Consumers are a forgiving lot, however, especially when they have no alternative: by statute, Canada Post has a monopoly on first-class mail. Section 14 of the 1981 Canada Post Act grants the corporation "the sole and exclusive privilege of collecting, transmitting and delivering letters to the addressee thereof within Canada." The only exceptions - aside from faxes and E-mail and so on - are "letters of an urgent nature" carried for a fee of more than three times the prevailing rate for a 50-gram letter. The punishment for violating the monopoly: up to five years in jail.

The burden of complaining about postage increases, therefore, has been picked up by the nation's courier companies: the people who carry those "letters of an urgent nature." At first glance, this seems odd. These are, after all, Canada Post's competitors. If Canada Post charges more to carry a letter, that should send more business their way, or at least leave them more room to raise their own rates. Indeed, the courier business owes its very existence to the post office: Before postal workers won the right to strike in 1967, there was no industry to speak of. It is now a $2.5- billion business, shared among more than 5,000 companies.

So what's the courier companies' problem? Besides delivering ordinary letters, Canada Post is also a courier company; two, in fact. While its own creation, Priority Post, holds barely 10 per cent of the courier market, the post office took a giant leap toward market dominance in 1993 when it bought 75 per cent of Purolator Courier Ltd., the largest courier in Canada. Depending on whose figures you believe, that gives Canada Post a combined market share of between 30 per cent and 60 per cent.

Private companies accuse Canada Post of pricing its courier service below cost, in a bid to drive them out of the market: the dreaded "predatory pricing." How can it afford to do this? By cross-subsidizing: using the profits generated by its monopoly on first-class mail to pay for price cuts in the competitive courier business.

Such a complaint is common among industry rivals. Bell Canada's competitors in the long-distance telephone market accuse it of cross- subsidizing out of its monopoly on local calls. Most of the time, accusations of predatory pricing suffer from just one problem: As a business strategy, it doesn't make sense. Maybe the predator does eventually drive its rival out of business after enduring heavy losses for several years. But it has no guarantee that another competitor with deeper pockets won't just fill the breach. Predatory pricing is potentially effective only for companies in a position of overwhelming market dominance: a market share of 85 per cent or more. In any other situation, shareholders would likely have some pointed questions to ask of management.

Of course, Canada Post has unusually forbearing shareholders. After losing money in three of the last five years, it hopes to parlay this latest postage hike into a $68-million profit this year - on revenues of $5-billion. Although in theory it is no longer subsidized by the government, the willingness of its sole owner to endure so trivial a rate of return constitutes a form of implicit subsidy. Which makes it more conceivable that Canada Post might be up to no good: Given such a safety net, managers tend to be interested less in maximizing profits than revenues.

Whether Canada Post really is cross-subsidizing its courier business is a matter for the accountants. The private firms point to a leaked study showing that Canada Post assigns 74 per cent of its overall costs to delivering first-class letters, though these account for just 45 per cent of its volume and 59 per cent of its revenues. Canada Post, for its part, denies it is doing any such thing. But since it does not break out the figures for Priority Post or Purolator, there's no way of knowing.

Well, there is one way. The complaints of Bell Canada's long-distance rivals are about to become obsolete: When competition invades the local telephone business, there won't be any monopoly profits to spread about. If the exclusive privilege on first-class mail were abolished, private courier firms could likewise be assured of the fabled level playing field.

Canada Post has a ready answer to that. The letter monopoly is essential, it says, in order to - are you ready for this? - cross- subsidize rural rates out of the profits earned on urban delivery. That's just the sort of thing Bell Canada used to say: It needed a monopoly on long-distance in order to cross-subsidize local calls. How either of these elaborate redistribution schemes advances social justice is murky: It's easier, cheaper and fairer to subsidize low-income users directly than to give every local caller or rural letter-writer the same break.

In any case, there are better means than subsidies to make the mail cheaper. Just as competition promises to deliver less expensive local phone service without need of cross-subsidy from long-distance callers, so even country folk may be better off if we abolished the letter monopoly.