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Royal Mail has warned that some of Ofcom’s proposed reforms to the universal service obligation go “against the wider government drive to reduce unnecessary regulation”.
International Distribution Services (IDS), which owns Royal Mail, added that the changes outlined by Ofcom to the universal service obligation (USO) would not deliver a reliable, efficient or “financially sustainable” postal service.
The USO places a number of responsibilities on Royal Mail, including mandating that next-day letter deliveries must be available across the UK six days a week.
However, the long-term decline in the letters market has placed a strain on Royal Mail’s finances and Ofcom, the UK regulator for communications services, has committed to reforming the rules.
At the end of January, Ofcom published a consultation that outlined a number of changes. These included removing the requirement for Royal Mail to deliver second-class letters six days per week.
At the same time, much of the USO would be kept intact, such as next-day delivery for first-class letters and a one-price-goes-anywhere service from any part of the UK.
While Royal Mail has welcomed some of the changes, it warned that other parts were either overly ambitious or introduced unnecessary regulation.
It said that Ofcom’s new reliability targets, which determined the proportion of deliveries that had to be delivered within a certain timeframe, were “over specified”.
Complying with the rules would add a significant cost to delivery, Royal Mail said, potentially leading to “materially higher prices for customers”.
Ofcom’s new targets say that 99.5 per cent of first-class mail would have to be delivered within three days of posting and 99.5 per cent of second-class mail would have to be delivered within five days of posting.
Last year, Royal Mail was fined £10.5 million by Ofcom for failing to meet its delivery targets for first and second-class post. It only managed to deliver 74.7 per cent of first-class mail within one working day and 92.7 per cent of second-class mail within three days, well below its targets.
The company also complained that Ofcom’s plans to regulate a delivered-within-two-days priority service for bulk mail, which involves letters sent by large organisations such as banks or government departments, “goes against the wider government drive to reduce unnecessary regulation”.
It pointed out that it was also hindered by regulation in other areas and called for Ofcom to remove regulations that prohibited the company from offering parcel-tracking to universal service customers.
“Tracking is now a hygiene factor when sending parcels in this highly competitive sector,” the company said. “The current restriction does not reflect what customers want and renders the universal service unfit for the digital age.”
Martin Seidenberg, the chief executive of IDS, said: “These changes we seek are important measures to ensure we can protect the one-price-goes-anywhere universal service for many years to come.”
The consultation closes on April 10and Royal Mail urged the regulator to publish its final decision by July 1. The company has long complained about the slow pace of reforms to the USO.
Last September Keith Williams, the chairman of IDS, told its shareholders that while the loss-making Royal Mail welcomed Ofcom’s plans to consult, the process was “frustratingly slow”, with no decision due until next summer.
“We’ve spent the last four years ping-ponging back between government and Ofcom while [letter] volumes have dropped even further,” he said at the time.
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