Irish firms fear fallout from An Post price increases

Some of the State's biggest firms have warned the Commission for Communications Regulation (ComReg) that proposed price rises from An Post will hurt their businesses and restrict growth.

The companies have also told ComReg that allowing An Post to raise its prices will force companies to reduce their mail volumes and seek alternative suppliers.

ComReg has agreed in principle that An Post should be allowed to increase prices on a range of post services by 17-104%, subject to setting up a discount scheme for businesses.

An Post has said that it had agreed to introduce a discount scheme for small business as proposed by the regulator. It will send its proposal to ComReg, paving the way for the price rises in late August.

However, industry submissions to ComReg on the proposed price rises – which have been seen by The Irish Times – show many companies believe the price rises are excessive and will undermine their business.

Credit card firm MBNA, which employs over 1,000 Irish staff, warned ComReg that the prices threatened its ability to grow and compete in the Irish market.

"The proposed price increases will have a significant impact on our business model, cost efficiency and our ability to grow and compete," wrote Ms Ciara Kennedy, head of business development at MBNA, who warned that mail volumes would fall because of the price increases.

Several other big companies including Eircom, NTL and TICo Group, a major bulk mail producer, proposed alternatives to the price increases, according to submissions made to ComReg.

Eircom's submission outlines that, as a major user of postal services, it wished to see postal prices maintained at the lowest possible level. It proposed introducing a multi-year price approval scheme for An Post that would give customers a greater degree of predictability. But in a reference to its own price regulation system, a system imposed by ComReg, Eircom said it recognised that prices must reflect the cost of providing a service.

TICo, which handles 400,000 items of mail for Irish firms every week, said the proposed price increases would make customers review their delivery arrangements. If it was cheaper to send mail from Britain, customers would move to produce and mail from there, said the company.

Some charities and business lobby groups, such as South Dublin Chamber of Commerce and the Irish Small and Medium Enterprises Association, are also strongly opposed to the price increases. Cork-based charity Missionaries of the Sacred Heart said it would be hit severely by the new prices and would be forced to post letters to its British benefactors from Northern Ireland to avoid An Post's new tariffs.

But, despite the strong opposition expressed by major companies to the price hikes, it has emerged that An Post is planning further price increases to address its financial problems.

Submissions to ComReg made by An Post and the Communication and General Workers' Union (CWU) show further postal price hikes are in the pipeline. In its submission for a price rise, An Post says: "It is likely that, in the future, An Post will have to charge and the regulator will have to approve further significant price increases."

The CWU, representing 9,500 An Post staff, goes a step further by suggesting that the first phase of An Post's pricing strategy be restricted to a two-year duration. This implies that the union believes further price increases should be approved by ComReg within two years. An Post posted a €70.5 million loss in 2002, its worst ever financial results. Its restructuring programme is 18 months behind schedule.