Government Operations Committee on Sept. 27th, 2016

[Lynn Dollin]

Thank you for the question.

Through you, Mr. Chair, the answer is yes. I think we would have been able to come to a better solution for everyone had there been more consultation in the beginning. It is still my reality. I am still representing my municipality, plus all of the municipalities in Ontario.

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

I imagine that if we continue consulting municipalities and increase our communication with them, the situation would improve. The solutions should be more effective. There's no one size fits all approach. There's no magical solution that suits everyone. However, we would be able to find a solution that works better.

[Lynn Dollin]

Absolutely: better solutions come by collaboration and talking to each other.

Canada Post post offices across Ontario are community hubs. That's where you find out who died or who had a baby. That's where you figure out what happened to your lost cat or get your children a babysitting job. Those kinds of community hubs are essential in small-town Ontario.

Having a conversation with Canada Post could certainly help decide where those services are essential.

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

Do you know what percentage of mail was delivered door to door in rural regions, in comparison with the percentage of mail delivered in new neighbourhoods, where the community box is ever-present? I'm wondering whether that's the case in Ontario. It's certainly the case in Quebec.

Is the situation the same in Ontario?

[Lynn Dollin]

Thank you for the question.

In large urban centres, it has been door-to-door mail delivery. In small-town Ontario and rural Ontario, it's still the mailbox at the end of the farm driveway. Also, in small-town Ontario, the older residents are picking up mail at the post office; they have a slot in the post office. The newer residents in the newer subdivisions are picking up from these superboxes or community-style boxes that are at the corners in the subdivisions.

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

You spoke of compensation for mailbox maintenance. When you communicated with Canada Post, were you informed of the possibility of compensation? I would say that it's minimal, but a certain amount has been set aside for mailbox installation and maintenance, snow removal, and lighting to some extent. Did your association hear about it during your negotiations and discussions with Canada Post?

[Lynn Dollin]

Thank you for that question.

It is not the case, that I'm aware of. Again, I've only been holding this position for about a month now, so I'm fairly new in this cycle, but certainly from my own experience—with all due respect to the speaker who was here earlier who talked about newspapers and flyers—some people don't love their flyers. They take them out of the mailboxes, and the flyers either go onto the ground or into the garbage can. If there's no garbage can there, they go onto the ground. If that garbage can isn't opened up again, it's not Canada Post they call. It is their councillor.

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

But I can confirm that you don't need to.... You're not the one responsible for the snow removal and all the maintenance of those community boxes.

That's it for me.

[Lynn Dollin]

It would be lovely if we could have your phone number.

[Voices]

Oh, oh!

[The Chair, Conservative, Tom Lukiwski]

Panellists, thank you very much for your informative presentations here today.

I have just an extraneous comment, Ms. Dollin. As a politician—and I'm sure there are many of us around this table who would know exactly what I'm talking about—I find your comment about small-town post offices being a hub of all activity absolutely correct. It's an old politician's trick when you're campaigning in a small town to drive in with your magnetized name signs on the side of your car. I always park right in front of the post office, because I know that, every day, every single person in the community will show up there. They'll know I've been there.

At any rate, thank you so much.

Again, I offer what we offer all of our panellists. Should you have additional information you want to bring forward for the benefit of our committee—and Mr. Mazer, I'm thinking you might have that—please feel free to contact our clerk and submit any of your information to our clerk. Conversely, should any of our members have additional questions of you, I hope you would allow us to contact you directly.

Thank you very much. We will suspend for a few minutes until our next set of panellists comes to the table.

[The Chair, Conservative, Tom Lukiwski]

Panellists and colleagues, ladies and gentlemen, I think we'll commence now, if we can. We have a cast of thousands with us at the panellist table.

I'm sure all of our panellists have been in the room for some of the previous presentations, so I don't think I need to go over the process.

However, suffice it to say that since we have a number of panellists—I have six speakers who I believe will be making brief presentations this morning—I would encourage all of those speakers to please try to contain their comments to five minutes or less. That will allow time for only one seven-minute round of interventions, so we'll have enough opportunities to keep our road show on schedule.

With that, I have a list of speakers before me, and I will start on that.

Our first intervenor will be Mr. Rae, please, for five minutes.

[John Rae, First Vice Chairperson, Council of Canadians with Disabilities]

Good morning, honourable members.

My name is John Rae. I appear as first vice-chair of the Council of Canadians with Disabilities. We are Canada's cross-disability coalition working for a more accessible and accepting Canada. As such, we consider reliable home delivery of the mail an important part of the fabric of what makes Canada great.

In terms of specifics, we support the government's moratorium on the creation of more community mailboxes. We recommend that the moratorium be made permanent, and that the previous work, if possible, be somewhat reversed so that more Canadians receive home delivery.

The move toward community mailboxes has a disproportionately negative effect on our community, and I think also for women who are in abusive relationships. Simply getting to the mailbox for some of us is a barrier, a new barrier. In the year 2016, we think it's unreasonable that government entities should do anything that creates new barriers to our participation in Canadian society, and that's what's happening.

Our former chair, Mr. Tony Dolan, who lives in a suburb of Charlottetown, already has to rely on his spouse to pick up his mail. I consider that unacceptable.

We want no more community mailboxes. We believe that Canada Post is a public service and, as such, must remain public. Thus, any notions of privatization must be resisted. In rural areas, it is particularly important, and that's one of the many reasons why we support postal banking.

We have heard dire predictions about the future of our postal service. So far, the financial picture of Canada Post over the last number of years does not bear out this paranoia. Yes, it is true that the use of the postal service has changed since more and more people use the Internet. That's a problem for our community, many of whom are poor and cannot afford a computer.

If we look at what's happened so far, the corporation has done an excellent job of finding new sources of revenue. We see postal banking as one of those new aspects that excites us and should be seriously looked at. We believe that the post office is uniquely positioned, given the number of outlets that it already has across the country, to institute such a system and to operate it effectively.

It would, as other participants have suggested, help deal with the problems of payday loaners. I think Al Capone would have been proud that these people have found a way to do legally what he and his loan shark cronies were unable to do back in the 1930s. I think he'd be proud of them. These entities particularly prey upon the poor, and poverty is such a reality throughout our community, so this is an area that I think is exciting.

One of the reasons why I think mail usage has gone down, and only one, because there are others, is the excessive rate increase that happened. This had dire consequences for small businesses, which, after all, we are told, are the main creators of new jobs in this country, and also for community organizations that use the mail to send out notices of meetings or conduct direct mail campaigns. It is my hope that such excessive rate increases will not be our experience in the future.

In conclusion, we want regular, reliable home delivery of the mail, five days a week, throughout Canada.

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Next we have Mr. Dachis, please, for five minutes.

[Benjamin Dachis, Associate Director, Research, C.D. Howe Institute]

Thank you so much for having me.

My name is Benjamin Dachis. I'm the associate director of research at the C.D. Howe Institute. We are an independent not-for-profit organization that aims to raise Canadians' living standards by fostering economically sound public polices.

I'm the author of a C.D. Howe Institute study entitled, “How Ottawa Can Deliver a Reformed Canada Post”. I argue that it's time that Canada reform its postal services so we can catch up with those in the rest of the world and so Canadians benefit from the most efficient postal system possible.

The scale of Canada Post's competitiveness problem is enormous. Canada Post's labour costs are 41% higher than those of firms like UPS and DHL. That's a big problem. That labour is about 70% of Canada Post's total costs, according to Ernst & Young. The benefit costs at Canada Post are 60% higher than those of their competitors.

As of the middle of this year, Canada Post had a pension solvency deficit of about $8 billion. Keep in mind that Canada Post has received special permission from the federal government to defer the vast majority of the payments it needs to cover its pension deficit. That cannot go on forever.

Projected losses at Canada Post, assuming that it doesn't go ahead with the mailbox conversions, are going from $100 million in 2016 to over $700 million in 2026. Keep in mind that these are likely at the low end of the reasonable range of potential losses, according to the discussion paper from the Canada Post review panel.

This is why fundamental change in the Canada Post business model is critical. That's the long-term solution. It's similar to that of countries like Sweden or Finland, which was to eliminate the government monopoly on letter pickup and delivery completely and allow private entrants to handle the job.

The second option is to eliminate the government monopoly more gradually and make Canada Post lean enough to compete with private companies. This can be done through contracting and franchising.

Only about 40% of Canada Post's retail postal operations are contracted. Those are the operations you see in Shoppers Drug Mart, for example. Canada Post is prevented from closing or franchising almost 3,600 corporate post offices because of a 20-year-old moratorium on the closure or franchising of rural post offices. You may often hear of it as “the rural moratorium”, which is really a misnomer, because it now applies to places like Brampton, Saskatoon, and Halifax. These are major cities in Canada. Keep in mind that this moratorium now covers 96% of all locations operated and owned by Canada Post.

Aside from following through on conversion to community mailboxes, increasing use of contracting, according to the review panel study, is by far the largest saving option they've come across. Converting 800 of the highest-volume corporate post offices—less than a quarter of the total protected stores—to franchise outlets would save $177 million. In a scenario where Canada Post converted or franchised all of its corporate outlets, it could realize savings of over $350 million per year. That alone is half of the hole that Canada Post needs to fill.

Canada Post could extend this model even further and apply the franchising model to mail pickup and delivery to realize even bigger potential savings. If contracting pickup and delivery resulted in similar savings, the cost savings would be dramatic, without necessarily cutting delivery standards.

Contracting arrangements would also create a strong incentive for contracted employees to maximize their productivity, knowing that low productivity or excessive wage demands—or the threat of a work stoppage by contractor employees or Canada Post employees—could result in losing their contracts. Contracted employees and Canada Post employees likely would perform better at lower costs—or both—than what we see now.

Through attrition, Canada Post could gradually increase the share of services and contracts without relying on layoffs, as layoffs of most existing employees are forbidden under the current collective agreement. According to the review panel, 25% of approximately 16,500 in the Canada Post workforce will become eligible for retirement over the coming five years.

Whatever route the government chooses, and whether that route includes a fully privatized Canada Post or one that involves carefully selected private services to be tendered for contractor franchising, the goal really should be a competitive and efficient postal service.

Thank you again for inviting me. I look forward to discussing further in questions.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Our next panellist will be Professor Lipsig-Mummé.

[Professor Carla Lipsig-Mummé, Professor, York University, As an Individual]

Thanks very much and hello to everybody.

I should mention that I'm a professor of work and labour studies and I direct a seven-year research project called “Adapting Canadian Work and Workplaces to Respond to Climate Change”. It's part of a suite of research projects that began to get funding from the Social Sciences and Humanities Research Council in 2008 and continue into the 2020s.

Reviewing the task force discussion paper and some of CPC's own reports, I'm struck by the lack of strategic creativity when seeking options for the future and the need to broaden our ambition. I use the word “our” advisedly, because the task force report really showed us to what degree Canadians hold Canada Post in both affection and commitment.

The task force was struck to explore the range of possible responses by CPC to the new challenges of the digital era, particularly in relation to raising more revenue to compensate for the decline in letter mail volume. Unfortunately, both the CPC and the task force define narrowly both the central question of what is to be done and the scope of CPC's potential for growth and diversification.

The task force then looked at solutions in all the old places. The options proposed do not reach beyond the tried—and not so successful—and the known, focusing on cuts in services and jobs, with some outreach to new revenue sources. But is that all that's possible?

In my own research, I've looked around at what other countries have done. I have worked and talked with the president of the U.S. Postal Regulatory Commission on its work as well. Let's turn the question around: is to focus narrowly on cuts, jobs, and competition all that's possible?

On the question of what is the future for the Canadian postal service, let's ask these two questions. First, how can Canada Post take leadership in both the digital and the environmental transitions that are transforming the economy and society in Canada today, as they are in other developed countries? Second, how can Canada Post contribute to the government's high-priority climate action program? While that plays almost no role in the task force report, it's coming down the pike for Canada Post. We know it will.

We can widen the question. How can Canada Post take digital and environmental leadership in this transitional time? This opens the door to a broader vocation for Canada Post as a leader in environmental innovation as well as to next-generation training for Canada Post workers, because there will be a next generation.

Postal services in a number of developed countries are offering successful and innovative new services. Canadian postal unions have proposed collaborative strategies to reduce the greenhouse gas emissions that Canada Post's work creates, because Canada Post is a major producer of the very pollution that we need to slow.

I should mention that in 2011, during negotiations, the principal union came to Canada Post with a proposal for two things: one, to eco-audit mid-sized facilities to reduce their greenhouse gases; and two, to start a pilot project with greening the work. That did not go through. Canada Post didn't take it up in that round of bargaining. One hopes it will in the future.

I want to mention, too, a number of promising strategies that will contribute to Canada Post's transformation for the next generation.

First, conduct eco-audits of all Canada Post facilities, with transparent reporting.

Second, have Canada Post retrofit all corporate-owned postal facilities for energy conservation and sustainable practices. You seek federal infrastructure funding for that, but the federal government has been open to that kind of infrastructure funding.

Third, have Canada Post replace its 13,000-vehicle fleet with green vehicles.

Fourth, parcel markets are growing exponentially. Canada Post real estate, home delivery, and its local post offices for parcel pickup are all competitive advantages. Don't cut the infrastructure.

Fifth, use the delivery network for multiple purposes. It's good business. It is also environmentally cleaner.

Sixth, environmental multi-skilling and training of postal workers, which is going on in other countries, can make our postal workers specialists in safety monitoring and energy efficiency installation and will broaden the services that Canada Post can offer, as well as create a small army of environmental experts in the field. Now, you may be thinking, what is Canada Post doing here? The answer there is that it's what other countries are doing as well.

I'll continue.

Seventh, training for monitoring the health of seniors and disabled in rural areas is cost effective.

Eighth, have Canada Post to take on the responsibility for the delivery of some social programs for the government, as La Poste in France does.

Last, Canada Post is to develop a green plan in real time.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Next we have Mr. Kirk.

[Gary Kirk, Owner, A Good Read Bookstore, As an Individual]

Thanks for having me here.

My name is Gary Kirk, and I'm the owner of A Good Read bookstore in Toronto. Twenty years ago, as a hobby, I started selling rare books online. Nine years ago, that hobby had grown to the point where I was able to open a bricks-and-mortar store, and I now have four employees.

I like to think that's what the Canadian government wants to see happen with e-commerce. The sad reality is that Canada Post has been more of an obstacle than a tool in the growth of this business, most of which has been done by having my books taken across the border and mailed using the U.S. Postal Service.

E-commerce is not going away. In 2012, it represented about 5% of total retail. In 2015, it was up to a little over 9% of total retail. In 2019, it is predicted to exceed 20% of total retail, and our postal system will determine what that looks like.

I have with me a chart from a Global News report in 2014. I apologize, but my printer died and I didn't get to print enough copies for all of you. The dark red bars shown here represent foreign-owned or foreign-based sellers online and their percentage of total e-commerce. Normally, when you do the top 10, you would stop there, but here they had to go to the top 14, because otherwise there would be no Canadian companies. There are a number of reasons for that. I'll try to get to them as quickly as I can.

One is the Canada Post pricing model for packages. The second is the strategic advantage that Canada Post concedes to foreign sellers. Number five is the market distortions caused by the extremely large discounts that Canada Post gives to certain large sellers.

The first is the pricing model. If I want to mail a hardcover book anywhere in the United States, I can do it for under $3.50 U.S. In Canada, if I want to mail that same book across the street, it would cost me $12.90. That is before the discounts given to sellers, but those discounts amount to 20%.

Aside from the expense, the bigger problem is that each package will have a mailing rate that is a function of the dimensions, the weight, and—this is the best part—the volume of traffic at the originating postal code and the volume of traffic at the destination postal code. The range in prices for a package of the same size is over 400%, so a book that I can mail across the street for ten bucks would cost me $35 to mail to Canmore, Alberta. It would cost me more to mail a book from Toronto to Fergus, Ontario, than it does to Montreal, because of the volume.

That's not how e-commerce works. When you sell something online, you have to pick one shipping rate or the website you're using provides you with one. You have absolutely no way of predicting what it's going to cost you to send something somewhere, because you have no way of knowing where your customer is going to be. You can hope that the majority will be in large urban centres, but the reality is that a lot of people in smaller and more isolated communities rely on e-commerce to get things they can't find locally.

What makes this particularly galling is that if I'm mailing a book from the U.S. into Canada, I pay one rate that's based on weight, so it would be cheaper for someone to mail a book from Hawaii to Canmore, Alberta, than it would be for me to mail a book to Canmore, Alberta, by a factor of 50%. To me, that's just crazy, and I don't understand why we do this.

If I want to mail a CD in Canada, depending on whether or not the employee at the post office bends it to make sure there's only paper inside, I might mail it as a small letter for about two bucks. If he or she decides to bend it and says that I can't have anything stiff in there, it will be $8. That same CD mailed from China to anywhere in Canada costs $4, so we're creating a situation where we're putting our own domestic sellers at an enormous disadvantage. If I wanted to get into e-commerce in Alberta, I wouldn't be able to do it. It would cost me 40% more to mail a book within my own postal code than it would for a seller in Toronto.

The last point is that it isn't this way for everyone, and I know this because a couple of times a month Amazon.ca asks me: “Paying too much for shipping? Send your inventory to our warehouse and we'll do the fulfillment for you.” Now, every package I've ever received from Amazon.ca has come through Canada Post. When I look at what the FDA fees are, for a package that would cost me $9 to ship, Amazon.ca charges $3.75 in postage for the first 500 grams—37¢ a gram. Given that they've built in a profit margin there, that suggests to me discounts in the order of 80% or more.

People make their decisions about e-commerce based on the combined price of the item and shipping. We have created a monopoly: Amazon.com representing 23.6% of Canadian e-commerce and Amazon.ca 8.5%.

[The Chair, Conservative, Tom Lukiwski]

Mr. Kirk, I have to get you to wrap it up, please.

[Gary Kirk]

All I would say is that you need to decide what you want e-commerce to look like in this country, whether you want it to be distributed nationally, or whether you want it to be dominated by foreign-owned corporations.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

I would again encourage all our panellists to please keep your opening comments to five minutes.

We now have Wanda Morris, from the Canadian Association of Retired Persons, for five minutes, please.

[Wanda Morris, Chief Operating Officer, Vice-President of Advocacy, Canadian Association of Retired Persons]

Thank you.

We are a non-profit, non-partisan organization, and our mission is to look after the financial security and health care of Canadians as we age. I'm here not so much to speak about Canada Post, but to talk about why door-to-door mail delivery is an essential service in Canada.

When we look at services that our governments provide, whether it's police services, or firefighters, or the provision of highways, we don't ask that those break even. We recognize that those are essential costs to society, and I put it to you that mail delivery, for our constituents, falls in the same category.

A 2009 report from Statistics Canada showed that only 21% of individuals 75 and over were on the Internet, so this idea of phasing out physical mail delivery and instead having everyone go online is not workable for our constituents. That was seven years ago. People are going online more all the time, but even at that time, only 45% of 65-year-olds to 75-year-olds were using the Internet.

Though our members are perhaps more Internet-savvy than others and 70% of our members use the Internet, half of those only use it for Skype. There is a widespread fear among our members about things like identity theft, so they're concerned about using the Internet for their banking. I have to say that some of those fears are valid. We have seen identity and data breaches.

As well, many of our members are unable to handle the physical hardship of going to a community mailbox. We surveyed our members, and almost one in five, or 18%, said that the elimination of door-to-door delivery poses a hardship for them. When we think about what we're doing to seniors, to our elders, we are asking them to make these treks not on a nice fall day like today but in the middle of snow and ice, where they are at risk of a fall and, potentially, a very severe health incident.

If they are unable to make that trek to the mailboxes, they may be relying on others—for example, to pick up a pension cheque or some other government funds—which then puts them at risk of elder abuse. We know that one in 10 seniors over the age of 65 experiences some form of elder abuse, so we're really putting them at risk and, also, I believe, at risk of vandalism when they use community mailboxes. They are simply a target for somebody to go after.

We certainly believe there should be some form of mail delivery. CARP recognizes that there are financial realities and that we're not operating in a fiscal utopia here, so we're prepared to accept some type of cuts in services, but I think that as a minimum, one-day-a-week mail delivery needs to be sustained.

I'd also like to make the point that the community mailboxes we're seeing are not only a risk to our seniors, both as opportunities for potential physical or mental abuse as a result of using them, but they're also a tremendous eyesore in the community. I'll pass around an image for you. It's one of a whole selection of images that I could have pulled off the Internet showing the litter around these community mailboxes. That is not what we want to see in our communities and areas where we live.

We strongly call on the committee to immediately eliminate community mailboxes and restore at least once-a-week mail delivery services.

[The Chair, Conservative, Tom Lukiwski]

Thank you so very much.

Our final panellist will be Mr. Millar, from the Oakville District Labour Council.

Go ahead, please, for five minutes.

[David Millar, President, Oakville District Labour Council]

Thank you.

When the Liberals took over the challenge of our federal election campaign and promised the public they would stop the Conservatives and save Canada Post, we hoped that the failed Conservative strategy of cutting our public postal service would finally be cast aside. We were promised that all options would be on the table except for privatization.

The Canada Post review task force that was set up earlier this year to identify options for the future of Canada Post has now released its discussion paper. We were concerned that the makeup of this task force was composed of former CEOs and big-business people. That's a little like getting the fox to design the henhouse.

While we were disappointed, we're not really surprised to see that the discussion paper, instead of broadening Canada Post's horizon, continues to support and even expand the Conservative cuts to the postal service, including: reducing delivery frequency;;post office closures in rural and small towns by lifting the moratorium on such closures, converting more home delivery addresses to so-called community mailbox delivery; and, charging people for door-to-door delivery, like a postal tax.

The paper did touch on some ideas for service expansion but devoted much less time to them, skewing it heavily in the direction of cuts. Some ideas were: becoming an Internet service provider; providing scheduled monitoring services for the elderly and people with disabilities; offering green packaging and recycling; developing an electric vehicle charging network; using post offices as community hubs; providing a marijuana distribution service; and, providing postal banking on a very limited scale if the financial institutions are interested.

However, many of these more positive public-service-oriented possibilities were glossed over or dismissed. Some were not even discussed but placed in an appendix on the last page. Others that were raised, such as bringing back food mail to replace the failed nutrition north program, were not mentioned anywhere.

We don't need cuts to rural postal service, and we don't need to lose good jobs, especially since they are so scarce in our rural communities. We don't want to hear the Liberals say that privatization is out and then implement the self-privatization of the post office by allowing Canada Post to open more franchises and close more corporate retail stores.

The task force has evidently accepted Canada Post Corporation's claims and projections about its finances, including the solvency deficit in the pension fund. It even cites the discredited 2013 Conference Board report that falsely predicted massive losses and has been wrong every year. Once again, we have the CPC throwing out wild figures and projections without having to account for them. We cannot trust anything the corporation says about its finances at this stage.

The task force also asked the consulting firm Ernst & Young to independently review the CPC's finances; it's like dishing up dirt. Other experts consulted by the task force are not identified. Neither does this report disclose the methodology for conducting its polling, nor how it arrived at the cost savings it estimates.

Look at the section on postal banking as one example of the big business bias. There is no sign of a postal banking study, which the CPC conducted for four years. Instead, the paper claims that full-scale postal banking won't succeed in the Canadian context because we already have the best and most inclusive financial system there is. There is no mention of the fact that Canadians are paying some of the highest bank fees in the world. A public option is badly needed.

The task force does say that a partnership model with banks or credit unions could be considered. The paper also says there may be an opportunity for corporate post offices in select underserved remote communities in line with the task force hub option of offering services in select communities, provided financial institutions have an interest in this initiative. This may not be the postal bank we envisioned, but it's a start.

Let's remember that this is not yet a done deal, because we are now entering phase two, where we need the public to support our vision to create a better public postal service. We must remember that the task force's suggested cuts are not recommendations, only options. We must vigorously oppose any recommendations that undermine public postal services and good jobs.