Seanad Éireann - Volume 184 - 04 October, 2006

Postal Services.

  Mr. Ross: I raise this issue as a result of the appalling state of An Post and its delivery services. The Government should give an immediate commitment to the date for the liberalisation of postal services.

It has come to my attention that at least one company is staying out of the postal services market because of the situation with An Post and its lack of confidence in the ability of the Minister to provide a firm declaration that the postal services will be liberalised on 1 January 2009, as is expected but not confirmed. I ask the Minister of State to provide that confirmation. The company to which I refer, DX Ireland, is authorised by ComReg to provide postal services in Ireland. However, it will not enter the postal market until it is assured that it will be able to compete on a level playing field with An Post.

There are certain reasons companies proposing to enter the market feel that An Post has certain advantages with which it cannot compete. They are not operating on a level playing field and fair competition does not exist. An Post is a dinosaur — a monopoly which should be hewn down so that other players can gain entry to the market.

I will briefly outline the problems with which new entrants to the market are confronted. The first is that only 40% to 50% of the postal services are open to competition. This is particularly noticeable in the area of weight where An Post has a particular advantage over any entrants into the market.

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The second difficulty is that uniform pricing for An Post, which everybody believes exists, is a myth. The statutory instrument covering the activities of An Post — which was signed by the Minister — states that An Post can do deals with individual customers. In other words, it does not have to insist upon uniform pricing in all circumstances. For new entrants coming to the market this means a monopoly like An Post can not just compete with them on product, but can introduce and indulge itself in predatory pricing, undercutting the new competitor and thereby putting it out of business. It can behave like a vulture in a really monopolistic way. Below cost selling is a trick that it could get up to.

[1512]The third reason why new entrants, and DX Ireland in particular, will not come into the market unless a firm and convincing commitment is given, is that the High Court may, on the application of An Post, prohibit other entrants from this market. This should not be on an application from An Post — it should surely be done on the application of ComReg. This particular clause allows An Post to abuse a monopoly position. The other advantage it gives to such a large State monopoly with deep pockets is that it can delay the small company from going into business for so long that it will never be able to compete. Indeed it might even go beyond the 2009 deadline when it can compete if the Minister were to give us this commitment.

The other reason competition should be introduced is the utter incompetence of the Irish postal service. The latest figures from ComReg suggest that only 74% of mail is delivered the next day. This is a 2% decline on the previous quarter, and shows a consistent trend of decline in efficiency by An Post over the last four quarters. An Post is falling well short of its targets. In its last quarterly report, ComReg said it was disappointed that An Post was not meeting any targets.

My final point relates to the treatment of VAT, where An Post does not charge VAT but where, in certain circumstances, new entrants must charge it. This is utterly unfair. It is a really serious deterrent and must be ended by Government statutory instrument or order as soon as possible.

  Mr. Browne: I thank Senator Ross for raising this issue. Minister Dempsey regrets that he is unable to be in the House this evening to address the Senator on this matter.

The Government recognises the critical importance of having nationwide, reliable, high quality and efficient postal services. However, we must recognise that the challenges facing the postal sector now at the start of the 21st century are not the same challenges that faced us at the start of the 20th century, or even those we faced at the end of that century.

The economy and society at large also need strong and vibrant postal services in light of the many internationally traded sectors operating in the country. It also needs An Post to be competitive. There is universal agreement that change is required if the postal services of An Post are to adapt to the modern business environment and to continue to offer a top class nationwide delivery service to the customer into the future.

The Government also believes that liberalisation and the expected increase in competition ultimately will be good for both An Post and consumers. Like all businesses, if An Post is to prosper and grow, then it must adapt to the demands of its customers and place delivery of quality services to its customers as its primary focus and objective.

[1513]An Post operates within a regulatory framework as enshrined in EU law in European Directives 97/67/EC and 2002/39/EC. These directives set out the requirements for member states regarding the provision of high quality postal services. Both of these directives have been transposed into Irish law in Statutory Instrument 616 of 2002 European Communities (Postal Services) Regulations. Furthermore, the directives also provide for the liberalisation of the postal market.

Competition has arrived in the postal sector in Ireland and will intensify in the coming years. Currently, there are 29 firms with a postal service authorisation from ComReg operating in Ireland. Outbound international mail was fully liberalised on 1 January 2004. The parcels business is liberalised, with major international players operating in the Irish market. An Post now holds only 25% of the parcels market in this country. The weight limit applying to postal items falling within the reserved area and therefore not open to competition was reduced to 100g in 2003 with a price limit of three times the basic tariff for domestic and inbound international. The reserved area was further reduced to mail weighing 50g or less and two and a half times the basic tariff from 2006 for domestic and inbound international.

The current postal directive will expire on 31 December 2008 and it is expected that any new postal directive will be adopted by 2007. As provided for in the current postal directive, a study was recently undertaken by the EU on the impact on the universal service of the full accomplishment of a liberalised postal market. Based on the outcome of this study, the Commission will present a report to the European Parliament and Council by 31 December 2006 accompanied by a proposal confirming, if appropriate, the date of 2009 for the full liberalisation of the postal market or to determine alternative steps in light of the study’s conclusions.

The Government has no plans at this stage to bring forward the date of further liberalisation of the remaining postal services that are currently exempt from competition. Issues that will be important for Ireland in the context of this new postal directive will include the protection of the universal service in a liberalised market, ensuring that Irish citizens continue to receive a broad suite of postal services; the development of a postal market so that new competitively-priced products and services are available to customers and; the continued viability of An Post in the face of open competition along with the necessity to safeguard against big players coming in and cherry picking at the expense of the less commercially attractive parts of the country. Any proposed postal directive and changes to the universal service will, of course, be subject to Oireachtas scrutiny.

Irish consumers deserve a quality of service comparable to that received by consumers anywhere else in Europe. A quality postal service is [1514]important in the context of a modern competitive economy like Ireland’s. The way forward for our postal services is to ensure we have, on the one hand, adequate competition and, on the other, no diminution of the universal service. The development of further competition allied with a modernised and customer-focused An Post will provide the basis for the further development of the postal sector here.

  Mr. Ross: I would like to ask a supplementary question. By way of remark I would say that the Minister of State’s reply is not satisfactory. It does not answer any of the questions which I posed. This is, by its very nature, the form of this debate when the Minister comes here with a script. The script is preordained and it means he never addresses the issues raised by Senators on the Adjournment. It is something we should note.

Will the Minister of State confirm and guarantee that the Government will fully liberalise the postal services by 1 January 2009?

  Mr. Browne: As I have outlined, a review is underway at EU level and will go before the Parliament and the Council. Ireland will make its decisions when we see the outcome of that.

  Mr. Ross: I would like to compliment the Minister of State — when he read the speech that was written for the senior Minister at least he paid some attention to it.

  An Cathaoirleach: All Ministers do that.