By Stephen Smoot
Since the New Deal, the Universal Service Fund has helped to bring needed dollars to rural telecommunications projects built and administered by cooperatives such as Hardy Telecommunications. In the wake of a legal challenge to its current format, a working group of United States Senators continues to examine the fund to work towards changes.
In May of 2023, Senator Shelley Moore Capito joined U.S. Senators John Thune (R-S.D.) and Ben Ray Luján (D-N.M.), Amy Klobuchar (D-Minn.), Gary Peters (D-Mich.), and Jerry Moran (R-Kan.). A release from Senator Capito’s office stated that the “goal of this working group is to create a bipartisan forum to guide education, awareness, and policy-making on this topic.”
By 2025, the United States Supreme Court upheld the Universal Service Fund more out of convenience than an affirmation of the legal soundness of its funding source. The USF is operated by a non governmental entity that has the power to levy fees on telecommunications customers for government purposes.
Opponents argued that the fees represented taxation by another name and filed suit to end the program in the current format. Only government can tax.
Because of the tenuous constitutionality of the USF, the working group addressed a letter in mid-December to the Federal Communications Commission with a series of requests. These originated in communications sent to the working group with ideas and concerns. The letter stated that “this fall, our USF Working Group fielded a new slate of comments from a variety of stakeholders on possible reforms to USF programs, and the Working Group is actively reviewing those recommendations.”
It went on to add that “we take this responsibility seriously, recognizing the vital role that USF programs play in ensuring that households, schools, libraries, health care providers, and rural communities across the nation have access to essential communications services.”
With the future of USF still uncertain, the working group stated that “given ongoing discussions about the Fund’s stability, contribution methodology, and long-term policy direction, it is important for our offices to receive updated information directly from Commission staff.” Specifically, the letter asked for “the most recent program outlays and cost projections across each USF program; Assessment of the USF contribution factor and recent fluctuations; Rulemakings or reforms of USF programs under consideration by the Commission; and (also) any administrative challenges, program integrity concerns, or operational updates pertinent to congressional oversight of the Fund.”
Questions about the Fund in 2025 came prior to the administering entity of it, the Universal Service Administrative Company, to announce a USF fee of 37.6 percent, slightly down from its all-time high.
The FCC stated in the announcement letter that “contributions to the federal universal service support mechanisms are determined using a quarterly contribution factor calculated by the Federal Communications Commission (FCC or Commission).
It went on to add that “the Commission calculates the quarterly contribution factor based on the ratio of total projected quarterly costs of the universal service support mechanisms to contributors’ total projected collected end-user interstate and international telecommunications revenues, net of projected contributions.”
