Practical Approaches to USO Costing and Financing

Traditionally, universal services in network industries have relied on granting the universal service provider a reserved area. Current liberalization policies promoting competitive entry may put the traditional universal service and its financing at risk. Hence, there is an increased interest in estimating the cost of universal service provision. In the postal sector, the Third EC Directive proposes a calculation approach to determine the net cost of a universal service obligation and to compensate the universal service provider (USP). In this paper, we discuss various implementations of the costing and financing of USO based on profitability cost and argue that a holistic approach is appropriate to meet the core requirements of consistency and robustness.