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Regulation and the burden of the net cost resulting from the Universal Service Obligation


  • Christian Jaag
  • Urs Trinkner
  • Topias Uotila


The financing of the Universal Service Obligation (USO) in network industries has traditionally relied on granting the provider exclusive rights. Full liberalization has created the need for alternative funding mechanisms. This has increased the interest of regulators and the public in estimating the (net) cost of the USO as the universal service provider (USP) should be correctly compensated for its burden. While there is quite a comprehensive literature on the cost of the USO in light of a different business strategy in the hypothetical scenario without USO, there has been little discussion so far on the assumptions to be made about the regulatory environment in this hypothetical scenario. That is the focus of this chapter. In addition, the chapter argues that a careful assessment of the regulatory environment may be useful in assessing the burden resulting from the USO. In Europe, the costing and financing of the postal USO is laid out in the Third Postal Directive 2008/6/EG. Article 7 states that only the net cost of the USO that constitutes an unfair financial burden should be subject to compensation. It does not further define what is regarded as unfair, but imposes criteria on compensation such as objectivity, transparency, non-discrimination, proportionality, least distortion, or neutrality.

Suggested Citation

  • Christian Jaag & Urs Trinkner & Topias Uotila, 2013. "Regulation and the burden of the net cost resulting from the Universal Service Obligation," Working Papers 0042, Swiss Economics.
  • Handle: RePEc:chc:wpaper:0042

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    References listed on IDEAS

    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. 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.
    3. Christian Jaag & Urs Trinkner, 2011. "The interaction between universal service costing and financing in the postal sector: a calibrated approach," Journal of Regulatory Economics, Springer, vol. 39(1), pages 89-110, February.
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    Cited by:

    1. Christian Jaag & Urs Trinkner & Jeffrey Yusof, 2014. "Assessment of EU Postal Sector Policy during the Second Barroso Administration (2010-2014)," Working Papers 0050, Swiss Economics.

    More about this item


    Universal service obligation; burden of the net cost; regulatory delta approach;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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