An alternative approach to allocate universal service obligations

In a liberalized telecommunications market universal service is considered to be essential for social life of each member of society. However, to avoid discrimination the universal service provider has to be compensated for universal service costs. Instead of calculating universal service costs directly, someone may take auctions as an alternative approach to allocate universal service obligations. In this case the compensation as well as the universal service provider is implicitly determined by the bids of the participants of the auction. In this paper we scrutinize whether this is an appropriate approach.