Telecommunications Universal Service Problems

With the development of telecommunication reform, telecommunication universal service obligation (USO) reform is becoming the key and central issue in telecommunication reform. This paper addresses some important problems on telecommunication USO including economics rationale, financing mechanism, measurement of USO cost and USO under comparative competition. Applying adverse selection model to analyze USO under comparative competition is the focus of this paper. The result of the model shows that (1) asymmetric information will lead to a higher market price and a lesser network expanding scale and (2) the basic conclusion will not change except that distortion may become bigger or smaller when collusions are introduced. The paper takes the lead in china to analyze USO collusion with soft information model.