Universal Service Obligation

Price and Quantity Regulation
  • Menahem Spiegel
Part of the Topics in Regulatory Economics and Policy Series book series (TREP, volume 37)


The Universal Service Obligation (USO) is a regulation often imposed on the providers of network services. In the case of the telephone network, the Universal Service Obligation regulation can be traced back to the Communication Act of 1934. Where this act charged the FCC to provide all people of the United State a rapid and efficient telecommunication network facility. As stated, the main principle of this regulation is the requirement that the provider of the network services will make available the basic telecommunication services to all the customers residing within its exclusive territory. The practical meaning (profit wise) of this policy is that the provider of network services is not allowed to select his customers just according to their contribution to his profits but must serve all customers even if some of them are generating negative profits. That is, some customers must be served at a price “bellow” cost.1


Network Service Service Area Telecommunication Network Production Center Total Profit 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Averch H. and L.L. Johnson. 1962. “Behavior of Firm Under Regulatory Constraint.” American Economic Review 52: 1053–1069.Google Scholar
  2. Bental, Benjamin and Menahem Spiegel. 1994. “Deregulation Competition, and the Network Size in the Market for Telecommunication Services.” Journal of Regulatory Economics 34: 105–119.Google Scholar
  3. Beckmann, Martin J. 1976. “Spatial Price Policies Revisited.” Bell Journal of Economics (Autumn) 7: 619–30.Google Scholar
  4. Crew Michael A., and Paul R. Kleindorfer. 1998 “Efficient Entry, Monopoly and Universal Service Obligation in Postal Service.” Journal of Regulatory Economics 14: 103–125.Google Scholar
  5. Crew Michael A., and Paul R. Kleindorfer (eds). 1999. Emerging Competition in Postal and Delivery Services, Boston, MA: Kluwer Academic Publishers.Google Scholar
  6. Haddock, David D. 1982. “Basing Point Pricing: Competitive Vs. Collusive Theories.” American Economic Review 72: 286–306.Google Scholar
  7. Posner, Richard. 1971. “Taxation By Regulation.” Bell Journal of Economics and Management Science 2(1): 22–49.Google Scholar
  8. Rowe, Bob, Peter Blum, and Joel Shifman. 1999. “Universal Services: The Case of Rural America.” Public Utility Fortnightly 137 (14): 48–53.Google Scholar
  9. Spiegel, Menahem. 1982. “Pricing Policies Under Conditions of Spatial Competition.” The Journal of Industrial Economics 31(1–2): 189–194.Google Scholar
  10. Stigler, George J. 1949. “A Theory of Delivered Price Systems.” American Economic Review 39: 1143–59.Google Scholar
  11. Telecommunication Act of 1996, Pub.LA.No104–104, 110 Stat.56 (1996).Google Scholar
  12. Thisse, Jacques-Francois and Xavier Vives. 1988. “On the Strategic Choice of Spatial Price Policy.” American Economic Review 78 (March): 122–37.Google Scholar

Copyright information

© Springer Science+Business Media New York 2000

Authors and Affiliations

  • Menahem Spiegel
    • 1
  1. 1.Department of Finance and Economics Graduate School of ManagementRutgers UniversityUSA

Personalised recommendations