“The world has changed, we’re sending a third of the letters we were 20 years ago,” said Natalie Black, Ofcom’s group director for networks and communications.
“We need to reform the postal service to protect its future and ensure it delivers for the whole of the UK.”
The number of letters Royal Mail delivers has fallen from a peak of 20 billion in 2004-05 to 6.6 billion last year.
However, the price of stamps have continued to rise. Since 2022, Royal Mail has hiked the cost of a first class stamp five times from 85p to £1.65.
It has also increased the cost of a second class stamp over the same period from 66p to 85p.
Ofcom said making changes to second class deliveries could save the loss-making Royal Mail between £250m and £425m.
“This could enable it to improve reliability and redeploy existing resources to growth areas such as parcels,” it said.
Royal Mail’s parent company is being sold to a business controlled by Czech billionaire Daniel Kretinsky in a deal worth £3.6bn, after the Labour government approved the deal last year.
The government will maintain a “golden share” which means Mr Kretinsky’s business will have to get approval for any changes to Royal Mail’s ownership, the location of its headquarters and its tax residency.
Royal Mail must also adhere to the USO, which Mr Kretinsky has pledged he will do for “as long as I am alive”.
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