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Universal Service Regulation and Network Effects in Services of General Economic Interest in the European Union

Author

Listed:
  • Carlos Pateiro-Rodríguez

    (Department of Applied Economics, University of A Coruña, 15008 A Coruña, Spain)

  • Federico Martín-Bermúdez

    (Department of Applied Economics, University of A Coruña, 15008 A Coruña, Spain)

  • Carlos Pateiro-López

    (Department of Taxation, Tax and Financial Advisor, 15011 A Coruña, Spain)

  • Manuel Escourido-Calvo

    (Department of Business, University of A Coruña, 15008 A Coruña, Spain)

Abstract

The process of the liberalisation of services of general economic interest (SGEI) in the EU adopted the universal service (US) regulatory model. The objectives of the process were to strengthen free competition and improve social welfare. SGEIs have the characteristic of networked services and, as such, generate network externalities, as considered by the theory of market failures. This paper analyses the potential of the US in its role as a remedy for network externalities. In the SGEI context, the large number of participants reinforces network externalities, while limiting coordination mechanisms between users. Based on the relevant literature, a theoretical debate arises around the contribution of universal service obligations (USOs) to social welfare. A microeconomic analysis shows that USOs modify consumers’ utility functions by shifting from inefficient market equilibria to efficient equilibria, thereby improving social welfare.

Suggested Citation

  • Carlos Pateiro-Rodríguez & Federico Martín-Bermúdez & Carlos Pateiro-López & Manuel Escourido-Calvo, 2024. "Universal Service Regulation and Network Effects in Services of General Economic Interest in the European Union," Economies, MDPI, vol. 12(10), pages 1-19, October.
    • Handle: RePEc:gam:jecomi:v:12:y:2024:i:10:p:280-:d:1500558
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    References listed on IDEAS

    as
    1. Peitz, Martin & Schuett, Florian, 2016. "Net neutrality and inflation of traffic," International Journal of Industrial Organization, Elsevier, vol. 46(C), pages 16-62.
    2. Armstrong Mark, 2008. "Access Pricing, Bypass and Universal Service in Post," Review of Network Economics, De Gruyter, vol. 7(2), pages 1-16, June.
    3. Daniel F. Spulber, 2008. "Consumer Coordination In The Small And In The Large: Implications For Antitrust In Markets With Network Effects," Journal of Competition Law and Economics, Oxford University Press, vol. 4(2), pages 207-262.
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