Table of Contents

The Role of the Postal and Delivery Sector in a Digital Age

The Role of the Postal and Delivery Sector in a Digital Age

Advances in Regulatory Economics series

Edited by Michael A. Crew and Timothy J. J. Brennan

This volume, the result of the 21st Conference on Postal and Delivery Economics (Ireland, 2013), describes the continuing problem of the decline of the postal sector in the face of electronic competition and offers strategies for the survival of mail services in a digital age.

Chapter 15: Regulation and the burden of the net cost resulting from the Universal Service Obligation

Christian Jaag, Urs Trinkner and Topias Uotila

Subjects: economics and finance, competition policy, public sector economics

Extract

The financing of the Universal Service Obligation (USO) in the postal sector has traditionally relied on granting the provider a reserved area. 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 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.

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