Oireachtas Joint and Select Committees
Tuesday, 7 February 2017
Select Committee on Communications, Climate Action and Environment
Communications Regulation (Postal Services) Amendment Bill 2016: Committee Stage
I move amendment No. 1:
In page 3, between lines 10 and 11, to insert the following:"Amendment of section 28 of Communications Regulation (Postal Services) Act 2011
1.The Communications Regulation (Postal Services) Act 2011 is amended in section 28:(a) in subsection (1) by the substitution of “that postal service” for "a universal postal service" where it secondly occurs,
(b) in subsection (5) by the insertion of "may fail," after "a universal postal service provider" where it firstly occurs, and
(c) in subsection (5) by the substitution of "the Commission shall” for "the Commission may".".
This is a small word change which changes section 28 of the Communications Regulation (Postal Services) Act 2011. The existing section states "The tariffs for each postal service or part of a postal service provided by a universal postal service provider in the provision of a universal postal service shall comply with the following requirements:" I propose a change to the wording whereby "universal postal service shall comply with the following requirements" will be replaced with "that postal service shall comply with the following requirements". It is a technical amendment to ensure all the various postal services provided by An Post comply with European postal regulations so they are grounded in costs, transparent on pricing and non-discriminatory. While it is a small technical amendment, is to ensure the universal postal service and other services provided by An Post come under the same under the European standard of cost recovery, transparency and non-discrimination.
Amendment No. 2 proposes that section 28 be amended by the substitution of "that postal service provider" for "a universal postal service provider", and substituting section 28(5) for:
Where the Commission is of the opinion that a universal postal service provider is failing, may fail or has failed, to comply with any of the requirements specified in subsection (1), the Commission may give a direction to the universal postal service provider to ensure compliance with the requirement concerned.
The purpose of the proposed changes is to strengthen ComReg's powers to ensure the requirements of section 21 of the 2011 Act are met by An Post. Section 28(1) requires that postal tariffs meet certain standards, including that they be affordable, transparent, non-discriminatory and related to costs. ComReg's powers under section 28(5) need strengthening. The Bill proposes the repeal of the very considerable and specific powers under section 30 of the 2011 Act. This is a corollary to that. Section 30 established the price cap to control postal tariffs where no effective competition exists. While recognising the Minister of State's intention to issue a policy direction at this time, nevertheless it is felt strengthening the statutory position is necessary to ensure at least minimal controls are in place where there is a lack of effective competition.
Section 28(1) of the Communications Regulation (Postal Services) Act 2011 sets out the principles with which the universal postal service provider's tariffs must comply. These principles are enshrined in Article 12 of EU Directive 97/67/EC as amended by EU Directive 2008/6/EC. It provides the terms must be inter alia affordable and cost oriented. These directives were transposed into Irish law by the 2011 Act. Article 12 of the directive provides member states shall ensure the tariffs for each of the services forming part of the universal service comply with the tariff principles.
The requirements are clearly intended to apply only to the universal postal service and it was on this basis the 2011 Act was drafted. Extending these provisions beyond the universal service would represent a significant change in policy and would require detailed consideration and analysis as well as consultation with stakeholders. In any event, regulatory measures are generally introduced to address issues arising in a particular market and should only, in line with the principle of proportionality, be introduced when necessary. There has been no signal from the market on the need for regulatory measures in terms of tariffs outside of the universal postal service. In these circumstances I cannot accept the amendments proposed by Deputies Dooley and Ryan to section 28(1) of the 2011 Act.
I wish to reply to the Minister of State to tease out the point. He is right with regard to the original provisions of the Act on providing an exclusive universal postal service. In a sense, the thinking behind it was that competition would develop and people would have choices. In truth when looking at the business there is effectively no real competition in the widespread range of postal services in a market of Ireland's size and given the nature of the postal services. It is not just in the universal postal service provision this effective monopoly takes place. There are sections of the processing system that may be contracted out but it is not an entire alternative service system. It was on this basis the argument was made on applying closed tariff requirements, recognising the reality there is not really effective competition in the vast majority of the market in which An Post operates.
There is competition in the parcel sector. In any event, going down the road of regulatory changes would require detailed consideration and detailed consultation with stakeholders. This is, effectively, emergency legislation to get An Post over the impasse it is at, until such time as the various reports, including the McKinsey report, are implemented with regard to cost savings. This is to ensure An Post, as was said on Second Stage, gets over the present impasse and does not run out of money.
Section 28(5) is the subject of Deputy Dooley's amendment. I want to address the inclusion of the phrase "may fail".
While I understand the wish to see the powers of the regulator strengthened, widening their scope to include the determination that the universal service provider may fail is too subjective. It is difficult to see how ComReg could judge that a universal service provider may fail in its obligations to comply with the tariff principles. In considering this amendment, the Minister consulted ComReg, which agreed on this point.
The Minister is cognisant of the impact that this measure might have on consumers in the SME sector. In this regard, he has issued a policy direction to An Post instructing that price increases introduced following the repeal of the price cap mechanism must be subject to prior consultation with ComReg and have due regard to the tariff principles set out in section 28 of the 2011 Act as well as the interests of personal and SME users of the postal services.
Regarding the substitution of "shall" for "may", it is not appropriate to make the issuing of a direction obligatory. A direction referred to in section 28(5) is an enforcement mechanism that may be used by ComReg and detailed procedures around the issuing of such directions are provided for in section 51 of the 2011 Act. There may be some instances under section 28(5) in which a normal direction of this nature is not appropriate or necessary. Therefore, it is important that ComReg retain discretion. For these reasons, I am unable to accept the proposed amendments.
I am glad the Minister of State reverted to this matter, as we did not have time to discuss it. Deputy Lawless may have a similar point to the one that I am about to make. Our purpose and wordings are similar. We have been speaking to similar people with an interest in the area.
The point about not removing completely the capability of ComReg to have oversight is a valid one. In some ways, the Minister recognises this. If I heard the Minister of State correctly, the Minister has issued a direction that An Post, in any removal of the price cap and setting of new prices, would need ComReg to run the rule over its plans. What the Minister intends to do is similar to the intention of the amendment. The words are "shall" or "may", but the key point is that ComReg would maintain its oversight. That is valid.
Our regulatory system is there for good purposes. Even if An Post needed to raise revenue quickly in an emergency, it would be unfortunate if ComReg did not avail of its oversight role. ComReg is well placed to assess the company and provide regulatory oversight. The amendment provides for that. In some ways, the Minister of State is saying that the Minister will do this but will not, or is reluctant to, accept the amendment, which would provide for the doing of it.
Similarly, I will not press the amendment, but I will return to it on Report Stage. Perhaps the wording might be amended. I take the point about "may fail" being subjective. That is always difficult in law to enforce.
However, the point of the amendment holds. As Deputy Ryan pointed out, the Minister of State has expressed the intention to issue a policy direction, but a statutory footing is much stronger than a policy direction. That is the intention behind introducing the amendment. We will return to the matter on Report Stage. That is a sensible basis on which to proceed.
I am disappointed at that. It was comprehensive and aimed at speeding up the process for price increases. We have reached this cliff because management at An Post has not actively monitored this situation and managed it properly in the past decade or longer. That, and the reduction in mail volumes, has brought us to this point. To use the Minister of State's term, we are in an emergency situation. Sinn Féin recognises that and it is the reason for our amendment. I am disappointed that my amendment, which would have allowed for some oversight to be retained and accelerated matters, is not being included. Being able to handle matters quickly would help An Post. I will revert on Report Stage with an amendment on these themes.
Our intentions may have been misconstrued by some who may have a different agenda that has nothing to do with the future of An Post. I am not interested in that. Will the Minister of State clarify what could be done on Report Stage were I to submit an amendment on the basis that this one has fallen?
I also seek clarification from the departmental officials on another question that may have already been asked, but I was not 100% clear on what the answer was because we did not get a clear answer. If a price increase is sought currently, ComReg does its work. We all agree that this process takes too long and can inhibit a company from acting quickly enough to deal with what is happening in the real world. After ComReg has undertaken public consultant and so on, must the Minister still sign off on the matter?
I will table an amendment on speedier reviews on Report Stage, so I wish to clarify whether I can do that.
ComReg still has a role under section 28(5). It is simply not appropriate to ask it to adjudge that An Post may fail. Deputy Stanley's amendments were ruled out of order. As outlined on Second Stage, the repeal of the price cap mechanism has been identified as the most viable option for supporting An Post in the short term while the restructuring plan arising from the McKinsey review is implemented. This decision was not taken lightly by the Government. An in-depth review of the company took place in recent months on behalf of the shareholding Minister. It confirmed the seriousness of the situation facing An Post.
While I understand where Deputy Stanley is coming from, the fundamental problem is the profound structural change in the mail business in Ireland and internationally. Electronic substitution has had a significant impact on that business. This is particularly apparent in respect of large volume postal customers such as banks and utility providers. This business is becoming increasingly unstable, with volumes fluctuating on a month-to-month basis, making it difficult for An Post to plan. In such circumstances, it is impossible to predict with certainty what the future holds in terms of volume decline. As this information is central to determining the cap for pricing, current market conditions make it difficult to implement an effective and appropriate price cap mechanism. In drafting the Bill, the Minister has considered whether an alternative regulatory structure around pricing could be provided for but, given the urgent need to address the challenges facing An Post, this was not possible in the time available.
The Minister is cognisant of the impact that this measure might have on consumers in the SME sector. For this reason, the Bill provides that ComReg will undertake a review of the repeal of the price cap mechanism after a two-year period. He has issued a policy direction to An Post instructing that price increases introduced following the repeal must be subjected to prior consultation with ComReg and have due regard to the tariff principles set out in section 28 of the 2011 Act and the interests of personal and SME users of postal services. This will ensure that An Post does not abuse its position. Following the repeal, the Minister will continue to monitor closely the activities of An Post in terms of stamp prices, but he does not have the final say.
The Bill's purpose is to repeal the price cap, but Deputy Stanley's amendment was to reintroduce it in another way. There was no time to reintroduce regulation. If we wanted to do that, it would require consultation on the matters in question, but there is no time to do so at the moment.
I move amendment No. 4:
In page 3, between lines 28 and 29, to insert the following:" "(bc) to undertake a review of terminal dues with particular regard to the requirements of section 29(1) of the Communications Regulation (Postal Services) Act 2011 and to report to the Minister within 6 months of the commencement of this Act. Further such reviews shall be undertaken at least every two years, thereafter,".".
In the Bill, which is blessedly short in its construction, we are promising a variety of different reviews. The intent of the amendment is to look for a review of the terminal dues with regard to international postal services. If mail comes from the US or elsewhere, the foreign provider-----
This is an area where we believe it is possible for An Post to recover significant revenue it is losing on current arrangements. This review might be very beneficial for the company in terms of raising revenue.
The purpose of amendment No. 5 provides that there will be a review of terminal dues with particular regard to section 29(1) of the Communications Regulation (Postal Services) Act 2011. The amendment would require ComReg to undertake a review of the charges on An Post for international inbound mail into Ireland. Section 29 provides that terminal dues shall be transparent and non-discriminatory and related to costs. It is felt that this requirement is not being met adequately at present. ComReg reported that €67 million has been lost by An Post on this service over the past five years and has proposed action to address this matter. Addressing this would greatly improve the financial health of An Post and have a favourable impact on its ability to deliver the universal service. There are multiple competitors in this space in terms of how inbound international mail can arrive into Ireland, many of which can bypass the postal service. A review of this would be welcome, would make sense and might put An Post in a more favourable competitive position.
ComReg is already active in this area. As recently as June 2016, ComReg published a review and assessment of An Post's terminal dues agreements. Terminal dues are rates paid for delivery of international inbound mail items. This review, which was conducted with the assistance of Frontier Economics, was a useful exercise as terminal dues do have an impact on An Post. I should advise that the Minister was open to the inclusion of a provision along the lines of that proposed by Deputies Dooley and Ryan. In this regard, officials have been liaising with the Office of the Parliamentary Counsel. However, the Office of the Attorney General has advised that an amendment of this nature would create legal uncertainty and likely impact on ComReg's existing powers under the 2002 Act. It could also leave previous actions undertaken by ComReg on terminal dues open to challenge. Having regard to the Attorney General's advice, I cannot accept the amendments proposed. However, the Minister will raise this matter separately with ComReg.
That is very useful and will help us to develop our argument on Report Stage. If the Minister could inform us in advance of Report Stage about ComReg's views on this matter, it would help the Report Stage debate.
What is the nature of the legal advice from the Attorney General? What is the problem she flagged? As I understand it, from discussions on Second Stage of the Bill, the rate for international postage for a standard letter is €0.43. I know you could say that half of the job is done when it gets here. Is the figure of €0.43 correct? What is the legal problem in terms of us as a State making a decision about altering that up or down? Why is there a legal problem?
It is not the issue of the rates. The Attorney General has advised that it concerns the likely impact on ComReg's existing powers under the 2002 Act and that it could leave previous actions undertaken by ComReg on terminal dues open to challenge.