Consumers Still Burdened as FCC Sets USF Surcharge Rate at 29%

On March 14, the FCC's Office of Managing Director announced that the Universal Service Fund (USF) contribution factor for the second quarter of 2023 will be 29%. Barring any unlikely by the FCC's Commissioners, the proposed rate will soon kick in. Although that amounts to a slight decrease compared to the first quarter contribution factor of 32.6%, the figure is still unreasonably high and burdensome on voice consumers.  

The USF contribution factor is used to determine the line-item surcharge that is added to the monthly bills of voice consumers. The surcharges are functionally taxes imposed on voice consumers to pay for USF programs. As explained in my August 23, 2022 Perspectives from FSF Scholars, "Congress Should Consider Expanding Universal Service Contributions: FCC Poses a Potential Answer to USF's Financial Problems." In addition to pursuing contribution reforms, Free State Foundation President Randolph May recommended in his August 26, 2022 Perspectives from FSF Scholars,"The FCC's USF Report: Unprecedented Broadband Funding Requires Fundamental Universal Service Reforms," that Congress should re-evaluate the size of USF programs in light of the several billions that has recently been allocated to support broadband deployment and service on top of existing outlays for USF. Those additional subsidies include the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) Program. And as FSF Senior Fellow Andrew Long explained in his August 30, 2022 blog post, "A True Assessment of the USF's Future Relevance Demands a Full Accounting of Broadband Subsidies."

Importantly, there also are serious questions regarding the constitutionality of how the USF quarterly contribution factor is determined. As explained in blog posts from April 2022 and October 2022, FSF President Randolph May and the Free State Foundation have joined amicus briefs in ongoing cases before federal circuit courts of appeal that raise challenges to the FCC's USF contribution regime based on the non-delegation doctrine and the major questions doctrine.