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Calculating the Cost of the Universal Service Obligation: The Need for a Global Approach

Author

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  • Christian Jaag
  • Martin Koller
  • Urs Trinkner

Abstract

The paper presents the basic approaches to calculate the cost of the USO and compares them with the requirements of the 3rd postal directive. We conclude that the profitability cost approach will lead to consistent estimations if it is applied in a global way. We illustrate our findings with an econometric estimation of the net costs of Swiss Post?s obligation to provide a nationwide post office network for postal and financial services. We finally illustrate that the financing mechanism in place must be considered as well as there are important drawbacks on the cost of the USO.

Suggested Citation

  • Christian Jaag & Martin Koller & Urs Trinkner, 2008. "Calculating the Cost of the Universal Service Obligation: The Need for a Global Approach," Working Papers 0010, Swiss Economics, revised Jul 2008.
    • Handle: RePEc:chc:wpaper:0010
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    References listed on IDEAS

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    1. Massimo Filippini & Marika Zola, 2005. "Economies of scale and cost efficiency in the postal services: empirical evidence from Switzerland," Applied Economics Letters, Taylor & Francis Journals, vol. 12(7), pages 437-441.
    2. Cohen Robert & Di Paola Luigi & Sheehy Renee & Comandini Vincenzo Visco, 2008. "The Distribution of Post Offices in Italy and the United States," Review of Network Economics, De Gruyter, vol. 7(2), pages 1-12, June.
    3. Mehdi Farsi & Massimo Filippini & Urs Trinkner, 2006. "Economies of Scale, Density and Scope in Swiss Post's Mail Delivery," Chapters, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Liberalization of the Postal and Delivery Sector, chapter 6, pages 91-102, Edward Elgar Publishing.
    4. Michael A. Crew & Paul R. Kleindorfer, 2005. "Competition, Universal Service and the Graveyard Spiral," Topics in Regulatory Economics and Policy, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Regulatory and Economic Challenges in the Postal and Delivery Sector, chapter 0, pages 1-30, Springer.
    5. C. Jaag & U. Trinkner, 2009. "Tendering Universal Service Obligations in Liberalized Network Industries," Competition and Regulation in Network Industries, Intersentia, vol. 10(4), pages 313-333, December.
    6. Helmut M. Dietl & Urs Trinkner & Reto Bleisch, 2005. "Liberalization and Regulation of the Swiss Letter Market," Topics in Regulatory Economics and Policy, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Regulatory and Economic Challenges in the Postal and Delivery Sector, chapter 0, pages 53-72, Springer.
    7. Christian Jaag, 2007. "Liberalization of the Swiss Letter Market and the Viability of Universal Service Obligations," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 143(III), pages 261-282, September.
    8. Martin Buser & Christian Jaag & Urs Trinkner, 2008. "Economics of Post Office Networks: Strategic Issues and the Impact on Mail Demand," Chapters, in: Michael A. Crew & Paul R. Kleindofer & James I. Campbell Jr (ed.), Handbook of Worldwide Postal Reform, chapter 5, Edward Elgar Publishing.
    9. Joan Calzada & Christian Jaag & Urs Trinkner, 2010. "Universal service auctions in liberalized postal markets," Chapters, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Heightening Competition in the Postal and Delivery Sector, chapter 17, Edward Elgar Publishing.
    10. Michael DOBLE, 1995. "Measuring And Improving Technical Efficiency In Uk Post Office Counters Using Data Envelopment Analysis," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 66(1), pages 31-64, March.
    11. 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.
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    Cited by:

    1. Jaag Christian, 2011. "Entry Deterrence and the Calculation of the Net Cost of Universal Service Obligations," Review of Network Economics, De Gruyter, vol. 10(1), pages 1-19, March.
    2. Gautier Axel & Paolini Dimitri, 2011. "Universal Service Financing in Competitive Postal Markets: One Size Does Not Fit All," Review of Network Economics, De Gruyter, vol. 10(3), pages 1-30, September.
    3. Christian Jaag, 2010. "Compensating the Net Cost of Universal Postal Services," Working Papers 0017, Swiss Economics.
    4. Massimo Filippini & Martin Koller & Urs Trinkner, 2010. "Economies of scale and scope and opening hours in post offices and agencies," Chapters, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Heightening Competition in the Postal and Delivery Sector, chapter 10, Edward Elgar Publishing.
    5. Bakhtieva, Dilyara & Kiljański, Kamil, 2012. "Universal Service Obligation and Loyalty Effects: An Agent-Based Modelling Approach," MPRA Paper 48549, University Library of Munich, Germany.
    6. Claire Borsenberger & Denis Joram & Clément Magre & Bernard Roy, 2010. "Cross- country comparisons of optimal mail delivery frequency," Chapters, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Heightening Competition in the Postal and Delivery Sector, chapter 15, Edward Elgar Publishing.
    7. Helmut M. Dietl & Urs Trinkner, 2008. "Developing Universal Postal Services in Latin America ? an Economic Perspective," Working Papers 0012, Swiss Economics, revised Nov 2008.

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    More about this item

    Keywords

    USO; net costs; cost of the universal service obligation; financing; Post Office Network; Global Approach;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M38 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Government Policy and Regulation

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