Changes to zonal access contracts
On the 14 May 2009 Postcomm published its final decision on modifications to Royal Mail’s licence to change the way that zonal access is priced. The changes were proposed in our February 2009 consultation (which responded to Royal Mail Wholesale’s licence modification application received in November 2008).
After considering the issues raised by stakeholders during the consultation, Postcomm decided to make the licence modifications with some minor adjustments to those that we consulted on in February 2009. The main change was that the new four zone price structure will not now come into effect until April 2010, whereas we had previously consulted on the changes being implemented in 2009.
The licence modifications require Royal Mail Wholesale to offer a new zonal access pricing structure to its access customers. The licence modifications:
- require the change from a five to a four zone zonal access pricing structure, with effect from April 2010;
- require the publication of “assumed” zonal access prices in Formula Year t = 4 (2009/10) – these are “phantom” prices that will not come into effect but will be used as the basis for subsequent years’ prices;
- limit price changes in subsequent years such that they can only be changed so as to make prices “more cost reflective” and limited by a maximum annual amount;
- restrict Royal Mail Wholesale’s ability to change the allocation of postcode sectors to different zones;
- require price and postcode sector changes to be independently audited before implementation and be reported to the regulator each year;
- require Royal Mail Wholesale’s to consult on changing its costing methodology to use “real cost data” to calculate zonal prices from April 2011 and in subsequent years.
The later implementation date of April 2010 means that users of Royal Mail’s access services that are priced on a zonal basis have 10 months to prepare for the new system from the date of Postcomm’s decision.
Implementation of the changes in April 2010, will also afford Royal Mail Wholesale an opportunity to consult on making any changes to the national access contracts, such as to the national fall to earth provisions. Any changes could be made at the same time as the zonal access price changes in April 2010.
Postcomm believes that these licence modifications are important in contributing to the provision of a strong and self-financed universal service, whilst also helping the development and sustainability of both access and end-to-end competition.
Background
On 13 December 2007, TNT Post UK Limited submitted a request to Postcomm for a direction under Condition 9 of Royal Mail's licence for two products. TNT Post UK Limited refers to these two services as 'Deferred Urban Access' and 'Next Day Urban Access'.
- 'Deferred Urban Access' would comprise a two zone price structure for a Day+2 (after handover) service
- 'Next Day Urban Access' would be a two zone price structure for a Day+1 (after handover) service.
Postcomm was in the process of considering TNT Post's requests when, on 13 August 2008, Royal Mail published an industry letter proposing changes to zonal and national access agreements. Royal Mail consulted on two alternative zonal access pricing structures, one with four zones, and the other with five zones. In relation to national access, Royal Mail consulted on changing the NGPP definition to ensure that it is directly related to the zonal pricing structure.
In light of Royal Mail’s consultation, Postcomm decided to delay issuing a direction in response to TNT Post’s request.
On 29 August 2008 Postcomm published its observations on Royal Mail’s industry letter, welcoming the consultation. Postcomm stated that it believes that Royal Mail, TNT Post and the wider industry should work together to put in place appropriate terms for both zonally priced access and nationally priced access to the Royal Mail network.
On 25 November 2008 Royal Mail Wholesale published on its website an application to modify Condition 21:5(b)(ii) of its licence.
Postcomm published a consultation in relation to the proposed licence modifications on 20 February 2009 and published its decision on 14 May 2009.
In light of Postcomm’s decision on 14 May 2009, Postcomm has closed its file in relation to the zonal access price structure aspect of TNT Post’s direction request. In relation to TNT Post’s request for a deferred zonal service, Postcomm is in the process of considering this matter.
- 14 May 2009 - news release
- Postcomm's final decision on zonal access pricing by Royal Mail
- 14 May 2009 - final decision document
- 2009 05 14 Final decision vFinal. (pdf, 219KB)
- 3 April 2009 - responses to Postcomm's consultation
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Anonymous response 1 (pdf, 51KB)
Anonymous response 2 (pdf, 20KB)
Communication Workers Union (pdf, 30KB)
DX Group (pdf, 12KB)
Mail Competition Forum (pdf, 51KB)
Mail Users Association (pdf, 28KB)
Regional Mail Services (pdf, 18KB)
Royal Mail Wholesale (pdf, 13KB) Final MSORTAZ_NewZones020409 (pdf, 3058KB)
TNT Post UK Limited (pdf, 120KB)
UK Mail (pdf, 1039KB)
UPS (pdf, 29KB) - 20 February 2009 - news release
- Web statement for publication of Postcomm's document : Changes to Zonal Access pricing - proposed licence modifications
- 20 February 2009 - consultation documents
- Changes to Zonal Access pricing - proposed licence modifications (pdf, 171KB)
Changes to Zonal Access pricing - proposed licence modifications - Annex A (pdf, 71KB)
Changes to Zonal Access pricing - proposed licence modifications - Annex B (pdf, 125KB) - 25 November 2008 – news release
- Royal Mail applies for a licence modification
- 25 November 2008 – application
- Royal Mail Wholesale application for a licence modification (pdf, 107KB)
Royal Mail Wholesale application for a licence modification - Annex (pdf, 125KB) - 3 November 2008 - news release
- Update on proposed changes to Zonal and National access contracts.
- 19 September 2008 - Responses to Royal Mail Wholesale's consultation
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DMA (pdf, 13KB)
MCF (pdf, 61KB)
MUA (pdf, 196KB)
RMS (pdf, 20KB)
TNT (pdf, 4665KB)
UK Mail (pdf, 21KB)
UPS (pdf, 245KB) - 29 August 2008 - news release
- Postcomm publishes observations on Royal Mail's letter "Proposed Changes to RMW Access Contracts (Zonal and National).
- 14 August 2008 - news release
- Postcomm statement on Royal Mail's industry consultation on zonal access price structures.
- 14 August 2008 - letter
- Royal Mail Wholesale Zonal consultation letter (pdf, 46KB)
- 13 December 2007 - letter
- TNT Post’s request for a direction under Condition 9 of Royal Mail’s licence (pdf, 407KB)
