A Way Forward: Canada Post Deregulation and Commercialization (II)

Yesterday, we outlined the sorry history that has led to Canada Post’s major financial – $4 billion and counting – and operational strain.  

 

To better serve consumers and improve the effectiveness of federal spending, the federal government should take steps to eliminate its statutory monopoly and move towards greater commercialization and competition in the postal market.

 

It is increasingly difficult to argue that Canada Post should retain its monopoly on letter mail. It is no longer a natural monopoly as it once was, and economic analyses strongly suggest competition could enhance efficiency without impairing universal delivery and price.

 

Privatization offers fewer benefits than it did when it was last considered during Stephn Harper’s first minority government. Canada Post’s implied equity value has plummeted due to $4 billion in cumulative annual losses since 2018. Privatizing Canada Post today would yield limited proceeds, especially without accompanying reforms to allow a private operator to increase profitability. Moreover, privatizing Canada Post without first deregulating the postal market is unlikely to enhance economic welfare.

 

A private regulated monopoly would necessarily be less efficient than its public alternative. Lastly, while privatization would make Canada Post more efficient, it would fail to address the structural problems embedded by the Canada Post Corporation Act and the 2009 Canadian Postal Service Charter.  

 

Instead, the federal government should focus, at least initially, on improving Canada Post governance and liberalizing Canada’s postal market.

 

Commercialization, for example, could include deregulating the postal market through eliminating its letter monopoly under Section 14 and relieving Canada Post of its universal service obligations. Transitioning towards market-based competition would also require amending the 2009 Service Charter to permit prices to freely float. The EU adopted both changes in 2013 in its decision to end postal monopolies across the continent. These changes would pressure Canada Post to end its cross-subsidization practices, drive down urban delivery prices, and increase transparency into the costs of rural servicing, creating stronger incentives for management to control costs.

 

Recommendations:  

The future of Canada Post hinges on its ability to adapt to consumer preferences, technological changes and market demands via comprehensive reform. Labour strife just adds to the current list of issues. These reforms would modernize the postal service while preserving essential services for all Canadians.