Should Canada Post be privatized?

Put "Canada Post" and "radicalism" in the same sentence, and Canadians get the shakes. Many will be reminded of the incessant strikes and militancy that plagued the post office from the mid-1960s to the early '80s. But after reading Canada Post's first-quarter financial report, I say Canada's postal service needs to get more radical. In fact, it needs a seriously revolutionary rethink.

The balance sheet makes for bleak reading. As Canada Post had warned, a modest 2012 operating profit was temporary. Mail volumes dropped again-especially the monopoly-protected letter class. Its comprehensive income statement shows a large and persistent accumulated deficit, however, so Canada Post's overall net worth-a liability we all own through the federal government-is now $2.3 billion in the red.

I give credit to Canada Post for not sugar-coating the bad news, at least, and for commissioning a Conference Board report that details the various ways that digital alternatives are supplanting physical mail. Senders and receivers alike are going online to communicate, advertise, inform and pay. Only parcel delivery-a relatively small part of Canada Post's business, and one that faces fierce private-sector competition-is growing.

(The Canadian Press/Graham Hughes)

(The Canadian Press/Graham Hughes)

The report quotes surveys and focus groups on what a bargain mail service is-though most respondents didn't know the cost of a stamp-and, after remarking that "Canada Post currently delivers a higher standard of service than Canadians expect or use," lists such depressing options as higher prices, less frequent mail delivery, slower service and replacing door-to-door service for urban households with community mailboxes.

It may be true that today's world doesn't demand traditional mail service as frequent, fast and convenient as Canada Post now targets. But better performance-almost 95% achievement of aggressive delivery times in 2012-has been one of the few bright spots for Canada Post in recent years. Charging more for service that is less frequent, slower and more inconvenient? That's a slow fade to oblivion.

The declines since 2007 profiled in the annual report reminded me of a paper on Canada Post published that same year by the CD Howe Institute. Its authors, Michael Trebilcock, Edward Iacobucci and Tracy Epps, argued that innovation and competition at home and abroad were making Canada's postal system obsolete. They said the service's twin pillars-a government-owned monopoly on letter mail and a universal service obligation-needed to give way to competitive discipline and new ways of financing service to remote customers.

Six years later, their arguments are just as pertinent. Other countries have embraced competition in mail. Indeed, the stakes for Canada appear higher than before, with advances in communication prompting new appreciation of the importance of network industries to national competitiveness and productivity. Maintaining Canada Post's monopoly while acquiescing in degraded service is a doubtful prescription for Canada Post itself, and promises nothing good for consumers, businesses or Canada's economic dynamism.

So let's get truly radical. Let's phase out the letter-mail monopoly entirely. Let's replace cross-subsidization for universal service with competitive bidding to collect from, and deliver to, remote locations. We may need temporary regulations to monitor prices and ensure that Canada Post's dominant position doesn't freeze out competitors. Longer term, though, competition can ensure that a more dynamic Canada Post and its rivals give Canadians high-quality communications, at reasonable costs to users and to the public treasury.

The Canada Post and Conference Board reports confirm trends already evident in 2007, when the CD Howe Institute paper urged an end to the postal monopoly and a fresh approach to universal delivery. Six years later, those recommendations may still look radical. They also look more necessary than ever.

More from Canadian Business

Search