The UK, Belgium and Germany have done it. Should Canada also privatize its postal service?

The solution to Canada Post’s financial problems and bleak future, according to one observer, is just two words: Sell it.

“I’m not sure you can make any changes,” said Vincent Geloso, an assistant professor of economics at George Mason University in Fairfax, Va.

“The best thing you can do is make them think it’s not bad. That’s really the case. There’s no way around that,” Geloso, who is also a senior fellow at the Fraser Institute, told CBC News.

“It’s better if we go the way of selling it.”

Canada Post’s recent labor dispute has renewed focus on what changes may need to be made to adapt to the future. Proposals include irregular mail delivery, limiting home delivery and strengthening its parcel business.

But others argue that more drastic measures are needed, such as selling or privatizing the Crown corporation.

Even before the month-long strike by more than 55,000 postal workers, the national postal service was under heavy scrutiny for its dire financial situation. Back in May, Canada Post said it could run out of cash in less than a year.

However, taxpayers are not on the losing end; Canada Post is funded by the sale of postal products and services. However, it has been losing money since 2018. In the past six years, its losses have reached $3 billion, including $748 million in 2023.

The agency blamed this on a drop in revenue from letter and parcel delivery, despite an increase in package delivery rates. Meanwhile, the cost of delivering mail and parcels is increasing.

Canada Post also struggled to compete with private delivery companies.

Any other company — facing such losses and declining demand — will be forced to innovate and cut costs, or be bought out or liquidated, Geloso said in a recent Globe and Mail article.

Because of its dominance of a large portion of the book market, Canada Post “lacks this incentive,” he writes, and “can simply pass the burden on to consumers by raising prices.”

Instead, he says the federal government should look at how other European countries have reformed their postal services.

Eliminate postage

For example, the European Commission, which is responsible for proposing and monitoring new EU laws and policies, he said in 2013 the delivery of all books, regardless of weight, was open to competition. (In Canada, only Canada Post can deliver letters.)

Such open competition would eliminate monopolies and do more to control costs, Geloso said.

But, he says, Ottawa can go further by following the lead of Belgium, the Netherlands and Germany that have established their own private postal services.

Because of competitive pressure, those national postal services are focusing on controlling their costs, he says, the kind of focus “Canada Post won’t have as long as it’s a Crown corporation.”

Geloso, however, is not talking about the UK’s Royal Mail, which was founded in 2013 and has struggled to adapt as the number of people using it continues to drop dramatically. (Earlier this week, the UK government approved the sale of Royal Mail’s parent company to a Czech billionaire.)

Despite being privatized, Royal Mail loses millions of dollars a year and is repeatedly fined by the UK regulator Ofcom for failing to meet its delivery targets.

That shortfall is related to the British government requiring Royal Mail to deliver to more than 30 million UK buildings, six days a week, said Paul Simmonds, a former assistant professor at Warwick Business School.

“This requirement… has long been a huge and expensive thorn in Royal Mail’s side,” Simmonds wrote last year on The Conversation website.

Marvin Ryder, an associate professor at the DeGroote School of Business at McMaster University in Hamilton, says the privatization of the postal service brings in legislation and a watchdog group to make sure “your job as a country is still being done by the post office.”

Regulations and the backlog of orders from that group have a big impact on profits, which means these private postal services make less money, he said.

WATCH | What is the future of Canada Post?

Should Canada Post be privatized?

Publicly funded mail delivery systems have been privatized in some countries, including the UK and Germany. Although Canada Post is a Crown corporation, it is not funded by taxpayers and is expected to stay in business through the sale of its services, although it is required by law to deliver to all addresses in Canada. But is it time to make it a secret? Marvin Ryder, associate professor of marketing at McMaster University, spoke to CBC News about this prospect.

“Even though these kinds of things are being tried, it’s not at all clear to me that there is one example that really stands out,” said Ryder.

Ian Lee, an associate professor at Carleton University in Ottawa, who wrote his PhD thesis on the future of Canada Post., he says it is difficult to compare Canada with European countries because of the high population density.

“That changes the economy… that changes everything,” he said. “And that’s why using European models doesn’t work. It doesn’t work because they have incredible density.”

“[Those] analogies are invalid because the cost structure of Europe is very different due to its density. “

The privatization of Canada Post is certainly happening but raises questions, including who would want to buy it, Ryder said; the private sector has so far only shown interest in delivering parcels – not books.

“So if you want to sell it lock, stock and barrel, who wants to come in and do the rest?”