With the federal government deciding last week to let the status quo ride instead of reforming Canada Post, it’s worth asking once again why the Crown corporation should maintain its monopoly on the delivery of letters weighing less than 500 grams.
Striking a compromise that seemed designed to please nobody, the government announced that it will not resume the replacement of door-to-door mail delivery with community mailboxes. But neither will it reverse the conversions begun under the previous government, as many of the 840,000 affected households — not to mention the Canadian Union of Postal Workers — were hoping.
This non-reform comes as the postal landscape continues to be transformed by modern communications technology. Thanks to the ubiquity of things like email and online bill payment, physical letter mail volumes in Canada have declined by 44 per cent over the past 10 years. Meanwhile, as people get more and more comfortable with the idea of ordering consumer goods online, Canada Post’s parcel delivery volumes increased by almost 39 per cent in the third quarter of 2017 alone.
Faced with such changing circumstances, private companies in a competitive environment tend to adapt their service offerings and pricing structures accordingly. If they don’t, they lose market share to their more nimble competitors.
A monopoly, on the other hand, can count on maintaining 100 per cent of the market it monopolizes, regardless of what actions it does or does not take. But it can’t keep that market from shrinking, as the above statistic shows.
With less mail to deliver, each piece of mail becomes more expensive to deliver — other things remaining equal. Switching to community mailboxes was one way to try to reduce costs, by providing a less complete service. Now that this option has been taken off the table, the Crown corporation will have to come up with some other way to balance the books. Raising prices has been a popular response in recent years, with the price of a stamp having increased by 44 per cent from 2007 to 2015, adjusted for inflation.
Yet why should Canada Post have a monopoly on letters? And why do Canadians, through the federal government, need to be in the business of delivering mail? The short answers: It shouldn’t, and they don’t.
As my MEI colleagues pointed out in a 2011 study, several countries have liberalized and privatized their postal services, and lo and behold, the sky did not fall in the wake of these changes. Canada could do the same, and allow private actors in a competitive market to decide how to adapt to the rapidly evolving landscape.
Would private providers charge more to deliver letters to far-flung, sparsely populated villages? They likely would, since it costs more to deliver letters to far-flung, sparsely populated villages. That’s just a fact. But people might have the option of paying different rates for daily home delivery, less frequent delivery, community mailbox delivery or even postal outlet pickup. That’s what the competitive market tends to provide: options, based on objective, impartial criteria.
Another thing the market tends to do is encourage innovation, meaning better, cheaper ways of providing better goods and services than before. Government monopolies, on the other hand, have little reason not to keep doing the same thing they’ve always done, the same way they’ve always done it.
Jasmin Guénette is Vice President of Operations at the Montreal Economic Institute. The views reflected in this op-ed are his own.