This article originally appeared in National Newswatch.
By Ian Lee and Peter Copeland, December 19, 2024
Changing Canada Post wouldn’t need to be about dismantling one of Canada’s oldest institutions but about revitalizing it and enabling it to meet the demands of a rapidly evolving economy. Labour disruptions like the current strike are not isolated events but symptoms of a systemic issue threatening the relevance of Canada Post in the digital age.
National postal services like Canada Post provide undeniable benefits: they ensure universal access to mail delivery, and a lifeline for rural and remote communities. These advantages should be preserved. However, Canada Post must adapt to the pressures of a market dominated by e-commerce, digital communication, and gig economy delivery services.
Canada Post’s reliance on letter mail (the volume of which has declined 70% since 2006) coupled with an inability to compete effectively in the parcel delivery market, underscores the fragility of its current model. Letter mail is on track to disappear in 5-7 years. At present, the entire post office operating model, with its network of corporate-owned post offices, is designed for a vanishing reality.
While private-sector competitors like Amazon, UPS, and FedEx excel by embracing technology and agile logistics, Canada Post is burdened by an outdated cost structure, restrictive labour agreements, and an inflexible universal service obligation (USO).
All this begs the question: how should Canada Post reform to ensure it to serves Canadians effectively and can compete in today’s market?
1. Eliminate the Universal Service Obligation (USO)
The Universal Service Obligation (USO) — delivering mail to 17 million addresses five days a week, 52 weeks a year — is no longer sustainable. With letter mail volumes collapsing at unprecedented rates, and projected to disappear entirely under current trends, the USO has become a costly relic of the past. Canada Post’s existing structure, reliant on 5.5 billion pieces of mail annually to remain viable, is unsustainable with current volumes of just 2 billion.
The solution is to eliminate the outdated USO mandate and adopt a parcel-driven delivery model. Under this model, Canada Post would only deliver mail when there is mail to deliver, aligning operations with the realities of demand. This would replace the outdated daily letter delivery system with a streamlined, demand-based approach that prioritizes parcels, which continue to grow in volume.
2. Reinvent Delivery with Franchising and Centralization
The traditional model of delivering to 17 million addresses five days a week is unsustainable. A shift to community post office franchises—modeled after retail pharmacies or corner stores— coupled with an elimination of door-to-door delivery represents a viable path forward.
Door-to-door delivery costs Canada Post approximately $800 million annually and is no longer justifiable in an era of collapsing letter mail volumes. A complete transition to centralized delivery through community post office franchises eliminates this expense while addressing logistical challenges like last-mile delivery costs and porch theft.
This model will result in cost savings from a reduction in fixed operational costs associated with Canada Post-owned offices, and it will enhance accessibility, as franchised outlets can expand into more locations, modelling the convenience and ubiquity of retail stores. This approach will aligns post offices with the reality of reduced demand, while allowing them to effectively serve urban rural and remote communities at a much lower cost.
3. Downsizing and Structural Reform
Canada Post as it currently exists, with approximately 65,000 employees, cannot survive the decline in letter volumes. Radical restructuring is necessary to create a leaner, more efficient organization that reflects the realities of a parcel-dominated market. Downsizing the workforce aligns with a restructured business model focused on parcel delivery. Operational shifts to franchised post offices and centralized delivery eliminate the need for large-scale infrastructure and costly daily delivery routes. Canada Post would transition into a Canada Courier model — a smaller, streamlined operation delivering mostly parcels, which represent the future of postal services.
The Canada Post strike should be a catalyst for transformation. Failure to act decisively will render Canada Post increasingly irrelevant. Labour disputes, financial instability, and declining market share are not sustainable. Without reform, Canada Post risks losing its place as a cornerstone of Canadian infrastructure, leaving private companies to fill the void on less equitable terms. As letter mail is on track to disappear in 5-7 years, clinging to outdated obligations like the USO and door-to-door delivery will only accelerate its decline. The priority must be to eliminate the USO, franchise all post offices, and end costly door-to-door delivery. Canadians deserve a postal service that adapts to their needs while preserving its foundational values of accessibility and service. Bold leadership and visionary reform can ensure Canada Post thrives in the 21st century, securing its legacy for generations to come.
Ian Lee is an associate professor at Carleton University’s Sprott School of Business.
Peter Copeland is Deputy Director of Domestic Policy at the Macdonald-Laurier Institute.
