Mr. Speaker, I am pleased to rise today to speak on this motion with respect to Canada Post.
In December 2013, Canada Post announced its five-point action plan to return the corporation to financial self-sustainability by 2019.
The need to transform postal administrations is not unique to Canada. Mail volumes are declining globally, according to the Universal Postal Union, the United Nations body that sets the rules for international mail exchanges, and particularly so in developed economies. This is happening as a result of the growth of electronic communications, such as email and smart phones, including texting and the rise of e-communications.
The vast majority of bills were paid by mail 10 years ago. Now bill payment has moved online and some companies are even charging a supplementary fee to continue bill delivery by mail.
Personal letters are also on the way out, with letter writing become something of the past. Gone are the days when mail was delivered many times per day, as it was in the United Kingdom, for example. Cars have since replaced horses, computers have since replaced mechanical calculators, and email and texting are steadily replacing what many Canadians refer to as snail mail.
Greeting card companies are also experiencing a similar downturn in business as electronic birthday cards are becoming more popular. In the United States, where roughly 40% of the entire world's mail is delivered, the U.S. Government Accountability Office has estimated that total mail volume could fall by 60% by 2020 compared to peak 2006 levels. In a study undertaken by that organization in 2012, it also found that the United States Postal Service had excess processing capacity. This was despite the fact that the U.S. Postal Service has made significant cuts to its sorting plants and operations since 2006. The same study predicts that the U.S. Postal Service will reach $21 billion in net losses by 2016.
In the United Kingdom, until recently the Royal Mail operated at a loss. That was as a result of declining mail volumes and the deregulation of its postal market in 2006. This deregulation opened the door to foreign-based mail companies, which began to compete in the most lucrative, low-cost, urban business mail sector. These companies offered cheaper rates than the Royal Mail, thereby putting additional pressures on the Royal Mail's revenues.
In much of northern Europe, such as in the Netherlands and Scandinavia, where Internet penetration has exceeded 90%, the percent of mail volume decline has hit double digits.
What is the rest of the world doing about declining postal business?
Each country has a unique postal environment, including geography, population density, and climate. Not surprisingly, given national and, to some extent, political differences, each country is pursuing its own approach to the downturn in mail volumes.
In the United States, a bill was introduced in Congress in July 2013. If passed, the postal reform act of 2013 would authorize the United States Postal Service to end door-to-door mail delivery and implement a five-day a week delivery schedule.
According to the U.S. Postal Service, about 30 million Americans, or less than 10% of the population, get their mail directly to their front door at a yearly cost to the postal service of about $353 per household. In comparison, delivery to cluster mailboxes, which are similar to Canada Post's community mailboxes, costs about $160 per address per year. Since few Americans spend more than a fraction of the delivery cost per year on stamps, the goal is to cut the cost of delivery as much as possible, particularly since the U.S. Postal Service has a mandate to break even, something it has not achieved in years.
If passed, the postal reform act of 2013 would also remove the current no lay-off clause from future postal worker collective agreements.
Given that the legislation has not yet passed, the U.S. Postal Service is taking steps within its power to reduce costs. The U.S. Postal Service has now converted more than 6,000 of its post offices to reduced hour operations, which it hopes will save $500 million a year.
In the United Kingdom, the government has decided to privatize the Royal Mail. In 2011, the U.K. government passed the Postal Services Act that set the stage for the privatization of the Royal Mail, albeit the latter will still be required to continue fulfilling the universal postal service. Recognizing that the privatization could not be successfully carried out as long as the company was running at a loss, the United Kingdom increased postage stamp rates in 2012. To increase revenues, rates were increased by 30% for first class mail and 36% for second class mail. This translates into a cost of over a dollar at current exchange rates for first class mail.
The U.K. government also assumed the assets of the Royal Mail's pension regime, representing 28 billion pounds Sterling, or approximately $45 billion Canadian dollars. It also assumed the pension regime liabilities amounting to 8.4 billion pounds, or around $14 billion more than the asset amount. This allowed the Royal Mail to make profits in 2011 and 2012. In 2012, the post offices were spun off into a separate limited company that received almost $2 billion in subsidies from the government.
Canada Post's five-point action plan avoids the heavy subsidies that governments of other countries such as the United Kingdom have provided their postal systems.
Deutsche Post was also privatized, but Germany took a very different approach than Great Britain. The German government gave Deutsche Post the freedom to expand its business while continuing to operate in a protected German postal market. This market protection occurred before Deutsche Post went public in 2000 and for some years thereafter. In 1998, Deutsche Post began acquiring DHL and has since consolidated its leadership in the logistics and freight business through subsequent acquisitions of other companies. The protection afforded to an expanding Deutsche Post led it to becoming the world's largest courier company.
In fact, mail delivery makes up less than 20% of Deutsche Post's DHL business. Recognizing the advent of electronic communications, Deutsche Post was one of the pioneers of hybrid mail. Mail can be sent electronically through email and then delivered in physical form. The reverse scenario is also possible, where physical mail is scanned, sent electronically and then printed off using a handy Deutsche Post printing device. Legal documents are often mailed using this approach.
Other postal services have also diversified their business lines to offset shrinking mail revenues. Australia Post, for example, has diversified its services by selling licenses to post offices, which also sell electronics, travel items, books, phones, et cetera. This diversification has occurred in response to the declining mail revenues. Last year, Australia Post lost a record $187 million Australian dollars on its traditional mail business. Australia Post just conducted a survey to determine whether customers would prefer to have their mail delivered three times a week or pay an annual $30 fee for daily delivery.
Canada is a vast country. In fact, it is the largest of the G7 countries. Although it may only be 100 square kilometres bigger than the United States, it is almost 40 times the size of the United Kingdom. From a population density perspective, the United States has over 10 times the population density of Canada and Japan has over 100 times the population density of Canada, yet Canada's postal service is able to move Canadian mail at competitive prices over vast distances in our country, which at times experiences difficult weather. Other countries do not face these same challenges.
Rather than having Canada Post expand its business activities into areas for which it is not well suited, a more important question that Canada Post has considered is what sort of postal services do Canadians need? Canada Post has responded to the challenge of declining mail volumes. The result is Canada Post's five-point action plan announced in December 2013.
This plan is within the parameters of the Canadian postal service charter announced by the government in 2009. While it is easy to criticize Canada Post for taking steps to ensure the survival of Canada's postal system while meeting the needs of Canada's postal consumers, the alternative is the threat of a failing postal service provider, or a postal service that is no longer economically viable and operates with huge debts that ultimately will have to be borne by Canadian taxpayers.
While it is true that mail volumes are in decline, it is also true that mail will be around for some time. Canada depends on Canada Post to deliver the mail and this government expects Canada Post to continue to provide this service for years to come while ensuring sound fiscal management.