Royal Mail needs to make 'sweeping changes'Watchdog says Royal Mail has big problems

28 March 2008

Posting letters into postbox

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Royal Mail needs to make sweeping changes to meet the needs of its customers and secure a future for itself, says the postal regulator.

Postcomm says the way Royal Mail has tackled the growth of other types of communication, such as email and the internet, has been ‘disappointing’.

It said the company had concentrated more on forestalling competition than on adapting to the changing ways in which people communicate.

Lower prices

But Postcomm admitted that customers have benefited since the addressed letters market was opened fully to competition more than two years ago.

This had led to customers having more choice and lower prices, and seeing increased innovation.

Postcomm said that competition had also led to households getting record levels of service and quality from Royal Mail.

Deep-rooted

But Postcomm Chairman Nigel Stapleton added: ‘Royal Mail’s problems are a lot more deep-rooted than having to deal with modest amounts of mail competition and regulation.

‘Royal Mail is experiencing some fundamental changes in how senders are using mail following the rapid growth in the use of email, text messages and the internet for communications and marketing.

‘Sweeping change and innovation can make both Royal Mail and the public winners from these far-reaching market developments, but nothing less is required to ensure that the much valued universal service remains at the core of the market.’

Royal Mail said Postcomm's report had overlooked the fact that it offered a unique one-price-goes-anywhere universal service.

First class mail

The universal service includes first and second class mail, standard parcel mail, special and recorded delivery, international mail and other services such as mail re-direct.

Royal Mail Chief Executive Adam Crozier said: ‘The universal service is part of the fabric of our society and a huge asset to the UK.

‘Royal Mail is the only company in the open mail market with the commitment to the universal service obligation - but the issue is how to maintain it when it's now loss-making and the large business customers who for years have subsidised it are increasingly using the internet to communicate or are posting their mail with rival postal operators.’

Postcomm said it will make a second submission in early May when it will explain its proposals for addressing Royal Mail's problems.