Universal Service Obligations

Universal service obligations are common in many of the infrastructure sectors. The obligations are often cited as a justification for limiting entry of new providers because the new providers would cherry-pick the high profit customers who provide the basis for subsidisation of another group of customers. When obligations are beneficial, there are a number of policy traps that can be encountered. Obligations are often not well-focused on the customers who are meant to receive help. Obligations are frequently defined narrowly in ways that disfavour new technologies and cause extensive waste