Wolfgang Elsenbast, Frank Pieper, Ulrich Stumpf
Estimating the Universal Service Burden of Public Postal Operators
Nr. 150 / Mai 1995
The relationship between the universal service burden and the extent of monopoly protection is in the heart of the current postal policy debate in the European Union. Of central importance is the universal service burden that is imposed on a public postal operator. In this paper, we use the term „universal service burden“ in a broad sense. We propose to look at the burden that results from the totality of political constraints related to the universal service obligation. Those constraints encompass the obligation to provide a nationwide postal service at a uniform tariff as laid down in the national Postal Act and subordinate legislation, but also informal political constraints that are related to public ownership of the universal service provider.
The paper provides a definition of the universal service burden that can be used as a starting point for defining the reserved area or, in a completely liberalized market, for fixing a compensation for the universal service provider. The definition is based on the cross-subsidization that could be avoided if the universal service obligation were hypothetically abandoned. The paper describes in detail how the universal service burden can be estimated by a sequence of incremental cost tests.