American Enterprise Institute

The Universal Service Fund is funded  by a quarterly surcharge on interstate and international telecommunications revenue. Each quarter, a private nonprofit known as the Universal Service Administrative Company (USAC) estimates how much money it needs to fund the Federal Communications Commission’s (FCC) myriad universal service initiatives. It also estimates the amount of telecommunications revenue expected to be generated by industry, and from there calculates the surcharge percentage necessary to cover program costs.

Reducing the broadband affordability gap is an important and noble goal. Unfortunately, it is far from clear whether Lifeline, the federal program tasked with getting low-income households online, actually addresses this problem. For over a decade, academics, government watchdogs, and independent auditors have criticized the Federal Communications Commission’s inability or unwillingness to measure the program’s effectiveness—while private studies suggest much of this spending may be misdirected toward families at no risk of losing internet access.

Back in 1996, Congress amended the Communications Act to include antidiscrimination as part of American telecommunications policy.

How much broadband will Americans get for the $75 billion that Congress committed in 2021? That’s enough money to equip an additional 17 million households with broadband, taking the US to 99 percent broadband coverage, according to a Federal Communications Commission staff paper and data from the Census Bureau.

Each quarter, the Federal Communications Commission (FCC) determines the Universal Service Fund (USF) surcharge that is placed on customers’ telecommunications bills. The surcharge is calculated by estimating the cost of the agency’s various universal service programs, divided by the industry’s anticipated telecommunications revenue. As those programs have grown, and that revenue has shrunk, the surcharge has risen from 3 percent in 1998 to a whopping 33 percent in 2021.