Consignia: Competition will force prices to rise

Postage prices will rise for most customers if the industry regulator introduces competition to the Royal Mail, the postal services group Consignia claimed yesterday.

Consignia, formerly the Post Office, said the regulator seemed intent on encouraging "cherry picking" of profitable business customers. This, it claimed, would mean the death of the Royal Mail's universal service obligation, which guarantees delivery to any address in the country at a uniform price.

Responding to Postcomm's consultation paper on competition, Stuart Sweetman, Consignia's group managing director for strategy, said the regulator should not assume increased competition would automatically benefit all customers. "It will be very easy to attract operators into the postal market if Postcomm allows them to undercut the 27p first-class postage and cherry pick mail with low delivery costs," he said.

Only large business mailers would benefit from that approach, he said. Most customers will face dearer postage prices.

Even if the Royal Mail was allowed to lower its own prices to compete, the result was bound to be the end of the universal service and the creation of a two-tier pricing structure.

The Royal Mail used to have a monopoly over any letter costing less than £1 to deliver. Postcomm has decided to retain the £1 limit and then licence rival companies to operate within the monopoly area.