“to assess the impacts to date of liberalisation of the UK postal services market, including on the Royal Mail, alternative carriers and consumers”
The first of our terms of reference is diagnostic. As well as considering the impact of liberalisation, we will also evaluate how postal services have been affected by structural developments in the wider communications market, including the use of the internet, email and text messaging on mobile telephones. We will also consider whether lessons can be drawn from international experience, where Governments have faced similar opportunities and challenges.
Questions about overall objectives
Q1. What do you consider to be the essential aims of, and vision for, a postal service in the 21st century?
Questions about liberalisation
Q2. What has been the impact of liberalisation, so far, on:
1. social consumers sending and receiving mail;
2. SMEs sending and receiving mail;
3. large companies sending and receiving mail.
in terms of the price of services, the choice of services to suit particular needs, and the quality of service.
Q3. What has been the impact of liberalisation, so far, on:
1. people in rural areas;
2. people with disabilities;
3. senior citizens;
4. people in areas which receive relatively little mail.
Q4. What has been the impact of liberalisation on Royal Mail?
Q5. What has been the impact of liberalisation on alternative carriers?
Q6. To what extent has competition emerged since postal services were liberalised, and what kind of competition has developed? Please consider:
1. the collection and delivery of letters, packets and parcels
2. transactional mail, direct mail, social mail and publications
3. services for large businesses, SMEs and social consumers
Q7. Has liberalisation made an impact on any other groups?
Q8. Have Royal Mail and new entrants been able to compete effectively and fairly?
Q9. What can we learn about liberalisation in the UK from international experience?
Questions about structural changes
Q10. Which changes in the communications market do you consider have had an impact on postal services:
1. internet;
2. email;
3. text messaging on mobile telephones;
4. others?
Q11. Can you quantify these changes?
Q12. What is the relationship between e-fulfilment and e-substitution in terms of their impact on:
1. volume of postal business?
2. value of postal business?
Q13. What has been the impact of e-fulfilment and e-substitution for the following:
1. social consumers sending and receiving mail;
2. SMEs sending and receiving mail;
3. large companies sending and receiving mail;
4. Royal Mail;
5. alternative carriers?
“to explore trends in future market development and the likely impact of these on Royal Mail, alternative carriers and consumers”
The second of our terms of reference is forward-looking. This section considers the factors (whether economic, technological, environmental or social) which may change the business environment in which mail companies operate in future, irrespective of changes made to the way in which postal services are provided.
Questions about future scenarios
Q14. What does international experience tell us about the challenges and opportunities facing the UK market?
Q15. What factors might encourage – and discourage - the use of electronic services as an alternative to the postal service, for:
1. transactional mail;
2. direct mail;
3. social mail;
4. publications (such as magazines);
5. other purposes?
Q16. In particular:
1. what advantages might consumers ascribe to paper mail, as the volume of electronic mail increases?
2. how far is environmental policy and regulation likely to affect the market, in either a positive or negative way?
3. to what extent can the postal sector successfully provide complementary services to other media channels, including broadcasters and companies advertising on the internet?
4. what innovations are likely, or possible, in the development of IT hardware and software, with implications for the postal sector?
Q17. Is it possible to provide evidence for these factors, as a basis for preparing projections for the future of the mail market?
Q18. What factors may limit the ability of companies to enter the market, or their market share:
1. in providing upstream services?
2. in providing a downstream service?
3. other services?
Q19. Are there three broad scenarios which you believe would provide a useful framework to test policy options? (Scenarios should focus on economic, environmental, social and technological changes outside the mail market, assuming that current policy is maintained in relation to the postal sector). Please give your own projections for the volume and cost of mail under each
The third of our terms of reference is concerned with policy options. The panel will consider the range of postal services which consumers require in view of recent developments, which of these are likely to be supplied by a competitive market, the most effective way of regulating to provide the remaining services, the role of Royal Mail and whether changes are needed to enable the company to fulfil this role.
Questions about consumer needs
Q20. Is a delivery on each working day important to consumers, either for social or business reasons?
Q21. Is the time at which mail arrives important to consumers, either for social or business reasons?
Q22. Do business or social consumers have sufficient choice of services when sending mail for different purposes?
Q23. Do consumers have sufficient choice as a recipient about where and when mail is delivered?
Q24. Would consumers accept that greater choice in services may mean a variable (but specified) delivery time?
Q25. Would consumers be willing to pay more for a wider range of services, whether as a sender or recipient of mail?
Q26. What services should be offered as a minimum for senders and recipients of mail?
Q27. Which of these services do you believe would not be delivered by the market, on the basis that they are not economically viable?
Questions about the universal service
Q28. The universal service was originally established to ensure that all UK citizens have access to postal services at a uniform tariff. Do you consider that the USO as currently defined fully meets that aim?
Q29. Do you believe that the universal service has other objectives, not covered in the Postal Act?
Q30. Are there elements of the universal service as currently defined which are no longer relevant to consumers?
Q31. Do you believe that bulk mail services for business (either directed at other businesses or consumers) should be part of a universal service, and why?
Q32. What is the (variable, fixed or sunk) cost to Royal Mail of the Universal Service Obligation, as it is currently defined?
Q33. What are the externalities (for example, environmental and social) associated with postal services?
Q34. What are the public goods associated with the provision of postal services?
Q35. What other options are available for meeting consumer needs; and what would be their cost?
Questions about providing universal services
Considering both the current and any proposed new definitions of the universal service:
Q36. Do you consider that the obligation to provide the universal service is a commercial benefit or disadvantage for Royal Mail? Why?
Q37. Could the obligation be shared among Royal Mail and alternative carriers?
Q38. What should be Royal Mail’s role in providing the Universal Service?
Q39. Can the universal service continue to be financed internally (without a subsidy)?
Q40. If not, how should the universal service be financed?
Q41. Does Royal Mail have the capacity to deliver the universal service in an effective way?
Q42. If not, what are the changes necessary, in terms of the company’s mission, management, investment plans, structure or working practices?
Q43. Can these changes be delivered within public ownership?
Q44. If not, why?
Q45. What further measures would be necessary to enable the changes listed in your response to Q42? In particular:
1. Should Royal Mail and Post Office Ltd continue to form part of the same group?
2. Do you support the idea of wholesale equivalence (separating Royal Mail’s upstream and downstream operations), and why?
3. Do you support the idea of commercial equivalence (separating Royal Mail’s sales and marketing function from the management of the collection, sorting, transportation and delivery network) and why?
Q46. What is the impact of Royal Mail’s pension liability and deficit on the company’s ability to trade; and what are the implications for management?
Questions about the regulatory framework
Q47. Is the “final mile” (the ability to deliver to all 28 million addresses in the UK) a natural monopoly?
Q48. Is the “first mile” (the ability to collect from all postboxes and post offices in the UK) a natural monopoly?
Q49. To what extent has the access regime enhanced the possibility of competition in the final mile, or reduced it?
Q50. Do you believe that the regulator should set limits on prices for social mail, or other forms of mail, and why?
Q51. Which is the more appropriate system of regulation under the current market conditions: ex-ante or ex-post regulation, or a combination of both? Please explain.
Q52. What criteria should be used to determine when regulation can be withdrawn, as competition develops?
Q53. Should the price of different postal services reflect their costs? Or are cross-subsidies a natural and inevitable part of running a network business?
Q54. In current market conditions, what sort of regulatory framework would be most effective in stimulating innovation in the postal services sector to meet consumer needs?
Q55. To what extent is an efficient Royal Mail important for the development of the postal sector more generally?
Q56. Is it feasible that the postal sector should continue to be regulated separately from the wider communications market?
Q57. What sort of regulatory framework would be the most effective in stimulating innovation in the postal services sector, under current market conditions?
Q58. Does the current VAT regime create distortions in the postal market? What are they?
Other issues
Q59. In what order should any policy changes you believe necessary be implemented?
Q60. Are there any other issues which you believe should be considered by this review which are not covered by the questions set out above?
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