Government Operations Committee on Sept. 27th, 2016

[Erin Weir, NDP, Regina—Lewvan, SK]

Well, I don't know.... That's my question, though. What would be the remedy? Is it just a matter of not having flyers in multi-unit buildings?

[John Hinds]

I would put that over to you guys. We're raising an issue where a statutorily mandated exemption is being used as a competitive advantage. That's serious business when you consider the number of Canadians who live in multi-family residences and who are not allowed to be served due to a statutory exemption.

[Erin Weir, NDP, Regina—Lewvan, SK]

I think more than one panellist mentioned the idea of an independent regulator for the postal system. I wonder if anyone could speak in a more detail about what that might look like and how it might work.

[Matthew Holmes]

I'll kick us off and then defer to my colleagues.

In terms of a regulator, I think there's a spectrum of options. I note that in New Zealand there is a postal contract system set up between the government and the postal delivery. It establishes a set of commonly agreed upon goals and objectives, including those that we've been framing as the public service side of things as well as the more financial sustainability side of things.

It doesn't necessarily have to be a hard regulator like we might have in broadcast. It could be more of a formal process that sets and reviews certain annual or five-year goals and outcomes.

[John Hinds]

I think we almost need the ability to refer issues. We have 400 small newspapers in very small communities, and one of the things we find is that one is so dependent on the whim or the ruling of the local postmaster. There is no ability to appeal.

I think we've heard that through this process: you don't have anybody you can talk to. I think the regulator needs to be in a position where you can lodge a complaint. The reality is that if it's happening in one place, it's happening across the system. There are trends in these systems, whether it's a pricing issue or a delivery standards issue. I think we do need the ability to be able engage with a regulator as a complaint-driven process.

[Patrick Bartlett]

Yes, we would support that as well. We see it as a regulator's role to approve extraordinary rate increases, not necessarily those normal inflation-based increases that we're seeing in many cases, but the rate increases when they do something exceptional, like they did in 2014, I believe.

We would also like to have someone who could review with us the current surcharge structure that Canada Post has and could provide an appeals process where things of that sort happen.

We would also like them to oversee the relationship between Canada Post and its partners, many of whom are our members. Canada Post uses a group of people to go to the market for its advertising mail, and it does some inappropriate things. For example, a partner signs up a new customer, and Canada Post sends them information about a new product that's competitive with the service that partner provides—and Canada Post makes arbitrary decisions—so there needs to be a process in which that can be appealed, aired, and consulted on.

We also think there's an opportunity—maybe not for the regulator but overall—for Canada Post to work more closely with the industry, with perhaps some oversight, to focus on innovation within the industry. Canada Post has not had a great track record, but it doesn't have a great track record of consulting. We think that's an opportunity for an outside group to help Canada Post improve its revenue structure.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

We will go to Mr. Ayoub, please, for seven minutes.

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

Thank you, Mr. Chair.

I'll start asking my questions.

I'm a bit surprised to see how fine the line is between the business and residential services in terms of the competition, monopoly, benefits or perceptions of the competition.

Mr. Hinds, you spoke of flyers and how everyone loves getting them. That's the first time I've heard that. Obviously, you're in business. However, I've been hearing that people take all the advertisements in the community boxes and throw them out.

I'm a former mayor. There was a request to have a recycling bin beside the community box where people can put the advertisements instead of bringing them home.

You asked for greater access because you think Canada Post has an unfair competitive advantage. However, Canada Post claims to be looking for new revenue and to be experiencing a crisis of confidence. How can those two points be reconciled?

I asked residents and users this question. Do you want us to subsidize Canada Post despite its deficits? I'm asking you the question as a business representative. Do you want the Government of Canada to subsidize Canada Post in order to subsidize businesses?

[John Hinds]

I'll answer in English.

I think it comes down to this issue. I think that in urban Canada we do believe that there is competition and the competition should be encouraged. Again, it is a subsidy no matter what. If you're subsidizing Canada Post by taking away competitive business, you are essentially going to be subsidizing Canada Post either way.

The reality with rural Canada is that there may have to be some kind of subsidy or rural policy to support local communities. We've been talking about this with the current government.

As you know, the newspaper industry is currently quite challenged. The federal government has five consultations going on with us currently around how to continue to provide local news in local communities. There will likely be some solution there—we hope—that involves public policy. Again, in terms of supporting local communities, I think that may have to be the case. Whether that's done through Canada Post or through tax breaks, or whether it's done through regulation of American companies Google and Facebook in terms of advertising dollars, I think there's going to have to be some public involvement, particularly when you deal with rural and remote Canada.

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

I understand. It's a matter of finding a balance, and I understand that.

I want to know the difference between the speed of delivery of letters and packages and of magazine and newspapers. Packages can be delivered the same day or the following day. The business sector doesn't seem to be having any problems, based on the testimony heard up to now. However, what I've been hearing today is slightly different.

Canada Post's package delivery service is quite good. However, that doesn't seem to be the case for magazines or newspapers in remote regions. I want to hear a bit more from you about the difference between the speed of delivery of letters and packages in the business sector.

[Matthew Holmes]

I would respond that our members would be overjoyed if we could access some sort of speedy delivery, either next-day or same-day delivery, but currently we wouldn't hold our breath, to use that phrase.

The current delivery service is such that our members often see a significant delay in, for example, those weeklies, those regular mailers. For other magazines that are providing a quarterly or a monthly issue, that time frame is less precise and less dependent on the products they're delivering. For the weeklies in particular, for magazines like L'Actualité or Maclean's that have high frequency, it's critical to their service to have that timely delivery. That's why you see, where we have high density populations and customer bases in the cities, that most of those magazines have sidestepped Canada Post as much as they can, except for these community boxes, where they're absolutely dependent.

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

The package delivery market is competitive, however. Canada Post isn't your only choice.

[John Hinds]

In small communities, we only have Canada Post. For a small community newspaper there is no other option. Any newspaper in this country that has had an option to move to carriers or other things has moved. In terms of what has happened, 25 years ago, mail to suburban Canada was delivered by Canada Post. It now is no longer. It comes to rural and remote communities, where there is no option. The distances and the cost structure just don't do it. We've tried—and magazines have tried—a number of ways to do this.

The challenge we have is that news is becoming much more time sensitive: people want it immediately. Even if it's your weekly newspaper, you want it immediately, and advertisers also demand that. Particularly in our business, they want that delivery. If you say that you're going to deliver it on Thursday so it's there for the weekend shopping, then it has to be there on Thursday.

What we've noticed, particularly as a result of postal transformation, is that the delivery time, which used to be three days, is now from three to five days. It may be six days, as three to five days is only a target. To run a small business and to run a small newspaper in a town where your local advertisers are asking you to do something.... Advertisers have options. They have the online option, and they have everything else. You don't have an option except to rely on Canada Post to deliver your product in the time that they say they're supposed to be able to. When it doesn't happen and you get the paper that's supposed to be there on Thursday on the next Tuesday, then your advertiser wants the money back. That's what's happening.

[The Chair, Conservative, Tom Lukiwski]

We'll go to five-minute rounds now. We have two intervenors.

Mr. Brassard.

[John Brassard, Conservative, Barrie—Innisfil, ON]

Thank you, Mr. Chair.

I want a couple of points of clarification here.

Mr. Kelly, you spoke about the impact of past and future price hikes on small business. I want to give you an opportunity to expand on that. Just what are those impacts? Are they costing jobs? Are they costing productivity? Could you expand on that, please?

[Daniel Kelly]

The price hikes have been rather significant. I think that for most small businesses it hasn't gone past the point of looking at Canada Post as at least an option, but it does hasten the move to.... In some situations, the price gap between a private courier option and Canada Post is not as significant as it used to be. Canada Post is still a low-cost provider of services, so it still has that to its advantage, but that is eroding, and eroding quickly.

The groups I'm hearing the highest level of concern from are those that use Canada Post to send low-cost items in the mail, things where the value of the product—and I would imagine newspapers and magazines would probably be in this boat—itself isn't that significant. Obviously, the delivery end of that is just so significant that it can create huge pressures. It is hastening some moving away from Canada Post, which I don't think is serving anyone's needs, but it is also putting pressure on small firms that continue to use it.

The other worry I always have is with respect to even the possibility of a work disruption. That ties money up in the mail, and as we shift towards online banking and expand the number of electronic B2B options for payments, that will be another chunk of Canada Post's business that will erode, and we have to be concerned about that.

There is a high degree of price sensitivity on the part of SMEs.

[John Brassard, Conservative, Barrie—Innisfil, ON]

Thank you, Mr. Kelly. I do have one more question that I'd like to ask Ms. Kanitz, and maybe you'll have some time afterwards.

You spoke about fines being considered, surcharges. You also said that there's no process to reverse the fines within Canada Post. I wonder if you could speak to any examples of best practices where perhaps Canada Post can utilize some of those existing best practices.

[Kristi Kanitz]

Simply having a process to be able to reverse charges would be incredibly helpful. Right now, the surcharge can be levied within hours of a mailing being inducted. If it is determined that there was—the expression that I hear quite often—“overzealous application of the rules” by the Canada Post employees and it's determined that it is not a correct surcharge, it can take weeks or months for that surcharge to be reversed. We have a segment of our membership that prepares mail for third parties, and the bill goes directly to those third parties, so all of a sudden that client of theirs is being slapped with a $20,000 fine that is due and payable while that mail house is attempting to reverse that surcharge, and that could take months.

In terms of pricing, I want to show you the arbitrary nature of how this pricing works. People understand what happened with the postage. Canada Post also licenses data products that are used to support the mail industry. Last year, the price of one specific database was just under $20,000 per year to license the data set. This year, a company that uses that data will be paying almost $250,000 for the same data. That's in one year. It went from just under $20,000 to $250,000. There's no recourse, there are no appeals, and there is no way to change that.

[John Brassard, Conservative, Barrie—Innisfil, ON]

I believe Mr. McCauley has a quick question as well, Mr. Chair.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thanks.

I want to go back to a comment made earlier. We're talking about how Canada Post has a statutory mandate and monopoly—we know—which gives them an unfair advantage for high-rise mailboxes. We're kind of in a trap if they use that unfair monopoly for funding to subsidize the other part of the business that you're asking for help on.

From a business point of view, how do you see that contradiction? You want your lower prices. You're also asking for better services, but saying don't compete with us over here to get the funding to do it.

[John Hinds]

I don't think anti-competitive behaviour should be.... Unless that's a specific policy: I mean, if you want to say you're going to charge a surcharge to urban customers to support rural customers and that's a public policy discussion, then that's a public policy discussion. But in terms of a kind of arbitrary decision by a corporation to do this...? If that's what it is and it's transparent, you can show it and it's accountable, and it's put in place by a regulator or by a government, I think that's different from allowing a corporation to do that.

[Kelly McCauley, Conservative, Edmonton West, AB]

That's good feedback. Thank you.

[The Chair, Conservative, Tom Lukiwski]

Madam Ratansi, please, for five minutes.

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

Thank you.

Welcome to the riding of Don Valley East. You see 150 condominiums and then apartments, and we have fun. Ad mail is real fun.

I have a question for all of you, which you'll have to answer very quickly. Were any of you consulted by the task force? No? Yes?

[Patrick Bartlett]

Yes, we were.