Protecting the universal postal service for consumers

Ofcom has today outlined measures to continue to safeguard the universal postal service, including increased protection for rural post boxes.

One year on from establishing a new regulatory framework for postal services, Ofcom is ensuring that the needs of postal users, both consumers and businesses, continue to be met. Ofcom has today announced it is:

• not proposing any changes to the scope of the universal postal service.¹ This means that consumers will continue to benefit from the current service provided by Royal Mail, including six-day delivery and the choice of a next-day priority delivery service, 'First Class', and a lower-priced three-day standard delivery service, 'Second Class';
• proposing new protection against the removal of post boxes in rural areas; and
• publishing guidance on how it would assess the potential impact of competition on the universal postal service. Ofcom has outlined the steps that could be taken in the event that competition poses a threat to the sustainability of the postal service.

Claudio Pollack, Ofcom Consumer Group Director, said: "Consumers and businesses across the UK have told us that they place a high value on the universal postal service. Our decision not to change that service means the needs of postal users will continue to be met.

"We are also proposing new protections to ensure that everyone continues to have access to local post boxes, including those in rural communities.

"And crucially, we are reaffirming our commitment to ensure the universal postal service remains financially sustainable in the presence of competition".

Meeting the needs of postal users

Ofcom today concluded its Review of Postal Users' Needs, a comprehensive study into the needs of UK postal users.² More than 4,000 residential consumers and 1,100 businesses were surveyed, supplemented by discussion groups in locations across the UK.³

After consulting on this research Ofcom has concluded that, overall, the postal market is currently meeting the reasonable needs of users, and has decided not to change the scope of the universal service.

Greater protection for rural communities

Ofcom requires Royal Mail to provide a sufficient number of post boxes in appropriate locations to meet the needs of postal users. The criteria setting out how Royal Mail must meet this obligation are covered by a regulatory condition which imposes certain requirements on the location and density of post boxes.

Currently, these criteria⁵ apply in only 61 out of the 121 postcode areas in the UK. ⁶ The postcodes excluded from this level of protection mostly cover rural areas. However, some major cities, such as Belfast, Edinburgh, Newcastle and Swansea, are also not covered.

To address this issue, Ofcom is proposing to extend protection for rural users of the post box network, as well as for those in urban areas not covered by the current protection rules, by extending the protection across the whole of the UK. The proposals mean:

• there must be a post box within half a mile of at least 98% of 'delivery points' (usually the letter box of an address) nationally; and
• for the remaining 2% of delivery points, Royal Mail must provide sufficient post boxes or other means of access to the universal service (e.g. collection on delivery⁶) to meet the reasonable needs of those users.

These proposals are in line with the levels of post box access provided by Royal Mail today, and will ensure Royal Mail continues to provide sufficient post boxes in the future.

Safeguarding universal service in a competitive market

In line with its duty to protect the universal service, Ofcom has today published guidance on its approach to 'end-to-end' competition in the postal sector. This is where commercial postal operators collect, process and deliver mail directly to the recipient without the need to use Royal Mail's network.

The guidance sets out the circumstances under which Ofcom would undertake a review of the need to intervene in the market in relation to this form of competition, the process that it intends to follow when undertaking such a review and a range of factors that would be taken into account - such as how Ofcom intends to assess the potential financial effect of end-to-end competition on the universal service.

Ofcom will review the need to intervene if its active monitoring of the postal sector identifies a potential material threat to the provision of the universal service - for example, as a result of a significant new party entering or growing in the market, or a change in the expected level of Royal Mail’s future revenues or costs.

In addition, Ofcom has today committed to undertake a review of the impact of end-to-end competition on the universal service towards the end of 2015, if a review has not already been undertaken by that time.

Three documents are available online: statements on the Review of Postal Users' Needs and End to End Competition, and a consultation on post box provision, which is open until 1 May 2013.

ENDS

NOTES FOR EDITORS

1. The key features of the universal postal service - a delivery to every address in the UK, every working day (including Saturdays, for letters) at a uniform, affordable price - are set out in the Postal Services Act 2011. Only Parliament and the Government can change these minimum requirements of the universal postal service. Ofcom can specify the detailed scope or characteristics of this service; for instance it can require the choice of both a priority next-day and standard three-day delivery service.
2. Section 30(3) of the Postal Services Act 2011 requires Ofcom to "carry out an assessment of the extent to which the market for the provision of postal services in the United Kingdom is meeting the reasonable needs of users of the universal postal service" before modifying the Universal Postal Service Order. The Universal Postal Service Order sets out a description of the services that should be provided as a universal postal service and the standards with which those services are to comply.
3. Details of Ofcom’s market research can be found here.
4. Section 29(6) of the Postal Services Act 2011 requires Ofcom to "secure the provision of sufficient access points to meet the reasonable needs of users of the universal postal service".
5. Royal Mail is currently required by DUSP condition 1.8.1 to provide sufficient access points to meet the reasonable needs of users of the universal postal service. Royal Mail is considered to have met its general obligation in DUSP 1.8.1 in relation to post boxes if it meets access point criteria set out in DUSP 1.8.2(a). The current access point criteria set out in DUSP 1.8.2(a) are that: "in each postcode area where the delivery point density is not less than 200 delivery points per square kilometre, not less than 99% of users of postal services are within 500 metres of a letter box". This means that cities located in largely rural postcode areas are excluded from the current protection.
6. A postcode area refers to the first letter(s) in a postcode, for example "SE" in the postcode of Ofcom's address, SE1 9HA.
7. Collection on delivery refers to a case where the postal deliverer makes a final collection of mail at the same time as delivering to that area.