‘Outrageous’ post hikes approved

royal-mail-battered-for-price-hike-planRegulator Postcomm has approved Royal Mail price increases on bulk mail – branded outrageous by direct marketing industry bosses – as well as lifting regulatory restrictions which it claims will allow the postal operator to compete in the market.
Financial services, utility companies, and catalogue retailers are likely to be the hardest hit by the increases of up to 19 per cent, which will take effect from April 2011, although all brands that run direct mail campaigns will also be affected.
The hikes, which have been fought by both the DMA and print industry, are designed to raise an extra £100m from business mailers.
Postcomm said: “We have decided upon a range of deregulatory measures which will give Royal Mail greater commercial freedom in markets where competition is growing. These measures take account of representations received from third parties, including Royal Mail, on our package of regulatory safeguards and do not include all the options outlined in November 2010. In particular, in reaching our final decision, we have taken account of Royal Mail’s position on our proposed pilot for accounting separation.
“We received a large number of responses to our consultation on Royal Mail’s application to be able to raise additional revenues during 2011-12. Postcomm’s Commissioners have carefully considered all these submissions and the information provided by Royal Mail. We acknowledge the impact that such price rises are likely to have on customers and the risk that this may result in a further decline in mail volumes.
“However the Hooper Report, published in December 2008 and updated in September 2010, clearly identified that the universal service will remain under serious threat if Royal Mail fails to modernise and tackle its long standing inefficiency. We agree with this assessment. We have therefore concluded on the basis of the information presently available that agreeing to Royal Mail’s request will provide a much needed contribution to funding the company’s ongoing modernisation programme, and is appropriate taking account of all our statutory duties, in particular our primary duty in relation to the universal service. This decision will have no impact on the price changes already announced by Royal Mail for first and second class stamps.”
The following measures will now be implemented:
• Deregulation of packets and parcels weighing more than 2kg
• Removal of retail price controls from all packets and parcels weighing more than 1kg and from second class pre-sorted bulk mail services
• Reduction in access headroom for letters to 3p, but still working on a price point basis as currently
• Removal of headroom controls from all packets and parcels weighing more than 1kg
• Move to a ‘wholesale-led’ form of price control for second class pre-sorted bulk products
The regulator said Royal Mail will now have greater freedom to compete in the pre-sorted bulk mail market, where the company has lost significant volumes to competitors. Further, in agreeing to Royal Mail’s request for additional allowed revenue and reducing headroom, Postcomm claims it is addressing Royal Mail’s concern that it makes a loss on each item of mail delivered on behalf of its competitors and helping to ensure that access will no longer be loss making.

Related stories:
Industry outrage at bulk mail hike
Battle grows over postal hikes

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