Research On The Compensation Mechanism For The Universal Service In Postal Sector

Postal industry is the foundation of social development. With its typical positive externality and natural monopoly, for a long time, it is exclusive operated by the government as a public-service industry all over the world. Since the late 20th century, the marketization reform of other natural monopoly industries, such as Telecommunications, Electricity and so on, have achieved significant results. Many countries promote the rapid development of national postal industry through separating government functions from enterprise management and introducing competition mechanism, which set off a wave of postal reform.29th November,2006, China Post Group was established, which marked the beginning of postal reform through separating government functions from enterprise management and divided operation in China.The reform of marketization and the introducing of competition present a new challenge for universal postal service. One hand, postal carries, which aim at maximizing the profits of the company, would unwilling to bear the loss due to universal service. Meantime, the "Skimming" behavior makes internal cross-subsidies that are based on the traditional monopoly operation unsustainable. On the other hand, since universal postal service is a significant method to protect human rights, promote economic development and improve social welfare, the government has an obligation ensure all citizens can access to basic postal services. In view of this, in the context of postal reform, how to build efficient universal service compensation mechanism, to make the universal service postal carries participate in the competition and gain necessary compensation to remain their vitality and zeal, and to provide postal service to our residents practically, has important theoretical and practical significance for academia, the postal regulatory agencies and the postal carries.Based on the research of predecessors and the research on universal services in other industries, this paper focuses on the three core problems of universal postal service and proposes three main innovation points:1. Why we should provide universal postal service.At present, the literatures on universal service mostly admit that universal postal service is required, and then basing on this premise to do researches on universal service. Some academic points in foreign countries hold that universal service cannot be naturally reasonable, and the lost of efficiency cannot be oversaw. This paper bases on the real data of China in 1990-2010, and adopts linear model and double-log model to quantitatively simulate the relations of universal postal service and the development of economics. It also proves the conclusion derived by the model by using data in areas of high cost. From the angle of the close relation between universal postal service and regional economic development, it states the necessity to provide universal postal service in high cost region.2. How to provide universal postal service at areas of high service costs.The core problem of regulating universal service is the compensation of universal service in high cost regions. Friedman, the U.S. economics master, has a well-known thesis on the regulation of industry of natural monopoly:"Unfortunately, there is no good way to solve the natural monopoly problem, only three not very good ways:first, private monopolies that are not regulated by the government, and second, private monopolies that is regulated and the third the operation of the government in person, which can only be the minimum when three evils". Therefore, basing on explaining the exclusive sales, government subsidies, and fund subsidies of universal service, this paper does not try to compare the advantages and disadvantages of these ways but from a reasonable amount of subsidies, competition neutrality point of view, make an in-depth study on impacts on the market competitors due to different subsidies, the scope of subsidies.3. How to provide universal postal service for low-income groups.At first, this paper qualitatively explains on the need of universal service subsidies for low-income people. Second, quantitatively analyzes of the main factors that impact on the postal consumption of residents, and from the theoretical and empirical perspective, get the result that personal disposable income and the level of postal price significantly and directly affect the post consumption. And with the simulation using actual data of low-income areas, it calculates the price elasticity of the demand for postal service of high and low income groups. At last, comparing the impacts on customer welfare and producer surplus by uniform pricing and price discrimination, this paper illustrates that it is a better way to realize compensation policy by making low-price policy for low-income people, and verifies from another perspective that the current uniform pricing which distortions the price does not meet the needs of the postal market economy.Based on the research above, this paper make the following conclusions:First, through the actual data in China, it simulates the associated model between postal development and regional economic growth to prove the universal postal service and regional economic development are inseparable in close contact. From the internal efficiency perspective, regulating universal service leads to the free market economy distortions and efficiency losses. However, because of the typical external characteristics of postal sector, universal postal service mutually promotes the regional economic growth, thus the existence of universal postal service has its reasonability.Second, in the competitive environment, for the external costs of subsidies supported by the universal service funds, different amounts of subsidies and different ways of financing will cause different effects on main body of market competition. This effect mainly according to the objective conditions of the postal market. In different ways of subsidies, when the net cost of universal service higher than different thresholds, the postal service compensation mechanism may cause unfair competition or industry losses that lead to unsustainable development. Therefore, different ways of subsidies apply to different scope. From a neutral competitive point of view, the mutual funding, which is mostly adopted by current theory and practice, has narrower application scope than the scope of government finances and services or payment methods.Third, for the compensation mechanism for low-income people, since the price elasticity of demand for low-income people is significantly lower than for high-income earners in China, provide postal services by differential pricing not only enhance consumer welfare, but also help improve the producer surplus. Therefore, income compensation mechanism should be achieved mainly through differential pricing.