Finally, We Can Learn Something From Canada

An end to door-to-door delivery could save Canada Post, but don’t expect the U.S.P.S. to follow suit

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The Canadian postal service recently announced plans to phase out home delivery over the next five years, replacing it with “community mail boxes” for the 5 million urban residents who still rely on door-to-door deliveries.

Canadians were divided over the news, with some arguing that it would make Canada Post, which is struggling with declining mail volume and high pension costs, even less used, while others believe it’s an essential step for the post office to remain self-sustaining in a digital age. For Americans, there should be only one reaction: envy.

Canada Post and the U.S. Postal Service, both created in 1756 by Benjamin Franklin when he was postmaster of Britain’s North American colonies, share many of the same problems thanks to digital disruption and ballooning pensions. But they’re different in one very important way: Unlike the U.S.P.S., which is tethered to Congress like a dog on a leash, Canada Post doesn’t have to come running to Parliament every time it wants to make fundamental business decisions.

Canada Post has a mandate from the federal government to fund its operations through revenue from products and services and not from taxpayer money. The U.S.P.S. has a similar mandate, except it can’t make the sort of substantial changes that could help it achieve financial stability without Congressional approval. That’s why the U.S.P.S. isn’t able to deliver beer or wine. That’s why it wasn’t able to discontinue mail delivery on Saturdays (even after the postmaster general announced it would). And that’s why it can’t get rid of door-to-door delivery like its neighbor to the north. While there is a proposal to eliminate home delivery, it came this summer not from the postmaster general but from Darell Issa, a Republican Congressman from California.

A bipartisan bill in the Senate would allow U.S.P.S. to raise postal rates and diversify its services while also allowing the postmaster general to reduce delivery and shed labor costs. It would also restructure the multi-billion-dollar payments, Congressionally mandated in 2006, that the U.S.P.S. sets aside to pre-fund retiree health benefits. But passage in the House would be tough, where Republican lawmakers like Issa are more inclined to support measures that would drastically cut services across the board.

Canada Post is actually a pretty close approximation of what the U.S.P.S. would look like without that Congressional mandate. The Canadian postal service recorded 16 consecutive years of profits until 2011. Since, it’s had nine consecutive quarters of losses, largely due to the proliferation of digital communication. Mail volume has dropped by almost a quarter from 2008 to 2012 and the Conference Board of Canada estimates that Canada Post will lose $1 billion by 2020 but that cutting door-to-door delivery could cut that in half.

The reduction elimination of door-to-door delivery, which Canada Post estimates at $283 per address while a community mailbox only costs $108 per address, comes along with a number of other changes, including plans to raise the price of stamps and cut 8,000 jobs.

The U.S.P.S.’s financial situation is similar; the pain just started much earlier. The post office has been dealing with billion-dollar deficits since 2007 and a substantial decline in mail volume beginning around 2008. Last month, U.S.P.S. announced it lost $5 billion in the 2013 fiscal year, which would sound devastating if it wasn’t for the $15.9 billion it lost in 2012. Take away the $5.6 billion Congressional mandate, and the post office actually would’ve made money last year.

While the Canadian postal service is getting rid of door-to-door delivery in cities – urban residents will have to pick up their mail at shared “community mail boxes” – it will continue delivering to rural mailboxes and will still deliver parcels, the one item that is proving successful for both services.

Letters are increasingly becoming secondary to parcel delivery largely due to the growing popularity of online shopping. In Canada, parcel volumes were up 5.1% in the second quarter of this year compared with the same period last year. The U.S.P.S. is seeing similar numbers. It plans to deliver 400 million packages for the holidays this year, a 12% increase from 2012. The recent agreement between the post office and e-commerce giant Amazon to deliver parcels on Sundays is a reflection of that growth – and one move U.S.P.S. could make without crawling to Congress.

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