Report calls for new commercial model for Royal Mail
An independent report has dismissed the often-cited option of ‘structural separation’ for the Royal Mail as the best way to rejuvenate the UK postal market because of the ‘potentially significant and damaging costs’. Instead it recommends a radical new commercial model with two accountable businesses operating independently with distinct targets, objectives and incentives resulting in improved customer choice, service and value for money.
The report was undertaken by David Stubbs of Europe Economics to contribute to the ongoing industry consultations and to review different business models for Royal Mail. In particular the report considers the impact of different options for Royal Mail on the promotion of commercial and customer focus in the mail sector. It was commissioned by UK Mail, one of the leading players in this market.
The new model would introduce a new business unit, Royal Mail Sales which would interface with customers, and would contain all existing retail sales, marketing and product development aspects of Royal Mail. It would operate alongside Royal Mail Network which will be responsible for the operational delivery of postal services and would sell services to Access Customers, Downstream Access providers and Royal Mail Sales on an equal and transparent basis.
The report goes on to state that this model would create “commercial equivalence” for Royal Mail in dealing with all customers which is vital to create a model for a healthy, vibrant and sustainable mail market.
“This model would give Royal Mail staff much stronger incentives to maximise the value of its universal service infrastructure as a commercial asset – providing postal services to a wide range of customers and would ensure that all customers such as access customers, downstream access providers and end to end customers are being treated in the same way. This could increase the benefits that the UK is deriving from the infrastructure and assist the safeguarding of universal service provision for the future,” explains David Stubbs.
The report also recommends the inclusion of new arrangements whereby competing operators were able to gain access by arrangement with Post Office Ltd to Royal Mail’s network of post offices in offering mail and parcel services to posting and receiving customers.
Guy Buswell, Chief Executive of UK Mail commented: “We believe that this paper proposes a radical and much needed change which will instil a new commercial outlook to the benefit of the mail industry as a whole – customers, competition and Royal Mail itself. It is a less problematic option than structural separation in many ways so why use a mallet when a pin hammer will do?
“We believe it will provide a direct stimulus to innovation and customer responsiveness at Royal Mail and allow Royal Mail to re-establish their role as a force for progress at the heart of a vibrant postal market. I call on BERR and Postcomm to consider this proposal very seriously in their current work on Royal Mail and competition.”
Click here to read the report in full
