What is Royal Mail’s Universal Service Obligation and why is it important?

What is Royal Mail’s Universal Service Obligation and why is it important?

The Universal Service Obligation placed on Royal Mail is one of the most important pieces of legislation in the UK.

The obligation means that it recognises Royal Mail as the designated provider of the Universal Postal Service in the UK and it means that they must provide a six-day a week, one price goes anywhere postal service to 30 million UK addresses. This obligation is overseen and monitored by Ofcom.

What are the Minimum Universal Service requirements?

The Postal Services Act 2011 sets out the minimum requirements the Universal Service Provider must deliver, in this case, Royal Mail. These statutory obligations can only be altered with the consent of the UK Parliament. The minimum requirements for all postal items not subject to exemption (including those whose weight does not exceed 20 kilograms or whose dimensions fall outside the minimum and maximum dimensions) are as follows:

  1. Delivery of letters or parcels (including those posted outside the UK)
  • At least one delivery of letters every Monday to Saturday to every address in the UK.
  • At least one delivery of other parcels every Monday to Friday to every address in the UK.
  1. Collection of letters or parcels (including those for onward transmission outside the UK)
  • At least one collection of letters every Monday to Saturday from every access point in the UK used for receiving letters and parcels for onward transmission
  • At least one collection of other parcels every Monday to Friday from every access point in the UK used for that purpose.
  1. Service at affordable prices at a uniform public tariff
  • Postal services – (including conveying, receiving, collecting, sorting, and delivering) at an affordable, uniform public tariff across the UK; and to places outside the UK.
  1. A registered items service at a uniform UK-wide, affordable public tariff.
  2. An insured items service at a uniform UK-wide affordable public tariff.
  3. A free-of-charge postal service to blind or partially sighted people.
  4. Free carriage of legislative petitions and addresses.
  5. Redirection, Post restante and Retention services

For the purposes of this blog, the key element we focus on is point 3, the provision of an affordable service at a uniform rate. This means that for a single price you can send a letter or parcel anywhere around the UK, with no premium added for distance.

Where did the obligation start?

The obligation started with the introduction of The Uniform Penny Post in 1840, an event engineered by Roland Hill (later ennobled as Sir Roland Hill) and marked by the introduction of the world’s first postage stamp, the Penny Black. It was part of Britain’s official postal service, which to this point had been fragmented and inconsistent. The reforms were meant to eradicate abuse and corruption in a new government-run initiative. With these changes, it became more accessible for British citizens because now you had to pay only one penny per letter delivered anywhere within Great Britain or Ireland no matter how far apart they are from each other. This single act is credited with doing more for the improvement of literacy across the UK than anything else.

How does the obligation work in practice?

As Royal Mail has an extensive network of distribution and sorting offices around the country and a reliable and well-organised logistics team, then mail can travel, quite literally, from Lands End to John O’Groats in a single day.

In practice this means that two letters, posted the same day, one with a first class stamp and the other with a second class stamp, can often travel in the same mailbag from the post box to the sorting office, then from the sorting office to the distribution hub and from there onto the destination sorting office, local PO and eventually the address. And of course, this means that despite a big price difference between first class at 85p and second class at 66p*, the reality is that they receive pretty much the same treatment.

How is the Universal Service Obligation measured?

Royal Mail is required to publish quarterly Quality of Service reports against delivery targets set and reviewed by the postal industry regulator Ofcom. These targets are to ensure that Royal Mail continues to meet the obligations and are broken into two specific targets:

First Class mail – a minimum of 93 percent delivered the next working day

Second Class mail – a minimum of 98.5 percent delivered within three working days.

Royal Mail naturally, therefore, has demanding quality of service standards that they must meet to deliver the Universal Service obligation of collecting and delivering mail six days a week at a uniform price across the UK. Their performance is independently measured by a market research agency, Kantar, with the methodology employed and the results obtained separately verified by auditors appointed by the regulator Ofcom.

Is there a future for second class stamps?

At the moment, the answer appears to be yes. It all boils down to the interpretation of point three again, “service at affordable prices at a uniform public tariff” and how this might be seen. Looking back to Rowland Hill’s original reform, it was essential to make letter writing and sending inexpensive as it helped commerce and literacy.

Today, much of the traditional letter writing has been replaced by email, and whilst this is quick and convenient, and in many cases free, it has limitations. The obligation still, however, means that there needs to be a single ‘affordable’ option, and whilst a lower value option is on the menu, they can continue to argue that relative to the higher option, it is affordable. This strange logic may well apply for some time to come and ensure the longevity of a second class stamp service.

 

*these prices are correct as of September 2021

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