Indeed. It's a crappy business model and that's why they're going down the toilet.
Obviously there's a big element of hidden cross-subsidy here. But competitors can (and do) deliver local mail and bulk mail much more cheaply, so all the lucrative stuff that RM uses to subsidise the far-flung places is drying up.
One thing that I've never understood is why I should expect to be able to send something to the Hebrides for 34p. I mean, if I wanted to go there myself it would cost a packet, so why shouldn't sending a packet cost a packet too?
And as for the people who live in these places: Well, if you choose to live in the middle of nowhere there are certain downsides. You want the space and the peace and the clean air and the cheap property? Fine, but don't expect me to subsidise it for you. It's like why do people who live under the flight path complain about the aircraft noise? Didn't they work out why the house was so cheap?
The reason is
a) the volume of mail being sent..
Yes it may cost you say £50 in fuel cost, yes 34p is cheap and costly for one item, however lets say your sending 10,000 items from hub to hub thats £3,500, and 100,000 items is £34,000 etc, i cant remember the exact figures that where being handled at the main local hub (was over 6years since i worked there doing my electrical apprenticeship) but it was in the 6 figures on a daily basis.
but most importantly
b) the RM tried to put there prices up a few years ago, but where told by the regulators they could have the raise they wanted hence the price you now have.
The competors i.e TNT do sub from there other departements to compete, and for the most part use RM for most local post, although some areas have the TNT hubs which i think are growing. Think there business post is done via there parcel network but dont quote on that part.
Yes there is some poor management, and under investment by the Government, and yes i think it will be privatised in the not to distant future. In fact tbh i thought it would have happened along time ago, in the same there maintaince deparment (RoMEC) partly sold off about 6 years ago.
Having worked there i can understand the posties frastations, by striking in the short term it will not really effect as there competors still have to use them, we still a very very very long way from a 'totally nationwide competitive' market.