Privatization and deregulation of post offices: The global context — The domestic context

The postal world has changed quite a bit since 1992 when Harvie Andre, the former minister responsible for Canada Post, said, “If I had to bet, I would bet in the next couple of decades, you will see post offices being privatized all over the world and I would not mind seeing Canada first.” Since this time, a few post offices have been privatized, but not Canada Post. Today, the main trend is towards deregulation.

 

Deregulation

Post office competitors are pressing governments to deregulate post offices, that is, reduce or eliminate the monopoly on certain types of mail. Mostly, they want the lucrative letter market opened to competition. Many postal observers believe deregulation will lead to a downward spiral for public post offices, as private sector competitors focus on profitable areas and services, leaving the unprofitable parts to public post offices.

 

Why a monopoly?

The monopoly provides a post office with a guaranteed source of revenue which allows it to deliver mail to everyone, no matter where they live in a country, at affordable rates. That is, it allows a post office to use the money it makes in high-density areas to provide service in non-profitable low-density areas (i.e. cross subsidize). Canada Post has a monopoly or exclusive privilege to deliver letters.

A number of countries have already fully deregulated their post offices. For example, New Zealand, Sweden, Finland, Argentina, Columbia, Estonia, Peru, Russia and the United Kingdom have deregulated.

The European Union (EU) is heading towards full deregulation. It has a postal directive that sets common rules, including a limit on postal monopolies. The limit has been reduced in stages since 1997. At the moment, the directive allows universal service providers in each country to have a monopoly on letters weighing less than 50 grams or costing less than two-and-a-half times the price of a standard letter.

Originally, the postal directive called for the elimination of postal monopolies as of 2009. In response to union protests and concerns raised by many postal administrations, the Transport Committee of the European Parliament has recommended that the deadline for full competition in postal services be extended to 2011, and that some new member states and countries with difficult terrain be given until the end of 2012. The full Parliament will vote on this matter in July.

Union Network International (UNI), the global union federation for postal unions like CUPW, is opposed to the Committee's recommendation because it leads to full deregulation. “But we have the support of many operators and governments and — we believe — the European public, who want to keep affordable postal services for all,” said UNI. “We shall continue the fight.”

 

A few facts

What would full competition mean?

Only a few countries have had any long-term experience with postal deregulation. Sweden abolished its letter monopoly in 1993. Finland followed in 1994 and New Zealand (NZ) in 1998. There has been little in the way of competition in Finland because new entrants are required to make a very high contribution to a universal service fund if they operate in lucrative, high-density areas. This leaves Sweden and NZ as the main examples of postal deregulation.

Sweden: Between 1993 and 2005, Sweden Post eliminated more than 16,000 jobs, while the competition created only 2000 jobs. The proportion of full-time jobs declined from 79 per cent in 1994 to 72 per cent in 2005. Postal workers have not fared well in other ways. Absenteeism is high. Recent figures for the number of sick days per year per employee follow: 33.3 (2001) 35 (2002) 33.5 (2003) 32.1 (2004), 29.6 (2005).

Since deregulation, the postage rate for large volume business mailers has declined considerably while the rate for small business and the public has increased enormously. In the ten years following deregulation, the price of the popular domestic overnight 20 gram letter increased by 90 per cent, far outstripping the accumulated inflation rate of 14 per cent (Note: a third of this increase was due to the imposition of a value-added tax on postal services.) Postage rate increases for other products were even higher.

New Zealand: Postal workers have suffered a dramatic decline in wage levels. Between 1997 and 2005, postal workers' pay rates increased by 18.9 per cent whereas average wages in NZ increased by 28.3 per cent. Wages are significantly below the average industrial wage.

Standard postage rates have remained stable, in large measure due to a “Deed of Understanding” between the government and NZ Post. It is important to note that developments at NZ Post and Sweden Post could have occurred in the absence of deregulation. Other factors, such as commercialization, may have contributed.

A CUPW paper called Postal Deregulation: Its Impact on Postal Workers and the Response of a Postal Union contains additional information, plus ten reasons to oppose deregulation of postal services. To obtain a copy, write to CUPW National Office (377 Bank Street, Ottawa, Ontario, K2P 1Y3) or go to the union's website: http://publicpostoffice.ca/index.cfm/ci_id/8965/la_id/1.htm

United Kingdom: The UK, which fully deregulated its post office in 2006, is in the midst of massive upheaval. Operating profits are plummeting. The government is in the process of implementing a restructuring plan that includes closing 2,500 post offices. Additional service cuts are expected.

Royal Mail says competitors already handle about 25 per cent of the bulk mail business. It faces increasing pressure from competition in many areas. For example, rival TNT has complained that the UK post office charges too much for delivering letters on the final mile. Competitors do not yet have national networks and rely on the post office for the final mile of delivery. Postcomm, the postal industry regulator, is examining this issue.

Royal Mail has warned that intensifying competition and falling mail volumes are putting pressure on its ability to continue to provide a one-price-goes-anywhere service for every customer. It says higher prices for stamped letters are inevitable and universal service is at risk.

Pay and jobs are also at risk. In April, the Communications Workers Union (CWU) in the UK announced that members would vote on striking over Royal Mail's offer of a pay freeze and measures that threaten jobs. Royal Mail subsequently moved away from its demand for a pay freeze, with an offer of a 2.5 per cent increase. It claims the union does not understand new commercial realities, such as the difficulty of competing when employees are paid 25 per cent more than people employed by rival postal companies. CWU is demanding a pay increase in line with inflation and fears modernization will mean the loss of 40,000 jobs. Members voted strongly in favour of striking if necessary in June and are conducting strike actions at press time.

 

What if Canada Post were deregulated?

It is difficult to assess the impact deregulation might have here because of differing conditions (e.g. geography, labour law, access to mail boxes, etc.). Nevertheless, it is possible to look at the situation in Sweden and NZ and see there are differences between these countries and Canada with respect to the ability of competitors to enter the market and erode postal workers' wages based on a cheap labour strategy.

For instance, Sweden has strong labour laws that protect workers’ rights. Competitors cannot compete using cheap wages because the postal sector, including new entrants, is almost entirely unionized. The postal union in Sweden has negotiated a wage-benefit package for employees of new entrants that is roughly equal to that enjoyed by employees in the post office. Consequently, it is difficult for private companies to compete with Sweden Post by opposing unions or dramatically cutting labour costs.

In New Zealand, postal workers have wages that are significantly below the average industrial wage, and not that different than the wages of new entrants.

CUPW members in the urban operations bargaining unit, on the other hand, earn close to the average industrial wage. Employees of competitors earn less if they work for major competitors such as UPS, Purolator and Federal Express and dramatically less if they work in the same-day courier industry. There is every reason to believe that, if Canada Post were deregulated, new entrants would be able to use cheap wages to compete for a significant portion of the postal market and that this would put a great deal of pressure on the wages and benefits of CUPW members.

 

Privatization

Only a few countries have privatized their post office. Governments arguably lose a great deal by privatizing. They lose regular payments to national coffers if post offices are profitable (as opposed to receiving one-time profits from privatizing). But mostly, they risk being politically unpopular with the public, especially people living in rural areas. Rural residents stand to lose affordable service, or service altogether, in a privatized postal system geared to profit.

As a rule, post office competitors are not interested in privatization either. They don't want a big private post office competing with them. Of course, some of them would like to buy up the lucrative parts of a post office, just not the money-losing but socially valuable services such as rural post offices and delivery.

 

An overview

The majority of Deutsche Post shares have been sold, which means the German government no longer has a controlling interest in its postal service. Germany privatized early in an effort to prepare itself for competition in the common market of the European Union. It also established a presence in foreign markets by buying up foreign parcel delivery companies, courier services and direct mailers. Postal observers believe Deutsche Post will end up being one of a handful of post offices dominating the market in Europe and perhaps the world.

The post office in the Netherlands has been largely privatized. Post offices in other countries, such as Denmark, Belgium and Malaysia, have been privatized to varying degrees.

Argentina was privatized but is now back in state hands. Columbia's and Guatemala's repressive governments used force, intimidation and union-busting to privatize their postal services.

Japan Post is in the midst of being privatized. In 2005, Japan's parliament passed a package of bills to privatize its postal service. Japan Post is being split into four sections — postal savings, postal insurance, mail delivery, and over-the-counter services — and privatized over a ten-year period. This privatization has more to do with banking than postal service. Japan Post had the world's largest savings bank.

 

The United States

The United States government is not looking to privatize or deregulate its post office, but has recently reformed its postal service. In December, it passed a law called the Postal Accountability and Enhancement Act of 2006. The act, which is the first substantive overhaul of the post office since 1970, provides the US Postal Service with increased financial and structural flexibility. US postal unions waged a ten-year campaign to ensure that reforms maintain a publicly-owned postal system with universal postal service.

This legislative victory has been marred by recent moves to contract out postal processing work and city letter carrier jobs in new areas.

 

Here at home

Canada Post's competition and right-wing forces have been chasing their dream of taking down the post office since the Conservatives were elected. International mailers have been lobbying members of Parliament to partially deregulate Canada Post (i.e. remove international letters from Canada Post's exclusive privilege to deliver letters). It looks like the federal government may be considering this move. In addition, the think-tank, the CD Howe Institute, is calling for a "rethink" of the role and mandate of Canada Post, including privatization and gradual deregulation. Lawrence Cannon, the federal minister responsible for Canada Post, told a parliamentary committee, in May, he is considering doing a review of the corporation for the first time in 11 years. The last review, the Canada Post Mandate Review, looked at fundamental issues such as whether the post office should provide all services and retain its exclusive privilege.

“The good news is Harvie Andre was wrong. Canada Post wasn't privatized first or even second, thanks to the union's work with the public, municipalities and groups,” said CUPW National President Deborah Bourque. “The bad news is it looks like the current government is getting ready to partially deregulate our post office, which could open the door to further deregulation. Also, there are forces, possibly within Canada Post, that favour privatization.”

“We need to start talking about what we are likely to face and what we should do,” said Bourque. “To begin, we need to ask members of Parliament where they stand on the international remailer issue, as well as privatization and deregulation of our public post office.”

You can get a leaflet which explains how to find your MP and what you should say to your MP from your local or the union's website:

http://www.publicpostoffice.ca and go to Take action.