out even by a study on universal service in the U.S. authored by a number of Postal Rate Commission members. $ ^{70} $

In this study, the authors note that the USO does not necessarily mean ubiquitous counter service. There are many ways of delivering the counter service, including providing mobile counters by postal couriers on their rounds (especially effective on rural routes). The study noted that, in the US, there were 38,000 postal facilities, many of which sat idle for large parts of the day. Closing some 7,000 of these would only provide a saving of the order of 0.6 percent of total costs. Cost savings could also be incurred by reducing the delivery days on non-business routes (a 5 day service which is the norm in many countries would give rise to a 3 percent cost saving). The biggest saving by far, however, would be from equalizing postal workers with comparable private sector counterpart wage levels. In the US, where postal worker wage levels are 21-35 percent higher than comparable private sector workers, the saving would be between 12 and 20 percent of total costs. The reason the wage premium is sustainable is the lack of competition, so once competition is introduced the Post Office would likely benefit from these major savings quickly. In most privatizations, substantial workforce reductions occur – (40 percent between 1988 and 2001 in New Zealand, 15 percent between 2002 and 2005 in the UK). These reductions and cost savings dwarf tinkering with the USO. However, the significant benefit of the USO is the fact that the Post Office already has built out infrastructure as a result of the USO.

The USO is often regarded as a set of obligations fixed in stone. We would argue that this is not the correct way of analyzing the USO. The USO is a living obligation which may change with time and with liberalization. For example, the notion of the USO requiring a certain number of counters, if technology supersedes the use of counters for sorting, must itself be altered to take into account these dynamic changes.

This is best illustrated by looking at the telecoms example. Here, the notion of a USO tied to an incumbent wire-line company does not make sense when technology and cost reduction have totally transformed the way that basic telecoms services are delivered to consumers. Wireless telephony has lower cost than wire-line, and a USO that applies to wire-line incumbent companies can distort the market by making wire-line costs artificially lower than wire-less costs. Even newer technologies like Voice Over Internet Protocol (“VOIP”) are dramatically changing the very business model for the provision of telephony services. For VOIP, distance and duration of calls does not give rise to cost consequences. If consumers could be connected via VOIP, any USO for the incumbent would be damaging to the up-take of this new technology.

A recent study by the UK’s telecoms regulator, the Office of Communications (OFCOM), has shown again that the USO can be both benefit and burden. Specifically, the OFCOM study found that the incumbent – British Telecom (BT) – could receive the following benefits from the USO:

1. Enhancement of corporate reputation.

2. Marketing and brand recognition.

3. Information on how the telephone system is used by customers.

4. Benefits associated with customer life cycles.