Do not privatize

In the past, “neither snow nor rain nor heat nor gloom of night” could keep postal workers from their appointed rounds. So goes the famous quote carved on the main post office in New York City. But it is the Internet and the exploding number of alternative electronic communications technologies, not the elements, that will soon force dramatic changes to Canada Post Corporation (CPC).

The end is in sight for a form of communication that dates back to the system of horses and riders that crossed the Persian Empire in a week and evolved into the mighty Crown corporation that spans this nation with approximately 60,000 employees delivering mail five days a week to over 15 million addresses. In the 20th century, the Post Office became the partner of the banking and payments system, captured in one of the most famous phrases in the language: “the cheque is in the mail.”

The federal government must face the realities forced on CPC: plummeting use of letter mail fuelled by adoption of electronic communications technologies such as e-billing, e-banking, edeposit of paycheques and pensions, digital flyers, email, texting, social media. Between 2006–2013, the volume of mail per address declined 30 per cent, but the number of addresses serviced grew by 1.2 million, resulting in an unsustainable business model. By 2025, all letter mail and advertising mail in every part of the country is almost certain to disappear.

Letter mail which is by far the most profitable product line of CPC accounts for 50 per cent of total annual postal volumes, while admail or “junk mail” accounts for another 20 per cent by volume.

Yet, unit volumes of these two products accounting for 70 per cent of CPC volume are declining by 5 per cent annually.

While home delivery was terminated for new residential communities in the 1980s – a third of a century ago – older communities in the urban core were grandfathered to continue to receive mail to the door. This created a two-tier postal service with 32 per cent of Canadians receiving delivery to the door in older, mostly higher income neighbourhoods such as Rockcliffe in Ottawa, Outremont in Montreal, The Beaches and The Annex in Toronto and Shaughnessy in Vancouver while 68 per cent of Canadians in the rest of Canada adjusted to community mailboxes.

In 2013, the government announced the phasing out of door-todoor delivery for the 32 per cent of households that still receive it to generate an annual savings of $500 million annually. However, the move to community mailboxes met with significant backlash from union groups. Both the NDP and the Liberal Party of Canada have promised to reverse the $500 million savings decision.

This paper proposes policy changes that will allow a “bridge to the future” to facilitate CPC’s transformation from a highly regulated mail delivery entity where volume demand is collapsing, with prices set by government to a competitive parcel delivery entity servicing the rapidly expanding e-commerce market, with prices and service determined by market conditions. As 15,000 or 25 per cent of CPC’s 60,000 employees will leave within five years to retirement, these changes can be addressed through attrition.

Recommendations

Do not Privatize Canada Post

Privatization will not fix structural changes needed to address declining demand for delivery of letters and flyers; no private sector actor would want to take on the current business model Eliminate exclusive Privilege to Deliver Letters

Electronic communications substitutes such as e-billing, ebanking are already cherry-picking the lucrative parts of CPC’s business. Maintaining the monopoly simply slows the inevitable adjustments required Replace Door-to-Door Mail Delivery with Community Mailboxes

Community mailboxes cost less than half the price of doorto-door delivery with savings of $500 million annually. They service a quarter of Canadians already. All Canadians should receive the same level of postal service. Reduce Daily Delivery to residential (not business) Customers

Delivery is very labour-intensive. Declining volume reduces the need for daily delivery. However, businesses need to respond to customers who still use the physical post. Franchise all Corporately-owned Post offices

In 1994, the Chrétien government imposed a moratorium on closing and/or converting corporately operated post offices in rural Canada. Many of the remaining 3,400 post offices, especially those in rural areas, could be franchised, providing greater service and longer hours to residents. CPC estimates that 2/3 of total annual operating costs of a post office are eliminated by franchising. Implement the Canada rural broadband strategy by 2020

The federal government has pledged to help the 20 per cent of Canadians without high-speed Internet, mostly in rural areas, to gain access within five years. This would facilitate the transition away from letter mail. Deregulate CPC Post Pricing For Letter Mail

Wage and price controls are widely recognized to be a failure. Several European countries have deregulated their postal services. Mail pricing should reflect the true cost of the mail service.

15,000 of CPC’s 60,000 employees will leave within

five years to retirement