Dr. Ian Lee on the near future of Canada Post

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How will Canada Post survive the post-letter era? Dr. Ian Lee took a deep look at the challenges and offers solutions.

Ian Lee is Associate Professor at Carleton University’s Sprott School of Business. He published a critique on the future of the Canada Post Corporation entitled, Is the Cheque Still in the Mail? The Internet, E-Commerce, and the future of Canada Post Corporation.

It is a must-read for anyone interested in the business of Canada Post. Canada Post is a Crown corporation under the auspices of the Canadian Government. Because it is a Government entity and has no accountability to shareholders, this corporation has been severely understudied about its business decisions over the last decade.

Dr. Lee is one of the few who has taken considerable time and energy parsing through Canada Post’s financial statements and giving a thorough critique.

His background, education and experience give significant credence to his conclusions. Early on his career, he worked at Canada Post’s head office, corporate finance and banking, from 1982 to 1984. His PhD thesis was on the origins, growth and decline of the Canada Post.[1]

The article published by Dr. Lee along with his interview by Geoff Currier on a Winnipeg radio station, CJOB, outlines a position that Canada Post is dying and needs to be resurrected as a parcel delivery service. He clearly demonstrates the demise of the traditional Post Office and how some necessary adjustments must be made for its immediate survival, but he doesn’t delve any further into the long-term.

I predict within ten years by 2025 there will be no letters mailed in Canada. They will be as obsolete as 78 playing records or 33 and a third, or 8 track cassettes, or disco music.[2]

He highlighted nine recommendations that change the nature and definition of Canada Post.

  • Not to privatize Canada Post
  • Eliminate the Postal Monopoly or exclusive privilege to deliver letters
  • Replace all door-to-door mail delivery with community mailboxes
  • Reduce daily delivery to residential (not business) customers
  • Franchise all corporately-owned Post Offices
  • Consolidate Processing facilities
  • Implement the Canada rural broadband strategy by 2020
  • Deregulate CPC post pricing of letter mail
  • Revise the Canadian Postal Service Charter and the Universal Service Obligation[3]

When it comes to statistics and financial analysis, he carefully substantiates every point. He sets a new standard in the Canada Post debate.

Dr. Lee ordered “Not to privatize Canada Post” first because he wanted to be emphatic about this point. However, this is confusing. He believes his recommendations will lead to reforms in the letter mail service that will allow for privatization of the parcel service. Is he promoting Canada Post being a Crown corporation for the now, and then when Canada Post successfully transforms to a parcel delivery company then privatize? This point needs further clarification.

Neither does he answer the question on the survival rate of going private. Canada Post has a meagre infrastructure and does not have the capital to compete with the likes of UPS. Nor does he refer to the current talks between Canada and other countries discussing the Trans Pacific Partnership deal — an agreement which would require Canada Post to privatize.

He also omitted a serious failure by Canada Post’s management team that cost the company billions of dollars. Canada Post embarked on the transformation in 2008 with the idea of it being entirely self-funded without any debt. However, they were not prepared for the recession and this put them into a serious financial hole — one that they never have recovered from. If Canada Post was a publicly traded company at that time, they would have been close to if not in bankruptcy. Shareholders would have ousted the chairman, board and president. Instead, the blame has shifted to labour costs being too high. In other words, there is no admission to mismanagement. The problem has successfully been placed on employees instead.[4]

As a specialist in the financial sector, he believes that postal banking is not an option for Canada Post. The complexity of banking has increased significantly over the years and Canada Post does not have the ability to cross-over into this realm. Nor do present employees have the necessary transferable skills. The CUPW plan would also be cost-prohibitive:

I will be very blunt with you, I think it is preposterous. Before I worked at Canada Post and I went back to school for my PhD I worked ten years at banking, Bank of Montreal, I was in management lending money. Anybody who knows anything about banking knows that in the last 15, 20, 25 years banking has become very sophisticated. You have to be quite educated to get into a bank. My students are going in there now. You know Bcomms and finance and that sort of thing. More importantly banking is very capital intensive. The CBA, the Canadian Bankers Association, reports that the banks in Canada spends 2 billion a year, to upgrade their hardware, their software, their programmers to guard against fraud and people trying to hack in, and of course the high-speed digital communications. The idea that CUPW, and I am not putting them down, they are good people, but the idea that they could become bankers and that the Government going to spend billions of dollars to wire up all the branches across Canada of the Post Office to turn it into a bank. And the one final point on why it is such a silly idea, banks, deposit to a bank are a cost. You have to pay the depositors money. You have to pay them interest on their accounts and then you the bank, turn-around and make money by lending it out on mortgages. If CUPW is suggesting that they are going to be turned into mortgage lenders, and consumer lenders and credit card lenders, and if they say of course not, well what they are proposing is taking money in on deposit that becomes an expense to Canada Post because they gotta pay interest to the person who has the deposit. Where’s the revenue coming in to cover off the expense of paying interest on the deposit? So it doesn’t make any sense whatsoever.[5]

Footnotes

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