Private sector firms do not have the infrastructure of the Royal Mail to provide a comprehensive national letter delivery service at the current market price. A one-month suspension of monopoly status is ridiculously short given the sunk costs that TNT, DHL and others would have to invest in providing effective competition. Nonetheless there is scope for local delivery at a much lower unit cost in our major towns and cities. Private firms can create their own network of collection points much in the same way that Camelot has built up thousands of lottery terminals. It would not take long for users to become familiar with a range of competitive "service-providers" offering rapid letter delivery services within their area.
Ignoring the vindictive politics of the current dispute, the Government should permit a "market test" for private firms to provide delivery services over a two-year period. The pounds 1 minimum threshold should be removed to let local consumers decide who they want to deliver their local mail. Prices would fall in urban areas (to a level much closer to the marginal cost of each letter delivered) whilst the Government could provide an explicit subsidy for those firms committed to maintaining, and improving, services to rural areas.
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