Government Operations Committee on Sept. 26th, 2016

[Stéphane Ricoul]

Canada Post is basically a large conventional business. Consequently, it may not be easy to make it evolve. It must engage in a digital strategy exercise. It must digitize its current strategy, which constitutes its DNA, as well as its direction, vision, mission, and so on. By proceeding with that digitization, you will see where its weaknesses lie, what aspects Canada Post must address on a priority basis in order to become an innovative business.

It has no choice but to become such a business, for two reasons: first, it must improve its financial performance and regain market control, and, second, it has to achieve public popularity. Canada Post is a government-owned corporation. It has to be popular and offer service to the public.

Look at how our world is evolving today. All of us, without exception, are going digital. Stores are closing because people buy online. That is their first impulse. Canada Post must be part of that movement. However, the only way to do that is to take a step back and look at the eight dimensions of a business: governance, talent, technology, finance, and so on. The task is to determine, for each of those dimensions, whether you should digitize it and how mature the business is.

Do we have a high degree of digital maturity, in which case that is perfect and we can capitalize on that fact, or are we in a weak position? In the latter case, we must then become more digitally mature.

As it engages in this exercise, Canada Post will acquire what I earlier called an innovation culture or digital culture. Then it will no longer have to fear the arrival of the Ubers of this world, drones, and so on. It will be able to get ahead of them. I jokingly said that the connected mailbox was a good thing. Canada Post already sends text messages when parcels are received and delivered. However, a connected mailbox is even more glamorous. That may not seem like much, but I think it has to move toward that. Canada Post needs to do that.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. Ayoub, you have the floor.

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

Thank you, Mr. Chair.

Thanks to both witnesses for being here today. This is an extremely interesting subject that we have been talking about for several years now. The transformation of Canada Post has drawn a lot of suggestions and reactions.

I would like to get Mr. Tremblay-Pepin's opinion. It is often said that this is a state-owned business, and thus a business that provides a standard national service. The public takes that service for granted.

Does that service have to remain profitable in future, or should the business be subsidized as a public service? Regardless of the direction it takes, whether or not it is digital, do you think we necessarily have to make a choice between the two options or can we combine them?

[Simon Tremblay-Pepin]

I think the answers I gave earlier will lead you in a way to reward the one I will suggest to you now.

I think Canada Post can enter into agreements with various levels of government in Canada to provide other services than those it currently offers. Yes, the government should fund Canada Post in that case, but it would be to provide services that are not provided elsewhere. That would achieve a balance in public finances that I think would be good. In a way, Canada Post would be making an offer of service to the government respecting certain services. I think that is a promising prospect.

The asset that the government owns thanks to Canada Post comprises service centres across the country and employees who meet the public every day. I think it would be a strange idea to abandon that asset. Instead we should maximize its efficiency. Canada Post can help us with the digital shift. However, there are still a lot of very material things in our lives, and I think Canada Post can help us precisely in the area of those material objects.

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

I wonder why we are told that letter carriers come and see us every day, when, according to the report, only 32% of the population currently receives home delivery.

Some regions of Canada have recently lost home delivery service. There has been a lot of talk about the issue as a result of public opinion and the media effect. I am not talking about Montreal, where there have been some stunning developments.

In reality, approximately 70% of the population do not receive their mail at home. The connection between letter carriers and the public is far from a reality for the entire population as people think. That is not the case.

[Simon Tremblay-Pepin]

In areas where there are community mailboxes, letter carriers nevertheless come very close to people's homes. What you are asking me is whether community mailboxes are a good option. I would say that depends on the circumstances.

In the suburbs, where, in any case, everyone has a car and there is space for a community mailbox, they can work very well. In a large city such as Montreal, there are considerations of space, traffic, and access, for example. Someone nevertheless approaches your house, particularly in the case of a special request. The case of parcels is a good example of this because community mailboxes are indeed not all built to accommodate parcels, a fact that poses a number of problems. It is possible for a letter carrier go to a person's home because, in any case, he is in the area. It seems to me this is something that might be a good idea to exploit, from a public service standpoint. We should not view this as simply having a postal organization, but rather look at it from the standpoint of the government and legislators. We have to ask ourselves what we are doing with our asset and how to maximize its cost-effectiveness and profitability.

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

I would like to draw a parallel with another public service from the era when the telephone company had a monopoly. To ensure that the entire area was covered by telephone lines, competitors had to pay royalties in order to use the network.

Could this kind of model be transposed to Canada Post if the market were ever opened up? It is open to a certain degree for parcels, but I am talking here about mail delivery. Is this something we might consider?

[Simon Tremblay-Pepin]

Do you really think many businesses will want to deliver the mail? Letter mail delivery service is still provided because it is a public service. However, the service is collapsing. Here is what would happen if the market were opened up to competition. All around the world, in Europe, for example, businesses make their money by distributing promotional and advertising mail at very low prices. They go looking for clients that want to distribute advertising. However, I am not sure Canadians want more advertising in their mailboxes.

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

I may agree with you.

Mr. Ricoul, you said we should not even consider alternate day delivery. You were talking about parcels in particular. I can understand; the growth is there.

I am going to make a personal and not very scientific comment. In the past few years, I have been served by a community mailbox. I obviously do not go to the community mailbox every day. I go once a week or even every two weeks when I expect to receive bills. We already receive bills via email. Correspondence and parcels could probably be delivered once or twice a week. There could also be service points. So I am very open to this kind of initiative.

[Stéphane Ricoul]

When I spoke about Relais Colis, that is what I was referring to.

[The Chair, Conservative, Tom Lukiwski]

Sorry, it has to be a very brief answer.

[Stéphane Ricoul]

A fourth revolution is under way. If Canada Post does not join that revolution, it will die. It is that simple. Or else citizens will subsidize it with their taxes, but that is not the objective. If we do not want Canada Post to disappear, it must join the fourth revolution, which simply means it must adapt to today's consumer reality, which is digital. I am not saying that because I work for eCOM MTL. That is the reality.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

We'll now go into a five-minute round of questions and answers.

Mr. Gourde, you have the floor.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Thank you, Mr. Chair.

My question concerns consumer services.

I live in a rural area. The people in my region often tell me the problem is that the post office is open only from 9:00 a.m. to 4:00 p.m. People need services. They work and they drop their children off at the day care centre at 7:30 in the morning and get home at 5:30 in the evening. In fact, they are able go to the post office only on the days when they are sick.

Canada Post has lost a certain amount of trust, and consumers are trying other ways to receive their mail. They are turning to the private sector. This is often said, but we are not the ones who decide. It would probably be easier to have post offices open from 3:00 p.m. to 8:00 p.m. from time to time in order to have that contact with consumers. In that way, post offices could provide more services. The consumers who might need those services are not those 55 years of age and over, but rather those who are 30 to 55 years old and who keep the economy running. So even if we added other services and offices, they would not be able to get there.

What do you think about that?

[Simon Tremblay-Pepin]

I entirely agree with you.

A moratorium has been issued to keep post offices open in the rural regions, which is a good idea. The services and business hours of those offices have been gradually reduced because they were not cost-effective. They are now staffed by a single person from 9:00a.m. to 5:00 p.m., which are normal business hours, so they will cost less. This is the logic of declining services.

If services are cut, people will think that, since they are not getting services at that location, they will not go there any more. What will that lead to? Further service cuts. This is a vicious circle that leads to the end of Canada Post.

I am going to make a proposal that will have the opposite effect.

People in the rural regions complain all the time that the caisse populaire is going to close; that is what you constantly read in the newspapers. If the post offices provided new services, and if business hours were extended, people would get into the habit of going there. You could make the connection with the caisse populaire for many seniors who want personal service. Could a post office be turned into a rallying point? There could still be a single employee, but that employee would be given better hours, as you suggested. Post offices would be open longer, and people would have access to more services and would be more inclined to go there.

The report refers to major infrastructure costs. There are offices at many locations in Canada. Perhaps it would be a good idea to maximize those costs by providing more services at those offices. We must not abandon those offices or let in the competition.

I come from Causapscal. What will the competition offer in the way of a post office in Causapscal? It will offer nothing; it will simply shut it down.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Mr. Ricoul, what do you think about that?

[Stéphane Ricoul]

If we look at what is going on in retail, the amount of floor space in stores is only declining in order to generate economies of scale, and services are increasing as a result so that the number of square feet can be reduced. I do not understand why Canada Post would not do the same thing. I am not opposed to the idea that Mr. Tremblay-Pepin suggested, but I do not understand why Canada Post would not do the same thing. Canada Post already has many service points. I believe it has more service points than any other business in Canada.

First, I think the number of service points should not be increased. Second, that number should be reduced, somewhat as Desjardins has done by merging its caisses. Desjardins has reduced its number of service points across Quebec. I heard someone complain about that. I do not see why Canada Post would not promote that kind of saving, but, in return, it will have to provide other services. Desjardins has closed or merged caisses but has since offered a cellphone-based cheque deposit system. Could Canada Post consider offering digital services so that people living in remote regions would not be deprived of adequate service any more than necessary? That is my vision.

I forget exactly what your question was.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

I will get back to it, but I am going to ask you another one.

[Stéphane Ricoul]

All right.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

You talked at length about competition, but what is the rush for Canada Post? You talked a lot about parcels and digital; is Canada Post a dinosaur compared to private businesses currently trying to break into the market? Is Canada Post really becoming more aware so it can accelerate matters? Will it move fast enough to resist the competition?

[Stéphane Ricoul]

There are two parts to your question. No, Canada Post is not a dinosaur.

[The Chair, Conservative, Tom Lukiwski]

We have no time. Perhaps you can incorporate that into your next answer.

Colleagues, the next questioner will be Mr. Whalen. After Mr. Whalen's intervention, I think we'll close down this section of our consultations. Everyone at the committee table will have had an opportunity for at least one intervention. We will take a few moments to suspend while we get our next witnesses up here. We have a very tight schedule, unfortunately, and we have to make sure that we're in Blainville in time for this afternoon's session.

Madam Ratansi.

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

Could we ask the two gentlemen if they have any additional input?

We would love to hear from you, whatever you have not been able to say here.

[The Chair, Conservative, Tom Lukiwski]

Absolutely. It would be part of my closing comments, but thank you for that. We might as well do it now.

We would love to see any additional information you may have, or any submissions you wish to bring to the attention of this committee.

Monsieur Whalen.

[Nick Whalen, Liberal, St. John's East, NL]

Thank you very much, Mr. Chair.

Thanks to the witnesses for being here.

Like Mr. Gourde, I have a lot of questions about the

pace of change that Canada Post needs to go through.

Monsieur Ricoul and Monsieur Tremblay-Pepin, I wonder if you could elaborate on the pace of change within the marketplace, particularly as it relates to rural Canadians accessing the digital marketplace and services online. Most rural communities don't have very good Internet access. Is that a way Canada Post could help?

In addition, what types of services could rural businesses receive from Canada Post to allow them to better access markets themselves through their distribution channels? That may be a little bit like Canada Post being an Amazon for business-to-business services. Maybe you could comment on that for us.