Dear Mr Whittaker

Re: Freedom of Information Act - Request for Internal Review

I refer to your email dated 19 January 2010.

In response to your point about the level of detail which has been provided, I am able to provide a further description of the types of costs which fall under each heading (“Income” is self-explanatory). “Direct costs” includes staff and office costs, records management systems, promotional activity, investment in licensing, legal and financial services, and regulatory costs. “Customer Service” costs include the call centre which runs the “Postcode Enquiry Line” and handles other customer enquiries, and makes all manual updates to the database. “Service delivery and data supply” includes the costs of obtaining updated postal address information. “Systems” includes the costs of maintaining PAF®-related IT systems and its web application.

However, further detail of the way in which these figures break down is commercially sensitive information. For example, a breakdown of the AMU's revenue by customer, sector or product type would provide useful information to re-sellers of PAF® which could use the information to target areas from which the AMU currently derives greater revenue. Further, a large proportion of the AMU's costs relate to outsourced services. Having consulted the providers of these services, Royal Mail is satisfied that disclosure of these costs would be likely to prejudice their commercial interests. For example, this information would be of great use to those parties' competitors when the terms on which the services were provided are re-negotiated by the AMU. For this reason Royal Mail considers that the section 43 exemption - prejudice to commercial interests - is engaged.

As you are aware section 43 exemption is a qualified exemption and Royal Mail must consider the public interest test. In your letter you raised concerns about how Royal Mail had done this. Royal Mail does not accept that it has applied the public interest test incorrectly. Royal Mail acknowledges that there is a general public interest in transparency and accountability. However, this must be balanced against the public interest in the market for the data being allowed to operate in accordance with normal market forces, as set out in our letter dated 13 January 2010. Further, the revenues and costs associated with PAF® are subject to close scrutiny by both Royal Mail's regulator, Postcomm, and the PAF Advisory Board, which was set up specifically for this purpose, and includes representatives of other postal operators, solutions providers which make use of PAF®, public sector bodies and other mail users. The work of both of these bodies satisfy the public interest in ensuring that the AMU complies with the regulations which apply to this product.

Royal Mail acknowledges that its contractors will be aware of the existence of the FOIA and that information about their organisation may be made public pursuant to it. However, detail of the amounts paid by Royal Mail's AMU for their services would provide their competitors with crucial pricing information and thereby an unfair advantage in the market place. This in turn would make companies think twice about bidding for Royal Mail work in the future; fewer bidders would make it harder for Royal Mail to secure services at a competitive price.

Finally, the fact that the AMU's profits are included within Royal Mail's results, does not mean that those profits constitute “public money”: they are simply profits generated from commercial activity. While some of those profits are earned from contracts with public bodies, and members of the public at large do indeed pay for services which incorporate PAF®, Royal Mail does not consider that this means that the balance of the public interest is in favour of disclosure. As set out above, the public interest is well served by the regulatory activity carried out by Postcomm and the PAF Advisory Board.

In light of this, Royal Mail has concluded that the greater public interest lies in the detail you have requested being withheld, and this information is therefore exempt from disclosure pursuant to section 43(2) of the Freedom of Information Act.

Turning to your request for a description of the way in which IT costs are allocated to the AMU, this is based on the proportion of Royal Mail's total costs which the AMU's activity accounts for. In terms of the equipment and services used for PAF® maintenance activities, Royal Mail uses a system known as “Aplus” to record changes of address, which are then communicated via a system called Address Management Notification to the AMU's data management provider, to be entered into the PAF® database or referred back to the relevant delivery office.

In relation to the entities which supply data which is included in PAF®, these are as follows:

Local authorities in England, Wales and Northern Ireland

General Register Office for Scotland

Land & Property Services Northern Ireland

Land Registry

Environment Agency

Local health authorities

Ordnance Survey

Office of National Statistics

TV Licensing

BBC/Capita

SAGA

London Society of Chartered Accountants

Sainsburys PLC

Pharmacy 4U

Centrica

Customers

These entities supply some or all of the following from time to time: missing addresses; addresses to delete (following demolitions etc); changes to house names; house conversions into flats (or vice versa); changes, additions or deletions of business names; duplicate addresses; and spellings of road names (mostly land registry give us these). This supply of data is not regulated by legislation.

I trust that this answers your queries. However, if you are still not satisfied with our response you have a right to appeal to the Information Commissioner at:

Information Commissioner's Office

Wycliffe House

Water Lane

Wilmslow

Cheshire

SK9 5AF

Telephone: 01625 545 700

www.informationcommissioner.gov.uk

Cont…

08 February 2010