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The rationales for public service obligations listed above as economics-based do not form an exhaustive list of such rationales, but should give some flavor of the most important ones. It should be noted that public service obligations which do not base their foundation exclusively on economic reasoning can also be justified by social rationales below.
3.2 Social rationales
Although public service can be regard economic-operated, because of its general interest it should be regulated on another more important base of social reasoning. The main goal is designed to more particularly to benefit consumers and users. Consumer-oriented social obligations would seem to overlap with the economic rationales above, but the crucial distinction to be made is that its basis, rather than being to assist in a more efficient allocation of resources to consumers, is basically a distribution of wealth or opportunity. To illustrate the difference between economic and social rationales for obligations, a distinction should be made in affordable price control, which is designed to support every consumer available public service regardless of cost difference. So the base of affordable price control seems more close to social rationales. But under economic rationales reasonable price control, which has been discussed above, were justified by a desire to avoid unfair competition and to realize allocative efficiency. Except social rationales containing some economic factors there involves large matters of governmental value, such as obligations of safety and security.
From the analysis above it will be recalled that three types of public service obligations were identified: obligations of pure natural monopoly, obligations of competition, and social obligations. Notwithstanding each type is not most overriding goal than the others in public service obligations, none but the obligation of network access and interconnectivity provided by the Commission contains elements of effective competition. So it seems that obligations of effective competition are not more crucial than the other two types in liberalization. Subsequently the writer has confidence in that it may be one of reasons for the judgment in Almelo-case .
4. Obligations of Public Service
In its liberalization policy for regulated public services, the Commission has opted for an approach that considers regulated public services per sector, as each sector has its own technological and market characteristics. Nevertheless, there are some common elements in the legislation and proposals in all of the sectors concerned, which are public service obligations. Because PSOs is an evolutionary concept subject to technology, economic and social changes and will evolved over time, and because PSOs is defined either on the Community level or in the discretion of Member States, defining PSOs is being a necessary prerequisite for any formulation of a coherent public service policy both at national and Community level. Such harmonization could provide the basis for further sector-specific legislation, which could implement the objectives set out in PSOs, thus consolidating the single market in this field.
4.1 Obligations of Pure Natural Monopoly
4.1.1 Price Control
The public service are industries with substantial economies of scale — there are very high fixed costs invested in the network, while the marginal costs of operation are relatively low. It is a long time practice that the regulators determine price on the average total costs. By this method the regulators to some extent distribute the total costs into different items of service; then require the return produced by every item is sufficient to counteract the cost concerned. The most limitation of the average total costs is that it has no consequence with the marginal cost. So if some service is added, it cannot illustrate the cost added; under circumstances of some service reduced, neither do the cost reduced. Another limitation of the average total costs is lack of considering demand. Nevertheless economic analysis tells us that it is vital to pay attention to demand when choosing the best price. Therefore public service can not pay off by price determined on the average total costs. Furthermore this pricing method may lead to seriously low efficiency and restricting innovation and competition.
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