The
key to understanding Canada Post’s latest strategic masterstroke — henceforth,
the post office will charge you nearly twice as much to deliver a letter half
the way — is to understand the logic of monopoly. Only in a world entirely
insulated from competitive reality would the appropriate response to declining
demand be … higher prices and worse service.
There’s a question on WikiAnswers that wonders whether a monopoly can lose
money, despite being a price-setter facing zero competition.
Canada Post is the answer to that question, losing $130-million in the third quarter of this year alone. Bloated and inefficient, with a union, the Canadian Union of Postal Workers, that is actively “working to defeat capitalist globalization” (according to its constitution), it is no surprise that drastic action is required.
The problem is that the action proposed Wednesday is not drastic enough. The structure of the Canada Post business model will not change and it will still not face any competition in the declining part of the business it calls Lettermail.
But then, this has been the post office’s strategy all along. For the last forty-odd years Canada Post’s business plan has amounted to charging more and more for less and less. Long before email or electronic funds transfer or any of the other things the corporation blames for its woes, the post office was using the brief intervals between strikes to cut service.
First Saturday
deliveries were discontinued. Then next-day service became day-after-next,
redefining at a stroke a half-billion late letters every year as “on time.”
At length home delivery was discontinued altogether on rural routes in favour of community mailboxes — an innovation to which urban customers are now to be introduced. The price of a stamp, meanwhile, is to jump to a dollar — two and a half times, after inflation, what it cost in 1981, when it still made house calls. The day is not far off when, for $5, the post office will refuse to deliver your letter at all. Such is the logic of monopoly.
And yet all the while it was withdrawing service from wider and wider swaths of the country the corporation was insisting on maintaining its “exclusive privilege” in first-class mail — under the Canada Post Corporation Act, it is illegal for anyone but the post office to deliver a letter for less than three times the price of a stamp — on the grounds that it would otherwise be unable to provide universal service.
As loopy as that sounds, it still has its adherents. That, too, is the logic of monopoly: the less the service, the more attached people become to what remains. Already rural customers are lecturing their urban cousins on the delights of community mailboxes. (“You get to meet your neighbours!”) For without anything to compare it to, people cannot imagine how it could be better — though they are easily persuaded it could be worse.
Canada Post by the numbers
32 • Consecutive years Canada Post reported annual losses between 1957-1989
$104-million • Loss Canada Post reported last quarter
$1-Billion • Projected annual losses by the Conference Board of Canada by 2020 if nothing changes
1965 • Year of the first strike by Canadian Union of Postal Workers
42 • Length, in days, of 1981 CUPW workers strike
$100-million • Cost of a three-week strike by postal workers in 2011
68,000 • Current approximate number of Canada Post employees
6,000-8,000 • Number of jobs Canada Post expects to cut between now and 2015
48 • Average age of Canada Post employees
$17.69 • Starting wage per hour in 1998 for a mail dispatcher
$24.59 • Current minimum wage per hour for a Canada Post mail dispatcher hired before Feb.1, 2013
$19.14 • Current minimum wage per hour for a mail dispatcher hired after Feb.1, 2013
$700-$900-million • Estimated savings for Canada Post after proposed changes and reforms
$269 • Annual per-address cost of door-to-door delivery
$117 • Annual per-address cost of community mailbox delivery
5 • Number of years Canada Post expects the transition to community mailboxes to take
2 • Average number of stamps purchased by a Canadian household per month
11.6 billion • Number of pieces of mail delivered by Canada Post in 2006
9.6 billion • Number of pieces of mail delivered by Canada Post in 2012
14 million • Number of addresses served by Canada Post in 2006
15 million • Number of addresses served by Canada Post in 2012
1981 • Year Canada Post was made a Crown corporation
1837 • Year adhesive postage stamp was introduced
3 cents • Price of a stamp for domestic mail in 1867
46 cents • Price of a stamp for domestic mail in 1999
63 cents • Price of a stamp for domestic mail in 2013
85 cents • Proposed new price for stamps in the next five years
5 million • Number of people who will no longer receive mail at their doorstep
9,000 • Number of volunteers that respond to letters to Santa mailed through Canada Post
Hence the political debate now shaping up, between the Conservatives, who
support the cuts based on the need to “protect the taxpayer” — Canada Post has
parlayed its statutory monopoly into projected losses of near $1-billion —
while the opposition demands that they be reversed, in the name of protecting
consumers.
The possibility that the interests of both might be served does not
seem to occur to either, because neither can conceive of a world outside the
monopoly: a world in which anyone other than Canada Post is allowed to carry
the mail.
But that alternative must surely now be inescapable. The question before us is not whether to “save home delivery” or “save Canada Post.” That is a false choice, which only the logic of monopoly forces upon us. Step outside its confines, and the question is “who can offer the best service to postal users at the lowest cost?”. To which the answer is: open it up to competition and let’s see.
Indeed, step outside Canada, and you find that is increasingly the norm. Across Europe, under the aegis of the single-market directive, the old state postal monopolies are being cracked open, following the example set earlier by New Zealand. Once staid utilities like Deutsche Post have been transformed into dynamic international competitors.
Yet in Canada, we remain inert, seemingly helpless to do anything but watch as Canada Post grinds slowly and expensively to a halt. And as ever, the obstacle remains the “universal” service mandate. Private competitors, it is asserted with utter conviction, would refuse to serve the countryside. They’d undercut Canada Post on urban routes, leaving the post office with the costlier rural routes.
That would certainly be true — if the private carriers were obliged, as Canada Post is now, to charge the same price for a letter anywhere in the country, no matter where it goes or how much it costs to get it there. But this is an absurd restriction, required of no other good or service, public or private.
We
do not pay the same for a phone call, regardless of duration, distance or time
of day. Neither is it expected that the price of a house should be the same in
the country as it is in the city. Why should it be so for a letter? Why has it
been so?
Because it was useful. Politicians liked it, because it allowed them to subsidize rural consituents out of the prices paid by those in the cities. And the post office liked it, because it helped sustain the case for monopoly. But what was previously merely inefficient and unjust is now intolerable. The “exclusive privilege” has got to go, which means so must the uniform postage rate, and the rest of the logic of monopoly.
The issue, in short, that ought to concern us is not what becomes of Canada Post, but what is the best alternative for the people it serves; not whether Canada Post pulls out of the mail delivery business, but whether others are allowed to get in. Or will we continue to protect it from competition on a service it refuses to provide?
National Post
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