Postal Policy Division
Head of Division: Patricia Cronin, Principal Officer
Functions of Division
The Division has responsibility for postal policy and it also exercises a corporate governance function with respect to An Post. The Division also manages the Postcodes Project. The policy goal is to ensure that Irish customers, both business and residential, enjoy competitively priced, high quality postal services.
Postal Sector
The postal sector in Ireland is worth about €1bn annually with approximately 17,000 people employed in the sector. An Post is the largest player and dominates the letter-post and domestic parcels sector. Other providers are divided between subsidiaries of large multi-national operators, mainly in the logistics business, and smaller local operators in the express and courier businesses.
The health of the postal business is closely related to the overall health of the economy and An Post and the other operators have not been immune to the effects of the downturn.
In addition, postal operators worldwide are experiencing the effects of electronic substitution and this phenomenon is expected to become a greater competitive threat.
Liberalised Postal Market
The phased liberalisation of the postal sector was completed on 1 January last as the 3rd Postal Services Directive provided for the removal of monopoly provision of postal services.
The policy goals in the sector are (a) the provision of a basic suite of postal services to everyone (universal service) and (b) the promotion of competition and innovation.
The Communications Regulation (Postal Services) Bill sets out the regulatory framework by incorporating mandatory provisions under the Postal Directives plus other provisions which have been included in order to strengthen the capacity to achieve both policy goals.
Key features of the Bill
An Post continues to be designated to provide a universal postal service; however this designation will be reviewed by ComReg after seven years. This fulfils the State’s legal obligation to provide a universal service (5 day collection and delivery to every address in the country).
An Post, as the dominant player, is subject to the greatest degree of regulation. Obligations include:
· A price cap which will apply to those universal postal services provided by An Post for which there is no competition and where An Post is likely to exert market power, i.e. the residential and SME sectors
· Access to An Post’s delivery network (Downstream Access) will be available to other postal operators on a commercial basis, in order to stimulate competition and innovation in the sector
Operators in direct competition to An Post are also subject to regulatory obligations, the most significant of which is a potential contribution to a compensation fund if An Post is unable to discharge its universal service obligation without external assistance. Provision is not made in the Bill for Exchequer funding in this regard.
Operators in areas already open to competition and where choice is available to consumers face minimal regulation.
The Bill also contains provisions relating to consumer protection and an enabling provision for the Minister for Communications to establish, maintain and operate a national postcode system.
The Programme for Government commits to USO for 20 years and for an Exchequer subvention to fund this.
Status of the Bill
The Bill was passed by the Seanad in December, but the Dáil was dissolved before the second stage debate was completed. The Bill may be re-introduced in the Dáil by way of motion. It is vital that it be enacted urgently as the transposition date is passed and the State is exposed to the possibility of financial penalties.
An Post
· An Post is the largest postal provider and also operates the post office network.
· The Chairman is John Fitzgerald (appointed until February 2013), and the CEO is Donal Connell (appointed until August 2013)
· An Post employs circa 9,600 employees, which has remained fairly stable in recent years
· The post office network has 1,351 outlets, 57 of which are company owned and operated, 1,109 of which are contract offices operated by postmasters, and 185 are postal agents
· An Post has been profitable since 2004, (with the exception of 2006 which was attributable to the payment of €20m in arrears due under Sustaining Progress), though overall profitably has been enhanced by interest income and property sales. The postal business is essentially a high volume transaction business with correspondingly low profit margins
Challenges for An Post
· Electronic substitution - which is already affecting both the mails and post office business
· Mail volumes decline (down 18% since 2007 – 5.7% in 2010) due to the recession and electronic substitution
· Over-reliance by the post office network on State contracts, especially the social welfare business
· Remaining financial sustainable in a changed business environment
Positives
· Large countrywide retail network which can be leveraged to generate additional business especially if the banks downsize their retail footprint
· Good brand
· Capacity to change - demonstrated by the big improvement in mails quality of service and implementation and delivery of costs savings in IR agreements
· No debt and a cash balance of €204m (November 2010)
An Post 5 Year Plan
An Post has produced a five year plan for the period 2011-2015 which sets out the roadmap for company transformation. The most significant elements of the Plan are:
- The adjustment of the current operational model to address a continued decline in postal volumes. This will involve strict cost containment in both payroll and non payroll costs.
- Developing alternative sources of income based on developing (a) new products and services through the existing mails and post office network and (b) diversifying into new delivery channels.
There is no doubt that An Post faces a very challenging financial climate. Their core business will likely continue to fall and costs must be reduced. Sustainable new sources of income are vital.
Postcodes and the Implementation of a National Postcode System
Ireland is the only country in the EU or OECD which does not have a national postcode system. In 2009 the Government decided to proceed with the implementation of a National Postcode System. PA Consulting was appointed in 2010 to assist the Department with procurement and implementation. A Government Decision on 21 December 2010 authorised the Department to proceed with the first stage of procurement.
Project Phases:
Procurement
- First stage procurement underway with the issue of Pre-Qualification Questionnaire 17 January 2011 - Closing date 25 February 2011
- The ITT will issue to a shortlist of suppliers and they will commence the competitive dialogue stage to reach the best solution for a national postcode system
- A Postcode Management Licence Holder will be selected and appointed for the implementation of the National Postcode System by August 2011
Postal Integration
- An Post is fully committed to the implementation and integration of postcodes.
Database Conversion
- Interdepartmental Group established to ensure that Departments with large public databases are kept informed and assisted with the data conversion
Finance
- €7m capital allocated for Postcodes in 2011 together with €8m in 2012