Government Operations Committee on Nov. 3rd, 2016

[Marena McLaughlin, Member, Task Force on Canada Post Corporation]

If you look strictly at the last negotiation, as Madam Bertrand said, we were almost done when that was agreed.

In the review, though, we did consider the opportunity that exists with the financial—

situation of Canada Post, the composition of the union membership and see how we could harmonize the two.

There is a large number of retirement possibilities, since the average age of employees is 49 and 70% of Canadian Union of Postal Workers members are aged 45 and older. It's the ideal situation to avoid cutting positions. The workforce can be reduced through voluntary departures. We can accommodate employees without making cuts.

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

That's very good to hear.

With respect to other revenue sources, in the pricing-based strategy, you did focus on the domestic part of the market, and that is obviously the lion's share. Did you get the opportunity to examine international postal union rates, and how those are expected to change in the next couple of years? Were those baked into the financial modelling you did?

When I asked Ernst & Young that question last week, they said that they did not take changes to the universal postal union rates into account.

[Françoise Bertrand]

Definitely, we worked with Oliver Wyman, who have international expertise, especially in pricing. I don't know what you've heard in your consultations, but I know what we read from our surveys.

From the surveys we have read that maybe Canadians are prepared to have a smaller increase, according to inflation. They are not prepared to go for an increase in pricing like the one they had recently, in 2014.

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

I'm sorry, Mrs. Bertrand. The increases in prices I am referring to are for international post paid, so that, when someone orders something from China, China will get a weight-based rate for delivery of small packages within Canada. We heard from businesses that they felt that was anti-competitive. There will be some correction to that in 2018, with the rise in rates. Did your financial analysis include those—

[Françoise Bertrand]

We heard that.

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

Did your financial analysis include those rising rates, or were you relying strictly...?

[Françoise Bertrand]

No.

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

Okay. Thank you very much.

[Françoise Bertrand]

No, it belongs to government to raise those, because when you consider this, it has a negative impact on other considerations, and we didn't feel we had the liberty to really entertain that idea.

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

Okay, that's fair.

[Françoise Bertrand]

But we stated it in our report.

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

Thank you very much.

With respect to the regulator, the focus that the task force report puts on the regulator really seems about driving the possibility of private entrants into the marketplace. How do you feel—and this is a more broadly open question—about a regulator that exists primarily to ensure that the competitive parcel market appropriately subsidizes last-mile mail and parcel delivery?

[Françoise Bertrand]

Absolutely. As you know, I used to be the chair of CRTC. Those are the lines we were discussing in our task force, saying that it could be not strictly to regulate the pricing of stamps, but to regulate all the players in the parcel business. Rather than having a price cap or a ceiling cap, you can have a floor cap. You can also consider creating a fund in order to subsidize the ones who don't have an alternative and still need the last mile.

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

Speaking of alternative, what we heard from the union, from businesses that use parcel services, and from the corporation is that they want to expand the number of days on which mail could be delivered, but your report provided an option for reduction in the alternative-day solution. There is a bit of a gap there, and we've heard a lot on that, but it speaks to the question of whether, by reducing services, Canada Post is abandoning a part of the market. I feel that—and I hear it from Canadians—there is a market need, that there is a service they want to receive and pay for, and if Canada Post abandons that part of the market, isn't that encouraging further reduction in the overall revenue line that will encourage competition where they don't need to help their competitors?

[The Chair, Conservative, Tom Lukiwski]

Please give a very brief answer, Madam Bertrand.

[Françoise Bertrand]

We didn't push as far as how it can be realigned, but definitely those analyses and studies have to be done in terms of, if you do this, what does it impair? It has to be pushed and—

[Marena McLaughlin]

When we proposed the alternate-day delivery, we were talking about the mail delivery, not the parcel delivery, because we understand that Canadians want parcels every day. That, we heard loud and clear. What they don't necessarily want is the mail, because they don't necessarily expect a letter every day. It's junk mail, or it's bills. But they want the parcels right away, so the alternate-day delivery was never for parcels.

[The Chair, Conservative, Tom Lukiwski]

Mr. McCauley, go ahead.

[Kelly McCauley, Conservative, Edmonton West, AB]

Welcome back. It's great to have you with us again. We almost started with you, and we are almost finishing with you, so that's great.

You surveyed Canadians quite extensively about stamp prices and options of paying higher taxes for assisting Canada Post. Was I reading correctly that Canadians are quite opposed to the idea of paying higher stamp prices and taxes to subsidize?

[Jim Hopson, Member, Task Force on Canada Post Corporation]

We heard that, particularly from businesses. They felt that the last increase had quite an impact on them and on the amount of transactional mail there was. Business was very concerned about price increases. I think it's fair to say, though, that within the general public, there was an appetite for some reasonable increases over a period of time, but people were much opposed to big jumps where you would see the cost of transactional mail doubling and so on. They made the latter very clear.

[Kelly McCauley, Conservative, Edmonton West, AB]

From everyone you've spoken to and all the research you've done, what do you think are the top three items that have to be accomplished to keep Canada Post sustainable?

[Françoise Bertrand]

We came to an early conclusion that we've come into the digital age, so, first, we have to recognize the fact that it has changed—not strictly for postal services. It has changed for many other areas of our lives, not only business. That recognition is very important, because then we can, as we are bringing for consideration, do some gestures in the short and mid-term such as pursuit of community mailboxes—excluding, of course, people with mobility problems and dense downtown populations—but even that will not really ensure the future. In order to ensure the future, it is very important to consider deeper transformation.

[Jim Hopson]

I could add to that. What we heard was that with parcels, Canada Post has to be competitive cost-wise and also has to be convenient for the private sector. There has to be transformational work done with the unions so they are full partners and part of the process to determine the future working together, but it also has to serve all Canadians wherever they are in Canada at a reasonable cost.

Canada Post is very important to Canada and to Canadians, and they want that service to continue, but they understand there are changes coming with the digital age.

[Kelly McCauley, Conservative, Edmonton West, AB]

What do you think are the biggest risks facing Canada Post right now with the business disrupter coming in for parcel delivery, more competition with parcel delivery, and the pension issue?

What do you think are the biggest risks we're facing right now with Canada Post?

[Françoise Bertrand]

All of the above, sir. Definitely the pension issue is an important one because the amount involved is very substantial. However, it's also understanding that what seems to be the saviour, namely parcel delivery, is subject to increasing costs because we are changing our way of buying now. It is not in line with the costs. Until you are capable of really aligning costs and revenues—