Advances in Regulatory Economics series
Edited by Michael A. Crew and Paul R. Kleindorfer
Chapter 5: A Dynamic and Endogenous Approach to Financing the USO in a Liberalized Environment
5. A dynamic and endogenous approach to ﬁnancing the USO in a liberalized environment François Boldron, Claire Borsenberger, Denis Joram, Sébastien Lécou and Bernard Roy* 1 INTRODUCTION The Third European Directive (28/6/EC) concerning the full accomplishment of the internal market of Community postal services, published on 27 February 2008 conﬁrms the full market opening (FMO) for 1 January 2011.1 At the same time, the directive reasserts the safeguarding of a common level of universal services for all users in all EU countries. The removal of exclusive rights (the ‘reserved area’) will lead to signiﬁcant economic changes and raises several questions related to the sustainability of universal service in a liberalized environment. Until now, the reserved area, on which the universal service provider (USP) operates as a monopolist, has allowed for compensation of Universal Service Obligation (USO) costs. In a fully competitive environment, the European directive allows the ‘introduction of a public subsidy or a mechanism to share the net cost of universal service obligations between providers of services and/or users if the universal service obligations entail a net cost and represent an unfair ﬁnancial burden for the universal service provider(s)’. These changes in the postal sector then require: (i) deriving the net cost of the USO; (ii) assessing the ‘unfair ﬁnancial burden’ borne by the USP, if any; and (iii) implementing the appropriate funding mechanism as needed. Numerous works have investigated the calculation of the USO net costs. From a theoretical point of...
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