Note 2-24

24 The methods for covering the cost of expenditure for universal services each have their advantages and weaknesses. A cross-subsidy method does not require much expenditure to implement, but it assumes a monopolistic business and it has to set high charges in order to maintain the universal service, so it leads to distortions with respect to efficient resources allocation. The access charge method allows for new companies entering the market; but there is a possibility that arbitrariness will enter the calculation of the access charge, and it cannot necessarily be said that it is competitively neutral. The universal service fund method is competitively neutral because any business meeting certain conditions can receive support from the fund through the provision of a universal service, but it incurs management expenditure related to the calculation and levying of expenditure. Under the direct subsidy method, if users can freely select their service provider the competition principle is effective but if no service provider exists the competition principle does not function. Furthermore this method is faced with the problems that the financial burden is large and expenditure is required for the selection of recipients of subsidies, etc.