Royal Mail has submitted its response to Ofcom’s call for input into the universal service obligation (USO) and has urged for reforms to be introduced by April 2025 at the latest.
In January 2024, Ofcom stated that reform of the universal service is necessary, given letter volumes have declined from a peak of 20 billion a year in 2004/5 to seven billion in 2022/3. Volumes will likely drop to around four billion in the next five years.
In response, Royal Mail conducted extensive consultations with consumers, businesses and stakeholders, and has produced a proposal for USO reforms that is “designed to protect what matters most to customers”.
As part of its proposal, there would be no changes to the one-price-goes-anywhere service to all parts of the UK; First Class letters will continue to be delivered daily, six days a week (Monday to Saturday) to recognize the importance of next-day and Saturday deliveries, especially for the NHS, publishers and senders of greeting cards; the option of First Class and Second Class letters would remain, giving people the choice of price and speed; and parcels would continue to be delivered up to seven days a week.
Vital changes
The proposal includes vital changes to deliver a more efficient and more financially sustainable universal service, including:
- All non-First Class letter deliveries, including Second Class, would be delivered every other weekday;
- The delivery speed of standard bulk business mail (used by large mail shippers for bulk mailings such as bills and statements) would be aligned to Second Class, so they arrive within three weekdays instead of two currently.
Royal Mail is also calling on Ofcom to modernize the USO for the digital age by introducing new reliability targets for First Class and Second Class services, alongside revised, realistic speed targets to give customers further confidence, and by adding tracking to universal service parcels to reflect customer demand.
According to Royal Mail, the proposed reforms can be achieved with regulatory change without the need for legislation, and new regulations should be introduced by April 2025 at the latest.
Martin Seidenberg, group CEO of International Distributions Services, said, “The fact that letter volumes have dropped from 20 billion to seven billion a year means that the universal service is now unsustainable.
“If we want to save the universal service, we have to change the universal service. Reform gives us a fighting chance and will help us on the path to sustainability.
“Our proposal is based on listening to thousands of people across the United Kingdom to ensure it meets their needs. We have worked hard to come up with a proposal that is good for our customers, good for our people and would allow Royal Mail to invest in products and services that the UK wants.
“We have serious concerns that the urgency of the situation is not properly recognized by Ofcom. With no need for legislation, there is no need to wait.”
A more sustainable future
According to Royal Mail, its proposal would reduce the net cost of the universal service by up to £300m (US$380m) per year if fully and swiftly implemented. This is very dependent on how quickly reform is enacted and the rate of letter decline. These savings would allow Royal Mail to continue to invest in the modernization and transformation of the business to provide products and services that customers want and reduce its environmental impact.
The postal operator stated that the proposal is designed to “create a more financially stable future for the business and its shareholders, protecting tens of thousands of jobs and the best terms and conditions in the industry”.
“As a result of the changes creating a more efficient network, posties would, for example, deliver to around seven out of 10 addresses on every walk, compared to just four out of 10 today. This would mean a net reduction in daily delivery routes of 7,000-9,000 over the course of around 18-24 months,” Royal Mail added.
The company expects there to be no compulsory redundancies and fewer than 1,000 voluntary redundancies. The reduction would be managed through natural turnover wherever possible.
To read more about changes to the universal service obligation across Europe, make sure you read the March 2024 issue of Parcel and Postal Technology International magazine, coming soon!