Who should deliver the mail?
Poor UK postal services are forcing an increasing number of companies to seek alternatives to the state provider - which principally means TNT or UK Mail. They now handle more than one letter in five delivered in Britain and could easily double that, very possibly taking a majority of the mail.
The more successful the private providers become, the weaker Royal Mail will be. But this is not a classic model of splitting market share: these new rivals to the state monopoly are not only competitors of Royal Mail, they are its customers too.
The newcomers collect post and sort it but they hand it to the government-owned mail business to deliver to customers’ doors. Gaining market share and shrinking the Royal Mail business further thus puts the private companies’ own business at risk too. Delivery depends considerably on critical mass to give economies of scale, but without the state organisation to deliver the post, UK Mail and TNT, part off the Dutch post office, have no business.
A reliable postal service is essential for business and the private operators have picked up so much market share because of dissatisfaction with the state supplier. But Royal Mail has already declared a loss on its letter deliveries that is set to get bigger. It is in a market that is shrinking but which is being further eroded by these private suppliers that pay it money.
Repealling the legisalation that brought competition to the postal market is no answer: it would protect Royal Mail in the medium term but encourage its inherent inefficiency. Allowing innovation that reversed the fall in the postal market might allow it to return to profit while suffering competitors - but there has been little sign off that so far. Forcing the upstart rivals to deliver their own post would make them realise the costs involved in providing the “last mile” - but splitting this leg of the business would ruin the economies of scale from a monopoly deliverer.
The answer is to split delivery from the Royal Mail’s other functions - either by ownership or strict separate management. BT’s Openreach - the subsidary that provides phone facilities for both the parent and rivals - is the precedent. The delivery function would thus serve both Royal Mail and the private providers and ensure business had a real choice for its postal services. Perhaps TNT and UK Mail might even invest in this new delivery organisation?
May 14th, 2008 at 6:00 pm
Some of the facts in the above article are totally wrong! Firstly Royal Mail has to charge 13p to these rival private mail carriers for a 1st class service, it has been forced to do this by the regulator Postcomm, secondly there are no new “innovative” serivces, large businesses who send bulk mailings have simply switched because its cheaper, they get the same service they have always had and enjoyed by Royal Mail and thirdly domestic and small businesses have gained absolutely nothing from opening up the market, TNT and UK Mail do NOT want to know so thats been left to the Royal Mail to pick up the pieces. The Royal Mail is slashing hours in order to fill revenue gap that the private operators have created thats why you are seeing a poorer and later service.
And mail is not in decline!
May 15th, 2008 at 2:49 pm
The price private postal services pay the Royal Mail for delivery is fixed by the regulator but the price to the sender is usually cheaper and the sender receives a service that gives computerised tracking and audit up to the point when mail is handed over to the state service.
So far, while only big users can avail themselves of the service, all recipients of post - personal and small businesses - arguably receive a better service.
The private mail companies are starting to make innovations that might, perhaps, halt the decline in postage, which saw 8 per cent fewer letters sent last year.
May 15th, 2008 at 3:57 pm
“So far, while only big users can avail themselves of the service, all recipients of post - personal and small businesses - arguably receive a better service.”
No they don’t receive a better service, it is a worse service, mail used to be delivery before 10:30am first delivery and 1pm second delivery, it now gets delivered at anytime of the day, sometimes as late as 5pm, how is this better?