USO - unsustainable

[borders]

TNT Post UK can cherry-pick easy-to-serve urban areas; delivering easy-to-handle post to homes less frequently than Royal Mail and to no defined quality standard. Royal Mail is required to deliver six-days-a-week, overnight, throughout the whole country, to stringent quality standards and at a uniform, affordable tariff. Moreover, we are also required to deliver any items TNT Post UK does not consider economic to deliver itself. If TNT Post UK is successful in delivering its stated objectives, this could threaten the fundamental economics of the Universal Service. Based on our estimates of the impact of TNT Post UK’s publicly-stated plans, this could reduce Royal Mail revenue by over £200 million in 2017-18

8. At the same time, our ability to reduce costs to offset this would be limited by our obligations to deliver the Universal Service.
Our analysis is that, without timely intervention from the regulator, direct delivery competition will have a serious impact on the sustainability of the Universal Service. Ofcom has stated that an EBIT margin range of between five and ten per cent for Royal Mail’s reported business is appropriate and consistent with the need for Royal Mail to earn a reasonable commercial rate of return

9. With our proposed access price changes remaining suspended and unfettered direct delivery rollout, there is a reasonable prospect that this level of margin may never sustainably be achieved. We do not believe the current situation serves the best interests of consumers. Ofcom has acknowledged in a recent guidance document its duty, powers and willingness to act to protect the Universal Service if required

10. However, effective regulatory action could take some time to implement. Meanwhile, the Competition Act investigation and Ofcom’s access policy review may create a significant period of uncertainty in the UK postal market. This uncertainty, combined with our Universal Service commitments, means our ability to respond commercially is constrained. At the same time, direct delivery operators are continuing to expand their operations. This is why we are preparing a regulatory submission calling on Ofcom to take action now and carry out a full review of direct delivery. Such a review would be in line with Ofcom’s primary duty to secure the provision of the Universal Service. It would also allow for full consideration of what regulatory interventions may be necessary. At the same time, we are raising the issue with HM Government and are seeking a legislative amendment that would require a review of direct delivery if Ofcom does not initiate one in a timely manner.

so there you have it on page 6 of todays report , in less than a year of being privatised .......

[baldrick]

I thought they wouldn't be pushing for the scrapping of the uso for at least a couple of years after privatisation. So much for Vince Cable's assurances that the uso would protect a privatised rm's sevice.

[borders]

I have just heard Ofcom's reply on the radio and they said basically that RM needs to deal with the competition.

[wandle]

so there you have it on page 6 of todays report , in less than a year of being privatised .......

Borders, you are implying - wrongly, in my view - that Royal Mail are questioning the sustainability of the USO solely because it is now a private company.

TNT have made no secret of their plans to roll-out direct delivery. They would have been carrying-out those plans, irrespective of Royal Mail's status as a public or private entity. The USO is being undermined because of unconstrained direct delivery, not because of Privatisation.

[cyclemech1]

I have just heard Ofcom's reply on the radio and they said basically that RM needs to deal with the competition.

Yes boys and girls you are still not 'efficient' enough, cue more savings, absorption, etc. etc.
Oh yeah, and when the USO is unsustainable, RM can opt out of the 'deal of the century'.
The future's bright, the future's orange (or it will be when RM's T&C's match those of TNT)

[Budfrog]

Reaction from Ofcom (taken from the FT):

An Ofcom spokesperson said: “We do not believe that there is presently a threat to the financial sustainability of the universal postal service.

“Ofcom keeps the market under constant close review, examining the future business plans of major operators. We have a duty to secure the universal service, and if we identify any future threat we have powers to step in to protect it.

“We would expect Royal Mail to take appropriate steps to respond to the challenge posed by competition, including improving efficiency.”

[Chitchat]

In a declining letters market, the only way to sustain the USO for the longest possible time is to have one provider and regulation to control access costs to the network from DSA.

[borders]

so there you have it on page 6 of todays report , in less than a year of being privatised .......

Borders, you are implying - wrongly, in my view - that Royal Mail are questioning the sustainability of the USO solely because it is now a private company.

TNT have made no secret of their plans to roll-out direct delivery. They would have been carrying-out those plans, irrespective of Royal Mail's status as a public or private entity. The USO is being undermined because of unconstrained direct delivery, not because of Privatisation.

I don't think I implied that Wandle , its just a time frame I mentioned that's all. the whole sorry episode in my view has been manufactured. but that's what capitalism is all about opening up all markets for profit . you only have to read Ofcom's reply to realise what the game is all about now . nothing wrong with that I guess many people will say .....

[bustedflush]

Ofcom (and I personally know this from experience) is a cabal of retired police officers and retired sundry civil servants. Usually pensioned off at 55 by the taxpayers, they then get another 10 years' pensionable work at Ofcom via the Old Boys network while collecting their previous occupational pensions, until finally hitting 65. Collectively they have never worked in private industry with the threat of job losses, having had taxpayer-guaranteed safe positions and final-salary schemes all their lives.
Now, this wouldn't be so bad on its own, had they any actual experience, knowledge or understanding of the industries they purport to regulate. They have bugger-all experience, and basically toe the line of the incumbent government's policy or ethos as instructed by the relevant minister/civil service mandarin.
Were they truly independent and staffed by industry retirees or experts, their actions would carry some meaning, some objective. In reality, they are flaccid, timid and spineless and couldn't see the wood for the trees. Expect nothing constructive from them, and you'll not be disappointed.

[ni post]

were not stiking were just not delivering tnt mail the customers will then come back

[plymouth3]

I think it will end up us posties saving the USO by balloting non delivery of final mile and bringing the issue to a head.

[pinstripe]

I have just heard Ofcom's reply on the radio and they said basically that RM needs to deal with the competition.

Maybe we should make them an offer they can't refuse. Anyone got a spare horse's head lying around?

[JaneM]

Are OFCOM fit for purpose?,surely it is self evident that we are not operating on a level playing field,the politicians need to wake up and ensure the regulator operates in a robust,proportionate manner as was intended.

[Brain Fury]

Are OFCOM fit for purpose?,surely it is self evident that we are not operating on a level playing field,the politicians need to wake up and ensure the regulator operates in a robust,proportionate manner as was intended.

It rather depends what Ofcom are trying to achieve - it would argue that it's role is to achieve the best deal for the customer - it doesn't necessarily have to be fair to Royal Mail. When you start from a position of a single monopoly supplier the job of a regulator will be to ensure that supplier loses business.