Why does the government need to deliver the mail?

With Brits selling off the Royal Mail, it's an idea that's again being discussed in Canada - particularly in light of mounting and growing estimates of future losses (Toronto Star):

Currently, taxpayers pay no subsidy to the post office, but a Conference Board of Canada report commissioned by Canada Post warned that if the crown corporation doesn’t change, it faces a $1 billion deficit by 2020.

That said, I'd take exception to the idea that there aren't subsidies paid given that these resources could be freed up either to firms that can provide a better service or in resources that could be reallocated to other services that the government could do better. And lest there be any doubt, there are developing companies that continue to eat away at the rationale for government run mail - even if they're just in the US for now (TechCrunch):

But Outbox believes a staff of city navigation experts such as Gonzalez combined with a phalanx of compact Priuses can outmaneuver its parcel delivery rivals in the shuttling of small packages around town. By staying in-city and keeping the packages below a certain size, Davis estimates its drivers can make 200 to 300 stops per day and connect with up to 500 residents daily, taking multi-unit dwellings into account. Outobox calls the concept “hyperlocal distribution” — a concentrated delivery network in which digitizing the mail is just one feature on top of a versatile logistics platform.

“We’re not focused on shipping things around the world. We’re focused on just your city.” Davis says.

Outbox’s ability to expand into a full-fledged distribution and delivery service could depend on how many people sign up for the mail service, which would give its fleet reason to expand. Or maybe parcels become the main business and digitized mail a nice add-on. Either way, as the Postal Service itself learned to its dismay in its losing battle with UPS and FedEx, mail may be nice but packages pay. It’s the American way.