The Burden of the Canada Post Monopoly

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Appeared in the Financial Post

Canada Post is a dinosaur that has lived far too long.  Only a monopoly protected by government can treat the public the way it does.  The cost of stamps for a first class letter on January 11 went from 54 to 57 cents, for an increase in 5.5 percent over a year in which consumer prices rose only half that rate.  Since 1971, when a stamp cost 7 cents, the cost of mailing a letter has jumped by 714 percent while general inflation was only 443 percent.

Such increases in the cost of postal services could perhaps be justified if the quality of the service increased correspondingly.  But my own experiences suggest that the opposite is the case.  The first concerns Purolator, a subsidiary of Canada Post.   In the middle of December upon returning from a business trip I learned from a telephone message that I had to pick up a package at the local Purolator office by the next day.  If I did not do so, the package would be returned to the sender.  The package contained tickets for Olympic events, which Purolator had known long in advance would be sent to many people in Canada at that time.

When I arrived at the Purolator office the next morning shortly after it had opened at 8:30, a dozen people were already lined up in front of me, waiting to be served by one clerk.  Within a short time, another half dozen people joined the queue.  I estimated that it would take customers on average 30 minutes to be served by the single employee behind the counter.  Asked about more help, the employee responded that another person would arrive Within the next half hour.  Sure enough, around 9:15 a second customer service agent leisurely walked into the office.  She held a copy of coffee in her hand and disappeared for several minutes into another room before starting to serve customers. 

My second experience involved the Canada Post delivery system: A Christmas letter arrived on January 11, after it had been mailed in New York on December 9.  The letter had been returned to the sender because the address on the envelope had been imperfect.  It gave the correct name, street address, town and postal code but it gave the wrong apartment number, 2102 instead of 1202.  The mail carrier obviously could not be bothered to search for the correct mail box, at which on average I receive 3 pieces of mail a day.  Instead, he or she made a big cross on the envelope and wrote in bold letters NO SUCH, leaving open the question whether there is no such person, street address, town or apartment.

A final personal experience involved the shipment of books to a university in Italy where I needed them for courses I was teaching in the Spring of 2008.  Canada Post charged $250 and the books arrived after 2.5 months.  The same books shipped back to Canada later that year cost $40 and arrived after three weeks.  It is puzzling that the cost and time were so much better when my primary dealings were with the Italian rather than the Canadian postal services.

Canada Post publicly justifies its record of price increases by reference to a decrease in the volume of business, the cost of mechanization and the need to serve more customers.  No one really knows whether this explanation is valid.  Its operation and accounting are simply too complex. 

However, we do know from history that when governments remove the protection of monopolies, costs drop and consumers are serviced better.  There are many reasons for this result, but again history shows that the end of the monopoly is accompanied by the loss of power by unions to extract high levels of compensation, protect employees from the consequences of poor performance and prevent the introduction of new labour-saving technology.  Management also becomes more efficient and willing to resist union demands because government policies no longer permit higher costs and poor service to be passed on to consumers.

The argument that monopoly protection is needed so that Canada Post can subsidize the services to customers living in remote areas is bogus.  After airline deregulation, remote and small communities were serviced better and more cheaply by unregulated airlines.  If subsidies for some remote locations are still needed, government should pay them directly to private providers of first class mail services who won the contract in a competitive bid.

Canadians have the right to buy their goods and services from any supplier who offers them the best price and service.  The government has no right to force Canadians into buying first class mail services from the monopoly Canada Post.  It is time for genuine competition in this market.

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