An Post has criticised Ireland’s postal regulator for taking a “simplistic” approach to the current state of the postal market and the problem of declining letter volumes.
Ireland’s universal postal provider was commenting ahead of yesterday’s publication of regulator ComReg’s Postal Strategy Statement for the years 2012 to 2014.
An Post wants to increase postal rates to help alleviate the financial pressures from declining mail volumes and inflationary cost increases, but needs ComReg’s approval to do so for items under 50g in weight.
It applied back in February to increase these prices by 12% for domestic and by 11% for international mail, which would involve a 10c increase to the basic stamped letter price, up to 65c.
But consultants commissioned by ComReg cast doubt on An Post’s predictions for mail volumes, calling its forecasts “optimistic” considering current market trends and projections by other European operators.
Earlier this month (October 2012), ComReg said An Post will now go back and revise its pricing request as a result.
Issuing its 2012-14 plan yesterday, the regulator warned that raising postal rates could further damage mail volumes, and said it wants further cost savings from An Post.
ComReg chairperson Alex Chisholm said: “For postal services to stay competitive as a medium of communication, postal service providers must be cost effective, innovative, and continually aligning and re-aligning their postal services to postal users’ needs.”
An Post complained that ComReg’s strategy suggested there was a “wide range of attainable options” to deal with the decline in mail volumes, but the postal operator said: “This is not the case”.
“No simple solution exists,” the postal operator insisted. “The decline in mail volumes is both structural in nature and impacted by the current recession.”
An Post is looking ahead to potential growth in the parcel business, but said it was “not realistic” to assume parcel growth could replace the loss of revenue from the letters business, with packets and parcels a smaller and more competitive market than letters.
An Post is currently facing new competition from other postal services with the Irish market now liberalised under European postal laws, and is currently negotiating how to allow access for other delivery companies to its last mile network, similar to Royal Mail’s Downstream Access system in the UK.
As in the rest of the world, mail users in Ireland are also increasingly using Internet communications instead of the physical mail channel.
The Irish postal market has declined 23.5% in Ireland from 2008 to 2011, and “is likely to be close to 30%” by the end of 2012, An Post said. Losses from the universal service obligation have been increasing from the EUR 50m loss seen in 2010.
The postal service told the regulator this month that it is currently expecting to cut 1,500 full-time jobs over the next four years as part of its response to declining mail volumes and its effort to improve service efficiency.
The downsizing up to 2016 will bring its total job cuts to 2,600 including jobs already cut since 2008.
The company is also continuing to work to make other cost savings and develop new revenue streams, it said in documents released yesterday.
The call by An Post for ComReg to approve requested price increases was backed by the Communication Workers Union, which said Irish postal rages had not reflected inflation in recent years, and “a review of the tariff is long overdue”.
“In line with its statutory functions to protect and maintain the universal postal service there should be no further delay on this issue, which is becoming increasingly vital to the commercial viability of An Post,” said the union’s head of regulatory affairs, Ian McArdle.
The union also pointed out that it was “not helpful” for ComReg to continue pursuing legal action and a EUR 12m fine against An Post for not meeting its service quality targets.