2017 review of royal mail regulation

In 2017, the UK's Office of Communications (Ofcom) published its review of the regulation of Royal Mail, which is the country's postal service. Here are some key findings and recommendations from the review:

Background

Royal Mail is a publicly-owned company that provides postal services in the UK. In 2013, the company was privatized, and it is now listed on the London Stock Exchange. However, the UK government retains a golden share, which gives it special powers to intervene in the company's affairs.

Review objectives

Ofcom's review aimed to assess whether Royal Mail's regulatory framework was still fit for purpose, given changes in the postal market and the company's new private ownership structure. The review focused on three main areas:

  1. Competition and market structure
  2. Regulation and governance
  3. Universal Service Obligation (USO)

Key findings

  1. Competition and market structure: Ofcom found that the postal market has become more competitive since Royal Mail's privatization. However, the company still has a dominant position, and its prices are higher than those of its competitors. Ofcom recommended that Royal Mail be required to provide more information about its pricing and cost structure to help regulators and competitors better understand its business.
  2. Regulation and governance: The review found that Royal Mail's governance structure is complex and lacks transparency. Ofcom recommended that the company's board be simplified and that more information be made available about its decision-making processes.
  3. Universal Service Obligation (USO): The USO requires Royal Mail to provide a universal postal service, including the delivery of mail and parcels to all parts of the UK. Ofcom found that the USO is still necessary, but it recommended that the company be given more flexibility to innovate and reduce costs while still meeting its USO obligations.

Recommendations

Based on its review, Ofcom made several recommendations to improve the regulation of Royal Mail:

  1. Price regulation: Ofcom recommended that Royal Mail's prices be regulated to ensure that they are reasonable and do not harm competition.
  2. Cost transparency: The regulator recommended that Royal Mail provide more information about its costs and pricing structure to help regulators and competitors better understand its business.
  3. Simplified governance: Ofcom recommended that Royal Mail's governance structure be simplified and that more information be made available about its decision-making processes.
  4. Flexibility for innovation: The regulator recommended that Royal Mail be given more flexibility to innovate and reduce costs while still meeting its USO obligations.
  5. Monitoring and enforcement: Ofcom recommended that it be given more powers to monitor and enforce Royal Mail's compliance with its regulatory obligations.

Conclusion

Ofcom's review of Royal Mail's regulation in 2017 aimed to ensure that the company's regulatory framework was still fit for purpose in a rapidly changing postal market. The regulator's recommendations aimed to promote competition, improve transparency and governance, and ensure that Royal Mail continues to provide a universal postal service while also being able to innovate and reduce costs.