobble its ability to compete.

Royal Mail's competitors have different business models, and their gripes vary. UK Mail, the postal arm of Business Post, wants to continue using Royal Mail's Access arrangements to deliver its post. However, it says Royal Mail sees Access users as competitors rather than partners and has failed to work constructively to find new ways to make mail more attractive.

UK Mail has proposed restructuring the former monopoly to give the delivery arm freedom to develop its distribution network in partnership with all its users. "All the Access mail is still delivered by Royal Mail staff, after all," says Guy Buswell, Business Post chief executive.

TNT Post, part of the Dutch postal operator, also uses Access, but wants to create its own delivery network of orange-clad staff providing a full "end-to-end" service. What stops it doing this is Royal Mail's cost advantage, which derives from its exemption from charging 17.5 per cent value added tax on its services.

Nick Wells, chief executive, says: "We want to create jobs, we want to innovate, we want to deliver for our customer, but we are being held back by the Royal Mail VAT advantage."

DX, a smaller competitor, agrees. It already delivers end to end - but mainly high-value items such as tickets for sporting events. It says it is hard to win business from users unable to claim back VAT.

James Greenbury, DX chief executive, says: "We would also like the regulator to take a view on Royal Mail pricing strategies designed to drive us out of sectors where we are successful."

None of the competitors is sympathetic to Royal Mail's complaint that it is in danger of being left with all the most expensive business as "deliverer of last resort".

David Stubbs, of Europe Economics, a consultancy that has produced two separate reports on the market for UK Mail and TNT Post, says: "If they lose money on the universal service, it is their choice. They know what their revenues will be because of the price controls, but they have failed to cut their costs enough."

UK Mail's Mr Buswell agrees, but adds that there is scope for the regulator to remove non-essential elements of the universal service obligation. "Royal Mail's ability to deliver anywhere every working day is a unique asset, but it needs to be regulated in a way that puts the focus on efficiency."

[BB brother]

Words fail me...

Lets dismantle one of .if not the,cheapest and most efficient postal services in the world to increase the profits of three companies,one of which isnt even British!

Nice to see the Banks are saving money!

Who at the back shouted "Government Pandering !! "

Wash your mouth out !

[pinstripe]

Is swearing allowed on here? No, oh, okay then.


p.s

They're all

[sevenandseven]

David Stubbs, of Europe Economics, a consultancy that has produced two separate reports on the market for UK Mail and TNT Post, says: "If they lose money on the universal service, it is their choice. They know what their revenues will be because of the price controls, but they have failed to cut their costs enough."

The mind boggles that anyone takes seriously a partisan report paid for by RMs competitors who can come up with such a crass statement. The universal service is not Royal Mail's choice. It is government legislation. Make all the competitors operate under Universal Service, even if it means adding VAT to the cost of not just Royal Mail but the businesses using the postal services. And let Royal Mail charge a reasonable amount for DSA that actually covers the cost and not an amount reached by the Postcom quango through guesswork then perhaps there will be the fair competition these companies so desire.

[trythat]

David Stubbs, of Europe Economics, a consultancy that has produced two separate reports on the market for UK Mail and TNT Post, says: "If they lose money on the universal service, it is their choice. They know what their revenues will be because of the price controls, but they have failed to cut their costs enough."

I notice that all these so called experts don't acctually hint at 'how costs can be cut' perhaps they expect RM to outsource to some where like India for processing and send it back to us in bundles, ready to deliver?

How much so called 'walk sorted' mail comes in missorted, if RM was to users keep to their contracts then they could reap the benifits of technology, they should impose fines on firms who don't keep their side of agreements.