Government Operations Committee on Sept. 26th, 2016

[The Chair, Conservative, Tom Lukiwski]

Colleagues, ladies and gentlemen, my name is Tom Lukiwski. I am the chair of the government operations and estimates committee. One of the things that I routinely insist upon is that we start our meetings on time and that we adjourn on time, so even though some of our members are not here yet, I think we'll begin.

Gentlemen, as you are probably aware, the minister responsible for Canada Post has asked this committee to engage in a series of consultations with Canadians from coast to coast to coast on how Canadians view the future of Canada Post. The task force, which was also established by the minister, has come back with their report on the financial viability and the future of Canada Post from that perspective. This perspective is more how Canadians view Canada Post and what they expect from Canada Post in terms of services. This is our first meeting as we go across Canada.

I welcome both of you here today. My understanding is that you have been in consultation with our clerk, and you are prepared to open with five-minute statements. Following that, we will engage in a series of questions and answers with all members of the committee, and we have approximately one hour for our consultation.

On my list, Mr. Tremblay-Pepin, I have you first, and if you would care to deliver your opening statement, then we will go directly to Mr. Ricoul.

Mr. Tremblay-Pepin.

[Simon Tremblay-Pepin, Professor and Researcher, Institut de recherche et d’informations socio-économiques, As an Individual]

Thank you, Mr. Chair.

I want to thank all the committee members for having me here today.

I spent my weekend reading the task force's report with considerable interest. I will focus on that document, and not on my previous work on Canada Post, because what we are interested in are the proposals it contains.

First, I want to point out what is interesting in the report and the in-depth work that has been done on the Canada Post question. It informs us researchers about Canada Post and contains many proposals and much information on public opinion that I find very interesting.

I will be making my opening remarks under three headings. The first is the convergence issue, which I feel is somewhat absent from the report and on which I would like to comment. Second is the funding of Canada Post, on which I will also make a few comments. Lastly, there is the pension plan.

Starting with convergence, a number of very interesting points have been made on the topic. I am pleased the task force looked at Canada Post's viability and not immediately at its privatization. This is something of a change from my specialty. I have mainly published pieces in which I say that Canada Post should not be privatized. Consequently, I will not be giving my usual spiel since we are not discussing that issue today.

The report outlines certain possibilities such as making Canada Post a community service centre or replacing Service Canada to some extent. It also addresses the possibility of postal banking. The report raises the possibility of an agreement with Caisses Desjardins or with other credit unions elsewhere in Canada.

Services to seniors are also mentioned several times in the report, which dances around the topic but never examines in concrete terms what that might mean. There is also the parcel issue, of course.

I invite you, as legislators, to consider the convergence question. Is it possible to rethink the role of Canada Post today as that of a community service centre? Canada's population is aging. In many rural communities, banks and credit unions are closing, and that inconveniences many fellow citizens. Could we create a space where a number of minor services that people need to a lesser degree, but need nevertheless, could be provided together?

It is strange that these issues are raised in the report but that it does not consider the possibility of funding Canada Post if it were to take on certain responsibilities from the government, such as those of Service Canada. If that were the case, would funding not be granted to Canada Post if its employees began to provide services that are currently delivered by Service Canada? Would that not balance Canada Post's accounts?

If Canada Post began providing home delivery of prescription medication for seniors, would there not be a way to provide funding for that purpose from the provincial health departments? The report states that this has been done in other countries. I remind you that the provincial departments already fund not-for-profit organizations that perform similar services.

Are there no responsibilities that could be assigned to Canada Post? The corporation's employees provide public services and are in contact with the population every day. We know perfectly well they are not public servants because Canada Post is a crown corporation. Why not take advantage of that fact to provide more services rather than think in terms of cuts? This is something we could think about. If it offered services to banks and credit unions, they would obviously be prepared to pay for them. It is possible to consider a financial restructuring for Canada Post, a topic that I believe was quickly removed from the discussion.

I will close with a word about the corporation's pension plan, an issue that is currently being addressed in an odd way. Let us be clear. If Canada Post closed its doors tomorrow morning, we would want it to be able to repay in full all monies from its pension plan. If this committee and Parliament ultimately decided to keep Canada Post alive, why then require that it cut financial resources for an eventuality that will not occur?

It seems to me that Parliament must be able make its decisions and to do what it must to maintain the services that are provided to Canadians.

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Mr. Ricoul, you have the floor.

[Stéphane Ricoul, President, eCOM MTL inc.]

Thank you, Mr. Chair.

Mr. Tremblay-Pepin's presentation was very good. I am sorry but I must admit I am not as well-prepared as he is. I have not even read the report because I did not receive it. I did not know why I was here until two or three minutes ago, but I am beginning to understand. I will not be using Mr. Tremblay-Pepin's extensive vocabulary, and I do not know how to address you because this is the first time I have been involved in a parliamentary committee. I am nevertheless very pleased to be here.

I represent the e-commerce or digital economy component of Quebec and Canada. I would like to talk to you solely about that component.

I believe Canada Post plays an essential and extremely important role in this area. The digital world is in perpetual motion. Everything is constantly moving more quickly. We talk about accelerating acceleration in our world. When players like Amazon invent delivery in one hour or less, that creates expectations in citizens and consumers.

So people have expectations of Canada Post because the corporation delivers most small parcels. Large parcels are delivered by Purolator, which belongs to Canada Post. The corporation therefore has no choice but to play that role and to provide a service equivalent, or virtually equivalent, to that of Amazon or other such companies. However, I will not go so far as to say that Canada Post should acquire drones because I do not believe in them.

I very briefly took note a little earlier of the recommendations that were made. Community mailboxes were mentioned. That has triggered a debate in Montreal, in particular, with Mayor Coderre. That debate is more amusing than anything else because I think community mailboxes are extremely important.

The reason is simple. People do not want certain parcels to be left at their door. They would like to have them immediately, but sometimes they are not at home. It would be excellent if there were community mailboxes down the street. However, they would have to be equipped with compartments big enough for parcels. That is one of my recommendations. Since I know about the digital world, I think it would be a good idea for this to be connected to our cell phones so that we could be notified by text message that we have received a parcel and that it was delivered to the community mailbox at a specific time of day.

I think alternate day delivery is fine for letter mail but would pose major problems for parcels. In my view, alternate day parcel delivery is shooting oneself in the foot. It should not be recommended. When people order parcels online, they want them right now. It is impossible for certain businesses to deliver parcels in an hour while others deliver them every other day. I think that makes no sense, and we should especially not go in that direction.

As regards e-commerce, I think the synergies with Purolator are already excellent. The markets are clearly separated. Purolator handles heavy parcels and commerce between businesses, whereas Canada Post deals with light parcels and the business-to-consumer segment.

Now I will talk about advertising sales in the retail sector. I imagine we are talking about advertising on Canada Post's trucks and mailboxes. I think that is already being done. For the past four years, I have been a judge for the Canada Post e-commerce innovation awards competition. I have been a judge for four years, but the competition has been going on for five. Many awards go to Canadian businesses, particularly for free parcel shipping. Every year, the awards range between $50,000 and $100,000, which is enormous for a business.

There is also advertising on Canada Post trucks. I think one of the recommendations has already been implemented, at least as a result of the competition. Canada Post provides visibility on its trucks and mailboxes.

The idea of "last-mile" delivery is extremely interesting. I am in favour of Canada Post moving forward with that because when the UPSs and FedExes of the world deliver a parcel to a home but no one is there, that person must travel five kilometers to pick it up.

I will conclude by saying that we are talking about the digital shift right now, and Canada Post Corporation must embrace it. It is making that transition to the digital world—and doing it very well— but now it must do it internally and establish a culture of innovation and a digital culture.

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Merci beaucoup.

We'll now begin with our question and answer section. The first round will be seven minutes for both questions and responses.

We'll start with Monsieur Ayoub.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

Thank you, Mr. Chair.

I am going to give my speaking time to Ms. Ratansi. I will speak later.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Okay.

Thank you both for being here.

You said you hadn't read the report but you have read the recommendations of the report, which is quite interesting.

In terms of Canada Post, you talked about the task force. The task force was mandated to create a discussion paper. Our job as a committee is to go out and get input. If they had made any recommendations—they could make suggestions—then it would really defeat the purpose. So just to put it on the record, that was their job. Their job was not to tell us what to do. Their job was to advise us: here is what we have seen; Canada Post is not sustainable in its current format. And if it's not sustainable in its current format....

You have made a few suggestions. I think those suggestions are good to explore, because you've given us some ideas. You talked about the hub of services. You must have thought it through. Explain to me in very short terms how you would expect somebody to pay for those services. Are you saying that it should operate like a Service Canada concept, so that the immigration minister, let's say, or the minister responsible for border security, or whichever minister, could probably have their services, such as the passport service probably, provided by Canada Post, the current hubs? Is that what you're suggesting?

[Simon Tremblay-Pepin]

Exactly, ma'am.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Okay.

The second thing you talked about was that Canada Post is not in an environment where it can meet its pension obligation. Are you suggesting that the government take it back and run it under PSAC?

[Simon Tremblay-Pepin]

There would also be the very simple option of not requiring Canada Post to dispose of necessary assets in order to cover its pension liability immediately if it had to close its doors. That is the requirement you are setting now.

However, you should not impose that requirement, which jeopardizes the corporation's ability to achieve its quarterly financial targets. I really emphasize that aspect. We would obviously like Canada Post to be able to pay its employees once they retire, but you are demanding that the pension plan be balanced and zeroed out in the event the corporation closes down tomorrow morning. I think you can withdraw that obligation. Moreover, that point is considered in the report. It states that that would solve many problems. However, the government must make its decision. That is what I am inviting you to do.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

But if the government were to make this decision.... I am an accountant by trade, so I'm doing my debits and credits. As a crown corporation, they were supposed to be profitable. When you have a pension, you have to fund it as well. Is it possible that perhaps they can also look at their labourers' union and negotiate around it? If the pension liability, which is an unfunded liability, were to fall on the government, for example, then would you as a taxpayer be willing to absorb extra taxes?

[Simon Tremblay-Pepin]

The pension plan is currently in a position to pay those employees who retire. That is the first point that should be emphasized. In that respect, everything is fine for the moment. However, it would not be able to pay all its retirees if it had to shut down today. Consequently, I am telling you you should stop imposing this obligation on the corporation since you do not intend to shut it down.

Since most Canadians say they want the corporation to be maintained—you saw that in the report—I think you should maintain it and not require it to balance its pension plan financially. That does not prevent it from paying its retirees in due course. As a consequence, you do not have to increase taxes.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Fair enough. We'll take that under advisement.

You were talking about service to the elderly. Canada is a huge country. If you look at Britain, the Netherlands, or whatever, they do not have that vast land mass. There is no single solution. When the task force came, they were not saying there is a single solution; they were saying there should be flexibility in the type of service. What is your thought process on seniors, or people with disabilities, for example?

[Simon Tremblay-Pepin]

I am glad you raised that question. I must say at the outset that this is not one of my research areas. However, I have read around the question in other cases. I will give you my thoughts, but they are thoughts that I am sure you will be able to improve upon.

I think seniors are an interesting question because we have an aging population and because we are in a situation where access to resources for the care of seniors is increasingly difficult to achieve. Several provinces are having problems in this area.

Consider prescription medication, for example. We know it is dangerous for seniors to go and pick up prescription medication at pharmacies, especially in winter. They have to go themselves because they have a prescription. Could there be a system whereby the Canada Post service centre could receive prescription medication and forward it to the individuals concerned the next day instead of having the pharmacy send it through its own delivery system or even by mail? Could that centre not become a community venue where the pharmacy would deliver medication so that people could receive it the next day? The service would be provided quickly and simply, and people would be pleased with it. Provincial departments could decide whether to offer the service to the public and participate in its funding, which moreover they are already doing with not-for-profit organizations.

There you have a way to find other funding sources. That is why I was talking earlier about a section on funding. There are a number of good ideas about how other public or private organizations can take part in the funding of Canada Post, but they are never considered. It seems to me this is an idea that should be explored.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. McCauley, go ahead for seven minutes, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thank you, gentlemen.

Mr. Ricoul, I really enjoyed a couple of your suggestions, especially the one about the box with the phone link. I don't think we had thought about that before.

I really don't have much for questions. Ms. Ratansi brought up the issue about the taxes, and I think it's an important one. We heard from the committee that the task force did quite extensive polling, and what came back very loud and clear was that people do not wish to pay more, which is understandable.

On the pension thing, you brought up an interesting point. One issue is that if we allow Canada Post to continue a pension holiday and we do not do the same for FedEx, UPS, and other companies competing for them, how do you reconcile that unfair competition you'd be giving Purolator but not the other companies? We require other crown corporations to fulfill the pension rule, so do you suggest that if we give it to Canada Post, we should extend it to everyone else as well? You're obviously very learned on it; I'd like to hear your opinion on that.

[Simon Tremblay-Pepin]

I wouldn't put Canada Post and Purolator on the same level, and even less so for a pension plan system. It's not the same. I would tell you, though, that you don't have the same obligation from FedEx as from Canada Post.

You do not ask FedEx to be the universal postal service in Canada. As a result, you do not have to impose the same requirement on FedEx. FedEx competes with Canada Post in a certain sector, but not in all sectors where Canada Post holds a monopoly.

As for other crown corporations, such as CBC-Radio Canada, for example, you are not dealing with the same situation for the moment. With regard to the obligation to balance pension plans for immediate payment, let us be clear: I am not telling you not to provide the funding so that people can retire when they retire. We of course want the plan to be balanced. Strictly as regards the possibility of immediately paying back the entire pension plan, I believe that requirement is not consistent with the public organization you have before you. It will be around for a long time. It will not be shutting down tomorrow morning. You are not going to close the CBC or Canada Post tomorrow morning.

[Kelly McCauley, Conservative, Edmonton West, AB]

It's not a catch-22, but it's a funny situation. Yes, Canada Post is not going to close tomorrow, so we don't have to worry about the long-term pension. One thing of note, though—and it hasn't come up in our discussions—is that the current pension is in surplus, and this is the funny part. It is in surplus only because Canada Post put about $2.5 billion, present value dollars, into the pension above and beyond normal pension contributions because of the pension requirements that they have to be fully funded should it shut down. If we did not have this long-term rule, Canada Post wouldn't have coughed up that extra $2.5 billion, and the current pension wouldn't be in surplus. So it's almost a Möbius strip; one would not exist without the other.

[Simon Tremblay-Pepin]

I am not seeing that, in a situation of major surplus in Postes Canada, when you do the turnaround, Postes Canada will go better. Maybe then you can put back some rules regarding that. If you want it to survive, give it a chance on something that it doesn't need now.

[Kelly McCauley, Conservative, Edmonton West, AB]

Mr. Ricoul, I have a quick question for you. I appreciate your comments.

One of the things that we've seen obviously is a disruption of our businesses with e-commerce, Amazon, eBay, etc. We are wondering, do you see something like that? We mentioned drones, etc., perhaps five years down the road. We have these massive disrupters, such as Uber, which is getting into delivery now, wiping out this potentially huge increase in projected revenue for Purolator.

[Stéphane Ricoul]

That is why I emphasized and said that Canada Post should adopt a culture of innovation or a digital culture. One of the projects we are currently working on—I do not know where it stands—is in association with Canada Post and the Government of Quebec. We are creating, in a free zone, a distribution centre for all online orders. It is this kind of innovation that would set Canada Post apart in the public's mind and ensure its survival in the face of the Ubers of this world.

Every disruptive technology causes seismic change in our society. Seismic change is initially very broad in scope. It subsequently declines but takes an extremely strong turn toward the social and the individual. If Canada Post does not reinvent itself or strive for public popularity, at some point an Uber will appear and hurt it very badly. Canada Post needs to innovate extensively. That is why I go back to the importance of delivery every day, at a minimum, if not twice a day.

I do not know whether you are familiar with Relais Colis in France. Relais Colis is an enormous business today. Its operating principle is that, when you order online, you can decide to have your item delivered through it. The beauty of this arrangement is that Relais Colis takes the parcel to a store, to a merchant near you. The company was created because France's postal authority was always on strike and could no longer guarantee parcel delivery. People became fed up with that and made it known, and a company called Relais Colis was born.

If Canada Post delivers parcels every other day, that will not work in the e-business world. It is incompatible. There will be a rebellion, and the rebellion will result in the creation of a delivery Uber or a Relais Colis. Parcel delivery is growing at Canada Post. After discussing the matter with René Desmarais, I think that is where Canada Post's potential growth lies, but it will decline if Relais Colis establishes itself here.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Ms. Trudel, you have the floor.

[Karine Trudel, NDP, Jonquière, QC]

Thank you very much, Mr. Chair.

Gentlemen, I appreciate your comments and thank you for sharing your ideas with us.

Mr. Tremblay-Pepin, I especially appreciated the fact that you could clarify the pension issue, which moreover was in the news this summer. You have helped us understand that, if Canada Post were to shut down, the pension plan would be in a deficit position. Thank you for explaining that to us. It will help the committee make better decisions.

Let us talk about economic issues. I know you have read the entire task force report. I put the question to the task force representatives we met in Ottawa last week. I wanted to know why they had included the 2011 year in the average in their report. I would like to hear your view on that. I thought that was unfair because 2011 was an atypical year. There was a lock-out and a pay equity settlement.

I would like to hear what you have to say as a researcher and economist. Do you think it is fair to have used the 2011 year?

[Simon Tremblay-Pepin]

I was surprised too. It is quite common to average the last five years, but, yes, you are right to say this is an exceptional situation. It is different from all previous years in that respect. I would remind you that Canada Post has been profitable in virtually every year of its existence, except in recent years.

That definitely creates a strange impression, but it is interesting to include it in the average because it takes into account exceptional situations. They are not claiming that everything is fine, that there are no problems. I quite agree with the committee that it is important that Canada Post make changes to its structure and to the way it delivers its services. I find what Mr. Ricoul is proposing very interesting. The corporation must adapt in order to become a major player in the parcel sector.

Are we talking about community mailboxes? We have seen that it is difficult to implement that in the major cities.

In France, for example, there is space in the metro stations where people can go and pick up parcels. They get notifications on their phones. This is a very promising possibility that Canada Post could develop if it entered into agreements with metro representatives.

I mention metro stations because we are in Montreal, but this could be done in a host of other urban spaces that people frequently pass through. They would be able to pick up a parcel coming back from the office in the evening and take it home. The parcel would thus not be waiting on their doorstep.

In addition, people would no longer have to go to the post office during business hours to pick up their parcels, and so on. It is entirely possible to develop new options, but you have to be aware—and these are indeed figures that we must deal with—that there are more and more addresses but fewer and fewer letters. I think your task force stated that very clearly.

Now, what do we do? This is not a death sentence. This will not destroy Canada Post. In any case, as you can see, it is still profitable for the moment. The question is the form in which it is maintained and what purpose it serves.

[Karine Trudel, NDP, Jonquière, QC]

Mr. Ricoul, earlier you said we could already track our parcels while they were being delivered but that digital service could really be improved.

You also discussed mailboxes. Canada Post invested a great deal of money in the mail delivery, as volumes were declining, instead of in parcel delivery. That may be poor planning on its part. As you said, in the era of the Ubers of this world, perhaps it should have invested more in its parcel infrastructure. You have suggested a number of viable options.

I am an e-commerce neophyte. I would like to have more information on what Canada Post should do in order to move on to digital version 2.0.