Published December 1 , 2009
By Adrian Vannahme
As Christmas nears, line-ups at the post office will grow and packages will take longer than usual to reach their destinations. However, even outside of peak periods, customers occasionally grumble that Canada Post is slow, sometimes loses mail, and has poor service and high prices.
Canada Post has acknowledged that it has problems. “Most of the facilities are in significant need of upgrading, including the introduction of new technology,” said Don Woodley, interim chairman of Canada Post back in September 2007. “It will require very significant capital.”
But because Canada Post is a publicly-funded monopoly, there is reason to doubt that it can be reformed to deliver improved service and more competitive prices. There is, however, a better way to modernize Canada's postal system, including its need to find capital.
Canada Post's problems and the difficulties it faces are similar to the ones experienced in Germany in the 1990s. Back then, Deutsche Post, the German post office, also faced problems normally associated with being a monopoly – limited innovation, poor customer service, below average labour productivity and high letter prices.
How things have changed. The new German postal service is now an example of how liberalization of the postal market and privatization of a monopoly can produce better results.
The move to liberalize Deutsche Post began in the late 1990s, under a left-of-centre government coalition, and took over one decade to come into effect. The first step, taken in 2000, was to list Deutsche Post as a publicly-traded company on Germany's stock market. In the lead-up to the liberalization of the market, a regulator for the postal sector was then established and placed under government authority. Finally, competition was allowed for letters of more than 1,000 grams. Gradually, the weight was reduced until the market for all letters was opened in 2008.
What were the results of the privatization and liberalization? Post offices in Germany are open longer, allowing customers greater access to the postal services in a country where, traditionally, retail hours did not extend past normal work hours; service to rural areas have increase significantly, because postal hours are now as long as the grocery stores or pubs, now providing postal services, stay open and; business customers are also enjoying better service because of the competition between Deutsche Post and its new competitors.
Germany's entire postal sector, Deutsche Post in particular, had to modernize its structure and operations in order to remain competitive. Now, mail sorting is done by machine rather than by hand, requiring less time and money.
German customers have seen the benefits: Between 1998 and 2008, the inflation-adjusted price of mail fell by 16.3 per cent – the steepest decline among all European countries surveyed. In fact, prices rose in 17 European countries in the same period.
It is obvious that the fears – among them job loses – of those who had opposed privatization of Deutsche Post and the liberalization of the postal sector were unfounded.
Rather than fewer postal sector jobs, liberation led to an increase in postal service employees, even at Deutsche Post. Increased competition led to the modernization of Deutsche Post, which in turn enabled the company to expand into international markets with significant success. Today, Deutsche Post has almost double the number of employees it had in 1990, many of them spread around the globe. At the same time, the increases in efficiency and competitiveness led to large gains in revenue.
Its new German competitors are faring equally well. But their success has not come at the expense of service: Regulatory powers retained by the German government ensured that rural and remote areas retained access to mail services at reasonable prices.
Canada Post's CEO Moya Greene must have some sense of how other countries such as Germany have successfully modernized the postal sector.She was recently quoted as noting, “I'm not a person who has any problem with private ownership of equity. I believe there are lots of great companies out there where shares are held publicly”.
Given the similarities between Canada's postal sector and Germany's former state-run postal sector, and in light of Germany's positive experience with postal sector liberalization, there is no reason why gradual privatization of Canada Post and liberalization of the postal sector in Canada cannot also be a success.