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Industry warns removal of Royal Mail price controls “could drive businesses away from mail”

14 Dec 2011 10:00 GMT Back
Industry warns removal of Royal Mail price controls “could drive businesses away from mail”
DMA News

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Proposed changes to postal regulations to remove price controls on the cost of Royal Mail’s commercial bulk mailing services could undermine competition and threaten the long-term prospects of the medium by driving businesses away from using mail, the Direct Marketing Association has warned.

The comments follow a high-level summit of business mail users, postal service providers, senior marketers and industry trade associations, which was hosted by the DMA to address industry concerns about the current Ofcom public consultation on a raft of controversial changes to postal regulations to boost Royal Mail’s profitability. 

Companies that use mail for sending customer bills or statements have already been squeezed by a 15%-20% price increase this year on the cost of transactional bulk mail services. Many have indicated they plan to withdraw from using mail if Royal Mail takes advantage of its new commercial freedom to impose another round of large price increases.  

Commercial bulk mail users represent Royal Mail’s biggest customers and underwrite the cost of an affordable Universal Service.

Last month Ofcom, the new postal regulator, launched the public consultation about how postal services should be regulated over the next seven years. The proposals include continuing to allow access to Royal Mail’s network for competitors, monitoring Royal Mail’s price margins to prevent unfair treatment of competitors, and removing price controls to give Royal Mail the ability to set the cost of their retail products. 

Concerns about the potential impact of these changes prompted the DMA and the Postal Trade Association Forum to convene a summit for businesses and organisations affected by the proposals. Representatives at the summit reached agreement on a number of critical points in responding to the consultation. As well as voicing fears about the potential for abuse of market dominance and threats to competition, all doubted the projections for future mail volumes and Royal Mail’s ability to meet efficiency and cost reduction targets particularly in light of current economic forecasts. 

Commenting on the outcome of the summit, Mike Lordan, chief of operations for the DMA, said:

“The proposed changes to postal regulations set out in the public consultation are clearly intended to make Royal Mail an attractive proposition for investors. However, we believe there’s a danger that the Government has gone too far in its plans to prepare Royal Mail for sale to the private sector. 

“We called the postal summit to coordinate an industry-wide reply to the Ofcom public consultation because we want to see a healthy and vibrant Royal Mail. The businesses and organisations we’ve spoken to are in complete agreement that some of the proposed changes to postal regulation could be hugely damaging to the long-term prospects of transactional and advertising mail.

“Granting a monopoly the ability to raise its prices without adequate safeguards is very dangerous and could drive more and more businesses away from mail, which is concerning as mail volumes are already declining year on year.”

The DMA is currently canvassing opinions from its members for use in its official response to the Ofcom consultation, which closes on 5 January.

Tristan Garrick, DMA PR manager
Tel 020 7291 3315

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