Table of Contents

Competition and Regulation in the Postal and Delivery Sector

Competition and Regulation in the Postal and Delivery Sector

Advances in Regulatory Economics series

Edited by Michael A. Crew and Paul R. Kleindorfer

orldwide, postal and delivery economics has attracted considerable interest. Numerous questions have arisen, including the role of regulation, funding the Universal Service Obligation, postal reform in Europe, Asia and North America, the future of national postal operators, demand and pricing strategies, and the principles that should govern the introduction of competition. Collected here are responses to these questions in the form of 24 essays written by researchers, practitioners, and senior managers from throughout the world.

Chapter 2: Social Costs and Benefits of the Universal Service Obligation in the Postal Market

Helmuth Cremer, Philippe De Donder, François Boldron and Bernard Roy

Subjects: economics and finance, public sector economics

Extract

2. Social costs and benefits of the universal service obligation in the postal market* Helmuth Cremer, Philippe De Donder, François Boldron, Denis Joram and Bernard Roy 1. INTRODUCTION The universal service obligation (USO) is a cornerstone of regulatory policy in the postal sector. In the EU, where the sector is headed towards full liberalization, the USO is the major argument used to advocate some residual regulation. In the postal sector, like in many other network industries, universal service was historically provided by a monopolistic public or regulated operator. While the need for monopoly protection has been increasingly disputed, the very idea of universal service has remained relatively uncontested during the early stages of the liberalization process. The debate was not that much about the appropriate extent of the USO but about the most efficient (or least costly) way to make it competitively neutral, or at least as compatible as possible with competition. This in itself is a challenging question. More recently, however, the USO in itself has increasingly been questioned. The question is whether the social benefits associated with the USO are significant enough to justify its cost, and in particular the impediment to competition it often implies. The spectacular development of electronic communications is likely to further fuel this debate, because email and telephone tend to supplant the postal sector as provider of universal access to communications. To ensure a sound design of the future regulatory context in the postal sector, it is important...

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