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Progress in the Competitive Agenda in the Postal and Delivery Sector

Progress in the Competitive Agenda in the Postal and Delivery Sector

Advances in Regulatory Economics series

Edited by Michael A. Crew and Paul R. Kleindorfer

Regulation continues to be an important issue in the postal and delivery sector of the global economy. This latest volume of the series covers progress made in the competitive agenda in the industry. It is global in scope and addresses topics of great importance to scholars and practitioners of postal regulation and public sector economics.

Chapter 8: Calculating the Cost of the Universal Service Obligation: The Need for a Global Approach

Christian Jaag, Martin Koller and Urs Trinkner

Subjects: economics and finance, public sector economics


* Christian Jaag, Martin Koller and Urs Trinkner INTRODUCTION 1 In Switzerland as well as in the European Union (EU) postal market liberalization is a current issue. The reserved area has been the traditional means to finance the provision of universal services. In the absence of a reserved area, other means of funding are needed. If universal service obligations are delegated to one or more postal operators, compensating them is an important issue. There are two problems to solve: first, the cost of the Universal Service Obligation (USO) needs to be estimated; second, the universal service providers (USPs) have to be reimbursed. Our chapter deals mainly with the former issue. The chapter proceeds as follows. Section 2 provides the background and motivation for calculating the cost of the USO and analyzes the new regulations of the European Community (EC) in this regard (2008/6/EC). The EC follows a disaggregated approach by instructing member states to calculate the total net cost of the USO by summing the net costs arising from the specific components. Section 3 discusses the limits of this approach and advocates a global view which takes into account the dependencies between individual components of the USO. These considerations are complemented in Section 4 by an econometric assessment of the net cost resulting from obligations concerning the postal outlet network in Switzerland. A cross-section dataset of the postal outlet network is analyzed and the difference between a disaggregated and a global approach is illustrated. Section 5 concludes. 2 CALCULATING...

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