On December 12, the FCC's Office of Managing Director announced that the Universal Service Fund (USF) contribution factor for the first quarter of 2025 will be 36.3%. Early Happy New Year to American consumers! The rate hike to 36.3% appears to be yet another all-time high for USF surcharges – something the U.S. Court of Appeals for the 5th Circuit rightly called an unconstitutional "USF Tax." Absent any unlikely intervention by the FCC's Commissioners, the proposed rate will go into effect.
USF surcharges are functionally taxes paid by voice consumers on the long-distance part of their monthly bills. The money consumers pay is collected by the voice carriers and passed on to the Universal Service Administrative Company (USAC), the corporation established by the FCC to administer the USF program and dole out subsidies to program recipients.
The upcoming 36.3% USF surcharge rate is significantly higher than just a few years ago. Free State Foundation President Randolph May wrote about the recent history of spiking USF surcharge rates and concerns about the viability of the USF contribution system in his blog post from June 14 of this year, "The Telephone Tax Rises Again – Now 34%."
As observed in my November 26 blog post, the Supreme Court has granted a writ of certiorari in Consumers' Research v. FCC. The case, which will review an en banc decision by the 5th Circuit this summer, will be closely watched by many, including taxpayer advocates and opponents of the overreaching administrative state. In Consumers' Research v. FCC, the Court will decide the constitutionality of the USF contribution mechanism and the USF Tax.
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