Benjamin Dachis is a Senior Policy Analyst at the C.D. Howe Institute.

What would you think about a new bus service that got you away from currently crowded transit lines? How about a return of home letter delivery? These are just a few recent examples of privately operated services that have popped up to fill a void governments have left when it comes to serving consumers. Governments should start embracing, and harnessing, this private delivery of traditional government services.

Canada Post recently decided to end most home delivery, to serve only community mailboxes. A Winnipeg-based company will soon start to deliver to homes in the area – for a fee – mail collected from community mailboxes, with reported plans soon to expand to cities in Alberta.

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In parts of downtown Toronto, many streetcars are packed in morning rush hour. Some entrepreneurs have responded by starting the Liberty Village Express, which will ease the pressure at a premium price.

The economics of a transit or a postal service are quite similar. They are more cost-efficient the more people they serve or the bigger they are, and usually can connect the most people in the most places within a single integrated system. Transit riders can then go anywhere in town on a single ticket. Mail can go across the country with a single stamp.

So governments have provided a public monopoly for letter delivery and public transit to prevent private monopolies from forming. But governments don't always do that – they could choose to regulate private network monopolies, like natural gas distribution.

The Toronto Transit Commission (TTC) started because private streetcar lines refused to service new and growing areas, owing to the risk that they would not be profitable. Now we're back in the same position, but with the roles of public and private companies reversed.

Does the new bus line herald the start of freewheeling bus routes? Might a new company offering to deliver letters right to your home go head-to-head against Canada Post?

Government regulations stand firmly in the way. Canada Post has the exclusive right to collect and deliver most letters. The exception that might allow premium home delivery is if the price is at least three times that of the Canada Post stamp price.

The TTC has the exclusive authority to operate passenger transportation services in the city. There are exceptions for transportation services that do not charge a fee, Liberty Village's transit upstarts hope that applies to their crowdfunding model.

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Regulations banning new entrants had the upside of building up the economies of scale in these operations. The TTC could profitably serve outlying neighborhoods of a growing city. Canada Post could subsidize rural service from the profits from urban areas. Both companies ran profits not long ago.

But the ills of monopolies eventually caught up to both, with high-cost labour and bureaucracies that were slow to respond to change. Now, for both services, expanding service – or even maintaining them – is a money-losing proposition. The result for Canada Post: the end of home delivery of letters. For the TTC: service growth not matching growth, not just for booming Liberty Village but across the city.

How can governments inject the entrepreneurial spirit that we see into moribund operations? Short of outright privatization, which could result in a regulated monopoly, contracts for private provision offer hope.

Vancouver's Canada Line is privately operated. Toronto's GO trains and York Region's VIVA buses operate in a similar manner. Private bus services could operate across Toronto on behalf of the TTC. If private operators are paid out of fare box revenue, the TTC could top them up with competitively set subsidies. If the route is profitable on its own merits, as the Liberty Village or other currently underserved routes might be, bus companies might end up paying the TTC for the right to operate the route.

Rather than cancel home delivery, Canada Post could have offered contracts for home delivery. Between newspaper or parcel delivery companies and new start-ups, there are other ways to get mail to homes than in the hands of a Canada Post employee.

For both Canada Post and the TTC, contracting out services would be a gradual change. Management would soon find out which services work best, and allow private services to shrink or grow.

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Whether for transit or postal services, harnessing and managing competition is a better way to improve on existing services – better than simply failing to deliver.