Hayes - UK Postal Regulation Uniquely Bad
01 December 2009 - Jarvis Thomspson
Billy Hayes, general secretary of the Communication Workers Union described regulation of postal services in the UK as unlike that found in any other country and "uniquely bad". His comments at the Institute of Employment Rights Conference on Saturday, concern what the CWU sees as a 'rigged' regulatory framework by Postcomm that has allowed competitors to select the most profitable parts of Royal Mail's operations and discard the least profitable, leaving Royal Mail to provide an increasingly costly Universal Service.
"The problem arises from the fact that providing this universal service involves maintaining a very large infrastructure and relatively large work force. Providing a service to rural addresses or collection points is more expensive than in the densely populated urban areas. As a consequence, Royal Mail takes a loss on many of the services it delivers to many areas of the country.
"Removing the monopoly opens the way for competition on the profitable areas – no-one is going to compete for the loss making areas. This is what has happened in the UK. Since 2001, the monopoly area has been reduced by stages until it was abolished completely in 2006. Competitors have been able to bid for any of Royal Mail services. – In reality, they have concentrated on the highly profitable bulk mail. This means doing nothing more complicated than picking up bags of mail from large posters – part sorting it – then dropping off in Royal Mail to complete sortation and final delivery.
"The industry regulator – Postcom, has further rigged the market by preventing Royal Mail from charging a market price for the service it offers competitors for completing delivery. As a consequence, the industry subsidise competitors by around 2p per letter – according to Adam Crozier, Royal Mail’s CEO – which makes around £100 million a year subsidy.
"So this is money for old rope. Royal Mail has not won a contested contract in this area – and the competition has secured around 40% of the bulk traffic. Yet in delivery – Royal Mail continues to deliver 99.8% of previously reserved mail. No competitor is likely to break into this unless the regulator further rigs the market. I must make it clear, that the system used in the UK is not used in any other country. It is uniquely bad." he said.
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