APPENDIX 9
Memorandum by Intellect
Intellect represents over 1,000 organisations
and is committed to improving the environment in which our members
do business, promoting their interests and providing them with
high-value services. Intellect represents a sector contributing
around 10% of UK GDP, more than 1.1 million high-skill jobs, at
least 15% of total UK trade and more than £34 billion per
year in UK exports.
1. Intellect is recognised as the leading
high-tech industry body in the UK representing over a thousand
members in IT, telecommunications, software and services, and
office technology. Within Intellect there is a broad spectrum
of membership providing equipment, systems and services to all
participants in the postal sector—mailers; mailing houses;
postal service providers; facilities management providers; and
intermediaries. We share Royal Mail's prime objective of growing
profitable mail traffic (ie of value to the mailer, the recipient
and the postal service provider) and so we have a mutual interest
in the success of Royal Mail. We take the view that this is best
achieved in an effective market and by providing a diversity of
customer focused products; fair, transparent and commercial pricing
for all channels; and excellent quality of service. We see an
effective market and good management well supported by technology
investment as the prime driver of performance improvement. http://www.intellectuk.org
2. Intellect welcomes the opportunity to
make writen submission to the Trade and Industry Committee concerning
Royal Mail after liberalisation. In addition, Intellect fully
participates in the development of the positions and responses
developed by the Mail Users Association and the Postwatch Trade
Association Forum.
3. We believe the impact of liberalisation
will drive up the quality and choice of services in the postal
market:
(a) Competition is and will continue to stimulate
innovation in serving customer needs.
(b) An open market will provide customers
with a business environment that will lead them to seek new products
and services from providers (in contrast with a monopoly market
where customers are conditioned to a "take it or leave it"
approach to the business).
4. Intellect supports Postcomm's move to
open the market in January 2006, ahead of the rest of Europe:
(a) We believe that the actions taken by
Royal Mail over the last two years have placed it in a position
to be ready to operate effectively in an "open market"
but do believe that at some stage Royal Mail needs to be given
the capability to compete on an equal basis with new entrants,
particularly in the business market.
(b) Delaying the opening after January 2006
would be damaging to customers and operators who are prepared
for and ready to participate in the liberalised market and risk
investments made or being planned to be made.
(c) Early opening should improve the UK's
competitive position in the European market in the medium term.
(d) If the market opening is to the benefit
of postal customers, Intellect can see no reason for further delaying
their introduction.
5. Continuance of Royal Mail's Universal
Postal Service obligation (USO):
(a) Intellect believes that the USO is a
benefit to Royal Mail and is not in conflict with market opening.
(b) As the market changes and with the continued
growth in electronic alternatives to paper mail and physical products
(music, books, pictures, videos and films), we propose that a
thorough study and consultation be undertaken to consider the
redefinition of the USO and the drivers behind it.
6. Postcomm's proposals for the future pricing
of postal services in the UK:
(a) Intellect believes that the current proposals
on price control from Postcomm are complicated, do not reflect
what is happening in the market, does little to address some of
the cost reflective pricing issues and may be based on assumptions
that are out of date:
(i) The "two basket"
methodology does not relate to the reality of the market and gives
Royal Mail limited ability to be able to continue its cost reflectivity
programme. We are particularly concerned that the costs of the
stamp channel are being subsidised by business mailers, particularly
the meter channel, but also that the low price of stamps could
preclude new business models being developed for the consumer
market.
(ii) Service levels and compensation
should relate to individual products and not to "baskets"
which could lead to anomalies.
(iii) The view that 1st Class mail volumes
will not be affected by competition over the period of the price
control is seriously questioned by Intellect as we know that many
organisations are looking at the cost/delivery equation of remaining
with First Class versus moving to an Access model.
Intellect's submission to Postcomm on their
pricing proposals is appended to this document.[3]
7. In addition we would like to make the
following brief points which we believe are relevant to the current
debate:
(a) Growth—a vibrant and growing postal
market is good for Royal Mail, mailers, employment, and the economy.
(b) Partnership—we believe in a partnership
approach by mailers, Royal Mail and third parties such as technology
providers to ensure the success of this vital communications channel.
(c) Innovation—innovation in the market
is fundamental and the postal technology sector needs to be engaged
with Royal Mail to support change, quality improvement, and value
added services etc for the benefit of mailers and Royal Mail.
(d) Independent Regulation—is essential
for the market, providing benefits to the mailers and service
providers working in an effective market.
(e) A strong Royal Mail—we support
a strong Royal Mail operating within a transparent regulatory
system in a market environment of fair competition.
30 September 2005
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