Non-Commercial Service Obligations 2003 The OECD Competition Committee debated non-commercial service obligations in October 2003. This document includes an executive summary and the documents from the meeting: an analytical note by Mr. Sean Ennis for the OECD, written submissions from Australia, Austria, Canada, Czech Republic, Denmark, the European Commission, Hungary, Japan, Norway, Portugal, Switzerland, Chinese Taipei, the United States, as well as an aide-memoire of the discussion. Universal service obligations are common in many of the infrastructure sectors. The obligations are often cited as a justification for limiting entry of new providers because the new providers would cherry-pick the high profit customers who provide the basis for subsidisation of another group of customers. When obligations are beneficial, there are a number of policy traps that can be encountered. Obligations are often not well-focused on the customers who are meant to receive help. Obligations are frequently defined narrowly in ways that disfavour new technologies and cause extensive waste; and financing for the non- commercial obligations can often be raised in more efficient ways than through cross-subsidies and can often be spent on multiple service providers rather than one preferred provider. Falling into these traps can create incentives for over-investment in certain infrastructure technology and under-investment in other technology. This document provides guidance on the competition problems that can arise from universal service obligations and on some ways to limit these problems. Structural Reform in the Rail Industry (2005) Competition and regulation issues in telecommunications (2002) The regulation of access services (2002) Promoting competition in postal services (1999) Railways: structure, competition and regulatory policy (1998) Unclassified DAFFE/COMP(2004)19 Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development 18-Aug-2004 ___________________________________________________________________________________________ _____________ English/French DIRECTORATE FOR FINANCIAL, FISCAL AND ENTERPRISE AFFAIRS COMPETITION COMMITTEE Unclassified DAFFE/COMP(2004)19 NON-COMMERCIAL SERVICE OBLIGATIONS AND LIBERALIZATION English/French JT00168156 Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format DAFFE/COMP(2004)19 FOREWORD This document comprises proceedings in the original languages of a Roundtable on Non- Commercial Service Obligations and Liberalization which was held by the Working Party n°2 of the Competition Committee in October 2003. It is published under the responsibility of the Secretary General of the OECD to bring information on this topic to the attention of a wider audience. This compilation is one of a series of publications entitled "Competition Policy Roundtables". PRÉFACE Ce document rassemble la documentation dans la langue d'origine dans laquelle elle a été soumise, relative à une table ronde sur les obligations de services non commerciaux et leur libéralisation, qui s'est tenue en octobre 2003 dans le cadre du Groupe de Travail n°2 du Comité de la concurrence. Il est publié sous la responsabilité du Secrétaire général de l'OCDE, afin de porter à la connaissance d'un large public les éléments d'information qui ont été réunis à cette occasion. Cette compilation fait partie de la série intitulée "Les tables rondes sur la politique de la concurrence". Visit our Internet Site -- Consultez notre site Internet http://www.oecd.org/competition 2 DAFFE/COMP(2004)19 OTHER TITLES SERIES ROUNDTABLES ON COMPETITION POLICY 1. Competition Policy and Environment OCDE/GD(96)22 2. Failing Firm Defence OCDE/GD(96)23 3. Competition Policy and Film Distribution OCDE/GD(96)60 4. Competition Policy and Efficiency Claims in Horizontal Agreements OCDE/GD(96)65 5. The Essential Facilities Concept OCDE/GD(96)113 6. Competition in Telecommunications OCDE/GD(96)114 7. The Reform of International Satellite Organisations OCDE/GD(96)123 8. Abuse of Dominance and Monopolisation OCDE/GD(96)131 9. Application of Competition Policy to High Tech Markets OCDE/GD(97)44 10. General Cartel Bans: Criteria for Exemption for Small and Medium-sized Enterprises OCDE/GD(97)53 11. Competition Issues related to Sports OCDE/GD(97)128 12. Application of Competition Policy to the Electricity Sector OCDE/GD(97)132 13. Judicial Enforcement of Competition Law OCDE/GD(97)200 14. Resale Price Maintenance OCDE/GD(97)229 15. Railways: Structure, Regulation and Competition Policy DAFFE/CLP(98)1 16. Competition Policy and International Airport Services DAFFE/CLP(98)3 17. Enhancing the Role of Competition in the Regulation of Banks DAFFE/CLP(98)16 18. Competition Policy and Intellectual Property Rights DAFFE/CLP(98)18 19. Competition and Related Regulation Issues in the Insurance Industry DAFFE/CLP(98)20 20. Competition Policy and Procurement Markets DAFFE/CLP(99)3 21. Regulation and Competition Issues in Broadcasting in the light of Convergence DAFFE/CLP(99)1 3 DAFFE/COMP(2004)19 22. Relationship between Regulators and Competition Authorities DAFFE/CLP(99)8 23. Buying Power of Multiproduct Retailers DAFFE/CLP(99)21 24. Promoting Competition in Postal Services DAFFE/CLP(99)22 25. Oligopoly DAFFE/CLP(99)25 26. Airline Mergers and Alliances DAFFE/CLP(2000)1 28. Competition in Local Services DAFFE/CLP(2000)13 (Roundtable in October 1999, published in July 2000) 29. Mergers in Financial Services DAFFE/CLP(2000)17 (Roundtable in June 2000, published in July 2000) 30. Promoting Competition in the Natural Gas Industry DAFFE/CLP(2000)18 (Roundtable in February 2000) 31. Competition Issues in Electronic Commerce DAFFE/CLP(2000)32 (Roundtable in October 2000) 32. Competition and Regulation Issues in the Pharmaceutical Industry DAFFE/CLP(2000)29 (Roundtable in June 2000) 33. Competition Issues in Joint Ventures DAFFE/CLP(2000)33 (Roundtable in October 2000) 34. Competition Issues in Road Transport DAFFE/CLP(2001)10 (Roundtable in October 2000) 35. Price Transparency DAFFE/CLP(2001)22 (Roundtable in June 2001) 36. Competition Policy in Subsidies and State Aid DAFFE/CLP(2001)24 37. Portfolio Effects in Conglomerate Mergers DAFFE/COMP(2002)5 38. Competition and Regulation Issues in Telecommunications DAFFE/COMP(2002)6 39. Merger Review in Emerging High Innovation Markets DAFFE/COMP(2002)20 40. Loyalty and Fidelity Discounts and Rebates DAFFE/COMP(2002)21 41. Communication by Competition Authorities DAFFE/COMP(2003)4 42. Substantive Criteria used for the Assessment of Mergers DAFFE/COMP(2003)5 43. Competition Issues in the Electricity Sector DAFFE/COMP(2003)14 44. Media Mergers DAFFE/COMP(2003)16 4 DAFFE/COMP(2004)19 TABLE OF CONTENTS EXECUTIVE SUMMARY ............................................................................................................................ 7 SYNTHÈSE.................................................................................................................................................. 13 BACKGROUND NOTE............................................................................................................................... 21 NOTE DE RÉFÉRENCE.............................................................................................................................. 69 QUESTIONNAIRE SUBMITTED BY THE SECRETARIAT ................................................................. 123 QUESTIONNAIRE SOUMIS PAR LE SECRÉTARIAT.......................................................................... 127 NATIONAL CONTRIBUTIONS Australia...................................................................................................................................................... 133 Austria......................................................................................................................................................... 139 Canada ........................................................................................................................................................ 149 Chinese Taipei ............................................................................................................................................ 159 Czech Republic........................................................................................................................................... 171 Denmark ..................................................................................................................................................... 181 Hungary ...................................................................................................................................................... 187 Japan ........................................................................................................................................................... 193 Norway ....................................................................................................................................................... 197 Portugal....................................................................................................................................................... 199 Switzerland ................................................................................................................................................. 215 United States..............................................................................................................................................