Universal Service Financing in Competitive Postal Markets: One Size Does Not Fit All

Abstract

In the postal sector, the financial burden of the universal service depends on its content, the postal market characteristics and the country's geographical configuration. These three groups of factors affect both the direct cost of providing the service and the extent of competition on the market. In this paper, we consider countries with different geographical characteristics and we show that the choice of an appropriate mechanism to share the burden of universal service between market participants depends on the country configuration. Thus, for universal service financing, one size does not fit all.

Price Regulation and the Financing of Universal Services in Network Industries

“…The tax could also be based on profit, turnover or other variables (see, e.g. Gautier andPaolini, 2011, or Jaag and. 22 In practice, the difficulty with a "pay-or-play" system is to define the balance between the provision of universal services and the reduction of the contribution to the fund.…”

Gradual Network Expansion and Universal Service Obligations

“…In particular, the uniform tariff may open the door to cream‐skimming of the most profitable market segments, treat the viability of the universal service provider and break down the universal service (Crew and Kleindorfer 2005). Relaxing the universal service constraints and, in particular, allowing the universal service provider to apply non‐uniform prices for bulk mails is sometimes advocated as a flanking measure to maintain the universal service in a competitive environment (PricewaterhouseCoopers 2006, Gautier and Paolini 2011).…”

“…13 13 See d’Alcantara and Gautier (2008) and Gautier and Paolini (2011) for a static analysis of entry in postal markets with different geographical characteristics. …”

Equity justifications for universal service obligations

“…Kind [13], Gautier and Minuzo [14], Gautier and Paolini [15], Gautier and Wauthy [16], [17], and Jaag [18].…”