Take Canada Post private
The federal government should end Canada Post’s monopoly on the postal market and follow the leads of Germany and the Netherlands in introducing competition to the sector, says the C.D. Howe Institute.
“We believe the case for demonopolizing the Canadian postal sector and moving to some substantial degree of private ownership is compelling and consistent with developments in jurisdictions beyond Canada,” the think-tank said yesterday in a report. “Failure to rethink the role and mandate of Canada Post, given the dramatic technological transformation that is occurring in the communications sector, would be to acquiesce in a slow-motion train wreck.”
Canada Post has a monopoly over the domestic letter mail market, and is obligated to provide service at uniform rates across the country. For the 2005 fiscal year — the last for which numbers are available — the Crown corporation posted profit of $199-million on revenue of $6.9-billion. Canada Post has earned a profit in each of the past 11 years.
Despite this streak, the C.D. Howe study said the Crown corporation faces major structural challenges. Mail volumes are decreasing even though the number of addresses continues to grow, by roughly 250,000 a year. This is due in large part to business and residential customers favouring electronic forms of communication.
Moreover, Canada Post faces increased competition in international shipping and delivery.
In its 2005 annual report, Canada Post acknowledged that a revamp might be in order. “In order to operate successfully in the rapidly evolving marketplace, Canada Post needs to become more competitive and customer- focused. This will require a change in the way that Canada Post manages its business, its openness to outside trends and influences, and its willingness to engage with private sector partners.”
C.D. Howe said opening up the postal market to private sector competitors would force Canada Post to be more efficient and potentially lead to increased dividends — in the form of fatter profits –for the federal coffers.
“Privatizing Canada Post would improve its governance, and introducing competition would provide economic discipline that does not at present exist,” it said.
Concerns such as the commitment to uniform postal service across the country could be addressed through rules introduced at the same time that liberalization took effect.
The think-tank cited the success of liberalization in other markets, most notably Germany, the Netherlands, New Zealand and Spain. In Germany, for instance, there are more then 1,000 firms offering letter delivery service. And in Spain, 40% of that country’s mail volume is open to competition.
Moreover, countries that have dabbled with liberalization “appear to have either maintained or increased service quality,” the study said.
But opposition to postal market liberalization would most likely be fierce, especially on the part of organized labour, whose relations with Canada Post management have been rocky at best.
The Conservative federal government has not made postal market reform a priority item. But the federal Cabinet ordered Canada Post to reverse its decisions regarding rural mail delivery and subsidies for magazines.
