Now a competitor to Royal Mail is delivering some of my mail
For almost a decade now, Royal Mail has faced competition.
However, almost all this competition has taken the form of other licensed mail operators collecting and sorting mail from selected business customers and then injecting that mail into the Royal Mail network for final delivery to homes and businesses. This form of competition is called ‘downstream access’ and the competitors pays Royal Mail an agreed access charge for the delivery service.
An alternative form of competition is called ‘end-to-end’. This involves the competitor collecting, sorting and delivering the mail. Until recently end-to-end volumes were small and involved senders and recipients in the business sector.
Now though Royal Mail’s most serious competitor TNT Post – which is owned by the privatised mail incumbent operator in the Netherlands PostNL – is providing end-to-end services involving domestic recipients. This started two years ago in Manchester. It is now being rolled out in London (I live in the north-west of the city) and we received our first TNT- delivered item this week. The company plans to have a national network by next year.
Generally it is good for customers to have a choice of provider and for an incumbent provider to face competition which can drive efficiency.
The problem is that Royal Mail has a ‘universal service obligation’ which obliges it to deliver to every household in the country six days a week, whereas TNT Post can choose which households it covers and only delivers on alternate days. Royal Mail attempts to pay decent wages and provide good conditions to its staff, whereas TNT Post staff have inferior pay and conditions.
All this is happening in a letter market which has been declining by 5 or 6% a year for around five years now, mainly as a result of electronic substitution. As Royal Mail faces the double whammy of a declining share of a declining market, the provision of the current universal service will come under increasing threat. You have been warned.