EU ministers call off plans for full liberalisation of mail!

[NEWS]

GUARDIAN

Protesting European postal workers yesterday secured a notable victory when EU ministers killed off plans for full liberalisation of the €90bn (£60bn) postal market by 2009 because of fears over the funding of daily deliveries to remote areas.

The decision to ditch the further opening up of the mail sector is a blow to the UK government which has led the way in this area and will encourage British postal workers who voted for industrial action yesterday over modernisation plans.

"These latest developments underline again the absolute need for Royal Mail to modernise as rival companies will continue to be able to compete for business here in the UK while earning profits in their protected home markets in Europe," Royal Mail said last night.

France and Italy, opposed to the ending of the national monopoly over delivering mail under 50 grammes, sent the European commission back to the drawing board and insisted it come up with detailed plans for funding what is known as the universal service obligation.

Around 14 of the 27 ministers also objected to alternative proposals, drafted by German centre-right MEP Markus Ferber, to defer full-scale competition until the end of 2010. Instead national governments will decide when and how to open their markets to private sector competitors. Eleven, including Britain, backed the January 2009 deadline.

Failure to reach a consensus came the day after 100,000 postal workers staged protests across Europe at the commission's plans drafted by Charlie McCreevy, internal market commissioner.

John Pedersen, head of postal services at union Uni, which organised the demonstrations in more than 300 cities, said: "The post is too important to be wrecked by neo-liberal dogma in Brussels ... A free-for-all that leaves citizens in rural, mountain and island communities far worse off is not what the people of Europe want."

Jean-Louis Borloo, the new French finance minister, underlined the Sarkozy government's ambiguous approach to economic reform by insisting that France would not agree to a fixed date for ending La Poste's monopoly.

Michael Glos, German economy minister who chaired the meeting in Luxembourg, said a compromise could involve different countries committing to different dates for market opening. Germany could revise its plans to end Deutsche Post's monopoly from 2008. The row, mirroring previous EU disputes over complete liberalisation of the energy markets, is a setback for reformers led by the UK.

[golfer]

if the government want to have every address delivered to every day they should take a good look at what is happening tnt and such like wont do this . if they put people on the street in populated areas who will do the rurals?

[F0zziebear]

This is my experience from working in the private sector for a competitor. When a competitor wins a contract it is for all of it's mail. This means they are responsible for getting all of the mail delivered irrespective of where it is in the country. The competitor may decide to get some of it's own people to deliver it's mail in certain places and get Royal Mail (or someone else) to deliver the rest. However, RM has a policy of charging more if the mail they recieve is not evenly distributed by urban area and rural area (you still with me).

My own studies indicate that it is almost impossible to set-up a postal business within a certain region. In Germany there is a company called Ostpost who are able to do this and taking significant chunks out of Deutschepost's domestic market. The reason they can do this is because of the layout of Germany and the fact that they have regonal markets. This pretty well does not exist in the UK. Except for local government, NHS and utilities there isn't a market. So the only postal company you can set-up to compete against Royal Mail is a national one where you deliver some yourself and give the rest to the RM.

You could argue well why doesn't the competitor take the mail it can deliver and get the rest collected/process/delivered by RM. The reason is that the larger contracts use print house to produce their mail. These print houses need to be set-up to print that company's indicia and use their software. It costs millions to change over. It would also make absolutely no sense to do two different print runs for your mail. The extra cost in time etc... would make it unprofitable.

I hope this puts to bed the cherry-picking argument, as if this argument worked TNT would already be delivering their own mail.

RM will still be delivering most of the mail in future years and the competitors have to ensure the survival of the USO for their own business. These arguments do not necessarily apply elsewhere in Europe as I explained, but do apply in the UK with it's almost unique geographical and population demographics.

F0zz

Questions welcome

[robmacca]

Trust Britian to have thrown away the postal service so easily and so quickly and then get shafted by the other European neighbours as they back track on such a move.

Don't even get me started on Europe!!!!!

[POSTMAN]

F0zz

Questions welcome

Bit lost here FOzz,am i right in thinking,if i've read the above right,that TNT and the like WILL NOT be delivering the mail EVER
Or unless the printing part of it gets sorted,because if firms/printing houses can save money wont they just jiggle about with the process.
Or have i lost the plot.

[F0zziebear]

TNT & DHL WILL deliver mail at some stage. It depends on them getting investment via their own parent companies in the region of £100M+ to start. So you can see it's serious investment to even begin delivering their own mail. If they don't do this they will only ever be competing on existing Royal Mail products and therefore only able to compete on price. Royal Mail's prices are already low and the margins are almost non-existent for the effort needed.

Printing houses who produce the bulk of mail in this country now do not want to have to do several print run's every time they send out a mailing. So when TNT/UK Mail/DHL win a large contract the printing house has to spend serious money (for them) on new indicia's and implementing the new companie's software. If TNT for example only wanted to deliver the urban mail from a large national mailing it would require the printing house to run multiple software, indicia's sorting trays etc..... It just wouldn't work and the customer would probably not make any savings, in face no-one invovled would probably make any savings.

The bottom line means that Royal Mail's delivery arm will always need to be maintained. There is no chance that the USO will disappear. What may change is the definition of the USO as a way round this. In many places in Europe rural houses have postboxes at the end of several roads. Does this re-define the USO? Yes, but it will cut down on the postie needing to drive long distances to cut-off places to deliver one item, which is very costly. In the UK more people are moving to urban areas still, regardless of 2nd homers buyers buying out in the country-side.

The clever thing Royal Mail did was to say fine you can deliver to only urban places, but I will charge you more for only delivering your mail to rural places. This is where I think you give senior management and unfair time at Royal Mail. THey have actually done some really clever things in recent years to restrict competition, or if competition is coming, then we've dug the trenches etc... It may not feel like it from where you are standing, but as someone who had to try and design an alternative company to Royal Mail I can assure you it was no easy task.

There are discussions amongst the regulator and those holding postal licences about how best to maintain the USO. At the moment it is done as I mentioned above by charging more depending on the fall to earth profile of a mailing. There might in future be an annual flat fee. This approach might be easier, but the background work to determine this annual fee would be fairly complicated, though similar work had to be done to determine access prices 5 years ago.

If Royal Mail could really work out the cost of the various elements of the pipeline, collection, outward processing, inward processing, distribution and delivery then we could really become quite creative about how and when to use Royal Mail. This is what BT did with it's infrastructure. They divided it up and allowed competition access to various parts at different prices. So for example I might say to Royal Mail I will collect a large mailing bring it to an outward processing mail centre and let you process it and deliver it. In another case I might decide to collect it process it and then give it to Royal Mail for local (inward processing) and delivery.

I know of someone in a senior posititon in operations who really wanted to offer excess capacity at discounted prices which could under-cut the competition. It's a bit like the low-cost airlines. What do I mean? A mail centre has a certain amount of fixed cost. The building and permenant staff that get paid regardless of whether they process 1 item or 1 million items. So you determine how many items that place can process and then by getting advanced notice about the bulk of mailing due in that mail centre (large contracts are known in advance so mail profiling should be possible in the 21st century). Lets say you are at 75% capacity. They you could auction off the remaining 25% at a knock-down price because it is not costing you anymore to do it. Hope this makes some sense.

What I am getting at in summary is that the postal network has potential to change and become more flexible without necessarily changing much on the surface. In the 21st cnetury with technology and improved management information there is the potential to be more creative. RM have and are looking at this so don't be surprised if over the next 5 years the company starts talking more like BT. Also with all of this there needs to be some really new products coming to market and once TNT and DHL are delivering their own mail they will then be in a position to do this, which might galvanise Royal Mail, who will find it difficult in some cases to change their operation to compete directly, but will hopefully open them up to more creativity, which is what the customer really wants.

F0zz off to eat an over-charged under-cooked bruger

[POSTMAN]

Allrite,allrite FOzz no need to go on mate jeeeeeze
Na cheers FOzzarooney,knew i could count on ya.
While you digest ya dodgy burger i'll digest this
Be back in a while

[robmacca]

Interesting reply FOzz, I think there will be alot of similarities between how BT had to evolve as a business and how RM will try and change.

It's still a disgrace that British postal workers have been sold down the river by our elected European MP's who seemed to jump in head first to open up the postal market.

[Big Daz]

I will say this for the lib dems who voted for liberalsation, at least they are honest and up front with their policy on RM and post offices. No sneaky hide behind the regulator crap, just straight forward out in the open warts an all. Compare that to the letter from my local tory MP who said they dont have any policies other than to oppose post office closures. You might not agree with their views but at least they are open and honest abou them and have taken the time and trouble to formulate a policy. Yet her majestys opposistion cant produce a policy. The conservatives are not fit to hold that title!

[side_door]

FOzzie seems to have all the facts at his fingertips regarding how the competition actually works. I would be grateful FOzzie if you could spell it out for me.

For instance, I all the time hear the phrase "final mile" used in regard to what we actually do. But it's got to be a little further than that hasn't it? I mean there aren't a half a dozen wagons arriving at the delivery office in the morning one from RM, another from DHL, another from business post. So, what in actuality do the competition do in addition to sorting the mail in their machines. I assume it all goes to one location from where RM redistributes it to mail centres. How much work does Royal Mail actually do on this mail before it comes to me at the DO.

Also, some time back our DOM told us that all competitors mail is treated as first class, is this what they actually pay for? In practice it doesn't matter to me since everything that comes into our office is cleared (excepting only mailsort on a saturday), but I'm interested to know.

What I'm asking for is a simple guide say, if I wanted to set up a mail delivery business, what exactly would I need to do and how much, exactly, would I get for it? Just to understand how all this stuff actually works.

[F0zziebear]

You're really asking 2 questions so let me deal with them one at a time.

Currently the main competitors pretty much use the Downstream Access product created by Royal Mail. The competitor picks up the mail, processes it to the equivalent of outward processing (that means it divides it up into the 70 mail centres around the country and other options like abroad) and then distributes it to those Royal Mail mail centres. Royal Mail then processes that mail (inward processing) and divides it into the various delivery depots that the mail centre covers. Royal Mail then deliver that mail. The competitor pays Royal Mail about 13.5p per item to do inward processing local distribution and delivery.

The competitor has to get the mail into the mail centre the morning before delivery. They normally have a half-hour window in which to get the mail in. If they do not Royal Mail can refuse the mail. There is some debate at the moment about relaxing this rule. The reason it was put in place initially was to stifle competition and make it hard for them. Now Royal Mail recognise the threat of a complete competitor E2E system which cuts them out completely. If they carry on making it so difficult to get the mail in the competitor may decide to do the whole thing themselves. So yes the mail is treated as first class, but the mail was picked up the day before, which makes the overall service a J+2 (J is the day you pick it up and then every day from there is another day). All Downstream Access mail will have the indica of the company sending it. Be it TNT Post, UK Mail or Business Post.

Anyone can set-up their own delivery business if they obtain a licence from the regulator. At the moment that is fairly difficult (not done it myself) and almost restricts the option to the larger companies or those who already existed in other alreasdy liberated markets such as parcels. The Regulator is planning on making it easier so that there is more competition and access is there for smaller players, rather than the oligarches (TNT, DHL, Fed Ex, UPS). The reason why no-one is really delivering their own mail is the inital cost to create a national network. No-one has so far tried a regional postal offering. In my opninion there isn't enough mail staying in one region that is easy to capture under a few contracts to make it financially viable. If someone thinks otherwise then talk to me and we can see about setting it up.

If I could put in a diagram from my previous employers I would but I can't so hopefully a worded explanantion is acceptable

F0zz

[postie dave]

[quote="F0zziebear"]So the only postal company you can set-up to compete against Royal Mail is a national one where you deliver some yourself and give the rest to the RM.
You could argue well why doesn't the competitor take the mail it can deliver and get the rest collected/process/delivered by RM. The reason is that the larger contracts use print house to produce their mail. These print houses need to be set-up to print that company's indicia and use their software. It costs millions to change over. It would also make absolutely no sense to do two different print runs for your mail. The extra cost in time etc... would make it unprofitable.

I hope this puts to bed the cherry-picking argument, as if this argument worked TNT would already be delivering their own mail.

I apoligise in advance but dont these sentences conflict. You have just made me realise that I know very little outside of my office, however the local management dont know much more and the cherry-picking argument is used by them to explain just about everything. It would be nice to be able to suggest otherwise. Knowledge is power, please empower me.

[POSTMAN]

Nice one FOzz,something interesting you said.

In my opninion there isn't enough mail staying in one region that is easy to capture under a few contracts
to make it financially viable. If someone thinks otherwise then talk to me and we can see about setting it up.

On here theres some bits bout TNTwanting to trial E2E i think in Manchester,Bristol or some places like that on here.
And it's summin we're threatened with by management every day.
They've got a lot of contracts off of us but are you saying that they haven't got enough to go the whole hog.
I mean,the bits they's got is a lot but having a few companys bills once a month aint enough is it?

http://www.royalmailchat.co.uk/forum/vi ... =1056#1056

[side_door]

Thank you FOzzie - that makes things clearer.

The problem I have, no just with this particular issue but generally is with how mail centres work in practice. Being on delivery my experience is limited to a half hour tour of the mail centre back when I started at RM and things have changed since then.

[F0zziebear]

Maybe I should do a sermon every Sunday on post!

TNT in my opinion have enough mail to financially start an E2E operation. TNT have trialled deliveries in certain areas, but have not so far gone live. There are different schools of thought on how to do this. For example franchising out the delivery operation for example! Cherry-picking will happen, but only in the sense of delivering some yourself (where you can do it much cheaper - densely populated urban areas) and give the rest to RM to deliver, but you will process all of it yourself. If the extra cost of getting RM to deliver only rural mail is less than the savings you make on delivering the urban mail yourself then it makes sense, as long as the returns on your inital investment are worth it.

Most management won't have a full understanidng of the industry. I reckon (a bit arrogant) that I am one of the very people in the country who have done operational management, head office, strategy, and working for competition. So if there is someone reading this website who wants/needs a highly paid consultant then give me a call! Ha!

BUt seriously the concept of competition is not as straight forward as one might think. This is a combination of the demographics of the UK not making it easy to set-up a small operation, and Royal Mail's clever approach to entering liberlaisation. Whilst you may want to string up Al & Adam it was under some of tenure that they have helped stifle competition without being seen to. The DTi and the regulator in general are not as clever as Royal Mail and do not have the charisma to pull it off. Leighton threatening Gordon Brown with a letter about the company becoming insolvent in a week's time unless you give us the money. Who else in this country could get away with something like that? Adam Crozier playing the 'Seb Coe' card looking like a nice kind of a guy, but is absolutely ruthless under the bonnet. These guys have some fantastic strategists as well. This does not mean they get it right all of the time. The situation with the posties was always on the cards, and to be honest they put off having a fight with you for 4 years. I was there as single Daily Delivery was being put in. I was in the room with Crozier when it dawned on him to make management redundant before attacking posties again. Giving a manager redundancy saves the company at least 1.5 the salary of a postie. It is much easier to remove managerial posititons. I spent long enough doing it!

F0zz with his organisational hatchet!