Universal service obligations and public payphone use: Is regulation still necessary in the era of mobile telephony?

• We analyse the impact of universal service obligations (USO) on payphone use.
• We use micro-level data on 106,989 households from 27 EU countries, from 2005 to 2009.
• Particular focus on low-income households and households living in rural areas.
• Unlike USO, coverage obligations have a significant but low impact on payphone use.
• Absent regulation, payphone use would have declined by 15% between 2005 and 2009.

This paper analyses empirically whether universal service obligations for public payphone provision are still relevant in the European electronic communications market. It relies on micro-level data on 106,989 households from 27 EU countries, from 2005 to 2009, to estimate the impact of universal service obligations on public payphone use. A counterfactual scenario predicts the average use of public payphones if no universal service obligations were imposed in the EU countries. The estimation results show that universal service obligations do not have any significant impact on public payphone use. Only coverage obligations, i.e., when the law imposes a minimum number of payphones depending on the density of population, have a positive, though low, impact on payphone use. The counterfactual model predicts that if universal service obligations had been absent, between 2005 and 2009 public payphone use would have been 15% lower.