Royal Mail parent group International Distribution Services called for “major reform” of the USO back in May 2023. Ofcom subsequently launched an in-depth project to look into its future shape, and reported on the possible reforms four months ago.

Today (30 January) Ofcom published its proposed changes to Royal Mail’s obligations.

Saturday Second Class deliveries scrapped

As had been widely trailed, Second Class letters would be delivered on alternate weekdays, and not on Saturdays.

“In our latest in-depth research, most postal users said they do not need six days a week delivery for the majority of letters,” Ofcom said.

First Class mail delivery would continue six days a week.

However, Ofcom also proposes to relax Royal Mail’s delivery targets, with the postal operator recently fined £10.5m for failing to meet the existing benchmarks.

The First Class next-day delivery target would be reduced from 93% to 90%, while Second Class mail would fall from 98.5% to 95% of mail to be delivered within three days.

This change would result in new ‘backstop targets’ Ofcom said, to ensure that, even if letters missed the primary target, consumers would still have confidence that they will “arrive in a reasonable period of time”.

“For First Class mail, 99.5% would have to be delivered within three days of posting. For Second Class mail 99.5% would have to be delivered within five days of posting,” Ofcom stated.

How future Second Class deliveries would work 

Bulk mail

Regarding bulk mailings such as direct mail – which makes up the majority of letters currently sent at 63% but falls outside the universal service, Ofcom is proposing changes to the access obligations on Royal Mail that mean it must deliver letters that are collected by other postal operators and complete the so-called ‘final mile’.

Ofcom stated: “Royal Mail is introducing a new access service to be delivered on alternate weekdays, which would aim to deliver letters within three weekdays (D+3) after collection from the sender.”

It proposes to regulate this new service in the same way as it currently regulates existing access services.

“We will continue to regulate the existing D+2 access service for priority bulk mail, at least while the market responds to reform,” Ofcom explained.

The proposals also include removing Saturday delivery from D+5 access services.

Royal Mail currently delivers around 6.6bn letters a year, a drastic decline compared with 20 years ago when that figure was 20bn. And since 2008 the number of addresses it must deliver to has increased by 14.3%, to 32m.

Reaction

In a statement, Royal Mail CEO Emma Gilthorpe said: “Ofcom has recognised the urgent need for change so that the future of the Universal Service can be protected for all.

“Our proposal was developed after speaking to thousands of people across the country and is designed to preserve what matters most for our customers – maintaining a one-price-goes-anywhere service to 32 million UK addresses and First Class deliveries six days a week.

She noted: “As Ofcom’s analysis shows, it is no longer financially sustainable to maintain a network built for 20 billion letters when we are now only delivering 6.7 billion. Reform is crucial to support a modern, sustainable, and reliable postal service for our customers, our company and our people.”

Communication Workers Union general secretary Dave Ward claimed that its members had been instrumental in defending the postal service.

“We recognise Royal Mail now operates in a permanently changed world of communications. The mix of letter decline and parcel growth does present a legitimate challenge to securing the future of the universal service obligation - something that remains a crucial part of our national infrastructure and a major contributor to the UK economy,” he said.

“However, it's also true that Royal Mail has been grossly mismanaged in recent years and the Board have deliberately manufactured circumstances to make a purely financial case for change. This includes abandoning customer quality, attacking postal workers terms and conditions and pursuing a pricing strategy designed to accelerate letter decline in favour of parcels.”

Ward said the role of regulator Ofcom “must also be exposed”.

“They have pursued a relentless drive to promote artificial competition in a declining market, allowing competitors to cherry pick profits through downstream access of Royal Mail’s network, thus inflating the cost of the last mile delivery.”

He said the trials that CWU members had agreed with Royal Mail were subject to a number of conditions.

“This moment is a real test for many groups. Ofcom need to step up and allow Royal Mail to build innovation into this proposal that would include bespoke and advanced letter delivery services (The NHS and card industry as examples),” Ward noted.

“Our members also want to see the Labour government take a real oversight and involvement to ensure that a key part of the UK infrastructure is protected. The prospective owners of Royal Mail – EP Group – have committed to restoring faith in the UK postal service – we will hold them to this.”

Consultation

Detailed documents regarding the Ofcom proposals and how to respond can be found here. Responses should be submitted before 5pm on 10 April.