Royal Mail is to be given the freedom to set its own prices for first-class stamps and other mail, the regulator has announced.
Ofcom said that, subject to the safeguards it is putting in place, Royal Mail will make decisions on the price of stamps, not the regulator.
Ofcom has put a cap on the price of second-class stamps for standard letters to protect vulnerable consumers.
Over the next seven years, this will ensure that Royal Mail can price second-class stamps no higher than 55p. The cap will be indexed in line with inflation.
The announcement is set to lead to higher stamp prices, currently 46p for first class and 36p for second class.
The average household spends around 50p per week on post, with low-income families typically spending less. Ofcom said it believes the safeguard cap will ensure that postal services remain affordable for such families and vulnerable consumers more generally.
Ofcom will continue to require Royal Mail to provide competitors with access to its delivery network. Royal Mail will have the freedom to set the price for access to its network but will be subject to rules regarding the margin between its wholesale and retail prices. Ofcom said this will help ensure that efficient competitors can compete effectively with Royal Mail.
An Ofcom statement said: "The central aim of the decisions announced today is to ensure that Royal Mail's universal service obligation (USO) is financially sustainable and provided efficiently. Without regulatory changes there is a risk that Royal Mail may not be able to continue to deliver the USO to the same standard as today."
Stuart McIntosh, Ofcom's group director of competition, said: "Ofcom's decisions are designed to safeguard the UK's postal service, ensuring it is sustainable, affordable and high quality, to the end of the decade and beyond. The measures ensure that Royal Mail's products remain affordable for vulnerable consumers and small businesses."
A Department for Business spokesman said: "We welcome today's announcement from the independent regulator, Ofcom, regarding the future regulatory framework for postal services. The Postal Services Act 2011 allows for the large-scale reform of regulation. This is an important part of securing the future of the universal service."