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Competitively neutral universal service obligations

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  • GAUTIER, Axel

    (CREPP, HEC-Université de Liège, B-4000 Liège, Belgium; Université catholique de Louvain, CORE, B-1348 Louvain- la-Neuve, Belgium)

  • WAUTHY, Xavier

    (CREPP, HEC-Université de Liège, B-4000 Liège, Belgium; Université catholique de Louvain, CORE, B-1348 Louvain- la-Neuve, Belgium)

Abstract

Universal service obligations impose specific costs on the universal service provider. The measure of these costs and their financing have been studied along two complementary lines of reasoning: is the universal service obligation sustainable? Who should bear its costs? Most often, a two-step procedure is put forward. In a first step the cost of USO must be assessed; in a second step the USP must be compensated for this cost. In this paper we argue that this procedure is most often problematic because the implementation of the compensation scheme directly affects the effective cost of USO. We therefore put forward an alternative approach to this problem which does not rely on this two-step procedure and fully acknowledges the distortions that result from the compensation mechanism.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2010061.

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Date of creation: 01 Oct 2010
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Handle: RePEc:cor:louvco:2010061

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Keywords: universal service obligations; cost-sharing mechanism; competitive neutrality;

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References

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  1. Edward Pearsall, 2009. "The complete incremental cost test for cross-subsidies with a sub-modular cost function," Journal of Regulatory Economics, Springer, vol. 36(3), pages 274-285, December.
  2. GAUTIER, Axel & WAUTHY, Xavier Y., . "Price competition under universal service obligations," CORE Discussion Papers RP -2219, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Belleflamme,Paul & Peitz,Martin, 2010. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9780521681599, October.
  4. Anderson, S.P. & de Palma, A. & Kreider, B., 1999. "Tax incidece in Differentiated product Oligopoly," Papers 99-10, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
  5. Valletti, Tommaso M & Hoernig, Steffen & Barros, Pedro P, 2002. "Universal Service and Entry: The Role of Uniform Pricing and Coverage Constraints," Journal of Regulatory Economics, Springer, vol. 21(2), pages 169-90, March.
  6. Tim Goedemé & Wim Van Lancker, 2009. "A Guaranteed Minimum Income for Europe’s Elderly. Options and Pitfalls in the Design of a Harmonised Basic Pension Scheme in the European Union," Working Papers 0901, Herman Deleeck Centre for Social Policy, University of Antwerp.
  7. Palacios, Robert & Sluchynsky, Oleksiy, 2006. "Social pensions Part I : their role in the overall pension system," Social Protection Discussion Papers 36237, The World Bank.
  8. Dreze, Jean & Srinivasan, P. V., 1997. "Widowhood and poverty in rural India: Some inferences from household survey data," Journal of Development Economics, Elsevier, vol. 54(2), pages 217-234, December.
  9. Philippe Choné & Laurent Flochel & Anne Perrot, 1999. "Allocating and Funding Universal Service Obligations in a Competitive Network Market," Working Papers 99-55, Centre de Recherche en Economie et Statistique.
  10. Rodriguez, Frank & Storer, David, 2000. "Alternative approaches to estimating the cost of the USO in posts," Information Economics and Policy, Elsevier, vol. 12(3), pages 285-299, September.
  11. GAUTIER, Axel & PAOLINI, Dimitri, . "Universal service financing in competitive postal markets: one size does not fit all," CORE Discussion Papers RP -2336, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Economic Journal, Royal Economic Society, vol. 117(520), pages 686-712, 04.
  13. H. Cremer & F. Gasmi & A. Grimaud & J. J. Laffont, 2001. "Universal Service: An economic perspective," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 72(1), pages 5-43, 03.
  14. Panzar, John C., 2000. "A methodology for measuring the costs of universal service obligations," Information Economics and Policy, Elsevier, vol. 12(3), pages 211-220, September.
  15. Jaag Christian, 2011. "What is an Unfair Burden? Compensating the Net Cost of Universal Service Provision," Review of Network Economics, De Gruyter, vol. 10(3), pages 1-32, September.
  16. Winfried Pohlmeier & Luc Bauwens & David Veredas, 2007. "High frequency financial econometrics. Recent developments," ULB Institutional Repository 2013/136223, ULB -- Universite Libre de Bruxelles.
  17. Mark Armstrong, 2001. "Access Pricing, Bypass, and Universal Service," American Economic Review, American Economic Association, vol. 91(2), pages 297-301, May.
  18. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2002. "Allocating and funding universal service obligations in a competitive market," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1247-1276, November.
  19. Mirabel, F. & Poudou, J.-C. & Roland, M., 2009. "Universal service obligations: The role of subsidization schemes," Information Economics and Policy, Elsevier, vol. 21(1), pages 1-9, February.
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Cited by:
  1. Jean-Christophe Poudou & Michel Roland, 2013. "Efficiency of Uniform Pricing in Universal Service Obligation," Working Papers 13-13, LAMETA, Universtiy of Montpellier, revised Nov 2013.

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