REGULATOR Ofcom has given assurance that the universal postal service is 'financially sustainable' following fears that competition was making the service unviable in rural areas.

Ofcom began a review of Royal Mail regulation last summer but put the ‘Universal Service Obligation’ (USO) outside the scope of the review, which at the time was criticised by the Countryside Alliance.

The Countryside Alliance was concerned about the impact that added competition in the postal delivery market could have on rural postal services and the knock-on effect for rural communities and businesses.

The postal services market is fundamentally influenced and shaped by the USO and has been under significant financial pressure after years of falling letter volumes.

It was making a loss of more than £100m in 2011 and, coupled with increased competition in the end to end delivery service, the USO was under threat.

Sarah Lee, head of policy at the Countryside Alliance said: “Postal services and the USO are essential to those living and working in the countryside, particularly for individuals and businesses that rely heavily on the postal service.

"Digital communications provide alternative ways for people to exchange information, but many still rely on the post, as it is seen as reliable and secure.

"The USO has played a vital role in e-commerce to date, so it is vital that the USO remains financially sustainable and the full potential of e-commerce growth can be achieved not only in rural areas but the whole of the UK.

"Ofcom must ensure that we have a fair postal market which can respond to the changing market and delivers to all communities.”

Mrs Lee said that without the USO it is likely that the market would not deliver affordable and accessible parcel drop-off and delivery services throughout the whole of the UK. Instead, many parcel operators would focus their energies on the cheaper-to-serve urban and suburban centres.

"Rural consumers and businesses would be likely to pay more than urban customers and some retailers and delivery companies may choose not to deliver to certain parts of the country," she added.

"For example, Amazon Logistics choose only to operate in urban and suburban areas, putting rural businesses at a disadvantage.”