Questioning the Monopoly-Supported Postal USO in Developing Countries

The monopoly-supported universal service obligation (USO) is usually defended on the grounds that the monopoly allows for cross-subsidy in letter services that in turn allows universal access to a service of great importance to all. This paper argues that letter delivery (as opposed to other services that may be provided by post offices) is not in universal demand in poor countries, that the size of the market in developing countries is such that USOs could not be met under the monopoly model, and that the monopoly carries heavy costs for sector development and consumer welfare. It proposes in the place of the postal USO a competitive approach involving universal access to a range of services that poor people have a need to access.