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.