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Competitively Neutral Universal Service Obligations

  • Axel Gautier
  • Xavier Wauthy

Universal service obligations impose specific costs on the universal service provider. The measure of these costs and their financing have been studied along two complementary lines of reasoning: is the uni- versal service obligation sustainable? Who should bear its costs? Most often, a two-step procedure is put forward. In a first step the cost of USO must be assessed; in a second step the USP must be compensated for this cost. In this paper we argue that this procedure is most often problematic because the implementation of the compensation scheme directly affects the effective cost of USO. We therefore put forward an alternative approach to this problem which does not rely on this two- step procedure and fully acknowledges the distortions that result from the compensation mechanism.

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Paper provided by Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège in its series CREPP Working Papers with number 1008.

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Date of creation: 2010
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Handle: RePEc:rpp:wpaper:1008
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  1. Tim Goedemé & Wim Van Lancker, 2009. "A Guaranteed Minimum Income for Europe’s Elderly. Options and Pitfalls in the Design of a Harmonised Basic Pension Scheme in the European Union," Working Papers 0901, Herman Deleeck Centre for Social Policy, University of Antwerp.
  2. Valletti, Tommaso M & Hoernig, Steffen & Barros, Pedro P, 2002. "Universal Service and Entry: The Role of Uniform Pricing and Coverage Constraints," Journal of Regulatory Economics, Springer, vol. 21(2), pages 169-90, March.
  3. 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.
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  6. GAUTIER, Axel & PAOLINI, Dimitri, 2010. "Universal service financing in competitive postal markets : one size does not fill all," CORE Discussion Papers 2010032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. GAUTIER, Axel & WAUTHY, Xavier Y., . "Price competition under universal service obligations," CORE Discussion Papers RP -2219, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Mirabel, F. & Poudou, J.-C. & Roland, M., 2009. "Universal service obligations: The role of subsidization schemes," Information Economics and Policy, Elsevier, vol. 21(1), pages 1-9, February.
  9. Rodriguez, Frank & Storer, David, 2000. "Alternative approaches to estimating the cost of the USO in posts," Information Economics and Policy, Elsevier, vol. 12(3), pages 285-299, September.
  10. repec:cup:cbooks:9780521681599 is not listed on IDEAS
  11. Mark Armstrong, 2001. "Access Pricing, Bypass, and Universal Service," American Economic Review, American Economic Association, vol. 91(2), pages 297-301, May.
  12. J. Ignacio Conde & Paola Profeta, 2002. "What social security: Beveridgean or Bismarckian?," Economics Working Papers 633, Department of Economics and Business, Universitat Pompeu Fabra.
  13. H. Cremer & F. Gasmi & A. Grimaud & J. J. Laffont, 2001. "Universal Service: An economic perspective," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 72(1), pages 5-43, 03.
  14. Edward Pearsall, 2009. "The complete incremental cost test for cross-subsidies with a sub-modular cost function," Journal of Regulatory Economics, Springer, vol. 36(3), pages 274-285, December.
  15. Dreze, Jean & Srinivasan, P. V., 1997. "Widowhood and poverty in rural India: Some inferences from household survey data," Journal of Development Economics, Elsevier, vol. 54(2), pages 217-234, December.
  16. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2002. "Allocating and funding universal service obligations in a competitive market," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1247-1276, November.
  17. Palacios, Robert & Sluchynsky, Oleksiy, 2006. "Social pensions Part I : their role in the overall pension system," Social Protection Discussion Papers 36237, The World Bank.
  18. 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.
  19. Winfried Pohlmeier & Luc Bauwens & David Veredas, 2007. "High frequency financial econometrics. Recent developments," ULB Institutional Repository 2013/136223, ULB -- Universite Libre de Bruxelles.
  20. Philippe Choné & Laurent Flochel & Anne Perrot, 1999. "Allocating and Funding Universal Service Obligations in a Competitive Network Market," Working Papers 99-55, Centre de Recherche en Economie et Statistique.
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