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Monday, 26 March, 2001, 12:34 GMT 13:34 UK
Q&A: Letter delivery free-for-all

The Post Office has lost its monopoly over delivering letters, after more than 150 years. What does this mean for the organisation and the consumers it serves?

BBC News Online examines the implications.

What exactly has happened?

Until Monday, only the Post Office Group was allowed to deliver letters weighing less than a 350 grammes - in essence, those costing less than 1.

But there were fears that this privilege, as with any monopoly situation, was allowing the business to sit on its laurels, hindering the progress of innovations which might help customers get a better service.

So the government decided to open the market up to competition and allow letters to be delivered by other firms.

How will this affect me?

Initially, hardly at all.

While the letter delivery market has been liberalised, it will still be tightly regulated, by a watchdog called PostComm.

Firms wanting to deliver letters will have to win a licence from PostComm.

And so far PostComm has had only one applicant - Post Office Group.

Other potential candidates - and there are believed to be numerous international ventures sizing up the market - have been waiting to see exactly what guidelines they will have to adhere to.

What guidelines?

For any firm wishing to offer a national service, there is one important principle to be maintained - that of the universal service obligation.

This forces any potential national letter carrier to guarantee households throughout the UK the same service at the same price.

As such, it is not the kind of obligation to be shouldered lightly, even by firms such as DHL, UPS or Fedex, which have made such an impact in the parcel delivery sector.

New entrants to the letter market are more likely to focus on winning orders for one-off items, such as company mailshots, a thriving sector.

A thriving sector even in these days of e-mail?

Contrary to the warnings of doom-mongers in the mid-1990s, the coming of the worldwide web may have stimulated a growth in 'snail mail', rather than its demise.

Post chiefs have found that surfers often end up ordering an item, such as a catalogue, which will be sent by post (let alone making e-tail purchases which will be delivered by parcels firms).

At any rate, the number of letters sent grew 4.6% in the year to April 2000, and by 2.1% in the six months thereafter.

So the Post Office Group is sitting pretty?

The first thing to remember is that, from Monday, the Post Office Group will not be sitting anywhere except history books - the firm has actually changed its name to Consignia.

And Consignia is not quite the cash happy enterprise you might think.

In the year to April 2000, the then Post Office Group reported its first loss (of 264m) in 23 years, largely due to the cost of installing computer systems.

The business has in recent weeks been criticised for the number of first class letters delivered in less than an express manner.

And the company has the worst labour relations record in Britain - postal workers are reputed to be responsible for half the strikes to beset the UK economy.

The firm, which employs 200,000 people, has lost some 56,000 working days over the last 12 months due to industrial unrest or the hangover from October's Hatfield rail crash, which has caused delays to mail trains.

So Monday's move is yet another threat to my local post office?

First, post offices will still be called post offices - indeed, only in February the brand was found to be one of the strongest in the UK.

And as competition in national letter delivery - the main area served by over-the-counter stamp sales - looks ages away, post offices can expect to escape effects of the liberalisation for the foreseeable future.

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See also:

26 Mar 01 | Business
Postal competition the Swedish way
19 Mar 01 | Business
Post Office 'failing to deliver'
09 Jan 01 | Business
UK Post Office name change
22 Dec 00 | Business
Price cut 'threatens post offices'
22 Dec 00 | UK
Letter monopoly could end
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