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As Green Paper said, the term public service is less precise and it can leads confusion. From this paragraph, it seems that Commission’s original idea was to abandon the definition. But this term is so important that its definition can not be avoided. Therefore in the definition of public service obligations the Commission cannot but defining public service as service with certain public interest. Furthermore the Commission gave us some examples of public service, such as air, rail, road transportation and energy, however not only the definition is not normative but also we still do not know the standard how to identify public service. So its definition should be furthered.
What is public service? By the definition of economist P. Samuelson, public service is a service whose consumption by one consumer do not reduce the consumption by others. And “pure” public service has two characters, (1) non-rivalness, that is to say that the marginal cost of public service with increasing consumers is equal to zero; (2) non-excludability, which means that providers of public service can impossibly or difficultly to exclude free-riders. Let us analyze whether “public service” used by the Commission has the same meaning with that used by P. Samuelson. Taking the examples of public service given by the Commission, the marginal cost of these sectors drops with increasing consumers but will not reduce to zero. And the providers of these sectors can easily exclude free-riders. So the terms used by two parties are not the same one.
After Samuelson, other economists accepted the theory that there are more other service between pure public service and pure private service. This service is called mixed service or quasi-public service, which refers to service with non-rivalness and excludability. In view of analysis above, public service defined by the Commission has excludability but not non-rivalness. However, let us study it in-depth. The marginal cost of these sectors drops with increasing consumers, although it is not zero, it is very similar to the zero change of non-rivalness. As we usually admit there is weak competition (weak-rivalness) in these sectors, from this angle the term of public service used by the Commission is very close to quasi-public service used by public economists. Consequently when I research on public service obligations below, I will use theory of quasi-public service in public economics as reference.
2.2 Universal Service Obligations
Universal service obligations is an evolutionary concept, developed by the Community institutions, referring to a set of general interest requirements ensuring that certain services are made available at a specified quality to all consumers and users, independently of geographical location, and, in the light of specific national conditions, at an affordable price. Its dynamic definition was developed from the sectors of telecommunications, electricity, and postal services, not all public service sectors. From its definition we can know that universal service obligations compose of three elements: accessibility, affordability and a set of specific quality. The objective of universal service obligations is to protect consumers’ and users’ interest. Furthermore its consumers’ and users’ interest protection is only limited to the three elements above. But the basic requirements of public service are not limited to these, whose requirements should include other more elements, i.e. competitive elements (such as market entry for new entrants, effective competition between suppliers), social elements (such as safety, security, availability of redress mechanism and etc.). So the content of public service obligations is far broader than that of universal service obligations.
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