Postcomm review of Royal Mail break-up

The postal regulator Postcomm will confirm today that it is to consult widely on plans to split Royal Mail in two in a drive to increase competition in the letters market.

The proposal is contained in a strategy document being sent to customer groups, business users, suppliers, other postal operators and Royal Mail itself, canvassing views on how the regulatory system should evolve over the next five to 10 years.

Postcomm will also consult users on Royal Mail's one-price-goes-anywhere universal service guarantee and whether the scope of the obligation should be narrowed to a smaller range of postal services.

The idea behind separating Royal Mail's trunk network from its "last mile" delivery network of postmen and women is to make the business more transparent to rival operators.

Although 17 rival operators have entered the market since Postcomm began to break up Royal Mail's monopoly three years ago, the state-owned company still accounts for 96 per cent of all deliveries. The vast majority of new operators have signed what are known as access agreements, enabling them to collect and trunk letters to local sorting offices for final delivery by Royal Mail staff. Just 0.2 per cent of the 80 million items posted each day are handled by new entrants operating end-to-end delivery networks in direct competition with Royal Mail.

One of the questions the consultation document will pose is whether the proliferation of access agreements has hindered the full liberalisation of the postal market.

Nigel Stapleton, chairman of Postcomm, stressed that protecting the universal service would remain a key part of the regulator's job and that the consultation exercise could even result in the obligation being widened.

The consultation exercise will last three months.