No More Blank Checks for the Universal Service Fund

The Senate will soon be back, and changes to the Universal Service Fund (USF)—a program administered by the Federal Communications Commission (FCC) that subsidizes telecommunications and broadband access—are reportedly in the works. The United States Senate Commerce Subcommittee on Telecommunications and Media is “aiming to circulate a discussion draft of legislation that would modernize the $8.5 billion-per-year Universal Service Fund,” while the FCC undergoes review of the fund and how it is managed.

While some lawmakers have mulled collecting “contributions” (read: taxes) from large tech companies or broadband providers to fund the USF, this would tax innovation while giving a broken program a blank check. Former U.S. Rep. Cathy McMorris Rodgers recently said it best: “Before asking Americans for another dollar, Congress should streamline outdated programs, eliminate duplication, strengthen eligibility and oversight, root out waste and abuse, and determine which public policy needs we still need USF to address.”

Since its creation in 1996, the USF has repeatedly funded boondoggles with little oversight or accountability. Initiatives such as the High Cost Program have faced criticism from the FCC Office of Inspector General (OIG) and independent audits for internal control deficiencies and providing subsidies to telecommunications providers to build broadband in areas that either already had unsubsidized commercial competition or were receiving overlapping subsidies from other federal endeavors, such as the $42.5 billion BEAD program. Similarly, audits of the Lifeline and E-Rate programs have routinely uncovered instances of improper payments, ghost subscribers, equipment over-invoicing, and generally poor oversight, exposing critical gaps in how program subsidies are monitored and disbursed.

Because the program is financed through a fee levied on (declining) traditional interstate telecommunications revenues, the FCC’s mandatory “contribution factor”—the percentage ultimately passed on to consumers’ landline and wireless bills—has spiked dramatically from under 6 percent in 2000 to more than 38 percent in 2026. According to analyses by the Tax Foundation and the FCC’s own quarterly contribution public notices, this regressive fee functions as an ever-increasing hidden tax on households.

Instead of reining in this unfair and unaccountable fund, some have proposed propping it up with even more money. A few policymakers have called for examining “how the largest tech companies can pay their fair share” to “ensure the costs of expanding broadband are distributed equitably and that all companies are held accountable for their role in shaping our digital future.” The truth is that tech and streaming companies already pay their fair share; they already contribute to the USF directly if they provide services subject to USF assessments, and indirectly if they purchase telecommunications from another company to operate their service. For example, when companies such as Netflix, Google, or Amazon purchase assessable telecommunications services from traditional carriers, they can indirectly bear USF costs that carriers recover through their enterprise rates or USF surcharges. Additionally, major tech platforms invest heavily in private infrastructure—building undersea fiber-optic cables, massive data centers, and Content Delivery Networks (CDNs)—which offloads substantial traffic and routing costs from local broadband networks.

Forcing these companies to pay a double tax via expanded USF assessments would result in significant costs that would threaten to stall innovation and raise prices on consumers. Similarly, as McMorris Rodgers notes, “Taxing broadband would not make USF’s underlying problems disappear. It would simply send the bill to American families. That bill could be substantial. The FCC has previously estimated that taxing broadband service to fund USF could add anywhere from $5 to $18 per month to consumers’ internet bills.”

Instead of figuring out new ways to tax consumers, lawmakers should limit the USF’s scope and require comprehensive audits to ensure its funds are not being frivolously spent. Washington should not let yet another wasteful program expand.