Royal Mail spared tariff controls in Ofcom review

Ofcom announced on Wednesday (25 May) that it will not impose new price controls on Royal Mail's services, after deeming the service financially viable in its current form.

However, while the telecoms and postal regulator opted against imposing price caps on Royal Mail's wholesale and retail products, it retained the cap on stamp prices and suggested rules in the access market should be tightened.

"Given the declining letters market, and increased competition in parcels, Ofcom is not proposing to impose new price controls on Royal Mail's wholesale or retail products," the regulator said in a statement.

Ofcom said the London-listed company must extend the notice periods for contractual changes in the access market, where other rival operators collect and sort mail before handing it over to Royal Mail which will then complete the delivery.

The watchdog added the company should reply within six weeks to customers enquiring or requesting a product similar to those already sold by Royal Mail.

It also indicated it would closely monitor Royal Mail as it feels the company "has the potential to cross-subsidise its parcels business through its letters business – where it has a much larger market share and an established delivery network – in a way that might disadvantage other parcel operators".

The regulator stressed all postal operators in the UK would have to place greater focus on ensuring small and large letters were delivered safely.

"Ofcom intends to introduce new rules to clarify how postal operators must look after these items – shifting the focus of regulation away from logistical and procedural requirements, towards assessing postal operators' actual performance," Ofcom stated.

"Those who fail to meet the new rules would face fines."

The consultation on Ofcom's proposals will run until 3 August and a decision is expected later in the year.