Universal service obligations and the liberalization of network industries: taming the Chimera?

This paper considers the protection of universal service in the network industries, with a focus on the postal service and telecommunications sectors. We define the concept of universal service and explain how it was seen as a necessary quid pro quo for securing the liberalization agenda in the EU. We go on to explain and analyse the two competing means of protecting and compensating universal service, either under the State aid regime or the relevant sectoral legislation. In order to gain a better understanding of how these competing mechanisms operate in practice, we look in detail at two areas where liberalization and universal service are in particular tension: (i) high-speed broadband and (ii) letter collection and delivery. We conclude by discussing some of the problems of using State aid rules as a substitute for a sectoral framework and contemplate the future of universal service.