Progress in the Competitive Agenda in the Postal and Delivery Sector
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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.
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Chapter 5: A Dynamic and Endogenous Approach to Financing the USO in a Liberalized Environment

François Boldron, Claire Borsenberger, Denis Joram, Bernard Roy and Sebastien Lecou

Extract

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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