Royal Mail Universal Service Not Under Threat, Says Regulator

LONDON--The universal postal service, under which Royal Mail PLC (RMG.LN) is obliged to deliver letters and parcels across the country at a uniform price, isn't under threat from competition, the industry regulator said on Tuesday.

The U.K. Office of Communications said it had therefore decided not to impose new regulations on Royal Mail's direct-delivery competitors.

However, Ofcom said it would initiate a broader review of factors affecting Royal Mail's ability to deliver the universal postal service, to be concluded next year. "This will consider Royal Mail's efficiency and its parcel delivery performance," it said.

Ofcom has been monitoring the performance of the postal sector over the last year. It said it found that while Royal Mail's productivity was improving, the rate of progress was flat, compared with the previous year, and below the company's own targets. Royal Mail has also lost volume in the parcels sector, it noted.

Ofcom also said it plans to amend rules governing the prices Royal Mail can charge for access mail, where competitors collect and sort mail, before paying Royal Mail to deliver it through its network.

The new rules would allow Royal Mail to set fair prices for access services in different parts of the country, based on the costs of delivery in those areas, allowing Royal Mail to make a fair profit on all access letters, regardless of where they are being delivered, Ofcom said.

"The proposals would enable Royal Mail to vary its prices between different geographic areas, but would also ensure that these variations reflect differences in its underlying costs," it added.

Under European law, the U.K. was required to liberalize the postal services market to allow competition.

Write to Ian Walker at [e-mail]; @IanWalk40289749

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