Social Costs and Benefits of the Universal Service Obligation in the Postal Market

Boldron, François; Cremer, Helmuth; Donder, Philippe De; Joram, Denis; Roy, Bernard

doi:10.4337/9781847209955.00009

Cited by 15 publications

(14 citation statements)

References 9 publications

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“…(5) In last place in importance in the public debate about privatization has been the question of the cost of public funds for financing USO transfers. This point has until now largely been confined to theoretical discussions in the postal economics literature (e.g., CREMER et al [2008]). This is the focus of the present work.…”

Section: Introductionmentioning

confidence: 99%

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Privatization and Universal Service Obligations

Bel¹,

Calzada²

2009

JITE

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Telecommunications, airlines, and postal services have similar economic features. However, they have followed different privatization patterns. While privatization of the universal service provider (USP) is common in telecommunications and airlines, it is by far less frequent in the postal sector. This paper analyzes how the size of the universal service obligation (USO) and the mechanisms traditionally used to finance it have prevented privatization in the postal sector. By using a model of a mixed duopoly, we explain that privatization is inversely related to the cost of public funds for USO transfers and to the size of the USP's reserved area.

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Section: Introductionmentioning

confidence: 99%

“…3 CREMER, DE RYCKE, AND GRIMAUD [1997] and CREW AND KLEINDORFER [2000], [2005] analyze the USO in the postal sector.…”

Section: Introductionmentioning

confidence: 99%

Privatization and Universal Service Obligations

Bel¹,

Calzada²

2009

JITE

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“…However, the economic rationale behind this objective is not clear and it is still a matter of debate. Cremer et al [10] argued that the most "compelling theoretical justification" for USOs is their relative efficiency as a redistributive policy. 1 This justification comes from the uniform pricing constraint which is generally included in USOs: uniform pricing is a redistribution instrument through price that has the potential to be optimal in a second-best world when "policy makers do not have the necessary information to implement (potentially) more efficient policies like direct transfers".…”

Section: Introductionmentioning

confidence: 99%

“…4 For 1 Two types of redistribution are highlighted: from low-cost to high-cost consumers and from high-income to low-income consumers. 2 Cremer et al [10], p. 25. 3 As mentioned in Choné et al [8], this is meant to represent the "geographical component" of USOs, i.e., the component that addresses the redistribution from low-cost to high-cost consumers, as opposed to the "social component", which addresses the redistribution from high-income to low-income consumers.…”

Section: Introductionmentioning

confidence: 99%

Equity justifications for universal service obligations

Poudou

Roland

2017

International Journal of Industrial Organization

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Equity is often invoked as a possible justification for the imposition of universal service obligations (USOs). However, no previous analysis supports a formal link between equity and USO. In this paper, we describe the extent to which the imposition of USOs in oligopolistic network industries can meet the objectives of an inequality-averse regulator. We show that USOs can be used for equity purposes provided that the regulator is able to control the competitive structure of the industry. We also show that the uniform pricing constraint, which is an obligation to offer the same price conditions to all consumers, is welfare-enhancing but rather surprisingly, it does not necessarily improve equity.

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“…They find that a welfare evaluation of USO policies should take into account the interaction of various aspects of the USO and between different market segments or areas. Also, Boldron et al (2008) argue that the market structure and the actual cost/burden of USO are directly related to regulation and the funding mechanism in place. Similar points are raised in Jaag and Trinkner (2011) and Borsenberger et al (2010).…”

Section: Introductionmentioning

confidence: 99%

Entry Deterrence and the Calculation of the Net Cost of Universal Service Obligations

Jaag¹

2011

Review of Network Economics

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This paper relates to the current discussion about how to measure the net cost and the unfair burden of universal service provision in network industries. The established profitability cost approach compares the profit of a universal service provider (USP) with and without a universal service obligation (USO). This paper argues that the net cost of universal service provision critically depends on the regulatory counterfactual and hence the USP's strategy space without USO. On the one hand, a strong USO limits the USP's means to position itself in the market, which offers cream-skimming opportunities and invites competition. On the other hand, a simple game-theoretic entry analysis shows that the USO may effectively serve as a valuable strategic commitment device to deter entry. Hence, the USO may be valuable to the USP despite causing inefficient operations. From a policy perspective, this constitutes a counter-intuitive result for the definition of the USO: the stricter it is regulated, the more detrimental it may be to competition and, therefore, the smaller is its burden on the USP.

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Social Costs and Benefits of the Universal Service Obligation in the Postal Market

Cited by 15 publications

References 9 publications

Privatization and Universal Service Obligations

Privatization and Universal Service Obligations

Equity justifications for universal service obligations

Entry Deterrence and the Calculation of the Net Cost of Universal Service Obligations

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