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Allocating and Funding Universal Service Obligations in a Competitive Network Market

Author

Listed:
  • Philippe Chone

    (INSEE and CREST-LEI)

  • Laurent Flochel

    (University of Evry - Val d'Essonne)

  • Anne Perrot

    (CREST-LEI)

Abstract

We examine, in a network market open to competition, various mechanisms of allocating and funding ''universal service obligations'' among agents (rival operators and consumers). The obligations we consider are geographic ubiquity and non discrimination. We analyze, from both the efficiency and equity point of views, the respective advantages of a ''restricted-entry'' system (where the entrant is not allowed to serve high cost consumers) and the ''pay or play'' system at work for instance in Australia. We show that the pay or play regulation always dominates the restricted-entry regulation under ubiquity constraint alone. This result no longer holds when the regulator imposes also the non discrimination constraint.

Suggested Citation

  • Philippe Chone & Laurent Flochel & Anne Perrot, 2000. "Allocating and Funding Universal Service Obligations in a Competitive Network Market," Econometric Society World Congress 2000 Contributed Papers 0213, Econometric Society.
  • Handle: RePEc:ecm:wc2000:0213
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    References listed on IDEAS

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    1. Paul R. Milgrom, 1985. "Auction Theory," Cowles Foundation Discussion Papers 779, Cowles Foundation for Research in Economics, Yale University.
    2. Gasmi, F. & Laffont, J. J. & Sharkey, W. W., 2000. "Competition, universal service and telecommunications policy in developing countries," Information Economics and Policy, Elsevier, vol. 12(3), pages 221-248, September.
    3. Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 131-150, June.
    4. Anton, James J & Vander Weide, James H & Vettas, Nikolaos, 1998. "Strategic Pricing and Entry under Universal Service and Cross-Market Price Constraints," CEPR Discussion Papers 1922, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Kenneth Fjell & Øystein Foros & Debashis Pal, 2010. "Endogenous Average Cost Based Access Pricing," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(2), pages 149-162, March.
    2. Poudou, Jean-Christophe & Roland, Michel, 2014. "Efficiency of uniform pricing in universal service obligations," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 141-152.
    3. Gautier, Axel & Wauthy, Xavier, 2012. "Competitively neutral universal service obligations," Information Economics and Policy, Elsevier, vol. 24(3), pages 254-261.
    4. Losada, Ramiro, 2004. "Should network operators be allowed to build joint facilities?," UC3M Working papers. Economics we043914, Universidad Carlos III de Madrid. Departamento de Economía.
    5. Balmera, Roberto E. & Ünverb, Mehmet Bilal, 2016. "Cooperative investment in next generation broadband networks: A review of recent practical cases and literature," 27th European Regional ITS Conference, Cambridge (UK) 2016 148657, International Telecommunications Society (ITS).
    6. Balmer, Roberto E., 2015. "Geographic regulation of next generation broadband networks: A review of practical cases and recent literature," 26th European Regional ITS Conference, Madrid 2015 127125, International Telecommunications Society (ITS).
    7. Aguilar-Barceló, José G., 2003. "El estado actual de las telecomunicaciones en México: la regulación que no llega
      [The state of the telecommunications sector in Mexico: when will be realized a new regulation?]
      ," MPRA Paper 4734, University Library of Munich, Germany, revised 09 Jun 2003.
    8. Balmer, Roberto E., 2014. "Geographic regulation and cooperative investment in next generation broadband networks," 20th ITS Biennial Conference, Rio de Janeiro 2014: The Net and the Internet - Emerging Markets and Policies 106889, International Telecommunications Society (ITS).
    9. Holthausen, Cornelia & Rochet, Jean-Charles, 2005. "Incorporating a "public good factor" into the pricing of large-value payment systems," Working Paper Series 507, European Central Bank.
    10. Losada, Ramiro, 2004. "On the definition of affordable prices under universal service obligations," UC3M Working papers. Economics we044015, Universidad Carlos III de Madrid. Departamento de Economía.
    11. Anne Perrot, 2002. "Les frontières entre régulation sectorielle et politique de la concurrence," Revue Française d'Économie, Programme National Persée, vol. 16(4), pages 81-112.
    12. Antonio Estache & Liam Wren-Lewis, 2009. "Toward a Theory of Regulation for Developing Countries: Following Jean-Jacques Laffont's Lead," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 729-770, September.
    13. Bourreau, Marc & Cambini, Carlo & Hoernig, Steffen, 2012. "Geographic Access Rules and Investments," CEPR Discussion Papers 9013, C.E.P.R. Discussion Papers.
    14. Balmer, Roberto, 2013. "Geographic Regulation and Cooperative Investment in Next Generation Broadband Networks - A Review of Recent Literature and Practical Cases," MPRA Paper 54080, University Library of Munich, Germany.
    15. Balmer, Roberto E., 2015. "Cooperative investment in next generation broadband networks: A review of recent practical cases and literature," 26th European Regional ITS Conference, Madrid 2015 127124, International Telecommunications Society (ITS).
    16. 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.
    17. Matthias Finger & Dominique Finon, 2011. "From ‘Service Public’ to Universal Service: The Case of the European Union," Chapters,in: International Handbook of Network Industries, chapter 4 Edward Elgar Publishing.
    18. Silvia Concettini & Anna Créti, 2013. "Liberalization of electricity retailing in Europe: coming back or going forth?," Working Papers hal-00915924, HAL.
    19. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2000. "Universal service obligations and competition," Information Economics and Policy, Elsevier, vol. 12(3), pages 249-259, September.
    20. Balmera, Roberto E. & Ünverb, Mehmet Bilal, 2016. "Geographic regulation of next generation broadband networks: A review of practical cases and recent literature," 27th European Regional ITS Conference, Cambridge (UK) 2016 148656, International Telecommunications Society (ITS).
    21. Philippe Choné & Laurent Flochel & Anne Perrot, 2002. "Obligations de service universel et concurrence dans les réseaux," Économie et Prévision, Programme National Persée, vol. 156(5), pages 97-106.
    22. Mirabel, Francois & Poudou, Jean-Christophe, 2004. "Mechanisms of funding for Universal Service Obligations: the electricity case," Energy Economics, Elsevier, vol. 26(5), pages 801-823, September.
    23. Ilie, Laura & Losada, Ramiro, 2004. "Endogenous financing of the universal service," UC3M Working papers. Economics we044116, Universidad Carlos III de Madrid. Departamento de Economía.
    24. Poudou Jean-Christophe & Roland Michel & Thomas Lionel, 2009. "Universal Service Obligations and Competition with Asymmetric Information," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-25, October.
    25. Antonio Estache & L. Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES 2008_018, ULB -- Universite Libre de Bruxelles.

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