The mail services regulator's Competitive Market Review for 2005, which included a survey of 1,200 postal users, discovered a lack of awareness of the changes to the market, resulting in "inertia" when it came to switching firms.
The survey found that only a quarter of business customers could identify January 1 next year as the date when the market is fully opened up.
As well as lack of knowledge about switching, the report also says Royal Mail benefits from its "huge scale and VAT exemption".
Nigel Stapleton, Postcomm chairman, said: "Our job as regulator is to act as a surrogate for the consumer until we see effective competition. In the UK, we know the benefits of competition better than virtually any other country in the world."
He added that competition had been successful at forcing Royal Mail to be more responsive to customers and better able to embrace innovation.
Since the market first opened up to limited competition around 30 months ago, rivals to Royal Mail have won just 2% of the letters market. Royal Mail predicts it will still have a 90% share of the full market by 2010.
This latest document by Postcomm also reveals that the postal market is buoyant, with mail volumes up 1.7% over the last year and now totalling 20.3bn items.
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