16th Jun 2015 06:35
LONDON (Alliance News) - The UK's communications and postal regulator Ofcom Tuesday widened its review of the regulation of Royal Mail PLC in light of the decision by competitor Wistl to pull its plans to launch its own direct delivery services in the UK.
Ofcom said it wanted to look at what changes to the overall postal framework might be appropriate to secure the so-called universal postal service - Royal Mail's obligation to deliver to every address in the UK. It also wants to look at how best to ensure Royal Mail continues to become more efficient in the absence of any competitor in the direct delivery market, and whether the company's wholesale and retail prices are affordable while being sufficient to cover the costs of the universal service.
It said it will also examine whether Royal Mail's commercial flexibility remains appropriate in the changing market, and, if not, whether wholesale or retail charge controls might be appropriate.
Ofcom had already announced a review of Royal Mail's efficiency in December, as well as its performance in the parcels market and the company's potential ability to set wholesale prices in a way that might harm competition.
Royal Mail is the UK's formerly state-owned legacy postal operator. The market was opened up to competition, and it now has several competitors. But only Royal Mail has the obligation to deliver letters and packages to every UK address, and while its competitors collect and sort mail, Royal Mail does the final sorting and delivery.
Whistl was preparing to launch its own final deliver service in key cities and urban areas, but decided to abandon the project after LDC, the private equity arm of Lloyds Banking Group PLC, withdrew from talks about a possible investment in the company at the end of April.
"This leaves Royal Mail without any national competition for direct delivery of letters. (Competition remains strong in other postal markets such as parcels and 'access mail' - where operators collect and sort mail before handing over to Royal Mail to complete delivery.)," Ofcom said/
"Royal Mail itself is in a stronger position financially than when Ofcom last reviewed the postal framework. Royal Mail also now operates as a public company, following partial sale by the Government. The Government has also outlined its intention to release its remaining 15% stake in Royal Mail," it added.
The regulator said it will outline its initial thoughts and begin seeking formal submissions from industry, consumer groups and other stakeholders in July. The review is expected to be completed, and a revised regulatory framework put in place, during 2016.
"Ofcom's review will incorporate its existing work, announced in December, to assess Royal Mail's efficiency; consider its performance in the parcels market; and assess the company's potential ability to set wholesale prices in a way that might harm competition. In addition, the review will address the implications of Whistl's withdrawal, which represents a significant change in the direct delivery market," It said.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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