Leo Varadkar (Dublin West, Fine Gael)

I will probably not use all of that but the Ceann Comhairle might advise when I have a minute left in the slot. I thank the Minister for his speech. The Communications Regulation (Postal Services) Bill's main purpose is to transpose the third postal directive into Irish law by allowing private sector postal service providers to process or deliver mail weighing less than 50 grams. The Minister is correct to say the directive is already in force and has direct effect in that regard.

The Bill seeks to maintain a universal postal service involving the delivery of mail to all households in the State on every working day and designates An Post as the universal postal service provider for seven years. It gives the power to ComReg to both designate the universal postal service provider after that and also the power to review the position even within the seven-year timeframe. It designates ComReg as the regulator, defining its functions, responsibilities and powers and it imposes a five-year cap on the price of a stamp, which is welcome. It provides a compensation fund for the universal postal service provider and provides for An Post to negotiate with private providers for downstream access, with ComReg acting as an arbitrator and, in certain circumstances, with the power to issue directions. It also provides for a complaints resolution system, enables the Minister to establish, maintain and operate a national postcode system, further protects the inviolability of mail subject to certain exceptions and allows the Minister for Finance to designate an alternative postal service provider for the delivery of election mail. I note that, for the time being, Members will be able to send election mail to every individual as opposed to every household.

While the Fine Gael Party broadly welcomes the Bill, we have some concerns about it and will propose several amendments on Committee Stage. In framing this legislation we must balance the benefits of competition, of which there are many, with the risks to An Post which may arise from cherry-picking or other activities that may undermine the company's financial basis. Well managed competition will provide choice for consumers, keep prices down and incentivise and encourage An Post to innovate, continue to become more efficient and improve and diversify the services it provides. Badly managed competition and poor regulation could give rise to cherry-picking and a race to the bottom as regards the terms and conditions of employees in the broader sector. It could also undermine the universal service obligation which guarantees every home and business a postal delivery service for five days each week.

A further risk arising from badly managed competition is that it may turn a profitable State company, An Post, into a loss-making entity in need of support, either from the State or private sector through a compensation fund. Given that An Post has never required a bailout or hand-out from the State or taxpayer, the Oireachtas would not do a good job if it were to enact legislation that resulted in the company becoming unprofitable and, notwithstanding any transfers from private sector operators, end up requiring State cash to continue to perform its functions. We must be careful to ensure this legislation does not give rise to such an eventuality. The Fine Gael Party wants the development of a competitively priced, high quality postal industry providing services to homes and businesses in all areas on an equal basis.

To address the specifics of the Bill, section 17 designates An Post as universal postal services provider for seven years and allows ComReg to review this designation at any time, including during the seven year period. ComReg is also given power to designate a new universal postal service provider for seven years without reference to the Minister. Moreover, the Minister is precluded from vetoing any such decision if he or she is unhappy with it. The section also allows ComReg to decide seven years from now that a universal service obligation is no longer necessary. The Minister is prevented from overruling any such decision. It is possible, therefore, than in three or four years from now, ComReg may decide to designate Royal Mail or another company as the universal postal service provider. While this scenario may be an unlikely one, it is possible under the legislation.

I am concerned by the provision which allows ComReg, without the support of the Minister or the assent of the Oireachtas, to decide that the universal postal service obligation is no longer necessary. If ComReg were to make such a decision, An Post would in all likelihood decide that daily deliveries to rural areas were no longer viable and start to curtail weekday services. If such a scenario were to arise, I am concerned that the Minister of the day will be powerless to act and will wash his or her hands of the matter by arguing that ComReg had taken the initial decision and nothing could be done about it. This section must be changed and the seven year period increased to 20 years to give An Post more certainty. For example, 20 years would provide certainty that capital investment will be repaid, which would not be the case if the period were seven years.

I am also concerned about the provision giving ComReg the power to review An Post's position as the universal service provider within or after the seven year period. I am not sure of the reason for including this provision which I do not support. The legislation should also be amended to provide the Minister with a veto over any decision by ComReg that a universal postal service obligation is no longer necessary. The Minister should have a final say over any decision that would result in rural mail no longer being delivered for five days each week. The Bill gives ComReg too much power to make decisions of a sweeping nature without providing for a ministerial veto.

Section 13 removes the power of ComReg to summons people to give evidence under oath when it applies to postal cases. I am not sure of the reason this power is being removed and I believe it should probably remain in place. If competition issues can arise in the telecommunications sector, similar issues could arise in the postal sector. There is no reason ComReg should not retain authority to summons people to give evidence under oath in the relevant circumstances.

I have some concerns about sections 30 and 31 which deal with future financial support for An Post. As I indicated, An Post has never required State support or aid and I hope this will not be necessary in future. Section 31, while not providing for State aid, provides for the establishment of a compensation fund into which private sector providers will pay to compensate An Post for being left with unprofitable parts of the market. This mechanism is similar to risk equalisation in the health sector market, under which, in theory, VHI, which has most of the unprofitable customers, is to be compensated by other insurance companies.

The approach set out in section 31 creates problems on two levels. The main problem is that if the compensation fund is too large, private companies will be discouraged from entering the postal services business. A similar scenario arose in the case of BUPA when it pulled out of the Irish health insurance market in response to the establishment of a risk equalisation mechanism. A second problem is that it is not certain that the compensation would be adequate in the event of major competition developing in the market, particularly in central Dublin where services may be profitable. In the case of VHI the compensation provided has not been adequate. The result of this shortcoming has been evident in recent weeks.

Although it is a difficult decision to make, on balance the Bill should be amended to allow for State aid to be provided in certain circumstances, namely, where the Minister deems it necessary and the mechanism of compensation from other providers does not work. I will table an amendment to this effect on Committee Stage.

Section 27 gives ComReg the role of monitoring An Post's service quality and next day delivery targets. The level of next day deliveries currently stands at 87%. While this is a significant improvement on previous figures, it is not acceptable and must improve further. It is strange that An Post and ComReg separately assess the level of next day deliveries. I understand An Post hires PricewaterhouseCoopers for this purpose at a cost of €400,000 per annum, while ComReg hires TNS to perform the same task at a cost of approximately €400,000. Given that An Post pays ComReg's costs through a levy, the company and its customers are essentially paying €800,000 per annum to have two companies perform exactly the same task.

In addition, the results produced by PwC and TNS do not differ to a significant degree. I understand the former estimates that the next day delivery target is reached in 89% of cases, while TNS puts the figure at 87%. It is silly to have such duplication. The Bill should provide that ComReg monitor next day delivery and service quality and An Post bear the costs for such monitoring. I ask the Minister to amend the legislation. Failing that, I will propose an amendment to achieve this outcome.

Section 17, which deals with universal service provision, provides that ComReg may decide that a universal service obligation is no longer necessary. While I am aware that there is a market test involved, I am concerned that ComReg is being given power to make such a decision without reference to the Minister. If ComReg were to make such a decision, the net result would be a diminution of service, particularly in rural areas. For this reason, the power provided in section 17 should not be included in the Bill. If it is to remain, a ministerial power of veto should be included.

Section 16(1)(a) provides that a universal service obligation may not apply in certain exceptional circumstances. The reason for including this provision is unclear and I ask the Minister to outline what are these exceptional circumstances. Does the Minister suggest that, to ensure there is not a spread of the disease, an outbreak of foot and mouth disease would be an exceptional circumstance? That would be legitimate circumstances. Would it be an exception if the company decided that certain islands were too far away and it is too costly to deliver post to them every day? I would like clarification from the Minister on the exceptions he has in mind under this section.

I wish to make some general points about An Post and the industry. An Post is a very good company and it has never required a State subsidy. It made an operating profit, amounting to €5.7 million last year from a turnover of €800 million. In contrast to other semi-State bodies, pay levels are not astronomical but reasonable. An Post provides employment to 10,000 people. It provides an important social service as well as an economic one. People know their local postman and know the important social role a postman can provide, particularly in terms of visiting elderly people. The postman may be the only person to call to the door of elderly people. In the extremely cold weather we had in the past month or two, the postal service held up well. We can be impressed with the quality of service provided by An Post during that cold period when schools were closed and other services ceased to function. The postal service continued to function.

Its prices are also reasonable, at or below the EU average. We have the eighth cheapest postal and package delivery costs out of 29 OECD countries. This is in stark contrast to other semi-State bodies, where prices are higher than the European average even though the Minister continues to deny it. The service quality is getting better but needs to improve further. The Minister is correct in much of what he says. An Post needs to move with the times and must continue to become more efficient. It must also innovate. At present, 75% of its revenue goes on labour costs. This is not because pay levels are particularly high but because it is a low-tech enterprise and is low-tech in the services it provides. Irish postal volumes will continue to decrease, although I do not believe they will fall by 40%. They will fall considerably in the coming years but relative to France, Britain and Germany, postal volumes in Ireland are quite low. There are a number of reasons for this. One is the legacy of high prices in the past. For bulk mail, prices remain high. A politician who has leaflets delivered by An Post knows that it costs €90 per thousand, having been €70 per thousand a few years ago. Other providers will do it pretty well for €40 per thousand. There is a legacy of high prices in certain sectors. There is a previous legacy of poor delivery and the absence of postcodes, which reduces the volume of targeted mail and bulk mail. There are reasons to suggest, notwithstanding the long-term trend of falling volumes, that we could have a higher mail load, bringing us back to the European average.

Post offices need to develop beyond the remit of providing postal services and social welfare payments. The Minister mentioned this and I agree with his point. Post offices should be local communications hub, something like what they have in Australia. Although it is a different country and Australia is genuinely rural, the post office system there is impressive. There has been considerable diversification by An Post. Postfone is a welcome innovation and I am delighted to see it move forward. Pay point services are impressive and it is a real disappointment that Postbank did not succeed. If Fine Gael is part of the next Government, I hope we will examine it and try to find a new partner to establish Postbank and provide banking facilities in post offices.

It is likely we will see a significant diminution in the branch network of AIB and Bank of Ireland. In my constituency of 100,000 people, there is one branch of AIB yet other parts of Ireland have 50,000 people and seven branches of AIB. Realistically, AIB and Bank of Ireland branches will close down over the coming years as those banks shrink and try to become more profitable. There is an opportunity for An Post to provide banking services and cash services on behalf of banks in areas where banks no longer have branches. This should be investigated.

There is also a role for Internet services as more and more Government services move online. We could use the post office as a communications hub in which people without Internet access or who are not familiar with the Internet can be assisted to carry out Internet transactions. It could become a portal for Government services and services for business. The Minister is correct in stating that An Post can become a hub for goods and parcels and Internet shopping.

The company must expand its services to business. Many SMEs are happy with the service provided and the price levels but they would like to see a collection service. If An Post does not do it, it is an obvious area for a private company to provide the service. An Post should also become involved in printing. Large corporate companies that do not engage in e-billing do not particularly want to send out bills anymore. They want to e-mail a file to a company that will print, package and post it. An Post should provide the service. O2 or Vodafone should be able to send a simple e-mail to An Post and the latter can print, package and deliver to customers who want paper bills. That service is available in other countries and it is disappointing that much bulk mail in Ireland is posted from Britain. This post theoretically originates from Ireland but is posted from a company in Britain because it is cheaper to do so. The services that exist in Britain do not exist here.

An Post has something unique and valuable - a network that visits every home and business in Ireland every day. Many businesses would kill for this network. An Post must leverage the network and get more value from it. Politicians also kill for a network that accesses every home every day in the way An Post does.

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