Ofcom has published a consultation on how the market should be regulated from April 2012. Ofcom took over responsibility for the regulation of postal services on 1 October 2011.

Under the Postal Services Act, Ofcom’s primary duty is to secure the Universal Service which means ensuring that Royal Mail remains financially viable, since it is the only organisation that can provide the Universal Service in the foreseeable future.

Ofcom’s consultation document points out that Royal Mail’s profitability can’t be achieved simply by increasing prices and there need to be incentives for efficiency improvements and cost reduction.

Ofcom has proposed a number of changes in how the postal services market could be regulated from April 2012. These include:

1. More commercial freedom for Royal Mail by removing price controls on many products and services. 
Royal Mail will be allowed to set its own pricing but with the safeguard that Ofcom would monitor the market and intervene if it believed prices were excessive. (Currently Royal Mail has to apply in advance to the regulator for permission for any price changes.) 

2. Removing requirements for Royal Mail to obtain regulatory approval for changes to its products or services.

3. Requirements for Royal Mail to grant downstream access and set safeguards to promote competition in this market.

The consultation closes on 5 January 2012 and you can find full details here. 

The DMA will be working with other stakeholders to understand the potential impact of these proposals on business users and to coordinate an industry response. We would welcome members’ views and comments – for further information contact Alex Walsh. 

If you’re interested in participating in a webinar about the consultation please contact Sara Cameron before Friday 11 November 2011.