1 March 2011

Postcomm Consults on Its Analysis of Markets

Postcomm published on 1 March the second in a series of documents which set out initial views on the building blocks for a new and sustainable regulatory framework for 2012 and beyond.

They are launching a consultation on the next phase of their analysis of markets work, setting out their provisional conclusions on retail market definitions and whether Royal Mail has market power in these markets. While this analysis does not necessarily dictate particular regulatory outcomes, it is nevertheless an important input into decisions about future regulatory intervention. 

In this consultation they consider whether the market is wider than postal services and whether there are wider markets within post. They bring together a demand side analysis of competitive constraints in relation to the Letter and Large Letter retail markets with their November analysis of supply side factors. 

While mail is losing volume to non-postal alternatives, experiencing a structural decline as a result of changes in how we choose to communicate and undertake business transactions, Postcomm's analysis suggests that this is primarily due to reasons other than price. Digital alternatives offer advantages in terms of speed, ease of use and functionality and the roll out of high speed mobile, broadband and Wi-fi networks has made these alternatives increasingly widely available. However, these non-postal alternatives appear to exert only a limited competitive constraint on the price of retail mail services. 

Their further analysis suggests that mail also fulfils two purposes that are hard to replicate: physical delivery and the ability to contact named individuals.  They therefore provisionally conclude that for the time being, the retail markets for postal services are no wider than post. Postcomm recognise that the market is going through a transitional period and welcome views on these provisional conclusions. 

They also consider response, returns, redirections, redirections data and business collection services which do not fall within the markets already explored in their market study work so far, presenting their initial views on markets and market power for these services.

Please visit their website for further information.