USF Survives Supreme Court Ruling, But Carriers Still Face Rising Fees

The Universal Service Fund and its four funding programs survived a major legal challenge in June of 2025.  But the FCC’s multi billion dollars per year broadband and telecom subsidy isn’t out of the woods yet.  The legal case concerning the USF, which was put on hold during the government shutdown, resumed on December 3, 2025.

The Constitutional Question Is Settled

The biggest threat to the USF's existence was resolved in June 2025 when the Supreme Court ruled in FCC v. Consumers' Research that the USF's funding mechanism is constitutional clearing one major hurdle.

• The key legal challenge centered on whether Congress improperly delegated its taxing authority to the FCC and its administrator, the Universal Service Administrative Company (USAC).
• The Supreme Court's 6-3 decision reversed a lower court ruling, holding that the FCC's authority to set and administer the USF contribution system does not violate the Constitution's non-delegation doctrine.

The takeaway: The USF's legal foundation is secure for the moment. However, the debate now shifts entirely from whether the program can exist to how it should exist in the 21st century.  

The New Political and Financial Challenges

With the legal cloud lifted, policymakers must now face the reality of an antiquated system that is structurally incompatible with the modern digital economy. The current challenges fall into two primary buckets: Funding and Affordability.

1. The Shrinking, Unsustainable Funding Base

The most urgent problem is the USF's broken funding model.

• The Problem: The USF is primarily funded by mandatory fees levied on traditional interstate and international voice service revenues—i.e., landlines and old-school phone service.
• The Result: As Americans increasingly switch to mobile and internet-based communication (which largely do not contribute), the pool of revenue funding the USF shrinks. This forces the FCC to dramatically raise the Contribution Factor (the percentage carriers must pay) to maintain the fund's budget.
• The Consequence: The Contribution Factor has skyrocketed, recently hitting record highs (e.g., projected to hit around 38.1% for Q4 2025). This burden is passed on to consumers as an increasingly high Universal Service Charge on their bills—disproportionately affecting the very low-income consumers the fund is meant to help.

2. The Crisis in Affordability (Post-ACP World)

The constitutional debate also overshadowed the collapse of a critical, temporary program: the Affordable Connectivity Program (ACP).

• The Background: The ACP provided a crucial monthly discount (up to $30, or $75 on Tribal lands) to over 23 million households to secure or maintain their broadband connections. It was not part of the USF.
• The Collapse: The ACP lapsed due to congressional inaction in May 2024.
• The Void: Its expiration left millions of families without essential subsidies. The only permanent affordability mechanism remaining under USF is Lifeline, which provides a much smaller benefit (currently $9.25/month for most consumers) and was originally designed for voice service in 1985. Lifeline is simply not sized or structured to meet modern broadband affordability needs.

The Path Forward: Reform Is Inevitable

The political pressure for USF reform is now at an all-time high, with a consensus emerging that the system must change. Congressional and FCC discussions are focused on three major proposals:

A bipartisan, bicameral USF Working Group in Congress has been reconstituted to tackle these issues, suggesting that legislative action is a serious possibility.

In short, the Universal Service Fund has survived the legal battle, but the war for its long-term viability has just begun. The fundamental question for Congress is whether they will allow a 20th-century funding mechanism to continue funding a 21st-century digital lifeline.

What can providers do in the meantime to reduce their USF fees?

While the large, systemic funding issues require Congress and the FCC to act, individual telecommunications carriers can immediately and significantly reduce their own Universal Service Fund obligations through precise data analysis using firms like Advanced Technologies and Services, Inc. (ATS).

The Overpayment Problem: The Safe Harbor Trap

The FCC allows carriers, particularly Voice over Internet Protocol (VoIP) providers, to use a "Safe Harbor" default percentage to estimate what portion of their revenue is subject to the USF fee (i.e., interstate).

• The Default: For VoIP providers, the Safe Harbor assumes 64.9% of their revenue is interstate.
• The Reality: For many carriers, especially regional providers, their actual interstate traffic is often much lower. By using the inflated Safe Harbor rate, they are effectively overpaying their USF contribution by tens or even hundreds of thousands of dollars annually.

The ATS Solution: Data-Driven Jurisdictional Analysis

ATS utilizes actual call records and time tested statistical  methodologies to conduct a precise USF Traffic Study, which legally supersedes the Safe Harbor assumption.

1. CDR Collection: ATS collects comprehensive Call Detail Records (CDRs) from a carrier's billing systems.
2. Geo-Classification: Their technology analyzes the origin and destination of every call to accurately determine its jurisdiction: is it intrastate (not subject to federal USF), or interstate/international (subject to federal USF)?
3. PIU Calculation: The study calculates the carrier's true Percent of Interstate Usage (PIU), which is then used to accurately calculate the carrier's regulatory contribution base.

Case Study: The Power of Actual Data

The financial stakes are massive, particularly with the USF Contribution Factor hitting record highs at 38.1% in 4Q25. Consider a mid-sized VoIP provider with $1 million in annual assessable revenue:

Beyond USF: Savings on Other Regulatory Fees

The benefits of an ATS-conducted traffic study extend beyond the USF. Since the contribution base is the same, a lower PIU can also reduce contributions to other federal funds, including:

• Telecommunications Relay Service (TRS) Fund
• North American Numbering Plan Administration (NANPA) fees
• Local Number Portability (LNP) charges

A precise traffic study therefore transforms a regulatory requirement into a tool for financial efficiency, allowing carriers to use those savings for network improvements, debt reduction, or lowering their customers' bills.