Thursday, 13 January 2011
Communications Regulation (Postal Services) Bill 2010 [Seanad]: Second Stage
I move: "That the Bill be now read a Second Time."
The Communications Regulation (Postal Services) Bill has been discussed at some length in the Seanad where we had a useful debate and introduced several amendments that took into account some of the issues raised by the Senators. I look forward to having a similar process here where we can consider the issue of how we develop our postal service for the interest of our people and the interest of those working, particularly in An Post and the other operators in the industry.
The legislation before us comes on the back of the third European postal directive and follows a long process of reviewing the market for postal services in the European Union which started in approximately 1988. It led to the publication of a Green Paper on postal services by the Commission in 1992, the development of the first postal directive in 1997 and now this third portal directive, which came into effect on 1 January 2011. The European legislation is already in effect and already provides access to the postal market for operators other than An Post down to the smallest letter or postcard. Previously we had opened the market but just for larger parcels and heavier packages going through the postal system. This legislation provides for a more open competitive market across all mail volumes.
While I will go into the detail of the legislation later, I want to outline the broad framework first. The Bill recognises that we need a universal service obligation. Having mail delivered to every house and business every working day is a critical social and economic service. Providing for the licensing of such a universal service for seven years after which it can be reconsidered is an important protection in any changes in the market arrangement. There are social and economic interests in regard to the postal system that go beyond the interests of the companies involved; we have a wider public interest that we look to protect and do so with the provision of a universal service obligation.
The experience of other countries ahead of us in this regard suggests that we can set such universal service obligation without necessarily at the start having a cost accruing to it. There are real benefits in having a universal service capability and having a national distribution system. That economic benefit means that it may not be necessary for us to provide back-up funding for that universal service provision. I do not expect and we are not legislating for the Exchequer to provide such a support or response to the new market mechanisms we are introducing. At the same time we are legislating for this market to be fair. It will not allow someone to come in, cherry-pick the easier, more profitable routes, and see a very high and unfair burden in the cost of providing that universal service in other areas. If it can be shown that there is such unfair competition or unfair use of the universal service obligation, there is a mechanism for the regulatory bodies and parties responsible for managing our postal services to levy an income from the industry to cover that cost. That is an important protection for which we are legislating and it is appropriately market-based, based on evidence of the economic effect as the market evolves and develops.
The Bill provides other protection for consumers, particularly those doing low volumes of business, including businesses that do not have great economic influence because the nature of their postal business is small. We need price caps to ensure they are protected and the legislation is being designed to benefit the consumers. To do that we are using our existing regulatory structures by assigning the powers to ComReg to assess the performance of the operators, the development and delivery of the USO and the necessary regulatory amendments that are needed in that regard. ComReg is very well placed to do that job. It is now a very experienced regulatory office having done considerable work in the postal area. It has also done similar work in the communications area where we have opened the markets to competition and seen real benefits in price reduction and quality of service improvements as a result. Under the 2002 legislation ComReg is accountable to the Dáil through the Oireachtas committee system, which in my experience in opposition and government works well. People under estimate some of the work done in the committee rooms of this House where we have the right to question, investigate and examine the work or our regulators and other bodies. That political oversight exists particularly through the Oireachtas committee system.
There is also political oversight in Commission for Communications Regulation Act 2002, which provides that the Minister may send strategic directions where necessary to the regulator and in that way the market. That is an appropriate level of ministerial involvement. It is important to have that oversight - that ultimate political control over and interest in how our regulatory system and our markets develop. In my experience as Minister for the past few years it is a provision I have not had to use extensively. It is better used sparingly because it is better to work with the regulator and the market in developing a policy approach on a collaborative consistent and rational basis. If and when necessary, the Minister can set a policy direction that gives the regulatory authorities the necessary steer on a broader policy approach whereby they take on the day-to-day difficult decisions in pricing, competition and regulatory control; this legislation provides for that.
Critically the Bill legislates for the introduction of a post code, which not only implements the recommendations of the national post code review board of some years ago in having a very simple, easy to understand and easy to use alphanumeric postal address system that improves the efficiency of our postal system and helps people develop a range of new Internet businesses, including Internet shopping and so on, but also contains within it the ability for us to develop a location code that will allow a range of applications through the identification down to a single house in the delivery of better services, particularly public services where we can use the information in a range of new applications approved by the Data Protection Commissioner to improve the provision of health and educational services, and local waste, water and other management services to every house in the country. The legislation is critical in allowing for that development, which is now progressing on a very certain path, as we go to the procurement phase to identify an agency or company that will manage the delivery and operation of that postcode system which we expect to see later this year.
Having provided a broad outline I will now go into the details of the legislation section by section. I will set it in the context of what is happening in the postal market in general and some of the strategic developments which we should consider in the context of this legislation and the changing market conditions.
We must recognise that in the postal business the market is contracting quite dramatically, even in the past three or four years, by an estimated 20% reduction in the core volume of mail business. That is due partly to the economic downturn but a significant amount of that reduction is due to systemic changes in the nature of communications. The development of e-mail, instant messaging and a range of new communications systems is replacing a previous communications system, which will not come back because the world is moving to those new Internet and other new telecommunications systems in a way which works competitively.
A UK Government study assessing the five years from 2010 to 2015 expected a 25% to 40% reduction in mail volumes. Taking aside the economic downturn, we are in a market that is going through a fundamental and difficult change for those involved in the industry. We have already seen a change to the extent that the vast majority of mail, approximately 90%, is business orientated. Much of it is in direct marketing or other new services which have kept the volumes up, but the traditional letter post use of the mail system has changed radically. We must plan for continued change in a way that requires a different way of doing business. It requires new strategies, new innovation, new working mechanisms and new market mechanisms to ensure that we have a strong postal service here, and particularly a strong An Post company.
In this context we held a useful consultation exercise in November 2009 where we brought together all of the interested parties. We brought together An Post management, management from other companies with an interest in this market and operating in this market, representatives from the public service policy side such as ComReg, my Department and elsewhere, and workers within the companies and representatives of the workers. The idea was to consider future developments and ask questions such as what happens if the mail volume decreases by up to 40% or 50%, what is our model and how do we see ourselves reinventing this business to ensure it has a strong economic future. That involvement by all parties in this process strengthens this legislation. I hope it gives them a sense that we are not seeking to undermine one sector or one company. We are trying to ensure there is a postal service system in this country so that it can grow, adapt, be economic and provide creative employment.
An Post is a company for which I, as Minister, am responsible. I have seen its operations over the past three and a half years. When I talk to people in the business or meet staff at counter level, in the sorting office or at other office level, my sense is that this is a company with a strong and good working culture, with staff who are proud of their work and who are very good at what they do. It is a company that recognises it must change. We have seen in the past three or four years changes in its work practices which at that time were not working, inefficient and where the company was not making the best use of resources. We have seen improvements in efficiency. An extensive work programme is being put in place between the management and unions to make those changes, and they have been made. I commend both parties for engaging in that process and doing it on a pro-active, positive basis.
There is more work to be done. There are further efficiencies needed when one sees such dramatic falls in volume. We need new strategies and new ways of innovation and operating in the business but we have a chance of doing that, especially in view of the record of management in recent years, where management and workers have co-operated to start doing things differently.
Post offices and rural post offices are a critical part of the social fabric of the streets, towns and villages. In speaking to someone from An Post today, I realised that a typical post office trades in approximately 137 different services. As certain volumes of business is lost in one area, there are other opportunities opening. An Post has been open to that, looking at a range of different markets and applications to see where it can develop business. It has also tried to automate services. Its counter service systems achieve what would seemingly be an insurmountable task to manage 137 different products but one can do it in a clever automated way using modern technology. That is an example of where An Post has been progressive and willing to change and use new technology, which is critical in terms of making the change to a new business model. We must be not afraid of new technology but embrace it. We must embrace the efficiencies and the new market opportunities it provides.
Earlier this morning I met some people from the village of Ballingeary in west Cork. I am sure the Acting Chairman, Deputy Kathleen Lynch, will know the village from her own county. I will use it as an example to make a wider point on how I see a post office service or network developing. As Members will be aware because it is in the newspapers, there is a difficulty in Ballingeary in terms of the existing postmaster coming to the end of his career. The question then arises as what to do next and how to set up a postal outlet in a village like Ballingeary, a community of approximately 700 plus, that is economic, acts as a useful centre of services for the community and provides a livelihood and an economic structure to deliver key postal and other services. I am concerned here with a broad and strategic view which I am not relating to the individual decisions on any post office or area. That is a matter for An Post working with local business persons and the local community. I have assiduously avoided doing that in my three and a half years and I would recommend any future Minister to do the same. One cannot put oneself in the position of making some of the commercial calls - that is a matter for An Post, first and foremost, and the regulator - but one can set the strategic direction.
I use the example of Ballingeary because of my personal knowledge of the area and its businesses to make the wider point. I believe that one of the big economic opportunities for us in the development of the postal service is to adapt to the Internet, and particularly to on-line shopping and the delivery system that will come with it in a range of new parcel and package services. I believe that there is a significant area of growth and opportunity for whoever manages the distribution system and the commercial systems in providing for such a new Internet shopping service. We are starting to see it grow. An Post is already involved in establishing last year its new on-line shopping presence which, I am told, took off despite the difficult period of weather before Christmas. People who perhaps were not able to get to the shops in an efficient manner went on-line in large numbers. They will stay on-line, particularly in rural areas where there might not be the same choice as in central Dublin. This offers considerable opportunities to get to people a range of different services and products that they would not easily get in their local town or village. We need to develop that business as a centre point of the post office, or agency offices within shops that An Post has set up across Ireland, particularly in the towns and villages.
This development provides a two-way opportunity. I know the village of Ballingeary from my own business experience in the past. When one looks down to the village level at the companies engaged in translation services, on-line retailing of books, tourism business, and local food and craft businesses, it seems that almost all now have their marketing done on-line. There is no reason a cheese maker in west Cork should not be able to go to a local postal collection point in order to sell to every part of this country or even Europe. I do not know if he or she would be able to get the cheese as far as America. Those kinds of economic opportunities are now opening up for small businesses in Ireland if the right distribution system is created to enable them to easily transfer a package from wherever they are in Ireland to the market, which would preferably be abroad.
The UK has been good at delivering and developing online shopping business. It is seen as an export opportunity and it is interesting to see the UK study on how the sector is evolving. For every £1 of goods imported over the Internet, £2.80 of goods were exported. We need to enter that space and become good at that practice. We must have a national distribution network that will allow small businesses across Ireland to have a good contact point for an online distribution and shopping system and an export market in particular.
That has implications for what we do with our rural post offices and shops with postal services. Can we develop those shops with access systems for parcels so that people can both collect and deliver? A local business would not have to drive 20 miles to the nearest large town and there would be a flexible and easy system allowing business to be conducted closer to home. Critically, can we develop the number of retail outlets on a scale so that the cost of the universal service obligation mail system, which we must pay for anyway, would be increasingly subsidised or would sit with the new distribution system for goods and parcels that will grow? We must make an economic case for both services and work the two together.
I wanted to set out the process at this point using a local example which happens to be topical currently. That is the better strategy. An Post would have a comparative and competitive advantage with other operators already working in this area if companies can work with and feed products into An Post and there is a distributed and strong local retail presence, along with strong local knowledge and capability to use some of the new delivery and connection mechanisms which Senator Feargal Quinn mentioned in his Second Stage speech in the other Chamber. He is a former chairman of An Post and was nervous about speaking having come from that role. He is worth listening to because people recognise that when it comes to retailing and customer care, he has real experience.
It was interesting to hear his speech cite examples of new mechanisms such as a locker outside a shop. The current system would have a parcel delivered to a house but if the person is not there to receive it, the delivery will go somewhere else in the system and there is an awkward process of tracing and retrieving it. A system could exist where if a person orders a product online, it could be delivered to a locker in a local shop, with a text message or e-mail giving the code to open the locker. A person could pick up the delivery in his or her own time. That is one example mentioned by the Senator but I will not be specific in the services we want to deliver.
Such innovative thinking around customer service and the distribution system, particularly for online parcel and other business, is where the opportunity lies for An Post. It can be delivered in co-operation with other companies. We can see in the US and other markets that a postal company can work with FedEx or other operators to share some of the economics to make the process viable. The distribution system would start to become very extensive, with goods travelling both out of Ireland and around the country from businesses to customers. There would also be deliveries from abroad. Whoever has to manage that complicated and extensive distribution system will have a real economic opportunity and will create employment that may replace the employment we will have to lose in the core business where mail volumes may contract, in our predictions, by approximately 40%.
This is a statement of strategic intent in my mind as to where we should really consider going. We should push flexibility and innovation at the retail point, whether it is a post office or local shop, to deliver many services in conjunction with Internet services. There could also be development of a local contact point for government, using online and communications technology used for process transactions that An Post should be good at. The body will not be good at everything and all 137 of the services may not fly. Where An Post will have a real advantage is in areas where it has experience, scale and practice. That would be in the large volume transactions, including the 3 million postal movements it organises every day. The marginal cost is very small in this regard but on the back of 3 million transactions, there is an economic case to be made.
With all services it is inevitable that we will move to an online and electronic presence; this may involve the provision of social welfare or other services. We should not shy away from the development of new technologies and other mechanisms for fear of changing the current system. Change must come and it will do so more effectively if we proactively shape it in a way that benefits rural Ireland in particular, including small towns and villages. They must get a strong centre that will provide a contact point to government in all its guises and an Internet shopping centre for the community. There will also be a range of other services, financial transactions and other services in development.
I have set this out as a path we should take to answer some of the concerns people rightly have in villages and towns across the country as to what is the future of the local post office and postman or postwoman. It will be bright if we adapt to the new technology, look to new markets and create new commercial arrangements where we would work in co-operation with other companies. Margin, business and volume could be obtained by working with firms on such a basis.
This legislation allows such a process and facilitates An Post and other operators in being flexible. They can negotiate and co-operate as trade works on this basis. The volume of business will increase and although all the value would not be attached to one company, there would be a benefit to having an efficient system and service. That is what the legislation is doing. It is not an ideological argument of private versus public sectors but it is pragmatic with a sound economic sense.
We cannot just do business as usual and those who argue that this will damage or threaten business should know that is untrue; the legislation is required because European legislation has already been set in place which will create this competitive market. There is nothing to stop a company coming in now to cherrypick business services and what we are doing with the legislation is ensuring the new competitive market, which we need, is fair, well regulated and efficient. It can use new postcodes and other technologies. That is why I hope I will get the support of other parties in the Dáil as we did in the Seanad. The constructive debate and suggestions from the Seanad were useful in that regard and I hope we can have a debate for the benefit of An Post, the other companies in the industry and the people of this country.
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.
The Minister only touched on postcodes but the Bill is an enabling provision, allowing the Minister to establish and operate post codes. I am still very confused about post codes. There is a tender process ongoing at the moment but it is not clear to me how open it is and whether the process is free to consider a fully numeric system. Perhaps it must choose an alphanumeric system and the Minister might refer to this in his response. Perhaps he can assure us that the tender can consider all forms of post codes and not just the Minister's favourite model, the alphanumeric system, which he believes will help people to remember post codes. I do not know how people remember post codes. The only one I can remember is my sister's post code. I must look up everyone else's post code in the UK. I hope we will see post codes this year and there will not be too much of a delay.
In the Minister's response, I ask him to explain why this Bill was not brought forward last year. European legislation was passed in 2008 and almost every other country has enacted it in domestic law. When we discussed this issue during Question Time in early December, the Minister promised to introduce the Bill before the Christmas recess. It is only being brought in now even though the directive is already in force. Perhaps the Minister can explain why this was not done. Fine Gael broadly welcomes this Bill, which derives from European legislation that is already in force. Competition will provide low prices or keep prices low for consumers. It will provide new services for consumers, particularly business consumers. It will also encourage An Post to continue to innovate and become more efficient.
However, the protections in the Bill are not strong enough. We need stronger provisions to ensure that An Post remains a strong company and that the universal service obligation is not undermined. If the universal service obligation is changed, it should be done by ministerial decision and not by ComReg. We also need to ensure there is provision for State aid in the unlikely event that it is necessary to compensate An Post for providing postal services to rural areas on an equal basis.
I regret that the Minister has left, although I am sure he had important business. The most important statement I can make is to urge him to have an open mind, because this legislation is flawed and it is important that it is amended. I had hoped he would listen to what the Opposition had to say about amendments we will be tabling, so I regret that he has now left the Chamber.
The premise underpinning this Bill is that liberalisation is good for the postal consumer. It is 20th century legislation, based on an ideology that is fast becoming out of date in today's harsh economic climate. It presumes that a market solution for postal services is always progressive. However, the one-size-fits-all approach devised by the EU has had mixed effects in different countries. In some cases, far from improving the service, it has led to deterioration, job losses and the undermining of equal access. In a country such as Ireland, with a small market and a large scattered rural population, there are genuine concerns that the negatives resulting from liberalisation will outweigh the benefits. Large companies may benefit, but for the general public and for SMEs there is a danger that higher prices and a poorer service will result.
I hope the Minister adopts an open mind to amendments that the Labour Party will be putting forward on Committee Stage. Our concern is that this Bill, unless amended, may put undue strain on an essential public service. This is not a good time for An Post. At a time when electronic communication is having a major impact on postal communication, the Minister should be conscious of his responsibility to protect the consumer and the universal nature of the postal service. In 2005 an ECORYS report commissioned at EU level listed Ireland as a country in which the potential for the development of competition in a liberalized environment in the medium term was relatively low.
This Bill transposes the third postal directive, which eliminates all remaining obstacles for a fully liberalised postal market. Its purpose is to establish an open and competitive market across the EU by opening the final reserved area - the delivery of letters of less than 50 g, which makes up around 40% of the revenue of An Post - to competition. It is worth remarking that we are introducing this legislation after the deadline has passed. In fact, Ireland's postal market has been open to full competition since 1 January 2011. It is not clear, even at this late stage, whether there is any significant interest from private operators in entering the under 50 g market. We must presume there will be such interest, and improve the legislation accordingly, if we are to meet the needs of public.
I have reservations about the political approach to the liberalisation of essential services in Ireland. We should learn lessons from our past. It has taken years of costly effort to open up the electricity market, for example, and the consumer has paid a heavy price. Competition only began when one semi-state company, Bord Gáis, took on another, the ESB. The small scale of the Irish market, whether in energy, postal services or telecommunications, should influence how we protect essential public services.
If we are not careful we could end up sacrificing our competitiveness on the altar of competition. We have done so in the past and we cannot afford to do it again. The Eircom privatisation debacle should be the lodestar for our decisions now. The proud boast in 2004 by the then Minister for Communications, Marine and Natural Resources, Deputy Dermot Ahern, that Ireland would be a world leader in broadband provision has disintegrated to dust. Instead, we ended up with a company that has changed ownership six times and at every stage declined deeper into debt. By failing to protect an essential telecommunications infrastructure, Ireland has lost out badly.
In the Dáil we often ask parliamentary questions about broadband provision and regularly highlight the problems affecting businesses, homes and services across the country. The Minister's reply to such questions is revealing. He has stated many times: "The provision of telecommunication services, including broadband, is a matter for the private sector". This means we are not delivering next-generation broadband, and other countries are passing us out.
While the Labour Party does not intend to vote against this Bill, I am asking the Minister to be aware of the concerns being expressed about the implementation of this directive and open to addressing them. The postal market has changed in the last two years. The recession has had a heavy impact: mail volumes are down by approximately 16%, and the Minister claims this will grow to 20% or more. Each percentage point drop represents a decline of millions of euro in revenue. We all recognise the inevitability of the substitution of e-mail for traditional mail and the growth of e-billing, and that challenges have opened up for An Post as a result. That is the way life is. Nobody will be able to hold back such development, nor should we. However, we must ensure that consumers always have choice. I raised the issue of certain mobile telephone companies that tried to pull a fast one on consumers, forcing them to use e-billing even if they did not own a computer, and I was glad that ComReg took an initiative in that regard.
I pay tribute to An Post and its staff for its long record of service. This was brought home to me, like Deputy Varadkar, particularly during the recent snows. Coming up to Christmas, people were expecting letters and parcels, and An Post carried on delivering these in a commendable way. It should be no surprise that in 2010 it was assessed as the seventh most efficient operator out of 29 from various countries. Its management and workers have played a vital and progressive role in developing the public service. An Post has fulfilled its brief. The universal service obligation ensures a legal guarantee of equal access for every citizen to the postal services. It guarantees the delivery and collection of mail five working days per week, regardless of where one lives, and for the same price. As has been said here, An Post has been providing this service without having to resort to any State aid or subvention.
The Bill provides that An Post is designated as the universal postal service provider for a period of seven years. As stated in the explanatory memorandum, "ComReg is to review this designation before the end of the seven years and may designate An Post again, or designate another postal service provider or decide that no such designation is required, as the market is meeting users' reasonable needs." The question is whether that brief can be fulfilled in the future. How feasible is the notion of more than one postal operator running different aspects of the universal service obligation? It could cause immense confusion in terms of delivery, cost and quality of service. While the seven years' grace for An Post is welcome, it is important that there is political involvement in determining the future after those seven years. It should not be left to ComReg.
The principle underpinning An Post, as has been said by the Minister, the Fine Gael Members and myself, is its importance in the social and cultural fabric of Irish society. That visit by the postman or postwoman - that certainty, that connection - is valuable, particularly at a time when communities are becoming more atomised. The Minister of State with responsibility for the elderly, Deputy Áine Brady, is present; she may be conscious of this aspect, and play her part in ensuring that the Minister amends the Long Title of the Bill to reflect the social and cultural significance of the postal service.
The trade union representing postal workers, the Communications Workers Union, has been an important participant in the modernisation of An Post. It has raised key issues on financing the universal service obligation, which I want to put on the record. The CWU stated:
Liberalisation will remove the restricted monopoly that An Post currently uses to fund the loss-making parts of the USO. The Government view appears to favour the establishment of a compensation fund, referred to in the Bill as a sharing mechanism. However the CWU would prefer [and I agree with its view] that all funding options would be included in the legislation – nothing should be ruled out until we know what a liberalised market in Ireland looks like. We must learn from the lessons of other countries, such as the UK, where the USO is now under serious threat due to the regulatory choices made there.
The sharing mechanism as set out in this Bill in section 31, states:
...where the commission makes a determination under section 30 that the net cost of provision of a universal postal service represents an unfair financial burden on the universal postal service provider within the scope of the universal postal service and such providers shall make a contribution, in accordance with the cost apportioned to each of them, for the purposes of meeting that burden.
According to the Minister, the sharing mechanism will be funded by new companies entering the Irish postal market to deliver the letter post on a profitable basis. If new companies do not enter the market and make a sustained profit there will be no money contributed to the sharing mechanism. Similarly, if new companies do not even enter the market there will be no funding for the sharing mechanism. What will happen if that is what emerges? Money will not be contributed to the sharing mechanism or there will be certainly great resistance to making that contribution if it is required.
There is no plan B if the sharing mechanism does not function as planned. The CWU has suggested that this kind of funding model has not been proven to work anywhere to date. This must be taken seriously in order to have a more comprehensive section in the Bill that allows for different options if required. This levy on operators is similar in part to the risk equalisation fund in private health insurance, which has been the subject of repeated court proceedings. It is additional to the levy required on operators to fund the regulator, ComReg.
We must learn from experience, otherwise we are condemned to making the same mistakes. It is not that long ago since a furore was created by a similar levy imposed on radio and television broadcasters to fund the Broadcasting Authority. I regret that this legislation has not offered the opportunity to provide one new regulator combining the Broadcasting Authority and ComReg. It was an ideal opportunity to rationalise one regulator instead of having two. Professor Colm McCarthy recommended it in his report, yet the Minister, who has a blind spot in this matter, insists on having two regulators in an area where only one should apply with resulting efficiencies of scale.
Returning to the funding of the Broadcasting Authority levy, there was a protracted campaign by radio and television broadcasters, but particularly the small local radio stations which were badly hit. It was interesting that it took so long to get the message through, although finally there was a response to the distress caused by the levy. It revealed an ignorance on the part of the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, as to the reality of a country in recession. In particular, the SMEs have had to endure the pain of recession. That ignorance was significantly revealed, so we must be conscious of what we are doing with the legislation and how its provisions are being applied in that sector.
The economic value of An Post is significant. It is self-financing and successful. It is one of the largest employers in the State and delivers 3 million items of mail per day. There are approximately 6,000 post-box points and several thousand customer collection points. Every week, An Post serves 1.7 million customers through its unique national network. The rate of next-day delivery - although not perfect and behind target - has been improving.
An Post has made a profit, even though the profit is going down, so clearly there is pressure which we must acknowledge. It is worth restating certain facts, however. An Post has the eighth lowest postage costs out of 29 European countries. It is the seventh most efficient operator out of 29 countries. In 20 years, the price of a stamp increased on only three occasions and lags inflation for the same period.
We are talking about a good operation, so my feeling is "If it's not broke, don't fix it". We may say that nobody else coming in from the private sector would have a major impact on An Post in these hard times. However, the legislation is all about opening up the market, so we must have safeguards in place. We need to make changes in this legislation to protect the common good and the public interest.
Other issues have been raised in a useful commentary on the Bill by the Communication Workers Union. They include job losses and social dumping, downstream access, and cherry-picking of profitable routes. I wish to outline these matters in more detail. We must maintain certain employment standards to avoid job losses and social dumping. I understand that, if properly implemented, Recital 16 on social protection from the European Directive will protect employment standards.
On the issue of downstream access, the CWU states
Looking at the experience of Royal Mail in the UK we can see how important it is to get downstream access right. If it is handled badly it could spell the end of An Post and 10,000 jobs. Access to the An Post network must be on a commercial basis and not based on a price imposed on it by the regulator. In addition, access to the network must not be below the mail centre level as this would render useless much of the investment in technology that An Post has made in recent years and require the entire delivery network to be reconfigured.
We may have different views on that issue but there is a genuine concern in terms of how we will have a viable An Post company in future that would have a nationwide network delivering for our people.
Another concern is cherry-picking, which occurs when An Post competitors compete for business on profitable postal routes only. The effect of this is twofold. It reduces vital revenues for An Post, leaving it only with the loss-making routes, which in Ireland's case are substantial; and, in turn, it threatens the viability of the USO. That is a central issue. I am sure the Minister will argue that the protections are in place, but we need to tease out that out on Committee Stage. This matter must be crystal clear. It is blatantly obvious that, because of our widespread rural population and urban centres of critical size, cherry-picking of profitable postal routes can be very attractive to a private operator. Such an operator may wish to pick off what will make money, while leaving An Post to bear the loss-making routes.
The price control mechanism, as outlined in the Bill, should take into account declining mail volumes. This is a feature of price controls in other European regimes, such as Royal Mail and Groupe La Poste. It is essential that An Post can continue to ensure its prices are cost-oriented. There also appears to be a conflict in the Bill regarding the terms and conditions which require all USO prices to be approved in advance by ComReg. Section 19(2)(b) gives ComReg ex ante control over all prices for all services within the USO. This appears to conflict with the concept of a price cap, which is set out in section 1.
Part 3 provides that the Minister for Communications, Energy and Natural Resources may establish, maintain and operate a national postcode system. The Minister is persisting in taking a bewildering approach, to say the least. Ireland is the last country in the European Union to develop a postcode system, despite our technological capabilities. However, the Minister, who talks a good deal about the smart economy, persists with the notion of a location-based cluster system even though a unique identifier system could be introduced at far less cost, with a far less significant maintenance requirement and with many more possibilities to develop follow-on applications in line with technological advances in satellite navigation and so on. I am bewildered and frustrated by the Minister's persistence in plodding along as if his way is the only way. It is an inadequate approach in terms of the current and future needs of a smart economy. It is also a ponderous and burdensome way to approach the development of a postcode system because it will require continuous and costly maintenance as properties are added to particular clusters.
I was appointed rapporteur when the Oireachtas Committee on Communications, Energy and Natural Resources undertook to produce a report on options for a postcode system. Our report, which was endorsed by the committee, proposed a unique identifier system as offering several advantages such as facilitating a speedy response by emergency services, providing greater efficiency and interaction with GPS technologies, and not requiring a change in the names of townlands. Such a system would have low maintenance costs, support spatial planning and facilitate the delivery of health services. I ask the Minister, Deputy Ryan, to review that report. It is crucial that we use the best available technology. We may be behind our European Union colleagues but we should aim to be the best in terms of delivery. A postcode system based on a unique identifier scheme offers a range of benefits and can utilise the best, most up-to-date technology.
Our report to the Oireachtas committee also recommended that a roadmap outlining precisely how postcodes will operate should be published by September 2010. This would have fully prepared the public, businesses and State bodies for the changes. The Minister is talking about changes being introduced by the end of 2011, but nobody knows what is involved. A roadmap is vital to provide clarity and direction and to ensure people buy into the concept. A new system will not work unless people operate it.
The report also recommended that if a short lead-in time is envisaged, an incentive-based scheme should be introduced to encourage the use of postcodes. This could include free postage for a month for households who opt to participate. That proposal was also favourably received by the committee. As part of our consultation process we received valuable contributions from various organisations including the Health Service Executive and the National Centre for Geocomputation. Both of these bodies of critical mass were crystal clear in their endorsement of a unique identifier system.
What the Minister is proposing, however, is a type of hybrid which has been endorsed by nobody. None of the reports produced by various consultants and interested parties called for such a system. We need a postcode system that represents good investment practice and which is line with the objective to develop a modern and progressive digital economy. It is regrettable that the Minister is not listening. I would be the first to applaud him were he to open his eyes and take that leap into the 21st century. We get a great deal of rhetoric from the Minister, yet here we have a practical example where, given a choice, he has chosen wrong.
The Minister's arguments against a unique identifier system are that, first, people will have difficulty remembering such a number and, second, that there is a data protection issue. Neither argument stands up and the first is insulting. People remember their mobile telephone number and PPS number, for example, without difficulty, and some with good numerical ability can remember entire lists of numbers. Regarding data protection, I will put forward an amendment to deal with that issue, which I hope the Minister will accept. Even without the amendment, the reality is that what the Minister seems to be saying, in his rather convoluted way, is that locational codes can become unique identifiers. If that is the case then data protection is not an issue. In other words, he is developing a very slow route towards the same objective whereas I would urge the fast track.
Coming back to An Post, it has a good record in meeting many difficult challenges. It is blessed in that the staff union has been very active in representing workers while at the same time taking a realistic approach in terms of meeting challenges. There is a good bedrock for new initiatives. At a meeting of the Oireachtas committee some time ago to discuss the demise of Postbank, the Minister painted a rosy picture of all the opportunities available to An Post and of its wonderful network - which is true - yet here was a practical initiative that went into the sand. Will the Minister ask his colleague, the Minister for Finance, why that was allowed to happen? That meeting was attended by Mr. Ian McArdle of the Communications Workers Union, CWU, and he made the point that when BNP Paribas, which was 50% partner in Postbank, decided to pull out, the union had tried to engage with the Minister for Finance based on his declaration at the time that no Irish bank should be allowed to fail. It is extraordinary that this innovation which met a need at local level - particularly in small provincial towns and villages, including many in my constituency, where banking services had been lost - was allowed to go under. The Minister for Finance was asked for the relatively modest sum €50 million, which seems like peanuts compared with the figures involved in the bank bailout, to keep that service going, but it was not forthcoming.
We must be realistic about the challenges facing An Post. I do not go along with the rose tinted view that An Post can do all sorts of lovely things and provide for rural communities in a progressive way. It may be able to do so - I hope it will - but it will be very difficult. We are faced with an extremely harsh climate in which to develop innovative schemes whether in the public or private sector. We must be conscious of that in terms of making this legislation work. I urge the Minister to be open to amendments.
Deputy Varadkar has raised a couple of very valuable points. I hope I can do the same when the time comes. I note we are not to have Committee Stage next week but I suppose it is no surprise that these matters continue into the never-never since the Government wants to do the same. To be cynical, if An Post had been in a position to take the Minister out onto the golf course, perhaps it would have got its €50 million.
Sinn Féin probably stands alone in this Chamber in support of the postal workers and the rights and entitlements of people who live in rural communities. It is totally opposed to this Bill.
The object of the Bill is to liberalise the postal services. That means it claims to protect the universal service obligation. That claim is not worth the paper it is written on, nor is the claim that the EU directive will protect the obligation forever. If we need proof of this, we need only look to what is happening in the United Kingdom at present. When similar legislation to give effect to the EU directive was published, assurances were given that six-day deliveries and collections would be copper-fastened. Now that the UK Government is preparing to privatise Royal Mail, it has emerged that the provision of all services will be dependent on profit margins. This will mean that if a postal company can prove that it is losing money, it will be able to downgrade its services and only operate the profitable ones.
Defenders of this Bill claim the universal service obligation is copper-fastened. In fact, section 17 makes it clear that this will be reviewed by ComReg even before the seven-year period for which An Post is designated as universal provider is up. The section also provides for the designation of companies other than An Post as the universal provider but, more important, contains a clause under which the obligation can be removed altogether. There are currently no plans to privatise An Post as a whole but the Bill and the tenor of the EU stance on the liberalisation of postal and other public services will inevitably lead not only to the breaking up of the postal services, but to cherry-picking and the selling off of the most profitable ventures.
That the privatisation of State assets will be part of the IMF-EU bailout for the banks is clear. The Review Group on State Assets and Liabilities, chaired by Mr. Colm McCarthy, who has already made clear his support for privatisation, is due to be presented soon. It would be interesting to see what he recommends and the way in which the Government and its successors act upon the recommendations. The report was supposed to have been published before the end of last year but in reply to a question from me yesterday, the Minister for Finance, Deputy Brian Lenihan, stated the group is to engage in further consultation before it presents the report. Has the postponement anything to do with the fact that light was shed on the interests of a company chaired by the former Taoiseach in buying Coillte? Mr. McCarthy, in his an bord snip nua report, already recommended that the privatisation of our forestry sector be given consideration so it might have been a bit embarrassing if his report were to repeat that at a time when people had realised the interest of former Taoiseach Deputy Bertie Ahern and his chums in buying up 7% of the State's land.
In another reply, the Minister, Deputy Lenihan, told me that privatisation of State assets has been discussed as part of the bailout and that the Government will consult the Commission on the results of this assessment with a view to setting appropriate targets for the possible privatisation of State-owned assets. He specifically mentioned An Bord Gáis and the ESB.
It is clear, then, that in the current climate we need much firmer guarantees that An Post will not be asset stripped and that the people of this State will not be left with a poorer and more expensive service. It must also be guaranteed that rural communities will not be left in circumstances where postal collection and deliveries do not take place six days per week.
The service provided by the postal service to people in isolated rural areas, particularly those who are most in need, including the elderly, is second to none. The service constitutes a point of social contact for many in rural Ireland. I know postal workers who, in the line of duty, make deliveries to people who are unable to make it to the nearest village or town. They take papers and groceries to those who need them and act as a conduit to the general public. The service will almost certainly be lost with the privatisation of An Post, thereby doing considerable damage to rural Ireland. The damage will add to existing damage to rural Ireland by the Government and its predecessors down through the years.
We need guarantees to protect the tried and tested service. If such guarantees are not built into this Bill by way of amendment, Sinn Féin will vote against it. It will do so to protect the jobs of postal workers and the excellent service that An Post currently provides throughout the State. It will also be opposing it because it does not believe that public companies that have been built over generations should be stripped down, torn apart and sold off to private interests. It certainly does not support the selling off of any State company in order to comply with the terms of the IMF-EU bailout for the failed bankers, speculators and developers, some of whom will no doubt be joining their former Taoiseach in companies ready to move in for the kill if and when the services are sold.
It is clear that this Bill, as it stands, does not serve to protect our postal services. It is also clear that it lays the basis for the breaking up of An Post and the selling off of profitable parts of the company to private companies. Sinn Féin will stand against the content of the Bill and it has tabled amendments thereto. If they are not accepted and implemented to the letter, we will stand against this Bill. We will stand with the workers and those who live in rural Ireland who have no service. We will stand with the postal workers because an inevitable consequence of privatisation, if this Bill is passed, will be that they will lose their jobs. Services that are less profitable or unprofitable will be done away with. This will mean the only interest the private companies will have in any future postal service will be based exclusively on profit for themselves.
Tá spéis ar leith agam sa Bhille seo toisc gur bean phoist í mo bhean chéile agus má tá aon athrú le tarlú sa chóras is ise agus a comhlghleacaithe a bheidh thíos leis. De bharr sin agus an t-eolas breise atá agam maidir le córas scaipthe agus dáileadh litreacha agus pacáistí timpeall na tíre, measaim gur droch Bille atá os ár gcomhair.
Courtesy normally ordains that a Minister be present for the opening slots when a Bill is being considered. I find it strange that the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, is not present for the opening contributions on this major, pressing Bill. Perhaps he is doing something more pressing such as twitting or F-booking. Perhaps this is not the case and he is engaged in something else. It is not a trivial matter.
I tweet as well but I am not a twit. Having said that, this is serious legislation. I am opposed to it because I am ideologically opposed to its thrust. It is one of the hangover Bills from the Progressive Democrats, the agenda of which was fully endorsed by Fianna Fáil in various coalitions. It has now been embraced totally by the Green Party. I am opposed to it.
I was recently at the GPO, which is running an interesting exhibition entitled, "The Letters, Lives and Liberty". It shows the pivotal role of An Post and its predecessor in Irish history and society. I advise the Minister, Deputy Ryan, to attend the exhibition before he destroys one of our society's best organisations and the network it has created. Rural Deputies in particular would be able to outline the vital role played by An Post.
By privatising postage, the Bill will discard the proud record of An Post and end in tears, as it will ruin the postal service as we know it. It is a charter for cherry-pickers. Cherry-picking is a process whereby market entrants only provide services to the lucrative end of the market, leaving existing operators with most of the loss-making part of the operation. In terms of postal services, we can expect postal operators to be interested in large towns and cities, the likes of Dublin and Cork, while much of rural Ireland will be left alone because of its isolation. Due to the cost involved in daily deliveries, those areas would be left without a proper postal service and definitely without daily deliveries. This would make the provision of rural services non-viable for what remains of An Post without a significant price hike or subsidies from the taxpayer. Given our current crisis, the Minister should consider how we will need to bail out An Post.
Cherry-picking is not a possible outcome of the legislation. Rather, it is a certainty. The 2005 Ecorys report on the development of competition in the European postal sector predicted that private providers in Ireland will seek to operate in niche markets and certain geographical areas. Instead of establishing any genuine competition with An Post, private companies will simply take the easy profits. This will remove the revenue streams that are necessary for An Post to cross-subsidise the price of deliveries to rural homes. As a competing business, An Post will be left with few options. One would be to increase the price of stamps exorbitantly for rural post, another would be to seek Exchequer support and another would be to close up shop.
The so-called sharing mechanism outlined in the Bill is a non-runner. The Bill provides that ComReg may, at an unspecified time, develop some sort of mechanism to have new private operators compensate An Post for the burden of the latter's universal service obligation. Deputies should remember the debacle that was the battle over risk equalisation in the health insurance market, which was liberalised in the not-too-distant past. We all know how that ended. The compensatory transfers necessary to ensure community ratings were successfully challenged by the new insurance entrants. Cherry-picking still continues. This situation has contributed to what is fundamentally a piecemeal system as well as to phenomenal price hikes, such as those announced by the VHI last week. Likewise, private postal companies will challenge the proposed sharing mechanism as a barrier under EU competition law. A likely outcome of the Bill will see the taxpayer needing to bail out An Post. Given that An Post would not need a bailout in the absence of private operators, it is important to ask who those operators would benefit. In this case, the beneficiaries would be the usual suspects, namely, Germany and Britain.
I have more to say on this matter. The Bill is based on the policies of a former Deputy and Commissioner, Mr. Charlie McCreevy. It is interesting that today he is a director of one of Ireland's most anti-union companies, Ryanair. It is regrettable that he has strange bedfellows in the Labour Party, which supported the European directive from which this Bill stems and failed to oppose the Bill in the Seanad. I urge Labour Party Deputies in particular to concentrate more on this Bill and to oppose it and the political and ideological agendas behind it.
The Bill's purpose is to open the postal services market to competition. While competition can be of benefit, for example, in the case of airlines, I am not convinced the postal service situation is comparable. I am stating the obvious when I say we have an excellent postal service. It is efficient, regular and reasonably priced. Our prices are the eighth lowest among 29 European countries. I hope the Bill will protect our high levels of service.
I wish to acknowledge another aspect of postal services, namely, the social service that postmen and postwomen provide, particularly in rural areas. It is positive, albeit unfortunate, that a postman or postwoman is often the only source of contact for people in some isolated rural areas. The Minister acknowledged the role of post offices throughout the country and the considerable range of services they provide.
Is it a case of reinventing a system that works? If something is not broken, why are we trying to fix it? Like others, I have been contacted by people who are worried about the Bill's implications. They are concerned that with the opening of the postal market, there may be an erosion of service levels. In Europe, liberalisation has seen social dumping. People are concerned about job losses and that reliable and socially beneficial jobs may be replaced by temporary and poorly paid positions. This type of social dumping cannot be allowed and employment standards must be protected. There are also concerns that An Post's high standards will not be maintained.
One section of the Bill relates to ensuring that postal service users may avail of a universal postal service that meets their reasonable needs but is this not the case under the current system? Will the Bill have positive or negative effects?
I welcome some provisions. For example, the postal service will be free of charge for blind and partially sighted persons and address the needs of specific social groups, in particular disabled postal service users. I welcome the provisions on the quality, regularity and reliability of service standards and the directions regarding corrective action where necessary. I also acknowledge the conditions regarding the withdrawal of service, the code of practice for the handling of users' complaints and the provisions on a price cap.
An Post will be the universal postal service provider for a period of seven years. This will pose it with a challenge and an opportunity. It has been facing other challenges, given the advantages posed by IT and the need to generate new income but I trust its board and management will rise to the challenge and ensure it is the operator of choice in a liberalised market. I hope its board and management will not get caught up in the culture of bonuses and expenses. Workers in post offices and those who deliver the mail have been doing their part efficiently and responsibly. I hope the fears of many workers and their families that this Bill is a threat to the postal service and the 10,000 jobs that depend on it will not be realised in this legislation. I hope the high standards to which we are used, the efficiency and reliability of those working in An Post and a reasonably priced service that covers many needs and the wonderful work being done in post offices will be maintained.
I thank the Acting Chairman for the opportunity to speak on this new legislation. I support the principle of a universal postal service. I also support the 18,000 people employed in the communications sector. I commend the Communication Workers Union, CWU, and its members on their dedication and professionalism in providing this service. My late father was a postman and a committed public sector worker. The significant community service provided by postal workers, particularly to senior citizens and people who live on their own, has been mentioned. Many of us remember the joy when the local postman delivered a parcel from America. It is important to remember such community contacts because they are relevant to the debate.
This legislation also relates to quality public services. It is important to recognise the great work done by CWU members. It seems not to be fashionable to stand up for public sector workers and trade union members but I support the public service, the teachers, nurses, civil servants, council staff, postal staff and health care staff. Most of them do a great job but are often blamed by certain political and other sections of society. From the lack of informed debate, one would think public servants caused the economic crisis. Politicians, bankers, developers, sections of the media, the regulator and a greedy section of society caused this economic mess. Any other view is inaccurate and unacceptable.
The legislation will shape the future of the Irish postal market for generations. The changes that will be introduced under the legislation must be carefully considered to ensure we do not make the mistakes other European countries have made when liberalising their postal markets, which led to job losses, higher costs and lower service levels. At stake is a vital public service that must be considered a basic right as it connects every household and business to a communications and economic infrastructure that is essential to the social and economic well-being of the country.
I have major concerns about the liberalisation of the postal service. The viability of the universal service obligation would be under threat in a liberalised market. In the absence of a proven method of financing, there are serious questions about the USO. Liberalisation will remove the restrictive monopoly that An Post uses to fund the loss making parts of the USO. The Government view appears to favour the establishment of a sharing mechanism but the CWU would prefer all funding options to be included in the legislation, including state aid. Nothing should be ruled out until we know what a liberalised market looks like. We must learn the lessons from other countries, such as Britain, where the USO is now under serious threat due to the regulatory choices made there.
Looking at the experience of the Royal Mail in Britain, we can see how important downstream access is. If it is handled badly, it could spell the end of An Post and the loss of 10,000 jobs. Access to the network must be on a commercial basis and must not fall below mail centre level as this would render useless much of the technology in which An Post has invested in recent years and would require the reconfiguration of the entire network. Cherry picking occurs when An Post's competitors compete for business on profitable postal routes only. The effect is to reduce vital revenues for An Post, leaving it only with the loss making routes, which are substantial in Ireland, thereby threatening the viability of the USO.
Unfortunately job losses and liberalisation go hand in hand. This has been the experience in every postal market that has been opened to competition as shown in a comprehensive study by the UNI across a number of liberalised markets. Social dumping is also a concern, where decent jobs with reasonable terms and conditions are replaced by low paid temporary posts that force employees to maintain dependence on social welfare, as has happened in Germany.
The social value of the postal service is widely acknowledged, particularly in rural communities and especially in bad weather conditions like those we saw recently. It is striking that the legislation does not refer to the fact that the postal network is a vital part of the fabric of our communities. It should be the case that decisions of the regulator must take into account the unique value of the postal service in Ireland, with its substantial rural population, and care should be taken to ensure the interests of a competitive market do not take precedence over or put at risk this vital public service, which is part of the fabric of our communities and provides a sense of national cohesion.
We must also address the positive side of An Post and its services. Postage costs in Ireland are the eighth lowest of the 29 European countries according to a 2010 survey, while it is the seventh most efficient postal operator. In 20 years, prices have increased on only three occasions and it has lagged behind inflation for the same period. It operates with no State subvention or taxpayer support. It is important to remember that An Post made €5.7 million in operational profit in 2009 on a turnover of €805.2 million, down 5.4% from €850 million in 2008. We have also seen the decline in mail volumes due to modern technology, down 16% since the start of 2009. Each 1% decline represents €5 million. We also have e-billing becoming more common and grave concern has been expressed by An Post about companies imposing such billing on customers.
The greatest challenge is the funding of the USO in the future. A compensation fund has not worked anywhere else in the world. We need state aid as an option for the future because we do not know how the market will look in five years. We need a plan B in case the market needs it. A lack of planning led to many of our current problems so we must ensure An Post has commercial freedom to compete with new market entrants in profitable areas. Access below mail centre level will signal the end of An Post and must therefore be covered in the legislation.
The main purpose of this Bill is to transpose the third postal services directive, providing for the final phase in the opening of postal services to competition. The Bill sets out a regulatory framework the main purpose of which is to safeguard the permanent provision of a universal postal service while encouraging competition in the market. We must ensure financial support for the provision of universal postal services. I am concerned, however, about the influence of the former Minister for Finance, Charlie McCreevy, on this directive. We have learned that the direction in which such people brought the country was part of the problem that led to the current crisis. We must learn those lessons when looking at this legislation. I commend the staff on doing an excellent job. They have a fantastic record for delivering the services, including a day-after postal service.
I urge the Minister to listen to my concerns about this legislation.
The Communication Regulation (Postal Services) Bill 2010 is vital legislation which should be used to improve the postal service for the population as well as allowing greater efficiencies for business. It also has the potential to be of great benefit to the emergency services. However, in achieving these efficiencies, job losses must be minimised and negative repercussions for our rural communities must be avoided.
I have serious concerns about opening the Irish postal services market to free competition. My fear is that it will lead to significant inefficiencies within the postal service and widespread job losses. I am also of the opinion that it will jeopardise the vital services currently provided by the existing postmen and postwomen in rural Ireland who for decades have provided an essential service to rural communities. Our elderly population, especially in rural areas, often rely on the staff of An Post for peace of mind and, at times, they are their only form of communication with the outside world. I doubt that this vital cog in the wheel of rural Ireland will be maintained if we adopt an approach which opens up the market to private operators.
This provision in the Bill will, in my view, lead to widespread job losses throughout the country. We must learn from the experience of our fellow EU members where the opening of the postal market has led to job losses but has failed to have the desired effect of decreasing costs. According to British commentators, the Royal Mail was seriously damaged when private operators were allowed to gain access to the market. In Germany, staff numbers were slashed when liberalisation was introduced. However, the German consumer experienced no drop in prices for the service. Currently, 10,000 jobs are dependent on the postal service in Ireland and we have the eighth lowest price out of 29 European countries for postal services.
I question whether this provision would lead to a more efficient postal service. Currently, An Post operates very efficiently. On the other hand, the quality of service in countries where the service has been liberalised has suffered a decline. The Communication Workers Union has told an Oireachtas committee that liberalisation will not necessarily guarantee an increase in postal volumes or employment, nor will it lead to a decrease in the cost of postage. The universal service obligation, which guarantees five days a week delivery to every address in the country, comes under threat. We must protect this critical element of the Irish market which provides the same service to everyone in the country at the same price. There are significant doubts as to whether there will be any interest from private operators. To date, there has been no contact from any private operator inquiring about the prices which An Post may charge for access to the service.
In my view, the most important aspect of the existing postal service is the contribution to rural communities. The introduction of the provision would have a significantly negative impact in this regard. The postmen and postwomen call regularly to isolated rural homes. This provides an important social outlet for the elderly and provides security and peace of mind for thousands. The liberalisation of the postal service would seriously jeopardise this important social service. It must be remembered that 40% of the population is rural and widely dispersed. The most probable outcome of opening the market would be widespread cherry-picking of the more profitable urban routes, leading to the neglect of rural areas. This is of significant concern to me.
I welcome certain elements of the Bill. The introduction of post codes is long overdue. Ireland is the only OECD country which does not have a national post code system. The introduction will undoubtedly benefit businesses and consumers and emergency services.
We must be prepared to learn lessons from the international experience. We need to examine events in Germany, the Netherlands and the United Kingdom. Ireland cannot afford the inevitable job losses which will occur. We need to support An Post which already offers very competitive prices. Most important, we must maintain the valuable services provided by postmen and postwomen in rural Ireland, as I have outlined.
It seems to me that some of this legislation we have introduced in the past few years has had a very negative impact on rural Ireland. In fact, I would go so far as to say that rural Ireland has taken a bit of a hammering in this respect. We must not isolate these communities further by doing anything that would jeopardise them.
I am delighted to have the opportunity to speak on Second Stage of the Bill. I welcome the Minister and I hope he is listening and will engage with all sides of the House before the Bill is rushed through or given a swift passage through the House.
This legislation proposes to open the Irish postal market to free competition. This may be regarded as a wonderful thing but, unfortunately, we have found out in recent times that it is not all it is made out to be. The result will be to undermine the current funding model for the universal service obligation of the Irish postal services. This is a fundamental tablet of stone that has been used by An Post and successive Governments since the foundation of the State. This is the mechanism that allows An Post to fund the loss making part of its service provision. This is critical for our society and our communities as it guarantees a five days a week delivery service to every address in the country at a single price. It is the backbone of the postal service.
With advances in technology, communications networks are changing drastically. There are more ways and options available for people to communicate, but this does not take away from the importance of the postal service which provides a door-to-door service to every household, at a reasonable cost. It also facilitates and further embodies the age-old practice of letter-writing. The art of letter-writing is a creative art in itself and is treasured by many people in both rural and urban Ireland. Many elderly people have learned that wonderful craft of letter-writing in school and enjoy writing letters and look forward to the postman whistling as he comes to the door.
The viability of this service is threatened by this Bill, as are 10,000 jobs in the sector. At a time when jobs are haemorrhaging at an alarming rate, if this Bill is passed, we will be accused of paying lip-service and of uttering pious platitudes and passionate pleas about stimulating growth and preserving jobs. It beggars belief that the Bill will have such a fundamental impact.
I have been lobbied not only by postmen and women and post mistresses and masters, but also by trade union representatives, who made solid cases. They asked us to look over our shoulders to our near neighbours in Britain. Evidence from across Europe, including Germany, the Netherlands and the UK, where liberalisation has already occurred, indicates that the opening of the postal market results in an erosion in service levels and job losses. It also results in social dumping. That is new jargon but we all know what it means. Decent jobs with reasonable pay and conditions will be replaced by low paid work. We have heard too much about that in the context of the recent unfair reduction to the minimum wage. In Germany, the temporary and precarious nature of postal jobs force employees to depend on social welfare for supplementary income. Employment standards in the industry must be protected.
The Bill must include a reference to recital 16 of the European postal directive, which states that social considerations should be taken into account when preparing to open postal markets. With the advent of the Celtic tiger, social considerations were put on the back burner. Recital 16 was specifically included in the directive to provide member states with an opportunity to legislate against negative outcomes.
An Post has never needed State aid or taxpayer support. The price of a stamp funds a service which delivers post to every door. Clearly, a significant amount of human labour is required from the time the stamp is fixed onto an envelope in a friendly post office until it is delivered locally, in some cases by bicycle. I compliment postmen and women on their work. As a small boy I remember the friendliness of my postman. That is still the case in rural Ireland and, I believe, in our towns. It was never needed more than during the recent cold spell, when the postman or woman was the only individual who regularly checked in on elderly and isolated people. In many cases, they were the ones who raised the alarm when they discovered somebody who was unwell or worse.
Postmen and women have also prevented crimes. I sit on the national board of Muintir na Tire, which runs the community alert and neighbourhood watch programmes. Many postmen went beyond the call of duty to act as the eyes and ears for their communities. They are not spies, however, but decent people who are mindful of who they meet in strange places and vehicles. They play an important role in ensuring the safety of our communities.
The efficient service which An Post operates is one of the least expensive in Europe, but it operates to some of the highest standards. Its prices are the eighth lowest out of 29 countries surveyed. These high standards must be protected. The employment conditions of postal workers who work in difficult conditions should not be undermined. I acknowledge the importance of postal services to the public good. They form an essential part of the fabric of our society and provide stable jobs that must be protected in the current economic conditions.
All post offices do a great job but sub-post offices face particular dangers because of the money which they carry on behalf of An Post and the State. Many have been violently robbed and they must operate to high standards of security. I have an intimate understanding of the risks they face because my own sister is a post mistress. There is no more important social role than that of postal worker. We have stripped away many social services but we cannot allow this one to be undermined or threatened in any way.
The Minister has good reason for introducing this Bill but it is badly thought out, ill-advised and must be re-examined. The experience across the water in the UK indicates the importance of downstream access. If this is handled badly, it could spell the end of An Post and 10,000 jobs. I am not scaremongering; I refer to the experience of our nearest neighbour. Opening up the service will lead to the cherry-picking of profitable routes. We saw what happened to Telecom Éireann. I have repeatedly argued in this House and elsewhere that the ESB should not be a monopoly but I am certainly not in favour of opening up services as we did with Eircom in 1999. A good friend of mine who is employed by that company was previously based in Clonmel but is now required to cover the entire south east. He would need a helicopter to travel and he is on call almost every second weekend. Eircom's employees work very diligently but local knowledge has been lost. The company has changed hands so many times that its employees would be hard pressed to know who owns it now. That cannot be allowed to happen to An Post.
I have no intention of voting for the Bill because it may do irreversible damage to the fabric of rural communities. We have seen the result of the loss of rural co-operatives. The meitheal spirit of the late Canon Hayes, which led to the creation of small and beautiful co-operatives, mushroomed into Glanbia and Dairygold, with the result that wastelands have been created in the centre of our towns and villages. Trucks are on the road 24-7 but the human way of life in rural Ireland has been undermined. The inclement weather restored the spirit of co-operation somewhat because people had time to check on each other or sit and talk because they could not drive along the roads. It was an act of God that brought us back 20 years to a time when we engaged with our neighbours.
Several years ago, we fought a huge battle over the proposal to install green boxes at the end of certain lanes. It may have been a cost cutting exercise but it was also a retrograde step. Postmen and women are often invited to have a cup of tea and a chat with lonely people. Sometimes they deliver or exchange newspapers. I hope I do not get anybody into trouble when I note that many postmen drove past the boxes to deliver post personally. It is part of the human nature of Irish people, who are diligent about their work and interested in human engagement.
Unfortunately, job losses and social dumping go hand in hand with liberalisation. We need look no further than Eircom for evidence of this. According to a comprehensive study undertaken by the UNI network, job losses occurred in nearly every postal market opened to competition. That first class research on countries which opted for liberalisation is there for anybody to examine.
We cannot allow this and must call a halt. We must hold on to what we have and go back to sensible engagement. I do not believe many people will line up to take this over in the current climate. We should hold on to what we have as we have lost enough. It is incumbent on all of us go ndéanfaimid ár ndícheall chun an seirbhís sin a choimeád.
I welcome the opportunity to speak on the Communications Regulation (Postal Services) Bill 2010. The reality is that An Post has never received state aid as a semi-State company. In fact, it has been one of the more profitable semi-State companies. Throughout its history it has been seen as one of the leaders in Europe in regard to its efficiency as an operator. It is the seventh most efficient operator of 29 countries surveyed by DHL last year. That survey also showed that An Post is the eighth cheapest in regard to postal costs. Last week, we saw the appalling situation in regard to the VHI and the dramatic increase in premiums. In 20 years An Post has increased the cost of a stamp on three occasions. It is semi-State company which has done well.
This side of the House has made the argument that we need to restructure and reform our semi-State companies to deal with the challenges in our economy and An Post has met those challenges head on. We do not want to see badly managed and poorly regulated competition introduced into the postal market that will end up with the State and the taxpayer having to subsidise An Post. The company and its employees do not want that situation to arise either.
It is vitally important that we do not repeat the mistakes made in other EU countries. In other EU member states services, in particular rural services, have been degraded. There has been a dramatic impact on rural services in many of the countries which have deregulated the sector in regard to the letter market. The UK is a prime example where the situation is a complete mess. The British postal system will never be repaired. It will cost a significant amount of taxpayers' money in the UK to address the situation on foot of deregulation taking place there.
The postal service is a vital public service. I spoke to an elderly person earlier this week and he made the point that unless he meets the postman in the morning, he does not know what is going on in the local area because he will not see another individual for the whole day. If he misses the postman, he will not know what is going on, whether a neighbour is sick, someone has passed away or whatever. It is a communications lifeline for many people in rural and isolated areas.
We must acknowledge that our country is largely rural and that the population is very dispersed. One cannot compare what happens in Ireland to what happens in other European countries where there are high proportions of densely populated areas. Large proportions of our population live in rural areas. There is a crucial social service aspect to the postal service and that must be acknowledged.
On foot of this legislation, there is a question mark over the five day postal delivery service in rural areas. As my colleague, Deputy Leo Varadkar, pointed out earlier, section 17 allows ComReg to remove this requirement without ministerial approval. Many of us who have had direct experience of ComReg down through the years would not exactly sing its praises in regard to its performance in the telecommunications sector. We are now giving ComReg a role in regard to the postal service. There is a real and genuine fear that because of costs, An Post will be forced into a situation where it will reduce the five day per week rural delivery service, which it currently provides, to a two or three day per week service. It is imperative that the nationwide door-to-door postal delivery service remains in place and that it remains a cornerstone of policy for this Government, or the next one. As far as Fine Gael is concerned, it will be a cornerstone of our national policy on the postal service.
We must ensure this legislation guarantees the continuation of that vital aspect of the postal service, that An Post remains a truly nationwide company and that it continues to run in a cost effective and efficient manner, something which it has done down through the years. Over the past number of years it has made significant investment in its mail system and the last thing that should happen is for that system to be undermined by this legislation. We do not want a situation to arise where there is a requirement to turn to the Government for a subsidy. The protections must be enshrined in this legislation to ensure that does not happen.
Not only are we looking at the possibility of a threat to the daily delivery service, we are probably looking at a significant increase in the cost of postage in rural areas. What will in all likelihood happen is that a zonal system in regard to charging will be introduced with the cheapest delivery cost being the main urban centre of Dublin, with the next rate being the other urban centres throughout the country. Then as one moves further from Dublin, additional costs will be involved. We will lose the universality which has been the cornerstone of our postal system to date. This will also have an impact on isolated individuals and rural communities. They are not prepared to accept a reduction in service. We have a company which is able to provide a cost effective and profitable service to every home in the country.
There is also a huge security aspect in rural areas. Over the past number of years the Government has downgraded or closed many rural Garda stations and run down many of the other services available in rural communities. Having the postman call on a daily basis gives that added element of security to elderly people and individuals living in isolated areas.
It seems the Government is trying to use a telecoms model of liberalisation in this legislation. As we know, the telecoms model has failed dismally. My fear is that if we introduce this, we will destroy the services that have been so important to rural areas.
I also have serious concerns about the proposed compensation fund which seems very like the proposal put in place for the health insurance sector. Introducing a compensation fund in the health insurance sector has been an unmitigated disaster. As we have seen, the VHI has hiked its premiums for the third year in a row, this time with a massive increase of 45%. We will now use something similar in regard to the postal service. It has not worked in regard to the health insurance sector, nor has it worked in any other EU country where it has been introduced. It is a failed system and if it has failed in another EU country, I do not see why we should try to adopt it when it has not, nor is likely, to work. We should consider the Finnish model which seems to be very successful. That country has a very dispersed population similar to Ireland. There has not been the cherry-picking we have seen in other EU countries.
It is also important that the Minister should have powers to direct the regulator. This has been a fundamental flaw in energy regulation here and we have had debates in the House when the Minister stated he should not give a direction to the energy regulator. It is imperative that the Minister should have the ability to give such direction to the regulator. Let him lay those directions before the House and put them in the public domain.