History: Public Service Obligation

European Union law defines public service obligation (PSO) as an obligation imposed on an organisation by the lawmaker or a contract to provide a service of general interest within the borders of the European Union. The PSO may regard any field of public service, usually transport, energy, social services, banking and postal services are considered as sectors where PSO is relevant¹.

Transport law

Public Service Obligation is an arrangement between a governing body or other authority which offers an auction for subsidies and a public or private company which gains monopoly to operate a specified service of public transport for a specified time for the given subsidy. This happens because otherwise there would be not enough revenue for that route to be profitable in a free market but there is a social need for that transport route to be available. Public service obligation can be applied to any mode of transport: air, road, sea or rail.

In the past public transport was traditionally operated by a state company, for example the national railway company. Private companies were granted some privileges (with or without subsidy) and that lead to monopolies. In the current economic climate public transport has been deregulated (especially in Europe) so the lowest bidder at the regular auctions gets to carry the passengers for a specified period of time.

Public service obligation was used in some cases to privatize former government owned transport. The infrastructure is separated from the operation and can be either private or public. There are cases when the ownership of the vehicles (ferries or rolling stock is retained by the public authority.

Specification

European Union

United States

Related links

1. A Quality Framework for Services of General Interest in Europe, Brussels 20.12.2011 COM(2011)900 Final
2. Public Service Obligation Levy 2015/2016