Postcomm forum - strong feelings and diverse views on zonal pricing
12 June 2007
- Royal Mail has said Postcomm should allow zonal pricing - if customers want it.
- Postwatch believes that any change will be unreasonable for users of mail services.
- TNT said it is complicated, reduces transparency and creates uncertainty.
Debate at Postcomm’s fourth annual industry forum over Royal Mail’s application to apply what it calls zonal pricing to some business mail products has illustrated the strong feelings and diverse views on the subject.
Royal Mail has applied to Postcomm to charge large mailers – using products which are not part of the Universal Service – different prices depending on where in the UK their mail is delivered. Today’s workshop was held as part of Postcomm’s consultation process for this application.
In advance of the workshop, a Royal Mail spokesperson said “the one-price-goes-anywhere universal service to the UK's 27 million addresses is open to every customer and we have urged the regulator to agree that this service should be focused on stamped mail.”
For business customers, Royal Mail “believes where strong competition and customer choice is already well established, Postcomm should let the market decide on prices. That means allowing Royal Mail to introduce zonal pricing for bulk business mail - if business customers want it. Zonal pricing is already available and being used by Royal Mail's access customers where prices can already vary if the mailing is for high or low density areas.”
Representatives from Postwatch, the customer watchdog, asked why Royal Mail “is proceeding with zonal pricing, an initiative that has received no customer support whatsoever”. Highlighting the potential impact on customers, and the wider postal market, Postwatch identified significant features, both positive and negative, within Royal Mail's proposals concluding that the time was “not right to change to such a pricing structure”. Postwatch also urged customers to respond to Postcomm stating their opposition to the proposals to support “the fact that this change will be unreasonable for users of the service”.
Nick Wells, TNT Post’s chief executive, said:
“Zonal pricing is bad for everyone – both consumers and businesses alike. It is complicated, reduces transparency and creates a tremendous amount of uncertainty. No one is asking for it, and it will threaten deliveries to the millions of people who live in rural areas. So why bother? It isn’t necessary. In fact, Royal Mail could haemorrhage millions of pounds from the introduction of zonal pricing which will slow down the modernisation of the UK postal service. Everyone will lose as a result of zonal pricing.”
In concluding the workshop, Postcomm chief executive Sarah Chambers said:
“Postcomm will consider carefully all of the responses and concerns raised today, in addition to the substantial input we have already received, and we expect to put out our recommendations to consultation in early August. If customers decide they don’t want zonal pricing, they should challenge Royal Mail on why it is proposing this change. Given its statement today that it will introduce zonal pricing only if customers want it, Royal Mail will have to demonstrate that this is the case.”
Notes for editors
Royal Mail’s ‘zonal pricing’ application does not affect stamp prices or those bulk mail products that are included within the scope of the universal service. It covers products that generated about 25 per cent or £1.4 billion of Royal Mail’s total regulated revenue in the last financial year.
Under Royal Mail’s licence, Postcomm has up to nine months in which to make a decision on this application. The nine month assessment period began on 2 April, and the regulator will take into account the debate and information gleaned from today’s workshop when making its decision on the application.
The following figures from Royal Mail illustrate the price premiums and discounts that it proposes to make on the current geographically uniform prices in the first year of implementation:
| Greater London | Business District | High Density | Average Density | Low Density |
|---|---|---|---|---|
| +2.5% | -4.9% | -2.0% | -1.7% | +4.8% |
This second table shows the differences in cost to Royal Mail of delivering to each zone relative to the national average cost of delivery:
| Greater London | Business District | High Density | Average Density | Low Density |
|---|---|---|---|---|
| +12% | -28% | -11% | -4% | +11% |
Royal Mail has said that it wants to improve cost reflectivity further by moving to prices that mirror more closely the cost differences shown in the tables above within the period of the current Price Control in stages before April 2010.
The Postcomm forum provides industry stakeholders - including postal operators, customers and representatives of the Government - with the opportunity to engage in a discussion with all the major players in the UK postal service.
