The U.K. government recently decided to privatize the Royal Mail postal group. It will sell a majority stake in the state enterprise to investors, and about 150,000 Royal Mail employees will receive free shares.
I think (hope) that such reform will one day have to occur here, with Canada Post.
The Crown Corporation delivers less and less mail, partly because of the growing popularity of e-mail and new technologies. And shipping costs — including transportation and labour — are growing faster than revenues. The Conference Board of Canada, a think-tank, recently released a report saying the corporation may incur losses of $1 billion per year until 2020.
So what do we do with this venerable but costly institution? Among solutions proposed by the Conference Board to save money:
- Freeze wages for a number of years;
- Deliver mail every other day;
- Eliminate door-to-door delivery and replace it with community mailboxes for urban residential customers.
Raising the cost of mailing letters and advertising could help raise some revenues, but not enough to eliminate the shortfall.
But we should go further. Like Britain, we could privatize Canada Post, in part, to set up the discipline that comes from having investors who demand a return on their investment. Right now the sole shareholder of Canada Post is the federal government — not the most demanding shareholder.
If possible, the government should open up the market to competition. Allowing competitors to enter the postal market would force Canada Post to innovate and become more efficient in order to retain market share. Without such pressures, Canadian consumers will always bear the brunt of Canada Post’s underperformance, in the form of lower quality and/or higher prices.
In fact, the state monopoly to distribute letters, like the one enjoyed by Canada Post, is a model that has been increasingly abandoned in countries around the world, particularly in Europe.
Some will raise the issue of sparsely populated regions, which is a legitimate concern. The costs of services are indeed higher in those areas. But it shouldn’t be an obstacle to reform.
Thanks to the Internet, physical distances have become less and less relevant. And if some unprofitable business — but considered absolutely essential — must be maintained, nothing prevents the federal government from imposing this condition to any prospective buyer of Canada Post, and offering a subsidy accordingly. Which should be transparent, and subject to review and debate.
Canada Post must focus on providing the best service to Canadians, at the best price. A privatization, even partial, could most likely help meet that goal.
Michel Kelly-Gagnon is President and CEO of the Montreal Economic Institute. The views reflected in this column are his own.
* This column appears in many Sun Media newspapers and websites.