infonet-economy

Mandating universal service requires the public to decide what services people should have and what prices they should pay. Postal services have traditionally been financed by charging the senders only, while recent steps in the liberalization of the postal sector forced policymakers to find a broader financial basis for postal services. The existence of a receiver externality, the benefits enjoyed by the receiver of a postal item, implies that also they should contribute to the financing of delivery costs. Moreover, since it is rather the operation of a delivery network than an individual sending that contributes to the costs of the postal operator, it is optimal that also the publicwho profits from its existence bears part of the cost.
We discuss the revenue effects of alternative financing regimes, arguing that introducing the possibility of new levies from the receivers' side may yield adverse effects in terms of operator revenue: Receivers opting for free P.O. box delivery instead of costly doorstep delivery destroy the positive welfare attribute of non-rivalry in last-mile delivery. This lowers the total social value of the postal network (and the services provided by it) to the public and therefore also its willingness to contribute to its financing.