A new report from the C.D. Howe Institute is calling for the end of Canada Post's monopoly and deregulation of the postal market, but stops short of advocating for outright privatization.
Financial losses drive reform calls
Canada Post has bled money in recent years, posting a $1.7 billion deficit in the last fiscal year and $6.1 billion in cumulative losses since 2018, according to the report. The report, written by Erik De Lorenzi, argues that the current postal market is no longer a 'natural monopoly,' which is when a 'single firm can supply the market at a lower cost than two or more firms.'
It's why De Lorenzi writes that 'eliminating' Canada Post's monopoly is 'a step towards renewed viability.'
Declining mail volumes despite population growth
The report points to other tipping points for the postal crown corporation, including a 60 per cent drop in mail volume from 2006 to 2023 despite a 21 per cent increase in population. The report commends the federal government's transformation plan of Canada Post as 'important first steps,' but 'they will not address the most significant, underlying causes of Canada Post's lack of financial self-sustainability.'
Commercialization over privatization
To mitigate the losses, the author calls for the 'commercialization' of Canada Post by deregulating the postal market and ending universal service obligations. 'Commercialization is the policy most conducive to Canada Post's greater economic welfare,' the report said. The report said that rural communities, which often rely on Canada Post, would 'be maintained by compensating carriers under a subsidy scheme.'
The report added that an 'open letter market' could reduce letter prices and allow Canada Post to become more competitive against the private sector.
Privatization only after regulatory reform
However, the report does not argue for outright privatization. De Lorenzi warns a privatized monopoly would 'abuse its market power by maximizing returns through higher rates and lower service standards.' 'Ultimately, if the federal government chooses to pursue (Canada Post's) privatization, it should do so only after first addressing the structural problems inherent in (Canada Post's) existing regulatory framework,' the report said.
Independent postal regulator proposed
The report also calls on Parliament to 'establish an independent postal regulator. Canada is the only major Western economy without one.' The report said a regulator would address possible conflicts of interest and would 'enhance customer service, improve corporate governance, and address potential conflict of interest in the ratemaking process.' A regulator would also separate performance targets from financial obligations, creating an oversight body 'tasked exclusively to oversee Canada's postal market.'
That regulator 'would reduce the likelihood of another decade of inattention and inaction, improving the odds that future problems are addressed before they become crises,' the report said.
