TNT Post calls on Postcomm to increase protection against margin squeeze
22 March 2007
TNT Post, the leading challenger to Royal Mail in the UK postal market has made a formal request to Postcomm to strengthen the current rules which prevent Royal Mail from margin squeezing its competitors.
The request comes as a response to the recent Royal Mail appeal for a reduction in the level of headroom in downstream access prices and the right to margin squeeze its competitors out of the market.
Royal Mail delivers 99.8% of the licensed letters in the UK (including all the mail TNT Post handles) and sets both wholesale and retail prices. By closing the gap between wholesale prices and retail prices and reducing margin headroom, Royal Mail could severely restrict the competitive landscape and prevent business customers, large and small, from enjoying the benefits of competition.
The limited margin protection currently in place does not cover a wide enough range of postal services and makes it difficult for competitors to invest in the infrastructure required to compete with Royal Mail. TNT Post’s request outlines the need for Postcomm to create the conditions for sustainable investment in this market and widen and deepen the protection against margin squeeze. Whilst Royal Mail remains the only company delivering mail, it is critical that they offer their services on wholesale prices which are fair and do not destroy competition.
Nick Wells, CEO, TNT Post commented:
“Royal Mail is trying to squeeze us out of the market without any justification. Royal Mail recently stated that it costs their business 8 pence to deliver a letter and yet they are charging us around 13 pence, as part of a commercial agreement reached a couple of years ago. It is unbelievable that they are now seeking to charge us even more. An increase in wholesale price could destroy our business and we want tougher controls which stop Royal Mail from doing this in the first place. “
He added:
“Royal Mail should welcome the benefits of competition which have improved the level of service available to customers. Their efforts should focus on becoming efficient and not engaging in anti-competitive practices which are ultimately to the detriment of customers.”
The first wholesale agreement was signed less than three years ago and almost all new competition has come from downstream access. Customers have been delighted at having choice in the postal market for the first time in 350 years. Any move to increase wholesale prices would damage competition and impact heavily on customers who have direct wholesale agreements with Royal Mail.
