Ms Patricia Cronin:

I thank the committee for the opportunity to discuss the Communications Regulation (Postal Services) (Amendment) Bill 2016. By way of background, I will explain the role of the Department of Communications, Climate Action and Environment in terms of An Post. The Department is responsible for the postal sector, including governance of An Post, to ensure the company is fully compliant with the code of practice for the governance of State bodies and the governance functions included in the statutory framework underpinning An Post. Following a Government decision earlier this year, responsibility for the post office network and associated matters transferred to my colleagues in the Department of Arts, Heritage, Regional, Rural and Gaeltacht Affairs. I should also point out that operational matters and the role of developing commercial strategies for the post office network are a matter for the board of management of An Post.

The mail business is undergoing a profound structural change both here and internationally. Electronic substitution has made significant inroads into the letters business while also providing opportunities for growth in parcels. The trend is particularly apparent for large volume postal customers such as banks and utility providers. The trend, which has been evident for some years now, accelerated in 2016 and has resulted in An Post facing serious financial difficulties. To give an example, mail volume decline, which was projected at 3.5% for 2016 at the start of the year, is now estimated to have reached 5.5% for the year as a whole, with this trend to continue and accelerate in 2017. This outcome represented a doubling of the year-on-year volume decline and if this rate continues, volume decline could reach 50% by 2019 compared with 2007. As the mail business generates approximately two thirds of An Post revenue, the scale of the decline is having a significant impact on company finances. The other issue that impacted last year was a 2.5% Labour Court pay recommendation which has added €8.5 million to payroll.

Members will recall that the challenges facing An Post were well set out by the chair of the company in his appearance before the committee in July 2016. In addition, at the request of the Minister, NewERA has conducted an in depth review of the company in recent months on behalf of the shareholding Ministers and has confirmed the seriousness of the situation facing the company. In light of the scale of the challenges facing the postal sector, the company has started a fundamental review with a view to identifying the strategic challenges and restructuring necessary to maintain the company on a sound financial footing. The Government fully supports this review and looks forward to the outcome which is expected in May 2017.

One of the main elements of the postal service is the daily delivery of post to every address in the State. The Minister recognises it is important that An Post has the capacity to continue to provide the service which is valued by communities in both urban and rural areas. In addition, the company requires some financial headroom to undertake and implement the findings of the strategic review. Recognising both imperatives, Government has agreed to bring forward legislation repealing the price cap mechanism in the 2011 Postal Services Act. This will enable An Post to increase the price of the stamp and generate much-needed additional revenue. As it stands, Ireland falls well below the European average in terms of stamp prices and it is expected that the proposed increases will bring the price in line with European norms. The Minister is cognisant of the impact such a measure might have on consumers and the SME sector. Therefore, the Bill also provides that the Commission for Communications Regulation will undertake a review of the consequences of the repeal of the price cap after a two-year period. ComReg will report to the Minister on its findings within six months after the commencement of the review and the Minister will lay the report prepared by ComReg before each House of the Oireachtas as soon as possible. In addition, provision is made to enable ComReg to undertake such consultation as it considers appropriate in carrying out the review. It is important to emphasise - the Minister is very keen to make this point - that despite the difficult financial situation, there was no threat to the mail deliver or the universal service obligation. An Post will continue to deliver post to every address every working day. This amended approach to pricing aims to ensure that An Post can continue to fulfil this obligation. Once again, I thank the committee for the opportunity to address it and am happy to take questions on the legislation.