The case for privatizing Canada Post is mounting. New technology and competition on every front are rapidly undermining the rationale for its monopoly on letter mail and its future financial viability.

The latest call to privatize Canada Post comes from the Organization for Economic Co-operation and Development (OECD). It urges Canada to “liberalize postal services by eliminating legislated monopoly protections and privatizing Canada Post.”

Last year, Canada Post’s letter volumes fell by 2 per cent, parcels by 8 per cent, and direct marketing mail declined by 11 per cent. What makes these volume drops even more serious is that they are occurring while the number of addresses Canada Post must serve is growing by more than 200,000 a year.

Delivering less mail to more addresses while still using antiquated processing equipment is a formula that will propel it back into deficits after more than a decade of modest profits.

Some of the core problems are new. A growing number of personal and business customers are turning to electronic means of moving their messages and money — and to do their advertising.

Others problems have persisted in perpetuity: restrictive collective agreements; aging equipment; financing the universal service obligation; and the ever changing and conflicting expectations from successive governments.

Progress has been made on some of these issues. But there is a limit to the productivity and competitiveness that Canada Post can achieve as a public enterprise. So the status quo is not an option.

The Harper government’s response? Allow Canada Post to borrow a staggering $2.5 billion over the next five years to modernize its “state of the ark” processing plants and equipment. This latest plan also is supposed to unleash Canada Post from some regulatory restrictions and open up new revenue streams to offset declining letter business.

The only regulatory change so far is not very encouraging. Canada Post has been given permission to raise first class letter rates from 54 cents to 65 cents by 2014. The new sources of revenue being promised remain a mystery.

The larger concern is that Canadian taxpayers are being asked to guarantee a multi-billion-dollar investment in a process that lacks a clear, long-term business plan.

If these billions are simply intended to speed up the processing of hard-copy letter mail to add some efficiency to today’s unsustainable postal business model, then they will be wasted. This money will also be wasted if the government allows Canada Post to indulge in its costly vision of a separate e-post electronic service when the Internet is readily available.

It seems that the Harper government has opted to buy time by allowing Canada Post to borrow billions to invest in a yet-to-be determined future. Harper’s main motives are probably twofold:

• Privatizing Canada Post means a prolonged period of trench warfare with the postal unions. Not an undertaking relished by any minority government.

• Canada Post is the most visible and (surprisingly) trusted federal presence across the country. Not something easily relinquished.

Whatever his reasons, Harper has missed a golden opportunity to move ahead with privatizing Canada Post.

Five years ago, when Moya Green joined Canada Post as CEO, she brought with her extensive experience in successfully transforming several other major federal entities. She was involved in privatizing CN Rail, deregulating the Canadian airline industry and commercializing the Canadian port system.

Green tried to interest the Harper government in gradually privatizing Canada Post by offering equity shares to the public to raise private capital for modernization while Canada Post was still profitable. Harper retreated from the idea. Instead, he is allowing Canada Post to boost its debt limit from $300 million to $2.5 billion without really understanding how this borrowing will benefit Canadians.

The new U.K. government moved quickly to hire Green as chief executive of the Royal Mail. Her mandate is the one she sought for Canada Post: to privatize all or part of the British mail service. As a result, Canada has lost a change agent with the ability to have led serious postal reform in this country.

One of the perceived obstacles to privatization is the universal service obligation (USO) — the requirement for Canada Post to provide mail services at uniform rates to all regions of the country. However, this social service can be maintained by less costly means.

Some countries provide targeted subsidies to private operators to maintain required levels of service on specific routes. These routes are often put out to tender and awarded to the company that will deliver the best service for the lowest subsidy.

Not having to cross-subsidize its services to finance the USO, and freed from the conflicting roles imposed by government, Canada Post would become a much more attractive business. Add to this Canada Post’s ownership of Purolator, one of the nation’s leading courier companies thought to be worth close to $1 billon, and buyers will soon emerge.

Canada Post would be better equipped to compete in providing a wide range of mail and other services. Improved governance, labour agreements tied to productivity and the incentive to innovate could make it a profitable private enterprise.

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The Harper government is asking taxpayers to guarantee billions for the chance to watch a slow-motion train wreck. Instead, it should sell Canada Post and add billions to the government’s bottom line.

Or he could invest those savings in ensuring that Canadians, regardless of where they live, have access to computers and high-speed Internet service. The social and economic payoffs from that investment would far surpass anything that might flow from Harper’s expensive tinkering with Canada Post.

Michael Warren is the CEO of the Warren Group and a public policy commentator. He is a former CEO of Canada Post, chief general manager of the Toronto Transit Commission and an Ontario deputy minister. r.michael.warren@gmail.com

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