Sweden’s Post Office Understands The Future

Commentary, Crown Corporations, Frontier Centre

The Canadian Union of Postal Workers (CUPW) will strike soon. Even though the public's attitude towards it seems to be "Who cares?", the pending job action offers an opportunity to look at the future of mail and mail delivery, and how we should prepare for it.

Direct door-to-door mail delivery is less important today than it was for past generations. Almost the entire commercial world and a growing part of the residential sector are wired.

Many businesses have trimmed their costs by using electronic communication to displace so-called "snailmail" and courier methods. They are discovering big savings in shedding the "hard copy" fixation and going totally on line.

What does this mean for a traditional industry like the Post Office? Despite CUPW's blindness, it means that Canada Post must do things in different ways or see its market wither away, as its functions become irrelevant.

Sweden saw how a monopoly can insulate organizations from customer sensitivity. So, in 1994 it removed the Swedish Post Office's monopoly on first class mail. Consequently, SwedPost aggressively promotes customer service, and stresses to its staff the importance of doing productive work. Its consulting subsidiary, SwedPost, offers this penetrating advice:

"We want to see postal administrations world-wide change so that customer demand is satisfied and competitiveness strengthened. But time is running out. Unless changes come fast, there is a strong likelihood that competitors will capture large parts of the current markets of the postal organizations."

After the change, a private business in Stockholm called CityPost started to deliver mail four days a week, at a profit. Following its own advice, SwedPost bought the firm a year ago. In addition to the usual letter and parcel services, its aggressive marketing strategy offers electronic mail and information technology. It's not content to become a dinosaur watching technology render it obsolete.

The Swedish Parliament's role? All it had to do was change the rules, and allow competition in first class mail. In response, Sweden's Post Office became a dynamic, forward-looking business with a future.

CUPW's response to all this? Recently, the union's president chided those who cite the Swedish example and said that the Post Office there just announced a 40% increase in first-class postage rates. That's a pertinent response.

But as long as competition is allowed, any effort by Sweden's Post Office to gouge its customers will automatically prompt others to enter the market. What happened in Sweden is that the real cost of hand-delivering a letter is now reflected in the rate charged. It's called transparency. As e-mail takes over, volumes of hard mail diminish, and those who wish to keep the service have to pay more for it. It means a level playing field, where hidden costs are revealed, and internal subsidies diminished.

The same thing is underway in Canada with telecoms; local phone service is no longer subsidized by exorbitant long-distance charges. Real costs now dictate prices. For economists, that information translates into a more efficient allocation of resources and a healthier economy. Competition provides the framework for them.

Defenders of the monopoly mail model argue that it allows folks in isolated, rural areas to receive letters at the same rate. But it would be far more efficient to pay direct subsidies to competing providers in rural areas than to preserve the cost-plus monopoly framework dominated by CUPW and company.

Even that makes less sense when people grasp how inexpensive and convenient the new communications technologies have become. For $5.64 a month, the Frontier Centre enjoys unlimited e-mail. It allows our organization to send hundreds and thousands of communications anywhere in the world, at the push of a button. Canada Post's monopoly is just not an important issue for our organization now.

All over the world, in post offices from the Netherlands to Singapore, governments are enabling post offices to experiment with new forms of organization and new rules.

Shall we be left behind?