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Last Updated: Wednesday, 7 December 2005, 03:08 GMT
Q&A: Royal Mail competition
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Will competition drive the Royal Mail out of business?
The Royal Mail is set to lose its monopoly on the UK's postal service, opening the market up to rival companies.

But what will the changes mean for the postal business and for postal customers?

What does Postcomm's decision mean?

Essentially stripping the Royal Mail of its monopoly means that the market will become more competitive.

From 1 January 2006, any licensed operator will be able to deliver mail to business and residential customers.

Competition is nothing new.

Currently 30% of the 4.5bn market is open to rivals - but only to companies handling bulk mail in batches of 4,000 letters or more.

Royal Mail has welcomed the move, claiming it is "ready for a fair fight", while regulator Postcomm claims it will "improve the state of the nation's postal service" and improve reliability.

However, unions have warned the "ill-advised" move will leave the Post Office in jeopardy.

Will customers notice any difference?

Postcomm and commentators do expect the postal service to improve in the face of increased competition.

"This isn't an asteroid coming out of the blue to smash the Royal Mail," Ian Senior, of postal service consultants Triangle Management, said.

"Whatever is going to happen, in the next five years, you're still going to see Royal Mail as the dominant supplier."

Meanwhile, Postcomm director of competition and regulation Richard Moriarty said the move will increase reliability, lead to a wider range of services and "ultimately improve the state of the nation's postal service".

The average consumer should however see little change, as the Royal Mail is still under an obligation to provide a universal postal service. The price of stamps will still be regulated by Postcomm.

The lucrative business end of the market, which accounts for 85% of Royal Mail's business, is likely to see the most change.

Rival companies could choose to set up their own local delivery services or work in partnership with Royal Mail to use its delivery network.

So we won't be seeing rival pillar boxes on street corners?

Maybe in the future, but certainly not in January.

Only two countries have so far liberalised their postal markets - New Zealand five years ago and Sweden 12 years ago.

As Ian Senior explains, both still have their original postal services which supply at least 90% of the mail.

And while rival firms could set up entirely new postal networks, such a costly move is highly unlikely in the first few years of deregulation.

What companies could muscle in on the market?

Holland's TPG, owner of TNT Mail, has expressed an interest as has Germany's Deutsche Post - whose courier arm DHL currently operates in the UK.

However, postal union CWU has expressed fears that the most lucrative parts of Royal Mail's market could be cherry-picked.

For example, UK Mail already holds licences to collect from business customers in large conurbations like London, Birmingham and Manchester.

Meanwhile, in opening up the market the UK will become the first European country after Sweden to eliminate its postal monopoly.

However, while that means La Poste from France or Deutsche Post will be able to operate in the UK - Royal Mail will be unable to operate in their markets.

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