An Post will get cash to open up the market

An Post is likely to be compensated if new competitors ‘cherry pick’ lucrative, highly-populated areas after the postal market is opened up to competition in 2009.

A European Commission Directive announced last week by the EU Internal Market and Services Commissioner Charlie McCreevy w ill expose An Post to the full rigours of competition in all sections of the postal markets in just over two years.

McCreevy sa id the directive would deliver ‘‘efficiency, quality, performance and profitability’’ to postal companies. European postal companies will be free to compete in the domestic letter market and deliver mail directly to the public.

But the government can impose a levy on new entrants to compensate An Post for losses arising from its legal obligation to deliver domestic mail to poorly populated areas, which are loss-making.

The levy, which would be regulated by ComReg, has been compared to the controversial risk equalisation levy imposed on private health insurers Bupa and Vivas, to compensate the semi-state company, VHI, for the costs incurred insuring older patients. Under its universal service obligation, the state postal company is legally obliged to deliver letters five days a week, to all homes in the country, irrespective of location, at an affordable price to consumers.

However, new private postal companies entering the Irish market will target more lucrative markets, such as cities and towns, for domestic mail, as well as the business market, which makes up 90 per cent of all deliveries.

‘‘This mechanism would establish what the fund and the contributions made would be, but it can be done in away th at does not act against the market and prevents cherrypicking,” an EU source said. ‘‘The directive gives an indication of the range of funding mechanisms and it will be up to each member state to decide what works best for them.”

This weekend, Fine Gael MEP Simon Coveney called on the Minister for Communications, Noel Dempsey, to start negotiations immediately with An Post to devise a system of compensation to guard against cherrypicking under the directive. Coveney said the options for a compensation fund included direct state aid, a levy or a requirement that forced new private postal operators to service the entire market. The final option was unlikely due to An Post’s extensive delivery network and infrastructure.”

You can either support An Post from the taxpayer or you get it from the new entrants in the market,” he said. McCreevy believes the directive provides the broadest flexibility t o governments ‘‘to share out any unfair burden, and to organise compensation mechanisms’’.

In his address to the EU Commission last week, McCreevy stressed that countries that had fully opened their postal markets – which included Britain, Sweden, Finland, Germany and the Netherlands – were reaping the benefits.

‘‘All have shown, not only that market opening is feasible, but that those who opened up and started early have gained the most. There is no reward for sitting on the fence,” McCreevy said.