No. H 105/08
For release - April 21, 2008
OTTAWA — The Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities, and Minister responsible for Canada Post, today announced that the Government of Canada will conduct a strategic review of the Canada Post Corporation that will be guided by established terms of reference.
"We are conducting a strategic review of Canada Post to make sure this public institution has the right tools and means to fulfil its mandate in the future," said Minister Cannon. "This review is being conducted with the full understanding that Canada Post will remain a Crown corporation. In the changing business context and with new challenges ahead, we want to act now to make sure it continues to fulfil its mandate: delivering essential, universal services every day to Canadians, while remaining financially self-sustaining."
The review will focus on four major areas: market and competition; public policy objectives and responsibilities; commercial activities; and financial and performance targets. A review of Canada Post has not been conducted since 1995.
The review will be led by an external, independent advisory panel composed of three members. "I am very pleased that Dr. Robert Campbell has agreed to chair the panel and that Mrs. Nicole Beaudoin and Mr. Daniel H. Bader will support him as panel members on this important review," said Minister Cannon. "I look forward to their report and recommendations, which are due to me in December 2008."
The panel will be guided by the following four principles:
- Canada Post will not be privatized and will remain a Crown corporation;
- Canada Post must maintain a universal, effective and economically viable postal service;
- Canada Post will continue to act as an instrument of public policy through the provision of postal services to Canadians; and
- Canada Post will continue to operate in a commercial environment and is expected to attain a realistic rate of return on equity.
"The review will be conducted with all Canadians in mind," said Minister Cannon. "To this end, I have asked the advisory panel to consult with interested parties, including key stakeholders such as the unions. The Government of Canada wants a modern Canada Post for the future. We value the work of its dedicated workforce of over 70,000 employees."
Canadians are encouraged to provide written submissions to the panel by mail or e-mail, or through the following website: www.cpcstrategicreview.gc.ca.
A backgrounder with biographies of advisory panel members, a backgrounder on the Canada Post Corporation and the Government of Canada, and the review's terms of reference are attached.
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CANADA POST CORPORATION AND THE GOVERNMENT OF CANADA
Canada Post was created as a Crown corporation in 1981 as the successor to the Post Office Department of Canada. Canada Post's mandate is to provide affordable, universal postal service to Canadians on a financially self-sustaining basis. The corporation contributes to Canadian society and to Canada's economy as an enabler of business activity. It fulfils these roles by providing Canadians with the tools to communicate, transact business and interact with governments in a timely, accessible and affordable manner.
During the past several years, the pace of change in information technology, such as e-mail and the Internet, combined with globalization, have greatly accelerated and impacted Canada Post. Additionally, the number of addresses in Canada has continued to increase every year as traditional mail volumes have dropped, causing letter carriers to deliver fewer pieces of lettermail to more addresses.
Although the Corporation is doing well financially, it is facing new challenges in all aspects of its business. The government believes that Canada Post should remain a Crown Corporation to ensure it is well positioned to meet its public policy obligations while providing the best value for Canadians.
Canada Post offers a variety of traditional and innovative services to connect Canadians. It is an important public institution, with a dedicated workforce of over 70,000 employees. It processes over 11 billion pieces of mail per year and maintains a network of 6,600 post offices in urban, rural and remote locations across Canada. The corporation has been profitable for the past 12 consecutive years and has paid more than $400 million in dividends to the Government of Canada since 1998.
Under its mandate, Canada Post is required to be financially self-sufficient while at the same time providing an affordable, universal service to all Canadians, no matter where they live. Over the years, the Government of Canada has increasingly looked to Canada Post to contribute to public policy objectives beyond the provision of affordable, universal postal service. For example, in 1994 it placed a moratorium on the closure of rural post offices. More recently, the government has taken action on other key postal matters. In December 2006, the government issued two directives to Canada Post. The first required Canada Post to develop and implement an operational plan to restore and maintain mail delivery to rural roadside mailboxes. The second directed the corporation to continue funding the Publications Assistance Program for up to two more years.
Progress has been made on both fronts. Since the directive on rural mail was issued, Canada Post has successfully maintained over 70 per cent of the rural mailboxes at the end of Canadian laneways. Changes to rural mail delivery were made only as a last resort; in every possible situation, rural mail delivery has been and will be maintained.
The Publications Assistance Program provides support to the Canadian publishing industry and is run by Canadian Heritage. Canada Post was to end its financing of this program in early 2007. The additional two years of funding by Canada Post allow Canadian Heritage to establish next steps for the program. Consultations are currently being conducted by Canadian Heritage on the redesign of this program.
In October 2007, the government tabled legislation to amend the Canada Post Corporation Act. The purpose of this bill is to modify the exclusive privilege of the Canada Post Corporation and to permit letter exporters (remailers) to collect letters in Canada for transmittal and delivery outside Canada. Canada Post will continue to have the exclusive privilege for domestic mail throughout Canada. While it is true that Canada Post could see a decline in revenue of more than one per cent associated with the opening up of the international outbound mail market, the bill should not have a significant effect on revenues and operations. Therefore, no job losses, decrease in service or post office closures are expected in the event this bill is passed into law.
For more information on Canada Post, please visit the following website: www.canadapost.ca/corporate/about/annual_report/index-e.html
April 2008
INDEPENDENT ADVISORY PANEL MEMBER BIOGRAPHIES
Dr. Robert Campbell graduated from Trent University in 1974, from the University of Toronto in 1976 and from the London School of Economics, where he received his PhD, in 1980. He taught at Trent University between 1980 and 2000, after which he became Wilfred Laurier University's first dean of arts. His areas of research, teaching and specialization include Canadian politics, political economy and comparative public policy. He has also been active in Canadian studies and has served in several senior administrative positions at Trent University, including provost and dean of arts and science, and then vice-president academic. Since 2006, he has been president and vice-chancellor of Mount Allison University. Dr. Campbell has published numerous books - including two on postal politics - monographs, articles and studies. He has also served as a consultant on various studies, such as the future of the American postal system (Pitney Bowes); legislative reform of the U.S. Postal Act for various American postal unions; and, for the Government of Canada, related to the United Parcel Service's NAFTA challenge.
Mrs. Nicole Beaudoin received her bachelor of arts degree from the Université de Montréal in 1960 and her chartered accountant's degree in administration from McGill University in 1974. She subsequently received a bachelor of applied arts in public accounting in 1978 and her master's of business administration in finance in 1985, both from HEC Montreal. She is currently the president and CEO of the Quebec Business Women's Network Inc. and of the Women's Entrepreneurial Centre of Quebec. Mrs. Beaudoin has held several other high-level executive positions, including vice-president of finance at Shirtmate (Canada) Inc., VIA Rail Canada, Papiers Perkins Ltée and she was general manager of Scott Paper Limited's eastern division. She also sat on the board of directors of numerous organizations, including the HEC Montreal Alumni Association, the Canadian Race Relations Foundation and the Fondation de l'entrepreneurship. She is a fellow of the Order of Chartered Accountants of Quebec and of the Canadian Institute of Chartered Accountants. In 2006, she was named Officer of the Ordre national du Québec, as well as one of Canada's Most Powerful Women, Top 100TM, Champions category. In 2007, when honoured at HEC's 100th anniversary, Mrs. Beaudoin received an honorary doctorate from the Université de Montréal.
Mr. Daniel H. Bader graduated with a bachelor of science in civil engineering from the University of Saskatchewan in 1973 and with a master of science in civil engineering from the University of Waterloo in 1979. He also attended the Banff School of Advanced Management in 1988 and undertook the director's education program at the University of Alberta in 2007. He joined the Government of Alberta in 1979 and served in a variety of positions, including assistant deputy minister for three different divisions with Alberta Public Works, Supply and Services: Property Management, Reservoir Development, and Technical Resources and Property Development. Subsequently, he became deputy minister of Alberta Innovation and Science, and of Alberta Municipal Affairs. He was later appointed corporate chief information officer for the Government of Alberta.
April 2008
STRATEGIC REVIEW OF CANADA POST CORPORATION TERMS OF REFERENCE
I. Background
Canada Post is mandated to provide affordable, universal postal service to Canadians. It contributes to Canada's social cohesion and economic prosperity objectives by giving Canadians the capacity to keep in touch and do business with each other and their governments in a timely, accessible and inexpensive manner.
Canada Post was created as a Crown corporation in 1981 as the successor to the Post Office Department of Canada. Since that time there have been two significant mandate reviews of Canada Post; the first in 1985 and the second in 1995.
In response to the 1995 review, the Government established a set of requirements, including:
- that Canada Post provide an affordable, universal postal service;
- that Canada Post remain a public institution as long as it continued to fulfil its public policy role; and
- that Canadians should not be asked to subsidize letter mail.
The Government also confirmed Canada Post's involvement in the provision of competitive services such as parcels, courier and admail, on the understanding that these services would help to maintain affordable lettermail service.
As part of its response to the 1995 review, the Government also approved a Multi-Year Policy and Financial Framework for Canada Post in December 1998, which set specific service standards and financial goals for the Corporation and established a price cap formula for the basic lettermail rate (see Annex A).
Since the 1998 Multi-Year Policy and Financial Framework was established, the pace of change in information technology combined with globalization has greatly accelerated. This includes the continued prominence of the Internet and its increasing popular acceptance for receiving and paying bills as well as its use for advertising purposes. Also, the number of addresses in Canada increases by approximately 240,000 per year, causing letter carriers to deliver to more addresses with fewer pieces of lettermail. This adds pressure to Canada Post's operating costs each year.
Concurrently, the Government has been increasingly looking to Canada Post to contribute to public policy objectives beyond the provision of affordable, universal postal service by:
- placing restrictions on service rationalizations (e.g. moratorium on the closure of rural post offices);
- establishing delivery standards (e.g. delivery to rural mailboxes); and
- requiring Canada Post to support specific programs (e.g. Publications Assistance Program).
Canada Post has been asked to endorse these measures with limited funding or compensation. Despite these pressures, Canada Post has paid out more than 400 million dollars in dividends to the Government of Canada since the Multi-Year Policy and Financial Framework was put in place in 1998.
II. Purpose of the Strategic Review
In light of the aforementioned developments, and similar in approach to the federal government's decision to conduct strategic reviews for all departments over the next few years, a strategic review of Canada Post will be conducted to ensure it remains focused and is well positioned to continue to serve Canadians in the future.
The purpose of the strategic review is to examine Canada Post's public policy objectives, its ability to remain financially self-sustaining, and the continued relevancy of the 1998 Multi-Year Policy and Financial Framework.
III. Guiding Principles
The strategic review will be guided by the following four principles:
- Canada Post will not be privatized and will remain a Crown corporation;
- Canada Post must maintain a universal, effective and economically viable postal service;
- Canada Post is to continue to act as an instrument of public policy through the provision of postal services to Canadians; and
- Canada Post is to continue to operate in a commercial environment and is expected to attain a reasonable rate of return on equity.
IV. Scope
Within the parameters of the guiding principles outlined above, the strategic review will focus on the following areas:
A. Market and Competition
- How have changes in technology, competition and customer demographics shaped the postal market?
- What has been the evolution of the markets for lettermail, parcels, advertising mail, and international mail?
- What are the emerging needs of postal service customers?
- What can be learned from these same developments in the postal services markets in other countries?
B. Public Policy Objectives and Responsibilities
- What are the costs of the universal service obligation and to what extent do revenues generated by Canada Post's exclusive mail collection and delivery privilege offset these costs? How are those costs and revenues expected to evolve in the future?
- What have been the financial impacts of public policy obligations placed on Canada Post? How are the costs of public policy obligations funded?
- What are the social impacts of the universal service obligation?
- To what extent do all of the public policy obligations imposed on Canada Post meet the needs of Canadians?
C. Commercial Activities
- What are the internal and external challenges and risks faced by Canada Post in its effort to ensure its activities generate reasonable rates of return and contribute to fund its public service obligations?
- Which activities or services currently provided should be preserved as exclusive privileges and which ones should be provided in a more competitive environment?
- Does Canada Post have sufficient latitude/flexibility to perform successfully in a competitive market environment?
D. Financial and Performance Targets
- Are the parameters set out in the 1998 Multi-Year Policy and Financial Framework still valid and provide appropriate accountability?
- Is there an appropriate policy and financial framework in place to ensure that Canada Post can compete successfully in the marketplace and meet its public policy obligations?
- What are appropriate financial and performance targets for Canada Post that will reflect its dual public and commercial objectives, and support its efforts to improve the corporation's cost structure and efficiency and meet future infrastructure needs?
- How should service delivery standards be established?
V. Governance and Process
The strategic review will be conducted by an Advisory Panel comprised of three part-time members selected by the Minister of Transport, Infrastructure and Communities and Minister responsible for the Canada Post Corporation. The Advisory Panel will be supported by a small full-time Secretariat staffed by federal employees.
The Panel will work closely with the Chairperson of the Board of Directors as well as Senior Management of Canada Post. The work to be completed as part of this strategic review will rely extensively on information provided by Canada Post and as such, the successful completion of this strategic review will be dependant on cooperation between all involved parties.
Consultations with major stakeholders inside and outside of government will be undertaken. Public input will be sought through written submissions.
Under the Advisory Panel's guidance, the Secretariat will develop and manage the overall project work plan and undertake studies to be completed internally or contracted out to fully assess matters defined in the scoping section of this document.
VI. Reporting and Timing
The Advisory Panel will provide a status update to the Minister of Transport, Infrastructure and Communities and Minister responsible for the Canada Post Corporation no later than September 30, 2008 and a Final Report in December 2008. The Final Report will be prepared in both official languages and, with the exception of the sections that are commercially sensitive, will be made public.
ANNEX A
MULTI-YEAR POLICY AND FINANCIAL FRAMEWORK (est. 1998)
| Financial Performance |
Target |
| Earnings before interest and taxes (EBIT): |
$175 M |
| Return on equity (ROE): |
11% |
| Dividend policy: |
25% (40% once ROE at 11%) |
| Debt-to-capital ratio: |
40% |
| Cost as a percentage of revenue: |
97% |
|
| Lettermail Service Delivery Standards (Urban and Rural) |
| Within same centre: |
2 business days |
| Between centres in same province: |
3 business days |
| Between centres in different provinces: |
4 business days |
|
| Rural Retail Service Standards
- CPC to negotiate with local community to better reflect community requirements.
- Rural moratorium continues in place, although amalgamations are allowed.
Price Cap Formula Price cap formula for determining future increases in the basic postal rate:
- Rate increases to be held below inflation at a rate of 2/3 the annual rate of growth of the Consumer Price Index (CPI);
- Rate increases to be implemented no more than once annually, effective in January if such an increase is warranted; and
- Increases to be announced six months in advance.
The price cap formula forms part of the Letter Mail Regulations. |
