An Post concedes stamp price rise would cut volume

An Post has acknowledged that the volume of domestic mail would drop by 10 per cent over the next two years if it secured a major increase in the price of stamps.

In documentation provided to ComReg, the telecoms and postal regulator, An Post admits a price increase would affect use of the postal system.

However, the company argues that, while volumes will fall, the increase sought would provide a net benefit in revenue terms. It also claimed that An Post needs an increase to fulfil its universal service obligations.

An Post estimates that, taking 2006 and 2007 together, the drop in domestic mail volumes will be about 10 per cent. The company is seeking a 25 per cent increase in the price of basic stamp from 48 to 60 cent. This rise has been rejected in a preliminary assessment by ComReg, although a final decision may take another month or two.

On Thursday, ComReg said the case for this increase had not been justified. However, it said it might consider allowing the price of large envelopes to rise from 60 to 90 cent, with the price of a packet rising from 96 cent to €2. Under legislation, An Post is required to meet various universal service obligations (USO). Among these is that all letters must bear the same tariff regardless of their destination within the Republic.

Ironically, ComReg cites the USO as the reason it cannot permit a price increase at the present time.

In a document released on Thursday, the regulator said: "In ComReg's opinion, the reduction in volume and the consequent increases in unit costs would seriously undermine An Post's ability to provide an affordable universal service in the medium to long term," it said.

The chairwoman of ComReg, Isolde Goggin, has said that consumers will only use the system if they are guaranteed a "quality service at a fair market price".

She said more work needed to be done before An Post reached a next-day delivery target of 94 per cent. The regulator has pointed out that its role in the postal area is to promote the development of the sector and guarantee the USO.

It has emphasised in the last two years its desire to see mail volumes significantly increased.