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Index of Postal Freedom
Canada Post
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Overview
Canada Post is the national postal service of Canada. For nearly thirty years, it has retained a monopoly on all letters weighing less than 500 grams traveling within the country. Canada Post competes against private-sector firms to offer other services, like parcel delivery.
In October 1981, the Canada Post Corporation Act placed the postal service under the auspices of a new, government-owned, semi-autonomous corporation of the same name. The change was welcome, as Canada Post ran deficits every year from 1964 to 1981. In 2008, Canada Post made up 80 percent of the holding company's revenue.
In 2008, mail volume declined for the second straight year. Each household received an average of only 355 pieces of mail during the year.
The first mail delivery occurred in 1693 when Pedro da Silva was paid to deliver mail between Montreal and Quebec City. He was later named the "first courier" in Canada. In 1867, the Dominion of Canada created the Post Office Department, thus giving birth to the modern postal system. Prior to that date, there had been unofficial routes, mainly connecting the eastern cities.
In 2008, Canada Post achieved a 96-percent rate of on-time delivery of letters. The "on-time" designation ranges from two to four business days, depending on the distance traveled. There are over 23,000 delivery routes, and that number is projected to grow. Canada Post delivers 45 million pieces of mail each day to about 14 million addresses.
Canada Post maintains a significant presence in express services. In 1993, it bought courier company Purolator. In 2008, this part of Canada Post contributed 20 percent of the company's revenue and was the top overnight-express-services firm in the nation.
Liberalization
Canada Post maintains a broad monopoly on mail service. Letters weighing less than 500 grams are subject to the national post's monopoly. Magazines and books may be delivered by private firms. Private companies can deliver "letters of an urgent nature" if they charge at least three times Canada Post's regular rate of postage for a 50-gram package.
Private firms are also allowed to handle bulk mail sent by Canadian interests to destinations outside the country. Government authorities have generally held that Canada Post's monopoly only applies to mail sent within the country. In 1988, Canada Post stated that "outbound mail is not protected by exclusive privilege." But in 2004, the Post went to court to try to have the government re-interpret the exclusive privilege to include outbound international mail. Although the court ruled in favor of Canada Post, private firms have continued to operate within the sector. Legislation was introduced in parliament in 2007 to officially exclude outbound international mail from Canada Post's exclusive privilege, but it has not yet passed.
Canada Post and the United States Postal Service (USPS) maintain a bilateral inbound competitive service agreement, which dictates the levels of remuneration for delivering mail originating in one country and destined for the other. Canada Post and USPS negotiate their terminal dues through this agreement rather than through the Universal Postal Union. The bilateral agreement is classified as a market-dominant product under U.S. law because Canada and USPS both maintain letter-mail monopolies.
Privatization
An Ipsos Reid poll conducted on behalf of the Canadian Union of Postal Workers (CUPW) determined that about 70 percent of Canadians oppose allowing private companies to deliver mail in Canada.
The opposition to privatization stems from the popularity of the current pricing system. Some Canadians fear that private competitors will force Canada Post to charge different fees depending on the destination of a letter.
The postal unions oppose privatization because they fear job losses. They claim privatization will result in more expensive delivery costs for consumers and fewer service counters.
The Canadian Union of Postal Workers has launched an official campaign against "closures, privatization, and deregulation of Canada Post." One of the motivating factors for the campaign was the 2008 launch of the Canada Post Corporation Strategic Review (CPCSR). A three-member panel appointed by the Conservative government released its report in mid-2009.
The CPCSR panel did not consider whether Canada Post should be privatized. The report did recommend scrapping a moratorium on the closure of rural post offices in favor of new procedures that could allow post offices to be privately operated. The CPCSR also stated that Canada Post's regulated products should generate enough revenue for the organization to be self-sufficient. The panel raised the possibility that significant one-time rate hikes might be necessary to achieve such an outcome.
The CPCSR also floated the idea of creating an employee share ownership plan. The CUPW is adamantly opposed to this measure, which it terms "partial privatization."
Some outside observers credited the CUPW's campaign against "closures, privatization, and deregulation" with dampening the scope of the Strategic Review.
Certain functions within Canada Post have already been privatized. Some post offices are privately owned and run as franchises. Some non-core activities are contracted out to private concerns, and Canada Post offers pricing incentives to mailers who presort.
Universal Service
The universal service obligation requires Canada Post to deliver mail five days a week to every address in Canada for one uniform price. Mail is defined as letters, parcels, and publications. Standard-sized letters require only one stamp, regardless of destination. The price to send parcels, however, depends on the distance. The Post is obligated to deliver materials for the blind for free. Ultimately, prices and services must meet "reasonable" standards, but the definition of reasonable is not specified.
After passage of the Canada Post Corporation Act, the Post reduced service in rural areas from six days per week to five and cut multiple deliveries to businesses, eventually to just one delivery per day.
The CPCSR recommended that Canada Post and the national government draft a Service Charter that lays out explicitly the terms of the universal service obligation. Whether such a Charter will soon be drafted is unclear.
Competition
Private international mail firms are allowed to transfer packages sent by Canadian corporations to destinations outside the country. Materials sent in this manner included checks, invoices, and brochures from large corporations. Despite the 2004 court ruling which determined that outbound international mail was the exclusive privilege of Canada Post, private firms have continued to operate as they did before the decision. The federal government has been trying to pass a law that would solidify the private companies' right to operate since 2007, but no such law has passed.
In 1993, Canada Post purchased Purolator, a competing courier company. In 2008, this branch of Canada Post was the leading overnight courier company in the country and contributed about 20 percent of Canada Post's revenue. Canada Post also maintains an agreement with FedEx Ground in which the national post delivers FedEx packages to some of the country's more rural and isolated addresses.
Organization and Structure
The Minister of Transportation officially oversees Canada Post. Canada Post's eleven-member board of directors, however, guides overall strategy. The Board includes Canada Post's President and Chief Executive Officer. Board members also sit on special committees for such topics as pensions, corporate social responsibility, and auditing.
In 1997, the first Ombudsman was appointed. This person provides an independent avenue through which customers can raise issues that could not be resolved though traditional channels. The Ombudsman does not mediate labor disputes; the office was created with the express purpose of addressing customer satisfaction.
Canada Post has 72,000 employees, including about 15,000 letter carriers. About 60,000 workers -- or more than 80 percent of the Post's labor force -- are unionized. The most prominent union is the CUPW. Between 1965 and 1981, workers went on strike at least 6 times.
The contracts between Canada Post and the unions stipulate that labor disputes are to be adjudicated by one of about a dozen arbitrators across the country. The arbitrator's decision on a matter is final. The union involved and Canada Post split the cost associated with the arbitrator.
As has happened in the United States, Canada Post is looking to centralize deliveries around cluster boxes in order to cut costs and head off safety disputes. In 2009, for instance, the Post announced that it would review delivery to 843,000 addresses, particularly in rural areas, because delivering to those addresses may pose safety risks. Postal labor unions see this as cover for potential job cuts.
More than 6,600 post offices serve the nearly 15 million addresses in Canada. The services offered by Canada Post can be divided into three categories: Transaction mail (domestic letter mail, international letter-post, and Epost), Parcel (priority next Am, Xpresspost, and Borderfree), and direct marketing (addressed and unaddressed).
Pricing
In 2000, a price-cap formula was implemented that holds basic letter rates to two-thirds the rate of inflation. The past two price increases for first class stamps occurred in January 2007 and 2009, first by one cent and then by two. As of 2009, a first class stamp goes for $0.54 CAN.
In 2008, Canada Post delivered 11.8 billion pieces of mail. Its revenue was $7.7 billion CAN.
Canada Post offers a "Permanent Stamp," which is sold at the going rate but may be used as a first class stamp even after a stamp price increase.
Transaction mail makes up over half of the Post's revenue. Parcel post and direct marketing contribute 21 percent and 24 percent, respectively. Businesses and government are responsible for 90 percent of Canada Post's mail volume.
Future
The increasing popularity of e-mail and digital transactions poses a challenge for Canada Post. In 2000, the national post implemented an electronic alternative called Epost to compensate for the decrease in letter mail. A part of the Transaction Mail line, Epost allows customers to pay bills, view statements, and receive payments through Canada Post.
Canada Post is planning significant rate increases over the next five years. The organization will raise the rates charged for publication delivery by 3 percent in 2010, despite protests from the magazine industry. Since 2002, magazine delivery rates have gone up 38 percent. For letters, Canada Post's five-year plan includes a three-cent stamp price increase in January 2010 and an additional two-cent increase each year until 2014. If the plan is approved by regulators, stamp prices will have risen 20 percent by 2014.
Canada Post is also looking to cut costs by $250 million CAN in 2009. To do this, Canada Post intends to cut the management workforce by 5 percent and reduce hours worked by about two million. Canada Post is looking to upgrade some services for bulk mail clients, including presorting and permit indicia.
Due to competition from other providers, the national post expects low growth in the parcel sector. To combat this, Canada Post is looking to modernize mail delivery. By implementing new technologies, the organization hopes to ensure parity with peers in efficiency and pricing. Renovations will include new sorting techniques and implementation of a "clean addresses" list, which could result in less undeliverable mail and more efficiency. Officials project that this transformation will cost about $2.7 billion.
Each year, Canada Post adds about 200,000 addresses to its delivery list. Actual mail volume, however, has declined about 6 percent since 2004. The combination of decreasing volume and increasing service requirements represents a significant challenge.
Useful Links
Canada Post Official Website
Recent bilateral inbound competitive service agreement
C.D. Howe Institute Paper "Rerouting the Mail: Why Canada Post Is Due for Reform"
Canada Post Corporation Strategic Review
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