Royal Mail: Competition threat to deliveries

UNFETTERED competition threatens to end regular daily postal deliveries to rural areas, Royal Mail has warned.

The recently privatised firm has called for an immediate review of the issue and the implementation of any regulatory changes needed to safeguard its so-called "universal service".

In simple terms, the universal service means Royal Mail customers can expect largely comparable services regardless of location – whether urban or rural.

Royal Mail is obliged to provide postal delivery services to both rural and urban locations but the same is not true of its competitors.

This means competitors could in theory deliver only to the most profitable urban areas, leaving Royal Mail obliged to deliver to unprofitable rural areas.

Unfettered direct delivery competition poses a real threat to the universal postal service, according to a Royal Mail submission to communications regulator Ofcom.

"Urban areas have high delivery point densities and higher numbers of items per address," it explains.

"This makes the unit cost of delivery lower in these areas, whereas the revenue generated per address tends to be higher than average.

"In providing the same service to all addresses, Royal Mail must therefore utilise revenues derived from urban areas to offset the higher unit costs and lower revenues from more rural areas."

Some 15% of the UK population live in lower density areas - equating to about 63% of total landmass.

"The UK has a significant portion of costly to serve rural areas," says the submission.

"No other major European country provides the same level of opportunity for urban cherry picking coupled with such a significant portion of low density, more costly to serve rural areas."

Ofcom surveys shows that people recognise a wider social benefit from the universal service – including in supporting rural communities, argues the Royal Mail.

This was reflected in the different patterns of usage among households, with post being more important to older, disabled and housebound users, and those in rural and offshore areas, it said.

"Royal Mail's national network helps small and large businesses find new customers as well as delivering to their existing ones," says the submission.

"It is a particularly crucial lifeline for many rural communities and businesses."

Independent surveys of customers demonstrated strong support for the universal service which had been delivered, clearly and consistently over many years, said Royal Mail.

The full Royal Mail submission to Ofcom can be downloaded here.


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