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Funding Universal Service Obligations with an Essential Facility: Charges vs. Taxes and Subsidies


  • Madet, C.
  • Mirabel, F.
  • Poudou, J.-C.
  • Roland, M.


This paper compares three schemes for funding Universal Service Obligations in network industries with an essential facility: an uplift to the network access charge, the establishment of a Universal Service (US) fund financed through a lump-sum tax and a US fund financed through a unit tax. The comparison is made under a duopoly structure with a potential entrant and an incumbent, which owns the essential facility and is responsible for universal service. The incumbent is also constrained to offer the same price on all markets. Using a social welfare criteria, we show that the US fund financed with a lump sum tax dominates the other two schemes, while the US fund with unit tax is equivalent to the access charge uplift.

Suggested Citation

  • Madet, C. & Mirabel, F. & Poudou, J.-C. & Roland, M., 2004. "Funding Universal Service Obligations with an Essential Facility: Charges vs. Taxes and Subsidies," Cahiers du CREDEN (CREDEN Working Papers) 04.07.47, CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1.
  • Handle: RePEc:mop:credwp:04.07.47

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    Cited by:

    1. 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.

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    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods


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