PostCON to make it easier for competitors to enter market.

[NEWS]

Postcomm, the independent regulator for postal services, is seeking views on the current licensing regime to ensure that it continues to support the development of the UK postal market.

Four years after the market was first opened to competition the current licensing regime has seen 18 new entrants to the market. Confidence in the market has been maintained as mail operators have broadly achieved high standards of service quality and customer focus. However, Postcomm have been sensitive to suggestions that the current licensing arrangements could do more to facilitate market entry for some small and medium sized potential mail operators - and therefore promote the development of choice and innovation for mail users.

Accordingly, the regulator has launched a consultation on proposals to move to a form of less prescriptive licensing for those seeking to enter the postal services market. Some of the key proposals include:

* Removing the annual fee - currently £1,000 - for all licensees with a turnover of less than £10 million (licensees with a turnover of more than £10 million pay an annual fee based on its size);
* Reducing the current application fee to £50 for all applicants;
* Removing the requirement for applicants to provide, as part of the application process, information on exactly how they would comply with Postcomm’s mandatory mail integrity code; and
* Removing the requirement for both existing licensees and future applicants to provide a financial guarantee.

The current licensing regime came into effect in January 2006. These latest proposals form the first of a two stage licensing review. Taking forward the review in two stages will allow Postcomm to deliver early improvements within the existing framework through stage one while focussing on more detailed changes in stage two.

This first stage proposes amendments to the current licensing framework. If accepted, the proposed amendments would be implemented in November 2007. Stage two of the review - a more fundamental review of Postcomm’s licensing framework which will consider all aspects of the licensing framework - will commence in 2008.

Postcomm’s aim during both stages will be to ensure its licensing rules support the developing UK postal market.



The full consultation document, Amendment of the 2006 licensing framework, is available on Postcomm’s website, at www.psc.gov.uk, together with further details on the development of the current licensing regime. Hard copies are available from Postcomm at Hercules House, 6 Hercules Road, London, SE1 7DB.

Responses are required on or before 20 August 2007.

Today’s proposals would not affect Postcomm’s regulation of, or the requirements on, Royal Mail. As the UK’s dominant postal operator with more than 90% of the mail market and provider of the universal postal service (which includes the ‘one price goes anywhere’ stamp and daily collections and deliveries for all UK addresses), the company must be subject to more rigorous regulatory requirements to protect the interests of customers.

More information on Postcomm’s regulation of Royal Mail’s standards and prices is available at www.psc.gov.uk.

[F0zziebear]

I haven't even bothered to open the document if the highlights are in the message above. There's nothing in what they are saying. They have put off a proper review of some of the anti-competitive practices out their.

Without some of these changes we will have an oligarchy in the UK consisting of RM/TNT & DHL. They will probably collude to fix prices and stifle true competition, whilst at the same time reduce employees rights, perks and overall basic pay

[ROCKY]

FOZZIE
you mean like erm
gas
electricity
water
telecomunications
ive only skip read the above but what they are saying is open up to every muppet with a van,there will be stuff lying on the streets everywhere,then the big boys will take over the small people,and the others will go bust,i remember when gas and lekky opened up i couldnt open my door without 2 people falling through it trying to sell me gas and lekky,now there are only the big boys left with funnily enough no national headlines about lack of competition from the watch dog,the problem to me though is that most of what is left is now owned by the french,so we dont even provide our own essential services anymore is that the way we are going to go

[side_door]

I seem to remember in the early days of gas, electricity and water privatisation slight decreases in prices and then a couple of years later whopping increases.

[DirtyHarry]

What is it about this so-called free market ? .......... Sounds more like a free for all to me , and I
don't have to be Nostradamus to know that it'll all end in tears.

[Big Daz]

Should have stuck to EU wide deal of a level playing field and a europe wide postal market being created evenly by 2009.

RM wasnt ready for competion, but would have been through gradual negotiated (with the CWU) change by 2009 .

[johno47]

The markets should never have been opened up at all, we should be a public service, not a free for all scramble to get the most lucrative business mail, this has nothing to do with a free open postal market, its all about profit and greed and the losers will be the general public...UNITY IS STRENGTH.

[F0zziebear]

Boys, the days of this service being predominantly a public service are long gone. The vast majority of mail is direct mail B2C. This is dominated by the big banks. This type of mail is not social, and certainly not an essential public service.

However, and this is important the country still requires a universal service to all parts of the country. It should be provided through Royal Mail. All of the competition will still need Royal Mail to provide this service, so it's in their interests to maintain this otherwise their customers won't be happy.

The current situation is that for the prices being offered to business somewhere the maths doesn't quite add up. You can argue many different ways what the cause of this is. Put simply Royal Mail's machinery is out-dated in many places, it's buildings aren't suitable for modern faster machinery, and the delivery operation is still over-staffed by how much depeneds on each location). There is also still too many non-ops people in the company as well before anyone starts accusing me of favouratism.

Major problem is that you have no compulsory redundancy, which mean's that if you don't want to leave then you don't have to. RM and the uion will come to some form of compromise and another large redundancy programme will be under waybefore the end of the 2007-2008 financial year.

F0zz

[TrueBlueTerrier]

Oh good fozzie in the middle of one fight and you go an cheer us up with more doom and gloom.

However still a good post and its nice to be able to get another point of

[johno47]

Fozzie, whats happening is a travesty, the whole point of competition is to give the consumer the choice of a better deal, in reality whats happening is the postal market is now about big companies making big profits fast, we are aware of banks having the major share of post, but they arent the only big players, and we still have to deliver it, and considering that thousands of new houses have been built and another 2.5 million still to be built, how do you come to the conclusion that we are overstaffed, who is going to deliver to these new houses our competitors, they will be too busy counting the easy extra proffit theyve just made from doing bugger all.
We all know that the public service has gone, we happen to be living in it, but it went because the E U and the Goverment wanted it to because they wanted backdoor privatisation, not because there was something wrong with the business, and a universal service i predict will be gone in under 10 years, certain rural areas will have a delivery like they do in rural areas in Germany where whole villages have to pick up their post from the local PO, and a letter sent by a member of the public will be graded as it will cost more the further from the point of delivery it goes, as i said before this has nothing to do with customers choice, they are the ultimate losers, thats whats being lost is our traditional services and we should all be fighting bloody hard to keep them.
Some things should not be touched, look at the Railways, competition has f***ed that up, the competition moan about RM being loaned 2.5 billion, that money should have been given to RM so that it could pay back the 13 years it didnt pay into our pension fund whilst making 20 years of continuouse profit where the goverment took 90% of it, the robbing b*****ds.

[F0zziebear]

If you look at Royal Mail's interim performance there is a significant drop in 1st class and 2nd class volumes. Overall there has been a decline, but would argue that mailsort has actually increased with competition as the medium becomes financially more attractive to use when compared to others such as Television (which it's advertising has seen a decline).

Extra houses does mean some new volume, but most likely RM has too many posties per unit of mail in the wrong place.

Also for example the fastest growing take of the internet is amongst silver surfers now, the same people you'd think would still be crying out for the traditional mail. The volumes are just simply not there anymore. They are also harder to process and cost a lot per unit to move.

The universal service is an interesting one. It will need to be protected, but it's definition may well come under fire. Does it mean picking up your rural mail from a collection of letterboxes at the end of the road (as in some parts of Europe?) It is not actually so easy to make a profit as a competitor as the prices are already so low. I spent several months with business modellers and other analysts bemoaning the anti-competitive spanners RM had thrown in the works. It requires huge investment to make this work and it will be a major risk for TNT and DHL to make this work in the UK. The UK has fantastic quality of service and customers will expect the same if not better from the competition. Downstream Access provides that quality as we used RM posties to deliver the mail. Our superior collection and processing facilities enabled us to off lower prices, but our margins if any were a tiny fraction of say investing the same money in the developing markets of China and India.

The raillways is slightly different so I wouldn't make an exact comparison. I think the privitisation of the utlity industry gives a slightly better idea of how things will go.

So far the consumer has not really had much better choice as no really new products have been created, this is because the competition rely almost exclusively on RM to deliver their mail and have to adhere to their structures. I agree that new products are what is really needed and not just a price war.

[johno47]

There isnt one utility or otherwise industry that is any better under privatisation, not a single one, and when these industries were privatised, idiots were lining up to buy shares in utilitys that were already owned buy the people, all privatisation does is make goverments vast ammounts of money, and allows companys to come in and make big profits from it, the idea that it gives consumers a choice is a farce, a lot of our big utilitys are owned buy foriegn companies now, british companies at the whim of foriegn investors, the point i was making about the Railways was it was a goverment industry that was sold off to lots of different companies, who were then more concerned with there own proffit margins than the safety of its consumers, and is now in a complete mess to the point that goverment was thinking of renationalising the railways, as i said somethings should not be touched, you talk about other mail competitors not making much profit, sorry just let me wipe the tears from my eyes, the universal delivery will be unsustanable in years to come because of competition, it has nothing to do with new products, it has everything to do with the delivery of those items, competition in every industry involves companies offering the same product, all be it at the most competative price, in the mail industry it involves one company delivering the mail but other companies making a proffit from the mail and giving it to one company to deliver, that Fozzie is not fair competition, thats explotation.

[TrueBlueTerrier]

Excellent post Johno

[POSTMAN]

Agreed,well done johno.

[F0zziebear]

I am in a job billing by the hour. At this rate I'll get the sack. Please can we stop responding so quickly?

Johno's argument about utilities is reasonably valid as many have gone back to the former nationalised company. I would argue that privisation has in some cases enabled money to pumped into infrastructure improvements. Harping back to Victorian times when individuals actually built much of the UK's current infrastructure should be mentioned but not overstated.

I am not saying that privitsation will necessarily make a huge difference. However, TNT, UK Mail and DHL have already invested in new sorting machinery and IT systems, which offer customers as good a service as RM and in some cases better for lower prices. Because they use you the postie to deliver their mail they are also gauranteed RM's high quality delivery performance as well. This comes at a price of 13.5p now when the competittion are selling at anywhere from 15-17.5p per item there isn't much letter to do their part of the process and make a profit. TNT for example has at least 2.5bn items in volume (approx. 10%) of the total 24.2bn market. They are hardly making any profit after tax on this volume. The only way is to deliver it themselves which they can then do for significantly less than 13.5p, thugh initial investment in infrastructure and cashflow for wages will mean they won't see a return for over 5 years.

The question is whether liberalisation will lead to equally good service and new products. So far this is unknown. However market research I carried out suggested that customers aren't willing to go with an alternative E2E service if their quality is worse than RM's.

The difference between the postal industry and many others is that with water for example there isn't a local alternative, and the same with trains. Telecoms is different and this is where we are seeing a major battle between BT/Virgin and Sky amongst a few others. We have seen numerous buy-outs, but have we seen an improved service? The same can be said of British Gas privitisation. It mainly comes down to the individual experience as to whether we have seen an improvement and more choice.

I have personally helped design new products for the market place that I think will make a huge difference, but as it's new it is unproven as to whether it will work, which is where the major risk comes from. Well we shall we, it's out of my hands as I no longer work in the industry!

F0zz