Opinion: Privatize Canada Post and end its monopoly

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7 days ago

Last year, Canada Post's deficit hit $841 million. Its deficits over the past decade totalled more than $3.6 billion. This year the federal government had to provide it with more than $1 billion in funding so it could continue operating.
The core of Canada Post's business is its legal monopoly over first-class mail. But that business has collapsed. In 2006, Canadians sent a record 5.5 billion letters. Last year, only about two billion. By contrast, the parcel business is booming. But Canada Post's market share has fallen sharply — from 62 per cent in 2019 to 24 per cent last year. The company has run into a brick wall. Things clearly have to change.
This is not the first time a government postal service has been in trouble. At the end of the 1980s, Deutsche Post, Germany's postal service, faced similar difficulties as a result of ingrained inefficiencies. Instead of reforming its sclerotic structures, the public monopoly covered its continuously rising expenses by simply raising the price of stamps year after year. Consumers saw regular price increases but no improvement in services. Sound familiar?
Recognizing things had to change, the German government launched a series of reforms that first opened the postal market to new players and then privatized the postal service.
Reforms were timid at first. By 1997 just three per cent of the postal market was open to competition. But things soon accelerated, with Deutsche Post losing the last vestiges of legal monopoly in 2008. At the same time, the government gradually privatized the company, selling shares tranche by tranche, so that the German government now holds just 16.99 per cent of the shares.
The effect of these reforms has been dramatic. Today German consumers are served by nearly 400 different companies offering the entire range of postal services and more than 11,000 companies that offer partial services.
Deutsche Post has maintained a dominant position in letter mail but its competitors exert pressure that keeps it from increasing prices. Adjusting for inflation, sending a letter today costs 10 per cent less than in 1989. In contrast, under Canada Post's monopoly, sending a regular letter today costs nearly 50 per cent more in real terms than in 1989. As for service, in terms of delivery speed postal services in Germany rank better than in most of Europe.
Canada should learn from these successful reforms and adapt them to our own context so our postal service meets the realities of the 21st century. Such an approach would gradually open up Canada Post shares so that its employees and Canadians in general could become shareholders.
If postal workers were given a portion of the company's shares or could buy them on a preferential basis, they'd have a stake in the enterprise and every incentive to identify and eliminate inefficiencies, since they would benefit from the savings that resulted.
Ottawa should also gradually eliminate Canada Post's monopoly over regular letter mail, allowing the country's consumers and businesses, small and large, to enjoy the lower prices that would result from the pressure exerted by the arrival of new competitors.
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The world has changed and so have our postal service needs. If Canada Post is to survive, it needs to get with the times.
Gabriel Giguère is a senior policy analyst at the Montreal Economic Institute.
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