Uniform Pricing and Postal Market Liberalization

Abstract

A widely accepted definition of the universal service obligation (USO) in posts is the provision of a universal postal service at a uniform (that is, geographically averaged) price. Historically, the reserved area has been put in place in individual countries to allow postal administrations to finance this obligation. However, as postal markets move into an increasingly liberalized environment, the question naturally arises as to whether the uniform price would necessarily be a market generated outcome in this new world. Alternatively, would demand and cost conditions make it more likely that market behavior would lead to a more complex pattern of tariffs from postal operators which would lead to differentiation by customer type and geography? This is an issue of fundamental importance to regulators and policy makers for, in general, national governments value highly the maintenance of the uniform tariff while, at the same time, wishing to promote market liberalization.