Mail promise short postage
Trudeau’s election pledge will cost taxpayers more than they are willing to pay
Is door-to-door postal service dead?
Five million households in Canada are wondering whether they will have to walk to a community mail box in the future to get their mail. They’ve been waiting for two years: ever since Justin Trudeau promised to “Stop Stephen Harper’s plan to end door-to-door delivery . . . and undertake a new review of Canada Post.”
Since then, the government has the benefit of a comprehensive task force report. It says the Digital Age means long-term deterioration in transaction and marketing mail volumes and revenues. Growing parcel business competition and pension plan underfunding also threaten the Crown corporation’s financial future.
The task force said Canada Post Corp. (CPC) needs “transformational change” if the government is to avoid subsidizing future postal services. It lays out a series of savings opportunities for maintaining CPC as a financially self-sustaining corporation. These include: • Community mail box conversions, $400 million • Converting 800 post offices to franchise outlets, $177 million • Alternate day delivery, $74 million • Streamlining operations,
$66 million
Public opinion research shows Canadians and businesses are “highly satisfied” with Canada Post’s services. They are willing to accept changes to delivery modes once they are made aware of the financial challenges facing CPC. More than two thirds of Canadians who were converted to community mail boxes are satisfied with that form of delivery.
Given this level of customer goodwill and CPC’s daunting financial future, the Commons committee that followed the task force was expected to recommend the sensible solution. Tell Trudeau his naive election promise of restoring door-to-door service isn’t realistic. Community mail box conversions are a critical part of CPC’s future profitability.
In the end, the Commons committee sidestepped Canada Post’s financial problems. The Liberal dominated committee recommended what they thought Trudeau wanted to hear. They called for a return of door-todoor delivery for the 350,000 households that lost service since the election writ was dropped in 2015. That bizarre cut off date
would still leave 480,000
households using community mail boxes.
The committee avoided any meaningful discussion about the costs. They mused about fixing the pension plan and introducing cellular services. But they failed to tell the government or Canada Post how to adopt their recommendation without incurring taxpayer subsidies.
Trudeau is faced with a difficult
decision. CPC is required to be “financially self-sustaining.” This means responding to the digital age by modifying mail delivery methods to cut costs and raising rates to enhance revenues. Maintaining door-to-door delivery would mean returning the corporation to a tax subsidized social service.
Canada Post made a small profit in 2016 because of an increase in its parcel business. But they face competitors in the online shopping fulfillment business with lower operating costs and more systems improvement capital.
The digital age is undermining the rest of CPC’s businesses. Letter mail volumes have dropped by nearly 40 per cent since 2006. At the same time, 170,000 new addresses are added each year. Having to serve more addresses with lower mail volumes is a major drain on profitability.
Direct marketing mail also is losing ground to less costly, more individually targeted online advertising by giant competitors such as Amazon and Google.
The Task force found CPC’s labour costs are 41 per cent higher than their private sector competitors. A labour agreement prevents the corporation from closing or franchising 3,700 protected
corporate post offices.
The state of CPC’s pension plan is equally disturbing. It has a staggering $6.7 billion solvency deficit. For years, the government has allowed cash strapped CPC to skip making payments to reduce this liability. The plan is guaranteed by the Canadian taxpayer.
Canadians and businesses now use the Internet for most of their messages and financial transactions. However, the vast majority still believe the mail is “highly important” and Canada needs a postal service owned and operated as a public service.
We are emotionally attached, even nostalgic about Canada Post, but we continue undermining it with every convenient click of our mouse. And we don’t want to subsidize its survival.
Trudeau needs to tell Canadians if they want Canada Post to survive without major taxpayer subsidies it has to act like other businesses trying to adjust to the onslaught of the “Internet of everything.” We can’t have it both ways. — R. Michael Warren is a former corporate director, Ontario deputy minister, TTC chief general manager and Canada Post CEO. r.michael.warren@gmail.com