Canada Begins Phasing Out Door-To-Door Postal Service; All Home Delivery To End By 2019

The beginning of the end is afoot for door-to-door postal delivery in Canada.

Canada Post, the country’s primary postal service, stopped home delivery today for about 75,000 customers, as it implements the first phase of a multi-phased program to replace door-to-door mail delivery with a community mailbox system over the next five years.

Rather than receiving mail at home, customers will get mail from their local community mailbox. The change will eliminate thousands of jobs, which the postal service says is necessary to remain financially viable.

Canada Post has suffered significant financial losses in recent years due to rapid declines in the volume of physical mail sent.  Canadians mailed almost 1.2 billion fewer items in 2013 than they did in 2006, according to the company.

The change from home delivery to community mailboxes will affect fewer customers in Canada (about five million) than it would in the United States because two thirds of Canadian households never received home delivery.

Nevertheless, the phase out of home delivery for the remaining one third of households has not been without controversy. In particular, the labor union representing postal workers filed last week a lawsuit challenging Canada Post’s decision to end home delivery.

UPDATE

One reader wanted to know how this story is related to energy? The changes taking place in Canada’s postal system are relevant for the debate over the so-called “utility death spiral” in the United States. In particular, the postal service is struggling a vicious cycle of escalating financial losses caused by customer erosion. The politics of socializing the cost of public postal delivery infrastructure is analogous to the challenge of socializing the costs of the electric power grid.

Like the postal service, utilities rely on revenues from a very, very broad base of customers to pay for maintaining the power grid. As more customers exit the system via self-generation or reduced utility purchases as the result of energy efficiency investments, utility revenues decline. In most cases, the amount of revenue lost is greater than the associated reduction in costs. The result is that the costs must be recovered from a smaller group of customers, which means utilities must raise rates to recover their capital investment in the grid.

The cycle can become vicious very quickly. As rates rise, more customers are likely to exit the system or reduce purchases, driving revenues down and pushing prices up even higher for the remaining customers. Thus, thedeath spiral.

In a democracy, the imbalance between revenues, costs and rates can become so severe that it leads to political intervention. Alternatively, the bureaucrats managing the infrastructure (e.g., the Post) can make fundamental changes to the structure of the system that restores the balance between costs and revenues. This fundamental change appears to be underway in Canada with the phasing out of home delivery service in favor of community mailboxes.