Postcomm allows Royal Mail to price post by size as well as weight

Royal Mail’s new Pricing in Proportion (PiP) price structure will be the greatest change in postal pricing since the introduction of the Penny Black. It will come into operation, at the earliest, in August 2006. Its introduction will mean some post will cost less to send than it does now but light-weight items that are also large or bulky will cost more.

Today’s announcement follows two years of extensive consultation by Postcomm and reflects substantially revised proposals from Royal Mail. In its most recent consultation, Postcomm proposed to allow Royal Mail to introduce the new charges from next April. After analysis of responses, this has been put back to August next year to allow postal users at least 12 months to prepare.

“This is a major change to the way people pay for their post,” said Nigel Stapleton, chairman of Postcomm. “It will promote the development of a successful and growing postal market by allowing Royal Mail to bring its prices much more closely into line with its costs. This is particularly important given the full liberalisation of the postal market in January.”

The case Royal Mail has made to Postcomm is that light-weight mail that is large or bulky costs more to transport, sort, handle and deliver than regular size items. Up to now the company has been under-charging for some items and over-charging for others. Under PiP some prices will now go down while others go up. Postcomm has agreed to this on the basis that Royal Mail will not make any extra revenue from the revised pricing structure.

Royal Mail is to mount a substantial publicity campaign to explain the changes. Postwatch, the consumer body and Postcomm will be monitoring the implementation closely to safeguard the interest of customers.

Pricing in Proportion will apply to most of Royal Mail’s inland services, including first and second class post. However, because the vast majority of post is flat and weighs less than 60 grams, most people will find the price of posting a letter will be the same. Research indicates that the prices of around 70% of items posted each day will be unchanged. Of the remaining 30%, roughly half will cost less and half will cost more. A table of indicative revised prices is in

NOTES FOR EDITORS

From next year it will cost more to send lightweight but large or bulky mail such as rolls of photographic film, very large greetings cards and video tapes, through Royal Mail, but some heavier items -- catalogues and books for example -- will cost less. Any price rises must be balanced by reductions elsewhere, to make the price restructuring revenue-neutral overall.

Royal Mail has agreed to mitigate some of the effect of price rises for business customers who spend more than £100,000 a year on post and find the changes add 50% or more to their postage bill.

Pricing in Proportion defines the maximum size of each mail format as follows:

A Letter is a mail item that would fit into an envelope no larger than 165mm x 240mm (approx 6½in x 9½in) and not more than 5mm (approx. 3/16 in) thick. This includes most A5 sized items.

A Large Letter is a mail item that would fit into an envelope no larger than 250mm x 353mm (approx 9¾in x 14 in) and not more than 25 mm (approx. 1 in) thick. This includes most A4 sized items. (For one of Royal Mail’s business products – Response Services – the thickness limit is 50mm).

A Packet is mail that either measures more than 250mm x 353mm, is thicker than 25mm or weighs more than 750g.

Post Offices will have templates so that customers can measure their mail before posting.Winners

At the moment a stamped first class letter weighing up to 60 grams costs 30p and one up to 100 grams needs a 46p stamp. Under PiP, Royal Mail will extend the first weight limit for letters to 100g. Providing it conforms to the maximum size and thickness limits, a first class 100g letter will need only a 30p stamp. The first-class stamp price of a large letter weighing 750g and less than 25mm thick drops from £2.71 to £1.23

Losers

A large greetings card weighing less than 60 grams, which at present needs a 30p stamp to send first class, would cost 42p, and first class stamp postage on a 100 gram packet more than 25mm thick would rise from 46p to 94p.

The table gives a comparison of present stamp prices with Royal Mail’s proposed PIP prices*

Format	Maximum size	Maximum thickness	Weight	First class current stamp prices	PIP first class	Second class current stamp prices	PIP second class
Letter	240 x 165mm	5mm	0 -100g	30 – 46p	30p	21 – 35p	21p
Large Letter	353 x 250mm	25mm	0 -100g 101-250g 251-500g 501-750g	30 – 46p 64 – 94p 107 – 178p 215 – 271p	42p 61p 85p 123p	21 – 35p 47 – 71p 83 – 148p 175- 212p	35p 53p 72p 105p
Packet	All items larger than large letters	over 25mm	0 -100g 101-250g 251-500g 501-750g 751-1000g	30 – 46p 64 – 94p 107 – 178p 215 – 271p 290 – 364p	94p 119p 159p 206p 253p	21 – 35p 47 – 71p 83 – 148p 175- 212p	80p 104p 132p 166p 199p

*Prices quoted are for 2005/06. There may be changes as a result of Postcomm’s next price control due to

operate from April next year. Metered and PPI customers pay slightly less for first class.

The decision document: Royal Mail’s Proposals for Pricing in Proportion, is published on

Postcomm's website www.psc.gov.uk. Printed copies will shortly be available from Postcomm

at 6 Hercules Road, London SE1 7DB.

More information

Chris Webb T 020 7593 2114 M 07779 635881 chris.webb@psc.gov.uk.

Suzanne Murray T 020 7593 2164 M 07966 059983 suzanne.murray@psc.gov.uk

Crispin Slee T 020 7255 5404 M 07788 437541 crispin.slee@uk.grayling.com

Postcomm and the mail market

Postcomm regulates Royal Mail’s prices and service quality in the letters market and licences

postal operators who handle items that cost less than £1 to post and weigh less than 350 grams.

In the UK postal market

Over 80 million items are delivered each day six days a week to more than 27 million

addresses

Around 30% of the market, by value, for bulk mail, is open to competition

Postcomm has licensed 10 companies to compete with Royal Mail

Royal Mail is by far the biggest operator with more than 95% of the market

Royal Mail made a profit from operations of £452 million on its regulated activities last year

(excluding exceptionals and pension deficit payments)