9th Apr 2014 16:02
LONDON (Alliance News) - Royal Mail PLC Wednesday urged the UK postal market regulator to speed through its review into some changes that Royal Mail made to contracts it imposes on rivals and big businesses for using its delivery services, warning that the review may create a period of uncertainty in the market.
Royal Mail also said that the regulator will now also review the wider universal service provider Access conditions that were imposed on Royal Mail in March 2012.
In February, Royal Mail said the regulator Ofcom had opened an investigation into the contract changes after rival TNT Post UK, one of the companies that uses the contracts, complained.
A month earlier, Royal Mail had said it would raise its so-called Access prices on March 31 by between the Retail Price Index plus 0.3% and RPI plus 1.0%. It also changed some of the terms of the contracts, saying it would alter the price differential it charges for delivery between London, urban areas, suburban areas and rural areas to better reflect "relevant costs and market conditions". It said it would also give a discount to Access customers who guarantee volumes for up to two years.
However, Royal Mail suspended its plan to offer a 0.25 pence per item discount if the customer provides monthly volume forecasts for up to two years ahead as that was the subject of the Ofcom review. The RPI-related price changes went ahead as planned.
"The suspension of these changes creates a significant asymmetry in the market as upstream and direct delivery competitors are not constrained in the same way," Royal Mail said in its statement Wednesday.
"Unconstrained direct delivery competition could impact the economics of the universal service network - the protection of which is Ofcom's primary regulatory duty."
"In the light of this, we are again calling for Ofcom to commence immediately a full review of how it will protect the universal service from the serious risk presented by unfettered direct delivery competition. It should take action as soon as possible to safeguard the finances of the universal service. This is necessary to give clarity and certainty to all market participants," Royal Mail said.
The company added that it had separately been notified that the regulator intends to review the Universal Service Provider Access conditions that were imposed on Royal Mail in March 2012.
In a separate statement, an Ofcom spokesperson said, "Ofcom has a legal duty to secure the universal service. We monitor developments in the market very closely, including the impact of greater competition."
"Ofcom has powers to step in to protect the needs of postal users and safeguard the universal service. We do not currently consider it necessary to intervene," the spokesperson added.
"Royal Mail will cooperate fully with Ofcom in both these matters and will share with it the comprehensive and robust rationale for our proposals," the company said in a statement.
Royal Mail has a requirement to maintain postal delivery services across the UK. Rivals in the deregulated market, like TNT, can't build a full-scale distribution network because the cost would be prohibitive, and so Royal Mail charges them to deliver the mail, which is delivered partially sorted to Royal Mail centres.
Royal Mail shares Wednesday closed at 524.40 pence, down 0.2%.
By Steve McGrath; [email protected]; @stevemcgrath1
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