Royal Mail could be allowed to end the delivery of second class letters on Saturdays, as part of reforms being considered by the regulator.
Ofcom is also investigating whether to allow second class deliveries to be made on alternate weekdays, which could help cut costs for Royal Mail.
The regulator has been reviewing the Universal Service Obligation (USO) under which Royal Mail is required by law to deliver letters six days a week and parcels five days a week.
The number of letters sent through the post has been falling steadily for years while parcels volumes have grown, leading to millions of pounds in losses at Royal Mail.
Royal Mail estimates that reforming second class services, plus changing its performance targets, could save the business £300m a year.
Lindsey Fussell, Ofcom’s group director for networks and communications, told the BBC’s Today programme the universal service “does need to change”.
“To be clear, no change is not really an option, otherwise it is going to be unsustainable and we’re all going to have to pay a lot more for it,” she said.
Royal Mail’s owner, International Distribution Services (IDS), said that “change cannot come soon enough”.
It had proposed axing second class mail on Saturdays as well alternate weekday deliveries – both of which options are now being examined by Ofcom.
In theory, it would mean second class deliveries being made on Monday, Wednesday and Friday one week then Tuesdays and Thursdays the following week.
IDS chief executive Martin Seidenberg said: “The universal service faces a very real and urgent financial sustainability challenge.”
But Tom MacInnes, interim policy director at Citizens Advice, said that Royal Mail had failed to meet its targets for half a decade, and the USO “clearly doesn’t protect consumers as it should”.
Reforms should not “just be a disguise for cuts that prioritise saving Royal Mail money over providing a good standard of service”, he added.
Ofcom said no final decision had been made and it continues to review the possible changes. It aims to publish a consultation early next year and make a decision in the summer.
Asked why the process was taking so long, Ms Fussell said the national debate had helped the regulator “narrow down to what we think is an option really worth exploring, but we now need to do some really detailed consumer research”.
Last year, Ofcom fined Royal Mail £5.6m for failing to meet its first and second class delivery targets.
And between April and the end of June, Royal Mail delivered less than 80% of first class post on time, missing key targets set by the communications watchdog.
Ms Fussell said: “We’re now looking at whether we can get the universal service back on an even keel in a way that meets people’s needs.”
“But this won’t be a free pass for Royal Mail – under any scenario, it must invest in its network, become more efficient and improve its service levels.”
The UK Greeting Card Association said it was concerned that the options outlined by Ofcom “takes us one step closer to the dismantling of a postal service that’s affordable and reliable”.
The association said that cards were the most frequent things that people post. “Any changes to the USO must prioritise the needs of small businesses and consumers – not Royal Mail profitability,” it said.
The number of letters being sent in the UK has fallen from a peak of 20 billion a year in 2004-05 to seven billion last year, Royal Mail said.
In contrast, parcel volumes have jumped, especially during the pandemic when lockdowns led millions to shop online.
Royal Mail is also facing increased competition from other parcel delivery companies.
It has hiked the price of stamps a number of times over the past couple of years. In March, the cost of both first class and second class stamps rose by 10p each, to £1.35 and 85p respectively.
In its last full financial year, Royal Mail’s losses stood at £348m.
IDS is in the process of being bought by Czech billionaire Daniel Kretinsky for £3.57bn.
Mr Kretinsky has committed in writing to honouring the universal service obligation, but only for five years.
His Royal Mail takeover will face a government probe, including into potential links with Russia.
The Communication Workers Union said that Ofcom’s “absolute priority” at the moment “should be restoring quality of service”, adding that the regulator was now “completely unsuitable” to oversee “one of the UK’s key pieces of infrastructure”.
“The takeover bid by Daniel Kretinsky coupled with the ongoing mismanagement of the company at the highest level means Royal Mail faces a serious threat to its very existence,” a union spokesperson said.
