Mail Delivery Price-Cap Leaves Britain’s Royal Mail Fuming

21 May 2003

UK postal operator Royal Mail Group is threatening legal action against regulator Postcom over new measures to break its monopoly.

The latest in a long line of spats between Postcom and Royal Mail’s combative chairman Allan Leighton, the new row centres on the watchdog’s proposals for how much the cash-haemorrhaging postal giant can charge to deliver rivals’ letters.

Eager to open up the market to competition, Postcom is encouraging new operators to collect mail then hand it to Royal Mail for delivery via its network of postmen.

The regulator has now proposed how much the first such independent operator, UK Mail, should pay Royal Mail for this delivery service: between 11.46 pence ($0.19; €0.16) and £4.06 per item depending on weight.

Leighton – who had been pressing for higher charges – professed himself “shocked” at the scheme, vowing to scrutinise the regulator’s maths. He warned that too low a price could deal a fresh blow to Royal Mail’s struggling finances and threaten the universal service (whereby all internal UK deliveries cost the same regardless of distance between sender and receiver).

“If Postcom’s plans amount to a green light for rival firms to creamskim [sic] profitable mail and leave Royal Mail without the means to provide the universal service, then we will not hesitate to fight the regulator’s plans in the High Court and, if necessary, the European Court,” he blasted.

To which Postcom chairman Graham Corbett retorted: “If the price is pitched too high that would not only deter the development of effective competition but in due course companies could set up alternative delivery networks leading to a much riskier market for Royal Mail and everyone else.”

Business Post, owner of UK Mail, did not seem happy either, claiming the price was higher than it had hoped.

Interested parties have until August 20 to submit comments on the proposals.

Data sourced from: BBC Online Business News (UK); additional content by WARC staff