Ofcom is refusing to bow to pressure to bring forward a full-scale review of the postal market, maintaining Royal Mail should use increased competition from the likes of Whistl as an incentive to become more efficient.
The move follows last week’s Business, Innovation & Skills Select Committee review, which saw Royal Mail boss Moya Greene claim the Universal Service is under threat from “cherry-picking” by rivals.
At the time, Whistl boss Nick Wells described the claim as a “smokescreen”, while Business Secretary Vince Cable has called it “scaremongering”.
Having reviewed the market and the business plans of both companies, Ofcom said it believed Royal Mail’s ability to meet its Universal Service obligation was not being impeded by competition.
The regulator said: “Competition is likely to provide Royal Mail with a further incentive to become more efficient. Continued progress on efficiency is crucial if the Universal Postal Service is to be financially sustainable in the longer term.”
However, in one slight concession Ofcom said it had begun a broader review of factors affecting Royal Mail’s ability to deliver its service, including efficiency and its parcel delivery performance, due to complete next year.
It also outlined proposals to amend rules on prices Royal Mail can charge competitors to deliver mail through its network, based on the cost of delivery in certain areas of the UK.
Ofcom said the new rules would allow Royal Mail to set fair prices for these services in different parts of the country based on the costs of delivery. At present, Royal Mail must charge a uniform rate for this service.
The regulator said such measures would allow Royal Mail to make a “fair profit” on these deliveries “regardless of where they are being delivered”.
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