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Suzanne Gamache a 31-year Canada Post employee delivers mail and parcels to business and condo towers in Vancouver December 11, 2013. (John Lehmann/The Globe and Mail)John Lehmann/The Globe and Mail

Most businesses, faced with lower demand, do not react by promising less service and higher prices. But when you're a monopoly, you get to do all sorts of strange things. You can respond to failure with an extra order of more of the same. Or in the case of Canada Post, less of the same.

What Canada Post needs is innovation, competition and privatization. Other countries have gone down that road, with good results. All 27 member states of the European Union this year eliminated their postal monopolies, opening the market up to competition. Many countries have gone even further: Germany privatized its post office, Deutsche Post, more than a decade ago. The Netherlands did the same thing. Ditto for Austria. All of these privatized enterprises, operating in a competitive market, have seen costs fall dramatically.

None of the above is on the menu at Canada Post. It has a long history of planning to do less with more, and a record of consistency maintained by this week's announcements. A generation ago, the post office began phasing out home delivery in new suburban subdivisions; this week it announced plans to bring the pleasures of close-to-home delivery to nearly all Canadians currently receiving their mail at home. The price of a regular stamp will also jump by roughly a third.

For all of this inside-the-box thinking, much of the blame falls on the Harper government. Ottawa long ago gave Canada Post its monopoly on basic letter mail: By law, competitors must charge at least three times the basic stamp rate. Ottawa also forces Canada Post to offer one-size-fits-all and one-price-fits-all basic mail services, so that the cost of sending a letter across town within a big city is the same as sending it across the country to a remote farm. A government that normally has nothing but good things to say about the free market shows little interest in freeing either Canada Post or the market.

It is not as if Canada Post is incapable of innovation. For years, it has been partnering with private-sector merchants such as pharmacies, opening franchised postal outlets, which are run by the private sector. There are now thousands of them across Canada. According to a recent Conference Board of Canada study, those private postal outlets operate at one-third the cost of a traditional, Canada Post-staffed post office. The study found that converting all of its urban post offices to franchises would save as much as $100-million a year.

The business that Canada Post is in may be changing, but it's hardly disappearing. In 2003, Canada Post delivered nearly 11 billion pieces of mail. Last year, it carried just shy of 10 billion pieces, and the Conference Board expects that to drop to 7 billion by 2020. But the volume of parcels and packages is growing, thanks to online shopping. The business of delivering things is alive and well. It's Canada Post that's sick.

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