Zonal pricing: legal battle looms

[TrueBlueTerrier]

http://www.precisionmarketing.co.uk/Art ... looms.html

Postcomm is bracing itself for a legal challenge from Royal Mail following the regulator’s rejection of the postal operator’s revamped zonal pricing proposal.

The watchdog revealed late last year that Royal Mail’s fresh proposal was still not acceptable (precisionmarketing.co.uk). The full report will not be published until next month but Postcomm has admitted in its Draft Forward Work Plan for 2008-11 that “our recent zonal pricing decision may be the subject of a legal challengeâ€

[andy2007]

RM seem determined to undermine the USO. Thank goodness Postcomm is trying to put a stop to it.

If RM are allowed to bring in these Zonal Pricing ideas in on the Business Post, how long do you think it will be, before Companies start to pass the extra cost on to Rural Customers?
After a few years, if it is allowed to become established. RM are likley to try to get some form of it included in the USO. For example delivering to everywhere, but having different (but slightly more expensive) Stamps for Rural Areas, as they have done with Large Letters. Look at all the problems people have had with sending Christmas Cards as a result of that!

I may be being overly pessemistic, but considering that RM seem determined to force Postcomm to allow them to compete on our rivals level, instead of forcing them to come up to ours. I think that it is a very real, and worrying possibility.

[Lounge Lizard]

Zonal Pricing is not entirely new. I remember lower rates for 'Local Parcels' ( to the same or adjacent counties or postcode areas ) for a while in the 1980s.
Also pricing by size didn't first start in August 2006. Up to 1968 the rate for larger postcards was 4d instead of the normal 3d.

[F0zziebear]

This is being done to compete against competitors. If another company got Royal Mail to deliver for the same price anywhere in the country they would then deliver mail in urban areas cheaply and then give royal mail the rural mail to deliver which is more expensive per item.

The cost will then be on Royal Mail's books and the competitor is able to go off and make good profit margins.

The risk with this approach is that the competition if stifled by zonal pricing may start their own E2E service and then take all the revenue for an item away from Royal Mail.

[Lounge Lizard]

Royal Mail might use Zonal Pricing to increase the cost of postage from, within and to London in a bid to offset the higher wages of postal workers in the capital !

[jemima]

I expect Postcomm are worried that RM will use the excuse of zonal pricing to undercut its rivals in city business deliveries and thereby stifle the competition. The EU aim, in opening the mail market for competition, is to ensure more equal mailing prices across Europe - to create a level playing field for all European businesses which use postal services. Competition wasn't itself the main aim of the EU legislation. If zonal pricing for business mail is the norm in other EU countries, then RM should be able to use it too. It does need to be clearly defined as being for business mail only, and mustn't interfere with the USO.

[andy2007]

I strongly believe, that they should change the terms of the Licenses. So that after a set amount of time, EVERYONE who wants to compete against us MUST have their own end to end service. And ensure that they ALSO comply with the USO.

How long you would have to give them, I don't know. That would have to be decided by people who know more about that type of thing. But if they fail to do so, they should be fined, and eventually have their License revoked.

The fact is, that we have supposedly had competition from these Companies for some time now. They should know by now, what is involved in delivering the Mail. The only thing stopping them providing their own end to end Service, is the fact that it is such an expensive thing to do. All they care about is the money they can make, by giving us the expensive part of the job, and undercutting us.

An alternative to altering the terms of the Licenses, would be to increase the price of Downstream Access to make it financially viable for us. But Postcomm would never allow that, as it would remove the advantage that our so called competitors have over us.

[F0zziebear]

As said many times before if you raise DSA prices then it will become commercially viable to create a rival E2E system. The fact that DSA prices are so is preventing the competition from actively providing an alternative E2E system, alternative products and make real profits. At the moment TNT, DHL and Business Post are not making anywhere near the profit margins expected by their parent companies.

The only winners financially are the big companeis who essentially get a Royal Mail service at 20% discounts

[andy2007]

As said many times before if you raise DSA prices then it will become commercially viable to create a rival E2E system. The fact that DSA prices are so is preventing the competition from actively providing an alternative E2E system, alternative products and make real profits. At the moment TNT, DHL and Business Post are not making anywhere near the profit margins expected by their parent companies.

The only winners financially are the big companeis who essentially get a Royal Mail service at 20% discounts

Good point about the risks of increasing the price of DSA. But what about the idea of changing the Licenses?

If we only provided DSA to Companies who hadn't reached their deadline for providing their own end to end Service, they would only be able to take advantage for a limited time. After that, they would be on their own, and could (if they wanted to) provide their own DSA Service.

As far as I'm concerned, that would level out the playing field. If we are unable to compete with everyone subject to the USO, then we would deserve all we get. But the fact is, that we are only struggling, because we are subject to commitments that no-one else has to cope with. These are ESSENTIAL commitments, but they should also be applied to our competitors.