The Future of the Post Office

MR. HERMANT:

Ladies and gentlemen: The Immediate Past Chairman of the Canadian Radio and Television Commission, Mr. Harry J. Boyle, has been quoted as saying, "Without communication there is no society, whether it be a hive of bees, a troop of Boy Scouts, a bar association or a nation."

Probably the thing that worries our guest of honour today, Postmaster General Jean-Jacques Blais, is, in his own words, that, "The Post Office is really retarded in the sense that the message we carry is written and people just cannot expect the mails to act like telecommunications systems."

Most of us would certainly agree that there is not much of a comparison between electronic communication means and the Post Office--and despite the temptation, I am not going to beleaguer the Honourable Minister with one, or even more, horror stories about the nation's mail deliveries. Suffice it to say that in recent days it would appear that the only people capable of handling mail efficiently in this country are the RCMP.

Nevertheless, we should not lose sight of the enormity of the challenge which faces any Postmaster General and Mr. Blais is the fifth in that position since 1970 and the twelfth since 1962.

In 1976, the Canadian Post Office handled six billion deliveries of mail and employed 63,000 people. Despite its problems, it is still rated as the eighth cheapest in the western world and third in efficiency behind Belgium and Japan (although, undoubtedly, these figures were computed before our recent Christmas problem).

While it may be difficult to discern, the postal service is nearing the end of a one billion dollar plan to increase its efficiency--and that effort, in terms of the technology and automation required, is probably at the base of its frustrations.

There is, however, still the element of humour. Thank God we can still laugh at ourselves. Mark Nicholls wrote in last July's Maclean's, "On July 19 a newspaper will be mailed from Deloraine, Manitoba, to Morris, 120 miles away. Simultaneously, a group of pony express riders will set off on the same journey, carrying a copy of the same newspaper. They will change horses every twenty miles until they get to Morris. Postmaster General Jean-Jacques Blais is backing the speed of his postal operation against the stamina of the quarter horses. Around Deloraine, they feel he hasn't got a chance."

When Jean-Jacques Blais took over his current duties, it was a notable day--September 15, 1976, his son's fifth birthday. He had been well prepared for his new position, having been vice-chairman of the standing committee on natural resources and public works; member of the committee on privileges and elections; member of the committee on justice and legal affairs; and parliamentary secretary to Mitchell Sharp. All this in the short time since he was elected in the riding of Nipissing, Ontario, in 1972.

Mr. Blais is an Ontarian. More than that, he is a fourth generation Franco-Ontarian who graduated from the University of Ottawa and from Osgoode Law School here in Toronto. Before his political career, he practised law in this city--mostly labour law--until he was, in his own words, "depending for my livelihood on fewer and fewer unions." And so he moved back up to North Bay, from whence he was elected.

It must have been coincidence that he has also been quoted as saying, "I am a politician--I am not a labour relations expert."

Well, it would seem from this distance that he will have to be a great deal of both in order to survive the months, and we hope years, ahead.

Ladies and gentlemen, remembering the Book of Hebrews, Chapter 13, verse 16, which says, "But to do good and communicate forget not: for with such sacrifices God is well pleased," and trying to remember that we have progressed somewhat from that era when messengers bearing evil tidings were themselves beheaded, it is a pleasure for me to introduce to you the Postmaster General of Canada, the Honourable Jean-Jacques Blais who will address us under the title, "The Future of the Post Office".

THE HONOURABLE JEAN-JACQUES BLAIS

Mr. Chairman, distinguished guests, ladies and gentlemen: Before I get down to the business at hand, permit me to say how pleased and privileged I feel to be addressing this Empire Club gathering. Your organization is one of the very few in Canada which dedicates itself to the task of dealing with important matters of public concern, and has been occupied for all of its 74-year history with preserving and strengthening the concept of a united Canada ... something we need more today than at any other time since Confederation.

In this widely scattered country of ours, few things are of more pressing concern than communication with one another. And, in this context, nothing could be more important than the future of our only truly national communications system, the Canada Post Office. This is what I would like to talk to you about this afternoon.

That the Post Office has problems is indisputable. But they're almost exclusively people problems arising from a poor labour relations atmosphere that has prevailed in the Post Office since the early 1960s. There was a belief that with the introduction of mechanization not only would the problem of handling mounting volumes of mail be solved, but that worker tensions and resulting union militancy would be eliminated. We were right on one aspect. Mechanization has solved the volume problems, but it has created new problems in the area of labour/management relations.

The most recent pre-Christmas work stoppage here in Toronto is clear evidence that mechanization is one of the root causes of this. But at the heart of the problem is the refusal of the CUPW leaders to consult with management on matters affecting the membership. If, in the case of the Toronto work stoppage, consultation had preceded the use of casual help to feed mechanized equipment, I am certain that the situation could have been resolved without friction.

The unfortunate consequences of the sporadic and all too frequent disruptions of service have been fewer people using the mails and more people expressing a lack of confidence in the Post Office as an organization that can be relied upon to deliver.

As I conceive of my responsibilities as Postmaster General, they are twofold. One, I must provide a communications service to all Canadians and two, I must manage the postal operations on a businesslike basis. This is a mandate that has been and continues to be difficult to discharge.

Because Canada Post has been and must continue to be primarily a public service and an instrument of public communications policy, it will require subsidization from the Treasury. But that subsidization must be limited to those identified areas of public policy. The normal, commercial operation of Canada Post must be on a cost recovery basis. Our difficulty has been identifying justifiable areas of subsidization on the one hand and generating sufficient revenues on the other.

For reasons beyond the control of the Post Office, its management and work force, expenditures have continued to outstrip revenues. Inflation, rising material and labour costs, competition, and labour-management relations are some of the factors that add up to some very sombre reading along the bottom line of our balance sheet.

Rapidly rising costs have outstripped the growth in revenue. Our deficit is growing larger by the year. It reached $90.9 million in the fiscal year 1972/73; in fiscal year 1976/77 it had risen to $568.8 million.

Revenues are determined by two factors: mail volumes and postal rates. Volumes are continuing to grow, but at a slower rate than we once thought they would. Current volumes just under six billion pieces a year are historically high, but they are still one billion pieces short of forecast volumes made a few years ago. Service disruptions, coupled with aggressive competition from other forms of communication, are the principal causes of this shortfall.

Some classes of mail have been more affected than others. Parcel volumes, for instance, are about 22 per cent below the peak we reached in 1966/67 and are now running at about the level they were twenty years ago.

In the area of first class mail, our volumes are continuing to grow, but the mix in the mailstream has changed greatly over the past few years. Today we're heavily dependent on the movement of things like bills, cheques, statements, and so on. This material now makes up about 40 per cent of all our mail, rendering us highly vulnerable to any changes in this market.

If the Post Office is to survive as a public service and grow with the rest of Canada, it must solve the problems I've outlined and reverse the trends which are making increasing demands on scarce government resources.

It's my firm belief that nobody can put us out of business but ourselves. What is at present affecting us most, as I have just said, are people problems. We've got to get these under control and I think we will get them under control--and soon.

There has been a marked change in the attitude of postal management and most unions, including the 20,000 member LCUC, through a process called "intergroup".

Union representatives and management personnel have met throughout the system at all levels. During the sessions assisted by professionals, problems have been identified, personality clashes have been minimized and solutions have been arrived at as a result of joint efforts. The aim of the process is to avoid confrontation leading to win-lose power struggles that have been our experience in the past, and continue to be our experience with the only union which is not participating in the process. I am confident that CUPW will see that the very survival of Canada Post depends on a change of their present attitude of non-consultation.

In the meantime, we have to think about service improvements. Without going into too much unnecessary detail in this regard, we've got to obtain the maximum efficiency from our mechanization program; try to get everyone to use the postal code on which our whole mechanization program depends, and compete aggressively in the fast changing world of communications. We must continue our current efforts to explore the whole area of electronic mail to see where the Canada Post Office can fit in.

We've got to think not only in terms of today's customers but of tomorrow's customers. And the current thinking is that many of tomorrow's customers won't be licking stamps and putting them on envelopes. They'll be communicating by high speed electronic means--data processors, facsimile transmitters, telephones hooked up to computers, television systems and so on.

In my opinion, one of the reasons Canada Post is no longer seen as an efficient reliable institution is that it has for two generations forgotten that it is a communications medium. There was a time when it was the only national communications network. Those days are long gone. In fact, we have been relegated to moving non-essential communications and commercial papers of a non-urgent nature, because of our inability to let go of yesterday and grab hold of tomorrow.

At the Canada Post Office we're becoming more and more tomorrow oriented. And it's a tomorrow that is causing us to take a long and penetrating look at electronic mail, among other options.

With the introduction of mechanization, we took a first step towards modernization. Our mail sorting productivity has been maintained notwithstanding negotiated settlements which reduced demands made of the individual employee, improved his working conditions dramatically and provided him with good industrial wages and the best fringe benefits in today's labour market.

But as I indicated previously, our volume increases are disappointing and those volumes are more dependent on the business community's transaction mail which comprises two thousand million pieces of first class mail annually. And this is the area which is so significant to us--the transaction mail. And this is the same mail which is being threatened by our labour problems, by our unending strikes and labour disruptions.

The transaction mail came to us essentially because of the fact that we exist and there was a need for a very well-established credit granting and collection system in the country, and they came to us too, I suppose, as another stimulus resulting from the desire of business and industry to automate and computerize.

At the same time as the computer was generating for us a windfall of these pieces of transaction mail, it was equally of benefit to the telecommunication industry because, with the advent of the appropriate software and hardware, information started to be gathered and transmitted from remote locations into central computer systems and, with developments that have taken place over the last decade, into what are now called distributive processing systems.

So, we now have the opportunity for people to talk very glowingly about a cashless society through the advent of Electronic Funds Transfer Systems (EFTS).

Meanwhile the banks have been busily engaged in setting up automated teller positions and changing their procedures around very subtly to get ready for that.

In 1975, the federal government in the persons of the Ministers of Finance, and Communications, issued a statement to the press indicating that it was the desire of the federal government to see a national electronic payment system implemented in Canada as quickly as possible and to that extent it was calling upon three basic committees for implementation of that program.

One committee is made up of non-government people, bankers and their suppliers of computer terminal communications, and the committee is looking at the standards needed to implement such a system--how to go about it and how to integrate it.

There are two other committees, one is a Justice Department--motivated committee which is examining the legal and consumer aspects of these funds transfer systems, and the third is a government-based policy committee which is to look in a little more detail at the kind of legislation that may be necessary to foster all of these things and make them happen.

Now, that's EFTS, and in the Post Office, because of the high percentage of transaction mail that is handled, we've been highly interested in EFTS for a number of years.

And until very recently we had a very coloured opinion of what's going to happen in EFTS because we have been dependent for our information on what we have been reading in the popular press--the dailies and particularly the articles that appear in The Financial Post. Every year the Post has a supplement on information and other electronic transfer systems and they do a very detailed analysis of what's happening from one year to the next.

The message is: "Before too long you won't have to depend on the mail anymore. You'll be able to make purchases and transfer payments and establish credit and do automatic debiting and all those things via EFTS without having to rely on anything else other than electronic gadgetry."

In the study the Post Office is doing, an information transfer study, we've gone into detail on all of these aspects. The one that was gone into in the greatest detail is EFTS. The study has drawn on the services and expertise of a number of outside consultants to the point where most of the investigative work has been done.

The committee now has two objectives: to take a look at a quantified analysis of the kind of threat posed to future Post Office volumes from technological developments such as those in telecommunications, and come up with an action plan for the Post Office to counter whatever threats are perceived.

What the committee essentially is doing is taking the myths, half truths and intuition as to what an electronic information transfer system is and what it can do, completely out of the picture and synthesizing all of this into hard, provable facts.

It's very much a multi-faceted study and it will eventually produce service--offering recommendations which will be technically and economically sound, as well as being feasible in a marketing research context.

There's a popular myth that's grown out of those newspaper articles I've mentioned: that with all of these wonderful electronic devices, the Post Office is no longer a viable entity and is going to be replaced in the private sector. The telecommunications companies, the banks, all of those people are going to handle the kind of transfers--information transfers--that traditionally the Post Office has handled, a process that, over the last decade, has become, let's say, less reliable than it used to be.

Well, in our study we found that the postal system, and primarily the local distribution part of it, is a national resource that's as well entrenched as the highways, and the telecommunications networks.

It would take an enormous amount of financial as well as human resources, over a long period of time, to replace it. And it would have to be replaced, because the one thing the Post Office does that nobody else does is serve all Canadians regardless of where they live and regardless of what they're receiving. Furthermore, because of its mandate, the Post Office may not take into account profitability. Its mandate is to serve. Whether you are sending a letter to someone in the next block or from one end of the country to the other, the cost is the same, twelve cents.

So, we combine the social with the commercial. And that makes us different from anybody else. Doing only some of the things Canada Post Office does, the private carriers are even at that looking at their operation from the point of view of an obligation to their shareholders to come up with a profit. Obviously, they have to be private-enterprise oriented. The Post Office does not.

The carriers will not offer services, in the main, unless there is some equitable rate of return in the form of a percentage of profit decided upon in advance, and therefore, there are gaps in their networks that you could drive a mail truck through. But there aren't any gaps in ours.

That's our strength. More than 8,500 post offices across the country and around 63,000 employees make us the third largest institution in the country, behind only Canadian Pacific, which is a conglomerate involving communication and transportation, and Bell Canada, which is a totally communications-oriented system.

These are the only two organizations that eclipse us in the things that other organizations and businesses measure--assets, revenues and employees--and both are in the transportation end, or in the communications area. So we're in good company. And we're not a johnny-come-lately either. We've been around for a period of time longer than anyone can recall. Really, nobody can point to any given year and say that's when the Post Office came into being. And we're not all that vulnerable, popular opinion to the contrary, because of this unbroken continuity.

However, we're not really happy with the kind of service image we have. We're not happy with the way people, especially the business public, react towards us because of some of the difficulties we're having and the resultant reduction in mail volumes due to those difficulties.

The more talk there is about taking business away from the Post Office or the more talk there is about the Post Office not being able to keep up, then the more the Post Office won't be able to provide good service, the more it will suffer from the inability to attract business, attract revenue, and therefore will incur more volume losses.

The only course for any institution as large, as important, and as much a part of the Canadian business and social fabric as the Post Office is growth. Move ahead. There must be no retrenchment. So, as you can gather from my remarks, my motivation is one of growth for the Post Office; stimulus, competition, get in there and do something.

Demonstrate responsibility to the public by improving existing services and providing new ones. Anything but preserving the status quo. If we do that, we'll continue to be the butt of jokes about the way we operate. That is debilitating to us in the marketplace and is demoralizing within the Post Office itself.

We've got to get people thinking positively about the Post Office, and I think we can. It was only after years of preserving the status quo and finding that it would no longer work for the Post Office that it was decided that action, in the form of mechanization, was required. Mail volumes were escalating and people power was no longer adequate to handle them.

Now, the point of the mechanization program is to be able to handle large, heavy volumes of mail. Not individual pieces of mail per se, but to be able to consolidate them and be able to handle them in such a way that arms and legs and backs of human beings are not overly burdened.

If we look into the future, the mail processing system that we have is not going to be a very long-term mainstream approach. Certainly, we're going to need this equipment no matter how long we stay in business. And we're going to have to improve upon it and refine it. The point I'm trying to make is that the mechanization to which I'm referring is very much past-oriented. It has to be looked at in terms of its final implementation representing a no-further-growth situation.

This is because in the future the computer will take a considerable quantity of mail out of our present system. We will take some of it out ourselves. It will be a very logical strategy for us to be able to implement the same kind of services as those in the private sector from an electronic point of view so that we can divert some physical mail into our own electronic services.

Some of the mail we are now handling could lend itself very easily to a computerized EFT system. Funds transfer currently effected by means of conventional mailings by the Federal Department of Supply and Services is one prime example. Bell Canada telephone billings and the standardized billing formats the banks have for credit card accounts are two more.

Recognizing this, I nevertheless do not feel that EFTS is going to arrive overnight. In Canada we have a very conservative financial community founded on a very small number of banks.

The Canadian financial industry prides itself on its stability and part of this stability is the capacity to resist rapid changes. The banks have changed over the years, of course, but gradually, smoothly, and on a planned evolutionary basis.

But when the winds of change do begin to blow in real earnest, it is my confident expectation that the Canada Post Office will be ready to meet them.

The main challenge facing Canada Post in attempting to enter the electronic information transfer sector is to demonstrate clearly that any proposed service will be financially self-sustaining or will meet the public need, or both. In addition, Canada Post must show that there are particular advantages to offering the new services in conjunction with mail service either in terms of cost or accessibility to the public.

I'd like to mention now some of the potential service opportunities we are looking at:

Telepost Plus Service in which the Post Office would expand on its present Telepost service to provide more flexible input capabilities and a much greater variety of features and options.

Network Message Services in which the Post Office would accept messages from all kinds of terminal devices, including the telephone and computer terminals, and not only process them, but store them for later retrieval by addressees at their convenience.

Compatibility Services in which the Post Office, through its own computers, would make possible communication between normally incompatible word processing and other terminals.

Record Services in which the Post Office would prepare volume mailings such as utility billings from information provided by its corporate customers.

Funds Transfer Services in which the Post Office would assist the government in expediting delivery of transfer payments to organizations and individuals, or would accept payments by consumers to businesses over-the-counter.

List Brokerage Services in which the Post Office would store customer mailing lists in its own computers, and provide not only list update and maintenance services, but also search processing, retrieval, and segmenting capability coupled with automatic preparation and mailing of customer-specified messages.

Information Services of various kinds which would be offered to households either directly or through local post offices. A wide variety of services could be considered, including electronic catalogues, national classified advertising, library services, and information on government programs.

Our study group that I've talked about expects to present its report this month or next. So you may expect to be hearing much more about our future plans and how those plans will affect our customers, old and, we hope, new, quite a lot in the months ahead.

The appreciation of the audience was expressed by Mr. Donald H. Carlisle, a Director of The Empire Club of Canada.