About USAC

Purpose of the Universal Service Fund

The goals of Universal Service, as mandated by the Telecommunications Act of 1996, are:

  • to promote the availability of quality services at just, reasonable, and affordable rates
  • to increase access to advanced telecommunications services throughout the Nation
  • to advance the availability of such services to all consumers, including those in low income, rural, insular, and high cost areas at rates that are reasonably comparable to those charged in urban areas

The Universal Service Fund (USF) was created by the Federal Communications Commission in 1997 to meet these goals. In addition, the 1996 Act states that all providers of telecommunications services should contribute to federal universal service in some equitable and nondiscriminatory manner; there should be specific, predictable, and sufficient Federal and State mechanisms to preserve and advance universal service; all schools, classrooms, health care providers, and libraries should, generally, have access to advanced telecommunications services; and finally, that the Federal-State Joint Board and the FCC should determine those other principles that, consistent with the 1996 Act, are necessary to protect the public interest.

How Does USF Funding Work?

All telecommunications carriers that provide service internationally and between states pay contributions into the USF.

The Universal Service Administrative Company (USAC) submits fund size and administrative cost projections for each quarter in accordance with FCC rules.

Projections are due 60 days before the beginning of the next quarter (e.g., approx. November 2 for first quarter, January 31 for second quarter, May 2 for third quarter, and August 2 for fourth quarter).

At the same time, USAC's Finance Department calculates revenue projections based on the Telecommunications Reporting Worksheets (Form 499s) that are filed by all carriers. Carriers must file Form 499-Q February 1, May 1, August 1, and November 1. Carriers file an annual Form 499-A on April 1.

USAC collects quarterly interstate and international revenue information from carriers on the Form 499-Q four times each year and submits aggregate information on a quarterly basis to the FCC (March 2, June 1, September 1, and December 2). USAC also calculates and submits the expected contribution factor. Based on these filings, the FCC reviews the data and establishes the contribution factor for the upcoming quarter. Typically, the FCC releases the contribution factor for the quarter between the 2nd and 15th day of the month preceding the quarter (e.g., between Dec. 2 and Dec. 15 for the upcoming first quarter).

Using this information, carriers calculate the amounts they will owe for USF. Carriers may build this factor into their billing systems if they choose to recoup this amount from their customers. At the beginning of the quarter to which the contribution factor applies, USAC bills all contributors for the amounts due based on the contribution factor. Typically, USAC sends the bills by the 15th of the beginning of the quarter (i.e., by January 15, April 15, July 15, and October 15).

The billed contributions are typically due from the carriers one month after they are billed. This allows USAC to have the money on hand before the first quarter disbursements are made at the end of February, March, and April for the first three months of the quarter (January, February, and March).

This is repeated for each quarter.

Who Pays for the USF?

All telecommunications carriers that provide service internationally and between states contribute into the Universal Service Fund. USAC makes payments from this central fund to support the High Cost, Low Income, Rural Health Care, and Schools and Libraries programs.

Consumers may notice a "Universal Service" line item on their telephone bills. This occurs when a company chooses to recover its contributions directly from its customers through a line-item charge on telecommunications bills. The FCC does not require this. Each company makes a business decision about whether and how to assess customers to recover its Universal Service Fund costs.


Last modified on 2/18/2008