Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

 Introduction

2          The postal sector was fully liberalised on 1st April this year with the end of SingPost's monopoly in the basic mail services market. Pursuant to this, this Bill seeks to make the necessary amendments to the existing Postal Services Act.

 Liberalisation of the postal sector

3          Let me begin with a brief overview of the postal sector and the process by which we have managed this liberalisation. 

 Evolution of competition

 4         As a whole, the postal sector remains an important one.  In 2005, revenues in the sector were about S$1.2 billion, with some 564 commercial establishments.  This market is also a mature one.  While total mail volume has been growing since the 1990s, the average growth rate in recent years has only been about 2% per year.

 5         The Government has been introducing competition gradually to this sector.  This, first, began in 1992 when SingPost was granted a Public Postal Licence with a 15-year exclusive right to collect and deliver ordinary letters and postcards within, into and out of Singapore .  Three years later, in 1995, the provision of express letter services was liberalised and opened to competition. Today, we have more than 100 express letter licensees.  In addition, there has been a completely liberalised market for the delivery of parcels, marketing brochures, advertisements and publicity material.  

 Benefits of liberalisation

 6         The stimulus of competition will, we believe, spur even greater and better services for the whole postal sector.  The opening of the market to many new players will promote innovation, a greater diversity of services and more competitive prices.  This will benefit all users, especially the business users, who today account for more than 90% of the domestic mail that is sent.

7          It is estimated that the liberalisation of the postal services would result in cost savings of between eight and 25 million dollars per year, for the sector as a whole, over the next two to three years.  

 Key considerations

8          Sir, we must ensure that the quality and integrity of the  postal services are maintained at a high level even as we promote a competitive environment. It is in this spirit that the proposed changes in this Bill have been drafted.

 9         As the changes will have a wide-ranging impact, my Ministry and the Infocomm Development Authority of Singapore (IDA) have conducted a series of public consultations which began in October last year.  I would like to thank all the organisations and individuals who have provided much useful feedback, which we have carefully considered in the formulation of this Bill.

The new postal landscape

 10       The existing postal sector really consists of two markets.  These are the Basic Mail Services market and the Express Letter Services market. Our proposed changes will focus on the Basic Mail Services market while, as I have explained earlier, the Express Letter Services market will remain unchanged because it is already open to competition.

 11       Under the old regime, SingPost was the only Public Postal Licensee (PPL) in the Basic Mail Services market and, therefore, had a monopoly.  We will now introduce a new type of licensee, in addition to the PPL, called the Postal Service Operator (PSO).   Collectively, PPLs and PSOs can be referred to as basic mail service providers. 

 12       The key difference between the PPL on the one hand and the PSO on the other hand is that the PPL will have to meet a set of Universal Service Obligations (USOs) in return for certain privileges.  These USOs will include the requirement to maintain an island-wide letter collection and delivery system.  Under the terms of its current licence, SingPost will continue to be the PPL in this market.  A PSO, on the other hand, will have the flexibility to select one or more segments of the postal services market in which to operate, without the need to meet such USOs.  Such market segments in the postal sector could include the conveyance of letters or mailroom operations.

 Details of the Bill

13        Sir, I have explained the policy objectives behind this Bill.  Let me quickly explain some of the key changes.   

 Revised definition and new provisions

 14       First, we have redefined the scope of a "letter" to now include all written communications, including postcards but excluding books, catalogues, newspapers or periodicals. We have specified that letters weighing more than 500 grams or the conveyance of letters by direct mail would be exempted from the licensing regime.

 Functions, duties and powers of the Postal Authority

15        The second major change pertains to the powers of the Postal Authority.  Clause 3 of the Bill adds new provisions that elaborate on the functions, duties and powers of the Postal Authority, which in our case is the IDA.

 16       The proposed changes will allow IDA to design and fine-tune legal instruments to implement its policies for the sector. Clause 18 of the Bill will empower IDA to issue directions, codes of practice and standards of performance to ensure effective competition, fair market conduct and enforcement.

 17       In the same vein, clause 21 of the Bill sets out the IDA's new powers to control mergers and acquisitions involving designated postal licensees.  It will empower the IDA to review acquisitions and consolidations, so as to address ownership changes that may raise regulatory or competition concerns, or which have an impact on national interest.

 Enforcement powers and procedures

18        Let me move on to enforcement powers and procedures.  Sir, we need to maintain public confidence in the integrity of our national postal system.  Consequently, IDA must be equipped with the appropriate enforcement powers to respond and fully investigate any alleged lapses or abuses.  Today, section 46 of the Act empowers IDA to require any person to furnish any information or document in his possession relating to any postal service or system.  Clause 31 of the Bill will enhance this provision by requiring the person who furnished the information or document, to also provide an explanation of the document in order to facilitate IDA's investigations.  If the person claims that the document cannot be produced, then he would have to state, to the best of his knowledge, the location of such document. A provision has also been inserted to stipulate that such a document can either be in physical or electronic form.

 19       Sir, to balance this enhanced leverage, a clause has been included to offer the person a defence if he can prove that the document was not in his possession or not under his control, or that it was not reasonably practicable for him to comply with the requirements.
  
20        The other key changes in enforcement powers aim to provide greater clarity on the status of letters that have been seized during enforcement procedures.  Currently, the Act is silent on what would happen to such letters and there is an uncertainty over who would be held accountable.  To remove this uncertainty, for operators and consumers alike, clause 34 of the Bill will provide for the IDA to deliver to its intended addressee, or return the letter to the original sender.

 Offences and penalties

 21       To ensure the integrity and smooth functioning of the postal services and prevent any deliberate abuses, this Bill will also seek to reinforce the penalty regime for offences.  Under the old regime, the gains from anti-competitive behaviour to disadvantage other competitors may well exceed the current stipulated penalties.  Consequently, we believe that by enhancing the penalties regime, we will ensure that our objective of maintaining a deterrent effect is retained. To do so, we have strengthened the financial penalties for licensees who contravene licence conditions, and for licensees who do not comply with orders issued by IDA.  The scope of conditions for the suspension or cancellation of licence in section 9 of the Act has also been broadened to include an assessment of whether the licensee is in a position to comply with the Act or the licence conditions as well as its propensity to default again.

 22       For example, the financial penalty for contravention of licence conditions has been increased from the current $10,000 to an amount not exceeding $1 million.  This might seem, at first glance, to be a large jump, but we believe that the magnitude of the increase in penalties is appropriate.  It is also in line with what has been adopted under other pieces of legislation, for instance, the Telecommunications Act and the Electricity Act.   This will serve as a safeguard against anti-competitive actions by any single operator if that operator was to attempt to hurt other operators and, ultimately, hurt consumers by reducing competition.

 Updating of existing provisions

23        Sir, the third major area of change to the Act consists of updates to existing provisions to ensure they remain relevant.  Let me cite a few examples.

 National postage stamps

 24       One such area is national postage stamps.  Because of their significance, clause 15 of the Bill will allow only IDA and the designated PPL to issue national postage stamps that bear the word " Singapore ". The designated PPL will have to meet certain obligations, for instance, obtaining IDA's approval for the designs of the national postage stamps.  The designated PPL must also comply with any related instructions from IDA.  

 25       SingPost, as a designated PPL, will continue to issue national postage stamps.  These stamps and their associated rights, together with other philatelic archival materials, will continue to be the property of the Government.

 Remittance of money

 26       Another provision that has been fine-tuned is the remittance of money under section 11 of the existing Act. The Bill repeals and re-enacts a new clause 11 that scopes the remittance activities to cover only those remittance systems that have been established by or among public postal licensees and any relevant foreign postal administrations.  This will make clear that the new Act does not cover remittance activities carried out by financial institutions.

 Appeals mechanism

 27       One further enhancement to the Act is the inclusion of provisions to provide better clarity about the appeals mechanism. Clause 38 provides the details about the appeals mechanism that postal licensees who do not agree with IDA's decision can refer to, if they decide to appeal to the Minister.
 
Other provisions

28        There have also been other changes to the Act that I will not dwell on.  The House will find that these are mainly changes to ensure that the Act will remain relevant in this new competitive environment.

 29       Sir, we note that the changes that we have proposed in the Bill will require adjustments in other pieces of legislation as well.  These include, first, the Bankruptcy Act; second, the Newspaper and Printing Press Act (NPPA); and third, the Undesirable Publications Act (UPA). In essence, the consequential amendments to these Acts will widen the coverage of these Acts to include any of the new postal service operators that enter the scene.

 30       Lastly, we appreciate the need for industry players and consumers alike to have sufficient time to adjust to the changes in the legal and regulatory frameworks for the postal sector.  Clause 41 of the Bill provides the transitional provisions that would allow a six-month period for operators to adjust to the new regime.

 Access to letter box keys

 31       Sir, before I conclude, I would like to address one issue which has attracted comments and queries in the press and during the public consultation phase, although it is strictly not part of the Bill. This issue is related to the matter of access to letter box keys. Some press reports have even implied that the letter box key might actually undermine our attempts to liberalise the sector.  Let me explain the situation.

 32       We are a unique country with a unique set of letter boxes.  The traditional letter box which you will see all over the world is an open-aperture letter box, which means a postman or anybody else for that matter can come to the letter box and insert a letter.  That is what we call the open-aperture letter box.  But, in Singapore , because we - when I say "we", I mean the people in general - did not like junk mail.  We came out with the idea of optionally locking the aperture in the letter box, which means the ordinary postman or the deliveryman cannot slip letters into your letter box.  But, yet, in order to enable SingPost to deliver the letters, we came up with what we call a two-door system, an aperture in front which the user can lock and a door at the back which SingPost has the keys to, and they can use that to open up the back of the letterbox and insert the letters and the parcels.  That is the two-way system.  

 33       Then there was another innovation, a three-way system.  Because the problem with the two-way system is that when the postman opens the back of the box, not only could he put letters in, he could also theoretically remove materials out of that letterbox.  So the next innovation was a three-way system where, if a person has that key, he could open the back, he could put in letters but he could not remove materials.  That was meant to enhance security.  The problem then arises with the two-door system because the postman can put letters in as well as remove materials out. And if you have free competition and multiple operators with that second key, where they could both insert and remove materials, then quite legitimate questions would be raised as to the security and integrity of your postal system.  Because you will never be sure whether the letter was delivered or removed and, if it was removed, who removed it?

 34       So after a significant amount of discussions and consideration, we have now decided that IDA will only facilitate that the designated Public Postal Licensee will have the full set of keys for both the two-way and three-way master letterboxes in Singapore .  And to qualify for this access, the PPL would have to comply with arrangements that satisfy IDA that security and integrity have been addressed. Till such a new PPL emerges, for the time being, SingPost will continue to be the designated PPL that would have access to all local letterboxes for mail delivery under its universal service obligations.

 35       However, this does not mean that there will not be competition in letter delivery.  Because this two-way master-door letterboxes that I told you about only represent about 32% or one third of all local letterboxes. That means all the other basic mail service providers will still be able to deliver directly to the open-aperture letterboxes and to the three-way master-door letterboxes which together account for 67% of all the letterboxes in Singapore.  Basic mail providers are welcome to directly approach the town councils or, in the case of condominiums, the Management Committees to obtain the master-door keys that will grant them access to the three-way master-door letterboxes.

 36       In this respect, I would like to encourage all the town councils and the Management Committees to work with interested postal operators because, by doing so, it will provide more competition and more choices and, hopefully, more competitive pricing for the residents.  But at the same time, IDA would also facilitate the system so that other basic mail providers will, if they do not have access to the letterbox, still have access to SingPost delivery network and that delivery network will, as I said earlier, be able to reach all letterboxes but at regulated prices, terms and conditions, which IDA will decide.  So using these two methods, we will still ensure that competition prevails and people will have choice.  More details about this very difficult issue of access to letterboxes will be published by IDA in their Regulations, the Competition Code and Operations Code for the postal sector.

 37       Sir, let me end by summarising that the policy intention is to provide legal effect to the liberalisation of the postal sector.  We believe this Bill will encourage fair market competition and ensure better services and more competitive prices for consumers. Crucially, it will also foster greater service innovation and lay the foundation for a strong and vibrant postal sector in a competitive and liberalised environment.

38        Sir, I beg to move.