Ofcom orders review of Royal Mail prices

ROYAL Mail could be made to cap the prices it charges to customers and rivals as part of a fundamental review of regulation launched by watchdog Ofcom.

The review was launched after the recent collapse of a rival letters service run by Whistl left Royal Mail with no competitors in that market. The move by Ofcom is designed to ensure efficiency for the service in the absence of competition.

A cap on the cost of firstclass stamps, which is currently unregulated, is not being ruled out, though the focus is understood to be on the charges for providing services used by rivals.

Ofcom said the review would consider “whether wholesale or retail charge controls might be appropriate”. It will also examine whether wholesale and retail prices “are affordable and sufficient to cover the costs of the universal service”.

There is currently some regulation on the way Royal Mail provides wholesale services to rivals, but this could be tightened. For stamps, second-class prices are capped at the rate of inflation, but there is no such limit for first-class.

Ofcom may follow a similar model to the one recently proposed for telecoms giant BT, which has been told to slash the wholesale prices it charges for using “leased line” high-speed data links. The review of Royal Mail could also bring changes to delivery time and quality of service obligations.

Ofcom said: “The review will ensure regulation remains appropriate and sufficient to secure the universal postal service.”

Shares in Royal Mail fell one per cent. Last year, it called for a review of the direct delivery market saying t he f act rivals c ou ld “cherry-pick” the best routes threatened its ability to use these to subsidise universal services covering harder-toreach communities.

However, Whistl, formerly known as TNT, has itself complained to Ofcom about Royal Mail’s charges.