Cream skimming

Cream skimming is a perjorative term used to refer to the perceived practice of a company providing a product or a service to only provide it to the high-value or low-cost customers of that product or service, and either leaving the more expensive or harder to service customers without the desired product or service at all or "dumping" them on some default provider, who is left with less of the higher value customer whom, in some cases, would have used the extra revenue from lower cost or higher value customers to subsidize or reduce the cost to service the higher-cost customers. It is considered a type of moral hazard.

Whether or not the perceived negative effects of cream skimming actually do occur - or only occur in limited circumstances - is a matter of debate.

For example, it was believed that MCI and Sprint long distance telephone companies would end up taking away very high value business and some residential accounts from AT&T, leaving AT&T primarily with higher-cost to service residential and rural accounts, meaning all customers of AT&T would end up paying more. This could conceivably lead to a vicious circle as more customers leave the high-price carrier for the lower priced carrier. This scenario did not occur, as various technological changes (spurred in part by the availability of competition) eventually lowered the net cost for most long-distance telephone calls.

The United States Postal Service has a monopoly on the delivery of "non-urgent" first-class mail, where delivery is not time sensitive. It also has the exclusive right to use its customer-owned mail boxes for placing the customer's mail for delivery. This law is in effect because it is believed that were the Postal Service not have this monopoly, other competing mail carriers would take over the most lucrative parts of the business (e.g. local delivery of bills in dense urban areas), leaving the Postal Service with more expensive urban deliveries and rural service.