A controversial request from An Post for a 25 per cent rise in the price of a basic stamp has been rejected by the regulator ComReg.
An Post claims the rise is an integral part of its recovery plan, but ComReg in a preliminary assessment said the increase had "not been justified". The postal company was hoping to increase the price of a stamp from 48 to 60 cent.
However, the regulator has said it is prepared to consider the idea of increasing the price of large envelopes from 60 to 90 cent and packets from 96 to cent to €2. A consultation process is now under way on the pricing issue and submissions must be made to the regulator by October 14th. After this a final decision will be announced.
An Post has been lobbying for a price rise since 2003. The company believes its financial position remains weak to the extent that it believes it is not in a position to pay the full terms of the national pay agreement, Sustaining Progress.
ComReg said all price rises had to be geared to cost and consequently a rise in the price of basic stamp could not be justified. It also said price increases would drive down volumes and increase unit costs. It said this could in turn lead to "demands for further price increases".
"This could lead to a vicious cycle and could undermine the future provision of this universal service," it said in a statement.
For the last two years ComReg has constantly emphasised the low usage of the postal system in Ireland compared to other industrialised countries. There are only 187 items of post generated per person in Ireland at present, compared to 220 in Germany, 291 in France and 739 in the USA.
The regulator said there were potential growth opportunities for An Post but price increases tended to dampen demand. Isolde Goggin, ComReg chairwoman, said the organisation had to tread a fine line in its deliberations.
"We are required to strike a balance between protecting the universal service and interests of consumers. It is vital that An Post ensures it is in a position to compete in an increasingly competitive market and also that its tariffs are in line with costs," she said.
A statement from An Post simply said: "This price increase was always an essential element of An Post's strategic recovery plan, presented to the Minister for Communications in September 2003, and ComReg's consultation paper recognises this fact. ComReg's final decision regarding this price increase will have a significant bearing on the future of An Post."
Last night, the small business lobby group ISME strongly criticised the intention to approve the increases for large envelopes and packets. ISME said such increases, if finally approved, would represent a "kick in the teeth to smaller businesses".
ISME chief executive Mark Fielding said: "The decision by ComReg to recommend an increase from 60c to 90c (50 per cent) for large envelopes and 96c to €2 (108 per cent) for packages is outrageous and will have a significant impact on the costs of many small businesses who rely on the postal system to send informational and promotional material. If approved, the increase will equate to over 40 times the current rate of inflation.
"An Post, instead of being granted price increases, should be forced to address the underlying problems in their business, including restructuring their cost base and eliminating management inefficiencies. They cannot continuously be granted price increases, which only mask the underlying problems that exist within the company," he added.
