Ofcom to review Royal Mail's universal service obligations

UK communications regulator Ofcom announced plans to review the nation's universal postal service on Tuesday, as a result of the changing needs and habits of postal users.

Ofcom said the universal postal service, underpinned by the Postal Services Act of 2011, mandated International Distributions Services subsidiary Royal Mail to deliver letters six days a week, and parcels five days a week, to every address in the UK at uniform, affordable prices.

Any changes to those minimum requirements could only be determined by the UK Government and Parliament.

The announcement came at a time when consumer behaviour regarding postal services had notably shifted.

Ofcom said the volume of letters sent and received had dropped by 46% over the last decade, owing to the increasing reliance on digital communication methods.

On the flip side, parcel deliveries had become more integral to people's daily lives, reflecting changes in consumer expectations.

The regulator said it was planning to gather evidence on how the universal service might need to evolve, adding that it intended to publish its findings later in the year.

It said it would delve into the changing consumer demands, challenges, and costs associated with delivering the universal service.

Ofcom said it also expected to outline potential options for changes and how those could be managed for a smooth transition to any future arrangements.

Interested parties would be invited to provide input following the publication.

As the designated postal regulator, Ofcom said it had the responsibility to ensure that a universal postal service was both financially sustainable and efficient.

That included the possibility of specifying additional features of the universal service, such as offering First Class and Second Class services, and setting enforceable delivery targets for Royal Mail.

“The UK is not alone in seeing user demands change, with an increasing reliance on parcels and a decline in letter volumes,” Ofcom said in its statement.

“Many countries around the world are reviewing how their universal postal service should adapt in line with consumers’ needs, environmental concerns and the need to ensure that everyone is able to participate fully in society, while others have already scaled back the scope of their universal service.

“Last year, we concluded our latest review of postal regulation, which set our regulatory framework for postal services from 2022 to 2027.”

Since then, Ofcom said there had been growing public debate around the long-term future of the universal service.

“We therefore believe that now is a good time to consider the longer-term future of the universal service, ahead of any future review of the regulatory framework.

“As well as gathering input from a wide range of people and organisations across the UK, our review will draw on our existing monitoring work; our periodic review of users’ needs; our regular and one-off programme of consumer surveys; and international comparisons.”

At 1133 BST, shares in International Distributions Services were up 0.72% at 239.4p.

Reporting by Josh White for Sharecast.com.