Postcomm agrees one-year stay of execution for mail monopoly

The postal regulator Postcomm will tomorrow announce a one-year delay in the timetable for opening up Consignia's Royal Mail monopoly to competition from other operators.

Postcomm had planned to begin phasing in competition immediately and then throw the entire £5bn postal market open from April 2006.

But after lobbying from Consignia and the postal unions, the regulator has decided to give the Royal Mail a 12-month period of grace. Postcomm will not now begin awarding long-term licences to competitors until 1 January 2003 and will delay the full liberalisation of the market until 2007.

Consumer groups such as Postwatch, which voiced strong support for Postcomm's initial proposals when they were published in January, are likely to view the concessions as acceptable. But Consignia and the postal unions are likely to renew their warnings that the speed with which competition is being introduced will undermine the Royal Mail's universal obligation – the guarantee to deliver to every home in the country for a standard price.

In an attempt to influence Postcomm, the Secretary of State for Trade and Industry, Patricia Hewitt, wrote to its chairman, Graham Corbett, the night before it finalised the proposals urging the regulator to remember it had a duty not to undermine the universal service.

But Ms Hewitt's intervention appears to have gone largely unheeded. Postcomm is sticking by its original plan to allow competition initially for bulk mail users who send out 4,000 or more items at a time. Postcomm says this accounts for 30 per cent of the UK's postal market. But Consignia claims it will put 50 per cent of its business at risk. In 2005, the threshold will be lowered to companies which mail out more than 500 to 1,000 items at a time before complete liberalisation is introduced two years later.

Postcomm will make it clear that individual companies will not be allowed to get together to aggregate their bulk mail deliveries in order to meet the initial threshold.

But its final proposals are understood to remain vague on the issue of how rival operators will have to pay for access to the Royal Mail's trunk network and "last mile" delivery. Critics argue that unless competitors know how much it will cost them to enter the market, they will be deterred from applying for licences.

Consignia, which is next month expected to announce losses of more than £1bn for 2001-02, has argued that Postcomm's proposals will cost it £250m a year in lost profits and force it to raise the price of a first-class stamp by as much as 3p a year to generate enough income to safeguard the universal service.