Mr. Alex Chisholm:

I am delighted to be here and thank the committee for the invitation. It is very useful for us to have the opportunity to discuss our work here. We appeared before the communications committee in its previous form in January and some of the members here today were present then. On that day we were mainly discussing electronic communications services. It is a great opportunity today to talk about post. I very much agree with the statement the Chairman issued last night that good communications with stakeholders is very important for us both in informing and in delivering on our strategy.

I am accompanied by my fellow commissioner, Mr. Kevin O'Brien, Mr. Stephen Brogan, our postal regulatory manager and Mr. Seamas Plunkett, our postal operations manager. We have a short presentation which, I hope, has been made available to the members of the committee. We will speak to that and would be delighted to take questions seeking clarifications as we go along or to have a discussion at the end.

Our mandate comes directly from legislation. We are the national regulatory authority under European law and the independent regulator under Irish communications law. Last year major new legislation, the Postal Services Act, was passed. That gave us a considerable number of new responsibilities as well as extending existing responsibilities. I believe the Act contains 66 postal sections and while I do not propose to go through them here, it is complex, demanding and important legislation and I know a number of you will have been involved in debating it.

Under the Act we have two key statutory functions: to ensure the provision of a universal postal service that meets the reasonable needs of users; and to monitor and ensure compliance by postal service providers with obligations imposed by them in the provision of postal services. We also have three statutory objectives: to promote the development of the postal sector and in particular the availability of a universal postal service within, to and from the State at an affordable price for the benefit of all the users; to promote the interests of postal service users within the community; and, subject to the first overriding objective, to facilitate the development of competition and innovation in the market for postal service provision. That is in order to ensure that postal service users derive maximum benefit in terms of choice, price and quality. It is interesting to note that there is a clear hierarchy of objectives with the first objective taking priority over the other two.

There have been important changes to the overall scheme of regulation for post both from the Act passed here and from the third EU postal directive which liberalised all postal markets across Europe. Obviously we have had to respond to that and we published our strategy in the knowledge of the overall liberalisation that has occurred. We are also very conscious of the significant changes taking place in the Irish postal market in common with all postal markets around the world. These are changes of a structural kind with in particular a very substantial move towards electronic communication. However, these structural changes have been also greatly exacerbated by the cyclical recession and the financial crisis we are experiencing. Obviously that has had a very significant impact on letter volumes, which have fallen by approximately 30% in the past five years. Furthermore this trend appears to be continuing and there is a significant threat in particular from electronic substitution, e-mail, texts, social media and so on.

The flip side of that threat is the opportunity particularly in the area of parcels that comes from the rapid growth of the fulfilment of online transactions - Internet commerce. In addition there is continued growth in advertising mail - direct mail - where the volumes in Ireland are low by comparison with international standards.

It is worth taking stock and recognising that post is one form of communication. An interesting report, published in July by the international postal corporation, the Boston Consulting Group, looked at all the different types of communication that exist. Judged by units of communication, post in 2000 accounted for 10% of the total when measured along with e-mailing, phoning and texting. According to the study, by 2010 it was just 1% of the total of all communication. That is measured by volume and not value, but nevertheless it shows that in the modern world there are many forms of communication and that presents a particular challenge to the postal sector.

The next slide has a graph that shows a strong historical linkage between overall economic activity and the volume of post, so as the economy improved the post improved with it and the same was also true on the downside. However, that linkage in Ireland and in other countries appears to have been broken in recent years largely because of technological change and e-substitution, meaning that as the economy has recovered somewhat from the worst of the crisis in 2009 and we hope will continue to recover, the extent to which postal volumes recover with that is much less. That presents a great challenge for the postal sector and puts particular pressure obviously not only on revenues but also on the need to manage cost in line with that.

When considering why postal volumes do not recover in the same way, it is important to consider that 80% of the volume of post comes from business organisations, large public organisations and charities. Most of that is one way, which is from business to consumers. When people are under pressure economically they try to manage their costs as best they can and in some cases they do that by communicating with their customers through their websites, by e-mail or text, or through social media, including Facebook and so on. Once they have invested in doing business that way, it is less likely they will revert to using the post. That is one of the reasons when people have moved away from the post it is harder to get them back. That is a significant point in considering the challenges facing the postal sector.

The next slide contains an extract from our postal strategy, a copy of which we supplied to the committee in advance. I do not propose to speak through the entire detail of that strategy because I want to have time for a proper discussion today. I will simply highlight the mission ComReg has for the postal sector. Through effective and relevant regulation, our mission is to promote the development of the postal sector, to ensure the provision and availability of an affordable, high quality universal postal service; to promote the interests of postal service users; and to facilitate the development of competition and innovation in postal service provision. We also have a number of high-level goals and I will ask Mr. O'Brien to talk about them.