Rain or shine, the monopoly must end

Andrew Coyne on why Canada’s postal service should open up to competition

Rain or shine, the monopoly must end

Jeff McIntosh/CP

The current strike at Canada Post (perhaps you hadn’t noticed: it started last week) presents a curious spectacle: an all-out struggle for control of a company whose main line of business—carrying bits of paper from one point to another—is rapidly disappearing.

It isn’t just email, which has reduced the letter to more or less the same function that telegrams once performed, something you send on formal occasions but otherwise wouldn’t think of using. Nearly everything that Canada Post once charged to carry is being vaporized. Cheques are giving way to electronic funds transfer; catalogues to online shopping; CDs, DVDs and books to iTunes, Netflix and Kindle.

And yet, notwithstanding a 17 per cent plunge in volume per address in the last five years, it still carries 11 billion pieces of mail a year. Some customers in particular—small businesses, charities, rural and elderly correspondents—remain dependent on “snail mail.” For them a strike is an inconvenience, and even if some take the opportunity to make the switch to electronic transmission—never to return—for many others the post office is their only choice.

Which is to say, no choice: the monopoly Canada Post enjoys on the delivery of letter mail is not by virtue of its sterling service, but by statute. Sections 14, 15 and 50 of the Canada Post Act make it an offence for anyone else to carry a letter for less than three times the prevailing postage rate. You can go to jail for it.

Once upon a time, that meant a great deal. As Canada Post had a monopoly on its customers, so the postal workers’ union had a monopoly on Canada Post. Empowered with the right to strike in 1967, CUPW set out to extract as much of the monopoly “rents” (what economists call “loot”) as it could for its members. Over the next two decades, the union went on strike 10 times, and was rewarded with an array of wages and benefits of which other workers could only dream.

Rather than confront the union head-on, post office management adopted a series of cunning business plans. At first, they lost buckets of money, as much as $1 billion in a single year, and passed the costs on to taxpayers. Then, when that was no longer politically acceptable, they passed it on to their customers, in the form of higher prices and less service. Weekend delivery is but a fond memory, of course, but over much of the country households no longer receive any delivery: instead, they are required to pick up and deliver the mail the last mile, or miles, themselves.

Under fire for the numbers of letters arriving late, Canada Post solved the problem at a stroke in 1986 by reclassifying late letters as “on time”: whereas next-day delivery used to be the standard, Canada Post now allows for between two (across town) and four (between provinces) business days. So, for example, if a letter were mailed in Ottawa on a Wednesday and arrived in Gatineau the following Tuesday, that would be considered “on time.”

Naturally, in order for the post office to deliver fewer letters, less often, late, it has to charge you more, much more. Between 1981 and 2008, the price of a stamp more than tripled, from 17 cents to 52 cents, about a 40 per cent increase after inflation. The post office is currently in the process of jacking up the price a further 25 per cent, to 65 cents in 2014.

By any standard, then, Canada Post is a colossal failure, abandoned by anyone who can, and desperately gouging the ones who remain captive to its legal monopoly. There would seem a simple remedy—abolish the monopoly—for which the strike would seem a golden opportunity: at first as a temporary relief measure, then permanently. This is, after all, no more than the trend across much of the developed world. Every one of Europe’s national postal services, for example, have been or are being opened to competition, a process that must be completed by 2013; several, including those in Germany, the Netherlands and Sweden, have also been privatized. There, prices are falling, not rising; service is improving, not declining.

Alas, as with so many other obvious policy disasters in this country, the postal monopoly enjoys rock-solid all-party support. The argument is always the same. Canada Post is mandated to deliver a letter to every address in the country for the same 59-cent stamp, across town or across six time zones, regardless of cost. In effect, city subsidizes country. If competition were allowed, runs the argument, private couriers would “cream off” those low-cost urban routes, leaving rural routes unserved, but for the post office.

But this only applies so long as the uniform rate does. Let rates vary with cost, and private competitors would eagerly serve both urban and rural routes. Not only would city customers benefit, but so might those in the country: competition cuts costs, where subsidy only disguises them. Or suppose rural customers did have to pay more. Why is it acceptable for the price of a house to vary between city and country, but not the price of a stamp? It costs you more to make a phone call, or an airline ticket, depending on the distance: why should it not to deliver a letter?

For that matter, by what principle of social justice are city residents, rich or poor, obliged to subsidize the correspondence of gentleman farmers? If governments want to redistribute income, let them do so directly, out of general revenues. But it seems an odd job for the post office.




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Rain or shine, the monopoly must end

  1. Well, it makes perfect sense that if the market is shrinking beyond the point which one company can make a profit (although they still manage to, according to their workers) it’s perfectly sensible to divide it among several companies who will surely be able to make it up in volume.

    But privatisation has a been a world of pain for European post offices: http://www.lrb.co.uk/v33/n09/james-meek/in-the-sorting-office

    “Every week Dutch households and businesses are visited by postmen and postwomen from four different companies. There are the ‘orange’ postmen of the privatised Dutch mail company, trading as TNT Post but about to change their name to PostNL; the ‘blue’ postmen of Sandd, a private Dutch firm; the ‘yellow’ postmen of Selekt, owned by Deutsche Post/DHL; and the ‘half-orange’ postmen of Netwerk VSP, set up by TNT to compete cannibalistically against itself by using casual labour that is cheaper than its own (unionised) workforce. TNT delivers six days a week, Sandd and Selekt two, and VSP one. From the point of view of an ardent free-marketeer, this sounds like healthy competition. Curiously, however, none of the competitors is prospering. TNT is being forced by the hedge funds and other transnational shareholders who control its destiny to split up, even as it tries to beautify its bottom line by replacing reasonably paid jobs with badly paid ones. Deutsche Post is pulling out of the Netherlands and selling Selekt to Sandd – a company that has never made a profit.”

    • Unlike Andrew Coyne, I don’t believe “the market” is the solution for everything.  Postal services is a case where it is not, as adamwb points out.  In any case under our current government, there is no such thing as a free market in anything; Air Canada is the most recent example.  The Air Canada example shows us that ANY corporation experiencing ANY discomfort in “the market” need only apply to the Harper Government for relief and Andrew’s fantasy of competition solving everything disappears.  Harper has amply demonstrated that he, and only he, knows how things should proceed in the “free market system” he advertised during campaigns, and he is willing to exert government control to make sure the “free markets” work just the way he wants them to.  You can bet corporations will prosper and workers will not. 

  2. Canada Post could make a profit for us if they didn’t pay $26 an hour to their workers.

    It’s a crown corporation, the federal government could just write a law that says their wages will be $15 an hour, and everything’s solved. No one’s being forced to work for the post office, young girls in Eastern Europe are not being abducted and forced into a life of sorting and delivering mail. If $15 isn’t enough they can change jobs.

    • I’m leaning to reducing postal services. They’ve already been reduced. I don’t get the junk mail I used to.

      But I’m disturbed by your idea that an infrastructure service should make a profit. To make a profit they have to charge us more than their costs. I’m not comfortable with social and infrastructure services making a profit. I don’t want my taxes going to profit.

      I pay enough profit as it is. 

      • Except they don’t need to raise prices to make a profit. They can do it by lowering their costs. They could lower wages, and reduce delivery to 2 or 3 times a week (less workers to pay).

        The LCBO is a profitable crown corporation in Ontario, with the $1 to $1.4 billion in profits going to the Ontario government each year, that’s on top of the $500 million or so in taxes they pay, and $500 million in federal taxes.

        Would it really be such a bad thing if Canada Post was similarly profitable through increased efficiency and not higher prices?

        • Yes. Government should not be in the business of making a profit. Government should not be in business at all. The responsibility of government is to provide those services that are essential to a well-functioning, prosperous, and healthy society. Some services cannot be profitable so we have to make up the deficit in taxes. 

          You LCBO example is interesting. Booze is not an essential public service, does not contribute to a well-functioning, prosperous, and healthy society so its distribution is not a responsibility of government. Regulation and taxation of booze are perhaps – perhaps – a legitimate concern, but otherwise profiting from its sale is more the business of business.

          • But why do all essential services have to be money losers? As long as they remain affordable, and their quality of service is acceptable.

            The LCBO was the only profitable crown corporation I could think of.

          • It’s that some essential services are not by nature profitable. Adam Smith recognized this. 

            Schools, for example. The social benefit of schools cannot be measured by the profit they provide to shareholders. If education is required to be profitable then we are paying too much for it. Medical services are another. Insurance, too. If insurance is required to make a profit, then as an economy we are over-paying for risk distribution. That requirement for profit is a drag on the business environment and that profit is a form of tax. 

            A vibrant business community requires an infrastructure of communication and transportation and social services that ensure a healthy and well-educated population of employees and entrepreneurs. 

            If we are required to make a profit of those services we will not be able to afford them and our society will degrade. It’s important we identify those services that are essential, and implement policies that reduce their cost. This speaks to the efficiency you write about and with which I agree. But the requirement for profit, or even the tolerance of profit, is anathema to an efficient economy. 

            A core component of this statement is the recognition that there is a respectable difference between Economy and the Business Environment. This is a distinction that is too seldom drawn in the current conversation.

          • I see what you mean in your latest post, but can’t reply to it for some reason.

            So if Canada Post or any crown corporation were to find itself profitable year after year. What would be the right thing for them to do?

            Privatize? Or just get rid of the profits by lowering the price of a stamp, or paying more to their workers, or improving service speed to Nunavut?

            They’re already pretty quick, letters sent within Ontario get to me within 2-3 days, and small packages from BC get here in 5-6 days through the normal mail (non-express).

            Another profitable government business I thought of is Toronto’s Green P parking. They face a lot of private competition, but their rates are much lower, especially during events. They give 75% of profits (usually $25-$30 million) to the city each year.

        • LCBO operates at a loss every single year. They do NOT and have RARELY turned a profit? Why? They include liquor tax revenue as income. Name me another business that can count tax collected at the point of sale as revenue.

          • Any private business that uses a calculator to figure out how much you owe, and then doesn’t provide you with a receipt. :)

          • Because of the minimum pricing for alcohol determined by the provincial government, and no competition, it’s almost impossible for the LCBO NOT to be profitable.

            They’re also huge, so they get better prices from the makers.

            What they’re doing is really all taxation, but the actual GST and PST collected in 2009 was around $500 million each, and the profit from their high prices was over $1,000,000,000. It’s on their website.

    • While I don’t necessarily agree with your solution, it is true that a lot of unemployed or minimally employed Canadians would be happy to work for Canada Post for a lot less than current postal workers, and they need to keep that in mind when making demands.

    • Very few would do a letter carrier job for $15 an hour… I know you don’t believe me… but I have seen the job up close, along with UPS and FedEx delivery jobs, and job of an average letter carrier is no picnic.  There was a time when a physically fit carrier could knock off a route by doing a straight through (no breaks) in 5 hours, but less mail per household translates into longer routes and it seems Canada Post is reaching the breaking point as to how many km’s their letter carriers can handle week in week out.  The answer – I believe – is to expand the community mail box program; with a third of the workforce retiring before the end of this decade, the Corporation has a golden opprotunity to undertake the transformation without relying on massive layoffs.  CUPW must see the writing on the wall, which could be why they are launching such an aggressive attack against the Corportation, even though they have probably have less than 50% of their own membership behind them – in would be very interesting and telling to see a membership vote on the current tabled offer by the Corporation.

      • I don’t like your solution because I’m in a neighborhood that still gets door to door mail delivery. :) Although that, combined with reducing mail delivery to two or three times a week could reduce their workforce a lot.

        So in the real non-public-unionized world they’d try to get people to work for $15 an hour, and they’d succeed in routes that aren’t door to door. But would have to pay more for the harder routes, and would have to pay even more to the parcel delivery guys who are competing with UPS and FedEx. But most of the wages would come down.

        • I like my door to door delivery also, and I agree, most recievers (indirect customers) of the mail would probably warm to three day a week delivery. But the senders (direct customers) which are mostly businesses, want five day delivery: The direct customer writes the cheque to Canada Post.

          The Canada Post solution – Modern Post – is to have a small cargo van come into your neighborhood deliver your letter carrier mail, courier items and parcels with one employee: Park and Loop. The employee would make small loops away and then back to the vehicle with ‘manageable’ loads of mail and then move on to the next delevery area. To deliver a large item they could drive directly to the address.The complexity and added responsibilites of the job would go a long way towards justifying the more than fair wages that Canada Post delivery personel receive.

          I’m not sure if areas which are currently serviced by community mail boxes would be converted back to door to door under the new system. 

          I would think the current wages for walking letter carriers has a lot to do with mileage plus wieght plus responsibility:  routes are longer; it takes three or four pieces of admail to equal the revenue of one first class envelope; and as long as personal and private information is sent via the mail – there is a liability issue. If the wages are not high enough to attract long term employees, then the high turnover and issues like mail tampering could undermine the Corporate trust.

          UPS is unionized and their employees are paid well, with great benefits.  I suspect the union and employer are more or less on same page.  Apparently not so at Canada Post.

          • Businesses also want low rates though, the ones that want 5 day delivery could pay Canada Post a bit more for it or pay UPS a lot more for it.

            I don’t see why Canada Post couldn’t do a hybrid Park and Loop system, where they deliver packages that way on letter days, and deliver it the UPS way with a truck to your door on the other days.

            If $15 an hour isn’t enough to keep their employees and attract new ones, they could raise it up to UPS levels.

            - Truck Driver $19.49 (median hourly rate)
            - Courier $17.17 (median hourly rate)

            http://www.payscale.com/research/CA/Employer=United_Parcel_Service_(UPS),_Inc./Hourly_Rate

          • Thirty months into the job, the company’s U.S. drivers earn top union scale
            wages — up to $70,000 or more a year. Senior drivers get up to nine weeks paid
            annual leave. While most workers’ medical insurance premium costs are rising,

            UPS picks up 100% of drivers’ premiums. Pensions are also generous; drivers
            retiring after 25 years get up to $30,000 a year.

            http://www.usatoday.com/money/companies/management/2003-10-14-ups_x.htm

            Your link may be giving you entry level wages, which, if so, are interesting, because this is near Canada Post’s current offer.

            Perhaps UPS has rolled backed or leveled out the wages over the last few contracts, I’m not sure. Canada Post has historically fallen between FedEx and UPS when it comes to wages and benefits. Again, not sure if that is still the case.

            Before this decade is out I wouldn’t be surprised to see a hybrid system like you are suggesting. The tipping point for paper mail and paper admail byproducts, rests with the under 30 crowd. Parcel post on the otherhand must be seen as a strong growth industry.

        • I also have the convenience of door to door delivery, but I could cope with walking to a central box. It would be a good way to get Canadians out of the house and walking more.

        • OMG this is to funny.  Cut THEIR WAGES.  Cut THEIR BENEFITS, CUT THEIR HEADS OFF FOR ALL I CARE!!!!!   But don’t cut home delivery because I STILL GET HOME DELIVERY!!!!!

          OMG  What a crock! 

          And Of course you realize that the wages for similar jobs at UPS are HIGHER THAN CANADA POST dont you?  UPS top wage will be over  $27.00 an hour because of the new contract they just signed! 

          Lol to funny

          Pass the buck to the next guy!

      • I agree, the community mailbox method of delivery offers many future benefits, including security and handy parcel delivery.  It also overcomes the problems that the union has described with the “two bundle” method, which I can relate to, but most of the public cannot..  

        I think Canada Post management is too chicken, too afraid of public reaction from the vested interests who now enjoy delivery to the door.  But, we thje public endured the changes, much more severe, with loss of milk and bread delivery to the door, decades ago.  

        • Two bundle method means there is no time value or you are not allowed… to organize the sort for the standard door to door delivery method?  If so,as more plants come online with the new technology, I would hope Canada Post would be willing to address the oversight. I know, I won’t hold my breath. Or maybe the current situation is a only a bridge between door to door and community mailboxes. It is hard to say: I’ve always thought it was more political than corporate when it came to door to door delivery:

          An independent survey in the Hill Times today notes: 65% of Canadians are still in favour of having Canada Post remain a Crown asset. And Postal Reviews show corporations and small business are strongly behind a Crown Post Office. Much to the dismay of right wing think tanks I’m sure. Best way to control costs and services is to keep Canada Post within arms length of the Government.

          I would think the Crown Corp. approach would be to time transformation with attrition; a politically correct approach. 

    • Yeah; McDonalds is not creating enough soul sucking McJobs for our society, so we should count on the government to do it for us.  Meanwhile reduce corporate taxes rates more so that investors and management can ride Harper’s gray train.  Good idea CaptainAwsomeless. 

      • I’m sorry, you’re confused. CaptainAwesomeless is my nemesis.

        Corporate welfare is a waste of tax dollars too, but how does that justify overpaying and over-employing our civil servants? We need to save money wherever we can, and under right wing governments those savings come from new labor contracts. When the left is in power in 8 to 12 years from now then the corporations will pay their share too.

        Or are you willing to pay 60% income taxes so the government can hire everyone from McDonalds at $26 an hour to do equally low skilled jobs for the public?

    • What you are proposing is basically a centrally controlled economy with government deciding all prices for good and services.  This requires a huge bureaucracy at great cost and usually the decisions are wrong.  I thought that was proven to be a very bad idea when the Soviet Union tried it decades ago.  It made their economy run inefficiently and government officials corrupted the system and abused the rights of corporations and citizens alike. 

      • Except Canada Post IS a government controlled corporation, So why shouldn’t the government decide how much the workers get paid? That would make more sense than the current situation of letting the workers decide every 3 years that they should be paid more, striking for it, and then having the government raise our taxes to pay for it.

        The postal workers would end up with something fair, since Canada Post has to compete with UPS and FedEx for employees.

    • I believe Canada Post is making a large profit which is one of the points the workers are making.  By the way they aren’t on strike they are locked out – big difference!

    • Canada Post has made a profit EVERY year for the past 16 years ($241 Million in 2009 alone).  Their public comments about losing money and accusing CUPW of attempting to make Canada Post a “burden on taxpayers” are nothing but lies backed up by a biased government and a lack of journalistic integrity.  Canada Post paid out $69 Million in “bonuses” to CUPW members last year… money the Union has repeatedly requested be used to improve services or reinvested in the community.  CUPW members are middle class Canadians who still give a damn about postal service in this country.  The same cannot be said for Canada Post or the Harper Government.

  3. Canada Post is a disgrace.  Can I say that I’m fortunate to live in the Netherlands, where next day service is a reality and the postal service was privatized long ago?  Our favorite on-line shop says to expect next day delivery if the order is placed before 3:30pm.  It works. And they pay the post!

    I get The Economist. every Saturday, 2 days after publication (99% of the time). Could I mention my experience in Canada? I have before.

    Not long ago, on April 19th, as a matter of fact, I faxed my application to vote to Elections Canada. Actually I didn’t fax it myself, I had someone at the Canadian embassy in The Hague do it for me. I take elections seriously. I didn’t want it to fail again..

    I did not receive my mail-in ballot, which was sent to me by mail, until May 2, which was election day!

    Unsurprised and undetered by the delay in delivery, I asked if it was possible to vote at the embassy on election day. Sorry sir, not unless you are in the armed forces or foreign service.

    You can imagine how pissed I was about the whole experience.  Someone from Elections Canada called me after and basically blamed the post office. I mean, there was Good Friday, Easter, and Easter Monday, none of which are fully qualified business days if you think about it. And rules are rules, sir.

    Canada Post is not the only FAIL in the country.

    • “…the Netherlands, where next day service is a reality…”

      Not to defend Canada Post (as I agree their service is extremely poor), but given the size of the Netherlands, you have to admit that next day service is far more easily achieved there than here – at least, if we’re talking from one end of a country to the other.

      Also, check out adamwb’s post on postal service in the Netherlands for a counterpoint to your own.

      • Uh, there is this thing called air mail, or is Canada still relying on the pony express to haul mail across the country? Or perhaps it’s because a wedding invite mailed to a neighbour in Calgary gets sorted in Winnipeg before being delivered?

        As for Adamwb’s post…

        But privatisation has a been a world of pain for European post offices

        I should care about the pain that European post offices must endure when faced with competition?  The postal service here, for us at least, is great. That’s the point.  And that ridiculous portrait of mail service in Holland by James Meek (the link in Adamwb’s post) is just a little over the top.

        But Royal Mail is superior to Canada Post.  We lived in London for a year – next day delivery, 6 days a week .  The only thing that fails there is the delivery of bank cards, but that’s a whole other story.

        • Uh, there is this thing called air mail, or is Canada still relying on the pony express to haul mail across the country?

          Try this: Squamish, BC to St. Anthony, NL. I challenge you to find any commercially viable way to get a letter from one to the other overnight.
           
          Major city to major city overnight is reasonable. But our population is far too thinly spread over this large landmass of ours to make that kind of promise to everyone.

        • It takes longer to fly the breadth of Canada than to drive the breadth of the Netherlands, by a fair margin. I don’t think 100% next-day delivery would be economic in Canada.

    • Why would you wait until April 19 to request an overseas ballot?   

      • Given the performance of Canada Post, it would probably have been best if I’d had mailed my application just ahead of the election writ.

        By the way, the official list of candidates was not available until April 15th.  I planned to NOT vote for Rob Anders, one of the biggest idiots in the House of Commons,  In order to do this, I needed to know who the other candidates were – otherwise it’s just a spoiled ballot.

        Imagine how many other thought about marking their ballot  ^NOT Rob Anders!, ^NOT Bev Oda, ^NOT Tony Clements

  4. The article has some twists in it that show it was writtien with an agenda in mind.

    Lets look at just a few:

    1 – The 17 cent postage rate of 1981 was an outcome of strictly politics over the70′s to disguise inflation, the postage rates were restrained for show by the government, it ate the loss.   So, the crown coproration formed out of the government department also showed a big loss.  Then in one feel swoop the postage jumped to 30 cents.   Actually if you look over time, basic letter postage has not increased as much as most day to day items.    I recall the 5 cent stamp of my youth in the mid 60′s.  But also 5 cent ice cream cones, 5 cent small candy bars and 10 cent newspapers.  What was the price of Macleans magazine in 1965?  Canada enjoys a lower postage rate than most of the G8, though its massive in area.  When you look at the area of the Netherlands, fact is that there are some counties in Ontario bigger in area.  And, most provinces in Canada are larger than Germany, the largest country within Europe.   

    2 – Your point about a letter being mailed in Ottawa and delivered “on time” in Gatineau fails to consider that there are exceptions built into the 2,3,4 day standards, thus Gatineau is insie the Ottawa local delivery two day standard.  And, a big volume link, Toronto to Montreal, is a three day, not a four day  service standard.      

    3 – It was not Canada Post Corporation, but the Marchment Commission, appointed by the government, that decided the 2, 3 and 4 day service standards for letters that Canada Post works within.   

    • Your point about Gatineau is well taken. My mistake.

  5. I’m very open to the idea of privitization, but I continue to be concerned with the way that lazy journalism can impact on political issues.  In this case, Mr. Coyne makes a big deal over the fact that the price of a stamp has risen from 17 cents to 52 cents from 1981 to 2008.  The reality is that this works out to 4.1% per year over the 27 year time frame.  And during the early 80′s, inflation ran well into double digits, which would have dramatically increased the rate increases.

    Mr. Coyne, you’re a very good writer.  However, you should be more thorough in your mathematical analysis and in providing historical perspective before you throw out poorly researched information just because it supports your position.  Surely, MacLean’s editors should be holding you to a higher standard.

    • I am waiting on important documents. I used to sell books on Amazon.ca. Not viable any longer due in part to the high costs of shipping with Canada Post. Shipping with a tracking number very expensive. Parcels I get from USA much cheaper. The high cost of Canada Postal services affects us all in lost business within Canada and outside our borders. More people will use email, online payments, etc. We still need that service.Privitization seems like a good idea, however we are a large country with not a high density of population. Back to work ruling is needed, cutbacks in expenses and this includes workers. The union in the end is stabbing each other in the back and highlighting what needs to be changed.

      • I buy from Amazon and it’s delivery is cheaper than stuff I get delivered by UP
        It’s also really fast.  UP sends tracking emails and something I guy in Montreal gets shipped to California and then to Vancouver and on to Vancouver Island.  This takes almost 2 weeks on average.

    • 17 to 52 is an increase of a little over 200 per cent. Inflation in that time, as measured by the GDP price index, was 118 per cent. (With 2002=100, index was 55.7 in 1981, 121.4 in 2008.) So 17 cents in 1981 was 37 cents in 2008. 52 cents, the price of a stamp in 2008, is 40.5 per cent more than 37 cents, ie precisely what I said it was: “a 40 per cent increase after inflation.”

      What remains of your point?

      • Coyne, BTW I totally agree with your avatar pic!

        OK, so why choose 1981 and not 1982 when Canada Post became a crown corporation and in an era of huge deficits. The postage rate nearly doubled in 1 year, between 1981 and 1982. Using 1982 as a base, the 30 cents in 1982 was 63 cents in 2008, using the Bank of Canada calculator. The 52 cent rate in 2008 looks is a bargain! Boo-yah! I think you need to go back to the drawing board and stop trying to pull the wool over your readers’ eyes with manipulating the facts. 

      • Another point to be noted here: just because the price of a stamp has risen faster than inflation doesn’t automatically imply that Canada Post has done a bad job.  Is it possible that the cost of a stamp was far too low in the past, and it’s just getting to the level it needs to be at?

        • If no one can deliver mail cheaper than Canada Post, it has nothing to fear from competition, and the ban on mail delivery costing less than 3x the CP rate should be lifted.

  6. The city subsidizing the “gentleman farmers” argument is totally ridiculous.  Does it not make sense that the city dweller, nay forget the mere pleb, the city based business man would want to connect with and from time to time send mail to his or her suppliers (doing things like subsidizing city dweller’s existence by growing food for them) that are based in the country?  

    It is called a society, Mr. Coyne.  The fact that a commonly accessed service is held in public trust or ownership could possibly be because that is the best place to have it owned.  Public ownership does not equal subsidy.  

    Crikey, you must have been giddy at the opportunity to dis publicly held assets (utilities), unions, and (supposed) subsidies.  Do you get a bonus from your pay masters when you hit more than two corporatist talking points? 

    • 1. The price of a stamp is the same on urban and rural routes. 2. The cost of delivering mail to or from a city address is much less than the cost of serving rural addresses. 3. Therefore urban routes cross-subsidize rural routes, which is to say people in cities cross-subsidize those in the country. 

      That means all city residents, rich or poor, are cross-subsidizing all rural residents, poor or rich. There is a well-established moral case for redistributing income from rich to poor (“it is called a society”). There is no such case for redistributing from city to country.

      • Hey - we pay for highways we never drive on,,,have you really thought this through?

        • Um, yes: http://www2.macleans.ca/2011/01/11/stuck-in-traffic/

      • So you would add an as yet undetermined (and therefore un-costed) level of complexity over what amount of supposed subsidy by the city dweller of the country dweller?  Why would you trade simplicity of pricing for complexity of pricing?  What sort of savings would it produce?  How much extra effort would someone in the city have to exert to save, what?, 1/2 a cent?

        It follows that if the great majority of Canadians live in cities then the great majority of the mail is being sent and received in the cities.  Therefore, the greatest benefit to the system is already in the hands of those that use it most.

        Show me the money.  If the supposed city to rural subsidy is so egregious, then surely your case would be better made by showing some figures.  I highly doubt that city dwellers are so eager to stick it to the country folk over a cent or two.  Lest you bemoan the cost to business, it aught already be costed into the price of goods which self interested persons can choose to purchase or not as is their free choice.  

        • I’d be happy to concede that there was no cross-subsidization going on, since it would kick the props out of the main, indeed only argument for maintaining the monopoly. The first thing people say when the argument for competition is offered is, “but who would provide service on all those money-losing rural routes?” The supposition is not only that they are money-losing now, but somehow must inevitably be. 

          But that’s absurd: whatever the cost of rural delivery, if people are willing to pay a price sufficient to cover it (including the cost of capital), profit-seeking enterprises will do it. So the second argument you hear is, we don’t want to pay that price. That’s the reason people want to preserve the uniform postage rate: to continue the cross-subsidization. And uniform postage in its turn becomes the justification for preserving the monopoly.

          I’m simply making the case that any such cross-subsidization is unjustified, and that without it — that is, if the price of rural service were allowed to reflect its true costs — rural routes would continue to be served. But if you would like to argue that there is no such cross-subsidization, that it costs no more to deliver a letter to Inuvik than to Rosedale, be my guest. I have never heard anyone before make that case.

          • I didn’t say that there was no cost difference.  I said that the cost difference is not a significant factor (percentage) in the cost of delivery (by which I should say price of the stamp) because the vast majority of the expense of delivery is for the cities anyways because that is where the most of the mail goes.  Additionally, it seems like money well spent vs. a more complicated pricing structure.  In other words, my time is better spent putting a one price stamp, for Canada-wide delivery, vs. combing through a rate schedule of probably byzantine complexity to assuage some supposed principle of non-subsidization. 

            You are penny wise and pound foolish.

          • I think Mr. Coyne is only suggesting that Canada Post should have to face private competitors.  The private competitors would be free to adopt their own cost structure.  If the cost structure Mr. Coyne appears to be suggesting is too complicated, then private competitors simply won’t use it, since their customers won’t respond well to it.  On the other hand, if such a pricing system works well, then even Canada Post may feel encouraged to use it.

          • You assume that in free market competition we would still use stamps.  Innovation would likely render your problem of a complicated pricing structure moot.

          • Fraser Harris: the innovation already exists.  It is called the internet and email.  It too has a one price fee structure.  

          • RK: Canada Post already faces a host of competitors for your communications dollars.  It is already a competitive environment.

          • Coldstanding,
            You make excellent points. 

            I’m afraid Coyne is going off theoreticals and can’t show anyone the money. Increasing transaction costs is a big deal. I’m in ecommerce and I’m quite dubious of Coyne’s ideas and I don’t think they would result in any improvements of a postal system that’s not broken. He thinks it is, but I think if you ask most Canadians and business owners, I think they’ll be in agreement that Canada Post is fine.

            A byzantine patchwork of carriers, coverage, and rates would drive up my transaction costs and I don’t see the possibility for efficiency gains under competition that would reduce rates given the capital intensive nature and geography of Canada. If Coyne has the results of a simulation or something concrete, I’d listen, but I’m not holding my breath.

          • ColdStanding: under section 14 & 15 of the Canada Post Corporation Act, if I were to act as a private messenger and deliver a letter for you, I am required to charge you THREE TIMES the rate that Canada Post charges.  I cannot stay competitive under such laws.

            DundasLass: While you may be right about the cost of a complicated pricing scheme, Mr. Coyne is only saying that private competitors should be allowed on the market.  You don’t have to use them if you don’t want to.

          • @RK True, but my concerns are what happens to the market in the long-term. I want more information before I support any idea that might leave the market in worse shape. I’m sorry if I seem too skeptical, but as a businessperson I’ve seen competition in a high barrier to entry arena result in 3 weakened suppliers, instead of one stable one. Price has remained the same, since they have differentiated themselves, but I’m spending much more time and effort procuring product. I’d really love to see some modeling of various postal scenarios, given differing assumptions. I don’t see how that could possibly hurt. :)

          • Even cross-subsidization is not a justification for maintaining the monopoly. The government could subsidize rural delivery through private providers. It wouldn’t make sense, but they could do it.

    • I don’t think a stamp costing 70 cents while an urban stamp costs 40 cents is going to meaningfully impact a business’s ability to send mail to rural-based businesses. It’s not like we’re ripping up the roads at the city limits.

      Farmers do not subsidize city dwellers by growing food. They provide a service, and are paid the market price. If anything, farmers enjoy hundreds of billions in subsidies world-wide, largely paid by urban dwellers.

      • The price of the stamp for the letter is an access fee, not a delivery charge.  It gains you access to the system.  The system is letter delivery anywhere within the Can Post system for one price.   You have no idea, and neither does AC, how much it would end up costing business in terms of time and money should Canada Post be broken. .  What business do you know that does anything for less than $0.60?  I-tunes, which doesn’t have to deliver anything really physical, costs you minimum $0.99.  I guarantee that you do not have access to any data showing how breaking up Canada Post will deliver cost savings for mail delivery.  

        Canada Post benefits from massive legacy investments, that, once broken, can never be recovered.  Keep your mitts off of it.  

  7. So Mr Coyne, the cost of MacLean’s would rise significantly for ‘gentlemen farmers’, owing to higher delivery costs. Right?  Could MacLean’s absorb the hit?  Hasn’t it been a principle of our version of democracy that some services provided by the government require subsidizing so as not to disadvantage less prosperous, more remote areas?  The cost to me of sending this email, from Nova Scotia, would be the same had I sent it from Ottawa, where I live.  Unfair?  By your logic it should be cheaper had it been sent from Ottawa.  Am I being ripped by in a competitive market?  No, even big business realizes the need to be as uniform as possible with pricing.  And, in the cell phone market, long distance subsidizies local calling, and on and on.   The Post Office isn’t broken.

    • Good point.  In a model proposed by Andrew Coyne, would country subscribers to Macleans pay more for their subscription, or would they be subsidized by city subscribers?

      • Macleans, as a private provider in a competitive marketplace is free to set their own business model. If that includes cross-subsidization between urban and rural areas, that is their prerogative, and that of subscribers to use the service.

        • Whether private or public, a business model is a business model.  Regardless, if a city reader wanted to subscribe to Macleans, he/she would have a price structure that would either subsidize rural readers or not.  Why is it that conservatives think that whatever the private sector does is their prerogative and doesn’t affect the little guy, and whatever the public sector does is wrong and an imposition on citizens?  

          You cannot pretend that one single individual has that much influence on private megacorporations. 

          • This is priceless. By turns I’m called a left-winger and a right-winger.
            Anyway, CPC has liabilities backed by the Canadian government and a monopoly
            power enforced by the Canadian government. Thus, its affairs are the concern
            of Canadian voters and taxpayers.

            Macleans does not have its liabilities backed by the Canadian government,
            and competes in a relatively open media market, so it is free to run itself
            in any way it sees fit.

    • Cross subsidization is not the best way to do this. Better to offer cash transfers to rural residents and let them choose how to spend it.

  8. Do like Reagan when US air traffic  controllers went on strike. Replace them with new hires when they did not report for work.

    I don’t think privatization would work because of the shrinking market and the information given by some of the comments here.

  9. This is an excellent article Mr. Coyne!  I would like to remind commenters that Mr. Coyne is only suggesting that Canada Post should be exposed to some competition; he is not saying we should privatize it at this point.  If Canada Post is really as good as some of you say it is, and if there is no subsidization taking place, then Canada Post will not be affected at all by private competitors.

  10. The sad thing is that it isn’t even draconian cuts that are being suggested, or, god forbid!, some sort of competition. It is more like “Can we explain reality to you?”

  11. I’d like to put forth the notion that Andrew Coyne is proposing what some of us call market socialism. His ideas are statist, where markets are used to do the bidding of the state. Reading his words, you can see he doesn’t explicitly state he’s in favour of privatization, but dances his little song and dance whilst patting himself on the back for his own cleverness. You’ll rarely see him go into any great depth, as he knows enough to know there’s no “there” there. The problem with Coyne is that his logic lacks conviction and stops short of true market liberalization. Sure, he comes out against government-funded auto industry bailouts, but if you look closely at his writing, he often sees markets as a means to set price.

    He has no problem nursing from the teat of the CBC and I’d implore him to prove, not just state, otherwise. Coyne profits from more market socialism through his participation in the CBC machinery of state directed media that uses the market.

    I could care less if he were a Layton-loving socialist or a Ron Paul Libertarian, but I find his position to be untenable. I think it’s perfect that he decided to vote Liberal and making it clear in his waffling way he was not endorsing the party. He and the Liberals are caught in a logical no-mans’ land of embracing free markets, but not too much.

    • Just because someone doesn’t accept your rigid ideology does not make their positions unsound.

      • Er, market socialism is unsound. It simply doesn’t work because of the misalignment of interests.

  12. Spoken like a true believer in private enterprise.  Canada Post does a good job at a reasonable price.  In a world of $1.38 gasoline (Toronto prices for gas would be welcomed here in Northeastern Ontario) the fact I can send a letter for 59 cents any where in Canada is good value.  The main competition for Canada Post is a national courier who charges through the nose to ship even the smallest parcel unless you are a company or the government.   I say leave Canada Post as they are and do something about Air Canada who charge high prices for each flight then charge for everything but a glass of pop and offer nothing but poor service. I can fly to Europe cheaper than I can fly to Timmins and in a lot more comfort.

  13. I work at Canada Post.  In the new mail processing plant in Winnipeg.  I agree that lettermail is dying quickly.  Why my employer spent over 30 million dollars just in Winnipeg modernizing our lettermail sorting machines is beyond me.  The old machines were just as unsafe and sorted just as much mail for 30 million dollars less.  CPC took over 400 million from the employees pension in 2007 to finance this boondoggle.  When the market crashed in 08 and they could not take any money from the pension which was now billions in the hole, they got the Conservative Gov’t to let them borrow 2.5 billion more to modernize this dying industry.   WTF.  In a few years, CPC will be bleeding money, due to the interest on a 2.5 billion dollar loan and the absolute screwup that is the modern post.  They will probably get permission to borrow more from our pension to “ride out the storm” and continue modernization because it is necessary to make us viable into the future.  Shortly after this when our pension fund is sucked dry, we will get sold to FedEx with the only stipulation being that the Gov’t accept the 18 billion dollar pension liability for the employees.  FedEx will fire all us lazy useless posties, and hire us back the next day for 10.96 an hour, a Fair wage.  Most of us will not accept, like myself and choose to go on unemployment for a year and then make the Gov’t pay to retrain me.  Me on EI = $450 a week x 50 weeks= $22,500.  $22,500 X 48,000 Posties = about a billion dollars.  Plus retraining cause it tooks me aboot an huur to tipe this.  I’m such a stupid postie, who’s gonna enjoy my year off and new career.  Total cost to taxpayers, I dunno over 15 billion tho.  

    • An excellent argument for why our unemployment insurance system needs to be improved.

      • For sure lets fix EI.  Then lets fix health care, transfer payments,  equalization payments, education taxes, property taxes, road taxes, sales taxes, taxes that support emergency services and police, maternity leave, payroll tax, dog license fees, income taxes.

        Right, when we get rid of all that then everything will be fixed!
         

        • Moron. @Andrew_notPorC:disqus  said ‘improved’, and you type a bunch of unrelated junk, and follow it up with an assumption that he intends to ‘get rid of’ it.

          Stick to what people say – don’t read in your own prejudices. EI needs to be reformed, but apparently to you that means ‘get rid of’.

  14. A prediction:  Instead of a Crown Corporation that pays for itself, we’ll have a private corporation that loses money year-to-year and requires massive taxpayer bailouts in order to maintain an acceptable level of service. (the Air Canada experience, although their consumer rates are much more reasonable now than they were 30 years ago…as happened to the rates of the entire airline industry.)

    A second prediction:  Higher rates across the board, with no uniformity of service for those who live in remote communities. (the NS Power experience)

  15. Why is there no public outcry over our two tier delivery system?  When I lived in a house built in the 70s, I got door to door delivery, and that house still does.  Now I’m in a newer house, and I walk to the big mailbox.  I don’t mind doing this, but I don’t see why everyone shouldn’t.  Why not, as each letter carrier retires, service his/her route with a big mailbox?  Eventually no more letter carriers, and we all walk.  “I like door to door service,” says a commenter.  Well, why do you get it and not me?  We both buy stamps and pay taxes.  Phase it out, please.  What a screwed-up system we have…

    • You have a case here for sure.  However no government with half of a brain would ever do it and for one reason only.  They would lose votes and the next election.  As well with a major part of our population retiring soon many of them would go crazy without there door to door delivery.  I to have to walk to a mail box every day to check my mail(not lately lol).  It is something I enjoy.  However in my neighborhood there are no elderly residents ect.

      I guess in this case a question we can ask is why don’t we have door to door delivery?   Why should we be dumbing down the service to the lowest common denominator instead of increasing it to the highest common denominator?

      Just asking?!?

  16. Mail delivery should become a function of municipal governments. Door-to-door or community boxes; it is a characteristic that can help define a community. 

    • I for one would not support this.  Now you would be increasing our property taxes to pay for mail delivery.  As well there would be absolutely no continuity.  How could you get mail from city neighboring city let alone from province to province.

      Lol  maybe pony express?  Or maybe the meter readers?  Or Maybe Greyhound?
      Remember there is a lot of mail that does not originate in the city it is destined to!
        

      • Or the recycling guys could deliver all my junkmail, then take it away.

  17. Articles like this are a joke.  The writer has no idea of how the post system works and the ramifications of privatization.   He as well does not understand that Canada Post is the final deliverer of parcels for every other carrier in the country.  Yes Canada Post Delivers to every address.  UPS, DHL, FED EX, Purolator, and everyone else do not.  They Charge much higher rates and then give it to Canada Post to Deliver to the Door in many instances. 

    So lets look at privatization.  Canada post is now a private money making entity!  Yay Way to go,  Low Wages,  Foreign Owned,  Profits Leaving the country….  YAY.

    Oh.  We forgot.  Now that Canada Post is only in it for profit it will no longer deliver to the 30% of addresses in the country that are not profitable.  Hmm…….

    So  now the Government starts the ULAPDS.  Universal Letter and Parcel  Delivery Service.  Its job is to deliver Mail and Parcels to Every address  in the  country that is money losing and that no profit making company will go to.  It is completely taxpayer funded and costs taxpayers 1.5 Billion a year. 

    But Heh!  At least we got rid of that lame duck Canada Post.  Why would we want to keep that Dog.  Just because it made money every year……..

    Smart Article for a dolt.

    • Or CP could just raise the rates until they are profitable. (aren’t they right now? while delivering to all the ‘losers’)

      • Canada Post is a profitable company and has been for 17 years.  In fact as a Crown Corporation it has never lost money!

         

        • That proves my point.
          You are the one shouting that there are so many locations that CP ‘loses’ delivering to. All they have to do is raise their price to those destinations. Problem solved, no loss. Then they can decrease their rates in the areas that are subsidizing the ‘losers’ right now.
          If CP has been making money with the business model that it has, and the over fed union that it has, there is probably room for some competition.

  18. I can’t say I see a market for 5 companies doing postal services in Canada, but privatizing it, and seeing 2 or three would be great. The competition would keep the wages and compensation at a reasonable level, and let the market determine the prices. They could even keep Canada Post as a crown corporation, and just let others compete.

    If it turns out to be a bad idea, they can just create a new law that demands that postage charged for a private company be higher than CP. Then only the ‘evil corporations’ that everyone seems to hate would take the beating.

    •  Lol modster.  As usual you dont have a clue what you are talking about.  Why would any company enter this market place when you have stated in other comments that canada post is toast.  Why would they want to compete against anybody in a market where they would go bankrupt within 2 years.  You see 30% of all address in Canada are money losers. 

      That is why none of the big couriers deliver to those 30%  of addresses in the Nation.  CANADA POST IS THE ONLY COMPANY THAT DELIVERS TO THESE ADDRESSES!

      How would the FREE MARKET determine the prices to customers  who no one will deliver to?

      Why would anyone compete against Canada Post for these addresses. 

      So then you Keep Canada Post around to deliver to all the addresses that lose money and then you allow competition on all the profitable addresses in  the country.  How much are you willing to inject into Canada  post to deliver to those 30% of addresses?  1 billion? 2 Billion?  Or would you be willing to invest 3-11 billion per year like the United States tax payer does. 

      Then how would you create a law  to make postal costs  higher for private companies than for a crown corporation.  Would that not go against every wto and free trade law on the books???

      Also  wouldn’t that end the free market??  Or at least end the illusion that there is a free market in the first place!

      • Please, don’t make this so easy.
        1) I have never said that CP is toast. Don’t put words in my mouth. I have said that the underfunded pension is a huge liability.
        2) Did you even read this article? Do you understand the term ‘monopoly’? Right now CP has a federally regulated monopoly. My last statement was just to say that the federal gov’t could always return to where we are now, (monopoly) if it didn’t work.
        3) You jump up and down about CP being the only one to deliver to some addresses. They are the only ones in Canada with a monopoly.
        4) Companies could compete against CP, if it wasn’t against the law to compete on price.
        5) Who said that I would keep CP around to deliver only to those addresses? If they lose money, raise the rate. As I said, if was a bad idea, they could always revert to where we are now. Monopoly. No need for the taxpayer to inject any money.

        Again, you make this too easy. Reread your comments before you post them. You might catch some of the mistakes you make. Also, read the article before you comment on comments made about it.

        • Ok then.  Please don’t make this so easy.  Please show us the business model that will show the rest of the world who will successfully compete for addresses that are money losing. 

          I understand what a monopoly is.  Why does it matter that Canada post has a Monopoly when it is the only carrier to deliver to the 30% of addresses that are money losers.  The Monopoly that Canada post has does not prevent any of the other companies to deliver to those addresses.  Every company has the ability to deliver to those addresses.  But for some reason (profit)….  all of the other companies use Canada Post to deliver to those addresses.

          Again please give us a break down of a successful business model that would provide the service we have today by Canada Post with the VISION that you have for a FREE MARKET based system!  I will also add that any idea that you have cannot have any taxpayer funds injected into it. As well as it cannot raise rates beyond the historical raise in rates that Canada Post has used and that at no time is any competitive venture allowed to have any form of subsidization….

          Point 4. Please define exactly what you mean when you say it is illegal for compaines to compete with Canada Post on price. I would assume that you are talking about lettermail. If this is so you are correct. Im sure you do realize that no company on earth would actually try to undercut canada post on a 59 cent stamp. However I am sure you realize that other carriers at times have lower parcel prices than Canada post? For example not to long ago purolator was killing Canada Post on Parcel shipping a few months ago!
          Maybe you didn’t know this?

          Point 5.  So lets try it….  If it doesn’t work then raise the rates….. AND THEN IF ITS A BAD IDEA SCRAP IT????  NO need for taxpayer money?  are you serious?

          to you sir!

          • Again, if they are ‘money losing’, they can become more efficient, or raise price. No one in private enterprise keeps selling things at a loss.

            Again, read the article first:

            “Which is to say, no choice: the monopoly Canada Post enjoys on the
            delivery of letter mail is not by virtue of its sterling service, but by
            statute. Sections 14, 15 and 50 of the Canada Post Act make it an
            offence for anyone else to carry a letter for less than three times the
            prevailing postage rate. You can go to jail for it.”

            Yes, the monopoly prevents exactly that, if you mean that they want to compete by price.

            Totally serious.

          •  So then what is the point of competition?  Is it competition for just the sake of competition?  You do realize the network that each company would have to create just to be able to compete in this arena don’t you?

            Canada post is investing over 2.5 Billion dollars in improving its infrastructure so that it can better provide these services! ( lets not get into the actual value that Canada Post will receive from this investment as it is will surely not be worth 2.5 Billion in returns).

            It seems that your idea is to allow competition for the sake of competition.  Increase rates to allow the competitors to have a chance at success!  And then pass added costs on to the end user ( TAXPAYER ).  All this to replace a system that is already working at a reasonable cost when compared to any other industrialized country.

            Do you also feel that we should break the monopolies that Cable, phone, cellular and utility companies have as well?

            FYI  I do appreciate your comments and thank you for your time!

          • It is not ‘competition for the sake of competition’. Not even sure what that means. It is opening the door to competition. If no company thinks that they can compete, as you seem to think, they won’t. Everything would stay the same.

            Not sure what your comment about increasing the CP rates. I would hope that they would go down. There is never a need to pass added costs to Taxpayer.

            As far as cable, I have choices. As far as phone, I have choices, cell phone – lots of choices, and utility companies, lots of choices (on most, sewage and water, no). Again, CP has a gov’t mandated monopoly, so not a good comparison. Would I like to see more competition? Yes, especially in the cable area.

            We used to have a gov’t owned an operated telephone company here. I remember my parents having $400/m long distance bills. Since they have privatized it, and competition has come, the rates are amazingly cheap, and get cheaper every year.

  19. haha, this article smells like propaganda. Why is the world would the government privatize a crown corporation (that all Canadians essentially own) that does 11 billion dollars in business and makes a 100 million in profit? Let me guess… So one or two fat cats can make more. People, we need to stand up to this non-sense and see the bigger picture of what is happening! 

  20. Funny enough, I have got a parcel from Hong Kong from my brother. He paid $40 for the delivery. The same parcel would cost to send to Hong Kong from Toronto $233. I still do not understand why such a huge difference.

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