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Allocating and Funding Universal Service Obligations in a Competitive Network Market

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  • Philippe Choné

    (Crest)

  • Laurent Flochel

    (Crest)

  • Anne Perrot

    (Crest)

Abstract

We examine, in a network market open to competition, various mechanisms of allocating and funding ''universal service obligations'' among agents (rival operators and consumers). The obligations we consider are geographic ubiquity and non discrimination. We analyze, from both the efficiency and equity point of views, the respective advantages of a ''restricted-entry'' system (where the entrant is not allowed to serve high cost consumers) and the ''pay or play'' system at work for instance in Australia. We show that the pay or play regulation always dominates the restricted-entry regulation under ubiquity constraint alone. This result no longer holds when the regulator imposes also the non discrimination constraint.
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Suggested Citation

  • Philippe Choné & Laurent Flochel & Anne Perrot, 1999. "Allocating and Funding Universal Service Obligations in a Competitive Network Market," Working Papers 99-55, Center for Research in Economics and Statistics.
    • Handle: RePEc:crs:wpaper:99-55
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    References listed on IDEAS

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    1. Paul R. Milgrom, 1985. "Auction Theory," Cowles Foundation Discussion Papers 779, Cowles Foundation for Research in Economics, Yale University.
    2. Gasmi, F. & Laffont, J. J. & Sharkey, W. W., 2000. "Competition, universal service and telecommunications policy in developing countries," Information Economics and Policy, Elsevier, vol. 12(3), pages 221-248, September.
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    4. Anton, James J & Vander Weide, James H & Vettas, Nikolaos, 1998. "Strategic Pricing and Entry under Universal Service and Cross-Market Price Constraints," CEPR Discussion Papers 1922, C.E.P.R. Discussion Papers.
    5. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, April.
    6. Tirole, Jean, 1986. "Procurement and Renegotiation," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 235-259, April.
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    Cited by:

    1. Losada, Ramiro, 2004. "Should network operators be allowed to build joint facilities?," UC3M Working papers. Economics we043914, Universidad Carlos III de Madrid. Departamento de Economía.
    2. Gautier, Axel & Wauthy, Xavier, 2012. "Competitively neutral universal service obligations," Information Economics and Policy, Elsevier, vol. 24(3), pages 254-261.
    3. Holthausen, Cornelia & Rochet, Jean-Charles, 2005. "Incorporating a "public good factor" into the pricing of large-value payment systems," Working Paper Series 507, European Central Bank.
    4. Mirabel, F. & Poudou, J.-C. & Roland, M., 2009. "Universal service obligations: The role of subsidization schemes," Information Economics and Policy, Elsevier, vol. 21(1), pages 1-9, February.
    5. Gautier Axel & Paolini Dimitri, 2011. "Universal Service Financing in Competitive Postal Markets: One Size Does Not Fit All," Review of Network Economics, De Gruyter, vol. 10(3), pages 1-30, September.
    6. Poudou, Jean-Christophe & Roland, Michel, 2014. "Efficiency of uniform pricing in universal service obligations," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 141-152.
    7. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2000. "Universal service obligations and competition," Information Economics and Policy, Elsevier, vol. 12(3), pages 249-259, September.
    8. Mirabel, Francois & Poudou, Jean-Christophe, 2004. "Mechanisms of funding for Universal Service Obligations: the electricity case," Energy Economics, Elsevier, vol. 26(5), pages 801-823, September.
    9. Aguilar-Barceló, José G., 2003. "El estado actual de las telecomunicaciones en México: la regulación que no llega [The state of the telecommunications sector in Mexico: when will be realized a new regulation?]," MPRA Paper 4734, University Library of Munich, Germany, revised 09 Jun 2003.
    10. Losada, Ramiro, 2004. "On the definition of affordable prices under universal service obligations," UC3M Working papers. Economics we044015, Universidad Carlos III de Madrid. Departamento de Economía.
    11. Matthias Finger & Dominique Finon, 2011. "From ‘Service Public’ to Universal Service: The Case of the European Union," Chapters, in: Matthias Finger & Rolf W. Künneke (ed.), International Handbook of Network Industries, chapter 4, Edward Elgar Publishing.
    12. Poudou Jean-Christophe & Roland Michel & Thomas Lionel, 2009. "Universal Service Obligations and Competition with Asymmetric Information," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-25, October.

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