Transport Committee on Dec. 18th, 2013

[The Chair, Conservative, Larry Miller]

We'll call to order meeting number 9. Our orders of the day are to deal with the recent changes announced by Canada Post.

I will just remind members that this meeting is televised and is split into three panels today, each for a one-hour session. In the first one we have Canada Post with Mr. Deepak Chopra and Mr. Jacques Côté.

With that I'll turn it over for your opening remarks, gentlemen. Thanks for being here.

[Deepak Chopra, President and Chief Executive Officer, Head Office, Canada Post]

Thank you, Mr. Chair.

Thank you to the committee members for this opportunity to talk to you about the changes we're making at Canada Post to better serve the rapidly changing postal needs of Canadians in an increasingly digital age.

Before I begin, let me introduce my colleague, Jacques Côté. He is the president of our physical delivery network.

Canada Post was established as a crown corporation in 1981. Back then, the digital age was just an idea. Canada Post was given a mandate with two components: to fund its operations with the revenue it earns from the sale of products and services, not through taxpayer money; and to provide a postal service that meets the needs of the people of Canada.

These expectations continue to be part of Canada Post's public policy obligations mandated by the government and written into the Canadian Postal Service Charter.

For the last couple of decades, Canada Post had no problem fulfilling these mandates. The mail was a convenient and low-cost way for Canadians to communicate with each other, to receive their statements, and to pay their bills. Letter-mail volumes were driven by the rising influx of credit cards, bank statements, and cable, phone, and utility bills. Each one of the smart phone devices bought by Canadians led to another monthly bill.

Then came the year 2007, and the dynamics that fueled Canada Post's profitability began to change. The balance between digital communication and paper-based communication began to shift against Canada Post.

In 2010 tablets hit the market. More than any computer technology that had come before, tablets mimicked paper. They were lightweight, easily carried around, and designed completely for convenience. Tablets offered the first true alternative to paper. It was their arrival that accelerated the decline in mail with surprising speed.

But the technology was only getting started. In the digital age, tablets and smart phones allow Canadians to communicate faster, cheaper, and more conveniently than they can through the mail. This includes paying bills and receiving statements, which we can now do pretty much on the run.

The convenience of digital technology is indisputable—but unfortunately it's devastating to the letter-mail business model. In 2012 we delivered one billion fewer mail pieces than we did in 2006. In the third quarter of this year, we posted $129 million in losses. Last spring a Conference Board of Canada report projected that if nothing changes, Canada Post will begin to lose close to $1 billion by the end of the decade.

Canada wasn't alone in facing these challenges. The trend was, and indeed is, global. Postal administrations around the world are facing the same dramatic challenge. We have all been asking the same question: what role can the postal service play in the digital age? Some people are even asking whether it has a role at all.

Like many other postal administrations, however, Canada Post does see opportunities around it. While the Internet has forever changed the way Canadians send and receive their mail, we see it is also creating opportunities for us to deliver the physical goods that Canadians are increasingly buying online. We see that postal service continues to be a vital link for small businesses in Canada. It remains crucial to people and businesses in remote and particularly northern communities.

We believe Canada Post still has an important role to play in the lives of Canadians and in the economy of our country. We believe this because Canadians have told us that.

This year we spent five months consulting with Canadians and asking them questions about the kinds of postal service they need. Senior leaders from Canada Post visited 46 communities across Canada in every province and in the north. We sat down and talked face to face with a wide range of people: representatives from non-profits and charities; health and education administrators; seniors; students; local elected officials; business people, including representatives from large companies; and small owner-operators. We spoke to people who have every kind of mail delivery, including door to door delivery and community mailboxes. I was pleased to host a number of these discussions myself. I also heard from thousands of Canadians online and through the mail.

The Canadian Union of Postal Workers website promoted the link to an online feedback process on their home page for the entire duration. Let me say that we are grateful for their participation and their valuable feedback. I say “valuable feedback” because we were able to take what we heard and use it as a blueprint for the five-point action plan that we released last week. In these consultations, Canadians told us they lead busy lives. They're juggling demanding schedules. They're shopping more online but are not home during the day when mail or the parcels they order online arrive. They told us their mailing habits are changing. They pay their bills online and shop online. They like being able to renew their driver's licence and other government identification online and have it delivered by mail. That means they can avoid waiting in long lineups. They told us they value Canada Post and want to change with the times. They said they understand we face serious challenges. However, they do not want their tax dollars to fund the solutions to our problems. They want us to find solutions that pay for themselves. We heard from small businesses that told us categorically that they still rely on mail far more than the larger businesses do. They said they need reliable delivery and they need delivery five days a week.

Small businesses remain the economic engine of Canada, so it's important for all Canadians that we continue to meet their demands. The feedback we heard from Canadians was consistent with our own observations about the changing relationship between Canadians and Canada Post. It provided us valuable insights on the future of Canada Post and ultimately led to a five-point action plan that strives to balance often competing priorities and needs of Canadians.

The five-point action plan establishes the foundation of a new postal system that will serve the current and future needs of Canadians. It will help open new opportunities to businesses that are redefining how they will connect and serve Canadians in a digital world. It will help level the playing field for small businesses wanting to take advantage of e-commerce and to compete with large businesses using the postal infrastructure. It will become a key enabler of remote trade and commerce. This plan is based on what Canada Post is good at: delivering to Canadians. Only the shape and size of what we are delivering is changing. We are delivering more of this and, as we have seen, fewer letters.

We are building not only on the experience of serving Canadians but also on the extensive experience we have in serving Canadians through community mailboxes. No changes to the Canadian Postal Service Charter are required as a result of this plan. The initiatives set forth in the plan will be worth between $700 million and $900 million a year once they are fully implemented. We project they will help bring Canada Post back to financial sustainability by 2019. In other words, the five-point action plan gets us back to the foundation under which the corporation was set up, meeting the two core mandates to be financially self-sufficient and to provide postal service that meets the needs of the people of Canada.

Let me conclude by saying that Canadians are embracing a more digital world. Now Canada Post can embrace that future as well while being a partner to Canadians with a new postal system designed for the digital age. This is indeed an historic moment for Canada Post. We believe it is critical to prepare Canada Post to be as relevant to the next generation of Canadians as it has been to the generations past.

Thank you, Mr. Chairman.

[The Chair, Conservative, Larry Miller]

Thanks very much.

I should have asked the committee before if it's their wish to stick to the regular format of four rounds of seven minutes.

Okay. Very good.

Mr. Mai, you have seven minutes.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair.

I would also like to thank committee members for agreeing to meet today. It is a step in the right direction. Naturally, we would like to discuss this a bit further.

Mr. Chopra and Mr. Côté, thank you for being here.

Further to the announcement made after the House was adjourned, many Canadians have said that they are very unhappy with the decision. This decision affects many people, including people with reduced mobility, people with disabilities and seniors.

We were unable to ask the minister questions because the announcement was made after the House adjourned. Since then, we have heard from many Canadians that these changes will have a huge and even a terrible impact on their lives. Seniors and people with disabilities or reduced mobility will be particularly affected, as will small businesses and charitable organizations. It seems that an incredible number of people are opposed to these changes because their lives will be directly affected.

You talked about consultation. That is exactly why we are here. In fact, we feel that there was not enough consultation or discussion.

Do you realize just how much these changes will affect seniors and people with reduced mobility? What are you going to do for them?

[Deepak Chopra]

Let me first acknowledge that changes of this magnitude were not taken lightly or thought through on a short notice. This is a trend that has been emerging for several years. As I mentioned in my remarks, since 2007 the mail volumes irreversibly started to decline.

The work we have done in preparing options is not only based on extensive face-to-face consultations, the over 3,000 items of feedback we received on our website, and the over 1,000 letters: this is a highly engaged consultation process that we undertook over the last seven or eight months, which was widely covered in over 400 articles and hundreds of hours of television and radio coverage. This has been extensively covered—the options that were laid out that we were discussing with Canadians through the Conference Board report—so this has been a long consultation process.

As regards the second part of your question about the seniors, as you know, two-thirds of Canadians currently receive their mail through a centralized delivery system. Much of that includes community mailboxes or apartment central delivery points, and those two-thirds of Canadians also include seniors, and also include people with disabilities, and Canada Post has a robust process to accommodate requirements where it's appropriate for seniors.

We continue to innovate in that area in terms of providing extra keys for those who need a loved one to pick up their mail. In order for some seniors to be able to reach their community mailboxes, we have been managing the latter's placement, location, height, and other adjustments for the past three decades, and in fact dealing with Canadians very successfully. We intend to learn from that and to continue to improve, and indeed, if we learn that there are new requirements that we need to accommodate, we will continue to be innovative.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

So what I hear is that there's no specific proposition for people who are being affected. When you made the announcement, people really came out, and I got a lot of phone calls. I spoke to a lot of people with respect to that, and people find it terrible. I don't find it normal. For instance, if you decide to increase the rates drastically, by almost 56%, and to reduce the services, I don't think that is helping consumers. How will that help get more customers in terms of a business plan?

[Deepak Chopra]

Let me address both points separately.

The pricing is related to our letter-mail business. We have three parts of our business. The first part is parcels, where the announcement we made in the five-point plan has no impact on pricing. Close to 40% of our business as a group of companies comes from parcels, and there's no impact on parcel business, which is used by small businesses that are trying to innovate and to grow their businesses.

The second part of our business is marketing mail: direct marketing, flyers. Many of the charities and many of the small businesses that are using promotional mail flyers in fact spend a lot more on flyers and promotional mail than they do on the actual 10 or 20 bills.... So the pricing we announced first of all affects the letter-mail business, and it hasn't been easy—

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you very much, but unfortunately charities and small businesses are saying that it is hurting them. We'll hear from small businesses.

Also, you're talking about the fact that it took a long time to come to the process.

You said you thought about it for a long time.

When did you inform the Minister of Transport of your decision?

[Deepak Chopra]

The process of preparing the corporate plan and submitting it to the officials is an ongoing one.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

All right, but what I want to know is at what point did the Minister of Transport find out that you had decided to cut services and hike prices.

[Deepak Chopra]

The process of a corporate plan is an iterative one, where we present our plans, work with the officials, go through the analysis, and that process goes on—

[Hoang Mai, NDP, Brossard—La Prairie, QC]

You are not answering my question, which is a simple one. You are the CEO of Canada Post. When did you tell the minister that you were planning to cut services and hike prices? When did you present your five-point action plan to the minister?

[Deepak Chopra]

The announcement we made last Wednesday was primarily driven by the urgent need to address our pension shortfall, and we had received that approval from the Department of Finance on Monday. We were advised of that decision, and, as you know, we have been very public about our financial shortfall, including the $1 billion dollar shortfall in 2014 that we have to top up.

We were informed of the department's decision on Monday, and we cannot afford to waste a day. We notified the minister on Monday that now that we have the last component of our plan...because a plan without a cash solution would have been hollow. We could come up with solutions that would take five or six years to solve the Canada Post problem.

[The Chair, Conservative, Larry Miller]

I'm going to have to cut you off there. I think you've answered his question.

Mr. McGuinty, you have seven minutes.

[David McGuinty, Liberal, Ottawa South, ON]

Thank you, Mr. Chair.

Thank you, Mr. Chopra.

Merci, Monsieur Côté, for being here today.

You have a tough job and there's no doubt that Canadians are reacting strongly to the proposed changes. I know that you know that.

I do want to go back, if I could, to where my colleague left off and just ask you point-blank if Canada Post is under any statutory obligation to present this kind of change plan to cabinet or to the government.

[Deepak Chopra]

Canada Post is an arm's-length corporation. I report to the board of directors. Management prepares plans every year, and any changes to the plans we discuss with the board of directors. The board of directors approves the plans and those are submitted for approval as part of the normal Treasury Board process wherein corporate plans are approved.

That is the process we have followed ever since the corporatization—

[David McGuinty, Liberal, Ottawa South, ON]

As a result, if that's the pattern, then this five-point plan would have been submitted to the Minister of Transport and cabinet and to the government before it was released last week.

[Deepak Chopra]

I can't comment on the government's decision-making process—

[David McGuinty, Liberal, Ottawa South, ON]

But was it submitted to them?

[Deepak Chopra]

The process of corporate planning is an iterative process. Our officials work with the Department of Transport officials throughout the process, and then once we submit the plan they do their analysis and they will ask us for additional information—

[David McGuinty, Liberal, Ottawa South, ON]

It is submitted by Canada Post. This five-point plan is submitted to whom in the federal government?

[Deepak Chopra]

The Department of Transport officials are the ones—

[David McGuinty, Liberal, Ottawa South, ON]

Right, so have you been working hand-in-glove with the department in an iterative way for some time as you came to ground on this five-point plan?

[Deepak Chopra]

As part of our normal process, we work on several topics with the departmental officials, with Finance and Treasury Board. That's our normal process.

[David McGuinty, Liberal, Ottawa South, ON]

I ask because most Canadians were struck, Mr. Chopra, by the extent to which the government's reaction to your plan was without question. There was not a single doubt raised by the government. There was not a single question asked about whether it was improvable. There was no question raised about mid-course directions going forward, which led most Canadians to conclude that it wasn't actually your plan, but Mr. Harper's plan, the government's plan.

Let's just hold that in abeyance for a second because there hasn't been a word uttered by the minister or the government since the plan was released to say, “Well, we like this contribution but we want to hear an awful lot more”.