Strategic review of Canada Post announced



    OTTAWA, April 21 /CNW Telbec/ - 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.

                                 Backgrounder
                                 ------------
                                 ------------

             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 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 an officer of the Ordre national du Québec, as well as
one of Canada's Most Powerful Women, Top 100(TM), 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.

    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.

                                                                   April 2008

                                   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
    




For further information:

For further information: Karine White, Office of the Minister of
Transport, Infrastructure and Communities, Ottawa, (613) 991-0700; Media
Relations, Transport Canada, Ottawa, (613) 993-0055; Anne-Marie Bouchard,
Canada Post Corporation Strategic Review Secretariat, (613) 991-7795;
Transport Canada is online at www.tc.gc.ca. Subscribe to news releases and
speeches at www.tc.gc.ca/e-news and keep up to date on the latest from
Transport Canada. This news release may be made available in alternative
formats for persons with visual disabilities.


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