Media briefing: Facts about the competitive mail market

March 2009

Full market opening on January 1st 2006 was not a "big bang"

Most of the 25 licensed operators in the UK already had their licences and were conducting a mail business before full market opening.
Nearly all of these entered the mail market on the back of their existing mail or parcels/express business in the UK.
The bulk mail market, where practically all the competitive activity has been focused, has been open to competition since January 2003.
The European Union's approach has been to open up postal markets gradually to competition. On 18 October 2006, the European Commission published its proposals for the next Postal Directive. Negotiations on the draft Directive were concluded and the Directive was adopted at the end of January 2008. Member States have until 31 December 2010 to transpose the Directive in national legislation. (See the European Postal debate factsheet for further information).
More on the introduction of competition to the mail market.

This table shows that Royal Mail’s price controlled revenues fell during the year ending 25 March 2008. The revenue increases permitted under Postcomm's price control are more than offset by volume declines, due partly to those price increases, substitution to other media and 'intelligent purchasing' by customers switching to cheaper Royal Mail products, eg, using Second Class rather than First Class services. It also shows that factors other than competition have contributed most to the weakening revenue trend that has affected Royal Mail's financial results.

Change in Royal Mail's revenue for its price controlled products between 2006-07 and 2007-08
Price Control area	Revenue (£m)	Percentage of total revenue
*Total revenue - regulatory accounts 2006/07*	*5,959*	*100.0%*
Increase in revenue due to:
Price increases	298	5.0%
Decrease in revenue due to:
Working day adj	82	1.4%
Volume decline	-203	-3.4%
Mix decline	-289	-4.9%

*Total revenue - regulatory accounts 2007/08*	*5,847*

Notes

Data above drawn from Royal Mail's published Regulatory Financial Statements 2007-08, Part 2: Royal Mail's reg accounts, page 4.
More on Postcomm's regulation of Royal Mail's standards and prices.

Royal Mail still delivers more than 99% of all licensed area mail in the UK.
Competitors now handle around 30% of letters at some point during their journey, but actually deliver less than one per cent - ten in every thousand.
End-to-end competition is developing much more slowly than predicted by Royal Mail.
In the Netherlands, Spain, Sweden and Germany, national operators have lost 8-12% of end-to-end volume to competition.

‘Access’ arrangements are when rival postal operators, or mail customers, pay Royal Mail to deliver letters on their behalf, having themselves collected and sorted the letters and carried them across the country using their own transport networks.
So, business is not entirely ‘lost’ by Royal Mail; it is shared between the new operators and Royal Mail, with Royal Mail still getting the lion's share of the revenue from it.
Royal Mail is still paid around 13p of the price of an average access letter, while competitors typically receive only around 2–3p for the work they do in collecting mail, sorting it and getting it to Royal Mail for final delivery.
More on 'access' agreements.

In 2007-08, Royal Mail achieved 3 out of 12 standards compared to achieving 11 in 2006-07. The target's achieved were Standard Parcels, European International delivery and percentage of items correctly delivered. The low achievement has been attributed to industrial action.
More on the universal service and on Royal Mail's quality of service standards.

Postcomm is the independent regulator for postal services in the UK.
Its primary job is to protect the universal service and make sure that postal operators, including Royal Mail, meet the needs of their customers throughout the UK.
More information about Postcomm.