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A pre-condition for efficient operation of public service is that it must have the ability to choose its own prices (possibly subject to some overall constraint on market power). In the situation of high fixed cost and low marginal costs, if the public service is to recover its total costs it is desirable for public service engaged in some form of price discrimination (except in sector of energy). The simplest form of price discrimination is charging different prices to different ender-users, according to the demand of those ender-users. Only through price discrimination can the costs produced by economies of scale be exactly distributed into different services. And exact distribution of costs can realize economic pricing, which then produces adequate profit for public service. Consequently, price discrimination to some extent can ensure effective operation in public service.
The second pre-condition for effective operation of public service is that it can freely setup its own service. Now that public service can be engaged in some form of price discrimination, the different costs of every item of public service can be reflected clearly. Firstly, industries of public service can increase prices of some items with high marginal costs or reduce in adverse conditions. Secondly, industries of public service must unrestrictedly expand new service items or suspend existing ones. For example, exists as price discrimination above, if an item can not reflect its added cost, then the industry should suspend the item. Otherwise, industries of public service can not have economic efficiency. But when regulators find the suspending item has general interest, they can force the industries to provide the item with State subsidies or purchase this item themselves.
4.1.2 Quality Control
The definition, monitoring and enforcement of quality requirements by regulators have become key elements in the regulation of general interest. There are two problems existing in quality control as follows:
The first is lack of uniform quality standards in Community level. Firstly, no single organization encompasses all aspects of public service standard-setting. European public service standards are defined by a host of institutes such as the European Telecommunications Standard Institute (ETSI), Comité Européan en Normalisation (CEN), and Comité Européan en Normalisation Ėlectrotechnique (GENELEC). Secondly, there are no European standard-setting institutes in some sectors. Thirdly, in general the Member States are authorized to define quality levels for public service. The organizations raise questions about the efficiency and efficacy of such forms of market governments. The Multiplicity of organizations and interests involved in setting standards makes mote difficult any assessment of impact and effectiveness of these institutions in tackling barriers to trade. Consequently, agreements must be reached within different standard organizations, and also between different Member States. Approach to this should be base on the sameness and distinctness of definitions of every institute.
The other is that the implementation of quality standards is almost completely within the Member States’ jurisdiction. Quality control has become ever more critical in European efforts to reconcile regulation and free trade.
4.2 Social Obligations
4.2.1 Universal Service Obligations
The dynamic concept of universal service obligations was originated from telecommunication sector and then developed into postal sector. Although the rationales of this concept is social-based, in telecommunication and postal sectors the rationales are to some extent economic-based, because the more customers who join the network the more valuable it is for all customers. Because of this advantage to some degree universal service obligations can also apply to the other network industries. It guarantees that everybody has access to the service at affordable price and that the service quality is maintained and, where necessary, improved. Universal service obligations include three sub-categories — accessibility, affordability and quality.
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