The concept of regular mail delivery goes back to the ancient Persians who, according to Greek historian Herodotus, operated a pony-express-style courier system throughout the empire of Darius the Great circa 500 BC. The modern post office, however, comes from Rowland Hill.
In 1837 Hill, a British educator and social reformer, proposed a dramatic change in how the Royal Mail operated. Back then the cost of delivering a letter was paid for by the recipient and involved a complicated calculation based on weight and distance. This opaque system proved a lucrative source of income for the Crown and private competitors were forced out to protect the government’s monopoly. As a result of the high cost and complication, few Britons sent letters.
Hill’s scheme was to limit the government’s monopoly powers by requiring that letters be delivered anywhere in the United Kingdom for the same price – with next-day delivery for local mail. Further, the sender would pay for this via a stamp affixed to the front of the envelope. These reforms were adopted in 1840 with the appearance of the famous Penny Black stamp, and proved a tremendous success. The volume of mail doubled within a year, and doubled again a decade later. Hill’s concept of universal postal coverage at a single, low price was quickly adopted around the world, including in pre-Confederation Canada in 1851.
The result was a worldwide communications revolution that lasted well into the 21st century. Recall that up until very recently, every household bill arrived in an envelope with a little window on the front. Love letters were once a primary means of romantic engagement. And Christmas cards were as ubiquitous as icicles in wintertime. Throughout this era, mail was the lifeblood of the economy and any disruption to it threatened economic catastrophe. Due to the state’s monopoly on mail delivery, unionized postal workers in Canada and elsewhere used this lever to their maximum advantage – frequently going on strike to extort higher wages and better working conditions. But while this pushed up costs over time, the critical need to send and receive mail meant state-owned post offices such as Canada Post remained reliably profitable. As recently as 2014, the Crown Corporation earned a profit of nearly $200 million.
Today, however, the ubiquity of email, texts and online billing has robbed letter mail of its economy-shaking significance. Government-owned post offices around the world are now teetering on the verge of bankruptcy – with Canada Post being a prime example. The status quo is no longer sustainable. And the solution will require changes every bit as dramatic as Hill’s initial 1837 reforms. Except this time, it may be necessary to undo almost everything Hill advocated: from daily delivery and uniform pricing to a regulated government-owned monopoly.
Should Canada Post be privatized?
Some experts argue privatization is the best solution to Canada Post’s ongoing financial struggles. Economist Vincent Geloso suggests that privatizing Canada Post would make it more efficient and innovative. Such a move would also limit taxpayer liability. He points to Europe’s long track record of success with privatized post offices as proof. Critics worry about the impact privatization will have on Canada’s rural mail service, as well as potential union opposition.
“Never Coming Back”
“The first thing you have to understand about Canada’s postal service is that the volume of letter mail has declined by 65 percent since 2006,” says Ian Lee, a business professor at the Sprott School of Business at Carleton University in Ottawa. “And this trend is not going to change.” In 2006, Canada Post delivered 5.5 billion pieces of mail and made a profit of $148 million. Last year it delivered 2.3 billion pieces of mail and lost $748 million. Within a decade, Lee predicts in an interview, “Letters will essentially vanish, and with them Canada Post’s core business.”
Since 2018 Canada Post has reeled off six consecutive losses totalling $3 billion. And the situation keeps getting worse. When CUPW went on strike yet again this past November, it only served to reinforce the public’s perception that ‘snail mail’ had become irrelevant to their lives.
Simultaneous with the disappearance of letter mail has been a vast expansion in the parcel delivery business, driven by the growth of online shopping. Given its expertise in delivering things door-to-door, it might seem plausible that Canada Post could shift its focus from letters to parcels and chart a way back to profitability. Unfortunately, its reliance on expensive unionized labour means this is not possible.
Lee estimates that full-time employees who belong to the Canadian Union of Postal Workers (CUPW) make between $50 and $60 per hour. And they only work weekdays. Established private-sector courier companies such as UPS and FedEx pay around $40 to $50 per hour and offer greater flexibility. An even bigger threat is posed by private contractors, such as Intelcom, that rely on part-time gig workers earning between $20 and $30 per hour. Plus, these workers often drive their own vehicles and are available seven-days-a-week. Due to its high-cost, inflexible labour force, observes Lee, “Canada Post is massively, massively uncompetitive” in parcel delivery.
Caught between these two powerful trends – the disappearance of its core letter-delivery business and the proliferation of more competitive parcel-delivery services – Canada Post has become deeply unprofitable. Since 2018 it has reeled off six consecutive losses totalling $3 billion. And the situation keeps getting worse. When CUPW went on strike yet again this past November, it only served to reinforce the public’s perception that “snail mail” is now irrelevant to their lives. Many paper-bill holdouts finally switched to online billing and almost no-one sent Christmas cards, further dooming the letter-mail business. About all that’s left is pizza flyers.
As a self-financing Crown Corporation since 1981, Canada Post has so far paid for its growing deficits by drawing down its capital reserves and taking out loans, essentially burning though the remnants of its once-profitable self. But this can’t go on forever. Last year Canada Post executives warned Ottawa they were in danger of running out of cash sometime in 2025. Making good on that prediction, in January the federal government lent Canada Post $1 billion “to maintain its solvency and ensure it can continue operations.” With bankruptcy now a very real possibility, this billion-dollar loan ought to be regarded as the first step in a looming and massive taxpayer-funded bailout of Canada’s failing postal system. Here’s how to prevent that from happening.
An End to Door-to-Door Delivery
Lee has been studying Canada Post since he wrote his PhD dissertation on it in 1989. He says the solution to its financial crisis lies in radically changing the requirements of its job. Currently the federal Canadian Postal Service Charter (what is called a “Universal Service Obligation” in other countries) mandates that Canada Post provide five-day-a-week service to all 17 million Canadian residential and business addresses. For reasons of political expediency, the federal government has occasionally added additional requirements to the Charter, such as requiring that Canada Post maintain existing levels of door-to-door delivery and forbidding it from closing unprofitable rural post offices.
Lee figures all this has to change if Canada Post is to survive. In a 2024 report for the National Association of Major Mail Users, he proposed eliminating door-to-door delivery altogether, ending five-day-a-week service and closing all stand-alone post offices, which would be replaced by additional franchised outlets in grocery stores and pharmacies. By dramatically reducing the mail carrier’s service obligations, Lee figures his “major surgery” could reduce Canada Post’s headcount from the current 65,000 to around 15,000 workers, cutting its financial losses in sharp fashion.
Reforms of this sort are already happening around the world, reflecting the global collapse in letter mail. Last year, for example, Australia Post switched all its customers to alternate-day delivery, while Finland moved to three-days-a-week. Denmark recently abolished its Universal Service Obligation entirely, allowing the market to set its own standards for frequency and speed.
Despite this ample supply of precedent, imposing such reforms in Canada will be difficult, predicts Lee. “It’s going to take a legislated solution,” Lee observes, noting that if the federal government removes or modifies the Postal Charter, it will have to deal with a very angry and volatile CUPW. Rural residents are also likely to bristle at the loss of frequent mail delivery and local post offices, and take their own political action. “It’ll get ugly,” he warns.
Even with a substantial reduction in obligations and workforce, however, Lee isn’t convinced taxpayers can avoid subsidizing Canada Post. He figures political necessity and the interests of social cohesion will require maintaining an unprofitable level of service across small towns and remote areas. So even after major surgery, a state-owned Canada Post is still likely to need taxpayer assistance forever.
Freeing Taxpayers
If the overarching goal of postal reform is to completely remove the burden of Canada Post from taxpayers’ shoulders, then just reducing its service obligations will clearly not be sufficient. The only way to guarantee a future without perpetual public postal deficits is to get rid of it entirely – by selling it to the private sector.
Vincent Geloso is a professor of economics at George Mason University in Virginia, senior economist at the market-based Montreal Economic Institute and a vocal supporter of privatizing Canada Post. “There’s no particular reason why the government should be in charge of mail delivery,” Geloso says. “Canada Post has always been a political entity that takes from taxpayers.”
Public monopolies such as Canada Post inevitably deliver low-quality, expensive service, Geloso observes. Unions keep wages up due to the constant threat of strikes, which in turn pushes up the price of stamps. And as a Crown Corporation with a monopoly over letter mail, it is insulated from competitive forces. Further, its operations are ultimately backstopped by taxpayers, forestalling any drive for greater efficiency. “As consumers we end up paying high prices. And when this produces deficits, we are potentially on the hook for bailouts as well,” Geloso gripes. “We’re screwed either way.” The solution, he says, is a bracing round of “market liberalization and privatization.”
The crowning example for privatization is undoubtedly Germany’s highly-profitable and respected Deutsche Post…Not only does it deliver the mail quickly, efficiently and inexpensively, it makes a lot of money doing so.
Geloso advocates ending Canada Post’s exclusive rights over letter mail delivery and cancelling the entire Postal Charter, allowing private firms to compete in mail on whatever terms they choose. Following this Geloso would quickly sell Canada Post to eliminate the taxpayer’s unlimited liability. “Private competition in the postal business is really easy to achieve,” he insists. “You just need to look around the world.” For evidence on the benefits of privatization, he points to Europe’s long track record of privately-owned post offices.
How much has Canada Post lost in recent years?
Since 2018, Canada Post has lost a combined $3 billion due to a sharp decline in letter mail volume and its inability to compete in the parcel delivery market. To help it stay afloat, the federal government provided a $1.034 billion loan in January 2025.
Europe: A Privatization Proving Ground
In 2013 the European Union liberalized the postal sectors in all 27 member countries, opening it to private competition and encouraging the sale of state-owned post offices. Since then, many countries have experimented with various forms of competition and privatization, providing a rich array of evidence on what works and why.
The crowning example for privatization is undoubtedly Germany’s highly-profitable and respected Deutsche Post. Last year it tied for top spot in rankings by the Universal Postal Union, a UN agency that rates the performance of 174 global postal operators on measures such as cost, reliability and innovation. (Canada Post came 15th.) Not only does Deutsche Post deliver the mail quickly, efficiently and inexpensively, it makes a lot of money doing so. According to its most recent annual financial statements, DHL Group, which includes Deutsche Post and parcel carrier DHL, booked a net profit of €3.7 billion ($5.5 billion Canadian). Canada Post has never, ever had a year like that.
The secret to Deutsche Post’s success, says postal reform expert and lawyer Mateusz Chołodecki, is that it took action long before the current crisis hit. “In the 1990s they realized they wouldn’t be able to survive on letter mail alone,” says Chołodecki, a Visiting Fellow at the Centre for a Digital Society (CDS) at the European University Institute, in an interview from Florence, Italy. While still a state-owned operation then known as the Deutsche Bundespost, it began buying up parcel delivery companies such as DHL and overhauling its internal operations. Today, Chołodecki says, “Deutsche Post is the biggest postal/logistics operator in the world. They are successful, very efficient and fully private.”
Other notable European postal privatization efforts include Sweden (which took its post office private in 1984), Belgium, the Netherlands and Austria. Some countries, such as Italy, only partially privatized their postal business. Others are now contemplating the move in light of major financial crises. This broad range of experiences in Europe points to a variety of motivations behind privatization, says Anna Pisarkiewicz, a Research Fellow at the CDS. She observes that some countries have privatized to stave off bankruptcy, or to push inefficient operators into improving their administration and logistics. “You can also privatize a profitable company as a way of encouraging the public to own shares in these former government-owned firms, or to pay down public debt,” Pisarkiewicz says in an interview, pointing out that Italian prime minister Georgia Meloni is now planning to sell off part of the government’s remaining 30 percent share in Poste Italiano to reduce debt. “There is not one path to privatization,” adds her colleague Chołodecki.
Britain’s experience is often presented as a counter-argument to the many benefits of privatization. In 2013 the Royal Mail was sold in a successful public stock offering. Strangely, however, only the mail-delivery portion of the business was sold; the British government retained control over the physical post offices which provide other public services. Since then, critics have pointed to the Royal Mail’s poor delivery performance, financial losses and a hacking scandal as evidence that privatization is no panacea. A recent CBC report scolded Geloso for focusing on the success of Germany while ignoring Britain’s woes.
It is true that the privately-owned firm has struggled with regulatory requirements that it provide six-day-a-week service and deliver local first-class letters within one day. However, hugely-profitable Deutsche Post faces much lighter regulations; it is only required to deliver letters within three days, and recently scrapped other services, such as domestic air mail, that proved unprofitable. The real problem facing the privately-owned British mail system is that its operations are still tightly controlled by government fiat rather than market forces. And even so, in December Czech billionaire Daniel Kretinsky paid ₤4.5 billion ($6.7 billion Canadian) to buy the Royal Mail – what looks to be a strong vote of confidence in its profit-making potential. “Kretinsky obviously thinks he can be successful as a postal operator,” observes Chołodecki.
As for the overall European experience with privatization, Chołodecki’s research shows that after more than a decade’s worth of postal liberalization, “for most Europeans there has been no impact, nothing has changed” with their perception of overall mail service. Except, of course, that any losses are now the responsibility of shareholders rather than taxpayers.
Still, some proponents of postal reform remain dubious about outright privatization. Carleton’s Lee is one, arguing that evidence from Europe isn’t particularly relevant to Canada. European population densities are far higher than in North America, and the distances between major centres much smaller – two big factors in mail delivery profitability. While Lee acknowledges that selling off state-owned firms can be “a very important tool” to improve economic performance and reduce taxpayer burdens, he worries that a privatized Canada Post would fail remote areas of the country. “Rural customers are the only market left for letter mail,” Lee says. “The distances between them are simply too great to be profitable. But they still vote.” Looking ahead to the next federal election, he notes the preponderance of Conservative MPs representing rural ridings, and doubts they’ll have the nerve to shut down their local post offices if they win power.
The same geographic obstacles bedeviling Canada Post are also at work in the United States. Since 2007 the United States Postal Service (USPS) has lost a staggering US$100 billion due to falling letter mail volumes and stiff competition from private-sector parcel carriers. Last year alone it lost US$9.5 billion; this despite a $50 billion bailout from Congress in 2022 that covered USPS employees’ health care and pension benefits. What is different south of the border is that it appears U.S. president Donald Trump is prepared to stop the bleeding by privatizing the USPS. Last week, the Washington Post revealed that Trump plans to dismiss the entire USPS Board of Directors and absorb its administration into the Department of Commerce, in what the newspaper regards as a precursor to selling it.
Same problem, different solution: The United States Postal Service has lost US$100 billion since 2007 for reasons identical to those facing Canada Post. According to the Washington Post, however, U.S. President Donald Trump is planning dramatic action to fix the problem – possibly including privatization. (Source of photo: Dan Busey/The TimesDaily via AP)
Getting There
With postal privatization having proved its worth in Europe and gaining steam in North America, Geloso suggests the first step for Canada is figuring out how to overcome an obstreperous postal union. To get around CUPW opposition to selling Canada Post, he suggests letting it in on the ground floor by offering the first round of shares exclusively to union members. Not only would this make them partners in the concept, it would transform Canada Post into a far more efficient company. “All of a sudden, there would be an incentive [for CUPW workers] to improve productivity and profitability,” Geloso says. “Right now, they have no profit motive.”
‘We allow regional variation in prices for everything from food products to insurance,’ notes Geloso. ‘Why should a stamp be any different?’
After a year of employee ownership, Geloso would then put the rest of the company up for sale in a public offering. Staging the process over two years “should improve the odds of a successful privatization,” he says. To further improve the new, publicly traded for-profit company’s odds, he’s also prepared to abandon Hill’s nearly two-century-old notion of a single price for delivery anywhere in the country in favour of market-oriented pricing that varies by distance. “We allow regional variation in prices for everything from food products to insurance,” notes Geloso. (Not to mention parcel shipping.) “Why should a stamp be any different?”
Crucial to this staged yet rapid liberalization and privatization process is the unleashing of new competitive forces. “Markets allow us to figure things out,” Geloso says. For this reason, he’s unwilling to declare letter mail doomed. “Perhaps some people like door-to-door delivery so much they’re prepared to pay for it. Or maybe a parcel delivery company can figure out a way to deliver letter mail at the same time,” he says. But unless the door to innovation and competition is opened, he observes, it’s impossible to predict what might happen.
As for the thorny issue of maintaining uneconomic rural mail delivery, Geloso recommends finding other ways to assuage those voters. For example, mail services could be made exempt from GST, which would offer a modest subsidy to rural customers. Or the federal Northern Resident Tax Deduction could be increased to compensate for the higher costs a private firm might charge for mail delivery in remote areas. The goal should be to ameliorate the problem as cheaply as possible.
These same challenges face Trump’s putative plan to privatize USPS. Victor Glass is a professor at the Rutgers Business School in New Jersey and co-editor of the recent book The Economics of the Postal and Delivery Sector. In an interview, Glass agrees that privatizing state-owned post offices such as Canada Post or USPS makes a lot of sense. He echoes Geloso in observing that regulated monopolies are intrinsically ponderous and lack incentives to innovate. A privatized, more-nimble mail carrier could, he hopes, generate the sort of competitive instincts displayed in Europe. “I’m not convinced certain types of mail will disappear completely,” Glass says. “If postal services were more creative, they could probably stimulate new types of mail.”
What happens when Canada Post runs out of money?
As a self-financing Crown Corporation, Canada Post has so far covered it annual losses by drawing down on its capital reserves and taking out loans. But it is now running out of cash. When that happens, the federal government will be obligated to bail it out. That means those losses will become the responsibility of Canadian taxpayers.
Where Glass differs from Geloso is in how privatization should be implemented. Rather than shock therapy, he prefers an incremental approach based on the successful privatization of the telecom industry around the world in the 1980s and 1990s. The key here is the concept of a “reverse auction”, in which firms bid against each other to take on work for the lowest amount of government subsidy. Reverse auctions are a proven method for selling off money-losing government-owned or regulated enterprises – in this case, unprofitable rural mail delivery routes. When Denmark scrapped its universal service requirements for PostNord last year, it announced a system of explicit government subsidies to protect mail service to remote island communities as well as blind residents.
Reverse auctions could solve several problems to reforming the USPS, Glass observes. They would allow innovative private firms to enter the market and take on the biggest challenges in letter delivery while minimizing government assistance. And by removing its worst money-losing aspects, the USPS might eventually regain profitability ahead of privatization. Admitting that “the political obstacles are huge” for postal privatization in both the U.S. and Canada, Glass figures this gradual approach offers the best chance for success. But whether fast or slow, privatization is the only way to permanently insulate taxpayers from enormous postal deficits in the future.
Staving off Catastrophe
The federal Liberals’ $1 billion lifeline for Canada Post in January came with a catch. “This cash injection will ensure the continuity of Canada Post operations, however, it is clear that the corporation must be put on a path to viability,” the press release from Public Service and Procurement Canada stated. Unfortunately, it made no mention of what that path should look like, or who would lead the way.
The idea that salvation lies in turning CUPW’s 65,000 mail carriers into bankers is ‘preposterous’, quips Lee. ‘If you can’t make money at your core business, how are you going to be successful in an entirely new business line?’
Having seen its earlier cost-cutting efforts aimed at closing rural post offices and ending door-to-door delivery stymied by the Liberal government, Canada Post has recently pivoted to the absurd notion that it can diversify its way to solvency. It has tried to get into the digital identification business with a new “Identity+” app. The federal Liberal party is using this app to verify voters in its ongoing leadership contest, with notably disappointing results. Canada Post also has plans to provide chequing and savings accounts in conjunction with online bank Koho Financial. This is its second attempt at getting into postal banking; a similar joint offering with TD Bank in 2022 was shuttered after just a few weeks. The idea that salvation lies in turning CUPW’s 65,000 mail carriers into bankers is “preposterous”, quips Lee. “If you can’t make money at your core business, how are you going to be successful in an entirely new business line?”
Time to get busy: While the federal government says Canada Post must be “put on a path to viability,” Ottawa has so far failed to demonstrate any leadership on how that should happen. Shown, the 1937 mural Transportation of Mail, by Alfredo de Giorgio Crimi, illustrating the many modes of moving the mail back when it was still a vital part of the economy. (Source of image: Carol M. Highsmith/Library of Congress P&P)
Equally concerning is the absence of leadership from a flailing and moribund Justin Trudeau government. Beside preventing Canada Post from trimming its expenses on door-to-door delivery and rural post offices, it has shown no interest in fixing the underlying problems. Consider the federal response to the recent CUPW strike. Rather than allowing the two sides to come to a negotiated settlement that might have set the stage for necessary changes to Canada Post’s headcount or business model, the government instead waited a month before ordering CUPW back to work. The two sides were then instructed to keep talking until May – but with no real incentive to come to an agreement. With a federal election expected within the next few months, it seems likely this issue will be punted down the road for as long as possible. Meanwhile, Canada Post careens towards bankruptcy.
The secular collapse in Canada Post’s core business of delivering letter mail, exacerbated by an expensive and inflexible labour force and unrealistic service obligations is now producing a steady stream of unsustainable deficits. Unless decisive action is taken, the Crown Corporation risks becoming a permanent ward of the state, sucking up valuable taxpayer resources while providing services that ever-fewer Canadians want or are prepared to pay for. And the only realistic solution is an immediate and permanent change to the very concept of Canada Post. Given the experience in Europe and elsewhere, the surest “path to viability” lies in letting the market take over. This means removing the obligations of the federal Postal Charter and harnessing the innovation and creativity of the private sector.
It’s time to sell Canada Post. The cheque is no longer in the mail.
Peter Shawn Taylor is senior features editor at C2C Journal. He lives in Waterloo, Ontario.
Source of main image: The Canadian Press/Spencer Colby.
