COMMENT: There has been little debate about the biggest source of losses, writes Alex Pigot.

This Christmas's mail delivery problems, where over a million Irish Christmas cards went undelivered until after Christmas Day, should have been avoided. An Post's statement that it is contractually bound to deliver foreign mail before Irish domestic mail, its proposal to move to kerbside boxes and its unwillingness to introduce a postcode system must all be questioned. And An Post should be currently making significant profits and not losses.

These are the issues that customers of An Post would like addressed by An Post, Minister Dermot Ahern and ComReg, the Irish postal regulator. That An Post should be making profits is the only reasonable conclusion one can draw from figures published on its own website just before Christmas (http://www.anpost.ie/about/Regulatory Accou nts.html).

It is worth considering these figures not just because of the Christmas mail problems but, as has emerged in recent days, An Post is currently proposing, or opposing, major changes in our national postal service.

Firstly, it has stated that it sees no need to introduce a national postcode system similar to what every other EU country (except Greece) has had for decades. Secondly, it is proposing to suspend door-to-door deliveries for almost one in two Irish households and instead spend arguably in excess of €40 million on kerbside boxes. Thirdly, it is proposing to continue with an investment programme in more sortation technology, when it is absolutely clear that the existing equipment, in which it has invested over €150 million over the last three years, is not yet working satisfactorily.

Overall An Post lost €6.7 million in 2001, yet most of its individual businesses made profits. More surprisingly, given all the publicity regarding these losses, its core domestic delivery service made a profit of €7.5 million in 2001. The three areas, as per An Post's own accounts, where An Post is actually losing money are (a) small letters posted internationally; (b) delivering letters from abroad; (c) post office counters. If these three areas broke even An Post would have made a profit of €31.2 million!

The problems in the An Post Counters Division have been well documented and debated. Actions to stem the losses appear to be well advanced and An Post management are to be congratulated on their strategy, which will mean the retention of so many of our post offices, which provide such an important part of our Irish social infrastructure.

However, there has been little debate about An Post's biggest source of losses. That is the fact that foreign postal operators, and overwhelmingly the Royal Mail, are not compensating An Post for the real cost of delivering cross- Border mail into and from Ireland. As a result, as ComReg has made clear, Irish consumers and businesses are subsidising Royal Mail and other foreign postal operators. And now it would seem that because of this we, the Irish customers of An Post, are also suffering reductions in the quality of our own national postal service.

The root cause of this serious haemorrhaging of money from An Post is an agreement that it has signed with most other EU postal operators called REIMS. This agreement sets the level of compensation that postal operators pay each other for delivering each other's mail. In practice, its terms and conditions are hugely unfair to Ireland, but for some reason An Post appears unwilling to opt out of it, as for example the Dutch post office has done. This is remarkable because, if An Post had a separate agreement with Royal Mail that simply made sure An Post was paid a fair price for the work it actually does, then according to its own figures it would move overnight from serious losses into significant profits.

REIMS also negatively affects the volume of business that An Post has because it is now very much cheaper, because of the cheaper postage available, to produce bulk mail for Ireland in the UK and post it via the Royal Mail back to Ireland. This unfair discrimination against Irish bulk mail producers has also been highlighted by ComReg.

Yet surprisingly, instead of tackling the core problem, An Post appears to be cutting back on the number of its staff, the amount of overtime paid and the quality of service to customers. And at the same time it is proposing to continue to invest in a sortation system that appears to be giving serious problems and opposes the introduction of a postcode system (unlike almost all of the other 105 postal operators worldwide).

The men and women who work in An Post collecting, sorting and delivering the mail do an excellent job, often in difficult circumstances. They provide Ireland with a first class universal mail system. It could also be a profitable one if An Post:

Negotiates a new compensation agreement with Royal Mail (and also with other European postal operators);

Suspends investment in sortation equipment and asks larger customers how new efficiencies can be introduced;

Supports the introduction of postcodes that so clearly are good for everyone including An Post;

Suspends plans for investment in kerbside boxes until there has been a real debate on the alternatives.

Alex Pigot is managing director of bulk mail production company TICo Group Ltd. He is a board member of FEDMA (Federation of European Direct Marketing Associations) and a member of the Irish Direct Marketing Association's regulatory affairs committee.