MSE News: Ofcom proposes further stamp price caps

hpsauce_2

I understand limiting letter stamp prices to a degree as poeple have no options, but limiting parcels is unfair as I don't see them limiting what all the other private parcel delivery companies charge, surely if RM reaise the price to much people will just go to the competition?

custardy

hpsauce wrote: »

I understand limiting letter stamp prices to a degree as poeple have no options, but limiting parcels is unfair as I don't see them limiting what all the other private parcel delivery companies charge, surely if RM reaise the price to much people will just go to the competition?

and if RM cut the prices. the competition would just use them under DSA.

Eco_Miser

Premier wrote: »

The official proposal document can be found on the Ofcom website

http://stakeholders.ofcom.org.uk/binaries/consultations/postal-service-letters-packets/summary/condoc.pdf



:eek: :eek: :eek:

I think I prefer the MSE explanation

The equations define how to calulate the average price, and the maximum allowed average price.
Left hand side of first equation is the average cost per item, calculated as the sum of the Price for each class of mail that year times the Volume for that class in the previous year over all classes, divided by the total Volume of relevant mail in the previous year.
Right hand side is the maximum average price calculated as the average cost as above, but using the base year's prices and last year's volumes times the inflation factor X for the year.

The inflation factor (second equation) is the change in Consumer Prices Index since the base-point as a ratio, times 1.53. (1+53%) (the 27 is a footnote marker: "27 or such other value as determined by Ofcom following our consultation process" and the news story suggests the factor has been reduced to 1.34 (34% above inflation))

veganline

Q1
Do you agree with our proposals for the structure & form of the safeguard cap?
If not, please explain why. [scroll down for Question#2 about 53% rise]
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No: the act is not fit for purpose; its parts cannot be reconciled with each other. There is more sorting-out and regulation to do before a price rise.

I'll start with a general answer or scroll down to the next line of dots for suggestions.

• This part of the act requires un-attainable transparency:
  http://www.bailii.org/cgi-bin/markup.cgi?doc=/uk/legis/num_act/2011/ukpga_20115_en_1.html#section-39
  
  
• This part requires un-achieved fairness on the providers:
  http://www.bailii.org/cgi-bin/markup.cgi?doc=/uk/legis/num_act/2011/ukpga_20115_en_1.html#section-36-5
  "prices take account of the costs of providing the service or part of a service"
  
  
• This part requires impossibly expensive standards of delivery, given that there is no longer a great monopoly GPO service to cross-subsidise them
  http://www.bailii.org/cgi-bin/markup.cgi?doc=/uk/legis/num_act/2011/ukpga_20115_en_1.html#section-31
  "one delivery of letters every Monday to Saturday-
  (a) to the home or premises of every individual or other person in the United Kingdom, or
  (b) to such identifiable points for the delivery of postal packets as OFCOM may approve."
  royalmail.com/customer-service/universal-service#47800780
  In practice a "fifteen minute rule" applies for one box, and no rule that I can find for two boxes together, such as a row of empty beach huts that get junk mail.

These different requirements defy rational solution.

If there is a universal 6-day letter post on a national tariff, where is the transparent price? Is the VAT tax break enough to pay for it? A Royal Mail spokesman said "That is a matter for Offcom" on a radio 4 interview, but how is Ofcom meant to know? Trial and error? Royal Mail's boss seems clear that there has always been cross-subsidy from delivery rounds in towns to rural deliveries, but the trial has ended and he is being forced into error; price hikes they would price Royal Mail out of the market rather than ending losses.
http://www.guardian.co.uk/uk/2012/apr/25/royal-mail-rivals-tough-conditions

In this first question about the "structure and form" of the price cap, I suggest that other economies need to be made first, including changes to the act or the regulations surrounding it.

• There is nothing in the act about bad letterboxes, so someone needs to right some better regulations about what's reasonable.
• There is nothing in the act to qualify "every individual" and their 6-day right to letter post at a national rate. In practice I think 15 minutes attempting delivery is too much.

I don't think the cost of subsidising bad letterboxes or distant ones is calculated clearly enough for Ofcom's own principal of "ensuring that our interventions are evidence-based, proportionate, consistent, accountable and transparent in both deliberation and outcome".


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Suggestions

I think any price cap above inflation is unfair while bad letterboxes are charged in exactly the same way as good ones; I think the "fifteen minute rule" is too lenient. I don't think the Universal Service was ever intended to subsidise badly designed letterboxes or suburban garden paths.

This is a picture of a letterbox which all of us subsidise.



By default, without anyone having ever written this down, deliveries are required to

• low.boxes
• small boxes, which force the bell to be rung more often
• stiff boxes
• boxes down parallel garden paths that are separated by a fence
• boxes without clear numbers on them, visible to Google Street View.

I suggest that the worst 10% of boxes get deliveries every other day.
And that standards of good letter boxes are written down - maybe with a 5cm height.
"It could easily have been done and has been suggested many times", according to someone called who signs himself "ex postie" on Moneysaving expert.

I suggest, if practical, an extra £5 on the council tax for households with the worst letterboxes, paying towards a fund for paying for improvements. Either way, this would allow Royal Mail and other roundsmen to cut costs rather than raise prices. I think this reduced obligation should be in place before a price rise above inflateion is considered. To recap: I disagree with the structure and form of the safeguard cap because any price because there is no safeguard of Royal Mail's ability to me more efficient. The two should go together.

I suggest that the franking discount should end before ordinary online postage prices rise. It's an unfair discount. I can't see how franked letters are cheaper for Royal Mail to sort than ones labelled with online postage. Online postage controls the format of the address, the checking of the postcode against Royal Mail's database, and in future might automate weight-checking. Packets and letters sent this way, I guess, are the easiest to automate at the sorting office: easier than franked mail.

For franked mail senders, their discount is eaten-up by requirements for old-fashioned machanical machines made by a duopoly of suppliers, and their various tied-in service deals.

I think Royal Mail should have to explain why they still give a discount for franking before they are allowed to raise prices for the rest of us, so I disagree with the structure of the cap for that reason.

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Q2:
Do you agree with our recommendation of up to 53% for the maximum increase permitted by the cap (in addition to inflation)?
If not, please explain why.
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No: I disagree with 53%. I think it allows Royal Mail to price itself out of the market while an unfair universal service obligation forces it to do so.

• The increase is unfair on Royal Mail. It will be forced to price itself out of the market to avoid making a loss in the short term.
• The increase is unfair on the taxpayer. In the long term they will have bigger losses as Royal Mail is priced out of the market
• The increase in use of cheap couriers will lead to extra congestion, pollution, and frustration as people wait-in for unreliable delivery times.

I can back-up by statement about Royal Mail pricing itself out of the market for my shoe and slipper packets weighing 0.5-2kg.
I keep temporary notes of parcel prices on http://www.veganline.com/parcel.htm and they may still be there as you read this.
£3.99 buys Yodel delivery from a Collectplus.co.uk shop to your door including VAT this April 2012.
£4.19 buys Hermes delivery from my door to yours including VAT.
£4.41 buys Royal Mail Standard Parcel Post from a sub-post office to your door, more quickly, reliably and with less pollution or risk of very low wages.
£5.21 buys the same at a proposed new price after April 30th. Reluctantly I want to switch.

After the proposed rise, I'm sure you'll agree that Collectplus/Yodel and Hermes will take a much larger share of the market as their likes have done for big customers for parcels over 2kg, and more recently for the rest of us via brokers like Interparcel. Moneysavingexpert's column on courier prices doesn't even bother to list the standard parcel prices from post office to door above 2kg; it suggests that there is no point using it and I guess few of us do. The very page on Moneysavingexpert that promotes this consultation also has a link to "use the internet to post parcels over 2kg" and another saying "failed delivery - fight back!" suggesting that cheap courier networks don't work well: a delivery round that did not have to subsidise the highlands of Scotland in its prices would be better for everyone.

Kite2010

I reckon in 15 years time, you will go to the post office and get given a selection of postal companies to pick from, some won't take your letters because they only will accept post to cities & large towns (limited to certain post codes), some will charge you extra on "distance" covered and some will just drop off the mail in a central point in rural areas.