Ofcom backs direct delivery competition in letter post

02 Dec 2014

Ofcom has rejected a plea by Royal Mail to impose a universal service obligation on rival operator Whistl (formerly TNT Post) in respect of its direct delivery (or ‘end-to-end) letter post services.  Whistl now delivers mail direct to letterboxes in many areas of London and Manchester using its own postmen and women, instead of accessing Royal Mail’s delivery network in those areas, and has plans to expand direct delivery to other areas.

In its Statement on end-to-end competition in the postal sector, published today, the UK communications regulator found that direct delivery competition had an important role to play in promoting efficiency in postal services including at the delivery level.  The evidence did not support Royal Mail’s claim that its universal service was under threat from direct delivery competition.

Ofcom also dismissed Royal Mail’s complaint that Whistl’s incremental roll-out of direct delivery to selected geographical areas represented unfair competition.  Royal Mail’s ability to charge ‘zonal ’ prices for delivery network access enable it to charge Whistl and other customers accessing Royal Mail’s delivery network only in some geographical areas prices that reflect Royal Mail’s costs of delivering to those areas.  Ofcom found that, provided that the zonal prices were properly reflective of Royal Mail’s costs of delivering to each zone, it would be profitable for Whistl to carry out direct delivery itself only if and where that option was more efficient than using Royal Mail’s delivery network access service.

At the same time as publishing the Statement, Ofcom has published proposals for changes to Royal Mail’s delivery network access pricing arrangements to prevent the pricing scheme from being adjusted in ways that might undermine direct delivery competition, and to enable Royal Mail to receive a fair return from the use of its assets.  Separately, Ofcom is continuing its investigation into Whistl’s complaint that Royal Mail’s announcement in January 2014 of changes to its access pricing scheme were an abuse of dominant position.

For more information see: http://stakeholders.ofcom.org.uk/post/securing-universal-postal-service/

Monckton barrister Alan Bates is advising Whistl.