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Ruling out privatization limits Canada Post review’s effectiveness

R. Michael Warren is a former corporate director, Ontario deputy minister, TTC chief general manager and Canada Post CEO

Another government, another Canada Post task force that isn't allowed to consider privatization or deregulation as options for better service at affordable prices.

The minister responsible for this one should instruct the task force to look at all options for postal services in this digital age. Anything else is just kicking the can down the road once more.

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Crown corporations such as Canada Post are established to advance social and economic objectives. They are used as instruments of public policy, to fill needs that governments feel the private sector can't or won't meet.

When Crown corporations are no longer needed to advance policy or deliver social services, they are often privatized. In the case of Canada Post, there are two basic questions:

  • Is there still an economic or social rational for Canada Post to be government owned and controlled?
  • Is there sufficient private sector capability to serve the postal needs of business and the public?

The Liberals should ask their task force to first answer these two questions. Their subsequent recommendations about how to deliver quality, affordable postal services should flow from the answers.

Canada has a long and successful history of privatizing Crown corporations that have outlived their usefulness.

Air Canada was formed in 1936 to connect Canada's cities by air. By 1988, the government no longer needed to own the airline in order to regulate Canadian skies. The privatized Air Canada has gone on to become the 10th-largest airline in the world.

Petro-Canada was created as a Crown corporation in the mid-1970s in response to concerns about ownership of domestic oil supply. A decade later, Ottawa concluded it could manage energy policy without owning a national oil company. A privatized Petro-Canada eventually merged with Suncor Energy Inc. in 2009 to form a mammoth energy company worth $43-billion

Canadian National Railway Co. was formed as a Crown corporation in 1919 to help colonize the country. But by the mid-1990s, it had served its policy purposes and was privatized. Since then, the company has become a North American rail, trucking and warehousing giant. It employs 23,000 people across the United States and Canada with annual sales of $15-billion.

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If this task force was allowed to consider deregulation or privatization, it might find it's no longer necessary for Ottawa to own Canada Post in order to meet the postal needs of Canadians. They would find an extensive network of private carriers capable of providing a quality, affordable national letter service – if allowed to compete with Canada Post.

Canada Post exists as a Crown corporation for one basic social purpose: to deliver a universal letter service. It was given an "exclusive privilege" (monopoly) over letter mail delivery to help meet this obligation. But the obligation has become a money-losing millstone around the corporation's neck.

The growing use of the Internet to transmit information, advertising, money and messages is seriously undermining letter mail volume, and the corporation is required to deliver this shrinking volume to thousands of additional addresses every year.

The corporation has tried to generate enough profit from their parcel business to compensate for letter mail losses. But even with large rate increases, pension payment deferrals and reductions in home delivery, profitability has remained elusive.

Canada Post's problems run deeper. Wages and fringe benefits are high. So is absenteeism. Productivity lags. There's a long history of strained labour relations. All this is a product of a government-owned quasi-monopoly. It's not a business model to perpetuate.

Faced with similar challenges, many advanced countries have deregulated their postal systems. They've opened up letter mail delivery to the private sector. Lower unit-cost private competitors can make money delivering letter mail, even in rural areas. Others, such as Britain, have completely privatized their postal systems.

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Freed from government control and the universal mail obligation, a privatized Canada Post could become a private sector powerhouse such as Air Canada, CN and Petro-Canada.

Deregulation and privatization are not panaceas. Ottawa would have to regulate the quality and frequency of private letter delivery service. And Canada Post would face a challenging period of deregulation and reinvention.

Prime Minister Justin Trudeau was elected on a platform of "real change." But so far, his postal task force is being limited to tinkering around the edges of an outdated system.

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