Ofcom 2022 Review of Postal Regulation Statement

Ofcom 2022 Review of Postal Regulation Statement

On 18th July Ofcom published a statement setting out its decisions on the regulation of postal services from 2022 to 2027.  This follows a review process that began with an initial ‘Call for Inputs’ in March 2021 and then a consultation on Ofcom’s proposals in December 2021, as reported on under LTB 293/21 and LTB 542/21.   The CWU made a submission to each stage of Ofcom’s review, both of which can be found on the CWU’s website and on Ofcom’s website (links to these are included below).

The CWU Research Department has produced an initial summary and brief analysis of Ofcom’s statement, as set out below.

Statement summary

Ofcom’s statement says that broadly the current postal regulatory framework is working well, allowing the postal market to meet the needs of its users. Consequently, Ofcom has decided that a root-and-branch review of the framework is not necessary, and so it will continue the current approach.

Ofcom’s statement is in line with its proposals as reported on in December 2021 under LTB 542/21.   In brief, Ofcom has made the following decisions on the regulatory framework for post:

  • Maintain the current overall framework, including price caps on basic universal services and quality of service standards.
  • Introduce new targeted consumer protections, requiring parcel operators to have policies and procedures for the fair and appropriate treatment of disabled consumers. Ofcom will also issue new guidance for parcel operators on complaints handling.
  • Continue to ensure that Royal Mail has commercial flexibility so that it can meet the challenges of providing a financially sustainable universal service.
  • Require Royal Mail to provide Ofcom with a view of the financial sustainability of the universal service over a longer period than currently requirede. five years rather than the current three year period.
  • Require Royal Mail to provide and publish a five-year view of its efficiency expectations and reportagainst actual performance. This includes a high level overview of its efficiency ambitions and an insight into the expected operational efficiency of frontline staff.  Ofcom has decided that it would not be appropriate or proportionate to impose price controls or set efficiency targets for Royal Mail.
  • Provide a stable regulatory framework, to support investment by all postal operators and ensure Royal Mail competes on a level playing field. This includes not extending access regulation into the parcels market, and not requiring tracking in the Universal Service Obligation (USO), as Ofcom considers that doing so could be damaging to competition.

Main CWU concerns

Labour standards in parcels

It is very disappointing that Ofcom has not proposed any measures in response to the CWU’s call for regulation to address the exploitation of workers in the unregulated parcels sector.  We argued that Ofcom has a role to play in this given the connection between employment standards and service quality.  We said that Ofcom should start by levelling the playing field on mail integrity and consumer protection, whilst also pushing for more powers and duties on labour standards.

Ofcom’s statement says “In response to CWU’s comment concerning the employment models of parcel operators,Ofcom does not regulate parcel operators’ employment models, and this extends to Royal Mail also. We note that CWU would like Ofcom to push for more powers from the Government to regulate parcel operators in order to improve quality of service and protect parcel workers.”

Whilst Ofcom notes the CWU’s point on pushing for more powers in this area, they make no further comment on this and there is no commitment to take this forward.

Consumer protection in parcels

It is a concern that Ofcom has decided not to extend mail integrity requirements to all parcel operators other than Royal Mail, which the CWU argued would help to improve quality of service standards. It is also disappointing that Ofcom has only decided to issue guidance for parcel operators other than Royal Mail on complaints handling, as opposed to new rules.  The CWU said that voluntary guidance is not sufficient and that rules are needed for all operators to ensure that customer complaints are handled effectively and to provide proper redress for customers when things go wrong.  In addition, whilst Ofcom will introduce a new condition for parcel operators to have policies in place for consumers with a disability, unfortunately it will not set minimum requirements on this as called for by the CWU.

Tracking on universal service products

It is disappointing that Ofcom has decided not to allow Royal Mail to offer tracking on universal service products.  Ofcom has concluded that extending regulation to include tracking on First and Second Class USO parcel services could harm the further development of competition in the C2X (Consumer to Anywhere) segment.  However, as the CWU and Royal Mail have argued, the C2X market is already highly competitive.

Royal Mail has released a statement on Ofcom’s decision on this issue, saying that tracking should be a feature of a modern postal Universal Service in 2022, and urging Ofcom to reconsider its decision.

Welcome decisions 

 Although there are some clear areas of concern for the CWU, Ofcom has also made some decisions we can welcome, including:

  • Not to reintroduce price controls or binding efficiency targets on Royal Mail, which we argued would threaten the future financial sustainability of the USO.
  • Not to extend access regulation to small parcels or other bulk letter services (e.g. business reply mail), which we argued would adversely impact Royal Mail’s revenues and the security of the universal service.
  • To maintain the requirements on Royal Mail to provide USO services for parcels weighing up to 20kgwhich we said is important in meeting the needs of citizens and consumers.

We will be doing some further analysis on Ofcom’s statement to help inform our next steps in making representations to Ofcom and influencing postal regulation in the interests of our members.

Ofcom’s Review of Postal Regulation Statement, consultation documents and all stakeholder responses, including the CWU’s responses, can be found here:

The CWU’s submissions to Ofcom’s review can also be found in the Reps Resources area of the CWU website here: https://www.cwu.org/reps/reports-research-publications/

Any enquiries in relation to the content of this LTB should be addressed to the GS Department.

Yours sincerely

Dave Ward                                                              Terry Pullinger
General Secretary                                              Deputy General Secretary (Postal)

22LTB316 Ofcom Postal Review Statement July 2022

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