Calculating the Cost of the Universal Service Obligation: The Need for a Global Approach

The paper presents the basic approaches to calculate the cost of the USO and compares them with the requirements of the 3rd postal directive. We conclude that the profitability cost approach will lead to consistent estimations if it is applied in a global way. We illustrate our findings with an econometric estimation of the net costs of Swiss Post’s obligation to provide a nationwide post office network for postal and financial services. We finally illustrate that the financing mechanism in place must be considered as well as there are important drawbacks on the cost of the USO.