Table of Contents

Reinventing the Postal Sector in an Electronic Age

Reinventing the Postal Sector in an Electronic Age

Advances in Regulatory Economics series

Edited by Michael A. Crew and Paul R. Kleindorfer

This compilation of original essays by an international cast of economists, regulators and industry practitioners analyzes some of the major issues now facing postal and delivery services throughout the world as competition from information and communication technologies has increased.

Chapter 9: How Many Outlets if the USP Does Not Face Any USO? A Cross-country Comparison

Claire Borsenberger, Denis Joram and Bernard Roy

Subjects: economics and finance, public sector economics


* Claire Borsenberger†, Denis Joram‡ and Bernard Roy§ INTRODUCTION 1 The full market opening (FMO) process puts high on the agenda the question of implementing the calculation of the cost of the universal service obligations (USOs). Currently the consensus methodology for calculating the net cost of USOs in the postal sector is the profitability cost approach (see Cremer et al., 2000 and Panzar, 2000), which consists in determining the difference in universal service provider (USP) profits between the USOconstrained scenario and a counterfactual scenario in which the USP is free to adapt its network and operations in the absence of USO constraints. This approach complies with Annex I of the Third European Postal Directive. Such an approach has already been implemented in several studies (see Frontier Economics, 2008; Postal Regulatory Commission, 2008). In particular, Borsenberger et al. (2010) focused on the cost of one component of the USO: the delivery frequency constraint. This chapter extends this previous work, by studying another constraint of universal service – the density of postal retail outlets. Indeed, postal presence through some kind of proximity of postal outlets (hereafter ‘accessibility’ constraint) is part of the USO (see Article 3.2 of European Postal Directive). The Postal Regulatory Commission (PRC) tackled the issue of the accessibility net cost by assuming that the US Postal Service (USPS) would close rural post offices in the counterfactual scenario. Indeed, in the USA, USPS is required to provide retail services and access throughout the nation. While the USO does not explicitly specify the...

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