Ofcom says USO reform ‘necessary’

Views invited on options to secure long-term future of UK’s ‘vital’ postal service

 

Ofcom’s 106-page review released today, 24 January, makes no bones about how universal postal service risks becoming unsustainable as people are sending fewer letters and receiving more parcels, meaning reform is necessary to secure its long-term future.

As anticipated it also lays out how postal deliveries could be reduced to five or even three times a week.

On a positive note, the industry regulator has also confirmed today that it has retained its safeguard cap on the price of second-class stamps “to make sure the universal service remains affordable”.

Above: Ofcom’s review looks at how the landscape has changed since 2011
Above: Ofcom’s review looks at how the landscape has changed since 2011

The Future Of The Universal Post Service review, which can be downloaded in full here, admits postal services and postal workers “remain a vital communications tool for many people and businesses” and are “essential to those who rely on them”, with 79% of respondents telling Ofcom some things will always need to be sent by post. and 74% of those who use the mail say they rely on the post for letters.

Ofcom said: “However, while Royal Mail’s obligations have not changed since 2011, letter volumes have halved and parcel deliveries have become increasingly important. Given the significant cost to Royal Mail of delivering the universal service, there is an increasing risk it will become financially and operationally unsustainable in the long term.”

Ofcom is now inviting views on its range of options for redesigning the universal postal service to secure its future, which includes cutting the USO from its current six-days-week to all addresses in the UK for the same stamp price to just five days – or even three – while ensuring it reflects the way people use it.

Summarising the review as that the “letters market is in structural decline whereas people are sending and receiving more parcels”, Ofcom said letter volumes halved from about 14billion to 7bn between 2011/12 and 2022/23 “and the rate of decline has recently accelerated”, and the regulator said the UK is not alone in needing to respond to these challenges with USO being reformed across Europe and more widely, including reductions in the frequency of deliveries and extended delivery times for letters, while seeking to strengthen reliability.

Above & top: Reponses are invited to the options Ofcom is considering
Above & top: Reponses are invited to the options Ofcom is considering

It added “the postal service remains important for social cohesion”, with the elderly and less mobile using it as a “vital tool to connect with the outside world and maintain contact with their friends and families”, and confirmed: “Royal Mail postal workers also play an important role, as for some people they are considered as a regular and familiar visitor.”

For the options, Ofcom stated: “The potential options we set out rely on Royal Mail remaining the USP and the core principles of the USO (universality, affordability and uniform pricing) being maintained. They are based on our research into user needs, market trends and the experiences of reform in other countries.”

The suggestions assessed include a reduction in frequency of delivery for letters, changes to the speed of delivery for most mail and amending the current quality of service targets for existing services.

Ofcom said: “We consider that changes to delivery speed and/or delivery frequency for letters could still continue to meet users’ needs while offering scope for significant cost savings. Should there be changes to services in future, we consider it important that QoS targets should also be set at a level to ensure reliability and high-quality services to meet users’ needs.

“We also note that the options we have assessed could be implemented in combination. For example, a reduction to three days a week delivery for letters may also require the removal, or material modification, of the current first-class letters product as the delivery speed would no longer be achievable without material changes to Royal Mail’s current methods of letter delivery.”

Above: The review recognises the importance of the postal service to older and less mobile people
Above: The review recognises the importance of the postal service to older and less mobile people

However, Ofcom said reforming the USO “will not provide the answer to the financial and operational challenges Royal Mail faces”, adding that it expects the company to improve its reliability and resolve any operational issues that contributed to its failure to meet its delivery targets in 2022/23.

It also said Royal Mail must “continue to work towards transforming its network and operations, and improving efficiency”, to ensure consumers get the best possible value for the services they buy. Ofcom concluded: “Action in these areas is vital for Royal Mail to rebuild trust and remain a viable provider of the universal service. As the regulator, Ofcom will continue to hold Royal Mail to account.

“Under any scenario, Royal Mail must modernise its network, become more efficient and improve its service levels.”

The story of the GCA and public reaction to Ofcom’s consultation can be read here, and anyone wishing to submit their views is asked to download the 10-question consultation response form here and return it to the email address supplied by 5pm on 3 April, 2024.n

 

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