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

Listed author(s):
  • 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.

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Paper provided by CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1 in its series Cahiers du CREDEN (CREDEN Working Papers) with number 04.07.47.

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Length: 43 pages
Date of creation: 2004
Handle: RePEc:mop:credwp:04.07.47
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CREDEN, Faculté d'Economie, Avenue Raymond Dugrand, CS 79606, 34960 MONTPELLIER Cedex 2, France

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